Option Investor
Newsletter

Daily Newsletter, Wednesday, 1/28/2015

Table of Contents

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

Market Wrap

More Disappointment from Central Banks

by Keene Little

Click here to email Keene Little
It turns out the stock market wasn't happy with the ECB's QE plan and then showed more disappointment this afternoon with the FOMC announcement. Are the central banks losing their mojo?

Wednesday's Market Stats

The euphoria that followed last Thursday's announcement by the ECB lasted that one day. The market sold off a little on Friday (more of a consolidation) and then sold off some more on Monday. The afternoon bounce on Monday was followed by a large gap down Tuesday morning. Thanks to AAPL's blowout earnings report after the bell on Tuesday the market got a lift this morning but that was immediately sold into. NDX was strong, thanks to AAPL, but it did a nearly 100 -point reversal off today's high by the time the market closed. The bulls have been having a tough time in the last few days but in reality the only thing we have is more of the same choppy whippy price action that has kept the indexes inside a tightening price range.

One of the reasons why the ECB-inspired rally last Thursday didn't last for more than a day is because investors began to realize how little it actually meant. The lack of response in the bond market (the smarter market) last Thursday was a strong hint that the stock market experienced a bullish emotional reaction that was not warranted. The ECB announced a plan to buy 60 billion Euros per month, which is of course a lot of newly-created money. But it was likely just more jawboning by the ECB since it might end up being only about a quarter (15B) of that amount. All of these games the central banks continue to play only makes the air pocket beneath the stock markets that much more vulnerable to collapse when the recognition phase hits.

The problem with the ECB plan to buy 60B euros each month is that the responsibility for most of the buying of sovereign debt will be with each individual country. In other words the ECB will very likely not be buying much of Spain's or Italy's or France's or anyone else's government bonds (and Greece was specifically excluded from this agreement). Each country will be provided money to buy their own bonds to fund their debt but they will be responsible for the debt, not the EU's central bank. This is primarily in deference to Germany, which does not want to be responsible for the debt of other nations that it sees as "lacking industriousness."

The reason for the ECB's approach is due to the way the Articles of the ECB were written. Referencing Article 16, John Hussman wrote recently:

"Under Article 16 of the Protocol that established the European System of Central Banks (ESCB), the ECB Governing Council has the exclusive right to authorize [emphasis mine] the creation of euros, but either the ECB or the individual national central banks can issue those euros. The ECB will authorize a large QE program this week, but my impression is that the details will leave the ECB itself responsible for executing only a fraction of the announced program, with the remaining majority of the program (perhaps 60-75%) being nothing more than the option for each national central bank to purchase its own country's government bonds, at its own discretion, and its own risk. Moreover, that option is likely to be limited to something on the order of 25% of the outstanding government debt of each respective country."

From George Friedman at Stratfor.com (before the ECB announcement):

"The European strategy is vitally different [from the U.S.], however. The Federal Reserve printed the money and bought the cash. The European Central Bank will also print the money, but each Eurozone country's individual national bank will do the purchasing, and each will be allowed only to buy the debt of its own government."

Friedman went on to explain that many Eurozone governments are unable to pay for more of their own debt and other European countries do not want the responsibility of another country's debts, either directly or by exposing the ECB to the debts. This is why Germany has resisted so hard any effort for the ECB to launch a QE program that could cripple the EU, and in turn Germany, if other countries are unable to pay off their debts. It would be as if the Fed were to purchase all the states' debts and saddling all states with the burden of the debt if it's not paid off. If California then went belly up do you think Texas would be OK with having to pay off California's debt?

Germany's incentive in this case is that it needs a strong Europe to take its exports. Fully 50% of Germany's production is exported and needless to say, its economy would crumble if the EU crumbles. So the compromise between Mario Draghi and Angela Merkel was to allow the ECB to authorize the creation of money but give the money to each country's national bank based on some agreed-upon formula and make each individual country responsible for purchasing their own debt and be individually responsible for paying it down. This sounds like another pushing-on-a-rope scheme that the Fed has tried for so long. "You can lead a horse to water but you can't make it drink." The end result is a program that sounds good in theory (print lots of money) but probably will fail as a stimulus tool.

In this afternoon's FOMC announcement the Fed upgraded its assessment of the economy because of the recent strength in the GDP reports and the improved employment picture. That likely spooked traders into believing the Fed could soon start talking about rate increases, which would further increase the value of the U.S. dollar and that would further hurt international companies and their export business. Some recent earnings warnings by big international companies, such as CAT, have already spooked the market.

