NEW DIRECTIONAL PUT PLAYS

Zumiez, Inc. - ZUMZ - close: 27.47 change: -1.68

Stop Loss: 29.05
Target(s): 23.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of ZUMZ, a teen apparel retailer, have fallen out of favor with the market. The stock peaked back in June and since then it's been in a bearish trend of lower highs and lower lows. The earnings report in late August sparked another drop thanks to a revenue miss. Now the oversold bounce is reversing under technical resistance at the simple 300-dma.

I am suggesting a trigger to buy puts at $27.00. Our target is $23.00. I do want to warn you that the $25.00 could be potential support but it's not guaranteed. Another concern is that a lot of investors are already bearish on ZUMZ and the most recent data listed short interest at 18.4% of the small 22.3 million share float. That raises the risk of a short squeeze.

We want to keep our position size small.

Trigger @ 27.00

- Suggested Positions -

buy the Nov $25 PUT (ZUMZ1217w25) current ask $1.35

Annotated Chart:

Entry on September xx at $ xx.xx
Average Daily Volume = 821 thousand
Listed on September 10, 2012