Option Investor
Newsletter

Daily Newsletter, Monday, 10/12/2015

Table of Contents

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

Market Wrap

Waiting On Earnings

by Thomas Hughes

Click here to email Thomas Hughes
The market held steady while we wait on earnings season to really start.

Introduction

The market held steady today while we wait on earnings season to really get started; the first report of the season was several weeks ago, the unofficial start was last week with Alcoa but this week is when it really begin to get started. For one, the big banks report en masse, for another the quality of companies reporting goes way up. Today there was only one name on the list I saw, tomorrow there are a few dozen led by names like CSX, Johnson & Johnson, Intel and JP Morgan Chase.

The morning started off on a positive note. Asian markets got a lift from the PBOC which said the correction in Chinese stock markets was nearly over. The mainland Shang Hai index gained 3.2% on the news followed by a 1.6% rise in the Nikkei and a 1.2% rise in the Hang Seng. The positive vibe helped support European indices as well but just enough to keep them above break even.

Market Statistics

Futures trading indicated a flat to slightly positive open in the early hours of trading. There were no economic or earnings releases to move the market and trading was fairly calm. The indices opened just above break even and then traded around that level the rest of the day. Action was a little choppy but the range was very narrow and volume was light all day and into the close. With so much on the calendar for the week, and nothing really happening today, it is not surprising to see the market hold steady like this. Tomorrow we will start to get a deeper insight into actual earnings for the season so action could be a little different.

Economic Calendar

The Economy

No economic data today but there is a bit coming out later this week with most coming out Wednesday, Thursday and Friday. Tomorrow is only Treasury Budget information. Wednesday is the Fed's Beige Book. Also, PPI, Retail Sales and Business Inventories. Thursday is Jobless Claims, CPI, Empire Manufacturing and Philly Fed. Friday wraps it up with TIC Flows, Industrial Production, Capacity Utilization, JOLTs and Michigan Sentiment. Out of them all CPI, PPI and the Beige Book top my list of things to watch. They are all important but these have the most direct impact on outlook, inflation and FOMC rate hike speculation. Both inflation gauges are expected to show slight declines, in the range of -0.1% to -0.2%. JOLTs is also a good one to watch. It shows the number of job openings. In light of the recently weak NFP report a strong JOLTs would be reassuring.

Moody's Survey of Business Confidence declined for the 6th week in a row. This week it fell -0.1% to 39.6 and the lowest level since March 6th. Despite the decline it is still trending near all time highs and above levels seen before 2008. According to Mark Zandi, Moody's Chief Economist, global businesses remain upbeat, led by those in the US. He says that in the US hiring remains strong, as do sales and pricing.


According to FactSet the blended rate for S&P earnings for the third quarter is now -5.5%. This is -0.1% lower than last week and -4.4% lower than at the beginning of the quarter. The energy sector is still leading in expected declines, near -65%. The ex-energy blended rate is now 1.8%. If the 4 year average hold true we can expect to see these number improve by up to 4% or more, leaving the final rate near -1.4% for the full index and 5.25% ex-enegy. So far 24 companies have reported, 19 beat earnings expectations, 14 beat on the revenue side.

Looking forward things are not shaping up quite as rosy as expected. The projected Q4 earnings growth rate for the S&P 500 is now negative at -0.4%. This is due largely to downward revisions in the energy sector. Ex-energy the rate is near 5%. Taking into account the 4 year averages we can expect both those numbers to rise by up to 4% by the end of the 4th quarter reporting season leaving full index growth near 3.5%, and ex-energy growth near 9%.

2016 is still positive but full index growth now stands at 9.7% for the year. All quarters are expected to see earnings growth, starting in the first quarter with 4.9% and moving up from there. Q2 growth is expected to be near 7.0%, Q3 doubles that to 14.3% and Q4 stands at 14.1%.

The Oil Index

Oil prices took a dive today, from recent highs, with both WTI and Brent shedding nearly -5%. A report that frackers had upped their hedges on oil at $50 may have been the trigger. Mixed news from OPEC may have also helped to depress prices. On the one side Kuwait oil ministers and others within the cartel are sounding bullish on prices into next year. On the other Saudi production is up 7% from this time last year. On the domestic front rig counts are still falling but supply and production remain high. Prices fell from a three month high and could be retreating back to the $45 support level.

The Oil Index fell a little more than -1.25% in today's session, closing with a loss near -0.85%. The index appears to be retreating to support at the recently broken 1175 level. This could lead to a retest of support or break through with next support target near 1125 and the short term moving average. The indicators are bullish and strong, upside momentum just made an extreme peak convergent with a new high, so a retest of this high is likely.


The Gold Index

Gold extended its rally, driven by a dovish Fed, Fed minutes and reduced inflation expectations. The metal gained an additional $5 in today's trading and crossed above $1160 for the first time since early August. At this level gold is trading near the top of its 4 month range and at resistance with a rate hike still expected to come, perhaps this year. If data continue to be weak, particularly inflation, gold could break above this range. If so next resistance is in the $1180 range, if not support is down near $1130.

The gold miners got a lift early in the day, on gold's strength, but bears were lurking. The Gold Miners ETF GDX gapped up at the open to begin trading at resistance levels and sold off from there. The ETF ended the day with a loss near -3.7% and creating a long black candle. The ETF has confirmed resistance above the top of its range and appears set to return to support, possible as low as $12.50. Stochastic and MACD are both still bullish but indicating near term decline and consistent with a trading range. Divergence is also present between the current high, a three month high, and peaks in both indicators. Today's candle is also a Dark Cloud Cover candle pattern, and accompanied by divergence in the indicators, both suggestive of lower prices. This is of course dependent on gold prices, if gold continues to strengthen or consolidate at today's levels the miners are likely to find support. In the meantime profit taking may continue.


In The News, Story Stocks and Earnings

Eli Lilly reported an end to a trial of one of its heart drugs this morning. The drug was in the final stages of trials of up til now expected to pass. The news was a surprise and comes on the recommendation the drug would not meet approval as a therapy for heart disease. Shares of the stock took a hit in the early pre-market session and lost more than -8% at the open. There were some buyers during the day, price was able to rise from the early low, but the losses were not recovered. Shares are now trading at the bottom of a 5 month range.


Many of the big banks report this week. The financial sector is only expected to produce earnings growth in the range of 4.5% this quarter but Bank of America is expected to be one of the top producers of growth for the entire S&P 500. Tomorrow JP Morgan reports, Wednesday it's Wells Fargo, Thursday is BB&T, Bank of America and Goldman Sachs. Many smaller regional banks will also be reporting, and the onslaught will continue next week. This week, today, the Financial Sector Spyder XLF gained 0.26% in a quiet day of trading. The ETF is sitting just above support levels and the short term moving average with bullish indicators. The ETF is near the bottom of a 12 month trading range and looks like it is going to move up to the top of the range, driven on a combination of earnings and earnings outlook. Support is near $23 with upside target near $25.50.


Rail carrier CSX reports tomorrow. The company is expected to report $0.50 per share, down from $0.56 in the last quarter. Shares of the stock have been on the rise but took a hit today after comments from a JP Morgan analyst. He says not to chase prices in the sector, that the bottom is not in, specifically pointing to Norfolk Southern but impacting the entire sector. The stock lost -2.44% and is now trading just above the short term moving average.


Intel is also reporting tomorrow. The chip making giant is expected to earn $0.59 per share, better than last quarters $0.55. The decline in PC shipments has been hurting the company but the release of Windows 10 is expected to have helped. Today the stock gained 0.25% and appears to be making a flag pattern within a rally. Upside target, providing earnings are not disappointing, is near $35.


The Indices

It was a quiet session today, waiting on earnings, waiting on economic data. No major news reports were out, and the credit markets were closed for Columbus Day. A quiet day indeed. The indices bobbed along throughout the day, briefly breaking below last week's closing prices only to bob back above. By end of day the indices were all in the green, led by the Dow Jones Industrial Average. The blue chips gained 0.28% and extended its march towards resistance. The indicators remain bullish and indicative of higher prices although momentum may have peaked. Upside target is near 17,250 with a possible break to the upside should earnings season unfold better than expected.


Today's runner up is the NASDAQ Composite. The tech heavy index gained only 0.17% in today's session and created a very small spinning top doji. The index is drifting higher on momentum, with rising indicators, and upside target near 4,950. Although the indicators are bullish, they remain weak so a break above resistance targets is questionable at this time.


The S&P 500 is next up on the list today. The broad market gained 0.13% in a move that barely keeps it above break even levels. Today's candle is a very small spinning top type doji just below resistance targets near 2,020. The indicators are bullish but showing signs of peaking so resistance could indicate a near term top. However, momentum is strong and convergent with this new high so a retest of it would be expected should/when a pull back occurs. Earnings could renew momentum and break the index above this resistance, with upside targets near 2,050 and 2,100.


The Dow Jones Transportation Average made the smallest gain in today's session, only 0.09%. The transports may have been affected by the comments from JPM about the rail carriers but was able to hold support above 8,250. The indicators are bullish and rising, with some indications of strength, particularly in the MACD, with upside targets near 8,500 should the index break resistance.


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The market has been in rally mode since confirming bottom two weeks ago. The rally is strong and looks like it could go higher, perhaps all the way to the current all time highs for all the major indices. In the near term, as in tomorrow and this week, it looks like earnings is the only thing standing in the way. Tomorrow is going to be a big day, no doubt, but is still only a handful of reports so I don't really expect a break out then. By the end of the week we should have a pretty good idea of what to expect for the quarter, and if it's not decisive then maybe the next week. I am bullish but remain cautious, and eagerly awaiting all the reports.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Capitalize On the Aging Of America

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

CVS Health Corp. - CVS - close: 103.07 change: +1.07

Stop Loss: 99.40
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 4.7 million
Entry on October -- at $---.--
Listed on October 12, 2015
Time Frame: Exit PRIOR to earnings on October 30th
New Positions: Yes, see below

Company Description

Trade Description:
Healthcare stocks have outperformed the broader market over the last few years. The country's adjustment to the Affordable Care Act (Obamacare) is one reason. There are huge demographic shifts occurring as well. Currently the U.S. sees 10,000 Baby Boomers hit 65 years old every single day. This is a trend that will last for years and highlights the aging population in the U.S. Older consumers have higher healthcare costs and they will likely try to save money by using companies like CVS.

CVS is in the healthcare sector. According to the company, "CVS Health (CVS) is a pharmacy innovation company helping people on their path to better health. Through its more than 7,800 retail drugstores, nearly 1,000 walk-in medical clinics, a leading pharmacy benefits manager with more than 70 million plan members, and expanding specialty pharmacy services, the Company enables people, businesses and communities to manage health in more affordable, effective ways. This unique integrated model increases access to quality care, delivers better health outcomes and lowers overall health care costs."

CVS has been making some key acquisitions lately. They spent $1.9 billion to buy all of Target's (TGT) 1,660 pharmacies across 47 states. CVS will operate them as a store-within-a-store format. CVS also acquired Omnicare for almost $13 billion. Omnicare is the biggest provider of pharmacy services to nursing homes, assisted living facilities, and other healthcare providers. This is a key acquisition to capitalize on the aging of America.

CVS has been consistently beating Wall Street's bottom line earnings estimates. Their most recent report was August 4th. CVS said their Q2 earnings were $1.19 a share, above estimates. Revenues rose +7.4% to $37.17 billion, which was in-line with expectations. Management offered slightly bullish guidance, above analysts' estimates.

Technically healthcare stocks peaked this past summer and began to correct lower in August. CVS was no exception. The trading on August 24th, the market's August-correction low, was more than a little crazy in shares of CVS. If we ignore that one day, then CVS has corrected from $113.45 down to $96.35 by late September. That was a -15% pullback. Fortunately investors finally stepped in to buy the decline and CVS has produced a bullish reversal higher.

The last few days have seen CVS' stock rally through resistance at $100. Today's rally (+1.0%) was significant because CVS closed above technical resistance at both its 50-dma and its 200-dma. The intraday high today was $103.52. I am suggesting a trigger to buy calls at $103.75. We will plan on exiting this trade prior to CVS' earnings report on October 30th.

Trigger @ $103.75

- Suggested Positions -

Buy the NOV $105 CALL (CVS151120C105) current ask $1.82
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:



In Play Updates and Reviews

Today Was An Entry Point

by James Brown

Click here to email James Brown

Editor's Note:

Most of the stock market meandered sideways with the bond market and banks closed for Columbus Day. That did not stop the upward momentum in many of our candidates. We had four bullish candidates hit our entry trigger to launch positions today (CRM, DIS, INGR, and NKE).


Current Portfolio:


CALL Play Updates

Alkermes Plc - ALKS - close: 59.07 change: -1.75

Stop Loss: 54.25
Target(s): To Be Determined
Current Option Gain/Loss: -51.4%
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:
10/12/15: Biotech stocks continue to churn sideways. ALKS underperformed the group today with a -2.8% drop after its early morning rally failed.

The failed rally attempt this morning is worrisome. I'm worried ALKS could be headed toward support near $55.00.

No new positions at this time.

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: 153.63 change: -0.34

Stop Loss: 147.45
Target(s): To Be Determined
Current Option Gain/Loss: +160.0%
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:
10/12/15: Most of the market drifted sideways today and COST followed suit. The stock traded in a relatively narrow range. COST is arguably short-term overbought. I would not be surprised to see a dip. Broken resistance at $150.00 might offer some support.

No new positions at this time.

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

10/10/15 new stop @ 147.45
10/08/15 COST rises on better than expected September same-store sales
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


Salesforce.com, Inc. - CRM - close: 75.88 change: +0.63

Stop Loss: 72.95
Target(s): To Be Determined
Current Option Gain/Loss: -9.5%
Average Daily Volume = 3.6 million
Entry on October 12 at $76.25
Listed on October 07, 2015
Time Frame: Exit PRIOR to earnings in November
New Positions: see below

Comments:
10/12/15: Our CRM trade is now open. The stock produced a slow-moving rally off its morning lows. Shares eventually traded above resistance at $76.00 and managed to tag our suggested entry point at $76.25 late this afternoon.

I would wait for a new rally above $76.00 or above $76.25 before initiating bullish positions.

Trade Description: October 7, 2015:
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.

(Side note - 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).

- Suggested Positions -

Long DEC $80 CALL (CRM151218C80) entry $3.05

10/12/15 triggered @ $76.25
Option Format: symbol-year-month-day-call-strike


The Walt Disney Company - DIS - close: 106.35 change: +0.79

Stop Loss: 99.75
Target(s): To Be Determined
Current Option Gain/Loss: -9.6%
Average Daily Volume = 9.9 million
Entry on October 12 at $106.50
Listed on October 10, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: see below

Comments:
10/12/15: Our brand new trade on DIS is open. The rally continued on Monday and shares traded above technical resistance at their 200-dma. Our trigger to buy calls was hit at $106.50. At the moment I would wait for a new rally above $106.50 (or above today's high $106.70) before initiating positions.

Trade Description: October 10, 2015:
The Force is strong with this one. DIS is poised to reap a galaxy of profits as the company re-launches the Star Wars franchise.

DIS has been a big cap superstar with strong, steady gains off its 2011 lows. That changed in August this year. Shares of DIS plunged into a very sharp and painful correction. The catalyst for the drop was the company's earnings report. 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 accelerated in August thanks to the global market meltdown. Since then shares have recovered.

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 were 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.

(sidenote - The advertising environment for television should also improve in 2016 thanks to the U.S. presidential election.)

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 list)

Dec. 18, 2015 - "Star Wars: Episode VII - The Force Awakens"
2016 - "The Incredibles 2"
2016 - "Frozen" sequel
April 2016 - "Captain America: Civil War"
June 2016 - "Finding Dory"
Dec. 2016 - "Star Wars Anthology: Rogue One"
May 2017 - "Star Wars: Episode VIII"
June 2017 - "Toy Story 4"
Late 2017 - "Thor: Ragnarok"
May 2018 - "Avengers: Infinity War - Part I"
2018 - "Untitled Star Wars Anthology Project"
May 2019 - "Avengers: Infinity War - Part II"
2019 - "Star Wars: Episode IX"

Content is still king and DIS rules. They're going to make a hoard of money off their Star Wars movies but that's just the tip of the iceberg. There will be tons of money made on merchandising from toys, clothing, video games, and just about everything else under the sun they can slap a Star Wars logo on.

The stock's correction from $121 to $90 was abrupt. DIS quickly fell from correction territory to bear-market territory in just a few days. Fortunately DIS produced a pretty good rebound. Yet the oversold bounce stalled under resistance near $105 and its 200-dma.

The breakdown under round-number support at $100 in late September looked ugly but there was no follow through lower. Since the late September low shares have rallied and Friday, October 9th, saw DIS close above resistance at its 50-dma and above resistance at $105.00. Now it just needs to clear technical resistance at the 200-dma currently at $106.21. We are suggesting a trigger to buy calls at $106.50.

We will plan on exiting prior to DIS' earnings report in early November. More aggressive investors might want to hold over the report (if that's you I suggest considering the January 2016 calls).

- Suggested Positions -

Long NOV $110 CALL (DIS151120C110) entry $1.66

10/12/15 triggered @ $106.50
Option Format: symbol-year-month-day-call-strike


The Home Depot, Inc. - HD - close: 121.90 change: +0.57

Stop Loss: 117.45
Target(s): To Be Determined
Current Option Gain/Loss: +6.3%
Average Daily Volume = 5.3 million
Entry on October 08 at $120.25
Listed on October 05, 2015
Time Frame: Exit PRIOR to earnings on November 17th
New Positions: see below

Comments:
10/12/15: HD is still drifting higher. Shares added another +0.4% today, outperforming the major indices. Monday was HD's fourth gain in a row and its eighth gain in the last nine sessions.

If you're looking for an entry point consider waiting for a dip. Broken resistance at $120.00 should be new support.

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.

- Suggested Positions -

Long NOV $125 CALL (HD151120C125) entry $1.43

10/10/15 new stop @ 117.45
10/08/15 triggered @ $120.25
Option Format: symbol-year-month-day-call-strike


Ingredion Inc. - INGR - close: 91.56 change: +0.95

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: -20.0%
Average Daily Volume = 458 thousand
Entry on October 12 at $91.05
Listed on October 08, 2015
Time Frame: Exit PRIOR to earnings on October 29th
New Positions: see below

Comments:
10/12/15: INGR is another bullish candidate that hit our entry trigger today. Shares rallied past last week's high and in the process hit our suggested entry at $91.05. INGR closed near its high for the session, which should bode well for tomorrow morning.

Trade Description: October 8, 2015:
The rally continues for INGR. The stock is up +400% from the 2008-2009 bear-market lows. Shares are only up +6.3% in 2015 but that's better than the S&P 500's -2.2% decline this year.

INGR is in the consumer goods sector. According to the company, "Ingredion Incorporated (INGR) is a leading global ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients and biomaterial solutions. With customers in more than 100 countries, Ingredion serves approximately 60 diverse sectors in food, beverage, brewing, pharmaceuticals and other industries."

Looking at the last couple of quarters INGR has beaten Wall Street's bottom line earnings estimates both times. Revenues have slipped -2.0% in Q1 and -2.3% in Q2 but that is a reflection of bearish foreign currency exchange rates. Their Q2 earnings were up +13.3% from a year ago.

Technically shares are in a long-term up trend. They're also seeing strength on a short-term basis with traders buying the dips. The $90.00-91.00 area has been short-term resistance. Tonight we are suggesting a trigger to buy calls at $91.05. Plan on exiting prior to INGR's earnings report on October 29th.

- Suggested Positions -

Long NOV $95 CALL (INGR151120C95) entry $1.75

10/12/15 triggered @ $91.05
Option Format: symbol-year-month-day-call-strike


NIKE, Inc. - NKE - close: 126.43 change: +1.49

Stop Loss: 119.75
Target(s): To Be Determined
Current Option Gain/Loss: -1.2%
Average Daily Volume = 3.8 million
Entry on October 12 at $126.15
Listed on October 08, 2015
Time Frame: Exit PRIOR to earnings in December
New Positions: see below

Comments:
10/12/15: NKE shares outpaced the broader market today with a +1.19% gain. The stock is also our fourth bullish candidate to hit our entry trigger today. For NKE our suggested entry was $126.15. I would still consider new bullish positions at current levels.

Trade Description: October 8, 2015:
Nike is named after the Greek goddess of victory. The stock has definitely been winning this year. NKE's stock is up +30% in 2015 and looks poised to keep running.

In the athletic footwear and apparel industry Nike is the 800-pound gorilla with annual sales of more than $30 billion. According to the company, "NIKE, Inc., based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories, and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories."

NKE has reported strong earnings all year long. You could probably sum up NKE's year with growth in every geography and every key category and improving gross margins. Their Q3 2015 earnings in March beat estimates with earnings up +16% from a year ago and revenues up +7% in spite of negative currency headwinds (would have been +13%).

NKE's Q4 2015 earnings were 15 cents better than expected at $0.98 a share. Revenues were up +4.8% (+13% on a currency neutral basis). Future orders were above expectations. Their 2016 Q1 results just came out a few weeks ago on September 24th. Earnings of $1.34 a share beat estimates by 15 cents. Revenues were up +5.4% to $8.41 billion, above expectations. Their future orders were up +9% compared to estimates for low single digits. On a constant currency basis their future orders are up +17%. Their China business was a bright spot with very strong growth.

Shares of NKE vaulted higher on their Q1 results and closed at all-time highs near $125 a share. The stock has spent the last two weeks consolidating gains in a sideways range. We want to hop on board the NKE bandwagon if shares rally to new highs. NKE's intraday high is currently $126.49. Tonight we are suggesting a trigger just below this level at $126.15. The plan is for this to be a multi-week trade and we'll exit prior to earnings in December.

- Suggested Positions -

Long 2016 JAN $130 CALL (NKE160115C130) entry $4.05

10/12/15 triggered @ $126.15
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

The Cooper Companies Inc. - COO - close: 139.19 change: +1.57

Stop Loss: 143.60
Target(s): To Be Determined
Current Option Gain/Loss: +17.1%
Average Daily Volume = 469 thousand
Entry on October 08 at $141.75
Listed on October 06, 2015
Time Frame: Exit PRIOR to November options expiration
New Positions: see below

Comments:
10/12/15: After a five-day sell-off shares of COO finally bounced. The stock rallied +1.1% but seemed to find resistance near $140.00 (exactly where it should find resistance).

No new positions at this time.

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.

- Suggested Positions -

Long NOV $140 PUT (COO151120P140) entry $4.10

10/10/15 new stop @ 143.60
10/08/15 triggered @ $141.75
Option Format: symbol-year-month-day-call-strike