Two Additional Plays

Add MRO and ITRI Calls

By Bryan Bottarelli
Wednesday, June 27, 2007 12:29 PM EDT
Wed, 27 Jun 2007 16:29:00 GMT

Dear Bottarelli Research Member,

Take a look at today’s chart of Marathon Oil (MRO – NYSE). Talk about a strong support point!

MRO

As you can see, shortly after splitting its shares 2 for 1, MRO has been experiencing weakness that I feel has now become way overblown. In fact, today’s candlestick formation has taken the stock right down to the 50-day moving average — which immediately sparked a very strong intra-day recovery. With a move like this, I think it’s a very good idea to add MRO August 60 calls. A continued upside move from these levels could produce a tremendous short-term winner, so let’s go ahead and add this position now.

PLAY: Buy the MRO August 60 Calls (MRO HL) at or under $2.90, good for the day. Current bid/ask spread is $2.70 to $2.90. Place a protective stop limit at $1.40.

I also have an interesting play forming up in the water sector. While traveling to Las Vegas recently, I was shocked to look out of the airplane window to see the water levels of Lake Meade at such low levels. This picture of Lake Meade is a good example of what I’m talking about.

ITRI_Image

The calcium deposits in the water leaves the white marks, showing you just how much the lake levels have dropped. And if the drought continues to pinch water supplies, you could see increased investor activity in the water sector. In fact, the PowerShares Water Resources (PHO — AMEX) just reached a new 52-week high, and this promoted me to study the components of this index. I discovered a very strong upside stock in the form of Itron (ITRI – NASDAQ). Take a look:

ITRI

The company provides automated meter reading (AMR) technology and real-time analytic applications for energy and water providers worldwide, and the stock’s recent strength looks like it’ll gradually continue over the next two months. I’d like to use today’s slight pullback to establish an August call position, which I expect to be a little less volatile than some of our other recent plays. Here’s the trade:

PLAY: Buy the ITRI August 75 Calls (IUP HO) at or under $4.50, good for the day. Current bid/ask spread is $4.10 to $4.40. Place a protective stop limit at $2.60.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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