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New Plays
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  FLS
  GGI

New Long Plays

None today.
 

New Short Plays

Play Editor's note: You already know that the U.S. market's failure to rebound on Friday is pretty bearish. Part of the challenge here is that so many stocks and indices are already oversold. We need to anticipate a bounce and that makes setting stop loss a difficult task. Too tight and we'd be stopped out an almost any rebound. Too wide and we're taking too much risk. Our stops are only a suggestion. You may want to adjust yours to account for your own risk profile.

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Avid Tech. - AVID - close: 37.35 change: -1.82 stop: 39.41

Company Description:
Avid Technology, Inc. is the world leader in digital nonlinear media creation, management, and distribution solutions, enabling film, video, audio, animation, games, and broadcast professionals to work more efficiently, productively, and creatively. (source: company press release or website)

Why We Like It:
It looks like the oversold bounce in shares of AVID is over. The stock gapped down back in April after the company issued an earnings warning. Shares eventually traded back up toward the $40.00 region and now the stock has produced what looks like a double-top pattern near $40.50. In the last few days AVID has been sliding lower under technical pressure at its simple 50-dma. Friday's 4.6% sell-off was fueled by above average volume and sparked by an analyst firm downgrading their earnings estimates for the company. The P&F chart is bearish and points to a $32.00 target. Before shorting AVID traders should take a good long look at the daily chart over the past year. Aside from its six-month trendline of lower highs the big thing that should stand out to you is the gaps. AVID can be a very volatile stock and theoretically shorting has an unlimited risk potential. Our worst-case scenario would be for AVID to gap open higher on us. Fortunately, at the moment it looks like shares are pretty entrenched in a bearish slide lower and the next scheduled event that we can find that might produce any news is the earnings report in early August. Our target is the $32.50 mark but readers should be prepared for a bounce near $35.50-36.00. Traders can open positions here or use a failed rally under the 50-dma. FYI: The latest data puts short interest at 9.3% of AVID's 42 million-share float.

Picked on June 11 at $37.35
Change since picked: + 0.00
Earnings Date 08/03/06 (unconfirmed)
Average Daily Volume: 763 thousand

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Flowserve - FLS - close: 50.82 chg: -0.23 stop: 52.25

Company Description:
Flowserve Corp. is one of the world's leading providers of fluid motion and control products and services. Operating in 56 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. (source: company press release or website)

Why We Like It:
The 2005-2006 rally in FLS appears to have ended. Shares peaked near $60 in early April, tried to breakout again in May but broke down under technical support at its 50-dma during the May market sell-off. FLS bounced from round-number, psychological support at the $50.00 level but the bounced failed near the 50-dma. Broken support tends to become new resistance. Now shares are testing the $50 level again, which by the way happens to be very close to the 38.2% Fibonacci retracement level of its big run up. We want to use a trigger at $49.90 to catch any further breakdown. If triggered we'll target a decline into the $45.75-45.50 range. We would expect the 200-dma near $45.00 to act as support. The Point & Figure chart is bearish with a $40.00 target. FYI: The daily chart may be building a bearish head-and-shoulders pattern (see below).

Picked on June xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 07/21/06 (unconfirmed)
Average Daily Volume: 579 thousand

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The Geo Group Inc. - GGI - cls: 34.14 chg: -1.32 stop: 36.65

Company Description:
The GEO Group, Inc. ("GEO") is a world leader in the delivery of correctional, detention, and residential treatment services to federal, state, and local government agencies around the globe. GEO offers a turnkey approach that includes design, construction, financing, and operations. GEO represents government clients in the United States, Australia, South Africa, Canada, and the United Kingdom. GEO's worldwide operations include 62 correctional and residential treatment facilities with a total design capacity of approximately 50,500 beds, inclusive of facilities under management, facilities for which GEO has received contract awards but which have not yet opened, and inactive facilities. (source: company press release or website)

Why We Like It:
Looking at GGI's company description you might think that this is a real growth business. However, it doesn't matter what business you're in, investors hate it when you dilute their holdings. GGI recently announced a secondary public offering of approximately three million shares, which is a 33% jump from the current nine million-share float. On a technical basis it looks like GGI's March to May rally has ended. The stock produced a bearish double-top pattern with both peaks in May. Now the stock is breaking down under technical support at its 50-dma. Shares of GGI are quite volatile so we're starting the play with a relatively wide stop loss. More conservative traders may want to pass on this one or we would strongly suggest waiting for a new decline under Friday's low as an entry point to confirm the breakdown below GGI's 38.2% retracement level (see chart). The P&F chart is bearish and points to a $26.00 target. We're going to suggest shorts with GGI under $35.00. Looking at the chart there is potential support near $32.25 and $29.00 so we're going to suggest that readers sell/cover part of their positions at $32.25 and then exit any remainder at $30.25. Due to GGI's volatility this is an aggressive, higher-risk play.

Picked on June 11 at $34.14
Change since picked: + 0.00
Earnings Date 05/04/06 (confirmed)
Average Daily Volume: 135 thousand
 

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