Add LVS Puts

Plus: Maintain UNP Into Next Week

By Bryan Bottarelli
Friday, February 15, 2008 1:57 PM EST
Fri, 15 Feb 2008 18:57:00 GMT

PLAY: Buy the LVS March 85 Puts (LVS OQ) at or under $4.30, good for the day.

Dear Bottarelli Research Member,

Today’s Dow chart doesn’t look good. For example, the February high of 12,750, which was set on the first trading day of this month, is acting as the near-term high. But as you can see below, yesterday’s failure to hold above the 12,500 level has established a lower-high. And like I mentioned yesterday, this is not a good technical formation.

INDU

On a day like today, where we we’re faced with February options expiration combined with a long three-day market holiday, I typically don’t like putting any profits at risk. That’s why we locked in profits on our DIA and CRM puts this morning. But as we head into the close of the trading week, I would like to issue one final put play. The thinking is that we’ll combine this new put position with our UNP calls, and no matter which direction the markets open on Tuesday, we’ll be in position to lock in a gain.

Today’s newest downside play comes in the form of Las Vegas Sands (LVS – NYSE). As you can see from the chart below, shares of LVS have rebounded rather nicely off their $70.00 low in mid-January. But now, the stock is experiencing a new round of resistance as it approaches its 50-day moving average above $90.00. This signals that a move back down is on the horizon, so the time to play puts is now.

LVS

PLAY: Buy the LVS March 85 Puts (LVS OQ) at or under $4.30, good for the day. Place a protective stop limit at $2.10. Plan to “sniper sell” these puts if they trade at or above $4.80.

Another downside catalyst for LVS could be the recent movements of competing casino operations like Wynn Resorts (WYNN – NASDAQ) and MGM Mirage (MGM – NYSE). WYNN just reported fourth-quarter earnings on Tuesday, which actually came in rather strong. But CEO Steve Wynn cautioned that WYNN may not experience continued growth in Las Vegas, and this is pushing shares lower today.

WYNN

Also moving in a similar pattern is MGM, with shares threatening to break underneath their previous low at $65.00. If LVS follows this same pattern of WYNN and MGM, we could expect to see a sharp downside move coming soon, so let’s get positioned to profit off this fall using the LVS March puts noted above.

MGM

*NOTE: The financial markets are closed next Monday for President’s Day, so we’ll resume our trading on Tuesday. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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