Option Investor

Daily Newsletter, Wednesday, 11/19/2014

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

SPX and A New Record

by Keene Little

Click here to email Keene Little
Since the October low SPX has now made a new record for the number of days in a row it has closed above its 5-dma, now at 24, beating out the old record of 23 set back in July 1998. It's a sign of a very strong rally. But too strong perhaps? Things didn't go well for the market after the previous record.

Wednesday's Market Stats

Even though SPX closed marginally in the red today, it still closed above its 5-dma, which is at 2043.77 and SPX closed at 2048.72. That makes it 24 straight days above its 5-dma, which is a very fast moving average and to close above it for one day shy of 5 weeks of trading is a phenomenal achievement (it has closed above its 5-dma for 18 or more straight days only 8 times, including the current streak, in the past two decades). It's a rare event and the two previous times ended with 18 days on September 3rd and 19 days on July 24, 2013.

The two previous occurrences of this kind of strength were followed by a brief dip before making a marginal new high (September 19th this year) but then gave up ground over the next 4 weeks. This isn't hard to understand when you think about a market that has gone too far too fast -- the profit taking can easily retrace a good chunk of the rally since there wasn't much building going on underneath the market. It's essentially an air pocket below us.

The previous record number of straight days above its 5-dma was 23 days back in July 1998, which occurred the day following the market peak and was then followed by a loss of near -15%, taking back the gains of the year in the following 6 weeks. It would take "only" at -10% decline to accomplish the same thing for this year (200-point decline to the December 2013 close at 1850). Going for a record number of days above its 5-dma is probably not a good idea for the bulls. A -15% decline would lop off about 300 points and knock SPX back down to about 1750. That's not a projection but it is the kind of risk the market is facing here.

Today was only an inside day (price action remained inside yesterday's price range) and that could mean it was just an indecision day. Part of that indecision was the market waiting for the FOMC minutes to be released this afternoon and the after the minutes the market chopped up and down but closed virtually where it was before the minutes were released. In other words, not much of a reaction to the minutes.

The minutes from the Fed's October meeting were interpreted as slight dovish, which was a good thing since the market is not going to be a happy camper if there's any hint of tightening. The Fed said it was concerned about signs of slowing in the global economy since it could affect the U.S. The main worry is disinflation (love that word - they can't seem to get de- in place of dis- since in order to become a Fed head you must be brain-washed into thinking deflation is a complete and total economic disaster and therefore the word has been removed from their vocabulary).

The most important thing for the market is that the phrase "considerable time" was still there (in reference to accommodation). Removing those two words would have an immediate negative effect on the market since it would essentially mean the Fed is getting ready to tighten. But that's highly unlikely in the next year since the Fed is more worried about "disinflation" and another recession, which the rest of the world is back in or is heading there quickly.

Tonight we'll get reports from several countries, including China and Japan, that report on their manufacturing strength. There's a lot of worry about China right now, especially since their housing prices have been dropping and as with Japan and the U.S., that's a precursor to much tougher times for the stock market. The U.S. market will not be immune to bad news coming out of China and Japan. Before the bell we'll get PMI data from Germany.

It's important how strong the economies are doing because the stock market is now going to become more dependent on that, and the financial performance of companies, and less on the Fed's money. There is still plenty of money coming from Japan and Europe but that money is going to be split between different world markets. This comes at a time when the U.S. market is overbought and overloved and has a big air pocket below it.

Of the many market analysts I read, some technical, others fundamental (and the best ones use both), I like John Hussman's work. He uses unemotional analysis to make his points and often reminds his readers that he's not out to convince anyone of anything but instead offers his observations and opinions for what it's worth. He has a very good track record for identifying the reasons why a market's direction is likely to continue or reverse. He is currently describing a market that is "extremely overvalued, overbought and overbullish."

As Hussman notes, currently we have the most lopsided bullish sentiment, according to Investor's Intelligence data, since 1987. Bearish sentiment is now down to 14.8%, which is back down near the 13.3% seen at the September high. Prior to this year, the two previous occurrences of readings this lopsided were at the April 2011 peak, which was followed by a -20% decline, and the October 2007 high, which of course led to the market crash into 2008 and a -58% decline. With a record like that, I think it's prudent to at least be cautious about the upside potential vs. the downside risk.

The market has been overbought for quite a while and we know these conditions, including wildly bullish sentiment and low VIX readings (although the VIX has started to climb even as prices press higher), can continue far longer than expected. But this time we're seeing a widening of credit spreads between Treasuries and other bonds. This is indicative of risk-off trading and when combined with the deterioration of market internals it could be different this time. There's still a lot of faith in the Fed protecting our backs but I think that's misplaced faith.

Further highlighting the bullish sentiment, the most recent Investors' Intelligence poll of newsletter writers shows the biggest shift of bears to bulls in more than 40 years (since back in the 1970s). The most recent AAII numbers show the number of ordinary investors who are bearish is less than half of what it was at the October low, and it's the lowest reading in nine years (2005). It would appear everyone has literally bought into the idea that we're going to have a Thanksgiving rally, a Santa Claus rally and an end-of-year rally. Nothing but rally and not a care in the world, which is of course a major warning that now is the time for bulls to be afraid. Be very afraid.

From a sentiment perspective, this is a very dangerous time to be complacent about the upside, or to even harbor thoughts about holding through the next "pullback" since the pullback could turn into something much more significant. We have seasonality behind the bulls but statistics showing the recent rally could be setting up more than just a pullback before heading higher. As a trader, the best course of action is to at least protect what you've got, get to cash and be ready to buy back in at cheaper prices. Playing the short side is likely to be a winning strategy soon.

OK, to the charts. Looking at the SPX weekly chart below, there is no indication yet that the bulls are in trouble. I would say they look like they're in potential trouble as price has reached up and tagged the trend line across the highs from April 2010 - May 2011. This trend line stopped the rallies since December 2013 and until proven otherwise I think it's a good bet that the rally will again be stopped by it. But there's certainly the possibility we'll see a throw-over finish as a way to nail the stops just above the trend line, near 2059 by the end of the week, before finishing the rally. And of course it would turn more bullish if it rallies above 2060 and holds above.

S&P 500, SPX, Weekly chart

The importance of the trend line along the highs from April 2010 - May 2011 is that it fits as the top of a rising wedge pattern, which is an ending pattern, and it fits for the c-wave of a big A-B-C rally off the 2009 low. This can be seen clearly on the weekly chart below. In other words, the rising wedge pattern, unless price can break out the top of it, near 2060, is a sign that the 5-1/2 year rally is not the start of a secular bull market but instead it's been a large cyclical bull within a continuing secular bear. The continuing degradation of rate-of-change (ROC) is not a healthy sign for the rally either.

SPX vs. XLY/XLP ratio, Weekly chart

The blue line on the above chart is the ratio of XLY to XLP, which shows the relative strength of consumer discretionary stocks vs. consumer staples. Purchasing the former is done by consumers when they feel good about their purchasing power (income vs. expenses) whereas they tend to buy fewer discretionary stocks and stick with the staples (toilet paper, toothpaste, etc.) when their financial times are tougher. And how the consumer behaves has a lot to do with our economic wellbeing and right now, since the peak in March, the consumer hasn't been feeling so well (regardless of improving consumer sentiment, their purchases speaks louder than their words). The divergence between the stock market and consumer spending will not likely continue much longer, which makes the recent streak of days above its 5-dma feel more like a blow-off top than something more bullish.

Updating another chart comparison I've shown before, shown below, highlights the kinds of divergences we're seeing between the Wall Street and Main Street. This comparison is between the stock market and the commodity index. Just as consumer spending can be used as an economic gauge, so too can the commodity price index (which reflects demand more than what the U.S. dollar is doing). These are more affected by the global economy but we're all so inextricably linked now that any strength in the U.S. will only be relative and similar to all boats in a rising or receding tide.

As can be seen with the weekly chart below, the decline in prices for commodities, especially the sharp decline this year, says our economy is not as strong as one might guess by looking at the stock market. That gator's mouth could snap shut at any time and a -15% decline might seem like child's play compared to what could actually happen. One thing to note on the chart below is the uptrend line on RSI from 2011, which was broken in September and is now being back-tested. This is a common occurrence with a new price high while RSI back-tests its broken uptrend line (or the opposite in a decline) with a lower high -- it's bearish divergence and often provides a very good heads up that the rally is about to complete.

SPX vs. DJUBS Commodity index, Weekly chart

On the daily chart of SPX, shown below, you can see the trend line along the highs from April 2010 - May 2011 (bold green), as well as the broken uptrend line from November 2012 - February 2014 (blue) intersected yesterday near 2056, which was yesterday's high. Yesterday's rally carried SPX over its trend line along the highs from July-September, currently near 2048.70, and basically closed on it today. A successful back-test of this line could lead to at least another minor new high before topping out. But the setup here looks good for a top so we'll soon find out if the market agrees with that. A rally above 2063 that holds above that level will clear the field for the bulls to dash higher, in which case I've got a Fib projection near 2073 (127% extension of the September-October decline) for the next upside target.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2063
- bearish below 2030

The 60-min chart below shows two upside projections I've been tracking since the end of October. The 5-wave move up from October 15th shows the 1st wave up to the October 22nd high and a wave-ii pullback on the same day. Wave-iii is shorter than wave-I, which means wave-v needs to be shorter than wave-iii and in this case is typically 62%. Wave-i is considered an extended wave and typically the 3rd through 5th waves then become equal to the 1st wave. All that said, it gives us two projections for the completion of the 5th wave -- at 2055.31 and 2061.35. Yesterday's high at 2056.08 is in the target zone and it's what has me watching carefully for confirmation of a high (don't have it yet). You can see the rolling top that's also getting put in as price levels off. We could find the rolling top continue with minor ups and downs for the next week. The risk is that once the rally is finished we could get a flush to the downside as all those who recently turned bullish are suddenly scared out of their positions. In fact a break below today's low would be a breakdown from a narrowing price arc that it's been in.

S&P 500, SPX, 60-min chart

If the buyers can keep up the pressure, to at least block the sellers, I see the potential for the DOW to make it up to its trend line along the highs from May 2011 - May 2013, which will be near 17900 by the end of the month (currently near 17845). But a drop below the November 12th low, at 17536, would also be a drop back below its trend line across the highs from December 2013 - July 2014, as well as its uptrend line from November 2012 -February 2014.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish up to 17,900
- bearish below 17,536

NDX has been crowding up near its trend line along the highs from April 2010 - April 2012, as well as its Fib projection near 4233. This projection is the 127% extension of its September-October decline, which is a common reversal Fib to watch. A drop below Monday's low at 4194 would be a good indication the final high is in place. As with the other indexes, what we don't know yet is whether we'll get just a pullback before heading higher (much higher) into the new year or if instead the decline will be the start of the next bear market. The longer-term pattern suggests the latter but we'll have to wait to see what kind of pullback/decline pattern we get in order to help answer that question.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4235
- bearish below 4194

There are two other charts I'm watching to help me get a better sense for what NDX might do in the next couple of weeks -- the SOX and AAPL. The SOX is a very good indicator of economic health since chips are most every electrical product we buy today. AAPL is a very good sentiment indicator. The chart below of the SOX shows it has reached a very important level and what it does from here will tell us plenty about the health of the current rally.

The rally from October has brought the SOX back up to its previous highs in July and September, which were 652 and 659, resp. Yesterday's high was 656 and while testing its previous highs, with significant bearish divergence, it is also back-testing its broken uptrend line from November 2012. While it could certainly head higher, and that's what stops are for, this is one of those setups that I take every time (short in this case) and then let the market tell me whether or not the trade is going to work. And if the SOX does roll back over from here I think it's going to be tough for NDX to make much more headway to the upside.

Semiconductor index, SOX, Weekly chart

AAPL has also been strong since its October 15th low but it too could be completing its longer-term rally. As noted on its weekly chart below, the move up from January is now a 5-wave move and can be considered complete at any time. At a minimum we should see a pullback correction before heading higher (green dashed line). The more bearish interpretation says the 3-wave move up from April 2013 is a corrective move in what will become a larger pullback correction off the September 2012 high. AAPL has met two price objectives shown on the chart -- the first is the 127% extension of its previous decline (2012-2013), at 113.15, and the a-b-c move up from January has two equal legs up at 114.43. This morning's spike up was to 115.74, which was followed by a selloff to 113.80 before bouncing back up to close at 114.67. This week's doji candle, if it stays that way, could be interpreted as a reversal candle so it bears watching here.

Apple Inc., AAPL, Weekly chart

The RUT has been the weaker index since last week's high, which is another check in the bear's column and more evidence of risk-off trading. The daily chart shows last week's high was another test of its broken uptrend line from March 2009 - October 2011. This is a major trend line which identifies the trend since 2009. Breaking that uptrend line in September, as well as its uptrend line from October 2011 - November 2012, was a big deal. Coming back up to it for a back test on November 3rd and another one last week, with bearish divergence on MACD, followed by a bearish kiss goodbye is another big deal and the chart basically has "SELL!" written all over it. It tried to hold its 20-dma today, at 1160.66, but lost the battle into today's close, finishing at 1157.68. The next support level will be near 1148 where its 200-dma and broken downtrend line from July-September are both located. If that support level holds I'll be watching the bounce pattern to help identify whether it could lead to yet another new high or just a correction to the decline before heading lower.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1185
- bearish below 1160

Since achieving a price target at 87.98, where the 5th wave in the leg up from May is 162% of the 1st wave, on November 6th, the U.S. dollar has chopped sideways. Consolidating on top of its downtrend line from March 2009 - June 2010, currently near 86.92, looks bullish. I show a pullback for the rest of the year, possibly something more bearish for next year, but the current bullish consolidation says dollar bulls might have different ideas.

U.S. Dollar contract, DX, Weekly chart

Gold's bounce off the November 7th low is looking more corrective than impulsive, which keeps the larger pattern bearish. It's not clear what the short-term direction will be but until I see evidence to the contrary I see gold bounces as shorting opportunities and that's likely to continue into the new year.

Gold continuous contract, GC, Weekly chart

Silver continues to support the idea for a larger bounce into January before heading lower again. It's been a struggle, like that for gold, with only two strong up days since the low on November 7th so it could be a choppy ride higher but a bounce up to the 18.60 area in the next couple of months is my expectation until proven otherwise.

Silver continuous contract, SI, Weekly chart

Oil is struggling to get off support at 74.60-74.95. It's oversold on a weekly basis and showing bullish divergence on the daily chart so it looks like it's getting ready for at least a larger bounce into early next year. Depending on the bounce pattern, assuming we'll get it, it should then help determine whether or not it will be just a 4th wave correction in the decline from August 2013, to be followed by another new low next year, or if instead we'll get a more bullish bounce. For now, just waiting to see if support holds.

Oil continuous contract, CL, Daily chart

Thursday will see a few economic reports that could move the market. As mentioned earlier, overnight we've got some PMI manufacturing so the combination of economic reports could shove the futures around before the open. Following the housing starts and permits data this morning (neutral for the market) we'll get existing home sales data tomorrow morning. Core CPI data (good for the Fed's "data-dependency"), the Philly Fed index and Leading Indicators will present more data on how the economy is doing. One of these days that data will be more important than what the Fed is doing, which is likely right around the corner.

Economic reports and Summary

We've got good setups on the charts for market highs yesterday. At most I was looking for just a small pullback in the blue chips and then one more new high on Thursday/Friday, which a bullish opex week supports. But today's pullback negated some of the short-term bullish patterns I was watching and that turns the market bearish short term unless there's a recovery on Thursday.

Time is coming together with the price pattern to suggest this week is potentially very important for the market. There are some Fib time cycles, Lindsay cycles (George Lindsay) and a Bradley turn date pointing to this week as an important turn window. Since we've rallied into the turn window the expectation is for a reversal to the downside. The EW counts suggest the final 5th waves completed, especially on NDX. The RUT has already made its turn and being out in front to the downside is another notch in the bear's gun.

In addition to time/price coming together for a high we've got extreme bullish sentiment and virtually no more bears in the market. Everyone's in the theater waiting for the movie to start and it's a bit crowded. Hopefully no one will yell "FIRE!" since the stampede out the door is likely to hurt some people. The huge amount of money that has flowed into ETFs, especially leveraged ones, could leave the market extremely vulnerable if they get hit with a lot of selling. It's not something that's been tested before and many are suggesting it will be the next reason for a downside disconnect in the market (where buyers simply vanish).

The bottom line is that I see this market as far more vulnerable than I have since October 2007, and actually more vulnerable than in 2007. If you're long the market, keep your stops tight (and hope that a limit-down morning isn't a jump over your stop, which is why market orders are needed for your stops). If you're an anxious bear, get ready to rumble.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying

New Option Plays

Plenty of Room to Grow

by James Brown

Click here to email James Brown


Under Armour, Inc. - UA - close: 70.48 change: +1.11

Stop Loss: 67.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.6 million
Entry on November -- at $---.--
Listed on November 19, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
UA is in the consumer goods sector. "Under Armour, the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. Under Armour's wholly owned subsidiary, MapMyFitness, powers one of the world's largest Connected Fitness communities. The Under Armour global headquarters is in Baltimore, Maryland." (source: company press release)

Apparel sales can be tricky as fashion fads come and go. Yet right now athletic wear has been gaining traction. Athletic wear sales are up +9% in the past year. Two giants in this industry, Nike (NKE) and Under Armour (UA), are outperforming the group.

NKE is the giant with annual sales of $28.8 billion. UA is a tenth the size of NKE at $2.87 billion a year in sales. It's not surprising to see UA outgrowing its rival. NKE managed +15% sales growth in the third quarter. UA delivered 30%. NKE reported gross margins of 46.6%. UA has gross margins of 49.6%. Both companies delivered earnings growth of more than 20% year over year.

UA is impressive because its apparel sales have been rising +30% for the last three quarters in a row. Apparel is important because it's 75% of UA's business. Currently UA only has 2% of the global athletic apparel market and many believe it has significant room to grow.

Investors were a little concerned when apparel sales only grew +25.6% in the third quarter. However, UA has been consistently beating Wall Street's earnings estimates on both the top and bottom line four quarters in a row. They have also raised guidance four quarters in a row.

Their most recent earnings report was October 23rd. UA delivered earnings of $0.41 a share with revenues up +29.7% to $937.9 million. Analysts were only expecting $0.40 on revenues of $925 million.

Management raised their Q4 guidance but they warned that growth would slow down to only +22% in 2015. It's worth noting that UA has a history of under promising and over delivering. The stock initially sold off on this guidance but investors quickly bought the dip. Shares of UA have broken through the two-month trend line of lower highs and technical resistance at the 50-dma. The point and figure chart is bullish and forecasting an $87 target.

The plunge in gasoline prices is a tailwind for retailers and it should be a strong holiday shopping season. Another bonus for UA could be the weather. Last year winter was colder than normal and UA had strong sales of their coldgear line. This year we could see the coldest winter in decades, which could also bode well for UA.

UA has spent the last few days consolidating sideways in the $68.00-70.00 range. Today saw UA showing relative strength (+1.6%) and breaking out past resistance at $70.00. The intraday high was $70.72. More aggressive traders may want to buy calls now. I am suggesting a trigger at $71.05 to buy calls.

Trigger @ $71.05

- Suggested Positions -

Buy the 2015 Jan $75 call (UA150117c75) current ask $1.50

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Stocks Chop Sideways

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market chops sideways as investors digest the latest FOMC minutes.

CERN has been removed. GPRO hit our entry point and then our stop loss.

We closed the directional GMCR trade but the call spread is still open.

Plan on exiting OTEX tomorrow morning.

Current Portfolio:

CALL Play Updates

Apple Inc. - AAPL - close: 114.67 change: -0.80

Stop Loss: 106.45
Target(s): To Be Determined
Current Option Gain/Loss: + 78.2%
Average Daily Volume = 55.5 million
Entry on November 12 at $110.25
Listed on November 08, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: AAPL experienced a tiny bit of profit taking today. If this pullback continues the nearest support could be the 10-dma near $111.85 or the $110.00 level.

I am not suggesting new positions at this time.

Earlier Comments: November 8, 2014:
Love it or hate it AAPL always has Wall Street's attention. It has a cult-like following. The company's success has turned AAPL's stock into the biggest big cap in the U.S. markets with a current valuation of almost $640 billion.

The company is involved in multiple industries from hardware, software, and media but it's best known for its consumer electronics. The iPod helped perpetuate the digital music revolution. The iPhone, according to AAPL, is the best smartphone in the world. The iPad helped bring the tablet PC to the mass market. The company makes waves in every industry they touch with a very distinctive brand (iOS, iWork, iLife, iMessage, iCloud, iTunes, etc.) and they've done an amazing job at building an Apple-branded ecosystem. Now they're getting into the electronic payments business with Apple Pay.

The company's latest earnings report was super strong. AAPL reported its Q4 (calendar Q3) results on October 20th. Wall Street was expecting a profit of $1.31 a share on revenues of $39.84 billion. The company delivered a profit of $1.42 a share with revenues up +12.4% to $42.12 billion. The EPS number was a +20% improvement from a year ago. Gross margins were up +1% from a year ago to 38%. International sales were 60% of the company's revenues.

AAPL's iPhone sales exceeded estimates at 39.27 million in the quarter and up nearly 16% from a year ago. The only soft spot in their ecosystem seems to be iPad sales, which have declined several quarters in a row. The company hopes to rejuvenate its tablet sales with a refresh of the iPad models. More importantly AAPL management raised their Q1 (calendar Q4) guidance as they expect revenues in the $63.5-66.5 billion in the quarter. Recent news would suggest that AAPL might deliver an incredible 50 million iPhone 6s in 2014. That's not counting their new iPhone 6+.

The better than expected results and bullish guidance sent the stock to new highs. The rally has created a quadruple top breakout buy signal on its point & figure chart that is currently forecasting at $135 target. Shares have been outperforming the broader market and AAPL is currently up +36% year to date.

Currently AAPL is up three weeks in a row but it spent most of last week consolidating sideways and digesting its prior gains. As we approach the holiday shopping season AAPL is poised to benefit from what should be stronger than average consumer spending with the company's stable of new releases to tempt consumers to upgrade their older electronics.

The daily chart shows AAPL's intraday high to be $110.30 on November 3rd but that's actually a bad tick. The real intraday high is about $109.90. Tonight I am suggesting a trigger to buy calls on AAPL at $110.25. We will start with a stop loss at $106.45. More conservative traders may want to try a stop loss closer to last week's low near $107.70 instead.

- Suggested Positions -

Long 2015 Jan $110 call (AAPL150117c110) entry $3.90

11/12/14 triggered @ 110.25
Option Format: symbol-year-month-day-call-strike

ASML Holding - ASML - close: 105.54 change: +1.68

Stop Loss: 98.90
Target(s): To Be Determined
Current Option Gain/Loss: +37.9%
Average Daily Volume = 1.0 million
Entry on November 18 at $102.84
Listed on November 11, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

11/19/14: Shares of ASML were upgraded this morning. The stock gapped open higher on this news and rallied to $106.95 before paring its gains. I would not be surprised to see ASML fill the gap with a dip toward $104.

Earlier Comments: November 11, 2014:
We are surrounded by electronics. There are mini-computers in just about every appliance we use. Our lifestyles are built on the magic of semiconductors. ASML makes the equipment for companies to build semiconductor circuits.

The company describes itself as "ASML makes possible affordable microelectronics that improve the quality of life. ASML invents and develops complex technology for high-tech lithography machines for the semiconductor industry. ASML's guiding principle is continuing Moore's Law towards ever smaller, cheaper, more powerful and energy-efficient semiconductors. We are a multinational company with over 70 locations in 16 countries, headquartered in Veldhoven, the Netherlands. We employ more than 13,800 people ASML is traded on Euronext Amsterdam and NASDAQ under the symbol ASML."

