The “Odd” Trading Continues

Watch APA for a Potential Play

By Bryan Bottarelli
Thursday, May 01, 2008 12:14 PM EDT
Thu, 1 May 2008 16:14:00 GMT

Dear Bottarelli Research Member,

Boy oh boy, we are sure seeing the continuation of the “awkward” trading pattern that I’ve alluded to in prior alerts. Once again, we have technology and financials leading the markets higher — while the top oil, energy, steel, metals, agricultural, and commodity names continue to get slammed. Luckily for us, we were able to profit off this via our CLF May 145 Puts (CGJ QI) and our AGU May 80 Puts (AGU QP).Both stocks are getting clobbered today, so our puts handed us nice returns.

Now, you would think that the Dow would be down over 100 points on the day that Exxon Mobil (XOM – NYSE) is off more than 4%, but that’s defiantly not the case. In stark contrast, the major market averages are trading solidly in the green — but I continue to feel that the near-term bias should remain to the downside. The 1,400 level on the S&P 500 and the 13,000 level on the Dow remain key technical breakout points, and even with today’s action, we continue to trade below these levels. Therefore, continue to hold your SPY May 140 Puts (SFB QJ).

If the major market averages do decide to shoot higher, we could have a strong call-buying opportunity in shares of Apache Corporation (APA – NYSE). Like we’ve seen recently, APA reported absolutely stellar earnings — and yet the stock is taking a huge hit. They reported that first-quarter net income surged to $1.02 billion ($3.03 a share) from $492.9 million ($1.47 a share) one year ago — and on top of that, they also indicated that production will continue to accelerate into the second half of 2008.

APA

As you can see, today’s sell-off has taken APA shares right back down to their 50-day moving average, so this could offer a nice swing-trade opportunity in the APA May 125 Calls (APA EV). These calls traded for $11.40 yesterday, and now they’re trading for $3.50. That’s quite a fall, so keep this one on your radar. I may add them on any forthcoming rebound strength in APA.

We could also re-visit a call in a technology or a financial stock or a put in a materials or commodity stock — so I’ll continue scanning for the best trading opportunities. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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