Option Investor
Newsletter

Daily Newsletter, Saturday, 10/24/2015

Table of Contents

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

Market Wrap

Major Market Movers

by Jim Brown

Click here to email Jim Brown

Last week was a story of major moves in high profile stocks by both winners and losers. The big gains pushed the indexes to a two-month high and the first four-week gain for the Dow since 2014.

Market Statistics

On September 29th, Carl Icahn warned in an online video we were facing a disaster in the market. The Dow hit a low of 15,942 on that day and rallied to close at 17,646 on Friday. That is a +1,704 point gain or roughly +10%! The S&P has rallied from 1,872 to close today at 2,075 or a gain of +203 points or 10.8%.

Friday's gains were driven by news China was cutting interest rates for the sixth time since November. The gains were also driven by monster moves in stocks that posted huge earnings. For example Amazon +35, Google +40, AthenaHealth +35 and Microsoft +10% to name a few.

China said they were cutting deposit rates by -0.25%, lending rates by -0.25% and reserve ratio rates by -0.50%. While this was positive for the market, you have to wonder why they are adding so much stimulus to juice an economy growing at a reported 6.9% rate. More than one analyst said the October numbers must be dropping fast.

Only a day earlier Mario Draghi said the ECB was ready to increase stimulus again. He hinted he was ready to add hundreds of billions in QE and produce an even deeper negative deposit rate.

There is also a strong rumor that Japan will also add to QE and stimulus before the end of October.

Obviously, with the world's major central banks applying stimulus with a fire hose to avoid deflation it would be next to impossible for the Fed to raise rates in the near future. The chances for a rate hike have suddenly slipped all the way out to March or even later.

The market celebrated stimulus and earnings and the big cap indexes closed at a two-month high.

There were no economic reports of note on Friday. The ECRI Weekly Leading Index (WLI) I wrote about last Friday rebounded from nearly a three-year low at 128.7 to 130.0. That does not mean we are out of trouble but simply the data is volatile.


The big event next week is the October Fed meeting. Nobody expects them to make any moves and the meeting is a formality. It will be interesting to see if they still see it "appropriate to hike rates in 2015." I suspect that sentence will disappear.

The first reading on the Q3 GDP is due out on Thursday and the official consensus is for +1.6% growth but Moody's is expecting 1.1% and the Atlanta Fed GDPNow real time forecast is expecting +0.9%. These numbers are down from the previously reported +3.92% growth in Q2, up from 0.64% growth in Q1. So which is it? Are we ticking along at a less than 1% growth in Q1/Q3 while the nearly 4% growth in Q2 is looking more like an accounting error every day? This is going to be an interesting report.


The Richmond Fed Manufacturing Survey on Tuesday could take us farther into correction from the -5.0 reading in September. That was the first negative reading since April after hitting a 12.6 high in July. How quickly the bloom faded.


Shenandoah Telecom (SHEN) was the only split announced last week with a 2:1 scheduled for New Years Eve. With volume of 50,000 shares a day, they need to do something to increase the float and the activity.

Full Stock Split Calendar


Amazon (AMZN) reported actual earnings of 17 cents compared to estimates for a 10-cent loss. Shares of Amazon rallied +10% or +$56 at the open before fading to close +$35 and +6%. Analysts are so used to Amazon losing money that a surprise profit has them speechless. Prime subscriptions rose about 50%, which is a huge driver of Amazon future sales.

Amazon Web services only accounted for about 8% of overall revenue but 52% of the profit. AWS revenue was up +14.3% sequentially from Q2 and +78% over the year ago quarter. AWS is on track to hit $7 billion in revenue for the year. Amazon total revenue ex-FX was up about 30% at $25.36 billion. Active customer accounts rose 9 million to 294 million.

Management said sales were four times year ago levels in India and active customer accounts rose +230%. The number of sellers rose +250% with 90% using Amazon logistics and warehouse services and were adding 40,000 products per day.

Amazon operating expenses rose 8.4% sequentially to $8.2 billion. They added 25,000 full time workers year to date and will be adding 100,000 temporary workers for the holidays.

Amazon ended the quarter with $14.43 billion in cash and equivalents, up +$427 million for the quarter. Inventories rose +20.2% ahead of the holiday quarter. They provided guidance for the current quarter with revenue up +19.9% to just over $35 billion. As long as Amazon can continue to increase revenues about 20% per quarter, they can continue to spend money like crazy and get away from it. Shares closed up +$35 at a new high on the news.


Alphabet (GOOGL) reported strong earnings and received no less than 19 price target raises from analysts. Google saw strength in its paid clicks on search ads and by strength in YouTube. Google is increasingly able to power search ads on smaller mobile screens and pricing is stabilizing as a result of their new technology. Paid clicks rose +23% while cost per clicks declined -1%. The cost-per-click rate that Google charges advertisers declined -11%. The number of ad impressions served rose +350% from the comparison quarter. That is a lot of ads.

Google earnings of $5.73 actually missed estimates for $5.88. The problem was a $1.87 per share hit from the strong dollar. Without that hit they would have crushed estimates at $7.35 per share. The company also announced a $5,099,019,513.59 stock buyback, the first of its kind. They announced a YouTube subscription service for $9.99 that is ad free. Gross revenue rose +5.3% sequentially to $18.63 billion. That is a 13% increase from the comparison quarter.

