Modest Gainers (Follow Up)

Weather the Storm

By Bryan Bottarelli
Friday, January 05, 2007 11:42 AM EST
Fri, 5 Jan 2007 16:42:00 GMT

Dear Bottarelli Research Member,

This morning, I tried to use the early-session movements to lock in some gains on our STP February 35 Puts (STP NG) and our CTRP February 65 Calls (QCT BM).As I write, each position has not moved close to our sell prices, so continue to hold each position — looking to sell if prices tick back up to our designated sell targets.

STP

Since both the STP and the CTRP plays are either right at of just below our entry levels, I won’t be too concerned if we don’t witness these sell levels today — as each chart confirms our directional bias going into next week’s action.

CTRP

On the positive side of the ledger, TIE is showing signs of life, as the February 30 Calls (TIE BF) have traded as high as $2.15 today. As I’ve been telling some Charter Members, TIE has been on the downside this week — alongside every other commodity (oil, copper, gold, you name it, and it’s gotten clobbered in 2007).

TIE

But TIE’s weakness has not been nearly as bad as some other commodity names — which shows me that TIE is internally strong at these levels. If we can just get past this broad-based commodity selling pressure, I think we’ll be ok. With a February expiration, I think we’ll be able to weather the storm and come out ahead.

Also making a nice move today is your DIA February 120 Puts (DAW NP). As a protective measure, these puts are ticking higher as the Dow is ticking lower. In fact, they’re up 36% in today’s action, offering us a nice buffer to the broad-based selling pressure.

But what’s really interesting is the ongoing struggles of crude-oil — as prices have pushed below $55 a barrel, hitting $54.96 in electronic trade, marking the lowest level since June 2005. Just look at today’s OIH chart and you’ll see the devastating three days:

OIH


As I’ve said before, prices will not stay down here for long — which means we’ll soon have a great entry opportunity on 2-3 month OIH calls. But the trick is to let all the downside play out — and then enter right as the oil sector finds strong support. Most likely, this will happen early next week — so stay tuned. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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