Editor's Note:

Another big drop in crude oil prices, to new multi-year lows, continues to weigh on the broader market.

ATHN hit our stop loss. FB has been removed.

CPHD and ZBRA both hit our bullish entry points.


Current Portfolio:


CALL Play Updates

Alkermes plc. - ALKS - close: 68.61 change: +3.47

Stop Loss: 59.25
Target(s): To Be Determined
Current Option Gain/Loss: +93.5%
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:
01/12/15: It was another big day for ALKS. M&A news in the biotech space helped give a lot of biotech names a boost today. ALKS outperformed the market with a +5.3% gain. The next challenge is potential round-number resistance at $70.00.

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


Cepheid - CPHD - close: 56.23 change: +0.54

Stop Loss: 53.95
Target(s): To Be Determined
Current Option Gain/Loss: - 13.6%
Average Daily Volume = 623 thousand
Entry on January 12 at $56.55
Listed on January 10, 2014
Time Frame: 3 to 5 weeks, exit PRIOR to Q4 earnings
New Positions: see below

Comments:
01/12/15: The rally in CPHD continued today and shares broke out to new highs. Our trigger to buy calls was hit at $56.55.

Earlier Comments: January 10, 2015:
CPHD is part of the technology sector but after you hear what they do the company sounds like they belong in the biotech industry. The company's marketing material describes themselves as "Based in Sunnyvale, Calif., Cepheid (CPHD) is a leading molecular diagnostics company that is dedicated to improving healthcare by developing, manufacturing, and marketing accurate yet easy-to-use molecular systems and tests. By automating highly complex and time-consuming manual procedures, the company's solutions deliver a better way for institutions of any size to perform sophisticated genetic testing for organisms and genetic-based diseases. Through its strong molecular biology capabilities, the company is focusing on those applications where accurate, rapid, and actionable test results are needed most, such as managing infectious diseases and cancer."

The stock struggled over the 2014 summer. Earnings in July came in two cents ahead of expectations. Yet management lowered their guidance. The stock collapsed. Now it looks like the company is seeing an earnings turnaround. Their most recent report was October 16th. Wall Street estimates were pretty wide ranging from breakeven ($0.00) to a loss of -16 cents. CPHD reported a loss of -6 cents. Yet revenues were up +15% to $115.2 million, which was above expectations. Gross margins improved as well with a jump from 49% to 52%. More importantly management raised their guidance for the rest of 2014. That fueled a nice rally in shares.

The company seems to be on a roll with a number of positive announcements. In just the last few weeks CPHD has announced European approval of Xpert HIV-1 Viral Load, which is a test to measure the active amount of HIV in a patient's blood. This is significant since nearly 35 million people globally are living with HIV/AIDS. The U.S. FDA recently approved CPHD's test to detect the presence of highly contagious Noroviruses of the genogroup 1 and genogroup II. This is significant since estimates suggest 267 million people are affected by a norovirus ever year and 200,000 people die annually. The FDA also issued an approval for a test to detect the presense of Flu A, Flu B, and the respiratory syncytial virus in a patient. CPHD said they also received a grant to work on an Ebola detection test that can be used on a person's saliva or blood.

Shares displayed relative strength on Friday with a +2.3% gain. The stock is challenging resistance in the $55-56 zone and on the verge of breaking out to new record highs. If CPHD does break out it could see some short covering. The most recent data listed short interest at 13% of the relatively small 69.4 million share float.

The November 28th intraday high was $56.47. More aggressive traders may want to jump in on a rally past $56.00. We are suggesting a trigger to buy calls at $56.55. Please note this could be a short-term trade. It looks like CPHD might report earnings at the very end of January and we will most likely exit prior to the announcement.

- Suggested Positions -

Long MAR $55 CALL (CPHD150320C55) entry $4.40

01/12/15 triggered @ 56.55
Option Format: symbol-year-month-day-call-strike


Royal Caribbean Cruises - RCL - close: 83.26 change: -0.66

Stop Loss: 78.40
Target(s): To Be Determined
Current Option Gain/Loss: - 2.1%
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:
01/12/15: RCL succumbed to some profit taking this morning but shares pared their losses and spent most of the session consolidating sideways.

I am not suggesting new positions at this time.

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


Whole Foods Market, Inc. - WFM - close: 51.82 change: +1.87

Stop Loss: 48.75
Target(s): To Be Determined
Current Option Gain/Loss: +39.1%
Average Daily Volume = 4.9 million
Entry on January 08 at $50.35
Listed on January 07, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
01/12/15: WFM was a big winner today. I don't see any company-specific news but shares rocketed higher and outperformed the major indices with a +3.7% surge to new multi-month highs.

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


Zebra Technology - ZBRA - close: 80.66 change: +0.12

Stop Loss: 78.75
Target(s): To Be Determined
Current Option Gain/Loss: + 2.9%
Average Daily Volume = 494 thousand
Entry on January 12 at $80.85
Listed on January 10, 2015
Time Frame: Exit prior to earnings in February
New Positions: Yes, see below

Comments:
01/12/15: The rally in ZBRA continued with shares up four days in a row. The stock hit new five-month highs this morning. ZBRA also hit our suggested entry point to buy calls at $80.85. Looking at the intraday chart I am suggesting readers wait for a new rally above $80.90 before initiating new positions.

Earlier Comments: January 10, 2015:
ZBRA is considered part of the industrial goods sector but they sound more like a technology company. The company website describes them as "Zebra Technologies is a global leader in enterprise asset intelligence, designing and marketing specialty printers, mobile computing, data capture, radio frequency identification products and real-time locating systems. Incorporated in 1969, the company has over 7,000 employees worldwide and provides visibility into valued assets, transactions and people."

Their goods are used by 90% of the Fortune 500 companies. They have almost no debt. Last year they spent almost $3.5 billion buying Motorola Solutions (symbol was MSI). ZBRA's CEO believes that the MSI acquisition will help them capitalize on three big trends: mobility, the Internet of things, and cloud computing.

In February 2014 ZBRA raised their earnings guidance. They did it again two months later in April. Their most recent earnings report was above expectations. ZBRA announced record revenues with sales up +19% in Middle East and Africa, +16% in North America, +11% in Latin America, and +9% in Asia Pacific.

Technically the stock has been stair-stepping higher with a bullish trend of higher lows and higher highs. This past week ZBRA displayed relative strength and broke out to new multi-month highs. The point & figure chart is bullish with a $92.00 target.

Tonight we are suggesting a trigger to buy calls at $80.85. We will plan on exiting positions before ZBRA reports earnings in mid February.

- Suggested Positions -

Long FEB $85 CALL (ZBRA150220C85) entry $1.70

01/12/15 triggered @ 80.85
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Dover Corp. - DOV - close: 68.74 change: -0.90

Stop Loss: 72.25
Target(s): To Be Determined
Current Option Gain/Loss: +65.2%
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:
01/12/15: DOV spiked lower this morning and traded below $68 before trimming its losses. Shares still underperformed the major U.S. indices with a -1.29% decline. I don't see any changes from my recent comments.

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



CLOSED BULLISH PLAYS

Athenahealth, Inc. - ATHN - close: 139.60 change: -1.38

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:
01/12/15: I cautioned readers last night that ATHN looked vulnerable. Another down day in the market did not help. Shares slipped to new relative lows and hit our stop at $139.15.

- Suggested Positions -

FEB $155 CALL (ATHN150220C155) entry $5.50 exit $3.20 (-41.8%)

01/12/15 stopped out
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: 76.72 change: -1.02

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: see below

Comments:
01/12/15: We are giving up on FB as a bullish candidate tonight. The bounce is rolling over. Shares underperformed the major indices with a -1.3% decline. We may have to wait until after FB reports earnings on January 28th before looking at FB as a potential candidate again.

Trade did not open.

01/12/15 removed from the newsletter, suggested trigger was $78.65

chart: