Play PBR and MOS Calls

Targeting More Upside Momentum

By Bryan Bottarelli
Wednesday, December 05, 2007 11:09 AM EST
Wed, 5 Dec 2007 16:09:00 GMT

Dear Bottarelli Research Member,

One look at the chart below and you’ll see that the Dow is calling the 200-day moving average a strong support point. But although this is a bullish sign, don’t take too much comfort in it. After all, we have another resistance level at the 50-day moving average, which is only 200 points above current levels.

INDU

Now, if the Dow can penetrate this 50-day moving average and call this level a support point, then we’ll rally into the New Year. But if the Dow cannot penetrate this level, when we’ll probably see move intra-day volatility, biased to the downside, over the next 2-3 weeks. So the next 200 points on the Dow are very critical going into the close of the 2007 calendar year, and as always I’ll keep very close tabs on the situation.

In the meantime, let’s capitalize on today’s upside momentum using Petroleo Brasileiro (PBR – NYSE). As you have probably noticed, I’m getting more and more into these International plays — which offer us a certain level of protection against a violent U.S based sell-off. In the past, we’ve successfully played International telecom and mining plays, so today let’s jump into the oil/gas sector.

PBR

Founded in 1953 and based in Rio de Janeiro, Brazil, Petroleo Brasileiro engages in the exploration, exploitation, and production of oil from reservoir wells in Brazil. They also supply and distribute gas and power in Argentina, Angola, Bolivia, Colombia, Ecuador, Equatorial Guinea, Iran, Libya, Mexico, Mozambique, Nigeria, Paraguay, Peru, the United States, Tanzania, Turkey, Uruguay, and Venezuela.

As you can see by the chart, PBR is just now bouncing off its 50-day moving average, which could spark another upside run at the $120.00 level. Let’s get positioned to ride this move using December calls.

PLAY: Buy the PBR December 100 Calls (PMJ LT) at or under $5.70, good for the day. Current bid/ask spread is $5.00 to $5.40. Place a protective stop limit at $2.90.

Also setting a new 52-week high today is Mosaic (MOS — NYSE). The agricultural sector continues to be red hot, and the phosphate fertilizer company looks poised to extend its recent gains over the next few days. Let’s catch a ride on this strong upside momentum using December calls as well.

MOS

PLAY: Buy the MOS December 75 Calls (MOS LO) at or under $4.40, good for the day. Current bid/ask spread is $3.70 to $3.90. Place a protective stop limit at $2.10.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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