NEW BULLISH Plays

Brocade Communications - BRCD - close: 5.11 change: +0.15

Stop Loss: 4.75
Target(s): 6.45
Current Gain/Loss: unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
While the rest of the market was plunging lower this past week shares of BRCD were setting new relative highs. The stock has spent almost four months slowly recovering from a brutal July and August sell-off. This past week was significant because shares of BRCD just broke through a major line in the sand at the $5.00 mark. Friday's close is also a close above technical resistance at the exponential 200-dma.

More aggressive traders may want to buy it now. I want to see a little more confirmation. Thus I am suggesting a trigger to open bullish positions at $5.25. Keep in mind that the simple 200-dma near $5.40 could still be technical resistance. I expect this trade to take many weeks to play out but we're aiming for $6.75. We'll make adjustments to our exit strategy as needed.

Trigger @ $5.25

Suggested Position: buy BRCD stock @ $5.25

- or -

buy the 2012JAN $5.50 call (BRCD1221A5.5) current ask $0.35

Annotated chart:

Entry on November xx at $ xx.xx
Earnings Date 02/16/12 (unconfirmed)
Average Daily Volume = 8.6 million
Listed on November 26, 2011


NEW BEARISH Plays

Nexen Inc. - NXY - close: 14.33 change: -0.49

Stop Loss: 16.05
Target(s): 10.25
Current Gain/Loss: + 0.0%
Time Frame: 6 to 9 weeks or more
New Positions: Yes, see below

Company Description

Why We Like It:
NXY is a Canadian oil and gas company with operations around the world. The company has significant resources in the Middle Eastern country of Yemen. You may recall that Yemen has been the site of bloody protests calling for a change in power. The protestors appear to have won with news that Yemeni President Ali Saleh will step down.

That bad news for NXY is a breakdown in negotiations with the Yemen government. NXY's largest contract, worth 28,000 barrels of oil a day, will expire in December (about three weeks from now) and NXY has been unable to work out an extension with regulators. The Yemen government will create a new company to take over NXY's operations in the Masila field. This could be a big hit to NXY's revenues and earnings.

I am suggesting bearish positions now. More nimble traders may want to hope for an oversold bounce and then launch bearish positions on a bounce instead. While conservative traders may want to wait for a breakdown under the October low at $13.88 before initiating positions. I am listing a wide stop loss at $16.05. The 2008 lows near $11.50 could be support but we will tentatively put our multi-week (month?) exit target at $10.25.

Suggested Position: short NXY stock @ the open on Monday(or see above)

- or -

buy the JAN $14 PUT (NXY1221M14) current ask $1.05

- or -

buy the MAR $12 PUT (NXY1217o12) current ask $0.80

Annotated chart:

Entry on November 28 at $ xx.xx
Earnings Date --/--/-- (unconfirmed)
Average Daily Volume = 3.0 million
Listed on November 26, 2011


AT&T Inc. - T - close: 27.41 change: -0.14

Stop Loss: 28.55
Target(s): 24.25 or 22.75
Current Gain/Loss: unopened
Time Frame: 6 to 9 weeks or more
New Positions: Yes, see below

Company Description

Why We Like It:
Sometimes corporations are sneaky. I have no doubts that AT&T planned to release news about its struggling merger for T-Mobile on Thanksgiving day in an effort to deflect the headline's impact on its stock price.

Citing anti-trust concerns the U.S. Justice Department has sued to stop the $39 billion merger between AT&T and T-Mobile, which is owned by Deutsche Telekom. On Thursday AT&T announced that they had withdrawn their merger plans from the FCC. That certainly doesn't bode well. The really bad news is at $4 billion breakup fee that AT&T will owe Deutsche Telekom should the merger not go through.

Shares of AT&T have been bouncing off support in the $27.20-27.50 zone for several months (almost all of 2011). I am suggesting a trigger to open bearish positions at $27.15. More conservative traders may want to use a trigger under $27.00 instead as their entry point for bearish positions. If we are triggered at $27.15 our multi-month target is $22.75, however, more conservative traders may want to exit near $24.00 instead. I have listed to targets (24.25 and 22.75) above depending on your risk tolerance. The $24.00 level was significant support back in 2010. Unfortunately for AT&T shareholders the stock has produced a huge (bearish) head-and-shoulders pattern over the last several months. A breakdown under $27.00 would signal a drop toward the $22.50 area (see weekly chart).

Trigger @ $27.15

Suggested Position: short T stock @ 27.15

- or -

buy the 2012Jan $25 PUT (T1221M25) current ask $0.41

- or -

buy the Mar $25 PUT (T1217O25) current ask $0.81

Annotated chart:

Entry on November xx at $ xx.xx
Earnings Date 01/26/12 (unconfirmed)
Average Daily Volume = 23.4 million
Listed on November 26, 2011