NEW BEARISH Plays

Cliffs Natural Resources - CLF - close: 42.06 change: -1.24

Stop Loss: 45.30
Target(s): 36.50
Current Gain/Loss: - 0.0%

Entry on August 15 at $ xx.xx
Listed on August 14, 2011
Time Frame: 6 to 8 weeks
Average Daily Volume = 5.3 million
New Positions: Yes, see below

Company Description

Why We Like It:
CLF produces iron and metallurgical coal. You might think that investors would be drawn to CLF for its high dividend yield. Shares are currently yielding 5.6%. Yet that's not stopping traders from selling into strength. Recent economic data is suggesting the global economy is slowing down and that should mean less demand for basic materials like metals.

CLF's oversold bounce just failed at resistance near $45.00 and shares are starting to roll over again. The stock looks poised to begin a new leg lower. I am suggesting we launch bearish positions now at the open tomorrow. We'll place our stop loss at $45.30. Our target is $36.50 (for now).

(entry tomorrow morning)

Suggested Position: short CLF stock @ (the open)

- or -

buy the Oct $40 PUT (CLF1220V40) current ask $2.20

Annotated chart:



Strayer Education - STRA - close: 69.43 change: -1.34

Stop Loss: 71.55
Target(s): 62.50
Current Gain/Loss: unopened

Entry on August xx at $ xx.xx
Listed on August 14, 2011
Time Frame: 3 to 6 weeks
Average Daily Volume = 306 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
STRA is in the secondary education industry. The big drop in late July was due to STRA's earnings report. The company missed estimates and guided lower on top of it. STRA has been trying to hold support at the $70.00 level but it broke that level today.

Before we go any farther I have to warn you that this should be considered a higher-risk trade. Lots of investors are already bearish on STRA. The for-profit secondary education industry has had its share of troubles in recent years. The most recent data listed short interest at 41% of STRA's very small 11.0 million-share float. That does raise the risk of a short squeeze. If you look at a daily chart you can see the short squeeze that happened in late June.

I am suggesting a trigger to open bearish positions at $69.00 and we'll start with a stop loss at $71.55. Our target is $62.50. I would not trade the options because the spreads are too wide (which is too bad).

Limit your risk by using small positions.

Trigger @ 69.00 *Small Positions*

Suggested Position: short STRA stock @ (trigger)

Annotated chart: