Option Investor
Newsletter

Daily Newsletter, Wednesday, 9/16/2015

Table of Contents

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

Market Wrap

Pre-FOMC Rally

by Keene Little

Click here to email Keene Little
For some reason the stock market tends to rally into the FOMC announcements and some are anticipating a post-FOMC rally following the first rate increase since 2006. The question now is whether the market is setting itself up for a buy the rumor, sell the news reaction on Thursday.

Today's Market Stats

It's been documented, even by the Fed, that the stock market tends to rise into the FOMC announcement, which is what we're seeing this week. There's also a common pattern for the market to rally, even if only for a few days, following the first rate increase, which apparently many traders are betting on. There's also the fear factor from the shorts, who do not want to be part of a short squeeze in the event of a rally following the FOMC announcement and their covering could be fueling this week's rally. Short covering could of course leave the market vulnerable to a stronger post-FOMC selloff since sellers of long positions would be joined by all those who want to be short piling back in. It could be an interesting time following Thursday's announcement.

The only economic report of importance this morning, particularly for the Fed and their "data" dependency for making rate decisions, was the CPI data for August. It came in as expected -- -0.1% for CPI (vs. +0.1% in July) and +0.1% for core CPI (the same as July). It was market neutral and futures barely reacted to the pre-market report.

We are at an interesting point in the market with the Fed. Up until recently we've seen the market react negatively to any hint of a rate increase, primarily because the market has been afraid it can't stand on its own two feet without the Fed's help. But with the constant barrage of Fed heads saying they need to start the ball moving toward higher rates, that it will be minimal, etc., the market has essentially accepted it and wants to get it over with and move on. Removing the uncertainty of it could get the market unstuck and start another rally leg.

But the other side of the argument is still there -- if the Fed becomes less accommodative it could start to negatively affect the market. Since the Fed stopped purchasing $85B/month in Treasuries, in October 2014, we've seen the market trade sideways. Prior to the strong selloff in August the DOW was where it was in September 2014 and is currently negative a year later. If the Fed now starts raising interest rates it could put a further damper on the economy (although it's hard to see how a 0.125% or 0.25% rate increase could have much effect). So the bottom line is we really don't have a clue how the market will react to Thursday's rate decision or what Yellen might say after the announcement, no matter which decision they make.

So we stick with the charts and make our best guess based on what we see there. At least we can determine where we see an acceptable risk:reward setup, take the trade and then manage it appropriately, which for most traders means where to place your stop (where the market proves your assumption is wrong and to then get out of the way). We've got some interesting setups as of Wednesday's close and what happens on Thursday could finally answer some short-term direction questions.

The DOW's weekly chart shows it has bounced back up near its broken trend line along the highs from 1971-1972-1987. The DOW had climbed above this line in March 2013 and then used the line for support multiple times, the last being the October 2014 low. This is one reason why the break below the October 2014 low, into the August 24th low, was so important -- it confirmed the break of this important long-term trend line. The line is currently near 16800 so from today's high at 16756 there's still a small upside potential (and of course the line marks a general price area). The bulls need to get the DOW above 17100 in order to make it look like something more bullish than just a bounce correction to the decline. The bears need price back below the August 30th low near 15980 in order to confirm the bounce off the August 24th low is just a correction to the decline.

Dow Industrials, INDU, Weekly chart

Anyone who knows how to draw lines on a chart has been tracking a triangle pattern for the DOW's bounce off the August 24th low, which is what I too have been tracking and is shown on the daily chart below. Today's rally, especially with the push higher in the final 30 minutes (short covering?), pushed the DOW above the top of the ascending triangle, near 16670. A close above 16670 left it bullish but only if the bulls can hold it above that level on Thursday otherwise it will look like a 1-day head-fake break. With so many watching this pattern, short covering following the rally above 16670 is a very likely possibility and it might not hold tomorrow. I show a breakdown from here because the triangle pattern, if left intact, is a bearish continuation pattern following the selloff. But a failed pattern tends to fail hard so a continuation of the rally should have bears backing away. A rally could run into trouble at the downtrend line from July-August, near 16995, price-level resistance near 17067, and then its 50-dma, near 17158 on Thursday.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,100
- bearish below 15,980

The ascending triangle pattern is shown more closely on the 60-min chart below, including today's pop above the top of the triangle. These patterns often finish with a small throw-over, which could be what today's finish was. An immediate drop back down is needed by the bears otherwise we could see a continuation higher into next week, especially if a pullback finds support at the top of the triangle (as it did late today), shown with the green dashed line.

Dow Industrials, INDU, 60-min chart

SPX has the same triangle, the top of which is near 1994 and that too was exceeded with today's close at 1995. It stays bullish above 1994 but bearish below 1950. The pattern would be confirmed bearish below the September 1st low near 1903. The bulls have a shot here though, as I'll show on the 60-min chart further below. Notice MACD has bounced back up to the zero line from deeply oversold. A rollover from the zero line here would create a strong sell signal, something I'll be watching carefully over the next few days.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1994
- bearish below 1903

It's possible the sideways triangle since the August 28th high is a b-wave triangle in what will become a larger A-B-C bounce off the August 24th low. As depicted on the 60-min chart below, a drop back down to about 1965 could set up a strong rally to 2090-2100 before reversing back down. That kind of move would completely whip both sides and perversely is probably the reason we'll see something like this (wink). Either that or a deeper decline, maybe 1900, to complete the b-wave before the strong c-wave rally and then a stronger decline. The reason for showing the different pattern on the SPX 60-min chart vs. the DOW's 60-min chart is to make you aware that we could see some big moves over the next week but they might be reversed hard. I can only show the possible moves and then wait for price to show us which one is more likely. This is a tough spot for a trader to take a position and it's one reason why it could be a good idea to say "I'll pass" and wait for the next opportunity.

S&P 500, SPX, 60-min chart

With today's high near 4388 NDX made it up to its broken 200-dma, at 4384.69, and it closed its August 21st gap down, at 4385.13. It could turn into a back-test that will be followed by a reversal back down and a red candle for Thursday would leave a bearish play against today's or tomorrow's high. But as long as NDX stays above 4385 it will stay bullish.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4385
- bearish below 4121

The RUT drove right up to resistance today at 1175, which is where it closed. Its downtrend line from July-August and its broken uptrend line from October 2011 - October 2014 cross near 1175 today (arithmetic price scale) so it would obviously be more bullish above that level. Interestingly, today's potential back-test of the broken 2011-2014 uptrend line is essentially the 3rd one since the August 26th low, which sets up the potential for a 3-drives-to-a-high topping pattern. The bounce off its August low looks like a choppy correction to the decline rather than something more bullish. That can change quickly but at the moment, what I see on the chart is a bounce pattern to resistance begging to be shorted.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1175
- bearish below 1124

Treasury yields have spiked up this week and it's looking like the bond market is telling us the Fed is going to raise rates. But from a chart perspective TNX (10-year yield) could be setting up a reversal back down, which says the Fed will not raise rates. It has rallied up to its broken uptrend line from January-April, currently near 2.3% (today's high was 2.296%). Also, the bounce off the August 24th low is a 3-wave move and the 2nd leg of the bounce is 62% of the 1st leg at the same 2.3%. Disregarding the FOMC announcement, this setup is an "automatic" short. A down day on Thursday, following today's back-test and small doji at resistance, would be a sell signal. But a continuation of the rally, especially above 2.32% would be bullish. Since the stock market and Treasury yields are more often in synch than not, it will be important to watch bonds over the next few days.

10-year Yield, TNX, Daily chart

There's not much to add for the dollar this week since it has barely moved. If the Fed raises rates it would likely rally the dollar, in which case watch for resistance at its downtrend line from March-August, near 97.80. If the dollar drops I'll be watching for support near its 50-week MA, near 94, and the top of its parallel up-channel form 2008-2011, near 93.80, which it had climbed above in January and is now using as support.

U.S. Dollar contract, DX, Weekly chart

Like the dollar, gold hasn't moved much this week and is currently trapped between price-level resistance near 1142 and Fib support (50% retracement of 2001-2011 rally) at 1090. I can see the potential for a rally up to about 1195 (two equal leg up from its July 24th low) to finish a bounce correction before continuing lower but a drop below its July 24th low at 1072.30 would confirm the bearish trend remains intact, which is what I'm currently thinking.

Gold continuous contract, GC, Weekly chart

While the stock market indexes have been consolidating in ascending triangle patterns oils was consolidating in a descending triangle (flat bottom, declining tops) and broke to the upside yesterday. It's looking like the bounce off its August 24th low should continue, which is what I've been projecting for a sideways triangle consolidation pattern into next year. A rally in oil is supportive of a rally in stocks so this one is a heads up to bears to be careful.

Oil continuous contract, CL, Weekly chart

Tomorrow's economic reports include housing starts and permits for August, which are expected to be roughly the same as July. After the opening bell we'll get the Philly Fed report for September, which is expected to show a slowdown from August. The big report will of course be the FOMC announcement at 2:00 PM.

Economic reports and Summary

Conclusion

While we can't know how the market will react to the FOMC announcement we can at least watch for some clues from the charts and the key levels I've identified with the chart patterns. From a time-cycle perspective, September 16/17 is a turn window based on a 40-day cycle that has marked previous turns. Rallying into the current window suggests a reversal back down and a strong selloff on Thursday into Friday would suggest. But as shown on the charts, we have no clear setups at the moment, except for a short play if the market reverses back down in the morning. The trouble is holding a position over the FOMC announcement, always a dicey proposition.

The bottom line is we could see some big price swings in both directions before the market settles on a direction. This could be exacerbated by opex and therefore caution is required if you step into the waters tomorrow and Friday. As traders we try to catch the turns and play the momentum but it's been a choppy mess lately and that might not change this week. Flat is a position while waiting for a direction to better identify itself and while I lean bearish this evening, this market has a nasty habit of showing me why I'm wrong. We'll soon find out.

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

Going For The High Score

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Electronic Arts - EA - close: 70.28 change: +0.90

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.1 million
Entry on September -- at $---.--
Listed on September 16, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: Yes, see below

Company Description

Trade Description:
Believe it or not but consumers spent more money on video games than movies. One of the biggest video game makers out there is EA.

They are considered part of the technology sector. According to the company, "Electronic Arts (EA) is a global leader in digital interactive entertainment. The Company delivers games, content and online services for Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 300 million registered players around the world. In fiscal year 2015, EA posted GAAP net revenue of $4.5 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality blockbuster brands such as The Sims®, Madden NFL, EA SPORTS® FIFA, Battlefield®, Dragon Age® and Plants vs. Zombies®."

Earnings have managed to beat Wall Street estimates even as revenues declined in the last couple of quarters. EA reported its 2015 Q4 results on May 5th. Results of $0.39 a share beat estimates by 13 cents. Revenues were down -2% to $896 million but that beat expectations by a wide margin. Management announced a new $1 billion stock buy back program that will last between now and May 2017.

With the May Q4 report the company lowered its Q1 guidance. Three months later EA beat this lowered forecast. Earnings were $0.15 a share. That was 13 cents better than expected. Revenues fell -10% to $693 million but still ahead of analysts' expectations. The company lowered its Q2 guidance but raised its full year 2016 estimates.

Bigger picture EA has a lot of new products coming out in the next few months that should drive sales. One of them is a Star Wars game timed to hit the shelves ahead of the movie debut in December.

Technically the long-term trend is higher. Shares did suffer a painful $16 drop from its August high to August low but has already recovered half of it. Wall Street is bullish with new price target upgrades in the $82-85 region. The point & figure chart is bullish and forecasting at $82 target.

Today EA sits just below resistance at its simple 50-dma (near $70.50). We are suggesting a trigger to buy calls at $70.75.

Trigger @ $70.75

- Suggested Positions -

Buy the DEC $75 CALL (EA151218C75) current ask $2.97
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

The Pre-FOMC Run Continues

by James Brown

Click here to email James Brown

Editor's Note:

Depending on who you ask the market rallied today because of the bounce in crude oil or because investors do not think the Fed will raise rates tomorrow. Wall Street is highly divided on if the Fed will increase rates on Thursday afternoon.

The most recent poll showed an even 50:50 split on a rate hike tomorrow.

STZ and VMC hit our bullish entry triggers.
WYNN hit our stop loss.


Current Portfolio:


CALL Play Updates

Avago Technologies - AVGO - close: 131.49 change: -2.47

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -18.9%
Average Daily Volume = 3.8 million
Entry on September 14 at $132.50
Listed on September 12, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/16/15: The relative strength AVGO showed yesterday just evaporated. The broader market continued to climb but AVGO fell -1.8%. Traders did buy the dip twice near short-term support at $130.00.

The midday high was about $132.20 so we could use a rally above this level as a new entry point. However, I would hesitate to launch positions ahead of the FOMC meeting decision.

Trade Description: September 12, 2015:
It's been a while since we traded AVGO. The stock has seen some big moves this year. Shares peaked near $150 on June 1st and then spiked down toward $100 during the market's correction on August 24th.

If you're not familiar with AVGO they are in the technology sector. The company is part of the semiconductor industry. They make chips that speed up mobile phones while reducing interference. According to company marketing materials, "Avago Technologies is a leading designer, developer and global supplier of a broad range of analog, digital, mixed signal and optoelectronics components and subsystems with a focus in III-V compound semiconductor design and processing. Backed by an extensive portfolio of intellectual property, Avago products serve four primary target markets: wireless communications, wired infrastructure, enterprise storage, and industrial and other."

AVGO is probably best known as a part supplier to Apple Inc. (AAPL). AAPL's huge success with the iPhone 6 and 6+ has been a blessing for AVGO. Earnings and revenue growth is seeing significant momentum. Revenues were up +137% from a year ago during Q2 (reported May 28th) and up +36% during Q3 (reported Aug. 26th).

Another key event happened on May 28th. AVGO announced they were buying rival Broadcom (BRCM) for $37 billion. Wall Street applauded the news and shares of AVGO rallied on the announcement. The combined company will have revenues of $15 billion a year. The M&A news also sparked a handful of new price targets on AVGO in the $160-170-180 region. Currently the point & figure chart is bullish and forecasting at $185 target.

As a high-profile, momentum stock shares of AVGO are volatile. I am suggesting traders start with small positions to limit risk. The stock is breaking out through significant resistance in the $125-130 region. Friday's display of relative strength (+1.8%) is a good sign and the first close above $130.00 in about two months. The intraday high on Friday was $131.22. We are suggesting a trigger to buy calls at $131.55. I'm listing the October calls. You may want to consider January calls but we'll exit ahead of October option expiration.

*small positions to limit risk* - Suggested Positions -

Long OCT $140 CALL (AVGO151016C140) entry $3.70

09/14/15 triggered on gap open at $132.50, suggested trigger was $131.55
Option Format: symbol-year-month-day-call-strike


The Walt Disney Co. - DIS - close: 103.96 change: +0.53

Stop Loss: None. No stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -10.7%
Average Daily Volume = 8.5 million
Entry on August 27 at $101.35
Listed on August 24, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/16/15: DIS inched higher with a +0.5% gain on Wednesday. The stock is just treading water in the $100-105 zone until the Fed decision tomorrow.

The simple 200-dma is at $105.40. I would be tempted to buy calls on a rally past this moving average but only after the Fed decision tomorrow.

Trade Description: August 24, 2015:
We are bringing DIS back. The sell-off from its August high has been extreme. At its low today near $90.00 DIS was down -26% from its high. The retreat offers a lot of opportunity. Jump to the bottom of this play update for our entry point strategy.

Disney reported earnings on August 4th and beat the street with earnings of $1.45 compared to estimates for $1.42. The very next day shares fell -$11.00 to $110. The sell-off in DIS stock has continued thanks to a global market meltdown.

We think this pullback in the stock is way overdone. 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"

The four-week drop in DIS' stock has sent shares back to their 2015 lows. During the panic this morning investors bought the dip at round-number support near $90.00 (FYI: the February 2015 low was $90.06). When the market bounced DIS rallied more than +10% only to stall at round-number resistance at $100.00. DIS closed right in the middle of this $90-100 trading range today.

We want to be ready no matter what direction DIS moves. That's why we are listing two different entry point strategies.

Our first plan is to buy calls on a dip at $91.00 should DIS dip toward today's low. The second entry trigger is to buy calls on a breakout at $101.00 since the $100 level was resistance.

We are not listing a stop loss tonight. The market volatility has been extreme. The intraday moves in the market are a little ridiculous and nearly impossible to trade around if you're not glued to your screen and day trading. You can manage your risk by limiting your position size. We'll add a stop loss once the dust settles, likely in a couple of days.

- Suggested Positions -

Long OCT $105 CALL (DIS151016C105) entry $2.52

09/12/15 a breakout past resistance near $105 could be a new bullish entry point.
09/09/15 caution - DIS produced a bearish engulfing candlestick reversal pattern
08/27/15 triggered on gap open at $101.35, suggested entry was $101.00
Option Format: symbol-year-month-day-call-strike


Facebook, Inc. - FB - close: 93.45 change: +0.55

Stop Loss: No stop at the moment (See August 24th update)
Target(s): To Be Determined
Current Option Gain/Loss: +385.7%
Average Daily Volume = 27.3 million
Entry on August 24 at $77.03
Listed on August 20, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/16/15: FB continues to drift higher and added another +0.59% today.

Tomorrow is a wildcard. The market and thus FB could rally on the Fed decision or it could plummet on the Fed decision. I don't know which way it will go. Thus I am reiterating my comments from yesterday that more conservative traders will want to seriously consider taking some money off the table here just in case FB does sell-off.

Trade Description:
Facebook needs no introduction. It is the largest social media platform on the planet. As of June 30th, 2015 the company reported 1.49 billion monthly active users and 968 million daily active users. If FB were a country that makes them the most populous country on the planet. China has 1.35 billion while India has 1.25 billion people.

Earlier this year (March) the company announced a new mobile payment service through FB's messenger app. The new service will compete with similar programs through PayPal, Apple Pay, and Google Wallet.

Meanwhile business at FB is great. According to IBD, FB's Q4 earnings, announced in January, were up +69% from a year ago. Revenues were up +49%. The company released their Q1 results on April 22nd. Earnings were up +20% to $0.42 per share, which beat estimates. Revenues were up +41.6% to $3.54 billion in the first quarter.

FB's Q2 results, announced July 29th, were also better than expected. Earnings were $0.50 per share, which was three cents above estimates. Revenues surged +39% to $4.04 billion, above expectations. Daily active users were up +17%. Mobile daily active users were up +29%. Monthly actives were up +13%. Wall Street expects income to surge next year with +12% profit growth in 2015 but +32% profit growth in 2016.

FB continues to see growth among its niche properties. The company bought Instagram for $1 billion in 2012. Last late year Instagram surpassed Twitter with more than 300 million active users. FB is also a dominant player in the messenger industry with more than 600 million users on WhatsApp and 145 million users on Facebook Messenger.

FB has not yet started to truly monetize its WhatsApp and Messenger properties. It's just now starting to include ads in Instagram. Eventually, with audiences this big, FB will be able to generate a lot of cash through additional advertising. On the subject of Instagram advertising, FB just released the advertising API for the photo-sharing service in August 2015. The API or application programming interface will allow third-party marketers to plug into the system to buy advertising. Instagram could soon rival Google and Twitter for the online ad market. According to EMarketer, Instagram will surpass Google and Twitter for U.S. mobile display ad revenue by 2017.

Since we are talking about advertising, this year has seen FB jump into the video ad market with both feet and it's off to a strong start. FB claims that it's already up to four billion video views a day. They had 315 billion video views in Q1 2015. That's pretty significant. YouTube had 756 billion video views in Q1 but YouTube has been around for ten years (FYI: YouTube is owned by Google). FB has only recently focused on video.

Wall Street is growing more optimistic as FB develops its blooming video ad business, its Instagram business, and messaging properties. In the last several weeks the stock has seen a number of price target upgrades. Bank of America upped their FB price target from $95 to $105. Cantor Fitzergerald upped theirs to $100. Brean Capital raised theirs to $108. Piper Jaffray upgraded their FB target to $120.

After surging to new highs in mid July shares of FB had been consolidating sideways in the $92-99 zone. The stock broke down through the bottom of that trading range today with a -4.98% plunge toward technical support at the simple 50-dma. The broader market looks very vulnerable right now with the S&P 500, the NASDAQ composite, and the small cap Russell 2000 all piercing key support levels with today's sell-off. If this market weakness continues we want to take advantage of it.

Stocks tend to overreact to big market moves, especially to the downside. FB is no exception. When traders panic they sell everything. We want to be ready to buy FB when it nears support. Prior resistance near $85-86 should be new support. Tonight we are suggesting a buy-the-dip trigger to buy FB calls at $85.50. If triggered we'll start with a stop at $81.40, just below the simple 200-dma.

- Suggested Positions -

Long OCT $90 CALL (FB151016C90) entry $1.05

09/16/15 More conservative traders will want to consider taking some money off the table before the Fed decision tomorrow afternoon
09/05/15 FB recently announced their WhatsApp service has hit 900 million people
08/27/15 Zuckerberg announced that FB hit a new milestone - one billion people used FB in a single day.
08/24/15 Strategy Update = remove the stop loss. Expect more volatility
08/24/15 Trade opens. FB gapped down at $77.03.
08/22/15 Adjusted entry point. FB missed our buy-the-dip trigger at $85.50 by a few cents on Friday. We want to buy calls at the opening bell on Monday morning, August 24th.
Option Format: symbol-year-month-day-call-strike


iShares Russell 2000 ETF - IWM - close: 116.94 change: +1.00

Stop Loss: No stop at the moment (See August 24th update)
Target(s): To Be Determined
Current Option Gain/Loss: +17.8%
Average Daily Volume = 31 million
Entry on August 25 at $114.05
Listed on August 22, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/16/15: It was a good day for the IWM. Shares broke through short-term resistance near $116.00 and closed near their highs for the day. Unfortunately there is still a lot of overhead resistance to work through. The $120 area could be a real challenge.

No new positions at this time.

Trade Description: August 22, 2015:
Stocks are getting crushed. Worries about a slowing Chinese economy worsened this week. This China concern combined with uncertainty about the Federal Reserve raising rates was enough of a catalyst to spark a serious sell-off. The U.S. market just experienced its worst weekly decline in more than four years.

Friday's action looks like a capitulation sell-off. Volume soared. It was the heaviest volume day of the year. Most of that volume was down volume. The S&P 500 posted zero new highs on Friday. All ten sectors were in the red. The two-day (Thursday-Friday) decline has pushed all of the major U.S. indices into negative territory for 2015 (although the NASDAQ composite is only -0.6% year to date).

The Dow Jones Industrial Average and the NASDAQ-100 index are both in correction territory, which is a decline of more than -10% from its highs. The small cap Russell 2000 index also hit correction territory on Friday. The tone on Friday was fearful with the volatility index (VIX), a.k.a. the fear gauge, soaring +46% to a new high for 2015. One CNBC commentator described the action on Friday as investors just "puking" up stocks to get out of the market.

According to 18th century British nobleman Baron Rothschild, "The time to buy is when there's blood in the streets." We think Friday's market sell-off qualifies as a "bloody" day for stocks.

Did you notice that the Dow Industrials, the NASDAQ composite, and the S&P 500 were all down -3.1% (or worse) but the small cap Russell 2000 index was only down -1.3% on Friday? This relative strength is a reflection of investors' fears. If China is the bogeyman then no one wants big multi-nationals that do a lot of business overseas. Small cap companies tend to be more U.S. focused. They do less business overseas and should have less exposure to China or a rising U.S. dollar.

Tonight we are suggesting a bullish trade to buy calls on the IWM, which is the small cap Russell 2000 ETF. The afternoon peak on Friday was $116.66 for the IWM. We are suggesting a trigger to buy calls if the IWM trades at $116.85 or higher.

Please note that this is just a trade. We are not calling a bottom for the stock market. On a short-term basis stocks are very oversold and due for a bounce. The big cap indices (S&P 500, NASDAQ, and Dow Industrials) all closed on their low for the day. Normally that's a bearish indication for the next trading day. There is a very good chance that stocks see another spike lower on Monday morning before bouncing. That's one reason why we are suggesting a trigger to buy IWM calls on a bounce.

- Suggested Positions -

Long NOV $115 CALL (IWM151120C115) entry $4.15

08/25/15 Trade opened this morning. The IWM gapped higher at $114.05
08/24/15 Adjust Entry Strategy = new entry = buy IWM calls at the opening bell tomorrow (Tuesday, August 25th). No stop loss at the moment.
Previous entry trigger was $116.85
08/24/15 Adjust option strike = use the November $115 calls
Option Format: symbol-year-month-day-call-strike


Martin Marietta Materials, Inc. - MLM - close: 176.51 change: +1.42

Stop Loss: None, no stop at this time
Target(s): To Be Determined
Current Option Gain/Loss: +14.3%
Average Daily Volume = 855 thousand
Entry on September 03 at $170.46
Listed on September 2, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/16/15: MLM briefly tagged a new all-time high today. Shares rallied up and challenged their prior high from August. Cross your fingers that the rally continues tomorrow. A reversal here will look like a bearish double top pattern. Traders may want to add a stop loss.

No new positions at this time.

Trade Description: September 2, 2015:
Industrial sector stocks have not had a good year. The IYJ industrial ETF is down -7.4%. The XLI industrial ETF is down -9.7% year to date. Yet shares of MLM are up +52.7% for 2015. (for the record the Dow Jones Industrial Average is down -8.3%).

If you're not familiar with MLM, here is a brief description, "Martin Marietta, an American-based company and a member of the S&P 500 Index, is a leading supplier of aggregates and heavy building materials, with operations spanning 32 states, Canada and the Caribbean. Dedicated teams at Martin Marietta supply the resources for the roads, sidewalks and foundations on which we live. Martin Marietta's Magnesia Specialties business provides a full range of magnesium oxide, magnesium hydroxide and dolomitic lime products."

If you look at a year-to-date chart of MLM then you probably noticed the huge rally in MLM back in February. That was a reaction to its 2014 Q4 results. Earnings were above expectations and revenues soared +57% from a year ago to $856 million, which was also above analysts' estimates.

The company also announced a 20 million share stock buyback program back in February. Now 20 million shares may not sound like much but MLM only has 67.48 million shares outstanding.

The stock spent the following eight weeks slowly drifting lower. It finally found support in the $135.00 area. Then suddenly MLM found its mojo again when the company reported its 2015 Q1 results on April 30th. The funny thing is MLM actually missed Wall Street estimates. Analysts were expecting a profit of $0.09-0.12 a share for the first quarter. MLM only delivered $0.07 but it was better than a loss of $0.47 a year ago. 2015 Q1 was the first time MLM had reported a profit in the first quarter since 2008.

MLM said revenues rose +61% from a year ago to $691.4 million. That too was below expectations but traders didn't care. Management said their margins improved 500 basis points. Business was strong enough they were able to raise prices +11%.

MLM's Q2 results, announced on August 4th, were not quite as good. The company missed estimates. Wall Street was expecting a profit of $1.60 per share on revenues of $1.01 billion. MLM only delivered $1.22 per share (relatively flat from a year ago) as revenues were up +37.7% to $921 million. Management did say their gross margins improved 350 basis points. They also provided a relatively optimistic outlook for the rest of 2015 and 2016 albeit without significantly raising their estimates.

The company said this year was the second wettest year in the last 100 years. A lot of companies postponed construction projects, which delayed sales for MLM. They expect this pent up demand to return.

Investors must have been in a forgiving mood because shares of MLM soared following this Q2 report. The stock delivered a string of all-time highs before collapsing during the stock market's recent correction. Shares fell from $175.00 to $$143.16 (at its intraday low on Aug. 24th) in just four days. That's a -$32.00 drop (a -18% correction).

Since that market correction MLM has rebounded back above previous resistance at $156 and $160. Shares were showing relative strength today with a +2.95% gain and a close above all its key moving averages. The point & figure chart has gone from bullish to bearish and back to bullish with a $197.00 target. The next hurdle could be potential round-number resistance at $170.00. Tonight we are suggesting a trigger to buy calls at $170.25.

- Suggested Positions -

Long OCT $175 CALL (mlm151016C175) entry $5.60

09/03/15 triggered on intraday gap at $170.46, suggested entry was $170.25
Option Format: symbol-year-month-day-call-strike


Noble Energy, Inc. - NBL - close: 33.25 change: +1.70

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: + 0.0%
Average Daily Volume = 5.7 million
Entry on September 08 at $31.32
Listed on September 5, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/16/15: Oil and energy stocks were in rally mode thanks to a big bounce in crude oil today. NBL surged +5.38% and looks like it might have broken one of its bearish trend lines of lower highs. It definitely broke through short-term resistance near $32.00.

Trade Description: September 5, 2015:
Unless you have been living under a rock the last several months then you already know that energy stocks have been crushed thanks to a plunge in crude oil prices. One side effect of this crash in energy stock is the potential for mergers and acquisitions as companies try and buy growth and assets while valuations are depressed.

According to the company, "Noble Energy (NBL) is a global independent oil and natural gas exploration and production company, with proved reserves of 1.7 billion barrels of oil equivalent at year-end 2014 (pro forma for the Rosetta acquisition). The company's diverse resource base includes core positions in four premier unconventional U.S. onshore plays - the DJ Basin, Eagle Ford Shale, Delaware Basin, and Marcellus Shale - and offshore in the U.S. Gulf of Mexico, Eastern Mediterranean and West Africa."

The bear market in oil stocks has pushed NBL down to five-year lows. Shares are hovering near round-number support in the $30.00 region. On Friday market watchers noted that someone bought 18,000 call options at the September $30 strike. That's rather unusual since there were only 863 contracts of open interest at that strike price. That got people talking that maybe there is a deal in NBL's future.

We are adding NBL as a very speculative bullish play. Tonight we are suggesting traders buy calls (October $32.50 strike) at the opening bell on Tuesday morning. However, we do not want to initiate positions if shares of NBL gap open more than $1.00 higher (or lower) on Tuesday.

- Suggested Positions -

Long OCT $32.50 CALL (NBL151016C32.5) entry $2.10

09/05/15 trade begins. NBL opens at $31.32
Option Format: symbol-year-month-day-call-strike


Post Holdings, Inc. - POST - close: 68.80 change: +0.75

Stop Loss: 62.40
Target(s): To Be Determined
Current Option Gain/Loss: -3.3%
Average Daily Volume = 1.0 million
Entry on September 03 at $66.55
Listed on August 29, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/16/15: The rally in POST continued with shares hitting another all-time high. Unfortunately the option really isn't participating in the stock's rally, which is obviously frustrating for us. Eventually the option will catch up to the stock.

After the closing bell tonight POST made headlines with their decision to permanently close its Dymatize plant in Farmers Branch, Texas. The company said there were unable to solve the operational quality issues and would transfer the production to third-party facilities that POST has co-manufacturing agreements with. Dymatize is a supplement brand that includes protein powders and nutritional bars. Tonight's decision will result in a $9.2 million write down of unsalable inventory plus additional money for severance for laid off workers and other expenses for closing the plant. This expense will likely show up in POST's 2015 Q4 and fiscal 2016 results.

No new positions in POST at this time.

Trade Description: August 29, 2015:
Shares of ready-to-eat cereal maker POST have shown surprising strength this month and the last few days during the market turmoil. POST is also poised to be one of the better performing stocks this year with a +57% gain year to date.

POST is in the consumer goods sector. According to the company, "Post Holdings, Inc., headquartered in St. Louis, Missouri, is a consumer packaged goods holding company operating in the center-of-the-store, private label, refrigerated and active nutrition food categories. Through its Post Consumer Brands business, Post is a leader in the ready-to-eat cereal category and offers a broad portfolio that includes recognized brands such as Honey Bunches of Oats(R), Pebbles(TM), Great Grains(R), Grape-Nuts(R), Honeycomb(R), Frosted Mini Spooners(R), Golden Puffs(R), Cinnamon Toasters(R), Fruity Dyno-Bites(R), Cocoa Dyno-Bites(R), Berry Colossal Crunch(R) and Malt-O-Meal(R) hot wheat cereal.

Post's Michael Foods Group supplies value-added egg products, refrigerated potato products, cheese and other dairy case products and dry pasta products to the foodservice, food ingredient and private label retail channels and markets retail brands including All Whites(R), Better'n Eggs(R), Simply Potatoes(R) and Crystal Farms(R). Post's active nutrition platform aids consumers in adopting healthier lifestyles through brands such as PowerBar(R), Premier Protein(R) and Dymatize(R). Post's Private Brands Group manufactures private label peanut butter and other nut butters, dried fruits, baking and snacking nuts, cereal and granola."

The earnings picture has improved significantly. Back in February 2015 POST reported its Q1 results that missed estimates by a wide margin. Yet the last couple of quarters the company has seen earnings and revenues soar. Their Q2 report said revenues were up +140%. Their Q3 results, announced on August 6th, reported revenue growth of +91%. Earnings were $0.27 per share, which was $0.20 better than expected. Management raised their full year guidance from $585-610 million up to $635-650 million. A lot of POST's revenue growth has been due to its aggressive acquisition strategy but Wall Street doesn't seem to care.

As a matter of fact, Wall Street has ignored POST's warnings about its egg supply. The company uses a lot of eggs and the U.S. egg-production industry has been hammered by an outbreak of Avian Influenza (AI). The last significant outbreak of AI was back in the early 1980s. According to CNN the current outbreak has been causing havoc since December 2014 and 35 million egg-laying hens have been killed. The price of eggs surged this summer but looks like it may have peaked.

Back in May this year POST warned that the outbreak had infected a significant portion of their company-owned flocks and 35% of their egg commitments could be impacted. Fortunately, a few weeks later they said the damage may be down to just 25% of their egg supply but they still expected a $20 million hit to earnings. The market doesn't seem to care.

Instead POST seems to be getting a boost from the crop outlook for the rest of 2015. The USDA raised their estimates for crop productions. The harvest this year could see record soybean numbers. Corn could produce the third largest crop on record. This is pushing commodity prices lower, which is a bullish tailwind for cereal makers like POST.

Shares of POST have been very strong this month. The market's reaction to their Q3 results produced a bullish breakout in POST with a rally past resistance near $55.00 and a surge to all-time highs. When the market crashed late last week and this past Monday, shares of POST did see a decline but it was minor compared to the rest of the market. POST didn't even dip to support at $60.00.

Today POST is surging. Shares are poised to breakout past their mid-August high. If that happens POST could see more short covering. The most recent data listed short interest at 19% of the 54.2 million share float. The point & figure chart is bullish and forecasting at $78.00 target. Tonight we are suggesting a trigger to open bullish positions at $66.55.

- Suggested Positions -

Long OCT $70 CALL (POST151016C70) entry $2.43

09/10/15 new stop at $62.40
More conservative traders may want to exit early tomorrow morning
09/03/15 triggered @ $66.55
Option Format: symbol-year-month-day-call-strike


Constellation Brands Inc. - STZ - close: 131.16 change: +2.62

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: +2.4%
Average Daily Volume = 1.1 million
Entry on September 16 at $130.55
Listed on September 3, 2015
Time Frame: Exit PRIOR to Earnings on October 7th
New Positions: see below

Comments:
09/16/15: Instead of breaking out the cattle prod to move STZ higher it looks like all we needed was a little M&A news in the beverage industry. Earlier today beer giant Anheuser-Busch InBev (BUD) said it plans to make a friendly acquisition offer for smaller rival SABMiller. Shares of BUD surged +6.8%. If the merger is approved the company would control almost 80% of the U.S. beer market.

Shares of STZ gapped open higher at $129.56 and surged past resistance near $130.00 to close at a new all-tine high with a +2.0% gain on the day. Our trigger to buy calls was hit at $130.55.

Trade Description: September 3, 2015:
Major beer brands have suffered from the boom in craft beers. Yet STZ's Corona and Modelo have seen significant growth, especially in the U.S. The company's earnings and revenue growth has fueled a rally in the stock that has outpaced the major marker indices.

STZ is in the consumer goods sector. According to the company, "Constellation Brands (NYSE:STZ and STZ.B) is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Canada, Mexico, New Zealand and Italy. In 2014, Constellation was one of the top performing stocks in the S&P 500 Consumer Staples Index. Constellation is the number three beer company in the U.S. with high-end, iconic imported brands including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the world`s leader in premium wine, selling great brands that people love including Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company`s premium spirits brands include SVEDKA Vodka and Black Velvet Canadian Whisky.

Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand-building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, sales in approximately 100 countries, about 40 facilities and approximately 7,200 talented employees."

This past January STZ reported their fiscal year 2015 Q3 results that beat analysts' estimates on both the top and bottom line. Management raised their 2015 guidance. Their Q4 results were announced on April 9th. Earnings were up +37% from a year ago to $1.03 per share. That was 9 cents above estimates. Revenues were up +5% to $1.35 billion. Gross margins improved to 44%.

STZ said they're seeing strong demand for their Mexican beer brands Corona and Modelo. They're gaining market share in both the spirits and wine categories as well.

The company said 2015 sales were up +24% from the prior year to $6.03 billion. STZ's management guided in-line for fiscal 2016 and forecast earnings of $4.70 to $4.90 per share. That compares to 2015's profit of $4.17 per share (essentially +12% to +17.5% earnings growth).

STZ's most recent earnings report was July 1st. Wall Street was expecting a profit of $1.24 per share on revenues of $1.62 billion. STZ narrowly beat expectations with a profit f $1.26 per share. Revenues were up +7% to $1.63 billion. Management then raised their full-year 2016 earnings guidance from $4.70-4.90 to $4.80-5.00 a share.

The stock did not get much of a reaction from its earnings news or improved guidance. There was a brief spike higher but it didn't last. STZ spent almost the entire month of July consolidating sideways.

The technical picture changed in August. STZ began to rally and displayed impressive strength with a climb from its July 27th low near $115 to $130 by August 18th. Then STZ gave it all back in about three days as the U.S. market tanked. The sharp correction lower saw STZ plunge back toward support in the $114-115 area. What is shocking is how fast STZ has recovered. Buyers just poured into this stock and now STZ is testing its all-time highs near $130 again.

While the three-day crash is a bit terrifying the relative strength in STZ's rebound is impressive. I would consider this an aggressive, higher-risk trade due to STZ's volatility. Tonight we are suggesting a trigger to buy calls at $130.55. We'll exit prior to the October option expiration.

- Suggested Positions -

Long OCT $135 CALL (STZ151016C135) entry $2.05

09/16/15 triggered @ $130.55
Option Format: symbol-year-month-day-call-strike


Skyworks Solutions, Inc. - SWKS - close: 91.52 change: -0.14

Stop Loss: None, no stop at this time
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 4.0 million
Entry on September -- at $---.--
Listed on September 15, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: Yes, see below

Comments:
09/16/15: I'm a little bit surprised that SWKS did not participate in the market's widespread rally today. Shares just sat there hovering in the $90-92 region. Traders did buy the intraday dip so nothing has really changed. Our suggested entry point is $92.55.

Trade Description: September 15, 2015:
SWKS seems to be everywhere. They make semiconductor chips for just about every industry including aerospace, automotive, consumer electronics, wearables, and the Internet of Things. They have been called the leading wireless semiconductor company. They are probably best known for being a component supplier to Apple (AAPL) for their ubiquitous iPhones.

If you are not familiar with SWKS they are in the technology sector. According to the company website, "Skyworks Solutions, Inc. is an innovator of high performance analog semiconductors. Leveraging core technologies, Skyworks supports automotive, broadband, wireless infrastructure, energy management, GPS, industrial, medical, military, wireless networking, smartphone and tablet applications. The Company's portfolio includes amplifiers, attenuators, circulators, demodulators, detectors, diodes, directional couplers, front-end modules, hybrids, infrastructure RF subsystems, isolators, lighting and display solutions, mixers, modulators, optocouplers, optoisolators, phase shifters, PLLs/synthesizers/VCOs, power dividers/combiners, power management devices, receivers, switches and technical ceramics. Headquartered in Woburn, Mass., Skyworks is worldwide with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America."

The company is really cashing in on some major global trends including smart phones and smart(er) cars. Data suggests that over 90% of mobile phone users are still using 2G and 3G phones. That means SWKS should benefit as consumers upgrade to 4G phones. Meanwhile SWKS is also poised to benefit from the surging trend of interconnectivity in automobiles. One forecast estimates that 75% of automobiles in 2020 (about 70 million vehicles) will have Internet-connectivity. Today that number is only around 10 million cars.

The company's earnings growth has been phenomenal. They have beaten Wall Street's earnings and revenues estimates the last five quarters in a row. They have also raised their guidance the last five quarters in a row. Their 2014 Q4 report saw revenues up +50%. Their 2015 Q1 reported revenues were up +59% while earnings were up +88%. SWKS' Q2 report on April 30th delivered earnings growth of +85% on revenue growth of +58%. Results seemed to slow down a little bit with their Q3 report (announced July 23rd). Earnings were $1.34 per share (+61%) while revenues were up +38% to $810 million.

Analysts are bullish on the stock. SWKS has seen multiple price target upgrades in recent months with several in the $115-120-130 range. Out of 21 analysts the mean target is about $118 and the median target is $120 per share.

One factor that has analysts bullish on SWKS is the Apple iPhone upgrade cycle. There are 450 million iPhones in circulation but only 20-30% of consumers have upgraded to the 6 or 6+ models. When they do it should propel sales for SWKS.

If you're going to trade SWKS it is important to note that the stock is volatile. As a high-flying, high-growth, momentum name, shares of SWKS see a lot of movement. SWKS peaked near $113 in June, which was a +55% gain for the year. The stock began to correct lower and then finally capitulated with the market's crash on August 24th. SWKS hit an intraday low of $70.80, which was a -$40 drop or -37% decline from the intraday high in June. The bounce back to $91.60 is a +29% rebound off its August low. As of today, September 15th, SWKS is up +26% for the year. That compares to the NASDAQ composite, which is only +2.6% and the SOX semiconductor index, which is down -9% year to date.

The positive trend of higher lows over the last few weeks has produced a bullish breakout through significant resistance in the $90-91 area. This is where SWKS's 50-dma and 200-dma have converged. The stock just rallied through both moving averages with today's display of relative strength (+2.4%). Tuesday's intraday high was $91.86. We are suggesting a trigger to buy calls at $92.55.

Trigger @ $92.55

- Suggested Positions -

Buy the NOV $100 CALL (SWKS151120C100)

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


The TJX Companies - TJX - close: 71.57 change: +0.60

Stop Loss: None. No stop at this time
Target(s): To Be Determined
Current Option Gain/Loss: -27.6%
Average Daily Volume = 3.0 million
Entry on September 03 at $72.05
Listed on August 26, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/16/15: Traders bought the dip in TJX near its rising 50-dma and the stock rebounded to a +0.8% gain on the session.

No new positions at this time.

Trade Description: August 26, 2015
Believe it or not but there are only 120 days until Christmas 2015. Most of us are just adjusting to school starting again but retailers are already planning for the 2015 holiday shopping season. Historically the time to buy retailers has been early fall (i.e. right now) and then sell on Black Friday (day after Thanksgiving). TJX could be a great way to play that seasonal trend.

TJX is in the services sector. According to the company, "The TJX Companies, Inc. is the leading off-price retailer of apparel and home fashions in the U.S. and worldwide. As of May 2, 2015, the end of the Company's first quarter, the Company operated a total of 3,441 stores in seven countries, the United States, Canada, the United Kingdom, Ireland, Germany, Poland, and Austria, and three e-commerce sites. These include 1,126 T.J. Maxx, 987 Marshalls, 498 HomeGoods and 6 Sierra Trading Post stores, as well as tjmaxx.com and sierratradingpost.com in the United States; 239 Winners, 97 HomeSense, and 39 Marshalls stores in Canada; and 416 T.K. Maxx and 33 HomeSense stores, as well as tkmaxx.com, in Europe."

Just a couple of days before the market collapsed TJX reported its Q2 2016 earnings results (on August 18th). Wall Street was looking for a profit of $0.76 per share on revenues of $7.25 billion. TJX beat both estimates with a profit of $0.80 per share and revenues of $7.36 billion. Earnings were up +7% from a year ago and revenues were up +6.5%. Gross margins improved. Comparable-store sales improved from +3% a year ago to +6%. TJX said their customer traffic improved for the fifth quarter in a row.

Most retailers have not been doing so hot this year so TJX management was naturally optimistic given their strong results. Carol Meyrowitz, Chairman and Chief Executive Officer of The TJX Companies, Inc., commented on her company's quarter,

"We are extremely pleased that our momentum continued in the second quarter. Our 6% consolidated comparable store sales growth and 7% adjusted EPS growth significantly exceeded our expectations. It was great to see that comp sales were entirely driven by customer traffic - our fifth consecutive quarter of sequential traffic improvement - and that we had strong sales across all of our divisions. Our flexible model and ability to offer an eclectic, exciting merchandise mix at outstanding values continues to resonate with consumers in all of our geographies. We were also very pleased with our solid merchandise margins. We are proud of our strong comp sales, traffic increases and merchandise margins, all of which are core to a successful retail business. We enter the back half of the year in an excellent position to keep our momentum going and have many exciting initiatives planned. I am convinced that our gift-giving selections will be better than ever this year, and that our fall and holiday marketing campaigns will keep attracting more shoppers to our stores. Above all, we will be offering consumers amazing values every day! The third quarter is off to a solid start and we are raising our full year comp sales and earnings per share guidance. Today, we are a nearly $30 billion retailer with a clear vision for growth, a differentiated apparel and home fashions business, and world-class organization. Looking ahead, we are confident that we will achieve, and hope to surpass, our plans as we continue to bring value around the world and grow TJX to a $40 billion-plus company!"
TJX management did lower their Q3 guidance but they raised their full year 2016 EPS forecast. They also raised their 2016 comparable store sales estimate from +2-3% to +3-4%. It was the second quarter in a row that management raised their guidance.

The stock market's recent sell-off produced a correction in shares of TJX, which fell from its August high of $76.78 down to an intraday low of $67.25 on Monday morning. That is a -12.4% correction. Shares just happened to bounce near technical support at the simple 200-dma and its late July lows near $67.00. In spite of the sharp retreat the point & figure chart is still bullish and still forecasting at long-term $98.00 target.

Tonight we are suggesting a trigger to buy calls at $72.05. This is a relatively longer-term trade and hope to hold this position for several weeks.

- Suggested Positions -

Long 2016 Jan $75 CALL (TJX160115C75) entry $2.90

09/03/15 triggered @ $72.05
Option Format: symbol-year-month-day-call-strike


Vulcan Materials Co. - VMC - close: 101.28 change: +1.19

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -5.6%
Average Daily Volume = 1.0 million
Entry on September 16 at $101.15
Listed on September 14, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: Yes, see below

Comments:
09/16/15: VMC displayed relative strength with a 1.18% gain. The stock hit new multi-year highs and also hit our suggested entry point to buy calls at $101.15.

Trade Description: September 14, 2015:
VMC and rival MLM are some of the best performing stocks this year. The S&P 500 index is down -5% year to date while VMC is up +51%. That's because the construction business in the U.S. has rebounded. VMC is a domestic company that primarily sells its building materials in the U.S.

According to the company, "Vulcan Materials Company is the nation's largest producer of construction aggregates-primarily crushed stone, sand and gravel-and a major producer of aggregates-based construction materials, including asphalt and ready-mixed concrete. Our coast-to-coast footprint and strategic distribution network align with and serve the nation's growth centers."

Looking at the last few earnings reports VMC has had some trouble meeting Wall Street's bottom line earnings estimates. However, they have been consistently beating on the revenue estimate. The last three quarters in a row have seen revenues come in better than expected. The most recent quarter (Q2) was reported on August 6th and revenues were up +13%.

The stock has seen multiple upgrades into the $106-110-111 region. The point & figure chart is bullish and forecasting at $115 target. The stock has displayed significant strength with its bounce off the late August lows (when the market corrected lower).

Today VMC is challenging round-number, psychological resistance at $100 and closed at new multi-year highs. The intraday high on September 9th was $101.00. We are suggesting a trigger to buy calls at $101.15.

- Suggested Positions -

Long NOV $105 CALL (VMC151120C105) entry $3.60

09/16/15 triggered @ $101.15
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Jack In The Box - JACK - close: 75.82 change: -2.02

Stop Loss: 80.35
Target(s): To Be Determined
Current Option Gain/Loss: -29.6%
Average Daily Volume = 677 thousand
Entry on September 01 at $76.88
Listed on August 31, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/16/15: It looks like the bearish trend in JACK is finally reasserting itself. Shares underperformed today with a -2.5% decline. We are adjusting the stop loss down to $80.35.

Trade Description: August 31, 2015:
It's a burger-eat-burger world out there in the fast-food business. Jack in the Box is small fries compared to its larger rivals like McDonalds (36,258 locations) and Wendy's (6,515 locations). Let's not forget heavy weights like Taco Bell, Burger King, Subway, Dairy Queen, and a handful of pizza chains. JACK only has about 2,200 restaurants but it also has a secret weapon and that is the Qdoba Mexican Grill, a fast-casual restaurant with about 600 locations. Fast-casual restaurant rival Chipotle Mexican Grill has almost 1,800 locations.

Some of that intense competition being felt by McDonalds and Chipotle Mexican Grill is coming from Jack in the Box and its Qdoba brand, which is growing sharply. A majority of their Qdoba franchisees own multiple stores with 10, 20 even 40 stores common. Enterprising business owners don't open additional stores if the original stores are not working. To have so many owners with high numbers of stores suggests the franchise is consistently profitable.

To be profitable they need solid customer traffic, good food and decent margins. Shares of JACK have been one of the best performers on the S&P over the last couple of years because the company has been posting solid earnings and growth.

Customers are trending towards healthier foods and away from the mass produced burgers and fries at McDonalds. Did you know there are 19 ingredients in McDonalds fries? Surely you didn't think they were just potatoes and grease? This trend may not help the Jack in the box brand but it's good news for Qdoba. Restaurants like Qdoba and Chipotle are capitalizing on the healthy food craze.

Management is trying to be shareholder friendly. They have an active share buyback program and they reduced the share count by 10% over the last few quarters. In their Q2 earnings report (May 13th) the company raised their quarterly dividend by +50%.

JACK reported its Q1 2015 earnings on February 17th. Analysts were expecting a profit of $0.87 a share on revenues of $461.2 million. JACK delivered earnings of $0.93 a share. That's a +24% improvement from a year ago. Revenues were up +4.1% to $468.6 million, above estimates. Their operating margins improved 1% to 19.3%. Management raised their 2015 guidance.

The company did it again in May with their Q2 report. Estimates were for $0.66 per share on revenues of $356 million. JACK reported $0.69 per share with revenues up +5.0% to $358 million. That is a +35.2% earnings improvement from a year ago. Their consolidated restaurant operating margins improved 210 basis points to 20.6%. Plus, management raised their 2015 guidance again.

If we stopped right here the story for JACK looks pretty bullish. They definitely seem to be outgrowing their competition. However, the picture appeared to change in the third quarter.

It looks like growth slowed down a bit too much for the market's liking. JACK reported its Q3 earnings on August 5th. Earnings were $0.76 per share. That beat analysts' estimates by three cents. Revenues only rose +3.2% to $359.5 million, which was essentially in-line with estimates. JACK is still seeing strong same-store sales growth with Q3's SSS up +7.3% for their Jack in the Box brand and +7.7% for the Qdoba business. Management said they are only expecting +3.5-5.5% same-store sales growth for Jack in the Box and +5.0-7.0% growth for Qdoba in the fourth quarter.

Investors must have been expecting more from the company because they sold JACK after its earnings report. Shares corrected pretty fast with a -$10.00 drop in following week. JACK was trying to hold support near $85.00 and then the market collapsed. Last Monday saw shares of JACK plunge to an intraday low of $63.94. The oversold bounce just failed at its 10-dma.

Technically JACK looks broken. After incredible gains over the last couple of years JACK is now in a bear market. The peak in August was a lower high. The breakdown under major support near $85 and its 200-dma was bearish. Now JACK has broken one of its long-term trend lines of support. It looks like JACK has further to fall. Today's low was $78.00. Last Wednesday's low was $77.81. I am suggesting a trigger to buy puts at $77.70.

- Suggested Positions -

Long OCT $75 PUT (JACK151016P75) entry $2.84

09/16/15 new stop @ 80.35
09/01/15 triggered on gap down at $76.88, suggested entry was $77.70
Option Format: symbol-year-month-day-call-strike


Tiffany & Co. - TIF - close: 81.44 change: +1.12

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -43.0%
Average Daily Volume = 1.2 million
Entry on September 11 at $79.75-
Listed on September 9, 2015
Time Frame: Exit PRIOR to November option expiration
New Positions: see below

Comments:
09/16/15: The stock market's broad-based bounce today helped TIF add +1.39%. Shares have rallied back above their simple 10-dma and that's short-term bullish. The stock should face significant resistance in the $82.00 region. However, if the market surges on the Fed decision tomorrow TIF could follow the major indices higher.

No new positions at this time.

Trade Description: September 9, 2015:
2015 has not been a good year for shares of TIF. The stock is down about -24% for the year thanks to a big drop in January and August. The August drop was painful with a -14% slide.

TIF is in the services sector. According to the company, "Tiffany is the internationally-renowned jeweler founded in New York in 1837. Through its subsidiaries, Tiffany & Co. manufactures products and operates TIFFANY & CO. retail stores worldwide, and also engages in direct selling through Internet, catalog and business gift operations."

On January 12th, 2015, TIF issued an earnings warning for 2015 and lowered guidance. Shares fell from about $103.50 to $90. TIF spent months churning sideways and the popped higher in May thanks to better than expected earnings results. Their Q1 results, reported May 27th, beat estimates by a wide margin and revenues came in better than expected in spite of a -5% slide from a year ago.

Three months later the company missed analysts' expectations. TIF reported their Q2 results on August 27th. Wall Street was looking for earnings of $0.91 a share on revenues of $1 billion. TIF said earnings fell -10% to $0.86 a share (a 5-cent miss). Revenues dropped -0.2% to $991 million.

The strong dollar is hurting their sales. Tourists coming to America are spending less in TIF's flagship stores. Management lowered their 2016 guidance. TIF now expects earnings to be -2% to -5% less than last year's $4.20 per share.

Analysts have been lowering their price targets in response to TIF's new guidance but shares are sinking faster than expected.

TIF is currently hovering near round-number support at $80.00. The breakdown in August was significant because TIF has broken below its long-term up trend dating back to the 2009 bear-market lows (see weekly chart below). If TIF breaks down below $80 the next support level could be $70.

- Suggested Positions -

Long NOV $75 PUT (TIF151120P75) entry $2.42

09/11/15 triggered @ $79.75
Option Format: symbol-year-month-day-call-strike


CLOSED BEARISH PLAYS

Wynn Resorts Ltd. - WYNN - close: 73.78 change: +1.88

Stop Loss: 72.45
Target(s): To Be Determined
Current Option Gain/Loss: -40.8%
Average Daily Volume = 2.7 million
Entry on September 10 at $69.85
Listed on September 1, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/16/15: Our aggressive, bearish trade on WYNN has been stopped out. Shares of WYNN spiked higher at the open and pierced round-number resistance at $75.00 before lunchtime.

The reason behind today's rally was a story that the recent theft from a Macau junket operator was a lower amount that previously reported. Instead of a theft of $258 million the local police said it was about $43 million. However, this is lame excuse for WYNN's stock to rally. When the theft story was initially reported the company said the theft had zero impact on them since it was a local junket operator and not WYNN who lost money.

Shares of WYNN did hit our stop loss at $72.45 so the play is closed.

*caution - WYNN is a volatile stock* - Suggested Positions -

OCT $65 PUT (WYNN151016P65) entry $2.50 exit $1.48 (-40.8%)

09/16/15 stopped out
09/12/15 new stop loss @ 72.45
09/10/15 triggered @ $69.85
Option Format: symbol-year-month-day-call-strike

chart: