One New Friday Play

Add FCX Calls, Watch DRYS

By Bryan Bottarelli
Friday, October 05, 2007 12:57 PM EDT
Fri, 5 Oct 2007 16:57:00 GMT

Dear Bottarelli Research Member

By now, you know that the market is rallying off this morning’s unemployment report. But here’s what I find interesting. The government said the U.S. unemployment rate rose to 4.7%, which was exactly what everyone expected. This is not pushing the market higher. The one news item that is driving today’s rally is the surprise upward revision to the prior month’s count, where it was reported that 93,000 jobs were somehow missed in September. How they “missed” 93,000 jobs is beyond me, but nevertheless, this is what’s providing the fuel to today’s upside move. Here’s today’s action on the Dow:

INDU

As you can see, the upside move is nice — but it’s certainly not a powerfully significant move by any means. We’re still hovering below Tuesday and Wednesdays’ 14,100 levels, which doesn’t necessarily give me overwhelming conviction that the bulls are completely in control. After all, today’s data could reduce the likelihood of another Fed rate cut later this month, and that could spark a downside move. So for today, the best course of action will be to continue our “nimble” trading pattern by carefully selecting highly-targeted calls on companies exhibiting strong upward strength.

As I’ve mentioned in past alerts, I have a nice list of companies that fit this bill, but its’ not quite time to push “all in” just yet. What I’d like to do, however, is make one new trade for today and ride the upside momentum into next week. And as much as I’d love to play calls on DryShips (DRYS – NASDAQ) right now, I think the better candidate today comes in the form of Freeport-McMoRan Copper & Gold (FCX – NYSE).

FCX

As you can see from the chart, FCX is on the verge of busting out to a new 52-week high — which could offer us a very strong advance early next week. To profit off this upside run, I’d like to establish a November call position — which offers us enough time to let FCX set a series of new highs. So in anticipation of next week, let’s go ahead and enter this position now. Here’s the play:

P:AY: Buy the FCX November 110 Calls (FCX KB) at or under $8.00, good for the day. Current bid/ask spread is $7.55 to $7.75. Place a protective stop limit at $4.30.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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