NEW BULLISH Plays

Emulex Corp - ELX - close 9.84 change +0.17 stop 8.95

Company Description:
Emulex Corporation is a provider of a range of storage networking infrastructure solutions that connect servers, storage and networks within the data center. The Company's product portfolio includes host bus adapters (HBAs), converged network adapters (CNAs), mezzanine cards for blade servers, and embedded storage bridges, routers, switches and input/output controllers (IOCs). The Company’s host server products (HSP) include both fiber channel-based connectivity products and enhanced Ethernet-based products that support Internet protocol (IP) and storage networking, including transmission control protocol (TCP)/IP, Internet small computer system interface (iSCSI), network attached storage (NAS), IOC solutions, and fibre channel over Ethernet (FCoE). The Company’s fibre channel-based products include LightPulse, HBAs, custom form factor solutions for original equipment manufacturer (OEM) blade servers and application specific integrated circuits (ASIC).

Target(s): 10.40, 10.85, 11.20
Key Support/Resistance Areas: 11.40, 11.00, 10.50, 10.10, 9.70, 9.25
Time Frame: 1 to 2 weeks

Why We Like It:
ELX broke out of a short term downtrend line today and has been making higher lows since its lows on 6/8. I like the volume patterns recently and over the past two days ELX has surged higher on much heavier volume than its daily average of 1.76 million. I've also been waiting for this stock to close above its 20-day SMA (currently $9.69) which it did today. I believe ELX will easily make a run up to its recent highs near $10.40 which is our first target. The stock may experience a some resistance at this level but ultimately I think it heads toward the $11.00 area. Today's candlestick could be considered a reversal pattern but I don't think ELX will trade below its 20-day SMA ($9.69) unless there is a big drop in the market which is certainly possible. However, I'm viewing the afternoon sell-off from its highs as a test of the 20-day SMA from above and a second chance to get on board the momentum ELX is building. In addition, the stock has made two consecutive higher weekly highs. Our initial stop will $8.95 which is below two upward trend lines. A tighter stop could be placed at $9.20 which is below yesterday's low. I would like to use a trigger of $9.75 to enter positions. NOTE: I view this as a potentially volatile trade so please use proper position size to limit risk. For options traders I am pushing the recommended option out to October as buying the additional time value is cheap.

Suggested Position: Long ELX stock if it trades to $9.75

Suggested Position: Buy October $10.00 CALLS, current ask $0.80, estimated ask at entry $0.75

Annotated Chart:

Entry on July xx
Earnings Date 8/5/10 (unconfirmed)
Average Daily Volume: 1.76 million
Listed on 7/14/10

<-- NEW SHORT PLAYS -->


NEW BEARISH Plays

SPDR S&P 500 ETF - SPY - close 109.65 change -0.00 stop 112.60

Company Description:
SPDR S&P 500 ETF (the Trust), formerly SPDR Trust, Series 1, generally corresponds to the price and yield performance of the S&P 500 Index. The S&P 500 Index consists of 500 selected stocks, all of which are listed on the exchange, the NYSE or NASDAQ, and spans over 24 separate industry groups.

Target(s): 108.20, 107.25, 106.25
Key Support/Resistance Areas: 110.50, 108.80, 107.60, 106.00
Time Frame: 1 weeks

Why We Like It:
This is fairly simple. I'm looking for SPY to spike a tad bit higher to the 105.50 area (equivalent to 1105 in the S&P 500) and then retrace to fill its gap higher on 7/13 which is also just above its 20-day SMA. This is the primary target and is a good place to tighten stops to see if we can get more out of the trade. If we get filled I like this set-up a lot and I think the retracement could come quick. Our trigger to enter short positions is $110.35 and our stop will be $112.60 which is above all recent closing highs and the 200-day SMA. If we get filled on this trade I will be thoroughly amazed if we get stopped out prior to hitting our target. But the market can do anything so it is possible, but nor probable in my opinion. I think we have a 50/50 chance of getting filled so traders may consider entering at current levels with a tighter stop just above the 200-day SMA at $111.75.

Suggested Position: Long SPY stock if it trades to $110.65 .

Options Traders: August $108.00 PUTS, current ask $2.64, estimated ask at entry $2.35

Annotated chart:

Entry on July xx
Earnings N/A (unconfirmed)
Average Daily Volume: 251 million
Listed on July 14, 2010