We’re Now Oversold

Dow Drops 200, Approaches 12,800

By Bryan Bottarelli
Friday, January 04, 2008 11:30 AM EST
Fri, 4 Jan 2008 16:30:00 GMT

Dear Bottarelli Research Member,

Make no mistake about it — the markets are now approaching oversold territory.

As you can see from the chart below, the Dow is now threatening to penetrate the 12,800 level, and this level represents the floor that sparked the latest 1,000 point move from 12,800 up to 13,800 in less than a month. If the 12,800 level once again acts as support, I feel that a move back up to the crossing of the 50-day and the 200-day moving averages at 13,400 is solidly in the cards.

INDU

As a result, I’d like to maintain our POT January 150 Calls (PYP AJ), which we added to this morning. Any market bounces will shoot this position right back into profitability, so let’s maintain these calls into next week.

POT

I also received a handful of emails from members who were unable to sell their FLR January 155 Calls (FLR AK) or their WYNN January 105 Puts (UWY MA). If this is you, then go back to what I wrote earlier this week. In a volatile market like this, adhere to our buy and sell orders within 20 cents of the recommended price. For example, in the WYNN trade, this morning’s alert said to sell “at or above $5.70, good for the day.” But by the time the alert was received and the order was placed, these puts were available for $5.60, which is 10 cents below the recommended $5.70 selling price. Nevertheless, this position was sold! After all, there is no sense messing around with 10 or 20 cents when it comes to buying — and this is especially true for taking profits on the sell side!

So going forward, be sure to make your trading decisions within a 20-cent leniency window so that you can best maximize your profits. After all, I’m here to give you the best available buy and sell advice in the timeliest fashion.When it’s time to lock in a profit (as it was this morning when FLR was up over $2.50 per share) then the difference of 10 or 20 cents is secondary to locking in your profits. Especially in a volatile market like this, be sure to adhere to these new trading tactics at the outset of 2008. And if you’re still holding WYNN and FLR, I’ll continue to offer trading guidance in the coming week.

Also, as I scan my bloody-red trading screen today, I’m seeing a lot of high-quality stocks getting punished — and this could open up some wonderful trading opportunities moving into next week. So like I mentioned before, let’s keep a level head and trade this market in the most profitable way possible. And as always, I’ll be here to navigate the entire way.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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