Play ATK & UA Calls

Balance Out the Ledger

By Bryan Bottarelli
Tuesday, August 21, 2007 11:05 AM EDT
Tue, 21 Aug 2007 15:05:00 GMT

Dear Bottarelli Research Member,

Right as this morning’s MCO sell alert hit the tape, the stock bounced and started moving higher. So if you’re still holding your MCO September 50 Puts (MCO UJ), maintain your $6.00 sell orders — and let’s see if we get another opportunity to lock in our gains at these level.

At the same time, let’s continue to hold the BEN September 130 Puts (BEH UF). We entered these puts for $6.00 and they’ve traded as high as $6.80 today, so let’s continue to hold onto them for more gains.

Now, to balance out our ledger, let’s add a call position on Alliant Techsystems (ATK – NYSE).The company is our country’s major ammunition supplier, serving both law enforcement agencies and commercial customers. With our troops firing more than 1 billion bullets a year, we’re facing a major ammunition shortage across the country. In fact, the Associated Press reports that police and sheriff’s departments are facing year-long delays for both handgun and rifle ammunition. The ammo demand is that tremendous. And for ATK, this incredible demand equates to ammo prices that are double what they were one year ago. That’s why the stock chart has been so strong. Take a look:

ATK

As you can see, the stock hit a high of $115.00 before coming back down and re-testing the 50-day moving average at $102.50. Now that ATK has established support at this level, it looks highly probable that the next move will be higher — and I’d like to participate in this move using October calls.

PLAY: Buy the ATK October 105 Calls (ATK JA) at or under $5.80, good for the day. Place a protective stop limit at $3.70.

Let’s also establish a new upside position in Under Armour (UA – NYSE). The leader in compression, fitted, and athletic cut microfiber gear is considered the biggest threat that Nike (NKE – NYSE) has ever seen before — and leading into football season the stock looks poised to make a new run at its 52-week high at $73.40. Take a look:

UA

Let’s ride this upside momentum using October calls. Here’s the play:

PLAY: Buy the UA October 65 Calls (UA JM) at or under $7.30, good for the day. Place a protective stop limit at $4.00.

At the same time, I think it’s time to cut bait on our speculative play on the ICE September 170 Calls (IHH IN). As you can see from the chart below, the stock has been unable to gain any sort of upside momentum that I expected off the 200-day moving average, so let’s close out this trade and move on.

ICE

I’ll be out with further updates as necessary — but until then:

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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