Option Investor

Daily Newsletter, Monday, 8/24/2015

Table of Contents

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

Market Wrap

Could It Be Capitulation

by Thomas Hughes

Click here to email Thomas Hughes
Global woe, tepid earnings, low oil, mixed data and FOMC speculation has been weighing the market down, today it may have capitulated.


Many factors have been weighing on the market. Global woe, mixed data, Chinese currency manipulation, low oil prices, Greece and weak earnings growth have each played their part. A confused market began to sell off last week, the sell off turned into a correction and today may have reached the point of capitulation.

Futures on the major indices had been negative in early trading but nothing like what we saw going into the opening bell. A major sell-off in China was today's primary news, there were no economic releases and no earnings reports of note. The Shang Hai index fell more than -8% and closed at those levels, driven no doubt by ongoing market skittishness and government intervention. Other indices in Asia fell as well, but in the range of -4% to -5%.

Market Statistics

European markets were equally affected by the sell-off in Asia and our market last Friday. They lost -3% to -4% and were able to move up off of the lows before the end of the day. Futures trading here are home indicated an open -2.5% - 3% lower in the early part of the pre-market session. This deepened to greater than -5% by the opening bell. The open saw a rush to get out of the market with the indices gapping lower and moving down to reach indicated levels and lower within the first 5 minutes of trading. The move sparked support, as often happens on days like this, and was able to generate a bounce back rally that more than halved the initial decline.

By 10:30 the indices were hovering with losses near -2.75% and held these levels for the next hour. By early afternoon they had regained nearly all of the losses, coming within a percentage point in most cases. This level held for an hour so but eventually began to falter. Later afternoon saw the indices fall back to roughly -4.5%, nearly to the early lows but not quite, where they managed to find some buyers. A few minutes of consolidation led to another rally that sent the indices back up to close with losses of only 3.7%-3.9%.

Economic Calendar

The Economy

There was no official economic data today. There is some important data due out this week, and next week will probably be even more significant. Tomorrow we get the Case Shiller 20, Housing Price Index, New Home Sales and Consumer Confidence. Wednesday is Durable Goods, Thursday is jobless claims, Pending Home Sales and the 2nd Estimate For 2nd Quarter GDP. Friday is Personal Income and Spending, and Michigan Sentiment. GDP is expected to rise from 2.3% to 3.1%. A miss here would not help sentiment. Next week is the turn of the month, which means lots of macro data including the jobs bundle; ADP, Challenger, Claims, NFP and Unemployment.

There is no new earnings data from FactSet this week. At last report 2nd quarter earnings growth was -1% with 81% of the S&P 500 reporting. By next week another 15% or more will have reported so I expect the blended rate to go up. Ex-energy earnings growth was 5.5% with 73% of all companies beating earnings expectations. Third quarter growth was still expected to be negative, but with the likelihood of it reaching positive levels based on recent earnings trends. 2016 S&P 500 earnings growth is expected in the range of 10-12%.

Moody's Survey Of Business Confidence declined slightly but remains near the all-time high. This week's reading is 44.2, -0.3 from last week's 44.5. In his summary Moody's economist and survey creator Mark Zandi said market volatility had not yet made an impact on results and that global businesses remain upbeat. US business lead, Asian lag but all are positive. US businesses are characterized as reporting robust sales, sturdy pricing and ample credit.

The Oil Index

Oil prices sank to new lows. China has taken the fore front in the eyes of energy traders. Fear of slow down is fueling concern for demand outlook while supply and production remain high. WTI and Brent both fell more than 5% in today's action hitting new lows. No sign of a bottom is present here and without a change in supply/demand perspective oil could go much lower. At this time price outlook for 2016 has WTI trading near $50 on average.

The Oil Index gapped more than -8% lower at the open but managed to regain some of the loss before the close. Despite the drop, the index was able to make a white candle with long upper shadow and looks poised to snap back and retest my recently broken resistance line near 1,180. I say this because today's move leaves the index extremely extended, well below the short term moving average and far out side their deviation bands with only weakly bearish momentum and stochastic consistent with longer term support and highly divergent from prices. Upside targets are near 1110, 1180 and 1200. Support target is near the bottom of today's candle just above the 1,000 level.

The Gold Index

Gold prices fell about $5 but are basically holding steady above $1150. Price has snapped back on a recent rapid decline in dollar value driven primarily on FOMC outlook. Weakness in China is adding to fear of a US slowdown sparked by some of last week's data. Together they are spurring speculation of a later rather than sooner rate hike, weakening the dollar and lifting gold. Add in the volatility of global markets and the flight to safety and gold trades near a two month high. If the rate hike does get pushed back significantly then gold could trade much higher with $1180, $1200 and $1215 as targets. Data will continue to be important, so long as it remains strong we can not rule out a rate hike.

The gold miners ETF GDX fell a little over -7% in today's action. The ETF created a long black candle and broke the short term moving average with mixed indicators. The indicators are mixed but stochastic is showing a bearish cross with bullish momentum on the decline so it is possible we could see another move down to support. Regardless of today's action in gold, with it trading near $1150 and oil below $40 the miners profitability potential increases making them buy. It looks like $13.00 is support with upside resistance in the range between $15.50 and $16.50.

In The News, Story Stocks and Earnings

The dollar was a big mover in today's session. The Dollar Index DXY fell more than -2% to test recent support levels and bounced back from them. Support was met at $92.50 with a move back above the previous 7 month low a positive sign. However, both indicators are weak and weakening, supportive of at least a retest of the new low if not new lower prices. Data and FOMC outlook will be the biggest factors over the next few weeks but global woes and their possible affect on the US economy will take their toll as well.

No significant earnings reports today but there are a few to take note of this week, man of which in the retail sector. One of which is Best Buy. The consumer electronics company is expected to report $0.34 per share, down 3 cents from the previous quarter and ten cents from the comparable quarter last year. Expectations for next quarter are flat from this quarter and last year. The company has been struggling to maintain relevancy in the era of internet shopping so any signs of improvement and/or positive surprise will be welcome. Today the stock gapped lower at the open, dropping more than -5%, but regained all of the loss by end of day. This could be a sign of optimism going into tomorrow's earnings report but a new 12 month intra-day low was set and volume was light.

Toll Brothers is reporting its earnings tomorrow as well. The home builder is expected to report $.50 per share, 35% higher than last quarter and 10% above the comparable quarter last year. Based on recent housing data estimates could be light. Existing home sales was better than expected and Home Builder Confidence is at long term highs. New Home Sales data is due out tomorrow as well. Today the stock gapped lower and tested support but did not quite regain as much as the broader market. The short term moving average provided resistance and capped gains at $39.25 and left it with a loss near $38.50 at the close.

Intel was one of only a handful of S&P stocks to trade in positive territory today. At least half of those that were are tech stocks, and at least marginally connected to the semiconductor industry. Intel and others in the space have been under pressure over the past few quarters as sluggish growth and a rapidly changing environment has weighed on earnings. Today Intel opened at a new 12 month low but found support and regained all of the loss and more, on an intra-day basis at least. Intra-day volatility saw the stock up as much as it was down, leaving it with a loss more than -1% at the close of day.

The Indices

The indices moved lower right from the start and nearly just as fast were bouncing back. The bears were definitely in control but the bulls held their ground once they got into the fray. Today's action was led by the S&P 500 which closed with a loss of -3.92%. The broad market created the largest candle I've seen and broke through numerous support levels. Today's action found support above 1,850 and the low set by the correction last October. The indicators are bearish and consistent with low prices so a test of the low set today is very likely.

The NASDAQ Composite was the next biggest loser in today's action. If not for the rebound in chip makers it would have been today's loss leader. The tech heavy index created a long white candle, after gapping nearly -8% lower, with long upper and lower shadows. The upper shadow is very pronounced, revealing that selling pressure is still present, but also revealing that buying pressure is present as well. The indicators are moving lower with strong momentum convergent with prices so a retest of the lows is likely.

The Dow Jones Industrial Average shed only -3.58%, about -588 points, after falling more than 1000 points at the low of the day. Price action created a long bodied candle, black, with long lower shadow indicative of support. The indicators are bearish and pointing lower so a retest of the day's low, near 15,500, is likely. Volume is on the rise here as well, nearly triple the past 30 days average, adding weight to any signals given. Support appears to be present near 15,800, just above the low set last October.

The Dow Jones Transportation Average made the smallest decline, only -3.52%, but did not close above support levels set last fall. Some support is indicated though by the long lower shadow and rising volume levels but it may not have been reached yet. The indicators are bearish and moving lower so the new low set by the indicator could be retested in the least. So far the transports have been leading the broader market lower, if this keeps up today's action could be an ominous sign.

