Option Investor
Newsletter

Daily Newsletter, Wednesday, 9/18/2013

Table of Contents

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

Market Wrap

Taper Tossed

by Keene Little

Click here to email Keene Little
The market got what it wanted today, and more, from the Fed and reacted favorably, with the DOW rocketing 200 points off its low following the FOMC announcement. Now we wait to see if the rally will stick.

Market Stats

The FOMC announcement was kind to the bulls since there was no mention of tapering. This was a surprise and as there were expectations for some kind of tapering of the Fed's asset purchases. The Fed heads have been warning the market that it was coming but the announcement made no mention of it. That means the $85B/month will continue with no tapering in sight and the market rejoiced at the "gift" of more drug money to come.

The Fed is not convinced the economy is doing well enough yet to support any tapering of the Fed's help. In fact they again ratcheted down their estimate for GDP growth for the rest of the 2013 and 2014. But in this Bizzaro World where the only thing that matters is how much drug money the banks are getting, this announcement is to be treated as very good news.

And since the Fed has done so much for the economy so far with their asset purchases (cough) they must feel that they need to keep up their support (cough). What they're doing is making the rich richer and the middle class poorer. History will not treat this period kindly and identify it for what it is -- a greedy money grab by those in control of the money and a total failure of the central banking scheme.

The FOMC members have been very concerned about the spike in yields and what they're doing to the sputtering economy. Actually what they're really worried about, but of course won't say out loud, is that they do not want to exacerbate the rising yield problem by withdrawing demand for Treasuries. I think that's the real concern by the Fed right now but they're boxed in here -- their Treasury purchases are losing value as yields run higher but they need to keep up their purchases to prevent a further decline in value. It's kind of like China having too many dollars but they can't sell them off without negatively affecting the value of the dollars they hold. As the buyer of last resort the Fed has boxed itself in as being required to continue buying otherwise they hurt the value of their own portfolio. These are private bankers more concerned about themselves than our country or the people affected by their decisions.

Bonds rallied on the announcement so the Fed at least accomplished the start of a more serious decline in yields. As I'll show with my updated 30-year bond chart, the rally has been expected and the Fed's decision kicked it up a notch. Could a bond rally start to see some rotation out of stocks and into bonds? I see that potential.

As Jim mentioned last night, the failure to start tapering asset purchases might start to make the market a little nervous as traders start wondering why the Fed is not tapering. What do they know that caused them to back away from following through on their taper talk? But for the moment the market got the all-clear signal to buy, buy, buy.

The DOW rocketed out of negative territory and gained 200 points in the hour following the announcement as shorts ran for cover and the bulls rejoiced. Now the bulls need to get some follow through on Thursday since it's common for the market to head in the opposite direction following the post-FOMC move. Typically the wrong side exits the market quickly, giving us the big post-FOMC move but then there's no follow through the next day. While I see the potential for at least slightly higher Thursday morning, watch for the possibility that new highs will not hold and selling will follow.

Gold also shot higher out of negative territory since more money printing by the Fed will continue to debase the dollar and inflate the value of gold and other hard assets. The U.S. dollar dropped sharply and at the moment we're left to wonder if each move is starting a larger move or if instead it was just a kneejerk reaction. As I'll show on their charts, there's reason to believe the latter but we'll have to wait to find out.

The weekly chart of SPX below shows the potential for a high today, maybe tomorrow, at the top of a rising wedge pattern, which it hit today with a little throw-over above it. Many have been looking for 1730-1750 and the lower end was tagged today (1729.44). The rising wedge, starting from the June low, might need another down-up sequence to complete it (shown with the dashed line) and it could of course just keep rallying from here. But considering the fact that the market often reverses the direction of the afternoon move following the FOMC announcement, the setup here is that we could see it happen again on Thursday with a decline.

S&P 500, SPX, Weekly chart

The rising wedge is shown more clearly on the daily chart below and shows the small poke above the top of it today and the close on the line. SPX 1725 could be a strong magnet for a Friday-morning settlement price so even if we get more to the upside tomorrow we might find it pulling back to the same level into the close. Just a thought on opex settlement. Any strong decline from here should be taken seriously since it could be the start of a more serious decline. But if the bulls maintain control we could see a blow-off move up to 1776 (too bad not on July 4th) where the move up from June would have two equal legs. Inside a rising wedge like this it's more common to see the 2nd leg achieve 62%, which at 1719.76 was achieved today. Again, it's a good setup for a reversal so we'll see if the bears take advantage of it.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1730
- bearish below 1650

It's arguable where the current rally leg started from but if I use the August 30th low I can count a completed 5-wave move up to today's high. The 5th wave is equal to the 1st wave near 1724, which was achieved. This, along with the other reasons mentioned above, adds to my belief that we'll see a down day on Thursday and that this afternoon's rally was mostly short covering and will see little if any follow through. The market breadth for the rally from August has been negatively divergent with price and is more indicative of a final rally leg than the start of something bigger to the upside. The caution to bulls is to be careful about this one -- it might be over or could finish with a bang to the downside.

S&P 500, SPX, 60-min chart

There's a full moon tomorrow and it might be a good time for the market to make a top. Today's rally was a news-related event with lots of emotion, which is typically how rallies finish. The timing with a full moon could be just icing on the cake for bears.

SPX MPTS daily chart

The DOW has a similar pattern to SPX but shallower. The past two weeks it has shot higher but it's been a laggard otherwise. Today's rally brought it up close to the top of its wedge (trend line along the highs from May-August), near 15740, with a high of 15709. A rally above 15740, which stays above, would be a bullish move but until that happens I would view this line as resistance.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 15,740
- bearish below 15,290

NDX punched through the top of its rising wedge pattern today but the Nasdaq Composite just ticked its line, at 3790. For the a-b-c move up from June the c-wave would be 62% of the a-wave at 3820 so I see at least that much more potential to the upside. By this time next week that projection will cross the top of its parallel up-channel from October 2011 so if the bulls hold the market up (but not make a lot of headway to the upside) into the end of the month/quarter we could see that 3820 projection achieved. But as with the others, there is the potential for an immediate reversal back down from here.

Nasdaq Composite index, COMPQ, Daily chart

Key Levels for NDX:
- bullish above 2282
- bearish below 2237

Back in July and into the August 5th high the RUT had made it above the top of its parallel up-channel from October 2011, even using it as support at the end of July, as can be seen on the RUT's chart below. It then broke back inside the channel with the gap down on August 15th and it looked like that might be it for the bulls. But the dipsters won again and have driven the indexes to new highs. Now the RUT has achieved the same 62% projection for the c-wave as the other indexes, just shy of 1080 (today's high was 1080.49) and at the same time to top of a slightly wider up-channel using the July-August highs for the parallel line. In other words the size of the throw-over above the up-channel from 2011 is now the same as it was in July-August. This is oftentimes a good way to identify where resistance will be so once again, it's a good setup for a reversal but we'll have to see if the bears do something with it instead of running back into the woods, screaming like little girls.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1080
- bearish below 1047

Bond shorts ran for cover today following the FOMC announcement. With no threat of the Fed backing off their purchases traders feel there is now a floor under the market that the Fed won't let break. As I've been covering for a couple of weeks, we were already warned that a rally was coming and with today's news the 30-year bond broke out of its descending wedge pattern, the top of which is currently near 131'12 (today's high was 132'15). It ran into its 50-dma today and pulled back a little. The top of the wedge should now hold as support. The longer-term pattern suggests a big bond rally should follow into next year.

30-year Bond contract (e-mini), ZB, Daily chart

The banking index, BKX, has remained weak since the August low, having just now retraced 62% of its August decline rather than making new highs with the broader market indexes. Coinciding with the 62% retracement, at 65.15, is its broken uptrend line from April-June, near 65.35, which was tagged with today's high at 65.36. Following the high there was a sharp selloff into the close, which so far a back test and bearish kiss goodbye if there's no follow through to the upside. Follow the money either way here.

KBW Bank index, BKX, Daily chart

Even the home builders got into the rally today and in fact quite strongly -- up almost +6% today to 461. It has at least a little more upside potential to the 469 area to achieve a 50% retracement of its May-August decline and a back test of its 200-dma. But for an a-b-c bounce off the August low the rally achieved the 162% projection for the c-wave and therefore it, like the other indexes, could start back down from here and head for new lows

Home Construction index, DJUSHB, Daily chart

The U.S. dollar collapsed on the news that the Fed is going to continue on its asset purchase program with no pullback. I imagine many are wondering if the Fed sees enough wrong with the economy and rising interest rates to prompt them to consider increasing, rather than decreasing, their asset purchases. The more they do this the more the dollar will be devalued. It continues to be a race to the bottom among the various countries as they pursue their own quantitative easing program.

The dollar firmly broke support at its uptrend line from 2011-2013 and could be headed for its H&S neckline from February 2012, near 79.50, or down to a price projection at 78.58 where the decline from July would have two equal legs down for an a-b-c pullback. But today's low at 80.17 was at the 62% projection for the c-wave, at 80.18, and we might not get any further pullback than this for the dollar (like the stock indexes but in reverse). That's what I'm showing on its chart but obviously we'll know more in the next couple of days.

U.S. Dollar contract, DX, Daily chart

Gold had dropped further during the last night's overnight session to a low of 1291.50 but after the FOMC announcement it shot up to 1367.80 for a gain of $76 before pulling back slightly in today's after hours. There's a large net short position in gold right now so it doesn't take much to ignite some short covering. While the bounce off the June 28th low could continue from here, I'll want to first see it climb above its 20-dma at 1374.40, which is also where its broken uptrend line from June is located. It could be setting up for a back test and bearish kiss goodbye, which is the way I'm leaning gold until proven otherwise.

Gold continuous contract, GC, Daily chart

Oil also rallied today but it was rallying some before the FOMC announcement. It remains inside its choppy trading range since mid-July. Nothing to see here folks, move along.

Oil continuous contract, CL, Daily chart

Tomorrow's economic reports include the unemployment claims before the bell but will not likely move the market. At 10:00 AM we'll get existing home sales, the Philly Fed index and Leading Indicators and these could negatively affect the market, especially if the market will already be struggling to find more buyers. The reports are expected to be worse than the previous month so there will obviously be some concern if they're weaker than expected. It might start tongues wagging as to why the Fed decided not to even mention taper and the worry about the economy and when the Fed will start to taper will start to weigh on the market.

Economic reports and Summary

The FOMC announcement caught most traders by surprise. Not mentioning tapering was not what most expected and the shorts in stocks, bonds and the metals ran for cover. This afternoon's spike was an emotional reaction and these news-related spikes following a rally are often the final leg of the rally so there's the potential for a more important high today, or possibly after a little more to the upside Thursday morning. It's also common to see the day after the FOMC announcement to reverse the afternoon move following the announcement, which means a reversal back down on Thursday.

Interestingly, even though the market reacted favorably to today's FOMC announcement it actually makes it more difficult for bulls from here forward. The Fed's words can't be trusted now that there was so much yammering about expecting $10-$15B in tapering and then tell us "never mind" when the announcement is made. It now also starts the whole worrying process all over again -- when is the Fed going to taper? Is it going to be December before Bernanke leaves? Maybe sooner rather than later? Maybe not at all for the foreseeable future? What does that then mean about the economy? The Fed has been telling us the economy is slowly improving and that they can therefore start tapering. Was it all a lie? All this uncertainty is what the market hates and today's announcement could backfire on the Fed.

As reviewed with tonight's charts, the indexes show a common pattern at this point and that actually strengthens the bearish pattern. We've had some strong differences for the past month and that made it more difficult to figure out which one was correct. Now we've got indexes hitting the same Fib projections, hitting (or near hitting) the tops of rising wedge patterns and showing daily/weekly bearish divergences. Market breadth has been weaker for the August-September rally than it was for the June-August rally, which is a clue that rally is not the start of something bigger to the upside.

We've got a full moon on Thursday and emotional highs and lows are often found on full and new moons. That makes this particular one potentially important, considering the technical setup. At the moment I'm thinking we saw an emotional reaction to the Fed that will not see follow through. We'll obviously know more by the end of the week but I would caution bulls to be careful (goes without saying for the bears).

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Option Plays

Rising Healthcare

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. Some of these stocks may need to see a break past key support or resistance:

(bullish ideas)
VAR, CMI, BWA, TMO, DOV, JNJ, NOV, HES, ITW, CTXS, HP, IR, PNR, VRSN, CTRP



NEW DIRECTIONAL CALL PLAYS

Actavis, Inc. - ACT - close: 139.10 change: +1.41

Stop Loss: 134.70
Target(s): 148.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
ACT is in the healthcare sector. The company manufacturers generic drugs. Wall Street has been bullish on this stock with multiple analysts raising their price targets. The most recent was this past week with Barclays raising their price target to $175.

Technically ACT has been building on a bullish trend of higher lows and higher highs. Plus, the point & figure chart recently created a new triple-top breakout buy signal.

We want to see a little more follow through on top of today's rally. I am suggesting a trigger to buy calls at $139.50. If triggered our target is $148.50. More conservative traders may want to wait for ACT to trade above the early September high near $141.00 before initiating bullish positions.

Trigger @ 139.50

- Suggested Positions -

buy the Oct $145 call (ACT1319j145) current ask $1.45

Annotated Chart:

Entry on September -- at $---.--
Average Daily Volume = 985 thousand
Listed on September 18, 2013


CR Bard Inc. - BCR - close: 120.55 change: +1.27

Stop Loss: 118.75
Target(s): 124.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
BCR is in the healthcare sector. The company provides medical, surgical, diagnostic, and patient care supplies and devices. This stock has been gaining momentum with shares up five weeks in a row. BCR also managed to spent a few days consolidating under resistance at the $120 level. Today's bullish breakout past $120 is a new all-time high.

We want to see a little bit of follow through. I am suggesting a trigger to buy calls at $120.75. If triggered our short-term target is $124.75.

Trigger @ 120.75

- Suggested Positions -

Buy the Oct $120 call (BCR1319j120) current ask $2.35

Annotated Chart:

Entry on September -- at $---.--
Average Daily Volume = 448 thousand
Listed on September 18, 2013



In Play Updates and Reviews

LII Hits Our Bullish Target

by James Brown

Click here to email James Brown

Editor's Note:

Wall Street was surprised by the Federal Reserve's decision to not begin tapering their QE program. Investors reacted by sending equities higher.

Shares of Lennox Intl. (LII) hit our bullish exit target today.
RRGB was triggered. TSCO was closed at the open. UNH was stopped out. We also exited the October calls on NOC and SBUX. j

Tomorrow we want to exit our DO put play.


Current Portfolio:


CALL Play Updates

Anadarko Petroleum - APC - close: 94.96 change: +1.29

Stop Loss: 91.65
Target(s): 99.50
Current Option Gain/Loss: - 7.2%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
09/18/13: Oil rallied today and the energy stocks tried to keep up. APC added +1.37%. The bounce today looks like a new bullish entry point to buy calls.

- Suggested Positions -

Long Oct $95 call (APC1319j95) entry $3.05*

*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on September 11 at $94.25
Average Daily Volume = 2.55 million
Listed on September 09, 2013


Cornerstone OnDemand, Inc. - CSOD - close: 53.91 change: +0.23

Stop Loss: 52.25
Target(s): 59.50
Current Option Gain/Loss: -48.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/18/13: CSOD added +0.4% today as traders bought the dip near its 10-dma. The bounce underperformed the broader market. I would be cautious here. I would still wait for a new rally above $55.00 before considering new positions.

- Suggested Positions -

Long Oct $55 call (CSOD1319j55) entry $2.60*

Entry on September 13 at $55.25
Average Daily Volume = 367 thousand
Listed on September 12, 2013


Fluor Corp. - FLR - close: 69.91 change: +1.87

Stop Loss: 65.75
Target(s): 74.50
Current Option Gain/Loss: Oct70c: +61.9% & 2014jan70c: +21.8%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
09/18/13: The post-FOMC meeting rally in FLR was a sharp one with shares surging to $70.74 intraday. The stock settled with a +2.7% gain and closed just below round-number resistance at the $70.00 level. I am raising our stop loss to $65.75.

Our target is $74.50. You may want to aim higher. The Point & Figure chart for FLR is bullish with an $82 target.

- Suggested Positions -

Long Oct $70 call (FLR1319j70) entry $1.05

- or -

Long 2014 Jan $70 call (FLR1418a70) entry $3.20

09/18/13 new stop loss @ 65.75

Entry on September 12 at $67.65
Average Daily Volume = 1.1 million
Listed on September 11, 2013


Harman Intl. - HAR - close: 67.11 change: +0.19

Stop Loss: 64.70
Target(s): 71.00
Current Option Gain/Loss: -28.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/18/13: HAR's performance today was disappointing. Shares dipped toward support near $66.00, which we suggested might happen. The stock bounced but HAR only gained +0.28% today. Traders may want to wait for some follow through higher before initiating new positions.

Our short-term target is $71.00. More aggressive traders could aim higher. The point & figure chart is bullish with an $88 target.

- Suggested Positions -

Long Oct $70 call (HAR1319j70) entry $1.25

09/16/13 trade opened on gap higher at $67.07.
trigger was 67.00

Entry on September 16 at $67.07
Average Daily Volume = 690 thousand
Listed on September 14, 2013


Hanesbrand Inc. - HBI - close: 64.07 change: +0.51

Stop Loss: 59.90
Target(s): 68.50
Current Option Gain/Loss: + 7.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/18/13: Traders were also in a buy-the-dip mood with HBI today. The stock slipped toward its 10-dma before rebounding and closing up +0.8%. I would use today's rebound as a new bullish entry point to buy calls.

Earlier Comments:
The late July high near $65.60 could be short-term overhead resistance. I would not be surprised to see HBI stall or pullback on its initial test of this level.

- Suggested Positions -

Long Oct $65 call (HBI1319j65) entry $1.40

Entry on September 16 at $63.25
Average Daily Volume = 612 thousand
Listed on September 10, 2013


Magna Intl. - MGA - close: 83.71 change: +0.04

Stop Loss: 79.65
Target(s): 89.50
Current Option Gain/Loss: +16.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/18/13: MGA did not really participate in the market's rally today. Shares were actually sliding lower ahead of the FOMC decision. The afternoon market rally lifted MGA to virtually unchanged on the day. Today's performance is a bit troubling. More conservative traders may want to raise their stop loss.

- Suggested Positions -

Long Oct $85 call (MGA1319j85) entry $1.20

09/16/13 trade opened on gap higher at $82.76
trigger was $82.65

Entry on September 16 at $82.76
Average Daily Volume = 545 thousand
Listed on September 14, 2013


NetSuite Inc. - N - close: 107.50 change: +0.78

Stop Loss: 104.75
Target(s): 109.75
Current Option Gain/Loss: +74.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
09/18/13: N managed a +0.7% gain but the stock remains stuck under short-term resistance near the $108.00 level. Fortunately, N does look poised to breakout higher. I am raising our exit target from $109.00 to $109.75. I am also raising our stop loss to $104.75.

- Suggested Positions -

Long Oct $105 call (N1319j105) entry $2.75*

09/18/13 new stop loss @ 104.75, adjust exit target to $109.75
09/17/13 new stop loss @ 103.75
09/14/13 new stop loss @ 102.40
09/12/13 readers may want to take profits now
09/11/13 new stop loss @ 101.45
09/10/13 new stop loss @ 99.45
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on September 09 at $101.05
Average Daily Volume = 294 thousand
Listed on September 03, 2013


Northrop Gruman - NOC - close: 98.59 change: -0.16

Stop Loss: 94.75
Target(s): 99.50
Current Option Gain/Loss: Oct97.5c:+118.1% & 2014j100c: +38.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/18/13: NOC delviered a disappointing performance. Shares were slipping lower before they bounce near $97.50. Then the market's afternoon rally lifted NOC to a new high before the stock pared its gains. The intraday high was $99.05 and our target is $99.50. More conservative traders may want to just take profits right now and exit early.

Speaking of exiting early, our plan was to exit our October $97.50 calls this morning to lock in gains before the Fed decision. The option did not trade at the open so our exit price is an estimate.

- Suggested Positions -

Oct $97.50 call (NOC1319j97.5) entry $1.10 exit $2.40*(+118.1%)

- or -

Long 2014 Jan $100 call (NOC1418a100) entry $2.16

09/18/13 closed the Oct. $97.50 calls @ the open
*option exit price is an estimate since the option did not trade at the time our play was closed.
09/17/13 prepare to exit the Oct. $97.50 calls at the open tomorrow
09/17/13 new stop loss @ 94.75, adjust exit target to $99.50
09/16/13 new stop loss @ 94.25
09/14/13 new stop loss @ 93.30

Entry on September 12 at $95.25
Average Daily Volume = 1.2 million
Listed on September 11, 2013


Red Robin Gourmet Burgers - RRGB - close: 70.12 change: +0.50

Stop Loss: 67.90
Target(s): 74.75
Current Option Gain/Loss: -11.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/18/13: Our brand new trade on RRGB has been triggered. The stock traded above resistance near $70.00 this morning and then again later this afternoon. Our suggested entry point was hit at $70.25. I would still consider new positions now or you could wait to see some follow through and buy calls on a rally past $70.50 instead.

- Suggested Positions -

Long Oct $70 call (RRGB1319j70) entry $2.25

Entry on September 18 at $70.25
Average Daily Volume = 126 thousand
Listed on September 17, 2013


Starbucks Corp. - SBUX - close: 77.33 change: +1.29

Stop Loss: 72.40
Target(s): 79.00
Current Option Gain/Loss: Oct75c:+ 93.2% & 2014Jan75c: +60.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
09/18/13: It was another bullish day for SBUX. The post-FOMC decision market rally lifted shares to a +1.69% gain and another new all-time closing high. I am adjusting our exit target to $79.00 (for the 2014 January call). We're also moving the stop loss to $73.40.

It was our plan to lock in gains on our October $75 call at the opening bell this morning. The option gapped down and our exit was $2.28. If we had held them the bid is currently up to $3.20.

- Suggested Positions -

Oct $75 call (SBUX1319j75) entry $1.18 exit $2.28 (+93.2%)

- or -

Long 2014 Jan $75 call (SBUX1418a75) entry $3.25

09/18/13 new stop loss @ 73.40, adjust exit to $79.00
this morning we closed the Oct. $75 calls at the open.
09/17/13 prepare to exit the October $75 calls at the open tomorrow
09/17/13 new stop loss @ 72.40
09/14/13 new stop loss @ 71.75
09/11/13 SBUX at new highs. Cautious traders may want to lock in some gains.

Entry on September 05 at $72.35
Average Daily Volume = 3.0 million
Listed on September 04, 2013


PUT Play Updates

Diamond Offshore Drilling - DO - close: 65.43 change: +0.42

Stop Loss: 66.01
Target(s): 57.50
Current Option Gain/Loss: -74.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/18/13: We are giving up on our DO put play. Shares are not cooperating. The last few days is starting to look like a short-term bottom for DO. We are suggesting an immediate exit at the opening bell tomorrow morning. The October $60 put currently has a bid at $0.22.

- Suggested Positions -

Long Oct $60 PUT (DO1319v60) entry $0.85

09/18/13 prepare to exit at the open tomorrow
09/11/13 DO is not cooperating and traders may want to exit early now

Entry on September 03 at $63.75
Average Daily Volume = 1.0 million
Listed on August 28, 2013


The Fresh Market, Inc. - TFM - close: 49.69 change: -0.13

Stop Loss: 50.05
Target(s): 42.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
09/18/13: TFM rebounded off its midday lows but shares really didn't participate in the market's widespread gains today. There is no change from my prior comments.

Earlier Comments:
The September 4th low was $47.71. I am suggesting a trigger to buy puts at $47.50. If triggered our target is $42.00. I am suggesting we keep our position size small because TFM can be a little bit volatile. Plus the most recent data listed short interest at 13% of its small 40.1 million share float.

FYI: The Point & Figure chart for TFM is bearish with a $39 target.

Trigger @ 47.50

- Suggested Positions -

buy the Oct $45 PUT (TFM1319v45)

Entry on September -- at $---.--
Average Daily Volume = 591 thousand
Listed on September 16, 2013



Longer-Term Play Updates



Chicago Bridge & Iron - CBI - close: 66.19 change: +2.03

Stop Loss: 57.65
Target(s): 74.50
Current Option Gain/Loss: +68.6%
Time Frame: 4 to 6 months
New Positions: see below

Comments:
09/18/13: The post-Fed rally today helped boost CBI past resistance near the $65.00 level. Shares outperformed the major indices with a +3.1% gain.

*Small Positions* - Suggested Positions -

Long 2014 Jan $65 call (CBI1418A65) entry $2.55

09/11/13 new stop loss @ 57.65
07/20/13 new stop loss @ 55.75
06/29/13 CBI might be poised to dip into the $57-55 zone again.
06/24/13 triggered @ 56.75
06/22/13 adjust entry trigger to $56.75
06/15/13 entry strategy change: change the breakout trigger at $65.25 to a buy-the-dip trigger at $56.50. Adjust the stop loss to $53.75.
Adjust the option strike to the 2014 Jan. $65 call

Entry on June 24 at $56.75
Average Daily Volume = 1.8 million
Listed on June 01, 2013


Vanguard FTSE Europe ETF - VGK - close: 55.76 change: +1.37

Stop Loss: 50.95
Target(s): 58.50
Current Option Gain/Loss: +38.8%
Time Frame: exit PRIOR to 2014 March option expiration
New Positions: see below

Comments:
09/18/13: The VGK also reacted well to the no taper headline and shares soared to a new two-year high with a +2.5% gain. I would not chase it here. Wait for a pullback.

Earlier Comments:
We are taking a multi-month time frame with this trade. If we are triggered our target is $58.50 but we'll adjust it as the trade progresses. FYI: The Point & Figure chart for VGK is bullish with a $63 target.

- Suggested Positions -

Long 2014 Mar $55 call (VGK1422L55) entry $1.80*

09/11/13 trade opens. VGK @ 53.60
*option entry @ 1.80 is an estimate. Ask closed at $1.75 yesterday
09/10/13 entry trigger met. open positions tomorrow.
09/10/13 new stop loss @ 50.95
08/24/13 adjust the option strike from 2013 Dec $55 to $2014 Mar $55.

Entry on September 11 at $---.--
Average Daily Volume = 3.0 million
Listed on August 10, 2013


CLOSED BULLISH PLAYS

Lennox Intl. - LII - close: 74.76 change: +1.06

Stop Loss: 69.65
Target(s): 74.90
Current Option Gain/Loss: +61.2%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
09/18/13: Target achieved.

The post-Fed meeting rally pushed LII past resistance at the $75.00 level. Our exit target was hit at $74.90.

- Suggested Positions -

Oct $70 call (LII1319j70) entry $3.10* exit $5.00** (+61.2%)

09/18/13 target hit
**option exit price is an estimate since the option did not trade at the time our play was closed.
09/11/13 new stop loss @ 69.65
*option entry price is an estimate since the option did not trade at the time our play was opened.

chart:

Entry on September 09 at $71.00
Average Daily Volume = 386 thousand
Listed on September 07, 2013


Tractor Supply Company - TSCO - close: 131.15 change: +0.40

Stop Loss: 127.75
Target(s): 134.00
Current Option Gain/Loss: +68.1%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/18/13: TSCO underperformed the market this morning but shares bounced back thanks to the market's widespread rally this afternoon. Our plan was to exit positions this morning at the opening bell to lock in gains.

Our option exit price is an estimate. TSCO gapped open higher by five cents but the option didn't trade right at the open.

Don't forget TSCO is due to split 2-for-1 on Friday.

- Suggested Positions -

Oct $130 call (TSCO1319j130) entry $2.20* exit $3.70** (+68.1%)

09/18/13 scheduled exit
**option exit price is an estimate since the option did not trade at the time our play was closed.
09/17/13 prepare to exit at the opening bell tomorrow morning
09/16/13 new stop loss @ 127.75
09/12/13 traders may want to take profits now. Ask @ $3.90 (+77.2%)
09/11/13 new stop loss @ 124.75
*option entry price is an estimate since the option did not trade at the time our play was opened.

chart:

Entry on September 09 at $125.25
Average Daily Volume = 352 thousand
Listed on September 05, 2013


UnitedHealth Group - UNH - close: 73.04 change: -1.27

Stop Loss: 73.40
Target(s): 79.75
Current Option Gain/Loss: -41.3%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
09/18/13: UNH hit our stop loss @ 73.40. The stock has been weak right at the opening bell two days in a row. I couldn't find any specific headlines to explain this relative weakness. UNH broke down below short-term support near $74.00 and hit our stop loss pretty quickly.

- Suggested Positions -

Oct $75 call (UNH1319j75) entry $2.30 exit $1.35 (-41.3%)

09/18/13 stopped out
09/12/13 trade opened on gap higher at $75.32. Trigger was $75.25

chart:

Entry on September 12 at $ 75.32
Average Daily Volume = 3.3 million
Listed on September 10, 2013