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Morning Matters:

New Buy RTH
by Geoff Garbacz

July 1, 2010

The selloff in retail names is overdone. Aa highlighted in this morning's scorecard, the largest name in the Retail HOLDRS (RTH) is undervalued by 20% to its price target.

There are no names that are above their price target in the constituents of the RTH. Sure these names can go lower BUT we can hedge this buy idea and we will. This is exactly what we did with V and MON.

Therefore, we will buy the the July $85 put for $1.70 with an adjustment on the 9:45 price. Like Monsanto (MON) we will probably role this into future expiration if the RTH break the $85 level.

[Image 1]

The above chart is a weekly chart of the RTH. A line has been drawnat $85 and it is pretty clear this is a big level over time.

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