NEW DIRECTIONAL PUT PLAYS

Polo Ralph Lauren - RL - close 77.72 change +2.26 stop 82.50

Company Description:
Polo Ralph Lauren Corporation is engaged in the design, marketing and distribution of products, including men’s, women’s and children’s apparel, accessories, fragrances and home furnishings. The Company operates in three segments: Wholesale, Retail and Licensing. Apparel products include collections of men’s, women’s and children’s clothing. Accessories include a range of footwear, eyewear, watches, jewelry, hats, belts and leather goods, including handbags and luggage. Home products include bedding and bath products, furniture, fabric and wallpaper, paint, tabletop, and giftware. Fragrance products are sold under its Romance, Polo, Lauren, Safari, Ralph and Black Label brands, among others.

Target(s): 75.25, 73.50, 72.10
Key Support/Resistance Areas: 82.00, 80.00, 78.00, 75.00
Time Frame: 1 to 2 weeks

Why We Like It:
RL has rallied +8% off of its lows on Friday and is now approaching its 20-day SMA, two downtrend lines, and a price congestion dating back to October 2009, all from below. The facts are that the consumer is not in good shape, jobs are hard to come to come by, and the housing market remains in the tank. This doesn't bode well for retailers and I believe we will see RL retest its lows before it breaks the downtrend lines. I've chosen $77.40 as the entry trigger which is just above today's closing price. I would like to buy August $75.00 PUTS for no more than $3.00 which is what they should be worth at $77.40. Our stop will be $82.50 which is 20-day and 200-day SMA's and will be below the 50-day SMA in a matter of couple of days. NOTE: Trading in the August contracts is a bit light because the strikes for August were just opened for trading recently.

Suggested Position: Buy August $75.00 PUTS if RL trades to $77.40, current ask $3.10, estimated ask at entry $3.00

Annotated chart:

Entry on July xx
Earnings 8/5/2010 (unconfirmed)
Average Daily Volume: 1.8 million
Listed on July 8, 2010