NEW BEARISH Plays

Financial Sector SPDR - XLF - close 14.37 change -0.11 stop 14.37

Company Description:
Financial Select Sector SPDR Fund (the Fund) seeks to provide investment results that correspond to the price and yield performance of the Financial Select Sector of the S&P 500 Index (the Index). The Index includes companies from industries, such as diversified financial services, insurance, commercial banks, capital markets, real estate investment trusts (REITs), consumer finance, thrifts and mortgage finance, and real estate management and development.

Target(s): 13.75, 13.45
Key Support/Resistance Areas: 15.00, 14.60, 14.20, 13.70, 13.30
Time Frame: 1 to 2 weeks

Why We Like It:
The financial services continues to trade terrible across all industries, from banks, to lenders, to broker dealers. While the broader market has surged higher in recent weeks, XLF has struggled. Either XLF catches up with the broader market or the broader market corrects sending XLF lower. I think the latter happens which should send XLF to test its recent lows. I suggest readers initiate short positions at current levels and play for a -4% to -6% pullback. We will keep a tight stop on the trade and be out for a small loss if we are wrong.

Suggested Position: Short XLF stock at current levels.

Options Traders: Buy November $14.00 PUT, current ask $0.46

Annotated chart:

Entry on September xx
Earnings: N/A (unconfirmed)
Average Daily Volume: 74 million
Listed on September 29, 2010