Your Friday Wrap-Up

Gear Up for Another Great Week of Trading

Dear Bottarelli Research Member,

The broader markets are experiencing weakness this morning – as yesterday’s 48-point loss on the Dow has been followed up by today’s 47-point early session decline. As I’ve mentioned in past alerts, there is an incredible and real threat of a bull-market “correction” – which means the major market averages could fall anywhere between 3% and 10% and still be within the parameters of a long-standing bull market.

Because of this looming threat, I continue to stress the importance of holding downside protection via the DIA March 126 Puts (DAW OV). Similar to car insurance (which financially protects you in the event of a car crash), these puts act as your “stock market insurance” policy. Currently trading for $0.90, these puts could increase 188% if we witness a 3% down-move and a whopping 630% if we witness a 10% down-move. Considering the magnitude of the potential fall, owing a small position in these protective puts continues to be a smart tactical move.

At the same time, owning these puts allows us to play upside calls without worrying about the proper downside exposure. This allowed us to play VLO June 60 Calls (VLO FL) and RIG March 80 Calls (RIG CP) this week – and lock in tremendous gains in each play. As I write, in fact, both RIG and VLO continue to push higher – which has equated into even larger gains for each call play. If you have yet to lock in profits on these positions, do so now!

At the same time, we’re continuing to patiently wait for Las Vegas Sands (LVS – NYSE) to experience its upside pop – and I still think it’s coming soon. We originally entered the LVS March 95 Calls (LVS CS) on February 14^th for $3.80 with a $2.30 stop, and since that time the stock has see-sawed back and forth just above the $90 level without any upside or downside bias. Since this is a more speculative play, I’d like to add to the position at current levels – as I feel the calls have deteriorated in value due to the stock’s inability to make a significant move. If your stop triggered, you may consider jumping back into the position at these depressed levels – and a simple comparison of the recent trading action of Wynn Resorts (WYNN – NASDAQ) vs. Las Vegas Sands (LVS – NYSE) will show you why.

First off, please understand that LVS and WYNN have historically traded in lock-step. Since both companies have exposure in Las Vegas and Macau, what’s good for one is good for the other. But as you can see, WYNN has established a support level right at the 50-day moving average – which is now setting up for another upside push. But while WYNN has found 50-day support, LVS has dipped below this level and is now languishing. I see this as an opportunity to pick up cheap upside calls and profit as the stock pops back above the 50-day moving average. So let’s get aggressive and add to our LVS position:

PLAY: Buy the LVS March 95 Calls (LVS CS) at or under $2.30, good for the day. Re-adjust your protective stop loss to $1.10.

I’d also like to take a moment and comment on our three longer-dated calls plays. As you know, I’ve started introducing longer-dated plays as a way to compliment our shorter-term trading with longer-dated plays – so you can experience daily, weekly, and monthly winners.

Input/Output (IO – NYSE) is one of these longer-dated stock candidates. They’re a promising $14.00 stock that provides seismic services to the oil and natural gas industry worldwide. As you can see, the stock is engaged in a very strong up-trend that is establish new 52-week highs along the way, and the IO August 12.5 Calls (IO HV) allow you to profit off the stock’s continued upside move.

CDC Corp. (CHINA – NASDAQ) is another longer-dated stock candidate. They’re one of the fastest-growing provider of mobile and online games in China – and if you think the video game craze is rampant here in the US, just imagine what its’ like in China. Once again, we have a very strong stock chart, and the CHINA January 2008 7.5 Calls (WRW AU) give you just under one year to benefit from continued upside momentum.

And finally, we have ISIS Pharmaceuticals (ISIS – NASDAQ) which is a pure take-over play. You see, with Big Pharma companies like Pfizer (PFE – NYSE) continuing their struggles to bring new drugs to the market, a small firm like ISIS with a promising drug development pipeline could be extremely appealing. Trading for under $10.00 a share, any takeover news could blast the shares higher – which is why I recommended holding the ISIS January 2008 10 Calls (LFE AB).

Looking to next week, we could have another great week of trading – as a handful of exciting set-ups are currently taking shape. First off, Infosys Technologies (INFY – NASDAQ) has experienced a healthy sell-off, which could be a great set up to play the next rising leg. If the stock finds support at the 50-day moving average, it could be ideal for 2-3 month calls.

At the same time, Allegheny Technologies (ATI – NYSE) continues to be strong as ever. I see no reason why the stock can’t trade for $120 or even $130, so it may be time to re-enter calls on them as well.

I also could have a longer-dated “pure play” on the tremendous boom in gift-cards in the United States. As you know, gift cards have exploded onto the scene in the past few years – and now you see them everywhere from gas stations to restaurants to every retail store in America. The company that manages the balances on these gift cards is called Ceridian Corporation (CEN – NYSE).

They’re actually a Human Resource management business, but they have quietly developed a secondary arm of their business called the Comdata segment — and business is going gangbusters. I’d like to see if the stock can fill the gap around the $30 to $32 level before issuing a new upside play — so stay tuned. As always I’ll keep you fully posted. And until then…

Lock and load!

Sincerely,