Option Investor
Newsletter

Daily Newsletter, Monday, 11/24/2014

Table of Contents

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

Market Wrap

Holidays And Economic Data

by Thomas Hughes

Click here to email Thomas Hughes
This Thanksgiving market participants will be digesting a load of economic data as well as turkey dinners.

Introduction

Trading was quiet today. There was not much in the way of global news, earnings and no economic data. The only thing impacting early morning action was last weeks news and the international markets. Asian and European markets were still swooning from unexpected central bank and government policy action.

The positive vibe coming from Europe and Asia helped our markets to start the day off on a positive note. Futures trading was up from the very earliest and stayed that way up until the opening bell. At that time the indices moved into the green where and stayed there, for the most part. Techs led today, the NASDAQ Composite gained about 0.90%, while the blue chips lagged, barely closing in positive territory.

Market Statistics

There are several special factors impacting trading this weeek. First up is the Thanksgiving Holiday. The market will be closed on Thursday, and only open until 1PM on Friday. On top of that the OPEC meeting is also on Thursday and will likely fuel heavy speculation in oil. There is also quite a lot of economic data due out, including 3rd quarter GDP 2nd estimate.

Because of the holiday all of this weeks data will be coming out over the next two days. GDP I think will be most important but there are many important data points on the schedule. These include new home sales, pending home sales, Case-Shiller 20 city index, 3rd quarter GDP, ISM Index, durable goods, Michigan Sentiment and others. Not to mention that December 1st is next Monday which means there will be a new round of ADP, NFP and Unemployment figures.

Economic Calendar

The Economy

Moody's Survey of Business Confidence continues to indicate optimism and growth in the economy. This week's summary by Mark Zandi states that “U.S. business sentiment has been upbeat all year, consistent with an economy that is expanding above its potential. Hiring is robust and investment spending is strong. Expectations regarding the economy’s prospects through next spring are optimistic.” Which is contrasted by sentiment in South America and Europe which “remains in a funk”. The US portion of the survey is consistent with all the data and pointing to increasing momentum in the economy. I am very very curious to see the new GDP numbers. Current expectation is for GDP between 3.0% and 3.2%. I would not be surprised to see it higher.

The Oil Index

Oil prices continue to shuffle around while we wait to see what OPEC is going to do. The highly anticipated November meeting starts this Friday and could produce some fireworks, if the apparent division between members is not resolved. One one hand Iran and other members are calling for cuts, up to a million barrels per day, while the Saudis seem unwilling to give up market share. This afternoon WTI and Brent both fell after testing resistance earlier in the day. WTI lost more than -1.25% to fall below $76 while Brent lost about -1%, falling below $80. Today's mover most likely the extension of talks with Iran over its nuclear program along with the greater OPEC situation.

The Oil Index fell today as well, shedding about -0.75%. The index fell from a previous resistance and the 38.2% retracement of the October correction. At this time the index is still trapped within a post-correction consolidation zone but looks like it could break to the upside, provided oil prices move higher. The indicators are not strong, but momentum is bullish and on the rise while stochastic is making a weak bullish crossover. I think it more likely the index will remain trapped inside this range until after the OPEC meeting, at which time oil prices will be the main indicator of direction. Currently resistance is around 1,485 with support around 1,430.


The Gold Index

Gold traded in a tight range just below $1200, held in check by dollar strength. The long term down trend in gold may have bottomed, but a new up trend has not yet begun. Long term outlook for rising interest rates and rising inflation may be supporting gold, but near term outlook for stronger dollar is weighing it down and I think it will take a little more time for that combination of factors to play out. Until then economic data and central bank news could create volatility.

The Gold Index traded lower today, falling down to near $70. The index appears to have bounced back above the 100% retracement line, and to be finding support above that line, but I am still not convinced of a bottom. The indicators are bullish, and price action suggests a move up to $80 could happen, but with gold prices in question I have a hard time seeing the index following through. Current support is between $66.50 and $70 with potential resistance at or above the current level.


In The News, Story Stocks and Earnings

FactSet reports that 97% (487) of S&P 500 companies have reported so far. Of those, 77% have reported earnings above the average estimate of S&P companies while 59% have reported sales above the average estimate. As a whole, the S&P 500 has reported earnings growth of 7.9% for the quarter, well above the consensus estimates at the beginning of the reporting season. On a year-over-year basis 3rd quarter earnings growth is 4%, just ahead of the expected 3.8%. No S&P companies reported today.

Nuance Communications reported after the bell. The communications technology provider reported earnings and revenue above expectations. The results were driven by an increase in bookings which is expected to carry over into next year, and help the company return to growth. Shares of the stock traded higher during the day, by about a half percent, and then skyrocketed after the release, adding another 4% to today's closing price.


Workday also reported after the bell. The cloud solutions provider reported a smaller than expected but failed to spark a rally. The company reported earnings growth of over 68% from the comparable period last year, but only 54% growth is expected for the full year. The news was not what the market wanted to hear and sent the stock lower in after hours trading. Shares of WDAY lost more than -5.5% after the news.


Apple was one of today's top movers, driven by expectations for record sales of iPhones this Christmas. Shares of the stock gained over $2 today, extending the latest rally by 1.85%. The indicators are bullish and showing a late rally buy signal. MACD is ticking up after a dip and stochastic is firing a trend following bullish crossover; my only caution is that it is a holiday week and volume was very low.


Lions Gate Entertainment fell today after opening weekend results for MockingJay were released. The movie set a record as we could have expected but not as good a record as early Monday traders would have liked. The stock dropped in the premarket session but was able to reclaim most of the losses by the end of the day.


The Indices

Today's action was very light but the indices were able to set new highs, if barely. The Dow Jones Industrial Average barely squeaked above break even after a day spent in the red, closing with a gain of only 0.04%. The blue chips traded created the smallest candle as well as the smallest gain. The indicators remain bullish, but momentum is very low and stochastic is weakening within the upper signal range. This could be a warning but while the index is making new highs still a positive indication of consolidation, not reversal. Should the index fall back to support the first target is 17,500.


The S&P 500 gained only 0.29%, setting a new closing high, and nearly a new intraday high as well. The index is trending up, as is the Dow Jones Industrials, with indicators that are slightly better. MACD momentum is still weak, but flat and could easily rollover and increase, while stochastic is showing a weak bullish crossover. For now, it appears as if the index is drifting higher following a two week consolidation, although the consolidation is not well defined. Near term support, on a pullback, looks to be around 2,050 with 2,000 looking like firmer, longer term support.


The Dow Jones Transports gained 0.80% today, setting a new all time closing and intraday high. This index completed a more defined consolidation following the October/November rally and is now breaking out. The trannies are in an up trend and accompanied by indicators supportive of a continuation and in line with a trend following signal. MACD dipped into the red during the consolidation and is now making a bullish crossover as is stochastic. Current targets for this index are 9,250 and 9,500.


The NASDAQ Composite Index made today's largest gain, aided by the rally in Apple. The tech's rose 0.89% and also set a new high, although not an all time high as it is still under the shadow of the Tech Bubble. However, talking about today, the NASDAQ is moving higher and perhaps will be the market leader over the next few weeks. the indicators are bullish and creating a trend following signal. MACD is ticking higher and stochastic is firing a bullish crossover, both following a consolidation during a strong uptrend.


The market is moving higher and looks like it will continue doing so into the near term. There are of course reasons to be wary. There is quite a lot of economic data to be released this week and all at once, not to mention volume could be light all week because of the holiday, and the OPEC meeting.

The most important release may be the GDP numbers tomorrow, and since it is a holiday week market reaction could be amplified, and hard to predict. I think the data will be good, all the current trends are pointing to increasing momentum, but how good is the question. Will they be the same Goldilocks numbers we have been getting and spur on the rally, or so good they inspire fear of the Fed? In either event, the next month, and on into 2015 are still looking pretty good with no signs of change as yet.

Until then, remember the trend!

Thomas Hughes


New Plays

Strong Pipeline

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Isis Pharmaceuticals - ISIS - close: 52.42 change: +1.48

Stop Loss: 49.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 24, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.5 million
New Positions: Yes, see below

Company Description

Why We Like It:
ISIS is part of the healthcare sector. They operate in the biotech space. Biotech stocks have been crushing the market this year. The BTK biotech index is up +43.4% year to date. ISIS is only up +2.2% but it has come a long way from its May 2014 lows near $22.25. The last seven months have produced a +135% rally.

According to a company press release, "Isis is exploiting its leadership position in antisense technology to discover and develop novel drugs for its product pipeline and for its partners. Isis' broad pipeline consists of 34 drugs to treat a wide variety of diseases with an emphasis on cardiovascular, metabolic, severe and rare diseases, including neurological disorders, and cancer.

Isis' partner, Genzyme, is commercializing Isis' lead product, KYNAMRO, in the United States and other countries for the treatment of patients with homozygous FH. Isis has numerous drugs in Phase 3 development in severe and rare and cardiovascular diseases. These include a novel triglyceride lowering drug, ISIS-APOCIIIRx, for patients with familial chylomicronemia syndrome; ISIS-TTRRx, which Isis is developing with GSK to treat patients with the polyneuropathy form of TTR amyloidosis; and, ISIS-SMNRx, which Isis is developing with Biogen Idec to treat infants and children with spinal muscular atrophy, a severe and rare neuromuscular disease. Isis' patents provide strong and extensive protection for its drugs and technology."

Part of the challenge with biotech stocks is their volatility. Biotechs can be extremely sensitive to any headline. The right or wrong headline about an FDA approval or clinical trial results can send a biotech stock soaring or crashing in a heartbeat.

Another challenge is earnings. Many of the smaller biotech names suffer from very lumpy earnings based on milestone payments by partners. For example, last quarter ISIS saw their quarterly revenues soar almost +90% yet they still missed Wall Street revenue estimate.

Most bulls on this stock will point to the company's pipeline. ISIS has a very broad pipeline so it's not just a one-trick pony. You can view their current pipeline here on this webpage: ISIS pipeline.

The stock has been stair-stepping higher with investors buying the dips as prior resistance acts as new support. Last week the stock garnered a new price target upgrade to $62.00. ISIS will also present at a couple of analyst conferences in early December that might offer more catalysts to keep the rally going. The big bounce from its 2014 lows has produced a huge buy signal on the Point & Figure chart that is projecting a long-term target of $73.00.

More aggressive investors may want to open bullish positions now. I am suggesting we wait for a rally past the November high ($53.12) and use a trigger to open positions at $53.25.

Trigger @ $53.25

- Suggested Positions -

Buy ISIS stock @ (trigger)

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

Buy the 2015 Jan $55 call (ISIS150117C55) current ask $2.90

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

Annotated Chart:

Intraday Chart:



In Play Updates and Reviews

Small Caps Rally

by James Brown

Click here to email James Brown

Editor's Note:
The small cap Russell 2000 index ($RUT) outpaced the big cap indices on Monday. This is a four-month closing high for the $RUT. Strength in the small caps is encouraging for the broader market.

MU hit our entry trigger.


Current Portfolio:


BULLISH Play Updates

Ambarella, Inc. - AMBA - close: 51.51 change: +1.88

Stop Loss: 47.35
Target(s): To Be Determined
Current Option Gain/Loss: +10.8%
Entry on November 07 at $46.50
Listed on November 06, 2014
Time Frame: Exit PRIOR to earnings on December 4th
Average Daily Volume = 1.6 million
New Positions: see below

Comments:
11/24/14: AMBA delivered a strong bounce from its morning low of $49.75. Shares displayed relative strength with a +3.78% gain. I'm not suggesting new positions.

Note: AMBA has earnings coming up on December 4th. We will likely exit prior to the announcement.

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

11/22/14 new stop @ 47.35
11/13/14 Warning! Today's move is a potential bearish reversal
11/12/14 new stop @ 46.75
11/07/14 triggered @ $46.50
Option Format: symbol-year-month-day-call-strike


Columbia Sportswear Co. - COLM - close: 44.54 change: +1.23

Stop Loss: 41.85
Target(s): To Be Determined
Current Option Gain/Loss: +10.7%
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:
11/24/14: COLM continues to defy gravity and rallied another +2.8% on top of recent gains. This is a new all-time closing high for the stock.

Tonight I am raising the stop loss to $41.85.

I am not suggesting new positions.

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

11/24/14 new stop @ 41.85
11/19/14 new stop @ 41.45, readers may want to take some money off the table right here.
11/12/14 new stop @ 39.25
11/06/14 triggered @ $40.25
Option Format: symbol-year-month-day-call-strike


CSX Corp. - CSX - close: 37.88 change: +0.32

Stop Loss: 36.25
Target(s): To Be Determined
Current Option Gain/Loss: + 2.1%
Entry on November 20 at $37.10
Listed on November 19, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 7.2 million
New Positions: see below

Comments:
11/24/14: Transport names were showing strength again. CSX rallied +0.85%. I am not suggesting new positions at current levels. Look for a dip near $37.00 as a potential entry point.

Earlier Comments: November 19, 2014:
CSX is in the services sector. They run a railroad and intermodal transport business that covers much of the U.S. and Canada. According to the company website, "CSX Corporation, together with its subsidiaries based in Jacksonville, Fla., is one of the nation's leading transportation suppliers. The company's rail and intermodal businesses provide rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers.

Overall, the CSX Transportation network encompasses about 21,000 route miles of track in 23 states, the District of Columbia and the Canadian provinces of Ontario and Quebec. Our transportation network serves some of the largest population centers in the nation. Nearly two-thirds of Americans live within CSX's service territory.

CSX serves major markets in the eastern United States and has access to over 70 ocean, river and lake port terminals along the Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. The company also has access to Pacific ports through alliances with western railroads."

The railroad stocks have been showing relative strength as the broader U.S. economy slowly improves. Weekly average carloads have hit levels not seen in years. CSX's most recent earnings report was October 14th and it was a record breaker with record revenue, operating income, net earnings and EPS.

Wall Street was expecting a profit of $0.48 per share on revenues of $3.18 billion. CSX reported $0.51 a share, which is a +13% increase from $0.45 a year ago. Revenues were up +7.9% to $3.22 billion. Management said that "This performance was supported by volume increases of 7 percent, with broad-based growth across nearly all markets CSX serves." It was CSX's third earnings beat in a row.

CSX's Executive Vice President of Sales and Marketing and Chief Commercial Officer, Mr. Clarence Gooden, said, "The underlying macro-economy remains strong and the data and our experience suggest a positive outlook for growth." CSX is expecting steady growth in the fourth quarter and they see growth improving to double-digit earnings growth and margin strength in 2015.

When asked about the drop in oil prices CSX does not think the drop in oil will impact their business. CSX management said they have already signed more than 50% of their 2015 contracts. There has been some speculation that coal could impact the rail business but CSX believes domestic coal volumes will remain strong as utilities continue to rebuild their inventories.

Investors might like to know that CSX saw some big gains in October over M&A speculation. Evidently Canadian Pacific (CP) had approached CSX about a merger but CSX rejected the offer. That has revived the idea that the railroad industry could see more M&A.

Shares of CSX have spent the last few days consolidating sideways in the $36.40-37.00 zone. A breakout could be a new entry point. I'm suggesting a trigger to open bullish positions at $37.10.

- Suggested Positions -

Long CSX stock @ $37.10

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

Long 2015 Jan $37 call (CSX150117c37) entry $1.30

11/20/14 triggered @ 37.10
Option Format: symbol-year-month-day-call-strike


Barracuda Networks - CUDA - close: 34.88 change: -0.40

Stop Loss: 33.65
Target(s): To Be Determined
Current Option Gain/Loss: - 2.2%
Entry on November 18 at $35.65
Listed on November 12, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 247 thousand
New Positions: see below

Comments:
11/24/14: Hmm... we may need to turn more defensive on CUDA. Shares underperformed the broader market with a -1.1% decline on Monday. Today's move is also a breakdown under short-term technical support at its simple 10-dma.

I am not suggesting new positions at this time.

Earlier Comments: November 15, 2014:
CUDA is part of the technology sector. This is a small cap company in the cloud computing space. According to the website, "Barracuda provides cloud-connected security and storage solutions that simplify IT. These powerful, easy-to-use and affordable solutions are trusted by more than 150,000 organizations worldwide and are delivered in appliance, virtual appliance, cloud and hybrid deployments. Barracuda's customer-centric business model focuses on delivering high-value, subscription-based IT solutions that provide end-to-end network and data security."

CUDA has only been a public company for little more than a year. Lately they have been on a roll with their earnings reports. CUDA has beaten Wall Street's estimates on both the top and bottom line four quarters in a row. The last two reports also included bullish guidance.

CUDA's most recent report was October 9th when they reported their Q2 results. Analysts were expecting a profit of $0.04 a share on revenues of $66.7 million. CUDA delivered a big beat with a profit of $0.8 on revenue growth of +18.9% to $68.7 million.

Management said their active subscribers grew +18% and their renewal rate was 96.5%. Their Next Generation Firewall solutions saw sales up +50% in the quarter. CUDA said sales were up across all geographically regions. Plus their gross margins were strong with an improvement to 81.7%. That's above the prior quarter's 80.4% and the year ago period 79.8%.

CUDA's guidance was bullish. Their Q3 estimates are for revenues in the $69-70 million range versus Wall Street's $69 million estimate. They expect a profit in the $0.04-0.05 zone compared to estimates of only $0.03. They raised their 2015 revenue guidance above their prior estimates but this was slightly below Wall Street's estimate. They also raised their 2015 earnings growth into the $0.22-0.24 range compared to analysts' consensus estimates of only $0.17.

Technically the stock has been soaring from its double bottom in the $24.00 area. The point & figure chart is bullish and forecasting a long-term target of $56.00. Right now CUDA is testing resistance in the $35.00 area. A breakout here could spark some short covering. The most recent data listed short interest at 9.7% of the very, very small 9.9 million share float.

We are suggesting a trigger to open bullish positions at $35.65.

- Suggested Positions -

Long CUDA stock @ $35.65

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

Long 2015 Jan $35 call (CUDA150117c35) entry $3.15

11/22/14 new stop @ 33.65
11/18/14 triggered @ $35.65
Option Format: symbol-year-month-day-call-strike


Cynosure, Inc. - CYNO - close: 27.58 change: +0.27

Stop Loss: 25.90
Target(s): To Be Determined
Current Option Gain/Loss: +5.1%
Entry on November 12 at $26.25
Listed on November 11, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 201 thousand
New Positions: see below

Comments:
11/24/14: CYNO bounced off its 10-dma and closed with a +0.98% gain. Today's move is encouraging but I would hesitate to launch new positions. The $28.00 level remains short-term overhead resistance.

Earlier Comments: November 11, 2014:
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.

*small positions* - Suggested Positions -

Long CYNO stock @ $26.25

11/19/14 new stop @ 25.90
11/18/14 caution: potential bearish reversal today
11/15/14 new stop @ $25.35
11/12/14 triggered @ 26.25


Electronic Arts - EA - close: 43.60 change: +0.11

Stop Loss: 40.85
Target(s): To Be Determined
Current Option Gain/Loss: + 4.4%
Entry on November 17 at $41.75
Listed on November 12, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.7 million
New Positions: see below

Comments:
11/24/14: Monday turned out to be a quiet session for EA. The stock traded sideways in a narrow range. I don't see any changes from my weekend comments. I do want to caution traders that EA is nearing potential resistance at a trend line of higher highs.

I am not suggesting new positions at this time.

Earlier Comments: November 13, 2014:
EA is considered part of the technology sector. More broadly they are part of the entertainment industry. Previously EA was the biggest video game company on the planet but when Activision merged with Blizzard they stole the top spot. It remains a fight. EA has annual revenues of $4.1 billion while AVTI has annual revenues around $4.35 billion.

According to a company press release, "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. 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."

Video games are big business. Microsoft (MSFT) has sold more than 83 million Xbox 360s. Rival Sony (SNE) has sold more than 80 million PlayStation 3s. Meanwhile, another company, Steam, is the biggest online retailer for downloadable PC games and has over 75 million users. Back in 2012 the global video game market was $78 billion. That grew to $93 billion in 2013. Research firm Gartner estimates that global video game sales (all formats) could hit $111 billion by 2015. In comparison the global movie box office is only about $38 billion in 2014.

EA continues to fight for market share and dominance in the gaming industry and they've seen success in 2014. The company has beaten Wall Street's earnings estimates on both the top and bottom line three quarters in a row. Their most recent quarterly report was October 28th. Analysts were expecting a profit of $0.53 a share on revenues of $1.16 billion. EA blew those numbers away with a profit of $0.73 and revenues up +17% to $1.22 billion. Gross margins surged thanks to rising digital sales. Mobile sales were also up strongly and in-game purchases soared.

EA offered bullish guidance for both their December quarter (EA's Q3) and their fiscal year 2015. The company raised their Q3 guidance to $0.90, which was above analysts' estimates. They also raised their 2015 guidance to $2.05, which is above Wall Street's estimate.

The stock reacted by soaring to new highs in late October. Since then shares of EA have been consolidating sideways in the $40-41 zone. It looks like that consolidation could be over with EA breaking out to new highs today. The Point & Figure chart is bullish and forecasting a long-term target of $60.00.

Analysts are expecting a strong holiday shopping season this year. The big drop in oil and thus gasoline prices is giving consumers a little extra spending money. The National Retail Federation is forecasting sales growth of +4.1% versus the normal 10-year average of +2.9%. That's a very broad retail outlook. It could be even stronger for video games this year.

Tonight we are suggesting a trigger to open bullish positions at $41.75.

- Suggested Positions -

Long EA stock @ $41.75

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

Long 2015 Jan $45 call (EA150117c45) entry $0.71

11/22/14 new stop @ 40.85
11/20/14 Caution. EA could be volatile tomorrow in reaction to GME's earnings report
11/17/14 triggered @ 41.75
Option Format: symbol-year-month-day-call-strike


International Paper Co. - IP - close: 53.65 change: +0.03

Stop Loss: 52.85
Target(s): To Be Determined
Current Option Gain/Loss: +0.7%
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:
11/24/14: Heads up! I am suggesting we move to the escape pods on this trade. Shares of IP have underperformed the S&P 500 four days in a row. We've noted its recent relative weakness. The bounce stalled again today with an intraday reversal at its 10-dma. IP is clearly warning us it's poised to correct lower.

We want to exit immediately tomorrow morning. Investors may want to keep it on their watch list since $50.00 should be pretty strong support. A bounce from $50 could be a new bullish entry point.

- Suggested Positions -

Long IP stock @ $53.30

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

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

11/24/14 prepare to exit tomorrow morning!
11/20/14 new stop @ 52.85
11/12/14 new stop @ 52.35
11/10/14 triggered @ 53.30
Option Format: symbol-year-month-day-call-strike


Micron Technology - MU - close: 34.73 change: +0.43

Stop Loss: 32.45
Target(s): To Be Determined
Current Option Gain/Loss: - 1.1%
Entry on November 24 at $35.10
Listed on November 22, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 24.8 million
New Positions: see below

Comments:
11/24/14: Our brand new bullish trade on MU has been triggered. MU spiked higher at the open and traded above resistance at $35.00. Our suggested entry point to open bullish positions was hit at $35.10. Unfortunately shares pared their gains by the closing bell. MU still showed relative strength and closed with a +1.25% gain, beating the major market indices.

At this time I would wait for a new rally above $35.00 before initiating positions.

Earlier Comments: November 22, 2014:
MU is in the technology sector. The company is part of the semiconductor industry. They make memory chips. According to a company press release, "Micron Technology, Inc., is a global leader in advanced semiconductor systems. Micron's broad portfolio of high-performance memory technologies—including DRAM, NAND and NOR Flash—is the basis for solid state drives, modules, multichip packages and other system solutions. Backed by more than 35 years of technology leadership, Micron's memory solutions enable the world's most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications."

The semiconductor space has been a strong performer this year with the SOX semiconductor index up +23.9% in 2014. That outperforms the NASDAQ's +12.8% and the S&P 500's +11.6% gain. MU is beating all of them with a +57.7% rally in 2014.

The company has been beating Wall Street's earnings and revenue estimates all year long. Their most recent report was MU's Q4 results that came out in September. Analysts expected a profit of $0.81 on revenues of $4.15 billion. MU delivered $0.82 as revenues soared +48.7% to $4.23 billion.

Management then raised their Q1 revenue guidance into the $4.45-4.70 billion range, which was above analysts' estimates. They also announced at $1 billion stock buy back program. Following its results and the buy back news the stock has seen several price target upgrades. Many brokers have price targets in the low to mid $40s. One firm has a $60 target.

Technically shares have been stuck under resistance in the $34.85 area since July. A rally past $35.00 would create a new buy signal on MU's point & figure chart. Tonight I am suggesting a trigger to open bullish positions at $35.10.

- Suggested Positions -

Long MU stock @ $35.10

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

Long 2015 Jan $35 call (MU150117C35) entry $2.01

11/24/14 triggered @ $35.10
Option Format: symbol-year-month-day-call-strike


Seagate Technology - STX - close: 66.03 change: +1.09

Stop Loss: 62.45
Target(s): To Be Determined
Current Option Gain/Loss: - 0.7%
Entry on November 21 at $66.52
Listed on November 20, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.7 million
New Positions: see below

Comments:
11/24/14: STX was back in rally mode on Monday. Shares surged at the open and outperformed the market with a +1.6% gain. This is encouraging after Friday's retreat from its intraday highs. I would use today's move as a new bullish entry point.

Earlier Comments: November 20, 2014:
STX is in the technology sector. The company makes hard disk drives, solid-state drives, and additional computer memory and storage systems.

STX's main rival is Western Digital (WDC). The two have something of a duopoly on the global hard drive and storage business. STX has suffered a bit of a public relations problem when a study came out earlier this year that showed WDC's hard drives had a longer (average) life span than STX drives. The news has helped WDC steal some market share from STX but both companies are still seeing strong growth.

Back in July STX announced their Q4 results and guided higher for their Q1 (calendar Q3). The company's Q1 numbers were better than expected and above their July guidance thanks to big demand for their PC, gaming, and cloud storage products. Management noted they are definitely seeing better than expected momentum in their cloud-computing systems.

STX's most recent earnings report was October 27th. Wall Street expected a profit of $1.24 a share on revenues of $3.6 billion. STX beat both estimates with a profit f $1.34 a share and revenues of $3.79 billion. The EPS number was up +22% from the prior quarter and up +4% from a year ago. Revenues were up +8.5% from a year ago and up +15% against the prior quarter.

Management said they have confidence in their future cash flow generation which is why they raised their quarterly dividend from $0.42 to $0.54. STX's guidance for the current quarter is $3.7 billion in revenues, which is above Wall Street's estimate.

Technically shares have recovered from a brief November pullback and now the stock is hitting all-time highs. The point & figure chart is bullish and forecasting a long-term $94 target.

Today's breakout past resistance at $65.00 looks like a bullish entry point. I'd like to see just a little bit more confirmation. Tonight we are suggesting a trigger to open bullish positions at $65.75.

- Suggested Positions -

Long STX stock @ $66.52

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

Long 2015 Jan $65 call (STX150117c65) entry $3.10

11/21/14 trade opened on gap higher at $66.52, suggested trigger was $65.75
Option Format: symbol-year-month-day-call-strike


Take-Two Interactive - TTWO - close: 27.71 change: +0.82

Stop Loss: 25.45
Target(s): To Be Determined
Current Option Gain/Loss: + 1.1%
Entry on November 21 at $27.42
Listed on November 18, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.6 million
New Positions: see below

Comments:
11/24/14: TTWO sprinted past the market today with a +3.0% rally. The stock appears to have finally broken out past resistance in the $27 area and closed at new multi-year highs.

Earlier Comments: November 18, 2014:
TTWO is considered part of the technology sector. The company makes video games. They're probably best known for their Grand Theft Auto franchise, L.A. Noire, and Red Dead Redemption.

According to the corporate website, "Headquartered in New York City, Take-Two Interactive Software, Inc. is a leading developer, publisher and marketer of interactive entertainment for consumers around the globe. The Company develops and publishes products through its two wholly-owned labels Rockstar Games and 2K. Our products are designed for console systems and personal computers, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms and cloud streaming services."

If you read the Electronic Arts (EA) trade in the Premier Investor newsletter than you already know how big the video game market is and how fast it's growing. Unfortunately the earnings cycle for most video game companies has a lot of peaks and valleys. TTWO's latest earnings report on October 29th is a good example.

The company's Q3 2013 quarter was strong thanks to their record-breaking launch of the Grand Theft Auto V game. One year later revenues plunged -89% to $134.5 million in Q3 2014. That was still above Wall Street's estimate of only $111 million. TTWO said they lost $0.44 a share, which was 15 cents better than analyst expectations.

TTWO management then issued mixed guidance but most of it was bullish. The company expects their current quarter to see a profit in the $1.34-1.45 range compared to Wall Street's estimates of $1.20. Yet TTWO guided revenues below consensus estimates.

They also raised their 2015 guidance and expect profits in the $1.05-1.30 range compared to prior guidance in the $0.80-1.05 zone. TTWO also raised their revenue guidance but was less than Wall Street expected.

TTWO's results and guidance was good enough to spark a big rally in the stock. Likely due to the high amount of short interest. The most recent data listed short interest in TTWO at almost 20% of the 73.8 million share float. The fact that TTWO has not seen any correction following its post-earnings rally probably has bears in a panic.

TTWO has spent the last two weeks consolidating its gains in a sideways manner. Now it's breaking out from this trading range and hitting new 2014 highs. This move could spark more short covering.

Today's high was $27.19. I am suggesting a trigger to open bullish positions at $27.30.

- Suggested Positions -

Long TTWO stock @ $27.42

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

Long 2015 Jan $28 call (TTWO150117C28) entry $1.05

11/21/14 triggered on gap higher at $27.42, suggested entry was $27.30
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates


None. We do not have any active bearish trades.