Option Investor
Newsletter

Daily Newsletter, Thursday, 9/17/2015

Table of Contents

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

Market Wrap

Will They Ever Raise Rates

by Thomas Hughes

Click here to email Thomas Hughes
The FOMC left rates unchanged, they lowered their forecast, blamed it on global weaknesses and remain dependent on data.

Introduction

The FOMC meeting was a little bit of a let down. They did not raise interest rates. They also lowered their forecasts for inflation and the pace of interest rate hikes going out to 2018, not because of a weak US economy but because of global weaknesses and growth expectations. Regardless of their stated reasons, they remain data dependent and waiting on clearer signs of inflation.

According to the statement our own economy is expanding at a modest pace with improvements in labor, housing, household spending and business investment. The risk is that recent global economic and financial developments will put downward pressure on inflation and economic activity in the US. Lacker was the only dissenter, calling for 1/4 point hike.

Yellen tried once again to reassure the market. She stated, again, that policy would be accomodative long after the first rate hike. She also reiterated the point that the market should be more concerned with the pace of rate hikes, and not so much with when lift-off would occur.

Market Statistics

Trading was actually pretty calm all day. Asian indices were mixed, poor data from Japan sent Chinese indices down with fear of economic slowing and Japanese indices up on hopes of stimulus. EU indices were equally mixed but traded in a much narrower range. Futures trading for US indices indicated a flat open although this mornings economic data sent them briefly lower.

After the opening bell trading remained flat. The indices hugged break-even levels for most of the morning with a slight bias to the up-side. By early afternoon they were firmly in positive territory, about +0.25%, and held those levels going into the FOMC announcement at 2PM. The news caused a brief stir in the market, a quick drop followed by a short pop, but basically held steady near the highs of the day.

By 3PM the news had digested and Janet Yellen's press conference was well underway. At this time the bulls were able to push the indices up to new 3 week highs, near 1% higher for the day, although resistance was met. Resistance turned out to be strong and once touched, unleashed enough selling pressure to send the indices back to break even. By end of the day the indices were mixed with some negative and some positive but all little changed from yesterday.

Economic Calendar

The Economy

There was a lot of economic data this morning, more than usual, and all leading to a rate hike at some point in the future. First up is Housing Starts and Building Permits. Housing Starts came in a bit light at a 1.126 annualized rate. This is down -3% from July levels but up 16.6% on a year-over-year basis. Permits were strong at 1.17 million, up 3.5% from July and +12.5% from last year at this time. Completions fell -6.1% from the previous month but are up 3.3% from last year. The housing data show a steady year-over-year increase in activity and one that appears to be gaining momentum.

Initial Claims for unemployment fell -11,000 to 264,000 and an 8 week low. The four week moving average of claims also fell, shedding -3,250 to hit 272,000. Last week's data was unrevised. On a not adjusted basis claims fell -14.6% versus an expected -10.9% as predicted by the seasonal factors. Not adjusted claims are now at a new long term low and -18% below last years levels. Washington and Texas led with increases of 1,256 and 1,120 while New York and Oregon led with declines of -4,012 and -633.


Continuing Claims fell -26,000 from an upward revision of 3,000 to hit 2.237 million. The four week moving average also fell, -4,750, hitting 2.256 million. Together the two are trending just above the long term low, where they have been the last 6 months, and consistent with healthy labor markets.

Total claims also fell, shedding -46,723 to hit 2.106 and a 12 week low. Total claims levels are also trending just above the long term low and have been receding in recent weeks. This, along with receding levels of initial claims and continuing claims over the past three weeks, suggests that job markets may have strengthened going into September.


Philly Fed Survey data was released at 10AM and was a negative surprise, with a bit of a silver lining. The headline general activity index fell -6 versus an expected reading closer to +6. This is down from 8.3 in August and the lowest reading in over 2 years. The silver lining is in the individual component indices, the negative headline number attributed to recent market instability. The employment component came in at 10.2, double last month's reading, new orders rose to 9.4 from 5.8 and shipments, which fell, is still reading above 14. All together these show demand growth and support future economic expansion. The future looking gauge of the economy gained 1 point hitting 44 and the highest level since January.


The Oil Index

Oil trading was choppy today but held near $47. Yesterday's unexpected draw in US stock piles is helping to support prices but global demand outlook and over supply issues remain. The draw in Cushing supplies could be an indication that production levels and demand are coming back into line but it is only week of data, not a trend. Regardless, global supply remains high with weak demand growth.

The Oil Index tried to move higher in today's session but was met by resistance. The index gained more than 0.5% on an intraday basis but resistance at the short term moving average capped the gains. Once it fell back below the 61.8% retracement level it found increased resistance and was not able to regain the level. The indicators are bullish and on the rise so a retest of resistance looks probably but the move lacks strength. A break above the short term moving average, near 1,130, would find additional resistance near 1,180. Failure to break resistance could see the index retest recent lows.


The Gold Index

Gold got the expected boost from a no-rate-hike scenario and gained more than 1%. Spot gold gained more than $12 to trade above $1130 and looks like it could go as high $1150 before hitting major resistance. The move is sparked by weakening in the dollar due to lowered rate hike expectations and remains tied to that outlook.

The gold miners got a boost from rising gold prices and are moving up off of recently set lows. The gold miners ETF GDX gained nearly 3% in a move extending a bounce from recent support levels. The move created the second of two large white candles, broke the short term moving average and is accompanied by bullish crossovers in both indicators. Upside target is near $16 but dependent on gold prices. Support is near $13. These levels could present range limits for gold over the next 6-12 weeks, as we approach the final two FOMC meetings of 2015.


In The News, Story Stocks and Earnings

GM made headlines in early hours. The company settled criminal charges with government about its cover up of the ignition switch failures for $900 million and stipulations including third party oversight. The company also announced that is has so far spent $575 million settling civil cases related to the same. Shares of the stock gained more than 0.5% in today's session and reached a new 30 day high. The indicators are strong and on the rise with possible resistance at $32.50.


Rite Aid released earnings today and missed expectations. EPS missed consensus guidance for the full year was revised lower. The company now expects full year EPS in the range of $0.12 to $0.19, consensus is near $0.21. Shares of the stock sold off on the news in pre-market trading and gapped lower at the open. Selling pressure carried it lower throughout the day closing with a loss greater than 10%.


Adobe Systems reported after the bell. The software company reported record revenue and 21% revenue growth over last year. EPS of $0.54 was a little shy of expectations but forward outlook is positive. Company execs say they have a strong foundation for long term growth with momentum from the 3rd quarter expected to carry into the 4th , the bad news is that guidance is a little short of consensus. Shares of the stock initially rose 1.8% in after-hours trading but fell back to break even shortly after.


The Indices

The indices seemed to be unaffected by today's FOMC meeting but I am not convinced. The news did not spark any wild rallies or sell-off's but it did cause a little volatility. By end of day the market was little changed from yesterday with sign of resistance at current levels. Today's biggest gainer was the Dow Jones Transportation Average at 0.39%. The transports remain with an increasingly narrowing range and have now hit resistance. Today's candle tested resistance at 8,250 and was rejected. The move was not overly strong so resistance may be overcome. The indicators are bullish, strong and rising so a further test is likely. A break above 8,250 could take it up to 8,500. The short term moving average is first target for support should a pull back occur.


The Dow Jones Industrial Average matched the transports with a 0.39% move, but it was to the down side. The blue chips faded in late day trading as was not able to hold gains made earlier in the day. Today's candle has a small body but long upper shadow crossing the short term moving average, a sign of resistance. Indicators are bullish and rising so further testing of resistance is likely. A break above the short term moving average, near 16,740, could take it up to 17,200 before hitting next resistance. Support may be found at 16,500 but is more likely near 16,000.


The S&P 500 also fell in today's session, losing -0.26%. The broad market index created a candle similar to the industrials, likewise halted by resistance and closing below the short term moving average. The indicators are bullish and rising so further testing of resistance is likely but the move lacks strength at this time. Resistance is currently at 2,020 with potential support just below today's closing price.


The NASDAQ Composite closed with a gain although it too created a candle with an extremely long upper shadow. This shadow is a sign of resistance to higher prices and can precede a pull-back or sell-off. The index has been rising over the past few weeks and appears to be gaining strength. The indicators are both bullish and on the rise with strong MACD and stochastic %D crossing the upper signal line. This index is above its short term moving average with no immediate resistance although there is potential resistance in the 5,000 – 5,050 range.


The Fed had their meeting and made their announcement and nothing has changed. The economy is still on the path to full recovery, the rate hike is still imminent and global risks are still present. The only thing different is that forward outlook is diminished, it's still positive but less positive than before.

Something else that hasn't change, we still have the specter of economic data/Fed-Speak induced market volatility hanging over us. The market is going to be hanging on every data point and word spoken by a Fed member looking for signs of rate hike. There is only one data release tomorrow, the Leading Indicators, but it is options expiration day so there could be some wild action associated with that as options positions are unwound.

Now that the Fed meeting has passed the market can focus on earnings, at least for a little while. The coming quarter is largely expected to be poor, but also should begin to give us glimmers of the growth projected for the 4th quarter and next year. So long as this expectation is met I think the bottom is in for this correction. At least one positive comes from a lack of rate hike, lower dollar value. Lower dollar value is good for earnings among companies with international business.

Today's market action is little hard to read. On the one hand there are the indicators; they are on the rise and pointing to higher prices or at least a retest of resistance levels already tested. On the other are the candles; they show resistance to higher prices and could very well turn out to be pin-bar/shooting star doji's preceding another sell-off. I am still looking for some kind of test of support, maybe as far down as the recently set lows, based on convergences I've discussed before, but am bullish long term.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Is The Market's Lack of Follow-Through A Warning?

by James Brown

Click here to email James Brown

Editor's Note:

Investors could not make up their minds on how they wanted to interpret the Federal Reserve's decision to not raise rates. The afternoon gains faded and stocks raced back toward unchanged on the session.

This looks like a failed breakout past resistance near 1,994-2,000 for the S&P 500. After several days of gains prior to the FOMC meeting it might be time for some profit taking, especially ahead of the weekend. S&P futures have already turned negative after hours tonight. I wouldn't be surprised to see some profit taking tomorrow.

We are not adding any new positions this evening.

S&P 500 intraday chart:

S&P 500 daily chart:




In Play Updates and Reviews

Stocks Reverse Post-FOMC Gains

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market gave back its afternoon gains and the major indices closed in mixed fashion. The NASDAQ and small cap Russell 2000 both eked out gains while the S&P 500 and Dow Industrials posted losses.

SWKS hit our entry trigger today.


Current Portfolio:


CALL Play Updates

Avago Technologies - AVGO - close: 130.61 change: -0.88

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -27.0%
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:
09/17/15: AVGO delivered a rather subdued performance today. Even during the post-FOMC announcement volatility the movement in AVGO was muted. Shares settled with a -0.6% decline but held support near $130.00 again.

No new positions at this time.

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: 104.20 change: +0.24

Stop Loss: None. No stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -15.1%
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:
09/17/15: The stock market's post-FOMC rally helped push DIS above resistance at $105.00 and its 200-dma but the rally didn't last. Shares settled almost unchanged on the day.

I'd wait for a new rally past the 200-dma ($105.45) before considering new bullish positions.

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


Electronic Arts - EA - close: 71.06 change: +0.78

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -1.6%
Average Daily Volume = 3.1 million
Entry on September 17 at $70.75
Listed on September 16, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments:
09/17/15: Our new trade on EA is off to a good start. The stock was in rally mode almost all day long. EA pushed through resistance at its 50-dma and hit our suggested entry point at $70.75. If both EA and the S&P 500 index open positive tomorrow I'd still consider new positions at current levels.

Trade Description: September 16, 2015:
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.

- Suggested Positions -

Long DEC $75 CALL (EA151218C75) entry $3.15

09/17/15 triggered @ $70.75
Option Format: symbol-year-month-day-call-strike


Facebook, Inc. - FB - close: 94.34 change: +0.89

Stop Loss: No stop at the moment (See August 24th update)
Target(s): To Be Determined
Current Option Gain/Loss: +433.3%
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:
09/17/15: FB continues to flex its relative strength muscle. Shares broke through the $94.00 level for the first time in about a month. The stock managed to maintain a good chunk of its post-Fed gains and closed up +0.95%.

No new positions at this time. FB is short-term overbought.

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: 117.34 change: +0.40

Stop Loss: No stop at the moment (See August 24th update)
Target(s): To Be Determined
Current Option Gain/Loss: +15.9%
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:
09/17/15: The intraday rally saw the IWM almost tag its 50-dma. Unfortunately gains faded and this ETF settled with a +0.3% gain. The small cap Russell 2000 index actually outperformed its larger-cap peers today.

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: 175.93 change: -0.58

Stop Loss: None, no stop at this time
Target(s): To Be Determined
Current Option Gain/Loss: + 0.0%
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:
09/17/15: MLM spent most of today's session churning sideways. The brief, post-Fed rally pushed MLM to a new high but gains faded.

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: 33.11 change: -0.14

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -9.5%
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:
09/17/15: After big gains yesterday I'm surprised NBL did not see more profit taking today. The stock's intraday rally failed near $34.00 and the stock reversed into a -0.4% decline.

Broken resistance near $32.00 should be new support.

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: 69.73 change: +0.93

Stop Loss: 62.40
Target(s): To Be Determined
Current Option Gain/Loss: +13.2%
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:
09/17/15: POST displayed some relative strength today. Shares traded above $70 for the first time ever. The rally stalled near $71.25 and gains faded but POST still outperformed the market with a +1.35% gain.

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: 130.41 change: -0.75

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -22.0%
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:
09/17/15: STZ managed to hit new highs above $132 but the market's reversal this afternoon left STZ with a -0.5% decline. Broken resistance near $130.00 should be new support. Watch for a bounce tomorrow as a potential entry point.

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: 90.74 change: -0.78

Stop Loss: None, no stop at this time
Target(s): To Be Determined
Current Option Gain/Loss: -18.1%
Average Daily Volume = 4.0 million
Entry on September 17 at $92.55
Listed on September 15, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: see below

Comments:
09/17/15: The market's post-Fed rally pushed SWKS to $92.63. Our trigger to buy calls was hit at $92.55. SWKS did follow the market lower when stocks reversed this afternoon but shares held support near $90. At this time I would wait for a new rally past $92.00 before considering bullish positions.

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.

- Suggested Positions -

Long NOV $100 CALL (SWKS151120C100) entry $4.03

09/17/15 triggered @ $92.55
Option Format: symbol-year-month-day-call-strike


The TJX Companies - TJX - close: 72.54 change: +0.97

Stop Loss: None. No stop at this time
Target(s): To Be Determined
Current Option Gain/Loss: -17.2%
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:
09/17/15: Before the opening bell TJX was upgraded to a "buy". The stock reacted by gapping open higher at $72.40. The post-FOMC market rally lifted shares to $73.49. By the closing bell TJX had pared its gains to just +1.35% but that was enough to outperform the major indices.

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: 101.20 change: -0.08

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -16.7%
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:
09/17/15: VMC tagged another relative high at $102.65 before reversing its gains. Shares settled virtually unchanged on the session. I am suggesting traders wait to see if there is any follow through tomorrow and if VMC can hold the $100 level before considering new positions.

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: 77.02 change: +1.20

Stop Loss: 80.35
Target(s): To Be Determined
Current Option Gain/Loss: -52.5%
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:
09/17/15: After a $2.00 drop yesterday JACK bounced today with a $1.20 gain or +1.58%. I don't see any specific news behind today's relative strength. The $79-80 region should be overhead resistance.

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: 80.61 change: -0.43

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -42.1%
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:
09/17/15: TIF tagged short-term resistance near $82.00 and its simple 20-dma this afternoon. Fortunately the stock reversed (as did the market) and TIF closed with a -0.5% decline.

I am not suggesting new positions at this time. Let's see if TIF produces any follow through lower tomorrow.

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