Option Investor
Newsletter

Daily Newsletter, Thursday, 1/22/2015

Table of Contents

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

Market Wrap

ECB Follows Through!

by Thomas Hughes

Click here to email Thomas Hughes
After more than a year of talking the market up Mario Draghi and the ECB have followed through with “additional measures”.

Introduction

To say that all eyes were on the ECB this morning may be an understatement. The central bank has been talking the market up for a long time on hints and teases that there would be “additional measures” to QE programs and today was the day it was expected to come. After meany missed opportunities and months of deteriorating economic data the bank has finally followed through on its talk and added those measures. Today the ECB announced that it would be adding 60 billion euros a month of asset purchases in an open ended attempt to stimulate the European economy. This exceeded market expectations by 10 billion euros and was well received.

Asian indices have yet to feel the benefit of the ECB decision as they closed long before the announcement was made. Anticipation for the expected move had them mostly higher and they are indicated to open higher already. European indices were largely flat ahead of the statements due to fear the bank would not, or only, meet expectations. The surprise helped lift them by an average 1% once the details of the plan were laid out. These include the purchase of sovereign bonds from all EU countries, except maybe Greece, and that the plan would begin in March of this year. The target end is September 2016 but was left open as the bank would like to see a “sustained adjustment of the path of inflation” more in line with their goals.

Market Statistics

US futures were up from the start, boosted by earnings and economic data as well as the ECB. The S&P was indicated to open about 6 points higher and quickly matched that in the first minute following the opening bell. After hitting the early high the indices retreated to test yesterday's closing prices while the market digested the new ECB policies. Around 9:45 bottom was hit and from there the bulls took charge, driving the indices up by more than 1.5% on average. The ECB decision had a wide ranging impact and moved gold and the dollar as well as equities. Buying persisted all day leaving the major market indices at their highest levels of 2015 and very near to recent all time highs.

Economic Calendar

The Economy

Economic data was released with little fanfare today as the ECB press conference began at precisely the same time. First up was the FHFA Housing Price Index with a gain of 0.8%. This is for the November 2014 period so is rear looking at best. On a rolling 12 month basis prices are up 5.3%.

Initial claims fell by 10,000 but is still above 300K. The number of first time claims was reported as 307,000 with a 1,000 claim revision to last week's figures. The four week moving average climbed by 6,500 and is now above the 300K level for the first time since early September. It looks like claims are beginning to trend higher from the lows set in October. This is mildly alarming but is most likely attributable to seasonal employment adjustments rather than a reversal in trend. Whatever the case, claims need to be monitored as a sustained increase in this metric would indicate an increase in the pace of job losses. For now, claims remain near long term lows and at a level consistent with the long term improvement in labor.


Continuing claims rose by 15,000 versus an expected decline of similar proportion. Continuing claims was reported at 2.443 million with a revision of 4,000 to last week. This figure is a less volatile and better indication of underlying conditions and remains near long term lows as well. There has been an increase in this figure post-holiday's but it is not yet as sharp as in initial claims suggesting those being laid off are finding work or returning to work fairly quickly. This idea is supported by other data including Challenger planned layoffs, JOLTs job openings and the quits rate but also bears watching. An increase in jobless claims that persists into the future would not be a good sign.

Total claims is also presenting a red flag. The total number of jobless claims rose by 196,315 to 3.049 million and an eight month high. The total claims were on the rise steadily into the end of the year, as expected due to end of year lay-offs, and could rise further before settling back down. While at a high, the number of claims is still well below the year ago period, -17%, which was the first week of reporting after the expiration of benefits extensions that occurred at the beginning of 2014. Based on the other labor data I expect to see this begin to fall in the next few weeks. If not it will be time to take a new look at whats going on in the labor market.


There are two economic releases tomorrow, Leading indicators and Existing Home Sales, both scheduled for 10AM. Leading Indicators are forecast to have risen 0.5% last month, indicating an increase in activity this month. This is slightly higher than the consensus estimate from just a week ago. Existing Home Sales are expected to have risen in Decmeber to an annualized rate just above 5 million.

The Oil Index

Oil had been holding steady around $47.50 on talk from OPEC about an expected rebound. The bloc thinks a rebound is more likely to occur than a dip to below $40. A build in inventory reported by the EIA did not jibe with that sentiment and sent prices lower. WTI fell 3% from yesterday's settlement price and is now just a few cents above the long term low. It seems as if supply is still on the rise and pressuring prices but signs that production growth may be slowing are also beginning to appear. One such is a drop in the Bakken rig count.

The Oil Index rose in today's session despite the drop in the underlying commodity and is above the down trend line. The break of the short term down trend line is a positive sign for long term oil bulls but is as yet unconfirmed. Today's move was a mild testing of support but I think there could be more. Volatility could persist as oil prices seek and/or find bottom which will have a big impact on index prices. The indicators are currently bullish and pointing up leading me to think it could move up to the 1,350-1,400 level. If not, potential support is along the back of the down trend line and then the longer term up trend line near 1,250.


The Gold Index

Gold continues to rally. The ECB move is fueling the flight out of currency begun last week by the SNB and sent prices up another 1% to above $1,300. This is the first time gold has traded at this level in over 5 months. The way things are going it is hard to say where the end of this rally may be, especially with the FOMC meeting next week. Gold is back in demand with long term outlook bullish but at these levels is looking extended and vulnerable to pullback with $1250 looking like a good target to find support.

The gold miners ETF GDX tried to move higher today but couldn't hold it. The ETF opened with a gain, but traded down from the open all day, unlike the underlying metal which is making new highs. The positive is that today's action appears to confirm support at $22.25 and to be part of consolidation following the gapping move on Tuesday. The indicators are bullish and convergent with higher prices so unless the long term outlook in gold changes any pull backs in price would be a potential entry point. Current support is $22.25 with potential upside targets near $25 and $26. If support fails the ETF could retreat as much as $2.50 to the $20 level.


In The News, Story Stocks and Earnings

Earnings continue to roll in and are beginning to look a lot better than they did earlier this week. The big banks and oil are still a drag but the regional banks and transports are shining. A number of big name transportation companies reported today spanning trucking, airlines and the rails. JBHunt moved as much as 5% higher in today's session after reporting earnings that beat expectations. On a year over year basis earnings for the trucking company are up 21% in the quarter and 10% for the full year. Revenues are also up driven largely by a 6% increase in intermodal shipping, an increase that is emerging as a trend in the sector. Intermodal is big. Shares of JBHunt are now tackling resistance near the current all time high.


Union Pacific reported their 6th year of intermodal growth. This comes along with a 27% increase in EPS and a 20% increase in operating income that were both ahead of expectations. The rail carrier reports that low oil prices are helping the bottom line but may affect carrier volumes next year. The upside is that all the other businesses who are having trouble shipping because the rails are full of oil products may now find relief. Shares of the stock rose 5% in today's session to test resistance just below the all time high set at the end of last year. The indicators are bullish and in line with a trend following entry.


Not all reports were rosy. Sandisk, maker of flash memory storage devices released earnings yesterday after the bell and did not meet expectations. Revenue and earnings both fell short on a decline in sales that sparked a round of down grades today. The stock was hit hard in the pre-opening session and opened more than 12% lower and at a 9 month low. Buyers stepped in however and drove prices back to near break even.


Starbucks reported after the bell today. The coffee giant earned $0.80 per share, in line with expectations, and reported comp store sales increased by more than 5%. The comp sales numbers were above expectations and the 20th straight quarter of increases more than 5%. The stock jumped on the news and gained 2% in after hours trading.


The Indices

The ECB did it, and they did it bigger than expected. The bank allowed the market to think one thing, and then delivered it and more, providing catalyst for markets around the world. Once the news was out, and the details of the new plan discussed, the bulls came out in force and drove the indices up all day and into the close. Our markets began the day with a quick dip to touch base with support but once they began moving higher never looked back.

The Dow Jones Transportation Index led the charge, boosted by strong earnings and outlook from the sector. The index gained nearly 3% in today's action and is fast approaching potential resistance at the current all time high. The indicators are bullish and on the rise, confirming the move. Current upside target is near 9,250 with further targets near 9,500 and 10,000 provided the index can break to new highs.


The NASDAQ Composite made the next largest gain but fell short of the high mark set by the transports. Today's move is another confirmation of the long term trend as it tested support along the short term 30 day moving average confirmed by a bullish crossover on the stochastic and MACD. Support is the moving average with upside target at or near the current high around 4,800 with additional targets near 4,900 and 5000 on a break above resistance.


The S&P 500 and Dow Jones Industrial Average finished the day basically even near a 1.5% gain. The blue chips gained just under1.5% and blasted right through the short term moving average. The index is moving higher following a support/trend bounce and is showing an early buy. Stochastic is forming a bullish crossover but has yet to confirmed by MACD. MACD is very close to making a bullish crossover as well but has not quite made it. Target is now 18,000 with support just below the moving average near 17,500.


The S&P 500 gained just over 1.5% or 31.03 points. The broad market created a long white candle and also confirmed support along the short term moving average. The index is moving higher on a trend line bounce with increasingly bullish indicators and upside targets near the current all time highs. Stochastic has already fired off a trend following bullish crossover and MACD is in the process of confirming that signal. It is now exactly at zero and crossing over to bullishness. Resistance may be met at the all time highs, near 2090, with additional upside possible on a break above it. This could coincide with the FOMC meeting, or the release of 4th quarter GDP both scheduled to be released next week.


The markets are bouncing higher, in line with underlying trends. Economic data is good, outlook is fine and earnings are looking better and better every day. Now that Mario Draghi and the ECB has provided some support for the EU economy we can put to rest one fear, at least for now, and focus on the future of our own economic recovery. The next possible market mover is the FOMC, meeting next week and releasing a statement on Wednesday. After that is the GDP release on Thursday.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Order Up! Rising Restaurants

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Cracker Barrel Old Country Store - CBRL - cls: 133.42 chg: +1.99

Stop Loss: 129.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 248 thousand
Entry on January -- at $---.--
Listed on January 22, 2015
Time Frame: Exit prior to earnings in late February
New Positions: Yes, see below

Company Description

Why We Like It:
The falling price of gasoline in the U.S. is a significant tailwind for the restaurant industry. AAA said the price of gas has fallen 119 days in a row with the national average down to $2.04 a gallon. Looking in the rearview mirror we can see how it affected the restaurant industry.

According to TDn2K's Black Box Intelligence data restaurants saw their same-store sales grow +3.1% in December, the fastest pace in three years. The fourth quarter of 2014 delivered the fastest same-store sales growth in the last six years. Another industry analyst believes that having more money in their pocket from low gas prices means that consumers are willing to trade up from fast-food to more traditional dining options.

One firm that should benefit is CBRL. According to the company, "Cracker Barrel Old Country Store, Inc. provides a friendly home-away-from home in its old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping that’s surprisingly unique, genuinely fun and reminiscent of America's country heritage … all at a fair price. Cracker Barrel Old Country Store, Inc. (CBRL) was established in 1969 in Lebanon, Tennessee and operates 634 company-owned locations in 42 states." Another detail that makes CBRL unique is that 85% of the company's locations are at Interstate highway exits (likely near a gas station).

Earnings last year were decent. The company has developed a trend of beating Wall Street's estimates and then guiding lower. Management has either been super cautious on guidance or they're trying to manage expectations. Their most recent earnings report was November 25th. CBRL earnings were up +16% to $1.42 a share. That beat estimates of $1.29. Revenues came in at $683 million, above the $665 million estimate. CBRL said their same-store sales surged +3.3%, which was above the industry average.

Once again CBRL management lowered their immediate quarter guidance but this time they did raise guidance for FY2015.

Looking ahead the restaurant industry should see easy comparisons to January and February last year since much of the country was blanketed by winter storms. On the other hand several states raised their minimum wage, which began on January 1st this year so that has the potential to impact restaurant industry margins.

Technically shares of CBRL have just performed a 38.2% Fibonacci retracement from their recent high. This bounce might be an entry point. However, I want to see CBRL break through some short-term resistance. Tonight I'm suggesting a trigger to buy calls at $135.15. We will plan on exiting prior to the company's earnings report in late February.

Trigger @ $135.15

- Suggested Positions -

Buy the MAR $140 CALL (CBRL150320C140) current ask $2.45

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

U.S. Stocks Rally On ECB QE

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market rallied as the ECB delivered QE above and beyond expectations. Estimates were for potentially €50 billion a month but the ECB said it will start with €60 billion through September 2016.

Our WCC play was closed this morning.


Current Portfolio:


CALL Play Updates

Alkermes plc. - ALKS - close: 69.00 change: +0.26

Stop Loss: 63.65
Target(s): To Be Determined
Current Option Gain/Loss: + 64.5%
Average Daily Volume = 833 thousand
Entry on January 07 at $63.01
Listed on January 06, 2015
Time Frame: Exit PRIOR to February option expiration
New Positions: see below

Comments:
01/22/15: ALKS tested its simple 10-dma before bouncing today. Investors may want to turn defensive here. ALKS only gained +0.3% versus the +1.7% gain in the NASDAQ. It's the second day in a row that shares have underperformed the broader market.

I am not suggesting new positions.

Earlier Comments: January 6, 2015:
Biotech stocks were not immune to the market's widespread sell-off today. Yet one stock was bucking the trend. That's biotech stock ALKS.

According to the company's marketing material, "Alkermes plc is a fully integrated, global biopharmaceutical company that applies its scientific expertise and proprietary technologies to develop innovative medicines that improve patient outcomes. The company has a diversified portfolio of more than 20 commercial drug products and a substantial clinical pipeline of product candidates that address central nervous system (CNS) disorders such as addiction, schizophrenia and depression. Headquartered in Dublin, Ireland, Alkermes plc has an R&D center in Waltham, Massachusetts; a research and manufacturing facility in Athlone, Ireland; and manufacturing facilities in Gainesville, Georgia and Wilmington, Ohio."

Investors want to see companies with a growing pipeline of drugs and ALKS certainly qualifies. Here is a list of treatments in various stages of clinical trials at ALKS current pipeline .

The stock's jump today was thanks to a press release issued this morning. Here's an excerpt from ALKS' press release:

[ALKS] today announced topline results from FORWARD-1, one of a series of supportive clinical studies in the comprehensive FORWARD phase 3 pivotal program for ALKS 5461, a once-daily, oral investigational medicine with a novel mechanism of action for the adjunctive treatment of major depressive disorder (MDD). The FORWARD-1 study was designed to evaluate the safety and tolerability of two titration schedules of ALKS 5461. In addition, the study assessed the efficacy of ALKS 5461 over an eight-week period, compared to baseline, in patients with MDD.

...significantly reduced depressive symptoms from baseline starting at Week One and continued to the end of the treatment period at Week Eight...

If this treatment gets approved by the FDA it could be huge. According to a Thomson-Reuters article, depression is a massive opportunity going forward. Almost 350 million people worldwide suffer with depression and it's the leading cause of disability in the world. As more and more healthcare systems around the world get better at diagnosing depression it's going to drive demand for treatment.

Jim Cramer, on CNBC, mentioned ALKS this morning and commented on the company's press release about this new depression drug.

Technically shares have been showing relative strength the last few days and ignoring the market's sell-off. Today's breakout past resistance at $60.00 has also produced a new point & figure chart triple-top breakout buy signal with a $100 price target.

I am cautioning readers that biotech stocks are volatile. ALKS is no different. This is another higher-risk, more aggressive trade. The option spreads are pretty wide, which puts us at a disadvantage.

Tonight we are suggesting small bullish positions if ALKS can trade at $61.75. I would prefer to buy March calls since ALKS reports earnings in late February but March options are not available yet.

- Suggested Positions -

Long Feb $65 CALL (ALKS150220C65) entry $3.10

01/10/15 new stop @ 59.25
01/07/15 triggered on gap higher at $63.01, suggested entry was $61.75.
Stock rallied on positive Phase 2 trial data for schizophrenia drug.
Option Format: symbol-year-month-day-call-strike


Big Lots Inc. - BIG - close: 45.17 change: +0.64

Stop Loss: 43.40
Target(s): To Be Determined
Current Option Gain/Loss: -31.6%
Average Daily Volume = 1.26 million
Entry on January 15 at $45.75
Listed on January 14, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
01/22/15: The bounce in BIG continues with a +1.4% gain. Shares are once again approaching resistance in the $45.65-46.00 zone where the stock has failed multiple times in the past two weeks.

I'm not suggesting new positions at this time.

Earlier Comments: January 14, 2015:
It would appear that investors have a pretty short memory when it comes to BIG. This company is in the services sector. They're part of the discount store industry.

According to company marketing materials, "Big Lots Inc. (BIG) is a unique, non-traditional, discount retailer operating 1,495 BIG LOTS stores in 48 states with product assortments in the merchandise categories of Food, Consumables, Furniture & Home Decor, Seasonal, Soft Home, Hard Home, and Electronics & Accessories."

The stock saw big gains in 2014 at least until they reported their Q3 earnings in December. That big drop on the daily chart was a reaction to BIG's earnings results. Analysts were expecting a loss of $0.05 a share on revenues of $1.12 billion. BIG reported a loss of $0.06 with revenues virtually flat at $1.11 billion. Guidance was only in-line with Wall Street's estimates.

The good news is that BIG does expect to see a profit again in the fourth quarter. They also reported +1.4% comparable store sales growth in the third quarter, which not only beat the -2.5% comp sales from a year ago but was the first positive growth in three years. None of that mattered. BIG plunged -17% on its Q3 report and didn't find support until the $38.00 area.

Since then shares have seen something of a turnaround. After consolidating sideways for a couple of weeks BIG has shot higher in January while most of the broader market has been sinking. The breakout above technical resistance at its 50-dma and its 200-dma is encouraging.

This morning the U.S. retail sales data came in below expectations and yet BIG managed to shrug off this headline. Traders bought the dip near the 50-dma (around $44) this morning. By the closing bell BIG was outperforming with a +1.6% gain.

