Editor's Note:
The S&P 500 marked its third loss in a row. It was the seventh decline out of the last eight sessions. This move was sharp enough to erase the prior three week's worth of gains.

Double check your stop loss placement. We have updated a few stop losses tonight.


Current Portfolio:


BULLISH Play Updates

Microsoft Inc. - MSFT - close: 52.84 change: -0.48

Stop Loss: 52.15
Target(s): To Be Determined
Current Gain/Loss: -3.2%
Entry on November 04 at $54.60
Listed on November 03, 2015
Time Frame: 6 to 8 weeks.
Average Daily Volume = 35.4 million
New Positions: see below

Comments:
11/14/15: Big cap giant MSFT was not immune to the market's decline on Friday. Shares fell -0.9% but they did start to bounce from short-term support near $52.50.

I am not suggesting new positions at this time but a rebound from current levels could set up for another entry point.

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

chart:


Paychex, Inc. - PAYX - close: 52.36 change: -0.49

Stop Loss: 51.25
Target(s): To Be Determined
Current Gain/Loss: -1.5%
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:
11/14/15: I cautioned readers in the Thursday night newsletter that we might see PAYX dip toward $52.50 or potentially $52.00. Thanks to the market's widespread declines on Friday that is where PAYX seems to be heading.

Depending on your trading style you can buy a dip at $52.00 or wait for PAYX to bounce near $52.00 before considering new bullish positions.

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

chart:




BEARISH Play Updates

Denny's Corp. - DENN - close: 9.65 change: -0.22

Stop Loss: 10.25
Target(s): To Be Determined
Current Gain/Loss: +2.5%
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:
11/14/15: Restaurant stocks continued to underperform the market on Friday. Shares of DENN lost -2.2% and closed at new multi-month lows. Tonight we are adjusting our stop loss down to $10.25.

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

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

chart:


CarMax Inc. - KMX - close: 53.98 change: -1.47

Stop Loss: 57.25
Target(s): To Be Determined
Current Gain/Loss: +1.4%
Entry on November 13 at $54.75
Listed on November 12, 2015
Time Frame: Exit PRIOR to earnings in mid December
Average Daily Volume = 1.8 million
New Positions: see below

Comments:
11/14/15: Our brand new bearish trade on KMX is off to a good start. The market is starting to see clues that the surge in car buying might have peaked. Combine that with worries about consumer spending and you can see why KMX might be underperforming the market.

On Friday the stock broke down below support near $55.00 and hit our suggested entry point at $54.75.

Trade Description: November 12, 2015:
The labor market in the U.S. is healthy. The October jobs report came in above estimates at +271,000 jobs. Wages are actually rising. You would think this would be bullish for consumer spending. Unfortunately the demand for used cars seems to be slowing down.

KMX is in the services sector. According to the company, "CarMax, a member of the FORTUNE 500 and the S&P 500, is the nation's largest retailer of used cars. Headquartered in Richmond, Va., we currently operate 151 used car stores in 76 markets. The unique CarMax consumer offer allows customers to shop for vehicles the same way they shop for items at other 'big-box' retailers. We provide low, no-haggle prices; a broad selection of CarMax Quality Certified vehicles; and superior customer service. During the fiscal year ended February 28, 2015, we retailed 582,282 used vehicles and we sold 376,186 wholesale vehicles at our in-store auctions."

It looks like low interest rates has fueled huge demand for new cars. Last month the number of new cars sold in the U.S. hit ten-year highs with an annual pace of 18.24 million units. This is probably stealing market share from the used car market. Looking at KMX's last couple of earnings reports both their comparable store unit sales and their quarterly revenues have come in below estimates. Keep in mind that used car sales are still seeing growth but growth is slowing. That's hurting KMX's stock price since they are the largest retailer of used cars.

This stock peaked in April this year. KMX set a lower high in June. Since then shares have been stuck in a bearish trend of lower highs and lower lows. KMX is now in a bear market (down -26% from its 2015 high) and currently testing support near $55.00.

If KMX breaks key support at $55.00 it could signal the next major leg down. I wouldn't be surprised to see a drop toward $50 or even the late 2014 lows in the $44 region. Tonight we are suggesting a trigger to launch bearish positions at $54.75. Please note this is going to be a relatively short-term trade. KMX has earnings coming up in mid December. We will plan to exit prior to their announcement.

- Suggested Positions -

Short KMX stock @ $54.75

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

Long JAN $52.50 PUT (KMX160115P52.5) entry $2.00

11/13/15 triggered @ $54.75
Option Format: symbol-year-month-day-call-strike

chart:


Lululemon Athletica - LULU - close: 45.05 change: -3.11

Stop Loss: 48.25
Target(s): To Be Determined
Current Gain/Loss: +4.7%
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:
11/14/15: Retail-related stocks had a rough week. The market did not react well to earnings and guidance from Macy's (M) and Nordstrom (JWN). The disappointing retail sales numbers from the U.S. Commerce Department on Friday didn't help either.

Shares of LULU accelerated lower on Friday with a -6.4% plunge to new 2015 lows. Tonight we are adjusting the stop loss down to $48.25. No new positions at this time.

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

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

chart:


Skechers U.S.A. Inc. - SKX - close: 25.40 change: -1.20

Stop Loss: 27.65
Target(s): To Be Determined
Current Gain/Loss: +13.6%
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:
11/14/15: The sell-off in SKX continued on Friday with a -4.5% drop. Shares are now down seven out of the last eight sessions. The stock is testing what could be round-number, psychological support at the $25.00 level. We shouldn't be surprised if SKX bounces from here.

More conservative investors may want to take some money off the table now at current levels. Tonight we are adjusting the stop loss down to $27.65. 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

11/14/15 new stop @ 27.65
11/11/15 new stop @ 29.05
11/05/15 triggered @ $29.40
Option Format: symbol-year-month-day-call-strike

chart:


Seagate Technology - STX - close: 33.07 change: -1.01

Stop Loss: 36.25
Target(s): To Be Determined
Current Gain/Loss: +7.8%
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:
11/14/15: Technology stocks underperformed on Friday and STX fared worse than its peers. Shares lost another -2.9% by the closing bell and that's after a bounce off its Friday morning lows.

STX is looking short-term oversold with the stock down six days in a row. Tonight we are adjusting our stop loss down to $36.25. No new positions at this time.

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

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

chart:


iPath S&P500 VIX Futures ETN - VXX - close: 21.96 change: +1.40

Stop Loss: None, no stop at this time.
Target(s): $16.65
Current Gain/Loss: -0.6%
2nd position Gain/Loss: +24.3%
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:
11/14/15: The stock market has been retreating lower all week. Unfortunately the pullback started to gain some momentum in the last couple of days. Friday's drop fueled a big bounce in the volatility indices.

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

chart: