Option Investor

Daily Newsletter, Tuesday, 1/20/2015

Table of Contents

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

Market Wrap

Oil, Earnings And Central Banks

by Thomas Hughes

Click here to email Thomas Hughes
A full slate of earnings reports, economic data and central bank meetings have the bulls and bears jockeying for position.


Today's market action was another roller coaster ride that had the indices testing support once again. A long list of earnings reports, two major central bank meetings and economic data, mostly scheduled for later this week, have bulls ducking for cover and bears seeking shelter.

Asian markets began the trading day with a rally that initially carried over into the European markets. Chinese GDP was the reason, holding steady from the previous quarter and slightly above expectations. European indices were largely higher on this news as well as expectations for tomorrow's ECB meeting but the gains did not hold leaving many flat for the day. The positive sentiment had an effect on early trading here at home with futures indicating an opening 6-8 points above last weeks close.

The big headline impacting early trading was a downgrade of 2015 GDP expectation from the IMF. The new projection is for global growth of only 3.5%, compared to 3.8% in the previous report. They also downgraded 2016 GDP by an equal 0.3% to 3.7%. The report went on to say that there are significant growth factors in play such as low oil prices but these are being offset by “persistent negative forces”.

Market Statistics

The bulls were able to keep futures positive up to and after the opening bell but were not able to sustain a rally. The SPX opened with a gain of 1 or 2 points and moved another 4 or 5 points higher before selling in the energy and financial sectors dragged it lower. By 10Am the SPX was down by 8 points and proceeded to trade in negative territory for most of the day. After lunch the markets began to move higher, off of the lows, but did not move into the green until just after 2:30. From that point on market action remained in the green until the close of trading.

Economic Calendar

The Economy

Only one economic release today, the National Association of Home Builders Housing Market Index. The index, a gauge of builder sentiment, dropped by one point from an upward revision of one point. The January reading of 57 is one point below expectations but remains near an 8 year high. Other housing data due to be released throughout week includes housing starts, building permits and existing home sales.

Mark Zandi reports that Moody's Survey of Business confidence remains near record highs. The index rose by a tenth of a percent to 38.3 after ending last year at a record high. According to the summary sentiment in the US remains near record highs while business spending, hiring and sales are all strong. Improvement in the credit market also remains and expectations for the current year are strong.

Aside from weekly jobless claims the only other major report this week is the Index of Leading Indicators released on Friday. Jobless claims are expected to decline and the Leading Indicators are expected to show a gain of 0.4%.

The Oil Index

Oil got hit hard again although it did not set a new low. WTI lost as much as 4% in today's trading following the IMF's global GDP down grade followed by a similar drop in Brent. The downgrade, along with signs that production levels remains strong, is not good for oil bulls who need to see supply/demand stability. As of yet there is still no sign that demand is matching supply in a way to support prices that. < p> The Oil Index fell in today's session but not hard. The index dropped about 2%, compared to 4% for the underlying commodity, but regained most of the loss. Today's action was another test of support for the oil sector as short term and long term trends collide. The index is wedged between a down trend line (short term) and an up trend line (long term) with indicators in line with longer term support. The question is, which line will hold? Oil prices are low and very likely heading lower which is having an effect on earnings outlook and driving the index lower but at the same time low oil prices are good for the economy and by extension oil demand rising oil prices. The indicators are in line with support at this level and rolling into a trend following signal. However, a break above the down trend line near 1280-1300 is required. A drop below the up trend line could take the index as much as 100 points lower.

The Gold Index

Gold moved higher again today, adding another 1.5% or so to last week's prices. Gold is now trading around $1290 supported by long term economic outlook and flight out of currency. The metal is receiving the benefit of recent turmoil in forex trading centered on the Swiss National Bank de-pegging move last week. Momentum is to the upside and could carry prices higher with $1300 the next target for resistance. Regardless of direction I expect to see more volatility in gold and currency once the ECB and BOJ release their policy statements later this week.

The Gold Miners ETF GDX extended its break above resistance. Today the ETF moved over 2.5% higher after creating a small gap at the open. The ETF is moving higher, driven by rising gold prices, with indicators in line with higher prices. At current levels gold is more than 10% off of the lows set last year and in position to boost earnings expectations and outlook among the miners.

