Playing the Worldwide Rally

EEM and ETR Trigger Upside

By Bryan Bottarelli
Monday, April 16, 2007 12:28 PM EDT
Mon, 16 Apr 2007 16:28:00 GMT

Dear Bottarelli Research Member,

As I’ve been saying all month, we want to be biased towards the upside here in the month of April. As a mid-month follow-up, this thesis has been right on the money — as today’s 100-point gain on the Dow has sparked a plethora of new 52-week highs. Most notably, both the S&P 500 and the S&P 100 are now trading above their pre sell-offs highs, setting the table for more gains to come. Just look at today’s S&P 500 chart and you can see just how strong the markets have recovered:

SPY

Armed with a continued upside bias, I’d like to highlight two new candidates that are exhibiting continuous bullish characteristics. First up is the iShares MSCI Emerging Markets Index (EEM – NYSE), which is an equity benchmark for international stock performance.

EEM

This asset grabbed my attention because the International Monetary Fund just reported that the world economy is growing 4.9% this year, extending its streak of 4% (or more) annual gains to six years. Now here’s the important point: At the same time, the IMF also reported that U.S. growth will slow to 2.2% in 2007, down from 3.3% in 2006. So if you think the gains we’ve seen in the US major market indices are impressive (as noted by the S&P’s strength above), then the gains on a worldwide scale are even better! And this makes a strong case for owning EEM.

With the EEM, you own a comprehensive basket of companies with international upside exposure — all in one simple to follow (and liquid) trading vehicle. As major investors begin to realize what you just learned (that indices on a worldwide scale are growing at a rate that’s double the US), you’ll begin to see increasing amounts of funds transferring into these more powerful international indices — and this money flow should continue to drive the upside momentum of the EEM. Let’s capitalize on this fund transfer by playing June calls on EEM. Here’s the play:

PLAY: Buy the EEM June 125 Calls (EEM FE) at or under $4.70, good for the day. Current bid/ask spread is $4.30 to $4.60. Place a protective stop loss at $2.20.

Also exhibiting strong upside characteristics is Entergy (ETR – NYSE). They are the owner of the second-largest atomic power plant in the United States — serving 2.6 million utility customers primarily in Arkansas, Mississippi, Texas, and Louisiana.

ETR

As you can see by the chart, the temporary down-move that occurred last week has been quickly bought up, signaling that the stock is internally strong and poised for further upside movement. Let’s ride this upside via June calls as well. Here’s the play:

PLAY: Buy the ETR June 110 Calls (ETR FB) at or under $4.00, good for the day. Current bid/ask spread is $3.70 to $3.90. Place a protective stop loss at $$2.50.

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 April 2007