Add RGLD Calls

Play An Extended Gold Rally

By Bryan Bottarelli
Thursday, March 12, 2009 1:00 PM EDT
Thu, 12 Mar 2009 17:00:00 GMT

PLAY: Buy the RGLD April 40 Calls (MJQ DH) at or under $2.55, good for the day. Place a protective stop limit at $1.40 and a pre-determined sniper sell at $4.00.

Dear Bottarelli Research Member,

First off, I’d like to congratulate you on exiting the AEM April 45 Calls (AEM DI) at exactly the right time. Right as the markets opened, we locked in a sale price between $7.20 and $7.70, which turned out to be the high of the day (thus far). And shortly after closing out these calls, AEM sharply reversed and is now trading lower on the day. It just goes to show you that, in a market like this, we simply must take our money and run.

Now, interestingly enough, gold stocks have reversed course despite the fact that gold itself is up over $13.00 on the session. Perhaps this is simply profit-taking. But whatever the reason, we’re being presented with a nice opportunity to add gold stocks at low prices — while gold itself is moving higher. So, similar to AEM, I’d like to enter into a new metals play. And today, it comes in the form of Royal Gold (RGLD – NASDAQ).

RGLD

As you can see from the chart, RGLD is making a strong bounce right off its 200-day moving average. Compared to other gold companies (like ABX, AEM, and NEM, all of which are trading below their 200-day moving average), this is probably the strongest chart formation of all the gold plays right now. Therefore, let’s play this bounce by adding April calls. Here’s the play…

PLAY: Buy the RGLD April 40 Calls (MJQ DH) at or under $2.55, good for the day. Place a protective stop limit at $1.40 and a pre-determined sniper sell at $4.00.

At the same time, I’m still comfortable holding our Visa April 50 Puts (V PJ) and our QID March 69 Calls. Visa is still fussing around at the 50-day moving average, which should give out on any forthcoming market weakness.

V

And the QID is touching its support point at the 50-day moving average as we speak, which could trigger the next upside move. Therefore, maintain both positions.

QID

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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