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Shares of Synaptics (NASDAQ:SYNA) plunged nearly 15% Monday after Bear Stearns analyst Andrew Neff reduced his price target on the stock. The downgrade was apparently based on a decision by Apple Computer (NASDAQ:AAPL) not to include a well-known Synaptics product, TrackPad, in the company's newly revamped line of PowerBook computers. The analyst noted that "our concern is that TrackPad may signal a change in Apple's strategy whereby in the future Apple may source all of its interface solutions internally." Apple currently uses Synaptics technology in a number of its products.

Surprisingly, Neff's rating on Synaptics is "outperform" and he did not change his forecast for the company's third-quarter results. Investors were not as ambiguous in their assessment, dropping the stock over $6 on heavy volume. Our position has a cost basis below $30, so there is still some room for downside activity. However, Tuesday's session will likely determine the near-term direction of the issue and traders should be prepared to exit the short (put) option on any further selling pressure. Keep in mind, the spread is currently profitable, thus the primary goal for those with conservative portfolios will be to prevent losses going forward.

MCM Staff

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