Add AEM Calls

Re-Loading Gold

By Bryan Bottarelli
Monday, April 13, 2009 10:12 AM EDT
Mon, 13 Apr 2009 14:12:00 GMT

PLAY: Buy the AEM May 50 Calls (AEM EJ) at or under $4.10, good for the day. Place a protective stop limit at $2.30 and a pre-determined sniper sell at $6.00.

Dear Bottarelli Research Member,

Good morning, and welcome back from a nice 3-day market weekend! As we kick off another week of trading, the questions around Wells Fargo’s record earnings report continue to swirl.

For example, Tim Geithner has been speaking about a $2 trillion dollar hole on the banking system — at the same time that banks (like Wells Fargo) are reporting that they’re well-capitalized and have record profits. As I mentioned last week, something doesn’t smell right.

At the same time, we’re awaiting results of the governmental-run “stress test.” And if that weren’t enough, we also have a slew of major financial earnings reports coming out, including:

  • April 14th: Goldman Sachs
  • April 16th: JPMorgan Chase
  • April 17th: Citigroup
  • April 20th: Bank of America Corporation

Throw it all together, and it’s clear that we’re looking at some major volatility in the financial sector. As a result, I think we might have a really strong opportunity to play calls on the Direxion Financial Bear 3X Shares (FAZ – NYSE).

FAZ

The FAZ moves at the rate of three times the daily performance of the Russell 1000 Financial Services Index, and as you see from the chart above, the recent financial rally has absolutely clobbered the shares. If we see any signs of a financial sector pullback, we’ll jump into FAZ calls and profit handsomely off any sell-off. More to come.

In the meantime, I think it’s time to get repositioned in gold. Looking at a chart of the pure metal, you can see that gold is in the process of hammering out a support level right at the 200-day moving average. This tells me that we’re pretty close to a bottom.

GOLD

As a result, I’d like to get repositioned in calls on Agnico-Eagle Mines (AEM – NYSE). As you can see below, AEM is trading in a very tight range between its 200-day support level and its 50-day moving average. To my eye, AEM could be on the verge of a powerful upside breakout. Therefore, let’s get positioned to ride any forthcoming upside momentum using May calls.

AEM

PLAY: Buy the AEM May 50 Calls (AEM EJ) at or under $4.10, good for the day. Place a protective stop limit at $2.30 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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