Add DO Calls

Plus, Close Out AMZN

By Bryan Bottarelli
Tuesday, July 31, 2007 1:59 PM EDT
Tue, 31 Jul 2007 17:59:00 GMT

Dear Bottarelli Research Member,

We have an immediate profit opportunity in shares of Diamond Offshore (DO – NYSE). As you can see from the chart, the stock has tested the 50-day moving average at $100 and is now bouncing – which signals further upside is on the horizon.

DO

Last Thursday, DO reported that their earnings increased 43% to $251.9 million – up from $175.7 million in June of 2006. But unfortunately, this blockbuster earnings announcement came on a 300-point down-day, and shares of DO dropped on the news. I see this as a strong buying opportunity. After all, DO has locked up three new floater contracts that could extend into 2012, so all signs point to a rock-solid offshore oil and gas drilling market for years to come. Plus, the recent merger of drilling rivals Transocean (RIG – NYSE) and Noble (NE – NYSE) indicates that more deals could be in the works, so let’s establish a position on DO now.

PLAY: Buy the DO August 105 Calls (DO HA) at or under $3.60, good for the day. Current bid/ask spread is $3.40 to $3.60. Place a protective stop limit at $2.10.

At the same time, let’s close off our speculative trade on Amazon (AMZN – NASDAQ). Although the market has moved up, AMZN has not been able to particulate in the gains, so let’s make the prudent choice and close off our speculative position in the AMZN September 85 Calls (ZQN IQ).

Also, let’s keep a sharp eye on Entergy (ETR – NYSE). The nation’s second-largest nuclear plant operator is not only bouncing off the 200-day moving average, but they’re also attempting to break past the 50-day moving average — all in one shot!

ETR

If ETR can hold the line at the 200-day moving average, then we can make a quick play targeting a 50-day moving average breakout as well, so let’s keep a close eye on ETR for a pending trade. In the meantime, maintain your DRYS August 60 Calls (DQR HL) and your BX September 25 Puts (BX UE). And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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