Take VMW Profits!
Lock in Overnight Gainer
Dear Bottarelli Research Member,
According to the Stock Trader’s Almanac, December is the second best month of the year on the Dow Jones Industrials and the S&P 500. Dating back to 1950, each index has averaged gains of 1.8% and 1.7% in December. It’s also the third best month for the NASDAQ, Russell 1000, and Russell 2000. So as you can see, we have some powerful upside tailwinds on the horizon.
Not only that, but history has also shown that the market rarely falls precipitously in December. Perhaps this aversion to bearishness is sparked by the phenomenon known as the “Santa Claus Rally” which is a short (yet respectable) rally that begins during the last five trading days of the year and goes through the first two trading days of the New Year. Dating back to 1969, the S&P 500 has averaged 1.5% during this seven-day span.
Because December is such a bullish month, I’d like to maintain an upside trading bias throughout the rest of the year. Unless we see a dramatic market pullback, it looks like the Dow will establish a higher-low at these current levels, which could snap the Blue Chip index back up between 13,400 and 13,600. This would offer us wonderful upside trading opportunities from now until the end of the year, and of course, I plan to take full advantage. So in that spirit, today’s first order of business is locking in gains on VMware (VMW – NYSE).
As you can see, the stock still has plenty of room to move on the upside, but with overnight gains of 25% in hand, I’d like to sweep our profits off the table leading into the Holiday weekend. These calls have traded as high as $6.40 today, but the current bid/ask spread is $5.70 to $6.00. Let’s try to get filled at or above $6.00 in today’s trading, thus locking in a nice overnight gainer.
PLAY: Sell your VMware December 90 Calls (VMW LR) at or above $6.00, good for the day.
At the same time, I’d like to hold our Apple December 175 Calls (APV LO). As you can see, AAPL has established support at the 50-day moving average, which should push the shares much higher leading into the end of the year. After adding to our December call position, we’re currently right at break-even on this play, so let’s hold for more upside.
Lock and load!
Sincerely,
© 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.
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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.
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