NEW DIRECTIONAL CALL PLAYS

The Boeing Company - BA - close: 135.25 change: +0.11

Stop Loss: 129.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
BA is in the industrial goods sector. The company is a major manufacturer for aerospace, aviation, and a defense contractor. The company last reported earnings on April 23rd and held an analyst day in mid May. Earnings results were strong. Wall Street expected a profit of $1.56 per share on revenues of $20.21 billion. BA delivered $1.76 per share with revenues rising to $20.46 billion for the quarter.

BA said their total company backlog had ended the first quarter at $440 billion. That's up from $390 billion a year ago. About $374 billion is for commercial airplanes and the rest is defense and space related. This represents about 5,100 aircraft orders and several years worth of production. BA recently reaffirmed their 2014 guidance and their airplane delivery scheduled.

Analysts have been positive and raising their price targets and earnings estimates thanks to BA's strong Q1 results, their improving margins, and BA's stock buyback program. Margins are a big deal. BA has been slowly growing its margins over the last couple of years and suggested they will continue to see margin improvement in 2014.

There has been some concern that the U.S. defense budget might be cut again and that could impact BA's defense sales. Yet the New York Times recently reported that BA is close to signing another multi-billion deal with the U.S. Navy for 47 more fighter jets. This deal is expected to close over the summer.

BA has also seen strong growth overseas with international sales accounting for 30% of its backlog. China is expected to grow into the largest aircraft market by 2032. BA is strengthening its position in China with another big sale of fifty 737 jets to a new Chinese budget airline. The retail price on this deal is estimated to be in the $3.8 to $5.5 billion. BA's China president said the company will deliver 140 aircraft to China this year following 143 deliveries in 2013.

Asia will also be a growing market for BA's defense and security business. A recent Bloomberg article mentions how territorial disputes in Asia are getting worse and there will be rising demand for maritime and aerial surveillance systems. BA's defense business chief believes aerial surveillance equipment and machines will continue to grow steadily for the "foreseeable future."

Technically shares of BA are on the up swing after spending more than three months consolidating in the $120-132 area. The recent strength has pushed BA through resistance and the stock closed at new four-month highs.

We are suggesting a trigger to buy calls at $135.55 with a stop loss at $129.90. More conservative investors might want to wait for BA to close above $136.50 as an alternative entry point since the top of the January 2014 gap down could be resistance (near $136.00-136.50).

We are not setting a bullish target yet but the point & figure chart is bullish and forecasting at $160 target. I do expect BA to see some resistance at its 2014 high near $145.00.

Trigger @ $135.55

- Suggested Positions -

Buy the Aug $140 call (BA140816C140) current ask $2.18

Option Format: symbol-year-month-day-call-strike

Annotated Chart:

Weekly Chart:

Entry on May -- at $---.--
Average Daily Volume = 2.95 million
Listed on May 31, 2014


Hanesbrands Inc. - HBI - close: 84.83 change: +0.93

Stop Loss: 81.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
HBI is in the consumer goods sector. The company designs and manufacturers apparel. You wouldn't normally think of basic apparel maker as a momentum stock but HBI has been outperforming. Shares just ended the week at a new all-time high.

The company has delivered on its earnings results. When HBI last reported in January and April this year the company beat Wall Street's estimates both times and raised their guidance both times.

Think about that. HBI is not a retailer but their products are sold through retailers. Most of retail got hammered in the first quarter due to lousy winter weather. Yet HBI managed to beat estimates and then raised its guidance.

Jim Cramer has pointed out what many analysts are saying on the company. HBI has strong brand names like Hanes, Champion, Playtex, and Bali. HBI owns most of their supply chain, which allows them to keep and improve their strong margins. Their first quarter saw margins increase 180 points. Most of Wall Street is bullish on HBI's recent acquisition of Maidenform. HBI believes they can generate significant margin improvement in the Maidenform brand by 2016.

Technically the stock has been strong and traders quickly bought the dip last week. Currently HBI sits just below round-number resistance at $85.00. We are suggesting a trigger to buy calls at $85.25.

The Point & Figure chart for HBI is bullish with a $92 target.

Trigger @ $85.25

- Suggested Positions -

Buy the Oct $90 call (HBI141018C90) current ask $2.90

Option Format: symbol-year-month-day-call-strike

Annotated Chart:

Weekly Chart:

Entry on May -- at $---.--
Average Daily Volume = 690 thousand
Listed on May 31, 2014