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New Long Plays

None today.
 

New Short Plays

Ladish - LDSH - close: 29.93 change: +0.55 stop: 31.01

Company Description:
Founded in 1905, today Ladish is a family of advanced metal-working companies that supply highly engineered products and services for aerospace and industrial manufacturers around the world. (source: company press release or website)

Why We Like It:
LDSH is another stock in the metals and steel sector (actually steel and fabricated parts) that looks poised for more weakness. The stock suffered some sharp losses in early September that broke down under multiple levels of support including the $30 level and its 200-dma. Since then LDSH has produced an oversold bounce but the bounce appeared to run out of steam this last Thursday with a bearish reversal (bearish engulfing) candlestick pattern. The Fibonacci traders out there might notice that the oversold bounce stalled out at about 50% of its September decline. If the bounce is failing then LDSH could trade toward the $25.00 region before finding support again. The Point & Figure chart is bearish with an $18 target. What chart readers will note when you look at the P&F chart is that LDSH bounced from its initial test of (P&F chart) support but now it looks like shares may be ready to resume the downtrend. We're suggesting a trigger to short the stock at $29.65, which is under last week's lows. If triggered our target is the $25.50-25.00 range. We do not want to hold over the late October earnings report. FYI: The latest (August) data puts short interest at 6.5% of LDSH's 14 million-share float. That's not a very big float and might be a reason for concern.

Picked on September xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/24/06 (unconfirmed)
Average Daily Volume: 270 thousand

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Linear Tech. - LLTC - close: 31.97 chg: -0.14 stop: 32.66

Company Description:
Linear Technology Corporation designs, manufactures and markets a broad line of standard high performance integrated circuits. Applications for the Company's products include telecommunications, cellular telephones, networking products, notebook and desktop computers, video/multimedia, industrial instrumentation, automotive electronics, factory automation, process control, and military and space systems. (source: company press release or website)

Why We Like It:
The SOX semiconductor index closed under what should have been support at the 450 level on Friday. The influential sector index is also flirting with a breakdown under its two-month trendline of support. If the semis continue lower we expect LLTC to follow. Shares of LLTC are already looking vulnerable with a couple of failed rallies under the exponential 200-dma this past month and rising volume on the declines. The P&F chart is already bearish with a $25 target. We are suggesting that readers use a trigger to short the stock at $31.79, which is under last week's low. If triggered our target is the $30.10-30.00 range. More aggressive traders may want to aim lower. We're going to use a relatively tight stop at $32.66 to keep our risk at a minimum. We do not want to hold over the mid October earnings report. FYI: The latest (August) data puts short interest at 4% of LLTC's 300 million-share float.

Picked on September xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/17/06 (unconfirmed)
Average Daily Volume: 4.0 million

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Reliance Steel - RS - close: 29.35 change: -0.90 stop: 31.01

Company Description:
Reliance Steel & Aluminum Co. is one of the largest metals service center companies in the United States. Through a network of more than 150 locations in 37 states, Belgium, Canada, China and South Korea, the Company provides value-added metals processing services and distributes a full line of more than 90,000 metal products. (source: company press release or website)

Why We Like It:
We have had our eye on RS as a potential bearish candidate for a while now but our first reaction has been that RS is just too oversold and due for a bounce. However, if you believe that the markets will see some window dressing this week before the third quarter ends then this might be a good spot for a short-term trade. Window dressing by fund managers is when they sell their losers and buy whatever has been winning this past quarter to make your quarterly statements look better. RS would definitely fall into the "losers" category. The pattern is pretty bearish with a steady trend of lower highs, a bearish breakdown and sell signal with Friday's 3% decline, and sector weakness in general. We are suggesting shorts with RS under $30.00 and if we're wrong then we should be stopped out relatively quickly. Our short-term target is the $26.50-26.00 range.

Picked on September 24 at $29.35
Change since picked: + 0.00
Earnings Date 10/19/06 (unconfirmed)
Average Daily Volume: 1.1 million

 

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