Option Investor
Newsletter

Daily Newsletter, Wednesday, 11/6/2013

Table of Contents

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

Market Wrap

Playing Defense

by Keene Little

Click here to email Keene Little
Sometimes the right offensive play is a good defense -- defend what you've got and don't let the other side gain on you. Today saw a rotation out of some of the riskier stocks into the safety of the blue chips.

Market Stats

While the DOW got a big lift today from MSFT (up +4.2%), there were only 3 DOW stocks that finished in the red today. The riskier stocks in the tech and small-cap indexes finished in the red while the blue chips finished nicely in the green. Money rotated out of the higher-beta stocks, especially the stocks that have been seeing strong momentum to the upside, and into the relative safety of the blue chips. The utility sector was also the leading sector to the upside while biotech was the weakest. These are signs that fund managers want to reduce their risk while staying invested.

The RUT has been showing relative weakness since last week and the consolidation pattern for NDX looks like a distribution pattern (rallies are being sold), which adds to the look of a defensive market. Many pundits are beating the table about the buying opportunity here, citing the statistic that the market will likely rally into the end of the year now that we've made it through September-October. But the price action, especially between the indexes, doesn't support their view. The retail investor has bought (literally) into the idea of a higher market and the NYSE margin debt exceeding previous highs proves it.

Tops in the stock market are typically a painful process for both sides and it's the back and forth choppy price action that can whipsaw traders. We're certainly seeing plenty of that lately. Yesterday gapped down and sold off before turning sharply back up. Today gapped up and rallied before turning sharply back down. This is currently looking more like a market where the HFTs are playing with each other, using an initial market move and reversal to create higher liquidity for their trading programs. It's certainly a time for caution by both longer-term traders as well as day traders.

We received some more data on the bullish vs. bearish sentiment from AAII and their Asset Allocation Survey -- equity allocations in October reached a 6-year high (the highest level since September 2007, just before the October 2007 market high). Those who want in on the stock market rally have bought in. Cash allocations are at their lowest level in five months and margin debt is at all-time highs. So we've got fund managers all in and using leverage to buy more. That doesn't leave a lot of wiggle room if the market starts back down.

The Bull/Bear Ratio climbed strongly higher last week to 3.19. This was up from 1.96 just two weeks prior and that's a rapid expansion of the number of bulls vs. bears. It means a lot of bears have capitulated and the percentage of bears fell to 16.5%, which is the lowest number since May 2011. That was when the market peaked and then went on to lose more than 21% into the October 2011 low. When the ratio climbs above 3 (3 bulls for every bear) it's often been the conclusion of the bull market, which makes sense since everyone who believes the rally will continue have already bought in, leaving a dearth of buyers to push it higher. After all, it's just one big Ponzi scheme. Caveat emptor.

But for now the bulls are tenaciously holding the market up and simply the lack of selling keeps the bulls in charge. I've been using the DOW for a while now to show the bullish potential for the market and that hasn't changed. In fact the DOW's pattern is looking more and more like the correct one, even if it doesn't continue higher, so I'll start off with its charts tonight.

As mentioned previously, we have the statistic that says a market that's up at least +10% through October will typically continue to rally into year-end and tack on another +6%. For the DOW, another 6% above October's closing price gives us an upside target near 16500. On the weekly chart I've been showing two price projections that point to 16700 so clearly the 16500-16700 area is a good target zone if the bulls keep up the pressure and the bears stay in hibernation. The top of the DOW's up-channel from October 2011 crosses 16700 at the end of December. But there's also reason for caution right here.

The weekly chart below shows the upside targets that I'm watching, the first of which has now been reached. For the 5-wave move up from June 2012 the 5th wave is 62% of the 1st wave at 15725, which was reached today. This is considered the normal minimum for the 5th wave so it could lead to a reversal of the rally from June 2012 at any time. Only slightly higher is the trend line along the highs from May, currently at 15771. The next level of resistance is the trend line along the highs from 2000-2007, near 16130. And then above that is the top of the up-channel from October 2011, near 16500 by the end of November, and finally the 16700 projections. There are a few road blocks to a further rally but the bulls haven't shown much worry about any road blocks so far.

Dow Industrials, INDU, Weekly chart

The trend line along the highs from August-September, near 15771 on Thursday, might not be that important but the top of an up-channel from June might be. The May and July highs are at the top of the channel and it's currently near 15810 so a rally much above that level would be more bullish and would likely point to at least the next resistance level near 16130 (the trend line along the highs from 2000-2007). The bearish divergence at the current high vs. the September high is another reason for caution by the bulls, especially since we have a wave count that can be considered complete at any time.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 15,820
- bearish below 15,520

The DOW's 60-min chart below shows the leg up from October 9th, which counts as the 5th wave in the move up from June 2012 (to complete the a-b-c move up from October 2011). It's a bit of an awkward count but it fits. The 5th of the 5th wave is the move up from Tuesday morning and it too needs to be a 5-wave move, which it now is (although I could argue for another small pullback/consolidation followed by one more minor new high into Friday). The bottom of its up-channel from October 15th has been holding as resistance since breaking on October 31st. The repeated back tests, which the DOW loves to do, point to an ending rally, not something stronger. It's now getting pinched between the uptrend line from October 9th through the November 1st low, the bottom of its up-channel and the trend line along the highs from August-September. The uptrend line was broken with Tuesday's gap down and recovered with today's gap up. Another break would be meaningful and at 15717 Thursday morning the bulls are going to need to hold it.

Dow Industrials, INDU, 60-min chart

Money flowed into the blue chips today and out of the riskier techs and small caps. It's much easier to sell out of a highly liquid blue chip than a smaller thinly traded small cap. SPX benefitted from the rotation today as well but not as much as the DOW. This morning's high near 1774 was about a point shy of testing its October 30th high and is showing bearish divergence, which is another warning sign for the bulls since it could be forming a double top.

The October 30 high and today's high are only a few points shy of the 1778 price projection for two equal legs up from 2009, as shown on its weekly chart below. That price projection crosses the top of the up-channel from October 2011 this week. There's higher potential to the price projection at 1829 where the c-wave in the move up from October 2011 would be 162% of the a-wave, which is the depiction in green on the weekly chart below (the equivalent projection for the DOW is the one at 16700). I'm showing the 1829 projection being achieved by the end of the year but it would be in jeopardy if SPX breaks its uptrend line from November 2012 again, currently near 1693.

S&P 500, SPX, Weekly chart

On the SPX daily chart below I show a little more upside potential for Thursday, perhaps back up to the top of its up-channel from 2009, near 1781. That would also have it achieving its 1778 price projection. One other thought is that we could see price simply spend the rest of the week consolidating sideways before heading up again next week (opex). A break below 1750 should worry the bulls but stay bullish above that level.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- stay bullish above 1750
- bearish below 1730

The choppy sideways consolidation has continued for NDX in an even tighter pattern than we see for the DOW and SPX. Other than Tuesday's small white candle we've seen mostly little red candles as rally attempts have been sold. The consolidation looks like a bullish continuation pattern but this is the same way previous major highs have been formed and it took bulls by surprise when it suddenly broke down instead of rallying. Only time will tell if the same thing will happen again but the little red candles have it looking more like a distribution pattern than accumulation that I would have expected to see if it was consolidating for another run higher.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 3410
- bearish below 3300

I've been following a rounding topping pattern for NDX as it's been consolidating and I've adjusted it slightly to accommodate the lengthening consolidation. Between the downtrend line from October 30th and the rounding top we're close to seeing a break of resistance and that could lead to another leg up to confirm the bullish continuation pattern. The top of the up-channel from June and the trend line along the highs from December 2012 - May 2013 intersect near 3420 at the end of the week so that would be a level of interest if reached. But a break below the shelf of support near 3367, for more than just a quick break, would likely be followed by strong selling (from a failed bullish pattern).

Nasdaq-100, NDX, 60-min chart

After the RUT reached the top of its rising wedge (trend line along the highs from September 2012 - July 2013) it has been a weaker index than the others. While the short-term pattern for the pullback remains unclear (as to whether or not it confirms a top is in place), the daily chart is looking good for a top in place. Obviously that would change if it rallies above its October 30 high at 1123 but today's close below its 20-dma, which has been providing support since the November 1st test, suggests we're going to see this index head lower. Money is rotating out of the higher-beta stocks and it will be worth watching to see if the current bifurcation between indexes continues (supporting the idea that the bearish non-confirmation points to a major high forming for the market).

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1135
- bearish below 1087

TNX (10-year yield) is close to giving us a bullish breakout signal if it can rally from here. Tuesday's rally had it breaking its downtrend line from September as well as climbing back above its neckline, both now 2.628%. Today it pulled back to test the lines as support, which sets it up for a continuation of its rally. But a breakdown would give us a failed breakout attempt and point lower. It's currently trapped between its 20-dma at 2.593 and its 50-dma at 2.692 so a break of either of those would also likely tell us which direction it's heading next.

10-year Yield, TNX, Daily chart

The TRAN has given us a sell signal after its head-fake break on Monday above the top of its up-channel from June. The failure to hold above the top of the channel, which was tested at today's high, is what gives us the sell signal. The wave count can be considered complete and a break below its October 31st low near 6929 would confirm the top is in.

Transportation Index, TRAN, Daily chart

Following the dollar's breakout from its bullish descending wedge pattern I thought it was ready for a pullback and perhaps a back test of its broken downtrend line from July. It's been consolidating since Sunday night's high and it could still pull back some more but at the moment the consolidation looks bullish for more upside.

U.S. Dollar contract, DX, Daily chart

As the dollar has consolidated so too have the metals and other commodities. Gold is consolidating around its 20-dma, currently at 1318.40, and below its 50-dma at 1332. Assuming it will break down further once the dollar starts rallying again, we should see gold test its uptrend line from June 28th and it could stay inside a sideways triangle pattern for a little longer but as long as it stays below its October 28th high it remains bearish.

Gold continuous contract, GC, Daily chart

Oil got a nice little bounce today (up +1.24, +1.3%) off its late-June low but better support should be at its uptrend line from June 2012 - April 2013, now near 91.60. That would be a nice setup for a bigger bounce before continuing lower.

Oil continuous contract, CL, Daily chart

Economic reports begin to pick up a little speed for the rest of the week and while we'll get a little employment data on Thursday it will be Friday when we hear how well nonfarm payrolls have done. There will be all kinds of explanations for the poor number (+85K expected), especially with the government shutdown so there might not be much of a reaction to the number. As always, the market will be trying to figure out if the numbers will continue to be bad enough to keep the Fed fully engaged in their QE program.

Economic reports and Summary

Prior to today the techs were getting a lift presumably from some of the excitement surrounding the TWTR IPO tomorrow, which is expected to do very well. Bullish sentiment is showing up in the IPO market as well and I can't help but wonder how the market would react if the IPO did not go well. Even if it does go well, it wouldn't be the first time a market high was made on the day of a highly-anticipated IPO.

The market has remained bullish if for no other reason than the sellers haven't shown up yet. Or at least the selling is being masked by smart liquidation efforts by the big funds. But a pattern that looks like distribution, especially in the techs as they consolidate, and a rotation out of the small caps into the blue chips gives me the feeling we're seeing a topping pattern. But it's a tricky spot -- there's clearly some additional upside potential and the momentum, even if it's waning, is to the upside. Therefore it makes sense that the bears have stayed in hibernation.

If the market is topping, or at least with fund managers getting a little defensive, we're probably just one catalyst away from some stronger selling. Bullish sentiment is very high and traders are using a large amount of debt to buy their positions. It wouldn't take much selling to start the margin calls, which of course results in more selling. That's the potential danger when we have high margin debt levels with high equity-to-cash ratios -- the selling can become much more intense than it might have otherwise been. Selling simply begets more selling and the market doesn't have any more buyers to prop things back up. People will wonder why the market is selling off so hard on no news, or even on good news.

There are plenty of reasons to believe the stock market is overpriced and overbought, which makes it hard to buy into it. But the trend is your friend and even if you don't want to chase it higher here we know it's a risky time to short it. Wait for some confirmation of a breakdown and then look to short the bounces. It's getting whippy out there so stay protected and trade carefully.

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

Financials & Industrials

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Aon Plc. - AON - close: 80.05 change: +1.36

Stop Loss: 78.25
Target(s): 85.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
AON is in the financial sector. The company provides insurance and risk management services. The stock has been quietly pushing higher since its early October lows. Shares are now working on their fifth weekly gain in a row. The most recent pullback was mild and traders bought the dip at AON's rising 10-dma. Today's display of relative strength (+1.7%) leaves the stock poised to breakout past resistance near $80.00.

I am suggesting a trigger to buy calls at $80.50. If triggered our target is $85.00.

Trigger @ 80.50

- Suggested Positions -

buy the 2014 Jan $82.50 call (AON1418a82.5) current ask $1.50

Annotated Chart:

Entry on November -- at $---.--
Average Daily Volume = 2.3 million
Listed on November 06, 2013


Lockheed Martin - LMT - close: 136.87 change: +1.40

Stop Loss: 134.40
Target(s): 148.50
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
LMT is in the industrial goods sector. The company manufactures products for the aerospace and defense industries. The defense stocks have been strong performers this year. LMT is no exception and the stock is working on its fifth weekly gain in a row. The company seems to be firing on all cylinders. When LMT last reported earnings in late October they beat estimates by a wide margin and beat the revenue estimate as well. Management then raised their full year guidance. The stock has since rallied to new all-time highs.

I am suggesting a trigger to buy calls at $137.25. If triggered our target is $148.50.

Trigger @ 137.25

- Suggested Positions -

Buy the 2014 Jan $140 call (LMT1418a140) current ask $2.10

Annotated Chart:

Entry on November -- at $---.--
Average Daily Volume = 1.5 million
Listed on November 06, 2013



In Play Updates and Reviews

Stocks Deliver Mixed Performance

by James Brown

Click here to email James Brown

Editor's Note:

European markets were up today but the U.S. market was mixed. The Dow Industrials hit a new high but the small cap Russell 2000 underperformed. This relative weakness in the Russell is a potential warning signal.

COST, HOT and KSU hit our entry triggers.
DIS was closed as planned. SNDK hit our stop loss.


Current Portfolio:


CALL Play Updates

B/E Aerospace Inc. - BEAV - close: 82.51 change: -0.14

Stop Loss: 79.60
Target(s): 89.50
Current Option Gain/Loss: -10.3%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
11/06/13: BEAV followed the market's spike higher this morning but gains faded. Shares eventually closed in negative territory. Look for short-term support at its simple 10-dma (near $81.50).

Earlier Comments:
Our target is $89.50. FYI: The Point & Figure chart for BEAV is bullish with a $90 target.

- Suggested Positions -

Long DEC $85 call (BEAV1322L85) entry $1.45

Entry on November 05 at $82.75
Average Daily Volume = 894 thousand
Listed on November 02, 2013


Costco Wholesale - COST - close: 124.07 change: +3.94

Stop Loss: 118.40
Target(s): 129.00
Current Option Gain/Loss: +112.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
11/06/13: Our COST trade opened with a big show of relative strength. After flirting with a breakout past resistance near $120 the last few days the stock finally pushed higher and did so with a convincing rally to new all-time highs. Our trigger to buy calls was hit at $120.50 this morning.

NOTE: Our call option has already doubled in value.

- Suggested Positions -

Long 2014 Jan $125 call (COST1418a125) entry $1.30

Entry on November 06 at $120.50
Average Daily Volume = 1.9 million
Listed on November 02, 2013


GNC Holdings - GNC - close: 58.88 change: -0.88

Stop Loss: 57.95
Target(s): 64.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
11/06/13: Hmm... there was no follow through on GNC's rally yesterday. The stock reversed at the $60.00 level and dropped back toward its 10-dma. At the moment I don't see any changes from our Tuesday night new play comments.

I am suggesting a trigger to buy calls at $60.50. If triggered our target is $64.50.

Trigger @ 60.50

- Suggested Positions -

Buy the DEC $60 call (GNC1322L60)

Entry on November -- at $---.--
Average Daily Volume = 1.5 million
Listed on November 05, 2013


Starwood Hotels & Resorts - HOT - close: 74.76 change: +0.08

Stop Loss: 73.40
Target(s): 79.75
Current Option Gain/Loss: -17.6%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
11/06/13: I would be cautious here. HOT followed the market's spike higher this morning. Yet the rally in HOT reversed and shares traded back down below resistance at the $75.00 level. Unfortunately our trigger to buy calls was hit this morning at $75.25. Today's high was $75.45. Readers might want to wait for a rise past $75.50 before initiating new positions.

Earlier Comments:
More conservative traders may want to wait for a rally past $75.50 instead. If we are triggered at $75.25 our target is $79.75. More aggressive traders could aim higher. The Point & Figure chart for HOT is bullish with a $96 target.

- Suggested Positions -

Long DEC $75 call (HOT1322L75) entry $2.10

Entry on November 06 at $75.25
Average Daily Volume = 1.8 million
Listed on November 04, 2013


Helmerich & Payne, Inc. - HP - close: 77.65 change: -0.13

Stop Loss: 75.75
Target(s): 79.50
Current Option Gain/Loss: +29.8%
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
11/06/13: The stock market's early morning rally was strong enough to lift HP above short-term resistance near $78.00 but the rally didn't last. HP reversed and retested short-term support near its 10-dma. I am not suggesting new positions.

We do not want to hold over the mid-November earnings report. FYI: The Point & Figure chart for HP is bullish with an $82 target.

- Suggested Positions -

Long NOV $75 call (HP1316K75) entry $2.31

10/29/13 new stop loss @ 75.75
10/24/13 new stop loss @ 74.25
10/22/13 new stop loss @ 73.75

Entry on October 14 at $74.50
Average Daily Volume = 1.1 million
Listed on October 12, 2013


iShares Russell 2000 ETF - IWM - close: 109.12 change: -0.47

Stop Loss: 107.75
Target(s): 114.00
Current Option Gain/Loss: -10.0%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/06/13: Warning! The action in the small cap Russell 2000 index (and the IWM) does not bode well for the broader market. The IWM's early morning rally (gap higher) failed and shares closed near their lows. Technically this looks like a failed rally and a bearish engulfing candlestick reversal pattern. I am not suggesting new positions.

- Suggested Positions -

Long 2014 Jan $110 call (IWM1418a110) entry 2.80

10/29/13 new stop loss @ 107.75
10/23/13 new stop loss @ 105.95

Entry on October 16 at $108.55
Average Daily Volume = 41 million
Listed on October 14, 2013


Kansas City Southern - KSU - close: 124.52 change: -0.08

Stop Loss: 122.00
Target(s): 134.00
Current Option Gain/Loss: -16.6%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
11/06/13: Our new KSU trade has been triggered but I am urging caution. The stock spiked higher with the stock market this morning but the rally didn't last. KSU quickly traded back below resistance near $125.00 and closed almost unchanged on the session. Our trigger was hit at $125.25. I would wait for a new rally past $125.25 before considering new bullish positions.

Earlier Comments:
Our target is $134.00. More aggressive investors could aim higher. The Point & Figure chart for KSU is bullish with a $152 target.

- Suggested Positions -

Long DEC $125 call (KSU1322L125) entry $3.60

Entry on November 06 at $125.25
Average Daily Volume = 813 thousand
Listed on November 04, 2013


Pall Corp. - PLL - close: 82.38 change: +0.50

Stop Loss: 79.75
Target(s): 86.00
Current Option Gain/Loss: +13.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/06/13: PLL displayed some relative strength with a +0.6% gain and another new high. I am raising our stop loss to $79.75.

I do find it odd that our December $85 call is not moving very much.

Earlier Comments:
Our target is $86.00. However, we will plan to exit prior to PLL's earnings report in late November (not date set yet). FYI: The Point & Figure chart for PLL is bullish with a long-term $113 target.

- Suggested Positions -

Long DEC $85 call (PLL1321L85) entry $1.10

11/06/13 new stop loss @ 79.75

Entry on October 28 at $80.50
Average Daily Volume = 551 thousand
Listed on October 23, 2013


Constellation Brands - STZ - close: 66.41 change: +0.34

Stop Loss: 64.25
Target(s): 68.50
Current Option Gain/Loss: +175.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
11/06/13: Another day, another new high for shares of STZ. I am raising our stop loss up to $64.25.

Our option is up +175%. Readers may want to take profits now.

- Suggested Positions -

Long NOV $62.50 call (STZ1316k62.5) entry $1.38

11/06/13 new stop loss @ 64.25
11/05/13 new stop loss @ 63.85
10/30/13 new stop loss @ 63.40
10/29/13 new stop loss @ 63.25
10/28/13 adjust exit target to $68.50
10/22/13 new stop loss @ 61.90, readers may want to take profits now. Our option is up +84%.
10/16/13 new stop loss @ 59.75
10/11/13 trade opened on gap higher at $61.25,
trigger was $61.10

Entry on October 11 at $61.25
Average Daily Volume = 1.9 million
Listed on October 10, 2013


PUT Play Updates

F5 Networks - FFIV - close: 81.20 change: +1.46

Stop Loss: 82.75
Target(s): 76.00
Current Option Gain/Loss: - 3.1%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/06/13: I am growing concerned over our FFIV put play. The stock hasn't posted any real declines in the last three days. Shares outperformed the market today with a +1.8% gain. The stock should find resistance near $82.00 and its 10-dma near $82.15. I am adjusting our stop loss down to $82.75. I am not suggesting new positions.

- Suggested Positions -

Long DEC $80 PUT (FFIV1322X80) entry $3.15

11/06/13 new stop loss @ 82.75
11/04/13 new stop loss @ 83.25

Entry on October 31 at $82.00
Average Daily Volume = 2.2 million
Listed on October 30, 2013


Garmin Ltd. - GRMN - close: 47.95 chane: -0.04

Stop Loss: 48.55
Target(s): 43.50
Current Option Gain/Loss: -44.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/06/13: I am growing concerned about our GRMN put play. It is noteworthy that GRMN did not spike higher with the rest of the stock market this morning. Instead shares shot lower. Yet traders bought the dip midday and GRMN rebounded back to resistance near $48.00.

Tonight we are adjusting our stop loss down to $48.55.

Earlier Comments:
I do consider this an aggressive trade. GRMN has obviously been volatile the last couple of days. Plus the most recent data listed short interest at 13% of the 121 million share float.

Our target is $43.50. At this point GRMN should be nearing significant support in the $43.00 area and we might switch directions and buy calls.

*Small Positions!* - Suggested Positions -

Long DEC $45 PUT (GRMN1322X45) entry $1.08

11/06/13 new stop loss @ 48.55

Entry on November 01 at $46.82
Average Daily Volume = 1.2 million
Listed on October 31, 2013



Longer-Term Play Updates



Vanguard FTSE Europe ETF - VGK - close: 56.78 change: +0.54

Stop Loss: 53.90
Target(s): Sell half @ $58.00, sell the rest at $63.00
Current Option Gain/Loss: +58.3%
Time Frame: exit PRIOR to 2014 March option expiration
New Positions: see below

Comments:
11/06/13: After widespread declines yesterday the European markets reversed into widespread gains today. This helped the VGK gap higher and posted a +0.95% gain.

Traders should be aware that the European markets could see increased volatility tomorrow following the European Central Bank's interest rate decision and ECB President Mario Draghi's press conference.

Earlier Comments:
Don't forget that we have two exit targets for this trade! More conservative traders could lock in gains now with our option up +94%.

We are taking a multi-month time frame with this trade. FYI: The Point & Figure chart for VGK is bullish with a $63 target.

- Suggested Positions -

Long 2014 Mar $55 call (VGK1422C55) entry $1.80*

10/22/13 Strategy Update: Plan to exit half @ $58.00 and exit the rest at $63.00. New stop loss @ 53.90
10/19/13 new stop loss @ 52.75
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

The Walt Disney Company - DIS - close: 69.00 change: +0.15

Stop Loss: 67.45
Target(s): 74.00
Current Option Gain/Loss: + 1.5%
Time Frame: exit PRIOR to earnings on November 7th.
New Positions: see below

Comments:
11/06/13: Our plan was to exit our DIS positions at the closing bell today to avoid holding over earnings out tomorrow night. We might revisit DIS on Thursday or Friday if shares breakout past resistance near $70.00.

- Suggested Positions -

NOV $70 call (DIS1316K70) entry $0.66 exit $0.67 (+1.5%)

11/06/13 planned exit
11/05/13 prepare to exit tomorrow at the close
11/02/13 time is almost up. Prepare to exit on Nov. 6th at the close
new stop loss @ 67.45

chart:

Entry on October 22 at $68.10
Average Daily Volume = 7.1 million
Listed on October 21, 2013


SanDisk Corp. - SNDK - close: 68.12 change: -0.86

Stop Loss: 67.90
Target(s): 74.75
Current Option Gain/Loss: -45.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
11/06/13: SNDK underperformed the stock market today with a -1.24% decline. The market spiked higher this morning but SNDK spiked lower. There are new concerns that the NAND flash memory market might suffer from oversupply issues in 2014. SNDK makes NAND chips so the news was bearish. Our stop loss was hit at $74.75.

- Suggested Positions -

2014 Jan $72.50 call (SNDK1418a72.5) entry $2.75 exit $1.50 (-45.4%)

11/06/13 stopped out

chart:

Entry on October 29 at $70.60
Average Daily Volume = 5.0 million
Listed on October 28, 2013