An Aggressive Maneuver
Close KSS, Add to AGU
Dear Bottarelli Research Member,
With the major market averages already engaged in a choppy and volatile session, I think it’s critical that we remain positioned on both the upside and the downside. As you can see from the Dow chart below, the last three days have given both the bulls and the bears a moment to pause as the “tug of war” concerning the next directional move continues to play out. Until one side surrenders, we’ll see more days of up and down action. Therefore, we’ll play this action on both sides of the coin.
Looking at our current positions, let’s continue to hold our QID March 60 Calls (QID CH), CMG April 60 Calls (CMG DL), and PCP March 60 Puts (PCP OL). Both CMG and PCP are slightly profitable, and QID seems to be in and out of the money every time you check your ticker screen. Maintain all three plays.
In terms of our KSS March 35 Puts (KSS OG), I think the safe and smart play is to close them out now. Leading into an earnings announcement, it’s just too risky holding onto a one-sided play. Personally, I think KSS should be a $15.00 stock, but for whatever reason, Wall Street values them at $35.00. Either way, let’s cut our KSS puts loose. Sell.
When it comes to our AGU March 40 Calls (AGU CH), I’d like to get aggressive. If you’ve been following the fertilizer plays, then you know that names like MOS, POT, and AGU have been strong despite the weak market internals. Unfortunately, AGU launched a hostile takeover bid for CF Industries (CF – NYSE), and this temporarily sparked selling pressure in shares of AGU.
As you can see from the chart, this downside movement has pushed AGU right down to its 50-day moving average, which should serve as a level of support. Therefore, let’s take advantage of this weakness by adding to our March 40 calls now. This will lower our cost basis and give us a chance to turn this play into a winner prior to March expiration. Here’s the aggressive play…
PLAY: Buy more AGU March 40 Calls (AGU CH) at market, good for the day. Lower your protective stop limit to $0.50 and reset your pre-determined sniper sell to $3.45.
UPDATE: If you recall, I issued a special report on Wednesday, December 3rd 2008 titled “The Best 5 Stocks You Can Buy Under $5.00.” As you know, we’ve already taken profits in excess of 100% on three of these five picks. Today, I’d like to lock in profits on our fourth 100% winner, which comes in the form of Smith & Wesson (SWHC – NASDAQ).
If you recall, SWHC was recommended for $2.12 per share. The thesis for the trade was that an Obama-lead political system (dominated by Democratic leadership) has pro-gun Republicans fearing that new regulatory legislation could restrict their right to bear arms. Therefore, they’re stockpiling guns and ammo like never before. As a result, gun sales are exploding. In fact, just yesterday, Attorney General Eric Holder said that the Obama administration will reinstate the assault weapons ban that expired in 2004 during the Bush administration. In response, shares of SWHC are exploding. As I write, they’ve hit a high of $4.00, good for an 88.6% gainer. Let’s lock in these profits now! Sell.
I’ll follow with further updates as needed. Until then…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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