Option Investor
Newsletter

Daily Newsletter, Thursday, 1/2/2014

Table of Contents

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

Market Wrap

First Day Blues

by Thomas Hughes

Click here to email Thomas Hughes
The major indices had a case of the blues on the first day of trading in 2014.

Introduction

The day, and the year, began with mixed data. Data that support the current global recovery but not robust expansion. First, Chinese official PMI fell to 51.0, weaker than expected but still expansionary. This was balanced by the HSBC China PMI reading which came in as expected at 50.5. In Europe PMI also came in as expected but there was some isolated weakness. France being the notable one. Greece and Spain both performed slightly better than expected, not a big deal for us but definitely a piece of the global puzzle worth being aware of. Asian market closed mostly in positive territory while the European indices gave up ground nearly across the board.


Data here at home was not much more inspiring, it certainly did not help to support the markets on an intraday basis. Unemployment claims have moderated from the peak seen last month but remains a spot of worry. At the same time construction spending rose at a faster 1% rate than expected for November while October figures were also revised higher. ISM manufacturing data cooled slightly from last months 57.3 to an even 57 for the current month. This is just off of a two and a half year high set last month. Within the report one of the best performing segments was employment. Early trading saw futures hover just under break even from the last closing prices before the end of the year. After the release of data there was a little weakening to the trade but only 2-3 points on the S&P. At the open the markets held their ground for a brief time before they began to sink to the early morning lows.


Oil and gold both made big moves today as well. Oil prices were hit hard by the expected reopening of Libyan oil facilities. The country has been rocked by tribal and civil war that has reduced production and delivery to roughly 10% of levels seen earlier this year. At this time rebel leaders and the Libyan government are targeting an opening later this month. As for gold, the metal gained about 2% in today's trading. The first of the year and low low gold prices could be attracting some investors to begin rebuilding positions. Other news of interest today was a series of up and down grades on some notable stocks.

The Employment Data

Unemployment was first up on the economic calendar today. Claims fell by 2,000 from an upwardly revised 341,000 to hit 339,000. The upward revision is 3,000 claims from last weeks reported number for a net gain of +1,000 for the current week. Initial claims appears to be moderating from the spike last month, the cause of which is still unclear. It may have been merely an affect of seasonal adjusting or have some other more sinister cause. However, at this time it does appear that if there was any downtrend in initial claims developing it has been negated. Initial claims may not have an impact on overall unemployment in terms of an increase but I don't think it is doing anything to help in terms of a decrease either.


Continuing claims looks a little better. This week continuing claims fell by nearly 100,000 to hit a 5 week low just off the long term low set in November. The downtrend in continuing claims is in better shape and could help in terms of overall employment numbers provided that it keeps coming down and doesn't bottom at the current levels. The real danger for overall unemployment now is the elevated levels of total claims. This figure has increased to an alarming extent and could lead to an increase in unemployment. An increase in unemployment will surely lead to speculation over the taper and possible a pause at the next FOMC meeting later this month. Non-Farm Payrolls, ADP and U.S. Unemployment figures are being released next week amid a host of other important data. The current expectation is for job growth to moderate to around 185K from the previous months +200K and for unemployment to rise mildly to 7.1% from 7.0% last month.



Oil Retreats From $100

Oil prices had been flirting with the $100 level but today fell back sharply. The weak, but expected, Chinese data gave cause for concern demand weakness while at the same time the expected to opening of Libyan oil facilities has eased supply concerns. Oil prices fell by over 2% in today's session. The Oil Index is likewise retreating from a longer term resistance zone around the 1500 level. This level held the index at bay in November and could do it again now. Momentum is peaking and the index is approaching overbought levels at the same time, adding weight to resistance at this time. The long term trend is still up but a correction looks possible with support zones at 1475, 1450 and 1425.


Gold Jumps 2%

Gold prices jumped roughly 2% today. This could be the start of a bounce but that is still question. Today's gain came with very light volume and could easily be a short term swing. The long term trend in gold is still down. The spot price encountered resistance at the $1225-30 level, an area of previous support just prior to the fall below $1200. The Gold Index has been able to maintain prices in the face of gold reaching new lows. The index has been trading sideways over the past month and has just now reached and retouched the 30 day EMA. There is evidence of a potential bottom forming in the stochastic on the daily chart but it is still very weak and not something to trade on. Looking at the longer term chart of weekly prices the index is not showing signs of bottoming and looks as if it could drift even lower. The key will be gold prices and gold profits. If gold prices bottom then I would expect to see the index bottom as well. I have been hearing and reading more and more about the possible bear market in gold for 2014 so I am still bearish but with the new contrarian idea a bottom could be coming soon.


Currencies Mixed

The currency markets were a bit mixed today. The dollar gained against the euro and fell versus the yen. The EUR/USD fell from retesting resistance at the 1.38250 level confirming it as a longer term resistance and its potential as the upper boundary of a trading range. The indicators are bearish and moving lower, adding to the argument a top, if only short term, has been reached. The current pro taper stance of the FOMC could continue to strengthen the dollar against the euro provided the ECB makes no changes to their policy. The ECB will hold their monthly meeting next week on the 9th. The pair is currently sitting on an equally important support level, a break below this range could bring the pair as low as 1.3500 or 1.33750.


The dollar weakened versus the yen in today's trading. This could be simple profit taking as the pair has been moving higher over the past two months. At this time the indicators are bullish and pointing to higher prices for this pair. At this time the Fed Taper and the BOJ QE program have these two currencies moving apart in value. This could continue on into the future provided the Fed does not need to pause or reverse the taper. The BOJ still has a year to go in it's plan so I do not see them reducing their efforts any time soon. The pair could consolidate at or above the 103.75 level before making any move higher as data rolls in and traders assess the taper situation. A break below this level would be bearish for the pair and could lead the BOJ to act sooner than expected to re-stimulate the Japanese economy. The next BOJ meeting is January 21st.


Story Stocks

A flurry of up and down grades had individual stocks moving in the early trade. Apple received a downgrade from Outperform to MarketPerform at Wells Fargo. The investment banks says that higher margins are already being priced in to the stock. Apple shed 1.5% today but was able to maintain support above $550. This level is coincident with the short term 30 day EMA and previous support/resistance. Indicators also suggest there is support for the stock at the current levels. Don't forget that Apple just significantly increased its potential customer base with a deal to sell iPhones to China mobile customers.


U.S. Steel got an upgrade with an increased 2014 earnings outlook. KeyBanc upgraded the company from hold to buy citing a benefit from higher steel prices and a break on the cost of raw materials. The bank increased its earnings outlook by 25% and sent the share price up on what was a down day for nearly every other stock. U.S. Steel has been in an uptrend since early September. Indicators are currently bullish but suggest a peak may have been reached. Today's shooting star/pin bar type candle stick echoes that possibility. $30 is first support but $27.50 looks more likly to hold, if a pull back does occur.


Urban Outfitters was also upgraded from hold to buy at Jeffries, who called it a top pick for 2014. Jeffries thinks that Urban has potential to benefit from a better position and improved margins over the next year. The stock jumped in the early trading and was able to post gains for today, although it sold off from the early high. The stock has been trading sideways for over a year now and is currently below a strong resistance zone.


The Indices

This year did not start off with a bang, at least not the bang many bulls had been hoping for. The markets began the day with a little whimper, moved lower and then kept moving lower into the end of the day. The sell off was not wild, not driven by fear and did not come with a lot of hooplah. This leads me to think it is nothing to be too worried about, at least for now. There is the possibility that a little selling could lead to a little more selling and to a little more selling until we're in a bear market but that is not likely. Today I think was a mixture of profit taking and wait-and-see. The S&P, Dow and Nasdaq closed out last year with gains in the 25%-30% range, a very attractive place for some to book profits.

The S&P opened with a loss of -2 points and slowly moved lower throughout the day. The early mornings saw near term support at the 1835 level hold for a few hours until it broke down. Once broken the index moved to test the 1830 levels. Both levels are above the closing levels of December 20th (1818 S&P)the last day of trading before the two week holiday period. Late afternoon saw some support kick in around 1830 that helped to keep the index from closing off of the daily low.


On the daily charts the S&p 500 is trending up and above support. The index has bullish indicators but may be at a near to short term peak. The MACD momentum is in decline and stochastic is overbought. The 1818 level will be important to watch over the next few days to a week as the market volume steps back in from the holiday. Likewise, the longer term weekly charts are also bullish but suggest a shorter term peak may have been reached. This peak could be a consolidation, a small pullback or a full blown correction. It will be important to watch support levels for break-throughs and/or confirmations. Data, starting tomorrow and continuing through the end of next week, will be incredibly important for market direction. The data will need to be in the sweet spot that means the economy is growing just fast enough to be strong and need the taper but not strong enough that tapering is sped up. Until broken or confirmed, the 1818 level is the one to watch for me.


The Dow also had a bad first day of the year. The blue chip index fell by 0.75% with indicators suggesting a near term peak has been reached. The index is well above support, about 2% above the short term moving average, and ripe for profit taking and short term selling. The longer term trends are still up at this time with support around 16,215, 16,100 and 16,000.


The Nasdaq was not immune to today's sell off. The tech heavy index came closer to testing the December 20th closing prices than the other two indices but still remains above that level. This index is also trending up with indication a near term peak may have been reached. Current near term support levels exist around the 4,100 and 4,050 levels with longer term support around 4,000.


The indices are still trending up and I think so long as the economy continues to improve the indices will continue to move up. Data is an important factor in this theory, if the data is good the economy is good and the market will be good. The economic data will need to show that the economy is improving, resilient and able to stand on its own two feet. The next two weeks are packed with data and could present another buy-the-dip opportunity.

The monthly releases of auto and truck sales is on tap for tomorrow. Monday, factory orders and ISM followed by FOMC minutes, trade balance, mortgage index and the all important monthly employment bundle; ADP, Challenger, NFP and U.S. Unemployment rates. No one data will reverse the market but the group as a whole could negatively impact outlook if it is less than expected. Until then, expectations are for a slight moderation in growth from the previous month but nothing alarming. Volume was light across the markets, adding to today's volatility, and could remain that way until next week.

Also on the horizon, earnings season. It is that time again. Alcoa reports earnings next Thursday and is followed the next week by the big banks.

Until then, remember the trend!

Thomas Hughes

 


New Option Plays

Cloud-Based Technology

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Demandware, Inc. - DWRE - close: 64.76 change: +0.64

Stop Loss: 62.75
Target(s): 69.50
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to earnings in mid February
New Positions: Yes, see below

Company Description

Why We Like It:
DWRE is in the technology sector. The company operates in the application software industry and provides cloud-based digital commerce solutions. The stock shot higher in early November on better than expected earnings. Then when trading in the mid $60s the stock plunged on November 19th on news that DWRE would issue a secondary offering of almost four million shares at $57. Since then DWRE has recovered with investors buying the dips at DWRE's rising 30-dma for a while. The last couple of weeks have seen DWRE consolidating sideways below resistance at the $65.00 level.

The market's weakness today sparked a drop toward $62.00 but DWRE bounced back and closed in positive territory, outperforming the broader market. The stock looks poised to breakout. I am suggesting a trigger to buy calls at $65.25. If triggered our target is $69.50 but we'll plan to exit prior to earnings in mid February. FYI: The Point & Figure chart for DWRE is bullish with a $77 target.

Trigger @ 65.25

- Suggested Positions -

Buy the Feb $70 call (DWRE1422B70) current ask $2.30

Annotated Chart:

Entry on January -- at $---.--
Average Daily Volume = 275 thousand
Listed on January 02, 2014



In Play Updates and Reviews

Stocks Surprise With A Slide

by James Brown

Click here to email James Brown

Editor's Note:

Most market participants were surprised by the weakness in stocks on the first day of trading in 2014. Normally the first day of the year tends to be a positive one for equities.

PVH hit our entry trigger.


Current Portfolio:


CALL Play Updates

Advance Auto Parts - AAP - close: 109.74 change: -0.94

Stop Loss: 107.95
Target(s): 117.50
Current Option Gain/Loss: -23.0%
Time Frame: exit PRIOR to earnings in February
New Positions: see below

Comments:
01/02/14: The S&P 500 lost -0.88% today. AAP followed suit with a -0.84% decline. The stock failed near short-term resistance at $112.00 this morning and almost completely erased Tuesday's gains. I am not suggesting new positions at this time.

