Option Investor
Newsletter

Daily Newsletter, Monday, 11/30/2015

Table of Contents

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

Market Wrap

Cyber Monday!

by Thomas Hughes

Click here to email Thomas Hughes
Trading was light as the market waits for the results to Cyber Monday, a host of monthly macroeconomic data and a policy decision from the ECB.

Introduction

Trading was light today as the market waits for the results of Cyber Monday. By all accounts it was a strong one but so far there is little hard data. While Cyber Monday is an important, attention may actually be more focused on events scheduled later in the week. It is once again the turn of a new month so there is a full calendar of economic releases including the NFP, several speeches from FOMC members and a policy meeting from the ECB.

Global markets began the week mixed. Asian indices closed mostly lower but losses were limited. The Nikkei led with a decline of -0.69% followed by -0.39% for the Heng Seng, the mainland Shanghai index made a gain near 0.25%. Mainland shares were boosted by the financial sector and possible acceptance of the yuan as a reserve currency which the IMF confirmed later in the day. Weighting for the yuan in the SDR basket is just over 10% compared to 41.7% for the the dollar and over 30% for the euro.

Trading in European markets was positive and light, led by the DAX gain of 0.8%, a new three month high. The gains were made on hopes the ECB will increase and expand its QE efforts at the meeting on Thursday, something the ECB and Mario Draghi have indicated likely to happen.

Market Statistics

The FOMC is not out of the picture this week. First, it announced today it would adopt new emergency lending rules. The rules include no lending to individual companies, penalty rates for emergency loans and no aid for insolvent companies. This means only broad based sector wide assistance and no aid to failing companies, essentially excluding companies like Bear Stearns and AIG from bail-out.

Futures were indicating a positive open all morning. The S&P 500 was indicated to open with gains near 6 points in the earliest trading but this moderated going into the opening bell and after the release of Chicago PMI. Needless to say, PMI was a miss. Trading got off to a positive start, the indices gained a few points right after the open but trading was choppy and the gains did not hold. By 10AM the indices were all in negative territory.

Losses were minimal for most of the day. Early morning through lunch time say the S&P range between 0.00% and -0.025%. By noon the indices were setting new lows, but only just below the morning range, and then held those lows until mid afternoon. Around 2PM a rally took the indices back up to touch break even levels but it did not last. Selling followed and took them back down to the low of the day and lower, where they stayed until the close of the regular session.

Economic Calendar

The Economy

Chicago PMI was released at 9:45AM and came in lighter than expected. Analysts had been expecting a decline but for manufacturing to remain at or slightly above the expansionary 50 level. The actual results were 48.7 and driven largely by a sharp decline in new orders. This is a decline of -7.5 points from last months reading of 56.2 and the 6th month this year of contraction in this index. Employment remains steady and slightly above 50.

Pending Home Sales came out at 10AM and was also weaker than expected at +0.2%. Analysts had been expecting 1.5%. Low inventory and rising prices are to blame. Despite the weak showing this month pending sales, a forward looking indicator, is 3.9% above last year at this time and has been trending higher for 14 months straight. NAR economist Lawrence Yun sees a combination of factors at play; on one side low inventory is driving up prices and hurting demand in some areas while ongoing health in labor is supporting the market overall. He expects sales growth to continue in 2016 but moderate to a pace near 3% unless new supply hits the market.

Moody's Survey Of Business Confidence fell a full point to 33.4 and a new long term low. Mr. Zandi reports that instability in global financial markets and the recent attacks in Paris have taken their toll on sentiment, particularly in the US. The caveat is that this week's reading is affected by a low response rate due to last week's holiday. Concern for current conditions weighs heaviest on the reading while outlook for next year is brighter.


According to FactSet 98% of the S&P has reported earnings for the 3rd quarter with the remaining 2% scattered over the next couple of weeks. Of those reporting 74% have beaten earnings expectations while only 45% have beaten on the revenue side. The blended rate for 3rd quarter earnings growth is now -1.3% with positive growth not expected until the 1st quarter of next year. The energy sector led the decline with growth of -56.8%; ex-energy S&P 500 earnings growth jumps to 5.7%.

Fourth quarter expectations have declined again. All index growth is now estimated at -4.2%, down -0.2% from last week and down more than 6% from earlier in the year. Factoring in the 4% improvement in the blended growth rate that we can expect due to long running averages brings growth up to only -0.2%. Ex-energy 4th quarter growth expectations move up to 1.5%.

Growth is expected to return in the first quarter of 2016 and gain strength throughout the year. First quarter is expected to come in at 2.1% and average 7.8% for the year. Full year expectations have come down further, primarily due to declining expectations in the energy sector. Earnings growth in the energy sector is now barely above 0%, down substantially from earlier projections in excess of +45%.

There is a lot of data to come out this week. Tomorrow is Auto/Truck Sales, ISM Manufacturing. Wednesday is ADP Employmnent in the morning with the Fed Beige Book later that afternoon. Thursday is weekly jobless claims along with the Challenger report on planned lay-offs, Factory Orders and ISM Services. Friday wraps up the week with NFP, Unemployment and hourly earnings. The data will heavily influence the upcoming FOMC decision, the stronger the data the more likely the FOMC is to raise rates. The NFP is expected to come in around 200K, down from last months 271K and consistent with the recovery. Last month's number was freakishly strong so there could be significant revisions to color the headline number as well.

The Oil Index

Oil prices tried to rally today but were not able to hold gains. The OPEC meeting has raised some hope that the cartel will make moves to support prices but there is little sign that will happen. If anything, the members all seem bent on pumping as much as possible even with the Saudi's pledging a willingness to support prices. The meeting could result in changes to policy but until production and supply levels are more in line with demand prices are likely to stay low. WTI gained as much as 3.5% intraday but fell back to break even levels by settlement time.

The Oil Index gained 0.75% in today's session. The index created a small bodied candle sitting on the short term moving average and continues recent the recent sideways trend. The index appears to be hanging between support and resistance at 1,150 and 1,250 with no real indication of direction. The indicators are mixed but largely consistent with a range bound index, underlying direction will be driven by oil prices; oil prices drive earnings in the sector and earnings expectations are poor. If oil falls further, or simply trends near the recent lows, expectations for next years growth could easily turn negative.


The Gold Index

Gold prices rebound from the 6 year low set last week. Gold gained as much as $10, about 0.85%, intraday but closed below $1075. The metal is getting hurt by rising dollar values and is likely to move lower should the ECB act as expected, weakening the euro and strengthening the dollar. There is economic data to consider as well. This week's data is likely to influence FOMC outlook and could help cement rate hike expectations.

The gold miners got a lift from gold prices but remain near recent lows. The Gold Miners ETF GDX gained just over 2% in a move that keeps the ETF near its long term low. The ETF has been trending sideways for nearly a month, while gold prices are hitting 6 year lows, and could be getting ready for another test of support at the $13 level. The indicators have rolled into a bullish crossover but momentum is weak and more consistent with consolidation within a down trend than a reversal or bounce. I remain bearish on gold and the GDX.


In The News, Story Stocks and Earnings

The Dollar Index rose today on ECB and FOMC expectations. The ECB is expected to loosen policy, the FOMC expected to tighten, moves that are both supporting dollar value. Today's move takes the index to a new 8 month high and just shy of the all time high set last March. The indicators are mixed, the index could have reached the top of the range, but there is some underlying strength in the move so a break out is not out of the question.


Target made Cyber Monday headlines, for having its website crash. The website received so much traffic it caused delays for many users and even shut down for about 20 minutes. This is not the first website crash of the season or even the only one today. Nieman Marcus crashed on Black Friday and PayPal had troubles today too, both signs of increase on line traffic and possible trouble for brick and mortar locations. Despite the problems many retailers are reporting that sales have been good the entire weekend and upped the chances for a strong consumer holiday season.

The XRT Retails SPDR lost -2.17% in today's session and fell back below the short term moving average. The indicators are bullish, consistent with the ETF's bounce from support, but weakening in the near term and consistent with a retest of support. First downside target is near $44 with a pull back to long term support near $42 likely if Black Friday/Cyber Monday numbers do not match expectations. The sector has been in rotation the last few months and could continue as investors size up which stores, and which types of retailers, are going to profit in 2016.


FitBit received an upgrade today in the wake of positive sales reports from Target and Best Buy. Both retailers report strong sales of FitBit and other wearable technology. Target says FitBit is one of their most popular items, BestBuy that sales of wearables are double their levels of last year. Mathew McClintock of Barclays upgraded the stock to outperform saying the recent slide was unjustified and that holiday sales would be a meaningful catalyst. Shares of the stock gained more than 5% in the pre-market session and closed the day with a gain of 3.5%.


Shoe Carnival reported before the bell. The discount shoe retailer reported comp store sales of 6% but earnings and revenue slightly below estimates. This wouldn't have been a problem I think except that they also lowered guidance to a range of $1.38 to $1.43, below the previous range and consensus estimate of $1.47. Comp sales are also expected to come in light next year at 3%. Shares of the stock opened higher, touched the short term moving average, and then sold off hard to close with a loss near -3%.


The Indices

The indices fell in today's action but most were able to close the month with gains. While most losses were minimal the Dow Jones Transportation Average posted a more substantial decline, -1.39%. The index has continued its fall from resistance which it began last week and has today crossed beneath the short term moving average. The indicators are pointing lower in the very near term but remain very weak and consistent with sideways range bound trading in the short. The index could continue to fall with downside target near 8,000 and then 7,750 if the first target does not hold.


The S&P 500 made the next largest decline but less than half that posted by the transports, only -0.46%. The broad market created a black bodied candle, but a relatively small one, that fell back toward potential support near 2,080. This support level looks good for now but may be tested in the near term. The indicators remain mixed but consistent with a trend following bounce; stochastic is pointing higher but momentum has yet to confirm. Upside target is the current all time high, first target for support is just below today's closing level near 2,080 and then below that along the short term moving average.


The Dow Jones Industrial Average made the third largest decline in today's session, -0.44%. The blue chips also created a small black bodied candle in a move that may be seeking support. First target for support is near 17,600 and the short term moving average from which the index has recently bounced. The near and long term trends remain bullish, short term trends are range-bound/sideways, so it looks likely the index will bounce from the moving average again with upside targets near 18,000 and 18,250.


The NASDAQ Composite made the smallest decline in today's session, only -0.37%. The tech heavy index created a very small black candle that while not bullish, does not look over bearish either. The indicators are mixed, like with the other indices, but largely consistent with the trend following rally we have seen over the last couple of months. Today's action looks more like a pause in a rally, possibly precursor to a small pull back, but not the start of a major sell-off or correction. First target for support is near 5,050 and the short term moving average.


Over the past three months the market has corrected, bottomed, bounced and rallied. The indices, except for the transports, are trading near their all time highs and above long term trend lines. A test of the highs seems likely but is by no means guaranteed; outlook is positive for next year, no reason to sell off, but nearer term events have the market wary and could cause further consolidation and/or a drop to firmer support levels. Despite the concerns, assuming that no other hurdles appear, outlook for next year is still good. Economic recovery is expected to continue and earnings growth is expected to return. With this in mind I remain a bull and a buyer of dips. In the meantime I am keeping a close eye on my positions and eagerly awaiting this weeks events. My top picks for possible market movers include the Fed's Beige Book, the ECB meeting and the NFP release on Friday. . . and the OPEC meeting, which could have serious impact on oil prices.

If the stars are in proper alignment a vote of confidence from the FOMC, a dose of QE from the ECB and a healthy jobs number could be the spark that starts this years Santa Rally.

Until then, remember the trend!

Thomas Hughes

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New Option Plays

The Industrial Rally Continues

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these stocks may need to see a break past key support or resistance:

Bullish ideas: LEA, AVY

Bearish ideas: ABG, DDS, UHS, EPC, WMT




NEW DIRECTIONAL CALL PLAYS

Illinois Tool Works Inc. - ITW - close: 93.98 change: +0.78

Stop Loss: 89.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.7 million
Entry on December -- at $---.--
Listed on November 30, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: Yes, see below

Company Description

Trade Description:
The stock market has delivered a pretty good bounce over the last few weeks. The S&P 500 index is up +10% from its late September low. Industrial stocks have fared even better. Shares of ITW are up +14% from their late September low and they look poised to breakout to new five-month highs.

ITW is in the industrial goods sector. According to the company, "ITW is a Fortune 200 global multi-industrial manufacturing leader with revenues totaling $14.5 billion in 2014. The Company's seven industry-leading segments leverage the unique ITW Business Model to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required. ITW has nearly 50,000 dedicated colleagues in operations around the world who thrive in the company's unique decentralized and entrepreneurial culture."

ITW has had a rough time this year. The stock peaked at round-number, psychological resistance near $100 in the first quarter of 2015. Then a series of disappointing revenue numbers and overall weakness in the industrial sector weighed on ITW's stock price. As of today ITW has bounced back to virtually flat on the year.

The company tends to beat Wall Street's earnings estimate but they have been missing the revenue estimates. Revenues have declined the last three quarters in a row. Yet the stock found a bottom in the August-September time frame anyway. Now ITW's stock in a bullish trend of higher lows and higher highs.

Their most recent earnings report was October 21st. Q3 earnings were up +9% from a year ago. However, if you back out negative currency headwinds their earnings growth was +18%. ITW said their operating margin was up 180 basis points to a record 22.7%.

The company is restructuring while also facing headwinds with a strong dollar. Yet investors seem to be looking past these struggles. The stock soared following its Q3 earnings report. The rally has carried ITW back above its 200-dma. Now it's poised to breakout past short-term resistance near $94.00. Tonight we are suggesting a trigger to buy calls at $94.25.

FYI: ITW could get a boost this week. The company is holding its annual investor day on December 4th. The three-hour presentation starts at 9:00 a.m. eastern time.

Trigger @ $94.25

- Suggested Positions -

Buy the JAN $95 CALL (ITW160115C95) current ask $1.55
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 End November On A Down Note

by James Brown

Click here to email James Brown

Editor's Note:

The pullback today threatened to push the S&P 500 into negative territory for November. The index managed to eke out a one-point gain for the month. Retail stocks were significant underperformers following a disappointing Black Friday start to the holiday shopping season.

BA hit our stop loss. The SNA trade is now open.


Current Portfolio:


CALL Play Updates

ABIOMED, Inc. - ABMD - close: 81.57 change: -1.92

Stop Loss: 78.85
Target(s): To Be Determined
Current Option Gain/Loss: -46.1%
Average Daily Volume = 841 thousand
Entry on November 27 at $83.20
Listed on November 24, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
11/30/15: The stock market's decline on Monday weighed heavily on ABMD. Shares underperformed with a -2.29% decline on the session. If this weakness continues we could see ABMD dip toward what should be round-number support at $80.00. No new positions at this time.

Trade Description: November 24, 2015:
2015 has been a roller coaster ride for ABMD investors. Shares are down -26% from their 2015 highs near $110. However, the stock is still up +114% year to date. After its recent drop in October shares could be poised for another surge.

ABMD is in the healthcare sector. According to the company, "Abiomed is a pioneer and global leader in healthcare technology and innovation, with a mission of RECOVERING HEARTS AND SAVING LIVES. Abiomed CEO, Chairman, and President, Michael R. Minogue, has focused the company's efforts on developing ground-breaking technologies designed to assist or replace the life-sustaining pumping function of the failing heart. The Company's portfolio of products and services offer healthcare professionals an array of choices across a broad clinical spectrum. From the world's first total replacement heart to the World's Smallest Heart Pump, 1/100th the size of the heart with rapid and simple insertion, Abiomed is dedicated to finding ways to bring the most advanced and beneficial technology to patients and physicians."

The big rally in August started with its 2016 Q1 earnings report on August 4th. ABMD beat estimates on both the top and bottom line. Revenues were up +50% from a year ago and management raised their 2016 guidance from $285-295 million to $300-310 million. Analysts were only forecasting $292 million. This report kicked off a rally from $80 to $110, which was really impressive considering the fact that healthcare stocks were retreating lower in August. Then the whole market corrected lower in late August.

By mid to late October it looked like the correction in ABMD was over and shares were back in rally mode. Suddenly that changed after the company reported its Q2 earnings on October 29th. Wall Street was expecting a profit of $0.13 a share on revenues of $74.5 million. ABMD beat estimates. Earnings rose +88% from a year ago to $0.17 a share. Revenues soared +47% to $76.3 million. It was ABMD's fifth quarter in a row of earnings coming in above estimates.

ABMD management raised their 2016 revenue guidance from $300-310 million to $305-315 million. Unfortunately Wall Street had already adjusted their expectations to $310 million. ABMD's bullish outlook was not bullish enough. Traders were worried that ABMD's growth might be slowing down too fast. The stock was crushed with a -30% plunge on October 29th. It closed down -28.5% for the day.

This looks like an overreaction. The company's main product, Impella, still has a lot of growth ahead of it. Analyst estimates suggest that ABMD's Impella sales could hit $1 billion by 2020.

After this post-earnings crash, the stock bounced off round-number support at $70.00 but this rebound stalled a few days later. Shares of ABMD have spent most of November consolidating sideways in the $76.00-83.00 range. The good news is that ABMD looks like it could breakout from this trading range. The point & figure chart has already turned bullish again and is forecasting at $90.00 target.

Tonight we are suggesting a trigger to buy calls at $83.20. I do consider this a more aggressive, higher-risk trade. ABMD is a volatile stock. If we can catch it on the next up swing it could be a big winner for option traders. I would use small positions to limit risk.

*small positions to limit risk* - Suggested Positions -

Long JAN $90 CALL (ABMD160115C90) entry $3.80

11/27/15 triggered @ $83.20
Option Format: symbol-year-month-day-call-strike


Alkermes Plc - ALKS - close: 73.36 change: -2.24

Stop Loss: 69.75
Target(s): To Be Determined
Current Option Gain/Loss: -75.5%
Average Daily Volume = 699 thousand
Entry on November 17 at $75.25
Listed on November 10, 2015
Time Frame: Exit PRIOR to December option expiration
New Positions: see below

Comments:
11/30/15: Ouch! ALKS just erased most of last week's gain with a -2.9% plunge on Monday. Since we have the December call, which expires in three weeks, our call value is not doing well.

No new positions at this time.

Trade Description: November 10, 2015:
The healthcare and biotech names have started to show life again. Biotechs have definitely shown some relative strength in late October and now this week.

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

Recent earnings results have generally been better than expected. On July 30th ALKS reported its Q2 results with both earnings and revenues coming in above expectations. Management raised their fiscal 2015 guidance.

ALKS beat analysts' estimates again when they reported their Q3 results on October 29th. The company lost ($0.18) a share but that was better than the estimates for ($0.21). Revenues were down -4.6% to $152.7 million but that was better than expected.

In ALKS' Q3 press release they provided a breakdown of revenues:

Manufacturing and royalty revenues from RISPERDAL CONSTA and INVEGA SUSTENNA/XEPLION were $67.6 million, compared to $68.5 million for the same period in the prior year.

Net sales of VIVITROL were $37.9 million, compared to $25.8 million for the same period in the prior year, representing an increase of approximately 47%.

Manufacturing and royalty revenues from AMPYRA/FAMPYRA 1 were $22.1 million, compared to $16.5 million for the same period in the prior year.

Royalty revenue from BYDUREON was $13.0 million, compared to $10.3 million for the same period in the prior year.

A few weeks ago ALKS announced that the FDA had approved their ARISTADA treatment for schizophrenia. ALKS explained that schizophrenia is a chronic, severe and disabling brain disorder that affects millions of patients in the U.S.

In ALKS' Q3 press release the company also announced they were working toward key milestones for their ALKS 3831 treatment for schizophrenia, their ALKS 8700 treatment for multiple sclerosis, and their ALKS 5461 treatment for major depressive disorder. They expect more data on all three within the next six months.

Technically the stock has soared from the bottom of its major trading range near $55 toward the top of its trading range near $75.00. The current rally has produced a buy signal on the point & figure chart, which is also forecasting a long-term target of $108.00.

The key level to watch is resistance at $75.00. ALKS has been consolidating sideways in the $70-74 zone the last several days but shares are on the verge of a breakout. It would be tempting to buy calls on a rally above today's high ($74.11) but we are suggesting a trigger to buy calls at $75.25, which would be a new multi-year high and above resistance from early 2015.

- Suggested Positions -

Long DEC $80 CALL (ALKS151218C80) entry $2.45

11/17/15 triggered @ $75.25
Option Format: symbol-year-month-day-call-strike


Clovis Oncology - CLVS - close: 31.45 change: -0.77

Stop Loss: 27.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.4 million
Entry on November -- at $---.--
Listed on November 28, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: Yes, see below

Comments:
11/30/15: Biotech stocks were not immune to the market decline today. CLVS dipped toward $29.60 before paring its losses on the session.

Currently our suggested entry point to launch positions is $32.55.

Trade Description: November 28, 2015:
After a -70% plunge all the bad news might be priced in for this biotech stock.

CLVS is in the healthcare sector. According to the company, "Clovis Oncology is a biopharmaceutical company focused on acquiring, developing and commercializing cancer treatments in the United States, Europe and other international markets. Our product development programs target specific subsets of cancer, and we seek to simultaneously develop, with partners, companion diagnostics that direct our product candidates to the patients most likely to benefit from their use. We believe this approach to personalized medicine - to deliver the right drug to the right patient at the right time - represents the future of cancer therapy."

The company has three product candidates in their pipeline. They are rociletinib, rucaparib, and lucitanib. Right now the market is reacting to news on its rociletinib clinical trials, where the drug is being tested on non-small-cell lung cancer.

Several days ago the company issued an update on their Rociletinib NDA filing. CLVS held their regularly scheduled mid-cycle communication meeting with the U.S. Food and Drug Administration (FDA). The current data on the Rociletinib clinical trials was not good enough. The FDA is asking for more data to prove the treatment's efficacy. This will likely push back the time frame on any approval. Investors were expecting a potential approval in the March-April 2016 time frame.

The delay in Rociletinib approval is a serious setback. Rival biotech firm AstraZeneca just got FDA approval for a competing drug, Tagrisso. By the time Rociletinib is approved (if it's approved), it will face serious competition from an already established treatment.

CLVS is a perfect example of why biotech stocks can be high-risk trades. On November 13, 2015 the stock closed at $99.43. The next trading day, Nov. 16th, shares gapped down at $29.27 and closed near $30. The stock traded down to $24.50 on November 23rd and started to reverse higher. CLVS' stock is now up three days in a row.

The current rally could be a combination of short covering and investors bargain hunting. It has been a full two weeks since the sell-off. If investors were going to sell they probably did so already. We think this rebound has a lot further to go but make no mistake CLVS is still a higher-risk trade. Tonight we are suggesting a trigger to buy calls at $32.55.

Trigger @ $32.55

- Suggested Positions -

Buy the JAN $35 CALL (CLVS160115C35)

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


Global Payments Inc. - GPN - close: 70.85 change: -1.44

Stop Loss: 68.40
Target(s): To Be Determined
Current Option Gain/Loss: -20.0%
Average Daily Volume = 718 thousand
Entry on November 17 at $70.25
Listed on November 11, 2015
Time Frame: Exit PRIOR to December options expiration
New Positions: see below

Comments:
11/30/15: I cautioned readers that if the market dips the nearest support in GPN was likely the $70.00 level. Shares lost -2% today and look poised to test the $70.00 mark soon. A bounce from $70.00 could be used as a new bullish entry point.

More conservative traders might want to raise their stop loss again.

Trade Description: November 11, 2015:
Consistently strong earnings growth can do wonders for your stock price. Just ask GPN. Shares are up +72% year to date. That compares to a +0.8% gain in the S&P 500 and a +7% rally in the NASDAQ this year. The rally in GPN started a couple of years ago and shares are up +218% from its $22 lows in 2013.

GPN is in the services sector. According to the company, "Global Payments Inc. (GPN) is a leading worldwide provider of payment technology services that delivers innovative solutions driven by customer needs globally. Our partnerships, technologies and employee expertise enable us to provide a broad range of products and services that allow our customers to accept all payment types across a variety of distribution channels in many markets around the world. Headquartered in Atlanta, Georgia with approximately 4,500 employees worldwide, Global Payments is a Fortune 1000 Company with merchants and partners in 29 countries throughout North America, Europe, the Asia-Pacific region and Brazil."

This company has beaten Wall Street's earnings estimates every quarter this year. Not only that but GPN has raised guidance the last four quarters in a row. GPN has delivered two years of consistent earnings growth and investors have noticed.

Last year (fiscal 2015) the company earned $4.12 a share. That was a +22% improvement from the prior year. This year analysts are expecting GPN's earnings to grow +39%.

GPN's most recent earnings report was October 7th. Earnings surged +37.5% from the prior year. GPN beat on both the top and bottom line. They raised their fiscal 2016 guidance above Wall Street estimates. Plus they announced a 2-for-1 stock split, which took place on November 2nd.

Jeff Sloan, CEO, commented on their quarter, "We are delighted with our outstanding first quarter results, which represent an excellent start to the 2016 fiscal year and a continuation of exceeding our expectations across our markets. This performance builds on the momentum we have generated as we continue to invest in our strategy to expand distribution and create competitive differentiation through technology by delivering innovative solutions globally."

You can see the surge in GPN's stock following its October 7th earnings report. Investors have been buying the dips. Today GPN is challenging round-number resistance at the $70.00 level. Tonight we are suggesting a trigger to buy calls at $70.25.

- Suggested Positions -

Long DEC $70 CALL (GPN151218C70) entry $2.25

11/21/15 new stop @ 68.40
11/17/15 triggered @ $70.25
Option Format: symbol-year-month-day-call-strike


Huntington Ingalls Industries - HII - close: 130.92 change: -1.85

Stop Loss: 129.75
Target(s): To Be Determined
Current Option Gain/Loss: -47.4%
Average Daily Volume = 318 thousand
Entry on November 17 at $132.05
Listed on November 16, 2015
Time Frame: Exit PRIOR to December option expiration
New Positions: see below

Comments:
11/30/15: Defense-related stocks were hit with some profit taking on Monday. Shares of HII continued to pull back and lost -1.39%. The stock traded to an intraday low of $130.25. If shares break down below $130 we could get stopped out. No new positions at this time.

Trade Description: November 16, 2015:
Defense stocks were in the spot light today. The tragic terrorist attack in Paris on Friday has changed the worldview for many governments. Most major world powers have vowed to intensify their efforts to destroy ISIS. That should mean additional defense spending.

HII is in the industrial goods sector but it's part of the defense industry. According to the company, "Huntington Ingalls Industries is America's largest military shipbuilding company and a provider of engineering, manufacturing and management services to the nuclear energy, oil and gas markets. For more than a century, HII's Newport News and Ingalls shipbuilding divisions in Virginia and Mississippi have built more ships in more ship classes than any other U.S. naval shipbuilder. Headquartered in Newport News, Virginia, HII employs approximately 37,000 people operating both domestically and internationally."

The earnings picture has been mixed for HII. The market was relatively forgiving with the company's most recent earnings report. HII announced its Q3 results on November 5th. Earnings were up +18.5% from a year ago to $1.98 a share. That actually missed Wall Street estimates by three cents. Revenues were up +4.8% to $1.8 billion, which was above expectations. HII said their total operating margin improved from 10.0% to 11.1%. Management also said their backlog grew about $800 million to $23.3 billion.

The stock reacted sharply with a surge to new multi-month highs. Since this earnings report HII has been digesting its gains in a sideways consolidation pattern. Friday's market decline pushed HII to short-term technical support at the 10-dma. Today shares bounced +3.1% to set a new six-month closing high. We think this rally continues. The point & figure chart is bullish and forecasting a long-term target of $179.00.

Tonight we are suggesting a trigger to buy calls at $131.75.

FYI: HII will begin trading ex-dividend on November 24, 2015. The quarterly cash dividend is $0.50.

- Suggested Positions -

Long DEC $135 CALL (HII151218C135) entry $2.83

11/21/15 new stop @ 129.75
11/17/15 triggered on gap higher at $132.05, trigger was $131.75
Option Format: symbol-year-month-day-call-strike


Lennox Intl. Inc. - LII - close: 135.92 change: -1.71

Stop Loss: 132.85
Target(s): To Be Determined
Current Option Gain/Loss: -31.7%
Average Daily Volume = 425 thousand
Entry on November 23 at $137.25
Listed on November 18, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/30/15: LII dipped toward technical support at its rising 20-dma and started to bounce. The bad news is that today's session looks like a potential bearish reversal pattern.

No new positions at this time. More conservative traders may want to move their stop loss closer to $135.00.

Trade Description: November 18, 2015:
Not many publicly-traded companies can say they have been around for over 100 years. LII started back in 1895. The last four years have been solid for bullish investors in the stock. There was a big pullback in mid 2014 but the stock recovered. Since then LII has been setting a string of new all-time highs.

LII is in the industrial goods sector. According to the company, "Lennox International is a leading provider of climate control solutions for heating, air conditioning and refrigeration markets around the world. We have built our business on a heritage of integrity and innovation dating back to 1895. Our employees are dedicated to providing trusted brands, innovative products, unsurpassed quality, and responsive service." The company operates three key businesses with a residential heating and cooling division, a commercial heating and cooling division, and a refrigeration business.

The earnings picture has been relatively solid as well. LII has beaten Wall Street's earnings and revenues estimates in three of the last four quarterly reports. Their most recent earnings report was October 19th. LII's earnings rose +26% from a year ago to $1.82 per share. That was three cents above estimates. Revenues were up +6.3% to $955 million versus the $940 million estimate. On a constant currency basis revenues were up +11%. Management raised their 2015 revenue forecast.

Todd Bluedorn, LII Chairman and CEO, commented on his company's quarter, "Lennox International realized strong revenue growth at constant currency and significant margin expansion across all three of our businesses in the third quarter. For the company overall, total segment profit set a third-quarter record, and profit margin expanded 140 basis points from the prior-year quarter to a record level of 13.7%. Our Residential business set third-quarter records for revenue, margin and profit as strong business momentum continued. Residential revenue was up 13% at constant currency, and margin expanded 240 basis points to 17.4%. In Commercial, segment profit and margin set new highs on 8% revenue growth at constant currency. North America and Europe both saw high single-digit revenue growth at constant currency. Commercial segment margin expanded 70 basis points to 18.2%. In Refrigeration, revenue was up 8% at constant currency, with double-digit growth in North America and Europe. Refrigeration margin expanded 220 basis points from the prior-year quarter to 10.7%."

It's hard to go wrong with record results and rising margins. The stock surged on this earnings report. Momentum finally stalled near $136-137 in early November. LII has spent the last couple of weeks consolidating gains in a sideways trading pattern. Shares were relatively resistant to the market's mid-November swoon. Now with the market in rally mode LII is on the verge of another breakout higher. Today's high was $136.94. Tonight we are suggesting a trigger to buy calls at $137.25.

- Suggested Positions -

Long MAR $140 CALL (LII160318C140) entry $6.30

11/23/15 triggered @ $137.25
Option Format: symbol-year-month-day-call-strike


Lam Research Corp. - LRCX - close: 78.20 change: +0.57

Stop Loss: 74.95
Target(s): To Be Determined
Current Option Gain/Loss: -37.9%
Average Daily Volume = 2.5 million
Entry on October 30 at $76.25
Listed on October 28, 2015
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
11/30/15: Semiconductor stocks were one of the few areas of the market posting gains today. LRCX managed a +0.7% gain on Monday and looks like it could challenge its November highs soon.

No new positions.

Trade Description: October 28, 2015:
Wall Street loves mergers and this month LRCX has jumped into the 2015 buying spree. Semiconductor stocks had a rough summer with the SOX semiconductor index plunging from early June through late August. Fortunately the group appears to have bottomed. LRCX's recent earnings news and acquisition announcement has accelerated the stock's rebound.

LRCX is part of the technology sector. According to the company, "Lam Research Corp. (LRCX) is a trusted global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. Lam's broad portfolio of market-leading deposition, etch, and clean solutions helps customers achieve success on the wafer by enabling device features that are 1,000 times smaller than a grain of sand, resulting in smaller, faster, more powerful, and more power-efficient chips. Through collaboration, continuous innovation, and delivering on commitments, Lam is transforming atomic-scale engineering and enabling its customers to shape the future of technology. Based in Fremont, Calif., Lam Research is a Nasdaq-100 Index and S&P 500 company whose common stock trades on the Nasdaq Global Select MarketSM under the symbol LRCX."

LRCX's most recent earnings report was October 21st. Analysts were expecting a profit of $1.72 per share on revenues of $1.6 billion. LRCX delivered earnings of $1.82 a share. Revenues were up +38.8% from a year ago to $1.6 billion. Management then raised their Q2 earnings guidance to $1.32-1.52 a share, which is significant above analysts' estimates.

The news didn't stop there. LRCX also announced they were buying KLA-Tencor (KLAC) for $10.6 billion. This new combined company will have $8.7 billion in revenues.

Here are a few highlights from the LRCX-KLAC merger deal:

Creates Premier Semiconductor Capital Equipment Company: Strengthened platform for continued outperformance, combining Lam's best-in-class capabilities in deposition, etch, and clean with KLA-Tencor's leadership in inspection and metrology

Accelerates Innovation: Increased opportunity and capability to address customers' escalating technical and economic challenges Broadens Market Relevance: Comprehensive and complementary presence across market segments provides diversity, scale and value creating innovation opportunities

Significant Cost and Revenue Synergies: Approximately $250 million in expected annual on-going pre-tax cost synergies within 18-24 months of closing the transaction, and $600 million in annual revenue synergies by 2020 Accretive Transaction: Increased non-GAAP EPS and free cash flow per share during the first 12 months post-closing

Strong Cash Flow: Complementary memory and logic customer base, operational strength, and meaningful installed base revenues strengthen cash generation capability Anstice concluded, "We have tremendous respect for the company KLA-Tencor employees have built over nearly 40 years - their culture, technology, and operating practices. I have no doubt that our combined values, focus on the customer, and complementary technologies will create a trusted leader in our industry, capable of creating significant opportunity for profitable growth and in turn delivering tremendous value to all of our stakeholders. This is the right time for the right combination in our industry." You can read more details about the merger here.

The combination of the earnings beat, raised guidance, and the merger news launched LRCX stock higher. Traders have been consistently buying the dips since then. Now shares of LRCX are poised to break through technical resistance at its 200-dma soon. Shares have been upgraded with a new price target of $85.00. Meanwhile the point & figure chart is bullish and forecasting at long-term target of $107.00.

LRCX looks like it could run towards the 2015 highs in the $84-85 region. Today's intraday high was $76.19. We are suggesting a trigger to buy calls at $76.25.

- Suggested Positions -

Long JAN $80 CALL (LRCX160115C80) entry $3.30

11/21/15 new stop @ 74.95
11/12/15 LRCX closes below short-term support at $76.00
11/03/15 new stop @ 73.85
10/30/15 triggered @ $76.25
Option Format: symbol-year-month-day-call-strike


Roper Technologies - ROP - close: 193.49 change: -1.34

Stop Loss: 186.75
Target(s): To Be Determined
Current Option Gain/Loss: -2.4%
Average Daily Volume = 468 thousand
Entry on November 24 at $192.66
Listed on November 23, 2015
Time Frame: Exit PRIOR to earnings in January
New Positions: see below

Comments:
11/30/15: ROP managed to tag another new high before succumbing to the market's decline on Monday. This dip may not be over yet. I see possible short-term support near $192.50 and near $190.00.

No new positions at this time. More conservative traders may want to raise their stop loss.

Trade Description: November 23, 2015:
The Dow Jones Industrial Average is virtually flat for the year (-0.2%) while ROP is soaring. The stock is up +23% year to date and up +25% from its September lows. The relative strength does not show any signs of slowing down.

ROP is in the industrial goods sector. According to the company, "Roper is a diversified technology company with annual revenues of $3.2 billion. We provide engineered products and solutions for global niche markets, including software information networks, medical, water, energy, and transportation. Our strong operating capabilities enable us to convert end-market potential into profitable growth and cash flow in order to create value for our investors. Roper is a component of the S&P 500, Fortune 1000 and Russell 1000 Indexes." The company operates four major business segments. These are: industrial technology, energy systems and controls, medical and scientific imaging, and RF technology.

The earnings picture has been somewhat mixed this year. Shares of ROP plunged in July when they reported their Q2 results. Q2 earnings beat estimates but revenues missed. Management also lowered their Q3 guidance.

Low expectations may have helped ROP beat Q3 estimates when their results came out on October 26th. Earnings of $1.61 a share beat analysts' estimates by four cents. Revenues were up +0.1% to $886 million. This was actually below expectations but traders didn't seem to care. Adjusted gross margins improved 130 basis points to 60.7% and ROP management upped the low-end of their earnings guidance. Overall ROP is forecasted to show +5% growth in 2015 and see a +10% jump in 2016 earnings. That was enough for investors as shares of ROP soared past resistance to hit new highs following its Q3 report.

The company has been very active on the acquisition front. Recent acquisitions include law firm software company Aderant. They have also purchased Atlas medical and CliniSys. Thus far ROP has spent $1.7 billion on acquisitions this year.

Technically shares have shown significant relative strength. The rally off its September lows has been especially strong. The point & figure chart is bullish and forecasting a long-term target of $273.00. ROP has broken through multiple layers of resistance in the last few weeks. Most of November the stock consolidated sideways in the $184-190 zone. A few days ago ROP found support at its rising 20-dma and then rallied through round-number resistance at $190.00. ROP looks headed for $200 a share if not higher. Tonight we are suggesting a trigger to buy calls at $192.65.

- Suggested Positions -

Long FEB $200 CALL (ROP160219C200) entry $4.10

11/24/15 triggered @ $192.66
Option Format: symbol-year-month-day-call-strike


Snap-on Inc. - SNA - close: 172.16 change: +0.40

Stop Loss: 167.40
Target(s): To Be Determined
Current Option Gain/Loss: -24.3%
Average Daily Volume = 407 thousand
Entry on November 30 at $172.46
Listed on November 28, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
11/30/15: Our new bullish trade on SNA is open. The suggested entry point was $172.25 but our trade was triggered with the gap higher this morning at $172.46. If the major U.S. indices open positive tomorrow then I would launch new positions in SNA at current levels. If the market continues to pullback then we may want to wait and see if SNA bounces at $170.00 before initiating new positions.

Trade Description: November 28, 2015:
How many car brands can you think of? Every year automobile makers deliver new models designed to be new and improved. Every year cars get more and more complicated. That means more diagnostic and specialty tools to repair them. This trend is driving organic growth for SNA.

SNA is in the industrial goods sector. According to the company, "Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. Snap-on also derives income from various financing programs to facilitate the sales of its products. Products and services are sold through the company's franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.3 billion, S&P 500 company headquartered in Kenosha, Wisconsin."

The company has beaten Wall Street earnings estimates the last four quarters in a row. The revenue number has not been as strong. SNA does get a decent chunk of sales outside the U.S. so the strong dollar does have an impact.

SNA's most recent earnings report was October 22nd. They delivered their Q3 results with earnings of $1.98 a share. That was a +12.5% improvement from a year ago and above expectations. Revenues were only up +1.9% to $821.5 million. However, organic sales were up +7.3%. Their full-year 2015 revenues are expected to rise +3.5% but that is expected to jump to 7% in 2016.

Shares of SNA popped on the earnings report in spite of the revenue miss. Investors have been buying the dips since the October low. Now SNA has broken through resistance near $170.00 to close at all-time highs. The point & figure chart is bullish and forecasting at $207 target.

Traders bought the dip on Friday near $170.00. That's exactly what we want to see. Old resistance should be new support. The high on Friday was $171.91. Tonight we are suggesting a trigger to buy calls at $172.25.

- Suggested Positions -

Long JAN $180 CALL (SNA160115C180) entry $1.85

11/30/15 triggered on gap open at $172.46, suggested entry was $172.25
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Bunge Limited - BG - close: 66.61 change: -0.40

Stop Loss: 68.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on November -- at $---.--
Listed on November 21, 2015
Time Frame: Exit PRIOR January option expiration
New Positions: Yes, see below

Comments:
11/30/15: BG posted another decline on Monday (-0.59%). If this decline does not pick up speed soon we may remove BG as a candidate. Currently our suggested entry point to buy puts is at $64.85.

Trade Description: November 21, 2015:
BG's business is facing multiple headwinds and the stock has suffered for it. Shares are underperforming the market in a big way with BG down -17% from their late October high. The stock is down -29% from its 2015 highs.

BG is in the consumer goods sector. According to the company, "Bunge Limited (www.bunge.com) is a leading global agribusiness and food company operating in over 40 countries with approximately 35,000 employees. Bunge buys, sells, stores and transports oilseeds and grains to serve customers worldwide; processes oilseeds to make protein meal for animal feed and edible oil products for commercial customers and consumers; produces sugar and ethanol from sugarcane; mills wheat, corn and rice to make ingredients used by food companies; and sells fertilizer in South America. Founded in 1818, the company is headquartered in White Plains, New York."

One of BG's biggest challenges is the strong dollar. This makes American products, including crops and commodities, more expensive overseas. Thus demand from foreign markets has been soft. Currencies issues have also been trouble with BG's business in Brazil, which has a slow economy and a weak currency. Meanwhile in the U.S. farmers are facing a larger than expected harvest for some crops, which will further push prices down.

These troubles are crushing BG's revenues. The company reported better than expected Q1 earnings back in April but revenues were down -19.7% and significantly below Wall Street estimates. Their Q2 results were worse. Analysts expected a profit of $1.36 a share on revenues of $14.59 billion. BG reported Q2 results of $0.50 a share. Revenues were down -35.8% to $10.78 billion. BG's Q3 numbers were not much better. Earnings were $1.24 a share, which missed estimates by 35 cents. Revenues plunged -21% to $10.79 billion, compared to estimates of $12.5 billion.

Naturally analysts have began downgrading their earnings and revenue numbers for BG, which doesn't inspire any confidence in the stock. The point & figure chart has produced a new sell signal that is forecasting at $53.00 target.

Bulls could argue that BG's stock is short-term oversold and due for a bounce. However, the S&P 500 just delivered its best one-week gain of the year and BG did not participate. Friday's intraday low was $65.32. Tonight we are suggesting a trigger to buy puts at $64.85.

Trigger @ $64.85

- Suggested Positions -

Buy the JAN $65 PUT (BG160115P65)

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



CLOSED BULLISH PLAYS

The Boeing Company - BA - close: 145.45 change: -1.50

Stop Loss: 145.85
Target(s): To Be Determined
Current Option Gain/Loss: -69.2%
Average Daily Volume = 3.8 million
Entry on November 20 at $150.25
Listed on November 19, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
11/30/15: The pullback in shares of BA continued on Monday with a -1.0% decline. Shares fell below their up trend of higher lows and hit our new stop loss at $145.85.

- Suggested Positions -

JAN $155 CALL (BA160115C155) entry $2.21 exit $0.68 (-69.2%)

11/30/15 stopped out
11/28/15 new stop @ 145.85
11/20/15 triggered @ $150.25
Option Format: symbol-year-month-day-call-strike

chart: