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Daily Newsletter, Monday, 12/1/2014

Table of Contents

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

Market Wrap

A Break for the Bears

by Keene Little

Click here to email Keene Little
Today's price action in the stock market suggests the small breakdown could be the break the bears have been looking for. Of course the bulls still view any and all dips as buying opportunities and there is the potential they could be right again.

Wednesday's Market Stats

I hope everyone had a great Thanksgiving weekend, especially if you were able to turn it into a 4-day weekend. Last Friday's half-day session was one of the slowest days, if not the slowest, of the year. But it just might have marked the top of this market since today's decline looks potentially important.

The market started in the hole this morning following a decline in equity futures last night, which is uncharacteristic for a Sunday evening. Right away that was a heads up that something changed -- it's been typical for Sunday evening to see a rally in the futures as bets are made on a continuation of the rally. Manipulated or not, that's been a strong signal of rally strength. So the decline (gap down) Sunday evening was a ruh-roh warning and today's inability to reverse the early-morning decline was another ruh-roh.

The dip buyers immediately showed up this morning and the indexes (except the RUT) got a sharp bounce. But the quick short-covering rally quickly fizzled and the indexes dropped back down to their lows and some made new lows for the day. From there it was more or less a sideways consolidation for the rest of the day and that's another bearish sign. All in all I'd have to give today's round to the bears and that starts the bears with a deficit for the week.

The metals and oil dropped lower Sunday evening but then ran sideways for the rest of the overnight session before they started to ramp back up shortly after the European markets opened. I'll cover them in more detail later but it's looking like key reversal days for them. Equity futures tried to bounce with the metals but got turned back down as we approached the opening bell.

Some of this morning's weakness was blamed on a lonely economic report this morning -- the ISM index dropped marginally from 59 in October to 58.7 in November, and near expectations. But U.K.-based Markit Economics reported earlier in Europe's day that U.S. manufacturing activity grew at the slowest pace since January. Their index ticked down to 54.8 vs. 55.9 in October, which was slightly below economists' forecasts. It's not below 50 and there it's not contracting (yet) but the growth is definitely slowing. The recent trend makes it a little more worrisome for the economy, which in turn makes the high stock valuations a little more vulnerable.

What was a little more worrisome in the ISM report was the prices-paid component, dropping to 44.5 from 53.5 in October. This is another indication of price softening and another deflationary signal. Much of this is attributed to the strong drop recently in commodity prices but I suspect they're not going to see any sharp upward pressure over the next few months.

Today's 14-point (-0.7%) decline for SPX was not that much but it's the biggest drop in the past month. That alone tells you how narrow the price range has become. Contracting volatility is always followed by expanding volatility and that of course begs the question -- was today the start of a period of higher volatility. It's of course possible, especially since selling pressure (if only due to profit taking) will be fought by dipsters who believe December is going to be good for the bulls. An article in Bloomberg this morning (Momentum Forecast) sounded pretty unanimous by market forecasters -- look for higher prices this month. This of course ties in with recent data I've shown about bullish sentiment in this market -- everyone is fully aboard the train and now everyone's hoping we haven't run out of more buyers to keep pushing this thing higher.

Seasonality says we should continue to look higher, including through the coming year (election cycle and years ending in 5), but it's my belief that with everyone looking northward they're not seeing the tsunami headed their way. I could of course be wrong in my assessment (no, say it isn't so) but long-term successful traders know when not to run with the crowd and the crowd is clearly looking for more rally. Rather than guess how the market will react to news or sentiment I'll continue to stick with the charts and look for early warning signals. Today was the first torpedo across the bow of the USS Bullship so we'll see if the bulls simply ignore the torpedo, full speed ahead.

I want to take a top-down look at NDX first tonight since it had a very interesting setup on Friday for a reversal and I thought a red candle on Monday would create a sell signal. So far that's what we have. The weekly chart below shows NDX ran up to a trend line along the highs from December 2012 through the December 2013 - March 2014 highs. The wave count for the leg up from June 2013 has the rally from October completing the 5th wave. Up against the trend line is a strong reason to watch for the completion of the 5th wave here.

Nasdaq-100, NDX, Weekly chart

In addition to the trend line along the highs from December 2012 there is a shorter-term trend line along the highs from July-September and the combination of the two trend lines made for some formidable resistance at 4337-4347. Friday's high was at the high end and it closed at the lower number. Today's decline also broke the uptrend line from October 15 - November 20. At the moment though, NDX is holding inside the up-channel from November 4th, the bottom of which is currently near this morning's low at 4274. That keeps the bulls in the game but only if they can get a stronger bounce started on Tuesday.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4350
- bearish below 4237

Moving in closer to the up-channel mentioned above, you can see it consolidated in the bottom half of the channel, which itself looks like a bearish continuation pattern following this morning's sharp decline. It supports the idea that the next move will be another leg down but as already mentioned, the bulls can't be ruled out yet. From a price perspective I think a stronger sell signal would occur if NDX drops below its November 20th low near 4237.

Nasdaq-100, NDX, 30-min chart

Gann's analysis of the market had him believing time was much more important than price. It's one reason why I pay attention to the work of others who study cycles. I mentioned last week the .447/.553 work by Stan Harley. This time ratio shows up repeatedly and since multiple cases of this relationship were coinciding in the last two weeks of November it pointed to the potential for a major market turn before December. This is the updated chart from last week's update and today's small red candle is hardly scary to a bull, it could be the initial crack in the earth that will soon widen more than the bulls can spread their legs.

S&P 500, SPX, Weekly chart with .447/.553 time ratio

The Bradley turn model and the new moon on November 22nd was also a good setup for a reversal. Last week's holiday bullishness might have been just a way to hold the market up into the end of the month. But the updated MPTS chart shows a top on Friday could certainly have been close enough for government work.

SPX MPTS Daily chart

On November 21st SPX popped above its trend line along the highs from April 2010 - May 2011, which stopped the rallies in July and August (small throw-over above the line in July) but was again not able to hold above the line, currently near 2064. With the waning momentum seen on MACD as it was hitting trendline resistance I thought it was a fair bet resistance would hold. Of course betting on resistance holding in the wild ride up from October has been a bad bet. But this one looks like it's going to hold. Also holding is the Fib projection at 2073.28, which is the 127% extension of its previous decline (September-October). This is such a common reversal Fib that you should make a note of it and always watch price action around it -- any signs of weakening around that Fib level is reason enough to start anticipating a reversal. Combined with the timing factors discussed above had me thinking the week following Thanksgiving was not going to be kind to the bulls who remain convinced we'll head higher into year-end. It could happen but I think the odds are not with them. What we don't know yet, and won't know for a few weeks, is whether or not a larger pullback/decline will lead to more rally next year or instead be the start of the next major decline. Playing it just short term for now...

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2076
- bearish below 2040

There is one bullish possibility here, although I think today's bounce pattern weakened the probability, is for this morning's sharp decline to have been the c-wave of an a-b-c pullback from the November 21st high. For SPX the c-wave projected down to about 2052 where it would be 162% of the a-wave (light green wave labels). This interpretation calls for a sharp rally on Tuesday and if it gets above 2063 it would look more bullish. Above the 78.6% retracement of the decline from Friday would strongly suggest new highs are coming. A drop below 2047 would negate the bullish potential, at which point I'll be looking for a drop at least to the 2030 area (more bearish below that level).

S&P 500, SPX, 60-min chart

If the market does head higher again I can see the potential for the DOW to rally up to the top of its up-channel that it's been in since November 4th, which will be near 18100 by the end of the week. Like NDX it's holding at the bottom of its up-channel but today's bounce off the morning low looks bearish. Like SPX, it rallied up to resistance at its trend line along the highs from May 2011 - December 2013 and Friday's attempt was soundly rejected, leaving a bearish gravestone doji (with a long upper shadow). As noted by Gregory Morris in his book "Candlestick Charting Explained" (a highly recommended book), "If the upper shadow is quite long, it means that the Gravestone Doji is much more bearish...this cannot possibly be interpreted as anything but a failure to rally." This was one of the factors that had me feeling more bearish by the end of Friday's half-day session. The gravestone doji following a rejection at trendline resistance and bearish divergence was a special invitation to bears. Now we wait to see if today's pullback is just another 1-day correction.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,900
- bearish below 17,600

Another bearish sign for the market on Friday was the RUT. As a leading indicator, bailing out of small caps on Friday was the same sign you'd get if you saw rats scrambling off a ship and running down the ropes tying the ships to the pier. Sometimes those rats are the smarter creatures when they sense the ship is about to sink. Last Wednesday I noted the 3 drives to a high at both its broken uptrend line from March 2009 as well as its previous highs in March and July. Friday's sharp decline, and the close below its 20-dma, left me thinking it was the first index to turn on its turn signal. Today's decline, which has it almost testing its 200-dma, nearing 1150, has it now looking like a 5-wave move down from last Tuesday. This should set it up for a larger bounce to correct the decline, which is what I've depicted, but it should be the next good shorting opportunity.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1192
- bearish below 1140

On Friday the SOX ran up to 687.71, a point shy of its price projection at 688.71, which is where the 5th wave of its leg up from November 12th equals the 1st wave. This morning's sharp decline, followed by the corrective bounce into this afternoon, has it looking like today started an important turn back down. The completion of the leg up from November 2012 is the completion of the c-wave of a big A-B-C bounce off its November 2008 low.

Semiconductor index, SOX, Weekly chart

The banking index, BKX, also is in the early stages of what looks like could be an important reversal. It might have completed its own 3-drives-to-a-high topping pattern after failing again to get through its March and September highs, which are near the projection at 73.64 for two equal legs up from 2009. But it needs to drop below 66 to prove it's not still in a bullish sideways consolidation.

The TRAN left a bearish shooting star at resistance on Friday. It was another reversal pattern in the making and today's big red candle confirmed it, especially with the drop below its previous low at 8961 on November 19th. That also has it back below the short-term trend line along its highs from July-September, currently near 9000, which had supported the pullback into the November 19th low. It also closed below its 20-dma near 9030. Following the bearish divergence at Friday's high, there's very little bullish about this chart.

Transportation Index, TRAN, Daily chart

While commodities made a big reversal today there wasn't that much action in the U.S. dollar so it can't be blamed for the big commodity move, as many are saying (looking for some air time and trying to sound like they know what they're talking about). I thought last week's high for the dollar will lead to at least a multi-month pullback but it might not be ready for the pullback yet. It could be heading for about 89.10 where it would hit the top of an up-channel created off the uptrend line from 2011-2014. It's not something I'd be willing to bet on the upside but there is at least a little more upside potential before pulling back.

U.S. Dollar contract, DX, Weekly chart

The metals saw a key reversal today. Following a spike down this morning there was a strong reversal and that produced a bullish engulfing candlestick. The gap down and new lows for gold and silver, followed by a close above the previous day's high, defines an outside up key reversal day. Gold had an $80 reversal intraday (about 6.5%) and that puts gold bears on the defensive. Now we watch to see if the bullish day will see follow through. Interestingly, gold rocketed higher today following a "no" vote from the Swiss about whether or not their central bank should move to a gold standard. There was an expectation for a strong gold rally if the Swiss demanded their central bank start buying gold. The overnight decline could have been the result of the vote, which produced a washout event (on news).

On gold's weekly chart I've been showing an expectation for a drop down to Fib support at 1090 before starting a larger bounce but this morning's reversal now has it looking like that bounce could start earlier rather later. But at the moment there is the potential that today's short squeeze will not see follow through, which would obviously disappoint more than a few gold bulls.

The daily chart below shows today's big white bullish engulfing candlestick. The price projections shown on the chart, at 1218.90 and 1266.61 are for the 2nd leg of the bounce off the November 7th low. At 1218.90 the bounce has two equal legs up and at 1266.61 the 2nd leg of the bounce would be 162% of the 1st leg up. It's possible the bounce off the November 7th low is a completed a-b-c correction to the decline, with today's high at 1221, and will now continue lower from here. If we see a choppy pullback it would support the idea we'll get a larger bounce pattern into the end of the year, which is the way I'm leaning until proven otherwise.

Gold continuous contract, GC, Daily chart

Silver's spike down this morning tagged its price-level support from back in 2006-2010, near 14.65 (with a morning low at 14.15), as well as its broken downtrend line from November 2012 - August 2013 (light blue). Silver has been riding this broken downtrend line since breaking it last February. As with gold, the strong reversal off this morning's low has created an outside up key reversal day today with its bullish engulfing candlestick. Now we watch to see if the silver bulls can keep today's short covering going. The first level of resistance is at its broken uptrend line from 2003-2008, near 17.15 this week (log price scale). Above that level there's very little resistance until broken price-level support near 18.60. By the end of December that level crosses its downtrend line from November 2012 - July 2014 (light purple). If the selling continues there is downside potential to about 13.25 where it would hit the trend line down along the lows from 2011-2013.

Silver continuous contract, SI, Weekly chart

Oil's overnight decline had it testing its long-term uptrend line from 1998-2008, near 64.50, with a low at 63.72. Today's rally has it now approaching price-level S/R near 69, which it broke below on Friday. Assuming a tradeable low is now in place, the bearish pattern calls for a multi-month choppy bounce for a 4th wave correction in the decline from August 2013. At the moment the decline from August 2013 is a 3-wave move and could be the conclusion to its pullback, to be followed by another rally up to the 110 area next year. I have my doubts about the bullish scenario but for now it's at least bullish if it holds above 64.

Oil continuous contract, CL, Weekly chart

Tomorrow will be another quiet morning for economic reports with only Construction Spending and Auto/Truck Sales. That will likely leave the market to fend for itself and what happens overseas. Wednesday's economic reports will have more of an impact on the market, such as the ADP Employment report and the labor costs and ISM Services. Friday will be the big nut for economic reports, which will include the Non-farm Payroll report.

Economic reports and Summary

Today appears to have marked reversals in stocks and commodities and while I didn't touch on bonds, they appear to be starting at least a larger pullback. Interestingly, bond prices and stock prices seem to be trading in synch at the moment. The key reversals in the metals suggest an important low has now been put in place. How bullish commodities will become is still not clear since we could see only a choppy sideways consolidation before heading lower again. The opposite could happen with stocks as well. But the longer-term pattern supports the idea that an important high has now been made. It's too early to declare THE top is in place but bulls should understand that that is the potential here. At a minimum I'm looking for a pullback to correct the rally from October. More bearishly, today's decline has kicked off a much larger decline that could quickly retrace the rally. As always, we'll piece the market's moves together and let it tell us what the higher-probability pattern will be.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

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New Option Plays

Casual Dining

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Red Robin Gourmet Burgers - RRGB - close: 69.03 change: +1.68

Stop Loss: 67.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 214 thousand
Entry on December -- at $---.--
Listed on December 01, 2014
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
RRGB is part of the services industry. They operate a chain of casual dining restaurants. According to a company press release, "Red Robin Gourmet Burgers, Inc. (www.redrobin.com), a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc., is the Gourmet Burger Authority, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries in a fun environment welcoming to guests of all ages. There are more than 500 Red Robin restaurants across the United States and Canada, including those operating under franchise agreements."

After big gains in 2013 the stock has had a rocky year in 2014. They beat earnings back in February but revenues missed the estimate. The stock rallied anyway. In May they reported earnings that beat both the top and bottom line estimates and shares soared. Then in August the stock reported its Q2 numbers that missed Wall Street's estimates by a wide margin. You can see the plunge lower on the daily chart.

It would appear that August may have been a one-quarter anomaly. RRGB reported their latest quarterly results on November 4th. Analysts were expecting a profit of $0.34 a share on revenues of $267.65 million. RRGB delivered earnings of $0.50 a share. That's a +56% increase from a year ago. Revenues missed estimates by a small margin at $267.4 million but that's still a +16% increase. The company said their number of guests were down -2.3% but the average bill was up +3.2%. Management expects comparable sales to rise +3% for fiscal 2014 and they believe RRGB will see operating profit margins of 21.3%. The stock soared on this report.

Casual dining stocks should see a big benefit from lower crude oil prices. Lower oil means lower gasoline prices at the pump. Gas prices have fallen to four-year lows in recent weeks. That means more disposable income for consumers to spend. After the OPEC decision last week we could see depressed oil prices for a long time.

Currently shares of RRGB have been consolidating gains in a sideways pattern under resistance near $70.00 the last couple of weeks. A breakout past $70.00 could spark some short covering. The most recent data listed short interest at 12.7% of the very small 13.8 million share float. Currently the Point & Figure chart is very bullish with a long-term target of $115.00.

The November intraday high was $70.45. Tonight I am suggesting a trigger to buy calls at $70.55.

Trigger @ 70.55

- Suggested Positions -

Buy the 2015 Jan $70 call (RRGB150117c70) current ask $2.35

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Start December On A Sour Note

by James Brown

Click here to email James Brown

Editor's Note:

The market began the last month of 2014 on a down note with relatively widespread profit taking.

AAPL, PSMT, and QQQ hit our stop loss today.


Current Portfolio:


CALL Play Updates

CR Bard Inc. - BCR - close: 170.04 change: +2.69

Stop Loss: 165.85
Target(s): To Be Determined
Current Option Gain/Loss: +40.7%
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:
12/01/14: BCR displayed relative strength on Monday. Shares rallied from short-term technical support at its 10-dma to close at a new high thanks to a +1.6% gain.

Tonight we are updating the stop loss to $165.85. I am not suggesting new positions at this time.

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

12/01/14 new stop @ 165.85
11/22/14 new stop @ 163.35
11/13/14 triggered @ 165.65, suggested entry was $165.60
Option Format: symbol-year-month-day-call-strike


Costco Wholesale - COST - close: 141.98 change: -0.14

Stop Loss: 138.65
Target(s): To Be Determined
Current Option Gain/Loss: +374.0%
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 10th
New Positions: see below

Comments:
12/01/14: COST delivered a relatively quiet session. Shares briefly hit a new high this morning but spent most of the day drifting sideways.

I am not suggesting new positions at this time.

NOTE: COST is scheduled to report earnings on December 10th. We will most likely exit prior to the announcement.

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

11/29/14 new stop @ 138.65
11/25/14 Caution: investors may want to take profits now
11/22/14 new stop @ 137.25
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: 94.70 change: -2.02

Stop Loss: 93.65
Target(s): To Be Determined
Current Option Gain/Loss: + 2.6%
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:
12/01/14: The latest data on the Black Friday launch to the holiday shopping season was disappointing. This news sparked some profit taking in anything related to consumer goods. DECK fell 2% to close on technical support at its 10-dma.

I am not suggesting new positions at this time.

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

11/29/14 new stop @ 93.65
11/22/14 new stop @ 89.75
11/17/14 triggered $92.25
Option Format: symbol-year-month-day-call-strike


DineEquity, Inc. - DIN - close: 98.08 change: -0.38

Stop Loss: 96.85
Target(s): To Be Determined
Current Option Gain/Loss: +200.0%
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:
12/01/14: DIN held up well with only a minor decline today. It looks worse on the daily chart but shares gapped down thanks to DIN's dividend. Shares began trading ex-dividend this morning.

I am still suggesting more conservative traders take profits now. 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

11/29/14 new stop @ 96.85
11/26/14 new stop @ 94.85, traders may want to take profits here!
11/22/14 new stop @ 93.85
11/19/14 new stop @ 92.75
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


The Walt Disney Co. - DIS - close: 92.70 change: +0.19

Stop Loss: 88.65
Target(s): To Be Determined
Current Option Gain/Loss: +1.1%
Average Daily Volume = 6.5 million
Entry on December 01 at $92.63
Listed on November 29, 2014
Time Frame: exit prior to February expiration
New Positions: see below

Comments:
12/01/14: Our new play on DIS held up well in spite of the relatively widespread market decline today. We wanted to buy calls at the open. DIS gapped higher at $92.63. Traders bought the dip near $92.00, which as prior resistance should be support.

I would still consider new positions now at current levels. However, given the market's weakness today investors may want to wait to check that both the S&P 500 and DIS are positive tomorrow morning before initiating positions.

Earlier Comments: November 29, 2014:
Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.

The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.

Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. Last year they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits this year Captain America: Winter Soldier and Guardians of the Galaxy.

Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. This weekend DIS released the teaser trailer for episode 7, The Force Awakens. It has been shocking to see just how much hype and buzz this teaser has generated. There are stories and links to this trailer just about everywhere you go on the Internet this weekend. It has reawakened fan interest in the Star Wars story and DIS has a whole year to feed the hype until episode seven's release in December 2015. Analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.

I expanded on the movie business above because it was Disney's studio segment that really drove earnings last quarter. DIS has been beating Wall Street's estimates on both the top and bottom line four quarters in a row. The most recent earnings report was November 6th (DIS' Q4). Analysts were expecting a profit of $0.88 a share on revenues of $12.37 billion. DIS reported $0.89 a share with revenues rising +7.1% to $12.39 billion. The movie division saw its quarterly revenues soar +18% to $1.8 billion. Altogether the company reported record-breaking revenues for all five businesses in 2014.

The correction in DIS' stock from the September highs to the October lows was painful but shares have come roaring back. Now after consolidating sideways between $88.75 and $92.00 this last month the stock is rested and ready to run. The breakout past resistance at $92.00 looks like an entry point to buy calls.

I suspect the $100.00 level could be round-number, psychological resistance but the point & figure chart is very bullish and forecasting a long-term $119.00 target. Tonight we are suggesting traders buy calls on Monday morning at the opening bell.

- Suggested Positions -

Long 2015 Feb $95 call (DIS150220C95) entry $1.80

12/01/14 trade begins. DIS opens at $92.63
Option Format: symbol-year-month-day-call-strike


FedEx Corp. - FDX - close: 177.70 change: -0.48

Stop Loss: 174.25
Target(s): To Be Determined
Current Option Gain/Loss: +245.3%
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:
12/01/14: FDX saw some profit taking this morning following Friday's pop to a new record high. Traders bought the dip today and FDX pared its losses.

Shares remain short-term overbought. Investors may want to take profits early.

I am not suggesting new positions at this time.

NOTE: FDX is scheduled to report earnings on December 17th. We will likely exit prior to the report to avoid holding over the announcement.

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

11/29/14 new stop @ 174.25
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


The Hain Celestial Group, Inc. - HAIN - close: 114.33 change: +1.11

Stop Loss: 109.85
Target(s): To Be Determined
Current Option Gain/Loss: +77.8%
Average Daily Volume = 615 thousand
Entry on November 26 at $110.25
Listed on November 25, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/01/14: HAIN continues to show relative strength. The stock is now up four days in a row. I would expect a pullback soon. The $112.00 level might be short-term support. I am not suggesting new positions at this time.

Earlier Comments: November 25, 2014:
"Our business continues to benefit from strong growth trends in the organic and natural, better-for-you segment of consumer packaged goods."

That quote is from HAIN's CEO after the company reported its latest earnings results in early November. He's right. Consumers are choosing healthier foods and it looks like a major trend change that could benefit HAIN for a long time.

The company website describes HAIN as, "The Hain Celestial Group, headquartered in Lake Success, NY, is a leading natural and organic food and personal care products company in North America and Europe. Hain Celestial participates in almost all natural food categories with well-known brands that include Celestial Seasonings, Terra, Garden of Eatin', Health Valley, WestSoy, Earth's Best, Arrowhead Mills, DeBoles, Hain Pure Foods, FreeBird, Hollywood, Spectrum Naturals, Spectrum Essentials, Walnut Acres Organic, Imagine Foods, Rice Dream, Soy Dream, Rosetto, Ethnic Gourmet, Yves Veggie Cuisine, Linda McCartney, Realeat, Lima, Grains Noirs, Natumi, JASON, Zia Natural Skincare, Avalon Organics, Alba Botanica and Queen Helene."

HAIN's results have definitely confirmed the trend in consumer spending. They have beaten Wall Street's estimates and guided higher in three out of the last four earnings reports.

The Q4 report in late August this year saw revenues up +26% to $583.8 million. Management raised their guidance as they now expect sales growth of +27% to +30% in 2015.

The company reported their 2015 Q1 numbers on November 6th and sales are accelerating. Wall Street was expecting a profit of $0.67 on revenues of $640.27 million. HAIN delivered a profit of $0.68, which is a +31% increase from a year ago. Revenues were up +34.6% to $642.6 million. These are really impressive results when you consider that includes a voluntary recall of their HAIN nut butters back in August.

Commenting on their Q1 results, Irwin Simon, Founder, President, and CEO of the company said, "We are pleased with another strong start to our fiscal year across all of our segments on a worldwide basis with the highest quarterly net sales in the Company's history."

"Our diverse portfolio of brands and products across multiple categories and our customer base across various channels of distribution enabled us to deliver double-digit sales growth even with the impact of the nut-butter recall initiated in August."

Accompanying these results their Board of Directors also approved a 2-for-1 stock split but shareholders needed to approve an increase in the number of shares outstanding first. The company's annual meeting was a few days ago and shareholders did approve the stock split. That headline came out tonight, after the closing bell.

The 2-for-1 stock split will occur in December. The shareholder record date is December 12th, 2014. The ex-dividend date is expected to be December 29th (this is when HAIN will begin trading post-split).

Shares of HAIN have been consolidating sideways beneath resistance at $110 for the last three weeks. The stock displayed relative strength today and looks poised to breakout past this resistance. The 2-for-1 stock split news could be the catalyst it needed. After hours tonight shares are trading around $110.50. We are expecting HAIN to gap open higher tomorrow morning. I'm suggesting a trigger to buy calls on HAIN if shares trade at $110.25 or higher.

We are not setting an exit target tonight but I will point out that the point & figure chart is bullish and forecasting a long-term $131.00 target.

- Suggested Positions -

Long 2015 Jan $115 call (HAIN150117c115) entry $1.80

11/29/14 new stop @ 109.85
11/26/14 triggered @ $110.25
Option Format: symbol-year-month-day-call-strike


Northrop Grumman - NOC - close: 138.76 change: -2.17

Stop Loss: 138.65
Target(s): To Be Determined
Current Option Gain/Loss: -26.7%
Average Daily Volume = 1.0 million
Entry on November 21 at $140.25
Listed on November 20, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/01/14: Defense stocks underperformed today and NOC lost -1.5%. The close below what should have been short-term support at $140 and its 10-dma near $139.25 is short-term bearish.

The low today was $138.68. Our stop loss is currently at $138.65. If NOC sees any follow through lower tomorrow we will be stopped out.

Earlier Comments: November 20, 2014:
One might have assumed that when Washington politics cut $500 billion from the U.S. defense budget over the 2012-2021 time frame it would have been bearish for defense sector stocks. Yet the group has been an outperformer in the stock market and delivered amazing gains last year. The defense-related juggernauts like NOC continue to perform well in 2014. This stock is currently up +20% in 2014 versus a +10.8% gain in the S&P 500.

According to their company website, "Northrop Grumman is a leading global security company providing innovative systems, products and solutions in unmanned systems, cyber, C4ISR, and logistics and modernization to government and commercial customers worldwide." What does that mean? It means NOC makes bombers, unmanned drones, cyber security solutions, and logistics. If you're curious, C4ISR stands for command, control, communications, computers, intelligence, surveillance, and reconnaissance.

The fact that the world seems to be growing more dangerous, not less dangerous, should be a bullish undercurrent that lifts the defense sector. NOC should benefit because the American public does not have the stomach for another war. That means the U.S. will use more and more unmanned technology like NOC's drones.

The company has been performing well this year and NOC has raised guidance the last four quarters in a row. They reported their Q3 results on October 22nd. It was NOC's eight consecutive quarter in a row of earnings growth. Wall Street was looking for a profit of $2.14 a share on revenues of $5.9 billion. NOC delivered $2.26 a share. That's up +6% from a year ago. Revenues beat estimates at $5.98 billion.

NOC management has been trying to diversify their customer base and international sales are expected to hit 13% of total revenue in 2014 compared to 10% last year. NOC's Q3 saw its total backlog soar +8% to $38.5 billion from the prior quarter.

Once again management has raised their guidance. NOC expects 2014 earnings in the $9.40-9.50 zone compared to prior guidance of $9.15-9.35. Wall Street was estimating $9.35.

Shares of NOC have spent the last three weeks consolidating gains in the $135-140 zone. The point & figure chart remains bullish and is forecasting at $158.00 target. Given the stock's bullish trend of higher lows NOC could see a breakout soon.

Tonight I am suggesting a trigger to buy calls at $140.25.

- Suggested Positions -

Long 2015 Jan $145 call (NOC150117c145) entry $1.50

12/01/14 NOC has broken short-term support and looks poised to hit our stop loss
11/29/14 new stop @ 138.65
11/21/14 triggered @ 140.25
Option Format: symbol-year-month-day-call-strike


NXP Semiconductors - NXPI - close: 75.88 change: -1.93

Stop Loss: 74.85
Target(s): To Be Determined
Current Option Gain/Loss: -16.3%
Average Daily Volume = 3.9 million
Entry on November 24 at $76.05
Listed on November 22, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/01/14: Semiconductor stocks have been a leadership group in the market but chip stocks encountered some profit taking today. NXPI dipped back toward prior resistance and what should be support near $75.00.

The late afternoon highs today were around the $76.40 level. Traders could use a new rally past $76.40 as an entry point to buy calls.

Tonight after the closing bell Cypress Semiconductor (CY) announced it was buying/merging with Spansion for $1.59 billion. Shares of CY are up sharply afterhours tonight and this M&A news should be bullish for the semiconductor stocks tomorrow.

Earlier Comments: November 22, 2014:
NXPI is in the technology sector. The company classified as part of the semiconductor industry but they make a host of electronic parts and components. The company describes itself on their website as follows, "The electronics industry is being driven by four mega trends that are helping shape our society: Energy Efficiency, Connected Devices, Security and Health. Connecting to these trends and enabling Secure Connections for a Smarter World, NXP Semiconductors N.V. (NASDAQ: NXPI) creates solutions for the Connected Car, Cyber Security, Portable & Wearable and the Internet of Things. Through our innovations, customers across a wide variety of industries – including automotive, security, connected devices, lighting, industrial and infrastructure – are able to differentiate their products through features, cost of ownership and/or time-to-market."

