Option Investor
Newsletter

Daily Newsletter, Tuesday, 11/11/2014

Table of Contents

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

Market Wrap

No Volume, No Movement

by Jim Brown

Click here to email Jim Brown

It was another dull day in the market but all the major indexes managed to close at new highs.

Market Statistics

The Dow fought sellers all day but it was never down more than 29 points. A mid-morning spurt of buying pushed it up +24 points but it could not hold the gains. Another flurry of orders at the close kept it from closing negative. It was a very boring day for the Dow with a range of only 54 points.

The Nasdaq was the hot index in a slow market with a gain of +9 points. I know you are laughing that I called the Nasdaq hot with a 9 point gain. That was the kind of day it was.

The S&P managed to close barely positive with a +1 point gain.

Today is Veterans Day and the banks and bond markets were closed. Without an active bond market the equity market typically wanders aimlessly and today was a prime example.

There was a serious lack of headlines and almost no economic reports. The only one of note was the NFIB Small Business Survey. The headline rose from 95.3 to 96.1 for the October period. That lifted it back to the August levels after losing ground in September. Of the respondents a net 10% said they were planning on increasing employment. That is about average for the last 6 months. Of those surveyed 24% said they had unfilled job openings. Also, 26% said they were planning on making capital expenditures to grow their business. That was the second highest reading in the last 7 months with August the highest at 27%. The report is not wildly followed and it was ignored.

The calendar for Wednesday is also lacking any material reports. Wholesale Trade and the U.S. Budget rarely stimulate investor interest. The biggest report for the rest of the week is the Retail Sales for October on Friday.


In stock news Alibaba (BABA) may have had a record day for sales on Monday but the stock collapsed today. The singles holiday that Alibaba started about 5 years ago is now the biggest shopping day of the year in China. Alibaba posted $9.39 billion in sales for the 24 hour Singles Day event. The first event in 2009 had sales of $7 million. That grew to $5.8 billion last year and today $9.39 billion. By comparison Black Friday online sales in 2013 were $1.2 billion. Cyber Monday sales were $1.84 billion according to ComScore. Last year more than 150 million packages were shipped from Singles Day sales. This year more than 250,000 temporary workers were hired to manage the expected sales volume. The scale here is simply mind boggling and fewer than 20% of the 600 million people online in China actually shop online.

Shares sold off on what could have been a sell the new event. The big day came and sales were posted. Now there is no immediate catalyst. Another factor could have been Jack Ma's comments that the stock price was very high and he was feeling pressured to perform. Ma may be channeling his inner Elon Musk since Musk also tanked his stock on two occasions by talking about its high price. Whatever the reason I hope it drops another $10-$15 to relieve some of those monster gains since earnings when it was just under $100. I really want to own this stock but not until the current feeding frenzy has subsided.


Fossil (FOSL) reported earnings after the close and the stock exploded higher. Earnings of $1.96 easily beat estimates of $1.82 and well above the year ago quarter at $1.58. Revenue rose +10% to $894 million also beating estimates of $879 million. The board also announced a $1 billion share repurchase program. Since their market cap is only $5 billion that is a huge buyback program. For the current quarter the company expects sales to rise 3-6% with operating margins in the range of 19.8% to 21.3%. Shares rallied +15.5% in afterhours.


Vivint Solar (VSLR) fell -22% after reporting horrible earnings. The company reported an adjusted loss of -66 cents. There were no analyst estimates. Revenue rose +266% to $8.3 million. This was the first quarterly report since VSLR went public in September. Hoovers is projecting a -47 cent loss in Q4, -$1.55 loss for the year and -$2.53 loss for 2015. VSLR is a competitor to SolarCity (SCTY). I am sure you are wondering as I am why anyone would have bought this IPO.


Homebuilder DR Horton (DHI) reported earnings of 45 cents compared to estimates of 48 cents. Revenue rose +33% to $2.4 billion and slightly above estimates at $2.38 billion. The number of homes sold in the quarter rose +25% to 8,612. Order backlogs rose +29% and October sales were up more than 20%. Apparently home sales in their market are very strong. Shares of DHI rallied +2.2% despite the earnings miss.

Toll Brothers (TOL) preannounced a +29% spike in sales on Monday.


Insys Therapeutics (INSY) reported earnings of 63 cents compared to estimates of 35 cents. That was a +28 cent beat! Revenues rose +99.7% to $58.3 million. Shares of INSY rallied +12% on the news.


Rackspace Hosting (RAX) saw its shares rally +13% after reporting earnings of 18 cents that beat estimates by 2 cents. Revenue rose +18% to $459 million. They also announced a $500 million stock buyback program. This is quite a turnaround for a company that put itself up for sale earlier in the year and then cancelled that plan in September after failing to find any buyers.


There are some decent earnings on tap for Wednesday with Dow component Cisco, JC Penny, Macy's, NetApp and others. Thursday has Dow component Walmart plus Tyco, Applied Materials, Dillards and Nordstrom.


Yahoo (YHOO) announced after the bell that it would pay $640 million for automated advertising service BrightRoll in order to improve its ability to sell video ads in real-time. BrightRoll is profitable and is expected to have revenues of more than $100 million in 2014. This will make Yahoo's video advertising platform the largest in the USA.


Crude oil did not go down today. Well, at least West Texas Intermediate (WTI) did not decline. Brent crude, the benchmark for waterborne crude around the world, broke below support at $82 to close at a five year low. This is really spooking some people in the energy sector but the farther it drops before the OPEC meeting on November 27th the better the chance they will announce a production cut.


One risk for future oil prices is the November 24th deadline for the nuclear negotiations with Iran. While the 7 countries are far from an agreement we all know nothing important ever happens until the last minute. John Kerry said there are still "big gaps" remaining in any potential deal. There is no agreement on any of the fundamental issues.

The biggest is the enrichment process for uranium. Initially the Obama administration and international negotiators were willing to let them have 1,500 centrifuges for research purposes. They currently have over 19,000. In the most recent talking points the President has raised his limit to 4,000 but only the older models and only if Iran gets rid of its existing stockpile of enriched uranium. Iran is not accepting any limits. They have 9,000 of a newer IR2m version that can enrich uranium much faster and to much higher levels. This is another source of contention. Iran has said it will not dismantle its existing enrichment facilities but the P5+1 nations want the equipment rendered inoperable so that Iran can't secretly enrich uranium when the IAEA is not watching.

Another sticking point is how and when to remove the sanctions if a deal is reached. Iran wants all sanctions removed before they will agree to any deal. The P5+1 nations only want to remove the sanctions in measured steps over time after they verify Iran's compliance with the terms of the deal. Also, there is disagreement on how long Iran will have to remain under the watchful eye of the IAEA. Of course Iran wants the observation to end immediately after they have complied with the terms. The other nations are talking in terms of 20 years in order to prevent Iran from immediately reverting back to a nuclear weapons program.

Iran still refuses to let the IAEA inspectors into closely guarded research sites where it was thought Iran had secretly tested explosive component for nuclear weapons. Iran claims they never did but if that was the case then why not let the inspectors inspect.

President Obama has sent four previously secret letters to Ayatollah Ali Khamenei trying to appeal to him to be reasonable and enter into an agreement. He did this without the knowledge of any of the other five nations. Khamenei has never respond to any of them.

The reason this agreement deadline is so important is the sanctions. If no agreement is reached the full sanctions go back into effect and Iranian oil sales will plunge again from their current 1.25 mbpd. If an agreement is reached and oil sanctions are lifted we could see exports double to 2.5 mbpd very quickly. That would put extra pressure on an already oversupplied oil market. Saudi Arabia would like to see the full sanctions reinstated on Iran not just because they are enemies but it would remove oil from the market and the rest of OPEC would not have to cut production at the November 27th meeting in Vienna.

There is a meeting with Iran this weekend in Oman and then again next week in Vienna. Former U.S. negotiator Robert Einhorn said it will be "virtually impossible" for the two sides to reach an agreement by November 24th. The P5+1 nations have said there will be no extension and that date is final. There have already been multiple extensions and Iran is trying to run out the clock by continuing its crash enrichment program while delaying the negotiations for years at this point. This has been going on for the last ten years.

Markets

I could just repost the market commentary for the last several days and I doubt nobody would notice. The lack of movement has seen the markets gain only a handful of points for the week. The S&P gained +1 point to close at 2,039 and a new high. While I would be happy with a couple weeks of steady gains the lack of any bullish emotion is troubling. When traders are passively holding on to their current positions it suggests everybody is "all in" on the market and there is nobody left to push it higher. There are no buyers or sellers and that makes me uncomfortable.

Of course this was a holiday for all practical purposes and Tuesday's volume of 5.4 billion shares was the lowest since September 26th. Advancers and decliners were almost tied at 3525 to 3323.

The S&P has risen to uptrend resistance at 2,040 and the index may be getting tired without a rest since the bottom on October 15th. We have seen almost a month of solid gains with no material bouts of profit taking.

Support should be 2,015 with resistance 2,040.


The Dow is creeping very slowly to new highs and the +1 point gain today accomplished that. However, that is like going to a football game that ends with only a field goal on the board. There was a lot of action but it was all in slow motion. Like the S&P the Dow is very overbought and very much in need of a temporary dip. It is almost inconceivable that we could continue to climb until Thanksgiving without a dip. I would consider it a buying opportunity but given the length of the rebound I would not want to buy the dip on the first day. A three day drop would be perfect.

No Dow component gained or lost a dollar on Tuesday.



All the good news today came from the Nasdaq. The +9 point gain may have been minimal but it was a new 14 year high and it suggests the consolidation from last week may finally be over. I was really encouraged by the Nasdaq gains for that reason. All we need now is for the shorts to begin covering and we could be off to the races.

You have heard the term never short a dull market. The last week has been exceedingly dull and everyone that shorted the Halloween breakout should be very nervous today.

There is really nothing else to say since the index is now well over the 4,600 support from the last week and making new highs. As long as we can avoid any negative headlines we should see fund managers chasing prices on any future gains.



The Russell 2000 is also starting to move higher from last week's consolidation phase. The 1,180 range is now resistance and once through that level it should target the old highs at 1,208. The Russell is not showing any excitement but it is moving higher. We should be happy as long as that continues.


I think this week is the equivalent of tip toeing through a minefield. There is nothing on the calendar to provide a headline boost and the negative headlines always appear unexpectedly. Cisco's earnings Wednesday evening could be a catalyst but hopefully not a negative one.

I would welcome a 2-3 day bout of profit taking but I would not complain if we just continue higher into Thanksgiving. I just don't believe we will continue higher without a short term dip.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email

 


New Plays

Trillionths of a Second

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Cynosure, Inc. - CYNO - close: 26.15 change: +0.74

Stop Loss: 24.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 11, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 201 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
CYNO is in the healthcare sector. The company is part of the medical equipment industry. According to a company press release, "Cynosure designs, manufactures and markets medical devices for aesthetic procedures and precision surgical applications worldwide that enable plastic surgeons, dermatologists and other medical practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascular and benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, liquefy and remove unwanted fat through laser lipolysis, reduce cellulite, clear nails infected by toe fungus and ablate sweat glands."

Their flagship product is the PicoSure laser workstation, designed to remove tattoos. This laser technology produces ultra-short bursts of energy to the skin in trillionths of a second. The company recently gained FDA approval to use their PicoSure system to treat acne scars and wrinkles.

CYNO's earnings results have been mixed. Their Q1 report back in May missed estimates by four cents even though revenues were up +52% from a year ago. The stock sold off on this report. They followed that with a Q2 report in July that beat estimates as revenues soared +45% from a year ago. Growth slowed a bit in their latest report in October.

Analysts were expecting 25 cents a share on revenues of $70 million. CYNO met expectations on the bottom line while the top line grew +18% to $71.5 million.

CYNO's Chairman and CEO Michael Davin commented on the quarter saying, "Cynosure delivered record third-quarter revenue of $71.5 million, up 18 percent year-over-year as revenue in each of our direct sales channels improved from the same period in 2013. North American laser revenue increased 17 percent, revenue from our Asia Pacific subsidiaries rose 46 percent, while our European direct sales channel was up 7 percent. Product and technology innovation, expanded indications and new international marketing clearances continue to drive favorable results for the Company."

Discussing his company's outlook Davin said, "We are on schedule to launch our next flagship platform in 2015 for non-invasive fat removal, and we believe this large addressable market represents a significant growth opportunity for the Company."

Technically shares have broken out from a six-month consolidation in the $19-24 range. The rally following its October earnings report lifted CYNO above key resistance at $24.00 and its 200-dma. Shares have already retested this level as support and now the stock is breaking out to multi-month highs. The point & figure chart is bullish with a $31.50 target.

Tonight I am suggesting small bullish positions if CYNO can trade at $26.25. We want to keep our position size small to limit our risk.

Trigger @ $26.25 *small positions*

- Suggested Positions -

Buy CYNO stock @ $26.25

Annotated Chart:



In Play Updates and Reviews

Stocks Meander Sideways

by James Brown

Click here to email James Brown

Editor's Note:
The U.S. market meandered sideways as investors digested a slow news day.


Current Portfolio:


BULLISH Play Updates

Ambarella, Inc. - AMBA - close: 49.21 change: +2.07

Stop Loss: 43.75
Target(s): To Be Determined
Current Option Gain/Loss: + 5.8%
Entry on November 07 at $46.50
Listed on November 06, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.6 million
New Positions: see below

Comments:
11/11/14: AMBA tagged another new high before giving back its gains to close virtually unchanged on Tuesday. If the market were to see a pullback I would not be surprised to see a dip toward the $47 area. More conservative traders may want to raise their stop loss.

Earlier Comments: November 6, 2014:
AMBA is in the technology sector. They're considered part of the semiconductor and semiconductor equipment makers. The company was founded in 2004 and went public in October 2012 at $6.00 a share. That price was significantly below where AMBA was expected to price in the $9-11 range. Investor sentiment has definitely changed since then.

The company has grown from making broadcast-class encoders to making consumer and sports cameras, security cameras, and now automotive cameras. Their high-definition chips are being integrated into security IP cameras and wearable cameras. AMBA is also capturing part of a new market - cameras on consumer-level remote control drones.

The last two plus years have seen a strong performance in AMBA with the stock up more than +600% from its IPO price. AMBA has GoPro, Inc. (GPRO) to thank for part of that rally. GPRO came to market in June this year and the stock has been in rally mode since mid August with a rally in GPRO from less than $40 to $90 a share. I mention GPRO because AMBA happens to make the HD camera sensors in many of GPRO's products. As GPRO rallies it could be giving AMBA a boost and GPRO expects record sales this holiday season. I find it interesting that GPRO has been chopping sideways the last few weeks while AMBA has hit new highs.

Another note on GPRO, the company reported earnings on October 30th and beat estimates on both the top and bottom line. GPRO management then raised their earnings guidance significantly above Wall Street's estimates. That should spell good news for AMBA's business with GPRO.

GPRO isn't the only one with strong earnings. AMBA's rally has been helped by consistent earnings growth. The company has beat Wall Street's estimates on both the top and bottom line for the last four quarters in a row. Their most recent earnings report in September saw AMBA's management raise their revenue guidance.

Shorts are getting killed. As the rally continues AMBA could see more short covering. The most recent data listed short interest at 26.7% of the small 28.0 million share float.

Currently AMBA is bouncing from the $44.00 level after a two-day pullback. If this rebound continues we want to hop on board. The company will likely report earnings in early December so our time frame is the next four to six weeks.

- Suggested Positions -

Long AMBA stock @ $46.50

- (or for more adventurous traders, try this option) -

Long DEC $50 call (AMBA141220C50) entry $2.15

11/07/14 triggered @ $46.50
Option Format: symbol-year-month-day-call-strike


Burlington Stores, Inc. - BURL - close: 41.55 change: -0.13

Stop Loss: 40.65
Target(s): To Be Determined
Current Option Gain/Loss: + 1.2%
Entry on October 30 at $41.05
Listed on October 27, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 663 thousand
New Positions: see below

Comments:
11/11/14: Outside a 15-minute window from about 10:30 to 10:45 this morning it was a really quiet day for shares of BURL. During that time frame the stock was sinking fast but failed to hit our new stop loss at $40.65.

I am still cautious on BURL given its breakdown below the 10-dma. No new positions at this time.

Earlier Comments: October 27, 2014:
Christmas is less than 60 days away. This year retail spending is expected to surge. The National Retail Federation is forecasting sales during the holiday shopping season to rise +4.1%. Analyst firm Deloitte LLP is expecting a +4.5% improvement. Last year we only saw +2.8% growth and the 10-year average is +2.9%.

If we take into account the positive impact low gasoline prices will have then the estimates above might be too low. Fuel prices are down nearly 20% from their early 2014 highs. That is a huge boost for consumer spending. Oil looks like it will continue to sink so the trend should continue.

The off-price retailers have been outperforming their regular price peers. BURL is part of the off-price group. According to their company website, "Burlington is a national off price retailer offering style for less for the entire family and the home with up to 65 percent off department store prices every day. Departments include ladies' dresses, suits and sportswear, juniors, accessories, menswear, family footwear, children's clothing, furniture and accessories for baby at Baby Depot, home décor and gifts, along with the largest selection of coats in the nation for the entire family. Burlington has 520 stores in 44 States and Puerto Rico."

Credit Suisse recently noted that BURL has delivered three years in a row of strong same-store sales growth. They did it again when the company reported earnings in early September. BURL said their same-store sales grew +4.7% in their second quarter, compared to estimates for +2-3% growth. Management also noted that their gross margins improved by 50 basis points to 38.2%.

Wall Street was expecting a loss of 8 cents per share on revenues of $1.03 billion. BURL delivered a loss of only one cent and revenues were up +8.2% to $1.05 billion. It was a big improvement from a loss of 19 cents a year ago. More importantly management raised their 2015 guidance for both their earnings and revenue estimates.

The bears will argue that BURL is expensive. It's hard to argue with them since BURL currently sports a P/E near 58. However, investors continue to buy the stock and now shares are poised for another bullish breakout. New highs could spark some short covering. The most recent data listed short interest at 13% of the very small 29.3 million share float.

Tonight we are suggesting a trigger to open bullish positions at $41.05.

- Suggested Positions -

Long BURL stock @ $41.05

- (or for more adventurous traders, try this option) -

Long DEC $40 call (BURL141220c40) entry $3.10

11/10/14 new stop @ 40.65
11/01/14 new stop @ 39.85
10/30/14 triggered @ 41.05
Option Format: symbol-year-month-day-call-strike


Columbia Sportswear Co. - COLM - close: 40.76 change: +0.17

Stop Loss: 38.25
Target(s): To Be Determined
Current Option Gain/Loss: + 1.3%
Entry on November 06 at $40.25
Listed on November 04, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 138 thousand
New Positions: see below

Comments:
11/11/14: COLM managed to outperform the major U.S. indices with a +0.4% gain. If you're looking at a chart of COLM then you probably notice the big spike this morning. That was one trade of 100 shares at $42.55 right at the opening bell. COLM spent the rest of the day in a 40-cent range.

Consider waiting for a dip if you're looking for a new entry point.

Earlier Comments: November 5, 2014:
COLM has been consistently beating earnings expectations all year long. The company is part of the consumer goods sector.

According to a company press release, "Columbia Sportswear Company is a leader in the global outdoor and active lifestyle apparel, footwear, accessories and equipment industry. Founded in 1938 in Portland, Oregon, the company has assembled a portfolio of global brands whose products are sold in approximately 100 countries. In addition to the Columbia brand, Columbia Sportswear Company also owns the Mountain Hardwear, Sorel, prAna, Montrail and OutDry brands."

The trend of earnings in 2014 has been strong with COLM beating Wall Street's earnings estimates four quarters in a row and raising guidance three out of four quarters. Their most recent earnings report was October 30th. Analysts were looking for a profit of $0.87 per share on revenues of $632.29 million. COLM delivered earnings growth of +20% to $0.93 a share. Revenues soared +29% to $675.3 million.

Management then raised their full year 2014 earnings and revenue guidance above analysts' estimates. COLM expects 2014 sales to hit $2.06 billion, which is +22% improvement above 2013. They also expect gross margins to rise 130 basis points from a year ago. COLM is guiding 2014 net income to rise +35% to $1.80 per share.

COLM's president and chief executive office, Tim Boyle, said they expect 2015 net sales to grow at a double-digit rate above their new 2014 estimate of $2.06 billion. They plan to hit mid-teen operating margins.

COLM appears to have strong sales momentum as we head into the crucial holiday shopping season. Retail analysts are expecting industry wide sales to be above average this year. Low gasoline prices provide a great tailwind for all the consumer goods companies.

Technically shares of COLM found support near $34-35 dating back to their prior highs (see the long-term chart below). The rebound has accelerated thanks to the company's earnings report and bullish guidance. Now COLMN is breaking out past resistance at $40.00 and its simple 200-dma. We are suggesting a trigger to open bullish positions at $40.25.

- Suggested Positions -

Long COLM stock @ $40.25

- (or for more adventurous traders, try this option) -

Long 2015 Jan $40 call (COLM150117C40) entry $1.75

11/06/14 triggered @ $40.25
Option Format: symbol-year-month-day-call-strike


International Paper Co. - IP - close: 53.62 change: -0.04

Stop Loss: 50.75
Target(s): To Be Determined
Current Option Gain/Loss: +0.6%
Entry on November 10 at $53.30
Listed on November 08, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.8 million
New Positions: see below

Comments:
11/11/14: It was a quiet day for shares of IP as well. Shares traded in a 43-cent range and closed virtually unchanged for the session. I don't see any changes from my recent comments.

Earlier Comments: November 8, 2014:
IP is part of the consumer goods sector. According to a company press release "International Paper (IP) is a global leader in packaging and paper with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include industrial and consumer packaging and uncoated papers. Headquartered in Memphis, Tenn., the company employs approximately 65,000 people and is strategically located in more than 24 countries serving customers worldwide. International Paper net sales for 2013 were $29 billion (which included our now divested xpedx business)."

The company has been facing a lot of headwinds this year but they still managed to beat Wall Street's earnings estimates three quarters in a row. Their most recent earnings report was November 4th. Analysts were expecting a profit of $0.89 per share on revenues of $6.0 billion. IP reported a profit of $0.95 with revenues beating estimates at $6.05 billion.

The company saw significant improvements in its operating profits in all three categories: industrial packaging, printing papers, and consumer packaging. Management expects a surge in packaging orders in the fourth quarter.

Wall Street loves the company's focus on delivering value to shareholders. IP is almost done with their $1.5 billion stock buyback program they announced in September 2013. They also raised their dividend 14% from $1.40 to $1.60. This is IP's third consecutive fourth quarter double-digit dividend increase. The stock now sports a 3.0% yield.

IP's CEO said they were looking seriously at converting part of their business into a master-limited partnership (MLP). This would be another shareholder friendly step as MLPs do not pay federal tax if the return most of their cash to shareholders.

The stock's current rally has produced a buy signal on the point & figure chart with a long-term target at $70.00. This last week has seen shares of IP break out to new multi-year highs. It is also on the verge of breaking out from a major channeling pattern on its weekly chart (see below).

Tonight we are suggesting a trigger to open bullish positions at $53.30.

- Suggested Positions -

Long IP stock @ $53.30

- (or for more adventurous traders, try this option) -

Long 2015 Jan $55 call (IP150117c55) entry $1.21

11/10/14 triggered @ 53.30
Option Format: symbol-year-month-day-call-strike


Lowe's Companies - LOW - close: 58.00 change: +0.17

Stop Loss: 56.95
Target(s): To Be Determined
Current Option Gain/Loss: +5.4%
Entry on October 23 at $55.05
Listed on October 21, 2014
Time Frame: Exit PRIOR to earnings on November 19th
Average Daily Volume = 5.5 million
New Positions: see below

Comments:
11/11/14: LOW is still trying to push higher but it's having a hard time with resistance near $58.00.

We are planning to exit this trade on Friday. Given our time frame I am raising our stop loss up to $56.95. That's 25 cents under the 10-dma.

I am not suggesting new positions at this time.

Earlier Comments: October 21, 2014:
LOW is in the services sector. They run the second biggest chain of home improvement stores in the country. Their 1,837 stores offer more than 200 million square feet of retail space through the U.S., Canada, and Mexico.

The company's most recent earnings report was back in August. LOW beat Wall Street's top and bottom line estimates. Revenues were up +18.2% from a year ago. Gross margins saw some improvement. Same-store sales were up +4.4%, which was impressive. Management provided a small reduction in their full year revenue guidance but this failed to have much impact on the stock. Shares of LOW gapped down on its earnings news and investors bought the dip at support near $50.00.

Since this August earnings report we've seen homebuilder confidence hit nine-year highs while shares of LOW were hitting all-time highs in the $54-55 zone. Investors keep track of the housing market because LOW's business seems to rise and fall with real estate.

The stock market's recent volatility drug LOW back to support near $50.00 and once again traders bought the dip. There was a recent analyst note that was cautious on LOW and its rival Home Depot. The analyst noted that a slow down in sales for building materials would suggest the slowdown should hit retailers too. We may have to wait for LOW's earnings report to see if the analyst is right. In the mean time shares of LOW just ended at an all-time closing high.

If you believe the U.S. economy will continue to improve and the labor market will continue to see job growth then home improvement retailers like LOW and HD should see steady improvement as well.

We are not setting an exit target tonight but I will point out that the point & figure chart is bullish and forecasting a long-term $75.00 target for LOW.

Use a trigger at $55.05 to open bullish positions. We will most likely exit ahead of LOW's earnings report on November 19th.

- Suggested Positions -

Long LOW stock @ $55.05

- (or for more adventurous traders, try this option) -

Long NOV $55 call (LOW141122c55) entry $1.45

11/11/14 new stop @ 56.95
11/05/14 new stop @ 55.85
11/01/14 new stop @ 55.35
10/23/14 triggered @ 55.05
Option Format: symbol-year-month-day-call-strike


The Pantry, Inc. - PTRY - close: 26.27 change: -0.76

Stop Loss: 25.70
Target(s): To Be Determined
Current Option Gain/Loss: + 7.2%
Entry on October 17 at $24.50
Listed on October 15, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 190 thousand
New Positions: see below

Comments:
11/11/14: Profit taking in PTRY continued for a third day but shares found support near $26.00. It also happens to be support near the rising 10-dma.

Tonight we are raising the stop loss to $25.70.

I am not suggesting new positions at this time.

Earlier Comments: October 16, 2014:
This is a simple relative strength trade. PTRY has been almost bullet proof against the market's recent weakness. Instead of following the major indices lower PTRY has soared to new four-year highs.

The company website says, "Headquartered in Cary, North Carolina, The Pantry, Inc. is a leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated convenience store chains in the country. As of September 25, 2014, the Company operated 1,518 stores in thirteen states under select banners, including Kangaroo Express, its primary operating banner. The Pantry's stores offer a broad selection of merchandise, as well as fuel and other ancillary services designed to appeal to the convenience needs of its customers."

PTRY is a small cap stock that has been dead money for years. That seemed to change with their last earnings report. When PTRY delivered earnings on July 30th they beat estimates on both the top and bottom line. The stock soared and broke out past key resistance. Several analysts have raised their earnings estimates on PTRY since that report.

Shares are currently hovering just under short-term resistance at $24.40. We are suggesting a trigger to launch small bullish positions at $24.50. I am suggesting small positions to limit our risk. Looking at a long-term weekly chart of PTRY you could argue that the $25.00 level might be resistance. We will try and limit our risk with a stop loss at $22.90, just under today's low.

*small positions to limit risk* Suggested Positions -

Long PTRY stock @ $24.50

- (or for more adventurous traders, try this option) -

Long DEC $25 call (PTRY141220c25) entry $1.60*

11/11/14 new stop @ 25.70
11/08/14 traders may want to take some money off the table here.
11/01/14 new stop @ 24.85
10/30/14 new stop @ 23.80
10/23/14 new stop @ 23.30
10/17/14 triggered @ $24.50
Option Format: symbol-year-month-day-call-strike


Synchronoss Technologies - SNCR - close: 52.75 change: -0.92

Stop Loss: 49.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 10, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 504 thousand
New Positions: Yes, see below

Comments:
11/11/14: SNCR retreated from the $54.00 level this morning. Shares did see some selling pressure and underperformed the broader market with a -1.7% decline. Overall I don't see any changes from last night's new play description. Our suggested entry point is $54.15.

Earlier Comments: November 10, 2014:
SNCR is in the technology sector. The company provides cloud-based computer solutions and software. Thirty of the biggest wireless carriers use SNCR to back up their customer data. That accounts for more than three billion mobile users. Over 300 of the Fortune 500 companies use SNCR.

The company describes itself as "the mobile innovation leader that provides cloud solutions and software-based activation for connected devices across the globe. The company's proven and scalable technology solutions allow customers to connect, synchronize and activate connected devices and services that empower enterprises and consumers to live in a connected world."

The company is a high-beta, high-growth name and the stock can be volatile but SNCR has been delivering growth. They have beaten Wall Street's estimates on both the top and bottom line four quarters in a row. Their most recent earnings report was October 28th.

Analysts were looking for SNCR to report a profit of $0.43 a share with revenues of $118.8 million. The company beat expectations with earnings up 35% from a year ago to $0.46 a share. Revenues were up +39.6% to $125.2 million.

SNCR's Founder and CEO, Stephen Waldis, commented on the quarter saying, "Synchronoss' strong third quarter financial results exceeded our expectations from a revenue and profitability perspective and were highlighted by 115% year-over-year Cloud Services revenue growth."

SNCR has an above average amount of short interest at more than 9% of the very small 34.4 million share float. The better than expected earnings results sparked a sharp rally to new all-time highs. Shares have now spent two weeks digesting these gains and they have started moving higher again as traders buy the dips.

Today saw SNCR showing relative strength (+2.9%) and close at a record high. We want to jump on board and we're listing a trigger to open bullish positions at $54.15. I want to reiterate that SNCR can be a little volatile. Investors may want to use small positions.

Trigger @ $54.15

- Suggested Positions -

Buy SNCR stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the DEC $55 call (SNCR141220c55)

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


Sonic Corp. - SONC - close: 25.07 change: -0.12

Stop Loss: 24.45
Target(s): To Be Determined
Current Option Gain/Loss: -0.3%
Entry on October 29 at $25.15
Listed on October 25, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 738 thousand
New Positions: see below

Comments:
11/11/14: My enthusiasm for SONC as a bullish candidate is fading as the stock seems to be losing momentum. I am not suggesting new positions at this time.

Earlier Comments: October 25, 2014:
"Service at the speed of sound." That was SONIC's original slogan after the company was rebranded from a chain of Top Hat root beer stands decades ago. Today the company has over 3,500 locations in 44 states. That makes SONIC the largest chain of drive-in restaurants in the United States.

Shares of SONC saw big gains in 2013. The rally continues in 2014 but it has been a much more volatile year for the share price. Yet in spite of all the ups and downs SONC is still respecting the long-term bullish trend of higher lows. Now with strong earnings numbers the stock it hitting multi-year highs.

SONC recently reported its Q4 results on October 21st. Same-store sales in the quarter were up +4.6% and margins improved 150 basis points. Net profits came in at 34 cents a share, which is a 62% improvement from the same period a year ago. Revenues were up +3.1%, which beat Wall Street's estimates.

Management guided in-line and SONC expects profit growth of 18-20% in 2015. Multiple analyst firms raised their price target on SONC stock follow these results. The stock's rally has produced a buy signal on the point & figure chart that is forecasting a long-term target near $35.00.

Friday's high was $25.07. Tonight we are suggesting a trigger to open bullish positions at $25.15. We will start with a stop loss at $23.75. I will point out that the 2007 highs in the $25.30-26.20 area is potential resistance so this might be considered a more aggressive entry point.

- Suggested Positions -

Long SONC stock @ $25.15

- (or for more adventurous traders, try this option) -

Long DEC $25 call (SONC141220C25) entry $0.95

11/01/14 new stop @ 24.45
10/29/14 triggered @ 25.15
Option Format: symbol-year-month-day-call-strike


Zumiez Inc. - ZUMZ - close: $33.94 change: +0.03

Stop Loss: 32.45
Target(s): To Be Determined
Current Option Gain/Loss: - 0.6%
Entry on October 29 at $34.15
Listed on October 28, 2014
Time Frame: Exit prior to earnings in early December
Average Daily Volume = 296 thousand
New Positions: see below

Comments:
11/11/14: ZUMZ dipped to $33.50 and bounced. Shares managed to close virtually unchanged on the session. If the last few weeks is any guide ZUMZ should be poised to rally back toward the top of its trading channel.

Earlier Comments: October 28, 2014:
ZUMZ is in the services sector. The company is considered a specialty retailer. The website describes the company as "a leading multi-channel specialty retailer of action sports related apparel, footwear, equipment and accessories, focusing on skateboarding, snowboarding, surfing, motocross and BMX for young men and women. As of October 4, 2014 we operated 594 stores, included 545 in the United States, 34 in Canada, and 15 in Europe. We operate under the name Zumiez and Blue Tomato. Additionally, we operate ecommerce web sites at www.zumiez.com and www.blue-tomato.com."

Apparel retailers as a group have been pretty hit or miss this year. Yet the sports-related names have been doing okay. ZUMZ's focus on sports-related clothing and equipment might insulate it from the normally finicky teen crowd.

ZUMZ's latest earnings report was back in September. You can see the gap down on the daily chart. ZUMZ beat EPS estimates by 4 cents as earnings grew +35%. Yet revenues only rose +11.9% and missed analysts' estimates. More importantly management issued somewhat soft EPS guidance. The good news for investors is that the post-earnings sell-off did not see any follow through. Instead ZUMZ continues to build on its multi-month trend of higher lows.

I suspect investors might be willing to over look guidance that was a couple of cents below Wall Street's estimates in favor of a company that continues to grow same-store sales. ZUMZ has a pretty good track record with the retailer reporting same-store sales growth that beat analysts' estimates several months in a row. Their latest sales data was very impressive. On October 8th ZUMZ said their net sales in September rose +12.5% while their comparable store sales soared +6.6% compared to estimates for only +2.7% growth.

The current rally has lifted ZUMZ stock to new 2014 highs and the point & figure chart is bullish and forecasting a long-term target of $46.00. Tonight we are suggesting a trigger to open bullish positions at $34.15. We will plan on exiting prior to ZUMZ's next earnings report in early December.

- Suggested Positions -

Long ZUMZ stock @ $34.15

- (or for more adventurous traders, try this option) -

Long DEC $35 call (ZUMZ141220C35) entry $1.60

11/01/14 new stop @ 32.45
10/29/14 triggered @ 34.15
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Coach, Inc. - COH - close: 34.29 change: +0.39

Stop Loss: 34.65
Target(s): To Be Determined
Current Option Gain/Loss: - 3.4%
Entry on November 05 at $32.80
Listed on November 04, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 4.6 million
New Positions: see below

Comments:
11/11/14: More conservative traders may want to abandon ship. COH is clearly not cooperating. The stock outperformed the major U.S. indices with a +1.1% gain on Tuesday. This is the fourth gain in a row. The intraday high was $34.50 and our stop is at $34.65.

Earlier Comments: November 4, 2014:
The Coach brand could be dying and may never regain its previous cachet in the luxury goods market. The company describes itself as, "Coach, established in New York City in 1941, is a leading design house of modern luxury accessories and lifestyle collections with a rich heritage of pairing exceptional leathers and materials with innovative design. Coach is sold worldwide through Coach stores, select department stores and specialty stores, and through Coach’s website at www.coach.com."

Unfortunately for COH their sales have been falling for quite some time. They're currently in the midst of a turnaround plan but they're not seeing results fast enough and investors are losing their patience. The company's most recent earnings report was October 28th. COH beat Wall Street's estimates on both the top and bottom line but the devil is in the details.

Analysts were expecting COH's Q1 (calendar Q3) results to be $0.45 per share on revenues of $1.01 billion. The company delivered $0.53 cents and revenues hit $1.04 billion. Sadly, at 53 cents per share, COH's earnings are still down -31% from a year ago. At $1.04 billion, revenues dropped -9.7%. Margins also contracted from a year ago.

A key metric to watch for any retailer is same-store sales. The company gets about 65% of their total sales in the North American market. Sales were down -19%. Same-store sales were off -24%. That was actually better than analysts' estimates of -25.5%. A year ago COH's same-store North American sales were -6.8%. Last quarter they were -17%. You can see the trend is getting worse.

Disastrous sales in the N. America were offset by +4% sales growth internationally. Yet again it's the details that paint the real picture. Japan saw sales drop -12%, which was the eighth quarter of declines in a row. COH saw sales in China rise +10% but that's down from +20% the prior quarter.

Coach's CEO Victor Luis blamed their terrible results on rising competition and "intensified promotional activity". He's right. It's a tough market for the luxury handbag and accessory business. COH's main rival, Michael Kors (KORS) just reported their earnings results today. KORS also beat Wall Street's top and bottom line estimates. Yet KORS warned of slowing growth and same-store sales. That's terrible news as we approach the key holiday shopping season. KORS blamed slower spending in North America and less mall traffic.

Both companies face challenges. COH may not be able to recover. They were once a highly coveted, luxury brand. Yet today they get 70% of their revenues from their discount stores. That could prove to be an impossible job to reverse this trend now that customers expect to buy COH products at a discount. The high-end customer may have moved on.

- Suggested Positions -

Short COH stock @ $32.80

- (or for more adventurous traders, try this option) -

Long 2015 Jan $30 PUT (COH150117P30) entry $0.75

11/11/14 Traders may want to exit early, COH is not cooperating
11/05/14 triggered @ $32.80
Option Format: symbol-year-month-day-call-strike


Pandora Media, Inc. - P - close: 18.59 change: +0.09

Stop Loss: 20.05
Target(s): To Be Determined
Current Option Gain/Loss: + 2.4%
Entry on October 30 at $19.04
Listed on October 29, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 7.1 million
New Positions: see below

Comments:
11/11/14: Pandora saw its bounce stall at the 10-dma again. More conservative traders may want to lower their stop loss. I am not suggesting new positions at this time.

Earlier Comments: October 29, 2014:
Pandora is in the services sector. The company provides streaming music over the Internet and through your mobile device. They have over 200 million registered users and over 76 million active users.

It has been a really rough year for shares of Pandora. The stock is down over 50% from its all-time high of $40.44 set in March this year. Traders have been selling the rallies for months. If you only looked at the profit numbers you might be surprised by Pandora's performance.

Pandora's most recent earnings report was October 23rd. They beat analysts' estimates with a profit of 9 cents per share. That's a +50% improvement from a year ago. Revenues were up +41.5% from a year ago to $239.6 million, which also surpassed analysts' estimates. Pandora said listener hours soared +25% to almost 5 billion hours in the third quarter versus a year ago. The company's guidance was actually somewhat bullish with Pandora guiding slightly above consensus estimates on both the top and bottom line.

Given this impressive growth from 2013 you might think the stock would be soaring. Unfortunately for Pandora shareholders the company is seeing growth actually slow down and that's due to significant competition.

The 4.99 billion listener hours last quarter may have been up from a year ago but it's down -1% from the second quarter. The company's active users came in at 76.5 million users in the third quarter. That's up +5.2% from a year ago but it's virtually flat versus the 76.4 million from the prior quarter.

The slowdown is likely a result of too much competition. There are a ton of streaming music services like Rdio, Deezer, Grooveshark, Xbox Music, Sony Music Unlimited, and Songza. Yet the major competitors for Pandora are probably Spotify, Amazon.com's Prime Music, Apple's iTunes radio, which will soon merge with Beats Music, and finally Google has their Google Play Music All Access service. If all the competition wasn't enough Pandora also has to contend with music labels constantly fighting to raise the royalties that Pandora has to pay.

There are plenty of bears in this name. The most recent data listed short interest at 13.2% of the 197.2 million share float. Given the stock's recent performance, the slowing growth, and rising competition, the bears should have the upper hand. The stock's performance has produced a bearish signal on the point & figure chart, which is forecasting a long-term target of $11.00.

Tonight we are suggesting bearish positions at the opening bell tomorrow morning. More conservative traders could wait for a new relative low under $18.90 instead. The next support level might be the $15.00 area.

- Suggested Positions -

Short P stock @ $19.04

- (or for more adventurous traders, try this option) -

Long 2015 Jan $19 PUT (P150117p19) entry $1.71

11/08/14 new stop @ 20.05
10/30/14 trade begins. P opens @ $19.04
Option Format: symbol-year-month-day-call-strike


Twitter, Inc. - TWTR - close: $39.59 change: +0.00

Stop Loss: 43.05
Target(s): To Be Determined
Current Option Gain/Loss: + 0.4%
Entry on November 04 at $39.75
Listed on November 03, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 27.9 million
New Positions: see below

Comments:
11/11/14: TWTR tagged new lows before bouncing back to unchanged. I'm not surprised that the stock was little moved today. The company is hosting its investor/analyst day tomorrow. I do expect TWTR stock to be volatile tomorrow. The question is what direction will it move as Wall Street digests any new headlines.

Earlier Comments: November 3, 2014:
TWTR is considered part of the technology sector. The company runs a micro-blogging, communication platform. Users can express themselves but they're limited to 140 characters. The platform is part of the social media industry, which constantly gets a lot of attention from Wall Street.

TWTR came public with its IPO about one year ago. The stock priced at $26.00 and shares ended their first day of trading (November 7, 2013) at $44.90. It has been a roller coaster ride for the stock price. TWTR almost hit $75.00 in December last year and then fell to $30 by May 2014. The company has seen incredible growth but even with the growth its valuations fuel a lot of critics. Their P/E ratio is negative. The stock is trading around 20 times its annual revenues and over 100 times next year's earnings.

The stock's most recent earnings report was October 28th and Wall Street was not happy with the results. Analysts were expecting a profit of $0.01 per share on revenues of $351.59 million. TWTR delivered $0.01 cent, matching estimates, and revenues soared +114.9% to $361 million in the quarter.

TWTR's advertising revenue grew +109% to $320 million from the same quarter a year ago. International revenues were up +176%. With all of this growth and the revenue beat, why did TWTR's stock crash on this report?

The reason is user growth. The company's user growth appears to be slowing down. TWTR's Monthly Active Users (MAUs) hit 284 million in the third quarter. That's an improvement of 13 million from the same quarter a year ago. Wall Street was expecting 285 million MAUs and the whisper number was around 290 million or higher.

The 284 million MAU number is a +4.8% growth rate from the same quarter a year ago. Yet a year ago MAUs were growing +6.4%. The prior quarter Q2 2014 MAUs were growing +5.9%. You can see the concern here. TWTR's valuations are based on extremely strong growth, which is it seeing in its ad revenues, but if users aren't growing then ad revenues will likely stall as well.

Management issued Q4 revenue guidance in the $440-450 million range versus consensus estimates around $448 million. This is another reason traders could have hit the sell button. At least five firms downgraded TWTR following these results.

The stock plunged from the high $40s to low $40s on this earnings report. There has been almost no oversold bounce and now shares are hitting new three-month lows near support at $40.00.

Tonight we are suggesting a trigger to open bearish positions at $39.75. I do want to caution readers that there was a rumor of an activist investors getting involved with TWTR but nothing has been confirmed yet. Should that that story prove to be true it could spark some short covering.

- Suggested Positions -

Short TWTR stock @ $39.75

- (or for more adventurous traders, try this option) -

Long DEC $40 PUT (TWTR141220P40) entry $2.69

11/04/14 triggered @ $39.75
Option Format: symbol-year-month-day-call-strike