Rumors are Swirling

Will ATI Acquire TIE?

By Bryan Bottarelli
Wednesday, May 09, 2007 11:41 AM EDT
Wed, 9 May 2007 15:41:00 GMT

Dear Bottarelli Research Member,

Today is Fed day, which means we want to trim down on our trading positions going into this afternoon. We all know how one slight language change in a policy statement can effect the markets — so it’s always smart to keep the ledger on the lighter side leading up to this afternoon’s rate announcement.

And if you’ve noticed, we’ve effectively lightened our ledger. In fact, we’re only holing June contracts on the MON June 60 Puts (MON RL) and the protective SPY June 150 Puts (SYH RT). Depending on how this afternoon’s statement moves the markets, there are a number of set-ups that we can play.

For example, oil is down another $1.00 in today’s trading but Marathon Oil (MRO – NYSE) just set a new 52-week high at $106.20. If the timing is right, I’d like to add MRO calls on any dips.

MRO

At the same time, we’re experiencing weakness in the oil service sector. Diamond Offshore Drilling (DO – NYSE), which is a company that I mentioned earlier this week, could engage in a near-term fall. I’ll continue to monitor this situation closely — as we may have a call/put oil play combination using MRO and DO.

DO

Also, let’s not lose sight of John Deere (DE – NYSE). The stock continues to blast higher, setting a new 52-week high today at $118.84. The more I watch DE, the more I’m thinking that buying longer-dated calls on any 2-day dips will be the best tactic here. I’ll continue to monitor DE and tell you when it’s time to strike.

DE

But in the meantime, I have a play that we can make right now — and it surrounds two of my favorite metals plays: Titanium Metals (TIE – NYSE) and Allegheny Technologies (ATI – NYSE). If you’ll notice, both TIE and ATI as shooting higher today, and the upside momentum is coming on a rumor that ATI wants to acquire TIE. And if you can believe it, the take-over whisper number is $65 per share! Since TIE currently trades for $37, this is a huge deal.

TIE

Titanium Metals just reported net income of $75.0 million ($0.41 per share) for the quarter ended March 31st compared to $56.8 million ($0.32 per share) for the same quarter last year. So the numbers look great — and in this new era of M&A, I wouldn’t be surprised if ATI is looking to make a move. Let’s capitalize on this upside momentum by entering TIE calls now!

ATI

PLAY: Buy the TIE June 35 Calls (TIE FG) at or under $4.00, good for the day. Current bid/ask spread is $3.60 to $3.80. Place a protective stop limit at $2.00.

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 May 2007