Option Investor

Daily Newsletter, Thursday, 10/8/2015

Table of Contents

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

Market Wrap

Minutes Signal All Clear

by Thomas Hughes

Click here to email Thomas Hughes
The FOMC minutes signaled all clear, at least for now, and the market rallied for a fourth day.


Today was one of those days in which there were two distinct periods of trading; before the FOMC minutes were released and after. Early trading was quiet and lack luster. There was little action and gains were marginal. After the release trading volume picked up and the indices began a steady march that carried them higher into the close of the day.

Market Statistics

International markets were relatively quiet today as well. Asian indices were mixed with Chinese indices rising in post-holiday trading and those in Japan falling on some weak data. Japanese machine orders fell by more than 3% despite the BOJ's stance that their economy is on track for recovery. European indices were largely unaffected by the news from Asia and were able to hold steady for most of the day, closing with gains in the range of 0.2% to 0.60%.

Futures trading was weak all morning. The indices were indicated to open with losses in the range of -0.5% and that held through the early pre-opening session. Today's data was positive, supportive of a rate hike, but did little to move the market. Between Alcoa's release of earnings after the bell and the FOMC minutes at 2PM it was pretty clear that attention was focused on events later in the day.

The market opened weak as indicated, losses near -0.5%, but those levels were able to hold. The indices tread water from that point forward, until 2PM, with some bullish bias. The market popped on the FOMC release, which was more of the same. They are ready to raise rates, but find it appropriate to wait. The post-release rally met some resistance but by 2:30PM the indices were making another new high, and then another, leaving the indices near the highs of the day.

Economic Calendar

The Economy

The economic calendar for today was light on the number of releases if a little on potential impact. Aside from the weekly jobless claims numbers the FOMC minutes were the only other release. On the jobs front Initial Claims fell by -13,000 to hit the lowest level since July. This is just off the 15 year low. Last week's figures were revised lower by -1,000 for a net decline of -14,000 from last week's report. The 4 week moving average of claims also fell, shedding -3,000 to hit 267,000 and its lowest level since early August.

On a not adjusted basis claims rose by 5.8%, about half of the expected 11.4% gain projected by the seasonal factors. On a year over year basis not adjusted claims are down -11%. Michigan and Illinois led with increases in claims of 2,837 and 871 respectively. Kansas and Georgia led with declines of -2,588 and -868. These drops are indicative at least of declining job losses, if not job creation stronger than the NFP indicated.

Continuing Claims rose by 9,000, on top of an upward revision of 4,000, to hit 2.204 million. The four week moving average continued to decline, losing -14,750 to hit 2.221 million. Continuing claims, despite this weeks gain, continues to trend near the long term lows and indicative of labor market health.

The total number of claims for unemployment fell by -61,340. This is the 9th week of declines since hitting a peak in later summer and a new long term low dating to before the financial crisis. Total claims are now down -9.5% from last year at this time and appear to be trending lower. Based on this and the other claims data it looks like joblessness is reaching new levels. Job creation may be lack luster but job openings are at high levels and that is helping to suck up labor market slack.

The minutes turned out to be another FOMC non-event. They still think it is right to raise rates soon, but are in no hurry to do so. They cite things like high dollar, slow China, global market turmoil and low inflation as their reasons for standing pat. They also lowered their target for inflation to remain below 2% until the end of 2018. According to them US growth is moderate and labor market slack is nearly if not completely gone. Although there is renewed risk from global slowing there is no material change to the outlook. The news helped send the market to a high intra-day high.

The Oil Index

Oil prices continued to rebound today but I think it is mostly on fear. Russia's entry into the Syrian conflict is raising the chances for international conflict in the region and putting a premium into oil prices. Despite this risk premium US stockpiles remain high as does global production levels. There are some signs of slowing US production but so far not enough to cause a drop in available supply. WTI and Brent both gained near 3.5% with WTI closing near $49.50 for the first time since July.

The Oil Index gained a little more than 2% on the rise in oil and has extended its rebound above resistance targets. Today's action created a long white candle moving up from the 1,175 support/resistance line set last month. The indicators are bullish and on the rise with MACD setting a +12 month extreme peak in support of the move. The index is moving higher and looks like it will continue higher into the near term. Now that oil prices are rebounding we can start to expect earnings outlook for the oil companies to rise which, along with outlook for the end of the year and next year, should be bullish for the sector.

The Gold Index

Gold action was tepid today despite the dovish tone to the FOMC minutes and subsequent drop in dollar value. The DXY fell about a half percent after the minutes, to a three week low, but gold prices did not rise in response. Prices fell more than -0.6%, perhaps on the lowered inflation target. Without inflation, and with lower targets, there is lowered expectation for higher gold prices. At the same time the rate hike is still on the way, eventually, which will strengthen the dollar as well. In the meantime movers of gold are economic data (ex-inflation), earnings and outlook which all support the rate hike. Gold may not move down to its recent lows, but I don't see any reason for it to rise either.

The gold miners tried to move higher but were capped at resistance. The miners ETF GDX opened slightly lower than yesterday's close to move higher and create what would have been a large white bodied candle. The index broke above the 100% retracement level, previous all time low, but found resistance and was pushed back creating a regular white candle with long upper shadow. Today's high is consistent with the high set last month, when the index tested resistance and was shut down. The indicators are bullish at this time, pointing up in indication of possible testing of resistance, but remain weak and consistent with resistance and range bound trading. The MACD peak is weak, not large or extreme, and stochastic is trending in the middle of its range. Resistance is between $15.75 and $16 with support near the bottom of the three month range near $13.00.

In The News, Story Stocks and Earnings

Netflix announced that it would raise prices for its basic service by a dollar per month. This may not sound like much but with an estimated 60 million subscribers could result in substantial income for the company. Simple math comes up with a possible $760 million addition to annual revenues. Shares of the stock gained 3.5% to trade at a four month high. Earnings are scheduled to be released next week, guidance could be materially affected by development.

Domino's Pizza reported before the bell. The deliverer of tasty pizza reported a 6% rise in earnings and an 8% rise in revenue but missed analysts expectations. Consensus called for $0.74 per share, more than a nickel above the actual $0.67 reported. The company also reported double digit comp store growth in the US with high single digit growth in international markets. The primary headwind cited was currency exchange rates. The news was met with mixed emotions and caused shares to fall more than -4% to trade just above support levels. Volume was high, as was volatility, creating a long legged doji candle. Support is near $100 with resistance along the short term moving average.

Alcoa reported after the bell and kicks off the unofficial start of the earnings season. The aluminum giant missed on both the top and bottom lines, by substantial margins, in a report that highlights reasons for the recently announced split. The value added products all produced significant gains on a year over year basis, all undermined by low commodity pricing. Analyst had been predicting $0.13 per share, actual results were $0.07. Shares of the stock lost 5% in after hours trading.

Helen Of Troy, maker of popular consumer products, reported a top and bottom line beat after the bell. The company was able also to narrow guidance to the upper end of a previously stated range and above consensus estimates. Shares of the stock popped in after hours trading, gaining more than 7% to trade at a new all time high.

The Indices

The indices opened weak but upon reflexion strength was exhibited most of the day. Except for the early dip to support the bulls were in charge all day. The middle portion of the day was mostly sideways but once the minutes were released action was all up, led by the transports. The Dow Jones Transportation Index gained 1.38% and was the market leader all day. The index is approaching resistance targets near 17,200 with rising indicators so it looks like a test of resistance is on the way. Both MACD and stochastic are on the rise although only MACD is showing any strength at this time.

The S&P 500 made the next largest gain today, just shy of 0.9%. The broad market also created a large white bodied candle in a move that is approaching resistance. The index has now regained the long term up trend with bullish indicators and looks like it could break past the next resistance target. Resistance is just above today's closing price, near 2,015, and, once broken, could lead to additional movement up to 2,050 or higher. The indicators are positive, MACD is bullish and rising, stochastic is pointing up, both in line with the underlying trend, but the signal is still weak. A consolidation and move above resistance would help strengthen the near term outlook.

The Dow Jones Industrial Average was the third largest advancer in today's session. The blue chips gained 0.82% in a move that is approaching resistance targets, just like the first two. Today's action fell just short of my resistance line at 17,250 but looks like it will go that high at least. The indicators are bullish and on the rise, pointing to higher prices, and the MACD peak is convergent with the new two month high, so a test of next resistance target is very likely . A break above that level would be bullish and could lead to a move up to test the current all time high.

The NASDAQ Composite was today's laggard with a gain of only 0.41%. The tech heavy index was under pressure all morning even as the others were trying to move higher and was barely able to move above break even. Despite the sluggishness in the index today's action confirmed support at the short term moving average and the recently broken resistance level with rising indicators. The index looks set to move up to next resistance, near 4,950. Although bullish, the indicators are remain weak so a break above next resistance is questionable.

The FOMC gave the market the all clear one more time. The news was largely as expected, did not produce any surprises, and was barely an impediment to the rally. The indices are moving higher, perhaps to consolidate at resistance levels, with earnings season at hand so for now I think that will be focus of the market. The long term trend remains up, economic trends remain up and outlook for the future is positive so there is a good chance this rally could have legs.

Until then, remember the trend!

Thomas Hughes

New Option Plays

The Stocks Are Winning

by James Brown

Click here to email James Brown


Ingredion Inc. - INGR - close: 90.24 change: +1.19

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 458 thousand
Entry on October -- at $---.--
Listed on October 08, 2015
Time Frame: Exit PRIOR to earnings on October 29th
New Positions: Yes, see below

Company Description

Trade Description:
The rally continues for INGR. The stock is up +400% from the 2008-2009 bear-market lows. Shares are only up +6.3% in 2015 but that's better than the S&P 500's -2.2% decline this year.

INGR is in the consumer goods sector. According to the company, "Ingredion Incorporated (INGR) is a leading global ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients and biomaterial solutions. With customers in more than 100 countries, Ingredion serves approximately 60 diverse sectors in food, beverage, brewing, pharmaceuticals and other industries."

Looking at the last couple of quarters INGR has beaten Wall Street's bottom line earnings estimates both times. Revenues have slipped -2.0% in Q1 and -2.3% in Q2 but that is a reflection of bearish foreign currency exchange rates. Their Q2 earnings were up +13.3% from a year ago.

Technically shares are in a long-term up trend. They're also seeing strength on a short-term basis with traders buying the dips. The $90.00-91.00 area has been short-term resistance. Tonight we are suggesting a trigger to buy calls at $91.05. Plan on exiting prior to INGR's earnings report on October 29th.

Trigger @ $91.05

- Suggested Positions -

Buy the NOV $95 CALL (INGR151120C95) current ask $1.60
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:

NIKE, Inc. - NKE - close: 124.91 change: +2.81

Stop Loss: 119.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.8 million
Entry on October -- at $---.--
Listed on October 08, 2015
Time Frame: Exit PRIOR to earnings in December
New Positions: Yes, see below

Company Description

Trade Description:
Nike is named after the Greek goddess of victory. The stock has definitely been winning this year. NKE's stock is up +30% in 2015 and looks poised to keep running.

In the athletic footwear and apparel industry Nike is the 800-pound gorilla with annual sales of more than $30 billion. According to the company, "NIKE, Inc., based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories, and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories."

NKE has reported strong earnings all year long. You could probably sum up NKE's year with growth in every geography and every key category and improving gross margins. Their Q3 2015 earnings in March beat estimates with earnings up +16% from a year ago and revenues up +7% in spite of negative currency headwinds (would have been +13%).

NKE's Q4 2015 earnings were 15 cents better than expected at $0.98 a share. Revenues were up +4.8% (+13% on a currency neutral basis). Future orders were above expectations. Their 2016 Q1 results just came out a few weeks ago on September 24th. Earnings of $1.34 a share beat estimates by 15 cents. Revenues were up +5.4% to $8.41 billion, above expectations. Their future orders were up +9% compared to estimates for low single digits. On a constant currency basis their future orders are up +17%. Their China business was a bright spot with very strong growth.

Shares of NKE vaulted higher on their Q1 results and closed at all-time highs near $125 a share. The stock has spent the last two weeks consolidating gains in a sideways range. We want to hop on board the NKE bandwagon if shares rally to new highs. NKE's intraday high is currently $126.49. Tonight we are suggesting a trigger just below this level at $126.15. The plan is for this to be a multi-week trade and we'll exit prior to earnings in December.

Trigger @ $126.15

- Suggested Positions -

Buy the 2016 JAN $130 CALL (NKE160115C130) current ask $3.75
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:

In Play Updates and Reviews

Stocks Rally On FOMC Minutes

by James Brown

Click here to email James Brown

Editor's Note:

Bulls remain in control as stocks rally following the FOMC minutes. The Dow Industrials closed above the 17,000 mark while the S&P 500 closed above the 2,000 level. Another gain for crude oil, which tagged $50 a barrel, helped energy stocks stay strong.

Keep in mind that the S&P 500 still has short-term resistance at the 2,020 level and the small cap Russell 2000 index closed just below resistance at its simple 50-dma.

HD and COO both hit our entry triggers today.

Current Portfolio:

CALL Play Updates

Alkermes Plc - ALKS - close: 59.90 change: -0.08

Stop Loss: 54.25
Target(s): To Be Determined
Current Option Gain/Loss: -52.9%
Average Daily Volume = 1.0 million
Entry on October 05 at $61.17
Listed on October 03, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

10/08/15: Biotech stocks can't pick a direction and the group drifted sideways today. ALKS did not see any follow through on yesterday's rally and closed virtually unchanged on Thursday's session.

I am suggesting investors wait for ALKS to trade above $61.25 before considering new bullish positions.

Trade Description: October 3, 2015:
The U.S. market delivered an impressive bounce the last few days. If this rebound continues the beaten-down biotech stocks could easily outperform. ALKS looks like a good candidate to capture the bounce.

ALKS is in the healthcare sector. According to the company, "Alkermes plc is a fully integrated, global biopharmaceutical company developing innovative medicines for the treatment of central nervous system (CNS) diseases. The company has a diversified commercial product portfolio and a substantial clinical pipeline of product candidates for chronic diseases that include schizophrenia, depression, addiction and multiple sclerosis. Headquartered in Dublin, Ireland, Alkermes plc has an R&D center in Waltham, Massachusetts; a research and manufacturing facility in Athlone, Ireland; and a manufacturing facility in Wilmington, Ohio."

The earnings picture for ALKS seems to be improving. Looking at the last few earnings reports ALKS has beaten Wall Street expectations on both the top and bottom line the last three quarters in a row. Their most recent report, on July 30th, was follow up with management raising their 2015 guidance above analysts estimates.

While the earnings picture is supportive for a bullish bias, today's trade is more of a technical one. The biotechs have been crushed lately (Thanks, Hillary Clinton!) and shares of ALKS plunged from resistance near $73.00 to support near $54.00. Now it's starting to rebound. This is not the first time ALKS has bounced from this area.

Tonight we are suggesting a trigger to buy calls at $60.75. Our target is $71.50. Plan on exiting prior to ALKS' earnings report in late October. Please note that I consider this a more aggressive trade because the option spreads on ALKS' November options are a little bit wide (and because ALKS is a biotech stock and biotech stocks tend to be more volatile anyway but regular readers already know that).

- Suggested Positions -

Long NOV $65 CALL (ALKS151120C65) entry $3.50

10/06/15 a very volatile day with ALKS down -11% from its intraday highs. Shares close down -2%.
10/05/15 triggered on gap open at $61.17, suggested entry was $60.75
Option Format: symbol-year-month-day-call-strike

Costco Wholesale Corp. - COST - close: 151.66 change: +3.70

Stop Loss: 141.85
Target(s): To Be Determined
Current Option Gain/Loss: +112.5%
Average Daily Volume = 1.9 million
Entry on October 05 at $146.25
Listed on October 03, 2015
Time Frame: Exit PRIOR to November option expiration
New Positions: see below

10/08/15: COST was a big winner today as the market reacted to better than expected September same-store sales. The stock surged +2.5% and closed above potential round-number resistance at $150.00.

Analysts were expecting a -1.0% drop in September sales. COST reported their total company comp sales were +0.0%. The U.S. region saw +3% same-store sales growth. Canada was down -10% while international stores fell -6% However, if you back out the drop in gas prices and foreign exchange headwinds then total comparable store sales were up +8%.

Investors may want to start raising their stop loss on our COST trade.

Trade Description: October 3, 2015:
Thus far 2015 has been a frustrating year for COST bulls. After years of steady stock price appreciation (2009-2014) the rally peaked in the first quarter of 2015. Shares spent months correcting lower but it looks like the worst may be behind it for COST.

If you're not familiar with COST they are in the services sector. The company runs a membership warehouse business that competes with the likes of Sam's Club (a division of Wal-Mart). According to the company, "Costco currently operates 686 warehouses, including 480 in the United States and Puerto Rico, 89 in Canada, 36 in Mexico, 27 in the United Kingdom, 23 in Japan, 12 in Korea, 11 in Taiwan, seven in Australia and one in Spain. The Company plans to open up to an additional 16 new warehouses (including one relocation to a larger and better-located facility) prior to the end of its fiscal year on August 30, 2015. Costco also operates electronic commerce web sites in the U.S., Canada, the United Kingdom and Mexico."

