Option Investor
Newsletter

Daily Newsletter, Thursday, 12/3/2015

Table of Contents

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

Market Wrap

Euro Short Squeeze

by Thomas Hughes

Click here to email Thomas Hughes
The ECB did indeed expand their QE program, what they did not do was meet the market's expectations.

Introduction

There is a lot to go over today but let me start with today's top story, the ECB meeting. The European Central Bank ended their December policy meeting this morning and announced their plans. They did indeed increase their QE efforts but in a way that surprised the market. The bank held it's benchmark rate steady but lowered the deposit rate by 10 basis points to -0.30%. In addition to this they announced that they would keep asset purchases at 60 billion euros monthly but extended the duration until March of 2017 at least. They also announced that they would be reinvesting the interest payments from assets. The bank also raised its outlook for GDP over the next 2 years but is worried about the slow pace of inflation stating they they wanted to see signs of sustained inflation growth before ending QE.

Market Statistics

The news was a surprise to the market and caught euro traders in a massive short squeeze that added 3 handles to the EUR/USD pair. This move appears to confirm support at the 1.0500 level but with the NFP data coming out tomorrow and the FOMC meeting two weeks away it may be setting the pair up for another move lower. Regardless of how they did it, the ECB did increase QE and the FOMC is still expected to tighten policy, a combination that has until today strengthened the dollar and weakened the euro.


International markets were mixed going into the ECB announcement and press conference. The Asian indices closed flat except for the Shanghai which gained a little over 1.25%. European markets were largely higher ahead of the announcement and then reversed their gains following it. The DAX fell more than -3%.

Futures trading indicated a positive open for our markets most of the morning. The trade was strong ahead of the ECB announcement, indicating an open near 1% higher than yesterday's close, but fell to break even levels afterward. From then until the open of today's session futures wavered, slipping into negative territory several times only to find support and move back into the green.

The indices moved higher immediately following the opening bell but not far. The SPX met resistance within the first few minutes of trading and by 9:45 had fallen into negative territory. The morning low was hit by 10:20 at which time the indices made a small bounce and began trading sideways, just below yesterday's closing level.

The sidewinding only lasted about an hour. By mid-lunch the bears were back out and pushing prices lower. The indices began a slow march that took them down nearly -2% in most cases. Bottom was hit by late afternoon, a small bounce ensued, but not enough to regain today's losses. By the end of trading the SPX had only regained a few points and closed with a loss near -1.5%.

Economic Calendar

The Economy

There was quite a bit of economic data today as well. The Challenger, Gray & Christmas report on planned lay-offs started us off. It shows that planned lay-offs fell -39% from October to November and is sitting at a 14 month low. This is of course following 4 months of heavy cuts. On a year over year basis the November data is down -14% but nevertheless year to date cuts are still running at a 6 year high. Year to date cuts are running close to 575,000, 28% higher than last year at this time.

Now, to put those numbers into perspective. The previous high, in 2009, was over 1.2 million job cuts, double this years expected total. Also, the cuts we have seen this year are primarily in 5 sectors which account for 60% of the total. These are, in order from largest to smallest contributor; energy, government, retail, computer and industrial goods.

Job cuts in energy we can discount because most of those are due to low oil prices, not declining economics, and not really comparable on a year over year basis; the YTD total in the sector is up 708% from last year. Retail and Computers can also be discounted to some extent as these are due to restructurings which as seen as a positive for their sectors. In terms of computers most of those cuts were done by Hewlett Packard pre-spin-off and Microsoft when it wrote off its investment in Nokia. In this light yes, there are a rising number of job cuts but no, it doesn't look too alarming.


Initial claims for unemployment rose slightly this week from last week's not revised figure, in line with expectations. This week claims gained 9,000 to hit 269,000, the four week moving average fell by -1,750 to 269,250. On a not adjusted basis claims fell by -14% versus an expected -16.9%, year over year the not revised figure is down -11%. The largest increases in claims were in California and Illinois, +7941 and +3617, while the largest declines were reported by Louisiana and Rhode Island, -792 and -207. Initial claims data continues to trend near the long term lows and remains consistent with a healthy labor market.


Continuing claims also moved higher adding 6,000, however, last weeks figure was revised lower by -50,000 so the net difference is a decline from last week's report. Continuing claims are now at 2.161 million and holding relatively steady at the long term low. These figures continue to show a labor market in which long term unemployment and turnover rates are low.

The total number of Americans claiming unemployment also rose in this week's report, adding over 100,000 to hit 2.059 million, an 11 week high. This is mildly alarming but based on historical data not unexpected, there is usually a rise in total claims going into the end of the year. Despite the gains the total number of claims remains low by historical standards and consistent with labor market health.


Factory order rose more than expected following two months of declines. October factory orders rose 1.5%, slightly ahead of the 1.2% expected by the analysts. Within the report unfilled orders rose 0.3% while inventories fell by -0.1%. This is the 4th consecutive month of declining inventories.

The Services Sector ISM came in at 55.9, down 3.2 points from last month and below expectations for a reading of 58.5. Within the report all three sub indices declined as well. Business activity fell to 58.2%, New Orders fell to 57.5% and the Employment Index fell to 55%. Despite the declines the headline number and sub-indices still reflect a growing economy, just as a slower pace than last month.

Tomorrow is the all-important NFP release, along with the unemployment rate, average hourly earnings and workweek. Based on the ADP report I would expect the number to be steady to strong in the 200K+ range. Unemployment levels may tick up due to increased levels of Total Claims. Regardless, it will take a huge miss for this data to derail the recovery. A weak number may however alter expectations for the Fed rate hike.

The Oil Index

Oil prices spiked today on a report that the Saudis were going to make a proposal at tomorrow's OPEC meeting to curb production in 2016. WTI and Brent both spiked more than 4% on the news but gains were tempered later in the day when another report, citing a different high ranking Saudi official, said the idea of OPEC supporting prices through production cuts was baseless. WTI settled with a gain near 3% but remains near below $42. There could be some big moves in oil tomorrow and next week depending on what happens with the OPEC meeting. Until then supply and production are high and demand is low.

The Oil Index tried to rally with oil but wasn't able to do it. The index moved up to hit the 30 day moving average and met resistance which drove prices back down to below yesterday's close. Today's action breaks support at 1,175 and is approaching firmer support targets near 1,150. The indicators are pointing lower with momentum on the rise so a test of 1,150 is likely to come in the least. A break below this level could take the index down to the long term low near 1,025.


The Gold Index

Gold prices tried to rally on the back of the ECB decision and managed to eek out a gain of 0.7%. The ECB decision and wild rally in the EUR/USD has pushed dollar values down, giving gold its lift, but the effect may not last long. Despite disappointing the market the ECB has still increased QE, and indicated it will add more as needed, and the FOMC is still expected to raise rates, so the dollar rally is likely to resume. I remain bearish on gold and do not think we have seen the bottom yet.

The miners have been holding relatively well in light of gold prices hitting 6 year lows. The miners ETF has been trending near its long term lows but has not set a new low since September. It is possible that the miners are indicating a rise in gold prices but I think it more likely to be the other way around; gold is leading the miners lower. The indicators are pointing higher but momentum is very weak, the ETF was unable to cross the short term moving average today and the overall trend is down so I see it testing support again, if not breaking it.


In The News, Story Stocks and Earnings

Kroger reported earnings before the bell. The food retail giant reported record results, better than expectations, and raised full year guidance. EPS of $0.43 is 20% higher than last year and 10% above projections. Sales increased only 0.4% over the same period last year due to lower retail prices for fuel but other segments of business were quite strong. Ex-fuel comparable sales grew more than 5%. Shares of the stock jumped on the news and gained nearly 5% to hit a new all time high.


Dollar General also reported before the bell. The discount chain reported earnings slightly above estimates on revenue that fell slightly short. The news that helped drive the stock higher is the strength in sales, up 7.3% over last year, and guidance which was affirmed in-line with estimates. Shares of the stock gained more than 4.15% and are trading at a one month high.


Shares of Yahoo! fell more than -4% today as the board of directors deliberates on what to do with the business. A sale of the core seems to be the most likely outcome but other possibilities exist as well. As of this posting there is no word on their decision. The list of potential buyers has firmed up with reports that NewsCorp, Verizon and IAC are interested. Today's action confirmed resistance near $35.50 and looks set to take the stock back down near $32.50.


The Indices

The indices sold off again today. The move was led by the Dow Jones Transportation Index which closed with a loss of -1.80%. Today's candle is long and black and set a new two month low. The indicators are pointing lower with rising momentum so it looks like this move will continue. However, even though they are pointing lower the indication are weak and more consistent with a move within a trading range than not. Downside target is the bottom of the 4 month trading range near 7,750 with a possible move to 7,500 if first target doesn't hold.


The NASDAQ Composite made the next largest decline, nearly -1.7%. The tech heavy index made its largest decline in two months and is now sitting on the short term moving average with potentially strong support just below along the long term up trend line. The indicators have made a bearish crossover and are pointing lower so a test of support is likely. I am bullish looking into next quarter and next year (only 4 weeks away) so any pull backs and tests of support remain buying opportunities in my opinion.


The next largest decline was in the S&P 500. The broad market fell -1.42% in a move that broke the short term 30 day moving average but was stopped at the 2,050 support level. The indicators are pointing lower with rising momentum so it looks like support will be tested further with a possible move below to the long term trend line. The long term trend is still up and current action appears to be a consolidation/sector rotation ahead of the anticipated rate hike, next earnings season and next year.


The Dow Jones Industrial Average made the smallest decline in today's session, -1.41%. The blue chips broke support at 17,600 and the short term moving average with bearish indicators and downside target near 17,200. A break below my support target could take the index down to the long term trend line near 16,750. The long term trend is still up but near to short term action may remain mixed up to and until the market focuses on expected earnings growth.


The market sold off today there is no doubt about that. The move was more in response to the ECB's failure to meet full market expectations than it was to anything else. The ECB added to QE, just not as much or quite in the way the market expected. Over the past 5 years QE has led to one rally after another and this addition is more than likely going to do the same. On top of that expectations for next year remain stable with revenue and earnings growth expected for all 10 S&P sectors. With that in mind I find it hard to expect a bear market.

The fact that we have one more quarter of negative growth to look forward is likely going to keep the market churning in the near term but it looks like the market could be in a sector rotation. This rotation could last for several more weeks at least, up to and until next earnings season begins and/or outlook brightens. Needless to say I am still bullish on the economy, earnings and the market and a buyer of dips.

In between now and then is the FOMC meeting. They are expected to raise rates, tomorrow's NFP could easily affect the speculation. If the data looks like a rate hike is guaranteed the dollar could easily regain a lot of the ground it lost today.

Until then, remember the trend!

Thomas Hughes

Annual End of Year Subscription Special

It is that time of year again when we offer the best prices of the year on a package of our top newsletters. If you have been a subscriber for several years you know this is the best price and best deal of the year.

Please follow the link below to see for yourself the EOY subscription special for 2016. You will not be disappointed!


New Option Plays

2016 Outlook Still Sour For This Financial

by James Brown

Click here to email James Brown




NEW DIRECTIONAL PUT PLAYS

American Express Company - AXP - close: 70.42 change: -0.78

Stop Loss: 72.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.8 million
Entry on December -- at $---.--
Listed on December 03, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: Yes, see below

Company Description

Trade Description:
Having one of the best known brands in the world is not enough if business turns south. AXP has been struggling, especially after the high-profile loss of its contract with Costco (COST). You may not remember but earlier this year COST and AXP failed to agree on terms to extend their relationship. COST was one of the few big merchants that only took AXP cards and not rival Visa, MasterCard, or Discover card.

AXP is in the financial sector. According to the company, "American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success." That doesn't tell us much. The company operates through four segments: U.S. Card Services, International Card Services, Global Commercial Services, and Global Network & Merchant Services. The company claims $159 billion in total assets and over 112 million card customers. Their annual revenues are just over $34 billion with net income of $5.89 billion.

The revenue picture for AXP has been tough. The company has missed Wall Street's revenue estimate the last three quarters in a row. AXP's most recent earnings report was October 21st. They delivered their Q3 earnings of $1.24 a share. That missed estimates by seven cents. Revenues were down -1.3% to $8.19 billion, below analysts' estimates at $8.31 billion. AXP management then lowered their 2015 guidance below Wall Street expectations.

Barclays believes that AXP will continue to suffer from strong dollar headwinds in 2016. A Stifel's analyst believes that the impact of the Costco breakup has not been felt yet. Their exclusivity deal doesn't end until March 31, 2016. The impact may not be priced into AXP stock yet. UBS is also bearish and downgraded AXP to a sell in October. AXP has been forecasting +12-15% EPS growth but UBS is estimating AXP growth at +8%.

Technically the stock is in a bear market. AXP is down -25% from its early January 2015 highs. Shares have a bearish trend of lower highs and lower lows. The point & figure chart is bearish and forecasting at $63.00 target. Today AXP dipped toward round-number support at $70.00. A breakdown below this level could be an entry point. Tonight we are suggesting a trigger to buy puts at $69.75.

Trigger @ $69.75

- Suggested Positions -

Buy the JAN $70 PUT (AXP160115P70) current ask $1.86
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

ECB Disappoints The Market

by James Brown

Click here to email James Brown

Editor's Note:

European Central Bank President Mario Draghi has been promising to boost stimulus for months. The ECB's new stimulus plan this morning was less than investors expected. The U.S. market plunged in response.

It was a very widespread decline for U.S. stocks. Our bearish candidates BG and SRCL both hit our entry triggers. Unfortunately several bullish plays were stopped out (ABMD, ALKS, GPN, HII, LII, LRCX).


Current Portfolio:


CALL Play Updates

Clovis Oncology - CLVS - close: 33.27 change: -0.54

Stop Loss: 27.75
Target(s): To Be Determined
Current Option Gain/Loss: - 3.4%
Average Daily Volume = 1.4 million
Entry on December 01 at $32.55
Listed on November 28, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
12/03/15: Biotechs suffered a rough session. The IBB biotech ETF plunged -3.58%. Shares of CLVS held up better than its peers with a -1.59% decline. It looks like CLVS may have found some short-term support in the $32.65-32.80 region.

No new positions at this time.

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.

- Suggested Positions -

Long JAN $35 CALL (CLVS160115C35) entry $2.90

12/01/15 triggered @ $32.55
Option Format: symbol-year-month-day-call-strike


Salesforce.com, Inc. - CRM - close: 79.93 change: -0.95

Stop Loss: $76.65
Target(s): To Be Determined
Current Option Gain/Loss: -17.7%
Average Daily Volume = 3.8 million
Entry on December 02 at $81.35
Listed on December 01, 2015
Time Frame: Exit PRIOR to February option expiration
New Positions: see below

Comments:
12/03/15: The late morning rally in CRM peaked around lunchtime near yesterday's high in the $82.00 area. From there CRM fell toward $79.50 and spent the remainder of the day churning sideways.

I would hesitate to launch new positions tomorrow. Let's see how the market reacts to the jobs report on Friday morning first.

Trade Description: December 1, 2015:
Cloud computing stocks continue to capture investor imaginations and their investment dollars. Founded in 1999 and headquartered in San Francisco, Salesforce.com has become a huge player in the cloud computing industry. The stock has shown significant strength with shares up +36% year to date.

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%. Q2 revenues, announced in August, were a bit better at +23.5% and management raised their Q3 and 2016 guidance.

Their most recent earnings report was announced on November 18th. Q3 earnings beat estimates at $0.21 a share. Revenues grew +23.7% to $1.71 billion, just ahead of estimates. Management continued to provide an optimistic outlook and raised both their 2016 and 2017 guidance above analysts' estimates.

Shares gapped open higher the next day following its Q3 results and improved guidance. Since then the stock has slowly consolidated lower with very little selling pressure. The point & figure chart is bullish and has seen its price target rise from $85 to $98. Meanwhile Wall Street is bullish too. Multiple firms have upgraded their price targets on CRM with recent price targets at $87, $93, and $96.

We like today's bounce and how CRM has broken the very short-term trend of lower highs. Tonight we are suggesting a trigger to buy calls at $81.35. Our time frame is several weeks. CRM reports earnings in February. We are listing the February calls.

- Suggested Positions -

Long FEB $85 CALL (CRM160219C85) entry $2.83

12/02/15 triggered @ $81.35
Option Format: symbol-year-month-day-call-strike


Illinois Tool Works Inc. - ITW - close: 92.36 change: -1.02

Stop Loss: 89.85
Target(s): To Be Determined
Current Option Gain/Loss: -51.4%
Average Daily Volume = 1.7 million
Entry on December 01 at $94.30
Listed on November 30, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
12/03/15: ITW's performance over the last three days is not very encouraging. The bullish breakout above resistance on Monday is starting to look like a bull-trap pattern. ITW briefly traded below short-term support near $92.00 and its 200-dma today. More conservative traders may want to raise their stop loss. No new positions at this time.

Trade Description: November 30, 2015:
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.

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.

- Suggested Positions -

Long JAN $95 CALL (ITW160115C95) entry $1.75

12/01/15 triggered on gap open at $94.30, trigger was $94.25
Option Format: symbol-year-month-day-call-strike


Snap-on Inc. - SNA - close: 170.50 change: -1.49

Stop Loss: 167.40
Target(s): To Be Determined
Current Option Gain/Loss: -45.9%
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:
12/03/15: The stock market's big drop today pulled SNA back toward prior resistance and what should be new support near $170.00 today. The intraday low was $169.97. I would use a bounce from current levels as a new bullish entry point.

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: 64.40 change: -1.03

Stop Loss: 68.05
Target(s): To Be Determined
Current Option Gain/Loss: +2.2%
Average Daily Volume = 1.0 million
Entry on December 03 at $64.85
Listed on November 21, 2015
Time Frame: Exit PRIOR January option expiration
New Positions: see below

Comments:
12/03/15: The recent oversold bounce has finally been erased. Shares of BG broke down to new multi-year lows and below the $65.00 level. Our trigger to buy puts was hit 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.

- Suggested Positions -

Long JAN $65 PUT (BG160115P65) entry $2.30

12/03/15 triggered @ $64.85
Option Format: symbol-year-month-day-call-strike


Stericycle, Inc. - SRCL - close: 113.64 change: -5.13

Stop Loss: 122.55
Target(s): To Be Determined
Current Option Gain/Loss: +77.3%
Average Daily Volume = 941 thousand
Entry on December 03 at $118.07
Listed on December 02, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
12/03/15: Our new bearish play on SRCL is off to a good start. Our suggested trigger to buy puts was $118.40 so the gap down this morning immediately triggered our play at $118.07. SRCL plunged to a -4.3% decline on the session.

If you missed the entry this morning I would not chase it here. More conservative traders may want to lower their stop loss now.

Trade Description: December 2, 2015:
Wall Street hates to be disappointed. If companies really disappoint their stocks get hammered. That's what happened to shares of SRCL.

SRCL is in the industrial goods sector. According to the company, "Stericycle, Inc., a U.S.-based business-to-business services company operating in 23 countries, is focused on solutions that protect people and brands, promote health and safeguard the environment." Unfortunately that doesn't really tell us much. The company started as a medical waste management service. Now they cover multiple areas including "complex and heavily regulated arenas, including compliance and sustainability waste services, brand protection solutions, and customer contact solutions."

In mid October, just prior to their Q3 earnings report, SRCL was trading near all-time highs in the $150 area. At the time SRCL was up about +14% for the year. On October 22nd SRCL reported their Q3 results. Wall Street was expecting adjusted earnings of $1.18 per share on revenues of $735.4 million.

Management reported unadjusted earnings fell from 96 cents a year ago to 47 cents a share. Their adjusted earnings came in flat (no growth) at $1.08 a share (a 10-cent miss). Revenue growth was +7.6% to $718.6 million, another miss. The company was hit with a perfect storm in the third quarter. Slower business volumes, higher expenses, and negative foreign currency headwinds all impacted their results.

The next trading day (Oct. 23rd) shares of SRCL plunged -25.8% intraday and settled with a -19% loss near $120 a share. The stock has spent the last six weeks trying to recover but investors have been selling the rallies. Now SRCL is starting to breakdown. The company's management offered slightly bullish 2015 and 2016 revenue guidance but traders don't seem to care. Now the point & figure chart is bearish and forecasting at $73.00 target.

The last few days have seen SRCL testing round-number support at $120.00. Today shares displayed relative weakness with a -1.5% decline and a breakdown below support. This sell-off could accelerate. Tonight we are suggesting a trigger to buy puts at $118.40.

- Suggested Positions -

Long JAN $115 PUT (SRCL160115P115) entry $2.20

12/03/15 triggered on gap down at $118.07, suggested entry was $118.40
Option Format: symbol-year-month-day-call-strike



CLOSED BULLISH PLAYS

ABIOMED, Inc. - ABMD - close: 79.00 change: -5.72

Stop Loss: 79.75
Target(s): To Be Determined
Current Option Gain/Loss: -57.9%
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:
12/03/15: The market's big drop on Thursday sparked a -6.75% plunge in shares of ABMD. The stock hit our stop loss at $79.75.

*small positions to limit risk* - Suggested Positions -

JAN $90 CALL (ABMD160115C90) entry $3.80 exit $1.60 (-57.9%)

12/03/15 stopped out
12/01/15 new stop @ 79.75
11/27/15 triggered @ $83.20
Option Format: symbol-year-month-day-call-strike

chart:


Alkermes Plc - ALKS - close: 71.24 change: -3.08

Stop Loss: 70.85
Target(s): To Be Determined
Current Option Gain/Loss: -93.9%
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:
12/03/15: ALKS was also crushed by the market's sharp decline today. Shares fell -4.1% and traded below the short-term trend of higher lows. Our new stop was hit at $70.85.

- Suggested Positions -

DEC $80 CALL (ALKS151218C80) entry $2.45 exit $0.15 (-93.9%)

12/03/15 stopped out
12/01/15 new stop @ 70.85
11/17/15 triggered @ $75.25
Option Format: symbol-year-month-day-call-strike

chart:


Global Payments Inc. - GPN - close: 69.34 change: -2.33

Stop Loss: 69.65
Target(s): To Be Determined
Current Option Gain/Loss: -53.3%
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:
12/03/15: The stock market's widespread plunged sparked some profit taking in shares of GPN. The stock tried to rally this morning but struggled near $72.00. GPN then reversed lower and broke down below the $70.00 level and technical support at its 20-dma, settling with a -3.25% decline. Our stop was hit at $69.65.

- Suggested Positions -

DEC $70 CALL (GPN151218C70) entry $2.25 exit $1.05 (-53.3%)

12/03/15 stopped out
12/01/15 new stop @ 69.65
11/21/15 new stop @ 68.40
11/17/15 triggered @ $70.25
Option Format: symbol-year-month-day-call-strike

chart:


Huntington Ingalls Industries - HII - close: 130.10 change: -1.11

Stop Loss: 129.75
Target(s): To Be Determined
Current Option Gain/Loss: -63.5%
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:
12/03/15: HII broke down below the $130.00 level and hit our stop loss at $129.75 before paring its losses on the session.

- Suggested Positions -

DEC $135 CALL (HII151218C135) entry $2.83 exit $1.04 (-63.5%)

12/03/15 stopped out
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

chart:


Lennox Intl. Inc. - LII - close: 133.50 change: -1.95

Stop Loss: 134.75
Target(s): To Be Determined
Current Option Gain/Loss: -38.1%
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:
12/03/15: Today's market-wide decline was strong enough to push LII through the bottom of its recent trading range. Shares hit our new stop loss at $134.75.

- Suggested Positions -

MAR $140 CALL (LII160318C140) entry $6.30 exit $3.90 (-38.1%)

12/03/15 stopped out
12/01/15 new stop @ 134.75
11/23/15 triggered @ $137.25
Option Format: symbol-year-month-day-call-strike

chart:


Lam Research Corp. - LRCX - close: 76.44 change: -2.21

Stop Loss: 76.40
Target(s): To Be Determined
Current Option Gain/Loss: -59.7%
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:
12/03/15: LRCX displayed relative weakness today. The SOX semiconductor index only fell -0.58%. The NASDAQ composite dropped -1.6%. Yet LRCX plunged -2.8% and hit our new stop loss at $76.40.

- Suggested Positions -

JAN $80 CALL (LRCX160115C80) entry $3.30 exit $1.33 (-59.7%)

12/03/15 stopped out
12/01/15 new stop @ 76.40
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

chart: