Two New Plays

Add GDX Calls, BNI Puts

By Bryan Bottarelli
Monday, June 08, 2009 2:59 PM EDT
Mon, 8 Jun 2009 18:59:00 GMT

PLAY: Buy the GDX July 40 Calls (GDX GN) at or under $3.50, good for the day. Place a protective stop limit at $1.80 and a pre-determined sniper sell at $5.80.

PLAY: Buy the BNI July 75 Puts (BNI SO) at or under $3.70, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.00.

Dear Bottarelli Research Member,

The markets opened the day lower, and have basically remained that way for all of today’s session. But the one sector that has made an impressive move has been metals – notably gold companies. I mentioned GG earlier this morning, but a quick look at all of the popular names (like NEM, ABX, and AEM) shows that every one of them gapped down this morning, but has now recovered. Just to maintain consistency from this morning’s alert, here is the latest GG chart. Most gold plays are exhibiting a similar formation.

GG

Instead of picking between the specific companies, why not play them all via the Market Vectors Gold Miners ETF (GDX – AMEX)? This basket of companies groups together the best gold miners in the world, including Agnico-Eagle Mines, Barrick Gold, Newmont Mining, and Randgold Resources. From a weekly perspective, this group is just about to tap the support level at the 200-day moving average. See below:

GDX

As I’ve said before, gold is solidly entrenched in a year-long uptrend. The trick is taking profits on the pops and buying the dips (or as traders call it, “sell the rips and buy the dips”).That’s why it’s time to add July GDX calls now. Here’s the play…

PLAY: Buy the GDX July 40 Calls (GDX GN) at or under $3.50, good for the day. Place a protective stop limit at $1.80 and a pre-determined sniper sell at $5.80.

At the same time, I’d like to add some downside exposure to our trading ledger, and today’s best candidate comes from the Dow Transports (TRAN). As a sector group, the Transports have had a powerful upside run, but they’ve now set up the possibility of a double-top formation right at 3,500. Check it out:

TRAN

Among the components of the Dow Transports, the weekly chart formation on Burlington Northern Santa Fe (BNI – NYSE) shows that the stock is currently hitting a very strong level of resistance. All we need is a pullback down to $70.00, and we’ll have a powerful winner. Therefore, let’s play this pullback using July 75 Puts.

BNI

PLAY: Buy the BNI July 75 Puts (BNI SO) at or under $3.70, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.00.

And a always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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