Standing Pat

The Case for Non-Action

By Bryan Bottarelli
Monday, March 23, 2009 3:00 PM EDT
Mon, 23 Mar 2009 19:00:00 GMT

Dear Bottarelli Research Member,

While it might sound boring, the best advice I can give you right now is to stand pat, and the reasoning is simple. A quick look at the chart of the Dow Jones Industrial Average shows you that the Blue Chips are tapping the top of the 50-day moving average. From here, it’s basically a coin-flip which direction we’ll move next. Either we’ll hold onto the recent downside trend and fail at this level, which could bring about a re-test of the 6,500 low (noted by the black line below). Or, we’ll break through this level to re-test the double-top high at 8,300 (noted by the black line above).

INDU

To be perfectly honest with you, the jury is still out. It’s pretty clear that the market wants to rally right now, but it’s also pretty clear that every rally over the last 18 months has gotten aggressively sold off. In times like this, it’s strategically smart to stand pat and simply let the markets tell us which move to make next.

In the spirit of full disclosure, I really like the idea of pairing calls on Monsanto (MON – NYSE) with calls on UltraShort QQQ ProShares (QID).

MON

As you can see above, MON could breakout above the $85.00 level, while QID could easily bounce back above the $50.00 level.

QID

But honestly, I’d like to hold off on making this trade until we see how the markets close. Should anything occur over the next hour to sway my opinion, you’ll be the first to know. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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