Option Investor
Newsletter

Daily Newsletter, Thursday, 1/9/2014

Table of Contents

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

Market Wrap

Earnings And The NFP

by Thomas Hughes

Click here to email Thomas Hughes
The market once again awaits the NFP.

Introduction

The day started out with a drop in Asian markets caused by Chinese inflation data. Consumer inflation in the country fell to 2.5%, below the expected 2.7%, causing the mainland index to fall to a 5 month low. In Europe, trading was muted in the early part of the day as traders awaited the results of the ECB meeting and rate decision. The ECB held rates steady with no sign of a cut or other form of policy change despite some speculation to the contrary. Here at home the futures were positive ahead of the daily economic releases.


The U.S. equities markets were fairly quiet during the day, trading in a fairly narrow range near yesterday's closing prices. The S&P 500 began the day in positive territory, dipped into the red during the middle of the day before regaining ground and moving into positive territory by the close. The other major indices were much the same with the Nasdaq touching a new intraday high. The dollar index got an early boost from the ECB decision and statements but fell back before the close. Gold prices held steady around the $1225 level while WTI benchmark crude made a new low.

The monthly bundle of employment data continued with the Challenger survey of planned lay offs and the weekly release of employment claims. The data, like yesterday's ADP report, was positively surprising and in line with the economic trends of the past 12 months. Planned layoffs are at a 13 year low and unemployment claims are back down near the recent lows. The data supported the markets going into the open but did nothing to spur the bulls into rally mode, all eyes are on the Non Farm Payrolls data tomorrow and the start of earnings season which kicked off today, after the bell.

The Jobs Picture

Tomorrow is the all important cap to the monthly jobs picture. The Non Farm Payrolls number, largely expected to be in the rangeo of 185,000, could in fact be much stronger than expected. Yesterday's ADP report was the first sign of such a possibility. Despite some unexpectedl weak Decmeber unemployment claims data the ADP report showed that jobs creation in the private sector was in fact growing and not declining from the previous month. The average analyst expectation for ADP, also in the range of 185,000, was in fact 238,000, more than 50K above average estimate. This is the second month ADP jobs have increased by more than 200,000.


Today, Challenger, Gray and Christmas helped to tip the balance to the favor of those looking for a strong NFP number. The firm reported that layoffs planned in/for the month of December fell by 32% from the previous month to hit a 13 year low not seen since June of 2000. This is the second month of declines in expected layoffs, the previous month declined by 20%. Taken together I think that ADP jobs and planned lay offs point toward at least a stable, if not growing, need for employees, a need that could continue to lower the overall unemployment rate into the short term.

Also released today, weekly unemployment claims figures. This week first time claims fell by -15,000 from a revised 345,000 to reach a 5 week low. Last weeks figure was revised upward by 6,000 for net drop of 9,000 from the last reported data. The four week moving average also fell, losing nearly 10,000 claims. This drop is in line with expectation and also supported by and supportive of ADP/Challenger data. It could also be a signal that seasonal fluctuation and adjustments could be working themselves out of the system. Regardless, this data brings initial claims back down to about average for the past 6 months and to levels that have benefited overall employment rates in the past.


Continuing claims for unemployment was also in line with expectations. It gained 50,000 from a revised 2.815 million. Last weeks figure was revised lower making this weeks net gain from the last reported data about 30,000. Continuing claims are off of their long term lows but still near them and trending lower over the longer term. If today's initial claims remains at or near the current low level in revision and the next few weeks data continuing claims should come down as well which could lead to a reduction in overall unemployment in next month's data.


Total claims dropped by over a quarter million to hit a four week low. The total claims number is approaching the 4 million mark and could easily fall below that level provided other data trends such as declining first time claims and rising jobs creation. This figure is still reporting data from December so expiring benefits have not begun to impact this figure. State level data shows that employmet remains spotty by region. Nine states reported a drop in claims greater than 1,000 led by CA, TX and FL with -14,635, -6,723 and -3,738 respectively. Michigan, Pensnsylvania and New Jersey led the charge with new claims with a combined total over 33,000.


Even though it is the employment data bundle as a whole that is really important the market, as usual is waiting for the NFP and unemployment releases tomorrow. It is very likely that NFP could be stronger than expected. The ADP figure foreshadows the possibility while the other data helps to support the idea. The current expectation is for NFP of 185,000 and for unemployment to rise by a tenth to 7.1%. The actual results will fuel FOMC speculation and the possibilities of less, more or the same amount of tapering at the next meeting.

Gold And The Gold Index

Gold prices have retreated from resistance at $1250 since testing it the first part of this week. Gold prices are now sitting right on $1225 awaiting tomorrow's NFP and unemployment releases. The data will fuel Fed speculation which will fuel dollar speculation and valuation so I am expecting some volatility from gold tomorrow. The trend is still down but the metal could just as easily spike up to retest resistance or dip to test support. The Gold Index is also still trending down. The early part of the week saw the index retreat from the 30 day EMA in tandem with golds test of resistance at $1250. The long and short term indicators are bullish on the index but now that resistance is revealing itself the short term bull movement could be over or at least temporarily halted. The long term indicators also suggest that a bottom may be forming. There are significatn divergence forming in both the MACD and stochastic that indicate there is some longer term support at or near the current levels. Nearest support for the index is near the recent lows around the $82 level. A drop below this level would be bearish while a confirmation of support could indicate a correction to the long term down trend line near the $100 level. For now I am keeping an eye on gold prices and the $82 level.


Oil And The Oil Index

Oil prices traded in a tight range today. Global supply and demand concerns have been shifting and tomorrown's NFP will add to the speculation. Prices for WTI held steady around the $92.50 mark, the lowest levels seen since late November. The drop in oil prices is good for the economy but may be hurting oil companies, at least in the near to short term. The Oil Index, while trading near long term highs around the 1,500 level is possibly making a short term top. The index is now testing the level for the second time with weakening indicators. However, the index is also above potential support, trapped in a tight range between the long term highs and the combined support of the 30 day EMA and a previous high. The long term trend is up but the near to short term analysis is pointing to a potential correction that could bring down to the 1,450-1,425 level. Watch for a break or test of both support and resistance.


The Dollar

The dollar got a boost today, perhaps from Mario Draghi and the ECB. The ECB held its benchmark rate unchanged and then made comments that dampened bullish sentiment in the EU region. One comment effectively said that the only good sign the ECB sees at this time is that overly high unemployment levels seem to be stabilising, at those high levels. Another comment hurting EU outlook is “it's too early to declare a victory” and that there are still global risks to the “fragile recovery”. The Dollar Index tested new support in a continuation of a rally begun with the new year but failed to hold. The index closed below said support but still above the short term moving average.


The EUR/USD pair fell from a retest of resistance with bearish indicators. The pair, which fell below support last week, has been moving steadily sideways this week, with some volatility, making new lows 5 of the past 6 trading sessions. Long and short term indicators are bearish with potential support around the 1.3500 level.


The USD lost a little ground to the yen. This pair has been consolidating above previous resistance and is in mid-bounce. This pair has been trending up for the past 2 months and is still in an uptrend. Tapering/FOMC policy is strengthening the dollar while at the same time Abenomics/BOJ policy is aimed at weakening the yen. The current consolidation could continue until the next round of meetings from both central banks later this month. Until then economic data could cause volatility. Support is around the 103.75 level coincident with the previous resistance and the short term moving average.


The Ten Year Treasury fell back from the 3% yeild level today. The TNX has been flirting with 3% for about two weeks now and could continue to do so while tapering is in effect. The MACD and stochastic indicators are both consistent with range bound trading with 3% as the top of the range. If the range is confirmed yeilds could return to previous low levels near 2.75% or lower. A break above this level could take yeilds up as high as 3.25% or 3.5%.


Earnings Is Upon US

Earnings season begen today after the bell. Alcoa released earnings that negatively surprised the market. The company had been expected to earn $0.06 per share, down from the previous quarter's $0.11 but only posted $0.04. The company was able to beat on the top line but aluminum prices near their lowest levels in over a year and high supply levels combined to impact the bottom line. Today, shares traded to the downside on high volume but were halted at the $10.50 level. Shares of Alcoa were off as much as 2% more in the after market trading session, breaking support.


The Indices

The indices continued to tread water today. Even though the bulk of data is pointing to ongoing and possibly strengthening job growth the markets are awaiting the release of the NFP and possibly more importantly the unemployment number. The NFP and unemployment figures are more directly tied to GDP and the Fed decision on taper than the other data which may explain the waiting. Of course, the market action after the last FOMC meeting when the taper began may be evidence that it (the taper) doesn't matter, maybe the market was/is waiting for earnings.

The SPX made the second of what I am going to call spinning tops. The index is at an inflection point, sitting just above support with MACD momentum at 0 and crossing into bearishness. Stochastic, while still high in the overbought zone, is also pointing down and suggestive of near term market weakness. This combination of indicators, with the index at/on support, could be pointing to a near term extreme of bearishnesh, which would be a good entry point for directional positions. Or it could be the just the beginning of a longer bearish move. At this time the nearest support is at the 30 day EMA, which is currently coincident with what I have termed the “pre-holiday support level”, that is, the closing level of the market on the Friday before the Christmas holiday. If that level fails to hold the next target for support is around the long term trend line between 1750 and 1775.


The long term trend is still bullish if weak and weakening, nothing new. And, as has happened before the index is also at a level elevated above the long term trend line with softening indicators. The stochastic is high in the overbought range and pointing down following a bearish cross, the MACD is bullish but weakening and divergent in the shorter and longer term analysis of this chart. These indicators suggest that a dip/correction is or will occurr in the nearer term. With short term (daily chart) support in the 1820-1825 range that is the first place to watch for a test, a break below this would have longer term implication and could result in a correction to trend.


The Dow Jones Industrial Average made a similar spinning top/doji candle as the SPX. This index has been trading sideways in consolidation since the first of the year as well and also has softening indicators. However, at this time momentum has not yet reached 0 nor has stochastic begun to cross out of the OB zone. The decline in indicators suggests that more weakness could be on the way but at the same time tomorrow's NFP report could be the catalyst to provide the needed support to spring board the indices to new highs.


Pulling out to the longer term look of the weekly charts the DJI is also looking more bullish. The index is trading very close to the all time closing highs with indicators that suggest the nearer term bull run may not be over. There is a divergence in MACD over the past 24 months of rally but the near term peak is actually convergent with higher prices, if only mildly.


The NASDAQ actully opened at a new all time high today before pushing slightly higher and then falling back before the close. This index could be telegraphing bullish intent. Currently, indicators are a bit mixed in the short term. The momentum is bearish, but very weak, and stochastic is pointing down, but high in the OB range. Nearest support is the same as with the SPX and DJI, the closing level on the Friday before the Christmas break, about 4104. A break below this level could have targets as low as 4,000 before significant support kicks in.


Is the market awaiting the NFP/unemployment numbers for permission to rally? The data is still rolling in supportive of the long term trends of economic growth. It is possible that the NFP will be only a blip on the radar as the market turns it eyes on other things, such as earnings. The data is good and the taper has been accepted so earnings could take over the driver seat, at least until the next FOMC meeting in two weeks. Tomorrow, on top of the NFP effect, the market could begin the day down simply on the Alcoa news. There is only one earnings report tomorrow so not much happening there. Next week gets really hot with the big banks starting with JP Morgan and Wells Fargo on Tuesday then Bank Of American Wednesday and Citi and Goldman Sachs Thursday. In between be on the look out for dozens of small and regional banks.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Defensive Strength

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Northrop Grumman - NOC - close: 115.63 change: +0.44

Stop Loss: 113.75
Target(s): 124.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 5 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
NOC is in the industrial goods sector. The company is a major player in the defense and aerospace industry. This group of stocks performed very well last year and they have kept the momentum alive thus far in 2014 (check out names like BA, LMT, GD,). We like NOC because shares seem to be a little bit less volatile on a daily basis. The stock just set a new all-time closing high today.

Looking ahead to tomorrow the market will be moving in reaction to the December jobs report. If stocks rally on the news we could see NOC surge to new highs. I am suggesting a trigger to buy calls at $116.50. If triggered our target is $124.00. I'll confess that might be a little bit optimistic since the $120 level could be round-number resistance. We will plan on exiting prior to NOC's earnings in very late January or early February (no date yet).

Trigger @ 116.50

- Suggested Positions -

buy the FEB $1120 call (NOC1422B120) current ask $1.20

Annotated Chart:

Entry on January -- at $---.--
Average Daily Volume = 1.3 million
Listed on January 09, 2014



In Play Updates and Reviews

Stocks Churn Ahead of Jobs Report

by James Brown

Click here to email James Brown

Editor's Note:

The market's major indices failed to make any real progress as investors wait for the jobs report due out Friday morning.

We can expect an increase in volatility tomorrow morning based on the jobs number.

OTEX hit our stop. TIF was closed.


Current Portfolio:


CALL Play Updates

Advance Auto Parts - AAP - close: 113.55 change: +1.25

Stop Loss: 109.75
Target(s): 117.50
Current Option Gain/Loss: +12.8%
Time Frame: exit PRIOR to earnings in February
New Positions: see below

Comments:
01/09/14: AAP managed to outperform the market's major indices with a +1.1% gain today. Yet shares are still struggling with short-term resistance near the $114.00 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: 82.09 change: +1.02

Stop Loss: 79.65
Target(s): 89.50
Current Option Gain/Loss: - 3.2%
Time Frame: Exit PRIOR to CBI's earnings report in February
New Positions: see below

Comments:
01/09/14: CBI is starting to bounce from support near the $80 level. Shares displayed relative strength today with a +1.25% gain and a bullish breakout back above its simple 10-dma. Traders could use today's move as a new entry point to buy calls.

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: 64.70 change: +0.13

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:
01/09/14: CHKP briefly traded above resistance at the $65.00 level. Yet shares did not hit our suggested entry point at $65.25. If the market cooperates tomorrow we could see CHKP hit our entry point on Friday morning.

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: 68.97 change: +0.28

Stop Loss: 64.75
Target(s): 69.50
Current Option Gain/Loss: +34.6%
Time Frame: exit PRIOR to earnings in mid February
New Positions: see below

Comments:
01/09/14: Friday morning the market will be moving in reaction to the jobs number. This will either push DWRE toward $70.00 and our exit target at $69.50 or we could see DWRE reversing back toward the $65.00 level.

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: 95.23 change: +0.51

Stop Loss: 93.85
Target(s): 99.50
Current Option Gain/Loss: -14.0%
Time Frame: exit PRIOR to earnings on January 17th
New Positions: see below

Comments:
01/09/14: GD briefly traded at a new high but failed at resistance near $96.00. I am not suggesting new positions at this time.

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: 90.47 change: +0.03

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:
01/09/14: HON tried to rally this morning but the surge ran out of steam near short-term resistance at $91.50. HON faded back to unchanged on the session. Tomorrow's movement will be a reaction to the jobs report out Friday morning. We'll either see HON breakdown and hit our stop loss at $89.65 or we should see a bullish breakout higher. 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: 104.21 change: -0.02

Stop Loss: 99.95
Target(s): 110.00
Current Option Gain/Loss: - 6.6%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
01/09/14: The rally in shares of N took the day off with the stock drifting sideways near $104. Investors are most likely waiting for the jobs report due out tomorrow morning.

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: 79.77 change: +2.63

Stop Loss: 77.50
Target(s): 87.50
Current Option Gain/Loss: -28.0%
Time Frame: 3 to 5 weeks
New Positions: see below

Comments:
01/09/14: Uh-oh! Warning signals should be going off for NTES bulls. The spike higher this morning didn't last very long and NTES completely reversed into a -3.19% decline. Asian markets were weak today but nothing that would explain such a big drop in NTES. Unfortunately today's session has created a bearish engulfing candlestick reversal pattern. More conservative traders may want to exit immediately or raise their stop loss closer to $79.00. I am not suggesting new positions.

- Suggested Positions -

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

01/09/14 Warning! Today's session has created a bearish reversal pattern

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



Palo Alto Networks, Inc. - PANW - close: 60.64 change: +0.59

Stop Loss: 57.65
Target(s): 64.00
Current Option Gain/Loss: +42.8%
Time Frame: exit PRIOR to February option expiration
New Positions: see below

Comments:
01/09/14: PANW continued to push higher with a +0.98% gain. I am adjusting our stop loss up to $57.65. 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*

01/09/14 new stop loss @ 57.65
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: 144.97 change: -0.53

Stop Loss: 142.40
Target(s): 149.00
Current Option Gain/Loss: - 8.4%
Time Frame: EXIT prior to earnings on January 28th
New Positions: see below

Comments:
01/09/14: PII spent Thursday's session fading lower and retesting its simple 10-dma. 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: 91.60 change: +0.65

Stop Loss: 87.80
Target(s): 98.50
Current Option Gain/Loss: -16.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
01/09/14: The rebound in SLXP continued on Thursday but shares were unable to breakout past resistance near $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


United Technologies - UTX - close: 113.71 change: +0.06

Stop Loss: 111.75
Target(s): 118.50
Current Option Gain/Loss: - 4.4%
Time Frame: exit PRIOR to earnings in late January
New Positions: see below

Comments:
01/09/14: UTX keeps trying to breakout past resistance near $114.00. Looks like we'll have to wait and see if the jobs report tomorrow morning will boost stocks or drag them lower.

Today's high was $114.23. I would be tempted to buy calls on a rally past this level.

Please note our new stop loss at $111.75.

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

01/09/14 new stop loss @ 111.75
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: 57.35 change: -0.67

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:
01/09/14: As expected LULU continues to underperform the market. Shares did trade down to new 52-week lows yet the stock missed our suggested entry point by the narrowest of margins. Today's low was $57.01. I am adjusting our suggested entry point from $57.00 to $56.90.

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 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 @ 56.90

- Suggested Positions -

Buy the Feb $55 PUT (LULU1422N55)

01/09/14 LULU missed our trigger by a penny. We're adjusting the suggested entry point from 57.00 to 56.90

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


Rock-Tenn Co. - RKT - close: 101.60 change: -0.21

Stop Loss: 105.25
Target(s): 96.00
Current Option Gain/Loss: - 2.7%
Time Frame: Exit PRIOR to earnings on January 28th
New Positions: see below

Comments:
01/09/14: Our new trade on RKT began this morning with shares opening at $101.96. The stock dipped to $100.37 before bouncing back, almost to unchanged. If the market bounces on the jobs report tomorrow we could see RKT testing the $103-104 area.

Earlier Comments:
There is a lot of congestion in the $100-95 area but we suspect that RKT could retreat back toward $95.00. Our target is $96.00.

- Suggested Positions -

Long FEB $100 PUT (RKT1422N100) entry $3.70

Entry on January 09 at $101.96
Average Daily Volume = 656 thousand
Listed on January 08, 2014



CLOSED BULLISH PLAYS

Open Text Corp. - OTEX - close: 90.06 change: -3.98

Stop Loss: 90.75
Target(s): 98.50
Current Option Gain/Loss: -29.3%
Time Frame: exit PRIOR to February expiration
New Positions: see below

Comments:
01/09/14: Ouch! What happened to OTEX? I can't find any news to explain the -$4.00 drop in the first two hours of trading. The stock plunged to round-number support near $90.00. Our stop was hit at $90.75. The bullish breakout from yesterday suddenly looks like a potential bull trap pattern.

- Suggested Positions -

FEB $95 call (OTEX1422b95) entry $2.90* exit $2.05 (-29.3%)

01/09/14 stopped out
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.

chart:

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


Tiffany & Co - TIF - close: 92.01 change: +0.31

Stop Loss: 89.75
Target(s): 98.50
Current Option Gain/Loss: -38.6%
Time Frame: exit PRIOR to February option expiration
New Positions: see below

Comments:
01/09/14: Last night we decided to close our TIF trade due to worries about the retail sector. Sure enough this morning the retail industry was full of bad news. BBBY reported earnings, missed estimates, and guided lower. FDO also missed estimates and guided lower. Altogether there were eleven retailers that lowered their guidance this morning following the monthly same-store sales data release. Granted TIF has a much different clientele than BBBY and FDO but overall the retail industry could report a disappointing holiday shopping season.

Our plan was to exit TIF this morning. All this negative data helped push TIF to gap open lower at $91.20 before bouncing. The option gapped down at $1.38 (six cent spread).

- Suggested Positions -

FEB $95 call (TIF1422b95) entry $2.15 exit $1.32 (-38.6%)

01/09/14 planned exit, TIF gapped down
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.

chart:

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