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Daily Newsletter, Wednesday, 10/14/2015

Table of Contents

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

Market Wrap

Market Turns Down

by Keene Little

Click here to email Keene Little
Heading into Tuesday's highs we had a good setup for a reversal of the rally. Following Tuesday morning's highs we now have some confirmation that the rally has probably finished and the 3-wave bounce correction off the August low has probably completed. We now wait for further confirmation.

Today's Market Stats

Tuesday morning gapped down but there was a big buying spike at the open, which was then followed by strong selling as big money used the buying and increased liquidity to sell into. The same thing happened this morning with the buy programs hitting at the open and then before 10:00 AM the sellers hit the tape, again using the liquidity surge in the buying as a way to cover their selling. But then the selling overwhelmed the buying and the indexes dropped back into the red. An afternoon bounce attempt was again used to sell inventory and it's looking like a distribution pattern this week, which is at odds with a normally bullish opex week. Was last week's rally the usual head-fake move in front of opex, but this time opposite to what has been normal?

Not helping the market's mood this morning were the economic reports that showed a continued slowing in inflation (not deflation since that's a bad word so we'll go along with the Fed's "disinflation") and a continued slowing in the economy.

The PPI numbers before the bell showed a decline of -0.5%, which was a more significant drop than the expected -0.3% and a drop from 0.0% in August. This continues the slowing in inflation since peaking around +2% last year. Taking out those items near and dear to most of us, that being food and energy-related goods, the core PPI was -0.3%, which was also lower than expected. The expectations were for a drop from +0.3% in August to +0.1% for September. The economy appears to be dissing the Fed with its disinflation.

Retail sales are also in decline and have been this year, coming in at +0.1% (but -0.3% when removing automobiles). August was revised lower as well, from +0.2% to 0.0% and it was less than the +0.2% expected. Ex-auto saw the August number revised lower from +0.1% to -0.1% and it too came in less than the expected -0.1%. A drop in energy prices was expected to boost retail spending but it appears the consumer failed to get the memo and instead pocketed the savings. Not even back-to-school shopping could get the consumer spending more than usual. And if the mighty consumer cuts back on his and her spending it's going to cause further slowing in the economy.

But the Fed continues to see "moderate" growth according the Fed Beige Book report for September, which was released this afternoon. Wage growth was mostly flat and consumer spending grew moderately (not apparent in this morning's retail sales report). The energy sector continues to slow as active rigs and drilling activity continue to decline. The stronger dollar gets the blame for the slowdown in manufacturing (never mind that the dollar hasn't moved much since March and is in fact lower since then). Overall, the report supports those who say the Fed will not be raising rates this year.

Jumping into a review of the charts, I'll start tonight's review with a look at the NYSE Composite index since it gave one of the cleaner setups for this week's reversal. Following the low in August, which was a test of the 200-week MA, we've had a 3-wave bounce correction (I'm calling it a correction to the May-August decline until proven otherwise). The b-wave, which was the pullback into the end of September, was another test of support and a retest of the August low. The c-wave, which is the rally from September 29th, came close to achieving a price projection near 10418 (with a high at 10400 on October 9th), which is where the bounce off the August low has two equal legs up. When I see a reversal from near that kind of price projection it helps confirm the likelihood that it's an a-b-c bounce correction and not something more bullish.

NYSE Composite index, NYA, Weekly chart

The bearish setup on NYA was triggered with the decline below the October 7th high at 10284 and now we wait for further confirmation that we have something more than just a pullback before pressing higher. Note also that the rally into the October high was also rejected from price-level S/R at 10387 (the October 2007 high). The bulls need to get the NYA above 10418 before I'd starting thinking that perhaps we have something more bullish going on. In the meantime, shorting the bounce for another leg down is the higher-probability play and the downside target is the May 2011 high near 8700 (-16% from the October high). That level is also close to where the decline from May would have two equal legs down. A more bearish interpretation of the pattern calls for much lower prices than 8700 but one leg at a time until the bigger picture becomes clearer.

The daily chart below shows the price projection near 10418 for two equal legs up from August and how close it is to the October 2007 high at 10387. Last Friday's small doji at resistance was a good setup to short resistance. Now all the bears need to do is break support at the 50-dma, near 10211, which was almost tagged with today's low near 10215. It could be good for at least a little bounce on Thursday but watch the series of lower highs since last Friday -- a break of a downtrend line along those highs would be fair warning to those in short positions.

NYSE Composite index, NYA, Daily chart

Like the NYA, SPX nearly achieved its price projection at 2025.76 (with Tuesday's high at 2022.34) where its 3-wave bounce off the August low would have two equal legs up. Tuesday's high was short of price-level resistance at 2040-2045 that most had been expecting to see and the spike rallies out of the gate yesterday and today likely caught many traders in bull traps. While the setup for a reversal followed by the decline from Tuesday morning looks good for the bears, another leg up can't be ruled out yet. SPX hasn't yet tested/broken its 50-dma, currently near 1988 (today's low was near 1991) and there's a bullish setup for a back-test that could be followed by a bullish kiss goodbye. Back above Tuesday's high near 2023 would be bullish but then there's that 2040-2045 resistance to worry about.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2023
- bearish below 1960

The rally from September 29th (the c-wave of the a-b-c bounce off the August low) completed as a 5-wave move, which it needs to be. There's a way to look at the current pullback as just a correction that will lead to another new high, probably up to the 2040-2045 resistance zone. A rally back above today's midday bounce high at 2005.74 would be a warning sign for bears to heed since that would suggest another new high is coming. In the meantime, especially with the downside potential, I think shorting bounces is the way to go.

S&P 500, SPX, 60-min chart

Considering what looks like a reversal back down in the stock market, the VIX is confirming it with what looks like a reversal to the upside. On Monday I thought it was setting up a reversal after it dropped down near 16 where it was about to test price-level S/R and back-test its broken downtrend line from October 2014 - July 2015. The bounce off Tuesday's low leaves a reversal signal so VIX is bullish until proven otherwise (with a drop below 15.70).

Volatility index, VIX, Daily chart

Into Tuesday's high the DOW had been able to push marginally above price-level resistance at 17037-17067, which are the February 2015 and December 2014 lows, resp. But yesterday's little doji and close at this S/R line has now been followed by a big red candle and that gives us a sell signal. If the bulls negate the sell signal with a rally above Tuesday's high at 17173 I'd look for a rally to 17242, for two equal legs up from August, and perhaps up to the top of its parallel up-channel for the bounce off the August low, near 17450. If this is the start to the next decline, one which should at least match the May-August decline (nearly 3000 points), the first downside target would be a test of the August low at 15370 before getting another large bounce before heading lower again.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,173
- bearish below 16,740

NDX held onto a potentially bullish setup today. Last Friday it climbed above price-level S/R near 4345 and its downtrend line from July and then tagged its broken 200-dma on Monday and again on Tuesday. Tuesday's pullback was close to back-testing both the S/R line and its broken downtrend line, which it did again today but continues to hold above both. Today's pullback found support at its 50-dma, near 4329, and all of this keeps the NDX looking bullish and a rally back above today's midday high near 4374 would keep the bulls in control. The bears need to see a continuation lower Thursday morning and a firm break below the 50-dma near 4329. It should be noted that the Nasdaq has not been able to break its downtrend line from July and has only been able to back-test its broken 50-dma, near 4816, including another failed test today (twice).

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4403
- bearish below 4273

The RUT's rally off the September 29th low, which was a test of price-level support near 1080, made it up to its downtrend line from June, poking slightly above it and its 50-dma, both near 1160. It then rolled over from resistance and has dropped back below price-level S/R near 1152. It tagged its 20-dma, near 1137, and held it so there's the potential for another attempt at a new high for the bounce and maybe up to its broken uptrend line from October 2011 - October 2014, near 1187 (and a test of its September high at 1194). The bears would be in better shape with the RUT below the October 6th low, near 1127, which would also be a break of an uptrend line that is parallel to the one for the August-September bounce.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1170
- bearish below 1127

The RUT continues to be a good sentiment index for us -- when investors are feeling bullish they want to be exposed to the higher-beta names to get more punch out of their investments. When they're worried about the stock market they know the small caps are higher risk. The big fund managers know it's harder to get out of the small caps and therefore start lightening up their inventory of small caps if they're worried about the market. So when we look at a relative strength (RS) chart of SPX vs. the RUT we can identify those times when the players are feeling bullish vs. bearish and take our cues from that overall sentiment.

The chart below shows the RS of the RUT as compared to SPX and it's been warning us since it peaked in March 2014. That's a long time that the RUT has been underperforming and the bounce from the October 2014 low led to a RS high in June 2015 was followed by a break of the uptrend line from October 2014 in July. That was of course during the time the entire stock market started to decline and the RUT was one of the leaders to the downside. Another bounce off the August low has been followed by a new low, once which is breaking a H&S neckline along the lows since May. This is all supportive of the idea that we've entered a larger decline and that the RUT will likely lead the way down.

RUT vs. SPX Relative Strength, Daily chart

I think another sign of trouble for the stock market comes from what we see happening in the emerging market, using EEM, which better reflects the weaknesses underlying the markets. The removal of the threat of a rate increase by the Fed helped the emerging market recover off their August lows (along with the bounce in the markets in developed countries), as can be seen on the EEM weekly chart below. A stronger dollar from a rate increase would further devastate developing economies as they struggle to pay down their debts (all thanks to the lower-than-normal borrowing rates that prompted over-leveraging in the past decade) with a lower-value currency. The bounce off the August low was good enough for a back-test of the shelf of support near 36.15 and a rollover from here creates another sell signal.

Emerging Market ETF, EEM, Weekly chart

Another interesting RS chart is between the banks and the broader market. BKX had peaked in RS compared to SPX back in early 2003, started to taper off into September 2005 and then peaked at a lower high in July 2006. It started to drop steeply from there into the 2009 low. I remember in July and October 2007 thinking the banks' weakness was another confirming sign that the broader market was peaking. Following the March 2009 low we've seen the RS chart go sideways and it has formed a sideways triangle, retracing less than 38% of its former glory. As the stock market made new highs along the way, the RS chart made lower highs, once again showing us the banks were never full onboard with the Fed-induced rally (the unnatural low rates hurt the banks). The wave count for the sideways triangle looks complete (a-b-c-d-e) with a throw-over for wave-e into the August high. This pattern suggests another big leg down in what will be a large A-B-C pullback from the 2003 peak. In other words, along with the RUT, I see the banks leading the way lower. As leveraged as they are (far more than in 2006-2007) we're looking at either massive bank bailouts in the near future or massive failures.

BKX vs. SPX Relative Strength, Weekly chart

Need a little more proof that the thrill is probably gone for bulls? A comparison (not RS) between SPX and the difference between junk bond prices and 10-year Treasury prices (HYG-ZN, the blue line on the weekly chart below) shows the significant drop in HYG prices relative to Treasury prices (less demand for the riskier junk bonds) compared to the much smaller drop (so far) for SPX. This is just another chart showing how much money is leaving the riskier assets and why it's important to think defensively about the broader market. It's time to be picking out shorting candidates or if you don't like playing the short side then at least get into cash, which includes short-term Treasuries.

Comparison between SPX and difference between HYG and 10-year prices, Weekly chart

The U.S. dollar has pulled back a little further than I expected but still well inside its descending wedge pattern and holding above support at the top of its parallel up-channel from 2008-2011, currently near 93.70. It's also currently holding its 50-week MA, near 94.77, which held on the last two tests in August and September. I continue to look for a slightly higher bounce before turning back down inside its descending wedge pattern before starting another rally at the end of this year.

U.S. Dollar contract, DX, Weekly chart

Gold has attracted strong buying over the past two weeks, rallying $86 from a low near 1104 on October 2nd to a high near 1190 today. And the rally might not be finished since there's a price projection near 1195 for two equal legs up from its July 24th low at 1072. But it has reached a level that could be a challenge for gold bulls to push through. It climbed above its 200-dma, near 1176, and its 50-week MA, near 1181, but it's only one day so far. The downtrend line from October 2012 - January 2015 is also near 1181 and it has almost made it up to the top of a parallel up-channel for its 3-wave bounce off its July low. So there's a little more upside potential but if you're long gold here you should be asking yourself if this is a place you'd enter a new long trade. If not then you should either take profits and/or trail your stop up closer. I think gold will head lower into next year (1000 or lower) as the deflationary cycle continues.

Gold continuous contract, GC, Weekly chart

Supporting gold's bullish run is silver, which is lagging but it has climbed above resistance near 16 (with today's high at 16.19), which includes its 200-dma, at 15.97, and 50-week MA at 16.04. But its daily RSI is showing bearish divergence against last week's lower price high and its weekly RSI is in overbought territory and back up to previous highs made in January and May. Again, there's more upside potential but I would not want to enter a new long trade here. If anything I'd be looking to short the bounce into resistance (on a rollover) since silver should drop down toward 12 (if not lower) by the end of the year.

Silver continuous contract, SI, Weekly chart

Last week I had mentioned I expected oil to pull back to retrace a portion of the rally off its October 2nd low before continuing higher. We have the pullback and now I'm looking for the rally to continue up to the price projection at 55.55 for two equal legs up from August 24th. Assuming we'll get the rally, I continue to believe it's all part of a larger sideways consolidation that will continue into early next year before heading lower (as the dollar heads higher).

Oil continuous contract, CL, Daily chart

Tomorrow morning will be busy with economic reports, which will include CPI data, the Empire Manufacturing index and the Philly Fed index. We'll get to find out more data about what's happening with inflation as well as the economy. With each passing report it seems the bond market is pricing in a lower and lower probability of a rate increase this year. I continue to believe the Fed will be implementing its next QE program (probably a massive one) long before they'll raise rates.

Economic reports and Summary

Conclusion

Last week I was watching for the completion of the leg up from September 29th (with a 5-wave move) to then complete the 3-wave bounce off the August low. That was a setup for at least a pullback, if not the start to the next big decline, one which should at least match the leg down in the August lows. If the market is going to instead head higher, we should see a choppy pullback that retraces a portion of the rally from September 29th and then continue higher. If that happens I'll turn bullish since it should indicate new highs are coming. But for now, I think the 3-wave bounce correction off the August low is a very good setup to get short and ride the next leg down, possibly into the end of the year. By this time next week we should have a much better idea whether or not the market has turned down and then whether or not we should expect lower lows or instead just a pullback before heading higher. In the meantime, trade safe until we get further confirmation of what the next big move should be.

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

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Plays

Look Out Below

by James Brown

Click here to email James Brown


NEW BEARISH Plays

Tenet Healthcare Corp. - THC - close: 35.04 change: -0.89

Stop Loss: 37.65
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 14, 2015
Time Frame: Exit prior to earnings on November 2nd
Average Daily Volume = 2.1 million
New Positions: Yes, see below

Company Description

Trade Description:
The healthcare sector has seen huge gains in the stock market over the last few years. Unfortunately the group appears to have peaked in late summer this year. The market correction in August hit the group hard. Now investors are selling the rallies. Several healthcare stocks have found themselves in a bearish trend of lower highs and lower lows. Wall Street is turning cautious with more analysts downgrading healthcare stocks from buy to neutral.

THC is in the healthcare sector. According to the company, "Tenet Healthcare Corporation is a diversified healthcare services company with more than 130,000 employees united around a common mission: to help people live happier, healthier lives. Through its subsidiaries, partnerships and joint ventures, including United Surgical Partners International (USPI), the company operates 87 general acute care hospitals, 19 short-stay surgical hospitals and over 440 outpatient centers in the United States, as well as nine facilities in the United Kingdom. Tenet's Conifer Health Solutions subsidiary provides technology-enabled performance improvement and health management solutions to hospitals, health systems, integrated delivery networks (IDN), physician groups, self-insured organizations and health plans."

THC's stock popped in late June when the U.S. Supreme court narrowly affirmed the Affordable Care Act (a.k.a. Obamacare). The rally ran out of steam several days later forming a lower high. Since then THC has been suffering with a very pronounced trend of lower highs and lower lows.

The company's most recent earnings report was August 3rd. THC reported their Q2 earnings were $0.75 a share. That was 31 cents better than expected. Revenues beat expectations with a +11% rise to $4.49 billion. Unfortunately management significantly lowered their guidance. Wall Street was expecting THC to earning $2.23 per share on revenues of $19.17 billion for fiscal 2015. THC just lowered their 2015 guidance to $1.32-2.21 per shares on revenues of $18.1-18.5 billion.

Currently THC is in a bear market with a -42% drop from its July highs. The oversold bounce from round-number support at $35.00 just failed a couple of weeks ago. Now THC is poised to breakdown below $35.00. The intraday low today was $34.92. Tonight we are suggesting a trigger to launch bearish positions at $34.75. Plan on exiting prior to THC's earnings report on November 2nd.

Trigger @ $34.75

- Suggested Positions -

Short THC stock @ $34.75

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

Buy the NOV $35 PUT (THC151120P35) current ask $2.10
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 Slip On Disappointing Earnings News

by James Brown

Click here to email James Brown

Editor's Note:
The Q3 earnings season is off to a rough start this year. Expectations were already low but corporate results are disappointing. WMT doesn't report for a few more weeks but their earnings warning today spooked the market.

GNC hit our entry trigger.


Current Portfolio:


BULLISH Play Updates

Bitauto Holdings - BITA - close: 31.09 change: -1.87

Stop Loss: 29.90
Target(s): To Be Determined
Current Gain/Loss: -7.9%
Entry on October 13 at $33.75
Listed on October 07, 2015
Time Frame: Exit prior to earnings in mid November
Average Daily Volume = 946 thousand
New Positions: see below

Comments:
10/14/15: Both the Chinese and U.S. markets displayed weakness on Wednesday. BITA underperformed them both with a -5.6% plunge. Today's breakdown under short-term support at $32.00 is bearish. The next stop could be the $30.00 level, which should be round-number support.

I warned readers last night that Tuesday's session could be a bull-trap pattern. It's starting to look that way today. No new positions at this time.

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.

*small positions to limit risk*- Suggested Positions -

Long BITA stock @ $33.75

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

Long NOV $35 CALL (BITA151120C35) entry $2.50

10/13/15 triggered @ $33.75
Option Format: symbol-year-month-day-call-strike


Ingram Micro Inc. - IM - close: 29.07 change: +0.06

Stop Loss: 27.45
Target(s): To Be Determined
Current Gain/Loss: +4.4%
Entry on September 09 at $27.85
Listed on September 8, 2015
Time Frame: Exit prior to earnings on October 29th
Average Daily Volume = 1.0 million
New Positions: see below

Comments:
10/14/15: IM held up well today. The stock churned sideways and eked out a small +0.2% gain on the session.

No new positions at this time. More conservative investors may want to raise their stop loss again.

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


Intra-Cellular Therapies, Inc. - ITCI - close: 41.39 change: -0.30

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -8.2%
Entry on October 12 at $45.10
Listed on October 10, 2015
Time Frame: Exit prior to earnings in November
Average Daily Volume = 850 thousand
New Positions: see below

Comments:
10/14/15: Our aggressive trade on ITCI is reminding us why we wanted to keep our position size small. The stock delivered a volatile session with a drop to $38.32 this morning (a -8% decline). Shares pared their loss to -0.7% by the closing bell.

No new positions at this time.

Trade Description: October 10, 2015:
Biotech stocks had a terrible third quarter with the group down almost -18%. ITCI was an exception with shares up +25% and that's after some serious profit taking from its mid-September highs. The story for ITCI might be strong enough that shares could ignore further weakness in the group.

You may not be familiar with ITCI since they have been a public company for less than two years. Here's a brief description of the company, "Intra-Cellular Therapies is developing novel drugs for the treatment of neuropsychiatric and neurodegenerative diseases and diseases of the elderly, including Parkinson's and Alzheimer's disease. The Company is developing its lead drug candidate, ITI-007, for the treatment of schizophrenia, bipolar disorder, behavioral disturbances in dementia, depression, and other neuropsychiatric and neurological disorders. ITI-007, a first-in-class molecule, is in Phase 3 clinical development for the treatment of schizophrenia. The Company is also utilizing its phosphodiesterase platform and other proprietary chemistry platforms to develop drugs for the treatment of Central Nervous System (CNS) disorders and other disorders."

It is their lead drug candidate, ITI-007, that fueled huge gains in the stock last month. Here's an excerpt from ITCI's website, "ITI-007 is in Phase 3 clinical trials as a first-in-class treatment for schizophrenia. Current medications available for the treatment of schizophrenia do not adequately address the broad array of symptoms associated with this CNS disorder. In addition, use of these current medications is limited by their substantial side effects. ITI-007 is designed to be effective across a wider range of symptoms, treating both the acute and residual phases of schizophrenia, with improved safety and tolerability." (If you would like more details check out their press release here.

Schizophrenia is a serious mental illness that affects more than 70 million people worldwide. The stock more than doubled on news of its successful Phase 3 clinical trial with shares surging from $26 to almost $60 in two days. That's because ITI-007 would be the first treatment for schizophrenia without significant side effects. Analysts are estimating that potential sales for ITI-007 could reach $6 billion a year in the U.S. and EU if approved by the FDA (and its European counterpart).

ITCI is also investigating if the treatment could help other mental illnesses like dementia, depression, and bipolar disorders.

The company's management was quick to capitalize on the good news. They issued a secondary offering of 6.9 million shares at $43.50 a share (about $300 million). Demand was strong enough that they sold 7.93 million shares and raised $345 million. They already had $204 million in cash. Together that bumps their war chest up to more than $500 million.

Gravity eventually took over and shares of ITCI retreated from $60 to $35 but investors have started buying the dips. Now ITCI is building on a bullish trend of higher lows. Shares appear to have short-term resistance at the $45.00 level. A breakout above $45.00 could be our entry point to hop on board the next leg higher.

Regular readers know that we consider biotech stocks aggressive, higher-risk trades. The right or wrong headline can send a stock soaring. ITCI is a great example with shares exploding higher on positive headlines in September. Tonight we are suggesting small bullish positions if ITCI can trade at $45.10. We will tentatively plan on exiting prior to ITCI's earnings report in early November.

(small positions to limit risk) - Suggested Positions -

Long ITCI stock @ $45.10

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

Long NOV $50 CALL (ITCI151120C50) entry $3.80

10/12/15 triggered @ $45.10
Option Format: symbol-year-month-day-call-strike


Kate Spade & Co. - KATE - close: 20.94 change: -0.44

Stop Loss: $19.85
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 12, 2015
Time Frame: Exit prior to earnings on November 5th
Average Daily Volume = 2.2 million
New Positions: Yes, see below

Comments:
10/14/15: Another bullish analyst call and higher price target on KATE could not save it from the sell-off in retail stocks today. Shares were given at $29 price target. Unfortunately the earnings warning by Wal-Mart (WMT) fueled sharp declines in anything retail related.

Currently we are on the sidelines with a suggested entry to launch bullish positions at $22.05.

Trade Description: October 12, 2015:
The luxury goods and accessories industry has been crushed this year. Look at charts for Coach (COH), Michael Kors (KORS), and Kate Spade (KATE). The good news is that the group may have found a bottom. KATE looks poised to leave its rivals in the dust.

KATE is in the consumer goods sector. According to the company, "Kate Spade & Company (KATE) designs and markets accessories and apparel principally under two global, multichannel lifestyle brands: kate spade new york and Jack Spade. With collections spanning demographics, genders and geographies, the brands are intended to accent customers' interesting lives and inspire adventure at each turn. The Company also owns the Adelington Design Group, a private brand jewelry design and development group that markets brands through department stores and serves jcpenney via exclusive supplier agreements for the Liz Claiborne and Monet jewelry lines. The Company has a license for the Liz Claiborne New York brand, available at QVC, and Lizwear, which is distributed through the club store channel."

KATE's most recent earnings report was August 5th. The company announced its Q2 results were $0.08 a share. That missed estimates by three cents. Revenues were only up +5.6% at $281 million. That also missed estimates. The company pointed out their Q2 results still represents several businesses they are winding down. Their core sales of the KATE brand actually rose +20%. Management bumped their guidance and the stock popped on the news.

Traditionally the fourth quarter is the time to own retail-related stocks as investors key in on the holiday shopping season. After shares of KATE were almost cut in half from their 2015 highs near $35.00, Wall Street analysts have turned bullish on the stock. Stephens upped their rating to an overweight and put a $31 price target on the stock. Wunderlich offered a bullish perspective and has a $39 target for KATE. Citigroup named KATE one of their top picks for the rest of the year and issued a $33 price target.

If this rally continues KATE could see more short covering. The most recent data listed short interest at 10% of the 127 million share float. Technically KATE has been consolidating sideways below resistance at its 100-dma and the $22.00 level. Today's display of relative strength (+1.5%) also produced a close above the 100-dma. We want to hop on board if shares breakthrough the $22.00 level. Tonight we are suggesting an entry trigger at $22.05.

Trigger @ $22.05

- Suggested Positions -

Buy KATE stock @ $22.05

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

Buy the NOV $23 CALL (KATE151120C23)

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


Mobileye N.V. - MBLY - close: 48.51 change: +0.26

Stop Loss: $46.45
Target(s): To Be Determined
Current Gain/Loss: -2.5%
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:
10/14/15: Tesla (TSLA) announced they were rolling out a software update to customers that allows for auto-pilot like features in their Tesla vehicles. Market pundits speculated that TSLA isn't the only high-end car maker that will offer these types of features and that should be bullish for MBLY.

Shares of MBLY suffered some volatility this morning with a plunge below its 200-dma. The stock hit $46.70 before bouncing back and eventually closing up +0.5%.

Wait for a rally above $50.00 before considering new bullish positions. More conservative traders may want to wait for a close above $50.00 before launching 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

10/12/15 new stop @ 46.45
10/05/15 triggered @ $49.75
Option Format: symbol-year-month-day-call-strike


Matrix Service Company - MTRX - close: 24.26 change: +0.18

Stop Loss: 22.45
Target(s): To Be Determined
Current Gain/Loss: -3.3%
Entry on October 09 at $25.10
Listed on October 08, 2015
Time Frame: Exit PRIOR to earnings in early November
Average Daily Volume = 272 thousand
New Positions: see below

Comments:
10/14/15: MTRX bounced off support near $24.00 and rallied to a +0.74% gain on Wednesday. I am suggesting traders wait for MTRX to trade at $24.75 or higher before considering new bullish positions.

Trade Description: October 8, 2015:
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.

- Suggested Positions -

Long MTRX stock @ $25.10

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

Long NOV $25 CALL (MTRX151120C25) entry $2.05

10/12/15 MTRX plunges -7% on no news
10/09/15 triggered @ $25.10
Option Format: symbol-year-month-day-call-strike


Starbucks Corp. - SBUX - close: 58.82 change: -1.34

Stop Loss: 54.75
Target(s): To Be Determined
Current Gain/Loss: -1.2%
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:
10/14/15: Traders were in the mood to take profits today. After hitting all-time highs on Monday SBUX was definitely a target for profit taking. Shares fell -2.2% and closed below both the 10-dma and below what should have been support at $59.30 (prior highs). The next support level looks like the $58.00 area. If SBUX tests $58 and bounces I'd use it as a new bullish entry point. Keep in mind this is a relatively short-term trade.

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: 38.70 change: +0.73

Stop Loss: 42.05
Target(s): To Be Determined
Current Gain/Loss: -3.5%
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:
10/14/15: The beaten down biotechs managed a bounce on Wednesday. The IBB gained +0.9%. AMAG outperformed its peers with a +1.9% gain. The overall pattern for AMAG still looks bearish.

I am suggesting investors wait for a decline below $37.50 before considering new 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

10/10/15 new stop @ 42.05
10/08/15 triggered @ $37.40


GNC Holdings - GNC - close: 40.02 change: -0.76

Stop Loss: 42.55
Target(s): To Be Determined
Current Gain/Loss: -0.3%
Entry on October 14 at $39.90
Listed on October 13, 2015
Time Frame: Exit prior to earnings at the very end of October
Average Daily Volume = 1.2 million
New Positions: see below

Comments:
10/14/15: Our new GNC trade is open. Shares continued to sink and traded below the $40.00 level. Our trigger to launch bearish positions was hit at $39.90.

Trade Description: October 13, 2015:
We want to take another swing at GNC. The bearish story for the stock has not changed and the oversold bounce has reversed.

Here's an updated trade description:
Tougher competition, increased government scrutiny, and changing consumer habits have not been a good recipe for shares of GNC. The stock is down -13.1% 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 the oversold bounce just failed near resistance in the $43.00 area. The point & figure chart is bearish and forecasting at $33.00 target. Tonight I am suggesting a trigger to launch bearish positions at $39.90.

This is a short-term trade. GNC has earnings coming up at the very end of October or early November. We plan to exit prior to the announcement.

- Suggested Positions -

Short GNC stock @ $39.90

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

Long NOV $40 PUT (GNC151120P40) entry $2.10

10/14/15 triggered @ $39.90
Option Format: symbol-year-month-day-call-strike


iPath S&P500 VIX Futures ETN - VXX - close: 21.43 change: +0.43

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: +1.8%
2nd position Gain/Loss: +26.1%
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:
10/14/15: All of the major U.S. indices posted losses today. That helped fuel gains for the volatility ETN the VXX, which added +2.0%.

No new positions at this time.

Note - Option traders - our October options expire in a couple of days. I am suggesting we exit our October options tomorrow (Thursday, October 15) at the closing bell.

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

10/14/15 if you own the options, prepare to exit tomorrow at the close
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