Editor's Note:

The stock market continued to melt higher on Tuesday driven by widespread gains across the energy industry. Crude oil had a strong day with a rally toward $48 a barrel. This strength in oil naturally weighed on the transportation stocks.

We closed the CBRL and JWN trades this morning.


Current Portfolio:


CALL Play Updates

The Boeing Company - BA - close: 148.09 change: -0.31

Stop Loss: 144.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.8 million
Entry on November -- at $---.--
Listed on November 02, 2015
Time Frame: 6 to 8 weeks.
New Positions: Yes, see below

Comments:
11/03/15: Hmm... BA did not participate in the market's widespread rally on Tuesday. It looks like most of the defense-related names took the day off. I don't see any changes from last night's new play description. Our suggested entry point is $150.25.

Trade Description: November 2, 2015:
Defense stock investors have had a frustrating year with the group peaking in March 2015 and sliding lower the next six months. Fortunately the defense industry appears to have reversed higher. BA is leading the charge.

BA is in the industrial goods sector. According to the company, "Boeing is the world's largest aerospace company and leading manufacturer of commercial jetliners and defense, space and security systems. A top U.S. exporter, the company supports airlines and U.S. and allied government customers in 150 countries. Boeing products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, and performance-based logistics and training."

The company has delivered strong earnings results the last three quarters. Their most recent report was October 22nd. Wall Street was expecting BA's Q3 numbers to be $2.20 per share on revenues of $24.78 billion. The company beat expectations on both fronts. Earnings rose +18% from a year ago to $2.52 a share. Revenues were up +9% to $25.85 billion. Their free cash flow surged from $317 million a year ago to $2.3 billion. Their backlog is huge at $485 billion and nearly 5,700 commercial airplanes.

If that wasn't good enough BA's management raised their guidance. The company upped their fiscal year 2015 earnings guidance from $7.70-7.90 to $7.95-8.15. They also raised their revenue estimate from $94.5-96.5 billion to $95.0-97.0 billion. This compares to Wall Street estimates at $8.08 per share on revenues of $95.4 billion.

BA's president and Chief Executive Officer Dennis Muilenburg commented on his company's performance:

"By continuing to profitably deliver on our large and diverse backlog, we are driving strong growth in revenue, earnings and cash flow. Solid operating performance across our commercial and defense businesses during the quarter also supported our continued investment in innovation and our people, and our commitment to return cash to shareholders.

Three quarters of solid results and confidence in our continued operating performance enabled us to raise our revenue, earnings per share and operating cash flow guidance for the year. Looking ahead, our teams remain focused on improving productivity and quality and delivering improved capabilities to meet our customers' expectations."

Shares of BA bottomed in August with the market's sharp correction lower. Traders bought the dip in late September near $127.50. Since then BA's stock has surged toward $150. We see a breakout past round-number resistance at $150.00 as a potential entry point. If BA breaks out it could rally toward its 2015 high near $159.00. The point & figure chart is bullish and forecasting at $165 target. Coincidentally the average analyst price target is also $165.

Tonight we are suggesting a trigger to buy calls at $150.25.

Trigger @ $150.25

- Suggested Positions -

Buy the 2016 JAN $155 CALL (BA160115C155)

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


Costco Wholesale - COST - close: 158.80 change: -0.35

Stop Loss: 155.40
Target(s): To Be Determined
Current Option Gain/Loss: -5.1%
Average Daily Volume = 1.9 million
Entry on October 30 at $158.85
Listed on October 29, 2015
Time Frame: Exit PRIOR to earnings in mid December
New Positions: see below

Comments:
11/03/15: COST gapped down at the open but traders bought the dip near short-term technical support on its rising 10-dma. Tonight we are adjusting the stop loss up to $155.40 since the $155.50 level appears to be short-term support.

Trade Description: October 29, 2015:
We are bringing COST back to the Option Investor newsletter. Shares have been doing well since they bottomed in August this year. We were in COST last week and were unexpectedly stopped out on this Monday's gap down.

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.

Wall Street is generally bullish on COST. Out of the twenty analysts that cover the stock 12 of them have a "strong buy" rating. COST has seen its price target upgraded twice this month. The most recent upgrade was this week with a $180 target. The point & figure chart is very bullish and forecasting a long-term target of $239.00.

The last few days have seen COST consolidating gains with a sideways move in the $155.00-158.50 area. The intraday high was set last week at $158.80. Tonight we are suggesting a trigger to buy calls at $158.85. We will plan on exiting prior to COST's earnings report in December.

- Suggested Positions -

Long DEC $165 CALL (COST151218C165) entry $1.36

11/03/15 new stop @ 155.40
10/30/15 triggered @ $158.85
Option Format: symbol-year-month-day-call-strike


Salesforce.com, Inc. - CRM - close: 78.63 change: -0.57

Stop Loss: 75.75
Target(s): To Be Determined
Current Option Gain/Loss: +26.2%
Average Daily Volume = 3.6 million
Entry on October 12 at $76.25
Listed on October 07, 2015
Time Frame: Exit PRIOR to earnings on November 18th
New Positions: see below

Comments:
11/03/15: It is surprising to see CRM underperforming the market with the NASDAQ up +0.35% today. CRM displayed relative strength yesterday so this could just be normal profit taking. CRM remains below round-number resistance at $80.00.

Trade Description: October 7, 2015:
Cloud computing and software giant CRM has been churning sideways for almost seven months. In spite of this lack of upward movement CRM is still outperforming the broader market. The NASDAQ composite is up +1.2% year to date. CRM is up +26%. The good news is that CRM looks poised to breakout past major resistance and begin its next leg higher.

CRM is part of the technology sector. According to the company, "Salesforce is the world's #1 CRM company. Our industry-leading Customer Success Platform has become the world's leading enterprise cloud ecosystem. Industries and companies of all sizes can connect to their customers in a whole new way using the latest innovations in cloud, social, mobile and data science technologies with the Customer Success Platform."

CRM's revenues have been consistently growing in the mid +20% range the last few quarters. Their Q4 revenues were up +26%. Q1 revenues were +23%. The company's most recent quarter was announced August 20th. Analysts were expecting Q2 results of $0.17 a share on revenues of $1.6 billion. CRM beat both estimates with a profit of $0.19 as revenues grew +23.5% to $1.63 billion. Management raised their Q3 and full year 2016 revenue guidance.

Technically the stock is in a long-term up trend and the point & figure chart is forecasting an $85.00 target. The $75.00-76.00 area is major resistance with CRM failing in this region multiple times. The recent rally has boosted CRM back to this level and the stock looks poised to breakout soon.

(Side note - CRM did hit an intraday high of $78.46 on April 29th thanks to M&A rumors. The company is still considered a potential acquisition target by larger rivals.)

We like CRM's relative strength and consistently strong earnings and revenue growth. A breakout here could spark a run that lasts until the company's earnings report in November. Tonight we are suggesting a trigger to buy calls if CRM trades at $76.25 (or higher).

- Suggested Positions -

Long DEC $80 CALL (CRM151218C80) entry $3.05

10/31/15 new stop @ 75.75
10/17/15 new stop @ 74.75
10/12/15 triggered @ $76.25
Option Format: symbol-year-month-day-call-strike


The Home Depot, Inc. - HD - close: 125.66 change: +1.25

Stop Loss: 121.75
Target(s): To Be Determined
Current Option Gain/Loss: +80.4%
Average Daily Volume = 5.3 million
Entry on October 08 at $120.25
Listed on October 05, 2015
Time Frame: Exit PRIOR to earnings on November 17th
New Positions: see below

Comments:
11/03/15: The rally in HD seemed to pick up some speed today. Shares gained +1.0% and set a new all-time closing high.

We plan on exiting prior to HD's earnings report on Nov. 17th.

Trade Description: October 5, 2015:
Home Depot's stock has outperformed the broader market in spite of the fact shares have been stuck in a trading range for the last seven months. That could be about to change.

The big surge in the U.S. housing market this year has been a bullish tailwind for HD's business. The home remodeling and repair industry and consumer spending in this category is expected to hit levels not seen since before the "Great Recession" in 2008-2009. HD is poised to reap the benefits.

HD is in the services sector. According to the company, "The Home Depot is the world's largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. In fiscal 2014, The Home Depot had sales of $83.2 billion and earnings of $6.3 billion. The Company employs more than 370,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index."

HD has been showing steady earnings and revenue growth. The company has beaten Wall Street estimates on both the top and bottom line the last three quarters in a row. Management has also raised their guidance the last three quarters in a row.

Their most recent report was August 18th. HD announced its Q2 earnings were up +14% from a year ago to $1.71 per share. Revenues were up +4.3% to $24.83 billion. Comparable store sales came in better than expected with a +4.2% improvement.

Wall Street analysts seem bullish with firms like Deutsche Bank and UBS recently raising their price targets on HD. Currently the point & figure chart is bearish but a rally past $120.00 would generate a brand new buy signal.

Earlier I mentioned that HD has been stuck in a long trading range or consolidation for most of 2015. With the exception of a few days, shares of HD have been churning sideways in the $110-120 range. Today HD looks poised to breakout from this channel. The $120.00 level is round-number resistance. Tonight we are suggesting a trigger to buy calls at $120.25. Plan on exiting prior to HD's earnings report in mid November.

- Suggested Positions -

Long NOV $125 CALL (HD151120C125) entry $1.43

10/22/15 new stop @ 121.75
10/10/15 new stop @ 117.45
10/08/15 triggered @ $120.25
Option Format: symbol-year-month-day-call-strike


iShares Russell 2000 ETF - IWM - close: 118.35 change: +0.61

Stop Loss: 114.85
Target(s): To Be Determined
Current Option Gain/Loss: +33.9%
Average Daily Volume = 36 million
Entry on October 28 at $116.55
Listed on October 24, 2015
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
11/03/15: The small cap Russell 2000 index outperformed its big caps peers today. The IWM managed a +0.5% gain. This is a new six-week high. This ETF is now challenging several layers of resistance with the exponential 200-dma, the 100-dma, the 300-dma, and its prior trend line of support in this area. Further strength would be very bullish.

Tonight we are adjusting the stop loss to $114.85.

Trade Description: October 24, 2015:
If you haven't noticed the market is in rally mode. Worries over the Fed raising rates in 2015 are fading while the rest of the world is trying to add stimulus to their economies. Concerns over a terrible Q3 earnings season are also fading. Yes, earnings results have been bad but the bar was set low enough that companies are beating estimates. Now the U.S. market is surging.

One area of the market has lagged behind and that is the small cap stocks. The NASDAQ composite ended the week with a +6.3% gain for 2015. The S&P 500 edged back into positive territory with a +0.8% gain for the year. Yet the small cap Russell 2000 index is still down -3.2%. It's time for the small caps to play catch up with the rest of the market.

A couple of issues have driven this divergence. Right now big caps are outperforming because mutual fund and hedge fund managers are probably window dressing their portfolios for the end of their fiscal year (October 31st). Another factor has been weakness in the biotech stocks. Biotechs reversed sharply in the last three months and they have struggled to keep up with the market's rebound. Currently there are a lot of small biotech companies in the small cap index. Biotechs now account for about 7% of the Russell 2000 index. This group has definitely lagged the rest of the market over the last three weeks.

The good news is that the IWM small cap ETF, which tracks the Russell 2000 index, looks poised to breakout higher. It has been coiling below resistance in the $116 area the last several days. When it finally breaks higher it can move pretty quick.

Tonight we are suggesting a trigger to buy calls at $116.55. If triggered we will start with a stop loss at $113.35. This is a multi-week trade.

- Suggested Positions -

Long 2016 JAN $120 CALL (IWM160115C120) entry $1.89

11/03/15 new stop @ 114.85
10/28/15 triggered @ $116.55
Option Format: symbol-year-month-day-call-strike


Lear Corp. - LEA - close: 124.03 change: -2.31

Stop Loss: 121.45
Target(s): To Be Determined
Current Option Gain/Loss: -8.1%
Average Daily Volume = 951 thousand
Entry on October 28 at $123.65
Listed on October 27, 2015
Time Frame: Exit PRIOR to December option expiration
New Positions: see below

Comments:
11/03/15: Ouch! Something happened to LEA this morning but I do not see any news that would explain the spike lower. Shares fell toward the $123.60 area and then spent the rest of the day sliding sideways. We will try and reduce our risk by raising the stop loss up to $121.45. No new positions at this time.

Trade Description: October 27, 2015:
Shares of LEA experienced a correction this summer but the stock has come charging back. Year to day LEA is up +25% against the S&P 500, which is virtually flat with a +0.3% gain. The relative strength has been very evident in the last couple of months. The S&P 500 is up +10.6% from its August-correction lows. LEA is up +36% off its August intraday lows.

LEA is in the consumer goods sector. They are part of the auto parts industry. According to the company, "The Lear Corporation is a Fortune 500 company with world-class products designed, engineered and manufactured by a diverse team of talented employees. As a leading supplier of automotive seating and electrical, Lear serves its customers with global capabilities while maintaining individual commitment. With headquarters in Southfield, Michigan, Lear maintains 235 locations in 35 countries around the globe and employs approximately 135,000 employees. Lear is traded under the symbol [LEA] on the New York Stock Exchange."

The strong dollar has created negative currency headwinds for LEA but the company continues to beat on the bottom line. Their Q2 results, announced on July 24th, were better than expected with earnings of $2.82 per share. That was 34 cents above estimates. Management raised their full-year 2015 guidance.

The trend of better than expected earnings continued in the third quarter. LEA just announced their Q3 results a few days ago on October 23rd. Analysts were expecting a profit of $2.37 a share on revenues of $4.41 billion. LEA delivered a profit of $2.56 a share. That is a +33% jump from a year ago. Revenues were only up +2.3% to $4.33 billion. That missed expectations. However, if you discount negative currency headwinds, sales were up +11%. LEA management raised their 2015 outlook again.

These results were good enough to generate some bullish analyst comments on LEA and a new price target at $138.00. Coincidentally the point & figure chart is bullish and forecasting at $138 target. The current rally in LEA has produced a bullish breakout past major resistance in the $118.00 region, which should now become new support. More aggressive traders may want to buy calls now. We are suggesting a trigger to buy calls at $123.65, which would be a new all-time high. .

- Suggested Positions -

Long DEC $125 CALL (LEA151218C125) entry $3.70

11/03/15 new stop @ 121.45
10/28/15 triggered @ $123.65
Option Format: symbol-year-month-day-call-strike


Lam Research Corp. - LRCX - close: 76.34 change: -0.26

Stop Loss: 73.85
Target(s): To Be Determined
Current Option Gain/Loss: -12.1%
Average Daily Volume = 2.5 million
Entry on October 30 at $76.25
Listed on October 28, 2015
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
11/03/15: LRCX seems to be struggling to convincingly breakout past its 200-dma. The SOX semiconductor index continued to rally on Tuesday but LRCX dipped back to $75.51 before paring its losses. LRCX has been dancing around its 200-dma (near $76.00) the last few days.

Tonight we are adjusting the stop loss up to $73.85. I would consider new positions on a rally above $76.50 again.

Trade Description: October 28, 2015:
Wall Street loves mergers and this month LRCX has jumped into the 2015 buying spree. Semiconductor stocks had a rough summer with the SOX semiconductor index plunging from early June through late August. Fortunately the group appears to have bottomed. LRCX's recent earnings news and acquisition announcement has accelerated the stock's rebound.

LRCX is part of the technology sector. According to the company, "Lam Research Corp. (LRCX) is a trusted global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. Lam's broad portfolio of market-leading deposition, etch, and clean solutions helps customers achieve success on the wafer by enabling device features that are 1,000 times smaller than a grain of sand, resulting in smaller, faster, more powerful, and more power-efficient chips. Through collaboration, continuous innovation, and delivering on commitments, Lam is transforming atomic-scale engineering and enabling its customers to shape the future of technology. Based in Fremont, Calif., Lam Research is a Nasdaq-100 Index and S&P 500 company whose common stock trades on the Nasdaq Global Select MarketSM under the symbol LRCX."

LRCX's most recent earnings report was October 21st. Analysts were expecting a profit of $1.72 per share on revenues of $1.6 billion. LRCX delivered earnings of $1.82 a share. Revenues were up +38.8% from a year ago to $1.6 billion. Management then raised their Q2 earnings guidance to $1.32-1.52 a share, which is significant above analysts' estimates.

The news didn't stop there. LRCX also announced they were buying KLA-Tencor (KLAC) for $10.6 billion. This new combined company will have $8.7 billion in revenues.

Here are a few highlights from the LRCX-KLAC merger deal:

Creates Premier Semiconductor Capital Equipment Company: Strengthened platform for continued outperformance, combining Lam's best-in-class capabilities in deposition, etch, and clean with KLA-Tencor's leadership in inspection and metrology

Accelerates Innovation: Increased opportunity and capability to address customers' escalating technical and economic challenges Broadens Market Relevance: Comprehensive and complementary presence across market segments provides diversity, scale and value creating innovation opportunities

Significant Cost and Revenue Synergies: Approximately $250 million in expected annual on-going pre-tax cost synergies within 18-24 months of closing the transaction, and $600 million in annual revenue synergies by 2020 Accretive Transaction: Increased non-GAAP EPS and free cash flow per share during the first 12 months post-closing

Strong Cash Flow: Complementary memory and logic customer base, operational strength, and meaningful installed base revenues strengthen cash generation capability Anstice concluded, "We have tremendous respect for the company KLA-Tencor employees have built over nearly 40 years - their culture, technology, and operating practices. I have no doubt that our combined values, focus on the customer, and complementary technologies will create a trusted leader in our industry, capable of creating significant opportunity for profitable growth and in turn delivering tremendous value to all of our stakeholders. This is the right time for the right combination in our industry." You can read more details about the merger here.

The combination of the earnings beat, raised guidance, and the merger news launched LRCX stock higher. Traders have been consistently buying the dips since then. Now shares of LRCX are poised to break through technical resistance at its 200-dma soon. Shares have been upgraded with a new price target of $85.00. Meanwhile the point & figure chart is bullish and forecasting at long-term target of $107.00.

LRCX looks like it could run towards the 2015 highs in the $84-85 region. Today's intraday high was $76.19. We are suggesting a trigger to buy calls at $76.25.

- Suggested Positions -

Long JAN $80 CALL (LRCX160115C80) entry $3.30

11/03/15 new stop @ 73.85
10/30/15 triggered @ $76.25
Option Format: symbol-year-month-day-call-strike


Pepsico, Inc. - PEP - close: 100.92 change: -0.48

Stop Loss: 99.40
Target(s): To Be Determined
Current Option Gain/Loss: -1.8%
Average Daily Volume = 5.0 million
Entry on October 22 at $101.00
Listed on October 19, 2015
Time Frame: Exit prior to expiration in January
New Positions: see below

Comments:
11/03/15: What's up with shares of PEP? The market is in rally mode and shares just posted their third decline in a row. Technically today's move is an entry point. Shares dipped toward round-number support and broken resistance near $100 and began to bounce (the intraday low was $99.83).

Tonight I am suggesting investors wait for PEP to trade above $101.55 again before initiating new bullish positions.

Trade Description: October 19, 2015:
Soda sales remain the biggest chunk of non-alcoholic drinks. Unfortunately for big soda makers like PEP and KO trends are changing. Consumers are become more health conscious. Sugary soda drink sales have fallen ten years in a row. The good news is that more and more consumers are reaching for bottled water and other drinks perceived to be healthier than traditional colas. Bottled water sales are on pace to surpass soda as the beverage of choice for U.S. consumers soon. (FYI: PEP's bottled water brand is Aquafina)

PEP is a consumer goods giant with a global presence. According to the company, "PepsiCo products are enjoyed by consumers one billion times a day in more than 200 countries and territories around the world. PepsiCo generated more than $66 billion in net revenue in 2014, driven by a complementary food and beverage portfolio that includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. PepsiCo's product portfolio includes a wide range of enjoyable foods and beverages, including 22 brands that generate more than $1 billion each in estimated annual retail sales."

The stock has been stuck consolidating sideways in the $90-100 trading range for almost a year. It looks like that consolidation may be nearing its end.

Earnings have been better than expected. I looked at the last three quarters. PEP has managed to beat Wall Street's estimates on both the top and the bottom line. Revenues have declined year over year but that is due to negative foreign currency exchange rates that is shaving off about -10% from earnings and revenues. The company says their gross margins and operating margins continue to improve.

PEP's Q3 results showed a +7.4% jump in organic revenues. On a constant currency basis their operating profit was up +12%. Earnings were up +14% from a year ago and their core gross margins surged 120 basis points. They have raised their full year 2015 core constant currency EPS guidance twice this year. Thus far PEP has saved $1 billion in productivity savings and returned $9 billion to shareholders in 2015.

The U.S. market is up the last three weeks in a row but it's relatively flat for the year. Investors are confused with all the different global cross currents, exchange fluctuations, central bank moves, and more. Fund managers are probably tempted to park cash in a huge, liquid big cap like PEP and get paid 2.8% a year with dividends. Why not? PEP is still growing with solid single-digit growth.

Technically PEP looks poised to breakout past major resistance in the $100 area. The point & figure chart is already bullish and forecasting at $120.00 target. Tonight we are listing a trigger to buy calls at $101.00.

- Suggested Positions -

Long 2016 JAN $100 CALL (PEP160115C100) entry $2.81

11/02/15 PEP underperforms the broader market (Monday)
10/31/15 new stop @ 99.40
10/22/15 triggered @ $101.00
Option Format: symbol-year-month-day-call-strike


Signet Jewelers Limited - SIG - close: 148.16 change: -1.01

Stop Loss: 144.15
Target(s): To Be Determined
Current Option Gain/Loss: -27.9%
Average Daily Volume = 889 thousand
Entry on October 29 at $150.75
Listed on October 26, 2015
Time Frame: Exit PRIOR to earnings on November 24th
New Positions: see below

Comments:
11/03/15: SIG saw a small spike lower this morning and then spent the rest of Tuesday drifting sideways. The stock closed just a few cents below its 10-dma. If this dip continues SIG might be headed for the $145.00 area.

No new positions at this time.

Trade Description: October 26, 2015:
The holiday shopping season is almost here. A lot of retailers launch their holiday sales push in the first week of November. Soon investors are going to be looking for a Santa Claus rally. SIG looks like a tempting candidate since it has a history of outperforming the S&P 500 during the fourth quarter.

SIG is in the services sector. According to the company, "Signet Jewelers Limited is the world's largest retailer of diamond jewelry. Signet operates approximately 3,600 stores primarily under the name brands of Kay Jewelers, Zales, Jared The Galleria Of Jewelry, H.Samuel, Ernest Jones, Peoples and Piercing Pagoda. Further information on Signet is available at www.signetjewelers.com. See also www.kay.com, www.zales.com, www.jared.com, www.hsamuel.co.uk, www.ernestjones.co.uk, www.peoplesjewellers.com and www.pagoda.com."

Kay, Zales, and Jared are the first, third, and fourth biggest brand names in the jewelry business. In spite of having such a dominant position SIG only has about 8% of the $74 billion U.S. jewelry market. That leaves plenty of room to grow.

The company is integrating its recent acquisition of Zales. The results have boosted sales. Their 2016 Q1 and Q2 results (announced in May and August) came in better than expected. Same-store sales have been healthy at more than +4%. They are also seeing strong growth in their online sales.

Wall Street seems positive on SIG. A Nomura analyst recently labeled SIG as one of their best multi-year growth stories in retail. The stock has been showing relative strength too. SIG is up +12% in 2015 versus an S&P 500 that is virtually flat for the year.

Technically shares have a bullish trend of higher lows and higher highs. The point & figure chart is bullish with a quadruple top breakout buy signal and a $187 price target. On a short-term basis SIG has resistance in the $150.00 area. The recent high was $150.65. Tonight we are suggesting a trigger to buy calls at $150.75.

