NEW BULLISH Plays
Cisco Systems - CSCO - close 23.29 change -0.04 stop 22.20
Cisco Systems, Inc. designs, manufactures and sells Internet protocol (IP)-based networking and other products related to the communications and information technology (IT) industry, and provides services associated with these products and their use. The Company provides a line of products for transporting data, voice, and video within buildings, across campuses, and around the world. Its products are designed to transform how people connect, communicate and collaborate. The Companyâ€™s products are installed at enterprise businesses, public institutions, telecommunications companies, commercial businesses and personal residences. It has five segments: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The Emerging Markets theater consists of Eastern Europe, Latin America, the Middle East and Africa and Russia and the Commonwealth of Independent States. In December 2009, the Company completed its acquisition of Starent Networks..
Target(s): 23.55, 24.20
Key Support/Resistance Areas: 23.65, 22.55
Time Frame: Several weeks
Why We Like It:
CSCO has been building a nice base for the past 3 to 4 weeks and is trading in a $1 range (4.5%) between $22.55 and $23.55. $22.50 is key pivot level for the stock dating back to 2006. It appears the stock may want to break out of this base, but we don't necessarily need that to happen for a profitable trade. CSCO looks stable here with a lot of support and I suggest we take advantage of the reliable price pattern that is being built. I would like to use $22.85 as a trigger to enter long positions. If triggered options traders should be able to purchase July $22.00 calls for about $1.30 (current ask is $1.64). If CSCO then proceeds to rally to the top of its base at $23.55 we should make about 55 cents on the position for a +40% gain. If CSCO breaks out it could rally to fill the a gap which is up near our more aggressive 2nd target of $24.40 and below the stock's 200-day SMA. Another entry could be considered at $23.05. Our Stop will be $22.20. NOTE: I view this trade as potentially being quick.
Suggested Position: Long CSCO stock if it trades down near $22.85
Suggested Position: Buy July $22.00 CALL, current ask $1.64, estimated ask at entry $1.30
Entry on June xx
Earnings Date 8/5/10 (unconfirmed)
Average Daily Volume: 69 million
Listed on 6/16/10
<-- NEW SHORT PLAYS -->
NEW BEARISH Plays
Mohawk Industries - MHK - close 53.27 change -0.81 stop 24.25
Mohawk Industries, Inc. is a producer of floor covering products for residential and commercial applications in the United States and residential applications in Europe. The Company is a carpet and rug manufacturer, and manufactures, markets and distributes ceramic tile, natural stone and hardwood flooring in the United States, as well as a producer of laminate flooring in the United States and Europe. The Company operates in three segments: the Mohawk segment, the Dal-Tile segment and the Unilin segment.
Target(s): 52.05, 50.40, 49.10
Key Support/Resistance Areas: 55.00, 52.00, 50.00
Time Frame: 1 to 2 weeks
Why We Like It:
MHK has rallied +14% from its 6/8 lows and finds itself in a resistance and congestion area between $53.00 and $55.00. The stock has also hit its 100-day and 20-day SMA's and has turned back. I believe it is time for the stock to turn back down from here and fill the gap higher between 6/11 and 6/14. MHK is a residential and commercial manufacturer of floor products in the US and Europe. The construction industry is struggling on both continents and consumer spending is weak. Any bad news about the industry or lowered guidance warnings could send the stock tumbling. Fundamentally, the company trades at about 28 times trailing earnings which I think is too high. I am going to place a wide stop above the 50-day SMA at $58.05 to account for volatility, but a tighter stop could be placed at $56.60 which is above the congestion zone and should give enough room for the trade to work. Our primary target is $50.40 but the stock may find support at $52.02. If it breaks this level it should see $50.40 in fairly quick. NOTE: This stock is volatile so please use proper position size to limit risk.
Suggested Position: Short MHK stock at current levels
Suggested Position: Buy August $50.00 PUT, current ask $3.20
Entry on June xx
Earnings 7/20/2010 (unconfirmed)
Average Daily Volume: 975,000
Listed on July 29, 2010