Option Investor
Newsletter

Daily Newsletter, Sunday, 12/27/2015

Table of Contents

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

Leaps Trader Commentary

Bring Out The Mistletoe

by test

Click here to email test

The S&P 500 index is flirting with gains for the year.

It is too bad we can't have Christmas every week. Stocks soared during the holiday-shortened week with big gains Monday-through-Wednesday. Thursday's session was relatively quiet with the market's intraday gains reversing to settle virtually unchanged on the session.

The major U.S. indices all gained +2.5% or more for the week. Many of the industry-specific indices rallied +3% or more. The transportation average gained +3.5%. Semiconductors surged +3.1%. Banks were up +3.0%. Biotech stocks rallied +3.4%. Housing stocks sprinted higher with a +3.7% gain. Even oil stocks rallied. Crude oil finally produced an oversold bounce with WTI oil tagging new lows on Monday intraday and then reversing higher to close the week with +6.4% gain. Oil-related stocks rallied +4.7% while oil service stocks surged +6.5% by Thursday's closing bell. Crude oil closed near $37.50 a barrel.

Final Week For Retailers

It has been a disappointing holiday shopping season for brick-and-mortar retailers. The unseasonably warm weather for a big chunk of the country severely crimped apparel sales. More than 20 states saw new record high temperatures for this time of year.

There was some hope that "super Saturday" might save the season. This is the final Saturday before Christmas, which has grown into one of the biggest shopping days of the year, rivaling Black Friday. Retailers, both online and off, did see about +4% improvement from a year ago on Saturday, according to one retail research firm. Unfortunately that wasn't enough. Overall in-store and online sales from early November through December 22nd looks on track to rise +3.1%. That's below estimates and down from +4.1% a year ago.

Retail profits likely took a hit on what they did sell. It was an extremely competitive year. According to Market Track, who has been analyzing the advertising and promotional landscape for more than 30 years, retailers were offering discounts in the 20% to 50% off range. Advertising for post-Christmas sales offered 60% to 75% off sales. According to analytics firm Retailnext, sales for big chain stores like Best Buy, Target, and Wal-mart dropped -6.7% the weekend before Christmas as store traffic plunged -10%. The winner behind these declines is Amazon.com. Online sales continue to grow.

Economic Data

The third estimate for U.S. Q3 GDP growth was revised down from +2.1% to +2.0%. Meanwhile the final reading for December's University of Michigan Consumer Sentiment survey improved from 91.8 to 92.6. That's up from 91.3 in November.

Exiting home sales did not have a good month. October's sales number was revised down from 5.36 million to a seasonally adjusted annual rate of 5.32 million. The November reading plunged -10.4% to a rate of 4.76 million. This is the first time since early 2014 that existing home sales have had two back to back months of declines. New home sales fared better. The seasonally adjusted annual rate for October was revised down from 495,000 to 470,000. Fortunately November's reading was up +4.3% to 490,000.

The personal income and spending numbers showed some improvement. November's reading for both rose +0.3% each. The monthly durable goods orders were unchanged in November after October reading was adjusted lower to +2.9%. Durable goods excluding the volatile transportation component fell -0.1%.

The weekly initial jobless claims continue to sink. The latest number showed a drop from 272,000 to 267,000. This is the 42nd week in a row they have been under 300,000. That hasn't happened since 1973. The non-seasonally adjusted numbers put weekly claims at lows not seen since 1969.

Bundle it altogether and we get a recipe for slower growth in Q4, according to the Atlanta Federal Reserve. They publish a weekly GDPNow estimate. Last week their GDPNow forecast for Q4 growth was revised down from +1.9% the prior week to +1.3% as of December 23rd.

Chart of the Atlanta Fed's GDPNow estimate

Overseas Economic Data

It was a very quiet week for economic data overseas. The United Kingdom announced that their Q3 GDP estimate came in at +2.1% versus a year ago. That was slightly below estimates. It was up +0.4% versus Q3. France also reported their Q3 GDP estimate, which was in-line with expectations at +0.3%. Across the Pacific the news out of China was disappointing with industrial profits falling. Every month China provides an estimate on profits earned by Chinese industrial companies. In October these profits fell -4.6% from a year ago. November this improved to -1.4%. The first 11 months of 2015 show this industry down -1.9% versus 2014.




Major Indices:

The big cap S&P 500 index surged +2.76% in the last three and a half trading days following a rough Thursday-Friday plunge the prior week. Year to date the S&P 500 is up +0.1% for the year. The index essentially closed right on technical resistance at its 50-dma and 200-dma, which have converged near the 2,060-2,065 area.

Technically the overall trend is somewhat bearish with a pattern of lower highs and lower lows. If you're a glass-half full chart reader you could cross your fingers and hope that the S&P 500 is actually building a big bull-flag consolidation pattern over the last several weeks.

The 2,076-2,080 zone is short-term resistance while the 2,000 area is likely short-term support.

Daily chart of the S&P 500 index:

The NASDAQ composite index bounced off its trend line of higher lows and rallied +2.55% for the week. This boosted the index's 2015 gain to +6.6%.

This index also has a short-term trend of lower highs but I would focus on round-number resistance at 5,100 and the recent highs near 5,165-5,170 as overhead resistance. The trend line of support is nearing the 5,000 level (see chart). Below that the 4,900 area is still support (for now).

chart of the NASDAQ Composite index:

December is normally a very strong month for small cap stocks. It's obviously not shaping up to be that way. The Russell 2000 small cap index did gain +3.0% for the week. It is still down -3.6% for the month of December and off -4.1% for the year. Last week's bounce tagged potential short-term resistance at 1,160 and started to reverse lower on Thursday.

If the rally continues then 1,180 is the next hurdle. If the $RUT retreats then 1,140, 1,120, and 1,100 are the levels to watch for support.

chart of the Russell 2000 index



Economic Data & Event Calendar

Stocks face another holiday-shortened week. The U.S. markets will be closed on Friday, January 1st, for New Year's Day. Most European markets will close early on December 31st for New Year's Eve. The U.S. bond market also closes early.

- Monday, December 28 -
Dallas Fed manufacturing survey
Japan's industrial output
Japan retail sales

- Tuesday, December 29 -
Case-Shiller 20-city home price index
Consumer Confidence (survey)

- Wednesday, December 30 -
Pending home sales

- Thursday, December 31 -
Chicago PMI data

- Friday, January 01 -

New Year's Day (markets closed)

Additional dates to be aware of:

Jan 18th - Martin Luther king, Jr. Day (markets closed)
Jan 27th - FOMC policy update
Feb 15th - Presidents Day (markets closed)
Mar 16th - FOMC meeting, updated forecasts
Mar 16th - Fed Chairman Yellen's press conference
Mar 25th - Good Friday (markets closed)

Looking Ahead:

The stock market's recent bounce didn't do much for investor confidence. The weekly AAII survey only showed a +2.5% jump in bullish sentiment to 26.4%. Bearish sentiment did fall -8% to 31.5% while neutral sentiment rose +5.4% to 42.1%. According to the AAII, the long-term average for bullish sentiment is 38.7%. The long-term average for neutral is 31% and for bears it is normally 30.2%.

Market Outlook

History says that December is the best month of the year for stocks. Obviously that's not a guarantee and this year is proving to be an exception. The S&P 500 index is down -0.9% for the month while the Russell 2000 is down -3.6% for the month. The good news is that we still have four trading days left for the year. Once again history would suggest the trend should be higher.

The normal Santa Claus rally starts on December 24th and runs through the first two trading days of January. Over the last 45 years the S&P 500 has typically rallied +1.4% over this time frame. With the yearend fast approaching we are seeing more Wall Street forecasters offer their outlook for 2016. Thus far the 2016 bulls outnumber the bears. A recent Wall Street Journal article noted that Birinyi Associates polled 15 strategists among the major Wall Street firms. Their average 2016 yearend forecast is 2,215. That's a +7.5% rally from current levels.

We need to see the S&P 500 close above 2,059 on Thursday to post a gain for the year. Let's hope last week's rally sees some follow through higher.

~ James





Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Investors were in a festive mood last week as traders bought the dip and drove the market higher. The post-FOMC meeting sell-off has almost been erased.

UA hit our stop loss on Dec. 22nd.
We closed half of our TSN trade on Dec. 21st to lock in a potential gain. The TSN option bid was $7.00 (+75%).

CLX, EA, FB, and KMB all have new stop losses.

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

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

Hoping To See Santa This Year

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(December 27, 2015)

The U.S. market delivered a nice, widespread rebound last week. Most of the major indices gained +2.5% or more in spite of only having four trading days in the week. Traditionally the next several trading days are bullish. It's the long awaited Santa Claus rally. Let's just hope Santa shows up this year.

Volume is going to be very light this week. We only have four trading days left for 2015. Markets are closed next Friday for New Year's Day. My market bias is bullish but the intermediate trend for the major U.S. market is still bearish with a pattern of lower highs and lower lows.

We need to trade the market we see not the market we want or expect. No new trades tonight. I am adding DAL and NOC as new watch list candidates.

Some of the big retail stocks have gotten crushed this year. Most of the bad news might be priced in. I've added WMT and KSS to my radar screen.

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

WMT, LOW, KSS, PYPL, COL, LMT,



Play Updates

The Santa Claus Rally Started Early

by James Brown

Click here to email James Brown


Closed Plays


We closed half of our TSN trade on Monday, Dec. 21st.

UA hit our stop loss on December 22nd.



Play Updates


Adobe System Inc. - ADBE - close: $94.30

Comments:
12/27/15: ADBE added about the $3.00 for the week after bouncing near the $90.85 area. If the market will cooperate we could see ADB rally towards round-number, psychological resistance at $100.

No new positions at this time.

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 $8.45/8.65

12/11/15 shares garner several upgrades
12/10/15 ADBE reports Q4 earnings above estimates
11/29/15 new stop @ 85.75
11/22/15 new stop @ 84.75
11/08/15 new stop @ 81.75
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: 85.75
Play Entered on: 10/19/15
Originally listed on the Watch List: 10/11/15


Alaska Air Group - ALK - close: 82.12

Comments:
12/27/15: Shares of ALK were downgraded from a "buy" to a "hold" but that didn't stop ALK from adding a couple of dollars for the week. I am still suggesting investors wait for ALK to close above $82.50 before considering new bullish positions.

Trade Description: November 22, 2015:
Depressed oil prices have been great for airline industry profits. Yet airline stocks, as a group, have struggled this year. The XAL airline index is down about -10% year to date. ALK is an exception. The stock has shown significant relative strength and is up +37% in 2015.

ALK is part of the services sector. According to the company, "Alaska Airlines, a subsidiary of Alaska Air Group (ALK), together with its partner regional airlines, serves more than 100 cities through an expansive network in the United States, Canada and Mexico. Alaska Airlines ranked 'Highest in Customer Satisfaction Among Traditional Carriers in North America' in the J.D. Power North America Airline Satisfaction Study for eight consecutive years from 2008 to 2015. Alaska Airlines' Mileage Plan also ranked 'Highest in Customer Satisfaction with Airline Loyalty Rewards Programs' in the J.D. Power 2014 and 2015 Airline Loyalty/Rewards Program Satisfaction Report."

ALK has beaten Wall Street's bottom line earnings estimates the last four quarters in a row. Their most recent report was October 22nd. The company raised its outlook. The past 12 months have seen ALK's revenues rise +4.8%. Net income and earnings have both grown more than +50%. Back in August the company announced at $1 billion stock buyback program (current market cap is about $10 billion).

Crude oil is expected to remain cheap and likely get cheaper in 2016. That should provide a strong tailwind for ALK's business. Currently the stock has been consolidating sideways the last few months. Yet the rally this past week has pushed ALK toward major resistance and shares could see a breakout. We want to hop on board if that occurs. Tonight I am suggesting we wait for ALK to close in the $83.00-84.00 zone and then buy calls the next morning with a stop loss at $74.75.

- Suggested Positions -
DEC 09, 2015 - entry price on ALK @ 83.50, option @ 9.20
symbol: ALK170120C90 2017 JAN $90 call - current bid/ask $7.30/8.10

12/09/15 triggered on a dip at $83.50
12/06/15 new entry trigger. ALK rushed past our suggested entry (a close in the $83.00-84.00 zone). Tonight we are listing a new entry - an intraday dip to $83.50
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 74.75
Play Entered on: 12/09/15
Originally listed on the Watch List: 11/22/15


The Clorox Co. - CLX - close: $127.86

Comments:
12/27/15: The rally in CLX has stalled. After the big drop on Friday, Dec. 18th, shares have been drifting sideways. The lack of participation in last week's broad-based market rally could be a warning signal. Tonight we will adjust our stop loss up to $123.85.

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 $9.20/11.00

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

12/27/15 new stop @ 123.85
11/29/15 new stop @ 118.85
11/22/15 new stop @ 116.40
11/17/15 planned exit for the short-term put (virtually $0.00)
11/15/15 plan on exiting the short-term Nov. $120 put on Tuesday, Nov. 17th at the close
11/08/15 new stop @ 113.40
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: 123.85
Play Entered on: 09/22/15
Originally listed on the Watch List: 09/08/15


Costco Wholesale - COST - close: 161.75

Comments:
12/27/15: A week ago COST looked ugly with a breakdown below its 50-dma. Fortunately shares rebounded and managed a four-day winning streak (barely). The $164.00 level is overhead resistance.

More conservative investors may want to raise their stop loss.

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 $13.85/14.20

12/09/15 COST reported earnings that missed estimates.
11/22/15 new stop @ 153.00
11/08/15 new stop @ 146.40
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: 153.00
Play Entered on: 10/06/15
Originally listed on the Watch List: 10/04/15


Salesforce.com - CRM - close: 77.83

Comments:
12/27/15: It was a disappointing week if you're bullish on CRM. The market delivered a widespread rally and CRM manages an 80-cent gain for the week. The company did announce they were spending $360 million to buy six-year-old start up SteelBrick. The new subsidiary offers quote-to-cash (QTC) technology.

Technically CRM shares are consolidating sideways with a neutral pattern of higher lows and lower highs. At this point I would wait for a close above $80.00 before considering new bullish positions.

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 $6.30/ 7.90

11/22/15 new stop @ 73.75
11/15/15 heads up - CRM has earnings on Nov. 18th
11/08/15 new stop @ 71.40
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: 73.75
Play Entered on: 10/14/15
Originally listed on the Watch List: 09/20/15


DR Horton Inc. - DHI - close: 32.16

Comments:
12/27/15: DHI displayed relative strength last week with a +4.5% gain. The stock looks poised to challenge short-term resistance in the $32.65 area soon. Optimistically DHI's consolidation over the last three weeks is a bull-flag consolidation pattern.

No new positions at this time.

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 $2.74/3.55

11/29/15 new stop @ 28.35
11/15/15 new stop @ 27.45
11/10/15 DHI reports earnings
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: 28.35
Play Entered on: 10/06/15
Originally listed on the Watch List: 09/13/15


Electronic Arts - EA - close: 68.95

Comments:
12/27/15: Uh-oh! EA's performance last week does not inspire any confidence. The broader market surges +2.5% (or more) and EA closes virtually unchanged for the week. The $65.00 level should be strong support. Tonight we are moving our stop loss up to $64.65.

No new positions at this time.

Trade Description: November 1, 2015:
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.

- Suggested Positions -
NOV 17, 2015 - entry price on EA @ 65.08, option @ 6.85
symbol: EA170120C75 2017 JAN $75 call - current bid/ask $ 7.00/7.85

12/27/15 new stop @ 64.65
11/17/15 triggered on gap down at $65.08
11/15/15 adjust the option strike from 2017 January $80 call to $75 call
11/15/15 Adjust the entry trigger from $68.00 down to $66.50.
Adjust the stop loss from $64.65 down to $62.85.
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 64.65
Play Entered on: 11/17/15
Originally listed on the Watch List: 11/01/15


Facebook, Inc. - FB - close: 105.02

Comments:
12/27/15: FB's performance was rather unimpressive. Shares only gained 98 cents for the week. The stock has been drifting sideways for almost two months. Tonight we are raising the stop loss to $99.00.

No new 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 @ 11.10*
symbol: FB170120C100 2017 JAN $100 call - current bid/ask $17.35/17.60

12/27/15 new stop @ 99.00
11/21/15 short-term put has expired
11/08/15 new stop @ 97.25
11/04/15 FB reports strong earnings
11/03/15 Buy the November $97.50 put ($1.85)
* adjust the cost of our call by $1.85
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: 99.00
Play Entered on: 09/29/15
Originally listed on the Watch List: 09/13/15



The Home Depot, Inc. - HD - close: 132.90

Comments:
12/27/15: It was a quiet week for HD. The market's bullish bounce lifted HD from support near $130 to short-term resistance near $133.50.

More conservative investors may want to move their stop loss closer to the $129-130 area. No new positions at this time.

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 $7.95/8.15

11/30/15 sell half of our HD calls (exit $8.85, +70.1%)
11/29/15 plan on exiting HALF of HD calls on Monday morning (Nov. 30th)
11/29/15 new stop loss @ 124.65
11/22/15 new stop loss @ 118.45
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: 124.65
Play Entered on: 10/23/15
Originally listed on the Watch List: 10/18/15


Kimberly-Clark - KMB - close: 126.88

Comments:
12/27/15: Our new trade on KMB continues to show relative strength. The stock broke through resistance near $126.00 and ended the week at new all-time highs. Tonight we will adjust our stop loss up to $119.40.

No new positions at this time.

Trade Description: December 6, 2015:
There are not many public companies that have been around as long as KMB. The company has a history going back more than 140 years. It looks like investors are still bullish on it with KMB trading near all-time highs.

KMB is in the consumer goods sector. According to the company, "Kimberly-Clark (KMB) and its well-known global brands are an indispensable part of life for people in more than 175 countries. Every day, nearly a quarter of the world's population trust K-C's brands and the solutions they provide to enhance their health, hygiene and well-being. With brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend, Kimberly-Clark holds No. 1 or No. 2 share positions in 80 countries."

The company has beaten Wall Street's earnings estimates the last three quarters in a row. A stronger labor market in the U.S. combined with lower gasoline prices should be a tailwind for consumer spending in the globe's biggest economy. Meanwhile KMB is pursuing high-growth opportunities in emerging markets.

Technically the stock has been trading sideways in the $117.00-123.00 zone the last seven weeks. The recent bounce near the bottom of its trading range might suggest a bullish breakout soon. The point & figure chart is bullish and forecasting at $163 target. Tonight I am suggesting investors wait for KMB to close above $123.00 and then buy calls the next morning with an initial stop loss at $116.95.

- Suggested Positions -
DEC 16, 2015 - entry price on KMB @ 124.75, option @ 7.50
symbol: KMB170120C130 2017 JAN $130 call - current bid/ask $7.00/7.40

12/27/15 new stop @ 119.40
12/16/15 Trade begins. KMB opens at $124.75
12/15/15 Triggered with KMB @ $124.44, above our $123.00 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 119.40
Play Entered on: 12/16/15
Originally listed on the Watch List: 12/06/15


Microsoft Corp. - MSFT - close: 55.67

Comments:
12/27/15: MSFT's +2.84% gain last week was enough to outperform the big cap indices. Shares essentially bounced from short-term support near $54.00 toward short-term resistance near $56.00.

No new positions at this time.

Trade Description: December 6, 2015:
MSFT is one of the biggest stocks in the U.S. market and shares just surged to new 15-year highs.

MSFT is more than just a software company. They are part of the technology sector. It is considered part of the business software industry. According to the company, "Microsoft is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more."

The company is run under three segments. They have their productivity and business processes segment. This includes commercial office software, personal office software, and more. One of their fastest growing segments is MSFT's Intelligent Cloud business, which includes their server software and enterprise services. Then they have their "More Personal Computing" segment. This includes their Windows operating software, MSN display advertising, Windows phones, smartphones, tablets, PC accessories, Internet search, and their Xbox platform.

The stock has been dead money for almost a year. MSFT peaked near round-number resistance at $50.00 back in November 2014. Shares channeled sideways between support at $40 and resistance at $50 for months. That changed in October.

MSFT reported its 2016 Q1 results on October 22nd. Analysts were expecting a profit of $0.59 a share on revenues of $21.04 billion. MSFT beat both estimates with a profit of $0.67 a share. Revenues came in at $21.66 billion. Their Intelligent Cloud segment saw sales rise +8% but it was actually +14% on a constant currency basis.

Shares of MSFT soared the next day with a surge to multi-year highs. The big rally is based on investors' belief that MSFT and its relatively new management is successfully transitioning away from declining PC sales and moving quickly towards the cloud (and mobile).

The stock has been relatively resistant to any serious profit taking. Last week's midweek market decline only pushed MSFT toward short-term support at its 10-dma near $54.00. The stock displayed relative strength on Friday with a +3.1% gain. Investors may want to jump in and buy calls now. I am crossing my fingers and hoping for a little pullback. Tonight I'm suggesting a buy-the-dip trigger at $55.05.

- Suggested Positions -
DEC 08, 2015 - entry price on MSFT @ 55.05, option @ 3.20
symbol: MSFT170120C60 2017 JAN $60 call - current bid/ask $3.15/3.30

12/08/15 triggered @ 55.05
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 51.95
Play Entered on: 12/08/15
Originally listed on the Watch List: 12/06/15


Orbital ATK, Inc. - OA - close: $89.92

Comments:
12/27/15: OA tagged new all-time highs above $92 a share last week. The stock got some help with an analyst upgrade to a "buy". OA did pare its gains by Thursday's close.

More conservative investors may want to raise their stop again.

No new positions at this time.

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 $8.60/9.80

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

12/06/15 new stop @ 79.45
11/21/15 short-term put has expired ($0.00)
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: 79.45
Play Entered on: 10/23/15
Originally listed on the Watch List: 09/08/15


Pepisco, Inc. - PEP - close: 100.54

Comments:
12/27/15: PEP delivered a nice three-day bounce. Unfortunately the rally stalled under its short-term trend of lower highs and resistance in the $101.00-101.50 zone.

No new positions at this time.

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 $2.56/2.94

11/08/15 new stop @ 94.75
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: 94.75
Play Entered on: 10/23/15
Originally listed on the Watch List: 10/18/15


Royal Caribbean Cruises - RCL - close: 99.92

Comments:
12/27/15: RCL displayed some relative strength with a +4.1% gain last week. The stock surged toward its all-time highs and resistance near $100.00. Some bullish analyst comments for RCL helped start the week with a jump.

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 $8.20/8.60

12/13/15 RCL endured the market's decline relatively well
11/22/15 Caution - RCL did not perform well last week
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: 58.62

Comments:
12/27/15: SBUX delivered a +2.9% gain for the week and yet shares still look bearish. I'm starting to worry about SBUX's bearish trend of lower highs and lower lows.

Currently our stop loss is at $54.95 but more conservative investors may want to adjust theirs higher. If SBUX rolls over again the $58.00 level should be its next level of support.

No new 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 $2.70/2.81

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

11/22/15 new stop loss @ 54.95
11/21/15 short-term November put has expired
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: 54.95
Play Entered on: 10/12/15
Originally listed on the Watch List: 09/20/15


Smith & Wesson Holding - SWHC - close: 21.99

Comments:
12/27/15: SWHC spent most of the week churning sideways on either side of the $22.00 level. The $22.35 area looks like new resistance for SWHC. More conservative investors may want to take some money off the table or raise their stop loss.

No new positions at this time.

Trade Description: November 8, 2015:
Shares of SWHC have been shooting higher all year long. The stock is showing massive relative strength with a +91% gain year to date. That dwarfs the +8.5% gain in the NASDAQ composite and +1.8% gain in the S&P 500 this year.

SWHC is considered part of the industrial goods sector. According to the company, "Smith & Wesson Holding Corporation (SWHC) is a U.S.-based leader in firearm manufacturing and design, delivering a broad portfolio of quality firearms, related products, and training to the global military, law enforcement, and consumer markets. The company's firearms division brands include Smith & Wesson®, M&P®, and Thompson/Center Arms®. As a leading provider of shooting, reloading, gunsmithing, and gun cleaning supplies, the company's accessories division produces innovative, high-quality products under several brands, including Caldwell® Shooting Supplies, Wheeler® Engineering, Tipton® Gun Cleaning Supplies, Frankford Arsenal® Reloading Tools, Lockdown® Vault Accessories, and Hooyman® Premium Tree Saws. Smith & Wesson facilities are located in Massachusetts, Maine, Connecticut, and Missouri."

The earnings picture for SWHC has been pretty strong. They have beaten Wall Street's earnings estimates the last four quarters in a row. Management has raised guidance three of the last four quarters.

Their most recent earnings report as August 27th. SWHC announced their 2016 Q1 results with earnings of $0.32 a share. That beat estimates of $0.23. Revenues surged +12% to $147.8 million, above expectations. Management raised their Q2 guidance and raised their fiscal year 2016 guidance.

The company benefits from strong retail trends. According to the FBI, gun sales in the U.S. have set a record for the last six months in a row. Now we are moving into the holiday shopping season and this trend should continue for the next two month (at least). Another benefit for SWHC is the current election cycle. Every time one of the democrat candidates says something about increasing gun control laws the sale of guns goes up. The closer we get to the 2016 election the louder these campaign promises about gun control could get.

Technically the trend in SWHC is bullish. The point & figure chart is forecasting at $26.50 target. The stock has been rising inside a big bullish channel (see chart). Rival Ruger (RGR) reported earnings a few days ago and their stock plummeted on a disappointing quarter. Yet shares of SWHC barely budged on the news. Today we see SWHC bouncing from support near the bottom of its bullish channel and its 100-dma. More aggressive investors may want to buy calls now. I am suggesting we wait for SWHC to close above $18.40 and then buy calls the next day.

- Suggested Positions -
NOV 25, 2015 - entry price on SWHC @ 18.70, option @ 2.90
symbol: SWHC170120C20 2017 JAN $20 call - current bid/ask $4.80/5.10

12/13/15 new stop @ 19.75
12/08/15 SWHC beats earnings estimates and raised guidance
11/25/15 trade begins. SWHC opens at $18.70
11/24/15 triggered. SWHC closed @ $18.65, above our $18.40 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 19.75
Play Entered on: 11/25/15
Originally listed on the Watch List: 11/08/15


Tyson Foods, Inc. - TSN - close $53.94

Comments:
12/27/15: A week ago we decided to lock in a potential gain by exiting half of our TSN call position on Monday, Dec. 21st. The stock gapped higher at $52.97. Our exit on the 2017 Jan. $50 call was $7.00 (+75%).

TSN continued to rally throughout the week posting gains four days in a row. Now the stock is challenging resistance near the $54.00 level.

More conservative investors may want to raise their stop loss again.

No new positions at this time.

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 $7.60/8.40

12/21/15 Exit half of call position. Option bid $7.00 (+75%)
12/20/15 Plan on selling half of our call position on Monday, Dec. 21st to lock in a partial gain
12/13/15 new stop @ 49.45
12/06/15 new stop @ 45.75, readers may want to take some money off the table. Our option is already up +60%.
11/29/15 new stop loss @ 44.75
11/23/15 TSN reports earnings. The stock rallies
11/22/15 TSN could be volatile following its earnings report
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

Current Target: To Be Determined
Current Stop loss: 49.45
Play Entered on: 10/26/15
Originally listed on the Watch List: 10/25/15


Visa Inc. - V - close: 78.26

Comments:
12/27/15: The three-day bounce in Visa stalled at short-term technical resistance near its 20-dma. Unfortunately I am not convinced the pullback from its November highs is over.

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 $7.10/7.35

12/06/15 new stop @ 74.40
11/08/15 new stop @ 71.75
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: 74.40
Play Entered on: 08/24/15
Originally listed on the Watch List: 08/09/15


CLOSED Plays


Under Armour - UA - close: $81.20

Comments:
12/27/15: UA has been a huge disappointment. The stock continued to sink in spite of the market's broad-based rally. Shares of UA spiked down through round-number support at $80.00 hours before larger rival Nike (NKE) reported earnings on Tuesday night. Our stop loss was hit at $79.85.

Long-term I still believe UA has a great story but the stock is not performing. It could take several weeks (or months) before we see another entry point in UA.

- Suggested Positions -
NOV 13, 2015 - entry price on UA @ 88.50, option @ 11.30
symbol: UA170120C100 2017 JAN $100 call - exit $5.70 (-49.6%)

12/22/15 stopped out
11/15/15 adjust stop loss to $79.85
11/13/15 triggered on a dip at $88.50
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: To Be Determined
Current Stop loss: 79.85
Play Entered on: 11/13/15
Originally listed on the Watch List: 11/01/15



Watch

Airlines & Aerospace

by James Brown

Click here to email James Brown


New Watch List Entries

DAL - Delta Air Lines

NOC - Northrop Grumman


Active Watch List Candidates

GE - General Electric

RHT - Red Hat, Inc

UPS - United Parcel Service


Dropped Watch List Entries

None.



New Watch List Candidates:

Delta Air Lines - DAL - close: 52.26

Company Info

The XAL airline index is down -13% for 2015. One air line stock outperforming many of its peers is Delta (DAL), which is up +6% year to date and poised to rally into 2016.

DAL is part of the services sector. According to the company, "Delta Air Lines serves more than 170 million customers each year. Delta was named to FORTUNE magazine's top 50 World's Most Admired Companies in addition to being named the most admired airline for the fourth time in five years. Additionally, Delta has ranked No.1 in the Business Travel News Annual Airline survey for four consecutive years, a first for any airline. With an industry-leading global network, Delta and the Delta Connection carriers offer service to 327 destinations in 57 countries on six continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees worldwide and operates a mainline fleet of more than 800 aircraft."

One of the biggest stories of 2015 was the drop in oil prices. This has been a major tailwind for airline profits as fuel is a huge expense for the industry. Yet instead of soaring on oil's weakness the airline stocks have struggled because investors were worried the industry would overbuild capacity, which would create too much supply and bring down air fares. Overall the industry has managed to keep capacity relatively in check. The last several weeks have seen some lowered guidance for PRASM from several airlines. PRASM is an industry metric for Passenger Revenue per Available Seat Mile. DAL was not immune and lowered its Q4 PRASM several weeks ago. Fortunately the outlook has improved following the company's investor day on December 17th.

A few of the highlights from their investor day include +36% earnings growth forecasted for 2015. They previously guided Q4 PRASM down -2.5% to -4.5%. Now they have adjusted that to -2%. Capacity growth is expected to be relatively flat in 2016. Management said that fuel prices are down about 35% from a year ago. They are forecasting about $3 billion in fuel savings next year. 2016 earnings should grow about +24%.

Following this investor day presentation a couple of analysts raised their price targets. One new target is $62 while another is $68. Currently the point & figure chart is bullish and forecasting at $65 target.

The stock has been showing relative strength, especially against many of its peers. Today DAL is trading near all-time highs and is poised to breakout. Tonight we are suggesting a trigger to buy calls. Wait for DAL to close above $53.00 then buy calls the next morning.

FYI: DAL will likely report earnings in mid to late January

Breakout trigger: Wait for DAL to close above $53.00
Then buy calls the next morning with a stop at $47.75

BUY the 2017 Jan $60 call (DAL170120C60) current ask $3.85

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

Chart of DAL:

Originally listed on the Watch List: 12/27/15


Northrop Grumman - NOC - close: 190.11

Company Info

Defense stocks have come a long way from the sequestration fears from a few years ago. Back in 2011, politicians in Washington created massive defense spending and entitlement cuts in their sequestration budget cut threats. It was supposed to be a goad to provoke their peers and rivals to getting a budget deal done. It didn't work. The sequestration cuts were put into place in 2013 but instead of crushing the defense industry stocks the group has thrived.

NOC is in the industrial goods sector. According to the company, "Northrop Grumman is a leading global security company providing innovative systems, products and solutions in unmanned systems, cyber, C4ISR, and logistics and modernization to government and commercial customers worldwide." They focus on four business sectors: aerospace systems, electronic systems, information systems, and technical services.

One reason the major defense names have done so well was their focus on gaining new clients overseas. If the U.S. was going to cut back on spending (more like cut back on the pace of spending) then military contractors focused on generating new business with allies overseas and it worked.

NOC has beaten Wall Street's earnings estimates the last four quarters in a row. They've delivered better than expected revenue numbers three of the last four quarters. Plus, NOC management has raised guidance three of the last four quarters. As of their most recent earnings report on October 28th, NOC's backlog was about $36 billion.

NOC has been in a heated battle with rivals Boeing (BA) and Lockheed Martin (LMT) over one of the biggest defense contracts of all time. That is the Air Force's new Long Range Strike Bomber contract. Aerospace giants Boeing and Lockheed had teamed up together to win this deal. Some were calling it a David-versus-Goliath story. NOC was the underdog and surprisingly the U.S. government gave the contract, worth a potential $80 billion, to NOC in late October this year. BA and LMT have since chosen to protest this decision so the ultimate decision has yet to be finalized but it's a bullish development for NOC investors.

The LRSB contract has two parts. The engineering and manufacturing and development portion of the contract is worth more than $21 billion. Once it's finally developed the planes are supposed to cost the government $564 million apiece. Altogether the defense department could spend up to $80 billion on the program.

Another bullish tailwind for defense contractors like NOC is the ongoing global battle with radical Islamic terrorists and ISIS. The U.S. will likely boost its defense spending as it turns up the heat on this threat. Meanwhile after the terrorist attacks in Paris, analysts believe that NATO could generate an additional $100 billion in defense spending as they beef up their military might.

JPMorgan recently upgraded shares of NOC from "neutral" to "overweight" and gave the stock a $212 price target. They like NOC and believe it is a place of "safety and steadiness" in a volatile market.

The stock has shown significant relative strength this year with a +28% gain in 2015. The last few weeks have seen NOC consolidate sideways beneath resistance at $190 but with a bullish trend of higher lows as investors keep buying the dips. The stock looks ready to break out. Tonight we are suggesting investors wait for NOC to close in the $191.00-193.00 zone and use that as a bullish entry point to buy calls.

Breakout trigger: Wait for NOC to close inside the $191.00-193.00 zone,
Then buy calls the next morning with a stop loss at $184.35.

BUY the 2017 Jan $220 call (NOC170120C220) current ask $6.60

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

Chart of NOC:

Originally listed on the Watch List: 12/27/15



Active Watch List Candidates:


General Electric - GE - close: 30.83

Comments:
12/27/15: GE has rallied toward the top of its trading range. The stock looks like it could break out any day now.

Trade Description: December 20, 2015:
Tonight we are going old school with our new watch list candidate. GE has been slowly drifting higher since the 2009 market lows. Most of 2014 and 2015 the stock was stuck churning sideways. The situation changed in early October this year after a big activist investor got more involved. It's making a difference. The S&P 500 is down -2.6% year to date. Yet GE is up +20% in 2015 and should continue to outperform in 2016.

GE is in the industrial goods sector. According to the company, "GE is the world's Digital Industrial Company, transforming industry with software-defined machines and solutions that are connected, responsive and predictive. GE is organized around a global exchange of knowledge, the 'GE Store,' through which each business shares and accesses the same technology, markets, structure and intellect. Each invention further fuels innovation and application across our industrial sectors. With people, services, technology and scale, GE delivers better outcomes for customers by speaking the language of industry. www.ge.com"

One of the biggest changes at GE has been the company's long-term transformation to get rid of its financial assets that have been an albatross around its neck for so long. Management is focusing on the company's roots, which is industrial products and innovation.

The company recently held their annual meeting with analysts. The year ahead brings a lot of challenges. The global market is still struggling. The U.S. economy is limping along at +2% growth. Plus the strong dollar hurts sales outside the U.S. In spite of these headwinds GE's CEO Jeffery Immelt is bullish on 2016.

Management is forecasting 2016 earnings to rise +15% on revenue growth of +2% to +4%. That is impressive for such a massive company like GE who does so much business overseas. They also foresee paying investors $8 billion in dividends and spending $18 billion on stock buybacks in 2016. GE provided a long-term 2018 earnings forecast of more than $2.00 per share compared to $1.30-1.20 a share in 2015. They expect to return $55 billion to shareholders in dividends and buybacks between now and 2018. That sort of investor-friendly action could help GE weather any market volatility in 2016.

The stock has been showing relative strength the last few months. The stock held up pretty last week too during the market's volatile moves. GE tagged multi-year highs on Wednesday. The point & figure chart is bearish and forecasting a long-term target at $53.00.

The action in GE's stock over the last few weeks is either a new top or it's a new base. We are betting it is the latter. Tonight I am suggesting investors wait for GE to close above $31.35 and then buy calls the next morning.

FYI: GE is scheduled to report Q4 earnings on January 22nd.

Breakout trigger: Wait for a close above $31.35
Then buy calls the next morning with a stop at $29.40

BUY the 2017 Jan $35 call (GE170120C35)

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

Originally listed on the Watch List: 12/20/15


Red Hat, Inc. - RHT - close: 81.74

Comments:
12/27/15: The volatility in shares of RHT continued on Monday. Shares essentially filled the gap from Friday morning and bounced. RHT is still consolidating sideways below resistance near $83.00. Let's give RHT more time to push higher.

Trade Description: November 29, 2015:
Consistent earnings and revenue growth have helped power RHT shares to new multi-year highs. The stock has also shown relative strength with a +19% gain in 2015, outperforming the NASDAQ's +8% gain.

RHT is in the technology sector. According to the company, "Red Hat is the world's leading provider of open source software solutions, using a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training, and consulting services. As a connective hub in a global network of enterprises, partners, and open source communities, Red Hat helps create relevant, innovative technologies that liberate resources for growth and prepare customers for the future of IT."

I mentioned that earnings have helped drive RHT's stock higher. The company has beaten Wall Street's estimates on both the top and bottom line the last four quarters in a row. Their most recent earnings report was their Q2 results announced on September 21st.

Analysts were expecting a profit of $0.44 a share on revenues of $494 million. The company delivered earnings growth of +15% with a profit of $0.47 a share. Revenues were up +13% to $504 million. Management raised their Q3 and 2016 guidance above analysts' expectations. RHT does do a lot of business overseas so the strong dollar has had a negative impact. On a constant currency basis their results are even stronger.

Technically shares are in a bullish trend of higher highs and higher lows. The point & figure chart is bullish and forecasting at $109 target. RHT's bounce from its November low has stalled just below short-term resistance near $83.00. Tonight I am suggesting bullish positions if RHT can close in the $83.00-84.50 range.

Breakout trigger: Wait for RHT to close in the $83.00-84.00 range,
Then buy calls the next morning with a stop at $77.35

BUY the 2017 Jan $100 call (RHT170120C100)

12/17/15 RHT reports better than expected earnings
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 11/29/15


United Parcel Service - UPS - close: 97.34

Comments:
12/27/15: UPS underperformed the stock market with traders selling the rally attempts. Investors could have been worried that deliver companies like UPS and FDX would blow it again and fail to deliver a lot of Christmas presents on time. That seems to be the case for rival FedEx (FDX) who struggled to keep up with demand and was still delivering packages on December 25th and the 26th.

UPS' underperformance last week might also be a reflection of growing worries that Amazon.com seems to be reducing its dependence on the company. Amazon accounts for almost 40% of online sales. That is a HUGE amount of packages to be delivered around the world and UPS gets a lot of that business. UPS investors might be worried over recent headlines that Amazon has been building up its fleet of trucks and is now looking at buying more cargo planes.

We are not giving up yet on UPS. The $94.00 level is still major support. Our suggested entry point is an intraday dip to $94.50.

Trade Description: November 29, 2015:
Black Friday has grown from a one-day sales event to a four-day weekend sales bonanza. Nowadays the theme of Black Friday holiday sales starts before Thanksgiving. Unfortunately the initial impressions from retailers this year is that crowds were smaller than expected. That's because more and more consumers are shopping online. One retail research firm is estimating that online sales will grow +8% this year versus the +5.8% we saw in 2014.

One way to play the growth of online shopping is the delivery business. UPS is in the services sector. According to the company, "UPS is a global leader in logistics, offering a broad range of solutions including transporting packages and freight; facilitating international trade, and deploying advanced technology to more efficiently manage the world of business. Headquartered in Atlanta, UPS serves more than 220 countries and territories worldwide."

Smaller rival FedEx (FDX) is forecasting a +12% surge in deliveries this holiday season (to 317 million packages). The U.S. Postal Services is forecasting +11% growth to nearly 600 million packages. UPS, the largest delivery company, is projecting +10% growth this holiday season. They expect to handle more than 630 million packages between Black Friday and New Year's Eve this year.

The combination of low gasoline prices and rising online shopping should be a bullish combination for UPS. I wouldn't be surprised to see online sales surpass the +8% growth estimate. More and more companies are trying to develop their online sales. Plus, following the tragic events in Paris this year, there is a heightened sense of wariness that could keep some consumers out of the malls this year.

The last few weeks have seen shares of UPS consolidating sideways in the $102.00-105.50 zone. We want to buy calls if UPS can breakout from this trading range. Tonight I am suggesting investors buy calls if UPS can close above $105.50.

Buy-the-dip @ $94.50, use a stop at $91.45

BUY the 2017 Jan $100 call (UPS170120C100)

12/13/15 Entry Point Strategy Update = adjust to a buy-the-dip strategy. Use buy-the-dip trigger at $94.50. Move the option strike to the 2017 January $100 call. Move the stop loss down to $91.45.
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 11/29/15