Option Investor

Daily Newsletter, Thursday, 11/20/2014

Table of Contents

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

Market Wrap

Who Needs The World

by Thomas Hughes

Click here to email Thomas Hughes
The difference between overseas and US economies was put into further contrast today.


The market was down from the very earliest, but bounced back to set a new high. Economic data from Europe is to blame for the early dip although there was some negative news from China as well. Flash PMI in China fell to 50 indicating neither a gain nor a loss of activity. Asian markets were mostly flat on the news and had little impact on early morning trading. One ray of light among all this international gloom was a rise in imports and exports for Japan, the second monthly rise in a row and a sign that maybe Abenomics is helping a little bit after all.

European flash PMI fell to new lows, the November reading for the entire EU is 51.4. The reading fell to 52.1 in Germany, expansionary but a decline form last month and less than expected. France is worse, falling to 47.6. These numbers underline the shaky nature of the EU recovery and added fuel to speculation of potential central bank action from the ECB. European indices were down on the news but managed to claw their way back to break even by the close, largely aided by US data and the rally that carried our indices to new highs today.

Market Statistics

As I said, futures trading was negative this morning. The S&P 500 was indicated about 8 points lower ahead of the 8:30AM release of economic data and then fell to new lows of the premarket session. Jobless claims and CPI were both decent but not enough to spark the round of buying we saw later in the day.

The market opened lower and then quickly moved down, only to hit bottom and bounce back within the first 30 minutes of trading. At 10AM surprisingly strong numbers from the Philly Fed, the Conference Board and the National Association of Realtors provided lift to break the market out to what would become new highs, for some indices at least. The market drifted above break even for most of the afternoon and then strengthened into the closing bell.

Economic Calendar

The Economy

There was quite a lot of data released today and as a whole are pointing to an ongoing uptrend in economic activity.An uptrend that is expected to continue through the end of the year and into the start of 2015. First up was CPI. The Consumer Price Index was unchanged in October. This was due to a big decline in energy prices which offset gains in other areas such as housing. Ex-food and energy prices rose 0.2% for the month and are up 1.7% on a 12 month basis. This is below the Fed target rate for inflation.

Initial claims for unemployment fell, by -2,000, to 291,000. This is from an upward revision of 3,000 to last week's figures so is a wash on a week to week basis. The four week moving average fell by -1,750 to 287,000. On a not adjusted basis claims fell by -7.4%, slightly more than the -7.2% predicted by the seasonal factors and down -12.7% from last year at this time. First time claims remain low and at levels consistent with the ongoing recovery in labor.

Continuing claims fell by -73,000 to a new low. This low dates back to 12/16/2000 and extends the downtrend in this metric. Last week's number was revised higher by 11,000. The total number of claims for unemployment rose by 81,659 to 2.183 million. This is the highest number of total claims since early September and could be an indication that the overall decline in unemployment is stalling. However, with all the other labor data, it could also be an indication of an increase in the participation rate; if more people are participating in the workforce it may be harder for those who are unemployed to find new work, kind of a bad news is good news scenario. The LPI rose last month, perhaps it will rise again this month.

Philly Fed, the Index of Leading Indicators and Existing Home Sales were all released at 10AM. All were better than expected and point to continuing economic expansion. I'll start with the Philly Fed because it was the biggest surprise, rising to 40.8 in November, nearly double the October reading. This is much better than the small decline expected by analysts and makes me wonder who may have made a mistake. The rise is due to increases in new orders, shipments and employment. The employment index rose by 10 points to a 3.5 year high, the hours worked index also rose, from -1.3 to 7.8. The forward looking component of labor was positive for the next 6 months. Among the special questions asked in this month's survey was about hiring intent and outlook for the next year. Answers indicate that business in the Philly region are expecting to be hiring more employees for the next 12 months.

The Index of Leading Indicators rose by 0.9% from last month's reading of 0.7%. This is better than the expected 0.6% and indicating the economy is gaining momentum. All components of the index rose in October indicating a broad and strong expansion, according to economists quoted in the report. The coincident indicator also rose, by 0.1%, while the lagging index fell by -0.1%, indicating the past two months were basically unchanged from what we already knew.

Existing home sales rose by 1.5% in October, to an annualized rate of 5.62 million. This is the second month of gains and the first time that sales have shown a gain from last year. Last month was revised higher, to 5.18 million.

The Oil Index

With everything else going on in the world of oil economic trends helped to underpin price today. WTI and Brent both gained more than 1.25% while natural gas rose by over 2%. Cold weather is helping to lift both oil and gas.

The Oil Index also gained a little more than 1.25%, helping confirm support at 1430 and the 23.6% retracement of the October correction. Both MACD and stochastic confirm support and are rolling over into a bullish signal. MACD has already begun to tick back up and stochastic right behind it. Together, the two are looking pretty strong but there is still resistance at 1485 to break through. This move is going to be impacted greatly by oil price direction, which is still in question. OPEC is still a wild card but it's in their interest to keep prices as high as the market will bear. Another factor that could keep supporting oil prices is weather. The winter is looking pretty cold from where I am sitting and the colder it is, the more oil and gas we'll use and the higher prices will go.

The Gold Index

Gold prices rose today to trade just below $1195. Reports are, physical buyers of gold are stepping into the market due to low prices. If so, and if this continues, the bottom in gold may indeed be in. However, I still think it is too soon to say because there are some near term factors that could pressure gold lower, specifically dollar strength. The rally in the dollar has stalled of late but is still at four year highs and susceptible to moves expected by both the ECB and BOJ that could weaken their respective currencies and drive the dollar higher. Gold faces resistance at $1200.

The Gold Index also traded higher today. The index gained over 2% from yesterday's close and is still above the 100% retracement line. This line could be support, assuming a reversal of the long term downtrend, but just as easily not. The index is in a long term down trend, driven by low gold prices, and there is no evidence yet of that having changed. The indicators are currently bullish but suggestive that the move above the retracement line is a whipsaw. The MACD is showing what could be a double top and stochastic is weak in the longer term and overbought in the shorter term. Additionally, price action is currently caught in technical resistance at the point of the triangle I drew around the October price pattern. Resistance is between $70-$72.50 with possible support around $66.00 and then $60.00.

Gold prices, as always, will drive the course of this trade and presents an interesting conflict. If the bottom in gold is in then so might a bottom in the Gold Index, but if not the long term downtrend will continue.

In The News, Story Stocks and Earnings

Retail was the sector in focus today. Several well known retailers reported today, both before and after the bell. Best Buy reported before the bell, beating street estimates. The struggling electronics retailer reported EPS of $0.32 versus the expected $0.25. Revenue also beat. Comparable store sales increased 2.2% and was largely the reason for the improvements; there was an expectation for store traffic to decline. The company also issued positive forward guidance for the holiday shopping season. Shares of the stock jumped more than 7% during today's session, breaking above resistance set last January when the stock gapped down more than 20%.

Ross Stores reported after the bell, also beating estimates. The clothing retailer reported earnings of $0.92 per share, a nickel above estimates. The company also reaffirmed current guidance, guidance that is slightly below analyst estimates. The report was met with approval and sent shares soaring in after hours trading and could open at a new high tomorrow.

Gap Stores also reported after the bell. The teen retailer reported earnings and revenue that rose from last year, but not enough to match estimates. The company also lowered guidance for the upcoming quarter. The news sent shares of this stock down in after hours trading following a gain of 1.5% in today's session.

The retail Spyder XRT gained over 1.5% today. Price action created a long white candle and completed a text book continuation signal. Over the past 7 trading days the ETF created a long white candle, moving up from a break above resistance, followed by a week of consolidation ending in another long white candle that breaks to another new high. The indicators are also bullish and support the signal. MACD is bullish and ticking up, stochastic is strong and on the cusp of a bullish crossover. Upside target for this move is equal to the distance from the October bottom to the early November high, about $11.50, putting it just over $101. By all accounts the holiday season is going to be a good one and the retail sector is responding accordingly.

The Indices

The market opened lower today, hurt by continued poor economic performance in Europe and Asian. However, the poor international data helped to contrast our own economic data and show it for what it is, good and not dependent on international trade.

The NASDAQ Composite led today's rally. The techs climbed just over a half percent, falling short of a new closing high. The index is trending higher and setting up for a potential move higher. The indicators are bullish but have declined from their peak, set at the beginning of the month. Momentum has retreated to near zero but that is not overly concerning for now as stochastic is still high in the upper signal zone and indicating underlying strength. Stochastic is also flattening out, rolling over and about to produce a bullish crossover. Current support is indicated around 4,650 with resistance less than a point above today's close.

The Dow Jones Transportation Average were another leader in today's rally with a 0.46% gain. The trannies did not set a new high but came close, and helped confirm support along the 9000 level. The indicators are still in decline but are beginning to show signs of rolling over, stochastic most notably. Current upside targets include 9,250 in the near term with resistance near 9,125.

The S&P 500 only gained 0.20% but was able to set a new closing high. The broad market gained just over 4 points to close above 2050. The indicators are in decline, as with the others, but also showing some underlying strength. The current MACD peak is an extreme dating back for several years and stochastic is still high in the upper signal zone. The trend is up and at this time there is no indication from price action that is ending. A decline in indicators is natural during the consolidation of an uptrend and that is what looks like is happening now. Support is around 2020 with little in the way of resistance.

The Dow Jones Industrial Average brings up the rear in today's action. The blue chip index only gained 0.19% but was able to set a new all time high above 17,700. The indicators are similar to the other indices and like the others, indicative of some underlying strength. The decline in the indicators is reason to keep tight stops but as yet not a concern as it is setting us up for a possible leg higher. First target for support on a pull back is 17,500 and then 17,250 with upside targets near 18,000.

The market is moving higher on a wave of economic recovery. The data says it all, things are not only steady but beginning to gain momentum. The rest of the world isn't doing great but do we really need it if our own economy is gaining momentum? At the end of the day exports are only about 15% of GDP.

To date, the economy has been improving in fits and starts. One sector would improve, then another, and then another, but not all at once and yet the stop-and-go nature of the recovery has produced economic growth. I have thought for some time that there could be a real surge in activity if each independent segment of the economy were to improve at once and this could be it. The Philly Fed number may be a one off and something we won't see from any other data but what if it isn't? The leading indicators are on the rise and gaining momentum, the labor market is improving and gaining momentum and there is a lot of optimism going into the end of the year and next year. With all of this in mind it is really hard to be a bear....but that could change. There is a lot of data being released next week, all on Tuesday and Wednesday because of the holiday. One that jumps out is the 2nd estimate for 3rd quarter GDP.

Until then, remember the trend!

Thomas Hughes

New Option Plays

Consistently Raising Guidance

by James Brown

Click here to email James Brown


Northrop Grumman - NOC - close: 138.45 change: +0.91

Stop Loss: 135.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on November -- at $---.--
Listed on November 20, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
One might have assumed that when Washington politics cut $500 billion from the U.S. defense budget over the 2012-2021 time frame it would have been bearish for defense sector stocks. Yet the group has been an outperformer in the stock market and delivered amazing gains last year. The defense-related juggernauts like NOC continue to perform well in 2014. This stock is currently up +20% in 2014 versus a +10.8% gain in the S&P 500.

According to their company website, "Northrop Grumman is a leading global security company providing innovative systems, products and solutions in unmanned systems, cyber, C4ISR, and logistics and modernization to government and commercial customers worldwide." What does that mean? It means NOC makes bombers, unmanned drones, cyber security solutions, and logistics. If you're curious, C4ISR stands for command, control, communications, computers, intelligence, surveillance, and reconnaissance.

The fact that the world seems to be growing more dangerous, not less dangerous, should be a bullish undercurrent that lifts the defense sector. NOC should benefit because the American public does not have the stomach for another war. That means the U.S. will use more and more unmanned technology like NOC's drones.

The company has been performing well this year and NOC has raised guidance the last four quarters in a row. They reported their Q3 results on October 22nd. It was NOC's eight consecutive quarter in a row of earnings growth. Wall Street was looking for a profit of $2.14 a share on revenues of $5.9 billion. NOC delivered $2.26 a share. That's up +6% from a year ago. Revenues beat estimates at $5.98 billion.

NOC management has been trying to diversify their customer base and international sales are expected to hit 13% of total revenue in 2014 compared to 10% last year. NOC's Q3 saw its total backlog soar +8% to $38.5 billion from the prior quarter.

Once again management has raised their guidance. NOC expects 2014 earnings in the $9.40-9.50 zone compared to prior guidance of $9.15-9.35. Wall Street was estimating $9.35.

Shares of NOC have spent the last three weeks consolidating gains in the $135-140 zone. The point & figure chart remains bullish and is forecasting at $158.00 target. Given the stock's bullish trend of higher lows NOC could see a breakout soon.

Tonight I am suggesting a trigger to buy calls at $140.25.

Trigger @ $140.25

- Suggested Positions -

Buy the 2015 Jan $145 call (NOC150117c145) current as $1.10

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Philly Fed Fuels A Rally

by James Brown

Click here to email James Brown

Editor's Note:

Better than expected domestic economic data in today's Philly Fed survey helped fuel a widespread rally for stocks.

Our plan was to close the OTEX trade this morning.

We need to exit our IYT options at the closing bell tomorrow!

Do not forget that normal November options expire after tomorrow!

Current Portfolio:

CALL Play Updates

Apple Inc. - AAPL - close: 116.31 change: +1.64

Stop Loss: 106.45
Target(s): To Be Determined
Current Option Gain/Loss: +108.9%
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

11/20/14: Thursday was another strong day for shares of AAPL with a +1.4% gain and a new record closing high. Shares got a boost from not one but three new price target upgrades. New price targets out this morning are $126, and two at $135.

Traders may want to raise their stop loss. 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: 105.91 change: +0.37

Stop Loss: 98.90
Target(s): To Be Determined
Current Option Gain/Loss: +44.8%
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

11/20/14: ASML gapped lower and almost filled yesterday's gap higher. The weakness didn't last long and traders bought the dip. I cautioned readers yesterday we could see ASML trade towards $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

11/20/14: BCR dipped toward short-term support near $165 and its 10-dma before bouncing. More conservative investors might want to move their stop loss closer to the trend of higher lows.

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: 139.25 change: -0.76

Stop Loss: 134.75
Target(s): To Be Determined
Current Option Gain/Loss: +237.6%
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

11/20/14: Thursday was a relatively quiet day for COST. The stock retreated from potential round-number resistance at $140 but the dip today was pretty mild.

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: 95.20 change: +0.68

Stop Loss: 88.75
Target(s): To Be Determined
Current Option Gain/Loss: +18.4%
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

11/20/14: The relative strength in DECK continued with a +0.7% gain. The stock is now up six out of the last seven trading days. The next level of resistance is probably the $99.50-100 zone.

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: 95.90 change: +0.67

Stop Loss: 92.75
Target(s): To Be Determined
Current Option Gain/Loss: +50.0%
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

11/20/14: DIN briefly hit new highs this morning. Shares spent most of the day fading lower but traders jumped in to buy the dip late this afternoon. DIN looks poised to rally again tomorrow morning.

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: 172.50 change: +0.82

Stop Loss: 169.85
Target(s): To Be Determined
Current Option Gain/Loss: +150.9%
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

11/20/14: Shares of FDX ricocheted from the bottom of its $170-173 trading range and closed near the upper band of this resistance. Investors may want to take some money off the table here. A breakout past $173.00 would be encouraging.

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: 142.50 change: -11.45

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: -$1.17
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

11/20/14: The disaster in shares of GMCR today is an excellent example of why we do not like to hold over a company's earnings report.

Last night the company reported earnings and beat Wall Street estimates on both the top and bottom line. Yet management lowered their guidance. The stock collapsed today with a gap open lower at $150.40 and a drop to $139.50 intraday before closing down -7.4% near its 50-dma.

On Tuesday night I said the worst case scenario would be GMCR crashing on its earnings report and closing under $150. If that occurred we'd lose $1.17 on the call spread. That's exactly what happened.

Our two calls are trading near zero we will let them expire worthless (expiration is Saturday). We will remove GMCR from the play list tomorrow.

- 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

11/20/14 GMCR crashes on its earnings guidance
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: 162.45 change: +0.77

Stop Loss: 156.85
Target(s): To Be Determined
Current Option Gain/Loss: +408.8%
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

11/20/14: Our November call options on the IYT expire after tomorrow. We are long the Nov. $143 call and short the $159 call.

Traders need to exit both positions at the closing bell tomorrow!

*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

11/20/14 prepare to exit tomorrow at the closing bell!
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

PriceSmart Inc. - PSMT - close: 94.25 change: +0.65

Stop Loss: 91.45
Target(s): To Be Determined
Current Option Gain/Loss: + 1.7%
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

11/20/14: PSMT spiked lower this morning but shares rebounded and managed to outperform the major indices with a +0.69% gain. 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: 103.67 change: +0.46

Stop Loss: 99.95
Target(s): To Be Determined
Current Option Gain/Loss: +42.9%
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

11/20/14: The NASDAQ outperformed the S&P 500 and the Dow Industrials while the QQQ almost kept pace with a +0.44% gain. This ETF bounced off short-term support at its simple 10-dma this morning.

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: 242.24 change: +1.39

Stop Loss: 236.75
Target(s): To Be Determined
Current Option Gain/Loss: +104.7%
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

11/20/14: SHW continues to impress with a +0.5% gain. Shares tested their 10-dma and rebounded higher.

Tonight we'll raise the stop loss to $236.75. More conservative investors may want to just take profits now.

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: 53.41 change: +0.79

Stop Loss: 51.40
Target(s): To Be Determined
Current Option Gain/Loss: +236.3%
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

11/20/14: Semiconductor stocks were definitely in rally mode today. The SMH outperformed the major indices with a +1.5% gain and a breakout to new multi-year highs.

We will raise the stop loss to $51.40. 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

11/20/14 new stop @ 51.40
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

Under Armour, Inc. - UA - close: 70.41 change: -0.07

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

11/20/14: UA briefly traded to a new relative high but it failed to rally above $71.00. Our suggested entry point is $71.05.

Earlier Comments: November 19, 2014:
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 $1.45

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

United Rentals, Inc. - URI - close: 114.52 change: +0.22

Stop Loss: 111.75
Target(s): To Be Determined
Current Option Gain/Loss: + 8.8%
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

11/20/14: URI was little changed today. Shares continue to churn sideways in the $112.00-115.00 range.

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: 55.97 change: -0.40

Stop Loss: 58.85
Target(s): To Be Determined
Current Option Gain/Loss: -30.7%
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

11/20/14: FMC is finally starting to breakdown after two weeks of slowly drifting lower. Today's move could be 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


Open Text Corp. - OTEX - close: 57.80 change: -0.43

Stop Loss: 57.45
Target(s): To Be Determined
Current Option Gain/Loss: -67.0%
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

11/20/14: After OTEX recent reversal we decided in last night's newsletter to exit positions immediately. The stock gapped down at $57.82 this morning and underperformed the broader market with a -0.7% decline by the closing bell.

- Suggested Positions -

Dec $60 call (OTEX141220c60) entry $1.67 exit $0.55 (-67.0%)

11/20/14 planned exit this morning
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