Playing the Volatility

An Aggressive Move on POT, PCP & FLR

By Bryan Bottarelli
Tuesday, August 28, 2007 12:03 PM EDT
Tue, 28 Aug 2007 16:03:00 GMT

Dear Bottarelli Research Member,

I’ve spent the morning watching every tick on the Dow chart, and as I write, we’ve just dipped below the 13,200 level. This is an important level because this is exactly where the markets found near term support numerous times — both in late July and again in early August. As you can see from the chart below, this 13,200 level sparked a flurry of volatility starting in the last week of July and moving into the first week of August. During this period, the Dow moved over 400-points higher — breaking the Blue Chip average above its 50-day moving average. Of course, shortly after making this move, the Dow subsequently moved down to its 200-day moving average at 12,800, but it’s important to note that our current level has acted as a near-term support level in recent trading.

INDU

This technical reading leads me to believe that we’ll witness a near-term reaction similar to what we experienced less than one month ago. As a result, I’d like to take an aggressive position by adding to the three call positions that we currently have open. In studying today’s charts of Potash of Saskatchewan (POT – NYSE), Precision Castparts (PCP – NYSE), and Fluor Corporation (FLR – NYSE), today’s down-move on all three stocks does not violate the parameters of a continued upside run. As a result, I’d like to use today’s dip to add to our September positions. If you have yet to enter these plays — or you’re currently holding them and would like to lower your cost basis — here is what I’m recommending:

PLAY: Add to your FLR September 125 Calls (FLR IE) at or under $4.00, good for the day. Current bid/ask spread is $3.50 to $3.70. Lower your protective stop limit to $2.10.

PLAY: Add to your PCP September 140 Calls (PCP IH) at or under $3.00, good for the day. Current bid/ask spread is $2.65 to $2.85. Lower your protective stop limit to $1.80.

PLAY: Add to your POT September 90 Calls (PYP IR) at or under $2.00, good for the day. Current bid/ask spread is $1.70 to $1.80. Lower your protective stop limit to $0.90.

Also, be sure to maintain your FXI September 146 Puts (FFP UP), which have already moved up 12% from our morning entry price. As I mentioned earlier, we want to be exposed to both sides of this market, and our current positions offer us this smart tactical position. As always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From August 2007