Add AZO & V Puts
Playing a Pending Breakdown
PLAY: Buy the V February 50 Puts (V NJ) at or under $3.40, good for the day. Place a protective stop limit at $2.20 and a pre-determined sniper sell at $5.00.
PLAY: Buy the AZO February 125 Puts (AZO NE) at or under $2.60, good for the day. Place a protective stop limit at $1.20 and a pre-determined sniper sell at $4.40.
Dear Bottarelli Research Member,
It’s rather amazing that January of 2008 was the worst January in the history of the stock market (that’s 113 years!) Last month, the Dow lost 8.8%, the S&P 500 lost 8.6%, and the NASDAQ lost 6.4%. And as I study the Dow chart this morning, it appears like the Blue Chips are on the verge of re-testing their November lows around 7,500. As you can see, the Dow is clinging to the 8,000 level. If this level breaks, then it’s time to take cover, because things could get rather ugly.
To prepare for this potential breakdown, I’d like to issue two new put plays. The first play comes in the form of Visa (V – NYSE). When you consider the status of the economy, I can’t imagine any way that Visa will please shareholders. First of all, they’re dramatically reducing the number of credit cards being issued. In some cases, they’re actually taking cards away from delinquent members! Plus, with spending down, the number of credit card “swipes” will take a massive hit this year. This doesn’t bode well for Visa’s processing fees. As a result, I think shares of V are ideal put-play candidates on any short-term pop. If you look at the chart below, you’ll notice that shares of V just moved higher — but are now losing their upside momentum. As a result, I’d like to add February puts on Visa now.
PLAY: Buy the V February 50 Puts (V NJ) at or under $3.40, good for the day. Place a protective stop limit at $2.20 and a pre-determined sniper sell at $5.00.
Also looking weak is auto-parts retailer AutoZone (AZO – NYSE). It seems like every retail analyst is making a bullish case for AZO, as hard-pressed consumers are now likely to buy replacement car parts and fix their vehicles themselves. In some respects, I can understand this argument, but I truly feel that the buying power of the American consumer right now is at an all-time low. As a result, sales at AZO cannot remain strong for too much longer. And when AZO investors begin to witness some selling pressure, you better believe they’ll run for the exits fast. In fact, if you look at the AZO chart, you’ll notice a mini “Head & Shoulders” formation that just occurred (the two shoulders and head are circled in the chart below):
If this pattern plays out, shares of AZO could dip back down to $115, which is an $18.00 down-move from current levels. Therefore, let’s go ahead and get positioned in AZO puts as well. Here’s the play…
PLAY: Buy the AZO February 125 Puts (AZO NE) at or under $2.60, good for the day. Place a protective stop limit at $1.20 and a pre-determined sniper sell at $4.40.
At the same time, continue to hold your AEM March 60 Calls (AEM CL) and your TBT March 48 Calls (TBT CV), each of which offer you diversified exposure to the gold and Treasury markets. And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.
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CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.
Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.
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