Dow Drops 140

A Buying Opportunity?

By Bryan Bottarelli
Monday, October 15, 2007 11:47 AM EDT
Mon, 15 Oct 2007 15:47:00 GMT

Dear Bottarelli Research Member,

One of the strongest niche sectors continues to be the engineering & construction market (as noted in my write up titled “One Final Play” from last Friday). If you have yet to read this alert, I urge you to do so. With oil prices now pushing $85.00 per barrel, names like FWLT, MDR, OII, and FLR will all continue to experience massive upside tailwinds, so we definitely need to be ready to add calls on these tremendously strong names on any pullbacks. Here’s the FWLT chart as a quick refresher:

FWLT

As we wait for the ideal time to get into these engineering and construction plays, I’ve isolated two stocks that piggy-back on other bullish themes that we’ve been successfully playing. By now, I’m sure you know my feelings on Potash of Saskatchewan (POT – NYSE) (HINT: I love it). Playing alongside this same bullish theme is a company called Mosaic (MOS – NYSE). They’re a worldwide producer of crop nutrient and animal feed, with operating segments in Phosphates, Potash, and Nitrogen. One look at the chart and you’ll see the incredible upside strength:

MOS

Another piggy-back play comes alongside the rocket-ship company DryShips (DRYS – AMEX).I’m sure you’ve witnessed how DRYS blasts to the moon day after day, and the next stock in line to follow this pattern is Excel Maritime (EXM – NYSE). Similar to DRYS, EXM owns and operates 16 dry bulk carriers that transport iron ore, coal, grains, bauxite, fertilizers, and steel products, and the chart is a thing of beauty:

EXM

With the markets trading lower today, I’m waiting for the best time to jump into all of the plays listed above. But having said that, I’d like to carefully add one new call play on EXM. As you know, the market’s direction doesn’t seem to have any effect on the dry bulk shippers, so let’s use this momentary price dip to add EXM November calls. Here’s the play…

PLAY: Buy the EXM November 75 Calls (EXM KO) at or under $7.30, good for the day. Current bid/ask spread is $6.60 to $7.10. Place a protective stop limit at $3.10.

In terms of downside put plays, let’s keep an eye on Entergy (ETR – NYSE). The northeastern electric power operator looks to be losing strength at the $115 level, which could spark $10.00 down-move back to $105.

ETR

If the bulls cannot hold up the stock any longer, we would be in the early stages of pending downside move, so watch ETR for a possible put play. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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