Option Investor
Newsletter

Daily Newsletter, Sunday, 9/14/2014

Table of Contents

  1. Leaps Trader Commentary
  2. Portfolio
  3. New Plays
  4. Play Updates
  5. Watch

Leaps Trader Commentary

Stocks Quietly Drift Lower

by James Brown

Click here to email James Brown

Thus far September has been a quiet month. Stocks slowly drifted lower last week. The S&P 500 and the Dow Jones Industrial Average both snapped a five-week winning streak with minor declines. Early last week the focus was on Apple (AAPL) and its iPhone 6 launch on Tuesday. On Wednesday President Obama announced a new strategy to target ISIS in Syria and Iraq. The last couple of days the market's interest has focused on this week's FOMC meeting and if the Fed will change their statement and remove the "consider period" language.

It seemed the only thing really moving last week was currencies and commodities. The British pound fell to new relative lows losing ground nine out of the last ten weeks as markets worry over Scottish independence. The euro dropped to new 2014 lows. The Japanese yen plunged to new multi-year lows. Meanwhile all this currency weakness helped prop up the dollar to new one-year highs. Strength in the dollar is bearish for commodities. Copper dropped -2.2%. Silver fell -2.9%. Gold declined -3.0% for the week. Oil lost another -1.3% and this is weighing on the energy stocks. New sanctions by the U.S. and Europe against Russia's major oil companies are also pressing oil stocks lower since a lot of U.S. and European energy companies have deals with their Russian peers. These deals are now in jeopardy.

Economic Data

We did see improvement in consumer sentiment. Economists were expecting the latest University of Michigan consumer sentiment survey to rise from 82.5 to 83.3. The report came in at 84.6, the highest reading since July 2013. Most of the gain came from an improving expectations component.

Normally analysts like to equate stronger consumer sentiment with stronger consumer spending. It doesn't always pan out that way but the latest retail sales report did show improvement. The month of August saw retail sales rise +0.6%. That's a full +5% from a year ago levels. Motor vehicles were a big reason for the gains. Excluding vehicle sales we were still up +0.3%.

Another bonus for the consumer is falling gasoline prices. The average price of gasoline in the U.S. has fallen to $3.42 a gallon. That is a seven-month low and a significant drop from the $3.70 average we saw in June. Years ago Deutsche Bank estimated that every one cent rise in gasoline consumes about $1 billion worth of consumer spending in the U.S. Thus a 28-cent drop in gas is gives the average consumer a bit more breathing room and some extra spending money in their pocket they will hopefully spend somewhere else. Some are speculating that we could see gas fall to $3.15 a gallon by Halloween and potentially $3.00.

Overseas Economic Data

Economic data overseas was generally positive. The Eurozone said their industrial production rose +1.0% for the month, up from -0.3% the prior month. Spain reported a +0.8% gain in their industrial production. This was worse than expected but better than the prior month. Meanwhile Italy said their industrial production dropped -1.0%, significantly worse than expected and down from +0.8% the prior month. Germany's trade surplus surged from 16.4 billion euros to 22.2 billion, which was way above expectations. Germany's imports dropped -1.8% but their exports rose +4.7% versus estimates for a gain of +0.6%.

Looking toward Asia we see Japan revising their latest GDP estimate to -1.8%. Japan also reported their industrial production rose +0.4% for the month, beating expectations. China saw its trade surplus grow from $47.3 billion to $49.83 billion. This was significantly above expectations. Analysts were expecting Chinese exports to rise +9% but they came in at +9.4%. They were also expecting a +3% gain in imports but imports actually fell -2.4%.

In more disturbing news a recent poll shows that 53% of Chinese expect their country to be at war with Japan by 2020. That's less than six years from now! Almost a third of Japanese (about 29%) expect to go to war with China. The relationship between both countries has been steadily deteriorating over the last few years. Some have pointed out the parallels between Europe prior to World War I and the Asia region today.





Major Indices:

The S&P 500 posted its first weekly loss in six weeks with a -1.1% decline. The index has spent the last few days beneath its simple 10-dma and many of the short-term momentum oscillators have turned bearish. If this pullback continues I would look for support near 1950, which is close to the bottom of its bullish channel on the weekly chart. Year to date the S&P 500 is up +7.4%.

chart of the S&P 500 index:

Weekly chart of the S&P 500 index

The NASDAQ composite lost -0.3% for the week. This index has been consolidating sideways for about three weeks in a row. The range seems to be 4,545-4,610. If the NASDAQ sees a deeper pullback I would expect some support in the 4,485-4,500 area. Year to date the NASDAQ is up +9.4%.

chart of the NASDAQ Composite index:

The small cap Russell 2000 index slipped -0.8%. This index is currently in no-man's land between significant support near 1,080 and significant resistance near 1,210. Many of the technical indicators are mixed but short-term oscillators have turned bearish. Year to date the $RUT is down -0.1%.

chart of the Russell 2000 index



Economic Data & Event Calendar

It's a relatively quiet week for economic data if you're looking at the number of reports. The next three days will be entirely focused on the Federal Reserve's two-day meeting and its conclusion on Wednesday. No one expects the Fed to adjust rates. The focus will be on their policy statement and if they change their economic forecasts.

Economic and Event Calendar

- Monday, September 15 -
New York Empire State manufacturing survey
U.S. Industrial Production

- Tuesday, September 16 -
Producer Price Index (PPI)
Germany's ZEW index

- Wednesday, September 17 -
Consumer Price Index (CPI)
FOMC meeting and updated economic forecast
Fed Chairman Yellen press conference
NAHB housing market index

- Thursday, September 18 -
Weekly Initial Jobless Claims
U.S. housing starts and building permits
Philadelphia Fed survey

- Friday, September 19 -
(nothing significant)

Additional Events to be aware of:

Looking Ahead:

It has been relatively quiet on the geopolitical front. Last week President Obama announced a new offensive against ISIS and the U.S. and Europe launch yet another round of sanctions against Russia. This new attack against ISIS will not include "boots on the ground" but will mainly be airstrikes and a supporting role for countries that border Syria and Iraq. At least that's the official statement. I mentioned a week or two ago of eyewitness accounts of U.S. special forces operating in Iraq with their insignia removed so they can't be identified. Meanwhile Russia is preparing their own economic riposte to the new sanctions. As long as Ukraine and ISIS just simmer in the background the U.S. markets will ignore them. We only have to worry if another flare up occurs.

As I mentioned earlier the real focus will be on the FOMC meeting. Will Fed Chairman Janet Yellen remove the "considerable period" language from the Fed statement or not? If they do remove it then it could be interpreted as bearish for stocks since that might suggest the Fed will raise rates sooner than expected.

A Merrill Lynch analyst commented on the Fed meeting next week saying, "While we anticipate Yellen will continue to support a patient and gradual normalization process, the risk is that the markets may sell off on the perception of a less dovish Fed. We also expect the statement to note that these changes do not reflect a shift in policy preferences, and for Yellen to reiterate that point at the press conference. Still, the risk is that markets see these revisions as a hawkish move in the timing of liftoff. While we expect Yellen's overall tone to remain dovish, market perception will be key. The combination of changes to the forward guidance language and any comments seen as potentially hawkish, could lead to a selloff, particularly at the short end of the yield curve." (emphasis mine).

Another wildcard this week could be the Scottish vote for independence on Thursday. This event has been building up for years and it's finally come down to a vote. The "no" crowd has been avoiding the issue assuming it would never pass. Everyone has been shocked that the "yes" crowd has gained so much strength. Currently polls put the vote at 50/50. Scotland has been part of the U.K. for more than 300 years. If they do vote for independence it is going to cause serious upheaval in Europe. If successful it will raise a quagmire of questions for the United Kingdom. It will also strengthen the growing secessionists movements spreading through parts of Europe. Of course all of this uncertainly in Europe probably means more money finds its way to American markets.

Speaking of money in American markets, a lot of money managers are having a rough time this year. More than 80% of fund managers are below their benchmarks in 2014. Many of last year's high-profile winners are not performing well this year. That is going to put a lot of pressure on them to catch up. A lot of funds use October 31st as their yearend. The next six weeks will be critical for them.

Stocks could use a pullback to help set up for a strong fourth quarter rally. Investors should practice patience. The next couple of weeks could provide a great entry point for new positions.

James







Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The LeapsTrader newsletter had another successful week for its watch list. GD graduated to our active trade list. VFC met our entry requirement on Friday and has been moved to the new plays section.

There are new stop losses on DECK

Disclaimer: At any given time the author may have positions in any or all of any companies mentioned in the Leaps Newsletter.

--Position Summary Table--
Table lists Directional CALL or PUT/LEAPS only.
Insurance puts, if applicable, are not shown.

Red symbol/name represents a play or option position exited or closed this week.





New Plays

A Fashionable Trade

by James Brown

Click here to email James Brown


- New Trades -


V.F. Corp. - VFC - close: 65.86

Comments:
09/14/14: VFC is a watch list candidate that met our entry point requirements with Friday's rally. The stock outperformed the broader market with a surge of +1.85% and a close at $65.86. Our plan was to wait for VFC to close above $65.75 and then buy calls the next morning. Our entry point is Monday morning.

Earlier Comments: September 7, 2014:
Wall Street remains concerned about the consumer, especially on apparel spending. Yet shares of VFC have managed to weather these concerns pretty well. The company offers a broad range of apparel, footwear, accessories, and more.

According to a company press release VFC describes itself as, "a global leader in the design, manufacture, marketing and distribution of branded lifestyle apparel, footwear and accessories. The company's highly diversified portfolio of 30 powerful brands spans numerous geographies, product categories, consumer demographics and sales channels, giving VF a unique industry position and the ability to create sustainable, long-term growth for customers and shareholders. The company's largest brands are The North Face, Vans, Timberland, Wrangler, Lee and Nautica." Sales are nearing $11.8 billion a year.

Management decided to split its stock 4-for-1 back in December 2013. Stocks splits are normally seen as a sign of confidence by the management. VFC missed earnings estimates and guided lower back in February 2014. Since then the earnings picture has improved. Investors have been buying the dips and the point & figure chart is bullish with a $77 target.

Technically the stock looks like a buy right now with Friday's bounce from its 10-dma and the close near all-time highs. I'd like to see a little bit more confirmation. Wait for a close above $65.75 and then by calls. We'll start with a stop at $60.75, just under the simple 200-dma.

- Suggested Positions -
SEP 15, 2014 - entry price on VFC @ ??.??, option @ -.--
symbol: VFC160115C70 2016 JAN $70 call - current bid/ask $4.20/4.50

09/12/14 VFC met our entry requirement with a close above $65.75
Option Format: symbol-year-month-day-call-strike

Chart of VFC:

Current Target: VFC 85-90.00 zone
Current Stop loss: 60.75
Play Entered on: 09/15/14
Originally listed on the Watch List: 09/07/14



Play Updates

Starting To See Some Profit Taking

by James Brown

Click here to email James Brown

Editor's Note:

GD has graduated from our watch list to our active play list below.


Closed Plays



None. No closed plays this week.




Play Updates


American Intl. Group - AIG - close: 55.19

Comments:
09/14/14: AIG eked out a small gain for the week. Shares are being squeezed between very short-term support at $55.00 and resistance at its simple 10-dma.

If the market continues to sink look for stronger support at AIG's 200-dma.

I am not suggesting new positions at this time.

- Suggested Positions -
May 14, 2014 - entry price on AIG @ 53.94, option @ 1.50*
symbol: AIG150117C60 2015 JAN $60 call - current bid/ask $0.68/0.75

- or -

May 14, 2014 - entry price on AIG @ 53.94, option @ 4.35*
symbol: AIG160115C60 2016 JAN $60 call - current bid/ask $3.45/3.65

08/24/14 new stop @ 51.25
08/04/14 AIG beats earnings estimates, announces $2 billion stock buyback
05/14/14 trade opens. AIG opens at $53.94
*option entry price is an estimate since the option did not trade at the time our play was opened.
05/13/14 AIG closed at $53.96, above our suggested trigger above $53.75
Please note I'm listing the standardized option symbol:
symbol-year-month-day-call-strike

Current Target: AIG 65.00
Current Stop loss: 51.25
Play Entered on: 05/14/14
Originally listed on the Watch List: 05/11/14


Activision Blizzard, Inc. - ATVI - close: 23.39

Comments:
09/14/14: It was a big week for ATVI with the company launching its Destiny game. The company said first day sales hit $500 million. The bad news is that Destiny is not getting very good reviews. I should reword that. Most of the negative reviews suggest the game does not live up to the hype not necessarily it's a bad game. The stock did see some choppy action last week but overall the trend is still higher. Watch for support at its rising 50-dma.

Earlier Comments: August 31, 2014:
Under promise and over deliver. That appears to be ATVI's model. They consistently offer cautious or lowered guidance and yet continue to beat Wall Street's profit and revenue estimates. ATVI has bested analysts' estimates for at least the last four quarters in a row. Their latest report was August 5th. Management offered EPS guidance below Wall Street's estimates but ATVI raised their revenue guidance significantly above estimates.

If you didn't know ATVI is a giant in the video game industry. They make games like "Call of Duty" and "World of Warcraft". They're about to launch a brand new game called "Destiny" in September this year. Plus, they'll release a new update to Call of Duty in November.

Analysts have been raising their price targets and investors have been buying the dips. This stock ended the week at all-time highs. I am suggesting we wait for the stock to close above $23.80 and buy calls the next morning with a stop loss at $21.95. I prefer the 2016 calls but we'll list the 2015s as well.

- Suggested Positions -
SEP 04, 2014 - entry price on ATVI @ 23.90, option @ 1.05*
symbol: ATVI150117c25 2015 JAN $25 call - current bid/ask $0.77/0.80

- or -

SEP 04, 2014 - entry price on ATVI @ 23.90, option @ 2.79*
symbol: ATVI160115c25 2016 JAN $25 call - current bid/ask $2.43/2.51

09/04/14 trade begins. ATVI opens at $23.90
*option entry price is an estimate since the option did not trade at the time our play was opened.
09/03/14 ATVI closes @ $23.95 above trigger of $23.90
Option Format: symbol-year-month-day-call-strike

Current Target: ATVI @ Yet to be determined
Current Stop loss: 21.95
Play Entered on: 09/04/14
Originally listed on the Watch List: 08/31/14


Celgene Corp. - CELG - close: 91.52

Comments:
09/14/14: Profit taking in CELG continued last week. I would not panic. The stock is nearing what should be support near $90.00 and its simple 50-dma. Investors can use this dip as a new entry point to launch bullish positions.

Earlier Comments: August 17, 2014:
If you're looking for opportunity it's hard to beat some of the biotech names. CELG is one of the strongest. According to their press release, "Celgene Corporation, headquartered in Summit, New Jersey, is an integrated global biopharmaceutical company engaged primarily in the discovery, development and commercialization of novel therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation."

What makes CELG so attractive is the company's pipeline. Developing drugs is an expensive business. A lot of older firms are buying other companies for their pipeline. Meanwhile CELG is developing a very strong pipeline. You can view the company's current progress on this webpage.

CELG is also growing earnings. Their most recent earnings report was July 24th. Wall Street was looking for a profit of 89 cents a share on revenues of $1.84 billion. CELG beat estimates with a profit of 90 cents and revenues rising +17.1% to $1.87 billion. Earnings per share are up +18% from a year ago. Management raised their guidance for 2014. Wall Street was a little disappointed with the guidance because analysts are more optimistic.

Big picture, CELG is a strong company and the stock looks poised to breakout. Shares have been consolidating sideways under resistance at $90.00 for the last six weeks. Now it's poised to breakout. The stock is only up +6.0% year to date versus a +16% gain for the IBB biotech ETF and a +19% gain in the XBI biotech ETF. CELG could be poised to catch up with its peers.

Technically the point & figure chart is also bullish with a quadruple top breakout buy signal.

The 2014 high is $90.50. I am suggesting an intraday trigger to buy calls at $91.00. More conservative traders could instead choose to wait for a close above $90.50 as an alternative entry point. If triggered we'll start with a stop loss at $85.75, under the 50-dma. I do expect the $100 level to offer some resistance but our long-term target is the $110-120 zone.

- Suggested Positions -
Aug 18, 2014 - entry price on CELG @ 91.00, option @ 3.45*
symbol: CELG150117c100 2015 JAN $100 call - current bid/ask $3.15/3.25

- or -

Aug 18, 2014 - entry price on CELG @ 91.00, option @ 10.00*
symbol: CELG160115c100 2016 JAN $100 call - current bid/ask $10.25/10.45

08/31/14 new stop @ 88.00
08/18/14 CELG hit our trigger at $91.00 (intraday)
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Current Target: CELG 110-120 zone
Current Stop loss: 88.00
Play Entered on: 08/18/14
Originally listed on the Watch List: 08/17/14


Cummins Inc. - CMI - close: 138.57

Comments:
09/14/14: Our CMI trade is in trouble. The stock is not performing well. The stock has essentially fallen every day in September. Now its testing potential support near $138 and its 300-dma. The low on Friday was $138.06. Our stop loss is at $137.90. If there is any follow through on Monday we'll probably be stopped out.

I am not suggesting new positions at this time.

Earlier Comments: August 10, 2014:
Cummins Inc. was founded back in 1919 by its namesake Clessie Lyle Cummins. The company has four businesses: engines, power generation, components, and distribution. They're headquartered in the state of Indiana with about 48,000 employees worldwide. They do business in 190 countries.

According to the company website CMI describes themselves as "a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems."

CMI reported Q1 earnings on April 29th. They crushed the earnings number and beat the revenue estimates with revenues up +12.3% for the quarter. CMI management raised their 2014 guidance by +6% to +10% (about $18.3-19.0 billion).

When CMI reported Q2 earnings on July 28th Wall Street was expecting a profit of $2.39 a share on revenues of $4.82 billion. CMI beat those numbers with a profit of $2.43 on revenues of $4.84 billion. Profits were up +10.5% from a year ago. Management raised their 2014 guidance again. This time they see revenues up +8% to +11% in 2014. That's about $18.7-19.2 billion.

CMI's Chairman and CEO Tom Linebarger said, "Demand is growing in on-highway markets in North America this year as the economy improves and we have gained market share in medium duty truck and bus markets." Their North American sales surged +14% last quarter versus a -1% pullback in international sales.

That's two quarters in a row that CMI has beat Wall Street's top and bottom line estimates and raised guidance. Yet the stock was crushed following the July earnings number. It appears the upgraded revenue guidance wasn't good enough and analysts were expecting more.

CMI reported sales of $17.3 billion in 2013. Now they're approaching $19 billion. They've already approved a $1 billion stock buyback program to replace their current $1 billion buyback program once it's complete. They have also raised their dividend this year.

The company has rising sales, rising market share, rising profits, and rising dividends. It has a trailing P/E of 17 and a forward P/E of 12.8. That sounds like a pretty good combination.

Technically the stock has fallen to its long-term trend line of support (see the weekly chart below). Last week shares have started to rebound from this trend. However, on a short-term basis the breakdown under its 200-dma looks pretty ugly. The bounce last week failed near $144.00 and its 10-dma. Therefore tonight we are suggesting investors wait for CMI to close above $144.00 and then buy calls the next morning with a stop at $137.90.

- Suggested Positions -
Aug 20, 2014 - entry price on CMI @ 144.19, option @ 4.75*
symbol: CMI150117c150 2015 JAN $150 call - current bid/ask $2.20/2.35

- or -

Aug 20, 2014 - entry price on CMI @ 144.19, option @ 9.50*
symbol: CMI160115c160 2016 JAN $160 call - current bid/ask $6.60/6.90

08/20/14 trade begins. CMI opens at $144.19
*option entry price is an estimate since the option did not trade at the time our play was opened.
08/19/14 CMI closed at $144.40 above our trigger at $144.00
Option Format: symbol-year-month-day-call-strike

Current Target: CMI 160-200 zone
Current Stop loss: 137.90
Play Entered on: 08/20/14
Originally listed on the Watch List: 08/10/14


CSX Corp. - CSX - close: 31.29

Comments:
09/14/14: CSX raised its Q3 guidance on Thursday and shares bounced but the stock still ended up losing 20 cents for the week. CSX appears to be churning sideways inside the $31.00-31.50 zone. Investors may want to wait for a close above $31.50 before initiating new positions.

Earlier Comments: August 10, 2014:
The transportation group has been leading the stock market higher until about two weeks ago. That's then the group peaked. Since then the Dow Jones Transportation Average has seen a -6% pullback. It looks like the profit taking might be over as the group helped lead the bounce on Friday.

The railroads have delivered a similar performance. We want to take advantage of the pullback with CSX. According to the company's website, " CSX Corporation, together with its subsidiaries based in Jacksonville, Fla., is one of the nation's leading transportation suppliers. The company’s rail and intermodal businesses provide rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers. CSX Transportation network encompasses about 21,000 route miles of track in 23 states, the District of Columbia and the Canadian provinces of Ontario and Quebec. Our transportation network serves some of the largest population centers in the nation. Nearly two-thirds of Americans live within CSX's service territory."

The rebound in the U.S. economy should be great news for the railroads. Rising consumer demand would mean more shipments. A healthy automobile market means more auto shipments. The oil and gas shale boom means more energy shipped by rail. Record harvests mean more grain shipments. A stabilizing coal industry will also help put a floor under the railroads.

Altogether the future looks bullish for the railroad companies. That's why we want to take advantage of this post-earnings profit taking in CSX. The stock has retreated to its long-term trend line of support and started to bounce. More aggressive investors may want to buy calls now. I am suggesting we wait for CSX to close above $30.00 and then buy calls the next morning with a stop loss at $28.40.

Our long-term target for the 2016 calls is CSX in the $37-40 zone. Currently the Point & Figure chart is $38.50. If you buy the 2015 calls plan on exiting sooner.

- Suggested Positions -
Aug 15, 2014 - entry price on CSX @ 30.29, option @ 1.48
symbol: CSX150117C30 2015 JAN $30 call - current bid/ask $2.02/2.06

- or -

Aug 15, 2014 - entry price on CSX @ 30.29, option @ 1.14*
symbol: CSX160115C35 2016 JAN $35 call - current bid/ask $1.33/1.41

09/07/14 new stop @ 28.95
08/15/14 trade begins. CSX opens at $30.29
*option entry price is an estimate since the option did not trade at the time our play was opened.
08/14/14 CSX meets our entry point requirement with a close above $30.00 (closed at $30.16)
Option Format: symbol-year-month-day-call-strike

Current Target: CSX in the $37-40 zone
Current Stop loss: 28.95
Play Entered on: 08/15/14
Originally listed on the Watch List: 08/10/14


Deckers Outdoor Corp. - DECK - close: 98.82

Comments:
09/14/14: It was a good week for shares of DECK. Traders bought the dip on Wednesday morning and DECK surged to new highs. The stock is nearing what could be round-number, psychological resistance at the $100.00 mark.

We are raising the stop loss up to $89.75.

Earlier Comments: August 3, 2014:
The 40-year old Deckers Corp. is headquartered in California. The company considers itself "a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The Company's portfolio of brands includes UGG®, Teva®, Sanuk®, TSUBO®, Ahnu®, MOZO®, and HOKA ONE ONE®. Deckers Outdoor products are sold in more than 50 countries and territories through select department and specialty stores, 126 Company-owned and operated retail stores, and select online stores, including Company-owned websites."

DECK might also be an exception to the struggling retail space this year. The company just reported its 2015 fiscal year first quarter on July 24th. Spring happens to be the worst season for DECK's sales but they still turned in a strong report. Wall Street was expecting a loss of $1.29 a share. DECK reported a loss of $1.07. Revenues soared +24.3% from a year ago to $2.11.5 million, significantly above expectations. Their Q1 gross margins were 41.% Management raised their 2015 guidance and expect gross margins to rise to 49%. DECK is still planning on adding 30 to 35 new stores this year. Management is also forecasting +18% sales growth for the year. Altogether it was a bullish report and shares soared to new multi-year highs and almost tagged $95 a share.

The post-earnings profit taking is normal. Prior resistance in the $87.50-90.00 zone should be support. Seeing DECK rebound from its 10-dma on Friday is encouraging if you're bullish. If you're bearish, well, it could be a painful year. The long-term trend is bullish with a strong pattern of higher lows. The most recent data listed short interest at 19% of the small 33.4 million share float. If the up trend continues it could pressure more shorts to cover.

I am cautious on the broader market so we want to be patient with our entry point on DECK. I am suggesting we wait for DECK to close above $91.25 and then buy calls the next morning with a stop loss at $86.90. I'm suggesting a target in the $110-115 zone.

- Suggested Positions -
AUG 06, 2014 - entry price on DECK @ 91.54, option @ 5.05*
symbol: DECK150117c100 2015 JAN $100 call - current bid/ask $6.40/7.30

- or -

AUG 06, 2014 - entry price on DECK @ 91.54, option @ 13.30*
symbol: DECK160115c100 2016 JAN $100 call - current bid/ask $13.10/17.20

09/14/14 new stop @ 89.75
08/06/14 trade begins @ 91.54
*option entry price is an estimate since the option did not trade at the time our play was opened.
08/05/14 triggered with a close at $91.71 (above trigger $91.25)
Option Format: symbol-year-month-day-call-strike

Current Target: DECK @ 110-115
Current Stop loss: 89.75
Play Entered on: 08/06/14
Originally listed on the Watch List: 08/03/14


The Walt Disney Co. - DIS - close: 89.67

Comments:
09/14/14: DIS saw a little bit of profit taking last week. After consolidating sideways the prior two weeks the pullback has generated some bearish signals on short-term momentum oscillators. DIS should see support near $88.00.

I am not suggesting new positions at this time.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $14.65/15.60

09/07/14 new stop @ 86.40
08/24/14 new stop @ 83.75
08/17/14 new stop @ 82.95, adjust exit target to $98.50
08/05/14 DIS delivers better than expected earnings and revenues
08/03/14 Investors will want to consider taking profits now before DIS reports earnings.
07/06/14 DIS is testing a trend line of higher highs
06/15/14 new stop @ 79.00
05/26/14 new stop @ 77.75
05/11/14 new stop @ 75.75, adjust exit target from $89 to $97.50
...please see older updates for earlier adjustments...

Current Target: DIS @ 98.50
Current Stop loss: 86.40
Play Entered on: 10/23/13
Originally listed on the Watch List: 10/13/13


The Dow Chemical Co. - DOW - close: $52.67

Comments:
09/14/14: Ouch! It was not a good week for DOW with shares falling every day last week. The stock is testing technical support near its 50-dma. More conservative investors may want to raise their stop loss after last week's display of relative weakness.

I am not suggesting new positions at this time.

Earlier Comments:
DOW is in the basic materials sector. The company supplies chemical products as raw materials. The stock is currently in a long-term bullish channel. Investors have lifted shares to multi-year highs as market participants search for yield. DOW currently offers a 3.0% annual yield. Plus, they have an aggressive stock buyback program and plan to buy back $4.5 billion in stock this year.

DOW's business is doing well too. They have faced some rising prices for feedstock and energy costs. Yet they have managed to grow margins in the rest of their business. Management believes this margin growth will continue in 2014. Their Q1 2014 earnings were up +75% from a year ago and marked their sixth quarter in a row of year-over-year earnings growth.

- Suggested Positions -
MAY 29, 2014 - entry price on DOW @ 51.78, option @ 1.95
symbol: DOW150117C55 2015 JAN $55 call - current bid/ask $1.40/1.42

- or -

MAY 29, 2014 - entry price on DOW @ 51.78, option @ 3.90*
symbol: DOW160115C55 2016 JAN $55 call - current bid/ask $3.90/4.05

08/17/14 new stop @ 49.75
07/20/14 new stop @ 49.00
06/27/14 DOW declines after DuPont issues an earnings warning
05/29/14 trade begins. DOW opens at $51.78
*option entry price is an estimate since the option did not trade at the time our play was opened.
05/28/14 DOW closed at $51.77, above our trigger of $51.25
Option Format: symbol-year-month-day-call-strike

Current Target: DOW @ 60.00
Current Stop loss: 49.75
Play Entered on: 05/29/14
Originally listed on the Watch List: 05/26/14


DaVita Healthcare Partners - DVA - close: 74.07

Comments:
09/14/14: DVA quietly consolidating sideways near $74.00 all week. If the market pullback continues we can look for potential support near $72.00 .

I am not suggesting new positions at this time.

Earlier Comments: June 1, 2014:
DVA is in the healthcare sector. The company provides kidney dialysis services and related lab services. The most recent earnings report was lackluster but DVA did report revenue growth above Wall Street estimates. Management has been buying up smaller domestic rivals and expanding overseas into countries like China, Columbia, Germany, India, Malaysia, Portugal, Saudi Arabia, and Taiwan. In the U.S. DVA has about 35% of the outpatient dialysis market.

Bears on this stock would argue the company is at risk for pricing pressures from Medicare. About 90% of its total U.S. dialysis patients are on some form of government-assisted program. Nearly 80% of are part of Medicare. The latest rules from Medicare said there would be no price changes in 2014 and 2015 but there could be reimbursement reductions in 2016 and 2017.

This pressure from Medicare has not stopped Warren Buffet's Berkshire Hathaway from raising its stake in DVA. Berkshire started investing in DVA back in Q4 2011. They have been slowly building a position and this past quarter (Q1 2014) Berkshire added another 1.1 million shares. Their total position is now 37.6 million shares worth about $2.6 billion. Berkshire tends to be a long-term investors, longer than our timeframe but it is still a vote of confidence for DVA.

- Suggested Positions -
JUN 04, 2014 - entry price on DVA @ 71.44, option @ 2.65*
symbol: DVA150117C75 2015 JAN $75 call - current bid/ask $2.40/2.70

- or -

JUN 04, 2014 - entry price on DVA @ 71.44, option @ 4.70*
symbol: DVA160115C80 2016 JAN $80 call - current bid/ask $4.30/7.40

08/24/14 new stop at $69.85
07/31/14 DVA reports better than expected bottom and top line results
07/20/14 new stop @ 69.00
06/04/14 trade begins. DVA opens at $71.44
*option entry price is an estimate since the option did not trade at the time our play was opened.
06/03/14 DVA closed at $71.47, above our trigger of $71.25
Option Format: symbol-year-month-day-call-strike

Current Target: DVA @ 85.00
Current Stop loss: 69.85
Play Entered on: 06/04/14
Originally listed on the Watch List: 06/01/14


Expedia Inc. - EXPE - close: 86.55

Comments:
09/14/14: EXPE saw a sharp drop on Tuesday but traders bought the dip. I am not convinced the pullback is over. If EXPE breaks down under support in the $85.00-85.50 zone it could signal a drop close to $80-82.

I am not suggesting new positions at this time.

Earlier Comments: June 1, 2014:
EXPE is in the services sector. The company is in the super competitive online travel industry with rivals like Priceline.com (PCLN) and Orbitz Worldwide (OWW).

EXPE is developing a trend of beating analysts' estimates with strong profit and revenue growth. This past quarter EXPE reported revenues of $1.2 billion. That is the fifth quarter in a row that EXPE has delivered double-digit year over year revenue growth. The company has also seen surging growth in its bookings. Q3 2014 saw 15% bookings growth. Q4 2014 was +21%. Q1 2014 was +29%.

Analyst firm Cantor Fitzgerald recently offered bullish comments on EXPE and raised their price target. The company is having success with its Expedia Traveler Preference program. In Q3 2013 there were about 35,000 hotels in the program. By Q1 2014 that has grown to 51,000 hotels. As more hotels join it will boost EXPE's room nights metric and sales.

Billionaire hedge fund manager David Tepper's Appaloosa Management is also bullish on EXPE. The latest 13F filing showed that Appaloosa had initiated a new stake in EXPE in the first quarter of 2014.

Bears could argue that EXPE, PCLN and OWW could face competition from companies like Google and Facebook as they seek to boost their ad revenues to their large audiences. Reuters has reported that Google is experimenting with some programs with a few hotels. This threat is probably a few years away and could eventually make EXPE as potential takeover target.

Technically EXPE experienced a correction from $81 to $67 earlier this year. The stock found support in the $67 area and just recently EXPE has broken out past some key resistance. Currently shares hover just below short-term resistance at $74.00.

Our long-term target is the $90-100 zone.

- Suggested Positions -
JUN 09, 2014 - entry price on EXPE @ 75.30, option @ 8.20*
symbol:EXPE160115C90 2016 JAN $90 call - current bid/ask $11.80/12.30

08/24/14 new stop @ 79.75, adjust target to $98.00
08/03/14 new stop @ 76.75
07/31/14 EXPE delivers better than expected earnings and revenue growth
07/06/14 new stop @ 74.75
06/09/14 trade begins. EXPE opens at $75.30
*option entry price is an estimate since the option did not trade at the time our play was opened.
06/06/14 EXPE closes above our trigger, above $75.00
Option Format: symbol-year-month-day-call-strike

Current Target: EXPE @ 98.00
Current Stop loss: 79.75
Play Entered on: 06/09/14

Originally listed on the Watch List: 06/01/14


F5 Networks - FFIV - close: 125.08

Comments:
09/14/14: FFIV garnered some bullish analyst comments and a $150 price target last week. Shares managed to hit new two-year highs before a little profit taking on Friday.

I am not suggesting new positions at this time.

Earlier Comments: June 8th, 2014:
FFIV is in the technology sector. The company sells networking equipment and software. The company is seeing a strong turnaround after introducing a new good/better/best pricing model for its products last year. Customers have responded well to the strategy. FFIV said products in this pricing model saw a +83% increase in sales quarter over quarter.

FFIV is also seeing strong sales demand from its telecom customers. The company also announced that it is seeing double-digit growth in America, Europe, Middle East, Africa and Japan. FFIV's most recent earnings report beat Wall Street's estimates on both the top and bottom line. Management then raised their guidance (for FFIV's third quarter).

Our long-term target is the $135 region. Currently the point & figure chart is bullish and forecasting at $138 target.

- Suggested Positions -
JUN 11, 2014 - entry price on FFIV @ 111.96, option @ 8.20*
symbol:FFIV150117C120 2015 JAN $120 call - current bid/ask $11.20/11.35

- or -

JUN 11, 2014 - entry price on FFIV @ 111.96, option @ 12.55*
symbol:FFIV160115C130 2016 JAN $130 call - current bid/ask $16.20/16.45

08/31/14 new stop @ 116.40
08/24/14 new stop @ 112.40
08/10/14 new stop @ 107.40
07/24/14 reported strong earnings and raised guidance
06/22/14 Caution! FFIV has reversed at a trend line of resistance.
06/11/14 trade begins. FFIV opens at $111.96
*option entry price is an estimate since the option did not trade at the time our play was opened.
06/10/14 FFIV closed @ 112.59, above our trigger of $112.50
Option Format: symbol-year-month-day-call-strike

Current Target: FFIV @ 135.00
Current Stop loss: 116.40
Play Entered on: 06/11/14
Originally listed on the Watch List: 06/08/14


General Dynamics - GD - close: 126.40

Comments:
09/14/14: GD is a watch list candidate that has graduated to our active play list. The plan was to wait for shares to close above $126.25 and then buy calls the next day. GD met our entry point requirement on September 9th. Our trade opened on the 10th at $126.13. I would still consider new positions now at current levels.

Earlier Comments: September 7, 2014:
GD is considered part of the industrial goods sector. The company is a huge aerospace and defense company. They have four significant segments: aerospace, combat systems, information systems, and marine systems (ships and submarines). The defense industry in the U.S. has been saddled with significant budget cuts due to the 2011 sequestration deal that will shave $500 billion from U.S. defense spending from 2012 through 2021. The industry has managed to thrive in spite of these budget cuts.

GD has beaten Wall Street's earnings estimates four quarters in a row. The company is also seeing margin improvement. Their latest report on July 23rd not only beat analysts estimates but management raised their EPS and revenue guidance for 2014. Multiple analysts raised their price target on GD following this announcement.

Technically shares of GD look like a buy right here at $125.45. I'd like to see a little bit of follow through. Wait for a close above $126.25 and then buy calls the next day. We'll start with a stop loss at $119.75. Our long-term target is the $140-150 zone.

- Suggested Positions -
SEP 10, 2014 - entry price on GD @ 126.13, option @ 5.60*
symbol: GD160115C140 2016 JAN $140 call - current bid/ask $5.20/5.50

09/10/14 trade begins. GD opens at $126.13
*option entry price is an estimate since the option did not trade at the time our play was opened.
09/09/14 GD closed @ 126.25, above our trigger of $126.25
Option Format: symbol-year-month-day-call-strike

Chart of GD:

Current Target: GD in the $140-150 zone
Current Stop loss: 119.75
Play Entered on: 09/10/14
Originally listed on the Watch List: 09/07/14



Lockheed Martin Corp. - LMT - close: 174.43

Comments:
09/14/14: It was another mellow week for shares of LMT. The stock has been consolidating sideways for about two and a half weeks now.

If the broader market continues to sink then a dip or a bounce near $170 could be a new entry point in LMT.

Tonight we are moving the stop loss to $164.75.

Earlier Comments: August 17, 2014:
LMT is considered part of the industrial goods sector. According to their press release, "Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 113,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation’s net sales for 2013 were $45.4 billion."

That's a pretty brief summary for such a large company. Their aerospace and defensive business is extensive covering aircraft, ground vehicles, missiles, missile defense, naval systems, radar systems, sensors, tactical communications, training & logistics, transportation, and unmanned systems.

Their information technology business works in biometrics, cloud computing, cyber security, health and life sciences, and more. Their space division includes satellites, exploration, and launch vehicles. Plus their emerging technologies operations covers exciting fields like robotics, nanotechnology, and advanced aeronautics.

Fundamentally the company has managed to navigate both the economy's ups and downs and the constantly stormy political weather in Washington. LMT has managed to beat Wall Street's earnings estimates the last four quarters in a row. Management has raised their guidance three out of the last four quarters. LMT's most recent earnings report was July 22nd. Analysts were expecting a profit of $2.66 a share on revenues of $11.15 billion. LMT delivered $2.76 a share with revenues of $11.31 billion.

If you look at the world today there seems to be a growing number of conflicts, not less. Just this past week U.S. Defense Secretary Hagel was speaking and said, "The world is exploding all over." Sadly that's probably bullish for LMT's military business.

The stock has spent almost six months consolidating its very impressive 2013 gains. Now it looks ready to breakout. Shares are hovering just below resistance in the $170-171 area. Tonight I am suggesting we wait for LMT to close above $171.00 and then buy calls the next morning with a stop loss at $161.95.

The point & figure chart is bullish with a $196.00 target. We'll start this trade with a potential exit target at $199.00.

- Suggested Positions -
AUG 19, 2014 - entry price on LMT @ 172.02, option @ 3.40*
symbol: LMT150117C180 2015 JAN $180 call - current bid/ask $3.60/3.80

- or -

AUG 19, 2014 - entry price on LMT @ 172.02, option @ 7.00*
symbol: LMT160115C190 2016 JAN $190 call - current bid/ask $7.30/7.70

09/14/14 new stop @ 164.75
08/19/14 trade begins. LMT opens at $172.02
*option entry price is an estimate since the option did not trade at the time our play was opened.
08/18/14 LMT closed at $171.52, above our trigger at $171.00
Option Format: symbol-year-month-day-call-strike

Current Target: LMT @ 199.00
Current Stop loss: 164.75
Play Entered on: 08/19/14
Originally listed on the Watch List: 08/17/14


Morgan Stanley - MS - close: 35.01

Comments:
09/14/14: MS has recovered from the sell-off last Tuesday. Shares rebounded back to new highs and extended their gains to six up weeks in a row.

Earlier Comments: August 31, 2014:
MS is in the financial sector. They're one of the biggest players in the financial services industry. The stock has been outperforming its peers with a +9.4% gain this year versus a +6.8% gain in the XLF financial ETF. MS has managed to beat Wall Street's earnings estimates four quarters in a row.

Technically shares just recently broke through significant resistance in the $33.50 level this past week. This leaves MS at new multi-year highs.

Currently MS is testing short-term resistance at $34.50. I'm suggesting a trigger to buy calls if MS can close above $34.60.

- Suggested Positions -
SEP 05, 2014 - entry price on MS @ 34.42, option @ 1.57*
symbol: MS150117C35 2015 JAN $35 call - current bid/ask $1.79/1.82

- or -

SEP 05, 2014 - entry price on MS @ 34.42, option @ 1.80*
symbol: MS160115C40 2016 JAN $40 call - current bid/ask $1.86/1.95

09/05/14 trade begins. MS opens at $34.42
*option entry price is an estimate since the option did not trade at the time our play was opened.
09/04/14 MS closed @ 34.70, above our trigger of $34.60
Option Format: symbol-year-month-day-call-strike

Current Target: 2015 calls is MS @ 39.50, 2016 calls is MS @ 49.00
Current Stop loss: 30.90
Play Entered on: 09/05/14
Originally listed on the Watch List: 08/31/14


Microsoft Corp. - MSFT - close: 46.70

Comments:
09/14/14: MSFT continues to show relative strength. The stock just posted its sixth weekly gain in a row. On a short-term basis MSFT is testing resistance at $47.00. Watch for broken resistance near $45.50 to be new support.

Last week we updated our exit strategy. We will plan to exit our 2015 calls when MSFT hits $49.50. We will leave the exit target on the 2016 calls undetermined at the moment.

Earlier Comments: June 15, 2014:
Shares of semiconductor giant Intel (INTC) soared on Friday (June 13th) when the company surprised investors by raising its revenue guidance the night before. INTC said they were seeing stronger sales of PCs. That's right. They said PCs. The sale of personal computers has been falling for several quarters as consumer spend the money on laptops, tablets, and smartphones. To be fair INTC did say they were seeing stronger sales of PCs to businesses but it's still good news for INTC but it could be great news for MSFT.

INTC hinted that when MSFT stopped supporting the Windows XP operating system in April this year it has sparked an upgrade cycle. XP has been around for years. One analyst estimated that 25% of the PCs currently connected to the Internet are running XP. That's a huge number of computers and now they're at risk for virus and hacking attempts that MSFT will no longer try to patch.

As businesses and consumers upgrade their PC it should mean strong sales for MSFT's Windows 8 operating software. This upgrade cycle could last a while.

Currently shares of MSFT are in a long-term up trend (see chart) and they closed near 14-year highs on Friday. There is short-term resistance at $41.65. I am suggesting we wait for MSFT to close above $42.00 and then buy calls the next day with a stop loss at $38.40.

I am listing the 2015 and 2016 calls but my preference is for the 2016s.

- Suggested Positions -
JUN 25, 2014 - entry price on MSFT @ 41.93, option @ 1.05
symbol:MSFT150117c45 2015 JAN $45 call - current bid/ask $ 2.87/2.92

- or -

JUN 25, 2014 - entry price on MSFT @ 41.93, option @ 2.60
symbol:MSFT160115c45 2016 JAN $45 call - current bid/ask $ 4.80/4.95

09/07/14 new stop @ 41.90
09/07/14 set exit target for 2015 calls: MSFT @ $49.50
08/24/14 new stop @ 41.45
07/27/14 new stop @ $39.75
07/20/14 Our 2015 call option has almost doubled in value and investors may want to take some money off the table.
06/26/14 Trade begins. MSFT opens down at $41.93
06/25/14 MSFT closes at $42.03, above our trigger of $42.00
06/23/14 MSFT closes at $41.99
Option Format: symbol-year-month-day-call-strike

Current Target: Exit 2015 calls: MSFT @ $49.50
(no target yet to exit the 2016 calls)
Current Stop loss: 41.90
Play Entered on: 06/25/14
Originally listed on the Watch List: 06/15/14


Newmont Mining Corp. - NEM - close: 25.17

Comments:
09/14/14: The rising U.S. dollar continues to push commodities lower including precious metals. This is weighing on the miners like NEM. Last week NEM tested support near $25.00 and its 100-dma.

Currently our stop loss is at $24.25. More conservative investors may want to adjust their stop closer to Friday's low (24.92). I am not suggesting new positions at this time.

Earlier Comments: July 13, 2014:
According to the company website, Newmont Mining Corporation is primarily a gold producer, with significant assets or operations in the United States, Australia, Peru, Indonesia, Ghana, New Zealand and Mexico. Founded in 1921 and publicly traded since 1925, Newmont is one of the world's largest gold producers and is the only gold company included in the S&P 500 Index and Fortune 500. Headquartered near Denver, Colorado, the company has around 32,000 employees and contractors worldwide.

NEM also produces copper and silver but they are the second biggest gold producer on the planet by production. The biggest gold producer is Barrick Gold Corp. (ABX) and NEM almost merged with ABX in April this year but discussions fell apart. NEM investors either want the company to resume talks with ABX or break itself up to unlock shareholder value. That seems unlikely but JPMorgan believes the deal talks with ABX may not be dead.

I like NEM more for the technical set up on the charts. It's true that gold has been in rally mode, currently up six weeks in a row and up +10% for the year. Yet the gold miners have been outperforming and the GDX gold miner index is up +29% this year. NEM is only up +12.5% this year but it could play catch up if shares break out from its base.

The stock has been building a base in the $21-26 zone for months. I am suggesting we wait for NEM to close above $26.75 and then buy calls the next morning with a stop loss at $23.75. I would consider this a more aggressive, higher-risk trade because gold and the gold miners can be a volatile group. You may want to limit your position size to reduce your risk.

- Suggested Positions -
AUG 13, 2014 - entry price on NEM @ 27.14, option @ $0.91*
symbol: NEM150117c30 2015 JAN $30 call - current bid/ask $0.26/0.29

- or -

AUG 13, 2014 - entry price on NEM @ 27.14, option @ $2.73*
symbol: NEM160115c30 2016 JAN $30 call - current bid/ask $1.61/1.70

09/07/14 new stop @ 24.25
08/13/14 trade begins. NEM opens at $27.14
*option entry price is an estimate since the option did not trade at the time our play was opened.
08/12/14 NEM meets our entry point requirement with a close above $26.75 (closed @ 27.06)
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 24.25
Play Entered on: 08/13/14
Originally listed on the Watch List: 07/13/14


Nike, Inc. - NKE - close: 81.84

Comments:
09/14/14: NKE is a new addition to the newsletter we added last weekend. The $80.00 level was major resistance and we wanted to buy the breakout. Shares didn't see much movement last week but then neither did the market. I would still consider new positions now but if you're patient we might see a better entry point on a dip in the $80.50 area instead.

Earlier Comments: September 7, 2014:
We have had NKE on and off our radar screen for weeks. I've personally been watching this stock for months as it consolidated sideways under major resistance at the $80.00 level. Shares are finally breaking out.

The company is a powerhouse in the athletic apparel and footwear industry. NKE is targeting a pretty big demographic. According to the company's mission "to bring inspiration and innovation to every athlete* in the world" (*if you have a body, you are an athlete). Real athletes might not take to kindly to NKE's definition but it's great for marketing. The company is considered the world leader in athletic footwear, apparel, equipment, and accessories.

This company is poised to cash in on the latest fashion trend called "athleisure". Last year apparel sales were down -1%. Yet sales of activewear rose +7%. The activewear segment now accounts for 16% of the U.S. market and has grown to $34 billion a year. Athleisure is the growing trend of fashion and activewear.

NKE's most recent earnings report was better than expected. Wall Street was looking for a profit of $0.75 on revenues of $7.34 billion. The company beat estimates with $0.78 on revenues of $7.42 billion. Gross margins improved 170 basis points to 45.6 percent. Management reported that they spent $912 million on buying back 12.3 million shares of stock last quarter as part of their $8 billion stock buyback program.

Technically shares of NKE have been stuck under major resistance at the $80.00 level since December 2013. Investors have been slowing buying the dips and now the stock looks poised to breakout past resistance. The point & figure chart is bullish and currently forecasting at $98 target.

Friday's bullish breakout past resistance is an entry point. I am suggesting we buy calls immediately. If you have the patience then consider waiting for a dip back into the $80.00-81.00 zone as an alternative entry point. Broken resistance at $80.00 should be new support. We'll start this trade with a stop loss at $75.75.

- Suggested Positions -
SEP 07, 2014 - entry price on NKE @ 81.92, option @ $5.20*
symbol: NKE160115c90 2016 JAN $90 call - current bid/ask $5.00/5.15

09/08/14 Trade begins. NKE Opens at $81.92
*option entry price is an estimate since the option did not trade at the time our play was opened.
09/07/14 NKE is added to our new play section

Current Target: $99.00
Current Stop loss: 75.75
Play Entered on: 09/08/14
Originally listed in the New Plays 09/07/14


Nucor Corp. - NUE - close: 54.96

Comments:
09/14/14: NUE encountered some profit taking last week. I would consider new positions now on this dip.

Earlier Comments: August 31, 2014:
NUE is in the basic materials sector. The company makes steel and steel-related products. The stock has been dead money for months as NUE consolidating sideways n the $48-54 zone since its 2013 peak but that could be changing soon.

NUE's latest earnings report in July beat Wall Street's estimates on both the top and bottom line. Management issued an optimistic outlook. In August there was good news for domestic steel makers. The U.S. International Trade Commission (ITC) ruled in favor of American companies who make oil country tubular goods (OCTG) after foreign steel makers dumped a ton of product in the U.S. back in 2013. This ITC decision will levy duties against certain steel imports from South Korea, India, Taiwan, Turkey, Ukraine, and Vietnam. While this particular decision doesn't impact NUE's business that much it is a bullish undercurrent for the broader industry as a whole.

Technically NUE has been looking stronger. On August 19th the stock produced a spread-triple top breakout buy signal on its point & figure chart, which is now forecasting at $65 target.

At the moment NUE is hovering just below resistance near $55.00. I am suggesting we wait for NUE to close above $55.25 and then buy calls the next morning with a stop loss at $51.75.

- Suggested Positions -
SEP 05, 2014 - entry price on NUE @ 55.69, option @ $3.35*
symbol: NUE160115c60 2016 JAN $60 call - current bid/ask $2.87/3.05

09/05/14 trade begins. NUE opens at $55.69
*option entry price is an estimate since the option did not trade at the time our play was opened.
09/04/14 triggered. NUE closed @ 55.79, above our trigger of $55.25
Option Format: symbol-year-month-day-call-strike

Current Target: exit calls NUE @ 69.00
Current Stop loss: 51.75
Play Entered on: 09/05/14
Originally listed on the Watch List: 08/31/14


O'Reilly Automotive - ORLY - close: 154.23

Comments:
09/14/14: ORLY was also hit with profit taking last week. Shares ended the prior week at record highs. This past week saw ORLY down every day. At the moment I would wait for a new close above $156.00 before considering new bullish positions.

Earlier Comments: August 31, 2014:
The U.S. economy is slowly improving. We are seeing slow but consistent job growth. Yet consumers remain cautious. While there has been a healthy trend of new car sales this year most consumers are keeping their old cars. Of the 247 million cars in the U.S. the average age is at a record high. Passenger cars have hit an average age of 11.4 years while light trucks are at 11.3. If consumers are keeping their cars this long that is going to mean more replacement parts and repairs. That has been good news for the auto part companies.

ORLY is one such company. According to their company website, "O'Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, serving both professional service providers and do-it-yourself customers. Founded in 1957 by the O'Reilly family, the Company operated 4,257 stores in 42 states as of June 30, 2014."

One analysts on Wall Street called ORLY a "well-oiled machine." It's easy to see why. The company has delivered four years of consistent double-digit earnings growth. Steady same-store sales are impressive considering the tough retail environment we've seen over the last few years. The company's margins are expected to grow over the next 12-18 months. ORLY is on track to open 200 new stores in 2014. They have also boosted their stock buyback program. On August 13th ORLY announced an additional $500 million, which bumps their total stock repurchase program to $4.5 billion.

Technically shares have been consistently bouncing off their long-term trend of higher lows (on the weekly chart below). ORLY did spent the last few months consolidating sideways but it has started to breakout past resistance. This is our chance to hop on board. A rally past $158.00 could create a new point & figure chart buy signal.

Friday's high was $157.18. I am suggesting we wait for ORLY to close above $157.25 and then buy calls the next morning with a stop loss at $149.75.

NOTE: I am labeling this a more aggressive trade due to the relatively wide option spreads. Consider reducing your normal position size to limit risk.

- Suggested Positions -
SEP 05, 2014 - entry price on ORLY @ 156.85, option @ $5.95*
symbol:ORLY150117c160 2015 JAN $160 call - current bid/ask $4.20/4.90

09/05/14 trade begins, ORLY opens at $156.85
*option entry price is an estimate since the option did not trade at the time our play was opened.
09/04/14 triggered. ORLY closed @ 157.43, above trigger of $157.25
Option Format: symbol-year-month-day-call-strike

Current Target: exit calls ORLY @ 185.00
Current Stop loss: 149.75
Play Entered on: 09/05/14
Originally listed on the Watch List: 08/31/14


Thermo Fisher Scientific - TMO - close: 123.28

Comments:
09/14/14: TMO also retreated lower last week. We can use this pullback as a new bullish entry point.

Earlier Comments: August 10, 2014:
TMO is considered part of the healthcare sector. They provide products and services in their analytical instruments, laboratory services, specialty diagnostics, and their new Life Sciences division.

According to the company website, "Thermo Fisher Scientific Inc. is the world leader in serving science, with revenues of $17 billion and 50,000 employees in 50 countries. Our mission is to enable our customers to make the world healthier, cleaner and safer. We help our customers accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics and increase laboratory productivity. Through our four premier brands – Thermo Scientific, Life Technologies, Fisher Scientific and Unity Lab Services – we offer an unmatched combination of innovative technologies, purchasing convenience and comprehensive support."

TMO is developing a trend of beating Wall Street's estimates. Back in April they reported their first quarter results that beat estimates on both the top and bottom line. Management then raised their guidance for 2014. TMO did it again when they reported Q2 earnings on July 23rd. However, this report is significant because it's the first earnings report including its new Life Sciences acquisition.

Wall Street was expecting TMO to report earnings of $1.63 a share on revenues of $4.25 billion. The company beat these expectations. Earnings rose +30% to $1.72 a share. Revenues soared +33% to $4.32 billion. Gross margins improved 154 basis points to 45.4%. Management then adjusted their revenue guidance higher.

TMO's management has also upgraded their expected synergies from the Life Sciences acquisition. They now expect to reap $350 million in synergies over the next three years. That's up from $300 million.

The stock has reflected TMO's bullish performance with big gains over the past couple of years. Yet the rally peaked in March 2014 and shares have been digesting gains for months. This past week saw TMO testing significant support near its long-term trend of higher lows. This looks like an opportunity to hop on board.

I am suggesting we wait for TMO to close above $122.50 and then buy calls the next morning with a stop loss at $117.40. The $127.00 level is overhead resistance but we're betting on a bullish breakout to record highs.

- Suggested Positions -
SEP 04, 2014 - entry price on TMO @ 123.98, option @ $3.25*
symbol: TMO150117c130 2015 JAN $130 call - current bid/ask $2.45/3.10

- or -

SEP 04, 2014 - entry price on TMO @ 123.98, option @ $12.00*
symbol: TMO160115c130 2016 JAN $130 call - current bid/ask $ 9.90/11.90

09/04/14 trade begins. TMO opens at $123.98
*option entry price is an estimate since the option did not trade at the time our play was opened.
09/03/14 triggered. TMO closed @ 123.75, above our trigger of $123.00
08/24/14 adjust entry strategy: wait for a close above $123.00 and then buy calls the next day (instead of a close above $122.50)
Option Format: symbol-year-month-day-call-strike

Current Target: exit calls TMO @ 150.00
Current Stop loss: 117.40
Play Entered on: 09/04/14
Originally listed on the Watch List: 08/10/14


Western Digital Corp. - WDC - close: 99.89

Comments:
09/14/14: WDC has been a disappointment. The stock has been consolidating sideways for nearly eight weeks in a row. If the broader market continues to sink we could see WDC hit our stop loss at $97.45 soon. I would wait for a new close over $103.50 before considering new bullish positions.

Earlier Comments: June 22, 2014:
WDC is in the technology sector. The company manufacturers data storage devices. They make hard drives and solid state drives. The company has about a 45% market share in the hard drive market, just ahead of its biggest rival Seagate Technology (STX). WDC has managed to grow in spite of long-term decline in PC sales. Today WDC's non-PC related devices account for 53% of its sales.

There has been a new development in the death of the PC story. A couple of weeks ago Intel reported that they were seeing growth in PC sales, mostly for business/enterprise use. That could be great news for WDC, who has developed a stronger solid-state drive business focused on enterprise.

The acceptance of cloud storage continues to surge. All of those cloud storage networks need hard drives to store that data, which should benefit WDC.

Technically shares of WDC have been consolidating sideways the last three weeks. The stock closed up on Friday and looks poised to breakout past short-term resistance near $93.00. More aggressive traders may want to launch positions above $93.50. I am suggesting an intraday trigger to buy calls at $95.25.

There is a good chance that $100.00 could be round-number, psychological resistance. Eventually I do expect WDC to rally past the $100 mark. Our long-term target is $110. Currently the Point & Figure chart is bullish and forecasting at $118 target.

- Suggested Positions -
JUL 01, 2014 - entry price on WDC @ 95.25, option @ 5.62
symbol: WDC150117C100 2015 JAN $100 call - current bid/ask $5.65/5.80

- or -

JUL 01, 2014 - entry price on WDC @ 95.25, option @ 8.00*
symbol: WDC160115C110 2016 JAN $110 call - current bid/ask $ 8.85/ 9.15

08/31/14 new stop @ 97.45
08/24/14 new stop @ 94.75
08/17/14 WDC looks poised for a pullback
08/03/14 new stop at $92.40
07/30/14 WDC delivered better than expected earnings and revenue results
07/01/14 WDC hit our intraday trigger at $95.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Current Target: WDC @ 110.00
Current Stop loss: 97.45
Play Entered on: 05/28/14
Originally listed on the Watch List: 06/22/14


Wells Fargo & Co. - WFC - close: 51.70

Comments:
09/14/14: Shares of WFC held support near $51.00 again. I would watch for a close above $52.10 as a new bullish entry point to buy 2016 calls.

Earlier Comments:
(June 1, 2014) WFC's management also said they would love to boost the amount of capital they return to shareholders. They'd like to pay out 55% to 75% of their net profits back to shareholders as dividends and stock buybacks. That's up from 34% in 2013. Any changes still have to be approved by regulators.

- Suggested Positions -
DEC 26, 2013 - entry price on WFC @ 45.50, option @ 1.50
symbol: WFC1517a50 2015 JAN $50 call - current bid/ask $ 2.77/2.78

-- or --

DEC 26, 2013 - entry price on WFC @ 45.50, option @ 2.95*
symbol: WFC1615a50 2016 JAN $50 call - current bid/ask $ 4.40/4.65

09/14/14 a close above $52.10 could be a new bullish entry point to buy 2016 calls.
08/24/14 new stop @ 49.25
08/10/14 adjust stop loss to $48.80
07/11/14 WFC reported earnings that were in-line with estimates
07/06/14 investors may want to take profits before WFC reports earnings on July 11th.
06/29/14 new stop loss @ 49.40
06/08/14 new stop loss @ 47.45
05/26/14 adjust long-term target from $54.50 to $59.00
04/06/14 WFC looks poised for a pullback
03/30/14 new stop loss @ 44.80
03/09/14 new stop loss @ 43.90
01/19/14 new stop loss @ 42.90
12/26/13 trade opens with WFC @ $45.50
*option entry price is an estimate since the option did not trade at the time our play was opened.
12/24/13 WFC closed @ 45.39, above our trigger at $45.25

Current Target: Exit WFC hits $59.00
Current Stop loss: 49.25
Play Entered on: 12/26/13
Originally listed on the Watch List: 12/08/13


WellPoint Inc. - WLP - close: 118.62

Comments:
09/14/14: WLP closed at record highs on Tuesday the 9th. Shares have since retreated a bit but traders bought the dip on Friday at its simple 10-dma. If WLP breaks the 10-dma then $115-116 is the next area of potential support.

I am not suggesting new positions at this time.

Earlier Comments: July 6, 2014:
WellPoint is one of the nation's leading health benefits companies. We believe that our health connects us all. So we focus on being a valued health partner and delivering quality products and services that give members access to the care they need. With nearly 67 million people served by our affiliated companies including nearly 37 million enrolled in our family of health plans (source: WLP website).

Healthcare stocks have been market leaders. Both the XLV healthcare ETF and the XHS healthcare services ETF are at all-time highs. One of the factors driving this move has been Obamacare. Love it or hate it the Affordable Care Act has generated more customers for the healthcare industry. The latest data would suggest about eight million people have signed up for Obamacare. It would appear that 60% of the people that have signed up did not previously have insurance.

A lot of insurance/healthcare firms expect their participation in the Obamacare program to either be a breakeven or end up with negative margins. WLP has been forecasting their Obamacare business should see 3% to 5% margins.

WLP has also done well focusing on the Medicaid business. They are currently the largest participant in Medicaid and they believe it will continue to grow for them at a double-digit rate.

Technically shares of WLP are hitting all-time highs. Shares produced a big rally higher in May and spent most of June consolidating gains in the $105-110 zone. Now WLP is on the verge of a breakout. Thursday's intraday high was $111.01. I am suggesting we wait for WLP to close above $111.00 and then buy calls the next morning with a stop loss at $104.75. Our long-term target is the $130.00 area. Currently the Point & Figure chart is bullish and forecasting at $149.00 target.

- Suggested Positions -
JUL 15, 2014 - entry price on WLP @ 113.05, option @ 4.00*
symbol:WLP150117c120 2015 JAN $120 call - current bid/ask $ 5.05/5.45

-- or --

JUL 15, 2014 - entry price on WLP @ 113.05, option @ 7.35*
symbol:WLP160115c125 2016 JAN $125 call - current bid/ask $ 9.20/10.05

09/07/14 new stop @ 112.25
08/31/14 new stop @ 109.45
08/10/14 technically WLP is showing weakness and investors might want to raise their stop loss.
07/15/14 trade begins. WLP opens at $113.05
07/14/14 triggered. WLP closed at $113.15, above our $111.00 trigger
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Current Target: Exit WLP hits $130.00
Current Stop loss: 112.25
Play Entered on: 07/15/14
Originally listed on the Watch List: 07/06/14



Watch

Internet Traffic & Internet Security

by James Brown

Click here to email James Brown


New Watch List Entries

AKAM - Akamai Technologies

CHKP - Check Point Software


Active Watch List Candidates

None, see below.


Dropped Watch List Entries

GD graduated to our active play list.

VFC met our entry point requirement on Friday and has been moved to our new play section.



New Watch List Candidates:


Akamai Technologies - AKAM - close: 62.47

Company Info

This company handles one third of the traffic on the Internet and yet most people have probably never heard of them. Who are they? According to the company website, "Akamai is the leading provider of cloud services for helping enterprises provide secure, high-performing user experiences on any device, anywhere. If you've ever shopped online, downloaded music, watched a web video or connected to work remotely, you've probably used Akamai's cloud platform."

The company has been growing. AKAM has beaten Wall Street's estimates every quarter this year. Back in May they raised guidance. Their latest quarterly results came out on July 30th and revenues were up +26%.

Bloomberg recently ran an article suggesting AKAM is a potential takeover target by Chinese Internet giant Alibaba (BABA). After BABA IPOs later this month they company will be flush with cash and might spend some of its $8 billion on acquisitions.

Shares of AKAM were also upgraded recently with a $70 price target. Currently shares are in a long-term up trend and nearing 14-year highs.

I am suggesting we wait for AKAM to close above $63.25 and then buy calls the next morning. I prefer the 2016 calls. If you choose the 2015s we'll have to exit in a few months.

Breakout trigger: Wait for a close above $63.25
Then buy calls the next morning with a stop at $59.45

BUY the 2015 Jan $65 call (AKAM150117C65) current ask $3.05

- or -

BUY the 2016 Jan $70 call (AKAM160115c70) current ask $6.80

Option Format: symbol-year-month-day-call-strike

Chart of AKAM:

Originally listed on the Watch List: 09/07/14


Checkpoint Software Tech. - CHKP - close: 71.80

Company Info

CHKP is another technology stock and it is similar to AKAM in that both have beaten earnings estimates every quarter this year and both are trading near 14-year highs. While AKAM facilitates Internet traffic, CHKP seeks to guard its clients against Internet hazards.

The company describes itself as, "the worldwide leader in securing the Internet, provides customers with uncompromised protection against all types of threats, reduces security complexity and lowers total cost of ownership. Check Point first pioneered the industry with FireWall-1 and its patented stateful inspection technology."

"Today, Check Point continues to develop new innovations based on the Software Blade Architecture, providing customers with flexible and simple solutions that can be fully customized to meet the exact security needs of any organization. Check Point is the only vendor to go beyond technology and define security as a business process. Check Point 3D Security uniquely combines policy, people and enforcement for greater protection of information assets and helps organizations implement a blueprint for security that aligns with business needs. Customers include tens of thousands of organizations of all sizes, including all Fortune and Global 100 companies. Check Point's award-winning ZoneAlarm solutions protect millions of consumers from hackers, spyware and identity theft."

It feels like a week doesn't go by that we don't hear about another major hacking scandal in the business world. It's not going away and corporations have to constantly update their cyber defense. CHKP has been working cyber security since 1993.

Shares of CHKP spent much of this year consolidating gains from 2013. However, the last week of August produced a crucial breakout past resistance near $70.00. Tonight I am suggesting a trigger to buy calls if CHKP can close above $72.50. We'll start with a stop at $69.45. The point & figure chart is bullish and currently forecasting an $89.00 target. We'll start with a long-term target in the $95-100 zone (our target to exit the 2015 calls will be lower).

Breakout trigger: Wait for a close above $72.50
Then buy calls the next morning with a stop at $69.45

BUY the 2015 Jan $75 call (CHKP150117C75) current ask $1.90

- or -

BUY the 2016 Jan $80 call (CHKP160115c80) current ask $4.70

Option Format: symbol-year-month-day-call-strike

Chart of CHKP:

Originally listed on the Watch List: 09/07/14


Active Watch List Candidates:



Currently we do not have any active watch list candidates.

They have all graduated to our active play list or the new play section.

Please see the new watch list candidates added (above).

In addition to the new watch list candidates above you may want to keep an eye on these stocks below.

Radar Screen:
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself. In no particular order:

FLDM, BAC, JPM, GS, PRU, GPC, CMA, BBY, TGT, SNE, XRS, GILD, AAPL, UNP, FDX, AMGN,

NOTE: I would not consider positions in FDX until after we see how the market reacts to its earnings report (due out September 17th).