Dow Pops 300: Bear Trap??

Major Intra-Day Movement Continues

By Bryan Bottarelli
Friday, August 08, 2008 2:23 PM EDT
Fri, 8 Aug 2008 18:23:00 GMT

Dear Bottarelli Research Member,

This morning, I said that yesterday’s Dow failure at the 50-day moving average indicated that further selling pressure was ahead for the Blue Chip average. But as it turns out, the exact opposite has happened. As I write, the Dow is trading higher by 292 points, capping off a completely improbable move within a 5-day week that witnessed a 330-point rally, a 230-point fall, and another 292-point rally. Take a look:

INDU

If I could offer you a logical way to play these moves, I would. Trust me. But in times like this, the only logical tactic involves making quick trades, taking quick profits, and doing your best not to over-trade. As a result, I have refrained from making any new plays today. Looking at the Dow chart above, until I see evidence that the 50-day moving average has moved from resistance to support, I am still biased to the downside. That’ll be my position leading into next week.

In terms of our open positions, despite a bearish formation, shares of LAMR used today’s major market advance to rally, and this has triggered our stop on the LAMR August 35 Puts (LJQ TG).

LAMR

Therefore, we’ll go into next week holding nothing except our WB August 19 Puts (WB TV). I remain comfortable maintaining a downside bias on WB, as the stock appears poised and ready to dip below its 50-day moving average.

WB

But in terms of the remainder of today’s session, let’s shut it down — and we’ll look to start again next Monday. Until then, have a good weekend. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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