NEW DIRECTIONAL CALL PLAYS

The Greenbrier Companies - GBX - close: 54.08 change: -2.32

Stop Loss: 49.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 711 thousand
Entry on October -- at $---.--
Listed on October 11, 2014
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
GBX is in the services sector. The company manufacturers railroad freight cars and ocean-going barges. They also refurbish freight railroad cars. New rules by the White House on railroad tanker cars that carry crude oil should mean strong business for GBX as companies are forced to either buy new cars or refurbish old ones to meet the new requirements. The problem is that these rules have not been approved yet.

The White House has delayed the construction of the Keystone Pipeline for years and it is still in limbo. This has helped fuel a huge surge in oil transport by rail. The number of rail cars used to transport crude oil in the U.S. was 9,500 back in 2008. That number had soared to more than 415,000 rail carloads by 2013 and continues to climb.

Naturally it comes down to money. Oil firms paying to transport this oil want to delay these safety updates because it will be expensive. Yet the massive increase in oil transported by rail has led to a rash of train derailments with potentially deadly consequences. A couple of years ago there was a derailment in Canada and the oil inside ignited and wiped out a small town.

Believe it or not but train derailments seem to happen a lot more than you or I would think possible. Just last week a Canadian National Railway train derailed in Saskatchewan and two rail cars with petroleum distillate inside caught fire.

The new rules for rail car safety are coming. The question will be how tough will the new rules be and what time frame will the government make this happen. Recent comments suggesting the government might delay this process has sparked some serious profit taking in railcar makers like GBX. Combine that with the market's recent weakness and shares of GBX have collapsed. The stock is down -30% from its closing high near $77.50 in just the last four weeks.

We think the sell-off is way overdone. The profit taking in GBX stalled at its 200-dma on Friday. We suspect GBX might see one last spike into the $50.00-52.50 zone before bouncing. Tonight we are suggesting a trigger to buy calls at $52.50 with a stop at $49.65.

Make no mistake - this is an aggressive, higher-risk trade. Trying to catch the falling knife can be near impossible but with GBX near significant support this could be a great spot to speculate on a trading bottom.

Trigger @ $52.50 *higher-risk trade*

- Suggested Positions -

Buy the NOV $55 call (GBX141122C55) current ask $4.20

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

Daily Chart:

Weekly Chart:


iShares Transportation ETF - IYT - close: 140.90 change: -2.81

Stop Loss: 134.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 320 thousand
Entry on October -- at $---.--
Listed on October 11, 2014
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The IYT is an exchange traded fund (ETF) that tries to mimic the performance of the Dow Jones Transportation Average index.

Stocks have been sinking as investors worry about a global slowdown, especially in Europe. Yet the U.S. economy is still growing. Plunging oil prices should be great news for both business and consumers. Lower fuel costs means more money to spend elsewhere. Lower fuel prices also mean better margins for transportation companies.

The IYT has hit correction territory with a -10% pullback from its September highs about four weeks ago. When the market finally bounces the transports should lead the market higher thanks to the U.S. economy and low oil prices.

It looks like IYT's current drop could be near a bottom. Volume was almost three times the norm on Friday and shares settled near technical support at its simple 200-dma. We suspect the market will see another push lower before bouncing. That could see the IYT pierce the $140 level.

Tonight we're suggesting a trigger to buy calls at $138.75 with a stop loss at $134.45. This should be considered a higher-risk, more aggressive trade. You've heard the term "catching a falling knife" and that's what we're trying to do. You may want to wait for the IYT to pierce $140.00 and then buy the rebound back above this level as an alternative strategy.

Trigger @ $138.75 *Higher-risk, more aggressive trade*

- Suggested Positions -

Buy the NOV $143 call (IYT141122c143) current ask $4.10

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

Daily Chart: