Option Investor

Daily Newsletter, Thursday, 12/4/2014

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Which Way Do We Go

by Thomas Hughes

Click here to email Thomas Hughes
US economic data and growth outlook from the ECB sent the markets first up, then down, and then sideways.


This morning began with air of anticipation. Investors around the world were waiting on news from the ECB and economic data from the US. European markets were largely in the green, ahead of the ECB, and helped to lift futures trading here, which were also aided by positive labor data. After the ECB things changed a bit but by the end of the day the market was flat.

There were a couple of releases today, led by the Challenger report on planned lay-offs and followed up by weekly unemployment claims, both of which are in line with current trends. The positive spin to early trading held steady until the ECB released its decision, shortly after 8:30AM. At that time European markets hit the skids, beginning a decline that took them more than 1.21% lower. Our markets were also negatively affected, futures dipped just below break even and held there until the opening bell.

Mario Draghi and the ECB did exactly what they have done before; nothing. The bank held interest rates steady and enacted no new forms of QE, stimulus or other reforms. What he did do was talk the same talk. At the news conference he said that the bank was “stepping up preparations for new measures” which means nothing, really. Mario Draghi went on to say that any moves that do come were going to happen next year. What the market took to heart though is lowered outlook. The ECB has lowered its growth outlook for the EU out to 2016. He also says that the risk remains to the downside. This will of course be a drag on global GDP but my question is how bad will it hurt US GDP? Especially since our GDP appears to be gaining momentum.

Market Statistics

The market moved lower at the bell, but only just, and then hung below break even for the first hour. Around 10AM the market began to fall off with the SPX losing about 13 points over the next 45 minutes. Support began to appear around 10:30 and 2062.50, at which level the market created a double bottom and then moved higher. Around mid day the bulls were able to push the indices into the green but it did not last. By 1PM the market was back underwater and drifting sideways, just below break even, and held there into the close of trading.

Economic Calendar

The Economy

First up on the economic calendar is the Challenger Grey&Christmas report on planned lay offs. The number of planned lay offs fell in November, dropping more than 30% to 35,940. This is down from last month, which was a seasonally expected peak and the second highest level all year. The number is down from last year, -21% compared to last November and -5.8% year-to-date. These numbers are good news, support continued economic expansion and put us on pace for the lowest number of lay offs since 1997.

Challenger Grey & Christmas Reported Layoffs

Initial claims fell this week as well, dropping back below 300,000. This week initial claims were reported at 297,000, -17,000 from last weeks upwardly revised 314,000. The revision was only 1,000. The four week moving average moved counter to this weeks drop, reflecting the spike in claims last week, and gained 4,750. On a not adjusted basis claims fell by 62,943 or -17.6%, nearly 50% more than expected and another sign that there is some underlying strength in the labor market.

Initial claims have been moving higher over the past two months, in line with the expected seasonal increase in pre-end of the year lay offs, but are still near long term lows. The long term down trend in claims may have leveled off but it has not reversed. Claims may continue to trend sideways in a range near or just below 300,000.

Continuing claims rose this week, reflecting the lag between initial and continuing claims. Claims gained 39,000 from an upward revision of 7,000 to hit 2.363 million. Continuing claims, a better and less volatile indicator of labor trends, is still trending lower regardless of this weeks increase and have yet to level out.

Total claims also rose this week, gaining over 120,000 to reach 2.249. Total claims,which lag initial claims by two weeks, have been on the rise as well. This is a mild concern but also could be a positive. It could be a sign of a rise in participation rates. There was a gain in participation last month, there could be another increase this month.

Tomorrow the NFP and unemployment data will be big news. NFP should remain strong, expectations are for near 250,000 with unemployment holding steady at 5.8%. All the data is pointing in the right direction, the only weakness being the slight rise in unemployment claims that occurred this month. Claims may come in light, but I think positive revisions to the previous month would cancel that out. What we need to see is steady numbers in the current and revised numbers.

The Oil Index

Oil had been holding its ground, above $67, until two bits of news weighed it down. First, the Saudis announced another series of price discounts. Second, the Sharara oil field in Libya is about to come back online, again. The Saudis are still scrambling to stay ahead of the market, in whatever way they can while global supply and infrastructure continues to operate at high capacity. Together these two headlines helped to trim a full percent off of WTI and a half percent off of Brent and are no sign of a bottom in oil.

The Oil Index fell on the news as well, but was able to regain most of the loss. The index dropped about 5 points at the open, fell even further during the morning and then recovered the decline to close at today's open. This index looks ready to fall on bad news, but equally ready for buyers to step in on the dip. Support is still indicated below the current level although the indicators are looking bearish. The bearish MACD peaks are in line with support at this level and stochastic is holding firm in the middle portion of its range. Support is around 1,350 with resistance just above near 1,400. Oil prices will be the deciding factor as always, as I don't see anything to support oil prices I am expecting to see the Oil Index continue to test support.

The Gold Index

Gold prices held firm today, only experiencing mild volatility compared to earlier in the week. Gold made a $10 swing this morning as the ECB statement and press conference hit the air waves. The EBC statement helped to firm the Euro and weaken the dollar which in turn helped to support gold prices. Prices stabilized around $1207 by the close of the US session and are still above $1200.

The Gold Index traded lower today but was not able to recover the loss. The index fell -1.85% to drop below $67. The index is trading below the short term 30 day moving average but above long term support. Support is currently at $66.59, a significant Fibonacci Retracement level, and extremely long term in nature as it dates back roughly 6 years to before the 2008-2011 bull market in gold.

Gold Index-10yrs/One Month Candles

Flipping back and forth between monthly, weekly and daily charts the time frames do not really match up in terms of trend but an argument for a bottom could be made. Right now I am very cautious with both gold and the index , it looks like a bottom could be forming but I still think it is too soon to say. On the short term daily charts both indicators are in decline and neither consistent with any kind of longer term signal. This, along with price action is leading me to think there could be retest of support along the retracement level or lower, at or near the current long term low near $60.

Gold Index -6M/One Day Candles

In The News, Story Stocks and Earnings

Attention is mostly on the economy but there were still a few interesting story stocks today. Disney announced this morning that it was raising its dividend by 34%. This raises the annual pay out to shareholders to $1.15, or +$0.29, and brings the rate up to just over 0.9%. Not very much compared to some other stocks I could name. The news was not met with much fanfare and failed to lift share prices. Disney traded slightly higher after the announcement, opened marginally higher and then fell back to trade near yesterday's close. The stock appears to be cresting a peak, which is supported by the indicators. There are divergences in both MACD and stochastic that bear close watching. Prices are trading just below the all time high and could easily pull back to support near $90.

Barnes&Noble reported earnings before the bell and did not inspire confidence. The company reported revenue and earnings below estimates but what really got to the market was the announced separation from Microsoft. B&N will be ending its agreement with Microsoft concerning the Nook which will has raised some concerns. The move will lower costs but also reduce reach by 34 countries. It also led execs to push pack a planned spin off of the Nook business next summer. Shares of the stock sank more than 10% in pre-market trading and opened near the bottom of the 6 month range. Buyers stepped in at this level and drove prices back up but did not recover all the loss. Today's volume is more than 5X the 30 day average.

Gap reported earnings after the bell. The news included a 6% increase in comp store sales as well as strong sales for the month of November. The gains were led by Old Navy but other brands also performed well. Execs report that they expect momentum to continue into December. Shares of the stock were basically flat at the end of today's trading but surged right after the release. The euphoria did not last long as investors found reason to doubt future gains and eventually sent shares sinking lower.

The Indices

There was some volatility in the market today. Optimism for ECB support was dashed, sending the market lower, and then later regained and supported by US economic data. Supported by US economic data being the more important of the two. Today's data is in line with trends and pointing to continued recovery. Anyway, if the market were going to sell off on data it will be tomorrow when they release the NFP report. Today's action was led by the Dow Jones Industrial Average which lost less than a tenth of a percent. The rest were not far behind, lined up with losses of -0.11%, -.12% and -.13%.

The blue chips created a small hanging man doji today. A little ominous when looking at the chart but more of a spinning top when you consider the important economic data being released tomorrow. The index is still trending higher and was able to touch a new intraday high today so there are at least some bulls still out there. The indicators are mixed but the first glimmers of a trend following signal are emerging. MACD is still bearish but stochastic is firing a bullish crossover. This is a late rally signal but a strong-ish looking one because both %K and %D are moving higher. If confirmed this could lead to a follow through that could take the index higher into the end of the year.

The Nasdaq Composite is next in line with a decline of -0.11%. The tech heavy index also created a little doji but this one looks more indecisive. It's small, and has equal length wicks on both sides which indicate more of a balance between buyers and sellers. This index is also still trending higher but is not yet making new highs. It is however very close to the 10,000 mark and top of the Tech Bubble so don't forget about that. There could be some volatility but it looks like this one is still moving higher in the longer term.

The S&P 500 fell -0.12% and also created a small hanging man doji. This one also gives the appearance of indecision as it is not an overly large candle, is sitting at the all time high and comes one day before widely anticipated economic data. The trend is still up with this one as well and is being confirmed by a bullish crossover on the stochastic indicator. The caveat being that momentum is still bearish, if very weak, and both indicators are diverging from price. Basically the indicators are as indecisive as the candlestick. Support is near 2,050 on a pull back with targets near 2,025 and 2,000 on a deeper correction.

The Dow Jones Transportation Average brings up the rear today with a loss of -0.13%. This index created a small shooting star-like doji and one a little more suggestive of resistance to higher prices. It is still a very small candle and not overly alarming at this time. The indicators are also a little more bearish looking than the others as stochastic has fallen below the upper signal line and is moving lower while bearish momentum persists. Trend and price action suggest the index is moving higher while the indicators continue to weaken, reason for caution. My first target for support, should the index pull back, is around 9,000 and just below that along the short term moving average. Resistance is just above, near 9,250 and the all time high.

The market is waiting. Waiting on the NFP and unemployment data to be released. The economic trends are up and the market trends are up and tomorrow is not likely to be a day to change that. A negative surprise may spark some selling but the long term economic trends are in place and gaining momentum if the data as a whole is to be believed. We'll find out tomorrow, maybe. Most likely the numbers will be more of the same, which so far have been good enough to lift the economy and the market but not really enough to get all exited about. In the end steady may be best; Too good and it raises the specter of the FOMC and higher interest rates and if its too low maybe the economy isn't as strong as we think it is.

Until then, remember the trend!

Thomas Hughes

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New Option Plays

Favorable Momentum

by James Brown

Click here to email James Brown


Zebra Technologies - ZBRA - close: 76.55 change: -0.53

Stop Loss: 74.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 489 thousand
Entry on December -- at $---.--
Listed on December 04, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
ZBRA is in the industrial goods sector. They specialize in barcode, receipt, kiosk, and RFID printers and supplies. The company's equipment is used by the vast majority of Fortune 500 companies. They recently purchased Motorola Solutions Enterprise business.

Today the company is focusing on the Internet of Things (IoT). ZBRA's CEO, Mr. Anders Gustafsson, said, "Over the last two years, there has been a growing need for organizations to obtain a full picture of their business operations. I believe that with these survey results, it is clear that enterprises in key industries globally are adopting Internet of Things solutions to arm themselves with the real-time data and intelligence to become smarter and more connected. At Zebra, we believe that IoT and visibility solutions can help businesses reach new levels of efficiency and deliver greater value for customers."

ZBRA has zero debt and has been consistently beating Wall Street's earnings estimates. Their latest report was November 4th. Analysts were looking for a profit of $0.87 a share on revenues of $292 million. ZBRA delivered $0.93 a share, which is a +22.9% increase from the same quarter a year ago. Revenues were up +15% to $303.3 million.

The company said its sales rose in all geographic regions and hit a record quarterly revenues. Sales in Asia were up +9%, in Latin America +11%, in North America +16%, and in Middle East and Africa sales were up +19%. ZBRA also reported that its gross margins improved from 48.8% in 2013 to 50.0% in the recent quarter. Gustafsson said, "Favorable business momentum is continuing into the fourth quarter."

The stock has spent almost a month consolidating sideways in the $70-75 zone. The last couple of days have seen a bullish breakout through key resistance. Traders were buying the dip today. If this rally continues we want to hop on board. The point & figure chart is bullish and forecasting a long-term target of $105.00.

Tonight we are suggesting a trigger to buy calls at $76.85.

Trigger @ $76.85

- Suggested Positions -

Buy the FEB $80 CALL (ZBRA150220C80) current ask $2.70

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

Intraday Chart:

Daily Chart:

In Play Updates and Reviews

ECB Disappoints, Stocks Fade

by James Brown

Click here to email James Brown

Editor's Note:

The European Central Bank postponed any new stimulus measures, disappointing the markets, and sparking some selling pressure.

Stocks could be volatile tomorrow morning as investors react to the November jobs report.

Current Portfolio:

CALL Play Updates

Aetna Inc. - AET - close: 89.19 change: -0.49

Stop Loss: 85.75
Target(s): To Be Determined
Current Option Gain/Loss: + 8.0%
Average Daily Volume = 2.45 million
Entry on December 03 at $88.65
Listed on December 02, 2014
Time Frame: Exit PRIOR to January expiration
New Positions: see below

12/04/14: AET spent Thursday's session consolidating sideways between short-term support near $88.00 and short-term resistance at $90.00. I don't see any changes from my prior comments. Nimble traders could try and launch positions on a dip near $88.00 if you are looking for an entry point.

