Adding CLF Calls

Plus MGM, CELG, and CMI

By Bryan Bottarelli
Wednesday, June 20, 2007 11:11 AM EDT
Wed, 20 Jun 2007 15:11:00 GMT

Dear Bottarelli Research Member,

We’re finally starting to see the downside move that we expected to see in Celgene (CELG – NASDAQ). With a successful test (and failure) at the 50-day moving average, all signs point to continued weakness.

CELG

If you’re still holding the CELG July 60 Puts (LQH SL) that you entered on June 12th for $3.20, you’re sitting right at break even today — and any continued weakness will put you into the profit zone. Continue to hold for more gains.

Also making news this morning is MGM Mirage (MGM – NYSE). I was in Las Vegas this weekend — and I saw (with my own eyes) their new multi-billion dollar City Center development right in the heart of the Las Vegas Strip. With land values rumored at $20 million per acre — and the project rumored to already be $7 billion over budget, it was not a shocker to learn that billionaire investor Kirk Kerkorian dropped his efforts to acquire this property. As you probably know, MGM’s stock has been surging ever since Kerkorian announced his intentions to buy the Bellagio and the City Center development, but today the stock is down 10% on the news that this deal is no longer on the table.

MGM

The speculation fueling the upside run was that Kerkorian’s interest would spark the sale of the entire company — which pushed shares aggressively higher. But as you cans see from today’s chart, this “buyout speculation” is no longer a possibility — so it’s time to take that premium out of MGM shares. And I must say, even with today’s big drop, it would appear that MGM has even more room to fall. There is an enormous un-filled gap between $65 and $76 per share, and it’s certainly possible that MGM could keep falling and fill at least a part of this gap. The stock is gaining a little strength here, so its’ not time to make a play just yet. I’ll continue to monitor the situation and alert you the moment it’s time to act.

Another stock making a big move today is Cummins (CMI – NYSE). We took a nice profit playing the CMI July 100 Calls (CDM GT) yesterday, but if you’re still holding this position you’re getting an even better profit opportunity today. In fact, these calls just traded for $7.60 per contract, so if you’re still holding them definitely take your profits now!

CMI

I also think it’s time to enter a new call play on Cleveland-Cliffs (CLF – NYSE). After a strong upside run on takeover speculation, the North American iron ore pellet and integrated steel company (which also serves markets in Australia) is now developing a support level right at the 50-day moving average. If this level indeed serves as support, the stock should run higher. There’s also the possibility that takeover rumors could also re-emerge, so let’s play CLF calls now.

CLF

PLAY: Buy the CLF July 80 Calls (CLF GP) at or under $3.60, good for the day. Current bid/ask spread is $3.40 to $3.50. Place a protective stop limit at $2.00.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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