Revisiting FDC & WU

Each Shooting Higher – Take Any Gains

By Bryan Bottarelli
Wednesday, October 25, 2006 3:14 PM EST
Wed, 25 Oct 2006 20:14:00 GMT

Dear Bottarelli Research Member,

We’ve had some crazy market action in the last hour, highlighted by the market’s initial reaction to the Fed’s decision to hold short term interest rates at 5.25%. The immediate reaction witnessed the Dow turn a 30-point loss into a 15 point gain, a 45-point reversal in a matter of seconds. Then investors digested the Fed’s policy statement, which left the door open to take action if inflationary pressures in the economy are not vanquished, and this dropped the Dow back down to its original 30-point loss. Now, as I write the Dow is practically flat-lining, which means investors don’t know how to translate the Fed’s recent statement. Wild action!

All the while, oil continues to tick higher (now up $2.00 a barrel on the day) which should continue to benefit both our DO December 75 Calls (DO LO) and our CAL December 35 Puts (CAL XG). The CAL puts, in fact, are now trading up to $2.55, a nice 13% gain from our earlier entry price of $2.25. Hold each position for more gains.

In between all the hoopla, I wanted to bring to your attention the current trading action of one (actually two) of our past plays: First Data (FDC – NYSE) and Western Union (WU – NYSE). If you’ve been a Charter Member for the last few months, then you’ll recognize each name, as we played FDC prior to their spin-off of WU. In the context of this play, many readers may have bought stock in FDC to benefit from the spin-off of WU. If you are one of those who purchased FDC stock, I’m happy to report that both FDC and WU are shooting higher today, which could now be handing you a gain on your total position.

Starting with FDC, the stock is rallying based on strong Q3 earnings and a $700 million share buyback. In Q3, revenue rose 9% to $1.8 billion, beating the forecasts of $1.79 billion. Just look at this chart and you’ll see what a great run FDC has been on (and you’ll also see yet another example of my thesis that all gaps eventually get filled!)

FDC

Not to be outdone, Western Union is also looking great today in their first earnings report since spinning off of FDC. The leading money transfer firm in the world managed to also beat expectations by $0.06 cents a share, which is pushing shares of WU higher as well.

WU

I bring this to your attention because anyone holding shares in FDC and WU could now be showing a gain on your total position. I understand that everyone had different entry prices, which complicates reporting on this trade a little big. Nevertheless, if you are now showing a gain, I’d like you to consider taking your profits off the table. It’s been quite a run for each stock, and our patience is now beginning to pay off. Like any good trader, take your money and run!

*SPECIAL OFFER REMINDER: I’d like to remind everyone that our special renewal offer, which gives you three months of service for free, expires on October 31st. That’s only six calendar days from now! If you’d like to take advantage of this special offer, then please don’t wait. Click the link below and take this reduced-price deal before it expires! Here’s the link:

https://www.bottarelliresearch.com/renew/?21NF3Z6T0Z

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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