Option Investor
Newsletter

Daily Newsletter, Tuesday, 1/10/2017

Table of Contents

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

Market Wrap

Which Way Did They Go?

by Jim Brown

Click here to email Jim Brown

The market reminds me of an old Abbott and Costello routine, Which Way Did They Go.

Market Statistics

The Nasdaq continues to make new highs, thanks to the biotech sector today, but the Dow and S&P remain weak. The Dow opened lower, rallied intraday to 19,957 then gave it all back to close lower at 19,855. The S&P was similar with a surge to 2,279 intraday but it gave back -11 points to close flat for the day and barely avoided another decline.

The markets are confused. Traders are confused and anyone leaving their computer for a couple hours is likely to see a complete reversal when they return. The November rally that stalled in December has lost momentum and the clock is ticking on January's event calendar.

With the market closed next Monday, we should see a decline in volume over the next several days and there should be a tendency to take profits ahead of the 3-day weekend when the rest of the world is open for trading.

The economic news was positive this morning with the NFIB Small Business Survey Optimism Index soaring from 98.4 to 105.8 for December. This is the highest level since 2004. More than 50% of respondents said they expected the economy to improve. That is the strongest reading since 2002 and is up from 12% in November and a net of -7% in October.

Those planning on raising capital investments rose from 24% to 29%. Those expecting sales to improve rose from 11% to 31%. This was a very strong report and when coupled with multi year highs in the Consumer Sentiment Index and Consumer Confidence Index it suggests everyone is very excited about 2017. Not to get political here but we did not see similar post election bounces in 2008 and 2012.

Moody's Chart

The Job Openings and Labor Turnover Survey (JOLTS) for November showed openings rose by 3.7% from 5.451 million to 5.522 million. That was a 6.2% increase over November 2015. Hires rose from 5.160 million to 5.219 million, a 3.6% increase. On the negative side, layoffs rose from 1.569 million to 1.637 million. Overall separations for any reason rose from 4.966 million to 5.028 million. Overall, the report was positive and showed available jobs rising. Quitters rose slightly from 3.023 million to 3.064 million and that suggests workers are becoming more confident about finding a better job so they are making changes. Because the report covered November, it was ignored. We have already seen two payroll reports since November.

The wholesale inventory numbers for November surged by 1.0% compared to a 0.05% average for the prior 6 months. Durable and nondurable goods were both up +1.0%. However, sales declined from 1.1% to only 0.4%. Durable goods sales fell from 0.8% to 0.4% and nondurable goods sales declined from 1.3% to 0.4%. If the build in inventories continues in December, it will provide a strong boost to Q4 GDP. The lagging report was ignored.

The calendar for the rest of the week is not exciting with the Producer Price Index on Friday the most important report. Coming on the day before a 3-day weekend it will be ignored.


Valeant Pharmaceuticals (VRX) was back in the news today. The company said it sold three skin care brands to L'Oreal for $1.3 billion. The company also said it was selling its Dendreon cancer business to Sanpower for $820 million. CEO Joseph Papa said the company would use the proceeds to pay down debt and they were targeting a $5 billion reduction over the next 18 months. This would be accomplished through normal cash generation and potentially some additional asset sales. Shares rallied about 10% at the open but faded as the day progressed.


Yahoo (YHOO) said it was changing its name to Altaba once the deal with Verizon is complete. The remaining company will only have a ton of Alibaba shares and its interest in Yahoo Japan as its remaining non-operating assets. The Altaba is a play on "alternate Alibaba" for investors that want to invest in that company and get the Japanese assets as well. Essentially it will become an Alibaba tracking stock.


Barracuda Networks (CUDA) reported earnings of 22 cents compared to estimates for 8 cents. Revenue rose 11% to$88.8 million. Recurring subscription revenues rose 17% to $68.3 million and 77% of its total revenue. Gross billings rose 13% to $100.4 million. Total active subscribers rose 15% to 309,000 with a renewal rate of 90%. RW Baird said CUDA was well on its way to transitioning to a cloud subscription model and growth would be faster in the future compared to the legacy appliance model. Shares rallied sharply at the open but faded as the day progressed.


Dow component Goldman Sachs (GS) was downgraded by Citigroup from neutral to sell. The Citi analyst, Keith Horowitz said Goldman would need an additional $4 billion in revenue above current year forecasts in order to bridge the gap between current and expected return on tangible equity. Citi expects the bank to see "improved trading revenues the rest of 2017 but the path is uncertain and the bar is relatively high." Analysts expect Goldman to have revenues of $32.32 billion. Goldman will report Q4 earnings on Jan 18th and analysts expect $4.80 a share on $7.67 in revenue. Goldman shares were down sharply at the open to $239 but rebounded to close with only a fractional loss. The opening drop was a big drag on the Dow.


Alphabet (GOOGL) is in talks to sell its satellite business to San Francisco based Planet. Alphabet bought the business in 2014 for $500 million when it was known as Skybox Imaging. The division is now known as Terra Bella and Alphabet is reportedly willing to take an equity stake in Planet to get the deal done. Skybox raised $93 million in venture capital to produce small satellites that would take thousands of high-resolution images every day. The images would then be merged together to track changes over time. They launched their first satellite in 2013. Alphabet thought the acquisition would help improve Google Maps. Planet had 63 satellites in orbit at the end of 2016. Planet takes pictures of 50 million square kilometers of earth every day. Google has been scaling back on many of its "moonshot" projects that have been a black hole for cash and failed to generate significant revenue.


WD-40 Co. (WDFC) lost traction after reporting earnings of 82 cents that missed estimates for 87 cents. Revenue was $89.2 million and missing estimates by $7.1 million. They blamed the miss on the strong dollar. Shares slipped on the earnings and fell -$12 on the news.


Fast growing Parsley Energy (PE) said it would acquire 23,000 acres in the Permian for $607 million and fund it with a secondary stock offering. The acreage has existing production of 2,300 boepd. The company said it would offer 20 million shares of common stock with the offering underwritten by Morgan Stanley and BMO Capital. Shares closed at $36.67 but declined to $35 in afterhours because of the announcement. PE has been an active acquirer and has used secondary offerings in the past. The volatility on the top right side of the chart has been prior acquisitions.

The company also said its capex budget for 2017 would be in the range of $750-$900 million with 60% of that going to the Midland Basin. That is up from the $460-$510 million target for 2016. They projected production growth of 60% in 2017 to 57,000-63,000 boepd.


Crude prices collapsed this week with a $2.20 decline on Monday and $1.18 decline today. The problem is exactly what I expected. Field reports suggest some OPEC producers are actually cutting production but the amount of cuts is in doubt. Iraq said it was raising exports from the port of Basra to an all time high in February while exports over the first nine days of January have been near record highs.

Even reports that Saudi Arabia, Russia and Kazakhstan had reduced production failed to support prices. The market ran up on all the OPEC headlines and expectations and now prices are falling on the realization that the overall cuts may not be as large as expected and overshadowed by increases in Libya and Nigeria. Meanwhile rig counts in Canada rose 20% in December to 209 and U.S. rigs counts are expected to move sharply higher in the weeks ahead.

Inventories are very high and the combination of all the global factors do not point to a decline in the near future.


There is no shortage of analysts now calling for a market reversal. One of those was DoubleLine Capital CEO Jeffrey Gundlach. He said today that the post election gains will be reversed and investors should "peel off" their exposure to equities.

Sven Henrich from Northman Trader warned that the S&P was due to pull back to its 25-day moving average and that would represent a 4% or better decline.

Carolyn Boroden said there are eight different Fibonacci time cycles on the Dow and seven of them come due next week with the other coming due this week. She said this kind of setup normally leads to a market reversal 65-75% of the time. She also warned that a convergence of time cycles could also lead to a breakout and a new leg higher. I guess she can claim she was right regardless of what happens.

There is also the earnings cycle causing analysts to worry. Nearly every warning to date has mentioned the strong dollar. I reported above an earnings miss by WD-40 and they blamed it on the strong dollar. This is going to be a recurring theme throughout the cycle and could provide some disappointments for investors.

Markets

The S&P did something rare today. The index closed unchanged for the first time since Jan 3rd, 2008. Prior to that, it was 11 years before the last occurrence. Since 1980, the S&P has closed unchanged only 11 times. While that is interesting, it does not tell us where the market is going tomorrow.

However, the S&P closed -11 points off its intraday high and that is not bullish. The Dow closed exactly 100 points off its intraday high at 19,957. For both of those indexes to give back those intraday gains suggests the sellers are getting anxious.

