Editor's Note:

The Chinese market collapsed (again) with a -8.48% plunge. This undermined equity markets around the world. Major European markets were down about -2.3% or worse. U.S. markets fared better but still produced widespread declines.

Our plan was to exit the CXO trade today at the closing bell.

ADBE, COST, DIS, and INSY all hit our new stop losses.


Current Portfolio:


CALL Play Updates

Advance Auto Parts Inc. - AAP - close: 168.34 change: +0.03

Stop Loss: 165.85
Target(s): To Be Determined
Current Option Gain/Loss: -27.1%
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:
07/27/15: Most of the market spiked lower at the opening bell. AAP was no exception except shares bounced near the bottom of its recent trading range. Shares managed to close virtually unchanged while the rest of the market was sinking.

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


GoPro, Inc. - GPRO - close: 61.27 change: -0.90

Stop Loss: 58.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 6.1 million
Entry on July -- at $---.--
Listed on July 25, 2015
Time Frame: Exit PRIOR to earnings
New Positions: Yes, see below

Comments:
07/27/15: GPRO dipped toward short-term technical support at its simple 10-dma and bounced. Even with the intraday rebound GPRO settled with a -1.4% decline.

We are on the sidelines waiting for a new relative high.

Trade Description: July 25, 2015:
The U.S. stock market delivered one of its worst weekly performances all year long as investors reacted to disappointing earnings results. GPRO managed to buck the trend and shares rallied to new six-month highs thanks to significantly better than expected earnings results.

Here's the company's rather self-confident description, "GoPro, Inc. is transforming the way consumers capture, manage, share and enjoy meaningful life experiences. We do this by enabling people to self-capture engaging, immersive photo and video content of themselves participating in their favorite activities. Our customers include some of the world's most active and passionate people. The quality and volume of their shared GoPro content, coupled with their enthusiasm for our brand, virally drives awareness and demand for our products.

What began as an idea to help athletes document themselves engaged in their sport has become a widely adopted solution for people to document themselves engaged in their interests, whatever they may be. From extreme to mainstream, professional to consumer, GoPro has enabled the world to capture and share its passions. And in doing so the world, in turn, is helping GoPro become one of the most exciting and aspirational companies of our time."

GPRO came to market with its IPO in June 2014. The stock opened for trading at $28.65 and by October 2014 shares were nearing $100 per share. That proved to be the peak. GPRO spent the next six months correcting lower and finally bottomed near $37 in March 2015.

GPRO reported their 2015 Q1 results on April 28th. Wall Street was expecting a profit of $0.18 per share on revenues of $341.7 million. GPRO beat estimates with a profit of $0.24 a share. Revenues were up +54% from a year ago to $363 million.

Management said it was their second highest revenue quarter in history. Their GAAP results saw gross margins improve from 40.9% in Q1 2014 to 45.1% today. Their net income attributable to common stockholders increased 98.2% compared to the first quarter of 2014. International sales surged +66% and accounted for just over half of total sales in Q1 2015. GPRO shipped 1.3 million devices in the first quarter. This was the third quarter in a row of more than one million units.

GPRO management raised their guidance. They now expect 2015 Q2 revenues in the $380-400 million range with earnings in the $0.24-0.26 region. Analysts were only forecasting $335 million with earnings at $0.16 a share.

The better than expected Q1 results and the upgraded Q2 guidance sparked several upgrades. Multiple analysts raised their price target on GPRO. New targets include: $56, $65, $66, $70, and $76.

GPRO reported its Q2 report on July 21st. Results were way above expectations. Analysts were expecting earnings of $0.26 per shares on revenues of $396 million. GPRO said Q2 earnings came in at $0.35 per shares. That's a +337% improvement from a year ago. Revenues were up +71.7% to $419.9 million, significantly above the estimate. Gross margins improved from 42.2% to 46.4%.

Naturally GPRO management was enthusiastic. GoPro Founder and CEO, Nicholas Woodman, commented on their quarterly results saying, "I couldn't be more proud of our aggressive pace of innovation. With the introduction of HERO4 Session and HERO+ LCD, we've launched five new cameras in the past 10 months, exciting both new and existing customers and contributing to strong second quarter results. Our core business is enjoying terrific momentum as we charge forward into attractive adjacent markets."

This better than expected Q2 result sparked another round of upgrades. Piper Jaffray raised their GPRO target to $72. Barclays bumped theirs to $71. Another firmed raised theirs to $70. Shares of GPRO saw a bit of a short squeeze this past week. There are plenty of traders who think GPRO is overpriced and too rich with a P/E above 42, especially when you consider the company is facing rising competition.

The biggest argument against GPRO is competition from a Chinese rival Xiaomi who has produced a competitive action camera that they're selling for less than half of GPRO's similar model. GPRO critics are worried this could kill GPRO's growth in China and the rest of Asia. It's too early to tell who will be right but momentum is currently favoring the bulls. The point & figure chart is forecasting a long-term target at $95.00.

The stock experienced some profit taking on Friday with a -2.7% decline. Shares failed at the $65.00 level on Thursday and Friday. We want to be ready if GPRO reverses higher again. Tonight we're suggesting a trigger to buy calls at $65.05. We'll start with a wide stop loss at $58.65, making this a more aggressive, higher-risk trade. It might take GPRO a couple of days to get back to $65.00. I don't expect a new relative high on Monday.

Trigger @ $65.05

- Suggested Positions -

Buy the SEP $67.50 CALL (GPRO150918C67.5)

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 65.09 change: -0.71

Stop Loss: 67.65
Target(s): To Be Determined
Current Option Gain/Loss: +25.5%
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:
07/27/15: The sell-off in BBBY continues and shares dipped to potential round-number support at $65.00. I am not suggesting new positions at this time.

Broken support at $67.00 should be new resistance.

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


PowerShares QQQ ETF - QQQ - close: 110.18 change: -0.92

Stop Loss: 111.65
Target(s): To Be Determined
Current Option Gain/Loss: +88.3%
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:
07/27/15: The market's widespread decline helped push the QQQ to a -0.8% loss. Shares are testing potential round-number support at $110 and its 50-dma near $109.75. No new positions at this time.

We will adjust the stop loss down to $111.65.

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

07/27/15 new stop @ 111.65
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


Energy SPDR ETF - XLE - close: 68.51 change: -1.00

Stop Loss: 70.25
Target(s): To Be Determined
Current Option Gain/Loss: +79.3%
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:
07/27/15: Commodities continue to sink and crude oil fell to new relative lows. This helped push the XLE lower, which fell -1.4%.

Tonight we are moving the stop loss to $70.25. 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

07/27/15 new stop @ 70.25
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



CLOSED BULLISH PLAYS

Adobe Systems Inc. - ADBE - close: 79.93 change: -1.05

Stop Loss: 79.85
Target(s): To Be Determined
Current Option Gain/Loss: -38.9%
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:
07/27/15: Another rough day for the U.S. market was enough to push ADBE below support at its 50-dma and the $80.00 level. Shares hit our stop at $79.85.

- Suggested Positions -

OCT $85 CALL (ADBE151016C85) entry $2.80 exit $1.71 (-38.9%)

07/27/15 stopped out
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: 144.25 change: -0.74

Stop Loss: 143.85
Target(s): To Be Determined
Current Option Gain/Loss: -33.3%
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:
07/27/15: Monday's widespread market decline also pushed COST below short-term support. Shares hit our stop at $143.85.

- Suggested Positions -

OCT $150 CALL (COST151016C150) entry $3.00 exit $2.00 (-33.3%)

07/27/15 stopped out
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: 118.25 change: -0.66

Stop Loss: 117.85
Target(s): To Be Determined
Current Option Gain/Loss: +87.0%
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:
07/27/15: DIS managed to resist the market's widespread sell-off last week. Unfortunately shares followed the market lower today. DIS hit our new stop loss at $117.85.

I would keep DIS on your watch list. A pullback after its earnings report on August 4th could be a new entry point.

- Suggested Positions -

AUG $115 CALL (DIS150821C115) entry $2.30 exit $4.30 (+87.0%)

07/27/15 stopped out
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: 42.79 change: -0.55

Stop Loss: 41.85
Target(s): To Be Determined
Current Option Gain/Loss: +14.7%
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:
07/27/15: Monday turned out to be a very volatile day for shares of INSY. There was a rush to sell the stock this morning. INSY fell more than -10% at its worst levels of the day. The stock bounced near its 20-dma and managed to pare its loss to just -1.26%. Our stop was hit at $41.85.

*Small positions to limit risk* - Suggested Positions -

AUG $40 CALL (INSY150821C40) entry $3.40 exit $3.90 (+14.7%)

07/27/15 stopped out
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:


CLOSED BEARISH PLAYS

Concho Resources - CXO - close: 99.19 change: -3.82

Stop Loss: 107.05
Target(s): To Be Determined
Current Option Gain/Loss: +52.2%
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:
07/27/15: We have to be happy with CXO's performance today! Our plan was to exit at the closing bell on Monday. The continued weakness in crude oil is pressuring energy stocks lower. CXO underperformed the broader market with a -3.7% plunge.

Earnings are coming up on July 29th.

- Suggested Positions -

AUG $105 PUT (CXO150821P105) entry $4.60 exit $7.00 (+52.2%)

07/27/15 planned exit at the close
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: