Take SDS Profits

Plus: Add to ADM

By Bryan Bottarelli
Friday, March 20, 2009 11:44 AM EDT
Fri, 20 Mar 2009 15:44:00 GMT

PLAY: Sell your SDS April 84 Calls (SBJ DF) at or above $7.00, good for the day.

PLAY: Buy more ADM April 30 Calls (ADM DF) at market, good for the day. Readjust your protective stop limit to $0.30.

Dear Bottarelli Research Member,

It’s been a relatively quiet morning. The major market averages are temporally stalled at their 50-day moving averages, as you can see from the SPX chart below. In fact, to be perfectly honest with you, this formation has all the makings for more downside movement going into next week. Similar to the chart pattern in early February, a failure at the 50-day moving average could spark another sizable downside move.

SPX

Having said that, I think it’s a safe and smart idea to lock in our profits on the SDS April 84 Calls (SBJ DF). As you know, we established a super entry price yesterday at $6.10. And today, these calls have traded as high as $7.30, good for a respectable 19.6% gainer. Perhaps I’m being overly cautious, but I’ve seen this market do some strange things. We also run the “headline risk” of some new positive announcement out of Washington over the weekend. Therefore, let’s take our money and run. We can always re-enter into puts if the downside trend continues. But for now, the safe play is to sweep the gains going into the weekend. Here’s the play…

PLAY: Sell your SDS April 84 Calls (SBJ DF) at or above $7.00, good for the day.

NOTE: If you cannot execute a sell price at or above $7.00, then maintain these calls going into next week.

At the same time, I’d like to add to our ADM April 30 Calls (ADM DF). Ever since entering this position, ADM has been stuck in the mud. But now, as shares approach a strong support level just under $28.00, I think the next upside move is upon us. Therefore, let’s lower our cost basis and add to our calls now!

ADM

PLAY: Buy more ADM April 30 Calls (ADM DF) at market, good for the day. Readjust your protective stop limit to $0.30.

And finally, our PBR April 30 Calls (PBR DF) are looking good, so maintain this position going into next week. In terms of new trades, I don’t expect anything further for today. So have a great weekend, and we’ll catch up next Monday. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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