Aeropostale, Inc. - ARO - close 27.72 change -1.06 stop 29.55

Company Description:
Aeropostale, Inc. is a mall-based specialty retailer of casual apparel and accessories. The Company designs, markets and sells its own brand of merchandise principally targeting 14 to 17 year-old young women and young men. The Company also sells Aropostale merchandise through its e-commerce Website, www.aeropostale.com. During the fiscal year ended January 30, 2010 (fiscal 2009), the Company launched P.S. from Aeropostale, which offers casual clothing and accessories focused on elementary school children between the ages of 7 and 12.

Target(s): 27.00, 26.35, 25.25
Key Support/Resistance Areas: 29.35, 28.50, 27.50, 27.00, 26.30, 25,00
Time Frame: 1 to 2 weeks

Why We Like It:
ARO rallied hard last week making a double top with the highs from May 5. The retail sector has some catching up to do with the broader market declines as the sector is still several percentage points away from its February lows. I believe ARO is a vulnerable stock that is ready for sharper decline. I suggest readers initiate puts if ARO retraces some of its losses today and tests its 20-day SMA from below up near $28.20. This is also an intraday support/resistance area that is logical place for ARO to reverse back down. Our first target is $27.00 but ARO should be ultimatley be testing its 200-day SMA near $26.35 which is our 2nd target.

Suggested Position: Buy July $27.00 PUT if ARO trades up near $28.20, current ask $1.60, estimated ask at entry $1.40.

Annotated chart:

Entry on June xx
Earnings 8/19/2010 (unconfirmed)
Average Daily Volume: 3.3 million
Listed on June 7, 2010


Arch Caol - ACI - close 20.60 change -0.67 stop 21.80

Company Description:
Arch Coal, Inc. is a coal producer in the United States. During the year ended December 31, 2009, the Company sold approximately 126.1 million tons of coal, including approximately 7.5 million tons of coal, it purchased from third parties. The Company sells coal to power plants, steel mills and industrial facilities. As of December 31, 2009, it operated 19 active mines at 11 mining complexes located in the United States. The Company operates in three segments: the Powder River Basin, the Western Bituminous region and the Central Appalachia region.

Target(s): 19.30, 18.00
Key Support/Resistance Areas: 22.00, 21.75, 21.40, 21.0020.40, 19.25
Time Frame: 1 to 2 weeks

Why We Like It:
ACI is forming a bear pennant on its weekly chart and I believe it is poised to test its recent lows near $19.30. There is also an upward trend line from its November 2009 lows near $18.00 that ACI could easily trade down to if the overall market continues to be weak. I would like to see ACI retrace some of today's losses and use $20.95 as a trigger to enter short positions. I want to keep a tight leash on this trade and use a stop of $21.80 which is just above today's highs.

Suggested Position: Buy July $20.00 PUT if ACI trades up near $20.95, current ask $1.35, estimated ask at entry $1.20

Annotated weekly chart:

Entry on June xx
Earnings 7/22/2010 (unconfirmed)
Average Daily Volume: 6.4 million
Listed on June 7, 2010