Option Investor
Newsletter

Daily Newsletter, Tuesday, 2/5/2013

Table of Contents

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

Market Wrap

Bears Were Just Kidding

by Jim Brown

Click here to email Jim Brown

The worries over Europe on Monday were completely forgotten on Tuesday and the Dow regained the 14,000 level at least momentarily.

Market Statistics

Only a couple days after various news articles suggested the storm clouds over Europe had evaporated and it was clear sailing for the rest of the year a flurry of headlines upset market sentiment on Monday. In Spain the Prime Minister, Rajoy, appeared susceptible to being included in a potential corruption story that would drag him down and sink Spain again. In Italy the prior prime minister, Silvio Berlusconi was trying to implicate Mario Draghi and Mario Monti in a scandal over a bank bailout for Monte de Paschi. Berlusconi is running for reelection so he stands to gain if he can inflate the cloud over Draghi and Monti.

The European markets cratered on the sudden resurgence of perceived political instability that led to a sharp drop in the U.S. markets on Monday. Traders never let a good headline go to waste and they were looking for a reason to take profits after the spike to Dow 14,000 on Friday.

The buy the dip trade is alive and well as evidenced by the rebound today. A note from Trimtabs.com claimed investors poured $77.4 billion in new cash into stock mutual funds and exchange-traded funds in January. This easily exceeded the prior record of $53.7 billion in February of 2000. However, if you only read the headlines you don't get the meat of the story. Only $39.3 billion flowed into U.S. equity funds but it was still a record.

I have a hard time with fund flows. There are three major reporters of flows, TrimTabs, Lipper and Investment Company Institute. They all use different methods for calculating the flows and include different metrics and dates in the process. Since the periods reported cover different date ranges it is tough to know the real answer. However, all are reporting record inflows in their various reporting periods. It may not have been $77.4 billion or even $60 billion but everyone agrees it was a record.

Analysts are pointing to these flows as evidence the retail investor is coming back into the market. While I believe that is true to some extent I think the real answer is less bullish. In December we had a -50 point decline on the S&P as investors sold stocks ahead of the fiscal cliff in order to avoid potentially higher taxes. Corporations paid tens of billions in special dividends in December for the same tax avoidance reasons. Billions in year end bonuses were also pulled forward and paid in December rather than January. When the massive tax hike did not appear and the fiscal cliff was avoided on January 2nd that excess cash was immediately put back into the market. Did $60+ billion flow into the market in January? Yes, but it was the same $60 billion that flowed out in December ahead of the fiscal cliff.

I am glad to see it come back into the market and when coupled with the normal January inflows from retirement funds and 401Ks it did produce a monster rally. It remains to be seen where we go from here.

Much has been made about the potential rotation out of bonds and into equities. Trimtabs showed that $31.4 billion flowed into bond funds and ETFs in January. Apparently quite a few investors did not get the email to rotate into stocks.

Trimtabs warned that after the nine largest months of inflows the S&P declined around -1% in the 90 days that followed. The initial gains were erased in six of those nine events. The next month should be really interesting.

Economics reports in the U.S. were lackluster. The ISM Nonmanufacturing Index declined from 55.7 to 55.2 for January. That was hardly earthshaking and the market ignored it. New orders declined from 58.3 to 54.4. Backorders were basically flat at 49.0 and slightly in contraction territory. The business activity index declined from 60.8 to 56.4 and the lowest level since March 2011. Employment did rise slightly from 55.3 to 57.5 and the highest level since 2006 so the outlook by service companies may be improving.

Only eight of the 18 industries surveyed claimed activity increased in January. There were 13 with increased activity in December. Consumers are being pressured by higher taxes and higher fuel prices and that will mean lower consumer spending for services.

ISM Nonmanufacturing Chart

The U.S. economic calendar for the rest of the week is lackluster. Europe could provide some volatility for the U.S. markets on Thursday when the Bank of England and the ECB both announce their rate decisions before the market opens. The BOE is expected to remain unchanged but the ECB could actually cut rates to slow the rise in the euro currency.

Economic Calendar

The earnings cycle is definitely winding down with very few headlines today about earnings reports. On Wednesday the highlights will be Visa, Time Warner, Green Mountain Coffee and Prudential.

Earnings Calendar

One of the biggest earnings events of the day was Computer Sciences Corp (CSC). The company posted earnings of 90 cents compared to estimates for 65 cents. Revenue of $3.78 billion was only slightly higher than the $3.73 billion estimate. The company raised guidance for the full year to an average of $2.60 and consensus estimates were $2.40.

With revenue failing to grow as fast as earnings it is clear the company is slashing costs to the bone. They claim they have laid off workers and devised ways to more efficiently manage contracts. Profit margins rose in all three divisions. They are the network manager for NASA and the U.S. Navy. Shares of CSC rose +9% after the release.

CSC Chart

Disney (DIS) reported earnings of 79 cents compared to estimates of 76 cents. Revenue rose to $11.34 billion from $10.78 billion and also beat estimates for $11.21 billion. There were no real surprises. The company said it had sold out its advertising for the upcoming Academy Awards. CEO Iger said JJ Abrams would direct the next Star Wars film and it would be in theaters in 2015. Shares rose +1.60 in afterhours trading.

Disney Chart

Aflac (AFL) posted earnings of $1.24 but analysts were looking for $1.47. Revenue rose +6.6% to $6.38 billion. Aflac shares only declined about 50 cents after the report.

CH Robinson Worldwide (CHRW) posted earnings of 68 cents compared to estimates of 70 cents. Revenue rose +16% to $2.97 billion. With that much additional revenue you would have expected them to at least meet earnings estimates. Shares of CHRW were flat after the report.

Zynga (ZNGA) reported a loss of 6-cents compared to -$1.22 in the year ago quarter. Analysts were expecting a loss of only 3 cents so even though the earnings were vastly improved they still missed the targets. Shares of ZNGA rallied +4% after the report.

Expedia (EXPE) reported earnings of 63 cents that missed estimates of 65 cents. Earnings increased by +10% on revenue of $975 million. In the year ago quarter revenue was $787 million. Gross bookings were $7.53 billion. Expedia shares rose +4% on the news.

Panera Bread (PNRA) reported earnings of $1.75 that beat estimates by a penny. Revenue rose +15% to $571.5 million and same store sales rose +4.9%. Shares of PNRA rallied +$7 or +4% after the report.

Chipolte Mexican Grill (CMG) reported earnings of $1.95 compared to estimates of $1.96. Revenue increased from $596.7 million to $699.2 million. Shares rallied from the close at $305 to $327 on the strong revenue increase but then fell back to close at $303. Same store sales rose +3.8%. The challenge for CMG is rising food costs and the company has been reluctant to raise prices in a highly competitive market. They forecast slower growth in 2013 in the low single digit percentages. The lackluster forecast is what killed the afterhours rally.

The biggest stock movers were not due to earnings. S&P, a division of Mcgraw Hill (MHP) was knocked for another -11% loss to $44 after the government filed a $5 billion civil suit against S&P for fraud in its ratings practices during the subprime crisis. The government claims S&P rated subprime securities higher than practical for fear of losing market share in the highly lucrative market. The government produced some emails internal to S&P where the ratings people were laughing about how bad the products were. One analyst even wrote new words to a Talking Heads song, "Burning Down the House" and created a video of himself singing. The words basically said the subprime market was imploding. Another analyst was questioned why S&P was rating such bad paper and she said, "We rate every deal. It could be structured by cows and we would rate it." That email surfaced during the 2008 Congressional hearings.

To date Moodys (MCO) has not been sued and there were allegations the suit against S&P was retaliation against the S&P downgrade of the U.S. debt. U.S. Attorney General Eric Holder said that was preposterous. Their conduct was "egregious and goes to the very heart of the financial crisis."

McGraw Hill (S&P) Chart

Moody's Chart

Shares of Virgin Media (VMED) spiked 18% after the Wall Street Journal and CNBC claimed they were close to a deal to be acquired by Liberty Global (LBTYA). CNBC said the boards of both companies had approved the deal. No price was given for the deal, which would be funded with a mixture of cash and stock. Virgin Media is the U.K.'s number two pay TV operator. Virgin did confirm the talks are in progress.

Virgin Media Chart

Michael Dell has inked a deal to take Dell Inc private in a $24.4 billion LBO. The target price is $13.65. Dell started the company in the 1980s in his dorm room and built it into a high flyer and created thousands of Dell millionaires because of the constant rise of the stock. That all changed when the computer business started to suffer from the onset of smart phones, laptops, netbooks and finally tablets. PC sales have been declining and it is a tough market for Dell. By taking the company private he can attempt to turn the business around without having to please shareholders on a quarterly basis. The turnaround time is reportedly five years and the company will IPO again when it is complete. I wish him luck but it will take a lot more skill and effort to create a winner today than it did in the 1990s when PCs were in their prime.

Dell Chart

In past years I have reported on trades that were so large it appeared someone had inside knowledge of a pending event. Sometimes those were massive put positions on the S&P. A new trade just appeared that suggests there will be a market event in the near future. Last week somebody put on a call spread on the VIX using the April 20 and 25 calls. They bought 150,000 contracts for a net of $70 per contract. That is an $10,500,000 bet that the VIX will move over 20 over the next 60 days. You would have to be VERY confident in your outlook to risk $10 million on a directional position with the VIX at five year lows and the markets trying to break out to new highs.

Obviously there are some events in Washington over the next 60 days that could rile the market. The sequestration hits on March 1st and the president was out today begging Congress to kick the can farther down the road instead of letting the across the board spending cuts hit on March 1st. The republicans are going to extract a pound of flesh before they let that happen. You can expect further sound bites on that in the weeks ahead. Is that worth $10 million?

Next up would be the continuing resolution battle on March 27th where the existing resolution currently providing funds for the government expires. This one will be accompanied by the now routine "you can't allow the government to default, you can't not pay people" headlines. This will probably get kicked farther down the road as well but not without a toll. Is that worth $10 million?

Personally I believe we are going to see a market event over the next two months but bull markets can remain irrational far longer than the bears can remain solvent. I have launched some VIX calls in the Ultimate Investor newsletter but obviously not $10 million worth.

I would simply caution everyone to remain hedged on your long positions. There may be a more dramatic market event than most expect.

Al Qaeda posted a note on a website last week saying they were preparing to launch small and large attacks against the U.S. and France. They have made similar claims in the past with limited success but you never know when the next 9/11 could appear.

In July 2001 a reader emailed a staff writer saying "In September every market in the world is going to crash." In retrospect we believe that was someone with knowledge of the 9/11 plot. You can rest assured there are current plots in motion. Whether they are ever executed is a different question.

April VIX Call Open Interest (as of Friday)

VIX Chart

The Dow traded over 14,000 intraday but gave back -33 points in the final seconds to close at 13,979. The failure to hold 14,000 is of course a challenge. However, we have moved back to the higher ground and we are close enough that another bull rush could take us back over that level. However a drop back below 13,875 would be a bad sign and probably trigger a deeper decline.

The S&P has the same challenge with 1,515 and 1,495. The S&P actually made a slightly higher intraday high at 1514.96 and closed well over 1500 so the bullish case is still alive. It is only 4 points away from a new five year high so any positive news could produce a breakout. Unfortunately the economic calendar and the list of earnings for Wednesday are lackluster.

Art Cashin was pointing out this afternoon that the short term chart pattern could be seen as a double top if it failed to break through that 1515 level and then retreated back below 1495. If that pattern develops we could see a return to 1470. That may be the real bout of profit taking everyone is hoping for in order to launch new positions.

Support at 1495 is strong with the close on Monday at 1495.66 and the intraday low 1495.02.

S&P Chart - 90 Min

S&P Chart - Daily

The Dow has equivalent support at 13,875 to the S&P level at 1,495. A break below that level would be serious and setup a larger decline. The most likely direction is a breakout with the buy the dip mentality alive and well.

Just be prepared for this rally to stall now that the January influx of cash is over. Twenty eight of the Dow components were positive today but that old volume problem returned to haunt us. There were just over six-billion shares traded and new highs were less than half the number we saw on Friday. Advancers were 2:1 over decliners so everything was positive. Internals were just not exciting. We saw a short squeeze rebound but it was muted and that should be a cautionary warning.

Dow Chart

Plus 36, minus 50, plus 40. Nothing like a little volatility in the Nasdaq to keep tech investors on the edge of their seats. Friday's +36 point gain was erased with a -50 point drop on Monday and then followed by a +40 gain today. The entire exercise never broke out of the current support/resistance range of 3125-3185.

The good news is that Apple returned to the party today with a $15 gain and a dead stop at $460. It appears Apple is about to break out over the post earnings resistance at that $460 level and that would be very bullish for the Nasdaq. Once Apple resumes an upward trend the buyers should come back in droves.

That would push the Nasdaq to ultimate resistance at 3200 and set the stage for a new leg higher in the broader market. It is amazing how much impact one stock can have on market sentiment.

Apple Chart

Nasdaq Chart - Daily

The Dow Transports closed at a new historic high. The minor consolidation we had last week was not nearly enough to make up for the two months of gains but apparently the Transport bulls don't care. This would be my canary in the coal mine for market direction. It is seriously overextended but as long as they keep buying it the broader market will move higher.

Dow Transports Chart

I would be very cautious about committing new money to the market and I would tighten up stop losses on existing long positions.

We can go higher from here but we need to see a convincing breakout on decent volume to confirm a new leg higher. Traders bought the dip but they could not hold the 14,000 level. It could be just a blip but look for confirmation before going all in.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email

Have you tried the new Ultimate Investor newsletter? This publication focuses on "investing" not "trading." The goal is to enter lower volatility positions with strong fundamentals and sleep comfortably at night.


New Option Plays

Conglomerates & Technology

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

3M Company - MMM - close: 101.49 change: +0.72

Stop Loss: 100.70
Target(s): 106.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
MMM has delivered a very impressive rally over the last five weeks. The stock has pushed through round-number resistance at $100 and hit new all-time record highs. By all accounts MMM's stock is overbought yet the rally remains intact. The last few days have seen MMM hover near new resistance at the $102.00 level. We think the stock will breakout soon especially following the company's press release after the closing bell tonight.

MMM's board of directors has raised its quarterly cash dividend by +8% to 63.5 cents a share. This dividend is payable on March 12th, 2013 to shareholders of record on Feb. 15th. Plus, the board has authorized a stock buyback program of $7.5 billion to replace its prior program.

I am suggesting a trigger to buy calls at $102.25. There is a chance that MMM might gap open higher following the press release tonight. You may want to wait on launching positions if MMM gaps open too high. I am suggesting we keep our position size small to limit our risk. I am placing the stop loss at $100.70, just below its rising 10-dma.

Trigger @ 102.25 *small positions*

- Suggested Positions -

buy the Mar $100 call (MMM1316c100) current ask $2.44

Annotated Chart:

Entry on February -- at $---.--
Average Daily Volume = 3.0 million
Listed on February 05, 2012


NEW DIRECTIONAL PUT PLAYS

SourceFire, Inc. - FIRE - close: 41.19 change: -0.56

Stop Loss: 41.55
Target(s): 35.25
Current Option Gain/Loss: Unopened
Time Frame: exit prior to earnings on Feb. 21
New Positions: Yes, see below

Company Description

Why We Like It:
FIRE is a network security and software company. The stock has been sinking under a trend of lower highs since the peak last summer. Now FIRE is nearing support near $40.00. A breakdown at $40.00 could spark the next leg lower. The January 30th low was $39.51. I am suggesting a trigger to open small bearish put positions at $39.40. If triggered our target is $35.25. We do not want to hold over the earnings report on Feb. 21st.

Trigger @ 39.40 *Small Positions*

- Suggested Positions -

buy the Mar $35 PUT (FIRE1316o35) current ask $1.15

Annotated Chart:

Entry on February -- at $---.--
Average Daily Volume = 890 thousand
Listed on February 05, 2012



In Play Updates and Reviews

Stocks Produce A Widespread Bounce

by James Brown

Click here to email James Brown

Editor's Note:

There was no follow through on yesterday's market decline and stocks rebounded.

We closed our MNST trade this morning. I am suggesting we exit both HOT and NBL tomorrow. See the individual play update for details.


Current Portfolio:


CALL Play Updates

Check Point Software Tech. - CHKP - close: 50.81 change: +0.58

Stop Loss: 48.25
Target(s): 54.50
Current Option Gain/Loss: + 0.0%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
02/05/13: The stock market's widespread bounce on Tuesday produced a +1.1% gain in shares of CHKP. The stock is bouncing from round-number support near $50.00.

*Small Positions* - Suggested Positions -

Long Mar $50 call (CHKP1316c50) entry $1.90

Entry on February 01 at $50.25
Average Daily Volume = 2.7 million
Listed on January 31, 2012


The Cooper Companies - COO - close: 100.86 change: +0.21

Stop Loss: 99.90
Target(s): 107.50
Current Option Gain/Loss: Unopened
Time Frame: Exit prior to earnings on Mar. 7th
New Positions: Yes, see below

Comments:
02/05/13: COO's performance was a bit disappointing today. The stock posted a gain but it underperformed the broader market and remains stuck in the middle of its $100-102.50 trading range. I am suggesting we stick to the plan and wait for a new relative high.
FYI: COO is scheduled to report earnings on March 7th.

Earlier Comments:
The highs last week were near $102.50. I am suggesting a trigger to open new bullish positions at $102.60. If triggered our target is $107.50. Please note that we do want to keep our position size small because the option spreads are a little bit wide. FYI: The Point & Figure chart for COO is bullish with a $125 target.

Trigger @ 102.60 *Small Positions*

- Suggested Positions -

buy the Mar $105 call (COO1316c105)

Entry on February -- at $---.--
Average Daily Volume = 303 thousand
Listed on February 02, 2012


Starwood Hotels - HOT - close: 61.75 change: +0.93

Stop Loss: 60.45
Target(s): 64.50
Current Option Gain/Loss: +29.2%
Time Frame: exit prior to earnings on Feb. 7th
New Positions: see below

Comments:
02/05/13: HOT outperformed the market with a +1.5% gain but didn't quite erase yesterday's losses. Tomorrow is our last day for this trade. We are planning to exit tomorrow (Wed. Feb. 6th) at the closing bell to avoid holding over earnings on the 7th. I am raising our stop loss to $60.45.

- Suggested Positions -

Long Feb $60 call (HOT1316B60) entry $1.81

02/05/13 new stop loss @ 60.45, prepare to exit tomorrow at the closing bell
01/28/13 new stop loss @ 59.75

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


Noble Energy - NBL - close: 108.77 change: -0.42

Stop Loss: 109.00
Target(s): 114.00
Current Option Gain/Loss: +143.4%
Time Frame: Exit prior to earnings on Feb. 7th!
New Positions: see below

Comments:
02/05/13: NBL came alive today with a +2.89% gain and a new high. The breakout past resistance at $110 is a bullish one. Unfortunately we are out of time. NBL is scheduled to report earnings on Feb. 7th. That means we need to plan on exiting positions tomorrow (Feb.6th) at the closing bell if NBL does not hit our exit target at $114.00 first.

I am raising our stop loss to $109.00.
Remember, plan on exiting at the close tomorrow.

- Suggested Positions -

Long Feb $110 call (NBL1316B110) entry $1.15

02/05/13 new stop loss @ 109.00, prepare to exit tomorrow at the closing bell
01/30/13 new stop loss @ 106.95
01/29/13 new stop loss @ 105.75
01/26/13 new stop loss @ 104.65
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


Rock-Tenn Company - RKT - close: 80.11 change: +0.18

Stop Loss: 79.45
Target(s): 84.85
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
02/05/13: RKT tried to rally this morning but didn't make it very far before turning lower. Shares did manage to bounce off its rising 10-dma near $79.50. We are still waiting for a new relative high.

I am suggesting a trigger to buy calls at $81.05. If triggered our target is $84.85. More aggressive traders could aim higher. FYI: The Point & Figure chart for RKT is bullish with a long-term $117 target.

Trigger @ 81.05

- Suggested Positions -

buy the Mar $80 call (RKT1316c80)

Entry on February -- at $---.--
Average Daily Volume = 743 thousand
Listed on February 02, 2012


Starbucks Corp. - SBUX - close: 56.20 change: +0.32

Stop Loss: 54.75
Target(s): 59.85
Current Option Gain/Loss: - 11.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
02/05/13: SBUX spent Tuesday's session churning sideways. I don't see any changes from my prior comments.

Our target is $59.85. More aggressive traders could aim for the all-time highs in the $62 area set last year. FYI: The Point & Figure chart for SBUX is bullish with a long-term $67 target.

- Suggested Positions -

Long Mar $55 call (SBUX1316c55) entry $2.51

Entry on February 01 at $56.57
Average Daily Volume = 6.8 million
Listed on January 30, 2012


Shire Plc - SHPG - close: 100.32 change: -1.08

Stop Loss: 99.75
Target(s): 104.90
Current Option Gain/Loss: -42.1%
Time Frame: Exit prior to earnings on Feb. 14th
New Positions: see below

Comments:
02/05/13: Uh-oh! SHPG displayed relative weakness. Almost the whole market was in bounce mode today, including the drug sector and biotech sector. Yet SHPG gave up -1.0% and briefly dipped below round-number support at $100.00. The intraday low was $99.91. If there is any follow through lower tomorrow we will likely see SHPG hit our stop loss. I am not suggesting new positions.