- Suggested Positions -

Long DEC $155 CALL (SIG151218C155) entry $4.30

10/29/15 triggered @ $150.75, upgraded by Goldman Sachs
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Canadian Pacific Railway - CP - close: 141.94 change: +1.88

Stop Loss: 143.75
Target(s): To Be Determined
Current Option Gain/Loss: -31.7%
Average Daily Volume = 1.0 million
Entry on November 02 at $139.75
Listed on October 31, 2015
Time Frame: Exit PRIOR to earnings in January
New Positions: see below

Comments:
11/03/15: The Dow Jones Transportation Average underperformed the market today with a -0.4% decline. The DJUSRR railroad index closed virtually unchanged today (+0.07%). Meanwhile shares of CP surged with a +1.3% gain. I do not see any news to account for this display of relative strength.

If CP is not going to cooperate we are going to try and limit our risk by moving the stop loss down to $143.75. More aggressive traders may want to leave their stop above $145.00, which looks like short-term resistance.

FYI: Yesterday I suggested looking for resistance at $142.50. The intraday high today was $142.49.

Trade Description: October 31, 2015:
Transportation stocks have been significant underperformers this year in spite of lower fuel costs. The Dow Jones Transportation Average peaked in late 2014-early 2015 and has fallen -11% year to date. Railroad stocks have fared even worse. The DJUSRR railroad index is down -26% for the year. Shares of CP are down -27% this year and look poised to extend their losses.

CP is in the services sector. According to the company, "Canadian Pacific is a transcontinental railway in Canada and the United States with direct links to eight major ports, including Vancouver and Montreal, providing North American customers a competitive rail service with access to key markets in every corner of the globe. CP is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise."

One of the challenges for the railroad companies has been falling coal demand. The White House has been pressure the coal industry. Meanwhile falling natural gas prices have made it a more attractive alternative to coal. One estimate suggest coal demand in the U.S. could fall by 100 million st this year and 2016 will be even lower. A lot of that coal gets moved by train but falling demand means less carloads to transport.

Another challenge for the railroad industry has been falling capex spending from the energy companies across North America. Depressed oil prices make it less profitable to invest in new wells and that means less demand to move that equipment and fracking supplies by rail. Wall Street analysts have been reducing their earnings estimates on the railroad companies and cutting their price targets.

A U.S. economy stuck near 2% growth doesn't help either. GDP growth fell from +3.9% in Q2 to +1.5% in Q3. Last week the latest durable goods orders (from September) were another disappointment and suggest the economy is slowing.

The stock market's plunge in August pushed shares of CP from $160 to $130. The stock almost made it back to $160 by early October but the rebound has reversed. Disappointing earnings news in the transportation industry this past week sparked another sell-off. Now the trading in CP over the last two months looks like a bear-flag consolidation pattern (see chart). The point & figure chart has turned bearish and is currently forecasting a $128 target but it could get worse. Tonight we are suggesting a trigger to buy puts at $139.75.

- Suggested Positions -

Long 2016 JAN $130 PUT (CP160115P130) entry $4.10

11/03/15 new stop @ 143.75
11/02/15 triggered @ $139.75
Option Format: symbol-year-month-day-call-strike


Darden Restaurants - DRI - close: 62.55 change: -0.11

Stop Loss: 63.65
Target(s): To Be Determined
Current Option Gain/Loss: -0.0%
Average Daily Volume = 1.7 million
Entry on October 21 at $63.40
Listed on October 20, 2015
Time Frame: Exit PRIOR to earnings in December
New Positions: see below

Comments:
11/03/15: DRI did not participate in the market's widespread rally today. Shares simply drifted sideways and closed with a minor loss. DRI's failure to bounce is a small win for the bears.

No new positions at this time.

Trade Description: October 20, 2015:
Consumer spending has been disappointing and some of the restaurant names are suffering for it. DRI has actually raised guidance two quarters in a row but investors are ignoring this news and seem to be focusing on the larger macro trends for the industry.

DRI is in the services sector. According to the company, "Darden Restaurants, Inc., (DRI) owns and operates more than 1,500 restaurants that generate $6.8 billion in annual sales. Headquartered in Orlando, Florida, and employing 150,000 people, Darden is recognized for a culture that rewards caring for and responding to people. Our restaurant brands - Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V's and Yard House - reflect the rich diversity of those who dine with us. Our brands are built on deep insights into what our guests want."

DRI reported their Q4 report on June 23rd. They beat Wall Street's EPS estimate and raised their 2016 guidance. Shares popped on the news and the stock continued to rally into late summer. Unfortunately shares produced a bearish double-top pattern in the July-August time frame. DRI began to correct lower.

The company reported its 2016 Q1 results on September 22nd. Earnings of $0.68 per share beat estimates by 10 cents. Revenues were up +5.7% to $1.69 billion, which was above estimates. Same-store sales were up +3.4% for the quarter. Management raised their 2016 earnings guidance again. This looked like a pretty good report. Yet three days later investors sold the rally.

Nationwide the pace of consumer spending has been lower than expected. A few days ago an industry research firm said U.S. restaurant sales were up +1.5% in Q3 but that was slower than Q2's +1.8% growth. A higher tab helped offset slower traffic numbers. The outlook for traffic is worrisome. This firm expects restaurant traffic numbers to be stagnant. This is inline with another research note that expects foot traffic at retailers to fall -8% this holiday season.

The market used to think that consumers would take the money they saved from lower gasoline prices and spend it elsewhere. That doesn't seem to be happening. Now the restaurant industry is facing tough comparisons to last year's relatively healthy Q4 numbers.

Technically DRI is now in a bearish trend of lower highs and lower lows. Shares have broken down below their 200-dma. The oversold bounce just failed at resistance near $66.00. The point & figure chart is bearish and forecasting at $55.00 target. Tonight we are suggesting a trigger to buy puts if DRI trades down to $63.40. This is a multi-week trade. We will plan on exiting prior to earnings in December.

- Suggested Positions -

Long 2016 JAN $60 PUT (DRI160115P60) entry $2.15

10/31/15 new stop @ 63.65
10/21/15 triggered @ $63.40
Option Format: symbol-year-month-day-call-strike


CLOSED BEARISH PLAYS

Cracker Barrel Old Country - CBRL - close: 140.77 change: +3.31

Stop Loss: 142.75
Target(s): To Be Determined
Current Option Gain/Loss: -50.0%
Average Daily Volume = 395 thousand
Entry on October 22 at $136.90
Listed on October 21, 2015
Time Frame: Exit PRIOR to earnings on Nov. 24th
New Positions: see below

Comments:
11/03/15: CBRL has not been cooperating. We decided in last night's newsletter to exit this trade on Tuesday morning. CBRL opened lower (-0.20) and eventually settled with a -0.7% decline on the session.

Yesterday I said the overall trend is bearish but CBRL is just not seeing any follow through lower. The stock has short-term support in the $137.00 area.

- Suggested Positions -

DEC $130 PUT (CBRL151218P130) entry $3.20 exit $1.60 (-50.0%)

11/03/15 planned exit this morning
11/02/15 prepare to exit tomorrow morning
10/31/15 new stop @ 142.75
10/22/15 triggered @ $136.90
Option Format: symbol-year-month-day-call-strike

chart:


Nordstrom Inc. - JWN - close: 66.99 change: +1.79

Stop Loss: 66.25
Target(s): To Be Determined
Current Option Gain/Loss: +30.1%
Average Daily Volume = 1.4 million
Entry on October 15 at $66.40
Listed on October 14, 2015
Time Frame: Exit PRIOR to earnings on November 12
New Positions: see below

Comments:
11/03/15: We got lucky on the timing of our JWN exit. Last night we decided that shares appeared to have bottomed and we wanted to exit this morning. Today JWN broke out from its $64-66 trading range and surged to a +2.74% gain on the session. Our exit was this morning at $66.07.

- Suggested Positions -

NOV $65.15* PUT (JWN151120P65.15) entry $1.13 exit $1.47 (+30.1%)

11/03/15 planned exit this morning
11/02/15 prepare to exit tomorrow morning at the opening bell
10/29/15 new stop @ 66.25
10/15/15 triggered @ $66.40
*NOTE: The odd option strike is due to JWN's special cash dividend of $4.85 per share. The ex-distribution date was Wednesday, October 7, 2015. The option market adjusted all the prior option strikes down -4.85.

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

chart: