Option Investor

Daily Newsletter, Thursday, 10/15/2015

Table of Contents

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

Market Wrap

Data, Earnings Drive Rally

by Thomas Hughes

Click here to email Thomas Hughes
A round of mixed economic data and the onset of earnings season supported the market today.


A round of mixed economic data and the onset of earnings season helped support the market today. Weak data has pushed back rate hike expectations, alleviating fears and allowing the market to focus on earnings. Earnings are generally positive relative to expectations, nothing to brag about but leading to growth later this year and next.

International markets were positive. Asian indices gained 1% to 2% in a session largely devoid of market moving news, European indices gained a little over 1% driven primarily by earnings. The early pre-market session was busy for us here at home. Th economic calendar was relatively heavy today and complimented by an equally heavy dose of earnings. Futures trading indicated a positive open all morning but early strength faded after the release of 8:30AM data, cutting indicated gains by early half. At the open the market was indicated higher by a little more than a half percent and that gain was made within the first few minutes of open trading.

Market Statistics

The first half of the day saw a mild rally to an early high and then steady retreat back to the day's opening levels. The market hit bottom just above today's opening prices and then began another, slightly more decisive, rally which took the indices back to today's highs and higher. By 2PM the broad market was approaching the 2 month highs set earlier this week and looking ready to test resistance. By 3PM the S&P 500 was breaking resistance and moving up to set another daily high, a high that held into the close of the day.

Economic Calendar

The Economy

Lot's of data today. First up, Initial Jobless Claims. Claims by -7,000 from a downward revision of -1,000 to hit 255,000 and match the lowest level of claims in over a decade. The 4 week moving average of claims also fell, losing -2,250, to hit 265,000. This is the lowest level for the average since December of 1973. On a not adjusted basis claims rose by 12.3% versus an expected 15.6% but remain down for the year. On a year-over-year basis not adjusted claims are down -6.8% from the comparable period. Pennsylvania and California had the largest gains in claims, 2,548 and 2,351. Michigan and New York had the largest declines in claims, -2,436 and -1,614.

Continuing Claims also fell, -50,000, to hit 2.158 million. This is a new low and the lowest level since November of 2000. Last week's figure was revised up by 4,000. The four week moving average fell by -21,500 and also hit a new low not seen since November of 2,000.

The total number of Americans receiving unemployment benefits also fell, shedding -7,496. This is another new low in total claims and the 10th week of decline for this number. The NFP number may have been weak last month but so far none of the other employment data supports weakening in the labor market. Based on the jobless claims numbers it looks like less people with jobs are finding themselves without a job, less people who lose a job can't find a new one within a week and the total number of people without work is declining.

The Consumer Price Index declined by -0.2% in September, in line with expectations and furthering expectations for a delayed rate hike. The drop is primarily due to a decline in gasoline prices but all components of the energy index posted declines. The energy index fell -4.7% off setting gains in other areas such as food, and all-items less food and energy. Food inflation ran at 0.4% while ex-food and energy is running at 0.2%. On a trailing 12 month basis CPI remains flat.

The Empire State Manufacturing Survey came in at -11.4, 3 points higher than last months reading. Despite the gain it remains negative and lower than the expected -8.0 consensus. Within the report new orders, shipments, unfilled orders and employment all declined. The labor component shows declining employment levels and less hours worked, concerning and contrary to the claims data. The forward looking portion of the survey remains positive but was described as tepid within the report.

The Philadelphia Federal Reserve Manufacturing and Business Outlook Survey shows that conditions declined for a second month in that region. The index came in at -4.5%, an improvement from last month's -6% but below expectations for -2.5%. New orders, shipments and employment all declined and fell below zero. Firms reported declines in the number of hours worked as well as employment levels. The forward looking component of this survey also declined but remains positive and optimistic at 36.7.

On the one hand labor data shows a healthy labor market. On the other manufacturing data shows signs of a weakening labor market, as well as possible economic contraction. The question is, which will lead which moving forward? Will labor conditions lead to ongoing improvement in the economy, or will declining manufacturing output hurt the labor market, the housing market and the economy in general? Based on outlook for earnings and economic growth into next year I tend to believe the former rather than the latter.

The Oil Index

Oil trading was volatile in today's session. Early gains were wiped out by a surprise build in inventory, double the expected 3.5 million barrels, and then a late day rally recouped losses suffered on the inventory data. Price for WTI settled near $46.50 for the day and remain under pressure. A new report shows that there is a .5 billion barrel supply glut year-to-date and this situation is not getting any better as global production remain high.

The Oil Index gained nearly 1.5% in today's session. Despite oil fall from its recently set three month high prices are above the low set last month and helping to support earnings outlook. The index has now touched back to support following a strong rally and is bouncing higher with initial upside target near the August high (1235) and the 50% retracement level. Momentum is strong, although MACD shows it has retreated from a peak, and could be enough to carry the index up to test resistance. Stochastic is also strong, %D has crossed the upper signal line and %K is confirming strength as well. A break above resistance could carry this index up to next resistance at the bottom of the previously broken long term up trend line near 1,325. The caveat is oil prices. It looks like the sector is ready to make a run despite low oil prices so I am cautious. A drop in oil, or a break through support near $45, could help solidify resistance

The Gold Index

Low inflation and weak manufacturing data are helping to weaken the dollar and have sent gold up to levels not seen since late June. Today gold gained about $5 and traded around $1185 and approaching resistance targets near $1200. The move is driven on data and fed expectations and could reverse as quickly as it has rallied. However, despite my over all bearish view on gold, it is obvious the current move is up and that for now there is little sign of resistance, it's doubtful data will alter outlook in the near term. If today's inflation data is any indication an October rate hike is probably off the table leaving December the last chance for this year. The next FOMC meeting is in two week, October 27th and 28th, and offers a possible catalyst for the metal.

The gold miners are being supported by gold prices. The Gold Miners ETF GDX made nominal losses in today's session but was able to create a white bodied candle. The ETF opened with a loss but moved up from recently broken resistance, possibly turning to support, and closed just below yesterday's closing prices. The indicators are bullish and pointing higher but momentum remains weak and I am skeptical of the rally in gold so I am concerned of whipsaw/false-break out. If gold prices drift higher to test resistance this ETF could follow with upside target near $18.

In The News, Story Stocks and Earnings

The big banks, and quite a few smaller banks, have been reporting this week and the results are largely positive. Wells Fargo reported a solid quarter as did Bank of America. A few weak spots have emerged, such as negative impact from low trading volumes, but it is isolated. The sector as whole is looking sound with positive forward outlook and was one of the leaders in today's session. The XLF Financial SPDR gained more than 2.3% in a strong move up from support levels and breaking above the short term moving average. The ETF is accompanied by bullish indicators and appears to be moving back toward the top of the 12 month range. First target is near $24, with additional targets near $25 and $25.50.

BB&T reported before the bell. The North Carolina based bank reported $0.70 adjusted earnings on a 4.5% increase in revenue. Earnings are 4 cents ahead of expectations although still down 1 cent from last year in the comparable quarter. Results include the addition of Susqhehanna Bancshares which increased total assets held by the bank to more than $200 billion. Shares of the stock responded positively, gaining more than 3% and breaking above the short term moving average.

Wynn Resorts reported after the bell. The company produced EPS of $0.86, in line with estimates, on lighter than expected revenue. Both Macau and Las Vegas produced weaker than expected results but Macau was the real loser, revenue in that region fell nearly 40%. Despite the miss the board approved a cash dividend of $0.50. The news was not met with approval and sent shares down more than -2.5% in after hours trading.

Mattel reported after the bell and did not meet expectations. The company reported global sales fell by -4% in constant currency led by declines in over seas markets. EPS came in at $0.71 per share, short of the $0.77 projected by analysts. Despite the miss execs reiterated full year guidance and said they were comfortable with performance at this stage of the companies turn-around.

The Indices

Price action was bullish from the earliest part of the day but I did not expect the rally to advance quite as far as it did. Early action was lack luster with little indication of big moves on the way but late day activity pushed the indices higher, and then higher again. Today's session was led by the NASDAQ Composite which gained 1.82%. The tech heavy index created a long white candle moving up from support levels and the short term moving average with bullish indicators. MACD is bullish and has ticked higher with today's data and stochastic is moving higher and about the cross the upper signal line. The index looks like it will keep moving higher now that it has set a new one month high with next target near 4,950.

The S&P 500 made the next largest gain, nearly 1.5%. The broad market also created a long white candle and looks a little stronger than the NASDAQ. Today's action confirmed support along the previously broken up-trend line and is supported by rising indicators. Both MACD and stochastic ticked higher with stochastic showing additional strength with a cross above the upper signal line. The index has also set a new two month high adding additional evidence of bullish intent. Next target is near 2,050 with a chance for a move up to retest the current all time high.

The Dow Jones Transportation Average made the third largest gain, 1.44%. The transports did not set a new high in today's session but look set to try. Today's action created a long white candle moving up from the short term moving average, supported by the indicators. The indicators are both bullish with MACD ticking higher and stochastic approaching the upper signal line. The index may find resistance near 8,275 but it looks very likely it will be tested at least. A break above this level could take the index as high as 8,500.

The Dow Jones Industrial Average made the smallest gain in today's session, only 1.28%. The blue chips also did not set a new high with today's action, but also look set to try. The indicators are bullish and declining momentum has leveled off and could easily carry the index up to resistance near 17,250. A break above this level could carry the index up to 17,500 in the near term with a run at the all time high a possibility, should earnings season not leave us wanting.

It looks like the rally is on, although there is still a lot of earnings season left to go. The indices made a nice move today, if on mediocre volume, and are set to continue moving higher. Weak data is a concern, we don't want to see a trend develop, but for now it is helping to reduce FOMC fear and allowing the market to focus on earnings. Earnings are OK, not stellar by any means, but generally better than expected with continued expectations for improvement into the next quarter and next year. So long as this season holds to trend and the economy doesn't deteriorate the rally should continue with a real chance for the market to reach the current all time highs.

Tomorrow is another big day for data, 5 reports including Michigan Sentiment, JOLTs and Industrial Production. It won't be huge day for earnings but there will be a few reports from regional banks, as well as General Electric. It's also options expiration day so there could be some volatility associated with that.

Until then, remember the trend!

Thomas Hughes

New Option Plays

Setting Up For A Pre-Earnings Rally

by James Brown

Click here to email James Brown


Facebook, Inc. - FB - close: 95.96 change: +1.89

Stop Loss: 89.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 31 million
Entry on October -- at $---.--
Listed on October 15, 2015
Time Frame: Exit PRIOR to earnings on November 4th
New Positions: Yes, see below

Company Description

Trade Description:
Facebook needs no introduction. It's the largest social media platform on the planet. The company is quickly approaching 1.5 billion monthly active users. In early September 2015 FB hit a new milestone - one billion people logged into Facebook in a single day (that's about 1 out of every 7 humans).

The company continues to grow. In addition to their Facebook social media powerhouse they also own Facebook Messenger, WhatsApp, and Instagram. Their WhatsApp product is the largest messaging service on the planet with over 900 million monthly active users. Meanwhile FB's photo-sharing Instagram property has more than 300 million active users. The company has been ramping up their advertising efforts to slowly monetize Instagram. FB has also been very successful with adding video ads to their Facebook platform, which is driving a lot of revenue growth.

FYI: FB also owns Occulus Rift, the virtual reality company, but it's probably a few more years before VR goes mainstream.

The stock can be volatile so traders may want to limit their position size to reduce risk. The bounce off FB's late September low has lifted shares toward resistance near $95.00-96.00. A breakout here could spark the next big leg higher. If you look at the trend line of lower highs then FB has already broken through resistance.

The point & figure chart is bullish and forecasting a $106.00 target. Wall Street is currently more optimistic. The average price target on FB is about $111.00. Shares have recently received a couple of new price targets in the $115.00 area. You could argue that the $100.00 level is round-number, psychological resistance. I suspect FB will be able to break through it as part of a pre-earnings run up. We will plan on exiting prior to FB's earnings report on November 4th. Tonight we are suggesting an entry trigger at $96.60.

Trigger @ $96.60

- Suggested Positions -

Buy the NOV $100 CALL (FB151120C100) current ask $2.24
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

Hope for More Central Bank Stimulus Fuel Gains

by James Brown

Click here to email James Brown

Editor's Note:

Weak economic data is fueling new hope that Asian and European central banks will provide more stimulus to their economies soon. Meanwhile there is a growing expectation that the Federal Reserve will not raise rates this year.

Stock markets delivered very widespread gains around the globe today.

COO hit our stop loss. JWN hit our entry trigger.

Current Portfolio:

CALL Play Updates

Costco Wholesale Corp. - COST - close: 151.77 change: +1.93

Stop Loss: 147.45
Target(s): To Be Determined
Current Option Gain/Loss: +95.0%
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

10/15/15: The market's widespread bounce generated a bullish environment for stocks but COST actually underperformed the major averages and only gained +1.28%. Today's move is an "inside day" and suggests some indecision by investors.

No new positions at this time.

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

10/14/15 Wal-Mart warns and retail-related stocks suffer
10/10/15 new stop @ 147.45
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: 77.70 change: +2.12

Stop Loss: 72.95
Target(s): To Be Determined
Current Option Gain/Loss: +16.4%
Average Daily Volume = 3.6 million
Entry on October 12 at $76.25
Listed on October 07, 2015
Time Frame: Exit PRIOR to earnings in November
New Positions: see below

10/15/15: Thursday's rally in CRM is very encouraging. Yesterday the stock looked like it might have formed a short-term top. Today CRM surged +2.8%, outperformed the major indices, and erased yesterday's losses. This is a new all-time closing high for CRM.

More conservative investors may want to raise their stop loss.

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.

(Side note - 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).

- Suggested Positions -

Long DEC $80 CALL (CRM151218C80) entry $3.05

10/12/15 triggered @ $76.25
Option Format: symbol-year-month-day-call-strike

CVS Health Corp. - CVS - close: 102.41 change: +1.96

Stop Loss: 99.40
Target(s): To Be Determined
Current Option Gain/Loss: -34.3%
Average Daily Volume = 4.7 million
Entry on October 13 at $103.75
Listed on October 12, 2015
Time Frame: Exit PRIOR to earnings on October 30th
New Positions: see below

10/15/15: CVS was in rally mode nearly all day long. The stock found support near $100.25 this morning and shares then reversed higher and eventually closed up +1.9%. Yesterday I suggested looking for a bounce as a new entry point and we got it.

Trade Description: October 12, 2015:
Healthcare stocks have outperformed the broader market over the last few years. The country's adjustment to the Affordable Care Act (Obamacare) is one reason. There are huge demographic shifts occurring as well. Currently the U.S. sees 10,000 Baby Boomers hit 65 years old every single day. This is a trend that will last for years and highlights the aging population in the U.S. Older consumers have higher healthcare costs and they will likely try to save money by using companies like CVS.

CVS is in the healthcare sector. According to the company, "CVS Health (CVS) is a pharmacy innovation company helping people on their path to better health. Through its more than 7,800 retail drugstores, nearly 1,000 walk-in medical clinics, a leading pharmacy benefits manager with more than 70 million plan members, and expanding specialty pharmacy services, the Company enables people, businesses and communities to manage health in more affordable, effective ways. This unique integrated model increases access to quality care, delivers better health outcomes and lowers overall health care costs."

CVS has been making some key acquisitions lately. They spent $1.9 billion to buy all of Target's (TGT) 1,660 pharmacies across 47 states. CVS will operate them as a store-within-a-store format. CVS also acquired Omnicare for almost $13 billion. Omnicare is the biggest provider of pharmacy services to nursing homes, assisted living facilities, and other healthcare providers. This is a key acquisition to capitalize on the aging of America.

CVS has been consistently beating Wall Street's bottom line earnings estimates. Their most recent report was August 4th. CVS said their Q2 earnings were $1.19 a share, above estimates. Revenues rose +7.4% to $37.17 billion, which was in-line with expectations. Management offered slightly bullish guidance, above analysts' estimates.

Technically healthcare stocks peaked this past summer and began to correct lower in August. CVS was no exception. The trading on August 24th, the market's August-correction low, was more than a little crazy in shares of CVS. If we ignore that one day, then CVS has corrected from $113.45 down to $96.35 by late September. That was a -15% pullback. Fortunately investors finally stepped in to buy the decline and CVS has produced a bullish reversal higher.

The last few days have seen CVS' stock rally through resistance at $100. Today's rally (+1.0%) was significant because CVS closed above technical resistance at both its 50-dma and its 200-dma. The intraday high today was $103.52. I am suggesting a trigger to buy calls at $103.75. We will plan on exiting this trade prior to CVS' earnings report on October 30th.

- Suggested Positions -

Long NOV $105 CALL (CVS151120C105) entry $2.07

10/13/15 triggered @ $103.75
Option Format: symbol-year-month-day-call-strike

The Walt Disney Company - DIS - close: 107.89 change: +2.16

Stop Loss: 101.85
Target(s): To Be Determined
Current Option Gain/Loss: +13.9%
Average Daily Volume = 9.9 million
Entry on October 12 at $106.50
Listed on October 10, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: see below

10/15/15: Stocks were in rally mode today and DIS rebounded higher. It's +2.0% gain outperformed the major indices and left shares at a two-month high.

Tonight we are adjusting the stop loss up to $101.85.

Trade Description: October 10, 2015:
The Force is strong with this one. DIS is poised to reap a galaxy of profits as the company re-launches the Star Wars franchise.

DIS has been a big cap superstar with strong, steady gains off its 2011 lows. That changed in August this year. Shares of DIS plunged into a very sharp and painful correction. The catalyst for the drop was the company's earnings report. 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 accelerated in August thanks to the global market meltdown. Since then shares have recovered.

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 were 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.

(sidenote - The advertising environment for television should also improve in 2016 thanks to the U.S. presidential election.)

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 list)

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

Content is still king and DIS rules. They're going to make a hoard of money off their Star Wars movies but that's just the tip of the iceberg. There will be tons of money made on merchandising from toys, clothing, video games, and just about everything else under the sun they can slap a Star Wars logo on.

The stock's correction from $121 to $90 was abrupt. DIS quickly fell from correction territory to bear-market territory in just a few days. Fortunately DIS produced a pretty good rebound. Yet the oversold bounce stalled under resistance near $105 and its 200-dma.

The breakdown under round-number support at $100 in late September looked ugly but there was no follow through lower. Since the late September low shares have rallied and Friday, October 9th, saw DIS close above resistance at its 50-dma and above resistance at $105.00. Now it just needs to clear technical resistance at the 200-dma currently at $106.21. We are suggesting a trigger to buy calls at $106.50.

We will plan on exiting prior to DIS' earnings report in early November. More aggressive investors might want to hold over the report (if that's you I suggest considering the January 2016 calls).

- Suggested Positions -

Long NOV $110 CALL (DIS151120C110) entry $1.66

10/15/15 new stop @ 101.85
10/12/15 triggered @ $106.50
Option Format: symbol-year-month-day-call-strike

The Home Depot, Inc. - HD - close: 121.81 change: +1.54

Stop Loss: 117.45
Target(s): To Be Determined
Current Option Gain/Loss: -1.4%
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

10/15/15: HD rebounded from yesterday's dip toward $120. Last night I suggested a new entry point at $120.75 and HD delivered this morning.

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

10/10/15 new stop @ 117.45
10/08/15 triggered @ $120.25
Option Format: symbol-year-month-day-call-strike

Ingredion Inc. - INGR - close: 90.53 change: +0.70

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: -45.7%
Average Daily Volume = 458 thousand
Entry on October 12 at $91.05
Listed on October 08, 2015
Time Frame: Exit PRIOR to earnings on October 29th
New Positions: see below

10/15/15: I was expecting short-term support at $90.00 but instead INGR found support in the $89.60-90.00 region. Shares did bounce today but INGR's +0.7% gain underperformed the broader market.

This relative underperformance is a little bit of a warning sign. Instead of buying calls here, consider waiting for INGR to trade above $91.00 again and then consider buying calls.

Trade Description: October 8, 2015:
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.

- Suggested Positions -

Long NOV $95 CALL (INGR151120C95) entry $1.75

10/12/15 triggered @ $91.05
Option Format: symbol-year-month-day-call-strike

NIKE, Inc. - NKE - close: 128.79 change: +2.95

Stop Loss: 122.45
Target(s): To Be Determined
Current Option Gain/Loss: +23.5%
Average Daily Volume = 3.8 million
Entry on October 12 at $126.15
Listed on October 08, 2015
Time Frame: Exit PRIOR to earnings in December
New Positions: see below

10/15/15: NKE provided a very optimistic outlook at its investor day yesterday. Wall Street followed up with some bullish analyst comments today and two new (higher) price targets. Shares of NKE rallied +2.3% to close at new all-time highs.

Tonight we are adjusting the stop loss to $122.45.

Trade Description: October 8, 2015:
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.

- Suggested Positions -

Long 2016 JAN $130 CALL (NKE160115C130) entry $4.05

10/15/15 new stop @ 122.45
10/12/15 triggered @ $126.15
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

B/E Aerospace Inc. - BEAV - close: 45.00 change: +0.01

Stop Loss: 48.20
Target(s): To Be Determined
Current Option Gain/Loss: +11.8%
Average Daily Volume = 1.3 million
Entry on October 14 at $45.75
Listed on October 13, 2015
Time Frame: Exit PRIOR to earnings on October 27th
New Positions: see below

10/15/15: Shares of BEAV did not participate in the market's very widespread rally today. That's good news if you're bearish. BEAV closed virtually unchanged on the session. I don't see any changes from my recent comments.

Trade Description: October 13, 2015:
The business jet market is tough these days. Falling demand from foreign customers and companies cutting their capex budgets has hurt sales. Shares of BEAV have suffered due to the bearish outlook.

BEAV is in the industrial goods sector. According to the company, "B/E Aerospace is the world's leading manufacturer of aircraft cabin interior products. B/E Aerospace designs, develops and manufactures a broad range of products for both commercial aircraft and business jets. B/E Aerospace manufactured products include aircraft cabin seating, lighting systems, oxygen systems, food and beverage preparation and storage equipment, galley systems, and modular lavatory systems. B/E Aerospace also provides cabin interior reconfiguration, program management and certification services. B/E Aerospace sells and supports its products through its own global direct sales and product support organization."

BEAV has missed Wall Street revenue estimates two quarters in a row. The most recent report (July 22nd) saw revenues crumble -35%. Management has also lowered their guidance two quarters in a row.

Last month BEAV announced they were cutting 450 jobs as they shuttered some facilities and eliminated some product lines. The company said they're trying to reduce expenses due to slowing revenues expected in 2015 and 2016.

Technically the stock is bearish. Shares are in a bearish trend of lower highs and lower lows. The oversold bounce in October has failed at the trend of lower highs (resistance). The point & figure chart is bearish and forecasting at $41.00 target. Today saw BEAV's attempt at a bounce fail and shares underperformed the market with a -1.49% decline. We suspect BEAV will continue to drop into its earnings report as investors fear the worst.

Use a trigger to launch bearish positions at $45.75. Plan on exiting prior to BEAV's earnings report on October 27th.

- Suggested Positions -

Long NOV $45 PUT (BEAV151120P45) entry $1.70

10/14/15 triggered @ $45.75
Option Format: symbol-year-month-day-call-strike

Nordstrom Inc. - JWN - close: 67.42 change: +0.55

Stop Loss: 70.05
Target(s): To Be Determined
Current Option Gain/Loss: +12.4%
Average Daily Volume = 1.4 million
Entry on October 15 at $66.40
Listed on October 14, 2015
Time Frame: Exit PRIOR to earnings on November 12
New Positions: see below

10/15/15: Our new bearish play on JWN is open but I am suggesting caution tonight.

The stock displayed some volatility this morning. JWN gapped higher and then plunged to a new 2015 low. Shares hit $65.76. Our trigger to launch bearish positions was hit at $66.40. Just as quickly JWN reversed higher. The stock ended the session with a +0.8% gain.

The $68.00 level should be short-term resistance. Nimble traders could watch for a failed rally near $68.00 as a new entry point. Otherwise I would hesitate to launch new positions.

Trade Description: October 14, 2015:
Normally Q4 is the time investors think about buying retail-related stocks in anticipation of a strong holiday shopping season. This year the retailers' Q4 is off to a weak start.

JWN is in the services sector. According to the company, "Nordstrom, Inc. is a leading fashion specialty retailer based in the U.S. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 316 stores in 39 states, including 120 full-line stores in the United States, Canada and Puerto Rico; 188 Nordstrom Rack stores; two Jeffrey boutiques; and one clearance store. Additionally, customers are served online through Nordstrom.com, Nordstromrack.com and HauteLook. The company also owns Trunk Club, a personalized clothing service serving customers online at TrunkClub.com and its five clubhouses. Nordstrom, Inc.'s common stock is publicly traded on the NYSE under the symbol JWN."

JWN's earnings results have struggled this past year. Last November they beat estimates by a penny but guided lower. When JWN reported earnings in February 2015 they missed expectations and guided lower the second quarter in a row. In May this year they missed estimates again. Their most recent earnings report was August 13th. JWN beat Wall Street estimates by three cents with a profit of $0.93 a share. Revenues were up +9% to $3.6 billion, slightly above estimates. Management actually raised their 2016 guidance. The stock popped higher on the earnings beat and bullish guidance. Unfortunately the rally did not last.

Shares of JWN reversed and formed a bearish double top. Since then investors have continued to sell the rallies. The big drop on October 7th was an adjustment for JWN's special cash dividend of $4.85. There has been virtually no bounce.

Today JWN underperformed as the market reacted to Wal-Mart's earnings warning. Suddenly investors are concerned that consumer spending this holiday season may be weaker than expected. That doesn't bode well for JWN. The trend is already down and the point & figure chart is forecasting at $58.00 target.

Shares readers could argue there is potential support near the $65.00 level but we think JWN is headed a lot lower and could drop toward round-number support at $60.00. Tonight we are suggesting a trigger to buy puts at $66.40. Prepare to exit prior to JWN's earnings report in November.

- Suggested Positions -

Long NOV $65.15* PUT (JWN151120P65.15) entry $1.13

10/15/15 triggered @ $66.40
*NOTE: The odd option strike is due to JWN's special cash dividend of $4.85 per share. The ex-distribution date was Wednesday, October 7, 2015. The option market adjusted all the prior option strikes down -4.85.

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


The Cooper Companies Inc. - COO - close: 145.23 change: +5.04

Stop Loss: 143.60
Target(s): To Be Determined
Current Option Gain/Loss: -27.3%
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

10/15/15: The oversold bounce in COO accelerated higher in a big way. Shares added more than $5.00 (+3.59%). Our stop loss was hit at $143.60.

- Suggested Positions -

NOV $140 PUT (COO151120P140) entry $4.10 exit $2.98 (-27.3%)

10/15/15 stopped out
10/10/15 new stop @ 143.60
10/08/15 triggered @ $141.75
Option Format: symbol-year-month-day-call-strike