Ledger Parameters

Managing Positions for the Week

By Bryan Bottarelli
Tuesday, September 08, 2009 4:01 PM EDT
Tue, 8 Sep 2009 20:01:00 GMT

Dear Bottarelli Research Member,

As we approach the close of today’s trading, we haven’t seen too much movement off the open. Gold stocks opened right at the high of the day and have drifted lower throughout the session. At the same time, the major market averages, despite some intra-day weakness, have maintained their gains and will close in the green. But a quick look at the weekly S&P chart below still indicates that the bulls are losing their buying power. As you can see, the upside ticks are getting smaller and smaller, which could soon lead to downside pressure.

SPX

For this reason, be sure to maintain your SDS September 45 Calls (SSH IS). As you know, we added to this position today, lowering our cost basis down to $1.55. Going forward, this position will serve as our “safety net” in case the markets break down (which could happen any day now). If and when the markets move lower, you’ll be glad you’re holding these calls.

Now, as I mentioned earlier today, this will be the last alert you receive this week. Therefore, in my absence, I’d like to set some parameters that dictate your trading activities over the next three days. Here’s a quick rundown…

SDS September 45 Calls (SSH IS): As mentioned above, this is our downside safety net. Hold these ultra-short calls going into the end of the week, unless the markets really blast higher. Hold.

SDS

BEN September 95 Puts (BEN US): This is a chart-based position, which we entered for $4.10. As you can see from the weekly chart below, BEN continues to experience significant resistance at the 200-day moving average. Combine this resistance with today’s unfilled upside gap (which occurred right at the open), and I continue to feel that owning downside exposure to the financial sector using BEN makes a whole lot of sense. Maintain these puts this week, and plan to sell them if they trade at or above $5.00. Close them off if they dip under $1.30.

BEN

ESI September 105 Calls (ESI IA): We own these calls for $2.25. Since ESI moves very fast, you can see gains come rather quickly. Therefore, plan to sell these calls if they trade at or above $3.50. Close them off if they trade under $1.10.

ESI

Have a good week, and we’ll talk again next Monday. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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