Four New Plays

More Ways to Play this Market

PLAY: Buy the LMT June 70 Calls (LMT FN) at or under $7.30, good for the day. Place a protective stop loss at $4.50.

PLAY: Buy the CX June 70 Calls (CX FN) at or under $3.90, good for the day. Place a protective stop loss at $2.20.

PLAY: Buy the CHL June 30 Calls (CHL FF) at or under $1.70, good for the day. Place a protective stop loss at $0.80.

PLAY: Buy the eBay June 32.5 Puts (XBA RZ) at or under $1.90, good for the day. Place a protective stop loss at $1.00.

Dear Bottarelli Research Member,

First off, I’d like to say how much I enjoyed meeting all you Charter Members at the Atlanta Wealth Expo. Although the expo was smaller than most, the crowd was really engaging and plugged-in to our “lock and load” trading style. In sitting through a handful of speeches, it was clear that no other presenter is anywhere close to the trading service we have here in Bottarelli Research, so for that alone I’m humbled and proud to have you in our elite group of Charter Members. But enough small-talk, let’s get into today’s action!

When I checked the markets from the hotel room last Friday, I was shocked to see the Dow up 139 points. But, what was pleasantly surprising was the fact that Black and Decker (BDK – NYSE) closed that huge up-day in the red — proving just how dried-up their upside momentum currently is. On the flipside, PF Changs (PFCB — NASDAQ) was unable to dismiss the upside pressure, and our PFCB May 45 Puts (HUO QI) were stopped at $2.00. Not to worry, I have a new list of trading opportunities for this week — which offer you two conservative call plays, a quick and speculative upside call play, and a downside put play to balance out the ledger. I’ll begin with the two conservative call plays.

The first is Lockheed Martin (LMT – NYSE).As I’m sure you know, LMT is heavily involved in the defense and aerospace segment, a market sector that I’ve been bullish on for quite some time. With a vast array of military aircraft — including the F-35 Joint Strike Fighter and the F-117 stealth fighter — mixed in with missile defense systems and radar surveillance, the Bethesda, Maryland company is very well-positioned for future growth.

In a Wall Street Journal article from today, author Andy Pasztor explains how Lockheed stands to reap billions as the Bush administration delays implementation of their defense and spy systems. The article states that, “program delays stemming from overhaul of the most advanced federal navigation and surveillance satellite systems may yield a multibillion-dollar windfall for Lockheed Martin Corp., according to people familiar with the details. Some estimates peg the potential extra revenue at about $3 billion”

Another positive for Lockheed is that the US Air Force wants to buy 20 more F-22 Raptors. At the cost of $130 million apiece, they are the most expensive fighters ever. What’s more, Lockheed was also awarded a $2.5 million contract by the U.S. Air Force for a Hybrid Launch Vehicle (HLV), a new design where the HLV will take off vertically and the reusable first stage will return to the launch site for a horizontal landing. All told, Lockheed looks to continue its upward march towards $78.00, with a potential break-out to the mid-$80’s by mid-June. Here’s the play:

PLAY: Buy the LMT June 70 Calls (LMT FN) at or under $7.30, good for the day. Place a protective stop loss at $4.50.

My second play comes in a cement company called Cemex (CX – NYSE).CX is basically a holding company thatsells cement and ready-mix concrete worldwide. While much attention has been paid to commodities like silver, copper, gold and oil, cement is a similar commodity that’s facing a supply/demand disequilibrium — but nobody’s talking about it. In fact, the chart looks as good, if not better, than any oil or gold chart out there. Since there are not as many pure cement plays as there are pure gold, copper, oil, or silver plays, a CX move to $80.00 is certainly within reason.

Right now, Cemex is preparing to move into the Chinese market which should further propel the company’s upside momentum. So let’s play it up!

PLAY: Buy the CX June 70 Calls (CX FN) at or under $3.90, good for the day. Place a protective stop loss at $2.20.

On the speculative side, we have a company called China Mobile Hong Kong (CHL – NYSE).China is the world’s largest telecom market with 409.7 million mobile subscribers. That’sdouble the number we have here in the U.S. But unlike the U.S, China’s mobile market continues to experience explosive growth. In fact, in five years, China is expected to pass 617 million mobile subscribers, and China Mobile controls 66% of this market.

Last year, CHL posted $29.7 billion in revenue — and on April 27^th they reported $8.1 billion in first-quarter revenue. That’s up 22% from the prior year — primarily on the addition of 21 million new subscribers in just the first quarter! This is a trend that’ll only get stronger, so let’s play CHL to the upside using a cheap call that could quickly double.

PLAY: Buy the CHL June 30 Calls (CHL FF) at or under $1.70, good for the day. Place a protective stop loss at $0.80.

And finally, it’s time to enter a downside position on eBay (EBAY – NASDAQ).Similar to our downside plays on Intel (INTC – NASDAQ) and Dell (DELL – NASDAQ), eBay is just the next in a long line of companies that were once superstars — but who are now struggling mightily.

Down 27% thus far in 2006, the San Jose, California company is leading shareholders to believe that they cannot increase their 16% e-commerce market share. Even with plans to expand in China and Korea, the company is struggling to figure out ways to boost that number higher, and quite frankly, it seems like they’re out of ideas. Let’s play eBay for a move under $30.00.

PLAY: Buy the eBay June 32.5 Puts (XBA RZ) at or under $1.90, good for the day. Place a protective stop loss at $1.00.

Lock and load,

Sincerely,