NEW DIRECTIONAL PUT PLAYS

Home Depot - HD - close 32.22 change -0.50 stop 33.65

Company Description:
The Home Depot, Inc. is a home improvement retailer. The Home Depot stores sell an assortment of building materials, home improvement and lawn and garden products and provide a number of services. The Home Depot stores average approximately 105,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. As of January 31, 2010, it had 2,244 The Home Depot stores located throughout the United States, including the Commonwealth of Puerto Rico and the territories of the United States Virgin Islands and Guam (U.S.), Canada, China and Mexico.

Target(s): 31.35, 30.10
Key Support/Resistance Areas: 33.25, 32.90, 32.15, 31.25, 29.95
Time Frame: 1 to 2 weeks

Why We Like It:
I'm going to give the retail sector one more shot. HD is struggling to get through resistance and a congestion area in the $32.15 to $32.90 area. There is also a downtrend line just overhead. $32.65 provides an ideal entry point and I expect HD to retest its recent lows and possibly even make a trip down to its 200-day SMA. We'll use an initial stop at $33.65 which is above the declining 20-day SMA. A tighter stop could be placed at $33.05 which would get you out of the trade if HD begins to fill the gap lower from 6/3 to 6/4.

Suggested Position: Buy July $32.00 PUTS if HD trades up near $32.65, current ask $1.50, estimated ask at entry $1.25.

Annotated chart:

Entry on June xx
Earnings 8/18/2010 (unconfirmed)
Average Daily Volume: 23 million
Listed on June 12, 2010