Editor's Note:
The U.S. market sank again on Thursday thanks to another down day in oil and further weakness across the retail-related names. Small caps underperformed.

ETN hit our stop loss.
LULU hit our entry trigger.


Current Portfolio:


BULLISH Play Updates

Microsoft Inc. - MSFT - close: 53.32 change: -0.33

Stop Loss: 52.15
Target(s): To Be Determined
Current Gain/Loss: -2.3%
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:
11/12/15: MSFT held up better than most of its rivals today. The NASDAQ slipped -1.2% while the S&P 500 fell -1.39%, its worst one-day drop in six weeks. MSFT only lost -0.6% today. Yet if this market retreat continues I expect MSFT to follow stocks lower. MSFT should have support near $52.50 but I am not suggesting 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: 52.85 change: -0.32

Stop Loss: 51.25
Target(s): To Be Determined
Current Gain/Loss: -0.6%
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:
11/12/15: PAYX was not immune to the market's widespread decline today. Fortunately shares only fell -0.6% versus the NASDAQ's -1.2% loss.

If this market decline continues we could get a buy-the-dip entry point in PAYX near the $52.50 area or even $52.00 if PAYX trades below its 10-dma.

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




BEARISH Play Updates

Denny's Corp. - DENN - close: 9.87 change: -0.09

Stop Loss: 10.85
Target(s): To Be Determined
Current Gain/Loss: +0.3%
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:
11/12/15: The rally attempt in DENN this morning failed near yesterday's high. Shares reversed and set another new 10-month closing low. I would consider new bearish positions at current levels.

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

11/10/15 triggered @ $9.90
Option Format: symbol-year-month-day-call-strike


Lululemon Athletica - LULU - close: 48.16 change: +0.59

Stop Loss: 50.05
Target(s): To Be Determined
Current Gain/Loss: -1.9%
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:
11/12/15: Most of the retail-related names had another down day with the XRT falling -1.2%, which was in-line with the broader market. Athletic apparel giants like NKE and UA also followed the market lower. LULU was an exception. Shares of LULU dipped to new 2015 lows this morning, tagged our suggested entry point at $47.25, and quickly bounced. Shares rallied up towards $49 before paring their gains for the day with a +1.24% advance.

I don't see any specific news behind today's relative strength in LULU. I would wait for another drop below $47.40 or a drop below $47.00 before considering new bearish positions.

Trade Description: November 11, 2015:
Disappointing earnings guidance and rising competition have been tough on shares of LULU. It doesn't help that expectations for this holiday season are falling.

LULU is in the consumer goods sector. According to the company, "lululemon athletica inc. (LULU) is a yoga-inspired athletic apparel company with products that create transformational experiences for people to live happy, healthy, fun lives. Setting the bar in technical fabrics and functional designs, lululemon works with yogis and athletes in local communities for continuous research and product feedback."

LULU's most recent earnings report was September 10, 2015. The company beat the bottom line estimate by a penny. Revenues were up +16% from a year ago and came in above estimates. Comps showed strength with a +11% improvement on a constant dollar basis. However, management spoiled the news by drastically lowering their Q3 estimates below Wall Street expectations. The stock was crushed on this outlook.

LULU is facing a few challenges. The biggest challenge is rising competition. The athleisure trend in apparel has been around for a while now but everyone is trying to cash in on it. That includes heavyweights like Under Armour and Nike. Nike plans to almost double its sales in women's apparel by 2020. You can bet they plan on stealing some market share from its smaller rivals like LULU. LULU also has competition from other apparel stores like the Gap (with all of its various labels) and Victoria's Secret. If rising competition wasn't enough LULU has also raised their prices, which could further drive consumers toward lower cost alternatives.

Bigger picture the outlook for holiday spending this year is wilting. In the last couple of weeks multiple analyst firms have released reports that consumers will spend less time in stores (lower traffic). Plus, retail sales growth is expected to fall from last year, especially on apparel.

Technically LULU is in another bear market. The stock is down -32% from its 2015 highs. Shares have a bearish trend of lower highs as investors keep selling the rallies. Now LULU has fallen to short-term support in the $47.40-47.50 area.

My biggest concern is the elevated short interest. The most recent data listed short interest at 27% of the 110 million share float. That many shorts can make this stock volatile as weak hands could panic on any bounce. Of course longer-term the bears are probably right on LULU until the story changes. Readers may want to trade the put options to limit their risk. Tonight we are suggesting a trigger to launch bearish positions at $47.25. Plan on exiting prior to LULU's earnings report in mid December.

- Suggested Positions -

Short LULU stock @ $47.25

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

Long DEC $45 PUT (LULU151218P45) entry $2.40

11/12/15 triggered @ $47.25
Option Format: symbol-year-month-day-call-strike


Skechers U.S.A. Inc. - SKX - close: 26.60 change: +0.24

Stop Loss: 29.05
Target(s): To Be Determined
Current Gain/Loss: + 9.5%
Entry on November 05 at $29.40
Listed on November 04, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 2.1 million
New Positions: see below

Comments:
11/12/15: After a big drop yesterday SKX managed an oversold bounce today. Shares added +0.9% but that's after trimming its morning rally.

More conservative traders may want to tighten their stop loss further. No new positions at this time.

Trade Description: November 4, 2015:
Sometimes investors can get spoiled when a company is executing really well. When that company suddenly stumbles the reaction can be extremely painful. SKX definitely stumbled when they reported their Q3 results on October 22nd.

SKX is in the consumer goods sector. According to the company, "SKECHERS USA, Inc., based in Manhattan Beach, California, designs, develops and markets a diverse range of lifestyle footwear for men, women and children, as well as performance footwear for men and women. SKECHERS footwear is available in the United States and over 120 countries and territories worldwide via department and specialty stores, more than 1,200 SKECHERS retail stores, and the Company's e-commerce website. The Company manages its international business through a network of global distributors, joint venture partners in Asia, and 13 wholly-owned subsidiaries in Brazil, Canada, Chile, Japan, Latin America and throughout Europe."

SKX has turned in some impressive numbers this year. Back in April they reported their Q1 results, which beat estimates on both the top and bottom line. Revenues were up +40% from a year ago and hit a company record for quarterly sales. Three months later SKX did it again. They reported their Q2 results on July 29th. SKX beat estimates on both the top and bottom line. Revenues were up +36% from a year ago and another new record.

You can imagine the market's surprise when SKX reported their Q3 results on October 22nd and missed estimates on both the top and bottom line. Analysts were expecting a profit of $0.55 a share on revenues of $876 million. SKX only delivered $0.43 a share. Revenues were up +27% to $856 million. It was another record quarter for sales - their highest ever. Yet investors were suddenly worried about a slowdown in growth. There does seem to be a trend developing. Q1 revenues were +40%. Q2 was up +36%. Q3 +27%.

Prior to SKX's Q3 report the stock was up +150% year to date. The stock was up +400% from its 2014 lows. You could say the stock had gotten ahead of itself and suddenly investors hit the expectations reset button. Shares of SKX plunged -31% in one day (Oct. 23rd). Management said that negative foreign currency exchange rates in Brazil, Canada and Chile, combined with a slow domestic retail environment hurt results.

In SKX's Q3 press release they provided more details:

The Company's diluted earnings per share for the third quarter of 2015 was negatively impacted by several factors including foreign currency translation and exchange losses of $13.5 million, and increased deferred rent expenses of $3.5 million related to the new Fifth Avenue Skechers retail store, which opened during the third quarter, and a second Skechers location in Times Square, which just opened. Additionally, during the third quarter of 2015 diluted earnings per share were impacted by increased legal expenses of $5.0 million related to the settlement of personal injury lawsuits from the Company's toning footwear business; and $5.9 million in higher legal fees and associated costs primarily related to intellectual property litigation, which included the matter of Converse, Inc. v. Skechers U.S.A., Inc., which went to trial before the International Trade Commission in August of this year. The Company believes that most, if not all, of these legal matters will come to a conclusion by early next year. During the third quarter of 2015, these additional expenses reduced diluted earnings per share by $0.15.
Technically the big drop in shares of SKX has done a ton of damage. The point & figure chart is now forecasting a long-term target of $11.00 (I doubt SKX will get that low). It is significant that there has been almost no oversold bounce. SKX tried to bounce but it failed at its 200-dma. Now after consolidating sideways the last several days SKX is starting to breakdown again. Shares underperformed the market today with a -4.9% decline.

The intraday low on October 23rd was $29.55. Tonight we are suggesting a trigger to launch bearish positions at $29.40. I suspect the $25.00 level is potential round-number support and could make a good short-term target for the bears.

FYI: SKX had a 3-for-1 stock split on October 15, 2015.

- Suggested Positions -

Short SKX @ $29.40

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

Long 2016 JAN $25 PUT (SKX160115P25) entry $1.00

11/11/15 new stop @ 29.05
11/05/15 triggered @ $29.40
Option Format: symbol-year-month-day-call-strike


Seagate Technology - STX - close: 34.08 change: -2.04

Stop Loss: 37.25
Target(s): To Be Determined
Current Gain/Loss: +4.9%
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:
11/12/15: The sell-off in STX accelerated on Thursday with a -5.6% plunge to new two-year lows. I would not chase STX at current levels. More conservative investors may want to lower their stop loss again.

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

11/11/15 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: 20.56 change: +1.66

Stop Loss: None, no stop at this time.
Target(s): $16.65
Current Gain/Loss: + 5.8%
2nd position Gain/Loss: +29.1%
Entry on August 25 at $21.82
2nd position: September 2nd at $29.01
Listed on August 24, 2015
Time Frame: Exit prior to October option expiration
Average Daily Volume = 50 million
New Positions: see below

Comments:
11/12/15: The market's recent pullback accelerated lower today. The S&P 500 delivered its worst, one-day session in six weeks. This fueled a big bounce in the volatility index (VIX), which rose +14.3%. The VXX gained +8.7%.

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

Eaton Corp. - ETN - close: 54.19 change: -1.33

Stop Loss: 54.75
Target(s): To Be Determined
Current Gain/Loss: -4.2%
Entry on November 03 at $57.15
Listed on November 02, 2015
Time Frame: 6 to 8 weeks.
Average Daily Volume = 3.4 million
New Positions: see below

Comments:
11/12/15: The stock market's widespread decline fueled the pullback in shares of ETN. Shares gapped down at the open and dropped -2.39% on the session. Shares stalled near $54 and its simple 50-dma. Our new stop loss was hit at $54.75.

- Suggested Positions -

Long ETN stock @ $57.15 exit $54.75 (-4.2%)

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

2016 JAN $60 CALL (ETN160115C60) entry $0.75 exit $0.30 (-60.0%)

11/12/15 stopped out
11/11/15 new stop @ 54.75
11/03/15 triggered @ $57.15
Option Format: symbol-year-month-day-call-strike

chart: