Add CLF Calls
Piggy-Back U.S. Steel
PLAY: Buy the CLF February 25 Calls (CLF BE) at or under $2.25, good for the day. Place a protective stop limit at $1.10 and a pre-determined sniper sell at $3.70.
Dear Bottarelli Research Member,
Despite the fact that the Dow is running rather flat lately, I still think it’s a smart idea to maintain our downside bias leading into tomorrow’s Fed meeting. Over the last eight trading sessions, the Dow has been stuck between 8,000 and 8,250, but something like a Fed announcement can certainly trigger a breakout from this range.
Therefore, continue to hold your FLR February 40 Puts (FLR NH), MHK February 35 Puts (MHK NV), and RTH February 70 Puts (RTH NN).But just to balance out the ledger, I’d like to add one upside call play — which piggy-backs on the strong earnings news that came today from U.S. Steel (X – NYSE).
Despite steel prices that plunged in the second half of 2008 (and an industry-wide slump in demand) United States Steel’s Q4 net income jumped to $308 million ($2.65 per share). By all counts, this is a blowout compared to the $35 million ($0.29 per share) that they reported one year ago.
Based on this news, shares of X are seeing a modest pop in today’s trading. To be honest with you, this is truly a powerful earnings report in today’s economic climate, yet investors remain cautious when it comes to buying shares of U.S. Steel. In any other market, news like this would have sent shares of U.S. Steel soaring. But as it stands today, the upside reaction remains muted. That’s why I think we have a strong opportunity to piggy-back these earnings by playing calls on Cliffs Natural Resources (CLF – NYSE).
Along the same lines as steel, Cliffs Natural Resources produces iron ore pellets (among other things). As you can see from the chart, the stock has just recently poked its head above the 50-day moving average, which is actually a stronger chart formation than what we’re seeing with U.S. Steel. From the technical side, CLF has another $5.00 to rally before hitting some resistance. Therefore, let’s balance out our ledger by adding CLF calls now!
PLAY: Buy the CLF February 25 Calls (CLF BE) at or under $2.25, good for the day. Place a protective stop limit at $1.10 and a pre-determined sniper sell at $3.70.
And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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