A Sea of Red

Brutal Open Targets 2008 Lows

By Bryan Bottarelli
Thursday, June 26, 2008 10:00 AM EDT
Thu, 26 Jun 2008 14:00:00 GMT

Dear Bottarelli Research Member,

Once again, we’re being welcomed into a new trading day with a fresh round of selling pressure. This morning, the Dow dropped over 130 points on negative financial commentary from Goldman Sachs, bankruptcy rumors over at General Motors (GM – NYSE), and an earnings outlook that didn’t please shareholders of Research in Motion (RIMM – NASDAQ). Throw it all together, and you’ve got a market that has now dipped below the March lows and is quickly approaching the January 2008 low point of the year.

INDU

At a time like this, the only thing we can do is to take on a defensive position. In my view, this entails limiting our intra-day trading, reducing our position sizes, and owning positions in only the strongest market sectors. As you know, we’re currently holding puts on CMG July 90 Puts (CMG SR) with a pre-determined sell order at $5.70. Maintain this $5.70 sell order for the remainder of the day.

We’re also holding calls on ACH August 30 Calls (ACH HF), which is one stock that is actually trading higher today. As a severely over-sold play on a China-based turnaround, maintain these calls for further upside.

And then, we come to the two positions that we’ve been holding since June 16th, the COP July 100 Calls (COP GT) and the STLD July 40 Calls (RQL GH). As I review both the COP and the STLD charts (listed below), I continue to feel that the upside scenario in each company remains in tact.

COP

STLD

The problem is, both COP and STLD have been unable to mount the necessary upside momentum to hand us a gain on our July calls due to the incredibly weak market conditions. If we can withstand this latest round of turbulence and avoid a stop-out, then I think we should witness a strong recovery on both positions. So for now, let’s do our best to absorb the body-blow that the market is throwing at us and maintain each position.

I’ll be out later in the session with further updates. But until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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