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The Dow Futures Report

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Stocks Rocket Higher, but may run into Trouble

Wed, Apr 2 2008, 14:33 GMT
by Carley Garner

Alaron

**Read my article “Tips and Tricks” in this month’s bonus issue of Stocks and Commodities!!!

Stocks soared on UBS and Lehman Brothers news, better than expected economic date, but most of all second quarter and beginning of the month fund buying. The major indices were sharply higher in the overnight session and had very little to slow them down as the day wore on.

Both Lehman Brothers Holdings Inc. and UBS AG issued shares to improve their balance sheets. The market took it as a sign of better things to come in the financial stocks as well as a possible sign that the worst of the credit crisis is behind us. Whether that is a correct assessment or not has yet to be seen, but there are certainly those with the opposite opinion. In fact, some of my contacts on the S&P floor seem to think that we are approaching a great selling opportunity. After all, we have seen similar “bear market rallies” thus far in 2008 and we all know how they have turned out. Until this market proves that it is ready to break out of the range, which I am convinced that it will eventually be on the upside, it doesn’t make sense to try to trade otherwise.

Today, I was recommending to my clients that they sell call options into this volatility but giving the market plenty of room to move, and more importantly room for us to be wrong without having to suffer financially (to a point). The April 130 calls for $600 or better seem to be a good play; this would have been filled today but should be possible tomorrow for a similar price.

Major resistance in the Dow can be found at 12,645 and again at 12,775. In the case of the Nasdaq, the market closed near heavy resistance at 1865 but may find a ceiling near 1885.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.

Dow Recommendations...

**There is unlimited risk in naked option selling and futures trading

Position Trade –

• April 1 – Sell 1 April Dow 130 call for $600 or better (this can be done in the mini instead!)

Please note: A mini-Nasdaq chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.

Nasdaq Recommendation

**There is unlimited risk in naked option selling and futures trading

Position Trade – Flat

Published on  Wed, Apr 2 2008, 14:40 GMT