Add MTB Puts

Staying One Step Ahead

By Bryan Bottarelli
Monday, March 30, 2009 10:57 AM EDT
Mon, 30 Mar 2009 14:57:00 GMT

PLAY: Buy the MTB April 45 Puts (MTB PI) at or under $4.20, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $6.00.

Dear Bottarelli Research Member,

First off, congrats on your QID April 46 Calls (QID DT) gains. As you probably know, we positioned ourselves one step ahead of the market — and ultimately pegged this down-move perfectly!

Secondly, the “head-fake” move above the 50-day moving average that I warned about last week looks like a correct read as well. After weeks of unbridled optimism, it looks like the global markets have all snapped back to the ugly reality at the same time. This morning, for example, concerns have once again resurfaced about the U.S. auto industry, the global banking sector, and the viability of the worldwide stimulus efforts. All this comes on the eve of this week’s G-20 meeting of world leaders. As you can see, this rebirth of negativity has once again pushed the Dow below its 50-day moving average. Like I said, we pegged this false breakout perfectly!

INDU

Further supporting the new round of market fear is a powerful upside move in the CBOE Volatility Index (VIX).In the first 90 minutes of trading, the VIX has jumped from its 200-day moving average up to its 50-day moving average. This tells me that fear is coming back into the markets — and it’s coming back very quickly. If the fear continues into this week, don’t be surprised if the VIX breaks above the 55 level.

VIX

All of these indicators support our bearish bias. Therefore, our current positions in the AET April 25 Puts (AET PE) and the UGL April 33 Calls (UGL DG) look good. AET looks ready to push aggressively lower, while gold is once again attracting attention as a safe haven. Continue to hold both positions.

AET

But in terms of a new play, I’d like to add April puts on M&T Bank (MTB – NYSE). If you’re part of Bottarelli Research LEAPS, then you know that I consider MTB one of the only banking stocks that has not experienced the downside selling pressure that has been felt by virtually every other bank.

MTB

As you can see from the chart above, MTB has recently moved up to the $45 to $50 level, but it’s now beginning to fail. This could easily lead to a retrenchment under the 50-day moving average, especially if the financial sector (which was largely responsible for leading the recent market rally) starts to give back their recent gains. As a result, let’s get positioned in MTB April puts now.

PLAY: Buy the MTB April 45 Puts (MTB PI) at or under $4.20, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $6.00.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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