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Add QQQQ July 40 Puts

By Bryan Bottarelli
Thursday, June 08, 2006 10:10 AM EST
Thu, 8 Jun 2006 15:10:00 GMT

Dear Bottarelli Research Member,

The markets on a worldwide scale are ALL moving lower. Nothing is being sparred.

Japan’s Nikkei 225 index tumbled 3.07% last night, closing at its lowest level in six months. Indian shares fell for the fourth straight day as the Sensex gave up 4.7%. South Korean dropped to its lowest level in seven months. Australia fell 2.35%, the CAC-40 dropped 1.8%, Germany’s DAX lost 1.9%, and London’s FTSE 100 lost 2%.

Mark my words, there will be a time when this incredible amount of market fear turns into tremendous opportunity. But until that time comes, it’s probably a good idea to enter into another round of protective puts. And this time, I’d like to play the NASDAQ 100 Tracking Stock (QQQQ).

QQQQ

As you can see by the chart, the $38.50 level has been the QQQQ’s last line of defense. If that level breaks, then lookout below! As I write, the QQQQ is trading at $38.20. This means we’re right at this critical breakdown point. If this level fails to hold, the QQQQ could be in for a world of hurt, and it’s wise that we position ourselves to capitalize on this breakdown.

Now remember, there will soon be a time when the markets will make a strong upside move as opportunistic buyers come back into the markets. When that happens, we’ll be positioned to ride the next wave up — both in our “Aftermath Report” plays plus the new upside trades that I’ve been watching. But until then, let’s keep playing off the market’s fear with protective index puts for quick profits.

PLAY: Buy the QQQQ July 40 Puts (QQQ SN) at or under $2.15, good for the day. Current bid/ask spread is $2.05 to $2.10. Place a protective stop loss at $1.30.

Lock and load,

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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