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New Long Plays

Smurfit-Stone - SSCC - close: 13.58 chg: +0.00 stop: 12.99

Company Description:
Smurfit-Stone Container Corporation is the industry's leading integrated manufacturer of paperboard and paper-based packaging. Smurfit-Stone is a leading producer of containerboard, including white top linerboard and recycled medium; corrugated containers; point-of-purchase displays; multiwall and specialty bags; and clay-coated recycled boxboard; and is one of the world's largest collectors and marketers of recovered fiber. In addition, Smurfit-Stone is a leading producer of solid bleached sulfate, folding cartons, flexible packaging, and labels. The company operates approximately 250 facilities, located primarily in the U.S., Canada and Mexico, and employs approximately 35,000 people. (source: company press release or website)

Why We Like It:
It looks like the consolidation in SSCC is about over. The stock has spent the last two and a half months digesting its October to December rally. The pull back stopped around the 38.2% Fibonacci retracement level in February. More recently the stock broke out over technical resistance at its 50-dma and its trendline of lower highs on March 15th. Coincidentally that was the same day an analyst firm downgraded the stock to neutral and cut their price target to $14. We believe shares look ready to run higher. There is some resistance around the December-January highs in the $14.25 zone. Conservative traders may want to exit early near $14.25. We're going to target a rally into the $14.95-15.50 range.

Picked on March 19 at $13.58
Change since picked: + 0.00
Earnings Date 04/26/06 (unconfirmed)
Average Daily Volume: 3.1 million
 

New Short Plays

N.Y.Times - NYT - close: 26.05 change: -0.58 stop: 26.76

Company Description:
The New York Times Company, a leading media company with 2005 revenues of $3.4 billion, includes The New York Times, the International Herald Tribune, The Boston Globe, 15 other daily newspapers, nine network-affiliated television stations, two New York City radio stations and 35 Web sites, including NYTimes.com, Boston.com and About.com. The Company's core purpose is to enhance society by creating, collecting and distributing high-quality news, information and entertainment. (source: company press release or website)

Why We Like It:
Newspaper stocks have been serious losers for the last 12 to 18 months. Now after five months of consolidating above support at the $26.00 level it looks like NYT is poised to begin a new leg lower. The stock broke down under this level of support on an intraday basis this Friday after some bearish comments from Moody's Investors Service. Here's a quote from an AP article, "Fundamentals in the newspaper sector will remain weak for the foreseeable future," Moody's said. "Of particular concern is the continuing downward trend in circulation and intensifying competition from online rivals." Moody's is also considering a credit downgrade for NYT and TRB. Shares of NYT managed to rebound from their lows but we think it's temporary. The Point & Figure chart is already bearish and points to a $13.00 target. Aggressive traders might want to watch for a failed rally near its simple 10-dma as a new entry point for shorts. We're going to suggest a trigger at $25.64 to open new short positions. Our short-term target is only the $24.00 level since we do not want to hold over the earnings report next month. More aggressive traders with a longer time horizon may want to aim lower. Please note that NYT does have relatively strong short interest. The most recent data put short interest at 7.9% of its 134 million-share float. We are also listing Tribune (TRB) as a new short play. We are not recommending that readers short both stocks since they are in the same industry group.

Picked on March xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/13/06 (confirmed)
Average Daily Volume: 1.1 million

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Tribune Co. - TRB - close: 29.36 change: -1.41 stop: 31.01

Company Description:
TRIBUNE is one of the country's top media companies, operating businesses in publishing and broadcasting. It reaches more than 80 percent of U.S. households and is the only media organization with newspapers, television stations and websites in the nation's top three markets. In publishing, Tribune operates 11 leading daily newspapers including the Los Angeles Times, Chicago Tribune and Newsday, plus a wide range of targeted publications such as Spanish-language Hoy. The company's broadcasting group operates 26 television stations, Superstation WGN on national cable, Chicago's WGN-AM and the Chicago Cubs baseball team. Popular news and information websites complement Tribune's print and broadcast properties and extend the company's nationwide audience. (source: company press release or website)

Why We Like It:
Shares of TRB are suffering from the same factors that are wearing on shares of NYT. Investors have been exiting the newspaper industry due to circulation scandals and concern over the future of the business. Here's a quote from an AP article that came out on Friday, "Fundamentals in the newspaper sector will remain weak for the foreseeable future," Moody's said. "Of particular concern is the continuing downward trend in circulation and intensifying competition from online rivals." Moody's is also considering a credit downgrade for NYT and TRB. To make matters worse for TRB an analyst firm downgraded the stock to a "hold". Shares of TRB reacted with a 4.5% sell-off on huge volume and a breakdown below short-term support at the $30.00 level. We don't think the weakness is over yet. We're going to suggest shorts with TRB under $30.00. Our target will be the $26.50-26.00 range. We do not want to hold over the April earnings report. We would not recommend that traders short both TRB and NYT since they are in the same industry group.

Picked on March 19 at $29.36
Change since picked: + 0.00
Earnings Date 04/13/06 (confirmed)
Average Daily Volume: 1.6 million
 

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