Add BEN Puts

Plus, Hold DO and JASO

By Bryan Bottarelli
Thursday, February 28, 2008 11:29 AM EST
Thu, 28 Feb 2008 16:29:00 GMT

PLAY: Buy the BEN March 95 Puts (BEN OS) at or under $2.00, good for the day.

Dear Bottarelli Research Member,

As you can see below, the Dow is experiencing some slight weakness this morning at the 50-day moving average. The two most recent examples of the Dow coming up to its 50-day moving average occurred in December of 2007, and each time witnessed the Dow jumping above this level before the bears took control.

INDU

Nevertheless, we must respect the downside threat. Therefore, I’d like to add one new downside put position on Franklin Resources (BEN – NYSE).

BEN

As you can see from the chart, shares of the asset management company are finding weakness right at the 50-day moving average, and this signals that this is a clear area of resistance. As a result, shares could easily fall back to $95 or even $90, so let’s profit off this down-move using BEN March puts. Here’s the trade:

PLAY: Buy the BEN March 95 Puts (BEN OS) at or under $2.00, good for the day. Place a “sniper sell” at $2.50 and a protective stop limit at $1.00.

In terms of our two upside calls, I’m happy to see shares of Diamond Offshore Drilling (DO – NYSE) finding strength at its 50-day moving average. As I’ve mentioned before, these oil service stocks tend to beat to their own drum — which is why the stock was down over $3.00 yesterday for no apparent reason. But in today’s trading, our DO March 130 Calls (DO CF) have traded back up to our entry point, so maintain the position with a “sniper” sell at $3.00.

DO

Also holding its own is JA Solar Holdings (JASO – NASDAQ). The longer-dated JASO April 15 Calls (QJP DC) that we entered for $2.40 are also at break-even, so the tactic here is to hold these calls until the day comes that solar stocks all rise aggressively on some news item (analyst upgrade, good earnings report, ect). When this group moves, it moves fast, and these April JASO calls put is in good position to profit off any upside moves.

JASO

Also showing upside strength today is Bunge (BG – NYSE). The agribusiness and fertilizer company hit a new 52-week high at $135.00 on January 15th, but has since sold off and moved lower. Then today, the stock is making a strong push towards its 50-day moving average, so I’ll keep a close eye on this one for a possible upside call play.

BG

Rumor on the street is that BG’s 2008 earnings estimates are way too low, and this could set up a situation in which BG blows away earnings in their next report. I’ll keep you informed on this situation, but until then:

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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