Editor's Note:
The U.S. equity markets endured a volatile week as traders came back from holiday vacation.

We have removed W as an active candidate.


Current Portfolio:


BULLISH Play Updates

Covenant Transportation Group - CVTI - close: 28.31 change: +0.41

Stop Loss: 25.45
Target(s): To Be Determined
Current Option Gain/Loss: +0.9%
Entry on January 05 at $28.05
Listed on January 03, 2015
Time Frame: Exit prior to earnings in late January or early February
Average Daily Volume = 203 thousand
New Positions: see below

Comments:
01/10/15: CVTI managed to buck the market's down trend on Friday and post a gain of +1.4%. The larger trend still looks great. I would still consider new positions now while more conservative traders may want to wait for a new rally above $28.60 before initiating positions.

Earlier Comments: January 3, 2015:
Last year the S&P 500 added +11.3%. The Dow Jones Transportation Average doubled that with a gain of +23%. Yet CVTI's performance is light years ahead of the major indices with a +230% gain in 2014.

According to the company, "Covenant Transportation Group, Inc. is the holding company for several transportation providers that offer premium transportation services for customers throughout the United States. The consolidated group includes operations from Covenant Transport and Covenant Transport Solutions of Chattanooga, Tennessee; Southern Refrigerated Transport of Texarkana, Arkansas; and Star Transportation of Nashville, Tennessee. In addition, Transport Enterprise Leasing, of Chattanooga, Tennessee is an integral affiliated company providing revenue equipment sales and leasing services to the trucking industry."

Why are shares of CVTI surging? The simple answer seems to be business is booming. The company has raised its guidance twice in the last four months. The most recent time was December 11th. Now you might think the stronger profit picture is due to falling gasoline prices. CVTI confessed they hedge some of their fuel costs so the drop in gas prices actually has little impact on its current outlook. They're raising guidance because demand is so strong. Anecdotally this is a pretty optimistic sign on the strength of the U.S. economy.

Technically shares of CVTI have been consistently rising with a bullish trend of higher lows and higher highs. Shares are just starting to bounce from support again. This is our chance to jump on board. Friday's high was $27.80. I'm suggesting a trigger to open bullish positions at $28.05. Earnings are expected in late January or early February. We will most likely exit prior to their announcement. I will note that the point & figure chart is bullish and forecasting at $34.50 target.

- Suggested Positions -

Long CVTI stock @ $28.05

01/05/15 triggered @ 28.05

chart:


Sprouts Farmers Market - SFM - close: 33.95 change: +0.20

Stop Loss: 30.85
Target(s): To Be Determined
Current Option Gain/Loss: + 2.7%
Entry on December 29 at $33.05
Listed on December 23, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.0 million
New Positions: see below

Comments:
01/10/15: SFM also showed relative strength on Friday with a +0.59% gain versus the S&P 500's -0.8% decline. Shares appear to have very, very short-term resistance near $34.00 and again near $34.30ish.

More conservative investors may want to start raising their stop loss.

Earlier Comments: December 23, 2014:
SFM is in the services sector. They operate in the grocery store industry. According to the company, "Sprouts Farmers Market, Inc. is a healthy grocery store offering fresh, natural and organic foods at great prices. The Company offers a complete shopping experience that includes fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, baked goods, dairy products, frozen foods, natural body care and household items catering to consumers' growing interest in health and wellness. Headquartered in Phoenix, Arizona, the Company employs more than 17,000 team members and operates more than 190 stores in ten states."

Back in the fourth quarter of 2013 the health food and natural grocery stores saw their stocks peak and begin a multi-month decline. The market was worried about growing competition. The organic and "natural" trend had allowed companies like SFM and WFM to enjoy wider margins than traditional grocery stores. Now everyone seems to be trying to cash in on the organic trend.

Shares of SFM were almost cut in half with their drop from its 2013 peak to the 2013 low this past spring. Since then it appears that SFM has found a bottom. That might be thanks to steady earnings growth. SFM has beaten Wall Street's bottom line earnings estimates the last four quarters in a row. Back in May they guided higher but since then their guidance has only been in-line with consensus estimates.

The recent strength in the stock is encouraging. Shares are now challenging resistance in the $32-33 area. Should SFM breakout it could see some short covering. The most recent data listed short interest at 12.9% of the 124 million share float.

Tonight we are listing a trigger to launch bullish positions at $33.05.

- Suggested Positions -

Long SFM stock @ $33.05

- (or for more adventurous traders, try this option) -

Long MAR $35 CALL (SFM150320C35) entry $1.10

12/29/14 triggered @ 33.05
Option Format: symbol-year-month-day-call-strike

chart:


TASER Intl. - TASR - close: 26.27 change: -0.36

Stop Loss: 24.70
Target(s): To Be Determined
Current Option Gain/Loss: - 0.9%
Entry on January 08 at $26.50
Listed on January 07, 2015
Time Frame: Exit PRIOR to earnings in late February
Average Daily Volume = 3.4 million
New Positions: see below

Comments:
01/10/15: TASR has seen a shallow, two-week pullback from its late December high. In spite of the profit taking the stock remains inside its bullish channel. I would still consider new positions now while more conservative traders might want to wait for a rally past $26.75 before launching positions.

Earlier Comments: January 7, 2015:
50,000 volts. That's what a Taser electro-muscular disruption (EMD) device shoots through your body to override the central nervous system. Your body freezes as all the muscles contract.

Their website describes the company as "TASER International makes communities safer with innovative public safety technologies. Founded in 1993, TASER first transformed law enforcement with its electrical weapons. TASER continues to define smarter policing with its growing suite of technology solutions, including AXON body-worn video cameras and EVIDENCE.com, a secure digital evidence management platform."

They may have started with electrical weapons but now the company is expanding to mobile video cameras worn on a law enforcement officer's gear. The company has been in the news lately thanks to President Obama. On Monday this week Obama wants to spent $75 million over the next three years to outfit the nation's police force with body-worn cameras.

The White House believes that body-worn cameras on police will help reduce violence and avoid another event like the one in Ferguson, MO. Current estimates suggest there are only 70,000 police wearing cameras now. Obama's plan would almost double that. Industry analysts are forecasting significant growth if the federal government approves Obama's plan. There are nearly 800,000 policemen in the U.S. There's plenty of room to grow. Plus TASR is expanding internationally.

The bears will argue that TASR's stock is expensive with a P/E near 63. There is no denying that. However, the body-camera business could soar. Currently it's less than 8% of their annual sales. The real winner could be TASR's Evidence.com ecosystem. This is a subscription service for law enforcement to back up and manage all the data from TASER electric weapons, body-worn cameras, and more.

The stock hit multi-year highs on back in December following President Obama's comments suggesting the federal government endorsing body cameras for cops.

I will caution investors that TASR can be a volatile stock. You may want to limit your position size. I will point out that the latest data lists short interest at almost 30% of the 51.3 million share float. If the rally continues TASR could see some short covering.

Technically shares of TASR just bounced near the bottom of its bullish channel. We think TASR will outperform if the rally resumes. The simple 10-dma is at $26.36. Tonight we are suggesting a trigger to open bullish positions at $26.50. We will plan on exiting prior to TASR's earnings announcement due in late February.

- Suggested Positions -

Long TASR stock @ $26.50

- (or for more adventurous traders, try this option) -

Long MAR $27 CALL (TASR150320C27) entry $2.50

01/08/15 triggered @ 26.50
Option Format: symbol-year-month-day-call-strike

chart:


Tree.com, Inc. - TREE - close: 49.39 change: +0.18

Stop Loss: 47.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on January -- at $---.--
Listed on January 08, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 147 thousand
New Positions: Yes, see below

Comments:
01/10/15: TREE managed to shrug off the market's weakness on Friday and post a minor gain. We are on the sidelines and waiting for a breakout past potential round-number resistance at $50.00. Our suggested entry point is $50.10.

Earlier Comments: January 8, 2015:
Do not go to Tree.com if you're looking for deciduous or coniferous trees or any plants for that matter. The deceptive name is part of a new marketing campaign. Tree.com started out as LendingTree.com, which is an online exchange for mortgage loans between consumers and lenders.

According to the company website, "Tree.com, Inc. is the parent of several brands and businesses that provide information, advice, products and services for critical transactions in our customers' lives. Our family of brands includes LendingTree®, GetSmart®, DegreeTree®, LendingTreeAutos, DoneRight!® and ServiceTree ?. Together, these brands serve as an ally for consumers who are looking to comparison shop for loans, home services, education, auto and other services from multiple businesses and professionals who will compete for their business."

DegreeTree.com helps consumers choose from hundreds of schools. InsuranceTree is a free to consumer service to find insurance. Done Right! is a home improvement professional directory for consumers. LendingTree Autos is designed to help consumers make smarter decisions about their vehicles. Meanwhile HealthTree sounds like a competitor to WebMD but I couldn't get the website to come up.

Earnings appear to be improving and the stock has more than doubled from its 2014 lows. In May 2014 the company raised their full year revenue guidance. They beat earnings estimates on both the top and bottom line last August. In November they beat the EPS estimate and raised their guidance again. That announcement sent the stock soaring (you can see the big rally on November 6th).

After a correction from its post-earnings rally shares of TREE have recovered. Now the stock is breaking out to new all-time highs. The P&F chart is very bullish and forecasting a long-term target above $90. The stock does have a very small float of less than six million shares. Daily volume is pretty low as well. For that reason I am labeling this a more aggressive, higher-risk trade.

Shares were showing relative strength today with a +2.1% gain and a breakout past recent resistance at $49.00. The $50.00 mark is potential round-number resistance. I am suggesting a trigger to open small bullish positions at $50.10.

Trigger @ $50.10 *small positions*

- Suggested Positions -

Buy TREE stock @ $50.10

chart:




BEARISH Play Updates

SodaStream Intl. - SODA - close: 19.13 change: -0.16

Stop Loss: 20.25
Target(s): To Be Determined
Current Option Gain/Loss: + 1.5%
Entry on January 05 at $19.42
Listed on January 03, 2014
Time Frame: Exit PRIOR to earnings in late February
Average Daily Volume = 946 thousand
New Positions: see below

Comments:
01/10/15: SODA's performance has been a bit disappointing. Shares broke down under key support at $20.00 and then the decline stalled. SODA has been drifting sideways. We did see shares tag a new relative low on Friday morning at $18.88. Investors may want to use a new relative low (under $18.88) as a bearish entry point.

Earlier Comments: January 3, 2015:
The excitement over shares of SODA has definitely fizzled out over the last couple of years. The stock peaked just below $80 a share back in 2011. Then in early 2013 the stock was soaring and looked like it might reach $80 again. The rally lost its buzz and SODA peaked near $78 in mid 2013. Since then shares have reversed and stuck in a bear market decline.

Who is SODA? According to the company's marketing material "SodaStream is the world's leading manufacturer and distributor of home beverage carbonation systems which enable consumers to easily transform ordinary tap water instantly into carbonated soft drinks and sparkling water. Soda makers offer a highly differentiated and innovative solution to consumers of bottled and canned carbonated soft drinks and sparkling water. Our products are environmentally friendly, cost effective, promote health and wellness, and are customizable and fun to use. In addition, our products offer convenience by eliminating the need to carry bottles home from the supermarket, to store bottles at home or to regularly dispose of empty bottles. Our products are available at more than 65,000 retail stores in 45 countries around the world, including 17,000 retail stores in the United States."

2014 was tough for SODA investors as the stock collapsed from about $50 to $20. The company guided lower when they reported earnings in July 2014. Then SODA shares gapped down sharply on October 7th when they issued another earnings warning. That big spike on October 24th was a story from Bloomberg that SODA was testing some Pepsi products. The rally was probably short covering as investors worried a partnership with Pepsi could turn things around. The rally quickly faded. Pepsi has already partnered with in-home beverage company Bevyz in Europe so any deal with SODA might be limited.

SODA's most recent earnings report was October 29th. Their EPS came in at $0.45, which beat estimates of $0.35. Yet revenues fell -12.9% in the third quarter to $125.9 million, which was significant below Wall Street's estimate. Gross margins are also sinking and fell 380 basis points to 50.5% in the third quarter. Management lowered their guidance again and announced they would stop providing annual guidance in 2015. That's never a good sign.

Like rats jumping off a sinking ship there have been stories that hedge fund managers are bailing out of their SODA positions. Plenty of investors are already bearish on SODA and short interest at about 17% of the small 20.8 million share float.

Friday's drop was significant because it's a bearish breakdown under major psychological support at $20.00. Tonight we are suggesting bearish positions immediately with a stop loss at $21.05. More conservative traders may want to wait for a new relative low under $19.33 before initiating positions.

NOTE: SODA has been rumored to be a takeover target for a long time. That hasn't stopped the stock from crashing over the last 18 months. You may want to limit your position or use the options to limit your risk just in case some M&A news happens to appear out of nowhere and send SODA higher.

- Suggested Positions -

Short SODA stock @ $19.42

- (or for more adventurous traders, try this option) -

Long FEB $20 PUT (SODA150220P20) entry $2.05

01/08/15 new stop @ 20.25
01/05/15 trade begins. SODA gaps down 30 cents to $19.42
Option Format: symbol-year-month-day-call-strike

chart:


Zulily, Inc. - ZU - close: 22.27 change: +0.16

Stop Loss: 23.55
Target(s): To Be Determined
Current Option Gain/Loss: +14.0%
Entry on December 08 at $25.90
Listed on December 06, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.3 million
New Positions: see below

Comments:
01/10/15: ZU's oversold bounce is stalling at short-term technical resistance on its 10-dma again. I'm not suggesting new positions. Currently our stop is at $23.55. More conservative traders may want to lower their stop closer to $23.00 instead.

Earlier Comments: December 6, 2014:
ZU is in the services sector. They're considered part of the discount variety store industry. Yet the company doesn't have any retail locations. Instead they operate online. ZU focuses on the "flash sales" model with 72 hour sales (and occasionally 24 hour sales).

The website describes the company as follows, "zulily (http://www.zulily.com) is a retailer obsessed with bringing moms special finds every day—all at incredible prices. We feature an always-fresh curated collection for the whole family, including clothing, home decor, toys, gifts and more. Unique products from up-and-coming brands are featured alongside favorites from top brands, giving customers something new to discover each morning. zulily was launched in 2010 and is headquartered in Seattle with offices in Reno, Columbus and London."

If you do any research on ZU you'll hear a lot about the business model. It makes sense. The company doesn't suffering from all the hassles and expenses of normal retail locations. The constantly rotating nature of their flash sales model generates a sense of urgency for the buyer. It seems like a great idea. The last couple of earnings reports have been better than Wall Street expected. Yet the stock is getting crushed.

ZU's most recent report was their Q3 results on November 4th. Wall Street was expecting ZU to lose between 3 to 4 cents per share on revenues of $285.4 million. ZU reported a profit of $0.02, which is up from $0.00 a year ago. Revenues soared +71.5% to $285.8 million.

Management said it was a good quarter for ZU. Darrell Cavens, CEO of zulily, said, "This was a strong quarter where we hit several key milestones— the business reached a billion dollars in revenue on a trailing 12 month basis and the majority of our North American orders now come from mobile." They also saw their active customers surge +72% from a year ago to 4.5 million. Their average purchase was up +4%. In spite of all the good news the stock plunged -20% the next day.

The reason appears to be guidance and valuations. ZU issued Q4 guidance, the critical holiday shopping season, that was below analysts' estimates. Another major issue is valuation. At current prices ZU is still valued at $2 billion for a company with a net income of only $11.5 million. Their current P/E is about 202. They do seem to be growing rapidly but evidently not enough to justify current valuations.

Eventually shares will get cheap enough that the selling stops. Where that bottom is no one knows yet. The point & figure chart is bearish and forecasting at $14.00 target. There are a lot of investors betting on new lows. The latest data listed short interest at 31% of the 41.7 million share float.

We think ZU heads lower but I consider this a more aggressive, higher-risk trade. The big short interest could make ZU volatile. Tonight we're suggesting small bearish positions if ZU can trade at $25.90. You may want to use the put options to limit your risk.

NOTE: ZU's IPO priced at $22.00. It's possible that $22 could be potential support.

*small positions to limit risk* - Suggested Positions -

Short ZU stock @ $25.90

- (or for more adventurous traders, try this option) -

Long Jan $25 PUT (ZU150117P25) entry $1.15

01/08/15 new stop @ 23.55
01/03/15 new stop @ 24.10
12/29/14 new stop @ 24.45
12/27/14 new stop @ 25.15
12/18/14 new stop @ 26.05
12/10/14 Caution! The recent action in shares of ZU could spell trouble.
12/08/14 triggered @ 25.90
Option Format: symbol-year-month-day-call-strike

chart:



CLOSED BULLISH PLAYS

Wayfair Inc. - W - close: 20.90 change: -0.50

Stop Loss: 21.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on January -- at $---.--
Listed on January 06, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.0 million
New Positions: see below

Comments:
01/10/15: Shares of W are still not cooperating. After a five-day rally the stock has fallen three days in a row. I still think W has potential but we need to see the stock showing more strength. I'd keep an eye on it for a close above $23.00.

Our trade did not open and tonight we're removing W from the newsletter.

Trade did not open.

01/10/15 removed from the newsletter, suggested entry was $23.05.

chart: