Option Investor
Newsletter

Daily Newsletter, Wednesday, 12/3/2014

Table of Contents

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

Market Wrap

Market Keeps Hanging On

by Thomas Hughes

Click here to email Thomas Hughes
The market is hanging at or above recent highs while the technicals deteriorate and economic data remains strong.

Introduction

The market traded just above break even for most of the day, hanging near the long term and all-time highs set in the past week. Earnings and an injection of economic data helped support prices until late day buyers stepped in to push the market to today's highs. Overall, trading was quiet today with nothing really there to grab the market's attention.

The over seas sector was fairly quiet as well, European investors at least are waiting on tomorrow's ECB meeting. There is some expectation for the ECB to make a move to help the ailing EU economy but it is unclear what it may be. Based on Mario Draghi's history of talking the talk and then failing to act I would expect to hear more talk and see little action. Any moves by the bank will occur before the New York open.

Index futures were flat for the first hour or so of the early morning session. The S&P 500 was indicated down by about a point ahead of today's economic releases but slowly gained traction as they hit the wires. The data was decent, not great, but definitely enough to help support current trends. Job creation remains steady, productivity is up, labor costs are down and the economy is growing. Today's releases include the ADP report, Productivity, Unit Labor Costs and Services Sector PMI. Once the data began coming out the indices began to firm, a little. Daily lows were set just after the opening bell and then left behind as most indices moved into the green.

Market Statistics

After the start of trading the market was still quiet. Today's news, including earnings from a couple of teen retailers, helped to support prices but was not enough to really lift them. There is still a load of macroeconomic data due out this week that both bulls and bears may be waiting for. Tomorrow Challenger Gray & Christmas report on planned layoff's/hirings then Friday will be dominated by the Non Farm Payrolls and total US unemployment reports. Another factor possibly affecting trading today was a speech/Q&A session given by President Obama at the business summit. He spoke about the need to come together to get things done, potential hurdles in the Congress and how tax reform shouldn't blow the deficit. Whatever the reason, stocks traded in a tight range for most of the day, and then strengthened into the close. The last half hour of trading saw a number of buyers step into the market and drive prices up to the daily high.

Economic Calendar

The Economy

The ADP employment report was released first. According to the report there were 208,000 new jobs created last month. This is slightly below the 215,000 expected and the 225,000 reported last month. It is a little low but still above the 200,000 level and inline with the steady improvement in labor that has been going on all year. Additionally, the previous month was revised up by 8,000 to 233,000, the fourth straight month of positive revision and an indication of momentum. November gains were broad but led by small business, and by the services sector. There were 101,000 new small business jobs, and 177,000 new service sector jobs. There were notable gains in trades/transportation, construction and manufacturing as well.


Productivity and labor costs were both positive surprises. Productivity for the 3rd quarter was revised higher by 0.3%. This is slightly ahead of the consensus estimates. Unit Labor costs dipped by -1.0%, unexpectedly, versus the estimated 0.0% predicted by analysts. This is also well below the -0.3% decline reported in the last estimate. Labor costs are now up only 1.2% for the year, below the 2.2% long term average. Together these data points are positives for the economy as they mean business are making more revenue with less costs and are more able to pay higher wages without raising prices. It is also a sign that inflation is still tame. The flip side is that, over the long term, as wage earners have more money and want nicer stuff the prices for premium items may go up.

The Services Sector ISM jumped last month too, climbing 2.2% to reach the fourth highest level ever recorded. November ISM was reported at 59.3, much better than expected. A gain was predicted but this reading topped it by nearly 1.5 percentagepoints and indicates growth and growing momentum in the non-manufacturing portion of the economy. Business activity, new orders and prices paid were all indicated higher, business activity and new orders both above 60. Employment was the only portion of the report to decline but is still reading at 56.7, well above the expansionary 50 level.

The last piece of economic news released today was the Fed Beige Book. This was released at 2PM and largely confirms what we already know. The Fed is generally upbeat on the economy but remains cautious over the housing market. Consumer spending, aided by low oil prices and improving labor conditions, is advancing and retailers are optimistic about the holiday season. Looking at jobs the Fed says the gains are widespread throughout all 12 Federal Reserve Districts.

The Oil Index

Oil prices traded to the upside and held steady today around $67.25. Prices have been consolidating below $67 ever since the OPEC inspired dip below $70 and have yet to break back through. Today, a drop in US inventory sparked a brief surge to $68 but it was not long lived, prices soon retreated back to near $67.25. Volatility could continue in this market as traders try to figure out how world demand, cold weather, inventories and the global supply situation are going to affect prices long term. WTI and Brent are both on the verge of another move lower if nothing emerges to help support the long term outlook.

The Oil Index traded to the upside today as well. The index gained close to 1.5% on an intraday basis before resistance pushed it back. The index is now just off of the long term low, set last week when oil prices tanked, and above support along the 1,350 level. The indicators are weak but also still consistent with support along this level but that could change. Oil prices will have a lot to do with how strong support turns out to be and may remain volatile. Should they fall sharply again they will likely carry the Oil Index down too. Resistance is currently around 1,400 with current support around 1,350.


The Gold Index

Gold prices rose today even as the dollar index broke out to a new high. Spot prices for gold climbed about 1% to just shy of $1210 per ounce in today's session. This is after the extreme volatility we saw in gold prices earlier in the week, sparked by the Swiss referendum on gold reserves, and further sign that gold may be bottoming. Gold has now bounced from the $1150 level twice and is currently trading above the $1190-$1200 resistance level. There may be more volatility in the coming weeks but it looks like there are buyers waiting to step in on the dips.

The Gold Index gained more than 3.5% today, moving up from support around the $67 level. Today's action is another indication that the Gold Index may have bottomed. It is still early to say for certain but the index appears to have found long term support at the 100% retracement level of the 2008-2011 bull market in gold. The indicators are bullish and setting up for a secondary confirmation. This is not a signal nor does it mean a rally is about to kick off, merely that the bear market may be over. If so I would expect to see several months of side to side action at least, with a possible retest of the long term low near $60. In the short term, support is indicated along the retracement level at $66.49 with $60 next target should it fail. Resistance is potentially at $72.50 with a target near $80 should the index rise above it.


