NEW DIRECTIONAL PUT PLAYS

Best Buy Co. - BBY - close: 17.23 change: -0.11

Stop Loss: 18.51
Target(s): 15.05
Current Option Gain/Loss: Unopened
Time Frame: exit prior to the Aug 21st earnings
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of BBY appear to be in a long-term decline. The company has struggled with the show-room phenomenon where consumers browse products in BBY's big-box stores but then buy the product online from competitors like Amazon.com (AMZN). Recent signs of weakness in consumer spending only add to BBY's troubles. The company recently laid off 2400 people.

This trade is not without risk. There were some rumors a few weeks ago that BBY might be a takeover target or it might be taken private. Plus there are a lot of shorts already in BBY with the most recent data listing short interest at 16% of the 268 million-share float. This high short interest helps produce the short, sharp squeezes higher we've seen over the last several months.

BBY continues to show relative weakness. We are suggesting small bearish positions at the open tomorrow. We'll start with a stop loss just above the 10-dma. I would not be surprised to see BBY bounce near the 2008 low at $16.42. If BBY breaks down under the 2008 low the next level of support is probably $15.00 but the price history would suggest support is near $12.50 and the 2002 lows.

FYI: The Point & Figure chart for BBY is bearish with a $10 target.

- Suggested Positions -

buy the Aug $17 PUT (BBY1218T17) current ask $0.79

- or -

buy the SEP $17 PUT (BBY1222U17) current ask $1.63

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 08/21/12 (confirmed)
Average Daily Volume = 4.4 million
Listed on July 26, 2012


United Rentals, Inc. - URI - close: 27.43 change: +0.20

Stop Loss: 30.05
Target(s): 23.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
URI reported earnings last week and beat estimates by eight cents but that wasn't good enough. Traders sold the news. The oversold bounce failed early this week. Now URI is breaking down to new multi-month lows.

Yesterday and today the stock bounced near $26.90. I am suggesting a trigger to buy puts at $26.80. If triggered our target is the $23.00 level. However, don't be surprised if URI sees an oversold bounce off the $25.00 level (we just expect this bounce to roll over).

FYI: The Point & Figure chart for URI is bearish with a long-term $17 target.

Trigger @ 26.80

- Suggested Positions -

buy the Aug $26 PUT (URI1218T26) current ask $1.10

- or -

buy the Sep $26 PUT (URI1222U26) current ask $2.05

Annotated Chart:

Entry on July xx at $ xx.xx
Earnings Date 07/17/12
Average Daily Volume = 4.4 million
Listed on July 26, 2012