Editor's Note:

My market bias remains bearish. Today is just an oversold bounce and the bounce could last two or three days. Then we'll look for stocks to roll over again. If you disagree and you're looking for bullish candidates then check out these symbols that caught my eye. Traders might see a bullish trade in these soon: DGX, MCD, TDC, WPI.

- James


NEW DIRECTIONAL PUT PLAYS

Abercrombie & Fitch Co. - ANF - close: 67.33 change: +1.72

Stop Loss: 72.05
Target(s): 65.50, 62.75(100-dma)
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
The U.S. May retail sales were better than expected but they were still negative. Shares of ANF had reached short-term oversold status with a sharp two-week sell-off so they were poised to bounce. Broken support near $70 and its 50-dma should be overhead resistance. I suspect the correction isn't over yet and we want to launch bearish positions when ANF bounces back toward resistance.

I'm listing a trigger to buy puts at $69.75 with a stop loss at $72.05. More conservative traders may want to use a tighter stop loss and might want to wait for ANF to actually produce a failed rally type of move before initiating positions. Our first target is $65.50. Our second target is the 100-dma but if this trade takes too long we may abandon the second target. Aggressive traders could aim for support near $60 but I'm concerned the 100-dma will act as support.

Trigger @ 69.75

- Suggested Positions -

buy the July $70 PUT (ANF1116S70)

Annotated Chart:

Entry on June xxth at $ xx.xx
Earnings Date 08/17/11 (unconfirmed)
Average Daily Volume = 2.8 million
Listed on June 14th, 2011