NEW DIRECTIONAL CALL PLAYS

Keurig Green Mountain, Inc. - GMCR - close: 145.24 change: +1.24

Stop Loss: 141.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.68 million
Entry on October -- at $---.--
Listed on October 25, 2014
Time Frame: Exit PRIOR to earnings on November 19th
New Positions: Yes, see below

Company Description

Why We Like It:
GMCR is labeled as part of the consumer goods business. GMCR describes their company as "a leader in specialty coffee, coffee makers, teas and other beverages, Keurig Green Mountain (Keurig), is recognized for its award-winning beverages, innovative brewing technology, and socially responsible business practices. The Company has inspired consumer passion for its products by revolutionizing beverage preparation at home and in the workplace." GMCR makes almost 300 varieties of coffee, hot cocoa, teas, and other beverages in K-cup and Vue portion packs.

The company's latest earnings report back in August were better than expected but revenues were a disappointment and management guided lower. Yet the stock did see much follow through on the initial post-earnings drop. Then a couple of weeks later shares of GMCR soared to new highs on news it had finally signed a licensing deal with Kraft Foods, the second largest food and beverage company in the world. GMCR already had licensing deals with all the major coffee brands but Kraft was the lone holdout.

Several weeks later shares of GMCR soared again after Goldman Sachs slapped a buy rating on the stock and gave it a 12-month $166 price target. The Goldman analyst believes GMCR will see sales rise at a compounded annual growth rate of almost 30% and profits will soared at 23% per year through 2017.

On a short-term basis the middle of last week was starting to look like a top, especially with Thursday's bearish engulfing candlestick reversal pattern. Yet there was no confirmation on Friday.

Friday's intraday high was $145.54. We are suggesting a trigger to buy calls at $145.75. We'll try and limit our risk with a stop loss at $141.90. We are not setting an exit target yet but I will note the point & figure chart is suggesting a $182.00 target.

Earnings are coming up on November 19th. We will plan on exiting prior to the announcement. More aggressive traders may want to take a longer-term approach and hold over the announcement (and use longer-dated calls).

Trigger @ $145.75

- Suggested Positions -

Buy the NOV $150 call (GMCR141122C160) current ask $6.30

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

Daily Chart:

Weekly Chart:




NEW DIRECTIONAL PUT PLAYS

Sanderson Farms, Inc. - SAFM - close: 78.95 change: -1.12

Stop Loss: 80.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 483 thousand
Entry on October -- at $---.--
Listed on October 25, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
SAFM is part of the consumer goods sector. They raise chickens - a lot of chickens. The company will process more than 3.0 billion pounds of chicken meat in 2014. At almost 9.4 million chickens a week that makes SAFM the third largest poultry farmer in the United States.

Earlier this year the stocks of chicken producers were soaring. The price of beef and pork were rising fast and consumers were buying more chicken. Now it would appear the price of chicken is catching up and consumers might be buying less.

SAFM's most recent earnings report was in August. Even though the retail price of chicken was near record highs the company still missed Wall Street's estimates by a mile. Management blamed the earnings miss on chickens that didn't reach their target weights fast enough, a lower hatch rate for new chicks, and a rise in employee bonus programs.

Nearly all the poultry producers have had a rough October thanks to a big drop on October 16th. It would appear that drop was sparked by SAFM's comments at an investor conference. SAFM said casual dining traffic was down and thus people were eating less chicken at restaurants. SAFM blamed the weak job market and weakness in the broader economy, which seems a little out of sync with the rest of the country since the U.S. economy is still growing and the labor market has been slowly improving.

The S&P 500 put in a short-term bottom in the October 15-16 time frame and is up sharply since then. SAFM has not participated in the market's bounce. Instead the oversold bounce is rolling over. The point & figure chart looks ugly and suggests a $63 price target.

More aggressive traders may want to buy puts now. We are suggesting a trigger to buy puts at $78.20. More conservative investors might want to see a breakdown under the October low (77.25) before initiating positions.

NOTE: I am listing the 2015 February puts. I would prefer to use Decembers or Januarys but I didn't see any decent option strikes to trade. Earnings are not due until December.

Trigger @ 78.20

- Suggested Positions -

Buy the 2015 FEB $75 PUT (SAFM150220P75) current ask $2.45

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

Daily Chart:

Weekly Chart: