Keep Everyone Guessing

Battle at 8,000 Continues

By Bryan Bottarelli
Thursday, April 16, 2009 12:28 PM EDT
Thu, 16 Apr 2009 16:28:00 GMT

PLAY: Buy more MOS May 45 Calls (MOS EI) at market, good for the day. Lower your protective stop limit to $1.10 and maintain your sniper sell at $5.70.

PLAY: Buy more HES May 60 Calls (IGG EL) at market, good for the day. Lower your protective stop limit to $1.50 and maintain your pre-determined sniper sell at $5.00.

PLAY: Buy the SMH May 22 Puts (SMH QJ) at or under $2.40, good for the day. Place a protective stop limit at $1.40 and a pre-determined sniper sell at $3.50.

Dear Bottarelli Research Member,

This market has everyone guessing, as the battle at Dow 8,000 has now moved into its tenth trading day. As you can see from the chart below, the Blue Chips are still deciding if they want to push higher or re-test the 50-day moving average at 7,500. Thus far, the bulls have been quite resilient while the bears take shelter on the sidelines. This leads me to believe that we could have a little more upside strength. But as always, we’ll remain conscious and cautious about the ever-present threat of awakening the bear.

INDU

From a position standpoint, our TBT June 44 Calls (TBT FR) that we entered on April 3rd for $3.32 are trading just below our entry price. This position has more to do with a personal bias than a technical bias, as global buyers of U.S. Treasuries are slowly backing away from the table. As a result, TBT should eventually experience an upside move.

TBT

In terms of our other positions, I’d like to get a little aggressive. The MOS May 45 Calls (MOS EI) that we entered on April 13th for $3.30 are currently trading for $2.70. As you can see below, MOS could still establish a support level at the 50-day moving average, which could lead to a nice upside move. Therefore, let’s lower our cost basis and add to this position now.

MOS

PLAY: Buy more MOS May 45 Calls (MOS EI) at market, good for the day. Lower your protective stop limit to $1.10 and maintain your sniper sell at $5.70.

I’d like to do the same thing with our HES May 60 Calls (IGG EL). As you know, we entered these calls on April 14th for $3.89 and they’re currently trading for $2.20. I continue to feel like HES can quickly shoot up past $60.00 per share, so let’s lower our cost basis and add to this position as well.

HES

PLAY: Buy more HES May 60 Calls (IGG EL) at market, good for the day. Lower your protective stop limit to $1.50 and maintain your pre-determined sniper sell at $5.00.

At the same time, I’d like to hedge against a sudden sell-off by adding puts on a sector that’s gotten ahead of itself. Specifically, I’m referring to the Semiconductor HOLDRs (SMH), which is a basket of 20 of the top semi plays, including Applied Materials, Broadcom, Intel, KLA-Tencor, National Semiconductor, Texas Instruments, and Xilinx. From a chart perspective, it looks like this group is topping out right around $20.00, which supports adding SMH puts to our ledger.

SMH

PLAY: Buy the SMH May 22 Puts (SMH QJ) at or under $2.40, good for the day. Place a protective stop limit at $1.40 and a pre-determined sniper sell at $3.50.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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