Three Candidates

Watch BG, AKS, FCSX

By Bryan Bottarelli
Thursday, April 10, 2008 2:43 PM EDT
Thu, 10 Apr 2008 18:43:00 GMT

Dear Bottarelli Research Member,

As you can see from the Dow chart below, the Blue Chips are attempting to hover above the 50-day moving average. While it’s nice to see the bulls supporting the indices above this critical level, we’re still left in a period of market indecision — one where we will probably witness a re-test of the 50-day moving average in the coming days.

INDU

Therefore, it makes sense to maintain an equally-weighted position of May calls and puts.

So continue to hold your LEAP May 50 Puts (UAO QJ) and your CHK May 47.5 Calls (CHK ES).Throughout today’s session, we haven’t seen any further signals that would warrant an immediate trading opportunity, so while I have a moment, I’d like to highlight some potential set-ups that I’m following which could lead to future plays.

One such opportunity is found in shares of Bunge (BG – NYSE).

BG

As you know, the agribusiness, fertilizer, and food product company has the ability to make aggressive price moves — and today’s chat shows that BG is waiting for an upside catalyst to blast it through the crossing of the 50-day and the 200-day moving averages. Looking at the company’s events calendar, they have an earnings report scheduled for Thursday, April 24th at 10:00 am EST, and this could lead to buying interest leading up to this report. Let’s watch BG for a possible upside call play.

Also noteworthy is the new 52-week high set in shares of AK Steel Holding (AKS – NYSE).

AKS

Between 2000 and 2005, world steel demand increased 6% a year. But recent futures (which have yet to be published) are indicating that the 2006-2008 demand has doubled, moving anywhere between 10%-15% per year. This is fueling a tremendous upside rally in steel stocks across the board. As a pure momentum play, AKS could extend upon this strong rally in coming days, so I’ll keep an eye on this one as well.

Also coming back to life is FCStone Group (FCSX – NASDAQ).

FCSX

The commodity risk management firm reported a 75% increase in second-quarter earnings and a 52% increase in revenue, and this has pushed shares all the way up to the crossing of their 50-day and 200-day moving averages. FCSX is still a relatively unknown company (they went public in March of 2007), but this could be the trigger that sparks an extended rally in the shares, so I’ll be watching this one as well.

If the markets turn south, it could be time for us to re-enter a gold play (like ABX calls). Of course, the moment something triggers, you’ll be the first to know. But until then,

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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