Mid-Day Update

Comments on MRO, GPRO, KSS, & ICE

By Bryan Bottarelli
Wednesday, August 15, 2007 2:06 PM EDT
Wed, 15 Aug 2007 18:06:00 GMT

Dear Bottarelli Research Member,

Unlike previous intra-day sessions, today’s action has been relatively muted. So while we have a quick moment, allow me to comment on both the current U.S. markets and our open positions. We’ll begin by looking at the status of the Dow.

INDU

As you can see from the chart above, the Dow is awfully close to touching its 200-day moving average. And looking at today’s upside tick, it appears like the Blue Chip average wants to call this level a support point. For this reason, I’d like to remain slightly biased to the upside — and this warrants holding the line on all of our current positions.

Looking at Marathon Oil (MRO – NYSE), the stock is just now re-testing support at the 200-day moving average, and I feel this level will hold. After all, we have a potential upside oil price catalyst with the formation of Tropical Storm Erin in the Gulf of Mexico, which could potentially threaten oil and gas facilities on the Texas coast. At the same time, the U.S. military just launched a major new offensive in Iraq — and this could lead to further oil price increases in the coming days. All things considered (MRO’s 200-day MA test, a tropical storm due to hit Texas on Thursday, and a new Iraq offensive), I think it’s safe to continue holding our MRO September 55 Calls (MRO IK). If you have yet to own this position (or you’d like to add to your position) this could be a good place to do it.

MRO

At the same time, I’d like to remain biased to the downside in Kohl’s (KSS — NYSE). You already know that Wal-Mart (WMT – NYSE) was a major retail disappointment yesterday, but even more specific to KSS was today’s news out of Macy’s. The high-end retailer reported a whopping 77% drop in their fiscal second-quarter net income. They reported net income of $74 million ($0.16 per share) versus $317 million ($0.57 a share) one year earlier. They also cut their sales outlook and projected annual earnings below analysts’ expectations. To my eye, this announcement doesn’t bode well for the upcoming earnings announcement in KSS tomorrow. I admit, holding a position into earnings always involves additional risk, but in this case, I think it’s worth it. Maintain your KSS September 60 Puts (KSS UL).

KSS

The best looking stock of the group is Gen-Probe (GPRO – NASDAQ). As you can see below, it looks like the stock will call the 50-day moving average a support point, and this signals further upside gains on our GPRO September 60 Calls (PSU IL). Hold for more gains.

GPRO

And finally, our “super-speculative” play on InterContinental Exchange (ICE – NYSE) is truly living up to its reputation. As you can see below, shares of ICE have moved notably lower over the last few days — and this down-move has taken them very close to their 200-day moving average. I consider this level a major support point — and this leads me to believe that ICE could put in an aggressive bounce anywhere at these current levels.

ICE

I mentioned to some members who decided to maintain this position that I’d continue to follow it, and that’s why I’ll continue to monitor the play. In fact, if you’re still holding the ICE calls, I recommend that we capitalize on this over-sold position and add to our ICE September 170 Calls (IHH IN). With these calls currently trading between $1.75 and $1.85 per contract, this would significantly lower our cost average — offering you the opportunity to capitalize on any sudden price increase going into September. If you have yet to enter this play — and you have the tolerance for high volatility and/or the appetite for big returns — then feel free to add this position to your “speculative” trading ledger.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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