Can 14,000 Hold?

Play FWLT Calls Now

By Bryan Bottarelli
Wednesday, October 17, 2007 10:29 AM EDT
Wed, 17 Oct 2007 14:29:00 GMT

Dear Bottarelli Research Member,

Buying technology stocks heading into the 4th Quarter has been a strategy that’s worked for the last four years. And when you see today’s news out of Intel (INTC – NASDAQ) and Yahoo (YHOO – NASDAQ), which are trading up 4% and 7% respectively, it appears like this tactic will be “in play” again this year.

But before jumping into a fresh round of calls, it’s important to study today’s early trading action. You see, the Dow opened the day with a +90 increase, but has since given back over half of these early gains. It’ll be very important to see if the Blue Chips can once again hold at the 14,000 level. If so, then we’ll commit to trading calls for an extended upside move. If the 14,000 level does not hold, we’ll over-weight the put side of the ledger, because the down-move back to the 50-day MA could be quite substantial. Check out today’s Dow chart and you’ll see what I mean:

INDU

As we wait for this tug of war to play out, I have two potential upside play candidates lined up. The first comes in the form of Cummins (CMI – NYSE). The company reports earnings on October 25th, and this could be the trigger that attracts buyers into the stock leading up to this announcement — and this could spark an upside push back over the $140 level.

CMI

Also looking strong is Foster Wheeler (FWLT – NASDAQ). The stock looks poised to break to new highs north of the $150 level leading into their November 7th earnings announcement. It looks so strong, in fact, that I’m willing to add a new November call position before getting overall upside market confirmation. Here’s the play:

FWLT

PLAY: Buy the FWLT November 155 Calls (UFG KK) at or under $9.20, good for the day. Current bid/ask spread is $8.20 to $8.80. Place a protective stop limit at $4.20.

Also, continue to maintain your HES November 70 Calls (IGG KN) and your X November 105 Puts (X WA), which offer you both upside and downside exposure. After all, until the market tips its hand, we must continue to be nimble with our intra-day trading. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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