Two New Plays

Add APA and DXD Calls

By Bryan Bottarelli
Thursday, August 07, 2008 10:14 AM EDT
Thu, 7 Aug 2008 14:14:00 GMT

PLAY: Buy the APA August 115 Calls (APA HC) at or under $2.40, good for the day. Place a protective stop limit at $1.30 and a pre-determined sniper sell at $3.30.

PLAY: Buy the DXD August 60 Calls (DXD HH) at or under $2.40, good for the day. Place a protective stop limit at $1.30 and a pre-determined sniper sell at $3.30.

Dear Bottarelli Research Member,

I’m back from my quick San Francisco investing conference to address a market that experienced a 330-point upside move on Tuesday and now an opening-session loss of 160-points here on Thursday. From a chart perspective, today’s Dow failure at the 50-day moving average signals that the Blue Chips have more downside to come. Take a look:

INDU

More importantly, this formation signals to me that we could see money flow back into the oil, energy, and metals sector, and this could warrant an upside call play on Apache (APA – NYSE), United States Oil (USO – AMEX), or Freeport-McMoRan (FCX – NYSE). Lookingspecifically atAPA, a near-term bottom at $105.00 could spark an upside jump back above the 200-day moving average. So let’s go ahead and play this move using August calls.

APA

PLAY: Buy the APA August 115 Calls (APA HC) at or under $2.40, good for the day. Place a protective stop limit at $1.30 and a pre-determined sniper sell at $3.30.

At the same time, let’s combine these APA calls with another call on the Ultra Short Dow 30 ProShares (DXD – AMEX). Chart-wise, a DXD bounce off the 50-day moving average looks like a pretty strong bet, and any further market selling pressure will push the DXD higher. Therefore, let’s get positioned to profit off further selling pressure by adding August calls on DXD. Here’s the play:

DXD

PLAY: Buy the DXD August 60 Calls (DXD HH) at or under $2.40, good for the day. Place a protective stop limit at $1.30 and a pre-determined sniper sell at $3.30.

Looking at our other positions, we were able to lock in a nice profit on our GENZ August 75 Calls (GAA HO) but that return wasunfortunately combined with a stop out on our BEN August 100 Puts (BEN TT).In terms of our LAMR August 35 Puts (LJQ TG), a major downside move from yesterday could easily extend into the close of the week, so I’ll continue to follow this position.

LAMR

Should anything else come up, 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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