Can This Be The Break?

Is The Month of Market Stagnation Finally Over?

By Bryan Bottarelli
Friday, March 10, 2006 12:01 PM EST
Fri, 10 Mar 2006 17:01:00 GMT

Dear Bottarelli Research Member,

Don’t be fooled by today’s 100-point rally on the Dow. Even accounting for today’s action, the three major markets have been stuck in a tight one-month range.

For example…

On February 15th, the Dow opened at 11,025. Today, on March 10th, it opened at 10,972. That’s a 53-point difference over 18 trading days.

On February 7th, the NASDAQ QQQQ closed at $40.63. Today, on March 10th, it’s currently trading for $40.67. That’s a $0.04 difference over 19 trading days.

On February 15th, the S&P 500 closed at 1,280. Today, on March 10th, it’s currently trading for 1,281. That’s a 1-point difference over 17 trading days.

As you can imagine, these super-tight ranges are less than ideal for trading. But the good news is that they can only last for so long. In fact, you typically don’t see such extreme flat patterns drag out for more than a calendar month before something breaks. Since we’re going on 18 trading days (which his around 30 calendar days), the three major market averages are bound to break out soon. This will definitely make for a much better trading environment. In fact, today’s strong up-move sets the table nicely for next week’s action — so I’m excited about entering some new trades early next week.

As for your four open positions, here’s a quick update:

MDC: It looks like we’ll have to wait until next week to take profits on this one. All week, I’ve been trying to get filled on the $8.10 and $8.00 exit prices, but the stock just wasn’t weak enough to make a downward push to get us out. Today, the stock is participating in the Dow’s nice rally, so we’ll have to wait until next week for another shot at taking profits. Maintain your MDC June 65 Puts (MDC RM).

APOL: After the huge gap-down, the bulls are trying to collect themselves back off the floor and turn the chart around. So far, they’ve made a little progress, but certainly nothing that’s eyebrow-raising. As I mentioned in a past alert, I’d love to be holding the APOL May 50 Puts (OAQ QJ) when the company reports their earnings on March 23rd, but maintain your $2.00 stop as prices are getting close.

MCO: The stock continues to display the qualities of a “soft” return to trend. In other words, after hitting a new 52-week high, the stock experienced a slight sell-off (which is to be expected) and is now slowly and methodically turning the corner to re-join the up-trend. Of all out open plays, this one looks to have the best potential for gains. Maintain your Moody’s May 65 Calls (MCO EM).

BDX: I’m a little surprised that the stock is not participating more in today’s upside, but looking at the recent chart formation, it appears like BDX had to once again prove there is support just above the $62.00 level. If this is indeed the support point — as it’s proven now on three straight days — we’ll be in good shape for an upside push. Maintain your BDX June 60 Calls (BDX FL).

As I mentioned above, I expect to have a fresh round of trades ready for next week. Rest up this weekend, because when the markets finally break, we’ll be positioned to make some sweet profits. Have a good weekend — and as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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