Beef Up Protection
Add DXD Calls
PLAY: Buy the DXD March 30 Calls (DOF CD) at or under $2.20 (or best price) good for the day.
Dear Bottarelli Research Member,
Take one look at the Dow Industrials chart below, and you’ll see that the Blue Chips aren’t looking so healthy lately. As I write, the interim support level at 10,200 is just about to fail, which could easily trigger the next wave of selling pressure. From a technical perspective, this could be scary. After all, the next strong support level doesn’t come until the 200-day moving average below 9,600. You can barely see the 200-day moving average on the Dow chart below – it’s the red line in the lower right-hand corner. Quite honestly, this market could fall 1,000 points. I’m not saying this to alarm you, but rather to help you properly prepare for the worst-case scenario.
As you know, we recently added the QID February 21 Calls (QOI BU) as a way to protect against weakness in the technology sector. With shares of Apple (AAPL – NASDAQ) down over $6.00 today, it looks like this was the correct move. These calls have just ticked up to $0.80, good for a slight 14% gain off our $0.70 entry price, so remain protected. Hold.
But just to beef up our downside protection, I’d also like to add March calls on the UltraShort Dow30 ProShares (DXD – NYSE). This way, we’re protected against a sell-off in both the technology sector and the Dow Industrial sector. After all, with a 1,000-point fall on the table for the Dow, we can never be too careful. Let’s increase our protection going into March now!
PLAY: Buy the DXD March 30 Calls (DOF CD) at or under $2.20 (or best price) good for the day.
And once again, congratulations on a powerful trade on Netflix (NFLX – NASDAQ). As I mentioned earlier this year, one of my goals for 2010 is to limit losses and maximize winners. In that spirit, you might encounter a higher frequency of trades that range between 10% to 15% gains. Why?
Well, I’m placing a higher emphasis on taking profits at these small levels, simply to avoid losses. After all, I’m pretty certain you’d accept a 10% gain, knowing that this gain could soon reverse course and turn into a 30% loser. In other words, when the charts indicate that it’s time to exit, we’re going to exit. This will do wonders for your profit margins. Because every once in a while we’ll hit a grand slam — like today’s trade on NFLX — which will offer a big boost to your weekly, monthly, and yearly trading profits.
Just so we’re clear, I will record NFLX in our portfolio as a 322% gain despite the fact that some of you did even better. If you can, please shoot me a quick note at bryan@bottarelliresearch.com and tell me how you did. Thanks!
And as always…
Lock and load!
Sincerely,
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