Editor's Note:

The S&P 500 index and the Dow Jones Industrial Average have produced their worst four-day start to any year in history! The S&P 500 is already down -5% for the year. The NASDAQ's -6.4% plunge has erased all of its gains for 2015.

The Dow Industrials and NASDAQ are now in correction territory, down more than 10% from their highs. The S&P 500 would need to drop to 1,898 before hitting correction territory.

Our DLTR trade was triggered this morning before the stock rolled over with the broader market.


Current Portfolio:


CALL Play Updates

Dollar Tree, Inc. - DLTR - close: 78.45 change: -2.07

Stop Loss: 76.90
Target(s): To Be Determined
Current Option Gain/Loss: -38.9%
Average Daily Volume = 3.6 million
Entry on January 07 at $80.85
Listed on January 06, 2016
Time Frame: Exit PRIOR to February option expiration
New Positions: see below

Comments:
01/07/16: The stock market was crushed again at the opening bell. Traders bought the dip in DLTR. For a little while shares managed to buck the market's down trend. DLTR actually hit new four-month highs before yielding to the market's plunge lower. Unfortunately DLTR did hit our suggested entry point to buy calls at $80.85 before rolling over. The stock ended the session with a -2.5% decline but near what should be short-term support near $78.00.

I would hesitate to launch new positions tomorrow but nimble traders may want to consider buying calls on another rally above $80.60.

Trade Description: January 6, 2016:
Last year DLTR shares delivered a very bumpy ride for investors but the stock did manage to outperform. 2015 saw the S&P 500 index flat with a -0.7% loss. The NASDAQ gained +5.7%. Yet DLTR added +9.7%. More importantly DLTR has been showing relative strength THIS year and appears to be breaking out past resistance.

DLTR is part of the services sector. According to the company, "headquartered in Chesapeake, VA, Dollar Tree is the largest and most successful single-price-point retailer in North America, operating thousands of stores across 48 contiguous U.S. states and five Canadian provinces, supported by a solid and scalable logistics network. At Dollar Tree, we are committed to serving the best interests of our shareholders. We seek to enhance shareholder value not only through exceptional business performance and practices, but also through responsible and effective communication. To help put Dollar Tree, Inc.'s financial performance into perspective, our Investor Relations site provides the latest company information relevant to the individual."

One of the big stories for DLTR last year was its $9.5 billion acquisition of rival Family Dollar (FDO). This more than doubled DLTR's stores and more than doubled its annual sales.

DLTR's earnings results have been mixed and the stock has seen some big moves on its recent reports. On September 1st DLTR reported their Q2 results that missed estimates and guided lower. Shares plunged. Fortunately for investors DLTR bottomed in the $60-62 area in the October-November time frame.

On November 24th DLTR reported its Q3 results, which looks like their first full quarter as a combined company (with Family Dollar). Earnings were $0.38 a share. That missed analysts' estimates. Revenues were up +136% from a year ago thanks to the merger and above expectations at $4.95 billion. Management lowered their Q4 guidance but raised their full year 2016 revenue guidance above Wall Street estimates. Investors bought this news and shares of DLTR have been outperforming the broader market for the last several weeks.

DLTR's CEO Bob Sasser commented on his company's Q3 performance, "I am pleased with our Company's third quarter performance. Dollar Tree delivered same-store sales of 2.1%, which represented our 31st consecutive quarter of positive same-store sales. This was against a 5.9% comp from the prior year, our strongest quarter of 2014. While not included in our comp calculation, Family Dollar delivered positive same-store sales of low to mid-single-digits, as a percent, each month during the quarter." Sasser added, "Our integration project is on schedule and we are on track to achieve our stated synergy goals. Today, I am even more enthusiastic about the long-term opportunity this merger provides for our customers, our suppliers, our associates, and our shareholders."

In early December analyst firm RBC upgraded DLTR to one of their "top picks" and raised their price target on the stock to $90. RBC believes DLTR can achieved +20% to +25% growth in 2016-2017. Analyst firm Cantor Fitzgerald is also bullish on DLTR. A couple of weeks ago they issued an note on the company saying, "We expect a re-acceleration of SSS growth and believe there is opportunity for the company to realize cost synergies from the Family Dollar acquisition that doubles the $300 million guidance by year three." Cantor upped their DLTR price target from $85 to $105.

Currently the point & figure chart is bullish and forecasting at $90.00 target.

DLTR spent a good chunk of December consolidating sideways in the $75-80 zone. Now the stock is breaking out, which is impressive considering the stock market's weakness. The S&P 500 is already down -2.6% in 2016 and the NASDAQ is down -3.4%. DLTR is up +4.2% year to date and broke through resistance near $78.50 and now the $80.00 level. Tonight we are suggesting a trigger to buy calls at $80.85.

- Suggested Positions -

Long FEB $80 CALL (DLTR160219C80) entry $3.60

01/07/16 triggered @ $80.85
Option Format: symbol-year-month-day-call-strike


Harris Corp. - HRS - close: 86.24 change: -1.13

Stop Loss: 84.90
Target(s): To Be Determined
Current Option Gain/Loss: -47.2%
Average Daily Volume = 927 thousand
Entry on January 05 at $88.15
Listed on January 04, 2016
Time Frame: Exit PRIOR to earnings in early February
New Positions: see below

Comments:
01/07/16: HRS held up better than most. The S&P 500 index lost -2.3% today. HRS only fell -1.29% and closed near technical support at its 20-dma. The prior highs near $85.00 should also be another layer of support.

At the moment I would not launch new positions but a rally above today's high ($87.62) could be used as an alternative bullish entry point.

Trade Description: January 4, 2016:
Out of the thousands of publically traded companies out there only a few have been around for over 100 years. A couple of weeks ago HRS celebrated its 120th anniversary.

HRS issued a press release to mark the achievement. Here's an excerpt: "Founded in the back room of an Ohio jewelry store in December 1895, Harris grew from a tiny printing press company into a top 10 defense contractor with $8 billion in annualized sales, 22,000 employees, customers in 125 countries, and a diverse portfolio of technologies that connect, inform and protect the world. Harris is the longest-thriving major defense contractor and one of 398 publicly held companies still in existence for 120 years or longer - including GE, CVS, Coca-Cola, Pfizer, P&G, and J.P. Morgan."

Today HRS is in the technology sector. They are considered part of the communication equipment industry. According to the company, "Harris Corporation is a leading technology innovator, solving our customers' toughest mission-critical challenges by providing solutions that connect, inform and protect. Harris supports customers in more than 125 countries, has approximately $8 billion in annual revenue and 22,000 employees worldwide. The company is organized into four business segments: Communication Systems, Space and Intelligence Systems, Electronic Systems, and Critical Networks."

Last year HRS ended 2015 on a strong note. The month of December saw HRS win several government contracts worth more than $1 billion. Meanwhile analysts are bullish on the stock. Goldman Sachs has a buy rating on HRS. Cowen recently upped their price target to $102 and said it was one of their best trading ideas for 2016.

Technically the stock has been showing relative strength. Last year HRS outperformed the broader market with a +20% gain. The positive news about the company's new contract wins produced a bullish breakout past major resistance at $85.00 in mid December. Today investors bought the dip near short-term support at its 10-dma. HRS displayed relative strength today too with a +0.8% gain. If this bounce continues we want to hop on board. Tonight we are suggesting a trigger to buy calls at $88.15.

- Suggested Positions -

Long FEB $90 CALL (HRS160219C90) entry $2.65

01/05/16 triggered @ $88.15
Option Format: symbol-year-month-day-call-strike


Ionis Pharmaceuticals - IONS - close: 55.43 change: -3.29

Stop Loss: 56.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.6 million
Entry on January -- at $---.--
Listed on January 02, 2016
Time Frame: Exit PRIOR to February option expiration
New Positions: Yes, see below

Comments:
01/07/16: Biotech stocks were some of the market's worst performers today. The IBB biotech index plunged -4%. Shares of IONS fared even worse with a -5.6% decline. If shares bounce tomorrow we will re-evaluate our entry point strategy and may lower our entry trigger again. Currently our suggested entry point is $60.35.

Trade Description: January 2, 2016:
Biotech stocks had a volatile year, especially after the group peaked in July 2015. The IBB managed to deliver a +11% gain for the year thanks to strength among some of its bigger cap names. IONS closed virtually flat for the year (down -19 cents for all of 2015). The stock has been showing relative strength recently and looks poised to sprint past its peers.

IONS is in the healthcare sector. They are part of the drug and biotech industry. The company was previously known as ISIS pharmaceuticals. Unfortunately the rise of the radical Islamic terrorist group known as ISIS has tarnished the name. A couple of weeks ago ISIS changed its name to Ionis. Here's a bit from the company press release:

"Isis Pharmaceuticals, Inc. today (December 18th) announced that the company has changed its name to Ionis Pharmaceuticals, Inc. Ionis (pronounced "eye-OH-nis") Pharmaceuticals is an original name that the Company has chosen to represent its innovative culture and heritage as both the pioneer and leader in the RNA-targeted therapeutic space for the past 26 years."

Now here is the company's description: "Ionis is the leading company in RNA-targeted drug discovery and development focused on developing drugs for patients who have the highest unmet medical needs, such as those patients with severe and rare diseases. Using its proprietary antisense technology, Ionis has created a large pipeline of first-in-class or best-in-class drugs, with over a dozen drugs in mid- to late-stage development. Drugs currently in Phase 3 development include volanesorsen, a drug Ionis is developing and plans to commercialize through its wholly owned subsidiary, Akcea Therapeutics, to treat patients with familial chylomicronemia syndrome and familial partial lipodystrophy; IONIS-TTRRx, a drug Ionis is developing with GSK to treat patients with all forms of TTR amyloidosis; and nusinersen, a drug Ionis is developing with Biogen to treat infants and children with spinal muscular atrophy. Ionis' patents provide strong and extensive protection for its drugs and technology."

Regular readers know that we feel biotech stocks are aggressive, higher-risk trades. A lot of biotech companies are relatively small and only have one or two treatments in development, which make them binary trades. You can win big or lose big depending on the approval process of their treatment. There is a lot of headline risk. There is still headline risk with IONS but the company's relatively deep pipeline of drugs makes IONS a stronger play. You can view IONS' pipeline here.

Shares of IONS surged through several layers of resistance in early November on a better than expected Q3 earnings report. Since that big rally the stock has been consolidating lower. That changed in mid December when traders bought the dip near its 100-dma. Investors have been buying the dips every since. IONS displayed relative strength on Thursday with a +0.99% gain. The point & figure chart is bullish and forecasting at $74.00 target.

We would like to see some follow through higher. Tonight we are suggesting a trigger to buy calls at $63.20. Plan on exiting prior to February option expiration.

Trigger @ 60.35 *new entry trigger*

- Suggested Positions -

Buy the FEB $65 CALL (IONS160219C65)

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.

01/06/16 Entry point update - Adjust the entry point to buy calls from $63.20 down to $60.35. Move the stop loss down to $56.75
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Red Robin Gourmet Burgers - RRGB - close: 56.62 change: -2.68

Stop Loss: 62.15
Target(s): To Be Determined
Current Option Gain/Loss: - 2.0%
Average Daily Volume = 244 thousand
Entry on January 06 at $58.40
Listed on January 05, 2016
Time Frame: Exit PRIOR to earnings in mid February
New Positions: see below

Comments:
01/07/16: RRGB underperformed the broader market with a -4.5% plunge. That was worse than the NASDAQ composite's -3.0% decline. These are new 52-week lows for the stock.

No new positions at this time.

Trade Description: January 5, 2016:
The second half of 2015 had to be frustrating if you were bullish on RRGB. The company has been outperforming many of its peers in the restaurant industry but shares still got crushed. RRGB delivered a -19.7% decline for all of 2015 but fell -33.5% from its 2015 peak near $92.00 a share.

RRGB is in the services sector. According to the company, "Red Robin Gourmet Burgers, Inc. (www.redrobin.com), a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc., is the Gourmet Burger Authority®, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries® in a fun environment welcoming to guests of all ages. In addition to its many burger offerings, Red Robin serves a wide variety of salads, soups, appetizers, entrees, desserts and signature Mad Mixology® Beverages. Red Robin offers a variety of options behind the bar, including its extensive selection of local and regional beers, and innovative adult beer shakes and cocktails, earning the restaurant the 2014 VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are more than 500 Red Robin restaurants across the United States and Canada, including Red Robin Burger Works® locations and those operating under franchise agreements."

One of the biggest stories last year was the decline in crude oil. Lower crude oil means lower gasoline prices at the pump. Many were expecting lower gas prices to fuel a jump in consumer spending. Unfortunately that increase in spending never really showed up.

The data has shown a slowdown in restaurant sales. Black Box Intelligence, a research firm, publishes monthly statistics on the restaurant industry. Black Box said industry-wide sales growth fell from +1.8% in Q2 2015 to +1.5% in Q3 (no word yet on Q4). Traffic stalled as well. In early November Black Box Intelligence reported that same-store sales growth for the restaurant industry went negative for the first time since July 2014 with a -0.2% drop in October 2015. Traffic plunged -2.8%. There was a bounce in November with comp sales up +0.5% but traffic fell another -1.7%.

That is the environment RRGB has been operating in. They have been beating a lot of their peers with stronger comparable-store sales but RRGB has not been immune to the slow down. Looking at RRGB's last four quarterly reports they have beaten Wall Street's earnings estimate the last three quarters in a row. However, they have missed analysts' revenue estimates three out of the last four quarters. Revenue growth has slowed from +16.6% to +16% to +14.4% and down to +6% in their most recent announcement. Comps started last year at +3.6% and dipped to +2.9% before bouncing back to +3.5%.

Investors don't seem to care that RRGB's comparable store sales are beating the industry. Traders have sold the stock hard following the last two earnings reports and shares have continued to sink under a bearish trend of lower highs. The last three weeks of December saw RRGB consolidating sideways in the $60.00-65.00 range. The recent breakdown below support at $60.00 has produced a new quadruple bottom breakdown sell signal on the point & figure chart, which is currently forecasting a target near $54.00 (and could go lower).

Shares of RRGB displayed relative weakness today. The intraday bounce attempt failed and shares lost -1.7% on the session to close at new 52-week lows. The stock is poised for a drop toward the $50-55 zone. Tonight we are suggesting a trigger to buy puts at $58.40.

- Suggested Positions -

Long FEB $55 PUT (RRGB160219P55) entry $2.50

01/06/16 triggered @ $58.40
Option Format: symbol-year-month-day-call-strike