No Buyers in Sight

Profit-Taking in Advance of the Holiday

By Bryan Bottarelli
Wednesday, July 02, 2008 10:53 AM EDT
Wed, 2 Jul 2008 14:53:00 GMT

Dear Bottarelli Research Member,

Despite the fact that the major market averages are posting a slight advance in today’s trading, we’re continuing to see a sell-off in the strongest sector plays — notably steel, coal, and agriculture. As a result, shares of U.S. Steel (X — NYSE) have once again fallen below their 50-day moving average, triggering a stop on our X July 180 Calls (BXW GP).

X

It appeared like we timed this one correctly, as shares of X dipped below — and then closed above — their 50-day moving average in yesterday’s trading. In fact, our X calls were showing a profit at the open of today’s session. But in this market, things can change in a blink of an eye, and unfortunately, X could not build off yesterday’s move. Therefore, this position is now closed.

We’re also seeing weakness in shares of BTU, as profit-taking is sweeping across every momentum stock that I follow. For now, maintain your BTU August 90 Calls (BTU HR), but also maintain your $3.10 stop limit as well.

At the same time, maintain your DUG July 28 Calls (DZG GB) and your ACH August 30 Calls (ACH HF), as each position could come back our way rather quickly.

But in terms of new trades, we’ll probably see reduced trading on low-volume for the next two days as investors and floor traders alike get ready for the long three-day weekend. Therefore, I don’t plan on making too many new plays over the next day and a half. Unless a dynamic play opportunity arises (or an action alert is needed on any of our existing positions), I’ll most likely play it light leading into Thursday’s close. So until further notice,

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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