But interestingly, for the first time the Fed announced part of their "formula" would include international financial developments in their policy decisions. This should have calmed fears of a rate increase since foreign developments have been getting weaker and that should help the Fed avoid talk of a rate increase for the rest of this year at least. But the market sold off anyway and now we wait to see if we'll get the typical reversal the day after the FOMC announcement.

The end result of all this is what we're currently seeing in the market -- a selloff following the ECB announcement and a further selloff following this afternoon's FOMC announcement. What the market is finally beginning to realize is the inability of the central banks to really do much more and than what they've done so far hasn't worked. We kept getting assurances from the central bankers but in reality it's been one grand experiment by people who don't know what they're doing and in the process they've created an enormous stock market bubble (that has surpassed the dot com bubble in the 1990s) and a huge debt bubble. It can always get bigger, such as it has in Japan, and it very likely will, but like Japan we could remain mired in a very long recession/depression as a result of all the debt.

Now, having said all that, I still see the potential for another rally into February to make a new high. No one ever accused the stock market of being the sharpest knife in the drawer and there's still a lot of hope out there. Even if it's just because this year ends in '5' and it's the 3rd year of a presidential term, which have been historically bullish, many are pinning their hopes and dreams on another successful year. I think this time will be different but many money managers are betting their portfolios on the expectation for a bullish year and dips continue to be bought. As I'll review with the charts, we have bullish continuation patterns that have not been negated and they point higher. Now all the bulls need to do is prevent those bullish patterns from being negated, which could be close to happening, especially for the DOW.

Kicking off a review of tonight's charts, the SPX weekly chart shows how price remains stuck in a tightening trading range (sideways triangle) since December. Typically a sideways triangle leads to one more leg in the direction that preceded it (up in this case) but I've been leaning toward the bearish side since the December high based on the longer-term pattern. Many previous important highs for the market have seen similar high-level consolidations which looked bullish at the time but failed to get follow through. If it does break down we'd then have a failed bullish pattern and that would likely lead to a hard failure. But bears need to see the upside potential here -- at least up to the trend line along the highs from April 2010 - May 2011, perhaps up to about 2130 by mid-February. If you're feeling bullish the market, we're very close to solid support and the upside potential is about 130 points.

S&P 500, SPX, Weekly chart

The daily chart below shows a closer view of the sideways triangle pattern but I'm also showing the bearish wave count (red) that's calling the decline from December a 1st and 2nd wave and we're into the 3rd wave down (or it will be an a-b-c). There are 3 support levels the bears need to break before they can claim victory over the bulls. There were 4 levels but the one at 2019 (price-level S/R starting from the September high) was broken today. The next is the bottom of the sideways triangle, near 1995, followed by the uptrend line from March 2009 - October 2011, near 1978, and then the 200-dma, near 1973, and finally a price projection for two equal legs down from December 29th, which is near 1963. Once below 1963 it would be more apparent that the decline is a 1-2-3 instead of an a-b-c.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2065
- bearish below 1963

If the bears can't get a stronger decline going and if the sideways triangle is a bullish continuation pattern we should be close to starting the next rally leg. It's been typical for this market to reverse the post-FOMC afternoon move, which would mean a rally tomorrow morning, so it's a bullish setup here. Whether it will lead to another rally leg can only be guessed here and after so many choppy and whippy reversals since the end of November we have to continue to be careful.

The 60-min chart below shows a downside price projection at 1998.42, which is where the move down from last Thursday would have two equal legs. A triangle pattern is filled with corrective price action and that's what we've had, including the decline from last Thursday. This is one of the reasons why I continue to respect the idea that we'll get a rally out of this pattern. A rally above Tuesday afternoon's high near 2043 would be a bullish heads up but the bulls need to see a break above last Thursday's high near 2065. A drop below 1998 would be a bearish heads up but the bears would be in much better shape below 1980 since it's hard to call the decline impulsive yet.

