Take MELI Profits!

Plus, Add DRQ and AEM Calls

By Bryan Bottarelli
Monday, September 28, 2009 10:16 AM EDT
Mon, 28 Sep 2009 14:16:00 GMT

PLAY: Buy the DRQ October 45 Calls (DRQ JI) at or under $4.30, good for the day. Place a protective stop limit at $3.10 and a sniper sell at $6.00.

PLAY: Buy the AEM October 65 Calls (AEM JM) at or under $3.20, good for the day. Place a protective stop limit at $1.90 and a sniper sell at $5.00.

PLAY: Sell your MELI October 40 Calls (QMB JH) at market, good for the day.

Dear Bottarelli Research Member,

Good morning. The major market averages are making a strong upward push this morning, which comes on the heels of last week’s weakness. Could this be the one last hurrah for the major market averages? In other words, will the bulls make one last push up past Dow 10,000, and then call it a year?

As you know, the bulls have been buying into each and every market dip – and today is no exception. But in recent trading, the dip-buying has been getting weaker and weaker. Therefore, we must continue to approach this upside momentum with caution. That means our nimble trading methodology will remain in tact. For today, I’d like to use the recent dip in gold and oil prices to re-establish two new positions in each sector.

Starting with oil, we’ll add calls on a company called Dril-Quip, Inc. (DRQ – NYSE). DRQ manufactures and markets engineered offshore drilling and production equipment, which is used in deepwater and harsh oil drilling environments across the globe. As you know, we’ve played companies like RIG and DO in the past, and DRQ falls into this same sector. From a chart perspective, the company has been extremely strong, which is something I’d like to play alongside today. As I write, the Dow is up over 100 points but oil is up only fractionally. This could offer us a nice opportunity to add an oil company like DRQ in anticipation of a follow-through upside push.

PLAY: Buy the DRQ October 45 Calls (DRQ JI) at or under $4.30, good for the day. Place a protective stop limit at $3.10 and a sniper sell at $6.00.

On the same hand, let’s also use the recent dip in gold stock Agnico-Eagle Mines (AEM – NYSE) to establish a new upside call position as well. The stock price dipped recently with gold’s pullback off the $1,000 level, but this could simply offer those who missed out on the first upside run a chance to jump on board now. As a result, AEM looks ready to push higher. Let’s get positioned to ride this upside move now!

PLAY: Buy the AEM October 65 Calls (AEM JM) at or under $3.20, good for the day. Place a protective stop limit at $1.90 and a sniper sell at $5.00.

And finally, let’s go ahead and lock in gains on our MELI October 40 Calls (QMB JH). As you know, this position has been all over the map, but the strength of the company turned knee-jerk selling pressure into a snap back recovery, giving new life to our position. As I write, the calls we entered on September 23rd for $1.55 have just hit a high of $1.75. Considering where this position was at, this is a great recovery move. Lock in the gains now!

PLAY: Sell your MELI October 40 Calls (QMB JH) at market, good for the day.

And as always…

Lock and load!

NOTE: I would normally include charts with these plays, but StockCharts.com, our stock chart provider, seems to be down today. As soon as their technical problems are resolved, I’ll include charts in follow-up alerts.

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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