Revenue growth has been lackluster this year. COST has managed to beat Wall Street estimates on the bottom line but the revenue number has been soft. Their most recent quarterly report was announced on September 29th. Earnings were up +10% from a year ago to $1.73 a share. That beat estimates. Yet COST said their Q4 revenues were virtually flat (+0.7%) to $35.78 billion. That missed expectations. Comparable store sales were up +2% in the U.S. but down -10% in Canada.

A lot of COST's revenue troubles have come from lower oil, which has pushed gas prices lower. The big drop in gas prices cuts their revenue growth. Plus the stronger dollar hurts their foreign sales. The company continues to expand its presence in the U.S. and overseas. Management plans to launch 12 new warehouses this quarter. Overall COST plans to build 32 new stores in the next 12 months, including its first store in France.

The stock looks poised to breakout past its July, August, and September highs and make a run at its 2015 highs. We suspect COST is going to grab more investor attention as we approach the holiday shopping season. The stock tends to see a rally from September into Black Friday (the day after Thanksgiving).

Tonight we are suggesting a trigger to buy calls at $146.25. More conservative traders may want to wait for a rally past the September peak ($146.90) or even past short-term resistance $147.00. We want to jump in a little early as COST could surge wants it clears $147.00.

- Suggested Positions -

Long NOV $150 CALL (COST151120C150) entry $2.00

10/08/15 COST rises on better than expected September same-store sales
10/07/15 COST could see a short-term dip here.
10/05/15 triggered @ $146.25
Option Format: symbol-year-month-day-call-strike

Salesforce.com, Inc. - CRM - close: 75.09 change: +0.09

Stop Loss: 72.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.6 million
Entry on October -- at $---.--
Listed on October 07, 2015
Time Frame: Exit PRIOR to earnings in November
New Positions: Yes, see below

10/08/15: CRM's late day rally failed at resistance near $76.00. I don't see any changes from last night's new play description. Our suggested entry point to buy calls is $76.25.

Trade Description: October 7, 2015:
Cloud computing and software giant CRM has been churning sideways for almost seven months. In spite of this lack of upward movement CRM is still outperforming the broader market. The NASDAQ composite is up +1.2% year to date. CRM is up +26%. The good news is that CRM looks poised to breakout past major resistance and begin its next leg higher.

CRM is part of the technology sector. According to the company, "Salesforce is the world's #1 CRM company. Our industry-leading Customer Success Platform has become the world's leading enterprise cloud ecosystem. Industries and companies of all sizes can connect to their customers in a whole new way using the latest innovations in cloud, social, mobile and data science technologies with the Customer Success Platform."

CRM's revenues have been consistently growing in the mid +20% range the last few quarters. Their Q4 revenues were up +26%. Q1 revenues were +23%. The company's most recent quarter was announced August 20th. Analysts were expecting Q2 results of $0.17 a share on revenues of $1.6 billion. CRM beat both estimates with a profit of $0.19 as revenues grew +23.5% to $1.63 billion. Management raised their Q3 and full year 2016 revenue guidance.

Technically the stock is in a long-term up trend and the point & figure chart is forecasting an $85.00 target. The $75.00-76.00 area is major resistance with CRM failing in this region multiple times. The recent rally has boosted CRM back to this level and the stock looks poised to breakout soon.

(Sidenote - CRM did hit an intraday high of $78.46 on April 29th thanks to M&A rumors. The company is still considered a potential acquisition target by larger rivals.)

We like CRM's relative strength and consistently strong earnings and revenue growth. A breakout here could spark a run that lasts until the company's earnings report in November. Tonight we are suggesting a trigger to buy calls if CRM trades at $76.25 (or higher).

Trigger @ $76.25

- Suggested Positions -

Buy the DEC $80 CALL (CRM151218C80)

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 Home Depot, Inc. - HD - close: 121.06 change: +1.41

Stop Loss: 114.65
Target(s): To Be Determined
Current Option Gain/Loss: +4.2%
Average Daily Volume = 5.3 million
Entry on October 08 at $120.25
Listed on October 05, 2015
Time Frame: Exit PRIOR to earnings on November 17th
New Positions: see below

10/08/15: Our HD trade is open. Shares rallied past resistance at $120.00 and hit our entry trigger at $120.25. The stock outperformed the major indices with a +1.1% Gain on Thursday.

