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New Long Plays

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New Short Plays

Educ. Mgmt. Corp. - EDMC - close: 29.73 chg: -0.72 stop: 31.05

Company Description:
Education Management Corporation is among the largest providers of private post-secondary education in North America, based on student enrollment and revenue. EDMC has 71 primary campus locations in 24 states and two Canadian provinces. EDMC's education institutions offer a broad range of academic programs concentrated in the media arts, design, fashion, culinary arts, behavioral sciences, health sciences, education, information technology, legal studies and business fields, culminating in the award of associate's through doctoral degrees. EDMC has provided career-oriented education for over 40 years. (source: company press release or website)

Why We Like It:
EDMC peaked under long-term resistance at the $36.00 level back in the July-August period. Since then the stock has slowly melted lower under a trend of lower highs and lower lows. The P&F chart is bearish and points to a $23.00 price target. We believe that EDMC might be on the verge of breaking down from its two-week trading range between $29.80-31.00. We'll suggest shorts in the stock under the $30.00 level and target a decline to the $27.75 mark. Our time frame is pretty short. We do not want to hold over the company's earnings report on November 8th. If we do not see some downward momentum in the next couple of days we'll exit this play early. The biggest risk to shorting EDMC now would be a bullish earnings surprise from one of its peers. Dates to watch out for are October 28th (COCO reports earnings), November 2nd (CECO reports earnings), and October 27th (STRA reports earnings). STRA reports earnings tomorrow morning before the opening bell. If they surprise to the upside we would step back and just watch how EDMC reacts to the news for the first 60-90 minutes before considering any positions. Remember, we only want to initiate a short position in EDMC is the stock is trading under $30.00. Alternatively, if STRA bombs its earnings report you may not want to chase any big moves (more than 3%) in shares of EDMC. As another alternative conservative traders may actually want to use a trigger at $29.49 to open the play.

Picked on October 26 at $29.73
Change since picked: + 0.00
Earnings Date 11/08/05 (confirmed)
Average Daily Volume: 493 thousand

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Netflix - NFLX - close: 24.98 change: -2.43 stop: 25.01

Company Description:
Netflix is the world's largest online movie rental service, providing more than three million subscribers access to over 50,000 DVD titles. Under the company's most popular program, for $17.99 a month, Netflix subscribers rent as many DVDs as they want and keep them as long as they want, with three movies out at a time. There are no due dates, no late fees and no shipping fees. DVDs are delivered for free by the USPS from regional shipping centers located throughout the United States. Netflix can reach more than 90 percent of its subscribers with generally one business-day delivery. Netflix offers personalized movie recommendations to its members and has more than 1 billion movie ratings. (source: company press release or website)

Why We Like It:
NFLX is a high-risk, speculative play. The stock has just left a trail of dead and injured bears in its wake since shares bottomed back in March of 2005. That's why we suggest major caution considering a short on the stock. The stock peaked several days ago just before the company reported earnings. NFLX beat estimates by 5 cents but revenues came a bit under analysts' expectations. NFLX offered more good news by raising its subscriber estimates for the fourth quarter. That was a few days ago. Oddly enough shares of NFLX lost almost 9% today on very strong volume with no news. Shares dipped intraday to just under its simple 50-dma, which has been support and the bottom of its rising channel for the past several months. We want to speculate that a drop may be coming. Weekly technical indicators have turned or are turning bearish. Some of the daily indicators have turned bearish. We'll suggest a trigger at $23.74 to open the play. Only if NFLX trades at $23.74 or lower would be short the stock. If we are triggered we'll target a decline toward the 100-dma (21.00-20.85 is our target range). One of the biggest risk here is a short squeeze. The latest data puts short interest at about 30 percent of NFLX's 53.6 million shares. Plus, there is another risk. Rival Blockbuster (BBI) is due to report earnings on November 1st. What BBI has to say about the past quarter and its future guidance will very likely push shares of NFLX either higher or lower depending on BBI's outlook. There is a definite risk here but we're going to try and limit our risk to a stop loss at $25.01.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 02/16/05 (unconfirmed)
Average Daily Volume: 1.6 million
 

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