Add OIH Calls
Plus, Close RTH
PLAY: Buy the OIH February 85 Calls (OIH BY) at or under $3.40, good for the day. Place a protective stop limit at $1.90 and a pre-determined sniper sell at $5.00.
Dear Bottarelli Research Member,
This Sesame Street notion of a “Good Bank/Bad Bank” has sparked a strong upside rally here in the early moments of trading. It’s quite clear that the market’s directional moves are being driven entirely by the financial sector, and I suppose today’s news proposes some sort of solution to the financial dilemma. This, by itself, is cause for celebration among investors. As a result, the Dow has moved up over 100 points. But as you can see from the chart, today’s move is inching ever closer to a strong resistance level at the 50-day moving average at 8,500.
If the market experiences selling pressure at (or even below) this level, then we’ll most likely see investors running for cover — which translates into profit-taking selling. But on the other hand, a breakout above this level could be a strong showing. Adding gasoline to the fire is the fact that we’re leading up to a Fed announcement this afternoon, which will most likely spark some strong market volatility. As a result, I’d like to maintain some of our downside positions. But one put position that we have to let go is our RTH February 70 Puts (RTH NN).
For reasons that are still unclear to me, the RTH has yet to fully break down. As you can see from the chart, the RTH is bumping its head on the 50-day moving average right now, which should ignite a pending sell-off. Unfortunately, our puts have triggered our stop loss, so this position is now closed. Going forward, if the RTH begins to finally sell off (as I expect), we can jump back into more puts. But for now, close this play.
Despite this morning’s rally, let’s continue to hold our FLR February 40 Puts (FLR NH) and our MHK February 35 Puts (MHK NV). Any downside pressure could quickly shoot both plays back into the black. Over on the call side, continue to hold your CLF February 25 Calls (CLF BE) and your speculative LVS February 7.5 Calls (LJJ BU).Like a coiled spring, LVS could shoot higher at any time. Hold.
In terms of new plays, I think investors are getting more and more curious about the low price of oil — and the current market valuation of oil-related stocks. This week’s Barron’s cover story made a strong case for names like COP, XOM and CVX, but I’ve been watching the movements of the oil service plays contained in the Oil Service Holders (OIH – NYSE).
As you can see above, this powerful collection of stocks (which includes Diamond Offshore, Halliburton, Schlumberger, and Transocean) has just moved above its 50-day moving average. This indicates that the bottom may have been set. Therefore, let’s get positioned to ride the continued upside momentum going forward. Here’s the play…
PLAY: Buy the OIH February 85 Calls (OIH BY) at or under $3.40, good for the day. Place a protective stop limit at $1.90 and a pre-determined sniper sell at $5.00.
And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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