hey there, we're live at the nasdaq after a very big day for the markets. the guys are getting ready behind me. while they're doing that, here's what's coming up >> stocks just closed out a blowout quarter, but if you missed the rally, there's one name to play catch up. plus -- >> you have no style or sense of fashion. >> that's what dan nathan is saying about retail stocks right now. and it could be about to get ugly for the group he'll lay out the trade. and -- >> what's there to eat >> mate yourself a dang

quesadilla. >> you might want to think twice about that because mike khouw says chipotle shares are too hot to touch he'll break it down. it's time to risk less and make more the action begins now. and let's get straight to it because the s&p 500 just saw its best quarter in a decade, up 13%. the average stock rallying around 15% in that time. if you missed the rally, don't worry, because carter has a way to play catchup. he's at the plasma to break it all down. >> we had our best quarter since '09. what was preceding it was the worst quarter since w'08. here is the xli, industrials, of course 3m is a part sprerversus the market, and 3m so this is the opportunity, the bagging. the presumption is this is a

fairly important bottoming out formation. you can use a moving average typically i like the 150-day but 200 is the same. what you have in many ways is a double bottom of sorts but you also have this well-defined inflection. turns and now turning again. and so the bet is that this is on its way to meaningfully higher prices. another way to draw the lines is as follows, just a simple break above the downtrend. the bet is this big name, lagging name will play catchup with the market. let's look at a long-term chart. it's found this line quite precisely and has bounced, has bounced, has bounced and ultimately the question is does it go on and make a new high, make a new high, make a new high somewhere close to that, let's look at relative performance this is also key here is the same chart here is the setup.

here is the prospective. basically 3m has done nothing for a long time but has found support off of this relative line repeatedly and we are here yet again. this is the setup for playing a big name, a dow name that has lagged. >> carter is very casual but seemed very adamant about this trade, so what is the trade here. >> this is an interesting situation because we have a stock trading probably at a reasonable valuation on a historical basis it hasn't seen a whole lot of top line growth. but this used to be a darling for the longest time they have earnings coming up on april 23rd typically it moves about 3%. that's about what the options market is implying but this is a name where when you take a look a little further out, what we're seeing is that the options are not overwhelmingly expensive this is a situation where i think we can be pretty simple with the trade structure we were choosing earlier today you could buy the

june 210 calls so a little over 3% of the stock price to make a bullish bet that will capture earnings and a decent amount beyond an important point i would make is that i think this is one of those situations where you wouldn't want to reach out and buy the stock right here i think you'd be committing quite a lot ofr and has a beta of 1.2 so it would potentially get hurt if earnings provides a positive catalyst, this is a situation where you could look to spread this into a call spread. if it declines significant a further, you can look at selling some puts if you feel compelled to buy the stock right now i think options are cheap enough that buying calls is the simple way to play it. >> what do you think >> i was just looking at the chart and it does look really constructive and looks like it's poised for a breakout and showing some good relative performance right here 60% of 3m sales come from

without the u.s. did you see what the dollar did this week? when you think about all these issues with trade and china and the potential for it to be pushed out, i say this is a company that is very -- could be adversely affected by any legitimate pushout, which is why mike is saying with option prices where they are and the technical setup pretty good, to buy calls at the money makes a whole heck of a lot of sense if you get all that right, this is going to be a big winner. this stock was trading at 260 in early 2018, so there's a lot of things i like about it i most like the idea of just dwiepi defining your risk with a trade like that. >> consider how much the market moved this specific quarter. what if we started to see something similar happen here. some of that overhang in 3m didn't present itself, could the stock be 15% higher in 90 days i think that's entirely realistic. i also think that given those same overhangs, it could be 10% lower. that's why we're risking 3% of

the current stock price to make our bullish bet. the hope is if that proves to be correct, we're going to see an outsized win if we prove to be incorrect, we're not going to risk that much. >> the person that wants to be cautious says it didn't participate in the bounce in industrials. my take is that it's such a nonparticipant that that's the opportunity. it is a sort of slower moving kind of safe name, household name i think those would be beneficial things. >> the one last thing i would say that could give it a little extra boost, is that the sentiment amongst the street, amongst analysts hasn't been very positive on this thing. of course when everybody is looking down, that might actually be a time to start looking up. let's talk about another group that's been heating up and that's retail. the etf having one of its best weeks of the year and best quarters since 2014 but dan says the chart is about to make a major fashion faux pas

what are you looking at, dan >> obviously one of the biggest headwinds to our economy is this trade situation with china it doesn't seem that there's going to be any resolution any time soon. the other thing that's important to think about and we heard larry kudlow speaking to you earlier today, there seems to be the entire global economy is resting on the u.s. consumer's shoulders here we see a lot of volatility in consumer-related data. i'll go back to i know the university of michigan consumer confidence is trading at an 18-year high but there was an interesting thing when you pull back one layer of the onion here is that long lasting goods, the indication to buy those is at a multi year low despite the fact consumer confidence is at an 18-year high sometimes that could be a precursor to lower ending goods sloughing off a little bit q1 auto sales are supposed to be down 2%. we just got pending home sales this week. they were down 1% year over year that's the tenth decline in the last 12 months so i say the xrt, the etf that

tracks the s&p retail sector doesn't act so great it really has underperformed, especially this year you talk about one of the best quarters, it's only up 10% versus the s&p up 13%, but it's still down, a little less than 4% from its highs. i say to myself there's not going to be a trade deal probably until june or so. i think once we get into may and start getting retail earnings and start getting less clarity from companies, i think that the xrt turns down i have a one-year chart real quickly. i see resistance at 46 i see some support at 44 i see an air pocket down to 38 that was the december low. look at this five-year chart i'll let carter speak to it. this is just what i see. i see that series of lower highs, the lower lows, it looks pretty nasty you breakthat support at 44, there's an air pocket down to those prior lows to me i look out to the may expiration when the xrt was trading at 45 and you could buy

the 45-40 put spreads, it breaks even at 44 you can make up to $4 between 44 and 40 your max risk is $1. i like the risk/reward here. >> you know, it's interesting given the potential headwinds you have and the fact thajt this as a group has been in no man's land, what's interesting is how cheap the options are. the trade that he's looking at, those options are priced at two-year lows, which i think is pretty extraordinary if you're wondering why it's extraordinary, look at names like restoration hardware. look what happened to that stock today. this 'em beds basically any of the secular headwinds that you can think about in the economy, this has a whole basket of those stocks so if you think you're going to see some pressure, the fact that options are cheap sets up pretty well. >> it has basically

underperformed four of the past five years its relative performance peaked five years ago it's 95 stocks, it's $1.9 trillion by virtue of being equal weight it gives you a very good tell. there's something wrong. that's it. and i think it's a great short the levels are right. >> let me mention one other chart which you may agree. have you seen the oil chart? it closed above 60 today for the first time i think since november i mean that's obviously another headwind so it feels like that underperformance is really kind of telling us something is out there and it seems like given how cheap option prices are, this is a good way to be a little contrarian right here. >> no question if you look at the consumer discretionary sector itself, it was so influenced by amazon when it was in there, home depot, mcdonald's, the underlying story is a very negative one for most of these consumer names. whether it's autos, whether it's individual stores, not good. >> yeah, i mean that's the other thing. there's obviously a lot of

stocks that are in this particular sector, but a lot of those, the headwinds that we have talked about for all of this time, the whole sector essentially has gone nowhere those headwinds have not been removed. there are some others in there where you're going to see the carvanas of the world where you have a decent amount of leverage and not a very favorable earnings picture you take a bunch of those and put them together -- >> i've got one more point, lennar it was trading $53 after that better-than-expected earnings. you know where the stock closed today? $49. reversed the entire move when you're getting good news and stocks are not reacting, i think you'll see more of that over the next month and a half. >> for everything options action, check out our website, optionsaction.cnbc.com check out our news letter. here's what's coming up next avocado. >> chipotle shares are on fire this year, but mike khouw is saying no to the fast casual

trade. he'll tell you how to play it. plus, calling all options action fans. reach into your pocket, grab your phone, and tweet us your question @optionsaction. if it's nice, we'll answer it on air when "options action" returns. looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪

i'm not really a, i thought wall street guy.ns. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade welcome back chipotle shares have been sizzling this year check it out, the stock is up 65% in 2019 making it the company's best quarter on record since its 2006 ipo, its the second best performing stock but mike khouw says it may be

getting a little too hot to handle he's going to show you how in a call to action take it away, mike. >> we're going to take a look at a put calendar this is a stock that i've been skeptical about before and of course it's had a phenomenal quarter. it's up 65%. it's up nearly 85% since the december lows, but it is an exceptionally expensive stock. so are the options how expensive? i was taking a look at this thing earlier today. let's assume for the sake of argument that the growth targets on the top line hold true and that somehow they manage to expand their net income margins basically to the widest they have been since the company went public, about 11%. this company is trading in that instance at about 28 times 2021 earnings i think that's pretty ambitious. so we're going to be having earnings coming up in the third, fourth week of april usually in the month going into earnings, the stock moves about 5% in that month preceding

earnings we'll have slightly less than that when we go into the market on april 1st afterwards we usually see moves of about 10% so the idea here is with an expensive stock wanting to be bearish on the stock, but also recognizing that until they announce earnings, we might see some muted moves we can take a look at the kind of stock price that we've seen you can see this thing has essentially gone straight up so the idea here is that we want to make a bearish bet. we recognize that it could go a little higher. i'm not going to be inclined to short this kind of a chart, i can tell you that for sure, but i do want to make a bearish bet. how do we do it? the trade i was looking at was buying the june 700 puts, expensive, $43.70, to reduce the cost of that trade i wanted to sell the april 15.40 puts. they're reporting earnings in april but that's after those first options expire so we're anticipating relatively modest moves going into earning,

relatively big moves coming out of them. net-net i'm spending $28.30 if you got this at the prices you're seeing today. another quick point as we look at this chart, if the stock just sot looks like we're going to be losing money in here. we're not. why not? because this thing is going to be decaying away but this put over here that basically gives you the opportunity to short the stock after earnings will maintain a good deal of its value this one will decay away here. this is a trade that i think for now going into earnings is a good setup so that you can own a way to take a bearish bet if the bottom falls out of it we do have a huge concentrated holder in bill akman it's been a big source of his winnings this quarter. it would be unlikely he would have sold any shares going into the end of the quarter but might he want to take some profits coming out of it i don't know, i might be

inclined to. >> what do we think of mike's trade or do we say avocano that's what it said. >> it's not likely to give up a good bit of that so the fact mike is targeting that earnings date makes a lot of sense. by selling that shorter dated april put it doesn't catch earnings and he's setting up to own that may put to catch those earnings i like this trade idea i think the likelihood of any stock specific news before earnings is probably not good. it's fine if it goes up a little bit. >> it's actually the june put that we're looking at so you'll have a lot more time so essentially coming out of that, you'll get almost two months coming out of earnings which they're reporting on the 23rd or 24th so the week after that april put rolls off. >> the incredible thing is it's returned to the scene of the crime. the stock was $50 in '09,

basically gets to 7.50, 7.60 the stock gets wiped out that is the definition of returning to a difficult level before you can ever exceed a high, you typically contend with it contending is backing and filling or backing away. i'd rather sell my stock or put an options trade that reflects that view than make the bet there's a lot more to go. >> i was speaking to karen before we came on the air about this because i was talking about how much optimism seems to be built in at the valuations we're seeing her point, and it's a good one, if they are seeing peak revenues, if they are seeing peak margins, those things may well coincide. but the problem is it's basically priced right there right now, so how much more upside could it have unless there's a squeeze going on. coming up, shares of lululemon reaching for the sky on the back of its earnings

report and that's great news for one of our traders. plus have a question about trading options or maybe you want to know how dan keeps his hair so sleek? you are in luck because we are taking your tweets later in the show we are live from the nasdaq in times square much more o.a. still ahead (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says tt? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade.

what do you look for i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront.

yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ welcome back to "options action." time to look back at some of our open trades. just last week mike khouw partnered up with guy adami on a bullish lulu bet. >> solid chinese sales what does that mean? up 41% in china, an economy that's slowing down. apparently they're still buying their lululemon because those sales were crazy the last operating margins, despite all the things they have done, operating margins have improved. >> i'm looking out to april. i want to sell the 135 puts for $4.30, buy the 145 calls for $9.45 and then sell the 155

calls. why isn't that drawing for 4.95 >> they were right the retailer falling today, but still up more than 14% since the time of the trade. so, mike, what do you do now >> so if you follow us on twitter, and you should, then you would know that we recommended earlier this week that you take the profits and run. we spent 20 cents to put the structure on when i was looking at it earlier this week, you could have taken it off for actually is $10, so really most of the money that you could make actually was made. the options market was implying a pretty good move but not as big as the one we saw. if you had just bought the calls, that obviously would have been a big win actually if you had bought that call spread it still turned out to be a very good win. when you take a look at how much it actually geared, it worked out about the same so this trade worked out for us. >> the word sublime comes to mind also it stopped right at the former high. it stopped right at that october high perfect trade, in and out, what more could you get.

>> earlier this month dan said chip maker western digital was heading for a rebound. >> it bottomed out on christmas. it broke up above that downtrend line here's the really important part it was able to actually get back above 50 today, and that was the breakdown level from the fall. so i think that's an interesting setup. you look out to may expiration where the stock as trading and you could buy the may 50-65 call spread paying $4 for that. >> the stock soared with the rest of the semis today, but still down nearly 7% since the time of the trade. so what do you do with western dig, dan >> this was in the money at the time so we chose the 50-65 call spread the stock was closing 51.5 it closed today about 48 bucks what you need to do is you're targeting a $54 break-even the spread is worth about $2.50. this is one where i really think you have to keep a close eye on and keep a premium stop. i like to use a 50% premium stop so you don't want to see this go

below $2 the probability of it being worth much less on may expiration probably increases. >> the pattern is intact, right? with the play for the bearish to bulls versus bottoming out, thhas changed. i think you stay. up next, your tweets and the up next, your tweets and the final call what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you knoweritrade, we u through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

what do you look for i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely.

do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ the options action family is growing. take a look at baby courtland, the newest addition to the worth family congratulations to carter, his wife jill, big sister alice and big brother brewster thank you very much. >> thank you very much. >> adorable. time for the final call. carter braxton worth. >> 3m, play on the long side for catchup. >> mike khouw. >> i think you want to use calls for that if you're long chipotle, i would think about taking some profits or look at maybe the put spread calendar that i recommended. >> dan nathan.

>> i think there's something brewing in consumerland. i know you think i always hate the retail stocks. >> you hate everything really administrator i really hate them now so xrt puts. >> that does it for us here on "options action. we'll see you back here next friday don't go awhe,nyer though. "mad money" starts right now don't go anywhere, "mad money" with jim cramer starts right now. my mission is simple -- to make you money i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now hey, i'm cramer. welcome to "mad money. welcome to cramerica other people want to make friends, i'm just trying to save you money. my job is not just to entertain but teach you. so call me at 1-800-743-cnbc or tweet me @jimcramer. today's move was all