Option Investor
Newsletter

Daily Newsletter, Monday, 10/19/2015

Table of Contents

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

Market Wrap

Quiet Market Watches Earnings

by Thomas Hughes

Click here to email Thomas Hughes
We are deep in 3rd quarter earnings and so far the results are supporting the market.

Introduction

This is the first really big week of earnings. There are over 100 S&P 500 companies scheduled to report, a few today, and the market held steady.

International indices were also steady, despite some mixed data from China, and had little affect on trading here at home. Third quarter GDP figures show that expansion in the Chinese economy fell below 7% to 6.9%, but came in ahead of expectations. This, along with weaker than expected industrial production and better than expected retail sales, helped Chinese indices to hug the flat line while the Japanese Nikkei lost a little more than -0.80%. European indices were also largely steady, led by the German DAX +0.59%, although eyes in that country may be more focused on the ECB meeting scheduled for later this week than they are on Chines GDP.

Market Statistics

Futures trading indicated a lower open throughout the early pre-market session, the S&P was indicated to fall about 0.5% at the open. The biggest news affecting US indices was the earnings/revenue miss reported by Goldman Sachs but it's affect was not broadly felt. Other headlines included the China GDP numbers, and Oprah's purchase of Weight Watchers. There were no economic releases before the opening bell.

The indices fell at the open, as expected, but the losses were muted and quickly hit bottom. By 9:45AM the indices were bouncing back toward break even levels and spent the next four hours trending sideways. Afternoon trading saw the indices drift higher, by 3:30PM most were back in positive territory with all moving into the green before the close of the day.

Economic Calendar

The Economy

Very little economic data today, and not that much for the week either. Today's report came from the NAHB in the form of Home Builders Sentiment. The survey reading came in at 64 for October, 2 points above expectations and the highest level in nearly 10 years. Within the report future expectations and current sales both rose while traffic levels remained flat and below the expansionary 50 level. Future expectations rose by 7 points to 75, current sales up 3 to 70.

Tomorrow we get two more pieces of housing data, Housing Starts and Building Permits. Thursday is Existing Home Sales and then next week is New Home Sales. Also this week is the Housing Price Index and Leading Indicators on top of the weekly Jobless Claims, all scheduled for Thursday.

Moody's Survey Of Business Confidence fell -2.3% this week to hit 37.3, a near 2 year low. This is the 7th week of decline since hitting the most recent peak in late August. Mark Zandi, Moody's chief economist, says that market volatility has worn down sentiment although it remains strong, particularly in the US. He does take note of two potential positives, one being that last week's reading could be an outlier, as has been seen before. The second is that businesses are reporting difficulty in finding qualified labor. If we are not on the brink of labor market collapse this could lead to increased competition for employees, higher pay and wage inflation.


Earnings, this week is one of the biggest of the season in terms of the number of top name companies reporting, over 100 S&P companies, more than 20%, along with 8 Dow companies. According to data from Factset of the 58 S&P companies which have so far reported 81% of them have beaten on the earnings side, while only 50% have beaten on the revenue side. The percentage beating earnings is above average, the percentage beating on revenue is below average.

At this point the blended rate is -4.6%. This is down from -5.6% last week, falling due to upside surprises in 6 of the 10 sectors, led by the industrials and the financials. Based on four year averages we can expect to see the blended rate continue to creep up with a target near -1.1%. Ex-energy the blended rate is 1.8% with an expected increase to the range of 4-6% by end of the reporting season.

The fourth quarter estimates have fallen, to -0.9% from -0.4%, due to downside revisions to the financials, materials and energy sectors. Ex-energy 4th quarter earnings should come in around 4.6%. Looking out to 2016 earnings expectations are also falling, to 9.2% from 9.9% last week and over 12% earlier this summer. Regardless of the downward revisions earnings outlook improves with the next quarter and turns firmly positive in the 1st quarter of next year and getting better throughout the year so it is very likely this quarter is the bottom of the earnings trough.

The Oil Index

Oil prices took a dive today. WTI fell more than -2.75%, Brent more than -3.75%, on fears driven by slowing China, the ever nearing closing of the Iran deal and the overall global supply/demand imbalance. WTI is now back below $46 and heading toward support levels near $45. In the near to short term supply and production remains high, long term there are some signs that this will change in the next year but as yet they have had little material impact on prices. Price outlook for 2016, WTI, remains near $53, about $4 above this years projected price average.

The Oil Index fell nearly -3% in today's session. The index created a long black candle falling from resistance in a move suggestive of a near term double top. The indicators are bullish but in decline and could be indicative of a top. Resistance is near the 1235 level, the 50% retracement level, consistent with resistance in August that sent prices down to the long term lows we saw in late August and September. The index could find support in the range between 1150 and 1175, near the short term moving average, but that remains to be seen. If the index should break through support a move back down to the long term lows, near 1,075, is likely. As always, oil prices and price outlook will be important drivers of this sector.


The Gold Index

Gold prices fell from resistance today as well. The dollar strengthened from last week's lows, perhaps driven on caution centered on the upcoming ECB meeting, helping to pressure gold lower. Today's action took the metal back down to the $1170 level with all eyes the central banks. The ECB is not expected to make any policy changes although there is some expectation for a dovish tone or comments during the press conference. Next week is the FOMC meeting and at this time there is little expectations for a data driven rate hike, not to say there couldn't be a surprise one. If the ECB is dovish, and FOMC is hawkish/on track for a rate hike, the dollar could shoot back to the top of the 6 month range and send gold lower.

The gold miners fell hard on golds fall below $1180. The miners ETF GDX shed more then -4.25% in a move that helps confirm resistance at the top of the three month range. Last Monday the ETF created an overly bearish candle, indicative of said resistance, that failed to result in an immediate fall to lower prices. Today's candle reconfirms that resistance, and sets a lower low, along with indicators setting up for a bearish crossover within a greater down trend.

In the near term the indicators are consistent with a top and/or confirmation of resistance, with MACD approaching the zero line from above and stochastic already forming a bearish crossover, high in the upper signal zone. This could lead to a test of support, near the short term moving average or lower, near the long term lows, but is heavily dependent on gold prices, dollar value, the ECB, the FOMC and interest rate outlook.


In The News, Story Stocks and Earnings

Perhaps the biggest story of the morning was Weight Watchers and Oprah Winfrey. Oprah bought a 10% stake in the company, took a board seat and is providing her endorsement/likeness for marketing among other consideration she is providing for the company. Shares, which have been languishing near all time lows, shot up more than 75% in the pre-market session and extended those gains in the open session. The stock closed with a gain greater than 100% and trading at an 8 month high.


Morgan Stanley was another name to hit the wires in the pre-market session. The investment banking giant reported earnings down more than -40% on a sequential and year over year basis, driven primarily on difficult market conditions in its Institutional Securities Group. Shares of the stock fell more than -5.5% in the pre-market session, gapping lower to open below the short term moving average.


Hasbro reported before the bell as well. The toy maker reported a beat on the earnings side but fell short on revenue and sent shares tanking in today's session. Despite the revenue miss the company was able to grow revenues by 5% in North America and 14% internationally. Actual EPS of $1.64, $1.58 adjusted, beat expectations for $1.51 and last years results of $1.46. Shares fell about -1% in the pre-market session and then extended those losses to near -8% during the open session.


IBM reported after the bell. Big Blue beat on the bottom line but missed on the top line, a common event in the market over the past year. The company reported $3.34 per share versus the $3.30 expected by analysts. This is the 14th quarter of revenue decline and comes with lowered guidance. The company lowered as well, to the bottom end of the previous range and in line with estimates. Shares of the stock fell nearly 5% in after hours trading.


The Indices

The market was mostly flat in today's session with most finishing in positive territory, if barely. The NASDAQ Composite made the largest gain, near 0.38%, in a move that actually extended its bounce from support. The index created a small bodied white candle and set a new one month high with bullish indicators. Both MACD and stochastic are bullish and pointing higher so a continuation of the bounce looks very possible. Resistance is just above the current level, near 4,950 and last months high. Support is near 4,800 and the short term moving average.


The Dow Jones Transportation Average came in second with a gain near 0.35%. The transports moved up from support along the short term moving average although the indicators show that near term weakness is present. MACD is bullish but retreating from a peak while stochastic %K is below %D and pointing lower. The index could retreat to test support along the moving average with downside target near 7,750 should it break. Resistance is near 8,250 should the index bounce.


The Dow Jones Industrial Average gained 0.08% in a session just below current resistance. The index created a small, doji style spinning top that closed just below my 17,230 support/resistance line with mixed indicators. Both indicators are still bullish although momentum is quickly in decline. Stochastic is still trending higher in both the near and short term so resistance could still be tested at least.


The S&P 500 made the smallest gains in today's session and was barely able to do that. A late day pop helped send the index above break even to close with a gain of 0.03%. The broad market also created a doji type spinning top candle, just above support levels and extending its bounce from support if ever so slightly. Both indicators are bullish although momentum is waning. Stochastic is strong, both %K and %D are pointing up following a bullish crossover high in the upper signal zone. The index looks like it will drift higher although there is chance for resistance to set in. Current target is near 2,050 with support near 2,020 and the below that along the long term up trend line near 2,000.


Today's action was very mild and thankfully devoid of earth shattering international headlines and knee-jerk reaction to news. There are still risks present in terms of news events but at this time they not a focus. At this time earnings are a focus and will remain so for the next few weeks.

The ECB is also a focus, expected to do little more than try to reassure the market. Regardless, the tone and words that Mario Draghi uses could go along way toward weakening/strengthening the euro, affecting the dollar and the markets driven by it. The FOMC too is a focus but the meeting is still a week away.

For now, earnings trends are positive, positive in that they are better than expected, if still showing declines from last year. So long as this continues, and forward outlook remains positive, I see the bull market continuing as we exit from the trough in earnings growth experienced over the past three quarters.

Until then, remember the trend!

Thomas Hughes


New Option Plays

On The Verge Of All-Time Highs

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Pepisco, Inc. - PEP - close: 100.18 change: +0.48

Stop Loss: 94.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.0 million
Entry on October -- at $---.--
Listed on October 19, 2015
Time Frame: Exit prior to expiration in January
New Positions: Yes, see below

Company Description

Trade Description:
Soda sales remain the biggest chunk of non-alcoholic drinks. Unfortunately for big soda makers like PEP and KO trends are changing. Consumers are become more health conscious. Sugary soda drink sales have fallen ten years in a row. The good news is that more and more consumers are reaching for bottled water and other drinks perceived to be healthier than traditional colas. Bottled water sales are on pace to surpass soda as the beverage of choice for U.S. consumers soon. (FYI: PEP's bottled water brand is Aquafina)

PEP is a consumer goods giant with a global presence. According to the company, "PepsiCo products are enjoyed by consumers one billion times a day in more than 200 countries and territories around the world. PepsiCo generated more than $66 billion in net revenue in 2014, driven by a complementary food and beverage portfolio that includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. PepsiCo's product portfolio includes a wide range of enjoyable foods and beverages, including 22 brands that generate more than $1 billion each in estimated annual retail sales."

The stock has been stuck consolidating sideways in the $90-100 trading range for almost a year. It looks like that consolidation may be nearing its end.

Earnings have been better than expected. I looked at the last three quarters. PEP has managed to beat Wall Street's estimates on both the top and the bottom line. Revenues have declined year over year but that is due to negative foreign currency exchange rates that is shaving off about -10% from earnings and revenues. The company says their gross margins and operating margins continue to improve.

PEP's Q3 results showed a +7.4% jump in organic revenues. On a constant currency basis their operating profit was up +12%. Earnings were up +14% from a year ago and their core gross margins surged 120 basis points. They have raised their full year 2015 core constant currency EPS guidance twice this year. Thus far PEP has saved $1 billion in productivity savings and returned $9 billion to shareholders in 2015.

The U.S. market is up the last three weeks in a row but it's relatively flat for the year. Investors are confused with all the different global cross currents, exchange fluctuations, central bank moves, and more. Fund managers are probably tempted to park cash in a huge, liquid big cap like PEP and get paid 2.8% a year with dividends. Why not? PEP is still growing with solid single-digit growth.

Technically PEP looks poised to breakout past major resistance in the $100 area. The point & figure chart is already bullish and forecasting at $120.00 target. Tonight we are listing a trigger to buy calls at $101.00.

Trigger @ $101.00

- Suggested Positions -

Buy the 2016 JAN $100 CALL (PEP160115C100) current ask $2.51
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

Nike Sprints Higher On New Price Target

by James Brown

Click here to email James Brown

Editor's Note:

Our bullish trade on NKE got a big boost today as shares surged to new highs. One Wall Street analyst just raised his price target on NKE from $150 to $200.

Overall it was a pretty good day for the play list with the exception of JWN's bounce.


Current Portfolio:


CALL Play Updates

Costco Wholesale Corp. - COST - close: 153.22 change: +1.16

Stop Loss: 147.45
Target(s): To Be Determined
Current Option Gain/Loss: +130.0%
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:
10/19/15: The U.S. market struggled to eke out gains today but COST continues to rebound higher. The stock added another +0.7% and closed near its high for the day. Readers may want to start inching up their stop loss.

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

10/14/15 Wal-Mart warns and retail-related stocks suffer
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: 77.93 change: -0.84

Stop Loss: 74.75
Target(s): To Be Determined
Current Option Gain/Loss: +16.4%
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:
10/19/15: After closing at all-time highs on Friday shares of CRM encountered a little bit of profit taking today with a -1% decline. Broken resistance at $76.00 should be new support.

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

10/17/15 new stop @ 74.75
10/12/15 triggered @ $76.25
Option Format: symbol-year-month-day-call-strike


CVS Health Corp. - CVS - close: 103.51 change: +0.13

Stop Loss: 99.40
Target(s): To Be Determined
Current Option Gain/Loss: -25.1%
Average Daily Volume = 4.7 million
Entry on October 13 at $103.75
Listed on October 12, 2015
Time Frame: Exit PRIOR to earnings on October 30th
New Positions: see below

Comments:
10/19/15: CVS spent Monday's session drifting sideways and managed to end the day with a minor +0.1% gain. Readers may want to wait for CVS to trade above $103.85 before considering new positions.

Trade Description: October 12, 2015:
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.

- Suggested Positions -

Long NOV $105 CALL (CVS151120C105) entry $2.07

10/13/15 triggered @ $103.75
Option Format: symbol-year-month-day-call-strike


The Walt Disney Company - DIS - close: 109.47 change: +1.23

Stop Loss: 104.40
Target(s): To Be Determined
Current Option Gain/Loss: +59.6%
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:
10/19/15: Shares of DIS continued to surge and closed above technical resistance at its 100-dma and 150-dma today. The rally did pause just below round-number resistance at $110.00. After such a big bounce from its late September low I would not be surprised to see a little pullback.

Odds are any pullback will be shallow as investors snap up the stock on any weakness. Demand for tickets to see the next Star Wars movie is proving to be huge. Tickets went on sale in the United Kingdom and demand was so big that some of the websites crashed. Consumers will be able to buy advanced tickets in the United States tonight. DIS will air the next trailer for the movie during tonight's Monday Night Football game.

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

10/17/15 new stop @ 104.40
10/15/15 new stop @ 101.85
10/12/15 triggered @ $106.50
Option Format: symbol-year-month-day-call-strike


Facebook, Inc. - FB - close: 98.47 change: +0.93

Stop Loss: 89.85
Target(s): To Be Determined
Current Option Gain/Loss: +34.7%
Average Daily Volume = 31 million
Entry on October 16 at $96.60
Listed on October 15, 2015
Time Frame: Exit PRIOR to earnings on November 4th
New Positions: see below

Comments:
10/19/15: FB is getting closer and closer to a new all time high. Shares gained +0.95% today. I would not chase it at current levels. Odds are decent that FB will tag the $99-100 area and see a brief pullback before moving higher. That pullback can be our next entry point.

Trade Description: October 15, 2015:
Facebook needs no introduction. It's the largest social media platform on the planet. The company is quickly approaching 1.5 billion monthly active users. In early September 2015 FB hit a new milestone - one billion people logged into Facebook in a single day (that's about 1 out of every 7 humans).

The company continues to grow. In addition to their Facebook social media powerhouse they also own Facebook Messenger, WhatsApp, and Instagram. Their WhatsApp product is the largest messaging service on the planet with over 900 million monthly active users. Meanwhile FB's photo-sharing Instagram property has more than 300 million active users. The company has been ramping up their advertising efforts to slowly monetize Instagram. FB has also been very successful with adding video ads to their Facebook platform, which is driving a lot of revenue growth.

FYI: FB also owns Occulus Rift, the virtual reality company, but it's probably a few more years before VR goes mainstream.

The stock can be volatile so traders may want to limit their position size to reduce risk. The bounce off FB's late September low has lifted shares toward resistance near $95.00-96.00. A breakout here could spark the next big leg higher. If you look at the trend line of lower highs then FB has already broken through resistance.

The point & figure chart is bullish and forecasting a $106.00 target. Wall Street is currently more optimistic. The average price target on FB is about $111.00. Shares have recently received a couple of new price targets in the $115.00 area. You could argue that the $100.00 level is round-number, psychological resistance. I suspect FB will be able to break through it as part of a pre-earnings run up. We will plan on exiting prior to FB's earnings report on November 4th. Tonight we are suggesting an entry trigger at $96.60.

- Suggested Positions -

Long NOV $100 CALL (FB151120C100) entry $2.45

10/16/15 triggered @ $96.60
Option Format: symbol-year-month-day-call-strike


The Home Depot, Inc. - HD - close: 123.10 change: +0.36

Stop Loss: 117.45
Target(s): To Be Determined
Current Option Gain/Loss: +18.9%
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:
10/19/15: HD spent most of Monday' session drifting sideways. Shares did enjoy a late afternoon bounce that lifted HD to a +0.29% gain and another new multi-week high. Shares are poised to challenge their all-time high from mid-August at $123.80 soon.

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: 91.74 change: +0.90

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: -37.1%
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:
10/19/15: INGR's performance today was encouraging. The stock outperformed the major indices with a +0.99% gain. Readers may want to move their stop loss closer to last week's low near $89.65.

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


L Brands, Inc. - LB - close: 97.18 change: +0.36

Stop Loss: 92.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.9 million
Entry on October -- at $---.--
Listed on October 17, 2015
Time Frame: Exit PRIOR to earnings on November 18th
New Positions: Yes, see below

Comments:
10/19/15: LB continued to rally on Monday but it wasn't enough to breakout from its sideways consolidation. Nor was it enough to hit our entry point. Our suggested entry trigger to buy calls is $97.65.

Trade Description: October 17, 2015:
The U.S. economy has hit a slow spot. Q2 GDP growth was +3.9% but Q3 is expected to dip to +1.0%. Consumers are not helping. The monthly U.S. retail sales figures for September inched higher +0.1% when economists were expecting a +0.2% gain. The core-retail sales, which excludes autos, gasoline, building materials, and food actually fell -0.1%.

Wal-Mart (WMT), the biggest retailer on the planet, did not help investor confidence when they surprised the market by lowering their guidance on Wednesday last week. WMT plunged -10% in one day and most of the retail stocks fell with it. Wednesday's decline looks like a buy-the-dip entry point in LB.

LB is in the services sector. According to the company, "L Brands, through Victoria's Secret, PINK, Bath & Body Works, La Senza and Henri Bendel, is an international company. The company operates 2,987 company-owned specialty stores in the United States, Canada and the United Kingdom, and its brands are sold in nearly 700 additional noncompany-owned locations worldwide. The company's products are also available online at www.VictoriasSecret.com, www.BathandBodyWorks.com, www.HenriBendel.com and www.LaSenza.com."

U.S. retail sales may be slowing but not at LB! The company recently reported their same-store (comparable) sales for September. Analysts were expecting comparable sales to rise +5%. LB said their September comps surged +9%. The gain was driven by strength in their Victoria's Secret business. This is a power house in its space with Victoria's Secret capturing 40% of the $13 billion lingerie market (that's just the U.S. market).

The strong September comps followed a strong August where same-store sales rose +6%. After the September numbers came out LB raised their Q3 earnings guidance from +0.12-0.16 per share to $0.18-0.22.

LB is also enjoying some tailwinds for their input costs. You're already aware that oil prices have been depressed all year. Now cotton prices are forecasted to fall this year and into 2016. Plus there has been some bullish speculation that the new Trans-Pacific Partnership trade agreement could also lower costs for apparel makers.

Technically LB has been incredibly strong with a big rebound from its August correction lows. Shares consolidated for a good chunk of September and then resumed its up trend in October. The last few days have seen LB consolidating gains in the $95-97 range. Traders bought the dip on Wednesday, when WMT issued their earnings warning, near round-number support at $95.00. I suspect LB will rally past $100 soon. The point & figure chart is forecasting at long-term $127.00 price target.

I am suggesting an initial stop loss at $92.85 but more conservative investors may want to use a stop closer to $95.00. Tonight we are listing a trigger to buy calls at $97.65.

Trigger @ $97.65

- Suggested Positions -

Buy the NOV $100 CALL (LB151120C100)

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


NIKE, Inc. - NKE - close: 133.21 change: +2.74

Stop Loss: 127.85
Target(s): To Be Determined
Current Option Gain/Loss: +84.0%
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:
10/19/15: NKE continues to see bullish analyst comments. Today the stock was praised by Omar Saad, with Evercore ISI, who raised his price target from $150 to $200. Shares of NKE surged +2.1% to new highs.

NKE is short-term overbought here. That does not mean it will automatically retreat soon but it is due for a dip. Tonight we are moving the stop loss up to $127.85. More conservative traders may want to use a higher stop loss.

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

10/19/15 new stop @ 127.85
10/17/15 new stop @ 124.85
10/15/15 new stop @ 122.45
10/12/15 triggered @ $126.15
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

B/E Aerospace Inc. - BEAV - close: 43.61 change: -0.12

Stop Loss: 48.20
Target(s): To Be Determined
Current Option Gain/Loss: +47.1%
Average Daily Volume = 1.3 million
Entry on October 14 at $45.75
Listed on October 13, 2015
Time Frame: Exit PRIOR to earnings on October 27th
New Positions: see below

Comments:
10/19/15: BEAV ignored the market's gain today. Instead shares drifted sideways in a narrow range and closed with another loss.

No new positions at this time. More conservative traders may want to move their stop lower.

Trade Description: October 13, 2015:
The business jet market is tough these days. Falling demand from foreign customers and companies cutting their capex budgets has hurt sales. Shares of BEAV have suffered due to the bearish outlook.

BEAV is in the industrial goods sector. According to the company, "B/E Aerospace is the world's leading manufacturer of aircraft cabin interior products. B/E Aerospace designs, develops and manufactures a broad range of products for both commercial aircraft and business jets. B/E Aerospace manufactured products include aircraft cabin seating, lighting systems, oxygen systems, food and beverage preparation and storage equipment, galley systems, and modular lavatory systems. B/E Aerospace also provides cabin interior reconfiguration, program management and certification services. B/E Aerospace sells and supports its products through its own global direct sales and product support organization."

BEAV has missed Wall Street revenue estimates two quarters in a row. The most recent report (July 22nd) saw revenues crumble -35%. Management has also lowered their guidance two quarters in a row.

Last month BEAV announced they were cutting 450 jobs as they shuttered some facilities and eliminated some product lines. The company said they're trying to reduce expenses due to slowing revenues expected in 2015 and 2016.

Technically the stock is bearish. Shares are in a bearish trend of lower highs and lower lows. The oversold bounce in October has failed at the trend of lower highs (resistance). The point & figure chart is bearish and forecasting at $41.00 target. Today saw BEAV's attempt at a bounce fail and shares underperformed the market with a -1.49% decline. We suspect BEAV will continue to drop into its earnings report as investors fear the worst.

Use a trigger to launch bearish positions at $45.75. Plan on exiting prior to BEAV's earnings report on October 27th.

- Suggested Positions -

Long NOV $45 PUT (BEAV151120P45) entry $1.70

10/14/15 triggered @ $45.75
Option Format: symbol-year-month-day-call-strike


Nordstrom Inc. - JWN - close: 68.44 change: +1.17

Stop Loss: 70.05
Target(s): To Be Determined
Current Option Gain/Loss: -20.4%
Average Daily Volume = 1.4 million
Entry on October 15 at $66.40
Listed on October 14, 2015
Time Frame: Exit PRIOR to earnings on November 12
New Positions: see below

Comments:
10/19/15: Uh-oh! JWN displayed relative strength today (+1.7%) and closed above short-term resistance at $68.00. No new positions at this time.

Trade Description: October 14, 2015:
Normally Q4 is the time investors think about buying retail-related stocks in anticipation of a strong holiday shopping season. This year the retailers' Q4 is off to a weak start.

JWN is in the services sector. According to the company, "Nordstrom, Inc. is a leading fashion specialty retailer based in the U.S. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 316 stores in 39 states, including 120 full-line stores in the United States, Canada and Puerto Rico; 188 Nordstrom Rack stores; two Jeffrey boutiques; and one clearance store. Additionally, customers are served online through Nordstrom.com, Nordstromrack.com and HauteLook. The company also owns Trunk Club, a personalized clothing service serving customers online at TrunkClub.com and its five clubhouses. Nordstrom, Inc.'s common stock is publicly traded on the NYSE under the symbol JWN."

JWN's earnings results have struggled this past year. Last November they beat estimates by a penny but guided lower. When JWN reported earnings in February 2015 they missed expectations and guided lower the second quarter in a row. In May this year they missed estimates again. Their most recent earnings report was August 13th. JWN beat Wall Street estimates by three cents with a profit of $0.93 a share. Revenues were up +9% to $3.6 billion, slightly above estimates. Management actually raised their 2016 guidance. The stock popped higher on the earnings beat and bullish guidance. Unfortunately the rally did not last.

Shares of JWN reversed and formed a bearish double top. Since then investors have continued to sell the rallies. The big drop on October 7th was an adjustment for JWN's special cash dividend of $4.85. There has been virtually no bounce.

Today JWN underperformed as the market reacted to Wal-Mart's earnings warning. Suddenly investors are concerned that consumer spending this holiday season may be weaker than expected. That doesn't bode well for JWN. The trend is already down and the point & figure chart is forecasting at $58.00 target.

Shares readers could argue there is potential support near the $65.00 level but we think JWN is headed a lot lower and could drop toward round-number support at $60.00. Tonight we are suggesting a trigger to buy puts at $66.40. Prepare to exit prior to JWN's earnings report in November.

- Suggested Positions -

Long NOV $65.15* PUT (JWN151120P65.15) entry $1.13

10/15/15 triggered @ $66.40
*NOTE: The odd option strike is due to JWN's special cash dividend of $4.85 per share. The ex-distribution date was Wednesday, October 7, 2015. The option market adjusted all the prior option strikes down -4.85.

Option Format: symbol-year-month-day-call-strike