Editor's Note:

After five weekly declines in a row it might be time for the market to bounce but the overall trend is turning negative. These stocks caught my eye this weekend.

Nike Inc. (NKE) looks like a bearish candidate. I'd look for a drop under $80 or a failed rally at its 100-dma near $83 or its 200-dma near $82 as a potential entry point.

Sears (SHLD) is breaking down to new multi-month lows. I'd watch for a failed rally near new resistance at $70.00.

Cognizant Technology (CTSH) looks like a bearish candidate now but my concern is potential support at its 200-dma.

CME Group (CME) can be a very volatile stock. Shares are down sharply in the last two weeks. I wouldn't chase it but watch for a failed rally near resistance (maybe near $280).

Quality Systems Inc. (QSII) has broken its up trend but shares look a little bit oversold.

HMS Holdings (HMSY) is breaking down from its sideways consolidation and its 100-dma. My biggest concern here was the wide spreads on the July puts. HSMY looks headed for the $70 area.

- James


NEW DIRECTIONAL PUT PLAYS

Amazon.com Inc. - AMZN - close: 188.57 change: -5.08

Stop Loss: 196.25
Target(s): 180.25, 175.00
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
AMZN spent almost three weeks consolidating sideways in the $190-200 range. Shares were slowly building a bearish trend of lower highs and lower lows. Unfortunately for the bulls AMZN broke down sharply on Friday with a -2.75% decline and a breakdown under support near $190 and its simple 50-dma. The drop also produced a new P&F sell signal (see my comments below).

I am suggesting we open small bearish put positions now. We want to keep our position small that way if we see a better entry point on a failed rally near the trend of lower highs we can increase our position. We'll start this trade with a stop loss at $196.25. Our first target is $180.25. Our second target is $175.00 (or the simple 200-dma, whichever one AMZN hits first).

FYI: The Point & Figure chart for AMZN has turned bearish with a $176 target.

- small bearish positions -

- Suggested Positions -

buy the June $185 PUT (AMZN1118R185) current ask $2.91

- or -

buy the July $180 PUT (AMZN1116S180) current ask $4.30

Annotated Chart:

Entry on June 6th at $ xx.xx
Earnings Date 07/26/11 (unconfirmed)
Average Daily Volume = 4.5 million
Listed on June 4th, 2011


SanDisk Corp. - SNDK - close: 44.32 change: -1.06

Stop Loss: 47.70
Target(s): 40.50, 36.00
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Technology stocks have not performed very well. SNDK's bearish trend of lower highs and lower lows over the last several weeks has finally broken down under key technical support at the 200-dma. Shares have also broken their long-term up trend.

I am suggesting bearish positions now. Our targets are $40.50 and $36.00, given enough time. FYI: The P&F chart for SNDK is bearish with a $30 target.

- open Bearish Positions Now - Suggested Positions -

buy the July $42.00 PUT (SNDK1116S42) current ask $1.11

- or -

buy the July $40.00 PUT (SNDK1116S40) current ask $0.62

Annotated Chart:

Weekly Chart:

Entry on June 6th at $ xx.xx
Earnings Date 07/21/11 (unconfirmed)
Average Daily Volume = 5.8 million
Listed on June 4th, 2011