Option Investor
Newsletter

Daily Newsletter, Tuesday, 1/5/2016

Table of Contents

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

Market Wrap

Volatility Over?

by Jim Brown

Click here to email Jim Brown

After a -460 point drop intraday on Monday and -110 intraday decline today the Dow actually finished slightly positive. Does this mean the January volatility is over?

Market Statistics

After the worst opening drop in January since 1932, the markets traded sideways for most of Tuesday. However, sharp declines in some big cap tech stocks kept the Nasdaq under pressure to close with an 11 point loss. Biotechs gapped open to provide an opening bounce for the Nasdaq but the sector rolled over to a loss late in the day and barely recovered to close with a 0.7 point gain.

Apple (AAPL) was a big drag on the Nasdaq and the Dow after a Japanese news outlet said Apple would slash production of the iPhone by 30% between January and March. The report said iPhone inventories have risen sharply in Asia, Europe and the U.S. because of lack of demand. Apple shares fell -$3 to $102.71. That short I recommended last Tuesday at $108.75 is looking pretty good today.

Apple suppliers Avago Technologies (AVGO), Skyworks Solutions (SWKS) and NXP Semiconductor (NXPI) crashed along with Apple on worries of slowing demand. AVGO fell -3.4%, NXPI -2.4% and Skyworks -6%.



The Asian markets all finished lower but well off their lows. The Shanghai Composite traded down -3% intraday. Had the Shanghai finished at the -3% level I am sure our markets would have also been negative.

The worry in China is that the six-month ban on insider selling expires on Friday and will allow pent up selling by those insiders. That worry added to the slowing economy is weighing on their markets.



In the U.S., the economic reports were not as bad as in recent days. The vehicle sales for December came in at a pace of 17.3 million, which was well below the November pace of 18.2 million and the forecast for 18.2 million. However, the total sales for the year reached 17.47 million and a record high. This was about 700,000 over the level seen in 2014.

Annual Sales

2011 12.7 M
2012 14.4 M
2013 15.5 M
2014 16.5 M
2015 17.3 M

Despite the record numbers for the year, vehicle sales are slowing. Light truck sales fell for the second time in three months while auto sales fell for the second consecutive month. Auto sales fell from 7.8 million to 7.4 million while light truck sales declined from 10.4 million to 9.9 million.

Foreign manufacturers did the best. Nissan saw sales increase 18.6%, Toyota 10.8% and Chrysler Fiat +12.6%. Ford sales rose +8.4% and GM +5.7%.

Semiconductor stocks were down after the semiconductor billings for November declined -0.3% from the +1.9% rise in October. This was the first monthly decline since July. Global billings were $28.9 billion in November and that is -3.0% below year ago levels. That is the biggest YoY drop since mid-2012. North American sales are now -7.1% below year ago levels.


Relatively speaking today's reports, although negative were the best in several days. On Monday, the ISM Manufacturing Index for December fell further into contraction to 48.2, down from 48.6 in November. December was the lowest level since the recession. All the major components were also in contraction.


The weak ISM followed the Chicago PMI last week that fell from 48.7 to 42.7 and the lowest reading since 2009. The estimate was for a rise to 50.1. Order backlogs fell -17.2 points to 29.4 and the 11th month in contraction. New orders fell from 44.1 to 38.8 with employment dropping from 51.6 to 46.8.

This followed the Philly Fed Manufacturing Survey that declined from +1.9 to -5.9 and the third month of the last four in contraction. New orders declined from -3.7 to -9.5 and back orders fell from +2.4 to -17.7.


Construction spending declined -0.4% and the weakest since November 2014.

Moody's Chart

The Atlanta Fed real time GDPNow forecast is now predicting only 0.7% growth in Q4 and dropping fast.


The U.S. economy is sinking fast and that is another reason our markets are weak. China's economy has now contracted for ten consecutive months with the December PMI numbers at 48.2 and the lowest since the recession.

Investors are worried the Fed is pressing its rate hike cycle because they want to get a few hikes completed before the U.S. falls back into recession. However, energy, commodities and manufacturing are already in a recession. Consumer spending is the only thing keeping economic our head above water.

Tomorrow is the first look at the December employment picture. Jobs are expected to decline but not materially. The ADP report is expected to drop from 217,000 in November to 190,000 in December. Typically, some employers reduce the workforce ahead of year-end in order to start the new year fresh. The Nonfarm Payrolls on Friday are expected to decline from 211,000 to 200,000. However, these forecasts are rarely accurate. If jobs suddenly tumbled more than expected after last week's bearish economic reports, it could impart some additional bearish sentiment to the market.

This is one set of reports where I would like to see some blowout gains that would support the Fed's stated outlook for an improving economy. Otherwise, the bears could gain a tighter grip on the market.


There were several ratings changes on stocks today. Analysts are sharpening their pencils and recalculating targets for 2016. First Solar (FSLR) rallied sharply on an upgrade from Goldman Sachs to buy, saying shares could rise 50% in 2016. They raised the price target from $61 to $100 and shares spiked +5 to $72. Goldman said FSLR was the underappreciated bellwether in the sector. However, Goldman cast some shade on the rest of the sector with a downgrade to neutral.


Fitbit (FIT) was crushed for an 18% loss after they announced a new watch at the opening day of CES in Las Vegas. Fitbit announced the Blaze smartwatch with features similar to Apple's Watch. The Blaze has a five-day battery life compared to Apple's 12-18 hours. The watch sells for $199.95.

However, UnderArmour (UA) also showcased a connected fitness system that included more functions than the Blaze. The UA system can connect to sensors in your shoe and has wireless headphones. Fossil said it will introduce more than 100 wearable products in 2016.

Competition in the wearable market is heating up fast and that means Apple needs to stretch out that battery life quick or be left behind in the smartwatch space. The competitor announcements crushed Fitbit shares today and it is only going to get worse.


President Obama proved he was the best gun salesman on earth again today as he announced more plans for gun control. Rather than wait for congressional action that may never come he is using executive action to restrict gun sales.

Smith & Wesson (SWHC) shares rallied +11% to a new high. Their shares are now up more than 1000% since president Obama took office. Sturm Ruger (RGR) shares spiked 7% on the news.

Louis Navellier, chairman of Navellier Associates, said "Mr. Obama is the best gun salesman on the planet." When asked if his firm was getting any kickback from investors for their holdings in the gun companies and he said no, "they just want us to make money."

The FBI said they processed more background checks on Black Friday, 185,345, than any day on record. The previous high was 177,170 on 12/21/2012. The FBI said for all of 2015 they processed a record 23,141,970 background checks. The prior record was 21,093,273 in 2013. Since 1998, the FBI has processed more than 220 million background checks for gun purchases.


Eli Lilly (LLY) warned that earnings and revenue for 2016 would be below analyst expectations. The company expects revenue of $20.3-$20.7 billion and below consensus for $21.36 billion. Lilly guided for earnings in the range of $3.45-$3.55 and also below consensus for $3.65. Bernstein said the guidance was very conservative and took into account the $675 million to $1.0 billion in currency translation issues due to the strong dollar. Lilly shares rallied +$1.24 on the lowered guidance. They got a pass because of the strong dollar impact.


Amazon (AMZN) reported third party merchants selling on Amazon sold a record 23 million items on Cyber Monday. That was a +40% increase from the prior year. That is not total Amazon sales, just the third party sellers on Amazon. The company releases details in such a way it makes it hard to compare with prior years. For instance, the company also said sellers that used the "Fulfillment by Amazon" service or FBA, sold more than 1 billion items in 2015. Those are sellers that let Amazon warehouse and ship their products so that Amazon can guarantee the two-day delivery. Those active sellers using the FBA service grew by more than 50% and are now active in 100 countries with sales to 185 countries. Worldwide FBA sellers located in another country grew by more than 100%. The FBA service now delivers qualifying orders the same day to customers in more than 750 U.S. cities.

Shares declined $3 on Monday after Monness Crespi Hardt cut them from buy to neutral saying gross margins were getting squeezed and there was increasing competition to Amazon Web Services. They may have to eat that downgrade when Amazon reports earnings on Feb 4th.


Nordstrom (JWN) was cut by Citigroup from buy to neutral. The bank said the investment cycle for Nordstrom was peaking and the return on capital would begin to shrink. They repeated the fact that sales slowed in Q3 and probably were lackluster in Q4.

Citi upgraded JC Penny (JCP) from sell to neutral based on valuation. The stock declined -30% over the last two months to hit their target price. While they believe JCP will still have an uphill battle they said the risk/reward no longer favors the downside.



Crude Oil declined to $35.97 at the close and well off Monday's high at $38.39 despite the ongoing conflict in the Middle East. Saudi Arabia and Iran are fighting a new war of words and Saudi cut off diplomatic relations with Iran. Bahrain, Sudan, the UAE followed and Kuwait recalled its ambassador to Iran. Saudi is already fighting a proxy war against Iran in Yemen and Syria. A Middle East diplomat said the confrontation was a level 5 on a scale of 1-10 with 10 being a shooting war.

Crude prices initially spiked on the news of the escalating war of words but then declined on the outlook for even more supply. I know that seems counter intuitive but they believe Saudi Arabia, Kuwait and others will simply pump even more oil to punish Iran with lower prices. The low prices are causing serious harm to Iran's economy. Saudi Arabia went so far as to lower prices to Iran's customers in Europe in an effort to take away the buyers for Iran's oil. Iran currently produces about 2.5 million barrels per day and has said they will increase that by one million by July once sanctions are released. Saudi Arabia is producing about 10.5 mbpd and has the capacity to pump as much as 12.5 mbpd according to the Saudi oil minister.

The price war may just be getting started according to one analyst today. He said with Saudi cutting prices to Iran's customers in Europe that will likely begin an entirely new series of price cuts by both countries.


Markets

In one of the other newsletters last week, I said, "There is a seasonal bout of volatility in the first week of January. We either shoot up big or fall off a cliff. It is a coin flip for direction." We lost the coin toss and the winners elected to press their advantage.

Obviously, we could not have predicted the dramatic reaction to China's economic numbers and the worries over the expiring trading ban. We also did not expect the U.S. economics to be so negative. Add those factors to the normal January tax selling and it has been an ugly week and it is just Tuesday. The S&P futures are down -25 as I type this so tomorrow is not looking to exciting either.

At this point, we simply need to stand aside and let the market do its thing. Eventually the market forces will equalize and the market will become buyable again. We needed a decent dip to finally remove the sellers that had been weighing down the market since early November. We saw that big rebound from the September lows and once it began to weaken we had significant volatility over the last two months as sellers continued to jump on every 2-3 day rally. I would like them to get it out of their system and let the markets retest the August lows. Once we have a decent retest maybe we can begin a bullish rally that lasts until summer.

Many analysts believe the market will be the strongest in the first six months of the year. I would love to be able to buy a retest and ride those positions up for that expected rally.

The S&P declined on Monday to 1,989 and exactly to the 50% retracement point from the August lows. If that 1,989 level breaks I think we will get our retest of the lows. Some technicians are looking for 1,969 as a pause point but I think sentiment has been damaged and a break below 1,989 is the trigger for a larger decline. The Monday low was another lower low and until that cycle is broken, we should continue to expect lower highs and lows. Note the MACD and RSI are both negative.


The Dow actually made a decent recovery from the -110 intraday drop. Goldman, Apple and Disney were the biggest losers but the winners were pretty broad based. We are still seeing a dash for trash with the most beaten up stocks from 2015 finding the most buyers in 2016.

The Dow also made a lower low with the -43 point intraday dip under 17,000 on Monday. The 17,000 level is now our line in the sand and the Dow futures are down -160 and trading at 16,927 as I type this. If we close under 17,000 we are in deep trouble and we could retest 16,000.

With earnings coming up in two weeks there could be some anticipation to lift stocks but with earnings for the quarter expected to decline -4% and companies warning every day we could see the reverse effect.



The Nasdaq closed right on the threshold of the abyss. Support at 4888-4900 has been broken both days but the close at 4,891 is still clinging by its fingernails. If that support fails we are probably going to retest the 4,600 level or even 4,500. Nasdaq futures are down -53.

The big cap techs are sinking fast and the biotechs were not adding support on Tuesday. If Apple continues to decline and take AVGO and SWKS with it the Nasdaq will suffer from a sentiment perspective.




The Russell 2000 imploded on Monday and managed only a 1.8-point rally today. The index tested support at 1100-1102 on both days. A further decline would target 1,082 and that would be a -16.5% decline from the highs. Small caps are normally favored in early January and that is not happening. This is negative for market sentiment and we can see that impacting all the indexes. Russell futures are down -10.


The Dow transports closed near a two-year low on Monday and barely recovered positive territory on Tuesday thanks to rate increases by three major airlines. The weak economics are going to be a continued drag on the transport sector and the overall market.


The Chinese economics, Saudi/Iran conflict and weak U.S. economics triggered a rapid dose of window undressing and tax selling. Anyone thinking about holding their yearend window dressing purchases for a few more days in hopes of a bounce from end of year retirement contributions into mutual funds, changed their mind in a heartbeat before the open on Monday.

Those not so quick on the trigger on Monday were probably hoping for a rebound today so they could reduce their losses. That did not happen and now we are looking at a significantly negative open on Wednesday if the futures do not improve.

I would continue to stand aside and wait for the market to settle. I ended my commentary over the weekend with the quote from Mark Yusko at Morgan Creek Capital Mgmt. "Trying to catch falling knives always results in lost fingers. Better to let the knife hit the floor, bounce around a little and when it stops moving go pick it up." We need to let the knives bounce around this week and look for a better opportunity in the days to follow.

 

TIME IS RUNNING OUT!
LOCK IN YOUR SAVINGS
BEFORE THE EOY SPECIAL ENDS!


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Enter passively, exit aggressively!

Jim Brown

Send Jim an email

 


New Option Plays

Better Comp Sales Not Helping

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Red Robin Gourmet Burgers - RRGB - close: 58.92 change: -1.02

Stop Loss: 62.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 244 thousand
Entry on January -- at $---.--
Listed on January 05, 2016
Time Frame: Exit PRIOR to earnings in mid February
New Positions: Yes, see below

Company Description

Trade Description:
The second half of 2015 had to be frustrating if you were bullish on RRGB. The company has been outperforming many of its peers in the restaurant industry but shares still got crushed. RRGB delivered a -19.7% decline for all of 2015 but fell -33.5% from its 2015 peak near $92.00 a share.

RRGB is in the services sector. According to the company, "Red Robin Gourmet Burgers, Inc. (www.redrobin.com), a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc., is the Gourmet Burger Authority®, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries® in a fun environment welcoming to guests of all ages. In addition to its many burger offerings, Red Robin serves a wide variety of salads, soups, appetizers, entrees, desserts and signature Mad Mixology® Beverages. Red Robin offers a variety of options behind the bar, including its extensive selection of local and regional beers, and innovative adult beer shakes and cocktails, earning the restaurant the 2014 VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are more than 500 Red Robin restaurants across the United States and Canada, including Red Robin Burger Works® locations and those operating under franchise agreements."

One of the biggest stories last year was the decline in crude oil. Lower crude oil means lower gasoline prices at the pump. Many were expecting lower gas prices to fuel a jump in consumer spending. Unfortunately that increase in spending never really showed up.

The data has shown a slowdown in restaurant sales. Black Box Intelligence, a research firm, publishes monthly statistics on the restaurant industry. Black Box said industry-wide sales growth fell from +1.8% in Q2 2015 to +1.5% in Q3 (no word yet on Q4). Traffic stalled as well. In early November Black Box Intelligence reported that same-store sales growth for the restaurant industry went negative for the first time since July 2014 with a -0.2% drop in October 2015. Traffic plunged -2.8%. There was a bounce in November with comp sales up +0.5% but traffic fell another -1.7%.

That is the environment RRGB has been operating in. They have been beating a lot of their peers with stronger comparable-store sales but RRGB has not been immune to the slow down. Looking at RRGB's last four quarterly reports they have beaten Wall Street's earnings estimate the last three quarters in a row. However, they have missed analysts' revenue estimates three out of the last four quarters. Revenue growth has slowed from +16.6% to +16% to +14.4% and down to +6% in their most recent announcement. Comps started last year at +3.6% and dipped to +2.9% before bouncing back to +3.5%.

Investors don't seem to care that RRGB's comparable store sales are beating the industry. Traders have sold the stock hard following the last two earnings reports and shares have continued to sink under a bearish trend of lower highs. The last three weeks of December saw RRGB consolidating sideways in the $60.00-65.00 range. The recent breakdown below support at $60.00 has produced a new quadruple bottom breakdown sell signal on the point & figure chart, which is currently forecasting a target near $54.00 (and could go lower).

Shares of RRGB displayed relative weakness today. The intraday bounce attempt failed and shares lost -1.7% on the session to close at new 52-week lows. The stock is poised for a drop toward the $50-55 zone. Tonight we are suggesting a trigger to buy puts at $58.40.

Trigger @ $58.40

- Suggested Positions -

Buy the FEB $55 PUT (RRGB160219P55) current ask $2.40
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

Is Your Glass Half Full Or Half Empty?

by James Brown

Click here to email James Brown

Editor's Note:

If you are feeling optimistic then today's session is somewhat encouraging since there was no serious follow through lower after yesterday's sell-off. On the other hand the bounce attempt was very anemic and might suggest the sell-off is not over yet.

AVGO, CLVS, and RCL all hit our stop losses today.


Current Portfolio:


CALL Play Updates

Harris Corp. - HRS - close: 88.17 change: +0.52

Stop Loss: 84.90
Target(s): To Be Determined
Current Option Gain/Loss: -15.1%
Average Daily Volume = 927 thousand
Entry on January 05 at $88.15
Listed on January 04, 2016
Time Frame: Exit PRIOR to earnings in early February
New Positions: see below

Comments:
01/05/16: Our new bullish play on HRS is off to a pretty good start. Shares displayed relative strength today with a +0.59% gain versus the S&P 500's +0.2% advance. HRS hit our suggested entry point at $88.15. I would consider new positions at current levels although more conservative investors might want to wait for a new rise above $88.40 or $88.50 as an alternative entry point.

Trade Description: January 4, 2016:
Out of the thousands of publically traded companies out there only a few have been around for over 100 years. A couple of weeks ago HRS celebrated its 120th anniversary.

HRS issued a press release to mark the achievement. Here's an excerpt: "Founded in the back room of an Ohio jewelry store in December 1895, Harris grew from a tiny printing press company into a top 10 defense contractor with $8 billion in annualized sales, 22,000 employees, customers in 125 countries, and a diverse portfolio of technologies that connect, inform and protect the world. Harris is the longest-thriving major defense contractor and one of 398 publicly held companies still in existence for 120 years or longer - including GE, CVS, Coca-Cola, Pfizer, P&G, and J.P. Morgan."

Today HRS is in the technology sector. They are considered part of the communication equipment industry. According to the company, "Harris Corporation is a leading technology innovator, solving our customers' toughest mission-critical challenges by providing solutions that connect, inform and protect. Harris supports customers in more than 125 countries, has approximately $8 billion in annual revenue and 22,000 employees worldwide. The company is organized into four business segments: Communication Systems, Space and Intelligence Systems, Electronic Systems, and Critical Networks."

Last year HRS ended 2015 on a strong note. The month of December saw HRS win several government contracts worth more than $1 billion. Meanwhile analysts are bullish on the stock. Goldman Sachs has a buy rating on HRS. Cowen recently upped their price target to $102 and said it was one of their best trading ideas for 2016.

Technically the stock has been showing relative strength. Last year HRS outperformed the broader market with a +20% gain. The positive news about the company's new contract wins produced a bullish breakout past major resistance at $85.00 in mid December. Today investors bought the dip near short-term support at its 10-dma. HRS displayed relative strength today too with a +0.8% gain. If this bounce continues we want to hop on board. Tonight we are suggesting a trigger to buy calls at $88.15.

- Suggested Positions -

Long FEB $90 CALL (HRS160219C90) entry $2.65

01/05/16 triggered @ $88.15
Option Format: symbol-year-month-day-call-strike


Ionis Pharmaceuticals - IONS - close: 60.94 change: -0.74

Stop Loss: 59.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.6 million
Entry on January -- at $---.--
Listed on January 02, 2016
Time Frame: Exit PRIOR to February option expiration
New Positions: Yes, see below

Comments:
01/05/16: IONS found support near $60.00 again for the second day in a row. Shares initially rallied to new three-week highs before reversing lower. There is no change from my recent comments.

Our suggested entry point remains $63.20.

Trade Description: January 2, 2016:
Biotech stocks had a volatile year, especially after the group peaked in July 2015. The IBB managed to deliver a +11% gain for the year thanks to strength among some of its bigger cap names. IONS closed virtually flat for the year (down -19 cents for all of 2015). The stock has been showing relative strength recently and looks poised to sprint past its peers.

IONS is in the healthcare sector. They are part of the drug and biotech industry. The company was previously known as ISIS pharmaceuticals. Unfortunately the rise of the radical Islamic terrorist group known as ISIS has tarnished the name. A couple of weeks ago ISIS changed its name to Ionis. Here's a bit from the company press release:

"Isis Pharmaceuticals, Inc. today (December 18th) announced that the company has changed its name to Ionis Pharmaceuticals, Inc. Ionis (pronounced "eye-OH-nis") Pharmaceuticals is an original name that the Company has chosen to represent its innovative culture and heritage as both the pioneer and leader in the RNA-targeted therapeutic space for the past 26 years."

Now here is the company's description: "Ionis is the leading company in RNA-targeted drug discovery and development focused on developing drugs for patients who have the highest unmet medical needs, such as those patients with severe and rare diseases. Using its proprietary antisense technology, Ionis has created a large pipeline of first-in-class or best-in-class drugs, with over a dozen drugs in mid- to late-stage development. Drugs currently in Phase 3 development include volanesorsen, a drug Ionis is developing and plans to commercialize through its wholly owned subsidiary, Akcea Therapeutics, to treat patients with familial chylomicronemia syndrome and familial partial lipodystrophy; IONIS-TTRRx, a drug Ionis is developing with GSK to treat patients with all forms of TTR amyloidosis; and nusinersen, a drug Ionis is developing with Biogen to treat infants and children with spinal muscular atrophy. Ionis' patents provide strong and extensive protection for its drugs and technology."

Regular readers know that we feel biotech stocks are aggressive, higher-risk trades. A lot of biotech companies are relatively small and only have one or two treatments in development, which make them binary trades. You can win big or lose big depending on the approval process of their treatment. There is a lot of headline risk. There is still headline risk with IONS but the company's relatively deep pipeline of drugs makes IONS a stronger play. You can view IONS' pipeline here.

Shares of IONS surged through several layers of resistance in early November on a better than expected Q3 earnings report. Since that big rally the stock has been consolidating lower. That changed in mid December when traders bought the dip near its 100-dma. Investors have been buying the dips every since. IONS displayed relative strength on Thursday with a +0.99% gain. The point & figure chart is bullish and forecasting at $74.00 target.

We would like to see some follow through higher. Tonight we are suggesting a trigger to buy calls at $63.20. Plan on exiting prior to February option expiration.

Trigger @ 63.20

- Suggested Positions -

Buy the FEB $65 CALL (IONS160219C65)

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




PUT Play Updates

Currently we do not have any active put trades.




CLOSED BULLISH PLAYS

Avago Technologies - AVGO - close: 137.52 change: -4.76

Stop Loss: 139.75
Target(s): To Be Determined
Current Option Gain/Loss: -36.7%
Average Daily Volume = 3.6 million
Entry on January 05 at $143.14
Listed on December 29, 2015
Time Frame: Exit PRIOR to February option expiration
New Positions: see below

Comments:
01/05/16: It was a frustrating day if you were bullish on AVGO. The stock started Tuesday with strength. Shares gapped higher at $143.14. Our suggested trigger to buy calls was $142.65 so the gap open immediately triggered our play. Unfortunately AVGO quickly reversed lower. One story suggested that new concerns about falling iPhone sales for Apple may have pressure Apple part suppliers. The funny thing is slower iPhone sales have been a worry for months and hasn't really impacted AVGO before.

Whatever drove AVGO lower the stock broke down below support at $140.00 and its 30-dma. Shares underperformed the market with a -3.3% drop and hit our stop loss at $139.75.

- Suggested Positions -

FEB $150 CALL (AVGO160219C150) entry $4.90 exit $3.10 (-36.7%)

01/05/16 stopped out at $139.75
01/05/16 triggered on gap higher at $143.14, suggested entry was $142.65
01/04/16 Entry Point Update - Move the entry trigger from $150.25 down to $142.65. Adjust the stop loss down to $139.75. Adjust the suggested option from February $155 call to the $150 call.
Option Format: symbol-year-month-day-call-strike

chart:


Clovis Oncology - CLVS - close: 31.70 change: -1.67

Stop Loss: 32.45
Target(s): To Be Determined
Current Option Gain/Loss: -63.8%
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:
01/05/16: CLVS displayed relative weakness for the second day in a row. Yesterday CLVS was hammered with a -4.6% drop. Today it lost another -5% and hit our stop loss at $32.45 along the way.

- Suggested Positions -

JAN $35 CALL (CLVS160115C35) entry $2.90 exit $1.05 (-63.8%)

01/05/16 stopped out
12/29/15 new stop @ 32.45
12/26/15 new stop @ 31.95
12/14/15 new stop @ 30.75
12/05/15 new stop @ 29.65
12/01/15 triggered @ $32.55
Option Format: symbol-year-month-day-call-strike

chart:


Royal Caribbean Cruises - RCL - close: 96.54 change: -1.60

Stop Loss: 96.45
Target(s): To Be Determined
Current Option Gain/Loss: -39.8%
Average Daily Volume = 2.0 million
Entry on December 29 at $100.85
Listed on December 26, 2015
Time Frame: Exit PRIOR to earnings in late January
New Positions: see below

Comments:
01/05/16: The selling pressure in RCL continued on Tuesday. Bears got some help after Morgan Stanley downgraded RCL this morning. The stock gapped down to $96.39 on this downgrade, which immediately stopped us out.

- Suggested Positions -

MAR $105 CALL (RCL160318C105) entry $4.10 exit $2.47 (-39.8%)

01/05/16 stopped out on gap down at $96.39
01/04/16 new stop @ 96.45
12/29/15 triggered @ $100.85
Option Format: symbol-year-month-day-call-strike

chart: