NEW DIRECTIONAL CALL PLAYS

Starbucks Corp. - SBUX - close: 74.69 change: +0.73

Stop Loss: 71.75
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:
The twin-tailed siren of Stabucks could be ready to sing for investors again. The company is named after the first mate in Herman Melville's Moby Dick. According to company literature their mission is "to inspire and nurture the human spirit - one person, one cup and one neighborhood at a time."

Notice it didn't say one cup of coffee at a time. Make no mistake. Coffee is big business. According to Business Insider coffee is worth about $100 billion globally and planet earth drinks about 500 billion cups of coffee every year. Quite a few of those cups are consumed at Starbucks' ubiquitous coffee chain, which now has over 10,000 company-run stores and over 9,500 licensed stores.

Believe it or not but tea is a bigger market. Tea producers churn out more than 4 billion kilograms of tea every year. Tea is the second-most consumed beverage behind water. Several months ago SBUX purchased the Teavana chain for $620 million. Now they're planning to update and expand the brand into 1,000 tea bars in the next five years.

SBUX recently said that food remains a big opportunity and currently food sales are only 22% of its U.S. business. SBUX purchased the French bakery chain "La Boulange" in 2012 and they've started distributing some of the bakery's products in more than 6,000 Starbucks stores. These should reach all of their coffee stores by the end of this year. They're also testing lunch items and testing alcohol sales in certain states. That means Malbec wines and bacon-wrapped dates could be available at a Starbucks store near you soon. The company said that adding food items has increased purchases and boosting ticket growth.

This past week SBUX said they're going to roll out wireless charging mats for smartphones in some of their stores soon.

Put it altogether and the company has big plans. Their latest earnings report in late April was mixed. Profits were in-line with estimates but revenues were a miss although same-store sales came in above expectations. SBUX management raised their Q4 guidance and 2014 guidance following its results.

Technically SBUX looks ready to breakout again. After correcting from its 2013 highs near $82 the stock tested $68 in April this year. The last several days have seen SBUX trying to breakout past big moving averages like the 150-dma and 200-dma. The June 6th high was $75.54. We're suggesting a trigger to buy calls at $75.65.

Trigger @ $75.65

- Suggested Positions -

Buy the OCT $80 call (SBUX141018c80) current ask $1.44

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

Annotated Chart:

Weekly Chart:

Entry on June -- at $---.--
Average Daily Volume = 3.5 million
Listed on June 14, 2014


U.S. Silica Holdings - SLCA - close: 51.31 change: +1.86

Stop Loss: 48.40
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:
There is a new gold rush going on for sand! America's shale oil and gas boom has created another boom for sand producers. Energy companies use hydraulic fracking to mine oil and gas out of tight shale formations. This fracking technique blasts millions of gallons of water at high pressure into shale rock where the oil and gas is trapped. These wells can cost between $4 million and $12 million each. In order to maximize their returns drillers use proppants to help "prop" open these minute cracks in the shale rock to help the oil and gas escape to the surface.

The cheapest and one of the most effective proppants has been fine sand. SLCA has been providing sand for industrial use for over 100 years. The company currently has 297 million tons in reserve. Oil and gas industry demand for proppants is expected to rise +30% between 2013 and 2016. That might be underestimated. The energy industry consumed 56.3 billion pounds of sand for fracking in 2013. That's up 25% from 2011.

According to SLCA they saw a +45% increase in demand for their sand. SLCA's CEO reported that some hydraulic fracking wells have doubled their use of sand from 2,500 tons per well to 5,000 tons. There are some wells using up to 8,000 tons.

Demand has been so strong that SLCA is actually sold out of some grades of sand and they're raising prices (about +20%) on non-contracted silica. SLCA believes demand for their products will rise another 25% this year alone.

Wall Street has taken notice of the dynamics of the sand industry and shares of SLCA have soared from their February 2014 lows. It may not be a coincidence that the stock was added to the S&P 600 smallcap index in February this year.

The recent pullback in shares of SLCA could be an opportunity. The high on Wednesday this past week was $52.06. We're suggesting a trigger to buy calls at $52.15. We are not setting an exit target tonight but Point & Figure chart for SLCA is bullish with a $69 target.

Trigger @ $52.15

- Suggested Positions -

Buy the Sep $55 call (SLCA140920C55) current ask $2.95

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

Annotated Chart:

Entry on June -- at $---.--
Average Daily Volume = 1.2 million
Listed on June 14, 2014