We left the AutoZone (AZO, $130.64, down $2.42) trade open over the weekend hoping to get a break below $130 which was achieved 30 minutes into today’s trading session. The stock got a downgrade from “Outperform” to “Market Perform” which has pushed the shares lower. I’m not really sure what “Market Perform” means but if Bernstein downgrades the stock and the market does extremely well, does that still mean it was a downgrade? I’m not sure where these research firms come up with their wording and you already know my two cents on analyst upgrades and downgrades.
In any event, the downgrade has helped our February 115 puts (AZONC, $3.60, up $0.70) which were entered at $3.00. We got the break below $130 which is what I was originally looking for but I thought we would get lower than $129. We may still get there but as I mentioned Sunday night, we are trading in a narrow range and we will look to take profits quicker than normal. You could set stops at $3.30 to protect profits but I think the puts can get to $4.00-$4.50 this week.
DryShips (DRYS, $16.70, up $0.12) may have peaked at $17.35 this morning as the stock appears to be headed into negative territory after a strong start. The January 15 calls (OOCAC, $2.20,up $0.10) have traded to a high of $2.55 and I said they could run to $3 if the stock could have made it to $18. The calls got to $2.55 before fading.
First Solar (FSLR, $159.04, down $3.50) looks weak and the January 175 calls (HJQAO, $1.90, down $0.60) could be headed for a rough day if there is no turn-around in the stock. I had warned of the dangers of chasing DryShips and First Solar higher especially with the January options but the action in both stocks will still attract option players.