Xylem Inc (XYL) is a provider of pumps and pumping equipment for water and wastewater applications. The company’s stock is currently trading around $38.35 in a 52 week range of $23.61-$38.50. The stock has performed well over the past year with shares rallying nearly 36% over the past 12 months. The stock made a new all-time high today and is up nearly 1% on the day. Options action during today’s trading session also suggests that this trend could continue through July expiration.  Earlier in the session a trader bought 1,375 XYL Jul 40 calls for $1.80. This is a very bullish bet and this block represents volume nearly 20 times the average daily option volume in XYL. With stock trading at a new 52 week high and well above the Ichimoku Cloud we believe that XYL is setting up well for a long position.

Trade: I bought the XYL Jul 40 Calls for $1.80
Risk: $180 per 1 lot
Reward: Unlimited
Breakeven: $41.80

Tesla Motors, Inc (TSLA) is a designer and manufacturer of electric cars and electric vehicle components. The company’s stock is currently trading around $202.50 in a 52 week range of $33.80-$205.50. TSLA opened at a new 52 week high before selling off slightly as buyers seem to be coming into TSLA stock ahead of their quarterly earnings report set to be released on February 19^th after the market close. Over the past 8 quarters the stock has rallied 5 times on earnings day and has sold off 3 times with an average move of 10.6%. Currently, the options market is implying a move of $24.00 by this Friday’s expiration. With shares of TSLA trading well above the Ichimoku Cloud and the future cloud sloping strongly upward we believe that TSLA is setting up well for a long ahead of earnings. Using the implied move we can calculate an upside target of $226.50 for expiration and use that level to set up an options strategy.

Trade: Buying the TSLA Feb 220-225 Call Spreads for $1.40
Risk: $140 per 1 lot
Reward: $360 per 1 lot
Breakeven: $221.40

REASON PREVAILS IN D.C.? MAYBE!

Yesterday Congress voted to raise the debt ceiling without preconditions. The importance of this event, done without past histrionics, is huge. Leader Boehner and other Republican leaders allowed this to happen with only about 12% voting support from Republican representatives. A contrary result would have been very bad news for the markets.

Today, Tea Party groups are attacking both Boehner and Republicans for allowing the debt ceiling to rise.

On Monday, The US Chamber of Commerce encouraged Republicans to raise the debt ceiling in order to help confidence in the economy, the markets, and the country. Only 12% of Republicans followed their wishes. Does this indicate a split between the Chamber and Republicans? Probably not. But it does shine a light on the infighting in the Republican Party between the pro-business wing and the anti-many things Tea Party wing.

The Tea Party has threatened challenging Republicans in upcoming primary elections. The Chamber and other groups have vowed to defend pro-business Republicans in elections. How this plays out over the next few months will greatly affect the political landscape of the country.

Is it just me, or did the market tanking of January and early February coincide with debt ceiling concerns? And, has the market soared when it became clear that Mr. Boehner would get it raised?

Attributing market reactions to debt ceiling events is probably not totally correct. But debt ceiling concerns have likely contributed to market sentiment—both pro and con.

Yesterday’s action in Congress is hopefully a sign of reason starting to prevail in Washington. Recent compromises on the Budget and the Farm Bill bolster these hopes. The country needs a respected, rational Republican party that does more than just obstruct, obstruct, obstruct—and crush the markets in the process. Hopefully, recent events have signaled reason and sanity gaining momentum.

Floyd at KOTM

Follow me on Twitter @USKOTM

Republic Airways Holdings Inc (RJET) is a holding company whose subsidiaries offer commercial air services to destinations in 132 cities in the U.S., Canada, and Mexico. The company’s stock is currently trading around $9.20 in a 52 week rang of $8.66.13.92. The stock has been underperforming the market with share prices falling 1.75% over the past 12 months. Stock is down over 6% today but has rallied hard off of its new 52 week lows. On the move higher we have seen aggressive call buying in name. Earlier today a trader bought 2,050 RJET Mar 10 Calls for $0.49. This is a very large block and over 5,600 contracts have now traded on that line. Although the stock is trading below the cloud we believe that this provides a good set up for a trader looking for an aggressive countertrend long.

Trade: Buying the RJET Mar 10 Calls for $0.50
Risk: $50 per 1 lot
Reward: Unlimited
Breakeven: $10.50

Scientific Games Corporation (SGMS) is a manufacturer of gambling and gaming machines for lottery and gaming organizations around the world. The company’s stock is currently trading around $13.20 in a 52 week range of $7.55-$19.48. The stock has been very strong over the past year with shares rising around 42% in the past 12 months. Big call buyers we flagged during yesterday’s trading session are betting that this trend continues. Early in the session a trader bought 6,000 SGMS Apr 12.5 Calls for $1.40. Over 9,500 contracts have now traded on that line and volume has reached 48 times the average daily option volume in SGMS. Although the stock is trading below the Ichimoku Cloud it is trading in the middle of its 52 week range. We believe that order flow this significant is reason to justify a long position in SGMS.

