Add DUG Calls

Play an Oil/Gas Retreat

By Bryan Bottarelli
Friday, December 12, 2008 10:51 AM EST
Fri, 12 Dec 2008 15:51:00 GMT

PLAY: Buy the DUG January 31 Calls (DZG AE) at or under $5.70, good for the day. Place a protective stop limit at $2.90 and a pre-determined sniper sell at $8.00.

Dear Bottarelli Research Member,

As one final trade for the week, I’d like to add calls on UltraShort Oil & Gas ProShares (DUG – NYSE). As you know, the major market averages have been shrugging off a continuous flow of bad news — and this has helped them to inch higher in recent sessions. As a result, shares of the top oil and energy companies have posted impressive gains, which has (in turn) crushed the shares of ultra-short plays like DUG.

DUG

As a quick reminder, DUG is an investment vehicle that seeks investment returns of twice the inverse of the daily performance of the Dow Jones U.S. Oil & Gas index. Therefore, if the oil/gas sector gives back some of their recent gains, the DUG should pop higher. And as you can see from the chart, DUG shares haven’t traded this low since mid-July, which indicates that we could see such a move in the very near future. Therefore, let’s add January calls now!

PLAY: Buy the DUG January 31 Calls (DZG AE) at or under $5.70, good for the day. Place a protective stop limit at $2.90 and a pre-determined sniper sell at $8.00.

NOTE: As I mentioned above, this will be the last trading alert of the day. Going into next week, I intend to maintain our DUG calls, AMGN calls, and AZO puts for more directional profitability. Until we talk again, have a good weekend.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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