Editor's Note:

The first full week of trading in 2015 proved to be a volatile one. Markets were busy digesting central bank expectations and terrorist attacks in France.


Current Portfolio:


CALL Play Updates

Alkermes plc. - ALKS - close: 65.14 change: -0.09

Stop Loss: 59.25
Target(s): To Be Determined
Current Option Gain/Loss: +32.3%
Average Daily Volume = 833 thousand
Entry on January 07 at $63.01
Listed on January 06, 2014
Time Frame: Exit PRIOR to February option expiration
New Positions: see below

Comments:
01/10/15: ALKS continues to see some profit taking after Wednesday's big surge higher. However, traders did buy the dips twice near $64.00 these last two sessions. That's encouraging.

Tonight we are raising our stop loss to $59.25. ALKS can be volatile so we're keeping a wide stop. More conservative investors may want to use a tighter stop loss.

I am not suggesting new positions at this time.

Earlier Comments: January 6, 2015:
Biotech stocks were not immune to the market's widespread sell-off today. Yet one stock was bucking the trend. That's biotech stock ALKS.

According to the company's marketing material, "Alkermes plc is a fully integrated, global biopharmaceutical company that applies its scientific expertise and proprietary technologies to develop innovative medicines that improve patient outcomes. The company has a diversified portfolio of more than 20 commercial drug products and a substantial clinical pipeline of product candidates that address central nervous system (CNS) disorders such as addiction, schizophrenia and depression. Headquartered in Dublin, Ireland, Alkermes plc has an R&D center in Waltham, Massachusetts; a research and manufacturing facility in Athlone, Ireland; and manufacturing facilities in Gainesville, Georgia and Wilmington, Ohio."

Investors want to see companies with a growing pipeline of drugs and ALKS certainly qualifies. Here is a list of treatments in various stages of clinical trials at ALKS current pipeline .

The stock's jump today was thanks to a press release issued this morning. Here's an excerpt from ALKS' press release:

[ALKS] today announced topline results from FORWARD-1, one of a series of supportive clinical studies in the comprehensive FORWARD phase 3 pivotal program for ALKS 5461, a once-daily, oral investigational medicine with a novel mechanism of action for the adjunctive treatment of major depressive disorder (MDD). The FORWARD-1 study was designed to evaluate the safety and tolerability of two titration schedules of ALKS 5461. In addition, the study assessed the efficacy of ALKS 5461 over an eight-week period, compared to baseline, in patients with MDD.

...significantly reduced depressive symptoms from baseline starting at Week One and continued to the end of the treatment period at Week Eight...

If this treatment gets approved by the FDA it could be huge. According to a Thomson-Reuters article, depression is a massive opportunity going forward. Almost 350 million people worldwide suffer with depression and it's the leading cause of disability in the world. As more and more healthcare systems around the world get better at diagnosing depression it's going to drive demand for treatment.

Jim Cramer, on CNBC, mentioned ALKS this morning and commented on the company's press release about this new depression drug.

Technically shares have been showing relative strength the last few days and ignoring the market's sell-off. Today's breakout past resistance at $60.00 has also produced a new point & figure chart triple-top breakout buy signal with a $100 price target.

I am cautioning readers that biotech stocks are volatile. ALKS is no different. This is another higher-risk, more aggressive trade. The option spreads are pretty wide, which puts us at a disadvantage.

Tonight we are suggesting small bullish positions if ALKS can trade at $61.75. I would prefer to buy March calls since ALKS reports earnings in late February but March options are not available yet.

- Suggested Positions -

Long Feb $65 CALL (ALKS150220C65) entry $3.10

01/10/15 new stop @ 59.25
01/07/15 triggered on gap higher at $63.01, suggested entry was $61.75.
Stock rallied on positive Phase 2 trial data for schizophrenia drug.
Option Format: symbol-year-month-day-call-strike

chart:


Athenahealth, Inc. - ATHN - close: 140.98 change: -3.81

Stop Loss: 139.15
Target(s): To Be Determined
Current Option Gain/Loss: - 41.8%
Average Daily Volume = 516 thousand
Entry on January 08 at $146.25
Listed on January 03, 2014
Time Frame: Exit PRIOR to earnings in early February
New Positions: see below

Comments:
01/10/15: Caution! I am worried about our ATHN trade. Yes, the market was down on Friday but the NASDAQ only lost -0.6%. Shares of ATHN really underperformed with a -2.6% drop. Friday also marked the second day in a row that shares failed at short-term technical resistance at the 10-dma. Bulls can argue that ATHN effectively held potential round-number support at $140.00. However, I'm suggesting caution. We are not suggesting new positions tonight.

Earlier Comments: January 3, 2015
You might think Athenahealth is in the healthcare sector but it's actually in the technology sector. The company provides information services to the healthcare sector. ATHN describes itself as "athenahealth is a leading provider of cloud-based services for electronic health records (EHR), revenue cycle management and medical billing, patient engagement, care coordination, and population health management, as well as Epocrates and other point-of-care mobile apps. We connect care and drive meaningful, measurable results for more than 59,000 health care providers in medical practices and health systems nationwide."

Earnings in 2014 have been up and down. ATHN missed estimates in April 2014. They beat estimates in July and then reported in-line results in October. Their next report is expected in early February.

ATHN held an investor day on December 10th. They reaffirmed their 2014 guidance, which is essentially 22% to 27% year over year growth with gross margins in the 63% range. They also provided a 2015 forecast of +20% growth with revenues in the $900-925 million area. There was some concern that this 2015 guidance was too light but shares have been soaring in spite of the initial dip on the news.

If you're going to trade ATHN it's worth pointing out that David Einhorn, the outspoken hedge fund manager at Greenlight Capital, issued a very bearish call on ATHN back in May 2014. We don't know if he's still short ATHN but his opinion may have fueled the short interest in this name. The most recent data listed short interest at 26% of the small 37.5 million share float. Unfortunately for the bears they have been getting killed with the rally from its December lows.

ATHN's recent breakout past resistance in the $145-146 area is bullish and helped generate a buy signal on the Point & Figure chart that is suggesting at $178 target. Technicians will note that ATHN found support right where it was supposed to at prior highs (near $146).

If this rally continues ATHN could see more short covering. Tonight we are suggesting a trigger to buy calls at $150.45 with a stop at $144.90. We will plan on exiting prior to ATHN's earnings report in early February (no confirmed date yet).

- Suggested Positions -

Long FEB $155 CALL (ATHN150220C155) entry $5.50

01/08/15 triggered @ 146.25
01/07/15 strategy update: move the entry trigger from $150.45 to $146.25, move the stop loss to $139.15
Option Format: symbol-year-month-day-call-strike

chart:


Facebook, Inc. - FB - close: 77.74 change: -0.44

Stop Loss: 74.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 33 million
Entry on January -- at $---.--
Listed on January 08, 2014
Time Frame: Exit PRIOR to earnings on January 28th
New Positions: Yes, see below

Comments:
01/10/15: FB did not see a lot of follow through on Thursday's rally. Shares briefly traded higher on Friday morning but by 9:45 a.m. the rally was over. The intraday high was only $78.62. That means we are still on the sidelines.

Earlier Comments: January 8, 2015:
FB is the largest social media company. If the company's audience was a country their 864 million daily active users would mark them as the third most populous country on the planet behind India and China. They have 1.35 billion monthly active users. FB has done an impressive job in monetizing all of these eyeballs. Earnings continue to growth. The company has beaten Wall Street's earnings estimates on both the top and bottom line the last four quarters in a row.

Last month Citigroup issued a pretty bullish note on Instagram. Back in April 2012 the market was pretty skeptical when FB CEO Mark Zuckerberg decided to pay $1 billion to buy Instagram. Yet two years later Instragram has surpassed 300 million users. Citigroup now estimates the business is worth $35 billion (FB actually paid about $715 million).

FB continues to see strong growth in its WhatsApp texting service. Last April FB paid an astonishing $19 billion for the instant messaging service when WhatsApp had 600 million users. This past week WhatsApp hit 700 million monthly active users. FB still hasn't announced any new plans to monetize this service but will be extremely valuable when they do.

Wall Street is growing optimistic on FB. Thomson Reuters said analysts have been raising their earnings estimates on FB's Q4 results. According to the IBD analysts "now expect Facebook to earn 48 cents per share minus items in Q4, compared with 31 cents in Q4 2013. That's an increase of 55%."

The amount of video content on FB is growing as well. Last year FB purchased LiveRail, a small startup that now helps FB deliver video outside the social network. CEO Zuckerberg recently said that the amount of video in the average user's news feed rose 3.6% in the past year. The number of video posted by users soared +75%. FB has been delivering more than one billion video views a day since June last year. The company plans to capitalize on this trend and sell more video advertising. That's why it's not surprising that FB just announced today they purchased QuickFire, another video technology company.

Shares of FB didn't really participate in the market's bounce yesterday but they appeared to be playing catch up today with a +2.65% gain. The stock is bouncing from technical support at its trend of higher lows. I see this as a opportunity for a short-term trade to play a rally into FB's earnings report. The company is set to report Q4 earnings on January 28th. We do not want to hold over the announcement.

The simple 10-dma is at $78.50. We are suggesting a trigger to buy calls at $78.65.

Trigger @ $78.65

- Suggested Positions -

Buy the FEB $80 CALL (FB150220C80)

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

chart:


Royal Caribbean Cruises - RCL - close: 84.51 change: +1.32

Stop Loss: 78.40
Target(s): To Be Determined
Current Option Gain/Loss: + 8.3%
Average Daily Volume = 2.9 million
Entry on December 24 at $82.30
Listed on December 22, 2014
Time Frame: We will likely exit prior to earnings in very late January
New Positions: see below

Comments:
01/10/15: RCL continues to show strength. The stock gapped down on Friday morning but traders bought the dip. RCL pared its Friday loss to -0.6% but it did post a gain for the week. RCL is up four weeks in a row and up 10 out of the last 12 weeks. Shares look poised to breakout past the $85.00 level soon.

Earlier Comments: December 22, 2014:
The cruise line stocks have been pretty strong this year. Carnival Cruise (CCL) has been the weakest of the big three with a +11.5% gain in 2014. That compares to the S&P 500's +12.0% gain. Norwegian Cruise Line (NCLH) is up +32% this year. Meanwhile RCL has outpaced them all with a +69.9% gain in 2014 as of today.

According to a company press release, "Royal Caribbean Cruises Ltd. is a global cruise vacation company that owns Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Club Cruises and CDF Croisieres de France, as well as TUI Cruises through a 50 percent joint venture. Together, these six brands operate a combined total of 42 ships with an additional seven under construction contracts, and two on firm order. They operate diverse itineraries around the world that call on approximately 490 destinations on all seven continents."

CCL has suffered a series of mishaps, bad decisions, and just poor luck in recent years and RCL has managed to capitalize on its rivals misfortune, especially in Europe. Earnings growth for RCL has kind of mediocre. Their most recent report was October 23rd. RCL beat estimates by a penny while revenues were only in-line with Wall Street estimates. Management then guided lower for Q4. So why has the stock performed so well? Normally when a company lowers their earnings forecast the stock gets hammered!

A big part of the stock's rally has been weakness in crude oil. These are massive ships. They burn between 140 to 150 tons of fuel every single day. That's about 30 to 50 gallons a mile. Falling oil prices mean that fuel costs for these companies has plunged dramatically and should boost their profit margins.

Tigress Financial Partners recently shared their opinion that the cruise liner industry has "benefited from strong demand trends both domestically and globally and more recently the swoon in oil prices has helped to reduce one of their largest costs - fuel. We think long-term demand trends are bullish for the sector and lower oil prices not only mean lower fuel costs but more discretionary cash in consumers' pockets that can be used for additional expenditures on leisure time." Their point about consumers having more cash to spend on leisure is a big one.

The month of December has brought more good news for shares of RCL. On December 1st the S&P Dow Jones Indices announced they would replace Bemis (BMS) with RCL in the big cap S&P 500 index. That means all the mutual funds that track RCL have to buy it eventually. That went into effect on December 4th.

On December 8th analyst firm Jefferies said "The cornerstone of our view on RCL has been that it offers a superior product, this is based on the following: it has a younger fleet, more new ships being built, more impressive features available (e.g. high-speed internet), a better strategy with respect to distribution of cabins (more Balcony berths available) and better brand perception." Jefferies then raised their price target on RCL from $73 to $87.

The analyst love continued on December 22nd when Stifel analyst Steven Wieczynski said, "you have a stock that is trading at 14x forward earnings (2016) for average EPS growth of 28 percent/year for the next three years. When we look back at where Carnival Corp. has traded (15x-17x) on average on a forward EPS basis and then apply the same multiple to RCL, there is clearly a significant amount of upside from current levels" for RCL. Stifel raised their price target on RCL from $88 to $96.

Technically the stock has been showing strength with a bullish trend of higher lows and higher highs. The breakout past resistance at $80.00 is bullish. Today's intraday high was $82.20. Tonight we're suggesting a trigger to buy calls at $82.30.

- Suggested Positions -

Long MAR $85 CALL (RCL150320C85) entry $3.37

12/24/14 triggered @ 82.30
Option Format: symbol-year-month-day-call-strike

chart:


Whole Foods Market, Inc. - WFM - close: 49.95 change: -0.69

Stop Loss: 48.75
Target(s): To Be Determined
Current Option Gain/Loss: -14.8%
Average Daily Volume = 4.9 million
Entry on January 08 at $50.35
Listed on January 07, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
01/10/15: WFM dipped to its three-week trend of higher lows before finding support on Friday. Shares managed to pare their losses but still closed down -1.3%. Tonight I am suggesting traders wait for a new rally above $50.30 before initiating new bullish positions in WFM.

Earlier Comments: January 7, 2015:
WFM is in the services sector. As of November 2014 the company had 401 stores in the U.S., Canada, and the United Kingdom. Founded in 1978, WFM has become synonymous with healthy, organic food, at least for a growing portion of the population.

In early May 2014 the stock was crushed when the company missed Wall Street's earnings estimates and lowered its 2014 guidance. Investors were very unhappy with WFM's same-store sales growth as well. The organic food space has been growing more competitive in recent years as other retail groceries seek to boost their profits with wider margin "organic" fare.

WFM spent months languishing in the $36-40 zone before finally surging in early November. The big rally was sparked by better than expected earnings results and management raising their 2015 guidance. Shorts panicked and the stock exploded higher.

WFM has been slowly working its way higher since then but now WFM looks poised to breakout past key resistance at the $50.00 level.

The huge drop in gasoline prices is very bullish for the U.S. consumer. They now have more money in their pocket that they can spend on other items, like high priced organic foods at WFM.

Traders have started buying the dip and shares hit an intraday high of $50.18 today. Tonight we are suggesting a trigger to buy calls at $50.30. We will plan on exiting prior to WFM's earnings results in mid February.

- Suggested Positions -

Long FEB $50 CALL (WFM150220C50) entry $2.30

01/08/15 triggered on gap open at $50.35, suggested entry was $50.30
Option Format: symbol-year-month-day-call-strike

chart:




PUT Play Updates

Dover Corp. - DOV - close: 69.64 change: -1.49

Stop Loss: 72.25
Target(s): To Be Determined
Current Option Gain/Loss: +43.5%
Average Daily Volume = 1.7 million
Entry on December 29 at $73.40
Listed on December 27, 2014
Time Frame: Exit PRIOR to earnings on January 27th.
New Positions: see below

Comments:
01/10/15: Friday's session was another good one for DOV bears. The stock's bounce reversed at its 10-dma. Shares underperformed the market with a -2.0 %decline and DOV closed on its low.

I'd be tempted to launch new positions here. However, DOV's stock will likely bounce on Monday so I would wait on new positions. After the closing bell on Friday DOV announced that its Board of Directors had approved a 15-million share stock buyback program over the next three years. This program replaces their prior 10-million share buyback authorization. This new buyback is about 9% of the current 165 million shares outstanding. DOV was trading higher, around $70.25, after hours on Friday. I suspect this is a short-term pop that will fade.

Earlier Comments: December 27, 2014:
DOV is part of the industrial goods sector. They make an array of equipment and parts for multiple industries. According to the company, "Dover is a diversified global manufacturer with annual revenues of $8 billion. We deliver innovative equipment and components, specialty systems and support services through four major operating segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. Dover combines global scale with operational agility to lead the markets we serve."

Unfortunately for DOV investors the company's earnings picture has soured. Back in October they reported their Q3 results that beat Wall Street estimates on both the top and bottom line. Yet management issued relatively bearish guidance. It would appear that the outlook is worse than previously thought. On December 8th DOV issued an earnings warning and lowered their 2014 guidance. They're blaming restructuring costs and downsizing expenses.

The very next day (Dec. 9th) an analyst at Deutsche Bank downgraded DOV to a "sell" and lowered their price target from $83 to $65. Deutsche Bank's concern is DOV's exposure to the U.S. oil and gas industry. More than 33% of DOV's profits come from sales to the U.S. oil and energy sector. Given the plunge in crude oil prices this year (to five-year lows) the United States is already seeing a slowdown in oil rig use. A lot of the shale oil is expensive to drill and oil needs to be above $75 to be truly profitable. Right now oil is closer to $55 a barrel. That's going to significantly encumber capital spending for the oil industry and DOV could suffer as a result.

Technically shares of DOV broke their long-term up trend in 2014. Shares have developed a bearish trend of lower highs and lower lows. It looks like the most recent oversold bounce has just started to stall. We want to catch the next wave lower. Tonight I'm suggesting a trigger to buy puts at $73.40.

- Suggested Positions -

Long MAR $70 PUT (DOV150320P70) entry $2.30

01/09/15 DOV's BoD approves a 15 million share stock buyback program over the next three years
01/08/15 new stop @ 72.25
01/03/15 new stop @ 74.25
12/29/14 triggered @ 73.40
Option Format: symbol-year-month-day-call-strike

chart: