Another Dangerous Formation
Dow Looks to Re-Test November Lows
Dear Bottarelli Research Member,
We’ve opened the session with another troubling candlestick formation on the Dow. As you can see below, the Blue Chips are currently dipping underneath the near-term floor that has been established over the past month (noted by the black line). This offers an early indication that we could be ready to re-test the November lows.
If that’s the case, we’ll certainly want to be exposed to the downside. As it stands right now, we’re holding FDX March 50 Puts (FDX OW), which just hit a high of $3.30, good for a quick 22% gainer. Continue to hold these puts for more downside. Plus, I’ll certainly add more puts if the selling pressure intensifies.
Looking at our DV March 60 Calls (DV CL), we can thank Cramer for today’s selling pressure. He advised everyone to sell the education stocks (notably DV, ESI, and APOL) on the notion that a $25 billion spending cut in education from the Senate will hit the sector very hard.
Whether or not this is true is debatable, as for-profit education companies don’t rely as heavily on government money as other education organizations. Plus, the fact that Cramer says “sell” should set off a contrarian warning bell in your head. But that doesn’t matter too much today, as the entire education sector is taking a big hit. As a result, close your DV calls.
I’ll follow up in the day with further updates. But until then…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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