My Trade: I bought the SGMS Apr 12.5 Calls for $1.40
Risk: $140 per 1 lot
Reward: Unlimited
Breakeven: $13.90

hhgregg, Inc (HGG) is a consumer electronic retailer operating 208 stores in states across the country. The company’s stock is currently trading around $8.45 in a 52 week range of $7.23-$20.75. The stock has underperformed the market over the past year with shares down 13% in the past 12 months. Options action in today’s trading session would however suggest that traders believe the stock will rally through April expiration. Early in the session a trader sold 3,000 HGG Apr 6 puts to buy 3,000 Apr 9 calls for a net debit of $0.55. This bullish risk reversal carries a high level of risk and suggests that this trader’s level of conviction is relatively high. This block also represents volume over 3 times the average daily option volume in HGG. Although the stock is trading below the Ichimoku Cloud it has rallied hard off of its 52 week lows in over the past week. We believe that order flow this strong and the strength in very recent price action is justification for a long position in HGG.

My Trade: I bought the HGG Apr 9 Calls for $0.55
Risk: $55 per 1 lot
Reward: Unlimited
Breakeven: $9.55

Angie’s List, Inc. (ANGI) is an internet services company operating a reviews website for local professionals for needs such as home and healthcare services. The company’s stock is currently trading around $17.20 in a 52 week range of $11.88-$28.32. The stock has performed relatively well over the past 12 months with shares rallying over 31% during that time. Options action in today’s trading session would indicate that traders believe this trend will continue. Early in the session a trader bought 4,630 ANGI Feb 20-22.5 call spreads for $0.40. This is a bullish trade that represents volume nearly 3 times the average daily option volume in ANGI. The stock is also trading above the Ichimoku Cloud indicating it is in bullish territory. We believe that this order flow is strong enough to justify a long in ANGI.

My trade: Buying the ANGI Feb 20 Calls for $0.60
Risk: $60 per 1 lot
Reward: Unlimited
Breakeven: $20.60

IMAX Corporation (IMAX) is an entertainment company who specializes in theater systems for customers who operate commercial theaters and theaters in museums and science centers. The company’s stock is currently trading around $26.55 in a 52 week range of $23.50-$31.23. The stock has underperformed the market over the past 12 months having only added 5.87% to share prices over that time. Despite this relatively weak performance options action in IMAX in recent weeks has been decidedly bullish. Early in today’s trading session a trader bought 1,215 IMAX Feb 27 calls for $0.90 and sold 1,215 IMAX Mar 23 puts for $0.20. Volume on the Feb 27 call line has now reached 3,200 contracts and will add to open interest of 1,711 on that line. This also adds to the persistent call buying we have seen over the past week. Although the chart of IMAX is relatively weak we believe that all of this bullish order flow is a signal to get long IMAX. We will remain long through earnings on the 20th

Trade: Buying the IMAX Feb 27 Calls for $0.90
Risk: $90 per 1 lot
Reward: Unlimited
Breakeven: $27.90

Toll Brothers, Inc (TOL) is a homebuilder who designs and builds homes in residential communities. The company’s stock is currently trading at $36.75 in a 52 week range of $26.64-$39.25. The stock underperformed the market last year as shares only rallied 1.63% over the past 12 months. However, options action TOL in today’s trading session suggests that traders believe the stock will rally through September expiration. Earlier in today’s trading session a trader bought 16,000 TOL Sep 37 calls for $3.95. Over 20,000 contracts have now traded on that line and today’s option volume in TOL is now nearly 8 times the average daily option volume in the name. With stock trading well above the Ichimoku Cloud and the future cloud sloping upward we believe that TOL is setting up well for a long position.

Trade: Buying the TOL Sep 37 Calls for $3.95
Risk: $395 per 1 lot
Reward: Unlimited
Breakeven: $40.95

The January unemployment number was announced this morning showing slower than expected job growth in January. Analysts were expecting around 180,000 jobs to be added while the actual number came in at 113,000. The unemployment rate also down ticked from 6.7% to 6.6%. Markets traded lower initially then swung wildly from lows to highs and E-mini S&P 500 futures are now trading 14 points higher on the day trading in a 27.75 point range. LNKD reported quarterly earnings this morning announcing better than expected earnings but lowering guidance. TWTR and FB are both higher this morning with TWTR rallying nearly 4%. Looking to next week we see few catalysts and could expect relatively muted moves in the broader market. We have been seeing some bullish activity in retailers like JWN, TJX, and LB which could represent speculative bets ahead of next week’s retail sales number on Thursday. We will likely revisit potential long set ups in those names ahead of the number.