End-of-Day Update

Unexpected Rally Fuels SMG

By Bryan Bottarelli
Tuesday, April 04, 2006 4:06 PM EST
Tue, 4 Apr 2006 21:06:00 GMT

Dear Bottarelli Research Member,

How about a quick end-of-day update on your positions?

To be frank, I didn’t expect a 63-point rally on the Dow. Based on yesterday’s exhaustive sell-off at the close of trading, I would have guessed the bulls had run out of gas. Well, it appears they do in fact have a little pop left. Luckily, today’s up-move isn’t hurting our positions, which is yet another reason why it’s always critical to be positioned on both sides.

In terms of our broad-based market downside play on the SPY, the May 130 Puts (SFB QZ) you bought yesterday for $1.55 have traded as high as $1.95 today. Currently, they’re closing the day at $1.40, which is not at all bad considering the surprise strength of today’s rally. Hold.

The best mover we witnessed today was the great upside on SMG. This up-move pushed your SMG June 45 Calls (SMG FI) up to a bid/ask spread of $2.95 to $3.20. Based on our longer-term thesis and our $3.20 entry price, I’m hoping this could be the spark that sends the stock back up to its recent high north of $50.00. Maintain your SMG June 45 Calls (SMG FI).

SMG

Another strong up-move today happened in our diabetes supplier BDX, which I’d like to see re-test the 52-week high they set just a hair under the $66.00 level. Keep holding your BDX June 60 Calls (BDX FL ).

On the downside, BOL continues to move lower. This down-move has pushed the BOL May 65 Puts (BOL QM) that you entered yesterday for $5.10 up to as high as $5.80 in today’s trading.

BOL

The news story I brought to you yesterday is really getting around and spooking investors. In fact, my local channel 5 Chicago news team covered the contact-lens infection story in yesterday’s broadcast. I’m targeting a quick 20% gainer on this one — and we’re getting close. If you plan to be away from your desk tomorrow, place a “busy man” sell order now at $6.20.

The most concerning position is our upside play on CMED. The stock has established support at the $26.00 level — which promoted a quick move up to $31.95 that caught my attention. Since then, the stock has drifted lower, pushing under the $30.00 level and currently trading for $28.00. I still think the stock is a strong upside candidate, as the company’s cancer treatments in China represent a monster-sized market. I hope we can stay positioned to the upside, but your protective $2.50 stop on the CMED June 30 Calls (QCY FF) just got triggered as I write.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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