Opportunities Abound
Watching XAU, ABX, VE, CAT, ABB
Dear Bottarelli Research Member,
For most of the trading session, the major market averages have held right around the levels they were when I wrote your first alert.
Therefore, just to reiterate our position, we’re positioned to play the downside using the BG January 50 Puts (BGW MJ), VAR February 30 Puts (VAR NF), and KSS January 40 Puts (KSS MH).
In terms of KSS, I have no idea who is buying this stock right now. The one and only trading thesis I can think of is that investors are buying KSS on the idea that their revenues will be bad — but not as bad as Wall Street expects. In my experience, this is never a good investing philosophy. With January expiration coming this Friday, I’m looking to use a move back down under the $35.00 level to lock in profits. As it stands right now, we’re sitting right at our $3.50 entry price.
In terms of VAR, it’s also my experience that stocks that hit new lows continue to hit new lows. Despite today’s upside move (which is coming on no news, mind you), the VAR chart continues to look bearish. I’d expect to see new lows in the days ahead.
And like I mentioned this morning on BG, it appears as if the oil, energy, and commodity rally that we experienced last week is about to unwind, which makes a case to remain short BG as well. Hold.
Looking at our two upside call positions, both of them are certainly worth holding on to. On one hand, they each allow us to participate in any upcoming market rally going into February. On the other hand, they’re both cheap plays on two stocks that have shown the ability to make very aggressive upside price moves. Therefore, despite the recent downside moves, maintain your JASO February 5 Calls (QJP BA) and your LVS February 7.5 Calls (LJJ BU).
Looking at new trading opportunities, I mentioned early in the year that we have some very exciting plays unfolding. One such opportunity comes in the global infrastructure plays within under-developed countries. Perhaps this sounds counter-intuitive, but hear me out.
While preparing my research for this week’s newest Bottarelli Research Small Caps pick, which by the way was ABB Ltd. (ABB – NYSE), I discovered an interesting fact. When it comes to under-developed nations, it’s clear that they have an urgent need to upgrade and expand their infrastructure well beyond 2009. But unlike developed nations, whose GDP is expected to fall by 2% to 3% this year, many of the under-developed countries have GDP readings that are expected to actually rise from 2% to 4% in 2009. That’s quite a substantial difference — which is why any companies that are exposed to this segment could prove to be very strong for most of 2009. ABB is one such name on this list. Other plays that fall into this category are heavy machinery maker Caterpillar (CAT – NYSE) who I consider a strong roadway play, and also Veolia Environnement (VE – NYSE) who I consider a strong water-systems play. All three charts are displayed for you below.
If any of these three companies touch their support at the 50-day moving averages and hold at these levels, it could setup a strong upside. More to come.
Also moving down to very attractive levels are the precious metals plays. Similar to the three charts above, names like the Philly Gold and Silver Index (XAU– PHLX) and Barrick Gold Corporation (ABX — NYSE) are also moving down to attractive levels. If the markets begin to free-fall, you will certainly see investment dollars flowing into the one and only safe-haven of 2008, which was gold. Therefore, I will carefully watch these plays as well.
The moment it’s time to act on any of these plays, you’ll be the first to know. Until then…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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