Option Investor
Newsletter

Daily Newsletter, Thursday, 3/6/2014

Table of Contents

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

Market Wrap

Market Climbs On NFP Hopes

by Thomas Hughes

Click here to email Thomas Hughes
World markets rise on future hopes, Non-Farm Payrolls in focus for tomorrow.

Introduction

The global markets were relatively positive today. Asian and European markets were both largely in the green. Asian stocks had been treading water from the previous day's close until the last hour or two of trading. The Nikkei led, helped in part by a weakening yen, with a 1.59% gain. European markets had their eyes on the ECB and the policy statement released today. The ECB maintained their lending rate, as expected, and did not change QE policy, also as expected. The ECB sees signs of stabilization and slow growth but does not see the need to increase their efforts to stimulate the economy. The EU markets closed in the green, barely, after a choppy day of trading. Our own markets were trading to the upside in the early hours as well. S&P futures were up in the +5 range, the Dow around +40, before and after the 8:30 release of jobless claims data.


The initial claims fell this week but the overall trend is still sideways in terms of first time claims. Longer term claims dropped again but may still be feeling the impact of expiring benefit extensions. Other data, such as the Challenger survey of planned lay-offs, revealed more weakness in the jobs sector. Other data, particularly the backward looking Q4 productivity and February factory orders, were also down. The markets did not seem to care as the early gains carried into the open and were extended upon throughout the morning. Eyes seem to be on the NFP report tomorrow and hopes that the current dip in economic activity will end soon. Comments from the retail sector this morning revealed that although weather did impact traffic and sales they saw strong demand in the second half of the month as the weather abated, something I noted around my home town as well.


Today's rally was pretty broad. A look at the Select SPDR's website showed that 9 of the 10 S&P sectors tracked by the ETF's were up in the first half of today's. The only declining sector was the Utilities, XLU. Afternoon trading was a little less robust. The indices retreated from the intra-day highs set during the morning, some moving into negative territory. The Nasdaq hit a new 14 year high before it turned tail and went in to the red. The S&P 500 and Dow Jones Industrials were both able to hold onto positive territory going into the close.

The Data

According to data compiled by Challenger, Grey & Christmas the number of planned layoffs fell in February. The number declined by over 7% to 41,000 after surging in January by more than 50%. Planned layoffs are well above the lows set in December last year but basically flat over the past 12 months. This neither helps or hinders the jobs picture in my opinion. This is the second piece of the monthly jobs bundle, the first was yesterday's ADP report. ADP job creation was reported below expectation but more in line with the last two months of NFP. The previous month ADP number was also revised sharply lower.

Initial jobless claims fell last week by -26,000 to 323,000. The previous weeks figure was revised up by 1,000. The four week moving average of claims dropped by -2,000 to 336,500. This is a three month low and a possible first sign that the labor market is firming a little. If I am not mistaken the weekly release of initial claims, which is lagging by less than a week, is the most current view of labor conditions if also a very unreliable one. Nonetheless, this is a data point to take note of for future reference. On an unadjusted basis initial claims gained 5,702 this week. Nine states reported a drop in claims greater than 1,000 with a total near -22,000. Seven states reported a jump in claims greater than 1,000 with a total just under 20,000.


Continuing claims fell as well. This number fell -8,000 from a downward revision to last weeks data to hit 2.907 million. This is an 8 week low for this figure. Continuing claims have been elevated over the past two months, though slowing coming down. This weeks number could be another indication that labor conditions are firming somewhat going into the spring. This number lags the current by two weeks, and the initial claims data by one week.


Total claims also fell but I still think this number could be affected by the expired benefit extensions. Total claims fell by over -86,000 to 3.399 million. This is a new low. Even if the total claims are being impacted by benefit extensions it could also be moving lower on firming labor conditions. Together, all three measures of jobless claims are lower, moving lower and could be indicating a turn in labor conditions. I don't expect to see much proof of that in tomorrow's NFP and unemployment data but it should become apparent next month providing the trends in the data I see now hold up for March and into the spring.


Some final data for Q4 was also released today but I don't think it matters that much. Productivity in the quarter was revised lower, below expectations, to 1.8%. This is also a drop from the third quarter. I don't think it matters too much because it is the third revision of data for a quarter that ended more than 8 weeks ago.

The Gold Index

Gold prices made a wild swing today. Early in the morning the spot price for gold was down in the -$5 to -$10 range, then it turned around and shot up about $10. I think the ECB decision and unfolding drama in the Ukraine/Crimea had something to do with it. Weak U.S. data could also have had a hand in the move. Prices moved above the $1350 mark today in the U.S. session but had a hard time staying above that level. This could become resistance if prices do not move higher soon. Economic data and the upcoming Fed meeting will be a factor in this move.

The Gold Index moved up today as well but is still below the resistance of the lower boundary of the previous bear pennant. With gold prices up near 5 and 6 month highs another wave of buying in the gold stocks might not be out of the question. However, I think I am going to need to see a break back into and above the pennant before getting truly bullish on the gold miners. The index is finding short term support along the 30 day EMA near the $100 level but faces resistance just above near $105.


The Oil Index

Oil prices fell again, the third day of declines after the Putin inspired rally on Monday, before whipsawing back up. Prices dropped to near $100 before bouncing back to the $101 level. Look to the $100 level for support, a break could take oil back to $95, over the next few days. The Oil Index traded to the upside today, challenging resistance but once again failing to break it. High oil prices could mean better earnings for oil companies but were prices elevated high enough, long enough to really make a difference? The index has been fighting the long term resistance level for almost two weeks and could reverse it if not broken soon. The index is struggling to hold the current uptrend, a trend that is now intersecting with resistance set during the 2008 market reversal. A break above the 1485 level has another resistance just above at 1500.


The Dollar Index

The dollar sank to a four month low versus the basket of international currencies. The Dollar Index dropped more than a half percent, breaking the lower end of the four month range and sinking to near a five month low.


The euro strengthened versus the dollar. The ECB decision and statements helped to rally some belief that things are turning around in the EU. Despite low inflation the bank held rates unchanged on the expectation that there were be some gradual upward movement as the economy slowly improved. The EUR/USD pair moved up sharply from the 30 day EMA today but was halted at a Fibonacci Retracement near 1.3875.


The yen finally started to move this week. This pair made a retest of support Monday during the heat of the Ukraine sell-off and then began to move upward from there. The pair has made two strong white candles but at this time is still contained by resistance near the 103 level. Today's move brings the pair up to a five week high with strengthening technicals. As the winter wears on and the spring grows closer so to does the planned Japanese usage tax hike and the chances the BOJ will need to increase QE. Meanwhile, Fed tapering and Abenomic are still moving this pair in the longer term.


Sector Snapshot

The banks were one of today's hottest sectors. The Banking Index moved up nearly a full percent, making the third of what I will call almost a Three White Soldiers. The index is moving up on bullish indicators but is also facing resistance just above the current level around $71.50. Bullish momentum is on the rise and stochastic has plenty of room to move up so a test of resistance is likely. Economic data will play a big role in moving this index. Tomorrow's NFP report could help to move this and other indices as well. Looking a little farther out the next FOMC is in just under two weeks. Statements, policy changes, interest rates and the taper are all factors as well.


Looking at the XLF things are a little different. This index is already breaking out to new highs and could be foreshadowing a similar move in the BKX. One thing to note is that the XLF includes a lot of the smaller and regional banks, unlike the BKX. The indicators here are also bullish. The MACD is converging with today's spike in prices so even if there is a pullback or consolidation it looks at this time as though we can still expect higher prices in this sector. An improving economy, improving jobs, improving spending, improving housing sector and etc can only benefit the banks whose job it is to handle all of that money.


Story Stocks

There were a quite a few earnings reports today despite being after the so-called earnings season. The top name on the list today was Costco, who posted a miss. The company was expected to earn about $1.16, up $0.20 from last quarter, but reported only $1.05. This is down 15% from the same quarter last year. The drop was blamed on weaker sales, weak exchange rates and poor performance from the non-foods group of merchandise. Same store sales grew by 5% in the quarter while new memberships grew just over 4%. This quarter continues the trend of weakening membership growth and is one area of concern cited by analysts. The stock dropped more than 2% before the open but found some support around the $110-$112 level.


The Indices

The indices were mixed today after setting new highs this week. The S&P, Dow and Transports were all able to move into the green while others like the Nasdaq and Russell 2000 dipped into the red. The S&P moved up nearly 8 points in today's trading before peaking out in the early afternoon. The index appears to want to move higher even though the data and the earnings are not really leading the way. I know that I for one am expecting an end to the winter weakness in the economy and think that there could be signs of this soon. Tomorrow's NFP report will likely not be that sign but what it could be is confirmation that the economic dip is only as bad as it has been and no worse. This, to me, would be in line with the longer term trends, the expected winter slow down and the upcoming expected pick up in activity.

The S&P 500 is moving higher with bullish technicals. Momentum and stochastic are both diverging in the nearer term but longer term analysis suggests that higher prices could still come. With the index back at new all time highs it is harder to pinpoint where resistances might be. One way is to look on the calendar for potential market moving events, the next real big one after the NFP tomorrow will be the FOMC meeting in two weeks. There could be some near term weakness once the NFP is released but the long term trends are still up. Near term support is now around the 1850 level.


The Nasdaq traded into the red today, after making a new 14 year high. Even with the afternoon weakness the index is still riding high on a bullish wave. The indicators are strongly bullish in the longer term but diverging in the nearer term. Like the S&P 500, there may be some near term weakness but the longer term trend is still up.


The Dow is right behind the other two indices but has not quite made it to a new high yet. Resistance is about 150 higher near the current all time around the 16,575 level. Indicators are bullish on this index as well, but are also diverging in the nearer term indicating the current rally is losing steam. Be on the lookout for a pullback or consolidation with support around the 16,250 level.


The markets are setting new highs. That is something that is hard to argue with. So long as new highs are being set weakness, dips and corrections are buying opportunities. Until the data, the earnings or something else emerges as a sign that something is changing the trends are up. The dip we are experiencing was expected. The fact it was a little deeper than expected could be the fault of the “weather effect”, or not. The important thing is when will it end and when will the next uptick in activity begin. This weeks employment data could be an early sign of this happening. Don't expect to see too much in tomorrow's data but pay attention to any forward looking components and the weekly claims. Next month's data and NFP may be better, showing a resumption of growth, or not.

Until then, remember the trend.

Thomas Hughes


New Option Plays

Tech Momentum

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Facebook, Inc. - FB - close: 70.84 change: -0.73

Stop Loss: 68.40
Target(s): 77.50
Current Option Gain/Loss: Unopened
Time Frame: exit prior to April expiration
New Positions: Yes, see below

Company Description

Why We Like It:
FB is in the technology sector. They are the largest social network on the planet with over 1.06 billion active monthly users. The stock remains a favorite for the momentum trading crowd. Shares just tagged new all-time highs yesterday.

I am suggesting a trigger to buy calls at $71.25. More conservative traders may want to wait for a breakout past $72.00 (a new high) before initiating positions. If triggered our multi-week target is $77.50. Investors may want to aim higher. The Point & Figure chart is very bullish with a long-term target of $110.

Trigger @ 71.25

- Suggested Positions -

Buy the Apr $75 call (FB1419D75) current ask $2.21

Annotated Chart:

Entry on March -- at $---.--
Average Daily Volume = 58 million
Listed on March 06, 2014



In Play Updates and Reviews

Stocks Drift Higher Ahead Of Jobs Report

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. markets managed to shrug off the latest news out of Ukraine and for the most part drifted higher ahead of tomorrow's jobs report.

We closed our CAT and CSC trades this morning.
XONE hit our entry trigger.


Current Portfolio:


CALL Play Updates

BorgWarner Inc. - BWA - close: 61.85 change: +0.40

Stop Loss: 59.90
Target(s): 67.50
Current Option Gain/Loss: Unopened
Time Frame: exit prior to April expiration
New Positions: Yes, see below

Comments:
03/06/14: BWA is bouncing back toward resistance near $62.00 but not breakout yet. I don't see any changes from my prior comments.

We want to use a trigger to buy calls on BWA at $62.25. If triggered we'll use a stop loss at $59.90. Our initial target is $67.50.

Trigger @ 62.25

- Suggested Positions -

Buy the Apr $65 call (BWA1419D65)

03/05/14 corrected some numbers on the entry point, target and stop loss.
Use a trigger @ 62.25. Use a stop at $59.90. Target 67.50

Entry on March -- at $---.--
Average Daily Volume = 2.0 million
Listed on March 04, 2014


Chicago Bridge & Iron - CBI - close: 85.36 change: +0.91

Stop Loss: 80.90
Target(s): 89.50
Current Option Gain/Loss: +7.1%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/06/14: CBI bounced from the $84 level to set a new all-time closing high. Investors may want to start raising their stop loss. Look for short-term support near the simple 10-dma (currently 82.60).

Earlier Comments:
Our target is $89.50. More aggressive investors could aim higher since the Point & Figure chart for CBI is bullish with a $111 target.

- Suggested Positions -

Long Apr $85 call (CBI1419D85) entry $2.80

03/04/14 triggered @ 84.50

Entry on March 04 at $84.50
Average Daily Volume = 1.16 million
Listed on March 01, 2014


Centene Corp. - CNC - close: 62.83 change: -0.32

Stop Loss: 61.75
Target(s): 67.75
Current Option Gain/Loss: -60.0%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/06/14: CNC has been underperforming a bit these last two days. Readers may want to adjust their stop loss again. I am not suggesting new positions at this time.

Earlier Comments:
Our target is $67.75. More aggressive investors may want to aim higher since the Point & Figure chart for CNC is bullish with a $78 target.

- Suggested Positions -

Long Mar $65 call (CNC1422C65) entry $1.25

03/01/14 new stop loss @ 61.75
02/24/14 triggered @ 63.60

Entry on February 25 at $63.60
Average Daily Volume = 656 thousand
Listed on February 24, 2014


Rockwell Collins Inc. - COL - close: 82.35 change: -0.66

Stop Loss: 81.75
Target(s): 89.50
Current Option Gain/Loss: Unopened
Time Frame: exit prior to April expiration
New Positions: Yes, see below

Comments:
03/06/14: COL underperformed the market today with a -0.8% decline and a close below its simple 10-dma. That is short-term bearish. Shares are also nearing the bottom of their recent trading range. If COL does not improve soon we will likely drop it as a candidate.

Currently, I am suggesting a trigger to buy calls at $84.15. If triggered our target is $89.50. FYI: The Point & Figure chart for COL is bullish with a $106 target.

Trigger @ 84.15

- Suggested Positions -

Buy the APR $85 call (COL1419D85)

Entry on March -- at $---.--
Average Daily Volume = 915 thousand
Listed on March 04, 2014


Intl. Flavors & Fragrances - IFF - close: 95.23 change: -0.05

Stop Loss: 92.40
Target(s): 99.50
Current Option Gain/Loss: +36.6%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/06/14: Thursday was another quiet session for shares of IFF with the stock moving sideways. Look for potential support near $94.00.

- Suggested Positions -

Long Apr $95 call (IFF1419D95) entry $1.50

03/04/14 new stop loss @ 92.40
02/28/14 triggered @ 93.65

Entry on February 28 at $93.65
Average Daily Volume = 410 thousand
Listed on February 27, 2014


Imperva Inc. - IMPV - close: 65.53 change: +0.53

Stop Loss: 61.40
Target(s): 68.00
Current Option Gain/Loss: +67.6%
Time Frame: exit prior to March option expiration
New Positions: see below

Comments:
03/06/14: Hmm... IMPV displayed relative strength by closing with a +0.8% gain. Yet shares are off their intraday high of $67.12. IMPV tested a trend line of higher highs and retreated. More conservative traders may want to just take profits now. I am not suggesting new positions. We will raise our stop loss to $61.40.

Earlier Comments:
The Point & Figure chart for IMPV is bullish with a $77.00 target.

- Suggested Positions -

Long MAR $60 call (IMPV1422c60) entry $3.40*

03/06/14 new stop loss @ 61.40
Traders may want to take profits now to lock in potential gains!
02/26/14 new stop loss @ 59.75
02/22/14 new stop loss @ 58.65
*option entry price is an estimate since the option did not trade at the time our play was opened.
02/21/14 triggered @ 60.50

Entry on February 21 at $60.50
Average Daily Volume = 264 thousand
Listed on February 18, 2014


Lockheed Martin - LMT - close: 166.84 change: +0.02

Stop Loss: 159.90
Target(s): 169.75 & 174.75
Current Option Gain/Loss: +19.0%
Time Frame: exit prior to April option expiration
New Positions: see below

Comments:
03/06/14: I am not surprised to see LMT churn sideways just below its highs and just ahead of tomorrow's jobs report. I am not suggesting new positions at this time.

We have two different targets. Our conservative target is $169.75. Our more aggressive target is $174.75. FYI: The Point & Figure chart for LMT is very bullish with a $221 target.

- Suggested Positions -

Long Apr $165 call (LMT1419D165) entry $4.20

03/04/14 triggered @ 164.35

Entry on March 04 at $164.35
Average Daily Volume = 2.3 million
Listed on March 03, 2014


Perrigo Co. - PRGO - close: 163.89 change: -3.06

Stop Loss: 162.75
Target(s): 169.50
Current Option Gain/Loss: - 3.1%
Time Frame: Exit prior to March option expiration
New Positions: see below

Comments:
03/06/14: Ouch! PRGO suffered some profit taking with a -1.8% decline. The stock settled on short-term support at its simple 10-dma. I didn't see any news behind today's drop. If there is any follow through lower tomorrow we could see PRGO hit our stop at $162.75.

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

*small positions* - Suggested Positions -

Long MAR $165 call (PRGO1422C165) entry $3.20

03/05/14 new stop loss @ 162.75
02/26/14 triggered @ 162.50

Entry on February 26 at $162.50
Average Daily Volume = 1.3 million
Listed on February 25, 2014


Rock-Tenn Co. - RKT - close: 112.62 change: -0.85

Stop Loss: 109.65
Target(s): 119.50
Current Option Gain/Loss: -14.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/06/14: I have cautioned readers that RKT might try and fill the gap from March 4th. Shares appear to be moving that direction. Look for a dip toward $111.

Earlier Comments:
Our target is $119.50. FYI: The Point & Figure chart for RKT is bullish with a $129 target.

- Suggested Positions -

Long APR $115 call (RKT1419D115) entry $3.10*

03/04/14 new stop loss @ 109.65
03/04/14 triggered on gap higher at $113.35, trigger was 112.00
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on March 04 at $113.35
Average Daily Volume = 809 thousand
Listed on March 01, 2014


Rockwell Automation - ROK - close: 123.46 change: -0.03

Stop Loss: 119.40
Target(s): 125.00
Current Option Gain/Loss: +35.2%
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
03/06/14: ROK quietly churned sideways near short-term resistance at the $124.00 level. Currently our exit target is $125.00. More aggressive traders may want to aim higher but there is a trend line (resistance) of higher highs in the $125-126 area.

If stocks rally on the jobs data tomorrow we should see ROK hit our target.

- Suggested Positions -

Long APR $125 call (ROK1419D125) entry $1.70

03/04/14 adjust exit target to $125.00
03/01/14 new stop loss @ 119.40
02/27/14 new stop loss @ 118.75
02/25/14 triggered @ 121.25

Entry on February 25 at $121.25
Average Daily Volume = 1.1 million
Listed on February 22, 2014


Constellation Brands Inc. - STZ - close: 83.85 change: +1.12

Stop Loss: 79.65
Target(s): 84.75
Current Option Gain/Loss: Mar$80c:+111.7% & Apr$80c: +54.5%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
03/06/14: More new highs for STZ. The stock displayed more relative strength with a +1.35% gain. Our exit target is $84.75. More aggressive traders may want to aim higher.

Earlier Comments:
STZ does not move super fast so you may want to buy the April calls instead of the March calls.

- Suggested Positions -

Buy the MAR $80 call (STZ1422C80) entry $1.70

- or -

Buy the APR $80 call (STZ1419D80) entry $3.30

03/01/14 new stop loss @ 79.65
02/25/14 new stop loss @ 78.75
02/22/14 new stop loss @ 77.80
02/18/14 new stop loss @ 77.40
02/13/14 new stop loss @ 76.40
02/12/14 triggered @ 79.00

Entry on February 12 at $79.00
Average Daily Volume = 1.5 million
Listed on February 11, 2014


Domtar Corp. - UFS - close: 110.44 change: -0.47

Stop Loss: 107.90
Target(s): 118.00
Current Option Gain/Loss: -28.5%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/06/14: UFS retreated lower this morning but shares found support near $110 and bounced along the $110 mark the rest of the session. If the market rallies on the jobs report tomorrow I expect UFS to see new highs.

Earlier Comments:
Our target is $118.00. The Point & Figure chart for UFS is bullish with a $135 target.

- Suggested Positions -

Long APR $115 call (UFS1419D115) entry $2.10*

02/28/14 triggered @ 110.50
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on February 28 at $110.50
Average Daily Volume = 817 thousand
Listed on February 26, 2014


Vulcan Materials - VMC - close: 67.99 change: -0.21

Stop Loss: 66.25
Target(s): 74.50
Current Option Gain/Loss: -34.0%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
03/06/14: VMC is still churning sideways near the $68 level, which as prior resistance should offer some support. A bounce from current levels could be used as a new entry point.

- Suggested Positions -

Long APR $70 call (VMC1419D70) entry $2.35*

03/04/14 triggered on gap higher at $69.31. Suggested trigger was $68.75
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on March 04 at $69.31
Average Daily Volume = 1.1 million
Listed on March 03, 2014




PUT Play Updates

Green Mountain Coffee Roasters - GMCR - cls: 107.12 chg: -3.42

Stop Loss: 113.55
Target(s): 101.00
Current Option Gain/Loss: +103.4%
Time Frame: Exit prior to March option expiration
New Positions: see below

Comments:
03/06/14: Good news! The profit taking in GMCR resumed on Thursday and shares underperformed the market with a -3.0% decline and a new relative low.

Our put option has doubled in value. Traders may want to take some money off the table.

Earlier Comments:
GMCR can be a volatile stock so we consider any trades to be more aggressive and higher risk. Use small positions to limit risk.

*small positions* - Suggested Positions -

Long MAR $110 PUT (GMCR1422o110) entry $2.58*

03/06/14 our put has doubled in value. Traders may want to take some money off the table.
03/05/14 new stop loss @ 113.55
03/01/14 new stop loss @ 115.05
02/27/14 triggered @ 114.65
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on February 27 at $114.65
Average Daily Volume = 6.7 million
Listed on February 26, 2014


The ExOne Company - XONE - close: 43.18 change: -2.13

Stop Loss: 46.35
Target(s): 40.25
Current Option Gain/Loss: +20.3%
Time Frame: exit PRIOR to earnings on March 19th
New Positions: see below

Comments:
03/06/14: Our brand new play on XONE has triggered. As expected the stock broke down to new relative lows. Our trigger to buy puts was hit at $44.40. XONE settled with a -4.7% decline.

XONE could have support at $40.00 or it might drop toward the early February low of $37.80. We are currently aiming for $40.25. More aggressive traders could aim lower.

FYI: After the closing bell tonight XONE announced a couple of acquisitions. They paid approximately $4.8 million in cash to buy MWT, a "pioneer in industrial grade microwaves with leading design and manufacturing experience, ExOne has enhanced its position as the market leader of 3D sand production systems for industry."

XONE also bought the assets of Machin-A-Mation, a specialty machine shop in Chesterfield, Michigan for about $5.0 million.

I am not seeing any reaction in XONE's stock price to this news in after hours markets.

Earlier Comments:
I do consider this an aggressive, higher-risk trade. The 3D printing stocks can be very volatile. Furthermore XONE has very high short interest. The most recent data listed short interest at 43% of the very, very small 7.9 million share float. That raises the risk of a short squeeze. This trade also has a short time frame. XONE is scheduled to report earnings on March 19th. We do not want to hold over the report. That gives us about two weeks.

*Small Positions - Aggressive Trade*

Long MAR $40 PUT (XONE1422o40) entry $1.08

03/06/14 triggered @ 44.40

Entry on March 06 at $44.40
Average Daily Volume = 444 thousand
Listed on March 05, 2014



CLOSED BULLISH PLAYS

Caterpillar Inc. - CAT - close: 97.60 change: +1.23

Stop Loss: 94.85
Target(s): 99.65
Current Option Gain/Loss: -44.8%
Time Frame: 3 to 4 weeks
New Positions: see below

Comments:
03/06/14: Sometimes the market seems spiteful. Last night we decide to drop CAT for lack of movement and today the stock displays relative strength with a +1.27% gain. On the positive side of this move the gap open higher at $96.95 should have helped but the option only opened at $0.80.

small positions - Suggested Positions -

MAR $97.50 call (CAT1422C97.5) entry $1.45 exit $0.80 (-44.8%)

03/06/14 planned exit
03/05/14 prepare to exit immediately tomorrow morning
02/22/14 adjust exit target to $99.65
02/20/14 new stop loss @ 94.85
02/18/14 new stop loss @ 94.40
02/13/14 planned entry at the opening bell
CAT gapped down at $95.29

chart:

Entry on February 13 at $95.29
Average Daily Volume = 8.3 million
Listed on February 12, 2014


Computer Sciences - CSC - close: 62.58 change: +0.03

Stop Loss: 61.75
Target(s): 68.00
Current Option Gain/Loss: Mar $60c - 2.1% & Jun $65c: + 1.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
03/06/14: CSC seems to be developing a very short-term trend of lower highs. We decided last night to close positions this morning. The stock opened at $62.72. I would keep CSC on your watch list for a dip toward $60.00 or its 50-dma, either could prove to be support.

- Suggested Positions -

MAR $60 call (CSC1422C60) entry $2.81* exit $2.75** (-2.1%)

- or -

JUN $65 call (CSC1421F65) entry $2.27* exit $2.30** (+1.3%)

03/06/14 planned exit
**option exit price is an estimate since the option did not trade at the time our play was closed.
03/05/14 prepare to exit at the open tomorrow
02/24/14 new stop loss @ 61.75
02/13/14 triggered @ 62.15
*option entry price is an estimate since the option did not trade at the time our play was opened.

chart:

Entry on February 13 at $62.15
Average Daily Volume = 1.59 million
Listed on February 12, 2014