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Daily Newsletter, Tuesday, 8/18/2015

Table of Contents

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

Market Wrap

Currency Jitters Continue

by Jim Brown

Click here to email Jim Brown

China's Shanghai Composite fell another 6.2% last night on worries that China was going to devalue the yuan once again. Other Asian countries followed China's markets lower on currency war fears.

Market Statistics

Chinese regulators have their work laid out for them in preventing a meltdown in the equity markets. They said last week they would be supporting the markets for "years to come." After that monster rally in less than a year, the odds are good they are going to be fighting sellers in every session.

With China's economy slowing in every sector, the commodity speculators are getting killed. Prices for commodities are declining because of lack of demand. In China commodities have been used as security for margin loans to buy stocks. With commodity prices hitting six year lows some of those loans are being called and investors have to sell both equities and commodities. This is a recipe for a continued slow motion train wreck.


Copper, sometimes called Dr Copper for its ability to foretell economic direction, is at a six-year low. Global demand is crashing and mines have been slashing output to support prices. Apparently it is not working. Dr Copper is telling us that global manufacturing is slowing. Since copper is part of almost every electrical item as well as wiring for cars, homes, buildings, planes, transportation infrastructure, etc, the slowing demand is an economic warning.


Other Asian countries are crashing and that decline has accelerated since the yuan devaluation. Thailand is at an 18-month low. Malaysia and Indonesia shares are falling off a cliff. If the Fed hikes rates the dollar will spike and all these countries will plunge even farther. The U.S. markets are weak because of the turmoil in the emerging markets and the worry about our own economics. What is a Fed head to do?




In the U.S. the NY Empire Manufacturing Survey on Monday was the weakest since 2009. The survey declined from +3.9 to -14.9 with both new orders and shipments falling by double digits. New orders declined from -3.5 to -15.7. Inventories fell from -8.5 to -17.3. Shipments declined a whopping -22 points and the biggest drop since 2001. All the components were weak and suggest the Fed is going to have a tough time justifying a rate hike in September. It is not that the market is not prepared for a rate hike after nearly a decade but it is not prepared for a hike with economics this weak.


There was only one economic report today. The New Residential Construction for July showed housing starts rose from 1.174 million to 1.206 million. That was well over the consensus for 1.190 million. While the headline number was strong, the internals painted a different story. Housing permits, a gauge for what starts will look like in the future, declined sharply from 1.337 million to 1.119 million. That was a -16.3% decline. Single family permits fell -1.9% and multifamily declined -31.8%. Single family starts rose +12.8% while multifamily starts fell -17%. Completions rose +2.4% to 987,000.

Analysts blamed the expiration of permit tax subsidies in New York and other Northeast states for the decline in permits. The subsidies expired at the end of June.


The big item on the calendar for Wednesday is the FOMC minutes. Investors will be looking for a clue about what to expect at the September 16th FOMC meeting. In the April minutes, the clue said "many participants saw a June rate hike as unlikely, while a few favored a move that month." While we are not likely to see such a blatant clue in these minutes, you never know what they will insert to direct market expectations.

In past minutes, the Fed said they wanted to see "some further improvement in employment." The word "some" was added to the sentence from the prior statement. So, what is the meaning of the word some? Jobs have declined for two consecutive months from the high of +260,000 in May to 231,000 in June and 215,000 in July. I don't see ANY improvement there but the Fed's prior guidance was they wanted to see jobs over 200,000 for several months. So what are we going to see in the minutes this time around? "Some improvement" suggests better than before and we have not seen that.

Since the last Fed meeting the situation in the emerging markets has gone from bad to worse. They are the markets that will be hurt the worst by a rate hike and the upward impact on the dollar. However, in previous statements the Fed has said they are the U.S. central bank, not the global central bank. Unfortunately the Fed cannot work in a vacuum whatever they do will have consequences. This is why the FOMC minutes on Wednesday are so important.

After the crash in the NY Manufacturing Survey the Philly Fed Manufacturing Survey on Thursday is going to be very important. This will show us whether the NY number was an outlier and specific only to New York or a symptom of a larger problem.


The Dow was pushed and pulled by two of its components this morning. Home Depot (HD) shares broke out to a new high at $123 after reporting earnings that beat the street. The company reported earnings of $1.73 that beat estimates for $1.71. Revenue of $24.8 billion barely edged out estimates for $24.7 billion. The average sale rose +1.7% to $59.42 and the number of transactions rose +2.6%. Transactions over $900 rose +6.3%. U.S. same store sales rose +5.7% and international sales +4.2%. HD also raised full year guidance to $5.31-$5.36 compared to estimates of $5.27. HD added 24 points to the Dow.


Walmart (WMT) shares lost ground after the company reported earnings of $1.08 compared to estimates for $1.12. This was also down from the $1.21 earned in Q2-2014. The company blamed the miss on shrinking margins in the pharmacy section. Drug costs are rising and Walmart always tries to be the lowest price. The company also said labor costs were rising as minimum wages are raised around the country. Walmart said it paid 24 cents a share for higher wages, training and hiring additional sales people. Walmart shoppers have complained for over a year that the shelves were not stocked and many items were missing. Walmart has pledged to fix that.

Walmart lowered full year guidance from $4.70-$5.05 to $4.40-$4.70. The consensus was for earnings of $4.77 per share. Same store sales rose +1.5% and that was the fourth consecutive quarter of sales growth. Walmart is planning on opening 60-70 supercenters and 160-170 Neighborhood Markets in 2015. Walmart's drop erased 19 points from the Dow.


Sandisk (SNDK) was cut to a sell by Bank of America Merrill Lynch and the price target was lowered from $75 to $40. SNDK closed at $57. Apparently, BAML cannot make up their mind because they just raised SNDK from neutral to a buy on July 23rd or less than a month ago. The analyst said a sudden increase in excess capacity has become a concern.

Micron (MU) announced on Friday it was raising capex spending in 2016 from $3.6-$4.0 billion to $5.3-$5.8 billion. However, Micron said some of that money is coming from third parties like Intel.

Hynix said it was considering a $39 billion investment in factories but there was no time frame specified.

BAML said sell Sandisk and Micron on the capex news. Yesterday Wells Fargo upgraded Micron. Wedbush cut Micron to a neutral. Lots of conflicting opinions on chip stocks.



A slow motion Chipwreck appears to be in progress. The Semiconductor Index ($SOX) is down -17% since the June high at 751. The chip stocks have been a crowd favorite for several years but the bloom is quickly fading from the rose.


Dow component Disney (DIS) was slammed by Wells Fargo with a cut from buy to neutral and cut its target range to $112-$119. The bank cited a lack of visibility combined with negative sentiment on cable networks. The Well Fargo analyst said he was a little more cautious now. "We love Disney as a company and we do not think ESPN is broken as some have suggested. Yes, it has slowed, which is important since ESPN is 50% of operating income, but it really is not broken." The analyst raised earnings estimates for 2016 saying they did not give the company enough credit for the strong slate of movies other than Star Wars. I strongly disagree with the downgrade on Disney given all the sources of income they have today and those they are building for the future. I cannot imagine Disney will not be a lot higher a year from now. Disney shares erased -16 points from the Dow.


Dicks Sporting Goods (DKS) reported earnings of 77 cents compared to estimates for 75 cents. However, revenue of $1.82 billion missed estimates for $1.83 billion. The company raised guidance for the full year to a range of $3.13-$3.21 per share. The company added 45 stores in the last 12 months to bring their total to 619. Gross margins rose to 30.4% as the result of adding their own branded merchandise to the mix.


TJX Companies (TJX) was the big earnings winner. The company reported earnings of 80 cents compared to estimates for 76 cents. Revenue of $7.4 billion beat estimates for $7.3 billion. Currency issues subtracted 4% from sales or the revenue would have been a lot higher. Same store sales rose +6% compared to +3% in the year ago quarter. That is the fifth consecutive quarter of same store sales improvement. TJX raised guidance slightly from $3.21-$3.27 to $3.24-$3.28 per share. That was still below analyst estimates for $3.32. They guided for the current quarter to a range of 80-82 cents and that was below estimates for 89 cents. The weak guidance did not have any impact on the stock with a +7% gain.


Headline earnings out on Wednesday include Lows, L Brands, Staples and Target.


Crude oil continues to hover over support at $42. Shares were up this afternoon on short covering ahead of Wednesday's inventory report. On 9 of the last 11 Tuesdays WTI has closed higher on short covering. Nobody wants to be caught short if there is a big drawdown in inventories.

Energy equities continue to find a bid but they are no longer rising. The brief spurt we saw last week has faded only slightly and they are holding their gains. However, should crude oil decline into the $30s as most analysts expect the equities are likely to decline as well. The analyst consensus is to buy now knowing that oil could drop another $5 before it rebounds. At this point $5 is a lot and I think equities will feel the pain. The next two months are typically negative for oil prices.


Markets

Volume over the last three days has averaged about 5.3 billion shares. Friday's volume at 5.17 billion was the lowest day of the year. Today's volume at 5.46 billion was definitely lackluster.

With low volume comes a lack of conviction. This is option expiration week and volume should be higher than next week. That means the next 13 trading days could be very boring. With the earnings cycle drawing to a close there will be little in the way of headlines to power the market. Historically the last week of August is negative. Labor Day is not until September 7th so the entire first week of September will also be lackluster ahead of the holiday weekend. Investors will be focused entirely on the payroll report on Friday Sept 4th and then on the FOMC meeting announcement on Thursday the 17th.

With nothing to power the market over the next two weeks, we could be highly susceptible to geopolitical headlines and whatever stray article hits the news in the USA. With earnings fading, we should not have any high profile earnings misses to dodge.

This suggests we are going to be at the mercy of whichever side feels the most conviction. Buyers have been weak but sellers appear to be exhausted after those major downdrafts we saw over the last two weeks. If they could not force a breakdown with multiple 200-point losses then they may not have enough firepower left to try again in the days to come.

Recently we have seen the dips bought with a little more enthusiasm. That suggests buyers may be feeling a little more conviction than sellers. With recent events putting pressure on the Fed to stand still we could see buyers gain a little more confidence in a calm market. Corporations are in buyback mode at this point in the cycle. That means their purchases will increase on every dip.

On the negative side the resistance at 2100 on the S&P remains firm. We traded over that level intraday but sellers appeared at 11:00 and it was downhill from there. The resistance at 2100-2110 could be a serious hurdle to cross.

We did have several tests of support at 2080 after the Wednesday rebound so that is now the line to watch for direction.


The Dow was unable to retest resistance at 17,600 and remains in a downtrend. That was an admirable rebound from the 17,150 level but it may have run out of steam. Fortunately, there are no further Dow components reporting earnings this week.

The winners and losers were almost evenly matched and that simply emphasizes the lack of conviction by either side.



The Nasdaq also failed to retest resistance at 5100 and gave back more than half its gains from Monday. The biotechs rallied for +2.5% on Monday and gave back -1% today. With the chip stocks crashing and biotechs weak the Nasdaq did not have a chance. Support is now 5020 and resistance remains 5100.



The Russell 2000 gained +1% on Monday and gave back -0.8% today. That is 5 steps forward and 4 steps back. We are not going to gain any ground unless the small caps show some strength. Resistance at 1230 remains untested and support at 1200 remains critical. The index closed right in the middle of that range at 1215.


I am neutral on market direction for the rest of the week. Our direction will most likely be headline driven and those headlines are yet unknown. With very low volume we could see some dramatic moves but that would require a big headline to provide motive power.

Nearly all the noted analysts are still expecting to see a 2015 close in the 2225-2250 range on the S&P with some higher and some lower. That would be a significant move and it could be violent once the short covering begins as resistance levels are broken. However, forecasting a closing level does not make it happen. We need to trade what the market gives us not what we want to see. However, given the strong rebounds of late I would be a buyer of any decent dips.


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Enter passively, exit aggressively!

Jim Brown

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New Option Plays

This Stock Is Getting Grilled

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Jack In The Box - JACK - close: 85.94 change: -1.46

Stop Loss: 88.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 639 thousand
Entry on August -- at $---.--
Listed on August 18, 2015
Time Frame: Exit PRIOR to earnings in November
New Positions: Yes, see below

Company Description

Trade Description:
Wall Street can be a fickle place. Sometimes a company seems to be doing everything right and their stock gets crushed anyway. That appears to be the case with JACK.

JACK is in the services sector. According to the company, "Jack in the Box Inc., based in San Diego, is a restaurant company that operates and franchises Jack in the Box® restaurants, one of the nation's largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Grill®, a leader in fast-casual dining, with more than 600 restaurants in 47 states, the District of Columbia and Canada."

JACK reported its 2015 Q3 results on August 5th. Earnings rose +17% from a year ago to $0.75 per share. That beat estimates by three cents. Revenues were up +3.2% to $359.5 million, which is essentially in-line with estimates. Their margins improved 270 basis points to 21.8%. Their Jack in the Box business saw comparable store sales of +7.3% versus +2.4% a year ago. Qdoba's comps were +7.7% vs. +7.5% a year ago. That's significantly above rival Chipotle Mexican Grill's comparable store sales, which only rose +4.3%. Management said their catering business for Qdoba saw double-digit gains. They even raised their fiscal year 2015 earnings guidance from a range of $2.90-3.00 a share to $2.97-3.03 per share. Wall Street was estimating $2.99.

In spite of all of these positives JACK's stock price was hammered the next day on August 6th with a plunge from $97 to almost $89 intraday. Now two weeks later shares of JACK are trading down -11% from its pre-earnings high. Why are shares of JACK being punished? That's a really good question. The only issue I can see might be the pace of store openings for their Qdoba brand. Previously JACK was forecasting 50 to 60 new Qdobas this year. In their last earnings report that estimate dropped to 40 to 45 new Qdobas.

At the moment, it doesn't matter what the reason is. JACK has reversed lower and reversed hard. The point & figure chart has turned bearish and is now forecasting at $74.00 price target. Today saw JACK close below technical support at its simple 200-dma for the first time since November 2012. JACK looks like it's about to breakdown under key support near the $85.00 level. Tonight we are suggesting a trigger to buy puts at $84.75.

FYI: JACK will trade ex-dividend on Monday, August 24th. The quarterly dividend should be $0.30.

Trigger @ $84.75

- Suggested Positions -

Buy the DEC $80 PUT (JACK151218P80) current ask $2.90
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

Wal-Mart Disappoints, China Crashes

by James Brown

Click here to email James Brown

Editor's Note:

Retail titan Wal-Mart (WMT) reported earnings today. The company disappointed and lowered their guidance sending their stock to multi-year lows. Meanwhile China's Shanghai market plunged -6% on Tuesday, which undermined confidence in stocks around the globe.


Current Portfolio:


CALL Play Updates

Accenture plc. - ACN - close: 103.86 change: +0.38

Stop Loss: 101.85
Target(s): To Be Determined
Current Option Gain/Loss: -15.6%
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:
08/18/15: Accenture displayed some relative strength with a +0.3% gain while most of the market slipped lower on Tuesday. ACN is on the verge of breaking through short-term resistance near the $104.00 level. Consider wait for a rally past $104.25 before initiating new positions.

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: 106.94 change: -2.11

Stop Loss: 102.85
Target(s): To Be Determined
Current Option Gain/Loss: +1.9%
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:
08/18/15: Ouch! DIS erased yesterday's gains with a -1.9% decline today. The weakness was sparked by a downgrade from Wells Fargo who cut DIS shares from "outperform" to "market perform".

DIS looks like it will test what should be short-term support near the $105.00 level soon. No new positions at this time.

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


General Dynamics - GD - close: 153.28 change: +0.43

Stop Loss: 147.50
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.3 million
Entry on August -- at $---.--
Listed on August 17, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: Yes, see below

Comments:
08/18/15: GD managed to ignore the market's relatively widespread weakness on Tuesday. The stock continued to rally and added +0.28%. Yet the intraday high was only $153.52. Our suggested entry point to buy calls is at $153.55. If GD sees any follow through tomorrow the stock should hit our entry trigger.

Trade Description: August 17, 2015:
Worries over the U.S. sequestration defense cuts are in the rear view mirror for companies like GD. They have adjusted and now they are adding international customers to account for slower defense spending growth from the U.S. The stock has delivered strong gains over the last few years and the relative strength continues this year. The S&P 500 index is up +2.1% year to date. The defense and aerospace ETF (ITA) is up +5.8%. Yet shares of GD are up +11% and just closed at a new all-time high.

GD is considered part of the industrial goods sector. The company is a huge aerospace and defense company. They have four significant segments: aerospace, combat systems, information systems, and marine systems (ships and submarines). The defense industry in the U.S. has been saddled with significant budget cuts due to the 2011 sequestration deal that will shave $500 billion from U.S. defense spending from 2012 through 2021. The industry has managed to thrive in spite of these budget cuts.

GD has beaten Wall Street's earnings estimates several quarters in a row. They have also managed to beat analysts revenue estimates the last three quarters in a row. GD's most recent earnings report was July 29th. Management announced earnings of $2.27 per share, which was 22 cents better than expected. It also represents earnings growth of +44% from a year ago. Revenues were up +5.5% to $7.88 billion, above estimates. Margins improved +1% to 13.7%. Furthermore GD management raised their 2015 earnings guidance to $8.70-8.80 per share, above Wall Street estimates. GD's backlog was $70 billion at the end of the second quarter.

We all know that the world isn't getting any safer and the major defense contractors have been working on boosting their overseas sales just in case the U.S. decides to cut defense spending again. Considering the current state of world affairs with a growing military rival in China, a new cold war brewing with Russia, and an openly hostile ISIS, defense spending should stay healthy.

GD has a very active stock buyback program. They purchased 7.5 million shares last quarter. The big buyback is one reason Goldman Sachs listed GD as one of their top five favorite stocks recently.

Shares of GD have been marching higher since they bottomed in April this year. The point & figure chart is bullish and forecasting a $181.00 target. The last couple of weeks have seen GD consolidating sideways after shares spiked higher on its July 29th earnings report. Today saw GD set a new closing high and it's about to breakout past its intraday high. Tonight we are suggesting a trigger to buy calls at $153.55.

Trigger @ $153.55

- Suggested Positions -

Buy the NOV $160 CALL (GD151120C160)

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


Lennox Intl. - LII - close: 126.73 change: +1.09

Stop Loss: 119.85
Target(s): To Be Determined
Current Option Gain/Loss: +88.6%
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:
08/18/15: LII continues to impress with its ninth gain in a row. Traders bought the dip very quickly this morning at $123.77. More conservative traders will want to consider raising their stop loss and/or taking some money off the table.

No new positions at this time.

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

08/18/15 More conservative traders may want to take some money off the table here with our call option up +88%.
08/15/15 new stop @ 119.85
08/12/15 triggered @ $121.60
Option Format: symbol-year-month-day-call-strike


McCormick & Co. - MKC - close: 84.75 change: -0.25

Stop Loss: 82.45
Target(s): To Be Determined
Current Option Gain/Loss: -22.6%
Average Daily Volume = 608 thousand
Entry on August 14 at $85.05
Listed on August 12, 2015
Time Frame: Exit PRIOR to September earnings expiration
New Positions: see below

Comments:
08/18/15: MKC briefly traded at a new high this morning. The rally didn't last and shares faded to a -0.29% loss, which is in-line with the S&P 500's dip today. Today's high was $85.30. If you're looking for a new entry point then consider waiting for a rally past $85.30.

Trade Description: August 12, 2015:
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.

- Suggested Positions -

Long SEP $85 CALL (MKC150918C85) entry $1.55

08/14/15 triggered @ $85.05
Option Format: symbol-year-month-day-call-strike


Starbucks Corp. - SBUX - close: 57.83 change: +0.09

Stop Loss: 54.40
Target(s): To Be Determined
Current Option Gain/Loss: +52.4%
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:
08/18/15: SBUX eked out another gain today thanks to a gap open higher this morning. This is SBUX's sixth gain in a row. I'm not suggesting new positions at this time.

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: 104.31 change: +0.17

Stop Loss: 99.85
Target(s): To Be Determined
Current Option Gain/Loss: +41.6%
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:
08/18/15: SYK ignored the market's weakness today and shares continued to drift higher. This is a new all-time high for the stock and looks like a breakout past short-term resistance at $104.00.

The simple 20-dma has been support in the past and more conservative traders may want to move their stop near this moving average (currently at $101.80).

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: 69.03 change: -0.11

Stop Loss: 68.20
Target(s): To Be Determined
Current Option Gain/Loss: -37.6%
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:
08/18/15: Shares of TEVA began trading ex-dividend today, which accounts for the gap down this morning. Shares essentially traded sideways in a relatively narrow range.

I am not suggesting new positions at this time.

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

08/15/15 new stop @ 68.20
08/04/15 triggered @ $70.25
Option Format: symbol-year-month-day-call-strike


Tempur Sealy Intl. - TPX - close: 78.13 change: -0.04

Stop Loss: 74.25
Target(s): To Be Determined
Current Option Gain/Loss: -9.4%
Average Daily Volume = 711 thousand
Entry on August 17 at $78.25
Listed on August 15, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments:
08/18/15: TPX spent today's session hovering near its new highs in the $77.80-78.80 region. Today does market the second day in a row that TPX failed near $78.80. Readers may want to wait for rally past this level before initiating new call positions.

Trade Description: August 15, 2015:
TPX is turning out to be one of the better performing stocks this year. The S&P 500 index is only up +1.6% in 2015. Yet TPX has soared +41%. That's because the company has been delivering with its earnings results.

If you are not familiar with TPX they are in the consumer goods sector. According to the company, "Tempur Sealy International, Inc. (TPX) is the world's largest bedding provider. Tempur Sealy International develops, manufactures and markets mattresses, foundations, pillows and other products. The Company's brand portfolio includes many of the most highly recognized brands in the industry, including Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturepedic®, Optimum® and Stearns & Foster®. World headquarters for Tempur Sealy International is in Lexington, KY."

Back in February this year shares of TPX plunged from about $56.00 down to $49.00 when the company warned and lowered their earnings and revenue guidance for all of 2015. This may be a case of setting expectations with an under promise and over deliver strategy.

Looking at TPX's recent earnings results they have beaten Wall Street's estimates on both the top and bottom line the last three quarters in a row. They've actually raised their 2015 earnings guidance the last two quarterly reports.

TPX's most recent report was July 30th. The company's Q2 profit swung from a loss a year ago to a profit of $0.53 per share. That was eight cents better than expected. Their adjusted net income was up +38.8% from a year ago and up +49% on a constant currency basis. Revenues were up +6.9% to $764.4 million, above expectations. Gross margins improved +140 basis points to 38.9%. TPX said they saw double digit sales growth in both North America and internationally (when you back out currency headwinds). Management raised their 2015 earnings guidance from $2.80-3.15 per share to $3.00-3.20.

Shares of TPX surged on this bullish outlook and rallied toward $78.00. The last two weeks have seen TPX consolidate sideways under this new resistance at $78.00. Shares have been relatively resistant to the market's volatile swings in August. If shares can breakout past $78 we could see TPX make a run towards its all-time high near $87.50 set in April 2012. The point & figure chart is more optimistic and forecasting at $95.00 target.

Tonight we are suggesting a trigger to buy calls at $78.25. Plan on exiting prior to TPX's earnings report in late October.

- Suggested Positions -

Long DEC $85 CALL (TPX151218C85) entry $3.20

08/17/15 triggered @ $78.25
Option Format: symbol-year-month-day-call-strike


Under Armour, Inc. - UA - close: 100.36 change: -0.38

Stop Loss: 95.65
Target(s): To Be Determined
Current Option Gain/Loss: +24.1%
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:
08/18/15: UA rallied toward resistance near $102.00 but only made it to $101.68 before failing. The stock settled near round-number support/resistance at the $100 mark.

FYI - UA's upcoming stock split - UA is hosting a special stockholder meeting on August 26th, 2015 to vote on its stock split plans. UA's upcoming split is different than normal because the company is creating a new class of stock - Class C shares. If you hold Class A or Class B shares then you'll receive one new share of Class C. Essentially this is a two-for-one stock split but the new Class C shares will not have any voting rights and will trade under a different stock symbol. Why is UA pursuing this more complicated process for what is in effect a 2:1 split? The answer is CEO Kevin Plank. Class A shares have one vote per share. Class B shares have 10 votes per share. Plank owns most of Class B shares and wants to maintain control of UA.

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: 63.51 change: +0.24

Stop Loss: 65.25
Target(s): To Be Determined
Current Option Gain/Loss: +47.1%
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:
08/18/15: BBBY managed a bounce but the rebound failed near its short-term trend of lower highs (and the $64.00 level).

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: 55.39 change: -0.16

Stop Loss: 56.65
Target(s): To Be Determined
Current Option Gain/Loss: +7.4%
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:
08/18/15: Aside from a brief spike higher this morning, TUP spent Tuesday's session drifting sideways. I am not suggesting new positions at this time.

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: 56.95 change: -0.04

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:
08/18/15: WCC also spent Tuesday's session consolidating sideways inside a relatively narrow range.

No new positions at this time.

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


Wynn Resorts Ltd. - WYNN - close: 90.90 change: -1.01

Stop Loss: 100.15
Target(s): To Be Determined
Current Option Gain/Loss: +10.8%
Average Daily Volume = 2.5 million
Entry on August 14 at $93.40
Listed on August 13, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
08/18/15: WYNN continued to sink and underperformed the broader market with a -1.0% decline. If you're looking for a new entry point you might want to wait for a breakdown below $90.00.

Trade Description: August 13, 2015:
Casino stocks have been a bad bet this year. CZR and LVS are both down for the year. MGM seems to be an exception with a very minor gain. Yet one of the biggest losers is WYNN. Shares of WYNN are down -36% in 2015. The bear market started last year. Shares of WYNN peaked just below $250.00 in early 2014 and now they're down -60% from the highs. The catalyst for this dramatic decline is a plunge in gaming revenues from Macau.

WYNN is in the services sector. According to the company, "Wynn Resorts, Limited, owns 72.2% of Wynn Macau, Limited (www.wynnmacaulimited.com), which operates a casino hotel resort property in the Macau Special Administrative Region of the People's Republic of China. The Company also owns and operates a casino hotel resort property in Las Vegas, Nevada.

Our Macau resort is a resort destination casino with two luxury hotel towers (Wynn Macau and Encore) with a total of 1,008 spacious rooms and suites, approximately 280,000 square feet of casino space, casual and fine dining in eight restaurants, approximately 57,000 square feet of retail space, and recreation and leisure facilities, including two health clubs and spas and a pool.

Our Las Vegas operations (Wynn Las Vegas and Encore) feature two luxury hotel towers with a total of 4,748 spacious hotel rooms, suites and villas, approximately 186,000 square feet of casino space, 34 food and beverage outlets featuring signature chefs, an on-site 18-hole golf course, meeting space, a Ferrari and Maserati dealership, approximately 96,000 square feet of retail space, two showrooms, three nightclubs and a beach club."

The problems started in June 2014. China launched a nationwide crackdown on corruption. This had a huge impact on how many government officials decided to vacation and gamble in Macau. The region also saw a drop in other high rollers not wanting to be seen tossing money around. Plus the Chinese government enacted harsh no-smoking rules in Macau. There was a direct impact on gambling revenues that is still being felt today.

WYNN reported its 2015 Q1 results on April 28th. Analysts were expecting a profit of $1.33 per share on revenues of $1.17 billion. The company delivered a profit of $0.70 (big miss) and revenues plunged -27.8% to $1.09 billion. Its Macau revenues were down -37.7%. Management also announced they were reducing their quarterly dividend.

We looked at playing WYNN as a bearish candidate back in June after several bearish analyst calls on the gambling companies with exposure to Macau. A Sterne Agee analyst noted that table-only gross gaming revenues in Macau were down -46% from a year ago in the first week of June. They estimate that June 2015 will see Macau gambling revenues fall -33% to -38%. June is on track to be the 13th monthly decline in gambling revenues and the tenth month in a row of double-digit declines.

A Susquehanna Financial Group analyst also warned that the region could suffer further declines. There are rumors of an complete smoking ban and there seems to be no let up on the government's anti-corruption efforts. Meanwhile a Wells Fargo analyst is forecasting June gambling revenues in Macau to plunged -30% to -40% to about $2 billion. This would be the lowest monthly total in more than four years.

The stock saw a big bounce in early July on an upgrade but the rally didn't last. WYNN reported its Q2 results on July 29th. Analysts were forecasting $0.97 per share on revenues of $1.07 billion. WYNN missed both estimates with a profit of $0.74 as revenues plunged -26% to $1.04 billion. Their Macau business saw revenues drop -35.8%.

Believe it or not but shares of WYNN saw a relief rally on this earnings news. Maybe investors were expecting even worse numbers. Yet the rally failed the very next day. That's because the situation in Macau hasn't changed. July was the 14th month in a row of falling revenues for the casino industry.

The recent headlines regarding the Chinese government's devaluation of their currency (the yuan, a.k.a. the renminbi) could be a clue that their economy is slowing down faster than expected. That's bad news for the casino business. If the Chinese economy is retreating it would seem unreasonable to expect a recovery in the gambling business.

Shares of WYNN have plunged to key support in the $93.60-94.00 region. We are suggesting a trigger to buy puts at $93.40. A breakdown to new lows could spark the next leg lower after weeks of consolidating sideways.

Traders should note that WYNN can be a volatile stock. The most recent data listed short interest at 13.7% of the relatively small 80.8 million share float. Currently the point & figure chart is bearish and forecasting an $85.00 target.

- Suggested Positions -

Long SEP $90 PUT (WYNN150918P90) entry $3.25

08/14/15 triggered @ $93.40
Option Format: symbol-year-month-day-call-strike