Your Friday Wrap-Up

Plus, Setting the Table for Next Week

Dear Bottarelli Research Member,

As we close out this wild week of mid-term elections, I’d like to share with you some observations and possible trade set-ups that I’ve been following that could turn into plays for next week.

First and foremost, what a move in CROCS (CROX – NASDAQ)! The maker of lightweight, non-slip, and odor-resistant plastic shoes is truly a “Who Cares” stock, as their massive short position simply means that any slight down-tick in the shares causes nervous shorts to cover their positions, which ultimately leads to more upside! Congrats to everyone who traded the CROX December 45 Calls (CQJ LI). If you missed this one, don’t worry. We may end up playing these CROX calls again on any dips.

Next up is Boeing (BA – NYSE) who was just awarded a $10 billion contract to build the next combat search-and-rescue helicopter for the Air Force. In beating out Lockheed Martin (LMT – NYSE) and United Technologies (UTX – NYSE), BA has once again landed a massive contract that could add up to ten cents in their upcoming earnings. On May 11^th, BA hit a high of $89.06, which could be a level it re-tests in the near future, especially when you consider that support and maintenance for the helicopter contract could raise its total value between $13 billion and $20 billion.

On the downside, we have a play on Potash of Saskatchewan (POT – NYSE). The Saskatoon, Canada outfit engages in the production and sale of fertilizer, animal feed and industrial acids (which are used in food products and industrial processes), and it looks like their recent rally got a little overextended.

As you can see by the chart, the stock has been on a massive upside run lately, but the last two days have signaled that the bullish may be coming to and end. What’s interesting is that any further downside could equate into a down-move that hits two significant support levels, one at the 50-day moving average and the other filling the gap right under $120. In fact, the selling pressure is really starting to compound on itself as I write, so let’s establish a new put position immediately.

PLAY: Buy the POT December 125 Puts (POT XE) at or under $3.30, good for the day. Current bid/ask spread is $2.90 to $3.10. Place a protective stop loss at $1.80.

Next up is the Biotech HOLDRs (BBH – AMEX), as I still think the market has this one pegged incorrectly. We were unfortunately stopped out on our BBH December 195 Calls (BBH LS) but I think we’ll have an opportunity to make that up very soon. After all, the news that Genentech (DNA – NYSE) acquired Houston-based Tanox (TNOX – NYSE) for a big premium sparked selling pressure across the biotech group, which stung our upside calls in BBH. I think this weakness will be short-lived, as the biotech names included in the BBH look to take over the upside that, until this point, has been enjoyed by the Big Pharma stocks.

After all, Amgen (AMGN – NASDAQ) just reported third-quarter earnings that beat estimates and raised forward guidance. Sepracor (SEPR – NASDAQ) also swung to a third quarter profit thanks to strong sales of asthma drug Xopenex and sleep aid Lunesta. And Gilead Sciences (GILD – NASDAQ) is the owner of one of the most promising aids drugs on the market. With all this, I wouldn’t be surprised if we get re-positioned in more BBH calls on any support.

I’d also like to enter an upside position in Southern Copper (PCU – NYSE) to serve as an all-around metals play. Since PCU engages in mining and producing of copper, molybdenum, zinc, silver, gold, and lead, this one company gives you complete exposure to the whole metals group. I’d look to add calls on any dips under $55.00.

Netflix (NFLX – NASDAQ) is also a name that’s getting some upside momentum, as it’s crystal clear that the clock is ticking on Blockbuster’s relevance. Over the past year, Blockbuster has reduced their stores from 9,076 to 8,529, and I’d expect this trend to get even stronger in 2007. This will paint a strong picture for NFLX, which could easily be trading in the mid-$30’s by year end.

As far as our current holdings, I’d like to maintain everything we have. That includes our DIA December 120 Puts (DAW XP), SUN January 70 Calls (SUN AN) (which I may add to next week), PVX March 10 Calls (PVX CB), and our CAT January 65 Calls (CAT AM).

Now you know what I’m looking at for next week. Until then, have a good weekend, and as always…

Lock and load!

Sincerely,