All Eyes on AAPL

Enter ABX June Calls Now

By Bryan Bottarelli
Wednesday, April 23, 2008 11:07 AM EDT
Wed, 23 Apr 2008 15:07:00 GMT

PLAY: Buy the ABX June 42.5 Calls (ABX FV) at or under $2.50, good for the day.

PLAY: Sell HALF of your NVDA June 20 Calls (UVA FD) at or above $2.00, good for the day. Hold remaining half for more upside.

Dear Bottarelli Research Member,

Over the first hour of trading, it appears like the market is in a state of temporary pause. The S&P 500, for example, is plodding along right in-between its 50-day and its 200-day moving average, so it’s really a 50/50 bet whether the next major move will be up or down.

SPX

In coin-flip cases like this, it’s typically one catalyst that pushes the markets over the top, and we could have this very catalyst when Apple Computer (AAPL – NASDAQ) reports their earnings after the bell today. As you can see from the AAPL chart below, shares have been very choppy leading up to this announcement, so this will certainly be the factor that fuels the next significant market move.

AAPL

From a tactical perspective, situations like this make a strong case for establishing a position that’ll offers both downside protection and upside ability. And I feel this position comes to us in the form of ABX. But instead of playing the May calls, I’d like to give us some wiggle room — and therefore I’d like to enter into the June series. Specifically, the ABX June 42.5 Calls (ABX FV).

ABX

Currently trading for only $2.35 per contract, these calls offer us a really nice way to play a bounce off the 200-day moving average anywhere between now and mid-June. By having time on our side, we can let ABX sort itself out without fearing time-decay. And following up on my commentary from this morning, I feel the June series offers us the best way to play this current chart formation. So let’s enter these calls now!

PLAY: Buy the ABX June 42.5 Calls (ABX FV) at or under $2.50, good for the day. Place a protective stop limit at $1.10 and a pre-determined sniper sell at $3.30.

In terms of our other positions, things have gotten a lot better over the last hour. As we continue to work our $6.20 sell orders on the DO May 135 Puts (DO QG), I’m happy to see that Monsanto has recovered $2.50 of its morning losses, and this has put our MON May 130 Calls (MFP EF) back on track. Continue to hold these calls. But the best news of all comes from our NVDA June 20 Calls (UVA FD), which have traded as high as $2.20 today, good for a 37.5% gain from our Monday entry price at $1.60.

NVDA

Looking at the NVDA chart, the stock still has a lot of room to move, so I’d like to target a gain of at least 50% to 100% on this one. But with 37% gains in pocket, its’ hard to turn that down. Therefore, let’s sell HALF of our position right now, and continue to hold the remaining half for more upside.

PLAY: Sell HALF of your NVDA June 20 Calls (UVA FD) at or above $2.00, good for the day. Hold remaining half for more upside.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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