Morning Update

Maintain Positions

By Bryan Bottarelli
Tuesday, November 18, 2008 10:50 AM EST
Tue, 18 Nov 2008 15:50:00 GMT

Dear Bottarelli Research Member,

As Bernanke and Paulson defend their $700 billion bailout to Congress, the major market averages have opened the session with a 130-point upside move. As you can see below, this move still has the Dow underneath the 8,500 level.

INDU

As much as it appears like the markets are fighting to establish a bottom, I still think we’ll see a dip underneath the 8,000 level. After all, yesterday’s major sell-off at the close tells you that there is still a strong amount of fear in the markets. Therefore, we must remain positioned with both calls and puts — and lock in quick profits the moment a play moves in our direction.

Looking specifically at our open positions, the VZ December 32.5 Puts (VZ XZ) that we entered yesterday for $4.55 still look good. I cannot offer any opinion on the VZ chart other than a bearish one, so maintain your puts for more downside.

VZ

At the same time, our two other downside puts remain “in play” as well. The PSA December 65 Puts (PSA XM) that we entered on 11/13/2008 for $6.60 traded as high as $7.60 yesterday before bouncing back up. Since the stock hit another new 52-week low, I’d like to maintain these puts.

PSA

Also, the COST December 45 Puts (PRQ XI) that we entered on 11/13/2008 for $3.28 are clawing their way back. They’ve traded as high as $3.50 in today’s action, so hold these puts for more downside as well.

COST

Over on the call side, the DNA December 85 Calls (DWN LQ) that we entered on 11/14/2008 for $2.85 are looking to break out. Once they establish a support level at the 200-day moving average, it’ll be off to the races. As I write, these calls are trading right at our $2.85 entry price, so hold them for more upside.

DNA

And finally, the GDX January 23 Calls (GBJ AW) that we’re holding for $2.15 appear to be ready for a bounce as well. As you can see, the GDX is right at the $20.00 level, which should act as a strong support point. Maintain these calls for more upside.

GDX

If it’s time to lock in profits on any of these positions, you’ll be the first to know. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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