NEW DIRECTIONAL PUT PLAYS

NetApp Inc - NATP - close 48.77 change +0.73 stop 50.50

Company Description:
NetApp, Inc. (NetApp) is a provider of storage and data management solutions. The Company offers solutions for storing, managing, protecting and archiving business data. NetApp's products and services are designed to meet the requirements and service levels of large enterprises and their business applications. The Company offers storage solutions that incorporate its unified storage platform and the functionality of its data and storage resource management software.

Target(s): 45.25, 43.75, 42.25
Key Support/Resistance Areas: 51.40, 50.40, 46.90, 45.00, 42.00
Time Frame: 1 to 2 weeks

Why We Like It:
We are back with an aggressive countertrend play in NTAP. Back in June we caught a nice correction in this stock and I believe it is on the verge of another much needed correction from overbought levels. The stock was trading near 10 year highs until the sharp one day correction on 10/6. Since then NTAP has formed a bear flag on its daily chart and is consolidating under its 20-day SMA. I believe the stock should easily trade down to its 50-day SMA which is more than $3 lower than current levels and near our first target. The most significant support level for the stock is $42.00 which represents highs from June 2010 and December 2006,but the primary targets are $45.25 and $43.75. Options positions at the first and second targets should gain +65% and +90%, respectively. Let's open positions at current levels. Our stop is $50.50 and will be adjusted as the trade develops. NOTE: This has the potential to be a quick play, especially if the broader market corrects in the coming days. I suggest being ready to take profits or tighten stops to protect them.

Suggested Position: Buy November $47.00 PUT, current ask $2.03

Annotated chart:

Entry on October xx
Earnings: 11/17/2010 (unconfirmed)
Average Daily Volume: 8.5 million
Listed on October 12, 2010