Option Investor
Newsletter

Daily Newsletter, Thursday, 11/19/2015

Table of Contents

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

Market Wrap

Calm Quiet Trading

by Thomas Hughes

Click here to email Thomas Hughes
Today was the calmest day of trading in quite some time as traders await options expiration.

Introduction

Today was the calmest day of trading we have seen in quite some time. Today's range for the S&P 500 was less than 8 points, the smallest range since February 23, and not too surprising given yesterday's Fed driven rally. The Fed seems to be saying we should be ready for a rate hike in December, today's data supports this view.

Global markets were cheered by the FOMC minutes and the rally in US equities. Asian indices closed with gains greater than 1%, European indices did not fare so well but were able to close in the green, and at new 3 month highs. Both regions were also buoyed by central bank activity other than from the FOMC. The PBC lowered its overnight lending facility, adding stimulus to the Chinese economy, the ECB minutes revealed the members discussed adding QE at their last meeting.

Market Statistics

Futures trading indicated a positive open for most of the morning. Futures fell off a little going into the release of 8:30AM data but firmed a little following it. The indices opened flat to positive and the stayed there all day. There was a little back and forth action between the bulls but it was so mild as to be nearly unnoticeable. This held through until the end of the day leaving the indices just off yesterday's closing levels. One index bucked the trend; the transports put in a stealth rally that added 1% to yesterday's closing price.

Economic Calendar

The Economy

Initial claims for unemployment fell in line with expectations to 271,000. This is a decline of -5,000 from last week's not revised figures. The four week moving average gained 3,000 and hit 270,750, the highest level in nearly two months. On a not adjusted basis claims fell by -9.5%, ahead of the -7.6% projected by the seasonal factors. New Jersey and Pennsylvania had the largest increases in claims, 2,963 and 2,840, while Louisiana and Michigan had the largest declines in claims, -632 and -520. Despite the rise in the 4 week moving average initial claims figures are still trending near the 43 year lows and consistent with labor market health.


Continuing claims fell, shedding -2,000 from last weeks upward revision. Last week was revised higher 3,000, wiping out this weeks decline. Even so continuing claims are holding steady near the 43 year low and consistent with labor market health. The four week moving average moved slightly higher, 750, but is also holding steady near the long term low.

The total number of claims for unemployment rose this week, the fourth week of gains since reaching the long term low last month. Total claims gained 24,215 to hit 1.951 million. Even with the rise in total claims this week's figure is still below the previous long term low set earlier in the year and consistent with labor market health.


The Philly Fed Manufacturing Business Outlook Survey was better than expected, indicating a rebound in activity. The headline index reading came in at 1.9 versus an expected -1.0. This is up from last month's -4.5 and ends a two month streak of contraction in the region. Within the data new orders and shipments both remain negative but increased to near 0. The employment index also improved and also moved back into positive territory, coming in at 2.6. The gains reflects an increase in employment offset by a decline in average hours worked. Perhaps the most notable portion of the report is the future outlook index which gained 6.7 points to hit 43.4, reflecting increased levels of optimism for the next 6 months.


The Index Of Leading Indicators was released at 10AM and was as expected, +0.6%. This end two months of negative readings, -0.1% in both August and September, and indicates growth is expanding into the fourth quarter. The Coincident and Lagging Indices also made gains, rising 0.2% each.

Today's data points support ongoing economic recovery, tightening labor markets and an FOMC rate hike. There will be no data releases tomorrow but there are quite a few next week. Due to the holiday most are scheduled to come out on Tuesday and Wednesday. Big on the list are revisions to 3rd quarter GDP, existing and new home sales, jobless claims, income and spending and durable goods.

The Oil Index

Oil prices did not get a boost from global tensions and are now hovering at three month lows. Today WTI fell, losing about a half percent at settlement time but falling more than 1% on an intraday basis. Price remains just above $40 and looks like it could break through to new lows. Supply and production remain very high while demand expectation is still very weak.

The Oil Index lost about -1% in today's session. The fall was halted at the short term moving average which has provided support for two days now. The indicators remain weak however and pointing lower so a retest of more substantial support is likely, especially if oil prices remain near $40 or move lower. First target for support is 1,150 with a chance for move down to 1,050 if oil breaks below $40. Resistance is near 1,250 should the index move higher.


The Gold Index

Gold prices rebound today after hitting a multi year low yesterday. This move, near 1.5% intra-day, met resistance at previous support, just above $1,080, and does not appear to have ended golds down trend. The Fed has more than hinted a rate hike would come in December, which, along with dovish ECB intentions and steady US economic data, is driving the dollar higher. The dollar index retreated from resistance today, most likely the cause for golds rise, but is looking strong in the short to long term. A combination of an ECB add-on to QE with an FOMC rate hike could cause the dollar index to break above resistance and pressure gold to new lows. It is now less than one month until the December FOMC meeting.

The Gold Miners ETF GDX gained nearly 3.5% in today's session after retesting the all-time low yesterday. This move is likely driven by short covering as well as options expiration/assignments and bottom seekers more than anything else. This bounce could continue higher with the short term moving average,$14.40, as near term target but I don't trust it. The move to retest the lows was strong in terms of momentum and indicates support is likely to be tested again, if not broken. Support is the all time low, just below $13.00.


In The News, Story Stocks and Earnings

UnitedHealth made the news early this morning when it issued a profit warning due to Obamacare. The company revised 2015 full year earnings down by nearly a quarter because its health exchange based products are not performing. The company says that not enough people are signing up to make the exchanges profitable, claims are higher than expected and they even suggested that some users are taking advantage of the system. The release goes on to suggest that UnitedHealth would not participate in the exchange system after 2016. Needless to say the news sparked more talk of the possible demise of Obamacare. Shares of the stock fell more than -6% at the open, struggled to regain the loss but were held near the low of the day.


Best Buy reported earnings before the opening bell and sent the stock seeking support. The company reported earnings that were ahead of expectations on weaker than expected revenue and lowered full year guidance. The stock lost more than -7.5% in the pre-opening session to open near the one year low. Support was there and drove prices back up but not enough to recover all the losses.


The JM Smucker Company reported before the bell as well but delivered much different results. The company beat on the top and bottom lines and was able to adjust guidance to the top end of the previously stated range. The improvement is due to strength in the Big Heart pet brand and coffee. Shares of the stock surged by 3% in the pre-opening session and then more than doubled that gain after the opening bell. Smuckers is now trading at a new all time high.


Jack Dorsey's Square IPO'd today. The stock opened at $11.20 after pricing at $9, then popped on the open gaining more than 50% on an intraday basis and closing with a gain of 45%.

Nike made headlines in after hours trading with the announcement of a new $12 billion buy back plan, a 14% increase to the dividend and a 2 for 1 stock split. The news was well received, sending shares up more than 4%.


The Indices

Today's action was light to say the least. Volumes were low as was volatility; most indices traded within very tight ranges except for one, the Dow Jones Transportation Index. This index gained 1% in a move that takes it to the top of the three month range. The indicators are still weak but swinging into a bullish signal so it looks like resistance will be tested here if not broken. A break above the top of the range, 8,275, could take it up to next resistance near 8,500. Support is near 8,000 should a pull back occur.


The other indices all closed with a loss, if negligible, led by the S&P 500. The broad market created its smallest candle in 10 months and is hanging near the top of yesterday's candle. The index is bouncing higher and looks like it could continue but the indicators remain mixed. The indicators are mixed, but also showing what could be the early signs of a bullish trend following entry. Stochastic has already fired a weak signal, yet to be confirmed by MACD, while MACD is approaching the zero line, a set up that can easily lead to a stronger signal should the index continue to consolidate at or near current levels. Upside target is near 2,120 in the near term with support targets near 2,075, 2,050 and 2,000.


The NASDAQ Composite made the next largest decline, -0.03%. The tech heavy index created a similarly small candle although it has traded in a tighter range than today's within the last 30 days. The index appears to be bouncing higher with upside target near 5,110 but the move has yet to gain strength. The indicators are mixed as with the SPX but also setting up for a potential bullish trend following entry.


The Dow Jones Industrial Average made the smallest move of all, only -0.2%. The blue chips are also bouncing from support levels, in line with underlying long term trends, and look like they will continue with upside target near 18,000. The indicators are mixed as with the others and likewise beginning to rollover into what could become a strong trend following entry signal. It may take a few weeks for this signal to develop so I expect to see some side-winding in this as well as the other indices until then.


The market took a breather today. The negative implications of that is there was no follow through on yesterday's rally. The positive is that the market held its ground and did not reverse yesterday's gains.

It looks like the rally will continue but there are still some hurdles for the market to overcome. One is geopolitical tensions, another is slow global growth, another is weak expectations for 4th quarter earnings, not to mention the fact we are entering the doldrums of the earnings cycle.

The combination of waiting for the FOMC meeting along with a lack of earnings news could keep the market from breaking out to a new high. At best the indices will remain range bound at current levels, at worst they will correct to long term support levels. In between now and the meeting will be an entire month of economic data to sway sentiment, induce volatility and drive market direction.

I remain bullish and a buyer of dips.

Until then, remember the trend!

Thomas Hughes


New Plays

Consistently Beating Wall Street Expectations

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Total System Services, Inc. - TSS - close: 54.48 change: +0.12

Stop Loss: 52.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 19, 2015
Time Frame: 6 to 9 weeks
Average Daily Volume = 1.4 million
New Positions: Yes, see below

Company Description

Trade Description:
TSS must be doing something right. Earnings and revenues have grown every quarter for the last four quarters. The stock has shown significant relative strength with TSS up +60% year to date.

TSS is part of the financial sector. According to the company, "As one of the world's largest payment solutions and services companies, TSYS® believes payments should revolve around people, not the other way around. Since we got our start in the payments space more than 30 years ago, we have evolved from a supporting role servicing several hundred bank card issuers and bank acquirers to directly touching hundreds of thousands of merchants and millions of consumers.

TSYS is a global, publicly traded company with operations in more than 80 countries, including many of the world's most high-growth emerging markets. We provide electronic payment services to financial institutions and companies around the globe with a broad range of issuing and acquiring payment technologies, including consumer, credit, debit, healthcare, loyalty, prepaid, chip and mobile payments."

As I mentioned earlier the earnings picture has been very healthy. TSS has beaten Wall Street's earnings and revenue estimate the last four quarters in a row. Earlier in the year they announced a 20 million share stock buyback. Plus management has raised guidance the last two quarters in a row.

TSS' most recent earnings report was October 27th. Wall Street was expecting a profit of $0.59 a share on revenues of $668 million. TSS announced that earnings were up +40% from a year ago to $0.78 a share. Revenues were up +15% to $708 million. The company management said, "we are raising our guidance range for revenues before reimbursables to 12-13%, up from the previous range of 10-12%, and our adjusted earnings per share (EPS) guidance range to 24-26%, up from the previous range of 15-17%."

You can see how the stock surged the next day on its strong results and bullish outlook. Since then shares of TSS have been consolidating sideways but it looks like that consolidation is almost over. Shares have rallied back toward round-number resistance at $55.00. Currently the point & figure chart is bullish and forecasting at $65.00 target. Tonight we are suggesting a trigger to launch bullish positions at $55.15.

Trigger @ $55.15

- Suggested Positions -

Buy TSS stock @ $55.15

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

Buy the FEB $55 CALL (TSS160219C55) current ask $2.20
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Markets Meander Sideways

by James Brown

Click here to email James Brown

Editor's Note:
Stocks were directionless on Thursday with the major indices drifting sideways. The S&P 500 was vacillating on either side of unchanged most of the session.

NHTC has been stopped out.

KMX was closed this morning. LULU hit our stop.


Current Portfolio:


BULLISH Play Updates

FMC Corp. - FMC - close: 42.61 change: -0.42

Stop Loss: 39.85
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 18, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 1.6 million
New Positions: Yes, see below

Comments:
11/19/15: The market churned sideways on Thursday. Shares of FMC dipped about -1% following its big bounce from last week's low. Currently our suggested entry point to launch bullish positions is $43.55. However, nimble traders might want to consider a buy-the-dip strategy. The $42.00 level or the 10-dma (near $41.00) might be alternative entry points.

Trade Description: November 18, 2015:
Shares of FMC have been struggling for a couple of years. The stock peaked near $83.00 in early 2014. Since then FMC traded at a low near $32.60 in late September this year. FMC's performance over the last couple of months looks like the stock has bottomed.

FMC is in the basic materials sector. According to the company, "For more than a century, FMC Corporation has served the global agricultural, industrial and consumer markets with innovative solutions, applications and quality products. FMC acquired Cheminova in April of 2015. Pro forma revenue totaled approximately $4.5 billion in 2014. FMC employs approximately 6,600 people throughout the world and operates its businesses in three segments: FMC Agricultural Solutions, FMC Health and Nutrition and FMC Lithium."

The earnings picture has been disappointing over the last several months. The company reported its Q1 results on May 5th and missed on both the top and bottom line. Management lowered their guidance. FMC's Q2 results were not much better with the company missing analysts' estimates on both the top and bottom line again.

On October 12th FMC warned that Q3 earnings would take a hit due to currency weakness in Brazil. Here's an excerpt from the company's press release, "FMC Corporation (FMC) today announced that, due to the recent rapid devaluation of the Brazilian real, the company is reducing third-quarter and full-year outlook for its Agricultural Solutions segment... A rapid devaluation of the Brazilian real, which depreciated over 50 percent versus the U.S. dollar in the past 12 months, and over 25 percent versus the U.S. dollar during the third quarter alone, has created significant headwinds that will continue to impact Agricultural Solutions segment earnings in the second half of 2015."

Shares of FMC plunged on this news from $37.50 to $35.00 but investors bought the dip. Earnings came out on October 28th. After warning in mid October their final results were above expectations. Q3 earnings fell from 72 cents a year ago to 42 cents but that beat the 38-cent estimate. Revenues were up +1.4% to $830.7 million, which was also above estimates. FMC rallied on this report.

Investors bought the recent dip (last week) and since then FMC has been showing relative strength. The rally has produced a triple-top breakout buy signal on FMC's point & figure chart, which now projects a $57.00 target. The relative strength continued today with a +2.6% gain and a breakout past short-term resistance at $43.00 and its 100-dma.

It's starting to look like all the bad news has been priced in and investors are betting on a turnaround in the company. The stock's recent rallies have been fueled with strong volume, which is normally a good sign. Tonight we are suggesting a trigger to launch bullish positions at $43.55. (Note: FMC is up five days in a row. Patient investors may want to wait for a dip before initiating new positions instead of our trigger at $43.55).

Trigger @ $43.55

- Suggested Positions -

Buy FMC stock @ $43.55

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

Buy the JAN $45 CALL (FMC160115C45)

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


Microsoft Inc. - MSFT - close: 53.94 change: +0.09

Stop Loss: 52.15
Target(s): To Be Determined
Current Gain/Loss: -1.2%
Entry on November 04 at $54.60
Listed on November 03, 2015
Time Frame: 6 to 8 weeks.
Average Daily Volume = 35.4 million
New Positions: see below

Comments:
11/19/15: MSFT briefly traded above short-term resistance at $54.00 today. The stock made it as high as $54.66. Unfortunately gains faded and shares closed back below the $54.00 level. This intraday pullback makes me short-term cautious. No new positions at this time.

Trade Description: November 3, 2015:
MSFT is more than just a software company. MSFT is in the technology sector. It is considered part of the business software industry. According to the company, "Microsoft is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more."

The company is run under three segments. They have their productivity and business processes segment. This includes commercial office software, personal office software, and more. One of their fastest growing segments is MSFT's Intelligent Cloud business, which includes their server software and enterprise services. Then they have their "More Personal Computing" segment. This includes their Windows operating software, MSN display advertising, Windows phones, smartphones, tablets, PC accessories, Internet search, and their Xbox platform.

The stock has been dead money for almost a year. MSFT peaked near round-number resistance at $50.00 back in November 2014. Shares channeled sideways between support at $40 and resistance at $50 for months. That changed last month.

MSFT reported its 2016 Q1 results on October 22nd. Analysts were expecting a profit of $0.59 a share on revenues of $21.04 billion. MSFT beat both estimates with a profit of $0.67 a share. Revenues came in at $21.66 billion. Their Intelligent Cloud segment saw sales rise +8% but it was actually +14% on a constant currency basis.

Shares of MSFT soared the next day with a surge to 15-year highs. The big rally is based on investors' belief that MSFT and its relatively new management is successfully transitioning away from declining PC sales and moving quickly towards the cloud (and mobile).

Normally I would hesitate to buy a stock like MSFT after a big gap higher. Too often stocks tend to fill the gap. However, shares of MSFT have been able to levitate sideways in the $52.50-54.50 zone as traders keep buying the dips. Odds are growing we could see MSFT rally toward its all-time highs near $60.00 a share from December 1999. The big gain in October produced a buy signal on the point & figure chart, which is now forecasting a long-term target of $82.00. Tonight we are suggesting a trigger to launch bullish positions at $54.60.

- Suggested Positions -

Long MSFT stock @ $54.60

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

Long 2016 JAN $55 CALL (MSFT160115C55) entry $1.54

11/04/15 triggered @ $54.60
Option Format: symbol-year-month-day-call-strike


Paychex, Inc. - PAYX - close: 54.05 change: +0.12

Stop Loss: 51.25
Target(s): To Be Determined
Current Gain/Loss: +1.7%
Entry on November 11 at $53.15
Listed on November 09, 2015
Time Frame: Exit PRIOR to earnings in mid December
Average Daily Volume = 2.3 million
New Positions: see below

Comments:
11/19/15: PAYX drifted higher on Thursday. Shares managed to outperform the major indices with a +0.22% gain. No new positions at this time.

More conservative traders may want to start raising their stop loss.

Trade Description: November 9, 2015:
Last week the Bureau of Labor Statistics announced that the nonfarm payroll (jobs) report for October showed a gain of +271,000. That was way above expectations. The separate household survey showed a gain of +320,000 jobs. This pushed the unemployment rate down to 5.0%, the lowest reading since early 2008. Many believe that the U.S. has now reached full employment. Do you know what that means? It means more Americans working. That means more paychecks to be delivered and more HR services to be handled.

PAYX is in the services sector. According to the company, "Paychex, Inc. (PAYX) is a leading provider of integrated human capital management solutions for payroll, HR, retirement, and insurance services. By combining its innovative software-as-a-service technology and mobility platform with dedicated, personal service, Paychex empowers small- and medium-sized business owners to focus on the growth and management of their business. Backed by more than 40 years of industry expertise, Paychex serves approximately 590,000 payroll clients across 100 locations and pays one out of every 15 American private sector employees."

PAYX earnings have been slowly and consistently creeping higher. Revenues have been rising about 8% the last couple of quarters. This company's most recent earnings report was September 30th. They beat estimates on both the top and bottom line, which helped fuel another rally in the stock.

PAYX management has been very consistent about paying a dividend. PAYX now sports a dividend yield of 3.7%. That could draw more and more income investors looking for a safe company to buy.

A recent article on Forbes.com, by Brett Owens, noted that "demand for payroll outsourcing (60% of Paychex's latest quarterly revenue) will grow at a 3.9% compound annual rate between 2013 and 2018. HR outsourcing (40% of revenue) is on a stronger tear, with a projected 12.3% yearly gain in the same period" (source)

We like PAYX's relative strength. Shares are up +14.2% year to date. That compares to a +1.0% gain in the S&P 500 and a +7.6% rally in the NASDAQ. The NASDAQ composite is up +18% from its August low but PAYX is up +26.7%. The rally in PAYX has produced a buy signal on the point & figure chart, which is also forecasting a long-term target at $72.00.

On Friday PAYX found short-term support near $53.00. Tonight we are suggesting a trigger to launch bullish positions at $53.15.

- Suggested Positions -

Long PAYX stock @ $53.15

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

Long JAN $55 CALL (PAYX160115C55) entry $0.80

11/11/15 triggered @ $53.15
Option Format: symbol-year-month-day-call-strike


Yelp Inc. - YELP - close: 28.06 change: -0.17

Stop Loss: 24.40
Target(s): To Be Determined
Current Gain/Loss: +1.1%
Entry on November 18 at $27.75
Listed on November 17, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 3.5 million
New Positions: see below

Comments:
11/19/15: YELP followed the market lower and quietly drifted sideways on Thursday. If this dip continues the $27.50 area might be the nearest support.

Trade Description: November 17, 2015:
It has been a rough ride for YELP investors. The stock is down -50% year to date and off -72% from its all-time highs set in 2014. Yet the action lately is starting to look like all the bad news is priced in.

YELP is considered part of the technology sector. According to the company, "Yelp Inc. (http://www.yelp.com) connects people with great local businesses. Yelp was founded in San Francisco in July 2004. Since then, Yelp communities have taken hold in major metros across 31 countries. Approximately 83 million unique visitors visited Yelp via their mobile device1, including approximately 18 million unique devices accessing the Yelp app2, and approximately 79 million unique visitors visited Yelp via a desktop computer3 on a monthly average basis during the second quarter of 2015. By the end of the same quarter, Yelpers had written approximately 83 million rich, local reviews, making Yelp the leading local guide for real word-of-mouth on everything from boutiques and mechanics to restaurants and dentists."

The earnings picture has struggled this year. YELP's Q1 and Q2 reports both missed analysts' estimates. YELP also guided lower each time. Then there was news in July that YELP had given up on trying to sell itself because they couldn't find a buyer.

The revenue picture improved in the third quarter. YELP reported its Q3 results on October 28th. Earnings of $0.03 a share missed estimates of $0.06. Yet revenues were up +40% to $143.6 million, which was better than expected. Management then raised their 2015 guidance.

On November 13th shares of YELP received a big upgrade from RBC Capital Markets who raised their outlook to "outperform" and upped their price target from $34 to $42. Meanwhile recent news that InterActiveCorp (IACI) had offered to buy Angie's List (ANGI) might restart the M&A speculation on YELP since ANGI and YELP are in similar businesses.

Technically shares of YELP definitely appear to have formed a bottom over the last three months. The rally from its October lows has generated a buy signal on the point & figure chart that is forecasting a long-term target of $37.00. Right now YELP is flirting with a breakout past its early August peak. A breakout could spark some short covering. The most recent data listed short interest at 22% of the 60.8 million share float.

We are listing YELP as an aggressive, higher-risk bullish trade. The stock can be volatile so readers may want to limit their position size. Tonight we are suggesting a trigger to launch positions at $27.75.

*small positions to limit risk*- Suggested Positions -

Long YELP stock @ $27.75

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

Long 2016 JAN $30 CALL (YELP160115C30) entry $1.47

11/18/15 triggered @ $27.75
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Denny's Corp. - DENN - close: 9.39 change: +0.03

Stop Loss: 9.75
Target(s): To Be Determined
Current Gain/Loss: +5.2%
Entry on November 10 at $9.90
Listed on November 05, 2015
Time Frame: 4 to 8 weeks
Average Daily Volume = 527 thousand
New Positions: see below

Comments:
11/19/15: DENN did show some relative strength today (+0.3%) but I see today's move as a small victory for the bears. The oversold bounce failed near the $9.50 level intraday.

No new positions at this time. More conservative traders may want to lower their stop again.

Trade Description: November 5, 2015:
Wall Street seems to have soured on restaurant stocks. The group has been underperforming and this stock is accelerating lower.

DENN is in the services sector. According to the company, "Denny's is the franchisor and operator of one of America's largest franchised full-service restaurant chains, based on the number of restaurants. As of July 1, 2015, Denny's had 1,696 franchised, licensed, and company restaurants around the world with combined sales of $2.7 billion including 108 restaurants in Canada, Costa Rica, Mexico, Honduras, Guam, Curacao, Puerto Rico, Dominican Republic, El Salvador, Chile and New Zealand, and 160 company operated restaurants in the United States."

The stock rallied in early August on its earnings report but that proved to be a bull-trap. The breakout past resistance near $12.00 didn't last. When the market corrected lower in August, shares of DENN plunged toward its 200-dma and the $11.00 level. Shares spent the next eight weeks churning sideways with investors selling the rallies near resistance.

This week DENN reported their Q3 earnings report. The company delivered a profit of $0.11 a share. Revenues were up +5.8% to $123.8 million. These were in-line with estimates. Actually revenues were just slightly above expectations. The company's guidance was in-line with analysts' estimates. Evidently these results were not good enough as shares of DENN plunged on the news.

The stock has broken down below multiple layers of support. Now shares are on the verge of breaking through round-number support at $10.00. If shares to trade below $10.00 it should generate a new sell signal on the point & figure chart. Tonight we are suggesting a trigger to launch bearish positions at $9.90.

- Suggested Positions -

Short DENN stock @ $9.90

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

Long DEC $10 PUT (DENN151218P10) entry $0.55

11/17/15 new stop @ 9.75
11/14/15 new stop @ 10.25
11/10/15 triggered @ $9.90
Option Format: symbol-year-month-day-call-strike


Seagate Technology - STX - close: 34.28 change: -0.10

Stop Loss: 35.55
Target(s): To Be Determined
Current Gain/Loss: +4.4%
Entry on November 11 at $35.85
Listed on November 10, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 4.9 million
New Positions: see below

Comments:
11/19/15: Shares of STX were upgraded to a "buy" this morning. The stock reacted by gapping open higher at $34.91. Fortunately the rally failed (twice) near $35.20. Shares gave back all of their morning gains. I would use a new drop below $34.00 as a new bearish entry point.

Trade Description: November 10, 2015:
A slowdown in PC sales is killing STX's performance. Share are significantly underperforming the broader market. The company's stock is down -45% year to date.

STX is part of the technology sector. According to the company, "Seagate creates space for the human experience by innovating how data is stored, shared and used." That doesn't tell us much. Visiting their website you can learn that "Seagate is the global leader in data storage solutions, developing amazing products that enable people and businesses around the world to create, share and preserve their most critical memories and business data." Essentially STX makes hard drives and data storage for both personal and business use. This includes desktop storage, laptop storage, backup solutions, data recovery, cloud computing storage, and a lot more.

Unfortunately for investors the earnings picture has been disappointing. STX management issued an earnings warning on October 15th as they reduced their guidance for Q1 earnings and revenues. You can see the drop in their stock price on the 15th.

STX reported their 2016 Q1 earnings on October 30th. Net income fell -63.6% from a year ago. Earnings came in at $0.54 a share, which was three cents below estimates. Revenues plunged -22.7% to $2.92 billion, which matches the levels they warned about two weeks prior. STX said their gross margins contracted from 28.1% to 24.2%.

Management knew the quarter was going to be bad so they tried to soften the bad news by announcing a +17% jump in their dividend just prior to their earnings announcement. The news didn't seem to help. Their 2016 Q2 guidance did not help either as management lowered their revenue forecast below analysts' estimates. Wall Street has been reducing their ratings and their price target on the stock in reaction to the company's lowered forecast.

I could see dividend investors looking a STX as a potential buy. The plunge in the stock price has driven the dividend yield up to 6.9%. Yet who wants to buy a stock for their dividend and watch your capital evaporate?

Technically STX is in a bear market. Shares displayed relative weakness today with a -4.5% decline and a drop to new multi-year lows. The point & figure chart is already bearish and forecasting at $26.00 target. If STX trades below $36.00 it will produce a new triple-bottom breakdown sell signal on its P&F chart. Tonight we are suggesting a trigger to launch bearish positions at $35.85.

- Suggested Positions -

Short STX stock @ $35.85

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

Long JAN $35 PUT (STX160115P35) entry $1.93

11/17/15 new stop @ 35.55
11/14/15 new stop @ 36.25
11/11/15 new stop @ 37.25
11/11/15 triggered @ $35.85
Option Format: symbol-year-month-day-call-strike


iPath S&P500 VIX Futures ETN - VXX - close: 20.11 change: +0.66

Stop Loss: None, no stop at this time.
Target(s): $16.65
Current Gain/Loss: + 7.8%
2nd position Gain/Loss: +30.7%
Entry on August 25 at $21.82
2nd position: September 2nd at $29.01
Listed on August 24, 2015
Time Frame: to be determined
Average Daily Volume = 50 million
New Positions: see below

Comments:
11/19/15: It was a relatively quiet day for the U.S. stock market. Yet the volatility index managed a gain. Traders might be a little nervous and seeking to protect some profits by buying puts.

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

11/07/15 adjust exit target to $16.65
11/02/15 adjust exit target to $16.50
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



CLOSED BULLISH PLAYS

Natural Health Trends Corp. - NHTC - close: 40.90 change: -1.63

Stop Loss: New 40.65
Target(s): To Be Determined
Current Gain/Loss: -10.9%
Entry on November 18 at $45.60
Re-Listed on November 17, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 379 thousand
New Positions: see below

Comments:
11/19/15: Ouch! There is no way to sugar coat this. The action in NHTC has been absolutely terrible. We were bit twice! There is no reason for the relative weakness in shares of NHTC yet traders continue to sell it. The stock pierced potential support at $40.00 and its 50-dma this morning. NHTC managed to pare its losses to just -3.8% by the closing bell. This stock is down -23.8% in the last three days.

Our aggressive trade did not work. NHTC hit our new stop at $40.65 this morning.

*small positions to limit risk*

- Suggested Positions -

NHTC stock @ $45.60 exit $40.65 (-10.9%)

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

JAN $50 CALL (NHTC160115C50) entry $5.00 exit $2.35 (-53.0%)

11/19/15 stopped out
11/18/15 new stop @ 40.65
11/18/15 Trade reopened this morning
11/17/15 re-list this trade, launch new positions tomorrow
New stop 39.85, new option = Jan. $50 call
11/17/15 NHTC trade -8.1%, Jan. $60 call trade -44.0%
11/17/15 stopped out @ $49.90 - on DoJ story about another company
11/17/15 Triggered on gap higher @ $54.32
Option Format: symbol-year-month-day-call-strike

chart:



CLOSED BEARISH PLAYS

CarMax Inc. - KMX - close: 56.35 change: -0.33

Stop Loss: 57.25
Target(s): To Be Determined
Current Gain/Loss: -3.3%
Entry on November 13 at $54.75
Listed on November 12, 2015
Time Frame: Exit PRIOR to earnings in mid December
Average Daily Volume = 1.8 million
New Positions: see below

Comments:
11/19/15: Shares of KMX have not cooperated. Our plan was to exit early this morning to cut our losses. Shares opened at $56.54. There was a brief rally but it failed near $57 and its 20-dma.

- Suggested Positions -

Short KMX stock @ $54.75 exit $56.54 (-3.3%)

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

JAN $52.50 PUT (KMX160115P52.5) entry $2.00 exit $1.20 (-40.0%)

11/19/15 planned exit this morning
11/18/15 prepare to exit tomorrow morning, KMX is not working for us
11/13/15 triggered @ $54.75
Option Format: symbol-year-month-day-call-strike

chart:


Lululemon Athletica - LULU - close: 47.33 change: +1.64

Stop Loss: 46.55
Target(s): To Be Determined
Current Gain/Loss: +1.5%
Entry on November 12 at $47.25
Listed on November 11, 2015
Time Frame: Exit PRIOR to earnings in mid December
Average Daily Volume = 2.9 million
New Positions: see below

Comments:
11/19/15: The oversold bounce in LULU continued today. Shares outperformed the market with a +3.5% gain. The stock got some help this morning after LULU was upgraded. This probably sparked some short covering. Our stop loss was hit at $46.55.

- Suggested Positions -

Short LULU stock @ $47.25 exit $46.55 (+1.5%)

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

DEC $45 PUT (LULU151218P45) entry $2.40 exit $2.24 (-6.7%)

11/19/15 stopped out
11/17/15 new stop @ 46.55
11/14/15 new stop @ 48.25
11/12/15 triggered @ $47.25
Option Format: symbol-year-month-day-call-strike

chart: