United States Steel - X - close 43.30 change +0.71 stop 39.75

Company Description:
United States Steel Corporation is an integrated steel producer of flat-rolled and tubular products with production operations in North America and Europe. The Company has an annual raw steel production capability of 31.7 million net tons (tons) (24.3 million tons in North America and 7.4 million tons in Europe). U. S. Steel is also engaged in other business activities, which are related to steelmaking operations, including the production of coke and iron ore pellets, and transportation services (railroad and barge operations), real estate operations, and engineering consulting services. It operates in three segments: Flat-rolled Products (Flat-rolled), U. S. Steel Europe (USSE) and Tubular Products (Tubular).

Target(s): 44.90, 46.20, 47.95
Key Support/Resistance Areas: 48.70, 46.25, 50-day SMA, 43.50, 40.50
Time Frame: 1 weeks

Why We Like It:
The steel sector has been beaten down and it appears to be gaining momentum and ready for move higher. X has broken out of its primary downtrend line from its highs on 4/6 and has now closed above its 20-day SMA 3 out of the past 4 days. The stock is creating an ascending triangle on its daily and intraday charts and I believe it should easily trade up to its 50-day SMA before the company's earnings on 7/27. I suggest readers initiate long positions on weakness in the stock. Our official trigger is $42.05 but readers may also consider $41.05. I'm just not convinced $41.05 will be triggered prior to the stock advancing. Our stop is relatively tight at $39.75 so if this is a false break out our losses will be limited. NOTE: I view this an aggressive and potentially quick trade. Please use proper position size to manage risk.

Suggested Position: Buy August $46.00 CALLS if X trades to $42.05, current ask $1.80, estimated ask at entry $1.30

Annotated Chart:

Entry on July xx
Earnings Date 7/27/10 (unconfirmed)
Average Daily Volume: 13.5 million
Listed on July 14, 2010


SPDR S&P 500 ETF - SPY - close 109.65 change -0.00 stop 112.60

Company Description:
SPDR S&P 500 ETF (the Trust), formerly SPDR Trust, Series 1, generally corresponds to the price and yield performance of the S&P 500 Index. The S&P 500 Index consists of 500 selected stocks, all of which are listed on the exchange, the NYSE or NASDAQ, and spans over 24 separate industry groups.

Target(s): 108.20, 107.25, 106.25
Key Support/Resistance Areas: 110.50, 108.80, 107.60, 106.00
Time Frame: 1 week

Why We Like It:
This is fairly simple. I'm looking for SPY to spike a tad bit higher to the 105.50 area (equivalent to 1105 in the S&P 500) and then retrace to fill its gap higher on 7/13 which is also just above its 20-day SMA. This is the primary target and is a good place to tighten stops to see if we can get more out of the trade. If we get filled I like this set-up a lot and I think the retracement could come quick. Our trigger to enter short positions is $110.35 and our stop will be above all recent closing highs at $112.60 and the 200-day SMA. If we get filled on this trade I will be thoroughly amazed if we get stopped out prior to hitting our target. But the market can do anything so it is possible, but not probable in my opinion. I think we have a 50/50 chance of getting filled so traders may consider entering at current levels with a tighter stop just above the 200-day SMA at $111.75.

Suggested Position: August $108.00 PUTS, current ask $2.64, estimated ask at entry $2.35

Annotated chart:

Entry on July xx
Earnings N/A (unconfirmed)
Average Daily Volume: 251 million
Listed on July 14, 2010