Earlier Comments: December 2, 2014:
AET is in the healthcare sector. According to a recent press release, "Aetna is one of the nation's leading diversified health care benefits companies, serving an estimated 46 million people with information and resources to help them make better informed decisions about their health care. Aetna's customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups and expatriates."

If you study a one-year chart of AET the stock has definitely seen its ups and downs. That's because the healthcare industry has faced a number of issues. AET's CEO commented on this past year in their latest post-earnings conference call.

Mark T. Bertolini, Aetna chairman, CEO and president, said, "some of the challenges we face this year, including pricing solving for nearly $1 billion in ACA related industry fees and taxes, solving for the largest rate cuts to the Medicare Advantage program in our recent history, navigating a host of new regulatory requirements in our small group and individual businesses, managing through a turbulent launch in public exchanges and controlling pharmacy costs in a year where heavy priced Hepatitis C treatments first became available and treatment guidelines changed in unforeseen ways." (ACA stands for Affordable Care Act, a.k.a. Obamacare).

In spite of all these challenges shares of AET are outperforming the major indices with a +27% gain in 2014 compared to a +11% gain in the S&P 500. AET's strength is due to the company's earnings performance. They have beaten Wall Street's earnings estimates and raised guidance three quarters in a row.

AET's most recent quarterly report was October 28th. Analysts were expecting a profit of $1.58 a share on revenues of $14.7 billion. AET delivered a profit of $1.79 a share. Revenues were up +13% to match estimates. The company said they added 470,000 new medical insurance customers in the third quarter, putting the total at 23.6 million.

Bertolini commented on their results, "Aetna reported solid third-quarter results, including our 10th consecutive quarter of membership growth, record quarterly operating revenues, and continued high single-digit pretax operating margin."

The major healthcare companies are reaping the benefits of Obamacare as more people sign up. Management raised their full year 2014 earnings guidance into the $6.60-6.70 zone versus Wall Street's estimate of $6.57.

Just last month AET raised their quarterly dividend 11% to 25 cents a share and added $1 billion to its stock buyback program, up from $464 million. In the last two months the stock has received multiple price target upgrades into the $95-100 zone. The point & figure chart is bullish with a $112.00 target.

AET's bullish trend of higher lows has just produced a breakout past resistance to new all-time highs. Tonight we are suggesting a trigger to buy calls at $88.65.

- Suggested Positions -

Long 2015 Jan $90 call (AET150117C90) entry $1.76

12/03/14 triggered @ 88.65
Option Format: symbol-year-month-day-call-strike

CR Bard Inc. - BCR - close: 172.47 change: +0.07

Stop Loss: 165.85
Target(s): To Be Determined
Current Option Gain/Loss: +78.7%
Average Daily Volume = 538 thousand
Entry on November 13 at $165.65
Listed on November 12, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

12/04/14: It was a quiet session for BCR. The stock closed virtually unchanged. If the market dips we can look for BCR to find short-term support near $170.00. I'm not suggesting new positions at this time.

Earlier Comments: November 12, 2014:
BCR is in the healthcare sector. The company makes medical supplies. According to the company website, "C. R. Bard, Inc. is a leading multinational developer, manufacturer, and marketer of innovative, life-enhancing medical technologies in the product fields of vascular, urology, oncology, and surgical specialty. BARD markets its products and services worldwide to hospitals, individual health care professionals, extended care facilities, and alternate site facilities."

The company has been on a roll with its earnings reports. BCR has beaten Wall Street's estimates on both the top and bottom line the last four quarters in a row. The last couple of quarters have seen some pretty big beats and management has raised guidance.

BCR's most recent earnings report was October 22nd. Wall Street expected a profit of $1.87 a share on revenues of $818.8 million. BCR said earnings rose +28% from a year ago to $2.15 a share. Revenues were up +9% to $830 million. Inside the U.S. net sales were up +13%. Management raised their Q4 EPS guidance above analysts' estimates.

The stock has been struggling to breakout past major resistance near the $150-155 range but the October earnings results launched shares of BCR higher. The last couple of weeks have seen BCR consolidating sideways under resistance near the $165.00 level. We think it's about to break out. The point & figure chart is bullish and forecasting at long-term target of $194.00.

Tonight we are suggesting a trigger to buy calls at $165.60

- Suggested Positions -

Long 2015 Jan $170 call (BCR150117c170) entry $2.63

12/01/14 new stop @ 165.85
11/22/14 new stop @ 163.35
11/13/14 triggered @ 165.65, suggested entry was $165.60
Option Format: symbol-year-month-day-call-strike

Costco Wholesale - COST - close: 143.02 change: +0.33

Stop Loss: 138.65
Target(s): To Be Determined
Current Option Gain/Loss: +406.5%
Average Daily Volume = 1.9 million
Entry on October 30 at $132.25
Listed on October 29, 2014
Time Frame: Exit prior to earnings in December 10th
New Positions: see below

12/04/14: Analysts were expecting COST to report November same-store sales growth of +3.8%. The company announced +5.0%. Yet the early morning gains faded. COST has been finding support near $142 most of the week and shares dipped to $142 again before rebounding back into positive territory by the closing bell.

I am not suggesting new positions at this time.

NOTE: COST is scheduled to report earnings on December 10th. We will most likely exit prior to the announcement.

Earlier Comments: October 29, 2014
COST is part of the services sector. The company runs a discount, membership sales warehouse. The company's latest earnings report said Costco currently operates 664 warehouses, including 469 in the United States and Puerto Rico, 88 in Canada, 33 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, six in Australia and one in Spain.

The company has struggled to hit Wall Street's bottom line estimates for over a year but steady improvement in their same-store sales have helped drive the stock higher. A strong back to school shopping season and higher membership fees fueled a better than expected quarterly report.

COST reported their Q4 numbers on October 8th. After missing estimates for five quarters in a row the company finally beat estimates. Analysts were expecting a profit of $1.52 a share on revenues of $35.3 billion. COST delivered $1.58 a share with revenues up +9.3% to $35.52 billion. The net profit number was up +13% and gross margins improved 15 basis points.

COST also reported that their e-commerce sales continue to grow at a brisk pace and their online sales rose +18% in their fourth quarter. Same-store (comparable store) sales remain a key metric to watch. COST's Q4 same-store sales were up +4% yet if you back out falling gasoline prices and currency effects their comparable store sales were up +6% for the quarter versus +4.5% a year ago. Membership renewal rates remain very strong at 91% in the U.S. and 87% globally. COST plans to open up to eight more locations before the end of the 2014 calendar year.

The company also recently announced their first foray into China. COST has entered the Chinese market with an online store through Alibaba Group's (BABA) Tmall Global platform.

The holiday shopping season is almost upon us with less than 60 days before Christmas. COST is poised to do well since the company caters to the higher-end more affluent customer.

Shares are hovering just below the $132.00 level. Tonight we are suggesting at trigger to buy calls at $132.25. We will plan on exiting positions prior to their December earnings report.

- Suggested Positions -

Long DEC $135 call (COST141220c135) entry $1.54

11/29/14 new stop @ 138.65
11/25/14 Caution: investors may want to take profits now
11/22/14 new stop @ 137.25
11/08/14 new stop @ 134.75
11/01/14 new stop @ 130.75
10/30/14 triggered @ 132.25
Option Format: symbol-year-month-day-call-strike

Deckers Outdoor Corp. - DECK - close: 96.67 change: +0.13

Stop Loss: 93.65
Target(s): To Be Determined
Current Option Gain/Loss: +21.1%
Average Daily Volume = 763 thousand
Entry on November 17 at $92.25
Listed on November 15, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

12/04/14: I don't normally listen to CNBC's Jim Cramer but I heard he was pretty bullish on DECK last night. Evidently he did an interview with DECK's management on Cramer's TV show. This morning a Wall Street firm raised their price target on DECK to $130.00. The two bullish calls on DECK helped push shares up to $98.14 this morning but gains reversed. DECK saw its rally fail twice today but fortunately traders were buying the dips at $96.00.

The $98 and the $100 levels appear to be overhead resistance for DECK.

No new positions at this time.

Earlier Comments: November 15, 2014:
DECK is part of the consumer goods sector. The company owns a number of brands but for many Deckers means UGG. The iconic footwear line was started in 1978 in Southern California. Strength in the UGG line helped power the company's latest quarterly results.

According to the company website, "Deckers Brands is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The Company's portfolio of brands includes UGG, I HEART UGG, Teva, Sanuk, TSUBO, Ahnu, MOZO, and HOKA ONE ONE. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, 130 Company-owned and operated retail stores, and select online stores, including Company-owned websites. Deckers Brands has a 40-year history of building niche footwear brands into lifestyle market leaders attracting millions of loyal consumers globally."

The most recent earnings report was October 23rd. Analysts were expecting a profit of $1.03 per share on revenues of $457.2 million. DECK beat estimates with a profit of $1.17 a share. That's a +23.2% increase from the same period a year ago. Revenues soared +24.2% to a record $480.3 million. U.S. sales rose +21.1% and international sales surged +29.2%. E-commerce sales soared +45%.

It was DECK's Q2 and their gross profit rose +34% while gross margins increased 340 basis points to 46.6%. This was above estimates of 45% and above their gross margin a year ago of 43.2%. Management said all brands delivered a strong performance.

The company lowered their Q3 guidance (current quarter) to below Wall Street estimates. They also raised their Q4 and 2015 guidance on both the top and bottom line. DECK expects 2015 to see revenues up +15%, earnings up +15.8%, and gross margins around 49%. Last quarter the S&P 500 saw earnings growth of about +6.9%. DECK is clearly outgrowing the market with +23% growth. The S&P 500 is expected to see +10-11% growth in 2015.

Technically shares are poised for a breakout on both the daily chart and the point & figure chart. Looking at the point & figure chart (not shown), a breakout past $92.00 would generate a new triple-top breakout buy signal. A breakout could also spark some short covering. The most recent data listed short interest at 17% of the small 33.6 million share float.

Tonight we are suggesting a trigger to buy calls at $92.25. Such a move probably signals a run toward resistance near $100.00.

- Suggested Positions -

Long 2015 Jan $95 call (DECK150117c95) entry $3.80

11/29/14 new stop @ 93.65
11/22/14 new stop @ 89.75
11/17/14 triggered $92.25
Option Format: symbol-year-month-day-call-strike

DineEquity, Inc. - DIN - close: 98.44 change: +0.54

Stop Loss: 96.85
Target(s): To Be Determined
Current Option Gain/Loss: +191.7%
Average Daily Volume = 154 thousand
Entry on November 05 at $91.55
Listed on November 04, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

12/04/14: This is the fourth day in a row that shares of DIN have been consolidating sideways near the $98.00 level. Today's session happened to have an upward tilt to it and DIN outperformed the broader market with a +0.5% gain.

I'm not suggesting new positions at the moment.

Earlier Comments: November 4, 2014:
Restaurant stocks were showing relative strength today. Better than expected earnings results from the likes of Red Robin (RRGB) and Bloomin Brands (BLMN) helped buoy the group. Additional stocks in this industry showing relative strength on Tuesday are: BWLD, PNRA, JACK, EAT, SONC, TXRH, KKD, DNKN, CAKE, DRI, and PBP. The one we like tonight is DIN.

According to a company press release, "Based in Glendale, California, DineEquity, Inc., through its subsidiaries, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar and IHOP brands. With more than 3,600 restaurants combined in 19 countries, over 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity is one of the largest full-service restaurant companies in the world."

The company has seen success with a steady improvement in earnings. DIN has beaten Wall Street's estimates on both the top and bottom line three quarters in a row. Their most recent report was October 28th. Analysts were looking for a profit of $1.05 a share on revenues of $157.2 million. DIN served up $1.14 per share with revenues climbing to $162.85 million.

The company saw domestic system-wide same-store sales up +2.4% at IHOP and +1.7% at Applebee's. Management then raised their sales guidance on both Applebee's and IHOP. DIN also raised its dividend by 17% to $0.875 per share and they boosted their stock buyback program from $40 million to $100 million.

The restaurant industry should be a major beneficiary of the drop in oil prices. Lower gasoline prices at the pump mean consumers have more spending money and will likely burn a lot of that cash eating at restaurants.

Shares broke out to new highs on this earnings report and bullish guidance. Today the stock is at all-time highs. The point & figure chart is bullish and forecasting a long-term target at $118.00.

Tonight we are suggesting a trigger to launch bullish positions at $91.55.

- Suggested Positions -

Long DEC $95 call (DIN141220c95) entry $1.20

11/29/14 new stop @ 96.85
11/26/14 new stop @ 94.85, traders may want to take profits here!
11/22/14 new stop @ 93.85
11/19/14 new stop @ 92.75
11/13/14 new stop @ 92.25
11/12/14 new stop @ 91.45
11/08/14 new stop @ 89.65
11/05/14 triggered @ 91.55
Option Format: symbol-year-month-day-call-strike

The Walt Disney Co. - DIS - close: 93.23 change: +0.12

Stop Loss: 88.65
Target(s): To Be Determined
Current Option Gain/Loss: + 1.7%
Average Daily Volume = 6.5 million
Entry on December 01 at $92.63
Listed on November 29, 2014
Time Frame: exit prior to February expiration
New Positions: see below

12/04/14: DIS hasn't been moving much this week. Aside from Tuesday's rally shares are just consolidating sideways, albeit at all-time highs. I would still consider new positions at this time but traders may want to wait and see if the Friday morning jobs report sparks any weakness. You might get a better entry point.

Earlier Comments: November 29, 2014:
Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.

The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.

Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. Last year they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits this year Captain America: Winter Soldier and Guardians of the Galaxy.

Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. This weekend DIS released the teaser trailer for episode 7, The Force Awakens. It has been shocking to see just how much hype and buzz this teaser has generated. There are stories and links to this trailer just about everywhere you go on the Internet this weekend. It has reawakened fan interest in the Star Wars story and DIS has a whole year to feed the hype until episode seven's release in December 2015. Analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.

I expanded on the movie business above because it was Disney's studio segment that really drove earnings last quarter. DIS has been beating Wall Street's estimates on both the top and bottom line four quarters in a row. The most recent earnings report was November 6th (DIS' Q4). Analysts were expecting a profit of $0.88 a share on revenues of $12.37 billion. DIS reported $0.89 a share with revenues rising +7.1% to $12.39 billion. The movie division saw its quarterly revenues soar +18% to $1.8 billion. Altogether the company reported record-breaking revenues for all five businesses in 2014.

The correction in DIS' stock from the September highs to the October lows was painful but shares have come roaring back. Now after consolidating sideways between $88.75 and $92.00 this last month the stock is rested and ready to run. The breakout past resistance at $92.00 looks like an entry point to buy calls.

I suspect the $100.00 level could be round-number, psychological resistance but the point & figure chart is very bullish and forecasting a long-term $119.00 target. Tonight we are suggesting traders buy calls on Monday morning at the opening bell.

- Suggested Positions -

Long 2015 Feb $95 call (DIS150220C95) entry $1.80

12/01/14 trade begins. DIS opens at $92.63
Option Format: symbol-year-month-day-call-strike

FedEx Corp. - FDX - close: 180.18 change: +0.14

Stop Loss: 176.65
Target(s): To Be Determined
Current Option Gain/Loss: +284.0%
Average Daily Volume = 1.5 million
Entry on October 17 at $155.50
Listed on October 15, 2014
Time Frame: Probably exit prior to earnings on Dec. 17th
New Positions: see below

12/04/14: FDX garnered some bullish analyst comments this morning along with a new $200 price target. Yet shares barely budged today and continue to hover near $180.00.

There is no change from my prior comments. The stock remains overbought. I'm not suggesting new positions.

NOTE: FDX is scheduled to report earnings on December 17th. We will likely exit prior to the report to avoid holding over the announcement.

Earlier Comments: October 15, 2014:
Last year a last minute surge of online shoppers overwhelmed the system and thousands of Christmas presents were delivered late. Part of the problem was terrible weather. The other challenge was the growth in online shopping. Amazon.com (AMZN) blamed UPS for the mass of delayed deliveries last year. You can bet that UPS' rival FDX has taken notice and plans to be ready this year.

Market research firm EMarketer is estimating that retail online shopping will surge +17% in 2014 to $72.4 billion. That might be under estimating the growth, especially this year as many consumers might opt to shop online instead of face the crowds and risk being a target for terrorism or catching Ebola. Granted neither a terrorist event inside the U.S. and a widespread outbreak of Ebola in the states has happened yet but people are already afraid with the daily headlines about the virus.

UPS and FDX hope to be ready. UPS is hiring up to 95,000 seasonal workers and FDX is hiring 50,000 holiday workers this year. That's 10K more than last year for FDX.

In addition to the surge in online shopping FDX should also benefit from the multi-year lows in oil prices. Low oil prices means lower fuel costs, one of FDX's biggest expenses.

It would appear that FDX has fine tuned its earnings machine as well. Their latest earnings report was September 17th. Wall Street was expecting a profit of $1.95 a share on revenues of $11.46 billion. FDX delivered a profit of $2.10 a share with revenues up to $11.7 billion. That's a +24% increase in earnings from a year ago and the second quarter in a row that FDX beat EPS estimates.

FDX chairman, president, and CEO Frederick Smith said, "FedEx Corp. is off to an outstanding start in fiscal 2015, thanks to very strong performance at FedEx Ground, solid volume and revenue increases at FedEx Freight and healthy growth in U.S. domestic volume at FedEx Express." Business has been strong enough that a few weeks ago FDX started raising prices on some services.

Since that September earnings report Wall Street analysts have been raising price targets. Some of the new price targets for FDX stock are $175, $180 and $183 a share.

The recent sell-off in the market and FDX could be an opportunity. FDX has already seen a -10% correction from its intraday high near $165 to today's low near $149. Right now FDX sits just below resistance near $155.

We're suggesting a trigger to buy calls at $155.50.

- Suggested Positions -

Long 2015 Jan $160 call (FDX150117c160) entry $5.30

12/02/14 new stop @ 176.65
11/29/14 new stop @ 174.25
11/17/14 new stop @ 169.85
11/15/14 new stop @ 168.40
11/08/14 new stop @ 165.50
11/01/14 new stop @ 163.45
10/28/14 new stop @ 162.65, traders may want to take profits now!
10/25/14 new stop @ 157.85
10/23/14 new stop @ 155.90
FDX is nearing resistance at $164.00. Traders may want to take profits now.
10/21/14 new stop @ 153.45
10/17/14 triggered @ 155.50
Option Format: symbol-year-month-day-call-strike

The Hain Celestial Group, Inc. - HAIN - close: 114.07 change: +1.59

Stop Loss: 109.85
Target(s): To Be Determined
Current Option Gain/Loss: +50.0%
Average Daily Volume = 615 thousand
Entry on November 26 at $110.25
Listed on November 25, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

12/04/14: Traders were in a buy-the-dip mood with HAIN and shares outperformed the broader market with a +1.4% gain.

Jim Cramer also voiced his opinion on HAIN and speculated that HAIN would be a good acquisition target by the larger food companies.

Earlier Comments: November 25, 2014:
"Our business continues to benefit from strong growth trends in the organic and natural, better-for-you segment of consumer packaged goods."

That quote is from HAIN's CEO after the company reported its latest earnings results in early November. He's right. Consumers are choosing healthier foods and it looks like a major trend change that could benefit HAIN for a long time.

The company website describes HAIN as, "The Hain Celestial Group, headquartered in Lake Success, NY, is a leading natural and organic food and personal care products company in North America and Europe. Hain Celestial participates in almost all natural food categories with well-known brands that include Celestial Seasonings, Terra, Garden of Eatin', Health Valley, WestSoy, Earth's Best, Arrowhead Mills, DeBoles, Hain Pure Foods, FreeBird, Hollywood, Spectrum Naturals, Spectrum Essentials, Walnut Acres Organic, Imagine Foods, Rice Dream, Soy Dream, Rosetto, Ethnic Gourmet, Yves Veggie Cuisine, Linda McCartney, Realeat, Lima, Grains Noirs, Natumi, JASON, Zia Natural Skincare, Avalon Organics, Alba Botanica and Queen Helene."

HAIN's results have definitely confirmed the trend in consumer spending. They have beaten Wall Street's estimates and guided higher in three out of the last four earnings reports.

The Q4 report in late August this year saw revenues up +26% to $583.8 million. Management raised their guidance as they now expect sales growth of +27% to +30% in 2015.

The company reported their 2015 Q1 numbers on November 6th and sales are accelerating. Wall Street was expecting a profit of $0.67 on revenues of $640.27 million. HAIN delivered a profit of $0.68, which is a +31% increase from a year ago. Revenues were up +34.6% to $642.6 million. These are really impressive results when you consider that includes a voluntary recall of their HAIN nut butters back in August.

Commenting on their Q1 results, Irwin Simon, Founder, President, and CEO of the company said, "We are pleased with another strong start to our fiscal year across all of our segments on a worldwide basis with the highest quarterly net sales in the Company's history."

"Our diverse portfolio of brands and products across multiple categories and our customer base across various channels of distribution enabled us to deliver double-digit sales growth even with the impact of the nut-butter recall initiated in August."

Accompanying these results their Board of Directors also approved a 2-for-1 stock split but shareholders needed to approve an increase in the number of shares outstanding first. The company's annual meeting was a few days ago and shareholders did approve the stock split. That headline came out tonight, after the closing bell.

The 2-for-1 stock split will occur in December. The shareholder record date is December 12th, 2014. The ex-dividend date is expected to be December 29th (this is when HAIN will begin trading post-split).

Shares of HAIN have been consolidating sideways beneath resistance at $110 for the last three weeks. The stock displayed relative strength today and looks poised to breakout past this resistance. The 2-for-1 stock split news could be the catalyst it needed. After hours tonight shares are trading around $110.50. We are expecting HAIN to gap open higher tomorrow morning. I'm suggesting a trigger to buy calls on HAIN if shares trade at $110.25 or higher.

We are not setting an exit target tonight but I will point out that the point & figure chart is bullish and forecasting a long-term $131.00 target.

- Suggested Positions -

Long 2015 Jan $115 call (HAIN150117c115) entry $1.80

11/29/14 new stop @ 109.85
11/26/14 triggered @ $110.25
Option Format: symbol-year-month-day-call-strike

Hanesbrands Inc. - HBI - close: 111.87 change: -2.83

Stop Loss: 111.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 786 thousand
Entry on December -- at $---.--
Listed on December 02, 2014
Time Frame: Exit prior to 2015 January option expiration
New Positions: Yes, see below

12/04/14: Ouch! It was kind of a rough session for shares of HBI but not for any fault of its own. Rival clothing maker Gildan Activewear (GIL) reported earnings and missed the EPS estimate, missed the revenue estimate, and then guided lower. Shares of GIL plunged -9% on its report. HBI dropped to round-number support at $110 before paring its loss and closing down -2.4% in sympathy to GIL's weakness.

We are currently on the sidelines with HBI. Our suggested entry point to buy calls is at $115.05. Let's see how HBI performs tomorrow. We may re-evaluate our entry point strategy.

Earlier Comments: December 3, 2014:
HBI is in the consumer goods sector. The company makes clothing. According to the company website, "Our innerwear and activewear apparel brands include Hanes, Champion, Playtex, Bali, Maidenform, Flexees, JMS/Just My Size, barely there, Wonderbra and Gear for Sports. In addition, our international brands include Zorba, Sol y Oro, Rinbros, Track N Field and Ritmo.

We sell bras, panties, shapewear, sheer hosiery, men's underwear, children's underwear, socks, T-shirts and other activewear in the United States, Canada, Mexico and other leading markets in the Americas, Asia and Europe. In the United States, we sell more units of intimate apparel, male underwear, socks, shapewear, hosiery and T-shirts than any other company."

Shares of HBI have been a strong performer for investors thanks to significant earnings growth. The company has beaten Wall Street's bottom line estimate and raised guidance the last four quarters in a row. Investors Business Daily noted that HBI's profits have risen 40% in the last three quarters, which is the best streak of profitability since 2010. HBI's quarterly pretax profit margins are at multi-year highs. Wall Street expects HBI's profits to rise +46% in Q4.

HBI's Chairman and Chief Executive Office, Richard Noll, commented on their most recent earnings report (released October 29th) saying,

"Our business continues to perform very well, particularly in an uncertain consumer environment. We have delivered more earnings in the first three quarters of 2014 than we did all of last year. Our Innovate-to-Elevate strategy, global self-owned supply chain, and acquisitions continue to generate shareholder value and give us confidence in our potential for many years to come."

After breaking out to new highs a few days ago the stock has pulled back to retest prior highs as new support. Today's bounce looks like a new bullish entry point to hop on board the HBI train. Tonight I am suggesting a trigger to buy calls at $115.05.

Trigger @ $115.05

- Suggested Positions -

Buy the 2015 Jan $120 call (HBI150117C120)

12/04 down sharply in reaction to GIL's earning miss and warning
Option Format: symbol-year-month-day-call-strike

Northrop Grumman - NOC - close: 139.84 change: -1.13

Stop Loss: 138.65
Target(s): To Be Determined
Current Option Gain/Loss: -20.0%
Average Daily Volume = 1.0 million
Entry on November 21 at $140.25
Listed on November 20, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

12/04/14: It's starting to look like NOC may have lost its upward momentum. Shares drifted lower toward its recent lows near $139 today. Our stop loss is currently at $138.65.

NOC will likely trade higher tomorrow thanks to its press release out tonight. The company announced they have added an additional $3 billion to their stock buyback program. The WSJ noted that NOC plans to buy back 25% of their stock by the end of next year. That should put a nice floor under NOC for a while.

Earlier Comments: November 20, 2014:
One might have assumed that when Washington politics cut $500 billion from the U.S. defense budget over the 2012-2021 time frame it would have been bearish for defense sector stocks. Yet the group has been an outperformer in the stock market and delivered amazing gains last year. The defense-related juggernauts like NOC continue to perform well in 2014. This stock is currently up +20% in 2014 versus a +10.8% gain in the S&P 500.

