Option Investor
Newsletter

Daily Newsletter, Saturday, 10/3/2015

Table of Contents

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

Market Wrap

Bad News is Good News Again

by Jim Brown

Click here to email Jim Brown
An ugly nonfarm payroll report and downward revisions to prior reports knocked the chance of an October rate hike off the table and turned December into only a minimal possibility. After a -258 point opening drop the Dow recovered to close up +200 points. Apparently, bad news is good news again.

Market Statistics

The Fed took a lot of heat by not raising rates in October. Now that decision is looking like the right one or at least a lucky one. Even a blind squirrel finds an acorn occasionally and that decision was their acorn.

The estimate for the September Nonfarm Payrolls was for a gain of +203,000. The headline number came in at +142,000 and a serious -61,000 miss. In addition, the +173,000 job gain in August was revised lower to +136,000 and the loss of another -37,000 jobs. Analysts were expecting an upward revision of +60,000 jobs. The July reading of +245,000 was also revised lower to +223,000 and a loss of -22,000 previously reported jobs. Including the downward revisions and the estimate misses the Friday payroll report was -180,000 jobs lower than analysts expected. That is a huge miss.

The three-month moving average is now only +167,000 and under the "well over 200,000" the Fed wants to see before they can raise rates. That is the weakest quarterly average since mid 2012. It would require a gain of nearly 300,000 jobs in October to push the average back to more than 200,000. That is not likely to happen. The average for all of 2015 is +198,000 compared to +260,000 for all of 2014.

Normally when there is a bad number the analysts always point to some internal component as the silver lining in the report. There were no silver linings. A Jefferies analyst said, "It has been years since we have seen such an unambiguously bad report."

Average hourly earnings were flat after a +0.4% rise in August. The average workweek declined from 34.6 to 34.5 hours. The unemployment rate remained 5.1% except that 579,000 workers left the workforce to push the participation rate down from 62.6% to 62.4% and a level not seen since Oct 1977.


Goods producer payrolls shrank by -13,000. Mining (energy) lost -12,000 jobs and manufacturing shrank by -9,000 after a -18,000 loss in August. That is the largest two-month loss for manufacturing since 2010. The mining/energy sector has lost -102,000 jobs since peaking in December. Services jobs rose only +131,000 compared to +197,000 in September 2014. Government jobs rose +24,000. Retail rose +24,000 compared to the average of +27,000.

In the separate Household Survey, jobs actually declined by -236,000 to 148.8 million. The -579,000 decline in the workforce and the -447,000 decline in involuntary part time workers lowered the U6 employment from 10.3% to 10.0% and a post recession low.


The Fed Funds Futures collapsed after the report. The odds of an October hike fell from 18% to 8%. The odds for a December hike declined from 47.5% to 28.2%. January odds fell from 53.8% to 36.9% and March odds fell from 66.7% to 50.7%. April declined from 7.1% to 54.7% but is now the closest month with odds comfortably over 50%.

When you couple the weak payrolls with the weak national ISM Manufacturing data from Thursday it is a miracle the market did not implode. Global economic weakness and the strong dollar are crushing the U.S. manufacturing sector. The 50.2 print was only 0.3 above contraction territory and nearing a post recession low. Order backlogs declined from 46.5 to 41.5 and even deeper into contraction territory suggesting future manufacturing activity will continue to slow.

Factory Orders declined for the tenth consecutive month and the longest streak in history outside a recession. The ratio of inventories to shipments rose to 1.35 and the highest level since 2009. Rising inventories suggests slowing sales.


If the trend in job growth continues to decline over the next four months, the market is going to be talking about QE4 rather than rate hikes according to David Rosenberg at Gluskin Sheff.

The yield on the 3-month treasury declined to -0.02% suggesting investors are expecting more trouble ahead. The yield on the ten-year treasury declined to close at 1.989% and under the emotional 2% level. There is no rate hike on the horizon based on treasury yields. A couple more economic reports with weak numbers and we could be down to 1.8%.


After the factory orders, ISM, International trade data and payrolls the Atlanta Fed GDPNow forecast for Q3 sank from +1.8% on Sept 28th to only +0.9% growth on Friday.


The calendar for next week is nonthreatening with the only material event the FOMC minutes on Thursday. The ISM Nonmanufacturing report on Monday is likely to be disappointing but the ISM Manufacturing, Factory Orders and payrolls have already laid the sentiment groundwork so a decline will probably be ignored.


Acasti Pharma announced a 1:10 reverse split to avoid being delisted. It should be ignored. Full Stock Split Calendar


Wynn Resorts (WYNN) was the winner on Friday. On Thursday, it was reported that gaming revenue in Macau declined -33% in September for the 16th consecutive month of declines. Shares of WYNN hit a new six-year low. On Friday, there was a report out of China that the government planned to revive the slowing gambling industry in Macau. Support policies will be announced by the end of December. Wynn generates 70% of its revenue in Macau so that was good news. Shares spiked +23% on short covering. Unfortunately, the gain is almost invisible on the chart because WYNN shares had declined so badly over the last two years. The $12 spike is a good lesson on why you need to maintain stop losses on your option positions. That would have erased $12 in premium on any deep in the money put.


Tesla (TSLA) reported deliveries of 11,580 vehicles in Q3 and met its targets. Tesla expects to deliver more than 50,000 vehicles in 2015. That was up slightly from the 11,532 delivered in the prior quarter. Their nine-month total is now 33,157 and that suggests they have to deliver 16,483 in Q4 to meet the full year forecast.

Now that the model X is delivering, the company has two models in production for the first time. Elon Musk said orders for both the Model X and the Model S spiked last week after the first Model X was delivered. The publicity and rave reviews prompted more people to order the Model X. Those that do not want to wait for 9-12 months or longer to get the Model X transferred their deposits to the Model S. On the first delivery day on September 29th, Musk delivered six Model Xs. Musk got the first one, board member Steve Jurvetson the second and the fourth went to Google co-founder Sergey Brin. Shares were up +$8 on Friday.


Twitter (TWTR) shares rose 7% but there is still no CEO announcement. Analysts were expecting the big news on Wednesday but it did not appear. Shares rebounded on Friday after several analysts made positive comments on the stock. Deutsche Bank said it was "firmly in the bull camp" despite the lack of an announcement. The bank expects project Lightening, which will be called "Moments" to be delivered on Tuesday. DB said this could be the key to converting casual users into regular users. They also expect the CEO announcement and a restructuring of the board.

Wedbush initiated coverage with a neutral rating and a $30 price target. The analyst said the business model was flawed and casual users drifted away. However, as they eventually spend more time on Twitter their usage grows dramatically once they find a compelling reason to stay on the platform.

Twitter recently removed the 140-character limit on "direct" messages. Users can now send up to 10,000 characters. Reportedly, Twitter is considering removing the restriction on tweets as well. Interim CEO Jack Dorsey is monitoring a project code-named 140 Plus that would remove the restriction.

The company is struggling to find a way to involve the drive by readers. More than 500 million unique visitors come to the Twitter home page every month but they do not log in. if they can figure out some way to hook those visitors their usage numbers would explode.


Amazon (AMZN) decided to ban streaming products from Apple and Google that do not cooperate with Amazon's streaming infrastructure. Google Chromecast and Apple TV do not provide customers with the "optimal experience" for viewing Amazon Instant Video on their products. Other competitors including the Xbox and PlayStation to play well with Amazon so those products are not banned. Since there are thousands of retailers that sell Apple and Google products this is not likely to hamper sales for those companies. It might help Amazon sell a few more of their own streaming devices.


Google (GOOG/GOOGL) became Alphabet after the close on Friday. The shares will begin trading under the new name on Monday but the ticker symbols will not change. The core business will still be called Google and will operate as a wholly-owned subsidiary of Alphabet. Sundar Pichai will head Google. Alphabet will be run by Larry Page and each of the individual businesses in Alphabet will have its own CEO.

Oppenheimer upgraded Google to outperform with a price target of $700. The analyst said the concerns over the flurry of ad blocking apps is overblown. He said YouTube usage is growing at the fastest rate in the last two years. In Q2 the time spent on YouTube increased +60%. The target for his bull case is $905. Shares of Google rallied +$15 on Friday.


UBS added three firms to its "focus list" for Q4. They added Gilead Sciences (GILD) because of its top-selling drugs and strong pipeline. The stock closed at $98.28 with the consensus target at $125.

The bank added Eli Lilly (LLY) because it was poised to significantly grow earnings with new drugs for cancer and diabetes. With patent expirations behind it and a robust pipeline the company is poised to surge. Shares closed at $87.54 with the consensus target at $96.26.

The last company was WhiteWave Foods (WWAV). This is the leading packaged food distributor throughout North America and Europe. The company manufactures and sells foods under dozens of different brands. Shares closed at $41.78 with the consensus target at $53.89.

Of the group, I like Gilead the best. They have a PE of 9 compared to 45 for LLY and 51 for WWAV. Gilead has a very strong and growing free cash flow and they are poised to make an acquisition in the coming months to add to their pipeline.

They were crushed in the biotech selloff because their Hep-C drugs are $90,000 for a 12-week course of treatment. Since nothing is going to happen in the form of price controls until 2017, I think the selloff was overdone.


The earnings calendar is thin for next week with Yum Brands, Monsanto and Alcoa the only standouts. The following week will see a dramatic acceleration in the number of reports. Currently S&P is forecasting a -4.7% decline in earnings and -2.9% decline in revenue for Q3. However, if you remove the energy sector there would be +3.4% earnings growth. You can expect to hear that many times over the next four weeks. Four of the ten S&P sectors, energy, materials, consumer staples and information technology are expected to post negative earnings growth.


This is the week when oil prices were supposed to go down. However, Putin decided to move into Syria and support Assad and that produced worries over a bigger conflict with Russia and the U.S. getting into a skirmish. It also injected Putin into the Middle East in a more forceful way as Iran's ally. That means Saudi Arabia now has a bigger target on its back as the biggest producer in the region and the archenemy of Iran. With Russian military in Syria and Iranian troops headed for Syria the future of Iraq is even more uncertain.

With the U.S. withdrawing from the region, and Russia/Iran in control of Syria it would be very easy to include Iraq in their sphere of influence. Whether Iran understands it or not, Putin could end up as the controller of Iran, Iraq and Syria and the oil production from those regions. I know that is a lot to understand in one paragraph but traders immediately grasped the potential for higher oil prices thanks to Russian intervention.


Crude spiked to $47.10 on short covering on Thursday and although it retraced its gains on Friday, it refused to move under $44. When the Baker Hughes rig counts came out in the afternoon it spiked back to close at $45.55.

Baker Hughes said active rigs declined a whopping -29 for the week ended on Friday. That is the biggest one-day decline since the recession. The total active rigs fell to 809. Oil rigs declined -26 to 614 and a new 10-year low. Gas rigs declined -2 to 195 and a new 18-year low. This is the result of producers moving into cash conservation mode. Prices did not rebound as expected and they are forced to slash drilling expenses to keep from running out of cash.

The sharp drop in rigs suggests production will continue to decline. U.S. production declined -40,000 bpd last week to 9.021 million bpd. That is now -514,000 bpd below the April peak at 9.612 million bpd. That decline in production did not keep inventories low. Crude inventories rose +4.0 million barrels last week.

Fundamentally oil prices should be declining but the geopolitical events in the Middle East and the sharp drop in rigs could keep a bid under prices for weeks to come.



Markets

If you look at the short-term chart, it would appear the Tuesday low of 1,871 was a successful retest of the August low of 1,867. The rebound was instant and despite intraday selling, the S&P rallied back at the close each day starting on Wednesday.

The Dow gapped down -258 points on Friday morning. It appeared that bad news was going to send us to lower lows in the first week of October to match the historical pattern.

However, a series of buy programs hit the tape several times in the morning. Those programs lifted the indexes back into positive territory and created a serious short squeeze. We can tell the afternoon was a squeeze because the stocks with the worst declines in recent days were the biggest gainers and most of their gains were in the afternoon.

The Dow and S&P were helped by the short squeeze in energy stocks. Chevron rallied +4% and Exxon just under 3% to lift the Dow. Caterpillar, a company that has missed, warned and warned again surged +2% on no news.

Wynn Resorts spiked +23% on news that China may do something several months from now about gambling in Macau. It was clearly short covering rather than a change in the immediate fundamentals. Biotechs rebounded sharply after several brokers upgraded their favorite picks. The biotech index rallied +3.27%.


The Semiconductor Index ($SOX) rebounded +2% on the Micron earnings and guidance. Qualcomm spiked +3.55% on minimal news. On Thursday Samsung said they were going to use Qualcomm chips in "some" Galaxy S7 phones. The gain was short covering.

Alibaba (BABA) spiked +7%, Sohu.com (SOHU) +6%, Sina (SINA) +6% and Baidu (BIDU) +8% on news that the Chinese government "may" increase targeted stimulus to boost the lagging economy. The Chinese markets are closed for a holiday until October 8th. This was short covering ahead of the holiday and the potential for stimulus details.

I know everyone wants to believe that the rebound was due to a successful retest of the August lows. In reality it may be. Most bull market rallies begin with a strong short squeeze from very oversold conditions.

Market sentiment after Tuesday's low was very bearish. The AAII sentiment survey saw a big +11.2% spike in bearish sentiment. Those in the neutral camp fled to the dark side with a -7.2% decline in neutral sentiment. Bullish sentiment declined -4%.

Extremely bearish sentiment is a contrarian indicator. With 72% of investors either bearish or neutral there was a lot of cash on the sidelines or short. That was a lot of dry powder that could come back into the market at any time.

The series of buy programs at the open were likely related to end of quarter portfolio restructuring. Q3 is over and Q4 is now in play. Fund managers have very little time to buy some winners and hope they can recover losses in Q4.


Here is the test. The S&P closed at 1,951 and ever so slightly over resistance from last week. If the S&P can add to those gains on Monday and then break through that 1990-2005 resistance we should be good to go. Breaking through that heavy resistance surrounding 2,000 should convince even the strongest doubters that a Q4 rally has begun and the real short covering and price chasing can begin.

Support has been 1,900 for the last three days and a return to that level would negate the late week rebound.



The Dow is a similar chart to the S&P only the support at 16,000 was tested the first week of September and then again last week. That support test may be valid because the 15,370 low on August 24th was really a bad print. Numerous stocks had not opened or opened with serious imbalances and caused the panic low. The low the next day was 15,651 and came at the close. That was the real low, which should have been retested.

That has not happened and the Dow has moved sideways for the last month. The mid month pre Fed rally was sold hard when the Fed did not hike rates. For the last seven trading days, the Dow has retested the 16,000 level and it has held.

The key here will be to move back above those pre Fed highs at 16,666-16,750. I am not counting the post Fed intraday volatility spike. Those are not valid events and are caused by competing program trades.

A lot of the Dow laggards saw short covering on Friday and caused the +458 point rebound from the opening lows. That is not likely to be repeated on Monday. We need a day of "normal" trading so pressure from opposing forces can equalize and the real market direction can appear.




The Nasdaq received help from multiple sectors and surged to a +1.74% gain. Unfortunately, it is still a long way from resistance at 4,800 and 4,835. That is followed by even stronger resistance at 4,900. While it will not be an easy task for the Nasdaq to punch through those levels a rebound in the biotech stocks could help. A lot of tech stocks were severely beaten down and we saw short covering there on Friday. That could be a one-day wonder.

The Nasdaq is nearing some significant congestion and the tech stocks will need a catalyst to keep the momentum going. We are still a couple weeks away from the burst of earnings and we do not know if weak earnings are going to be able to provide the rally fuel.

Support is 4,560.



The Russell 2000 was the laggard last week with a decline compared to gains by the big cap averages. On the plus side, the support at 1,082 held and the index closed back over 1,100 on Friday. The Russell has a long way to go to clear resistance at 1,150 and 1,165. Since the Russell was the only index to actually make a lower low it should find some buyers because confidence will be stronger that the retest was valid.


The next week is typically bearish with lows seen in the first week of October. When Q3 and September are negative, the gains in Q4 are normally muted and occur only about 47% of the time. I would like to think that all the bad news is priced in and the market will continue to rebound from oversold conditions. That may be wishful thinking but I will keep my fingers crossed. If you made a shopping list in case of lower lows, I would reevaluate it to see if you want to buy now or holdout for a better buying opportunity. The key for me would be a decent gain on Monday over S&P 1,950. That could shift sentiment back into bullish mode and begin the price chasing.


If you like the market commentary you have been receiving and you are on a free trial then now is the time to subscribe. Don't wait until you miss a newsletter to decide you want to take the plunge.

subscribe now

Random Thoughts


Bill Ackman's Pershing Square Holdings declined -12.5% in September. Being smart and rich with a building full of analysts is no guarantee of success in the market.


The demand for silver coins has exploded after silver hit a six-year low in August. The demand is so strong that the premium, the cost of the coin over the actual silver content, has surged to 34%. That means a one-ounce Silver Eagle costs an average of $20.10, if you can find them. Silver is $15.23 today. A quick check of Apmex.com shows a price of $20.84 to $21.84 depending on quantity. The mint is backordered and cannot make them fast enough. Both the U.S. Mint and the Canadian Mint are allocating production after temporarily selling out in July. The U.S. Mint allocation is now 750,000 coins a week after dropping to one million coins two weeks ago. In the last two weeks, all the available coins have been purchased in just the first two days. Dealers are quoting four-week delivery after receipt of your funds.

American Silver Eagles have sold 34,304,500 year to date, up +15% from record 2014 levels. The Perth Mint has a new one-ounce coin called the Silver Kangaroo. They sold a record 3.53 million coins in September, which was FIVE times higher than August sales simply because of the global demand for silver coins. The mint has suspended orders until they work through the existing backlog.

JP Morgan is reportedly buying bulk silver in large volumes. Demand was 22% higher than supply in 2014 and with the cost of mining silver now above the value, many mines have shutdown and others have curtailed production. Global demand was 1.07 billion ounces and production was 877.5 million ounces. The shortfall came from existing inventories but obviously that cannot last forever.

With demand for solar panels increasing dramatically the demand for silver will also accelerate. Silver is a key ingredient in silicon photovoltaic cells. According to IHS Cera solar demand is expected to grow by 30% in 2015 with 70 million ounces of silver used in the process.

I would recommend that any investor continue to hold a significant amount of physical silver in bars or coins because the long term price of silver will go a lot higher. Eventually inflation will return, the dollar will decline and silver will spike significantly. In the longer term, the dollar as a global reserve currency is in serious trouble and once our national debt exceeds $20-$22 trillion or even $25 trillion the value of the dollar is going to crash. Analysts expect the debt to rise $500 billion a year until the Fed normalizes rates and then climb $750 billion a year because of interest on the debt.



JP Morgan said 67% of mutual funds underperformed their benchmark in Q3, with more than one third underperforming by at least -2.5%. Those statistics are based on a universe of 2,300 funds with more than $5.5 trillion in assets. The -11% decline in healthcare was the primary cause of the underperformance since that was the hot sector going into Q3. Everyone owned it. Funds Underperform

Mutual funds and ETFs currently hold $18 trillion in investor capital. Jack Bogle of Vanguard was quoted as saying, "if everybody were to suddenly want their money back at once, it is not going to happen." The opening drop on August 24th was a preview of what would happen if everyone hit the sell button at the same time. More than 1,200 stocks were halted for trading under the circuit-breaker rule. ETFs with no ability to get quotes on their underlying stocks went into free fall with some dropping 20-40% below their net asset value in a matter of seconds.

Eventually some event is going to cause investors to hit the panic button and it will not be pretty. Are You Ready for the Bear?


The Dow just suffered its third straight quarterly decline for the first time since 2009 when it suffered six negative quarters. Before that, you have to go back to 1978 for a similar streak. In its 119 year history the Dow has only had 20 streaks of three quarters or more of losses. This is a rare occurrence since this has happened only three times in the last 43 years. Dow Losing Streaks

The global markets just suffered the worst quarter since 2011. More than $11 trillion in wealth was erased from the world markets.


There are fewer bulls today than in March of 2009 when the market began a six-year rally. Only 25% of financial advisors are bullish today according to an Investors Intelligence survey. When Lehman imploded, only 22% were bullish because of fears about a collapse of the entire banking system. Conditions are nowhere near as grim today as they were during the Lehman collapse but the bullish sentiment is almost that low.

Chart Source

Ed Yardeni of Yardeni Research, pointed out that the Investors Intelligence ratio of bulls to bears declined to 0.7 and the fifth consecutive week under 1.0. "In the past that has been a very reliable buy signal." Investors too Bearish


Investor Carl Icahn posted a video to his website last week warning investors of danger ahead. He said the low interest rates have created bubbles everywhere and there is trouble brewing. Back in 2007, he warned of trouble ahead but was not very forceful in his comments. This time around, he decided to go all in with the warning in hopes of preventing significant losses by investors that heed his advice. Danger Ahead Video


Time flies way too fast. In a little over two weeks, Marty McFly will arrive in the future on Oct 21st, 2015. Seems like yesterday it was 1985 and we were watching Back to the Future. Now we are living in it.



 

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

 

"Doubt is the father of invention."


