Not Out of the Woods Yet

Near Term Puts Are Still the Play

By Bryan Bottarelli
Friday, March 16, 2007 3:04 PM EDT
Fri, 16 Mar 2007 19:04:00 GMT

Dear Bottarelli Research Member,

It’s quite clear that the markets are not out of the woods yet. After spending most of the trading session without making any major up or down move, the Dow has now broken back down to the 12,100 level on higher than normal volume. This indicates that the Blue Chip index could once again re-test the low levels that we witnessed on Wednesday of this week, which dropped the Dow below the 12,000 mark for the first time since November of last year. For this reason, I want to be sure to maintain our downside put positions.

DIA

Looking specifically at Qualcomm (QCOM – NASDAQ), we’re getting the beginning stages of witnessing the nice red “over-bought” price tick that we’re looking for — and hopefully today’s downside indication carries over into next week. The QCOM April 45 Puts (AAO PI) that we entered yesterday for $2.37 have traded as high as $2.75 today, good for a 16% gainer. Hold this position for more gains.

QCOM

I also think it’s wise to own a downside position in InterMune (ITMN – NASDAQ). As you know, we entered the ITMN April 20 Puts (IQY PD) based on the company discontinuing their key clinical trial evaluating the effectiveness of Actimmune — which is a drug candidate designed for patients with idiopathic pulmonary fibrosis (scarring of lung tissue).

ITMN

As you can see, the stock dropped heavily on this news — and I initiated puts thinking that ITMN could easily drop into the low-teens since Actimmune accounted for 90% of ITMN’s sales. Since making that put play, shares of ITMN have basically traded sideways — which has decreased the value of our puts. But the stock could receive a new series of bearishness after InterMune requested more time to file its annual report so it can fully account for the financial implications of discontinuing this late-stage clinical trial. They’ve asked to extend their filing 15 days beyond the March 15th deadline, so any time over the next 2 weeks could be the catalyst for another downside drop. After all, if the financial implications of discontinuing this trial shock Wall Street, shares could be in for another bit time fall.

At the same time, it’s also a good idea to carry positions in stocks that have strong upside potential over a longer-term time horizon, which is why I’ll continue to follow plays like our LMT June 100 Calls (LMT FT), our NDAQ June 30 Calls (NDQ FF), and our AGN April 115 Calls (AGN DC).

Of course, the key is to continue taking quick profits no matter which direction the market is moving that day — and we’ll pick up this trading tactic come next week. Until then have a good weekend, and as always…

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 March 2007