MDT Breaking Down

Enter Quick Round of Puts

By Bryan Bottarelli
Tuesday, June 27, 2006 3:39 PM EST
Tue, 27 Jun 2006 20:39:00 GMT

PLAY: Buy the MDT August 50 Puts (MDT TJ) at or under $3.10, good for the day. Current bid/ask spread is $2.95 to $3.10. Place a protective stop loss at $2.00.

Dear Bottarelli Research Member,

I said last week that I intended to get back into some quick trading positions. After taking a nice gainer on OXPS puts, another quick profit opportunity has popped up which can replace the downside protection we just lost by selling OptionsXpress.

This new play surrounds more bad news out of Boston Scientific (BSX – NYSE).The company said yesterday that it’s recalling their devices used to correct irregular heartbeats because of defects that could cause them to malfunction. This news has pushed BSX shares down to their lowest level in nearly four years. After all, when it comes to artificial hearts, nothing could be worse than premature battery depletion.

Boston Scientific’s chief executive, Jim Tobin, said the problems could take up to 18 months to fix — and in the meantime, he expects additional problems to emerge. He was quoted as saying "I know as sure as I’m sitting here that we will have further recalls.” Not only that, he said "I also know that everyone in the industry will have further recalls."

Without question, this development will severely affect the multibillion dollar market for ICDs. The trickle-down effect will be huge, which is why I’d like to add put options on BSX’s competitor, medical device company Medtronic (MDT – NYSE).

MDT

As you can see by the chart, MDT just broke below a very significant support level at $48.00. This breakdown points to a lot more downside weakness to come, so let’s enter into MDT August puts before the trading day is over.

PLAY: Buy the MDT August 50 Puts (MDT TJ) at or under $3.10, good for the day. Current bid/ask spread is $2.95 to $3.10. Place a protective stop loss at $2.00.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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