According to MACD bullish momentum is strong and on the rise, confirmed by a bullish crossover on the stochastic, and pointing to higher prices. The stochastic crossover is providing an additional sign of strength by forming above the upper signal line. Assuming that the ETF has indeed bottomed price action is confirming the reversal and the indicators are now confirming price action. This move has a target near $26.75, previous resistance and an important retracement level.

In The News, Story Stocks and Earnings

Earnings season is not off to a great start. We came into the season with the energy sector dragging expectations down and now weak reporting from the banking sector has them down even further. According to FactSet the average growth expected for the S&P 500 is now just 0.6%. This is the lowest expectation for over 2 years and down from last week's 1.7%. If trends hold true, and so far it looks like they will, most companies will beat the average estimate. As of last Friday 37 companies have reported and 84% of them reported above the estimate.

Johnson&Johnson reported before the bell, meeting expectations but failing to inspire a rally. The company reported earnings that were basically in line with projections with light revenue and full year guidance slightly above consensus. While in line with estimates the results are significantly down from last year and could be impacted in future quarters by negative currency conversions, this quarter alone saw negative impacts over 7%. Today the stock fell sharply at the open and is now trading near potential support.

Multiple names reported after the bell, all moving their respective stock. Netflix was the first to report and sent its shares skyrocketing more than 10%. The streaming media provider reported earnings of $0.72 versus the consensus estimate of $0.45 and a strong increase in new users. The one negative is that revenue came in a little light so the amount of further improvement remains questionable. The stock had been trading higher today and with after hours action is now near resistance at $395.

IBM also beat earnings expectations but did not spark a rally in its shares. Big Blue reported EPS of $5.81, $0.40 above estimates, but revenue was light and 2015 guidance is low. Shares initially surged on the report but eventually fell on weak expectations and nearly 3 years of continuously declining revenue. At last look shares were down about 2% and trading near the long term low.

Cree, maker of semi-conductors, intensly bright LED lights and other electronics reported a strong quarter with results in line with expectations. Earnings are down on a year over year basis but execs say that demand is strong, especially in the lighting business, and guided full year earnings in a range above the current consensus. Today's announcement sent the stock up by 10% in after hours trading.

The Indices

Market action was a little volatile today but only a little. One cause was oil. WTI plunged by 4%, but down to test current lows, not new ones, so the market did not react quite the same way it has in the past. Today's action was a slow and measured dip to support that found enough buyers to support prices. The Dow Jones Transportation led today's action with a gain of 0.96% by the close of trading. The transports never really dipped into the red like the other indices and are now trading just below the short term moving average. The index is moving higher from the bottom of a 2 ½ month range with indicators in line with the move; stochastic is forming a weak bullish crossover and momentum is shifting to the upside. Potential resistance exists at the moving average, near 8,850, but my current target is 9,250 and the upper boundary of the trading range. The longer term trend is up with no sign of reversing at this time but the index could remain range bound in the near to short term while earnings season plays out.

The NASDAQ Composite was able to squeak out a gain of nearly a half percent. The tech heavy index closed 0.44% higher after a strong open and test of support had it down by a half percent. Today's action created a doji and one that may be more important than the average. This one occurred along the long term trend line and as a test of support coincident with earnings season and important central bank meetings. As an individual indication of market direction it is not very strong but along with other factors serves to highlight support along the long term trend line. The trend is up and for now the index appears to be making another bounce along it. The indicators, while bearish at this time, remain consistent with support in the 4,500-4,600 range.

The S&P 500 closed with a gain of 0.15% after dipping nearly a half percent during the day. Today's action was similar to that of the NASDAQ and created a small bodied candle after testing support. Support is the combination of the long term trend line and the September all time high. The indicators are also consistent with long term support and rolling over into a possible trend following entry. First target for resistance is the short term moving average near 2035 with next target near 2050. Support, in the range of 2010-2020, could be tested again while earnings are coming out. A move lower will not be critical until below 2,000 and could take the index down as much as 50 to 100 points.

The Dow Jones Industrial Average brings up the rear today, barely closing with any gains at all, only 0.02%. The Dow, out of all the indices, had the most trouble getting above back above break even today and created a doji in the process. Price action is confirming support below 17,500 with indicators that consistent with support. If support continues to hold possible upside targets exist near the current all time high around 18,000. If not a move below support could take the index down as much as 1,000 points to my next targets near 16,500.

