Add KSS Puts
Plus: Watch PRU, IBM, QID
PLAY: Buy the KSS March 35 Puts (KSS OG) at or under $3.10, good for the day. Place a protective stop limit at $1.90 and a pre-determined sniper sell at $4.30.
Dear Bottarelli Research Member,
It didn’t take long for this morning’s rally to wash away. As I write, the Dow is off another 100 points, taking it down to 7,260. If that weren’t enough, the failure to hold this morning’s rally is yet another bearish sign. See below:
To play this continued bearishness, I’d like to add a slightly more speculative put position on retailer Kohl’s (KSS – NYSE). As you probably know, KSS operates 957 stores in 47 states. As you can see from the chart, the stock has many things going against it right now. First, KSS has established a firm ceiling at the $40.00 level, which I have drawn in using a horizontal black line below. Secondly, the stock is failing below the 50-day moving average, which means that a re-test of the $25.00 level could be in the cards (this price target is noted by the circle). And third, they’re operating in this super-weak retail environment. I could realistically see the shares around the $15.00 level.
Now, I call this play a “speculative” position because KSS has an earnings announcement scheduled for February 26th at 5:00 PM EST. They’re expected to earn $1.03 per share, which is lower than the $1.31 that they reported one year ago. Nevertheless, we always run the risk of KSS moving up on announcements like this. Therefore, I plan to exit this play before Thursday’s earnings announcement. (Or, if the technical formation is still bearish leading into Thursday’s close, we’ll enter into a hedge position.) We’ll prepare ourselves either way. But for today, let’s enter the KSS puts now.
PLAY: Buy the KSS March 35 Puts (KSS OG) at or under $3.10, good for the day. Place a protective stop limit at $1.90 and a pre-determined sniper sell at $4.30.
Another stock looking rather weak is Prudential Financial (PRU – NYSE). As you probably know, Prudential provides financial products in the United States, Asia, Europe, and Latin America. They operate three divisions: Insurance, Investment, and International Insurance and Investments — which are the same segments that competitors like American International Group (AIG – NYSE) and MetLife (MET – NYSE) have failed miserably to keep above water.
As you can see from the chart, PRU shares look ready to re-test the lows in the mid-teens, so I’ll continue to monitor this situation going forward.
Other notable bearish chart formations come from International Business Machines (IBM – NYSE) and United Parcel Service (UPS – NYSE), shown below:
At the same time,a new 52-week low today on the NASDAQ 100 might indicate that it’s time to play another round of calls on the UltraShort QQQ ProShares (QID).
If the timing is right to make any of these plays, you’ll be the first to know.
Until then…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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