Add FFIV Calls

Playing Earnings Momentum

By Bryan Bottarelli
Monday, July 20, 2009 2:44 PM EDT
Mon, 20 Jul 2009 18:44:00 GMT

PLAY: Buy the FFIV August 35 Calls (FLK HG) at or under $2.95, good for the day. Place a protective stop limit at $1.40 and a pre-determined sniper sell at $4.50.

Dear Bottarelli Research Member,

Although I still don’t like the idea of buying calls into this market rally, today’s intra-day winner on Wynn Resorts (WYNN – NASDAQ) is clear proof that we need to ride the waves of market sentiment no matter how bogus we feel they are. In that spirit, I’d like to add a new call play to our ledger on a company called F5 Networks (FFIV – NASDAQ).

FFIV

F5 Networks isn’t a company that you hear about often, but they came to my attention today after setting a new 52-week high. Similar to our recent winner on Netease.com (NTES – NASDAQ), this indicates that FFIV will keep moving higher.

Similar to competitors like Cisco Systems and Citrix, FFIV sells products that optimize the delivery of network-based applications (such as servers, data storage devices, IP networks, and firewalls). This entire sector is hot right now, and that’s why we have such a nice opportunity today. You see, FFIV is hitting new 52-week highs leading into their earnings report, which is scheduled for 4:30 PM ET on Wednesday July 22nd. Early indicators show that FFIV will beat last year’s number by 70%, which is remarkable in this environment.

So, what I’d like to do is to play FFIV August calls leading up to this report. We’ll use any momentum-inspired strength over the next two days to hit a quick winner, and then lock in profits just before the earnings announcement is released. On a momentum stock like this, you typically see an upside push leading into an earnings announcement, and we’re going to take full advantage of this run-up today. Here’s the play…

PLAY: Buy the FFIV August 35 Calls (FLK HG) at or under $2.95, good for the day. Place a protective stop limit at $1.40 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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