Add HON Puts

Piggybacking GE

By Bryan Bottarelli
Monday, April 14, 2008 11:00 AM EDT
Mon, 14 Apr 2008 15:00:00 GMT

PLAY: Buy the HON May 55 Puts (HON QK) at or under $1.70, good for the day.

Dear Bottarelli Research Member,

We all know that Friday’s sell-off was sparked by General Electric’s (GE – NYSE) biggest single-day fall in over 20 years. See below.

GE

As you can imagine, the largest decliners on Friday were the Blue-Chip conglomerates, and to play a continuation of this theme, I’d like to introduce a new put play on Honeywell International (HON – NYSE).

HON

Similar to General Electric, HON is global and diversified technology/manufacturing company that operates in four business segments: aerospace, automation and control, specialty materials, and transportation systems. Their chart shows that the stock is just now dipping underneath its 50-day and its 200-day moving average — which is not a strong sign leading up to their earnings report on April 18th (this Friday). With three bearish indicators all lining up let’s go ahead and balance our ledger by adding put son HON. Here’s the trade:

PLAY: Buy the HON May 55 Puts (HON QK) at or under $1.70, good for the day. Place a protective stop limit at $0.90 and a sniper-sell at $2.10.

At the same time, continue to hold your SPWR May 100 Calls (QSU ET), LEAP May 50 Puts (UAO QJ), and CHK May 47.5 Calls (CHK ES).All three stocks are moving up today, which is good for SPWR and CHK but not so good for LEAP. Nevertheless, I want to remain equally hedged to both the upside and the downside, as its’ clear that the major market average still don’t have a clue as to which direction they’ll move next. Therefore, the trick is to remain exposed to both the upside and the downside — and use any intra-day volatility to lock in gainers. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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