Option Investor
Newsletter

Daily Newsletter, Thursday, 12/4/2014

Table of Contents

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

Market Wrap

Which Way Do We Go

by Thomas Hughes

Click here to email Thomas Hughes
US economic data and growth outlook from the ECB sent the markets first up, then down, and then sideways.

Introduction

This morning began with air of anticipation. Investors around the world were waiting on news from the ECB and economic data from the US. European markets were largely in the green, ahead of the ECB, and helped to lift futures trading here, which were also aided by positive labor data. After the ECB things changed a bit but by the end of the day the market was flat.

There were a couple of releases today, led by the Challenger report on planned lay-offs and followed up by weekly unemployment claims, both of which are in line with current trends. The positive spin to early trading held steady until the ECB released its decision, shortly after 8:30AM. At that time European markets hit the skids, beginning a decline that took them more than 1.21% lower. Our markets were also negatively affected, futures dipped just below break even and held there until the opening bell.

Mario Draghi and the ECB did exactly what they have done before; nothing. The bank held interest rates steady and enacted no new forms of QE, stimulus or other reforms. What he did do was talk the same talk. At the news conference he said that the bank was “stepping up preparations for new measures” which means nothing, really. Mario Draghi went on to say that any moves that do come were going to happen next year. What the market took to heart though is lowered outlook. The ECB has lowered its growth outlook for the EU out to 2016. He also says that the risk remains to the downside. This will of course be a drag on global GDP but my question is how bad will it hurt US GDP? Especially since our GDP appears to be gaining momentum.

Market Statistics

The market moved lower at the bell, but only just, and then hung below break even for the first hour. Around 10AM the market began to fall off with the SPX losing about 13 points over the next 45 minutes. Support began to appear around 10:30 and 2062.50, at which level the market created a double bottom and then moved higher. Around mid day the bulls were able to push the indices into the green but it did not last. By 1PM the market was back underwater and drifting sideways, just below break even, and held there into the close of trading.

Economic Calendar

The Economy

First up on the economic calendar is the Challenger Grey&Christmas report on planned lay offs. The number of planned lay offs fell in November, dropping more than 30% to 35,940. This is down from last month, which was a seasonally expected peak and the second highest level all year. The number is down from last year, -21% compared to last November and -5.8% year-to-date. These numbers are good news, support continued economic expansion and put us on pace for the lowest number of lay offs since 1997.

Challenger Grey & Christmas Reported Layoffs

Initial claims fell this week as well, dropping back below 300,000. This week initial claims were reported at 297,000, -17,000 from last weeks upwardly revised 314,000. The revision was only 1,000. The four week moving average moved counter to this weeks drop, reflecting the spike in claims last week, and gained 4,750. On a not adjusted basis claims fell by 62,943 or -17.6%, nearly 50% more than expected and another sign that there is some underlying strength in the labor market.

Initial claims have been moving higher over the past two months, in line with the expected seasonal increase in pre-end of the year lay offs, but are still near long term lows. The long term down trend in claims may have leveled off but it has not reversed. Claims may continue to trend sideways in a range near or just below 300,000.


Continuing claims rose this week, reflecting the lag between initial and continuing claims. Claims gained 39,000 from an upward revision of 7,000 to hit 2.363 million. Continuing claims, a better and less volatile indicator of labor trends, is still trending lower regardless of this weeks increase and have yet to level out.

Total claims also rose this week, gaining over 120,000 to reach 2.249. Total claims,which lag initial claims by two weeks, have been on the rise as well. This is a mild concern but also could be a positive. It could be a sign of a rise in participation rates. There was a gain in participation last month, there could be another increase this month.


Tomorrow the NFP and unemployment data will be big news. NFP should remain strong, expectations are for near 250,000 with unemployment holding steady at 5.8%. All the data is pointing in the right direction, the only weakness being the slight rise in unemployment claims that occurred this month. Claims may come in light, but I think positive revisions to the previous month would cancel that out. What we need to see is steady numbers in the current and revised numbers.

The Oil Index

Oil had been holding its ground, above $67, until two bits of news weighed it down. First, the Saudis announced another series of price discounts. Second, the Sharara oil field in Libya is about to come back online, again. The Saudis are still scrambling to stay ahead of the market, in whatever way they can while global supply and infrastructure continues to operate at high capacity. Together these two headlines helped to trim a full percent off of WTI and a half percent off of Brent and are no sign of a bottom in oil.

The Oil Index fell on the news as well, but was able to regain most of the loss. The index dropped about 5 points at the open, fell even further during the morning and then recovered the decline to close at today's open. This index looks ready to fall on bad news, but equally ready for buyers to step in on the dip. Support is still indicated below the current level although the indicators are looking bearish. The bearish MACD peaks are in line with support at this level and stochastic is holding firm in the middle portion of its range. Support is around 1,350 with resistance just above near 1,400. Oil prices will be the deciding factor as always, as I don't see anything to support oil prices I am expecting to see the Oil Index continue to test support.


The Gold Index

Gold prices held firm today, only experiencing mild volatility compared to earlier in the week. Gold made a $10 swing this morning as the ECB statement and press conference hit the air waves. The EBC statement helped to firm the Euro and weaken the dollar which in turn helped to support gold prices. Prices stabilized around $1207 by the close of the US session and are still above $1200.

The Gold Index traded lower today but was not able to recover the loss. The index fell -1.85% to drop below $67. The index is trading below the short term 30 day moving average but above long term support. Support is currently at $66.59, a significant Fibonacci Retracement level, and extremely long term in nature as it dates back roughly 6 years to before the 2008-2011 bull market in gold.

Gold Index-10yrs/One Month Candles

Flipping back and forth between monthly, weekly and daily charts the time frames do not really match up in terms of trend but an argument for a bottom could be made. Right now I am very cautious with both gold and the index , it looks like a bottom could be forming but I still think it is too soon to say. On the short term daily charts both indicators are in decline and neither consistent with any kind of longer term signal. This, along with price action is leading me to think there could be retest of support along the retracement level or lower, at or near the current long term low near $60.

Gold Index -6M/One Day Candles

In The News, Story Stocks and Earnings

Attention is mostly on the economy but there were still a few interesting story stocks today. Disney announced this morning that it was raising its dividend by 34%. This raises the annual pay out to shareholders to $1.15, or +$0.29, and brings the rate up to just over 0.9%. Not very much compared to some other stocks I could name. The news was not met with much fanfare and failed to lift share prices. Disney traded slightly higher after the announcement, opened marginally higher and then fell back to trade near yesterday's close. The stock appears to be cresting a peak, which is supported by the indicators. There are divergences in both MACD and stochastic that bear close watching. Prices are trading just below the all time high and could easily pull back to support near $90.


Barnes&Noble reported earnings before the bell and did not inspire confidence. The company reported revenue and earnings below estimates but what really got to the market was the announced separation from Microsoft. B&N will be ending its agreement with Microsoft concerning the Nook which will has raised some concerns. The move will lower costs but also reduce reach by 34 countries. It also led execs to push pack a planned spin off of the Nook business next summer. Shares of the stock sank more than 10% in pre-market trading and opened near the bottom of the 6 month range. Buyers stepped in at this level and drove prices back up but did not recover all the loss. Today's volume is more than 5X the 30 day average.


Gap reported earnings after the bell. The news included a 6% increase in comp store sales as well as strong sales for the month of November. The gains were led by Old Navy but other brands also performed well. Execs report that they expect momentum to continue into December. Shares of the stock were basically flat at the end of today's trading but surged right after the release. The euphoria did not last long as investors found reason to doubt future gains and eventually sent shares sinking lower.


The Indices

There was some volatility in the market today. Optimism for ECB support was dashed, sending the market lower, and then later regained and supported by US economic data. Supported by US economic data being the more important of the two. Today's data is in line with trends and pointing to continued recovery. Anyway, if the market were going to sell off on data it will be tomorrow when they release the NFP report. Today's action was led by the Dow Jones Industrial Average which lost less than a tenth of a percent. The rest were not far behind, lined up with losses of -0.11%, -.12% and -.13%.

The blue chips created a small hanging man doji today. A little ominous when looking at the chart but more of a spinning top when you consider the important economic data being released tomorrow. The index is still trending higher and was able to touch a new intraday high today so there are at least some bulls still out there. The indicators are mixed but the first glimmers of a trend following signal are emerging. MACD is still bearish but stochastic is firing a bullish crossover. This is a late rally signal but a strong-ish looking one because both %K and %D are moving higher. If confirmed this could lead to a follow through that could take the index higher into the end of the year.


The Nasdaq Composite is next in line with a decline of -0.11%. The tech heavy index also created a little doji but this one looks more indecisive. It's small, and has equal length wicks on both sides which indicate more of a balance between buyers and sellers. This index is also still trending higher but is not yet making new highs. It is however very close to the 10,000 mark and top of the Tech Bubble so don't forget about that. There could be some volatility but it looks like this one is still moving higher in the longer term.


The S&P 500 fell -0.12% and also created a small hanging man doji. This one also gives the appearance of indecision as it is not an overly large candle, is sitting at the all time high and comes one day before widely anticipated economic data. The trend is still up with this one as well and is being confirmed by a bullish crossover on the stochastic indicator. The caveat being that momentum is still bearish, if very weak, and both indicators are diverging from price. Basically the indicators are as indecisive as the candlestick. Support is near 2,050 on a pull back with targets near 2,025 and 2,000 on a deeper correction.


The Dow Jones Transportation Average brings up the rear today with a loss of -0.13%. This index created a small shooting star-like doji and one a little more suggestive of resistance to higher prices. It is still a very small candle and not overly alarming at this time. The indicators are also a little more bearish looking than the others as stochastic has fallen below the upper signal line and is moving lower while bearish momentum persists. Trend and price action suggest the index is moving higher while the indicators continue to weaken, reason for caution. My first target for support, should the index pull back, is around 9,000 and just below that along the short term moving average. Resistance is just above, near 9,250 and the all time high.


The market is waiting. Waiting on the NFP and unemployment data to be released. The economic trends are up and the market trends are up and tomorrow is not likely to be a day to change that. A negative surprise may spark some selling but the long term economic trends are in place and gaining momentum if the data as a whole is to be believed. We'll find out tomorrow, maybe. Most likely the numbers will be more of the same, which so far have been good enough to lift the economy and the market but not really enough to get all exited about. In the end steady may be best; Too good and it raises the specter of the FOMC and higher interest rates and if its too low maybe the economy isn't as strong as we think it is.

Until then, remember the trend!

Thomas Hughes

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New Plays

Healthcare Technology

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Veeva Systems - VEEV - close: 31.52 change: +1.27

Stop Loss: 29.70
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 04, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 991 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
Wall Street loves a growth stock and this company is growing quickly.

VEEV is in the technology sector. They're part of the healthcare information technology industry. A company press release describes Veeva Systems Inc. as "a leader in cloud-based software for the global life sciences industry. Committed to innovation, product excellence, and customer success, Veeva has more than 200 customers, ranging from the world's largest pharmaceutical companies to emerging biotechs. Veeva is headquartered in the San Francisco Bay Area, with offices in Europe, Asia, and Latin America."

The company held its IPO in 2013 and shares priced at $20.00 and traded up to $49.00 four days later. The next eight months were painful as VEEV's stock drifted down to the $17.50 area. Fortunately shares have reversed thanks in large part to VEEV's earnings.

The company has beaten Wall Street's estimates on both the top and bottom line and guided higher the last three quarters in a row. Their most recent report was November 25th. Analysts were expecting a profit of $0.08 per share on revenues of $78.97 million. VEEV reported a profit of $0.09 while revenues soared +52.4% from a year ago to $83.8 million. They said their subscription service revenues in the third quarter rose +58% from a year ago. Their third quarter operating income doubled from $10.0 million to $19.9 million.

VEEV's management raised their Q4 guidance on both the top and bottom line. The stock soared the next day (Nov. 26th) and hit new eight month highs. Shares have since corrected but investors are buying the dip near support in the $30 area. Further gains could spark some serious short covering. Depending on the source, current short interest is between 22% and 55% of the relatively small 37.1 million share float.

This stock is volatile so I am suggesting investors limit their position size to reduce risk. Tonight we are suggesting a trigger to open bullish positions at $32.05.

Trigger @ $32.05

- Suggested Positions -

Buy VEEV stock @ (trigger)

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

Buy the JAN $32 CALL (VEEV150117c32) current ask $1.60

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Slip Ahead of Jobs Report

by James Brown

Click here to email James Brown

Editor's Note:
The markets were expecting more from the ECB today. Investors look a little nervous ahead of the U.S. nonfarm payroll data due out tomorrow morning.

TASR and VJET hit our entry triggers.

We have removed QLIK as a candidate.


Current Portfolio:


BULLISH Play Updates

Columbia Sportswear Co. - COLM - close: 44.37 change: -0.50

Stop Loss: 42.85
Target(s): To Be Determined
Current Option Gain/Loss: +10.2%
Entry on Novo:tember 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:
12/04/14: It was down day for COLM but the weakness was likely a reaction to earnings from a rival. Gildan Activewear (GIL) reported earnings that missed Wall Street's estimates on both the top and bottom line and then GIL lowered guidance. That sent GIL to a -9% drop today. COLM fell -1.1% and seemed to find support near its 10-dma. Technically today's session has created a bearish engulfing candlestick reversal pattern on COLM. We'll have to see if shares confirm the reversal tomorrow.

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: 34.79 change: -0.18

Stop Loss: 33.65
Target(s): To Be Determined
Current Option Gain/Loss: - 2.4%
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:
12/04/14: I am growing worried about our CUDA trade. The stock tried to rally but failed at its simple 10-dma. The stock looks like it will retest the $34.00 level soon.

I am not suggesting new positions.

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: 28.18 change: -0.24

Stop Loss: 25.90
Target(s): To Be Determined
Current Option Gain/Loss: +7.4%
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:
12/04/14: CYNO encountered some profit taking today. Prior resistance near $28 was acting as short-term support. More conservative traders will want to strongly consider raising their stop loss.

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: 46.49 change: +0.50

Stop Loss: 44.85
Target(s): To Be Determined
Current Option Gain/Loss: +11.4%
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:
12/04/14: EA kept the rally going with a +1% gain while most of the market slipped into negative territory. Shares do look short-term overbought here. I would expect a pullback but hopefully not too deep of a dip.

Tonight we're moving the stop loss to $44.85. 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

12/04/14 new stop @ 44.85
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: 52.68 change: -0.93

Stop Loss: 49.45
Target(s): To Be Determined
Current Option Gain/Loss: - 1.1%
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:
12/04/14: Biotech stocks were not immune to the market's relatively widespread pullback today. ISIS lost -1.7% but remains above its 10-dma. At this point investors may want to wait for a new close above $54.00 before considering bullish 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


Microsoft Corp. - MSFT - close: 48.84 change: +0.76

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:
12/04/14: Shares of MSFT were outperforming the market with a +1.5% gain on Thursday. The stock likely got a boost from bullish analyst comments out this morning and a new $56 price target. The intraday high was only $49.06.

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: 36.07 change: -0.03

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:
12/04/14: MU briefly tagged a new high before erasing its gains. The stock essentially closed unchanged on the session. If the market dips on the jobs data tomorrow I would expect MU to dip toward $35.00.

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


Seagate Technology - STX - close: 66.09 change: -0.76

Stop Loss: 62.45
Target(s): To Be Determined
Current Option Gain/Loss: - 0.6%
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:
12/04/14: STX dipped toward short-term technical support at its simple 10-dma today. If this level breaks the next support could be the $65.00 mark.

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


TASER Intl. - TASR - close: 24.15 change: +1.29

Stop Loss: 20.75
Target(s): To Be Determined
Current Option Gain/Loss: +2.2%
Entry on December 04 at $23.63
Listed on December 03, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.9 million
New Positions: see below

Comments:
12/04/14: This morning before the opening bell TASR announced they had received multiple large orders for its Axon body camera system and subscription memberships to its Evidence.com service. The stock gapped open higher on this news and rallied to a +5.6% gain on the session.

We wanted to open positions at $23.25 but the gap open this morning triggered our play at $23.63.

Investors may want to wait for a dip if you're looking for an entry point.

Earlier Comments: December 3, 2014:
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.

- Suggested Positions -

Long TASR stock @ $23.63

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

Long Mar $25 CALL (TASR150320C25) entry $2.20

12/04/14 triggered on gap higher at $23.63, suggested trigger was $23.25
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Voxeljet AG - VJET - close: 9.95 change: -0.07

Stop Loss: 11.05
Target(s): To Be Determined
Current Option Gain/Loss: -0.5%
Entry on December 04 at $ 9.90
Listed on December 01, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 372 thousand
New Positions: see below

Comments:
12/04/14: VJET continued to sink and closed below round-number support at $10.00. The stock also hit our suggested entry point for bearish positions at $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.

*higher-risk, more aggressive trade* - Suggested Positions -

Short VJET stock @ $9.90

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

Long 2015 Jan $10 PUT (VJET150117P10) entry $1.05

12/04/14 triggered @ $9.90
Option Format: symbol-year-month-day-call-strike




CLOSED BULLISH PLAYS

Qlik Technologies - QLIK - close: $30.44 change: -0.24

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: see below

Comments:
12/04/14: We are throwing in the towel on QLIK. Shares have developed a trend of lower highs over the last few days. It could be temporary but our trade has not opened yet. Tonight we are removing QLIK from the newsletter.

You might want to keep QLIK on your watch list since a breakout past $31.75 would be bullish.

Trade did not open.

12/04/14 removed from the newsletter, suggested entry was $31.75

chart: