The Plan for the Week

OIH, WFC, & Your 3 New Longer-Term Picks

Dear Bottarelli Research Member,

We have a few items to address as we kick off a short week of trading.

First off, I hope you were able to log in and access my newest research report titled “3 Speculative (and Cheap) Doublers.” The idea behind all three recommendations is to use the low volatility to enter into a cheap and longer-dated call option that’ll slowly increase in value as we enter into fall and winter. I’ve purposely chosen cheap calls so you can commit a small cash outlay to own these positions over the longer term — which also allows you to engage in our shorter-term trading positions as well. As a quick review, here are the three new positions:

PLAY #1: Buy the GIS January 60 Calls (GIS AL) at or under $0.50, good for the month.

PLAY #2: Buy the NWS January 20 Calls (NWS AD) at or under $1.35, good for the month.

PLAY #3: Buy the MMM January 80 Calls (MMM AP) at or under $1.15, good for the month.

To access this full report, use your email and password to log into the Member’s Section of the website (http://www.bottarelliresearch.com) and you’ll find the report in the right-hand sidebar.

Secondly, the OIH continues to perplex. When I initiated the recommendation, it was a pure play on oil prices moving down under $70 a barrel — a move that has indeed happened exactly as predicted. But for a reason that’s still a mystery to me, this down-move has ignited the oil service stocks to rally from a seemingly break-down point of $135 all the way up to $140.

Today, Chevron estimated that a 300-square-mile region could hold between 3 billion and 15 billion barrels of oil and natural gas liquids, but it will take many years and tens of billions of dollars to bring this potential oil to market. In fact, Oppenheimer & Co. estimated that the first production may not come on line until after 2010. For this reason, I think any knee-jerk upside reaction will be short-lived.

Nevertheless, moves like this are why I adhere to my pre-determined stop-loss levels — a discipline that’s often times very hard to do in trading. But since I told you that I’d continue to follow the position — and I must say I’m still not convinced the recent rally is for real. Stubborn? Perhaps.

But if you look at the chart, the last time the OIH attempted to hold past the $140 level, it went from $141.68 down to $133.33 in three days time. That’s an $8.35 down-move! For that, I still think we’ll see the $130 level before September expiration.

The third item is Wells Fargo (WFC – NYSE), which continues to stick close to the $35.00 level without making a significant up or down-move. I’m still inclined to bet to the downside, so let’s go ahead and set a pre-determined sell price on the WFC October 35 Puts (WFC VG) at $1.20 to capitalize on any sudden price dips.

And the final item for you today is one that comes on a personal level. Tomorrow, I will be taking my wife and 20-month old daughter to Disney World in Orlando. I will be out of the office for the rest of the week to recharge the jets — and get ready to come back fresh and ready to dig in for the autumn and winter months. Therefore, use this week to enter into the new report picks, and then get ready to ratchet it up next week as volatility finds its’ way back onto the marketplace. Our next correspondence will be when I return on Monday September 11^th, so until then…

Lock and load!

Sincerely,