Currently the company is working hard on the future of semiconductor fabrication with a new system for lithography. ASML is calling it EUV, which stands for "extreme ultraviolet", which is a reference to the light source used to etch the semiconductor wafers.

Here's an excerpt from ASML's website:

For the past decades, the semiconductor industry has been driven by what is called "Moore's Law". It goes back to Intel co-founder Gordon Moore, who observed in the 1960s that the amount of transistors that could be fit on a chip of a given size at an acceptable cost doubled roughly every year. (He later revised the period to two years.)

The entire semiconductor industry operates to this model, which requires chip makers to pack transistors more tightly with every new generation of chips, shrinking the size of transistors. Smaller transistors mean that semiconductor lithography machines must be able to print finer features with every new generation of chips as well.

Since lithography is an optical technology, one of the things that limits the resolution of the equipment is the wavelength of the light that is used. Shortening the wavelength of the light means higher resolution and smaller features. Lithography machines have gone from using ultraviolet light with a wavelength of 365 nanometers to "deep ultraviolet" light of 248 nanometers and 193 nanometers, improving the resolution at every step. EUV is the next step, with light of a wavelength of 13.5 nanometers. (An analogy is painting: we use a smaller brush to paint the finer details)"

Shares of ASML plunged back in July on a disappointing guidance. Yet a couple of weeks later the stock soared following an update on its EUV system. ASML said their latest test showed their EUV system "reached a throughput of 637 wafers per day, ahead of the target of 500 wafers it gave in its Q2 earnings report this month." The company's target is processing 1,500 wafers a day by 2016.

ASML's most recent earnings report was October 15th, and coincidentally the market's recent bottom. Wall Street was expecting a profit of € 0.57 per share with revenues of €1.41 billion. ASML missed with a profit of only €0.56 a share and revenues of only €1.32 billion. Management said the miss was due to a couple of shipments that were pushed back to the fourth quarter. They also reported strong gross margins of 43.7%, which was above their estimate of 42%.

ASML raised their Q4 guidance and expects revenues of €1.3 billion, which was above Wall Street's €1.19 billion estimate. Their backlog soared almost 40% to €2.4 billion, not counting their EUV systems. ASML's President and CEO Peter Wennink said, "We are on track to meet our full-year 2014 forecast of at least EUR 5.6 billion of net sales. In the third quarter, we delivered a good profit margin on net sales that fell just short of our previous guidance due to a couple of system shipments shifting into Q4, which does not impact our full-year guidance. Looking ahead, we see a solid start to 2015. In memory, we expect higher sales in H1 driven by the strong backlog. In logic, the ramp of 20/16/14 nanometer nodes is expected to continue, but the timing and volume depends on the business allocations by our customers' customers."

ASML is also shareholder friendly with a steady dividend they have increased every year since 2009. In the third quarter they purchased 2.3 million shares of their stock. In the last two years they have spent €776 million to buy back 11.8 million shares of company stock. They still have €224 million left to spend on their buyback program before 2014 ends.

Shares of ASML have been very strong during the market's rebound off its October lows. Shares are in the process of breaking out past resistance at its 2013-2014 highs. A breakout here would be new record highs. The point & figure chart is bullish and forecasting at $129 target.

There should be a steady news flow from ASML to support the stock. The company is presenting at several conferences between now and year end. Their investor day is November 24th.

Tonight I am suggesting a trigger to buy calls at $102.75.

- Suggested Positions -

Long 2015 Jan $105 call (ASML150117c105) entry $2.90

11/18/14 triggered on gap higher at $102.84, trigger was $102.75
Option Format: symbol-year-month-day-call-strike

CR Bard Inc. - BCR - close: 166.67 change: -0.69

Stop Loss: 161.60
Target(s): To Be Determined
Current Option Gain/Loss: - 6.8%
Average Daily Volume = 538 thousand
Entry on November 13 at $165.65
Listed on November 12, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: BCR retreated a little bit this morning but the selling was short lived. BCR spent most of the day consolidating sideways. A new rally above $167.00 could be used as a bullish entry point.

Earlier Comments: November 12, 2014:
BCR is in the healthcare sector. The company makes medical supplies. According to the company website, "C. R. Bard, Inc. is a leading multinational developer, manufacturer, and marketer of innovative, life-enhancing medical technologies in the product fields of vascular, urology, oncology, and surgical specialty. BARD markets its products and services worldwide to hospitals, individual health care professionals, extended care facilities, and alternate site facilities."

The company has been on a roll with its earnings reports. BCR has beaten Wall Street's estimates on both the top and bottom line the last four quarters in a row. The last couple of quarters have seen some pretty big beats and management has raised guidance.

BCR's most recent earnings report was October 22nd. Wall Street expected a profit of $1.87 a share on revenues of $818.8 million. BCR said earnings rose +28% from a year ago to $2.15 a share. Revenues were up +9% to $830 million. Inside the U.S. net sales were up +13%. Management raised their Q4 EPS guidance above analysts' estimates.

The stock has been struggling to breakout past major resistance near the $150-155 range but the October earnings results launched shares of BCR higher. The last couple of weeks have seen BCR consolidating sideways under resistance near the $165.00 level. We think it's about to break out. The point & figure chart is bullish and forecasting at long-term target of $194.00.

Tonight we are suggesting a trigger to buy calls at $165.60

- Suggested Positions -

Long 2015 Jan $170 call (BCR150117c170) entry $2.63

11/13/14 triggered @ 165.65, suggested entry was $165.60
Option Format: symbol-year-month-day-call-strike

Costco Wholesale - COST - close: 140.01 change: +0.80

Stop Loss: 134.75
Target(s): To Be Determined
Current Option Gain/Loss: +266.8%
Average Daily Volume = 1.9 million
Entry on October 30 at $132.25
Listed on October 29, 2014
Time Frame: Exit prior to earnings in December
New Positions: see below

11/19/14: The relative strength in shares of COST continues. The stock hit another high and it also hit potential round-number resistance at $140.00.

I am not suggesting new positions at this time. More conservative investors may want to raise their stop loss or take some money off the table here.

Earlier Comments: October 29, 2014
COST is part of the services sector. The company runs a discount, membership sales warehouse. The company's latest earnings report said Costco currently operates 664 warehouses, including 469 in the United States and Puerto Rico, 88 in Canada, 33 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, six in Australia and one in Spain.

The company has struggled to hit Wall Street's bottom line estimates for over a year but steady improvement in their same-store sales have helped drive the stock higher. A strong back to school shopping season and higher membership fees fueled a better than expected quarterly report.

COST reported their Q4 numbers on October 8th. After missing estimates for five quarters in a row the company finally beat estimates. Analysts were expecting a profit of $1.52 a share on revenues of $35.3 billion. COST delivered $1.58 a share with revenues up +9.3% to $35.52 billion. The net profit number was up +13% and gross margins improved 15 basis points.

COST also reported that their e-commerce sales continue to grow at a brisk pace and their online sales rose +18% in their fourth quarter. Same-store (comparable store) sales remain a key metric to watch. COST's Q4 same-store sales were up +4% yet if you back out falling gasoline prices and currency effects their comparable store sales were up +6% for the quarter versus +4.5% a year ago. Membership renewal rates remain very strong at 91% in the U.S. and 87% globally. COST plans to open up to eight more locations before the end of the 2014 calendar year.

The company also recently announced their first foray into China. COST has entered the Chinese market with an online store through Alibaba Group's (BABA) Tmall Global platform.

The holiday shopping season is almost upon us with less than 60 days before Christmas. COST is poised to do well since the company caters to the higher-end more affluent customer.

Shares are hovering just below the $132.00 level. Tonight we are suggesting at trigger to buy calls at $132.25. We will plan on exiting positions prior to their December earnings report.

- Suggested Positions -

Long DEC $135 call (COST141220c135) entry $1.54

11/08/14 new stop @ 134.75
11/01/14 new stop @ 130.75
10/30/14 triggered @ 132.25
Option Format: symbol-year-month-day-call-strike

Deckers Outdoor Corp. - DECK - close: 94.52 change: +2.32

Stop Loss: 88.75
Target(s): To Be Determined
Current Option Gain/Loss: + 7.8%
Average Daily Volume = 763 thousand
Entry on November 17 at $92.25
Listed on November 15, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: As expected yesterday's intraday bounce in DECK continued today. The stock outperformed the broader market with a +2.5% gain.

Earlier Comments: November 15, 2014:
DECK is part of the consumer goods sector. The company owns a number of brands but for many Deckers means UGG. The iconic footwear line was started in 1978 in Southern California. Strength in the UGG line helped power the company's latest quarterly results.

According to the company website, "Deckers Brands is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The Company's portfolio of brands includes UGG, I HEART UGG, Teva, Sanuk, TSUBO, Ahnu, MOZO, and HOKA ONE ONE. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, 130 Company-owned and operated retail stores, and select online stores, including Company-owned websites. Deckers Brands has a 40-year history of building niche footwear brands into lifestyle market leaders attracting millions of loyal consumers globally."

The most recent earnings report was October 23rd. Analysts were expecting a profit of $1.03 per share on revenues of $457.2 million. DECK beat estimates with a profit of $1.17 a share. That's a +23.2% increase from the same period a year ago. Revenues soared +24.2% to a record $480.3 million. U.S. sales rose +21.1% and international sales surged +29.2%. E-commerce sales soared +45%.

It was DECK's Q2 and their gross profit rose +34% while gross margins increased 340 basis points to 46.6%. This was above estimates of 45% and above their gross margin a year ago of 43.2%. Management said all brands delivered a strong performance.

The company lowered their Q3 guidance (current quarter) to below Wall Street estimates. They also raised their Q4 and 2015 guidance on both the top and bottom line. DECK expects 2015 to see revenues up +15%, earnings up +15.8%, and gross margins around 49%. Last quarter the S&P 500 saw earnings growth of about +6.9%. DECK is clearly outgrowing the market with +23% growth. The S&P 500 is expected to see +10-11% growth in 2015.

Technically shares are poised for a breakout on both the daily chart and the point & figure chart. Looking at the point & figure chart (not shown), a breakout past $92.00 would generate a new triple-top breakout buy signal. A breakout could also spark some short covering. The most recent data listed short interest at 17% of the small 33.6 million share float.

Tonight we are suggesting a trigger to buy calls at $92.25. Such a move probably signals a run toward resistance near $100.00.

- Suggested Positions -

Long 2015 Jan $95 call (DECK150117c95) entry $3.80

11/17/14 triggered $92.25
Option Format: symbol-year-month-day-call-strike

DineEquity, Inc. - DIN - close: 95.23 change: -0.23

Stop Loss: 92.75
Target(s): To Be Determined
Current Option Gain/Loss: +25.0%
Average Daily Volume = 154 thousand
Entry on November 05 at $91.55
Listed on November 04, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: DIN experienced some minor profit taking today. It does look like DIN's upward momentum has stalled. The bullish trend of higher lows is still in place but I'm growing cautious here.

We will move the stop loss to $92.75.

I'm not suggesting new positions at the moment.

Earlier Comments: November 4, 2014:
Restaurant stocks were showing relative strength today. Better than expected earnings results from the likes of Red Robin (RRGB) and Bloomin Brands (BLMN) helped buoy the group. Additional stocks in this industry showing relative strength on Tuesday are: BWLD, PNRA, JACK, EAT, SONC, TXRH, KKD, DNKN, CAKE, DRI, and PBP. The one we like tonight is DIN.

According to a company press release, "Based in Glendale, California, DineEquity, Inc., through its subsidiaries, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar and IHOP brands. With more than 3,600 restaurants combined in 19 countries, over 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity is one of the largest full-service restaurant companies in the world."

The company has seen success with a steady improvement in earnings. DIN has beaten Wall Street's estimates on both the top and bottom line three quarters in a row. Their most recent report was October 28th. Analysts were looking for a profit of $1.05 a share on revenues of $157.2 million. DIN served up $1.14 per share with revenues climbing to $162.85 million.

The company saw domestic system-wide same-store sales up +2.4% at IHOP and +1.7% at Applebee's. Management then raised their sales guidance on both Applebee's and IHOP. DIN also raised its dividend by 17% to $0.875 per share and they boosted their stock buyback program from $40 million to $100 million.

The restaurant industry should be a major beneficiary of the drop in oil prices. Lower gasoline prices at the pump mean consumers have more spending money and will likely burn a lot of that cash eating at restaurants.

Shares broke out to new highs on this earnings report and bullish guidance. Today the stock is at all-time highs. The point & figure chart is bullish and forecasting a long-term target at $118.00.

Tonight we are suggesting a trigger to launch bullish positions at $91.55.

- Suggested Positions -

Long DEC $95 call (DIN141220c95) entry $1.20

11/19/14 new stop @ 92.75
11/13/14 new stop @ 92.25
11/12/14 new stop @ 91.45
11/08/14 new stop @ 89.65
11/05/14 triggered @ 91.55
Option Format: symbol-year-month-day-call-strike

FedEx Corp. - FDX - close: 171.68 change: -0.32

Stop Loss: 169.85
Target(s): To Be Determined
Current Option Gain/Loss: +148.1%
Average Daily Volume = 1.5 million
Entry on October 17 at $155.50
Listed on October 15, 2014
Time Frame: Probably exit prior to earnings on Dec. 17th
New Positions: see below

11/19/14: FDX retested the bottom of its $170-173 trading range. The stock closed firmly in the middle of its range.

Investors may want to take some money off the table here.

A breakout past $173.00 would be encouraging but momentum has definitely stalled over the past several days.

I am not suggesting new positions at this time.

Earlier Comments: October 15, 2014:
Last year a last minute surge of online shoppers overwhelmed the system and thousands of Christmas presents were delivered late. Part of the problem was terrible weather. The other challenge was the growth in online shopping. Amazon.com (AMZN) blamed UPS for the mass of delayed deliveries last year. You can bet that UPS' rival FDX has taken notice and plans to be ready this year.

Market research firm EMarketer is estimating that retail online shopping will surge +17% in 2014 to $72.4 billion. That might be under estimating the growth, especially this year as many consumers might opt to shop online instead of face the crowds and risk being a target for terrorism or catching Ebola. Granted neither a terrorist event inside the U.S. and a widespread outbreak of Ebola in the states has happened yet but people are already afraid with the daily headlines about the virus.

UPS and FDX hope to be ready. UPS is hiring up to 95,000 seasonal workers and FDX is hiring 50,000 holiday workers this year. That's 10K more than last year for FDX.

In addition to the surge in online shopping FDX should also benefit from the multi-year lows in oil prices. Low oil prices means lower fuel costs, one of FDX's biggest expenses.

It would appear that FDX has fine tuned its earnings machine as well. Their latest earnings report was September 17th. Wall Street was expecting a profit of $1.95 a share on revenues of $11.46 billion. FDX delivered a profit of $2.10 a share with revenues up to $11.7 billion. That's a +24% increase in earnings from a year ago and the second quarter in a row that FDX beat EPS estimates.

FDX chairman, president, and CEO Frederick Smith said, "FedEx Corp. is off to an outstanding start in fiscal 2015, thanks to very strong performance at FedEx Ground, solid volume and revenue increases at FedEx Freight and healthy growth in U.S. domestic volume at FedEx Express." Business has been strong enough that a few weeks ago FDX started raising prices on some services.

Since that September earnings report Wall Street analysts have been raising price targets. Some of the new price targets for FDX stock are $175, $180 and $183 a share.

The recent sell-off in the market and FDX could be an opportunity. FDX has already seen a -10% correction from its intraday high near $165 to today's low near $149. Right now FDX sits just below resistance near $155.

We're suggesting a trigger to buy calls at $155.50.

- Suggested Positions -

Long 2015 Jan $160 call (FDX150117c160) entry $5.30

11/17/14 new stop @ 169.85
11/15/14 new stop @ 168.40
11/08/14 new stop @ 165.50
11/01/14 new stop @ 163.45
10/28/14 new stop @ 162.65, traders may want to take profits now!
10/25/14 new stop @ 157.85
10/23/14 new stop @ 155.90
FDX is nearing resistance at $164.00. Traders may want to take profits now.
10/21/14 new stop @ 153.45
10/17/14 triggered @ 155.50
Option Format: symbol-year-month-day-call-strike

Keurig Green Mountain, Inc. - GMCR - close: 153.95 change: -3.15

Stop Loss: (removed)
Target(s): To Be Determined
Directional call play
Current Option Gain/Loss: +41.2% Closed 11/19/2014
Call spread:
Current Option/Gain loss if you sold the NOV $160 call: +669.2%
Average Daily Volume = 1.68 million
Entry on October 28 at $145.75
Listed on October 25, 2014
Time Frame: Exit PRIOR to earnings on November 19th
New Positions: see below

11/19/14: GMCR experienced some profit taking ahead of its earnings report tonight with a -2.0% decline on Wednesday.

Our plan was to exit the November $150 call this morning if you only traded the directional call play.

If you chose the call spread then we are holding over the earnings report.

I warned readers that Thursday morning (tomorrow) would likely be volatile as the market reacted to GMCR's earnings results. The company beat Wall Street's estimates on both the top and bottom line. Yet they lowered their Q1 guidance.

GMCR has been wildly volatile after hours tonight with a range fro $148 to $163. It's currently trading down around $152.

Earlier Comments: October 25, 2014:
GMCR is labeled as part of the consumer goods business. GMCR describes their company as "a leader in specialty coffee, coffee makers, teas and other beverages, Keurig Green Mountain (Keurig), is recognized for its award-winning beverages, innovative brewing technology, and socially responsible business practices. The Company has inspired consumer passion for its products by revolutionizing beverage preparation at home and in the workplace." GMCR makes almost 300 varieties of coffee, hot cocoa, teas, and other beverages in K-cup and Vue portion packs.

The company's latest earnings report back in August were better than expected but revenues were a disappointment and management guided lower. Yet the stock did see much follow through on the initial post-earnings drop. Then a couple of weeks later shares of GMCR soared to new highs on news it had finally signed a licensing deal with Kraft Foods, the second largest food and beverage company in the world. GMCR already had licensing deals with all the major coffee brands but Kraft was the lone holdout.

Several weeks later shares of GMCR soared again after Goldman Sachs slapped a buy rating on the stock and gave it a 12-month $166 price target. The Goldman analyst believes GMCR will see sales rise at a compounded annual growth rate of almost 30% and profits will soared at 23% per year through 2017.

On a short-term basis the middle of last week was starting to look like a top, especially with Thursday's bearish engulfing candlestick reversal pattern. Yet there was no confirmation on Friday.

Friday's intraday high was $145.54. We are suggesting a trigger to buy calls at $145.75. We'll try and limit our risk with a stop loss at $141.90. We are not setting an exit target yet but I will note the point & figure chart is suggesting a $182.00 target.

Earnings are coming up on November 19th. We will plan on exiting prior to the announcement. More aggressive traders may want to take a longer-term approach and hold over the announcement (and use longer-dated calls).

- Suggested Positions -

(Directional call play) closed 11/19/14 at the open.
NOV $150 call (GMCR141122C150) entry $6.17 exit $10.50 (+41.2%)

- or -

(Call spread)

Long NOV $150 call (GMCR141122C150) entry $6.17

- plus -

(On November 3rd, 2014, Sell the November $160 call)
Short NOV $160 call (GMCR141122C160) sold short @ $5.00

11/19/14 GMCR beats earnings but guides lower
11/19/14 Closed the directional call play this morning
November $150 call @ $10.50 (+41.2%)
11/18/14 Prepare to close the directional call play (Nov $150 call) tomorrow morning at the opening bell.
If you chose the call spread, you have a choice to make. We are keeping the call spread open over the earnings report.
11/12/14 removed the stop loss
11/08/14 new stop @ 148.65
11/05/14 new stop @ 144.90
11/03/14 Sold short the NOV $160 call
11/01/14 Strategy Update: Sell the Nov $160 call on Monday morning, November 3rd
10/30/14 new stop @ 143.25
10/28/14 triggered @ $145.75
Option Format: symbol-year-month-day-call-strike

iShares Transportation ETF - IYT - close: 161.68 change: -0.54

Stop Loss: 156.85
Target(s): To Be Determined
Current Option Gain/Loss: +402.9%
Current Option/Gain loss if you sold the NOV $159 call: + 900.0%
Average Daily Volume = 320 thousand
Entry on October 13 at $138.75
Listed on October 11, 2014
Time Frame: 3 to 6 weeks
New Positions: see below

11/19/14: The IYT did not see any follow through on yesterday's bounce. Instead the ETF sank to new two-week lows. I've been warning readers to look for a dip toward $160. Shares hit $160.72 before paring its losses. There is no guarantee the pullback is over.

I am not suggesting new positions at this time. Investors may want to take profits early. We have two trading days left on our November options.

Earlier Comments: October 11, 2014:
The IYT is an exchange traded fund (ETF) that tries to mimic the performance of the Dow Jones Transportation Average index.

Stocks have been sinking as investors worry about a global slowdown, especially in Europe. Yet the U.S. economy is still growing. Plunging oil prices should be great news for both business and consumers. Lower fuel costs means more money to spend elsewhere. Lower fuel prices also mean better margins for transportation companies.

The IYT has hit correction territory with a -10% pullback from its September highs about four weeks ago. When the market finally bounces the transports should lead the market higher thanks to the U.S. economy and low oil prices.

It looks like IYT's current drop could be near a bottom. Volume was almost three times the norm on Friday and shares settled near technical support at its simple 200-dma. We suspect the market will see another push lower before bouncing. That could see the IYT pierce the $140 level.

Tonight we're suggesting a trigger to buy calls at $138.75 with a stop loss at $134.45. This should be considered a higher-risk, more aggressive trade. You've heard the term "catching a falling knife" and that's what we're trying to do. You may want to wait for the IYT to pierce $140.00 and then buy the rebound back above this level as an alternative strategy.

*Higher-risk, more aggressive trade* - Suggested Positions -

Long NOV $143 call (IYT141122c143) entry $3.40

- plus -

(sell short the Nov $159 call on October 29th)
Short NOV $159 call (IYT141122c159) entry $1.80

11/08/14 new stop @ 156.85
11/06/14 new stop @ 154.50
10/29/14 IYT gapped open higher at $157.44 (+56 cents)
10/28/14 Strategy Update: new stop @ 151.85, Plus, we want to sell the November $159.00 call (current bid is $1.75).
10/25/14 new stop @ 148.65, traders may want to take some money off the table now
10/23/14 new stop @ 147.25
10/21/14 new stop @ 144.65
10/18/14 new stop @ 141.75
10/13/14 triggered @ 138.75
Option Format: symbol-year-month-day-call-strike

Open Text Corp. - OTEX - close: 58.23 change: -1.45

Stop Loss: 57.45
Target(s): To Be Determined
Current Option Gain/Loss: -61.0%
Average Daily Volume = 300 thousand
Entry on November 18 at $60.29
Listed on November 15, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: Watch out! The action in OTEX today looks terrible. Shares underperformed the market with a -2.4% decline. OTEX spent most of the day hovering above short-term support near $58.00.

I am very concerned. After yesterday's failed breakout past $60 and now today's drop, this looks like a potential bearish reversal.

Tonight I'm suggesting an immediate exit tomorrow morning.

- Suggested Positions -

Long Dec $60 call (OTEX141220c60) entry $1.67

11/19/14 prepare to exit tomorrow morning
11/18/14 triggered @ 60.29, intraday gap higher, suggested entry was $60.25
Option Format: symbol-year-month-day-call-strike

PriceSmart Inc. - PSMT - close: 93.60 change: -1.90

Stop Loss: 91.45
Target(s): To Be Determined
Current Option Gain/Loss: - 4.0%
Average Daily Volume = 156 thousand
Entry on November 10 at $92.75
Listed on November 06, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: We need to turn more cautious on our PSMT trade. Yesterday's reversal at $97.00 has continued into today's session. Shares underperformed with a -1.98% decline and a close under its 10-dma. The next level of support should be $92.00 or the 200-dma near $91.75.

Tonight I'm moving our stop loss to $91.45. I am not suggesting new positions at this time.

Earlier Comments: November 6, 2014:
PSMT is in the services sector. The company is essentially the Costco of Latin America. A company press release describes them this way, "PriceSmart, headquartered in San Diego, owns and operates U.S.-style membership shopping warehouse clubs in Latin America and the Caribbean, selling high quality merchandise at low prices to PriceSmart members. PriceSmart now operates 34 warehouse clubs in 12 countries and one U.S. territory (six in Costa Rica; four each in Panama, Trinidad, and Colombia; three each in Guatemala, the Dominican Republic, and Honduras; two in El Salvador; and one each in Aruba, Barbados, Jamaica, Nicaragua and the United States Virgin Islands)."

A lot of PSMT's locations are in fast growing countries. Honduras has an annual growth rate of +3.1%. Costa Rica's is +4.2%. Columbia & Guatemala are growing at +4.3%. Panama latest GDP was +6.3%. Yet a few countries are struggling. Trinidad's growth rate is -1.2% while the Dominican Republic's plunged to an annual pace of -13%. Overall the consolidate trend is positive for PSMT's environment and they're building new stores in Columbia.

The company's latest earnings report was mixed. Their 73-cent earnings missed estimates by one cent but revenues were up +6.3% for the year and above Wall Street's estimate. This was PSMT's fourth quarter and they ended their fiscal year with sales of $2.4 billion, a +9.2% increase. Overall same-store sales rose +4.8%. Management reported double-digit sales growth for the year in Columbia, Panama, Trinidad, and Aruba.

Technically the stock has been in a bear market after a sharp decline from its late 2013 highs near $125 a share. PSMT appears to have built a base in the $80-92 range over the last few months. Now shares are starting to breakout from this significant consolidation pattern. Today's rally is significant because it's a bullish breakout above technical resistance at the 200-dma. The point & figure chart is bullish and forecasting a target of $102.

The October 29th intraday high was $92.68. Tonight I am suggesting a trigger to buy calls at $92.75.

- Suggested Positions -

Long 2015 Jan $95 call (PSMT150117C95) entry $3.44

11/19/14 new stop @ 91.45
11/10/14 triggered @ 92.75
Option Format: symbol-year-month-day-call-strike

PowerShares QQQ (ETF) - QQQ - close: 103.21 change: -0.47

Stop Loss: 99.95
Target(s): To Be Determined
Current Option Gain/Loss: +26.8%
Average Daily Volume = 38.1 million
Entry on November 12 at $102.35
Listed on November 10, 2014
Time Frame: exit prior to December option expiration
New Positions: see below

11/19/14: The QQQ dipped toward its 10-dma before paring its losses today.

I am not suggesting new positions at this time. More conservative investors may want to consider a stop loss closer to the $102.00 level.

Earlier Comments: November 10, 2014:
The QQQ is the exchange traded fund (ETF) that mimics the NASDAQ-100 index, which is the largest 100 non-financial stocks on the NASDAQ exchange, including both foreign and domestic companies.

The NASDAQ-100 has been outperforming its index brethren this year with the QQQ up +15.5% in 2014 compared to a +9.9% gain in the S&P 500, a +9.4% gain in the S&P 100, a +6.0% gain in the Dow Industrials, and a +0.8% gain in the Russell 2000.

This leadership should continue. Seasonally this is a very bullish time of year for stocks. November is the third best month of the year. We just started the best six months of the year. Midterm years perform even better than normal. Corporate earnings has been strong. Interest rates are low. The Fed remains cooperative. Japan's central bank just announced a massive new QE program that will send more money into U.S. stocks. Europe is on the verge of more QE. There are plenty of reasons to be bullish.

Most of the market does look short-term overbought with a massive bounce from the October 15th low. Yet the QQQ has spent the last several days consolidating gains in a sideways move under short-term resistance near the $102 area. That consolidation is narrowing and the Qs look poised to breakout higher.

Tonight we are suggesting a trigger to buy calls at $102.35.

- Suggested Positions -

Long DEC $102.63 CALL (QQQ141220C102.63) entry $1.49

11/12/14 triggered @ 102.35
Option Format: symbol-year-month-day-call-strike

The Sherwin-Williams Co. - SHW - close: 240.85 change: -0.47

Stop Loss: 234.45
Target(s): To Be Determined
Current Option Gain/Loss: + 83.9%
Average Daily Volume = 526 thousand
Entry on November 05 at $231.00
Listed on November 01, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: SHW held up well today with only a minor decline. I don't see any changes from my recent comments.

Investors will want to consider taking some money off the table here and/or raising their stop loss.

I am not suggesting new positions at this time.

Earlier Comments: November 1, 2014:
It's not very often you see a company about to celebrate its 150th birthday. For SHW that will be the year 2016. The company has been in business since 1866. The Company's core business is the manufacture, distribution and sale of coatings and related products. SHW is headquartered in Cleveland, Ohio. They sell through over 4,100 company-operated stores. Their global group has sales in more than 115 countries. Sherwin-Williams is also a very well known dividend payer and has annually increased dividends since 1979.

The slow and steady economic improvement in the U.S. has been beneficial. The real estate market has also helped SHW. New homes need new paint. The pace of new home sales in the U.S. hit six-year highs last month. While home sales do tend to slow down a bit in the winter months SHW should benefit from lower input costs. Crude oil and natural gas are big components in the paint and coatings industry. The severe drop in oil the last few months is a blessing for SHW.

The company raised their earnings guidance back in July. They issued bullish guidance again in their latest quarterly report. SHW announced earnings on October 28th. Wall Street was expecting a profit of $3.22 per share on revenues of $3.18 billion. SHW said their earnings rose +31.4% to a record-setting $3.35 per share. Revenues were up +10.6% at $3.15 billion, which missed the estimate.

SHW's remodeling business saw growth. The real driver was paint sales. Their paint stores account for the lion's share of sales, which saw revenues up +20%. SHW also purchased 2.0 million shares of their stock last quarter and still have 6.8 million yet to buy in their stock buy back program.

Management was optimistic. SHW's Chairman and CEO MR. Christopher Connor, said,

"We are pleased to report record sales and earnings per share in the third quarter and first nine months of 2014 on the continued positive sales volume and strong operating results of our Paint Stores Group. The Paint Stores Group architectural volume growth was positive across all end market segments. The Comex acquisition continues to perform better than expected in the year. Our Consumer Group improved its operating results through higher volume sales and operating efficiencies. Our Global Finishes Group continues to improve its operating margins through improved operating efficiencies."

Management raised their 2014 EPS guidance above Wall Street's estimates. They also raised their revenue guidance but this was only in-line with consensus. SHW now expects Q4 sales in the +6% to +8% range. They expect earnings to be in the $1.30-1.40 range versus $1.14 in the fourth quarter of 2013.

The stock's relative strength has driven shares to new all-time highs and a +25% gain in 2014. The point & figure chart is bullish and forecasting at long-term target at $286.

Tonight we are suggesting a trigger to buy calls at $231.00.

- Suggested Positions -

Long 2015 Jan $240 call (SHW150117c240) entry $3.37

11/15/14 new stop @ 234.45
11/13/14 SHW is hitting potential resistance at $240. Traders may want to take profits now.
11/08/14 new stop @ 229.75
11/05/14 triggered @ 231.00
Option Format: symbol-year-month-day-call-strike

Semiconductor ETF - SMH - close: 52.62 change: -0.09

Stop Loss: 50.85
Target(s): To Be Determined
Current Option Gain/Loss: +181.8%
Average Daily Volume = 2.4 million
Entry on October 17 at $47.15
Listed on October 16, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: The SMH tagged another new relative high this morning before trimming its gains.

I am not suggesting new positions.

Earlier Comments: October 16, 2014:
It looks like the correction in the semiconductor stocks might be done.

The SMH is the Market Vectors Semiconductor Exchange Traded Fund (ETF) that tries to mimic the performance of the Market Vectors Semiconductor 25 index. Semiconductors as a group had been strong performers with the SMH up +73% from its late 2012 lows.

A few weeks ago the industry started to see some profit taking. MCHP issued an earnings warning last week that that sparked the massive plunge in the SMH. The SMH has witnessed a -15% correction from its 2014 closing high to the closing low on Monday this week. Now it has started to bounce. It's possible all the panic selling is over.

Intel (INTC), a much bigger company than MCHP, just reported earnings on October 14th and the results were better than Wall Street expected. More importantly INTC offered slightly bullish guidance.

Bloomberg noted that INTC said its PC-processor business rose +8.9% last quarter. Sales for INTC's chips for notebook computers soared +21%. Even chips for desktop PCs rose +6% in the third quarter.

The strong results from INTC have helped buoy the SMH, which is starting to rebound after testing (and piercing) long-term support on its weekly chart (shown below).

We suspect the worst might be over. However, this could be a volatile trade. There are a lot of semiconductor companies who have yet to report their results.

The SMH saw its rally stall under $47 and near its 200-dma. Tonight we are suggesting a trigger to buy calls at $47.15.

- Suggested Positions -

Long 2015 Jan $50 call (SMH150117c50) entry $1.10

11/12/14 new stop @ 50.85, readers may want to just take profits now!
11/01/14 new stop @ 48.85
10/25/14 new stop @ 47.85
10/21/14 new stop @ 46.35
10/17/14 triggered @ 47.15
Option Format: symbol-year-month-day-call-strike

United Rentals, Inc. - URI - close: 114.30 change: +0.13

Stop Loss: 111.75
Target(s): To Be Determined
Current Option Gain/Loss: + 6.6%
Average Daily Volume = 1.6 million
Entry on November 03 at $110.55
Listed on November 01, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: URI ignored the market's weakness today. Shares continued to churn sideways in the $112.00-115.00 zone.

I am not suggesting new positions at this time.

Earlier Comments: November 1, 2014:
URI is a company that is gaining market share. Traditionally the equipment rental business has been a very fragmented industry with a lot of mom and pop stores. URI has decided that being the biggest offers a better selection to their clients. Today URI is the biggest equipment rental company in the world.

Twenty years ago commercial construction clients only accounted for about 15% of the equipment rental market. Today that number is closer to 50%. The last few years have seen a strong trend of construction companies choosing to rent equipment instead of buy new equipment due to an uncertain economic outlook.

According to URI's website they were founded in 1997 and have grown into a network of 832 rental locations in 49 states and 10 Canadian provinces. Their rental fleet includes 3,100 classes of equipment.

Earnings are improving. The last couple of quarterly reports have been strong. In the July 16th report URI beat Wall Street estimates with a profit of $1.65 per share on revenues of $1.399 billion. That was a +47% improvement from a year ago and management raised their guidance.

The most recent report was October 15th. Again URI beat estimates. Analysts were looking for a profit of $2.12 per share on revenues of $1.51 billion. URI delivered $2.20 per share with revenues up +17.8% to $1.54 billion. This was a +34% jump in URI's earnings from a year ago. Margins hit a record +49.3% in the third quarter. They reaffirmed their guidance.

URI's CEO Mr. Michael Kneeland commented on his company's report and said,

"The third quarter provided further confirmation that our strategy and the North American construction recovery are both solidly on track. Our end markets are continuing to rally, creating numerous opportunities for well-managed, profitable growth. We reported a robust 16% increase in rental revenue for the quarter— and more importantly, the discipline behind that growth is evident in our record EBITDA margin and gains in volume, utilization and rates."

Technically the stock experienced a painful correction from $120 to $90 during the market's pullback in September-October. The bounce back stalled at resistance near $110 and its 100-dma and 50-dma. However, after a two-week consolidation in the $105-110 zone, shares of URI now look poised to breakout. Shares were showing relative strength on Friday with a +3.7% gain.

The 50-dma is directly overhead at $110.17 and the intraday high on Friday was $110.39. Tonight we are suggesting a trigger to buy calls at $110.55.

- Suggested Positions -

Long 2015 Jan $115 call (URI150117c115) entry $4.50

11/12/14 new stop @ 111.75
11/08/14 new stop @ 107.15
11/03/14 triggered @ 110.55
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

FMC Corp. - FMC - close: 56.37 change: -0.42

Stop Loss: 58.85
Target(s): To Be Determined
Current Option Gain/Loss: -35.8%
Average Daily Volume = 1.42 million
Entry on November 04 at $55.85
Listed on November 03, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: FMC reversed nearly all of yesterday's bounce. Once again it's near short-term support near $56.00. We could use a breakdown under $56.00 as a new bearish entry point.

Earlier Comments: November 3, 2014:
FMC is in the basic materials sector. They are a diversified chemical company with agricultural chemicals, minerals, and health and nutrition businesses.

It has been a rough year for shareholders as FMC peaked in March this year and has been sliding lower every since. That's because the earnings picture has been deteriorating. You can see on the daily chart below where FMC issued an earnings warning in June. Then when they reported earnings in late July they missed estimates. It's not great when you warn about earnings and still miss Wall Street's lowered estimates.

FMC's most recent earnings report was October 29th. The company missed on both the top and bottom line. Analysts were expecting a profit of 96 cents a share on revenues of $1.06 billion. FMC only delivered 95 cents with revenues of $1.02 billion. The biggest part of their business, the Agricultural Solutions, which represents nearly half of FMC's sales, reported a small +2% revenue growth from a year ago.

In the company press release, Pierre Brondeau, FMC president, CEO and chairman, said: "In the third quarter, market dynamics continued to affect our portfolio. Agricultural markets were impacted by multiple factors around the world, a softening of demand in China affected parts of our Health and Nutrition portfolio, and Argentina continued to weigh on Lithium's results." Brondeau also noted they are concerned over some beverage products in China that have seen two quarters in a row of declining demand.

The weakness in shares of FMC have produced a -24% decline in 2014 versus the S&P 500's +10% gain. Meanwhile FMC's point & figure chart is suggesting the selling will continue and is pointing to a $25.00 target.

Tonight we are suggesting a trigger to buy puts at $55.85. More conservative investors might want to wait for a breakdown under $55.00 instead.

- Suggested Positions -

Long 2015 Jan $55 PUT (FMC150117P55) entry $1.95

11/04/14 triggered @ $55.85
Option Format: symbol-year-month-day-call-strike


Cerner Corp. - CERN - close: 63.57 change: -0.73

Stop Loss: 62.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.7 million
Entry on November -- at $---.--
Listed on November 13, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/19/14: CERN is not performing. Today shares broke down under short-term support. Our trade is not open yet and we're choosing to remove CERN as a candidate.

Trade did not open.

11/19/14 removed from the newsletter, suggested entry was $65.10


GoPro, Inc. - GPRO - close: 84.10 change: +2.60

Stop Loss: 79.90
Target(s): To Be Determined
Current Option Gain/Loss: -38.3%
Average Daily Volume = 8.6 million
Entry on November 19 at $86.00
Listed on November 18, 2014
Time Frame: We may want to exit prior to Dec. 23rd
New Positions: see below

11/19/14: Ouch! GPRO was a nasty disappointment today.

The stock gapped open higher at $85.22 and in less than two minutes the stock had hit our suggested entry point at $86.00. That proved to be the high for the day. GPRO immediately reversed. Not only did GPRO reverse but it drastically underperformed the rest of the market with a -5.95% decline that broke down under the $80.00 mark and hit our stop at $79.90.

I warned readers that GPRO was volatile and that we should use small positions to limit our risk but I wasn't expecting today's move.

*small positions to limit risk* - Suggested Positions -

2015 Jan $90 call (GPRO150117c90) entry $6.00 exit $3.70 (-38.3%)

11/19/14 stopped @ 79.90 Wednesday afternoon
11/19/14 triggered @ $86.00 Wednesday morning
Option Format: symbol-year-month-day-call-strike