An Aggressive Play
POT Calls, RIMM Calls & CHL Puts
Dear Bottarelli Research Member,
The markets are once again showing remarkable resiliency. After withstanding an opening-session drubbing, buyers are once again coming in and markets buying on any substantial dips. As a result, I’d like to get a little more aggressive here and recommend a position that could sharply rocket to the upside on any coming market strength. And that position comes in the form of Research In Motion (RIMM — NASDAQ).
As you can see from the chart, RIMM is shrugging off today’s downside action and hitting a new 52-week high at $131.34. This signals even more upside in RIMM’s future, so let’s add November calls and capitalize on this strong momentum. Here’s the play:
PLAY: Buy the RIMM November 130 Calls (RUL KV) at or under $6.40, good for the day. Current bid/ask spread is $6.05 to $6.10. Place a protective stop limit at $3.30.
I’d also like to stick with our POT November 120 Calls (PYP KD). As you can see, the chart has yet to show be that the bears are firmly in control of the stock, which means we should be adding to our position on dips like today. That’s exactly what I’d like to do. As I write, these calls are trading between $3.90 and $4.00 per contract, which is down from our $6.20 entry price. Since I still feel the stock will move higher, let’s go ahead and lower our cost basis by adding to this position now!
PLAY: Buy more POT November 120 Calls (PYP KD) at or under $4.30, good for the day. Adjust your stop limit down to $2.40.
And finally, let’s limit our downside exposure by adding another play on China — and today’s new candidate comes in the form of China Mobile Limited (CHL — NYSE). As you can see from the chart below, CHL looks like it wants (and needs) to re-test the 50-day moving average before moving any higher. And judging on FXI’s strong downside gap this morning, it’s clear that these Chinese-based plays can make substantial moves — so let’s play any continued downside weakness by adding a November put play to our ledger. Here’s the trade:
PLAY: Buy the CHL November 90 Puts (CHL WR) at or under $4.60, good for the day. Current bid/ask spread is $3.90 to $4.10. Place a protective stop limit at $2.10.
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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