Editor's Note:

The market rally over the last two days has been a short squeeze entirely based on headlines from Europe. The market is expecting large stimulus moves by the ECB and the Fed and traders are likely to be disappointed. The short squeeze impacted nearly every stock that had been sold hard in the prior three days. We were lucky to only lose one position to a stop loss but several are very close. This will be a pivotal week in the markets and without any concrete action by the central banks that pivot could be down.

James is on vacation this week.


NEW BULLISH Plays

Sandisk Corp. - SNDK - close: 42.45 change: +.94

Stop Loss: 38.95
Target(s): 50.00
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
SNDK reported earning on July 20th that beat on both earnings and revenue. Guidance for Q3 was also not as bad as analysts expected. In the current earnings cycle a company that beats on both metrics and has positive guidance is a rare commodity. Increasing use of flash memory in smartphones and tablets along with the rapidly increasing solid state drive market should keep Sandisk out of trouble.

Shares gapped up +$5 after earnings on the 20th and they held those gains during the ugly market at the beginning of last week. When the market turned positive on Thursday Sandisk began to accelerate higher.

There is always the chance of profit taking from this bullish bounce but analysts have been pretty positive on SNDK.

If the market cooperates I believe we could see $50 on SNDK over the next several weeks. That is a big "IF" given the highly volatile market today but some form of stimulus from the ECB and/or Fed could give us another ramp higher.

Trigger @ 42.75

Suggested Position: buy SNDK stock @ $42.75

OR

Buy SNDK Sept $44 Call, currently $1.64.

SNDK Chart

Entry on July xx at $ xx.xx
Earnings Date 07/20/12 (past)
Average Daily Volume = 4.5 Million
Listed on July 28, 2012


NEW BEARISH Plays

CTrip.com. - CTRP - close: 13.45 change: -0.24

Stop Loss: 14.25
Target(s): 10.25
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The travel sector is hot with Expedia and Priceline in strong rally mode. However, CTRIP, a Chinese travel service is going the other way. With EXPE and PCLN up big on Friday, CTRP lost ground. They recently reported earnings that beat the street but revenue was a miss. Margins are falling and GAAP earnings were 52% lower than the comparison quarter. Operating margins fell to 17.3%, 1,490 basis points lower than the prior year and net margin was 12.3%, -1,940 points lower.

I believe CTRIP is suffering from the slowdown in China and the general slowing in the global economy. The stock failed to rally on a +200 point Dow day when every oversold stock in sight was rebounding higher. It should have rebounded on sector sentiment with PCLN up +$56 and EXPE +$9.

The chart is really ugly and there is no support until $10.

Trigger @ 13.15

Suggested Position: short CTRP stock @ $13.15

- or -

buy the Dec $12 PUT, currently $1.10

CTRP Chart

Entry on July xx at $ xx.xx
Earnings Date 07/24/12
Average Daily Volume = 2.8 Million
Listed on July 28, 2012