An Aggressive Play

Add SPWR Calls

By Bryan Bottarelli
Friday, January 04, 2008 3:19 PM EST
Fri, 4 Jan 2008 20:19:00 GMT

PLAY: Buy the SPWR January 130 Calls (QSU AW) at or under $6.10, good for the day. Place a protective stop limit at $2.80.

Dear Bottarelli Research Member,

Welcome to the stock market bloodbath of 2008. As I write, the Dow has extended to a 250-point loss, making the first week of the trading year a 3.8% loser (as of this writing). A 5% jump in the December jobless rate has recession fears on everyone’s lips today, and this has sparked selling pressure throughout the day.

But like I mentioned earlier, I think we’re now in oversold territory, so I’d like to get aggressive here and make a play that sets the table for next week. First, a little background information:

My wife (at my request) gave me the movie “300” for Christmas. If you’re not familiar with 300, it’s a testosterone-filled tale about the storied Battle of Thermopylae, which was a conflict that pitted 300 ancient Greeks against tens of thousands of Persians in 480 B.C. I find the movie inspirational, from an options trading standpoint, because sometimes we need to adopt the “never retreat, never surrender” motto of the Spartans, especially when the first three trading days of 2008 have witnessed over 400 points of downside selling pressure. Now, this movie (and my subsequent trading theme) is definitely not for everyone. But with the markets down so violently this week, I’d like to carefully make an aggressive play and add calls on SunPower Corporation (SPWR – NASDAQ).

SPWR

As you can see from the chart, SPWR is testing its 50-day moving average as we speak — and this has been a level of support dating back to September of 2007. If SPWR bounces off these levels next week, we could be in for quite a nice upside move.

Also working in our favor is new whispers of an emergency Fed cash infusion. Whether it’s a big purchase of S&P futures contracts or an emergency rate cut, any of these actions next week could spark a major market rebound — and this will offer a major lift to any calls that we own. Therefore, while we continue to hold our POT January 150 Calls (PYP AJ), let’s also take on an aggressive position and add SPWR calls as well. If you’re willing to make this aggressive play alongside me and my other “Spartan” traders, then here’s the play:

PLAY: Buy the SPWR January 130 Calls (QSU AW) at or under $6.10, good for the day. Place a protective stop limit at $2.80.

Apple (AAPL – NASDAQ), Google (GOOG – NASDAQ) and CME Group (CME – NYSE) are three additional stocks that fall into the list of bounce candidates, so we could also be taking call positions on these three next week as well. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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