Option Investor
Newsletter

Daily Newsletter, Thursday, 2/5/2015

Table of Contents

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

Market Wrap

Another Day, Another Rally

by Thomas Hughes

Click here to email Thomas Hughes
The ECB/Greek standoff was brushed off in favor of economic data and earnings reports.

Introduction

The market bounced back from yesterday's ECB inspired sell-off. The ECB/Greek stand off is still an issue, and will likely be in the market eye into the near future, but was shrugged off today in favor of economic data and earnings reports. There was a flood of earnings today, both before the open and after the close of trading, but it was the names on the after-the-close list that garnered the attention. Early action, before the opening bell, was largely influenced by the economic data. There was both rear looking December data and some fresher January data, both more or less as expected with some signs of strength in the labor market.

Market Statistics

Futures were positive from the earliest reports I saw. The markets were indicated to open higher, but only just, until after the bulk of the economic reports were released at 8:30AM. The December and Q4 data was largely weak, and a little weaker than expected; The January data a little mixed but in line with trends. In total, the data reveals that labor trends are still strong, jobs are still being added, wages are rising and more hours are being worked. The only real negative I found is that declining oil prices are having an affect on labor in the oil producing regions, and that this affect could spill over into other sectors with close contact with the aforementioned areas.

The market opened positive, and moved higher right from the start. The indices gained roughly 0.75% by 11AM and traded sideways from there until after lunch. The early high was tested several times during the afternoon until finally falling to bullish pressure just before 3:30. At that time the market experienced a little pop that carried it higher and into the close.

Economic Calendar

The Economy

Challenger, Gray&Christmas released their tally of lay-offs for January. The number spiked by 63% from last month, driven primarily by the sharp decline in oil. At least 40% of the spike in lay-offs is attributed to oil prices by the report. This is alarming but not too unexpected as the fall-out and effect on labor from plunging oil has been speculated on for some time. In the report Challenger says that there may be continued job losses related to oil and that there is now some systemic risk present. Other jobs in industries supporting the oil industry and the communities built on the oil boom may be at risk.

The report balanced this view by saying that there are also positive effects to low oil that may overshadow the losses due to oil and result in a net positive for the country. John Challenger, CEO of Challenger Gray&Christmas, had this to say … “Despite the recent surge in job cuts, the net result of falling oil prices could ultimately prove to be positive for the economy, as a whole. Not only will many industries see cost savings, but consumers will have more money for discretionary spending on things like dining out, travel, and entertainment”

Challenger,Gray & Christmas

Initial claims for unemployment remain at long term lows. The number of claims for the first week of benefits rose by 11,000, less than expected, to 278,000. Last week's number was revised higher, but only by 2,000, leaving it standing as a low mark dating back more than 10 years. The four week moving average fell, shedding 6,500 come in at 292,750. On a not adjusted basis claims rose by 8.5%, more than double the 4% expected by the seasonal factors. The part of the report that is confusing is that no state reported a gain in claims, only declines, so I'm not sure how it is the headline number rose. Regardless, claims are very low and despite the spike early in the month appear to be pointing to net job growth despite the surge in lay-offs.


Continuing claims gained as well, 6,000 from an upward revision of 9,000 for net increase of 15,000 from last weeks reported number. Continuing claims are near long term lows and holding steady around 2.4 million. While slightly elevated from last years low these claims are still trending at levels indicative of a healthy labor market and overall decline in unemployment. To that end, the total claims number fell this week by over 131,000 to 2.839 million. The total number of jobless claims is also elevated but appears to be coming down from its peak at the end of last year.


All in all the jobless claims data suggests to me that while there was a spike in lay-offs the labor market is still strong and that jobs creation is steady in the least. The ADP figure yesterday helps to prove that point, It was mildly below estimates but still above 200,000 and according to Mark Zandi the gains in jobs reported by ADP was “broad” and that any number “above 200,000 is good”. I'm going to go out on a limb here and say that I believe the NFP could remain steady to strong in the 250,000 range. Oh, and there could be added volatility due to the revisions to previous months, and to the entire 2014, scheduled for this release.

Other data released today included rear looking Trade Balance for December and Productivity/Labor Cost for the 4th quarter. The December trade balance is a deficit of -$46.6 billion, up from the -$39.8 billion reported in November. This is due to a decline in exports and an increase in imports from the previous month. Analysts had been expecting a deficit of -$43 billion.

Headline unit labor costs and productivity were not great. Productivity fell by -1.8% in the fourth quarter and labor costs rose by 2.7%, both more than expected. Productivity was estimated at -0.5%, labor costs +1% but both more or less in line with the rest of Decembers data. The parts that I think make this report better than it appears is that total output for the quarter increased by 3.2% and that much of the increas in labor cost were due to hourly compensation, +.9%, and hours worked, +5.1%. Also, the manufacturing sector saw notable improvement as well. Output in the sector increased by 1.3% with a rise in hourly earnings of 1.5% and only a 0.2% increase in unit costs.


The Oil Index

The oil pits were bubbling hot again today. The price of WTI surged yet again, by more than 5% intraday, to trade above $50. Prices are caught in a whirlwind of trading activity that may cause volatility into the foreseeable future. Not only do supplies continue rise, there are signs production is/will be coming down in 2015 and some geo-political risk in the air including a new scramble by western leaders to try and calm the ongoing fighting in the Ukraine. As far as outlook goes there has been little talk of demand increase, and no sign of falling inventory, but there has been a little, a very little, improvement in some of the European and Asian data that could lead eventually to rising demand.

The Oil Index is benefiting from the rise in oil prices. The index traded up today, gaining 0.6% in today's session, but may be at a peak. Today's action is above the 38.6% Fibonacci Retracement but below resistance at the top of the two month range. Of the two, the resistance line would be more significant in my view. The Fibonacci is important, but as a place in which a signal may occur, but not as a signal itself. Adding to the idea the index could be at a near term top is the indicators, which are bullish but peaking, consistent with range bound trading. Oil prices, and oil price outlook, will be a fundamental driver of this trade. Should prices continue to rise, or even to remain at or near $50 this index could continue to rise. Resistance is currently at 1,400 with possible support at 1,350, and below that near 1,250.


The Gold Index

Gold prices continue to languish around $1265 and appear to be stabilizing just above $1250. Gold traders may be waiting for some sign of when to expect inflation will hit, or when the FOMC will actually raise interest rates, but the general consensus is that rates are going to rise, if not this year then next. News impacting that outlook may affect prices but any downside is likely to be short term in nature and possible entries for long term positions. I have read several articles this week talking about fund managers and others buying gold so expect to see dips result in buying opportunities.

The gold miners ETF GDX traded up today, gaining close to 1.25%. The ETF is moving higher, bouncing up from the short term moving average and support. The sector has been rallying as the underlying commodity rallied and stabilized and this may continue. There is resistance at the current level but earnings, and earnings outlook, may help it to break through. Resistance is between $22.50 and $23 ad earnings for the bulk of the companies in the ETF come out over the next two weeks. The indicators are bearish in the near term but convergent with a retest of the current high in the short term.


In The News, Story Stocks and Earnings

There was a literal flood of earnings reports today, primarily after the bell. There were quite a few surprises, most of them positive. Starting with GoPro, the company reported $0.99 per share, smashing expectations for $0.65. Revenue was also way above estimates and come on sales of 2.4 million cameras. The stock has been trading near a 5 month low after hitting it high last fall and shot higher following the report.


Twitter also smashed its expectations. The social media service that I have yet get on board with reported revenue and earnings above the consensus estimate. Revenue was $479 with EPS of $0.12. EPS is double expectations but forward guidance and active users are light so the stock sank in after hours trading, and then soared. At first check it was down by over 5%, a little later on it was up 5%.


Linkedin is yet another social media provider, and yet another earnings beat. The company reported revenue of $643 million, versus the expected $617 million, and EPS of $0.61 versus an expected $0.53. Guidance was mixed, the first quarter is light but the full year meets expectations. This stock also saw active buying in the after hours session.


Pandora internet radio reported earnings in line with expectations. EPS of $0.18 was just a penny shy of the consensus but it was the bigger miss on revenue that hurt the stock, and weak guidance. Shares of Pandora tanked, shedding more than 20% after the news came out.


The Indices

The indices were able to power higher today with an average gain over 1%. The Greek debt talks merely provided an additional entry point for bullish traders. Today's action, in many cases, has brought the indices up to their respective resistance levels and put them on the brink of reaching new highs. Today's action was led by the Dow Jones Industrial Average. The blue chips gained close to 1.2% in today's session and have now erased all of this years losses. The index is still below the resistance of the current all time but looks likely to test that level in the least. The indicators are bullish and confirming each other, along with the bullish movement, with only a break to new highs needed to get really bullish. Resistance is at or near 18,000 with support between 17,000 and 17,500.


The NASDAQ Composite is runner up today with a gain of 1.03%, a mere 0.01% higher than the S&P 500. The tech heavy index is moving up from the short term moving average and is just shy of potential resistance. Resistance is the current long term highs near 4,800. The indicators are bullish and on the rise so I expect a test of the highes in the least. This move has the hall marks of a trend following bounce but has yet to break to new highs so caution is still due. Support on a pull back is along the short term moving average near 4,700 and the long the term up-trend line near 4,600.


The S&P 500 finished third today with a gain just over 1%. The broad market created a white bodied candle that closed at the high of the day, right at the top of the 30 day trading range. The indicators are bullish and in confirmation of the move but a break above resistance is still required. Once above 2,063 there is additional resistance at the current all time high near 2,090. If the index pulls back from resistance strong support exists along the long term trend line in the range of 1,990- 2,020.


The Dow Jones Transportation Average brings up the rear today. The transports gained only 0.9% in today's session. Today's action created a white bodied candle, moving up from the short term moving average with bullish indicators. The index is moving higher, with rising indicators, but has yet to show strength and has yet to meet resistance. Resistance is the current all time high and top of the three month trading range near 9,250. The index is currently trading in the middle of this range with near term support along the moving average and long term support at the bottom of the range.


The indices rallied once again. And once again are approaching resistance at the top of current trading ranges and near long term/all time highs. It looks like they could break through, but the chance remains that they will not. Tomorrow's data is likely to be a catalyst for the market, whether it moves it up or down we'll see in the morning. I am still a bull, the long term trends are up, expectation for the rest of the year is good and I don't see any reason to think that the NFP or unemployment data will change that. It is possible we get a negative surprise, but as always one month does not make a trend, and any sell off sparked by such a dip is usually viewed as a buying opportunity. NFP is expected in a range around 235,000, unemployment is expected to hold steady at 5.6%, average earnings are expected to rise by 0.2% and the average workweek is expected to remain flat.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Surging Growth Overseas

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Starbucks Corp. - SBUX - close: 89.64 change: +0.94

Stop Loss: 85.80
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.1 million
Entry on February -- at $---.--
Listed on February 05, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. The good news is that looks the consolidation is over.

Five-Year Plan

Late last year SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX is having a pretty good 2015 so far with the stock up +8.1%, outperforming the broader market. A lot of this gain was thanks to a post-earnings pop. SBUX reported its Q1 2015 results on January 22nd. Adjusted earnings, backing out one-time charges, were $0.80 a share. That's in-line with estimates. Revenues were up +13.3% to $4.8 billion, also in-line with estimates. Investors applauded the news anyway and sent SBUX soaring to new all-time highs the next day.

SBUX said their worldwide comparable store sales rose +5% while traffic only rose +2%. It was the 20th consecutive period that same-store sales were up +5% or more. It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week.

SBUX's guidance was pretty lackluster but Wall Street didn't care. The company actually guided down for the Q2 2015 (current quarter) as they expect earnings in the $0.64-0.65 range. Analysts' were expecting $0.68 a share. SBUX also provided 2015 guidance of $3.09-3.13 versus Wall Street's estimate of $3.12. The company is still projecting 2015 sales growth of 16% to 18% as they see sales ramping up in the second half of 2015. They also updated their outlook on China as they plan to add 3,400 stores by 2019.

Investor sentiment on SBUX is bullish. Shares have not seen barely any profit taking following its post-earnings pop. Now, after two weeks of digesting gains, the stock is pushing higher and poised to breakout past resistance at $90.00. The point & figure chart is bullish and forecasting at $104.00 target.

