Add BNI Calls

Balance Out the Ledger

By Bryan Bottarelli
Thursday, October 30, 2008 9:39 AM EDT
Thu, 30 Oct 2008 13:39:00 GMT

PLAY: Buy the BNI November 90 Calls (BNI KR) at or under $3.40, good for the day. Place a protective stop limit at $1.40 and a pre-determined sniper sell at $5.10.

Dear Bottarelli Research Member,

I don’t know if you watched the final 20 minutes of trading yesterday, but it was truly an insane ride. As we approached 2:45 CST, the Dow was trading higher by well over 200 points. But ten minutes later, the Dow was up only 30 points. And moments before the close, the Dow was down 175 points! All told, it was a 400-point swing in the final moments of trading. And when the dust settled, the Dow closed the session down 75.

When you witness moves like this, it’s clear that 85% of today’s directional movements are occurring within the first and last 30 minutes of trading. As the markets open today’s session higher by 200 points, it’s anyone’s guess whether or not these levels will hold up by the time the closing bell rings today. Nevertheless, we must maintain a balanced ledger, and that means adding a new upside call position. And in that spirit, I’d like to move into shares of Burlington Northern Santa Fe (BNI – NYSE).

As you can see from the BNI chart, it appears like BNI has hammered out a near-term bottom at the $75.00 level. The next move could be up to the crossing of the 50-day and the 200-day moving averages at $95.00.

BNI

Further support of a railroad bottom comes in the Dow Transportation Index. As you can see below, an even-stronger bottom has been established right below 3,500, and this points to an extended bounce in BNI as well. Therefore, as a way to balance out our ledger, let’s go ahead and add BNI November 90 calls now!

TRAN

PLAY: Buy the BNI November 90 Calls (BNI KR) at or under $3.40, good for the day. Place a protective stop limit at $1.40 and a pre-determined sniper sell at $5.10.

At the same time, continue to hold your LLL November 75 Puts (LLL WO) and your DIA November 80 Puts (DIJ WB).As we’ve seen many times before, this market can turn on a dime. Therefore, we must remain positioned to capitalize on these downside swings using these two puts. I’ll have further updates as the day progresses. But until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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