S&P 500, SPX, 60-min chart

As mentioned earlier, it's the DOW that needs an immediate reversal of today's selloff if the bulls are to have any hope of another rally from here. Following the December 5th high I can count the triangle as complete (5 waves, labeled a-b-c-d-e) and today's close can be viewed as a throw-under below the bottom of the triangle, which is a common finish to these patterns (head-fake break). But that requires an immediate reversal Thursday morning, in which case the bullish hopes would remain alive. A drop below the 200-dma near 17050 would confirm a bearish breakdown and it could get ugly (failed bullish pattern). If the bulls do get another rally leg started we could see the DOW up near 18700 in February. That would make it more than a bit painful for bears so if you're short don't get complacent here.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,840
- bearish below 17,050

NDX is stuck. Since its November 28th high it has created a wide descending triangle, similar to the others, and is more or less in the middle of the pattern but closing today closer to the bottom of it. The bottom of the descending triangle is the horizontal price support near 4090 while the top of the triangle is the downtrend line from November-December, currently near 4300. Near the bottom of the triangle is also its uptrend line from March 2009 - June 2013 so a drop below 4090 would be bearish while a rally above 4300 would be bullish. Mind the chop in between.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4300
- bearish below 4090

When you take a quick look at the RUT's daily chart below and then look away, what's your first impression (bullish or bearish)? That probably depends on your bias and right now it's really just a mess that could go either way. How about a bearish H&S top starting with the left shoulder in November? Or maybe it's an inverse H&S continuation pattern starting with the January 6th low? I see multiple trend lines causing price to act like a ping pong ball. This week's rally attempt was stopped by the broken uptrend line from October-December (followed by a selloff, creating a bearish kiss goodbye). Today it dropped back down to its broken downtrend line from December 31 - January 13. A successful back-test followed by a bullish kiss goodbye tomorrow could lead to another rally. Depending on how you're leaning you'll see what you want to see and trade accordingly but know where your stop should be and honor it because I think the next move out of this congestion could be a big one.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1217
- bearish below 1150

I've often discussed the idea that the risk-on vs. risk-off evaluation for the market can be derived from how well HYG is doing vs. TLT. HYG is the bond fund made up of high-yield (junk) bonds while TLT is the 20+ year Treasury bond fund. If HYG is outperforming TLT then you know investors are feeling bullish and will to take on the risk of being in the higher-yielding junk bonds. If investors are feeling nervous about the market they'll move into the safety of Treasuries instead. This often provides a heads up for where the stock market will head and like most of these "indicators" they're not a timing tool but instead a warning tool.

It's a little tough to see on the chart below but back in 2007 when the stock market (green line for SPX) made a higher high in October vs. July you can see the lower highs following the June high for HYG/TLT. HYG started weakening relative to TLT and the new stock market high in October was met with a lower high for HYG/TLT. And then at the March 2009 low for the stock market you can see the bullish divergence with the higher low in HYG/TLT vs. its December 2008 low. What's also obvious is how closely the HYG/TLT ratio tracks the stock market (at least back then).

HYG relative strength to TLT, Weekly chart, 2007 and 2009 divergences

Now look at the same chart up through today (below). The divergence between the two has been widening for a long time (since the end of 2013), which clearly shows why this is not a good timing tool. But I believe the widening divergence is something that's not going to end well for the stock market. While the HYG/TLT line could start turning up, it is instead accelerating lower, as evidenced by the breakdown out of the parallel down-channels, which are steepening. This is a classic waterfall decline that's likely to get steeper before finding a low. It's much more likely that the stock market will soon follow and it's very possible the December high will stand for a very long time. But if we do get a new high for the stock market in the next month I'd certainly want to see HYG/TLT pick up in response otherwise one more new high for the stock market could very well be its last.

HYG relative strength to TLT, Weekly chart, current divergences

A lot of today's decline in the HYG/TLT line had more to do with strong buying in TLT than selling in HYG. But that's another sign of risk-off as investors rush into the relative safety of Treasuries vs. the stock market. The heavy buying today knocked the 30-year yield down -4.5% today, to 2.294% (the 10-year dropped -5.5% to 1.724%) and it's looking like my expectation for 2% for the 30-year could happen sooner rather than later this year. The weekly chart of TYX shows two lower trend lines crossing near 2.09% next week so it would interesting to see what happens if that's reached by then.

30-year Yield, TYX, Weekly chart

Last week the U.S. dollar had stalled at the top of its parallel up-channel from 2008-2011 but then broke above it last Thursday. I had mentioned that a break much above 93.30 would open the door to two price projections at 97.33-97.35. As noted on the weekly chart below, the 2nd leg of the move up from April 2011 would be 162% of the 1st leg up at 97.35. The 2nd leg is the rally from May 2014 and it has an extended 5th wave, which oftentimes will reach a projection where it is 162% of the 1st through 3rd waves (especially for commodities and currencies). That level is at 97.33 and the tight Fib correlation makes it more important so if that level is reached there's a good chance that's where the rally will stop and we'll see a multi-month pullback/consolidation. But the rally can be considered complete at any time and therefore I think it's a risky time to be a dollar bull.

U.S. Dollar contract, DX, Weekly chart

After hitting Fib resistance near 1302 last week, gold has pulled back a little. The daily chart looks like it's ready to roll over and the thing to keep in mind about gold is that the bounce off the November low looks corrective. An a-b-c bounce from November to last week's high at important Fib resistance should now be followed by another decline that will take gold to a new low. That's what the larger pattern is telling me, which is supported by the corrective nature of the bounce. It has everyone feeling bullish about gold but I'm thinking it will turn into another head fake like it did back in August-September 2012. I circled that bounce to show how it had broken its downtrend line from August 2011 and it turned everyone bullish at the time. But it instead turned into a head-fake break and continued its decline. The current bounce has broken out of its down-channel from 2012, which clearly looks bullish, as well as a downtrend line March-July 2014. But if it now drops below its December 9th high at 1239 it would confirm a 3-wave bounce correction and likely new lows. In the meantime there's still the potential for a higher bounce to at least back-test its broken uptrend line from 2001-2005, currently near 1327.

Gold continuous contract, GC, Weekly chart

As expected, silver's rally stalled at price-level S/R near 18.60 (last week's high was 18.50) as well as its downtrend line from November 2012 - July 2014. If it drops below its December 10th high at 16.95 it will leave a 3-wave bounce correction off the December 1st low and likely point lower from there. There's higher potential to the downtrend line from 2011, near 20.70, but at the moment it looks ready to turn back down from here. It could be just one more new low we're looking for, maybe down to about $12, before setting up a longer-term buying opportunity (like gold).

Silver continuous contract, SI, Weekly chart

Oil has dropped back down to its January 13th low at 44.20, breaking it slightly with this afternoon's low at 44.08. It has bounced back up in the after-hours session, currently trading above 44.50, and at the moment it's looking like a retest. As you can see on the daily chart below, the bullish divergence at the lows is telling us the selling momentum is waning. It's probably a good retest to try the long side on oil, such as USO. The only warning is that oil could go into a choppy consolidation pattern and not make a lot of headway back to the upside. In that case buying calls might not work that well (time decay).

Oil continuous contract, CL, Daily chart

Other than this afternoon's FOMC announcement it was a quiet day for economic reports and that will continue on Thursday. Pending home sales might move the market a little but probably not. Friday's Chicago PMI and Michigan Sentiment are not expected to change much and will also probably not affect the market much. We're into month end and portfolio balancing will likely have more of an effect.

Economic reports and Summary

For the DOW in particular I mentioned the bulls need to see an immediate rally Thursday morning in order to keep the bullish triangle pattern alive. There are two things in favor of that happening, the first being a common pattern that sees a reversal of the post-FOMC afternoon move the next day. The afternoon sold off and the historical pattern says Thursday should rally. The second thing is that today saw some capitulatory kinds of market breadth readings. It's either the kickoff to a serious decline or the capitulation will lead to a strong reversal back up.

Closing TRIN today reached 3.47 which is the highest closing TRIN reading since the strong market decline into the August 2011 low. A high TRIN means lots of selling volume going into declining stocks. It's the highest TRIN reading since 3.58 on February 3, 2014, which ended the January decline with capitulation selling on that day. It was then followed by a new rally into early March and then higher after consolidating a bit. It's somewhat rare to see TRIN this high and it indicates extreme selling and extremely and is typically an indication of being oversold on a short-term basis. Combined with a +19% jump in the VIX it suggests we could be setting up for a strong rally, possibly as early as tomorrow.

As can be seen on the table at the top of tonight's report, new 52-week highs were double the new lows, 403 vs. 193 for a net of +210. Considering the strength of the selloff I would have expected the opposite. We also have a net new high for 2015 so the index prices might be looking worse than what we see under the hood and that's another warning sign that tells bears not to get cocky here -- the market might be setting a bear trap. In any case we should find out quickly Thursday morning since the bullish case, especially for the DOW, needs an immediate rally.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Option Plays

Consistently Underperforming The Market

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

International Business Machine - IBM - close: 151.55 chg: -2.12

Stop Loss: 155.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.1 million
Entry on January -- at $---.--
Listed on January 28, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Big cap stocks have helped lead the market rally over the last few years. One high-profile name that has not participated is IBM. The S&P 500 delivered a +29.6% rise in 2013 while IBM lost -2%. In 2014 the S&P 500 index rose +11.5% while IBM lost -14.4%.

IBM bills itself as an information technology (IT) products and services company. Years ago they were mainly hardware. Then they made the switch to services and software. Today they provide IT infrastructure, business process services, outsourcing, cloud services, data analytics, database and content management, data warehousing, and a lot more.

The company has been suffering from falling sales. Last year the company saw its sales decline every quarter and miss Wall Street estimates. The last four reports saw their revenues drop -3.9%, -2.2%, -4%, and -11.9% in the most recent quarter. IBM management confessed that they are facing "unprecedented pace of change in our industry." It looks like investors believe IBM is stuck behind the curve and can't keep up.

There was some good news in their latest earnings report (January 21st, 2015) with cloud revenues up +60% last year. Unfortunately the rest of their business is struggling with declining sales. Management lowered their earnings forecast. Wall Street was expecting full year 2015 earnings of $16.55 a share. IBM guided down into the $15.75-16.50 zone.

The last few days there has been a lot of speculation that IBM is about to lay off up to 110,000 workers. The company denied these rumors and tried to switch the focus to their 15,000 job openings. As of today, there were a number of stories surfacing that the lay offs had begun. The company isn't discussing it while one reporter at CNBC claims IBM is only laying off 10,000 workers.

Technically the stock is bearish. Shares have been showing relative weakness. This year has been a steady trend of lower highs. IBM is approaching significant support near $150.00. The point & figure chart is on the verge of forming a new triple-bottom breakdown sell signal. If IBM breaks support at $150 the next support level could be $140 or even $130.

Tonight we are suggesting a trigger to buy puts at $149.75.

Trigger @ 149.75

- Suggested Positions -

Buy the MAR $145 PUT (IBM150320P145) current ask $2.26

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Once Again, Oil's Slide Rattles The Market

by James Brown

Click here to email James Brown

Editor's Note:

A round of very impressive earnings results and a dovish FOMC policy statement were no match for crude oil plunging to new six-year lows. The broader U.S. stock market posted widespread declines.

AVGO and LOW hit our entry triggers this morning before the market rolled over.


Current Portfolio:


CALL Play Updates

Alkermes plc. - ALKS - close: 71.40 change: +0.85

Stop Loss: 66.85
Target(s): To Be Determined
Current Option Gain/Loss: +122.6%
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:
01/28/15: ALKS ignored the market's widespread weakness on Wednesday. Shares erased yesterday's loss and posted a +1.2% rally to tag new highs.

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

01/24/15 new stop @ 66.85
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


Avago Technologies - AVGO - close: 105.00 change: +0.21

Stop Loss: 101.40
Target(s): To Be Determined
Current Option Gain/Loss: -25.9%
Average Daily Volume = 2.2 million
Entry on January 28 at $107.75
Listed on January 24, 2015
Time Frame: Exit PRIOR to earnings in late February
New Positions: see below

Comments:
01/28/15: Apple's (AAPL) impressive earnings numbers last night fueled a rally in AVGO. The stock gapped open higher at $107.12 and spiked to a new high above $108.00. Unfortunately the rally faded thanks to the market's broad-based sell-off today.

Our trade was triggered at $107.75. I would wait for a new rally above $107.75 before initiating new positions.

Earlier Comments: January 24, 2015:
AVGO is in the technology sector. They are part of the semiconductor industry. They make chips that speed up mobile phones while reducing interference. According to company marketing materials, "Avago Technologies is a leading designer, developer and global supplier of a broad range of analog, digital, mixed signal and optoelectronics components and subsystems with a focus in III-V compound semiconductor design and processing. Backed by an extensive portfolio of intellectual property, Avago products serve four primary target markets: wireless communications, wired infrastructure, enterprise storage, and industrial and other."

AVGO is probably best known as a part supplier to Apple Inc. (AAPL). AAPL's huge success with the iPhone 6 and 6+ has been a blessing for AVGO. Earnings and revenue growth is seeing significant moment. The last few reports have all come in above expectations with revenues up +25% in the second quarter, +100% in the third quarter, and up +115.4% year over year in AVGO's fourth quarter (last October). Earnings growth surged +58% quarter over quarter and up +123% from a year ago. Gross margins also improved quarter over quarter and rose from 51% a year ago to 58% in their most recent quarter. Management then raised their guidance for Q1 2015.

Following their December 3rd, 2014 earnings report several Wall Street analysts raised their price targets on AVGO into the $115-122 range. The point & figure chart is even more positive with a forecast of $127.00.

The stock was showing strength again on Friday with a +1.7% gain. AVGO appears to have short-term resistance near $107.50. Tonight we are suggesting a trigger to buy calls at $107.75. I do want to caution investors that AVGO could be heavily influenced by AAPL's earnings report. AAPL reports earnings this coming Tuesday (Jan. 27th, after the closing bell). If AAPL somehow disappoints it could negatively impact shares of AVGO.

- Suggested Positions -

Long MAR $110 CALL (AVGO150320C110) entry $4.86

01/28/15 triggered @ 107.75
Option Format: symbol-year-month-day-call-strike


Acuity Brands, Inc. - AYI - close: 151.68 change: -1.61

Stop Loss: 149.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 365 thousand
Entry on January -- at $---.--
Listed on January 26, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
01/28/15: AYI followed the market lower today to close with a -1.0% decline. Shares look headed for support near the $150.00 mark.

We are on the sidelines waiting for a breakout higher. Our suggested entry point is $156.05.

Earlier Comments: January 26, 2015:
AYI is part of the technology sector. The company has managed to deliver double-digit sales and earnings growth in six out of the last seven quarters.

Who are they? "Acuity Brands, Inc. is a North American market leader and one of the world's leading providers of lighting solutions for both indoor and outdoor applications. With fiscal year 2014 net sales of $2.4 billion, Acuity Brands employs approximately 7,000 associates and is headquartered in Atlanta, Georgia with operations throughout North America, and in Europe and Asia. The Company's lighting solutions are sold under various brands." (source: company press release)

The last couple of earnings reports have been healthy. Back in October AYI beat Wall Street's estimates on both the top and bottom line with revenues rising +15.3%. Their most recent report was January 9, 2015. Earnings rose +38% from a year ago to $1.32 a share, which was above expectations. Revenues rose +12.7% to $647.4 million, also above expectations.

AYI's President Vernon Nagel commented on the quarter saying, "We were extremely pleased with our record fiscal 2015 first quarter results. Gross profit margin of 42.2 percent increased 90 basis points over prior year's first quarter, while adjusted operating profit margin of 14.9 percent increased 230 basis points over last year's first quarter adjusted operating profit margin. Our variable contribution margin, i.e., the incremental adjusted operating profit as a percentage of the increase in net sales, was over 33 percent. We believe our record first quarter results reflect our ability to provide customers truly differentiated value from our industry-leading portfolio of innovative lighting and control solutions along with superior service."

AYI also discussed their outlook and Mr. Nagel said, "We remain very bullish about our prospects for continued future profitable growth. Third-party forecasts as well as key leading indicators suggest that the growth rate for the North American lighting market, which includes renovation and retrofit activity, will be in the mid-to-upper single digit range for fiscal 2015 with expectations that overall demand in our end markets will continue to experience solid growth over the next several years. Our order rates through the month of December reflect this favorable trend. Further, we expect to continue to outperform the growth rates of the markets we serve due to benefits from growing renovation and tenant improvement projects, further expansion in underpenetrated geographies and channels, and growth from the introduction of new products and lighting solutions."

At least two analysts have already upgraded their price targets on AYI following the January earnings report.

Technically shares have spent the last couple of weeks digesting gains after its big, post-earnings pop to new highs. Now the stock looks poised to begin its next leg higher. There is short-term resistance near the $155.50-156.00 area. Tonight I'm suggesting a trigger to buy calls at $156.05.

Trigger @ $156.05

- Suggested Positions -

Buy the MAR $160 CALL (AYI150320C160)

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


Big Lots Inc. - BIG - close: 46.10 change: -1.50

Stop Loss: 43.90
Target(s): To Be Determined
Current Option Gain/Loss: -14.0%
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:
01/28/15: Uh-oh! I have been warning readers that the $48.00 level was potential resistance. Today shares managed to hit $48.22 before reversing. BIG underperformed with a -3.1% decline. Furthermore today's move has created an ugly bearish engulfing candlestick reversal pattern. BIG managed to close near $46.00, which should be short-term support.

Tonight I'm adjusting the stop loss to $43.90. More conservative traders may want to move their stop even higher. 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

01/28/15 new stop @ 43.90
01/15/15 triggered @ 45.75
Option Format: symbol-year-month-day-call-strike


Cracker Barrel Old Country Store - CBRL - cls: 134.52 chg: -0.66

Stop Loss: 129.75
Target(s): To Be Determined
Current Option Gain/Loss: -13.6%
Average Daily Volume = 248 thousand
Entry on January 26 at $135.15
Listed on January 22, 2015
Time Frame: Exit prior to earnings in late February
New Positions: see below

Comments:
01/28/15: CBRL was somewhat resistant to the market's decline and only fell -0.48% versus the NASDAQ's -0.92% loss. The $134.00 level is holding as short-term support for now. If $134 breaks then the simple 50-dma near $131.60 could also be support. I would hesitate to launch new positions at this time.

Earlier Comments: January 22, 2015:
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.

- Suggested Positions -

Long MAR $140 CALL (CBRL150320C140) entry $2.72

01/26/15 triggered @ 135.15
Option Format: symbol-year-month-day-call-strike


Lowe's Companies - LOW - close: 69.22 change: -0.63

Stop Loss: 65.75
Target(s): To Be Determined
Current Option Gain/Loss: -24.0%
Average Daily Volume = 5.3 million
Entry on January 28 at $70.60
Listed on January 27, 2015
Time Frame: Exit PRIOR to earnings on Feb. 25th
New Positions: see below

Comments:
01/28/15: LOW rallied at the open this morning. The stock hit new all-time highs above $71.00. Our trigger to buy calls was hit at $70.60. Sadly the rally didn't last as the broader market continued to sink. Today's move in LOW looks like a potential bull-trap pattern (and a potential bearish reversal). I am not suggesting new positions in LOW at this time. Wait for a new rally above $70.50.

Earlier Comments: January 27, 2015:
Lowe's Companies is a Fortune 100 company. They sell to 15 million customers a week with annual sales of more than $53 billion. LOW is the second biggest player in the home improvement retail business. Their main rival is Home Depot. LOW currently has more than 1,800 stores across the United States, Canada, and Mexico.

The stock has been a great performer the last couple of years, significantly outperforming the broader market. Their most recent earnings report was November 19th and results were one cent above expectations with a profit of $0.59 a share. Revenues also beat expectations with +5.6% growth to $13.68 billion. Same-store sales were up +5.1%.

Management issued bullish guidance for 2015 and raised their earnings estimate above Wall Street's forecast. LOW also raised their revenue guidance above analysts' estimates. The company expects revenues to grow +4.5% to 5% in 2015 with same-store sales growth in the +3.5% to 4% range.

The stock is often influenced by trading and news out of the homebuilders. This year there have been a couple of bombs in the homebuilding industry with both KBH and LEN warning on potential margin pressures in 2015. Shares of LOW, a retailer, shrugged off this headlines.

The U.S. economy grew +4.9% in the third quarter last year and is expected to grow about +3% in 2015. The slow and steady improvement in the U.S. economy is a tailwind for LOW. Another bonus is low gas prices. While we have not seen a lot of evidence that consumers are spending their savings at the pump eventually that money, amounting to hundreds of dollars a year for the average driver, will be spent. Americans love to spend money on their homes, which is bullish for LOW.

We are quickly approaching the spring residential real estate selling season. That means consumers will be spending money on fixing up their homes to go on the market. Those people who buy a home will spend money on their new purchase.

Technically LOW's stock has been consolidating sideways between support near $65 and resistance near $70 the last few weeks. The point & figure chart has already produced a new triple-top breakout buy signal with a $75 target (that could grow). Yesterday the stock hit an intraday high of $70.50. Tonight I am suggesting a trigger to buy calls if LOW hits $70.60.

- Suggested Positions -

Long MAR $70 CALL (LOW150320C70) entry @ 2.71

01/28/15 triggered @ 70.60
Option Format: symbol-year-month-day-call-strike


Monster Beverage Corp. - MNST - close: 119.21 change: +0.40

Stop Loss: 115.75
Target(s): To Be Determined
Current Option Gain/Loss: -26.7%
Average Daily Volume = 1.1 million
Entry on January 23 at $120.25
Listed on January 17, 2015
Time Frame: Exit PRIOR to earnings in late February
New Positions: see below

Comments:
01/28/15: Shares of MNST also traded to a new all-time high this morning. The rally began to fade late this afternoon. MNST probably would have closed in the red if the trading day was a little bit longer.

We can look for short-term support near $117.50-118.00. I am not suggesting new positions at the moment.

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.

- Suggested Positions -

Long MAR $125 CALL (MNST150320C125) entry $4.50

01/23/15 triggered @ 120.25
Option Format: symbol-year-month-day-call-strike


Constellation Brands - STZ - close: 110.29 change: -1.00

Stop Loss: 104.85
Target(s): To Be Determined
Current Option Gain/Loss: -10.9%
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:
01/28/15: We see a similar story here. STZ was trading at all-time highs before the market's sell-off picked up speed this afternoon. STZ eventually yielded to market weakness and dropped toward support near $110.

More conservative traders will want to seriously consider raising their stop loss. I am not suggesting new positions at this time.

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


Valeant Pharmaceuticals - VRX - close: 160.59 change: -0.21

Stop Loss: 154.80
Target(s): To Be Determined
Current Option Gain/Loss: -12.5%
Average Daily Volume = 2.5 million
Entry on January 26 at $160.55
Listed on January 24, 2015
Time Frame: Exit PRIOR to earnings in late February
New Positions: see below

Comments:
01/28/15: VRX is yet one more stock that was trading at historic highs this morning before reversing lower this afternoon. The pullback in VRX wasn't that bad (only -0.1%). This stock's nearest support might be the 10-dma near $158.00.

Earlier Comments: January 24, 2015:
Healthcare stocks have been some of the market's best performers in 2015. VRX is helping lead the group higher with a +11.5% gain already.

The company's website says, "Valeant Pharmaceuticals International, Inc. is a multinational specialty pharmaceutical company that develops and markets prescription and non-prescription pharmaceutical products that make a meaningful difference in patients' lives. The company's growth strategy is to acquire, develop and commercialize new products through strategic partnerships, and strategically expand its pipeline by adding new compounds or products through product or company acquisitions. Headquartered in Laval, Quebec, Valeant has approximately 17,000 employees worldwide and is listed on both the New York Stock and Toronto Stock Exchanges under the symbol VRX."

VRX made a lot of headlines last year with its attempted hostile takeover of Allergan (AGN). Eventually VRX lost out to a rival. AGN agreed to a takeout by Actavis (ACT) for $219 a share, which was more than VRX wanted to pay.

Meanwhile VRX has been doing just fine on the earnings front. The company is developing a trend of beating analyst estimates. Plus they guided higher in April 2014, in September and with their last earnings report on October 20th. In November VRX's Board of Directors announced at $2 billion stock buyback program.

This year VRX has already raised guidance again. They see Q4 results above Wall Street estimates. They also raised their guidance for FY2015 into the $10.10-10.40 range compared to consensus estimates near $10.01.

The stock has been surging with a rally to new all-time highs. The point & figure chart is bullish and forecasting at $180.00 target.

Currently VRX sits just below round-number resistance at $160.00. We are suggesting a trigger to buy calls on a breakout at $160.55.

- Suggested Positions -

Long MAR $170 CALL (VRX150320C170) entry $4.80

01/26/15 triggered @ 160.55
Option Format: symbol-year-month-day-call-strike


Whole Foods Market, Inc. - WFM - close: 52.70 change: -0.45

Stop Loss: 49.45
Target(s): To Be Determined
Current Option Gain/Loss: +63.0%
Average Daily Volume = 4.9 million
Entry on January 08 at $50.35
Listed on January 07, 2015
Time Frame: Exit PRIOR to earnings on February 11th
New Positions: see below

Comments:
01/28/15: WFM garnered bullish analyst comments today and was given a new $62 price target. This opinion failed to stop WFM from joining the market in a widespread decline. WFM looks poised to hit short-term support in the $52.00 region. If $52 fails then $50 is the next support level. Tonight I am adjusting our stop loss to $49.45.

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

01/28/15 new stop @ 49.45
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: 84.18 change: -0.44

Stop Loss: 81.35
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
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:
01/28/15: ZBRA was trading above resistance at $85.00 most of the session. Today's strength did not last as the wider market accelerated lower this afternoon.

Tonight we are moving the stop loss to $81.35. 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

01/28/15 new stop @ 81.35
01/12/15 triggered @ 80.85
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Starwood Hotels & Resorts - HOT - close: 72.62 change: -1.42

Stop Loss: 76.55
Target(s): To Be Determined
Current Option Gain/Loss: -34.4%
Average Daily Volume = 2.3 million
Entry on January 14 at $73.90
Listed on January 12, 2014
Time Frame: Exit PRIOR to earnings on February 10th
New Positions: see below

Comments:
01/28/15: It was another good day for HOT bears as the stock underperformed the major indices with a -1.9% decline. Shares are about to test its January support in the $71.70-71.80 area.

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