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Daily Newsletter, Tuesday, 12/2/2014

Table of Contents

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

Market Wrap

One Day Wonder

by Jim Brown

Click here to email Jim Brown

Monday's sharp decline turned into a one day wonder as the Dow rallied back to another new high.

Market Statistics

It was a turnaround Tuesday with the Dow surging to a new high and the rest of the indexes posting solid gains after an ugly decline on Monday. The Nasdaq lost -62 points on Monday but rebounded with a decent +28 point gain today.

The motivation for the rebound came from positive news from ShopperTrak on Black Friday sales. ShopperTrak said retail sales for the long Thanksgiving weekend fell -2.1%. This was in stark contrast to the headline news on Monday from the National Retail Federation (NRF) saying sales fell -11%. Retail stocks were crushed on Monday with Best Buy (BBY) falling -5.5% and JC Penny (JCP) falling -6% as examples.

Both companies said the numbers were impacted by earlier sales in Black Friday week and stores open on Thanksgiving. These events pull forward sales which would have normally occurred over the Black Friday weekend.

ShopperTrak retained its forecast for a +3.8% rise in sales for the holiday period and the NRF is projecting +4.1%. This is the biggest boost since 2010. Analysts are pointing out the changing retail trends and suggesting we can no longer rely on Black Friday weekend sales as a predictor of future holiday gains. Retail trackers may have to switch to an 8 day period from Saturday before Thanksgiving through Sunday after Thanksgiving to get a better picture of sales trends.

The economic reports from the week suggest the economy is improving. The ISM Manufacturing on Monday declined only fractionally from 59.0 to 58.7 with the forecast for a drop to 56.0. New orders and order backlogs both rose while inventories declined. This suggests the U.S. manufacturing sector is still healthy and has not been materially impacted by the slowdown in Europe or the strong dollar.


The Construction Spending report showed a jump in spending from -0.1% in September to +1.1% in October to $971 billion. Analysts had only expected an increase of +0.5%. The headline number is now +3.3% above year ago levels. Public construction spending rose +2.3% to $279 billion with a +1.3% rise in private residential spending to $354 billion. This report was market positive.

The ISM New York business report rose from 657.2 to 663.4. The current conditions component rose from 54.8 to 62.4, a whopping +8 points in one month. However, the employment component declined from 64.4 to 48.4 and back into contraction territory. The revenue component imploded from 71.9 to 53.1 and expected demand declined from 78.1 to 68.8.

Clearly the current conditions component rescued the index from a nasty fall but it does suggest we could see weakness in future months. This report is normally ignored.

The most bullish report of the day was the vehicles sales for November. Sales soared to an annual pace of 17.2 million compared to 16.5 million in October. Sales of domestic cars rose from 13.0 million to 13.7 million while imported cars rose only slightly from 3.4 to 3.5 million. Sales of the Jeep Cherokee rose +67%, Chevy Silverado truck +24% and the Honda CRV +43%. Sales of the Chevy Volt declined -30%, Toyota Prius -13% and Ford Taurus -37%. While the trend is still early the drop in gasoline prices has definitely boosted sales of trucks and SUVs while compact car sales have declined.

Gasoline prices averaged $2.76 today and it was the 68th consecutive day that prices have declined. Many analysts are now predicting $2.50 gas on average by the end of December and sub $2 in many Gulf coast states. This is going to seriously boost truck and SUV sales and prompt additional holiday spending by consumers.

New York Fed President William Dudley and Fed Vice chairman Stanley Fischer both spoke this week saying the drop in gasoline prices was going to be a mini stimulus program and consumers would definitely be spending more on the holidays. Both men suggested the boost to the economy from lower gasoline prices would allow the Fed to hike rates in the middle of 2015. This is contrary to recent analyst comments claiming the low oil prices would further depress inflation and keep the Fed on hold until 2016.

Dudley did warn the Fed should continue to be cautious about raising rates. He said, "When interest rates are this low the risks of tightening a bit too early are likely to be considerably greater than the risks of tightening a bit too late."

The job data starts tomorrow with the ADP Employment. This could be the pothole in the rally road if it comes in much lower or higher than expected. If it is lower the analysts will start projecting slower economic growth and worry that Europe is weighing on the USA. That is a bad news is good news story since it will keep the Fed on the sidelines longer. If the number comes in a lot higher then it is good for the economy but the Fed could act quicker. The Goldilocks number would be in the +220,000 range.

The Fed Beige Book is expected to be market positive with a continued upgrade to the economic conditions around the country. Some weakness in a couple regions is expected but overall I expect that conditions have improved.

The Nonfarm Payrolls on Friday is expected to show a gain of +235,000 jobs. The range of estimates in a Bloomberg survey was from 140,000 to 275,000. Either of those numbers could create some market volatility. The Goldilocks number here would also be in the +220,000 range.


MasterCard (MA) must be feeling the joy of the season with all those Black Friday purchases on credit cards. They raised their dividend +45% to 16 cents and announced a $3.75 billion stock buyback program. The company has $275 million remaining on its existing $3.5 billion buyback program they announced last December. The dividend will be paid on Feb 9th to holders as of Jan 9th. Since MasterCard went public in 2006 the stock has gained +1,800%. Shares recovered from a morning loss on news of the announcement.


The first post oil crash acquisition is now in the books. Berkshire Hathaway's Lubrizol business bought two units from Weatherford International (WFT) for $750 million. The Integrity Industries drilling fluids business and Engineered Chemistry, which provides additives for fracking, were the two units purchased. Lubrizol was purchased by Berkshire in 2011. Lubrizol has been actively making acquisitions with the last a pipeline flow improver from Phillips 66 in February. Lubrizol has been expanding its influence in the fracking community by increasing its offerings in the fracking fluids space.

Buffett has been asking the CEOs of the companies in the Berkshire portfolio to make their own acquisitions because it takes the pressure off Buffett to spend his growing pile of cash, now over $60 billion.


Iberia Capital upgraded Baker Hughes (BHI) today with an outperform rating and a $65 price target. Two weeks ago Halliburton (HAL) agreed to buy them for $78.62 based on the Halliburton share price at the time. There has been some fade from that announced price because the acquisition is for 1.12 shares of Halliburton plus $19 in cash or $64.19 based on today's prices. Baker Hughes closed at $56.70 today because the acquisition should not close until the second half of 2015.


Biogen's (BIIB) Alzheimer's drug BIIB037 was allowed to move directly from Phase I trials to Phase III testing and bypassing Phase II. The company said the drug had a significant effect on cognition among patients in the 54 week Phase I trial along with a decrease in amyloid deposits on the brain.

The CEO said the company was going to start the Phase III testing "very aggressively" because the data was encouraging enough to skip the Phase II process. Even with an aggressive testing schedule the drug will not be available to the public until 2018-2019. A Robert Baird analyst said there were some safety concerns with the drug but they might be handled with a lower dosage program. BIIB shares rallied +6% on the news.


North Korea is now a prime suspect in the successful hacking of Sony (SNE) and the distribution of confidential internal data to multiple new outlets. North Korea declared war against Sony in June after the country found out Sony was going to release a James Franco-Seth Rogan comedy about a plot to assassinate Kim Jong Un. The Korean foreign ministry said all North Koreans were determined to "mercilessly destroy anyone who dares hurt or attack the supreme leadership of the country, even a bit."

The hackers stole multiple movies from Sony including the Brad Pit movie "Fury" and a remake of "Annie," "Still Alice," "Mr Turner," and "To Write Love on Her Arms" and made them available on the Internet. Fury was downloaded more than 500,000 times since the Nov 25th attack. Variety.com said downloads could reach 1.2 million this week. They also released a list of Sony's top employees, rate of pay, identification numbers, dates of raises, home addresses and dozens of other items of personal information. Writers have jumped on this data to show that of the top 17 highest paid employees making over $1 million a year there was only one female.

The hack attack also crippled some computer systems at Sony with the picture of a skull appearing on company computer screens. The picture had a hashtag for "Guardians of Peace" and a warning that private data would be released unless demands were met. Researchers found Korean language in the software left behind in the attack. A FireEye (FEYE) subsidiary has been hired to help clean up the systems and prevent future attacks.

Lions Gate Films had the "Expendables 3" film stolen and placed on the Internet where it was viewed by more than 2 million people before the movie was available in theaters.


Amazon (AMZN) sold its biggest bond offering ever today with a $6 billion sale. The retailer sold $1.5 billion at 4.95% for 30 years at 205 basis points over 30-year treasuries. They also sold $1.25 billion at 3.8% for 10-years and 4.8% for 20 years. Lastly they sold $1 billion in 2.6% for 5 years and 3.3% for 7 years. The bonds were rated Baa1 by Moodys.

Jeff Bezos was interviewed at a conference and was asked about earnings. He said something like "we don't run the company to manage quarterly earnings. We are still a startup and building for the future. Startups have a lot of earnings volatility because of their expansion expenses." Bezos says he only spends about 6 hours a year on investor relations because he is totally focused on building the company. Shares were flat on the day.


Hedge funds are closing at the fastest rate since the financial crisis. In the first half of 2014 more than 460 funds have closed. If that pace continued in the second half it could exceed the 1,023 closures in 2009. Funds are posting disappointing returns with an average of +2% YTD in 2014 and the worst performance since 2011.

The $37 billion Brevan Howard Asset Management LLP closed a $630 million commodity fund last week after it lost -4.3% YTD. Personally I don't see how any commodity fund could have made money this year unless they shorted everything in sight in January and then turned off their computers.

Funds are not having any trouble finding capital despite their poor performance. Dan Loeb opened Third Point LLC for new money briefly on October 1st and raised $2.5 billion. Bill Ackman also raised $2.7 billion in October for a new fund. Ackman has produced a 42% return YTD. For more information on fund closures click here

The CME raised margins on crude futures for the fifth time in the last two months. Starting at the close today the margin on a WTI futures contract rose +16% to $4,895 for speculators and the highest since the $4,950 back on January 29th 2013. Margin for natural gas, gasoline and diesel futures also increased.

When volatility increases in various commodities the CME will raise the margin to make it more expensive to trade in an attempt to slow the volatility and reduce their risk. The CME is responsible for making sure there is enough collateral at risk in case of a default by the investor.


Gasoline futures hit a five-year closing low at $1.82 at the close today. Feel free to jump for joy!


Harold Hamm, CEO of Continental Resources lost $12 billion or more than half of his wealth over the last three months because of the drop in oil prices. Continental is an active shale driller in the Bakken and the company closed all its hedges a couple weeks ago when he basically called a bottom in the oil market. Unfortunately he was wrong.

He said on Monday that U.S. drilling is likely to slow dramatically since nobody wants to drill an unprofitable well. "Drilling will slow until prices recover. That is the way it ought to be." Hamm said the U.S. has the upper hand in battling OPEC. "We can adjust quickly. It is a lot easier to adjust company activity than it is for countries to adjust. When you have people starving or social policies within countries that people are used to, it is hard to adjust those."

Hamm claims Continental can continue to post profits at $50 a barrel. He said, "People need to calm down and take the long view and there is no need to panic at this point."


Over the last three years the energy sector has seen more than $90 billion in junk-rated debt sold to fund drilling expenses. That debt has fallen an average of -13% since crude began falling in June. Halcon (HK), Goodrich Petroleum (GDP) and SandRidge (SD) are three out of 21 borrowers that operate in the most expensive shale fields in the USA. They will be unprofitable at $60 WTI but their cash flow has already been severely disrupted.

A money manager at Alliance Bernstein said the company is worried there will be defaults because far too much money had been chasing the high interest loans in the oil sector. HK 9.75% bonds worth $1.15 billion have lost -33% since oil prices began to decline in June. $750 million in SandRidge notes have declined -29% and Goodrich debt has fallen -37%.

Those companies will have to quickly curtail drilling to preserve cash because there will not be any new debt offerings to help them out. Companies are able to borrow vast amounts of money based on the value of their proven reserves. Those reserves are worth a lot less today at $68 than they were at $102 a barrel back in June. The lender geese with the golden eggs have disappeared and companies are going to be forced to sell assets to raise cash to pay debt and future drilling expenses.

Analysts believe as many as one-third of drillers could default over the next year because of rapidly declining cash flow if oil prices remained at this level.

Companies have sold $1.5 trillion in corporate bonds YTD in 2014 and that is a record. Medtronic sold $17 billion on Monday and the largest sale in a year. So far borrowers have sold $1.168 trillion in investment-grade notes and $344 billion in junk bonds. This beats the $1.146 trillion of high grade and $348 billion in junk sold in 2013. The average yield has risen to 3.85%.

Markets

The Tuesday turnaround propelled the Dow to a new closing high at 17,877 but the other indexes failed to keep up. The S&P recovered to 2,066 with the record high close at 2,072 last Wednesday. The historical record shows that December is the best month of the year and investors are going to be betting on that trend to continue.

If there was anything the Monday dip showed us it is that dip buyers are alive and well. The opening lows were the lows for the day and while the indexes did not simply sprint higher every intraday dip was a higher low suggesting buyers were getting anxious about missing the rebound.

The S&P decline was halted at 2,050 on Monday and that is now our line in the sand as support. Resistance is that past high at 2,072.


The Dow chart is very bullish. The Dow finally managed a close well over that 17,825 level that held us back all last week. The Dow still closed at resistance but it was a material improvement over last week. If the Dow moves higher from here it is going to trigger additional short covering and a lot of price chasing into the end of December.

Support is now 17,725, 17,775 and 17,800.



The Nasdaq failed to rebound to a new high despite some strong gains from BIIB, REGN, NFLX and ALXN. A big drag on the index was Priceline with a -$15 loss after an analyst downgrade.

Both the Nasdaq 100 and the Nasdaq Composite pulled back from their recent highs to use prior resistance as support. This was a textbook reversal and rebound. The key here is whether the rebound continues on Wednesday. This will be a critical day for market direction with the ADP Employment report a potential trigger.

Support on the Nasdaq Composite was rock solid at 4,725. That becomes the focal point on any future decline. Any move below that level would trigger significant selling.





The Russell 2000 rebounded +1.24% today but remains well below resistance at 1,188. New support has formed at 1,155 giving us a 48 point range for the rest of the week. The Russell has lagged the big cap indexes as it normally does in late November. I got a cute cartoon from Hedgeye today that illustrates how the Russell has been a drag on the market.



I think the Monday dip was good for the market. Everyone waiting on the sidelines for a new entry got their wish. However, most of them probably procrastinated and missed it. Fortunately for us they will be the ones chasing prices higher for the rest of the week.

I am somewhat concerned about the payroll reports but any dip should be bought just like it was on Monday. I remain in buy the dip mode until proven wrong. Watch the 4,725 level on the Nasdaq Composite for a possible change in trend.

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Enter passively, exit aggressively!

Jim Brown

Send Jim an email

 


New Option Plays

Raising Guidance Again

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Aetna Inc. - AET - close: 88.34 change: +0.80

Stop Loss: 85.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.45 million
Entry on December -- at $---.--
Listed on December 02, 2014
Time Frame: Exit PRIOR to January expiration
New Positions: Yes, see below

Company Description

Why We Like It:
AET is in the healthcare sector. According to a recent press release, "Aetna is one of the nation's leading diversified health care benefits companies, serving an estimated 46 million people with information and resources to help them make better informed decisions about their health care. Aetna's customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups and expatriates."

If you study a one-year chart of AET the stock has definitely seen its ups and downs. That's because the healthcare industry has faced a number of issues. AET's CEO commented on this past year in their latest post-earnings conference call.

Mark T. Bertolini, Aetna chairman, CEO and president, said, "some of the challenges we face this year, including pricing solving for nearly $1 billion in ACA related industry fees and taxes, solving for the largest rate cuts to the Medicare Advantage program in our recent history, navigating a host of new regulatory requirements in our small group and individual businesses, managing through a turbulent launch in public exchanges and controlling pharmacy costs in a year where heavy priced Hepatitis C treatments first became available and treatment guidelines changed in unforeseen ways." (ACA stands for Affordable Care Act, a.k.a. Obamacare).

In spite of all these challenges shares of AET are outperforming the major indices with a +27% gain in 2014 compared to a +11% gain in the S&P 500. AET's strength is due to the company's earnings performance. They have beaten Wall Street's earnings estimates and raised guidance three quarters in a row.

AET's most recent quarterly report was October 28th. Analysts were expecting a profit of $1.58 a share on revenues of $14.7 billion. AET delivered a profit of $1.79 a share. Revenues were up +13% to match estimates. The company said they added 470,000 new medical insurance customers in the third quarter, putting the total at 23.6 million.

Bertolini commented on their results, "Aetna reported solid third-quarter results, including our 10th consecutive quarter of membership growth, record quarterly operating revenues, and continued high single-digit pretax operating margin."

The major healthcare companies are reaping the benefits of Obamacare as more people sign up. Management raised their full year 2014 earnings guidance into the $6.60-6.70 zone versus Wall Street's estimate of $6.57.

Just last month AET raised their quarterly dividend 11% to 25 cents a share and added $1 billion to its stock buyback program, up from $464 million. In the last two months the stock has received multiple price target upgrades into the $95-100 zone. The point & figure chart is bullish with a $112.00 target.

AET's bullish trend of higher lows has just produced a breakout past resistance to new all-time highs. Tonight we are suggesting a trigger to buy calls at $88.65.

Trigger @ $88.65

- Suggested Positions -

Buy the 2015 Jan $90 call (AET150117C90) current ask $1.66

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

Intraday Chart:

Daily Chart:



In Play Updates and Reviews

No Follow Through Lower

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market did not see any follow through on Monday's profit taking. Today saw the small caps outperforming the big caps while the Dow Industrials closed at a new record.

NXPI hit our stop loss.


Current Portfolio:


CALL Play Updates

CR Bard Inc. - BCR - close: 170.99 change: +0.95

Stop Loss: 165.85
Target(s): To Be Determined
Current Option Gain/Loss: +48.3%
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:
12/02/14: BCR has broken through potential resistance at the $170.00 level. The stock is also testing a short-term trend line of higher highs. I'm 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: 143.06 change: +1.08

Stop Loss: 138.65
Target(s): To Be Determined
Current Option Gain/Loss: +426.0%
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:
12/02/14: COST did not see any follow through on yesterday's intraday pullback. Instead shares managed to outpace the broader market with a +0.76% gain.

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: 95.86 change: +1.16

Stop Loss: 93.65
Target(s): To Be Determined
Current Option Gain/Loss: +13.2%
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:
12/02/14: DECK bounced +1.2% following yesterday's profit taking. I don't see any changes from my recent comments.

No 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: 98.32 change: +0.24

Stop Loss: 96.85
Target(s): To Be Determined
Current Option Gain/Loss: +191.7%
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:
12/02/14: Early morning gains in DIN faded but shares still closed with a gain. The stock is trying to get past psychological resistance at the $100 mark.

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: 93.47 change: +0.77

Stop Loss: 88.65
Target(s): To Be Determined
Current Option Gain/Loss: +14.4%
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:
12/02/14: DIS bounced off its rising 5-dma and outperformed the S&P 500 with a +0.8% gain. These are new all-time highs for DIS. Traders may want to start raising their stops.

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: 180.39 change: +2.69

Stop Loss: 176.65
Target(s): To Be Determined
Current Option Gain/Loss: +290.6%
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:
12/02/14: FDX continues to soar. Today shares gapped open higher thanks to bullish analyst comments. Bank of America's Merrill Lynch added FDX to their US 1 list and raised their price target on FDX to $209. Meanwhile Citigroup raised their FDX price target to $210.

The stock remains overbought. I'm not suggesting new positions. We will raise the stop loss to $176.65.

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

12/02/14 new stop @ 176.65
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: 113.25 change: -1.08

Stop Loss: 109.85
Target(s): To Be Determined
Current Option Gain/Loss: +55.6%
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:
12/02/14: HAIN snapped a four-day winning streak with some profit taking today. Traders bought the dip near $112.00 and its 50-dma. 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: 140.17 change: +1.41

Stop Loss: 138.65
Target(s): To Be Determined
Current Option Gain/Loss: -10.0%
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:
12/02/14: NOC did not see any follow through on yesterday's drop, which is good news for bulls. Shares actually gapped open higher. Unfortunately today's session is an "inside day" and doesn't really tell us much. I would wait for a rise above $141.0 0before considering new bullish positions in NOC.

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


Red Robin Gourmet Burgers - RRGB - close: 70.32 change: +1.29

Stop Loss: 67.35
Target(s): To Be Determined
Current Option Gain/Loss: - 5.1%
Average Daily Volume = 214 thousand
Entry on December 02 at $70.55
Listed on December 01, 2014
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
12/02/14: Our new trade on RRGB is open. Traders bought the dip this morning and RRGB rallied past resistance near $70.00. The entry trigger was hit at $70.55. At this time I would wait for a rally to $70.60 before initiating new positions.

Earlier Comments: December 1, 2014:
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.

- Suggested Positions -

Long 2015 Jan $70 call (RRGB150117c70) entry $2.95

12/02/14 triggered @ 70.55
Option Format: symbol-year-month-day-call-strike


The Sherwin-Williams Co. - SHW - close: 244.55 change: +1.48

Stop Loss: 238.25
Target(s): To Be Determined
Current Option Gain/Loss: +131.5%
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:
12/02/14: SHW recovered most of yesterday's pullback. It looks like the $245.00 level has become new short-term resistance. 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: 55.04 change: +0.13

Stop Loss: 53.85
Target(s): To Be Determined
Current Option Gain/Loss: +318.2%
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:
12/02/14: We were expecting the SMH to rally this morning on the Cypress Semiconductor merger news last night. Instead the SMH actually traded lower at the open. The ETF found minor support near $54.60 and eventually closed higher.

Shares remain overbought. I am not suggesting new positions at this time.

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: 69.47 change: -0.31

Stop Loss: 67.90
Target(s): To Be Determined
Current Option Gain/Loss: -50.0%
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:
12/02/14: Hmm... It might be time to worry about our UA trade. The profit taking yesterday was understandable on disappointing Black Friday data for the retail industry. UA did not see much of a bounce today and instead underperformed the broader market with a -0.4% decline. UA looks poised to drop toward short-term support near $68.00 soon. P> 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: 54.07 change: +0.32

Stop Loss: 54.85
Target(s): To Be Determined
Current Option Gain/Loss: + 2.6%
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:
12/02/14: FMC recovered about half of yesterday's decline. We remain defensive here and will try to limit our risk by lowering the stop loss to $54.85 tonight. I am not suggesting new positions at this time.

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

12/02/14 new stop @ 54.85
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

NXP Semiconductors - NXPI - close: 75.36 change: -0.52

Stop Loss: 74.85
Target(s): To Be Determined
Current Option Gain/Loss: -24.7%
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:
12/02/14: Our NXPI trade has been stopped out. I'm a little surprised by today's relative weakness. The SOX semiconductor index gained +0.68% while NXPI lost -0.68%. We were expecting the 10-dma and the $75.00 level to act as short-term support but NXPI broke through both of them today. I did warn readers that NXPI was a more aggressive trade given its trend line of higher highs.

- Suggested Positions -

2015 Jan $80 call (NXPI150117c80) entry $2.39 exit $1.80 (-24.7%)

12/02/14 stopped out
11/29/14 new stop @ 74.85
11/24/14 triggered @ 76.05
Option Format: symbol-year-month-day-call-strike

chart: