A Multitude of Candidates

Play BA Puts, JEC Calls

Dear Bottarelli Research Member,

As we kick off this Columbus Day trading week, we’re faced with a multitude of exciting opportunities that I’ll highlight below. And I’d like to begin by highlighting one of the weakest components on the Dow: Boeing (BA – NYSE).As you can see from the chart, BA was one of the only Blue Chip stocks to lose ground during last Friday’s jobs-related rally, and this established the technically significant double-top chart formation.

The last time BA experienced resistance at the $106 level, the subsequent down-move took shares all the way down to $94.00, good for a $12.00 haircut in less than one calendar month. If the same pattern holds today, then BA could easily move down $5.00 to $10.00 here in October, so let’s go ahead and profit off this move using November puts. Here’s the play:

PLAY: Buy the BA November 105 Puts (BA WA) at or under $6.10, good for the day. Current bid/ask spread is $5.60 to $5.80. Place a protective stop limit at $3.30.

Now that we own some exposure to the downside, we can highlight those stocks that could be continuing their strong upward advances. Topping this list is the strong performance late past week of two major transport companies, Burlington Northern Santa Fe (BNI – NYSE) and Union Pacific (UNP – NYSE).

As you probably know, BNI operates 32,000 miles of freight transportation services in 28 states and 2 Canadian provinces — carrying commodities like coal and other agricultural products. As you can see from the chart below, BNI just made a strong upside breakout above its 50-day and 200-day moving averages but is giving back a little of these gains today. This could be a nice entry point.

Along the same lines, UNP operates 32,339 freight miles that link Pacific and Gulf Coast ports with the Midwest and eastern United States — shipping commodities like lumber, steel, paper, food, chemicals, and coal. Just like BNI, shares of UNP have also witnessed a similar bullish breakout above its 50-day and 200-day moving averages — which could signal further strength ahead.

Another play quietly hitting new highs is Jacobs Engineering Group (JEC – NYSE). Similar to our recent plays on Foster Wheeler and McDermott International, JEC provides global construction services to industrial, commercial, and governmental customers — and momentum is clearly present in this powerful sector niche. The chart signals further strength in this continually strong sector, so let’s establish a new upside call play now.

PLAY: Buy the JEC November 80 Calls (JEC KP) at or under $6.20, good for the day. Current bid/ask spread is $5.90 to $6.00. Place a protective stop limit at $3.30.

Also on the move are hotel stocks. With hotel companies like Hilton Hotels (HLT – NYSE) hitting new highs, we could have a bullish upside trigger for Orient-Express Hotels (OEH — NYSE). Considered the most opulent of the hotel chains, OEH operates 49 properties that include 39 deluxe hotels, 2 restaurants, 6 tourist trains, and 2 river cruise ships. As you can see below, the stock has been moving higher — and all signs point to this trend continuing. Let’s keep an eye on OEH for future upside movement.

Another company breaking out is Immucor (BLUD – NASDAQ). The company’s products are critically important in hospitals, clinical laboratories, and blood banks because they’re used to detect and identify properties in human blood prior to blood transfusions — and thanks to bullish comments last week, the stock looks poised to move higher. Watch BLUD for a pending upside play.

Let’s also not forget about the looming upside trigger in InterContinental Exchange (ICE – NYSE).We’ve successfully played call options on ICE before — based on rumors of substantial investment dollars that’ll soon be flowing into ICE from wealthy Middle Eastern investors. This situation is still present, so let’s keep ICE on our watch list for upside call possibilities.

Also making news is shares of Sotheby’s (BID – NYSE). The New York based auctioneer of fine art, antiques, jewelry, and collectibles has a big fall art sale happening November 2^nd to 7^th, and the featured item at this sale will be Van Goh’s The Fields, which could reportedly sell for upwards of $35 million. You better believe BID will love the commissions from this sale, which could spark buying activity leading into November. Watch BID for a coming play.

And finally, the upward trajectory of emerging-market telecom stocks continues to blast higher. Take Philippine Long Distance Telephone (PHI – NYSE), for example. Based in Makati City, the company currently has 24,175,384 subscribers — and that total is rapidly growing by the day. The chart clearly tells the upside story:

Unfortunately, the options string on PHI looks to have been pulled off the market, so the next best opportunity comes in shares of Telefonica SA (TEF – NYSE). TEF provides fixed and mobile telephony services in Spain, Europe, and Latin America, and you can see the strength of their stock chart below:

After a strong upside run, the stock is in the process of establishing a new support point between $80 and $83. The moment we see signs of support, a new call play could be on its way. As always, I’ll be watching all of these plays — and many others — for trade opportunities.

Oh, and continue to hold your FCX November 110 Calls (FCX KB), as the November expiration gives us ample time for FCX to engage in the upside run that I expect. In fact, I may add to this position if the conditions present themselves. If we should add, you’ll be the first to know.

Until then…

Lock and load!

Sincerely,