HHH Running on Fumes

Expect a Let-Down

By Bryan Bottarelli
Thursday, January 25, 2007 11:16 AM EST
Thu, 25 Jan 2007 16:16:00 GMT

Dear Bottarelli Research Member,

The Internet HOLDRs (HHH – AMEX) is a collection of 13 Internet companies traded via one single, exchange-listed instrument. Over the last two days, the index has experienced incredible upside action thanks to two stocks: Yahoo (YHOO – NASDAQ) and eBay (EBAY – NASDAQ).

HHH

As you can see by the chart, the HHH has moved from $52.50 on Tuesday up to $56.31 today — a strong $3.81 up-move. But now that the HHH’s two biggest players have reported earnings — it looks like the euphoria may be coming to an abrupt end.

Absent of any further upside catalysts, I’d expect the HHH to move back down to the $53 to $54 range before January 31st — which is when Time Warner (TWX – NYSE) announces their earnings. With Amazon.com (AMZN – NASDAQ) not reporting until February 7th, we have plenty of time for profit-takers to sell off the HHH prior to the next big announcement. Combine that with a weak market today, and I think we have the makings for a nice downside opportunity, so here’s the trade:

PLAY: Buy the HHH February 55 Puts (HHH NK) at or under $0.75, good for the day. Current bid/ask spread is $0.60 to $0.70. Since these puts are a lot cheaper than the ones we normally play, let’s place a protective stop loss at $0.30.

Two plays that are moving in the wrong direction this morning are our LVS March 120 Calls (LVS CU) and our LFC February 50 calls (LFC BJ). But to be honest, I’m not too concerned about either position — simply because I know that each stock has the incredible ability to make big-time upside moves at the drop of a hat. So I’ll continue to follow each play as we wait patiently for the next upside move.

And here’s a sight for sore eyes: The current stock chart of Titanium Metals (TIE – NYSE) shows the stock finally breaking about the all-important $30 level, which represents the touching of the 50-day and the 200-day moving averages. If TIE can rally from here, we’ll be able to lock in a gain on our TIE February 30 Calls (TIE BF).

TIE

If anything else comes up, you’ll be the first to know. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From January 2007