CDW Moving Lower

Take Profits on Half

By Bryan Bottarelli
Tuesday, July 18, 2006 10:49 AM EST
Tue, 18 Jul 2006 15:49:00 GMT

PLAY: Sell Half of your CDW August 50 Puts (DWQ TJ) at or above $1.60, good for the day. Hold the remaining half.

Dear Bottarelli Research Member,

Tomorrow before the bell, CDW Computer (CDWC – NASDAQ) will report Q2 earnings. Given the extremely weak tech market, I feel the online technology vendor will provide an outlook that disappoints Wall Street, thus sending shares of CDWC lower. Of course, we’re betting against a company that has beaten the Street for five quarters in a row, so this isn’t a slam dunk play.

According to estimates, analysts will be looking for 7% sales growth. But the silver lining is that they also expect a 1% decline in profits, which could prove to be the catalyst that moves CDWC shares lower.

CDWC

As I write, shares of CDW are selling off leading up to tomorrow’s earnings report. This selling pressure has pushed the CDW August 50 Puts (DWQ TJ) that you entered yesterday for $1.30 up to $1.65, good for a 26.9% gainer. With these types of gains in hand, a conservative move would be to take HALF of your profits off the table now — and then let the remaining half ride into tomorrow’s earnings news.

PLAY: Sell Half of your CDW August 50 Puts (DWQ TJ) at or above $1.60, good for the day. Hold the remaining half.

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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