Editor's Note:

This note is similar to the play update comments. Our plan hasn't changed. We want to buy call options on a dip. The challenge is exercising some patience and waiting for the dip. I'd focus on a pull back toward the 950 level for the S&P 500. Broken resistance should become new support. However, it's very possible that the S&P 500 rallies to 1,000 before correcting. Nimble traders could try opening bearish positions on a rise near the 1,000 level. Potential trading vehicles would be bearish positions on the SPY, SSO, or bullish positions on inverse ETFs like SH or SDS.


Alliant Techsystems - ATK - close: 78.88 change: -0.67 stop: 81.15

Why We Like It:
The defense stocks have been under performing the market these last few days. This is not a great environment to buy puts but ATK is breaking down from a sideways consolidation in spite of the market's strength. Plus, today's move offers a great way to limit our risk.

I'm suggesting put positions now. Our first target is $75.25. Our second target is $72.00 but we may not have time for ATK to reach $72.00. Earnings are due out on August 6th and we don't want to hold over the announcement. I'm suggesting a stop loss at $81.15. FYI: The Point & Figure chart is bearish with a $62 target.

Suggested Options:
I'm suggesting the August puts.

BUY PUT AUG 80.00 ATK-TP open interest= 312 current ask $3.10
BUY PUT AUG 75.00 ATK-TO open interest=  85 current ask $1.05

Annotated Chart:

Picked on     July 27 at $ 78.88
Change since picked:      + 0.00
Earnings Date           08/06/09 (confirmed)
Average Daily Volume =       443 thousand 
Listed on  July 27, 2009