The Dow’s Big Test, Part II

Close Out CLF

By Bryan Bottarelli
Thursday, September 13, 2007 2:43 PM EDT
Thu, 13 Sep 2007 18:43:00 GMT

Dear Bottarelli Research Member,

Going into the final hour of trading, here’s a look at where we stand with he Dow in relation to its 50-day moving average. As you can see, today’s unexpected rally has moved the Blue Chip index right up to this critical level without the ability to push through.

INDU

Now, with a chart formation like this, I remain true to my original thesis that the downside scenario seems more likely (at least in the near term) than an upside breakout. But as much as I’d like to remain positioned the downside, I’m afraid that we must adhere to our stop and close out our CLF October 70 Puts (CLF VN). Although a large portion of the Dow’s gain today is coming thanks to McDoland’s (MCD – NYSE), the fact that CLF has continued to move higher throughout the day means that we have to be nimble in these market conditions. Therefore, let’s close out this position now.

CLF

At the same time, let’s continue to hold our PSA October 75 Puts (PSA VO) and our UA October 65 Calls (UA JM). This offers an equal balance of one call and one put, which should offer us both upside and downside exposure to close out the week.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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