Editor's Note:
It was an extremely volatile week for stocks but Friday's session was relatively calm. The major indices drifted sideways in a narrow range.


Current Portfolio:


BULLISH Play Updates

Oshkosh Corp. - OSK - close: 42.05 change: +0.54

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on August -- at $---.--
Listed on August 27, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.1 million
New Positions: Yes, see below

Comments:
08/29/15: OSK displayed some relative strength on Friday with a +1.3% gain. Yet shares did not hit our suggested entry point at $42.30. If the rally continues on Monday we could see this trade triggered.

Trade Description: August 27, 2015:
The future looks a little brighter for OSK after a big contract win from the U.S. military. OSK has been making vehicles for the military for over 90 years. Earlier this year (January) the military tested new prototypes for a new Humvee design from the likes of Lockheed Martin, AM General, and OSK. This week the Wall Street Journal reported that OSK had won the contract.

OSK is in the consumer goods sector. According to the company, "Oshkosh Corporation is a leading designer, manufacturer and marketer of a broad range of specialty access equipment, commercial, fire & emergency and military vehicles and vehicle bodies. Oshkosh Corporation manufactures, distributes and services products under the brands of Oshkosh®, JLG®, Pierce®, McNeilus®, Jerr-Dan®, Frontline®, CON-E-CO®, London® and IMT®. Oshkosh products are valued worldwide in businesses where high quality, superior performance, rugged reliability and long-term value are paramount."

The new Humvee contract is a big deal. The Pentagon has been cutting back on spending the last few years. This new contract could last 25 years. OSK won with its design that is lighter in weight, providers greater range, and better protection against mines and roadside bombs. Officially the vehicle is called a Joint Light Tactical Vehicle (JLTV).

The initial contract is valued at $6.75 billion for 17,000 vehicles. It could be extended out to year 2040 since the U.S. army wants to buy almost 50,000 new JLTVs for itself and about 5,500 for the Marines. The overall program could be worth $30 billion over 25 years.

OSK's revenues last year were only $6.2 billion so this is a nice boost.

Technically shares of OSK appear to have produced a bullish double bottom. The stock market's spike lower on Monday morning pushed OSK toward its late July lows. This week's rebound in the market has seen OSK breakout past resistance near $40.00 and its 50-dma. This reversal higher has produced a new buy signal on the point & figure chart, which is forecasting a long-term $63.00 target.

Today's high was $42.21. Tonight we are suggesting a trigger to launch bullish positions at $42.30.

Trigger @ $42.30

- Suggested Positions -

Buy OSK stock @ $42.30

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

Buy the 2016 Jan $45 CALL (OSK160115C45)

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

chart:


Starbucks - SBUX - close: 55.63 change: -0.32

Stop Loss: 51.15
Target(s): To Be Determined
Current Gain/Loss: +0.9%
Entry on August 27 at $55.15
Listed on August 25, 2015
Time Frame: Exit prior to earnings in October
Average Daily Volume = 8.0 million
New Positions: see below

Comments:
08/29/15: The U.S. stock market's rally stalled on Friday and SBUX followed suit. Shares briefly tagged a new high for the week at $56.31, just above its 20-dma, but the rally faded. SBUX ended Friday's session with a -0.5% decline. I would not be surprised to see a dip into the $53.00-54.00 region if the market slips this week (this would probably be our next entry point).j

Please note we are adding a stop loss at $51.15.

No new positions at this time.

Trade Description: August 25, 2015:
The sell-off in shares of SBUX is a bit ridiculous. The Thursday-Friday-Monday sell-off in the market saw SBUX fall from $57.59 to $42.05. That was a -27% drop in less than three days. The company's fundamentals didn't deteriorate -27%. The recent market turmoil presents an opportunity to buy SBUX. Jump to the bottom of this play description for details.

Here's a little bit about SBUX and the company's performance:

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.

Five-Year Plan

In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

Earnings results:

It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week.

SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years. Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

The trend of earnings pops continued in July with shares gapping up to new all-time highs following its Q2 report on July 23rd. Earnings were $0.42 per share, a penny above estimates. Revenues were up +17.5% to $4.88 billion, just a hair above expectations. Global same-store sales were up +7% and their non-GAAP operating margin improved 100 basis points to 19.5%. Management is still guiding 2015 revenues to rise +17% in the $19.1-19.4 billion range.

Recent Sell-off & Entry Point

The recent stock market bloodletting saw SBUX breakdown below a multitude of support levels. The weakness on Monday morning was just ridiculous. SBUX opened on Monday, August 24th near technical support at its 200-dma and then it plunged to $42.05. The stock bounced back to $50 by the closing bell. The rebound struggled today but SBUX displayed relative strength with a +1.48% gain versus a -1.35% drop in the S&P 500 and a -0.4% decline in the NASDAQ.

If the stock market continues to sink we want to take advantage of the weakness in SBUX and launch bullish positions on a dip near its 200-dma. Today the simple 200-dma is at $48.04. We will set our entry trigger at $48.00. We are starting this play without a stop loss. More conservative investors might want to wait on launching positions since the next few days could be volatile for the broader market (SBUX included).

- Suggested Positions -

Long shares of SBUX @ $55.15

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

Long NOV $57.50 CALL (SBUX151120C57.5) entry $2.00

08/29/15 new stop at $51.15
08/27/15 Triggered @ $55.15
08/26/15 Entry point adjustment - move the buy-the-dip trigger from $48.00 to $50.00. Plus, add a secondary trigger to open bullish positions at $55.15.
Option Format: symbol-year-month-day-call-strike

chart:


Wayfair Inc. - W - close: 42.22 change: +0.48

Stop Loss: None. No stop at this time.
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on August -- at $---.--
Listed on August 26, 2015
Time Frame: Exit
Average Daily Volume = 1.0 million
New Positions: Yes, see below

Comments:
08/29/15: Shares of W managed to recover a little bit from Thursday's relative weakness. The stock bounced +1.1% on Friday, which was enough to outperform the major indices. However, W remains stuck in the middle of its $40-45 range. We have decided to give W another day before removing it. If shares don't improve on Monday we'll likely cut it as a candidate. Our suggested entry point is $45.15.

Trade Description: August 26, 2015:
Tonight's new candidate has been outperforming the market and could see a short squeeze. Year to date W is up +116% and shows no signs of slowing down.

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

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

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

Revenue Growth

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

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

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

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

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

Big Potential

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

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

A few months ago in an interview one of the co-founders said that together the two co-founders own between 40% and 50% of the stock. The current float is only 30.1 million shares, which is relatively small. The most recent data listed short interest at 57% of the float.

Recent Strength

Shares of W soared to all-time highs in mid-August following its better than expected earnings and revenues. The stock market's recent crash bought the stock back to earth but investors bought the dip near support in the $40 area and its rising 50-dma. The recent bounce near $40.00 looks like a bullish entry point. However, the market remains volatile. We would like to see some follow through higher in shares of Wayfair. Therefore tonight we are listing a trigger to open bullish positions at $45.15. I do consider this a more aggressive, higher-risk trade due to W's volatility.

Trigger @ $45.15

- Suggested Positions -

Buy shares of W @ $45.15

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

Buy the NOV $50 CALL (W151120C50)

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

chart:




BEARISH Play Updates

iPath S&P500 VIX Futures ETN - VXX - close: 25.84 change: +1.13

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -18.4%
Entry on August 25 at $21.82
Listed on August 24, 2015
Time Frame: 2 or 3 weeks
Average Daily Volume = 50 million
New Positions: see below

Comments:
08/29/15: The stock market has produced a huge bounce off last Monday's lows. Yet investors remain worried. The VIX has receded but it is still elevated near 26. Readings above 20 tend to indicate higher levels of fear among traders. Meanwhile the VXX rallied again and tested its Wednesday highs before trimming some of its gains on Friday.

We are not suggesting new positions in the VXX 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

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

Long OCT $20 PUT (VXX151016P20) entry $2.93

08/25/15 trade begins. VXX gaps down at $21.82
Option Format: symbol-year-month-day-call-strike

chart: