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Newsletter

Daily Newsletter, Thursday, 10/8/2015

Table of Contents

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

Market Wrap

Minutes Signal All Clear

by Thomas Hughes

Click here to email Thomas Hughes
The FOMC minutes signaled all clear, at least for now, and the market rallied for a fourth day.

Introduction

Today was one of those days in which there were two distinct periods of trading; before the FOMC minutes were released and after. Early trading was quiet and lack luster. There was little action and gains were marginal. After the release trading volume picked up and the indices began a steady march that carried them higher into the close of the day.

Market Statistics

International markets were relatively quiet today as well. Asian indices were mixed with Chinese indices rising in post-holiday trading and those in Japan falling on some weak data. Japanese machine orders fell by more than 3% despite the BOJ's stance that their economy is on track for recovery. European indices were largely unaffected by the news from Asia and were able to hold steady for most of the day, closing with gains in the range of 0.2% to 0.60%.

Futures trading was weak all morning. The indices were indicated to open with losses in the range of -0.5% and that held through the early pre-opening session. Today's data was positive, supportive of a rate hike, but did little to move the market. Between Alcoa's release of earnings after the bell and the FOMC minutes at 2PM it was pretty clear that attention was focused on events later in the day.

The market opened weak as indicated, losses near -0.5%, but those levels were able to hold. The indices tread water from that point forward, until 2PM, with some bullish bias. The market popped on the FOMC release, which was more of the same. They are ready to raise rates, but find it appropriate to wait. The post-release rally met some resistance but by 2:30PM the indices were making another new high, and then another, leaving the indices near the highs of the day.

Economic Calendar

The Economy

The economic calendar for today was light on the number of releases if a little on potential impact. Aside from the weekly jobless claims numbers the FOMC minutes were the only other release. On the jobs front Initial Claims fell by -13,000 to hit the lowest level since July. This is just off the 15 year low. Last week's figures were revised lower by -1,000 for a net decline of -14,000 from last week's report. The 4 week moving average of claims also fell, shedding -3,000 to hit 267,000 and its lowest level since early August.

On a not adjusted basis claims rose by 5.8%, about half of the expected 11.4% gain projected by the seasonal factors. On a year over year basis not adjusted claims are down -11%. Michigan and Illinois led with increases in claims of 2,837 and 871 respectively. Kansas and Georgia led with declines of -2,588 and -868. These drops are indicative at least of declining job losses, if not job creation stronger than the NFP indicated.


Continuing Claims rose by 9,000, on top of an upward revision of 4,000, to hit 2.204 million. The four week moving average continued to decline, losing -14,750 to hit 2.221 million. Continuing claims, despite this weeks gain, continues to trend near the long term lows and indicative of labor market health.

The total number of claims for unemployment fell by -61,340. This is the 9th week of declines since hitting a peak in later summer and a new long term low dating to before the financial crisis. Total claims are now down -9.5% from last year at this time and appear to be trending lower. Based on this and the other claims data it looks like joblessness is reaching new levels. Job creation may be lack luster but job openings are at high levels and that is helping to suck up labor market slack.


The minutes turned out to be another FOMC non-event. They still think it is right to raise rates soon, but are in no hurry to do so. They cite things like high dollar, slow China, global market turmoil and low inflation as their reasons for standing pat. They also lowered their target for inflation to remain below 2% until the end of 2018. According to them US growth is moderate and labor market slack is nearly if not completely gone. Although there is renewed risk from global slowing there is no material change to the outlook. The news helped send the market to a high intra-day high.

The Oil Index

Oil prices continued to rebound today but I think it is mostly on fear. Russia's entry into the Syrian conflict is raising the chances for international conflict in the region and putting a premium into oil prices. Despite this risk premium US stockpiles remain high as does global production levels. There are some signs of slowing US production but so far not enough to cause a drop in available supply. WTI and Brent both gained near 3.5% with WTI closing near $49.50 for the first time since July.


The Oil Index gained a little more than 2% on the rise in oil and has extended its rebound above resistance targets. Today's action created a long white candle moving up from the 1,175 support/resistance line set last month. The indicators are bullish and on the rise with MACD setting a +12 month extreme peak in support of the move. The index is moving higher and looks like it will continue higher into the near term. Now that oil prices are rebounding we can start to expect earnings outlook for the oil companies to rise which, along with outlook for the end of the year and next year, should be bullish for the sector.

The Gold Index

Gold action was tepid today despite the dovish tone to the FOMC minutes and subsequent drop in dollar value. The DXY fell about a half percent after the minutes, to a three week low, but gold prices did not rise in response. Prices fell more than -0.6%, perhaps on the lowered inflation target. Without inflation, and with lower targets, there is lowered expectation for higher gold prices. At the same time the rate hike is still on the way, eventually, which will strengthen the dollar as well. In the meantime movers of gold are economic data (ex-inflation), earnings and outlook which all support the rate hike. Gold may not move down to its recent lows, but I don't see any reason for it to rise either.

The gold miners tried to move higher but were capped at resistance. The miners ETF GDX opened slightly lower than yesterday's close to move higher and create what would have been a large white bodied candle. The index broke above the 100% retracement level, previous all time low, but found resistance and was pushed back creating a regular white candle with long upper shadow. Today's high is consistent with the high set last month, when the index tested resistance and was shut down. The indicators are bullish at this time, pointing up in indication of possible testing of resistance, but remain weak and consistent with resistance and range bound trading. The MACD peak is weak, not large or extreme, and stochastic is trending in the middle of its range. Resistance is between $15.75 and $16 with support near the bottom of the three month range near $13.00.


In The News, Story Stocks and Earnings

Netflix announced that it would raise prices for its basic service by a dollar per month. This may not sound like much but with an estimated 60 million subscribers could result in substantial income for the company. Simple math comes up with a possible $760 million addition to annual revenues. Shares of the stock gained 3.5% to trade at a four month high. Earnings are scheduled to be released next week, guidance could be materially affected by development.


Domino's Pizza reported before the bell. The deliverer of tasty pizza reported a 6% rise in earnings and an 8% rise in revenue but missed analysts expectations. Consensus called for $0.74 per share, more than a nickel above the actual $0.67 reported. The company also reported double digit comp store growth in the US with high single digit growth in international markets. The primary headwind cited was currency exchange rates. The news was met with mixed emotions and caused shares to fall more than -4% to trade just above support levels. Volume was high, as was volatility, creating a long legged doji candle. Support is near $100 with resistance along the short term moving average.


Alcoa reported after the bell and kicks off the unofficial start of the earnings season. The aluminum giant missed on both the top and bottom lines, by substantial margins, in a report that highlights reasons for the recently announced split. The value added products all produced significant gains on a year over year basis, all undermined by low commodity pricing. Analyst had been predicting $0.13 per share, actual results were $0.07. Shares of the stock lost 5% in after hours trading.


Helen Of Troy, maker of popular consumer products, reported a top and bottom line beat after the bell. The company was able also to narrow guidance to the upper end of a previously stated range and above consensus estimates. Shares of the stock popped in after hours trading, gaining more than 7% to trade at a new all time high.


The Indices

The indices opened weak but upon reflexion strength was exhibited most of the day. Except for the early dip to support the bulls were in charge all day. The middle portion of the day was mostly sideways but once the minutes were released action was all up, led by the transports. The Dow Jones Transportation Index gained 1.38% and was the market leader all day. The index is approaching resistance targets near 17,200 with rising indicators so it looks like a test of resistance is on the way. Both MACD and stochastic are on the rise although only MACD is showing any strength at this time.


The S&P 500 made the next largest gain today, just shy of 0.9%. The broad market also created a large white bodied candle in a move that is approaching resistance. The index has now regained the long term up trend with bullish indicators and looks like it could break past the next resistance target. Resistance is just above today's closing price, near 2,015, and, once broken, could lead to additional movement up to 2,050 or higher. The indicators are positive, MACD is bullish and rising, stochastic is pointing up, both in line with the underlying trend, but the signal is still weak. A consolidation and move above resistance would help strengthen the near term outlook.


The Dow Jones Industrial Average was the third largest advancer in today's session. The blue chips gained 0.82% in a move that is approaching resistance targets, just like the first two. Today's action fell just short of my resistance line at 17,250 but looks like it will go that high at least. The indicators are bullish and on the rise, pointing to higher prices, and the MACD peak is convergent with the new two month high, so a test of next resistance target is very likely . A break above that level would be bullish and could lead to a move up to test the current all time high.


The NASDAQ Composite was today's laggard with a gain of only 0.41%. The tech heavy index was under pressure all morning even as the others were trying to move higher and was barely able to move above break even. Despite the sluggishness in the index today's action confirmed support at the short term moving average and the recently broken resistance level with rising indicators. The index looks set to move up to next resistance, near 4,950. Although bullish, the indicators are remain weak so a break above next resistance is questionable.


The FOMC gave the market the all clear one more time. The news was largely as expected, did not produce any surprises, and was barely an impediment to the rally. The indices are moving higher, perhaps to consolidate at resistance levels, with earnings season at hand so for now I think that will be focus of the market. The long term trend remains up, economic trends remain up and outlook for the future is positive so there is a good chance this rally could have legs.

Until then, remember the trend!

Thomas Hughes


New Plays

Turnaround In Progress

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Matrix Service Company - MTRX - close: 24.77 change: +0.52

Stop Loss: 22.45
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 08, 2015
Time Frame: Exit PRIOR to earnings in early November
Average Daily Volume = 272 thousand
New Positions: Yes, see below

Company Description

Trade Description:
After years of double-digit earnings and revenue growth MTRX ran into trouble last year. The stock peaked in June 2014 and plunged from $38 down to $17. It looks like MTRX's earnings trouble and stock price declines may have turned the corner.

MTRX is in the basic materials sector. According to the company, "Ranked as a Top 100 Contractor by Engineering News-Record, Matrix Service Company provides sophisticated design, engineering, and construction services to a diverse client base throughout North America. We offer a comprehensive EPC solution to a variety of end-markets with a focus on safety and superior service and quality." They service the "Electrical Infrastructure, Oil Gas & Chemical, Storage Solutions and Industrial markets." The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities in the United States and Canada.

MTRX's earnings results have struggled. They missed Wall Street estimates with their Q2 results (announced April 4th) and their Q3 results (May 7th). Management lowered their guidance with both reports. Fortunately the outlook improved in July.

On July 13th MTRX updated their guidance with numbers slightly above expectations. The stock soared on this news. Yet the stock did not see a lot of follow through higher. It wasn't until MTRX reported earnings on August 31st that the stock began to see any serious improvement.

MTRX's Q4 2015 results, announced August 31st, were $0.40 a share. That was 13 cents above estimates. Revenues were up +7.6% to $370.5 million. Guidance was good enough that the stock rallied past resistance. Shares spent the rest of September consolidating these gains.

Today it looks like the consolidation is over. After months of building a base in the $16-23 range MTRX is finally breaking out. Technically shares look better with the 50-dma and 200-dma beginning to curve upward as well. The point & figure chart is bullish and forecasting at $36.00 target.

MTRX just broke through resistance at the $24.00 level this week on above average volume. The $25.00 level is potential round-number resistance. Therefore we are suggesting a trigger to launch bullish positions at $25.10. Plan on exiting prior to MTRX earnings report in early November.

Trigger @ $25.10

- Suggested Positions -

Buy MTRX stock @ $25.10

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

Buy the NOV $25 CALL (MTRX151120C25) current ask $1.85
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

Markets Deliver Another Widespread Gain

by James Brown

Click here to email James Brown

Editor's Note:
Commodities and biotech stocks did not participate in the rally today but the rest of the market saw a surge higher following the release of the FOMC minutes.

SBUX and AMAG hit our entry trigger today.


Current Portfolio:


BULLISH Play Updates

Bitauto Holdings - BITA - close: 32.48 change: -0.50

Stop Loss: 29.90
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 07, 2015
Time Frame: Exit prior to earnings in mid November
Average Daily Volume = 946 thousand
New Positions: Yes, see below

Comments:
10/08/15: BITA underperformed the market on Thursday. The stock fell -3% this morning but managed to pare its loss to -1.5% by the closing bell. Currently we are waiting for a new relative high. Our suggested entry point is $33.75.

Trade Description: October 7, 2015:
After a -75% plunge in BITA's stock price is all the bad news baked in? The stock hit a high of $95.00 in January 2015. When the U.S. stock market corrected in late August and spiked lower on August 24th, shares of BITA hit a low of $22.00. That's a -76% drop. Since then BITA appears to have found a bottom.

If you're not familiar with BITA they are a Chinese company. BITA is considered part of the technology sector. According to the company, "Bitauto Holdings Limited (BITA) is a leading provider of internet content and marketing services for China's fast-growing automotive industry. Bitauto manages its businesses in three segments: its advertising business, EP platform business, and digital marketing solutions business.

The Company's bitauto.com advertising business offers automakers and dealers a variety of advertising services through its bitauto.com website, which provides consumers with up-to-date new automobile pricing and promotional information, specifications, reviews and consumer feedback.

The Company's EP platform business provides web-based integrated digital marketing and customer relationship management (CRM) applications to new automobile dealers in China. The platform enables dealer subscribers to create their own online showrooms, list pricing and promotional information, provide dealer contact information, place advertisements and manage customer relationships to help them effectively market their automobiles to consumers.

The Company's taoche.com business provides listing services to used automobile dealers that enable them to display used automobile inventory information on the taoche.com website and partner websites. The Company provides advertising services to used automobile dealers and automakers with certified pre-owned automobile programs on its taoche.com website. The Company's digital marketing solutions business provides automakers with one-stop digital marketing solutions, including website creation and maintenance, online public relations, online marketing campaigns and advertising agent services."

The economic slowdown in China is major news and has been a market-moving headline for months. What investors might forget is that China is still growing. It's just the pace of growth is slowing down. That slowdown is very evident in the auto market. According to McKinsey & Company the Chinese auto market grew +24% between 2005 and 2011. Last year (2014) Chinese consumers bought 19.7 million cars. That looks like a short-term peak. After years of consistent growth the Chinese auto market will be lucky to hit low single-digit growth and might actually post a decline in sales.

Through August 2015 the Chinese auto market has only sold 12.78 million vehicles. September's numbers continued to sink with sales down -3.4% from a year ago. The full-year 2015 sales are on pace for a -2.6% decline. However, analysts are expecting growth in the Chinese auto market to slow down to +8% annually between now and 2020. That's still healthy, just slower than previous years.

Consumers are feeling the pinch with China's slowdown. Unfortunately an extremely volatile Chinese stock market this year has not helped consumer confidence. The good news is that the Chinese government is trying to stimulate their economy. Last month the government slashed their purchase tax on cars by 50% down to 5%. This new discount applies to cars with engines 1.6 liters or smaller. According to Bank of America that accounts for almost 70% of cars sold in China. Credit Suisse analysts believe this tax cut by the government could boost sales by three million units a year. The tax cut started on October 1st and lasts through the end of 2016.

Bearish investors on BITA could argue the stock is expensive. BITA does have a trailing P/E of 40. Yet bullish investors could argue that BITA is cheap with a forward P/E of 2.6. The company continues to see strong revenue growth.

BITA's last couple of quarters saw revenues surge +99.5% in Q1 and +92.5% in Q2. Management has been beating estimates on both the top and bottom line the last three quarters. The company is growing but they are trying to adjust to the economic slowdown. Management has lowered their guidance in two out of the last three quarters. Part of the problem is that last year was so good for the auto market the company faces really tough comparisons.

Their most recent earnings report was August 6th and BITA management lowered their earnings and revenue guidance. The company expects earnings per share to decline -25% to -32% from a year ago. They also expect sales growth to slow from the +92-95% range down to the +64-73% range. Yes, that's a big drop but it's still strong growth. Shares have already been punished for the lowered guidance. BITA fell -18% the very next day (August 7th).

The question I asked earlier was if all the bad news had already been priced into BITA's stock price? After spiking down to $22 in late August shares spent weeks consolidating sideways in the $25.00-28.00 region. This appears to have built a base which the stock is now bouncing from. The last several days has seen a change in the tone of trading with traders buying the dips. The point & figure chart is now bullish and forecasting at $49.00 target.

Today's intraday high was $33.59. Tonight we are suggesting a trigger to launch bullish positions at $33.75. Make no mistake, this is a higher-risk, more aggressive trade. Chinese stocks can be volatile. If this rally continues BITA could see some short covering. The most recent data listed short interest at nearly 10% of the small 20.3 million share float. I am suggesting small positions to limit risk or use the call option to limit risk.

Trigger @ $33.75 *small positions to limit risk*

- Suggested Positions -

Buy BITA stock @ $33.75

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

Buy the NOV $35 CALL (BITA151120C35)

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


Ingram Micro Inc. - IM - close: 29.28 change: +0.28

Stop Loss: 27.45
Target(s): To Be Determined
Current Gain/Loss: +5.1%
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:
10/08/15: IM spiked down to $28.44 this morning but shares rebounded back into positive territory. IM is now up five days in a row and up seven out of the last eight sessions. Broken resistance near $28.00 should be new support.

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

10/07/15 new stop @ 27.45
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


Mobileye N.V. - MBLY - close: 47.89 change: -1.63

Stop Loss: None. No stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -3.7%
Entry on October 05 at $49.75
Listed on October 03, 2015
Time Frame: Exit prior to earnings in mid November
Average Daily Volume = 4.6 million
New Positions: see below

Comments:
10/08/15: MBLY is having a hard time getting past resistance near the $50 mark. There was no follow through on yesterday's rally. Instead MBLY plunged -5% this morning. Investors bought the dip near technical support at the simple 200-dma. MBLY managed to pare its loss to -3.2%.

I am suggesting traders wait for a rally above $50.00 before considering new bullish positions.

Trade Description: October 3, 2015:
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.

*small positions to limit risk* - Suggested Positions -

Long MBLY stock @ $49.75

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

Long NOV $55 CALL (MBLY151120C55) entry $2.30

10/05/15 triggered @ $49.75
Option Format: symbol-year-month-day-call-strike


Starbucks Corp. - SBUX - close: 59.46 change: +0.68

Stop Loss: 54.75
Target(s): To Be Determined
Current Gain/Loss: -0.2%
Entry on October 08 at $59.55
Listed on October 05, 2015
Time Frame: Exit prior to earnings in very late October
Average Daily Volume = 8.5 million
New Positions: see below

Comments:
10/08/15: It was a good day for SBUX bulls. The stock rallied past short-term resistance near $59.00 and past its prior all-time highs near $59.30. Shares outperformed the broader market with a +1.1% gain and hit our trigger to launch bullish positions at $59.55. I would still consider new positions now at current levels or more conservative investors could wait for a breakout past the $60.00 mark.

Trade Description: October 5, 2015:
SBUX has delivered a strong rebound off last week's lows. Once again the stock looks like a bullish candidate.

We recently traded SBUX as a bullish candidate. What follows is an updated play description:

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.

Five-Year Plan

In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

Earnings results:

It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week.

SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years. Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

The trend of earnings pops continued in July with shares gapping up to new all-time highs following its Q2 report on July 23rd. Earnings were $0.42 per share, a penny above estimates. Revenues were up +17.5% to $4.88 billion, just a hair above expectations. Global same-store sales were up +7% and their non-GAAP operating margin improved 100 basis points to 19.5%. Management is still guiding 2015 revenues to rise +17% in the $19.1-19.4 billion range.

Technical Set Up

Traders bought the dip in SBUX at its rising 100-dma last week. The rebound has lifted SBUX to major resistance in the $59.00-59.30 area. A breakout here would mark new all-time highs. Tonight we are suggesting a trigger to launch bullish positions at $59.55. It is possible that the $60.00 level is round-number resistance so more conservative traders may want to wait for SBUX to close above $60.00 before initiating bullish positions.

We plan to exit prior to SBUX's earnings report in very late October. More aggressive investors might want to consider holding over the announcement.

- Suggested Positions -

Long SBUX stock @ $59.55

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

Long NOV $60 CALL (SBUX151120C60) entry $1.96

10/08/15 triggered @ $59.55
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

AMAG Pharmaceuticals - AMAG - close: 38.74 change: -1.14

Stop Loss: 43.05
Target(s): To Be Determined
Current Gain/Loss: -3.6%
Entry on October 08 at $37.40
Listed on October 06, 2015
Time Frame: Exit PRIOR to earnings in late October
Average Daily Volume = 946 thousand
New Positions: see below

Comments:
10/08/15: It was a volatile day for shares of AMAG. The stock underperformed both the broader market and its peers. Shares plunged -6.3% this morning and traded to new 2015 lows. The stock hit our entry trigger for bearish positions at $37.40. Unfortunately AMAG pared its loss to -2.85%. I would wait for a new decline below $37.50 before initiating new bearish positions.

Trade Description: October 6, 2015:
If you're looking for excitement then check out the biotech stocks. It has been a rough few months for the group. The IBB biotech ETF is down -25% from its July 2015 highs. AMAG has sprinted past its peers with a -49% plunge from its July peak. It is worth noting that the prior year (July 2014-July 2015) the stock was up more than +300%.

Here's a brief description of the company, "As a high-growth specialty pharmaceuticals company, AMAG Pharmaceuticals uses its business and clinical expertise to bring therapeutics to market that provide clear benefits and improve people's lives. Based in Waltham, Mass., AMAG has a diverse portfolio of products in the areas of maternal health, anemia management and cancer supportive care. AMAG continues to work to expand the impact of these and future products for patients by delivering on its aggressive growth strategy, which includes organic growth, as well as the pursuit of products and companies that align with AMAG's existing therapeutic areas or those that could benefit from its proven core competencies."

What makes AMAG different from most small biotech firms is that the company actually has sales. AMAG has seen strong revenue and margin growth. At the moment traders don't seem to care. Investors might be worried about competition. The FDA recently approved a generic version of AMAG's Makena treatment. Previously Makena (hydroxyprogesterone caproate) was the only drug approved by the FDA to reduce the risk of pre-term birth. This is bad news for AMAG since Makena represents 75% of its Q2 sales.

Now add more bad news with the biotech sell-off thanks to presidential hopeful Hillary Clinton tweeting about controlling drug prices to prevent price gouging. Plus there are new headlines about the Transpacific partnership (TPP) which is potentially bearish since it limits the exclusivity for new drugs on the market.

The biotech industry is under a lot of pressure and AMAG is underperforming its peers as investors sell the group. Technically AMAG has found short-term support in the $37.50-38.00 region the last few days. It looks like the stock is about to break down to new lows. Tonight we are suggesting a trigger to launch bearish positions at $37.40.

Please note that we want to use small positions to limit our risk. Trading biotech stocks is a risky business. The right or wrong headline can send an individual biotech stock gapping higher or lower. AMAG is definitely a higher-risk, more aggressive trade. There are already a lot of bears in the name. The most recent data listed short interest a 24.4% of the small 28.7 million share float. Investors could use AMAG options but the spreads are so wide the options are untradeable.

*small positions to limit risk* - Suggested Positions -

Short AMAG stock @ $37.40

10/08/15 triggered @ $37.40


Synchronoss Technologies - SNCR - close: 35.66 change: +1.41

Stop Loss: 35.75
Target(s): To Be Determined
Current Gain/Loss: -10.1%
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:
10/08/15: Our SNCR trade is virtually dead. Our trade opened on October 1st. SNCR tagged $32.00 on October 2nd and began to bounce. The stock hasn't looked back with a big four-day surge higher. The stock added another +4% today. Odds are very good we will see SNCR hit our stop loss at $35.75 tomorrow morning. I am not suggesting new positions at this time.

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

10/08/15 SNCR will likely hit our stop loss at $35.75 tomorrow
10/07/15 SNCR is not cooperating. Investors may want to adjust their stop loss lower
10/01/15 triggered @ $32.40
Option Format: symbol-year-month-day-call-strike


iPath S&P500 VIX Futures ETN - VXX - close: 21.28 change: -1.06

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: +2.5%
2nd position Gain/Loss: +26.6%
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:
10/08/15: The stock market's push higher continues to whittle the volatility indices lower. The VIX fell -5.3%. The VXX ETN dropped -4.74%.

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