Tonight we are suggesting a trigger to buy calls at $90.25 with an initial stop loss at $85.80.

Trigger @ 90.25

- Suggested Positions -

Buy the Apr $95 CALL (SBUX150417C95) current ask $1.00

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Shrug Off Greek Worries

by James Brown

Click here to email James Brown

Editor's Note:

Oil reversed a good chunk of yesterday's slide. Meanwhile last night's headline that sent stocks lower about the ECB and Greece did not see any follow through today. Traders were in a buy-the-dip mood this morning. The major U.S. indices delivered widespread gains.

Our new play on NOW has been triggered.


Current Portfolio:


CALL Play Updates

Hanesbrand Inc. - HBI - close: 114.14 change: +0.27

Stop Loss: 109.90
Target(s): To Be Determined
Current Option Gain/Loss: -6.5%
Average Daily Volume = 800 thousand
Entry on February 03 at $114.14
Listed on February 29, 2015
Time Frame: Exit PRIOR to HBI's stock split on March 4th
New Positions: see below

Comments:
02/05/15: Today's performance in HBI was a bit disappointing. The broader market delivered widespread gains. HBI posted a gain but shares lagged behind the major indices.

Readers might want to wait for HBI to rally past yesterday's high (115.30) before initiating new positions.

Earlier Comments: February 2, 2015
How many stocks can you name that are up +400% in the last three years? HBI is in the consumer goods sector. They make apparel under a variety of brand names. Shares of HBI have been a big performer the last few years, outperforming the broader market.

According to the company, "HanesBrands, based in Winston-Salem, N.C., is a socially responsible leading marketer of everyday basic apparel under some of the world's strongest apparel brands in the Americas, Asia and Europe, including Hanes, Champion, Playtex, DIM, Bali, Maidenform, Flexees, JMS/Just My Size, Wonderbra, Nur Die, Lovable and Gear for Sports. The company sells T-shirts, bras, panties, shapewear, men's underwear, children's underwear, socks, hosiery, and activewear produced in the company’s low-cost global supply chain."

A good reason shares have been rising so consistently has been HBI's bullish guidance. Last year the company raised its earnings guidance three quarters in a row. Their most recent earnings report was January 29th (last week). HBI's Q4 results were $1.46 a share with revenues surging +20% to $1.55 billion. The bottom line number was two cents above estimates while revenues met estimates.

HBI said that 2014 was its second consecutive year of record results. Net sales rose +15% while its profit grew +28% and adjusted EPS soared +45%. Hanes Chairman and CEO Richard A. Noll commented on their results saying,

"We had another outstanding year in 2014, generating significant shareholder value and again achieving record results for sales, operating profit and EPS. We are in the midst of a multiyear period of strong growth supported by our powerful company-owned global supply chain, Innovate-to-Elevate product platforms, and acquisitions. Our guidance for 2015 translates into another year of double-digit EPS growth and what would be another record year for sales, profit and EPS, despite the challenges of currency exchange rates."

HBI's new guidance sees 2015 revenues in the $5.77-5.82 billion range. That's +9% growth but a little bit below Wall Street's estimates. HBI is forecasting earnings in the $6.30-6.50 range, which equals about +11% to +15% growth.

Management also raised its cash dividend +33% to $0.40 a share. On top of that they issued a 4-for-1 stock split. The split is coming up soon. HBI will start trading split adjusted on March 4th, 2015. We think HBI could see an old-fashioned split run.

Tonight we are listing a trigger to buy calls at $114.10. We'll start this trade with a stop at $109.90. Plan on exiting before the March 4th stock split date.

- Suggested Positions -

Long MAR $115 CALL (HBI150320C115) entry $3.21

02/03/15 triggered @ 114.14 on an intraday gap higher. Suggested entry was $114.10
Option Format: symbol-year-month-day-call-strike


ServiceNow, Inc. - NOW - close: 74.22 change: -0.39

Stop Loss: 69.85
Target(s): To Be Determined
Current Option Gain/Loss: -13.5%
Average Daily Volume = 1.1 million
Entry on February 05 at $75.15
Listed on February 04, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
02/05/15: Our new play on NOW is open. Unfortunately, like HBI above, shares of NOW underperformed the broader market today. The stock initially rallied to new highs and hit our suggested entry point at $75.15. The rally peaked at $75.27. NOW underperformed with a -0.5% decline.

