Option Investor
Newsletter

Daily Newsletter, Monday, 11/17/2014

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Treading Water

by Thomas Hughes

Click here to email Thomas Hughes
The market tread water today, hanging just below the highs set last week as we await another FOMC minutes release .

Introduction

The market tread water today, just below the long term highs set last week. Contrasting economic trends giving the market yet another reason to pause, ahead of the FOMC minutes released later this week. Our own data trends remain positive but the rest of the world is in question. It looks more than ever like there could be additional QE in Japan and maybe in Europe but as yet, no moves have been made.

First up this morning was weaker than expected GDP numbers from Japan. The decline, -1.6%, is far below the 2% increase expected by economists as well as the nations leadership. It also puts Japan in recession and Abeonomics in the spotlight as well as under the hammer. His plan is not working as hoped leading to speculation of possible additional moves in the coming weeks and months. The first likely a postponement of the second scheduled tax hike, the first tax hike(from the past spring) being the most likely reason for the GDP miss. The Nikkei lost over 3% on the news.

Chinese markets were less fazed by the news but traded mixed nonetheless. One positive development in China is the opening of the new trade connect between Shanghai and Hong Kong which will allow foreign investment in Chinese stocks. European markets were mixed as well, in early trading, but rose later in the day. New comments from Mario Draghi sparked buying in EU markets; He said that the ECB may indeed purchase government issued bonds. He didn't say when, or that there was a plan in the works, just that it was a possibility and so could be yet another smoke screen. The message was well received in the EU and even helped to send our indices higher for a little while as well.

Market Statistics

Futures trading was negative from the earliest but not sharply. The S&P 500 was indicated lower by about -0.25% when I first checked and fluctuated between that and break even throughout the early morning.

There was a little economic data released today, on a whole it was positive but not as good as predicted. It was enough to help lift trading but not enough to get a rally going. At the bell the indices opened lower, by only a few points, and then proceeded to trade just beneath break even until Mario Draghi's comments. At that time traders sent them higher and into positive territory. The surge did not last long, the market fell back, below break even, to retest support by lunch time. Afternoon trading was much the same. The indices held the day's range, closing near the top.

Economic Calendar

The Economy

Empire Manufacturing was released at 8AM. The gauge of New York region manufacturing came in at 10.2 versus the consensus of 12. This is weaker than expected but still expansionary and much better than last month's reading of 6. New Orders, Shipments and Employment were all positive but the employment component slipped to 8.5,the other two rose to 9.1 and 11.8 respectively. While the number of employed rose, the rate of rise slowed somewhat as did the number of hours work. This could be bad if the economy slows, but good if it continues to expand. The forward looking component of the survey were “generally higher and conveyed a strong degree of optimism about future business conditions”. Prices paid and received remained flat.

Industrial Production and Capacity Utilization were released at 9:15AM, both weaker than expected. Production fell by -0.1% versus an expected gain of +0.20% and a gain of +0.8% last month. The October reading is 104.9% of its long running average indicating production is trending higher at nearly 5% gain on a 12 month basis.

Output rose by 0.2%, the second month of equal gain. Capacity Utilization fell by -0.3% versus an expected unchanged reading. Although production levels declined this month they are trending higher with output rising and available capacity for new production. There is notable change in Moody's Survey Of Business Confidence. Mark Zandi reports that there is no sign that “business enthusiasm is waning” and that hiring intentions have risen to new highs in the past few weeks. The most noteworthy addition to this week's summary is that investment in equipment is on the rise.

The FHA announced that it was back in the black. The federal insurer of home loans reported it would no longer need emergency cash to remain afloat. The achievement was made on tighter credit standards and back ground checks as well as a crack downs on substandard lenders. Two moves that helped the improvement are higher credit score requirements and increased rates for premiums, two things that are also likely contributors to a sluggish housing market. The FHA went on to say they would not be relaxing standards now.

Along with the Fed minutes there are also two important reads on inflation this week. PPI tomorrow and CPI on Friday, both expected to remain flat or decline.

The Oil Index

Oil prices saw some volatility again today. Prices for WTI and Brent tanked when Japanese GDP was released but reports of increased tension between OPEC members helped to lift them later in the day. WTI fell from $76 to $75 and climbed back to $75.50 by the close of today's session, Brent traded in a range between $78 and $79.50. This is just off of the long term low but no sign of reversal even though there is growing talk of the possibility. On a fundamental basis weak global demand growth and rising supply are pressuring prices lower, but with each new low the pressure on OPEC to cut its production grows and with it speculation of a snap back rally in oil. There is no sign of a rally yet, the OPEC meeting is November 27th.

Looking at the Oil Index it appears that some traders are betting on a rally in oil, or at least in oil producing stocks. The index traded down today, but was halted by support at 1,430, the fourth time the index has tested support since the October low. This level is consistent with the 26.3% retracement of the July-October correction and beginning to look strong. The indicators are still in decline but so long as support holds will begin to roll over this week. If not the index will likely fall back to 1,400 and 1,350. Oil prices will have a lot to do with direction in the sector and they will likely remain volatile at least until the OPEC meeting so be careful.


The Gold Index

Gold traded flat to today, just beneath $1190 and a two week high. This is following the Friday short covering rally, the second day of strong buying originating from the $1150 region. It looks like gold could be bottoming but if so, I still don't think it is moving much higher in the near term. The Friday rally and today's action both fell short of resistance set by the October low in gold, just above $1190, and is not yet an entry signal.

My outlook for gold is mixed because I see the chance for a stronger dollar and for rising interest rates/inflation. A stronger dollar due to potential policy changes at the ECB and BOJ, both of which might come in the next month or two. The possibility of these moves will be amplified by any hawkish comments in the FOMC minutes. I also see an upcoming move by the FOMC to raise interest rates, this move is just farther out on the calendar.

My thinking that gold may be bottoming is because interest rates and inflation is coming, that is a guarantee, but 8 months away or so. My thinking that gold will not move much higher now is because the chance of a stronger dollar is much nearer than the chance of higher interest rates and inflation.

The Gold Index traded to the upside today after breaking above resistance on Friday. The move above $66.60 is tied directly to the short covering rally in gold and as of yet has not convinced me of a reversal in trend. The index is above support but this could be a whipsaw, I say this because gold prices themselves have not broken above what I consider to be comparable resistance at $1190. It looks like there is be additional resistance for the index around $68.75-$69.00 that the it will meet this week, coincidentally the same week as the FOMC minutes. The indicators are up but there is a lot of work for this index to do before I reverse my bearish stance. At the same time I don't think it is the right time to start any new bearish positions either.


In The News, Story Stocks and Earnings

Haliburton and Baker Hughes shocked the market today by announcing an agreement for the former to buy the later. This is contrary to reports released as late as Friday afternoon/Saturday morning but in the end not too surprising. Once they started the talks there were only two outcomes; they were either going to announce they didn't work it out or they did. The buy out is valued at $36.4 billion in cash and stock and set to close in the second half of next year. Shares of Haliburton fell by -5% but Baker Hughes International jumped 10%.


The news of the Haliburton/Baker Hughes deal spawned a lot of talk of possible mergers among other oil field services providers. The Oil Services Holder ETF (OIH) did not get a lot of activity though. The ETF traded in a tight range, like the broader market, but did not move into the green. The ETF has been trading in a narrowing range over the past month and could be winding up for a move. The indicators are pointing to lower prices but long term support is just below today's range, between $40 and $42.50, so if goes lower it may not go very far.


Tyson Foods reported earnings this morning along with positive forward guidance. The food packaging company reported $0.86 per share versus the expected $0.74 predicted by analyst. This is on revenue in line with estimates and in the face of higher input costs. Regardless of the estimates, earnings and revenue were company records and helped to send the stock higher. Shares of Tyson climbed during the pre market session and gapped up at the open by more than 3%. The move didn't stop there, taking Tyson up over 5% by the close of trading. Prices are now approaching long term resistance around $43.50.


Urban Outfitters reported after the bell today. The teen retailer reported earnings and revenue below estimates along with a miss on comp store sales. Shares of the stock traded flat during the open session but then fell 5% after the bell.


The Indices

The indices finished the day flat after a narrow day of trading. Flat describes them all, but some were up, some were down. The Down Jones Transportation Index was the leading loser, drifting down about a half percent. Today's action brought the index down near 9,000 but did not cross it, making this the 6th day of trading above 9,000.

The index looks like it could be cresting a peak, the question is, what kind of peak. Is it the kind that leads to a higher peak, or to a dip, and if it leads to a dip before a higher peak, how deep of a dip. The index is currently in a strong uptrend and based on my previous targets still has about 750 points to go. The indicators are in decline but so long as price action remain at the current levels is a good sign of consolidation mid-rally. This could continue until the next catalyst, which could be the FOMC minutes later this week.


The NASDAQ Composite also fell today, but not quite as far as the transports. The techs lost -0.37% and created the third of three spinning tops. This is a sign of market indecision or pause and not surprising ahead of this week's data. The index is trending up with strong indicators although they are also in decline, as with the transportation index. This could be an indication of impending bearishness but just as possible be setting the index up for another rally.


The S&P 500 drifted today,like the rest of the indices, but managed to close in the green. The broad market also managed to make a new all time closing high if not a new all time intra-day high. This index has been trading in a near horizontal line, and very tight range, over the past 6 trading days in what is looking to me like a flag pattern.

The current pattern is a narrow congestion/consolidation band, at all-time highs, during an uptrend, with economic tail-winds and ahead of expected economic data and FOMC minutes. The indicators are in decline but no reversal is yet indicated or confirmed so I am looking at this like a setup for trend following entry, at least until the FOMC minutes get released.


The Dow Jones Industrial Average matched the SPX for gains today, adding 0.07% but falling short of a new closing high. Today's action is the third day of trading at the current levels and looking a little extended. That being said, with current trends in place, outlook for next year improving and the FOMC minutes just two days away it also looks like this index could be consolidating in mid-rally as well.


The market seems to be holding its breath, waiting for the signal, a signal or permission, whatever it needs. The point is it looks like it is waiting. If there is one signal I can read well it's that one

It's no coincidence that the market corrected last month, and then bounced back only to pause here, just before the minutes are released. This same pattern has happened before, last month if I am not mistaken. The funny thing is, we already know what the Fed did at the meeting so I don't know why the minutes matter but they do. Maybe the market needs to synch up the meeting, the minutes and the current data...especially the inflation data.

My view; the trends are up, the economy is recovering and the outlook is good with low expectations of inflation. With this in mind I see rally and blue skies ahead, until some fear creeps up, which could be geopolitical or fundamental. Any dips, when they come, are still buying opportunities in my opinion but I am not so sure a dip is on the way right now.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Small Caps Accelerate Lower

by James Brown

Click here to email James Brown

Editor's Note:

No new trades for the Option Investor newsletter tonight.

The S&P 500 managed to eke out another record high but the NASDAQ composite did not rally. The small cap Russell 2000 index appears to be reversing lower. Meanwhile the leadership in the transportation stocks may be fading as their rally stalls.

If you are looking for new bullish plays I did note that BG, MNST, and NXPI were showing relative strength today. These might be bullish candidates on a breakout above resistance, directly overhead for these three stocks.




In Play Updates and Reviews

Weak Japan Keeps Market In Neutral

by James Brown

Click here to email James Brown

Editor's Note:

Stocks were somewhat weak on disappointing economic data out of Japan but the U.S. market managed to pare its losses.

DECK hit our entry trigger.

NOW hit our stop loss. IBM was closed this morning.


Current Portfolio:


CALL Play Updates

Apple Inc. - AAPL - close: 113.99 change: -0.19

Stop Loss: 106.45
Target(s): To Be Determined
Current Option Gain/Loss: + 64.1%
Average Daily Volume = 55.5 million
Entry on November 12 at $110.25
Listed on November 08, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: There were a lot of headlines for AAPL today. One story was AAPL teaming up with UnionPay for customers in China to make purchases in the Apple app store. Shares of AAPL also get another price target upgrade (to $120). The stock spiked to $117.28 this morning but then gave back all of its gains to close virtually unchanged.

Shares do look short-term overbought and due for a dip. I would not be surprised to see AAPL trade lower tomorrow.

Earlier Comments: November 8, 2014:
Love it or hate it AAPL always has Wall Street's attention. It has a cult-like following. The company's success has turned AAPL's stock into the biggest big cap in the U.S. markets with a current valuation of almost $640 billion.

The company is involved in multiple industries from hardware, software, and media but it's best known for its consumer electronics. The iPod helped perpetuate the digital music revolution. The iPhone, according to AAPL, is the best smartphone in the world. The iPad helped bring the tablet PC to the mass market. The company makes waves in every industry they touch with a very distinctive brand (iOS, iWork, iLife, iMessage, iCloud, iTunes, etc.) and they've done an amazing job at building an Apple-branded ecosystem. Now they're getting into the electronic payments business with Apple Pay.

The company's latest earnings report was super strong. AAPL reported its Q4 (calendar Q3) results on October 20th. Wall Street was expecting a profit of $1.31 a share on revenues of $39.84 billion. The company delivered a profit of $1.42 a share with revenues up +12.4% to $42.12 billion. The EPS number was a +20% improvement from a year ago. Gross margins were up +1% from a year ago to 38%. International sales were 60% of the company's revenues.

AAPL's iPhone sales exceeded estimates at 39.27 million in the quarter and up nearly 16% from a year ago. The only soft spot in their ecosystem seems to be iPad sales, which have declined several quarters in a row. The company hopes to rejuvenate its tablet sales with a refresh of the iPad models. More importantly AAPL management raised their Q1 (calendar Q4) guidance as they expect revenues in the $63.5-66.5 billion in the quarter. Recent news would suggest that AAPL might deliver an incredible 50 million iPhone 6s in 2014. That's not counting their new iPhone 6+.

The better than expected results and bullish guidance sent the stock to new highs. The rally has created a quadruple top breakout buy signal on its point & figure chart that is currently forecasting at $135 target. Shares have been outperforming the broader market and AAPL is currently up +36% year to date.

Currently AAPL is up three weeks in a row but it spent most of last week consolidating sideways and digesting its prior gains. As we approach the holiday shopping season AAPL is poised to benefit from what should be stronger than average consumer spending with the company's stable of new releases to tempt consumers to upgrade their older electronics.

The daily chart shows AAPL's intraday high to be $110.30 on November 3rd but that's actually a bad tick. The real intraday high is about $109.90. Tonight I am suggesting a trigger to buy calls on AAPL at $110.25. We will start with a stop loss at $106.45. More conservative traders may want to try a stop loss closer to last week's low near $107.70 instead.

- Suggested Positions -

Long 2015 Jan $110 call (AAPL150117c110) entry $3.90

11/12/14 triggered @ 110.25
Option Format: symbol-year-month-day-call-strike


ASML Holding - ASML - close: 102.10 change: +0.18

Stop Loss: 98.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on November -- at $---.--
Listed on November 11, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
11/17/14: ASML flirted with a bullish breakout to new highs but the rally stalled at $102.70. I don't see any changes from my recent comments. Our suggested entry point is $102.75.

Earlier Comments: November 11, 2014:
We are surrounded by electronics. There are mini-computers in just about every appliance we use. Our lifestyles are built on the magic of semiconductors. ASML makes the equipment for companies to build semiconductor circuits.

The company describes itself as "ASML makes possible affordable microelectronics that improve the quality of life. ASML invents and develops complex technology for high-tech lithography machines for the semiconductor industry. ASML's guiding principle is continuing Moore's Law towards ever smaller, cheaper, more powerful and energy-efficient semiconductors. We are a multinational company with over 70 locations in 16 countries, headquartered in Veldhoven, the Netherlands. We employ more than 13,800 people ASML is traded on Euronext Amsterdam and NASDAQ under the symbol ASML."

Currently the company is working hard on the future of semiconductor fabrication with a new system for lithography. ASML is calling it EUV, which stands for "extreme ultraviolet", which is a reference to the light source used to etch the semiconductor wafers.

Here's an excerpt from ASML's website:

For the past decades, the semiconductor industry has been driven by what is called "Moore's Law". It goes back to Intel co-founder Gordon Moore, who observed in the 1960s that the amount of transistors that could be fit on a chip of a given size at an acceptable cost doubled roughly every year. (He later revised the period to two years.)

The entire semiconductor industry operates to this model, which requires chip makers to pack transistors more tightly with every new generation of chips, shrinking the size of transistors. Smaller transistors mean that semiconductor lithography machines must be able to print finer features with every new generation of chips as well.

Since lithography is an optical technology, one of the things that limits the resolution of the equipment is the wavelength of the light that is used. Shortening the wavelength of the light means higher resolution and smaller features. Lithography machines have gone from using ultraviolet light with a wavelength of 365 nanometers to "deep ultraviolet" light of 248 nanometers and 193 nanometers, improving the resolution at every step. EUV is the next step, with light of a wavelength of 13.5 nanometers. (An analogy is painting: we use a smaller brush to paint the finer details)"

Shares of ASML plunged back in July on a disappointing guidance. Yet a couple of weeks later the stock soared following an update on its EUV system. ASML said their latest test showed their EUV system "reached a throughput of 637 wafers per day, ahead of the target of 500 wafers it gave in its Q2 earnings report this month." The company's target is processing 1,500 wafers a day by 2016.

ASML's most recent earnings report was October 15th, and coincidentally the market's recent bottom. Wall Street was expecting a profit of € 0.57 per share with revenues of €1.41 billion. ASML missed with a profit of only €0.56 a share and revenues of only €1.32 billion. Management said the miss was due to a couple of shipments that were pushed back to the fourth quarter. They also reported strong gross margins of 43.7%, which was above their estimate of 42%.

ASML raised their Q4 guidance and expects revenues of €1.3 billion, which was above Wall Street's €1.19 billion estimate. Their backlog soared almost 40% to €2.4 billion, not counting their EUV systems. ASML's President and CEO Peter Wennink said, "We are on track to meet our full-year 2014 forecast of at least EUR 5.6 billion of net sales. In the third quarter, we delivered a good profit margin on net sales that fell just short of our previous guidance due to a couple of system shipments shifting into Q4, which does not impact our full-year guidance. Looking ahead, we see a solid start to 2015. In memory, we expect higher sales in H1 driven by the strong backlog. In logic, the ramp of 20/16/14 nanometer nodes is expected to continue, but the timing and volume depends on the business allocations by our customers' customers."

ASML is also shareholder friendly with a steady dividend they have increased every year since 2009. In the third quarter they purchased 2.3 million shares of their stock. In the last two years they have spent €776 million to buy back 11.8 million shares of company stock. They still have €224 million left to spend on their buyback program before 2014 ends.

Shares of ASML have been very strong during the market's rebound off its October lows. Shares are in the process of breaking out past resistance at its 2013-2014 highs. A breakout here would be new record highs. The point & figure chart is bullish and forecasting at $129 target.

There should be a steady news flow from ASML to support the stock. The company is presenting at several conferences between now and year end. Their investor day is November 24th.

Tonight I am suggesting a trigger to buy calls at $102.75.

Trigger @ $102.75

- Suggested Positions -

Buy the 2015 Jan $105 call (ASML150117c105) current ask $2.80

Option Format: symbol-year-month-day-call-strike


CR Bard Inc. - BCR - close: 164.81 change: +0.77

Stop Loss: 161.60
Target(s): To Be Determined
Current Option Gain/Loss: -29.6%
Average Daily Volume = 538 thousand
Entry on November 13 at $165.65
Listed on November 12, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: Monday turned out to be a quiet session for BCR. The stock traded sideways inside a $1.00 range. I would wait for BCR to show additional strength before considering new positions. A rally past $166 could work.

Earlier Comments: November 12, 2014:
BCR is in the healthcare sector. The company makes medical supplies. According to the company website, "C. R. Bard, Inc. is a leading multinational developer, manufacturer, and marketer of innovative, life-enhancing medical technologies in the product fields of vascular, urology, oncology, and surgical specialty. BARD markets its products and services worldwide to hospitals, individual health care professionals, extended care facilities, and alternate site facilities."

The company has been on a roll with its earnings reports. BCR has beaten Wall Street's estimates on both the top and bottom line the last four quarters in a row. The last couple of quarters have seen some pretty big beats and management has raised guidance.

BCR's most recent earnings report was October 22nd. Wall Street expected a profit of $1.87 a share on revenues of $818.8 million. BCR said earnings rose +28% from a year ago to $2.15 a share. Revenues were up +9% to $830 million. Inside the U.S. net sales were up +13%. Management raised their Q4 EPS guidance above analysts' estimates.

The stock has been struggling to breakout past major resistance near the $150-155 range but the October earnings results launched shares of BCR higher. The last couple of weeks have seen BCR consolidating sideways under resistance near the $165.00 level. We think it's about to break out. The point & figure chart is bullish and forecasting at long-term target of $194.00.

Tonight we are suggesting a trigger to buy calls at $165.60

- Suggested Positions -

Long 2015 Jan $170 call (BCR150117c170) entry $2.63

11/13/14 triggered @ 165.65, suggested entry was $165.60
Option Format: symbol-year-month-day-call-strike


Cerner Corp. - CERN - close: 64.14 change: -0.18

Stop Loss: 62.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.7 million
Entry on November -- at $---.--
Listed on November 13, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
11/17/14: CERN continues to consolidate sideways in the $64-65 zone. We are on the sidelines waiting for a breakout higher. The newsletter is suggesting a trigger to open positions at $65.10.

Earlier Comments: November 13, 2014:
CERN is part of the technology sector. The company sells healthcare information technology solutions. According to a company press release, "Cerner's health information technologies connect people, information and systems at more than 14,000 facilities worldwide. Recognized for innovation, Cerner solutions assist clinicians in making care decisions and enable organizations to manage the health of populations. The company also offers an integrated clinical and financial system to help health care organizations manage revenue, as well as a wide range of services to support clients' clinical, financial and operational needs. Cerner's mission is to contribute to the improvement of health care delivery and the health of communities."

CERN's most recent earnings report was October 23rd. The results bottom line results were in-line with estimates and the revenue number was a miss. Yet these headlines don't tell the whole story. Analysts were expecting CERN to deliver a profit of $0.42 a share on revenues of $857 million.

The company met the EPS number of 42 cents but that's a +20% improvement from a year ago quarter. Revenues were only $840 million, which missed Wall Street's estimate but revenues still grew +15.4%. The company's last quarter saw a record $1.1 billion in bookings, the most ever for a third quarter.

CERN is very profitable. Their gross margins are above 80%. CERN's backlog soared +21% to $10.16 billion. It was a pretty good quarter considering they also announced on August 5th they were buying Siemens Health Services for $1.3 billion. This deal has already been approved by the U.S. FTC and should close in February 2015.

CERN's Q4 guidance expects revenues to grow +13% from a year ago to $880-915 million. Adjusted diluted earnings per share should come in the $0.46-0.47 range. New bookings are expected to hit the $1.15-1.25 billion zone. All of these show additional growth but they're largely in-line with analysts' estimates.

The stock has seen a significant bounce from its October low and the late October rally produced a breakout past its 2014 high. Now CERN has spent about two weeks digesting its gains and it's starting to breakout again. Today saw shares outperform the broader market and close above short-term resistance at $64.00.

More aggressive traders may want to buy calls now. We are suggesting a trigger to buy calls at $65.10.

Trigger @ $65.10

- Suggested Positions -

Buy the 2015 Jan $65 call (CERN150117c65)

Option Format: symbol-year-month-day-call-strike


Costco Wholesale - COST - close: 138.47 change: -0.01

Stop Loss: 134.75
Target(s): To Be Determined
Current Option Gain/Loss: +198.7%
Average Daily Volume = 1.9 million
Entry on October 30 at $132.25
Listed on October 29, 2014
Time Frame: Exit prior to earnings in December
New Positions: see below

Comments:
11/17/14: COST bounced off short-term technical support at its 10-dma and managed to close virtually unchanged on the session.

I am not suggesting new positions at this time. It's conceivable that the $140.00 level could be round-number resistance. More conservative investors may want to raise their stop loss closer to $136.00 or take some money off the table here.

Earlier Comments: October 29, 2014
COST is part of the services sector. The company runs a discount, membership sales warehouse. The company's latest earnings report said Costco currently operates 664 warehouses, including 469 in the United States and Puerto Rico, 88 in Canada, 33 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, six in Australia and one in Spain.

The company has struggled to hit Wall Street's bottom line estimates for over a year but steady improvement in their same-store sales have helped drive the stock higher. A strong back to school shopping season and higher membership fees fueled a better than expected quarterly report.

COST reported their Q4 numbers on October 8th. After missing estimates for five quarters in a row the company finally beat estimates. Analysts were expecting a profit of $1.52 a share on revenues of $35.3 billion. COST delivered $1.58 a share with revenues up +9.3% to $35.52 billion. The net profit number was up +13% and gross margins improved 15 basis points.

COST also reported that their e-commerce sales continue to grow at a brisk pace and their online sales rose +18% in their fourth quarter. Same-store (comparable store) sales remain a key metric to watch. COST's Q4 same-store sales were up +4% yet if you back out falling gasoline prices and currency effects their comparable store sales were up +6% for the quarter versus +4.5% a year ago. Membership renewal rates remain very strong at 91% in the U.S. and 87% globally. COST plans to open up to eight more locations before the end of the 2014 calendar year.

The company also recently announced their first foray into China. COST has entered the Chinese market with an online store through Alibaba Group's (BABA) Tmall Global platform.

The holiday shopping season is almost upon us with less than 60 days before Christmas. COST is poised to do well since the company caters to the higher-end more affluent customer.

Shares are hovering just below the $132.00 level. Tonight we are suggesting at trigger to buy calls at $132.25. We will plan on exiting positions prior to their December earnings report.

- Suggested Positions -

Long DEC $135 call (COST141220c135) entry $1.54

11/08/14 new stop @ 134.75
11/01/14 new stop @ 130.75
10/30/14 triggered @ 132.25
Option Format: symbol-year-month-day-call-strike


Deckers Outdoor Corp. - DECK - close: 92.72 change: +0.93

Stop Loss: 88.75
Target(s): To Be Determined
Current Option Gain/Loss: -7.9%
Average Daily Volume = 763 thousand
Entry on November 17 at $92.25
Listed on November 15, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: Our brand new play on DECK is off to a good start. We wanted to buy calls at $92.25. Shares broke through resistance near $92 and its 50-dma and outperformed the market with a +1.0% gain today. Our trigger was hit this morning.

Earlier Comments: November 15, 2014:
DECK is part of the consumer goods sector. The company owns a number of brands but for many Deckers means UGG. The iconic footwear line was started in 1978 in Southern California. Strength in the UGG line helped power the company's latest quarterly results.

According to the company website, "Deckers Brands is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The Company's portfolio of brands includes UGG, I HEART UGG, Teva, Sanuk, TSUBO, Ahnu, MOZO, and HOKA ONE ONE. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, 130 Company-owned and operated retail stores, and select online stores, including Company-owned websites. Deckers Brands has a 40-year history of building niche footwear brands into lifestyle market leaders attracting millions of loyal consumers globally."

The most recent earnings report was October 23rd. Analysts were expecting a profit of $1.03 per share on revenues of $457.2 million. DECK beat estimates with a profit of $1.17 a share. That's a +23.2% increase from the same period a year ago. Revenues soared +24.2% to a record $480.3 million. U.S. sales rose +21.1% and international sales surged +29.2%. E-commerce sales soared +45%.

It was DECK's Q2 and their gross profit rose +34% while gross margins increased 340 basis points to 46.6%. This was above estimates of 45% and above their gross margin a year ago of 43.2%. Management said all brands delivered a strong performance.

The company lowered their Q3 guidance (current quarter) to below Wall Street estimates. They also raised their Q4 and 2015 guidance on both the top and bottom line. DECK expects 2015 to see revenues up +15%, earnings up +15.8%, and gross margins around 49%. Last quarter the S&P 500 saw earnings growth of about +6.9%. DECK is clearly outgrowing the market with +23% growth. The S&P 500 is expected to see +10-11% growth in 2015.

Technically shares are poised for a breakout on both the daily chart and the point & figure chart. Looking at the point & figure chart (not shown), a breakout past $92.00 would generate a new triple-top breakout buy signal. A breakout could also spark some short covering. The most recent data listed short interest at 17% of the small 33.6 million share float.

Tonight we are suggesting a trigger to buy calls at $92.25. Such a move probably signals a run toward resistance near $100.00.

- Suggested Positions -

Long 2015 Jan $95 call (DECK150117c95) entry $3.80

11/17/14 triggered $92.25
Option Format: symbol-year-month-day-call-strike


DineEquity, Inc. - DIN - close: 95.27 change: +0.66

Stop Loss: 92.25
Target(s): To Be Determined
Current Option Gain/Loss: +50.0%
Average Daily Volume = 154 thousand
Entry on November 05 at $91.55
Listed on November 04, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: DIN continues to push higher and showed relative strength with a +0.69% gain on Monday. More conservative traders may want to raise their stop loss.

I'm not suggesting new positions at the moment.

Earlier Comments: November 4, 2014:
Restaurant stocks were showing relative strength today. Better than expected earnings results from the likes of Red Robin (RRGB) and Bloomin Brands (BLMN) helped buoy the group. Additional stocks in this industry showing relative strength on Tuesday are: BWLD, PNRA, JACK, EAT, SONC, TXRH, KKD, DNKN, CAKE, DRI, and PBP. The one we like tonight is DIN.

According to a company press release, "Based in Glendale, California, DineEquity, Inc., through its subsidiaries, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar and IHOP brands. With more than 3,600 restaurants combined in 19 countries, over 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity is one of the largest full-service restaurant companies in the world."

The company has seen success with a steady improvement in earnings. DIN has beaten Wall Street's estimates on both the top and bottom line three quarters in a row. Their most recent report was October 28th. Analysts were looking for a profit of $1.05 a share on revenues of $157.2 million. DIN served up $1.14 per share with revenues climbing to $162.85 million.

The company saw domestic system-wide same-store sales up +2.4% at IHOP and +1.7% at Applebee's. Management then raised their sales guidance on both Applebee's and IHOP. DIN also raised its dividend by 17% to $0.875 per share and they boosted their stock buyback program from $40 million to $100 million.

The restaurant industry should be a major beneficiary of the drop in oil prices. Lower gasoline prices at the pump mean consumers have more spending money and will likely burn a lot of that cash eating at restaurants.

Shares broke out to new highs on this earnings report and bullish guidance. Today the stock is at all-time highs. The point & figure chart is bullish and forecasting a long-term target at $118.00.

Tonight we are suggesting a trigger to launch bullish positions at $91.55.

- Suggested Positions -

Long DEC $95 call (DIN141220c95) entry $1.20

11/13/14 new stop @ 92.25
11/12/14 new stop @ 91.45
11/08/14 new stop @ 89.65
11/05/14 triggered @ 91.55
Option Format: symbol-year-month-day-call-strike


FedEx Corp. - FDX - close: 171.56 change: -0.01

Stop Loss: 169.85
Target(s): To Be Determined
Current Option Gain/Loss: +144.3%
Average Daily Volume = 1.5 million
Entry on October 17 at $155.50
Listed on October 15, 2014
Time Frame: Probably exit prior to earnings on Dec. 17th
New Positions: see below

Comments:
11/17/14: The rally in the transportation names is starting to look tired. We are going to try and protect our trade by moving the stop loss up to $169.85. More conservative investors may want to just take profits now.

I am not suggesting new positions at this time.

Earlier Comments: October 15, 2014:
Last year a last minute surge of online shoppers overwhelmed the system and thousands of Christmas presents were delivered late. Part of the problem was terrible weather. The other challenge was the growth in online shopping. Amazon.com (AMZN) blamed UPS for the mass of delayed deliveries last year. You can bet that UPS' rival FDX has taken notice and plans to be ready this year.

Market research firm EMarketer is estimating that retail online shopping will surge +17% in 2014 to $72.4 billion. That might be under estimating the growth, especially this year as many consumers might opt to shop online instead of face the crowds and risk being a target for terrorism or catching Ebola. Granted neither a terrorist event inside the U.S. and a widespread outbreak of Ebola in the states has happened yet but people are already afraid with the daily headlines about the virus.

UPS and FDX hope to be ready. UPS is hiring up to 95,000 seasonal workers and FDX is hiring 50,000 holiday workers this year. That's 10K more than last year for FDX.

In addition to the surge in online shopping FDX should also benefit from the multi-year lows in oil prices. Low oil prices means lower fuel costs, one of FDX's biggest expenses.

It would appear that FDX has fine tuned its earnings machine as well. Their latest earnings report was September 17th. Wall Street was expecting a profit of $1.95 a share on revenues of $11.46 billion. FDX delivered a profit of $2.10 a share with revenues up to $11.7 billion. That's a +24% increase in earnings from a year ago and the second quarter in a row that FDX beat EPS estimates.

FDX chairman, president, and CEO Frederick Smith said, "FedEx Corp. is off to an outstanding start in fiscal 2015, thanks to very strong performance at FedEx Ground, solid volume and revenue increases at FedEx Freight and healthy growth in U.S. domestic volume at FedEx Express." Business has been strong enough that a few weeks ago FDX started raising prices on some services.

Since that September earnings report Wall Street analysts have been raising price targets. Some of the new price targets for FDX stock are $175, $180 and $183 a share.

The recent sell-off in the market and FDX could be an opportunity. FDX has already seen a -10% correction from its intraday high near $165 to today's low near $149. Right now FDX sits just below resistance near $155.

We're suggesting a trigger to buy calls at $155.50.

- Suggested Positions -

Long 2015 Jan $160 call (FDX150117c160) entry $5.30

11/17/14 new stop @ 169.85
11/15/14 new stop @ 168.40
11/08/14 new stop @ 165.50
11/01/14 new stop @ 163.45
10/28/14 new stop @ 162.65, traders may want to take profits now!
10/25/14 new stop @ 157.85
10/23/14 new stop @ 155.90
FDX is nearing resistance at $164.00. Traders may want to take profits now.
10/21/14 new stop @ 153.45
10/17/14 triggered @ 155.50
Option Format: symbol-year-month-day-call-strike


Keurig Green Mountain, Inc. - GMCR - close: 154.50 change: +0.23

Stop Loss: (removed)
Target(s): To Be Determined
Current Option Gain/Loss: +39.3%
Current Option/Gain loss if you sold the NOV $160 call: +635.0%
Average Daily Volume = 1.68 million
Entry on October 28 at $145.75
Listed on October 25, 2014
Time Frame: Exit PRIOR to earnings on November 19th
New Positions: see below

Comments:
11/17/14: GMCR found support near a short-term trend of higher lows midday. The stock rebounded back into positive territory but gains were minor.

GMCR has earnings coming up this week on November 19th. I am not suggesting new positions.

Earlier Comments: October 25, 2014:
GMCR is labeled as part of the consumer goods business. GMCR describes their company as "a leader in specialty coffee, coffee makers, teas and other beverages, Keurig Green Mountain (Keurig), is recognized for its award-winning beverages, innovative brewing technology, and socially responsible business practices. The Company has inspired consumer passion for its products by revolutionizing beverage preparation at home and in the workplace." GMCR makes almost 300 varieties of coffee, hot cocoa, teas, and other beverages in K-cup and Vue portion packs.

The company's latest earnings report back in August were better than expected but revenues were a disappointment and management guided lower. Yet the stock did see much follow through on the initial post-earnings drop. Then a couple of weeks later shares of GMCR soared to new highs on news it had finally signed a licensing deal with Kraft Foods, the second largest food and beverage company in the world. GMCR already had licensing deals with all the major coffee brands but Kraft was the lone holdout.

Several weeks later shares of GMCR soared again after Goldman Sachs slapped a buy rating on the stock and gave it a 12-month $166 price target. The Goldman analyst believes GMCR will see sales rise at a compounded annual growth rate of almost 30% and profits will soared at 23% per year through 2017.

On a short-term basis the middle of last week was starting to look like a top, especially with Thursday's bearish engulfing candlestick reversal pattern. Yet there was no confirmation on Friday.

Friday's intraday high was $145.54. We are suggesting a trigger to buy calls at $145.75. We'll try and limit our risk with a stop loss at $141.90. We are not setting an exit target yet but I will note the point & figure chart is suggesting a $182.00 target.

Earnings are coming up on November 19th. We will plan on exiting prior to the announcement. More aggressive traders may want to take a longer-term approach and hold over the announcement (and use longer-dated calls).

- Suggested Positions -

Long NOV $150 call (GMCR141122C150) entry $6.17

- plus -

(On November 3rd, 2014, Sell the November $160 call)
Short NOV $160 call (GMCR141122C160) sold short @ $5.00

11/12/14 removed the stop loss
11/08/14 new stop @ 148.65
11/05/14 new stop @ 144.90
11/03/14 Sold short the NOV $160 call
11/01/14 Strategy Update: Sell the Nov $160 call on Monday morning, November 3rd
10/30/14 new stop @ 143.25
10/28/14 triggered @ $145.75
Option Format: symbol-year-month-day-call-strike


iShares Transportation ETF - IYT - close: 161.71 change: -0.84

Stop Loss: 156.85
Target(s): To Be Determined
Current Option Gain/Loss: +432.3%
Current Option/Gain loss if you sold the NOV $159 call: + 900.0%
Average Daily Volume = 320 thousand
Entry on October 13 at $138.75
Listed on October 11, 2014
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
11/17/14: The U.S. dollar popped higher this morning and that helped pressure oil again. Yet the rally in the transportation stocks is looking tired. The IYT faded lower -0.5%. It looks like this ETF could test round-number support near $160 soon.

I am not suggesting new positions at this time. Investors may want to take profits early. We have four trading days left on our November options.

Earlier Comments: October 11, 2014:
The IYT is an exchange traded fund (ETF) that tries to mimic the performance of the Dow Jones Transportation Average index.

Stocks have been sinking as investors worry about a global slowdown, especially in Europe. Yet the U.S. economy is still growing. Plunging oil prices should be great news for both business and consumers. Lower fuel costs means more money to spend elsewhere. Lower fuel prices also mean better margins for transportation companies.

The IYT has hit correction territory with a -10% pullback from its September highs about four weeks ago. When the market finally bounces the transports should lead the market higher thanks to the U.S. economy and low oil prices.

It looks like IYT's current drop could be near a bottom. Volume was almost three times the norm on Friday and shares settled near technical support at its simple 200-dma. We suspect the market will see another push lower before bouncing. That could see the IYT pierce the $140 level.

Tonight we're suggesting a trigger to buy calls at $138.75 with a stop loss at $134.45. This should be considered a higher-risk, more aggressive trade. You've heard the term "catching a falling knife" and that's what we're trying to do. You may want to wait for the IYT to pierce $140.00 and then buy the rebound back above this level as an alternative strategy.

*Higher-risk, more aggressive trade* - Suggested Positions -

Long NOV $143 call (IYT141122c143) entry $3.40

- plus -

(sell short the Nov $159 call on October 29th)
Short NOV $159 call (IYT141122c159) entry $1.80

11/08/14 new stop @ 156.85
11/06/14 new stop @ 154.50
10/29/14 IYT gapped open higher at $157.44 (+56 cents)
10/28/14 Strategy Update: new stop @ 151.85, Plus, we want to sell the November $159.00 call (current bid is $1.75).
10/25/14 new stop @ 148.65, traders may want to take some money off the table now
10/23/14 new stop @ 147.25
10/21/14 new stop @ 144.65
10/18/14 new stop @ 141.75
10/13/14 triggered @ 138.75
Option Format: symbol-year-month-day-call-strike


Open Text Corp. - OTEX - close: 59.54 change: +0.45

Stop Loss: 57.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 300 thousand
Entry on November -- at $---.--
Listed on November 15, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
11/17/14: OTEX continued to rally on Monday and outperformed the market with a +0.7% gain. Shares look poised to breakout past resistance at $60.00.

Earlier Comments: November 15, 2014:
OTEX is in the technology sector, specifically the application software industry. They are a Canadian company that was founded in 1991. The company considers itself a leader in the Enterprise Information Management (EIM) market. OTEX has beaten Wall Street's earnings estimates the last four quarters in a row.

The most recent report was OTEX Q1 report, announced on October 22nd. Analysts were expecting a profit of $0.86 on revenues of $461.2 million. OTEX beat the bottom line estimates with a profit of $0.97 a share. Revenues were a miss at $453.8 but that is still a +40% improvement from a year ago.

The quarter was fueled by a +260% surge in cloud services revenue. Their operating margin improved from 30.6% a year ago to 34.3%. OTEX CEO Mark J. Barrenechea said, "We delivered the strongest first quarter results in the history of OpenText, with total revenues of $453.8 million, up 40% year-over-year and non-GAAP-based operating income of $155.7 million, up 57% year-over-year, despite a toughening economy."

The stock experienced a knee-jerk reaction sell-off on this report (big drop on October 23rd) but shares have been up every week since then. Now OTEX is trading at all-time highs. Shares have spent the last few days consolidating sideways in the $58-60 zone and look poised to push higher. The point & figure chart is bullish and suggesting at $76 target.

Tonight we are suggesting a trigger to open bullish positions at $60.25.

Trigger @ $60.25

- Suggested Positions -

Buy the Dec $60 call (OTEX141220c60) current ask $1.30

Option Format: symbol-year-month-day-call-strike


PriceSmart Inc. - PSMT - close: 94.99 change: +0.24

Stop Loss: 89.45
Target(s): To Be Determined
Current Option Gain/Loss: +16.2%
Average Daily Volume = 156 thousand
Entry on November 10 at $92.75
Listed on November 06, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: PSMT spiked lower at the open but shares rebounded to close back in positive territory before the ending bell. If the market dips I would look for PSMT to find support in the $92.00-92.50 area.

Earlier Comments: November 6, 2014:
PSMT is in the services sector. The company is essentially the Costco of Latin America. A company press release describes them this way, "PriceSmart, headquartered in San Diego, owns and operates U.S.-style membership shopping warehouse clubs in Latin America and the Caribbean, selling high quality merchandise at low prices to PriceSmart members. PriceSmart now operates 34 warehouse clubs in 12 countries and one U.S. territory (six in Costa Rica; four each in Panama, Trinidad, and Colombia; three each in Guatemala, the Dominican Republic, and Honduras; two in El Salvador; and one each in Aruba, Barbados, Jamaica, Nicaragua and the United States Virgin Islands)."

A lot of PSMT's locations are in fast growing countries. Honduras has an annual growth rate of +3.1%. Costa Rica's is +4.2%. Columbia & Guatemala are growing at +4.3%. Panama latest GDP was +6.3%. Yet a few countries are struggling. Trinidad's growth rate is -1.2% while the Dominican Republic's plunged to an annual pace of -13%. Overall the consolidate trend is positive for PSMT's environment and they're building new stores in Columbia.

The company's latest earnings report was mixed. Their 73-cent earnings missed estimates by one cent but revenues were up +6.3% for the year and above Wall Street's estimate. This was PSMT's fourth quarter and they ended their fiscal year with sales of $2.4 billion, a +9.2% increase. Overall same-store sales rose +4.8%. Management reported double-digit sales growth for the year in Columbia, Panama, Trinidad, and Aruba.

