Strong News for GDX

Plus, Position Updates

By Bryan Bottarelli
Wednesday, November 19, 2008 10:35 AM EST
Wed, 19 Nov 2008 15:35:00 GMT

Dear Bottarelli Research Member,

Good morning. Although the pre-market futures indicated a substantial market fall, the open of today’s trading has been relatively orderly. In fact, the Dow has been bouncing between positive and negative all day long. Since this action does not offer any directional bias, it continues to support holding an equally-balanced ledger of calls and puts. Let’s review our current positions.

INDU

Looking at the call side of the ledger, we’re getting some positive news out of the gold sector today, as the World Gold Council reported that retail investors sharply increased their demand for gold bars and coins in the past few months — but institutional selling has been the reason that prices have not significantly moved up. This is exactly what I noted when entering our GDX January 23 Calls (GBJ AW).

GDX

Demand for gold bars and coins produced a net inflow of 232 tons in the third quarter, which is 120% higher than the 105 tons from the same time frame one year ago. I consider this very bullish for gold mining stocks, so continue to hold your GDX calls for more upside. As you know, we’re in this position for $2.15, and your calls have now traded as high as $2.25 in today’s action. We’re breaking into profitability, so maintain this position for more gains.

I’d also like to continue holding our DNA December 85 Calls (DWN LQ). The stock is clinging to the 200-day moving average, which has been a strong support level for two months. Having these calls in our back pocket will offer us protection against a sudden market up-swing. Hold.

DNA

Over on the put side, Verizon continues to look weak, so maintain your VZ December 32.5 Puts (VZ XZ) for more gains.

VZ

Also, let’s continue to work a $4.00 sell order on our COST December 45 Puts (PRQ XI). Had it not been for that freakish rally into yesterday’s close, we could have been able to close this position with profits in hand.

In terms of new trades, I continue to like Monsanto (MON — NYSE) as an upside call play right around the $70.00 level. If we get a dip under $70.00, I may give it a shot. Until then, let’s wait patiently on the sidelines.

MON

I also cannot ignore the major downside move in shares of the United States Oil (USO – AMEX).Oil prices cannot go down forever, and at these levels, USO could really spike up aggressively. Therefore, I’ll monitor this one for a possible upside call play as well.

USO

The moment it’s time to act, you’ll be the first to know. But until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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