Test at 8,250/900 Coming

Will Dow and S&P Break Below?

By Bryan Bottarelli
Monday, June 22, 2009 9:57 AM EDT
Mon, 22 Jun 2009 13:57:00 GMT

Dear Bottarelli Research Member,

Good morning. As I’ve been saying all along, the Dow is set to re-test the 50-day moving average at 8,250. Whether or not the Blue Chips find support at this level will be the major technical catalyst that determines how we structure this week’s trading.

INDU

A similar pattern is also present on the S&P 500. As you can see below, if the SPX dips below the support level at 900, then a new downside trend would be established. If that’s the case, then we’ll begin playing puts on the financial sector. After all, it was the financials that lead this market higher (thanks, in part, to the government’s open wallet), so it’ll probably be the financials that take the biggest hit on any forthcoming weakness. As always, I’ll lead you to navigate the waters in the best manner possible.

SPX

In terms of today’s positions, we’re seeing some nice early gains from our DXD July 46 Calls (DXD GT) and our FLR July 50 Puts (FLR SJ). As you know, we entered the DXD calls on June 18th for $3.00, and they’ve now traded as high as $3.50, good for a quick 16% gainer. At the same time, we entered the FLR puts on June 16th for $2.50 and they’ve traded as high as $3.40, good for a 36% gainer. Hold both positions for more upside.

FLR

On the other hand, it’s time to cut our GDX July 40 Calls (GDX GN) loose. The level of support at the 50-day moving average, which appeared to be set on Friday, has been violated today. Therefore, we have no choice but to close out this position now. Now don’t get me wrong, I still consider gold plays fantastic as they dip at such an extreme rate. But the trick is to let them fall down to a support level, which will probably come when gold hits $900 per ounce. At this time, we’ll load up for the run towards $1,000 and above. Until then, close out the GDX play now.

GDX

As always, I’ll continue to update you throughout the trading session. If it’s time to lock in gains on our FLR or DXD plays, you’ll be the first to know. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From June 2009