Still No Answers

Markets Remain Choppy and Skittish

By Bryan Bottarelli
Thursday, December 20, 2007 1:06 PM EST
Thu, 20 Dec 2007 18:06:00 GMT

Dear Bottarelli Research Member,

I purposely waited until noon to send out your first alert of the day — primarily so that I could get a handle on the intra-day action and offer you some solid advice on where the markets are headed. But unfortunately, today’s action has not offered any clues whatsoever, so we remain stuck in this choppy trading environment. The Dow, for example, remains underneath its 200-day moving average. This is a sign of weakness, but it could also quickly turn higher and negate this view — so we remain in a state of flux.

INDU

And despite strong results today from Oracle (ORCL – NASDAQ), the NASDAQ is also struggling to maintain its early-morning gains as well (as noted by the black candlestick formation from today). This looks weak as well.

COMPX

So, the more I watch this December trading action, the more I feel that we need to apply our “Fade Trade” trading tactic from December 12th. If you recall, I noticed that shares of Bear Sterns (BSC – NYSE) were in rally mode in early trading, so we used this pop to buy BSC December 100 Puts (BVD XT) for $3.30. A few hours later, BSC gave up all of these gains, and this moved our puts up to $4.80. We sold them and locked in a quick 45.45% gainer!

So as you can see, “fading” is a tactic that has you taking the opposite side of any early dips or pops, and as we close out the 2007 calendar year, this might be the one winning tactic that we apply more often — especially amongst the choppy trading action. If another fade-trade situation comes up, you’ll be the first to know.

In terms of our current positions, I’m happy with today’s trading action. Our GRMN January 90 Puts (GQR MA) are still down from our original entry price, but today’s chart is showing a bearish candlestick formation that could lead to coming weakness. This afternoon, an earnings announcement from Research in Motion (RIMM – NASDAQ) is set for release, and unless the Blackberry maker beats estimates, raises guidance, and gives a strong outlook for 2008, I think this market will move the shares lower. If this happens, GRMN could trade down alongside RIMM as well, so for now, let’s maintain our puts.

GRMN

In terms of our two call plays, each of them is moving up nicely today. Both Bunge (BG – NYSE) and Petroleo Brasileiro (PBR – NYSE) are making solid advances today, so let’s continue to hold our BG January 120 Calls (BG AD) and our PBR January 115 Calls (PMJ AZ) for more upside. And now, while we have a moment, let me quickly address our upcoming holiday trading schedule.

HOLIDAY TRADING SCHEDULE: As you know, the markets are closed next Tuesday for Christmas. And in situations like this, Christmas Eve is typically a dead trading day as well. Therefore, there will be no alerts on the 24th or the 25th. I will probably check in on the 26th, but I doubt we’ll do any trading that day. However, we will probably have an alert or two on the 27th and the 28th to close out the trading week. So as a general outline, that’s what you can expect for next week — and hopefully you can plan your holiday travel schedule accordingly! And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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