End of Day Update

Protective Puts Inching Higher

By Bryan Bottarelli
Wednesday, April 26, 2006 4:46 PM EST
Wed, 26 Apr 2006 21:46:00 GMT

Dear Bottarelli Research Member,

It’s been quite a day.

We started the trading session with blockbuster earnings from Foundation Coal Holdings (FCL – NYSE), only to see the stock sell-off on the news. Now that the report is behind us, I’d like to see FCL resume its up-trend. Considering that the insatiable demand for coal it not going away anytime soon, my guess is that the up-trend will resume. Hold your FCL May 50 Calls.

FCL

Next up, we used the continued weakness in Dell to take profits on your Dell June 30 Puts (DLQ RF). I noticed a handful of contracts cross the tape at $3.90, but the floor traders kept pretty firm at $3.80. If you did not get the $3.90 sell price, maintain this order through tomorrow.

Our other puts, the SPY June 129’s (SPY RY) have done a magnificent job of holding their value right at our $1.35 entry price despite today’s attempted rally. At the close of trading, they’re $1.35 to $1.45, which means they’re giving you the downside protection you need at these lofty market levels. Hold.

The one play I’m disappointed that we got out of was Archer Daniels Midland (ADM – NYSE). The big sell-off we witnessed yesterday is being credited to President Bush’s efforts to lower gasoline prices — making note that regulators are now free to loosen environmental rules on the formulation of gasoline. Investors took this news as a knock against ADM’s ethanol market, which is a third of their $1 billion profits.

But if you look at the facts, that’s not the case. Remember, therelaxed environmental rules are only temporary. That means yesterday’s announcement will probably not affect ethanol at all — which is why I feel the sell-off was overblown. Ethanol will continue to be a major player in the upcoming summer driving season, and its growth will only get stronger. Today, the June 35 Calls (ADM FG) bounced back up to $3.30. I’d still consider this a strong candidate for re-entry. I’ll let you know as soon as it happens.

Finally, our longstanding play on diabetes supplier Becton Dickinson (BDX) moved lower as their second-quarter earnings dropped 18%. After a solid run-up, the stock gave back all it its recent gains. It may be time to formulate an exit strategy for your BDX June 60 Calls (BDX FL) as the stock does not look like it’ll break its recent highs, so maintain your $3.00 stop.

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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