Technically the stock has been in a bear market after a sharp decline from its late 2013 highs near $125 a share. PSMT appears to have built a base in the $80-92 range over the last few months. Now shares are starting to breakout from this significant consolidation pattern. Today's rally is significant because it's a bullish breakout above technical resistance at the 200-dma. The point & figure chart is bullish and forecasting a target of $102.

The October 29th intraday high was $92.68. Tonight I am suggesting a trigger to buy calls at $92.75.

- Suggested Positions -

Long 2015 Jan $95 call (PSMT150117C95) entry $3.44

11/10/14 triggered @ 92.75
Option Format: symbol-year-month-day-call-strike


PowerShares QQQ (ETF) - QQQ - close: 102.91 change: -0.31

Stop Loss: 99.95
Target(s): To Be Determined
Current Option Gain/Loss: +16.7%
Average Daily Volume = 38.1 million
Entry on November 12 at $102.35
Listed on November 10, 2014
Time Frame: exit prior to December option expiration
New Positions: see below

Comments:
11/17/14: The QQQ just snapped a five-day winning streak. Worries about global growth sparked some profit taking this morning but the Qs pared their losses by the closing bell.

Earlier Comments: November 10, 2014:
The QQQ is the exchange traded fund (ETF) that mimics the NASDAQ-100 index, which is the largest 100 non-financial stocks on the NASDAQ exchange, including both foreign and domestic companies.

The NASDAQ-100 has been outperforming its index brethren this year with the QQQ up +15.5% in 2014 compared to a +9.9% gain in the S&P 500, a +9.4% gain in the S&P 100, a +6.0% gain in the Dow Industrials, and a +0.8% gain in the Russell 2000.

This leadership should continue. Seasonally this is a very bullish time of year for stocks. November is the third best month of the year. We just started the best six months of the year. Midterm years perform even better than normal. Corporate earnings has been strong. Interest rates are low. The Fed remains cooperative. Japan's central bank just announced a massive new QE program that will send more money into U.S. stocks. Europe is on the verge of more QE. There are plenty of reasons to be bullish.

Most of the market does look short-term overbought with a massive bounce from the October 15th low. Yet the QQQ has spent the last several days consolidating gains in a sideways move under short-term resistance near the $102 area. That consolidation is narrowing and the Qs look poised to breakout higher.

Tonight we are suggesting a trigger to buy calls at $102.35.

- Suggested Positions -

Long DEC $102.63 CALL (QQQ141220C102.63) entry $1.49

11/12/14 triggered @ 102.35
Option Format: symbol-year-month-day-call-strike


The Sherwin-Williams Co. - SHW - close: 239.31 change: -0.34

Stop Loss: 234.45
Target(s): To Be Determined
Current Option Gain/Loss: +75.0%
Average Daily Volume = 526 thousand
Entry on November 05 at $231.00
Listed on November 01, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: SHW is still hovering near resistance at the $240.00 level. I would be tempted to take profits here at current levels.

I am not suggesting new positions at this time.

FYI: Investors might want to note that both Home Depot (HD) and Lowes (LOW) report earnings this week (the 18th and 19th). Their results might influence trading in SHW.

Earlier Comments: November 1, 2014:
It's not very often you see a company about to celebrate its 150th birthday. For SHW that will be the year 2016. The company has been in business since 1866. The Company's core business is the manufacture, distribution and sale of coatings and related products. SHW is headquartered in Cleveland, Ohio. They sell through over 4,100 company-operated stores. Their global group has sales in more than 115 countries. Sherwin-Williams is also a very well known dividend payer and has annually increased dividends since 1979.

The slow and steady economic improvement in the U.S. has been beneficial. The real estate market has also helped SHW. New homes need new paint. The pace of new home sales in the U.S. hit six-year highs last month. While home sales do tend to slow down a bit in the winter months SHW should benefit from lower input costs. Crude oil and natural gas are big components in the paint and coatings industry. The severe drop in oil the last few months is a blessing for SHW.

The company raised their earnings guidance back in July. They issued bullish guidance again in their latest quarterly report. SHW announced earnings on October 28th. Wall Street was expecting a profit of $3.22 per share on revenues of $3.18 billion. SHW said their earnings rose +31.4% to a record-setting $3.35 per share. Revenues were up +10.6% at $3.15 billion, which missed the estimate.

SHW's remodeling business saw growth. The real driver was paint sales. Their paint stores account for the lion's share of sales, which saw revenues up +20%. SHW also purchased 2.0 million shares of their stock last quarter and still have 6.8 million yet to buy in their stock buy back program.

Management was optimistic. SHW's Chairman and CEO MR. Christopher Connor, said,

"We are pleased to report record sales and earnings per share in the third quarter and first nine months of 2014 on the continued positive sales volume and strong operating results of our Paint Stores Group. The Paint Stores Group architectural volume growth was positive across all end market segments. The Comex acquisition continues to perform better than expected in the year. Our Consumer Group improved its operating results through higher volume sales and operating efficiencies. Our Global Finishes Group continues to improve its operating margins through improved operating efficiencies."

Management raised their 2014 EPS guidance above Wall Street's estimates. They also raised their revenue guidance but this was only in-line with consensus. SHW now expects Q4 sales in the +6% to +8% range. They expect earnings to be in the $1.30-1.40 range versus $1.14 in the fourth quarter of 2013.

The stock's relative strength has driven shares to new all-time highs and a +25% gain in 2014. The point & figure chart is bullish and forecasting at long-term target at $286.

Tonight we are suggesting a trigger to buy calls at $231.00.

- Suggested Positions -

Long 2015 Jan $240 call (SHW150117c240) entry $3.37

11/15/14 new stop @ 234.45
11/13/14 SHW is hitting potential resistance at $240. Traders may want to take profits now.
11/08/14 new stop @ 229.75
11/05/14 triggered @ 231.00
Option Format: symbol-year-month-day-call-strike


Semiconductor ETF - SMH - close: 52.04 change: -0.26

Stop Loss: 50.85
Target(s): To Be Determined
Current Option Gain/Loss: +154.5%
Average Daily Volume = 2.4 million
Entry on October 17 at $47.15
Listed on October 16, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: The SMH gave back a little more than half of Friday's gains. The $52.30 area appears to be new resistance for this ETF.

I am not suggesting new positions.

Earlier Comments: October 16, 2014:
It looks like the correction in the semiconductor stocks might be done.

The SMH is the Market Vectors Semiconductor Exchange Traded Fund (ETF) that tries to mimic the performance of the Market Vectors Semiconductor 25 index. Semiconductors as a group had been strong performers with the SMH up +73% from its late 2012 lows.

A few weeks ago the industry started to see some profit taking. MCHP issued an earnings warning last week that that sparked the massive plunge in the SMH. The SMH has witnessed a -15% correction from its 2014 closing high to the closing low on Monday this week. Now it has started to bounce. It's possible all the panic selling is over.

Intel (INTC), a much bigger company than MCHP, just reported earnings on October 14th and the results were better than Wall Street expected. More importantly INTC offered slightly bullish guidance.

Bloomberg noted that INTC said its PC-processor business rose +8.9% last quarter. Sales for INTC's chips for notebook computers soared +21%. Even chips for desktop PCs rose +6% in the third quarter.

The strong results from INTC have helped buoy the SMH, which is starting to rebound after testing (and piercing) long-term support on its weekly chart (shown below).

We suspect the worst might be over. However, this could be a volatile trade. There are a lot of semiconductor companies who have yet to report their results.

The SMH saw its rally stall under $47 and near its 200-dma. Tonight we are suggesting a trigger to buy calls at $47.15.

- Suggested Positions -

Long 2015 Jan $50 call (SMH150117c50) entry $1.10

11/12/14 new stop @ 50.85, readers may want to just take profits now!
11/01/14 new stop @ 48.85
10/25/14 new stop @ 47.85
10/21/14 new stop @ 46.35
10/17/14 triggered @ 47.15
Option Format: symbol-year-month-day-call-strike


United Rentals, Inc. - URI - close: 113.01 change: -2.16

Stop Loss: 111.75
Target(s): To Be Determined
Current Option Gain/Loss: + 0.0%
Average Daily Volume = 1.6 million
Entry on November 03 at $110.55
Listed on November 01, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: Ouch! URI gave back all of Friday's gains and more with a -1.8% drop on Monday. I don't see any specific news to account for this weakness. If there is any follow through lower tomorrow we could see URI hit our stop loss at $111.75.

I am not suggesting new positions at this time.

Earlier Comments: November 1, 2014:
URI is a company that is gaining market share. Traditionally the equipment rental business has been a very fragmented industry with a lot of mom and pop stores. URI has decided that being the biggest offers a better selection to their clients. Today URI is the biggest equipment rental company in the world.

Twenty years ago commercial construction clients only accounted for about 15% of the equipment rental market. Today that number is closer to 50%. The last few years have seen a strong trend of construction companies choosing to rent equipment instead of buy new equipment due to an uncertain economic outlook.

According to URI's website they were founded in 1997 and have grown into a network of 832 rental locations in 49 states and 10 Canadian provinces. Their rental fleet includes 3,100 classes of equipment.

Earnings are improving. The last couple of quarterly reports have been strong. In the July 16th report URI beat Wall Street estimates with a profit of $1.65 per share on revenues of $1.399 billion. That was a +47% improvement from a year ago and management raised their guidance.

The most recent report was October 15th. Again URI beat estimates. Analysts were looking for a profit of $2.12 per share on revenues of $1.51 billion. URI delivered $2.20 per share with revenues up +17.8% to $1.54 billion. This was a +34% jump in URI's earnings from a year ago. Margins hit a record +49.3% in the third quarter. They reaffirmed their guidance.

URI's CEO Mr. Michael Kneeland commented on his company's report and said,

"The third quarter provided further confirmation that our strategy and the North American construction recovery are both solidly on track. Our end markets are continuing to rally, creating numerous opportunities for well-managed, profitable growth. We reported a robust 16% increase in rental revenue for the quarter— and more importantly, the discipline behind that growth is evident in our record EBITDA margin and gains in volume, utilization and rates."

Technically the stock experienced a painful correction from $120 to $90 during the market's pullback in September-October. The bounce back stalled at resistance near $110 and its 100-dma and 50-dma. However, after a two-week consolidation in the $105-110 zone, shares of URI now look poised to breakout. Shares were showing relative strength on Friday with a +3.7% gain.

The 50-dma is directly overhead at $110.17 and the intraday high on Friday was $110.39. Tonight we are suggesting a trigger to buy calls at $110.55.

- Suggested Positions -

Long 2015 Jan $115 call (URI150117c115) entry $4.50

11/12/14 new stop @ 111.75
11/08/14 new stop @ 107.15
11/03/14 triggered @ 110.55
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

FMC Corp. - FMC - close: 56.32 change: -0.30

Stop Loss: 58.85
Target(s): To Be Determined
Current Option Gain/Loss: -33.3%
Average Daily Volume = 1.42 million
Entry on November 04 at $55.85
Listed on November 03, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: FMC spiked higher this morning but the rally quickly faded and shares posted another loss.

A new breakdown under $56.00 could be used as a bearish entry point to buy puts.

Earlier Comments: November 3, 2014:
FMC is in the basic materials sector. They are a diversified chemical company with agricultural chemicals, minerals, and health and nutrition businesses.

It has been a rough year for shareholders as FMC peaked in March this year and has been sliding lower every since. That's because the earnings picture has been deteriorating. You can see on the daily chart below where FMC issued an earnings warning in June. Then when they reported earnings in late July they missed estimates. It's not great when you warn about earnings and still miss Wall Street's lowered estimates.

FMC's most recent earnings report was October 29th. The company missed on both the top and bottom line. Analysts were expecting a profit of 96 cents a share on revenues of $1.06 billion. FMC only delivered 95 cents with revenues of $1.02 billion. The biggest part of their business, the Agricultural Solutions, which represents nearly half of FMC's sales, reported a small +2% revenue growth from a year ago.

In the company press release, Pierre Brondeau, FMC president, CEO and chairman, said: "In the third quarter, market dynamics continued to affect our portfolio. Agricultural markets were impacted by multiple factors around the world, a softening of demand in China affected parts of our Health and Nutrition portfolio, and Argentina continued to weigh on Lithium's results." Brondeau also noted they are concerned over some beverage products in China that have seen two quarters in a row of declining demand.

The weakness in shares of FMC have produced a -24% decline in 2014 versus the S&P 500's +10% gain. Meanwhile FMC's point & figure chart is suggesting the selling will continue and is pointing to a $25.00 target.

Tonight we are suggesting a trigger to buy puts at $55.85. More conservative investors might want to wait for a breakdown under $55.00 instead.

- Suggested Positions -

Long 2015 Jan $55 PUT (FMC150117P55) entry $1.95

11/04/14 triggered @ $55.85
Option Format: symbol-year-month-day-call-strike



CLOSED BULLISH PLAYS

ServiceNow, Inc. - NOW - close: 65.32 change: -2.19

Stop Loss: 65.90
Target(s): To Be Determined
Current Option Gain/Loss: -43.8%
Average Daily Volume = 1.4 million
Entry on October 31 at $67.46
Listed on October 30, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: We've been growing cautious on NOW and it looks like our defensive posture was warranted. The stock underperformed the market with a -3.2% decline on Monday. Shares hit our new stop loss at $65.90.

- Suggested Positions -

DEC $70 call (NOW141220c70) entry $2.85 exit $1.60 (-43.8%)

11/17/14 stopped out
11/15/14 new stop @ 65.90
11/13/14 Caution! NOW looks vulnerable here. Readers may want to exit early now!
11/05/14 new stop @ 64.90
10/31/14 triggered on gap higher at $67.46, suggested entry was $67.25
Option Format: symbol-year-month-day-call-strike

chart:


CLOSED BEARISH PLAYS

Intl. Business Machines - IBM - close: 164.16 change: +0.00

Stop Loss: 165.75
Target(s): To Be Determined
Current Option Gain/Loss: -44.5%
Average Daily Volume = 4.1 million
Entry on November 06 at $160.90
Listed on November 05, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/17/14: IBM closed at $164.16 on Friday. That's where it opened this morning and that is where it closed this afternoon. Shares tried to rally but failed near $165.00 a couple of times today.

It was our plan to exit positions today at the opening bell.

- Suggested Positions -

2015 Jan $160 PUT (IBM150117P160) entry $4.00 exit $2.22 (-44.5%)

11/17/14 planned exit
11/15/14 prepare to exit on Monday morning.
11/06/14 triggered $ 160.90
Option Format: symbol-year-month-day-call-strike

chart: