SII Follow Up

Trying to Maintain Calls

By Bryan Bottarelli
Thursday, February 07, 2008 10:57 AM EST
Thu, 7 Feb 2008 15:57:00 GMT

Dear Bottarelli Research Member,

For a brief period this morning, shares of oil server Smith International (SII – NYSE) dipped lower — which may have triggered our $1.70 stop loss. But just as quickly as the stock dropped, it reversed course and recovered — which pushed our SII March 60 calls (SIK CL) back up to $2.10. Looking at the SII stock chart, I still feel that shares are hammering out a bottom, and therefore I’d like to stick with these calls. I received a handful of notes from members saying that their stop loss prices occurred so fast that they did not trigger, so if you’re still holding these calls, I will continue to follow them and offer guidance.

SII

Yesterday, the Board of Directors at SII approved a 20% increase in their quarterly cash dividend, and this should offer a nice incentive for shareholders to add to their stock position. And in a similar pattern, shares of the entire Oil Service sector, as denoted by the Oil Services HOLDRs (OIH), also looks to be establishing a higher-low, and this further supports my position that this collection of stocks could quickly move higher on any forthcoming market strength.

OIH

Now, the markets have once again been very choppy this morning, so I completely understand if you took the safe route and adhered to the $1.70 stop loss. In fact, if SII shares push lower and trigger these levels once again, I will call this position closed. But for now, my read of SII’s stock chart, along with our extended March expiration, leads me to believe that we should stick with these calls as long as we possibly can. All it’ll take is one strong day to get this position back into the black, so for now, I will continue to follow this position.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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