Editor's Note:

It looks like the stock market has finally found a top with Friday's bearish reversal. Volume was very strong on the sell-off, which is bearish. This move does need to see some follow through to confirm it but if the correction has begun it could be sharp and fast!

In addition to tonight's new candidates here's a list of stocks on my watch list. Be sure to check for upcoming earnings before initiating any trades. I still don't want to hold over a report. My list of potential bearish plays: WRC, AGCO, TKR, ALGT, DAL, ARB, IPCM, PM, MO, and NTGR.

Instead of stocks you could try and capture this pull back in the market with ultra-ETFs that move twice as fast. Of course that probably doubles the risk on these trades! For example, you could buy the QID (NASDAQ-100 ultra-short), DXD (DJIA ultra-short), SDS (S&P 500 ultra-short), or the TWM (Russell 2000 ultra-short). You could short the QLD (NASDAQ-100 ultra-long), DDM (DJIA ultra-long), SSO (S&P 500 ultra-long), and UWM (Russell 2000 ultra-long). Call and put options should be available for all of these ETFs.

- James


NEW BEARISH Plays

Hittite Microwave Corp. - HITT - close: 59.52 change: -1.58

Stop Loss: 62.05
Target(s): 56.15, 53.50
Current Gain/Loss: + 0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
After weeks of consolidating sideways under the $63 level shares of HITT had already begun to breakdown before Friday's market decline. When the market starts to sink it should accelerate the profit taking in HITT. Keep an eye on the SOX semiconductor index since this is a chip company.

I am suggesting bearish positions now. Our targets are $56.15 and $53.50. Readers should note that the most recent data listed short interest in HITT at 4% of the 28.2 million-share float. That's a very small float and raises our risk of a short squeeze. FYI: The Point & Figure chart for HITT has turned bearish.

Editor's note: The options on HITT have relative wide spreads making them a significantly higher-risk trade for us.

Suggested Position: short HITT stock @ current levels

- or -

Buy the 2011 March $55 PUTS (HITT1119O55) current ask $1.65

Annotated chart:

Entry on January 31 at $xx.xx
Earnings Date 02/17/11 (confirmed)
Average Daily Volume: 166 thousand
Listed on January 29th, 2010


Riverbed Technology - RVBD - close: 35.53 change: +0.62

Stop Loss: 38.15
Target(s): 31.75, 28.00
Current Gain/Loss: + 0.0%
Time Frame: 2 to 3 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Better than expected profits and revenues and some positive comments from management helped push RVBD toward the $38 level on Friday morning. Unfortunately traders sold the news as the wider market collapsed. Now that the earnings news is out, shares of RVBD could see a post-earnings depression. I'm suggesting bearish positions now with a stop loss at $38.15. Our targets for RVBD are $31.75 and $28.50. This is an aggressive, higher-risk trade. Keep your position size small.

Readers need to know that the latest data listed short interest at 7.6% of the 135 million share float. That's relatively high short interest and raises the risk on this trade. You may want to buy put options instead. FYI: The Point & Figure chart for HITT has turned bearish.

- Small Positions to Limit our Risk -

Suggested Position: Short RVBD stock @ current levels

- or -

Buy the 2011 Feb. $35 puts (RVBD1119N35) current ask $1.25

- or -

Buy the 2011 Mar. $35 puts (RVBD1119O35) current ask $2.00

Annotated chart:

Entry on January 31 at $xx.xx
Earnings Date 01/27/11
Average Daily Volume: 5.1 million
Listed on January 29th, 2010


Virgin Media, Inc. - VMED - close: 24.93 change: -0.81

Stop Loss: 26.15
Target(s): 22.25
Current Gain/Loss: + 0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The rally appears to have run its course in VMED. Shares produced a bearish double top near the $28 level. Now the stock is correcting and the oversold bounce from $24 failed under $26 and its 50-dma. Friday's move looks like an entry point to open bearish positions. Our target is the $22.25 mark, since the simple 200-dma could be technical support. Readers need to know that the most recent data listed short interest at 9.7% of the 298 million-share float. That's a lot of short interest and definitely raises the risk of a short squeeze. You might want to buy the puts instead of shorting the stock.

Suggested Position: short VMED stock @ current levels

- or -

Buy the 2011 Feb. $24 puts (VMED1119N24) current ask $0.55

- or -

Buy the 2011 Mar. $22.50 puts (VMED1119O22.5) current ask $0.45

Annotated chart:

Entry on January 31 at $xx.xx
Earnings Date 02/17/11 (unconfirmed)
Average Daily Volume: xxx million
Listed on January 29th, 2010