The Move I Was Looking For

SPY Gets Clobbered, You Take Profits

By Bryan Bottarelli
Friday, April 07, 2006 12:13 PM EST
Fri, 7 Apr 2006 17:13:00 GMT

PLAY: Sell your SPY May 130 Puts (SFB QZ) at or above $1.80, good for the day.

Dear Bottarelli Research Member,

When I said the market was over-extended, I wasn’t kidding.

Today’s down-move is exactly what I was calling for, and it finally happened right on target. I’m actually excited to see the sell-off, because each and every one of the exciting upside stocks I highlighted yesterday is getting a haircut today (*that’s trader’s talk for ‘they’re all moving down’).

Come next week, we’ll be in a prime position to scoop these stocks for very attractive entry prices. So the plan is to let the markets get hammered today, and then we’ll bargain hunt next week. But in the meantime, let’s take some profits on our SPY play. Here’s today’s chart:

SPY

Ignore that long leg of the candlestick chart — it’s an erroneous tick. Instead, focus on the big red candlestick formation that’s all red. That’s the big down-move happening right now. I want to capitalize on that down-move by taking profits on your SPY May 130 Puts (SFB QZ).

PLAY: Sell your SPY May 130 Puts (SFB QZ) at or above $1.80, good for the day. That’ll give you a gain of at least 16% in a week, depending on your entry price.

Switching gears, a lot of you have been asking me about playing a gold stock. After all, the yellow stuff just hit a 25-year high at $600 an ounce, and that’s not something that can be overlooked. But let me you this. If you’ve known me for a while, you’ll know that I’m notoriously bad at playing gold. If you want to become an instant millionaire, ask me my opinion on gold and do the exact opposite. I’m not kidding.

Having said that, I do have a play in mind that is a good “all-around” metals and commodities play, and I think playing this one will be the best way to play gold’s bull run. Plus, since it’s a combination of many metals, it’ll break my gold curse. So if the timing is right, we’ll play that next week as well. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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