It looks like this relative strength may continue. Further gains could spark some short covering. The most recent data listed short interest at 17% of the relatively small 52 million share float. Today's intraday high was $45.65. We are suggesting a trigger to buy calls at $45.75. The 200-dma is at $43.50. We'll start this trade with a stop at $43.40.

- Suggested Positions -

Long Apr $47.50 CALL (BIG150417C47.5) entry $2.85

01/15/15 triggered @ 45.75
Option Format: symbol-year-month-day-call-strike


Monster Beverage Corp. - MNST - close: 119.99 change: +1.45

Stop Loss: 115.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.1 million
Entry on January -- at $---.--
Listed on January 17, 2015
Time Frame: Exit PRIOR to earnings in late February
New Positions: Yes, see below

Comments:
01/22/15: MNST received bullish analyst comments on CNBC this morning. Shares managed to set a new high and MNST briefly traded above resistance at $120.00. Yet shares have not hit our suggested entry point at $120.25.

Odds are good that if the market continues to rally tomorrow we will see MNST hit our suggested entry point.

Earlier Comments: January 17, 2015:
Shares of MNST have been extremely effervescent. Last year the NASDAQ composite rallied +13.4%. Yet MNST soared +59% in 2014. Thus far in 2015 the NASDAQ is down -2.1% while MNST is up +9.7%. The stock looks poised for more gains.

The company's market material describes MNST as, "Based in Corona, California, Monster Beverage Corporation is a holding company and conducts no operating business except through its consolidated subsidiaries. The Company's subsidiaries market and distribute energy drinks and alternative beverages including Monster Energy® brand energy drinks, Monster Energy Extra Strength Nitrous Technology® brand energy drinks, Java Monster® brand non-carbonated coffee + energy drinks, M3® Monster Energy® Super Concentrate energy drinks, Monster Rehab® non-carbonated energy drinks with electrolytes, Muscle Monster® Energy Shakes, Übermonster® energy drinks, and Peace Tea® iced teas, as well as Hansen's® natural sodas, apple juice and juice blends, multi-vitamin juices, Junior Juice® beverages, Blue Sky® beverages, Hubert's® Lemonades and PRE® Probiotic drinks."

A big part of last year's gains in MNST came in August. On August 15th, 2014 it was announced that Coca-Cola (KO) was buying a 16.7% stake in MNST. This is part of a long-term strategic partnership to conquer the energy drink category. This generated a +20% pop in shares of MNST and the stock has been in rally mode ever since.

Earnings have been mediocre. MNST has beaten Wall Street's bottom line earnings estimate the last three quarters in a row. Yet they also missed analysts' revenue estimates those same three quarters. Revenue growth has actually been slowing down. Their Q4 2013 revenues grew +14.7% while their Q3 2014 revenue growth was down to +7.7%. Investors don't seem to care.

There has been a lot of analyst action on this name with both upgrades and downgrades in the last several weeks. So far the upgrades are outnumbering the downgrades. This past week saw Cowen upgrade MNST and give it a $140 price target.

The bears are that MNST will suffer from stronger competition from Red Bull, their main rival. They've been rival for years, so what's going to change? There is the valuation argument that MNST is too expensive with the stock trading at 36 times earnings.

Bulls can argue that MNST will see stronger growth when they make the switch to KO's global distribution system. Right now international sales only make up 22% of MNST's total revenues and MNST only has 5% of the international energy drink market. That compares to 37% of the energy drink market in the U.S. By joining KO's distribution platform it's going to give MNST a lot more exposure overseas, especially in Latin America and China. Currently MNST has zero exposure in China. There is speculation that MNST could double its market shares internationally pretty quickly.

Another bonus for MNST is the consumer spending situation in the United States. About 70% of MNST's sales come from convenience stores and gas stations. The massive drop in gasoline prices is very bullish for MNST since consumers will have more money in their pocket after filling up.

At a recent investor meeting MNST said that sales growth in the energy drink category had "re-accelerated" after three consecutive quarters of slowing sales growth (not declines, just slower growth).

There is speculation that MNST might be able to raise prices in the U.S. since their rival, Red Bull, recently raised their prices. There is also the relationship with KO as the company could up its stake in MNST to 25%. Of course they could outright buy MNST too.

The point & figure chart for MNST is bullish and forecasting a long-term $155.00 target. We are not setting a target tonight. The plan will be to exit prior to earnings in late February. The $120.00 level might be round-number resistance so we are suggesting a trigger to buy calls at $120.25.

Trigger @ $120.25

- Suggested Positions -

Buy the MAR $125 CALL (MNST150320C125) current ask $4.20

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


Royal Caribbean Cruises - RCL - close: 85.13 change: +1.92

Stop Loss: 79.65
Target(s): To Be Determined
Current Option Gain/Loss: +11.3%
Average Daily Volume = 2.9 million
Entry on December 24 at $82.30
Listed on December 22, 2014
Time Frame: We will likely exit prior to earnings in very late January
New Positions: see below

Comments:
01/22/15: RCL displayed relative strength with a +2.3% gain on Thursday. The stock closed at new all-time high. We only have a few days left as RCL will report earnings around January 29th.

I am not suggesting new positions.

Earlier Comments: December 22, 2014:
The cruise line stocks have been pretty strong this year. Carnival Cruise (CCL) has been the weakest of the big three with a +11.5% gain in 2014. That compares to the S&P 500's +12.0% gain. Norwegian Cruise Line (NCLH) is up +32% this year. Meanwhile RCL has outpaced them all with a +69.9% gain in 2014 as of today.

According to a company press release, "Royal Caribbean Cruises Ltd. is a global cruise vacation company that owns Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises and CDF Croisieres de France, as well as TUI Cruises through a 50 percent joint venture. Together, these six brands operate a combined total of 42 ships with an additional seven under construction contracts, and two on firm order. They operate diverse itineraries around the world that call on approximately 490 destinations on all seven continents."

CCL has suffered a series of mishaps, bad decisions, and just poor luck in recent years and RCL has managed to capitalize on its rivals misfortune, especially in Europe. Earnings growth for RCL has kind of mediocre. Their most recent report was October 23rd. RCL beat estimates by a penny while revenues were only in-line with Wall Street estimates. Management then guided lower for Q4. So why has the stock performed so well? Normally when a company lowers their earnings forecast the stock gets hammered!

A big part of the stock's rally has been weakness in crude oil. These are massive ships. They burn between 140 to 150 tons of fuel every single day. That's about 30 to 50 gallons a mile. Falling oil prices mean that fuel costs for these companies has plunged dramatically and should boost their profit margins.

Tigress Financial Partners recently shared their opinion that the cruise liner industry has "benefited from strong demand trends both domestically and globally and more recently the swoon in oil prices has helped to reduce one of their largest costs - fuel. We think long-term demand trends are bullish for the sector and lower oil prices not only mean lower fuel costs but more discretionary cash in consumers' pockets that can be used for additional expenditures on leisure time." Their point about consumers having more cash to spend on leisure is a big one.

The month of December has brought more good news for shares of RCL. On December 1st the S&P Dow Jones Indices announced they would replace Bemis (BMS) with RCL in the big cap S&P 500 index. That means all the mutual funds that track RCL have to buy it eventually. That went into effect on December 4th.

On December 8th analyst firm Jefferies said "The cornerstone of our view on RCL has been that it offers a superior product, this is based on the following: it has a younger fleet, more new ships being built, more impressive features available (e.g. high-speed internet), a better strategy with respect to distribution of cabins (more Balcony berths available) and better brand perception." Jefferies then raised their price target on RCL from $73 to $87.

The analyst love continued on December 22nd when Stifel analyst Steven Wieczynski said, "you have a stock that is trading at 14x forward earnings (2016) for average EPS growth of 28 percent/year for the next three years. When we look back at where Carnival Corp. has traded (15x-17x) on average on a forward EPS basis and then apply the same multiple to RCL, there is clearly a significant amount of upside from current levels" for RCL. Stifel raised their price target on RCL from $88 to $96.

Technically the stock has been showing strength with a bullish trend of higher lows and higher highs. The breakout past resistance at $80.00 is bullish. Today's intraday high was $82.20. Tonight we're suggesting a trigger to buy calls at $82.30.

- Suggested Positions -

Long MAR $85 CALL (RCL150320C85) entry $3.37

01/14/15 new stop @ 79.65
12/24/14 triggered @ 82.30
Option Format: symbol-year-month-day-call-strike


Constellation Brands - STZ - close: 111.40 change: +0.87

Stop Loss: 104.85
Target(s): To Be Determined
Current Option Gain/Loss: +11.3%
Average Daily Volume = 1.25 million
Entry on January 15 at $109.36
Listed on January 14, 2015
Time Frame: Exit prior to February expiration
New Positions: see below

Comments:
01/22/15: STZ found support again in the $110 area (intraday low was $109.60). Shares look poised to hit new highs tomorrow. I would be tempted to buy calls again on a rise above $11.50. More conservative traders may want to start raising their stop loss.

Earlier Comments: January 15, 2015:
Today the big players in the beer industry like Anheuser-Busch InBev (BUD) and Molson Coors (TAP) are losing market share to smaller craft beer brewers. Yet STZ actually seeing momentum in its beer portfolio.

STZ is part of the consumer goods sector. According to the company's website, "Constellation Brands, Inc. is a leading wine, beer and spirits company with a broad portfolio of premium brands. Constellation is the world leader in premium wine, the leading multi-category beverage alcohol company in the U.S. and the number three beer company in the U.S. Headquartered in Victor, New York, Constellation Brands is an S&P 500 Index and Fortune 1000® company with more than 100 brands in our portfolio, sales in approximately 100 countries and operations in approximately 40 facilities."

Last year the stock was a strong performer. The S&P 500 rallied about +11% in 2014 while STZ surged +39%. Investors have been consistently buying dips. The relative strength from last year has carried into 2015.

The company recently reported earnings on January 8th. Wall Street was expecting a profit of $1.14 per share on revenues of $1.51 billion. STZ said their earnings rose +11.8% to $1.23 a share. Revenues were up +7% to $1.54 billion, beating estimates on both counts. Management then raised their 2015 guidance from $4.10-to-$4.25 to $4.25-to-$4.35. That compares to Wall Street's 2015 estimate of $4.24.

STZ's CEO Rob Sands commented on their latest results saying, "We achieved outstanding results for the third quarter driven by the exceptional ongoing momentum for our beer business." Their beer sales rose +16% and gained market share.

The stock has seen multiple upgrades in January and currently trading at all-time highs. Today traders bought the dip near $105.00. The stock looks poised to breakout past short-term resistance at $108.50. The point & figure chart is bullish and forecasting a long-term target of $127.00.

We are suggesting a trigger to buy calls at $108.65. We'll start this trade with a stop at $104.85.

- Suggested Positions -

Long FEB $110 CALL (STZ150220C110) entry $2.47

01/15/15 triggered on gap open at $109.36, trigger was $108.65
Option Format: symbol-year-month-day-call-strike


Whole Foods Market, Inc. - WFM - close: 52.75 change: +0.02

Stop Loss: 48.75
Target(s): To Be Determined
Current Option Gain/Loss: +67.4%
Average Daily Volume = 4.9 million
Entry on January 08 at $50.35
Listed on January 07, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
01/22/15: WFM spiked lower this morning but traders were buying the dip ten minutes into the session. Readers may want to raise their stop loss closer to the $50.00 level.

I am not suggesting new positions at this time.

Earlier Comments: January 7, 2015:
WFM is in the services sector. As of November 2014 the company had 401 stores in the U.S., Canada, and the United Kingdom. Founded in 1978, WFM has become synonymous with healthy, organic food, at least for a growing portion of the population.

In early May 2014 the stock was crushed when the company missed Wall Street's earnings estimates and lowered its 2014 guidance. Investors were very unhappy with WFM's same-store sales growth as well. The organic food space has been growing more competitive in recent years as other retail groceries seek to boost their profits with wider margin "organic" fare.

WFM spent months languishing in the $36-40 zone before finally surging in early November. The big rally was sparked by better than expected earnings results and management raising their 2015 guidance. Shorts panicked and the stock exploded higher.

WFM has been slowly working its way higher since then but now WFM looks poised to breakout past key resistance at the $50.00 level.

The huge drop in gasoline prices is very bullish for the U.S. consumer. They now have more money in their pocket that they can spend on other items, like high priced organic foods at WFM.

Traders have started buying the dip and shares hit an intraday high of $50.18 today. Tonight we are suggesting a trigger to buy calls at $50.30. We will plan on exiting prior to WFM's earnings results in mid February.

- Suggested Positions -

Long FEB $50 CALL (WFM150220C50) entry $2.30

01/08/15 triggered on gap open at $50.35, suggested entry was $50.30
Option Format: symbol-year-month-day-call-strike


Zebra Technology - ZBRA - close: 84.96 change: +2.23

Stop Loss: 78.75
Target(s): To Be Determined
Current Option Gain/Loss: +26.5%
Average Daily Volume = 494 thousand
Entry on January 12 at $80.85
Listed on January 10, 2015
Time Frame: Exit prior to earnings in February
New Positions: see below

Comments:
01/22/15: ZBRA displayed relative strength with a +2.7% gain and a breakout past short-term resistance near $83.00. These are new six-month highs. Shares closed right below its 2014 highs (now resistance) near $85.00. I am not suggesting new positions at the moment.

Earlier Comments: January 10, 2015:
ZBRA is considered part of the industrial goods sector but they sound more like a technology company. The company website describes them as "Zebra Technologies is a global leader in enterprise asset intelligence, designing and marketing specialty printers, mobile computing, data capture, radio frequency identification products and real-time locating systems. Incorporated in 1969, the company has over 7,000 employees worldwide and provides visibility into valued assets, transactions and people."

Their goods are used by 90% of the Fortune 500 companies. They have almost no debt. Last year they spent almost $3.5 billion buying Motorola Solutions (symbol was MSI). ZBRA's CEO believes that the MSI acquisition will help them capitalize on three big trends: mobility, the Internet of things, and cloud computing.

In February 2014 ZBRA raised their earnings guidance. They did it again two months later in April. Their most recent earnings report was above expectations. ZBRA announced record revenues with sales up +19% in Middle East and Africa, +16% in North America, +11% in Latin America, and +9% in Asia Pacific.

Technically the stock has been stair-stepping higher with a bullish trend of higher lows and higher highs. This past week ZBRA displayed relative strength and broke out to new multi-month highs. The point & figure chart is bullish with a $92.00 target.

Tonight we are suggesting a trigger to buy calls at $80.85. We will plan on exiting positions before ZBRA reports earnings in mid February.

- Suggested Positions -

Long FEB $85 CALL (ZBRA150220C85) entry $1.70

01/12/15 triggered @ 80.85
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Starwood Hotels & Resorts - HOT - close: 75.36 change: +1.84

Stop Loss: 76.55
Target(s): To Be Determined
Current Option Gain/Loss: -60.6%
Average Daily Volume = 2.3 million
Entry on January 14 at $73.90
Listed on January 12, 2014
Time Frame: Exit prior to earnings in mid February
New Positions: see below

Comments:
01/22/15: Today was a rough day for bearish trades thanks to the widespread market rally. The oversold bounce in HOT continued with a +2.5% gain. The close above $75.00 and its 10-dma, both levels that should have been resistance, is potentially bad news for our bearish HOT trade.

I am not suggesting new positions at this time.

Earlier Comments: January 12, 2015:
HOT is in the services sector. According to a company press release, "Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with more than 1,200 properties in 100 countries, and 181,400 employees at its owned and managed properties. Starwood is a fully integrated owner, operator and franchisor of hotels, resorts and residences with the following internationally renowned brands: St. Regis®, The Luxury Collection®, W®, Westin®, Le Meridien®, Sheraton®, Four Points® by Sheraton, Aloft®, and Element®. Starwood also owns Starwood Vacation Ownership, Inc., a premier provider of world-class vacation experiences through villa-style resorts and privileged access to Starwood brands."

The company's most recent earnings report was October 28th. The company beat the bottom line estimate by a penny but missed the revenue number. Management then guided lower. Since then at least two analyst firms (UBS and JP Morgan) have downgraded shares of HOT. JPM said their downgrade was on valuation concerns. Other analysts have issued worries about how the strong dollar might hurt HOT's financials.

There are also concerns that Airbnb could be hurting the hotel business. Airbnb's growth has surged since it was founded back in 2008. Just four year later Airbnb announced their 10 millionth night booked. It may not be fair to say all 10 million of those would have gone to the hotel industry but certainly a good chunk of Airbnb's business has been stolen from more traditional lodging services.

Technically shares of HOT look weak. The point & figure chart is bearish and forecasting at $68 target (which could get worse). Today's breakdown under support near $75.00 looks ominous. The intraday low today was $74.06. Tonight I am suggesting a trigger to buy puts at $73.90. We will plan on exiting prior to HOT's earnings report in mid February.

- Suggested Positions -

Long FEB $70 PUT (HOT150220P70) entry $1.60

01/14/15 triggered @ 73.90
Option Format: symbol-year-month-day-call-strike


CLOSED BEARISH PLAYS

WESCO Intl. - WCC - close: 69.28 change: +0.76

Stop Loss: 68.65
Target(s): To Be Determined
Current Option Gain/Loss: -53.3%
Average Daily Volume = 619 thousand
Entry on January 14 at $67.76
Listed on January 13, 2014
Time Frame: Exit PRIOR to earnings on January 29th
New Positions: see below

Comments:
01/22/15: WCC has not been cooperating. In last night's newsletter we decided to close this trade early. The plan was to exit at the open this morning. WCC poured some salt in the wound with a gap open higher at $69.31.

- Suggested Positions -

Long FEB $65 PUT (WCC150220P65) entry $1.80 exit $0.84 (-53.3%)

01/21/15 prepare to exit tomorrow morning
01/15/15 new stop @ 68.65
01/14/15 triggered on gap down at $67.76, trigger was $68.75
Option Format: symbol-year-month-day-call-strike

chart: