Option Investor

Daily Newsletter, Tuesday, 9/8/2015

Table of Contents

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

Market Wrap

What a Difference a Day Makes

by Jim Brown

Click here to email Jim Brown

Friday's fear of the weekend sell off turned into a monster short squeeze with the Dow opening up +340 points. Although the indexes weakened slightly by late morning, it was not enough to save the shorts and they began to frantically cover by late afternoon.

Market Statistics

The fear of an Asian market meltdown over the long weekend sent longs to the sidelines on Friday and apparently there was some serious shorting in progress as well. Some shorts covered into the Friday close but based on today's opening spike there were many more expecting that weekend Asian meltdown.

The Japanese market closed at a new seven-month low with a -2% decline but it did not impact the U.S. markets. The Shanghai Composite closed up +2.9% today despite some lousy trade data for August. The rebound in the Chinese market helped overcome the drag from Japan. China announced a new circuit breaker for the market that would halt trading on any large market swings.

There were only a couple economic reports in the U.S. and none that were market movers. The Manpower Employment Outlook showed a decrease in hiring plans for Q4. In Q3 20% of respondents said they were planning on hiring. For Q4 that number declined to 15%. Those planning on increasing employment fell from 24% to 21% and those planning on cutting positions rose from 4% to 6%. Those planning no changes rose 1 point to 71%. However, even though the number of firms planning on increasing employment declined slightly it still represents a positive trend.

The NFIB Small Business Optimism Index rose slightly from 95.4 to 95.9 in August. While that was the second consecutive gain, the index has not recovered the decline from the May high at 98.3. June saw a significant -4.2 point drop. The number of firms planning on increasing employment rose from 12% to 13%. The net number of respondents expecting the economy to improve fell from -4% to -6%. Those with current job openings rose from 25% to 29%.

The Federal Reserve Labor Market Conditions Index rose from 1.8 to 2.1 for August. That is the highest level since December and a rebound from the -1.0 low in March. The index is made up of 19 labor market indicators. There are an equal number of respondents that feel jobs are plentiful and those that feel jobs are hard to get. That is the first time since 2009 that the net was not negative with more feeling that jobs were hard to get.

Consumer credit rose +$19.1 billion in July compared to +$27.0 billion in June. This is a lagging data point and was ignored.

China's exports declined -5.5% in August and are now down -1.4% for the first eight months of 2015 and the decline is accelerating. At the same time imports declined -14% in August for the 10th consecutive monthly drop. The decline shows how much imports have slowed for commodities like copper, steel, aluminum, etc. A sales manager at Shanghai Steel Fashion Industrial Company, an exporter of prefabricated steel structures, said business declined -40% in August. The devaluation of the yuan has caused a sharp drop in China's foreign reserves by more than -$100 billion in August alone. Analysts believe the drop in the yuan was not enough to help China's exports. Analysts at Nomura say the pressure on China to devalue the yuan even further is now the strongest since 1994.

Late in the day, the World Bank warned the Fed not to raise rates until 2016 and said a rate hike could cause panic in the emerging markets. Now the IMF and World Bank have both warned the Fed not to hike.

China's inflation data is due out on Wednesday and Retail Sales on Saturday.

The economic reports on Wednesday are normally ignored.

The big event on Wednesday is the Apple product announcement. Apple shares rose $3 today ahead of the event. Typically, the actual announcement produces a decline in Apple shares in a sell the news event. Analysts expect the update on iPhone 6, news for the Apple TV and a monster 12.9 inch iPad for business users. The event begins at 1:PM on Wednesday.

Not to be outdone, Amazon (AMZN) is about to announce a $50 version of its Android Fire tablet. This will be a 6-inch screen and will be targeted at kids in middle class families. The overall game plan will be to bring in more consumers into the Amazon retail space. The Fire tablets have embedded retail advertising unless you pay extra to skip the ads. Amazon took a $170 million hit on the Fire phone but they are still plugging along on the various tablet models.

Amazon recently announced they were going to let Prime members download movies to watch offline. This is to better compete with Netflix and Hulu, which only let you stream programs when you have an Internet connection. They are billing it "anywhere, anytime viewing."

Disney (DIS) signed a deal with Amazon and Microsoft to offer their cloud based movie service on the devices from those firms. Disney already has deals with iTunes, Google Play and Vudu. Disney's "Movies Anywhere" launched in February 2014. Users can store their purchased Blue-ray and DVD purchases in the cloud and watch them anywhere on any device. Now Xbox users and Amazon Fire tablet and Fire TV users will be able to access the service through an app, which will also allow them to purchase new movies online. On Sept 15th, Disney Movies Anywhere will also be available on Roku and Android TV. This is a home run for Disney given their extensive catalog of movies available for purchase and viewing.

Apple is expected to announce an upgrade to Apple TV on Wednesday. All of these video streaming offerings are killing Netflix. All of these offerings add to the perception that Netflix is losing viewers. I said perception since there is no proof at this point. They continue to add customers every quarter but investors are racing to the exits.

Shares of Netflix declined another $4 today on worries that the streaming business is becoming a lot more competitive.

Alibaba (BABA) lost -5% after it lowered guidance for gross merchandise volume (GMV) due to weaker consumer spending in China. The company said GMV would grow in lower to mid-single digits compared to prior estimates. The AliExpress business is expected to slow to low double digits due to weakening currencies in markets such as Russia and Brazil. Alibaba has a lockup expiring on 1.2 billion shares on September 20th. This guidance will cause even more pressure ahead of the expiration.

After the bell, Yahoo announced that the IRS denied the company's application to spin off its Alibaba shares in a tax-free distribution into a company called Aabaco. While the IRS did not conclude definitively that the spinoff would trigger taxes under U.S. law, it declined to provide a ruling that it would be tax-free. In theory, Yahoo could continue with the split relying on an opinion from outside lawyers but that would be extremely risky. Yahoo said "work proceeds on the Aabaco spin-off plan. The company will continue to carefully consider the company's options, including proceeding with the spin-off transaction on the basis of an opinion of counsel."

The 15% stake in Alibaba is now valued at about $23 billion since BABA shares have declined -50% since their $119 high in November. The stake was worth more than $40 billion in January. Yahoo paid 40% in capital gains taxes in its prior BABA share sales. Yahoo paid $1 billion for 30% of Alibaba in 2005.

Alibaba shares were flat in afterhours but Yahoo (YHOO) shares declined to $29.75. You may remember the news after the close on Friday that the SVP, Global Controller and Chief Accounting Officer resigned unexpectedly and Friday the 11th will be his last day. The resignation with no notice and short fuse suggested there could be some problems at Yahoo. Now we know what they were.

JD.com (JD) is a competitor to Alibaba and lately it has shown some surprising growth, unlike Alibaba. In August, JD reported revenue that rose +61% to $7.4 billion and easily beat estimates. For comparison Alibaba reported a +28% rise in revenue to $3.26 billion and missed estimates. That was Alibaba's slowest revenue growth in four years.

Today JD announced a $1 billion stock buyback program using its excess cash. Shares spiked to $26 on the news but faded to gain +5% and close at $24.

MKM Partners upgraded shares of Micron (MU) to a buy from neutral with a $23 price target. The analyst said the risk reward has turned positive as we approach 2016 and valuations are attractive at 1 times "true" book value. MKM said there was a $5 billion opportunity over the next two years because the 3D Crosspoint memory breakthrough is undervalued and not recognized in other analyst notes. The new memory technology was announced in July. The analyst expects Micron to be rewarded with premium pricing and premium margins. Shares rallied $4% on the news. Since Micron is down from $36 in December to $17 today, that new price target of $23 is hardly a big upgrade. There is solid resistance at $20.

Bank of America (BAC) was upgraded from neutral to buy at Nomura with an $18 price target. Nomura said the bank was best positioned for the tough new CCAR capital rules. Shares rose +3% to $16.16.

Accenture (ACN) was upgraded from hold to buy at Argus Capital. They gave the stock a $108 price target with shares at $97. They said the company was executing well and expanding margins. Shares rose +3%.

FitBit (FIT) was upgraded to overweight by Morgan Stanley with a $58 price target. The broker said unit sales were up and they were realizing greater operating leverage. Shares rallied +11% to $35.46.

Constellation Brands (STZ) was downgraded from top pick to outperform at RBC Capital. This was a valuation call based on their $145 price target. Shares closed up +1% at $129. Since the market crash, they have seen strong support at $127. I would be a buyer over $130.

Deutsche Bank upgraded PNC Financial (PNC), US Bank (USB) and Wells Fargo (WFC) saying now is the time to buy regional banks. USB has the highest returns in the industry. Wells Fargo can capitalize on higher interest rates with its mortgage business and PNC management was continuing to cut costs.

Orbital ATK (OA) was upgraded to buy at Goldman Sachs with a $91 price target. Goldman said the company had multiple growth drivers and generated strong cash flow. I am a fan of OA. This is a good company with a strong government business. Shares rallied +5% on the news. The upgrade powered the entire sector with LMT, NOC and GD also posting strong gains.

GE gained +4% after the company won EU approval to acquire Alstrom's power business for $13.9 billion. They had to agree to sell some assets to avoid owning too large a share of the power business in France. This is the largest deal ever for GE. This combines the two largest manufacturers of power plant equipment and will help GE continue to move more into industrial manufacturing and away from finance. GE expects to save $3 billion in costs over the next two years. Alstrom has 500 gigawatts of installed power around the world and GE has 1,000 gigawatts.

Teco Energy (TE) rallied +25% on news they would be acquired by Canadian utility, Emera Incorporated. The acquisition price is $27.55 per share in cash. The deal is not expected to close until the middle of 2016. Investors can cash out now by selling the shares into the market at the closing price of $26.34 or hold on for the 68 cents in dividends and the additional $1.21 in cash at the close. Personally, I would take the money and run. You can make a lot more than $1.89 by reinvesting the $26.34 into some other stock over the next nine months.

Somebody knew about this deal in advance. Last week somebody bought 35,000 of the November $22.50 calls for a few cents each. Today they are worth $3.90. The owner of those calls should expect a visit by the SEC soon.

Crude oil declined to $44.52 early in the session but rallied sharply after JP Morgan raised demand estimates by +150,000 bpd for the rest of 2015. However, traders should have listened to the rest of the commentary. JPM said the "US supply decline has been insufficient to alter the price outlook." Also, "while part of the gains from the August lows have been erased we expect prices to continue to fall into quarter end."

China and the Asian region are key drivers to demand and recent economic indicators are suggesting demand growth could slow. "We expect downside from crude prices from current levels as the balance of probabilities favor lower prices in the weeks ahead as slowing demand growth, rising Middle East production and the seasonal dip in refinery crude runs add pressure to the crude markets." JPM is expecting WTI to average $47.50 well into 2016. They recommended shorting the December Brent crude futures.

WTI has held on to the $45 level since the prior week's short squeeze. However, that is not likely to continue as inventory levels begin to spike into the fall season.

Also providing positive sentiment for WTI this morning was a report out of Mexico that they would be willing to cut production along with OPEC if the cartel decided to try and manage prices in the future. This is BS since Mexico is in serious economic trouble because of the 50% decline in crude prices. They cannot afford to cut a single barrel and would likely "say" they are cutting but continue to produce at 100%. In other news, Russia talked down the idea from last week that they would be willing to cut production along with OPEC. No surprise there.


Today was an interesting day. It was a giant short squeeze after the second worst weekly loss this year. However, there was no race to the exits at the close. It was as though investors had turned off the consistently bad news from Asia and decided to just buy stocks. Only 12 stocks on the S&P-500 closed in negative territory.

After repeated days where early gains were sold and the market closed on its lows we actually saw the market close on its highs and the S&P futures are positive in the overnight session. That is also unusual. Recent trading days have seen the futures decline after the regular session. There is a lot of darkness before morning but that is an encouraging sign.

The S&P gained +48 points to close at 1,969. I mentioned in the weekend commentary that we could easily see a close at 1,971 or 1,871 on Tuesday depending on what happened in Asia. That upper guess came very close.

Unfortunately, the S&P has major resistance at 1,975 and 1,990 give or take a couple points. If we were to close above that 1,990 level this week, it would be a signal that the bottom is in and it could start a race back to the highs. Those are big IFs but entirely possible. Over the prior week, the S&P tested the 1,912 level twice over a four-day period and there were rebounds both times. Today's low was 1,927 and well above that support.

The Dow was powered by gains in all 30 stocks with major gains in some of the high dollar stocks that have the biggest impact on the Dow. Goldman +5.50, Boeing +4, etc. The majority of the Dow stocks were heavily shorted with only 5 Dow stocks having even a hint of a positive chart. That means a short squeeze found a lot of dry powder waiting in the Dow stocks.

It would be a waste of time to try and apply any form of rational thinking to the Dow rebound. It was not a case of investors suddenly deciding to buy Dow stocks. It was purely a short squeeze and nothing else.

Support is now 16,000 and resistance 16,500 and 16,666.

It was a similar case on the Nasdaq. The heavily shorted stocks were the biggest gainers and the index rebounded very close to resistance from the 31st at 4,830. The biotech sector was a big lift with nearly a +4% gain. The $BTK closed right at the resistance of the 200-day average.

The Nasdaq has decent resistance at 4,830 and then 4,900. Further gains this week will be a good indicator of investor sentiment.

The Russell 2000 posted decent gains but it was the weakest of the major indexes. This is due to the fact there were fewer shorts in the small caps. If the Russell can move above resistance at 1165, it could trigger some follow on buying and provide positive market sentiment.

Since 1990, the S&P has lost more than 1% in the first week of September 8 times. In 7 of those 8 years, the index finished the month lower with an average loss of -5%. Historically, the first 10-days of September are the best days of the month. Whether it is just a rebound from an oversold August or fund managers putting a little extra cash to work before the end of the quarter is unknown. The last 15 days of the month are normally ugly and lead to market bottoms in October, which is called the bear killer month.

I do not want to apply too much attention to historical patterns. Clearly there is nothing historical about the economic meltdown in China and potentially the first rate hike in nearly a decade. Every year stands on its own. I would like to think that the extreme volatility over the last three weeks has run its course and we will move higher from here. That may be wishful thinking but I can still wish for it. I still have a shopping list in case we do retest the lows. Be prepared for continued volatility in both directions.

Enter passively, exit aggressively!

Jim Brown

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New Option Plays

Has This Stock Finally Found A Bottom?

by James Brown

Click here to email James Brown


Michael Kors Ltd. - KORS - close: 44.50 change: +0.56

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.2 million
Entry on September -- at $---.--
Listed on September 8, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: Yes, see below

Company Description

Trade Description:
Shares of KORS may have finally found a bottom. The stock has been crushed over the last 12-18 months. KORS peaked around $100 in the first half of 2014. Since then shares have been in a bear market as investors consistently sold the rallies near the trend of lower highs.

The bear-market selling accelerated back in May when KORS gapped down following its disappointing earnings and guidance. The stock finally appeared to bottom in the $37-38 region in just the last few weeks.

If you're not familiar with KORS they are in the consumer goods sector. The company has over 525 stores worldwide. They have an active e-commerce website. Plus they sell their products wholesale to specialty and department stores.

According to the company, "Michael Kors is a world-renowned, award-winning designer of luxury accessories and ready to wear. His namesake company, established in 1981, currently produces a range of products through his Michael Kors and MICHAEL Michael Kors labels, including accessories, footwear, watches, jewelry, men's and women's ready to wear, and a full line of fragrance products. Michael Kors stores are operated, either directly or through licensing partners, in some of the most prestigious cities in the world, including New York, Beverly Hills, Chicago, London, Milan, Paris, Munich, Istanbul, Dubai, Seoul, Tokyo and Hong Kong."

The company has been struggling with over exposure weakening its luxury brand name and slowing growth. Analysts have expressed concern that KORS has relied too much on its promotions and discounts to generate sales. There has been a very dramatic decline in comparable store sales from the +20% range down to mid single digits and then eventually into negative comparable store sales growth.

The company has been struggling to stop the slowdown. Management has been lowering guidance the last few quarters. However, the worst might be behind it for KORS. The company's most recent earnings report was August 6th. Wall Street was expecting a profit of $0.75 per share on revenues of $944 million. KORS managed to beat estimates on both counts with a profit of $0.87 per share. Revenues were up +11.2% to $986 million.

Their total retail sales grew +9.0% but this was offset by a -9.5% decline in comparable store sales. On a constant currency basis comp sales were down -5.0%. Management lowered their Q2 estimates. However, they actually raised their full year 2016 estimates. KORS is now forecasting EPS at $4.40-4.50 per share on revenues of $4.7-4.8 billion. Wall Street was only expecting 2016 results of $4.26 a share on revenues of $4.66 billion. The company said their comparable stores will continue to slip but the decline should slow to low single digits and on a constant currency basis actually be close to flat.

Technically shares of KORS look like they may have hit a bottom. The stock was not immune to the market's recent correction. The August 24th crash in the stock market pushed KORS to a new multi-year low. The stock has rebounded dramatically. Last week was the U.S. stock market's second worst week of the year. Yet KORS managed to post a gain.

Seasonally, one of the best times to buy retail-related stocks is the between the Labor Day holiday and Black Friday (day after Thanksgiving). Retail stocks tend to rally into the holiday shopping season.

We also noticed that if KORS can rally past short-term resistance at $46.00 it will reverse its point & figure chart from a sell signal to a new buy signal. Tonight we are suggesting a trigger to buy calls at $46.05.

Trigger @ $46.05

- Suggested Positions -

Buy the NOV $50 CALL (KORS151120C50) current ask $1.45
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

Stocks Enjoy A Big Relief Rally

by James Brown

Click here to email James Brown

Editor's Note:

Rallies in the Chinese and European markets helped give the U.S. a pop this morning. By the closing bell the major U.S. indices were up +2.5% or more on the session. This helped soothe the sting of last week's losses, which was the second worst week of the year.

We have removed SKX as a candidate.

Plan on exiting the STMP trade tomorrow morning.

Current Portfolio:

CALL Play Updates

The Walt Disney Co. - DIS - close: 104.01 change: +3.04

Stop Loss: None. No stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: +14.7%
Average Daily Volume = 8.5 million
Entry on August 27 at $101.35
Listed on August 24, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

09/08/15: DIS showed relative strength today with a +3.0% gain. Shares gapped open higher and then drifted up the rest of the session.

This may be a delayed reaction to the company's "Force Friday" toy unveiling last week. Or the extra pop today could be a reaction to news that DIS signed a deal with Amazon and Microsoft to provide more access to the Disney movie library.

Shares are nearing short-term resistance at the $105.00 area and its 200-dma. No new positions at this time.

Trade Description: August 24, 2015:
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.

- Suggested Positions -

Long OCT $105 CALL (DIS151016C105) entry $2.52

08/27/15 triggered on gap open at $101.35, suggested entry was $101.00
Option Format: symbol-year-month-day-call-strike

Facebook, Inc. - FB - close: 89.53 change: +1.27

Stop Loss: No stop at the moment (See August 24th update)
Target(s): To Be Determined
Current Option Gain/Loss: +247.6%
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

09/08/15: FB's gap higher this morning stalled at round-number resistance near $90.00. Shares almost filled the morning gap before starting to rebound and ended the session with a +1.4% gain. That lagged behind the major U.S. indices, which all rallied +2.5% or more.

No new positions at this time.

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

09/05/15 FB recently announced their WhatsApp service has hit 900 million people
08/27/15 Zuckerberg announced that FB hit a new milestone - one billion people used FB in a single day.
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: 115.45 change: +2.58

Stop Loss: No stop at the moment (See August 24th update)
Target(s): To Be Determined
Current Option Gain/Loss: + 8.4%
Average Daily Volume = 31 million
Entry on August 25 at $114.05
Listed on August 22, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

09/08/15: The market was in rally mode today. It felt like a relief rally after last week's sell-off. China's market reversed higher today on hopes their government would boost their stimulus measures. That helped fuel a widespread rally in Europe. U.S. stocks performed even better with a +2.5% gain on Tuesday.

The IWM is near short-term resistance at the $116.00 level.

No new positions at this time.

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.

- Suggested Positions -

Long NOV $115 CALL (IWM151120C115) entry $4.15

08/25/15 Trade opened this morning. The IWM gapped higher at $114.05
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

Martin Marietta Materials, Inc. - MLM - close: 169.99 change: +3.53

Stop Loss: None, no stop at this time
Target(s): To Be Determined
Current Option Gain/Loss: -32.1%
Average Daily Volume = 855 thousand
Entry on September 03 at $170.46
Listed on September 2, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

09/08/15: MLM delivered a nice bounce but shares are still below last week's peak. Today's intraday high was $170.40. Consider waiting for a rally past $170.50 before initiating new bullish positions.

Trade Description: September 2, 2015:
Industrial sector stocks have not had a good year. The IYJ industrial ETF is down -7.4%. The XLI industrial ETF is down -9.7% year to date. Yet shares of MLM are up +52.7% for 2015. (for the record the Dow Jones Industrial Average is down -8.3%).

If you're not familiar with MLM, here is a brief description, "Martin Marietta, an American-based company and a member of the S&P 500 Index, is a leading supplier of aggregates and heavy building materials, with operations spanning 32 states, Canada and the Caribbean. Dedicated teams at Martin Marietta supply the resources for the roads, sidewalks and foundations on which we live. Martin Marietta's Magnesia Specialties business provides a full range of magnesium oxide, magnesium hydroxide and dolomitic lime products."

If you look at a year-to-date chart of MLM then you probably noticed the huge rally in MLM back in February. That was a reaction to its 2014 Q4 results. Earnings were above expectations and revenues soared +57% from a year ago to $856 million, which was also above analysts' estimates.

The company also announced a 20 million share stock buyback program back in February. Now 20 million shares may not sound like much but MLM only has 67.48 million shares outstanding.

The stock spent the following eight weeks slowly drifting lower. It finally found support in the $135.00 area. Then suddenly MLM found its mojo again when the company reported its 2015 Q1 results on April 30th. The funny thing is MLM actually missed Wall Street estimates. Analysts were expecting a profit of $0.09-0.12 a share for the first quarter. MLM only delivered $0.07 but it was better than a loss of $0.47 a year ago. 2015 Q1 was the first time MLM had reported a profit in the first quarter since 2008.

MLM said revenues rose +61% from a year ago to $691.4 million. That too was below expectations but traders didn't care. Management said their margins improved 500 basis points. Business was strong enough they were able to raise prices +11%.

MLM's Q2 results, announced on August 4th, were not quite as good. The company missed estimates. Wall Street was expecting a profit of $1.60 per share on revenues of $1.01 billion. MLM only delivered $1.22 per share (relatively flat from a year ago) as revenues were up +37.7% to $921 million. Management did say their gross margins improved 350 basis points. They also provided a relatively optimistic outlook for the rest of 2015 and 2016 albeit without significantly raising their estimates.

The company said this year was the second wettest year in the last 100 years. A lot of companies postponed construction projects, which delayed sales for MLM. They expect this pent up demand to return.

Investors must have been in a forgiving mood because shares of MLM soared following this Q2 report. The stock delivered a string of all-time highs before collapsing during the stock market's recent correction. Shares fell from $175.00 to $$143.16 (at its intraday low on Aug. 24th) in just four days. That's a -$32.00 drop (a -18% correction).

Since that market correction MLM has rebounded back above previous resistance at $156 and $160. Shares were showing relative strength today with a +2.95% gain and a close above all its key moving averages. The point & figure chart has gone from bullish to bearish and back to bullish with a $197.00 target. The next hurdle could be potential round-number resistance at $170.00. Tonight we are suggesting a trigger to buy calls at $170.25.

