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SSD RMBS

New Long Plays

Simpson Mfg. - SSD - close: 29.00 chg: +0.92 stop: 27.99

Company Description:
Simpson Manufacturing Co., Inc., headquartered in Pleasanton, California, through its subsidiary, Simpson Strong-Tie Company Inc., designs, engineers and is a leading manufacturer of wood-to-wood, wood-to-concrete and wood-to- masonry connectors, fastening systems and pre-fabricated shearwalls. Simpson Strong-Tie also offers a full line of adhesives, mechanical anchors and powder actuated tools for concrete, masonry and steel. The Company's other subsidiary, Simpson Dura-Vent Company, Inc., designs, engineers and manufactures venting systems for gas and wood burning appliances. (source: company press release or website)

Why We Like It:
The P&F chart for SSD is still bearish but it looks like the stock has built a bottom over the last couple of months. SSD produced a bullish double bottom near $25.00 in August and September. Since then it has consolidated sideways with a minor bullish trend of higher lows over the past several weeks. Shares have been under performing the major indices but now the stock looks poised to catch up. The company reported earnings last Thursday after the closing bell and Friday's big gain was a reaction to the news. It looks like the earnings news was negative but SSD rallied higher anyway. This may be a short squeeze. The latest (early October) data puts short interest at 17% of SSD's 36.7 million-share float. That is a high amount of short interest and short covering would help explain the big volume on Friday. Technically Friday's move is also a bullish engulfing candlestick pattern, which is normally interpreted as a bullish reversal. However, we want to see some confirmation. The rally stalled under $30.00 on Friday. If SSD can trade over $30.00 it could spark more short covering. We're suggesting a trigger to go long the stock at $30.15. If triggered our target is the $34.00-35.00 range, under the 200-dma. Expect some resistance near $32.50.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/26/06 (confirmed)
Average Daily Volume: 494 thousand
 

New Short Plays

Rambus Inc. - RMBS - close: 16.39 change: -0.61 stop: 17.25

Company Description:
Rambus is one of the world's premier technology licensing companies specializing in the invention and design of high-speed chip interfaces (source: company press release or website)

Why We Like It:
Investors were not happy with RMBS' earnings report on October 19th and the stock spiked lower. Since then shares have been consolidating sideways but the stock looks poised to breakdown even further, especially with weakness in the semiconductor sector. Friday was a tough day for semis with the SOX falling almost 2% after Goldman Sachs released some analyst comments about falling motherboard sales. Shares of RMBS dropped 3.5% and is now trading near support in the $16.00 region. We want to short a breakdown under support at $16.00. We'll suggest a trigger to open positions at $15.90. If triggered our target is the $12.50 level. More aggressive traders may want to aim for the August lows closer to $10.00. Be advised that RMBS is very active in various legal battles over patents and intellectual property and bears (and bulls) are constantly at risk for an unexpected headline sending the stock surging one way or the other. More conservative traders may want to avoid this play. FYI: RMBS is also reviewing its stock option policies and is one of many companies that faces a possible delisting from the NASDAQ as it delays certain SEC filings while investigating the matter.

Picked on October xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/19/06 (confirmed)
Average Daily Volume: 9.7 million
 

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