by 07/22/08
When a stock or segment spikes, traders rush to sell into the rally. And when there's a dip, that's when many investors jump in and "stock" up. It's a strategy we like to call "buying the dips and selling the rips."
In my view, the bullish tone that we saw sparked a nice move up for stocks, but the optimism surrounding the consumer's ability to absorb the recent inflationary pressures is premature and explains the "reality check" pullback we got as we headed into the holiday weekend.
WHAT'S IN IT FOR US? PROFITS
Let's face it -- the start of summer has always meant a surge in fuel and energy costs, as more people are getting away from the office and cranking up the air conditioning. And it remains to be seen whether a significant number of folks will start trading in their gas-guzzling SUVs, even though a number of auto manufacturers are offering some nice incentives that appeal both to consumers' desire to save green while speaking to their sense of "going" green to help the environment.
It's the best of times for companies that find themselves smack-dab in the middle of the oil boom, and we can capitalize by buying at- or in-the-money calls on those that find themselves exposed to growing global demand are only going to trade higher.
And for other companies that have found themselves on a tear, they may find that a period of backing-and-filling is necessary to sustain those high (and going higher) prices. This means that there's a tremendous opportunity to play the inevitable pullback with strategic put option plays.
I offer tons of trading ideas absolutely FREE through my exclusive "Tactical Trader Minute" video series on OptionsZone TV. But if you want all the names on my radar -- including how and when to play them -- check out my Tactical Trader service that not only gives you fresh trading ideas, but also the specific options to buy, delivered straight to your inbox. I can't make it any easier than that!
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For more fresh trading ideas from Bryan, check out his "Tactical Trader Minute" -- a series of minute-long videos in which he talks about the trends and stock/option plays that will get you set up for one hot summer full of sizzling profits -- by clicking here now.
If you enjoyed this article, check out Bryan Perry's "Dividend Yields Can Impact Option Values" and "Choose the Right Options Broker."
Dawn Pennington
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