Add DO Calls
Some Upside Exposure
PLAY: Buy the DO April 65 Calls (DO DM) at or under $3.50, good for the day. Place a protective stop limit at $1.60 and a pre-determined sniper sell at $5.40.
Dear Bottarelli Research Member,
Once again, the markets find themselves at a very critical level. As you can see below, the Blue Chips are making a very strong effort to establish a support level right at the 50-day moving average. If successful, we could witness a bounce back above 8,000. If not, then we’ll probably be talking about a dip under 7,000. So once again, the risk versus reward scenario involves 500 points of potential upside versus 500 points of potential downside. And right now, the status is still unclear.
In situations like this, I try to maintain a ledger that positions us to profit no matter what happens. Typically, you see an upside move one day followed by a downside move the next. Therefore, the idea is to own a series of positions that allow you to capitalize on these pops and drops, which is what we currently have with our MTB April 45 Puts (MTB PI), UGL April 33 Calls (UGL DG), and AET April 25 Puts (AET PE). As I study all three charts, I’m still comfortable maintaining an upside bias on UGL and a downside bias on AET and MTB.
But at the same time, I think it’s time that we carefully add upside exposure, just in case we witness an upside move off support at 7,500. I’d like to accomplish this using calls on Diamond Offshore Drilling (DO – NYSE). As you know, oil prices have recently dipped below $50.00, which has pushed most of the oil service plays down. But as you can see, this is taking DO very close to their support level at the 50-day moving average. This could act as the next upside launch point. In fact, if you remember our trade on RIG, then you know that these oil service plays can really blast off when the buying momentum gets going. Therefore, let’s get positioned to ride any forthcoming upside moves using April calls.
PLAY: Buy the DO April 65 Calls (DO DM) at or under $3.50, good for the day. Place a protective stop limit at $1.60 and a pre-determined sniper sell at $5.40.
And as always…
Lock and load!
Sincerely,
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