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Daily Newsletter, Tuesday, 12/8/2015

Table of Contents

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

Market Wrap

Tax Loss Selling?

by Jim Brown

Click here to email Jim Brown

A wave of what appears to be tax loss selling has gripped the market and the major indexes are suffering. However, the Nasdaq struggled back from a -57 point loss to close near positive territory thanks to the biotech sector.

Market Statistics

The Dow Transports are headed in the opposite direction from the Nasdaq. The transports lost -221 points despite oil prices touching a 7-year low intraday at $36.64. Earnings warnings from the railroads and the airlines are calling into question the rate of economic growth. Rail car loadings are declining according to CSX last week. Southwest Airlines (LUV) warned today that revenue per passenger mile would decline -1% in Q4 compared to prior forecasts for a +1% rise.

Further research found that on Monday Southwest cancelled 22 of 79 flights to Chicago that were scheduled to arrive after 6:PM. The reason given was fog but none of the other major airlines reported any problems. The airport claimed visibility was ten miles. Some analysts believe Southwest was cancelling flights with few passengers.

With terrorist worries causing passengers to rethink their travel plans and competition rising the price for travel is crashing. I bought tickets from Denver to Seattle this week for $89. Southwest recently dropped prices from Chicago to the West coast to just over $100. That is the lowest prices since the Great Recession. Allegiant (ALGT) has also warned on weaker earnings.

This suggests the traveling public is planning to fly less this holiday season. It could be terrorist worries or simply economic issues since average annual income is down about $4,000 over the last 7 years. Whatever the reason the Dow Transports are at four-month lows and apparently headed lower. This is weighing on the broader market.



The U.S. economics were not exciting. The hiring intentions for Q2 declined for the second consecutive quarter according to the Manpower Employment Survey. The net number of respondents planning on hiring in Q1 declined from 15% to 14%. That is down from 20% in Q3 over Q4. Those planning no changes totaled 72% with those planning to reduce employment at 6%.

The Job Openings and Labor Turnover Survey (JOLTS) showed a 3.6% openings rate in October, down from 3.7% in September. Job openings totaled 5,383,000 an 11% gain from the same period in 2013. This report is a lagging report for October and was ignored.

The NFIB Small Business Survey for November declined from 96.1 to 94.8 and a five-month low. Those respondents planning on increasing employment remained flat at 11%. Capital expenditure plans declined slightly from 26% to 25%. For the second month, nobody was planning on increasing inventories. Those expecting the economy to improve declined from -4 to -7. Sales forecasts declined from +4 to -1. This was not a good report but it was also ignored.

Depressing the market at the open was the trade data from China. Exports declined -6.8% and worse than the -5% analysts expected. Imports declined -8.7% but better than expected. Imports have now been done for 13 consecutive months and analysts were expecting a -12.6% decline. Imports declined -18.8% in October.

The calendar for Wednesday and Thursday is lackluster with nothing that should be market moving. Everyone will remain focused on the Fed rate decision next week.


Other big news out before the open was Morgan Stanley's (MS) announcement of a layoff of 1,200 workers. That is 2% of their global workforce and the layoffs were concentrated in fixed income, commodities and currency trading. The company will take a $150 million charge for the layoffs. The company said the trading environment in Q4 has been lower than expected and not much better than Q3. Fixed income trading revenue declined -42% in Q3. Fixed income revenue over the first nine-months was $3.75 billion compared to $6.31 billion revenue from equity trading. That was the most equity revenue of all the banks. Shares declined -2% on the news.


UK miner Anglo American beat Morgan Stanley in the layoff department. Anglo American announced they were laying off 85,000 workers and reducing their total workforce to 50,000. They are also planning on selling off major chunks of their business as a result of the crash in commodity prices. Iron ore prices have declined from a peak near $200 a ton in 2011 to $39.60 today. Copper prices have declined from $4.65 a pound in 2011 to $2 today. This is killing the mining sector with Rio Tinto (RIO) falling -8% today and BHP Billiton falling -4% to a ten-year low. Anglo American is not traded in the USA.



Chipotle Mexican Grill (CMG) took another hit today after 80 Boston College students became sick after eating at a Chipotle. Early tests indicated this was an outbreak of norovirus, which causes severe vomiting and diarrhea. The company closed the single store temporarily and said it had no plans to close any other Boston locations.

The norovirus is highly contagious and can live on surfaces as well as foods. The virus is the largest blame for food borne disease outbreaks in the U.S. with more than 21 million cases annually. Hospitals, cruise ships and universities are prime breeding grounds where people work and live in close quarters. The Chipotle location was closed while they wait the result of the tests. Since the virus could have been transmitted in the school or dorms they do not know for sure how it originated or spread. Hundreds of students eat at this store daily so this could be a coincidence where blame was immediately put on Chipotle because of their recent E.Coli outbreaks. I doubt that but is is possible.

Chipotle had another norovirus outbreak in August that sickened over 100 customers at a location in Simi Valley California.

Shares declined -$31 at the open but improved to close down only $9.


Autozone (AZO) reported earnings of $8.29 that beat estimates for $8.20 and $7.27 in the year ago quarter. Revenue of $2.39 rose +5.6% and matched estimates. The company opened 22 stores in the U.S. during the quarter to bring its total to 5,163 of the 5,635 total stores globally. Shares rallied +6% or +$44.


Homebuilder Toll Brothers (TOL) reported earnings of 80 cents that rose +12.7% but missed estimates by 3 cents. Revenue rose +6.4% to $1.44 billion and beating estimates for $1.43 billion. Home deliveries rose +0.7% to 1,820 units. Signed contracts rose +29% to $1.25 billion with prices rising +15% to an average of $872,000. Order backlogs rose +10% to 4,064 homes. Shares fell -7% on the news despite the strong orders and sales.


Smith & Wesson (SWHC) reported earnings of 25 cents compared to estimates for 20 cents. Revenue of $143.2 million rose +32% and beat estimates for $139 million. The company said gun sales were soaring thanks to President Obama's push for gun control and the threat of U.S. terrorist attacks. On Black Friday alone a record of more than 185,000 background checks were conducted for people buying guns. Shares declined slightly after the earnings but they were up nearly 18% since the California shootings six days ago.


Dave & Busters (PLAY) reported earnings of 12 cents compared to estimates for 3 cents. Revenue of $193 million beat estimates for $185 million. Same store sales rose +8.8% compared to estimates for a 4.9% gain. The company guided higher for the full year. Shares rebounded to $42 in afterhours.


Krispy Kreme Doughnuts (KKD) reported earnings of 19 cents that was in line with estimates. Revenue of $129 million missed estimates for $133 million. However, same store sales rose 3.4% compared to +2.8% estimates. They guided higher for earnings in the 78-80 cent range for the full year compared to estimates for 78 cents. Shares were volatile in afterhours but closed with no material change.


Mastercard (MA) said it was increasing its dividend +19% to 19 cents. They also said they were adding $4 billion to their existing share buyback program with $786 million unspent. Even with the increase in the dividend their annual yield is still a paltry 0.77%. The dividend will be paid on Feb 16th to holders on Jan 8th. Shares gained about 50 cents in afterhours.


Bristol Myers Squibb (BMY) announced a 3% increase in their dividend to 38 cents. The dividend will be payable Feb 1st to holders on Jan 4th. The company expects the full year dividend to be $1.52. Shares did not move on the news.


CNBC broke the news that Yahoo (YHOO) had decided not to spin off its 384 million Alibaba shares. The actual announcement is expected to be made on Wednesday. It was also reported that the company was considering spinning off the core business in order to create value in the shares. The noncore business would essentially be the Alibaba shares. By splitting out the core in a tax-free spinoff the remaining business would continue to control the shares and trade in tandem with Alibaba. If a core split is announced it will probably take about a year to iron out all the details.

The problem with the spinoff of the BABA shares is the massive tax bill that could be incurred. A core spin should not incur any taxes. Shares rose $1 in afterhours.


Kinder Morgan (KMI) announced after the close they were slashing the dividend by 75% from 51 cents to 12.5 cents a quarter. In the first nine months of 2015 the partnership had paid out dividends of $1.48 and more than three times their reported earnings of 43 cents. This cut had been widely rumored and led to a steep decline in shares over recent weeks. The company said the cut was necessary to maintain its investment grade bond rating. KMI has $41 billion in debt and a market cap of only $35 billion. They need to maintain their credit rating to keep their interest rates low. They said they also needed to preserve cash for acquisitions in this time of real opportunity. Shares declined $1 in afterhours to give a prospective yield of 3.4% at the new stock price.

The company said business was good and cash flow was expected to increase 8% in 2016 with distributable cash flow around $5 billion. They paid $3.08 billion in dividends in 2014. Capital spending was $3 billion, which they raised with a share sale.


Steve Wynn said he bought more than 1 million shares of Wynn Resorts (WYNN) stock so far in December. He now owns or controls 11.07 million shares or roughly 10% of the outstanding shares. Wynn shares have been under substantial pressure because of the challenges in Macau. Steve has been known to buy shares at the lows and sell them at the highs and with the stock down from $249 in 2014 to $62 today, this is definitely a low. Shares rose 10% in afterhours.


Carl Icahn said he boosted his stake in Hertz (HTZ) from 11% to 14.3%. This is another attempt to buy low or in this case average down. Hertz shares have declined from $20 to $13 over the last month. Jana Partners said recently they cut their stake in Hertz by half to 4.8%. Unless something happens to Hertz soon this could be a loser for Icahn. I would avoid this stock. Car services Uber and Lyft are killing this sector.


Crude oil declined intraday to $36.64 and a post recession low. Without OPEC cutting production there is nothing to support oil prices long term. However, in the API inventory report tonight after the close they showed a -1.9 million barrel decline. With refiners raising their utilization to a three-month high of 94.5% last week I am not surprised there is a decline. Refiners are rebuilding supplies of refined products that shrank in Sept/Oct while they were in the Fall maintenance cycle. This utilization will slow once the winter blend fuels are replenished. Crude rebounded to $38 on the API report. The EIA report on Wednesday is the one that moves the market. If it shows a similar decline, we could see some short covering.


Markets

Most of the market damage was done at the open as stocks reacted to the negative trade news out of China. The Dow declined -245 at its lows but despite the recovery to close at -162 there was never any concentrated buying.

The S&P dipped to 2,052 at the open and quickly rebounded but the rebound was short lived. The second dip stopped at 2,060 and that remained support the rest of the day. The S&P closed at 2,063 and right below the 200-day average at 2,064.

The Dow and S&P have a series of lower highs and higher lows. It would take a close under 2,020 to make a lower low and break the uptrend from September but the market is looking a little shaky this week.

We would need a close over downtrend resistance at about 2,109 and then a confirmation close over 2,116 to really energize the bulls. This market appears to be in the throes of some serious tax loss selling and the lack of material rebounds either today or yesterday is troubling. The middle of December is known for declines due to tax loss selling so that is being blamed for the market weakness.


The Dow was handicapped by Exxon and Chevron as crude prices fell to seven-year lows. They rebounded late in the day but still remained at the bottom of the losers list. Goldman Sachs continues to be in a steep decline with another -$2.50 drop.

It was simply an ugly day for the Dow stocks as investors sold to either raise cash or offset gains elsewhere. The Dow has very pronounced downtrend resistance just below 17,900 and that will be the critical point once a rebound begins.

Support today was 17,500 with the dip last week to 17,425. Those are the critical levels if the selling continues.



The Nasdaq returned to positive territory late in the day after being down 57 points at the open. A late flurry of selling caused a close with a -3 point loss but traders should be happy. The majority of the gains came from a resurgence of biotech stocks with many posting really nice gains. The biotech index gained +1.8% for the day.

Apple announced a case for the iPhone with an extra battery attached for $99 but still finished negative. There is also a rumor that the second generation Watch will be announced in March with the first deliveries in April. Analysts believe Apple sold between 5 and 6 million of the first edition. There are also rumors about an iPhone 6c with longer battery life in the same time frame.

Without Apple leading the charge higher, it was remarkable that the Nasdaq 100 did finish in the green with a minor gain. Both tech indexes appear poised to make new highs if the market decides to move higher in late December.

The Nasdaq Composite has strong resistance at 5,160 and closed right at the lesser resistance at 5,100.




If the Russell 2000 is going to make a late December run, it needs to get started soon. The index declined to support at 1,150 and rebounded only slightly. I believe the market weakness has scared investors and they are afraid to buy the small caps. The strength in the Nasdaq big caps indicates fund managers are looking for end of December window dressing with high liquidity. However, if we could post a couple days of gains that liquidity fear could evaporate.


In my last couple of commentaries, I have cautioned that the market was risky and warned that we should be careful despite seasonal trends that suggest the market will recover before December was over. I recommended using the expected mid month weakness as a buying opportunity.

That weakness arrives earlier than expected and I am not yet suggesting we load up on longs. I think we could be near a bottom but I would like to actually see that bottom form before rushing into new positions.

Obviously, with the amount of shorts in the market we are rapidly approaching a monster short squeeze. If we wait for that squeeze, we could be left waiting on the sidelines. That is a chance we need to be willing to take. I have no problem with nibbling at certain big cap tech stocks given the performance today. Netflix would be my first choice. Amazon and Google are too expensive for me and Facebook needs to trade over $108 before I would be a buyer. This makes the QQQs the obvious choice for a speculative trade. With the Nasdaq 100 near a breakout to a new high that would be the least risky bet for the end of December.

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Jim Brown

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New Option Plays

A Hot Spot For Consumer Spending

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: DPS, LOW, BDX, LMT, EA, THS




NEW DIRECTIONAL CALL PLAYS

Expedia Inc. - EXPE - close: 125.63 change: +0.59

Stop Loss: 119.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.2 million
Entry on December -- at $---.--
Listed on December 08, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: Yes, see below

Company Description

Trade Description:
Consumer spending has been something of a disappointment this year. Yet travel is one of the few exceptions that continues to see strong consumer spending. Expedia is a major player inside the $1.3 trillion-a-year travel industry.

EXPE is in the services sector. According to the company, "Expedia, Inc. is one of the world's leading travel companies, with an extensive brand portfolio that includes leading online travel brands, such as: Expedia.com®, a leading full service online travel agency with localized sites in 32 countries. Hotels.com®, the hotel specialist that offers Hotels.com® Rewards and Secret Prices through its mobile booking apps and localized websites in more than 65 countries. Hotwire®, a leading discount travel site that offers Hot Rate® Hotels, Hot Rate® Cars and Hot Rate® Airfares, as well as vacation packages. Travelocity®, a pioneer in online travel and a leading online travel agency in the US and Canada. Orbitz Worldwide, a global travel portfolio including Orbitz, ebookers, HotelClub and CheapTickets, brands and business-to-business offerings, including Orbitz Partner Network and Orbitz for Business. Egencia®, a leading corporate travel management company Venere.com, an online hotel reservation specialist in Europe. trivago®, a leading online hotel search with sites in 52 countries worldwide. Wotif Group, a leading portfolio of travel brands operating in the Australia/New Zealand region, including Wotif.com®, Wotif.co.nz, lastminute.com.au®, lastminute.co.nz and travel.com.au®. Expedia Local Expert®, a provider of online and in-market concierge services, activities, experiences and ground transportation in hundreds of destinations worldwide. Classic Vacations®, a top luxury travel specialist. Expedia® CruiseShipCenters®, a provider of exceptional value and expert advice for travelers booking cruises and vacations through its network of 200 retail travel agency franchises across North America. CarRentals.com®, the premier car rental booking company on the web The company delivers consumers value in leisure and business travel, drives incremental demand and direct bookings to travel suppliers, and provides advertisers the opportunity to reach a highly valuable audience of in-market consumers through Expedia® Media Solutions. Expedia also powers bookings for thousands of affiliates, including some of the world's leading airlines, top consumer brands and high traffic websites through Expedia Affiliate Network."

EXPE has been very active at making deals. Earlier this year they completed the acquisition of Orbitz Worldwide, which combined the No. 2 and No. 3 travel-booking companies into a $6.7 billion giant. That still trails behind Priceline's $9.2 billion annual revenues.

About a month ago EXPE announced at $3.9 billion deal to buy HomeAway (AWAY). The deal is expected to close in Q1 2016 and when completed it will make EXPE a serious threat to Airbnb in the alternative accommodation business, where people rent out rooms and homes.

EXPE's most recent earnings report was October 29th. The company announced their Q3 earnings were $2.07 a share, which was 5 cents above estimates. Revenues were up +13.2% to $1.94 billion, just a hair below expectations. Wall Street applauded the results and shares of EXPE surged to new highs (see chart). Following EXPE's Q3 results a few analysts have raised their price target on the stock (new targets include $150 and $180 a share).

A few days before Thanksgiving the U.S. State Department issued a global travel alert warning Americans about the threat of terrorism. The government did not provide any real details and just urged citizens to be more vigilant and cautious, especially around large crowds and public transportation. Airline stocks and EXPE all spiked lower on this headline but there hasn't been any follow through.

Technically shares of EXPE are in an up trend. EXPE is off about 10% from its 2015 highs (late October-early November) but it is up +47% year to date, making it one of the best performing stocks this year. The last few weeks have seen EXPE bouncing along technical support at its rising 100-dma. It looks like this consolidation is about to end and EXPE could be poised for another sprint higher.

The Monday high was $126.50. Tonight we are suggesting a trigger to buy calls at $126.75. We will start with a stop loss below the 100-dma. The $131.00 area has been resistance in the past but we are looking for a rally toward its November highs (near $140).

Trigger @ $126.75

- Suggested Positions -

Buy the JAN $130 CALL (EXPE160115C130) current ask $3.40
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

Chinese Data & Oil Fuel Another Drop

by James Brown

Click here to email James Brown

Editor's Note:

Disappointing economic data out of China and further weakness in crude oil helped fuel another market decline. On the plus side traders did buy the dip intraday and stocks pared their losses by the close.

AXP hit our bearish entry point today.


Current Portfolio:


CALL Play Updates

Clovis Oncology - CLVS - close: 32.97 change: +1.13

Stop Loss: 29.65
Target(s): To Be Determined
Current Option Gain/Loss: -17.2%
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:
12/08/15: Biotech stocks bounced following yesterday's sell-off. CLVS rallied +3.5%, recovering about half of yesterday's -6% plunge. No new positions at this time. Let's see if CLVS can produce any follow through higher.

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: 81.08 change: +0.40

Stop Loss: $78.90
Target(s): To Be Determined
Current Option Gain/Loss: -10.6%
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:
12/08/15: CRM bounced near round-number support at $80.00 again. Shares managed to outperform the broader market with a +0.49% gain today. There is no change from yesterday's comments. 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


Domino's Pizza, Inc. - DPZ - close: 109.94 change: -0.45

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

Comments:
12/08/15: DPZ spent Tuesday's session consolidating sideways. Shares oscillated on either side of the $110 level. We want to see a breakout to new two-month highs. Our suggested entry point to buy calls is $111.25.

Trade Description: December 7, 2015:
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)

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


Illinois Tool Works Inc. - ITW - close: 92.29 change: -1.11

Stop Loss: 91.45
Target(s): To Be Determined
Current Option Gain/Loss: -60.0%
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:
12/08/15: The stock market's two-day decline this week has pushed ITW back toward short-term support near $92 and technical support at its simple 200-dma. More conservative traders may want to raise their stop closer to today's low ($91.91).

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

12/05/15 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: 126.98 change: +1.62

Stop Loss: 119.85
Target(s): To Be Determined
Current Option Gain/Loss: -34.1%
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:
12/08/15: It was another volatile session for NFLX. Shares gapped open lower at $121.51 and fell toward $121 before reversing higher and bouncing up to $128.24. Shares eventually trimmed their gains. NFLX managed to outperform the broader market with a +1.2% gain on the session.

No new positions at this time.

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: 170.72 change: -3.37

Stop Loss: 169.40
Target(s): To Be Determined
Current Option Gain/Loss: -51.4%
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:
12/08/15: Yesterday SNA managed to ignore the market's sell-off. The stock wasn't so lucky today. Shares displayed relative weakness with a -1.9% decline. Furthermore the intraday bounce attempt failed near short-term resistance at $174. Odds are good we will see SNA tag round-number support at $170.00 tomorrow. If shares fall too far we could get stopped out at $169.40.

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: 69.91 change: -0.70

Stop Loss: 72.35
Target(s): To Be Determined
Current Option Gain/Loss: -8.2%
Average Daily Volume = 5.8 million
Entry on December 08 at $69.75
Listed on December 03, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

Comments:
12/08/15: The bearish down trend in AXP has resumed. Shares broke support at $70.00 and AXP hit our suggested entry point to buy puts at $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.

- Suggested Positions -

Long JAN $70 PUT (AXP160115P70) entry $2.08

12/08/15 triggered @ $69.75
Option Format: symbol-year-month-day-call-strike


Bunge Limited - BG - close: 63.42 change: -1.59

Stop Loss: 67.05
Target(s): To Be Determined
Current Option Gain/Loss: +19.6%
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:
12/08/15: BG also saw its bearish trend accelerate lower today. The stock broke down to new multi-year lows and underperformed the market with a -2.4% decline.

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: 115.96 change: -0.03

Stop Loss: 118.25
Target(s): To Be Determined
Current Option Gain/Loss: +18.2%
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:
12/08/15: SRCL dropped a couple of dollars at the opening bell this morning but shares quickly bounced. The stock managed to rebound back to virtually unchanged by the closing bell. SRCL's failure to participate in the market's decline today is a potential warning signal for bearish traders.

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