NEW DIRECTIONAL PUT PLAYS

Ingersoll-Rand Plc - IR - close 34.06 change +0.58 stop 36.60

Company Description:
Ingersoll-Rand plc (IR-Ireland), formerly Ingersoll-Rand Company Limited, along with its subsidiaries, is a diversified, global company that provides products, services and solutions to enhance the quality of air in homes and buildings, transport and protect food and perishables, secure homes and commercial properties, and enhance industrial productivity. The Company operates through four segments: Climate Solutions, Residential Solutions, Industrial Technologies and Security Technologies. The Company generates revenue primarily through the design, manufacture, sale and service of a diverse portfolio of industrial and commercial products that include brand names, such as Club Car, Hussmann, Ingersoll-Rand, Schlage, Thermo King and Trane.

Target(s): 31.60, 30.60
Key Support/Resistance Areas: 37.00, 36.50, 35.70, 34.50, 33.11, 31.50, 30.12
Time Frame: 1 to 2 weeks

Why We Like It:
IR has broken down hard since its YTD high of $40.65 on 6/21. Today the stock gained +1.73% compared to the broader indexes that all gained approximately +3%. This is underperformance. IR appears to be forming a bear flag on the daily chart and I suggest readers take advantage of a break down below its recent lows near $33.00, or on any strength the stock exhibits in the coming days. The stock has broken below its 200-day SMA (currently $35.29) and if it bounces I anticipate it struggling at this level. There is a ton of overhead resistance to deal with (see rectangle). I've chosen a trigger of $34.30 and $32.96 to initiate short positions, whichever occurs first. $34.30 is just below Tuesday's highs which IR couldn't get to today. We'll use a wide stop of $36.60 until we are in the position and then adjust it. If we get filled at the higher price it presents a good risk reward set-up, i.e. risking $1.85 to make $2.70 at our first target of $31.60, and $3.70 at our second target of $30.60. If IR breaks lower I believe the selling will gain steam quickly.

Suggested Position: Buy August $35.00 PUTS if IR trades to $34.30 or $32.96, whichever occurs first. Current ask $2.45, estimated ask at entry $2.30

Annotated chart:

Entry on July xx
Earnings 7/23/2010 (unconfirmed)
Average Daily Volume: 5.4 million
Listed on July 7, 2010


PowerShares QQQQ Trust - QQQQ - close 43.96 change +1.36 stop 46.90

Company Description:
PowerShares QQQ Trust, Series 1 (the Trust) is a unit investment trust that issues securities called PowerShares QQQ Index Tracking Stock. The Trust holds all of the component securities of the Nasdaq-100 Index (the Index). The Investment objective of the Trust is to provide investment results that generally correspond to the price and yield performance of the Nasdaq-100 Index. Invesco PowerShares Capital Management, LLC is the Sponsor of the Trust and The Bank of New York Mellon is the Trustee.

Target(s): 42.55, 41.80, 41.05
Key Support/Resistance Areas: 46.77, 45.20, 44.46, 43.50, 42.50, 41.00
Time Frame: 1 to 2 weeks

Why We Like It:
QQQQ had a monster truck rally today but I believe this will be short lived. The ETF is nearing an important resistance level at $44.46 and has all of its SMA's and plenty of congestion overhead to act as resistance. The rectangle on the chart represents a gap that I suppose could get filled so conservative traders may consider waiting to enter at $45.00. I'm just not confidant the gap will get filled. Today was a relief rally and we may get a little more but I think the selling will resume again and QQQQ should easily retest its lows and possibly break them. Let's use a trigger of $44.30 to initiate short positions. Our stop is $46.90 and I do not see QQQQ trading up to this level prior to breaking down again.

Suggested Position: August $45.00 PUTS, current ask $2.08, estimated ask at entry $1.90

Annotated chart:

Entry on July xx
Earnings N/A (unconfirmed)
Average Daily Volume: 100 million
Listed on July 7, 2010