Editor's Note:

There were plenty of candidates this weekend but in the middle of earnings season it can be tricky. We don't want to hold over an earnings report so sometimes we have to pass on potential plays. Check out some of the stocks on my watch list.

DCI - it look slike the rally has stalled and shares are retreating from resistance at $60.00.

SM - This oil stock is underperforming its peers and has already started correcting lower.

UA - This apparel maker looks ready to breakdown but earnings are due on January 27th and I didn't want to hold over the announcement.

WRC - The path of least resistance seems to be down. I was tempted to open bearish positions now with a stop loss just over $53.00.

TSCO - This high-flyer appears to have run out of gas and has begun correcting. I would have opened bearish positions now with a stop above $48.40 but earnings are Jan. 26th.

If you're looking for bullish candidates, check these out.

HANS - This stock just broke out over key resistance near $55.00.

CPT - This could be a bullish candidate on a move past $55.00 but keep in mind that earnings are early February and CPT doesn't move super fast.

- James


NEW BEARISH Plays

Informatica Corp. - INFA - close: 41.97 change: -0.43

Stop Loss: 44.25
Target(s): 39.00, 36.00
Current Gain/Loss: - 0.0%
Time Frame: 4 trading days
New Positions: Yes, see below

Company Description

Why We Like It:
INFA has been struggling with resistance near $46.00 for several weeks. Now the up trend has finally run out of gas. INFA broke down under key support last week and looks poised to correct. My biggest concern is that INFA may just trade sideways for the next few days because earnings are due out on January 27th, after the closing bell. We do not want to hold positions over the earnings announcement so we will plan to exit all positions at the close on the 27th.

I am suggesting small bearish positions now. We'll use a stop loss at $44.25 since broken support near $44.00 should be new resistance. Our first target is $39.00. Don't be surprised to see a little bounce at $40 and the 100-dma.

Open small bearish positions now.

Suggested Position: Short INFA stock @ current levels

- or -

Buy the February $40 PUT (INFA1119N40) current ask $1.30

Annotated chart:

Entry on January 24 at $xx.xx
Earnings Date 01/27/11 (confirmed)
Average Daily Volume: 907 thousand
Listed on January 22nd, 2010


Reliance Steel - RS - close: 51.23 change: -0.93

Stop Loss: 55.05
Target(s): 45.05
Current Gain/Loss: - 0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
After big gains in December and January it looks like the rally in RS has run out of gas under resistance near $55.00. You can see the bearish reversal on both the daily and weekly charts below. I'm suggesting small bearish positions now. I say small positions because this is somewhat of an aggressive entry point due to our stop loss, which is a bit wider than I would like. Nimble traders could wait and try and time positions on a bounce near $52.50-53.00 again. I'm suggesting bearish positions now. There is potential support near $48 but I'm targeting a drop toward the $45 level and its 200-dma. We do not want to hold over the earnings in mid February.

Suggested Position: Short RS stock @ current levels

- or -

Buy the February $50 PUT (RS1119N50) current ask $1.70

Annotated chart:

WEEKLY chart:

Entry on January 24 at $xx.xx
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume: 654 thousand
Listed on January 22nd, 2010