We’ve opening a new bearish trade on American Railcar Industries, Inc. (ARII). The rally in ARII in September and October was perplexing. Significant declines in estimates from the energy sector (for both tankers and hopper cars) should have weighed on ARII and prevented it from hitting prior highs. However, some productivity in the leasing arm (that we believe to be unsustainable) helped spike prices. The stock has since formed a potential double-top on the verge of a breakout.

Lower oil prices recently and a threat from OPEC to crush the competition from shale production are finally hitting home. We expect that investors will realize that much of the revenue/earnings recorded this year are going to evaporate as the company depletes its backlog. Without higher prices in the energy market, ARII is unlikely to find support in the near term.

We like a put trade here, but ARII’s chain sheet is somewhat thin. We always recommend using limit orders to enter or exit a position, but, in this case, it is even more important to avoid costs associated with slippage.

Use a limit order to ‘buy to open’ the ARII January 50 Puts (ARII160115P00050000) for a maximum price of $3.20.

We rarely provide stop losses or targets and instead use the news cycle and the underlying technical analysis for a stock to tell us when to exit. We’ve instructed our SlingShot Trader members to exit the We’re also closing our bearish trade on Walmart (WMT) puts as investors who are on the hunt for discounts are irrationally driving WMT higher.

Our SlingShot Trader members get real-time recommendations and are alerted precisely when it’s time to take action, so get in on the next trade and receive 1 free month today by clicking here.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news.