Add DO Puts

Play Another Downside Mover

By Bryan Bottarelli
Wednesday, July 29, 2009 10:45 AM EDT
Wed, 29 Jul 2009 14:45:00 GMT

PLAY: Buy the DO August 90 Puts (DO TH) at or under $3.90, good for the day. Place a protective stop limit at $2.10 and a sniper sell at $6.50.

Dear Bottarelli Research Member,

First off, congratulations on your FCX winner. It’s always nice to start with day with a 40% gain! Since the chart pattern that I used to identify the FCX play worked so well, I scanned for other commodity-based plays exhibiting similar formations. And low and behold, I came across offshore oil and gas drilling contractor Diamond Offshore Drilling (DO – NYSE). As you can see below, DO is also experiencing double-top weakness, which could lead to a move back down to $85.00 (or below). Let’s profit off this dip using August puts.

DO

PLAY: Buy the DO August 90 Puts (DO TH) at or under $3.90, good for the day. Place a protective stop limit at $2.10 and a sniper sell at $6.50.

At the same time, Campbell Soup (CPB – NYSE) announced that they expect to surpass their long-range earnings growth target this year, which lead to an analyst upgrade. This sets a positive tone for fellow consumer goods play Kellogg’s, especially leading into their earnings announcement.

As you know, we entered the K August 45 Calls (K HI) on July 27th for $2.95 and they’ve traded as high as $3.30 today. In situations like this, my advice is to lock in profits on half of your position leading into the earnings announcement, and then hold the remaining half to participate in an earnings-induced pop. Let’s adhere to this tactical strategy today. Sell half, hold remainder.

K

I’ll update our remaining positions later today. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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