Option Investor
Newsletter

Daily Newsletter, Thursday, 12/10/2015

Table of Contents

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

Market Wrap

Focusing On The Fed

by Thomas Hughes

Click here to email Thomas Hughes
Equity markets bounced back today but remained focused on next week's FOMC meeting.

Introduction

The equity markets tried to bounce back today but focus remains centered on next week's FOMC meeting. There is an overwhelming expectation we will get a hike. The CME's Fed Watch Tool shows an 85% chance for a 50 basis point increase.

Global markets remain under pressure. Anticipation for next week's FOMC meeting, plunging oil prices and weak data are to blame. Asian indices closed mostly lower, led by the Nikkei's -1.3% decline. European indices were mixed but closed mostly higher after a late day rally in response to strength in our indices. The energy sector was one of today's leaders but the snap back is probably going to be short lived; oil prices fell to hit a new low below $47. Also in the news, three central banks made no changes to policy; the Bank Of Korea, the Bank of England and the Swiss National Bank.

Market Statistics

Futures trading indicated a positive open all morning, driven by anticipated strength in the energy sector. A new report from OPEC says production from non-OPEC nations will contract in 2016 while demand increases. Their report shows 2016 supply shrinking by 380,000 BPD after rising by 1 million BPD in 2015 so I don't really see this as an overly bullish forecast.

The indices opened flat and after a few minutes testing support began to rise. The first rally added roughly 0.5% to them but gains did not last, by 9:50 most indices had fallen back to break even levels. Another test of support ensued, followed by another rally. The second rally of the day had a little more strength and took the indices up by a full percent or more in some cases. The morning peak was reached at 10:44AM at which time the market began a slow descent back to earlier support.

A third rally which began during the lunch hour was the strongest of all. It took the indices to highs in excess of 1% but it to reached a peak that was unsustainable. By 2:45 the indices were once again retreating from a high and headed back down to support levels.

Economic Calendar

The Economy

There was not a lot of data today, only one report other than the weekly jobless claims. Initial claims rose 13,000 to 282,000 from last week's not revised figures. This gain is not surprising, we have entered a period of increased lay-off's due to end of the year restructuring. What we have to watch now is how high and how long the increase lasts, and if there is pass-through to the longer term unemployment figures. Until then, initial claims are off their long term lows but remain low by historic standards and consistent with labor market health.

On a not adjusted basis claims rose by 46.4% versus a gain of 39.5% as predicted by the seasonal factors. Year over year not adjusted claims are down only -1%. This is a mild concern due to this figure running at a rate over -5% most of the year. However, until a noticeable shift in trend occurs this figure is also running near historic low levels and consistent with labor market health. Wisconsin and Ohio had the largest increases in new initial claims, + 4,677 and + 2,212, while California and Texas had the largest declines, -20,308 and -7,225.


Continuing claims rose by 82,000 to hit 2.243 million from last week's not revised figure. The four week moving average of claims rose by 16,500 and at a one month high. This week's rise in claims is likely due to seasonal factors as mentioned before. Despite the rise continuing claims remain near the historic low, where they have been trending for over 8 months, and consistent with labor market health.

Total claims did not rise this week. Total claims fell by -124,632 to hit 1.934. This is a one month low and just off the long term low set two months ago. Year over year total claims are down -10% and consistent with ongoing health and recovery in the labor market.


Import and export fell in November. The headline decline in import prices was -0.4%, the decline in export prices was -0.6%. Import prices were driven by falling fuel prices led by gasoline's 2.5% decline. Ex-energy import prices fell -0.2%. Export price declines occurred in both agricultural and non agricultural products. Ex-agriculture prices fell -06%. We have now had declining prices for over 12 months. Import prices are down -9.4% and export prices are down -6.3%.

Tomorrow be on the look out for PPI, Retail Sales, Business Inventory and Michigan Sentiment. PPI is expected to remain steady from last month with a gain of 0.1%. Business inventories are also expected to rise by about 0.1%. Retail sales are expected to grow by a slightly faster pace of 0.3% and will be closely watched for signs of seasonal strength. Michigan sentiment is expected to remain strong but decline to 91.6 from just over 93.

Next week the biggest economic event will be the FOMC meeting. Exactly one week from today will be the day after the Fed did or didn't raise rates at the December meeting. We've been building up to it for so long it is most likely factored into the market, failing to raise rates may cause a bigger stir than raising them.

The Oil Index

Oil prices continue to remain under pressure. OPEC's view of production and demand for next year did little to alter current conditions. Supply remains high, demand remains low. WTI fell in today's session, losing close to -1% and setting a new low near $36.75. There is reason to believe that supply will tighten, or begin to tighten, in 2016 but as of yet there is not much sign of it. Until then I expect oil prices are likely to remain low or move lower.

The energy sector managed to stage a rally despite falling oil prices. The Oil Index itself gaining more than 1% intraday. However, today's action appears to be a test of resistance within a near term down trend rather than a reversal in prices. The indicators remain weak, pointing lower and convergent with a test of the recently set low if not a lower low. Resistance is the 61.8% retracement level near 1,120. Downside target is the September low near 1,025.


The Gold Index

Gold prices are holding steady near recent lows, today's action was choppy and shed $5 to settle near $1070. The Fed is the focus, and what may happen to the dollar after the meeting. The dollar has been falling since the ECB failed to fulfill market expectations and could continue if the Fed does the same. The risk with gold is that the Fed will not meet or exceed expectations and spark a short covering rally similar to the one started by the ECB two weeks ago.

The Gold Miners ETF GDX gained about 0.75% on an intraday basis but fell into negative territory before the close of trading. Today's candle is sitting on the short term moving average which has been support the past 5 sessions. The ETF appears to want to move higher, perhaps anticipating a rally in gold, but is also still below resistance so a break out is needed to get bullish.

The indicators are bullish but MACD is declining and stochastic is rolling over, forming a crossover in line with the underlying trend, so it looks like resistance could be strong. Resistance is near $15 with support at the short term moving average. A break below the moving average has a target near the long term low near $13. A break above resistance could take the ETF up to $17. I remain bearish on gold but wary of the FOMC and how the market will react to what they do.


In The News, Story Stocks and Earnings

The dollar regained some ground today but remains near the one month low. The ECB caused a rebalancing of expectations and a sharp drop in the Dollar Index but it's policy remains divergent from the FOMC, which has been strengthening the dollar. So long as the ECB is dovish and the Fed is hawkish the dollar should gain ground over the euro. Today's action was bullish but below a previous resistance level so appears to be heading lower in the near term; the indicators are both bearish and convergent with near term weakness. Resistance is near $98.50 and the short term moving average with downside target near $96. The caveat, with the FOMC expected to raise rates next week any dip over the next few days is likely a buying opportunity.


Atlassian Corporation went public today in what may be the last IPO of the year. The company, founded 2002 in Sydney, Australia, sells software and services intended to help collaboration and team based projects. Shares priced above the high end of the forecast range and then opened with a gain near 30% on top of that. Shares sold off from their early high but managed to hold steady near $27 until a late day rally took them back up to a new high. Fist day gains; 32%.


Healthcare is expected to be one of our leaders in terms of earnings growth in the 4th quarter. As a sector it is expected to post earnings growth near 5%. The last two quarters the sector has beaten earnings projections and more than doubled growth expectations. Healthcare was one of the strongest sectors in today's session. The Healthcare Sector SPDR gained over 1.25% but remains in the middle of a one month trading range . Today's action moved the ETF above the 30 day moving average but indicators remain weak. Any upside movement will meet resistance with first target near $73.25


Seritage Growth Properties got a big boost this morning when Warren Buffet disclosed a personal stake in the company. This company is the spin-off of more than 200 top performing Sears and K-Mart stores and operated as a REIT. Mr. Buffet's stake is worth a little more than 8.02% of the company and sparked a 12% surge in share prices.


Adobe Systems reported after the bell and blew away expectations. The company was projected to earn about $0.45 per share but came in at a whopping $0.62. Results are a quarterly record and a 22% gain over last year. Looking forward company guidance is for full year 2016 earnings of $2.70, 9 cents below consensus. Shares of the stock traded down by -0.6% during the open session and then jumped 4% after the news was released. If the after hours gains hold into tomorrow the stock will open at a new all time high.


The Indices

The indices tried three times to rally and three times fell back to support at or just above yesterday's closing prices. Each time the rally moved a little higher and each pull back support was found a little higher but nevertheless the indices did not close near the high of the day. Today's action was led by the Dow Jones Transportation Average which closed with a gain of 0.60%. The index may have led today's gains but it is trading below my first support target and indicated lower. MACD may have peaked but remains strong relative to the current down draft, stochastic is moving lower in both the near and short term, so further downside may be muted. Next target is just below yesterday's candle near 7,500 and the long term low.


The next biggest gainer in today's session was the Dow Jones Industrial Average. The blue chips attempted to move up from support levels but was capped by the short term moving average. Today's candle is smallish with a long upper shadow, indicative of resistance along the moving average. The indicators are bearish and pointing lower but momentum is weak and stochastic is trending in the middle of the range so support range bound trading rather than market reversal. Any further drop ahead of the FOMC meeting has a first support target near 17,225. A break below this level could take it down to 17,000 and the long term up trend line.


The NASDAQ Composite made the third largest gains in today's session, 0.44%. The tech heavy index is trading just above the long term up trend line but failed to break above the short term moving average. Today's action was not strong or overly significant but the indicators remain bearish so near term weakness could persist. Support is likely to be found just below today's candle, along the long term trend line near 5,000.


The S&P 500 made the smallest gains in today's session, only 0.23%. The broad market tried hard to move up off of support levels but was halted at the short term moving average. Today's action appears to be yet another within a recent range and consolidation pattern with the FOMC meeting the most obvious focal point. The indicators remain bearish, if weakly so, so further testing of support could come. If the index moves lower, below 2,050, next target for support is the long term trend line near 2,025. The long term trend remains up so any dip is a potential buying opportunity.


Today's action is more churn. The market is in sector rotation ahead of an important FOMC meeting, and ahead of another round of corporate earnings. This churn may continue into the next few weeks but in my view is only leading to a continuation of the bull market. Long term economic trends are positive as is outlook for corporate earnings, a combination that usually leads to higher prices for equities. Near term fears and concerns may be clouding the view but in the end nothing more than the proverbial wall of worry.

Earnings season poses a bit of a risk. Earnings growth is expected to be negative again, before turning positive in the 1st quarter of 2016, and could cause the market to seek strong support levels before moving higher.

The FOMC meeting poses the biggest risk in the near term and could spark some big moves next week. Don't forget next week is options expiration, a fact that will likely add volatility to the market. I remain bullish and a buyer of dips, cautiously waiting for the FOMC.

Until then, remember the trend!

Thomas Hughes

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New Plays

The Future Looks Stormy For This Retailer

by James Brown

Click here to email James Brown

Editor's Note:

Additional Trading Ideas:

In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these may need to see a break past key support or resistance:

Bearish ideas: GLW, SEE, M, NOV, DISH, HAS,




NEW BEARISH Plays

GameStop Corp. - GME - close: 32.01 change: -0.43

Stop Loss: 34.15
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 10, 2015
Time Frame: 6 to 8 weeks
Option traders exit prior to January expiration
Average Daily Volume = 2.1 million
New Positions: Yes, see below

Company Description

Trade Description:
The future of video game purchases is digital downloads. That is why shares of GME have struggled the last couple of years. Their retail business model is in serious jeopardy.

GME is in the services sector. According to the company, "GameStop Corp., a Fortune 500 and S&P 500 company headquartered in Grapevine, Texas, is a global, multichannel video game, consumer electronics and wireless services retailer. GameStop operates more than 6,800 stores across 14 countries. The company's consumer product network also includes www.gamestop.com; www.Kongregate.com, a leading browser-based game site; Game Informer® magazine, the world's leading print and digital video game publication and the recently acquired Geeknet, Inc., parent company of ThinkGeek, www.thinkgeek.com, the premier retailer for the global geek community featuring exclusive and unique video game and pop culture products. In addition, our Technology Brands segment includes Simply Mac and Spring Mobile stores. Simply Mac, www.simplymac.com, operates 72 stores, selling the full line of Apple products, including laptops, tablets, and smartphones and offering Apple certified warranty and repair services. Spring Mobile, http://springmobile.com, sells post-paid AT&T services and wireless products through its 590 AT&T branded stores and offers pre-paid wireless services, devices and related accessories through its 69 Cricket branded stores in select markets in the U.S."

The company's earnings results have been mixed. Their Q2 report, announced on August 27th, came in better than expected. GME beat analysts' estimates on both the top and bottom line. Management raised their 2016 guidance. Guess what? Traders sold the news anyway.

Fast-forward to November. The stock has already reversed under major resistance near $48 again. Shares plunge on November 13th following an analyst downgrade. Ten days later GME reports their Q3 earnings results. Their profit was $0.54 a share. Not only is that 5% decline from a year ago but it's five cents below estimates. Revenues were down -3.6% to $2.02 billion, another miss. Hardware sales plunged -20% in the third quarter. Software sales were down -9%. GME's comparable store sales fell -1.1%, which was below guidance. If that wasn't enough management lowered their Q4 guidance below Wall Street estimates. Following this Q3 report the stock garnered several analyst downgrades.

One of GME's biggest challenges is digital downloads where customers do not have to leave their home (or dorm room) to purchase new games. They can just purchase it online over the Internet and have it immediately downloaded and start gaming. Not only does this jeopardize GME's new game sales but it also hurts a major portion of their business, which is reselling used games. If fewer people are buying hard copy discs of their video games then that means fewer people selling their used games back to GME, which the company resells at a healthy margin.

The trend of digital downloads started years ago but they are growing in popularity. The bearish story on GME is not a secret. That's probably the biggest risk. There are already a lot of bears in the name. The most recent data listed short interest at 53% of the 103 million share float. That much short interest can make the stock volatile to any potentially positive headlines. I think the bears are right and GME is headed lower as their business continues to struggle.

Another risk is valuation. The stock has fallen -33% in the last few weeks. Most of the analyst action in GME has been bearish with several downgrades. The stock currently trades with a P/E around 8.6. Eventually some analyst firm might decide to upgrade it on a valuation basis and the stock could see a short-term rally on this sort of headline. Fortunately traders usually sell the rallies in GME.

Currently GME is flirting with a breakdown below major support in the $31.50-32.00 area. A breakdown here could see the current downtrend accelerate. The point & figure chart is bearish and forecasting at $19.00 target. Tonight we are suggesting a trigger to open bearish positions at $31.40. Please note that this is an aggressive, higher-risk trade. GME can be a volatile stock. I am removing our normal entry point disclaimer regarding gap downs. Due to potential volatility traders may want to use the options instead of trying to short the stock. I am listing the January puts. You might want to consider the April puts (next available month).

Trigger @ $31.40

- Suggested Positions -

Short GME stock @ $31.40

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

Buy the JAN $30 PUT (GME160115P30) current ask $1.53
option price is a current quote and not a suggested entry price.

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Ignore Oil's Decline Today

by James Brown

Click here to email James Brown

Editor's Note:
Crude oil continues to sink and hit new multi-year lows on Thursday. After following oil lower for days the stock market decided to ignore oil's drop today. The major U.S. indices all bounced.


Current Portfolio:


BULLISH Play Updates

Autodesk, Inc. - ADSK - close: 63.24 change: -0.01

Stop Loss: 61.75
Target(s): To Be Determined
Current Gain/Loss: -3.1%
Entry on December 04 at $65.25
Listed on December 01, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 3.5 million
New Positions: Yes, see below

Comments:
12/10/15: Thursday was a quiet day for shares of ADSK. The stock churned sideways inside a 90-cent range and closed virtually unchanged on the day.

No new positions at this time.

Trade Description: December 1, 2015:
It has been a bumpy ride for ADSK investors this year. The company is in the middle of a transition from selling perpetual software licenses to selling subscriptions. It's a move that mirrors larger rival Adobe Systems's (ADBE) transition to a subscription model.

If you're not familiar with ADSK they are in the technology sector. According to the company, "Autodesk, Inc., is a leader in 3D design, engineering and entertainment software. Since its introduction of AutoCAD software in 1982, Autodesk continues to develop the broadest portfolio of 3D software for global markets. Customers across the manufacturing, architecture, building, construction, and media and entertainment industries-including the last 19 Academy Award winners for Best Visual Effects-use Autodesk software to design, visualize, and simulate their ideas before they're ever built or created. From blockbuster visual effects and buildings that create their own energy, to electric cars and the batteries that power them, the work of our 3D software customers is everywhere you look."

Year to date the stock is up +7.7%. Yet ADSK is up +53% from its October 2015 low. What's driving the rally? It's certainly not revenue growth. The company tends to beat Wall Street's bottom line earnings estimates but revenues have been soft. The company has lowered their guidance multiple times this year.

Their most recent earnings report was November 19th. ADSK reported Q3 results of $0.14 a share. That beat expectations. Revenues fell -2.9% to $600 million. Management lowered their Q4 guidance. Yet they raised their 2016 outlook for the first time in several months. The improved 2016 outlook certainly helped. There was a brief sell-off in the stock (Nov. 20th) but ADSK quickly recovered.

One of the main reasons ADSK has performed so well lately is the market's hope that two major activists investors will do something to unlock more value. Eminence Capital owns a 5.8% stake in ADSK. Sachem Head Capital recently disclosed at 5.7% stake. The two activist funds have teamed up together (a combined stake of 11.5%). Expectations that these activists will drive change in ADSK has fueled a significant rally.

Today shares of ADSK have rallied toward major resistance at the $65.00 level. A breakout here would reaffirm that the bullish trend is still intact. The point & figure chart is bullish and forecasting a long-term target at $103. We want to hop on board if ADSK can break through the $65.00 level. Tonight we are suggesting a trigger to launch positions at $65.25. The stock can be somewhat volatile so I am suggesting small positions to limit risk.

*small positions to limit risk* - Suggested Positions -

Long ADSK stock @ $65.25

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

Long JAN $67.5 CALL (ADSK160115C67.5) entry $1.54

12/04/15 triggered @ $65.25
Option Format: symbol-year-month-day-call-strike


Activision Blizzard, Inc. - ATVI - close: 38.38 change: -0.21

Stop Loss: 36.40
Target(s): To Be Determined
Current Gain/Loss: +0.6%
Entry on December 04 at $38.15
Listed on December 03, 2015
Time Frame: Exit prior to ATVI earnings in early February
Average Daily Volume = 10.0 million
New Positions: Yes, see below

Comments:
12/10/15: ATVI dipped toward its 10-dma again. Shares bounced near $38.00 but they underperformed the broader market with a -0.5% decline. The overall trend is still up but I would hesitate to launch new bullish positions.

Trade Description: December 3, 2015
The movie industry gets a lot of press but the video game market is much bigger. One of the biggest companies in this arena is ATVI and they're about to get a lot bigger.

ATVI is part of the technology sector. According to the company, "Activision Blizzard, Inc. is the largest and most profitable western interactive entertainment publishing company. It develops and publishes some of the most successful and beloved entertainment franchises in any medium, including Call of Duty, Call of Duty Online, Destiny, Skylanders, World of Warcraft, StarCraft®, Diablo®, and Hearthstone. Headquartered in Santa Monica, California, it maintains operations throughout the United States, Europe, and Asia. Activision Blizzard develops and publishes games on all leading interactive platforms and its games are available in most countries around the world."

Revenues for a video game company like ATVI tend to be lumpy based on new releases throughout the year. The company has managed to beat Wall Street's estimates on the bottom line the last four quarters in a row.

On November 2nd, 2015, ATVI announced they had signed a $5.9 billion deal to buy King Digital Entertainment (symbol: KING). This deal should give ATVI a huge boost in its mobile gaming footprint and could add a significant chunk to earnings in 2016. A Wedbush analyst believes the mobile gaming market is about $24 billion and growing at up to 20% a year for the next five years. They see the KING acquisition as a great fit for ATVI.

Several days later, on November 11th, ATVI announced that their new Call of Duty: Black Ops III game was the biggest entertainment launch of the year with a three-day opening weekend sales above $550 million. That surpassed any other entertainment launch of the year including books, music, or movies (surpassing the movie Jurassic World's massive opening weekend).

Recently a Cowen analyst said videogames are going to be another hot seller this year and they listed ATVI as their top pick in the industry. Multiple analysts have upgraded their stock price on ATVI following the KING acquisition news. Shares of ATVI have shown significant strength this year. The stock is trading at all-time highs and up +86% year to date. The point & figure chart is bullish and forecasting at $49.50 target.

Today's widespread market decline sparked some profit taking in ATVI. The stock found support at its rising 10-dma. If shares bounce from here we want to jump on board. Tonight we are suggesting a trigger to launch bullish positions at $38.15.

- Suggested Positions -

Long ATVI stock @ $38.15

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

Long FEB $40 CALL (ATVI160219C40) entry $1.47

12/04/15 triggered @ $38.15
Option Format: symbol-year-month-day-call-strike


Microsoft Inc. - MSFT - close: 55.27 change: +0.29

Stop Loss: 53.20
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:
12/10/15: MSFT saw quiet trading on Thursday. Shares drifted sideways inside a 65-cent range. The stock did manage to outperform the major indices with a +0.5% gain.

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

12/01/15 new stop @ $53.20
11/04/15 triggered @ $54.60
Option Format: symbol-year-month-day-call-strike


Netgear Inc. - NTGR - close: 44.02 change: -0.38

Stop Loss: 43.25
Target(s): To Be Determined
Current Gain/Loss: -3.4%
Entry on December 04 at $45.55
Listed on December 02, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 468 thousand
New Positions: see below

Comments:
12/10/15: Our NTGR trade is in danger. Shares underperformed the market with a -0.85% decline. The stock also traded below what should have been short-term support near $44.00. The intraday low was $43.65. Our stop loss is at $43.25.

No new positions at this time.

Trade Description: December 2, 2015:
Shares of NTGR have delivered an impressive reversal in the last couple of months. Analysts believe the company is poised to carve out its niche of the Internet of Things (IoT). Meanwhile new products have helped NTGR's retail business soar.

NTGR is in the technology sector. According to the company, "NETGEAR is a global networking company that delivers innovative products to consumers, businesses and service providers. The Company's products are built on a variety of proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease-of-use. The product line consists of wired and wireless devices that enable networking, broadband access and network connectivity. These products are available in multiple configurations to address the needs of the end-users in each geographic region in which the Company's products are sold. NETGEAR products are sold in approximately 39,000 retail locations around the globe, and through approximately 31,000 value-added resellers. The company's headquarters are in San Jose, Calif., with additional offices in approximately 25 countries."

Shares of NTGR are up +57% from their 2015 lows near $28.50. Most of that was thanks to a +40% surge in the month of October. That was due to a strong Q3 earnings report.

Wall Street was expecting Q3 earnings of $0.51 a share on revenues of $322 million. NTGR beat estimates on both counts. Earnings were $0.67 a share. Revenues fell -3.2% but came in at $342 million. Their operating margin surged from 7.1% in Q2 to 10.3% in Q3.

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR, commented, "Our financial results for the third quarter of 2015 exceeded expectations, driven by strength in North America and a robust back-to-school season. Our revenue in Q3 was further augmented by higher than normal demand from our service provider customers. The Retail Business Unit had an all-time record quarter in sales, powered by our fast-growing Arlo and Nighthawk product lines. The success of both product lines continued to drive up average selling prices for NETGEAR retail products, and led to a healthy 24.9% year-over-year increase in revenue for the Retail Business Unit for Q3. We were also pleased with the sequential growth shown by the Commercial Business Unit, which was led by our switching products. With many new products in the pipeline, we see the momentum of our switching products rolling into the coming quarters. Meanwhile, we continued to closely manage the Service Provider Business Unit with a focus on profitability."

Wall Street analysts have been raising estimates since NTGR's Q3 report. The big move in the stock has generated a huge buy signal on the point & figure chart, which is now forecasting a long-term target at $77. The last few weeks have seen NTGR consolidate sideways under the $45.00 area. This is significant since $45.00 (actually $45.31) was the all-time high from July 2011. A breakout past resistance at $45.00 is in progress. Today's intraday high was $45.38. Tonight we are suggesting a trigger to launch bullish positions at $45.55.

- Suggested Positions -

Long NTGR stock @ $45.55

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

Long JAN $45 CALL (NTGR160115C45) entry $1.80

12/04/15 triggered @ $45.55
Option Format: symbol-year-month-day-call-strike


Paychex, Inc. - PAYX - close: 53.11 change: +0.12

Stop Loss: 52.45
Target(s): To Be Determined
Current Gain/Loss: -0.1%
Entry on November 11 at $53.15
Listed on November 09, 2015
Time Frame: Exit PRIOR to earnings on December 22nd
Average Daily Volume = 2.3 million
New Positions: see below

Comments:
12/10/15: PAYX bounced near yesterday's lows but the rebound struggled in the $53.50 area. PAYX is developing a short-term bearish trend of lower highs. The 10-dma crossing under its 20-dma is also short-term bearish. More conservative investors may want to exit early.

No new positions at this time.

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


Qorvo, Inc. - QRVO - close: 57.50 change: +1.35

Stop Loss: 55.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 05, 2015
Time Frame: Exit prior to earnings in late January
Average Daily Volume = 2.2 million
New Positions: Yes, see below

Comments:
12/10/15: Yesterday traders bought the dip in QRVO near $54.85 and shares staged a late afternoon rally. That rally continued today and QRVO outperformed the broader market with a +2.4% gain. We are still on the sidelines. The $60.00 level remains overhead resistance.

Trade Description: December 5, 2015:
2015 has been a bumpy ride for QRVO investors. Fortunately the stock appears to have found a bottom over the last few months. Right now semiconductors are in rally mode. We could see QRVO break through key resistance soon.

QRVO is in the technology sector. According to the company, "Qorvo is a leading provider of core technologies and RF solutions for mobile, infrastructure and aerospace/defense applications. Qorvo was formed following the merger of RFMD and TriQuint, and has more than 7,000 global employees dedicated to delivering solutions for everything that connects the world. Qorvo has the industry's broadest portfolio of products and core technologies; world-class ISO9001-, ISO 14001- and ISO/TS 16949-certified manufacturing facilities; and is a DoD-accredited 'Trusted Source' (Category 1A) for GaAs, GaN and BAW products and services."

The company has beaten Wall Street's estimates on both the top and bottom line the last three quarters in a row. Their most recent report was November 5th. QRVO announced their Q3 results with earnings of $1.22 a share. That was 11 cents above estimates. Revenues were up +11.6% to $707 million, above the $699 million estimate. The quarter was driven by a +19% jump in their mobile products segment.

QRVO's President and CEO Bob Bruggeworth commented on the quarter, "The Qorvo team delivered a solid September quarter, with quarterly revenue increasing 12% year-over-year, led by strong 19% year-over-year growth in Mobile Products. Design activity during the quarter was particularly robust, as we secured multiple opportunities to expand content in the marquee smartphones launching in calendar 2016 and 2017 and positioned IDP to accelerate growth across its target markets." Steve Buhaly, chief financial officer, said, "In the nine months since Qorvo's formation, revenue has grown 25% from the same period in the prior year while non-GAAP operating income has nearly doubled. We're proud of this performance and are excited about our opportunities in the coming year."

QRVO management raised their Q4 EPS guidance above analysts' estimates but their revenue guidance was below Wall Street expectations. They also announced a one-year $1 billion stock buyback program, which suggest that management believes their stock is too cheap. Shares soared to multi-week highs the next day (Nov. 6th).

Previously there was some concern about Apple's iPhone sales and their impact on QRVO since QRVO is a major component supplier to Apple. Wall Street has been worried that Apple's iPhone sales would slow down, which helped pressure QRVO's stock lower. The company's generally optimistic guidance for Q4 helped soothe these fears. Investors should be aware that QRVO's stock could be sensitive to any news regarding AAPL's iPhone sales.

Technically QRVO's stock is in a new bull market with a rally from its lows near $42. The point & figure chart is bullish and forecasting at $67 target. At the moment QRVO is hovering just below round-number resistance at $60.00. Tonight we are suggesting a trigger to launch bullish positions at $60.25. I will point out that prior support from early 2015 in the $63.00 area is potential resistance but we are expecting a rally toward the $70 area.

Trigger @ $60.25

- Suggested Positions -

Buy QRVO stock @ $60.25

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

Buy the FEB $65 CALL (QRVO160219C65)

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


Starbucks Corp. - SBUX - close: 61.87 change: +0.69

Stop Loss: 58.95
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 08, 2015
Time Frame: Exit prior to earnings in January
Average Daily Volume = 8.8 million
New Positions: Yes, see below

Comments:
12/10/15: SBUX is looking a little bit healthier with a bounce off its rising 50-dma. Shares showed some relative strength with a +1.1% gain on the session. Our suggested entry point is $62.65.

Trade Description: December 8, 2015:
Do you know someone giving or getting a Starbucks gift card for the holidays this year? Odds are you do (see below). The recent action in SBUX looks like another bullish entry point.

We have traded SBUX more than once this year. Here is an updated play description and entry point on the stock:

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.

Sales Growth:

SBUX is a big company and yet they continue to deliver strong earnings and revenue growth. Their Q2 2015 results, released in April, saw revenues up +17.8%. Q3 results, announced in July, saw revenues up +17.5%. Their Q4 results were announced on October 29th. Revenues grew +17.5% again. The company has been killing it with strong same-store sales. Q1's global same-store sales were +7%. Q2's same-store sales were also +7%. Q3's rose to +8%. What's impressive is SBUX is able to deliver this sort of sales growth in spite of the strong dollar and its negative foreign currency impact.

SBUX management provided guidance for Q1 2016 with earnings just below analysts' estimates. They still see double-digit revenue growth next year. The company plans to open about 1,800 new locations in fiscal 2016.

SBUX continues to build out their technology improvements. They see millions of orders a week on their mobile transactions platform. Currently they are testing a delivery service in Seattle.

It's also worth mentioning that the holiday season is normally a strong one for SBUX. Last year one in seven Americans received a Starbucks gift card.

We should also note that there is currently an E. Coli scare going around. Chipotle (CMG) is getting hammered on this story. Other companies like Costco and Starbucks have also had issues with E. Coli in a few products recently but thus far the impact has been very limited for SBUX.

Technically SBUX is in an up trend. It is also one of the best performing stocks in the S&P 500 this year with SBUX up +50% year to date. The point & figure chart is forecasting at $68.00 target. The stock peaked in late October and has spent the last few weeks consolidating sideways. The dips below $60 found support near prior resistance and now SBUX has built a potential bullish double bottom pattern. Tonight we are suggesting a trigger to launch bullish positions at $62.65.

Trigger @ $62.65

- Suggested Positions -

Buy SBUX stock @ $62.65

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

Buy the FEB $65 CALL (SBUX160219C65)

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


Total System Services, Inc. - TSS - close: 56.09 change: +0.79

Stop Loss: 54.85
Target(s): To Be Determined
Current Gain/Loss: +1.7%
Entry on November 21 at $55.15
Listed on November 19, 2015
Time Frame: 6 to 9 weeks
Average Daily Volume = 1.4 million
New Positions: see below

Comments:
12/10/15: It looks like bulls are not giving up on TSS. Shares bounced off their 20-dma for the second day in a row. The stock surged to new highs before paring its gains. TSS managed to outperform the market with a +1.4% gain on the session.

No new positions at this time.

Trade Description: November 19, 2015:
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.

- Suggested Positions -

Long TSS stock @ $55.15

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

Long FEB $55 CALL (TSS160219C55) entry $2.60

12/01/15 new stop @ 54.85
11/20/15 triggered @ $55.15
Option Format: symbol-year-month-day-call-strike


Yelp Inc. - YELP - close: 30.83 change: +0.83

Stop Loss: 28.85
Target(s): To Be Determined
Current Gain/Loss: +11.1%
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:
12/10/15: YELP also showed relative strength today. The stock bounced with a +2.7% gain. While this rebound is encouraging I want to caution readers that YELP's rally failed in the $31.30-31.40 zone for the second time in three days.

No new positions at this time.

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

12/05/15 new stop @ 28.85
11/21/15 new stop @ 27.90
11/18/15 triggered @ $27.75
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Columbia Sportswear - COLM - close: 45.35 change: -0.14

Stop Loss: 48.05
Target(s): To Be Determined
Current Gain/Loss: -1.3%
Entry on December 08 at $44.75
Listed on December 07, 2015
Time Frame: Exit prior to earnings in February
Option traders exit prior to January expiration
Average Daily Volume = 284 thousand
New Positions: see below

Comments:
12/10/15: COLM started to rally this afternoon but the bounce failed near $46.25. Shares reversed lower and underperformed the broader market with a -0.3% decline. I am suggesting investors wait for a new decline under $44.60 before initiating bearish positions.

Trade Description: December 7, 2015:
The pace of consumer spending has been disappointing this year. Overall retail sales have been slow. Plus the warmer weather has been a major set back for outerwear and winter clothing a lot of retailers are dealing with high levels of unsold inventory.

COLM is in the consumer goods sector. According to the company "Columbia Sportswear Company has assembled a portfolio of brands that connect active people with their passions, making it a leader in the global active lifestyle apparel, footwear, accessories and equipment industry. Founded in 1938 in Portland, Oregon, the company's brands are today sold in approximately 100 countries. In addition to the Columbia® brand, Columbia Sportswear Company also owns the Sorel®, Mountain Hardwear®, prAna®, Montrail® and OutDry® brands."

Bullish COLM investors have got to be frustrated. It's true that a lot of retailers have struggled. Yet COLM has had pretty good results this year. Their Q4 report from 2014, announced in February, was above estimates and management raised guidance. The stock soared on the bullish report and guidance.

Their Q1 results, on April 30th, beat estimates and guidance was in-line. Then on July 30th, COLM reported their Q2 results. Again earnings and revenues beat estimates by a wide margin. Management raised their guidance again. Shares of COLM exploded to new all-time highs and almost hit $75.00. That has proven to be the peak.

Since COLM's report in July the market has begun selling COLM's stock. The up trend reversed with COLM sinking under a bearish pattern of lower highs and lower lows. They reported their Q3 results on October 29th. They beat estimates again and raised their full-year guidance. The stock gapped higher nearly $10 the next day only to reverse lower.

Dick's Sporting Goods (DKS) really shook up the retail industry when they reported their earnings on November 17th. DKS missed Wall Street estimates on both the top and bottom line and DKS guided lower. The company blamed warm fall weather on their disappointing results. DKS also warned that Q4 would likely be very promotional, which would hurt margins. A few days later Bank of America Merrill Lynch downgraded COLM from "buy" to "neutral" over similar worries.

Technically COLM is in a bear market. The point & figure chart is forecasting at $36.00 target. COLM bounced off the $45.00 level in November. That bounce has failed. Now shares are about to breakdown under key support at $45.00. We are suggesting a trigger to launch bearish positions at $44.75.

- Suggested Positions -

Short COLM stock @ $44.75

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

Long JAN $45 PUT (COLM160115P45) entry $2.80

12/08/15 triggered @ $44.75
Option Format: symbol-year-month-day-call-strike


Harley-Davidson, Inc. - HOG - close: 46.32 change: +0.18

Stop Loss: 48.25
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 09, 2015
Time Frame: Exit prior to earnings in January
Average Daily Volume = 3.15 million
New Positions: Yes, see below

Comments:
12/10/15: Thursday turned out to be a very mellow session for HOG with shares drifting sideways inside a 50-cent range. There is no change from last night's new play description. Our suggested entry point is $45.75.

Trade Description: December 9, 2015:
HOG was a big winner during the market's rally off the 2009 bear-market low. Shares surged from about $8 in early 2009 to over $74.00 in 2014. Unfortunately that bullish momentum is long gone.

HOG is in the consumer goods sector. According to the company, "Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Since 1903, Harley-Davidson Motor Company has fulfilled dreams of personal freedom with custom, cruiser and touring motorcycles, riding experiences and events and a complete line of Harley-Davidson motorcycle parts, accessories, general merchandise, riding gear and apparel. Harley-Davidson Financial Services provides wholesale and retail financing, insurance, extended service and other protection plans and credit card programs to Harley-Davidson dealers and riders in the U.S., Canada and other select international markets."

The company has seen sales slow down. Their most recent earnings report was October 20th. Q3 earnings growth was flat (+0%) from a year ago at $0.69 a share. That missed estimates by 8 cents. Revenues only rose +0.9% to $1.14 billion, which also missed estimates. The company said their dealer new motorcycle sales were down -1.4% worldwide from a year ago. Their U.S. sales fell -2.5%. Shipments came in below guidance.

Matt Levatich, President and Chief Executive Officer, said, "We expect a heightened competitive environment to continue for the foreseeable future." The company lowered their shipment guidance for 2015. They also lowered their margin guidance. The stock reacted with a big drop on the earnings miss and lowered guidance. Multiple analyst firms downgraded the stock in response to the news.

Technically HOG is in a bear market. Shares have a bearish trend of lower highs and lower lows. HOG spent most of November struggling with resistance at $50.00. The recent weakness has pushed shares to new two-year lows. The next drop could push HOG toward $40 or lower. Tonight we are suggesting a trigger to launch bearish positions at $45.75.

My biggest concern is some analyst deciding that HOG looks "cheap" on valuation. At this point HOG could be a value trap. Cheap stocks can always get cheaper.

Trigger @ $45.75

- Suggested Positions -

Short HOG stock @ $45.75

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

Buy the FEB $45 PUT (HOG160219P45)

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


Leucadia National Corp. - LUK - close: 17.22 change: -0.04

Stop Loss: 18.75
Target(s): To Be Determined
Current Gain/Loss: +2.7%
Entry on November 30 at $17.70
Listed on November 28, 2015
Time Frame: 6 to 9 weeks
Average Daily Volume = 2.1 million
New Positions: see below

Comments:
12/10/15: LUK continues to sink with shares losing another -0.2% on Thursday. These are new six-year lows for the stock. Investors may want to start adjusting their stop loss lower. The $18.00 level should be new resistance.

Trade Description: November 28, 2015:
Investors appear to have soured on shares of LUK. The stock is down -20% year to date but it's off -29% from its July 2015 highs. LUK just ended the week at new five-year lows.

LUK is considered part of the financial sector. One of their biggest businesses is their Jefferies Group investment brokerage. Jefferies is only one in a long list of companies that LUK owns. You could argue LUK is more of a holding company or a conglomerate and a very diverse one at that.

Here's a list of some of LUK's businesses:
Berkadia, a full-service mortgage bank
FXCM, an online foreign exchange trading platform (NYSE:FXCM)
HomeFed, a real estate developer (65% owned by LUK)
Foursight Capital, an Auto loan originator and servicer
Leucadia Asset Management, a diversified alternative asset management platform
Folger Hill, a multi-manager discretionary long/short equity hedge fund platform
Topwater Capital, a highly-scalable multi-manager and multi-strategy liquid securities fund
Jefferies, a leading, client-focused global investment banking firm
Jefferies LoanCore, a joint venture between Jefferies and GIC Private Ltd (f.k.a. Government of Singapore Investment Corporation), is a finance company focused on originating and securitizing commercial mortgage loans
National Beef, a beef processing company that processes ~3 million fed cattle per year representing ~12.5% market share
HRG Group, a diversifed holiday company (NYSE: HRG) that operates in four business segments: consumer products - Spectrum Brands (NYSE: SPB, ~58% ownership); insurance - Fidelity & Guaranty Life (NYSE: FGL, ~81% ownership (1)); FrontStreet Re (100% ownership); Energy - Compass Production (~100% ownership); Asset Management (de minimis net book value).
Garcadia, 26 auto dealerships
Vitesse Energy
Juneau Energy
Linkem, a fixed wireless broadband internet provider in Italy
Conwed, a leading manufacturer of extruded, oriented and knitted plastic netting
Idaho Timber
Golden Queen (gold and silver mine)
(more details about LUK company .pdf
The earnings picture for LUK has taken a drastic turn for the worse. Their Q1 report, announced March 17th, showed earnings of $11.7 million versus $112 million a year ago. Q1 revenues were down -34%. LUK delivered similar results with their Q2 earnings, announced August 5th. Earnings per share were $0.11 compared to $1.12 a year ago. Revenues were flat at $2.84 billion. Their most recent earnings report was November 5th, 2015. LUK reported their Q3 results, which was a loss of ($0.47) a share versus a profit of $0.14 a year ago. Revenues plunged -21% to $2.36 billion. You can see why investors might be selling the stock.

Management has been trying to take advantage of their low stock price with an aggressive stock buyback program but it's not making much difference. Technically shares of LUK are in a bear market and showing significant relative weakness.

The point & figure chart is very bearish and forecasting an $11.00 target. The last few days LUK has been trying to hold short-term support near $18.00 but that appears to have failed. Tonight we are suggesting a trigger to launch bearish positions at $17.70.

- Suggested Positions -

Short LUK stock @ $17.70

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

Long MAR $18 PUT (LUK160318P18) entry $1.20

11/30/15 triggered @ $17.70
Option Format: symbol-year-month-day-call-strike


iPath S&P500 VIX Futures ETN - VXX - close: 20.28 change: +0.29

Stop Loss: None, no stop at this time.
Target(s): $16.65
Current Gain/Loss: + 7.4%
2nd position Gain/Loss: +30.1%
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:
12/10/15: The VXX diverged from the VIX today. The volatility index (VIX) fell -1.3% but the VXX added +1.4%.

Currently our exit target is $16.65.

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