A Pending Breakdown?
Approaching the Danger Zone
Dear Bottarelli Research Member,
With the Dow now down 84 points, the Blue Chips have now given up over 300 points over the last two trading sessions. And once again, the technical picture is getting rather close to the “danger zone” below the 8,000 level. Check it out:
As you can see, the Dow spent the better part of last week defending the 8,000 level — which sparked a move up to 8,500. But unfortunately, this upside move did not take the Blue Chips over the 50-day moving average. What’s more, nearly all of these gains have evaporated over the last two sessions. As a result, it looks like the bears are once again in control of this market. Leading into next week, we could face some downside selling pressure.
As a result, let’s be sure to maintain our FLR February 40 Puts (FLR NH). Looking at the chart, FLR is on the verge of a breakdown, so maintain your puts to profit off the pending selling pressure.
At the same time, let’s reduce our upside exposure by closing off our OIH February 85 Calls (OIH BY) and our LVS February 7.5 Calls (LJJ BU). While I still like the chart formation on the OIH, this basket of oil service plays was up over $2.00 in early trading — but has quickly given it all back. As a result, let’s adhere to our stop loss and close the position.
In terms of LVS, we’ve given the stock plenty of time to make an upside push, but things are just not happening. Therefore, let’s close out this cheap and speculative play and move on.
That leaves us holding the TBT March 48 Calls (TBT CV), and to be honest, I don’t think anyone knows what’ll happen to Treasuries going forward.
Therefore, we’ll lean on the prevailing trend, which is down (and thus UP for our ultra-short TBT play). Maintain your calls for more upside.
And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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