“A Truly Historic Week”

Today’s Close Will be Critical

By Bryan Bottarelli
Friday, August 17, 2007 1:37 PM EDT
Fri, 17 Aug 2007 17:37:00 GMT

Dear Bottarelli Research Member,

We’re closing off a trading week described as “a truly historic week” by 17-year CNBC veteran commentator Bob Pisani. And I must tell you, Bob is certainly correct in his assessment. Never before have I witnessed intra-day market moves of such tenacity and voraciousness, capped off by this morning’s surprise move by the Federal Reserve that acknowledged an extraordinary policy shift is needed to contain the sub-prime mortgage market. In response to this, the Fed cut the discount rate by 0.5 percentage points in an effort to calm the market and help financing — and as you can see by today’s upside market reaction, this move has worked. Here’s an updated look at the Dow chart:

INDU

As you can see, the Blue Chip average is using the 200-day moving average as a key support point — which is exactly what I alluded to in my “voice of reason” alert yesterday afternoon. Now, as much as I would have loved playing a series of puts yesterday and calls today, navigating that trading roadmap would have been next to impossible. That’s why I continue to think that the smartest course of action is to maintain a light trading ledger going into next week. Make no mistake, I have a series of potential play candidates lined up and ready to go, but I need to be certain that the timing for these plays is right. So for now, I will continue to monitor the MRO September 55 Calls (MRO IK), GPRO September 60 Calls (PSU IL), and ICE September 170 Calls (IHH IN).If you adhere to my protective stop limits, then the GPRO position is the only one that you’re holding right now — and as you can see below — the stock chart continues to look ready to rally. The 50-day moving average has help up remarkably well despite the tremendous market volatility, so we should be in good shape on this one leading into next week.

GPRO

Since I’ve received notes from members who are still holding MRO and ICE, I’ll continue to follow them for you as well. After all, I think all three stocks are due for substantial upside gains, so it’s best to remain positioned to benefit from this move.

For the rest of today, there’s no telling what the markets will do going into today’s close — so it’s best that we remain where we are and simply digest the day’s closing activity. Whether or not the market can hold onto today’s gains should be a good indication of our directional bias for next week, so let’s see how the week closes out and we’ll use this action to formulate a trading strategy going into next week.

Above all, give yourself a big pat on the back for surviving one of the most incredible trading weeks in recent history. And rest up for another exiting week come Monday! And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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