Handicapping the Next Move

A Buying Opportunity, or a Sign of More Weakness?

Dear Bottarelli Research Member,

We’re coming to a rather critical juncture in the markets — and it’s imperative that we remained positioned in both calls and puts to capitalize on whatever intra-day volatility the markets throws our way.

Yesterday’s sell-off, for example, was a strong reminder of how quickly the markets can turn tail and move aggressively lower. In a down market such as yesterday, you can expect to see your entire screen trading in the red — and situations like this make a strong case for owning puts. Therefore, I’d like everyone to maintain the protective SPY June 150 Puts (SYH RT), the MON June 60 Puts (MON RL), and the ISRG June 130 Puts (AXQ RV).

The Monsanto position, for example, traded as high as $3.10 in yesterday’s action, which was a 26% gain from our $2.45 entry price. Chart-wise, I still think that any coming market weakness could push MON down to the 50-day moving average around $56.00 per share.

On the same token, our more volatile play on Intuitive Surgical could also get pushed down to its 50-day moving average at $124.00, giving our puts room to tick higher. If the markets move lower — I want to be positioned to take quick profits off the table, so maintain all your put plays for more gains.

At the same time, the market’s looming weakness is also being absorbed and bought up by the resilient bulls. Today, for example, the market is opening the session with gains coming on the heels of yesterday’s big sell off. And if you’ll notice, right now we’re equally balanced in our ledger to profit off both either an up-move or a down-move by holding three June puts and three June calls.

The TIE June 35 Calls (TIE FG) are a pure momentum play based on takeover speculation. TIE is rebounding nicely today — which makes me comfortable maintain this position for more upside movement.

Our FMCN June 40 Calls (QOH FH) also look good — as the stock actually maintained its upside yesterday and closed the day in the green. This is a strong sign — especially since the stock just popped above its 50-day moving average.

And lastly, the FSLR June 70 Calls (QHB FN) had quite an intra-day swing yesterday. The stock was up over $3.00 at one point before succumbing to the broad-based market weakness and giving back most of its intra-day gains. This is by far the most volatile of our call positions — so I’ll continue to watch the stock and take profits off the table on any coming upside pop.

I also recognize that our sell order on the TSO June 120 Calls (TSO FD) moved rather quickly yesterday — so I’d like to follow up on this position for anyone still holding. These calls are trading right at our $5.10 entry price — and the stock is putting in a nice recovery from yesterday’s selling pressure. Since TSO has the tendency to move rather quickly, I would use any further advance to take your call gains off the table.

Looking ahead, I plan to use any directional upside or downside to take any quick profits off the table. If something should come up later in the day — you can expect to see an alert hitting your inbox. If not, we’ll follow up with our positions on Monday.

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As always, I’ll be in touch as conditions warrant. But until then…

Lock and load!

Sincerely,