Two New Plays

Add SHLD Puts, CSIQ Calls

By Bryan Bottarelli
Monday, August 25, 2008 10:14 AM EDT
Mon, 25 Aug 2008 14:14:00 GMT

PLAY: Buy the SHLD September 85 Puts (KTQ UQ) at or under $4.80, good for the day. Place a protective stop limit at $2.90 and a pre-determined sniper sell at $6.40.

PLAY: Buy the CSIQ September 35 Calls (GQA IG) at or under $2.10, good for the day. Place a protective stop limit at $1.00 and a pre-determined sniper sell at $2.80.

Dear Bottarelli Research Member,

Good Monday morning.As we kick off a new trading week, I’d like to highlight a particular quote that I liked from Alan Abelson.

If you’re not familiar with Abelson, he writes the lead column each week in Barron’s, and the guy is as bearish as they come. Being an optimist myself, I typically skim his stuff before getting into the meat of the issue. But this week, he had a particularly good line about Friday’s 196-point market rally. He said, “Lifting inventors spirits, too, was the assurance by Ben Bernanke at the annual Jackson Hole blahfest that inflation might be getting better — unless it wasn’t.”

I felt this line perfectly described the status of the Fed. After all, the Fed has done an awful job of anticipating the current financial crisis, so I’m certainly not going to believe them when they say that inflation is cooling off. As Abelson says, the Fed will hold this opinion until some new data proves them wrong. At which time, they’ll shrug their shoulders and say, “we’re closely monitoring it.”

I don’t want to spend too much time ranting about this issue, but I bring it to your attention because it sets the tone for two new plays this morning. The first is another round of puts on Sears Holdings Corporation (SHLD – NASDAQ) leading into their August 28th earnings announcement. The second is a new upside play on Canadian Solar (CSIQ – NASDAQ).

Starting with SHLD, a momentary 2-day upside run last Thursday and Friday appears to be giving out — and this should snap SHLD back into its established downside trend.

SHLD

Later in the week, Sears is expected to report earnings of $0.36 versus $1.17 one year earlier, which is quite a year-over-year fallout. This could set the tone for another downside push. But at the same time, I’m fully aware how Wall Street tends to reward stocks that “beat” the earnings expectation, so if we’re showing a quick profit, I’ll take this play off the table prior to their earnings. As for today, let’s play SHLD down.

PLAY: Buy the SHLD September 85 Puts (KTQ UQ) at or under $4.80, good for the day. Place a protective stop limit at $2.90 and a pre-determined sniper sell at $6.40.

At the same time, I’d like to play a pending upside breakout on Canadian Solar (CSIQ – NASDAQ).Solar stocks have been rather strong recently, noted by earnings blowouts and major new contracts from companies like STP, SPWR, and JASO. I would expect similar upside patterns in CSIQ, so let’s get positioned to ride this momentum now.

CSIQ

PLAY: Buy the CSIQ September 35 Calls (GQA IG) at or under $2.10, good for the day. Place a protective stop limit at $1.00 and a pre-determined sniper sell at $2.80.

Also, maintain your MOS September 110 Calls (MOS IY), as an upside breakout above the 200-day moving average could quickly push shares higher. Your calls have traded as high as $8.20 today, so we’re moving closer to our profit target of $8.90.

MOS

When it’s time to sell, you’ll be the first to know. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From August 2008