A Shift in Reaction
Add AEM Calls
PLAY: Buy the AEM November 75 Calls (AEM KO) at or under $3.30, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.50.
Dear Bottarelli Research Member,
Good morning, and welcome to the “now what?” phase of the market. In other words, now that the government has pumped enough liquidity into the markets to fund a mid-sized country, they’ve essentially bought themselves the 10,000 level on the Dow. Now that this benchmark has been set, what happens next?
In yesterday’s trading, the markets blasted higher when J.P. Morgan Chase reported earnings that topped estimates despite some clear warning signs that a full-blown recovery is still a long way off. But in today’s action, Goldman Sachs reported that their Q3 profits nearly quadrupled from year-ago levels, and yet the market reaction is to sell GS on the news. This could be a clear warning sign that the markets are set for a breather.
How long will this breather last? It’s anyone’s guess. It might last for only the first 30 minutes of trading, for all I know. The point is, we’ve seen a dramatic shift in how the market has reacted to earnings news – and this is something I’ll be watching very closely going forward.
In the meantime, maintain your balanced ledger of ICE November 100 Calls (IHH KT), HAL November 30 Calls (HZL KF), and PRU November 50 Puts (PWQ JW). But in terms of a new trade, I’d like to buy this morning’s opening session dip on shares of Agnico-Eagle Mines (AEM – NYSE).
In my humble opinion, investors will now buy into any dip in gold for the remainder of the year – and that’s something we’ll capitalize on this morning. Let’s use today’s dip in AEM to establish a November call position!
PLAY: Buy the AEM November 75 Calls (AEM KO) at or under $3.30, good for the day. Place a protective stop limit at $2.10 and a pre-determined sniper sell at $5.50.
As always, I’ll follow up as the trading day progresses. Until then…
Lock and load
Sincerely,
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