NEW BULLISH Plays

Sturm Ruger & Co - RGR - close: 43.76 change: +0.14

Stop Loss: 43.45
Target(s): 49.00
Current Gain/Loss: unopened
Time Frame: exit prior the Aug. 1st earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
Gun sales are surging following the recent tragedy in Aurora, CO. Citizens are buying firearms on fears that we will see tougher gun laws in 2013. RGR has already told investors that the company is a huge backlog of orders for the rest of 2012. The upcoming Q2 earnings report should be very strong. That's why I am surprised at how much short interest RGR has.

The most recent data listed short interest at 30% of the small 17.4 million share float. RGR could definitely see a short squeeze if the stock breaks out past resistance near $45.00. The question is will RGR see a rally into its earnings report or will investors just sit on the sidelines and wait for the results, which are due out on August 1st?

This is a short-term trade. We do not want to hold over the earnings announcement. If expectations are already high there is a risk RGR could disappoint. I am suggesting a trigger to launch bullish positions at $45.10. Our target is $49.00. We'll use a stop loss at $43.45.

FYI: RGR reports earnings on Aug. 1st, after the closing bell.

Trigger @ 45.10

Suggested Position: buy RGR stock @ (trigger)

- or -

buy the Aug $45 call (RGR1218H45) current ask $2.20

Annotated chart:

Entry on July xx at $ xx.xx
Earnings Date 08/01/12 (confirmed)
Average Daily Volume = 479 thousand
Listed on July 25, 2011


NEW BEARISH Plays

General Motors - GM - close: 18.80 change: -0.22

Stop Loss: 19.65
Target(s): 17.00
Current Gain/Loss: unopened
Time Frame: exit prior to the Aug. 2nd earnings report
New Positions: Yes, see below

Company Description

Why We Like It:
The pace of vehicle sales in the U.S. has been slowing for months now. GM's bearish trend has finally pushed the stock under support near $19.00. This is a new record low for the company's stock since it went public again in 2010.

I am suggesting new bearish positions now at current levels with a stop loss at $19.65, which is just above the 10-dma. More conservative traders may want to wait for GM to drop under $18.70 before initiating positions. Our target is only $17.00 because this is a short-term trade. Knowing that car sales have been weak it would be tempting to hold over GM's earnings report but we are going to plan on exiting prior to its announcement. If you're willing to hold over the report I would consider aiming lower.

FYI: GM reports earnings on Aug. 2nd, before the opening bell.

Suggested Position: short GM stock @ (the open)

- or -

buy the Aug $18 PUT (GM1218T18) current ask $0.44

Annotated chart:

Entry on July xx at $ xx.xx
Earnings Date 08/02/12 (confirmed)
Average Daily Volume = 8.7 million
Listed on July 25, 2011