- Suggested Positions -

Long OCT $175 CALL (mlm151016C175) entry $5.60

09/03/15 triggered on intraday gap at $170.46, suggested entry was $170.25
Option Format: symbol-year-month-day-call-strike

Noble Energy, Inc. - NBL - close: 31.42 change: +0.69

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -14.3%
Average Daily Volume = 5.7 million
Entry on September 08 at $31.32
Listed on September 5, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

09/08/15: Our speculative play on NBL is open. The plan was to buy calls this morning. Shares gapped higher at $31.32. We would still consider new positions here at current levels or you could wait for a rally past $32.00.

Trade Description: September 5, 2015:
Unless you have been living under a rock the last several months then you already know that energy stocks have been crushed thanks to a plunge in crude oil prices. One side effect of this crash in energy stock is the potential for mergers and acquisitions as companies try and buy growth and assets while valuations are depressed.

According to the company, "Noble Energy (NBL) is a global independent oil and natural gas exploration and production company, with proved reserves of 1.7 billion barrels of oil equivalent at year-end 2014 (pro forma for the Rosetta acquisition). The company's diverse resource base includes core positions in four premier unconventional U.S. onshore plays - the DJ Basin, Eagle Ford Shale, Delaware Basin, and Marcellus Shale - and offshore in the U.S. Gulf of Mexico, Eastern Mediterranean and West Africa."

The bear market in oil stocks has pushed NBL down to five-year lows. Shares are hovering near round-number support in the $30.00 region. On Friday market watchers noted that someone bought 18,000 call options at the September $30 strike. That's rather unusual since there were only 863 contracts of open interest at that strike price. That got people talking that maybe there is a deal in NBL's future.

We are adding NBL as a very speculative bullish play. Tonight we are suggesting traders buy calls (October $32.50 strike) at the opening bell on Tuesday morning. However, we do not want to initiate positions if shares of NBL gap open more than $1.00 higher (or lower) on Tuesday.

- Suggested Positions -

Long OCT $32.50 CALL (NBL151016C32.5) entry $2.10

09/05/15 trade begins. NBL opens at $31.32
Option Format: symbol-year-month-day-call-strike

Post Holdings, Inc. - POST - close: 66.59 change: +1.19

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -17.7%
Average Daily Volume = 1.0 million
Entry on September 03 at $66.55
Listed on August 29, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

09/08/15: The rise in POST today lagged behind the major indices but shares still added +1.8%. The stock looks poised to rally past $67.00. I would suggest new positions at current levels or more conservative traders could wait for a breakout past $67.00 instead.

Trade Description: August 29, 2015:
Shares of ready-to-eat cereal maker POST have shown surprising strength this month and the last few days during the market turmoil. POST is also poised to be one of the better performing stocks this year with a +57% gain year to date.

POST is in the consumer goods sector. According to the company, "Post Holdings, Inc., headquartered in St. Louis, Missouri, is a consumer packaged goods holding company operating in the center-of-the-store, private label, refrigerated and active nutrition food categories. Through its Post Consumer Brands business, Post is a leader in the ready-to-eat cereal category and offers a broad portfolio that includes recognized brands such as Honey Bunches of Oats(R), Pebbles(TM), Great Grains(R), Grape-Nuts(R), Honeycomb(R), Frosted Mini Spooners(R), Golden Puffs(R), Cinnamon Toasters(R), Fruity Dyno-Bites(R), Cocoa Dyno-Bites(R), Berry Colossal Crunch(R) and Malt-O-Meal(R) hot wheat cereal.

Post's Michael Foods Group supplies value-added egg products, refrigerated potato products, cheese and other dairy case products and dry pasta products to the foodservice, food ingredient and private label retail channels and markets retail brands including All Whites(R), Better'n Eggs(R), Simply Potatoes(R) and Crystal Farms(R). Post's active nutrition platform aids consumers in adopting healthier lifestyles through brands such as PowerBar(R), Premier Protein(R) and Dymatize(R). Post's Private Brands Group manufactures private label peanut butter and other nut butters, dried fruits, baking and snacking nuts, cereal and granola."

The earnings picture has improved significantly. Back in February 2015 POST reported its Q1 results that missed estimates by a wide margin. Yet the last couple of quarters the company has seen earnings and revenues soar. Their Q2 report said revenues were up +140%. Their Q3 results, announced on August 6th, reported revenue growth of +91%. Earnings were $0.27 per share, which was $0.20 better than expected. Management raised their full year guidance from $585-610 million up to $635-650 million. A lot of POST's revenue growth has been due to its aggressive acquisition strategy but Wall Street doesn't seem to care.

As a matter of fact, Wall Street has ignored POST's warnings about its egg supply. The company uses a lot of eggs and the U.S. egg-production industry has been hammered by an outbreak of Avian Influenza (AI). The last significant outbreak of AI was back in the early 1980s. According to CNN the current outbreak has been causing havoc since December 2014 and 35 million egg-laying hens have been killed. The price of eggs surged this summer but looks like it may have peaked.

Back in May this year POST warned that the outbreak had infected a significant portion of their company-owned flocks and 35% of their egg commitments could be impacted. Fortunately, a few weeks later they said the damage may be down to just 25% of their egg supply but they still expected a $20 million hit to earnings. The market doesn't seem to care.

Instead POST seems to be getting a boost from the crop outlook for the rest of 2015. The USDA raised their estimates for crop productions. The harvest this year could see record soybean numbers. Corn could produce the third largest crop on record. This is pushing commodity prices lower, which is a bullish tailwind for cereal makers like POST.

Shares of POST have been very strong this month. The market's reaction to their Q3 results produced a bullish breakout in POST with a rally past resistance near $55.00 and a surge to all-time highs. When the market crashed late last week and this past Monday, shares of POST did see a decline but it was minor compared to the rest of the market. POST didn't even dip to support at $60.00.

Today POST is surging. Shares are poised to breakout past their mid-August high. If that happens POST could see more short covering. The most recent data listed short interest at 19% of the 54.2 million share float. The point & figure chart is bullish and forecasting at $78.00 target. Tonight we are suggesting a trigger to open bullish positions at $66.55.

