NEW BEARISH Plays

Aon Corp. - AON - close: 52.23 change: -0.38

Stop Loss: 53.05
Target(s): 46.50
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
AON is an insurance broker that has seen its stock's rally stall. Shares peaked back in April. AON has spent the last four weeks consolidating sideways in the $52-53.50 zone. The sideways consolidation is a lot better than the three weeks of declines for the market's major averages. Yet it looks like AON is about to breakdown from this trading range.

I am suggesting a trigger to launch small bearish positions at $51.75. If triggered our target is the $46.50 level. I would expect some support near $50.00 and the 100-dma so don't be surprised to see an initial bounce near this area. NOTE: The option spreads on AON are a little wide. Conservative traders may not want to play the options.

Trigger @ 51.75 (small positions only)

Suggested Position: short AON stock @ 51.75

- or -

buy the June $50 PUT (AON1118R50) current ask $0.40

Annotated chart:

Entry on May x at $xx.xx
Earnings Date 07/29/11 (unconfirmed)
Average Daily Volume: 1.7 million
Listed on May 21st, 2011


LyondellBasell Industries - LYB - close: 40.00 change: -1.00

Stop Loss: 42.05
Target(s): 36.00, 33.00
Current Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
LYB is a specialty chemical company. The stock has seen a very impressive rally from $15 in July 2010 to over $45 just a few weeks ago. The action in early May looks like a blow-off top. The sell-off has broken the up trend. Now, in just the last few days, LYB's oversold bounce has stalled at resistance in the $41-42 area. This looks like an entry point to open bearish positions.

I am suggesting very small bearish positions now with a stop loss at $42.05. Our targets are $36.00 and $33.00 (or the simple 200-dma).

NOTE: While the options are likely to be very volatile you can limit your risk easier than shorting LYB stock. Buying a put limits your risk to what you paid for the option.

-Small Bearish Positions-

Suggested Position: short LYB stock @ current levels

- or -

buy the June $40 PUT (LYB1118R40) current ask $1.70

Annotated chart:

Entry on May 23 at $xx.xx
Earnings Date 05/02/11 (confirmed)
Average Daily Volume: 5.0 million
Listed on May 21st, 2011