The indices appear to be consolidating along their long term trend lines and support areas. They are at a position on the charts where they could easily go one way or the other; bounce higher in line with trends or break support and move lower. While there are plenty of reasons to fear a broad market decline I don't think one is coming. The market is digesting earnings, getting a read on economics and waiting for a round of central bank meetings to come and pass. So far earnings are ugly, but not bad, and economic trends remain intact. The central banks are the real question now but how much long term effect can the ECB and BOJ have on the US stock market?

What is more important and could keep the market from moving too far in either direction are events next week. The FOMC has their meeting on Wednesday and we get the first read on 4th quarter 2015 GDP.

Until then, remember the trend!

Thomas Hughes

New Option Plays

Poised For New Lows

by James Brown

Click here to email James Brown


Stratasys Ltd. - SSYS - close: 71.62 change: -1.11

Stop Loss: 74.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.3 million
Entry on January -- at $---.--
Listed on January 20, 2015
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The new 3D printing technology is amazing. Today 3D printing is being used in aerospace, automotive, consumer products, dental, medical, and several more industries. Right now the group seems to be facing challenges with valuations and competition.

According to the company, "Stratasys Ltd. (SSYS), headquartered in Minneapolis, Minnesota and Rehovot, Israel, is a leading global provider of 3D printing and additive manufacturing solutions. The company's patented FDM®, PolyJet™, and WDM™ 3D Printing technologies produce prototypes and manufactured goods directly from 3D CAD files or other 3D content. Systems include 3D printers for idea development, prototyping and direct digital manufacturing. Stratasys subsidiaries include MakerBot and Solidscape, and the company operates the digital parts manufacturing service, Stratasys Direct Manufacturing."

The stock delivered huge gains in 2012 and 2013. Unfortunately for investors the stock peaked back in very late 2013-early 2014. Earnings for SSYS have been mixed and the company's most recent report back in November saw management lower guidance.

One of the biggest issues for the handful of 3D companies out there right now is competition. Not only are smaller rivals popping up but technology heavyweight Hewlett-Packard (HPQ) is jumping into the space. In October last year HPQ said their new Multi-Jet Fusion 3D printer can operate 10 times faster than its rivals but it will not be available until 2016. That's a super high-end machine. HPQ is also making a consumer-level product with a $1,900 price target.

Technically shares of SSYS look broken. Wall Street analysts have been lowering price targets on the stock for weeks and SSYS has slipped below all of them. The Point & Figure chart is bearish and forecasting a $63 target. The oversold bounce from $70 already appears to be failing with today's display of relative weakness (-1.5%). Tonight we are suggesting a trigger to buy puts at $71.40. Please note I do consider this a more aggressive trade because the 3D printing stocks can be volatile. The most recent data listed short interest at 22% of the relatively small 47.4 million share float. Consider using small positions to limit risk.

Trigger @ $71.40 *consider small positions*

- Suggested Positions -

Buy the MAR $65 PUT (SSYS150320P65) current ask $3.10

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Equities Endure Another Volatile Day

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market experienced another volatile day but made little progress as investors look toward Thursday's ECB meeting.

DOV hit our stop loss.

Current Portfolio:

CALL Play Updates

Alkermes plc. - ALKS - close: 70.79 change: +0.79

Stop Loss: 63.65
Target(s): To Be Determined
Current Option Gain/Loss: +103.2%
Average Daily Volume = 833 thousand
Entry on January 07 at $63.01
Listed on January 06, 2015
Time Frame: Exit PRIOR to February option expiration
New Positions: see below

01/20/15: ALKS continues to flex its relative strength muscle. Shares only dipped to $68.58 intraday and rallied to another hew high by the closing bell. More conservative investors may want to raise their stop again.

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

Big Lots Inc. - BIG - close: 44.14 change: -1.41

Stop Loss: 43.40
Target(s): To Be Determined
Current Option Gain/Loss: -38.6%
Average Daily Volume = 1.26 million
Entry on January 15 at $45.75
Listed on January 14, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

01/20/15: Tuesday proved to be a rough day for shares of BIG. The stock followed the market lower but failed to see the same afternoon bounce. It is noteworthy that BIG found support near both its 10-dma and 200-dma, which represent short-term and longer-term technical support.

The intraday low was $43.64. If BIG sees any follow through lower then odds are it will hit our stop at $43.40.

Earlier Comments: January 14, 2015:
It would appear that investors have a pretty short memory when it comes to BIG. This company is in the services sector. They're part of the discount store industry.

According to company marketing materials, "Big Lots Inc. (BIG) is a unique, non-traditional, discount retailer operating 1,495 BIG LOTS stores in 48 states with product assortments in the merchandise categories of Food, Consumables, Furniture & Home Decor, Seasonal, Soft Home, Hard Home, and Electronics & Accessories."

The stock saw big gains in 2014 at least until they reported their Q3 earnings in December. That big drop on the daily chart was a reaction to BIG's earnings results. Analysts were expecting a loss of $0.05 a share on revenues of $1.12 billion. BIG reported a loss of $0.06 with revenues virtually flat at $1.11 billion. Guidance was only in-line with Wall Street's estimates.

The good news is that BIG does expect to see a profit again in the fourth quarter. They also reported +1.4% comparable store sales growth in the third quarter, which not only beat the -2.5% comp sales from a year ago but was the first positive growth in three years. None of that mattered. BIG plunged -17% on its Q3 report and didn't find support until the $38.00 area.

Since then shares have seen something of a turnaround. After consolidating sideways for a couple of weeks BIG has shot higher in January while most of the broader market has been sinking. The breakout above technical resistance at its 50-dma and its 200-dma is encouraging.

This morning the U.S. retail sales data came in below expectations and yet BIG managed to shrug off this headline. Traders bought the dip near the 50-dma (around $44) this morning. By the closing bell BIG was outperforming with a +1.6% gain.

It looks like this relative strength may continue. Further gains could spark some short covering. The most recent data listed short interest at 17% of the relatively small 52 million share float. Today's intraday high was $45.65. We are suggesting a trigger to buy calls at $45.75. The 200-dma is at $43.50. We'll start this trade with a stop at $43.40.

- Suggested Positions -

Long Apr $47.50 CALL (BIG150417C47.5) entry $2.85

01/15/15 triggered @ 45.75
Option Format: symbol-year-month-day-call-strike

Monster Beverage Corp. - MNST - close: 117.44 change: -1.45

Stop Loss: 115.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.1 million
Entry on January -- at $---.--
Listed on January 17, 2015
Time Frame: Exit PRIOR to earnings in late February
New Positions: Yes, see below

01/20/15: MNST found support near $117 several times midday. Unfortunately shares didn't see the same late-day bounce that the major indices did. Currently we are on the sidelines waiting for a new high. Our suggested entry point to buy calls is $120.25.

Earlier Comments: January 17, 2015:
Shares of MNST have been extremely effervescent. Last year the NASDAQ composite rallied +13.4%. Yet MNST soared +59% in 2014. Thus far in 2015 the NASDAQ is down -2.1% while MNST is up +9.7%. The stock looks poised for more gains.

The company's market material describes MNST as, "Based in Corona, California, Monster Beverage Corporation is a holding company and conducts no operating business except through its consolidated subsidiaries. The Company's subsidiaries market and distribute energy drinks and alternative beverages including Monster Energy® brand energy drinks, Monster Energy Extra Strength Nitrous Technology® brand energy drinks, Java Monster® brand non-carbonated coffee + energy drinks, M3® Monster Energy® Super Concentrate energy drinks, Monster Rehab® non-carbonated energy drinks with electrolytes, Muscle Monster® Energy Shakes, Übermonster® energy drinks, and Peace Tea® iced teas, as well as Hansen's® natural sodas, apple juice and juice blends, multi-vitamin juices, Junior Juice® beverages, Blue Sky® beverages, Hubert's® Lemonades and PRE® Probiotic drinks."

A big part of last year's gains in MNST came in August. On August 15th, 2014 it was announced that Coca-Cola (KO) was buying a 16.7% stake in MNST. This is part of a long-term strategic partnership to conquer the energy drink category. This generated a +20% pop in shares of MNST and the stock has been in rally mode ever since.

Earnings have been mediocre. MNST has beaten Wall Street's bottom line earnings estimate the last three quarters in a row. Yet they also missed analysts' revenue estimates those same three quarters. Revenue growth has actually been slowing down. Their Q4 2013 revenues grew +14.7% while their Q3 2014 revenue growth was down to +7.7%. Investors don't seem to care.

There has been a lot of analyst action on this name with both upgrades and downgrades in the last several weeks. So far the upgrades are outnumbering the downgrades. This past week saw Cowen upgrade MNST and give it a $140 price target.

The bears are that MNST will suffer from stronger competition from Red Bull, their main rival. They've been rival for years, so what's going to change? There is the valuation argument that MNST is too expensive with the stock trading at 36 times earnings.

Bulls can argue that MNST will see stronger growth when they make the switch to KO's global distribution system. Right now international sales only make up 22% of MNST's total revenues and MNST only has 5% of the international energy drink market. That compares to 37% of the energy drink market in the U.S. By joining KO's distribution platform it's going to give MNST a lot more exposure overseas, especially in Latin America and China. Currently MNST has zero exposure in China. There is speculation that MNST could double its market shares internationally pretty quickly.

Another bonus for MNST is the consumer spending situation in the United States. About 70% of MNST's sales come from convenience stores and gas stations. The massive drop in gasoline prices is very bullish for MNST since consumers will have more money in their pocket after filling up.

At a recent investor meeting MNST said that sales growth in the energy drink category had "re-accelerated" after three consecutive quarters of slowing sales growth (not declines, just slower growth).

There is speculation that MNST might be able to raise prices in the U.S. since their rival, Red Bull, recently raised their prices. There is also the relationship with KO as the company could up its stake in MNST to 25%. Of course they could outright buy MNST too.

The point & figure chart for MNST is bullish and forecasting a long-term $155.00 target. We are not setting a target tonight. The plan will be to exit prior to earnings in late February. The $120.00 level might be round-number resistance so we are suggesting a trigger to buy calls at $120.25.

Trigger @ $120.25

- Suggested Positions -

Buy the MAR $125 CALL (MNST150320C125)

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

Royal Caribbean Cruises - RCL - close: 83.00 change: +0.01

Stop Loss: 79.65
Target(s): To Be Determined
Current Option Gain/Loss: -13.9%
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

01/20/15: Traders bought the dip in RCL midday near its rising 30-dma (again). Yet the stock's rebound only lifted shares back to breakeven on the session.

I am not suggesting new positions.

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

01/14/15 new stop @ 79.65
12/24/14 triggered @ 82.30
Option Format: symbol-year-month-day-call-strike

Constellation Brands - STZ - close: 111.00 change: -0.60

Stop Loss: 104.85
Target(s): To Be Determined
Current Option Gain/Loss: +25.5%
Average Daily Volume = 1.25 million
Entry on January 15 at $109.36
Listed on January 14, 2015
Time Frame: Exit prior to February expiration
New Positions: see below

01/20/15: After big gains on Friday it wasn't surprising to see a little profit taking in STZ. Shares slipped 60 cents to $111.00. Our options definitely deflated a bit.

Broken resistance in the $109 area should be new support. More conservative traders may want to start raising their stop loss.

Earlier Comments: January 15, 2015:
Today the big players in the beer industry like Anheuser-Busch InBev (BUD) and Molson Coors (TAP) are losing market share to smaller craft beer brewers. Yet STZ actually seeing momentum in its beer portfolio.

STZ is part of the consumer goods sector. According to the company's website, "Constellation Brands, Inc. is a leading wine, beer and spirits company with a broad portfolio of premium brands. Constellation is the world leader in premium wine, the leading multi-category beverage alcohol company in the U.S. and the number three beer company in the U.S. Headquartered in Victor, New York, Constellation Brands is an S&P 500 Index and Fortune 1000® company with more than 100 brands in our portfolio, sales in approximately 100 countries and operations in approximately 40 facilities."

Last year the stock was a strong performer. The S&P 500 rallied about +11% in 2014 while STZ surged +39%. Investors have been consistently buying dips. The relative strength from last year has carried into 2015.

The company recently reported earnings on January 8th. Wall Street was expecting a profit of $1.14 per share on revenues of $1.51 billion. STZ said their earnings rose +11.8% to $1.23 a share. Revenues were up +7% to $1.54 billion, beating estimates on both counts. Management then raised their 2015 guidance from $4.10-to-$4.25 to $4.25-to-$4.35. That compares to Wall Street's 2015 estimate of $4.24.

STZ's CEO Rob Sands commented on their latest results saying, "We achieved outstanding results for the third quarter driven by the exceptional ongoing momentum for our beer business." Their beer sales rose +16% and gained market share.

The stock has seen multiple upgrades in January and currently trading at all-time highs. Today traders bought the dip near $105.00. The stock looks poised to breakout past short-term resistance at $108.50. The point & figure chart is bullish and forecasting a long-term target of $127.00.

We are suggesting a trigger to buy calls at $108.65. We'll start this trade with a stop at $104.85.

- Suggested Positions -

Long FEB $110 CALL (STZ150220C110) entry $2.47

01/15/15 triggered on gap open at $109.36, trigger was $108.65
Option Format: symbol-year-month-day-call-strike

Whole Foods Market, Inc. - WFM - close: 51.31 change: -0.15

Stop Loss: 48.75
Target(s): To Be Determined
Current Option Gain/Loss: +27.0%
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

01/20/15: WFM spiked higher this morning but the rally failed pretty quick. Shares found support in the $50.70-50.80 zone before lunchtime. I don't see any changes from my prior comments.

I am not suggesting new positions at this time.

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: 82.15 change: -0.76

Stop Loss: 78.75
Target(s): To Be Determined
Current Option Gain/Loss: -26.5%
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: see below

01/20/15: ZBRA briefly traded to new five-month highs on the morning spike higher. Traders bought the dip around $81.25 late morning. ZBRA is still trading in an $80-83 trading range. I am not suggesting new positions at the moment.

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

Eagle Materials - EXP - close: 72.11 change: -1.19

Stop Loss: 73.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 933 thousand
Entry on January -- at $---.--
Listed on January 15, 2015
Time Frame: Exit PRIOR to earnings on Feb. 3rd
New Positions: Yes, see below

01/20/15: EXP underperformed the market today with a -1.6% decline. We are still on the sidelines waiting for a breakdown below support. Currently our suggested entry point to buy puts is at $69.45.

Earlier Comments: January 15, 2015:
EXP is in the industrial goods sector. The company describes itself as, "Eagle Materials Inc. manufactures and distributes Cement, Gypsum Wallboard, Recycled Paperboard, Concrete and Aggregates, and Oil and Gas Proppants from 40 facilities across the US."

The crashing price of oil could have consequences for EXP. Energy companies will cut spending that includes cutting jobs. As they cut jobs, demand for housing will fall. That will hurt the builders and demand for wallboard will go down. Major U.S. homebuilders are already sounding the alarm with executives at both Lennar (LEN) and KB Home (KBH) warning about margins this week.

Another challenge for EXP will be their proppants business. As energy companies drill fewer wells there will be less demand for proppants.

Earnings were already struggling last year with EXP missing Wall Street's estimates three out of the last four reports. The one report they beat estimates they only beat by a penny and missed revenues at the same time.

Technically EXP has broken down into a bear market. The point & figure chart is bearish and forecasting at $63 target. Currently EXP is poised to break support near $70.00. The January 14th low was $69.57. We are suggesting a trigger to buy puts at $69.45. Plan on exiting prior to EXP's earnings report in February.

Trigger @ $69.45

- Suggested Positions -

Buy the Feb $65 PUT (EXP150220P65)

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

Starwood Hotels & Resorts - HOT - close: 72.78 change: +0.30

Stop Loss: 76.55
Target(s): To Be Determined
Current Option Gain/Loss: -13.8%
Average Daily Volume = 2.3 million
Entry on January 14 at $73.90
Listed on January 12, 2014
Time Frame: Exit prior to earnings in mid February
New Positions: see below

01/20/15: HOT snapped a six-day losing streak with today's +0.4% bounce. Broken support near $74.00-75.00 should be new overhead resistance.

I am not suggesting new positions at the moment.

Earlier Comments: January 12, 2015:
HOT is in the services sector. According to a company press release, "Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with more than 1,200 properties in 100 countries, and 181,400 employees at its owned and managed properties. Starwood is a fully integrated owner, operator and franchisor of hotels, resorts and residences with the following internationally renowned brands: St. Regis®, The Luxury Collection®, W®, Westin®, Le Meridien®, Sheraton®, Four Points® by Sheraton, Aloft®, and Element®. Starwood also owns Starwood Vacation Ownership, Inc., a premier provider of world-class vacation experiences through villa-style resorts and privileged access to Starwood brands."

The company's most recent earnings report was October 28th. The company beat the bottom line estimate by a penny but missed the revenue number. Management then guided lower. Since then at least two analyst firms (UBS and JP Morgan) have downgraded shares of HOT. JPM said their downgrade was on valuation concerns. Other analysts have issued worries about how the strong dollar might hurt HOT's financials.

There are also concerns that Airbnb could be hurting the hotel business. Airbnb's growth has surged since it was founded back in 2008. Just four year later Airbnb announced their 10 millionth night booked. It may not be fair to say all 10 million of those would have gone to the hotel industry but certainly a good chunk of Airbnb's business has been stolen from more traditional lodging services.

Technically shares of HOT look weak. The point & figure chart is bearish and forecasting at $68 target (which could get worse). Today's breakdown under support near $75.00 looks ominous. The intraday low today was $74.06. Tonight I am suggesting a trigger to buy puts at $73.90. We will plan on exiting prior to HOT's earnings report in mid February.

- Suggested Positions -

Long FEB $70 PUT (HOT150220P70) entry $1.60

01/14/15 triggered @ 73.90
Option Format: symbol-year-month-day-call-strike

WESCO Intl. - WCC - close: 66.49 change: -0.08

Stop Loss: 68.65
Target(s): To Be Determined
Current Option Gain/Loss: -2.8%
Average Daily Volume = 619 thousand
Entry on January 14 at $67.76
Listed on January 13, 2014
Time Frame: Exit PRIOR to earnings on January 29th
New Positions: see below

01/20/15: WCC delivered a relatively quiet session and closed virtually unchanged on Tuesday. I still think shares could see an oversold bounce. I'm suggesting traders wait for a new lower high before considering new positions.

Earlier Comments: January 13, 2015:
Last year the S&P 500 gained +11% as the U.S. economy slowly started to gain some momentum. That was not the case for WCC. This stock underperformed the market in 2014 with a -16% decline.

According to the company's marketing materials, "WESCO International, Inc. (WCC), a Fortune 500 company headquartered in Pittsburgh, Pennsylvania, is a leading provider of electrical, industrial, and communications maintenance, repair and operating (MRO) and original equipment manufacturers (OEM) products, construction materials, and advanced supply chain management and logistic services. 2013 annual sales were approximately $7.5 billion. The company employs approximately 9,200 people, maintains relationships with over 25,000 suppliers, and serves over 75,000 active customers worldwide.

Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. WESCO operates nine fully automated distribution centers and approximately 475 full-service branches in North America and around the world, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations."

Last year was challenging for WCC's earnings results. They missed Wall Street's earnings estimates three quarters in a row. The only reason they beat estimates back in October was because management had lowered their guidance back in July. So WCC managed to beat Wall Street's lowered estimates. On December 17th WCC lowered their guidance again, this time for fiscal year 2015. Management tried to soften the blow by announcing a $300 million stock buyback program over the next two years.

Technically WCC looks terrible. It formed a bearish double top with the peak in January and June in 2014. Shares have developed a bearish trend of lower highs. The point & figure chart is bearish and forecasting at $55.00 target. Now it appears to be breaking down under key support near $70.00. The intraday low today was $68.82. We are suggesting a trigger to buy puts at $68.75.

This is going to be a short-term trade. We will plan on exiting prior to WCC's earnings report on January 29th.

- Suggested Positions -

Long FEB $65 PUT (WCC150220P65) entry $1.80

01/15/15 new stop @ 68.65
01/14/15 triggered on gap down at $67.76, trigger was $68.75
Option Format: symbol-year-month-day-call-strike


Dover Corp. - DOV - close: 70.13 change: +0.56

Stop Loss: 70.35
Target(s): To Be Determined
Current Option Gain/Loss: +26.1%
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

01/20/15: The stock market spiked higher this morning and then rallied this afternoon. Both times DOV tagged our stop loss at $70.35. Our play is closed but I'd keep DOV on your watch list. A new breakdown under the December lows near $67 could be a new bearish entry point.

- Suggested Positions -

Long MAR $70 PUT (DOV150320P70) entry $2.30 exit $2.90 (+26.1%)

01/20/15 stopped out
01/15/15 new stop @ 70.35
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