Option Investor
New Plays

Retailers and Grocery

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Play Editor's Note: I'm adding new bearish plays because the trend is still down but traders opening new positions now are at a severe risk for a short-covering rally. No one knows what will spark the next short-covering rally but when it occurs it will charge through everyone's stops. The next opportunity for some sort of surprise to spark a rally is probably the Wednesday decision on interest rates.

---------------------- NEW BEARISH Plays ----------------------

GameStop - GME - close: 25.21 change: -0.52 stop: 26.85

Why We Like It:
Analysts have started predicting that this year will be the worst Christmas shopping season in ten years. While it's possible that falling gasoline prices might alleviate some of the pressure for retailers the industry has also faced challenges getting credit to order inventory. We're not suggesting GME struggled to order inventory but the stock's trend is pricing in a very dire shopping season. The recent breakdown from its consolidation phase is forecasting another leg lower. Today's failed rally is an opportunity to short the stock. We'd use a stop just above today's high. Our target is the $21.00 mark.

Annotated chart:
GME

Picked on October 27 at $25.21
Change since picked: + 0.00
Earnings Date 11/20/08 (unconfirmed)
Average Daily Volume: 3.3 million

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Pantry Inc. - PTRY - close: 18.11 change: +1.11 stop: 18.65

Why We Like It:
PTRY showed some very impressive relative strength today with a 6.5% gain. If you're been taking notes then you already know that the best bet has been to sell the rallies. The stock's pattern is still bearish and we can set up a low risk entry point with a tight stop. We're suggesting shorts here with a stop loss at $18.65. Our target is 15.05. More aggressive traders may want to aim lower.

Annotated chart:
PTR

Picked on October 27 at $18.11
Change since picked: + 0.00
Earnings Date 11/20/08 (unconfirmed)
Average Daily Volume: 591 thousand

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