Add QID Calls

Reload Downside Exposure

By Bryan Bottarelli
Thursday, March 05, 2009 10:49 AM EST
Thu, 5 Mar 2009 15:49:00 GMT

PLAY: Buy the QID March 66 Calls (DYM CN) at or under $4.10, good for the day. Place a protective stop limit at $2.30 and a pre-determined sniper sell at $5.90

Dear Bottarelli Research Member,

Well, it took the bears just over an hour to wipe out yesterday’s rally.

As you can see from the Dow chart below, the Blue Chips are once again threatening to break below 6,800, which would establish new 52-week lows.

INDU

In my view, the inability of the bulls to mount any sort of upside momentum remains very troubling. Of course, we see a one or two day rally every once in a while, but that’s it. Therefore, we’ll continue to take on a bearish bias. As you know, we shorted the oil rally yesterday and locked in a quick gainer using DUG calls. And today, I’d like to add some similar ultra-short exposure on the NASDAQ 100 using the UltraShort QQQ ProShares (QID – NYSE).Let’s begin by looking at the NASDAQ 100 (NDX):

NDX

Unlike the Dow, the NDX is not on the verge of setting a new 52-week low. But after the last two days of upside, it now appears like the technology-laden index is ready to pull back. If the 1,100 level acts as resistance, then we could peel off 50 points rather quickly. This would offer a strong boost to the QID.

QID

As you can see, the QID could easily blow past the $70.00 level very quickly. And in a market like this, we’ll certainly want to remain positioned to profit off such a move. Therefore, let’s add QID March calls to our ledger now. Here’s the play…

PLAY: Buy the QID March 66 Calls (DYM CN) at or under $4.10, good for the day. Place a protective stop limit at $2.30 and a pre-determined sniper sell at $5.90.

In terms of our other positions, continue holding the AAP April 40 Calls (AAP DH) and the ABX April 27.5 Calls (ABX DA).Both plays are currently trading right around our entry prices, so let’s give them some room to run. Let’s also continue holding our TBT April 48 Calls (TBT DV).Treasuries are up today, which has pushed the TBT down in early action. But let’s stick to our guns. I think we’ll see a fall coming soon.

Should anything else come up, you’ll be the first to know. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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