Option Investor
Newsletter

Daily Newsletter, Wednesday, 11/20/2013

Table of Contents

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

Market Wrap

Taper Talk Back On

by Keene Little

Click here to email Keene Little
The Fed's FOMC minutes brings the taper talk back on the table, leaving the market as confused as ever about what the Fed is likely to do over the next few months.

Market Stats

The market has been holding up well since the November 7th low and looked like we were ready for another leg up as we headed into this afternoon's release of the FOMC minutes. Instead the market was disappointed, if not confused, with the Fed's apparent turnaround with the taper talk back on the table. This afternoon's selloff left us with a bearish taste in our mouths. But there is still a chance the bulls will give us at least one more leg up to complete the rally from the November 7th low. They just need to start it immediately on Thursday.

Tuesday morning Bernanke had said the Fed will maintain its accommodative policy known as ZIRP (Zero Interest Rate Policy) for as long as needed and is now saying an unemployment rate below 6.5% would not necessarily kick in higher Fed rates. He stated their QE efforts, through asset purchases, would not begin to taper off until the Fed is assured the labor market improvements would continue. While believing significant progress has been made by the economy the Fed believes it is far from where they want it to be. All of this was interpreted by the market as a sign the Fed will keep both feet on the gas pedal and off the brake pedal. Interestingly the stock market did not react all that positively to his statements.

Perhaps the market is beginning (finally) to be worried that the Fed in fact is out of ammunition. Everything they've tried has not worked and just doing more of the same is only getting the Fed (the private banks) further into debt and the banks are massively leveraged at the moment. In many respects the banking system is much weaker today than it was in 2007. And if the Fed can't revive the economy with all that it has done, what is to happen with all of their debt and the leveraged assets owned by the banks? The Fed would be the next one looking for a bailout by the U.S. government to help it deal with its $4T in debt. If interest rates start rising sooner rather than later it's going to drastically decrease the value of the Fed's bond holdings.

It is this worry that will ultimately turn into fear and that will be what prompts the next stock market decline, and the decline will instill even more fear because it will show the Fed as completely incompetent and ineffectual. Their great financial experiment will go bust and market sentiment will quickly sour. Sentiment is the only reason the stock market is back into bubble territory and just like all bubbles, once the bullish momentum is lost it's usually a quick trip back down.

One way to measure the strength of the current rally is to look at the percentage of momentum movement (Momentum % on TDA's Prophet charts). The monthly chart below shows the indicator against the highs since 2000 and you can see how the momentum indicator clearly predicted trouble for the rally at the 2000 and 2007 highs. We've now got the same bearish divergence at the current high. This is clearly not a market timing tool but only one of many telling us the upside is probably limited.

SPX vs. Momentum %, 1994-present

The market was looking like we were going to get another leg up for the rally from November 7th but this afternoon's release of the FOMC minutes was a sucker punch to the bulls. Following the Fed's retraction of the taper talk back in September most have believed the Fed will not do anything until at least March 2014, with perhaps a discussion about it in December's meeting. They were surprised to hear the Fed is actively talking about tapering again and we've got a continuation of the Fed's miscommunication with the market, which is only increasing the market's frustration with the Fed's inability to affect anything and now only confusing everyone with their yo-yo responses.

Between Yellen's testimony last week and recent comments from Bernanke there's been an effort to let the market know the Fed will remain super accommodative until it sees further evidence of economic improvement. The only guessing recently has been on the timing of the next taper talk, which most believed will not come until next March. The ZIRP is expected to remain in place until at least 2015. There is no talk of potentially raising rates next year. The Fed has been attempting to make it clear that their ZIRP and their asset purchase program (QE) are two separate things and that relaxing their QE program (tapering their purchases) does not mean tightening. The market's reaction this afternoon says "I don't believe you."

The Fed is battling with mechanical rules (if unemployment drops to this, we do that), calendar dates and a limit on asset purchases vs. flexible rules for all of these. As they battle with how to do this (keep in mind that this is one grand experiment for them that's based only on theories that are debunked by many) they are confusing the markets with back and forth debate. It's not providing a sense of "they know what they're doing" and the uncertainty is what the market hates most. It's like following a guide into the woods on a long hike, assuming the guide knows where he's going, only to find out the guide is clueless, has no compass and the GPS batteries died. You're lost deep in the woods and getting ready to panic, fearing all the hungry bears around you and wondering why you ever trusted this yahoo to begin with.

There's now talk about tapering asset purchases without complete evidence of an improving economy while discussing other ways to entice banks to lend more money, such as stopping interest payments to banks who have deposits with the Fed. They keep pushing the supply side of the equation without realizing the demand side is missing. And these are Nobel-prize-winning economists!

The bottom line is that it appears the Fed is desperately looking for ways to stay accommodative while looking for ways to taper their asset purchases. They've successfully boxed themselves into a corner and now they're wondering how to get out. Many in the market realize we're in another asset bubble and worried that the Fed might not be able to keep it inflated. The web they've woven is starting to tear.

The good news for the Fed is the inflation picture. The bad news for the Fed is the inflation picture. One of the Fed's metrics, in helping to determine when enough is enough and to back off on asset purchases (creating money to do them) is inflation. For a long time their goal has been 2% inflation and have said they would move toward less accommodative if inflation started to worry them. Yesterday's report on CPI, showing 0% for October (+0.1% for Core CPI), gives them plenty of wiggle room to stay accommodative. That should have been market positive but it wasn't.

Perhaps the market is now becoming more worried about the fact that inflation has been budged higher even with the massive accommodation efforts by the Fed. It's another example of the market being much more powerful than even our mighty Fed. In fact, as the chart below shows, DEflation appears to be raising its "ugly" head again. I put ugly in quotes because deflation is like kryptonite to SuperFed -- it makes them quiver in their boots and fearful of a meltdown in the financial world as they know it. Deflation is actually a healthy cycle to go through as it helps clean out the debris, similar to a controlled burn in a forest, so that the markets become stronger overall.

But deflation is bad for borrowers because the value of the dollar increases and that increases the value of debt. Inflation decreases the value of debt over time and that helps the government. The chart shows the inflation rate down near the level it was in the early 1960s. Only the brief deflationary period in 2008-2009 saw the rate lower. It would appear that's where we're headed again, despite the enormous effort by the Fed to prevent it from happening. What's left in their arsenal to stop it?

Year-over year CPI, 1955-October 2013, chart courtesy Business Insider

With all the recent talk about how bullish the stock market is, and how it's expected to head higher into the end of the year. This has the retail trader feeling bullish, listening to the statistic that a market that is up at least +10% through October has a good chance of being another +6% higher into the end of the year. The CNBC cheerleaders have been out in force describing how bullish the market is and it's worked to get the retail investors pouring money into stock funds. In October the amount of money that flowed into equity mutual funds was the largest amount seen since April 2000. That was not a good time to be buying the stock market and I suspect neither is it a good time now. When everyone expects something (year-end rally), the market rarely accommodates them.

Before this afternoon's FOMC I was expecting another leg up to finish the rally tomorrow or by the end of the week. But based on this afternoon's selloff I'm now thinking we might have seen the final high on Monday. That would be fitting considering we had a full moon on Sunday and a quick high Monday morning fit well for a turn. Here's how my highly sophisticated (not to mention proprietary) Moon Phase Trading System (MPTS) looks:

SPX MPTS daily chart

In hindsight we'll know how well the latest full moon marked a high but considering the plethora of warning signals I think it deserves attention. But as I already mentioned, we had a good setup coming into this afternoon for at least a minor new high before completing the rally and while the afternoon selloff dented that expectation it hasn't punctured it yet.

Starting off with the DOW's charts tonight, the weekly chart shows how close it is to what should be strong resistance -- the trend line along the highs from 2000-2007, currently near 16150 and only about 120 points above Monday's high. A trend line drawn across the weekly closing highs since May crosses the 2000-2007 trend line this week, giving us another reason to suspect it could be resistance if tested. There is further upside potential to the 16700 area, as I've discussed previously, but at the moment I do not believe it will get there.

Dow Industrials, INDU, Weekly chart

A closer view shows the uptrend line from October 9th, which was tested with this afternoon's selloff. Currently near 15900, it will be important for the bulls to hold this line. A trend line along the highs from October 30 - November 18 crosses the 2000-2007 trend line Monday, near 16150. But another test of the trend line along the highs from May 2011 - August 2013, which stopped Monday's rally, is currently near 16045 so that would be another resistance level to watch if tested. A continuation of the selling on Thursday would turn the pattern more bearish but would not be confirmed bearish until it breaks below the November 13th low at 15672.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 15,800
- bearish below 15,672

To match up the DOW with the other indexes I'm using the November 7th low as the completion of the correction off the October 30th high. If we're to get a 5-wave move up from November 7th we need one more leg up. As labeled on its 60-min chart below, this afternoon's decline could have completed an a-b-c pullback from Monday, to complete the 4th wave in the move up from November 7th, which leaves one more leg up to complete the move. The 5th wave would equal the 1st wave at 16077, somewhat in between the trend lines mentioned above. This would be a very nice setup for the bears and then we'd have to see what kind of pullback/decline developed to help determine whether we're going to get just a larger pullback or something more bearish. But if the bulls don't step back in right away Thursday morning the first sign of serious trouble for the bulls would be a drop below the November 11th high at 15791 and confirmed bearish below the November 13th low at 15672.

Dow Industrials, INDU, 60-min chart

SPX has the same pattern as the DOW, which also requires an immediate rally on Thursday to save the bullish pattern that calls for one more new high before letting the bears tear into this thing. The November 11th high is near 1773 and today's low was 1777, so only 4 points before it would negate the bullish wave count (at that point the 4th wave would overlap the 1st wave in the move up from November 7th, which is an EW rule no-no in an impulsive rally). Confirmation of trouble for the bulls would be a drop below the November 13th low near 1760. Its 20-dma is located near 1772 on Thursday and a break below that would also be bearish (the 20-dma supported the decline into the November 7th and 13th lows). If the bulls can give us one more leg up I have upside targets pointing to 1804 and 1809 for a final high.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1780
- bearish below 1760

One of the reasons why I've been cautioning against an expectation for another new high is because of the rising wedge pattern for the rally from August. For a true wedge pattern we should see a corrective wave structure for each of the 5 waves inside it. That means the move up from November 7th should be a 3-wave move, which it currently is (more easily seen on the 60-min chart below). It did a little throw-over above the top of the wedge Monday morning and then collapsed back inside the wedge, creating a sell signal. On the daily chart above you can see how it also did a little throw-over above the top of the parallel up-channel from 2009, currently near 1786, and closed back below it today. That's another sell signal. This afternoon's decline broke and closed below the bottom of its wedge pattern, which is the uptrend line from October 9th. The November 13th low held this uptrend line so today's break is important. A 1-day break is recoverable but if it stays below the line, especially after a back test, it stays bearish.

S&P 500, SPX, 60-min chart

The pullback in NDX has already dropped it below its November 11th high, leaving the rally from November 7th a 3-wave move and potentially complete. It's back down to price-level support near 1367 but after breaking its uptrend line from October 9th and then back-testing it this morning it's not looking good for the bulls here. A drop below its November 13th low near 3346 would confirm we've seen the top, at least for now.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 3430
- bearish below 3346

The November 18th high for the RUT looks to have been a truncated finish to its rally. It was unable to climb above its October 30th high at 1123.26 and instead stalled at the 1119.49 projection where the rally from March 2009 has two equal legs up (Monday's high was 1119.98). The truncated finish, if in fact the rally is done, shows considerable weakness in the small caps and if the market is ready for at least a larger pullback we'll likely see the RUT lead the way down. There is also a significant bearish divergence at Monday's high, which makes the current setup look like a bearish double top. This afternoon's low hit its uptrend line from October 9th and bounced a little into the close. It might be good for at least a higher bounce but any bounce followed by a drop below today's low at 1096.46 would be a stronger sell signal.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1120
- bearish below 1095

There's not a lot to go on with many of the other indexes, which leave me with mixed signals tonight. Some support higher prices while others suggest lower from here. The TRAN is in a similar position (could go either way for the rest of the week) and keeping an eye it for clues, especially as it relates to the DOW, should provide us some better information about what the broader market will do. The break of its uptrend line from October 9th today looks bearish. But it's holding its 20-dma (tested this afternoon at its low at 7077) and so far that's bullish. It reached its price projection at 7157, where the 3rd leg of its rally from October 2011 is 162% of the 1st leg, but has now turned back down and that's bearish. But it has another projection at 7444, where the rally from 2009 would have two equal legs up so that's bullish potential. A drop below its November 8th low at 6938 would be confirmed bearish but there's no confirmation yet that we'll see that happen.

Transportation Index, TRAN, Weekly chart

The dollar has been pulling back from its November 8th high in a choppy pattern, which supports the bullish pattern calling for another rally leg. I show on its chart a deeper pullback (to relieve more of the overbought condition on the daily chart) to retest its H&S neckline, near 76.68 by the beginning of December before heading higher again, but with today's bullish engulfing candlestick we might see it head higher right from here. It came close to testing its 20-dma, near 80.52, with this morning's low at 80.56, which is now crossing up through its 50-dma at 80.43. The dollar got a strong spike up this morning on news about what Bernanke was saying (alluding to less money printing ahead) and then another boost higher following the FOMC minutes. If the Fed starts back tracking ("well, uh, what we meant to say is, well, mmm, you know, it's like, you know, maybe we won't taper but we could sooner rather later if, you know, we decide to do it) the dollar could still get another leg down before starting its next rally leg. Regardless, I see higher for the dollar.

U.S. Dollar contract, DX, Daily chart

Last week, on November 12th, gold briefly broke support at its uptrend line from June-October but recovered the next day, which gave gold bulls a chance to make something of support holding. Unfortunately gold could not find enough bulls and the price has once again broken the uptrend line. With deflation rearing its ugly head again, the break below the November 12th low at 1260.50 confirms the breakdown. A drop below the October 15th low at 1251 keeps the bearish wave count intact, which calls for a decline down to at least the 1155 area if not lower toward 1050 in early 2014 before finding a more significant bottom. If you're looking to pick up some gold and silver I think we'll have a "golden" opportunity in early 2014.

Gold continuous contract, GC, Daily chart

Oil has now dropped down closer to its uptrend line from June 2012, currently near 92, which I would expect to hold as support. In addition to the uptrend line there is the 200-week MA at 91.82, which supported the decline into the April low (brief break below it but then the start of the rally into August). I show an expectation for a higher bounce but then lower early next year, looking for a drop down to at least the uptrend line from October 2011 - June 2012, currently near 82.

Oil continuous contract, CL, Daily chart

Following today's lower-than-expected CPI numbers we'll get the PPI numbers tomorrow. The Philly Fed index is expected to show a slowdown and we're probably getting to the point where poorer economic numbers are going to become more worrisome to the market now that the Fed is already hinting it could start to back off on bond purchases. But all reports will still be filtered through the expected Fed reaction, making it difficult to judge how the market will react.

Economic reports and Summary

I see a little more upside potential for the market but it's getting close to giving the all-clear signal to the bears. Some indexes, such as the techs and small caps, have already given off stronger sell signals but the blue chips are still holding on. An immediate rally on Thursday will keep the potential for a new high alive but use a new high as an opportunity to look for a reversal to short. A new high should be followed by at least a larger pullback to correct the rally from August and has the potential to start something a lot more bearish.

With most of the market believing the stock market is going to rally into the end of the year, finishing with the Santa Claus rally, it begs the question about whether there are too many now expecting this to happen. We all know the market doesn't like to do what most expect. I think we're in the topping zone and bears should start looking for their next meal. Bulls need to get very defensive here -- upside potential is dwarfed by downside risk.

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

Services Candidates

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)
TTC, HBI, TMO, ACT, FNGN, IBB

(bearish ideas)
XEC, NHI, VTR, CLR, SLB, COH, HCN,



NEW DIRECTIONAL CALL PLAYS

eBay Inc. - EBAY - close: 50.39 change: -1.74

Stop Loss: 49.45
Target(s): 56.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
EBAY was a big loser today with a -3.3% decline but we suspect the weakness is overdone. EBAY's PayPal unit is growing very fast and is surging in the mobile payments industry. You'll notice that the weakness today stalled near $50 because the $50 level has been major support for months.

Tonight we are suggesting a trigger to buy calls at $50.65. If triggered our target is $56.00 over the next several weeks.

Trigger @ $50.65

- Suggested Positions -

buy the 2014 Jan $52.50 call (EBAY1418a52.5) current ask $1.62

Annotated Chart:

Entry on November -- at $---.--
Average Daily Volume = 11 million
Listed on November 20, 2013


Michael Kors - KORS - close: 79.09 change: -0.84

Stop Loss: 73.75
Target(s): 83.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
KORS is in the services sector. The company operates as a specialty retailer of apparel and accessories. Long-term the trend is higher but short-term KORS is correcting lower. Monday saw KORS produced a bearish reversal pattern and shares have been down three days in a row now. We suspect that KORS will find support near its 50-dma.

Tonight we're suggesting a buy-the-dip trigger at $76.50 with a stop loss at $73.75. If triggered our multi-week target is $83.00.

Trigger: buy the dip @ $76.50

- Suggested Positions -

Buy the 2014 Jan $80 call (KORS1418a80) current ask $3.30

Annotated Chart:

Entry on November -- at $---.--
Average Daily Volume = 7.2 million
Listed on November 20, 2013



In Play Updates and Reviews

Taper Talk Tips The Market

by James Brown

Click here to email James Brown

Editor's Note:

Taper talk from a fed governor and the October FOMC minutes helped push stocks lower for a third day.

JNJ and GLD hit our entry triggers.
PLL and RRGB hit our stop loss.


Current Portfolio:


CALL Play Updates

Aon Plc. - AON - close: 80.43 change: -0.10

Stop Loss: 79.45
Target(s): 85.00
Current Option Gain/Loss: -23.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
11/20/13: AON is still holding up. Shares found some support near the $80.00 level late this afternoon. A bounce from here could be used as a new bullish entry point.

- Suggested Positions -

Long 2014 Jan $82.50 call (AON1418a82.5) entry $1.70

11/18/13 new stop loss @ 79.45
11/13/13 new stop loss @ 78.75

Entry on November 08 at $80.50
Average Daily Volume = 2.3 million
Listed on November 06, 2013


Alliant Techsystems Inc. - ATK - close: 116.02 change: -1.00

Stop Loss: 113.90
Target(s): 120.00
Current Option Gain/Loss: -25.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/20/13: Caution! Today's action in ATK feels a little bit like a top. The stock saw a very brief spike higher first thing this morning to a new all-time high and then reversed. The stock closed on its lows forming a bearish engulfing candlestick reversal pattern. ATK should have some support near $115 and its 10-dma but there is no guarantee. More conservative investors may want to adjust their stop closer to the $115 level.

Earlier Comments:
You could certainly argue that ATK is overbought with a multi-week rally but thus far the momentum does not seem to be slowing down. The stock does have potential resistance at its 2007 highs in the $120.50-121.00 zone. I am setting our target at $120.00. More aggressive traders could aim higher.

FYI: ATK will begin trading ex-dividend on November 18th, 2013. The quarterly cash dividend should be 26 cents.

- Suggested Positions -

Long DEC $120 call (ATK1322L120) entry $1.80

11/14/13 trade opened on gap higher at $116.80. trigger was 116.55

Entry on November 14 at $116.80
Average Daily Volume = 321 thousand
Listed on November 13, 2013


Cardinal Health, Inc. - CAH - close: 64.78 change: -0.16

Stop Loss: 61.80
Target(s): 67.50
Current Option Gain/Loss: +72.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/20/13: CAH is still holding up reasonably well. The stock managed to tag a new high this morning and then spent the rest of the session churning sideways.

More conservative traders may want to just take profits early or investors could sell half their position to lock in some gains. Look for support near $62.00.

- Suggested Positions -

Long 2014 Jan $65 call (CAH1418a65) entry $0.84

11/19/13 investors may want to take some money off the table with our option up +84%.
11/16/13 new stop loss @ 61.80
11/13/13 new stop loss @ 61.40

Entry on November 11 at $62.50
Average Daily Volume = 3.8 million
Listed on November 09, 2013


The Chubb Corp. - CB - close: 94.56 change: -0.14

Stop Loss: 93.75
Target(s): 99.75
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Comments:
11/20/13: The intraday bounce in CB briefly traded above resistance near $95.00 but did not hit our suggested entry point. There is no change from my prior comments.

I am suggesting a trigger to buy calls at $95.25. If triggered our target is $99.75. FYI: The Point & Figure chart for CB is bullish with a $104 target.

Trigger @ 95.25

- Suggested Positions -

buy the 2014 Jan $95 call (CB1418a95) current ask $1.61

Entry on November -- at $---.--
Average Daily Volume = 967 thousand
Listed on November 18, 2013


Costco Wholesale - COST - close: 122.76 change: -0.87

Stop Loss: 121.40
Target(s): 129.00
Current Option Gain/Loss: + 49.2%
Time Frame: Exit PRIOR to earnings on Dec. 11th
New Positions: see below

Comments:
11/20/13: I probably would not panic yet but the action in COST today is bearish. Shares broke down under short-term technical support at its 10-dma and looks poised to test $122 soon. If that level breaks then COST is probably headed for likely support at $120.00. currently our stop is at $121.40. Readers may want to take profits now.

- Suggested Positions -

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

11/18/13 today's session has created a bearish reversal candlestick pattern. Traders may want to take profits now
11/16/13 new stop loss @ $121.40
11/09/13 new stop loss @ $119.40

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


Cognizant Technology - CTSH - close: 92.96 change: -0.46

Stop Loss: 91.45
Target(s): 99.00
Current Option Gain/Loss: +11.6%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/20/13: CTSH is down three days in a row but it looks like traders were buying the dip at the 10-dma late this afternoon. More conservative traders may want to adjust their stop higher again.

Our target is $99.00. More aggressive traders may want to aim higher. The Point & Figure chart for CTSH is bullish with a $107 target.

- Suggested Positions -

Long 2014 Jan $95 call (CTSH1418a95) entry $2.15

11/18/13 new stop loss @ 91.45
11/16/13 new stop loss @ 89.85

Entry on November 12 at $91.25
Average Daily Volume = 2.1 million
Listed on November 11, 2013


The Walt Disney Co. - DIS - close: 69.23 change: +0.11

Stop Loss: 67.00
Target(s): 77.50
Current Option Gain/Loss: Unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
11/20/13: DIS' intraday bounce failed under resistance at the $70.00 level.

The newsletter is suggesting a trigger to buy calls at $70.25. If triggered our multi-week target is $77.50. More aggressive investors could aim higher. The Point & Figure chart for DIS is bullish with an $83 target.

Trigger @ 70.25

- Suggested Positions -

buy the 2014 Jan $70 call (DIS1418a70) 5

Entry on November -- at $---.--
Average Daily Volume = 6.6 million
Listed on November 14, 2013


GNC Holdings - GNC - close: 58.15 change: -1.28

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:
11/20/13: It as kind of an ugly day for GNC with a drop below both its 10-dma and 20-dma. The next level of support could be $57.00 near its early November low or the 50-dma near $56.00. I would be tempted to buy a dip near its 50-dma (we'd have to adjust our stop loss).

Currently our plan is unchanged with a suggested trigger to buy calls at $60.50.

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


Johnson & Johnson - JNJ - close: 95.15 change: +0.29

Stop Loss: 93.40
Target(s): 99.75
Current Option Gain/Loss: - 1.9%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/20/13: JNJ continues to show relative strength. The stock broke through the $95.00 level and hit our suggested entry trigger at $95.25.

Earlier Comments:
If JNJ can breakout past the $95.00 level the next logical spot for resistance is the $100.00 mark. Our multi-week target is $99.75.

- Suggested Positions -

Long 2014 Jan $95 call (JNJ1418a95) entry $1.51

Entry on November 20 at $95.25
Average Daily Volume = 6.8 million
Listed on November 19, 2013


Lockheed Martin - LMT - close: 137.19 change: -1.78

Stop Loss: 134.90
Target(s): 148.50
Current Option Gain/Loss: -25.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
11/20/13: LMT underperformed the market with a -1.28% decline. The stock closed on its lows, which doesn't really bode well for tomorrow morning. I am looking for some short-term support near $136.00. I am not suggesting new positions at this time.

Earlier Comments:
I would not be surprised to see LMT paused at the $140 level, which might be temporary round-number resistance.

- Suggested Positions -

Long 2014 Jan $140 call (LMT1418a140) entry $2.20

11/13/13 new stop loss @ 134.90

Entry on November 07 at $137.25
Average Daily Volume = 1.5 million
Listed on November 06, 2013


National Oilwell Varco, Inc. - NOV - close: 83.36 change: +0.20

Stop Loss: 81.25
Target(s): 88.50
Current Option Gain/Loss: -18.6%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
11/20/13: NOV gave back most of its gains today but the stock still managed to outperform the major indices with a +0.24% gain. I am not suggesting new positions at this time.

- Suggested Positions -

Long 2014 Jan $85 call (NOV1418a85) entry $2.25

11/16/13 trade opened on gap higher at $83.98. suggested trigger was $83.75

Entry on November 15 at $83.98
Average Daily Volume = 3.0 million
Listed on November 14, 2013


United Parcel Service - UPS - close: 100.13 change: -0.59

Stop Loss: 98.95
Target(s): 108.00
Current Option Gain/Loss: -48.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
11/20/13: UPS has pulled back to potential support at the $100.00 mark and its 10-dma. I would buy calls on a bounce from current levels. I am adjusting our stop loss to $98.95. More conservative traders may want to use a stop closer to $99.50.

- Suggested Positions -

Long 2014 Jan $105 call (UPS1418a105) entry $0.98

11/20/13 new stop loss @ 98.95

Entry on November 14 at $101.25
Average Daily Volume = 3.8 million
Listed on November 13, 2013


WellPoint Inc. - WLP - close: 92.76 change: +0.76

Stop Loss: 88.25
Target(s): 99.00
Current Option Gain/Loss: +60.8%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/20/13: The rally in WLP continues. The stock outperformed the market with a +0.8% gain. WLP is now up six days in a row and up eight out of the last nine sessions. I would not chase it here. Wait for a pullback.

FYI: The Point & Figure chart for WLP is bullish with a $103 target.

- Suggested Positions -

Long 2014 Jan $95 call (WLP1418a95) entry $1.15

Entry on November 18 at $90.50
Average Daily Volume = 2.6 million
Listed on November 16, 2013


PUT Play Updates

SPDR Gold ETF - GLD - close: 120.12 change: -2.83

Stop Loss: 124.25
Target(s): 115.50
Current Option Gain/Loss: +10.5%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/20/13: The U.S. dollar saw a decent bounce today and gold plunged in response. The gold ETF gapped down at $121.67 and then fell to a -2.3% decline. This is a new four-month low. Shares hit our trigger to buy puts at $121.00 when gold and stocks turned lower following the release of the FOMC minutes this afternoon.

Earlier Comments:
Traders may want to limit their position size to limit risk.

Our target is $115.50. More aggressive traders may want to aim lower since the Point & Figure chart for GLD is bearish with a $110 target.

- Suggested Positions -

Long 2014 Jan $115 PUT (GLD1418m115) entry $1.80

Entry on November 20 at $121.00
Average Daily Volume = 7.0 million
Listed on November 12, 2013



Longer-Term Play Updates



Vanguard FTSE Europe ETF - VGK - close: 56.15 change: -0.52

Stop Loss: 53.90
Target(s): Sell half @ $58.00, sell the rest at $63.00
Current Option Gain/Loss: +30.5%
Time Frame: exit PRIOR to 2014 March option expiration
New Positions: see below

Comments:
11/20/13: The German market eked out a gain but the rest of Europe was lower. Another down day in the U.S. didn't help. Shares of VGK slipped -0.9%.

Earlier Comments:
Don't forget that we have two exit targets for this trade!

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

Pall Corp. - PLL - close: 80.91 change: -1.25

Stop Loss: 81.25
Target(s): 86.00
Current Option Gain/Loss: -45.4%
Time Frame: Exit PRIOR to earnings on Nov. 26th
New Positions: see below

Comments:
11/20/13: PLL shot lower at the opening bell this morning. That may have been a reaction to lackluster analyst comments on the stock before the bell. PLL underperformed the market with a -1.5% decline and hit our new stop loss at $81.25.

- Suggested Positions -

DEC $85 call (PLL1321L85) entry $1.10 exit $0.60* (- 45.4%)

11/20/13 stopped out
11/19/13 new stop loss @ 81.25
11/06/13 new stop loss @ 79.75

chart:

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


Red Robin Gourmet Burgers Inc. - RRGB - close: 77.89 change: -1.66

Stop Loss: 78.70
Target(s): 88.00
Current Option Gain/Loss: -65.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
11/20/13: The stock market's afternoon sell off today helped push RRGB significantly lower. Shares underperformed the market with a -2.0% decline and broke down below support at the $78.80 level. Our stop was hit at $78.70.

- Suggested Positions -

Dec $85 call (RRGB1322L85) entry $1.30* exit $0.45** (-65.3%)

11/20/13 stopped out
**option exit price is an estimate since the option did not trade at the time our play was closed.
11/18/13 new stop loss @ 78.70
11/18/13 trade opened on gap higher at $81.62, trigger was 81.55
*option entry price is an estimate since the option did not trade at the time our play was opened.

chart:

Entry on November 18 at $81.62
Average Daily Volume = 157 thousand
Listed on November 16, 2013