Editor's Note:

The market just delivered its best two-day rally in six years. The S&P has erased the prior five days of losses with an 89-point bounce.

A lot of stocks gapped open higher this morning. That made things tough for any bears looking to get out.

Both our PKG and SWKS bullish plays were triggered. GBX, a bearish play, was stopped out.


Current Portfolio:


CALL Play Updates

Packaging Corp of America - PKG - close: 79.32 change: +1.37

Stop Loss: 74.95
Target(s): To Be Determined
Current Option Gain/Loss: -10.0%
Average Daily Volume = 1.0 million
Entry on December 18 at $78.94
Listed on December 17, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/18/14: We were expecting PKG to rally and the plan was to buy calls at $78.55 but shares gapped open higher at $78.94 this morning. Our trade is open but investors may want to wait for a dip. It wouldn't surprise me to see PKG dip into the $78.00-78.50 area before moving higher.

Earlier Comments: December 17, 2014:
PKG is in the consumer goods sector. The company operates eight paper mills and 100 corrugated products plants and related facilities. Put it all together and PKG makes packaging products around the world.

According to company materials, "PCA is the fourth largest producer of containerboard in the United States, based on production capacity, and the third largest producer of uncoated freesheet in North America. We have approximately 13,600 employees, with operations primarily in the United States and some converting operations in Europe, Mexico and Canada."

It's been a pretty decent year for PKG earnings. Back in February they beat Wall Street estimates and guided higher. They beat estimates again in April and July. Their most recent report was October 20th. Earnings per share were only in-line with estimates at $1.26 but that is a +37% improvement from a year ago and a +8.6% improvement from the prior quarter. Revenues soared a whopping +79% to $1.52 billion, slightly above estimates. Management then raised their Q4 EPS guidance above Wall Street's estimates.

Mark W. Kowlzan, Chief Executive Officer, said, "This was our 8th consecutive quarter of record earnings driven by strong sales volume, record mill productivity, and mill cost reductions. The integration of Boise packaging continues to generate significant synergies, and operational improvements in White Papers have resulted in lower costs and higher margins."

Technically PKG looks bullish. The early 2014 high near $75.00 was resistance but the stock broke through this level in early December. Traders have since bought the dip at this level so $75 is now new support. The stock is near all-time highs. The point & figure chart is forecasting a very long-term target of $121.00.

The December 4th intraday high was $78.50. Tonight I'm suggesting a trigger to buy calls at $78.55. We are listing the April calls. More nimble traders may want to trade the January calls instead but they only have about four weeks left. There are no February or March calls available yet. After option expiration this coming Friday (December 19th) we should see more options listed.

- Suggested Positions -

Long APR $80 CALL (PKG150417C80) entry $4.00

12/18/14 triggered on gap open at $78.94, trigger was $78.55
Option Format: symbol-year-month-day-call-strike


Skyworks Solutions - SWKS - close: 73.19 change: +2.37

Stop Loss: 66.95
Target(s): To Be Determined
Current Option Gain/Loss: + 5.4%
Average Daily Volume = 3.9 million
Entry on December 18 at $73.00
Listed on December 17, 2014
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/18/14: Shares of SWKS also gapped open higher this morning. We were expecting shares to breakout and wanted to buy calls on rally at $71.55. SWKS soared today and outpaced the market's rally with a +3.3% gain. A good chunk of that gain was the gap open at $73.00.

SWKS' move today may have gotten a boost from one analyst firm upping their price target on SWKS to $90 this morning.

If you're looking for an entry point I'd consider waiting for a dip. Broken resistance in the $71.00-71.50 area should be new support.

Earlier Comments: December 17, 2014:
SWKS is part of the semiconductor industry. The SOX semiconductor index has been a strong performer this year with a +23.5% gain in 2014. Yet SWKS has outshined its peers with a +138% gain year to date.

Who is SWKS? According to the company website, "Skyworks Solutions, Inc. is an innovator of high performance analog semiconductors. Leveraging core technologies, Skyworks supports automotive, broadband, wireless infrastructure, energy management, GPS, industrial, medical, military, wireless networking, smartphone and tablet applications. The Company's portfolio includes amplifiers, attenuators, circulators, demodulators, detectors, diodes, directional couplers, front-end modules, hybrids, infrastructure RF subsystems, isolators, lighting and display solutions, mixers, modulators, optocouplers, optoisolators, phase shifters, PLLs/synthesizers/VCOs, power dividers/combiners, power management devices, receivers, switches and technical ceramics. Headquartered in Woburn, Mass., Skyworks is worldwide with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America."

SWKS is probably best known for being a component supplier for Apple's iPhones. SWKS is also supplying components to Amazon.com for that company's new Fire Phone.

SWKS soared in mid July following a better than expected earnings report. Wall Street was looking for a profit of 80 cents after SWKS guided higher to 80 cents in June. They still managed to surprise with a bottom line profit of 83 cents a share. Revenues soared almost 35% to $587 million, which was better than the $570 million estimate, up from $535 before SWKS's June guidance. SWKS management also raised their guidance going forward.

The earnings parade continued when SWKS delivered their Q4 report on November 6th. Analysts were expecting a profit of $1.08 per share. SWKS delivered $1.12. The company had already preannounced strong sales and quarterly revenues soared +50% to $718.2 million. Management then raised their guidance again (company's Q1 2015) and SWKS is forecasting earnings above Wall Street's estimates with revenues significant above prior expectations.

Since SWKS' last earnings report the stock has had a number of analysts reaffirm their bullish outlook and a few have upgraded their price targets.

Technically shares of SWKS have been building on a bullish trend of higher lows. However, the stock has been consolidating sideways the last two weeks under short-term resistance in the $71.00-71.25 area. After today's display of relative strength SWKS is setting up for a bullish breakout higher. The point & figure chart is already bullish and forecasting at $102 target.

I will warn investors that SWKS' all-time high going all the way back to February 2000 is the $78.25 area and could prove to be overhead resistance. Tonight we are suggesting a trigger to open bullish trades at $71.55.

- Suggested Positions -

Long FEB $75 CALL (SWKS150220C75) entry $4.08

12/18/14 triggered on gap open at $73.00, listed trigger was $71.55
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Arrow Electronics - ARW - close: 57.41 change: +2.05

Stop Loss: 57.75
Target(s): To Be Determined
Current Option Gain/Loss: -65.0%
Average Daily Volume = 585 thousand
Entry on December 16 at $54.75
Listed on December 13, 2014
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
12/18/14: ARW also gapped open higher this morning. Shares opened at $56.26 and then sprinted to a +3.7% gain. The intraday high was $57.67 and our stop loss is at $57.75. The $57.00 level should have been stronger resistance. More conservative traders may want to just abandon ship. If there is any follow through higher tomorrow we will see ARW hit our stop.

I'm not suggesting new positions at the moment.

Earlier Comments: December 13, 2014:
ARW is in the services sector. The company sells electronic components at the wholesale level. The company describes itself as "a global provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions. Arrow serves as a supply channel partner for more than 100,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of more than 460 locations in 58 countries."

Most of this year ARW has been reporting results that beat Wall Street's bottom line estimates but they kept missing the revenue number. That changed with their Q3 results when ARW reported on October 29th. ARW managed to beat estimates on both the top and bottom line with revenues up +11% from a year ago. Management offered relatively bullish guidance. Yet the stock did not react. That appears to be the mystery.

ARW's share price performance immediately slowed down following its Q3 report. You can see on the daily chart below that ARW plunged with the market's correction in September and October. Yet while the S&P 500 lost about -10% during that pullback shares of ARW lost more than -25%. When the market started to bounce ARW followed but its rally stalled after its Q3 report. The S&P 500 and the NASDAQ continued to rally and broke out to new highs for the year. ARW was unable to follow suit. Now the stock appears to be reversing after a failed rally at round-number resistance near the $60 mark.

With the new lower high there is a good chance the weakness in ARW continues. The stock never reversed its massive sell signal on its P&F chart. Tonight we are suggesting a trigger to open bearish positions at $54.75. More aggressive traders may want to jump in earlier (like a drop under $56.00) but we would like to see ARW trade below its simple 50-dma (currently $55.22).

- Suggested Positions -

Long Jan $55 PUT (ARW150117P55) entry $2.00

12/16/14 triggered @ 54.75
Option Format: symbol-year-month-day-call-strike


CLOSED BEARISH PLAYS

The Greenbrier Companies - GBX - close: 48.80 change: +2.29

Stop Loss: 47.05
Target(s): To Be Determined
Current Option Gain/Loss: -74.9%
Average Daily Volume = 940 thousand
Entry on December 16 at $43.25
Listed on December 15, 2014
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
12/18/14: The stock market's big rally today helped fuel a +4.9% gain in shares of GBX. Our stop loss was at $47.05 but GBX gapped open higher at $48.39, immediately closing our trade.

*small positions* - Suggested Positions -

JAN $40 PUT (GBX150117P40) entry $2.15 exit $0.54 (-74.9%)

12/18/14 stopped out on gap open at $48.39, stop was $47.05
12/16/14 triggered @ 43.25
Option Format: symbol-year-month-day-call-strike

chart: