Option Investor

Daily Newsletter, Thursday, 11/12/2015

Table of Contents

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

Market Wrap

Central Bankers Rule The Day

by Thomas Hughes

Click here to email Thomas Hughes
Central bankers and central bank policy ruled the day. Speeches and comments from ECB and FOMC members moved the market.


So many central bank members had speeches or made comments today you might have thought there'd been a policy meeting. There was no policy meeting, merely a half dozen speeches from Federal Reserve officials including Janet Yellen, as well as some comments from the ECB's Mario Draghi. The gist of the story remains the same; the ECB is dovish, perhaps more dovish the revealed at their last meeting, and the FOMC is still on the hawkish side, aiming for a rate hike in the near, near future.

Draghi says that the ECB is looking at a wide range of instruments with which they could affect policy. He also says that core inflation growth was weakening, and that downside risk for the economy were clearly visible. On the FOMC front the market received remaiks fromYellen, Bullard, Lacker, Evans and Dudley, all of whom see us on track for rising inflation, tight labor markets and rising core inflation. As a whole they remain data dependent but Dudley hedged by saying the risks of moving to fast or moving to slow were nearly balanced.

It is still unclear if they will raise rates or not come December but they all seem ready to do so if the economy firms up, or shows signs it will firm up, and there is an entire cycle of monthly data between now the next meeting to sway their decision.

Market Statistics

Pre-opening trading was quiet, the market was largely waiting on the Fed remarks which were scheduled for different events throughout the day. Asian markets were largely flat although their was a surprise rally in Hong Kong shares, they closed with a gain near 2.5%. European shares began the day just below break even levels and slowly lost traction throughout the day. Traders were not cheered by Draghi's dovish stance, or not enough to rally anyway, driving the DAX down by just over -1% and other indices in the region down nearly -2%.

Futures trading here at home indicated a flat to slightly negative open for most of the morning. Fed speak and economic data did nothing to support the market and the trade slipped going into the open. The market began to sell off as soon as the opening bell sounded and moved lower by more than -0.5% within the first 15 minutes of trading. Early bottom was hit by 9:45AM, some sideways movement carried into the lunch hour when a new intraday was low hit, near -0.85% for the SPX. Another intraday bottom was hit by 12:30 and induced another 2 hours of sideways action lasting until late afternoon when another new intraday low was made. Selling continued the rest of the day and into the close leaving the indices near their lows for the day.

Economic Calendar

The Economy

There was not a lot on today's economic calendar but it remains positive and in support of labor market health. First up is the weekly jobless claims data. Initial claims held steady at last week's unrevised 276,000. This is slightly higher than the estimated decline to 270,000. This is the 2nd week claims have been at this level, a one month high, but they remain just off the 43 year low and trending at historic low levels suggesting low low levels of job turnover and loss.

The four week moving average of initial claims rose by 5,000 with this weeks data but also remains in down trend and near historic lows. On a not adjusted basis claims rose by 12.5%, in line with the 12.5% expected by the seasonal factors. Not adjusted claims are now down -6% on a year over year basis. Michigan and California had the largest increases in claims, 3,942 and 2,250, while New York and South Carolina had the largest decreases, -777 and -571.

Continuing claims rose 5,000 from an upward revision of 6,000 to 2.174 million. The four week moving average of claims also rose, by 2,250, but remains in downtrend and near historic lows, as does the weekly figure. The total number of claims rose 13,565 to 1.925 million. This is the 3rd week in gains in total unemployment but this number is also still trending lower, and just off the long term historic lows.

Today's bonus data was the monthly JOLTs report on job openings and labor turnover. This data is lagging, this report is for September, but nonetheless gives insight to the labor market. This month job openings rose by 0.1 million to 5.4 million and is approaching the all time high, a bar set just two months ago. This number was driven by a surge in openings among business & professional services, health care providers and retailers. The hires rate fell slightly, to 3.6%, while the quits rate held steady for the 6th month in a row at 1.9%. The decline in the hires rates is a concern and may reflect a lack of available employee's as indicated by some reports and comments I've heard. The quits rate is a positive, it shows employee's with jobs remain confident of finding a new, different or better job should the need arise.

Tomorrow is a big data day with at least 5 important data points. First up is PPI, followed by Retail Sales, Michigan Sentiment and Business Inventories. Within the retail sales will be data on the auto industry, which has been booming, and could give a hint into next week's auto sales data. Next week will be important data wise too, as if any week isn't, including Empire Manufactuing, CPI, Industrial Production, Home Builders Index, Housing Starts, Housing Permits, Philly Fed, Leading Indicators and the FOMC minutes from the last meeting.

The Oil Index

Oil fell to a three month low today on a huge build in US stockpiles and a pledge from OPEC they would keep pumping. US inventory data was release today because of the Veterans Day Holiday yesterday, thank you to all vets reading this. Today's data showed a build more than 4 times expected, 4.2 million barrels, and adds weight to the supply/demand imbalance. At the same time OPEC is gearing up for their annual meeting, scheduled for next month, and are standing by their view demand would grow in 2016 and that they were going to keep pumping. Basically, still no reason to bet bullish in oil so far as I can see.

The Oil Index lost more than -2.2% today in a move that broke below the short term moving average. The index is on the hunt for support with targets just below today's closing level, near 1,150. The indicators have rolled over into a bearish signal, confirming each other, so a move down to support looks likely. If oil prices continue to lose ground the index could easily break support with next targets near 1,100 and 1,050.

The Gold Index

Gold did not make much of a move in today's trade, I'd have guessed the combination of Dovish Draghi and the Fed's cautious hawkishness would have helped support the dollar and crush gold. The metal had a volatile day, at first trying to move higher and then falling to new lows, only to bounce back to near break even for the day. I remain bearish on gold, I see no place for the dollar to go but up, and gold to go down, in light of the opposing stances taken by the FOMC and the ECB. Today's talk has helped cement that view, the market may be waiting for more data and/or an actual policy change.

The gold miners are slipping along with gold. The miners ETF GDX fell nearly -3% at the open but was able to regain most of the loss, closing down -1.25%. The miners have yet to make a new low, unlike gold, but are fast approaching support at the long term low, set 3 months ago, just below $13. The indicators are bearish and support a move down to test the low but may also be indicating support will hold, or at least cause a consolidation or bounce. Stochastic is low in the range and pointing lower but extremely oversold, MACD is bearish and strong, but retreating from a peak, conditions that combined with support targets are a good indication a decline may be paused or stopped at this level. The caveat as always is gold and gold prices, if gold breaks support at the long term low this index will likely follow.

In The News, Story Stocks and Earnings

The dollar lost ground today in the face of hawkish sounding Fed members and increased dovishness from Mario Draghi. The Dollar Index fell about a half percent on an intraday basis but did not break support. The index appears to be in a consolidation, above support and below resistance, with bullish outlook and conditions. The indicators are bullish but showing near term weakness, consistent with resistance near the all time high. The index may continue to move sideways from here while the data rolls in, and possible up to the actual December FOMC and ECB meetings, unless the data is good and clearly supports economic health.

Retailer Kohl's was able to buck today's sell-off. The high end discount chain reported earnings this morning that beat expectations, $0.75 adjusted versus $0.69 in the prior year, driven on a 1% increase in gross sales. Shares of the stock jumped on the news, soaring more than 7.5% in the pre-market session and gapping up at the open. The move was capped by the short term moving average which provided today's resistance. This one may have hit a bottom, it will be interesting to watch in the coming weeks.

Cisco reported after the closing bell and beat on the top and bottom line. The technology provider reported EPS of $0.59 versus the expected $0.56 consensus estimate. Margins also improved but despite the positive numbers shares of the stock fell, dropping -2.5% in after trading on weak guidance. The stock is now in the middle of the 12 month range with bearish indicators.

Nordstroms also reported after the bell. The nation wide retailer of fashionable goods did not meet expectations. Comparable earnings came in far below consensus, $0.54 versus $0.71 expected, on light revenue and poor comp store sales increases. Comps were up only 0.9%, consensus was over 3%, and resulted in higher than expected inventory levels and a reduction in full year guidance. Shares of the stock fell on the news, falling more than -15% in after hours trading.

The Indices

The market fell again today, putting many of them back in negative territory for the year. Today's move extends the pull-back begun last week and has brought the market down to possible support levels. The move was led by the Dow Jones Transportation Average which lost -1.56%. The index was able to break below the short term moving average but did not yet set a new low. This could lead to further downside and is confirmed by the indicators which both created bearish crossovers with today's action. However, the move today does not have a lot of strength behind it and looks more like a continuation of recent market churn than an indication of severe correction. First support target is near 8,000 with a possible move to 7,750.

The Dow Jones Industrial Average made the next biggest decline in today's session, -1.44%. The blue chips also had their largest decline in over 6 weeks, coming to rest right at the short term moving average. This could provide support but it will be tested, the indicators are both bearish and pointing lower. MACD momentum is bearish, but very weak at this time and consistent with a pull back to support within an uptrend. The previous bull wave has some underlying strength, it made an extreme peak before winding down with two smaller peaks, so could easily retest the current 3 month high ifnot hit my target of the all time highs. Support for now is along the short term moving average with next target near 17,225.

The S&P 500 made the third largest decline, -1.40%, and broke below support and the short term moving average. The index could be moving down to retest the long term up trend line, broken last summer and regained last month, with downside target near 2,000. The indicators are both pointing lower in support of at least a test of today's lows, if not a lower low. However, as with the blue chips, this index showed us some strength with the rally and is indicated to retest its highs so pullback such as this are still buying opportunities.

The NASDAQ Composite made the smallest decline in today's session, only -1.22%. The tech heavy index fell below 5,050 but did not break below the short the term moving average. The indicators are bearish and pointing to a test of support but not showing much strength in that move. Support target is the short term moving average and just below that near 4,090. This index looks best set to retest its highs; not only is did the rally leading up to the 3 month high show strength, the peaks are convergent with the rally.

The market is pulling back and that is exactly what it looks like, a pull back and not a major correction. Today's action was largely an extension of profit taking begun last week, and partly a reaction to worse than expected earnings from the retail sector. It was also a reaction to central bankers and their view on the economy. The FOMC indicated they think the economy is on the brink of strong enough to warrant a rate hike, a move at once confirming economic strength and spurring fear the next crash is near.

The economic trends are positive and if spotty in places are gaining strength in others. The recovery has always been hurky jerky, moving first in one direction and then in another, and I don't think anything has changed; we're still in recovery, some things are going better than others.

At the same time earnings outlook is beginning to brighten. The 4th quarter is likely to be last quarter of negative earnings growth, if it doesn't turn positive by end of season, and beyond that projections become good, and then robust,through the end of 2016. All things that add up to rally in my opinion. I remain a bull and looking to buy when the dip is done.

Until then, remember the trend!

Thomas Hughes

New Option Plays

34 Days And Counting

by James Brown

Click here to email James Brown


The Walt Disney Company - DIS - close: 116.21 change: -0.31

Stop Loss: 113.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 10.6 million
Entry on November -- at $---.--
Listed on November 12, 2015
Time Frame: Exit PRIOR to 2016 January option expiration
New Positions: Yes, see below

Company Description

Trade Description:
Star Wars fans are counting down the days until episode seven, The Force Awakens, hits theaters. 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 during that time frame. 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.

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. The company has a strong line up of movies in the pipeline and they all feed their massive merchandising machine.

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 in August 2015 was abrupt. DIS quickly fell from correction territory to bear-market territory in just a few days. Fortunately DIS produced a pretty good rebound.

Several days ago DIS reported their Q4 earnings on November 5th. Analysts were expecting a profit of $1.14 a share on revenues of $13.52 billion. DIS delivered $1.20 a share. Revenues were up +9% to $13.51 billion. The market is still worried about DIS' ESPN unit but these concerns were overshadowed by excitement over the new Star Wars franchise, which kicks off on December 18. That's just 34 days away. Shares of DIS could see a pre-movie rally as the hype builds up for the movie launch.

Technically shares of DIS are arguably overbought with a surge from $98 to $118 since its late September lows. One reality of the market is that overbought stocks can always get more overbought. The stock did see some volatility on November 4th in reaction to earnings from rival Time Warner. Today shares of DIS displayed some strength. The S&P 500 fell -1.39% yet DIS only dropped -0.26%. Another reason DIS could outperform between now and year end is mutual fund and hedge fund managers trying to boost their performance. It's been a tough year for money managers. Odds are they will be chasing performance in the market. A high-profile, big cap winner like DIS is a prime target for them.

The high this week was $117.58. Tonight we are suggesting a trigger to buy calls at $117.75.

Trigger @ $117.75

- Suggested Positions -

Buy the 2016 JAN $120 CALL (DIS160115C120) current ask $2.55
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

Markets See Worst Day In Six Weeks

by James Brown

Click here to email James Brown

Editor's Note:

Another drop in crude oil and another day of disappointing earnings news and guidance fueled widespread losses in stocks. The S&P 500 suffered its worst session in six weeks.

ALGN has been removed.
IWM and DRI hit our stop losses.

Current Portfolio:

CALL Play Updates

Alkermes Plc - ALKS - close: 71.42 change: -2.32

Stop Loss: 69.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 699 thousand
Entry on November -- at $---.--
Listed on November 10, 2015
Time Frame: Exit PRIOR to December option expiration
New Positions: Yes, see below

11/12/15: The widespread market decline on Thursday hit ALKS pretty hard. Shares fell -3.1% and closed below their 10-dma. ALKS should find support at $70.00.

Currently our suggested entry point is $75.25. We may have to adjust our entry point or remove ALKS as a candidate if shares continue to sink.

Trade Description: November 10, 2015:
The healthcare and biotech names have started to show life again. Biotechs have definitely shown some relative strength in late October and now this week.

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."

Recent earnings results have generally been better than expected. On July 30th ALKS reported its Q2 results with both earnings and revenues coming in above expectations. Management raised their fiscal 2015 guidance.

ALKS beat analysts' estimates again when they reported their Q3 results on October 29th. The company lost ($0.18) a share but that was better than the estimates for ($0.21). Revenues were down -4.6% to $152.7 million but that was better than expected.

In ALKS' Q3 press release they provided a breakdown of revenues:

Manufacturing and royalty revenues from RISPERDAL CONSTA and INVEGA SUSTENNA/XEPLION were $67.6 million, compared to $68.5 million for the same period in the prior year.

Net sales of VIVITROL were $37.9 million, compared to $25.8 million for the same period in the prior year, representing an increase of approximately 47%.

Manufacturing and royalty revenues from AMPYRA/FAMPYRA 1 were $22.1 million, compared to $16.5 million for the same period in the prior year.

Royalty revenue from BYDUREON was $13.0 million, compared to $10.3 million for the same period in the prior year.

A few weeks ago ALKS announced that the FDA had approved their ARISTADA treatment for schizophrenia. ALKS explained that schizophrenia is a chronic, severe and disabling brain disorder that affects millions of patients in the U.S.

In ALKS' Q3 press release the company also announced they were working toward key milestones for their ALKS 3831 treatment for schizophrenia, their ALKS 8700 treatment for multiple sclerosis, and their ALKS 5461 treatment for major depressive disorder. They expect more data on all three within the next six months.

Technically the stock has soared from the bottom of its major trading range near $55 toward the top of its trading range near $75.00. The current rally has produced a buy signal on the point & figure chart, which is also forecasting a long-term target of $108.00.

The key level to watch is resistance at $75.00. ALKS has been consolidating sideways in the $70-74 zone the last several days but shares are on the verge of a breakout. It would be tempting to buy calls on a rally above today's high ($74.11) but we are suggesting a trigger to buy calls at $75.25, which would be a new multi-year high and above resistance from early 2015.

Trigger @ $75.25

- Suggested Positions -

Buy the DEC $80 CALL (ALKS151218C80)

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

Salesforce.com, Inc. - CRM - close: 78.30 change: -0.41

Stop Loss: 75.75
Target(s): To Be Determined
Current Option Gain/Loss: +18.0%
Average Daily Volume = 3.6 million
Entry on October 12 at $76.25
Listed on October 07, 2015
Time Frame: Exit PRIOR to earnings on November 18th
New Positions: see below

11/12/15: CRM tried to rally but an uncooperative market sapped its strength. Shares reversed beneath resistance near $80.00.

No new positions at this time. We are planning to exit prior to CRM's earnings on November 18th.

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

10/31/15 new stop @ 75.75
10/17/15 new stop @ 74.75
10/12/15 triggered @ $76.25
Option Format: symbol-year-month-day-call-strike

Global Payments Inc. - GPN - close: 68.89 change: -0.81

Stop Loss: 66.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 718 thousand
Entry on November -- at $---.--
Listed on November 11, 2015
Time Frame: Exit PRIOR to December options expiration
New Positions: Yes, see below

11/12/15: GPN followed the market lower today with a -1.1% decline toward short-term support at its 10-dma. We want to see a breakout past resistance at $70.00. Our suggested entry point is $70.25.

Trade Description: November 11, 2015:
Consistently strong earnings growth can do wonders for your stock price. Just ask GPN. Shares are up +72% year to date. That compares to a +0.8% gain in the S&P 500 and a +7% rally in the NASDAQ this year. The rally in GPN started a couple of years ago and shares are up +218% from its $22 lows in 2013.

GPN is in the services sector. According to the company, "Global Payments Inc. (GPN) is a leading worldwide provider of payment technology services that delivers innovative solutions driven by customer needs globally. Our partnerships, technologies and employee expertise enable us to provide a broad range of products and services that allow our customers to accept all payment types across a variety of distribution channels in many markets around the world. Headquartered in Atlanta, Georgia with approximately 4,500 employees worldwide, Global Payments is a Fortune 1000 Company with merchants and partners in 29 countries throughout North America, Europe, the Asia-Pacific region and Brazil."

This company has beaten Wall Street's earnings estimates every quarter this year. Not only that but GPN has raised guidance the last four quarters in a row. GPN has delivered two years of consistent earnings growth and investors have noticed.

Last year (fiscal 2015) the company earned $4.12 a share. That was a +22% improvement from the prior year. This year analysts are expecting GPN's earnings to grow +39%.

GPN's most recent earnings report was October 7th. Earnings surged +37.5% from the prior year. GPN beat on both the top and bottom line. They raised their fiscal 2016 guidance above Wall Street estimates. Plus they announced a 2-for-1 stock split, which took place on November 2nd.

Jeff Sloan, CEO, commented on their quarter, "We are delighted with our outstanding first quarter results, which represent an excellent start to the 2016 fiscal year and a continuation of exceeding our expectations across our markets. This performance builds on the momentum we have generated as we continue to invest in our strategy to expand distribution and create competitive differentiation through technology by delivering innovative solutions globally."

You can see the surge in GPN's stock following its October 7th earnings report. Investors have been buying the dips. Today GPN is challenging round-number resistance at the $70.00 level. Tonight we are suggesting a trigger to buy calls at $70.25.

Trigger @ $70.25

- Suggested Positions -

Buy the DEC $70 CALL (GPN151218C70)

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: 123.81 change: -0.90

Stop Loss: 122.85
Target(s): To Be Determined
Current Option Gain/Loss: + 8.4%
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

11/12/15: Uh-oh! The rally in HD is starting to crack. Shares only lost -0.7% today. That was better than the S&P 500's -1.39% decline. Yet HD did close below technical support at its 20-dma.

Today's intraday low was $123.06. The stock found support near its rising 30-dma this morning. Tonight we are moving the stop loss up to $122.85.

No new positions at this time. We plan on exiting prior to HD's earnings report on Nov. 17th.

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

11/12/15 new stop @ 122.85
10/22/15 new stop @ 121.75
10/10/15 new stop @ 117.45
10/08/15 triggered @ $120.25
Option Format: symbol-year-month-day-call-strike

Lear Corp. - LEA - close: 123.81 change: -1.69

Stop Loss: 121.45
Target(s): To Be Determined
Current Option Gain/Loss: -24.3%
Average Daily Volume = 951 thousand
Entry on October 28 at $123.65
Listed on October 27, 2015
Time Frame: Exit PRIOR to December option expiration
New Positions: see below

11/12/15: LEA is an auto part maker not an auto part retailer. Yet disappointing earnings and guidance from AAP today could have weighed on shares of LEA.

LEA actually spent most of today's session consolidating sideways after the initial spike lower.

No new positions at this time.

Trade Description: October 27, 2015:
Shares of LEA experienced a correction this summer but the stock has come charging back. Year to day LEA is up +25% against the S&P 500, which is virtually flat with a +0.3% gain. The relative strength has been very evident in the last couple of months. The S&P 500 is up +10.6% from its August-correction lows. LEA is up +36% off its August intraday lows.

LEA is in the consumer goods sector. They are part of the auto parts industry. According to the company, "The Lear Corporation is a Fortune 500 company with world-class products designed, engineered and manufactured by a diverse team of talented employees. As a leading supplier of automotive seating and electrical, Lear serves its customers with global capabilities while maintaining individual commitment. With headquarters in Southfield, Michigan, Lear maintains 235 locations in 35 countries around the globe and employs approximately 135,000 employees. Lear is traded under the symbol [LEA] on the New York Stock Exchange."

The strong dollar has created negative currency headwinds for LEA but the company continues to beat on the bottom line. Their Q2 results, announced on July 24th, were better than expected with earnings of $2.82 per share. That was 34 cents above estimates. Management raised their full-year 2015 guidance.

The trend of better than expected earnings continued in the third quarter. LEA just announced their Q3 results a few days ago on October 23rd. Analysts were expecting a profit of $2.37 a share on revenues of $4.41 billion. LEA delivered a profit of $2.56 a share. That is a +33% jump from a year ago. Revenues were only up +2.3% to $4.33 billion. That missed expectations. However, if you discount negative currency headwinds, sales were up +11%. LEA management raised their 2015 outlook again.

These results were good enough to generate some bullish analyst comments on LEA and a new price target at $138.00. Coincidentally the point & figure chart is bullish and forecasting at $138 target. The current rally in LEA has produced a bullish breakout past major resistance in the $118.00 region, which should now become new support. More aggressive traders may want to buy calls now. We are suggesting a trigger to buy calls at $123.65, which would be a new all-time high. .

- Suggested Positions -

Long DEC $125 CALL (LEA151218C125) entry $3.70

11/03/15 new stop @ 121.45
10/28/15 triggered @ $123.65
Option Format: symbol-year-month-day-call-strike

Lam Research Corp. - LRCX - close: 75.44 change: -1.38

Stop Loss: 73.85
Target(s): To Be Determined
Current Option Gain/Loss: -33.3%
Average Daily Volume = 2.5 million
Entry on October 30 at $76.25
Listed on October 28, 2015
Time Frame: 6 to 8 weeks
New Positions: see below

11/12/15: Uh-oh! Today's broad-based market decline pushed LRCX below support near $76.00 and its 200-dma. That's not good news if we are bullish.

The $74.00 level should offer additional support. Our stop is at $73.85. No new positions at this time.

Trade Description: October 28, 2015:
Wall Street loves mergers and this month LRCX has jumped into the 2015 buying spree. Semiconductor stocks had a rough summer with the SOX semiconductor index plunging from early June through late August. Fortunately the group appears to have bottomed. LRCX's recent earnings news and acquisition announcement has accelerated the stock's rebound.

LRCX is part of the technology sector. According to the company, "Lam Research Corp. (LRCX) is a trusted global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. Lam's broad portfolio of market-leading deposition, etch, and clean solutions helps customers achieve success on the wafer by enabling device features that are 1,000 times smaller than a grain of sand, resulting in smaller, faster, more powerful, and more power-efficient chips. Through collaboration, continuous innovation, and delivering on commitments, Lam is transforming atomic-scale engineering and enabling its customers to shape the future of technology. Based in Fremont, Calif., Lam Research is a Nasdaq-100 Index and S&P 500 company whose common stock trades on the Nasdaq Global Select MarketSM under the symbol LRCX."

LRCX's most recent earnings report was October 21st. Analysts were expecting a profit of $1.72 per share on revenues of $1.6 billion. LRCX delivered earnings of $1.82 a share. Revenues were up +38.8% from a year ago to $1.6 billion. Management then raised their Q2 earnings guidance to $1.32-1.52 a share, which is significant above analysts' estimates.

The news didn't stop there. LRCX also announced they were buying KLA-Tencor (KLAC) for $10.6 billion. This new combined company will have $8.7 billion in revenues.

Here are a few highlights from the LRCX-KLAC merger deal:

Creates Premier Semiconductor Capital Equipment Company: Strengthened platform for continued outperformance, combining Lam's best-in-class capabilities in deposition, etch, and clean with KLA-Tencor's leadership in inspection and metrology

Accelerates Innovation: Increased opportunity and capability to address customers' escalating technical and economic challenges Broadens Market Relevance: Comprehensive and complementary presence across market segments provides diversity, scale and value creating innovation opportunities

Significant Cost and Revenue Synergies: Approximately $250 million in expected annual on-going pre-tax cost synergies within 18-24 months of closing the transaction, and $600 million in annual revenue synergies by 2020 Accretive Transaction: Increased non-GAAP EPS and free cash flow per share during the first 12 months post-closing

Strong Cash Flow: Complementary memory and logic customer base, operational strength, and meaningful installed base revenues strengthen cash generation capability Anstice concluded, "We have tremendous respect for the company KLA-Tencor employees have built over nearly 40 years - their culture, technology, and operating practices. I have no doubt that our combined values, focus on the customer, and complementary technologies will create a trusted leader in our industry, capable of creating significant opportunity for profitable growth and in turn delivering tremendous value to all of our stakeholders. This is the right time for the right combination in our industry." You can read more details about the merger here.

The combination of the earnings beat, raised guidance, and the merger news launched LRCX stock higher. Traders have been consistently buying the dips since then. Now shares of LRCX are poised to break through technical resistance at its 200-dma soon. Shares have been upgraded with a new price target of $85.00. Meanwhile the point & figure chart is bullish and forecasting at long-term target of $107.00.

LRCX looks like it could run towards the 2015 highs in the $84-85 region. Today's intraday high was $76.19. We are suggesting a trigger to buy calls at $76.25.

- Suggested Positions -

Long JAN $80 CALL (LRCX160115C80) entry $3.30

11/12/15 LRCX closes below short-term support at $76.00
11/03/15 new stop @ 73.85
10/30/15 triggered @ $76.25
Option Format: symbol-year-month-day-call-strike

Netflix, Inc. - NFLX - close: 108.92 change: -3.94

Stop Loss: 104.25
Target(s): To Be Determined
Current Option Gain/Loss: -17.0%
Average Daily Volume = 19 million
Entry on November 10 at $111.35
Listed on November 05, 2015
Time Frame: 6 to 8 weeks
New Positions: see below

11/12/15: NFLX underperformed the market with a sharp -3.5% plunge today. That was after the morning rally failed near resistance in the $115-116 zone.

The reason NFLX displayed relative weakness? The story today is that rival Hulu wants to sell an equity stake to Time Warner (TWX). If Hulu gets more cozy with TWX it could make Hulu more competitive with NFLX.

No new positions in NFLX at this time.

Trade Description: November 5, 2015:
Netflix has come a long way from its late 1990s roots as a DVD-rental-by-mail business. Today it is one of the largest online streaming video-on-demand businesses. The company's most recent earnings report was disappointing but failed to derail enthusiasm for the stock.

NFLX is part of the services sector. According to the company, "Netflix is the world's leading Internet television network with over 69 million members in over 60 countries enjoying more than 100 million hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any Internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments."

Traditional media giants have been struggling with a massive change in consumer viewing habits. More and more people are "cutting the cord" with traditional cable television subscription packages. Case in point, Time Warner (TWX) just reported earnings this week and lowered their guidance as they expect more pay-TV subscribers to leave. That's because there are too many online streaming video options that are more competitive than regular cable services. NFLX has been a significant winner as people cut the cord.

NFLX is one of the market's best performers this year with a +132% gain year to date. Yet NFLX is not invincible. Doubts have been growing about NFLX's ability to keep growing and its rising costs. Their most recent earnings report is a good example.

NFLX announced their Q3 earnings results on October 14th. They missed Wall Street estimates on both the top and bottom line. Analysts were expecting a profit of $0.08 a share on revenues of $1.75 billion. NFLX delivered $0.07 a share. Revenues were up +23% to $1.74 billion. It wasn't a big miss but it was a miss. Furthermore NFLX management lowered their Q4 guidance below estimates. They now see Q4 earnings at $0.02 a share compared to estimates at $0.03.

One of the biggest disappointments was domestic subscriber growth. NFLX added 3.62 million subscribers globally. 2.74 million where international subscribers. The rest, 880,000 subs, were U.S. subscribers. That was significantly below analysts' estimates at 1.25 million.

NFLX partially blamed this subscriber miss on the credit card industry, which has been issuing new, more sophisticated credit cards with security chips in them. Essentially subscribers needed to update their billing info with the new card and that didn't happen, which produced more customer "churn". At least that is the story from NFLX. Credit card experts think this story is baloney and just a scapegoat for NFLX's poor growth.

Another challenge facing NFLX is growing competition. Amazon.com tries to dominate every market they are in. Their Amazon.com video streaming service is $99.00 a year (about $8.25/month) but this hasn't stopped NFLX's growth. Hulu has been a competitor in the online streaming video industry for years. They just launched a new ad free subscription service at $11.99 a month. According to Hulu, the customer response has been awesome but they are not releasing any numbers on how many people have signed up. Hulu's advantage over NFLX is being able to watch current season TV on their service. Yet another competitor for NFLX is YouTube. YouTube is launching a paid subscription service called YouTube Red for $9.99 a month. In spite of all the competition NFLX remains the dominant player and they continue to expand both in the U.S. and overseas. (FYI: new subscribers pay $9.99 a month for NFLX)

If missing earnings estimates and lowering guidance wasn't bad enough NFLX also told investors that they plan to raise additional capital next year (2016) to help "fund our continued content investments". That means more debt and could mean more stock (which dilutes shareholders). One of NFLX critics biggest arguments has been the company's rising expenses. Yet in spite of all these challenges NFLX's stock continues to perform.

Investors bought the post-earnings sell-off in the $97 range. Shares are now up three weeks in a row. They have filled the gap from October 15th (post-earnings drop) and kept rising. Now NFLX is on the verge of breaking out past its early October highs (near $115-116). The point & figure chart is bullish and forecasting at $148 target.

In summary, the growth story for NFLX seems a little bruised with their missed subscriber numbers. They continue to spend a ton of money on content and expansion. Yet investors continue to buy the name. The consumer trend of switching from traditional cable to streaming is not going to reverse and that benefits NFLX.

We are adding NFLX as a bullish candidate. We do consider it a higher-risk, more aggressive trader because shares can be so volatile. Tonight we are suggesting a trigger to buy calls at $116.15. I would use small positions to limit risk.

FYI: If you're curious about Netflix and their long-term outlook, check out this page on their website Netflix's View: Internet TV is replacing linear TV .

*small positions to limit risk* - Suggested Positions -

Long 2016 JAN $120 CALL (NFLX160115C120) entry $5.12

11/10/15 triggered @ $111.35
11/09/15 Entry Point Strategy Change - move the entry trigger from $116.15 down to $111.35. Adjust the stop loss down to $104.25.
Option Format: symbol-year-month-day-call-strike

United Technologies - UTX - close: 99.22 change: +0.96

Stop Loss: 97.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.1 million
Entry on November -- at $---.--
Listed on November 04, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: Yes, see below

11/12/15: UTX spiked lower at the open but shares quickly rebounded. The company announced they will use $6 billion of their $10 billion stock buyback program as part of an accelerated repurchase program. This was widely expected since UTX already told the market that's what they planned to do with part of the proceeds of selling their helicopter unit.

The intraday rally stalled at resistance near $100. I don't see any changes from my earlier comments. Our suggested entry point for bullish positions is $101.15.

Trade Description: November 4, 2015:
It has been a tough year for UTX investors. The stock peaked near $124 a share in February 2015. Shares spent the next seven months in retreat. UTX finally bottomed in the $85-87 range in late September. Now shares appear to have reversed.

UTX is in the industrial goods sector. According to the company, "United Technologies, based in Farmington, Connecticut, provides high-technology systems and services to the building and aerospace industries." The company operates through different segments. They are: UTC Building & Industrial Systems, Pratt & Whitney (aircraft engines), UTC Aerospace Systems, and Sikorsky (helicopters). UTX is selling its Sikorsky unit to Lockheed Martin for $9 billion. The deal should close soon.

One of the biggest challenges for UTX has been an economic slowdown overseas and the strength of the U.S. dollar. The company gets more than 60% of their sales outside the U.S. That makes negative currency headwinds a serious issue.

Their most recent earnings report was October 20th. Analysts were expecting a profit of $1.56 a share on revenues of $14.59 billion. UTX beat the bottom line estimate with $1.67 a share, but that was still a double-digit decline from a year ago. Revenues were down -5.6% to $13.79 billion. Management reaffirmed their fiscal year 2015 guidance of $6.15-6.30 a share and revenues in the $57-58 billion range, which is in-line with Wall Street estimates. That was good enough for the street. The stock rallied.

The big reasons investors are looking past the disappointing earnings and revenue growth has been stock buybacks. Plus the current management has been selling off non-core assets as they try to streamline the company for better growth.

I mentioned earlier that UTX is selling their Sikorsky unit to LMT for $9 billion. UTX is going to use $6 billion of that money in an accelerated stock buyback program because they believe their stock is too cheap. Furthermore, UTX announced they were adding an extra $12 billion to their stock repurchase program. Altogether the company plans to spent $16 billion on stock buybacks through 2017.

Investors seem to like the news with shares up sharply from their Q3 report. The point & figure chart has turned bullish and is forecasting at $112 target. At the moment UTX is hovering near short-term resistance in the $100-101 zone. Tonight we are suggesting a trigger to buy calls at $101.15.

I will point out that UTX's daily chart seems to have resistance about every $5.00 ($105, $110, etc.). Odds are good we could see UTX rally back toward its simple 200-dma (currently near $109).

Trigger @ $101.15

- Suggested Positions -

Buy the 2016 JAN $105 CALL (UTX160115C105)

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.

11/10/15 UTX traded ex-dividend today ($0.64 dividend)
11/06/15 UTX finalized its sale of the Sikorsky helicopter business to Lockheed Martin today
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Anthem, Inc. - ANTM - close: 133.43 change: -0.76

Stop Loss: 141.00
Target(s): To Be Determined
Current Option Gain/Loss: -6.2%
Average Daily Volume = 2.2 million
Entry on November 04 at $134.25
Listed on November 03, 2015
Time Frame: 6 to 8 weeks
New Positions: see below

11/12/15: It was a decent day for ANTM bears. Shares only fell -0.5%, which is actually a show of relative strength compared to the market's -1.3% decline today. However, the oversold bounce in ANTM appears to have failed at its 10-dma. Today's low was $133.26. I would be tempted to launch new positions on a drop below $133.15 or a new relative low under $131.95.

Trade Description: November 3, 2015:
The big healthcare stocks used to be unstoppable. The group delivered huge gains in 2013 and 2014. Unfortunately the rally has peaked in 2015 and now the major names are retreating, in spite of increased M&A in the industry.

ANTM is in the healthcare sector. According to the company, "Anthem is working to transform health care with trusted and caring solutions. Our health plan companies deliver quality products and services that give their members access to the care they need. With over 72 million people served by its affiliated companies, including more than 38 million enrolled in its family of health plans, Anthem is one of the nation's leading health benefits companies."

The big story for healthcare has been consolidation. The handful of major insurers are getting bigger as they gobble each other up. Last July ANTM announced they were buying smaller rival Cigna (CI) for $54 billion. ANTM is holding a special shareholder meeting on December 3rd to approve the issuance of more stock to help pay for the merger. The deal is not expected to close until the second half of 2016. When it does CI should add to ANTM's earnings.

Speaking of earnings, ANTM is still growing. They reported their Q3 earnings on October 28th. Wall Street expected a profit of $2.32 a share on revenues of $19.65 billion. ANTM beat both estimates with a profit of $2.73 a share. Revenues were up +7.6% to $19.77 billion.

Investors seemed disappointed with ANTM's rising costs. Their benefit expense ratio rose 110 basis points to 83.6%. Furthermore ANTM raised their fiscal year 2015 guidance to $10.10-10.20 a share but that was seen as anemic. Wall Street estimates were already at $10.22 a share.

The IBD recently noted that all five of the big health insurers saw ObamaCare exchange enrollments fall in the third quarter. The average decline was -8.3%. That could be significant. The Affordable Care Act (ObamaCare) has driven a lot of growth for the big insurers over the last few years. Unfortunately the ACA has been plagued with problems and rising costs.

A couple of weeks ago a Credit Suisse analyst downgraded the healthcare sector over high valuations. The sector has been underperforming. Furthermore analysts earnings revisions have been slowing. Essentially Wall Street thinks growth is slowing for the group. ANTM has seen analysts lowering their price targets on the stock.

Technically the healthcare sector and shares of ANTM peaked this past summer. Currently ANTM is flirting with a breakdown into bear market territory with a -19.8% drop from its June closing high. The point & figure chart is already bearish and forecasting at $122 target. A decline under $134.00 would reaffirm the sell signal. ANTM does have significant support in the $134.50-135.00 zone. We want to be ready when it does break down. Tonight we are suggesting a trigger to buy puts at $134.25.

- Suggested Positions -

Long 2016 JAN $130 PUT (ANTM160115P130) entry $5.60

11/04/15 triggered @ $134.25
Option Format: symbol-year-month-day-call-strike


Align Technology - ALGN - close: 64.00 change: -1.59

Stop Loss: 64.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 496 thousand
Entry on November -- at $---.--
Listed on November 09, 2015
Time Frame: 6 to 8 weeks
New Positions: see below

11/12/15: Stocks saw widespread declines today but ALGN underperformed with a -2.4% drop. Shares have broken down from their recent sideways consolidation. Our trade has not opened yet. Tonight we are removing ALGN as a candidate. The next level of support could be the $60-62 region.

Trade did not open.

11/12/15 removed from the newsletter. Suggested entry was $68.55


iShares Russell 2000 ETF - IWM - close: 114.90 change: -2.24

Stop Loss: 114.85
Target(s): To Be Determined
Current Option Gain/Loss: -36.0%
Average Daily Volume = 36 million
Entry on October 28 at $116.55
Listed on October 24, 2015
Time Frame: 6 to 8 weeks
New Positions: see below

11/12/15: Small cap stocks tend to be more volatile than big caps. They proved that today with the IWM plunging -1.9% while the S&P 500 only fell -1.3%. The IWM broke down below short-term support levels at $117 and $116. It finally stalled near its simple 50-dma this afternoon. Unfortunately the IWM also hit our new stop loss at $114.85.

- Suggested Positions -

2016 JAN $120 CALL (IWM160115C120) entry $1.89 exit $1.21 (-36.0%)

11/12/15 stopped out
11/03/15 new stop @ 114.85
10/28/15 triggered @ $116.55
Option Format: symbol-year-month-day-call-strike



Darden Restaurants - DRI - close: 55.13 change: -0.38

Stop Loss: 56.55
Target(s): To Be Determined
Current Option Gain/Loss: - 2.3%
Average Daily Volume = 1.7 million
Entry on October 21 at $63.40
Listed on October 20, 2015
Time Frame: Exit PRIOR to earnings in December
New Positions: see below

11/12/15: It was a volatile day for shares of DRI. The stock was upgraded this morning and shares spiked up to $58.65 shortly after the opening bell. The stock quickly reversed lower again but our stop loss was hit at $56.55. Fortunately the bid/ask spread on our put option appeared to normalize, which helped our exit.

- Suggested Positions -

2016 JAN $60 PUT (DRI1160115P60) entry $2.15 exit $2.10 (-2.3%)

11/12/15 stopped out
11/11/15 new stop @ 56.55
11/10/15 DRI completes spin-off of FCPT
Option now represents 100 shares of DRI and 33 shares of FCPT
10/31/15 new stop @ 63.65
10/21/15 triggered @ $63.40
Option Format: symbol-year-month-day-call-strike