Addressing DE

Close Out Calls

By Bryan Bottarelli
Monday, March 10, 2008 3:37 PM EDT
Mon, 10 Mar 2008 19:37:00 GMT

Dear Bottarelli Research Member,

Since our last alert, news of New York Governor Eliot Spitzer’s involvement in a prostitution ring has broken into the open. For a man who has been on a personal witch-hunt for years, all under the umbrella of truth and justice, this is quite a shocking and disappointing development. Spitzer is so despised on Wall Street that cheers erupted no the trading floor when the news first broke.

In terms of the market, the major market averages have continued to deteriorate. While this is offering a lift to our LM April 60 Puts (LM PZ), which are now only $0.30 away from our pre-determined sniper sell target at $4.40, the same cannot be said for our DE April 90 Calls (DE DR). As you can see below, DE shares have continued to fall in today’s trading, and this weakness has officially triggered our stop at $1.80. Unlike our JASO play, I will stick to our trading rules and call this position closed.

DE

Now, I am still convinced that DE will be a great “buy on the dip” opportunity, but unfortunately the timing of this tactic is not applicable right now. I would have thought that any market upside (perhaps sparked by a PPT cash infusion) would push DE higher, but that’s simply not happening right now. In fact, all of the agricultural plays are getting clobbered today, so let’s sit back and let the dust settle before jumping back in. Looking ahead, the smart tactic might be to play these names with call options dated into May or June, which would give us more time for the upside strength to come back into play. After all, we all know that this group can (and will) pop back quickly, but it’s too dangerous right now to time the exact bottom. Therefore, let’s degrease our upside exposure and close out our DE calls now. If a market bottom forms up, we’ll get positioned to ride a strong bounce. But until then, take the safe route and close the play out for good. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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