Getting Over-Sold

Dow to Test 50-Day MA

By Bryan Bottarelli
Wednesday, May 21, 2008 2:13 PM EDT
Wed, 21 May 2008 18:13:00 GMT

Dear Bottarelli Research Member,

Over the last hour, the major market averages have extended into “oversold” territory — as the Dow has now given back over 360 points over the last two trading sessions. As you can see from the chart below, this action has brought the Dow within points of testing its 50-day moving average at 12,600. If the bulls have any intention of supporting the upside rally that began in mid-March, then this is the level where they must take a powerful and decisive stand.

INDU

I’ll keep a close eye on this situation as we head into the last two hours of trading. If the markets find support at the critical 50-day level, we’ll add a new round of calls. And if the markets break below these levels, then we’ll transition over into a new round of puts. But first thing’s first. We need to see the reaction to the 50-day moving average leading into today’s close. So while we monitor this situation, maintain your PTEN June 35 Calls (NZQ FG) and your CLF June 100 Calls (CGJ FT).If the markets bounce, each of these two plays will hand you a nice return. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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