Shopping for Puts, Part II

The Bears Are Still in Control

By Bryan Bottarelli
Wednesday, May 24, 2006 2:03 PM EST
Wed, 24 May 2006 19:03:00 GMT

PLAY: Buy the JOE July 50 Puts (JOE SJ) at or under $4.40, good for the day. Place a protective stop loss at $3.00.

PLAY: Buy the GCI July 55 Puts (GCI SK) at or under $2.55, good for the day. Place a protective stop loss at $1.90.

Dear Bottarelli Research Member,

On two occasions this week, the pre-market indicators have been 40 to 60 points higher. And on both of those occasions, the bears have quickly and decisively turned those gains into more losses.

As I’ve mentioned in past alerts, this selling pressure cannot be sustainable over the longer term. That’s why I’m following the 4-6 month plays from the “Aftermath Report.” But in the near term, the wise tactical play is to overweight your position in puts — so let’s follow up on this morning’s UNH play with more puts on St. Joe (JOE – NYSE) and Gannett (GCI – NYSE).

When I look at today’s markets, I find it interesting that real estate and home-builder stocks are weak — even though the Commerce Department reported that sales of new U.S. homes stayed strong in April — rising 4.9% in April to a seasonally adjusted annual rate of 1.20 million. If news like this can’t boost JOE, the owner of 838,000 acres of land in northwest Florida, than what will?

JOE

PLAY: Buy the JOE July 50 Puts (JOE SJ) at or under $4.40, good for the day. Place a protective stop loss at $3.00.

The next weak stock is Gannett (GCI – NYSE). The company operates in two segments, Newspaper Publishing and Broadcasting — which includes 91 daily newspapers and 21 television stations. As you can see by the chart, the stock is about to break below the near-term support level at $54.00, which could signal a move under $50.00 could soon be in the cards.

GCI

PLAY: Buy the GCI July 55 Puts (GCI SK) at or under $2.55, good for the day. Place a protective stop loss at $1.90.

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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