5 Possible “Gift Gaps”
CMI, ITRI, GRMN, SLB & CROX All Candidates
Dear Bottarelli Research Member,
It’s not everyday that a “Downside Gift Gap” occurs, but when this powerful technical formation does occur, it often times can lead to remarkable profits over a 2-3 month time horizon. If you read my “Automatic Money Proiciples” report, then you know that the secret to this trading tactic surrounds around the oldest floor saying in the book: “The Trend is Your Friend.” The theory goes like this:
No stock goes straight up. Not even the most bullish stock in all of Wall Street moves higher at a straight 45-degree angle. There will be bumps in the road in terms of profit-taking, one-day sell-offs, or momentary earnings disappointments. The trick to trading these “gift gaps” is to find a large-cap or mid-cap stock in a bona-fide uptrend and buy it anytime a one-day move pushes the stock down 5% or more. Traders consider this isolated down-move a gift, and medium-dated call options allow them to cash in big-time.
We’ve witnessed a number of these “gift gaps” over the last few weeks, and I’d like to take a quick moment to highlight these powerful technical formations right now — setting the table for a possible call play on any one of these companies in the immediate future.
The first candidate comes in the form of Itron (ITRI – NASDAQ). As you can see from the chart below, the producer of automated meter reading (AMR) technology had been engage in a strong upside trend before getting slammed. The stock is now sitting at its 200-day moving average, which could provider the floor that helps the stock fill the massive gap between the $85 and $100 level.
The second candidate comes in the form of Schlumberger (SLB – NYSE). The global oilfield services company was also moving up nicely before getting hit hard in early October, dropping the stock down $20. If SLB can bounce back above its 50-day moving average (and then hold these levels) we’ll definitely see shares fill the gap and re-test the $110 level.
The third example comes in the form of Cummins (CMI – NYSE). As you can see, the global diesel and natural gas engines manufacturer is a little further along than our previous two examples, and the stock is clearly on the road to recovering the substantial losses suffered in mid-October. Once again, if shares can break above the 50-day MA and hold, we’ll most likely play a new CMI call position targeting a move back up to $140.
The forth example is Garmin (GRMN – NASDAQ). The GPS technology leader fell hard in late October/early November and is now trading to establish a support level at $95. It would appear that anywhere under $100 per share is a strong entry point for 2-3 month call options, but let’s give GRMN time to establish a strong support level before jumping in.
And finally, our fifth candidate comes in the form of CROCS (CROX – NASDAQ). Some have called the specialty footwear manufacturer a fashion “fad” that has now run its course, and this has punished the stock to the tune of a $35 haircut. But as you can see, the stock is currently sitting right at its 200-day moving average, so this could prove to be the support level that sparks a new upside run.
As always, I’ll keep a close eye on all of these developments and alert you the moment it’s time to act. In the meantime, let’s also keep watch on Southern Copper (PCU – NYSE).
The global producer of copper, molybdenum, zinc, and silver has just bounced right off the 50-day moving average, and this could trigger another upside run to the $140 level. After all, the weak dollar combined with recession fears make a strong case for metals plays, and PCU is the best that money can buy. Should the time for calls appear, you’ll be the first to know. Until then…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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