Waiting for a Trigger

Careful: The Bear is Waiting

By Bryan Bottarelli
Monday, June 04, 2007 11:20 AM EDT
Mon, 4 Jun 2007 15:20:00 GMT

Dear Bottarelli Research Member,

The warning signs are all present — but it seems like nobody even cares to look.

For example, we just witnessed another precipitous overnight drop in Shanghai, which witnessed the SSE Composite Index drop 330-points (an 8% fall). Here is a chart of the SSE Index, but what you’re looking at below has yet to include the downside tick that pushed the index down to 3,670.40. Make a mental image of another solid red candlestick at the end of this chart and you’ll have the current status of the index.

SSEC

At the same time, the U.S. economy grew just 0.6% in Q1, the slowest pace in nearly five years. And yet the S&P 500 has risen 11 out of the last 12 months. Without question, it has been a truly incredible upside run — but we must be ready to switch over to a downside bias the moment the bulls concede power. All the indicators for a downside more are there — but it’s just a matter of the markets responding accordingly.

Rest assured, we’re ready to profit no matter what happens. We’re already outlined a possible put strategy on Bear Stearns Companies (BSC – NYSE). As you can see, the stock is in a dog-fight right at the crossing of the 50 and 200-day moving averages. It’s still too early to make a play, but the moment it’s time to act you’ll be the first to know. I’m still leaning towards a down-move happening, and soon.

BSC

Also keep an eye on one oil sector. News is circulating that a tropical cyclone is expected to enter the Persian Gulf region on Wednesday — and this could add price volatility to the oil patch sector. In response to this “storm volatility,” two relatively new names have appeared on my oil watch list today.

Imperial Oil (IMO – NYSE) is one of the big movers that not too many people follow. The company engages in the sale of crude oil and natural gas in Canada — and while U.S. investors focus on names like Exxon Mobil (XOM — NYSE) and Chevron (CVX – NYSE), IMO has been making a very strong upside push. If the upside trend continues, we can play IMO calls for a strong profit.

IMO

Apache (APA – NYSE) is another company powering to the upside. Also dealing in crude oil, natural gas, and natural gas liquids, APA has exploration and production interests in the Gulf of Mexico, Texas, and Canada as well as Egypt, Western Australia, and the United Kingdom. Today’s new 52-week high signals more upside, so be ready for a possible call play on APA as well.

APA

Also don’t lose sight of Tesoro (TSO – NYSE), fresh off their 2 for 1 stock split and ready to move up — and also Valero Energy (VLO – NYSE) could extend its recent upside gains.

I’m watching it all — and will notify you the moment it’s time to enter a play. But for now, let’s see which primary direction the markets want to move. This will dictate our newest play. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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