NEW BULLISH Plays

Tempur Pedic Intl. - TPX - close: 31.81 change: +1.70

Stop Loss: 29.75
Target(s): 39.00
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks

Entry on August xx at $ xx.xx
Listed on August 7, 2011
Average Daily Volume = 2.5 million New Positions: Yes, see below

Company Description

Why We Like It:
TPX is probably best known for its adjustable beds and mattresses. The stock was hammered for a big gap down back in June when the company lowered its guidance. Since then shares appear to have found a bottom and are trying to make a comeback. The bullish break through across the 50-dma and the $30.00 level is positive. I suspect we could see TPX try and fill the gap.

I do consider this somewhat of an aggressive trade so we will want to limit the size of our position. Today's high was $32.35. I am suggesting a trigger to open small bullish positions at $32.50. We'll start with a stop loss at $29.75. Our multi-week target is $39.00 since the $40.00 level is probably round-number resistance.

Trigger @ $32.50 (small positions)

Suggested Position: buy TPX stock @ (trigger)

- or -

buy the Sep $33 call (TPX1222I33) current ask $1.80

Annotated chart:


NEW BEARISH Plays

Incyte Corp - INCY - close: 18.15 change: -0.15

Stop Loss: 18.65
Target(s): 14.00
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks

Entry on August xx at $ xx.xx
Listed on August 7, 2011
Average Daily Volume = 2.0 million New Positions: Yes, see below

Company Description

Why We Like It:
INCY is a biotech firm. The company recently reported earnings and announced its first quarterly profit for the first time in six quarters. Yet this "win" was most likely due to the company's new accounting standards to use recognize revenue in the "sell-in" method when their drugs ship to the pharmacy instead of the "sell-through" method which recognizes revenues when the customer actually fills their prescription.

Investors were very unhappy with this new accounting change and the stock plunged from $25 to $18. There has been no follow through on its attempts to bounce. Shares now look like they are poised to breakdown under short-term support near $18.00 and its 300-dma.

I do consider this an aggressive trade since INCY is already considered oversold at this point. The August 2nd low was $17.75. I am suggesting a trigger to open bearish positions at $17.50. Our target is $14.00. We'll start with a stop loss at $18.65.

Trigger @ $17.50 (small positions)

Suggested Position: short INCY stock @ (trigger)

- or -

buy the Sep $17.50 PUT (INCY1222I17.5) current ask $1.05

*remember, small positions to limit risk!

Annotated chart: