This note is similar to the play update comments.
Our plan hasn't changed. We want to buy call options on a dip. The challenge is exercising some patience and waiting for the dip. I'd focus on a pull back toward the 950 level for the S&P 500. Broken resistance should become new support. However, it's very possible that the S&P 500 rallies to 1,000 before correcting. Nimble traders could try opening bearish positions on a rise near the 1,000 level. Potential trading vehicles would be bearish positions on the SPY, SSO, or bullish positions on inverse ETFs like SH or SDS.
NEW DIRECTIONAL PUT PLAYS
Alliant Techsystems - ATK - close: 78.88 change: -0.67 stop: 81.15
Why We Like It:
The defense stocks have been under performing the market these last few days. This is not a great environment to buy puts but ATK is breaking down from a sideways consolidation in spite of the market's strength. Plus, today's move offers a great way to limit our risk.
I'm suggesting put positions now. Our first target is $75.25. Our second target is $72.00 but we may not have time for ATK to reach $72.00. Earnings are due out on August 6th and we don't want to hold over the announcement. I'm suggesting a stop loss at $81.15. FYI: The Point & Figure chart is bearish with a $62 target.
I'm suggesting the August puts.
BUY PUT AUG 80.00 ATK-TP open interest= 312 current ask $3.10
BUY PUT AUG 75.00 ATK-TO open interest= 85 current ask $1.05
Picked on July 27 at $ 78.88
Change since picked: + 0.00
Earnings Date 08/06/09 (confirmed)
Average Daily Volume = 443 thousand
Listed on July 27, 2009