Add DXD Calls, DE Calls

Plus, Get Ready to Close Out DUG

By Bryan Bottarelli
Tuesday, December 02, 2008 1:58 PM EST
Tue, 2 Dec 2008 18:58:00 GMT

PLAY: Buy the DXD December 80 Calls (DZS LB) at or under $7.60, good for the day. Place a protective stop limit at $3.10 and a pre-determined sniper sell at $10.20.

PLAY: Buy the DE January 30 Calls (DE AF) at or under $4.40, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.90.

Dear Bottarelli Research Member,

Sometime around mid-morning, I was prepared to lock in profits on our DUG December 34 Calls (DZG LH).After all, we entered these calls yesterday for $4.20, and then they traded as high as $5.30, good for a quick 26% gainer.

While I continue to believe that DUG could quickly move from current levels of $35.40 up to $45.00 (and perhaps even higher), we must remain as nimble as possible in this current market environment. Therefore, I wrote a “sell” alert, but before I could even publish it, the markets reversed course and pushed aggressively higher.

DUG

As a result, we could no longer achieve the sell prices that I wanted — so I sat on the alert. And as it turns out, this could be a blessing in disguise. Don’t forget, we witnessed a brutal 670-point sell-off yesterday, followed by a 170-point advance today. While choppy, it’s clear that we must remain biased to the downside. Therefore, holding our DUG calls and QLD puts could still hand us the profits that we want. With both positions virtually sitting at break-even, let’s maintain our downside bias and hold both plays for more gains. If your DUG calls tick back above $5.30, you can expect a “take profits” alert. In fact, let’s go ahead and pre-program this sell order now.

PLAY: Sell your DUG December 34 Calls (DZG LH) if they trade at or above $5.30, good for the day.

In terms of new plays, I think it’s time to short this rally. But at the same time, we’ll also protect ourselves by using one upside call on a strong company that’s approaching its recent lows. Starting with the short play, I’d like to re-load the ultra-short ledger by playing calls on UltraShort Dow 30 ProShares (DXD – AMEX).

DXD

As you can clearly see from the chart, the DXD is just about to find support and bounce off the 50-day moving average. This could lead to a powerful upside move, so let’s get positioned to profit off it now!

PLAY: Buy the DXD December 80 Calls (DZS LB) at or under $7.60, good for the day. Place a protective stop limit at $3.10 and a pre-determined sniper sell at $10.20.

At the same time, let’s add January calls on Deere & Co. (DE – NYSE). As you can see, the stock has established the $30.00 level as a strong support point, and with the stock currently trading just above $31.00, I think we’re buying close to the lows — while also hedging our downside put plays. As a protective move, let’s add the calls now!

DE

PLAY: Buy the DE January 30 Calls (DE AF) at or under $4.40, good for the day. Place a protective stop limit at $2.10 and also place a pre-determined sniper sell at $5.90.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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