COF Getting Close

Prepare to Sniper Profits at $3.70

By Bryan Bottarelli
Thursday, March 27, 2008 11:35 AM EDT
Thu, 27 Mar 2008 15:35:00 GMT

Dear Bottarelli Research Member,

It’s been another see-saw day of trading, as the major market averages have been unable to hold into this morning’s gains. As I write, we’re treading water in the red without showing any signs of a decisive move in either direction. Looking at the DIA chart below it appears like we’ll certainly see a re-test of the 50-day moving average, but whether not we’ll find support — or fail — at this level will be determined today, tomorrow, or early next week.

DIA

From a positioning perspective, I want to remain biased to the downside — both using our DIA 114 Puts (DIA PJ) and our COF April 50 Puts (COF PJ). As you know, we entered the COF puts yesterday for $2.85 and they’ve traded as high as $3.50 in today’s action, good for a nice 22.8% gainer. But as you can see below, COF still has room to move down, so maintain these puts with a $3.70 sniper sell order.

COF

Another possible play could be a new round of puts on Merrill Lynch (MER – NYSE). For whatever reason, the talk about sub-prime exposure has completely died down, but MER still has $30.4 billion in sub-prime holdings on their books. Let’s keep an eye on this situation, for any renewed sub-prime fears could send MER back down to its previous low.

MER

Also, if you were unable to sell your RIG April 140 Calls (RIG DH) this morning, you’re getting a second opportunity to exit for profits right now — so be sure to lock in these gains! I’ll continue to follow up as market conditions warrant, but until then:

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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