Google actually announced a stock buyback of $5,099,019,513.59. Yes, that is an odd number. Google changed its name to Alphabet. The alphabet has 26 letters. That number is the square root of 26 multiplied by $1 billion. Google has a habit of planting "Easter eggs" in its products and communications. The name Google is a play on googol, which is the number 1 followed by 100 zeroes. When Google filed for its IPO, it said it planned on raising $2,718,281,828. That is the product of "e" and $1 billion with "e" a mathematical term used in calculus. When Google bid for Nortel Networks in 2011 it bid "Pi."


Microsoft (MSFT) posted earnings of 67 cents that beat estimates for 58 cents. Revenue of $21.7 billion beat estimates for $20.9 billion. Microsoft said Window 10 was now installed on 110 million computers. Annualized Cloud revenue was exceeding $8.2 billion as Azure cloud services rose +8% to $5.9 billion. The Office software suite added $6 billion. Windows operating systems declined -17% in volume but added $9.4 billion in revenue.

Microsoft's share price soared to $54 intraday and the highest level since March 31st, 2000 during the dot.com boom. During the quarter, Microsoft increased its dividend +16% to 36-cents and repurchased $6.9 billion in shares. Microsoft's market cap rose +$38.7 billion on Friday alone.


AthenaHealth (ATHN) reported earnings of 36 cents that easily beat estimates for 26 cents. Revenue of $236.1 million beat estimates for $232.9 million. The company guided to full year earnings of $1.10-$1.20 and revenue of $905-$925 million. Analysts were expecting $1.22 and $920.7 million.

While the earnings were up the guidance was mediocre and I am surprised the shares rallied +27%. Clearly, there were a lot of shorts betting against the results.


Stericycle (SRCL) crashed hard after reporting earnings of $1.08 compared to estimates for $1.18. Revenue rose +7.6% to $718.6 million but missed estimates for $735 million. Non-GAAP earnings were flat and GAAP earnings fell -51.6% to just 47 cents. The strong dollar removed $33 million from revenue. The company said volumes of hazardous wastes had fallen unexpectedly when normally they are very stable. Guidance was also about $150 million light on revenue because of the unexpected decline in waste.


Appliance maker Whirlpool (WHR) is what you would consider a stable business. Unfortunately, there is a price war in progress and the strong dollar is killing revenues. Foreign competition and the dollar have been forcing prices lower and the company is losing market share.

I am sure readers glaze over when I say the strong dollar impacted revenue. This one will choke you. Whirlpool said the strong dollar was going to reduce revenue by a whopping -$2.5 billion for all of 2015. That is not pocket change and it really reinforces the damage that is being done to all the international companies.

Q3 sales did rise +9% to $5.3 billion but missed estimates for $5.41 billion. Whirlpool lowered full year earnings estimates from $12-$13 to $12-$12.50. Analysts were looking for $11.96. Overall, the earnings and guidance was not bad but the $2.5 billion FX hit crashed the stock.


Next week has a very heavy calendar of earnings with more than 150 S&P companies reporting and more than 500 smaller companies. This should be the heaviest week of the cycle. Apple, Twitter, UPS and Alibaba on Tuesday will lead off the week. GoPro and Facebook will be the highlight on Wednesday and Conoco, Linkedin, Starbucks and MasterCard on Thursday. Bringing up the rear on Friday will be Chevron, Exxon and CVS Health.

So far, 172 S&P 500 companies have reported. Blended earnings are down -3.1% and revenue -4.0%. About 70% have beaten on earnings and only 50% on revenue. About 23% have missed on earnings.


Facebook (FB) does not report earnings until Wednesday but shares soared +2.52 to $102.19 and a new high. This was the first close in triple digits. The move came after the company said it had indexed more than 2 trillion posts in a move to take away some of Google's search territory. Users can search topics and see posts dating back to Facebook's beginning.

Facebook already has more than 1.5 billion searches a day. With the addition of their news feeds, you can now search on almost anything to get the news and see what your friends are saying about it. If Facebook is able to keep users at home on Facebook rather than see them move to a browser for information it keeps those ad clicks in the network rather than give them to Google. The new Moments feature allows users to see today's stories in pictures, videos and tweets. Facebook also allows you to make your posts private so they do not show up in a search.

Facebook is also pushing ahead into online video, which will eventually steal some market share from YouTube. Last week Facebook announced a dedicated video feed that users can browse to find new items of interest. Facebook earnings are Wednesday.


Apple shares finally showed some life after Nomura, Piper Jaffray and Maxim Group all upgraded the stock to a buy ahead of Tuesday's earnings. Maxim raised the price target from $144 to $167. Maxim said the recent partnership with Cisco will sell more iPads and iPhones to businesses and enable them to run on teleconferencing products.

The key to their earnings will be their phone sales and guidance. Q3 sales were thought to be in the 48 million range. Q4 estimates are in the 70-76 million range but there are a lot of disagreements over those targets. In Q4 2014, they sold 74.6 million. However, that was the first time they offered the dual format plus size options. The changes to the 6s this year are much less exciting and some analysts believe they could sell as few as 60 million in Q4. That is the same number they are expected to sell in Q1.

The analysts rebutting that call claim Apple is open in more countries this year and international sales will offset any weakness in the USA.

About the only safe bet on Apple is to be in cash on the sidelines. Shares are typically extremely volatile after earnings and could easily decline 10-15% or explode higher if the naysayers are wrong.


Twitter CEO Jack Dorsey surprised everyone on Friday when he gifted one-third of his company stock to an employee pool. Dorsey had 3.2% of the company shares and was the fifth largest shareholder. He is giving the shares, worth $206 million, to the company for free in order to "reinvest directly in our people." The move was the right thing to do in a company that seems to be floundering and competitors are trying to hire away your best people.

It was also a way to build up confidence in his ability to turn around the company and put it on the right track. How much more confidence in management are you going to have in a new CEO that just gave you and your friends $206 million in stock? The 6.8 million shares have to be approved by shareholders in 2016 by approving an equity incentive plan for the shares to be granted "over time" to Twitter employees. The board has already approved the deal.

Twitter shares rallied +4% on the news. They have earnings on Tuesday after the bell.


Sanity is finally returning to the oil market. Crude has declined from it's nearly $51 high the prior week and is now threatening to dip under support at $44. The Russian incursion into Syria did not cause the Middle East to melt down and there has not been a USA/Russian confrontation. Saudi Arabia is attacking Russian oil buyers in Europe by offering them even lower prices than before. Cutting Russia's income is far more effective than attacking them in Syria. When they run out of money, they will run out of a way to fund military interventionism.

In the U.S., crude inventories rose another 8.0 million barrels last week, now up +23 million in the last four weeks. That puts total inventories at 476.6 million and only 14.3 million below an 80 year high of 490.9 million set last April. There is almost no scenario that does not see a new record high in the coming weeks.

One noted analyst said last week, "one third of oil companies will go out of business or be acquired. One third will file bankruptcy and one third will struggle through with dramatically weakened balance sheets." That is definitely not a reason to rush out and buy energy equities.

Energy earnings begin next week with the big caps and while they will be ugly, they will still be in business. It is the two weeks after that where companies are going to be confessing and those confessions of dividend cuts, secondary offerings, earnings losses, reserve write-downs and credit line cuts will be painful for their stocks.

Energy company Noble Corp (NE) slashed its dividend on Friday from 37-cents to 15-cents in order to save $220 million and maintain liquidity. "Returning cash to shareholders through a dividend has been an important element of the company's long-term value creation goals and cash allocation strategy." However, (paraphrased) "preserving liquidity in an uncertain market" makes more sense today. The company did say they expect to beat the street when they report earnings next week. Noble has 32 offshore drilling rigs.


Active rigs were flat at 787 last week but active oil rigs declined -1 to 594 while gas rigs rose +1 to 193. Producers are continuing to slash drilling expenses and try to preserve cash.


Markets

So far the plan is working. The end of October, mutual fund fiscal year end window dressing is in full swing and working wonders on the market. The big cap indexes closed at a two-month high and even the Fed meeting next week should not have any impact. There is no way they are going to raise rates so the meeting is just a formality.

Earnings have been mostly better than expected except that Q3 is now the third consecutive quarter of revenue declines. Eventually that will become important but today it is being ignored. The strong dollar excuse is now so common that the impacts are ignored. Unfortunately, the dollar will get stronger once the Fed really does start raising rates and the impact will be worse.

The Trader's Almanac best six months of the year strategy kicked off early a couple weeks ago when the MACD turned positive. They are off to a good start. This is equivalent to the "sell in May and go away" strategy where the market is bought again around November 1st for a six-month holding period.

The Halloween Indicator, which is similar to the best six months strategy, is to buy on Halloween and sell on May Day. The history of that indicator since the inception of the Dow shows the returns are about 50% higher when the September/October period produces gains rather than a loss ahead of November. If the market loses ground in Sept/Oct then the market averages a 4.0% gain from Halloween to May Day. If those months produce a gain instead, then the Nov/May gain averages 6.8%. Just bear in mind that averaging anything since 1882 tends to produce some relatively flat averages. There are both large gains and large losses imbedded in those results. We cannot actually bet on the same results in 2015. However, since the late 1990s the gains have been even stronger than the long-term average according to Mark Hulbert.

I am not really worried about the long-term averages for the next two months. I am more worried about what happens when the calendar turns to November and the October window dressing ends. The global economy is weakening and about to get another dose of stimulus in hopes of waking it from its slumber. The U.S. economy is about to turn in another sub 1% growth quarter if the analysts are to be believed. Jobs weakened over the last two months and some analysts believe we are headed for a recession. How is that going to play out in the market fundamentals once we are in November?

The addition of global stimulus again may bounce the markets but eventually the same medicine over and over tends to have a weaker result.

As you would have expected bearish sentiment declined as the market was moving higher last week. However, bullish sentiment was flat and neutral sentiment is back over 41%. It seems investors are unsure about what the future holds despite the two-month highs.


I am going to refrain from making a prediction and simply suggest we trade what the market gives us. From that viewpoint the S&P has rallied +10.8% in four weeks. Is it just me or does anyone else feel like that is excessive? Granted we wandered around in correction territory for over a month and saw a nice double bottom retest. That was a picture perfect setup for a rally. However, now that we have pocketed an 11% gain will we be able to tack on another +2.6% gain to make a new high? After 11% what is another 2.6% in the greater scheme of things? Unfortunately, it is a lot.

The S&P came to a dead stop at Friday's close at 2,075 with major congestive resistance between there and the high close at 2,130.82. We spent six months wandering sideways in the 2050-2130 range and could not break through. Why should we expect to just charge higher this time after an 11% sprint. Normally the market would be very winded at this point and need to pause to refresh and then chip away a few points at a time at the overhead resistance until finally breaking through weeks later.

What I love about the market is that nobody can ever accurately predict the future. Thousands of analysts try and on any given day, dozens will be preaching on where the market is going. While I expect the markets to pause to refresh and weaken as we move into November there is no guarantee. That is just a calculated guess from 25 years of analyzing the market every day. That and $3 will buy you a cheap cup of Starbucks coffee.

I have said for a couple weeks that we are in a buy the dip market and that has not changed. Instead of trying to predict market direction, we should continue to buy the dip early this week and then become more cautious once we arrive in November. I do not care how many indicators and strategies claim we should buy the market in November I think we should look before we leap. Blindly buying stocks just because November is typically the beginning of a strong period, could be a recipe for disaster. Let us see what November brings before we bet the farm.


The Dow got a lot of help on Friday from the Microsoft post earnings bounce and the sudden resurgence in Apple ahead of earnings. Procter & Gamble also generated a post earnings gain. Eighteen Dow components have now reported with Apple, Pfizer and Merck the next on the calendar for Tuesday. Closing the week will be Exxon and Chevron on Friday.

Apple is the most likely candidate for a big whiplash in the Dow after it reports on Tuesday night. It is not unusual for Apple shares to move $10 the day after earnings. That would be great if it was a gain but it could be a significant headwind if Apple implodes. Pfizer and Merck are rarely Dow movers but anything is possible. Earnings from Exxon and Chevron are expected to be ugly but the damage may already be priced into the stocks.

The Dow sprinted into the congestion range last week and the next major resistance is 17,775 and then 18,165. Normally I would say the Dow was at risk for some decent profit taking this week but the small caps have been seriously deficient. The Russell 2000 did not pull back into the green for the week until late Friday. This suggests the majority of the short covering is occurring in the large caps with high liquidity. That means window dressing could keep the Dow stocks up for the coming week but the undressing at the first sign of market weakness in November could be brutal .

Support is about 17,400 followed by 17,150. However, other than some light profit taking I do not see anything on the horizon that could cause a significant retracement. Of course, it is the things you do not see that hurt the worst.



The Nasdaq added +121 points on Friday and a quick glance at the graphic below shows the winners definitely overcame the sinners in size of the moves. The top four winners totaled more than 150 points on their own. I did not research their Nasdaq weightings but you can bet they were substantial.

Other than Apple and Amgen the earnings calendar for next week is lacking any major market movers. Companies like GoPro and Twitter will be of interest to the tech crowd but even if they have a major swing it will not move the market.


Despite a decent +2% move on the Biotech Index on Friday the sector is still mired in the mud and cannot manage a rebound. That will continue to be a drag on the Nasdaq until the biotechs begin to recover.


The Nasdaq move on Friday was a strictly a gap higher on short covering. You can tell by the shortness of the candle that the intraday range was short compared to the total gain. There was a monster short squeeze on Amazon, Google and AthenaHealth and that represented the majority of the gain. They did stimulate short covering in the other issues but the gain was mainly in response to those three stocks.

The gap shot the index over 5,000 and resistance from March at 5,008. How long the Nasdaq remains over 5,000 is the $64 question. I would expect some of those monster gains to fade on Monday. How much they fade depends on how many investors are still short. I doubt many traders are going to be buying those highs in Amazon and Google and thinking they got a bargain.

On the bright side, that prior resistance from 4900-4925 should now be support but it is a long way down.


The fly in the ointment is the Russell 2000 small caps. They declined mid-week and barely returned to resistance at 1,165 by Friday. There is minimal buying interest in the small caps and that gives more credence to the big cap window dressing concept. Fund managers may be worried the market is not on stable ground long term and they are using the big caps as an ATM rather than an investment. Until some buying interest appears in the small caps, the market should be viewed cautiously as we approach November.

However, there is a historical pattern to the lagging small caps. Jeff Hirsch says this is normal until late November when the "January Effect" begins to appear and small caps finally find a bid. While he may be right, there is a reason behind the lagging performance and I suspect it is the window dressing in the big caps as I explained above.


At the risk of repeating myself, I would buy any dip on Monday but look to tighten your stops by Thursday as we near month end. The window dressing should taper as the week progresses. If managers are going to undress, they will do it on the first sign of weakness in November. Once past the October fiscal year end, they are free to raise cash again and restructure their portfolios at will until the end of the quarter. The end of December is another statement date where portfolio games can be played depending on what the market has done over the next six weeks.

The early bird discount for the End of Year Renewal Special will be out next weekend. Watch for it and save an additional $50 off your subscription.


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

subscribe now

Random Thoughts


Prepare for the ECB to become Japan. Mario Draghi telegraphed more easing from the ECB in December. The how or what question is keeping analysts busy. The ECB has a shortage of bonds it can buy. Rates are already negative and buying more for longer will only push rates further into negative territory.

There are worries that Draghi could copy Kuroda from the Bank of Japan and put stocks on the QE purchase list. RBS analyst Alberto Gallo included that possibility in an option list the ECB is likely considering.

Japan has already bought $100 billion in equities and the Swiss National Bank (SNB) also has $100 billion in equities. Draghi even mentioned the SNB during a Q&A session after the ECB press release. When Draghi said the ECB was "open to a whole menu of monetary policy instruments" he quite literally meant it. What will the ECB buy next?

Before we rush off the deep end here and think because the ECB may buy stocks that good times are here to stay we should consider the future. Rick Santelli repeated his statistics last week about the future of the global economy and it is a scary thought. Since the Great Recession, central banks have been pouring stimulus into the global economy through multiple fire hoses and it appears to be nonstop. The Fed has increased their balance sheet to $4.5 trillion, the ECB, BOJ, PBOC, etc, have added even more.

Since the recession, more than $60 trillion in debt has been added to the global economy in an effort to return to normal growth. What have we gotten out of it? After a brief rebound, the economy has begun to slow again and with commodity prices shrinking, we could be headed for a depression or at least another recession.

Ponder this. If the economy is shrinking after $60 trillion in stimulus, will anything save it? What will happen when central banks begin to remove that stimulus from the market? Can you even imagine that occurring over the next several years or even over the next decade?

More than $1.57 trillion in global government bonds are now priced with a negative interest rate. That is about 25% of the market. Will more QE really help?

If the global economy will not grow on $60 trillion in growth hormone injections then what comes next? $80 trillion, $100 trillion?

Eventually that money has to be withdrawn from the market and it is a scary scenario. While this is not going to impact us in the next 6-12 months, it will need to be removed just as sure as a cancer from your body. Hopefully a remedy can be found before this economic cancer becomes terminal.


What can the Fed do if the U.S. economy continues to weaken?

1. More forward guidance. (That has not worked well in the past)

2. More QE. (In a non-financial recession that would not help.)

3. Negative interest rates. (This could have serious negative effects.)

Full article on these options.


Who are the 92 million Americans not in the labor force?


The U.S. Dollar is slowly moving towards a critical juncture. The event will be the recognition of the Chinese yuan as a reserve currency by the IMF. The bank has given China strong signals that the yuan will be included in the Special Drawing Rights category when the board reaches a decision soon. China is already preparing celebrations of the event. It will mean they will no longer be required to transact international business in dollars, euros, yen and pounds and their dependence on the dollar will diminish. With that fading dependence the dollar's status as "the" favored global reserve currency will shrink. China's yuan could become a 14% share as the fifth currency to reach SDR status. That is calculated on China's export volumes. In addition, it has long been rumored that China and Russia are preparing to launch a gold backed currency that would be a major challenge to the dollar and other fiat currencies. Russia was the largest buyer of gold last month.

 

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

 

"Work like you don't need money, love like you've never been hurt, and dance like no one's watching."

Unknown author

 

subscribe now

 


New Plays

Powering Through Resistance

by James Brown

Click here to email James Brown


NEW BULLISH Plays

NetApp, Inc. - NTAP - close: 34.67 change: +0.29

Stop Loss: 32.90
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 24, 2015
Time Frame: Exit PRIOR to earnings on November 18th
Average Daily Volume = 3.7 million
New Positions: Yes, see below

Company Description

Trade Description:
Technology stocks were getting a lot of headlines this past week thanks to some much better than expected earnings results. NTAP looks interesting because the stock has bottomed and appears to have reversed higher into a new up trend.

NTAP is in the data storage business. According to the company, "Leading organizations worldwide count on NetApp for software, systems and services to manage and store their data. Customers value our teamwork, expertise, and passion for helping them succeed now and into the future."

NTAP is changing. They're transitioning from their older, legacy systems and investing in higher-growth areas. The new CEO, George Kurian, said, "We're the only company that can help customers manage their data seamlessly across multiple cloud architectures and provide the scale needed to accommodate the exponential data growth generated by the digital world. This is what I see as our big opportunity."

His new focus seems to be working. NTAP's stock had been falling for months. Their fiscal Q3 and Q4 reports (announced in February 2015 and May 2015) were terrible. NTAP reported falling numbers and management lowered guidance both times. Kurian became the new CEO in June and his first quarter as the leader has born fruit.

NTAP's most recent earnings report was August 19th. It was the company's fiscal Q1 announcement. Wall Street was expecting earnings of $0.23 a share on revenues of $1.32 billion. NTAP beat both estimates with a profit of $0.29 a share. Revenues were up +10% to $1.34 billion. Management raised their guidance significantly above analysts' estimates.

The stock popped but the broader market was in the middle of the late August correction lower. Shares of NTAP dropped again in late September when Goldman Sachs downgraded the stock. Fortunately NTAP found support near its August lows. Shares have built a bullish double bottom and reversed sharply higher. The point & figure chart has turned bullish and is now forecasting at $44.00 target.

Technically NTAP spent over a week consolidating sideways beneath resistance near $34.00. Now, in just the last few days, NTAP has rallied past resistance at $34.00 and its 200-dma.

Trigger @ $35.05

- Suggested Positions -

Buy NTAP stock @ $35.05

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

Buy the DEC $35 CALL (NTAP151218C35) current ask $1.57
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

Locking In Potential GNC Gains

by James Brown

Click here to email James Brown

Editor's Note:
Our bearish play on GNC was closed on Friday when shares hit our new stop loss. The market's big rally helped fuel an oversold bounce. Of course the rally was great for our bullish candidates.

We closed BITA and ITCI on Friday at the closing bell.

AMAG and GNC hit our stop loss. XPO has been removed.

We want to exit our SBUX trade on Monday morning.


Current Portfolio:


BULLISH Play Updates

Delta Air Lines - DAL - close: 51.00 change: +0.19

Stop Loss: 47.75
Target(s): To Be Determined
Current Gain/Loss: -0.4%
Entry on October 23 at $51.23
Listed on October 22, 2015
Time Frame: Exit prior to earnings in early January
Average Daily Volume = 9.8 million
New Positions: see below

Comments:
10/24/15: Our new trade on DAL is open. The stock continued to rally on Friday. Our suggested entry point was $51.15 but our trade was opened on the Friday morning gap higher at $51.23.

I am a little bit concerned with how DAL lagged behind the major indices. Shares only gained +0.37% for the session. That underperformed the S&P 500's +1.1% gain and the XAL airline index's +0.77% gain.

I would consider new positions at current levels in DAL but readers may want to wait for rally above $51.20 instead.