If you missed our entry point I would suggest looking for a dip near the $120.50 area as an alternative entry point.

Trade Description: October 5, 2015:
Home Depot's stock has outperformed the broader market in spite of the fact shares have been stuck in a trading range for the last seven months. That could be about to change.

The big surge in the U.S. housing market this year has been a bullish tailwind for HD's business. The home remodeling and repair industry and consumer spending in this category is expected to hit levels not seen since before the "Great Recession" in 2008-2009. HD is poised to reap the benefits.

HD is in the services sector. According to the company, "The Home Depot is the world's largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. In fiscal 2014, The Home Depot had sales of $83.2 billion and earnings of $6.3 billion. The Company employs more than 370,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index."

HD has been showing steady earnings and revenue growth. The company has beaten Wall Street estimates on both the top and bottom line the last three quarters in a row. Management has also raised their guidance the last three quarters in a row.

Their most recent report was August 18th. HD announced its Q2 earnings were up +14% from a year ago to $1.71 per share. Revenues were up +4.3% to $24.83 billion. Comparable store sales came in better than expected with a +4.2% improvement.

Wall Street analysts seem bullish with firms like Deutsche Bank and UBS recently raising their price targets on HD. Currently the point & figure chart is bearish but a rally past $120.00 would generate a brand new buy signal.

Earlier I mentioned that HD has been stuck in a long trading range or consolidation for most of 2015. With the exception of a few days, shares of HD have been churning sideways in the $110-120 range. Today HD looks poised to breakout from this channel. The $120.00 level is round-number resistance. Tonight we are suggesting a trigger to buy calls at $120.25. Plan on exiting prior to HD's earnings report in mid November.

- Suggested Positions -

Long NOV $125 CALL (HD151120C125) entry $1.43

10/08/15 triggered @ $120.25
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

The Cooper Companies Inc. - COO - close: 141.99 change: -0.69

Stop Loss: 150.25
Target(s): To Be Determined
Current Option Gain/Loss: +4.9
Average Daily Volume = 469 thousand
Entry on October 08 at $141.75
Listed on October 06, 2015
Time Frame: Exit PRIOR to November options expiration
New Positions: see below

10/08/15: Our COO trade is open. Shares fell to new multi-year lows and hit our entry trigger at $141.75.

COO spent most of Thursday churning sideways in the $141.25-142.25 range. If you're looking for a new entry point consider waiting for COO to trade below $141.25 as your next entry point.

Trade Description: October 6, 2015:
Healthcare stocks have been strong market performers for years. The group seems to be struggling with healthcare down -11% in the third quarter. Shares of COO are also underperforming the broader market. COO is down -10.7% year to date but it's down -23.4% from its 2015 highs. That means shares are in a bear market.

If you're not familiar with the company, here's a brief description: "The Cooper Companies, Inc. is a global medical device company publicly traded on the NYSE Euronext (COO). Cooper is dedicated to being A Quality of Life Company(TM) with a focus on delivering shareholder value. Cooper operates through two business units, CooperVision and CooperSurgical. CooperVision brings a refreshing perspective on vision care with a commitment to developing a wide range of high-quality products for contact lens wearers and providing focused practitioner support. CooperSurgical focuses on supplying women's health clinicians with market leading products and treatment options to improve the delivery of healthcare to women. Headquartered in Pleasanton, CA, Cooper has close to 10,000 employees with products sold in over 100 countries."

Earnings results have been mixed but there has been one constant over the last three quarters. COO has missed Wall Street's revenue estimate the last three quarters in a row. Plus, COO management has lowered their revenue guidance three quarters in a row.

The company's most recent earnings report was its Q3 results, announced on September 3rd. Earnings were $1.97 per share. That beat estimates by two cents but represents a -2% drop from a year ago. Revenues were down -6.8% to $461.7 million.

Shares of COO plunged on its revenue miss and lowered revenue guidance. The oversold bounce in September has failed. Now shares are poised to breakdown down to new 2015 lows and could begin its next major leg lower. The stock found support near $142.00 last month. Tonight we are suggesting a trigger to buy puts at $141.75. Plan on exiting prior to November options expiration. Investors may want to limit their position size to reduce risk because COO's option spreads are a little bit wide.

- Suggested Positions -

Long NOV $140 PUT (COO151120P140) entry $4.10

10/08/15 triggered @ $141.75
Option Format: symbol-year-month-day-call-strike