Option Investor
Newsletter

Daily Newsletter, Wednesday, 9/23/2015

Table of Contents

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

Market Wrap

Post-FOMC Slump

by Keene Little

Click here to email Keene Little
Following last week's market disappointment about the Fed not being sure what to do, the bulls have had one less reason why they should move the market higher. The bears sensed weakness from the Fed and pounced and it appears they might not be done pouncing.

Today's Market Stats

Equity futures sold off hard in the after-hours session last night but were then rescued later in the session after the European markets started trading. The market finished down as it continues to worry about more signs of a global economic slowdown and a powerless Fed (and other central banks) to do anything. The once mighty leaders of the market, I mean banks, have lost their luster after successfully painting themselves into an inescapable corner. It's looking like the market could struggle some more as it looks for a reason to rally (finding little in the process).

As I've been traveling around Ireland the past two weeks it's been difficult concentrating on anything other than the road (I've driven on the left side before (in Japan) so it's not totally new but it certainly requires the mantra "stay to the left, look right before crossing") and consequently I've missed some big moves in the market in the past two weeks. But I arrived in Ireland on September 10th and the DOW hit a low at 16212 that day. Today's low for the DOW was 16212 so from that I should assume nothing has happened. Of course plenty has happened since then as the DOW rallied more than 700 points into last Thursday's high before giving it all back by today's low. Well, that was fun and now we wonder what's next.

We didn't have much in the way of economic reports this morning and the only thing traders might have been worried about was the overnight decline might pull the cash indexes down for a retest. The day started with a small gap up, a quick pullback and then a rally attempt that failed about 11:00 AM. Yesterday's lows were tested at today's midday lows and that was followed by another bounce attempt to lower high. The pattern since yesterday is looking like a bearish continuation pattern and it should resolve lower, but possibly not much lower before setting up a larger bounce (to a lower high below last Thursday's). The net result could be more volatile price action over the next week.

I was asked recently how we could still be in a bear market since the indexes have been making new highs in the past year (the last being the May high for the blue chips). I thought it might be a good time to again review the big picture and work my way down, using the DOW for this exercise. I think it will help explain why I'm looking for a much larger decline in the next two years and why I think long plays are now to be considered counter-trend (some will be significant multi-week bounces to be traded on the long side but I think it's good to have a sense of the overall trend and then trade with it or against it when the pattern suggests it).

The high in May, at 18351, which was above the 2007 high at 14198, fits as the d-wave in an expanding triangle pattern that should complete with an a-b-c-d-e wave count. This particular triangle fits well as a large-degree 4th wave correction that started off the 2000 high. It's not hard to argue the 2009 low completed the 4th wave correction with the A-B-C pullback, which would mean a new secular bull market started off the 2009 low, but the rally since 2009 looks corrective and that supports the interpretation that it's still one of the legs of a triangle (all triangle patterns have corrective rather than impulsive wave structures). The depiction for another leg down to a lower low than 2002 and 2009 is shown on the monthly chart below.

DOW Industrials, monthly chart

This expanding triangle pattern is similar to the smaller-degree 4th wave for the previous secular bear market (1966-1982). The expanding triangle portion of the bear ran from 1966 to 1974, which was then followed by more or less a contracting triangle until 1982. Back then the January 1973 high for the DOW was higher than the 1966 and 1968 highs and yet still led to a low below both the 1966 and 1970 lows. The 1970 low could also have been interpreted as the conclusion to a big A-B-C pullback from 1966 and the new high in 1973 was certainly looking bullish at the time. Some will argue it was the oil embargo that caused the next decline but it's important to remember it doesn't matter the reason. The only thing that matters is that something caused a sentiment shift, which I believe we're experiencing now. The 1970-1973 rally was a 3-wave move and it was followed by a new low into the end of 1974. So the pattern shown above is hardly a novel idea.

DOW Industrials, 1965-1983

The 1966-1982 pattern ended up looking like a diamond pattern, which turned into a bullish continuation pattern instead of a major top and it's possible we'll see something similar, which would mean a continuation of a sideways consolidation with large price swings could be with us well into the 2020s. But since secular cycles tend to run about 18 years, it's not unreasonable to think a strong decline into 2017-2018 will finish off the bear. Once the final wave (wave-e) of this triangle pattern completes (typically down at the bottom of the triangle but it doesn't have to get there) we'll start a large-degree 5th wave rally for the next secular bull.

I think the stock market could also be ready to follow commodities after diverging since 2011. Note the recent (August) break of the uptrend line on RSI from the 2009 low (this is for SPX). While there's always the possibility the market could make another stab at a new high, if it did so with a back-test of the broken uptrend line I'd be all over it like Pooh Bear and his honey. The last time there was this large of a divergence was 1999 and the stock market peaked in 2000 while the commodity index roared back. We might see a replay of that scenario in the next year or two.

SPX vs. DJUBS Commodity index, monthly chart

Last week the DOW bounced back up to its trend line along the highs from 1971-1972-1987 (log price scale), which was last tested at the October 2014 low and then was broken on August 21st and is now resistance. The price action following the August 24th low has continued to be choppy and therefore looks like a bearish continuation pattern. But at this point we don't know if we'll get anything more than a retest of August low before setting up a bigger bounce correction. Until I see something impulsive to the upside I look at bounces as shorting opportunities.

Dow Industrials, INDU, Weekly chart

The DOW broke its uptrend line from August 24 - September 4 last Friday and then yesterday it broke down from a parallel up-channel for the 2nd leg of its bounce off the August low, which only helps confirm it's probably heading lower from here (or maybe only a test of the low). Note MACD on the daily chart below curling over at the zero line, which is usually a good sell signal. The bulls want to see MACD climb back above the zero line.

Dow Industrials, INDU, Daily chart

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

The DOW has an uptrend line for the 2nd leg of its bounce off the August low, which runs from the September 1st and 4th lows. It was tested yesterday and again today, which were also tests of the September 10th low at 16212. The lows since last Friday are showing short-term bullish divergence, which means it could bounce back up from here and give us a larger consolidation pattern. But the choppy sideways consolidation since Tuesday is looking like a bearish continuation pattern, which suggests lower prices sooner rather than later.

Dow Industrials, INDU, 60-min chart

SPX looks like the DOW -- it broke its uptrend line from August and while it could go more sideways from here I think the higher-odds scenario is lower prices before setting up a larger bounce correction.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2000
- bearish below 1937

The weekly chart of the Nasdaq shows its broken uptrend line from October 2011 - October 2014, near 4940, and its 50-week MA, near 4870, have both been broken and back-tested. Stay bearish the techs as long as the COMPQ stays below last Thursday's high.

Nasdaq Composite index, COMPQ, Weekly chart

Key Levels for NDX:
- bullish above 4960
- bearish below 4625

The RUT failed to get any follow through to its rally last Thursday when it rallied above its downtrend line from July 16 - August 17 and back above its broken uptrend line from 2011-2014, both of which crossed on Thursday near 1175. That rally has been followed by a break of price-level support near 1152 and its 20-dma, now near 1153. It could whip around over the next week or so but the pattern continues to suggest lower prices.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1194
- bearish below 1124

I won't be able to get additional charts out tonight because of a weak data signal where I'm staying for the night and the wi-fi service is apparently not working either. I can't seem to get my charting program to stay connected. About all I can say about the other charts I post each Wednesday is that I don't see any changes to my expectations. The dollar should continue to consolidate for weeks/months before starting another rally. Gold and silver both look like they head lower soon and oil should head higher after its multi-week consolidation, probably up to the $56 area before turning back down in its larger sideways consolidation that started this year.

Tomorrow morning's economic reports include the Durable Goods Orders for August, which are expected to show significant weakness compared to the July numbers. If they come in as negative as expected it's going to be just one more report that the Fed is going to have to ignore if they want to keep talking about rate increases. The Fed is stuck and the market is starting to get that.

Economic reports and Summary

Conclusion

There's been a lot of choppy price action, with some large whipsaws following the August 24th low and sharp bounce. The price action continues to look more corrective than impulsive and that keeps it looking like a bearish continuation pattern. I'm expecting lower prices, or at least a retest of the August lows. There's a more bearish interpretation of the pattern that calls for another sharp decline to match the one into the August lows and that should keep bulls very cautious. Look for bounces to short until we see something more bullish to the upside.

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

Keene H. Little, CMT

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


New Option Plays

Basic Materials & Shoes

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Compass Minerals Intl. - CMP - close: 79.08 change: -2.67

Stop Loss: 83.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 269 thousand
Entry on September -- at $---.--
Listed on September 23, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: Yes, see below

Company Description

Trade Description:
Continued weakness in commodities is really started to weigh down the basic material stocks. CMP could be on the verge of a big breakdown.

CMP is in the basic materials sector. According to the company, "Compass Minerals is a leading provider of essential minerals that provide solutions to nature's challenges, including salt for winter roadway safety and other consumer, industrial and agricultural uses, and specialty plant nutrition minerals that improve the quality and yield of crops. The company produces its minerals at locations throughout the U.S. and Canada and in the U.K."

Looking at CMP's last few earnings reports their results have been mixed. They tend to beat Wall Street's estimate on the bottom line but revenues have been up and down. The most recent report (Q2) came out on July 27th. Revenues were down -1.6% from a year ago but that actually beat expectations. CMP's management has reaffirmed their full year guidance two quarters in a row but that hasn't stopped multiple analyst firms from downgrading their outlook for the stock.

Technically CMP has been churning sideways in the $79.00-86.00 trading range for about three months. A breakdown through the bottom of this range would also generate a new sell signal on the point & figure chart.

Tonight we are suggesting a trigger to buy puts at $78.70. Plan on exiting prior to CMP's earnings report in late October.

Trigger @ $78.70

- Suggested Positions -

Buy the DEC $75 PUT (CMP151218P75) current ask $2.65
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:


Deckers Outdoor Corp. - DECK - close: 58.95 change: -1.56

Stop Loss: 62.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 775 thousand
Entry on September -- at $---.--
Listed on September 23, 2015
Time Frame: Exit PRIOR to earnings
New Positions: Yes, see below

Company Description

Trade Description:
Slowing sales and rising expenses is a dangerous recipe. Investors seem to have lost confidence in DECK with the stock down -35% year to date.

DECK is in the consumer goods sector. According to the company, "Deckers Brands is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The Company's portfolio of brands includes UGG®, Teva®, Sanuk®, Ahnu®, and HOKA ONE ONE®. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, 143 Company-owned and operated retail stores, and select online stores, including Company-owned websites. Deckers Brands has a 40-year history of building niche footwear brands into lifestyle market leaders attracting millions of loyal consumers globally."

The stock was crushed in January 2015 with a plunge from $94 to $66. A big chunk of that decline was a reaction to their earnings (January 29th). DECK missed estimates on both the top and bottom line and lowered guidance.

Since then DECK has seen some improvement in earnings but their most recent report was still disappointing. DECK reported its 2016 Q1 results on July 30th. Wall Street was expecting a loss of ($1.50) per share on revenues of $213 million. DECK delivered a loss of ($1.43) a share. That beat estimates but it was still worse than the ($1.07) loss a year ago. Revenues were up +4.5% to $221 million. Unfortunately DECK said their expenses were up while margins contracted.

DECK management also offered soft Q2 guidance while bumping their full-year 2016 earnings estimates. Investors chose to sell. Their Q1 results saw Teva brand sales up +6.8% but Sanuk brand sales fell -7.0% while Ugg brand sales dropped -7.2%. The Ugg number is important since Ugg sales account for more than 50% of DECK's revenues.

It looks like the bears might be right about this one but I have to warn you this is starting to look like a crowded trade. The most recent data listed short interest at 20% of the 32.1 million share float. This raises the risk of a short squeeze. Consider small positions to limit risk.

Technically DECK is in a bear market. The trend of lower highs is pushing it lower. Today DECK just broke down below key support at the $60.00 level. The next support area could be the $50 region. Today's low was $58.77. I am suggesting a trigger to open bearish positions at $58.65.

Trigger @ $58.65

- Suggested Positions -

Buy the NOV $55 PUT (DECK151120P55) current ask $2.35
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

Markets Meander Midweek

by James Brown

Click here to email James Brown

Editor's Note:

European markets managed widespread gains in spite of big declines in Asia. The U.S. market tried to rally a couple of times but eventually settled in the red after a choppy day of trading.

VMC and JACK hit our stop loss.

AON hit our entry trigger.


Current Portfolio:


CALL Play Updates

Avago Technologies - AVGO - close: 125.54 change: +0.84

Stop Loss: $123.65
Target(s): To Be Determined
Current Option Gain/Loss: -78.4%
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:
09/23/15: AVGO rallied from under $124 to almost $128 before lunchtime. Gains faded by the close but AVGO still outperformed the broader market with a +0.6% gain. This could just be an oversold bounce after five days of losses.

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: 101.57 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:
09/23/15: The drift lower in DIS continues. That's not a typo. The stock lost 92 cents today and 92 cents yesterday. I suspect DIS will test round-number support at $100 if the broader market continues to sink.

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: 69.46 change: +0.77

Stop Loss: $67.35
Target(s): To Be Determined
Current Option Gain/Loss: -22.9%
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:
09/23/15: EA garnered a new, higher price target ($86), which may have helped shares outperform today. The stock added +1.1% but failed to breakout past resistance near $70.00 and its 50-dma.

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: 93.97 change: +1.01

Stop Loss: $90.65
Target(s): To Be Determined
Current Option Gain/Loss: +400.0%
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:
09/23/15: There was no follow through on yesterday's profit taking in FB. The stock bounced and outperformed the major indices with a +1.0% gain. The company saw a lot of headlines about the future of virtual reality and how FB is poised to cash in on the new trend. FB bought VR firm Occulus Rift for $2 billion back in 2014.

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: 31.87 change: -0.44

Stop Loss: $31.45
Target(s): To Be Determined
Current Option Gain/Loss: -50.0%
Average Daily Volume = 5.7 million
Entry on September 08 at $31.32
Listed on September 5, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments:
09/23/15: Energy stocks trend lower again today and NBL followed suit with a -1.3% decline. Shares are flirting with a breakdown below what should be short-term support in the $32.00 area - a region bolstered by its 10-dma and 20-dma.

If this weakness continues we will want to exit. Tonight we are adjusting the stop loss to $31.45.

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: 67.89 change: +0.57

Stop Loss: 64.65
Target(s): To Be Determined
Current Option Gain/Loss: -28.0%
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:
09/23/15: POST displayed some relative strength today with a +0.84% gain. This morning the company announced they were buying Williamette Egg Farms for $90 million. POST said the deal with add $80 million in net sales and $15 million to adjusted EBITDA. The deal should be completed in the first quarter of 2016.

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: 128.05 change: +0.81

Stop Loss: $124.95
Target(s): To Be Determined
Current Option Gain/Loss: -61.0%
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:
09/23/15: STZ delivered a bounce with a +0.6% gain on Wednesday. Shares almost erased yesterday's losses. I am still cautious on STZ and we are running low on time with earnings coming up soon.

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: 88.12 change: +1.42

Stop Loss: $85.45
Target(s): To Be Determined
Current Option Gain/Loss: -46.7%
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:
09/23/15: This morning shares of SWKS were upgraded to a "strong buy". The stock reacted with a rally from the $86.20 area up toward $89.00. SWKS eventually pared its gains and settled with a +1.6% rally for the day. The $90 area, combined with the 50-dma and 200-dma, is still short-term overhead resistance.

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: 71.16 change: -0.06

Stop Loss: $69.85
Target(s): To Be Determined
Current Option Gain/Loss: -36.2%
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:
09/23/15: Wednesday turned out to be a very quiet session for shares of TJX. The stock opened at $71.15 and closed at $71.16.

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




PUT Play Updates

Aon plc - AON - close: 89.09 change: -0.44

Stop Loss: 92.25
Target(s): To Be Determined
Current Option Gain/Loss: -15.2%
Average Daily Volume = 1.2 million
Entry on September 23 at $88.65
Listed on September 22, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments:
09/23/15: AON broke down to new 2015 lows this morning. Shares fell to $88.50. Our trigger to buy puts was hit at $88.65. AON did pare its decline by the closing bell. If you're looking for an entry point I suggest waiting for AON to trade below today's low ($88.50).

Trade Description: September 22, 2015:
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.

- Suggested Positions -

Long 2016 JAN $85 PUT (AON160115P85) entry $3.30

09/23/15 triggered @ $88.65
Option Format: symbol-year-month-day-call-strike


Caterpillar Inc. - CAT - close: 70.20 change: -1.48

Stop Loss: 76.10
Target(s): To Be Determined
Current Option Gain/Loss: + 7.7%
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:
09/23/15: CAT weighed on the Dow Industrials as the sock fell -2.0%. This is a new multi-year closing low for the stock. More conservative investors may want to start adjusting their stop loss lower.

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: 104.71 chg: +0.20

Stop Loss: 108.25
Target(s): To Be Determined
Current Option Gain/Loss: -32.1%
Average Daily Volume = 470 thousand
Entry on September 23 at $104.45
Listed on September 19, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: see below

Comments:
09/23/15: IFF dipped to a new low on a spike this morning. Shares tagged our entry trigger at $104.45 but the sell-off didn't last. IFF managed to bounce and actually closed higher on the session.

Officially our trade is open but I would wait for a drop below today's low ($104.23) before initiating new positions.

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.

- Suggested Positions -

Long NOV $100 PUT (IFF151120P100) entry $2.80

09/23/15 triggered @ $104.45
Option Format: symbol-year-month-day-call-strike


Tiffany & Co. - TIF - close: 78.64 change: -0.07

Stop Loss: $80.35
Target(s): To Be Determined
Current Option Gain/Loss: -27.3%
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:
09/23/15: It was a relatively quiet day for TIF. The early morning bounce failed at $79.21. Shares closed virtually unchanged on the session. The $80.00 area should be overhead resistance. We are going to try and reduce our risk by moving the stop loss down to $80.35.

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

09/23/15 new stop @ 80.35
09/19/15 new stop @ 82.35
09/11/15 triggered @ $79.75
Option Format: symbol-year-month-day-call-strike



CLOSED BULLISH PLAYS

Vulcan Materials Co. - VMC - close: 93.71 change: -3.55

Stop Loss: $95.85
Target(s): To Be Determined
Current Option Gain/Loss: -62.5%
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:
09/23/15: Shares of VMC were hammered today on no news. The stock opened at $97.49 and then plunged to $92.00 before trimming its losses. Our stop loss was hit at $95.85.

- Suggested Positions -

NOV $105 CALL (VMC151120C105) entry $3.60 exit $1.35 (-62.5%)

09/23/15 stopped out
09/19/15 new stop @ 95.85
09/16/15 triggered @ $101.15
Option Format: symbol-year-month-day-call-strike

chart:


CLOSED BEARISH PLAYS

Jack In The Box - JACK - close: 78.43 change: +0.15

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:
09/23/15: The bounce in JACK continued on Wednesday and shares hit our stop loss at $78.45. Readers may want to keep JACK on their watch list. This bounce should roll over soon.

- Suggested Positions -

OCT $75 PUT (JACK151016P75) entry $2.84 exit $0.95 (-66.5%)

09/23/15 stopped out
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

chart: