Option Investor

Daily Newsletter, Saturday, 11/14/2015

Table of Contents

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

Market Wrap

No Black Cats or Broken Mirrors

by Jim Brown

Click here to email Jim Brown

Friday the 13th bought a continued market decline and bad luck for investors. Was it really bad luck or do fundamentals suddenly matter?

Market Statistics

With economics and earnings turning progressively lower I suspect the market decline was the return of fundamental worries. I wrote an article on Thursday questioning whether the U.S. was entering into a recession. I will summarize that again later in this commentary.

Friday's continued decline came after some ugly earnings in the retail sector, weak guidance from Cisco Systems and some negative economic reports. The snowball of negative headlines appears to be gaining speed as it moves down hill.

The Retail Sales report for October came in at +0.1% compared to estimates for a +0.3% rise. Revisions to prior months were mostly negative. Building supply stores saw a +0.9% rise and nonstore retailers (led by drug stores) rose +1.4%. General merchandise stores, gasoline stations, food and beverages, electronics and appliances and motor vehicles & parts all posted declines.

Year over year sales were down -1.7% over October 2014 levels. Sales in the prior two months were revised down to zero gain. Analysts remain confident that the strong housing sector will continue to power consumer spending as they furnish those new homes. Auto sales are also above trend and are providing significant support for the overall retail sales or the numbers would be much worse.

The last two times retail sales have been this bad we were already in a recession. Analysis

The Producer Price Index for October declined -0.4% compared to estimates for a +0.2% gain. There is no inflation at the producer level and after the -0.5% decline the prior month, there is some significant deflation at work.

It was not all related to energy, which was unchanged for the month. Food prices declined -0.8% for the second consecutive month. Core prices fell -0.3% and services prices fell -0.3%.

Prices have declined -1.7% since October 2014. Over the last three months alone prices have declined -3.6% on an annualized basis. Intermediate processed goods have declined -7.6% and unprocessed goods have declined -23.6%.

This is going to make it very hard for the Fed to make a "data dependent" case for hiking rates in December. They may hike anyway to rescue their credibility after targeting December in their last statement but it will not be because the data is supporting the decision. They may hike 25 basis points but then reduce their guidance for anticipated hikes in 2016 to end the year at 1.0%.

Hedgeye Cartoon

Business inventories for September rose 0.3% compared to estimates for no gain. That suggests either the pace of sales has slowed or there was some build in inventories ahead of the holiday season. Manufacturing inventories declined -0.37%, retail inventories rose +0.79% and wholesale inventories rose +0.50%. The largest subsector gain came from vehicles & auto parts with a +1.4% gain. Total sales growth was nearly unchanged for the second month. The inventory to sales ration has returned to 1.38 and the highest level since the recession.

While economic reports are printing new lows, the Consumer Sentiment report for November rose +3.1 to 93.1, up from 90.0 in October. The present conditions component rose from 102.3 to 104.8 and the expectations component rose from 82.1 to 85.6. Falling gasoline prices were credited with the gain in sentiment.

The economic calendar for next week has a lot of reports but only two are potential market movers. The FOMC minutes on Wednesday are always a problem for the market because we do not really know what the FOMC members were thinking at the last meeting. There is always a surprise of some sort. This is the last Fed update before the December Fed meeting in four weeks.

The Philly Fed Manufacturing Survey on Thursday is the most important regional report for the month. Analysts pay the most attention to it as a proxy for the ISM Manufacturing two weeks later.

On Thursday, I wrote an article on the potential for a U.S. recession. I got a lot of feedback on it and apparently, many readers feel the same way. Link to full article

The basic points are as follows:

First, the Fastenal CFO, Daniel Florness, warned "The industrial environment is already in a recession. I do not care what anybody says, because nobody knows the market better than we do." Fastenal (Nasdaq:FAST) sells wholesale industrial and construction supplies like bolts, nuts, screws, etc, which are used in manufactured products in the U.S. and internationally. They should know if manufacturing is slowing because demand for components is slowing.

Secondly, the Railway Supply Institute (Rsiweb.org) said third quarter railcar orders declined -83% to hit their lowest level in 27 years.

Third, FBR reported that orders for class A trucks declined -45% in October. In addition, BB&T reported that production of railcars, trucks and trailers would likely fall -20% to -35% in 2016 according to preliminary estimates.

That brings us to a warning from Wells Fargo. After the order data was released the bank said over the last 45 years ANYTIME orders for machinery and transportation equipment declined, as is happening today, a recession followed. The bank said the risk of a recession was accelerating as we head into 2016.

We had another confirmation today when the US Steel (X) CEO, Mario Longhi, said we are definitely in a recession, "it is happening now and it is more than just a recession."

Industrial production has fallen in 7 of the last 9 months. The ISM Manufacturing PMI for October was 50.1 and a 30-month low.

Joe LaVorgna, Chief Economist at Deutsche Bank, said a confirmed downturn was in progress and the dollar strength was becoming critical. As the Fed gets closer to hiking rates, the dollar is only going to get stronger and the impact on the U.S. economy even worse. The dollar index is hovering at six-month highs.

Add in the drop in commodity prices as a result of low demand and the recession or even deflation picture is pretty convincing.

Commodity Index

Analysts are blaming the Thr/Fri market decline on the implosion in the retail sector. They are worried that consumers are not spending money. The S&P Retail ETF (XRT) declined -8.5% last week alone. Macy's (M) declined -20%, Kohls (KSS) -8%, Nordstrom (JWN) -20%, Fossil (FOSL) -40% and JC Penny (JCP) -15% for just a few examples.

On the earnings front Nordstrom reported earnings of 57 cents compared to estimates for 72 cents. Same store sales rose only 0.9% compared to year ago levels of +3.9%. The company projected revenue growth of 7.5% to 8.0% and $3.40-$3.50 for earnings. Prior expectations were for 8.5% to 9.5% growth and $3.70-$3.80 on earnings. Shares were crushed for a -15% decline on Friday.

JC Penny's (JCP) reported a loss of -47 cents that was better than analysts expected at -58 cents. Revenue of $2.9 billion also beat estimates for $2.86 billion. Same store sales rose +6.4%. However, despite the earnings beat the company kept its lowered forecast for full year sales of 4-5%. Analysts were quick to caution that by not raising estimates they were actually warning that they expected additional weakness. Shares fell -15% on the news.

Fire protection and security company Tyco International (TYC) reported earnings of 61 cents and revenue of $2.51 billion. Earnings were in line with estimates but revenue missed estimates of $2.54 billion. Tyco failed to impress on its conference call and shares declined -3%.

Eagle Bulk Shipping was listed as an earnings reporter on Friday but there was no release. Shares crashed -10% on no news. Eagle is a dry bulk shipper. With the Baltic Dry Index of shipping rates nearing a post recession low the sector has declined sharply over the last week.

Fossil (FOSL) reported earnings of $1.19 compared to estimates for $1.13. Revenue of $771.3 million missed estimates for $784.8 million. The earnings were not the big problem. The company lowered its full year forecast suggesting it was preparing for a weak Q4. Fossil cut its full year outlook from $4.80-$5.60 to $4.15-$4.75 per share. Analysts were expecting $5.14. They projected earnings for Q4 of $1.40-$2.00 and analysts were expecting $2.15. They also projected sales to decline up to -11%. Shares fell -36% on the news.

Cisco Systems reported earnings on Thursday after the close. The company beat expectations but provided weak guidance for the current quarter. Cisco said it expected a +2% rise in revenue in Q4. However, they said macroeconomic conditions were challenging and overseas orders were slowing. Shares declined -6% on the report.

Late Friday news broke that Cisco was going to buy Ericsson (ERIC) and shares of ERIC spiked from $9 to $10.15. Within minutes, Cisco denied the report saying they were only in partnership with Ericsson and there were no plans to buy the company. They had announced the production partnership earlier in the week.

The Nasdaq big caps were down hard on Friday. Priceline continued its post earnings plunge with a $16 drop to a five-week low. Amazon (AMZN) gave back -$23 on no news. Alphabet (GOOGL) lost -$19.

Oil prices fell to $40.73 for a loss of -8.5% for the week. U.S. inventories rose +4.2 million barrels to 487.0 million. That is only 3.9 million barrels below the historic 80-year high of 490.9 million.

The IEA released its monthly report (Link) saying global oil inventories were near 3 billion barrels and at record highs. Those inventories were rising at +1.6 million barrels per day and would accelerate when Iran and Iraq increase production in early 2016. Iran is expected to add 500,000 bpd to start and raise that to 1.0 million bpd by July. Iraq is pumping the most oil since 1962 and expected to increase production further in Q1.

Furthermore the IEA said global demand growth was slowing. The IEA said demand growth would slow to 1.2 mbpd for all of 2016 compared to the 1.8 mbpd growth in 2015. Global production rose to 97 mbpd in October. OPEC supplied 31.76 mbpd despite temporary declines in Iraq and Kuwait. Libya, Saudi Arabia and Nigeria produced more than the prior month.

There are currently 19 million barrels of oil headed from Iraq to the USA. Ten tankers are currently headed for U.S. ports carrying Iraqi oil. That is the most in one month since June 2012. Iraq sold its heavy crude to the U.S. at a -$5.85 per barrel discount to the benchmark compared to the Saudi price of -$1.25 off the benchmark. This means we are going to see some big inventory gains in the weeks ahead.

Bloomberg Chart

There is a record tanker backlog in Houston of 39 tankers waiting to unload. In the fall when cold air hits the warm water Gulf they have a serious problem with fog, which shuts down tanker movement until it clears, sometimes for days.

China has filled up all available storage. Tankers have been sitting at terminals for weeks waiting to unload. In addition, there is now more than 100 million barrels of oil in storage on tankers with no place to go.

U.S. production rose again last week with a +25,000 bpd gain. Production of 9.185 mbpd was a nine-week high while active rigs continue to decline. Technology is winning the battle over reduced drilling but the rise helped push prices lower. There is a good chance we will see prices under $40 next week.

Active rigs declined -4 to 767 and another decade low. Oil rigs rose +2 to 574 and gas rigs declined -6 to 193. The number of active rigs is down -1,164 from the peak of 1,928 in September 2014. Oil rigs alone have declined -1,035.

Copper was in the news a lot last week as prices plunged to a post recession low at $2.16 per pound. Slowing demand and the rising dollar along with dumping due to margin calls is powering the decline. Copper is seen as a primary indicator of global economic activity. Copper goes into anything electrical as well as wires in homes, buildings, cars, planes, etc. There is about 55 pounds of copper in a new car and 400 pounds in a new home. With all the uses for copper and the falling demand, it is easy to deduce that global manufacturing and construction activity is slowing.


It was the second worst week of the year for the equity markets. The attacks in Paris was not initially reported until after the markets had closed or the decline would have been a lot worse.

The Dow lost -665 for the week, NYSE -358, Nasdaq -219, S&P -76, Russell 2000 -53, Dow Transports -231. There were no bright spots but the biotech sector tried to rally more than once to post a six-week high on Wednesday and managed a 35 point gain on the $BTK on Friday. However, it still lost -1.3% for the week to post the smallest loss of all the indexes.

Whenever we get a significant decline, we always try to look for any good news. Sometimes that search ends up grasping at straws but we still need to look. The Friday close on the S&P at 2,023 was exactly on the 38.2% Fib retracement. It was also only 2 points above the reaction high of 2,021 on September 13th and the 2,019 resistance on Oct 12th. If there were a logical rebound point, this would be it. Unfortunately, logic is rarely found in the equity market.

Support for Monday would be 2,020 followed by 1,985. Resistance is 2,060, 2,085 and 2,115.

The percentage of S&P stocks over their 200-day average declined from 56% to 39.2% in just a week.

I showed this chart last week and warned that the MACD and RSI were about to turn negative. That turn is complete and it would appear there is no relief in sight.

The Dow only had four components in positive territory and 12 that lost more than $1. The Dow is still well above strong support around 17,130. There is a support band from about 17,050 to 17,200 but I doubt it will be strong enough to stop the Dow's decline if the selling is as pronounced as it was on Thr/Fri.

The carnage in the Dow stocks was extreme. For instance Home Depot (HD) fell -3% on no news. The building materials sector was one of the strongest in the Retail Sales report. There was no reason for HD to crash.

IBM is in plunge mode with a -$20 decline since it posted earnings on October 19th. This is a major impact on the Dow because of its weighting in the index.

Even the banks were declining over the last two days despite the chance of a Fed rate hike in four weeks. I scanned the charts of the Dow 30 and it does not look good. It would take a major market reversal to turn the Dow around.

The Nasdaq Composite has reached decent support in the 4890-4925 range. This was a challenge to break through when it was a resistance and hopefully it will be decent support on the way back down.

Apple (AAPL) was a major drag on the Nasdaq with a -$9 drop for the week. However, on Friday Amazon, Cisco and Facebook were the biggest weight on the Nasdaq. The graphic below shows the point impact on the Nasdaq 100 from the 10 losers on Friday. Link to complete list

Point losses on the losers are far larger than the gains on the winners.

The Russell 2000 small caps were hammered but no worse than the rest of the indexes. That is small consolation. The -4.4% loss for the week was right in line with the Nasdaq and only slightly higher than the Dow and S&P at -3.7%. The Russell came to a stop on support at 1,145 that held in late October but it may be wishful thinking that it will hold again.

A continued decline would target 1,102 after a possible pause at 1,136. In theory, the small caps should be in favor over the next four weeks but theory has had some problems with reality in the recent past.

Historically the first week of November is normally the strongest week in the fourth quarter. That trend failed this year. Normally, the second week of November is bearish as fund managers undress those positions they added for window dressing at the end of October. I think we can safely assume the amount of selling was heavier than simple window undressing BUT the volume on Thursday was only 7.0 billion shares and Friday was 7.6 billion. That is moderately strong but the average over the last three weeks has been about 7.1 billion so there was no panic selling last week.

In the five minute chart of the S&P there was an initial drop at the open on the Cisco earnings, retail earnings from several companies and negative economic reports. About noon, there was a concerted buying spree in the energy stocks with several up more than $2 intraday. At 12:30 that buy program ended and the index began to trend lower. However, note that the trend was slow and there was solid support at that Fib retracement level at 2,023. The lack of heavy volume and the slow pattern of selling suggests we could see a bounce next week. However, the S&P did close right on the support lows.

I wrote last week that I was in buy the dip mode. I wrote midweek that I would buy the dip down to support at S&P 2,060. That support broke at the open on Thursday. Now I am in a quandary. The individual Dow charts are ugly and do not suggest a rebound is near. There may be a short squeeze in our immediate future and I would welcome one on Monday just to relieve the selling pressure. However, at this point I would be cautious about adding to existing longs. If that 2,023 level on the S&P holds and we rebound back over 2,040 then I would feel better about adding to long positions with that 2,023 level my exit point. If 2,023 fails I would be flat or short.

Strong Octobers tend to produce weak Novembers and that is one historical trend that has come true so far. The last 12 November Friday the 13ths have been down 8 times and up 4 times. Out of the last 144 Friday the 13ths November is the worst in terms of performance.

The third week of November has been up in 16 of the last 21 years. It is also option expiration week and after the big market decline that should have a bullish bias.

Random Thoughts

The terrorist attack in Paris is a tragedy but unfortunately one they are likely to relive multiple times in the years ahead. The influx of a million refugees, 85% of which are young men, has allowed an untold number of terrorists to infiltrate into Europe.

Personally, I am surprised we have not experienced the same type of attacks in the USA. The FBI currently has more than 1,000 active investigations into ISIS activities in the USA. We know there are sleeper cells in the U.S. and even with 1,000 active investigations, we know there are active individuals we do not know about. The border patrol finds Korans and prayer rugs along the border trails all the time. They are here whether the government wants to admit it or not.

America is a free society. We go to sports stadiums, movie theaters, malls, etc, completely unaware of our surroundings. We have never had to be threat aware. Eventually, terrorists are going to take out some theaters or shopping malls and the American lifestyle is going to change forever.

ISIS said last week, "American blood tastes the best and we will taste it soon."

Rogers Kiffen Worldwide warned that online retailers were stealing the business from brick and mortar retailers. Previously when you went to the mall you visited 5-6 stores and "shopped." Today a consumer may visit 3 and just buy. They already shopped online and they know what they want. They just go in the store, find the right size, buy and leave.

Steve Odland, former Office Depot CEO and now CEO of the Committee of Economic Development, said this holiday season is going to be a bloodbath. "Inventories are up, sales are down and that is causing a big problem for margins." The holiday sales are going to start out as clearance sales rather than holiday discounting. The lower price retailers are the only ones succeeding in this environment.

Mario Draghi went from super dovish to extremely dovish last week in what appears to be plans to add stimulus in December at the same time the Fed is likely to hike interest rates. The Fed has not hiked at the same time Europe was easing since May 1994. Nelson Mandela was the first black president of South Africa and Beverly Hills Cop 3 was showing at the movies. The Euro and the ECB did not exist.

Greenspan raised the rate from 3.75% to 4.25% and the Bundesbank cut rates from 5.0% to 4.5% to spur expansion in Germany. Full Bloomberg Article

Why Europe will Cut Rates

The World Gold Council said U.S. demand for gold bars and coins surged +207% in Q3. The interest in gold is at levels not seen since the financial crisis. Gold Eagle sales at the U.S. Mint surged to nearly 400,000 ounces last quarter, the highest level in five years. The -1,000 point drop in the Dow in August caused a flurry of buying in precious metals. The stronger dollar makes gold and silver cheaper and consumers are taking advantage of the trend. Americans Buying Gold

I would not want to be on a U.S. carrier in a war with China or Russia. China has a new supersonic carrier blaster that can be launched from hundreds of miles away, travels above the atmosphere and then comes straight down at 3 times the speed of sound from directly above the carrier. It can also be nuclear armed.

Last week Russia aired on TV plans for a long-range nuclear torpedo that can destroy ships, harbors or important economic installations. The torpedo's range could be up to 6,000 miles. The airing was accidental when a news crew was filming a meeting between Putin and his generals in Sochi. Putin said he was taking steps to prevent future accidents that release secret data. I would not put it past Putin to stage the entire event just to cause the U.S. to worry about what he might be doing. The government newspaper Rossiskaya Gazeta called the torpedo a mini robotic submarine. Nuclear Torpedo, OOPS!


Enter passively and exit aggressively!

Jim Brown

Send Jim an email


Veteran's Day Reflections:

"Semper Fidelis" - Always Faithful - U.S. Marine Corp
"Semper Paratus" - Always Ready - U.S. Coast Guard
"Non sibi sed patriae" - Not for Self but Country - U.S. Navy
"Aim High, Fly, Fight, Win" - U.S. Air Force
"This we will defend" - U.S. Army


Index Wrap

Dow Dips Back Below 200-Day Average

by Leigh Stevens

Click here to email Leigh Stevens

The major indices spent several days registering 'overbought' extremes. Momentum indicators like the 13-day Relative Strength Index (RSI) warned of a potential correction, even a sharp pullback and it came this past week.

Long-term upside momentum shifted according to the Dow falling below its 200-day average. After 26 days strongly up, SPX retraced 38 percent of those gains in a few. Traders who haven't been strongly bullish and fully on board with the SPX advance, quickly got strongly bearish. Based on me versus the 'pack' I'll go the other way and look for a next bullish opportunity.

A related note: getting bullish at the last oversold RSI extreme and exiting at the recent overbought reading was taking advantage of the fact that we don't often see the bottom-most extremes in RSI in a bull market.

Possible double tops in both the big cap S&P 100 (OEX) AND the big cap Nasdaq 100 (NDX) is a worry that traders should pay attention to. I think it's a matter of time not if, that prior highs are exceeded. I also have an eye on the fact that the Dow has half or more of its 30 stocks in downtrends. Some key tech stocks are looking tired as well, so I won't make intermediate (2-3 month outlook) bets this time of year!

My current assessment is that SPX stays mostly at/above 1990-1985, OEX at/above 885, INDU above 17000, COMP at/above 4800, NDX mostly holding above 4400, QQQ the same at/above 107-108, and RUT probably hanging in at/above 1120. A decisive and sustained decline under the aforementioned support levels or areas suggest I'm more bullish in my expectations than where the Market is headed.



The chart has turned mixed in its pattern short-term. After the S&P 500 (SPX) ran into resistance in the prior congestion zone of abundant stock available for sale, selling picked up as the index traced out a minor Head & Shoulder's top. The 'breakdown' point became 2080 and a mini-waterfall type decline followed below this point as SPX quickly retraced a Fibonacci 38 percent of the prior upswing of 26 (trading) days. Old saying: "They slide faster than they glide"!

A long-term bullish picture is still painted by the charts and I'm currently figuring this pullback will not take SPX below the 1994-1990 area, at least not for 2 or more days running. Given my assessment of the strong 'W' bottom pattern and the quick return to the top end of the prior broad trading range, I'm not anticipating more than a 'normal' 50% retracement of the last upswing.

[My usual highlights for resistance levels are the red down arrows; my highlights for support areas, the green up arrows.]

Near resistance is seen in the 2085-2100 zone. Near support looks to come in at 2020, extending to 2000-1990. Fairly major support begins at 1960.

The S&P went from a deep 'oversold' low/extreme in late-August both in terms of the 13-day Relative Strength Index (RSI) seen above, along with a sharp drop in bullishness. At the recent peak RSI then got up to an overbought reading along with relatively mild bullishness beforehand.

Traders then QUICKLY got bearish again as seen above with my Call-Put Ratio (CPRATIO). Traders may be acting too defensively after the last two big sell offs (an important double bottom and too apt to miss buy-side opportunities when they come.


The big cap S&P 100 (OEX) chart seen next below reestablished long-term upside momentum after the strong rebound from its second low in late-September.

OEX has now ALSO formed an approximate double top so this is a pattern that can't be ignored. Seeing a second top at or near a long-standing prior peak, followed by some sharp down days, it's no wonder that bullish 'sentiment' fell sharply (as seen above with the SPX chart)! I also think bearishness will run its course and prices right themselves without a deep and long dive below OEX 900.

Looks like a difficult road back to a retest of the prior OEX highs but the long-term trend is up so I assume the Index can get to the milestone 1000 level eventually per long-term chart projections.

Near resistance is noted at 925, extending to the 940 area. Near support begins at 900 (and a 38% Fibonacci retracement) and extends to 895. OEX support implied by a 50% retracement is at 885.


The Dow 30 (INDU) has dipped below its 200-day moving average, which is a common 'Street' indicator for longer-term price momentum stalled or declining. I see the chart as mixed but assume that long-term uptrends remain intact. A pullback yes, another major downturn seeming unlikely.

INDU went from several days in an RSI 'overbought' extreme zone so momentum indicators like this one warned of a potential correction, even a sharp pullback as seen this past week.

Very near resistance begins at 17400. Noted on my chart is resistance at 17600 and a pivotal one implied by the current 200-day moving average. Resistance at 17600 then extends to the 17800 area.

I anticipate support/buying interest coming in beginning at 17200, with next support around 17000 and which seems like a potential target for the current pullback.


The Nasdaq Composite (COMP) in a bullish rebound rallied from 4500 all the back to the 5100 area and toward the high end of its multimonth trading range. Once back in a resistance zone COMP started slipping then fell sharply below the milestone 5000 level. Not surprising, the move to ABOVE 5000 was on a 'gap' up move and now it's a gap-down one. It equals out.

I've noted support at 4900 with next support expected around 4800; I'll refine that to describe a ZONE of anticipated support, 4826-4800. I'm bullish in the 4800 area in COMP. Pivotal resistance is at 5000, extending to 5100.

4800 is a key support for the bulls and 5000 resistance for the bears. A strong move above or below is noteworthy for the intermediate-term trend. Downside pressures look to continue so 4800 may be tested and I'd expect it to hold.

Bullishness falls fast and far in the face of rallies so I'd bet against this view at the 'right' time. Bullish chart retracement around 4800 to a bit lower, coupled with meager bullishness and an RSI again near 30, look to exit Nasdaq puts at a minimum.


The Nasdaq 100 (NDX) pattern is mixed. For the period showing on my daily chart here there's some possibility of a double top having formed. NDX worked up to the 4737 area, nominally above its prior peak around 4700, but close to what could be a second key top in the 4700 area. Double bottoms and double tops often are key entry points as they can so strongly suggest a trend reversal.

NDX is hitting resistance at the top end of its longer-term uptrend price channel (not shown here). This pattern suggests that tech may pause or slow down in its march higher; e.g., slowing to a walk from a run!

Some support may come in around 4500 but stronger buying interest is more likely around 4400 at the half/50% retracement of the last upswing.

Near resistance comes in around 4600, extending to 4700. Volatility has climbed some and the 13-day Relative Strength Index (RSI) fallen to 40; 'oversold' is considered to be 30, take heed if seen as a bullish play comes into view.

The NASDAQ 100 Tracking Stock (QQQ); DAILY CHART:

The Nasdaq 100 tracking stock (QQQ) is bullish long-term, bearish to mixed in the short to intermediate-term. Key resistance is at 112. The price gap to below 112 leaves a possible 'island top' formation in the Q's. The same potential 'island top' pattern is seen in underlying NDX but QQQ looks more like it has a 'cap' from 112 to 115. Seen from the recent gap-down pattern is that 112 appears as a pivotal make or break a bull move resistance; next resistance is highlighted at 114.

A couple of ways to look at potential QQQ downside targets and/or for potential 'support' levels: 1.) Making note of the 'common' (Fibonacci) retracement levels, a downside target at 109 represents a 38% 'nominal' retracement; then, 107 represents a common 50 percent/one-half retracement. You see 50% retracements in stocks a lot.

2.) Another way to calculate downside possibilities in QQQ is to look at prior chart patterns, both daily and hourly, suggesting to me 108 as key chart support per the green up arrow; next lower support then is highlighted at 106.

107-106 in QQQ looks like a key support zone if reached; 112 will offer possibly tough resistance looking ahead over 2-3 weeks.


The Russell 2000 Index (RUT) may have settled into a predictable 'trading' zone, fluctuating from 2.5% above, to 5% below, its 21-day moving average. However, stay tuned on that as this theory could be too simplistic!

Near resistance is highlighted at 1180, extending to the recent 1200 top. Near support looks like 1140, extending to 1130.

A break of 1140-1130 might mean a follow on dip to the low 1100 area where RUT might be a bullish bet especially if the RSI was near its 30 oversold zone.


New Option Plays

This Brand Is On Sale

by James Brown

Click here to email James Brown


Under Armour, Inc. - UA - close: 87.43 change: -4.93

Stop Loss: 84.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.0 million
Entry on November -- at $---.--
Listed on November 14, 2015
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Trade Description:
The stock market's current pullback is an opportunity to snap up this footwear and athletic apparel brand on sale.

UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitness platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it's actively fighting for market share and in 2015 UA overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but they saw growth of +32%.

UA management expects sales grow +20% in 2015. UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance. That trend of raising guidance has continued this year. UA has beaten Wall Street's bottom line and top line estimates every quarter this year. They have also raised estimates every quarter.

Athletic apparel and shoe companies have been some of the market's best performers in 2015. Odds are they will continue to shine in the fourth quarter and beyond.

Right now UA is correcting low. Shares are down about -17% from their 2015 (and all-time) highs. The stock should have support at the bottom of its long-term bullish channel (see weekly chart below). UA just tested technical support at its simple 200-dma on Friday as well. We see the sell-off as an overreaction as nervous traders lock in profits.

UA should bounce from current levels. Tonight we are suggesting a trigger to buy calls at $88.75, which is above some intraday resistance UA saw on Friday. We'll try and limit our risk with an initial stop loss at $84.90.

Trigger @ $88.75

- Suggested Positions -

Buy the 2016 JAN $95 CALL (UA160115C95) 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

Stocks Accelerated Lower On Friday

by James Brown

Click here to email James Brown

Editor's Note:

Worries over economic growth and a potentially weak holiday shopping season plagued the market on Friday. Further weakness in crude oil didn't help.

CRM, HD, LEA, NFLX hit our stop losses. UTX has been removed.

Current Portfolio:

CALL Play Updates

Alkermes Plc - ALKS - close: 72.07 change: +0.65

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

11/14/15: ALKS displayed relative strength on Friday. Shares dipped towards short-term support at $70.00 and bounced. ALKS managed to end Friday with a +0.9% gain versus a widespread decline across the U.S. market.

We are still on the sidelines. Aggressive traders might want to consider buying this bounce but our suggested entry point is $75.25.

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


The Walt Disney Company - DIS - close: 114.84 change: -1.37

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

11/14/15: Popular big cap names like DIS were not immune to the market's sell-off on Friday. Shares of DIS lost -1.1%, which was in-line with the S&P 500's -1.1% decline. Nimble traders may want to try and buy calls on a bounce from DIS's rising 20-dma (currently $114.00). At the moment, our suggested entry trigger is $117.75.

Trade Description: November 12, 2015:
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)

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


Global Payments Inc. - GPN - close: 69.03 change: +0.14

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

11/14/15: GPN held up reasonably well on Friday. Shares churned sideways in the $68-70 zone and managed to end the session with a gain. 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


Lam Research Corp. - LRCX - close: 75.57 change: +0.13

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

11/14/15: Semiconductor stocks managed to hold up a little bit better than the broader market. The NASDAQ Composite fell -1.5% on Friday. The SOX index only lost -0.9%. Shares of LRCX fared even better with a +0.17% gain.

I would still be cautious on LRCX. The bounce on Friday morning failed at short-term technical resistance at its simple 10-dma.

Our stop remains 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


PUT Play Updates

Anthem, Inc. - ANTM - close: 132.55 change: -0.88

Stop Loss: 141.00
Target(s): To Be Determined
Current Option Gain/Loss: -1.8%
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

11/14/15: The short-term outlook for ANTM remains bearish but momentum has slowed. Shares only lost -0.65% on Friday versus the S&P 500's -1.1% decline.

I would consider new positions at current levels. However, more conservative traders may want to wait for a drop below the Nov. 9th low of $131.95 first before initiating bearish positions.

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



Salesforce.com, Inc. - CRM - close: 75.60 change: -2.70

Stop Loss: 75.75
Target(s): To Be Determined
Current Option Gain/Loss: -17.7%
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

11/14/15: Shares of CRM gave in to the market's widespread decline. Shares plunged -3.4% and erased nearly all of its gains in the past four weeks. The stock broke down below what should have been support at $76.00 (prior resistance). CRM also hit our stop loss at $75.75.

- Suggested Positions -

DEC $80 CALL (CRM151218C80) entry $3.05 exit $2.51 (-17.7%)

11/13/15 stopped out
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


The Home Depot, Inc. - HD - close: 120.00 change: -3.81

Stop Loss: 122.85
Target(s): To Be Determined
Current Option Gain/Loss: -13.3%
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

11/14/15: HD was another big cap winner that was suddenly hammered with profit taking on Friday. Shares fell -3.0% on Friday, underperforming the major indices. The stock dropped toward round-number support at $120.00 and technical support at its simple 50-dma. Our stop loss was hit at $122.85.

- Suggested Positions -

NOV $125 CALL (HD151120C125) entry $1.43 exit $1.24 (-13.3%)

11/13/15 stopped out
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: 121.25 change: -2.56

Stop Loss: 121.45
Target(s): To Be Determined
Current Option Gain/Loss: -43.2%
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

11/14/15: Shares of LEA also accelerated lower on Friday with a -2.0% decline. Shares broke down to new two-week lows and hit our stop loss at $121.45.

The story behind LEA is still bullish. I would keep this stock on your watch list.

- Suggested Positions -

DEC $125 CALL (LEA151218C125) entry $3.70 exit $2.10 (-43.2%)

11/13/15 stopped out
11/03/15 new stop @ 121.45
10/28/15 triggered @ $123.65
Option Format: symbol-year-month-day-call-strike


Netflix, Inc. - NFLX - close: 103.65 change: -5.27

Stop Loss: 104.25
Target(s): To Be Determined
Current Option Gain/Loss: -40.6%
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

11/14/15: The stock market's decline accelerated on Friday and NFLX along with it. Shares plunged through some short-term support levels and hit our stop loss at $104.25.

*small positions to limit risk* - Suggested Positions -

2016 JAN $120 CALL (NFLX160115C120) entry $5.12 exit $3.04 (-40.6%)

11/13/15 stopped out
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: 96.48 change: -2.74

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: see below

11/14/15: The market's sell-off this past week has weighed on UTX, especially on Friday. Shares underperformed with a -2.76% decline and a drop to new two-week lows.

Our trade has not opened yet. Tonight we are removing UTX as an active candidate.

Trade did not open.

11/14/15 removed from the newsletter, suggested entry was $101.15
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