MDT Update

Maintain $3.10 Buy

By Bryan Bottarelli
Wednesday, June 28, 2006 10:44 AM EST
Wed, 28 Jun 2006 15:44:00 GMT

PLAY: Maintain your $3.10 buy price on the MDT August 50 Puts (MDT TJ). Current bid/ask is $3.30 to $3.40. Place a protective stop loss at $2.00.

Dear Bottarelli Research Member,

Yesterday afternoon, I introduced a new put play on Medtronic (MDT – NYSE) based on less-than stellar news out of competitor Boston Scientific (BSX – NYSE).

BSX said that it’s recalling their devices used to correct irregular heartbeats because of defects that could cause them to malfunction — and this news pushed BSX down to its lowest level in four years. I noted that this development will severely affect the multibillion dollar market for ICDs, and the trickle-down effect will be a drag to Medtronic (MDT – NYSE). Corresponding with that thesis was the fact that MDT stock broke under a key support level at $48.00, which signaled more downside to come.

MDT

Based on this, we attempted to enter the MDT August 50 Puts (MDT TJ) at or under $3.10, good for the day. Prices moved quickly at the close, and these puts jumped up to $3.20 by the end of the day. But as of this morning, the MDT August 50 Puts traded as low as $2.95, with contracts getting filled at $3.00 and also $3.10. This means that if you maintained your order from yesterday, you may have gotten filled this morning. Because of this, I plan to monitor the position. On the flipside, if you have not yet entered these puts, I’d like you to keep your orders open for $3.10, good for today.

PLAY: Maintain your $3.10 buy price on the MDT August 50 Puts (MDT TJ). Current bid/ask is $3.30 to $3.40. Place a protective stop loss at $2.00.

In other morning news, AVID is falling (which is good) and LVS is rising (which is also good). Since we have a nice balance of calls and puts, I don’t plan on entering anything new leading into tomorrow’s Fed meeting. As legendary fund manager Bill Miller says, “My position is set.” In that spirit, maintain all your current positions.

Lock and load

Sincerely,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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