Today's New Recommendation: Posco August $130 call (PKX HF)

Rationale: Posco (PKX) is a South Korean steel company that has a lot to offer us. It's the largest steel producer, by far, in South Korea and is geographically situated right next to the largest steel producer in the world -- China. The company also has a cheap labor force, which works six days a week and cutting edge production technology.

Right now, Posco's chart looks to have more upside potential than downside -- the stock's trend line (teal line on chart below), which has been respected since October 2007, just breached, telling me that it's on the verge of a breakout. This action is in sharp contrast to U.S. steel players, such as U.S. Steel (X) and Reliance (RS) whose shares are soaring to new highs and look vulnerable to a correction.

The primary caveat that I see is the cost of raw materials, including iron ore and coal. But PKX is seeking to vertically acquire some miners to reduce this cost risk.

To take advantage of the move up that I'm expecting in Posco's shares, I recommend that you either purchase shares on any pullbacks to $124 or better or, if you're inclined to trade options, consider the August $130 call (PKX HF) at limit 8 or better (cancel if this doesn't fill in the next few trading sessions). I've chosen the August 130 call because it has a reasonable delta and we're getting plenty of time, with 101 days left until expiration.

As always, I suggest you buy only a modest position and spread your capital over a portfolio of diversified holdings.

Best wishes,

Jeff Manera
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net