Add AEM Calls

Playing the Bottom in Gold

By Bryan Bottarelli
Monday, April 06, 2009 10:43 AM EDT
Mon, 6 Apr 2009 14:43:00 GMT

PLAY: Buy the AEM May 50 Calls (AEM EJ) at or under $4.30, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $7.00

Dear Bottarelli Research Member,

I think we’re getting really close to a bottom in gold prices — and I’d like to take advantage of this low price by establishing an upside call play on Agnico-Eagle Mines (AEM – NYSE) going out until May.

AEM

The rationale behind this play is three-fold. First off, as the major market averages have all aggressively bounced in the month of March, the heightened level of fear has dramatically come out of the marketplace. As a result, gold prices have moved lower. But as we approach earnings season, any disappointments could ignite a new rash of apprehension about the sustainability of the recovery, resulting in a move back into gold as a safe-haven.

Secondly, we’re now entering into April and May, which have historically been very bullish periods for gold prices. And third, with the 2008 up-swing in metals prices, Bloomberg estimates that gold miners should report earnings between 6% and 10% higher in 2009 than they did in 2008 (and AEM is scheduled to report on April 29th). Combine all these catalysts with the AEM stock chart — which shows that AEM has peeled off over $10.00 over the last three days and is now sitting right at its 200-day moving average — and it’s certainly worth a shot playing calls going into May. On that note, here’s the play…

PLAY: Buy the AEM May 50 Calls (AEM EJ) at or under $4.30, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $7.00.

At the same time, maintain your TBT June 44 Calls (TBT FR) for more upside. And congratulations on your DNDN April 5 Calls (UKO DA) winner from this morning.

DNDN

We still have the month of April before DNDN officially reports their Provenge findings, which could lead to more speculative opportunities going forward. If we see any dips, it might work in our favor to jump back into calls. I’ll stay on top of this situation. And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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