Sitting Tight

Maintain CLF, Add More PTEN

By Bryan Bottarelli
Thursday, May 22, 2008 10:31 AM EDT
Thu, 22 May 2008 14:31:00 GMT

PLAY: Buy more PTEN June 35 Calls (NZQ FG) at or under $0.65, good for the day. Lower your protective stop limit to $0.25.

Dear Bottarelli Research Member,

A quick look at the Dow chart below shows that the Blue Chip Index just moved its 200-day moving average down to its 50-day moving average in two (2) trading days. And despite today’s 45-point jump this morning, we’re still left hovering at a very critical technical level. It’s quite simple, really. Either the Dow finds support or it doesn’t. And until we receive an answer to this question, the best tactical advice I can offer you is to “sit tight.”

INDU

As you know, I personally think we move higher. That’s why I attempted to “carefully buy the dip” on Tuesday using the PTEN June 35 Calls (NZQ FG) and the CLF June 100 Calls (CGJ FT). Looking at the CLF play, let’s maintain these calls for a bounce-back. But looking at the PTEN play, I’d like to go ahead and add to our calls now. PTEN is down $0.70 this morning, and I feel this is offering us a prime opportunity to pick up the PTEN June 35 Calls (NZQ FG) for less than our $1.00 entry price. Our June expiration offers us plenty of time for PTEN to continue its upside run, so let’s go ahead and add this cheap (and potentially explosive) position to our ledger now!

PLAY: Buy more PTEN June 35 Calls (NZQ FG) at or under $0.65, good for the day. Lower your protective stop limit to $0.25.

If you’re wondering why I have an upside bias, look no further than the two most important Transport indexes in the world: The Dow Transports and the Baltic Dry Index. Both the U.S.-based transports (like BNI and UNP) have been blasting to new highs, and International shippers (like DRYS and EXM) have been blasting higher as well. In fact, the Baltic Dry Index hit 11,793 on Tuesday, which is a whopping 80% increase from its mid-January low. If we were truly in a bear market, we would not see highs in the two most important transport sectors in the world, and that’s why I’ll remain my upside bias.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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