Continuation Formations

Add JRCC Calls

PLAY: Buy the JRCC July 22.50 Calls (JQM GX) at or under $4.40, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $6.50.

Dear Bottarelli Research Member,

I find it difficult to buy into a market that gaps up +200 points at the open. After all, a daily chart of the Dow indicates that it’s getting very close to a resistance level at the 200-day moving average at 8,750, shown below:

At the same time, a weekly Dow chart indicates that the Blue Chips could push above 9,000 before hitting the next resistance level. Perhaps the addition of Travelers and Cisco will be the catalysts to fuel such a move?

Either way, the market sentiment is up. And like I mentioned this morning, the best tactical strategy is to carefully join the party for however long we can. Therefore, I spent the morning searching for continuation patterns – ones that could extend their upside moves despite directional volatility on a day-to-day basis. As it turns out, most of these patterns are coming in companies that could be the next group to extend the commodities rally. As you know, materials plays (especially metals and oil-related companies) have officially triggered the powerful upside move. If this trend continues, the companies outlined below stand to follow a similar upside pattern.

First up is Teck Resources Limited (TCK – NYSE), which has been a powerful winner in my Bottarelli Research Small Caps service. We entered the stock on 1/20/2009 for $4.67 per share, and it now trades at $16.98, good for a 263.60% winner. But looking at the chart below, it appears like the upside move will continue. The company is a diversified mining, mineral processing, and metallurgical company that produces copper, metallurgical coal, metallurgical zinc, gold, molybdenum, and other specialty metals. All told, they’re a very nice mix of materials. The daily chart below shows that a breakout above the 200-day moving average is a very bullish signal. This is a company that I’d like to add calls on any forthcoming dips. But for now, let’s hold off.

Another continuation play is Cameco Corp. (CCJ – NYSE), the top uranium company in the world. If the global economy, fueled by China, begins to pick up steam, you better believe that nuclear energy will quickly jump back into the minds of investors. In fact, I’ve learned that China and India are both using their cash surpluses to acquire uranium deposits. What does that tell you? As a nice all-around play on uranium, fuel services, electricity, and even gold (which is also found in CCJ’s mines), CCJ looks ready to extend its upside rally past $30.00 and above. Once again, I’d like to wait for a pullback before entering.

This leads us to James River Coal (JRCC – NASDAQ), which is a play I’d like to jump into right now. The company mines, processes, and sells bituminous, steam, and industrial-grade coal. They control around 277.1 million tons of proven and probable coal reserves in Central Appalachia and the Midwest, and if the powerful commodity rally extends into coal stocks, you could see a powerful upside move. The daily chart (below) shows a nice breakout move above $24.00.

But more importantly, the weekly chart indicates that the upside breakout is just now taking place. If this breakout gains momentum, you can see just how quickly JRCC can move higher. The July 2008 highs of $65.00 give you a sense of the potential.

Therefore, let’s go ahead and play an extended commodity rally by adding July calls on JRCC now. Here’s the play…

PLAY: Buy the JRCC July 22.50 Calls (JQM GX) at or under $4.40, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $6.50.

Since I received such positive feedback from my first round of Hawaii pictures, here are a few more. Thanks for your comments, I truly appreciate it!

At the base of a waterfall (a much smaller one!) Man, this water was cold!

Zip-cording through the jungle and over a gulch. It felt like flying.

Our door-less helicopter tour, driven by an ex-Vietnam pilot in an authentic war chopper. This company does all the search and rescue missions for lost hikers in Hawaii. They’re true heroes, and it was an honor to fly with them.

On this tour, we captured some utterly amazing shots. The island’s beauty was breathtaking:

Waterfalls that went uninterrupted for hundreds of feet:

And finally, we flew right through a rainbow. That has to be good luck, right?!

Once again, thanks for all of your kind words. The trip was a blast, but I’m very glad to be back.

And as always…

Lock and load!

Sincerely,