According to their company website, "Northrop Grumman is a leading global security company providing innovative systems, products and solutions in unmanned systems, cyber, C4ISR, and logistics and modernization to government and commercial customers worldwide." What does that mean? It means NOC makes bombers, unmanned drones, cyber security solutions, and logistics. If you're curious, C4ISR stands for command, control, communications, computers, intelligence, surveillance, and reconnaissance.

The fact that the world seems to be growing more dangerous, not less dangerous, should be a bullish undercurrent that lifts the defense sector. NOC should benefit because the American public does not have the stomach for another war. That means the U.S. will use more and more unmanned technology like NOC's drones.

The company has been performing well this year and NOC has raised guidance the last four quarters in a row. They reported their Q3 results on October 22nd. It was NOC's eight consecutive quarter in a row of earnings growth. Wall Street was looking for a profit of $2.14 a share on revenues of $5.9 billion. NOC delivered $2.26 a share. That's up +6% from a year ago. Revenues beat estimates at $5.98 billion.

NOC management has been trying to diversify their customer base and international sales are expected to hit 13% of total revenue in 2014 compared to 10% last year. NOC's Q3 saw its total backlog soar +8% to $38.5 billion from the prior quarter.

Once again management has raised their guidance. NOC expects 2014 earnings in the $9.40-9.50 zone compared to prior guidance of $9.15-9.35. Wall Street was estimating $9.35.

Shares of NOC have spent the last three weeks consolidating gains in the $135-140 zone. The point & figure chart remains bullish and is forecasting at $158.00 target. Given the stock's bullish trend of higher lows NOC could see a breakout soon.

Tonight I am suggesting a trigger to buy calls at $140.25.

- Suggested Positions -

Long 2015 Jan $145 call (NOC150117c145) entry $1.50

12/01/14 NOC has broken short-term support and looks poised to hit our stop loss
11/29/14 new stop @ 138.65
11/21/14 triggered @ 140.25
Option Format: symbol-year-month-day-call-strike

Red Robin Gourmet Burgers - RRGB - close: 71.76 change: +0.33

Stop Loss: 67.35
Target(s): To Be Determined
Current Option Gain/Loss: +18.6%
Average Daily Volume = 214 thousand
Entry on December 02 at $70.55
Listed on December 01, 2014
Time Frame: 4 to 8 weeks
New Positions: see below

12/04/14: RRGB served up a very quiet session on Thursday with shares consolidating sideways in a narrow range. In spite of its movement the stock did manage to outperform the major market indices with a +0.4% gain.

Earlier Comments: December 1, 2014:
RRGB is part of the services industry. They operate a chain of casual dining restaurants. According to a company press release, "Red Robin Gourmet Burgers, Inc. (www.redrobin.com), a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc., is the Gourmet Burger Authority, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries in a fun environment welcoming to guests of all ages. There are more than 500 Red Robin restaurants across the United States and Canada, including those operating under franchise agreements."

After big gains in 2013 the stock has had a rocky year in 2014. They beat earnings back in February but revenues missed the estimate. The stock rallied anyway. In May they reported earnings that beat both the top and bottom line estimates and shares soared. Then in August the stock reported its Q2 numbers that missed Wall Street's estimates by a wide margin. You can see the plunge lower on the daily chart.

It would appear that August may have been a one-quarter anomaly. RRGB reported their latest quarterly results on November 4th. Analysts were expecting a profit of $0.34 a share on revenues of $267.65 million. RRGB delivered earnings of $0.50 a share. That's a +56% increase from a year ago. Revenues missed estimates by a small margin at $267.4 million but that's still a +16% increase. The company said their number of guests were down -2.3% but the average bill was up +3.2%. Management expects comparable sales to rise +3% for fiscal 2014 and they believe RRGB will see operating profit margins of 21.3%. The stock soared on this report.

Casual dining stocks should see a big benefit from lower crude oil prices. Lower oil means lower gasoline prices at the pump. Gas prices have fallen to four-year lows in recent weeks. That means more disposable income for consumers to spend. After the OPEC decision last week we could see depressed oil prices for a long time.

Currently shares of RRGB have been consolidating gains in a sideways pattern under resistance near $70.00 the last couple of weeks. A breakout past $70.00 could spark some short covering. The most recent data listed short interest at 12.7% of the very small 13.8 million share float. Currently the Point & Figure chart is very bullish with a long-term target of $115.00.

The November intraday high was $70.45. Tonight I am suggesting a trigger to buy calls at $70.55.

- Suggested Positions -

Long 2015 Jan $70 call (RRGB150117c70) entry $2.95

12/02/14 triggered @ 70.55
Option Format: symbol-year-month-day-call-strike

The Sherwin-Williams Co. - SHW - close: 247.71 change: +1.26

Stop Loss: 238.25
Target(s): To Be Determined
Current Option Gain/Loss: +187.8%
Average Daily Volume = 526 thousand
Entry on November 05 at $231.00
Listed on November 01, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

12/04/14: SHW also displayed relative strength with a +0.5% gain. The stock is approaching round-number, psychological resistance at the $250.00 mark. A breakout here could spark some short covering (not that SHW has a lot of short interest).

I don't see any changes from my prior comments. Traders will want to consider taking profits now. I am not suggesting new positions at this time.

Earlier Comments: November 1, 2014:
It's not very often you see a company about to celebrate its 150th birthday. For SHW that will be the year 2016. The company has been in business since 1866. The Company's core business is the manufacture, distribution and sale of coatings and related products. SHW is headquartered in Cleveland, Ohio. They sell through over 4,100 company-operated stores. Their global group has sales in more than 115 countries. Sherwin-Williams is also a very well known dividend payer and has annually increased dividends since 1979.

The slow and steady economic improvement in the U.S. has been beneficial. The real estate market has also helped SHW. New homes need new paint. The pace of new home sales in the U.S. hit six-year highs last month. While home sales do tend to slow down a bit in the winter months SHW should benefit from lower input costs. Crude oil and natural gas are big components in the paint and coatings industry. The severe drop in oil the last few months is a blessing for SHW.

The company raised their earnings guidance back in July. They issued bullish guidance again in their latest quarterly report. SHW announced earnings on October 28th. Wall Street was expecting a profit of $3.22 per share on revenues of $3.18 billion. SHW said their earnings rose +31.4% to a record-setting $3.35 per share. Revenues were up +10.6% at $3.15 billion, which missed the estimate.

SHW's remodeling business saw growth. The real driver was paint sales. Their paint stores account for the lion's share of sales, which saw revenues up +20%. SHW also purchased 2.0 million shares of their stock last quarter and still have 6.8 million yet to buy in their stock buy back program.

Management was optimistic. SHW's Chairman and CEO MR. Christopher Connor, said,

"We are pleased to report record sales and earnings per share in the third quarter and first nine months of 2014 on the continued positive sales volume and strong operating results of our Paint Stores Group. The Paint Stores Group architectural volume growth was positive across all end market segments. The Comex acquisition continues to perform better than expected in the year. Our Consumer Group improved its operating results through higher volume sales and operating efficiencies. Our Global Finishes Group continues to improve its operating margins through improved operating efficiencies."

Management raised their 2014 EPS guidance above Wall Street's estimates. They also raised their revenue guidance but this was only in-line with consensus. SHW now expects Q4 sales in the +6% to +8% range. They expect earnings to be in the $1.30-1.40 range versus $1.14 in the fourth quarter of 2013.

The stock's relative strength has driven shares to new all-time highs and a +25% gain in 2014. The point & figure chart is bullish and forecasting at long-term target at $286.

Tonight we are suggesting a trigger to buy calls at $231.00.

- Suggested Positions -

Long 2015 Jan $240 call (SHW150117c240) entry $3.37

11/22/14 new stop @ 238.25
11/15/14 new stop @ 234.45
11/13/14 SHW is hitting potential resistance at $240. Traders may want to take profits now.
11/08/14 new stop @ 229.75
11/05/14 triggered @ 231.00
Option Format: symbol-year-month-day-call-strike

Semiconductor ETF - SMH - close: 56.06 change: +0.08

Stop Loss: 53.85
Target(s): To Be Determined
Current Option Gain/Loss: +418.2%
Average Daily Volume = 2.4 million
Entry on October 17 at $47.15
Listed on October 16, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

12/04/14: The SMH took today off to consolidate sideways at the $56.00 level. The ETF remains overbought. I would be tempted to take profits early here.

I am not suggesting new positions at this time.

Earlier Comments: October 16, 2014:
It looks like the correction in the semiconductor stocks might be done.

The SMH is the Market Vectors Semiconductor Exchange Traded Fund (ETF) that tries to mimic the performance of the Market Vectors Semiconductor 25 index. Semiconductors as a group had been strong performers with the SMH up +73% from its late 2012 lows.

A few weeks ago the industry started to see some profit taking. MCHP issued an earnings warning last week that that sparked the massive plunge in the SMH. The SMH has witnessed a -15% correction from its 2014 closing high to the closing low on Monday this week. Now it has started to bounce. It's possible all the panic selling is over.

Intel (INTC), a much bigger company than MCHP, just reported earnings on October 14th and the results were better than Wall Street expected. More importantly INTC offered slightly bullish guidance.

Bloomberg noted that INTC said its PC-processor business rose +8.9% last quarter. Sales for INTC's chips for notebook computers soared +21%. Even chips for desktop PCs rose +6% in the third quarter.

The strong results from INTC have helped buoy the SMH, which is starting to rebound after testing (and piercing) long-term support on its weekly chart (shown below).

We suspect the worst might be over. However, this could be a volatile trade. There are a lot of semiconductor companies who have yet to report their results.

The SMH saw its rally stall under $47 and near its 200-dma. Tonight we are suggesting a trigger to buy calls at $47.15.

- Suggested Positions -

Long 2015 Jan $50 call (SMH150117c50) entry $1.10

11/29/14 new stop @ 53.85
11/22/14 new stop @ 52.25
11/20/14 new stop @ 51.40
11/12/14 new stop @ 50.85, readers may want to just take profits now!
11/01/14 new stop @ 48.85
10/25/14 new stop @ 47.85
10/21/14 new stop @ 46.35
10/17/14 triggered @ 47.15
Option Format: symbol-year-month-day-call-strike

Under Armour, Inc. - UA - close: 69.59 change: -0.29

Stop Loss: 68.85
Target(s): To Be Determined
Current Option Gain/Loss: -53.1%
Average Daily Volume = 2.6 million
Entry on November 21 at $71.05
Listed on November 19, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

12/04/14: It might be time to worry about our UA trade. Shares tried to rally but strength faded this morning. Granted the broader market also had a down day but we are turning cautious on UA and raising the stop loss up to $68.85.

I am not suggesting new positions at this time.

Earlier Comments: November 19, 2014:
UA is in the consumer goods sector. "Under Armour, the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. Under Armour's wholly owned subsidiary, MapMyFitness, powers one of the world's largest Connected Fitness communities. The Under Armour global headquarters is in Baltimore, Maryland." (source: company press release)

Apparel sales can be tricky as fashion fads come and go. Yet right now athletic wear has been gaining traction. Athletic wear sales are up +9% in the past year. Two giants in this industry, Nike (NKE) and Under Armour (UA), are outperforming the group.

NKE is the giant with annual sales of $28.8 billion. UA is a tenth the size of NKE at $2.87 billion a year in sales. It's not surprising to see UA outgrowing its rival. NKE managed +15% sales growth in the third quarter. UA delivered 30%. NKE reported gross margins of 46.6%. UA has gross margins of 49.6%. Both companies delivered earnings growth of more than 20% year over year.

UA is impressive because its apparel sales have been rising +30% for the last three quarters in a row. Apparel is important because it's 75% of UA's business. Currently UA only has 2% of the global athletic apparel market and many believe it has significant room to grow.

Investors were a little concerned when apparel sales only grew +25.6% in the third quarter. However, UA has been consistently beating Wall Street's earnings estimates on both the top and bottom line four quarters in a row. They have also raised guidance four quarters in a row.

Their most recent earnings report was October 23rd. UA delivered earnings of $0.41 a share with revenues up +29.7% to $937.9 million. Analysts were only expecting $0.40 on revenues of $925 million.

Management raised their Q4 guidance but they warned that growth would slow down to only +22% in 2015. It's worth noting that UA has a history of under promising and over delivering. The stock initially sold off on this guidance but investors quickly bought the dip. Shares of UA have broken through the two-month trend line of lower highs and technical resistance at the 50-dma. The point and figure chart is bullish and forecasting an $87 target.

The plunge in gasoline prices is a tailwind for retailers and it should be a strong holiday shopping season. Another bonus for UA could be the weather. Last year winter was colder than normal and UA had strong sales of their coldgear line. This year we could see the coldest winter in decades, which could also bode well for UA.

UA has spent the last few days consolidating sideways in the $68.00-70.00 range. Today saw UA showing relative strength (+1.6%) and breaking out past resistance at $70.00. The intraday high was $70.72. More aggressive traders may want to buy calls now. I am suggesting a trigger at $71.05 to buy calls.

- Suggested Positions -

Long 2015 Jan $75 call (UA150117c75) entry $1.60

11/21/14 trade opened on gap higher at $71.19
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Currently we do not have any active put trades.