Option Investor

Daily Newsletter, Tuesday, 11/24/2015

Table of Contents

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

Market Wrap

Another Lackluster Day

by Jim Brown

Click here to email Jim Brown

The major indexes came back from early losses to end the day only fractionally higher after events in Turkey overshadowed the positive GDP revision.

Market Statistics

Turkey shot down a Russian bomber in Turkish territory after warning it ten times to leave Turkish airspace. The warning was heard and recorded by other coalition forces. Two crewmen ejected and Russia sent a rescue helicopter to pick them up. The helicopter was destroyed by Syrian rebels and the pilot was killed. Syrian rebels also reported shooting at the Russian pilots as they floated to earth under their parachutes. At least one was killed.

Later Russia announced it had activated the Russian missile cruiser Moskva off the coast of Syria with orders to destroy any target that may pose a danger. Russian military contacts with Turkey were suspended. All future air operations against ground forces in Syria would be accompanied by Russian fighter jets.

Turkey called for an "extraordinary meeting" of NATO for Tuesday evening to discuss the shoot down and possible consequences. There are unconfirmed reports that Putin has ordered shooting down Turkish planes on the border and that Syria is going to start shooting at U.S. planes in Syrian airspace. Previously there was an unwritten agreement that Syria would not shoot at U.S. planes because they were attacking ISIS, which is also an enemy of Assad. I repeat, this is unconfirmed.

The events in Turkey caused a -17 point opening drop in the S&P to 2,070. By 11:AM traders begin buying the dip and the index rebounded to close up +2.55 at 2,089. The Dow dropped -112 points to 17,683 before rebounding to gain +19 at the close.

On the economic front, the GDP for Q3 was revised up from +1.49% growth to +2.08%. This was down from the +3.92% reading for Q2. Consumer spending at +2.05% and fixed investment at +0.54% provided the lift while inventories at -0.59% and exports at -0.22% provided the drag. Government spending added +0.29%. Corporate profits declined -3.19%.

The inventory lift was upgraded from a drag of -1.44% in the initial report. Inventory accumulation slowed dramatically late in the quarter as weak economics begin to weigh on sentiment.

This upgrade to GDP gives the Fed some cover for a December rate hike. They really do not pay a lot of attention to GDP with the emphasis on inflation and employment instead.

The Richmond Fed Manufacturing Survey for November declined from -1.0 to -3.0 and the third month in contraction territory. All the major components declined with backorders at -16 and the fourth month in decline. New orders fell back into contraction at -6. Employment was the only major component not in negative territory and it was zero.

This was not a good report and it shows manufacturing in the Richmond area is at its weakest point since 2012.

Manufacturing Components

Even worse, the Richmond Services number fell from 18 in October to -1 in November. That is a huge drop and only 1 of the seven retail components was positive. The retail wage index declined from 37 to 35.

However, hiring fell from -1 to -12, revenue from +20 to -12, inventories from +15 to -18, customer traffic from +36 to -3, big ticket sales from -3 to -25 and demand outlook fell from 10 to -21. Clearly, there was a huge shift in the services sector in November and that is a month when retail should have been accelerating rather than crashing.

Consumer Confidence for November declined from 99.1 to 90.4 and the second monthly decline. The high was 102.6 in September. This is the lowest level since September 2014 at 89. Consumers are becoming more pessimistic about economic conditions and I am sure the market drop in Sept/Oct was also a factor in dimming expectations.

The present conditions component declined from 114.6 to 108.1 and the expectations component declined -10 points from 88.7 to 78.6. Those that felt jobs were plentiful declined from 22.7% to 19.9%. Income expectations also declined. However, potential auto buyers increased from 9.8% to 12.4%. The new model year probably helped stimulate some buying interest. Potential homebuyers declined from 6.2% to 5.6% but appliance buyers increased from 47.4% to 51.5%.

Sinking confidence levels typically means consumers will tighten their wallets. That is a problem for retailers heading into the holiday shopping season.

There are a lot of numbers due out on Wednesday but none should be market moving. The oil inventories may turn out to be the most important if the inventory build jumps significantly, as I expect it will over the next couple of weeks. That could depress crude prices and the energy sector. The price of oil has had an unnatural impact on equities over the last couple of months.

The earnings calendar was lackluster today with Dollar Tree (DLTR) leading the pack of early morning reporters. The company reported earnings of 49 cents that missed earnings for 54 cents. However, revenue more than doubled to $4.95 billion and beat estimates for $4.84 billion. Shares rocketed higher despite the miss. The company said the earnings miss was related to its $8.5 billion acquisition of Dollar General. Same store sales rose +2.1%.

The company guided to full year earnings of $2.32 to $2.51 per share and well below estimates for $2.74. Revenue guidance rose to $15.5 billion and in line with analyst estimates.

I personally did not see the reason for the big jump in the stock price since they missed on earnings and guided lower on full year earnings.

Who knew Spam was such a hot commodity? Hormel Foods (HRL) reported earnings of 74 cents that beat estimates for 68 cents. Revenue of $2.4 billion missed estimates for $2.54 billion. However, the company raised guidance for the full year to earnings of $2.85 to $2.95 and analysts were expecting $2.83. Hormel also produces Dinty Moore stew, Hormel chili and owns organic meat producer Applegate. In what seems like a clever sales ploy from the maker of Spam, Applegate makes deli meats, hot dogs, bacon and sausage that do not contain antibiotics, hormones or artificial ingredients. Imagine an organic hotdog. Really?

Hormel has a chart that anyone would love and shares rose +3% today.

Tiffany (TIF) reported earnings of 70 cents compared to estimates for 75 cents. The company also warned that EPS would decline 5-10% this year and more than the prior forecast for "as much as 5%." Revenue declined -2.2% to $938.2 million and missing estimates for $971.3 million. The company said the impact of the strong dollar in the Americas reduced revenue by -6% while comparable sales rose +6% in Europe. Analysts were expecting +8.5% and +6% respectively. The company said tourism sales were lower because of the dollar's impact. Shares rose +3.6% on the report despite the earnings miss and lower guidance.

Signet Jewelers (SIG) also reported earnings of 33 cents compared to estimates for 39 cents. Shares of SIG declined -7.5% in early trading but rebounded to -4%.

Footwear retailer DSW Inc (DSW) reported earnings of 44 cents compared to lowered estimates for 44 cents after they warned in early November. Revenue of $665.5 million matched estimates. The company expects full year earnings of $1.40-$1.50 per share, down from prior estimates before the warning of $1.80-$1.90. Same store sales fell -3.9% compared to a rise of +2.6% in the year ago quarter. Shares rallied slightly despite the poor performance.

After the bell Hewlett Packard (HPQ) reported combined earnings as of October 31st. The split occurred on November 1st so the next earnings will be as individual companies. The company reported earnings of 93 cents that missed earnings of 97 cents. Revenue of $25.7 billion missed estimates for $26.36 billion. Revenue rose only +2% as a result of the strong dollar. In constant currency, sales would have risen +9% to roughly $27.3 billion, which would have beaten estimates. HPQ shares declined -7% in afterhours trading. HPE shares rose +40 cents.

The earnings cycle ends on Wednesday when Deere (DE) reports. There will be some stragglers in the days ahead but the majority of earnings are over.

The downing of the Russian plane caused oil prices to spike over $43 and lifted energy stocks. That is really what lifted the indexes into positive territory. Dow components Exxon and Chevron were the top gainers in the Dow producing about 20 Dow points and the Dow closed up only +19.

With Turkey giving Putin a bloody nose there is an even greater chance he will react aggressively and that could ratchet up geopolitical tensions. The increased bombing of oil pipelines, facilities and tanker trucks has made headlines and that is keeping a bid under crude. We have yet to see ISIS complete a successful attack on Saudi Arabian oil facilities and with the coalition striking ISIS oil operations we could easily see ISIS retaliate by striking back at Iraqi or Saudi facilities.

That $43 level is now resistance and without any new Syrian headlines on Wednesday, we could see prices begin to fade. We will also get the EIA inventory report on Wednesday that could show a big build in inventories.

The API inventory report after the close showed a 2.6 million barrel rise in inventories and a +1.9 million barrel rise in inventories at Cushing. The available storage at Cushing is about 70 million barrels and there are roughly 59 million barrels in storage after the API report. Cushing needs to keep about 10% of storage empty to facilitate the blending operations and maintain flexibility. Once Cushing rises to the point where they can no longer accept oil the price of WTI will decline sharply. Cushing is the delivery point for crude futures. The EIA numbers out in the morning are considered more accurate than the API numbers.


The markets opened lower on the Russian news and then rebounded back to the flat line. However, volume was a little heavier at 6.9 billion shares compared to Monday's 6.1 billion. The big opening drop on the S&P probably took out a lot of stop losses and closed those positions. Those hoping for a December rally bought the dip.

However, today's trading produced another lower high and a lower low on the S&P. That would normally suggest the rally is over but we have to take into account the calendar and the headlines. This week is a very low volume week and it will be even lower on Wednesday and Friday. The geopolitical headlines are keeping cautious traders on the sidelines and the rebound back to a small gain was actually a positive signal.

The overnight session could be dangerous tonight. If Putin exercises his Napoleon complex, he is only 5 foot 7, and takes aggressive action in Syria then all bets are off for the rest of the week. He hates to be seen as weak and I suspect there is a headline heading our way in the days ahead. He is not a leader that talks tough and fails to follow through.

Resistance is about 2,097 and initial support is 2,080 despite the headline drop to 2,070 intraday. Real resistance remains 2,016 and 2,132.

The Dow was lifted by the rebound in oil prices and calmer heads in the Middle East could remove that lift very easily. The last two days the Dow has topped out at 17,860 intraday and faded into the close. Today's close was 17,814. The Dow has the same lower high formation but it is not pronounced. I would like to think it is holding at the highs rather than failing at the highs but we do not have the answer yet.

We cannot make any rational projections from the charts in this low volume, low volatility market. We need to get past Thanksgiving and return to normal trading.

Resistance is 17,900 and support 17,700.

The Nasdaq is stuck at 5,100. It has closed between 5,102 and 5,104 for the last three days. The opening dip to 5,050 was quickly bought but it took all day to finally creep back to that solid resistance level.

I view this as positive because it refuses to decline. A material move over 5,100 could produce some short covering and push the Nasdaq closer to stronger resistance at 5,160.

The Nasdaq is currently our best hope for leading the indexes higher. As long as the big cap tech stocks continue to outperform the broader market could follow the Nasdaq higher.

However, the Russell 2000 is coming off the bench as a substitute hitter. The Russell rallied +8 today compared to only +0.33 for the Nasdaq. I said the big cap tech stocks were our best hope for leading the indexes higher but the Russell has suddenly caught fire and could eclipse the performance of the big caps. I am definitely not opposed to having two indexes competing for the lead.

The Russell has resistance at 1,194 and again at 1,200. Support is today's low at 1,173.

Our risk for the rest of the week is geopolitical and terror related. Negative headlines from the Middle East could definitely derail any market gains. A terror event in the U.S. would be even worse and bring back 9/11 style fears. With three million people planning on lining the streets of New York on Thursday for the Macy's parade that is a target rich environment for any ISIS cell ready to end their existence taking innocent lives. I pray nothing happens but the risk is extreme.

Enter passively, exit aggressively!

Jim Brown

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New Option Plays

Ready To Break Out

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these stocks may need to see a break past key support or resistance:

Bullish ideas: AOS, TRV, DPS, AVY, BABA, ITW, LYB


ABIOMED, Inc. - ABMD - close: 81.50 change: -0.23

Stop Loss: 78.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 841 thousand
Entry on November -- at $---.--
Listed on November 24, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: Yes, see below

Company Description

Trade Description:
2015 has been a roller coaster ride for ABMD investors. Shares are down -26% from their 2015 highs near $110. However, the stock is still up +114% year to date. After its recent drop in October shares could be poised for another surge.

ABMD is in the healthcare sector. According to the company, "Abiomed is a pioneer and global leader in healthcare technology and innovation, with a mission of RECOVERING HEARTS AND SAVING LIVES. Abiomed CEO, Chairman, and President, Michael R. Minogue, has focused the company's efforts on developing ground-breaking technologies designed to assist or replace the life-sustaining pumping function of the failing heart. The Company's portfolio of products and services offer healthcare professionals an array of choices across a broad clinical spectrum. From the world's first total replacement heart to the World's Smallest Heart Pump, 1/100th the size of the heart with rapid and simple insertion, Abiomed is dedicated to finding ways to bring the most advanced and beneficial technology to patients and physicians."

The big rally in August started with its 2016 Q1 earnings report on August 4th. ABMD beat estimates on both the top and bottom line. Revenues were up +50% from a year ago and management raised their 2016 guidance from $285-295 million to $300-310 million. Analysts were only forecasting $292 million. This report kicked off a rally from $80 to $110, which was really impressive considering the fact that healthcare stocks were retreating lower in August. Then the whole market corrected lower in late August.

By mid to late October it looked like the correction in ABMD was over and shares were back in rally mode. Suddenly that changed after the company reported its Q2 earnings on October 29th. Wall Street was expecting a profit of $0.13 a share on revenues of $74.5 million. ABMD beat estimates. Earnings rose +88% from a year ago to $0.17 a share. Revenues soared +47% to $76.3 million. It was ABMD's fifth quarter in a row of earnings coming in above estimates.

ABMD management raised their 2016 revenue guidance from $300-310 million to $305-315 million. Unfortunately Wall Street had already adjusted their expectations to $310 million. ABMD's bullish outlook was not bullish enough. Traders were worried that ABMD's growth might be slowing down too fast. The stock was crushed with a -30% plunge on October 29th. It closed down -28.5% for the day.

This looks like an overreaction. The company's main product, Impella, still has a lot of growth ahead of it. Analyst estimates suggest that ABMD's Impella sales could hit $1 billion by 2020.

After this post-earnings crash, the stock bounced off round-number support at $70.00 but this rebound stalled a few days later. Shares of ABMD have spent most of November consolidating sideways in the $76.00-83.00 range. The good news is that ABMD looks like it could breakout from this trading range. The point & figure chart has already turned bullish again and is forecasting at $90.00 target.

Tonight we are suggesting a trigger to buy calls at $83.20. I do consider this a more aggressive, higher-risk trade. ABMD is a volatile stock. If we can catch it on the next up swing it could be a big winner for option traders. I would use small positions to limit risk.

Trigger @ $83.20 *small positions to limit risk*

- Suggested Positions -

Buy the JAN $90 CALL (ABMD160115C90) current ask $3.40
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 Recover From Tuesday Morning Lows

by James Brown

Click here to email James Brown

Editor's Note:

Crude oil spiked on rising geopolitical tensions after Turkey shot down a Russian warplane this morning. The broader market initially sold off but investors continue to buy the dip. The major indices eked out minor gains by the close.

ROP hit our entry trigger.

Current Portfolio:

CALL Play Updates

Alkermes Plc - ALKS - close: 74.26 change: +1.73

Stop Loss: 69.75
Target(s): To Be Determined
Current Option Gain/Loss: -63.3%
Average Daily Volume = 699 thousand
Entry on November 17 at $75.25
Listed on November 10, 2015
Time Frame: Exit PRIOR to December option expiration
New Positions: see below

11/24/15: ALKS delivered a nice bounce (+2.3%) off its rising 20-dma on Tuesday. Shares are once again poised to breakout past resistance near the $75.00 level. I would be tempted to buy calls again on a rally past $75.25 but I would not buy December calls. Consider January or February calls instead.

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.

- Suggested Positions -

Long DEC $80 CALL (ALKS151218C80) entry $2.45

11/17/15 triggered @ $75.25
Option Format: symbol-year-month-day-call-strike

The Boeing Company - BA - close: 148.65 change: +0.31

Stop Loss: 144.75
Target(s): To Be Determined
Current Option Gain/Loss: -33.5%
Average Daily Volume = 3.8 million
Entry on November 20 at $150.25
Listed on November 19, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

11/24/15: Defense stocks got a boost as investors reacted to the news that Turkey had shot down a Russian war plane this morning. BA actually underperformed its peers in the defense industry but shares did add +0.2%, outperforming the major indices. I am suggesting traders wait for BA to trade back above $150.25 before initiating new bullish positions.

Trade Description: November 19, 2015:
Growing demand for airplanes and rising demand for defense spending to crush ISIS generates a couple of strong tailwinds for BA. The company is involved in both defense and a major player in the commercial airline industry.

BA is in the industrial goods sector. According to the company, "Boeing is the world's largest aerospace company and leading manufacturer of commercial jetliners and defense, space and security systems. A top U.S. exporter, the company supports airlines and U.S. and allied government customers in 150 countries. Boeing products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, and performance-based logistics and training."

BA's most recent earnings report was October 21st. Wall Street was expecting a profit of $2.20 a share on revenues of $24.78 billion. BA beat estimates on both fronts. Earnings were $2.52 a share. Revenues were up +8.7% to $25.85 billion. The company raised their guidance on both EPS and revenues. Their backlog is almost 5,700 planes valued at more than $425 billion.

The company sees strong demand for the airplane market. On November 4th BA issued a press release stating, "Boeing forecasts airlines in the Middle East will require 3,180 new airplanes over the next 20 years, valued at an estimated $730 billion. 70 percent of the demand is expected to be driven by rapid fleet expansion in the region." Then on November 16th, "Boeing projects the Latin American commercial aviation market will grow at one of the highest rates in the world over the next 20 years. As a result, Boeing forecasts the region's airlines will need 3,050 new airplanes valued at $350 billion."

A couple of days ago two analysts with Canaccord Genuity issued a note suggesting rising interest rates are bullish for BA. Here's what they had to say, "While it is difficult for us to determine exactly when the U.S. will raise its target federal funds rate, we wanted to review again the impact of rising rates has historically had on Boeing and the commercial aerospace cycle. Historically, rising rates have corresponded with strengthening commercial orders and outperformance by both Boeing stock and the broader Aerospace & Defense sector. For example, over the past three significant tightening cycles, commercial transport orders increased by an average of 7% and 140% in the 12 and 24 month time periods after rates started to increase. Similarly, the total commercial backlog also increased over these same periods by an average of 3% and 43%... Not surprising as well, over the past two tightening cycles, BA stock has outperformed the broader market by an average of 19%-20% annually while rates are rising. We agree that with the more diverse backlog today, the health of U.S. airlines is less impactful for the cycle. However, we believe in the aggregate, rising rates in the U.S. are generally a bullish signal for both Boeing and the A&D sector. Note that since 1991, BA stock has outperformed the S&P in 15 of the 24 years, and is on pace to do so again in 2015." (source)

News in late October that BA and project partner Lockheed Martin (LMT) had lost their bid on the Pentagon's long-range strike bomber project to rival Northrop Grumman (NOC) did not seem to have much impact on BA's share price.

On the subject of defense, the terrible attacks in Paris last week have generated new support for additional defense spending to focus on ISIS/ISIL. BA could see additional defense spending contracts from multiple governments as governments bulk up for more action.

Meanwhile shares of BA have been building on a bullish trend of higher lows since the market's correction in August. The bounce off its trend line of support has lifted BA toward major resistance at $150.00. The point & figure chart is bullish and forecasting at $165.00 target. We want to see a breakout past resistance at $150. Tonight we are suggesting a trigger to buy calls at $150.25.

- Suggested Positions -

Long JAN $155 CALL (BA160115C155) entry $2.21

11/20/15 triggered @ $150.25
Option Format: symbol-year-month-day-call-strike

The Walt Disney Company - DIS - close: 117.95 change: -1.47

Stop Loss: 115.85
Target(s): To Be Determined
Current Option Gain/Loss: -0.7%
Average Daily Volume = 10.6 million
Entry on November 18 at $117.75
Listed on November 12, 2015
Time Frame: Exit PRIOR to 2016 January option expiration
New Positions: see below

11/24/15: Shares of DIS gapped down this morning. The move was likely an overreaction to some cautious analyst comments and a new (lowered) price target in the $130s. The stock found support at its rising 10-dma.

No new positions at this time.

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.

- Suggested Positions -

Long 2016 JAN $120 CALL (DIS160115C120) entry $2.92

11/21/15 new stop @ 115.85
11/18/15 triggered @ $117.75
Option Format: symbol-year-month-day-call-strike

Global Payments Inc. - GPN - close: 72.25 change: -0.41

Stop Loss: 68.40
Target(s): To Be Determined
Current Option Gain/Loss: +26.7%
Average Daily Volume = 718 thousand
Entry on November 17 at $70.25
Listed on November 11, 2015
Time Frame: Exit PRIOR to December options expiration
New Positions: see below

11/24/15: GPN spent Tuesday's session consolidating sideways following yesterday's rally. The stock ended today with a -0.5% decline.

Broken resistance near $70.00 should be new support. More conservative traders might want to raise their stop loss again.

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.

- Suggested Positions -

Long DEC $70 CALL (GPN151218C70) entry $2.25

11/21/15 new stop @ 68.40
11/17/15 triggered @ $70.25
Option Format: symbol-year-month-day-call-strike

Huntington Ingalls Industries - HII - close: 133.85 change: +0.68

Stop Loss: 129.75
Target(s): To Be Determined
Current Option Gain/Loss: -3.5%
Average Daily Volume = 318 thousand
Entry on November 17 at $132.05
Listed on November 16, 2015
Time Frame: Exit PRIOR to December option expiration
New Positions: see below

11/24/15: HII dipped to short-term technical support at its simple 10-dma and bounced. The stock looks poised to rally tomorrow morning. If both HII and the S&P 500 are positive tomorrow morning I'd be tempted to launch new positions.

Trade Description: November 16, 2015:
Defense stocks were in the spot light today. The tragic terrorist attack in Paris on Friday has changed the worldview for many governments. Most major world powers have vowed to intensify their efforts to destroy ISIS. That should mean additional defense spending.

HII is in the industrial goods sector but it's part of the defense industry. According to the company, "Huntington Ingalls Industries is America's largest military shipbuilding company and a provider of engineering, manufacturing and management services to the nuclear energy, oil and gas markets. For more than a century, HII's Newport News and Ingalls shipbuilding divisions in Virginia and Mississippi have built more ships in more ship classes than any other U.S. naval shipbuilder. Headquartered in Newport News, Virginia, HII employs approximately 37,000 people operating both domestically and internationally."

The earnings picture has been mixed for HII. The market was relatively forgiving with the company's most recent earnings report. HII announced its Q3 results on November 5th. Earnings were up +18.5% from a year ago to $1.98 a share. That actually missed Wall Street estimates by three cents. Revenues were up +4.8% to $1.8 billion, which was above expectations. HII said their total operating margin improved from 10.0% to 11.1%. Management also said their backlog grew about $800 million to $23.3 billion.

The stock reacted sharply with a surge to new multi-month highs. Since this earnings report HII has been digesting its gains in a sideways consolidation pattern. Friday's market decline pushed HII to short-term technical support at the 10-dma. Today shares bounced +3.1% to set a new six-month closing high. We think this rally continues. The point & figure chart is bullish and forecasting a long-term target of $179.00.

Tonight we are suggesting a trigger to buy calls at $131.75.

FYI: HII will begin trading ex-dividend on November 24, 2015. The quarterly cash dividend is $0.50.

- Suggested Positions -

Long DEC $135 CALL (HII151218C135) entry $2.83

11/21/15 new stop @ 129.75
11/17/15 triggered on gap higher at $132.05, trigger was $131.75
Option Format: symbol-year-month-day-call-strike

Lennox Intl. Inc. - LII - close: 136.61 change: -0.08

Stop Loss: 132.85
Target(s): To Be Determined
Current Option Gain/Loss: -23.8%
Average Daily Volume = 425 thousand
Entry on November 23 at $137.25
Listed on November 18, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

11/24/15: LII fell toward short-term support near $135.00 before paring its losses. The stock bounced back to close nearly unchanged on the session. I would wait for a new rally above $137.25 before initiating bullish positions.

Trade Description: November 18, 2015:
Not many publicly-traded companies can say they have been around for over 100 years. LII started back in 1895. The last four years have been solid for bullish investors in the stock. There was a big pullback in mid 2014 but the stock recovered. Since then LII has been setting a string of new all-time highs.

LII is in the industrial goods sector. According to the company, "Lennox International is a leading provider of climate control solutions for heating, air conditioning and refrigeration markets around the world. We have built our business on a heritage of integrity and innovation dating back to 1895. Our employees are dedicated to providing trusted brands, innovative products, unsurpassed quality, and responsive service." The company operates three key businesses with a residential heating and cooling division, a commercial heating and cooling division, and a refrigeration business.

The earnings picture has been relatively solid as well. LII has beaten Wall Street's earnings and revenues estimates in three of the last four quarterly reports. Their most recent earnings report was October 19th. LII's earnings rose +26% from a year ago to $1.82 per share. That was three cents above estimates. Revenues were up +6.3% to $955 million versus the $940 million estimate. On a constant currency basis revenues were up +11%. Management raised their 2015 revenue forecast.

Todd Bluedorn, LII Chairman and CEO, commented on his company's quarter, "Lennox International realized strong revenue growth at constant currency and significant margin expansion across all three of our businesses in the third quarter. For the company overall, total segment profit set a third-quarter record, and profit margin expanded 140 basis points from the prior-year quarter to a record level of 13.7%. Our Residential business set third-quarter records for revenue, margin and profit as strong business momentum continued. Residential revenue was up 13% at constant currency, and margin expanded 240 basis points to 17.4%. In Commercial, segment profit and margin set new highs on 8% revenue growth at constant currency. North America and Europe both saw high single-digit revenue growth at constant currency. Commercial segment margin expanded 70 basis points to 18.2%. In Refrigeration, revenue was up 8% at constant currency, with double-digit growth in North America and Europe. Refrigeration margin expanded 220 basis points from the prior-year quarter to 10.7%."

It's hard to go wrong with record results and rising margins. The stock surged on this earnings report. Momentum finally stalled near $136-137 in early November. LII has spent the last couple of weeks consolidating gains in a sideways trading pattern. Shares were relatively resistant to the market's mid-November swoon. Now with the market in rally mode LII is on the verge of another breakout higher. Today's high was $136.94. Tonight we are suggesting a trigger to buy calls at $137.25.

- Suggested Positions -

Long MAR $140 CALL (LII160318C140) entry $6.30

11/23/15 triggered @ $137.25
Option Format: symbol-year-month-day-call-strike

Lam Research Corp. - LRCX - close: 77.29 change: +0.30

Stop Loss: 74.95
Target(s): To Be Determined
Current Option Gain/Loss: -31.8%
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

11/24/15: Semiconductor stocks outperformed the broader market on Tuesday. LRCX underperformed its peers but still managed a +0.38% gain.

No new positions.

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

11/21/15 new stop @ 74.95
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

Roper Technologies - ROP - close: 192.51 change: +0.23

Stop Loss: 186.75
Target(s): To Be Determined
Current Option Gain/Loss: -7.3%
Average Daily Volume = 468 thousand
Entry on November 24 at $192.66
Listed on November 23, 2015
Time Frame: Exit PRIOR to earnings in January
New Positions: see below

11/24/15: Our brand new trade on ROP is open. The plan was to buy calls at $192.65 but shares saw a mini-gap higher intraday so our trade opened at $192.66. ROP tagged new highs before paring its gains ahead of the closing bell. The stock retested $190.00 as support this morning so more conservative traders may want to raise their stop loss.

Trade Description: November 23, 2015:
The Dow Jones Industrial Average is virtually flat for the year (-0.2%) while ROP is soaring. The stock is up +23% year to date and up +25% from its September lows. The relative strength does not show any signs of slowing down.

ROP is in the industrial goods sector. According to the company, "Roper is a diversified technology company with annual revenues of $3.2 billion. We provide engineered products and solutions for global niche markets, including software information networks, medical, water, energy, and transportation. Our strong operating capabilities enable us to convert end-market potential into profitable growth and cash flow in order to create value for our investors. Roper is a component of the S&P 500, Fortune 1000 and Russell 1000 Indexes." The company operates four major business segments. These are: industrial technology, energy systems and controls, medical and scientific imaging, and RF technology.

The earnings picture has been somewhat mixed this year. Shares of ROP plunged in July when they reported their Q2 results. Q2 earnings beat estimates but revenues missed. Management also lowered their Q3 guidance.

Low expectations may have helped ROP beat Q3 estimates when their results came out on October 26th. Earnings of $1.61 a share beat analysts' estimates by four cents. Revenues were up +0.1% to $886 million. This was actually below expectations but traders didn't seem to care. Adjusted gross margins improved 130 basis points to 60.7% and ROP management upped the low-end of their earnings guidance. Overall ROP is forecasted to show +5% growth in 2015 and see a +10% jump in 2016 earnings. That was enough for investors as shares of ROP soared past resistance to hit new highs following its Q3 report.

The company has been very active on the acquisition front. Recent acquisitions include law firm software company Aderant. They have also purchased Atlas medical and CliniSys. Thus far ROP has spent $1.7 billion on acquisitions this year.

Technically shares have shown significant relative strength. The rally off its September lows has been especially strong. The point & figure chart is bullish and forecasting a long-term target of $273.00. ROP has broken through multiple layers of resistance in the last few weeks. Most of November the stock consolidated sideways in the $184-190 zone. A few days ago ROP found support at its rising 20-dma and then rallied through round-number resistance at $190.00. ROP looks headed for $200 a share if not higher. Tonight we are suggesting a trigger to buy calls at $192.65.

- Suggested Positions -

Long FEB $200 CALL (ROP160219C200) entry $4.10

11/24/15 triggered @ $192.66
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Bunge Limited - BG - close: 67.05 change: -1.32

Stop Loss: 68.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on November -- at $---.--
Listed on November 21, 2015
Time Frame: Exit PRIOR January option expiration
New Positions: Yes, see below

11/24/15: BG did not see any follow through on yesterday's oversold bounce. The stock gapped down this morning and closed with a -1.9% decline on the session. Currently our suggested entry point to buy puts is at $64.85.

Trade Description: November 21, 2015:
BG's business is facing multiple headwinds and the stock has suffered for it. Shares are underperforming the market in a big way with BG down -17% from their late October high. The stock is down -29% from its 2015 highs.

BG is in the consumer goods sector. According to the company, "Bunge Limited (www.bunge.com) is a leading global agribusiness and food company operating in over 40 countries with approximately 35,000 employees. Bunge buys, sells, stores and transports oilseeds and grains to serve customers worldwide; processes oilseeds to make protein meal for animal feed and edible oil products for commercial customers and consumers; produces sugar and ethanol from sugarcane; mills wheat, corn and rice to make ingredients used by food companies; and sells fertilizer in South America. Founded in 1818, the company is headquartered in White Plains, New York."

One of BG's biggest challenges is the strong dollar. This makes American products, including crops and commodities, more expensive overseas. Thus demand from foreign markets has been soft. Currencies issues have also been trouble with BG's business in Brazil, which has a slow economy and a weak currency. Meanwhile in the U.S. farmers are facing a larger than expected harvest for some crops, which will further push prices down.

These troubles are crushing BG's revenues. The company reported better than expected Q1 earnings back in April but revenues were down -19.7% and significantly below Wall Street estimates. Their Q2 results were worse. Analysts expected a profit of $1.36 a share on revenues of $14.59 billion. BG reported Q2 results of $0.50 a share. Revenues were down -35.8% to $10.78 billion. BG's Q3 numbers were not much better. Earnings were $1.24 a share, which missed estimates by 35 cents. Revenues plunged -21% to $10.79 billion, compared to estimates of $12.5 billion.

Naturally analysts have began downgrading their earnings and revenue numbers for BG, which doesn't inspire any confidence in the stock. The point & figure chart has produced a new sell signal that is forecasting at $53.00 target.

Bulls could argue that BG's stock is short-term oversold and due for a bounce. However, the S&P 500 just delivered its best one-week gain of the year and BG did not participate. Friday's intraday low was $65.32. Tonight we are suggesting a trigger to buy puts at $64.85.

Trigger @ $64.85

- Suggested Positions -

Buy the JAN $65 PUT (BG160115P65)

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

Cummins Inc. - CMI - close: 98.68 change: +0.54

Stop Loss: 101.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.0 million
Entry on November -- at $---.--
Listed on November 17, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: Yes, see below

11/24/15: Two weeks ago CMI dipped to an intraday low of $97.41. Today shares slipped to an intraday low of $97.41 before bouncing back into positive territory. We are not giving up on a potential breakdown in CMI's stock. Shares have struggled with resistance near $100 the last several days. Our suggested entry point to buy puts is at $97.30.

Trade Description: November 17, 2015:
Shares of CMI are in a bear market. The current down trend shows no signs of slowing. The stock is down -32% year to date.

CMI is in the industrial goods sector. According to the company, "Cummins Inc., a global power leader, is a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Headquartered in Columbus, Indiana, (USA) Cummins currently employs approximately 54,600 people worldwide and serves customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations and approximately 7,200 dealer locations. Cummins earned $1.65 billion on sales of $19.2 billion in 2014."

CMI reported its Q2 results on July 28th. The company beat estimates on both the top and bottom line. Yet the post-earnings rally quickly faded. Shares were already in a down trend and investors used the rally to sell. Unfortunately, the earnings picture has taken a dramatic turn for the worse.

Business conditions deteriorated in the third quarter. Wall Street was expecting CMI to report earnings of $2.59 a share on revenues of $4.92 billion. The company delivered earnings of $2.14 a share. Revenues fell -5.5% to $4.62 billion. Management lowered their 2015 guidance and said they would start laying off up to 2,000 people.

The stock crashed to new multi-year lows the next day (see chart). A bearish note from Morgan Stanley didn't help either. A team of analysts at Morgan Stanley cut their rating on CMI to a "sell" and slashed their price target down to $79. Here is an excerpt from the Morgan Stanley note:

We believe CMI is facing three major headwinds that will drive share price underperformance: 1) The secular growth story within the Components business is dissipating - as developed markets shift regulatory focus from emissions to fuel economy, we expect CMI's Emissions Solutions revenue growth to converge with production; this represents a $0.35 EPS headwind. 2) The NAFTA Engine business is likely to suffer from market share erosion - as per our analysis on pages 4-6, we calculate $0.40-0.60 EPS risk associated with incremental Ford, Freightliner, and PACCAR vertical integration. 3) Consensus forecasts do not yet reflect the full impact of a NAFTA truck industry downturn - based on ACT's outlook, we see $0.40-0.65 EPS risk associated with cyclical decline in the NA truck market. While the negative reaction to today's 3Q miss and 2015e guide-down implies increasing awareness of cyclical risk, our bearish call focuses more on the impediments to secular growth and market share. (source)
A couple of weeks later, on November 10th, CMI held their analyst day. The Board of Directors approved another $1 billion stock buyback program to replace the previous $1 billion buyback they announced in July 2014. This news didn't help the stock. That is probably because CMI warned that they expect 2016 revenues to be -5% below 2015 (or worse).

I will point out that some investors see CMI as a dividend trade. The stock's decline has boosted the dividend yield on CMI's stock to nearly 4%. We should keep in mind that if the Fed starts raising rates it will put pressure on high-dividend names. Speaking of dividends, shares of CMI should begin trading ex-dividend on November 18th or 20th (I saw two different dates). The quarterly dividend is 97.5 cents a share.

The last few days have seen CMI breakdown below round-number, psychological resistance at the $100.00 level. The oversold bounce has failed to lift CMI back above this key level. We think CMI accelerates lower from here. Last Friday's low was $97.41. Tonight we are suggesting a trigger to buy puts at $97.30.

Trigger @ $97.30

- Suggested Positions -

Buy the 2016 JAN $95 PUT (CMI160115P95)

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