The +212 point Dow gain today was confirmation of the +319 point Dow rebound yesterday. This may be the start of something big. If the S&P breaks over resistance at 1,950 on Friday and the Russell 2000 moves over 1,035 the bears will be running for the forest.
The market is finally starting to find its sea legs after a very rocky start to 2016. While we cannot guarantee that we will not suffer from another bout of seasickness in the coming days the internals are starting to turn positive.
Today's gain was even more amazing since the Shanghai Composite was down -6.4% last night. U.S. investors are starting to ignore China and that is positive for our markets.
The Fed is on the sidelines for the rest of the year according to some measures and it appears portfolio managers are trying to capture some gains before the "Sell in May" cycle, which is particularly strong in an election year.
I am adding a couple more longs and could have added a dozen more because suddenly there is an over abundance of candidates with good charts and stories. Assuming we don't crash and burn on Friday, I will add some more this weekend.
NEW DIRECTIONAL CALL PLAYS
PII - Polaris Industries - Company Description
Polaris makes off road vehicles, snowmobiles and motorcycles. They compete with Arctic Cat and have 8,100 employees. They are about four times larger than ACAT. They had some earnings issues from the lack of snow but their motorcycle business helped smooth out the rough spots. The company reduced guidance in December and shares declined from $96 to $68 by late January.
In Q4 sales declined -20% because of the lack of snow but also because of the oil recession. They sell a lot of off road equipment to oil field workers and they are not buying today. When oil field workers are employed they make a lot of money with starting wages in the $70-$80K range when times are good so there is a lot of extra cash floating around. Retail sales in oil regions were down -10% in Q4.
However, despite the lack of snow and a rough Q4 the company still managed to increase sales for 2015. That is impressive when snowmobile sales declined -25%. We have had some significant snowstorms in 2016 so that snowmobile inventory is probably shrinking in Q1.
Motorcycle sales rose +43% in Q4 so there is a bright side to warm weather and no snow. Sales in that division were up +74% for the full year.
Polaris is the number one off road vehicle manufacturer in the U.S. and are expecting a better 2016 with most of the growth in the second half.
Earnings are April 26th.
Shares are about to break over resistance at $89, market permitting. I am recommending the April $95 calls currently $2.00 on a breakout.
With a PII trade at $89.50
Buy April $95 call, currently $2.00, stop loss $83.85
IWM - Russell 2000 ETF - ETF Description
The Russell 2000 has come alive. Over the last two weeks the small cap index has been surging with bigger daily gains than the big cap indexes. The final resistance hurdle is 1,035 with another speed bump at 1,050 then it is clear sailing until 1,150. That is better than 100 points from today's close.
While we cannot guarantee it will happen the green shoots are appearing Today's gains was confirmation that the Wednesday rebound could be the start of a major move to the upside.
I am recommending we buy calls on the IWM in hopes of capturing the gains on a breakout that could run to the 115 level. The IWM is actually a little ahead of the Russell and was testing that local resistance today.
With an IWM trade at $103.25
Buy April $105 call, currently $1.83, no initial stop loss.
NEW DIRECTIONAL PUT PLAYS
No New Bearish Plays