Option Investor
Newsletter

Daily Newsletter, Sunday, 11/1/2015

Table of Contents

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

Leaps Trader Commentary

Stocks Rock In October

by James Brown

Click here to email James Brown

October 2015 is in the books and it was a winner for investors. Q3 earnings expectations were extremely low and thus far results have been much better than expected. Combine that with dovish comments from central banks and new rate cuts overseas and there was plenty of fuel to drive stocks higher in October. The big cap U.S. indices, the S&P 500 and the NASDAQ composite, both posted their fifth weekly gain in a row.

Money was flowing out of bonds and precious metals and into stocks. Crude oil had a good week (+3.9%) but the rally was not due to fundamentals. U.S. oil inventories actually rose +3.4 million barrels. The rally seems to be a rising geopolitical risk premium. Energy stocks underperformed last week (-0.5%) but they were still up +11% for the month of October.

October Results

Looking at the daily charts of the major U.S. indices (see below) the rally looks a little extreme. The U.S. market delivered its best one-month gains since October 2011. How good was it? According to CNBC the Dow Jones Industrial Average saw its biggest one-month point gain ever, up +1,379 points. That was enough for a +8.5% gain. The S&P 500 rallied +8.3% while the NASDAQ composite surged +9.4% in October.

It wasn't just U.S. stocks. Global markets were in rally mode. The German DAX soared +12.3% and the French CAC rallied +9.6%. That was their best month since April 2009. The British FTSE 100 only gained +5% but that was its best one-month rally since mid 2013. Asian stocks rallied as well. The Japanese NIKKEI climbed +9.75% and the Chinese Shanghai composite snapped a four-month losing streak to gain +10.8%. (read more about it here.)

This widespread rally in stocks finally fueled a surge in bullish investor sentiment. According to the American Association of Individual Investors (AAII), bullish sentiment has been stuck under its long-term average of 38.7% for 33 weeks. That changed last week with bullish sentiment rising +5.6% to 40.4%. Neutral sentiment dropped -2.2% to 39.0%. Bearish sentiment fell for the fourth week in a row to 20.6% (-3.4%). (AAII Survey link.)

Economic Data

The Commerce Department said U.S. durable goods orders fell -1.2% in September. The August reading was revised lower from -2.3% to -3.0%. The drop was fueled by weak transportation orders. If you exclude the volatile transportation number then durable goods orders only fell -0.4%. Unfortunately the August reading, ex-transportation, was also revised lower from +0.2% to -0.9%.

The durable goods numbers do not bode well for U.S. economic growth but it was countered by a better than expected Chicago PMI. This report improved from negative territory (under 50.0) at 48.7 in September up to 56.2 in October. It is the best reading since January this year.

Last week's data from the housing market was disappointing. Buyers seem to be hesitating with prices rising so fast. The Case-Shiller 20-city home price index rose +5.1% in August. Meanwhile new home sales slowed. The annualized rate from August was revised lower from 552,000 a year to 529,000. This worsened in September with a drop to 468,000 units. Pending home sales dropped -2.3% in September.

FOMC meeting

One of the biggest economic events for the week was the FOMC meeting. As expected the Fed did not change policy. However, they did remove a significant sentence from their statement. The Fed deleted their line that suggested the fed was worried how global economic weakness was slowing U.S. growth. They fed statement essentially said that as long as U.S. economic data doesn't worsen in the next six weeks that they would raise rates in December. Stocks initially plunged on this news but quickly rebounded on Wednesday afternoon.

The U.S. Federal Reserve has kept their benchmark overnight interest rate near zero since December 2008. They can't lower it any further. Many market pundits believe the Fed feels forced to raise rates this year to maintain their credibility and December is the last scheduled meeting. Plus the Fed would like to have some ammunition to lower rates again if economic growth slows down too much. According to Jay Morelock, an economist at FTN Financial, "It will be difficult for the Fed to justify a rate hike at a time when income, consumption, and inflation are trending lower, leaving a December rate hike less likely than prior to the data."

Inflation is not going to suddenly accelerate in the next six weeks. That means the Fed is probably focused on the labor market. If the October jobs report (just a few days away) and the November jobs report both come in above +200,000 jobs then that might be enough for the Fed to raise rates in December.

The Fed funds futures, where investors put real money on the line, has seen the odds of a rate hike in December surge from just 6% a month ago to 47% chance today. This seems to contradict Morelock's opinion, which is a common one among economists.

Q3 GDP

Q1 2015 GDP growth was a disappointing +0.64%. Inventories surged in Q2 and the Q2 GDP estimate came in at +3.92%. Last quarter saw inventory numbers decline and the Q3 estimate fell to +1.5%. That was relatively in-line with Wall Street estimates. The Atlanta Fed's GDPnow estimate was expecting +0.9% growth.

A lot of economists looked past the headline number (+1.5% growth) and pointed to the real final sales component, which rose +3.0% last quarter. Current estimates for the fourth quarter are now in the +2.5% region.

Consumer Sentiment

Consumer spending accounts for about 70% of the U.S. economy. That's why economists try to follow consumer attitudes and spending patterns. The latest personal income and spending numbers were disappointing. September's read only showed a +0.1% rise in income and spending versus a +0.4% rise for both in August. Meanwhile the Conference Board's Consumer Confidence index fell from 102.6 to 97.6 in October. The University of Michigan Consumer Sentiment Index was revised lower from a preliminary estimate of 92.1 to 90.0 in October. This is the second lowest reading since November 2014.

Overseas Economic Data

There were a number of data points from Japan last week. The country's retail sales for September fell -0.2% from a year ago, which was significantly worse than expectations and down from +0.8% in August. Their industrial production came in better than expected with a rise from -1.2% in August to +1.0% in September.

Japan said their household spending plunged -1.3% last month. That's down from +2.5% the prior month. Inflation remains stagnant with the Japanese national CPI coming in at 0.0% in September.

There was a lot of expectation that the Bank of Japan would boost their stimulus when the central bank met on Friday. That did not happen. The BoJ lowered their forecast for both growth and inflation but they left interest rates unchanged at 0.10%. They made no changes to their massive QE program.

There was not much data out of Europe last week. Germany said their retail sales for September were flat (0.0%) month over month but up +3.4% from a year ago. Meanwhile the Eurozone reported their CPI for October was flat (+0.0%) from a year ago. Their core CPI was up +1.0%. Unemployment in the Eurozone improved from 10.9% to 10.8%.




Major Indices:

The S&P 500 has soared +10.5% from its late September closing low. Last week the big cap index only gained +0.2%. That was enough for its fifth weekly gain in a row. Year to date the S&P 500 is now up +1%.

If you look at the daily chart there appears an interesting pattern. The S&P's rally was broken up by five pullbacks or dips that lasted one to two days each. This trend won't last very long but if it continues the S&P 500 should rally on Monday.

Technically the 2,100 level is likely round-number resistance. The index should see short-term support near 2,060 (bolstered by its simple 200-dma) and the 2,040 and 2,020 levels.

Believe it or not but the S&P 500 is only 50 points away from a new all-time closing high (that's about 2.4%).

Daily chart of the S&P 500 index:

Better than expected earnings among some high-profile technology companies has really helped propel the NASDAQ higher. Last week the index added another +0.44%. It's up +6.7% year to date.

You can see on the daily chart that 5,100 is short-term resistance. Beyond that the all-time highs from July near 5,200-5,230 is the next resistance level. The 5,000 mark is round-number support. Below that the 4,900 level should also be decent support.

chart of the NASDAQ Composite index:

The small cap Russell 2000 index has underperformed its large-cap peers. The $RUT has spent a good chunk of October just consolidating sideways. The bullish breakout past short-term resistance on Wednesday last week has already reversed.

For the week the $RUT fell -0.36%. That pushed its 2015 performance to -3.5%. There is short-term support near 1,140. If 1,140 breaks we could see the $RUT drop toward 1,100. Meanwhile there is very short-term resistance at both 1,170 and 1,180. I also expect resistance in the 1,200-1,220 region. There is some good news. Small caps usually tend to outperform the broader market in December and January.

chart of the Russell 2000 index



Economic Data & Event Calendar

It's a brand new month and that means lots of economic data. U.S. auto sales could hit a record in October. Meanwhile the U.S. ISM manufacturing index could slip into contraction territory (under 50.0). The ISM services is expected to dip to its lowest reading in four months.

The four week moving average on the weekly initial jobless claims fell below 260,000 for the first time since 1973 last week. That should be bullish for the labor market. However, analysts expect the ADP report to show a decline in job growth. On Friday we'll see the nonfarm payroll (jobs) number. Economists are anticipating +180,000 new jobs, up from +142,000 the prior month. If the October number is near 180K it would be the third month in a row below the 200,000 mark.

There are several Federal Reserve officials speaking this week. Federal Reserve Chairman Janet Yellen is one of them. She speaks before the U.S. House Financial Services Committee on Wednesday. The stock market will be sensitive to anything she has to say.

- Monday, November 02 -
Eurozone manufacturing PMI
ISM index
Construction spending

- Tuesday, November 03 -
Factory Orders
Auto and truck sales

- Wednesday, November 04 -
ADP Employment Change Report
ISM services
Federal Reserve Chairman Yellen testimony before the House

- Thursday, November 05 -
Bank of England interest rate decision

- Friday, November 06 -
Nonfarm payroll (jobs) report
Unemployment rate

Additional dates to be aware of:

Nov. 26th - Thanksgiving holiday (markets closed)
Dec. 16th - FOMC meeting, new forecast Dec. 16th - Fed Chairman Yellen's press conference
Dec. 24th - Christmas Eve (market closes early)
Dec. 25th - Christmas (market closed)

Looking Ahead:

Looking ahead the peak of Q3 earnings season is behind us. Over 340 of the S&P 500 companies have reported. 76% have beaten Wall Street's very low estimates. Only 47% have beaten analysts' revenue estimates. Thus far Q3 earnings have fallen -2.2% from a year ago. That's a big improvement from prior estimates of -5.5%. We are still on track for an "earnings recession" with two consecutive quarters of earnings declines. Most of this weakness is in the energy sector. Currently analysts are forecasting a -2.4% drop in Q4 earnings. This week we will hear from another 105 S&P 500 companies plus dozens more not in the index.

If haven't heard yet November 1st kicks off the "best six months of the year" according to the research team at the Stock Trader's Almanac. This trend has been pretty consistent over the last several decades. Everyone who follows the "sell in May" strategy is supposed to jump back into the market now.

This bullish seasonal trend does not mean stocks are immune to declines. After a +10% surge off their September lows the market is short-term overbought and likely due for a pullback. The first few days of a new calendar month tend to be more bullish as fund managers put new money to work. Yet I would not be surprised to see stocks drift lower in the week ahead. Fortunately we can use the pullback as a new entry point for bullish positions.

There have been some disappointing research notes come out in the last few days regarding potential November and December market gains. Sam Stoval, at S&P Capital IQ, wrote a note about how the market has "stolen from Santa". Essentially he is concerned that the big gains in October have essentially stolen from any normal Santa Claus rally the market might see in December. According to Stoval, when October is up more than +7% then gains in November and December tend to be subdued. The S&P 500 rallied more than 8% in October.

Another research note, this time from Kimberly Greenberger of Morgan Stanley, suggested the Grinch could steal Christmas this year. Greenberger believes that holiday sales growth will slow down from +4.3% in 2014 to +2.4% this year. You can read the Bloomberg article here.

Personally I remain optimistic. Yes, the U.S. market is short-term overbought. However, investors both big and small will likely buy the dips. It's been a disappointing year if you own the S&P 500 and hopes for a Q4 rally remain strong. Betting against the U.S. consumer is normally a losing trade. I am suggesting patience. A stock market pullback in early November is probably an entry point.

~ James





Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Stocks extended their rally through the final week of October. The S&P 500 rallied more than +8% for the month. We had another watch list candidate graduate to our active play list.

Please note that some of our positions have been adjusted for the cost of short-term protective puts.

AMBA was closed on Monday, October 26th.
HSY hit our stop loss but we are still long a short-term put. See the HSY play update for details.

TSN has joined the active play list.

There are new stop losses for DHI, LUV, OA, RCL, and V.

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

Ready For The Dip

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(November 1, 2015)

No new positions at this time. The S&P 500 is up five weeks in a row and up more than +10% from its late September low. Odds are rising for a pullback. The good news is that any pullback is probably another entry point for us to buy the dip. That's why I have added two new candidates to the watch list with a buy-the-dip strategy ( EA and UA ).



Play Updates

Seeing A Lot Of Consolidation

by James Brown

Click here to email James Brown

Editor's Note:

Most of our big-cap winners spent last week consolidating sideways.

TSN graduated to our active play list.


Closed Plays


AMBA was closed on Monday, October 26th.

HSY hit our stop loss on October 28th but we are still long a short-term put.



Play Updates


Adobe System Inc. - ADBE - close: $88.66

Comments:
11/01/15: ADBE spent most of the week consolidating sideways in the $87.50-90.00 range. Shares did manage to post a gain and ADBE looks poised to breakout past resistance at $90.0 soon.

Tonight I am suggesting investors wait for ADBE to close above $90.00 before considering new bullish positions. However, there is a chance the market dips following October's big gains. You could buy ADBE calls on a dip in the $85-86 region instead.

Trade Description: October 11, 2015:
Back in the old days you used to buy software in a store, bring it home, and install it on to your personal computer. You paid for it. It was your copy to use forever - a perpetual license. Today the business model has changed, especially at ADBE. Nowadays you download the software from the internet to your computer and pay for it on a monthly, subscription basis.

If you're not familiar with ADBE here's a brief company description: "Adobe is changing the world through digital experiences. Content built and optimized with Adobe products is everywhere you look - from websites, video games, and smartphones to televisions, tablets, and beyond. Adobe Creative Cloud software offers the most innovative tools for creating digital media, while Adobe Marketing Cloud delivers groundbreaking solutions for data-driven marketing. Our leadership in these two emerging categories, Digital Media and Digital Marketing, provides our customers with a real competitive advantage, positioning Adobe for continued growth well into the future. As one of the largest software companies in the world, Adobe achieved revenue of more than US$4 billion in 2013."

The company's Q1 earnings report was March 17th. Results were $0.44 a share, which was five cents better than expected. Revenues were up +10.9% to $1.11 billion, also above expectations. The company continues to see success with their subscription model and added 517,000 new creative cloud subscriptions, a +28% improvement from a year ago.

Q2 results came out on June 16th. ADBE beat the bottom line with earnings of $0.48 a share (3 cents above estimates). Revenues were up +8.8% to $1.16 billion, which was in-line with expectations. Management lowered their Q3 and 2015 guidance. This sparked a one-day sell-off that traders quickly used to buy the dip.

The company delivered a similar performance in its fiscal Q3. ADBE reported on September 17th. They beat estimates by four cents. Revenues improved +21% from a year ago to $1.22 billion, slightly ahead of estimates. Yet management lowered their Q4 estimate again. The stock gapped down the next day and then rallied.

This past week ADBE lowered their guidance yet again. This time they adjusted their fiscal 2016 numbers below estimates. What happened? Wall Street defends the stock and shares see a one-day decline. There seems to be a trend of investors buying bad news. It's probably because these are all short-term issues for ADBE and a good chunk of the problem is foreign currency headwinds. ADBE is still forecasting double-digit percentage gains for most of its businesses through 2018. Revenues growth is forecasted to grow +20% while earnings are forecasted to grow +30% over the next few years.

Technically ADBE is still in a long-term up trend in spite of some volatile moves in the last few months. Shares are only a few points away from new all-time highs. The peak is $87.25 set in August this year. Tonight I am suggesting we wait for ADBE to close in the $87.50-89.00 range and buy calls the next morning with a stop loss at $77.85.

- Suggested Positions -
OCT 19, 2015 - entry price on ADBE @ 88.15, option @ 6.80
symbol: ADBE170120C100 2017 JAN $100 call - current bid/ask $6.30/6.55

10/19/15: Trade begins.
10/16/15: Triggered. ADBE @ $88.67, in the $87.50-89.00 entry range
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 77.85
Play Entered on: 10/19/15
Originally listed on the Watch List: 10/11/15


The Clorox Co. - CLX - close: $121.94

Comments:
11/01/15: COST also spent last week churning sideways. The stock posted a loss for the week, which snapped a six-week winning streak.

CLX has earnings coming up tomorrow, Monday, November 2nd. Our plan was to buy the November $120 put on Friday at the closing bell to protect us from a post-earnings plunge (cost on the put $1.35).

No new positions at this time.

Trade Description: September 8, 2015:
Clorox is not just a bleach and cleaners company. They also make food and personal care items. Actually they make a lot more.

CLX is in the consumer goods sector. According to the company, "The Clorox Company is a leading multinational manufacturer and marketer of consumer and professional products with about 7,700 employees worldwide and fiscal year 2014 sales of $5.5 billion. Clorox markets some of the most trusted and recognized consumer brand names, including its namesake bleach and cleaning products; Pine-Sol cleaners; Liquid Plumr clog removers; Poett home care products; Fresh Step cat litter; Glad bags, wraps and containers; Kingsford charcoal; Hidden Valley and KC Masterpiece dressings and sauces; Brita water-filtration products and Burt's Bees natural personal care products. The company also markets brands for professional services, including Clorox Healthcare, HealthLink, Aplicare and Dispatch infection control products for the healthcare industry. More than 80 percent of the company's brands hold the No. 1 or No. 2 market share positions in their categories."

Earnings have been pretty strong when you consider the negative impact of currency fluctuations on a big multi-national like CLX. On February 4th CLX announced its Q2 report and beat Wall Street estimates on both the top and bottom line. Management raised their 2015 guidance and their revenue guidance.

Their Q3 report, on May 1st, was a little bit softer. Earnings of $1.08 per share missed estimates by 2 cents. Revenues were up +2.6% to $1.4 billion but that was above expectations. Management raised their outlook again for their full year 2015 guidance.

Their most recent report was CLX's Q4 results on August 3rd. Earnings of $1.44 per share was seven cents above estimates. Revenues were up +4.0% to $1.56 billion, also better than expected. Management issued soft guidance, below Wall Street estimates, but the stock rallied anyway.

CLX has a strong, long-term up trend. Investors could seek safety in stocks like CLX if the global economy continues to struggle.

The stock market's correction saw CLX plunged back toward technical support near its 200-dma. Now the stock has been consolidating sideways in the $108-112 zone. I'd like to see CLX fill the gap ($112-114) before we launch positions. Therefore the plan is to wait for CLX to close above $114.25 and then buy calls the next morning.

This is a long-term trade. We're using the 2017 calls.

- Suggested Positions -
SEP 22, 2015 - entry price on CLX @ 113.65, option @ 6.60*
symbol: CLX170120C125 2017 JAN $125 call - current bid/ask $6.80/8.70

Oct. 30, 2015 - bought the NOV $120 put @ $1.35

*Adjusted cost for the trade $5.25 + $1.35 = $6.60

10/30/15 bought the November $120 put at the closing bell
Put cost $1.35
10/25/15 Prepare to buy a short-term November put on Friday, Oct. 30th
10/18/15 CLX looks short-term overbought and due for a pullback
10/11/15 new stop @ 111.85
09/27/15 new stop loss @ 105.85
09/22/15 Trade begins. CLX opens at $113.65
09/21/15 triggered. CLX closed @ $114.47, trigger was a close above $114.25
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 111.85
Play Entered on: 09/22/15
Originally listed on the Watch List: 09/08/15


Costco Wholesale - COST - close: 158.12

Comments:
11/01/15: COST bounced along support near $155 last week before bouncing toward new highs. Shares look poised to breakout past short-term resistance in the $159-160 area.

No new positions at this time.

Trade Description: October 4, 2015:
After five years of solid gains the rally in COST peaked in the $155 area in early 2015. The stock has spent the last several months in a massive consolidation that could be coming to an end.

If you're not familiar with COST they are in the services sector. The company runs a membership warehouse business that competes with the likes of Sam's Club (a division of Wal-Mart). According to the company, "Costco currently operates 686 warehouses, including 480 in the United States and Puerto Rico, 89 in Canada, 36 in Mexico, 27 in the United Kingdom, 23 in Japan, 12 in Korea, 11 in Taiwan, seven in Australia and one in Spain. The Company plans to open up to an additional 16 new warehouses (including one relocation to a larger and better-located facility) prior to the end of its fiscal year on August 30, 2015. Costco also operates electronic commerce web sites in the U.S., Canada, the United Kingdom and Mexico."

Revenue growth has been lackluster this year. COST has managed to beat Wall Street estimates on the bottom line but the revenue number has been soft. Their most recent quarterly report was announced on September 29th. Earnings were up +10% from a year ago to $1.73 a share. That beat estimates. Yet COST said their Q4 revenues were virtually flat (+0.7%) to $35.78 billion. That missed expectations. Comparable store sales were up +2% in the U.S. but down -10% in Canada.

A lot of COST's revenue troubles have come from lower oil, which has pushed gas prices lower. The big drop in gas prices cuts their revenue growth. Plus the stronger dollar hurts their foreign sales. The company continues to expand its presence in the U.S. and overseas. Management plans to launch 12 new warehouses this quarter. Overall COST plans to build 32 new stores in the next 12 months, including its first store in France.

The stock looks poised to breakout past its July, August, and September highs and make a run at its 2015 highs. We suspect COST is going to grab more investor attention as we approach the holiday shopping season. The stock tends to see a rally from September into Black Friday (the day after Thanksgiving).

COST has resistance in the $147.00 area. The August intraday high was $147.59 while the August closing high was $146.89. Tonight I am suggesting we wait for COST to close above $147.60 and buy calls the next morning. More conservative traders may want to wait and make sure COST closes above $148.00 instead since a close above this level would generate a new buy signal on the point & figure chart.

- Suggested Positions -
OCT 06, 2015 - entry price on COST @ 148.15, option @ 8.70
symbol: COST170120C160 2017 JAN $160 call - current bid/ask $11.70/12.00

10/18/15 new stop @ 143.50
10/06/15 trade begins. COST @ $148.15
10/05/15 triggered. COST @ $148.07, above trigger @ $147.60
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 143.50
Play Entered on: 10/06/15
Originally listed on the Watch List: 10/04/15


Salesforce.com - CRM - close: 77.71

Comments:
11/01/15: CRM is yet another bullish candidate that spent most of last week consolidating sideways. CRM oscillated on either side of the $78 level last week.

No new positions at this time.

Trade Description: September 20, 2015:
If you're looking for a long-term bullish candidate CRM definitely fits. Founded in 1999 and headquartered in San Francisco the company has become a huge player in the cloud computing industry.

CRM is part of the technology sector. According to the company, "Salesforce is the world's #1 CRM company. Our industry-leading Customer Success Platform has become the world's leading enterprise cloud ecosystem. Industries and companies of all sizes can connect to their customers in a whole new way using the latest innovations in cloud, social, mobile and data science technologies with the Customer Success Platform."

CRM's revenues have been consistently growing in the mid +20% range the last few quarters. Their Q4 revenues were up +26%. Q1 revenues were +23%. The company's most recent quarter was announced August 20th. Analysts were expecting Q2 results of $0.17 a share on revenues of $1.6 billion. CRM beat both estimates with a profit of $0.19 as revenues grew +23.5% to $1.63 billion. Management raised their Q3 and full year 2016 revenue guidance.

Technically the stock is in a long-term up trend and the point & figure chart is forecasting an $85.00 target. Considering where we are on the calendar and the fact that the next three weeks tend to be the worst weeks of the year for stocks, I am suggesting a buy-the-dip trigger. Wait for CRM to dip to $65.25 and then buy calls.

- Suggested Positions -
OCT 14, 2015 - entry price on CRM @ 76.29 option @ 8.20
symbol: CRM170120C85 2017 JAN $85 call - current bid/ask $7.50/ 8.35

10/14/15 Trade begins. CRM @ $76.29
10/13/15 Triggered. CRM @ $76.63, above $76.25 trigger
10/11/15 strategy update: move the buy-the-dip trigger to $68.00 and adjust the stop loss to $63.75
If CRM continues to rally, buy calls if the stock closes above $76.25
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 67.65
Play Entered on: 10/14/15
Originally listed on the Watch List: 09/20/15


DR Horton Inc. - DHI - close: 29.44

Comments:
11/01/15: Homebuilding stocks have struggled with some disappointing economic data the last couple of weeks. Shares of DHI spent last week slowly fading lower toward support in the $28-29 zone.

No new positions at this time.

Tonight we are adjusting the stop loss up to $25.90.

FYI: DHI is scheduled to report earnings on November 10th.

Trade Description: September 13, 2015:
Believe it or not but homebuilders have been some of the market's better performers this year. The group is up about 15% year to date. DHI has outperformed its peers with a +24% gain in 2015. The stock is poised to breakout past resistance near $32.00 and hit new multi-year highs.

If the Federal Reserve does announce a rate hike on Thursday it could spark a temporary sell-off in the homebuilders. I want to be ready to buy the dip in DHI. The stock should have support in the $27.00-28.00 area. Tonight I am suggesting a buy-the-dip trigger at $28.50 and we'll list a stop loss at $25.75.

- Suggested Positions -
OCT 06, 2015 - entry price on DHI @ 31.15, option @ 3.70
symbol: DHI170120C35 2017 JAN $35 call - current bid/ask $2.14/2.81

11/01/15 new stop @ 25.90
10/06/15 Trade begins. DHI @ $31.15
10/05/15 Triggered. DHI @ $31.07, above $30.65 trigger
10/04/15 Add a second trigger - a close above $30.65 as another entry to buy calls
10/04/15 adjust the buy-the-dip trigger from $28.50 to $27.75 and move the stop loss down to $25.45.
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 25.90
Play Entered on: 10/06/15
Originally listed on the Watch List: 09/13/15


The Walt Disney Co. - DIS - close: 113.74

Comments:
11/01/15: DIS encountered some profit taking on Friday (-1.1%) but still posted a gain for the week. Shares are up five weeks in a row and quickly approaching earnings.

DIS should reported earnings on Thursday, November 5th, after the closing bell. After a rally from $98 to $115 in the last five weeks odds are good that DIS will see some profit taking when they report earnings.

We want to buy a short-term put prior to their earnings report. The good news is that DIS has options at $1.00 strikes. Here's the plan. On Wednesday, November 4th, we want to buy a November put (expires Nov. 20th). Which put do we buy? Pick a November put that is $5.00 less than where DIS is trading on Wednesday at the closing bell. This is an attempt to protect our position should DIS see another plunge like its last earnings report.

No new bullish positions at this time.

Trade Description: September 27, 2015:
The Force is strong with this one. DIS is poised to reap a galaxy of profits as the company re-launches the Star Wars franchise.

DIS has been a big cap superstar with strong, steady gains off its 2011 lows. That changed in August this year. Shares of DIS plunged into a very sharp and painful correction. The catalyst for the drop was the company's earnings report. Disney reported earnings on August 4th and beat the street with earnings of $1.45 compared to estimates for $1.42. The very next day shares fell -$11.00 to $110. The sell-off accelerated in August thanks to the global market meltdown. Since then shares have recovered.

Disney posted $13.1 billion in revenue compared to estimates for $13.2 billion. That minor miss was not the reason for the huge decline in the stock. Disney said revenues in its cable products rose +5% BUT they had seen some pressure from online streaming. Subscription growth to the ESPN cable bundle had slowed, not declined, just slowed.

There are multiple reasons. There were no major sporting events this summer like the World Cup, Olympics, etc. Some consumers are cutting the cord to cable because they are now getting their TV programming from Netflix, Hulu, etc. Cable is expensive compared to the streaming options. The drop off in ESPN growth is not related specifically to Disney. CEO Bob Iger said subscriptions would pick back up in 2016 and expand sharply in 2017 thanks to a flood of sporting events due to come online next year.

Disney has already purchased the rights to nearly every sporting event available in the next five years but the old contracts with the prior rights holders have yet to expire. As those contracts expire and the new Disney contracts begin the content on ESPN will surge.

(sidenote - The advertising environment for television should also improve in 2016 thanks to the U.S. presidential election.)

This slowdown in ESPN growth should be ignored. This is just a small part of the Disney empire and everything else is growing like crazy. Parks and resorts revenue rose +4%. Consumer products revenue rose +6% thanks to Frozen, Avengers and Star Wars merchandise. The only weak spot was interactive gaming, which declined -$58 million to $208 million. Disney expects that to rebound in Q4 as new games are released and holiday shopping begins.

The real key here is the theme parks, cruises and most of all the movie franchises. They have five Star Wars movies in the pipeline and the one opening this December is expected to gross $2.2 billion and provide Disney with more than $1 billion in profits. This is just one of the blockbusters they have scheduled.

Analysts are claiming Disney shares could add 25% before the end of December because of their strong movie schedule and coming attractions. The Avengers movie in April was a hit and added greatly to their Q2 earnings. However, that will just be a drop in the bucket compared to the money they are going to make on the Star Wars reboot in December. That is the first of five Star Wars movies on the calendar. Remember, Disney now has Marvel, Pixar and Star Wars (Lucasfilm) all under the same roof.

Disney Movie Schedule (partial list)

Dec. 18, 2015 - "Star Wars: Episode VII - The Force Awakens"
2016 - "The Incredibles 2"
2016 - "Frozen" sequel
April 2016 - "Captain America: Civil War"
June 2016 - "Finding Dory"
Dec. 2016 - "Star Wars Anthology: Rogue One"
May 2017 - "Star Wars: Episode VIII"
June 2017 - "Toy Story 4"
Late 2017 - "Thor: Ragnarok"
May 2018 - "Avengers: Infinity War - Part I"
2018 - "Untitled Star Wars Anthology Project"
May 2019 - "Avengers: Infinity War - Part II"
2019 - "Star Wars: Episode IX"

Content is still king and DIS rules. They're going to make a hoard of money off their Star Wars movies but that's just the tip of the iceberg. There will be tons of money made on merchandising from toys, clothing, video games, and just about everything else under the sun they can slap a Star Wars logo on.

The stock's correction from $121 to $90 was abrupt. DIS quickly fell from correction territory to bear-market territory in just a few days. Fortunately DIS produced a pretty good rebound. Yet the oversold bounce stalled under resistance near $105 and its 200-dma.

We have two different entry points. We have a buy-the-dip trigger if stocks crash again. We also have a breakout trigger if DIS pushes through resistance.

- Suggested Positions -
OCT 14, 2015 - entry price on DIS @ 106.50, option @ 6.45
symbol: DIS170120C120 2017 JAN $120 call - current bid/ask $9.00/9.25

11/01/15 Prepare to buy a short-term November put (expires Nov 20th) on Wednesday, November 4th, to protect our position prior to DIS' earnings
10/25/15 new stop @ 103.45
10/18/15 new stop loss @ $97.45
10/14/15 Trade begins. DIS opens at $106.50
10/13/15 Triggered. DIS @ $106.59, above the $106.50 trigger
10/11/15 updated the trade description
10/04/15 added a breakout entry trigger
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 103.45
Play Entered on: 10/14/15
Originally listed on the Watch List: 09/27/15


Facebook, Inc. - FB - close: 101.97

Comments:
11/01/15: FB's bullish breakout past round-number resistance at $100 continued last week. Shares tagged a new all-time high near $105 on Thursday. The stock encountered some profit taking on Friday (-2.7%), which snapped a three-week winning streak.

FB has earnings coming up on Wednesday, November 4th. Just like our DIS trade, we want to try and protect ourselves with a short-term November put.

Here's the plan. On Tuesday, November 3rd, we want to buy a November put (expires Nov. 20th). Which put do we buy? Pick a November put that is $5.00 less than where FB is trading on Tuesday at the closing bell.

No new bullish positions at this time.

Trade Description: September 13, 2015:
We are bringing FB back to the LEAPStrader newsletter. Cross your fingers and hope for a big dip!

Facebook probably needs no introduction. It's the largest social media platform on the planet. The company is quickly approaching 1.5 billion monthly active users. A couple of weeks ago they hit a new milestone - one billion people logged into Facebook in a single day.

The company continues to grow. In addition to their Facebook social media powerhouse they also own Facebook Messenger, WhatsApp, and Instagram. Their WhatsApp product is the largest messaging service on the planet with over 900 million monthly active users. Meanwhile FB's photo-sharing Instagram property has more than 300 million active users. The company has been ramping up their advertising efforts to slowly monetize Instagram. FYI: FB also owns Occulus Rift, the virtual reality company, but it's probably a few more years before VR goes mainstream.

Shares of FB have been incredibly volatile over the last few weeks. After surging to all-time highs in July following its earnings report the stock crashed in August. The market's correction lower sparked some extreme moves in FB with a plunge down to $72.00 on August 24th. This past week FB displayed relative strength and has rallied back above its 50-dma. However, I do not want to chase it here.

FB has already demonstrated that it can be volatile when the market sees big moves. If stocks sell-off on the Fed's decision this week we want to be ready to buy it on weakness. I view the $80-85 region as likely support. Tonight I am suggesting a buy-the-dip trigger at $85.00. If triggered we'll start this play with a stop loss at $79.75.

- Suggested Positions -
SEP 29, 2015 - entry price on FB @ 86.50, option @ 9.25
symbol: FB170120C100 2017 JAN $100 call - current bid/ask $16.30/16.40

11/01/15 Prepare to buy a short-term November put (expires Nov 20th) on Tuesday, November 3rd, to protect our position prior to FB' earnings
10/25/15 new stop @ 92.00
10/11/15 new stop @ 83.75
09/29/15 Triggered @ $86.50
09/20/15 adjust the buy-the-dip trigger from $85.00 to $86.50
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 92.00
Play Entered on: 09/29/15
Originally listed on the Watch List: 09/13/15


Fidelity National Info. Svcs. - FIS - close: $72.92

Comments:
11/01/15: Investors have a decision to make. FIS has earnings coming up on Tuesday morning, November 3rd. If FIS disappoints with their earnings results the stock could see a big move lower. Should that occur our January 2016 options will collapse. More conservative traders may want to trim their position or exit their positions tomorrow (Monday) to avoid holding over the earnings announcement. We are going to keep the play open.

No new positions at this time.

Trade Description: September 8, 2015:
We are adding FIS as a relative strength trade. The stock has been marching higher for years. Shares are outpacing the broader market this year with a +9.0% gain year to date.

FIS is in the technology sector. According to the company, "FIS is a global leader in banking and payments technology as well as consulting and outsourcing solutions. With a long history deeply rooted in the financial services sector, FIS serves more than 14,000 institutions in over 130 countries. Headquartered in Jacksonville, Fla., FIS employs more than 42,000 people worldwide and holds leadership positions in payment processing and banking solutions. Providing software, services and outsourcing of the technology that empowers the financial industry, FIS is a Fortune 500 company and is a member of Standard & Poor’s 500 Index."

FIS just recently announced it was acquiring financial software maker SunGard Data Systems for $9.1 billion in cash and stock. SunGard was about to go public and FIS gobbled them up. The combined company will have $9.2 billion in annual revenues and over 55,000 employees.

The big spike higher on FIS' daily chart was the market's reaction to this acquisition news. Shares of FIS filled the gap during the market's correction lower. Now traders are back to buying FIS. The point & figure chart is bullish and forecasting at $92.00 target.

Tonight I am suggesting we wait for FIS to close above $71.00 and then buy calls the next morning. We will start with a stop loss at $64.75.

- Suggested Positions -
OCT 09, 2015 - entry price on FIS @ 71.26, option @ 2.00
symbol: FIS160115C75 2016 JAN $75 call - current bid/ask $1.48/1.85

11/01/15 Get ready! FIS has earnings coming up on Tuesday morning
10/09/15 trade begins. FIS @ $71.26
10/08/15 triggered. FIS @ $71.30, above $71.00 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 64.75
Play Entered on: 10/09/15
Originally listed on the Watch List: 09/08/15



The Home Depot, Inc. - HD - close: 123.64

Comments:
11/01/15: HD's outperformance stalled last week. Like a lot of recent winners shares drifted lower. HD's minor decline for the week snapped a five-week winning streak.

The $120 level should be support. I would consider new bullish positions if we see HD trade near $120 and bounce (wait for the bounce).

FYI: HD is scheduled to report earnings on November 17th.

Trade Description: October 18, 2015:
Home Depot's stock has outperformed the broader market in spite of the fact shares were stuck in a trading range for the last seven months. HD broke through significant resistance at the $120.00 level several days ago.

The big surge in the U.S. housing market this year has been a bullish tailwind for HD's business. The home remodeling and repair industry and consumer spending in this category is expected to hit levels not seen since before the "Great Recession" in 2008-2009. HD is poised to reap the benefits.

If you're not familiar with the company, HD is in the services sector. According to the company, "The Home Depot is the world's largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. In fiscal 2014, The Home Depot had sales of $83.2 billion and earnings of $6.3 billion. The Company employs more than 370,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index."

HD has been showing steady earnings and revenue growth. The company has beaten Wall Street estimates on both the top and bottom line the last three quarters in a row. Management has also raised their guidance the last three quarters in a row.

Their most recent report was August 18th. HD announced its Q2 earnings were up +14% from a year ago to $1.71 per share. Revenues were up +4.3% to $24.83 billion. Comparable store sales came in better than expected with a +4.2% improvement.

Wall Street analysts seem bullish with firms like Deutsche Bank and UBS recently raising their price targets on HD. The recent breakout past $120 generated a new buy signal on the point & figure chart, which is now forecasting at $143 target.

The all-time high for HD was set in August this year at $123.80. Tonight I am suggesting investors wait for HD to close above $124.00 and then buy calls the next morning.

- Suggested Positions -
OCT 23, 2015 - entry price on HD @ 125.01, option @ 5.20
symbol: HD170120C140 2017 JAN $140 call - current bid/ask $4.25/4.50

10/25/15 new stop loss @ 113.45
10/23/15 trade begins. HD opens at $125.01
10/22/15 triggered. HD @ $124.36, above our $124.00 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 113.45
Play Entered on: 10/23/15
Originally listed on the Watch List: 10/18/15


The Hershey Company - HSY - close: 88.69

Comments:
11/01/15: The stock market did not react well to HSY's earnings. The company reported earnings on Wednesday morning, Oct. 28th. Analysts were expecting a profit of $1.13. HSY beat estimates with a profit of $1.17 a share. However, revenues were only in-line with estimates at $1.96 billion. Management then lowered their 2015 guidance below Wall Street expectations.

Shares of HSY plunged on Wednesday with a gap down at $90.95 and a drop to $88.24 at the close. It was a -6.4% drop. Our stop loss was hit at $89.75. However, the night before we bought a short-term November put to help protect us. The plan was to buy the November $90 put at the close on Tuesday (Oct. 27th). The cost on our November $90 put was $1.03. Today that put has a bid/ask of $2.30/2.42.

What to do now? Our long-term call position is closed. We have a short-term put that expires in three weeks. I have closed out the call position below (and on the portfolio) and added the short-term put. I would not be surprised to see HSY dip toward $85.00. Tonight we'll add an exit target to close the November $90 put if HSY hits $85.50. More nimble traders may want to play it by ear but this is a once a week newsletter so we have to plan ahead.

No new positions at this time.

Currently no stop loss on the put position.

- Suggested Positions -
OCT 13, 2015 - entry price on HSY @ 96.79, option @ 3.40
symbol: HSY170120C110 2017 JAN $110 call - exit $1.21 (-64.4%)

OCT. 27, 2015 - Bought HSY151120P90 Nov $90 put @ $1.03 Current bid/ask $2.30/2.42

HSY trade thus far:
Bought 2017 Jan $110 call @ $3.40,
Exit 2017 Jan $110 call @ 1.21, loss of $2.19 (-64.4%)
Bought 2015 Nov $90 put @ 1.03
Current bid Nov $90 put @ 2.30, gain of $1.27 (+123.3%)
- - - - - - - - - - - - - - - - - - -
Current cost $3.40 call + $1.03 put = $4.43
Adjusted loss on this trade so far = $0.92 (-20.7%)

11/01/15 Add a $85.50 target to exit the put
10/28/15 HSY hits our stop at $89.75, call position closed
10/27/15 Nov. $90 put purchased (cost $1.03)
10/25/15 plan on buying the November $90 put on Tuesday, at the close (Oct. 27th)
10/13/15 Trade begins. HSY opens at $96.79
10/12/15 Triggered. HSY @ $97.07, above our trigger of $97.00
10/08/15 HSY closed @ $97.00, not above $97.00
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: To Be Determined
Current Stop loss: 89.75
Play Entered on: 10/13/15
Originally listed on the Watch List: 10/04/15


Kellogg Co. - K - close: $70.52

Comments:
11/01/15: Our new trade on K is not off to a good start. After the big bullish breakout two weeks ago K has seen nothing but profit taking. Fortunately broken resistance near $70.00 is holding up as support so far.

Our trade opened on Monday, October 26th. I would be tempted to buy calls here. However, K is scheduled to report earnings this week on Tuesday, November 3rd, before the opening bell. Tuesday morning will likely be volatile for the stock. Therefore, no new positions at this time.

Trade Description: October 11, 2015:
Shares of this giant consumer goods sector company are poised for a massive breakout higher.

If you are not familiar with K, here's a brief description: "At Kellogg Company (NYSE:K), we are driven to enrich and delight the world through foods and brands that matter. With 2014 sales of approximately $14.6 billion, Kellogg is the world's leading cereal company; second largest producer of cookies and crackers; a leading producer of savory snacks; and a leading North American frozen foods company. Every day, our well-loved brands nourish families so they can flourish and thrive. These brands include Kellogg's®, Keebler®, Special K®, Pringles®, Kellogg's Frosted Flakes®, Pop-Tarts®, Kellogg's Corn Flakes®, Rice Krispies®, Kashi®, Cheez-It®, Eggo®, Coco Pops®, Mini-Wheats®, and many more. To learn more about our responsible business leadership, foods that delight and how we strive to make a difference in our communities around the world."

At first glance you would think K's products are on the wrong side of the growing health food trend in the U.S. You would probably be correct. Consumption of breakfast cereals in the United States has been falling for the last five years. However, K is seeing impressive growth overseas, especially in emerging markets.

The downside to all this growth overseas is foreign currency headwinds. Negative FX trends have crimped K's revenue growth all year long. The company expects bearish foreign currency trends to shave off 9 cents a share in 2016 earnings. Fortunately it appears that investors are looking past the currency trouble.

The stock has been consolidating beneath major resistance at the $70.00 level for months. A breakout could spark the next major leg higher. Dividend investors should be drawn to K for its 2.8% yield. The point & figure chart is bullish and forecasting a long-term $92.00 target.

Tonight I am suggesting investors wait for K to close in the $70.25-71.75 range and buy calls the next morning with a stop loss at $64.75.

FYI: K's earnings are coming up on November 3rd. Cautious investors may want to wait and see how the market reacts to K's results before initiating new positions.

Investors should also note that the spreads on the 2017 calls are relatively wide. We may have to hold this trade several months before the spreads contract.

- Suggested Positions -
OCT 26, 2015 - entry price on K @ 71.76, option @ 4.00
symbol: K170120C75 2017 JAN $75 call - current bid/ask $2.55/3.60

11/01/15 Expect volatility on Tuesday when K reports earnings
10/26/15 Trade begins. K opens at $71.76
10/23/15 K dips into our suggested entry range, closes @ $71.70
10/22/15 K soars past our entry range (70.25-71.75) with a close at $72.01
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 64.75
Play Entered on: 10/26/15
Originally listed on the Watch List: 10/11/15


Lions Gate Entertainment - LGF - close: $38.97

Comments:
11/01/15: The last couple of weeks have been brutal at the movie box office. All the new releases have bombed. The Martian seems to be the only exception but that came out a few weeks ago. This is a movie industry problem, not a LGF issue, but this might make investors nervous about LGF even though this company's Hunger Games movie coming out soon is going to be a blockbuster. Shares of LGF have not performed well. Last week's rally attempt failed on Thursday. LGF looks poised to test short-term support at $38.00 soon.

No new positions at this time. LGF is scheduled to report earnings on November 9th.

FYI: LGF's The Hunger Games: Mockingjay, Part 2, hits U.S. theaters on November 20th.

Trade Description: September 8, 2015:
If at first you don't succeed, try, try, try again. We tried trading LGF recently but we were shaken out thanks to the market's late August crash and LGF's spike to 2015 lows. Naturally the stock has recovered and is on the verge of a major breakout past resistance near $39-40.

What follows is an updated version of my original play description:

Have you ever wanted to trade the hype on a particular movie release? We might be able to do just that with LGF.

LGF is in the services sector. According to the company, "Lionsgate is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, new channel platforms, video games and international distribution and sales. Lionsgate currently has more than 30 television shows on over 20 different networks spanning its primetime production, distribution and syndication businesses, including such critically-acclaimed hits as the multiple Emmy Award-winning Mad Men and Nurse Jackie, the broadcast network series Nashville, the syndication success The Wendy Williams Show, the hit series Orange is the New Black, the critically-acclaimed drama Manhattan and the breakout series The Royals."

What that company description neglects to mention is the Hunger Games franchise. LGF makes the movies for the extremely popular franchise and the fourth and final movie is due to hit the U.S. market in November this year. Shares of LGF will likely rally into November as hype builds for the "Hunger Games: Mockingjay - Part 2" movie.

LGF is also considered a takeover target. Everyone is scrambling for quality TV programming and LGF has the awards to prove it can deliver. Potential suitors include any of the major media companies. There are rumors that LGF could be a target by someone like AAPL who wants to jump into media creation or possibly NFLX, who just lost LGF's content when they failed to renew their contract with EPIX.

I am suggesting we wait for LGF to close in the $40.00-41.00 range. If shares close in this range then buy calls the next morning. No initial stop loss.

- Suggested Positions -
SEP 18, 2015 - entry price on LGF @ 39.61, option @ 4.50
symbol: LGF170120C45 2017 JAN $45 call - current bid/ask $3.30/4.30

10/25/15 new stop @ 34.45
10/11/15 Rumors are growing that LGF is poised to buy Starz
09/18/15 Trade begins. LGF opens at $39.61
09/17/15 LGF closed at $40.06, inside our $40-41 entry range
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 34.45
Play Entered on: 09/18/15
Originally listed on the Watch List: 09/08/15


Southwest Airlines - LUV - close: $46.29

Comments:
11/01/15: Airline stocks ($XAL) have spent the last couple of weeks churning sideways. Thankfully LUV is an exception. The stock has been pushing higher and just tagged new six-month highs on Friday. Of course shares are now short-term overbought, near resistance, and likely due for a pullback.

LUV's 2015 prior highs in the $46.50 area are now resistance. While I'd love to see a breakout I would expect a pullback.

Tonight we will adjust the stop loss to $39.75.

Trade Description: October 11, 2015:
Airlines can be a cutthroat business. Yet LUV has managed to be profitable for 42 years in a row.

LUV is part of the services sector. According to the company, "In its 45th year of service, Dallas-based Southwest Airlines (LUV) continues to differentiate itself from other air carriers with exemplary Customer Service delivered by more than 47,000 Employees to more than 100 million Customers annually. Southwest operates more than 3,600 flights a day, serving 95 destinations across the United States and six additional countries. Southwest service to Belize City, Belize, begins Oct. 15, 2015. Subject to foreign government approval, service to Liberia, Costa Rica, begins Nov. 1, 2015.

Based on the U.S. Department of Transportation's most recent data, Southwest Airlines is the nation's largest carrier in terms of originating domestic passengers boarded. The Company operates the largest fleet of Boeing aircraft in the world, the majority of which are equipped with satellite-based WiFi providing gate-to-gate connectivity while over the United States. That connectivity enables Customers to use their personal devices to access streaming music provided by Apple Music or to view video on-demand movies and television shows, as well as nearly 20 channels of free, live TV compliments of our valued Partners. Southwest is the only major U.S. airline to offer bags fly free® to everyone (first and second checked pieces of luggage, size and weight limits apply, some airlines may allow free checked bags on select routes or for qualified circumstances), and there are no change fees, though fare differences might apply."

2015 has been a relatively challenging year for airline stocks. Investors have been worried that airlines would add too much capacity and thus put pressure on fares. Fares have begun to drop recently but that is more of a reflection in lower fuel prices for airlines thanks to low oil prices.

The third quarter was relatively strong for the industry. Several companies have guided higher. 2015 has not been a great year for airline stocks but it could be a record year for the industry in terms of profits. Domestic airlines are seeing strong free cash flow and they're buying back stock.

After the summer slump shares of LUV appear to have bottomed. Both the industry and Wall Street could be looking ahead to the busy holiday travel season. September was a good month for LUV. The company reported revenue passenger miles were up +11.4% last month.

Meanwhile Wall Street is bullish. The average analyst price target is about $50. Goldman Sachs recently said LUV has +34% upside. If shares of LUV can rally past $41.00 it will generate a new triple-top breakout buy signal on the point & figure chart.

Currently shares are challenging resistance near $40.00 and its simple 200-dma (also near $40). The August high was the $40.85 area. Tonight I am suggesting we wait for LUV to close above $41.00 and then buy calls the next morning with a stop loss at $36.85.

- Suggested Positions -
OCT 13, 2015 - entry price on LUV @ 40.82, option @ 2.60
symbol: LUV170120C50 2017 JAN $50 call - current bid/ask $4.40/4.90

11/01/15 new stop @ 39.75
10/25/15 new stop @ 38.75
10/22/15 LUV reports earnings and beats estimates on both the top and bottom line
10/13/15 Trade begins. LUV opens @ $40.82
10/12/15 Triggered. LUV @ $41.22, above our $41.00 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 39.75
Play Entered on: 10/13/15
Originally listed on the Watch List: 10/11/15


Orbital ATK, Inc. - OA - close: $85.62

Comments:
11/01/15: OA was a big winner last week. Shares soared to new highs thanks to better than expected earnings news. The company reported earnings on Tuesday, Oct. 27th. Analysts were expecting a profit of $1.10 a share on revenues of $1.09 billion. OA beat on both fronts with a profit of $1.35 a share. Revenues were up +52% to $1.13 billion. The company raised their full year 2015 guidance above expectations. The stock rallied on this bullish outlook.

We had purchased a short-term November $75 put just in case to protect us from a big drop if OA had reported disappointing earnings. This put cost us $1.10, which will adjust the cost of our long-term call trade. If OA sees any pullback this week we'll try and time an exit on the put and hopefully recoup some of our cost.

No new positions at this time.

Adjust the stop loss on OA to $76.40.

Trade Description: September 8, 2015:
If you read the news it seems like the world is an increasingly dangerous place to live. Defense companies like OA are seeing their business strengthen.

OA is part of the industrial goods sector. According to the company, "Orbital ATK is a global leader in aerospace and defense technologies. The company designs, builds and delivers space, defense and aviation systems for customers around the world, both as a prime contractor and merchant supplier. Its main products include launch vehicles and related propulsion systems; missile products, subsystems and defense electronics; precision weapons, armament systems and ammunition; satellites and associated space components and services; and advanced aerospace structures. Headquartered in Dulles, Virginia, Orbital ATK employs more than 12,000 people in 18 states across the United States and in several international locations."

Their most recent earnings report was August 6th. OA reported its Q2 results of $1.28 per share. That is +16% improvement from a year ago and 26 cents above estimates. Revenues were up +7% to $1.13 billion, also better than expected.

David W. Thompson, Orbital ATK's President and Chief Executive Officer, commented on his company's results, "Orbital ATK reported excellent second quarter financial results characterized by better-than-expected revenue and very strong earnings. These results benefited from outstanding new orders, as well as continued solid operational execution on our major programs. As a result, we are increasing the company's outlook for sales and earnings this year and expanding our previously-announced capital deployment program as well.

Management raised their full year 2016 earnings to $4.60-4.80 a share and forecasted revenues in the $4.425-4.50 billion range. This is above Wall Street estimates of $4.51 a share on revenues of $4.41 billion.

Argus upgraded the stock and boosted their OA price target to $95.00. A Goldman Sachs analyst also upgraded the stock. Goldman said OA has "multiple unique exposures to drive faster than average 3-year growth."

The sell-off during the market's crash on August 24th was ridiculous. OA plunged from $75 to $56 in the blink of an eye and has since recovered. Moves like that are more than a little unnerving. Investors may want to use small positions to limit risk. The August peak was about $81.00. I am suggesting we wait for OA to close in the $81.00-83.00 range and then buy calls the next morning. No initial stop on this trade.

Technically this isn't a LEAPS trade. OA doesn't have LEAPS. We are choosing the 2016 May calls.

- Suggested Positions -
OCT 23, 2015 - entry price on OA @ 82.00, option @ 6.60*
symbol: OA160520C85 2016 MAY $85 call - current bid/ask $3.60/3.90

*adjusted for cost of Nov. $75 put ($1.10)

Currently long the November $75 put (OA151120P75)

11/01/15 new stop @ 76.40
10/26/15 Cost on the Nov. $75 put was $1.10
10/26/15 Buy the November $75 put at the opening bell
10/25/15 new stop loss @ 72.45
10/23/15 Trade begins. OA opens at $82.00
10/22/15 triggered. OA closes at $81.33, in the $81.00-83.00 entry range.
10/18/15 Adjust the option strike from 2016 Feb. $85 call to the 2016 May $85 call
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 76.40
Play Entered on: 10/23/15
Originally listed on the Watch List: 09/08/15


Pepisco, Inc. - PEP - close: 102.19

Comments:
11/01/15: PEP, like so many other big cap names, spent last week consolidating sideways inside a relatively narrow range. If you're looking for a bullish entry point I would be patient and wait for a dip in the $100-101 zone.

Trade Description: October 18, 2015:
PEP is a consumer goods giant with a global presence. According to the company, "PepsiCo products are enjoyed by consumers one billion times a day in more than 200 countries and territories around the world. PepsiCo generated more than $66 billion in net revenue in 2014, driven by a complementary food and beverage portfolio that includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. PepsiCo's product portfolio includes a wide range of enjoyable foods and beverages, including 22 brands that generate more than $1 billion each in estimated annual retail sales."

The stock has been stuck consolidating sideways in the $90-100 trading range for almost a year. It looks like that consolidation may be nearing its end.

Earnings have been better than expected. I looked at the last three quarters. PEP has managed to beat Wall Street's estimates on both the top and the bottom line. Revenues have declined year over year but that is due to negative foreign currency exchange rates that is shaving off about -10% from earnings and revenues. The company says their gross margins and operating margins continue to improve.

The U.S. market is up the last three weeks in a row but it's relatively flat for the year. Investors are confused with all the different global cross currents, exchange fluctuations, central bank moves, and more. Fund managers are probably tempted to park cash in huge, liquid big cap like PEP and get paid 2.8% a year with dividends. Why not? PEP is still growing with solid single-digit growth.

Technically PEP looks poised to breakout past major resistance in the $100 area. The point & figure chart is already bullish and forecasting at $120.00 target. Tonight I am suggesting we wait for PEP to close above $101.00 and then buy calls the next morning. We will start this trade with a stop loss at $89.90.

- Suggested Positions -
OCT 23, 2015 - entry price on PEP @ 103.32, option @ 4.00
symbol: PEP170120C110 2017 JAN $110 call - current bid/ask $3.30/3.55

10/23/15 Trade begins. PEP @ $103.32
10/22/15 Triggered. PEP @ $103.08, above our $101.00 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 89.90
Play Entered on: 10/23/15
Originally listed on the Watch List: 10/18/15


Royal Caribbean Cruises - RCL - close: 98.35

Comments:
11/01/15: Cruise ship stocks continue to perform well. Last week RCL tested round-number resistance at $100.00 and retreated. Fortunately traders bought the dip and shares look poised to breakout past this level soon.

RCL garnered some bullish analyst comments last week and a new $116 price target, which certainly did not hurt.

Tonight we are raising the stop loss to $89.00. No new positions at this time.

Trade Description: September 20, 2015:
If you are looking for stocks with relative strength then RCL fits the bill. Shares tagged new all-time highs last week and posted their third weekly gain in four weeks.

RCL is in the services sector. According to the company, "Royal Caribbean Cruises Ltd. is a global cruise vacation company that owns Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises, Pullmantur and CDF Croisieres de France, as well as TUI Cruises through a 50 percent joint venture. Together, these six brands operate a combined total of 44 ships with an additional eight under construction contracts, and two under conditional agreements. They operate diverse itineraries around the world that call on approximately 480 destinations on all seven continents."

Barclays just upped their outlook on the cruise liners and believes the group is seeing improved strength in pricing. Meanwhile RCL has been cashing in on the growing trend of Chinese tourism. The recent change in ties between the U.S. and Cuba also represents a new opportunity for the cruise lines.

Technically RCL looks very bullish and the point & figure chart is forecasting at $121.00 target. Yet I don't want to buy it here. The market looks poised for a pullback. We will use a buy-the-dip trigger at $90.00. More conservative investors may want to hold out for a dip to $88.00 instead.

- Suggested Positions -
SEP 28, 2015 - entry price on RCL @ 90.00, option @ 6.30
symbol: RCL170120C110 2017 JAN $110 call - current bid/ask $7.85/8.20

11/01/15 new stop @ $89.00
10/23/15 RCL delivered better than expected earnings and raised full year 2015 guidance.
10/11/15 new stop @ 84.75
09/28/15 triggered @ $90.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 89.00
Play Entered on: 09/28/15
Originally listed on the Watch List: 09/20/15


Starbucks Corp. - SBUX - close: 62.57

Comments:
11/01/15: If you haven't noticed yet there was a trend last week among high-flying big-cap names. Most of them drifted sideways. SBUX was no exception with the stock churning sideways in the $62.00-64.00 zone.

The company reported its fiscal Q4 results on Thursday, October 29th. It was a record quarter for the company. Earnings were up +16% from a year ago $0.43 a share. That was in-line with Wall Street estimates. Revenues were up +17.5% to $4.91 billion.

Economist slowdown? What economic slowdown? SBUX said their comparable store sales grew in all geographical regions. Ticket prices were up for most regions. Traffic was up. The company actually lowered Q1 guidance to $0.44-0.45 a share, which is below analysts' estimates of $0.47 but this is due to the strong dollar and negative currency headwinds. SBUX is forecasting +10% revenue growth next year and plans to open about 1,800 stores.

The initial reaction to the earnings news had the stock trading down about $3.00 after hours (around $60) but it never got there in normal trading as investors quickly bought the dip around $62.

SBUX is trading at all-time highs. I was concerned about a potential post-earnings sell-off. Our plan was to buy a short-term November put on Wednesday night at the closing bell. The plan was to buy the November $57.50 put. The ask was $0.61. We will add this to the cost of our long-term call play. If SBUX sees a pullback this week we'll close the put and try and recoup some of our cost.

No new long positions at this time.

Trade Description: September 20, 2015:
It's time to bring SBUX back to the LEAPStrader newsletter.

Here is an updated trade description on SBUX:

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.

Five-Year Plan

In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX continues to serve up strong earnings and revenue growth too. The fourth quarter of 2014 saw a huge jump in SBUX gift cards. One out of every seven Americans received a SBUX gift card. SBUX has been reporting very strong overseas sales growth and consistently healthy same-store sales growth globally.

Shares were very steady performers for much of 2015 and then during the market's correction in late August the stock just collapsed. It was shocking to see SBUX erase six month's worth of gains in just a few days. Of course it bounced back almost as fast. Tonight I want to use SBUX's volatility to our advantage. If the market declines over the next couple of weeks SBUX might be unfairly punished. The $50-52 area should be support. We want to use a buy-the-dip trigger at $52.00.

- Suggested Positions -
OCT 12, 2015 - entry price on SBUX @ 60.35, option @ 3.91*
symbol: SBUX170120C70 2017 JAN $70 call - current bid/ask $3.60/3.80

*adjusted cost for the short-term put (Nov. $57.50)

OCT 28, 2015 -Long SBUX151120P57.5 Nov. $57.50 put @ $0.61

10/29/15 SBUX reported Q4 earnings
10/28/15 buy the Nov. $57.50 put, cost $0.61
10/25/15 prepare to buy short-term puts on Wednesday (Oct. 28th)
10/12/15 Trade begins. SBUX opens @ $60.35
10/09/15 SBUX closed at $60.07, above our suggested entry of a close above $60.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: n/a
Play Entered on: 10/12/15
Originally listed on the Watch List: 09/20/15


Tyson Foods, Inc. - TSN - close $44.36

Comments:
11/01/15: TSN is a watch list candidate that graduated to an active play last week. Two weeks ago shares had rallied to new all-time highs after breaking out past major resistance in the $44-45 zone. Our plan was to buy calls on a dip at $45.50. We didn't have to wait long. TSN reversed lower on Monday, October 26th, and hit our trigger. The profit taking continued through Thursday with TSN trading below $44.00.

I am suggesting investors wait for TSN to close above $45.25 before initiating new bullish positions.

FYI: TSN is scheduled to report earnings on November 23rd.

Trade Description: October 25, 2015
TSN's beef business has struggled as a prolonged drought has hurt the cattle business. Yet TSN is seeing strong improvement in their chicken and prepared foods businesses.

TSN is in the consumer goods sector. According to the company, "Tyson Foods, Inc. (TSN), with headquarters in Springdale, Arkansas, is one of the world's largest food companies with leading brands such as Tyson®, Jimmy Dean®, Hillshire Farm ®, Sara Lee®, Ball Park®, Wright®, Aidells® and State Fair®. It's a recognized market leader in chicken, beef and pork as well as prepared foods, including bacon, breakfast sausage, turkey, lunchmeat, hot dogs, pizza crusts and toppings, tortillas and desserts. The company supplies retail and foodservice customers throughout the United States and approximately 130 countries.

Tyson Foods was founded in 1935 by John W. Tyson, whose family has continued to lead the business with his son, Don Tyson, guiding the company for many years and grandson, John H. Tyson, serving as the current chairman of the board of directors. The company currently has approximately 113,000 Team Members employed at more than 400 facilities and offices in the United States and around the world. Through its Core Values, Code of Conduct and Team Member Bill of Rights, Tyson Foods strives to operate with integrity and trust and is committed to creating value for its shareholders, customers and Team Members. The company also strives to be faith-friendly, provide a safe work environment and serve as stewards of the animals, land and environment entrusted to it."

After big gains in 2013 the stock ran out of steam. Shares have been consolidating sideways for more than a year and a half. That's probably because the earnings picture has been cloudy. The company has struggled to meet estimates and management has guided lower in recent quarters. That changed recently in September when TSN raised their 2016 guidance. The company should see +9% earnings growth in 2015 but earnings are expected to grow +21% in 2016.

Technically the bullish breakout in TSN this month is significant. The $44-45 zone has been major resistance for months. The current rally has generated a bullish buy signal on the point & figure chart, which is now forecasting at $63.00 target.

Tonight I am suggesting a little patience. Wait for a pullback in TSN. We are listing a buy-the-dip trigger to launch bullish positions at $45.50.

- Suggested Positions -
OCT 26, 2015 - entry price on TSN @ 45.50, option @ 4.00
symbol: TSN170120C50 2017 JAN $50 call - current bid/ask $2.65/3.50

10/26/15 triggered on a dip at $45.50
10/25/15 added to the watch list
Option Format: symbol-year-month-day-call-strike

Chart of TSN:

Current Target: To Be Determined
Current Stop loss: 41.35
Play Entered on: 10/26/15
Originally listed on the Watch List: 10/25/15


Visa Inc. - V - close: 77.58

Comments:
11/01/15: Visa hit some profit taking on Friday (-1.1%) but still posted a gain for the week. Shares are now up five weeks in a row. The stock looks short-term overbought and likely due for a pullback.

V will report earnings tomorrow morning (Monday), November 2nd. I expect shares to see a drop as investors take profits. Tonight we are raising the stop loss to $69.00.

No new positions at this time.

Trade Description: August 9, 2015:
The world is moving closer and closer to a cash-less society. Big payment processing companies like Visa and MasterCard will benefit from this transition.

According to the company, "Visa Inc. (NYSE:V) is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world's most advanced processing networks - VisaNet - that is capable of handling more than 56,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products."

It's important to note that V does not extend credit to consumers. There's no credit risk for bad loans here. V makes money on transactions. That business is booming.

On July 23rd V report its Q3 results, which were $0.74 per share. That beat estimates by 16 cents. Revenues were also higher than expected at $3.52 billion, up +11.5%. Management offered strong guidance and upped their EPS estimates into the mid teen percentage range. Long-term V is expected to grow earnings at almost 15%.

One of the big stories to come out of V's recent earnings report was news of a merger brewing. Visa is talking to former subsidiary Visa Europe. Estimates suggest the price target could be in the $15-20 billion range. Wall Street is positive on the deal and Visa expects it would add to earnings in fiscal 2017.

Another reason to be bullish on Visa is the fact that China recently opened its market to foreign companies to participate in clearing domestic bank card transactions. Previously only Chinese companies could do this. Now giants like V and MasterCard can compete in a market valued at more than $6.8 trillion. Considering V's expertise in this field we should expect them to grab a healthy chunk of the market.

Shares of V recently surged to new all-time highs and traded above $76 per share. After four up weeks in a row V posted a loss last week. Technically it produced a bearish engulfing candlestick reversal pattern on its weekly chart. If shares do correct lower we want to take advantage of the pullback. Broken support near $70.00 should be support. Tonight we are suggesting a buy-the-dip trigger at $70.50.

- Suggested Positions -
AUG 24, 2015 - entry price on V @ 64.16, option @ 2.76
symbol: V170120C80 2017 JAN $80 call - current bid/ask $7.05/7.25

11/01/15 new stop @ 69.00
10/18/15 Our option has more than doubled in value. Investors may want to take some money off the table.
10/11/15 new stop @ 66.75
08/30/15 Remove the stop loss
08/24/15 triggered on gap down at $64.16, suggested entry was a buy-the-dip trigger at $70.50.
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 69.00
Play Entered on: 08/24/15
Originally listed on the Watch List: 08/09/15



CLOSED Plays


Ambarella, Inc. - AMBA - close: $49.44

Comments:
11/01/15: I'm glad we closed the AMBA trade on Monday. Shares opened at $53.50 on Oct. 26th. A couple of days later GPRO's earnings were a disappointment and the stock collapsed, dragging shares of AMBA down with it.

Prior comments:
Use small positions to limit risk - AMBA is a volatile stock!

- Suggested Positions -
SEP 24, 2015 - entry price on AMBA @ 61.00, option @ 5.40
symbol: AMBA160115C70 2016 JAN $70 call - exit $2.00 (-63.0%)

10/26/15 planned exit
10/25/15 prepare to exit tomorrow (Monday) morning
10/11/15 worries over GPRO are hurting AMBA. Cautious investors may want to add a stop loss.
09/24/15 triggered @ $61.00
09/13/15 adjust the buy-the-dip trigger to $61.00
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: To Be Determined
Current Stop loss: n/a
Play Entered on: 09/24/15
Originally listed on the Watch List: 09/08/15



Watch

Leisure And Athletic Apparel

by James Brown

Click here to email James Brown


New Watch List Entries

EA - Electronic Arts

UA - Under Armour


Active Watch List Candidates

AAPL - Apple Inc.


Dropped Watch List Entries

TSN graduated to our active play list.



New Watch List Candidates:

Electronic Arts - EA - close: 72.07

Company Info

EA has been one of the S&P 500's best performers this year. Just prior to EA's earnings report last week the stock was up +61% year to date. EA reported better than expected results but shares tanked -5.2% on Friday anyway. We see the pullback as an opportunity.

EA is part of the technology sector. According to the company, "Electronic Arts (EA) is a global leader in digital interactive entertainment. The Company delivers games, content and online services for Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 300 million registered players around the world.

In fiscal year 2015, EA posted GAAP net revenue of $4.5 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality blockbuster brands such as The Sims®, Madden NFL, EA SPORTS® FIFA, Battlefield®, Dragon Age® and Plants vs. Zombies®. More information about EA is available at www.ea.com/news."

Looking at EA's earnings results, they tend to beat Wall Street estimates on both the top and bottom line. Their prior to report EA beat estimates but lowered guidance both times. On Thursday night, October 29th, EA reported their Q2 results. Earnings were $0.65 a share. Revenues were down -6.1% to $1.15 billion. These results beat estimates for $0.44 a share on revenues of $1.1 billion.

EA management raised their Q3 earnings and revenue guidance as well as their full year 2016 guidance above analysts' estimates. The company sees a strong launch to their upcoming Star Wars: Battlefront game, which launches on November 17th. EA raised their estimated sales from 9-to-10 million units up to 13 million.

Analysts suggest there is actually more upside since EA tends to provide cautious guidance. One firm raised their price target on EA to $84.00 following EA's earnings report. That happens to coincide with the point & figure chart, which is forecasting an $85 target.

EA's long-term trend line of support should be in the $66-67 area. I suspect EA will drift toward this trend line and then rebound. Tonight I am suggesting a buy-the-dip trigger to buy calls at $68.00. We will try and limit our risk with a stop loss at $64.65.

Buy-the-dip trigger @ $68.00

BUY the 2017 Jan $80 call (EA170120C80) current ask $8.00

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

Chart of EA:

Originally listed on the Watch List: 11/01/15


Under Armour - UA - close: $95.08

Company Info

UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitness platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it's actively fighting for market share and in 2015 UA overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but they saw growth of +32%.

Management expects UA to see sales grow +20% in 2015. UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance. That trend of raising guidance has continued this year. UA has beaten Wall Street's bottom line and top line estimates every quarter this year. They have also raised estimates every quarter this year.

Athletic apparel and shoe companies have been some of the market's best performers in 2015. Odds are they will continue to shine in the fourth quarter and beyond. Yet right now UA is correcting low. The stock should have support at the bottom of its long-term bullish channel (see chart). We want to be ready to take advantage of this short-term weakness.

UA should find support in the $85.00-88.00 area. Tonight we are suggesting a buy-the-dip trigger at $88.50. We will try and limit our risk with a stop loss at $84.00.

Buy-the-dip trigger @ $88.50

BUY the 2017 JAN $100 call (UA170120C100) current ask $14.60

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

Chart of UA:

Originally listed on the Watch List: 11/01/15


Active Watch List Candidates:



Apple Inc - AAPL - close: 119.50

Comments:
11/01/15: Last week AAPL delivered a record-breaking quarter yet the stock is up less than 50 cents for the week.

The company reported Q4 results on October 27th. Earnings were $1.96 a share as revenues surged +22% to $51.5 billion. This beat estimates on both fronts. Gross margins improved from 39% to 39.9%. AAPL sold 48.1 million iPhones last quarter. That is up from 39.3 million a year ago but 48.1 was slightly below Wall Street estimates.

Shares of AAPL rallied on its earnings news but the rally stalled under resistance in the $120 area with the 200-dma as technical resistance at 121.70.

Right now the biggest struggle for AAPL seems to be investor doubt that the company can keep growing at such a tremendous pace. The company itself is doing great and seems to have dominated the smartphone market. iPhones are seen as status symbols in many countries. AAPL seems to be stealing market share from Samsung and Android.

We are now in the fourth quarter of 2015. This is a strong time of year for AAPL products thanks to the holiday shopping season. If AAPL's stock was going to rally it's probably now as investors turn hopeful for a big Christmas season.

Tonight we are flipping our entry point strategy. Instead of using a buy-the-dip strategy we will look for a breakout. AAPL has resistance near $122. Tonight I am suggesting we wait for AAPL to close in the $123-125 zone and buy calls the next day. No initial stop loss at this time.

Please see below for new option information.

Trade Description: September 13, 2015:
Love it or hate it AAPL always has Wall Street's attention. It has a cult-like following. The company's success has turned AAPL's stock into the biggest big cap in the U.S. markets with a current valuation of more than $651 billion.

The company is involved in multiple industries from hardware, software, and media but it's best known for its consumer electronics. The iPod helped perpetuate the digital music revolution. The iPhone, according to AAPL, is the best smartphone in the world. The iPad helped bring the tablet PC to the mass market. The company makes waves in every industry they touch with a very distinctive brand (iOS, iWork, iLife, iMessage, iCloud, iTunes, etc.) and they've done an amazing job at building an Apple-branded ecosystem. Now they're getting into the electronic payments business with Apple Pay.

Earnings growth has been significant as consumer snapped up the iPhone 6 and 6+. The company expects the iPhone to be a major driver as only 20-25% of their user base has upgraded. This past week AAPL held their annual event in September and introduced several upgrades.

AAPL has unveiled new stuff for their smartwatch, they introduced the iPhone 6s and 6s+, they introduced a new, larger iPad that's being called the iPad Pro. The company also introduced a new Apple TV system. They also unveiled a new leasing program for their iPhones.

Normally consumers buy iPhones through their wireless carrier. This past week AAPL announced a deal where consumers could lease their phone from Apple for $32.00 a month and get a free upgrade every year. For the iPhone fanatics it's probably a great deal.

The 2015 holiday shopping season will be here sooner than you expect and AAPL stands to benefit from their parade of new products announced last week. Yet I don't want to buy AAPL at current levels. Odds are good that stocks could sell-off following the FOMC decision this coming Thursday. We want to take advantage of any temporary weakness in shares of AAPL.

Tonight I am listing a buy-the-dip trigger at $101.00. No initial stop loss but investors might want to consider a stop under the August 24th low ($92.00).

Breakout: Wait for AAPL to close in the $123.00-125.00 zone
Then buy calls the next morning. No stop, initially

BUY the 2017 Jan $130 call (AAPL170120C130) current ask $10.25

11/01/15 Strategy Update - new entry point strategy
Use a breakout plan. Wait for AAPL to close in the $123.00-125.00 zone
Then buy calls the next morning. No initial stop loss.
Use a 2017 Jan $130 call
10/27/15 AAPL delivers a record quarter on earnings and revenues
Option Format: symbol-year-month-day-call-strike

Chart

Originally listed on the Watch List: 09/13/15