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Newsletter

Daily Newsletter, Monday, 12/1/2014

Table of Contents

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

Market Wrap

A Break for the Bears

by Keene Little

Click here to email Keene Little
Today's price action in the stock market suggests the small breakdown could be the break the bears have been looking for. Of course the bulls still view any and all dips as buying opportunities and there is the potential they could be right again.

Wednesday's Market Stats

I hope everyone had a great Thanksgiving weekend, especially if you were able to turn it into a 4-day weekend. Last Friday's half-day session was one of the slowest days, if not the slowest, of the year. But it just might have marked the top of this market since today's decline looks potentially important.

The market started in the hole this morning following a decline in equity futures last night, which is uncharacteristic for a Sunday evening. Right away that was a heads up that something changed -- it's been typical for Sunday evening to see a rally in the futures as bets are made on a continuation of the rally. Manipulated or not, that's been a strong signal of rally strength. So the decline (gap down) Sunday evening was a ruh-roh warning and today's inability to reverse the early-morning decline was another ruh-roh.

The dip buyers immediately showed up this morning and the indexes (except the RUT) got a sharp bounce. But the quick short-covering rally quickly fizzled and the indexes dropped back down to their lows and some made new lows for the day. From there it was more or less a sideways consolidation for the rest of the day and that's another bearish sign. All in all I'd have to give today's round to the bears and that starts the bears with a deficit for the week.

The metals and oil dropped lower Sunday evening but then ran sideways for the rest of the overnight session before they started to ramp back up shortly after the European markets opened. I'll cover them in more detail later but it's looking like key reversal days for them. Equity futures tried to bounce with the metals but got turned back down as we approached the opening bell.

Some of this morning's weakness was blamed on a lonely economic report this morning -- the ISM index dropped marginally from 59 in October to 58.7 in November, and near expectations. But U.K.-based Markit Economics reported earlier in Europe's day that U.S. manufacturing activity grew at the slowest pace since January. Their index ticked down to 54.8 vs. 55.9 in October, which was slightly below economists' forecasts. It's not below 50 and there it's not contracting (yet) but the growth is definitely slowing. The recent trend makes it a little more worrisome for the economy, which in turn makes the high stock valuations a little more vulnerable.

What was a little more worrisome in the ISM report was the prices-paid component, dropping to 44.5 from 53.5 in October. This is another indication of price softening and another deflationary signal. Much of this is attributed to the strong drop recently in commodity prices but I suspect they're not going to see any sharp upward pressure over the next few months.

Today's 14-point (-0.7%) decline for SPX was not that much but it's the biggest drop in the past month. That alone tells you how narrow the price range has become. Contracting volatility is always followed by expanding volatility and that of course begs the question -- was today the start of a period of higher volatility. It's of course possible, especially since selling pressure (if only due to profit taking) will be fought by dipsters who believe December is going to be good for the bulls. An article in Bloomberg this morning (Momentum Forecast) sounded pretty unanimous by market forecasters -- look for higher prices this month. This of course ties in with recent data I've shown about bullish sentiment in this market -- everyone is fully aboard the train and now everyone's hoping we haven't run out of more buyers to keep pushing this thing higher.

Seasonality says we should continue to look higher, including through the coming year (election cycle and years ending in 5), but it's my belief that with everyone looking northward they're not seeing the tsunami headed their way. I could of course be wrong in my assessment (no, say it isn't so) but long-term successful traders know when not to run with the crowd and the crowd is clearly looking for more rally. Rather than guess how the market will react to news or sentiment I'll continue to stick with the charts and look for early warning signals. Today was the first torpedo across the bow of the USS Bullship so we'll see if the bulls simply ignore the torpedo, full speed ahead.

I want to take a top-down look at NDX first tonight since it had a very interesting setup on Friday for a reversal and I thought a red candle on Monday would create a sell signal. So far that's what we have. The weekly chart below shows NDX ran up to a trend line along the highs from December 2012 through the December 2013 - March 2014 highs. The wave count for the leg up from June 2013 has the rally from October completing the 5th wave. Up against the trend line is a strong reason to watch for the completion of the 5th wave here.

Nasdaq-100, NDX, Weekly chart

In addition to the trend line along the highs from December 2012 there is a shorter-term trend line along the highs from July-September and the combination of the two trend lines made for some formidable resistance at 4337-4347. Friday's high was at the high end and it closed at the lower number. Today's decline also broke the uptrend line from October 15 - November 20. At the moment though, NDX is holding inside the up-channel from November 4th, the bottom of which is currently near this morning's low at 4274. That keeps the bulls in the game but only if they can get a stronger bounce started on Tuesday.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4350
- bearish below 4237

Moving in closer to the up-channel mentioned above, you can see it consolidated in the bottom half of the channel, which itself looks like a bearish continuation pattern following this morning's sharp decline. It supports the idea that the next move will be another leg down but as already mentioned, the bulls can't be ruled out yet. From a price perspective I think a stronger sell signal would occur if NDX drops below its November 20th low near 4237.

Nasdaq-100, NDX, 30-min chart

Gann's analysis of the market had him believing time was much more important than price. It's one reason why I pay attention to the work of others who study cycles. I mentioned last week the .447/.553 work by Stan Harley. This time ratio shows up repeatedly and since multiple cases of this relationship were coinciding in the last two weeks of November it pointed to the potential for a major market turn before December. This is the updated chart from last week's update and today's small red candle is hardly scary to a bull, it could be the initial crack in the earth that will soon widen more than the bulls can spread their legs.

S&P 500, SPX, Weekly chart with .447/.553 time ratio

The Bradley turn model and the new moon on November 22nd was also a good setup for a reversal. Last week's holiday bullishness might have been just a way to hold the market up into the end of the month. But the updated MPTS chart shows a top on Friday could certainly have been close enough for government work.

SPX MPTS Daily chart

On November 21st SPX popped above its trend line along the highs from April 2010 - May 2011, which stopped the rallies in July and August (small throw-over above the line in July) but was again not able to hold above the line, currently near 2064. With the waning momentum seen on MACD as it was hitting trendline resistance I thought it was a fair bet resistance would hold. Of course betting on resistance holding in the wild ride up from October has been a bad bet. But this one looks like it's going to hold. Also holding is the Fib projection at 2073.28, which is the 127% extension of its previous decline (September-October). This is such a common reversal Fib that you should make a note of it and always watch price action around it -- any signs of weakening around that Fib level is reason enough to start anticipating a reversal. Combined with the timing factors discussed above had me thinking the week following Thanksgiving was not going to be kind to the bulls who remain convinced we'll head higher into year-end. It could happen but I think the odds are not with them. What we don't know yet, and won't know for a few weeks, is whether or not a larger pullback/decline will lead to more rally next year or instead be the start of the next major decline. Playing it just short term for now...

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2076
- bearish below 2040

There is one bullish possibility here, although I think today's bounce pattern weakened the probability, is for this morning's sharp decline to have been the c-wave of an a-b-c pullback from the November 21st high. For SPX the c-wave projected down to about 2052 where it would be 162% of the a-wave (light green wave labels). This interpretation calls for a sharp rally on Tuesday and if it gets above 2063 it would look more bullish. Above the 78.6% retracement of the decline from Friday would strongly suggest new highs are coming. A drop below 2047 would negate the bullish potential, at which point I'll be looking for a drop at least to the 2030 area (more bearish below that level).

S&P 500, SPX, 60-min chart

If the market does head higher again I can see the potential for the DOW to rally up to the top of its up-channel that it's been in since November 4th, which will be near 18100 by the end of the week. Like NDX it's holding at the bottom of its up-channel but today's bounce off the morning low looks bearish. Like SPX, it rallied up to resistance at its trend line along the highs from May 2011 - December 2013 and Friday's attempt was soundly rejected, leaving a bearish gravestone doji (with a long upper shadow). As noted by Gregory Morris in his book "Candlestick Charting Explained" (a highly recommended book), "If the upper shadow is quite long, it means that the Gravestone Doji is much more bearish...this cannot possibly be interpreted as anything but a failure to rally." This was one of the factors that had me feeling more bearish by the end of Friday's half-day session. The gravestone doji following a rejection at trendline resistance and bearish divergence was a special invitation to bears. Now we wait to see if today's pullback is just another 1-day correction.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,900
- bearish below 17,600

Another bearish sign for the market on Friday was the RUT. As a leading indicator, bailing out of small caps on Friday was the same sign you'd get if you saw rats scrambling off a ship and running down the ropes tying the ships to the pier. Sometimes those rats are the smarter creatures when they sense the ship is about to sink. Last Wednesday I noted the 3 drives to a high at both its broken uptrend line from March 2009 as well as its previous highs in March and July. Friday's sharp decline, and the close below its 20-dma, left me thinking it was the first index to turn on its turn signal. Today's decline, which has it almost testing its 200-dma, nearing 1150, has it now looking like a 5-wave move down from last Tuesday. This should set it up for a larger bounce to correct the decline, which is what I've depicted, but it should be the next good shorting opportunity.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1192
- bearish below 1140

On Friday the SOX ran up to 687.71, a point shy of its price projection at 688.71, which is where the 5th wave of its leg up from November 12th equals the 1st wave. This morning's sharp decline, followed by the corrective bounce into this afternoon, has it looking like today started an important turn back down. The completion of the leg up from November 2012 is the completion of the c-wave of a big A-B-C bounce off its November 2008 low.

Semiconductor index, SOX, Weekly chart

The banking index, BKX, also is in the early stages of what looks like could be an important reversal. It might have completed its own 3-drives-to-a-high topping pattern after failing again to get through its March and September highs, which are near the projection at 73.64 for two equal legs up from 2009. But it needs to drop below 66 to prove it's not still in a bullish sideways consolidation.

The TRAN left a bearish shooting star at resistance on Friday. It was another reversal pattern in the making and today's big red candle confirmed it, especially with the drop below its previous low at 8961 on November 19th. That also has it back below the short-term trend line along its highs from July-September, currently near 9000, which had supported the pullback into the November 19th low. It also closed below its 20-dma near 9030. Following the bearish divergence at Friday's high, there's very little bullish about this chart.

Transportation Index, TRAN, Daily chart

While commodities made a big reversal today there wasn't that much action in the U.S. dollar so it can't be blamed for the big commodity move, as many are saying (looking for some air time and trying to sound like they know what they're talking about). I thought last week's high for the dollar will lead to at least a multi-month pullback but it might not be ready for the pullback yet. It could be heading for about 89.10 where it would hit the top of an up-channel created off the uptrend line from 2011-2014. It's not something I'd be willing to bet on the upside but there is at least a little more upside potential before pulling back.

U.S. Dollar contract, DX, Weekly chart

The metals saw a key reversal today. Following a spike down this morning there was a strong reversal and that produced a bullish engulfing candlestick. The gap down and new lows for gold and silver, followed by a close above the previous day's high, defines an outside up key reversal day. Gold had an $80 reversal intraday (about 6.5%) and that puts gold bears on the defensive. Now we watch to see if the bullish day will see follow through. Interestingly, gold rocketed higher today following a "no" vote from the Swiss about whether or not their central bank should move to a gold standard. There was an expectation for a strong gold rally if the Swiss demanded their central bank start buying gold. The overnight decline could have been the result of the vote, which produced a washout event (on news).

On gold's weekly chart I've been showing an expectation for a drop down to Fib support at 1090 before starting a larger bounce but this morning's reversal now has it looking like that bounce could start earlier rather later. But at the moment there is the potential that today's short squeeze will not see follow through, which would obviously disappoint more than a few gold bulls.

The daily chart below shows today's big white bullish engulfing candlestick. The price projections shown on the chart, at 1218.90 and 1266.61 are for the 2nd leg of the bounce off the November 7th low. At 1218.90 the bounce has two equal legs up and at 1266.61 the 2nd leg of the bounce would be 162% of the 1st leg up. It's possible the bounce off the November 7th low is a completed a-b-c correction to the decline, with today's high at 1221, and will now continue lower from here. If we see a choppy pullback it would support the idea we'll get a larger bounce pattern into the end of the year, which is the way I'm leaning until proven otherwise.

Gold continuous contract, GC, Daily chart

Silver's spike down this morning tagged its price-level support from back in 2006-2010, near 14.65 (with a morning low at 14.15), as well as its broken downtrend line from November 2012 - August 2013 (light blue). Silver has been riding this broken downtrend line since breaking it last February. As with gold, the strong reversal off this morning's low has created an outside up key reversal day today with its bullish engulfing candlestick. Now we watch to see if the silver bulls can keep today's short covering going. The first level of resistance is at its broken uptrend line from 2003-2008, near 17.15 this week (log price scale). Above that level there's very little resistance until broken price-level support near 18.60. By the end of December that level crosses its downtrend line from November 2012 - July 2014 (light purple). If the selling continues there is downside potential to about 13.25 where it would hit the trend line down along the lows from 2011-2013.

Silver continuous contract, SI, Weekly chart

Oil's overnight decline had it testing its long-term uptrend line from 1998-2008, near 64.50, with a low at 63.72. Today's rally has it now approaching price-level S/R near 69, which it broke below on Friday. Assuming a tradeable low is now in place, the bearish pattern calls for a multi-month choppy bounce for a 4th wave correction in the decline from August 2013. At the moment the decline from August 2013 is a 3-wave move and could be the conclusion to its pullback, to be followed by another rally up to the 110 area next year. I have my doubts about the bullish scenario but for now it's at least bullish if it holds above 64.

Oil continuous contract, CL, Weekly chart

Tomorrow will be another quiet morning for economic reports with only Construction Spending and Auto/Truck Sales. That will likely leave the market to fend for itself and what happens overseas. Wednesday's economic reports will have more of an impact on the market, such as the ADP Employment report and the labor costs and ISM Services. Friday will be the big nut for economic reports, which will include the Non-farm Payroll report.

Economic reports and Summary

Today appears to have marked reversals in stocks and commodities and while I didn't touch on bonds, they appear to be starting at least a larger pullback. Interestingly, bond prices and stock prices seem to be trading in synch at the moment. The key reversals in the metals suggest an important low has now been put in place. How bullish commodities will become is still not clear since we could see only a choppy sideways consolidation before heading lower again. The opposite could happen with stocks as well. But the longer-term pattern supports the idea that an important high has now been made. It's too early to declare THE top is in place but bulls should understand that that is the potential here. At a minimum I'm looking for a pullback to correct the rally from October. More bearishly, today's decline has kicked off a much larger decline that could quickly retrace the rally. As always, we'll piece the market's moves together and let it tell us what the higher-probability pattern will be.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

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New Plays

Mega Cap Muscle

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Microsoft Corp. - MSFT - close: 48.62 change: +0.81

Stop Loss: 47.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 01, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 28.6 million
New Positions: Yes, see below

Company Description

Why We Like It:
Founded in 1975, Microsoft (MSFT) started as a software company. Today they are one of the biggest companies in the world with a market cap of more than $400 billion. They continue to make software but they have expanded into computer and gaming hardware, including their X-box gaming console.

In June this year Intel (INTC) surprised the market when they reported stronger than expected enterprise sales of PCs. Many believed the PC market was dying as people buy more laptops, tablets, and smartphones. This resurgence in PC sales was linked to MSFT discontinuing support for its venerable Windows XP operating system. By ending support XP would become more vulnerable to hacking, viruses and malware. This prompted an upgrade cycle. While that's good news for Intel it's also good news for MSFT as more and more people replace old machines with their new Windows 8 operating system. The latest data suggest Windows 8 now has a bigger installation base than XP.

Investors have been generally enthusiastic with the company's direction since Mr. Satya Nadella took over as CEO of the company. Their most recent earnings report was October 23rd. Wall Street was expecting a profit of $0.48 a share on revenues of $22 billion. MSFT beat estimates with a profit of $0.54 a share. Revenues were up +25% to $23.2 billion.

The stock has been a strong performer this year with shares up +20% in 2014 versus the +11.8% gain in the S&P 500 and the +14.7% gain in the NASDAQ composite. MSFT displayed relative strength today with a +1.7% gain. The correction from its mid November high may be over. Investors bought the decline near support at its prior September highs.

We want to hop on board if MSFT continues to rally. Tonight I'm suggesting a trigger to open bullish positions at $49.15.

Trigger @ $49.15

- Suggested Positions -

Buy MSFT stock @ (trigger)

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

Buy the 2015 Feb. $50 call (MSFT150220C50) current ask $1.20

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

Annotated Chart:

Weekly Chart:



In Play Updates and Reviews

December Starts With Profit Taking

by James Brown

Click here to email James Brown

Editor's Note:
Stocks delivered a pretty solid performance in November. It looks like traders decided to take some profits today. The catalyst may have been disappointing Black Friday consumer spending and traffic numbers.

AMBA, CSX, and TTWO hit our stop.


Current Portfolio:


BULLISH Play Updates

Columbia Sportswear Co. - COLM - close: 43.66 change: -1.39

Stop Loss: 42.85
Target(s): To Be Determined
Current Option Gain/Loss: + 8.5%
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:
12/01/14: COLM retreated from Friday's all-time high with a -3.0% decline. The stock is nearing what should be short-term technical support at its rising 10-dma.

Our stop is at $42.85 but more conservative traders may want to move their stop closer to the 10-dma.

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

11/29/14 new stop @ 42.85
11/25/14 new stop @ 42.25
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


Barracuda Networks - CUDA - close: 34.21 change: -1.72

Stop Loss: 33.65
Target(s): To Be Determined
Current Option Gain/Loss: - 4.0%
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:
12/01/14: Tech stocks suffered some of the worst of the profit taking today. CUDA lost -4.78% and is nearing what should be short-term support at $34.00.

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: 27.53 change: -0.04

Stop Loss: 25.90
Target(s): To Be Determined
Current Option Gain/Loss: +4.9%
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:
12/01/14: CYNO weathered the market's pullback today pretty well. Shares closed virtually unchanged.

I am still cautious on the stock. No new positions at this time.

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: 43.15 change: -0.78

Stop Loss: 42.85
Target(s): To Be Determined
Current Option Gain/Loss: + 3.4%
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:
12/01/14: EA retreated -1.7% and closed near short-term technical support at its simple 10-dma. EA seemed to find support near $43.00 twice today. If this level breaks we will likely see EA hit our stop at $42.85.

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

11/29/14 new stop @ 42.85
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


Isis Pharmaceuticals - ISIS - close: 50.97 change: -0.82

Stop Loss: 49.45
Target(s): To Be Determined
Current Option Gain/Loss: - 4.3%
Entry on November 25 at $53.25
Listed on November 24, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.5 million
New Positions: see below

Comments:
12/01/14: Biotech stocks have been market leaders but today they suffered some profit taking and ISIS lost -1.5%. A new bounce from $50.00 would be encouraging but I would hesitate to launch new positions.

Earlier Comments: November 24, 2014:
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.

- Suggested Positions -

Long ISIS stock @ $53.25

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

Long 2015 Jan $55 call (ISIS150117C55) entry $3.15

11/25/14 triggered @ 53.25
Option Format: symbol-year-month-day-call-strike


Micron Technology - MU - close: 34.99 change: -0.96

Stop Loss: 32.45
Target(s): To Be Determined
Current Option Gain/Loss: - 0.3%
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:
12/01/14: Semiconductor stocks have also been showing relative strength. Unfortunately today the group hit some profit taking and MU lost -2.6%. News that J.P.Morgan had raised their price target on MU from $36 to $41 failed to stop the profit taking.

The good news is that MU found support near $35.00. I would use this pullback as a new entry point. After the closing bell tonight Cypress Semiconductor (CY) announced it was merging/acquiring another company. This M&A news could give the semis a boost tomorrow morning.

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


Qlik Technologies - QLIK - close: $30.61 change: -0.22

Stop Loss: 29.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 25, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.6 million
New Positions: Yes, see below

Comments:
12/01/14: QLIK found support near $30.00 and its 10-dma today. More aggressive traders may want to use this dip as a new bullish entry point. I am suggesting readers stick to the plan and wait for QLIK to trade at $31.75 before initiating positions.

Earlier Comments: November 25, 2014:
QLIK is in the technology sector. The company provides business intelligence software. According to a company press release, "Qlik is a leader in data discovery delivering intuitive solutions for self-service data visualization and guided analytics. Approximately 33,000 customers rely on Qlik solutions to gain meaning out of information from varied sources, exploring the hidden relationships within data that lead to insights that ignite good ideas. Headquartered in Radnor, Pennsylvania, Qlik has offices around the world with more than 1700 partners covering more than 100 countries."

It has been a very rocky road for QLIK investors the last couple of years. QLIK's stock peaked in mid 2013. Since then shares have seen big swings both up and down. Uneven earnings results and guidance have played their part. The last four quarters have seen QLIK beat Wall Street's bottom line estimate by a penny each quarter. Yet three out of the last four quarters QLIK management has lowered their guidance.

Their most recent earnings report was October 23rd. Analysts were looking for the company to breakeven ($0.00 a share) on revenues of $124 million. QLIK delivered $0.01 a share with revenues up +26% to $131.3 million. Then management guided lower on both EPS and revenues for the fourth quarter. So why did shares of QLIK soar higher the next day?

The answer is likely the company's license growth. QLIK is seeing sharp improvement in its license growth. The first quarter it was +2% growth. The second quarter saw that improve to +11%. Last quarter it was +24% year over year.

The stock has continued to gather bullish analyst opinions. Last week the stock received a price target upgrade to $37.00. This week Citigroup added QLIK to their focus list and upped their price target to $38. The point & figure chart is bullish and forecasting at $42 target.

The stock is volatile and therefore I am labeling this a higher-risk, more aggressive trade. Investors will want to consider limiting their position size or using the options to limit risk to the cost of their option.

Technically the recent breakout past $30.00 is bullish. Yet QLIK still has resistance near its 2014 Q1 highs in the $31.25-31.55 zone. Tonight I am suggesting a trigger to open small bullish positions at $31.75.

Trigger @ $31.75 *small positions, higher-risk trade*

- Suggested Positions -

Buy QLIK stock @ (trigger)

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

Buy the 2015 Jan $33 call (QLIK150117C33)

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


Seagate Technology - STX - close: 65.95 change: -0.17

Stop Loss: 62.45
Target(s): To Be Determined
Current Option Gain/Loss: - 0.9%
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:
12/01/14: STX tested its 10-dma and bounced this morning. Shares closed virtually unchanged on the session.

There is no change from my weekend comments. Depending on your trading style we could open bullish positions on a dip near $65.00 or wait for a new relative high above $66.70.

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


Intrexon Corp. - XON - close: 25.45 change: -1.08

Stop Loss: 24.85
Target(s): To Be Determined
Current Option Gain/Loss: - 5.5%
Entry on December 01 at $26.92
Listed on November 29, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 506 thousand
New Positions: see below

Comments:
12/01/14: Our brand new play on XON is off to a rough start. We were hoping to launch bullish positions at $26.75 but XON gapped open higher at $26.92. The rally immediately reversed as the broader market accelerated lower. Shares of XON ended the session near technical support at its 10-dma. To pour salt in the wound today's move has created a bearish engulfing candlestick reversal pattern.

Our trade was opened this morning but I am not suggesting new positions at this time.

Earlier Comments: November 29, 2014:
XON is considered part of the healthcare sector. They have an interesting attitude toward the application of biotechnology. Here's a bit from the company's website:

"Intrexon Corporation, founded in 1998, is a leader in synthetic biology focused on collaborating with companies in Health, Food, Energy, Environment and Consumer sectors to create biologically based products that improve quality of life and the health of the planet. At present rates of global industrialization and population growth, food and energy supplies and environmental and healthcare resources are becoming scarcer. We believe Intrexon’s leading Better DNA® approach to synthetic biology has the potential to provide new, more effective and sustainable solutions to address these challenges.

With a suite of proprietary and complementary technologies, Intrexon applies engineering to biological systems to enable DNA-based control over the function and output of living cells. Working with key collaborators, Intrexon seeks to develop high value applications that can bring better medicines to more people, alleviate shortages of essential nutrients, develop renewable fuels and other resources, and protect the environment."

The health division is working on new therapies for both humans and animals. The food division is trying to develop new science to boost crop yields. Their energy research hopes to find a biological approach toward greener energy. The company also plans to develop technology to help our environment and provide new solutions for consumers.

As is typical with most biotech companies their earnings are very lumpy. One quarter might see strong earnings results and the next they could be down sharply. XON is no different with hits and misses in its bottom line results. The good news is that the company is seeing revenue growth. In May 2014 XON reported revenues of $7.9 million, up +102% from a year ago. Their report in August saw revenues up +76% to $11.8 million. Their latest report in November XON said revenues grew +253% to $21.2 million.

The current rally in XON has powered shares from $16 toward resistance in the $26-27 area. A breakout here could spark a big short squeeze. The most recent data listed short interest at 73% of the float (12.1 million shares short versus a float of 16.5 million).

Tonight I am suggesting a trigger to open small bullish positions at $26.75 with an initial stop loss at $24.85. More conservative investors may want to wait for XON to rally past last week's high of $27.22 before initiating positions. We want to keep our position size small to limit risk since biotechs can be very volatile.

*small positions, more aggressive trade* - Suggested Positions -

Long XON stock @ $26.92

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

Long 2015 Jan $30 call (XON150117C30) entry $1.60

12/01/14 Trade opened on gap higher at $26.92, suggested entry was $26.75
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates


None. We do not have any active bearish trades.




CLOSED BULLISH PLAYS

Ambarella, Inc. - AMBA - close: 50.69 change: -4.31

Stop Loss: 50.75
Target(s): To Be Determined
Current Option Gain/Loss: + 9.1%
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:
12/01/14: Ouch! It was a rough day for AMBA. Traders were in a selling mood and shares plunged -7.8%. The stock was down -9.8% at its worst levels of the session. Our stop was hit at $50.75. After a seven-week run AMBA was due for some profit taking but today was a big excessive.

- Suggested Positions -

Long AMBA stock @ $46.50 exit $50.75 (+9.1%)

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

DEC $50 call (AMBA141220C50) entry $2.15 exit $3.20 (+48.8%)

12/01/14 stopped out
11/29/14 new stop @ 50.75
11/26/14 new stop @ 48.75
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

chart:


CSX Corp. - CSX - close: 35.06 change: -1.43

Stop Loss: 36.25
Target(s): To Be Determined
Current Option Gain/Loss: - 3.1%
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:
12/01/14: Railroad stocks continued to get pummeled on Monday. The DJUSRR railroad index was down -2.9%. Shares of CSX underperformed its peers with a -3.9% decline. Our stop would have been hit at $36.25 but CSX gapped down at $35.95.

- Suggested Positions -

Long CSX stock @ $37.10 exit $35.95 (-3.1%)

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

2015 Jan $37 call (CSX150117c37) entry $1.30 exit $0.75 (-42.3%)

12/01/14 stopped out on gap down at 435.95
11/20/14 triggered @ 37.10
Option Format: symbol-year-month-day-call-strike

chart:


Take-Two Interactive - TTWO - close: 26.70 change: -0.96

Stop Loss: 26.85
Target(s): To Be Determined
Current Option Gain/Loss: - 2.1%
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:
12/01/14: TTWO was underperforming the market on Friday so we raised our stop loss. That underperformance continued today with a -3.47% decline. TTWO hit our stop at $26.85 this midday.

- Suggested Positions -

Long TTWO stock @ $27.42 exit $26.85 (-2.1%)

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

2015 Jan $28 call (TTWO150117C28) entry $1.05 exit $0.70 (-33.3%)

11/29/14 new stop @ 26.85
11/26/14 new stop @ 25.85
11/21/14 triggered on gap higher at $27.42, suggested entry was $27.30
Option Format: symbol-year-month-day-call-strike

chart: