So Much for Yesterday’s Rally

Dow Opens Down 150

By Bryan Bottarelli
Friday, June 06, 2008 9:59 AM EDT
Fri, 6 Jun 2008 13:59:00 GMT

Dear Bottarelli Research Member,

Any excitement about yesterday’s strong 200-point market rally has been deflated this morning, as the Dow has opened 150-points lower within the first 10 minutes of trading. Without question, this market is nervous, skittish, and rather confused. Case in point, just look at the various ways in which oil prices affect the markets.

One day, you’ll see oil prices rise — and the markets will sell off (taking oil stocks down with it). But then other days, like today, you’ll see oil prices rise, markets fall, yet oil stocks will rally. A prime example of this comes in PBR. As you know, we had been holding PBR calls in anticipation of an oil sector bounce. But despite recovering oil prices, PBR could never capture any upside momentum. Then today, oil prices are shooting higher, and now the stock has decided that it’s time to begin its next move higher. See what I mean below:

PBR

Like I’ve said before, I certainly don’t want to bet against oil, but the prudent thing to do is probably let the markets settle down before jumping back into an oil play. We all know that stocks like RIG, DO, WFT, and PBR can hand us stellar returns if timed correctly, but sometimes properly timing these entry prices means simply waiting for this group to decide that they’re ready to move higher once again. It’s rather amusing, really, but these stocks truly beat to their own drum. And going forward, I’ll listen closely to this drum-beat to get a better handle on when it’s the right time to enter and exit.

Looking at our other positions, I absolutely loved the $2.00 up-move in shares of PTEN yesterday. If the stock can make one final upside push, we’ll be ready to take profits on our PTEN June 35 Calls (NZQ FG).

PTEN

I also want to remain in the NIHD June 50 Calls (QHQ FJ) and the DE June 80 Calls (DE FP). I’m always very skeptical of big opening-session moves, like today’s downside push, which offers the markets plenty of time to stage a recovery throughout the day. NIHD continues to display breakout potential, and DE still looks like a great buy at these depressed levels. Therefore, let’s maintain each position.

In other news, I’m putting the finishing touches on tomorrow’s newest Bottarelli Research LEAPS alert, and I want to be sure that every active options member (like you) gets positioned in this powerful play. Despite the fact that the Dow has lost around 700 points over the last two weeks, this stock has actually gained 10% over the same timeframe. It’s truly a powerful company immune to market volatility, which makes it perfect for tomorrow’s new LEAPS play. So if you haven’t already done so, take a moment to activate your Charter Membership now!

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If any instant trading opportunities come up throughout today’s session, you’ll be the first to know. But until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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