Editor's Note:

Traders are still reacting to Friday's intraday reversal higher. The market is also digesting the new idea that the Federal Reserve may not raise rates this year after all.

Our two new bullish trades, ALKS and COST, were triggered today.

The market's rally stopped out our bearish trades: AON, DECK, and WWAV. We have chosen to remove OUTR, it did not open.


Current Portfolio:


CALL Play Updates

Alkermes Plc - ALKS - close: 59.77 change: -0.71

Stop Loss: 54.25
Target(s): To Be Determined
Current Option Gain/Loss: -38.6%
Average Daily Volume = 1.0 million
Entry on October 05 at $61.17
Listed on October 03, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments:
10/05/15: Our new trade on ALKS is open. The plan was to buy calls at $60.75 but our trade opened with ALKS gapping higher at $61.17 this morning. The rally made it to $62.50 before ALKS reversed back into negative territory. If you didn't buy calls today you may have missed your chance. Shares of ALKS are trading higher after hours (near $63.60) on news that the FDA has approved ARISTADA for treatment of schizophrenia. Odds are good ALKS will gap higher again tomorrow morning.

Trade Description: October 3, 2015:
The U.S. market delivered an impressive bounce the last few days. If this rebound continues the beaten-down biotech stocks could easily outperform. ALKS looks like a good candidate to capture the bounce.

ALKS is in the healthcare sector. According to the company, "Alkermes plc is a fully integrated, global biopharmaceutical company developing innovative medicines for the treatment of central nervous system (CNS) diseases. The company has a diversified commercial product portfolio and a substantial clinical pipeline of product candidates for chronic diseases that include schizophrenia, depression, addiction and multiple sclerosis. Headquartered in Dublin, Ireland, Alkermes plc has an R&D center in Waltham, Massachusetts; a research and manufacturing facility in Athlone, Ireland; and a manufacturing facility in Wilmington, Ohio."

The earnings picture for ALKS seems to be improving. Looking at the last few earnings reports ALKS has beaten Wall Street expectations on both the top and bottom line the last three quarters in a row. Their most recent report, on July 30th, was follow up with management raising their 2015 guidance above analysts estimates.

While the earnings picture is supportive for a bullish bias, today's trade is more of a technical one. The biotechs have been crushed lately (Thanks, Hillary Clinton!) and shares of ALKS plunged from resistance near $73.00 to support near $54.00. Now it's starting to rebound. This is not the first time ALKS has bounced from this area.

Tonight we are suggesting a trigger to buy calls at $60.75. Our target is $71.50. Plan on exiting prior to ALKS' earnings report in late October. Please note that I consider this a more aggressive trade because the option spreads on ALKS' November options are a little bit wide (and because ALKS is a biotech stock and biotech stocks tend to be more volatile anyway but regular readers already know that).

- Suggested Positions -

Long NOV $65 CALL (ALKS151120C65) entry $3.50

10/05/15 triggered on gap open at $61.17, suggested entry was $60.75
Option Format: symbol-year-month-day-call-strike


Costco Wholesale Corp. - COST - close: 148.07 change: +2.21

Stop Loss: 141.85
Target(s): To Be Determined
Current Option Gain/Loss: +32.5%
Average Daily Volume = 1.9 million
Entry on October 05 at $146.25
Listed on October 03, 2015
Time Frame: Exit PRIOR to November option expiration
New Positions: see below

Comments:
10/05/15: Our new trade on COST is off to a strong start. Shares hit our entry trigger at $146.25 this morning. The stock broke out to new multi-month highs and closed up +1.5%. I would still consider new positions now at current levels or you could look for a dip near $147.00 as an alternative entry point.

Trade Description: October 3, 2015:
Thus far 2015 has been a frustrating year for COST bulls. After years of steady stock price appreciation (2009-2014) the rally peaked in the first quarter of 2015. Shares spent months correcting lower but it looks like the worst may be behind it for COST.

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 686 warehouses, including 480 in the United States and Puerto Rico, 89 in Canada, 36 in Mexico, 27 in the United Kingdom, 23 in Japan, 12 in Korea, 11 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."

Revenue growth has been lackluster this year. COST has managed to beat Wall Street estimates on the bottom line but the revenue number has been soft. Their most recent quarterly report was announced on September 29th. Earnings were up +10% from a year ago to $1.73 a share. That beat estimates. Yet COST said their Q4 revenues were virtually flat (+0.7%) to $35.78 billion. That missed expectations. Comparable store sales were up +2% in the U.S. but down -10% in Canada.

A lot of COST's revenue troubles have come from lower oil, which has pushed gas prices lower. The big drop in gas prices cuts their revenue growth. Plus the stronger dollar hurts their foreign sales. The company continues to expand its presence in the U.S. and overseas. Management plans to launch 12 new warehouses this quarter. Overall COST plans to build 32 new stores in the next 12 months, including its first store in France.

The stock looks poised to breakout past its July, August, and September highs and make a run at its 2015 highs. We suspect COST is going to grab more investor attention as we approach the holiday shopping season. The stock tends to see a rally from September into Black Friday (the day after Thanksgiving).

Tonight we are suggesting a trigger to buy calls at $146.25. More conservative traders may want to wait for a rally past the September peak ($146.90) or even past short-term resistance $147.00. We want to jump in a little early as COST could surge wants it clears $147.00.

- Suggested Positions -

Long NOV $150 CALL (COST151120C150) entry $2.00

10/05/15 triggered @ $146.25
Option Format: symbol-year-month-day-call-strike




PUT Play Updates


Currently we do not have any active put trades.



CLOSED BEARISH PLAYS

Aon plc - AON - close: 91.52 change: +1.74

Stop Loss: 90.35
Target(s): To Be Determined
Current Option Gain/Loss: -47.0%
Average Daily Volume = 1.2 million
Entry on September 23 at $88.65
Listed on September 22, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments:
10/05/15: AON shot higher this morning. The stock gapped open above round-number resistance at $90.00 and surged to a +1.9% gain. Our stop was hit at $90.35. (Note: today's move has confirmed Friday's bullish reversal pattern)

- Suggested Positions -

2016 JAN $85 PUT (AON160115P85) entry $3.30 exit $1.75 (-47.0%)

10/05/15 stopped out
10/03/15 new stop @ 90.35
09/28/15 new stop @ 90.85
09/23/15 triggered @ $88.65
Option Format: symbol-year-month-day-call-strike

chart:


Deckers Outdoor Corp. - DECK - close: 60.64 change: +1.63

Stop Loss: 60.25
Target(s): To Be Determined
Current Option Gain/Loss: -41.1%
Average Daily Volume = 775 thousand
Entry on September 24 at $58.28
Listed on September 23, 2015
Time Frame: Exit PRIOR to earnings
New Positions: see below

Comments:
10/05/15: Shares of DECK rallied through round-number resistance at $60.00 and hit our stop loss at $60.25. If this rebound continues the stock could run toward stronger resistance at the $65.00 level.

- Suggested Positions -

NOV $55 PUT (DECK151120P55) entry $2.85 exit $1.68 (-41.1%)

10/05/15 stopped out
09/28/15 new stop @ 60.25
09/24/15 Trade begins on gap down at $58.28, trigger was $58.65
Option Format: symbol-year-month-day-call-strike

chart:


Outerwall Inc. - OUTR - close: 59.67 change: +1.52

Stop Loss: 60.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 486 thousand
Entry on September -- at $---.--
Listed on September 30, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments:
10/05/15: The bearish story for OUTR has not changed but that doesn't matter when the market is in rally mode. A rising tide lifts all boats. OUTR surged +2.6% to close just below round-number resistance at $60.00.

Our trade has not opened yet. Tonight we are removing OUTR as a candidate.

Trade did not open.

10/05/15 removed from the newsletter, suggested trigger was $56.35

chart:


The WhiteWave Foods Co. - WWAV - close: 42.94 change: +1.16

Stop Loss: 42.35
Target(s): To Be Determined
Current Option Gain/Loss: -55.6%
Average Daily Volume = 1.8 million
Entry on October 02 at $39.45
Listed on October 01, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: see below

Comments:
10/05/15: WWAV turned out to be loser for us. It was almost a worse-case scenario. Shares spiked lower on Friday morning, hit our bearish entry trigger, and then reversed sharply higher. The reversal continued higher today and WWAV hit our stop loss at $42.35.

- Suggested Positions -

NOV $37.50 PUT (WWAV151120P37.5) entry $1.80 exit $0.80 (-55.6%)

10/05/15 stopped out @ 42.35
10/02/15 triggered @ $39.45
Option Format: symbol-year-month-day-call-strike

chart: