Option Investor
Newsletter

Daily Newsletter, Wednesday, 12/3/2014

Table of Contents

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

Market Wrap

Market Keeps Hanging On

by Thomas Hughes

Click here to email Thomas Hughes
The market is hanging at or above recent highs while the technicals deteriorate and economic data remains strong.

Introduction

The market traded just above break even for most of the day, hanging near the long term and all-time highs set in the past week. Earnings and an injection of economic data helped support prices until late day buyers stepped in to push the market to today's highs. Overall, trading was quiet today with nothing really there to grab the market's attention.

The over seas sector was fairly quiet as well, European investors at least are waiting on tomorrow's ECB meeting. There is some expectation for the ECB to make a move to help the ailing EU economy but it is unclear what it may be. Based on Mario Draghi's history of talking the talk and then failing to act I would expect to hear more talk and see little action. Any moves by the bank will occur before the New York open.

Index futures were flat for the first hour or so of the early morning session. The S&P 500 was indicated down by about a point ahead of today's economic releases but slowly gained traction as they hit the wires. The data was decent, not great, but definitely enough to help support current trends. Job creation remains steady, productivity is up, labor costs are down and the economy is growing. Today's releases include the ADP report, Productivity, Unit Labor Costs and Services Sector PMI. Once the data began coming out the indices began to firm, a little. Daily lows were set just after the opening bell and then left behind as most indices moved into the green.

Market Statistics

After the start of trading the market was still quiet. Today's news, including earnings from a couple of teen retailers, helped to support prices but was not enough to really lift them. There is still a load of macroeconomic data due out this week that both bulls and bears may be waiting for. Tomorrow Challenger Gray & Christmas report on planned layoff's/hirings then Friday will be dominated by the Non Farm Payrolls and total US unemployment reports. Another factor possibly affecting trading today was a speech/Q&A session given by President Obama at the business summit. He spoke about the need to come together to get things done, potential hurdles in the Congress and how tax reform shouldn't blow the deficit. Whatever the reason, stocks traded in a tight range for most of the day, and then strengthened into the close. The last half hour of trading saw a number of buyers step into the market and drive prices up to the daily high.

Economic Calendar

The Economy

The ADP employment report was released first. According to the report there were 208,000 new jobs created last month. This is slightly below the 215,000 expected and the 225,000 reported last month. It is a little low but still above the 200,000 level and inline with the steady improvement in labor that has been going on all year. Additionally, the previous month was revised up by 8,000 to 233,000, the fourth straight month of positive revision and an indication of momentum. November gains were broad but led by small business, and by the services sector. There were 101,000 new small business jobs, and 177,000 new service sector jobs. There were notable gains in trades/transportation, construction and manufacturing as well.


Productivity and labor costs were both positive surprises. Productivity for the 3rd quarter was revised higher by 0.3%. This is slightly ahead of the consensus estimates. Unit Labor costs dipped by -1.0%, unexpectedly, versus the estimated 0.0% predicted by analysts. This is also well below the -0.3% decline reported in the last estimate. Labor costs are now up only 1.2% for the year, below the 2.2% long term average. Together these data points are positives for the economy as they mean business are making more revenue with less costs and are more able to pay higher wages without raising prices. It is also a sign that inflation is still tame. The flip side is that, over the long term, as wage earners have more money and want nicer stuff the prices for premium items may go up.

The Services Sector ISM jumped last month too, climbing 2.2% to reach the fourth highest level ever recorded. November ISM was reported at 59.3, much better than expected. A gain was predicted but this reading topped it by nearly 1.5 percentagepoints and indicates growth and growing momentum in the non-manufacturing portion of the economy. Business activity, new orders and prices paid were all indicated higher, business activity and new orders both above 60. Employment was the only portion of the report to decline but is still reading at 56.7, well above the expansionary 50 level.

The last piece of economic news released today was the Fed Beige Book. This was released at 2PM and largely confirms what we already know. The Fed is generally upbeat on the economy but remains cautious over the housing market. Consumer spending, aided by low oil prices and improving labor conditions, is advancing and retailers are optimistic about the holiday season. Looking at jobs the Fed says the gains are widespread throughout all 12 Federal Reserve Districts.

The Oil Index

Oil prices traded to the upside and held steady today around $67.25. Prices have been consolidating below $67 ever since the OPEC inspired dip below $70 and have yet to break back through. Today, a drop in US inventory sparked a brief surge to $68 but it was not long lived, prices soon retreated back to near $67.25. Volatility could continue in this market as traders try to figure out how world demand, cold weather, inventories and the global supply situation are going to affect prices long term. WTI and Brent are both on the verge of another move lower if nothing emerges to help support the long term outlook.

The Oil Index traded to the upside today as well. The index gained close to 1.5% on an intraday basis before resistance pushed it back. The index is now just off of the long term low, set last week when oil prices tanked, and above support along the 1,350 level. The indicators are weak but also still consistent with support along this level but that could change. Oil prices will have a lot to do with how strong support turns out to be and may remain volatile. Should they fall sharply again they will likely carry the Oil Index down too. Resistance is currently around 1,400 with current support around 1,350.


The Gold Index

Gold prices rose today even as the dollar index broke out to a new high. Spot prices for gold climbed about 1% to just shy of $1210 per ounce in today's session. This is after the extreme volatility we saw in gold prices earlier in the week, sparked by the Swiss referendum on gold reserves, and further sign that gold may be bottoming. Gold has now bounced from the $1150 level twice and is currently trading above the $1190-$1200 resistance level. There may be more volatility in the coming weeks but it looks like there are buyers waiting to step in on the dips.

The Gold Index gained more than 3.5% today, moving up from support around the $67 level. Today's action is another indication that the Gold Index may have bottomed. It is still early to say for certain but the index appears to have found long term support at the 100% retracement level of the 2008-2011 bull market in gold. The indicators are bullish and setting up for a secondary confirmation. This is not a signal nor does it mean a rally is about to kick off, merely that the bear market may be over. If so I would expect to see several months of side to side action at least, with a possible retest of the long term low near $60. In the short term, support is indicated along the retracement level at $66.49 with $60 next target should it fail. Resistance is potentially at $72.50 with a target near $80 should the index rise above it.


In The News, Story Stocks and Earnings

Retail and especially Teen Retail were in focus today. A minimum of four commonly traded retailers reported out of about 30 earnings reports on today's calendar. Abercrombie&Fitch reported a horrible quarter this morning but the news turned out to be an ugly duckling. This quarter is a goose egg, but next year may be better than expected. Revenues and sales missed forecasts for the quarter, along with full year guidance, but signs are emerging that the long term plans to turn the company around are working. One such is to reduce logo merchandise in favor of non-logo merchandise and is already paying off. The company reported that comp store sales fell by 10%, but were positively impacted by gains in sales of non-logo products. Shares of the stock opened at a 5 ½ year low but quickly found buyers. The stock then moved nearly 3.5% higher on 3X average daily volume.


Aeropostale reported after the bell and did not inspire the same confidence as its competitor. The company reported a loss of -0.66, about 50% wider than expected. Along with this the teen retailer also guided fourth quarter earnings to a range below current estimates. Shares of the stock had been trading higher by more than 3% during the regular session but fell hard after the report was released.


Guess also reported after the bell. Revenue and earnings fell from the year ago period but came in ahea of expectations. On an adjusted basis EPS was $0.42, more than double consensus estimates. Along side this execs raised full year guidance. Shares of the stock closed the day about 1.25% above yesterdays close and extended that gain in the after hours market.


The retail sector has been in sharp focus the last few weeks as investors eye the holiday shopping season. Today's results from the teen retailers is example of the industry as a whole; consumers are spending but some retailers are doing well and some aren't. The sector has been trending up along with the rest of the market over the past two months and is now bouncing from support. The Retail Spyder XRT pulled back this week after hitting a high last month and could now be in the middle of a rotation. The disparity between the good and the bad retailers is growing and this could lead to a reallocation of portfolios. The indicators are also weak with divergences in line with a pull back. Current support is around $92.50 with the possibility of a pullback to $90.


The Indices

The indices did it once again; They pushed to new highs after a day of quiet trading. There was no one thing that I can put my finger on to cause it exept to say economic data. None of the reports released today was particularly stunning in terms of bullishness but taken together paint a Goldilocks picture of improving labor market, improving consumer, improving economy and low inflation.

All the major indices closed in the green but not all made new highs, the Dow Jones Transportation Average leading today's charge. The transports moved higher by 0.79% and are approaching the all time high set last week. The index appears to making a trend following bounce from the short term moving average but as of yet this is not confirmed by the indicators. The index is still trending up but also still losing strength. MACD is bearish, but very weak, while stochastic is below the upper signal line and moving lower. These could rollover soon but until then caution is warranted. Near term support is along the short term moving average near 9,000.


The NASDAQ Composite added 0.38% today and is now about 5% away from its all time high just over 5,000. This is a monumental number for the tech heavy index and one the market will be watching intently. Until then the index is trending higher and moving up to test current long term highs which are about 1% above today's closing price. The indicators on this chart are also weak and suggestive of a pull back in prices but it has not materialized yet. Price action continued to move higher, supported by the rising economic trends. Providing trends do not change, or outlook does not diminish, they could continue to support prices into the near future. First target for support is around 4,700 with next target near 4,650. Resistance is the current long term high near 4,800.


The S&P 500 was next biggest gainer today, moving barely half as much as the transports. The broad market gained 0.38% but still managed to set a new all-time closing and new all-time intraday high. Today's action barely touched into new territory but touch it did. The index has been trending higher and is now bouncing from support in line with the prevailing trend. The indicators remain weak but, like the transports, are set up for a possible trend following signal. Until then, the indicators are displaying significant divergences that could lead to a correction or pullback of some variety.


The Dow Jones Industrial Average brings up the rear today with a gain of only 0.8%. The blue chip index, despite the smallest gain, put in the most impressive performance by setting a new all time closing and intraday highs. This move is an additional confirmation of Dow theory as now the industrial average is setting new highs on its own, after being led to new highs by the transports earlier this year. The indicators however are still weak but have at least begun to show early signs of rolling over, stochastic is creating a weak, trend following, bullish crossover.


The indices are trending higher and appear to be moving higher on a bounce. Today two of the four majors hit new highs while the other two moved closer to testing their current highs; all supported by rising economic trends. The caveat is that all four also appear to be losing momentum and are at risk for correction. The thing is, there just isn't any sign of one except in the indicators. Price action is bullish, trends are up, economic data is good and outlook is good. For now the trend is up, the economics are rising and expectations are optimistic. So long as this continues weakening indicators are just as likely setting up for a potential trend following signal as not. It will take a catalyst to move the market either way and that catalyst could be data due out tomorrow/Friday.

Until then, remember the trend!

Thomas Hughes

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New Plays

50,000 Volts

by James Brown

Click here to email James Brown


NEW BULLISH Plays

TASER Intl. - TASR - close: 22.86 change: -0.48

Stop Loss: 20.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 03, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.9 million
New Positions: Yes, see below

Company Description

Why We Like It:
50,000 volts. That's what a Taser electro-muscular disruption (EMD) device shoots through your body to override the central nervous system. Your body freezes as all the muscles contract.

Their website describes the company as "TASER International makes communities safer with innovative public safety technologies. Founded in 1993, TASER first transformed law enforcement with its electrical weapons. TASER continues to define smarter policing with its growing suite of technology solutions, including AXON body-worn video cameras and EVIDENCE.com, a secure digital evidence management platform."

They may have started with electrical weapons but now the company is expanding to mobile video cameras worn on a law enforcement officer's gear. The company has been in the news lately thanks to President Obama. On Monday this week Obama wants to spent $75 million over the next three years to outfit the nation's police force with body-worn cameras.

The White House believes that body-worn cameras on police will help reduce violence and avoid another event like the one in Ferguson. Current estimates suggest there are only 70,000 police wearing cameras now. Obama's plan would almost double that. Industry analysts are forecasting significant growth if the federal government approves Obama's plan. There are nearly 800,000 policemen in the U.S. There's plenty of room to grow. Plus TASR is expanding internationally.

The bears will argue that TASR's stock is expensive with a P/E near 50. There is no denying that. However, the body-camera business could soar. Currently it's less than 8% of their annual sales. The real winner could be TASR's Evidence.com ecosystem. This is a subscription service for law enforcement to back up and manage all the data from TASER electric weapons, body-worn cameras, and more.

The stock hit multi-year highs on Tuesday following Obama's comments. Traders bought the dip today at $21.63. We think the rally continues. Tonight we are suggesting a trigger to open bullish positions at $23.25.

I will caution investors that TASR can be a volatile stock. You may want to limit your position size. I will point out that the latest data lists short interest at almost 20% of the 51.3 million share float. If the rally continues TASR could see some short covering.

Trigger @ $23.25

- Suggested Positions -

Buy TASR stock @ (trigger)

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

Buy the Mar $25 CALL (TASR150320C25) current ask $1.95

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

Annotated Chart:



In Play Updates and Reviews

Drifting Higher

by James Brown

Click here to email James Brown

Editor's Note:
The U.S. market continued to drift higher on Wednesday with the S&P 500 closing at a new high.

Overall it was a relatively quiet session.


Current Portfolio:


BULLISH Play Updates

Columbia Sportswear Co. - COLM - close: 44.87 change: +0.43

Stop Loss: 42.85
Target(s): To Be Determined
Current Option Gain/Loss: +11.5%
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:
12/03/14: COLM managed to outperform the major indices again with a +0.9% gain on Wednesday. The stock is trading near all-time highs. I wouldn't chase it after a six-week rally and very little consolidation.

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: 34.97 change: +0.36

Stop Loss: 33.65
Target(s): To Be Determined
Current Option Gain/Loss: - 1.9%
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:
12/03/14: CUDA continued to bounce and gained about +1% on the session. Shares face potential resistance at their 10-dma and then the $36.00 area. No 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: 28.42 change: -0.08

Stop Loss: 25.90
Target(s): To Be Determined
Current Option Gain/Loss: +8.3%
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:
12/03/14: This morning CYNO issued a press release on favorable clinical trial data for its MonaLisa Touch Laser Treatment. The stock initially rallied but strength faded after a few minutes. Following yesterday's big gains it's not surprising to see CYNO pause to consolidate.

I am not suggesting 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: 45.99 change: +2.36

Stop Loss: 42.85
Target(s): To Be Determined
Current Option Gain/Loss: +10.2%
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:
12/03/14: EA soared +5.4% and sprinted to new highs thanks to bullish comments from management. EA's CFO Blake Jorgensen said the company has hit its goal of 20% operating margin a lot faster than expected. He also suggested that EA could see further margin improvement as the industry shifts to more digital downloads.

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: 53.61 change: +0.57

Stop Loss: 49.45
Target(s): To Be Determined
Current Option Gain/Loss: + 0.7%
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:
12/03/14: ISIS saw a little volatility this morning but recovered to close up on the session and new multi-month highs. After the closing bell tonight ISIS issued a press release on its ISIS-APOCIII Rx Phase 2 Study for patients with familial Chylomicronemia. The data suggests that their new drug significantly reduced triglycerides. Shares look like they could open higher tomorrow morning on this news.

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


Microsoft Corp. - MSFT - close: 48.08 change: -0.38

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

Comments:
12/03/14: MSFT held its annual shareholder meeting. The fact that shareholders approved an $84 million pay package for MSFT's new CEO Satya Nadella made headlines. It's worth noting that it pales in comparison to Tim Cook's $378 million salary he got the first year as AAPL's CEO. MSFT's Board of Directors also approved a $0.31 quarterly dividend payable in March next year.

None of these headlines helped the stock price today. Shares have been fading lower the last couple of days. If MSFT doesn't improve soon we might remove it as a candidate.

Our suggested entry point is $49.15.

Earlier Comments: December 1, 2014:
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)

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


Micron Technology - MU - close: 36.10 change: +0.50

Stop Loss: 32.45
Target(s): To Be Determined
Current Option Gain/Loss: + 2.8%
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:
12/03/14: MU outperformed the broader market again with a +1.39% gain on Wednesday. The stock closed at multi-year highs.

More conservative investors may want to start raising their stop loss.

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: $30.68 change: -0.04

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:
12/03/14: QLIK had a volatile morning with an errant trade down to $28.95 before immediately bouncing back. That's twice in the last three weeks the stock has seen these weird spikes lower. It's definitely a turn off. I would definitely keep your position size in QLIK small. Currently we are on the sidelines with a suggested entry at $31.75 but if QLIK doesn't perform soon we'll likely remove it.

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: 66.85 change: -0.69

Stop Loss: 62.45
Target(s): To Be Determined
Current Option Gain/Loss: + 0.5%
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:
12/03/14: STX dipped to short-term support near $66 and its simple 10-dma. Traders bought the dip and STX pared its losses by the closing bell. As long as both STX and the S&P 500 are positive at the open tomorrow I would consider new positions.

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




BEARISH Play Updates

Voxeljet AG - VJET - close: 10.02 change: -0.15

Stop Loss: 11.05
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 = 372 thousand
New Positions: Yes, see below

Comments:
12/03/14: VJET continued to drift lower on Wednesday. The stock is testing what should be significant round-number support at the $10.00 mark. A breakdown here would be negative for any remaining investor sentiment.

Our suggested entry point for bearish positions is $9.90.

Earlier Comments: December 2, 2014:
VJET is in the technology sector. The company is part of the 3D printer industry. A company press release describes VJET as "a leading provider of high-speed, large-format 3D printers and on-demand parts services to industrial and commercial customers. The Company's 3D printers employ a powder binding, additive manufacturing technology to produce parts using various material sets, which consist of particulate materials and proprietary chemical binding agents. The Company provides its 3D printers and on-demand parts services to industrial and commercial customers serving the automotive, aerospace, film and entertainment, art and architecture, engineering and consumer product end markets."

Unfortunately this industry has been struggling. Q3 earnings results were disappointing almost across the board with 3D printing companies either posting earnings misses, lowering guidance, or both. VJET happens to fall in the both category.

VJET reported its Q3 results on November 13th. Analysts were expecting a loss of €0.03 for the quarter. The actual results were significantly worse with VJET reporting a loss of €0.41. That compares to a profit of €0.11 in Q3 2013. Management lowered their guidance following the Q3 earnings report.

The industry is facing a new competition in printer giant Hewlett-Packard (HPQ). Everyone knew that HPQ would eventually jump into the 3D printer market and HPQ has finally announced they will next year. HPQ recently gave a presentation saying their 3D printer technology will use "multi-jet fusion" which will generate speeds 10 times faster than current 3D printers.

Shares of VJET have been underperforming the market with a bearish trend of lower highs and lower lows. The point & figure chart is bearish and forecasting at $6.00 target.

Today VJET is setting at all-time lows and poised to break what should be round-number, psychological support at the $10.00 mark. Tonight we are suggesting a trigger to open bearish positions at $9.90.

Please note I do consider this a more aggressive, higher-risk trade. There is already a lot of short interest in this name. The most recent data listed short interest at 22% of the very small 12.4 million share float. That poses the risk of a short squeeze should VJET ever bounce. You may want to use put options to limit your risk to the cost of the option.

Trigger @ $9.90 *higher-risk, more aggressive trade*

- Suggested Positions -

Short VJET stock @ (trigger)

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

Buy the 2015 Jan $10 PUT (VJET150117P10) current ask $1.05

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