- Suggested Positions -

Long OCT $70 CALL (POST151016C70) entry $2.43

09/03/15 triggered @ $66.55
Option Format: symbol-year-month-day-call-strike

Stamps.com Inc. - STMP - close: 79.90 change: +0.52

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: -55.8%
Average Daily Volume = 222 thousand
Entry on August 31 at $83.55
Listed on August 29, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

09/08/15: Warning! STMP is underperforming. Shares only rallied +0.65% today while most of the market was up +2.5% or better. You could argue STMP is just consolidating sideways in the $78-84 region. However, considering today's relative weakness, the better move is probably an exit.

We are suggesting an immediate exit tomorrow morning.

- Suggested Positions -

Long OCT $85 CALL (STMP151016C85) entry $4.30

09/08/15 prepare to exit tomorrow morning
08/31/15 triggered @ $83.55
Option Format: symbol-year-month-day-call-strike

Constellation Brands Inc. - STZ - close: 129.16 change: +1.64

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.1 million
Entry on September -- at $---.--
Listed on September 3, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: Yes, see below

09/08/15: Traders may have been a little confused this morning. STZ was downgraded by RBC but they still raised their price target on STZ from $130 to $145. The downgrade was from RBC's "top pick" to just an "outperform".

STZ rebounded off its midday lows and looks poised to challenge resistance near $130 soon. Our suggested entry point to buy calls is $130.55. Wait for a new high.

Trade Description: September 3, 2015:
Major beer brands have suffered from the boom in craft beers. Yet STZ's Corona and Modelo have seen significant growth, especially in the U.S. The company's earnings and revenue growth has fueled a rally in the stock that has outpaced the major marker indices.

STZ is in the consumer goods sector. According to the company, "Constellation Brands (NYSE:STZ and STZ.B) is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Canada, Mexico, New Zealand and Italy. In 2014, Constellation was one of the top performing stocks in the S&P 500 Consumer Staples Index. Constellation is the number three beer company in the U.S. with high-end, iconic imported brands including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the world`s leader in premium wine, selling great brands that people love including Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company`s premium spirits brands include SVEDKA Vodka and Black Velvet Canadian Whisky.

Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand-building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, sales in approximately 100 countries, about 40 facilities and approximately 7,200 talented employees."

This past January STZ reported their fiscal year 2015 Q3 results that beat analysts' estimates on both the top and bottom line. Management raised their 2015 guidance. Their Q4 results were announced on April 9th. Earnings were up +37% from a year ago to $1.03 per share. That was 9 cents above estimates. Revenues were up +5% to $1.35 billion. Gross margins improved to 44%.

STZ said they're seeing strong demand for their Mexican beer brands Corona and Modelo. They're gaining market share in both the spirits and wine categories as well.

The company said 2015 sales were up +24% from the prior year to $6.03 billion. STZ's management guided in-line for fiscal 2016 and forecast earnings of $4.70 to $4.90 per share. That compares to 2015's profit of $4.17 per share (essentially +12% to +17.5% earnings growth).

STZ's most recent earnings report was July 1st. Wall Street was expecting a profit of $1.24 per share on revenues of $1.62 billion. STZ narrowly beat expectations with a profit f $1.26 per share. Revenues were up +7% to $1.63 billion. Management then raised their full-year 2016 earnings guidance from $4.70-4.90 to $4.80-5.00 a share.

The stock did not get much of a reaction from its earnings news or improved guidance. There was a brief spike higher but it didn't last. STZ spent almost the entire month of July consolidating sideways.

The technical picture changed in August. STZ began to rally and displayed impressive strength with a climb from its July 27th low near $115 to $130 by August 18th. Then STZ gave it all back in about three days as the U.S. market tanked. The sharp correction lower saw STZ plunge back toward support in the $114-115 area. What is shocking is how fast STZ has recovered. Buyers just poured into this stock and now STZ is testing its all-time highs near $130 again.

While the three-day crash is a bit terrifying the relative strength in STZ's rebound is impressive. I would consider this an aggressive, higher-risk trade due to STZ's volatility. Tonight we are suggesting a trigger to buy calls at $130.55. We'll exit prior to the October option expiration.

Trigger @ $130.55

- Suggested Positions -

Buy the OCT $135 CALL (STZ151016C135)

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

The TJX Companies - TJX - close: 72.34 change: +1.58

Stop Loss: None. No stop at this time
Target(s): To Be Determined
Current Option Gain/Loss: -3.4%
Average Daily Volume = 3.0 million
Entry on September 03 at $72.05
Listed on August 26, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

09/08/15: It was a good day for TJX. Today's +2.2% gain pushed shares back above short-term resistance at $72.00. This looks like a new entry point to buy calls.

Trade Description: August 26, 2015
Believe it or not but there are only 120 days until Christmas 2015. Most of us are just adjusting to school starting again but retailers are already planning for the 2015 holiday shopping season. Historically the time to buy retailers has been early fall (i.e. right now) and then sell on Black Friday (day after Thanksgiving). TJX could be a great way to play that seasonal trend.

TJX is in the services sector. According to the company, "The TJX Companies, Inc. is the leading off-price retailer of apparel and home fashions in the U.S. and worldwide. As of May 2, 2015, the end of the Company's first quarter, the Company operated a total of 3,441 stores in seven countries, the United States, Canada, the United Kingdom, Ireland, Germany, Poland, and Austria, and three e-commerce sites. These include 1,126 T.J. Maxx, 987 Marshalls, 498 HomeGoods and 6 Sierra Trading Post stores, as well as tjmaxx.com and sierratradingpost.com in the United States; 239 Winners, 97 HomeSense, and 39 Marshalls stores in Canada; and 416 T.K. Maxx and 33 HomeSense stores, as well as tkmaxx.com, in Europe."

Just a couple of days before the market collapsed TJX reported its Q2 2016 earnings results (on August 18th). Wall Street was looking for a profit of $0.76 per share on revenues of $7.25 billion. TJX beat both estimates with a profit of $0.80 per share and revenues of $7.36 billion. Earnings were up +7% from a year ago and revenues were up +6.5%. Gross margins improved. Comparable-store sales improved from +3% a year ago to +6%. TJX said their customer traffic improved for the fifth quarter in a row.

