NEW BEARISH Plays

Noodles & Co. - NDLS - close: 31.54 change: -0.51

Stop Loss: 33.25
Target(s): to be determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 08, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 288 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
NDLS is in the services sector. The company runs a chain of fast casual dining restaurants and is quickly approaching 400 locations. The stock IPO'd in June last year at $18.00 a share but opened at $33.00 on its first day of trading. The amount of stock available has risen from 5.4 million to 21.2 million.

The company warned about Q4 revenues back in January. When they reported in February they missed on both the top and bottom line while reaffirming their 2014 guidance.

The company just recently warned that same-store sales were down -1.6%. Like many companies with retail locations they blamed the weather. Unfortunately for shareholders the sell-off has accelerated and NDLS has broken down below its opening day price of $33.00 a share.

There are already a lot of bears in the name with the most recent data listing short interest at 27% of the 21.2 million share float. That does raise our risk of a short squeeze and investors might want to buy puts instead of shorting the stock.

I am suggesting a trigger at $31.25 to open bearish positions. We're not setting an official exit target just yet but I'm aiming for the $26-25 area.

Trigger @ 31.25

Suggested Position: short NDLS stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the Jun $30 PUT (NDLS14R30) current ask $1.50

Annotated chart:

Weekly chart: