Option Investor
Newsletter

Daily Newsletter, Thursday, 12/26/2013

Table of Contents

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

Market Wrap

Santa's Rally Keeps Giving

by Thomas Hughes

Click here to email Thomas Hughes
The Santa Rally extended gains and helped the market set new all time highs.

Introduction

The markets were fairly quiet this morning while most of the world woke up from its holiday stupor. Asian markets were the most active but ended the day mixed despite the Santa Rally in the U.S. markets. Japan and Hong Kong were both positive while mainland China gave up more than 1% on liquidity fears. European shares were higher but their trading day was shortened and marked by low volume. Low volume was the word of the day in the U.S. markets as well. Futures trading was positive ahead of the economic data and gained slightly after it. The S&P opened about 5 points higher and held those gains throughout the morning. Lunchtime saw the indices flirt with new intraday highs and then again by mid afternoon. The trading day was quiet but moved steadily higher until the end.


The Economic Data

It's been two weeks since the last time I was able to touch base on jobless claims. In that time claims have made a worrisome spike. This weeks claims fell back to lowe levels but there could be more volatility in this number in the coming weeks. It could be that seasonal adjusting is having some affect. Today, initial claims fell by 42,000 from a revised 380,000 to hit 338,000. The four week moving average added just over 4,000 to reach 348,000. The largest declines in new claims come from New York, Pennsylvania and Georgia accounting for a net drop of -40,000 claims. California and Illinois top the list for increases in claims with +4,600 and +3,686 respectively. These two states cited layoffs in manufacturing, retail and service industries. Jobs has been a cornerstone of the recovery and one of the key reasons tapering was begun last week. If the increase in jobless claims is persistnent it could lead the Fed to hold off on tapering next month.


Continuing claims gained 46K from a revised 2.877 million to reach 2.93 million. This is the third week of gains in this figure and the third week since it hit a 5 year low. At this time the figures are still below 3 million but are clearly on the rise. This weeks initial claims could push the continuing claims higher in the next week or two. Today's data is not bad per se but if the levels of unemployment claims keeps rising or if it even just maintains the levels set this week and last week then overall unemployment levels are in danger of rising. It will be two weeks until the next release of NFP and Unemployment data.


Total claims for unemployment fell by 0ver 130,000 to hit 4.279 million. The total claims has spiked along with the initial, today's drop does not bring it back to the low levels seen just two weeks ago. Total claims is still above 4 million and, based on the other two data points, looks like it may stay above 4 million at least for the next week or so. Unless the cause for the spike in the two shorter term data points is not long lasting, or job creation picks up. Of the three, I think total claims is the most important to watch. Seasonal, short term and one-off events that can raise initial and continuing claims don't always come through into this number, making it a better judge of the underlying trend.


Data this week and next week if pretty light. Next week is the end of the month as well as the New Year which means the market will be closed on Wednesday. Data usually released the first Friday of the month, NFP and Unemployment, is being pushed back to the next week. Until then there are a few data points to be on the alert for, including next Thursday's unemployment claims figures.


Story Stocks And The Retail Sector

There was not a lot of news on the wires today. The big headline was the disspointing performance of Federal Express in delivering packages on time. The company was swamped with more than expected traffic and was unable to deliver all as promised. The headline is bad in terms of the holiday, many plans were spoiled because of late or still as yet undelivered packages. However, once you look at the problem from a traders perspective it starts to look like a symptom of good things. The reason why Fed Ex had so much trouble over the past few days is because they received more than expected package volume. A lot more. The company had planned for a certain amount of traffic based on last years figures and this years performance to date. The bad news for them, and perhaps good news for retailers, is that online shopping in the weekend before Christmas increased by 37% over last year. This should become evident in earnings for Fed EX and the online retailers. Today shares of FDX traded at new all time highs. The stock is making a bounce from the short term moving average and recently broken above resistance with high volume. The indicators are bullish at this time and could indicate higher stock prices in the near to short term. Support levels exist just below the current levels at the $140 level, the short term moving average and at $130.


The retail sector has been in the spot light as usual for this time of the year. Depending on where you get your data the sector is doing better or worse than expected. Physical sales at brick-and-mortar stores is down but on line sales are up. Mastercard released a statement this mornings saying that holiday sales were up more than 2% over last year. Post holiday shopping could help to increase that gain. Gift cards are a big segment of the retail sector for the holiday season and the next two weeks are very important because of that. Shoppers are in the malls right now spending those gift cards, in order for the retailers to be able to book those gift card sales before the end of the year the shoppers have to spend it. Factors that could impact post holiday and gift card sales are heavy discounting, returns and exchanges. The XRT Retail Spyder traded to the upside today in continuation of the moving average bounce that began last week with the FOMC taper decision. The indicators are bullish and pointing to higher stock prices. However, there is resistance ahead at the previous high near $89.00. Support is at the moving average and the $85 level. At this time it looks like the XRT will at least test resistance. Whipsaws are possible so a confirmed break is neccesary for a longer term bullish stance.


Fed EX competitor UPS said that they too had experienced higher than expected volume over the holiday week. What they didn't say was that they had any problems. In fact, UPS said it operated at nearly 99% success rate and experienced no delays. UPS actually traded to the downside today. The stock has been trending up and even out pacing the rally in Fed Ex. The indicators are bullish and share prices are near all time highs. Today's news from Fed Ex would have I thought helped to send UPS higher and Fed Ex lower instead of the opposite. Today's price action is likely a combination of the amount of news coverage Fed Ex is getting and light trading volumes.


Amazon, the company responsible for selling a lions share of online merchandise, traded up today. The stock has been able to maintain share prices above $400, a resistance level broken last week after the Fed meeting. This level could be the starting point of a post holiday rally driven by better than expected sales. If the news that online sales in the week prior to Christmas jumped 37% we can assume that Amazons sales also jumped a comparable percent as well. At this time the indicators are bullish. The $400 level will be very important over the next week, if it can hold the stock could keep moving higher, if not first support is likely around $375 with the next likely target around $350.


Gold And The Gold Index

Gold got a boost today. The metal gained about $10 and reclaimed the $1200 handle. Gold prices have been under a lot of pressure lately and could continue to move lower. The taper adds a new dynamic to the trade however. Economic data will continue to drive the Fed's taper decisions, the data and the decisions will drive gold prices along with the dollar and other major world currencies. Before the taper began there were two questions; will the fed taper and if it does, how much? Now the questions have compounded; will the Fed taper the same? Will the Fed taper more, less? If the data weakens, jobs growth slows and unemployment rises will the Fed re-increase QE, Anti-taper if you will. I still don't see a bottom in gold, or a reason to buy in but that doesn't mean it is not there. For now I remain bearish or at least firmly neutral with a bearish bias on this metal. The Gold Index is still drifting lower. The index barely budged during last weeks massive Fed induced rally and does not appear to be gaining in bullish traction. The indicators on the long and short term charts are mixed while shares trade just below the 30 day EMA. Resistance is at the moving average with downside targets at $80, $75 and $65 for a full retracement of the 2008 -2009 bull market in gold.


Oil And The Oil Index

Oil prices traded to the upside today but did not break the $100 level. US WTI ended the day at $99.61, Brent at $111.98. Energy prices are being heavily influenced by expectations and world events at this time. Supply concerns from Libya and South Sudan wrestle with output increases planned by Iraq, Iran and other countries. Saudi Arabia says there is no shortage of demand at the same time more and more production is coming on line, especially in U.S. shale oil deposits in the Marcellus, Bakken and Eagle Ford regions. Meanwhile, Kazakstan's Kashagan Oil Field, one of the largest on Earth, remains closed due to leaking pipeline; there will be no decision on it's reopening for weeks at the least. The Oil Index extended its gains today as well. The index broke above the 1480 resistance again and is heading up to retest the most recent high around 1510. The indicators are bullish and gaining strength on the short term daily charts, on the long term weekly charts they are bullish but in decline. The index is bullish but may have trouble breaking out to new highs. The resistance level of 1510 will be crucial for this trade. If the index is able to break above my first target is 1550. If the index does not break above there are several support levels between the current level and the long term trend line around 1435-1450.


The Yen

The yen extended its losses versus the dollar and most other world currencies. Abenomics and Fed Tapering are pulling the dollar and yen apart and could take the pair to a long term high. Last weeks Fed Taper decision caused the pair to break above the 1.03.75 resistance set last spring and now the pair is moving higher again. The four trading days between the Fed decision and today were a consolidation above resistance now support that was confirmed with todays long white candle. Indicators are bullish in the long and short term, my current targets for this pair exist at 110 and 120. Changes to the taper, QE or Abenomics are risks to this trade.


The VIX

The VIX is trading at long term low levels. Almost approaching pre-financial crisis levels, that low. At this time the market is exibiting little fear, perhaps it finally believes the recovery is really on. However, the low level of fear may be cause to be afraid. I can't help thinking about my uncle's point about the Affordable Care Act. Of course it is good for people to have insurance but the financial burden on families will surely have an impact on spending and the economy. It may be nothing and appear as a blip on the radar but it may be not. For now, the VIX is low and the trend is up.


The Indices

The markets made a slow and steady drive higher today. The S&P 500 and Dow Jones Industrial Average both closed at new record highs. The caveat is that it is the holiday week and volumes are very light. Adding to that is the fact that Christmas was on Wednesday so it is really easy to take Thursday and Friday off for a nice long vacation. However, discounting that, the index is looking rather robust at this time. The index has been moving steadily higher since the Fed decision last Wednesday. Indicators are bullish and gaining strength, pointing to a continuation of the current trend.


Using the SPY ETF as a reference point on volume we can see that volume on Tuesday and today was light, but not excessively so. A little under average today, not too bad. The volume on Wednesday, Thursday and Friday of last week are what is important for me today. The Fed induced rally came with more than double average daily volume for those three days of the week, just before volume fell off for the holiday. I want to point out that the volume spike on the SPY was accompanied by a strong moving average bounce and a strong white candle.


Looking at the chart of the Dow we can see that a similar volume spike occurred in this index last Wednesday. At the same time the index made a long white candle and made a new high. The MACD and stochastic indicators are bullish on this index as well and point to higher prices. The caveat is that there may be some backing and filling over the next week as traders, investors and institutional money comes back to work. I would expect some form of consolidation at the least if not an actual pull back, maybe as far as the 30 day EMA. There is no technical resistance at this time, support targets on a pull back are around 16,200 and 16,000.


The holidays are still upon us and Santa is still driving the bulls to new highs. 2013 was a pretty good year for the stock markets. The S&P, Dow, Russels and others are all at new all time highs while the Nasdaq is making new highs not seen since the DOTCOM days. To put things in perspective the Dow is up about 25% and the S&P about 30%, for the year. This makes an attractive place for taking some profits, if just to book some nice gains. I don't think there will be any massive rush to get out of the market, just the chance that some profit taking may occur before the end of the year.

Looking into 2014 what could the markets bring? At this time the trend is up with no end in sight. The trend could continue but the markets are long overdue for a major correction. A correction could occur but what will cause it? Jobless claims have been elevated, not a lot but enough to give us reason to start speculating the job recovery may have stalled. The impact of the ACA is still an unknown and could also raise fear in the market, however I think the ACA as a catalyst is still a couple of months away. It will take data to move the market in either event. If job growth slows or stops, or if the ACA hurts consumer spending, then the Fed may have to stop or reverse the taper but this is all wild speculation. Regardless of market direction, there will be ample opportunity for savvy options traders to profit. And speaking of the end of the year, the next time I write the Wrap it will be next year.

And I almost forgot that earnings season starts in only two weeks with Alcoa on January 9th!

Until then, remember the trend!

Thomas Hughes

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New Option Plays

Healthcare & Industrial Goods

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

UnitedHealth Group - UNH - close: 74.85 change: +0.72

Stop Loss: 73.95
Target(s): 82.50
Current Option Gain/Loss: Unopened
Time Frame: Exit PRIOR to earnings on January 16th.
New Positions: Yes, see below

Company Description

Why We Like It:
UNH is in the healthcare sector. The company offers healthcare insurance plans. The stock has been volatile of late as investors reacted to UNH's earnings report in October and some legislation that affected Obamacare and Medicare payments. Through all of the volatility in UNH over the past few months the stock has created what appears to be a potential inverse head-and-shoulders pattern, which is bullish. The neckline (in this case resistance) of the pattern is in the $75.00-76.00 zone. A breakout would suggest a rally into the $83-84 area.

Tonight we're suggesting a trigger to buy calls at $76.05, which would be a new all-time high for UNH. If triggered at $76.05 our short-term target is $82.50 but we will plan to exit prior to UNH's earnings report on January 16th. Our target is optimistic and we'll make adjustments as needed. We may end up exiting closer to $80.00 instead.

Trigger @ 76.05

- Suggested Positions -

Buy the Feb $75 call (UNH1422B75) current ask $2.57

Annotated Chart:

Entry on December -- at $---.--
Average Daily Volume = 4.4 million
Listed on December 26, 2013


United Technologies - UTX - close: 112.69 change: +1.22

Stop Loss: 110.40
Target(s): 118.50
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to earnings in late January
New Positions: Yes, see below

Company Description

Why We Like It:
UTX is in the industrial goods sector. We've seen some of the market's strongest performers rise recently from the industrial goods sector. UTX is one of them with a sharp bounce from its December lows. Today's rally (+1.0%) is a bullish breakout to new all-time highs. We suspect this momentum will continue.

Today's intraday high was $112.76. I am suggesting a trigger to buy calls at $113.05. If triggered our target is $118.50 but we'll plan on exiting prior to UTX's earnings report in late January. More aggressive investors might want to consider aiming higher. The Point & Figure chart for UTX is bullish with a $139 target.

Trigger @ 113.05

- Suggested Positions -

buy the Feb $115 call (UTX1422B115) current ask $1.68

Annotated Chart:

Entry on December -- at $---.--
Average Daily Volume = 2.8 million
Listed on December 26, 2013



In Play Updates and Reviews

IWM & LMT Hit Our Targets

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market continues to rally with another round of new record highs. There are only three trading days left for 2013.

The small cap Russell 2000 ETF (IWM) and Lockheed Martin (LMT) both hit our bullish exit targets today.


Current Portfolio:


CALL Play Updates

Advance Auto Parts - AAP - close: 110.17 change: -0.11

Stop Loss: 107.95
Target(s): 117.50
Current Option Gain/Loss: -15.3%
Time Frame: exit PRIOR to earnings in February
New Positions: see below

Comments:
12/26/13: AAP spent the day after Christmas churning sideways. I don't see any changes from my prior comments. More conservative traders could wait for a rally past $111.00 as an alternative entry point.

Earlier Comments:
If triggered our short-term target is $117.50. Longer-term traders may want to aim higher since the Point & Figure chart for AAP is bullish with a $140 target.

- Suggested Positions -

Long Mar $115 call (AAP1422c110) entry $3.90*

12/24/13 triggered @ 110.65
*option entry price is an estimate since the option did not trade at the time our play was opened.
12/21/13 adjust the option strike from the January $110 to the March $115 call

Entry on December 24 at $110.65
Average Daily Volume = 923 thousand
Listed on December 14, 2013


Aon Plc. - AON - close: 83.47 change: -0.15

Stop Loss: 81.30
Target(s): 84.85
Current Option Gain/Loss: +23.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
12/26/13: AON bounced off its morning lows near $83.00 but failed to breakout past short-term resistance near $84.00. More conservative traders may want to exit early now. I am not suggesting new positions.

- Suggested Positions -

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

12/18/13 new stop loss @ 81.30, adjust exit target to $84.85
12/17/13 new stop loss @ 80.90
12/07/13 new stop loss @ 80.75
11/23/13 new stop loss @ 79.85
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


Chicago Bridge & Iron - CBI - close: 82.03 change: +0.35

Stop Loss: 77.70
Target(s): 89.50
Current Option Gain/Loss: + 9.6%
Time Frame: Exit PRIOR to CBI's earnings report in February
New Positions: see below

Comments:
12/26/13: CBI spent today's session churning sideways on either side of the $82.00 level.

If you're looking for a new entry point consider waiting for a dip closer to $80.00, which should be new support.

Earlier Comments:
Our target is $89.50. We want to exit prior to CBI's earnings report in February.

- Suggested Positions -

Long April $85 call (CBI1419D85) entry $3.10

Entry on December 19 at $80.35
Average Daily Volume = 1.5 million
Listed on December 18, 2013


Honeywell Intl. - HON - close: 91.10 change: +0.65

Stop Loss: 87.90
Target(s): 94.75
Current Option Gain/Loss: +20.5%
Time Frame: exit PRIOR to earnings in late January
New Positions: see below

Comments:
12/26/13: HON continues to show a little relative strength with shares outpacing the broader market thanks to a +0.7% gain on Thursday. This is another new high. At this point traders may want to wait for a new dip near $90.00 if you're looking for a new entry point.

Earlier Comments:
Our short-term target is $94.75. More aggressive traders may want to aim for the $97-100 zone instead.

- Suggested Positions -

Long Mar $92.50 call (HON1422c92.5) entry $1.75*

12/24/13 triggered @ 90.30
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on December 24 at $90.30
Average Daily Volume = 2.4 million
Listed on December 23, 2013


Helmerich & Payne - HP - close: 83.14 change: +0.11

Stop Loss: 79.90
Target(s): 87.00
Current Option Gain/Loss: +11.1%
Time Frame: exit PRIOR to January option expiration
New Positions: see below

Comments:
12/26/13: After Tuesday's big gain in HP the stock spent Thursday's session drifting sideways.

Our short-term target is $87.00 but we will plan to exit prior to January option expiration.

- Suggested Positions -

Long Jan $82.50 call (HP1418a82.5) entry $1.80
12/24/13 new stop loss @ 79.90

Entry on December 19 at $81.75
Average Daily Volume = 1.0 million
Listed on December 18, 2013



LyondellBasell Industries - LYB - close: 79.33 change: +0.16

Stop Loss: 77.75
Target(s): 85.00
Current Option Gain/Loss: Unopened
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
12/26/13: LYB continued to inch higher on Thursday. There is no change from my Tuesday night new play comments.

I am suggesting a trigger to buy calls at $80.25. If triggered our short-term target is $85.00.

Trigger @ 80.25

- Suggested Positions -

Buy the Feb $80 call (LYB1422B80) current ask $2.50

Entry on December -- at $---.--
Average Daily Volume = 3.1 million
Listed on December 24, 2013


Open Text Corp. - OTEX - close: 91.52 change: -0.62

Stop Loss: 88.90
Target(s): 98.50
Current Option Gain/Loss: - 1.7%
Time Frame: exit PRIOR to February expiration
New Positions: see below

Comments:
12/26/13: OTEX suffered some profit taking on Thursday. That's not too surprising. I pointed out on Tuesday that the upward momentum had temporarily stalled and that it would likely see a dip. Look for support near $90.00.

Our target is $87.90. FYI: The Point & Figure chart for OTEX is bullish with a $107 target.

- Suggested Positions -

Long FEB $95 call (OTEX1422b95) entry $2.90*
12/23/13 new stop loss @ 88.90
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on December 20 at $91.05
Average Daily Volume = 325 thousand
Listed on December 19, 2013


Polaris Industries, Inc. - PII - close: 144.23 change: +1.27

Stop Loss: 138.90
Target(s): 149.00
Current Option Gain/Loss: + 4.9%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/26/13: PII extended its gains with a +0.88% advance on Thursday. At the moment I would not launch new positions.

Earlier Comments:
Our multi-week target is $149.00. More aggressive traders could aim higher since the Point & Figure chart for PII is bullish with a $158 target.

- Suggested Positions -

Long Mar $150 call (PII1422c150) entry $4.48
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on December 23 at $142.25
Average Daily Volume = 457 thousand
Listed on December 21, 2013


Sturm, Ruger & Co. Inc. - RGR - close: 73.61 change: -0.21

Stop Loss: 71.75
Target(s): 79.50
Current Option Gain/Loss: -15.0%
Time Frame: 6 weeks
New Positions: see below

Comments:
12/26/13: RGR is still consolidating sideways below short-term resistance near $74.00 and its simple 30-dma. If you are looking for a new entry point I would consider waiting for a rally past $74.35.

Earlier Comments:
Currently RGR is hovering below short-term resistance near $74.00. A breakout here could spark a short squeeze. The most recent data listed short interest at 32% of the very small 18.8 million share float.

- Suggested Positions -

Long Apr $75 call (RGR1419D75) entry $4.00

12/24/13 triggered @ 74.25

Entry on December 24 at $74.25
Average Daily Volume = 294 thousand
Listed on December 23, 2013


Tiffany & Co - TIF - close: 90.97 change: -0.06

Stop Loss: 88.45
Target(s): 98.50
Current Option Gain/Loss: -21.3%
Time Frame: exit PRIOR to February option expiration
New Positions: see below

Comments:
12/26/13: TIF turned in another quiet holiday session with shares drifting sideways below resistance near $91.50. If you're looking for a new entry point consider waiting for a breakout past $91.50.

- Suggested Positions -

Long FEB $95 call (TIF1422b95) entry $2.15

12/26/13 TIF stock seems unaffected by the negative legal news from Monday
12/23/13 TIF reacts to news that a Dutch court orders it to pay Swatch $449 million in damages.

Entry on December 18 at $91.25
Average Daily Volume = 1.25 million
Listed on December 16, 2013


Tractor Supply Co. - TSCO - close: 76.12 change: +0.04

Stop Loss: 73.75
Target(s): 79.75
Current Option Gain/Loss: + 4.6%
Time Frame: EXIT PRIOR to January expiration
New Positions: see below

Comments:
12/26/13: The early morning gains in TSCO faded and shares closed virtually unchanged on the session. I would not be surprised to see TSCO retest the $75.00 level as support again.

Earlier Comments:
Our short-term target is $79.75. More aggressive traders may want to aim higher since the Point & Figure chart just produced a new quadruple top breakout buy signal and is forecasting an $87 target.

I am listing the January calls. I'd rather play February options but TSCO doesn't have any Februarys or Marchs available yet and the bid/ask spread on the April options is getting a bit wide. That means we only have four weeks on these January calls.

- Suggested Positions -

Long Jan $75 call (TSCO1418a75) entry $2.15

12/23/13 triggered on gap higher at $77.00. Suggested trigger was $75.60

Entry on December 23 at $77.00
Average Daily Volume = 875 thousand
Listed on December 21, 2013


United Parcel Service - UPS - close: 104.67 change: +0.21

Stop Loss: 101.90
Target(s): 108.00
Current Option Gain/Loss: + 8.1%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
12/26/13: UPS was making headlines on December 24th and the 25th. The company had so much business that its delivery system was actually overloaded. According to a company spokesperson a small number of packages were not delivered before Christmas.

On one hand it's terrible news for the clients and families that did not receive their bundles as expected. On the other hand it might suggest a very strong month of business for UPS (and its rival FedEx). Shares of UPS seemed unaffected by the news today. The stock notched another new record high.

- Suggested Positions -

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

12/24/13 new stop loss @ 101.90
12/21/13 new stop loss @ 100.90
12/12/13 new stop loss @ 100.45
11/23/13 new stop loss @ 99.75
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


Wyndham Worldwide - WYN - close: 73.20 change: +0.49

Stop Loss: 71.75
Target(s): 78.50
Current Option Gain/Loss: -25.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/26/13: WYN continues to drift higher and today marks a new all-time closing high for the stock. I would be tempted to launch new positions here or you could wait for a rally above Monday's intraday high (73.48).

FYI: The Point & Figure chart for WYN is bullish with a $102 target.

- Suggested Positions -

Long Feb $75 call (WYN1422B75) entry $1.95*

12/23/13 triggered on gap open at $73.27. Suggested entry point was $73.25
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on December 23 at $73.27
Average Daily Volume = 1.1 million
Listed on December 21, 2013




PUT Play Updates

Sears Holdings - SHLD - close: 46.94 change: +0.44

Stop Loss: 47.60
Target(s): 40.15
Current Option Gain/Loss: -62.6%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
12/26/13: SHLD is still not cooperating. The stock outperformed the broader market again with a +0.9% gain today. The intraday high was $47.20. Our stop loss is at $47.60. More conservative traders will want to seriously consider an early exit now.

Earlier Comments:
Our short-term target is $40.15. Keep in mind that there are already a lot of bears in this stock. The most recent data listed short interest at 56% of the 50.7 million share float. That's plenty of fuel for a short squeeze if the stock can bounce. It's another reason to keep your position size small.

- Suggested Positions - *small positions*

Long 2014 Jan $39 PUT (SHLD1418m39) entry $1.66

12/24/13 new stop loss @ 47.60, more conservative traders may want to just exit early.
12/16/13 new stop loss @ 48.60

Entry on December 12 at $46.18
Average Daily Volume = 1.5 million
Listed on December 11, 2013


CLOSED BULLISH PLAYS

Russell 2000 ETF - IWM - close: 115.23 change: +0.01

Stop Loss: 114.45
Target(s): 115.75
Current Option Gain/Loss: +133.1%
Time Frame: exit PRIOR to January option expiration
New Positions: see below

Comments:
12/26/13: Target hit!

IWM rallied to resistance and tagged its trend line of higher highs before paring its gains and closing virtually unchanged. Our exit target was hit at $115.75.

- Suggested Positions -

Long 2014 Jan $112 call (IWM1418a112) entry $1.78 exit $4.15 (+133.1%)

12/26/13 target hit at $115.75
12/24/13 new stop loss @ 114.45, set the exit target @ 115.75
12/23/13 new stop loss @ 111.75

chart:

Entry on December 18 at $111.65
Average Daily Volume = 35 million
Listed on December 17, 2013


Lockheed Martin - LMT - close: 148.84 change: +2.70

Stop Loss: 141.75
Target(s): 149.00
Current Option Gain/Loss: +104.1%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
12/26/13: Target achieved.

Defense-related names were showing relative strength on Thursday. LMT was leading the charge higher with a +1.84% gain. Our exit target was hit at $149.00.

- Suggested Positions -

Mar $145 call (LMT1422C145) entry $3.35 exit $6.84 (+104.1%)

12/26/13 target hit
12/24/13 new stop loss @ 141.75
12/21/13 new stop loss @ 139.75

chart:

Entry on December 16 at $140.25
Average Daily Volume = 2.0 million
Listed on December 14, 2013