Editor's Note:

The market declined to 15-month lows on a parade of worries. Another multi-year low in crude oil weighed on stocks as did another sell-off in Chinese equities. The combination of options expiration and fear of a long, three-day weekend all worked together to fuel the drop.

SSS was stopped out. QQQ hit our entry trigger.

We have added new entry triggers to both the SPY and STZ trades.


Current Portfolio:


CALL Play Updates

Digital Realty Trust Inc. - DLR - close: 76.32 change: -2.04

Stop Loss: 74.80
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
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:
01/16/16: A lot of REIT stocks have been crushed in the market's two-week plunge. DLR is an exception. Shares were hitting new three-year highs on Tuesday. Unfortunately, Friday's market sell-off was ugly enough that even DLR was effected. Shares lost -2.6% and closed below short-term technical support at the 10-dma.

The $75-76 zone should be support. Let's watch for a bounce before considering new positions.

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

chart:


PowerShares QQQ ETF - QQQ - close: 100.84 change: -3.23

Stop Loss: 97.45
Target(s): To Be Determined
Current Option Gain/Loss: +3.7%
Average Daily Volume = 35 million
Entry on January 15 at $100.50
Listed on January 07, 2016
Time Frame: Exit PRIOR to February option expiration
New Positions: see below

Comments:
01/16/16: Our QQQ trade is finally open. The market's big drop on Friday pushed the QQQ toward round-number support at $100.00 pretty early in the session. The ETF bounced at $99.51 and eventually pared its loss to -3.1% on the day. We had a buy-the-dip trigger to buy calls at $100.50.

If you missed our entry point I would still consider new positions at current levels. More conservative investors might want to wait for a little bounce first so a rally past $101.40 or $102.00 could be alternative entry points.

Currently our stop loss is $97.45.

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).

- Suggested Positions -

Long FEB $105 CALL (QQQ160219C105) entry $1.34

01/15/16 triggered at lower entry point $100.50, initial stop $97.45
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

chart:


SPDR S&P 500 ETF - SPY - close: 187.81 change: -4.12

Stop Loss: (see below)
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 128 million
Entry on January -- at $---.--
Listed on January 13, 2016
Time Frame: 4 to 6 weeks
New Positions: Yes, see below

Comments:
01/16/16: The stock market correction continues. The S&P 500 index is now down -8.0% in the first two weeks of 2016. The SPY ETF is off -7.8%. Both are down more than -10% from their early November highs, which puts them in correction territory.

We currently have a buy-the-dip trigger to buy calls if the SPY hits $183.00 as the $182.00 area should be significant support. However, there is a decent chance that the market actually bounces now. Just in case stocks do rebound in the week ahead we are adding a second entry trigger to buy calls if the SPY rallies and trades at $189.35. I've added a new option strike below.

Trade Description: January 13, 2016:
The stock market's sell-off seems to be getting worse. Constant worries about a slowing global economy and the potential for another currency devaluation in China have spooked investors. The nearly non-stop plunge in crude oil hasn't helped although at the moment it looks like the $30.00 a barrel level is offering some short-term support for oil. I wouldn't count on oil holding above $30 though.

In the U.S. we have the Federal Reserve that has begun a rate-hiking cycle seemingly at the wrong time as the U.S. economy slows down. The Atlanta Fed's Q4 GDP growth estimates have fallen to +0.8%. Meanwhile corporate earnings are forecasted to be negative for the second quarter in a row, which would be an "earnings recession" in the U.S.

All of these ingredients have come together in a bearish recipe to send stocks lower. Eventually stocks will bounce. The tone on Wall Street today felt "a little panicky" according to some market watchers. We could be getting close to a bottom (at least a short-term bottom). Tonight we are going to try and pick a trade to catch the bottom. This is typically called "catching a falling knife" and can be hazardous to your trading account. Consider this an aggressive, higher-risk trade. I suggest small positions to limit risk.

The SPY has potential support in the $187.00 area and again in the $182 region. I'm looking at a buy-the-dip trade near the lower level. The October 2014 low in the SPY was $181.92. The August intraday low was $182.40. Tonight I am listing a buy-the-dip trigger to buy calls on the SPY at $183.00. We'll start with a stop loss at $179.65.

*small positions to limit risk*

Trigger #1. Buy calls @ $189.35, initial stop at $184.90

- Suggested Option -

Buy the MAR $195 CALL (SPY160318C195)

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

Trigger #2. Buy-the-dip @ $183.00, initial stop at $179.65

- Suggested Positions -

Buy the MAR $190 CALL (SPY160318C190)

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

chart:


Constellation Brands Inc. - STZ - close: 142.75 change: -0.50

Stop Loss: 138.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.2 million
Entry on January -- at $---.--
Listed on January 14, 2016
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Comments:
01/16/16: It's always great to see relative strength in our bullish candidates but STZ surprised us on Friday. The plan was to buy calls on a dip at $140.50. The market's widespread drop on Friday should have driven STZ toward short-term support and triggered our play. To our surprise that did not happen.

STZ did gap down on Friday but traders bought the dip at $141.20, which is near Thursday's intraday low. STZ almost immediately rallied and tried to break through resistance at $145.00 midday. Shares eventually settled with a 50-cent loss.

We are keeping our buy-the-dip trigger at $140.50. However, if STZ displays relative strength again we do not want to miss it. Tonight we are adding a second entry trigger to buy calls on a breakout at $145.05.

Trade Description: January 14, 2016:
STZ was one of last year's best performing stocks with +45% gains in 2015. Consistently raising earnings and revenue guidance can do that for a stock. The company is seeing so much demand for their beer products that STZ just announced they're building a huge new brewery in Mexico. Meanwhile their wine and spirits business is seeing stronger margins due to recent acquisitions. Overall STZ is moving into 2016 with the wind at its back.

STZ is in the consumer goods sector. According to the company, "Constellation Brands is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Canada, Mexico, New Zealand and Italy. In 2014, Constellation was one of the top performing stocks in the S&P 500 Consumer Staples Index. Constellation is the number three beer company in the U.S. with high-end, iconic imported brands including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the world's leader in premium wine, selling great brands that people love including Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company's premium spirits brands include SVEDKA Vodka and Black Velvet Canadian Whisky... Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand-building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, sales in approximately 100 countries, about 40 facilities and approximately 7,700 talented employees."

STZ has been killing it on the earnings front. They have beaten earnings the last three quarters in a row. Management has raised their guidance the last three quarters in a row. Their most recent earnings report was last week on January 7th. Analysts were expecting a profit of $1.30 a share on revenues of $1.62 billion. STZ beat estimates with a profit of $1.42 a shares. Revenues were up +6.4% to $1.64 billion. Strong beer sales has helped fuel double-digit shipment increases. The company announced they were building another brewery and raised their guidance again.

This bullish outlook sparked a couple of new price target upgrades ($172, $174 and $185). The stock soared to new highs and broke through key resistance near the $145.00 level on its earnings news and guidance. Shares have seen some profit taking since its spike to new highs. Now STZ is near support at one of its long-term trend lines of higher lows. The simple 50-dma should offer technical support at $140.40. Meanwhile the $140.00 level could offer some round-number, psychological support. Both of these are converging near its trend line of higher highs.

STZ underperformed the market today, which may mean more profit taking ahead. We want to buy calls on STZ as it nears support in the $140.00-140.50 area. Tonight we are listing a buy-the-dip trigger at $140.50 with a stop loss $138.25, just under its early January low.

Trigger #1. Buy calls @ $140.50, initial stop loss @ 138.25

- Suggested Positions -

Buy the APR $150 CALL (STZ160415C150) current ask $4.30

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

Trigger #2. Buy calls @ $145.05, initial stop loss @ 141.15

- Suggested Positions -

Buy the APR $150 CALL (STZ160415C150)

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.

01/16/16 added a second trigger to buy calls at $145.05, initial stop @ 141.15
Option Format: symbol-year-month-day-call-strike

chart:




PUT Play Updates


Currently we do not have any active put trades.




CLOSED BULLISH PLAYS

Sovran Self Storage Inc. - SSS - close: 108.92 change: +0.39

Stop Loss: 107.40
Target(s): To Be Determined
Current Option Gain/Loss: -80.9%
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:
01/16/16: I cautioned readers in the original SSS play description that the stock would begin trading ex-dividend on Friday morning. The dividend was $0.85. The combination of trading ex-dividend and the market's sharp plunge on Friday morning produced a big gap down in shares of SSS. The stock dropped from $109.38 at Thursday's close to $106.65 at the open on Friday, immediately stopping us out.

Believe it or not but SSS ended Friday's session with a gain and ended the week with a gain. The stock is now up five weeks in a row in spite of the market's weakness.

- Suggested Positions -

FEB $110 CALL (SSS160219C110) entry $3.40 exit $0.65 (-80.9%)

01/15/16 stopped out on gap down at $106.65
01/13/16 triggered @ $110.75
Option Format: symbol-year-month-day-call-strike

chart: