Option Investor
Newsletter

Daily Newsletter, Wednesday, 10/7/2015

Table of Contents

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

Market Wrap

Strong Run for the Bulls

by Keene Little

Click here to email Keene Little
The stock market has had a strong run for the past seven days, with the DOW rallying just over 1000 points from low to high. By any measure we now have an overbought market, which makes bets on the long side a bit risky.

Today's Market Stats

With the DOW rallying 1000 points in seven days (SPX 127 points) we have an overbought market but that didn't bother the bulls today. A gap up to start the day was followed by more buying in the first 45 minutes but then the sellers hit hard. The selling had the indexes back in the red but then the buying started again and it lifted the indexes back up to near their morning highs (the RUT made new daily highs this afternoon). It looked like a bullish day but we're starting to see weakening momentum at the time when the leg up from September 29th looks close to completion. What follows this rally leg will provide an important clue for what the rest of the year might be like.

There were no major economic reports today to move the market and the morning floundered a bit before finding its legs and climbed back up. Other than the usual concerns about China it's been quiet overseas. The market is ignoring news about Syria and other problems that are having more of a negative impact on Europe than the U.S., which left the bulls with little interference in moving the ball. The DOW has now had its best winning streak since July (SPX missed the same accomplishment with a minor down day on Tuesday). I think most would agree that we're now looking for at least a pullback correction before continuing higher. Unless of course we're at the beginning of a blow-off move to a final top this year. I don't see that happening but this market has fooled me a time or two before (wink).

On the SPX weekly chart below you can see the double bottom with the August and September lows, both near price-level support at 1885, and a turn up in the oscillators (with MACD crossing to the upside). From a bullish perspective there's a lot to like on this chart since a double bottom with bullish divergence (on RSI) is a good reason to buy the "dip" in an uptrend. But are we in an uptrend? The correct answer to that question determines whether we should be looking to buy the dip or sell the rip. In my opinion we've already seen the final high and the sharp decline from July will be followed by another one, which makes the price consolidation since August a bearish continuation pattern. The more immediate question is how high the bounce might get before turning back down. From a weekly perspective I see upside potential in the 2040-2060 area, which would be a back-test of price-level S/R near 2040, the bottom of the up-channel from October 2011, near 2055, and a test of the broken 50-week MA, currently near 2059. As for downside potential, two equal legs down from July, if it drops from here, points to 1733, which would also be a test of the February 2014 low and the uptrend line from March 2009 - October 2011 (arithmetic price scale).

S&P 500, SPX, Weekly chart

In addition to the upside targets mentioned with the weekly chart above, the daily chart below shows the 200-dma currently near 2062 but coming down, so the upper target mentioned above, at 2060, would likely be very strong resistance. But there are some lower targets that could mean SPX will not even come close to the 2040-2060 target zone. I'm looking at the bounce off the August low as an a-b-c bounce correction to the July-August decline, which will be followed by another leg down. Two equal legs up from August, counting the leg up into the August 28th high as the 1st leg, points to 1998, which was achieved today. SPX also back-tested its 50-dma today, near 1996, and the bearish setup is for the start of the next leg down from here. But there is one other higher target for the 2nd leg of the bounce off the August low -- if I look at the move up from August into the September 17th high as the 1st leg of the bounce then the 2nd leg up projects to almost 2026 for equality. That remains upside potential until and unless SPX first drops below Tuesday's low at 1972, which would indicate the bounce has likely finished. Keeping it simple, I'd say bullish above the 50-dma, near 1996, bearish below.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2000
- bearish below 1871

Assuming we're only looking for an a-b-c bounce correction off the August low, the c-wave is the move up from September 29th and it needs to be a 5-wave move. On the 60-min chart below I've labeled the moves and I'm counting the 5th wave as the leg up from Tuesday's low. It projects to 2027 where it would equal the 1st wave. Note the correlation with the projection near 2026 for two equal legs up from August. The one caution about the upside projection for the 5th wave is that it's untrustworthy because many times it truncates and finishes early. In other words the rally could complete at any time and trap bulls who are buying into the expectation that the rally is breaking out to the upside.

S&P 500, SPX, 60-min chart

The DOW has the same pattern as SPX and the comments for SPX apply to the DOW. The pattern for the a-b-c bounce off the August low can be considered complete at any time and therefore betting on further upside is risky. But there is some additional upside potential to make it at least short-term risky for bears as well. There's price-level S/R near 17050 (December 2014 low at 17067 and Feb 2015 low at 17037) and then the top of a parallel up-channel for the bounce from August, currently near 17320.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,100
- bearish below 15,942

NDX has been struggling just beneath its price-level S/R line near 4345, as well as its broken uptrend line from 2012-2013-2014, currently near 4325 (arithmetic price scale). Only slightly higher and coming down is its broken 50-dma, currently near 4350. Yesterday and today it bounced off its 20-dma, currently near 4278 and climbing. It's looking like it will be a battle between the 20- and 50-dma's before we see which direction will be chosen. However, as with the discussion about SPX, it's looking like we should expect at most one more small rally before turning back down. A rally above the 50-dma could make it up to its 200-dma, near 4385, but probably not much, if any, higher.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4345
- bearish below 4119

Unlike the other indexes, the RUT had made new lows into its September 29th low, which was a test of price-level S/R near 1080, and therefore two equal legs up for its bounce off the August low, which points to 1168, would have it stopping short of its September 17th high at 1194. Near the projection for two equal legs up is its broken 50-dma, now near 1166 but coming down, and its downtrend line from June, near 1167. It's bullish above 1152 but I wouldn't press my luck if it gets up near 1168.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1152
- bearish below 1080

Looking to the bigger stock index, the NYSE Composite index, it's relatively easy to see the 3-wave bounce off the August low. Two equal legs for the a-b-c bounce points to 10312, only 28 points above today's high. But as you can see on its chart below, it has now run into its broken 50-dma, near 10266 (probably down near 10260 tomorrow), and the bears could set up an attack here. Not much above the 10312 projection is price-level resistance at 10387 (the 2007 high) so there's some upside potential but this is a risky spot to try a long play. The bigger pattern calls for a strong decline to follow the completion of the a-b-c bounce.

NYSE Composite index, NYA, Daily chart

Looking to the bond market for clues, it hasn't been much help lately. If the stock market is rallying I like to see the bond market selling (to help provide liquidity for the stock market). When the stock market sells off we often see that money rotating into the relative safety of bonds. The August 24th low for stocks was a high for bond prices, as can be seen on the TLT daily chart below. The September 17th high for stocks was a low for TLT. But since the September 29th low for stocks and the strong rally since then, TLT has essentially chopped sideways. In other words we're not seeing the typical support from a selloff in the bond market. In fact I think TLT has a good chance of continuing higher here after pulling back to its 50-dma for support yesterday and today. A continuation of the rally in bonds would likely put some pressure on the stock market, right at a time when I see the stock market bounce coming to an end.

20+ Year Treasury ETF, TLT, Daily chart

I usually show the weekly chart for the U.S. dollar since it gives a better longer-term perspective but tonight I'm using the daily chart to show the shorter-term picture and what to watch for. Since its March high I've been looking for the dollar to consolidate this year before heading higher next year. The large consolidation pattern looks like a shallow descending wedge, the top of which is currently near 97.30. There is a small rising wedge pattern for the bounce off the August 24th low, the top of which will cross the top of the descending wedge near 97.15 around October 20th. A rally up to that level and a reversal back down would be a good setup to see the dollar drop back down to the bottom of the descending wedge, near 91.75 in early December. That would then be a good setup for the start of a stronger rally in the dollar.

U.S. Dollar contract, DX, Daily chart

While the dollar has been consolidating in a shallow descending wedge, gold has also been working its way slowly lower, showing it doesn't trade counter to the dollar. Gold's decline has been reflecting the deflationary environment we've been in (and will continue to be in as the huge debt bubble is deflated) and I don't think we've seen the bottom for gold yet. We could see a larger bounce, perhaps up to 1195 for two equal legs up from the July 24th low, but at the moment gold is fighting its downtrend line from January, where it closed today at 1145. This is also only 3 points above price-level resistance near 1142. If it manages to push higher from here it will then run into resistance near 1180 where it would hit its 50-week MA and its longer-term downtrend line from October 2012. MACD has worked its way back up to the zero line from the low in July and a rollover from there would be a sell signal.

Gold continuous contract, GC, Weekly chart

Silver has been a little more bullish than gold this week and unlike gold it has popped above its August 21st high and made it up to its 50-week MA at 16.05 (today's high was 16.09 and it closed at 16.06). As can be seen on its daily chart below, it also reached its 200-dma at 15.97 and the trend line along the highs from September 3rd (it has formed an expanding triangle off its August 26th low). A price projection at 15.88, for two equal legs up from August, was also achieved. A downtrend line from July 2014 - May 2015 crosses the top of its expanding triangle pattern on Monday near 16.15 so it would be more bullish above that level but for now it's facing what could be stiff resistance to any further gains.

Silver continuous contract, SI, Daily chart

As with the dollar, I've been discussing the idea for a long sideways consolidation for oil before heading lower. A big sideways triangle is the pattern I'm thinking we'll see, which calls for 3-wave moves up and down for many months to come, but it's too early in the pattern to be sure how that will play out. For now it looks like oil should head higher following its month-long consolidation following its August 31st high. The triangle consolidation pattern fits well as the b-wave in an a-b-c move up from August 24th. Two equal legs up from that low points to 55.55 although it could run into trouble at its 200-dma, near 51, which would also be where the 2nd leg of its bounce would achieve 62% of the 1st leg up (a minimum expectation). It would turn more immediately bearish if it drops back below last Friday's low at 43.97.

Oil continuous contract, CL, Daily chart

Thursday and Friday continue the slow economic reports for this week. We'll get the FOMC minutes tomorrow afternoon but there should be no surprises for the market.

Economic reports and Summary

Conclusion

The price pattern got a little funky today but it's looking like we should expect only a little more upside before heading back down in a strong decline. I'm waiting for the completion of the 5th wave in the move up from September 29th, which would then complete an a-b-c bounce off the August low. That bounce fits best as a correction to the July-August decline and therefore should be setting up a very good opportunity to get short for another leg down. As mentioned for SPX, we could be looking at a 260-point drop, which would obviously be a nice trade. That's also the risk if you decide you want to hold onto a long position so be careful with your risk management.

Some cycle studies and comparisons of the price pattern since July to previous market crashes, including 1929 and 1987, suggest the market is vulnerable here. There's no guarantee of a strong decline to follow the bounce off the August low but I would say the odds favor the bears here and the coming decline, if we get it, could make the July-August decline look small. I mention this only to make you aware of the vulnerability. Upside potential is dwarfed by downside risk and I just don't see the value in holding long positions, such as in your 401(k). Go to cash, stay safe for the rest of the year or at least into November/December when we'll see if the coast is clear.

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

This Stock Is About To Break Resistance

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Salesforce.com, Inc. - CRM - close: 75.00 change: +0.58

Stop Loss: 72.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.6 million
Entry on October -- at $---.--
Listed on October 07, 2015
Time Frame: Exit PRIOR to earnings in November
New Positions: Yes, see below

Company Description

Trade Description:
Cloud computing and software giant CRM has been churning sideways for almost seven months. In spite of this lack of upward movement CRM is still outperforming the broader market. The NASDAQ composite is up +1.2% year to date. CRM is up +26%. The good news is that CRM looks poised to breakout past major resistance and begin its next leg higher.

CRM is part of the technology sector. According to the company, "Salesforce is the world's #1 CRM company. Our industry-leading Customer Success Platform has become the world's leading enterprise cloud ecosystem. Industries and companies of all sizes can connect to their customers in a whole new way using the latest innovations in cloud, social, mobile and data science technologies with the Customer Success Platform."

CRM's revenues have been consistently growing in the mid +20% range the last few quarters. Their Q4 revenues were up +26%. Q1 revenues were +23%. The company's most recent quarter was announced August 20th. Analysts were expecting Q2 results of $0.17 a share on revenues of $1.6 billion. CRM beat both estimates with a profit of $0.19 as revenues grew +23.5% to $1.63 billion. Management raised their Q3 and full year 2016 revenue guidance.

Technically the stock is in a long-term up trend and the point & figure chart is forecasting an $85.00 target. The $75.00-76.00 area is major resistance with CRM failing in this region multiple times. The recent rally has boosted CRM back to this level and the stock looks poised to breakout soon.

(Sidenote - CRM did hit an intraday high of $78.46 on April 29th thanks to M&A rumors. The company is still considered a potential acquisition target by larger rivals.)

We like CRM's relative strength and consistently strong earnings and revenue growth. A breakout here could spark a run that lasts until the company's earnings report in November. Tonight we are suggesting a trigger to buy calls if CRM trades at $76.25 (or higher).

Trigger @ $76.25

- Suggested Positions -

Buy the DEC $80 CALL (CRM151218C80) current ask $0.00
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

Healthcare & Oil Lift Stocks

by James Brown

Click here to email James Brown

Editor's Note:

A rally in healthcare names, led by a surge in the beaten down biotech stocks, helped boost the market on Wednesday. Meanwhile another rally in crude oil continues to fuel gains for energy-related stocks.


Current Portfolio:


CALL Play Updates

Alkermes Plc - ALKS - close: 59.98 change: +1.48

Stop Loss: 54.25
Target(s): To Be Determined
Current Option Gain/Loss: -58.6%
Average Daily Volume = 1.0 million
Entry on October 05 at $61.17
Listed on October 03, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments:
10/07/15: It was a volatile morning for biotech stocks. ALKS followed the group higher and outperformed the major indices with a +2.5% gain on the session. Shares probably got a boost from some bullish analyst comments this morning and a new, higher price target ($78).

I am suggesting investors wait for ALKS to trade above $61.25 before considering new bullish positions.

Trade Description: October 3, 2015:
The U.S. market delivered an impressive bounce the last few days. If this rebound continues the beaten-down biotech stocks could easily outperform. ALKS looks like a good candidate to capture the bounce.

ALKS is in the healthcare sector. According to the company, "Alkermes plc is a fully integrated, global biopharmaceutical company developing innovative medicines for the treatment of central nervous system (CNS) diseases. The company has a diversified commercial product portfolio and a substantial clinical pipeline of product candidates for chronic diseases that include schizophrenia, depression, addiction and multiple sclerosis. Headquartered in Dublin, Ireland, Alkermes plc has an R&D center in Waltham, Massachusetts; a research and manufacturing facility in Athlone, Ireland; and a manufacturing facility in Wilmington, Ohio."

The earnings picture for ALKS seems to be improving. Looking at the last few earnings reports ALKS has beaten Wall Street expectations on both the top and bottom line the last three quarters in a row. Their most recent report, on July 30th, was follow up with management raising their 2015 guidance above analysts estimates.

While the earnings picture is supportive for a bullish bias, today's trade is more of a technical one. The biotechs have been crushed lately (Thanks, Hillary Clinton!) and shares of ALKS plunged from resistance near $73.00 to support near $54.00. Now it's starting to rebound. This is not the first time ALKS has bounced from this area.

Tonight we are suggesting a trigger to buy calls at $60.75. Our target is $71.50. Plan on exiting prior to ALKS' earnings report in late October. Please note that I consider this a more aggressive trade because the option spreads on ALKS' November options are a little bit wide (and because ALKS is a biotech stock and biotech stocks tend to be more volatile anyway but regular readers already know that).

- Suggested Positions -

Long NOV $65 CALL (ALKS151120C65) entry $3.50

10/06/15 a very volatile day with ALKS down -11% from its intraday highs. Shares close down -2%.
10/05/15 triggered on gap open at $61.17, suggested entry was $60.75
Option Format: symbol-year-month-day-call-strike


Costco Wholesale Corp. - COST - close: 147.96 change: -0.45

Stop Loss: 141.85
Target(s): To Be Determined
Current Option Gain/Loss: +22.0%
Average Daily Volume = 1.9 million
Entry on October 05 at $146.25
Listed on October 03, 2015
Time Frame: Exit PRIOR to November option expiration
New Positions: see below

Comments:
10/07/15: COST turned in a lazy session on Wednesday. Its early morning gains faded and shares closed with a -0.3% decline. Tomorrow morning we'll hear the monthly retail sales figures for September. The story today is September's retail numbers (for the retail industry, not just COST) are likely to be sluggish. According to the IBD the recent warm weather has cooled spending on fall apparel.

Yesterday I suggested buying calls on a dip near $147.00. I'm adjusting that plan tonight. Today's move in COST has created a technical sell signal with a bearish engulfing candlestick reversal pattern. I suspect we could see COST dip tomorrow so readers may want to take a step back and just watch to see where COST finds support. The $145.00 level should offer support and likely a spot for COST to bounce.

Trade Description: October 3, 2015:
Thus far 2015 has been a frustrating year for COST bulls. After years of steady stock price appreciation (2009-2014) the rally peaked in the first quarter of 2015. Shares spent months correcting lower but it looks like the worst may be behind it for COST.

If you're not familiar with COST they are in the services sector. The company runs a membership warehouse business that competes with the likes of Sam's Club (a division of Wal-Mart). According to the company, "Costco currently operates 686 warehouses, including 480 in the United States and Puerto Rico, 89 in Canada, 36 in Mexico, 27 in the United Kingdom, 23 in Japan, 12 in Korea, 11 in Taiwan, seven in Australia and one in Spain. The Company plans to open up to an additional 16 new warehouses (including one relocation to a larger and better-located facility) prior to the end of its fiscal year on August 30, 2015. Costco also operates electronic commerce web sites in the U.S., Canada, the United Kingdom and Mexico."

Revenue growth has been lackluster this year. COST has managed to beat Wall Street estimates on the bottom line but the revenue number has been soft. Their most recent quarterly report was announced on September 29th. Earnings were up +10% from a year ago to $1.73 a share. That beat estimates. Yet COST said their Q4 revenues were virtually flat (+0.7%) to $35.78 billion. That missed expectations. Comparable store sales were up +2% in the U.S. but down -10% in Canada.

A lot of COST's revenue troubles have come from lower oil, which has pushed gas prices lower. The big drop in gas prices cuts their revenue growth. Plus the stronger dollar hurts their foreign sales. The company continues to expand its presence in the U.S. and overseas. Management plans to launch 12 new warehouses this quarter. Overall COST plans to build 32 new stores in the next 12 months, including its first store in France.

The stock looks poised to breakout past its July, August, and September highs and make a run at its 2015 highs. We suspect COST is going to grab more investor attention as we approach the holiday shopping season. The stock tends to see a rally from September into Black Friday (the day after Thanksgiving).

Tonight we are suggesting a trigger to buy calls at $146.25. More conservative traders may want to wait for a rally past the September peak ($146.90) or even past short-term resistance $147.00. We want to jump in a little early as COST could surge wants it clears $147.00.

- Suggested Positions -

Long NOV $150 CALL (COST151120C150) entry $2.00

10/07/15 COST could see a short-term dip here.
10/05/15 triggered @ $146.25
Option Format: symbol-year-month-day-call-strike


The Home Depot, Inc. - HD - close: 119.65 change: +0.97

Stop Loss: 114.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.3 million
Entry on October -- at $---.--
Listed on October 05, 2015
Time Frame: Exit PRIOR to earnings on November 17th
New Positions: Yes, see below

Comments:
10/07/15: HD spent the day churning sideways but it did so with a bullish bias. The stock added +0.8% and looks poised to breakout past round-number resistance at $120.00 soon.

We are suggesting a trigger to buy calls at $120.25.

Trade Description: October 5, 2015:
Home Depot's stock has outperformed the broader market in spite of the fact shares have been stuck in a trading range for the last seven months. That could be about to change.

The big surge in the U.S. housing market this year has been a bullish tailwind for HD's business. The home remodeling and repair industry and consumer spending in this category is expected to hit levels not seen since before the "Great Recession" in 2008-2009. HD is poised to reap the benefits.

HD is in the services sector. According to the company, "The Home Depot is the world's largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. In fiscal 2014, The Home Depot had sales of $83.2 billion and earnings of $6.3 billion. The Company employs more than 370,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index."

HD has been showing steady earnings and revenue growth. The company has beaten Wall Street estimates on both the top and bottom line the last three quarters in a row. Management has also raised their guidance the last three quarters in a row.

Their most recent report was August 18th. HD announced its Q2 earnings were up +14% from a year ago to $1.71 per share. Revenues were up +4.3% to $24.83 billion. Comparable store sales came in better than expected with a +4.2% improvement.

Wall Street analysts seem bullish with firms like Deutsche Bank and UBS recently raising their price targets on HD. Currently the point & figure chart is bearish but a rally past $120.00 would generate a brand new buy signal.

Earlier I mentioned that HD has been stuck in a long trading range or consolidation for most of 2015. With the exception of a few days, shares of HD have been churning sideways in the $110-120 range. Today HD looks poised to breakout from this channel. The $120.00 level is round-number resistance. Tonight we are suggesting a trigger to buy calls at $120.25. Plan on exiting prior to HD's earnings report in mid November.

Trigger @ $120.25

- Suggested Positions -

Buy the NOV $125 CALL (HD151120C125)

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




PUT Play Updates

The Cooper Companies Inc. - COO - close: 142.68 change: -2.03

Stop Loss: 150.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 469 thousand
Entry on October -- at $---.--
Listed on October 06, 2015
Time Frame: Exit PRIOR to November options expiration
New Positions: Yes, see below

Comments:
10/07/15: The relative weakness in COO continued with the stock falling -1.4% on Wednesday. The stock is poised to breakdown below its early September low. Our suggested entry point to buy puts is $141.75.

Trade Description: October 6, 2015:
Healthcare stocks have been strong market performers for years. The group seems to be struggling with healthcare down -11% in the third quarter. Shares of COO are also underperforming the broader market. COO is down -10.7% year to date but it's down -23.4% from its 2015 highs. That means shares are in a bear market.

If you're not familiar with the company, here's a brief description: "The Cooper Companies, Inc. is a global medical device company publicly traded on the NYSE Euronext (COO). Cooper is dedicated to being A Quality of Life Company(TM) with a focus on delivering shareholder value. Cooper operates through two business units, CooperVision and CooperSurgical. CooperVision brings a refreshing perspective on vision care with a commitment to developing a wide range of high-quality products for contact lens wearers and providing focused practitioner support. CooperSurgical focuses on supplying women's health clinicians with market leading products and treatment options to improve the delivery of healthcare to women. Headquartered in Pleasanton, CA, Cooper has close to 10,000 employees with products sold in over 100 countries."

Earnings results have been mixed but there has been one constant over the last three quarters. COO has missed Wall Street's revenue estimate the last three quarters in a row. Plus, COO management has lowered their revenue guidance three quarters in a row.

The company's most recent earnings report was its Q3 results, announced on September 3rd. Earnings were $1.97 per share. That beat estimates by two cents but represents a -2% drop from a year ago. Revenues were down -6.8% to $461.7 million.

Shares of COO plunged on its revenue miss and lowered revenue guidance. The oversold bounce in September has failed. Now shares are poised to breakdown down to new 2015 lows and could begin its next major leg lower. The stock found support near $142.00 last month. Tonight we are suggesting a trigger to buy puts at $141.75. Plan on exiting prior to November options expiration. Investors may want to limit their position size to reduce risk because COO's option spreads are a little bit wide.

Trigger @ $141.75

- Suggested Positions -

Buy the NOV $140 PUT (COO151120P140)

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