A Coming Financial Dip?

Watch Possible Plays on FAZ, FDX

Dear Bottarelli Research Member,

Good morning. With rumors circulating that President Obama is now considering a new tax on the big banks to recoup TARP funds, this might prove to be the trigger that sends the financial sector lower over an extended time period. As a result, we could be ready to turn the corner on Direxion Daily Financial Bear 3X Shares (FAZ – NYSE).

Plus, with news of the Fed sending $46 billion to the U.S. Treasury, it’s clear that the financial sector still has a heap of problems. Case in point, the Fed is printing money with their left hand to pay for what their right hand is spending. No matter how you digest it, this cannot be a good sign.

At the same time, Goldman, JP Morgan, and Bank of America will all testify tomorrow to the Financial Crisis Commission on the meltdown. This should offer some fireworks. And then, JP Morgan reports earnings Friday before the bell. Add it all up, and we could be getting close to the time to add FAZ calls. Once we get a handle on how this story will be spun, we’ll know how to play it. For now, sit tight. But going forward, be ready for a quick trade on the FAZ February 17 Calls (FEW BQ).

NOTE: If you’re still holding the SDS January 36 Calls (SSH AJ), which served as our last protective position, go ahead and sell this play. I plan to use whatever is left to help fund the FAZ position. With January expiration looming, these calls will likely expire as worthless by week’s end. Therefore, we might as well get whatever we can for them now and “roll” ourselves into the next protective position for February. Also, if you’re still holding the MON January 80 Puts (MON MP) from our strangle position, go ahead and sell that position as well. Just a little house-cleaning going into January expiration.

I also don’t want to lose sight of FedEx Corporation (FDX – NYSE). Thus far in 2010, we’ve made seven options trades, and six of them have been winners. Of these winners, two of them came on FDX. And of course, yesterday’s 52.17% gainer was the best winner we’ve hit to kick off the new year. Since we have such a nice handle on how FDX is trading, I want to continue milking this one for all that we can. As you know, $90.00 has been our price target and I still feel that way today. As you can see below, FDX began the morning by popping up to $88.68 before falling back down to the midpoint of yesterday’s candlestick formation. If this level appears to be a medium-term support point, it’ll support jumping back into the FDX February 90 Calls (FDX BR). Until we get the trigger, sit tight.

In other news, our WHR February 85 Calls (OFW BQ) are dipping a little today, but WHR has a strong upside catalyst on the horizon. Based on surprisingly strong sales from their green-energy appliances, WHR is getting set to increase their marketing firepower by launching their first major marketing campaign this week. If the momentum from their “green” products continues, WHR’s uptrend will remain in place.

Also, our GMCR February 85 Calls (QGM BQ) have dipped a little, but if GMCR can find support at $80.00, we should be alright.

As always, I’ll keep you fully informed. But until then…

Lock and load!

Sincerely,