Trade Description: October 22, 2015:
Depressed crude oil prices have kept jet fuel prices low. This has provided a big cushion for the major airlines. The recent strength in DAL has boosted shares to an all-time closing high.

DAL is in the services sector. According to the company, "Delta Air Lines serves more than 170 million customers each year. Delta was named to FORTUNE magazine's top 50 World's Most Admired Companies in addition to being named the most admired airline for the fourth time in five years. Additionally, Delta has ranked No.1 in the Business Travel News Annual Airline survey for four consecutive years, a first for any airline. With an industry-leading global network, Delta and the Delta Connection carriers offer service to 318 destinations in 58 countries on six continents.

Headquartered in Atlanta, Delta employs nearly 80,000 employees worldwide and operates a mainline fleet of more than 700 aircraft. The airline is a founding member of the SkyTeam global alliance and participates in the industry's leading trans-Atlantic joint venture with Air France-KLM and Alitalia as well as a joint venture with Virgin Atlantic. Including its worldwide alliance partners, Delta offers customers more than 15,000 daily flights, with key hubs and markets including Amsterdam, Atlanta, Boston, Detroit, Los Angeles, Minneapolis/St. Paul, New York-JFK, New York-LaGuardia, Paris-Charles de Gaulle, Salt Lake City, Seattle and Tokyo-Narita. Delta has invested billions of dollars in airport facilities, global products and services, and technology to enhance the customer experience in the air and on the ground."

DAL's most recent earnings report was October 14th. Wall Street was expecting a profit of $1.72 per share on revenues of $11.1 billion. DAL beat estimates with a profit of $1.74 a share. Revenues fell -0.6% to $11.11 billion, essentially in-line with estimates. At $1.74 a share DAL's earnings were up +45% from a year ago. That's thanks to the low cost of jet fuel.

Oil prices have been depressed long enough that airlines have started lowering air fares. This drop in air fares is hurting PRASM (passenger revenue per available seat mile). Fortunately DAL's fuel expense, plunged -40% from a year ago.

DAL management is forecasting Q4 PRASM to fall -2.5% to -4.5% but they are still guiding for strong operating margins (16-18%). Plus they see Q4 earnings growth of +40% or more. Think about that. How many other companies are forecasting +40% profit growth for Q4?

DAL's CEO made headlines following their Q3 earnings when he said there is a bubble in wide-body jets. What does he mean? There are a lot of wide-body jets that are being leased by other airlines. Once their lease expires there could be a flood of used jets for sale. DAL believes the price of wide-body jets (and possibly narrow-body jets) will decline and allow the company to purchase additional planes at a discount.

Oil prices are expected to remain low for the foreseeable future. Meanwhile we are approaching the busy holiday season, which means more travel by consumers. Technically shares of DAL appear to be breaking out from a multi-month consolidation pattern. The point & figure chart is bullish and forecasting at $62.00 target.

The January 2015 highs are in the $50.80-51.06 area. Tonight we are suggesting a trigger to launch bullish positions at $51.15. This is a multi-week trade.

- Suggested Positions -

Long DAL stock @ $51.23

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

Long 2016 JAN $55 CALL (DAL160115C55) entry $1.25

10/23/15 triggered on gap open at $51.23, suggested entry was $51.15
Option Format: symbol-year-month-day-call-strike

chart:


Ingram Micro Inc. - IM - close: 29.45 change: +0.20

Stop Loss: 28.75
Target(s): To Be Determined
Current Gain/Loss: +5.7%
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:
10/24/15: IM gapped higher on Friday morning but then spent the rest of the session drifting sideways. Shares look like they want to breakout from its current $28.50-29.50 trading range. Yet IM might be stuck consolidating sideways until its earnings report on Thursday, October 29th.

We do not want to hold over the earnings announcement. We will plan on exiting this trade on Tuesday at the closing bell. However, in an attempt to reduce our risk, we will raise the stop loss to $28.75, just under Thursday's intraday low. More conservative investors might want to exit now.

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

10/24/15 new stop @ 28.75
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

chart:


Lennar Corp. - LEN - close: 52.12 change: +0.28

Stop Loss: 47.90
Target(s): To Be Determined
Current Gain/Loss: -0.3%
Entry on October 21 at $52.25
Listed on October 20, 2015
Time Frame: Exit prior to earnings in January
Average Daily Volume = 2.8 million
New Positions: see below

Comments:
10/24/15: Investors are still buying the dips in LEN. Shares dipped to short-term support near the 50-dma again on Friday and LEN rebounded back toward its recent highs. I am suggesting a rally past $52.50 before initiating new bullish positions.

Trade Description: October 20, 2015:
Rents are soaring. Mortgage rates are low. The labor market is relatively healthy. This has been fueling a stable environment for the homebuilders. The latest National Association of Homebuilders sentiment index hit ten-year highs. The September reading for the NAHB index was 64. That was above the 62 estimate and a level not seen since October 2005.

David Crowe is the NAHB Chief Economist. According to Crowe, "This upward momentum shows that our industry is strengthening at a gradual but consistent pace. With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015."

LEN is in the industrial goods sector. According to the company, "Lennar Corporation, founded in 1954, is one of the nation's largest builders of quality homes for all generations. The Company builds affordable, move-up and retirement homes primarily under the Lennar brand name. Lennar's Financial Services segment provides mortgage financing, title insurance and closing services for both buyers of the Company's homes and others. Lennar's Rialto segment is a vertically integrated asset management platform focused on investing throughout the commercial real estate capital structure. Lennar's Multifamily segment is a nationwide developer of high-quality multifamily rental properties."

Earnings have been improving. LEN reported their Q2 results on June 24th. Results were $0.79 a share, which was 15 above estimates. Revenues soared +31.6% to $2.39 billion, above estimates. Home deliveries were up +21%. New orders were up +18%. Their backlog of homes rose +18%.

These bullish trends continued in LEN's fiscal third quarter. The company reported on September 21st. Earnings were $0.96 per share, which was 17 cents above estimates. Revenues were up +23.7% to $2.49 billion, also better than expected. Deliveries rose +16%. New orders were up +10%. The number of homes in the backlog rose +13% (to 8,250) while the value of their backlog surged +22%.

The stock has been consolidating sideways the last few months but LEN appears to be bouncing off its long-term up trend. The current bounce is testing short-term resistance at $52.00. Tonight we are suggesting a trigger to open bullish positions at $52.25. This is a multi-week trade that could last the rest of the year.

- Suggested Positions -

Long LEN stock @ $52.25

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

Long 2016 JAN $55 CALL (LEN160115C55) entry $1.88

10/21/15 triggered @ $52.25
Option Format: symbol-year-month-day-call-strike

chart:


Starbucks Corp. - SBUX - close: 62.61 change: +1.12

Stop Loss: 54.75
Target(s): To Be Determined
Current Gain/Loss: +5.1%
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:
10/24/15: Big cap, high-profile stocks continued to lead the market higher on Friday and SBUX added +1.8% to close at a new all-time high.

SBUX has earnings coming up on October 29th. We do not want to hold over the announcement. Tonight we are choosing a more conservative strategy to exit now and lock in a potential gain. SBUX could keep rising or it could churn sideways into its earnings report.

Exit on Monday morning.

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

10/24/15 Prepare to exit on Monday morning
10/08/15 triggered @ $59.55
Option Format: symbol-year-month-day-call-strike

chart:


Wayfair Inc. - W - close: 41.27 change: -2.79

Stop Loss: 39.85
Target(s): To Be Determined
Current Gain/Loss: +0.3%
Entry on October 16 at $41.15
Listed on October 15, 2015
Time Frame: Exit PRIOR to earnings on November 10th
Average Daily Volume = 1.1 million
New Positions: see below

Comments:
10/24/15: It has been a frustrating week if you're bullish on W. The Monday and Tuesday rally has been erased. W is now down three days in a row and it underperformed the market in a big way with a -6.3% plunge on Friday.

No new positions at this time.

Trade Description: October 15, 2015
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.

- Suggested Positions -

Long W stock @ $41.15

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

Long NOV $45 CALL (W151120C45) entry $2.80

10/20/15 new stop @ 39.85
10/16/15 triggered @ $41.15
Option Format: symbol-year-month-day-call-strike

chart:




BEARISH Play Updates

Hanesbrand Inc. - HBI - close: 27.06 change: -1.15

Stop Loss: 27.65
Target(s): To Be Determined
Current Gain/Loss: +1.1%
Entry on October 20 at $27.35
Listed on October 19, 2015
Time Frame: Exit PRIOR to earnings on October 28th
Average Daily Volume = 3.4 million
New Positions: see below

Comments:
10/24/15: It was great to see shares of HBI underperforming on Friday. The market was in rally mode but HBI's bounce reversed. Shares fell -4.0%.

Please note we are almost out of time. HBI is scheduled to report earnings on Wednesday, October 28th (after the closing bell). We do not want to hold over their announcement. I am suggesting we exit this trade on Monday at the closing bell. We will lower the stop loss to $27.65 just in case HBI bounces before we exit.

Trade Description: October 19, 2015:
The long-term rally in HBI may have peaked. The stock surged more than +500% from the beginning of 2012 to its 2015 highs near $34.50. Now momentum has reversed.

HBI is in the consumer goods sector. According to the company, "HanesBrands, based in Winston-Salem, N.C., is a socially responsible leading marketer of everyday basic innerwear and activewear apparel in the Americas, Europe and Asia under some of the world's strongest apparel brands, including Hanes, Champion, Playtex, DIM, Bali, Maidenform, Flexees, JMS/Just My Size, Wonderbra, Nur Die/Nur Der, Lovable and Gear for Sports. The company sells T-shirts, bras, panties, shapewear, men's underwear, children's underwear, socks, hosiery, and activewear produced in the company's low-cost global supply chain."

The upward momentum in shares of HBI had stalled in March this year. Shares tried and failed to breakout past the $34.50-35.00 zone several times between March and July. Then on July 30th HBI reported its Q2 earnings. Profits came in at $0.50 a share, which was in-line with estimates. Revenues were up +13.4% to $1.52 billion yet that missed estimates of $1.57 billion. Management provided soft guidance for the rest of 2015. The stock plunged the next two days.

Since their disappointing guidance in July investors have been selling the rallies in HBI. That has not stopped Wall Street from defending it. 12 of the 13 analyst firms that cover HBI are bullish on the stock. On September 17th shares of HBI popped after Goldman Sachs upgraded shares and gave it at $40 price target. Unfortunately for bullish investors the Goldman pop failed at resistance. Shares have continued to sink and now they're accelerating lower.

The weakness in HBI is a little bit surprising. The new TransPacific Partnership deal should be positive for apparel makers like HBI. Plus there was recent news that cotton prices are expected to decline through the rest of this year and into 2016. Traders don't seem to care about these potentially bullish tailwinds for HBI. The stock displayed significant relative weakness today with a -4.4% decline.

The market might be worried about HBI's relationship with Wal-Mart (WMT). Last week WMT surprised Wall Street by significantly lowering their earnings guidance. Now WMT is pressuring its suppliers, which could squeeze margins for companies like HBI. That's significant since WMT accounts for over 20% of HBI's sales.

Technically HBI is bearish. Shares have created a big bearish double top on the weekly chart (see below). More recently the rally attempts have failed at resistance near the 200-dma. The point & figure chart is bearish and forecasting at $20.00 target.

Today's low was $27.45. Tonight we are suggesting a trigger to launch bearish positions at $27.35. Please note that this is a short-term trade, which will probably last two or three weeks. HBI is due to report earnings in very late October or early November. There is no confirmed date yet but we plan to exit prior to HBI's announcement.

- Suggested Positions -

Short HBI @ $27.35

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

Long NOV $26 PUT (HBI151120P26) entry $0.65

10/24/15 prepare to exit on Monday, at the closing bell
10/24/15 new stop @ 27.65
10/20/15 triggered @ $27.35
Option Format: symbol-year-month-day-call-strike

chart:


iPath S&P500 VIX Futures ETN - VXX - close: 18.63 change: +0.19

Stop Loss: None, no stop at this time.
Target(s): $16.25
Current Gain/Loss: +14.6%
2nd position Gain/Loss: +35.8%
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:
10/24/15: The VXX eked out a gain on Friday after bouncing from its Friday morning lows.

No new positions at this time.

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

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

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

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

Here is an explanation from the product website:

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

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

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

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

- Suggested Positions -

Short the VXX @ $21.82

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

Short the VXX @ $29.01

10/19/15 add an exit target at $16.25
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

chart:



CLOSED BULLISH PLAYS

Bitauto Holdings - BITA - close: 36.09 change: +3.02

Stop Loss: 29.90
Target(s): To Be Determined
Current Gain/Loss: +6.9%
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:
10/24/15: The market's big rally on Friday appears to have sparked some short covering in BITA. The stock surged +9.1% and rallied to new two-month highs. That was perfect timing for us. Our plan was to exit on Friday at the closing bell.

*small positions to limit risk*- Suggested Positions -

Long BITA stock @ $33.75 exit $36.09 (+6.9%)

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

NOV $35 CALL (BITA151120C35) entry $2.50 exit $3.10 (+24.0%)

10/23/15 planned exit at the closing bell
10/22/15 prepare to exit this trade tomorrow at the closing bell
10/13/15 triggered @ $33.75
Option Format: symbol-year-month-day-call-strike

chart:


Intra-Cellular Therapies, Inc. - ITCI - close: 46.82 change: +3.48

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: +3.8%
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:
10/24/15: We were lucky with our ITCI exit. The plan was to exit this trade on Friday at the closing bell. The market's widespread rally fueled a lot of short covering. The IBB biotech ETF surged +3.3% yet shares of ITCI soared +8.0%. Unfortunately the option failed to keep up.

(small positions to limit risk) - Suggested Positions -

ITCI stock @ $45.10 exit $46.82 (+3.8%)

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

NOV $50 CALL (ITCI151120C50) entry $3.80 exit $2.85 (-25.0%)

10/23/15 planned exit
10/22/15 prepare to exit tomorrow at the closing bell
10/12/15 triggered @ $45.10
Option Format: symbol-year-month-day-call-strike

chart:



CLOSED BEARISH PLAYS

AMAG Pharmaceuticals - AMAG - close: 33.61 change: -2.76

Stop Loss: 37.75
Target(s): To Be Determined
Current Gain/Loss: -0.9%
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:
10/24/15: Whoa! AMAG reversed higher on Friday. After big declines earlier in the week shares surged +12.6% on Friday. The stock hit technical resistance at its 20-dma before paring its gains. Our stop was hit at $37.75.

*small positions to limit risk* - Suggested Positions -

Short AMAG stock @ $37.40 exit $37.75 (-0.9%)

10/23/15 stopped out
10/22/15 new stop @ 37.75
10/20/15 AMAG breaks down below support with a drop to new 2015 lows
10/17/15 new stop @ 41.05
10/10/15 new stop @ 42.05
10/08/15 triggered @ $37.40

chart:


GNC Holdings - GNC - close: 36.55 change: +2.05

Stop Loss: 36.25
Target(s): To Be Determined
Current Gain/Loss: + 9.1%
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:
10/24/15: The market's big rally on Friday may have played a part in GNC's oversold bounce. After a -14.2% plunge on Thursday shares rebounded +5.9% on Friday. Our new stop loss was hit at $36.25.

- Suggested Positions -

Short GNC stock @ $39.90 exit $36.25 (+9.1%)

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

NOV $40 PUT (GNC151120P40) entry $2.10 exit $4.90 (+133.3%)

10/23/15 stopped out
10/22/15 Decision time - do you take profits now or just lower your stop loss?
We are moving the stop loss to $36.25
10/14/15 triggered @ $39.90
Option Format: symbol-year-month-day-call-strike

chart:


XPO Logistics, Inc. - XPO - close: 28.36 change: +0.78

Stop Loss: 30.30
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 21, 2015
Time Frame: Exit PRIOR to earnings on November 4th
Average Daily Volume = 2.0 million
New Positions: see below

Comments:
10/24/15: We are removing XPO as a trade. The longer-term trend still looks bearish. Yet on a short-term basis XPO has bounced and outperformed the market on Friday with a +2.8% gain.

Trade did not open.

10/24/15 removed from the newsletter, suggested entry was $26.65

chart: