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Daily Newsletter, Wednesday, 8/12/2015

Table of Contents

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

Market Wrap

Currency War

by Keene Little

Click here to email Keene Little
For the 2nd day in a row China devalued their currency (after telling the world the 1st time was a only one-time devaluation) and it sent the global stock markets tumbling this morning. But the decline became too irresistible to value hunters and they drove the indexes back up near the flat line for the day. Both sides are now asking "what's next?"

Today's Market Stats

Developed countries continue to compete in the race to the bottom as they each devalue their own currency in an effort to fight the deflation monster and make their products cheaper for other countries to buy. It's the new way to fight a trade war (instead of tariffs as in previous trade wars). But as in all wars, it tends not to end well for anyone.

China has shocked the markets with not one but two significant devaluations in the past two days. After the first one, which hit our futures market Sunday night, China said it was a one-time reevaluation of their yuan and that there would be no more adjustments. Ha, if their mouth is moving they're lying (just like our politicians and Fed). After devaluing the yuan 2% on Sunday (their Monday), they did it again last night with another 1.6% devaluation. Those sound like small corrections but in the currency world they're huge moves. But not to worry, after two moves the Chinese tell us they're done. Ha, their mouths are still moving.

Many believe China did this out of spite for not being allowed into the IMF's world money called the Special Drawing Right (SDR). They had expected a decision by November to allow the yuan to be included in the basket of currencies but last week the decision was moved out nearly a year to the end of September 2016. Devaluing their yuan as they've done, with the surprise move, is tantamount to declaring they've joined the currency war (which the U.S. started with all the rate reductions and QE efforts).

But the problem for China was that they were leaving the yuan essentially pegged to the U.S. dollar, which has remained strong, and that's been hurting China's economy. While other countries have been devaluing their currencies (where's the outrage there?) to fight deflation and make their products more competitive in pricing in the export market, China has been losing market share and their own domestic demand is not enough to soak up the excess manufacturing capability that they have. They were willing to hold on until November to get accepted into the IMF's SDR but once the decision was pushed out a year the Chinese leadership realized they can't hold on for another year. Hence the devaluation now -- get it done, get the hate mail now and let it be forgotten in a year when the IMF reevaluates the yuan for inclusion. Actually, yuan devaluations are probably long from being finished.

China's economy is imploding and we see evidence of this even in commodity prices, which are now below where they were in 2009 at the bottom of that period of global contraction (and yet here we sit at the top in the stock market -- major disconnect anyone?). China feels it must devalue their currency to make it cheaper to sell their goods overseas. The fact that everyone is doing this and therefore no one is gaining an advantage seems to be lost on those making the decisions. But the race for the bottom continues as the currency wars heat up.

I have believed for a while that there's a snowball's chance in hell that the Fed would raise rates in September (or December for that matter) and now the chances are even less. The U.S. economy is headed for the slowest growth since 2012 and Yellen's forecast for unemployment to decline to 5% while the economy grows by +2.5% and inflation rises to 2% is as likely to happen as a pole flip in the earth's magnetic core.

China's devaluation is a direct admission their economy is in trouble. And if they're in trouble it's because the other countries are not buying their products. The global consumer has pulled back and obviously that means lower global growth. And if China continues to devalue the yuan it would keep the dollar stronger and as long as the dollar remains strong (above 93) the more difficult it is for the Fed to raise rates, which would only strengthen the dollar even more and make it more difficult for us to compete with prices with the rest of the world. We would experience even slower growth at a time when growth is already slowing. Do you see the corner into which the Fed has successfully painted itself? The Fed can't raise rates and instead of celebrating, as it is now, the stock market will realize it's because the global economies are not allowing rates to be raised and that means the stock markets are way overvalued.

These are interesting times indeed and as if figuring out what the stock market is up to was not hard enough on our own, we now have the global economies, currencies, bond markets, etc. to worry about. They're all factors that must be considered in our market analysis. They say everything that is known is already priced into the market and that's why we study charts. Surprise currency announcements and other events will always be a present danger and it's one reason why you don't go all in on a trade. Accept the fact that your position might get body slammed in an overnight move and be sure a big hit on your position is not going to wipe you out. At this time you should NOT be using any margin in your stock trades.

With that let's move to the stock charts, starting a "simple" look at DOW's uptrend, as shown on its weekly chart below. You can see how this morning's low was a small poke below the bottom of its up-channel for the rally from October 2011, which is currently near 17340. A weekly close at or above that level will be important. If the market rallies from here I see upside potential for the DOW to a new high in the 18500-18600 range by September (that would frustrate a few bears), where it would meet the midline of its up-channel and the trend line along the highs since last December.

Dow Industrials, INDU, Weekly chart

One thing that many are talking about is the death cross for the DOW, which is when the 50-dma crosses down through the 200-dma, which it did yesterday. One thing to take note about these though -- instead of being bearish they tend to mark turning points and instead should be called a bullish cross. By the time the index has dropped enough to get the cross it's usually oversold and ready for a reversal back up. Obviously the two MA's will be potential resistance if and when reached but for now there are enough pieces in place to suggest yesterday's death cross will in fact mark the bottom of the DOW's pullback this morning.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,630
- bearish below 17,200

There are a couple of points I'd like to make about the DOW's daily chart. First, it's using the arithmetic price scale, as is the weekly chart shown above, and that lowers the uptrend line from October 2011. Using the log price scale that uptrend line is near 17790 (near the 50-dma) and I'll be watching it for resistance again if tested (it held as resistance on a weekly closing basis on July 31st). With the arithmetic price scale it's holding as support. The second important point is the descending wedge pattern for the decline from July 20th, which at the moment looks like it completed with this morning's spike below the bottom of the wedge on news (a typical way for wedges to complete). The pattern for the pullback from May looks corrective, with an A-B-C pullback with two equal legs down at 17252, which was achieved (easily) today. With today's low at 17125 it also looks like a satisfactory test of its December 2014 low at 17067 and these are part of the reason I'm feeling bullish against this morning's low. But another drop below 17200 would have me turning more bearish.

I've mentioned before a rounding top pattern that appears to be developing as the choppy price action since last November/December has that choppy topping pattern look to it. But it doesn't preclude another stab higher and on the SPX weekly chart below that's what I'm projecting. The uptrend line from February-July fits as the bottom of a shallow rising wedge pattern for the 5th wave in the rally from October 2011 (to complete wave-C of an A-B-C bounce off the 2009 low). Currently near 2060, it was tested today and held on a closing basis (intraday stop runs are common in this market). More importantly, for the bulls, SPX has not yet dropped below price-level support near 2040, a break of which would be much more bearish.

S&P 500, SPX, Weekly chart

The bold blue lines on the daily chart below are the boundaries of the shallow rising wedge mentioned above, the top of which will be near 2150 next week. Two equal legs up from July 7th, for an a-b-c move to complete the 5th wave of the rising wedge, points to 2140.86, shown on the chart. The top of the wedge will be near 2152 by the end of the month and a little throw-over above the top, equal to today's 8-point throw-under, points to almost 2160 in early September. That gives us a 2140-2160 upside target zone, which will be narrowed if and when the rally makes it up there. We're still in the chop zone, which I define to be between 2045 and 2115 so be careful about continued choppy whipsaw price action until either one of those levels breaks.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2115
- bearish below 2045

Today's rally off this morning's low looks like a 5-wave move, which means we should look for a pullback Thursday morning. Maybe the pullback will be a scary one in order to suck the shorts back in so that they'll provide more short-covering fuel for a rally into opex. But the 5-wave move up suggests the pullback should be bought for at least another leg up for either another a-b-c move back up or something more bullish. Based on the choppy decline I'll be looking at a pullback as a buying opportunity for a higher rally into next week. If wrong, that's what stops are for.

S&P 500, SPX, 60-min chart

NDX also has a corrective (3-wave) move down from its high on July 20th. Each of the two legs down is also a 3-wave move and that has it looking like a double zigzag pullback correction. That's just EW terminology for the kind of pullback it looks like and it means we should be looking for a reversal of it and the start of a new rally leg. Two equal legs down for the zigzag pattern points to 4446.76, which was achieved with this morning's low near 4436 and the strong reversal supports the higher-probability move belongs to the bulls. An upside projection, at 4786, is based on two equal legs up from the July 7th low and that projection cross the trend line along the highs from November 2014 - April 2015 around mid-September. That gives us a price and time to watch for the next rally (if we get it), which if achieved would then set up a shorting opportunity for what should be a monster move back down into next year. Who knows, maybe the Fed will announce a large rate increase in spite of everything that points to no increase. More likely there will be no increase and a final high could be made on "good" news.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4635
- bearish below 4400

Similar to the DOW, the RUT looks like it completed a bullish descending wedge today. The decline from June 23rd has formed the wedge with the requisite 5-wave move and that in turn should be the completion of an A-B-C correction off the April high. The Fibs fit the EW pattern, known as an expanded flat correction where the b-wave (the May-June rally) was 127% of the a-wave (the April-May pullback), which was missed by only a point. Then the c-wave (the June-August decline) is a 5-wave move that typically achieves 162% of the a-wave, which is near 1187 and missed by a little more than 2 points. Until and unless the RUT drops below 1186 this is a bullish pattern, supporting what I'm seeing in the other indexes.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1245
- bearish below 1186

Treasuries may have given us an important turn signal today. With Treasury prices often counter to stock prices (money rotates into the relative safety of Treasuries during risk-off times) we might have seen at least a short-term top in Treasury prices today. The 20+ Treasury Bond ETF (TLT) daily chart below shows a key outside down day today (it gapped up, made a new high and then closed below yesterday's low). It also tried to climb above its 200-dma, at 124.48, as well as the top of a rising wedge pattern off it June 26th low, and left a throw-over above both before collapsing back down. A decline in TLT would be supportive for a stock market rally. A good trade on TLT is short against today's high at 125.71 (only a suggestion for educational purposes, wink).

20+ Year Treasury ETF, TLT, Daily chart

The initial negative reaction in the banks was a sign that a Fed rate hike has been pushed out by China's actions and that wouldn't help banks' profitability. This morning's decline broke below the uptrend line from January for BKX but it recovered it by the end of the day, near 77 (although intraday it looks like a bounce back up to the trend line for what could be a back-test to be followed by a bearish kiss goodbye). From its high on July 23rd there is so far just an a-b-c pullback with two equal legs down at 75.89 (missed by a penny with today's low at 75.90) and now it takes a rally above Monday's high at 79.54 to confirm new highs are likely coming.

KBW Bank index, BKX, Daily chart

The U.S. dollar tumbled a dollar lower today and briefly broke below its 50-dma, at 96.37, and closed pennies below it. It's also back-testing a previous broken downtrend line from April 13 - July 7, just as it did with a previously broken downtrend line from April 13 - May 27. The pullback from last Friday could be the start of another trip back down near the May low as part of a larger sideways consolidation that I've been showing on the weekly chart. A drop below today's low at 95.94 would likely mean lower prices for the dollar but keep in mind all the choppy price action in the dollar and that means potential whipsaw, subject to overseas news and what the Fed has to say. At the moment the message from the dollar is that the Fed will not be raising rates in September.

U.S. Dollar contract, DX, Daily chart

The relatively strong bounce in gold the past week has many calling for a stronger rally and a good time to buy gold. Every time I see so many newsletters calling for a strong rally in gold I keep thinking about all the previous times there were similar calls, only to see new lows follow. I don't think it will be any different this time, although I do see the potential for a higher bounce so for a trade it might work. But first I'd want to see gold get above a previous trend line along the lows from June-July, which was broken on July 17th and it led to a strong decline. At the moment gold is back up for a test of the line, near 1126, and it could be followed with a bearish kiss goodbye. A decline from here would target 1050 before another multi-month consolidation in a stair-step pattern lower into the end of the year. But the first sign of bullishness would be a climb back above price-level S/R near 1142 and its 50-dma which is coming down to the same level. Notice on the daily chart below that MACD has made it back up to the zero line and a cross back down from here would create a MACD sell signal, just as it did following the June 18th high.

Gold continuous contract, GC, Daily chart

While gold is back-testing a trend line along the lows from June-July, silver is back-testing a broken uptrend line from November 2014 - March 2015 (it ignores a brief spike down in December 2014), near 15.60. It's bullish above that level but remains bearish below it and another leg down would likely be a test of the July 24th low at 14.33 before a multi-month consolidation in its stair-step decline.

Silver continuous contract, SI, Daily chart

Oil has made it back down to previous lows in January and March and it currently showing a significant bullish divergence. I'm sticking with the big sideways consolidation into the end of the year until proven otherwise. That calls for a rally back up to the 58.50 area in October before dropping back down again.

Oil continuous contract, CL, Weekly chart

Not that anyone is paying much attention to domestic economic reports right now but tomorrow's will include the unemployment claims data, retail sales, which are expected to show further slowing in this sector as the mighty consumer pulls in their spending horns, and export and import prices. If we see further signs of deflation it will be another point for the Fed to evaluate in their rate-increase analysis (since they're so data dependent, as they say at each meeting). The PPI numbers on Friday are also expected to show a slowing in inflation, otherwise referred to as disinflation (that 'D' word is allowed but not Deflation).

Economic reports and Summary

Conclusion

In this yo-yo market that we've been in since last December, when SPX first climbed above today's closing price at 2086, means we really don't have a clue as to what direction this market will finally trade when it breaks out of the trading range. That means traders need to be cautious and assume the reversals of reversals will continue. But I think the market might have tipped its hand this week and I'm seeing more bullish signs than bearish.

I don't know what could drive a rally to new highs but I definitely see the potential from here. That could drastically change by this time next week and all I can do is go with what the market is telling me at the time. I use a combination of EW patterns, trend lines, Fib projections, oscillator divergences, market psychology, astrological signs (have I missed anything) and at the moment most of the tools I use tell me to look to buy pullbacks. August is typically a bearish month but I have a feeling to many are going to be caught leaning the wrong way if they keep trying to sell rallies.

Again, that could change in a heartbeat, which it has often done in this choppy market, but until I see some bearish price patterns emerge from this mess I'll be leaning with the bulls into a September high. From there we would then have a shorting opportunity of a lifetime (better than in 2008) but I'll get ready for that opportunity if and when it presents itself. Trade carefully in this whippy market.

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

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Option Plays

Spicy Returns

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

McCormick & Co. - MKC - close: 84.67 change: +0.06

Stop Loss: 82.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 608 thousand
Entry on August -- at $---.--
Listed on August 12, 2015
Time Frame: Exit PRIOR to September earnings expiration
New Positions: Yes, see below

Company Description

Trade Description:
MKC sales its products around the world. Currency headwinds have been a major issue this year. Yet investors seem to be looking past the currency issue and have driven MKC to a +13.9% rally in 2015, outperforming all the major U.S. indices.

MKC is in the consumer goods sector. According to the company, "McCormick & Company, Incorporated is a global leader in flavor. With $4.2 billion in annual sales, the company manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the entire food industry – retail outlets, food manufacturers and foodservice businesses. Every day, no matter where or what you eat, you can enjoy food flavored by McCormick."

Looking at their last three earnings reports MKC has managed to beat Wall Street's estimates on the bottom line three quarters in a row. Yet revenue growth has taken a hit due to currency headwinds. Management offered soft guidance in January when they reported their Q4 results. They lowered guidance in March when MKC reported its Q1 results. Yet after their most recent report MKC raised their full year 2015 earnings guidance, which might suggest the slowdown has passed.

Looking at their Q2 report in more detail (announced on July 1st) the company delivered earnings of $0.75 per share. That's a +17% rise from a year ago and seven cents better than expected. Revenues were down -0.9% to $1.02 billion, which missed expectations. When you back our currency headwinds their revenues were up +5%.

Investors have been buying the dips in MKC for months. The rally accelerated in the last couple of weeks with MKC surging to new all-time highs. Traders were quick to buy the dip today at short-term technical support on the 10-dma. We suspect MKC's relative strength will continue. The point & figure chart is forecasting at $95.00 target.

Tonight we are listing a trigger to buy calls at $85.05.

Trigger @ $85.05

- Suggested Positions -

Buy the SEP $85 CALL (MKC150918C85) current ask $1.45
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Deliver Big Intraday Rebound

by James Brown

Click here to email James Brown

Editor's Note:

The focus remained on China and its decision to devalue its currency. Initially the market was weak but the S&P 500 index managed a bounce near the bottom of its seven-month trading range.

Both DIS and LII hit our bullish entry triggers today.

HES hit our stop loss.


Current Portfolio:


CALL Play Updates

Accenture plc. - ACN - close: 103.77 change: +0.19

Stop Loss: 101.85
Target(s): To Be Determined
Current Option Gain/Loss: -3.1%
Average Daily Volume = 2.3 million
Entry on July 31 at $103.35
Listed on July 30, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
08/12/15: ACN dipped to technical support at its rising 20-dma today during the market's early morning crash. Shares consolidated there for a while and then rallied back into positive territory. I would be tempted to buy calls again on a rally past $104.00.

Tonight we will raise the stop loss to $101.85.

Trade Description: July 30, 2015:
Sometimes slow and steady wins the race. Patient investors have been rewarded in ACN. The stock is up +290% from its 2009 lows. Sales and earnings have also improved. From 2010 to 2014 ACN has seen revenues rise +38% and net income soar +54%. Year to date ACN is up +14%. The S&P 500 index is only up +2.4%.

ACN is in the technology sector. They're considered part of the information technology services industry. According to the company, "Accenture is a global management consulting, technology services and outsourcing company, with more than 336,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world's most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014."

A recent article on Investopedia.com noted that ACN is on a buying spree. "Since the beginning of 2015, Accenture has acquired nine other companies: smart grid company Structure, supply chain analytics company Gaspo, strategy consulting companies Axia and Javelin, Salesforce consulting services provider Tquila UK, digital design company Reactive Media, and digital solutions companies Agilex, Brightstep, and PacificLink Group. All of these acquisitions should strengthen Accenture's position in IT services against rivals like IBM and Infosys."

Last year ACN's earnings progress seemed to slow. Last September they reported their Q4 results that missed estimates by two cents. They beat the revenue number but guided lower. In December they beat analysts' estimates on both the top and bottom line but guided lower again. Guidance improved somewhat with ACN's 2015 Q2 report in March where the company beat estimates and guided in-line.

Their most recent report was June 25th when the company announced its 2015 Q3 results. Earnings were $1.30 per share, which was seven cents above estimates. Revenues were relatively flat (+0.4%) at $7.77 billion but that was significantly above expectations. New bookings last quarter were $8.5 billion. North American sales rose +12% on a local currency basis. Europe sales were up +7% while the rest of the world saw sales rise +13%. Management reaffirmed their fiscal year 2015 guidance and expect new bookings to be $33-to-$35 billion for the year.

The stock has been popping on its recent earnings reports. Then shares fade lower until they hit the long-term up trend and investors buy the dip. The up trend seems to be getting stronger. ACN recently broke out past round-number resistance at $100.00 and managed to hold this level during last week's market sell-off. Now ACN is poised to hit new highs. Tonight we're suggesting a trigger to buy calls at $103.35.

- Suggested Positions -

Long SEP $105 CALL (ACN150918C105) entry $1.60

08/12/15 new stop @ 101.85
07/31/15 triggered @ $103.35
Option Format: symbol-year-month-day-call-strike


The Walt Disney Co - DIS - close: 106.99 change: -1.01

Stop Loss: 102.85
Target(s): To Be Determined
Current Option Gain/Loss: +18.4%
Average Daily Volume = 5.9 million
Entry on August 12 at $106.00
Listed on August 05, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
08/12/15: The stock market's widespread weakness this morning helped push DIS to a gap down. Shares opened at $107.00. The stock fell to $105.51 intraday before paring its losses. Our buy-the-dip trigger at $106.00 was hit. This trade is now open.

I would consider new positions now or you could wait for a rally past $108.00 as an alternative entry point.

NOTE: Tonight we are adjusting the stop loss to $102.85.

Trade Description: Disney on Sale, Buy Now

Disney (Nyse:DIS) reported earnings last night and beat the street with earnings of $1.45 compared to estimates for $1.42. Today shares are down -$11 to $110 and erasing 85 points off the Dow. This is a major buying opportunity.

Disney posted $13.1 billion in revenue compared to estimates for $13.2 billion. That minor miss was not the reason for the huge decline in the stock. Disney said revenues in its cable products rose +5% BUT they had seen some pressure from online streaming. Subscription growth to the ESPN cable bundle had slowed, not declined, just slowed.

There are multiple reasons. There are no major sporting events this summer like the World Cup, Olympics, etc. Some consumers are cutting the cord to cable because they are now getting their TV programming from Netflix, Hulu, etc. Cable is expensive compared to the streaming options. The drop off in ESPN growth is not related specifically to Disney. CEO Bob Iger said subscriptions would pick back up in 2016 and expand sharply in 2017 thanks to a flood of sporting events due to come online next year.

Disney has already purchased the rights to nearly every sporting event available in the next five years but the old contracts with the prior rights holders have yet to expire. As those contracts expire and the new Disney contracts begin the content on ESPN will surge.

This slowdown in ESPN growth should be ignored. This is just a small part of the Disney empire and everything else is growing like crazy. Parks and resorts revenue rose +4%. Consumer products revenue rose +6% thanks to Frozen, Avengers and Star Wars merchandise. The only weak spot was interactive gaming, which declined -$58 million to $208 million. Disney expects that to rebound in Q4 as new games are released and holiday shopping begins.

The real key here is the theme parks, cruises and most of all the movie franchises. They have five Star Wars movies in the pipeline and the one opening this December is expected to gross $2.2 billion and provide Disney with more than $1 billion in profits. This is just one of the blockbusters they have scheduled.

Analysts are claiming Disney shares could add 25% before the end of December because of their strong movie schedule and coming attractions. The Avengers movie in April was a hit and added greatly to their Q2 earnings. However, that will just be a drop in the bucket compared to the money they are going to make on the Star Wars reboot in December. That is the first of five Star Wars movies on the calendar. Remember, Disney now has Marvel, Pixar and Star Wars (Lucasfilm) all under the same roof.

Disney Movie Schedule (partial)

Dec. 18, 2015 - "Star Wars: Episode VII - The Force Awakens"
2016 - "The Incredibles 2"
2016 - "Frozen" sequel
April 29, 2016 - "Captain America: Civil War"
June 17, 2016 - "Finding Dory"
Dec. 16, 2016 - "Star Wars Anthology: Rogue One"
May 26, 2017 - "Star Wars: Episode VIII"
June 16, 2017 - "Toy Story 4"
Late 2017 - "Thor: Ragnarok"
May 4, 2018 - "Avengers: Infinity War - Part I"
2018 - "Untitled Star Wars Anthology Project"
May 3, 2019 - "Avengers: Infinity War - Part II"
2019 - "Star Wars: Episode IX"

Disney was recently upgraded with a new price target of $150. The drop to $110 on Wednesday is a buying opportunity. Shares have risen from $90 in February to $122 on Tuesday. The $110 level is major support and should be bought. This is right at the 100-day average.

Tonight we are suggesting a trigger to buy calls at $111.65 with an initial stop loss at $106.85.

