Play Housing Calls

RYL Ticking Up

By Bryan Bottarelli
Wednesday, December 27, 2006 10:22 AM EST
Wed, 27 Dec 2006 15:22:00 GMT

Dear Bottarelli Research Member,

The November housing numbers just hit the tape — and they look very promising. According to the Commerce Department, sales of new homes rose 3.5% in November to a seasonally adjusted annual rate of 1.047 million. That’s better than the expectation of a seasonally adjusted annual rate of 1.02 million — which is pushing all the housing-relates stocks higher on hopes of a 2007 rebound. After a quick sector-study, the company with the most promising upside chart is Ryland (RYL – NYSE).

RYL

As you can see, the 50-day and the 200-day moving averages are set to cross just under $50, which serves as a super-strong support level. From current levels, I’d expect the stock to make a run at their previous high at $57.50, which would offer us a nice little upside gainer playing the RYL February 52.5 Calls (RYL BX). Currently trading between $3.60 and $3.80, a move up to $57.50 could push these calls all the way up to $5.90, good for a 59% gainer. Let’s go ahead and enter the trade now!

PLAY: Buy the RYL February 52.5 Calls (RYL BX) at or under $3.90, good for the day. Place a protective stop loss at $2.40.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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