Mid-Day Update
Maintain All Puts
Dear Bottarelli Research Member,
Following up on this morning’s alert, it appears like the Dow is making one final upside attempt leading into this Wednesday’s Fed meeting. Over the past few sessions, we’ve used the market strength to lock in strong gains on our HES, AEM, and MOS calls — but now it’s time to stand pat with our puts. From a chart perspective, the Blue Chips can easily retreat back under the 8,000 level, which could spark another round of market fear. If that’s the case, we’ll be in fine shape with our three current put plays.
Looking at the FLR February 40 Puts (FLR NH), the inability to break above the 50-day moving average confirms our bearish viewpoint. Therefore, maintain these puts for more selling pressure.
The same argument holds for our MHK February 35 Puts (MHK NV) as well. It’ll take a big upside move to blast MHK above its 50-day moving average, and today’s upside has yet to do the trick. Until proven otherwise, maintain your MHK puts as well.
Rounding out the threesome is our RTH February 70 Puts (RTH NN), which shows the same technical pattern as FLR and MHK. Although these puts are currently trading for $2.35, I still think they’ll hand us gains. After all, I’m really not sure who is buying retail stocks right now, but I can tell you this: The owners of these retail stock will run for cover at the first sign of continued weakness. Therefore, my bearish viewpoint still stands. Hold.
And finally our speculative LVS February 7.5 Calls (LJJ BU) could soon be in for a pop. As you can see below, shares of LVS have just crept above the 50-day moving average, which could lead to a strong upside move. Since these calls offer so much bang for your buck, continue to hold them.
Looking at new potential plays, I think that gold stocks like ABX and AEM have had a very powerful upside run — but now they might be ready to take a momentary breather. We’re already heavily positioned to the downside with puts, so I don’t want to add more puts on these plays just yet. But if you’re interested in a quick 2-day play, you might consider playing the gold names down for a quick trade.
Over in the oil sector, our old friend Petroleo Brasileiro (PBR – NYSE) could be offering us a powerful upside play. As you probably know, PBR engages in the exploration, development, and production of oil, liquefied natural gas, and natural gas in Brazil. In fact, they’re currently sitting on a world-class oil reserve, but due to current petroleum prices, it can no longer be profitably exploited. As a result, shares of PBR have moved down lately, but this could be a momentary event. After all, if oil prices begin to tick back up, PBR could aggressively rebound. I’ll keep a close eye on this situation going forward.
And finally, we could also have another powerful opportunity shorting U.S. Treasury Bonds. As you know, I’ve highlighted this idea before (via the TLT), but I have yet to pull the trigger on a play. But now, I’ve discovered that we can play Treasuries using the leverage of Ultra-Short plays via the UltraShort Lehman 20+ Trsy ProShares (TBT – NYSE).
The TBT moves at a rate of twice the inverse of the Lehman Brothers 20+ Year U.S. Treasury index. And as you can see, the free-fall in Treasuries has pushed the TBT aggressively higher in recent action. I’d like to see the TBT dip back down a little, and when it does, we’ll jump all over the calls. When it’s time to act, 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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