Option Investor
Newsletter

Daily Newsletter, Saturday, 10/24/2015

Table of Contents

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

Market Wrap

Major Market Movers

by Jim Brown

Click here to email Jim Brown

Last week was a story of major moves in high profile stocks by both winners and losers. The big gains pushed the indexes to a two-month high and the first four-week gain for the Dow since 2014.

Market Statistics

On September 29th, Carl Icahn warned in an online video we were facing a disaster in the market. The Dow hit a low of 15,942 on that day and rallied to close at 17,646 on Friday. That is a +1,704 point gain or roughly +10%! The S&P has rallied from 1,872 to close today at 2,075 or a gain of +203 points or 10.8%.

Friday's gains were driven by news China was cutting interest rates for the sixth time since November. The gains were also driven by monster moves in stocks that posted huge earnings. For example Amazon +35, Google +40, AthenaHealth +35 and Microsoft +10% to name a few.

China said they were cutting deposit rates by -0.25%, lending rates by -0.25% and reserve ratio rates by -0.50%. While this was positive for the market, you have to wonder why they are adding so much stimulus to juice an economy growing at a reported 6.9% rate. More than one analyst said the October numbers must be dropping fast.

Only a day earlier Mario Draghi said the ECB was ready to increase stimulus again. He hinted he was ready to add hundreds of billions in QE and produce an even deeper negative deposit rate.

There is also a strong rumor that Japan will also add to QE and stimulus before the end of October.

Obviously, with the world's major central banks applying stimulus with a fire hose to avoid deflation it would be next to impossible for the Fed to raise rates in the near future. The chances for a rate hike have suddenly slipped all the way out to March or even later.

The market celebrated stimulus and earnings and the big cap indexes closed at a two-month high.

There were no economic reports of note on Friday. The ECRI Weekly Leading Index (WLI) I wrote about last Friday rebounded from nearly a three-year low at 128.7 to 130.0. That does not mean we are out of trouble but simply the data is volatile.


The big event next week is the October Fed meeting. Nobody expects them to make any moves and the meeting is a formality. It will be interesting to see if they still see it "appropriate to hike rates in 2015." I suspect that sentence will disappear.

The first reading on the Q3 GDP is due out on Thursday and the official consensus is for +1.6% growth but Moody's is expecting 1.1% and the Atlanta Fed GDPNow real time forecast is expecting +0.9%. These numbers are down from the previously reported +3.92% growth in Q2, up from 0.64% growth in Q1. So which is it? Are we ticking along at a less than 1% growth in Q1/Q3 while the nearly 4% growth in Q2 is looking more like an accounting error every day? This is going to be an interesting report.


The Richmond Fed Manufacturing Survey on Tuesday could take us farther into correction from the -5.0 reading in September. That was the first negative reading since April after hitting a 12.6 high in July. How quickly the bloom faded.


Shenandoah Telecom (SHEN) was the only split announced last week with a 2:1 scheduled for New Years Eve. With volume of 50,000 shares a day, they need to do something to increase the float and the activity.

Full Stock Split Calendar


Amazon (AMZN) reported actual earnings of 17 cents compared to estimates for a 10-cent loss. Shares of Amazon rallied +10% or +$56 at the open before fading to close +$35 and +6%. Analysts are so used to Amazon losing money that a surprise profit has them speechless. Prime subscriptions rose about 50%, which is a huge driver of Amazon future sales.

Amazon Web services only accounted for about 8% of overall revenue but 52% of the profit. AWS revenue was up +14.3% sequentially from Q2 and +78% over the year ago quarter. AWS is on track to hit $7 billion in revenue for the year. Amazon total revenue ex-FX was up about 30% at $25.36 billion. Active customer accounts rose 9 million to 294 million.

Management said sales were four times year ago levels in India and active customer accounts rose +230%. The number of sellers rose +250% with 90% using Amazon logistics and warehouse services and were adding 40,000 products per day.

Amazon operating expenses rose 8.4% sequentially to $8.2 billion. They added 25,000 full time workers year to date and will be adding 100,000 temporary workers for the holidays.

Amazon ended the quarter with $14.43 billion in cash and equivalents, up +$427 million for the quarter. Inventories rose +20.2% ahead of the holiday quarter. They provided guidance for the current quarter with revenue up +19.9% to just over $35 billion. As long as Amazon can continue to increase revenues about 20% per quarter, they can continue to spend money like crazy and get away from it. Shares closed up +$35 at a new high on the news.


Alphabet (GOOGL) reported strong earnings and received no less than 19 price target raises from analysts. Google saw strength in its paid clicks on search ads and by strength in YouTube. Google is increasingly able to power search ads on smaller mobile screens and pricing is stabilizing as a result of their new technology. Paid clicks rose +23% while cost per clicks declined -1%. The cost-per-click rate that Google charges advertisers declined -11%. The number of ad impressions served rose +350% from the comparison quarter. That is a lot of ads.

Google earnings of $5.73 actually missed estimates for $5.88. The problem was a $1.87 per share hit from the strong dollar. Without that hit they would have crushed estimates at $7.35 per share. The company also announced a $5,099,019,513.59 stock buyback, the first of its kind. They announced a YouTube subscription service for $9.99 that is ad free. Gross revenue rose +5.3% sequentially to $18.63 billion. That is a 13% increase from the comparison quarter.

Google actually announced a stock buyback of $5,099,019,513.59. Yes, that is an odd number. Google changed its name to Alphabet. The alphabet has 26 letters. That number is the square root of 26 multiplied by $1 billion. Google has a habit of planting "Easter eggs" in its products and communications. The name Google is a play on googol, which is the number 1 followed by 100 zeroes. When Google filed for its IPO, it said it planned on raising $2,718,281,828. That is the product of "e" and $1 billion with "e" a mathematical term used in calculus. When Google bid for Nortel Networks in 2011 it bid "Pi."


Microsoft (MSFT) posted earnings of 67 cents that beat estimates for 58 cents. Revenue of $21.7 billion beat estimates for $20.9 billion. Microsoft said Window 10 was now installed on 110 million computers. Annualized Cloud revenue was exceeding $8.2 billion as Azure cloud services rose +8% to $5.9 billion. The Office software suite added $6 billion. Windows operating systems declined -17% in volume but added $9.4 billion in revenue.

Microsoft's share price soared to $54 intraday and the highest level since March 31st, 2000 during the dot.com boom. During the quarter, Microsoft increased its dividend +16% to 36-cents and repurchased $6.9 billion in shares. Microsoft's market cap rose +$38.7 billion on Friday alone.


AthenaHealth (ATHN) reported earnings of 36 cents that easily beat estimates for 26 cents. Revenue of $236.1 million beat estimates for $232.9 million. The company guided to full year earnings of $1.10-$1.20 and revenue of $905-$925 million. Analysts were expecting $1.22 and $920.7 million.

While the earnings were up the guidance was mediocre and I am surprised the shares rallied +27%. Clearly, there were a lot of shorts betting against the results.


Stericycle (SRCL) crashed hard after reporting earnings of $1.08 compared to estimates for $1.18. Revenue rose +7.6% to $718.6 million but missed estimates for $735 million. Non-GAAP earnings were flat and GAAP earnings fell -51.6% to just 47 cents. The strong dollar removed $33 million from revenue. The company said volumes of hazardous wastes had fallen unexpectedly when normally they are very stable. Guidance was also about $150 million light on revenue because of the unexpected decline in waste.


Appliance maker Whirlpool (WHR) is what you would consider a stable business. Unfortunately, there is a price war in progress and the strong dollar is killing revenues. Foreign competition and the dollar have been forcing prices lower and the company is losing market share.

I am sure readers glaze over when I say the strong dollar impacted revenue. This one will choke you. Whirlpool said the strong dollar was going to reduce revenue by a whopping -$2.5 billion for all of 2015. That is not pocket change and it really reinforces the damage that is being done to all the international companies.

Q3 sales did rise +9% to $5.3 billion but missed estimates for $5.41 billion. Whirlpool lowered full year earnings estimates from $12-$13 to $12-$12.50. Analysts were looking for $11.96. Overall, the earnings and guidance was not bad but the $2.5 billion FX hit crashed the stock.


Next week has a very heavy calendar of earnings with more than 150 S&P companies reporting and more than 500 smaller companies. This should be the heaviest week of the cycle. Apple, Twitter, UPS and Alibaba on Tuesday will lead off the week. GoPro and Facebook will be the highlight on Wednesday and Conoco, Linkedin, Starbucks and MasterCard on Thursday. Bringing up the rear on Friday will be Chevron, Exxon and CVS Health.

So far, 172 S&P 500 companies have reported. Blended earnings are down -3.1% and revenue -4.0%. About 70% have beaten on earnings and only 50% on revenue. About 23% have missed on earnings.


Facebook (FB) does not report earnings until Wednesday but shares soared +2.52 to $102.19 and a new high. This was the first close in triple digits. The move came after the company said it had indexed more than 2 trillion posts in a move to take away some of Google's search territory. Users can search topics and see posts dating back to Facebook's beginning.

Facebook already has more than 1.5 billion searches a day. With the addition of their news feeds, you can now search on almost anything to get the news and see what your friends are saying about it. If Facebook is able to keep users at home on Facebook rather than see them move to a browser for information it keeps those ad clicks in the network rather than give them to Google. The new Moments feature allows users to see today's stories in pictures, videos and tweets. Facebook also allows you to make your posts private so they do not show up in a search.

Facebook is also pushing ahead into online video, which will eventually steal some market share from YouTube. Last week Facebook announced a dedicated video feed that users can browse to find new items of interest. Facebook earnings are Wednesday.


Apple shares finally showed some life after Nomura, Piper Jaffray and Maxim Group all upgraded the stock to a buy ahead of Tuesday's earnings. Maxim raised the price target from $144 to $167. Maxim said the recent partnership with Cisco will sell more iPads and iPhones to businesses and enable them to run on teleconferencing products.

The key to their earnings will be their phone sales and guidance. Q3 sales were thought to be in the 48 million range. Q4 estimates are in the 70-76 million range but there are a lot of disagreements over those targets. In Q4 2014, they sold 74.6 million. However, that was the first time they offered the dual format plus size options. The changes to the 6s this year are much less exciting and some analysts believe they could sell as few as 60 million in Q4. That is the same number they are expected to sell in Q1.

The analysts rebutting that call claim Apple is open in more countries this year and international sales will offset any weakness in the USA.

About the only safe bet on Apple is to be in cash on the sidelines. Shares are typically extremely volatile after earnings and could easily decline 10-15% or explode higher if the naysayers are wrong.


Twitter CEO Jack Dorsey surprised everyone on Friday when he gifted one-third of his company stock to an employee pool. Dorsey had 3.2% of the company shares and was the fifth largest shareholder. He is giving the shares, worth $206 million, to the company for free in order to "reinvest directly in our people." The move was the right thing to do in a company that seems to be floundering and competitors are trying to hire away your best people.

It was also a way to build up confidence in his ability to turn around the company and put it on the right track. How much more confidence in management are you going to have in a new CEO that just gave you and your friends $206 million in stock? The 6.8 million shares have to be approved by shareholders in 2016 by approving an equity incentive plan for the shares to be granted "over time" to Twitter employees. The board has already approved the deal.

Twitter shares rallied +4% on the news. They have earnings on Tuesday after the bell.


Sanity is finally returning to the oil market. Crude has declined from it's nearly $51 high the prior week and is now threatening to dip under support at $44. The Russian incursion into Syria did not cause the Middle East to melt down and there has not been a USA/Russian confrontation. Saudi Arabia is attacking Russian oil buyers in Europe by offering them even lower prices than before. Cutting Russia's income is far more effective than attacking them in Syria. When they run out of money, they will run out of a way to fund military interventionism.

In the U.S., crude inventories rose another 8.0 million barrels last week, now up +23 million in the last four weeks. That puts total inventories at 476.6 million and only 14.3 million below an 80 year high of 490.9 million set last April. There is almost no scenario that does not see a new record high in the coming weeks.

One noted analyst said last week, "one third of oil companies will go out of business or be acquired. One third will file bankruptcy and one third will struggle through with dramatically weakened balance sheets." That is definitely not a reason to rush out and buy energy equities.

Energy earnings begin next week with the big caps and while they will be ugly, they will still be in business. It is the two weeks after that where companies are going to be confessing and those confessions of dividend cuts, secondary offerings, earnings losses, reserve write-downs and credit line cuts will be painful for their stocks.

Energy company Noble Corp (NE) slashed its dividend on Friday from 37-cents to 15-cents in order to save $220 million and maintain liquidity. "Returning cash to shareholders through a dividend has been an important element of the company's long-term value creation goals and cash allocation strategy." However, (paraphrased) "preserving liquidity in an uncertain market" makes more sense today. The company did say they expect to beat the street when they report earnings next week. Noble has 32 offshore drilling rigs.


Active rigs were flat at 787 last week but active oil rigs declined -1 to 594 while gas rigs rose +1 to 193. Producers are continuing to slash drilling expenses and try to preserve cash.


Markets

So far the plan is working. The end of October, mutual fund fiscal year end window dressing is in full swing and working wonders on the market. The big cap indexes closed at a two-month high and even the Fed meeting next week should not have any impact. There is no way they are going to raise rates so the meeting is just a formality.

Earnings have been mostly better than expected except that Q3 is now the third consecutive quarter of revenue declines. Eventually that will become important but today it is being ignored. The strong dollar excuse is now so common that the impacts are ignored. Unfortunately, the dollar will get stronger once the Fed really does start raising rates and the impact will be worse.

The Trader's Almanac best six months of the year strategy kicked off early a couple weeks ago when the MACD turned positive. They are off to a good start. This is equivalent to the "sell in May and go away" strategy where the market is bought again around November 1st for a six-month holding period.

The Halloween Indicator, which is similar to the best six months strategy, is to buy on Halloween and sell on May Day. The history of that indicator since the inception of the Dow shows the returns are about 50% higher when the September/October period produces gains rather than a loss ahead of November. If the market loses ground in Sept/Oct then the market averages a 4.0% gain from Halloween to May Day. If those months produce a gain instead, then the Nov/May gain averages 6.8%. Just bear in mind that averaging anything since 1882 tends to produce some relatively flat averages. There are both large gains and large losses imbedded in those results. We cannot actually bet on the same results in 2015. However, since the late 1990s the gains have been even stronger than the long-term average according to Mark Hulbert.

I am not really worried about the long-term averages for the next two months. I am more worried about what happens when the calendar turns to November and the October window dressing ends. The global economy is weakening and about to get another dose of stimulus in hopes of waking it from its slumber. The U.S. economy is about to turn in another sub 1% growth quarter if the analysts are to be believed. Jobs weakened over the last two months and some analysts believe we are headed for a recession. How is that going to play out in the market fundamentals once we are in November?

The addition of global stimulus again may bounce the markets but eventually the same medicine over and over tends to have a weaker result.

As you would have expected bearish sentiment declined as the market was moving higher last week. However, bullish sentiment was flat and neutral sentiment is back over 41%. It seems investors are unsure about what the future holds despite the two-month highs.


I am going to refrain from making a prediction and simply suggest we trade what the market gives us. From that viewpoint the S&P has rallied +10.8% in four weeks. Is it just me or does anyone else feel like that is excessive? Granted we wandered around in correction territory for over a month and saw a nice double bottom retest. That was a picture perfect setup for a rally. However, now that we have pocketed an 11% gain will we be able to tack on another +2.6% gain to make a new high? After 11% what is another 2.6% in the greater scheme of things? Unfortunately, it is a lot.

The S&P came to a dead stop at Friday's close at 2,075 with major congestive resistance between there and the high close at 2,130.82. We spent six months wandering sideways in the 2050-2130 range and could not break through. Why should we expect to just charge higher this time after an 11% sprint. Normally the market would be very winded at this point and need to pause to refresh and then chip away a few points at a time at the overhead resistance until finally breaking through weeks later.

What I love about the market is that nobody can ever accurately predict the future. Thousands of analysts try and on any given day, dozens will be preaching on where the market is going. While I expect the markets to pause to refresh and weaken as we move into November there is no guarantee. That is just a calculated guess from 25 years of analyzing the market every day. That and $3 will buy you a cheap cup of Starbucks coffee.

I have said for a couple weeks that we are in a buy the dip market and that has not changed. Instead of trying to predict market direction, we should continue to buy the dip early this week and then become more cautious once we arrive in November. I do not care how many indicators and strategies claim we should buy the market in November I think we should look before we leap. Blindly buying stocks just because November is typically the beginning of a strong period, could be a recipe for disaster. Let us see what November brings before we bet the farm.


The Dow got a lot of help on Friday from the Microsoft post earnings bounce and the sudden resurgence in Apple ahead of earnings. Procter & Gamble also generated a post earnings gain. Eighteen Dow components have now reported with Apple, Pfizer and Merck the next on the calendar for Tuesday. Closing the week will be Exxon and Chevron on Friday.

Apple is the most likely candidate for a big whiplash in the Dow after it reports on Tuesday night. It is not unusual for Apple shares to move $10 the day after earnings. That would be great if it was a gain but it could be a significant headwind if Apple implodes. Pfizer and Merck are rarely Dow movers but anything is possible. Earnings from Exxon and Chevron are expected to be ugly but the damage may already be priced into the stocks.

The Dow sprinted into the congestion range last week and the next major resistance is 17,775 and then 18,165. Normally I would say the Dow was at risk for some decent profit taking this week but the small caps have been seriously deficient. The Russell 2000 did not pull back into the green for the week until late Friday. This suggests the majority of the short covering is occurring in the large caps with high liquidity. That means window dressing could keep the Dow stocks up for the coming week but the undressing at the first sign of market weakness in November could be brutal .

Support is about 17,400 followed by 17,150. However, other than some light profit taking I do not see anything on the horizon that could cause a significant retracement. Of course, it is the things you do not see that hurt the worst.



The Nasdaq added +121 points on Friday and a quick glance at the graphic below shows the winners definitely overcame the sinners in size of the moves. The top four winners totaled more than 150 points on their own. I did not research their Nasdaq weightings but you can bet they were substantial.

Other than Apple and Amgen the earnings calendar for next week is lacking any major market movers. Companies like GoPro and Twitter will be of interest to the tech crowd but even if they have a major swing it will not move the market.


Despite a decent +2% move on the Biotech Index on Friday the sector is still mired in the mud and cannot manage a rebound. That will continue to be a drag on the Nasdaq until the biotechs begin to recover.


The Nasdaq move on Friday was a strictly a gap higher on short covering. You can tell by the shortness of the candle that the intraday range was short compared to the total gain. There was a monster short squeeze on Amazon, Google and AthenaHealth and that represented the majority of the gain. They did stimulate short covering in the other issues but the gain was mainly in response to those three stocks.

The gap shot the index over 5,000 and resistance from March at 5,008. How long the Nasdaq remains over 5,000 is the $64 question. I would expect some of those monster gains to fade on Monday. How much they fade depends on how many investors are still short. I doubt many traders are going to be buying those highs in Amazon and Google and thinking they got a bargain.

On the bright side, that prior resistance from 4900-4925 should now be support but it is a long way down.


The fly in the ointment is the Russell 2000 small caps. They declined mid-week and barely returned to resistance at 1,165 by Friday. There is minimal buying interest in the small caps and that gives more credence to the big cap window dressing concept. Fund managers may be worried the market is not on stable ground long term and they are using the big caps as an ATM rather than an investment. Until some buying interest appears in the small caps, the market should be viewed cautiously as we approach November.

However, there is a historical pattern to the lagging small caps. Jeff Hirsch says this is normal until late November when the "January Effect" begins to appear and small caps finally find a bid. While he may be right, there is a reason behind the lagging performance and I suspect it is the window dressing in the big caps as I explained above.


At the risk of repeating myself, I would buy any dip on Monday but look to tighten your stops by Thursday as we near month end. The window dressing should taper as the week progresses. If managers are going to undress, they will do it on the first sign of weakness in November. Once past the October fiscal year end, they are free to raise cash again and restructure their portfolios at will until the end of the quarter. The end of December is another statement date where portfolio games can be played depending on what the market has done over the next six weeks.

The early bird discount for the End of Year Renewal Special will be out next weekend. Watch for it and save an additional $50 off your subscription.


If you like the market commentary you have been receiving and you are on a free trial then now is the time to subscribe. Do not wait until you miss a newsletter to decide you want to take the plunge.

subscribe now

Random Thoughts


Prepare for the ECB to become Japan. Mario Draghi telegraphed more easing from the ECB in December. The how or what question is keeping analysts busy. The ECB has a shortage of bonds it can buy. Rates are already negative and buying more for longer will only push rates further into negative territory.

There are worries that Draghi could copy Kuroda from the Bank of Japan and put stocks on the QE purchase list. RBS analyst Alberto Gallo included that possibility in an option list the ECB is likely considering.

Japan has already bought $100 billion in equities and the Swiss National Bank (SNB) also has $100 billion in equities. Draghi even mentioned the SNB during a Q&A session after the ECB press release. When Draghi said the ECB was "open to a whole menu of monetary policy instruments" he quite literally meant it. What will the ECB buy next?

Before we rush off the deep end here and think because the ECB may buy stocks that good times are here to stay we should consider the future. Rick Santelli repeated his statistics last week about the future of the global economy and it is a scary thought. Since the Great Recession, central banks have been pouring stimulus into the global economy through multiple fire hoses and it appears to be nonstop. The Fed has increased their balance sheet to $4.5 trillion, the ECB, BOJ, PBOC, etc, have added even more.

Since the recession, more than $60 trillion in debt has been added to the global economy in an effort to return to normal growth. What have we gotten out of it? After a brief rebound, the economy has begun to slow again and with commodity prices shrinking, we could be headed for a depression or at least another recession.

Ponder this. If the economy is shrinking after $60 trillion in stimulus, will anything save it? What will happen when central banks begin to remove that stimulus from the market? Can you even imagine that occurring over the next several years or even over the next decade?

More than $1.57 trillion in global government bonds are now priced with a negative interest rate. That is about 25% of the market. Will more QE really help?

If the global economy will not grow on $60 trillion in growth hormone injections then what comes next? $80 trillion, $100 trillion?

Eventually that money has to be withdrawn from the market and it is a scary scenario. While this is not going to impact us in the next 6-12 months, it will need to be removed just as sure as a cancer from your body. Hopefully a remedy can be found before this economic cancer becomes terminal.


What can the Fed do if the U.S. economy continues to weaken?

1. More forward guidance. (That has not worked well in the past)

2. More QE. (In a non-financial recession that would not help.)

3. Negative interest rates. (This could have serious negative effects.)

Full article on these options.


Who are the 92 million Americans not in the labor force?


The U.S. Dollar is slowly moving towards a critical juncture. The event will be the recognition of the Chinese yuan as a reserve currency by the IMF. The bank has given China strong signals that the yuan will be included in the Special Drawing Rights category when the board reaches a decision soon. China is already preparing celebrations of the event. It will mean they will no longer be required to transact international business in dollars, euros, yen and pounds and their dependence on the dollar will diminish. With that fading dependence the dollar's status as "the" favored global reserve currency will shrink. China's yuan could become a 14% share as the fifth currency to reach SDR status. That is calculated on China's export volumes. In addition, it has long been rumored that China and Russia are preparing to launch a gold backed currency that would be a major challenge to the dollar and other fiat currencies. Russia was the largest buyer of gold last month.

 

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

 

"Work like you don't need money, love like you've never been hurt, and dance like no one's watching."

Unknown author

 

subscribe now

 


Index Wrap

Market Up, Traders Still Leery. Good Market!

by Leigh Stevens

Click here to email Leigh Stevens
THE BOTTOM LINE:

The major indexes continued to climb strongly this past week but with traders cautious and not in a strong bullish mode. My bullish/bearish (CPRATIO) sentiment indicator didn't flip up once into readings reflecting trust and belief in this rally. My kind of Market! The Dow crossed back above its 200-day moving average which is kind of a big deal in that even 'fundamentally' oriented money managers will tend to notice this event in terms of suggesting renewed upside momentum.

You can buy current low/no interest bonds at par easily enough but a chance to buy the Nas big cap tracking stock QQQ at 100 and under looks to have come and gone for now at least. As long as we remain in a bull market, as demonstrated by recent lows holding key support(s), trust that the economic sky is NOT falling. Still, such periods of disbelief is opportune as it brings opportunities. And, it's easier to buy bottoms in a bull market than pick tops, which are trickier to 'time' in my experience.

I'll get into considerations of the 'psychology' of trading and the merits of a 'technical/chart' approach to trading in an upcoming Trader's Corner column or two which I will get to again soon. Needless to say, forward thinking is a great advantage versus most traders who wait until they see 'the whites of their eyes' so to speak. To take one example, a double bottom like seen in the S&P 500 recently won't convince most that bullish 'news' will be forthcoming again. It's usually if not always like this.

The average market participant doesn't believe that market action or key price patterns that unfold PRECEDE events related to earnings, economic news and other such considerations. However, such prescience is what got savvy professional traders to buy into that second bottom. Charles Dow commented on this kind of dynamic 100+ years ago. Human nature doesn't change all that much!

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX) DAILY CHART:

The S&P 500 (SPX) has regained considerable upside momentum and a bullish chart. My upper resistance trading band, a 21-day moving average upper envelope line is now set at 5 percent above the centered moving average. As below, so above; i.e., the last low was around 5% under the 21-day average and resistance may now come in/start to come in the SAME percentage above the 'centered' (21-day) average.

I wrote last week that "SPX could fail on a first attempt to breech 2050 but as long as bullish sentiment remains relatively low I'm not overly concerned about any major downside reversal." Not much more to say about that, just check my CPRATIO sentiment indicator at the bottom of the SPX chart. Not once did this indicator rise above a 'neutral' mid-range reading.

I also noted last time that 2000 was a key resistance and this level, now flips to 'become' a secondary support per my green up arrow. Near support also flips from resistance to support at 2050.

As I said before, 2050 represented SPX's prior 'breakdown point' and was a key level to pierce and a pivotal bullish penetration because the S&P is now back above the LOW end of its prior long-standing trading range. Best bullish news going forward is for the Index to build renewed support around 2050. Next overhead resistance comes in around 2100 as highlighted.

The Index is now into its 13-day Relative Strength Index 'overbought' zone so higher risk of a shakeout/minor pullback is goes with this reading.

The S&P 100 (OEX) INDEX DAILY CHART

The big cap S&P 100 (OEX) continues bullish in its pattern as the Index has climbed well above resistance implied by its 21-day moving average. My upper resistance trading 'band' is re-set to 5% above the 'centered' 21-day moving average. I have seen often a next high at least equal to the prior low in terms of percentage values above/below this key trading average.

OEX cleared both prior resistance points I highlighted last week at 900 and 920. A next resistance zone is now suggested at 940 to 948 which was the prior intraday peak for the Index.

Near support is seen at the 'milestone' 900 level in OEX, with technical/chart support extending to 880.

The RSI is up into 'overbought' territory with some risk of a pullback implied and a key reason that I favor buying oversold lows; e.g., as suggested by the first and then second (higher) bottoms. The first intraday bottom just off my daily chart here was very briefly seen at 810 with that day's Close at 830; the lowest Close the next day was 820.

THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:

The Dow 30 (INDU) continued to climb what has been sometimes termed a 'wall of worry' and this past week pierced its 200-day moving average and significant technically; gets some notice from money managers who otherwise aren't otherwise especially technically oriented.

Climbing a wall of worry rather than that of a powerful trend shows up in my daily CBOE equities call-put ratio seen with SPX (above) and my COMP chart (below) not registering a single day in the past two weeks that climbed above a mid-range 'neutral' reading. There have been dips in bullishness seen with my CPRATIO indicator but NO bullish spikes in trader 'sentiment'.

Bullish price run ups were seen in BA, CSCO, GE, MSFT, TRV and big time in MCD. INDU now has near support in the 17500 area and well up from 17000-16900. Next support is highlighted at 17200.

Near resistance is suggested in the area of INDU's down trendline intersecting around 17766, with next resistance seen at 18150. The Dow's long-term uptrend channel (not shown) suggests major resistance comes in around 19200 currently.

As with the S&P, the Dow has climbed into its 'typical' overbought zone in terms of its 13-day Relative Strength Index (RSI) reading. I noted the same last week in saying that "We may see some corrective action ahead but the trend looks higher overall." I liked owning Dow Index (DJX) calls when the Average found repeated support in the 16000 area, but if you are waking up to bullish potential just now, risk to reward potential is maybe ok but no longer compelling, absent big pullbacks.



NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:

The Nasdaq Composite (COMP) continues bullish in its pattern as it first climbed above 4800, resistance implied by its down trendline. I wrote last time that I anticipated "that COMP could (also) again climb above 4900, but this time with possible 'basing' action at and above this level which would suggest a retest of 5000 in the Composite." This level not ONLY 'retested' but exceeded!

Next technical resistance now looks to come in around 5100 and as previously noted last week, with fairly major resistance staring at 5200. Near support is seen at 4900, then 4800.

COMP has just climbed into its 'typical' overbought zone in terms of the 13-day Relative Strength Index or RSI but bullish sentiment is still moderate without any extreme bullishness according to my CPRATIO indicator. And, accordingly, I would rate the chances of the Composite going to new highs ABOVE 5200 as reasonably good. Stay tuned!

NASDAQ 100 (NDX); DAILY CHART:

In continued bullish action, key resistance in the Nasdaq 100 (NDX) was pierced at 4470-4500, suggesting a possible next test of 4700, which is highlighted as near technical resistance. Next higher resistance is projected in the 4780-4800 area.

Near support is seen at the LOW end of the sizable bullish upside price gap at 4500, with next support likely in the 4400 area.

NDX, like the broad Composite has climbed into an overbought RSI reading as of the end of the week, suggesting that risk of a pullback, such as back into the sizable 4600-4500 chart 'gap' area, has increased. I don't anticipate more than the aforementioned chart gap being 'filled in' with still higher levels to come after and for NDX to at least retest its prior 4694 intraday high and prior Closing high of 4679.

Study of the Nas 100 Volatility Index history, VXN, suggests a tendency for eventual NDX tops being made when VXN settles back to the 14-13.7 area. VXN ended the week at 16.6

The NASDAQ 100 ETF (Tracking) Stock (QQQ); DAILY CHART:

The Nas 100 tracking stock (QQQ) is bullish in its chart pattern with QQQ having rebounded to back near the high end of its prior 106-114 trading range. I anticipate QQQ continuing higher and at least retesting the high end (114) of its prior price range which is of course now not far overhead from the Friday QQQ Close.

QQQ resistance is assumed to come in around 114-114.4 at the prior top. Next higher resistance is projected at 115.1 Near chart support for QQQ is seen at 110, extending to 108.

A key volume measure, the On Balance Volume indicator or OBV is trending higher, which is a bullish secondary technical aspect. Daily trading volume has picked up a bit on QQQ's recent advance. The last substantial SPIKE in the Q's volume is noted as a 'selling climax' on the daily volume indicator. Major volume spikes is the other pattern worth paying attention to in terms of trade volume. Otherwise, look for a predominate up or down trend in the OBV line.

The RUSSELL 2000 (RUT); DAILY CHART:

The Russell 2000's (RUT) chart pattern could be seen as predominately 'neutral' in its recovery to date. RUT at best could be forming a Head & Shoulder's bottom. A decisive upside penetration of 1170, with support found in this area on pullbacks would suggest that RUT would make a further bullish recovery.

Currently I am mostly focused on the potential (or not) for RUT to climb to resistance levels implied by a 50 percent to a Fibonacci 62% retracement of RUT's prior decline; i.e., to potential resistances highlighted at 1187, then in the 1213 area.

Near support is suggested at 1140, extending to 1120. A RUT Close below 1120, not reversed (back to the upside) in the following session, would suggest the Index being pulled lower again.

Given the bullish charts with the Nasdaq, S&P and Dow, the Russell is lagging considerably and doesn't look to offer a clear cut trend other than sideways.


GOOD TRADING SUCCESS!




New Option Plays

Small Caps Look Ready To Pop

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

iShares Russell 2000 ETF - IWM - close: 115.85 change: +1.13

Stop Loss: 113.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 36 million
Entry on October -- at $---.--
Listed on October 24, 2015
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Trade Description:
If you haven't noticed the market is in rally mode. Worries over the Fed raising rates in 2015 are fading while the rest of the world is trying to add stimulus to their economies. Concerns over a terrible Q3 earnings season are also fading. Yes, earnings results have been bad but the bar was set low enough that companies are beating estimates. Now the U.S. market is surging.

One area of the market has lagged behind and that is the small cap stocks. The NASDAQ composite ended the week with a +6.3% gain for 2015. The S&P 500 edged back into positive territory with a +0.8% gain for the year. Yet the small cap Russell 2000 index is still down -3.2%. It's time for the small caps to play catch up with the rest of the market.

A couple of issues have driven this divergence. Right now big caps are outperforming because mutual fund and hedge fund managers are probably window dressing their portfolios for the end of their fiscal year (October 31st). Another factor has been weakness in the biotech stocks. Biotechs reversed sharply in the last three months and they have struggled to keep up with the market's rebound. Currently there are a lot of small biotech companies in the small cap index. Biotechs now account for about 7% of the Russell 2000 index. This group has definitely lagged the rest of the market over the last three weeks.

The good news is that the IWM small cap ETF, which tracks the Russell 2000 index, looks poised to breakout higher. It has been coiling below resistance in the $116 area the last several days. When it finally breaks higher it can move pretty quick.

Tonight we are suggesting a trigger to buy calls at $116.55. If triggered we will start with a stop loss at $113.35. This is a multi-week trade.

Trigger @ $116.55

- Suggested Positions -

Buy the 2016 JAN $120 CALL (IWM160115C120) current ask $1.68
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

Stocks Rally To Two-Month High

by James Brown

Click here to email James Brown

Editor's Note:

A rate cut by the Chinese central bank and very strong earnings reports on Thursday night was a powerful combination for the bulls. The U.S. market surged to new two-month highs on Friday.

Our plan was to close the LB trade on Friday morning.

NKE hit our stop loss. STZ hit our entry trigger.

NOTE - we want to exit the FB, INGR, and BEAV trades on Monday morning.


Current Portfolio:


CALL Play Updates

Costco Wholesale Corp. - COST - close: 155.74 change: -2.41

Stop Loss: 153.25
Target(s): To Be Determined
Current Option Gain/Loss: +210.0%
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:
10/24/15: Shares of COST garnered another price target upgrade on Friday. The new target is $165 but this upgrade failed to stop some end-of-the-week profit taking. After a multi-day rally COST retreated with a -1.5% drop on Friday.

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

10/22/15 new stop @ 153.25
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

chart:


Salesforce.com, Inc. - CRM - close: 78.56 change: +1.19

Stop Loss: 74.75
Target(s): To Be Determined
Current Option Gain/Loss: +27.9%
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:
10/24/15: Big cap technology stocks were showing relative strength on Friday. Shares of CRM delivered a +1.5% gain.

No new positions at this time.

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

chart:


CVS Health Corp. - CVS - close: 103.95 change: -0.34

Stop Loss: 99.40
Target(s): To Be Determined
Current Option Gain/Loss: -8.2%
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:
10/24/15: CVS was hit with profit taking on Friday morning. Shares tagged $105.00 early Friday but this proved to be round-number resistance. The stock briefly pierced technical support at its converging 10-dma and 200-dma. Fortunately CVS pared its loss by the closing bell.

We only have a few days left. CVS is due to report earnings this Friday (Oct. 30th). We will plan on exiting this trade on Wednesday.

No new positions at this time.

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

10/24/15 prepare to exit by Wednesday.
10/13/15 triggered @ $103.75
Option Format: symbol-year-month-day-call-strike

chart:


The Walt Disney Company - DIS - close: 113.09 change: -0.16

Stop Loss: 109.25
Target(s): To Be Determined
Current Option Gain/Loss: +195.2%
Average Daily Volume = 9.9 million
Entry on October 12 at $106.50
Listed on October 10, 2015
Time Frame: Exit PRIOR to earnings on November 5th
New Positions: see below

Comments:
10/24/15: DIS shares have been surging higher. Last week the rally accelerated and DIS powered to new three-month highs and marked its fourth weekly gain in a row.

The hype about DIS' upcoming "Star Wars: The Force Awakens" seems to be working. They released another trailer last Monday and it set a record on Youtube with 128 million views in the first 24 hours (the prior record holder was "Furious 7" with about 100 million).

Currently we have less than two weeks left on our DIS trade. The company is scheduled to report earnings on November 5th and we do not want to hold over the announcement. The stock is also short-term overbought here. More conservative investors will want to seriously consider taking profits right now.

No new positions at this time.

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

10/24/15 Less than two weeks to go on this trade
10/22/15 new stop @ 109.25
Investors may want to take some money off the table with our option up +200%
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

chart:


Facebook, Inc. - FB - close: 102.19 change: +2.52

Stop Loss: 95.75
Target(s): To Be Determined
Current Option Gain/Loss: +130.6%
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:
10/24/15: FB was a strong performer last week. The stock broke through resistance at its prior 2015 highs and pushed through resistance at the $100 level.

The company has earnings coming up on November 4th and we do not want to hold over their announcement.

It's possible that FB continues to rally up into its earnings report. Tonight we are choosing a more conservative strategy and suggesting an immediate exit on Monday morning to lock in potential gains.

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

10/24/15 prepare to exit on Monday morning
10/22/15 new stop loss at $95.75, FB looks poised to breakout past $100
10/20/15 Caution - FB has generated a technical reversal pattern but it needs to see confirmation
10/16/15 triggered @ $96.60
Option Format: symbol-year-month-day-call-strike

chart:


The Home Depot, Inc. - HD - close: 124.61 change: +0.25

Stop Loss: 121.75
Target(s): To Be Determined
Current Option Gain/Loss: +69.9%
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:
10/24/15: The rally in HD slowed on Friday but it still notched a new all-time high. Shares are up six out of the last seven days.

There is no change from my recent comments. More aggressive traders may want to keep their stop loss below the $120.00 mark for now.

No new positions at this time.

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

10/22/15 new stop @ 121.75
10/10/15 new stop @ 117.45
10/08/15 triggered @ $120.25
Option Format: symbol-year-month-day-call-strike

chart:


Ingredion Inc. - INGR - close: 93.39 change: +0.24

Stop Loss: 89.85
Target(s): To Be Determined
Current Option Gain/Loss: -11.4%
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:
10/24/15: The rally in INGR accelerated last week. Shares marked their fourth up week in a row. Unfortunately the option hasn't moved as fast as expected. INGR is due to report earnings on October 29th and we do not want to hold over the announcement. Currently shares just stalled at resistance at their August 2015 highs near $94.00. A reversal here would look like a bearish double top.

We are suggesting an immediate exit on Monday morning. We don't have much time left and want to minimize any potential losses.

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

10/24/15 Prepare to exit on Monday morning
10/22/15 new stop @ 89.85
10/12/15 triggered @ $91.05
Option Format: symbol-year-month-day-call-strike

chart:


Pepsico, Inc. - PEP - close: 102.43 change: -0.65

Stop Loss: 94.75
Target(s): To Be Determined
Current Option Gain/Loss: +35.2%
Average Daily Volume = 5.0 million
Entry on October 22 at $101.00
Listed on October 19, 2015
Time Frame: Exit prior to expiration in January
New Positions: see below

Comments:
10/24/15: Shares of PEP hit some profit taking on Friday and the stock slipped -0.6%. I would prefer to see shares dip back into the $101.00-101.50 zone as our next bullish entry point. Broken resistance near $100-101 should be support.

Trade Description: October 19, 2015:
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.

- Suggested Positions -

Long 2016 JAN $100 CALL (PEP160115C100) entry $2.81

10/22/15 triggered @ $101.00
Option Format: symbol-year-month-day-call-strike

chart:


Constellation Brands Inc. - STZ - close: 136.20 change: -1.61

Stop Loss: 133.20
Target(s): To Be Determined
Current Option Gain/Loss: -30.0%
Average Daily Volume = 1.29 million
Entry on October 23 at $138.38
Listed on October 22, 2015
Time Frame: Exit PRIOR to earnings in early January
New Positions: see below

Comments:
10/24/15: Our new trade on STZ is open but shares are not off to a good start.

STZ gapped higher on Friday morning at $138.38. That immediately triggered our trade since the suggested entry was $138.25. Unfortunately STZ peaked at $138.88 and reversed. STZ did find support at its 10-dma but it underperformed the market with a -1.1% decline. Furthermore Friday's move looks like a bearish engulfing candlestick reversal pattern.

I am not suggesting new positions at this time. Let's see how STZ performs on Monday.

Trade Description: October 22, 2015:
Major beer brands have suffered from the boom in craft beers. Yet STZ's Corona and Modelo have seen significant growth, especially in the U.S. The company's earnings and revenue growth has fueled a rally in the stock that has outpaced the major marker indices.

STZ is in the consumer goods sector. According to the company, "Constellation Brands (NYSE:STZ and STZ.B) is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Canada, Mexico, New Zealand and Italy. In 2014, Constellation was one of the top performing stocks in the S&P 500 Consumer Staples Index. Constellation is the number three beer company in the U.S. with high-end, iconic imported brands including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the world`s leader in premium wine, selling great brands that people love including Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company`s premium spirits brands include SVEDKA Vodka and Black Velvet Canadian Whisky.

Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand-building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, sales in approximately 100 countries, about 40 facilities and approximately 7,200 talented employees."

STZ has been reporting strong earnings numbers. Back in January they reported their Q3 2015 numbers that beat estimates on both the top and bottom line numbers. STZ management raised their 2015 guidance. Their Q4 results were out on April 9th. Earnings were up +37% from a year ago. Gross margins improved. Their fiscal year 2015 sales were up +24%. Management guided 2016 earnings growth in the +12% to +17% range.

Their 2016 Q1 report came out in July. They managed to beat estimates again on both the top and bottom line. STZ management raised their guidance again. Their most recent earnings report was October 7th. STZ said their 2016 Q2 earnings were $1.56 a share. That was 24 cents better than expected. Revenues were up +7.8% to $1.73 billion, which was in-line with estimates. The company remains optimistic and raised their guidance yet again.

This strong track record of earnings growth has fueled a long-term rally in STZ. The stock is also outperforming the broader market. The S&P 500 index is flat for the year (-0.3%) while STZ is up +40% in 2015.

After a big rally off its late September lows (about $122 to almost $139) shares dipped to their 10-dma and bounced (around $133.25). The market's current rally has lifted STZ back toward its all-time highs. Tonight we are suggesting a trigger to buy calls at $138.25.

- Suggested Positions -

Long 2016 JAN $145 CALL (STZ160115C145) entry $2.50

10/23/15 triggered on gap open at $138.38, entry trigger was $138.25
Option Format: symbol-year-month-day-call-strike

chart:




PUT Play Updates

B/E Aerospace Inc. - BEAV - close: 43.44 change: -1.31

Stop Loss: 46.25
Target(s): To Be Determined
Current Option Gain/Loss: +50.0%
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:
10/24/15: Attention! We are almost out of time on our BEAV trade.

The stock underperformed the market on Friday thanks to an analyst downgrade. Shares briefly traded at new multi-year lows before paring their losses.

BEAV reports earnings on Tuesday morning, October 27th. We are suggesting an immediate exit on Monday morning to lock in a potential gain. More aggressive traders may want to exit on Monday at the close instead.

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

10/24/15 Prepare to exit on Monday morning
10/22/15 new stop @ 46.25
10/14/15 triggered @ $45.75
Option Format: symbol-year-month-day-call-strike

chart:


Cracker Barrel Old Country - CBRL - close: 141.07 change: +1.45

Stop Loss: 145.05
Target(s): To Be Determined
Current Option Gain/Loss: -40.6%
Average Daily Volume = 395 thousand
Entry on October 22 at $136.90
Listed on October 21, 2015
Time Frame: Exit PRIOR to earnings on Nov. 24th
New Positions: see below

Comments:
10/24/15: CBRL had its price target lowered on Friday. Yet shares managed a bounce anyway. CBRL briefly traded above short-term technical resistance at its 10-dma before paring its gains to +1.0%.

No new positions at this time.

Trade Description: October 21, 2015:
Some of the restaurant stocks are struggling. Disappointing consumer spending, slower foot traffic, and tougher comparisons are weighing on the group.

CBRL is in the services sector. According to the company, "Cracker Barrel Old Country Store restaurants provide a friendly home-away-from-home in its old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping that's surprisingly unique, genuinely fun and reminiscent of America's country heritage...all at a fair price. Cracker Barrel Old Country Store, Inc. (Nasdaq:CBRL) was established in 1969 in Lebanon, Tenn. and operates 637 company-owned locations in 42 states."

Earnings have taken a turn for the worse with CBRL. Back in June this year CBRL delivered a very upbeat earnings report. Profit was $1.49 per share, which was 12 cents above estimates. Revenues were up +6.3% to $683.7 million, beating expectations. Comparable store sales were relatively healthy and management raised their guidance.

Fast-forward to September 16th and CBRL reported their fiscal Q4 results of $1.97 a share. That did beat estimates but revenue growth slowed down to +3.8% to $719 million, which missed estimates. Comparable store sales slowed down to +0.6%. Management lowered their fiscal 2016 Q1 guidance.

Technically CBRL has developed a bearish trend of lower highs and now lower lows. This past week has seen the oversold bounce fail at resistance near its 200-dma. The point & figure chart is bearish and forecasting at $124.00 target.

I'm a little bit worried about the elevated short interest. The most recent data listed short interest at 22% of the small 19.0 million share float. That could make CBRL more volatile than normal but the shorts are probably right on this one, at least for a little while.

Tonight we are suggesting a trigger to launch bearish positions at $136.90. We are not setting an exit target tonight but the $130.00 and $120.00 levels are potential support (and thus possible bearish targets).

- Suggested Positions -

Long DEC $130 PUT (CBRL151218P130) entry $3.20

10/22/15 triggered @ $136.90
Option Format: symbol-year-month-day-call-strike

chart:


Darden Restaurants - DRI - close: 63.91 change: -0.18

Stop Loss: 66.30
Target(s): To Be Determined
Current Option Gain/Loss: -16.3%
Average Daily Volume = 1.7 million
Entry on October 21 at $63.40
Listed on October 20, 2015
Time Frame: Exit PRIOR to earnings in December
New Positions: see below

Comments:
10/24/15: The Friday morning bounce in DRI failed at its 10-dma. Shares underperformed the U.S. market with a -0.28% decline. I'd like to see some follow through lower before considering new positions.

No new positions at this time.

Trade Description: October 20, 2015:
Consumer spending has been disappointing and some of the restaurant names are suffering for it. DRI has actually raised guidance two quarters in a row but investors are ignoring this news and seem to be focusing on the larger macro trends for the industry.

DRI is in the services sector. According to the company, "Darden Restaurants, Inc., (DRI) owns and operates more than 1,500 restaurants that generate $6.8 billion in annual sales. Headquartered in Orlando, Florida, and employing 150,000 people, Darden is recognized for a culture that rewards caring for and responding to people. Our restaurant brands - Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V's and Yard House - reflect the rich diversity of those who dine with us. Our brands are built on deep insights into what our guests want."

DRI reported their Q4 report on June 23rd. They beat Wall Street's EPS estimate and raised their 2016 guidance. Shares popped on the news and the stock continued to rally into late summer. Unfortunately shares produced a bearish double-top pattern in the July-August time frame. DRI began to correct lower.

The company reported its 2016 Q1 results on September 22nd. Earnings of $0.68 per share beat estimates by 10 cents. Revenues were up +5.7% to $1.69 billion, which was above estimates. Same-store sales were up +3.4% for the quarter. Management raised their 2016 earnings guidance again. This looked like a pretty good report. Yet three days later investors sold the rally.

Nationwide the pace of consumer spending has been lower than expected. A few days ago an industry research firm said U.S. restaurant sales were up +1.5% in Q3 but that was slower than Q2's +1.8% growth. A higher tab helped offset slower traffic numbers. The outlook for traffic is worrisome. This firm expects restaurant traffic numbers to be stagnant. This is inline with another research note that expects foot traffic at retailers to fall -8% this holiday season.

The market used to think that consumers would take the money they saved from lower gasoline prices and spend it elsewhere. That doesn't seem to be happening. Now the restaurant industry is facing tough comparisons to last year's relatively healthy Q4 numbers.

Technically DRI is now in a bearish trend of lower highs and lower lows. Shares have broken down below their 200-dma. The oversold bounce just failed at resistance near $66.00. The point & figure chart is bearish and forecasting at $55.00 target. Tonight we are suggesting a trigger to buy puts if DRI trades down to $63.40. This is a multi-week trade. We will plan on exiting prior to earnings in December.

- Suggested Positions -

Long 2016 JAN $60 PUT (DRI160115P60) entry $2.15

10/21/15 triggered @ $63.40
Option Format: symbol-year-month-day-call-strike

chart:


Nordstrom Inc. - JWN - close: 64.99 change: -3.52

Stop Loss: 70.05
Target(s): To Be Determined
Current Option Gain/Loss: +116.8%
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:
10/24/15: Shares of JWN accelerated lower on Friday. JWN tried to bounce but failed beneath the $69.00 level and then plunged to a -5.1% decline and a new 2015 low.

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

chart:



CLOSED BULLISH PLAYS

L Brands, Inc. - LB - close: 93.88 change: -2.88

Stop Loss: 92.85
Target(s): To Be Determined
Current Option Gain/Loss: -36.4%
Average Daily Volume = 1.9 million
Entry on October 21 at $97.65
Listed on October 17, 2015
Time Frame: Exit PRIOR to earnings on November 18th
New Positions: see below

Comments:
10/24/15: LB was not cooperating so in the Thursday night newsletter we decided to exit on Friday morning. Thank goodness we did!

Shares of LB gapped open higher on Friday morning and then immediately plunged to new two-week lows. LB underperformed the market with a -2.9% decline.

- Suggested Positions -

NOV $100 CALL (LB151120C100) entry $1.65 exit $1.05 (-36.4%)

10/23/15 Planned exit at the open
10/22/15 LB did not participate in the market rally today, prepare to exit tomorrow morning
10/21/15 triggered @ $97.65
Option Format: symbol-year-month-day-call-strike

chart:


NIKE, Inc. - NKE - close: 130.53 change: -1.88

Stop Loss: 129.15
Target(s): To Be Determined
Current Option Gain/Loss: +32.1%
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:
10/24/15: After NKE's surge to new highs on Monday the rally stalled the rest of the week. Shares quickly drifted sideways until NKE encountered some profit taking on Friday morning. Our stop loss was hit at $129.15.

I would definitely keep NKE on your watch list. If shares corrected lower down toward support we'll look for another bullish entry point.

- Suggested Positions -

2016 JAN $130 CALL (NKE160115C130) entry $4.05 exit $5.35 (+32.1%)

10/23/15 stopped out
10/22/15 new stop @ 129.15
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

chart: