Add to SRS Calls

Taking Advantage Of The Dip

By Bryan Bottarelli
Friday, April 24, 2009 10:33 AM EDT
Fri, 24 Apr 2009 14:33:00 GMT

PLAY: Buy more SRS May 32 Calls (SAK EZ) at market, good for the day. Lower your protective stop limit to $1.20.

Dear Bottarelli Research Member,

Even though Amazon, Microsoft, and Amgen all reported lackluster numbers, the bulls continue to buy into the promise of recovery — which is sending stocks higher this morning. Looking specifically at MSFT, they posted a 32% drop in third-quarter profits, and they said that weakness will continue “through at least the next quarter.” On this news, the stock is rallying. Go figure.

Looking at the Dow, the Blue Chips are still holding at the 8,000 level, which seems to indicate that the markets are just waiting for a news catalyst to push the next directional move. Could the stress test results be this catalyst?

As it stands, I’d like to maintain all of our current positions. Barring some unforeseen occurrence, we won’t be adding any new positions going into the weekend. Gold prices continue to inch higher, which is good news for our ABX June 30 Calls (ABX FF).We entered these calls for $2.40 and they hit a high of $2.70 today, so we’re looking good. Hold.

ABX

Our CMED May 20 Calls (QCY ED) are also holding their own, offering us some upside protection. We entered these calls for $1.90 and they’ve traded as high as $2.20, today, so continue to hold them as well.

Over on the bearish side, I continue to feel that financials and real estate will give up their recent gains and probe lower. As a result, continue to hold your FAZ June 8 Calls (FAY FH) and your SRS May 32 Calls (SAK EZ). While we’re showing a gain on our FAZ position, our SRS calls have now dipped under $2.50. Commercial real estate looks like it’s the proverbial “next shoe to drop,” so let’s take advantage of this dip by adding to our SRS call position now.

SRS

PLAY: Buy more SRS May 32 Calls (SAK EZ) at market, good for the day. Lower your protective stop limit to $1.20.

And finally, our SMH May 22 Puts (SMH QJ) are also maintaining their profitability, so hold these puts for more weakness in the semiconductor sector.

SMH

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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