Add SQM Calls

Playing a Breakout Above $34.00

By Bryan Bottarelli
Thursday, May 14, 2009 3:27 PM EDT
Thu, 14 May 2009 19:27:00 GMT

PLAY: Buy the SQM June 35 Calls (SQM FG) at or under $2.25, good for the day. Place a protective stop limit at $1.05 and a pre-determined sniper sell at $4.50.

Dear Bottarelli Research Member,

As we close the day of trading, I’d like to introduce a company that you probably haven’t heard about. It’s called Chemical & Mining of Chile (SQM – NYSE), and they engage in the global production/distribution of potassium nitrate, iodine, and lithium. They also produce plant nutrition products that are used on crops, fruits, vegetables, cereals, and cotton, giving them a very powerful niche position in a sector that’s gaining a lot of strength.

In case you’re not familiar with iodine, it has a very wide range of uses, including medical, pharmaceutical, agricultural, and industrial applications. Specifically, it’s used in x-ray machines, antiseptics, biocides, and disinfectants. On the same hand, lithium is used in batteries, enamel, heat resistant glass, aluminum, air conditioners, steel extrusion, and pharmaceuticals. So what you have is a really diversified play on soft commodities, fertilizers, and other assorted products — all of which have been gaining momentum lately.

As you can see from the chart below, SQM is breaking out above the $34.00 level, which could offer us a strong momentum play to the upside. So, as one final trade of the day, let’s ride this upside push using June calls.

SQM

PLAY: Buy the SQM June 35 Calls (SQM FG) at or under $2.25, good for the day. Place a protective stop limit at $1.05 and a pre-determined sniper sell at $4.50.

And as always…

Lock and load.

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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