Fed Positioning

Maintain All Positions

By Bryan Bottarelli
Wednesday, January 30, 2008 11:06 AM EST
Wed, 30 Jan 2008 16:06:00 GMT

Dear Bottarelli Research Member,

Today’s opening losses (while contained) look like an effort to drive the weak hands out of their positions prior to the Fed’s afternoon rate announcement. I’m here to help you avoid falling into such a trap. As you can see from the Dow chart below, the Blue Chip average could easily move up and re-test its 50-day moving average at 13,000. Plus, it can just as easily move down and re-test its recent low at 11,750. Therefore, in times like this (where a 1,250 point swing is certainly realistic) it’s important that we maintain a two-sided ledger and lock in immediate sniper profits the moment any position hits our targets.

DIA

As I write, the ADM March 45 Calls (ADM CI) that we entered on Monday are holding their water, the AAPL February 135 Calls (APV BG) that we entered yesterday are close to break-even, and the FRE February 35 Calls (FRE BG) are $0.70 below our entry price. All three positions could receive a boost if the market embraces the Fed’s decision this afternoon, so maintain all three call plays. And be sure to take any sniper profits the moment any of these plays achieve our pre-determined profit targets.

AAPL

At the same time, also hold your protective play on the DIA February 120 Puts (DAW NP). Even if we get our wish and the market rallies this afternoon, there’s a good chance that the floor traders will “fade” the rally. In other words, the bears might use any upside pops as an opportunity to go short, thus potentially reversing any upside action. As a result, we must remain nimble — lock in quick profits — and use the volatility to work in our favor. Armed with these DIA puts (combined with the three calls above) puts us in the best tactical position leading into this afternoon’s announcement. So until further notice, prepare to lock in any quick gains, and as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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