Temporary Weakness?

Addressing FDG, GS, MOS, ABX, and INDU

By Bryan Bottarelli
Monday, May 05, 2008 2:07 PM EDT
Mon, 5 May 2008 18:07:00 GMT

Dear Bottarelli Research Member,

The major market averages are trading in the red this afternoon — as the Dow is experiencing some weakness right at its 200-day moving average (noted in red below).

INDU

It appears like this is a standard profit-taking correction, especially after coming off such strong monthly returns April. In other words, today’s new calls trades (on FDG and MOS) are meant to get us positioned for a carry-forward upside move later this week., so be sure to maintain both the FDG June 65 Calls (FDG FM) and the MOS May 130 Calls (MTJ EF). I mentioned that MOS makes wide intra-day price sweeps, and today’s action is a good illustration of this. But if we can hold onto the MOS calls into an upside move, we’ll be in fine shape.

The best news of the day is the fact that gold is recovering — trading up $16.00 as I write. This is a welcome relief for our ABX June 42.5 Calls (ABX FV), which we’re holding with a total cost basis of $1.52. Since these calls have traded as high as $1.40 today, we’re only one or two days away from locking in a nice turns, so maintain these calls for additional upside.

ABX

On the flipside, the bad news today comes in the form of our GS May 210 Calls (GPY EB).I had really hoped that we could have maintained these calls, as any indication of a U.S. dollar rebound could send shares of GS higher. In fact, a look at today’s chart shows that GS has yet to break below its critical support level at the 200-day moving average, and this tells me that the upside catalyst remains in tact.

GS

But nevertheless, today’s move has triggered our pre-determined stop limit at $1.30, so I must adhere to our trading rules and call the position closed. I could very well revisit these calls at a later date, but for now, close them out (if you haven’t already done so). And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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