Play MGM Puts/CROX Calls Now

If MGM Breaks 50-Day MA, Look Out Below!

By Bryan Bottarelli
Tuesday, July 24, 2007 10:32 AM EDT
Tue, 24 Jul 2007 14:32:00 GMT

Dear Bottarelli Research Member,

I personally feel that this morning’s dip could be another buying opportunity. After all, the trading tactic of “buying the dips” has worked for the last few months, so I’m not ready to abandon this winning philosophy just yet. But at the same time, we need to le the selling pressure run its course. So as we wait for a near-term bottom to form, we have an immediate put-buying opportunity in shares of MGM Mirage (MGM – NYSE).

MGM

As you can see by the chart, the stock is on the verge of breaking below its critical 50-day moving average. If this occurs (and it might be taking share right now) the stock has a ton of room to fall. In fact, the next major support level is down at $62.50, which is a full $15.50 lower than current levels! Needless to say, this could be quite a fall, so let’s participate in any pending down-moves via MGM August puts. In fact, we could see heightened selling pressure leading up to the company’s August 2nd earnings announcement, so here’s the play:

PLAY: Buy the MGM August 80 Puts (MGM TP) at or under $3.70, good for the day. Current bid/ask spread is $3.50 to $3.70. Place a protective stop limit at $2.80.

At the same time, I’d like to make a pure momentum play on plastic-shoe maker CROCS (CROX – NASDAQ). As you can see by the chart, the stock has (once again) displayed amazing support at the 50-day moving average, and yesterday’s upside tick leads me to believe that the stock will soon be breaking out to a new 52-week high above $50.00. Let’s get positioned to ride this upside move using August calls. Here’s the play:

CROX

PLAY: Buy the Crocs August 50 Calls (CQJ HJ) at or under $3.50, good for the day. Current bid/ask spread is $3.20 to $3.30. Place a protective stop limit at $1.90.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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