NEW BEARISH Plays

Automatic Data Processing - ADP - close: 39.45 change: -0.77 stop: 41.26

Company Description:
Automatic Data Processing, Inc., with nearly $9 billion in revenues and about 570,000 clients, is one of the world's largest providers of business outsourcing solutions. Leveraging 60 years of experience, ADP offers a wide range of HR, payroll, tax and benefits administration solutions from a single source. ADP's easy-to-use, cost-effective solutions for employers provide superior value to companies of all types and sizes. ADP is also a leading provider of integrated computing solutions to auto, truck, motorcycle, marine and recreational vehicle dealers throughout the world. (source: company press release or website)

Target(s): 36.00, 34.00
Key Support/Resistance Areas: 41.00, 39.00, 37.30,
Current Gain/Loss: +
Time Frame: 4 to 6 weeks
New Positions: Yes, See Entry Point Below

Why We Like It:
Is it possible that businesses are cutting back on bookkeeping as they reduce the number of employees? For whatever reason shares of ADP are losing ground. In late July, at the company's latest earnings report, management lowered their guidance. Now the stock is trading near the bottom of its $39-42 range. If you check out the weekly chart you can see ADP's bearish H&S pattern.

I am suggesting a trigger to open bearish positions at $38.75. If triggered our first target is $36.00. Our second target is $34.00. Use a stop at $41.26.

Suggested Position: SHORT the stock @ 38.75

Option traders may want to consider the November $37.00 puts.

Annotated chart:

Entry on August xxth @ $xx.xx
Earnings Date 10/28/10 (unconfirmed)
Average Daily Volume: 3.2 million
Listed on August 19th, 2010


Starbucks Corp. - SBUX - close: 24.04 change: -0.46 stop: 25.05

Company Description:
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest quality arabica coffee in the world. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup (source: company press release or website)

Target(s): 21.00, 20.00
Key Support/Resistance Areas: 25.00, 23.50, 22.00, 21.00, 20.00
Current Gain/Loss: +
Time Frame: 4 to 6 weeks
New Positions: Yes, See Entry Point Below

Why We Like It:
The rally in shares of SBUX appears to have cooled off. It isn't surprising with more and more signs of the economy slowing down, consumers cutting back and saving more. SBUX's latest earnings report was ho-hum. Profits were inline but what impressed was the better than expected revenues. Unfortunately, management guided 2010 inline with prior estimates and guided 2011 lower.

Shares of SBUX are now testing support near $23.50 and its 200-dma. It looks like the stock is ready to break. The weekly chart shows a bearish head-and-shoulders pattern. I am suggesting we wait for a drop under the early July lows. Therefore our entry point to open bearish positions is $23.40. Our target is the $21.00 and 20.00 levels. More nimble traders could try an alternative entry point with another failed rally near $25.00.

Suggested Position: SHORT the stock @ 23.40

- or -

Option traders could buy the October $23.00 puts.

Annotated chart:

Entry on August xxth @ $xx.xx
Earnings Date 11/04/10 (unconfirmed)
Average Daily Volume: 8.0 million
Listed on August 19th, 2010