NEW DIRECTIONAL PUT PLAYS

Tempur-Pedic International - TPX - close 33.78 change +0.25 stop 36.25

Company Description:
Tempur-Pedic International Inc. (Tempur-Pedic International) is a manufacturer, marketer and distributor of mattresses and pillows, which it sells in approximately 80 countries under the TEMPUR and Tempur-Pedic brands. The Company has two operating segments: Domestic and International. The Domestic operating segment consists of United States manufacturing facilities, whose customers include its United States distribution subsidiary and certain third party distributors in the Americas. The International segment consists of its manufacturing facility in Denmark, whose customers include all of the Company’s distribution subsidiaries and third party distributors outside the Domestic segment. (source: company press release or website)

Target(s): 31.50, 30.25
Key Support Areas: 32.40, 31.30, 30.00
Key Resistance Areas: 34.25, 35.10
Time Frame: 1 to 2 weeks

Why We Like It:
All good things have to come to end and I think TPX is poised to pullback with the remainder of the market. There is no arguing this stock has been a strong performer over the past year, gaining about +800%, but it could be overdone at these levels, especially if the market is going to correct. However, if the market is strong TPX will probably retest its from 2006 which are just above the stock's recent highs. After last week's plunge TPX has rallied back right into a resistance area and appears to be making another lower high. Volume on this recent snap back rally has been lighter than normal which also is bearish sign. I am looking for a 5% to 10% correction from here and suggest readers initiate June PUTS at current levels. Our stop is $36.25 and our target is $31.50. *NOTE: Due to volatility please use small position to limit risk.*

Suggested Position: JUNE $32.50 PUT, current ask $1.60

Annotated chart:

Entry on May xx at $xx.xx
Earnings July 15, 2010 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on May 11, 2010