In The News, Story Stocks and Earnings

Retail and especially Teen Retail were in focus today. A minimum of four commonly traded retailers reported out of about 30 earnings reports on today's calendar. Abercrombie&Fitch reported a horrible quarter this morning but the news turned out to be an ugly duckling. This quarter is a goose egg, but next year may be better than expected. Revenues and sales missed forecasts for the quarter, along with full year guidance, but signs are emerging that the long term plans to turn the company around are working. One such is to reduce logo merchandise in favor of non-logo merchandise and is already paying off. The company reported that comp store sales fell by 10%, but were positively impacted by gains in sales of non-logo products. Shares of the stock opened at a 5 ½ year low but quickly found buyers. The stock then moved nearly 3.5% higher on 3X average daily volume.


Aeropostale reported after the bell and did not inspire the same confidence as its competitor. The company reported a loss of -0.66, about 50% wider than expected. Along with this the teen retailer also guided fourth quarter earnings to a range below current estimates. Shares of the stock had been trading higher by more than 3% during the regular session but fell hard after the report was released.


Guess also reported after the bell. Revenue and earnings fell from the year ago period but came in ahea of expectations. On an adjusted basis EPS was $0.42, more than double consensus estimates. Along side this execs raised full year guidance. Shares of the stock closed the day about 1.25% above yesterdays close and extended that gain in the after hours market.


The retail sector has been in sharp focus the last few weeks as investors eye the holiday shopping season. Today's results from the teen retailers is example of the industry as a whole; consumers are spending but some retailers are doing well and some aren't. The sector has been trending up along with the rest of the market over the past two months and is now bouncing from support. The Retail Spyder XRT pulled back this week after hitting a high last month and could now be in the middle of a rotation. The disparity between the good and the bad retailers is growing and this could lead to a reallocation of portfolios. The indicators are also weak with divergences in line with a pull back. Current support is around $92.50 with the possibility of a pullback to $90.


The Indices

The indices did it once again; They pushed to new highs after a day of quiet trading. There was no one thing that I can put my finger on to cause it exept to say economic data. None of the reports released today was particularly stunning in terms of bullishness but taken together paint a Goldilocks picture of improving labor market, improving consumer, improving economy and low inflation.

All the major indices closed in the green but not all made new highs, the Dow Jones Transportation Average leading today's charge. The transports moved higher by 0.79% and are approaching the all time high set last week. The index appears to making a trend following bounce from the short term moving average but as of yet this is not confirmed by the indicators. The index is still trending up but also still losing strength. MACD is bearish, but very weak, while stochastic is below the upper signal line and moving lower. These could rollover soon but until then caution is warranted. Near term support is along the short term moving average near 9,000.


The NASDAQ Composite added 0.38% today and is now about 5% away from its all time high just over 5,000. This is a monumental number for the tech heavy index and one the market will be watching intently. Until then the index is trending higher and moving up to test current long term highs which are about 1% above today's closing price. The indicators on this chart are also weak and suggestive of a pull back in prices but it has not materialized yet. Price action continued to move higher, supported by the rising economic trends. Providing trends do not change, or outlook does not diminish, they could continue to support prices into the near future. First target for support is around 4,700 with next target near 4,650. Resistance is the current long term high near 4,800.


The S&P 500 was next biggest gainer today, moving barely half as much as the transports. The broad market gained 0.38% but still managed to set a new all-time closing and new all-time intraday high. Today's action barely touched into new territory but touch it did. The index has been trending higher and is now bouncing from support in line with the prevailing trend. The indicators remain weak but, like the transports, are set up for a possible trend following signal. Until then, the indicators are displaying significant divergences that could lead to a correction or pullback of some variety.


The Dow Jones Industrial Average brings up the rear today with a gain of only 0.8%. The blue chip index, despite the smallest gain, put in the most impressive performance by setting a new all time closing and intraday highs. This move is an additional confirmation of Dow theory as now the industrial average is setting new highs on its own, after being led to new highs by the transports earlier this year. The indicators however are still weak but have at least begun to show early signs of rolling over, stochastic is creating a weak, trend following, bullish crossover.


The indices are trending higher and appear to be moving higher on a bounce. Today two of the four majors hit new highs while the other two moved closer to testing their current highs; all supported by rising economic trends. The caveat is that all four also appear to be losing momentum and are at risk for correction. The thing is, there just isn't any sign of one except in the indicators. Price action is bullish, trends are up, economic data is good and outlook is good. For now the trend is up, the economics are rising and expectations are optimistic. So long as this continues weakening indicators are just as likely setting up for a potential trend following signal as not. It will take a catalyst to move the market either way and that catalyst could be data due out tomorrow/Friday.

Until then, remember the trend!

Thomas Hughes

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New Option Plays

Consistently Raising Guidance

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Hanesbrands Inc. - HBI - close: 114.70 change: +2.15

Stop Loss: 111.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 786 thousand
Entry on December -- at $---.--
Listed on December 02, 2014
Time Frame: Exit prior to 2015 January option expiration
New Positions: Yes, see below

Company Description

Why We Like It:
HBI is in the consumer goods sector. The company makes clothing. According to the company website, "Our innerwear and activewear apparel brands include Hanes, Champion, Playtex, Bali, Maidenform, Flexees, JMS/Just My Size, barely there, Wonderbra and Gear for Sports. In addition, our international brands include Zorba, Sol y Oro, Rinbros, Track N Field and Ritmo.

We sell bras, panties, shapewear, sheer hosiery, men's underwear, children's underwear, socks, T-shirts and other activewear in the United States, Canada, Mexico and other leading markets in the Americas, Asia and Europe. In the United States, we sell more units of intimate apparel, male underwear, socks, shapewear, hosiery and T-shirts than any other company."

Shares of HBI have been a strong performer for investors thanks to significant earnings growth. The company has beaten Wall Street's bottom line estimate and raised guidance the last four quarters in a row. Investors Business Daily noted that HBI's profits have risen 40% in the last three quarters, which is the best streak of profitability since 2010. HBI's quarterly pretax profit margins are at multi-year highs. Wall Street expects HBI's profits to rise +46% in Q4.

HBI's Chairman and Chief Executive Office, Richard Noll, commented on their most recent earnings report (released October 29th) saying,

"Our business continues to perform very well, particularly in an uncertain consumer environment. We have delivered more earnings in the first three quarters of 2014 than we did all of last year. Our Innovate-to-Elevate strategy, global self-owned supply chain, and acquisitions continue to generate shareholder value and give us confidence in our potential for many years to come."

After breaking out to new highs a few days ago the stock has pulled back to retest prior highs as new support. Today's bounce looks like a new bullish entry point to hop on board the HBI train. Tonight I am suggesting a trigger to buy calls at $115.05.

Trigger @ $115.05

- Suggested Positions -

Buy the 2015 Jan $120 call (HBI150117C120) current ask $1.15

Option Format: symbol-year-month-day-call-strike

Daily Chart:



In Play Updates and Reviews

Big Caps End At New Closing Highs

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market's big cap indices ended Wednesday at new closing highs. Semiconductors, energy, and railroads led the rally.

Retail and consumer-related names could react to monthly same-store sales numbers expected tomorrow morning. Only a handful of companies still report this data but it can influence trading in the industry.

FMC hit our stop loss.


Current Portfolio:


CALL Play Updates

Aetna Inc. - AET - close: 89.68 change: +1.34

Stop Loss: 85.75
Target(s): To Be Determined
Current Option Gain/Loss: +24.4%
Average Daily Volume = 2.45 million
Entry on December 03 at $88.65
Listed on December 02, 2014
Time Frame: Exit PRIOR to January expiration
New Positions: see below

Comments:
12/03/14: Our new play on AET is off to a good start. Shares accelerated higher and outperformed the major indices with a +1.5% gain. Our suggested entry point was hit very early at $88.65.

Earlier Comments: December 2, 2014:
AET is in the healthcare sector. According to a recent press release, "Aetna is one of the nation's leading diversified health care benefits companies, serving an estimated 46 million people with information and resources to help them make better informed decisions about their health care. Aetna's customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups and expatriates."

If you study a one-year chart of AET the stock has definitely seen its ups and downs. That's because the healthcare industry has faced a number of issues. AET's CEO commented on this past year in their latest post-earnings conference call.

Mark T. Bertolini, Aetna chairman, CEO and president, said, "some of the challenges we face this year, including pricing solving for nearly $1 billion in ACA related industry fees and taxes, solving for the largest rate cuts to the Medicare Advantage program in our recent history, navigating a host of new regulatory requirements in our small group and individual businesses, managing through a turbulent launch in public exchanges and controlling pharmacy costs in a year where heavy priced Hepatitis C treatments first became available and treatment guidelines changed in unforeseen ways." (ACA stands for Affordable Care Act, a.k.a. Obamacare).

In spite of all these challenges shares of AET are outperforming the major indices with a +27% gain in 2014 compared to a +11% gain in the S&P 500. AET's strength is due to the company's earnings performance. They have beaten Wall Street's earnings estimates and raised guidance three quarters in a row.

AET's most recent quarterly report was October 28th. Analysts were expecting a profit of $1.58 a share on revenues of $14.7 billion. AET delivered a profit of $1.79 a share. Revenues were up +13% to match estimates. The company said they added 470,000 new medical insurance customers in the third quarter, putting the total at 23.6 million.

Bertolini commented on their results, "Aetna reported solid third-quarter results, including our 10th consecutive quarter of membership growth, record quarterly operating revenues, and continued high single-digit pretax operating margin."

The major healthcare companies are reaping the benefits of Obamacare as more people sign up. Management raised their full year 2014 earnings guidance into the $6.60-6.70 zone versus Wall Street's estimate of $6.57.

Just last month AET raised their quarterly dividend 11% to 25 cents a share and added $1 billion to its stock buyback program, up from $464 million. In the last two months the stock has received multiple price target upgrades into the $95-100 zone. The point & figure chart is bullish with a $112.00 target.

AET's bullish trend of higher lows has just produced a breakout past resistance to new all-time highs. Tonight we are suggesting a trigger to buy calls at $88.65.

- Suggested Positions -

Long 2015 Jan $90 call (AET150117C90) entry $1.76

12/03/14 triggered @ 88.65
Option Format: symbol-year-month-day-call-strike


CR Bard Inc. - BCR - close: 172.40 change: +1.41

Stop Loss: 165.85
Target(s): To Be Determined
Current Option Gain/Loss: +90.1%
Average Daily Volume = 538 thousand
Entry on November 13 at $165.65
Listed on November 12, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/03/14: The relative strength in BCR continued with a +0.8% gain on Tuesday. Shares hit an intraday high just above $174 before paring their gains. I'm not suggesting new positions at this time.

Earlier Comments: November 12, 2014:
BCR is in the healthcare sector. The company makes medical supplies. According to the company website, "C. R. Bard, Inc. is a leading multinational developer, manufacturer, and marketer of innovative, life-enhancing medical technologies in the product fields of vascular, urology, oncology, and surgical specialty. BARD markets its products and services worldwide to hospitals, individual health care professionals, extended care facilities, and alternate site facilities."

The company has been on a roll with its earnings reports. BCR has beaten Wall Street's estimates on both the top and bottom line the last four quarters in a row. The last couple of quarters have seen some pretty big beats and management has raised guidance.

BCR's most recent earnings report was October 22nd. Wall Street expected a profit of $1.87 a share on revenues of $818.8 million. BCR said earnings rose +28% from a year ago to $2.15 a share. Revenues were up +9% to $830 million. Inside the U.S. net sales were up +13%. Management raised their Q4 EPS guidance above analysts' estimates.

The stock has been struggling to breakout past major resistance near the $150-155 range but the October earnings results launched shares of BCR higher. The last couple of weeks have seen BCR consolidating sideways under resistance near the $165.00 level. We think it's about to break out. The point & figure chart is bullish and forecasting at long-term target of $194.00.

Tonight we are suggesting a trigger to buy calls at $165.60

- Suggested Positions -

Long 2015 Jan $170 call (BCR150117c170) entry $2.63

12/01/14 new stop @ 165.85
11/22/14 new stop @ 163.35
11/13/14 triggered @ 165.65, suggested entry was $165.60
Option Format: symbol-year-month-day-call-strike


Costco Wholesale - COST - close: 142.69 change: -0.37

Stop Loss: 138.65
Target(s): To Be Determined
Current Option Gain/Loss: +406.5%
Average Daily Volume = 1.9 million
Entry on October 30 at $132.25
Listed on October 29, 2014
Time Frame: Exit prior to earnings in December 10th
New Positions: see below

Comments:
12/03/14: COST delivered a quiet session on Wednesday with shares hovering in the $142-143 zone most of the day. There is no change from my recent comments.

I am not suggesting new positions at this time.

NOTE: COST is scheduled to report earnings on December 10th. We will most likely exit prior to the announcement.