Galileo Galilei (Italian physicist and astronomer, 1564-1642)

 

subscribe now

 


New Plays

Potential Short Squeeze Candidate

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Mobileye N.V. - MBLY - close: 49.43 change: +2.51

Stop Loss: None. No stop at this time.
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 03, 2015
Time Frame: Exit
Average Daily Volume = 4.6 million
New Positions: Yes, see below

Company Description

Trade Description:
The future of hands free driving is a lot closer than you might think. MBLY is leading the charge. Their technology is already in more than three million cars made by companies like BMW, General Motors, and Tesla.

What exactly does this technology do? DAS stands for driver assistance systems. Sometimes you might see it called ADAS for advanced driver assistance systems. This new technology helps drivers avoid collisions with other vehicles, pedestrians, bicyclists, and more while also alerting the driver to road signs and traffic lights.

The company website describes Mobileye as "a technological leader in the area of software algorithms, system-on-chips and customer applications that are based on processing visual information for the market of driver assistance systems (DAS). Mobileye's technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving."

MBLY said their technology will be available in 160 car models from 18 car manufacturers (OEMs). Further, Mobileye's technology has been selected for implementation in serial production of 237 car models from 20 OEMs by 2016.

The company is already developing a system for autonomous driving or hands free driving. They currently plan to launch an autonomous system in 2016 that will work at highway speeds and in congested traffic situations.

MBLY stock came to market in August 2014. Demand was strong enough that they upped the number of shares available from around 27 million to 35.6 million shares. They raised the IPO price from the $22 range to $25. This valued MBLY at $5.3 billion. The first day of trading saw MBLY opened at $36.00. Two months later MBLY traded at $60.00.

It's easy to see why investors are optimistic on MBLY. Annual revenues have soared from $19.2 million in 2011 to $143.6 million in 2014. Their revenues last year rose +77% from 2013. Currently a poll of analysts by Thomson Reuters is forecasting sales to rise +50% in 2015 to $218.3 million. Earnings are forecasted to surge +95%.

MBLY's Q1 report was announced in May. Their Q1 earnings were $0.08 per share, which was a penny above estimates. Revenues were up +28% to $45.6 million, also above estimates.

Q2 results, announced August 6th, were better. Earnings were $0.10 a share, which was two cents better than expected. Revenues were up +56.7% to $52.8 million, above expectations.

Last year the New York Post ran an article discussing how the White House might generate a bullish tailwind for MBLY. The National Highway Traffic Safety Administration issued a research report that estimated ADAS type of technology could eliminate almost 600,000 left-turn and intersection crashes a year. They report also suggested that adding FCAM and lane departure technology on big vehicles like over the road trucks could reduce accidents with these huge vehicles by up to 25%. Following this report the White House said they would draft new rules that required this sort of tech in new vehicles.

A couple of weeks ago the U.S. Department of Transportation and IIHS announced that ten auto manufacturers had agreed to add autonomous emergency breaking to all new U.S. models as a standard feature. This should be a huge bonus for MBLY. The basic autonomous breaking system ranges from $120 to $350 per vehicle (FYI: the U.S. auto market is on pace to sell more than 18 million vehicles this year). MBLY has a history of winning 80 to 90 percent of ADAS contracts so this new push by the government and the auto industry's acceptance could mean billions to MBLY's bottom line going forward.

Naturally, with a high-profile, high-growth stock like MBLY there are critics. Bears point out that MBLY's valuations are sky high and they would be right. MBLY's trailing P/E is over 1,000 while it's forward P/E is about 65. Most of Wall Street seems bullish on MBLY as they can see the long-term growth outlook for MBLY. If this rally continues some of those shorts could panic and fuel a short squeeze. The most recent data listed short interest at 18% of the 163 million share float.

The stock looks ready to sprint higher after a healthy bounce off support. Tonight we are suggesting a trigger to launch bullish positions at $49.75. If triggered I would target a run into the $58-62 region. I am suggesting small positions as this is an aggressive, higher-risk trade. MBLY is a volatile stock. You may want to use the call options to limit your risk. More conservative traders may want to wait for MBLY to rally past $50.00 before initiating positions. Normally the $50.00 level would be round-number, psychological resistance. We're suggesting a trigger just below it since MBLY could move fast once it breaks out. It's worth noting that a rally past $50.00 will generate a new buy signal on the point & figure chart.

Trigger @ $49.75 *small positions to limit risk*

- Suggested Positions -

Buy MBLY stock @ $49.75

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

Buy the NOV $55 CALL (MBLY151120C55) current ask $2.20
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Shrug Off Jobs Number, Rally Anyway

by James Brown

Click here to email James Brown

Editor's Note:
The September jobs number was a huge miss but stocks didn't care. There was some initial weakness but the rally resumed. The S&P 500 posted its fourth gain in a row.

Warning! If you're bearish or have bearish trades the market's performance on Friday has generated a potential reversal. The early morning drop on the September jobs number and then rebound higher has produced several bullish-reversal looking candlesticks on the daily charts of our plays. Some of our bearish trades have been stopped out. The question now is if this bounce (reversal) sees any follow through higher or does it fail?

HOS, HP, MUR, QCOM, and SOHU were stopped out.


Current Portfolio:


BULLISH Play Updates

Ingram Micro Inc. - IM - close: 27.37 change: +0.47

Stop Loss: 25.75
Target(s): To Be Determined
Current Gain/Loss: -1.7%
Entry on September 09 at $27.85
Listed on September 8, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 1.0 million
New Positions: see below

Comments:
10/03/15: IM rallied off its rising 50-dma on Friday and closed up +1.74%. I'd like to see some follow through higher before considering new positions. The $27.85-28.00 area is still overhead resistance.

No new positions at this time.

Trade Description: September 8, 2015:
IM looks like it is about to break out from a huge consolidation pattern.

The company operates in the services sector. According to the company, "Ingram Micro helps businesses fully realize the promise of technology® - helping them maximize the value of the technology that they make, sell or use. With its vast global infrastructure and focus on cloud, mobility, supply chain and technology solutions, Ingram Micro enables business partners to operate more efficiently and successfully in the markets they serve.

No other company delivers as broad and deep a spectrum of technology and supply chain services to businesses around the world. Founded in 1979, Ingram Micro's role as a leader and innovator in technology and supply chain services has fueled its rise to the 69th ranked corporation in the FORTUNE 500.

Ingram Micro amplifies the value of its position at the intersection of thousands of vendor, reseller and retailer partners by customizing and delivering highly targeted applications for industry verticals, business to business customers and commercial needs. From provisioning solutions for system integrators working at the heart of the network to offerings through the full lifecycle of mobile devices, SMB to global enterprise software and computing, point of sale to cloud services, professional AV to physical security-Ingram Micro is trusted by customers to have the expertise and resources to help them define and push the boundaries of what's possible.

The company supports global operations by way of an extensive sales and distribution network throughout North America, Europe, Middle East and Africa, Latin America and Asia Pacific."

The company's most recent earnings report was July 30th. Wall Street was expecting a profit of $0.54 per share on revenues of $10.9 billion. IM delivered $0.55 cents. Revenues were down -3.3% to $10.55 billion. However, if you back out the impact of currency headwinds then IM's results look a lot better. Negative currency translations shaved off -8% from their revenues.

IM management's guidance was a little soft but they announced the initiation of a $0.10 per share dividend and that they were boosting their stock buyback program by $300 million. The stock soared on this news. Shares rallied from $24.50 to $27.25 the next day.

IM was not immune to the market's late-August crash but investors bought the dip at support near its July lows. Shares have since erased the sell-off. Now IM is poised to breakout past resistance and what looks like a consolidation that started in early 2014.

A rally past $28.00 would generate a new buy signal on the point & figure chart. We want to jump in a little earlier. Tonight we are suggesting a trigger to open bullish positions at $27.85.

NOTE: I want to caution readers about the options. The spreads on most of IM's options are a little bit wide. Actually some of them are probably too wide. Be careful with the options.

- Suggested Positions -

Long IM stock @ $27.85

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

Long DEC $30 CALL (IM151218C30) entry $1.15

09/15/15 Caution - IM did not participate in the market's rally today
09/09/15 triggered @ $27.85
Option Format: symbol-year-month-day-call-strike

chart:


JetBlue Airways - JBLU - close: 26.22 change: -0.01

Stop Loss: 22.45
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on September -- at $---.--
Listed on September 28, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 8.8 million
New Positions: Yes, see below

Comments:
10/03/15: JBLU didn't get very far on Friday. Traders bought the dip on Friday morning but the rally stalled near its 10-dma. The stock closed virtually unchanged on the session. We want to see a dip to support but the relative weakness on Friday is somewhat surprising.

I am suggesting patience. Stocks bounced last week but the first two weeks of October tend to be weak. Let's stick to the plan and wait for a dip. Our suggested entry point is $24.05.

Trade Description: September 28, 2015:
Crude oil prices have been depressed for months but airline tickets didn't really start falling until a couple of months ago. The average ticket is now down -6% from a year ago. That sounds like bad news for the airline companies. However, the drop in oil has slashed their fuel costs. Most airlines are spending 40% less on fuel than they were a year ago. That's a massive boost to their bottom line.

JBLU is part of the services sector. According to the company, "JetBlue is New York's Hometown Airline®, and a leading carrier in Boston, Fort Lauderdale-Hollywood, Los Angeles (Long Beach), Orlando, and San Juan. JetBlue carries more than 32 million customers a year to 90 cities in the U.S., Caribbean, and Latin America with an average of 900 daily flights."

The International Air Transport Association (IATA) recently issued a press release stating that customer demand for air travel remains strong. Global passenger traffic for July was up +8.2% from a year ago and an improvement above the +5.5% jump in June.

JBLU jus reported their August numbers, which saw traffic increase +6.7% as capacity rose +8.3%. The company did state that their passenger revenues per available seat mile (PRASM), a key metric for the airlines, did fall -3% in August but that was negatively impacted by a late Labor Day holiday this year. JBLU expects their Q3 PRASM to be relatively flat from a year ago (but still at a healthy pace).

Wall Street remains optimistic on JBLU. Analysts have been raising their earnings estimates on the company, which is usually a good sign. Plus JBLU has garnered some new price targets, one at $28 and another at $32. The point & figure chart is forecasting at $47.50 target.

JBLU hit multi-year highs several days ago and has been relatively resistant to the market's weakness. That changed today when investors were selling everything during the market's widespread decline. We want to take advantage of any temporary weakness in JBLU if this decline continues. Prior resistance near $24.00 should be new support. Tonight I am suggesting a trigger to launch bullish positions if JBLU trades at $24.05.

Buy-the-dip Trigger @ $24.05

- Suggested Positions -

Buy JBLU stock @ $24.05

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

Buy the NOV $25 CALL (JBLU151120C25)

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

chart:




BEARISH Play Updates

Belden Inc. - BDC - close: 46.98 change: +1.41

Stop Loss: 48.51
Target(s): To Be Determined
Current Gain/Loss: -4.7%
Entry on October 02 at $44.85
Listed on October 01, 2015
Time Frame: Exit prior to earnings (late October or early November)
Average Daily Volume = 394 thousand
New Positions: see below

Comments:
10/03/15: Friday was a frustrating session if you are bearish on BDC. The stock broke down below support at $45.00 and hit new multi-year lows. Shares tagged our trigger to launch positions at $44.85 and soon rebounded. BDC produced a +5.3% bounce off its morning low. Furthermore Friday's move has generated a bullish engulfing candlestick reversal pattern. These patterns need to see confirmation but I'm worried that any confirmation may lift BDC to our stop loss at $48.51.

No new positions at this time.

Trade Description: October 1, 2015:
Industrial stocks are not have a good year. Industrial sector ETFs like the XLI and IYJ are both down about -10% to -12% year to date. BDC is in the industrial sector and shares have been crushed. The stock is down -42% for the year and down about -52% from its 2015 highs.

BDC is considered part of the electrical equipment industry. According to the company, "Belden Inc. delivers a comprehensive product portfolio designed to meet the mission-critical network infrastructure needs of industrial, enterprise and broadcast markets. With innovative solutions targeted at reliable and secure transmission of rapidly growing amounts of data, audio and video needed for today's applications, Belden is at the center of the global transformation to a connected world. Founded in 1902, the company is headquartered in St. Louis and has manufacturing capabilities in North and South America, Europe and Asia."

The company has a history of beating earnings estimates but revenues have been suffering. BDC reported their Q4 results in February this year. Q4 revenues were down -19%. BDC management lowered their revenue guidance.

They reported their Q1 results in late April. They beat the bottom line estimate but revenues missed with revenues falling -12%. Again the company lowered their guidance.

Q2 results were announced on July 29th and earnings beat estimates but revenues were down -3.2% and significantly below expectations. Once again BDC management lowered their guidance. This time they lowered both Q3 and 2015 guidance.

The market was relatively forgiving until the Q1 report on April 30th. Investors had finally had enough and sold BDC on its disappointing results. Shares flat lined for almost two months before breaking down. The stock collapsed on its earnings report in July.

The path of least resistance is down and the next major support level could be the $40.00 area. The point & figure chart is forecasting at $39.00 target. If BDC happens to break $40 then there is no telling where the bottom is. The stock displayed relative weakness today (-2.39%) and looks ready to begin the next leg lower.

- Suggested Positions -

Short BDC stock @ $44.85

10/02/15 triggered @ $44.85
Option Format: symbol-year-month-day-call-strike

chart:


Bristow Group, Inc. - BRS - close: 28.27 change: +2.98

Stop Loss: 28.75
Target(s): To Be Determined
Current Gain/Loss: -2.1%
Entry on September 25 at $27.70
Listed on September 24, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 553 thousand
New Positions: see below

Comments:
10/03/15: Ouch! Beaten down oil-service stocks saw some of the biggest bounces on Friday. Shorts panicked and BRS surged from $25.00 support past its 10-dma. BRS is up +13% off its Friday morning low! If there is any follow through higher we could see BRS hit our stop loss at $28.75. (Note -- the 20-dma has been resistance in the past but it's up near $30.00. More aggressive traders may want to put their stop above $30.)

No new positions.

Trade Description: September 24, 2015:
The collapse in crude oil hasn't not just hurt the energy producers but also the oil services company that support the energy sector. This has driven BRS to five-year lows.

BRS is part of the basic materials sector. According to the company, "Bristow Group Inc. is a leading provider of helicopter services to the worldwide offshore energy industry based on the number of aircraft operated and one of two helicopter service providers to the offshore energy industry with global operations. The Company has major transportation operations in the North Sea, Nigeria and the U.S. Gulf of Mexico, and in most of the other major offshore oil and gas producing regions of the world, including Australia, Brazil, Canada, Russia and Trinidad."

The prolonged drop in oil prices has forced most energy companies to cut their capex budgets and expenses. That means less demand for oil services like BRS. The company has missed Wall Street's earnings estimates and lowered guidance the last three quarters in a row.

On February 5, 2015, BRS lowered their 2015 guidance from $4.70-5.20 down to $4.05-4.45 compared to estimates of $4.92 per share. On August 6th BRS lowered their 2016 guidance to $3.10-3.75 versus Wall Street estimates of $4.01 per share.

Unfortunately there appears to be no end in sight for the downturn in energy and crude oil. BRS could have much farther to fall. The last couple of days have seen shares of BRS breakdown below their prior September low. Today's intraday low was $27.83. I am suggesting a trigger to launch small bearish positions at $27.70. We want to start with small positions since BRS is already oversold (there is nothing stopping it from getting a lot more oversold).

*small positions to limit risk* - Suggested Positions -

Short BRS stock @ $27.70

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

Long DEC $25 PUT (BRS151218P25) entry $2.10

10/02/15 huge reversal higher!
09/28/15 new stop @ $28.75
09/25/15 triggered @ $27.70
Option Format: symbol-year-month-day-call-strike

chart:


GNC Holdings - GNC - close: 40.76 change: +0.48

Stop Loss: 42.25
Target(s): To Be Determined
Current Gain/Loss: -2.5%
Entry on September 30 at $39.75
Listed on September 29, 2015
Time Frame: Exit prior to earnings at the end of October
Average Daily Volume = 1.2 million
New Positions: see below

Comments:
10/03/15: GNC is another stock that produced a big bounce and a bullish engulfing candlestick reversal pattern on Friday. Currently our stop loss is at $42.25 but more conservative traders may want to lower their stop closer to the 10-dma (near $41.40).

No new positions at this time.

Trade Description: September 29, 2015:
Tougher competition, increased government scrutiny, and changing consumer habits have not been a good recipe for shares of GNC. The stock is down -14.6% in 2015 and poised to hit new lows.

GNC is in the services sector. According to the company, "GNC Holdings, Inc. - headquartered in Pittsburgh, PA - is a leading global specialty health, wellness and performance retailer. The Company's foundation is built on 80 years of superior product quality and innovation. GNC connects customers to their best by offering a premium assortment of vitamins, minerals, herbal supplements, diet, sports nutrition and protein products. This assortment features proprietary GNC - including Mega Men®, Ultra Mega®, Total Lean®, Pro Performance®, Pro Performance® AMP, Beyond Raw®, GNC Puredge®, GNC GenetixHD®, Herbal Plus® - and nationally recognized third party brands.

GNC's diversified, multi-channel business model generates revenue from product sales through company-owned retail stores, domestic and international franchise activities, third party contract manufacturing, e-commerce and corporate partnerships. As of June 30, 2015, GNC had more than 9,000 locations, of which more than 6,700 retail locations are in the United States (including 1,067 franchise and 2,304 Rite Aid franchise store-within-a-store locations) and franchise operations in more than 50 countries."

GNC faces multiple issues. This year there have been negative headlines for the supplement industry. Testing showed that multiple supplements at various retailers were filled with bogus ingredients. Companies like Wal-mart, Target, Walgreens, and GNC have all come under fire for selling the fraudulent products. This will likely increase government scrutiny for supplements in general.

GNC also faces an issue with changing consumer habits. While most of Americans are overweight and out of shape there is a growing trend of healthier eating. Consumers want to know what they are putting in their bodies. That means less pills and more raw fruits and veggies, especially organic ones.

The biggest challenge could be tough competition. Online rivals can provide supplements at cheaper prices than GNC's retail stores. Best Buy (BBY), the consumer electronics store, has faced this issue for years with consumers coming into a Best Buy store, shopping around, and then going home and buying the product online from Amazon.com for less money and getting it delivered. GNC faces the same issue.

GNC's earnings have struggled. Their Q1 report, announced April 30th, missed estimates. GNC missed on both the bottom line profit estimates and the revenue estimate. Revenues were down -0.6% and same-store sales plunged -4.1%. Management lowered their 2015 guidance following this report.

GNC's Q2 results were not much better. They missed on both the top and bottom line again. Earnings only grew +2.6% from a year ago. Revenues were virtually flat with a +0.5% gain. Same-store sales fell -2.8%.

The stock rallied anyway because management said they would focus on more franchised stores. This news seemed to have sparked some short covering. Shares of GNC soared from $42 to $50 in just a few days but the rally reversed. Now the stock is trading at new 2015 lows. The company's announcement on August 4th to boost their stock buyback program by an additional $500 million did not help the stock very much.

GNC is in a bear market and poised to break major support at the $40.00 level. The point & figure chart is bearish and forecasting at $33.00 target. Tonight I am suggesting a trigger to launch bearish positions at $39.75.

- Suggested Positions -

Short GNC stock @ $39.75

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

Long NOV $37.50 PUT (GNC151120P37.5) entry $1.60

09/30/15 triggered @ $39.75
Option Format: symbol-year-month-day-call-strike

chart:


Intl. Paper Company - IP - close: 38.92 change: +0.57

Stop Loss: 39.65
Target(s): To Be Determined
Current Gain/Loss: + 2.3%
Entry on September 22 at $39.85
Listed on September 19, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 2.9 million
New Positions: see below

Comments:
10/03/15: The oversold bounce in IP continues with shares up three days in a row. The market's big rally on Friday helped lift IP to a +1.48% gain and a close above short-term resistance at its 10-dma.

No new positions at this time.

Trade Description: September 19, 2015:
Over supply issues and currency headwinds are hurting IP's results.

IP is in the consumer goods business. According to the company, "International Paper (IP) is a global leader in packaging and paper with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include industrial and consumer packaging along with uncoated papers and pulp. Headquartered in Memphis, Tenn., the company employs approximately 58,000 people and is strategically located in more than 24 countries serving customers worldwide. International Paper net sales for 2014 were $24 billion."

The last few earnings reports have seen IP beat Wall Street's bottom line estimate but that was mainly due to cost cutting. Revenues have been slowing down. Their 2014 Q4 revenues were only up +1.6%. Q1 revenues fell -3.6%. Their most recent report saw Q2 revenues fall -3.6%. The last two quarters saw revenues come in below analysts' expectations.

IP's management did manage to slash selling and administrative costs by almost -8% last quarter. Unfortunately their international packaging, consumer packaging, and printing papers businesses all saw sharp sales declines.

Dividend investors might be drawn to this stock. IP currently has a yield near 4%. Is it worth buying a big yield when the stock has fallen -30% from its 2015 highs and shows no signs of stopping? A Bank of America analysts said their previously bullish thesis for IP doesn't work anymore. Over supply issues in the containerboard industry remain a trouble spot.

The stock is bearish with a clear trend of lower highs and lower lows. Today shares are poised to breakdown under round-number support at $40.00. We are suggesting a trigger to launch bearish positions at $39.85.

- Suggested Positions -

Short IP stock @ $39.85

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

Long 2016 Jan $40 PUT (IP160115P40) entry $3.00

09/28/15 new stop @ 39.65
09/24/15 Caution - the big intraday bounce is a potential warning for bears
09/22/15 triggered @ $39.85
Option Format: symbol-year-month-day-call-strike

chart:


Synchronoss Technologies - SNCR - close: 32.59 change: -0.11

Stop Loss: 35.75
Target(s): To Be Determined
Current Gain/Loss: -0.6%
Entry on October 01 at $32.40
Listed on September 30, 2015
Time Frame: Exit PRIOR to earnings in late October
Average Daily Volume = 603 thousand
New Positions: see below

Comments:
10/03/15: SNCR continued to show relative weakness on Friday. The stock ignored the market's widespread rally and lost another -0.3%. I would be tempted to launch new positions here but there is a good chance the market's bounce is not over yet. Readers may want to wait and see how SNCR performs on Monday before initiating new trades.

Trade Description: September 30, 2015:
SNCR is a technology company with strong revenue growth and yet investors have been selling the stock anyway.

SNCR is considered part of the application software industry. According to the company, "Synchronoss Technologies, Inc., is the mobile innovation leader that provides cloud solutions and software-based activation for connected devices across the globe. The company's proven and scalable technology solutions allow customers to connect, synchronize and activate connected devices and services that empower enterprises and consumers to live in a connected world."

SNCR has been consistently beating Wall Street's earnings expectations. The last three quarters in a row SNCR has delivered bottom line and top line growth above expectations. 2014's Q4 revenues were up +34.7%. 2015 Q1 sales rose +34.9% and Q2 sales rose +33.2%. Yet with strong results like these the stock is down -21.6% year to date and down -36% from its 2015 high.

Technically SNCR had been churning sideways in a wide consolidation pattern for months. It broke down from this consolidation in August when the broader market corrected lower. When the market produced a big bounce off its August lows SNCR did not participate.

Several days ago shares of SNCR collapsed on worries that they might lose their cloud-storage contract with Verizon (VZ). Several analysts defended SNCR and said the drop was a buying opportunity. Both SNCR and VZ said their contract has not changed and was good until 2018. Yet the oversold bounce from this story only lasted one day. Traders have been selling SNCR on every rally.

There is a risk that SNCR is a takeover target. Back in June and July there were rumors that SNCR was exploring a sale of the company. There were also stories that private equity might be interested in taking SNCR private. Yet this acquisition risk has not generated any new buying interest in the stock. Investors are bearish and the most recent data listed short interest at 17.7% of the 38.0 million share float. That's enough to raise the risk of a short squeeze.

Tonight I am suggesting small bearish positions if SNCR trades at $32.40 or lower. We want to use small positions to limit our risk. Investors might want to stick to put options to really limit risk.

- Suggested Positions - small positions to limit risk.

Short SNCR stock @ $32.40

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

Long NOV $30 PUT (SNCR151120P30) entry $1.90

10/01/15 triggered @ $32.40
Option Format: symbol-year-month-day-call-strike

chart:


Scripps Networks Interative - SNI - close: 49.80 change: +1.38

Stop Loss: 50.55
Target(s): To Be Determined
Current Gain/Loss: -2.3%
Entry on September 28 at $48.70
Listed on September 26, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 1.3 million
New Positions: see below

Comments:
10/03/15: SNI did participate in the market's big rally on Friday. Shares dipped toward their lows and reversed higher with a +2.85% gain on the session. SNI is now testing round-number resistance at $50.00. Any further follow through higher might hit our stop loss at $50.55. No new positions at this time.

Trade Description: September 26, 2015:
The television media space is extremely competitive. Investors have really started to worry about the future of broadcast television. There are very significant trends with younger consumers watching less and less TV. Plus there is a growing trend of consumers "cutting the cord" with their cable company and choosing to watch most of their content online, on their tablet, or on their smartphone. These concerns have depressed some stocks in the media industry. Less TV watching means weaker advertising dollars for TV content.

SNI is in the services sector. According to the company, "Scripps Networks Interactive (SNI) is one of the leading developers of engaging lifestyle content in the home, food and travel categories for television, the Internet and emerging platforms. The company's lifestyle media portfolio comprises popular television and Internet brands HGTV, DIY Network, Food Network, Cooking Channel, Travel Channel and Great American Country, which collectively engage more than 190 million U.S. consumers each month. International operations include TVN, Poland's premier multi-platform media company; UKTV, an independent commercial joint venture with BBC Worldwide; Asian Food Channel, the first pan-regional TV food network in Asia; and lifestyle channel Fine Living. The company's global networks and websites reach millions of consumers across North and South America, Asia, Europe, the Middle East and Africa. Scripps Networks Interactive is headquartered in Knoxville, Tenn. For more information, please visit http://www.scrippsnetworksinteractive.com."

SNI's earnings performance has generally been okay. Looking at the last three quarters SNI has beaten analysts' bottom line estimates. Management did warn and lowered their 2015 guidance back in February. However, SNI raised their guidance with their most recent quarterly report in early August.

The bullish view on SNI is the stock's valuation. It is cheaper than its peers in the television industry. Plus, management sees stronger revenues for 2015. However, this is not translating into strength for the stock. When SNI reported its better than expected earnings and raised guidance in early August traders sold the news and shares broke down to new lows.

Bears can argue that SNI's expansion into Europe will mean more currency risk as the dollar rises. Plus, fundamental traders might be concerned about the company's debt more than doubling from $1.5 billion to $3.44 billion in the last year. Moody's Investor Service recently downgraded SNI's credit rating to Baa3 due to SNI's surge in debt. Shorts seem to be winning the day with SNI in a bear market.

Technically SNI peaked with a huge bearish double top in the $86 region in the late 2013-to mid 2014 time frame. Since then shares have plunged with a bearish pattern of lower highs and lower lows. Short interest is currently at 18.5% of the 73.4 million share float. This past week saw SNI breakdown under short-term support near $51.00. Now the stock is flirting with a breakdown below round-number support at $50.00.

The intraday low on Thursday was 48.80. I am suggesting a trigger to launch bearish positions at $48.70.

- Suggested Positions -

Short SNI stock @ $48.70

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

Long NOV $45 PUT (SNI151120P45) entry $0.95

09/28/15 new stop @ $50.55
09/28/15 triggered @ $48.70
Option Format: symbol-year-month-day-call-strike

chart:


iPath S&P500 VIX Futures ETN - VXX - close: 24.03 change: -1.31

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -10.1%
2nd position Gain/Loss: +17.2%
Entry on August 25 at $21.82
2nd position: September 2nd at $29.01
Listed on August 24, 2015
Time Frame: Exit prior to October option expiration
Average Daily Volume = 50 million
New Positions: see below

Comments:
10/03/15: Another rally in the market continues to weaken the volatility gauges. The VIX fell -7.1% and the VXX dropped -5.1%.

We have less than two weeks left on our October options.

No new positions at this time.

Trade Description: August 24, 2015
The U.S. stock market's sell-off in the last three days has been extreme. Most of the major indices have collapsed into correction territory (-10% from their highs). The volatile moves in the market have investors panicking for protection. This drives up demand for put options and this fuels a rally in the CBOE volatility index (the VIX).

You can see on this long-term weekly chart that the VIX spiked up to levels not seen since the 2008 bear market during the financial crisis. Moves like this do not happen very often. The VIX rarely stays this high very long.

(see VIX chart from the August 24th play description)

How do we trade the VIX? One way is the VXX, which is an ETN but trades like a stock.

Here is an explanation from the product website:

The iPath® S&P 500 VIX Short-Term Futures® ETNs (the "ETNs") are designed to provide exposure to the S&P 500 VIX Short-Term FuturesTM Index Total Return (the "Index"). The ETNs are riskier than ordinary unsecured debt securities and have no principal protection. The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Any payment to be made on the ETNs, including any payment at maturity or upon redemption, depends on the ability of Barclays Bank PLC to satisfy its obligations as they come due. An investment in the ETNs involves significant risks, including possible loss of principal and may not be suitable for all investors.

The Index is designed to provide access to equity market volatility through CBOE Volatility Index® (the "VIX Index") futures. The Index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects market participants' views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the Index. Owning the ETNs is not the same as owning interests in the index components included in the Index or a security directly linked to the performance of the Index.

I encourage readers to check out a long-term chart of the VXX. This thing has been a consistent loser. One market pundit said the VXX is where money goes to die - if you're buying it. We do not want to buy it. We want to short it. Shorting rallies seems to be a winning strategy on the VXX with a constant trend of lower highs.

Today the VXX spiked up to four-month highs near $28.00 before fading. We are suggesting bearish positions at the opening bell tomorrow. The market volatility is probably not done yet so we are not listing a stop loss yet. Our time frame is two or three weeks (or less).

- Suggested Positions -

Short the VXX @ $21.82

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

Long OCT $20 PUT (VXX151016P20) entry $2.93

Sept. 2nd - 2nd position (Double Down On The September 1st Spike)

Short the VXX @ $29.01

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

Long OCT $20 PUT (VXX151016P20) entry $0.78

09/02/15 2nd position begins. VXX gapped down at $29.01
09/01/15 Double down on this trade with the VXX's spike to 6-month highs
08/25/15 trade begins. VXX gaps down at $21.82
Option Format: symbol-year-month-day-call-strike

chart:


CLOSED BEARISH PLAYS

Hornbeck Offshore Services - HOS - close: 14.85 change: +1.51

Stop Loss: 14.75
Target(s): To Be Determined
Current Gain/Loss: +3.1%
Entry on September 22 at $15.22
Listed on September 21, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 925 thousand
New Positions: see below

Comments:
10/03/15: Depressed oil and energy stocks saw some of the biggest gains on Friday. HOS tagged a new multi-year low on Friday morning and then exploded higher with a +12.5% gain off its session lows. Our stop loss was hit at $14.75 on Friday afternoon.

I had warned readers that HOS had high short interested and we wanted to limit our risk with small positions.

*small positions to limit risk* - Suggested Positions -

Short HOS stock @ $15.22 exit $14.75 (+3.1%)

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

DEC $15 PUT (HOS151218P15) entry $2.15 exit $1.90 (-11.6%)

10/02/15 stopped out
09/28/15 new stop @ 14.75
09/22/15 triggered on gap down at $15.22, suggested entry was $15.30
Option Format: symbol-year-month-day-call-strike

chart:


Helmerich & Payne, Inc. - HP - close: 49.28 change: +2.42

Stop Loss: $49.35
Target(s): To Be Determined
Current Gain/Loss: +0.7%
Entry on September 10 at $49.70
Listed on September 9, 2015
Time Frame: Exit prior to earnings in November
(option traders exit prior to October expiration)
Average Daily Volume = 2.1 million
New Positions: see below

Comments:
10/03/15: HP is another energy-related stock that delivered big gains on Friday. Shares produced a bullish engulfing candlestick reversal pattern. They also hit our stop loss at $49.35.

- Suggested Positions -

Short HP Stock @ $49.70 exit $49.35 (+0.7%)

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

OCT $45 PUT (HP151016P45) entry $1.75 exit $0.50 (-71.4%)

10/02/15 stopped out
09/28/15 new stop @ 49.35
09/19/15 new stop @ 54.35
09/10/15 triggered @ $49.70
Option Format: symbol-year-month-day-call-strike

chart:


Murphy Oil Corp. - MUR - close: 25.91 change: +2.26

Stop Loss: 25.35
Target(s): To Be Determined
Current Gain/Loss: +1.2%
Entry on September 23 at $25.65
Listed on September 22, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 2.4 million
New Positions: see below

Comments:
10/03/15: MUR is another energy stock that surged on Friday. Shares fell to $23.27 on Friday morning and then reversed. The stock rallied +11.3% off its session low to challenge resistance near $26.00. Our stop was hit at $25.35.

- Suggested Positions -

Short MUR stock @ $25.65 exit $25.35 (+1.2%)

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

2016 JAN $25 PUT (MUR150115P25) entry $2.40 exit $2.50 (+4.2%)

10/02/15 stopped out
09/29/15 Caution - today might be a short-term bottom
09/28/15 new stop @ 25.35
09/23/15 triggered @ $25.65
Option Format: symbol-year-month-day-call-strike

chart:


QUALCOMM Inc. - QCOM - close: 55.07 change: +1.89

Stop Loss: 54.25
Target(s): To Be Determined
Current Gain/Loss: +0.4%
Entry on September 04 at $54.45
Listed on September 1, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 12.5 million
New Positions: see below

Comments:
10/03/15: QCOM bears were hit with a one-two punch on Friday. The combination of better than expected earnings from rival Micron (MU) and the market's widespread surge higher was enough to boost QCOM to a +3.5% gain. The stock rallied past resistance at $54.00 and hit our stop loss.

- Suggested Positions -

Short QCOM stock @ $54.45 exit $54.25 (+0.4%)

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

OCT $50 PUT (QCOM151016P50) entry $0.96 exit $0.17 (-82.3%)

10/02/15 stopped out
09/28/15 new stop @ 54.25
09/23/15 QCOM's breakdown below support at $54.00 is bearish
09/12/15 new stop @ 56.65
09/04/15 triggered @ $54.45
Option Format: symbol-year-month-day-call-strike

chart:


Sohu.com Inc. - SOHU - close: 44.50 change: +2.54

Stop Loss: 42.75
Target(s): To Be Determined
Current Gain/Loss: -4.2%
Entry on September 24 at $41.03
Listed on September 23, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 607 thousand
New Positions: see below

Comments:
10/03/15: Short covering boosted gains in SOHU on Friday and the stock surged +6.0%. The stock hit our stop loss at $42.75. Shares are nearing their next level of resistance in the $45.00 region.

- Suggested Positions -

Short SOHU stock @ $41.03 exit $42.75 (-4.2%)

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

DEC $35 PUT (SOHU151218P35) entry $2.00 exit $1.25 (-37.5%)

10/02/15 stopped out
09/28/15 new stop @ $42.75
09/24/15 triggered on gap down at $41.03, trigger was $41.35
Option Format: symbol-year-month-day-call-strike

chart: