Do You Trust It?

Dow Up 150: Will It Last?

By Bryan Bottarelli
Thursday, June 12, 2008 10:29 AM EDT
Thu, 12 Jun 2008 14:29:00 GMT

Dear Bottarelli Research Member,

In the midst of the possible fall of Lehman Brothers (LEH – NYSE), the Dow is opening today’s session with a 150-point rally. As you can see below, this upside move is doing its best to counteract yesterday’s 200-point fall, and I sincerely hope that the Dow can maintain these levels above 12,000. But to me, this morning’s move looks like nothing more than a quick bounce in an oversold market, and that’s why I will continue to feel that the smartest move is to remain on the sidelines.

INDU

However, I would like to point out that some of our recent plays are finally moving in the direction that I expected. Cummins (CMI – NYSE), for example, is up 13% today. This is the very move that I attempted to play when we entered the CMI June 70 Calls (CDM FN) on May 28th. I know there are no “moral victories” in trading, but a move like this shows me that my original analysis was indeed correct — but the timing was just off. And like I mentioned yesterday, a market that’s experiencing major volatility increases could certainly cause these timing issues to occur.

CMI

EOG Recourses (EOG – NYSE) is another example. Although the EOG June 140 Calls (EOG FU) didn’t work out the way we expected, I continue to feel that the stock is on the verge of a strong move that blasts aggressively above the 50-day moving average. As you can see from the chart, the stock has been plodding along right at the $130.00 level for the last six trading days — and the inability to move any higher was caused by the emotional and fear-based mentality of the market.

EOG

So once again, the safe play is to remain on the sidelines for today and tomorrow. In fact, I’ll be attending a wedding in San Francisco this weekend, so I’ll be out for the rest of the week. And to be honest, I couldn’t think of a better time to take a 2-day breather. After all, at this point, the best tactical advice I can give you is to watch the markets for the next two sessions — and then we’ll come back next week armed and ready with a fresh series of plays.

And as one final take-away from this week’s volatility, today’s move in CMI (and even yesterday’s $2.00 up-move in PTEN) illustrates that our selection methodology continues to work — but we just got whipsawed with an intense period of volatility. It’s really nothing more than that. Once the VIX moves back down and investors become less frightened, I’m confident that we’ll start up another series of winning trades. So until next week, enjoy your 2-day reprieve, and as always:

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From June 2008