Taipan Online: Hotline

Hi, there – Martin Denholm here, checking in from Southampton on England’s south-coast, where the weather is (shock, horror) cloudy and overcast! Not complaining, however, as the very comfortable temperature makes for a pleasant change from the sweaty 85 degrees back at Taipan HQ in Baltimore (well, far too sweaty for sun-scared Brits like me, anyway!)

OK, first order of business today comes courtesy of Sara Nunnally at the WaveStrength team, who has a brief update for you on the nuclear energy plays from the August Taipan issue, as I inadvertently omitted the entry price recommendation for one of the calls. Sara explains:

“When Ann and I reissued a buy on the CEG January ’06 60 Calls (CEG AL) and EXC January ’06 55 Calls (EXC AK) in a Taipan Alert from Thursday, August 18, the buy price for the CEG calls was mistakenly left out.

“So here’s what we’ve done:

“Regarding the CEG calls, we’re recording an entry price of US$2.10, the average price taken from the open and close of Friday, August 19. Those calls closed Friday August 26 at US$2.50 – a healthy 19% gain.

“As far as the EXC calls are concerned, we told you to buy under US$1.60 and recorded an official entry price of US$1.55. Those calls closed last Friday at US$1.70 – a 9.7% gain so far.

“Continue to hold both positions, as well as the underlying stock recommendations that we made in the issue.”

BIDING TIME WITH ABERCROMBIE

Sticking with the options theme, I want to give you an update on the state of play with the Abercrombie & Fitch September 60 Calls (ANF IL) I recommended back on August 17.

If you recall, I issued the play in response to a crazy selloff following Abercrombie’s superb second quarter earnings, figuring that ANF would quickly refill the big gap created. Having hit a 52-week high of US$74.10 on July 7, ANF stock traded around US$63 at the time of the earnings announcement, but got beaten down to the mid-US$50’s.

Refill it did, rising to an intraday high of US$60.20 just two days later (Friday, August 19) and closed at US$59.98. The ANFIL 60 calls closed at US$2.30 – good for a 77% gain, at which point, I issued a sell on half the position (in last week’s Taipan Hotline).

At the close last Friday, ANF shares closed at US$57.39, with the calls closing at US$0.90.

Considering the entry price was around US$1.30-US$1.40, I received an e-mail during the week, enquiring what to do with the second half of the position, since it’s now down. In short, don’t sell for a loss! These options don’t expire until September 16, so we have a little time yet for both the underlying stock and options to rise again. Hold for now and I’ll keep you posted on the situation.

We now move on to my colleague Andrew Snyder, with an update of his own on his August Taipan recommendation:

ALAN TAKES A HIT…BUT CREATES STRONG BUYING OPPORTUNITY

“Over the last several days, I’ve received a few emails from subscribers asking about Alanco Technologies (ALAN:NASDAQ). With its share price dropping over 10% over the past couple of weeks, the basic question was whether or not I still recommend the stock.

“My answer is a vehement “yes.” If you haven’t already, buy it now. At the close last Friday, ALAN shares sat at US$0.83, just above a resistance level at US$0.80. On more than one occasion, the stock has made a healthy bounce off of that resistance.

“I’m not the only one who knows that either. Last Monday afternoon, ALAN hit US$0.80, and a large volume spike popped up nearly instantly. There are a lot of people that want shares of ALAN at this price. You should be one of them.”

This just in from Ian Cooper:

A “99-ER” FOR NETEASE

“When Chris DeHaemer first recommended a buy on Netease.com Inc (NTES:NASDAQ) on August 27, 2004, it was only trading at US$35.88. But despite pressure on the broader market, NTES is showing relative strength, moving to US$71.41 at last Friday’s close. That’s a 99% gain in about a year’s time.

“We’re not recommending you sell it any time soon. Higher highs and higher lows will keep us in this for the long haul.”

That wraps it up for this week. Talk to you again soon.

Martin Denholm

Executive Editor, Taipan

MMM

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