Editor's Note:
The U.S. stock market fell to new three-month lows before paring its losses on the session. The S&P 500 managed to close flat but the NASDAQ notched its eighth loss in a row. Crude oil continues to be a major drag on the market.

The volatility in biotech stocks stopped out the XBI trade. We closed the GME trade at the open this morning.

ETN hit our entry trigger.


Current Portfolio:


BULLISH Play Updates

The Kroger Co. - KR - close: 41.28 change: +0.48

Stop Loss: 40.45
Target(s): To Be Determined
Current Gain/Loss: -3.4%
Entry on December 30 at $42.75
Listed on December 26, 2015
Time Frame: Exit PRIOR to earnings in early March
Average Daily Volume = 726 thousand
New Positions: see below

Comments:
01/11/16: Our KR trade is still alive. Shares looked poised to break support at Friday's close. Today saw KR consolidate sideways most of the session and then surge higher in the last hour of trading. Shares outperformed the broader market with a +1.1% gain.

No new positions at the moment.

Trade Description: December 26, 2015:
If you're looking for a company with consistent growth then look no further. KR appears to be the king of same-store sales and recently announced 48 quarters of consecutive same-store sales growth.

KR is in the services sector. According to the company, "Kroger, one of the world's largest retailers, employs nearly 400,000 associates who serve customers in 2,626 supermarkets and multi-department stores in 34 states and the District of Columbia under two dozen local banner names including Kroger, City Market, Dillons, Food 4 Less, Fred Meyer, Fry's, Harris Teeter, Jay C, King Soopers, QFC, Ralphs and Smith's. The company also operates 780 convenience stores, 327 fine jewelry stores, 1,342 supermarket fuel centers and 37 food processing plants in the U.S."

A few months ago BusinessInsider ran an interesting article on KR that suggested the grocery chain is shaping up to be growing competition for the fast-food industry. A recent poll showed that 1 out of 4 consumers would choose Kroger instead of McDonald's to grab a quick bite to eat. KR has become more attractive because they have been expanding their prepared-food selection.

Another interesting tidbit came from CNBC Mad Money's Jim Cramer who said KR has twice the growth of rival Whole Foods Market (WFM). KR's most recent quarterly results showed same-store sales growth of +5.4%, which easily outpaces its rivals.

Speaking of Whole Foods, KR is quickly catching up. WFM built its brand on organic and natural foods, which also happen to have better margins than traditional grocery items. Rivals took notice and KR jumped into organics with both feet. According to JPMorgan, KR is on track to surpass WFM as the biggest seller of organic foods within the next two years. (FYI: Costco actually sells more organic food than anyone else in the U.S. but they are not a traditional grocery story).

Looking at the company's results they continue to beat estimates. KR announced their fiscal 2015 Q1 results on June 18th with earnings of $1.25 per share. That beat estimates of $1.22. Revenues were $33.05 billion, which actually missed estimates. The stock rallied anyway. KR management reaffirmed their fiscal year 2016 earnings forecast for $3.80-3.90 per share (essentially +10% growth).

Their 2015 Q2 results were announced on Sept. 11th. Earnings were $0.44 a share, beating estimates by five cents. Revenues were relatively flat at $25.44 billion. Same-store sales were up +5.3%. Management raised their full-year same-store sales guidance from +3.5%-4.5% to 4.0-5.0%

Q3 earnings came out on December 3rd. Earnings of $0.43 a share beat expectations by four cents. Revenues were still relatively flat at $25.07 billion (from a year ago). Same-store sales were up +5.4%. Management then raised their fiscal 2016 earnings guidance above Wall Street estimates. The stock soared on this report and bullish outlook.

Traders have been reluctant to let go of KR's stock. When the market dipped sharply a couple of weeks ago investors jumped in to buy the dip. Now KR has rebounded back toward its all-time highs. The point & figure chart is very bullish with a long-term target of $62.00. Thursday's intraday high was $42.67. Tonight we are suggesting a trigger to launch bullish positions at $42.75.

- Suggested Positions -

Long KR stock @ $42.75

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

Long APR $45 CALL (KR160415C45) entry $1.15

12/30/15 triggered @ $42.75
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Akamai Technologies - AKAM - close: 45.46 change: -2.64

Stop Loss: 46.85
Target(s): To Be Determined
Current Gain/Loss: +7.9%
Entry on January 07 at $49.34
Listed on January 06, 2016
Time Frame: Exit PRIOR to earnings in early February
Average Daily Volume = 2.1 million
New Positions: Yes, see below

Comments:
01/11/16: This morning, before the bell, one analyst lowered their price target on AKAM from $86 to $75. How did AKAM react? Shares plunged from $48 to $45 and ended the session with a -5.48% loss.

The $45.00 level is potential round-number support so I wouldn't be surprised to see AKAM deliver an oversold bounce here. We are going to try and protect a potential profit by adjusting the stop loss down to $46.85.

No new positions at this time.

Trade Description: January 6, 2016:
Right now the market's momentum is lower so we are adding a bearish momentum play. The long-term up trend in shares of AKAM appear broken after disappointing Q4 guidance. Shares underperformed the market last year with a -16% decline for 2015. That is thanks to a -33% plunge from its October peak (just before its Q3 earnings report).

AKAM is in the technology sector. According to the company, "As the global leader in Content Delivery Network (CDN) services, Akamai makes the Internet fast, reliable and secure for its customers. The company's advanced web performance, mobile performance, cloud security and media delivery solutions are revolutionizing how businesses optimize consumer, enterprise and entertainment experiences for any device, anywhere."

Shares were killed on October 28th with a -16.7% plunge following its Q3 earnings report. AKAM had reported earnings the night before. Analysts were expecting a profit of $0.58 a share on revenues of $550 million. The company said earnings grew +0% from a year ago to $0.62 a share. That beat estimates. Revenues were up +10% to $551 million, just a hair above expectations. The issue was AKAM's guidance. They guided Q4 revenues into the $557-577 million zone and Q4 earnings into the $0.60-0.64 range. Wall Street was forecasting Q4 revenues closer to $596 million and earnings near $0.65 a share.

Several analyst firms downgraded AKAM shares following its disappointing Q4 guidance. The stock has continued to underperform since this pivotal announcement with investors selling every rally. AKAM's stock tried to bounce off round-number support near $50 in mid December. Unfortunately the bounce has been failing at the $54.00 level. Now the broader market is in sell-off mode and AKAM is testing major support at $50.00 again. A breakdown here could signal a drop toward the $44-45 area. Tonight we are suggesting a trigger to launch small bearish positions at $49.75. I am suggesting smaller positions to limit risk since AKAM can be somewhat volatile.

*small positions to limit risk* - Suggested Positions -

Short AKAM stock @ $49.34

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

Long FEB $50 PUT (AKAM160219P50) entry $3.43

01/11/16 new stop @ 46.85
01/09/16 new stop @ 50.35
01/07/16 triggered on gap down at $49.34, suggested entry was $49.75
Option Format: symbol-year-month-day-call-strike


CF Industries - CF - close: 32.45 change: -1.37

Stop Loss: 34.15
Target(s): To Be Determined
Current Gain/Loss: +16.0%
Entry on January 06 at $38.65
Listed on January 05, 2016
Time Frame: Exit PRIOR to earnings in mid February
Average Daily Volume = 2.7 million
New Positions: see below

Comments:
01/11/16: Shares of CF continued to sink on Monday and underperformed the market with a -4.0% drop to new multi-year lows. Tonight we are adjusting our stop loss down to $34.15.

No new positions at this time.

Trade Description: January 5, 2016:
CF underperformed the broader market and its sector in 2015. The S&P 500 lost -0.7% for the year while the IYM basic materials ETF lost -14.4%. Shares of CF returned a -25% loss last year. Momentum remains to the downside.

According to the company, "CF Industries Holdings, Inc., headquartered in Deerfield, Illinois, through its subsidiaries is a global leader in the manufacturing and distribution of nitrogen products, serving both agricultural and industrial customers. CF Industries operates world-class nitrogen manufacturing complexes in Canada, the United Kingdom and the United States, and distributes plant nutrients through a system of terminals, warehouses, and associated transportation equipment located primarily in the Midwestern United States. The company also owns a 50 percent interest in an ammonia facility in The Republic of Trinidad and Tobago."

It is important to note that CF is currently in the process of merging with OCI. Here's a brief description, "OCI N.V. is a global producer and distributor of natural gas-based fertilizers and industrial chemicals based in the Netherlands. The company produces nitrogen fertilizers, methanol and other natural gas based products, serving agricultural and industrial customers from the Americas to Asia. The company ranks among the world's largest nitrogen fertilizer producers, and can produce more than 8.4 million metric tons of nitrogen fertilizers and industrial chemicals at production facilities in the Netherlands, the United States, Egypt and Algeria."

Once the merger is completed they plan to move the new company's headquarters to the Netherlands to reduce their tax burden. Last year some U.S. government officials voiced their displeasure at these tax-inversion mergers to avoid paying U.S. taxes. There is a chance (albeit a small one) that the U.S. tries to stop this merger before it's completed.

Meanwhile the company continues to struggle with weak prices for nitrogen fertilizer. Looking at CF's last four quarterly earnings reports they have missed Wall Street's earnings estimates three of the last four quarters (and two quarters in a row). Revenues were down -8.3%, -15.8%, -10.9%, and -0.7% in the most recently reported quarter.

CF faces tough competition from fertilizer producers in China and in Russia and the Ukraine. It is worth noting that Bank of America just recently came out with a bullish call on CF. The BoA analyst suggested that fertilizer prices are too low and will bounce and CF's stock price should bounce with it. CF claims demand remains strong but that doesn't help if prices keep falling (obviously demand isn't strong enough or prices would rise).

Technically the path of least resistance is down and CF just broke support near $40.00. These are new two-year lows. Tonight we are suggesting a trigger to launch bearish positions at $38.85. Plan on exiting prior to CF's earnings report in mid February.

- Suggested Positions -

Short CF stock @ $38.65

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

Long FEB $35 PUT (CF160219P35) entry $1.20

01/11/16: new stop @ 34.15
01/09/16: new stop @ 35.75
01/07/16: new stop @ 37.05
01/06/16: new stop loss @ 38.75
01/06/16: triggered on gap down at $38.65, suggested entry was $38.85
Option Format: symbol-year-month-day-call-strike


Eaton Corp. - ETN - close: 49.15 change: -0.02

Stop Loss: 51.85
Target(s): To Be Determined
Current Gain/Loss: -0.6%
Entry on January 11 at $48.85
Listed on January 09, 2016
Time Frame: Exit PRIOR to earnings in early February
Average Daily Volume = 3.9 million
New Positions: see below

Comments:
01/11/16: ETN fell to new multi-year lows this morning. Shares also tagged our suggested entry point for bearish positions at $48.85. Unfortunately ETN managed to pare its losses and close virtually unchanged on the session. That is a little bit worrisome. No new positions at current levels. I would wait for a new low (under $48.58) before initiating bearish positions.

Trade Description: January 9, 2016:
Industrial stocks did not have a good 2015. The XLI industrials ETF and the Dow Jones Industrial Average both fell more than -6% last year. ETN significantly underperformed its peers with a -23% decline for 2015. Part of the problem is weak demand overseas compounded by a stronger dollar. Plus, the manufacturing sector in the U.S. is in recession.

ETN is in the industrial goods sector. According to the company, "Eaton is a power management company with 2014 sales of $22.6 billion. Eaton provides energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton has approximately 99,000 employees and sells products to customers in more than 175 countries."

Earnings and revenue growth for ETN was challenging last year. The company lowered guidance four times in 2015. Their most recent earnings report (Q3 results) from October 30th showed revenues were down -9.2% from a year ago. Earnings were down -25%.

ETN management is trying to be proactive. They plan to expand their restructuring efforts into 2016. Hopefully they will be able to cut costs by another $190 million if all goes as planned. The one positive side of ETN's slide has been the surge in its dividend. The stock just closed at three-year lows, which as boosted the dividend yield to 4.2%. Although I don't know why you'd buy ETN for the dividend if you are in jeopardy of losing more than 4% in the stock. The point & figure chart is forecasting a $42.00 target.

The ISM index measures manufacturing activity in the United States. December's ISM reading was negative for the second month in a row and marked the sixth monthly decline in a row. Numbers under 50.0 on the ISM index represent contraction. November's was 48.6. December's slipped to 48.2. Odds are it will be under the 50.0 again this month.

With the industrial sector in recession, revenues and earnings falling, the bearish momentum in ETN should continue. Last week's market decline has pushed ETN below round-number, psychological support at the $50.00 level. Now shares are poised to accelerate lower. Tonight we are suggesting a trigger to launch bearish positions at $48.85. My only caution is our time frame. ETN has earnings coming up in early February (no confirmed date yet). This could be a short-term three-four week play.

- Suggested Positions -

Short ETN stock @ $48.85

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

Long FEB $47.50 PUT (ETN160219P47.5) entry $1.55

01/11/16: triggered @ $48.85
Option Format: symbol-year-month-day-call-strike


Harley-Davidson, Inc. - HOG - close: 42.90 change: -0.85

Stop Loss: 44.15
Target(s): To Be Determined
Current Gain/Loss: +6.2%
Entry on December 11 at $45.75
Listed on December 09, 2015
Time Frame: Exit prior to earnings in late January
Average Daily Volume = 3.15 million
New Positions: see below

Comments:
01/11/16: HOG was downgraded this morning. The stock reacted with a -4.2% plunge to new lows. Unfortunately shares started to bounce this afternoon and HOG pared its loss to -1.9%.

Tonight we are adjusting our stop loss down to $44.15.

No new positions at this time.

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.

- Suggested Positions -

Short HOG stock @ $45.75

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

Long FEB $45 PUT (HOG160219P45) entry $2.59

01/11/16 new stop @ 44.15
01/06/16 new stop @ 44.55
12/16/15 new stop @ 47.35
12/11/15 triggered @ $45.75
Option Format: symbol-year-month-day-call-strike


iPath S&P500 VIX Futures ETN - VXX - close: 24.02 change: -0.81

Stop Loss: None, no stop at this time.
Target(s): $16.65
Current Gain/Loss: -10.1%
2nd position Gain/Loss: +17.2%
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:
01/11/16: The VXX spiked up to 26.73 before reversing back into negative territory on the session. If the stock market will bounce the VXX should deflate in a hurry.

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

S&P Biotech ETF - XBI - close: 57.14 change: -3.37

Stop Loss: see below
Target(s): To Be Determined
Current Gain/Loss: -4.35
Entry on January 11 at $60.00
Listed on January 07, 2016
Time Frame: 3 to 4 weeks
Option traders: exit prior to February option expiration
Average Daily Volume = 4.3 million
New Positions: see below

Comments:
01/11/16: Biotech stocks were hammered again today. The group was one of the market's worst performers. The IBB biotech ETF dropped toward its 2015 lows before starting to pare its losses. We were trading the XBI. The plan was to buy a dip at $60.00, which should have been support.

This morning the XBI opened at $60.83 and then plunged to $55.51. Our trigger to open bullish positions was hit at $60.00 and then we were stopped out at $57.45 on the way down. In the original play description we discussed how volatile biotech stocks were and how this was an aggressive play but today's relative weakness was still somewhat surprising.

*small positions to limit risk* - Suggested Positions -

Long XBI @ $60.00 exit $57.45 (-4.3%)

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

FEB $65 CALL (XBI160219C65) entry $1.80 exit $0.75 (-58.3%)

01/11/16 stopped out at $57.45
01/11/16 triggered (buy-the-dip) at $60.00
01/09/16 Entry Strategy Update - We are listing two entry triggers.
One trigger is at $63.55 with a stop loss at $59.75.
The other is a buy-the-dip trigger at $60.00 with a stop at $57.45
(Note: the higher trigger has been adjusted from $63.40)
Option Format: symbol-year-month-day-call-strike

chart:



CLOSED BEARISH PLAYS

GameStop Corp. - GME - close: 29.38 change: +1.01

Stop Loss: 29.05
Target(s): To Be Determined
Current Gain/Loss: +6.3%
Entry on December 11 at $30.22
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: see below

Comments:
01/11/16: GME appeared to bottom last week. We decided in the weekend newsletter to exit this morning. Shares opened at $28.33 before surging to a +3.5% gain and breaking through resistance at $29.00 on Monday.

- Suggested Positions -

Short GME stock @ $30.22 exit $28.33 (+6.3%)

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

JAN $30 PUT (GME160115P30) entry $2.44 exit $2.00 (-18.0%)

01/11/16 planned exit this morning
01/09/16 prepare to exit on Monday morning
01/07/16 new stop @ 29.05, readers may want to take profits now
01/04/16 Caution - GME sank to new lows and reversed higher.
12/30/15 new stop @ 29.35
12/17/15 new stop @ 31.25
12/11/15 triggered on gap down at $30.22, suggested entry was $31.40
Option Format: symbol-year-month-day-call-strike

chart: