Option Investor
Newsletter

Daily Newsletter, Wednesday, 1/8/2014

Table of Contents

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

Market Wrap

January Barometer Indicates Storm Approaching

by Keene Little

Click here to email Keene Little
As go the first five trading days, so goes the month and as goes the month of January, so goes the year. By this measure the January barometer is showing rapidly dropping pressure and an approaching storm.

Market Stats

Today closed the first five trading days of the new year and as you can see in the table above, each of the broader indexes is in the red. Interestingly, the VIX is down from where it was on December 31st, which doesn't reflect the decline in the stock market. That's either bullish complacency or perhaps the bulls know something about how the rest of the month will proceed. We head into opex week next week and that's generally a bullish week. The flip side is that when it's not bullish it tends to be very bearish and as I'll review tonight, the bulls have some reasons to worry.

The market started off flat at the open, had a quick bout of selling and then rallied quickly back up. The S&P 500 made it back up to the highs of 2-day trading range it's been in and then chopped sideways in a small range for most of the day. There was some selling in the final hour, as we've been seeing this month, but the market got a stick save with some buy programs driving the indexes back up into the day's trading range. The DOW was weak and the techs were relatively strong (thanks to a good day for the SOX). SPX and the RUT closed near the flat line. By the end of the day neither side could claim a win

Today's economic reports, nor the FOMC minutes this afternoon, had much of an effect on the market. Before the open we received the ADP Employment report, which came in better than expected at +238K vs. an expected +203K. That was an improvement over November's +215K. There was a slight negative reaction in the futures market (good employment is bad for an accommodating Fed) but then it was reversed back up before the open. Pushing the market back up was the common theme for the day.

The FOMC minutes gave us nothing new to chew on and the market barely reacted except for a slow selloff into the late afternoon before it was rescued with a couple of big buy programs in the last half hour. The minutes reflected the Fed's confidence in the economy's continuing improvement as a reason to start tapering now rather than later. The FOMC members reflected increasing concern about inflation as a result of a large quantity of money sitting in banks' reserves. Once that money starts getting lent out we could see a very rapid spike in inflation.

At least that's the concern. The slowdown in the housing market, presumably affected by rising rates, has members concerned enough to only want a slow tapering of their asset purchases in an attempt to keep the bond market from selling off. The minutes also reflected the Fed's desire to not get locked into any particular direction with their asset purchases. They will decrease or increase purchases as they see fit. In a nod toward recognition that their QE program might be creating "excessive risk taking," they acknowledged that their purchases were having less of an effect on the economy and more of an effect on other asset prices. They recognize that they have provided an incentive to get in riskier assets which could lead to asset bubbles. Do ya think?

The market's highs so far for the broader indexes is December 31st. That is inside a December 27 - January 6 timing window that I've been monitoring and I've been looking for clues as to whether or not price agrees that a market top has been made. There's some other cycle work that I follow that points to January 10th (specifically mid-morning) for a market high. Interestingly, we'll get the Payrolls report Friday morning and it has me wondering if we'll get a positive reaction from the market that then puts in the final market high.

And then there is the 1929-2014 analog that has been playing out since Tom McClellan first showed the comparison at the end of November (1929 Analog). His projection, if the market followed a similar path, was for a market top by January 14th and he has since acknowledged that we could see a similar topping process as in 1929 that will take the first two weeks of January to play out (similar to a rounding top pattern). This fits in the turn window by cycle studies and is in agreement with what I'm seeing in the wave pattern (top is either already in or we're waiting for one more new high). I updated his chart with the DOW's price action since the end of November and added in where an equivalent high would occur (around 16700). If this follows through, and that's a big if, we're looking for a rough time for the market in the coming quarter.

DOW analog between 1928-1929 and 2012-present, chart courtesy mcoscillator.com

At the same time this price analog might be playing out we've got several measures of sentiment at bullish extremes, which makes the market vulnerable to a strong selloff (the market is now full of sellers-in-waiting). As can be seen from the chart below, bullish advisors haven't been this net-bullish since May 2011 and before that in October 2007, both times when the stock market made a big correction, especially off the 2007 high. We've got everyone in the water and the market is looking for more buyers to jump in. But now swimming toward the shore are a bunch of bears wearing shark suits (cue the music to "Jaws").

SPX vs. Net Investment Advisor sentiment, 2006-2013, chart courtesy markettechnician.com

I recently read a report on market advisors and their predictions for 2014 and it's nearly unanimous -- 2014 is going to be bullish. Wells Fargo's Gina Martin Adams was the most bearish last year and held onto her bearish projection for SPX 1440 for the entire year. Oops. And she remains more bearish than the others but her bearishness means SPX 1850 by the end of 2014. She's the most bearish one! She does acknowledge that we will likely have a volatile year where we could see 2100 on the upside and 1500 on the downside. To which I say bring it on! Let's get some volatility and inflated option premiums for us to trade. I have little doubt about her 1500 projection but I have every doubt about her 2100 projection. It's going to be an interesting year.

Starting off with the DOW's charts, the weekly chart shows how it has bumped up against its trend line along the highs from 2000-2007, near 15545. This is the 3rd week that it's been trying to get through that line of resistance but last week's and this week's candles are small doji stars. It's either signifying bullish consolidation or setting up a reversal pattern (with a red candle). I show a little more upside potential to the 16640-16700 area where three different price projections coincide. If the DOW is able to reach that level by Friday, or even January 14th, I'll be looking for the setup for a major reversal.

Dow Industrials, INDU, Weekly chart

The DOW's daily chart below shows how it's been struggling to get through its trend line while holding support at its trend line along the highs from September-November, currently near 16420, which supported this afternoon's low before getting a sharp little bounce into the close. We'll soon find out if it can get a quick pop up into Friday or instead break down. It turns more bearish below 16400 and confirmed bearish below 16170.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 16,550
- bearish below 16,170

SPX had achieved its 1845 projection at the end of December (where the 5th wave in the move up from October 2011 equals the 1st wave), as well as its trend line across the highs from September-November and the top of its up-channel from June. It was a good setup for a top on December 31st but we don't yet have proof of the high with an impulsive decline. I can make a bearish wave count work but I'd rather see another leg down before turning more bearish. I have been warning about a potential high but can't rule out another run up to a new high, perhaps even up to the 1870 projection where the 5th wave in the move up from August would equal the 1st wave. Trendline resistance is currently near 1848 and 1860 so the bulls could run into trouble along the way up to 1870. A break back below Monday's low at 1823 would be bearish and it would be confirmed bearish with a drop below 1810.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1845
- bearish below 1810

It was a nice setup for a top near January 1st according to my highly sophisticated and proprietary MPTS black-box trading system, as can be seen on the chart below. Now we wait for confirmation that the market made its final high on a new moon. Otherwise we might get a final high near the next full moon (January 16th), Thursday next week.

S&P 500, SPX MPTS daily chart

I sometimes work with Chris Carolan at spiralcalendar.com and he shared with me a portion of his "Solunar Model" that points to a high on or near January 7th (yesterday). He uses solar activity and the lunar phases to track its influence on the market and has been very accurate in showing where future turns can be expected. Not always of course but you can his model has been pretty close in the period shown (since June 2013). This fits within the timing window from the cycle studies I follow as well. Just another piece of the puzzle pointing to a potentially important market high either already in place or about to be put in place.

DOW Solunar Model, chart courtesy Chris Carolan, spiralcalendar.com

The SPX 60-min chart below shows the tight grouping of candles since Tuesday's pop up at the open. It looked like it was breaking down this afternoon until a couple of big buy programs slammed it back up into the close. Sometimes this is done to jam the shorts out if "someone" knows something and expects the market to drop the next morning -- they don't want the shorts in the market. That's of course pure speculation and I continue to respect the upside potential this week while waiting for proof the top is already in place. Above 1850 is bullish and below 1823 is bearish. Mind the chop in between.

S&P 500, SPX, 60-min chart

NDX bounced off its 20-dma, as it's done since October's low. That makes it an important level for the bears to break on a closing basis and then keep it below it, currently near 3533. An uptrend line from October-December (not shown on its daily chart below) is currently near Monday's low at 3512 so that's the level the bears need to break to confirm a top is in place.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 3592
- bearish below 3512

On January 2nd and again on Monday the RUT found support at its November 29th high at 1147 so that's an important level for the bulls to continue to defend. Its short-term pattern supports the idea that it will get another leg up but in reality it's just been chopping up and down since its December 26th high and I could argue a move in either direction from here. Just need price to lead the way. But any move to the upside should be a very good setup to get short, especially if it manages to reach the trend line along the highs since September 2012, currently near 1176. Two equal legs up from November is at 1167.66, which was achieved with the December 26th high at 1167.96.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1166
- bearish below 1146

Bond yields look like they've been in a topping pattern since November. As drawn on the 30-year (TYX) chart below, we've got a rounding top pattern and a break of the uptrend line from May-October. The uptrend line was broken on December 20th but it quickly recovered back above the line two days later on December 24th. This time it's now below the line for three days and today's high was only a back test of the trend line, followed by a drop this afternoon.

30-year Yield, TYX, Daily chart

I think it's a good setup for a drop in bond yields/rally in bond prices. I've shown my long-term charts a few times recently, which calls for a major bond market rally this year, one that drives yields down to all-time lows (2% for the 30-year, 1% for the 10-year). I am in the minority with this opinion so take it fwiw, but a minority opinion here, just as with a bearish opinion about the stock market for 2014, actually makes me more comfortable (I don't like trading with the crowd at turning points).

The banks have been strong in the first 5 trading days of the year and BKX is up +1.8% and one of the few sectors in the green (biotechs continue to outshine them all, up +2.9% in 2014, on top of the +51% in 2013). On January 3rd BKX launched out of its 6-day consolidation on top of the trend line along its highs from August-November and I've been eyeing an upside projection for it near 71. The wave relationships in the move up from October point to 70.99-71.15 for a final high and I project that to be accomplished by Friday. A drop below the trend line along the August-November highs, currently near 69, would indicate the top is in place.

KBW Bank index, BKX, Daily chart

Bank of America (BAC) got an upgrade last week and gapped up each of the first four trading days in January. From December 31st it rallied nearly +8% before banging its head on the trend line across the highs from March 2012 - July 2013, as can be seen on its weekly chart below. Following the 4th gap up on Tuesday, which looks like an exhaustion gap, it the closed below Monday's low, creating a bearish engulfing candlestick at trendline resistance. It now looks like BAC is on a sell signal so it'll be interesting to see how the stock does vs. expectations for a little higher for BKX.

Bank of America, BAC, Weekly chart

On Monday the TRAN broke its uptrend line from October-December and has been attempting to climb back above it but in a very choppy pattern. It looks like it's ready to break down but I can't yet rule out another attempt at a new high. I've got two price projections, based on its wave count, at 7443 (two equal legs up from 2009) and 7428 (2nd leg of its rally from June equal to 162% of the 1st leg). And there's a slightly higher projection at 7553 where the 5th wave in the move up from August would equal the 1st wave, which is what I'm depicting on its chart below but I have my doubts about it making it that high. And based on the short term pattern for this week's bounce I'm having my doubts whether the TRAN can make new highs. A drop back below Monday's low at 7228 (and its 20-dma at 7245) would be bearish and below its 50-dma at 7175 would be confirmation the top is already in place.

Transportation Index, TRAN, Daily chart

The U.S. dollar looks good for a continuation of its rally but in the short term it looks ready for a pullback. If the pullback turns into something more impulsive to the downside, especially with a break below its December 27th low at 79.82, I'll turn bearish the dollar. But as I've been for a long time now, I remain bullish the dollar and expect to see a rally in the first part of 2014 up to at least its downtrend line from 2010, currently near 84.25.

U.S. Dollar contract, DX, Daily chart

Silver has been chopping sideways since its December 4th low and it looks like a bearish consolidation before heading lower. I expect the same for gold and if it drops down to the bottom of a parallel down-channel that it's been in since the August high we could see gold drop down to about 1140 in a couple of weeks. There's still a chance the 62% retracement of its 2008-2011 rally, near 1155, will be its downside target before getting at least a bigger bounce. There's a lot of resistance between 1250 and 1270 if it tries another rally but would be bullish if it can get above 1270. Until then I think gold has lower prices coming, either directly or after a slightly bigger bounce off the December 31st low. The big caution for gold bears is the large net short futures, which is begging for relief with a short-covering rally.

Gold continuous contract, GC, Daily chart

On December 27th oil back-tested its downtrend line from May 2011 - March 2012 and it was slap following the kiss and it's been all downhill from there. It is now back down to its broken uptrend line from August for what could be a bullish back test as well as a test of its November 27th low. The pattern of its decline from December 27th does suggest it's ready for a bounce, which is what I'm depicting, but then a continuation lower into February. The form of the bounce will tell me more about whether or not to expect a larger bounce/rally or just a correction to the decline before heading lower.

Oil continuous contract, CL, Daily chart

Tomorrow morning's economic reports include the unemployment claims numbers but nothing that's expected to move the market. It's possible the market will stay quiet through the day as it waits for Friday morning's Payrolls report.

Economic reports and Summary

I've got several timing studies pointing to now as a very important turn window for the market. Since we've rallied into the window I expect it to be a significant market high (one that won't be seen again for many years). If I'm correct in the longer-term pattern you will not want to ride the next "pullback" (especially if the 1929 analog continues to play out). I'd rather have stops tight on long positions, get stopped out and then from a flat position do your analysis and see where and when you want to try the long side. Getting out of a position is much harder than getting in because most traders like to relax and let their position run. We're entering a period, which will likely last the majority of the coming year, where you'll want to be much more actively involved in trading. It's highly unlikely we'll have a smooth market move like we had last year.

Market sentiment, bearish divergences, timing models -- they're all coming together to tell bulls to get very defensive now. Bears do not have a good setup yet because the short-term pattern since the December highs has not yet confirmed the highs are in place. I could easily argue that the highs are in but I also see the potential for one more new high, especially around Friday's Payrolls report. A blast higher on Friday morning could be a good setup for the bears, something I'll be watching very closely.

The market might stay quiet on Thursday while we wait for the Payrolls report, which usually leads to some whippy moves like we saw today. Trade lightly and keep trades on a tight leash until we get a direction started. Right now it's more likely you'll feed your broker's hungry kids rather than your own.

We've got opex week coming up and the Thursday prior to opex is often a head-fake day so watch for that possibility as well. Opex tends to be bullish but when it's not it tends to be very bearish. Considering the bearish setup I see I'm wondering if the very bearish scenario is going to play out. Be careful out there.

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

Retreating From Resistance

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Rock-Tenn Co. - RKT - close: 101.81 change: -1.59

Stop Loss: 105.25
Target(s): 96.00
Current Option Gain/Loss: Unopened
Time Frame: Exit PRIOR to earnings on January 28th
New Positions: Yes, see below

Company Description

Why We Like It:
RKT is in the consumer goods sector. The company sells consumer packaging products. Unfortunately for shareholders this stock produced a very definite top back in the August-September time frame last year. Since then RKT has developed a bearish pattern lower highs and lower lows. The most recent oversold bounce has just failed near resistance around $105 and its 100-dma and 150-dma.

