The Importance of SPX 800

A Major, Major Test in the Making

By Bryan Bottarelli
Wednesday, March 25, 2009 3:22 PM EDT
Wed, 25 Mar 2009 19:22:00 GMT

PLAY: Buy the AET April 25 Puts (AET PE) at or under $2.90, good for the day. Place a protective stop limit at $1.75 and a pre-determined sniper sell at $4.50.

Dear Bottarelli Research Member,

Your better believe that every single floor trader is watching the 800 level on the S&P 500. Not only is this a psychologically critical level, but it also happens to fall right on the 50-day moving average. In the world of technical analysis, it doesn’t get any bigger than this. If this level fails, then we could see a cascade of fresh selling pressure. A re-test of the March lows could be in cards. But if this level holds, then we could have confirmation that the recent upside trend has sustainable legs. Right now, the status of the major market averages remains up in the air. Therefore, we must remain positioned on both sides of the coin.

SPX

In terms of our current positions, I’m comfortable holding TBT April 45 Puts (TBT PS), UGL April 33 Calls (UGL DG), and to a lesser extent, the MON April 85 Calls (MON DQ).If we witness the breakout move (as described above), MON should snap back into form. But since we just closed off our QID calls, this leaves us exposed to a possible downside move, which is something we’ll rectify right now in the form of Aetna (AET – NYSE).

If you’re a LEAPS member, then you know we locked in triple-digit profits off AET’s recent fall. And now that the stock has recovered, it looks like we can once again profit off a downside move using April puts. Check it out:

AET

I would expect to see a move on AET back under $20.00 very soon, with a possible downside target around $18.00. Let’s play this fall now!

PLAY: Buy the AET April 25 Puts (AET PE) at or under $2.90, good for the day. Place a protective stop limit at $1.75 and a pre-determined sniper sell at $4.50.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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