A Holiday-Shortened Week

Hold QLD and MON

By Bryan Bottarelli
Monday, November 24, 2008 10:34 AM EST
Mon, 24 Nov 2008 15:34:00 GMT

Dear Bottarelli Research Member,

Good morning. As we being this holiday-shortened trading week, please note that the markets are closed on Thursday — and they’re only open for a half-day on Friday. Therefore, we probably won’t be doing a heavy amount of trading this week. Come Wednesday, you’ll most likely see the trading volumes die off, as floor traders get a jump on holiday travel. But nevertheless, I do think we’ll see some directional moves that could be capitalized on. And amazingly enough, I think those moves will continue to be to the upside. Case in point, check out the chart of the CBOE Volatility Index (VIX):

VIX

As you can see, the so-called “fear gauge” has just established a classic double-top formation. This tells me that Friday’s 500-point reversal, combined with today’s early 200-point advance, could temporarily alleviate some of the market’s fear. Combine that with a holiday week, and you could see low-volume upside days for the rest of the week. In my opinion, we’ll drift higher this week — followed by more downside selling pressure once everyone gets back onto the floor next week. As a result, I’d like to continue holding our QLD December 22 Straddle, which positions us to profit off any move (up or down). If we play this one correctly, we can take profits on our calls and our puts by selling off each leg of the straddle at the most opportunistic time. For now, let’s let our calls run higher.

QLD

At the same time, I’d also like to continue holding our MON December 85 Calls (MON LO). I must admit, I’m a little annoyed with MON right now. As you know, we entered these calls last Wednesday expecting a market bounce — and this bounce occurred exactly as predicted on Friday (and again today). But for whatever reason, MON is underperforming the upside move. Once the stock establishes some sort of solid footing, I think a move up to $80.00 is quite realistic. Therefore, maintain your calls for more upside.

MON

In terms of new plays, I’ll do some further due diligence and follow up with you later in the session. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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