Option Investor
Newsletter

Daily Newsletter, Thursday, 1/24/2013

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Market Highs And Rotten Apples

by Thomas Hughes

Click here to email Thomas Hughes
Introduction

I have to admit that after reading Apple's results, and seeing the state of Apple's share value when I got up this morning, I was a little worried about my bullish outlook on the markets. Apple's sharp drop to a 12 month low was nothing short of shocking. The stock has been in bear market territory for a two month now and last weeks early calls for a bottom had me thinking that just might be the case, but more on Apple later. The futures trading was not as I would have expected, with the mega drop in Apples shares. The tech sector and Nasdaq indexes did post some big losses but the broader S&P 500 and the Blue Chip Dow were basically flat and positive respectively.


Economic data in the form of flash PMI from Europe and Asia helped to relieve fears of further global weakness. Shares in both regions regained early losses and closed in the green. Adding to the hopes that the world recovery is still on track, and possibly gaining a wee bit of momentum was our own economic releases. Drops in unemployment claims have reached a new 5 year low and may be indicating a shift in the employment scene. Oil and energy prices trended higher today on the back of the positive data.

Earnings season continued to wear on today as well with close to 200 corporations reporting. The calendar was dominated once again by the financial sector with dozens of small regional operators providing results. Despite the bias toward the financials the day was dominated by well known big name stocks like Apple, Microsoft, Starbucks and Netflix. The reports are tending to be taken in a positive light and helped the the major indexes push on to new highs with the Nasdaq the one exception

The US Data

Today we got a new reading on Leading Indicators. I always think this is a funny indicator because it is last months reading. As an actual leading indicator I don't put much faith in it; as a look at the current month it is OK. In any case, the December reading of the Leading Indicators Index posted a gain of 0.5%. This is nearly a 3/4 point increase from the November reading of -0.2 and an indication that the start of 2013 saw an increase in GDP. However, looking back over the last half year there are as many contractions in the LDI as there are expansions though it does seem as if the bias is to the upside.


On the unemployment front initial claims for unemployment fell to a new 5 year low for the second week in a row. Initial claims fell from 5,000 from last weeks unrevised number and 35,000 from last years period to 330,000. The expectations were for a jump to 360,000. These numbers are still reflecting the heavy adjustments due to the holiday season and should be taken with a note of caution. The four week moving average also fell this week. The average dropped 8,250 to 351,750 and set a near five year low of its own. The last two weeks of declines may be indicating a shift in the unemployment scene or it may simply be seasonal volatility. Any lingering impact that could be associated with Hurricane Sandy and post holiday lay offs may be wearing off. It is also possible that hiring plans paused in the pre-Fiscal Cliff period may have been turned back on. The biggest drops in initial claims were in New York, Georgia, North Carolina and Alabama. If you recall from last week, these were among the states listed as having the biggest gains in claims. The biggest gains this week were in Texas, California and Florida. These states cited losses in service, retail, construction and maintenance jobs.


The downward trend in initial claims is transcribing itself into the continuing and total claims. Continuing claims dropped by 71,000 to 3.16 million from a revised 3.228 million. This is very nearly the second lowest number of continuing claims in several years and only about 30,000 above the low set two weeks ago. This table is showing an ongoing down trend in claims as well, even discounting the volatility present over the last four weeks. This should be seen in the current month's unemployment figures released next Friday.


Total claims fell by 214,000 to 5.66 but remains well above this years low and the above the elevated levels we saw in December. This is the only metric in unemployment that looks as if the trend has reversed. We need to keep in mind though that this number lags the initial claims by two weeks, making it three weeks old today. This could just be a spike related to Hurricane Sandy, Fiscal Cliff issues and the Holiday season. If so, it should continue to tick down in the coming weeks. Total claims may have increased importance next week because of this and the fact that we will also get Challenger, ADP, Non-Farm Payrolls, Unemployment and 4th Quarter GDP figures.


Around The World

The IMF has released a new estimate for 2013 world GDP. The estimate is down 0.1% from the previous 3.5% to 3.4%. They also estimated a 4.1% world GDP for 2014 based on expected improvement in Europe. This is marked improvement from 2012's 3.2% but hinges on continuing improvements in China and Europe.

European shares started the day in negative territory on the heels of Apple's overnight drop. Economic data from the region, coupled with news from China and our own data helped to lift shared into the close. Indexes in the UK, France and Germany all made minimum gains of 0.5%. What spurred the rally today was flash PMI data. The number, though still below the expansionary 50 level did make an improvement of nearly a full point to hit 48.2. Germany was the shining star of the group and posted numbers signifying an acceleration of expansion. The German PMI was reported as 53.6, up the previous report of 50.6. Other stories from the region included a planned September stress test for Eurozone banks and a defense of austerity plans from the UK.

The Euro traded to the upside today versus the dollar, nearly reaching the top of the two week range. The pair is in bullish mode and appears to be waving a flag at us, move signal supported by bullish indicator. I am maintaining my previous upside target of 3.5000 and adding a secondary upside target of 3.675. I derived this target by adding the height of the flagpole, which begins at the 1.3000 level, to today's price. An impending increase in US debt and continuing fiscal improvement in Europe should help to drive this trade.

Eur/USD daily

Asian shared ended mixed today despite a two year high in the flash PMI reading. The reading, 51.9, is expansionary and helps support the idea that the Chinese recovery is on track. On the downside, there is increasing chatter about the possibilities of further weakness in the region associated with housing and industrial production. The Nikkei was the strongest index in the region today, driven in part by the strong Chinese data and a volatile yen trade.

The USD/YEN has entered a period of high volatility. Price targets for the yen, inflation targets from the BOJ and a lack of increased stimulus are all having their affects. The yen trade rebounded today from near term support but was halted at long term resistance. Indicators are still bullish but the trade is definitely in a period of consolidation and will need to break above 90 to confirm this stance. The pair has been in this range for two weeks, ever since it first approached 90. A price pattern is forming but which one is unclear to me at this time. The longer term charts are very bullish but peaking and also suggesting a pause in the trend. If a breakout occurs this trade has long term targets of 95 and 100. Shorter term, support exists around 88.50,88 and 87.50.

USD/Yen daily

The Oil Index

Light Crude and Brent both traded to the upside today. Global GDP expectations, Chinese and European PMI as well as the positive US data helped lend support to the trade. At the same supply concerns in the US were alleviated somewhat with a unexpectedly large build in crude oil. Oil has been trending up for about 7 weeks and broke above the short and long term resistance of $95 a barrel just last week. The Oil Index has broken out of its multi-year, narrowing, trading range on the back of this uptrend in oil prices. ON the long term charts the index is bullish and is making a new high but it still faces long term resistance. Continuing signs of global improvement could help to increase oil demand outlook and support higher prices for the underlying commodity and the index itself.

Oil Index weekly

The Gold Index

Gold experienced some selling today and shed about 1%. This is the second drop from the $1700 level and has caused some of the pundits to speculate more technical selling is on the way. The potential for long term holders of gold to get out and redeploy their cash in other markets is present. If there is no expectation for gold to increase in price then there is no expectation to profit on it as an investment. The gold index is echoing this sentiment and dropping below its support lines. The index dropped below an up trend line to reach the long term support around 176. The technicals are bearish and suggest a drop below support could be on the way.

Gold Index daily

Earnings And Apple

The earnings calendar today, and this week, was very full. There were over 180 corporations reporting today alone. Tomorrow is light for reports considering the time of year but holds a couple of key reports. Next week the calendar is full again with even more companies reporting than this week. Tomorrow be on the look out for earnings from the likes Halliburton, Honeywell and Proctor&Gamble. As for today, aside from Apple, important releases on the list included Netflix, Union Pacific, Starbucks and Microsoft. The last two reporting after the bell. Netflix was able to post a stellar quarter and gave investors plenty of reason to drive the stock up over 40% on high volume. The online movie streamer and mail order video provider improved sales over the holiday and has gained new subscribers for its streaming services. Growth of subscribers is being linked to iPad and other tablets who provide a perfect platform for utilizing the service. Netflix posted EPS of $0.13 versus an expected loss of -$0.13. Today's jump opened quite a large gap in the price action so caution and time are needed to determine the best trade at this level.

Netflix daily

Union Pacific, the nations largest railroad operator, posted EPS of $2.19 and beat expectations. This is a 4% rise in profits and a record quarter for the company. 2012 was also a record year. Despite the improvement and earnings beat the stock still traded to the downside. High volume and a bearish engulfing pattern appeared on the chart today and may be signaling a time for long term investors in the stock to take profits. In the report a strong portfolio of customers plus increased pricing helped to achieve the gains despite weakness in the coal and grain markets. That weakness could be the cause for today's bearish price action.

Union Pacific daily

Starbucks was expected to improve on last quarters earnings of $0.46 and post EPS of $0.57. Judging by the price action today I would say that the markets were expecting a miss, or at least some negative guidance. The stock traded down, losing 0.3%. The actual release posted earnings in line with estimates. The company stands firm on its 2013 guidance which is slightly below estimates. The company also reported that strong sales in China were offsetting other economic issues. The stock trade up in the after hours.

Starbucks daily

Microsoft also reported after the bell. The expectations were for a gain of $0.22 cents over last quarter for an EPS of $0.75. Price action in this stock suggested an expectation of positive results but the move was capped by the resistance of last fall's open window. Actual results were EPS of $0.76 on revenue of $21.46 billion, up from $0.78 per share on revenue of $20.89 billion. Revenue missed estimates and shares fell in the after hours.

Microsoft daily

Apple shares took a beating today after releasing its earnings after the bell yesterday. Despite posting record revenue the company did not meet expectations and failed to inspire confidence with weak guidance. Earnings per share was inline with the general run of expectations but slowing iPhone sales, which account for 56% of revenue, had an impact on overall performance. The company reported sales of iPhones reaching 47.8 million in the quarter, only slightly lower than consensus estimates. The slowing sales and weak guidance caused the stock to drop more than 10% overnight and kept pressure on the stock all day.

We already knew, from a variety of sources, that iPhone sales were on the decline. Sales figures from early in the quarter and the recent reports of a near shut down of parts production are only two of them. Speculation abounds as to whether Apple can reclaim its lost power. One article I read today gives evidence of growing support of the phones and the potential for long term sales and conversions. One fact the article cited was that 20% of iPhone sales in the quarter were users switching from Android, up from 9% in the previous comparable quarter. This, plus the ongoing popularity of iPhone 4's, is leading to new sales of later iPhone editions coming down the pipe. In the statements and conference call Tim Cook said that sales of iPhones 4's remained strong and Verizon said that sales of later models were less than half of all iPhone activations in the quarter. The iPhone is being viewed as an entry vehicle to the iPhone world, one that is expected to lead to future sales for the company. Based on this Apple is still a great long term investment but the near term remains hindered by bear market conditions.

The stock had lost about $60 overnight and that carried through into the start of today's US session. Volumes were incredibly high and, at least in the early part of the day, biased to buyers of the stock. Average daily volume was surpassed in the first 45 minutes of trading and reached twice daily by 2:00 PM. The long term charts show a breakdown of a head and shoulders reversal pattern as well as break below the long term moving average. The stock is oversold at this level and momentum is waning. On the daily charts are painting a similar picture. Today's drop opened a large bearish window and the early rebound was capped at the resistance of the aforesaid up trend line. If buyers don't step in soon this stock could move all the way back down to $400.

Apple daily

The Indexes

The futures trades were mixed this morning, and far better than I would have expected based on the Apple situation. However, the Dow was positive and the S&P was only barely negative. The Nasdaq was the one exception and with good reason. After the opening the markets were able to push higher and the S&P was even able to make a new intraday high. The Nasdaq regained most of its 20 point opening loss and barely made it into positive territory before falling back under the pressure of falling Apples. The tech index still above long term support and long term technicals look good for at least a retest of the ten year highs set in September.

Nasdaq daily

The S&P 500 made some small gains today. Buyers and sellers were basically balanced as the markets digested earnings and economic reports. The index turned positive soon after the open, brushed up against the 1500 round number resistance, broke through and made a new high. Later in the day trading turned negative for a time but regained the positive side of yesterday's close before the bell today. The long upper and lower shadows on today's candle are evidence of the markets indecision. Technicals on the daily charts are showing me a market that is overbought with bullish but divergent momentum. This, plus the near term round number resistance and the long legged lead me to think the market is ready for a short breather and possible pullback to support.

S&P 500 daily

The long term charts are bullish. MACD and Stochastic are both bullish and indicating a rising market. MACD is on the rise and stochastic is extremely overbought. A pullback on the daily charts to 1475 would do a lot to alleviate the overbought conditions and allow the index to move higher. On this chart 1500 looks fairly inconsequential so any resistance at this level will likely be short lived, provided the earnings season and economic data don't do an immediate about face. The next likely spot for significant resistance is at the all time highs around 1565.

S&P 500 weekly

The VIX is still at +5 year lows. The markets, at least in the near term, are not too scared. Earnings are OK, there have been some significant misses that have dominated the news but there have been even more earnings beats. The theme this quarter is not the one of rampant “upside surprises” I thought it could be but it has provided some nice, and reassuring, news from the corporate sector. The strength of the businesses, if not the strength of earnings, is what I believe will be driving the markets higher and help the S&P 500 reach a new all time high.

VIX daily

This week we have seen the markets reach new highs. Price action in the major indexes since the first of the year has been impressive and a consolidation is due. Right now it looks like the 1500 level could be the top of the consolidation range. Next week is reason enough for the markets to take a break. The calendar is stacked so full reports and releases that there is no way to put them in a chart or table that would fit in this posting. On the earnings front there are at least as many releases as we got this week, if not more. As for the economy we have another host of reports,around 40, that range from our regular weekly reportings on unemployment claims to monthly reports from Challenger and ADP as well as non farm payrolls, an FOMC rate decision, Q4 advance GDP figures, auto sales and housing.

Tomorrow is rather light. There are about 2 dozen earnings reports and only one economic release, New Home Sales. I don't expect any of this to have the strength to continue the uptrend, in fact, Microsoft's report may add further pressure to stocks and help with the pullback I have speculated on above.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Pharmacy Benefits & Beverages

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Many of these need to see a break past key support or resistance:

(bullish ideas) LFUS, RAX, RE, APC, BWA, PVH, ESV, SHOO, FAST, FELE, TCO, PRE, LVS, SOHU, DO, SNI, AAP,

(bearish ideas) MNST,



NEW DIRECTIONAL CALL PLAYS

Catamaran Corp. - CTRX - close: 53.12 change: +1.09

Stop Loss: 50.90
Target(s): 58.50
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to earnings in late February
New Positions: Yes, see below

Company Description

Why We Like It:
CTRX is a pharmacy benefits management company. The stock has been flirting with all-time high the last few weeks. Now after consolidating sideways it looks ready to breakout higher.

Traders could buy calls now. I want to see a little bit more follow through. Thus I am suggesting a trigger to open bullish positions at $53.25. More conservative traders could wait for a new high above $53.60 instead. Our target is $58.50 but we do not want to hold over the late February earnings report (no date set yet). FYI: The Point & Figure chart for CTRX is bullish with a $68 target.

Trigger @ 53.25

- Suggested Positions -

buy the Feb $55 call (CTRX1316B55) current ask $0.65

Annotated Chart:

Entry on January -- at $---.--
Average Daily Volume = 1.3 million
Listed on January 24, 2012


SodaStream Intl. Ltd. - SODA - close: 51.75 change: +1.34

Stop Loss: 48.75
Target(s): 58.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
If this rally then shares of SODA could see another short squeeze. The most recent data listed short interest at 49% of the small 17.4 million share float. This recent breakout past resistance at $50.00 should have the bears pretty nervous. Today's high was $52.07. I am suggesting a trigger to buy calls at $52.15. Our target is $58.50. FYI: The Point & Figure chart for SODA is bullish with a $62 target.

Trigger @ 52.15

- Suggested Positions -

buy the Feb $52.50 call (SODA1316b52.5) current ask $1.75

Annotated Chart:

Entry on January -- at $---.--
Average Daily Volume = 1.2 million
Listed on January 24, 2012



In Play Updates and Reviews

Mohawk Hits Our Target

by James Brown

Click here to email James Brown

Editor's Note:

Shares of Mohawk Industries (MHK) hit our bullish target today. Meanwhile we closed several trades at the open this morning. WFM hit our entry point.


Current Portfolio:


CALL Play Updates

Anheuser-Busch InBev - BUD - close: 90.26 change: +0.14

Stop Loss: 87.45
Target(s): 99.00
Current Option Gain/Loss: - 9.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
01/24/13: BUD eked out a gain today but the stock is still churning sideways. We may want to wait for a close above $90.50 before launching new bullish positions.

- Suggested Positions -

Long MAR $90 call (BUD1316c90) entry $3.05

Entry on January 22 at $90.25
Average Daily Volume = 894 thousand
Listed on January 19, 2012


Deere & Co - DE - close: 93.24 change: +0.47

Stop Loss: 89.25
Target(s): 99.00
Current Option Gain/Loss: +63.8%
Time Frame: Exit prior to the Feb. 13th earnings report
New Positions: see below

Comments:
01/24/13: DE is still showing relative strength and produced another day of new relative highs. I would not chase it at current levels. If you're looking for a new entry point, wait for a pullback.

We do not want to hold over DE's February 13th earnings report. FYI: The Point & Figure chart for DE is bullish with a $104 target.

- Suggested Positions -

Long Feb $90 call (DE1316B90) entry $2.35

01/22/13 new stop loss @ 89.25

Entry on January 11 at $90.25
Average Daily Volume = 2.3 million
Listed on January 09, 2012


Gilead Sciences - GILD - close: 78.40 change: +1.56

Stop Loss: 76.45
Target(s): 84.50
Current Option Gain/Loss: -19.8%
Time Frame: EXIT on Friday Jan. 25th at the close
New Positions: see below

Comments:
01/24/13: Good news! GILD reversed higher today and erased yesterday's losses. Unfortunately we are almost out of time. You are certainly free to hold on to positions but we are planning to exit tomorrow (Friday) at the closing bell to avoid holding over the stock split scheduled for Monday.

- Suggested Positions -

Long Feb $80 call (GILD1316b80) entry $1.51

01/24/13 prepare to exit at the close tomorrow, unless GILD hits our target
01/23/13 GILD not working, do not be surprised to get stopped tomorrow
01/22/13 Strategy adjustment, prepare to exit on Friday, Jan. 25th to avoid holding over the 2-for-1 stock split.
01/22/13 trade opened at trigger (78.65)

Entry on January 22 at $78.65
Average Daily Volume = 4.0 million
Listed on January 19, 2012


Starwood Hotels - HOT - close: 59.98 change: -0.43

Stop Loss: 58.85
Target(s): 64.50
Current Option Gain/Loss: -23.7%
Time Frame: exit prior to earnings on Feb. 7th
New Positions: see below

Comments:
01/24/13: HOT is not inspiring any confidence here. The stock rallied this morning but reversed under the $61.00 level, which is shaping up to be new short-term resistance. I would wait for a breakout past $61.00 before launching new positions.

Our target is $64.50. However, we will plan to exit prior to the earnings report on Feb. 7th.

- Suggested Positions -

Long Feb $60 call (HOT1316B60) entry $1.81

Entry on January 22 at $60.60
Average Daily Volume = 1.9 million
Listed on January 15, 2012


Ingersoll-Rand - IR - close: 51.09 change: +0.25

Stop Loss: 49.25
Target(s): 54.00
Current Option Gain/Loss: + 0.0%
Time Frame: Exit prior to earnings on Feb. 1st!
New Positions: see below

Comments:
01/24/13: IR managed to push its way past short-term resistance at $51.00. Today is a new 52-week high for the stock. I am raising our stop loss to $49.25.

Don't forget that we plan to exit prior to the earnings report on Feb. 1st.

- Suggested Positions -

Long Feb $50 call (IR1316B50) entry $1.75

01/24/13 new stop loss @ 49.25

Entry on January 17 at $50.25
Average Daily Volume = 1.8 million
Listed on January 12, 2012


Noble Energy - NBL - close: 107.31 change: -1.73

Stop Loss: 103.75
Target(s): 114.00
Current Option Gain/Loss: - 8.6%
Time Frame: Exit prior to earnings on Feb. 7th!
New Positions: see below

Comments:
01/24/13: NBL spiked at the open but gave back most of its intraday gains. Look for short-term support at its 10-dma.

- Suggested Positions -

Long Feb $110 call (NBL1316B110) entry $1.15

01/22/13 new stop loss @ 103.75
01/17/13 new stop loss @ 102.75

Entry on January 14 at $105.31
Average Daily Volume = 820 thousand
Listed on January 12, 2012


OpenTable, Inc. - OPEN - close: 54.00 change: -0.76

Stop Loss: 51.40
Target(s): 58.00
Current Option Gain/Loss: - 1.5%
Time Frame: Exit prior to earnings on Feb. 7th!
New Positions: see below

Comments:
01/24/13: The early morning rally in OPEN reversed at the $56.00 level and shares fell back toward $54.00. As prior resistance the $54.00 level is now acting as short-term support. I am not suggesting new positions.

Earlier Comments:
OPEN could see a short squeeze. The most recent data listed short interest at 42% of the very small 19.4 million share float. FYI: The Point & Figure chart for OPEN is bullish with a $73 target.

- Suggested Positions -

Long Feb $55 call (OPEN1316B55) entry $2.54

01/19/13 new stop loss @ 51.40
01/16/13 new stop loss @ 50.90
01/12/13 new stop loss @ 49.90

Entry on January 04 at $52.23
Average Daily Volume = 361 thousand
Listed on January 03, 2012


Sherwin-Williams Company - SHW - close: 165.79 change: +0.98

Stop Loss: 159.65
Target(s): 169.00
Current Option Gain/Loss: +29.0%
Time Frame: Exit prior to earnings on Jan. 31st!
New Positions: see below

Comments:
01/24/13: SHW spiked to a new high this morning and spent the rest of the day fading lower. I am not suggesting new positions.

Earlier Comments:
We keep our position size small to limit our risk. Plus, this is a shorter-term trade. We do not want to hold over the January 31st earnings report. FYI: The Point & Figure chart for SHW is bullish with a $196 target.

- Suggested Positions - *Small Positions*

Long Feb $165 call (SHW1316B165) entry $3.10

01/19/13 new stop loss @ 159.65

Entry on January 09 at $161.28
Average Daily Volume = 928 thousand
Listed on January 08, 2012


iShares Silver ETF - SLV - close: 30.65 change: -0.54

Stop Loss: 28.49
Target(s): 33.50
Current Option Gain/Loss: +38.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
01/24/13: I cautioned traders yesterday to expect some profit taking in silver. The SLV gapped down and fell -1.7% by the closing bell. I'd still look for a dip closer to $30.00.

Earlier Comments:
More cautious traders might want to raise their stop loss.

- Suggested Positions -

Long March $30 call (SLV1316c30) entry $0.95

01/22/13 new stop loss @ 28.49

Entry on December 31 at $29.07
Average Daily Volume = 11.6 million
Listed on December 29, 2012


SPX Corp. - SPW - close: 73.19 change: +0.68

Stop Loss: 69.75
Target(s): 79.00
Current Option Gain/Loss: - 3.8%
Time Frame: Exit prior to earnings on Feb. 14th
New Positions: see below

Comments:
01/24/13: SPW also shot higher at the open and posted a +0.9% gain by the closing bell. Readers may want to wait for a dip if you're looking for a new entry point.

- Suggested Positions -

Long Feb $75 call (SPW1316B75) entry $1.30

Entry on January 23 at $72.42
Average Daily Volume = 832 thousand
Listed on January 22, 2012


Whole Foods Market - WFM - close: 93.55 change: +0.38

Stop Loss: 91.40
Target(s): 99.50
Current Option Gain/Loss: - 7.8%
Time Frame: Exit PRIOR to earnings on Feb. 13th
New Positions: see below

Comments:
01/24/13: WFM posted another gain but the action today was actually disappointing. The stock shot past resistance near $94.00 and its converging 150-dma and 100-dma but the rally didn't last. The intraday high was $94.88 and WFM fell back below what I see as resistance at $94.00. At this point I would either wait for a new bounce off the 200-dma near $92.00 or a new rally above $94.00 before launching new positions.

We do not want to hold over the Feb. 13th earnings report.
NOTE: because of a previous dividend the option strike for February is an odd one (95.50)

- Suggested Positions -

Long Feb $95.50 call (WFM1316B95.5) entry $1.90

Entry on January 24 at $94.25
Average Daily Volume = 1.5 million
Listed on January 23, 2012


PUT Play Updates

Lululemon Athletica - LULU - close: 67.60 change: +1.39

Stop Loss: 66.65
Target(s): 60.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
01/24/13: LULU managed another bounce today. That is not too surprising with yesterday's dip near round-number support at $65.00. We are waiting on a bearish breakdown below this support.

I am suggesting we buy puts when LULU hits $64.75. If triggered our target is $60.50. More aggressive traders could aim lower.

Earlier Comments:
The most recent data listed short interest at 20% of the 101 million-share float. Because of the high short interest readers may want to keep their position size small.
FYI: The Point & Figure chart for LULU is bearish with a $56 target.

Trigger @ 64.75

- Suggested Positions -

buy the Feb $65 PUT (LULU1316n65)

Entry on January -- at $---.--
Average Daily Volume = 3.1 million
Listed on January 22, 2012


CLOSED BULLISH PLAYS

CH Robinson Worldwide - CHRW - close: 67.21 change: +1.46

Stop Loss: 63.75
Target(s): 69.25
Current Option Gain/Loss: +23.8%
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
01/24/13: The Dow Jones Transportation Average had rallied toward what looked like potential resistance at 5800 yesterday. The upward momentum in CHRW had slowed as well. We decided last night to close positions early at the open this morning. To our surprise the transports, including CHRW, rallied higher. The gap open this morning in CHRW helped our exit price.

- Suggested Positions -

Feb $65 call (CHRW1316B65) entry $2.10 exit $2.60 (+23.8%)

01/24/13 scheduled exit at the open
01/23/13 prepare to exit positions at the open tomorrow,
CHRW is not keeping pace with its peers in the transports.

chart:

Entry on January 15 at $65.20
Average Daily Volume = 1.3 million
Listed on January 14, 2012


Concur Technologies - CNQR - close: 71.38 change: +0.40

Stop Loss: 69.40
Target(s): 74.85
Current Option Gain/Loss: -10.6%
Time Frame: exit prior to the Jan. 30th earnings report
New Positions: see below

Comments:
01/24/13: Our plan was to exit positions at the open this morning. CNQR opened at $70.57 before spiking higher midday.

- Suggested Positions -

Feb $70 call (CNQR1316B70) entry $3.30 exit $2.95 (-10.6%)

01/24/13 scheduled exit this morning
01/23/13 prepare to exit at the open tomorrow
01/11/13 new stop loss @ 69.40, adjust exit target to $74.85

chart:

Entry on January 07 at $70.25
Average Daily Volume = 462 thousand
Listed on January 05, 2012


EOG Resources - EOG - close: 124.99 change: +0.24

Stop Loss: 123.40
Target(s): 134.00
Current Option Gain/Loss: - 44.4%
Time Frame: Exit prior to the Feb. 13th earnings report
New Positions: see below

Comments:
01/24/13: After yesterday's underperformance, EOG reversed with a spike higher at the open. We had already decided to exit positions at the open this morning.

- Suggested Positions -

Feb $130 call (EOG1316B130) entry $2.45 exit $1.36 (-44.4%)

01/24/13 scheduled exit this morning
01/23/13 prepare to exit positions at the open tomorrow

chart:

Entry on January 11 at $126.30
Average Daily Volume = 1.4 million
Listed on January 10, 2012


iShares Russell 2000 (ETF) - IWM - close: 89.29 change: +0.29

Stop Loss: 85.90
Target(s): 94.50
Current Option Gain/Loss: + 5.8%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
01/24/13: Believe it or not but the Russell 2000 index continues to inch higher and closed at 900.19. That's not high enough to declare a bullish breakout past the 900 level. The index could still see a pullback. Our plan was to exit our IWM trade at the open this morning. The ETF opened at $89.15.

- Suggested Positions -

Mar $90 call (IWM1316c90) entry $1.36 exit $1.44 (+5.8%)

01/24/13 scheduled close at the open
01/23/13 prepare to exit at the open tomorrow

chart:

Entry on January 15 at $87.85
Average Daily Volume = 41.2 million
Listed on January 10, 2012


Mohawk Industries - MHK - close: 100.70 change: +1.87

Stop Loss: 94.90
Target(s): 99.00
Current Option Gain/Loss: +46.9%
Time Frame: Exit prior to earnings on Feb. 21st
New Positions: see below

Comments:
01/24/13: Target achieved.

The MHK rally continues with shares outperforming the market again. The stock surged past the $100 level. Our exit target was hit at $99.00.

Our Feb. 95 call only traded five contracts today. It looks like that trade (@ $5.70) was around $100, which was a few minutes after shares hit our exit at $99.00. Our exit price is an estimate.

- Suggested Positions - *Small Positions*

Feb $95 call (MHK1316B95) entry $3.30 exit $4.85* (+46.9%)

01/24/13 target hit
*exit price is an estimate
01/23/13 new stop loss @ 94.90, readers may want to just take profits now!
01/17/13 new stop loss @ 92.45

chart:

Entry on January 10 at $95.00
Average Daily Volume = 787 thousand
Listed on January 09, 2012


Wynn Resorts Ltd. - WYNN - close: 122.68 change: -0.45

Stop Loss: 121.90
Target(s): 129.75
Current Option Gain/Loss: -41.1%
Time Frame: Exit prior to earnings (likely late Jan or early Feb)
New Positions: see below

Comments:
01/24/13: The rally in WYNN seems to have stalled so last night we decided to exit positions early at the open this morning.

NOTE: it looks like the gain/loss number yesterday was an error.

- Suggested Positions -

Long Feb $125 call (WYNN1316B125) entry $3.45 exit $2.03 (-41.1%)

01/24/13 scheduled close
01/23/13 prepare to exit positions at the open tomorrow
01/18/13 trade opened on gap higher at $125.15, trigger was 124.25

chart:

Entry on January 18 at $125.15
Average Daily Volume = 1.24 million
Listed on January 17, 2012