CMI Testing Its 50-Day MA

Add September Calls Now

By Bryan Bottarelli
Friday, August 24, 2007 10:27 AM EDT
Fri, 24 Aug 2007 14:27:00 GMT

Dear Bottarelli Research Member,

Despite today’s early-session gains, I’d still like to maintain exposure to the downside. Therefore, continue holding your BEN September 130 Puts (BEH UF) and your MCO September 50 Puts (MCO UJ). But at the same time, let’s once again equal out the ledger by adding one new upside call position — and today’s candidate comes in the form of Cummins (CMI – NYSE).

CMI

Cummins designs, manufactures, and distributes diesel and natural gas engines — and the stock has been hitting on all cylinders (pun intended). Their engine emission solutions are expected to drive their forward revenue and EPS growth, and as you can see by the chart, the stock looks like it’s hammering out a near-term bottom right at the 50-day moving average. Let’s use this bottom formation as an opportunity to add September calls — and ride the stock higher as it looks to re-test its recent high at $125. Here’s the play:

PLAY: Buy the CMI September 115 Calls (CDM IC) at or under $5.70, good for the day. Current bid/ask spread is $5.10 to $5.60. Place a protective stop limit at $3.00.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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