Most retailers have not been doing so hot this year so TJX management was naturally optimistic given their strong results. Carol Meyrowitz, Chairman and Chief Executive Officer of The TJX Companies, Inc., commented on her company's quarter,

"We are extremely pleased that our momentum continued in the second quarter. Our 6% consolidated comparable store sales growth and 7% adjusted EPS growth significantly exceeded our expectations. It was great to see that comp sales were entirely driven by customer traffic - our fifth consecutive quarter of sequential traffic improvement - and that we had strong sales across all of our divisions. Our flexible model and ability to offer an eclectic, exciting merchandise mix at outstanding values continues to resonate with consumers in all of our geographies. We were also very pleased with our solid merchandise margins. We are proud of our strong comp sales, traffic increases and merchandise margins, all of which are core to a successful retail business. We enter the back half of the year in an excellent position to keep our momentum going and have many exciting initiatives planned. I am convinced that our gift-giving selections will be better than ever this year, and that our fall and holiday marketing campaigns will keep attracting more shoppers to our stores. Above all, we will be offering consumers amazing values every day! The third quarter is off to a solid start and we are raising our full year comp sales and earnings per share guidance. Today, we are a nearly $30 billion retailer with a clear vision for growth, a differentiated apparel and home fashions business, and world-class organization. Looking ahead, we are confident that we will achieve, and hope to surpass, our plans as we continue to bring value around the world and grow TJX to a $40 billion-plus company!"
TJX management did lower their Q3 guidance but they raised their full year 2016 EPS forecast. They also raised their 2016 comparable store sales estimate from +2-3% to +3-4%. It was the second quarter in a row that management raised their guidance.

The stock market's recent sell-off produced a correction in shares of TJX, which fell from its August high of $76.78 down to an intraday low of $67.25 on Monday morning. That is a -12.4% correction. Shares just happened to bounce near technical support at the simple 200-dma and its late July lows near $67.00. In spite of the sharp retreat the point & figure chart is still bullish and still forecasting at long-term $98.00 target.

Tonight we are suggesting a trigger to buy calls at $72.05. This is a relatively longer-term trade and hope to hold this position for several weeks.

- Suggested Positions -

Long 2016 Jan $75 CALL (TJX160115C75) entry $2.90

09/03/15 triggered @ $72.05
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Jack In The Box - JACK - close: 79.79 change: +1.48

Stop Loss: 82.55
Target(s): To Be Determined
Current Option Gain/Loss: -54.2%
Average Daily Volume = 677 thousand
Entry on September 01 at $76.88
Listed on August 31, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

09/08/15: I am suggesting caution our bearish JACK trade. The stock's rally today failed near resistance at $80.00. However, it did close above short-term technical resistance at its 10-dma for the first time in nearly a month. That is a warning signal if you're bearish.

Trade Description: August 31, 2015:
It's a burger-eat-burger world out there in the fast-food business. Jack in the Box is small fries compared to its larger rivals like McDonalds (36,258 locations) and Wendy's (6,515 locations). Let's not forget heavy weights like Taco Bell, Burger King, Subway, Dairy Queen, and a handful of pizza chains. JACK only has about 2,200 restaurants but it also has a secret weapon and that is the Qdoba Mexican Grill, a fast-casual restaurant with about 600 locations. Fast-casual restaurant rival Chipotle Mexican Grill has almost 1,800 locations.

Some of that intense competition being felt by McDonalds and Chipotle Mexican Grill is coming from Jack in the Box and its Qdoba brand, which is growing sharply. A majority of their Qdoba franchisees own multiple stores with 10, 20 even 40 stores common. Enterprising business owners don't open additional stores if the original stores are not working. To have so many owners with high numbers of stores suggests the franchise is consistently profitable.

To be profitable they need solid customer traffic, good food and decent margins. Shares of JACK have been one of the best performers on the S&P over the last couple of years because the company has been posting solid earnings and growth.

Customers are trending towards healthier foods and away from the mass produced burgers and fries at McDonalds. Did you know there are 19 ingredients in McDonalds fries? Surely you didn't think they were just potatoes and grease? This trend may not help the Jack in the box brand but it's good news for Qdoba. Restaurants like Qdoba and Chipotle are capitalizing on the healthy food craze.

Management is trying to be shareholder friendly. They have an active share buyback program and they reduced the share count by 10% over the last few quarters. In their Q2 earnings report (May 13th) the company raised their quarterly dividend by +50%.

JACK reported its Q1 2015 earnings on February 17th. Analysts were expecting a profit of $0.87 a share on revenues of $461.2 million. JACK delivered earnings of $0.93 a share. That's a +24% improvement from a year ago. Revenues were up +4.1% to $468.6 million, above estimates. Their operating margins improved 1% to 19.3%. Management raised their 2015 guidance.

The company did it again in May with their Q2 report. Estimates were for $0.66 per share on revenues of $356 million. JACK reported $0.69 per share with revenues up +5.0% to $358 million. That is a +35.2% earnings improvement from a year ago. Their consolidated restaurant operating margins improved 210 basis points to 20.6%. Plus, management raised their 2015 guidance again.

If we stopped right here the story for JACK looks pretty bullish. They definitely seem to be outgrowing their competition. However, the picture appeared to change in the third quarter.

It looks like growth slowed down a bit too much for the market's liking. JACK reported its Q3 earnings on August 5th. Earnings were $0.76 per share. That beat analysts' estimates by three cents. Revenues only rose +3.2% to $359.5 million, which was essentially in-line with estimates. JACK is still seeing strong same-store sales growth with Q3's SSS up +7.3% for their Jack in the Box brand and +7.7% for the Qdoba business. Management said they are only expecting +3.5-5.5% same-store sales growth for Jack in the Box and +5.0-7.0% growth for Qdoba in the fourth quarter.

Investors must have been expecting more from the company because they sold JACK after its earnings report. Shares corrected pretty fast with a -$10.00 drop in following week. JACK was trying to hold support near $85.00 and then the market collapsed. Last Monday saw shares of JACK plunge to an intraday low of $63.94. The oversold bounce just failed at its 10-dma.

Technically JACK looks broken. After incredible gains over the last couple of years JACK is now in a bear market. The peak in August was a lower high. The breakdown under major support near $85 and its 200-dma was bearish. Now JACK has broken one of its long-term trend lines of support. It looks like JACK has further to fall. Today's low was $78.00. Last Wednesday's low was $77.81. I am suggesting a trigger to buy puts at $77.70.

- Suggested Positions -

Long OCT $75 PUT (JACK151016P75) entry $2.84

09/01/15 triggered on gap down at $76.88, suggested entry was $77.70
Option Format: symbol-year-month-day-call-strike

Praxair Inc. - PX - close: 104.27 change: +2.83

Stop Loss: 105.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.5 million
Entry on September -- at $---.--
Listed on September 5, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: Yes, see below

09/08/15: The market's big bounce today fueled a +2.7% rise for PX. Shares closed above their 10-dma and look like they could challenge short-term resistance at $105.00 soon.

Currently we are on the sidelines. Our suggested entry point for bearish positions is $99.85.

Trade Description: September 5, 2015:
Investors are worried that stocks' six-year bull market might be in jeopardy. Unfortunately for PX investors the rally in this stock stalled last year. Shares peaked in 2014 and after months of consolidating sideways the stock has begun to breakdown.

PX is suffering from a number of issues. They face rising competition and rising production costs. Their results are also being hurt by foreign currency headwinds. The economic slowdown in China and Brazil is also taking a toll on PX's business.

If you're not familiar with PX they are in the basic materials sector. According to the company, "Praxair, Inc., a Fortune 250 company with 2014 sales of $12.3 billion, is the largest industrial gases company in North and South America and one of the largest worldwide. The company produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings. Praxair products, services and technologies are making our planet more productive by bringing efficiency and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, primary metals and many others."

Looking at recent earnings results PX has seen revenues slowdown. They reported Q1 earnings o April 29th. Earnings of $1.43 per share missed estimates by a penny. Revenues were down -9% to $2.76 billion.

Their Q2 results were announced on July 29th. Earnings per share of $1.45 was in-line with Wall Street estimates. Yet revenues fell -12% to $2.74 billion. That missed expectations of $2.85 billion.

PX management lowered their guidance for the current quarter and 2015 below Wall Street's forecast. The company tried to mitigate the bad news by announcing an increase in their stock buyback program. In a separate press release PX announced their "board of directors has also authorized a new share repurchase program for up to $1.5 billion of Praxair's common stock. Praxair has approximately $500 million of repurchase authority available under its previously announced buyback authorization from January 2014, giving it approximately $2.0 billion available for stock repurchases under these programs."

Stock buybacks have lost their luster on Wall Street and PX plunged to new multi-year lows when the market corrected two weeks ago. The oversold bounce has already failed and PX is poised to breakdown under key psychological support at the $100 level. Tonight we are suggesting a trigger to buy puts at $99.85.

Trigger @ $99.85

- Suggested Positions -

Buy the OCT $95 PUT (PX151016P95)

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

Wynn Resorts Ltd. - WYNN - close: 74.85 change: +1.78

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.7 million
Entry on September -- at $---.--
Listed on September 1, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: Yes, see below

09/08/15: WYNN was not left out of the market's widespread rebound today. Shares managed to close above their 10-dma with a +2.4% gain on the session.

We are waiting for a breakdown. Our suggested entry point to buy puts is at $69.85.

Trade Description: September 1, 2015:
We recently traded WYNN as a bearish play. The bounce from last week's lows stopped us out on Friday, which was unfortunate since WYNN has continued to show relative weakness and plunged to new multi-year lows this week. We believe WYNN still has much further to fall as the company's Macau-region revenues plunged -35% in August. The Chinese weakness shows no signs of slowing down.

What follows is an updated version of our bearish trade description for WYNN:

Updated Bearish Trade Description:

Casino stocks have been a bad bet this year. CZR, LVS, and MGM are all down for the year. One of the biggest losers in the group is WYNN. Shares of WYNN are down -52% in 2015. The bear market started last year. Shares of WYNN peaked just below $250.00 in early 2014 and now they're down -70% 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."

Problems in Macau

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.

I mentioned earlier that WYNN's Macau revenues for August fell -35% from a year ago. August is the 15th month in a row of declining revenues for the casino industry.

The recent headlines regarding the Chinese government's devaluation of their currency (the yuan) 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.

Traders should note that WYNN can be a volatile stock. The most recent data listed short interest at 13% of the relatively small 80.8 million share float. It looks like bears have the right idea. It could be a long time before gambling recovers in Macau.

What to watch for:

I also want to warn readers that this is an aggressive trade for technical reasons. WYNN is extremely oversold. On the weekly chart (see below) the stock is nearing potential support at the bottom of its bearish channel. Now that channel does not guarantee a bounce. WYNN could break through it or it could follow the lower boundary. I do want investors to be aware of it.

The last few days have seen WYNN churn sideways in the $70-80 range. Tonight we are suggesting a trigger to buy puts at $69.85. Where WYNN bottoms is anyone's guess. The stock hasn't been this low since 2010. Looking at its trading in 2009 you could argue for potential support at $60, at $50, or $30. The bear-market bottom from early 2009 was near $15.00 a share. We are planning to exit prior to October option expiration. WYNN reports earnings in late October.

Trigger @ $69.85 *caution - WYNN is a volatile stock*

- Suggested Positions -

Buy the OCT $65 PUT (WYNN151016P65)

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


Skechers USA Inc. - SKX - close: 136.68 change: -0.27

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.3 million
Entry on August -- at $---.--
Listed on August 27, 2015
Time Frame: Exit PRIOR to the 3-for-1 stock split in mid October
New Positions: see below

09/08/15: We are giving up on SKX as a bullish candidate. The rally attempt failed near $140.00 and its short-term trend of lower highs this morning.

Trade did not open.

09/08/15 removed from the newsletter, suggested entry was $142.25
09/05/15 adjust entry trigger from $145.15 to $142.25
Option Format: symbol-year-month-day-call-strike