The company has seen a dramatic turnaround. NXPI was born in 2006 when Phillips Electronics sold its semiconductor business to private equity firms. By 2009 they were $6 billion in debt and losing money. Today they have cut their debt in half.

Investors business daily noted that companies like NXPI and its rival AVGO, another bullish looking stock, should both benefit thanks to a new trade deal with China. The U.S. and China have recently decided to remove some tariffs on almost $1 trillion worth of high-tech products.

As we approach the holidays shares of NXPI could get a boost thanks to Apple (AAPL). Investors expect AAPL to see a very strong fourth quarter with its new iPhone 6 and 6+ and AAPL is trying to revive its tablet business with a refresh of its iPad models. NXPI provides components to the iPhone, the iPad, and is rumored to produce equipment for AAPL's new Apple Pay technology.

NXPI's revenues have been strong all year. The company has actually beaten Wall Street's earnings estimates on both the top and bottom line the last four quarters in a row. Revenues were up +15.9%, +14.8%, +17.3% and in the most recent quarter +21.3%. NXPI's last earnings report was October 23rd. The company reported a profit of $1.35 a share, which was four cents above estimates. Revenues came in at $1.51 billion. Management issued bullish guidance on its Q4 EPS number while its revenue estimate was only in-line with Wall Street.

The stock received several price target upgrades in November. Recently as mutual funds issued their 13F filings it was unveiled that Appaloosa Management, the fund run by influential manager David Tepper, had initiated a new position in NXPI last quarter.

Technically shares of NXPI have been digesting gains in a sideways consolidation the last couple of weeks. Shares managed to end the week at a new all-time high. There looks like short-term resistance at $76.00. Tonight I'm suggesting a trigger at $76.05.

Please note this is a slightly more aggressive trade as NXPI appears to have potential resistance at a trend line of higher highs (see chart).

- Suggested Positions -

Long 2015 Jan $80 call (NXPI150117c80) entry $2.39

11/29/14 new stop @ 74.85
11/24/14 triggered @ 76.05
Option Format: symbol-year-month-day-call-strike


The Sherwin-Williams Co. - SHW - close: 243.07 change: -1.79

Stop Loss: 238.25
Target(s): To Be Determined
Current Option Gain/Loss: +122.6%
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:
12/01/14: SHW held up reasonably well. Shares consolidated sideways in the $242.50-244.50 zone most of Monday's session.

I don't see any changes from my prior comments. Traders will want to consider taking profits now.

I am not suggesting new positions at this time.

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

11/22/14 new stop @ 238.25
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: 54.91 change: -0.64

Stop Loss: 53.85
Target(s): To Be Determined
Current Option Gain/Loss: +336.4%
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:
12/01/14: After seven weekly gains in a row the SMH was overbought and due for some profit taking. The ETF dipped a mild -1.1% today. I would expect a pullback toward short-term technical support at the 10-dma (currently near $53.85). However, after the closing bell news hit that Cypress Semiconductor (CY) was merging with Spansion for $1.59 billion. Shares of CY are up sharply after hours. This M&A news could fuel gains for the chip stocks tomorrow.

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

11/29/14 new stop @ 53.85
11/22/14 new stop @ 52.25
11/20/14 new stop @ 51.40
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


Under Armour, Inc. - UA - close: 69.78 change: -2.71

Stop Loss: 67.90
Target(s): To Be Determined
Current Option Gain/Loss: -37.5%
Average Daily Volume = 2.6 million
Entry on November 21 at $71.05
Listed on November 19, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
12/01/14: The National Retail Federation (NRF) was expecting strong crowds and big spending over the Black Friday holiday weekend. The NRF put out a note Sunday night saying consumer spending and traffic came in worse than expected. This sparked profit taking in almost anything related to consumer spending. Shares of UA dropped -3.7%. The close below $70.00 and its 10-dma is short-term bearish.

I am not suggesting new positions at this time.

Earlier Comments: November 19, 2014:
UA is in the consumer goods sector. "Under Armour, the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. Under Armour's wholly owned subsidiary, MapMyFitness, powers one of the world's largest Connected Fitness communities. The Under Armour global headquarters is in Baltimore, Maryland." (source: company press release)

Apparel sales can be tricky as fashion fads come and go. Yet right now athletic wear has been gaining traction. Athletic wear sales are up +9% in the past year. Two giants in this industry, Nike (NKE) and Under Armour (UA), are outperforming the group.

NKE is the giant with annual sales of $28.8 billion. UA is a tenth the size of NKE at $2.87 billion a year in sales. It's not surprising to see UA outgrowing its rival. NKE managed +15% sales growth in the third quarter. UA delivered 30%. NKE reported gross margins of 46.6%. UA has gross margins of 49.6%. Both companies delivered earnings growth of more than 20% year over year.

UA is impressive because its apparel sales have been rising +30% for the last three quarters in a row. Apparel is important because it's 75% of UA's business. Currently UA only has 2% of the global athletic apparel market and many believe it has significant room to grow.

Investors were a little concerned when apparel sales only grew +25.6% in the third quarter. However, UA has been consistently beating Wall Street's earnings estimates on both the top and bottom line four quarters in a row. They have also raised guidance four quarters in a row.

Their most recent earnings report was October 23rd. UA delivered earnings of $0.41 a share with revenues up +29.7% to $937.9 million. Analysts were only expecting $0.40 on revenues of $925 million.

Management raised their Q4 guidance but they warned that growth would slow down to only +22% in 2015. It's worth noting that UA has a history of under promising and over delivering. The stock initially sold off on this guidance but investors quickly bought the dip. Shares of UA have broken through the two-month trend line of lower highs and technical resistance at the 50-dma. The point and figure chart is bullish and forecasting an $87 target.

The plunge in gasoline prices is a tailwind for retailers and it should be a strong holiday shopping season. Another bonus for UA could be the weather. Last year winter was colder than normal and UA had strong sales of their coldgear line. This year we could see the coldest winter in decades, which could also bode well for UA.

UA has spent the last few days consolidating sideways in the $68.00-70.00 range. Today saw UA showing relative strength (+1.6%) and breaking out past resistance at $70.00. The intraday high was $70.72. More aggressive traders may want to buy calls now. I am suggesting a trigger at $71.05 to buy calls.

- Suggested Positions -

Long 2015 Jan $75 call (UA150117c75) entry $1.60

11/21/14 trade opened on gap higher at $71.19
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

FMC Corp. - FMC - close: 53.75 change: -0.65

Stop Loss: 55.85
Target(s): To Be Determined
Current Option Gain/Loss: +12.8%
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:
12/01/14: FMC continues to slowly sink and shares lost another -1.1% today. The pace of FMC's decline could try your patience. I would hesitate to launch new positions.

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

11/29/14 new stop @ 55.85
11/22/14 new stop @ $57.35
11/04/14 triggered @ $55.85
Option Format: symbol-year-month-day-call-strike



CLOSED BULLISH PLAYS

Apple Inc. - AAPL - close: 118.93 change: -0.07

Stop Loss: 115.85
Target(s): To Be Determined
Current Option Gain/Loss: + 61.5%
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:
12/01/14: We closed our successful AAPL trade today. The stock and the company normally make headlines but this time AAPL was making headlines for its volatility. Shares were down sharply this morning with a drop from $119 to almost $111 before paring its losses.

Nobody had any really good reasons to explain the sell-off in AAPL today. Shares were actually upgraded by Barclays who raised their price target on AAPL from $120 to $140. CNBC suggested the sell-off may have been a reaction to a note from Morgan Stanley telling clients to trim positions in AAPL. It wasn't a note to exit but merely take some profits. That's what an analyst interviewed by Bloomberg believes. AAPL was up about 25% from the October lows versus a +10% rally in the NASDAQ and shares may have just gotten a little bit ahead of themselves.

Whatever the reason AAPL hit our stop loss at $115.85 thanks to a super sharp drop between 9:45 and 9:50 a.m.

- Suggested Positions -

Long 2015 Jan $110 call (AAPL150117c110) entry $3.90 exit $6.30 (+61.5%)

12/01/14 stopped out
11/25/14 new stop @ 115.85
11/22/14 new stop @ 113.25
11/12/14 triggered @ 110.25
Option Format: symbol-year-month-day-call-strike

chart:


PriceSmart Inc. - PSMT - close: 92.14 change: -4.82

Stop Loss: 92.85
Target(s): To Be Determined
Current Option Gain/Loss: -23.0%
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:
12/01/14: Ouch! It was an ugly day for shares of PSMT. The stock significantly underperformed the broader market with a -5% plunge toward technical support at its simple 200-dma (near $92). There was no apparent catalyst to explain the relative weakness. Our stop was hit at $92.85.

- Suggested Positions -

Long 2015 Jan $95 call (PSMT150117C95) entry $3.44 exit $2.65 (-23.0%)

12/01/14 stopped out
11/22/14 new stop @ 92.85
11/19/14 new stop @ 91.45
11/10/14 triggered @ 92.75
Option Format: symbol-year-month-day-call-strike

chart:


PowerShares QQQ (ETF) - QQQ - close: 104.81 change: -1.20

Stop Loss: 104.65
Target(s): To Be Determined
Current Option Gain/Loss: + 87.9%
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:
12/01/14: After huge gains from the October low it seems investors were in a mood to take profits the first day of December. The QQQs lost -1.1% and that was enough to hit our new stop loss at $104.65.

In reality the pullback today wasn't that bad. The QQQ remains above short-term technical support at its 10-dma. That doesn't mean the QQQ won't decline again tomorrow but for now the trend is still up.

- Suggested Positions -

Long DEC $102.63 CALL (QQQ141220C102.63) entry $1.49 exit $2.80 (+87.9%)

12/01/14 stopped out
11/29/14 new stop @ 104.65
11/22/14 new stop @ 102.45
11/12/14 triggered @ 102.35
Option Format: symbol-year-month-day-call-strike

chart: