Editor's Note:

Our plan was to exit the SM put play on Friday at the close.

FISV and JACK were stopped out.

We have updated nearly all of our stop losses tonight!


Current Portfolio:


CALL Play Updates

Advance Auto Parts Inc. - AAP - close: 168.31 change: -0.08

Stop Loss: 165.85
Target(s): To Be Determined
Current Option Gain/Loss: -21.4%
Average Daily Volume = 1.0 million
Entry on July 23 at $170.25
Listed on July 18, 2015
Time Frame: Exit PRIOR to earnings on August 13th
New Positions: see below

Comments:
07/25/15: It was another down day for stocks on Friday but AAP held up reasonably well. Shares closed virtually unchanged for the day. We are going to try and reduce our risk by raising the stop loss up to $165.85.

I am not suggesting new positions at current levels. Wait for another rally past $170.25.

Trade Description: July 18, 2015:
If you listen to financial media long enough you will eventually hear pundits talk about "bulletproof stocks". AAP just might be a bulletproof stock. The company has lowered its earnings guidance three quarters in a row and yet traders continue to buy the stock. Today AAP is hovering at all-time, record highs.

AAP is part of the services sector. According to the company, "Headquartered in Roanoke, Va., Advance Auto Parts, Inc., the largest automotive aftermarket parts provider in North America, serves both the professional installer and do-it-yourself customers. As of January 3, 2015, Advance operated 5,261 stores and 111 Worldpac branches and served approximately 1,325 independently owned Carquest branded stores in the United States, Puerto Rico, the U.S. Virgin Islands and Canada. Advance employs approximately 73,000 Team Members."

There seems to be a divergence in the U.S. We are half way through 2015 and new car sales are surging. Dealers have already sold more than 8.5 million vehicles and the industry is on pace to challenge the all-time record of 17.4 million autos in one year. Yet the age of the average car on the road continues to climb. Next time you're stuck in traffic and all you see is a river of cars, bear in mind that the average car is now 11.4 years old. It's forecasted to 11.7 years old by 2019. Americans are keeping their car longer and longer (because most can't afford a new car). That's really good news for car part sales.

I mentioned AAP's earnings guidance earlier. AAP has actually missed Wall Street's bottom line estimates the last two quarters in a row. They have lowered their guidance three quarters in a row. On May 21st AAP reported its Q1 results of $2.39 per share. Revenues were up +2.3% to $3.04 billion. They lowered their fiscal year 2015 earnings guidance from $8.35-8.55 per shares down to $8.10-8.30. Analysts were expecting $8.51. AAP seems to be having a few issues digesting its acquisition of General Parts International, which took place in 2014.

Normally when a company lowers guidance the stock gets crushed. Yet traders keep buying the dips in AAP. Looking at the AAP's recent announcements there is an knee-jerk reaction gap down in their stock price and then shares of AAP immediately rebound. It's happened multiple times. You have to like that kind of resilience. You could say AAP is almost bulletproof.

The stock has been trading off technical support as it climbed from its May 2015 lows. Last week's breakout past resistance near $165.00 is very bullish. The point & figure chart is forecasting at $193.00 target. Odds are AAP will rally up to its earnings report on August 13th. We want to exit prior to the announcement.

- Suggested Positions -

Long AUG $175 CALL (AAP150821C175) entry $3.50

07/25/15 new stop @ 165.85
07/23/15 triggered @ $170.25
Option Format: symbol-year-month-day-call-strike

chart:


Adobe Systems Inc. - ADBE - close: 80.98 change: +0.34

Stop Loss: 79.85
Target(s): To Be Determined
Current Option Gain/Loss: -26.4%
Average Daily Volume = 2.64 million
Entry on July 16 at $82.65
Listed on July 14, 2015
Time Frame: Exit PRIOR to earnings in September
New Positions: see below

Comments:
07/25/15: ADBE bucked the market's downtrend on Friday. Shares bounced off technical support at the 50-dma and managed a +0.4% gain. I'm a little hesitant to launch new positions here with the broader market in decline.

We will raise our stop loss to $79.85.

Trade Description: July 14, 2015:
ADBE appears to have successfully completed its transition from a traditional pay up front software sales model to a subscription based pay-as-you-go model for its industry leading creative software.

ADBE is in the technology sector. They are part of the software industry. According to the company, "Adobe is changing the world through digital experiences. Content built and optimized with Adobe products is everywhere you look — from websites, video games, and smartphones to televisions, tablets, and beyond. Adobe Creative Cloud software offers the most innovative tools for creating digital media, while Adobe Marketing Cloud delivers groundbreaking solutions for data-driven marketing. Our leadership in these two emerging categories, Digital Media and Digital Marketing, provides our customers with a real competitive advantage, positioning Adobe for continued growth well into the future. As one of the largest software companies in the world, Adobe achieved revenue of more than US$4 billion in 2013."

Looking at the last couple of earnings reports ADBE has beaten Wall Street's bottom line estimate. They reported their Q1 report on March 17th. Earnings were up +46% from a year ago to $0.44 per share. It was their best quarterly earnings growth in four years and above analysts' estimates. Revenues were up almost +11% to $1.11 billion.

During the first quarter they added 517,000 customers to their subscription service. While that was up +28% from a year ago it missed expectations. Jumping to the second quarter ADBE said they added +639,000 new subscribers, which was well above estimates for +575K.

The company announced their Q2 earnings on June 16th. Earnings were up +30% to $0.48 per share, which beat estimates. Revenues hit a record of $1.16 billion, which was in-line with expectations.

Shantanu Narayen, Adobe's president and CEO, commented on the quarter, "Strong execution against our Creative Cloud, Document Cloud and Marketing Cloud businesses drove record revenue. We are accelerating the pace of innovation in our Cloud offerings and are thrilled to be launching our best Creative Cloud release to date, which includes Adobe Stock - our new stock content service." ADBE's executive vice president and CFO, Mark Garrett, said, "With our business model transition largely behind us, the positive financial benefits are now reflected in our P&L. We are driving more profit, earnings per share, cash flow and deferred revenue and unbilled backlog."

Management did lower their Q3 and 2015 forecast on both the top and bottom line. Yet investors seemed to ignore this earnings warning because it was all due to foreign currency exchange headwinds. ADBE is expecting their Adobe Marketing Cloud sales to grow more than +20% year over year.

Mr. Narayen, CEO, mentioned their new Adobe Stock service. This is a multimedia marketplace where users can buy and sell images. Analysts think this could add a significant revenue boost by 2017 (up to $1 billion a year).

Multiple analysts have upgraded their price target on ADBE since its earnings report. The most recent was on July 6th where ADBE garnered a new price target at $103.00. Currently the point & figure chart is only forecasting at $92.00 target.

Shares of ADBE broke out past major resistance near $80.00 in mid June. Then the market reversed lower in the last several days of June and shares of ADBE sank back toward prior resistance and now new support in the $80.00 region. The intraday low was $78.94 on July 7th where ADBE bounced off technical support at its rising 50-dma.

Investors have started buying the dip again and this bounce from support near $80.00 is a bullish entry point. We are suggesting a trigger to buy calls at $82.50.

- Suggested Positions -

Long OCT $85 CALL (ADBE151016C85) entry $2.80

07/25/15 new stop @ 79.85
07/22/15 new stop @ 79.65
07/16/15 triggered @ $82.65 (gap open)
Option Format: symbol-year-month-day-call-strike

chart:


Costco Wholesale - COST - close: 144.99 change: -0.61

Stop Loss: 143.85
Target(s): To Be Determined
Current Option Gain/Loss: -21.7%
Average Daily Volume = 2.0 million
Entry on July 23 at $146.85
Listed on July 22, 2015
Time Frame: Exit PRIOR to earnings on Sept. 30th
New Positions: see below

Comments:
07/25/15: Our COST trade is not off to a very good start. Shares are down two days in a row. Friday saw COST testing potential technical support at its 100-dma near $144.85.

I am suggesting readers wait on launching new positions. Let's see if COST can bounce from current levels. Just in case it doesn't bounce we are raising the stop loss to $143.85.

Trade Description: July 22, 2015:
Shares of COST are only up +3% year to date but they seem to have turned the corner after a three-month correction lower. The stock saw big gains in early February but that proved to be the peak. Shares fell almost $20 or -12% from its late March high to late June. Fortunately for the bulls the correction appears to be over.

If you're not familiar with COST they are in the services sector. The company runs a membership warehouse business that competes with the likes of Sam's Club (a division of Wal-Mart). According to the company, "Costco currently operates 672 warehouses, including 474 in the United States and Puerto Rico, 89 in Canada, 34 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, seven in Australia and one in Spain. The Company plans to open up to an additional 16 new warehouses (including one relocation to a larger and better-located facility) prior to the end of its fiscal year on August 30, 2015. Costco also operates electronic commerce web sites in the U.S., Canada, the United Kingdom and Mexico."

Earnings growth has been lackluster. Their most recent earnings report was May 28th. COST reported their Q3 earnings of $1.17 per share. That only beat estimates by a penny. Revenues were up +1.2% to $26.1 billion, which missed estimates. The company seems to be suffering from slow same-store sales.

COST's April same store sales fell -2.0% versus estimates for -0.3%. May same-store sales were flat (+0.0%). June's same-store sales were -1.0% against estimates for -0.1%. Analyst Charles Grom, with Sterne Agee CRT, says the headline number is not showing the whole picture.

According to Grom, COST's June same-store sales decline was only the second time since 2009 they were negative. If you remove currency headwinds and volatile gasoline prices from the mix then COST's sales are up +5.5% and traffic has been rising +4.0%.

Sterne Agee is not the only analyst firm bullish on COST. Piper Jaffray recently defended COST and reiterated their bullish "overweight" rating and $154 price target. A few days later Oppenheimer's analyst Brian Nagel upgraded COST from perform to outperform and gave the stock a $160 price target.

Shares of COST have definitely broken their three-month bearish trend of lower highs. COST has also rallied past technical resistance at its 50-dma, 200-dma, and the $145.00 level. We think the rally continues. Today's high was $146.48. We're suggesting a trigger to buy calls at $146.75.

- Suggested Positions -

Long OCT $150 CALL (COST151016C150) entry $3.00

07/25/15 new stop @ 143.85
07/23/15 triggered on gap open at $146.85, trigger was $146.75
Option Format: symbol-year-month-day-call-strike

chart:


The Walt Disney Co. - DIS - close: 118.91 change: +0.11

Stop Loss: 117.85
Target(s): To Be Determined
Current Option Gain/Loss: +117.4%
Average Daily Volume = 5.7 million
Entry on June 18 at $112.25
Listed on June 17, 2015
Time Frame: Exit PRIOR to earnings on August 4th
New Positions: see below

Comments:
07/25/15: Shares of DIS were upgraded (again) on Friday and given a $138 price target. The news didn't do much for the stock but shares did not follow the broader market lower so I can't complain.

DIS appears to be stuck consolidating sideways between short-term support at its 10-dma and short-term resistance at $120.00. We plan to exit prior to DIS' earnings report on August 4th.

Tonight we are raising the stop loss up to $117.85.

Trade Description: June 17, 2015:
Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.

The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.

Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. In 2013 they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits in 2014 Captain America: Winter Soldier and Guardians of the Galaxy. Their 2015 Avengers: Age of Ultron was also a big winner at the box office grossing more than $1.3 billion worldwide. Of course not every Disney movie crushes it. Their recent Tomorrowland was a big disappointment and they could lose more than $100 million on the film.

Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. The next Star Wars film it titled "The Force Awakens." It will be episode seven in the franchise. The movie doesn't hit theaters until December 2015 but analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.

DIS management loves movie franchises because they can fuel years of sequels, park rides, and merchandise. The approach seems to be working. Revenues and net income have hit all-time highs for five consecutive quarters. Their 2015 Q1 results saw earnings per share up +23% to $1.27. Their Q2 results saw earnings grow +14% to $1.23 per share. Their domestic theme parks showed a strong surge in both attendance and in customer spending. Analysts are forecasting DIS earnings to grow +17% this year.

The stock surged to new all-time highs back in early May after its Q2 earnings report. Shares have since spent the last six weeks digesting gains in a sideways consolidation that has ignored much of the broader market's volatility. More recently DIS has started to rebound and is now at the top of its trading range. A breakout here could signal the next leg higher.

The point & figure chart is bullish and forecasting at long-term target of $154.00. I personally suspect that DIS could rally toward $120-125 before its next earnings report in August. Credit Suisse recently upped their price target to $130. Tonight we are suggesting a trigger at $112.25 to buy calls.

- Suggested Positions -

Long AUG $115 CALL (DIS150821C115) entry $2.30

07/25/15 new stop @ 117.85
07/22/15 new stop @ 117.25
07/16/15 Our call option has more than doubled in value. Traders may want to take some money off the table here.
07/14/15 new stop @ 115.85
06/27/15 new stop @ 112.25
06/18/15 triggered @ $112.25
Option Format: symbol-year-month-day-call-strike

chart:


INSYS Therapeutics - INSY - close: 43.34 change: -0.91

Stop Loss: 41.85
Target(s): To Be Determined
Current Option Gain/Loss: +26.5%
Average Daily Volume = 607 thousand
Entry on July 01 at $36.30
Listed on June 30, 2015
Time Frame: Exit PRIOR to earnings in August
New Positions: see below

Comments:
07/25/15: Friday was actually a relatively quiet day for INSY if we an overlook the 30 minutes of selling that drove shares down toward $42.20 on Friday morning. Shares managed to pare their losses but still closed down -2.0%.

INSY is now up four weeks in a row and up eight of the last nine weeks. Tonight we are raising our stop loss to $41.85. More aggressive traders may want to keep their stop under the simple 10-dma (currently $41.50) since that moving average is likely the nearest support.

No new positions at this time.

Trade Description: June 30, 2015:
INSY is probably best known for its synthetic cannabinoid drugs that use THC, the same ingredient in marijuana. Yet it is the company's Subsys treatment, a painkiller several times stronger than morphine, that generates the most revenues for INSY. The marketing practices behind Subsys have generated some scandal-worthy headlines but nothing seems to be slowing down the stock's long-term rally.

INSY is in the healthcare sector, more specifically the biotech industry. According to the company, "Insys Therapeutics is a specialty pharmaceutical company that develops and commercializes innovative drugs and novel drug delivery systems of therapeutic molecules that improve the quality of life of patients. Using our proprietary sublingual spray technology and our capability to develop pharmaceutical cannabinoids, Insys addresses the clinical shortcomings of existing commercial products. Insys currently markets two products: Subsys, which is sublingual Fentanyl spray for breakthrough cancer pain, and a generic version of Dronabinol (THC) capsules. The Company's lead product candidate is Dronabinol Oral Solution, a proprietary, orally administered liquid formulation of dronabinol that Insys believes has distinct advantages over the current formulation of dronabinol in soft gel capsule. Insys is developing a pipeline of sublingual sprays, as well as pharmaceutical cannabidiol."

The company's earnings growth has been impressive. They have consistently beaten Wall Street's bottom line earnings estimates the last six quarters in a row. They normally beat the revenue estimate as well. Looking at the last three quarters INSY has seen its revenues jump +99.7%, +65.4%, and +70.2%. Most of that has been on strong Subsys sales, which were up +69% in the fourth quarter and up +74% in the first quarter.

INSY management is very optimistic and expects to complete four Phase III clinical trials in 2015. If successful it will significantly broaden their product line. The company just recently announced a New Drug Application (NDA) for its "proprietary Dronabinol Oral Solution for anorexia associated with weight loss in patients with AIDS; and nausea and vomiting associated with cancer chemotherapy in patients who have failed to respond adequately to conventional antiemetic treatments. Dronabinol Oral Solution is an orally administered liquid formulation of the pharmaceutical cannabinoid dronabinol, a synthetic version of tetrahydrocannabinol (THC)."

INSY's stock has been a strong performer since the company's IPO in 2013. Shares saw a 3-for-2 split in 2014. They just completed a 2-for-1 split on June 5th.

Before I continue I want to remind traders that biotech stocks can be tough to trade. Normally stocks in this group can be volatile with lots of headline risk. The right headline about a successful test or clinical trial or FDA approval can send shares soaring. The wrong headline could see a biotech stock crash or even gap down several points.

It is important to note that not all the news is good for INSY. In late 2014 the Wall Street Journal (WSJ) ran a story about some shady marketing practices for INSY's Subsys painkiller. This is an under-the-tongue spray version of the painkiller fentanyl. Subsys has a very high risk of dependency and is currently only approved for cancer patients. Yet strangely enough only 1% of prescriptions last year were written by oncologists. Several doctors with the biggest number of Subsys prescriptions have also been under review or disciplined. The WSJ noted that the Office of the Inspector General of the U.S. Department of Health and Human Services and the U.S. Attorneys in the Central District of California and Massachusetts are all looking into the matter. This is significant because Subsys accounts for the vast majority of INSY's revenues.

Thus far the stock market has managed to ignore the shadow cast by Subsys and how the drug is prescribed and INSY's financial relationship with the doctors who prescribe it.

Last week saw biotech stocks retreat. The IBB biotech ETF had broken out in mid June and rallied to new record highs. The group reversed lower last week with a sharp correction. INSY followed its peers lower with a painful drop from $42 to $34 in about three days. Currently the $34.00 level is holding up as support. If INSY can bounce from current levels the move could be big.

A rally from here could spark a short squeeze. The most recent data listed short interest at 68% of the small 23.6 million share float. Tonight we are suggesting a trigger to buy calls at $36.30.

*Small positions to limit risk* - Suggested Positions -

Long AUG $40 CALL (INSY150821C40) entry $3.40

07/25/15 new stop @ 41.85
07/23/15 new stop @ 41.45
07/22/15 new stop @ 40.85
07/21/15 new stop @ 39.30
07/16/15 new stop @ 38.85
07/14/15 new stop @ 36.35
07/01/15 triggered @ $36.30
Option Format: symbol-year-month-day-call-strike

chart:




PUT Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 65.80 change: -1.47

Stop Loss: 67.65
Target(s): To Be Determined
Current Option Gain/Loss: +13.7%
Average Daily Volume = 2.0 million
Entry on July 24 at $66.80
Listed on July 23, 2015
Time Frame: Exit PRIOR to earnings in late September
New Positions: see below

Comments:
07/25/15: Our new bearish put play on BBBY is off to a good start. The stock underperformed the broader market on Friday with a -2.1% drop. Our entry trigger was hit at $66.80.

Broken support at $67.00 should be new resistance. We are moving our stop loss down to $67.65.

Trade Description: July 23, 2015:
This year is not shaping up very well for bullish investors in BBBY. The stock is down -11.6% year to date. The trouble started with its earnings report back in January.

If you are not familiar with BBBY they are in the services sector. According to the company, "Bed Bath & Beyond Inc. and subsidiaries (the "Company") is a retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in store, online or through a mobile device.

The Company has the developing ability to have customer purchases picked up in store or shipped direct to the customer from the Company's distribution facilities, stores or vendors. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare and other industries.

Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond. Shares of Bed Bath & Beyond Inc. are traded on NASDAQ under the symbol "BBBY" and are included in the Standard and Poor's 500 and Global 1200 Indices and the NASDAQ-100 Index. The Company is counted among the Fortune 500 and the Forbes 2000."

On January 8th BBBY reported its 2014 Q3 results. Earnings were in-line with estimates but revenues missed. Management lowered their same-store sales guidance. The stock plunged the next day. A few weeks later BBBY had managed to recover but the rally failed producing a bearish double top.

The trouble continued in April. BBBY had rallied up into its earnings report and then disappointed. Their 2014 Q4 results were in-line with estimates at $1.80 a share. Yet revenues missed estimates again. They lowered their Q1 guidance. The stock plunged the next day.

On June 24th BBBY reported earnings of $0.93 per share. That was down -1% from a year ago and a penny worse than expected. Revenues were only up +3% to $2.74 billion, which met expectations. Yet comparable store sales were +2.2% when Wall Street was expecting +2.5%. Management lowered their Q2 guidance. Guess what happened the next day? Yup, the stock dropped. Traders immediately sold the bounce and BBBY now has a clearly defined bearish trend of lower highs and lower lows. One has to wonder how bad would BBBY's Q1 results have been had the company not spent $385 million buying back stock last quarter?

In summary, BBBY has been missing Wall Street's revenue or earnings estimates the last three quarters in a row. They have warned twice and same-store sales are disappointing. Technically shares have broken down below multiple layers of support. The company is more of a home furnishing store so back to school season may not give them much of a boost. The point & figure chart is bearish and forecasting at $60.00 target. The last few days have seen some support near $67.00. We are suggesting a trigger to buy puts at $66.80.

- Suggested Positions -

Long NOV $65 PUT (BBBY151120P65) entry $2.55

07/25/15 new stop @ 67.65
07/24/15 triggered @ $66.80
Option Format: symbol-year-month-day-call-strike

chart:


Concho Resources - CXO - close: 103.01 change: -2.61

Stop Loss: 107.05
Target(s): To Be Determined
Current Option Gain/Loss: +10.9%
Average Daily Volume = 1.4 million
Entry on July 07 at $106.90
Listed on July 06, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: see below

Comments:
07/25/15: It looks like the oversold bounce in CXO is over with shares falling -2.4% on Friday. I wish we had more time as CXO looks poised to drop. Unfortunately earnings are coming up on July 29th. We need to plan on exiting soon. Tonight I suggest we exit this trade on Monday (July 27th) at the closing bell.

Trade Description: July 6, 2015:
It has been a bumpy ride for energy stock traders over the last year. That's especially true for CXO investors. The stock fell from $148 to $80 in less than five months last year. CXO bottomed in December 2014. The stock managed a big bounce from $80 to $130 in the next five months but that rally is over with a big reversal on the company's Q1 earnings report in early May.

CXO is in the basic materials sector. According to the company, "Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties. The Company's operations are primarily focused in the Permian Basin of southeast New Mexico and west Texas."

The last couple of quarters have seen CXO's revenues decline. They reported their 2014 Q4 results on February 25th. Earnings were 88 cents a share, which was four cents above estimates. Yet revenues fell -6.0% to $594 million, way below estimates. Their 2015 Q1 results were announced on May 4th. Earnings per shares was $0.06. That was 17 cents worse than expected. CXO's revenues plunged -37.4% to $413.5 million, another big miss. The stock reacted to this news with a spike higher that quickly reversed.

Today the oil stocks are suffering as the commodity sinks due to oversupply concerns. The weekly Baker Hughes active rig count just turned positive two weeks in a row after a 28-week decline. This would suggest the pullback in the industry is over and the market has found a temporary equilibrium that will allow domestic companies to start launching new oil and gas rigs again. This will continue to boost supply and pressure prices lower.

A bigger problem could be the Iran nuclear negotiations. If Iran does sign a deal with the West then sanctions could be lifted that would allow Iran to sell up to one million barrels of oil per day on the global market. Sources suggest Iran already has dozens of crude oil tankers filled up and ready to go if the sanctions are lifted. This is one reason crude oil has been plunging the last few days. The current deadline (and there have been many) is tomorrow, July 7th. If Iran signs a deal then oil will likely drop again. If they don't then oil could bounce. If talks are postponed again then I suspect the prevailing trend, which is down, will remain in effect for oil and the oil stocks.

CXO has technically broken down below support near $110 and its 200-dma. The point & figure chart looks very bearish and is currently forecasting an $89 target. Tonight we're suggesting a trigger to buy puts at $106.90.

- Suggested Positions -

Long AUG $105 PUT (CXO150821P105) entry $4.60

07/25/15 prepare to exit on Monday, July 27th at the closing bell
07/20/15 new stop @ 107.05
07/18/15 new stop @ 110.05
07/07/15 triggered @ $106.90
Option Format: symbol-year-month-day-call-strike

chart:


PowerShares QQQ ETF - QQQ - close: 111.10 change: -1.10

Stop Loss: 113.25
Target(s): To Be Determined
Current Option Gain/Loss: +55.9%
Average Daily Volume = 27.5 million
Entry on July 21 at $114.02
Listed on July 20, 2015
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
07/25/15: Big gains for AMZN on Friday morning were not enough to boost the QQQs. As AMZN's early morning pop began to fade the QQQ accelerated lower and the ETF settled with a -0.98% decline.

We are moving our stop loss down to $113.25.

Trade Description: July 20, 2015:
Big cap technology stocks have been strong performers this year and that has boosted the NASDAQ-100 index ($NDX) to new all-time highs. The $NDX is also outperforming the broader market with a +10% gain year to date versus a +3.4% gain in the S&P 500 index. The long-term up trend for the $NDX is still intact and yet we are short-term bearish on the $NDX. It's move too far, too fast, and on very, very narrow leadership. One way for us to play the $NDX is options on the QQQ ETF that tracks the index.

The QQQ is one of the largest and most liquid exchange traded funds. This particular ETF tracks the NASDAQ-100 index, which includes 100 of the largest non-financial stocks on the NASDAQ (lots of technology stocks). AAPL, MSFT, AMZN, GOOG, GOOGL, FB, GILD, INTC, CMCSA, CSCO and AMGN are its top holdings. You can see a list of the top twenty five holdings here.

The lack of leadership in the NASDAQ-100 (and QQQ) has been exceptionally narrow. That's a bearish sign.

On Friday the QQQ surged to new highs even though three stocks declined for every two advancing stocks in the QQQ. Today there were two declining stocks for every one stock that advanced (on the NASDAQ composite). More than 50% of the NASDAQ-100 components are actually negative for the year. So how is the index (and the Qs) at a new record high? The answer is because the $NDX is a market-cap weighed index.

The rally in the QQQ has been fueled by just four stocks with huge market caps. Here are the four stocks driving the QQQ (and their July gains):

Google (GOOG/GOOGL) +29%
Amazon.com (AMZN) +11%
Facebook (FB) +10%
Apple (AAPL) +3%
Those are some impressive numbers in just the last three weeks.

Now consider their market cap and their impact on the QQQ. AAPL's weighting in the QQQs is 13.9%. GOOG is 4.3% while GOOGL is 3.75%. AMZN is 4.19% and FB is 3.9%. For the record Microsoft (MSFT) is 7.0% of the QQQ.

The NASDAQ-100 index has a market cap of $5.4 trillion. If we combine the market cap of AAPL, AMZN, FB, and GOOG they are worth $1.7 trillion. These four stocks are almost 31% of the $NDX market cap. So what happens to the QQQ when these four stocks start to see some profit taking after those big July gains?

Cable television business and stock market channel CNBC noted the above observations on air today. They also posted an article regarding this interesting situation on their website. You can read the CNBC article here.

CNBC also noted that the NASDAQ-100 index is more than three standard deviations above its simple 50-dma. That almost never happens. It's so rare it's only happened nine times in the last 35 years. While that is not a big sample size the $NDX was down the following week 8 out of 9 times.

There are no guarantees in the market. However, odds are good that the QQQ is due for a pullback that should happen soon. The lack of leadership driving the $NDX higher makes the rally very fragile.

There is one big caveat here. Apple (AAPL), the biggest component in the $NDX, is scheduled to report earnings on Tuesday evening, after the closing bell. AAPL tends to beat Wall Street's earnings estimates 90% of the time. Thus expectations tend to be pretty bullish for AAPL's results. If they disappoint it could have a significant negative impact on the QQQ. Since expectations are already bullish for AAPL's quarter they probably need to really blow the doors off and crush the estimate to move the QQQ. It's possible but it seems unlikely that AAPL will singlehandedly lift the QQQ on Wednesday.

We suspect the market could start to see some profit taking tomorrow. Therefore we are suggesting traders buy QQQ puts at the opening bell tomorrow morning (Tuesday, July 21st). If you're worried about AAPL's earnings you could wait until Wednesday morning to buy puts. That way you could hear the results and see how the markets is reacting to AAPL's numbers after hours and pre-market on Wednesday.

Please note we are not setting a stop loss for this trade yet. We'll add a stop in the Wednesday evening newsletter.

- Suggested Positions -

Long SEP $112 PUT (QQQ150918P112) entry $1.88

07/25/15 new stop @ 113.25
07/23/15 expect the QQQ to gap higher tomorrow in reaction to AMZN's earnings report tonight
07/22/15 new stop @ $114.50
07/21/15 trade begins. QQQ opened @ $114.02
Option Format: symbol-year-month-day-call-strike

chart:


Energy SPDR ETF - XLE - close: 69.51 change: -1.36

Stop Loss: 72.25
Target(s): To Be Determined
Current Option Gain/Loss: +47.3%
Average Daily Volume = 13.3 million
Entry on July 22 at $71.22
Listed on July 21, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments:
07/25/15: The sell-off in crude oil continues and the XLE lost another -1.9% on Friday. This ETF is down 11 out of the last 12 weeks and just closed at new multi-year lows.

The XLE is definitely short-term oversold at current levels. I would not be surprised to see a bounce. Looking at its recent history the bounces only last a couple of days before the XLE rolls over again.

Tonight we are moving the stop loss down to $72.25. No new positions at this time.

Trade Description: July 21, 2015:
The 2015 bounce in crude oil appears to be over. The price of crude oil was cut in half with a plunge that started in the second quarter of 2014 and didn't stop until early 2015. Oil managed a multi-week bounce off its March 2015 lows but the rally stalled in May and oil prices churned sideways for almost two months. Now the commodity has resumed its decline.

Today WTI crude oil is hovering near $50.00 a barrel, which is a three-month low. Oil consumption is rising but it's not outpacing oil production. The big drop last year was the market realizing we (temporarily) have more supply than demand.

The Iran deal over the country's nuclear program, if it doesn't get derailed again, will remove sanctions on Iran and allow the oil-producing country to sell more oil on the global market. That's more supply to a market that doesn't need it. Iran denies it but sources say the country has more than 50 million barrels of oil just sitting in oil tankers ready for transport.

Another problem for the energy sector is natural gas supplies. Last month the U.S. Energy Information Administration said natural gas inventories rose 132 billion cubic feet to 2.2 trillion cubic feet. That's more than 50% above last year's inventory levels and the largest surplus in 12 years. The Natural Gas Supply Association expects industry production to hit a new all-time record this summer.

One way to play this bearish supply/demand issue on oil and natural gas is the XLE.

The XLE is an exchange traded fund (ETF) designed to track the Energy Select Sector Index. This is a great way for investors to play the energy sector of the S&P 500 index, which includes oil, gas & consumable fuels, and energy equipment and services companies.

Top 10 Holdings (61.54% of Total Assets)
Company Symbol % Assets
Exxon Mobil Corporation XOM 15.79
Chevron Corporation CVX 12.46
Schlumberger N.V. SLB 7.68
Kinder Morgan, Inc KMI 4.48
EOG Resources, Inc. EOG 3.94
ConocoPhillips COP 3.76
Williams Companies, Inc. (The) WMB 3.67
Occidental Petroleum Corporation OXY 3.51
Pioneer Natural Resources PXD 3.15
Anadarko Petroleum Corporation APC 3.10
The market is well aware of the supply issues facing the energy sector and the XLE has been falling 11 out of the last 12 weeks. We don't see any catalyst that would reverse this momentum.

Currently the XLE has broken down to new multi-year lows and the nearest support levels could be down near $66 or $60. The point & figure chart is bearish and forecasting at $61.00 target. Tonight we are suggesting a trigger to buy puts at $71.25.

- Suggested Positions -

Long SEP $70 PUT (XLE150918P70) entry $1.84

07/25/15 new stop @ 72.25
07/22/15 triggered on gap down at $71.22, suggested entry was $71.25
Option Format: symbol-year-month-day-call-strike

chart:



CLOSED BULLISH PLAYS

Fiserv, Inc. - FISV - close: 85.99 change: -0.68

Stop Loss: 85.85
Target(s): To Be Determined
Current Option Gain/Loss: -22.2%
Average Daily Volume = 1.0 million
Entry on July 10 at $85.41
Listed on July 07, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: see below

Comments:
07/25/15: The widespread market sell-off was too much for shares of FISV. The stock fell toward technical support at its 20-dma and hit our stop loss at $85.85 along the way.

The long-term trend for FISV is still bullish so I'd keep this stock on your radar screen. Once the correction is over we may jump in again.

- Suggested Positions -

AUG $85 CALL (FISV150821C85) entry $3.20 exit $2.49 (-22.2%)

07/24/15 stopped out
07/14/15 new stop @ 85.85
07/10/15 triggered on gap open at $85.41, trigger was $85.15
Option Format: symbol-year-month-day-call-strike

chart:


Jack In The Box Inc. - JACK - close: 91.62 change: -1.38

Stop Loss: 91.75
Target(s): To Be Determined
Current Option Gain/Loss: +6.2%
Average Daily Volume = 600 thousand
Entry on July 13 at $90.25
Listed on July 11, 2015
Time Frame: Exit PRIOR to earnings
New Positions: see below

Comments:
07/25/15: JACK has betrayed us. After a bullish breakout on Wednesday the stock has reversed sharply in the last two sessions. Friday saw JACK fall below prior support in the $92.00 area and hit our stop loss.

- Suggested Positions -

AUG $95 CALL (JACK150821C95) entry $1.60 exit $1.70 (+6.2%)

07/24/15 stopped out
07/22/15 new stop @ 91.75
07/16/15 new stop @ 90.85
07/14/15 new stop @ 89.75
07/13/15 triggered @ $90.25
Option Format: symbol-year-month-day-call-strike

chart:


CLOSED BEARISH PLAYS

SM Energy Company - SM - close: 33.40 change: -1.89

Stop Loss: 36.55
Target(s): To Be Determined
Current Option Gain/Loss: +275.8%
Average Daily Volume = 1.6 million
Entry on June 19 at $44.49
Listed on June 13, 2015
Time Frame: Exit PRIOR to earnings on July 28th
New Positions: see below

Comments:
07/25/15: SM ended the week with another plunge lower. Shares fell -5.35% on Friday. Our plan was to exit this trade on Friday, at the closing bell. The company has earnings coming up on July 28th and we do not want to hold over the report.

- Suggested Positions -

AUG $40 PUT (SM150821P40) entry $1.65 exit $6.20 (+275.8%)

07/24/15 planned exit on Friday
07/23/15 new stop @ 36.55, Prepare to EXIT tomorrow at the close
07/20/15 new stop @ 38.05
07/18/15 new stop @ 40.05
07/16/15 new stop @ 41.55
07/06/15 new stop @ 45.25
06/23/15 new stop @ 48.75
06/19/15 triggered on gap down at $44.49, suggested entry was $44.90
Option Format: symbol-year-month-day-call-strike

chart: