Military Spending Remains Strong

Expect Continued Bullishness in DRS

Dear Bottarelli Research Member,

I hope everyone was able to take good profits on the MCO May 65 Calls (MCO EM) yesterday. We originally entered the position for $4.70 and they traded as high as $6.30 today, giving us a nice 3-week winner.

This MCO call sale leaves us holding three calls and two puts — a comfortable position with the major market averages pushing to new multi-year highs. Let’s get into today’s action…

The big news I discovered today — which isn’t being covered yet by the mainstream media — is that President Bush restated his terror strategy by reaffirming his 2002 doctrine on pre-emptive war.

The doctrine applies to hostile states with chemical, biological or nuclear weapons — and states "…under long-standing principles of self defense, we do not rule out use of force before attacks occur, even if uncertainty remains as to the time and place of the enemy’s attack. When the consequences of an attack with WMD are potentially so devastating, we cannot afford to stand idly by as grave dangers materialize."

One cannot help but think this reaffirmation applies to Iran, a country in which Bush described as a “grave threat to the security of the world." In fact, both Iran and North Korea are under the microscope because of their nuclear programs, and the U.S. is making it clear they’ll “take all necessary measures” to protect against them.

My point of reporting this is not to debate politics — that’s the last thing I want to do here. Rather, my point is to reiterate the bullish stance on DRS April 50 Calls (DRS DJ).

As you know, DRS is one of the world’s leading suppliers of high-end products and services to military forces and intelligence agencies. The fact that Iran is now becoming a serious military threat — in combination with the Iraq war prolonging — means DRS will continue to get record orders to support U.S military operations.

Just today, in fact, DRS received a $22 million order for their Advanced Intelligence Equipment used in man-portable and mobile applications. With today’s news, I bet these orders will continue to flow in for DRS — further pushing the stock higher.

The DRS April 50 Calls (DRS DJ) you bought for $5.60 have traded as high as $6.20 today. Hold for more gains.

Continuing to jump all over the place is your speculative play on ICE April 70 Calls (ICE DN).After entering these calls for $5.30 and trying to take profits yesterday over $6.00, the stock has jumped back down to$69.05 and your calls now trade for $4.80. The way this stock trades, all it takes will be one good pop to get us out for profits, so be ready to take profits anywhere at or over $6.00 per contract. In fact, don’t wait for me to send an alert — if you see prices jump to $6.00, take the gain!

As far as out other positions, your BDX June 60 calls (BDX FL) and your FRO May 35 Puts (FRO QG) continue to move in the direction we want, so hold each position. The one and only counter-mover today is our longstanding put position, the MDC June 65 Puts (MDC RM).

As you can see by the chart, the stock is trying to break its previous high right around the $65.00 mark — a level in which gave the stock incredible resistance back in late February. As you know, MDC is a play on the bearish mood of the U.S. housing sector — a sector which continues to get bad news flowing in from all directions.

Yesterday, the National Association of Home Builders said their confidence rating fell to the lowest level since April 2003. Not only that, but there’s now a full 5.2-month supply of unsold homes on the market. Add to that the fact that home purchase applications are down 20.4% and the 30-year fixed-rate reached a 45-month high, and you have a bearish sector for sure.

So why is the sector rallying?

Today it was reported that new home construction fell 7.9% in February to a seasonally adjusted annual rate of 2.12 million housing starts. Although this number was indeed down, economists were expecting it to some in at an even lower 2.04 million units. Without question, the housing sector is headed for a slowdown, and numbers that come in low (but not as low as expected) are simply not going to reverse that trend. If anything, it’ll only prolong the coming pain. Hold your MDC June 65 Puts but maintain your protective $3.50 stop.

TWO QUICK ADMINISTRATIVE NOTES: It’s come to my attention that some of these recent plays have moved fast. And I admit, that’s true. In the world of trading, prices move fast sometimes. Now I realize that you’re busy and you may not be able to be at a computer the moment a trading alert hits — but I consider it my job to watch your plays every minute of every day and alert you the second it’s time to take action. In a perfect world, everyone would be at their computers when it’s time to act, but that’s simply unrealistic. Therefore, I’m working right now on two solutions.

The first is that I’m currently speaking to a series of auto-trading companies that would be able to place trades on your behalf. The caveat is that this arrangement is solely between you and the auto-trader. Although I can recommend a series of brokers to you, I can not — and will not — act as a broker.

The second is that I’d like to prepare for you — free of charge — a new special report that offers a series of longer-term option plays that are each capable of gaining 100% or more over the next 3-6 months. Getting positioned in these longer-term plays can offer you a continuous stream of winners even if you miss out on one of the quick-action trades we’ve seen recently.

I feel that these two solutions could help make your Charter Membership to Bottarelli Research more usable, more beneficial, and much more profitable.

It’s just my way of offering you the best possible service. I’ll give you a status update on both issues in the coming weeks. Until then…

Lock and load!

Sincerely,