Riding the Momentum

Add LVS and GMCR Calls

By Bryan Bottarelli
Monday, September 14, 2009 10:00 AM EDT
Mon, 14 Sep 2009 14:00:00 GMT

PLAY: Buy the LVS October 15 Calls (LJJ JW) at or under $3.30, good for the day. Place a protective stop limit at $1.60 and a sniper sell at $5.00.

PLAY: Buy the GMCR October 65 Calls (QGM JM) at or under $3.70, good for the day. Place a protective stop limit at $1.50 and a sniper sell at $5.50.

Dear Bottarelli Research Member,

Good morning. After four days of Disney magic, I’m very glad to be back in the saddle. I must admit, if you’re ever considering a Disney vacation, the very best time to go is the first week after Labor Day. Since every child in the country is back at school, the lines for every popular ride are nonexistent, taking one very critical variable out of play. But even so, after three jam-packed days, my Disney cup has definitely runneth over. So in that sense, I’m ready to get back to trading. I hope you are too! So let’s get started!

Reviewing last week’s action, it’s clear that the major market averages continue to plow fearlessly higher. Despite the fact that every technical reading is showing a severely over-bought market (which also happens to be occurring in the historically worst market month of the year), the Dow, S&P, and the NASDAQ all registered new yearly highs last week.

Traders across the land are scratching their heads…

Barron’s dubbed the rally, “the bull market in puzzlement.” And it’s easy to see why. Back in March, the major market averages were trading as if we were destined for a 3-year depression. And now, as I write you today, the major market averages are trading as if we’re destined for a 3-year recovery. As is the case with any situation like this, the truth lies somewhere in the middle. In my estimation, fair value should be somewhere around Dow 8,500. But once again, the name of the game is trading the tape – not trading your personal opinion. So in that spirit, let’s review where we stand with our trading ledger.

First and foremost, last week’s upside move triggered stops on our BEN September 95 Puts (BEN US) and our ESI September 105 Calls (ESI IA). This leaves us holding the SDS September 45 Calls (SSH IS), which are trading at nominal value. At this point, there’s no sense selling this ultra-short play at these prices. Therefore, let’s hold SDS and see if the market can gain any sort of downside momentum. But as I watch the opening moments, it sure looks like traders are buying the dip (once again!). It’s quite amazing, but let’s not fight it. Rather, let’s profit off it. In that spirit, I have two new upside calls plays.

The first is on Las Vegas Sands (LVS – NYSE). As you can see, the stock has major upside momentum – combined with strength in the Chinese casino sector (and also fueled by news of a potential IPO from WYNN). Let’s ride this upside momentum now!

LVS

PLAY: Buy the LVS October 15 Calls (LJJ JW) at or under $3.30, good for the day. Place a protective stop limit at $1.60 and a sniper sell at $5.00.

At the same time, let’s also play our favorite “short squeeze” candidate Green Mountain Coffee (GMCR – NASDAQ) to the upside as well. On a daily chart, GMCR is attempting to bounce back above the 50-day moving average. If successful, we could easily see another upside run to $70.00. Let’s get positioned to ride this move now!

GMCR

PLAY: Buy the GMCR October 65 Calls (QGM JM) at or under $3.70, good for the day. Place a protective stop limit at $1.50 and a sniper sell at $5.50.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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