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Daily Newsletter, Tuesday, 9/22/2015

Table of Contents

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

Market Wrap

Commodity Rout

by Jim Brown

Click here to email Jim Brown

Several downgrades to the outlook for China and the emerging markets weighed on the markets sending the Dow down -290 and the Nasdaq losing -114 at the lows. Copper declined -4.3% to $2.285 intraday to drag the entire commodity complex lower.

Market Statistics

Overnight the Asian Development Bank cut growth estimates for China from 7.2% to 6.8% and India from 7.8% to 7.4%. Credit Suisse released a report titled "Race to the Bottom" saying "There is little to like about most commodities over the medium-term, just relative degrees of unloveliness." The report outlined the long-term problems of falling demand and rising supply.


This commodity weakness increased the pressure on European markets that began with a decline because of the drop in the automakers. Volkswagen (VLKAY) shares declined -15% to $25.60 after the CEO issued a public apology for deceiving the public and regulators by including illegal software meant to cheat on emissions testing. Originally, the EPA claimed there were 482,000 vehicles with illegal software. That was raised to as many as 11 million today. The company said it would take a $7 billion charge to earnings for the recall. There is a worry, and rightly so, that this will turn into a criminal case rather than just a fine. Volkswagen shares have declined -33% since the news broke last week. There are no options.

French Finance Minister Michel Sapin called for a probe of the entire automobile sector in Europe to make sure there was no misconduct by other manufacturers.


The other European automakers were also down as investors were forced to sell other stocks to cover margin losses in Volkswagen. Porsche was down -17%, Daimler -7% and BMW -6%. The German stock market declined -3.8%, French CAC-40 -3.4%, FTSE-100 -2.8%. The German EWG ETF declined -4.1% to two-year lows. With those declines overseas it led to significant declines in the U.S. at the open.



The uncertainty over what the Fed said and did last week is continuing to weigh on the markets. The Fed said it was not hiking because of worries over slowing economic growth, especially in China, and that impact on the global markets and inflation. Despite the multiple warnings about global worries, the Fed said October was still on the table for a rate hike. Unfortunately, you cannot have it both ways. You cannot warn about events that could take 3-6 months to develop and then warn we could hike rates in five-weeks.

Investors do not know which way to go. Is there a global economic problem or not? Apparently, the problem does exist given all the declines in commodities and multiple entities slashing growth estimates. This suggests the Fed's continued warning about a potential rate hike in 2015 is a protective measure. If they said a potential hike was off the table until March we could see investors run for the sidelines with worry over what the Fed knows that we do not. By continuing to talk about the potential for a hike in the weeks ahead they are implying conditions are better than they are and they are keeping U.S. economic sentiment mildly bullish. At this point, I do not think anybody trusts the Fed. They lost credibility by not hiking and now they may be forced to hike in October to restore that credibility. That assumes the global economy does not get worse over the next five weeks.

In the U.S., the economic reports were not pretty. The Richmond Fed Manufacturing Survey for September fell into contraction territory at -5.0, down from +12.6 in July and zero in August. The internal components fell sharply lower with new orders falling from +1.0 to -12.0 and backorders dropping even further into contraction territory from -15.0 to -24.0. Those two components suggest the next survey will fall even farther into contraction territory. Manufacturing cannot move higher with sharply declining orders.

Employment rose slightly but the average workweek declined from +3.0 to -12.0 suggesting there will be layoffs in the future.

The separate services survey declined from 30 to 10 but the big news was in employment. The composite component declined from 18 to 5 with retail falling from 5 to -18. With the holidays ahead, we should not be seeing that significant a decline in retail employment. All the components in the services sector declined.

Manufacturing Survey


The calendar for Wednesday contains no important reports. The Chinese PMI due out at 9:45 tonight could be a market mover in either direction. Estimates are for a decline to 47.5. A stronger than expected decline could strengthen views that Asia is melting down. A stronger than expected gain could suggest the worries are overblown.

I added the Pope's mass in Philadelphia on Sunday. There is expected to be more than two-million people in attendance. It will be the largest and highest security event in U.S. history. Even with that security, it will still be the largest potential terrorist target in history. I do not need to tell you what would happen to the market if there were a successful attack.


In stock news Carnival Corp (CCL) reported its third consecutive decline in revenue and they blamed it on the strength in the dollar reducing travelers from Europe. Ticket revenues declined -2.4% to $3.63 billion in Q2 and that is normally their best quarter. Total revenue declined -1.3% to $4.89 billion. Earnings were $1.75 per share compared to estimates for $1.63. The company lowered guidance for the current quarter to a range of 36-40 cents and analysts were expecting 45 cents. They did upgrade full year guidance from $2.35-$2.50 to $2.56-$2.60 per share. The company did profit from a -33% decline in fuel prices to $439 per ton. Shares declined -5% on the lowered Q3 guidance.


Shares of NCR Corp (NCR) declined -7% after a story broke that Blackstone Group had not been able to reach a deal to acquire NCR. Blackstone had been trying to locate a partner to help fund a bid worth up to $10 billion. Potential partnerships with Bain Capital and Carlyle Group both fell apart because of disagreements over price. Sources warned that the eventual acquisition of NCR was now in doubt.


Shares of Office Depot (ODP) and Staples (SPLS) both declined after the NY Post said Deborah Feinstein, the head of the FTC Bureau of Competition, is going to oppose the deal. She said the combination of the two chains would leave the U.S. with only one major office supply chain and that would raise antitrust issues. Staples announced it was buying Office Depot in February for about $6 billion. One remedy floated was for Staples to divest its delivery business.



Autozone (AZO) reported earnings of $12.75 compared to estimates for $12.67 per share. Revenue of $3.29 exceeded estimates for $3.25 billion. Same store sales rose +4.5% and well above estimates for 3.2%. Analysts liked the earnings saying the margin squeeze from expansion expenses were offset by higher margins on higher dollar products. Shares were up $15 early in the day but traders took profits at the close to end flat.


Conagra Foods (CAG) reported earnings of 45 cents that beat by a nickel but revenue disappointed. Revenue of $2.79 billion fell short of estimates for $3.67 billion. The company refrained from issuing guidance saying it will delay until it is closer to divesting its private label business and has some better cost reduction targets. The market did not like those comments and shares declined -7% on the news.


Darden Restaurants (DRI) reported earnings of 68 cents that beat estimates for 58 cents. Revenue of $1.69 billion also beat estimates for $1.68 billion. Same store sales rose +3.4% with Olive Garden sales up +3.4% and Longhorn Steakhouse sales up +7.6%. They guided to full year earnings in the range of $3.15-$3.30 compared to prior guidance of $3.05-$3.20. Analysts were expecting $3.14.


CarMax (KMX) reported earnings of 82 cents that beat estimates for 75 cents. However, revenue of $3.88 billion missed estimates for $3.94 billion. Used vehicle sales rose +7.9% to $3.2 billion. Unit sales rose +9.2% to 156,516 vehicles but the average selling price declined -1.1% to $19,983. Same store sales rose +4.6%. New vehicle sales declined -13.5% to $60.5 million due to a -12.9% drop in the number of vehicles to 2,248. The average selling price declined -0.7% to $26,799. Wholesale vehicle revenues rose +11.6% to $591.8 million on an 8% increase in units sold to 106,522 vehicles. I did not think the earnings were that bad but shares declined -4.47% on the news.


The earnings schedule for Wednesday is weak with Lennar (LEN) the only major report. Thursday remains the big day with Nike and BBBY.

For those keeping track, out of the six companies giving guidance today, five of them were negative and only one positive. Darden was positive and CCL, ASPN, CAG, GIS and FDS gave negative guidance overall.


Crude oil dipped to $45.15 at the low but rallied on short covering just before the close to end the day at $46.23. Crude typically rallies late on Tuesdays because the API inventories come out after the bell and the EIA inventories are out on Wednesday morning. The API inventories showed a decline of -3.7 million barrels but the numbers rarely agree with the EIA numbers on Wednesday. Crude rallied about 25 cents to $46.54 after the report. That suggests traders are skeptical of the inventory decline.


Markets

The S&P declined sharply to a low of 1,929 intraday. There was a +13 point rebound late in the afternoon and it was broad based. However, I would not try to hang my hat on that as suggesting a rally tomorrow. The S&P futures are down -6.50 as I write this commentary but that can change in a heartbeat.

The odds are growing that we are going to retest the August lows. We may not decline all the way to 1,867 but I would not be surprised to see a print under 1,900. We are in the worst three weeks of the year for the market in normal years and there is certainly a lot of negativity heading our way from overseas.

If I had to pick a potential bounce point, it would be 1,912 and the post August lows in early September.



The Dow dipped below interim support at 16,335 but recovered to that level at the close. The intraday low of 16,221 was right at the level we saw as support two weeks ago. That would be our line in the sand for Wednesday followed by 16,030 and the support from early September.

The individual charts for the Dow stocks have not improved. The only change was in the amount of day-to-day volatility. I would not be surprised to see that 16,030 level tested but that could be a decent buying point.




The Nasdaq was crushed intraday with a -114 drop but closed with a +40 point rebound. The biggest, best-loved stocks were the ones that were sold the hardest. Facebook (FB) lost -3% on no news. Biotech stocks were sold hard again ahead of Clinton's proposal on drug price controls in the afternoon. Now that the proposal is public, the reality may sink in. She cannot make any changes if/until she is elected and then only if she can get those changes through Congress. It will be three years before there is any material risk for price controls. Stocks with extreme exposure to price controls like Gilead Sciences (GILD) actually closed positive for the day after an early decline. That could carry over into the Nasdaq on Wednesday.

Shares of the Nasdaq dipped below short-term support at 4,760 with future support at 4,635. Resistance would be significantly higher at 4,875.




The sentiment index for the market closed well under support. The Russell 2000 dipped to 1,137 and closed at 1,143 but 1,150 was strong support. With that support broken is suggests there is more trouble ahead. The next support level is around 1,130 and then 1,105.


The combination of weakness in China, Fed indecision and conflicting Fed guidance, seasonal history and declining earnings should continue to weigh on the markets. The S&P has only gained in the week after September expiration five times in the last 17 years. With all the negativity weighing on the market today, I do not see any reason for a sudden rally. However, there is always a short squeeze lurking in our future. I would be refining my shopping list on the assumption we are going to see a continued decline.

Enter passively, exit aggressively!

Jim Brown

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New Option Plays

This Financial Looks Broken

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Aon plc - AON - close: 89.53 change: -0.87

Stop Loss: 92.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.2 million
Entry on September -- at $---.--
Listed on September 22, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: Yes, see below

Company Description

Trade Description:
A slowing global economy and negative currency winds have created a tougher environment for AON. Financial stocks in general have underperformed the broader market (-8%) and AON looks like it could play catch up with the group.

AON is in the insurance business. According to the company, "Aon plc is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise."

Management has managed to beat Wall Street's bottom line earnings estimate the last few quarters. However, they have been missing analysts' revenue estimates. Revenues have been falling faster than expected. Their Q4 results saw revenues drop to +3% growth. By Q1 revenues were down -3.4%. Their Q2 results, announced on July 31st, saw revenues decline -3.9%. As a global company the impact of negative currency headwinds does account for a lot of this revenue trouble. While some traders may want to write this off the situation could get worse as the U.S. dollar should rally when the Fed starts to raise rates.

Technically shares of AON look broken. The stock collapsed during the market's correction in late August. The oversold bounce failed pretty quickly. Now three weeks later the stock is starting to breakdown from this short-term consolidation pattern. The point & figure chart is already bearish and forecasting at $75.00 target. We are suggesting a trigger to buy puts at $88.65.

Trigger @ $88.65

- Suggested Positions -

Buy the 2016 JAN $85 PUT (AON150115P85) current ask $3.20
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

Post-Fed Market Sell-off Resumes

by James Brown

Click here to email James Brown

Editor's Note:

Investors were in a mood to sell stocks on Tuesday and the U.S. market produced a very widespread decline. Worries over a slowing global economy and weakness in commodities weighed on the market.

IWM and MLM hit our stop loss today.


Current Portfolio:


CALL Play Updates

Avago Technologies - AVGO - close: 124.70 change: -2.56

Stop Loss: $123.65
Target(s): To Be Determined
Current Option Gain/Loss: -75.7%
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:
09/22/15: The stock market's drop this morning weighed on shares of AVGO. The stock gapped open lower near $125.00 and fell to $123.70 at its low before paring losses. AVGO's close below the 50-dma is short-term bearish. If shares see any follow through lower tomorrow AVGO will hit our stop loss at $123.65.

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

09/19/15 new stop @ 123.65
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: 102.49 change: -0.92

Stop Loss: $98.85
Target(s): To Be Determined
Current Option Gain/Loss: -47.6%
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:
09/22/15: DIS also gapped down this morning. Shares spent almost the whole day churning sideways inside the $101.60-102.60 range. If the market continues to sink we could see DIS tag round-number support at $100.00.

No new positions at this time.

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

09/19/15 new stop loss @ 98.85
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: 68.69 change: -1.89

Stop Loss: $67.35
Target(s): To Be Determined
Current Option Gain/Loss: -29.8%
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:
09/22/15: The market's big drop today sent EA toward short-term support near $68.00. The low was $68.22 and the afternoon bounce was rather anemic. EA underperformed the market with a -2.6% decline on the session. Currently our stop is $67.35. More conservative traders may want to bump their stop closer to today's low.

No new positions at this time.

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

09/19/15 new stop @ 67.35
09/17/15 triggered @ $70.75
Option Format: symbol-year-month-day-call-strike


Facebook, Inc. - FB - close: 92.96 change: -2.59

Stop Loss: $90.65
Target(s): To Be Determined
Current Option Gain/Loss: +347.6%
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:
09/22/15: FB must have misplaced its bullet proof armor this morning because shares were hammered. After days of relative strength the stock plunged almost $4.00 to $91.92 at its Tuesday low. Shares did bounce to close back above the 50-dma but FB underperformed the major indices with a -2.7% decline.

After the closing bell FB's Instagram photo-sharing service announced another milestone. In the last ten months Instagram has added another 100 million users. Instagram now has more than 400 million. More than 75 percent of users are outside the United States. In comparison, Twitter only has about 304 million users and TWTR's stock has an $18 billion valuation (with TWTR shares in the $26-27 area).

FB spent $1 billion to buy Instagram in 2012. According to eMarketer, a research firm, FB stands to rake in almost $2.8 billion in advertising revenues for Instragram in 2017.

More conservative investors might want to raise their stop loss closer to today's low. No new positions at this time.

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

09/22/15 Instagram announces they hit 400 million users
09/19/15 new stop @ 90.65
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


Noble Energy, Inc. - NBL - close: 32.31 change: -0.44

Stop Loss: $30.85
Target(s): To Be Determined
Current Option Gain/Loss: -35.7%
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:
09/22/15: Commodities suffered another down day and the weakness in oil undercut energy stocks. Rising concerns over a global economic slowdown do not help either.

Shares of NBL dipped to short-term support near $32.00 and bounced but still fell -1.3% by the close. More conservative traders may want to bump their stop closer to $32.00.

No new positions at this time.

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

09/19/15 new stop @ 30.85
09/05/15 trade begins. NBL opens at $31.32
Option Format: symbol-year-month-day-call-strike


Post Holdings, Inc. - POST - close: 67.32 change: -1.29

Stop Loss: 64.65
Target(s): To Be Determined
Current Option Gain/Loss: -36.2%
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:
09/22/15: A strong earnings report from rival food maker General Mills (GIS) this morning was not enough to save POST from the market's widespread decline today. POST actually underperformed the market with a -1.88% decline.

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: 127.24 change: -0.98

Stop Loss: $124.95
Target(s): To Be Determined
Current Option Gain/Loss: -68.3%
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:
09/22/15: STZ gapped open lower but traders bought the dip in the $126.40 region. Shares pared their loss to -0.7% but did close beneath potential support at the 20-dma and 30-dma.

No new positions at this time.

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

09/19/15 new stop @ 124.95
09/16/15 triggered @ $130.55
Option Format: symbol-year-month-day-call-strike


Skyworks Solutions, Inc. - SWKS - close: 86.70 change: -2.52

Stop Loss: $85.45
Target(s): To Be Determined
Current Option Gain/Loss: -52.9%
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:
09/22/15: Technology stocks underperformed the market today. SWKS helped lead the way lower with a -2.8% plunge. The stock closed below several key moving averages today. I am concerned that we could see SWKS hit our stop at $85.45 tomorrow.

No new positions at this time.

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

09/19/15 new stop loss @ 85.45
09/17/15 triggered @ $92.55
Option Format: symbol-year-month-day-call-strike


The TJX Companies - TJX - close: 71.22 change: -0.75

Stop Loss: $69.85
Target(s): To Be Determined
Current Option Gain/Loss: -34.5%
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:
09/22/15: TJX held up reasonably well. Shares bounced near the trend of higher lows and its 50-dma. TJX managed to pare its loss to just -1.0%.

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

09/19/15 new stop @ 69.85
09/03/15 triggered @ $72.05
Option Format: symbol-year-month-day-call-strike


Vulcan Materials Co. - VMC - close: 97.26 change: -2.57

Stop Loss: $95.85
Target(s): To Be Determined
Current Option Gain/Loss: -51.4%
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:
09/22/15: Today's sell-off in materials and commodity-related stocks hit VMC pretty hard. The stock gapped down and then spiked toward its simple 20-dma near $96.00. The afternoon rebound trimmed VMC's loss to -2.5%.

No new positions at this time.

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

09/19/15 new stop @ 95.85
09/16/15 triggered @ $101.15
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Caterpillar Inc. - CAT - close: 71.68 change: -0.48

Stop Loss: 76.10
Target(s): To Be Determined
Current Option Gain/Loss: -13.8%
Average Daily Volume = 5.8 million
Entry on September 22 at $71.12
Listed on September 21, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments:
09/22/15: Our new bearish play on CAT is open. The plan was to buy puts if shares hit $71.40 but we were triggered on the gap down at $71.12. CAT did shave its loss to -0.66% by the closing bell. Broken support near $72.00 should be new resistance. I would watch for a failed rally at $72 or a new drop below $71.20 as our next entry point.

Trade Description: September 21, 2015:
The recent relative weakness in CAT has awarded the stock a spot in our bearish plays section.

The bear market in shares of CAT continues. Most of the big industrial names are down about -10% year to date. CAT is down -21% in 2015 and off about -35% from its 2014 highs. The company has seen business hurt by a multitude of factors.

If you're not familiar with CAT, a component of the Dow Jones Industrial Average, they are in the industrial goods sector. According to the company, "For 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2014 sales and revenues of $55.184 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three product segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment."

The earnings outlook has been somewhat volatile for CAT. On January 27, 2015, the stock collapsed to new 52-week lows after the company missed earnings estimates and guided lower for 2015. Three months later on April 23rd the company beat estimates on both the top and bottom line and management raised their 2015 guidance. Jump ahead three more months and on July 23rd CAT reported earnings that were in-line with expectations but revenues fell -13% to $12.3 billion. This was below analysts' revenue estimates. CAT's management lowered their 2015 guidance below Wall Street expectations. Naturally the stock plunged on this bearish outlook.

The company has been hurt by the crash in commodity prices. Low prices for coal, iron ore, and oil discourage production and thus the need for more equipment manufacturers like CAT and rival Joy Global. A few weeks ago CAT reported that worldwide sales were down -11% in July. That was actually an improvement from the -14% drop in June. Asia was hardest hit thanks to weakness in China. Joy Global just lowered their 2015 outlook a few days ago as they look ahead through the rest of 2015. CAT also expect a tough second half.

This morning, September 21st, CAT updated their worldwide sales numbers for August. Global sales fell -11% again. This followed a -11% drop in July. The Asia-Pacific region worsened from -25% to -29%. Latin America improved from -37% to -33%. North America was still at -5%. CAT also noted that oil and gas-related equipment sales were down -20%, and transportation was down -38%. These are pretty ugly numbers.

CAT is a global business. Currency translations are taking a big bite out of sales. Weakness in the euro, the Japanese yen, and the Brazilian real are all adding pressure. When the U.S. Federal Reserve eventually raises rates that should boost the dollar and only make the currency issue worse.

CAT's management has been trying to support their stock price with an accelerated stock buyback program of $1.5 billion. It doesn't seem to be working. Investors are selling every rally and CAT is in a clear down trend of lower highs and lower lows.

The most recent oversold bounce from short-term support at $72.00 failed near resistance at $76.00. Now CAT is about to breakdown under $72.00. Friday's intraday low was $71.61. Tonight we are suggesting a trigger to buy puts at $71.40.

- Suggested Positions -

Long NOV $70 PUT (CAT151120P70) entry $3.25

09/22/15 triggered on gap down at $71.12, trigger was $71.40
Option Format: symbol-year-month-day-call-strike


International Flavors & Fragrances Inc. - IFF - close: 105.07 chg: -0.99

Stop Loss: 108.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 470 thousand
Entry on September -- at $---.--
Listed on September 19, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: Yes, see below

Comments:
09/22/15: IFF dipped to a new low but failed to hit our suggested entry point at $104.45. Odds are pretty good IFF will hit our entry trigger if the market continues to sink tomorrow.

Trade Description: September 19, 2015:
Currencies moves and a slowing global economy appear to be souring IFF's performance.

IFF is considered part of the basic materials sector. According to the company, "International Flavors & Fragrances Inc. (IFF) is a leading global creator of flavors and fragrances used in a wide variety of consumer products. Consumers experience these unique scents and tastes in fine fragrances and beauty care, detergents and household goods, as well as beverages, sweet goods and food products. The Company leverages its competitive advantages of consumer insight, research and development, creative expertise, and customer intimacy to provide customers with innovative and differentiated product offerings. A member of the S&P 500 Index, IFF has more than 6,200 employees working in 32 countries worldwide."

Bulls could argue that emerging markets offer a lot of opportunity as the growing population of consumers demand more variety and flavors. Bears can argue that IFF faces a lot of competition around the globe and they're very vulnerable to currency moves. We can already see the impact of currency fluctuations in IFF's results.

Their Q4 results, announced Feb. 12th, were better than expected but revenues were only +4.7%. Their Q1 results, out May 12th, beat estimates by a thinner margin. Revenues were only up +0.6%. Their Q2 report came out on August 10th. Wall Street was expecting a profit of $1.36 a share on revenues of $776 million. IFF only delivered $1.29 a share with revenues down -2.6% to $767 million. Currencies are a big part of the issue here but the stock is not acting very healthy either.

On August 6th, 2015, the company announced they were raising their quarterly dividend by +20% to $0.56 a share. IFF should begin trading ex-dividend on Sept. 23rd. Management also announced a $250 million stock buyback through 2017. This news has not helped the stock price.

Investors seem to be selling the rally. Shares peaked in early 2015 and have made a trend of lower highs and lower lows. It looks like the trend of lower lows will accelerated. A few days ago IFF broke down under a major trend line of support on its long-term chart (see below). Tonight we are suggesting a trigger to buy puts at $104.45.

Trigger @ $104.45

- Suggested Positions -

Buy the NOV $100 PUT (IFF151120P100)

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


Jack In The Box - JACK - close: 78.28 change: +3.27

Stop Loss: 78.45
Target(s): To Be Determined
Current Option Gain/Loss: -66.5%
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:
09/22/15: I cautioned readers last night that JACK might bounce today. Last night the company announced a new $200 million stock repurchase program. The stock rallied +4.35% today but this looks like an overreaction. During JACK's fiscal 2015 they bought back $371 million in stock but that didn't stop the stock's plunge. We are at risk of seeing JACK hit our stop loss at $78.45 tomorrow but nimble traders may want to watch for a failed rally near $80.00 as a new bearish entry point.

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

09/22/15 JACK sees a big bounce on the buyback news
09/21/15 after hours JACK announces a $200 million buyback
09/19/15 new stop @ 78.45
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: 78.71 change: -0.66

Stop Loss: $82.35
Target(s): To Be Determined
Current Option Gain/Loss: -24.8%
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:
09/22/15: TIF plunged to new 18-month lows and hit $77.31 before paring its loss. Readers may want to start inching down their stop loss. The simple 20-dma near $81 should be resistance.

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

09/19/15 new stop @ 82.35
09/11/15 triggered @ $79.75
Option Format: symbol-year-month-day-call-strike



CLOSED BULLISH PLAYS

iShares Russell 2000 ETF - IWM - close: 113.76 change: -1.75

Stop Loss: $113.35
Target(s): To Be Determined
Current Option Gain/Loss: -31.3%
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:
09/22/15: The market's widespread sell-off on Tuesday hit the small caps pretty good. The IWM fell -1.5%, underperforming its large-cap peers. The ETF broke the short-term trend of higher lows and hit our stop loss at $113.35.

- Suggested Positions -

NOV $115 CALL (IWM151120C115) entry $4.15 exit $2.85 (-31.3%)

09/22/15 stopped out
09/19/15 new stop @ 113.35
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

chart:


Martin Marietta Materials, Inc. - MLM - close: 166.02 change: -5.57

Stop Loss: $166.85
Target(s): To Be Determined
Current Option Gain/Loss: -64.3%
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:
09/22/15: Materials-related stocks were big underperformers today. MLM lost more than $5.50 by the closing bell (-3.2%). The stock was down -4.5% at its worst levels of the session. Our stop was hit at $166.85.

- Suggested Positions -

OCT $175 CALL (mlm151016C175) entry $5.60 exit $2.00 (-64.3%)

09/22/15 stopped out
09/19/15 new stop @ 166.85
09/03/15 triggered on intraday gap at $170.46, suggested entry was $170.25
Option Format: symbol-year-month-day-call-strike

chart: