Option Investor

Daily Newsletter, Wednesday, 8/19/2015

Table of Contents

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

Market Wrap

Charts Are a Mess

by Keene Little

Click here to email Keene Little
After the sideways chop that we've seen all year, including this week's whipsaws, about the only thing that can be said for the charts is they're a mess. And it's driving investors out of the market, something that should be of great concern.

Today's Market Stats

The trading range in tightening but the whipsaws have continued and there continues to be no sense of direction to this market. Traders who can catch the daily (hourly) swings have had some good trading opportunities. I suspect mostly HFTs, who have the ability to get in front of trades, have been the primary beneficiaries of this market. Investors are getting tired of it and leaving (pulling their money out) and that's leaving the market vulnerable from a low-liquidity perspective. What that means for the next week/month is the bigger question.

The market dropped hard this morning, following the global indexes, which were spooked by what's happening in China. It dropped -4% before a rally back up into the green and closed +1.2%. China policy makers have already said repeatedly that they will support the stock market and have money backing up their pledge. Today's trading in China is proof positive (so much for free markets). Even though China's support of the market will create this kind of bounce-back, in the long run its scaring investors out of the Chinese market, who are taking advantage of bounces to relieve themselves of their stock holdings. All parabolic rallies do not end well and while the government can try to delay the inevitable, it will be a losing battle and the government will merely add to the amount of money that makes it to money heaven.

Asian markets tanked and then European markets followed and that had us starting in the red this morning, which was then followed by strong selling into a midday low. The DOW was down about -230 points but then retraced all of its loss in the afternoon and made it +4 into the green following the FOMC minutes. That was followed by a reversal back down and the DOW gave up about 170 points into its afternoon low. Needless to say, today was a wild ride for traders trying to keep up and it's only a part of what we're seeing in the larger pattern, which suggests we might see stronger selling soon, possibly tomorrow and Friday.

Inflation data is a big part of the "data" that the Fed watches to help with their decisions about interest rates and for a long time they have said they want to see inflation around 2%, which helps pay down longer-term debt but causes loss of purchasing power (something the bankers don't care about). But this morning's data, in the CPI reports out before the bell, is not helping the Fed's cause. The rate of rise in inflation is dropping and both the CPI and core CPI rose only +0.1% in July instead of the +0.2% most economists expected.

For the past 12 months inflation is up only +0.2%, close to the dreaded "disinflation" that economists are worried about. Most of the disinflation is a result of a significant drop in commodities' prices, including energy. Excluding what's important to us, food and energy, the core index is up +1.8% for the past 12 months, which is in line with the average of +1.9% over the past 10 years. But while the longer-term average inflation rate is where the Fed wants it (near +2%), it's the short-term trend that isn't supporting the Fed's desire to raise rates.

One thing about the Fed that one needs to keep in mind, no matter how much jawboning they do for the market, and that is they will avoid embarrassment at all costs. And it would be very embarrassing for them to raise rates even a little bit if they're worried that the next quarter will require them to lower rates because the economy is slipping further into contraction territory. While they might be a little embarrassed about not being able to raise rates this September, or December, they have an easy out by saying the data didn't support the move, which is an out they've been carrying with them since first talking about raising rates (everything is "data dependent"). But to have to lower rates back down after trying to raise them would show their incompetence and they will avoid that embarrassment. The Fed will not raise rates this year or probably next either (and if they do I'll be surprised, wink).

The FOMC minutes did not present any new information and I'm not sure why there was such a volatile reaction following the release. It could be opex related as much as anything else. Squaring of opex positions before tomorrow generally creates some volatility if the market gets moving in one direction or the other.

The minutes show most Fed officials believe conditions are "approaching" what's needed for the Fed to start raising rates. Basically the Fed officials want to raise rates sooner rather than later and want to see if the August labor data will support an increase in September. The Fed is also looking for signs of an increase in inflation but this morning's numbers are not supporting them. While most economists believe the Fed will raise rates in September, it adds to my confidence in saying the Fed will not raise rates. Economists have an extremely poor record with their predictions.

The minutes also reflected the Fed's desire to continue rolling over expiring bonds and to keep reinvesting the proceeds, which keeps the Fed's balance sheet stable. This can be defined as QEL (QE light) and they want to continue that through the "early stages" of rate hikes, which tells me they'll be rolling over expiring bonds for years to come. Both the stock and bond markets liked this since the demand for bonds remains stable through Fed purchases and there's less fear about the Fed withdrawing more liquidity from the market.

There are legitimate concerns about the declining level of liquidity in today's market. There are people who study this and have been warning for a while that liquidity is drying up, especially after the Fed stopped its QE4 program (now holding with QEL). The reason for concern is that liquidity is what provides an orderly market -- it makes it easier to match sellers and buyers. But when liquidity vanishes, especially during a selling event, sellers can find themselves without buyers. The computers then go looking for prices and if you're in a market order to sell (as many stops are), you could find yourself selling at a drastically lower price than you thought likely.

Part of the problem causing liquidity to dry up is that investors are leaving the market. The current bull market is often described as the most-hated bull market anyone has seen. There are several reasons for that and without investor participation we've seen the indexes holding up on the backs of fewer and fewer stocks. That's been worrisome for some time. And this lack of participation is showing up in sentiment numbers. Tom McClellan posted the below chart to a small trading group that I'm with and asked the following question: "Does this really feel as bad as the Ebola Panic, when we were all about to die of hemorrhagic fever?"

Investors Intelligence Sentiment vs. SPX, July 2012 - August 2015, chart courtesy Tom McClellan

As you can see in the above chart, the Bullish minus Bearish sentiment is now back down near where it was at the market low in October 2014 (when the Ebola scare was as much to blame as other factors) and yet the market has held near its high as it trades sideways vs. the spike down as we had last October. The sentiment reading is now significantly below the lower band that McClellan uses to judge extreme moves and the current decline in sentiment looks ripe for a reversal (with a stock market rally) from a contrarian perspective. If most everyone is out and the market runs out of sellers we could then get a strong rally as everyone rushes back in (including the buying from short sellers).

The other interpretation of the above chart is that it's just more evidence for how much this market is hated by investors. I've talked with a number of people who are sick of being in the stock market. They're complaining that the only ones making money are their financial advisors. They're tired of losing money as the market goes nowhere, especially since there's still a lot of residual fear about another market crash (especially among baby boomers who can't afford another 50% loss). Many money managers are feeling the same and this in turn is reducing the liquidity in the market.

The Fed is not injecting new money (only rolling over expiring bonds) and investors are pulling out, all of which has significantly reduced the market's liquidity. And market liquidity is like oil to an engine -- without out it things begin to seize up. The real risk is that any selling could get carried away to the downside as liquidity simply disappears (which we've seen before in flash crashes). Sometimes very bearish sentiment means bad things for the market, not good things in a contrarian sense.

Exacerbating the liquidity problem is what we see happening in the emerging markets. There has been a surge in outflows, which is hurting the economies of these smaller countries. Like small businesses helping get an economy growing, it's the small emerging markets that help get global economies (and markets) growing. The opposite appears to be happening. China's yuan devaluation seems to have accelerated this trend. In the past year nearly $1T has left these markets and for small markets that's a lot of liquidity that has vanished.

As funds leave the emerging markets it puts downward pressure on the local currency, making the U.S. dollar stronger, which dampens demand for imports, which drives down demand for commodities and further negatively affects those countries dependent on commodity sales. It creates a downward spiral and at the moment no one is quite sure where this will end, all of which makes it even harder for the Fed to raise interest rates. Previous stock market crashes have followed a currency collapse in a small country and we're probably not far from that happening again. The cracks in the dam are widening...

As mentioned in the title of tonight's report, the charts are a mess and have been all year. It's getting quite frustrating trying to figure out what the market is up to and about the only thing that has been accurate in any prediction is that you should expect reversals of reversals. Lack of follow through has been the hallmark of this market and when that breaks is anyone's guess. But that's what I do (guess) and I'll provide my best guess on what the current pattern tells me.

Starting with the SPX weekly chart, it still supports the idea for another rally up to the top of a shallow rising wedge to complete the final 5th wave off the October 2014 low. That would take SPX up to about 2150-2160 by mid-September but the rally needs to get started now otherwise the rounding top pattern will begin to look like the more important pattern. A drop below 2040 would be a significant break and it would likely begin the stampede for the one and only narrow exit door. Have I mentioned the lack of liquidity in this market (wink)?

S&P 500, SPX, Weekly chart

Choppy mess. Need I say more about the daily chart? There's a sideways triangle that has formed after the July 20 high and July 27 low, the bottom of which was tested with today's low. A trade above Tuesday's high near 2104 would be bullish while a trade below the July 27 low near 2063 would be bearish. Mind the chop in between. The good news for bulls so far is that the 200-dma continues to hold as support on a daily closing basis. But how many times can it be tested before it runs of buyers at support?

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2104
- bearish below 2063

I continue to look for impulsive (5-wave) moves to help indicate market direction but we're seeing repeated 3-wave moves and that fits with the sideways triangle noted above. I've noted on the daily chart above and 60-min chart below the key levels to let us know when a break is confirmed but keep in mind that it could result in just a larger 3-wave move before reversing again. Trades need to be managed closely and look for base hits instead of home runs.

S&P 500, SPX, 60-min chart

Using the arithmetic price scale shows the DOW trying to hold its uptrend line from October 2011, near 17375, but closed slightly below it today. It's possible there's a slightly larger bullish descending wedge pattern for the decline from May and we could see a relatively small break below its December 2014 low before it sets up for a larger rally. It could of course simply rally from here. But the bearish wave count is a series of 1st and 2nd waves to the downside (with the series of lower highs for the bounces) and that supports the idea that we're about to see a disconnect to the downside. While I don't like to predict these kinds of moves (since they're rare), it's important to understand the downside risk here. Don't let the market move much against a long position that you might have.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,630
- bearish below 17,340

Following the high for NDX on July 20th, it had a 3-wave pullback with two equal legs down at 4446.76, which was achieved last Wednesday with its low at 4436. It was a good setup for bulls to get long and it was starting to look good for a rally that could take it to new highs. But after only a 3-wave bounce into Monday's high at the 20-dma it has dropped back down, leaving the upside in question (and the downside). It closed back below its 50-dma today, at 4519, which is bearish but this one could go either way. In other words, there is no good setup to recommend. It's bearish below 4415 and bullish above 4635. Mind the chop in between.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4635
- bearish below 4415

Since Monday's high, when the RUT stopped dead at its downtrend line from July 16th and was not able to jump above it on Tuesday, this is the one that has had me feeling more bearish about the market. The blue chips, until today, had me feeling the bulls had some good potential but the NDX and especially the RUT had me feeling like the bears are not done yet. Last Wednesday's low fit well as the completion of a bullish descending wedge (with the potential that it's instead a leading diagonal 1st wave down from the June 23rd high) but the 3-wave bounce into Monday's high followed by the downturn says we're still stuck inside the descending wedge. We could see a rally from here, in what will become a larger corrective move to the upside in the final rally, but a drop back down to the bottom of the wedge, near 1175 by next Monday, seems to be a higher-odds play. If the bottom of the wedge is reached we'll then get some clues as to whether or not we should get a higher bounce correction. A break below the bottom of the wedge would be very bearish and it would support the uber-bearish wave count on the DOW's chart (crash leg lower). Strict discipline required here on your trades.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1245
- bearish below 1175

Bonds have been just as choppy as the stock market in the past week and they're not providing much help in figuring out what the stock market is doing. Looking at TLT, Monday finished with a doji sitting on its 200-dma and still inside its rising wedge from early July. Tuesday it broke down and closed below the bottom of the wedge, which had it looking like we'd see some follow through to the downside today. While there was a selloff this morning it was immediately reversed after the open and TLT had a relatively strong rally. Today's candle is a bullish engulfing candlestick (lower open followed by a higher high and close above yesterday's high), which has it now looking like a 3-wave pullback from last Wednesday might have completed this morning and now we'll see a continuation of the rally (decline in yields). But today's rally took TLT back up to its broken uptrend line from July 13th and could be nothing more than a back-test, to be followed by a bearish kiss goodbye tomorrow. It did close marginally back above its 200-dma at 124.60. Confirmation for the bears would be a selloff tomorrow but at the moment it could go either way. Gun to my head, I'd say TLT is going higher and that would put additional pressure on stocks.

20+ Year Treasury ETF, TLT, Daily chart

Looking to the banks for clues, the BKX looks just as confused as the others. From the high on July 23rd it had a 3-wave pullback with two equal legs down at 75.89, achieved with the spike down last Wednesday to 75.90 (OK, missed by a penny). This is a very common pattern among different indexes, which is what had me feeling confident about a rally this week and into September. This week's price action has negated those bullish thoughts. A rally could still happen but it's certainly looking less likely. After its 3-wave pullback into last Wednesday's low the BKX then bounced back above its broken uptrend line from January and used that trend line for support this morning and again this afternoon when it pulled back into the close. That all looks bullish but it's been struggling to get through its 20- and 50-dma's, both now near 78.30, since last Friday. A close above 78.30 would be bullish and even more so above its August 10th high at 79.54, but a close below 75.89 would be bearish.

KBW Bank index, BKX, Daily chart

The U.S. dollar's choppy pattern since its high in March leaves many different corrective patterns available and figuring out which kind it will be in advance is very difficult. I've been showing an idea for a sideways consolidation through the rest of this year based on the larger pattern before it and where I think it is in the large wave count. As long as it stays trapped between 93-100 there's not much to do with the dollar but wait to see which way it's going to eventually break, which I believe will be to the upside next year.

U.S. Dollar contract, DX, Weekly chart

Gold is looking like it could rally up to price-level resistance near 1141, which was a shelf of support since last November until breaking in mid-July. It would be at least short-term bullish above that level but remains bearish below it.

Gold continuous contract, GC, Weekly chart

Silver has already made it back up to its previous shelf of support since last November, near 15.25. An uptrend line from November 2014 (ignoring the spike down on December 1st) was tagged with last week's high at 15.58 but it then dropped back down below 15.25 for the weekly close and continues to struggle near this 15.25 resistance level. The bullish divergence on the chart continues to caution bears not to be aggressive on the short side but as long as support-turned-resistance holds price below 16 I would not look to get long silver.

Silver continuous contract, SI, Weekly chart

Oil has declined for eight straight weeks and has made mincemeat out of anyone who has tried to catch falling knives in this commodity (every week I read more trade recommendations to get long oil and the oil stocks because they're so low). I too have been expecting a bounce back up but the relentless decline has it looking like it could head lower still. I continue to show the potential for a large sideways triangle for a consolidation into next year but if it continues to head lower, especially down to its January 2009 low, it could put in a bottom sooner rather than later. Where that bottom could be (many other commodities have already broken below their respective 2009 lows) is anyone's guess but I do think it's risky trying to short it here.

Oil continuous contract, CL, Weekly chart

Thursday will finish up the week for economic reports and it will include the usual unemployment data and more importantly for the market, the Philly Fed index, which the market will be watching carefully to see if yesterday's Empire index is starting a pattern or instead was an outlier. Leading indicators is expected to show further slowing while Existing Home Sales is expected to be relatively flat from June.

Economic reports and Summary


The rally off last Wednesday's lows had the potential to turn into something more bullish, as in new highs into September, but that is no longer looking like a high-probability move. We could still get a higher bounce/rally but with the corrective 3-wave structure it would likely be a very sloppy choppy rally or it will be just a higher bounce before turning back down. The short-term pattern now better supports the idea that we'll see a continuation of the selling.

It's possible the selling could become quite intense over the next couple of weeks if the bearish wave counts are correct. With the problem of liquidity drying up in the markets (globally and especially in emerging markets) and all the currency devaluations happening (the race for the bottom), things could turn ugly in a hurry for markets. That's always a dicey prediction because market crashes are rare. Probably the best thing to say is that I see an elevated risk for a market crash at this point and that requires tight stop management on long positions.

Investors (those who don't want to trade in and out) should also establish a stop level, a break of which would convince you that the downside risk is greater than the upside potential. We're there now in my opinion but trend following says you should use your judgment for when the trend has broken and then honor your stops and get out. The risk is that stops could get triggered on a large gap down and either not be executed (if it was a stop-limit order) or be executed at a price much lower than your stop. Getting into a trade is much easier than getting out (it's the fear/greed factor) and the best time to make the decision about getting out is when you don't have to -- there's a reason why many money managers sell into rallies instead of panicking out in a decline.

We continue to be in a sideways choppy trading zone, which has been full of whipsaws as we get reversals of reversals and then another reversal for good measure. That could continue for months but I think what we're seeing is a topping pattern (rolling top), which typically sees a lot of chop like this. Following such a long bull market it's not hard to recognize a topping pattern could easily take a year. It's painful for traders and investors and it will be nice when we get a break out of this maddening trading range and start to make some money in swing and position trades again. In the meantime, stay safe and carefully manage your trading account.

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

Keene H. Little, CMT

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

New Option Plays

The Long-Term Trend Is Broken

by James Brown

Click here to email James Brown


Mallinckrodt Public Ltd - MNK - close: 95.49 change: -2.30

Stop Loss: 100.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.3 million
Entry on August -- at $---.--
Listed on August 19, 2015
Time Frame: Exit PRIOR to earnings
New Positions: Yes, see below

Company Description

Trade Description:
Normally you might think of mergers and acquisitions in the healthcare sector is a bullish recipe. It has been a winning combination for Irish drugmaker MNK who has been actively buying smaller rivals. Unfortunately, after the company's most recent earnings report, Wall Street is worried they may have paid too much for a recent purchase.

MNK is in the healthcare sector. According to the company, "Mallinckrodt is a global specialty biopharmaceutical and medical imaging business that develops, manufactures, markets and distributes specialty pharmaceutical products and medical imaging agents. Areas of focus include therapeutic drugs for autoimmune and rare disease specialty areas like neurology, rheumatology, nephrology and pulmonology; neonatal critical care respiratory therapies; and analgesics and central nervous system drugs for prescribing by office- and hospital-based physicians. The company's core strengths include the acquisition and management of highly regulated raw materials; deep regulatory expertise; and specialized chemistry, formulation and manufacturing capabilities. The company's Specialty Brands segment includes branded medicines; its Specialty Generics segment includes specialty generic drugs, active pharmaceutical ingredients and external manufacturing; and the Global Medical Imaging segment includes contrast media and nuclear imaging agents."

Their most recent earnings report was August 4th. MNK announced its Q3 results of $2.05 per share. That beat estimates of $1.83. Revenues surged +47.8% to $965 million. A big chunk of that revenue improvement was due to recent acquisitions. Furthermore, analysts were expecting MNK to report revenues of $984 million. That's a $19 million miss.

The fly in the ointment seems to be sales of Acthar gel. MNK recently paid $5.6 billion to buy Questcor Pharmaceuticals who makes HP Acthar Gel, which is derived from the pituitary glands of pigs. The drug can be used to treat a variety of autoimmune and inflammatory conditions, plus rare skin diseases. MNK reported that sales of Acthar were only up +4% from a year ago, which was a disappointment. Management lowered their long-term forecast for Acthar sales to mid-single digit to low-double digit percentage growth.

MNK's CEO said they're facing pressure from health insurance companies over the price of Acthar. Some insurance companies have gone so far as to restrict coverage or refusing to cover the drug due to costs (source: AP).

The combination of the revenue miss and this disappointing outlook for Acthar sales sparked a serious sell-off in shares of MNK. The stock plunged from $124 down to $102 the next day. Shares have spent the last couple of weeks trying to produce an oversold bounce but traders keep selling the rallies. The point & figure chart has reversed sharply and is now forecasting at $63.00 target.

The $95.00 level was support in early August but MNK is about to break it. Today's intraday low was $94.44. Tonight I am suggesting a trigger to buy puts at $94.35.

MNK can obviously be a volatile stock. I would consider this a more aggressive, higher-risk trade.

Trigger @ $94.35 *small positions to limit risk*

- Suggested Positions -

Buy the OCT $90 PUT (MNK151016P90) current ask $3.50
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Bears Win After A Volatile Session

by James Brown

Click here to email James Brown

Editor's Note:

It was another volatile day for the stock market. The Chinese market continues to crash. Meanwhile crude oil plunged to new multi-year lows, which crushed energy stocks today. All of the major U.S. indices posted losses in what turned out to be a relatively broad-based decline.

GD and JACK both hit our entry trigger today.

Current Portfolio:

CALL Play Updates

Accenture plc. - ACN - close: 102.87 change: -0.99

Stop Loss: 101.85
Target(s): To Be Determined
Current Option Gain/Loss: -37.5%
Average Daily Volume = 2.3 million
Entry on July 31 at $103.35
Listed on July 30, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

08/19/15: ACN traded down toward the bottom of its $102.25-104.00 trading range. If this weakness continues we could see ACN break this support and hit our stop at $101.85.

No new positions at this time.

Trade Description: July 30, 2015:
Sometimes slow and steady wins the race. Patient investors have been rewarded in ACN. The stock is up +290% from its 2009 lows. Sales and earnings have also improved. From 2010 to 2014 ACN has seen revenues rise +38% and net income soar +54%. Year to date ACN is up +14%. The S&P 500 index is only up +2.4%.

ACN is in the technology sector. They're considered part of the information technology services industry. According to the company, "Accenture is a global management consulting, technology services and outsourcing company, with more than 336,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world's most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014."

A recent article on Investopedia.com noted that ACN is on a buying spree. "Since the beginning of 2015, Accenture has acquired nine other companies: smart grid company Structure, supply chain analytics company Gaspo, strategy consulting companies Axia and Javelin, Salesforce consulting services provider Tquila UK, digital design company Reactive Media, and digital solutions companies Agilex, Brightstep, and PacificLink Group. All of these acquisitions should strengthen Accenture's position in IT services against rivals like IBM and Infosys."

Last year ACN's earnings progress seemed to slow. Last September they reported their Q4 results that missed estimates by two cents. They beat the revenue number but guided lower. In December they beat analysts' estimates on both the top and bottom line but guided lower again. Guidance improved somewhat with ACN's 2015 Q2 report in March where the company beat estimates and guided in-line.

Their most recent report was June 25th when the company announced its 2015 Q3 results. Earnings were $1.30 per share, which was seven cents above estimates. Revenues were relatively flat (+0.4%) at $7.77 billion but that was significantly above expectations. New bookings last quarter were $8.5 billion. North American sales rose +12% on a local currency basis. Europe sales were up +7% while the rest of the world saw sales rise +13%. Management reaffirmed their fiscal year 2015 guidance and expect new bookings to be $33-to-$35 billion for the year.

The stock has been popping on its recent earnings reports. Then shares fade lower until they hit the long-term up trend and investors buy the dip. The up trend seems to be getting stronger. ACN recently broke out past round-number resistance at $100.00 and managed to hold this level during last week's market sell-off. Now ACN is poised to hit new highs. Tonight we're suggesting a trigger to buy calls at $103.35.

- Suggested Positions -

Long SEP $105 CALL (ACN150918C105) entry $1.60

08/12/15 new stop @ 101.85
07/31/15 triggered @ $103.35
Option Format: symbol-year-month-day-call-strike

The Walt Disney Co - DIS - close: 106.45 change: -0.49

Stop Loss: 102.85
Target(s): To Be Determined
Current Option Gain/Loss: -4.9%
Average Daily Volume = 5.9 million
Entry on August 12 at $106.00
Listed on August 05, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

08/19/15: DIS actually held up better than the major indices today with a -0.45% decline versus a -0.8% drop in the S&P 500. I warned readers yesterday that DIS was likely headed to $105.00 and still believe that will happen. I expect the $105 level and technical support at the 200-dma (currently $104.35) to hold. However, Jim Cramer, on CNBC, does not think so. Today he was telling his viewers to buy DIS on a dip at the $100.00 level.

Trade Description: Disney on Sale, Buy Now

Disney (Nyse:DIS) reported earnings last night and beat the street with earnings of $1.45 compared to estimates for $1.42. Today shares are down -$11 to $110 and erasing 85 points off the Dow. This is a major buying opportunity.

Disney posted $13.1 billion in revenue compared to estimates for $13.2 billion. That minor miss was not the reason for the huge decline in the stock. Disney said revenues in its cable products rose +5% BUT they had seen some pressure from online streaming. Subscription growth to the ESPN cable bundle had slowed, not declined, just slowed.

There are multiple reasons. There are no major sporting events this summer like the World Cup, Olympics, etc. Some consumers are cutting the cord to cable because they are now getting their TV programming from Netflix, Hulu, etc. Cable is expensive compared to the streaming options. The drop off in ESPN growth is not related specifically to Disney. CEO Bob Iger said subscriptions would pick back up in 2016 and expand sharply in 2017 thanks to a flood of sporting events due to come online next year.

Disney has already purchased the rights to nearly every sporting event available in the next five years but the old contracts with the prior rights holders have yet to expire. As those contracts expire and the new Disney contracts begin the content on ESPN will surge.

This slowdown in ESPN growth should be ignored. This is just a small part of the Disney empire and everything else is growing like crazy. Parks and resorts revenue rose +4%. Consumer products revenue rose +6% thanks to Frozen, Avengers and Star Wars merchandise. The only weak spot was interactive gaming, which declined -$58 million to $208 million. Disney expects that to rebound in Q4 as new games are released and holiday shopping begins.

The real key here is the theme parks, cruises and most of all the movie franchises. They have five Star Wars movies in the pipeline and the one opening this December is expected to gross $2.2 billion and provide Disney with more than $1 billion in profits. This is just one of the blockbusters they have scheduled.

Analysts are claiming Disney shares could add 25% before the end of December because of their strong movie schedule and coming attractions. The Avengers movie in April was a hit and added greatly to their Q2 earnings. However, that will just be a drop in the bucket compared to the money they are going to make on the Star Wars reboot in December. That is the first of five Star Wars movies on the calendar. Remember, Disney now has Marvel, Pixar and Star Wars (Lucasfilm) all under the same roof.

Disney Movie Schedule (partial)

Dec. 18, 2015 - "Star Wars: Episode VII - The Force Awakens"
2016 - "The Incredibles 2"
2016 - "Frozen" sequel
April 29, 2016 - "Captain America: Civil War"
June 17, 2016 - "Finding Dory"
Dec. 16, 2016 - "Star Wars Anthology: Rogue One"
May 26, 2017 - "Star Wars: Episode VIII"
June 16, 2017 - "Toy Story 4"
Late 2017 - "Thor: Ragnarok"
May 4, 2018 - "Avengers: Infinity War - Part I"
2018 - "Untitled Star Wars Anthology Project"
May 3, 2019 - "Avengers: Infinity War - Part II"
2019 - "Star Wars: Episode IX"

Disney was recently upgraded with a new price target of $150. The drop to $110 on Wednesday is a buying opportunity. Shares have risen from $90 in February to $122 on Tuesday. The $110 level is major support and should be bought. This is right at the 100-day average.

Tonight we are suggesting a trigger to buy calls at $111.65 with an initial stop loss at $106.85.

On August 11th we added a buy-the-dip trigger at $106.00 with an initial stop loss at $103.00 and listed the October $110 call.

- Suggested Positions -

Long OCT $110 CALL (DIS151016C110) entry $2.06

08/12/15 new stop @ 102.85
08/12/15 triggered at $106.00
08/11/15 Added a buy-the-dip trigger at $106.00 with a stop at $103.00 and listed the October $110 call
Option Format: symbol-year-month-day-call-strike

General Dynamics - GD - close: 152.75 change: -0.53

Stop Loss: 147.50
Target(s): To Be Determined
Current Option Gain/Loss: -11.1%
Average Daily Volume = 1.3 million
Entry on August 19 at $153.55
Listed on August 17, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

08/19/15: GD hit our entry trigger today. The market's afternoon rally, following the FOMC minutes, saw GD surge to a new high. Shares hit our suggested entry point at $153.55. Unfortunately, the market and GD did not maintain their gains.

At this time I would wait for a new relative high above today's intraday peak of $153.76 before initiating positions.

Trade Description: August 17, 2015:
Worries over the U.S. sequestration defense cuts are in the rear view mirror for companies like GD. They have adjusted and now they are adding international customers to account for slower defense spending growth from the U.S. The stock has delivered strong gains over the last few years and the relative strength continues this year. The S&P 500 index is up +2.1% year to date. The defense and aerospace ETF (ITA) is up +5.8%. Yet shares of GD are up +11% and just closed at a new all-time high.

GD is considered part of the industrial goods sector. The company is a huge aerospace and defense company. They have four significant segments: aerospace, combat systems, information systems, and marine systems (ships and submarines). The defense industry in the U.S. has been saddled with significant budget cuts due to the 2011 sequestration deal that will shave $500 billion from U.S. defense spending from 2012 through 2021. The industry has managed to thrive in spite of these budget cuts.

GD has beaten Wall Street's earnings estimates several quarters in a row. They have also managed to beat analysts revenue estimates the last three quarters in a row. GD's most recent earnings report was July 29th. Management announced earnings of $2.27 per share, which was 22 cents better than expected. It also represents earnings growth of +44% from a year ago. Revenues were up +5.5% to $7.88 billion, above estimates. Margins improved +1% to 13.7%. Furthermore GD management raised their 2015 earnings guidance to $8.70-8.80 per share, above Wall Street estimates. GD's backlog was $70 billion at the end of the second quarter.

We all know that the world isn't getting any safer and the major defense contractors have been working on boosting their overseas sales just in case the U.S. decides to cut defense spending again. Considering the current state of world affairs with a growing military rival in China, a new cold war brewing with Russia, and an openly hostile ISIS, defense spending should stay healthy.

GD has a very active stock buyback program. They purchased 7.5 million shares last quarter. The big buyback is one reason Goldman Sachs listed GD as one of their top five favorite stocks recently.

Shares of GD have been marching higher since they bottomed in April this year. The point & figure chart is bullish and forecasting a $181.00 target. The last couple of weeks have seen GD consolidating sideways after shares spiked higher on its July 29th earnings report. Today saw GD set a new closing high and it's about to breakout past its intraday high. Tonight we are suggesting a trigger to buy calls at $153.55.

- Suggested Positions -

Long NOV $160 CALL (GD151120C160) entry $2.70

08/19/15 triggered @ $153.55
Option Format: symbol-year-month-day-call-strike

Lennox Intl. - LII - close: 125.96 change: -0.77

Stop Loss: 121.45
Target(s): To Be Determined
Current Option Gain/Loss: +65.7%
Average Daily Volume = 427 thousand
Entry on August 12 at $121.60
Listed on August 11, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

08/19/15: The market's widespread weakness today finally slowed the rally in LII. Shares lost -0.6% and snapped a nine-day winning streak. The stock remains short-term overbought here. We will raise the stop loss to $121.45. More conservative traders may want to take some money off the table here.

No new positions at this time.

Trade Description: August 11, 2015:
Record profits and relative strength have made a recipe for new highs in LII. Shares have been outperforming the market with a +27% gain year to date.

LII is in the industrial goods sector. According to the company, "Lennox International Inc. is a global leader in the heating, air conditioning, and refrigeration markets."

The company has beaten Wall Street's earnings estimates in three of the last four quarterly reports. Although according to the IBD, LII's Q3 earnings miss was the first drop in three years.

LII's most recent report was July 20th when they announced their Q2 results. Earnings were up +22% from a year ago to $1.84 per share, which was three cents above estimates. Revenues improved +3.3% to $992.5 million, also better than expected. Management raised their full year 2015 earnings guidance.

LII's Chairman and CEO Todd Bluedorn offered bullish comments on his company's performance,

"Lennox International posted record profits in the second quarter with margin expansion across all three of our businesses. Total segment profit margin for the company expanded 120 basis points from the prior-year quarter to a record 13.5%. In our Residential business, we hit record revenue, margin and profit levels. Residential revenue was up 6% at constant currency, and margin expanded 190 basis points to 18.0%. In Commercial, segment profit reached new highs while revenue and margin set second-quarter records. Commercial revenue was up 10% at constant currency, and margin expanded 80 basis points to 17.0%. North America national account business resumed growth as expected, with revenue up high single-digits, and we continued to see success in non-national account business with mid-teens revenue growth. In Refrigeration, revenue was up 4% at constant currency, driven by high single-digit growth in North America. Refrigeration margin ticked up 10 basis points to 7.2%, including headwinds from negative foreign exchange and the mid-2014 repeal of the carbon tax on refrigerant in Australia."
The stock market rewarded LII shareholders with a huge pop from about $107 to $116 on this earnings news. Shares have been very resilient since this earnings announcement. Investors have been buying the dips and LII has avoided a lot of the market's volatility.

Yesterday LII managed to breakout from its post-earnings sideways consolidation and rally past resistance near $120.00. LII displayed relative strength again today. The point & figure chart is bullish and forecasting at $136.00 target. Tonight we are suggesting a trigger to buy calls at $121.60.

- Suggested Positions -

Long SEP $125 CALL (LII150918C125) entry $1.75

08/19/15 new stop @ 121.45
08/18/15 More conservative traders may want to take some money off the table here with our call option up +88%.
08/15/15 new stop @ 119.85
08/12/15 triggered @ $121.60
Option Format: symbol-year-month-day-call-strike

McCormick & Co. - MKC - close: 83.51 change: -1.24

Stop Loss: 82.45
Target(s): To Be Determined
Current Option Gain/Loss: -54.8%
Average Daily Volume = 608 thousand
Entry on August 14 at $85.05
Listed on August 12, 2015
Time Frame: Exit PRIOR to September earnings expiration
New Positions: see below

08/19/15: The market's weakness today helped fuel some profit taking in MKC. Shares broke down under their 10-dma. The stock underperformed with a -1.4% decline. Shares are nearing prior support at the $83.00 mark.

No new positions at this time.

Trade Description: August 12, 2015:
MKC sales its products around the world. Currency headwinds have been a major issue this year. Yet investors seem to be looking past the currency issue and have driven MKC to a +13.9% rally in 2015, outperforming all the major U.S. indices.

MKC is in the consumer goods sector. According to the company, "McCormick & Company, Incorporated is a global leader in flavor. With $4.2 billion in annual sales, the company manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the entire food industry – retail outlets, food manufacturers and foodservice businesses. Every day, no matter where or what you eat, you can enjoy food flavored by McCormick."

Looking at their last three earnings reports MKC has managed to beat Wall Street's estimates on the bottom line three quarters in a row. Yet revenue growth has taken a hit due to currency headwinds. Management offered soft guidance in January when they reported their Q4 results. They lowered guidance in March when MKC reported its Q1 results. Yet after their most recent report MKC raised their full year 2015 earnings guidance, which might suggest the slowdown has passed.

Looking at their Q2 report in more detail (announced on July 1st) the company delivered earnings of $0.75 per share. That's a +17% rise from a year ago and seven cents better than expected. Revenues were down -0.9% to $1.02 billion, which missed expectations. When you back our currency headwinds their revenues were up +5%.

Investors have been buying the dips in MKC for months. The rally accelerated in the last couple of weeks with MKC surging to new all-time highs. Traders were quick to buy the dip today at short-term technical support on the 10-dma. We suspect MKC's relative strength will continue. The point & figure chart is forecasting at $95.00 target.

Tonight we are listing a trigger to buy calls at $85.05.

- Suggested Positions -

Long SEP $85 CALL (MKC150918C85) entry $1.55

08/14/15 triggered @ $85.05
Option Format: symbol-year-month-day-call-strike

Starbucks Corp. - SBUX - close: 57.59 change: -0.24

Stop Loss: 54.40
Target(s): To Be Determined
Current Option Gain/Loss: +41.3%
Average Daily Volume = 7.2 million
Entry on August 10 at $56.00
Listed on August 06, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

08/19/15: SBUX was not immune to the market's broad-based decline on Wednesday but shares held up well. Traders bought the dip this morning. If the market accelerates lower then we can watch for support in the $55-56 area.

Trade Description: August 6, 2015:
Investors seem spooked today. There was widespread selling and a lot of the profit taking was focused on recent winners. Tim Seymour, managing partner at Triogem Asset Management, said traders were "cutting their flowers and keeping their weeds" today. SBUX looks like one of those cut flowers and we want to be ready to catch it when it stops falling.

Here is tonight's trade description:

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.

Five-Year Plan

In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX is having a great 2015 so far with the stock up +39% (that's after today's -3.0% decline), outperforming the broader market. The stock accelerated following its Q1 2015 earnings results in January and again when they reported in April.

It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week.

SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years. Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

The trend of earnings pops continued in July with shares gapping up to new all-time highs following its Q2 report on July 23rd. Earnings were $0.42 per share, a penny above estimates. Revenues were up +17.5% to $4.88 billion, just a hair above expectations. Global same-store sales were up +7% and their non-GAAP operating margin improved 100 basis points to 19.5%. Management is still guiding 2015 revenues to rise +17% in the $19.1-19.4 billion range.

The stock has been extremely resilient until today. We suspect that today's decline will see some follow through lower but investors will likely buy the dip at SBUX's up trend. Shares should find support in the $56.00 area. Tonight we are listing a buy-the-dip entry trigger at $56.00. We'll try and limit our risk with a stop loss just below the 50-dma (start at $54.40).

- Suggested Positions -

Long OCT $60 CALL (SBUX151016C60) entry $0.63

08/10/15 triggered on a dip at $56.00
08/08/15 Added a second entry trigger to buy calls at $57.65 (in addition to our buy-the-dip trigger at $56.00)
Option Format: symbol-year-month-day-call-strike

Stryker Corp. - SYK - close: 104.53 change: +0.22

Stop Loss: 101.75
Target(s): To Be Determined
Current Option Gain/Loss: +46.0%
Average Daily Volume = 1.1 million
Entry on July 29 at $102.15
Listed on July 28, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

08/19/15: SYK continues to show relative strength. Traders bought the dip at $102.95 this morning and SYK rebounded to new highs before paring its gains.

The simple 20-dma has been support in the past. Today the 20-dma is at $102.10. Tonight we will adjust the stop loss up to $101.75.

Trade Description: July 28, 2015:
The healthcare sector has consistently delivered a strong bullish performance for the last three years in a row. When you think of healthcare you might think health insurance providers. They are not the only healthcare stocks in rally mode. Tonight's candidate is in the medical equipment and supplies industry.

According to the company, "Stryker is one of the world's leading medical technology companies and together with our customers, we are driven to make healthcare better. The Company offers a diverse array of innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine, which help improve patient and hospital outcomes. Stryker is active in over 100 countries around the world."

Late last year the company's earnings growth was lackluster at best but the company has turned things around the last couple of quarters. SYK reported their Q1 results on April 21st. They beat the bottom line estimate. Revenues were only in-line with estimates. Yet management raised the low-end of their 2015 sales and earnings guidance. You can see the reaction to the stock price in April.

Their most recent earnings report was July 23rd. Wall Street was expecting Q2 earnings of $1.17 per share on revenues of $2.41 billion. SYK beat both estimates with earnings growth of +11% to $1.20 per share. Revenues were up +2.9% to $2.43 billion. On a constant currency basis their sales were up +7.6%.

SYK management raised their organic growth forecast to +5.5% to +6.5%. They raised both their Q3 and 2015 earnings forecast above analysts' estimates. SYK now expects full year earnings in the $5.06-5.12 range versus consensus estimates at $5.03 per share. Analyst reaction has been positive with several price target upgrades into the $107-110 range. The point & figure chart is bullish and currently forecasting at $111.00 target.

We like how SYK displayed relative strength last week and resisted most of the market's sell-off (prior to their earnings report). The better than expected Q2 results launched SYK to new all-time highs. Traders bought the dip this morning and today is a new all-time closing high for SYK. Tonight we are suggesting a trigger to buy calls at $102.15.

- Suggested Positions -

Long SEP $105 CALL (SYK150918C105) entry $1.13

08/19/15 new stop @ 101.75
08/01/15 new stop @ 99.85
07/29/15 triggered @ $102.15
Option Format: symbol-year-month-day-call-strike

Teva Pharmaceuticals - TEVA - close: 69.57 change: +0.54

Stop Loss: 68.20
Target(s): To Be Determined
Current Option Gain/Loss: -25.2%
Average Daily Volume = 5.4 million
Entry on August 04 at $70.25
Listed on August 03, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

08/19/15: Traders were in a buy-the-dip mood with TEVA today. The stock bounced near last week's lows in the $68.50 area and rallied up to short-term, round-number resistance at $70.00.

I would be tempted to buy calls in TEVA again on a rally past $70.25.

Trade Description: August 3, 2015:
The combination of M&A news and improving earnings results has been a win-win for shares of TEVA. The stock recently soared to new all-time highs on some key headlines in the last several days.

TEVA is in the healthcare sector. They're part of the drug manufacturing industry. According to the company, "Teva Pharmaceutical Industries Ltd. is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world's largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. Teva integrates its generics and specialty capabilities in its global research and development division to create new ways of addressing unmet patient needs by combining drug development capabilities with devices, services and technologies. Teva's net revenues in 2014 amounted to $20.3 billion."

TEVA's most recent earnings report was July 27th. Analysts were expecting a profit of $1.29 per shares for TEVA's Q2 results. The company delivered $1.43 per share. Revenues fell -1.5% to $4.97 billion but that was actually better than expected. TEVA's management then raised their 2015 guidance from $5.05-5.35 per share to $5.15-5.40 compared to Wall Street's estimate at $5.21.

If beating earnings and raising guidance wasn't enough to drive the stock higher TEVA also announced major acquisition news. TEVA had been trying to buy British drug firm Mylan (MYL) with an unsolicited bid. Meanwhile MYL is trying to buy Perrigo (PRGO). MYL didn't seem interested in being acquired by TEVA and actually adopted a poison pill strategy to make it less attractive to hostile takeovers.

On July 27th TEVA announced they had dropped their bid for MYL and instead announced a deal to buy Allergan's (AGN) generic drug business for $40.5 billion. TEVA will pay $33.75 billion in cash and $6.75 billion in stock, giving AGN a 10% stake in TEVA. They expect the deal to close in the first quarter of 2016.

According to a Reuters article, "Teva, which will gain a portfolio of more than 1,000 products, forecast a double-digit boost to adjusted earnings per share in 2016 and a more than 20 percent benefit in years two and three after closing the deal. It expects cost synergies and tax savings of $1.4 billion annually by the third anniversary from efficiencies in operations, manufacturing, and sales and marketing."

Wall Street applauded the deal with AGN and shares of TEVA soared from $62 to $72 in a single day.

TEVA has continued its M&A with another story out today. This morning, before the opening bell, TEVA announced it will purchase a 51% stake in a privately-held, genomic-analysis company, Immuneering Corporation. According to the press release "Immuneering uses advanced proprietary techniques to identify hidden signals and biological insights across an array of genetic, genomic, and proteomic data that can direct research for enhanced discovery, development and clinical success." The two companies have worked together before. Financial terms were not disclosed.

The AGN deal has gotten Wall Street's seal of approval. Several analyst firms have upgraded TEVA since then with multiple price target upgrades including: $82 from Deutsche Bank, $82 from Argus, $85 from RBC, $85 from Morgan Stanley, $86 from Citigroup. Just today J.P.Morgan restarted coverage on TEVA with an "overweight" and an $82 target. The point & figure chart is bullish and forecasting a long-term target of $98.00 for TEVA.

Shares of TEVA saw a $4.00 pullback but traders have started buying the dip. We want to hop on board if this bounce continues. Tonight we're suggesting a trigger to buy calls at $70.25.

- Suggested Positions -

Long SEP $70 CALL (TEVA150918C70) entry $2.02

08/15/15 new stop @ 68.20
08/04/15 triggered @ $70.25
Option Format: symbol-year-month-day-call-strike

Tempur Sealy Intl. - TPX - close: 78.04 change: -0.09

Stop Loss: 74.25
Target(s): To Be Determined
Current Option Gain/Loss: -20.3%
Average Daily Volume = 711 thousand
Entry on August 17 at $78.25
Listed on August 15, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

08/19/15: TPX dipped to short-term technical support at its 10-dma this morning. Shares managed a minor bounce and closed essentially unchanged on the session.

I am still suggesting a rally past $78.80 before considering new positions.

Trade Description: August 15, 2015:
TPX is turning out to be one of the better performing stocks this year. The S&P 500 index is only up +1.6% in 2015. Yet TPX has soared +41%. That's because the company has been delivering with its earnings results.

If you are not familiar with TPX they are in the consumer goods sector. According to the company, "Tempur Sealy International, Inc. (TPX) is the world's largest bedding provider. Tempur Sealy International develops, manufactures and markets mattresses, foundations, pillows and other products. The Company's brand portfolio includes many of the most highly recognized brands in the industry, including Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturepedic®, Optimum® and Stearns & Foster®. World headquarters for Tempur Sealy International is in Lexington, KY."

Back in February this year shares of TPX plunged from about $56.00 down to $49.00 when the company warned and lowered their earnings and revenue guidance for all of 2015. This may be a case of setting expectations with an under promise and over deliver strategy.

Looking at TPX's recent earnings results they have beaten Wall Street's estimates on both the top and bottom line the last three quarters in a row. They've actually raised their 2015 earnings guidance the last two quarterly reports.

TPX's most recent report was July 30th. The company's Q2 profit swung from a loss a year ago to a profit of $0.53 per share. That was eight cents better than expected. Their adjusted net income was up +38.8% from a year ago and up +49% on a constant currency basis. Revenues were up +6.9% to $764.4 million, above expectations. Gross margins improved +140 basis points to 38.9%. TPX said they saw double digit sales growth in both North America and internationally (when you back out currency headwinds). Management raised their 2015 earnings guidance from $2.80-3.15 per share to $3.00-3.20.

Shares of TPX surged on this bullish outlook and rallied toward $78.00. The last two weeks have seen TPX consolidate sideways under this new resistance at $78.00. Shares have been relatively resistant to the market's volatile swings in August. If shares can breakout past $78 we could see TPX make a run towards its all-time high near $87.50 set in April 2012. The point & figure chart is more optimistic and forecasting at $95.00 target.

Tonight we are suggesting a trigger to buy calls at $78.25. Plan on exiting prior to TPX's earnings report in late October.

- Suggested Positions -

Long DEC $85 CALL (TPX151218C85) entry $3.20

08/17/15 triggered @ $78.25
Option Format: symbol-year-month-day-call-strike

Under Armour, Inc. - UA - close: 100.06 change: -0.30

Stop Loss: 95.65
Target(s): To Be Determined
Current Option Gain/Loss: +16.5%
Average Daily Volume = 2.3 million
Entry on July 28 at $97.55
Listed on July 27, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

08/19/15: UA oscillated on either side of the $100.00 level and eventually settled on this round-number support-resistance magnet.

No new positions at this time.

FYI - UA's upcoming stock split - UA is hosting a special stockholder meeting on August 26th, 2015 to vote on its stock split plans. UA's upcoming split is different than normal because the company is creating a new class of stock - Class C shares. If you hold Class A or Class B shares then you'll receive one new share of Class C. Essentially this is a two-for-one stock split but the new Class C shares will not have any voting rights and will trade under a different stock symbol. Why is UA pursuing this more complicated process for what is in effect a 2:1 split? The answer is CEO Kevin Plank. Class A shares have one vote per share. Class B shares have 10 votes per share. Plank owns most of Class B shares and wants to maintain control of UA.

Trade Description: July 27, 2015:
UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), 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. The Under Armour Connected Fitness platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it's actively fighting for market share and recently overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but they saw growth of +32%.

UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance. UA reported their 2014 Q4 results on February 4th. The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

There was a steady stream of analysts raising their price targets on UA after its February earnings report. The company's most recent earnings report was April 21st when UA announced Q1 results. After raising guidance back in February the company reported earnings of $0.05 per share, which was in-line with Wall Street's new estimates. Revenues were up +25.4% to $804.9 million, which beat expectations.

UA management raised their outlook again. They expect 2015 operating income to improve +13-to-15%. UA expects 2015 revenues to rise +23% to $3.78 billion.

The company delivered a repeat performance when they did it again with their Q2 earnings on July 23rd. Analysts were expecting a profit of $0.05 per share on revenues of $761.7 million. UA beat both estimates with a profit of $0.07 per share. Revenues were up +28.5% to $783.5 million. Management raised their 2015 revenue guidance from $3.78 billion to $3.84 billion. That's above analysts' estimates of $3.83 billion.

Wall Street reacted to UA's Q2 report with a wave of price target upgrades. Several firms upped their target on UA into the $105-114 range. Naturally the stock rallied on this bullish earnings report and the analyst outlook. The stock soared past resistance near $90.00. More importantly UA has managed to maintain these gains in the face of a widespread market sell-off. We like that kind of relative strength.

Tonight we are suggesting a trigger to buy calls at $97.55. We'll try and limit our risk with an initial stop loss at $93.65.

- Suggested Positions -

Long SEP $100 CALL (UA150918C100) entry $2.66

08/06/15 new stop @ 95.65
08/01/15 new stop @ 94.65
07/28/15 triggered @ $97.55
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 63.53 change: +0.02

Stop Loss: 65.25
Target(s): To Be Determined
Current Option Gain/Loss: +45.1%
Average Daily Volume = 2.0 million
Entry on July 24 at $66.80
Listed on July 23, 2015
Time Frame: Exit PRIOR to earnings in late September
New Positions: see below

08/19/15: BBBY spent another day churning sideways in the $63-64 zone. There is no change from my recent comments.

More conservative traders may want to adjust their stop loss lower again. I am not suggesting new positions at this time.

Trade Description: July 23, 2015:
This year is not shaping up very well for bullish investors in BBBY. The stock is down -11.6% year to date. The trouble started with its earnings report back in January.

If you are not familiar with BBBY they are in the services sector. According to the company, "Bed Bath & Beyond Inc. and subsidiaries (the "Company") is a retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in store, online or through a mobile device.

The Company has the developing ability to have customer purchases picked up in store or shipped direct to the customer from the Company's distribution facilities, stores or vendors. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare and other industries.

Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond. Shares of Bed Bath & Beyond Inc. are traded on NASDAQ under the symbol "BBBY" and are included in the Standard and Poor's 500 and Global 1200 Indices and the NASDAQ-100 Index. The Company is counted among the Fortune 500 and the Forbes 2000."

On January 8th BBBY reported its 2014 Q3 results. Earnings were in-line with estimates but revenues missed. Management lowered their same-store sales guidance. The stock plunged the next day. A few weeks later BBBY had managed to recover but the rally failed producing a bearish double top.

The trouble continued in April. BBBY had rallied up into its earnings report and then disappointed. Their 2014 Q4 results were in-line with estimates at $1.80 a share. Yet revenues missed estimates again. They lowered their Q1 guidance. The stock plunged the next day.

On June 24th BBBY reported earnings of $0.93 per share. That was down -1% from a year ago and a penny worse than expected. Revenues were only up +3% to $2.74 billion, which met expectations. Yet comparable store sales were +2.2% when Wall Street was expecting +2.5%. Management lowered their Q2 guidance. Guess what happened the next day? Yup, the stock dropped. Traders immediately sold the bounce and BBBY now has a clearly defined bearish trend of lower highs and lower lows. One has to wonder how bad would BBBY's Q1 results have been had the company not spent $385 million buying back stock last quarter?

In summary, BBBY has been missing Wall Street's revenue or earnings estimates the last three quarters in a row. They have warned twice and same-store sales are disappointing. Technically shares have broken down below multiple layers of support. The company is more of a home furnishing store so back to school season may not give them much of a boost. The point & figure chart is bearish and forecasting at $60.00 target. The last few days have seen some support near $67.00. We are suggesting a trigger to buy puts at $66.80.

- Suggested Positions -

Long NOV $65 PUT (BBBY151120P65) entry $2.55

08/06/15 new stop @ 65.25
08/01/15 new stop @ 66.25
07/25/15 new stop @ 67.65
07/24/15 triggered @ $66.80
Option Format: symbol-year-month-day-call-strike

Jack In The Box - JACK - close: 86.13 change: +0.19

Stop Loss: 88.55
Target(s): To Be Determined
Current Option Gain/Loss: -18.0%
Average Daily Volume = 639 thousand
Entry on August 19 at $84.75
Listed on August 18, 2015
Time Frame: Exit PRIOR to earnings in November
New Positions: see below

08/19/15: The market's drop this morning helped push JACK to new relative lows. Shares broke down under support near $85.00 and its exponential 200-dma. The stock hit our suggested entry point at $84.75. Unfortunately JACK bounced back and actually showed relative strength with a +0.2% gain on the day.

The bounce back above $85.00 worries me. At this time I would wait for a new decline beneath $85 before considering new bearish positions.

Trade Description: August 18, 2015:
Wall Street can be a fickle place. Sometimes a company seems to be doing everything right and their stock gets crushed anyway. That appears to be the case with JACK.

JACK is in the services sector. According to the company, "Jack in the Box Inc., based in San Diego, is a restaurant company that operates and franchises Jack in the Box® restaurants, one of the nation's largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Grill®, a leader in fast-casual dining, with more than 600 restaurants in 47 states, the District of Columbia and Canada."

JACK reported its 2015 Q3 results on August 5th. Earnings rose +17% from a year ago to $0.75 per share. That beat estimates by three cents. Revenues were up +3.2% to $359.5 million, which is essentially in-line with estimates. Their margins improved 270 basis points to 21.8%. Their Jack in the Box business saw comparable store sales of +7.3% versus +2.4% a year ago. Qdoba's comps were +7.7% vs. +7.5% a year ago. That's significantly above rival Chipotle Mexican Grill's comparable store sales, which only rose +4.3%. Management said their catering business for Qdoba saw double-digit gains. They even raised their fiscal year 2015 earnings guidance from a range of $2.90-3.00 a share to $2.97-3.03 per share. Wall Street was estimating $2.99.

In spite of all of these positives JACK's stock price was hammered the next day on August 6th with a plunge from $97 to almost $89 intraday. Now two weeks later shares of JACK are trading down -11% from its pre-earnings high. Why are shares of JACK being punished? That's a really good question. The only issue I can see might be the pace of store openings for their Qdoba brand. Previously JACK was forecasting 50 to 60 new Qdobas this year. In their last earnings report that estimate dropped to 40 to 45 new Qdobas.

At the moment, it doesn't matter what the reason is. JACK has reversed lower and reversed hard. The point & figure chart has turned bearish and is now forecasting at $74.00 price target. Today saw JACK close below technical support at its simple 200-dma for the first time since November 2012. JACK looks like it's about to breakdown under key support near the $85.00 level. Tonight we are suggesting a trigger to buy puts at $84.75.

FYI: JACK will trade ex-dividend on Monday, August 24th. The quarterly dividend should be $0.30.

- Suggested Positions -

Long DEC $80 PUT (JACK151218P80) entry $3.23

08/19/15 triggered @ $84.75
Option Format: symbol-year-month-day-call-strike

Tupperware Brands - TUP - close: 54.01 change: -1.38

Stop Loss: 56.65
Target(s): To Be Determined
Current Option Gain/Loss: +55.6%
Average Daily Volume = 489 thousand
Entry on August 11 at $56.50
Listed on August 08, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

08/19/15: After a three and a half day bounce shares of TUP resumed their bearish trend. The stock accelerated lower with a -2.49% decline. If you're looking for a new entry point then a new relative low under $53.65 could be an alternative entry point.

Trade Description: August 8, 2015:
The Tupperware brand has been around for over 60 years. Yet the current version of the company was founded in 1996. They went public the same year. The stock market's huge rally off the 2009 bear-market lows saw shares of TUP surge from $11.00 per share to $97 by December 2013. Unfortunately that was the peak. TUP's stock has been sinking ever since.

TUP is in the consumer goods sector. According to the company, "Tupperware Brands Corporation is the leading global marketer of innovative, premium products across multiple brands utilizing a relationship-based selling method through an independent sales force of 2.9 million. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products through the Avroy Shlain, BeautiControl, Fuller Cosmetics, NaturCare, Nutrimetics and Nuvo brands."

It's easy to see why investors are selling TUP. The company has lowered its guidance four quarters in a row. The outlook seems to be getting worse. Revenues fell -5.2% in Q4 2014. They reported their 2015 Q1 results on April 22nd. TUP beat estimates but revenues were down -12%. They managed to beat the bottom line estimate in their Q2 report (July 22nd) but revenues were down -12.7%. Currently TUP management is expecting 2015 revenues to fall -10% to -11% from 2014.

The reaction to its Q2 results and lowered forecast sparked a sharp decline that pushed TUP to multi-year lows. There has been almost no oversold bounce. TUP tried to bounce last week and traders sold it pretty quick.

Shares displayed relative weakness on Friday with a -2.59% decline and a new multi-year closing low. The point & figure chart is bearish and forecasting at $44.00 target. Tonight we are suggesting a trigger to buy puts at $56.50. I'm listing the September puts but investors may want to go further out and give TUP even more time. There's no telling where the bottom might be.

- Suggested Positions -

Long SEP $55 PUT (TUP150918P55) entry $1.35

08/12/15 new stop @ 56.65
08/11/15 triggered @ $56.50
Option Format: symbol-year-month-day-call-strike

WESCO Intl. - WCC - close: 55.92 change: -1.03

Stop Loss: 59.35
Target(s): To Be Determined
Current Option Gain/Loss: +26.3%
Average Daily Volume = 592 thousand
Entry on August 05 at $58.40
Listed on August 04, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

08/19/15: WCC dipped to new multi-year lows before paring its losses. Even with the midday bounce WCC still underperformed the market with a -1.8% decline.

No new positions at this time.

Trade Description: August 4th, 2015:
The combination of currency headwinds and a slowing global economy has created a rough environment for WCC's business. Revenues are falling and the strong dollar only makes it worse.

WCC is in the services sector. According to the company, WESCO International, Inc. (WCC), a publicly traded Fortune 500 holding company headquartered in Pittsburgh, Pennsylvania, is a leading provider of electrical, industrial, and communications maintenance, repair and operating ("MRO") and original equipment manufacturers ("OEM") products, construction materials, and advanced supply chain management and logistic services. 2014 annual sales were approximately $7.9 billion. The Company employs approximately 9,400 people, maintains relationships with over 25,000 suppliers, and serves over 75,000 active customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers and utilities. WESCO operates nine fully automated distribution centers and approximately 485 full-service branches in North America and international markets, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.

Looking at some recent earnings reports from WCC the company has missed Wall Street's bottom line estimate three times in a row. Prior to their Q4 earnings report (January 29th), the company issued an earnings warning for their fiscal 2015 on December 17th.

WCC's Q1 report was April 23rd. They missed the EPS number by 10 cents. Revenues were only up +0.3% to $1.82 billion but that missed estimates. Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "We had a challenging start to the year where reduced demand in the industrial market, winter weather impacts, and foreign exchange headwinds weighed heavily on our results in the first quarter. While organic sales per workday grew 3%, sales momentum decelerated through the quarter. Gross margin was down versus prior year but was flat sequentially."

Following their Q1 report WCC management lowered their 2015 guidance again from $5.20-5.60 a share down to $5.00-5.40 per share.

The situation worsened in the second quarter. WCC reported its Q2 numbers on July 23rd. Analysts were expecting a profit of $1.15 per share on revenues of $1.97 billion. WCC only delivered $1.00 per share (a -15 cent miss) and revenues plunged -4.4% to $1.92 billion. The company said their normalized organic sales fell -3.0% and foreign exchange hit them for another -3.0%. They also suffered from falling margins while expenses rose. That's not a good recipe.

Following the Q2 numbers, Mr. Engel, stated, "Our second quarter sales declined 4% reflecting continued foreign exchange headwinds and weakness in the industrial market as well as a slow seasonal start in the non-residential construction market." Management lowered their 2015 forecast yet again. This time from $5.00-5.40 down to $4.50-4.90.

The forecast for WCC is bearish and the stock is getting hammered. Shares are trading at two-year lows. It's hard to say where the next support level is. The point & figure chart is forecasting at $44.00 target. Tonight we are suggesting a trigger to buy puts at $58.40.

- Suggested Positions -

Long SEP $55 PUT (WCC150918P55) entry $0.95

08/08/15 new stop @ 59.35
08/05/15 triggered @ $58.40
Option Format: symbol-year-month-day-call-strike

Wynn Resorts Ltd. - WYNN - close: 90.25 change: -0.65

Stop Loss: 97.25
Target(s): To Be Determined
Current Option Gain/Loss: +18.5%
Average Daily Volume = 2.5 million
Entry on August 14 at $93.40
Listed on August 13, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

08/19/15: WYNN flirted with a breakdown beneath round-number support at $90.00. Shares hit $89.18 before paring their loss. WYNN could be poised for an oversold bounce. Tonight we are adjusting the stop loss down to $97.25.

Trade Description: August 13, 2015:
Casino stocks have been a bad bet this year. CZR and LVS are both down for the year. MGM seems to be an exception with a very minor gain. Yet one of the biggest losers is WYNN. Shares of WYNN are down -36% in 2015. The bear market started last year. Shares of WYNN peaked just below $250.00 in early 2014 and now they're down -60% from the highs. The catalyst for this dramatic decline is a plunge in gaming revenues from Macau.

WYNN is in the services sector. According to the company, "Wynn Resorts, Limited, owns 72.2% of Wynn Macau, Limited (www.wynnmacaulimited.com), which operates a casino hotel resort property in the Macau Special Administrative Region of the People's Republic of China. The Company also owns and operates a casino hotel resort property in Las Vegas, Nevada.

Our Macau resort is a resort destination casino with two luxury hotel towers (Wynn Macau and Encore) with a total of 1,008 spacious rooms and suites, approximately 280,000 square feet of casino space, casual and fine dining in eight restaurants, approximately 57,000 square feet of retail space, and recreation and leisure facilities, including two health clubs and spas and a pool.

Our Las Vegas operations (Wynn Las Vegas and Encore) feature two luxury hotel towers with a total of 4,748 spacious hotel rooms, suites and villas, approximately 186,000 square feet of casino space, 34 food and beverage outlets featuring signature chefs, an on-site 18-hole golf course, meeting space, a Ferrari and Maserati dealership, approximately 96,000 square feet of retail space, two showrooms, three nightclubs and a beach club."

The problems started in June 2014. China launched a nationwide crackdown on corruption. This had a huge impact on how many government officials decided to vacation and gamble in Macau. The region also saw a drop in other high rollers not wanting to be seen tossing money around. Plus the Chinese government enacted harsh no-smoking rules in Macau. There was a direct impact on gambling revenues that is still being felt today.

WYNN reported its 2015 Q1 results on April 28th. Analysts were expecting a profit of $1.33 per share on revenues of $1.17 billion. The company delivered a profit of $0.70 (big miss) and revenues plunged -27.8% to $1.09 billion. Its Macau revenues were down -37.7%. Management also announced they were reducing their quarterly dividend.

We looked at playing WYNN as a bearish candidate back in June after several bearish analyst calls on the gambling companies with exposure to Macau. A Sterne Agee analyst noted that table-only gross gaming revenues in Macau were down -46% from a year ago in the first week of June. They estimate that June 2015 will see Macau gambling revenues fall -33% to -38%. June is on track to be the 13th monthly decline in gambling revenues and the tenth month in a row of double-digit declines.

A Susquehanna Financial Group analyst also warned that the region could suffer further declines. There are rumors of an complete smoking ban and there seems to be no let up on the government's anti-corruption efforts. Meanwhile a Wells Fargo analyst is forecasting June gambling revenues in Macau to plunged -30% to -40% to about $2 billion. This would be the lowest monthly total in more than four years.

The stock saw a big bounce in early July on an upgrade but the rally didn't last. WYNN reported its Q2 results on July 29th. Analysts were forecasting $0.97 per share on revenues of $1.07 billion. WYNN missed both estimates with a profit of $0.74 as revenues plunged -26% to $1.04 billion. Their Macau business saw revenues drop -35.8%.

Believe it or not but shares of WYNN saw a relief rally on this earnings news. Maybe investors were expecting even worse numbers. Yet the rally failed the very next day. That's because the situation in Macau hasn't changed. July was the 14th month in a row of falling revenues for the casino industry.

The recent headlines regarding the Chinese government's devaluation of their currency (the yuan, a.k.a. the renminbi) could be a clue that their economy is slowing down faster than expected. That's bad news for the casino business. If the Chinese economy is retreating it would seem unreasonable to expect a recovery in the gambling business.

Shares of WYNN have plunged to key support in the $93.60-94.00 region. We are suggesting a trigger to buy puts at $93.40. A breakdown to new lows could spark the next leg lower after weeks of consolidating sideways.

Traders should note that WYNN can be a volatile stock. The most recent data listed short interest at 13.7% of the relatively small 80.8 million share float. Currently the point & figure chart is bearish and forecasting an $85.00 target.

- Suggested Positions -

Long SEP $90 PUT (WYNN150918P90) entry $3.25

08/19/15 new stop @ 97.25
08/14/15 triggered @ $93.40
Option Format: symbol-year-month-day-call-strike