Option Investor
Newsletter

Daily Newsletter, Thursday, 10/15/2015

Table of Contents

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

Market Wrap

Data, Earnings Drive Rally

by Thomas Hughes

Click here to email Thomas Hughes
A round of mixed economic data and the onset of earnings season supported the market today.

Introduction

A round of mixed economic data and the onset of earnings season helped support the market today. Weak data has pushed back rate hike expectations, alleviating fears and allowing the market to focus on earnings. Earnings are generally positive relative to expectations, nothing to brag about but leading to growth later this year and next.

International markets were positive. Asian indices gained 1% to 2% in a session largely devoid of market moving news, European indices gained a little over 1% driven primarily by earnings. The early pre-market session was busy for us here at home. Th economic calendar was relatively heavy today and complimented by an equally heavy dose of earnings. Futures trading indicated a positive open all morning but early strength faded after the release of 8:30AM data, cutting indicated gains by early half. At the open the market was indicated higher by a little more than a half percent and that gain was made within the first few minutes of open trading.

Market Statistics

The first half of the day saw a mild rally to an early high and then steady retreat back to the day's opening levels. The market hit bottom just above today's opening prices and then began another, slightly more decisive, rally which took the indices back to today's highs and higher. By 2PM the broad market was approaching the 2 month highs set earlier this week and looking ready to test resistance. By 3PM the S&P 500 was breaking resistance and moving up to set another daily high, a high that held into the close of the day.

Economic Calendar

The Economy

Lot's of data today. First up, Initial Jobless Claims. Claims by -7,000 from a downward revision of -1,000 to hit 255,000 and match the lowest level of claims in over a decade. The 4 week moving average of claims also fell, losing -2,250, to hit 265,000. This is the lowest level for the average since December of 1973. On a not adjusted basis claims rose by 12.3% versus an expected 15.6% but remain down for the year. On a year-over-year basis not adjusted claims are down -6.8% from the comparable period. Pennsylvania and California had the largest gains in claims, 2,548 and 2,351. Michigan and New York had the largest declines in claims, -2,436 and -1,614.


Continuing Claims also fell, -50,000, to hit 2.158 million. This is a new low and the lowest level since November of 2000. Last week's figure was revised up by 4,000. The four week moving average fell by -21,500 and also hit a new low not seen since November of 2,000.

The total number of Americans receiving unemployment benefits also fell, shedding -7,496. This is another new low in total claims and the 10th week of decline for this number. The NFP number may have been weak last month but so far none of the other employment data supports weakening in the labor market. Based on the jobless claims numbers it looks like less people with jobs are finding themselves without a job, less people who lose a job can't find a new one within a week and the total number of people without work is declining.


The Consumer Price Index declined by -0.2% in September, in line with expectations and furthering expectations for a delayed rate hike. The drop is primarily due to a decline in gasoline prices but all components of the energy index posted declines. The energy index fell -4.7% off setting gains in other areas such as food, and all-items less food and energy. Food inflation ran at 0.4% while ex-food and energy is running at 0.2%. On a trailing 12 month basis CPI remains flat.


The Empire State Manufacturing Survey came in at -11.4, 3 points higher than last months reading. Despite the gain it remains negative and lower than the expected -8.0 consensus. Within the report new orders, shipments, unfilled orders and employment all declined. The labor component shows declining employment levels and less hours worked, concerning and contrary to the claims data. The forward looking portion of the survey remains positive but was described as tepid within the report.

The Philadelphia Federal Reserve Manufacturing and Business Outlook Survey shows that conditions declined for a second month in that region. The index came in at -4.5%, an improvement from last month's -6% but below expectations for -2.5%. New orders, shipments and employment all declined and fell below zero. Firms reported declines in the number of hours worked as well as employment levels. The forward looking component of this survey also declined but remains positive and optimistic at 36.7.

On the one hand labor data shows a healthy labor market. On the other manufacturing data shows signs of a weakening labor market, as well as possible economic contraction. The question is, which will lead which moving forward? Will labor conditions lead to ongoing improvement in the economy, or will declining manufacturing output hurt the labor market, the housing market and the economy in general? Based on outlook for earnings and economic growth into next year I tend to believe the former rather than the latter.

The Oil Index

Oil trading was volatile in today's session. Early gains were wiped out by a surprise build in inventory, double the expected 3.5 million barrels, and then a late day rally recouped losses suffered on the inventory data. Price for WTI settled near $46.50 for the day and remain under pressure. A new report shows that there is a .5 billion barrel supply glut year-to-date and this situation is not getting any better as global production remain high.

The Oil Index gained nearly 1.5% in today's session. Despite oil fall from its recently set three month high prices are above the low set last month and helping to support earnings outlook. The index has now touched back to support following a strong rally and is bouncing higher with initial upside target near the August high (1235) and the 50% retracement level. Momentum is strong, although MACD shows it has retreated from a peak, and could be enough to carry the index up to test resistance. Stochastic is also strong, %D has crossed the upper signal line and %K is confirming strength as well. A break above resistance could carry this index up to next resistance at the bottom of the previously broken long term up trend line near 1,325. The caveat is oil prices. It looks like the sector is ready to make a run despite low oil prices so I am cautious. A drop in oil, or a break through support near $45, could help solidify resistance


The Gold Index

Low inflation and weak manufacturing data are helping to weaken the dollar and have sent gold up to levels not seen since late June. Today gold gained about $5 and traded around $1185 and approaching resistance targets near $1200. The move is driven on data and fed expectations and could reverse as quickly as it has rallied. However, despite my over all bearish view on gold, it is obvious the current move is up and that for now there is little sign of resistance, it's doubtful data will alter outlook in the near term. If today's inflation data is any indication an October rate hike is probably off the table leaving December the last chance for this year. The next FOMC meeting is in two week, October 27th and 28th, and offers a possible catalyst for the metal.

The gold miners are being supported by gold prices. The Gold Miners ETF GDX made nominal losses in today's session but was able to create a white bodied candle. The ETF opened with a loss but moved up from recently broken resistance, possibly turning to support, and closed just below yesterday's closing prices. The indicators are bullish and pointing higher but momentum remains weak and I am skeptical of the rally in gold so I am concerned of whipsaw/false-break out. If gold prices drift higher to test resistance this ETF could follow with upside target near $18.


In The News, Story Stocks and Earnings

The big banks, and quite a few smaller banks, have been reporting this week and the results are largely positive. Wells Fargo reported a solid quarter as did Bank of America. A few weak spots have emerged, such as negative impact from low trading volumes, but it is isolated. The sector as whole is looking sound with positive forward outlook and was one of the leaders in today's session. The XLF Financial SPDR gained more than 2.3% in a strong move up from support levels and breaking above the short term moving average. The ETF is accompanied by bullish indicators and appears to be moving back toward the top of the 12 month range. First target is near $24, with additional targets near $25 and $25.50.


BB&T reported before the bell. The North Carolina based bank reported $0.70 adjusted earnings on a 4.5% increase in revenue. Earnings are 4 cents ahead of expectations although still down 1 cent from last year in the comparable quarter. Results include the addition of Susqhehanna Bancshares which increased total assets held by the bank to more than $200 billion. Shares of the stock responded positively, gaining more than 3% and breaking above the short term moving average.


Wynn Resorts reported after the bell. The company produced EPS of $0.86, in line with estimates, on lighter than expected revenue. Both Macau and Las Vegas produced weaker than expected results but Macau was the real loser, revenue in that region fell nearly 40%. Despite the miss the board approved a cash dividend of $0.50. The news was not met with approval and sent shares down more than -2.5% in after hours trading.


Mattel reported after the bell and did not meet expectations. The company reported global sales fell by -4% in constant currency led by declines in over seas markets. EPS came in at $0.71 per share, short of the $0.77 projected by analysts. Despite the miss execs reiterated full year guidance and said they were comfortable with performance at this stage of the companies turn-around.


The Indices

Price action was bullish from the earliest part of the day but I did not expect the rally to advance quite as far as it did. Early action was lack luster with little indication of big moves on the way but late day activity pushed the indices higher, and then higher again. Today's session was led by the NASDAQ Composite which gained 1.82%. The tech heavy index created a long white candle moving up from support levels and the short term moving average with bullish indicators. MACD is bullish and has ticked higher with today's data and stochastic is moving higher and about the cross the upper signal line. The index looks like it will keep moving higher now that it has set a new one month high with next target near 4,950.


The S&P 500 made the next largest gain, nearly 1.5%. The broad market also created a long white candle and looks a little stronger than the NASDAQ. Today's action confirmed support along the previously broken up-trend line and is supported by rising indicators. Both MACD and stochastic ticked higher with stochastic showing additional strength with a cross above the upper signal line. The index has also set a new two month high adding additional evidence of bullish intent. Next target is near 2,050 with a chance for a move up to retest the current all time high.


The Dow Jones Transportation Average made the third largest gain, 1.44%. The transports did not set a new high in today's session but look set to try. Today's action created a long white candle moving up from the short term moving average, supported by the indicators. The indicators are both bullish with MACD ticking higher and stochastic approaching the upper signal line. The index may find resistance near 8,275 but it looks very likely it will be tested at least. A break above this level could take the index as high as 8,500.


The Dow Jones Industrial Average made the smallest gain in today's session, only 1.28%. The blue chips also did not set a new high with today's action, but also look set to try. The indicators are bullish and declining momentum has leveled off and could easily carry the index up to resistance near 17,250. A break above this level could carry the index up to 17,500 in the near term with a run at the all time high a possibility, should earnings season not leave us wanting.


It looks like the rally is on, although there is still a lot of earnings season left to go. The indices made a nice move today, if on mediocre volume, and are set to continue moving higher. Weak data is a concern, we don't want to see a trend develop, but for now it is helping to reduce FOMC fear and allowing the market to focus on earnings. Earnings are OK, not stellar by any means, but generally better than expected with continued expectations for improvement into the next quarter and next year. So long as this season holds to trend and the economy doesn't deteriorate the rally should continue with a real chance for the market to reach the current all time highs.

Tomorrow is another big day for data, 5 reports including Michigan Sentiment, JOLTs and Industrial Production. It won't be huge day for earnings but there will be a few reports from regional banks, as well as General Electric. It's also options expiration day so there could be some volatility associated with that.

Until then, remember the trend!

Thomas Hughes


New Plays

Short Squeeze Candidate

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Wayfair Inc. - W - close: 40.79 change: +1.22

Stop Loss: 37.40
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 15, 2015
Time Frame: Exit PRIOR to earnings on November 10th
Average Daily Volume = 1.1 million
New Positions: Yes, see below

Company Description

Trade Description:
W displayed relative strength today and just closed above resistance. Shares could be poised for some serious short covering.

According to the company, "Wayfair Inc. offers an extensive selection of home furnishings and decor across all styles and price points. The Wayfair family of brands includes:

Wayfair.com, an online destination for all things home
Joss & Main, an online flash sales site offering inspiring home design daily
AllModern, a go-to online source for modern design
DwellStudio, a design house for fashion-forward modern furnishings
Birch Lane, a collection of classic furnishings and timeless home decor
Wayfair is headquartered in Boston, Massachusetts, with additional locations in New York, Ogden, Utah, Hebron, Kentucky, Galway, Ireland, London, Berlin and Sydney."

Shares of W came to market with an IPO in October 2014 and priced at $29.00. They opened at $36.00 and spiked up to $39.43 on the first day of trading. The IPO excitement faded and shares didn't find a bottom until about $17.00 in December 2014.

Revenue Growth

The company seems to be growing at a tremendous pace. Their first earnings report as a public company was November 10th, 2014. Revenues soared +41.7% to $336.2 million. Their direct retail business surged +57%. W said their gross profit was $79.0 million versus $58.6 million a year ago.

Additional 2014 Q3 highlights included the number of active customers for their direct retail business rose +61% to $2.9 million year over year. Their LTM Net revenue per active customer increase $342 or +8.6% year over year and +3.0% from the second quarter of 2014.

W reported their Q4 results on March 4, 2015. The company delivered a loss of ($0.18) per share, which was 10 cents better than expected. Revenues were up +38.4% to $408.6 million, above expectations. Management raised their Q1 guidance significantly above Wall Street estimates.

The company beat expectations again with their Q1 report on May 11th. Results were a loss of ($0.23) per share. Revenues accelerated with a +52% gain to $424.4 million.

The earnings beats kept coming when W reported its Q2 results on August 12th. Analysts were forecasting a loss of ($0.29) per share on revenues of $438.4 million. Wayfair delivered a loss of ($0.15) per share. Revenues roared +66.5% to $491.8 million. Management said their number of active customers was up +53.5% from a year ago to four million. Repeat customer orders hit 56%. Orders delivered shot up +80%.

Big Potential

Following their Q1 results back in May the company's CEO talked about their future. On their Q1 conference call the CEO noted that their potential markets are huge. Estimates suggest that spending in their industry will hit $264 billion in the U.S. and $308 billion in Europe by 2018 (a combined total of $572 billion market).

Bears will argue that W's valuations are outrageous. They're probably right. The recent rally in the stock has bumped the company's market cap to $3.6 billion. At the same time analysts are expecting W to operate at a loss for the next two fiscal years. On a short-term basis the market doesn't seem to care about W's valuation. If this rally continues W could see a short squeeze.

A few months ago in an interview one of the co-founders said that together the two co-founders own between 40% and 50% of the stock. The current float is only 30.2 million shares, which is relatively small. The most recent data listed short interest at 79% of the float.

Shares of W have been consolidating sideways beneath resistance at the $40.00 level for about two weeks. Today shares displayed relative strength with a +3.0% gain and a close above resistance. Tonight we are suggesting a trigger to launch bullish positions at $41.15 (hopefully W does not gap too far past our trigger tomorrow). We will plan on exiting prior to W's earnings report on November 10th.

Trigger @ $41.15

- Suggested Positions -

Buy W stock @ $41.15

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

Buy the NOV $45 CALL (W151120C45) current ask $2.45
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 Rebound Around The Globe

by James Brown

Click here to email James Brown

Editor's Note:
Bulls were in control of the stock market today with gains around the globe. Expectations for more stimulus in Asia and Europe helped drive stocks higher. Meanwhile investors expect the Federal Reserve to postpone any rate hike into 2016.

KATE has been removed as a candidate.

We closed the VXX October options today.


Current Portfolio:


BULLISH Play Updates

Bitauto Holdings - BITA - close: 33.19 change: +2.10

Stop Loss: 29.90
Target(s): To Be Determined
Current Gain/Loss: -1.7%
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:
10/15/15: Stocks rallied around the globe today, including China. That may have given BITA a boost as shares surged +6.75% and erased yesterday's ominous loss. I'd like to see some follow through before considering new positions.

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: 28.71 change: -0.36

Stop Loss: 27.85
Target(s): To Be Determined
Current Gain/Loss: +3.1%
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:
10/15/15: Uh-oh! Is IM sick? Shares were upgraded this morning. The stock gapped higher in response and immediately reversed near resistance at its October highs. Shares did not participate in the market's broad-based rally and instead fell -1.2%.

Tonight we are raising the stop loss up to $27.85. 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

10/15/15 new stop @ 27.85
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: 42.98 change: +1.59

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -4.7%
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:
10/15/15: Biotech stocks decided to join the market rally and the IBB biotech ETF surged +4%. ITCI could not quite keep up and only added +3.8%.

This is a higher-risk trade. If you can handle the volatility then today's bounce looks like another entry point.

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


Mobileye N.V. - MBLY - close: 49.86 change: +1.35

Stop Loss: $46.45
Target(s): To Be Determined
Current Gain/Loss: +0.2%
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:
10/15/15: The action in MBLY today was very encouraging. The stock has been stuck churning sideways in the $46.50-50.00 zone for days. MBLY displayed relative strength today (+2.78%) and closed just below resistance at $50.00. Shares look poised to breakout tomorrow.

A rally past $50.00 (or today's intraday high $50.20) could be used as a new bullish entry point.

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

10/15/15 MBLY looks ready to breakout past resistance at $50.00
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: 24.98 change: +0.72

Stop Loss: 22.45
Target(s): To Be Determined
Current Gain/Loss: -0.5%
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:
10/15/15: MTRX tested support near $24.00 again and then surged to a +2.9% gain on the session. I have been suggesting a rally to $24.75 or higher is a new entry point and we got it today.

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: 59.69 change: +0.87

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 on October 29th
Average Daily Volume = 8.5 million
New Positions: see below

Comments:
10/15/15: Bingo! Shares of SBUX bounced off support near $58.00 just as expected. Shares rallied to a +1.4% gain on the session. I see this as a new bullish entry point as long as you keep in mind our time frame. SBUX is scheduled to report earnings on October 29th and we want to exit prior to their announcement.

Meanwhile the big story for SBUX today was news it was preparing to enter the Italian market. Italy is a major market that SBUX has yet to enter, which is somewhat surprising since Italy drinks a lot of coffee. A SBUX spokesperson said the story was just rumor and would not comment on it.

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: 38.85 change: +0.15

Stop Loss: 42.05
Target(s): To Be Determined
Current Gain/Loss: -3.9%
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:
10/15/15: The trading in AMAG today is encouraging if you're bearish. Biotech stocks surged +4% today and yet AMAG did not participate. The stock gained less than +0.4%.

I've been suggesting a drop under $37.50 as our next entry point and shares hit $37.44 this morning. Considering the lack of follow through lower I am now suggesting a decline below $37.35 as our next entry point.

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: 40.70 change: +0.68

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:
10/15/15: After a four-day decline GNC managed a bounce (+1.6%) thanks to the market's very widespread rally today. Let's wait and see where this bounce stalls before initiating new bearish positions. The $42.00 area should be resistance.

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


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

Stop Loss: 36.75
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

Comments:
10/15/15: We need to adjust our entry point strategy on THC today. The plan was to launch bearish positions if shares traded down to $34.75. The stock gapped lower at $32.13 (a -8.3% drop). Our entry disclaimer says do not open positions if THC gaps down more than $1.00 past our trigger so the play did not open this morning.

Why did THC plunge at the open? It was a reaction to earnings from rival hospital company HCA. Last night HCA reported earnings and then lowered their guidance. This news weighed on all the hospital-related stocks. THC spiked down to $31.52 (-10% on the session) before bouncing all the way back to fill the gap.

Tonight I am adjusting our entry point strategy. This bounce should fail at $35.00, which is new resistance. Use a new trigger at $34.45 to launch bearish positions on THC. We will adjust the stop loss down to $36.75.

Trade Description: October 14, 2015:
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 @ $34.45

- Suggested Positions -

Short THC stock @ $34.45

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

Buy the NOV $35 PUT (THC151120P35)

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.

10/15/15 entry strategy adjustment - This morning THC gapped down more than $1.00 past our suggested entry trigger (of $34.75). This violated our entry strategy. Tonight we are adjusting our plan. Use a new decline at $34.45 as an entry point to launch bearish positions. Adjust the stop loss to $36.75.
Option Format: symbol-year-month-day-call-strike


iPath S&P500 VIX Futures ETN - VXX - close: 19.90 change: -1.53

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: +8.8%
2nd position Gain/Loss: +31.4%
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:
10/15/15: The stock market's big bounce today was great news for our VXX trade. The VXX fell -7.1%.

It was our plan to exit the October puts at the closing bell today.

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) -

OCT $20 PUT (VXX151016P20) entry $2.93 exit $0.53 (-81.9%)

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

Short the VXX @ $29.01

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

OCT $20 PUT (VXX151016P20) entry $0.78 exit $0.53 (-32.1%)

10/15/15 planned exit for the October puts
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



CLOSED BULLISH PLAYS

Kate Spade & Co. - KATE - close: 20.80 change: -0.14

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: see below

Comments:
10/15/15: We are cutting KATE loose. Shares did not participate in the market's very widespread rally today. Instead shares underperformed with a -0.66% decline.

If you like KATE then I'd watch for support near $20.00 and considering buying a bounce there with a relatively tight stop loss.

Trade did not open.

10/15/15 removed from the newsletter, suggested entry trigger was $22.05

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