Option Investor

Daily Newsletter, Wednesday, 11/26/2014

Table of Contents

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

Market Wrap

Thanksgiving Week Living Up To Bullish Pattern

by Keene Little

Click here to email Keene Little
The week of Thanksgiving holiday is typically a slow, but bullish, time for the stock market and this week has been no exception on both accounts. The blue chips have been on the weak side but the techs and small caps continue to show bullish behavior.

Wednesday's Market Stats

Tonight I'm putting the Economic reports at the top of my report instead of the bottom because today included the reports we'd normally get on Thursday and Friday so there are no more important economic reports for the rest of the week.

Economic reports and Summary

As you can see in the list above, this morning was busy with economic reports but they barely caused a ripple in the pre-market session -- a quick 3-point swing on the S&P futures and then quickly back to where it was before the 8:30 reports. The Durable Goods orders, ex-transportation, was a little bit of a disappointment, coming in at -0.9% vs. the +0.5% expected and below September's upwardly revised +0.2%. Personal income and spending were both less a little less than expected but a slight improvement over September's numbers.

After the opening bell we got more reports that were not that good overall. The Chicago PMI, which came in light at 60.8, was below expectations for only a drop to 63 from October's 66.2. Michigan Sentiment also came in lighter than expected, 88.8 vs 90 expected and below October's 89.4. Home sales were disappointing with both new home sales and pending home sales less than expected. Pending sales dropped -1.1% vs. expectations for only a slight decline to +0.5%. From all these reports it would appear the consumer's confidence and sentiment is in decline and it's showing up in their spending. This is just more evidence that the economy is not as rosy as many would like us to believe. There were more than a few economists lowering their estimates for Q4 GDP

The morning was quiet and the day became quieter as many traders left the market early to start their holiday weekend. The foul weather, including snow, had many New York traders getting out early to beat the traffic and weather. The result was trading volume was as light as the lightest days of the year, which made it easier to shove the market around (up). Despite the somewhat disappointing economic reports they were able to push the market a little higher with a message to bears: stay away.

The typically bullish Thanksgiving week is on track to be another bullish week, even if only marginally so as SPX is up about 9 points for the week. Keep in mind that the typical pattern calls for at least a pullback in early December before starting a year-end rally so this week's minor gains look like they could get retraced, and then some, next week.

Kicking off tonight's chart review I think it's important to first understand how vulnerable the stock market currently is. We've seen stretched markets before and bullish sentiment/low VIX continue for far longer than seems possible but this time the market has stretched even the stretched indicators. When the rubber band snaps this time it's likely to surprise many market participants, especially those who believe in the end-of-year rally scenario and/or in the all-powerful and benevolent Fed.

Tom McClellan showed a chart today of the bearish percent as reported by Investor's Intelligence (a measure of how many newsletter writers are currently bullish, bearish or looking for a correction). The percentage of bears is plotted upside down on McClellan's chart below to better visualize the coincidence of low bear percentage with previous market highs (the higher the blue line the lower the percent bears), which is again approaching a dangerously high (low) level, less than 15% bears at the moment. You can also see that previous low levels of percent bears has only resulted in a relatively small correction so from this it's not particularly scary except to warn of at least another pullback from the current high.

Investors Intelligence Percent Bears (plotted inversely), chart courtesy mcoscillator.com

Another measure of sentiment is shown with the Sentix Sentiment chart below. It has risen to the highest level of the year and matching December 2013. The December high in the stock market led to a -6% decline in January, which again shows it wasn't a rally killer but the excessive bullish sentiment first needed to be flushed away before the market could proceed higher.

Sentix Sentiment vs. SPX

The two charts above show us what the sentiment looks like but what does that mean for what investors are doing? The chart below shows the ratio of SPX bullish vs. bearish funds in Rydex. The ratio spiked higher following the October low, showing investors are putting their money where their sentiment is and if that doesn't look like a blow-off move then I don't know what qualifies. This is a vivid example of everyone jumping into the pool and as noted on the chart, it's the first time the ratio has achieved 2:1 in favor of bullish assets since February 2001. The high for SPX in February 2001 was actually a relatively small bounce in the stock market (but it had everyone convinced new market highs were coming) before rolling over and down into the 2002 low. It's the high bull:bear ratio and more importantly it's the rapidity at which the ratio has climbed in the last month that should have bulls quivering in their hooves right now.

Rydex Ratio of S&P 500 Bullish vs. Bearish Assets, chart courtesy my401kPro.com

Accompanying all this bullish fervor by investors is a market that is flat out running out of gas. The roller coaster that's been slowly clickety-clacking its way up the steep incline, especially with this month's shallow up-channels for price, has everyone giddy with joy for the expected fun (profitable ride). The problem is the gear pulling the train of cars up the incline is starting to lose some teeth and when it finally strips the gears it's going to be a run back down the incline going backwards and not something the riders expect to happen.

The charts below show the NYSE at the top and its potential triple-top formation as price again tests its July and September highs. At the same time it's back-testing its broken uptrend line from November 2012 (gray line), which was broken in late September. It's back up for a test of the previous highs and its broken uptrend line -- this is a setup only a bear could love, especially with the decaying market breadth. The middle chart shows the number of new 52-week highs, which has been declining rapidly since the October 26th high, and the bottom chart shows the advancing issues minus the declining issues, which is also showing fewer and fewer stocks are participating in the rally. In other words, the NYSE (and the other broader indexes) keeps pushing higher on the backs of fewer and fewer stocks. Sky-high bullish sentiment with deteriorating market breadth following a blow-off move to a new high is a recipe for disaster for late-to-the-party bulls.

NYSE vs. New 52-week highs and Advance-Decline Issues

We know price is king and the charts above don't mean a hill of beans (well, maybe one bean in the bear's pot) since we make or lose our money based solely on what price does. For that we go to the individual charts and use some technical indicators to help get a sense about what price is doing. I'll start with the RUT since it's been the stronger index off last Wednesday's low and it's approaching an important level. Starting with its weekly chart, this week's (yesterday's) high near 1192 is only about 4 points away from testing its broken uptrend line from March 2009 - October 2011, which will be near 1196 on Friday. This is a major uptrend line identifying the trend of the RUT's bull market since the 2009 low and breaking it in late September was a big deal. It's now back up for a potential back-test. At the same time it's also close to its previous highs in July and September for a possible triple top (3 drives to a high topping pattern).

Russell-2000, RUT, Weekly chart

Looking closer at the 3rd test of the broken uptrend line from March 2009, it's the 3rd attempt and now it's showing bearish divergence. In addition to the 3-drives-to-a-high topping pattern on the weekly chart we have the same pattern on the daily chart. This one is looking juicy for the bears, all 15% of them.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1202
- bearish below 1169

Moving in even closer, with the 60-min chart below, it's not a clean wave count but the best fit at the moment is to call the rally from November 19th the 5th wave. It would equal 62% of the 1st wave (a common relationship when the 3rd wave equals the 1st wave, which is what we have here) at 1199.38. This Friday's half-day session will see the top of a small rising wedge (ending diagonal 5th wave) intersecting the trend line along the highs from November 3-12 near 1203. So for Friday we've got an upside target/resistance zone at 1196-1203. A drop back below price-level support near 1184 would be a bearish heads up and below 1169 would tell us a high is in place.

Russell-2000, RUT, 60-min chart

Yesterday SPX made it up to the price projection at 2073.28, which is the 127% extension of its previous decline (September-October). It pulled back and then rallied back up to the projection just before the close before pulling back a little. I see upside potential to about 2082 (more bullish above that level) but the choppy move higher this month is a warning to bulls since it fits as an ending pattern (choppy moves up or down warn of a trend change).

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2082
- bearish below 2040

Looking closer at the move up from October, the 60-min chart below shows the slow choppy move up since the pullback on November 4th. It has been nuzzling up along its broken uptrend line from November 2012 and has been losing momentum in the past week. The small candles (and this is an intraday chart) since last Friday shows it's been just enough to keep the sellers away but hardly inspiring for the bulls to latch onto. It continues to look more like a rolling top pattern.

S&P 500, SPX, 60-min chart

There's a trader group that I belong to that includes Stan Harley, who writes a market timing newsletter, and his work has been recognized by Timer Digest. His work has been intriguing to say the least and the chart below is based on some of what he does, which is based on the formula 1/sq.rt.5 (1 over the square root of 5), which is .447. The number '5' is a Fibonacci number and it's common to see square root relationships between the various Fibonacci ratios. For example, the 78.6% retracement level that's been common in this market is the square root of 61.8%; the square root of 38.2% is 61.8%; 1 + sq.rt of 5 divided by 2 gives you 1.618, which is the golden ratio (phi). You get the idea. At any rate, the "opposite" of .447 is .553 (add them together to get 1) and it is this ratio that pops up repeatedly in the market's highs and lows.

I put together the SPX weekly chart below that shows this .447/.553 relationship in the highs and lows since March 2009. It also works before that date but this is to show the idea and why we're in an important turn window now. When you see a confluence of timing indicators, whether they are Fibonacci, astrological, Gann or cycles of days/weeks/months, it pays to watch closely for a market turn. The confluence of a few different .447/.553 ratios between previous market turns is now showing a confluence in the last half of November, which means it's a potentially important time period. Since we're rallying into it there is a high-odds likelihood that it will mark a high. This is a big reason why I'm looking for other technical indicators (EW pattern, trend lines, bearish divergence, overbought, etc.) to help confirm or negate the likelihood for an important market high here.

S&P 500, SPX, Weekly chart

It's hard to see on the chart above, since price is somewhat hidden by the vertical lines, but price is now up against the top of a parallel up-channel for the rally from October 2011. As I've shown in the past, the leg up from this past October fits well as the 5th wave of the rally from October 2011 and the fact that it's up to the top of its up-channel, with bearish divergence and at the turn window means bulls should be very careful here. It's a really nice reversal setup but of course we have no guarantee it will reverse.

Since last Friday the DOW has been poking at its trend line along the highs from May 2011 - December 2013, currently near 17873, but it's not clear yet whether or not it's going to be able to break through. The loss of momentum in its rally suggests anymore headway to the upside is going to be a tough battle.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,900
- bearish below 17,600

NDX was the stronger index today and it was able to break through trendline resistance near 4300. But it's now important for it to hold above 4300 otherwise it could be left as a head-fake break. As with the other indexes, the relatively shallow up-channel from November 4th is hard to figure out but a final 3-wave move for it would have two equal legs up at 4320.29, less than a point from today's high. A drop back below 4300 would be a bearish heads up and below 4200 would confirm the high is in place. In the meantime the bulls rule (but I don't trust them here).

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4300
- bearish below 4200

Helping NDX today, the semiconductor index (SOX) got a big pop up this morning and continued higher through the day, hitting a high near 684. That has it now close to a price projection at 688.71, shown on its weekly chart below, which is where the 5th wave (the leg up from October) in the move up from November 2012 would equal the 1st wave. The bullish development since last week is the climb back above its broken uptrend line from November 2012 and the climb above the trend line across the highs since July-September, currently near 668. But the bearish divergence at the new high, noted on the RSI, is another warning sign that this should be the 5th wave and the last hurrah for the bulls. From a timing perspective, this week would be a good turning point for the SOX since the time between its July-September-November highs is the same. A drop below 644 would be a strong indication that the rally is over but in the meantime there's still a little more upside potential.

Semiconductor index, SOX, Weekly chart

Over the past couple of months I've shown many charts indicating how much the stock market's broader indexes are way out of whack with so many other indexes. The ratio of consumer discretionary stocks vs. consumer staples has been showing how consumers have been getting defensive since the beginning of the year. As discussed at the beginning of this report, this morning's economic reports confirm the consumer is pulling in its horns. The comparison between commodity prices, which reflect global economic strength (and some due to strengthening in the U.S. dollar), and the stock market has been glaring for a long time (since 2011) but especially since the sharp decline in commodity prices since April. Another indicator is bond yields.

The stock market generally does better in an inflationary period because it's usually a good sign of economic strength -- companies' bottom lines tend to look better and that shows up in their higher stock prices. The opposite is also true -- in a "disinflationary" period stocks tend to suffer while bonds prices tend to rise. In an inflationary period bond yields climb because investors demand the higher yields to compensate for higher inflation. Higher yields mean lower bond prices but since the November 7th high for TNX its decline has created a widening spread between it and the stock indexes, as can be seen on the chart below.

SPX vs. TNX vs. DJUBS Commodity index

In the above chart you can see the both SPX and TNX spiked up off the October low but the rally for Treasury yields only lasted until November 7th. The dive lower in TNX since November 19th is widening the gap between the two as SPX just keeps pushing higher, oblivious to the message from the bond (smarter) market. I strongly suspect this is going to end in tears for those buying into the stock market rally here. The signal from the bond market suggests all the projections by economists for a growing economy are instead signs of a slowing one. Economists have a habit of making projections based on the past and are therefore consistently wrong at the turns.

The rally for the banking index, BKX, has not been as strong off the October low since it has not yet been able to exceed its September high. But it's close to a retest, which includes a retest of its March high. At the same time it has bounced back up to its broken uptrend line from October 2011 and the bearish divergence shown on the weekly chart below suggests the back-test could lead to a bearish kiss goodbye.

KBW Bank index, BKX, Weekly chart

For the past several weeks, whenever I showed the TRAN's chart, I was using the weekly chart to show the larger pattern and wave count. I'm looking for the completion of an a-b-c move up from October 2011 with the c-wave being the leg up from November 2012. It needs to be a 5-wave move and the leg up from October fits well as the 5th wave. Therefore once it completes it should be the completion of the entire rally from 2009. The daily chart below focuses where this 5th wave might finish.

Transportation Index, TRAN, Daily chart

The TRAN is currently pushing up against the trend line along the highs from March-May 2013 - May 2011, which was tested yesterday and today. This trend line is the top of a parallel up-channel for the rally since June 2013. There's higher potential to a longer-term trend line along the highs from April 2010 - May 2011, currently near 9360, and then a projection at 9430, where the 5th wave of the move up from October 2011 would equal the 1st wave. But the bearish divergence against the November 14th high suggests it could be in the final 5th of the 5th wave and might be stopped by the current trend line it's hitting. A drop below its November 19th low at 8961 would indicate the bull's party is over.

The U.S. dollar poked a little higher above its November 7th high and from a short-term perspective the move up from October 15th now looks like a completed 5-wave move that should be the completion of the 5th wave in the move up from May. A drop back below the downtrend line from March 2009 - June 2010, near 86.90, would be a good indication the dollar is into at least a larger pullback before continuing higher. There remains the potential for the dollar to pull all the back down to its uptrend line from April 2008 - May 2011 in a large sideways triangle pattern, perhaps down to about 75-76 by this time next year. But I think the dollar has much more bullish plans for its future (110-120).

U.S. Dollar contract, DX, Weekly chart

If the dollar is getting ready for at least a larger pullback into early 2015 that could help the commodities, including gold and oil. But gold's choppy bounce off the low on November 7th is a sign for gold bulls to be cautious. A "no" vote by the Swiss to require their central bank to buy more gold could spike gold back down, in which case I'll be watching for support near 1190. It takes a rally out of its down-channel that it's been in since 2011, the top of which is currently near 1250, to at least turn gold temporarily bullish but I continue to lean to the larger bearish pattern that calls for lower prices for gold into next year, regardless what the dollar does.

Gold continuous contract, GC, Weekly chart

Oil has remained weak and it's dropping lower in tonight's after-hours session (fighting to hold onto 73). I continue to look for the start of a larger bounce but it won't be clear for a while whether the bounce will develop into a 4th wave correction in the move down from 2013 or something more bullish. If oil continues to struggle I have a downside price projection, based on its pattern for the decline from June, at 66.90. The uptrend line from 1998-2008 will be near 65 by the end of December if the sellers keep up the pressure.

Oil continuous contract, CL, Weekly chart

As I look across the various sectors and indexes I get the distinct impression we're going to see trend reversals by next week. The stock market is peaky and fading. I've got a plethora of signals telling me the highs are very close to being put in place, perhaps during Friday's half session. Treasury yields have been pointing the way lower for about two weeks but the stock market has been ignoring the message. I doubt that will last much longer.

The commodity index looks like it could be bottoming although when I look at oil I wonder if there's a little more downside. Oil might be in a category of its own right now. The dollar looks ready for a reversal and a move back down into at least a larger pullback over the next few months. That should theoretically help commodities, including the metals. Since most of us focus our trading attention on the stock market, bears should get ready for their turn at the feeding trough while the bears go sleep it off.

Unfortunately for most of the bulls, they usually don't know when to exit and they get creamed in the melee when the bears start their attack runs. The huge influx of money into mutual funds and ETFs speaks volumes for what the retail traders have been up to and the bullish sentiment confirms their enthusiasm for more stock. That's usually a good sign for smart traders to quietly take their profits and their marbles and go home and let the others fight for the scraps. If you like playing the short side I think you'll like the month of December (certainly the first two weeks and then watch out for an end-of-year bounce).

Good luck and I'll be back with you on Monday as Tom and I switch next week. I hope everyone has a great Thanksgiving holiday and enjoys their friends and family (it's the best thing about this holiday -- no gifts, just lots of good food and company). Just be very careful if you have to drive on Thursday after a big dinner -- the sleepiness of drivers could literally kill you.

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

Safe Travels

by James Brown

Click here to email James Brown

Editor's Note:

The stock market marched higher on Wednesday and the S&P 500 closed at an all-time high. The S&P 500 is also on track for its sixth weekly gain in a row.

Tomorrow the U.S. markets are closed for the Thanksgiving holiday. On Friday markets will open but they close early at 1:00 p.m. (Eastern).

We are not adding any new trades tonight.

I hope everyone has a safe and happy holiday with your friends and family.


In Play Updates and Reviews

The NASDAQ Leads The Way

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market continued to drift higher on Wednesday with the NASDAQ composite leading the way.

Our new HAIN trade is open.

Current Portfolio:

CALL Play Updates

Apple Inc. - AAPL - close: 119.00 change: +1.40

Stop Loss: 115.85
Target(s): To Be Determined
Current Option Gain/Loss: +160.2%
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

11/26/14: AAPL did not see any follow through on yesterday's pullback. The stock resumed its climb and eyeing the $120 level again.

There was a new rumor out today that AAPL could sell as many as 71.5 million iPhones in its first quarter of 2015 (current quarter for AAPL). According to Zacks that would be a 40% jump from the year ago quarter and up +82% sequentially.

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

11/25/14 new stop @ 115.85
11/22/14 new stop @ 113.25
11/12/14 triggered @ 110.25
Option Format: symbol-year-month-day-call-strike

CR Bard Inc. - BCR - close: 167.17 change: +0.72

Stop Loss: 163.35
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

11/26/14: Good news! BCR did not see any follow through on yesterday's relative weakness. The stock looks like it might be temporarily stuck in the $166-168 zone although I might widen that to the $165-168 zone. I am not suggesting new positions at this time.

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

11/22/14 new stop @ 163.35
11/13/14 triggered @ 165.65, suggested entry was $165.60
Option Format: symbol-year-month-day-call-strike

Costco Wholesale - COST - close: 139.75 change: +0.88

Stop Loss: 137.25
Target(s): To Be Determined
Current Option Gain/Loss: +234.4%
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

11/26/14: COST spiked higher at the open this morning. Shares briefly traded at a new all-time high ($140.88) but the rally faded. Shares spent most of the day hovering just below round-number resistance at $140.00.

I am not suggesting new positions at this time.

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

11/25/14 Caution: investors may want to take profits now
11/22/14 new stop @ 137.25
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: 96.25 change: +0.26

Stop Loss: 89.75
Target(s): To Be Determined
Current Option Gain/Loss: +15.7%
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

11/26/14: DECK kept pace with the S&P 500 today. Both added about +0.28%. Shares of DECK appear to have new short-term resistance in the $96.50-97.00 zone. Beyond that I am expecting the $100.00 level to be the bigger challenge.

I am not suggesting new positions at this time.

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

11/22/14 new stop @ 89.75
11/17/14 triggered $92.25
Option Format: symbol-year-month-day-call-strike

DineEquity, Inc. - DIN - close: 97.30 change: +0.00

Stop Loss: 94.85
Target(s): To Be Determined
Current Option Gain/Loss: + 91.7%
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

11/26/14: The Wednesday before the Thanksgiving holiday is expected to see light volume. Yet DIN's volume today was slightly above its daily average. Oddly enough shares failed to participate in the market's rally and closed unchanged today. The intraday strength in DIN faded near yesterday's highs in the $98.00 area. Are we witnessing distribution (a.k.a. someone's getting out) in DIN right now?

Tonight we will raise the stop loss up to $94.85. More conservative traders may want to just take profits now!

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

11/26/14 new stop @ 94.85, traders may want to take profits here!
11/22/14 new stop @ 93.85
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: 175.08 change: +0.22

Stop Loss: 169.85
Target(s): To Be Determined
Current Option Gain/Loss: +191.5%
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

11/26/14: FDX has lost its momentum. Shares spent over two weeks churning sideways in the $170-173 zone. Now the stock appears to be lost as it drifts this week on either side of the $175.00 level.

We have less than three weeks left before FDX reports earnings on December 17th. Investors may want to just take profits now. Alternatively you may want to up your stop loss.

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

The Greenbrier Companies - GBX - close: 65.29 change: -0.93

Stop Loss: 63.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 855 thousand
Entry on November -- at $---.--
Listed on November 22, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

11/26/14: GBX displayed relative weakness on Wednesday with a -1.4% decline. The stock testing what should be support near $65.00 and its simple 100-dma. We are on the sidelines. Our suggested entry point to buy calls is $67.55.

Earlier Comments: November 24, 2014:
GBX is in the services sector. The company manufacturers railroad freight cars and ocean-going barges. They also refurbish freight railroad cars. New rules by the White House on railroad tanker cars that carry crude oil should mean strong business for GBX as companies are forced to either buy new cars or refurbish old ones to meet the new requirements. The problem is that these rules have not been approved yet.

The White House has delayed the construction of the Keystone Pipeline for years and it is still in limbo as the last vote on the pipeline this month did not pass. The booming shale-oil industry in the U.S. has produced a massive surge in oil transport by rail. The number of rail cars used to transport crude oil in the U.S. was 9,500 back in 2008. That number had soared to more than 415,000 rail carloads by 2013 and continues to climb.

Naturally it comes down to money. Oil firms paying to transport this oil want to delay these safety updates because it will be expensive. Yet the massive increase in oil transported by rail has led to a rash of train derailments with potentially deadly consequences. A couple of years ago there was a derailment in Canada and the oil inside ignited and wiped out a small town.

It has been months since the DOT proposed new rules. Public comments on it closed back in September. It's expected that new regulations could be out in the next few months. It would appear that businesses are already planning ahead and biting the bullet to buy new tanker cars because business at GBX has been soaring. The fact that crude oil prices have fallen to four-year lows has had no impact on demand for new railcars.

Bloomberg recently noted that the order backlog for railcars hit its highest level ever in the third quarter of 2014. A lot of that business is going to GBX. Greenbrier's Q2 report in July beat Wall Street's estimates on both the top and bottom line and management raised their guidance.

GBX's most recent earnings report was October 30th. Analysts were expecting a profit of $1.03 a share on revenues of $626.3 million. GBX met estimates with a profit of $1.03. Revenues surged +28% from a year ago to $618.1 million. That missed Wall Street's estimate but was still a record quarter for revenues. GBX said their aggregate gross margin rose from 16.3% in their third quarter (calendar Q2) to 17.2% in their fourth quarter (calendar Q3).

GBX reported that their backlog rose 5,100 units. The company saw new orders for railcars of 10,400 units worth more than $1 billion. After the last quarter ended they received another order for an additional 11,400 railcars also worth more than $1 billion. Their total railcar backlog hit a record 31,500 units with an estimated value of $3.33 billion compared to a backlog of 26,400 units at the end of May 2014.

GBX's Chairman and CEO William Furman said, "We leveraged our integrated business model to achieve our best annual performance yet and are well positioned to continue to grow in 2015 and beyond. We are obtaining the highest level of new orders in Greenbrier's history."

The company raised their fiscal year 2015 earnings guidance into the $4.25-4.55 range, which is above Wall Street's estimate of $4.15. They also expect revenues to come in above $2.5 billion, which is in-line with analysts' estimates of $2.54 billion. GBX issued a new goal to raise their aggregate gross margins to 20% by the second half of 2016.

Traders have been buying the dips in GBX for weeks and now the stock has a bullish trend of higher lows. Shares recently broke through resistance near $65.00. The big bounce has produced a buy signal on the Point & Figure chart that is forecasting an $85 target.

If this rally continues GBX could see a short squeeze. The most recent data listed short interest at 23% of the very small 23.3 million share float.

Friday's intraday high (Nov. 21st) was $67.45. Tonight I am suggesting a trigger to buy calls at $67.55.

Trigger @ $67.55

- Suggested Positions -

Buy the March $70 call (GBX150320C70)

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

The Hain Celestial Group, Inc. - HAIN - close: 112.59 change: +4.02

Stop Loss: 106.25
Target(s): To Be Determined
Current Option Gain/Loss: +41.7%
Average Daily Volume = 615 thousand
Entry on November 26 at $110.25
Listed on November 25, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/26/14: Bingo! As expected shares of HAIN did breakout past resistance at $110.00. Our plan was to buy calls at $110.25. Shares opened at $110.17 and then sprinted higher. If you missed our entry point there is a chance HAIN will see a pullback so wait for a dip. Broken resistance at $110 should be new support.

Earlier Comments: November 25, 2014:
"Our business continues to benefit from strong growth trends in the organic and natural, better-for-you segment of consumer packaged goods."

That quote is from HAIN's CEO after the company reported its latest earnings results in early November. He's right. Consumers are choosing healthier foods and it looks like a major trend change that could benefit HAIN for a long time.

The company website describes HAIN as, "The Hain Celestial Group, headquartered in Lake Success, NY, is a leading natural and organic food and personal care products company in North America and Europe. Hain Celestial participates in almost all natural food categories with well-known brands that include Celestial Seasonings, Terra, Garden of Eatin', Health Valley, WestSoy, Earth's Best, Arrowhead Mills, DeBoles, Hain Pure Foods, FreeBird, Hollywood, Spectrum Naturals, Spectrum Essentials, Walnut Acres Organic, Imagine Foods, Rice Dream, Soy Dream, Rosetto, Ethnic Gourmet, Yves Veggie Cuisine, Linda McCartney, Realeat, Lima, Grains Noirs, Natumi, JASON, Zia Natural Skincare, Avalon Organics, Alba Botanica and Queen Helene."

HAIN's results have definitely confirmed the trend in consumer spending. They have beaten Wall Street's estimates and guided higher in three out of the last four earnings reports.

The Q4 report in late August this year saw revenues up +26% to $583.8 million. Management raised their guidance as they now expect sales growth of +27% to +30% in 2015.

The company reported their 2015 Q1 numbers on November 6th and sales are accelerating. Wall Street was expecting a profit of $0.67 on revenues of $640.27 million. HAIN delivered a profit of $0.68, which is a +31% increase from a year ago. Revenues were up +34.6% to $642.6 million. These are really impressive results when you consider that includes a voluntary recall of their HAIN nut butters back in August.

Commenting on their Q1 results, Irwin Simon, Founder, President, and CEO of the company said, "We are pleased with another strong start to our fiscal year across all of our segments on a worldwide basis with the highest quarterly net sales in the Company's history."

"Our diverse portfolio of brands and products across multiple categories and our customer base across various channels of distribution enabled us to deliver double-digit sales growth even with the impact of the nut-butter recall initiated in August."

Accompanying these results their Board of Directors also approved a 2-for-1 stock split but shareholders needed to approve an increase in the number of shares outstanding first. The company's annual meeting was a few days ago and shareholders did approve the stock split. That headline came out tonight, after the closing bell.

The 2-for-1 stock split will occur in December. The shareholder record date is December 12th, 2014. The ex-dividend date is expected to be December 29th (this is when HAIN will begin trading post-split).

Shares of HAIN have been consolidating sideways beneath resistance at $110 for the last three weeks. The stock displayed relative strength today and looks poised to breakout past this resistance. The 2-for-1 stock split news could be the catalyst it needed. After hours tonight shares are trading around $110.50. We are expecting HAIN to gap open higher tomorrow morning. I'm suggesting a trigger to buy calls on HAIN if shares trade at $110.25 or higher.

We are not setting an exit target tonight but I will point out that the point & figure chart is bullish and forecasting a long-term $131.00 target.

- Suggested Positions -

Long 2015 Jan $115 call (HAIN150117c115) entry $1.80

11/26/14 triggered @ $110.25
Option Format: symbol-year-month-day-call-strike

Northrop Grumman - NOC - close: 141.45 change: +0.59

Stop Loss: 135.90
Target(s): To Be Determined
Current Option Gain/Loss: +13.3%
Average Daily Volume = 1.0 million
Entry on November 21 at $140.25
Listed on November 20, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/26/14: NOC began trading ex-dividend this morning for its latest quarterly dividend. This prompted the gap down in the share price. The rally continued with NOC posting a +0.4% gain.

Earlier Comments: November 20, 2014:
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.

- Suggested Positions -

Long 2015 Jan $145 call (NOC150117c145) entry $1.50

11/21/14 triggered @ 140.25
Option Format: symbol-year-month-day-call-strike

NXP Semiconductors - NXPI - close: 77.85 change: +1.70

Stop Loss: 71.75
Target(s): To Be Determined
Current Option Gain/Loss: +17.2%
Average Daily Volume = 3.9 million
Entry on November 24 at $76.05
Listed on November 22, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/26/14: Semiconductor stocks were showing relative strength on Wednesday with the SOX index up +2.1%. Shares of NXPI outperformed its peers with a +2.2% gain and a rally back toward yesterday's highs near $78.00.

Earlier Comments: November 22, 2014:
NXPI is in the technology sector. The company classified as part of the semiconductor industry but they make a host of electronic parts and components. The company describes itself on their website as follows, "The electronics industry is being driven by four mega trends that are helping shape our society: Energy Efficiency, Connected Devices, Security and Health. Connecting to these trends and enabling Secure Connections for a Smarter World, NXP Semiconductors N.V. (NASDAQ: NXPI) creates solutions for the Connected Car, Cyber Security, Portable & Wearable and the Internet of Things. Through our innovations, customers across a wide variety of industries – including automotive, security, connected devices, lighting, industrial and infrastructure – are able to differentiate their products through features, cost of ownership and/or time-to-market."

The company has seen a dramatic turnaround. NXPI was born in 2006 when Phillips Electronics sold its semiconductor business to private equity firms. By 2009 they were $6 billion in debt and losing money. Today they have cut their debt in half.

Investors business daily noted that companies like NXPI and its rival AVGO, another bullish looking stock, should both benefit thanks to a new trade deal with China. The U.S. and China have recently decided to remove some tariffs on almost $1 trillion worth of high-tech products.

As we approach the holidays shares of NXPI could get a boost thanks to Apple (AAPL). Investors expect AAPL to see a very strong fourth quarter with its new iPhone 6 and 6+ and AAPL is trying to revive its tablet business with a refresh of its iPad models. NXPI provides components to the iPhone, the iPad, and is rumored to produce equipment for AAPL's new Apple Pay technology.

NXPI's revenues have been strong all year. The company has actually beaten Wall Street's earnings estimates on both the top and bottom line the last four quarters in a row. Revenues were up +15.9%, +14.8%, +17.3% and in the most recent quarter +21.3%. NXPI's last earnings report was October 23rd. The company reported a profit of $1.35 a share, which was four cents above estimates. Revenues came in at $1.51 billion. Management issued bullish guidance on its Q4 EPS number while its revenue estimate was only in-line with Wall Street.

The stock received several price target upgrades in November. Recently as mutual funds issued their 13F filings it was unveiled that Appaloosa Management, the fund run by influential manager David Tepper, had initiated a new position in NXPI last quarter.

Technically shares of NXPI have been digesting gains in a sideways consolidation the last couple of weeks. Shares managed to end the week at a new all-time high. There looks like short-term resistance at $76.00. Tonight I'm suggesting a trigger at $76.05.

Please note this is a slightly more aggressive trade as NXPI appears to have potential resistance at a trend line of higher highs (see chart).

- Suggested Positions -

Long 2015 Jan $80 call (NXPI150117c80) entry $2.39

11/24/14 triggered @ 76.05
Option Format: symbol-year-month-day-call-strike

PriceSmart Inc. - PSMT - close: 95.57 change: -0.48

Stop Loss: 92.85
Target(s): To Be Determined
Current Option Gain/Loss: +13.3%
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

11/26/14: PSMT is once again retreating from resistance near $97 and its 100-dma. More conservative traders might want to raise their stop again.

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

11/22/14 new stop @ 92.85
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: 105.52 change: +0.68

Stop Loss: 102.45
Target(s): To Be Determined
Current Option Gain/Loss: +112.1%
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

11/26/14: The QQQs were strong all day long. This ETF closed at new 14-year highs. Investors might want to raise their stop closer to the 10-dma, currently near $103.85. I am not suggesting new positions at this time.

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

11/22/14 new stop @ 102.45
11/12/14 triggered @ 102.35
Option Format: symbol-year-month-day-call-strike

The Sherwin-Williams Co. - SHW - close: 240.60 change: +0.78

Stop Loss: 238.25
Target(s): To Be Determined
Current Option Gain/Loss: + 63.2%
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

11/26/14: SHW saw a small spike lower this morning but shares bounced at $238.92 (essentially $239). This stock spent most of the day consolidating sideways near the $240.00 mark. I don't see any changes from my prior comments. Traders will want to seriously consider taking 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

11/22/14 new stop @ 238.25
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: 55.18 change: +1.09

Stop Loss: 52.25
Target(s): To Be Determined
Current Option Gain/Loss: +372.7%
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

11/26/14: Semiconductor stocks were strong performers today with the SMH surging +2.0% to new multi-year highs. This ETF is on track to post its seventh weekly gain in a row.

Investors may want to raise their stops again.

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

11/22/14 new stop @ 52.25
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: 71.48 change: +0.81

Stop Loss: 67.90
Target(s): To Be Determined
Current Option Gain/Loss: - 9.4%
Average Daily Volume = 2.6 million
Entry on November 21 at $71.05
Listed on November 19, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

11/26/14: It was a good day for UA bulls. The stock broke through short-term resistance near $71.00 and outperformed the broader market with a +1.1% gain. The next challenge is potential resistance at its all-time high near $72.75.

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.

- Suggested Positions -

Long 2015 Jan $75 call (UA150117c75) entry $1.60

11/21/14 trade opened on gap higher at $71.19
Option Format: symbol-year-month-day-call-strike

United Rentals, Inc. - URI - close: 118.70 change: -0.32

Stop Loss: 112.25
Target(s): To Be Determined
Current Option Gain/Loss: +55.5%
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

11/26/14: After big gains yesterday it was not surprising to see a little profit taking in URI today. It was encouraging to see traders buying the dip midday and URI paring its losses by the closing bell.

The $120.00 level is still overhead resistance.

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

11/22/14 new stop @ 112.25
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: 55.69 change: -0.52

Stop Loss: 57.35
Target(s): To Be Determined
Current Option Gain/Loss: -38.5%
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

11/26/14: That's not a typo. Shares of FMC are down 52 cents two days in a row. Today's drop not only underperformed the market (-0.9%) but it's also a breakdown to new three-week lows. Traders could use today's decline 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

11/22/14 new stop @ $57.35
11/04/14 triggered @ $55.85
Option Format: symbol-year-month-day-call-strike