Editor's Note:

We had two watch list candidates (FDX and HUM) graduated to our active play list below.


Closed Plays



None. No closed plays this week.




Play Updates


DaVita Healthcare Partners - DVA - close: 76.73

Comments:
10/26/14: The stock market's big rally last week lifted shares of DVA to new all-time highs. The breakout past resistance in the $75-76 zone is good news.

I would be tempted to buy calls again if we saw DVA retest $75.00 and bounce.

DVA is scheduled to report earnings on November 6th.

Earlier Comments: June 1, 2014:
DVA is in the healthcare sector. The company provides kidney dialysis services and related lab services. The most recent earnings report was lackluster but DVA did report revenue growth above Wall Street estimates. Management has been buying up smaller domestic rivals and expanding overseas into countries like China, Columbia, Germany, India, Malaysia, Portugal, Saudi Arabia, and Taiwan. In the U.S. DVA has about 35% of the outpatient dialysis market.

Bears on this stock would argue the company is at risk for pricing pressures from Medicare. About 90% of its total U.S. dialysis patients are on some form of government-assisted program. Nearly 80% of are part of Medicare. The latest rules from Medicare said there would be no price changes in 2014 and 2015 but there could be reimbursement reductions in 2016 and 2017.

This pressure from Medicare has not stopped Warren Buffet's Berkshire Hathaway from raising its stake in DVA. Berkshire started investing in DVA back in Q4 2011. They have been slowly building a position and this past quarter (Q1 2014) Berkshire added another 1.1 million shares. Their total position is now 37.6 million shares worth about $2.6 billion. Berkshire tends to be a long-term investors, longer than our timeframe but it is still a vote of confidence for DVA.

- Suggested Positions -
(Closed on October 16, 2014)
JUN 04, 2014 - entry price on DVA @ 71.44, option @ 2.65*
symbol: DVA150117C75 2015 JAN $75 call - exit $1.65** (-37.7%)

- or -

JUN 04, 2014 - entry price on DVA @ 71.44, option @ 4.70*
symbol: DVA160115C80 2016 JAN $80 call - current bid/ask $4.60/5.90

10/16/14 DVA hit our stop at $71.75 to close our 2015 calls.
**option exit price is an estimate since the option did not trade at the time our play was closed.
10/12/14 adjusting stop loss strategy:
Use a stop at $71.75 for the 2015 calls.
Use a stop at $69.85 for the 2016 calls.
08/24/14 new stop at $69.85
07/31/14 DVA reports better than expected bottom and top line results
07/20/14 new stop @ 69.00
06/04/14 trade begins. DVA opens at $71.44
*option entry price is an estimate since the option did not trade at the time our play was opened.
06/03/14 DVA closed at $71.47, above our trigger of $71.25
Option Format: symbol-year-month-day-call-strike

Current Target: DVA @ 85.00
Current Stop loss: 69.85 for the 2016 calls, $71.75 for the 2015s
Play Entered on: 06/04/14
Originally listed on the Watch List: 06/01/14


FedEx Corp. - FDX - close: 163.88

Comments:
10/26/14: FDX has graduated from our watch list to our active play list. The plan was to buy calls if shares closed above $158.00. Our trade began on October 22nd.

Transports helped lead the rally higher. FDX gained almost $8.00 and now shares are testing resistance near their highs from late September and early October. After such a big bounce I would expect a pullback soon.

I am not suggesting new positions at this time.

Earlier Comments: October 19, 2014:
FDX is one of the largest package delivery companies in the world. The company's most recent earnings report showed improvement. FDX beat Wall Street's estimates on both the top and bottom line. Profits were up +24% from a year ago and it was the second quarter in a row that FDX beat estimates.

Management said their 2015 fiscal year was off to a great start. The company has enough demand they have recently raised prices on some services.

The plunge in crude oil and fuel prices is a huge tailwind for FDX. As a transportation company the cost of fuel is a major expense. With oil at four-year lows it should be a boost to FDX margins.

FDX should also benefit from the growth in online shopping. Last year there was a huge last minute surge in Christmas sales that needed to be delivered quickly by companies like UPS and FDX. This year online shopping is expected to grow +17%. That's another bonus for FDX.

The stock has been volatile thanks to the market's big swings but FDX is still respecting its long-term bullish trend of higher lows.

Tonight I am suggesting we wait for a close above $158.00 and buy calls the next morning with a stop loss at $148.50.

- Suggested Positions -
OCT 22, 2014 - entry price on FDX @ 160.74, option @ 12.65*
symbol: FDX160115C170 2016 JAN $170 call - current bid/ask $13.80/14.25

10/22/14 trade begins. FDX opens at $160.74
*option entry price is an estimate since the option did not trade at the time our play was opened.
10/21/14 triggered with a close at $159.88, above our trigger of $158.00
Option Format: symbol-year-month-day-call-strike

Chart of FDX:

Current Target: FDX @ TBD
Current Stop loss: 148.50
Play Entered on: 10/22/14
Originally listed on the Watch List: 10/19/14


Humana Inc. - HUM - close: 133.11

Comments:
10/26/14: HUM is another watch list candidate that has graduated to our active play list. The plan was to wait for shares to close above $130.25 and then buy calls the next morning. Our trade opened on October 22nd.

If you're looking for an entry point now I'd consider waiting for a dip near $130 and then buy a bounce. Otherwise consider waiting for a close above $136.00.

Earlier Comments: October 19, 2014:
HUM is in the healthcare sector. The company offer health insurance. Right now that's a good spot to be as the system irons out the kinks in the Affordable Care Act (a.k.a. Obamacare). Thus far Obamacare has been a boon to insurers as more and more Americans sign up for health insurance.

Shares of HUM did see a pullback from its recent highs near $136 down to $121 (a -11% correction) but now HUM is on the rebound. Even with the pullback HUM still has a long-term bullish trend of higher lows. The point & figure chart is bullish and suggesting a long-term target of $173.00.

Tonight I am suggesting we wait for HUM to close above $130.25 and then buy calls the next morning with a stop loss at $119.75. I do want to warn you that HUM is scheduled to report earnings on November 7th but several of its peers (AET, CI, and WLP) will report earnings in the next two weeks (before the end of October). Their quarterly results and guidance (good or bad) could influence shares of HUM.

- Suggested Positions -
OCT 22, 2014 - entry price on HUM @ 133.75, option @ 13.25*
symbol: HUM160115C140 2016 JAN $140 call - current bid/ask $10.30/14.20

10/22/14 trade begins. HUM opens at $133.75
*option entry price is an estimate since the option did not trade at the time our play was opened.
10/21/14 triggered. HUM closed @ 133.27, above our suggested entry above $130.25
Option Format: symbol-year-month-day-call-strike

Chart of HUM:

Current Target: HUM @ TBD
Current Stop loss: 119.75
Play Entered on: 10/22/14
Originally listed on the Watch List: 10/19/14