Wednesday, April 2, 2008

Broker Dealers Look Like They Are On The Verge of A Monster Rally

Below is the predictive price model of the Broker Dealer index and as you can see by the black bars, the model is calling for a very hefty move higher over the next 3 months.

It is no secret that these stocks have been beaten to a bloody pulp and some of them to levels that simply were not justified. Well the market has ways of fixing these pricing discrepancies and in this case it should be higher prices.

I am trading this with call options and not the actual stock.
I am buying Merrill Lynch call options as it seems to have the best odds of performance.
I am looking at the July 45 calls, which are trading at 6.70 right now. Therefore it will cost you $670 to control 100 shares of the stock as opposed to $4500 to buy the stock outright.
I will be purchasing 10 contracts in order to control 1000 shares and based upon my fill price I will be placing a protective stop order at 25% under my execution.

With the 3 day cycle starting to roll over I may wait until a small corrective move takes place, but I will keep you informed.

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