Taking a Measure of Protection

Add a DJX Put to Your Ledger

By Bryan Bottarelli
Monday, June 05, 2006 3:11 PM EST
Mon, 5 Jun 2006 20:11:00 GMT

PLAY: Buy the DJX July 110 Puts (DJV SF) at or under $1.65, good for the day. Place a protective stop loss at $1.00.

Dear Bottarelli Research Member,

If you look at today’s DJX chart, you’ll see a very clear illustration that the top blue-chips in America could now be calling their 50-day moving average a point of resistance. Just look at how today’s market action reacted to the blue line in the chart below:

djx

Over the last few days, the moment the DJX hit the 50-day moving average, a steep fall ensued. What this tells me is that the Dow could give up another 100-poitns or so before it finds any sort of support point.

Like I mentioned this morning, I’m finding a lot of super-attractive stocks that have fallen disproportionately to the overall market moves — and I plan to recommend calls in these stocks as soon as the timing is right. But in the meantime, we must add a level of portfolio protection in the form of DJX July puts.

PLAY: Buy the DJX July 110 Puts (DJV SF) at or under $1.65, good for the day. Current bid/ask spread is $1.55 to $1.60. Place a protective stop loss at $1.00.

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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