NEW BEARISH Plays

Sherwin-Williams - SHW - close 72.62 change +0.56 stop 76.70

Company Description:
The Sherwin-Williams Company (Sherwin-Williams) is engaged in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America, with additional operations in the Caribbean region, Europe and Asia. The Company’s segments include Paint Stores Group, Consumer Group and Global Finishes Group.

Target(s): 69.25, 68.35, 67.05
Key Support/Resistance Areas: 75.90, 73.50, 71.10, 69.00, 68.00, 66.50
Time Frame: 1 to 2 weeks

Why We Like It:
SHW broke below a key support level of $73.40 and has now rallied almost back up to that level. This should provide resistance along with the declining 20-day SMA. I expect the stock to at least retest its recent lows which are $3 to $4 lower than current prices, and possibly even the 200-day SMA. The 50-day SMA is also overhead and we will place our stop just above it at $76.70. The stop will be adjusted once we are in the position. I like shorting the stock at current levels but readers could wait to see if SHW rallies up to its 20-day SMA which is 50 to 75 cents higher.

Suggested Position: Short SHW stock at current levels

Options Traders: August $70.00 PUTS, current ask $1.95

Annotated chart:

Entry on July xx
Earnings 7/22/10 (unconfirmed)
Average Daily Volume: 1.48 million
Listed on July 8, 2010