Add XLF Puts Now

Another Financial Fall Ahead

By Bryan Bottarelli
Thursday, September 04, 2008 11:27 AM EDT
Thu, 4 Sep 2008 15:27:00 GMT

PLAY: Buy the XLF September 22 Puts (XLF UV) at or under $1.25, good for the day. Place a protective stop limit at $0.65 and a pre-determined sniper sell at $2.00.

Dear Bottarelli Research Member,

As noted in my most previous alert, the major market averages (notably the Dow and S&P 500) have once again penetrated below their critical 50-day moving averages. Therefore, I feel it’s once again time to play downside puts in the financial sector.

As I scanned the list of possibilities, Wachovia (WB – NYSE) and Wells Fargo (WFC – NYSE) looked primed for a fall. But as I scanned even more candidates, they all looked just as appealing. Therefore, we’re going to play them all in one shot using the Financial Select Sector SPDR (XLF – AMEX).

XLF

The XLF is a collection of financial stocks, with holdings that include American Express, AIG, Bank of America, Bank of NY Mellon, Citigroup, Morgan Stanley, US Bancorp, and Wells Fargo. As you can see above, this collection of financial names has a double-top formation at the $23.00 level. And as I write, the XLF is currently experiencing resistance at the $22.00 level, which would officially mark a lower-high. This is a bearish indicator, so let’s go ahead and add XLF puts now.

PLAY: Buy the XLF September 22 Puts (XLF UV) at or under $1.25, good for the day. Place a protective stop limit at $0.65 and a pre-determined sniper sell at $2.00.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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