Add AEM Puts

Play a Quick Gold Down-Tick

PLAY: Buy the AEM January 40 Puts (AEM MH) at or under $3.40, good for the day. Place a protective stop limit at $1.70 and a pre-determined sniper sell at $5.00.

Dear Bottarelli Research Member,

“Why has the market not been tanking lately?”

That was the question my dad asked me last night at my mom’s 59^th birthday party. And my response was quite simple…

“Because it’s sick of going down.”

As elementary as it might sound, I firmly believe that the recent market rallies — which were sparked primarily off bad news — were nothing more than an over-sold market that was tired of selling off. And in that respect, any announcement (good or bad) acted as the trigger for a new upside push. It might sound funny, but that’s truly my best explanation of the recent market action. Plus, as you can see from the Dow chart below, the Blue Chips are still stuck tightly to their 50-day moving average. This week’s upside push above this level (sparked by the Fed) has still not convinced anyone that the 50-day moving average has moved from a level of resistance to a level of support. Therefore, the next major move remains in doubt.

As you know, I’ve been skeptical of this rally. But at the same time, I also wanted to get positioned to profit off it without my personal bias getting in the way. Therefore, we’re holding a collection of both calls and puts on companies with current stock-chart formations that support our directional bias. The position we’ve held the longest is our DUG January 31 Calls (DZG AE), which we entered on 12/12/2008 for $5.20. Despite some volatility in the oil/energy sector, I’ve stressed that you maintain these calls — and I feel that the DUG can aggressively pop higher at anytime. Perhaps today is the beginning of this up-move? As you can see below, DUG is finally bouncing higher, and hopefully the upside momentum can sustain itself enough to push this position firmly into the profit zone. With these calls trading as high as $4.20 today, we’re getting closer. Hold.

Also moving up are our AMGN January 60 Calls (YAA AL), which we entered for $2.55. This morning, they’ve traded as high as $2.72, good for a modest gainer. This chart looks like a steady upside mover, so let’s utilize our January expiration date and hold for more upside.

We’re also holding AGU January 35 Calls (AGU AG) with a $2.92 entry price. Currently trading for $2.70, these calls are slightly down, but let’s continue to hold form for an upside push. Hopefully the 50-day moving average acts as support.

In terms of our X January 45 Calls (X AX), this position was quite volatile this morning, briefly trading down to our $2.10 stop price before quickly bouncing back. With a 50-day moving average acting as a possible support level and a January expiration date, I’d like to hold this position a little longer. If you’re still in, I’ll continue to monitor this play.

Finally, I’d like to add one final put play on shares of Agnico Eagle Mines (AEM – NYSE).As you probably know, I’m bullish on metals plays, especially gold. And lately, many of my favorite gold plays have blasted higher, supporting my bullish thesis. (The powerful upside move on Barrick Gold, for example, helped Bottarelli Research LEAPS members lock in a strong 54% profit.) But as you know, nothing goes straight up forever. Therefore, I’d like to play a quick counter-move in AEM by adding January puts.

This trade is simply a put play at the top of an aggressive upside gold move, so let’s use this situation to hit a quick winner as gold briefly pulls back. Here’s the play:

PLAY: Buy the AEM January 40 Puts (AEM MH) at or under $3.40, good for the day. Place a protective stop limit at $1.70 and a pre-determined sniper sell at $5.00.

ONLY 24 HOURS LEFT!

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And as always…

Lock and load!

Sincerely,