It was a volatile day of trading and there was not really a cause for it. Sure, there are lots of reasons to have caution but no real reason for the market to correct. The economy isn't tanking, earnings aren't in the toilet. The economy is trending higher, earnings are flat this time around but expected to grow in the next quarter or so. Too many near term and peripheral issues got the market wound up and now it is unwinding. It is no coincidence that this is happening now, we just had an expiration Friday and we are on the cups of the fall trading season and September FOMC meeting/rate hike lift off, but it is surprising how deep the correction is.

Today's move may have been sparked by capitulation. If so we could see them begin to bounce back as early as tomorrow but that may be wishful thinking. A positive sign is the level of today's volume. Volume, using the SPY S&P 500 index tracking stock as a proxy volume has been on the rise over the past three days and 4 times the previous 30 days average.

Today's move had cause. There reasons to fear. However, today's move also look over blown. Near term fears and news have caused volatility but long term trends are positive. There could be more down side but I really don't see a reason for reversal. This is most likely just another dip, a really big dip, but another dip, it'll play out and the bull market will carry on. There is a lot of data this week, GDP top of the list, with even more due out next week, including the Fed's Beige Book.

The really ominous sign is the Dow Transports. They set a new low today. The transports have been in correction for two months and led the broader market there as well. If this leadership continues we could see lower prices on the indices as well.

Until then, remember the trend!

Thomas Hughes

New Option Plays

Choose Your Own Adventure

by James Brown

Click here to email James Brown


The Walt Disney Co. - DIS - close: 95.36 change: -3.48

Stop Loss: None. No stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 8.5 million
Entry on August -- at $---.--
Listed on August 24, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: Yes, see below

Company Description

Trade Description:
We are bringing DIS back. The sell-off from its August high has been extreme. At its low today near $90.00 DIS was down -26% from its high. The retreat offers a lot of opportunity. Jump to the bottom of this play update for our entry point strategy.

Disney reported earnings on August 4th and beat the street with earnings of $1.45 compared to estimates for $1.42. The very next day shares fell -$11.00 to $110. The sell-off in DIS stock has continued thanks to a global market meltdown.

We think this pullback in the stock is way overdone. 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"

The four-week drop in DIS' stock has sent shares back to their 2015 lows. During the panic this morning investors bought the dip at round-number support near $90.00 (FYI: the February 2015 low was $90.06). When the market bounced DIS rallied more than +10% only to stall at round-number resistance at $100.00. DIS closed right in the middle of this $90-100 trading range today.

We want to be ready no matter what direction DIS moves. That's why we are listing two different entry point strategies.

Our first plan is to buy calls on a dip at $91.00 should DIS dip toward today's low. The second entry trigger is to buy calls on a breakout at $101.00 since the $100 level was resistance.

We are not listing a stop loss tonight. The market volatility has been extreme. The intraday moves in the market are a little ridiculous and nearly impossible to trade around if you're not glued to your screen and day trading. You can manage your risk by limiting your position size. We'll add a stop loss once the dust settles, likely in a couple of days.

Option strikes and entry points are listed below:


#1) Buy-the-dip trigger: If DIS hits $91.00

- Suggested Positions -

Buy the OCT $95 CALL (DIS151016C95) current ask $5.95

- or -

#2) Breakout trigger: If DIS hits $101.00

- Suggested Positions -

Buy the OCT $105 CALL (DIS151016C105) current ask $1.92
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

Wall Street Gone Wild

by James Brown

Click here to email James Brown

Editor's Note:

It was a wild day for Wall Street. Huge declines in the Chinese market overnight poured gasoline on the fire and the selling pressure around the globe turned into a frenzy.

Our FB trade was opened this morning.
We want to launch our IWM trade tomorrow morning.
TPX hit our stop loss.
All of our bearish plays have new stop losses.

Current Portfolio:

CALL Play Updates

Facebook, Inc. - FB - close: 82.09 change: -3.97

Stop Loss: No stop at the moment (See August 24th update)
Target(s): To Be Determined
Current Option Gain/Loss: +159.0%
Average Daily Volume = 27.3 million
Entry on August 24 at $77.03
Listed on August 20, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

08/24/15: It was a crazy day on Wall Street. FB was in the middle of the hurricane with a huge trading range. Shares opened at $77.03. They spiked down to $72.00 and then bounced all the way up to $87.14, which filled the gap from this morning. The bounce faded and FB settled with a -4.6% decline.

What do we do now?

In the weekend newsletter we changed our entry strategy and said buy calls at the opening bell today. We were not expecting the gap down at $77.03 but that proved to be a blessing since it negated our suggested stop loss at $81.40.

Here's what to do now. The market volatility is probably not over yet. FB could see a lot of volatile swings between the $75-85 region. We are removing our stop loss. There will be no stop for the moment. We just need to weather the storm. When the market finally settles the most popular, high-profile names like FB, will likely soar.

If you're looking for a new entry point I would suggest waiting for dips in the $72-75 region.

Trade Description:
Facebook needs no introduction. It is the largest social media platform on the planet. As of June 30th, 2015 the company reported 1.49 billion monthly active users and 968 million daily active users. If FB were a country that makes them the most populous country on the planet. China has 1.35 billion while India has 1.25 billion people.

Earlier this year (March) the company announced a new mobile payment service through FB's messenger app. The new service will compete with similar programs through PayPal, Apple Pay, and Google Wallet.

Meanwhile business at FB is great. According to IBD, FB's Q4 earnings, announced in January, were up +69% from a year ago. Revenues were up +49%. The company released their Q1 results on April 22nd. Earnings were up +20% to $0.42 per share, which beat estimates. Revenues were up +41.6% to $3.54 billion in the first quarter.

FB's Q2 results, announced July 29th, were also better than expected. Earnings were $0.50 per share, which was three cents above estimates. Revenues surged +39% to $4.04 billion, above expectations. Daily active users were up +17%. Mobile daily active users were up +29%. Monthly actives were up +13%. Wall Street expects income to surge next year with +12% profit growth in 2015 but +32% profit growth in 2016.

FB continues to see growth among its niche properties. The company bought Instagram for $1 billion in 2012. Last late year Instagram surpassed Twitter with more than 300 million active users. FB is also a dominant player in the messenger industry with more than 600 million users on WhatsApp and 145 million users on Facebook Messenger.

FB has not yet started to truly monetize its WhatsApp and Messenger properties. It's just now starting to include ads in Instagram. Eventually, with audiences this big, FB will be able to generate a lot of cash through additional advertising. On the subject of Instagram advertising, FB just released the advertising API for the photo-sharing service in August 2015. The API or application programming interface will allow third-party marketers to plug into the system to buy advertising. Instagram could soon rival Google and Twitter for the online ad market. According to EMarketer, Instagram will surpass Google and Twitter for U.S. mobile display ad revenue by 2017.

Since we are talking about advertising, this year has seen FB jump into the video ad market with both feet and it's off to a strong start. FB claims that it's already up to four billion video views a day. They had 315 billion video views in Q1 2015. That's pretty significant. YouTube had 756 billion video views in Q1 but YouTube has been around for ten years (FYI: YouTube is owned by Google). FB has only recently focused on video.

Wall Street is growing more optimistic as FB develops its blooming video ad business, its Instagram business, and messaging properties. In the last several weeks the stock has seen a number of price target upgrades. Bank of America upped their FB price target from $95 to $105. Cantor Fitzergerald upped theirs to $100. Brean Capital raised theirs to $108. Piper Jaffray upgraded their FB target to $120.

After surging to new highs in mid July shares of FB had been consolidating sideways in the $92-99 zone. The stock broke down through the bottom of that trading range today with a -4.98% plunge toward technical support at the simple 50-dma. The broader market looks very vulnerable right now with the S&P 500, the NASDAQ composite, and the small cap Russell 2000 all piercing key support levels with today's sell-off. If this market weakness continues we want to take advantage of it.

Stocks tend to overreact to big market moves, especially to the downside. FB is no exception. When traders panic they sell everything. We want to be ready to buy FB when it nears support. Prior resistance near $85-86 should be new support. Tonight we are suggesting a buy-the-dip trigger to buy FB calls at $85.50. If triggered we'll start with a stop at $81.40, just below the simple 200-dma.

- Suggested Positions -

Long OCT $90 CALL (FB151016C90) entry $1.05

08/24/15 Strategy Update = remove the stop loss. Expect more volatility
08/24/15 Trade opens. FB gapped down at $77.03.
08/22/15 Adjusted entry point. FB missed our buy-the-dip trigger at $85.50 by a few cents on Friday. We want to buy calls at the opening bell on Monday morning, August 24th.
Option Format: symbol-year-month-day-call-strike

iShares Russell 2000 ETF - IWM - close: 110.54 change: -4.49

Stop Loss: No stop at the moment (See August 24th update)
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 31 million
Entry on August -- at $---.--
Listed on August 22, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: Yes, see below

08/24/15: The stock market went a little crazy today. Huge declines in China fueled further weakness across the global markets. The U.S. market gapped open lower and plunged. The IWM opened lower at $109.51 and dropped to $108.26 before bouncing all the way back to almost $115 (filling the gap down) and then rolling over. It was a roller coaster ride for traders.

We suspect the worst of the selling pressure is over. Everyone's stop losses have been hit. Stocks should find a short-term bottom soon. Therefore, tonight we are adjusting our entry point strategy on the IWM. We want to buy calls at the opening bell tomorrow. We do expect more volatility so to avoid getting stopped out prematurely we are removing the stop loss. You can adjust your risk by adjusting your trade size.

NOTE: We are adjusting our option strike to the November $115 calls.

Trade Description: August 22, 2015:
Stocks are getting crushed. Worries about a slowing Chinese economy worsened this week. This China concern combined with uncertainty about the Federal Reserve raising rates was enough of a catalyst to spark a serious sell-off. The U.S. market just experienced its worst weekly decline in more than four years.

Friday's action looks like a capitulation sell-off. Volume soared. It was the heaviest volume day of the year. Most of that volume was down volume. The S&P 500 posted zero new highs on Friday. All ten sectors were in the red. The two-day (Thursday-Friday) decline has pushed all of the major U.S. indices into negative territory for 2015 (although the NASDAQ composite is only -0.6% year to date).

The Dow Jones Industrial Average and the NASDAQ-100 index are both in correction territory, which is a decline of more than -10% from its highs. The small cap Russell 2000 index also hit correction territory on Friday. The tone on Friday was fearful with the volatility index (VIX), a.k.a. the fear gauge, soaring +46% to a new high for 2015. One CNBC commentator described the action on Friday as investors just "puking" up stocks to get out of the market.

According to 18th century British nobleman Baron Rothschild, "The time to buy is when there's blood in the streets." We think Friday's market sell-off qualifies as a "bloody" day for stocks.

Did you notice that the Dow Industrials, the NASDAQ composite, and the S&P 500 were all down -3.1% (or worse) but the small cap Russell 2000 index was only down -1.3% on Friday? This relative strength is a reflection of investors' fears. If China is the bogeyman then no one wants big multi-nationals that do a lot of business overseas. Small cap companies tend to be more U.S. focused. They do less business overseas and should have less exposure to China or a rising U.S. dollar.

Tonight we are suggesting a bullish trade to buy calls on the IWM, which is the small cap Russell 2000 ETF. The afternoon peak on Friday was $116.66 for the IWM. We are suggesting a trigger to buy calls if the IWM trades at $116.85 or higher.

Please note that this is just a trade. We are not calling a bottom for the stock market. On a short-term basis stocks are very oversold and due for a bounce. The big cap indices (S&P 500, NASDAQ, and Dow Industrials) all closed on their low for the day. Normally that's a bearish indication for the next trading day. There is a very good chance that stocks see another spike lower on Monday morning before bouncing. That's one reason why we are suggesting a trigger to buy IWM calls on a bounce.

Buy calls at the opening bell tomorrow.

- Suggested Positions -

Buy the NOV $115 CALL (IWM151120C115) current ask $3.65 >
option price is a current quote and not a suggested entry price.

08/24/15 Adjust Entry Strategy = new entry = buy IWM calls at the opening bell tomorrow (Tuesday, August 25th). No stop loss at the moment.
Previous entry trigger was $116.85
08/24/15 Adjust option strike = use the November $115 calls
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 59.93 change: -1.94

Stop Loss: 61.55
Target(s): To Be Determined
Current Option Gain/Loss: +145.1%
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

08/24/15: The market's widespread plunge today pushed BBBY to new 52-week lows. Shares gapped down at $59.78 and dipped to $58.81 before paring its losses. We are moving our stop loss down to $61.55.

No 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

08/24/15 new stop @ 61.55
08/20/15 new stop @ 64.35
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: 78.50 change: -2.61

Stop Loss: 80.85
Target(s): To Be Determined
Current Option Gain/Loss: +79.6%
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

08/24/15: It was a wild, wild day for shares of JACK. The stock gapped open lower at $70.97 and then plunged to $63.94. That means JACK was down -21.4% intraday. The stock rallied all the way up to $80.71, which is a +26% bounce off its morning lows. Shares settled with a -3.2% decline.

Tonight we are moving the stop loss down to $80.85.

No new positions at this time.

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

08/24/15 new stop @ 80.85
08/22/15 new stop @ 85.15
08/19/15 triggered @ $84.75
Option Format: symbol-year-month-day-call-strike

Mallinckrodt Public Ltd - MNK - close: 81.96 change: -6.34

Stop Loss: 85.25
Target(s): To Be Determined
Current Option Gain/Loss: +91.8%
Average Daily Volume = 1.3 million
Entry on August 20 at $93.49
Listed on August 19, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

08/24/15: MNK followed the market's trend today. Shares opened lower, bounced off its morning lows, filled the gap from Monday morning, and then rolled over. Shares underperformed the broader market indices by closing down -7.1% versus a -3.9% drop in the S&P 500 and -3.8% decline in the NASDAQ.

Tonight we are adjusting the stop loss down to $85.25.

No new positions.

Trade Description: August 19, 2015:
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.

*small positions to limit risk* - Suggested Positions -

Long OCT $90 PUT (MNK151016P90) entry $4.90

08/24/15 new stop @ 85.25
08/22/15 new stop @ 92.85
08/20/15 new stop @ 97.75
08/20/15 triggered on gap down at $93.49, suggested entry was $94.35
Option Format: symbol-year-month-day-call-strike

Tupperware Brands - TUP - close: 49.07 change: -3.46

Stop Loss: 51.25
Target(s): To Be Determined
Current Option Gain/Loss: +329.6%
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

08/24/15: TUP also underperformed the broader market today. Shares gapped down like the rest of the market. The intraday bounce failed at $51.00. TUP rolled over and closed with a -6.58% decline.

Tonight we are adjusting the stop loss down to $51.25.

No new positions at this time.

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

08/24/15 new stop @ 51.25
08/22/15 new stop @ 54.15
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: 51.92 change: -1.13

Stop Loss: 54.25
Target(s): To Be Determined
Current Option Gain/Loss: +257.9%
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

08/24/15: Shares of WCC were upgraded to a buy rating today. That probably helped shares outperform. The stock settled with a -2.1% decline versus the broader market's -3.9% decline. The intraday bounce failed at $54.00. We are moving the stop loss down to $54.25.

No new positions.

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

08/24/15 new stop @ 54.25
08/22/15 new stop @ 56.05
08/20/15 new stop @ 57.05
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: 76.48 change: -5.29

Stop Loss: 81.55
Target(s): To Be Determined
Current Option Gain/Loss: +323.1%
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

08/24/15: WYNN is another underperformer. Shares gapped down at $75.00. They bounced at $72.75 and almost filled the gap with an intraday rebound back to $81.36. Unfortunately the midday market bounce failed. WYNN rolled over and closed down -6.4%.

Tonight we are moving the stop loss to $81.55. No new positions.

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

08/24/15 new stop @ 81.55
08/22/15 new stop @ 85.75
08/20/15 new stop @ 91.65, more conservative traders may want to take some money off the table now that our put option has doubled in value.
08/19/15 new stop @ 97.25
08/14/15 triggered @ $93.40
Option Format: symbol-year-month-day-call-strike


Tempur Sealy Intl. - TPX - close: 71.25 change: -3.26

Stop Loss: 74.25
Target(s): To Be Determined
Current Option Gain/Loss: -59.4%
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

08/24/15: The stock market collapse today left no stone unturned. Shares of TPX were crushed. Our stop loss was $74.25 but TPX gapped open lower at $68.22 before plunging to $62.84. We were stopped out immediately.

- Suggested Positions -

DEC $85 CALL (TPX151218C85) entry $3.20 exit $1.30 (-59.4%)

08/24/15 stopped out on gap down at $68.22
08/17/15 triggered @ $78.25
Option Format: symbol-year-month-day-call-strike