As Predicted, More Upside

MMM Follow Up Plus ACI, GIS, MRO & NWS

By Bryan Bottarelli
Friday, September 15, 2006 11:31 AM EST
Fri, 15 Sep 2006 16:31:00 GMT

Dear Bottarelli Research Member,

Over the past week, I’ve been getting a handful of emails from Charter Members asking me whether the markets are due for a sell-off. So in yesterday’s alert, I addressed these questions by saying “the big question circulating the trading desks is whether or not the major market averages are due for a sell-off after mounting an impressive upside rally so far this week. In my opinion, the answer is no. I must side with the near-term trend — which is to the upside.”

This morning, this upside directional call is coming true in spades as the Dow has traded 80-points higher to register a new 4-month high. Although I can’t guarantee this up-move will continue info the afternoon, I do know that today’s buying has done well for 3M (MMM – NYSE), which is making a strong charge towards its 200-day moving average. Check out the chart:

MMM

Although we sold our MMM January 80 Calls (MMM AP) earlier this week for a 44% gain, if you’re still holding these calls, you’re getting even higher returns. As I write, these calls have traded as high as $1.55, good for a 72% gain! If you’re still holding these calls, take your profits!

Looking at News Corp (NWS – NYSE), I’m really hoping today’s move above the 50-day moving average sticks. As you can see, NWS has been bouncing up and down without committing to any sustainable trend.

NWS

If NWS can break out of this trading pattern, we could be in for a really nice ride. Your NWS January 20 Calls (NWS AD) are finally breaking into profitability, so hold them for more gains.

Our quick-hit trade on Arch Coal (ACI — NYSE) has been all over the map today, as the stock has been down $0.30 and up $0.30 in today’s session. This tells me that traders are still unsure about what directional move is next — which makes me side with the prevailing trend (which is down). Continue to hold your ACI October 27.5 Puts (ACI VT), and I’ll be looking to take a quick profit if ACI continues to drift lower. In fact, if these puts trade at or above $2.00 today, take your profits!

In other news, I’m really hoping this is the near-term floor in General Mills (GIS – NYSE). As you can see from the chart, GIS has probed lower today — but has since recovered and is now looking to break into the green.

GIS

If we can catch the bottom, it would mean great things for your GIS January 60 Calls (GIS AL). Continue to hold.

And finally, I’m still looking for an established bottom on Marathon Oil (MRO). As I mentioned yesterday, the stock has gotten a $20 haircut over the last few weeks, and I think it is total overkill. Here’s the chart I wanted to give you yesterday so you can see the carnage for yourself:

MRO

If we can peg a bottom, entering into some January out-of-the-money calls (possibly the MRO January 75 Calls) could pay off handsomely on any pop. Of course, I’ll continue to keep an eagle eye on them for any potential upside play. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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