Your Friday Round-Up

Fed Ex Finds Life as LVS Treads Water

Dear Bottarelli Research Member,

On the surface, today’s trading action may appear quite boring. The Dow, for example, moved 40 points lower, then moved 40 points higher, and closed down 30. Although not much movement has happened, this is actually a big win for the bulls. Looking at recent market trends, the bears have absolutely pounced on any bullish attempt to move higher. This is why the Dow has been unable to string together three consecutive up-days in over a month. For this recent bearish pattern to hold true, then today should’ve been a crushing down-day — but the fact that it’s only a small decline has given the bulls hope that the bears are exhausted and there could be more upside gains to come next week.

Speaking of hope, I was very glad to see our FDX July 120 Calls (FDX GD) wake up from their hibernation. Today, these calls have traded as high as $1.05 per contract, increasing you total basket up to around $1.15. This upside move on the calls shows me that this position could ultimately get up to the levels I expect. Granted, it may take a little longer than I anticipated, but this is certainly a good sign. If FDX moves up to $120, these calls could be around $2.30 a contract! And that’s calculating the potential upside using the option’s current levels — which I think are already way too low.

Since so many investors view FDX as a proxy of the worldwide economy, the fact that they shrugged off rising oil prices and beat estimates on Wednesday could certainly lead to more upside strength. Continue to hold your basket of FDX July 120 Calls (FDX GD) and FDX July 100 Puts (FDX ST).

I’d also like you to hang in there with Las Vegas Sands (LVS – NYSE). As I noted yesterday, the stock has been drawing retailers to their international casinos at a breathtaking pace. This shows me that LVS is the best positioned company to cash in on Asian growth, particularly in Macau, the only area in China that allows casino gaming.

You probably don’t realize this, but Las Vegas Sands already earns more money off its Macau property than it does at the Venetian in Vegas, and their Macau property has only been open for two years. Not only that, but their Macau property is one of six major LVS properties expected to be serious earnings drivers in that area! Like a true Vegas card-shark, we “doubled-down” and added to our LVS July 70 Call (LVS GN) position at $2.00, lowering our total cost basis to $2.60. Intra-day, the stock was down another $1.00 but has since put in a nice recovery to close down only $0.13, and the calls remain locked at our second $2.00 entry level. Hold.

Looking at PEP, the stock gave up $0.51 today but still remains in its right range-bound up-trend. As the most conservative play in our ledger, Pepsi has all the traits of a great company: a reasonable price, a strong balance sheet, brands that can withstand an economic slowdown, steady returns on equity, and a corporation that’s not averse to share buybacks. Over on the put side, AVID set a new 52-week low at $33.16 which signals further weakness. Hold both your PEP October 60 Calls (PEP JL) and AVID August 35 Puts (AQI TG).

Looking to next week, we have the much-anticipated Fed meeting on the 29^th which means I don’t expect to trade too much towards the end of the week. If recent market action can tell us anything, it’s to be on the sidelines when the Fed is speaking! This means you can expect to see most of our trading action towards the early part of next week — primarily Monday through Wednesday. Until then, have a good weekend.

Lock and load

Sincerely,