Play Editor's Note: We strongly debated not adding any new plays this weekend. A number of professional traders have gone to all cash or if they are trading they're trading very small positions. I continue to stress that the best trade here is probably no trade at all. Sitting out on the sidelines is perfectly fine. The prevailing wisdom is that congress will eventually come to some sort of agreement on the bailout plan before Monday morning. However, there is a large camp of investors and market pundits who are calling it a coin toss whether or not an agreement is reached. No agreement on Monday means more volatile and probably more losses by the end of the day.
Please note that if/when an agreement on the bailout plan is reached I do expect a bounce but I don't expect the bounce to last very long. The rescue effort doesn't change the underlying economic environment, which is slowing. I would be watching very closely to short the bounce as it begins to falter. We're still in a bear market. Furthermore the end of September could see a lot of selling from funds facing rising redemptions. They don't have to do all of their selling by September 30th. It could carry into the first few days of October.
FYI: CEPH broke out from its multi-week trading range. The MACD turned bullish. Friday's move or a dip back toward $78.00 looks like an entry point on CEPH. Meanwhile Friday's bounce in FLIR also looks like a potential entry point for calls. Unfortunately, my big-picture market outlook is just too bearish. Readers will want to keep an eye on airline stocks. The U.S. dollar is likely to roll over, which will push oil higher and thus airlines lower.
Stericycle - SRCL - close: 63.24 change: +0.90 stop: 60.99
Why We Like It:
BUY CALL NOV 60.00 URL-KL open interest= 308 current ask $5.90
Picked on September 28 at $ 63.24