Editor's Note:

Our plan is to exit the FDX trade tomorrow (Monday, Dec. 15th) at the opening bell to lock in potential gains ahead of its earnings report.

AAPL and GS both graduated from our watch list to our play list.


Closed Plays



None. No closed plays this week.




Play Updates


Apple Inc. - AAPL - close: 109.73

Comments:
12/14/14: The correction in shares of AAPL continued last week. The stock is now down two weeks in a row and off about -8% from its recent highs set in late November.

We had AAPL on our watch list with a buy-the-dip trigger at $111.00 although last week I suggested that investors may want to wait for a dip to $110 instead. Fortunately for us our trade opened on the gap down December 9th when AAPL opened at $110.19. The stock immediately bounced but the rebound rolled over under short-term resistance at $115 and its 10-dma.

Given AAPL's relative weakness I suspect that we could see shares trade into the $102-105 area. Our trade is open but tonight I am suggesting investors wait for a dip closer to $105 before launching new positions.

Earlier Comments: November 2, 2014:
Love it or hate it AAPL always has Wall Street's attention. It has a cult-like following. The company's success has turned AAPL's stock into the biggest big cap in the U.S. markets with a current valuation of more than $633 billion.

The company is involved in multiple industries from hardware, software, and media but it's best known for its consumer electronics. The iPod helped perpetuate the digital music revolution. The iPhone, according to AAPL, is the best smartphone in the world. The iPad helped bring the tablet PC to the mass market. The company makes waves in every industry they touch with a very distinctive brand (iOS, iWork, iLife, iMessage, iCloud, iTunes, etc.) and they've done an amazing job at building an Apple-branded ecosystem. Now they're getting into the electronic payments business with Apple Pay.

The company's latest earnings report was super strong. AAPL reported its Q4 (calendar Q3) results on October 20th. Wall Street was expecting a profit of $1.31 a share on revenues of $39.84 billion. The company delivered a profit f $1.42 a share with revenues up +12.4% to $42.12 billion. The EPS number was a +20% improvement from a year ago. Gross margins were up +1% from a year ago to 38%. International sales were 60% of the company's revenues.

AAPL's iPhone sales exceeded estimates at 39.27 million in the quarter and up nearly 16% from a year ago. The only soft spot in their ecosystem seems to be iPad sales, which have declined several quarters in a row. The company hopes to rejuvenate its tablet sales with a refresh of the iPad models. More importantly AAPL management raised their Q1 (calendar Q4) guidance as they expect revenues in the $63.5-66.5 billion in the quarter. Recent news would suggest that AAPL might deliver an incredible 50 million iPhone 6s in 2014. That's not counting their new iPhone 6+.

The better than expected results and bullish guidance sent the stock to new highs. The rally has created a quadruple top breakout buy signal on its point & figure chart that is currently forecasting at $133 target. Yet we do not want to chase AAPL here. The stock is up $12 from its October low. We do want to be ready if shares see a pullback.

Tonight I am suggesting a buy-the-dip trigger to buy calls at $103.50 with a stop loss at $98.90. (We amended the buy-the-dip trigger to $111.00 on Nov. 30th).

- Suggested Positions -
DEC 09, 2014 - entry price on AAAPL @ 110.19, option @ 9.55
symbol: AAPL160115C120 2016 JAN $120 call - current bid/ask $9.80/10.00

12/09/14 triggered on gap down at $110.19, trigger was $111.00
11/30/14 raise the buy-the-dip entry trigger to $111.00
11/16/14 raise the buy-the-dip entry trigger to $108.00
Adjust the strike price to the 2016 Jan $120 call.
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: To Be Determined
Current Stop loss: 98.90
Play Entered on: 12/09/14
Originally listed on the Watch List: 11/02/14


Bank of America - BAC - close: $17.13

Comments:
12/14/14: BAC was moved from our watch list to the new play list a week ago after shares met our entry point requirement on Friday, December 5th. Unfortunately it was not a great week for banking stocks. The group turned lower (see tonight's market commentary for more on why banking stocks might be pulling back).

I remain bullish on BAC but investors may want to wait for a new close above $17.50 before launching new positions. Alternatively a dip toward its long-term trend line of higher lows (likely in the $16.25 area) could be another entry point.

Earlier Comments: November 09, 2014:
BAC is one of the biggest banks on the planet. They provide banking services to individuals, small business, big business, institutions, and governments. They have over 5,000 locations and over 16,000 ATMs.

The company's most recent earnings report was October 15th. They managed to beat Wall Street's estimates on both the top and bottom line with a loss of only $0.01 per share on revenues of $21.43 billion. The loss was due to a $5.3 billion settlement with the U.S. Department of Justice, part of the larger, record-breaking $16.7 billion settlement over the mortgage scandal dating back to Countrywide and the financial crisis of the last decade. BAC actually made $168 million for the quarter and that's including the huge $5 billion settlement payment but when you account for the $238 million it paid in dividends the final profit number was negative (-$0.01).

Legal issues have been a black cloud for the banking industry for years and a shadow over BAC but following the $16.7 billion settlement with the DoJ the worst is probably behind it for the big bank. While the industry may still see volatile headlines about future fiascos BAC management has been building up their litigation reserves to handle it.

Banking stocks as a group should help lead the market higher as the U.S. economy continues to improve. When the Federal Reserve finally starts raising interest rates next year it should also be another tailwind for the banks.

Tonight I am suggesting we wait for BAC to close above $17.55 and buy calls the next morning with a stop loss at $15.35. More conservative investors may want to wait for BAC to close above previous resistance at $18.00 as an alternative entry point.

- Suggested Positions -
DEC 08, 2014 - entry price on BAC @ 17.66, option @ 0.80
symbol: BAC160115C20 2016 JAN $20 call - current bid/ask $0.74/0.78

12/08/14 trade begins. BAC opens at $17.66
12/05/14 BAC closes at $17.68, above our $17.55 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 15.35
Play Entered on: 12/08/14
Originally listed on the Watch List: 11/09/14


Checkpoint Software Tech. - CHKP - close: 76.68

Comments:
12/14/14: CHKP managed to ignore the market's weakness last week until finally succumbing on Friday. The stock should find short-term support in the $76.00 area. Below that the next support level is $72.50 and then $70.00.

We are almost out of time on our January 2015 calls. More conservative investors may want to exit that trade now. I have a stop at $75.65 to exit the 2015 calls or if CHKP trades up to $79.50.

We will keep the stop loss at $69.45 if you are trading the 2016 calls. I'm not suggesting new positions at this time.

NOTE: The 2015 January calls only have about six weeks 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 $2.85/3.00
Exit target for 2015 calls is CHKP @ 79.50, stop loss $75.65

- or -

OCT 27, 2014 - entry price on CHKP @ 72.56, option @ 4.80*
symbol: CHKP160115C80 2016 JAN $80 call - current bid/ask $6.20/6.70
Stop loss @ 69.45 if you're trading the 2016s.

12/07/14 raise the stop loss on the 2015 calls to CHKP @ 75.65
11/30/14 2015 January call exit target CHKP @ 79.50, stop $74.40
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: see above
Current Stop loss: see above
Play Entered on: 10/27/14
Originally listed on the Watch List: 09/14/14


China Mobile Limited - CHL - close: $57.75

Comments:
12/14/14: Ouch! It was not a good week for CHL. The stock lost ground every day for the last five days in a row. Shares look headed for their October lows in the $56.40-56.70 area. Tonight I am moving our stop loss from $56.40 to $55.95.

I am not suggesting new positions at this time.

Earlier Comments: November 9, 2014:
China Mobile (CHL) is the boasts both the largest mobile network on the planet and the biggest mobile customer base. At the end of the third quarter they had 799.1 million customers. Of that 244.4 million are 3G users and 40.9 million are new 4G users. That last number is significant since the Chinese government just approved 4G licenses this year. CHL had zero 4G customers at the start of 2014 and only 13.9 million at the end of the second quarter.

CHL reported earnings on October 20th and the results were worse than expected. Q3 revenues were down -2% from a year ago to 156.6 billion yuan. That was below analysts' estimates. Yet profits managed to beat expectations at 24.9 billion yuan. The company said that the big drop was due to a sharp decline in SMS (text message) usage. This is due to strong competition in the SMS market from other companies like Tencent's WeChat application. A new VAT tax that started in June also hurt results.

Investors seem to be ignoring CHL's recent earnings miss and focusing on their 4G growth. The company has been investing heavily in its 4G networking and it seems to be paying off. The shocking growth of CHL's 4G customer basis has analysts raising estimates. One firm was estimating 50 million 4G customers this year but have since raised that to 70 million. They also expect CHL will add another 130 million next year to end 2015 at 200 million new 4G customers. This should boost the company's profitability since 4G customers use more data.

The stock bounced near $56.60-57.00 last month, which was a 50% retracement of the July-September rally. The lows in October look like a bullish double bottom and the point & figure chart is bullish and forecasting a long-term target of $108.

Tonight I am suggesting we wait for CHL to close above $62.65 and buy calls the next morning with a stop loss at $56.40. However, I am suggesting we keep our position size small. CHL is a foreign company and its stock will gap open, up or down, every morning as it adjusts for trading in the Chinese markets.

- Suggested Positions -
NOV 11, 2014 - entry price on CHL @ 61.39, option @ 2.80
symbol: CHL160115C70 2016 JAN $70 call - current bid/ask $1.75/2.15

12/14/14 adjust stop loss down to $55.95
11/11/14 trade begins. CHL gaps down at $61.39
11/10/14 CHL closes at $62.68, above our trigger of $62.65
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined (likely the $75-85 range)
Current Stop loss: 55.95
Play Entered on: 11/11/14
Originally listed on the Watch List: 11/09/14


The Walt Disney Company - DIS - close: $91.49

Comments:
12/14/14: Hmm... you could say DIS held up reasonably well considering the market's widespread drop and being downgraded last week. The stock did close under short-term support at $92.00. The next support level is $90.00 and then the $88.50 area.

I would be tempted to buy calls here. However, the pullback last week has created a bearish engulfing candlestick reversal pattern on the weekly chart. Investors may want to wait and see if DIS confirms this pattern before initiating new positions.

Earlier Comments: November 9, 2014:
DIS is considered a diversified entertainment company. The company with its subsidiaries is an international family entertainment giant. Their media networks division includes the Disney/ABC Television Group and ESPN Inc. Their Parks and Resorts business runs 11 theme parks and 44 resorts. Their studio business has been making movies for over 90 years. Their acquisition of Marvel Studios was a genius move and they recently purchased Lucasfilm which brought the Star Wars franchise into Disney's stable of intellectual property. DIS' consumer products division makes everything from toys to books to fine art based on their massive library of content and characters.

The company has been a consistent winner in the earnings camp. DIS beat Wall Street's earnings estimates the last four quarters in a row. They've beaten on both the top and bottom line the last three quarters in a row. Their most recent earnings report was November 6th, which was DIS' fourth quarter result for 2014. According to DIS' CEO their fiscal 2014 was another record setting year for profits and marked their fourth year in a row of record performances.

DIS's results last year were driven by the studio division, which saw operating profits more than double. The company has seriously been knocking it out of the park with their movies. 2013 had some pretty big hits but Frozen, which came out n November 2013, is one of the biggest animated movies of all time and helped drive results well into 2014. Other big winners for the studio division were Capitan America: Winter Soldier, Maleficent, and the hit of the summer Guardians of the Galaxy. This weekend DIS' new animated movie Big Hero Six is already beating the competition and outpaced Interstellar in their opening weekend.

Next year should be another banner year for DIS' studio division with blockbusters like the next Avenger's movie, another Pixar film, and the next chapter in the Star Wars saga, episode seven (comes out in December 2015). All of these films help fuel business for Disney's theme parks, consumer products, and video games.

Wall Street was looking for DIS to report their Q4 earnings of $0.88 on revenues of $12.37 billion. The company beat estimates with a profit of $0.89 (+12%) and revenues rising +7.1% to $12.39 billion. Looking back over 2014 DIS said their earnings results were up 26% above 2013.

The stock is only a couple of points from all-time highs and the point & figure chart is bullish with a $119 long-term target. We recently concluded a successful trade on DIS back in October. We would like to hop on board again if shares can breakout past resistance at the $92 level.

Tonight I am suggesting a trigger to buy calls if DIS can close above $92.25. We'll start with a stop loss at $87.25.

- Suggested Positions -
DEC 01, 2014 - entry price on DIS @ 92.63, option @ 5.00
symbol: DIS160115C100 2016 JAN $100 call - current bid/ask $5.30/5.55

12/14/14 Caution: DIS has created a potential reversal pattern on its weekly chart
12/01/14 trade begins. DIS opens at $92.63
11/28/14 DIS closes at $92.51, above our suggested trigger, above $92.25
Option Format: symbol-year-month-day-call-strike

Current Target: DIS @ TBD
Current Stop loss: 87.25
Play Entered on: 12/01/14
Originally listed on the Watch List: 11/09/14



FedEx Corp. - FDX - close: 175.79

Comments:
12/14/14: Our FDX trade is about over. We still have plenty of time on our January 2016 calls but earnings are coming up on December 17th. The stock has started to correct lower. We adjusted our exit plan last weekend. Tomorrow, Monday, December 15th, we want to exit our FDX trade. After a super strong, multi-week surge to new highs, the stock could be due for significant profit taking.

I would keep FDX on your watch list. We may want to jump back in after its corrects lower.

- Suggested Positions -
OCT 22, 2014 - entry price on FDX @ 160.74, option @ 12.65*
symbol: FDX160115C170 2016 JAN $170 call - current bid/ask $21.30/22.80

12/14/14 prepare to exit tomorrow morning, Dec. 15th
12/07/14 new stop @ 173.75
11/30/14 new stop @ 164.00
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: 173.75
Play Entered on: 10/22/14
Originally listed on the Watch List: 10/19/14


The Goldman Sachs Group, Inc. - GS - close: $188.82

Comments:
12/14/14: Financial stocks hit some profit taking last week. That was good news for us since we wanted to buy calls on GS if shares dipped to $192.25. GS hit our trigger on December 10th. We were looking pretty good until Friday when GS underperformed with a -2.4% decline.

Our trade is now open but I would hesitate to launch new positions here. If we are patient we might see a better entry point a week from now.

Don't forget that GS has earnings coming up on January 16th.

Earlier Comments: October 26, 2014:
Goldman is in the financial sector. They are considered part of the national investment brokerage industry. Goldman was founded in the year 1869 and is headquartered in New York. The company provides investment banking and management services to corporations, other financial institutions, governments and high-net-worth individuals. The lion share of their business is institutional client services where GS makes markets in fixed income, equities, currencies, and commodities.

The company's recent earnings report was strong. GS announced its Q3 results on October 16th. As of the first nine months of 2014 their revenues were up $1.4 billion above the same period a year ago. Management has managed to boost profits by reducing costs. A strong mergers and acquisitions market in 2014 has helped drive GS' results as the company is gaining market share.

Looking at their recent results Wall Street expected a profit of $3.21 per share on revenues of $7.8 billion for the quarter. GS delivered $4.57 per shares, a +59% increase from a year ago. Revenues soared +25% to $8.4 billion. GS saw $20 billion in net inflows bumping client assets to $1.15 trillion.

The company does have a habit of crushing analysts' earnings estimates so the market wasn't that surprised. The stock actually sank on these results but the initial weakness is over and GS is rebounding.

The stock experienced a -10% correction from its early October high to the mid October low. The recent breakout past resistance near $180 and all of its key moving averages is encouraging. I would be tempted to buy calls right now. However, I suspect the market might see some mild profit taking after last week's big rally.

Tonight I am suggesting a buy-the-dip entry point at $180.50 with a stop loss at $174.50. Our long-term target is the $220-230 zone.

- Suggested Positions -
DEC 10, 2014 - entry price on GS @ 192.25, option @ 10.75
symbol: GS160115C210 2016 JAN $210 call - current bid/ask $ 7.50/10.00

12/10/14 GS hit our buy-the-dip trigger at $192.25
12/07/14 Strategy update: move the buy-the-dip trigger to $192.25
Move the stop loss to $179.00, move the option strike to 2016 Jan $210 call
11/30/14 move the buy-the-dip trigger to $182.00
11/09/14 adjust buy-the-dip trigger from $183.50 to $185.00
11/02/14 adjust buy-the-dip trigger from $180.50 to $183.50
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: TBD
Current Stop loss: 179.00
Play Entered on: 12/10/14

Originally listed on the Watch List: 10/26/14


Humana Inc. - HUM - close: 143.60

Comments:
12/14/14: Stocks just delivered a stormy week and HUM weathered it well. Traders bought the dip near support in the $140 area. Shares were bucking the market's down trend on Friday. While HUM's relative strength is encouraging I am not suggesting new positions at the moment due to the broader market weakness.

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 $15.90/20.00

12/07/14 new stop @ 134.00
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: 134.00
Play Entered on: 10/22/14
Originally listed on the Watch List: 10/19/14


Micron Technology - MU - close: 34.00

Comments:
12/14/14: Semiconductor stocks were not immune to the market's pullback. Shares of MU erased the prior two weeks worth of gains with a dip to $34.00.

I am not suggesting new positions at this time.

FYI: MU is scheduled to report earnings on January 6th.

Earlier Comments: November 30, 2014:
MU is in the technology sector. The company is part of the semiconductor industry. They make memory chips. According to a company press release, "Micron Technology, Inc., is a global leader in advanced semiconductor systems. Micron's broad portfolio of high-performance memory technologies—including DRAM, NAND and NOR Flash—is the basis for solid state drives, modules, multichip packages and other system solutions. Backed by more than 35 years of technology leadership, Micron's memory solutions enable the world's most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications."

The semiconductor space has been a strong performer this year with the SOX semiconductor index up +20% in 2014. That outperforms the NASDAQ's +14.7% and the S&P 500's +11.8% gain. MU is beating all of them with a +65.2% rally in 2014.

The company has been beating Wall Street's earnings and revenue estimates all year long. Their most recent report was MU's Q4 results that came out in September. Analysts expected a profit of $0.81 on revenues of $4.15 billion. MU delivered $0.82 as revenues soared +48.7% to $4.23 billion.

Management then raised their Q1 revenue guidance into the $4.45-4.70 billion range, which was above analysts' estimates. They also announced at $1 billion stock buy back program. Following its results and the buy back news the stock has seen several price target upgrades. Many brokers have price targets in the low to mid $40s. One firm has a $60 target.

Technically shares look very bullish with a breakout past major resistance in the $35.00 area. More aggressive investors may want to buy calls now. After a sharp two-week rally I am hoping for a little pullback. Broken resistance at $35.00 should be new support. We will set a buy-the-dip trigger at $35.10.

- Suggested Positions -
DEC 01, 2014 - entry price on MU @ 35.10, option @ 3.75
symbol: MU160115C40 2016 JAN $40 call - current bid/ask $3.50/3.60

12/01/14 triggered @ 35.10
Option Format: symbol-year-month-day-call-strike

Current Target: MU @ TBD
Current Stop loss: 29.40
Play Entered on: 12/01/14

Originally listed on the Watch List: 11/30/14


Restoration Hardware - RH - close: 93.59

Comments:
12/14/14: RH delivered big gains last week thanks to its earnings report. The company reported its Q3 results on December 10th, after the closing bell. Earnings came in two cents ahead of expectations. Revenues soared +22.5% from a year ago and also beat estimates. Guidance was only in-line with Wall Street estimates but the stock rallied anyway. Shares also garnered some bullish analyst comments following the earnings report. RH gapped open higher on Thursday at $$94.00 and spiked toward $100 before paring its gains.

This stock is now short-term overbought but it was encouraging to see RH maintain most of its gains on Friday in spite of the market's widespread weakness. I would still expect some profit taking after such a big move higher.

Tonight we will move the stop loss from $76.40 to $84.85.

I am not suggesting new positions at this time.

Earlier Comments: November 16, 2014:
RH is in the services sector. They operate in the home furnishing industry. The company describes itself as "Restoration Hardware is a luxury brand in the home furnishings marketplace offering furniture, lighting, textiles, bathware, décor, outdoor and garden, as well as baby & child products. RH operates an integrated business with multiple channels of distribution including Galleries, Source Books and websites."

"We believe RH is one of the most innovative and fastest growing luxury brands in the home furnishings marketplace. We believe our brand stands alone and is redefining this highly fragmented and growing market, contributing to our superior sales growth and market share gains over the past several years as compared to industry growth rates. Our ability to innovate, curate and integrate products, categories, services and businesses with a completely authentic and distinctive point of view, then rapidly scale them across our fully integrated multi-channel infrastructure is a powerful platform for continued long-term growth. We evolved our brand to become RH, positioning our Company to curate a lifestyle beyond the four walls of the home. Our unique product development, go-to-market and supply chain capabilities, together with our significant scale, enable us to offer a compelling combination of design, quality and value that we believe is unparalleled in the marketplace."

If you look at a daily chart of RH you'll likely see the big gap higher in June. That was a reaction to the company's earnings report . They beat Wall Street's estimates on both the top and bottom line. Management also guided higher. The post-earnings rally peaked in June and RH has been slowly consolidating lower for the last four months.

Their most recent earnings report was September 10th. Analysts were expecting a profit of $0.64 a share on revenues of $454 million. RH beat estimates with earnings up +37% from a year ago to $0.67 a share. Yet revenues were a miss at $433.8 million. RH blamed the revenue miss on a later than usual catalog mailing. While it was a disappointment RH's Q2 sales still grew +13.5% while margins increased 240 basis points to 11.3%, a record for the company. Investors should also note that the +13% surge in sales followed a +30% jump in sales a year ago. Gary Friedman, RH's Chairman and Chief Executive Officer, commented,

"Our ability to innovate, curate and integrate new products, categories and businesses, then test and rapidly scale them across our multi-channel platform, is at the core of RH becoming a disruptive brand in the home furnishings marketplace. In the second quarter, we achieved a record operating margin of 11.3%, a 240 basis point improvement versus last year, and the driver of our earnings over-performance. Comparable brand revenue for the quarter increased 13% on top of a 30% increase a year ago – representing an industry-best 43% gain over the two-year period."

RH raised their Q3 guidance above Wall Street's estimates on both the top and bottom line. Their 2015 guidance was only in-line with consensus estimates. A couple of weeks later the stock was rising on news that its CEO had purchased almost 26,000 shares around $77.

Technically shares of RH have bounced at a long-term trend of higher lows. It's also breaking out past resistance near $80, past resistance at its 50-dma, and now it's 100-dma. The recent rally has created a buy signal and a $93 price target on the point & figure chart.

Bears will argue that RH is too expensive. They have a point. The stock has a P/E around 49. Yet growth names can sport pretty high valuations. If you have been reading the newsletter commentary then you already know that holiday spending should be stronger than normal this year. Online shopping is expected to be very strong, which should benefit RH, who has a big catalog business.

If this rally continues the stock could see some serious short covering. The most recent data listed short interest at 32.4% of the small 32.4 million share float.

More aggressive investors may want to buy calls now. I am suggesting we wait for RH to close above $84.25 and then buy calls the next morning with a stop at $76.40. I will warn you that RH will likely report earnings in mid December and shares will probably be volatile following this report.

- Suggested Positions -
NOV 22, 2014 - entry price on RH @ 88.93, option @ 15.70*
symbol: RH160115C90 2016 JAN $90 call - current bid/ask $17.00/19.70

12/14/14 new stop at $84.85
12/11/14 RH gaps higher after reporting earnings the night before. 12/07/14 Caution! RH announced they will report earnings on Dec. 10th
11/21/14 trade begins. RH gaps higher at $88.93
11/20/14 triggered with a close at $87.48, above our trigger at $84.25
*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: RH @ TBD
Current Stop loss: 84.85
Play Entered on: 11/21/14
Originally listed on the Watch List: 11/16/14


Raytheon Co. - RTN - close: $104.26

Comments:
12/14/14: Traders have targeted the defense stocks for profit taking in the last few days. RTN, GD, NOC, and LMT have all dropped sharply. RTN's pullback has erased over two weeks of gains. The next support level for RTN could be $102 and below that the $100 mark. I am not suggesting new positions at this time due to the severity of the decline. Let's wait and see where RTN finds support before considering new positions.

Earlier Comments: November 23, 2014:
RTN is in the industrial goods sector. They are part of the aerospace and defense industry. The company has four main businesses: integrated defense systems; intelligence, information and services; missile systems; and space and airborne systems.

A company press release describes RTN as "Raytheon Company, with 2013 sales of $24 billion and 63,000 employees worldwide, is a technology and innovation leader specializing in defense, security and civil markets throughout the world. With a history of innovation spanning 92 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as cyber security and a broad range of mission support services."

The defense stocks have managed to perform exceptionally well last year and still outperform the major market indices this year in spite of reduced defense budgets from Washington. Revenues have been down from year ago levels but these companies are leaner and more profitable.

RTN's most recent earnings report was October 23rd. Wall Street was expecting a profit of $1.60 a share. RTN delivered $1.65, which was up from $1.51 a year ago. RTN's backlog hit $33.2 billion, up $1 billion from a year ago. The company narrowed their prior 2014 guidance. While not inspiring the stock rallied anyway.

A couple of weeks later RTN announced they had acquired privately held Blackbird Technologies for $420 million. Blackbird provides cybersecurity, surveillance, and secure communications to America's spy agencies. According to RTN, "Blackbird Technologies also provides key synergies with Raytheon's existing cybersecurity, sensor, communications and command and control capabilities. With this transaction, Raytheon becomes one of the top industry partners to SOCOM."

Shares of RTN have spent the last three weeks digesting its gains in a $102-106 trading range. The stock displayed relative strength on Friday and looks poised to breakout past resistance. These are new all-time highs for the stock.

We want to be ready to catch the breakout. I am suggesting we wait for RTN to close above $106.50 and then buy calls the next morning with a stop loss at $99.00. Our target is the $135-140 zone.

- Suggested Positions -
NOV 25, 2014 - entry price on RTN @ 106.52, option @ 4.85
symbol: RTN160115C115 2016 JAN $115 call - current bid/ask $ 4.30/4.75

11/25/14 trade begins. RTN opens at $106.52
11/24/14 RTN closes at $106.59, above our trigger of $106.50
Option Format: symbol-year-month-day-call-strike

Current Target: RTN @ 135.00-140.00 zone
Current Stop loss: 99.00
Play Entered on: 11/25/14
Originally listed on the Watch List: 11/23/14


Toyota Motor Corp. - TM - close: 124.54

Comments:
12/14/14: The Japanese yen managed an oversold bounce last week. This may have contributed to the pullback in shares of TM. I warned readers last week that TM was overbought. I am suggesting a dip near $122.00 as a new entry point to buy calls although investors may want to wait for the dip and then buy calls on a bounce instead.

Earlier Comments: November 30, 2014:
TM is considered part of the consumer goods sector. The company is a major automotive manufacturer. Headquartered in Japan, TM was founded back in the 1930s. The company now has sales around the globe.

The company led the industry in greener cars with their Prius model of electric-gasoline hybrids. Now they're leading the industry again with a hydrogen fuel cell vehicle. TM unveiled the Mirai, which means "future" in Japanese, as is the first zero-emission vehicle for consumers. The vehicle will go from 0 to 60 MPH in 9 seconds. It has a range of 400-430 miles. The only emission is water vapor.

The Mirai will not be a big seller to start. TM only expects to sell a few hundred units next year. The challenge is the infrastructure so consumers can refuel the hydrogen fuelcell. It will take a few years to really catch on but they're going to get help from various government agencies. The state of California is one example. California hopes to have 1.5 million zero-emission cars on the road by 2025.

I'm not suggesting bullish positions on TM for the Mirai. Hydrogen fuelcell vehicles are not even a drop in the bucket for the global auto market. What should capture investor attentions is the combination of TM's strong sales combined with a central bank stimulus efforts.

TM has already seen strong sales this year. They reported their first half results on November 5th. TM beat estimates and raised their revenue guidance. Falling gas prices boosted sales of SUVs. TM is also seeing sharp growth in China. This past October TM saw their sales in China soar +27% from a year ago. That is on top of a +26% increase in September and a +9% jump in August. New estimates suggest TM is poised to outsell most of its rivals in the U.S. in November too, including big competitors like General Motors, Ford, and Nissan.

TM's secret weapon could be the currency devaluation by the Bank of Japan. The Japanese government is desperate to jump start their economy and avoid deflation. They have launched a massive QE program that is crushing the value of their currency. The yen ended the week at multi-year lows. This is an advantage for a company like TM who exports a lot of their product.

I do have to mention the risk of recall headlines. It seems that the big automakers are being super careful after seeing the Ford fiasco in the last couple of years. Now companies are recalling vehicles all the time. Right now the entire industry is dealing with a defective Takata airbag recall. The top ten automakers all use Takata airbags so it's something that will affect everyone. There is always the risk of another company-specific recall that could hurt TM.

Technically shares of TM have been showing strength and outperforming many of its peers. Shares have actually broken out past resistance near its 2014 July and early November highs. I would be tempted to buy calls now. However, I'd like to see a little more follow through. Tonight I am suggesting we wait for TM to close above $124.00 and then buy calls the next day.

I will warn investors that the prior highs near $135 and $138 could be potential resistance but the point & figure chart is very bullish and forecasting a long-term target of $160.00.

- Suggested Positions -
DEC 02, 2014 - entry price on TM @ 126.56, option @ 8.75
symbol: TM160115C130 2016 JAN $130 call - current bid/ask $ 6.60/8.35

12/07/14 new stop @ $119.00
12/02/14 trade begins. TM opens at $126.56
12/01/14 trade is triggered. TM closes at $124.94, above our 124.00 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: TM @ TBD
Current Stop loss: 119.00
Play Entered on: 12/02/14

Originally listed on the Watch List: 11/30/14


Under Armour, Inc. - UA - close: 68.83

Comments:
12/14/14: Shares of UA only lost 60 cents for the week. However, I am still urging caution. UA has a short-term trend of lower highs as traders sell into strength. Tonight I am raising our stop loss to $65.85.

No new positions at this time.

Earlier Comments: November 16, 2014:
UA is in the consumer goods sector. "Under Armour, the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. Under Armour's wholly owned subsidiary, MapMyFitness, powers one of the world's largest Connected Fitness communities. The Under Armour global headquarters is in Baltimore, Maryland." (source: company press release)

Apparel sales can be tricky as fashion fads come and go. Yet right now athletic wear has been gaining traction. As a whole sales of athletic wear are up +9% in the past year. Two giants in this industry, Nike (NKE) and Under Armour (UA), are outperforming the group.

NKE is the giant with annual sales of $28.8 billion. UA is a tenth the size of NKE at $2.87 billion a year in sales. It's not surprising to see UA outgrowing its rival. NKE managed +15% sales growth in the third quarter. UA delivered 30%. NKE reported gross margins of 46.6%. UA has gross margins of 49.6%. Both companies delivered earnings growth of more than 20% year over year.

UA is impressive because its apparel sales have been rising +30% for the last three quarters in a row. Apparel is important because it's 75% of UA's business. Investors were a little concerned when apparel sales only grew +25.6% in the third quarter. However, UA has been consistently beating Wall Street's earnings estimates on both the top and bottom line four quarters in a row. They have also raised guidance four quarters in a row.

Their most recent report was October 23rd. UA reported earnings of $0.41 a share with revenues up +29.7% to $937.9 million. Analysts were only expecting $0.40 on revenues of $925 million.

Management raised their Q4 guidance but they warned that growth would slowdown to only +22% in 2015. It's worth noting that UA has a history of under promising and over delivering. The stock initially sold off on this guidance but investors quickly bought the dip. Shares of UA have broken through the two-month trend line of lower highs and technical resistance at the 50-dma. The point and figure chart is bullish and forecasting an $87 target.

The plunge in gasoline prices is a tailwind for retailers and it should be a strong holiday shopping season. Another bonus for UA could be the weather. Last year winter was colder than normal and UA had strong sales of their coldgear line. This year we could see the coldest winter in decades, which could also bode well for UA.

Currently UA is sitting just below potential round-number resistance at $70.00. I am suggesting we wait for UA to close above $70.25 and then buy calls the next day with a stop loss at $64.85. More conservative investors may want to consider an alternative and wait for UA to close above its September highs near $73.40 before initiating positions.

- Suggested Positions -
NOV 20, 2014 - entry price on UA @ 70.20, option @ 6.95
symbol: UA160115C80 2016 JAN $80 call - current bid/ask $ 6.00/6.50

12/14/14 new stop at $65.85
12/07/14 Caution! The action in UA last week looks bearish.
11/20/14 trade begins. UA opens at $70.20
11/19/14 UA closes at $70.48, above our trigger at $70.25
Option Format: symbol-year-month-day-call-strike

Current Target: UA @ TBD
Current Stop loss: 65.85
Play Entered on: 11/20/14
Originally listed on the Watch List: 11/16/14