Editor's Note:

Earnings-induced volatility hit two of our current trades on Friday. I am updating stop losses on both FDX and HUM.


Play Updates


Checkpoint Software Tech. - CHKP - close: 74.67

Comments:
11/09/14: Shares of CHKP eked out a small gain for the week. Shares were bouncing along short-term support at the rising 10-dma. Now CHKP is poised to breakout past round-number resistance at the $75.00 level.

NOTE: The 2015 January calls only have about three months left.

Earlier Comments: September 14, 2014:
CHKP is another technology stock and it is similar to AKAM in that both have beaten earnings estimates every quarter this year and both are trading near 14-year highs. While AKAM facilitates Internet traffic, CHKP seeks to guard its clients against Internet hazards.

The company describes itself as, "the worldwide leader in securing the Internet, provides customers with uncompromised protection against all types of threats, reduces security complexity and lowers total cost of ownership. Check Point first pioneered the industry with FireWall-1 and its patented stateful inspection technology."

"Today, Check Point continues to develop new innovations based on the Software Blade Architecture, providing customers with flexible and simple solutions that can be fully customized to meet the exact security needs of any organization. Check Point is the only vendor to go beyond technology and define security as a business process. Check Point 3D Security uniquely combines policy, people and enforcement for greater protection of information assets and helps organizations implement a blueprint for security that aligns with business needs. Customers include tens of thousands of organizations of all sizes, including all Fortune and Global 100 companies. Check Point's award-winning ZoneAlarm solutions protect millions of consumers from hackers, spyware and identity theft."

It feels like a week doesn't go by that we don't hear about another major hacking scandal in the business world. It's not going away and corporations have to constantly update their cyber defense. CHKP has been working cyber security since 1993.

Shares of CHKP spent much of this year consolidating gains from 2013. However, the last week of August produced a crucial breakout past resistance near $70.00. Tonight I am suggesting a trigger to buy calls if CHKP can close above $72.50. We'll start with a stop at $69.45. The point & figure chart is bullish and currently forecasting an $89.00 target. We'll start with a long-term target in the $95-100 zone (our target to exit the 2015 calls will be lower).

- Suggested Positions -
OCT 27, 2014 - entry price on CHKP @ 72.56, option @ 1.35*
symbol: CHKP150117C75 2015 JAN $75 call - current bid/ask $1.95/2.10

- or -

OCT 27, 2014 - entry price on CHKP @ 72.56, option @ 4.80*
symbol: CHKP160115C80 2016 JAN $80 call - current bid/ask $5.20/5.50

10/27/14 trade begins. CHKP opens at $72.56
10/24/14 CHKP meets our entry point requirement with a close at $72.70. Trigger was a close above $72.50
10/05/14 Friday's move might signal the end of the pullback.
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Current Target: CHKP @ 95.00-100.00 zone
Current Stop loss: 69.45
Play Entered on: 10/27/14
Originally listed on the Watch List: 09/14/14


DaVita Healthcare Partners - DVA - close: 74.49

Comments:
11/09/14: DVA reported earnings on Thursday night, November 6th. Wall Street was expecting a profit of $0.89 on revenues of $3.19 billion. DVA delivered $0.90 with revenues rising +8.4% to $3.25 billion. The quarter saw earnings up over 30% from a year ago.

The company narrowed its guidance, which may have been the excuse investors chose to take profits. Shares gapped down on Friday morning and dipped to $72.70 intraday. Shares closed with a -4.5% decline on the session and DVA is down about $3.50 for the week.

Our stop loss is at $71.40. More conservative traders may want to raise their stop toward Friday's low. I am not suggesting new positions at this time.

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 $3.60/6.50

11/07/14 DVA gapped down following earnings the night before
11/02/14 new stop @ 71.40
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: 71.40 for the 2016 calls,
Play Entered on: 06/04/14
Originally listed on the Watch List: 06/01/14



FedEx Corp. - FDX - close: 171.22

Comments:
11/09/14: The transportation stocks continued to climb last week and FDX is leading the charge. This stock managed to breakout past a multi-month trend line of higher highs on Thursday. Shares do look short-term overbought here with a $22 bounce from its October low.

A few days ago Forrester Research forecasted that online sales will surge +13% this holiday shopping season. That should be a good omen for package delivery companies like FDX.

Tonight we will raise our stop loss to $158.00.

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 $17.25/17.90

11/09/14 new stop @ $158.00
11/02/14 new stop @ $154.00
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

Current Target: FDX @ TBD
Current Stop loss: 158.00
Play Entered on: 10/22/14
Originally listed on the Watch List: 10/19/14


Humana Inc. - HUM - close: 130.58

Comments:
11/09/14: Uh-oh! Friday was a painful session for shares of HUM. The stock plunged -6.6% with a drop from $140 to $130.58. The big decline was a reaction to HUM's earnings report Friday morning. I warned readers to expect some volatility but this was more than I expected.

Analysts were looking for HUM to report earnings of $2.00 a share on revenues of $12.35 billion. HUM only delivered $1.85 with revenues at $12.2 billion. Management blamed the earnings miss on higher costs and pointed to Gilead Sciences (GILD) $80,000 Sovaldi treatment for Hepatitis C as an example. HUM then lowered their full year 2014 guidance to a range of $7.40-7.60 versus Wall Street's estimate of $7.75.

While the earnings miss and lowered guidance was a surprise and raises concern the future still looks bright for HUM. The company expects their individual commercial memberships to double to one million customers thanks to Obamacare. The ACA will also help boost big enrollment gains for its Medicare Advantage plans, according to Forbes. The next couple of years should see revenues surge thanks to increased enrollments.

The profit taking on Friday was painful but the long-term trend is still up for HUM. I would hesitate to launch new positions. We will raise our stop loss to $124.00.

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 $ 9.60/13.50

11/09/14 new stop @ 124.00
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

Current Target: HUM @ TBD
Current Stop loss: 124.00
Play Entered on: 10/22/14
Originally listed on the Watch List: 10/19/14