Time to Play ATI

Another Longer-Dated Play

By Bryan Bottarelli
Tuesday, February 13, 2007 2:10 PM EST
Tue, 13 Feb 2007 19:10:00 GMT

Dear Bottarelli Research Member,

On February 8th I outlined my thesis for trading calls on Allegheny Technologies (ATI – NYSE), and now it appears like it’s time to act.

As a quick refresher, I’m very bullish on titanium metal suppliers and ATI is the best of the best. Right now, titanium is experiencing remarkable demand across three diverse market segments: Aerospace (as rising fuel costs have titanium the metal of choice for all new orders), Ethanol (since ethanol is highly corrosive it cannot be transported using the same pipelines as oil and other fuels — meaning refineries could be forced to recast their pipelines using titanium) and even Semiconductors (as both Intel and IBM are redesigning their transistors to allow for lower energy loss — and the key to this process is a metal called hafnium — and Allegheny is one of the word’s top hafnium producers). Combine all three events, and I think ATI is a stock that we want to be positioned in to the upside.

ATI

As you can see by the chart, the ATI rallied up to $105 and has since pulled back under $100, which appears to offer us a very attractive entry point. Let’s use this recent weakness — combined with today’s apparent recovery — so add longer-dated ATI calls to our ledger. Here’s the play:

PLAY: Buy the ATI April 110 Calls (ATI DX) at or under $2.85, good for the day. Current bid/ask spread is $2.65 to $2.75 per contract. A move up to ATI $110 by mid-April could make these calls worth around $5.75, good for a nice $109% gainer. Place a protective stop loss at $1.30.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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