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New Plays
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Play Editor's Note: I discussed our market outlook with Jim, tonight's market wrap author, and agree with him that there isn't a lot of compelling reasons for investors to buy stocks this week. The markets are facing a lot of uncertainty. Plus, the global markets could see some serious profit taking, which will likely influence trading here in the U.S. The month of October is likely to be very choppy but will hopefully set up for an entry point into a year-end rally.


New Long Plays

Sirius Satellite Radio - SIRI- cls: 3.49 change: +0.07 stop: 3.19

Company Description:
SIRIUS, "The Best Radio on Radio," delivers more than 130 channels of the best programming in all of radio. SIRIUS is the original and only home of 100% commercial free music channels in satellite radio, offering 69 music channels. SIRIUS also delivers 65 channels of sports, news, talk, entertainment, traffic, weather and data. (source: company press release or website)

Why We Like It:
We are adding SIRI as a speculative bullish candidate. The stock appears to have built a pretty significant bottom over the April-August time frame. The breakout in early September looks pretty bullish and shares have already retested broken resistance at its 200-dma as new support. We have two concerns. Our market outlook is flat to down this week. Second, there has been a lot of new talk about the proposed merger between SIRI and XMSR never getting completed. Thus far the recent comments on the merger have not derailed the rally in SIRI but future headlines could send the stock moving sharply lower and thus remains a risk. We are using a wide (aggressive) stop loss and SIRI is facing some resistance near $3.60. Our target is the $3.95-4.00 range.

Picked on September 30 at $ 3.49
Change since picked: + 0.00
Earnings Date 11/08/07 (unconfirmed)
Average Daily Volume: 35.2 million
 

New Short Plays

Insteel Industries - IIIN - cls: 15.35 chg: -0.41 stop: 16.35

Company Description:
Insteel Industries is one of the nation's largest manufacturers of steel wire reinforcing products for concrete construction applications. The Company manufactures and markets PC strand and welded wire reinforcement, including concrete pipe reinforcement, ESM and standard welded wire reinforcement. Insteel's products are sold primarily to manufacturers of concrete products that are used in nonresidential construction. (source: company press release or website)

Why We Like It:
It's been a rough month of IIIN. The company issued a warning on September 19th and shares plunged. The stock eventually broke through support near $16.00. IIIN is arguably oversold and due for a bounce. However, all the bounce attempts this past week have failed at the $16.00 level. The stock's sell-off has also produced a $9.00 target on its Point & Figure chart. We are suggesting shorts here under $16.00 with a $12.00 target. We're putting the stop at $16.35 just above the 10-dma. More conservative traders might try placing their stop just above $16.00. We do not want to hold over the October 18th earnings report. FYI: It is important to note that the most recent data lists short interest at 23% of the stock's small 14.2 million-share float. That is a high degree of short interest and combined with the small float is a recipe for a short squeeze. Our stop loss may not save us from significant losses. More conservative traders may want to pass on this play.

Picked on September 30 at $15.35
Change since picked: + 0.00
Earnings Date 10/18/07 (confirmed)
Average Daily Volume: 258 thousand

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Microchip - MCHP - cls: 36.32 change: -0.57 stop: 37.36

Company Description:
Microchip Technology Inc. is a leading provider of microcontroller and analog semiconductors, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide. (source: company press release or website)

Why We Like It:
The SOX semiconductor index has been struggling to rebound and shares of MCHP have been under performing its peers. Shares of MCHP have developed a bearish pattern of lower highs and this past two weeks have seen several failed rally attempts in the $37.00-37.50 zone. The stock looks poised to breakdown under support near $36.00. We want to capture that breakdown so we're suggesting a trigger at $35.79, which is under the late July low. If triggered at $35.79 our target is the $33.00-32.50 range. We did note that the P&F chart is still bullish and it will take a new decline under $35.00 to reverse that pattern. One of our concerns would be a bullish breakout in the SOX but our market outlook is flat to down this week.

Picked on September xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/23/07 (unconfirmed)
Average Daily Volume: 3.2 million

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Supervalu - SVU - cls: 39.01 change: -0.27 stop: 40.51

Company Description:
SUPERVALU INC. is one of the largest companies in the United States grocery channel with annual sales of approximately $40 billion. SUPERVALU holds leading market share positions across the U.S. with its approximately 2,500 retail grocery locations. (source: company press release or website)

Why We Like It:
Shares of SVU have been struggling the last couple of months. Rallies continued to fail near $43 during the month of August. September saw a new trend of lower highs and a breakdown under its 200-dma. This past week shares of SVU sold off sharply following Target's sales warning on Tuesday. Technically SVU's daily chart is producing a very bearish signal with the 50-dma crossing under the 200-dma. We are expecting the current oversold bounce to roll over under the 10-dma near $39.50 or the $40.00 level. Thus we're suggesting short positions at current levels. There is short-term support near $37.50 but our target is the $35.25-35.00 range.

Picked on September 30 at $39.01
Change since picked: + 0.00
Earnings Date 10/11/07 (unconfirmed)
Average Daily Volume: 2.4 million
 

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