The Volatility Trader
105 W. Monument Street
Baltimore, MD 21201
Friday, June 22, 2007
Email – #273
Volatility Trader Update
Dear Subscriber,
This was a great week for the portfolio. We saw a very noticeable recovery in our Digital Realty Trust (NYSE: DLR) puts. As you will see on the weekly chart below, the stock finally commenced a reversal… something we’ve been waiting for. At present, the stock needs to fail the 200-DMA at $36, which incidentally is just about where the 40-week MA is as well. A move below $36 could easily bring bears out of the woodwork, possibly giving us a MASSIVE winner.
Additionally, our Echelon (Nasdaq: ELON) puts are already green. Ideally, I would like to see the stock fail the 50-DMA at $15.35, thus prompting a test of the 200-DMA lower at $10.38. I will be watching the stock closely, as a broader market rally could bring bulls back on the scene. However, given that the Dow Jones Industrial Average was not able to post a new high earlier in the week, the markets could easily fall apart over the next few weeks.
International Coal Group (NYSE: ICO) is also moving in the right direction. The stock is consolidating above $6, and looks to be coiling for another move higher. Our position is in the black though, and with the chart showing a possible ascending wedge breakout setting up, things look darn good.
Finally, our Mosaic (NYSE: MOS) puts are hanging in there; though they have lost some value due to the stock’s ability to remain strong (despite being fundamentally overvalued). Regardless, given that the stock is up 87% for the year, a sharp selloff could appear any day now if one or more institutions decide to take their profits off the table. In this type of trade – a fundamentally overvalued situation – a large fund or institution exiting the stock is exactly what we’re looking for. While the stock does have a forward PE of 20, the present PE is sitting at a sky high 660. On a ‘here and now’ basis, there’s simply too much premium in the stock to justify the current price. Should any wind of slowing sales surface (with the irrational exuberance of Wall Street’s expectations propping up the stock), Mosaic could quickly take a huge nose dive. Again, patience is the key.
Exit is everything,
Mark Whistler
Current Portfoli
Mosaic (NYSE: MOS)
Sep 07 $35 puts MOS-UG
Purchased: 6/14/2007
Current Price: $1.40
Echelon (Nasdaq: ELON)
Nov 07 $20 puts EUL-WD
Purchased: 6/05/2007
Current Price: $3.80
International Coal Group (NYSE: ICO)
Dec 07 $5.00 calls ICO-LA
Purchased: 5/21/2007
Current Price: $1.60
Digital Realty Trust (NYSE:DLR)
July 07 $40 puts DLR-SH
Purchased: 3/14/2007
Current Price: $2.30
If you have any questions, feel free to call one of our VIP Trading Services representatives at 888.570.9830 (toll-free) or e-mail: viptrader@oxfordclub.com , or contact Pillar One Advisors Ron McCoy, Gunn Allen at 800.720.6576 or Neil Fern, RMB Group at 800.831.3114.
Bi
Mark Whistler is a specialist in high-level trading techniques, and has worked as a licensed trader on various trading floors for over a decade. He is the editor of The Volatility Trader and is an Advisory Panelist for Xcelerated Profits Report through Mt. Vernon Research . Mark has written for The Motley Fool, Active Trader Magazine, BullMarket.com, OptionInvestor.com, and Working-Money online . His first book, Trading Pairs (published by John Wiley & Sons, Inc.), appeared on shelves in 2005. The work is a comprehensive guide to pairs trading and statistical arbitrage. His second book, Trade with Passion and Purpose , has been on shelves since February of 2007. Whistler also writes regularly for Investopedia.com, TraderDaily.com and TraderMonthy Magazine .
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