Just Too Dangerous

Close Out EOG

By Bryan Bottarelli
Tuesday, June 10, 2008 2:42 PM EDT
Tue, 10 Jun 2008 18:42:00 GMT

Dear Bottarelli Research Member,

The Dow is only down 5 points as I write, but that’s far from telling the entire story. As we’ve seen with our recent trading positions, the market is now getting itself into that dangerous position of emotion-based decision making — and times like this could lead to selling off everything across the board.

For example, gold, oil, and the major market averages are all trading lower. This is a prime example of irrational selling pressure — and it sets up a dangerous proposition for virtually every momentum stock I follow. EOG Resources (EOG – NYSE) is a good example. Under any other circumstances, the stock would be using the 50-day breakout on Friday to hit a new high above $140.00. But EOG’s breakout got whip-sawed by Friday’s eventual 400-point market sell off, and these losses have now reversed course and extended into today. Unfortunately, this has forced us to close out the EOG June 140 Calls (EOG FU) for good.

EOG

In times like this, where strong momentum stocks are being deflated across the board, it’s smart not to fight against it. Therefore, taking a momentary timeout for a breather on the sidelines is probably the best idea at this time. Of course, there could be a possibility of playing puts on a high-flyer like Hess Corporation (HES – NYSE), but I’ll resist the urge of making any further plays in this unstable environment.

HES

As always, I’ll continue to carefully monitor things, but I think the best advice I can offer at this time is to take a breather. Once the dust settles, we can get back into the groove of hitting consistent winners. But in a market environment like this, any new trades represent nothing more than a coin flip — and those are not the odds we want in our favor. Therefore, at this point, we’re left holding only the Visa June 80 Puts (V RP) and the DE June 80 Calls (DE FP).I’ll continue to offer trading guidance on these two positions, but I’ll refrain from making any new trades until the trading environment becomes more stable. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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