Editor's Note:

The stock market sell-off accelerated lower. There was talk of investors being met with margin calls today in addition to speculation about some mutual funds needing to raise cash to meet redemptions. The U.S. market's major indices are all in correction territory (-10% from their highs).

After just eight trading days in 2016 the S&P 500 is down -7.5%.
The NASDAQ composite is off -9.6% and the small cap Russell 2000 index is down -11%.

SSS hit our entry trigger this morning.


Current Portfolio:


CALL Play Updates

Digital Realty Trust Inc. - DLR - close: 77.63 change: -0.45

Stop Loss: 74.80
Target(s): To Be Determined
Current Option Gain/Loss: -18.2%
Average Daily Volume = 1.5 million
Entry on January 11 at $77.75
Listed on January 09, 2016
Time Frame: Exit PRIOR to February option expiration
New Positions: see below

Comments:
01/13/16: Shares of DLR held up pretty well today. The broader market just collapsed with all of the major U.S. indices losing about -2.4% (or more). DLR only declined -0.57%.

Optimistically the $77.00-77.25 zone should offer some short-term support for DLR. However, if the market goes into full capitulation mode, where investors sell everything, DLR may get caught up in the cascade lower.

No new positions at this time.

Trade Description: January 9, 2016:
The last several days have been tough on investors. Stocks experienced a global market sell-off. This volatility and uncertainty could push investors into safer, high-dividend paying stocks. Currently the 10-year U.S. bond only yields 2.1%. That makes a stock like DLR, with a dividend yield above 4%, a lot more attractive. The company has a history of consistently raising its dividend over the last nine years in a row. The stock's relative strength doesn't hurt either.

DLR is in the financial sector. According to the company, "Digital Realty Trust, Inc. supports the data center and colocation strategies of more than 1,000 firms across its secure, network-rich portfolio of data centers located throughout North America, Europe, Asia and Australia. Digital Realty's clients include domestic and international companies of all sizes, ranging from financial services, cloud and information technology services, to manufacturing, energy, gaming, life sciences and consumer products."

DLR has consistently beat Wall Street earnings expectations the last four quarters in a row. The last two quarters the company has also beat analysts' revenue estimates.

Earlier this week DLR provided their 2016 outlook and the company's forecast was slightly above expectations, which helped shares resist the market's sell-off.

Here is an excerpt from DLR's press release on their 2016 outlook:

Digital Realty expects 2016 core FFO (Funds from Operations) per share to be within a range of $5.45-$5.60, which represents a 7% increase at the midpoint from the midpoint of 2015 core FFO per share guidance. Foreign currency translation is expected to represent a headwind to core FFO per share of 1%-2% in 2016.

"We are seeing solid demand for Digital Realty's comprehensive set of data center solutions, which gives us confidence in our ability to achieve accelerating core FFO per share growth in 2016," commented Andrew P. Power, Digital Realty's Chief Financial Officer. "We also expect to generate double-digit AFFO per share growth (Adjusted Funds from Operations), driven by greater cash flow contribution from our core business, accretion from the Telx acquisition and the continued burn-off of straight-line rent. In short, the quality of earnings is improving, the growth in cash flow is accelerating, and we are optimistic about the prospects for our business in 2016 and beyond."

The recent relative strength in shares of DLR over the last few weeks has lifted shares above key resistance near the $75.00 level. It has also produced a buy signal on the point & figure chart, which is now forecasting a longer-term target of $102.00.

Friday saw DLR shares tag new all-time highs (@ 77.67). Tonight we are suggesting a trigger to buy calls at $77.75. Plan on exiting prior to February option expiration.

- Suggested Positions -

Long FEB $80 CALL (DLR160219C80) entry $1.10

01/11/16 triggered @ $77.75
Option Format: symbol-year-month-day-call-strike


Dycom Industries - DY - close: 66.33 change: -4.71

Stop Loss: 68.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 729 thousand
Entry on January -- at $---.--
Listed on January 12, 2016
Time Frame: Exit PRIOR to earnings in late February
New Positions: Yes, see below

Comments:
01/13/16: Ouch! Shares of DY were crushed today. It was a bad day for the markets overall but DY plunged -6.6% and closed below what should have been technical support at its simple 200-dma.

If DY doesn't bounce tomorrow we may remove it as a candidate. Currently our suggested entry point is up at $73.75.

Trade Description: January 12, 2016:
Shares of DY suffered a -20% correction in the last several weeks of 2015. In spite of the pullback DY was one of the market's best performing stocks last year with a +100% gain. The reason why DY performed so well is rising demand for its telecom infrastructure business. Think about your smartphone usage. Consumer demand for data and streaming video has surged and will only increase as we go forward. That has the major communications companies upgrading their networks to handle more data and that means more business for DY.

DY is part of the industrial goods sector. According to the company, "Dycom is a leading provider of specialty contracting services throughout the United States and in Canada. These services include project management, engineering, construction, maintenance and installation services to telecommunications providers, underground facility locating services to various utilities, including telecommunications providers, and other construction and maintenance services to electric and gas utilities."

Stocks are supposed to rise when the company delivers earnings growth. Last year DY did not disappoint. In 2015 DY saw its revenues grow +20% while earnings surged +150% for the year. Their most recent earnings report was November 23rd. DY delivered their 2016 Q1 results. Quarterly earnings soared +110% from a year ago to $1.24 a share. Analysts were only expecting $1.01 on revenues of $625 million. DY said revenues were up +29% to $659 million. Furthermore DY's management raised their Q2 guidance significantly above Wall Street estimates. For the year ahead analysts are forecasting DY's earnings to rise +62% in 2016.

Technically DY's stock has been correcting lower. The point & figure chart is bearish but a rise above $75.00 will generate a new buy signal. You can see on the daily chart that DY bounced off technical support at its 200-dma but remains inside its descending bearish channel. We want to be ready to catch the breakout if DY does break out of this channel. Tonight we are suggesting a trigger to buy calls at $73.75. I'm listing the March $75 calls. You may want to consider the March $80s instead.

Trigger @ $73.75

- Suggested Positions -

Buy the MAR $75 CALL (DY160318C75)

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


Harris Corp. - HRS - close: 85.40 change: -3.51

Stop Loss: 84.90
Target(s): To Be Determined
Current Option Gain/Loss: -52.8%
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:
01/13/16: The stock market's widespread selling today hit shares of HRS pretty hard. The stock dove -3.9% and erased the prior four days' worth of gains. HRS settled on short-term technical support at its 30-dma. If HRS sees any follow through lower tomorrow there is a good chance we could get stopped out.

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


PowerShares QQQ ETF - QQQ - close: 101.90 change: -3.64

Stop Loss: 103.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 35 million
Entry on January -- at $---.--
Listed on January 07, 2016
Time Frame: Exit PRIOR to February option expiration
New Positions: Yes, see below

Comments:
01/13/16: The QQQ traded up to $106.23 before rolling over. The rally didn't last very long and the QQQ marched lower until it finally closed at a new three-month low. Odds are growing that we will see the QQQ hit our buy-the-dip trigger at $100.50.

There is no change from my weekend comments.

Trade Description: January 7, 2016:
The stock market moves on emotion. Most of the time it is a tug-of-war between fear and greed. Occasionally one emotion takes control of the market and stocks move too fast one direction. That is where we are at today.

Fears of a global slowdown thanks to disappointing economic data out of China have increased. China has devalued their currency again, which does not generate confidence. Yesterday we had the nuclear weapon testing headlines from North Korea, which generates fear. We have plunging oil prices, which is fueling worries about deflation.

Odds of a snap back rally are growing and we want to be ready to catch it. One way to play it is the NASDAQ-100 ETF or the QQQ. These are very liquid, big cap names that fund managers can move in and out of more easily.

Thus far 2016 has been ruled by fear. We are only four trading days into the year and the NASDAQ composite is already down -6.4% completely erasing its +5.7% gain from 2015. The QQQ is down -6.2% in the last four days and it's down -8.25% from its December 29th peak just six trading days ago. That's too far too fast.

Tonight we are suggesting a short-term bullish trade when stocks bounce. They will bounce (eventually). Today's intraday high on the QQQ was $107.29. We are suggesting a trigger to buy calls at $107.35. We'll use an initial stop loss at $103.85. More conservative traders may want to use a stop loss closer to today's intraday low instead ($104.81).

Trigger @ $106.50, use an initial stop loss at $103.45

- Suggested Positions -

Buy the FEB $110 CALL (QQQ160219C110)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Buy-the-Dip Trigger @ $100.50, use an initial stop loss at $97.45

- Suggested Positions -

Buy the FEB $105 CALL (QQQ160219C105)

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(s).

01/09/16 Entry Strategy Update - Use TWO different entry triggers
One is a buy-the-dip trigger at $100.50 with a stop at $97.45 and the Feb $105 calls
The other is a trigger at $106.50 with a stop at $103.45 and the Feb $110 calls
Option Format: symbol-year-month-day-call-strike


Sovran Self Storage Inc. - SSS - close: 109.64 change: -0.13

Stop Loss: 107.40
Target(s): To Be Determined
Current Option Gain/Loss: -82.4%* see below
Average Daily Volume = 257 thousand
Entry on January 13 at $110.75
Listed on January 11, 2016
Time Frame: Exit PRIOR to earnings in mid February
New Positions: see below

Comments:
01/13/16: Our new play on SSS is open. This stock surged out of the gate this morning and rallied to new highs. Our suggested entry point at $110.75 was hit early on. SSS found new resistance near the $112.00 level midday. When the market accelerated lower this afternoon SSS finally succumbed to the market's weakness. Shares dipped back to virtually unchanged on the session to close with a -0.13% loss.

On the surface a -0.1% loss versus the S&P 500's -2.5% drop looks great. Unfortunately today's action looks like potential failed rally and bull trap pattern. I would wait for a new rally above $110.75 before considering positions again.

* something crazy is going on with SSS' option quotes. It could be a reflection of the market's sell-off today or it could be an error in the system. At the close tonight the February $110 call had a bid of $0.60 and an ask of $5.00 (given our $3.40 entry we have a -82% loss at the moment).

Trade Description: January 11, 2016:
REIT stocks had a rocky year in 2015 as investors worried about the Federal Reserve raising rates. Well the Fed finally did raise rates in December and shares of SSS soared to new highs. This stock has been outperforming both its peers and the broader market. Last year the S&P 500 was flat (-0.7%) while the REIT ETF (symbol: IYR) lost -17.6%. Shares of SSS delivered a +22% gain last year and the bullish momentum continues in 2016.

SSS is part of the financial sector. According to the company, "Sovran Self Storage, Inc. is an equity REIT that is in the business of acquiring and managing self storage facilities. The Company operates over 500 self storage facilities in 25 states under the name Uncle Bob's Self Storage."

This is a relative strength play. SSS has rallied toward round-number resistance at $110.00. Shares spent the last several days consolidating sideways in the $105-110 zone. Now it looks poised to breakout. The point & figure chart is bullish and forecasting a long-term target at $130.00.

Readers might want to consider buying calls on a breakout past $110.00. However, the intraday high on December 30th was $110.60. We are suggesting a trigger to launch positions at $110.75.

FYI: SSS has an $0.85 dividend coming up soon. The ex-dividend date appears to be January 15th. The stock will likely gap down on Friday morning due to the dividend.

- Suggested Positions -

Long FEB $110 CALL (SSS160219C110) entry $3.40

01/13/16 triggered @ $110.75
Option Format: symbol-year-month-day-call-strike




PUT Play Updates


Currently we do not have any active put trades.