USG Corp. - USG - close 21.40 change -0.08 stop 23.25

Company Description:
USG Corporation (USG), through its subsidiaries, is a manufacturer and distributor of building materials, producing a range of products for use in new residential, new nonresidential, and residential and nonresidential repair and remodel construction, as well as products used in certain industrial processes. The Company is organized into three reportable segments: North American Gypsum, Building Products Distribution and Worldwide Ceilings, the net sales of which accounted for approximately 47%, 35% and 18%, respectively, of its consolidated net sales during the year ended December 31, 2009. North American Gypsum manufactures and markets gypsum and related products in the United States, Canada and Mexico. Building Products Distribution consists of L&W Supply, a specialty building products distribution business in the United States. Worldwide Ceilings segment manufactures and markets interior systems products worldwide. (source: company press release or website)

Target(s): 19.25, 18.25
Key Support Areas: 20.75, 20.00, 19.25
Key Resistance Areas: 22.25, 23.00
Time Frame: About 2 weeks

Why We Like It:
USG was caught in the recent new home sales hoopla which drove the stock +25% higher and to new highs not seen since 2008. The stock plunged last week with the market and has now retraced about 50% of the recent downward move with its intraday high today, and then reversed. We think there is more to come on the downside as long the overall market is weak. I suggest traders initiate short positions at current levels or a failed rally into the $22.00 area. $21.70 could act as a resistance area and potential short entry. We are looking for a move back to $19.25 which would represent more than a +10% gain depending on our entry. Our stop will $23.25. *NOTE: Please use small position due to the volatility in this stock and to limit risk.

Suggested Position: Short USG stock at current levels or a failed rally into the $22.00 area.

Option Traders:
Suggested Position: Buy JUNE $20.00 CALL, current ask $1.20

Annotated chart:

Entry on May xx at $xx.xx
Earnings Date More than 2 months (unconfirmed)
Average Daily Volume: 7.5 million
Listed on May 3, 2010