Earlier Comments: October 29, 2014
COST is part of the services sector. The company runs a discount, membership sales warehouse. The company's latest earnings report said Costco currently operates 664 warehouses, including 469 in the United States and Puerto Rico, 88 in Canada, 33 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, six in Australia and one in Spain.

The company has struggled to hit Wall Street's bottom line estimates for over a year but steady improvement in their same-store sales have helped drive the stock higher. A strong back to school shopping season and higher membership fees fueled a better than expected quarterly report.

COST reported their Q4 numbers on October 8th. After missing estimates for five quarters in a row the company finally beat estimates. Analysts were expecting a profit of $1.52 a share on revenues of $35.3 billion. COST delivered $1.58 a share with revenues up +9.3% to $35.52 billion. The net profit number was up +13% and gross margins improved 15 basis points.

COST also reported that their e-commerce sales continue to grow at a brisk pace and their online sales rose +18% in their fourth quarter. Same-store (comparable store) sales remain a key metric to watch. COST's Q4 same-store sales were up +4% yet if you back out falling gasoline prices and currency effects their comparable store sales were up +6% for the quarter versus +4.5% a year ago. Membership renewal rates remain very strong at 91% in the U.S. and 87% globally. COST plans to open up to eight more locations before the end of the 2014 calendar year.

The company also recently announced their first foray into China. COST has entered the Chinese market with an online store through Alibaba Group's (BABA) Tmall Global platform.

The holiday shopping season is almost upon us with less than 60 days before Christmas. COST is poised to do well since the company caters to the higher-end more affluent customer.

Shares are hovering just below the $132.00 level. Tonight we are suggesting at trigger to buy calls at $132.25. We will plan on exiting positions prior to their December earnings report.

- Suggested Positions -

Long DEC $135 call (COST141220c135) entry $1.54

11/29/14 new stop @ 138.65
11/25/14 Caution: investors may want to take profits now
11/22/14 new stop @ 137.25
11/08/14 new stop @ 134.75
11/01/14 new stop @ 130.75
10/30/14 triggered @ 132.25
Option Format: symbol-year-month-day-call-strike


Deckers Outdoor Corp. - DECK - close: 96.54 change: +0.68

Stop Loss: 93.65
Target(s): To Be Determined
Current Option Gain/Loss: +23.7%
Average Daily Volume = 763 thousand
Entry on November 17 at $92.25
Listed on November 15, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/03/14: Yesterday's bounce in DECK continued today with the stock up another +0.7%. DECK has still not escaped Monday's trading range, which means the recent highs could be a challenge for DECK.

No new positions at this time.

Earlier Comments: November 15, 2014:
DECK is part of the consumer goods sector. The company owns a number of brands but for many Deckers means UGG. The iconic footwear line was started in 1978 in Southern California. Strength in the UGG line helped power the company's latest quarterly results.

According to the company website, "Deckers Brands is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The Company's portfolio of brands includes UGG, I HEART UGG, Teva, Sanuk, TSUBO, Ahnu, MOZO, and HOKA ONE ONE. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, 130 Company-owned and operated retail stores, and select online stores, including Company-owned websites. Deckers Brands has a 40-year history of building niche footwear brands into lifestyle market leaders attracting millions of loyal consumers globally."

The most recent earnings report was October 23rd. Analysts were expecting a profit of $1.03 per share on revenues of $457.2 million. DECK beat estimates with a profit of $1.17 a share. That's a +23.2% increase from the same period a year ago. Revenues soared +24.2% to a record $480.3 million. U.S. sales rose +21.1% and international sales surged +29.2%. E-commerce sales soared +45%.

It was DECK's Q2 and their gross profit rose +34% while gross margins increased 340 basis points to 46.6%. This was above estimates of 45% and above their gross margin a year ago of 43.2%. Management said all brands delivered a strong performance.

The company lowered their Q3 guidance (current quarter) to below Wall Street estimates. They also raised their Q4 and 2015 guidance on both the top and bottom line. DECK expects 2015 to see revenues up +15%, earnings up +15.8%, and gross margins around 49%. Last quarter the S&P 500 saw earnings growth of about +6.9%. DECK is clearly outgrowing the market with +23% growth. The S&P 500 is expected to see +10-11% growth in 2015.

Technically shares are poised for a breakout on both the daily chart and the point & figure chart. Looking at the point & figure chart (not shown), a breakout past $92.00 would generate a new triple-top breakout buy signal. A breakout could also spark some short covering. The most recent data listed short interest at 17% of the small 33.6 million share float.

Tonight we are suggesting a trigger to buy calls at $92.25. Such a move probably signals a run toward resistance near $100.00.

- Suggested Positions -

Long 2015 Jan $95 call (DECK150117c95) entry $3.80

11/29/14 new stop @ 93.65
11/22/14 new stop @ 89.75
11/17/14 triggered $92.25
Option Format: symbol-year-month-day-call-strike


DineEquity, Inc. - DIN - close: 97.90 change: -0.42

Stop Loss: 96.85
Target(s): To Be Determined
Current Option Gain/Loss: +175.0%
Average Daily Volume = 154 thousand
Entry on November 05 at $91.55
Listed on November 04, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/03/14: DIN served up a lukewarm session with shares drifting sideways near $98 on Wednesday. If shares break short-term support at the 10-dma (near 97.25) then we will likely be stopped out at $96.85.

I am still suggesting more conservative traders take profits now. I'm not suggesting new positions at the moment.

Earlier Comments: November 4, 2014:
Restaurant stocks were showing relative strength today. Better than expected earnings results from the likes of Red Robin (RRGB) and Bloomin Brands (BLMN) helped buoy the group. Additional stocks in this industry showing relative strength on Tuesday are: BWLD, PNRA, JACK, EAT, SONC, TXRH, KKD, DNKN, CAKE, DRI, and PBP. The one we like tonight is DIN.

According to a company press release, "Based in Glendale, California, DineEquity, Inc., through its subsidiaries, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar and IHOP brands. With more than 3,600 restaurants combined in 19 countries, over 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity is one of the largest full-service restaurant companies in the world."

The company has seen success with a steady improvement in earnings. DIN has beaten Wall Street's estimates on both the top and bottom line three quarters in a row. Their most recent report was October 28th. Analysts were looking for a profit of $1.05 a share on revenues of $157.2 million. DIN served up $1.14 per share with revenues climbing to $162.85 million.

The company saw domestic system-wide same-store sales up +2.4% at IHOP and +1.7% at Applebee's. Management then raised their sales guidance on both Applebee's and IHOP. DIN also raised its dividend by 17% to $0.875 per share and they boosted their stock buyback program from $40 million to $100 million.

The restaurant industry should be a major beneficiary of the drop in oil prices. Lower gasoline prices at the pump mean consumers have more spending money and will likely burn a lot of that cash eating at restaurants.

Shares broke out to new highs on this earnings report and bullish guidance. Today the stock is at all-time highs. The point & figure chart is bullish and forecasting a long-term target at $118.00.

Tonight we are suggesting a trigger to launch bullish positions at $91.55.

- Suggested Positions -

Long DEC $95 call (DIN141220c95) entry $1.20

11/29/14 new stop @ 96.85
11/26/14 new stop @ 94.85, traders may want to take profits here!
11/22/14 new stop @ 93.85
11/19/14 new stop @ 92.75
11/13/14 new stop @ 92.25
11/12/14 new stop @ 91.45
11/08/14 new stop @ 89.65
11/05/14 triggered @ 91.55
Option Format: symbol-year-month-day-call-strike


The Walt Disney Co. - DIS - close: 93.11 change: -0.36

Stop Loss: 88.65
Target(s): To Be Determined
Current Option Gain/Loss: + 5.0%
Average Daily Volume = 6.5 million
Entry on December 01 at $92.63
Listed on November 29, 2014
Time Frame: exit prior to February expiration
New Positions: see below

Comments:
12/03/14: Shares of DIS snapped a six-day winning streak with today's pullback. Traders did buy the dip near its 5-dma and DIS was moving higher toward the closing bell.

After the close DIS announced they were raising their dividend by 34% to $1.15 a share.

Earlier Comments: November 29, 2014:
Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.

The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.

Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. Last year they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits this year Captain America: Winter Soldier and Guardians of the Galaxy.

Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. This weekend DIS released the teaser trailer for episode 7, The Force Awakens. It has been shocking to see just how much hype and buzz this teaser has generated. There are stories and links to this trailer just about everywhere you go on the Internet this weekend. It has reawakened fan interest in the Star Wars story and DIS has a whole year to feed the hype until episode seven's release in December 2015. Analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.

I expanded on the movie business above because it was Disney's studio segment that really drove earnings last quarter. DIS has been beating Wall Street's estimates on both the top and bottom line four quarters in a row. The most recent earnings report was November 6th (DIS' Q4). Analysts were expecting a profit of $0.88 a share on revenues of $12.37 billion. DIS reported $0.89 a share with revenues rising +7.1% to $12.39 billion. The movie division saw its quarterly revenues soar +18% to $1.8 billion. Altogether the company reported record-breaking revenues for all five businesses in 2014.

The correction in DIS' stock from the September highs to the October lows was painful but shares have come roaring back. Now after consolidating sideways between $88.75 and $92.00 this last month the stock is rested and ready to run. The breakout past resistance at $92.00 looks like an entry point to buy calls.

I suspect the $100.00 level could be round-number, psychological resistance but the point & figure chart is very bullish and forecasting a long-term $119.00 target. Tonight we are suggesting traders buy calls on Monday morning at the opening bell.

- Suggested Positions -

Long 2015 Feb $95 call (DIS150220C95) entry $1.80

12/01/14 trade begins. DIS opens at $92.63
Option Format: symbol-year-month-day-call-strike


FedEx Corp. - FDX - close: 180.04 change: -0.35

Stop Loss: 176.65
Target(s): To Be Determined
Current Option Gain/Loss: +286.8%
Average Daily Volume = 1.5 million
Entry on October 17 at $155.50
Listed on October 15, 2014
Time Frame: Probably exit prior to earnings on Dec. 17th
New Positions: see below

Comments:
12/03/14: After yesterday's pop to new highs shares of FDX took today off. The stock traded sideways in a narrow range near $180.00.

There is no change from my prior comments. The stock remains overbought. I'm not suggesting new positions.

NOTE: FDX is scheduled to report earnings on December 17th. We will likely exit prior to the report to avoid holding over the announcement.

Earlier Comments: October 15, 2014:
Last year a last minute surge of online shoppers overwhelmed the system and thousands of Christmas presents were delivered late. Part of the problem was terrible weather. The other challenge was the growth in online shopping. Amazon.com (AMZN) blamed UPS for the mass of delayed deliveries last year. You can bet that UPS' rival FDX has taken notice and plans to be ready this year.

Market research firm EMarketer is estimating that retail online shopping will surge +17% in 2014 to $72.4 billion. That might be under estimating the growth, especially this year as many consumers might opt to shop online instead of face the crowds and risk being a target for terrorism or catching Ebola. Granted neither a terrorist event inside the U.S. and a widespread outbreak of Ebola in the states has happened yet but people are already afraid with the daily headlines about the virus.

UPS and FDX hope to be ready. UPS is hiring up to 95,000 seasonal workers and FDX is hiring 50,000 holiday workers this year. That's 10K more than last year for FDX.

In addition to the surge in online shopping FDX should also benefit from the multi-year lows in oil prices. Low oil prices means lower fuel costs, one of FDX's biggest expenses.

It would appear that FDX has fine tuned its earnings machine as well. Their latest earnings report was September 17th. Wall Street was expecting a profit of $1.95 a share on revenues of $11.46 billion. FDX delivered a profit of $2.10 a share with revenues up to $11.7 billion. That's a +24% increase in earnings from a year ago and the second quarter in a row that FDX beat EPS estimates.

FDX chairman, president, and CEO Frederick Smith said, "FedEx Corp. is off to an outstanding start in fiscal 2015, thanks to very strong performance at FedEx Ground, solid volume and revenue increases at FedEx Freight and healthy growth in U.S. domestic volume at FedEx Express." Business has been strong enough that a few weeks ago FDX started raising prices on some services.

Since that September earnings report Wall Street analysts have been raising price targets. Some of the new price targets for FDX stock are $175, $180 and $183 a share.

The recent sell-off in the market and FDX could be an opportunity. FDX has already seen a -10% correction from its intraday high near $165 to today's low near $149. Right now FDX sits just below resistance near $155.

We're suggesting a trigger to buy calls at $155.50.

- Suggested Positions -

Long 2015 Jan $160 call (FDX150117c160) entry $5.30

12/02/14 new stop @ 176.65
11/29/14 new stop @ 174.25
11/17/14 new stop @ 169.85
11/15/14 new stop @ 168.40
11/08/14 new stop @ 165.50
11/01/14 new stop @ 163.45
10/28/14 new stop @ 162.65, traders may want to take profits now!
10/25/14 new stop @ 157.85
10/23/14 new stop @ 155.90
FDX is nearing resistance at $164.00. Traders may want to take profits now.
10/21/14 new stop @ 153.45
10/17/14 triggered @ 155.50
Option Format: symbol-year-month-day-call-strike


The Hain Celestial Group, Inc. - HAIN - close: 112.48 change: -0.77

Stop Loss: 109.85
Target(s): To Be Determined
Current Option Gain/Loss: +25.0%
Average Daily Volume = 615 thousand
Entry on November 26 at $110.25
Listed on November 25, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/03/14: The dip in shares of HAIN continues with the stock down two days in a row. Broken resistance near $110 should be support.

Earlier Comments: November 25, 2014:
"Our business continues to benefit from strong growth trends in the organic and natural, better-for-you segment of consumer packaged goods."

That quote is from HAIN's CEO after the company reported its latest earnings results in early November. He's right. Consumers are choosing healthier foods and it looks like a major trend change that could benefit HAIN for a long time.

The company website describes HAIN as, "The Hain Celestial Group, headquartered in Lake Success, NY, is a leading natural and organic food and personal care products company in North America and Europe. Hain Celestial participates in almost all natural food categories with well-known brands that include Celestial Seasonings, Terra, Garden of Eatin', Health Valley, WestSoy, Earth's Best, Arrowhead Mills, DeBoles, Hain Pure Foods, FreeBird, Hollywood, Spectrum Naturals, Spectrum Essentials, Walnut Acres Organic, Imagine Foods, Rice Dream, Soy Dream, Rosetto, Ethnic Gourmet, Yves Veggie Cuisine, Linda McCartney, Realeat, Lima, Grains Noirs, Natumi, JASON, Zia Natural Skincare, Avalon Organics, Alba Botanica and Queen Helene."

HAIN's results have definitely confirmed the trend in consumer spending. They have beaten Wall Street's estimates and guided higher in three out of the last four earnings reports.

The Q4 report in late August this year saw revenues up +26% to $583.8 million. Management raised their guidance as they now expect sales growth of +27% to +30% in 2015.

The company reported their 2015 Q1 numbers on November 6th and sales are accelerating. Wall Street was expecting a profit of $0.67 on revenues of $640.27 million. HAIN delivered a profit of $0.68, which is a +31% increase from a year ago. Revenues were up +34.6% to $642.6 million. These are really impressive results when you consider that includes a voluntary recall of their HAIN nut butters back in August.

Commenting on their Q1 results, Irwin Simon, Founder, President, and CEO of the company said, "We are pleased with another strong start to our fiscal year across all of our segments on a worldwide basis with the highest quarterly net sales in the Company's history."

"Our diverse portfolio of brands and products across multiple categories and our customer base across various channels of distribution enabled us to deliver double-digit sales growth even with the impact of the nut-butter recall initiated in August."

Accompanying these results their Board of Directors also approved a 2-for-1 stock split but shareholders needed to approve an increase in the number of shares outstanding first. The company's annual meeting was a few days ago and shareholders did approve the stock split. That headline came out tonight, after the closing bell.

The 2-for-1 stock split will occur in December. The shareholder record date is December 12th, 2014. The ex-dividend date is expected to be December 29th (this is when HAIN will begin trading post-split).

Shares of HAIN have been consolidating sideways beneath resistance at $110 for the last three weeks. The stock displayed relative strength today and looks poised to breakout past this resistance. The 2-for-1 stock split news could be the catalyst it needed. After hours tonight shares are trading around $110.50. We are expecting HAIN to gap open higher tomorrow morning. I'm suggesting a trigger to buy calls on HAIN if shares trade at $110.25 or higher.

We are not setting an exit target tonight but I will point out that the point & figure chart is bullish and forecasting a long-term $131.00 target.

- Suggested Positions -

Long 2015 Jan $115 call (HAIN150117c115) entry $1.80

11/29/14 new stop @ 109.85
11/26/14 triggered @ $110.25
Option Format: symbol-year-month-day-call-strike


Northrop Grumman - NOC - close: 140.97 change: +0.80

Stop Loss: 138.65
Target(s): To Be Determined
Current Option Gain/Loss: +10.0%
Average Daily Volume = 1.0 million
Entry on November 21 at $140.25
Listed on November 20, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/03/14: NOC rallied toward its recent highs near $142 before trimming its gains on Wednesday. NOC seemed to struggle with the $141.20-141.30 zone most of the session.

Earlier Comments: November 20, 2014:
One might have assumed that when Washington politics cut $500 billion from the U.S. defense budget over the 2012-2021 time frame it would have been bearish for defense sector stocks. Yet the group has been an outperformer in the stock market and delivered amazing gains last year. The defense-related juggernauts like NOC continue to perform well in 2014. This stock is currently up +20% in 2014 versus a +10.8% gain in the S&P 500.

According to their company website, "Northrop Grumman is a leading global security company providing innovative systems, products and solutions in unmanned systems, cyber, C4ISR, and logistics and modernization to government and commercial customers worldwide." What does that mean? It means NOC makes bombers, unmanned drones, cyber security solutions, and logistics. If you're curious, C4ISR stands for command, control, communications, computers, intelligence, surveillance, and reconnaissance.

The fact that the world seems to be growing more dangerous, not less dangerous, should be a bullish undercurrent that lifts the defense sector. NOC should benefit because the American public does not have the stomach for another war. That means the U.S. will use more and more unmanned technology like NOC's drones.

The company has been performing well this year and NOC has raised guidance the last four quarters in a row. They reported their Q3 results on October 22nd. It was NOC's eight consecutive quarter in a row of earnings growth. Wall Street was looking for a profit of $2.14 a share on revenues of $5.9 billion. NOC delivered $2.26 a share. That's up +6% from a year ago. Revenues beat estimates at $5.98 billion.

NOC management has been trying to diversify their customer base and international sales are expected to hit 13% of total revenue in 2014 compared to 10% last year. NOC's Q3 saw its total backlog soar +8% to $38.5 billion from the prior quarter.

Once again management has raised their guidance. NOC expects 2014 earnings in the $9.40-9.50 zone compared to prior guidance of $9.15-9.35. Wall Street was estimating $9.35.

Shares of NOC have spent the last three weeks consolidating gains in the $135-140 zone. The point & figure chart remains bullish and is forecasting at $158.00 target. Given the stock's bullish trend of higher lows NOC could see a breakout soon.

Tonight I am suggesting a trigger to buy calls at $140.25.

- Suggested Positions -

Long 2015 Jan $145 call (NOC150117c145) entry $1.50

12/01/14 NOC has broken short-term support and looks poised to hit our stop loss
11/29/14 new stop @ 138.65
11/21/14 triggered @ 140.25
Option Format: symbol-year-month-day-call-strike


Red Robin Gourmet Burgers - RRGB - close: 71.43 change: +1.11

Stop Loss: 67.35
Target(s): To Be Determined
Current Option Gain/Loss: +18.6%
Average Daily Volume = 214 thousand
Entry on December 02 at $70.55
Listed on December 01, 2014
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
12/03/14: The rally in RRGB continued with shares outperforming the broader market with a +1.5% gain on Wednesday. This breakout past resistance at $70.00 looks like a bullish entry point.

Earlier Comments: December 1, 2014:
RRGB is part of the services industry. They operate a chain of casual dining restaurants. According to a company press release, "Red Robin Gourmet Burgers, Inc. (www.redrobin.com), a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc., is the Gourmet Burger Authority, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries in a fun environment welcoming to guests of all ages. There are more than 500 Red Robin restaurants across the United States and Canada, including those operating under franchise agreements."

After big gains in 2013 the stock has had a rocky year in 2014. They beat earnings back in February but revenues missed the estimate. The stock rallied anyway. In May they reported earnings that beat both the top and bottom line estimates and shares soared. Then in August the stock reported its Q2 numbers that missed Wall Street's estimates by a wide margin. You can see the plunge lower on the daily chart.

It would appear that August may have been a one-quarter anomaly. RRGB reported their latest quarterly results on November 4th. Analysts were expecting a profit of $0.34 a share on revenues of $267.65 million. RRGB delivered earnings of $0.50 a share. That's a +56% increase from a year ago. Revenues missed estimates by a small margin at $267.4 million but that's still a +16% increase. The company said their number of guests were down -2.3% but the average bill was up +3.2%. Management expects comparable sales to rise +3% for fiscal 2014 and they believe RRGB will see operating profit margins of 21.3%. The stock soared on this report.

Casual dining stocks should see a big benefit from lower crude oil prices. Lower oil means lower gasoline prices at the pump. Gas prices have fallen to four-year lows in recent weeks. That means more disposable income for consumers to spend. After the OPEC decision last week we could see depressed oil prices for a long time.

Currently shares of RRGB have been consolidating gains in a sideways pattern under resistance near $70.00 the last couple of weeks. A breakout past $70.00 could spark some short covering. The most recent data listed short interest at 12.7% of the very small 13.8 million share float. Currently the Point & Figure chart is very bullish with a long-term target of $115.00.

The November intraday high was $70.45. Tonight I am suggesting a trigger to buy calls at $70.55.

- Suggested Positions -

Long 2015 Jan $70 call (RRGB150117c70) entry $2.95

12/02/14 triggered @ 70.55
Option Format: symbol-year-month-day-call-strike


The Sherwin-Williams Co. - SHW - close: 246.45 change: +1.90

Stop Loss: 238.25
Target(s): To Be Determined
Current Option Gain/Loss: +178.9%
Average Daily Volume = 526 thousand
Entry on November 05 at $231.00
Listed on November 01, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/03/14: SHW ticked higher with a +0.7% gain. This is the first time SHW has closed above the $245.00 mark. I don't see any changes from my prior comments. Traders will want to consider taking profits now.

I am not suggesting new positions at this time.

Earlier Comments: November 1, 2014:
It's not very often you see a company about to celebrate its 150th birthday. For SHW that will be the year 2016. The company has been in business since 1866. The Company's core business is the manufacture, distribution and sale of coatings and related products. SHW is headquartered in Cleveland, Ohio. They sell through over 4,100 company-operated stores. Their global group has sales in more than 115 countries. Sherwin-Williams is also a very well known dividend payer and has annually increased dividends since 1979.

The slow and steady economic improvement in the U.S. has been beneficial. The real estate market has also helped SHW. New homes need new paint. The pace of new home sales in the U.S. hit six-year highs last month. While home sales do tend to slow down a bit in the winter months SHW should benefit from lower input costs. Crude oil and natural gas are big components in the paint and coatings industry. The severe drop in oil the last few months is a blessing for SHW.

The company raised their earnings guidance back in July. They issued bullish guidance again in their latest quarterly report. SHW announced earnings on October 28th. Wall Street was expecting a profit of $3.22 per share on revenues of $3.18 billion. SHW said their earnings rose +31.4% to a record-setting $3.35 per share. Revenues were up +10.6% at $3.15 billion, which missed the estimate.

SHW's remodeling business saw growth. The real driver was paint sales. Their paint stores account for the lion's share of sales, which saw revenues up +20%. SHW also purchased 2.0 million shares of their stock last quarter and still have 6.8 million yet to buy in their stock buy back program.

Management was optimistic. SHW's Chairman and CEO MR. Christopher Connor, said,

"We are pleased to report record sales and earnings per share in the third quarter and first nine months of 2014 on the continued positive sales volume and strong operating results of our Paint Stores Group. The Paint Stores Group architectural volume growth was positive across all end market segments. The Comex acquisition continues to perform better than expected in the year. Our Consumer Group improved its operating results through higher volume sales and operating efficiencies. Our Global Finishes Group continues to improve its operating margins through improved operating efficiencies."

Management raised their 2014 EPS guidance above Wall Street's estimates. They also raised their revenue guidance but this was only in-line with consensus. SHW now expects Q4 sales in the +6% to +8% range. They expect earnings to be in the $1.30-1.40 range versus $1.14 in the fourth quarter of 2013.

The stock's relative strength has driven shares to new all-time highs and a +25% gain in 2014. The point & figure chart is bullish and forecasting at long-term target at $286.

Tonight we are suggesting a trigger to buy calls at $231.00.

- Suggested Positions -

Long 2015 Jan $240 call (SHW150117c240) entry $3.37

11/22/14 new stop @ 238.25
11/15/14 new stop @ 234.45
11/13/14 SHW is hitting potential resistance at $240. Traders may want to take profits now.
11/08/14 new stop @ 229.75
11/05/14 triggered @ 231.00
Option Format: symbol-year-month-day-call-strike


Semiconductor ETF - SMH - close: 55.98 change: +0.94

Stop Loss: 53.85
Target(s): To Be Determined
Current Option Gain/Loss: +436.4%
Average Daily Volume = 2.4 million
Entry on October 17 at $47.15
Listed on October 16, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/03/14: The Semiconductor ETF continues to soar and outpaced the market with a +1.7% gain. Currently the SMH is on track for its eighth weekly gain in a row.

I am not suggesting new positions at this time.

Earlier Comments: October 16, 2014:
It looks like the correction in the semiconductor stocks might be done.

The SMH is the Market Vectors Semiconductor Exchange Traded Fund (ETF) that tries to mimic the performance of the Market Vectors Semiconductor 25 index. Semiconductors as a group had been strong performers with the SMH up +73% from its late 2012 lows.

A few weeks ago the industry started to see some profit taking. MCHP issued an earnings warning last week that that sparked the massive plunge in the SMH. The SMH has witnessed a -15% correction from its 2014 closing high to the closing low on Monday this week. Now it has started to bounce. It's possible all the panic selling is over.

Intel (INTC), a much bigger company than MCHP, just reported earnings on October 14th and the results were better than Wall Street expected. More importantly INTC offered slightly bullish guidance.

Bloomberg noted that INTC said its PC-processor business rose +8.9% last quarter. Sales for INTC's chips for notebook computers soared +21%. Even chips for desktop PCs rose +6% in the third quarter.

The strong results from INTC have helped buoy the SMH, which is starting to rebound after testing (and piercing) long-term support on its weekly chart (shown below).

We suspect the worst might be over. However, this could be a volatile trade. There are a lot of semiconductor companies who have yet to report their results.

The SMH saw its rally stall under $47 and near its 200-dma. Tonight we are suggesting a trigger to buy calls at $47.15.

- Suggested Positions -

Long 2015 Jan $50 call (SMH150117c50) entry $1.10

11/29/14 new stop @ 53.85
11/22/14 new stop @ 52.25
11/20/14 new stop @ 51.40
11/12/14 new stop @ 50.85, readers may want to just take profits now!
11/01/14 new stop @ 48.85
10/25/14 new stop @ 47.85
10/21/14 new stop @ 46.35
10/17/14 triggered @ 47.15
Option Format: symbol-year-month-day-call-strike


Under Armour, Inc. - UA - close: 69.88 change: +0.41

Stop Loss: 67.90
Target(s): To Be Determined
Current Option Gain/Loss: -46.9%
Average Daily Volume = 2.6 million
Entry on November 21 at $71.05
Listed on November 19, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/03/14: Before the opening bell UA garnered some bullish analyst comments and a new higher price target ($93) but the stock really didn't move much on this news. Shares seemed content to just trade sideways beneath the $70 level.

I am not suggesting new positions at this time.

Earlier Comments: November 19, 2014:
UA is in the consumer goods sector. "Under Armour, the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. Under Armour's wholly owned subsidiary, MapMyFitness, powers one of the world's largest Connected Fitness communities. The Under Armour global headquarters is in Baltimore, Maryland." (source: company press release)

Apparel sales can be tricky as fashion fads come and go. Yet right now athletic wear has been gaining traction. Athletic wear sales are up +9% in the past year. Two giants in this industry, Nike (NKE) and Under Armour (UA), are outperforming the group.

NKE is the giant with annual sales of $28.8 billion. UA is a tenth the size of NKE at $2.87 billion a year in sales. It's not surprising to see UA outgrowing its rival. NKE managed +15% sales growth in the third quarter. UA delivered 30%. NKE reported gross margins of 46.6%. UA has gross margins of 49.6%. Both companies delivered earnings growth of more than 20% year over year.

UA is impressive because its apparel sales have been rising +30% for the last three quarters in a row. Apparel is important because it's 75% of UA's business. Currently UA only has 2% of the global athletic apparel market and many believe it has significant room to grow.

Investors were a little concerned when apparel sales only grew +25.6% in the third quarter. However, UA has been consistently beating Wall Street's earnings estimates on both the top and bottom line four quarters in a row. They have also raised guidance four quarters in a row.

Their most recent earnings report was October 23rd. UA delivered earnings of $0.41 a share with revenues up +29.7% to $937.9 million. Analysts were only expecting $0.40 on revenues of $925 million.

Management raised their Q4 guidance but they warned that growth would slow down to only +22% in 2015. It's worth noting that UA has a history of under promising and over delivering. The stock initially sold off on this guidance but investors quickly bought the dip. Shares of UA have broken through the two-month trend line of lower highs and technical resistance at the 50-dma. The point and figure chart is bullish and forecasting an $87 target.

The plunge in gasoline prices is a tailwind for retailers and it should be a strong holiday shopping season. Another bonus for UA could be the weather. Last year winter was colder than normal and UA had strong sales of their coldgear line. This year we could see the coldest winter in decades, which could also bode well for UA.

UA has spent the last few days consolidating sideways in the $68.00-70.00 range. Today saw UA showing relative strength (+1.6%) and breaking out past resistance at $70.00. The intraday high was $70.72. More aggressive traders may want to buy calls now. I am suggesting a trigger at $71.05 to buy calls.

- Suggested Positions -

Long 2015 Jan $75 call (UA150117c75) entry $1.60

11/21/14 trade opened on gap higher at $71.19
Option Format: symbol-year-month-day-call-strike




PUT Play Updates


Currently we do not have any active put trades.



CLOSED BEARISH PLAYS

FMC Corp. - FMC - close: 55.04 change: +0.97

Stop Loss: 54.85
Target(s): To Be Determined
Current Option Gain/Loss: -15.3%
Average Daily Volume = 1.42 million
Entry on November 04 at $55.85
Listed on November 03, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/03/14: FMC seems to be reversing its recent sell-off. Shares rallied off its morning lows today. Then late this afternoon FMC caught a second wind and rallied again. Our stop was hit at $54.85 in the last 30 minutes of trading.

- Suggested Positions -

2015 Jan $55 PUT (FMC150117P55) entry $1.95 exit $1.65 (-15.3%)

12/03/14 stopped out
12/02/14 new stop @ 54.85
11/29/14 new stop @ 55.85
11/22/14 new stop @ $57.35
11/04/14 triggered @ $55.85
Option Format: symbol-year-month-day-call-strike

chart: