Fed Announces: Market Rallies

TSO Hammering out $115 Support

By Bryan Bottarelli
Wednesday, May 09, 2007 3:05 PM EDT
Wed, 9 May 2007 19:05:00 GMT

Dear Bottarelli Research Member,

The Fed has announced what 99% of investors had expected: No change to short term interest rates. In the same breath, they made virtually no language changes to their policy statement — and this (for some reason) has sparked yet another market rally.

I’ve said it before and I’ll say it again: I think the markets are due for a correction, and soon. But at the same time, I’m certainly not going to ignore the profit-making potential of playing the upside momentum. Since we’re currently protected with two June put positions, I’d like to add another June call to our ledger. And the best candidate right now appears to be the strong support level at $115 that was just formed in Tesoro (TSO – NYSE). Take a look:

TSO

As you can see, the last six trading days have hammered out (what appears to be) a solid near-term floor at $115. If this is the bottom, we could soon witness another upside run that challenges the near-term high of $125.87 and I want everyone to particulate in this pending upside move. So here’s the trade:

PLAY: Buy the TSO June 120 Calls (TSO FD) at or under $5.20, good for the day. Current bid/ask spread is $4.90 to $5.10. Place a protective stop limit at $2.60.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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