There is a lot of congestion in the $100-95 area but we suspect that RKT could retreat back toward $95.00. I am suggesting bearish positions now at the opening bell tomorrow. Our target is $96.00.

- Suggested Positions -

Buy the FEB $100 PUT (RKT1422N100) current ask $3.90

Annotated Chart:

Entry on January -- at $---.--
Average Daily Volume = 656 thousand
Listed on January 08, 2014



In Play Updates and Reviews

Stocks Meander Sideways

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. stock market failed to see any follow through on Tuesday's bounce.

N and NTES both hit our entry triggers. PVH and SODA hit our stop loss. We want to exit our TIF trade tomorrow morning.


Current Portfolio:


CALL Play Updates

Advance Auto Parts - AAP - close: 112.30 change: -0.88

Stop Loss: 109.75
Target(s): 117.50
Current Option Gain/Loss: + 0.0%
Time Frame: exit PRIOR to earnings in February
New Positions: see below

Comments:
01/08/14: AAP quietly churned sideways on Wednesday. Unfortunately the stock slipped lower near the closing bell and posted a -0.77% decline. If the dip continues look for potential support at the 10-dma (near $111) or the $110 level.

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*

01/07/14 new stop loss @ 109.75
01/04/14 new stop loss @ 108.75
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


Chicago Bridge & Iron - CBI - close: 81.07 change: -0.12

Stop Loss: 79.65
Target(s): 89.50
Current Option Gain/Loss: -12.9%
Time Frame: Exit PRIOR to CBI's earnings report in February
New Positions: see below

Comments:
01/08/14: CBI spent today's session drifting sideways between short-term support near $80 and its 20-dma and short-term resistance directly overhead at its 10-dma. Traders might want to wait for a rally above $81.75 before initiating positions.

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


Check Point Software - CHKP - close: 64.57 change: +0.63

Stop Loss: 63.35
Target(s): 69.50
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to earnings on January 28th
New Positions: Yes, see below

Comments:
01/08/14: CHKP was showing relative strength with a +0.98% gain. The stock looks poised to challenge resistance near $65.00 soon.

I am suggesting a trigger to buy calls at $65.25. If triggered our target is $69.50 but we will plan to exit prior to CHKP's earnings report on January 28th.

Trigger @ 65.25

- Suggested Positions -

Buy the Feb $65 call (CHKP1422B65)

Entry on January -- at $---.--
Average Daily Volume = 821 thousand
Listed on January 04, 2014


Demandware, Inc. - DWRE - close: 68.69 change: +1.63

Stop Loss: 64.75
Target(s): 69.50
Current Option Gain/Loss: +30.6%
Time Frame: exit PRIOR to earnings in mid February
New Positions: see below

Comments:
01/08/14: The rally in DWRE continued in spite of the market's general malaise today. Shares outperformed with a +2.4% gain and closed at a new record high. I am raising our stop loss to $64.75. FYI: The Point & Figure chart for DWRE is bullish with a $77 target.

- Suggested Positions -

Long Feb $70 call (DWRE1422B70) entry $2.45*

01/08/14 new stop loss @ 64.75
01/06/14 new stop loss @ 63.45
01/06/14 triggered @ 65.25
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on January 06 at $65.25
Average Daily Volume = 275 thousand
Listed on January 02, 2014


General Dynamics - GD - close: 94.72 change: -0.54

Stop Loss: 93.85
Target(s): 99.50
Current Option Gain/Loss: -23.0%
Time Frame: exit PRIOR to earnings on January 17th
New Positions: see below

Comments:
01/08/14: GD continues to consolidate sideways. The stock has spent more than two weeks now inside the $94-96 zone. If shares can breakout it should spawn a quick surge toward the $100 level.

Earlier Comments:
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. The plan was to keep our position size small.

*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: 90.44 change: -0.37

Stop Loss: 89.65
Target(s): 94.75
Current Option Gain/Loss: -10.2%
Time Frame: exit PRIOR to earnings in late January
New Positions: see below

Comments:
01/08/14: Shares of HON underperformed this morning thanks to a downgrade from Citigroup from "buy" to "neutral". Analyst and TV personality Jim Cramer disagrees and said he doesn't understand the thought process behind today's downgrade and says he is still bullish on the stock. You'll notice that traders bought the dip near round-number support at $90.00. The intraday low was $89.92. Tonight we're adjusting our stop loss to $89.65. I am not suggesting new positions at this time.

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*

01/08/14 new stop loss @ 89.65
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


NetSuite Inc. - N - close: 104.23 change: +0.88

Stop Loss: 99.95
Target(s): 110.00
Current Option Gain/Loss: - 0.3%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
01/08/14: Our new play on N is off to a good start. Shares outperformed the market with a +0.85% gain. Our suggested entry point was hit at $103.75. I would still consider new positions now at current levels.

Earlier Comments:
Our target is $110.00. However, we will plan to exit prior to their earnings report in late January or early February. FYI: The Point & Figure chart for N is bullish with a $129 target.

- Suggested Positions -

Long Feb $110 call (N1422B110) entry $3.00

Entry on January 08 at $103.75
Average Daily Volume = 410 thousand
Listed on January 07, 2014


NetEase, Inc. - NTES - close: 82.40 change: +2.71

Stop Loss: 77.50
Target(s): 87.50
Current Option Gain/Loss: + 5.2%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
01/08/14: NTES is off to an even stronger start. Shares pushed past resistance near $80.00 and outperformed the major indices with a +3.4% gain. Our suggested entry point was hit this morning at $80.75. Broken resistance at $80 should be new support.

- Suggested Positions -

Long Feb $85 call (NTES1422B85) entry $2.85*

Entry on January 08 at $80.75
Average Daily Volume = 661 thousand
Listed on January 07, 2014



Open Text Corp. - OTEX - close: 94.04 change: +1.57

Stop Loss: 90.75
Target(s): 98.50
Current Option Gain/Loss: +24.1%
Time Frame: exit PRIOR to February expiration
New Positions: see below

Comments:
01/08/14: It was a bullish day for OTEX with shares breaking out past resistance near $93.00 and outperforming the major indices with a +1.69% gain. If you were waiting for a breakout as your entry point then you got it today.

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*

01/04/14 new stop loss @ 90.75
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


Palo Alto Networks, Inc. - PANW - close: 60.05 change: +0.06

Stop Loss: 56.75
Target(s): 64.00
Current Option Gain/Loss: +26.5%
Time Frame: exit PRIOR to February option expiration
New Positions: see below

Comments:
01/08/14: PANW started to see some profit taking this morning but traders bought the dip near $58.70. Shares bounced back to about unchanged on the session. I am not suggesting new positions at this time.

Earlier Comments:
Our short-term target is $64.00 but I will point out that the February 2013 high near $62.00 could be potential resistance.

- Suggested Positions -

Long Feb $60 call (PANW1422B60) entry $2.45*

01/07/14 new stop loss @ 56.75
01/06/14 triggered @ 58.25
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on January 06 at $58.25
Average Daily Volume = 1.1 million
Listed on January 04, 2014


Polaris Industries, Inc. - PII - close: 145.50 change: +0.72

Stop Loss: 142.40
Target(s): 149.00
Current Option Gain/Loss: - 1.7%
Time Frame: EXIT prior to earnings on January 28th
New Positions: see below

Comments:
01/08/14: PII briefly traded at a new high before paring its gains. If the market will cooperate we should see PII breaking out soon. Tonight we're inching up our stop loss to $142.40. I am not suggesting new positions at this time.

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
01/08/14 new stop loss @ 142.40
01/07/14 new stop loss @ 141.75
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


Salix Pharmaceuticals - SLXP - close: 90.95 change: +1.69

Stop Loss: 87.80
Target(s): 98.50
Current Option Gain/Loss: -20.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/08/14: Shares of SLXP continue to bounce after its Tuesday morning, downgrade-induced gap down. The stock was displaying relative strength with a +1.89% gain on Wednesday. The next hurdle for the bulls is short-term resistance at $92.00.

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. If triggered our multi-week target is $98.50.

- Suggested Positions -

Long Feb $95 call (SLXP1422B95) entry $2.50*

01/07/14 new stop loss @ 87.80
01/03/14 triggered @ 90.25
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on January 03 at $90.25
Average Daily Volume = 790 thousand
Listed on December 31, 2013


Tiffany & Co - TIF - close: 91.70 change: -0.45

Stop Loss: 89.75
Target(s): 98.50
Current Option Gain/Loss: -28.8%
Time Frame: exit PRIOR to February option expiration
New Positions: see below

Comments:
01/08/14: We are growing concerned about the retail-related stocks and the potential reaction to disappointing sales figures from the holiday shopping season. TIF has been holding up reasonably well but we are throwing in the towel. Prepare to exit positions immediately at the opening bell tomorrow morning.

- Suggested Positions -

Long FEB $95 call (TIF1422b95) entry $2.15

01/08/14 prepare to exit tomorrow at the opening bell
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


United Technologies - UTX - close: 113.65 change: +0.14

Stop Loss: 110.40
Target(s): 118.50
Current Option Gain/Loss: - 6.1%
Time Frame: exit PRIOR to earnings in late January
New Positions: see below

Comments:
01/08/14: Both HON and UTX were downgraded by Citigroup this morning. The news didn't have much impact on shares of UTX, which bounced back. This stock looks poised to breakout past resistance near $114.00 soon.

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




PUT Play Updates

Lululemon Athletica - LULU - close: 58.02 change: -0.26

Stop Loss: 60.05
Target(s): 51.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
01/08/14: Someone is still buying dips in LULU and shares pared their losses today. I don't see any changes from my prior comments.

Earlier Comments:
LULU is poised to breakdown below its December lows. I am suggesting small bearish positions if LULU can trade at $57.00. Why small positions? That's because short interest is already at 17% of the 134.5 million share float. Any sudden bounce could spark some short covering.

If triggered at $57.00 our target is $51.00. More aggressive traders could aim lower since the Point & Figure chart for LULU is bearish with a $43 target.

Trigger @ 57.00

- Suggested Positions -

Buy the Feb $55 PUT (LULU1422N55)

Entry on January -- at $---.--
Average Daily Volume = 4.6 million
Listed on January 06, 2014



CLOSED BULLISH PLAYS

PVH Corp. - PVH - close: 132.30 change: -2.77

Stop Loss: 133.90
Target(s): 147.50
Current Option Gain/Loss: -41.4%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
01/08/14: Ouch! PVH underperformed the market with a -2.0% plunge toward the $132 area. This is the stock's third decline in a row and seems to be a reflection of investor concerns over the recent holiday shopping season. We were growing worried over PVH's performance last night and raised our stop loss to $133.90.

- Suggested Positions -

Feb $140 call (PVH1422B140) entry $3.50 exit $2.05* (-41.4%)

01/08/14 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
01/07/14 new stop loss @ 133.90

chart:

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


CLOSED BEARISH PLAYS

SodaStream Intl. - SODA - close: 50.34 change: +1.92

Stop Loss: 50.25
Target(s): 41.50
Current Option Gain/Loss: -33.3%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/08/14: Our SODA trade has been stopped out. We can thank an analyst upgrade this morning. The stock was upgraded to a "buy" rating and shares gapped open higher at $49.89 before surging toward $51.70. We had just lowered our stop loss last night to $50.25.

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.

*small positions* - Suggested Positions -

Feb $45 PUT (SODA1422N45) entry $2.40 exit $1.60 (-33.3%)

01/08/14 stopped out
01/07/14 new stop loss @ 50.25

chart:

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