Earlier Comments:
This is a short-term trade. We do not want to hold positions over the Feb. 14th earnings report. For that reason I am listing the February calls, which expire after the 15th. Otherwise I would probably choose the March calls. Looking at Februarys I would play either the Feb. $100s or the Feb $105s. The spread is wider on the $105s but your capital outlay is less. FYI: The Point & Figure chart for SHPG is bullish with a long-term $137 target.

- Suggested Positions -

Long Feb $105 call (SHPG1316b105) entry $0.95*

*02/01/13 entry point on the option is an estimate. there was not a lot of volume during today's session.

Entry on February 01 at $101.15
Average Daily Volume = 323 thousand
Listed on January 29, 2012


SPX Corp. - SPW - close: 75.00 change: +0.39

Stop Loss: 73.75
Target(s): 78.00
Current Option Gain/Loss: +34.6%
Time Frame: Exit prior to earnings on Feb. 14th
New Positions: see below

Comments:
02/05/13: SPW failed to keep pace with the market's rally on Tuesday. The S&P 500 added +1.0% but SPW only added +0.5%. Shares can't seem to escape the gravitational pull of the $75.00 level. Readers may want to just exit early now to free up capital and book a small gain. I am not suggesting new positions at this time.

- Suggested Positions -

Long Feb $75 call (SPW1316B75) entry $1.30

01/30/13 new stop loss @ 73.75
01/29/13 new stop loss @ 71.95, adjust exit to $78.00
readers may want to just take profits right now
01/28/13 new stop loss @ 71.40

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


Whole Foods Market - WFM - close: 94.50 change: +0.22

Stop Loss: 93.75
Target(s): 99.50
Current Option Gain/Loss: +23.6%
Time Frame: Exit PRIOR to earnings on Feb. 13th
New Positions: see below

Comments:
02/05/13: Shares of WFM also failed to keep pace with the market's rally today. Readers may want to just exit early now to free up capital and record a small gain. I am not suggesting new positions.

Earlier Comments:
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

01/30/13 new stop loss @ 93.75
01/29/13 new stop loss @ 92.25, expect a pullback soon

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


PUT Play Updates

PetSmart, Inc. - PETM - close: 65.44 change: +1.86

Stop Loss: 65.25
Target(s): 56.00
Current Option Gain/Loss: Unopened
Time Frame: Exit Prior to earnings in late February
New Positions: Yes, see below

Comments:
02/05/13: The stock market's widespread bounce today sparked a decent sized rebound in shares of PETM. The stock soared +2.9% to close right at technical resistance at its exponential 200-dma. A failure here or at the $66.00 level could be used as an aggressive, high risk entry point for puts. I am suggesting readers be patient and wait for a new relative low per our plan below.

Earlier Comments:
I am concerned that the late January low could be support. Therefore I am suggesting a trigger to buy puts at $62.40. If triggered we'll use a stop loss at $65.25. Our target is $56.00. Do not be surprised to see a temporary bounce from the $60.00 level.

Trigger @ 62.40

- Suggested Positions -

buy the Mar $60 PUT (PETM1316o60)

Entry on February -- at $---.--
Average Daily Volume = 1.5 million
Listed on February 04, 2012


CLOSED BEARISH PLAYS

Monster Beverage Corp. - MNST - close: 48.33 change: +0.73

Stop Loss: 50.15
Target(s): 41.00
Current Option Gain/Loss: -29.3%
Time Frame: Exit PRIOR to the late February earnings report
New Positions: see below

Comments:
02/05/13: MNST has not been cooperating so we decided yesterday to exit positions at the open this morning. The stock opened at $48.05.

Earlier Comments:
Please note that MNST has been a very volatile stock in the past. This should be considered an aggressive, higher-risk trade.

- Suggested Positions - *Small Positions*

Long Mar $45 PUT (MNST1316o45) entry $2.90 exit $2.05 (-29.3%)

02/05/13 planned exit
02/04/13 prepare to exit at the open tomorrow morning

chart:

Entry on January 28 at $46.91
Average Daily Volume = 2.0 million
Listed on January 26, 2012