The 200-Day Test
Dow at Critical Level
Dear Bottarelli Research Member,
After yesterday’s massive 360-point sell off, the major market exchanges are treading very cautiously this morning. As you can see from the Dow chart below, yesterday’s price tick was quite remarkable. In one single shot, the Dow failed at the 50-day MA and moved all the way down to its next major technical level at the 200-day MA. And this is where the markets are currently sitting as we speak today. Will the 200-day MA hold? That’s now the huge question — which will dictate our directional bias over the next few weeks.
As we wait for an answer, it’s also important to point out the current status of the PHLX Gold and Silver Sector (XAU).
As you can see, this collection of gold and silver majors are bucking the weak market trend and moving higher — offering a safe-haven play for investors across the globe. With new 52-week highs being registered in companies like Barrick Gold, Newmont Mining, Comp de Minas, NovaGold, Agnico Eagle and Miramar Mining, I remain very comfortable holding our PCU December 130 Calls (PCU LF). These calls have already traded as high as $10.10 today, so we should begin to see a nice profit on this play as PCU follows suite and hits a new 52-week high above $140.
At the same time, I’d like to remain short the volatile Chinese plays via the CHL December 90 Puts (CHL XR). As I noted yesterday, CHL almost has to test the 50-day MA before making any more upside moves, and that could lead to another $10.00 on the downside. Hold these puts for more gains!
And on an interesting note, shares of Sotheby’s (BID — NYSE) are getting absolutely clobbered today after their much-anticipated fall art auction was a complete disaster. Of the 76 art lots on offered at this auction, 20 failed to find buyers, including Van Gogh’s highly anticipated “Wheat Fields", which is an 1890 landscape painted only days before his suicide in a town outside Paris. Considering all the talk about the strength of the high end art market fueled by global wealth, this is a devastating development for BID. Just look at how this is affecting the stock today. Ouch!
I’m sure some additional trading opportunities arise as the day progresses, and when they do 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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