didn't you get the memo? it's all good, or maybe not. we're live at the nasdaq marketplace. guys are getting ready behind me. while they are doing that, here's what's coming up. ♪ that's what stocks did this week, but a classic indicator says the rally may soon end. we'll tell you what it is and how you can protect yourself. >> plus -- >> and we're going to have a big, big, big a lot of fun. >> we sure are, donald, because we have a way to make money in apple if shares go up, down or nowhere at all and we'll explain. and soup and cereal stocks have been on fire, but the chartmaster has a simple message for traders. >> nothing for you. >> we'll explain why.

the action begins right now. ♪ spending all my nights all my money ♪ >> let's go right to it. the bear had reason to run scared maybe it's this. check out the transports. the economically sensitive group of stocks touching a year to date high today. is this a sign that maybe things are on firmer footing? dan what do you think? >> no doubt about it. i think you can take the price action year to date and say this is a group that's one of the worst performing groups late in 2014 and topped out and spent most of the last year trending lower top left to bottom right and here's the thing. this year's improvement doesn't seem to me anything based on anything fundamental and when you think about some of the stocks that make up the group, shippers and rails and airlines, that sort of thing, i actually see a lot of economic headwinds to these companies right now. so the fact that they have outperformed in a yore that's been kind of dicy is really -- it really doesn't make me warm and fuzzy about it.

and i think it kind of sets up for an interesting opportunity for a counter train thought. >> we don't need to put all the transport stocks together. low fuel costs, and that's helpful for them and it also promotes better load factors for these guys. getting into a good travel season, i think the airlines right now are basically making as much money as they are ever going to make and that's the reason they are trading at these obscenely low multiples. people don't think that the great times are going to continue forever. basically cyclical stock like those, where you see those really cheap p/es, that's usually a sign that this is the best that they are ever going to do. that's what the street is pricing in. >> it's all about the proceeding condition, what causes big steep ricochets is proceeding weakness. this is the single worst area of the market. it's been going down all of last year when the market was making new highs and even adjusted for beta, this 16% move off the low, double that of the s&p, is not really important in the sense that it hasn't changed the complex of this group. we know that in fact the big names at the top, like fedex and

u.p.s. -- remember, transportation is a price-weighted impact and the same impact of the top two and these stocks are not generally enough in trends and already, let's just say one is bullish. already expended a tremendous amount of energy just to get here. we had a huge amount of buying already. higher from here, i would say the chances are 1% because nothing is zero. you mentioned some of the parts of financials -- not financials, transports aren't doing well. talking about the rails, for instance? >> rails would be -- rails would be a very good exam. truckers are basically right in the middle. so the fedexes, the u.p.s.s, and the truckers don't have as much direct exposure to oil in a negative way that the rails do because they basically benefit from higher oil prices and better energy markets. the other ones are sort of in the middle and there's a secular tailwind to the u.p.s.s and fedexes of the world, and u.p.s. results weren't all that bad. we lump all of these things together and once upon a time they probably made a lot of sense. i don't think it makes as much

sense now. >> it may do in the instrument i want to use, the etf that tracks this index. and a very heavy one some of the ones and i want to put my carter hat on for a minute and i have a couple of charts that i think are really important and this is what got me looking at the iyt, that's the one-year chart. look at that. the stock -- the etf has come all the way back to the august low and the level where it found really good support. and the break down level in january. it's had a 15% run off the low. i think this is probably a good spot. if it can't get through early next week to lay out a short for traders, and the next chart is an eight-year chart from the 2009 lows, it held that uptrend like a boss. it got just over there. i think if it fails and it gets below 130 here, it fails at that breakdown level at about 134 and gets below that uptrend, i think you have a trading opportunity back to the january low. it's about 115 and there's really no room below that so this is a trade i'm looking at early next week. if we fail at 134 i think it sets up really well. looking out at april exploration

when the etf was 133.50. you could buy the april 130, 115 put spread paying 2.5 for a put spread, that's less than 2% than the underlying etf price. i like the risk reward. you can make up to 15 dollars if the etf goes back up to where it was in early january. to me i think you have a whole host of really central bank volatility coming. we know that we have a bunch of stuff going on next month, and i just think that the rally off the bottom in the broad market here in the u.s. has gone too far too fast. >> notice the construct of the conversation and how it started. if we in an uptrend and had a 16% decline in aggregate, the conversation would start isn't this an opportunity to buy weakness? buy the dip? now that we've had a counter trend rally, the conversation star starts with is this the beginning of a new ball? that's how we started it. exactly the reciprocal of buying the dip.

you buy rallies. >> not as bearish i think as you guys are. i think i said that last week, too, and what i will say is this trade makes a lot of sense and the likelihood that iyt trades sideways from here is essentially nil. and the magnitude of the move that you're targeting is exactly the magnitude of the move that we had over a comparable period of time. and $2.50 for a $15 spread is really, really cheap in a high volatility market like the one we're in right now so i think the put spread makes a lot of sense. >> and lastly about the long-term chart, upturn is great and it's been in a downtrend since 2014. to carter's point, that's what you want to sell, get back to the resistance and doing it with the defined risk and the risk/reward of the premium at stake and how close it is to the money, i like the trade setup. >> let's move on to another trade that has been on fire this year, consumer staples and specifically the food stocks. take a look at this. tyson, campbell's soup, the two best performing stocks in the consumer staple sector. up 18% and 22%. not far behind is hormel up 9%, but carter says one of these hot stocks might be ready to cool off.

>> well, we know that staples are a place to be in an environment like this, and they are getting money, but some of them are literally off the chart. that's what's kind of a problem here so let's just look at some setups and then get to -- get around to soup. staples, i mean, what we have here is just the absolute chart going back to 1990 recession and the performance, of course, of this group is stunning. it's quite good versus the market. in fact, close to a double, but not quite. what's interesting is through the entire bull market, of course, actually staples have underperformed and we know this to be the case, right. these are defensive assets so in a big bull market staples actually underperform. in a bear market they outperform. right now this is the move, but they have not outperformed the market, so that's what's expected in a bull market, yes, because these are low beta names. in fact, the beta of the sector is half the s&p.

but what we're getting now are certain individual stocks that have gone nuts. so here is campbells soup. and if you're able to maintain an orderly uptrend and check back to your line over and over and over like that. you can do this ad infinitum but that's not what it's done. it's taken off here and gone parabolic. so, how much has it taken off? this is a long-term chart of this. right now the stock is 20% above it's average trailing price over 150 days. going all the way back to and i've given you every instance. and what the bottom panel shows you, whenever it's gotten to the 20% above its moving average, it typically runs out of gas. so optically it's quite steep, you can see it here. mathematically it's never at a range that gets much more than and guess what happened today? it closed on the absolute low of touching high on 64, closed on

the low, and it was a reversal day and look where it's struggling. it's gotten right back to its all time hive 1998, touched there and closed down on the day. we think that's exactly where it stops so you've got a situation of a whole bunch of this or a bunch of that. but the third opportunity or prospect of this higher we would say is 1%. there are no zeros. >> all right. mike, you short this stock directionally? >> yeah, directionally i think we're right around the peak valuation. take a look back to 2006, 2007, that's the last time that this thing was trading at these kinds of multiples, probably trading around 21 times, estimated next 12-month earnings, 22, 23 times going back and -- and to me that's definitely towards the upper end of the range. i think you certainly want to fade that from a fundamental standpoint because it's not a growth stock. they were doing about $8 billion in revenues in 2008. that's what they did this last year. that hasn't even kept up with inflation, so as low as inflation is. simple thing to do here, look out to may, buy the 60 strike put.

you know this is only going to cost but 1.60. you need to watch your limit orders on this one though because even though this is a low volatility name and spreads a little bit wide and these are 150 at 65, put in a 160 bid for those. >> carter said pair bolick. i looked at this chart. it has gone up in a straight line. it makes no sense. a lot of staples, listen to carter on this stuff. a month ago, i don't know if you remember, did the xlp, the consumer staple etf, i tried to fade the breakout and he said wait, wait. we have waited and it's gotten more constructive. today's reversal in the whole space is really powerful. had a failed breakout at all-time highs. >> news-related, they had news, classic thing, like buying disney for "star wars," no, that's exactly the opposite. buying campbell's because it had good news, exactly the opposite. time to get out of the trade. >> what's interesting is in the food companies there was a lot of talk over the course of the last 18 months or so about mergers and acquisitions, that's kind of what we were expecting.

don't expect to see it at these types of valuations, and even if you did get it, the only reason i was looking at the rally and what it would possibly mean, i don't think you'd see much higher prices. >> i didn't even show it there. if you look at the 17 and 18 analysts that have this as -- as under coverage, their price target is below the current price. >> yeah. >> in terms of outright buying a put, how do you feel about that? >> it's okay. >> it's okay. that's not a ringing endorsement. >> we know that option prices are up across the board for single stock names, especially like a stock like this that has run so far so fast. you have to be right on the timing. you have to talk calendars here. if you think there's a potential for a range-bound situation -- selling short is -- >> it's moving like this, straight up and straight down. you can't short a stock that's spiking like that, although today's weakness might have been your entry point. you'll get your head taken off doing that. >> got a question out there? send us a tweet to "options action, "if it doesn't contain the words yours and momma in the sentence we might read it on air

and check at our website optionsaction.cnbc.com and while there sign up for our newsletter, it will change your world, promise. check it out. in the meantime, here's what else is coming up. >> walmart, all low prices. >> sums up walmart shares today but something in the charts suggest they could go higher. we'll tell you what it is. plus, the government's standoff with apple is creating a rare and unique situation to make money if apple goes up or down. >> it's a win-win. >> you have no idea, johnny, and we'll explain when "options action" returns. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings.

impressive... what's up, tim. td ameritrade. ♪ no, you're not ♪ yogonna watch it! ♪tch it! ♪ ♪ we can't let you download on the goooooo! ♪ ♪ you'll just have to miss it! ♪ yeah, you'll just have to miss it! ♪ ♪ we can't let you download... uh, no thanks. i have x1 from xfinity so... don't fall for directv.

xfinity lets you download your shows from anywhere. i used to like that song. here at the td ameritrade they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time.

did you finish your derivatives pricing model, honey? td ameritrade. welcome back to "options action." apple continuing to make headlines this week after ceo tim cook filed a legal motion to deny the fbi's request for access to the data on the iphones of the san bernardino shooters. the company holding a shareholders meeting and josh lipton is at the tech giant's headquarters with the very latest. josh. >> melissa, at that shareholder meeting here in cupertino, california, one big topic was that fight between apple and the u.s. government and one question is what has that all meant for apple stock. if you just look at the past week when this whole event began on unfolding apple stock, it's basically flat over that time. meanwhile, have you seen about a 1.5% pop for the s&p 500, so some recent underperformance. i spent a lot of time speaking

to apple shareholders. they were in from all over the country, from nash val to boston. i asked them, listen, you have your hard-earned money to work in apple. are you concerned about what this court case is going to mean for your investment? here's what they had to say. >> i am concerned about that, but i think -- i think apple has -- has the opportunity here to really right the ship and to make this better. and i think -- i think the investors will realize that. >> well, actually i think it's only going to strengthen people's respect for the company. >> if they hold their position and are able to maintain it, i think it will be a great accolade for them. i think it will help them gain respect and strength, and it will definitely be in their favor. >> so generally the shareholders, i was speaking to today, supportive of apple, supportive of apple's ceo, tim cook. and, listen, we know that this case is far from over the next date you want to circle on your calendar is going to be next tuesday, and that is when apple's legal chief is going to head to d.c. and testify on capitol hill.

melissa, back to you. >> josh lipton, thank you. while the stock has been nailed to the wall during this entire ordeal, options prices have remained relatively high and that's created great opportunity for one particular options strategy. mike's over at the smart board to explain. mike? >> yeah. so one of the things we're looking at is identify a stock you want to own. we're talking about apple here. it looks fundamentally cheap. it is under a little bit of pressure because of all the news that's coming up. the second thing when you're looking at a trade like the one i try to describe here. you want to try to figure out where you own the stock. so right now i'm thinking a little bit cheaper wouldn't be bad for around $95. pick a stock with a yield of 1% per month. what we're actually referring to here is if you're going to sell options, you're looking to collect 1% in premium every 30 days. right now we can see obviously the kind of pressure that the stock has been under. despite the recent rally that the s&p has had because of what's been going on. this stock is basically trading right here. but as i pointed out, it's trading at a very cheap multiple, probably around nine times earnings or less net cash.

what's the trade that i'm actually looking at? i'm looking out here and i'm looking at the april 95 puts, okay. these have less than two months to go to expiration. right now you can collect $2.40 to do that trade. think about it. 95 bucks, 1% of that is 95 cents. so two times that number, we're obviously getting more than the 1% per month we were trying to get. here's the thing. if the stock does get put to that level, that means the stock is still under pressure and options premiums will still be bid, and i'll have an opportunity to sell calls against my long position. >> the key question, mike, that you bring up is do you want to own that stock that you're selling puts on? carter, in terms of the chart, we've seen apple's performers of the past several months, down 25% or so and mike raises a good point. this week it has underperformed technology which was up 1.5% for the week. >> just one of those very rare moments. most things are moving, either improving or deteriorating.

this stock is dead flat. probably has nothing to do with the government, honestly. it's a massive company and this little dustup about give us your phone or not. this is a moment where after selling off 35%, it's that the buyer is holding it up and no one is willing to sell it down. so you have a dormant asset. there's no trade here. did or something like this. but getting directional makes no sense. it's a dead, lifeless moment in a very big stock. >> with that said, would you sell puts here? >> what mike is really targeting here is interesting. april expiration is not going to target the earnings event and that's something that will catalog the stock and in some ways, you know, $93 is held all year long. that's not a bad level and you might get -- put the stock just above the 3 if you factor in the put sale. march 15th, they'll have this iphone event, they'll update the watch. i think there's risk to that. if people are not impressed with what they have. then you have to start thinking about september and the iphone 7. here's the thing t could set up

as a great trade, but it has to be from lower levels t has , it be still 44 buys and six holds on it from wall street analysts and we know that investors are not particularly sanguine about it. a great trade setting up because this is the first year in many where they have had declining estimates for sales. >> one of the things you asked is would you. i did, so just to put things on the table i'm short the 94.5s in march myself so obviously i like the trade. >> coming up next financials rebounding this week along with the broader market. but has it come too far too fast? we'll tell you why it might not want to get in just yet. stay tuned. here at td ameritrade, they work hard. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement.

there's no way to predict that. td ameritrade.

steve, other than making i'm here atme move stuff,rade trader offices. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade.

welcome back to "options action." time for total recall. we take a look back to some of our open trades. last week dan made a trade on jpmorgan. check it out. >> today when the stock was about 57.50 you could buy a put calendar and have you to finance longer dated puts. the price of options is really high so i want to sell the february 19th, next friday, expiration, 55 puts for about 60 cents and buy the april 55 puts for $2.60. that costs me $2. that's my max risk. >> the first leg of this trade already expired.

what do you do with it now? >> long the april 55 puts. have the events that i'm looking out to. it's the -- the fed stress test and then the q1 earnings and the investor meeting this past week which the stock got hit on. it gave me an opportunity to actually spread the long april calls into a vertical put spread. the stock went through my long strike, through 55. it gave me a great opportunity to sell the downside 50 and have a 55, 50 put spread on and have almost two months and all the events to look forward to. >> three weeks back mike coe and carter were bullish on walmart. >> you can call it a trend line. it surely is that what it has done clearly is broken above that trend line. or you can do one of these. people call them things like heads or shoulders, bottoms or top. here's the neck line. the presumption is we'll move above the neck line. buy walmart. >> i think the bullish way to play this without risking too much money is simply to go out to april, and buy the 67.50 and

72.50 call, spread and spend 1.75 for that. >> the stock is flat so do you like the charts? >> we think the bottom is in place but the question is do you get absolute returns, we think you do. and also the relative. it's a low beta defensive stock, and we think the market is a bad proposition. >> mike? >> i'm willing to stick with the trade. first of all, it is down slightly because we've been trading flat. one thing to point out use call spreads to do it. the stock was down more than $1.50 today and it's worth a lot more than if you stayed in the trade today. walmart, fair value as far as the fundamentals are concerned. if you're going to make a bullish bet, maybe this is the place do it. >> coming up next, the final call from the options pits. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data

you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade. yeah! ahh... you probably say it a million times a day. ahh... ahh! ahh... ahh! but at cigna, we want to help everyone say it once a year. say "ahh". >>ahh... cigna medical plans cover one hundred percent of your in-network annual checkup. so america, let's go. know. ahh! and take control of your health. cigna. together, all the way.

time to answer your tweets.

first tweet from david newman. any comment about exxon? >> >> sure. you didn't happen to mention whether you were long the stock, but if you are long the stock you could consider selling strangles against it. specifically look at april. sell the 75, maybe the 87.5 strangle around that and you'll get called out of that stock if it rallies through the strike. you'll get to buy more at the lower price and meantime you'll collect $1.60 on the nice rate of return on an $80 stock. >> the next one is from twitter user called beta decay. when will the iron condor of technical analysis carter worth open a twitter account? we get this question all the time. >> i get this question all the time. >> because you don't have twitter. >> here's the deal. what am i going to do with it? i know where my wife is and my kids are, dear friends. i know where you guys are. start rambling on with strangers. >> and watch "options action" for more of carter worth. >> final call, carter?

>> take your camels, trim your stock. sell the stock. >> mike? >> i'm looking at selling puts in apple. in fact, i'm short them my self. >> dan? >> iyt failed breakout. >> see you back here next friday. have a great weekend. >> announcer: the following is a paid presentation for cize, brought to you by beachbody. this is the end of exercise. >> get ready to cize it up. [ beat drops ] [ people cheering ] are you ready to dance? 5, 6, 7, 8! >> ♪ on my way in i'ma take it ♪ >> stop exercising, people. it's time to start dancing. welcome to cize. >> announcer: cize is the all-new dance workout program that's gonna make losing weight fun and easy. >> to me, it's not even exercise because i don't want to stop. >> announcer: it's simple -- dance, have fun, and get awesome result