We saw last week that resistance had moved up steadily from 19,950 to 19,990 but this week it appears to be moving lower. Sellers that were content to dole out their stock in measured increments as the Dow approached 20,000 are no longer sure that is going to happen so they are setting their sell stops lower and lower.

With three Dow components cut to a sell this week, GS, PG and KO, that is going to be an added drag to the Dow. As the index exhibits weakness it could induce other analysts to jump on the bandwagon and begin cutting ratings on other Dow stocks.

Nobody can predict the market direction from day to day but with a three-day weekend ahead and the terror risk from the inauguration the following Friday, there is little to incentivize investors to take new positions at a market top.



The S&P traded well over resistance intraday but then declined to close flat. The index is still within easy distance of a new high but the intraday decline after a drop on Monday as well suggests that resistance level is moving lower. It would not take a very big headline to cause investors still long from November to reconsider their positions.


The Nasdaq Composite closed at a new high thanks to the semiconductors and biotech stocks. The big cap tech stocks were nowhere to be found. The FANG stocks all posted declines and Apple only gained 12 cents. The JP Morgan healthcare conference will be over on Thursday and the biotech surge will fade, if not before then. The conference draws 450 public and private companies and more than 9,000 investors. It was started in 1983 and has consistently provided a sector boost but those daily headlines will disappear on Thursday.

The Nasdaq has posted five days of gains and the biotech sector has been up for 6 days. The Nasdaq rally may be nearing an end. The Nasdaq is over extended and the index is up +181 points from the Dec-30th low. That is a 3.5% gain in six days.



The Russell 2000 closed right on support on Monday and appeared ready to break that 1,355 level and trigger a market decline. Today those same chips and biotechs powered a 1% rebound and relieved that pressure. The Russell should be our market indicator but it remains to be seen which index is going to crack first.


The S&P futures are down -4 as I type this. Volume is going to slow for the rest of the week and the path of least resistance is down but there are no guarantee that is the path. There are a lot of events over the next 8 trading days that could move the market. There is no reason to be overly long at this point in the rally.

The advertising for the End of Year subscription special is over. However, I will leave the link open until midnight Sunday in case anyone else wants to take advantage of the savings.



Enter passively, exit aggressively!

Jim Brown

Send Jim an email

 


New Option Plays

No Direction

by Jim Brown

Click here to email Jim Brown

Editors Note:

With the indexes moving opposite each other there is no market direction. The Nasdaq and Russell were up on the move in biotechs and the Dow and S&P declined significantly from their intraday highs. The S&P futures are down -4 as I type this. Volume will decline the rest of the week ahead of the three-day weekend. There is no reason to add new positions without a market direction.


NEW DIRECTIONAL CALL PLAYS

No New Bullish Plays


NEW DIRECTIONAL PUT PLAYS

No New Bearish Plays



In Play Updates and Reviews

Nasdaq and Biotechs

by Jim Brown

Click here to email Jim Brown

Editors Note:

The Nasdaq continued to make new highs thanks to the biotech sector with a six day gain. The big cap tech stocks failed to perform but the biotech sector was on fire thanks to the JP Morgan Healthcare Conference. The Dow and the S&P opened lower, tried to rebound intraday but then collapsed in the afternoon. There is still plenty of overhead resistance and it may actually be moving lower, down from the 19,975 from last week to 19,950 this week. That suggests some sellers are no longer content to wait for the big moves to exit.

Citigroup downgraded Goldman Sachs to a sell rating and that weighed on the Dow but stocks like CAT, HD and AXP that had been weak suddenly decided to rally again.



Current Portfolio


Stop Loss Updates

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.


Profit Targets

Check the graphic below for any profit stops in green. We need to always be prepared for a profit exit at resistance.




Current Position Changes


PVH - PVH Corp

Long call position was entered at the open.

FDX - FedEx

Long call position remains unopened until a trade at $191.85



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BULLISH Play Updates

FDX - FedEx - Company Profile

Comments:

No specific news. The Dow Transports rallied 1% and FDX declined. That is not a good sign. If FDX does not recover tomorrow, I will drop the recommendation.

The position remains unopened until a trade at $191.85.

Original Trade Description: Jan 7th

FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. The company's FedEx Express segment provides various shipping services for the delivery of packages and freight; international trade services specializing in customs brokerage, and ocean and air freight forwarding services; assistance with the customs-trade partnership against terrorism program; and customs clearance services, as well as an information tool that allows customers to track and manage imports. This segment also publishes customs duty and tax information; and offers critical inventory logistics, transportation management, and temperature-controlled transportation services, as well as international express transportation, small-package ground delivery, and freight transportation services. Its FedEx Ground segment provides business and residential money-back guaranteed ground package delivery services; and consolidates and delivers low-weight and less time-sensitive business-to-consumer packages, as well as offers third-party logistics services. The company's FedEx Freight segment offers less-than-truckload freight, and freight-shipping services. As of May 31, 2016, this segment operated approximately 65,000 vehicles and trailers from a network of approximately 370 service centers. Its FedEx Services segment provides sale, marketing, information technology, communication, customer, technical support, billing and collection, and other back-office support services; FedEx Mobile, a suite of solutions to track packages, create shipping labels, view account-specific rate quotes, and access drop-off location information; access to copying and digital printing through retail and Web-based platforms, signs and graphics, professional finishing, computer rentals, and ground shipping and time-definite express shipping services; and packing services, supplies, and boxes. Company description from FinViz.com.

On December 21st, FDX reported earnings of $2.80 that missed estimates for $2.91. Revenue rose 20% to $14.93 billion and beat estimates for $14.91 billion. The problem with the earnings was a large amount of spending to build new distribution hubs and improve others ahead of the holiday season.

FedEx said they were in the midst of a record-breaking holiday shipping season and package volume was expected to rise 10% or more over 2015. They raised full year guidance from $10.85-$11.35 to $10.95-$11.45. The CEO said the recent improvements would allow them to ship more packages at a lower cost with improved delivery.

During the holiday shopping season my family spends a lot of money on Amazon for gifts for our extended family. Because I am a Prime member, others in the family use my account to make purchases and everything comes to my house. In the 2015 season, UPS delivered to my house almost every single day from Amazon. I might get a box from USPS once a week and FedEx maybe once a week.

This year UPS only came twice between Thanksgiving and Christmas. Fedex came 3-4 days a week and USPS 3-4 days a week. That suggests FedEx gained a significant amount of market share from Amazon and moved a lot more packages than UPS. Hopefully this added to their profits on the improved shipping network.

Cowen just reiterated an outperform and raised the price target from $180 to $240.

Earnings are March 21st.

Because their earnings are expected to be good, the March option prices are out of sight at $7.50 for a $195 call with FDX at $190. We have to use the February options to get a reasonable price. Given the potential for market volatility between now and expiration, we do not want to spend a lot of money on premium.

I am putting an entry trigger on the position just in case the market decides to turn negative on Monday.

With a FDX trade at $191.85

Buy Feb $195 call, currently $3.25, initial stop loss $186.65


PVH - PVH Corp - Company Profile

Comments:

No specific news. Shares rallied nearly 2% in a mixed market. This position is off to a good start.

Original Trade Description: Jan 9th

PVH Corp. operates as an apparel company in the United States and internationally. The company operates through six segments: Calvin Klein North America, Calvin Klein International, Tommy Hilfiger North America, Tommy Hilfiger International, Heritage Brands Wholesale, and Heritage Brands Retail. It designs, markets, and retails men's and women's apparel and accessories, branded dress shirts, neckwear, sportswear, jeans wear, intimate apparel, swim products, handbags, footwear, golf apparel, fragrances, cosmetics, eyewear, hosiery, socks, jewelry, watches, outerwear, small leather goods, and home furnishings, as well as other related products. The company offers its products under its own brands, such as Calvin Klein, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Warner's, Olga, and Eagle; and licensed brands comprising Speedo, Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, Sean John, MICHAEL Michael Kors, Michael Kors Collection, and Chaps, as well as various other licensed and private label brands. Company description from FinViz.com.

In November, PVH guided lower for the full year because of a $1.65 per share negative impact from foreign currency exchange issues and some other problems. Shares fell from $119 to $90 where they spent most of December.

They guided for Q4 earnings in a range of $1.13 to $1.18 after a 23-cent impact for currency issues. On January 5th, the company updated guidance saying, "earnings would be at least at the top end of its guidance ranges for both Q4 and full year." That suggests a positive holiday shopping season. As of late last week 11 retail companies had reported sales for holiday shopping and 8 of them reported declines. It was a rough quarter and PVH raised guidance.

Earnings are March 1st.

I am playing PVH for multiple reasons, one of which is that they already lost $30 in the December guidance crash. The $90 support level has held and once a positive market returns, they should be favored by longer-term investors. Since they have already seen a steep decline, a market drop over the next couple weeks should not impact them materially.

I am reaching out to the March expirations so there will be some earnings expectations built into the premium when we exit before they report. If you want to use the February cycle the premiums are about $1 cheaper.

Position 1/10/17:

Long Mar $95 call @ $3.90, see portfolio graphic or stop loss.



BEARISH Play Updates (Alpha by Symbol)

CAT - Caterpillar - Company Profile

Comments:

No specific news. CAT rebounded nearly 2% despite the lack of headlines. This helped lift the Dow off its lows.

Original Trade Description: December 17th

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company's Construction Industries segment offers backhoe, small wheel, skid steer, multi-terrain, compact track, medium and compact wheel, and track-type loaders; mini, wheel, and track excavators; track-type tractors; and select work tools, motor graders, telehandlers, soil compactors, and pipelayers, as well as its related parts for the heavy and general construction, rental, mining and quarry, and aggregates markets. Its Resource Industries segment provides electric rope and hydraulic shovels; draglines; drills; highwall and longwall miners; hard rock vehicles; articulated, large mining, and off-highway trucks; large wheel loaders; wheel tractor scrapers; wheel dozers; machinery components; hard rock continuous mining systems; electronics and control systems; and select work tools for use in mining and quarry applications. The company's Energy & Transportation segment offers reciprocating engines, generator sets, marine propulsion systems, gas turbines and turbine-related services, diesel-electric locomotives, and other rail-related products and services. Its Financial Products segment provides retail and wholesale financing for Caterpillar equipment, machinery, and engines; offers property, casualty, life, accident, and health insurance; insurance brokerage services; and purchases short-term trade receivables. The company's All Other segments remanufactures Cat engines and components, and provides remanufacturing services for other companies; offers business strategy, and development, management, manufacturing, marketing, and support primarily for paving, forestry, industrial, waste, and Cat products. Company description from FinViz.com.

Caterpillar's business has been in decline for several years as the energy sector went into hibernation and Asia's economic growth appeared to slow. For some reason, the stock bottomed on January at $58 and rallied to almost $100 despite a weak outlook in every earnings cycle. The $18 post election bounce was just another example of irrational exuberance. The election did not sell more tractors overnight and a pickup in their business could be several quarters away.

The best thing Caterpillar has in its favor is OPEC's decision to cut production. That means a year from now oil prices may have recovered slightly and energy companies may begin to buy more tractors. That is a long time off for an $18 spike.

Earnings in 2014 were $6.38, 2015 $4.64, 2016 they are estimated to be $3.26 and for 2018 analysts expect $3.15. However, CAT said last week that the estimates were overly optimistic. While Asian sales may have quit declining there is no material rebound at present.

Earnings Jan 24th.

This is a play on the retracement of that $18 bounce. When the company says analyst expectations are overly optimistic you can bet analysts will begin to lower their numbers. That should produce an extra weight on the stock in addition to any normal decline with the Dow in January.

The earnings are Jan 24th and the February options are expensive. Since this is a short-term position, I am recommending the January options. I believe any material decline will happen in the first two weeks of January.

Position 12/19/16:

Long Jan $90 put @ $1.89, see portfolio graphic for stop loss.


DIA Dow ETF - ETF Profile

Comments:

No attempt at 20K again today as the Dow opened lower and then posted only a mediocre intraday rebound before slipping back into negative territory.

Original Trade Description: December 7th

The SPDR Dow Jones® Industrial Average ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones Industrial Average.

Remember Dow 10,000? Traders talked about it for weeks. When it was finally hit, they were passing out Dow 10,000 hats on the floor of the NYSE for a week. That was December 11th 2003. It was a big milestone for the market.

Now 13 years later we are about to double that with Dow 20,000. Given the place on the calendar, the massive post election rally and the potential for normal profit taking in January, the Dow 20,000 touch could be a massive sell on the news event.

However, we are only 386 points way and it could happen as soon as next week. The Fed rate announcement on Wednesday could either cripple that potential or accelerate it if the Fed maintains a dovish posture on future rate hikes. I believe we will hit Dow 20K before the end of December. When that happens I want to be short the DIA ETF and plan on holding it through January.

I am choosing the Dow because it is the most overbought and could produce the biggest percentage move. Just look at Goldman's chart and the profit that needs to be removed there.

Because there will be plenty of other traders thinking along the same lines I want to enter the put position at 19,900 or $199 on the DIA ETF. I know I am jumping in front of a speeding train to enter a short position on a runaway market but the potential is very high for a good trade.

Position 12/12/16:

12/12 - 1/2 position: Long Feb $195 put @ $3.40, no initial stop loss.

12/13 - 1/2 position: Long Feb $195 put @ $3.15, no initial stop loss.


DRI - Darden Restaurants - Company Profile

Comments:

No specific news. Despite some negative comments on the restaurant sector this morning, Darden rebounded 1%. The negative trend is still intact.

Original Trade Description: December 20th

Darden Restaurants, Inc., through its subsidiaries, owns and operates full-service restaurants in the United States and Canada. As of May 29, 2016, it owned and operated 1,536 restaurants, which included 843 Olive Garden, 481 LongHorn Steakhouse, 54 The Capital Grille, 65 Yard House, 40 Seasons 52, 37 Bahama Breeze, and 16 Eddie V's restaurants. Company description from FinViz.com.

Darden Restaurants (DRI) reported earnings on Tuesday of 64 cents that beat estimates by a penny. Revenue of $1.64 billion missed estimates for $1.65 billion. They guided for the full year 2017 to earnings of $3.87-$3.97 per share. Same store sales growth was choppy. Olive Garden saw +2.6%, Longhorn Steakhouse +0.1%, Capital Grille+1.2%, Eddie V's +2.7%, Yard House +0.7%, Seasons 52 -0.3% and Bahama Breeze +2.6%. Shares spiked $2 on the news but faded in the afternoon to close negative. Darden had rallied 23% since the election.

The idea behind the rally was the end of the push for a $15 per hour minimum wage. When Clinton lost, that effort turned into wishful thinking because republicans have held the view that a lower wage offers entry level workers an opportunity and they can move up in the organization if they are qualified and work hard. Was that worth a 23% rally in Darden shares? I find it hard to believe.

Now that Darden earnings are over, we should expect a couple weeks of post earnigns depression and given the recent rally and the chance for a market decline in early January, the Darden drop could be significant.

Position 12/21/16:

Long Feb $72.50 put @ $1.55, see portfolio graphic for stop loss.


GATX - GATX Corporation - Company Profile

Comments:

No specific news. Minor rebound but still below prior support.

Original Trade Description: December 15th

GATX Corporation leases, operates, manages, and remarkets assets in the rail and marine markets in North America and internationally. The company operates in four segments: Rail North America, Rail International, American Steamship Company (ASC), and Portfolio Management. The Rail North America segment primarily leases railcars and locomotive, as well as other ancillary services. This segment also offers repair, maintenance, modification, and regulatory compliance services on the railcar fleet. The Rail International segment leases railcars, as well as offers repair, regulatory compliance, and modernization work for railcars. The ASC segment operates a fleet of vessels that provide waterborne transportation of dry bulk commodities, such as iron ore, coal, limestone aggregates, and metallurgical limestone for steel makers, automobile manufacturing, electricity generation, and non-residential construction markets. The Portfolio Management segment is involved in leasing, asset remarketing, and marine operations, as well as manages portfolios of assets for third parties. As of December 31, 2015, it operated a fleet of 17 vessels; a fleet of approximately 106,100 cars; a fleet of 18,400 boxcars; and a fleet of 611 older four-axle and 26 six-axle locomotives. Company description from FinViz.com.

There has been no news since the company announced a 40 cent dividend on Oct 28th. The dividend is payable on Dec 31st to holders on Dec 15th. That is today. That means nobody else is going to be buying the shares to get the dividend.

Earnings Jan 19th.

GATX has rallied 69% since the election. I can only assume it was because of the rally in the Dow Transports in anticipation of a better economy in 2017. There is no current fundamental reason for a 69% rally and odds are good once the stock begins to roll over with the market it could fall very hard. Apparently other investors believe the same way since the only put strike with any volume is the January 60 puts. There is more volume in that one strike than all the other strikes combined.

Position 12/16/15:

Long Jan $60 put @ $2.35, see portfolio graphic for stop loss.




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