Option Investor
Newsletter

Daily Newsletter, Monday, 12/7/2015

Table of Contents

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

Market Wrap

Market Slips On Oil Prices

by Thomas Hughes

Click here to email Thomas Hughes
No follow through to Friday's job's driven rally; oil prices fall to new lows and the market slides.

Introduction

Friday's jobs number and revisions sparked a huge rally on Friday. This morning it looked as if there may be some follow through but plunging oil prices hit the oil sector and dragged the market lower. OPEC's lack of support for prices, as well as a de facto break-down of the cartel, sent Brent to 7 year lows, WTI crashing more than -6.0%, the oil sector falling by nearly -5% and the broad market down by nearly -1%.

Asian indices were largely unaffected by oil's decline as they closed before the slide began. The Nikkei gained nearly 1% while Chinese indices were flat to slightly positive; traders in both region cautious ahead of data due out later in the week. European indices were mostly higher despite the fall in oil prices. The DAX gained over 1.5% followed by a near 1.25% gain for the French CAC, both driven by ECB QE and US economic strength.

Market Statistics

Futures trading indicated a positive open during the earliest portion of the pre-market session but turned negative soon after 8AM. There was no sharp sell-off, just a mild -2 for SPX, but this level held until the open. At the open the indices began to fall, not hard or fast just a steady selling that carried them down to a morning low just over -1%. This low held for the day but was tested several times. Late afternoon saw the bulls stage a rally from support levels carrying them up off of their lows before the close of the day.

Economic Calendar

The Economy

Consumer credit levels for Q3 were released this morning. According to the Federal Reserve outstanding consumer credit fell -1% to 7.5%. On a month to month basis credit levels rose to 10% in the September, up 4.4% from August.

Moody's Survey Of Business Confidence declined by another full point this week, to 33.4 and a new low. This is the 13th week of decline since hitting a peak in late summer. According to Mark Zandi the decline isdriven by weak global economies and ongoing volatility in the financial markets. Outlook for current conditions has been hit the worst, led by businesses in North America. Prospects for the future are more optimistic. Despite the drop business sentiment remains high by historic standards.


Tomorrow only one economic release, the JOLTs report. JOLTs has been trending near record highs, a decline could indicate tightening labor market conditions. The quits rate will also be important, it has also been trending at high levels indicative of labor market confidence.

Wednesday is WholeSale Inventories, Thursday is weekly jobless claims and import/export prices. Friday is the heaviest of the week in terms of economic reports including PPI, Retail Sales, Business Inventories and Michigan Sentiment.

There are still one or two S&P 500 companies to report 3rd quarter earnings but focus has shifted to the 4th quarter earnings season. The estimated rate of growth for the 4th quarter has fallen again, by -0.1% to -4.3% and is expected to remain negative through the end of the season. Based on the four year average we can expect this to rise by roughly 4% for a final earnings growth near -0.5%. Energy is going to be the largest contributor to declining growth and is expected to post earnings decline of -65%. Ex-energy growth projections jump to 1.4%. Full year 2015 earnings growth is expected to be -0.5%, down from 1%-2% earlier in the year, with 2016 projections falling as well.

Full year 2016 estimates have risen from 7.8% to 8.1%. This is the first increase in full year estimates in nearly 2 months.

The Oil Index

Oil was the story of the day. Brent and WTI had their worst days in what may be years as support fled the market. Supply is high and demand is low, and OPEC did nothing about it, so there is little reason to get bullish on oil. WTI fell more than -6%, breaking through $40, $39 and $38 to settle near $37.50; Brent is a hairs breadth away from touching $40, their lowest levels since early 2009. Today's move could lead to further downside with possible targets as low as $30 for WTI, unless of course some sign of shrinking supply or increasing demand enters the market.

The oil sector got hit hard by plunging oil prices; Exxon, Chevron and the other top producers falling as much as -5%. The Oil Index fell -5% in a move that breaches support and looks set to move lower. Today's move also brings a possible H&S shoulders into play, with the early November rally as head. The indicators are pointing lower, in tandem with the move, and pointing lower so a move to long term support is very likely. Downside target is now 1,025 with a possible consolidation or test of resistance happening first. The market may take a day or more to digest new, low, oil prices, a time in which prices for both oil and the oil sector could experience increased volatility.


The Gold Index

Gold prices fell today as the dollar regained some lost ground, -1.25% or $13.00 . The dollar, it had a wild reaction to the ECB's new QE. The news was not quite as good as expected, sparked massive short covering in the euro and selling in the DXY, but did not change the fundamental picture. The ECB is still easing, the FOMC is still expected to raise rates, labor market remain steady/healthy, there is little sign of inflation and all putting gold under pressure. That pressure was seen today and is not expected to let up any time soon, new estimates put targets $100 lower and more. On the Fed front, Lockhart made comments this morning to the effect that conditions were right and the market was ready for a rate hike.

The gold miners of course did not perform well in the face of falling gold prices. The Gold Miners ETF fell -4.8%, reversing all of Friday's gains and dropping below the short term moving average. The indicators are bullish and could lead the ETF higher but I don't think so, not without a change in trend for gold. Momentum is peaking in the near term, indicative of resistance near the $14.75 level, and could easily lead to a retest of support. Stochastic is still moving higher but below the upper signal line, weak and softening. Support is near $13.00 with a possible break below should gold prices set a new low.


In The News, Story Stocks and Earnings

Chipotle is getting rocked by the e-coli scandal. The chain failed to contain the outbreak and it has now affected full year guidance. The company issued a warning over the weekend saying investors should expect a same store sales drop and rescinding their full year guidance. The flip-side is that several analysts have maintained their long term outlook with the belief full year 2016 targets will be met. The company's attitude and efforts to correct the issue have been cited as reasons to believe it will be able to heal it's image. Today the stock fell nearly -6% in the pre-market and then regained most of the loss during the open session.


GE announced it has terminated its proposed deal to sell part of its appliance unit to Electrolux. The deal was cut off by GE because of hurdles put forth by regulators citing anti-trust issues. GE will get a $175 million break-up fee the two had already agreed to and said the unit was operating well. GE will also seek other buyers. The stock barely reacted, falling -0.75% within a congestion band at the 6 year high.


Newel Rubbermaid and Jarden announced an intended merger late in the day. Both stocks jumped on the news, nearly 10% each. The businesses are about equal size, near $11 billion market cap, and would result in about $14 in annual sales.


The gun manufacturers did very well today, bucking the sell-off and hitting new highs in some cases. Smith & Wesson was one. Today's move is no doubt sparked by the Presidents call to disarm America, not going to happen, and carried it up over 8% and within 10% of the all time high. The company is reporting earnings later this week and has a history of positive upside surprise.


The Indices

The indices fell today but did not close at their lows. Today's declines were led by the Dow Jones Transportation Index which closed with a loss of -0.88%. The transports appear to be moving down to the lower limit of the recent trading range near 7,750. The indicators are consistent with such a move, both pointing to lower prices but neither showing much strength in the move. My first target may not hold, if broken next target is 7,500 and the August low.


The next largest decline was seen in the NASDAQ Composite which lost -0.79%. Today's move retreated from the Friday high to test support just above the short term moving average and the 5,100 level. The indicators are pointing lower so support could be tested again, possibly as low as 5,050 or 5,000, along the long term trend line. While bearish, the indicators are weakly so and consistent with consolidation/pull-back within a greater up trend.


The next largest decline was the -0.7% drop posted by the S&P 500. The broad market index made lows a little more than -1% for the day but closed up off of those lows, and above the short term 30 day moving average. Today's action appears to be further consolidation within the 2,100 – 2,200 range, a wind that is likely focused on next week's FOMC meeting. The indicators are pointing lower in the near term, suggesting support could be tested again, but consistent with a rising market in the short to long term. Support is currently at the moving average but could move down to 2,050 or 2,025 and the up trend line.


The Dow Jones Industrial Average made the smallest decline in today's session, only -0.66%. The blue chips tested support along moving average and found at least near term support. The index was able to bounce and move up off of today's lows but the indicators remain mixed. Both MACD and stochastic are indicating lower prices in the near term, suggesting a further test of support, but are also both consistent with support at/near current levels in the short to long term.


The markets have been throwing off mixed signals the last couple of weeks and months. There have been a lot of causes; China, Russia, ISIS, oil, negative earnings growth, FOMC outlook and mixed economic data to say the least. All this news, fear and reaction has caused the market to wind up and it looks like once again it is focused on the FOMC, which happens to be options expiration week as well.

Underneath it all the long term economic trends and earnings outlook has remained positive so I remain bullish. The FOMC may spook the market with a rate hike next week, it's really hard to say what is going to happen or if they even will raise rates but any dips remain buying opportunities. Lockhart seems to think the market is prepared for a hike and so do I. If so it could spark a rally and that is the direction I am leaning. After all, it will be just the first rate hike of a cycle, not the last, and indicative of economic health.

Until then, remember the trend!

Thomas Hughes

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New Option Plays

Outgrowing Its Peers

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Domino's Pizza, Inc. - DPZ - close: 110.39 change: +0.56

Stop Loss: 106.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 555 thousand
Entry on December -- at $---.--
Listed on December 07, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: Yes, see below

Company Description

Trade Description:
Delivering pizzas is old school business but one company has embraced technology. Domino's Pizza Group sales and marketing director Simon Wallis says: "The Domino's app has been downloaded over 10 million times and 75 per cent of our orders are now online." DPZ is outgrowing a lot of its competition.

DPZ is in the services sector. According to the company, "Founded in 1960, Domino's Pizza is the recognized world leader in pizza delivery, with a significant business in carryout pizza. It ranks among the world's top public restaurant brands with a global enterprise of more than 12,100 stores in over 80 international markets. Domino's had global retail sales of over $8.9 billion in 2014, comprised of more than $4.1 billion in the U.S. and nearly $4.8 billion internationally.

In the third quarter of 2015, Domino's had global retail sales of over $2.1 billion, comprised of over $1.0 billion in the U.S. and over $1.1 billion internationally. Its system is comprised of independent franchise owners who accounted for nearly 97% of Domino's stores as of the third quarter of 2015. Emphasis on technology innovation helped Domino's generate approximately 50% of U.S. sales from digital channels at the end of 2014, and reach an estimated run rate of $4.0 billion annually in global digital sales.

Domino's features an ordering app lineup that covers nearly 95% of the U.S. smartphone market and has recently introduced several innovative ordering platforms, including Ford SYNC®, Samsung Smart TV® and Pebble Watch, as well as Twitter and text message using a pizza emoji. In June 2014, Domino's debuted voice ordering for its iPhone® and Android® apps, a true technology first within traditional and e-commerce retail."

Their most recent earnings report was October 8th. DPS reported their Q3 results with earnings up +6.3% from a year ago to $0.67 a share. That actually missed Wall Street estimates by seven cents. Revenues were up +8.5% to $485 million. Their same-store sales in the United States rose +10.5%. Same-store sales internationally rose +7.7% and marked their 87th consecutive quarter of same-store sales growth. In comparison, DPZ's closest competitor, Pizza Hut, saw their revenues fall -0.8% last quarter to $262 million. Pizza Hut same-store sales were only up +1%.

A few weeks later late, on October 27th, DPZ announced an accelerated share repurchase (ASR) program. Management said they had approved an $800 million stock buyback program and would dedicate $600 million to an accelerated buyback. In their press release, J. Patrick Doyle, Domino's President and Chief Executive Officer, said: "Our business is flourishing. We're proud of the ongoing returns this is driving for both our shareholders and franchisees in the form of share appreciation, regular dividends, open market share repurchases – and store profitability. We were also able to use our balance sheet and strong relationships with lenders to provide an additional opportunity for shareholders through an accelerated share repurchase program." DPZ stock rallied on this announcement.

Technically shares have been stuck under a bearish trend of lower highs since the 2015 peak in July. That changed this week. DPZ has spent the last few days consolidating sideways beneath resistance near the $110 level. The stock displayed relative strength today with a breakout past $110 and its trend line of lower highs. Currently the point & figure chart is bearish but a rally above $112 would generate a new buy signal. Any follow through on today's bullish breakout could spark some short covering. The most recent data listed short interest at 16% of the 51 million-share float. Tonight we are listing a trigger to buy calls at $111.25.

Trigger @ $111.25

- Suggested Positions -

Buy the JAN $115 CALL (DPZ160115C115) current ask $1.45
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

Oil's Plunge Greases Market Drop

by James Brown

Click here to email James Brown

Editor's Note:

Crude oil suffered a rough session with oil prices falling to new seven-year lows. This weighed heavily on the broader market as did a sharp decline in biotech stocks. All of the major U.S. indices posted declines.

Our new NFLX trade was triggered this morning.


Current Portfolio:


CALL Play Updates

Clovis Oncology - CLVS - close: 31.84 change: -2.10

Stop Loss: 29.65
Target(s): To Be Determined
Current Option Gain/Loss: -24.1%
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:
12/07/15: Biotech stocks were hammered on Monday. CLVS was caught up in the swoosh lower and shares fell -6.1% by the close to settle near their 10-dma. If this dip continues we can look for potential support at the $30.00 mark.

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

12/05/15 new stop @ 29.65
12/01/15 triggered @ $32.55
Option Format: symbol-year-month-day-call-strike


Salesforce.com, Inc. - CRM - close: 80.68 change: -1.46

Stop Loss: $78.90
Target(s): To Be Determined
Current Option Gain/Loss: -15.5%
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:
12/07/15: After big gains on Friday CRM dipped back toward round-number support at $80.00 today. The intraday chart would suggest there is short-term resistance in the $82.00 area. Readers may want to wait for CRM to breakout past this level before considering new bullish positions.

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

12/05/15 new stop @ 78.90
12/02/15 triggered @ $81.35
Option Format: symbol-year-month-day-call-strike


Illinois Tool Works Inc. - ITW - close: 93.40 change: -0.92

Stop Loss: 91.45
Target(s): To Be Determined
Current Option Gain/Loss: -40.0%
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:
12/07/15: ITW dipped toward the $93.00 level before paring its losses today. I would hesitate to launch new positions tonight. We wanted to see some follow through on Friday's rally and it didn't happen.

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

12/05/15 new stop @ 91.45
12/01/15 triggered on gap open at $94.30, trigger was $94.25
Option Format: symbol-year-month-day-call-strike


Netflix, Inc. - NFLX - close: 125.36 change: -5.57

Stop Loss: 119.85
Target(s): To Be Determined
Current Option Gain/Loss: -40.7%
Average Daily Volume = 20.5 million
Entry on December 07 at $132.55
Listed on December 05, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
12/07/15: Our aggressive trader on NFLX is open. Shares continued to rally this morning. Our trigger to buy calls was hit at $132.55. The stock rallied to $133.27 before reversing lower. NFLX is reminding us that it is a volatile stock with an intraday plunge to $122.75 before bouncing late this afternoon.

No new positions at this time. Let's see if NFLX can build on the late day bounce. Technical traders will note that today's session has generated a bearish engulfing candlestick reversal pattern but it needs to see confirmation.

Trade Description: December 5, 2015:
The relative strength in shares of NFLX could accelerate between now and year end. Tonight we are looking at this stock as a bullish momentum trade.

Netflix has come a long way from its late 1990s roots as a DVD-rental-by-mail business. Today it is one of the largest online streaming video-on-demand businesses. The company's most recent earnings report was disappointing but failed to derail enthusiasm for the stock.

NFLX is part of the services sector. According to the company, "Netflix is the world's leading Internet television network with over 69 million members in over 60 countries enjoying more than 100 million hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any Internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments."

Traditional media giants have been struggling with a massive change in consumer viewing habits. More and more people are "cutting the cord" with traditional cable television subscription packages. Case in point, Time Warner (TWX) just reported earnings this week and lowered their guidance as they expect more pay-TV subscribers to leave. That's because there are too many online streaming video options that are more competitive than regular cable services. NFLX has been a significant winner as people cut the cord.

NFLX is one of the market's best performers this year with a +167% gain year to date. Yet NFLX is not invincible. Doubts have been growing about NFLX's ability to keep growing and its rising costs. Their most recent earnings report is a good example.

NFLX announced their Q3 earnings results on October 14th. They missed Wall Street estimates on both the top and bottom line. Analysts were expecting a profit of $0.08 a share on revenues of $1.75 billion. NFLX delivered $0.07 a share. Revenues were up +23% to $1.74 billion. It wasn't a big miss but it was a miss. Furthermore NFLX management lowered their Q4 guidance below estimates. They now see Q4 earnings at $0.02 a share compared to estimates at $0.03.

One of the biggest disappointments was domestic subscriber growth. NFLX added 3.62 million subscribers globally. 2.74 million where international subscribers. The rest, 880,000 subs, were U.S. subscribers. That was significantly below analysts' estimates at 1.25 million.

NFLX partially blamed this subscriber miss on the credit card industry, which has been issuing new, more sophisticated credit cards with security chips in them. Essentially subscribers needed to update their billing info with the new card and that didn't happen, which produced more customer "churn". At least that is the story from NFLX. Credit card experts think this story is baloney and just a scapegoat for NFLX's poor growth.

Another challenge facing NFLX is growing competition. Amazon.com tries to dominate every market they are in. Their Amazon.com video streaming service is $99.00 a year (about $8.25/month) but this hasn't stopped NFLX's growth. Hulu has been a competitor in the online streaming video industry for years. They just launched a new ad free subscription service at $11.99 a month. According to Hulu, the customer response has been awesome but they are not releasing any numbers on how many people have signed up. Hulu's advantage over NFLX is being able to watch current season TV on their service. Yet another competitor for NFLX is YouTube. YouTube is launching a paid subscription service called YouTube Red for $9.99 a month. In spite of all the competition NFLX remains the dominant player and they continue to expand both in the U.S. and overseas. (FYI: new subscribers pay $9.99 a month for NFLX)

If missing earnings estimates and lowering guidance wasn't bad enough NFLX also told investors that they plan to raise additional capital next year (2016) to help "fund our continued content investments". That means more debt and could mean more stock (which dilutes shareholders). One of NFLX critics biggest arguments has been the company's rising expenses. Yet in spite of all these challenges NFLX's stock continues to perform. The point & figure chart is bullish and forecasting at $148 target.

In summary, the growth story for NFLX seems a little bruised with their missed subscriber numbers. They continue to spend a ton of money on content and expansion. Investors don't seem to care. The consumer trend of switching from traditional cable to streaming services is not going to reverse and that benefits NFLX.

NFLX is showing significant relative strength this year and remains a momentum name. We are adding NFLX as a bullish candidate. We do consider it a higher-risk, more aggressive trade because shares can be so volatile. Tonight we are suggesting a trigger to buy calls at $132.55. I would use small positions to limit risk.

FYI: If you're curious about Netflix and their long-term outlook, check out this page on their website Netflix's View: Internet TV is replacing linear TV .

- Suggested Positions -

Long JAN $140 CALL (NFLX160115C140) entry $4.55

12/07/15 triggered @ $132.55
Option Format: symbol-year-month-day-call-strike


Snap-on Inc. - SNA - close: 174.09 change: +0.27

Stop Loss: 169.40
Target(s): To Be Determined
Current Option Gain/Loss: -21.6%
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:
12/07/15: SNA managed to ignore the market's widespread weakness today. Shares spent most of the session consolidating sideways just below the $174.00 level. Today's intraday high was $174.23. I would use a rally above $174.25 as another bullish entry point but you may want to wait and only launch positions if the broader market is also positive.

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

12/05/15 new stop @ 169.40
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

American Express Company - AXP - close: 70.61 change: -0.49

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

Comments:
12/07/15: AXP drifted lower, toward support at $70.00, but failed to breakdown below this level. There is no change from my prior comments. Our suggested entry point to buy puts is $69.75.

Trade Description: December 3rd, 2015:
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)

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


Bunge Limited - BG - close: 65.01 change: +0.03

Stop Loss: 67.05
Target(s): To Be Determined
Current Option Gain/Loss: -13.0%
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:
12/07/15: BG didn't move much today and that's potentially bad news for shorts. BG managed to ignore the market's widespread decline. The stock spent today's session consolidating sideways. This is technically a show of relative strength. I am not suggesting new positions at this time. Keep an eye on the $66.00 level for short-term resistance.

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

12/05/15 new stop @ 67.05
12/03/15 triggered @ $64.85
Option Format: symbol-year-month-day-call-strike


Stericycle, Inc. - SRCL - close: 115.99 change: -0.65

Stop Loss: 118.25
Target(s): To Be Determined
Current Option Gain/Loss: +11.4%
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:
12/07/15: SRCL delivered a relatively quiet session. Shares spent most of the day hovering in the $115.25-115.50 zone. SRCL pared its losses with a bounce in the last hour.

Tonight we are turning more defensive and lowering our stop loss to $118.25. No new positions at this time.

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

12/07/15 new stop @ 118.25
12/05/15 new stop @ 120.25
12/03/15 triggered on gap down at $118.07, suggested entry was $118.40
Option Format: symbol-year-month-day-call-strike