A New Put Set-Up

FDX Looks to Drop

By Bryan Bottarelli
Tuesday, December 12, 2006 2:06 PM EST
Tue, 12 Dec 2006 19:06:00 GMT

Dear Bottarelli Research Member,

I’m still amazed with today’s trading pattern in Goldman Sachs Group (GS – NYSE). The firm reports their best quarter in history, blowing away even the increased earnings expectations, and yet the stock falls on the news. Under normal circumstances, this should have been the catalyst for a $5 to $10 up-move in the stock. In fact, a move of this magnitude still might happen as bargain hunters can now come in and buy shares of GS on the cheap. We have until January expiration on our calls, so if anyone is still holding them, I’ll continue to monitor the position.

In other news, a new downside set-up just formed in shares of FedEx (FDX – NYSE). As you can see by the chart below, the stock just dipped below its 50-day moving average, which signals that a follow-on move down to the 200-day moving average could very well be in the cards. If this happens, we could see a very fast $5 haircut in shares of FDX, which warrants us entering into January puts.

FDX

The smart thing to do here is to wait to make a play until after the Fed announces their latest decision on short term interest rates. Then, depending on how the market reacts to the Fed news, we can decide whether or not to enter a new position in FDX puts. So keep FDX on your radar screen for a possible put play in the near future. Until then…

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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