Do We Short It Once Again?

Possible SDS Call Play Tomorrow

By Bryan Bottarelli
Wednesday, September 10, 2008 3:01 PM EDT
Wed, 10 Sep 2008 19:01:00 GMT

Dear Bottarelli Research Member,

Going into the final 60 minutes of trading, the major market averages are rallying. Personally, I don’t trust it. Why? Just look at today’s Dow chart, and you’ll see that today’s upside move is once again approaching the resistance level at the 50-day moving average. Despite some false break-outs, the Dow has been unable to convincingly break above this level for quite some time. In fact, every attempt to convert this level from resistance to support has failed miserably. Therefore, we must continue to play alongside the prevailing trends, and that means we maintain a short bias. As a result, hold your WYNN September 80 Puts (UWY UP) going into tomorrow.

INDU

To tell you the truth, we might want to short this rally once again by using another round of SDS September calls. But I want to be sure that we’re not getting into such a play too early, so I’m inclined to hold off on such a play until tomorrow.

SDS

In the meantime, I’d like to quickly comment on our DUG September 44 Puts (DUG UR).As you know, we entered these puts yesterday for $2.80, and some members were stopped at the close or yesterday’s trading at $1.90. Other members maintained the position into today — and the position is now profitable.

DUG

Now, in situations like this, I will always continue to maintain and follow these positions for the benefit of those members still holding the play. After all, I often encounter situations where quick-to-act brokers execute a stop loss, and then prices tick back above the stop out price (or in this case, the market closes for the day).

When situations like this occur, I will always give you commentary about how I feel about the position going forward. And as I stated this morning, my intention was to maintain the DUG puts because I felt like a down-turn was coming. The pop at the close of yesterday’s trading was too much, too fast. And as it turns out, DUG has indeed moved down, as expected.

Now, I do admit that some contracts executed for our stop out price. But on the same hand, markets as volatile as this need to be handled in a manner that account for such wild price swings. Therefore, please keep this in mind as you enter trades going forward. After all, only you can determine your level of risk tolerance.

If you’re still holding the DUG September 44 Puts (DUG UR), I’d like to go ahead and lock in profits now. After all, there’s no telling how the oil market will open tomorrow, so let’s not jeopardize our profits by subjecting them to any overnight “headline risk.” Lock in your modest gainer now!

PLAY: Sell your DUG September 44 Puts (DUG UR) at or above $3.20, good for the day.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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