Dear Bottarelli Research Member,
Based on today’s market action, I get the sense that the major market averages have yet to decide on their next substantial move. For example, look at the Dow chart below. As you can see, there is an obvious low in January of 2008 below the 11,750 level. Ever since setting this low, the Blue Chips have sheepishly threatened to re-test this level on three occasions — but the bulls have stepped in and supported the index between 12,000 and 12,250 all three times. Therefore, it’s quite obvious that the bulls are attempting to hammer out a solid support level above the January 2008 low.
From a technical perspective, if the bulls succeed, this would be a bullish indicator. But if they fail, then there is easily 500 more points of downside just to re-test the January 2008 low. And if that low is breached, then all bets are off. Therefore, in a situation like this, the smartest way to trade is doing exactly what we’re doing now. That is, combine calls on strong stock chart formations with puts on weak chart formations — and use the intra-day volatility to lock in quick profits.
Looking at our four open positions, we’re either sitting at a break-even or a slight profit on every one of them. The position that’s closest to our sniper sell target is the PSA April 80 Puts (PSA PP). We entered them yesterday for $4.50 with a sniper sell target at $5.30. They’ve traded as high as $4.90 today, so look to snipe these profits the moment that $5.30 triggers.
Also, our ABX April 50 Puts (ABX PJ) are also coming back to life, as shares of ABX are once again falling. With gold down $10.00 today, I think the over-extended upside ally is due for a breather, so maintain this position with a $3.30 sniper sell target.
Over on the call side, both our DE April 90 Calls (DE DR) and our JASO April 15 Calls (QJP DC) continue to hold their water, so maintain both positions for any mid-afternoon market reversal.
Should any further trading opportunities arise, you’ll be the first to know. But until then…
Lock and load!