A Near-Term Top?
Weak Month, Strong Week
Dear Bottarelli Research Member,
Happy Halloween. On the last trading day of October 2008, we’ve just experienced the single worst market month since 1987. As of today, the Dow is off 18% in October. But strangely enough, the Blue Chips are up 800 points this week.
As you can see from the Dow chart, we’re left with a strong week within a super-weak month. In terms of trend following, the tactical play is to short these rallies. That’s why I continue to hold downside positions on the LLL November 75 Puts (LLL WO) and the DIA November 80 Puts (DIJ WB). All it’ll take is one sharp reversal and we’ll be in position to lock in profits on both of these plays.
At the same time, we’re also holding the BNI November 90 Calls (BNI KR) as a buffer against any further market upside. In terms of portfolio balance, I think this offers us a nice mix of upside and downside bias. So for now, continue to hold all three positions.
In terms of new trades, I have a few possible candidates — but nothing worth putting out at this time. So while we have a moment, I’d like to follow-up on a past trade on Intercontinental Exchange (ICE – NYSE).
If you’ve been part of our trading group for a while, then you know that ICE is a stock that I enjoy trading. Not only do I feel that the company represents the future of trading, but the stock tends to move in large jumps, which is ideal for options trading. In past alerts, I mentioned that ICE was setting up for a rather large upside move. Based on these comments, I received some notes from members who bought the stock outright (or entered longer-dated calls). Just to follow up, ICE indeed blasted higher in yesterday’s action, gaining over 40% in one single day. See below:
If you’re showing a nice gain on your ICE play, you may consider taking half of your profits off the table. After all, being nimble in this market is critical, and you can always re-enter the stock on any forthcoming dips. Just a head’s up.
Should anything pop up throughout the trading day, you’ll be the first to know. But until then…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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