On August 11th we added a buy-the-dip trigger at $106.00 with an initial stop loss at $103.00 and listed the October $110 call.

- Suggested Positions -

Long OCT $110 CALL (DIS151016C110) entry $2.06

08/12/15 new stop @ 102.85
08/12/15 triggered at $106.00
08/11/15 Added a buy-the-dip trigger at $106.00 with a stop at $103.00 and listed the October $110 call
Option Format: symbol-year-month-day-call-strike


Lennox Intl. - LII - close: 122.46 change: +1.03

Stop Loss: 117.35
Target(s): To Be Determined
Current Option Gain/Loss: +0.0
Average Daily Volume = 427 thousand
Entry on August 12 at $121.60
Listed on August 11, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
08/12/15: Our brand new call play on LII is off to a strong start. Shares did not see that much of a drop this morning when the rest of the market was plunging. Shares bounced at $119.77 and rebounded to a new high. Our trigger to buy calls was hit at $121.60. I would consider new positions at current levels.

Trade Description: August 11, 2015:
Record profits and relative strength have made a recipe for new highs in LII. Shares have been outperforming the market with a +27% gain year to date.

LII is in the industrial goods sector. According to the company, "Lennox International Inc. is a global leader in the heating, air conditioning, and refrigeration markets."

The company has beaten Wall Street's earnings estimates in three of the last four quarterly reports. Although according to the IBD, LII's Q3 earnings miss was the first drop in three years.

LII's most recent report was July 20th when they announced their Q2 results. Earnings were up +22% from a year ago to $1.84 per share, which was three cents above estimates. Revenues improved +3.3% to $992.5 million, also better than expected. Management raised their full year 2015 earnings guidance.

LII's Chairman and CEO Todd Bluedorn offered bullish comments on his company's performance,

"Lennox International posted record profits in the second quarter with margin expansion across all three of our businesses. Total segment profit margin for the company expanded 120 basis points from the prior-year quarter to a record 13.5%. In our Residential business, we hit record revenue, margin and profit levels. Residential revenue was up 6% at constant currency, and margin expanded 190 basis points to 18.0%. In Commercial, segment profit reached new highs while revenue and margin set second-quarter records. Commercial revenue was up 10% at constant currency, and margin expanded 80 basis points to 17.0%. North America national account business resumed growth as expected, with revenue up high single-digits, and we continued to see success in non-national account business with mid-teens revenue growth. In Refrigeration, revenue was up 4% at constant currency, driven by high single-digit growth in North America. Refrigeration margin ticked up 10 basis points to 7.2%, including headwinds from negative foreign exchange and the mid-2014 repeal of the carbon tax on refrigerant in Australia."
The stock market rewarded LII shareholders with a huge pop from about $107 to $116 on this earnings news. Shares have been very resilient since this earnings announcement. Investors have been buying the dips and LII has avoided a lot of the market's volatility.

Yesterday LII managed to breakout from its post-earnings sideways consolidation and rally past resistance near $120.00. LII displayed relative strength again today. The point & figure chart is bullish and forecasting at $136.00 target. Tonight we are suggesting a trigger to buy calls at $121.60.

- Suggested Positions -

Long SEP $125 CALL (LII150918C125) entry $1.75

08/12/15 triggered @ $121.60
Option Format: symbol-year-month-day-call-strike


Starbucks Corp. - SBUX - close: 56.38 change: +0.03

Stop Loss: 54.40
Target(s): To Be Determined
Current Option Gain/Loss: +15.9%
Average Daily Volume = 7.2 million
Entry on August 10 at $56.00
Listed on August 06, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
08/12/15: SBUX fell to technical support at its rising 50-dma and bounced. Shares managed to close virtually unchanged on the session. I am still suggesting a new rally past $56.60 as our next entry point to buy calls.

Trade Description: August 6, 2015:
Investors seem spooked today. There was widespread selling and a lot of the profit taking was focused on recent winners. Tim Seymour, managing partner at Triogem Asset Management, said traders were "cutting their flowers and keeping their weeds" today. SBUX looks like one of those cut flowers and we want to be ready to catch it when it stops falling.

Here is tonight's trade description:

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.

Five-Year Plan

In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX is having a great 2015 so far with the stock up +39% (that's after today's -3.0% decline), outperforming the broader market. The stock accelerated following its Q1 2015 earnings results in January and again when they reported in April.

It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week.

SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years. Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

The trend of earnings pops continued in July with shares gapping up to new all-time highs following its Q2 report on July 23rd. Earnings were $0.42 per share, a penny above estimates. Revenues were up +17.5% to $4.88 billion, just a hair above expectations. Global same-store sales were up +7% and their non-GAAP operating margin improved 100 basis points to 19.5%. Management is still guiding 2015 revenues to rise +17% in the $19.1-19.4 billion range.

The stock has been extremely resilient until today. We suspect that today's decline will see some follow through lower but investors will likely buy the dip at SBUX's up trend. Shares should find support in the $56.00 area. Tonight we are listing a buy-the-dip entry trigger at $56.00. We'll try and limit our risk with a stop loss just below the 50-dma (start at $54.40).

- Suggested Positions -

Long OCT $60 CALL (SBUX151016C60) entry $0.63

08/10/15 triggered on a dip at $56.00
08/08/15 Added a second entry trigger to buy calls at $57.65 (in addition to our buy-the-dip trigger at $56.00)
Option Format: symbol-year-month-day-call-strike


Stryker Corp. - SYK - close: 103.13 change: +1.31

Stop Loss: 99.85
Target(s): To Be Determined
Current Option Gain/Loss: +28.3%
Average Daily Volume = 1.1 million
Entry on July 29 at $102.15
Listed on July 28, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
08/12/15: Bullish analyst comments and a new $123.00 price target for SYK helped shares outperform today. Traders bought the early morning dip near yesterday's intraday low and SYK bounced back to a +1.28% gain. A rally past $103.50 could be used as a new bullish entry point.

Trade Description: July 28, 2015:
The healthcare sector has consistently delivered a strong bullish performance for the last three years in a row. When you think of healthcare you might think health insurance providers. They are not the only healthcare stocks in rally mode. Tonight's candidate is in the medical equipment and supplies industry.

According to the company, "Stryker is one of the world's leading medical technology companies and together with our customers, we are driven to make healthcare better. The Company offers a diverse array of innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine, which help improve patient and hospital outcomes. Stryker is active in over 100 countries around the world."

Late last year the company's earnings growth was lackluster at best but the company has turned things around the last couple of quarters. SYK reported their Q1 results on April 21st. They beat the bottom line estimate. Revenues were only in-line with estimates. Yet management raised the low-end of their 2015 sales and earnings guidance. You can see the reaction to the stock price in April.

Their most recent earnings report was July 23rd. Wall Street was expecting Q2 earnings of $1.17 per share on revenues of $2.41 billion. SYK beat both estimates with earnings growth of +11% to $1.20 per share. Revenues were up +2.9% to $2.43 billion. On a constant currency basis their sales were up +7.6%.

SYK management raised their organic growth forecast to +5.5% to +6.5%. They raised both their Q3 and 2015 earnings forecast above analysts' estimates. SYK now expects full year earnings in the $5.06-5.12 range versus consensus estimates at $5.03 per share. Analyst reaction has been positive with several price target upgrades into the $107-110 range. The point & figure chart is bullish and currently forecasting at $111.00 target.

We like how SYK displayed relative strength last week and resisted most of the market's sell-off (prior to their earnings report). The better than expected Q2 results launched SYK to new all-time highs. Traders bought the dip this morning and today is a new all-time closing high for SYK. Tonight we are suggesting a trigger to buy calls at $102.15.

- Suggested Positions -

Long SEP $105 CALL (SYK150918C105) entry $1.13

08/01/15 new stop @ 99.85
07/29/15 triggered @ $102.15
Option Format: symbol-year-month-day-call-strike


Teva Pharmaceuticals - TEVA - close: 69.62 change: +0.02

Stop Loss: 67.45
Target(s): To Be Determined
Current Option Gain/Loss: -25.7%
Average Daily Volume = 5.4 million
Entry on August 04 at $70.25
Listed on August 03, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
08/12/15: TEVA bounced back to virtually unchanged on the session. I'm still hesitant on launching new positions but I would be tempted to buy calls on a rally past $70.50.

Trade Description: August 3, 2015:
The combination of M&A news and improving earnings results has been a win-win for shares of TEVA. The stock recently soared to new all-time highs on some key headlines in the last several days.

TEVA is in the healthcare sector. They're part of the drug manufacturing industry. According to the company, "Teva Pharmaceutical Industries Ltd. is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world's largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. Teva integrates its generics and specialty capabilities in its global research and development division to create new ways of addressing unmet patient needs by combining drug development capabilities with devices, services and technologies. Teva's net revenues in 2014 amounted to $20.3 billion."

TEVA's most recent earnings report was July 27th. Analysts were expecting a profit of $1.29 per shares for TEVA's Q2 results. The company delivered $1.43 per share. Revenues fell -1.5% to $4.97 billion but that was actually better than expected. TEVA's management then raised their 2015 guidance from $5.05-5.35 per share to $5.15-5.40 compared to Wall Street's estimate at $5.21.

If beating earnings and raising guidance wasn't enough to drive the stock higher TEVA also announced major acquisition news. TEVA had been trying to buy British drug firm Mylan (MYL) with an unsolicited bid. Meanwhile MYL is trying to buy Perrigo (PRGO). MYL didn't seem interested in being acquired by TEVA and actually adopted a poison pill strategy to make it less attractive to hostile takeovers.

On July 27th TEVA announced they had dropped their bid for MYL and instead announced a deal to buy Allergan's (AGN) generic drug business for $40.5 billion. TEVA will pay $33.75 billion in cash and $6.75 billion in stock, giving AGN a 10% stake in TEVA. They expect the deal to close in the first quarter of 2016.

According to a Reuters article, "Teva, which will gain a portfolio of more than 1,000 products, forecast a double-digit boost to adjusted earnings per share in 2016 and a more than 20 percent benefit in years two and three after closing the deal. It expects cost synergies and tax savings of $1.4 billion annually by the third anniversary from efficiencies in operations, manufacturing, and sales and marketing."

Wall Street applauded the deal with AGN and shares of TEVA soared from $62 to $72 in a single day.

TEVA has continued its M&A with another story out today. This morning, before the opening bell, TEVA announced it will purchase a 51% stake in a privately-held, genomic-analysis company, Immuneering Corporation. According to the press release "Immuneering uses advanced proprietary techniques to identify hidden signals and biological insights across an array of genetic, genomic, and proteomic data that can direct research for enhanced discovery, development and clinical success." The two companies have worked together before. Financial terms were not disclosed.

The AGN deal has gotten Wall Street's seal of approval. Several analyst firms have upgraded TEVA since then with multiple price target upgrades including: $82 from Deutsche Bank, $82 from Argus, $85 from RBC, $85 from Morgan Stanley, $86 from Citigroup. Just today J.P.Morgan restarted coverage on TEVA with an "overweight" and an $82 target. The point & figure chart is bullish and forecasting a long-term target of $98.00 for TEVA.

Shares of TEVA saw a $4.00 pullback but traders have started buying the dip. We want to hop on board if this bounce continues. Tonight we're suggesting a trigger to buy calls at $70.25.

- Suggested Positions -

Long SEP $70 CALL (TEVA150918C70) entry $2.02

08/04/15 triggered @ $70.25
Option Format: symbol-year-month-day-call-strike


Under Armour, Inc. - UA - close: 97.77 change: -1.32

Stop Loss: 95.65
Target(s): To Be Determined
Current Option Gain/Loss: -4.1%
Average Daily Volume = 2.3 million
Entry on July 28 at $97.55
Listed on July 27, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
08/12/15: Hmm... UA displayed relative weakness today. Actually both Nike (NKE) and UA displayed relative weakness. Traders did buy the dip near recent lows and both stocks rebounded intraday but they both closed with losses of more than -1.2%.

No new positions at this time.

Trade Description: July 27, 2015:
UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), 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. The Under Armour Connected Fitness platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it's actively fighting for market share and recently overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but they saw growth of +32%.

UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance. UA reported their 2014 Q4 results on February 4th. The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

There was a steady stream of analysts raising their price targets on UA after its February earnings report. The company's most recent earnings report was April 21st when UA announced Q1 results. After raising guidance back in February the company reported earnings of $0.05 per share, which was in-line with Wall Street's new estimates. Revenues were up +25.4% to $804.9 million, which beat expectations.

UA management raised their outlook again. They expect 2015 operating income to improve +13-to-15%. UA expects 2015 revenues to rise +23% to $3.78 billion.

The company delivered a repeat performance when they did it again with their Q2 earnings on July 23rd. Analysts were expecting a profit of $0.05 per share on revenues of $761.7 million. UA beat both estimates with a profit of $0.07 per share. Revenues were up +28.5% to $783.5 million. Management raised their 2015 revenue guidance from $3.78 billion to $3.84 billion. That's above analysts' estimates of $3.83 billion.

Wall Street reacted to UA's Q2 report with a wave of price target upgrades. Several firms upped their target on UA into the $105-114 range. Naturally the stock rallied on this bullish earnings report and the analyst outlook. The stock soared past resistance near $90.00. More importantly UA has managed to maintain these gains in the face of a widespread market sell-off. We like that kind of relative strength.

Tonight we are suggesting a trigger to buy calls at $97.55. We'll try and limit our risk with an initial stop loss at $93.65.

- Suggested Positions -

Long SEP $100 CALL (UA150918C100) entry $2.66

08/06/15 new stop @ 95.65
08/01/15 new stop @ 94.65
07/28/15 triggered @ $97.55
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 63.91 change: +0.07

Stop Loss: 65.25
Target(s): To Be Determined
Current Option Gain/Loss: +41.2%
Average Daily Volume = 2.0 million
Entry on July 24 at $66.80
Listed on July 23, 2015
Time Frame: Exit PRIOR to earnings in late September
New Positions: see below

Comments:
08/12/15: I'm starting to worry about our BBBY trade. The bearish momentum has stalled. BBBY looks like it wants to breakout past technical resistance at its 10-dma soon.

More conservative traders may want to adjust their stop loss lower again. I am not suggesting new positions at this time.

Trade Description: July 23, 2015:
This year is not shaping up very well for bullish investors in BBBY. The stock is down -11.6% year to date. The trouble started with its earnings report back in January.

If you are not familiar with BBBY they are in the services sector. According to the company, "Bed Bath & Beyond Inc. and subsidiaries (the "Company") is a retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in store, online or through a mobile device.

The Company has the developing ability to have customer purchases picked up in store or shipped direct to the customer from the Company's distribution facilities, stores or vendors. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare and other industries.

Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond. Shares of Bed Bath & Beyond Inc. are traded on NASDAQ under the symbol "BBBY" and are included in the Standard and Poor's 500 and Global 1200 Indices and the NASDAQ-100 Index. The Company is counted among the Fortune 500 and the Forbes 2000."

On January 8th BBBY reported its 2014 Q3 results. Earnings were in-line with estimates but revenues missed. Management lowered their same-store sales guidance. The stock plunged the next day. A few weeks later BBBY had managed to recover but the rally failed producing a bearish double top.

The trouble continued in April. BBBY had rallied up into its earnings report and then disappointed. Their 2014 Q4 results were in-line with estimates at $1.80 a share. Yet revenues missed estimates again. They lowered their Q1 guidance. The stock plunged the next day.

On June 24th BBBY reported earnings of $0.93 per share. That was down -1% from a year ago and a penny worse than expected. Revenues were only up +3% to $2.74 billion, which met expectations. Yet comparable store sales were +2.2% when Wall Street was expecting +2.5%. Management lowered their Q2 guidance. Guess what happened the next day? Yup, the stock dropped. Traders immediately sold the bounce and BBBY now has a clearly defined bearish trend of lower highs and lower lows. One has to wonder how bad would BBBY's Q1 results have been had the company not spent $385 million buying back stock last quarter?

In summary, BBBY has been missing Wall Street's revenue or earnings estimates the last three quarters in a row. They have warned twice and same-store sales are disappointing. Technically shares have broken down below multiple layers of support. The company is more of a home furnishing store so back to school season may not give them much of a boost. The point & figure chart is bearish and forecasting at $60.00 target. The last few days have seen some support near $67.00. We are suggesting a trigger to buy puts at $66.80.

- Suggested Positions -

Long NOV $65 PUT (BBBY151120P65) entry $2.55

08/06/15 new stop @ 65.25
08/01/15 new stop @ 66.25
07/25/15 new stop @ 67.65
07/24/15 triggered @ $66.80
Option Format: symbol-year-month-day-call-strike


Tupperware Brands - TUP - close: 54.72 change: -0.91

Stop Loss: 56.65
Target(s): To Be Determined
Current Option Gain/Loss: +44.4%
Average Daily Volume = 489 thousand
Entry on August 11 at $56.50
Listed on August 08, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
08/12/15: TUP plunged to new relative lows this morning and hit $53.65 before bouncing. Shares underperformed the broader market, which managed to close virtually flat on the session. TUP was not so lucky as shares ended the day down -1.6%.

Tonight we are moving the stop loss down to $56.65.

Trade Description: August 8, 2015:
The Tupperware brand has been around for over 60 years. Yet the current version of the company was founded in 1996. They went public the same year. The stock market's huge rally off the 2009 bear-market lows saw shares of TUP surge from $11.00 per share to $97 by December 2013. Unfortunately that was the peak. TUP's stock has been sinking ever since.

TUP is in the consumer goods sector. According to the company, "Tupperware Brands Corporation is the leading global marketer of innovative, premium products across multiple brands utilizing a relationship-based selling method through an independent sales force of 2.9 million. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products through the Avroy Shlain, BeautiControl, Fuller Cosmetics, NaturCare, Nutrimetics and Nuvo brands."

It's easy to see why investors are selling TUP. The company has lowered its guidance four quarters in a row. The outlook seems to be getting worse. Revenues fell -5.2% in Q4 2014. They reported their 2015 Q1 results on April 22nd. TUP beat estimates but revenues were down -12%. They managed to beat the bottom line estimate in their Q2 report (July 22nd) but revenues were down -12.7%. Currently TUP management is expecting 2015 revenues to fall -10% to -11% from 2014.

The reaction to its Q2 results and lowered forecast sparked a sharp decline that pushed TUP to multi-year lows. There has been almost no oversold bounce. TUP tried to bounce last week and traders sold it pretty quick.

Shares displayed relative weakness on Friday with a -2.59% decline and a new multi-year closing low. The point & figure chart is bearish and forecasting at $44.00 target. Tonight we are suggesting a trigger to buy puts at $56.50. I'm listing the September puts but investors may want to go further out and give TUP even more time. There's no telling where the bottom might be.

- Suggested Positions -

Long SEP $55 PUT (TUP150918P55) entry $1.35

08/12/15 new stop @ 56.65
08/11/15 triggered @ $56.50
Option Format: symbol-year-month-day-call-strike


WESCO Intl. - WCC - close: 57.41 change: +0.15

Stop Loss: 59.35
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
Average Daily Volume = 592 thousand
Entry on August 05 at $58.40
Listed on August 04, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
08/12/15: Hmm... WCC briefly traded to a new low this morning. Considering the violent move down in the broader market today I would have expected a deeper decline in WCC. After today's performance I am turning more cautious on WCC. More conservative traders may want to move their stop closer to the 10-dma, currently at $58.70.

Trade Description: August 4th, 2015:
The combination of currency headwinds and a slowing global economy has created a rough environment for WCC's business. Revenues are falling and the strong dollar only makes it worse.

WCC is in the services sector. According to the company, WESCO International, Inc. (WCC), a publicly traded Fortune 500 holding company headquartered in Pittsburgh, Pennsylvania, is a leading provider of electrical, industrial, and communications maintenance, repair and operating ("MRO") and original equipment manufacturers ("OEM") products, construction materials, and advanced supply chain management and logistic services. 2014 annual sales were approximately $7.9 billion. The Company employs approximately 9,400 people, maintains relationships with over 25,000 suppliers, and serves over 75,000 active customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers and utilities. WESCO operates nine fully automated distribution centers and approximately 485 full-service branches in North America and international markets, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.

Looking at some recent earnings reports from WCC the company has missed Wall Street's bottom line estimate three times in a row. Prior to their Q4 earnings report (January 29th), the company issued an earnings warning for their fiscal 2015 on December 17th.

WCC's Q1 report was April 23rd. They missed the EPS number by 10 cents. Revenues were only up +0.3% to $1.82 billion but that missed estimates. Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "We had a challenging start to the year where reduced demand in the industrial market, winter weather impacts, and foreign exchange headwinds weighed heavily on our results in the first quarter. While organic sales per workday grew 3%, sales momentum decelerated through the quarter. Gross margin was down versus prior year but was flat sequentially."

Following their Q1 report WCC management lowered their 2015 guidance again from $5.20-5.60 a share down to $5.00-5.40 per share.

The situation worsened in the second quarter. WCC reported its Q2 numbers on July 23rd. Analysts were expecting a profit of $1.15 per share on revenues of $1.97 billion. WCC only delivered $1.00 per share (a -15 cent miss) and revenues plunged -4.4% to $1.92 billion. The company said their normalized organic sales fell -3.0% and foreign exchange hit them for another -3.0%. They also suffered from falling margins while expenses rose. That's not a good recipe.

Following the Q2 numbers, Mr. Engel, stated, "Our second quarter sales declined 4% reflecting continued foreign exchange headwinds and weakness in the industrial market as well as a slow seasonal start in the non-residential construction market." Management lowered their 2015 forecast yet again. This time from $5.00-5.40 down to $4.50-4.90.

The forecast for WCC is bearish and the stock is getting hammered. Shares are trading at two-year lows. It's hard to say where the next support level is. The point & figure chart is forecasting at $44.00 target. Tonight we are suggesting a trigger to buy puts at $58.40.

- Suggested Positions -

Long SEP $55 PUT (WCC150918P55) entry $0.95

08/08/15 new stop @ 59.35
08/05/15 triggered @ $58.40
Option Format: symbol-year-month-day-call-strike



CLOSED BEARISH PLAYS

Hess Corp. - HES - close: 59.42 change: +1.53

Stop Loss: 59.05
Target(s): To Be Determined
Current Option Gain/Loss: -18.6%
Average Daily Volume = 2.8 million
Entry on August 03 at $58.21
Listed on August 01, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
08/12/15: Normally weakness in the U.S. dollar would give commodities a boost yet today's drop in the dollar didn't seem to help the commodity space. That didn't stop the oil stocks from surging higher. Energy stocks were some of the best performers as traders jumped into beaten down names. HES rallied +2.6% and hit our stop loss at $59.05.

- Suggested Positions -

SEP $57.50 PUT (HES150918P57.50) entry $2.31 exit $1.88 (-18.6%)

08/12/15 stopped out
08/08/15 new stop @ 59.05
08/05/15 new stop @ 60.25
08/03/15 triggered on gap down at $58.21, trigger was $58.65
Option Format: symbol-year-month-day-call-strike

chart: