A “Sniper” Play on PBR

Add February Calls Now

By Bryan Bottarelli
Thursday, January 10, 2008 10:53 AM EST
Thu, 10 Jan 2008 15:53:00 GMT

PLAY: Buy the PBR February 120 Calls (PMJ BD) at or under $5.10, good for the day. Plan to lock in a profit 15% to 20% above your entry price using our new “sniper” trading tactic. Also adhere to a protective stop limit at $2.40

Dear Bottarelli Research Member,

My hands feel very warm — simply because I’ve been sitting on them for most of the week. And as much as I’d love to trade more frequently, it just isn’t prudent right now. For example, how do you short an oversold market? And conversely, how to you pick a bottom in an irrational market? Both answers are the same: You can’t.Therefore, the most logical course of action right now is to stand pat — and only make one or two small plays when a strong opportunity presents itself. One such opportunity does exist now on PBR, but more on this below.

Let’s first begin by taking a look at today’s Dow chart. As you can see, I’ve included a larger chart so you can see the lows of August 2007, and I’d like to point out two major differences between the August lows and today’s currently levels. First off, the Dow broke under the 12,600 level on an intra-day basis back in August, and then closed the day back above 12,800. And even more importantly, the closing level back in August happened to be above the 200-day moving average. As you can see, this was a major Dow reversal that sparked a 10% upside move, from 12,800 up to 14,200, over the next two months.

Looking at our current action, the technical news isn’t nearly as good. First off, we’re well below the 200-day moving average — and that’s why I called this market “over sold” back on January 4th. Secondly, we haven’t received a bounce that has convinced anyone that we’ve firmly hit bottom (and no, yesterday’s late-day 146 point rally didn’t do the trick). And most troubling is the fact that we still have yet to see a true “wash out,” which is one of those situations where 97% of stocks are getting clobbered so hard that it’s foolish not to buy them.

Until one of these technical events occurs, I think we’ll continue to drift lower amidst extremely choppy conditions. So in the effort to preserve trading capital, I’ll continue to limit our actions until we see signs of a more stable (and less emotional) market environment. In fact, I feel that investors across the country are all feeling the same way, and this makes a strong case for emerging market stocks to serve as a safe haven.

As you know, I’m quite bullish on Petroleo Brasileiro (PBR – NYSE), which is Brazil’s major oil and natural gas producer. As you can see from the chart below, PBR has done a remarkable job of maintaining its upside trajectory among 2008’s excessive bearishness, and this makes me feel comfortable holding an upside position going into February. Therefore, let’s take a small position now — and be sure to use our “sniper” approach when it comes to locking in a quick 15% to 20% gain.

PBR

PLAY: Buy the PBR February 120 Calls (PMJ BD) at or under $5.10, good for the day. Plan to lock in a profit 15% to 20% above your entry price using our new “sniper” trading tactic. Also adhere to a protective stop limit at $2.40.

Sticking with the Brazil theme, Tele Norte Leste Participacoes (TNE – NYSE) is a telecommunication company based out of Rio De Janeiro that serves areas in North America, Europe, Asia, and Brazil. One look at the TNE chart and you can see that the stock is blasting off. It’s too late to buy calls now, but let’s keep an eye on this one for any coming pullbacks.

TNE

Also, if you were unable to close out your DECK January 130 Puts (QUK MF) yesterday, the position has since hit our designated stop loss price. This goes to show you just how quickly positions move, and that’s why it’s important to adopt our new “sniper” trading tactic.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 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.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

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.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From January 2008