Quest Software - QSFT - close 19.26 change +0.58 stop 18.40

Company Description:
Quest Software, Inc. (Quest) designs, develops, markets, distributes and supports enterprise systems management software products. The Company’s primary portfolio of software products includes software solutions grouped into four categories: Application Management, Database Management, Windows Management and Virtualization Management. In addition to perpetual software licenses, it sells time-based software licenses wherein customers pay a single fee for the right to use the software and receive maintenance for a defined period of time. It also provides support, maintenance and implementation services for these products. Its segments include Licenses and Services. The Licenses segment develops, and markets and sells licenses to use, software products. The Services segment provides post-sale support for software products and fee-based training and consulting services related to its software products. In December 2009, the Company acquired PacketTrap Networks, Inc.

Target(s): $19.60, 20.50, 21.00
Key Support/Resistance Areas: 18.60, 19.36
Time Frame: Several weeks

Why We Like It:
QSFT is relative strength play that is involved in virtualization software and cloud computing, among other things. These stocks have done extremely well as the market has been under pressure over the past month. QSFT has recently broken out of a resistance level near $18.60 which has acted as support the last couple of days. The stock made new all time highs on 5/19 and if the market can continue its bounce from today I expect QSFT to make new highs again. I have also noticed unusual option activity picking up in the July strike prices and above average volume, both bullish signals. I would like to see QSFT pullback near the $19.00 level which we will use as a trigger to enter long positions. With all of that said I want to keep a tight leash on the trade with a stop at $18.60 to protect capital if things reverse lower. I am also choosing a $20.00 out of the money call option to limit capital at risk.

Suggested Position: July $20.00 CALL if QSFT trades down near $19.00

Annotated Chart:

Entry on June xx
Earnings Date 8/10/10 (unconfirmed)
Average Daily Volume: 1.9 million
Listed on 6/2/10