From the official Kentucky Derby website, the recipe for the traditional Mint Julep cocktail enjoyed at The Kentucky Derby:

The Early Times Mint Julep Recipe

• 2 cups sugar
• 2 cups water
• Sprigs of fresh mint
• Crushed ice
• Early Times Kentucky Whisky
• Silver Julep Cups

Make a simple syrup by boiling sugar and water together for five minutes. Cool and place in a covered container with six or eight sprigs of fresh mint, then refrigerate overnight. Make one julep at a time by filling a julep cup with crushed ice, adding one tablespoon mint syrup and two ounces of Early Times Kentucky Whisky. Stir rapidly with a spoon to frost the outside of the cup. Garnish with a sprig of fresh mint.

The best times are enjoyed responsibly.
 Early Times Distillery Co., Kentucky Whisky. 40 percent Alc. By Volume. Louisville, KY 2006.

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I like a long-shot, “El Padrino,” to win the  138th Kentucky Derby later today. The field is stacked with great horses, but sometimes the oddsmakers learn a humbling lesson when they ignore the heart of a champion.

Speaking of Kentucky, you might not have known that the famous pizza chain, Papa John’s, is headquartered in Louisville. Papa’s reported earnings last week and spiked higher with strong buying volume to boot. The chart had been consolidating for quite some time. If the broad market settles into a trading range instead of another 2010/2011 summer swoon, PZZA would be a good long idea.

To balance out a mixed market, though, consider shorting the other major pizza chain, Domino’s. As I describe on the annotated weekly chart below, DPZ did not have as successful a post-earning’s reaction as Papa John’s. Domino’s gapped down on heavy selling volume, and is in danger of breaching its major weekly support trendline. Contrast the run that DPZ had already seen into earnings,versus the long consolidation that PZZA had been in prior to the earnings’ breakout. In other words, I think we have the makings of a good pair trade here: long PZZA, short DPZ. For the trade to have the best chance of working, I believe the broad market would need to slosh around in a reasonably-defined trading range, say from 1340-1420 on the S&P 500. That said, I still think the trade can work in all but the most of extreme upside or downside markets.

So, there you have it: Mint Juleps, some pizza, and a pair trade on this Kentucky Derby Saturday.

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