Shake Out?

Add More CLF Calls

By Bryan Bottarelli
Thursday, June 21, 2007 10:30 AM EDT
Thu, 21 Jun 2007 14:30:00 GMT

Dear Bottarelli Research Member,

The Dow has surrendered over 200 points over the last two trading sessions — and it could be nothing more than an attempt to shake out the weaker hands prior to the next upside push. Remember that the savvy traders have been buyers on every major dip over the last six months, and this could another one of those prime entry opportunities. In fact, one look at the SPY shows that it’s settling right at the 50-day moving average — which should serve as a very strong support level.

SPY

If you recall, we’re still holding half of the SPY August 150 Puts (SYH TT) that we entered for $2.15 on June 5th. These puts have traded as high as $2.95 in today’s session, so they continue to offer us the downside protection that’s needed in a choppy market like this one. Continue to hold this position.

But in the meantime, let’s go ahead and add to our play on Cleveland-Cliffs (CLF – NYSE).Similar to the SPY chart above, you can see that CLF is also approaching the strong support level represented by the 50-day moving average.

CLF

This level appears to be a very strong bounce point, so let’s take advantage of this by adding to our CLF July 80 Calls (CLF GP). We entered these calls for $3.50 yesterday just prior to the late-day sell off, so adding to the position again today offers us a very attractive second-entry opportunity. The calls currently trade between $2.60 and $2.65 per contract, so let’s add more to our position now.

PLAY: Buy more CLF July 80 Calls (CLF GP) at or under $2.80, good for the day. Lower your protective stop limit to $1.55.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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