Holding Strong

AIRM, WFC, and CRDN Updates

By Bryan Bottarelli
Tuesday, August 22, 2006 2:39 PM EST
Tue, 22 Aug 2006 19:39:00 GMT

Dear Bottarelli Research Member,

As I mentioned yesterday, we’re seeing inconsequential market movement on light trading volume, which is a good reason to keep the trading ledger light.

As I write, the Dow, NASDAQ, and S&P 500 are all slightly to the downside, which is why we’re only holding two puts and one call (thus giving us the proper downside bias). The combination of the summer doldrums, light economic news, the annual Fed meeting in Jackson Hole (where the panel is split down the middle as to whether interest rates should be cut to 5% or raised to 6%) and a defiant Iran has given birth to an overall muted trading day. The plan here is to keep our ledger light and take some quick profits off the table until trading volumes once again pick up (which will probably occur after Labor Day). But for today, let’s quickly address our open positions.

First off, I really like the looks of CRDN’s breakdown. This $1.00 down-move has pushed your CRDN September 45 Puts (AUE UI) back up to $3.10, a mere $0.30 away from our original entry price, which means we could be on our way to $42.00 and below. Hold.

CRDN

On the same hand, I also like the looks of WFC’s breakdown. The stock is once again flirting with the critical $35.00 level, and if WFC can finally break down underneath this point, we could be in for a great looking gainer. The fact that the company has made the conscious decision to increase their high-risk loans in the midst of a brutal real estate slowdown has me wondering why anyone would remain long WFC stock. A weak chart and my own personal downside bias makes the decision to hold the WFC October 35 Puts (WFC VG) an easy one.

WFC

Our upside plan on AIRM is taking a breather today, but your September 25 Calls (UDU IE) are still holding strong. After your $1.05 entry price yesterday, today’s red tick has only been able to drop them down to your original entry price, which tells me that floor traders are hesitant to drop the out-dated calls too much.

AIRM

If you have yet to enter these calls, the trading thesis is to spend a little bit of money to establish a position that’ll gain if the markets buck the trend and move higher — and AIRM is the perfect way to execute this plan. Hold.

As always, Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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