Another Great Day

CAT, CSX On the Move

By Bryan Bottarelli
Thursday, August 03, 2006 4:08 PM EST
Thu, 3 Aug 2006 21:08:00 GMT

Dear Bottarelli Research Member,

I’ll keep this short, as we’ve effectively been able to trim our open positions leading up to Tuesday’s Fed meeting — taking a nice string of profits along the way.

As it stands, we have two open positions, and both of them look great today.

First up is Caterpillar (CAT – NYSE), and apparently I’m not the only one using momentary dips to add to my position. According to InsiderScore.com, director Juan Gallardo just shelled out $7.7 million to purchase 110,000 shares of CAT on June 26th, a move which increased his CAT position to 204,109 shares.

CAT

As you can see from the chart, CAT is making a strong move today above its 50-day moving average. Similar to the move we just witnessed in ABX, I’m hoping CAT will now call this line support — thus establishing a base as it re-tests the $80.00 level. Today’s nice up-move pushed your CAT November 75 Calls (CAT KO) up to $3.60, which is awfully close to breaking into the profit zone. Hold.

Also on the move is CSX Corp. (CSX – NYSE). Although it has yet to penetrate the 50-day moving average, today’s strong upside move is certainly a step in the right direction.

CSX

I read a statistic that said the Dow Transports were the worst-performing sector group in July, posting a collective loss of 11% as companies like Boeing (BA – NYSE) and United Parcel Service (UPS – NYSE) did their best to bring the entire group down. As I noted in past alerts, I feel that the rail stocks were un-necessarily punished during this sell-off, as they were indirectly pushed down with the rest of the group despite bucking the trend and reporting outstanding numbers in July.

As a result, I’ve been adding to our CSX November 65 Calls (CSX KM), giving us an average entry price of $3.50. In today’s trading, these calls got as highs as $3.90, so we’re looking good. Hold for more gains.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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