Going Into Next Week

Plus, Close AGU

By Bryan Bottarelli
Friday, December 19, 2008 3:23 PM EST
Fri, 19 Dec 2008 20:23:00 GMT

Dear Bottarelli Research Member,

I attempted to give AGU some time to recover, but for most of today’s session, this simply has not happen. Therefore, it’s unfortunately time to officially close out our AGU January 35 Calls (AGU AG).

AGU

As I mentioned when I played our US Steel (X – NYSE) calls, I do believe that we’ll see a strong recovery in both potash- and steel-based companies in 2009, but the timing for this recovery just isn’t ready to sustain itself for more than a day or two. Therefore, let’s go ahead and close out our AGU calls, and we’ll look to ride this play again in more stable conditions.

As I look over POT, MOS, and AGU, all three are sitting right at the top of their 50-day moving averages. The same goes for X as well (seen below). If this level acts as support, we could have some powerful upside plays ahead. As always, I’ll carefully monitor the situation — and alert you if and when it’s time to strike. But for now, let’s close AGU.

X

Selling AGU will leave us going into the weekend holding our AEM January 40 Puts (AEM MH), DUG January 31 Calls (DZG AE), and AMGN January 60 Calls (YAA AL). In terms of AEM, I’m shocked that the stock can move up while gold is down over $20.00 today. This differential cannot last long, so maintain your puts for forthcoming downside.

DUG

On the same hand, I also cannot believe that oil prices have moved from historic highs around $147 per barrel down to historic lows around $32.00 per barrel, yet the top oil/energy names have staged a near-term rally. This simply does not make sense. DUG still looks poised for an aggressive upside pop, so maintain your calls into next week.

On that note, have a good weekend. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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