I am suggesting readers wait for a new rally above $75.00 before considering new bullish positions.

Earlier Comments: February 4, 2015:
Tonight we are looking at a company that saw its sales grow more than 60% last year. They're forecasting more than 40% growth in 2015. That company is cloud-based services ServiceNow.

NOW describes itself as "ServiceNow is changing the way people work. With a service-orientation toward the activities, tasks and processes that make up day-to-day work life, we help the modern enterprise operate faster and be more scalable than ever before. Customers use our service model to define, structure and automate the flow of work, removing dependencies on email and spreadsheets to transform the delivery and management of services for the enterprise. ServiceNow provides service management for every department in the enterprise including IT, human resources, facilities, field service and more. We deliver a 'lights-out, light-speed' experience through our enterprise cloud – built to manage everything as a service."

This company has been consistently guiding their earnings forecast higher. They've done it at least the last four earnings reports in a row. Their most recent earnings report was January 28th. NOW reported their Q4 results of $0.03 a share compared to a loss of 2 cents a year ago. Analysts were expecting a profit of 2 cents a share. Q4 revenues soared +58% to $198 million, which was above expectations.

Some of the highlights from their fourth quarter include billings up +62% year over year and up +34% quarter over quarter. Deferred revenues were up +20% for the quarter. NOW added 211 net new customers, bumping their total to 2,725. Their customer renewal rate was 97%.

NOW said their 2014 revenues soared +61% compared to 2013. Their backlog at the end of 2014 hit $1.4 billion. That's a +57% jump from a year ago. NOW's President and CEO Frank Slootman said, "We finished 2014 with strong metrics across the board, maintaining consistently high year-over-year growth rates. In addition to a growing list of new customers that now includes more than 25% of the Global 2000, we continue to see existing customers expand their relationship with us, resulting in the highest quarterly upsell rate since our IPO." NOW's CFO Michael Scarpelli said, "Within the Global 2000, annualized contract value per customer has increased 40% year-over-year. These expanding contracts have helped us grow our combined backlog and deferred revenue 57% year-over-year."

NOW offered bullish guidance. They expected Q1 revenues to grow +50% in the $207-212 million range compared to Wall Street's estimates of $202.4 million. NOW's 2015 guidance is forecasting revenue growth in the +41% to +47% range in the $960-1,000 million zone versus analysts' estimates of $948 million.

These strong numbers and the consistent growth makes them a popular candidate among Wall Street analysts. After NOW's most recent earnings report several analyst firms raised their price target on NOW's stock.

Technically shares have just recently broken out through major resistance near $70.00. The point & figure chart is bullish and forecasting a long-term target of $97.00. The last few days have seen shares consolidating sideways in the $70-75 range. Tonight we are suggesting a trigger to buy calls at $75.15.

- Suggested Positions -

Long MAY $80 CALL (NOW150515C80) entry $3.93

02/05/15 triggered @ 75.15
Option Format: symbol-year-month-day-call-strike


Constellation Brands - STZ - close: 112.66 change: +0.60

Stop Loss: 108.40
Target(s): To Be Determined
Current Option Gain/Loss: +25.5%
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:
02/05/15: It was a relatively quiet Thursday for STZ. Shares continued to consolidate sideways along prior resistance and what is now new support near $112.00. I don't see any changes from my recent comments.

If shares continue to rally then this could be another entry point. Keep in mind that our February options expire in less than three weeks. You may want to buy longer-dated options.

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

01/31/15 new stop @ 108.40
01/15/15 triggered on gap open at $109.36, trigger was $108.65
Option Format: symbol-year-month-day-call-strike


UnitedHealth Group - UNH - close: 108.82 change: +0.90

Stop Loss: 104.85
Target(s): To Be Determined
Current Option Gain/Loss: +4.5%
Average Daily Volume = 4.2 million
Entry on February 04 at $108.25
Listed on February 03, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
02/05/15: UNH managed to rally above short-term technical resistance at its simple 10-dma intraday. Unfortunately the rally stalled under round-number resistance at $110.00. UNH settled with a +0.8% gain, just behind the S&P 500's +1.0% rise today.

I would still consider new positions here at current levels although more conservative traders may want to wait for a breakthrough past $110.00.

Earlier Comments: February 3, 2015
Healthcare stocks have been consistent winners for investors over the last couple of years. Just check out a long-term chart of the IHF or XLV healthcare ETFs. Helping the group lead that charge is UNH, one of the biggest names in healthcare. The company's various businesses serve more than 85 million people around the world. The company is ranked No. 14 on the Fortune 500 list.

UNH has two different business segments. They have their UnitedHealthcare business and their Optum business. UnitedHealthcare provides health benefit products and services. Their Optum business is a health management services company.

The Affordable Care Act (ACA, or Obamacare) had a rough start but now the system is clearly seen as a huge benefit for the health insurance companies. According to Bloomberg the ACA has added millions of new customers to the healthcare industry. UNH recently joined the public exchanges and added more than 400,000 new individuals. UNH did say they are paying significantly more fees and taxes due to the ACA but thus far their increase in customers and better operating efficiency in 2014 have kept the costs manageable.

The results are showing up in the company's earnings growth. In July 2014 the company beat estimates and raised their guidance. In October 2014 they beat estimates and raised their guidance. In early December UNH reaffirmed their 2014 guidance and offered a 2015 forecast that was in-line with Wall Street estimates.

Their most recent earnings report was January 21st. The results were slightly ahead of expectations with profits up +10% from a year ago to $1.55 per share with revenues rising +7.4% to $33.43 billion. That was enough to surpass estimates of $1.50 a share on revenues of $33.15 billion.

UNH's CEO Stephen Hemsley commented on their business saying, "We enter 2015 with a positive outlook and rising business momentum. Steady innovation and year by year advances in the quality, breadth and value of our services to employers, government sponsors, consumers and care providers are creating opportunities for revenue and earnings growth in traditional and new markets."

Management offered 2015 guidance that was in-line with prior estimates. They expect earnings to grow about +7.4% in the $6.00-6.25 range. Revenues are expected to rise +8.0% in the $140.5-to-141.5 billion range.

The stock exploded higher on its better than expected Q4 numbers. Since the post-earnings rally peaked the stock has seen a nice correction. Traders just bought the dip yesterday near support at $105.00. We want to hop on board this healthcare train and buy the rebound. There appears to be short-term resistance near $108.00. Tonight we're suggesting a trigger to buy calls at $108.25.

- Suggested Positions -

Long MAR $110 CALL (UNH150320C110) entry $2.46

02/04/15 triggered @ 108.25
Option Format: symbol-year-month-day-call-strike


Valeant Pharmaceuticals - VRX - close: 161.45 change: +0.58

Stop Loss: 155.85
Target(s): To Be Determined
Current Option Gain/Loss: -25.0%
Average Daily Volume = 2.5 million
Entry on January 26 at $160.55
Listed on January 24, 2015
Time Frame: Exit PRIOR to earnings on February 24th
New Positions: see below

Comments:
02/05/15: VRX announced they would report earnings on February 24th. VRX also announced they have raised their bid to buy Dendreon's PROVENGE immunotherapy product for $400 million in cash. Their prior bid was $296 million.

Shares of VRX did see a little volatility this morning but eventually the stock just drifted sideways into the closing bell.

I am not suggesting new positions at this time.

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

02/03/15 News that VRX is interesting in buying SLXP
01/26/15 triggered @ 160.55
Option Format: symbol-year-month-day-call-strike


Whole Foods Market, Inc. - WFM - close: 53.38 change: -0.31

Stop Loss: 51.25
Target(s): To Be Determined
Current Option Gain/Loss: +80.4%
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:
02/05/15: Shares of WFM snapped a three-day winning streak with today's -0.5% decline. It is disappointing to see WFM not participate in the market's widespread rally today. Fortunately traders did buy the dip. WFM spent most of the session consolidating sideways in the $52.80-53.20 range.

We only have a few days left on this trade. WFM is due to report earnings on February 11th. 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

01/31/15 new stop @ 51.25
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


Williams-Sonoma Inc. - WSM - close: 80.47 change: -0.04

Stop Loss: 77.85
Target(s): To Be Determined
Current Option Gain/Loss: +9.4%
Average Daily Volume = 990 thousand
Entry on February 03 at $79.35
Listed on January 29, 2015
Time Frame: Exit PRIOR to earnings in March
New Positions: see below

Comments:
02/05/15: WSM tagged a new record high this morning. Sadly shares spent the rest of the day drifting lower. WSM closed virtually unchanged, which is disappointing when the broader market produces a widespread rally.

I am suggesting traders wait for a new rally past $81.00 before considering new bullish positions.

Earlier Comments: January 29, 2015:
Normally when a company lowers their earnings guidance Wall Street tends to punish the stock price. WSM has lowered guidance several times but that didn't stop shares for outperforming the market with a +29% gain in 2014.

The company describes itself as "Williams-Sonoma, Inc. is a specialty retailer of high-quality products for the home. These products, representing eight distinct merchandise strategies – Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Williams-Sonoma Home, Rejuvenation, and Mark and Graham – are marketed through e-commerce websites, direct mail catalogs and 603 stores. Williams-Sonoma, Inc. currently operates in the United States, Canada, Australia and the United Kingdom, offers international shipping to customers worldwide, and has unaffiliated franchisees that operate stores in the Middle East and the Philippines."

They have an enviable position of mostly selling to high-end customers who make more than $150,000 a year. Unlike many retailers, WSM has an extremely healthy online presence. Their e-commerce business generated half of all sales, which certainly gives their margins a boost compared to rivals.

WSM seems to have perfected the beat estimates and guide lower game to management Wall Street's earnings expectations. Looking at the last four earnings reports in a row WSM has beaten estimates three out of the last four reports on both the top and bottom line. Every time management has guided lower for the next quarter. This strategy has definitely generated some volatility in the stock price. A quick look at WSM's daily chart and you'll see a lot of big gaps up and down as investors react to news. Yet the overall trend has been higher. Today WSM sits at all-time highs.

Shares have been showing relative strength in 2015 with a +5.4% gain thus far. The point & figure chart is bullish and forecasting a long-term target at $105.00. Tonight I am suggesting a trigger to buy calls at $81.15. Please note that I am suggesting small positions to start. WSM is flirting with and apparently breaking out past a long-term trend line that you can see on the monthly chart below.

*start with small positions* - Suggested Positions -

Long MAR $80 CALL (WSM150320C80) entry $3.20

02/04/15 new stop @ 77.85
02/03/15 triggered on gap higher at $79.35, new trigger was $79.15
02/02/15 Strategy Update: Move the entry trigger from $81.15 to $79.15. Adjust the stop loss to $75.90. Adjust the option strike from March $85 call to March $80 call.
Option Format: symbol-year-month-day-call-strike


Zebra Technology - ZBRA - close: 86.96 change: +0.46

Stop Loss: 83.85
Target(s): To Be Determined
Current Option Gain/Loss: +17.6%
Average Daily Volume = 494 thousand
Entry on January 12 at $80.85
Listed on January 10, 2015
Time Frame: Exit prior to earnings on February 26th
New Positions: see below

Comments:
02/05/15: ZBRA posted another gain but our option value retreated. Shares of ZBRA tagged another new high before paring its gains to +0.5% versus the NASDAQ's +1.0% gain.

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

02/04/15 new stop @ 83.85
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: 74.60 change: +0.91

Stop Loss: 75.05
Target(s): To Be Determined
Current Option Gain/Loss: -68.1%
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:
02/05/15: It would appear that our HOT trade is in trouble. Shares managed to outperform the major indices today with a +1.2% gain. HOT looks like it's coiling for a bullish breakout past the $75.00 level. Our stop loss is at $75.05 but more conservative traders may want to just abandon ship immediately.

I am not suggesting new positions.

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

01/29/15 new stop @ 75.05
01/14/15 triggered @ 73.90
Option Format: symbol-year-month-day-call-strike