Earlier Comments:
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: 82.36 change: -1.53

Stop Loss: 81.90
Target(s): 87.00
Current Option Gain/Loss: -23.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/02/14: Ouch! Our AON trade went from a winning trade to a losing trade with today's underperformance. I didn't see any specific headlines to account for today's -1.8% decline. Shares are once against testing their 30-dma. I am not suggesting new positions.

- Suggested Positions -

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

12/31/13 adjust exit target higher to $87.00
12/28/13 new stop loss @ 81.90
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: 81.57 change: -1.57

Stop Loss: 79.65
Target(s): 89.50
Current Option Gain/Loss: + 0.0%
Time Frame: Exit PRIOR to CBI's earnings report in February
New Positions: see below

Comments:
01/02/14: CBI ended 2013 at a new all-time high. Shares erased Tuesday's gains with a -1.88% decline today. If this dip continues we can watch for what should be support near the $80.00 mark.

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

12/28/13 new stop loss @ 79.65

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


Discovery Communications, Inc. - DISCA - close: 89.10 change: -1.32

Stop Loss: 87.90
Target(s): 97.50
Current Option Gain/Loss: -23.5%
Time Frame: exit PRIOR to earnings in mid February
New Positions: see below

Comments:
01/02/14: DISCA's -1.45% decline pulls the stock back below the $90.00 mark. Shares look like they are headed for what should be short-term support at the 10-dma and the $88.00 level. I would wait for a bounce or a new relative high before considering new positions (depending on your trading style).

Earlier Comments:
Our target is $97.50 but we will plan to exit prior to DISCA's earnings report in mid February. FYI: The Point & Figure chart for DISCA is bullish with a $107 target.

- Suggested Positions -

Long Feb $90 call (DISCA1422B90) entry $3.40*

12/31/13 trade opened on gap higher at $90.76. Suggested trigger was $90.75
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on December 31 at $90.75
Average Daily Volume = 1.1 million
Listed on December 30, 2013


Energen Corp. - EGN - close: 68.67 change: -2.08

Stop Loss: 67.95
Target(s): 75.75
Current Option Gain/Loss: -33.1%
Time Frame: exit PRIOR to earnings in late January
New Positions: see below

Comments:
01/02/14: I don't see any news to account for EGN's relative weakness. The stock plunged -2.9%. Shares started to bounce once EGN neared recent support at the $68.00 level. I would be cautious here. We're not suggesting new positions at this time.

Earlier Comments:
Our plan was to keep our position size small to limit our risk. Our target is $75.75 since the $76.00-76.50 area looks like resistance.

*small positions* - Suggested Positions -

Long Feb $75 call (EGN1422B75) entry $2.17

12/30/13 triggered at $71.05

Entry on December 30 at $71.05
Average Daily Volume = 727 thousand
Listed on December 28, 2013


General Dynamics - GD - close: 94.75 change: -0.80

Stop Loss: 93.85
Target(s): 99.50
Current Option Gain/Loss: -14.0%
Time Frame: exit PRIOR to earnings in late January
New Positions: see below

Comments:
01/02/14: The pullback in GD, -0.83%, kept pace with the broader market (-0.88%). Shares should find short-term support near $94.00 and its 10-dma. Nimble traders may want to look for a bounce from the $94 area before launching new positions.

Our target is $99.50. More aggressive traders may want to aim higher since the Point & Figure chart for GD is bullish with a $105 target. I am suggesting small positions because GD is arguably overbought with an almost non-stop rally from its December lows near $89.

*small positions* - Suggested Positions -

Long Feb $95 call (GD1422B95) entry $2.21

Entry on December 31 at $95.25
Average Daily Volume = 1.1 million
Listed on December 28, 2013


Honeywell Intl. - HON - close: 90.32 change: -1.05

Stop Loss: 88.40
Target(s): 94.75
Current Option Gain/Loss: +00.0%
Time Frame: exit PRIOR to earnings in late January
New Positions: see below

Comments:
01/02/14: The industrials were some of the hardest hit by today's profit taking. HON fell -1.1%. Shares started to bounce once HON neared round-number support near $90.00, which is an area bolstered by its simple 10-dma. If you were looking for a dip to $90 as an entry point then we got it today!

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*

12/28/13 new stop loss @ 88.40
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: 82.25 change: +1.83

Stop Loss: 79.90
Target(s): 87.00
Current Option Gain/Loss: -16.6%
Time Frame: exit PRIOR to January option expiration
New Positions: see below

Comments:
01/02/14: Ouch! HP just erased about four days worth of gains with today's -2.1% decline. I didn't see any news to account for today's relative weakness. If this dip continues the next possible levels of support are $81.00 and $80.00. I am not suggesting new positions at this time.

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: 78.78 change: -1.50

Stop Loss: 77.75
Target(s): 85.00
Current Option Gain/Loss: -29.3%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/02/14: Hmm... today's relative weakness in LYB (-1.8%) doesn't bode well. The sudden reversal lower just erased about four and a half days worth of gains and makes the bullish breakout past $90.00 look more like a bull trap. Traders bought the dip near $78.00 this afternoon. I am not suggesting new positions at this time.

- Suggested Positions -

Long Feb $80 call (LYB1422B80) entry $2.90

Entry on December 31 at $80.25
Average Daily Volume = 3.1 million
Listed on December 24, 2013


Open Text Corp. - OTEX - close: 91.73 change: -0.23

Stop Loss: 89.65
Target(s): 98.50
Current Option Gain/Loss: - 6.8%
Time Frame: exit PRIOR to February expiration
New Positions: see below

Comments:
01/02/14: The profit taking in OTEX was pretty mild. Shares only fell -0.25% and they settled on short-term technical support at the 10-dma. Any further weakness from here will probably carry OTEX toward the next level of support at the $90.00 mark. I am not suggesting new positions at this time.

Our target is $98.50. FYI: The Point & Figure chart for OTEX is bullish with a $107 target.

- Suggested Positions -

Long FEB $95 call (OTEX1422b95) entry $2.90*
12/30/13 new stop loss @ 89.65
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: 145.00 change: -0.64

Stop Loss: 139.75
Target(s): 149.00
Current Option Gain/Loss: + 4.9%
Time Frame: EXIT prior to earnings on January 28th
New Positions: see below

Comments:
01/02/14: It was a relatively quiet day for PII. The stock churned sideways in the $144-146 zone. If the market and PII continues to dip we could see shares testing the 10-dma soon. I am not suggesting new positions at this time.

Please note that our time frame has changed. PII just announced that they will report earnings on January 28th. Our plan will be to exit positions prior to the announcement.

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
12/30/13 new stop loss @ 139.75
*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


PVH Corp. - PVH - close: 136.58 change: +0.56

Stop Loss: 132.95
Target(s): 147.50
Current Option Gain/Loss: - 5.7%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/02/14: PVH continued to show relative strength and outperformed the market with a +0.4% gain and a breakout to a new high today. Our suggested entry point to buy calls was hit at $136.55.

Our multi-week target is $147.50. Do not be surprised if we see PVH temporarily stall near the $140 level, which could be round-number resistance. More aggressive investors with a longer time frame might want to aim higher since the Point & Figure chart for PVH is bullish with a $172 target.

- Suggested Positions -

Long Feb $140 call (PVH1422B140) entry $3.50

Entry on January 02 at $136.55
Average Daily Volume = 939 thousand
Listed on December 31, 2013


Salix Pharmaceuticals - SLXP - close: 89.09 change: -0.85

Stop Loss: 87.40
Target(s): 98.50
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
01/02/14: SLXP spent the first day of 2014 churning sideways inside the $88-90 zone. There is no change from my new play comments from Tuesday night.

Earlier Comments:
SLXP is poised to breakout past resistance at the $90.00 level. If shares can breakout past $90 the next major milestone would be the $100 mark.

I am suggesting a trigger to buy calls at $90.25. If triggered our multi-week target is $98.50.

Trigger @ 90.25

- Suggested Positions -

buy the Feb $95 call (SLXP1422B95)

Entry on December -- at $---.--
Average Daily Volume = 790 thousand
Listed on December 31, 2013


Tiffany & Co - TIF - close: 92.55 change: -0.23

Stop Loss: 89.75
Target(s): 98.50
Current Option Gain/Loss: + 1.8%
Time Frame: exit PRIOR to February option expiration
New Positions: see below

Comments:
01/02/14: TIF held up pretty well today. Shares didn't see that much profit taking. The stock actually spiked higher this morning and hit $93.64 before reversing lower. I am not suggesting new positions at this time.

- Suggested Positions -

Long FEB $95 call (TIF1422b95) entry $2.15

12/31/13 new stop loss @ 89.75
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: 76.80 change: -0.75

Stop Loss: 74.50
Target(s): 79.75
Current Option Gain/Loss: +13.9%
Time Frame: EXIT PRIOR to January expiration
New Positions: see below

Comments:
01/02/14: TSCO gave back just over half of Tuesday's gains with today's 78-cent drop. The stock was starting to bounce after nearing the $76.00 level midday. More conservative traders might want to inch their stop loss higher.

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 listed the January calls. I'd rather play February options but (at the time) TSCO didn't have any Februarys or Marchs available yet and the bid/ask spread on the April options is getting a bit wide.

- Suggested Positions -

Long Jan $75 call (TSCO1418a75) entry $2.15

12/28/13 new stop loss @ 74.50
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


UnitedHealth Group - UNH - close: 74.57 change: -0.73

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

Comments:
01/02/14: UNH was not immune to the market's widespread pullback on Thursday. Shares dipped -0.96%. If shares do not show significant improve soon we will likely drop this stock as an active candidate due to UNH's upcoming earnings report.

Earlier Comments:
UNH has been volatile the last few months and 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)

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


United Parcel Service - UPS - close: 103.32 change: -1.76

Stop Loss: 102.75
Target(s): 108.00
Current Option Gain/Loss: -50.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
01/02/14: Ouch! Today's -1.6% drop in UPS erased almost seven days worth of gains for the stock. Shares fell toward support near $103.00 before starting to bounce this afternoon. The intraday low was $102.82. Our stop loss is at $102.75. Not surprisingly the sharp drop crushed our January options.

- Suggested Positions -

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

12/30/13 new stop loss @ 102.75
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


United Technologies - UTX - close: 112.49 change: -1.31

Stop Loss: 110.40
Target(s): 118.50
Current Option Gain/Loss: -13.8%
Time Frame: exit PRIOR to earnings in late January
New Positions: see below

Comments:
01/02/14: UTX slipped -1.1% thanks to relative weakness in the industrials sector. The $112.00 level could be short-term support so nimble traders might want to try and buy a bounce from the $112.00 mark.

Earlier Comments:
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.

- Suggested Positions -

Long Feb $115 call (UTX1422B115) entry $1.80

12/31/13 trade opened on gap higher at $113.16. Suggested trigger was $113.05

Entry on December 31 at $113.16
Average Daily Volume = 2.8 million
Listed on December 26, 2013


Wyndham Worldwide - WYN - close: 73.52 change: -0.17

Stop Loss: 71.75
Target(s): 78.50
Current Option Gain/Loss: -20.5%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/02/14: WYN held up relatively well. The stock bounced midday near the $73.00 level and shares pared their losses by the close. I am not suggesting new positions.

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

SodaStream Intl. - SODA - close: 48.11 change: -1.53

Stop Loss: 51.25
Target(s): 41.50
Current Option Gain/Loss: +10.4%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/02/14: Today brought good news for SODA bears. The stock failed at round-number resistance near $50.00 this morning. Shares underperformed the market with a -3.0% drop by the closing bell. This is a new relative low.

Earlier Comments:
I am suggesting we use small positions to limit our risk. There are a lot of bears already in this trade. The most recent data listed short interest at more than 50% of the very small 17.5 million share float.

Our target is $41.50. However, I want to warn you that the $45.00 level could be potential support.

*small positions* - Suggested Positions -

Long Feb $45 PUT (SODA1422N45) entry $2.40

Entry on December 31 at $48.70
Average Daily Volume = 980 thousand
Listed on December 30, 2013