Option Investor

Daily Newsletter, Wednesday, 12/2/2015

Table of Contents

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

Market Wrap

Bulls Get a Little Nervous

by Keene Little

Click here to email Keene Little
The stock market has been rallying, or holding up, into this week with the expectation it will receive good news about the employment picture and more QE from the ECB. Today there was some nervousness about those expectations.

Today's Market Stats

The stock market's rally in the past week was hardly inspiring (except for the relative strength in the small caps), especially after the strong rally off the November 16th lows, but there's been a clear expectation for some help from the ECB and positive employment data. But today's selling showed investors getting a little nervous in front of Thursday's ECB announcement. The market is also a little uncertain about what the reaction will be to Friday's nonfarm payrolls (NFP) report. There are a lot of mixed economic signals for the Fed to contemplate and their upcoming decision on a rate hike is at best only a 50/50 guess for the market.

Today's decline completely reversed yesterday's gains and the week is slightly negative after today but it's the next two days that could significantly move the market. Bullish sentiment is very high, which means we have a lot of traders who are not going to be scared off by a decline, at least not initially. Dip buying, including today's, is probably on the mind of most traders. But various measures of trader sentiment show a reason for caution as we head into the end of the week.

There are many ways to gauge market sentiment and we have plenty of surveys that tell us what percentage of traders are bullish, neutral or bearish and these are typically played from a contrarian perspective. When too many become bullish, as is the current situation, the market can simply run out of buyers to keep propelling the market higher. Another "sentiment" gauge comes from watching how traders are using the Rydex funds, which have a selection of bullish and bearish funds, straight and leveraged. One fund, the Nova fund, is for traders who feel bullish about the market and it seeks to leverage the gains in the S&P 500 by 150%. As always, the leverage can work against a trader, which is why using leverage is a sign of bullish enthusiasm.

Looking at the Rydex Nova fund assets, shown on the chart below, you can see that it has now pushed above where it was at the November 3rd market high. A lower price high is met with higher total assets in the leveraged bullish fund and that should be a warning flag for over-eager bulls. In a market decline, even if it's to be just a pullback, the leveraged fund will feel the pain to a greater degree. Note also on the chart that RSI for Nova has reached a level (above 70) where previous market highs have been found. This begs the question about whether or not the market has priced in expectations for what the ECB and Fed will do with their monetary policies. Buy the rumor, sell the news? That's certainly one possibility here.

Rydex Nova fund vs. SPX, Weekly chart

There are plenty of ways to look at the underlying strength of the market and I've shown several recently to point out the disparity between what the indexes are doing (rallying) vs. what most of the stocks are doing (underperforming). When the market's indexes are rallying but the number of participating stocks is dwindling it's usually a good signal the bull run is coming to an end. The chart below shows the NYSE Summation index (NYSI), which is essentially a running total of the McClellan Oscillator, which measures advancing issues minus declining issues. Like other oscillators, you look for divergences between the peaks and valleys of each and we're currently seeing divergences at two different peaks.

You can see the deterioration in the NYSI since the market in March, which led to the strong breakdown in the market in August. The rally back up into the year's trading range (prior to the August decline) has been met with a lower high in the NYSI. And now the rally from November 16th, which has SPX knocking on the door to new highs, the NYSI is showing significant bearish divergence. SPX has rallied back up on the backs of fewer stocks, which is a strong indication it's a counter-trend rally and not the start of something more bullish.

NYSE Summation index vs. SPX, Daily chart

Interestingly, as bullish sentiment about the stock market hits extreme levels and the stock market shows weakening participation in the rally, there's another sentiment indicator that comes from the bond market. Back in 2007, as the stock market was searching for a high (with the same weakening signals as shown above), I was watching the TED spread, especially since there were so many concerns about the sub-prime mortgage problem (well, Bernanke wasn't worried about it since the problem would be "contained"). The TED spread measures the difference between the perceived safety of 3-month U.S. Treasuries and Eurodollars futures, which reflects concerns about the credit ratings of corporate borrowers.

We know corporations have been binge borrowing for the past several years, thanks to the uber-cheap borrowing rates. They've been using the money to buy back stocks and enable more M&A activity but now they're starting to struggle to make payments. With corporate earnings in decline it has put the squeeze on the companies' ability to service their debt. This is especially true in the energy-related fields and many of the miners. The worry over their ability to repay their loans is causing the TED spread to start widening again, as can be seen on the chart below. The rise has been starting to accelerate higher and is now higher than it's been since late-2011 following the market scare that year. This rate rise should be of great concern to the market.

TED Spread

Another way to look at concerns about risk is to look at the LIBOR (London Interbank Offered Rate) rate, which is basically the interest charged on money lent between banks. There was little concern about risk after recovering from the 2008-2009 market crash until this past year, which is when the rate started to rise. It's another indication banks are getting nervous about lending money even to other banks and are starting to demand a higher rate of return for what they feel are higher risks. Whether they're failing corporate loans, student loans or sub-prime auto loans (worse today than the sub-prime mortgage fiasco back in 2006-2007), there's a lot of debt out there that's not going to get paid back. The big question of course is what the banks are seeing amongst themselves that warrants increasing concern. These rates have a long way to go before they're even close to where they were back in 2005-2006 but it's the relative change (about 50% higher in the past year) and the accelerating rise, especially in the longer-dated maturities, that's worth watching.

LIBOR rates, 2012 - November 2015

The above charts are not meant to be trading signals but instead they tell you whether or not you can relax about the long side here or should instead be vigilant about controlling risk. The use of leverage is inadvisable in this current climate and liquidating some inventory and going to cash is, in my opinion, highly advisable. Selecting some shorting candidates (e.g., in relatively weak sectors but nearer their highs than lows) as a hedge, if not for speculation, would be a good exercise to go through.

As always, timing is everything in the stock market and your trading horizon will determine when you decide to get in and out of trade positions. The month of December is typically bullish, though it has its ups and downs, so one could easily argue it's too early to be thinking short. The chart below shows the average December and while the 2nd week is typically weak, it usually sets up the Santa Claus rally. This is of course not guaranteed and as I'll cover in tonight's charts, I could argue that this December will not be bullish. Or if we do get a Santa Claus rally it will start from much lower and lead only to a lower high. Notice too the relative strength in the RUT -- this is likely one reason why the RUT has seen relative strength in the past week. Traders are front-running the normally bullish month. But as with the rally into what could be significant news this week, have traders gotten ahead of themselves?

December trading pattern

I came across a good interview with Milton Berg, the CEO of MB Advisors, who did a good job summarizing the issues facing us in the stock market. He talks about some of the things mentioned above and I like the way he pulled some fundamental and technical analysis together: Milton Berg on Bloomberg

Moving on to the regular charts, the SPX weekly chart shows it has stalled for nearly six weeks now at trendline resistance, which includes the broken uptrend line from October 2011 - October 2014 and the top of a parallel up-channel for the rally from 2009, both of which cross near 2098. The big question is whether it's been consolidating beneath resistance as it tries to gather some strength to bust out to the upside, in which case I can see the potential for a rally up to the 2170 area before year-end. That would likely be a blow-off move with lots of bearish divergences as a result of a reaction to the Fed perhaps. But it's vulnerable here and a turn back down, which would likely be strong and fast, is clearly a risk that must be respected by the bulls.

S&P 500, SPX, Weekly chart

The daily chart below shows the cycling around the broken uptrend line from 2011-2014 in late October and into the November 3rd high and how it's been resistance since coming back up to it on November 20th. I show a projection on the chart at 2145.86, which is where the 5th wave of the move up from August would achieve equality with the 1st wave. This bullish wave count calls the November 16th low the start of the 5th wave. The bearish wave count says the November 16th high was the completion of a 3-wave bounce correction resulting in a lower high relative to the July high. The bounce off the November 16th low is to another lower high and a drop below 2065 would be a strong clue that no more new highs are coming.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2117
- bearish below 2060

The choppy price action since November 20th could be a correction to the rally from November 16th, with today's sharp decline finishing the correction, and the bullish interpretation is that it will be followed by a strong rally, presumably in reaction to a bullish reaction to the ECB and maybe Friday's NFP report. A rally above this morning's high near 2104 would be a bullish move and short-term traders should abandon the short side if that happens. But if we get just a bounce correction to today's decline that's then followed by a drop below whatever low is found following today's decline, I would abandon the long side since the bearish interpretation of the pattern calls for a strong decline to follow, one that could quickly take SPX back down to at least the August low (1867) before the end of the month.

S&P 500, SPX, 60-min chart

The DOW has the same pattern as SPX and therefore the same setup -- bullish above this morning's high at 17901 (more bullish above its November 3rd high at 17978) and bearish below a projection near 17525 (below which I would have a difficult time interpreting the pullback pattern as bullish). It has been struggling with its broken uptrend line from October 2011 - October 2014 and its downtrend line from May-November, both of which cross today near 17900 and today's high. It could literally go either way from here and it's very likely going to be this week's news events that propel the move. Be careful of the whipsaws in between the key levels but follow the break of one of them.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,978
- bearish below 17,525

The techs were the stronger indexes this morning but the selling brought them back down and into the red and although the candles are small on the Nasdaq daily chart, one could argue the two bearish engulfing candlesticks this week (Monday and today) are telling us rallies are being used to sell into. The bearish divergences evident on the oscillators as the November 3rd highs are tested provide another warning. I see upside potential for the Nasdaq to the 5300 area but only if the market gets a strong positive reaction to this week's news. A drop below its November 24th low at 5050 would be a strong sign the top is already in place.

Nasdaq Composite, COMPQ, Daily chart

Key Levels for COMPQ:
- bullish above 5163
- bearish below 5050

The RUT has been the more bullish index since the November 16th low (after languishing for much of the bounce off the August low) and as mentioned earlier, it appears traders were front-running the expected December rally (playing the seasonal pattern). But like its big brothers, it has been struggling with its broken uptrend line from October 2011 - October 2014. In fact its struggle the past four trading days is its 3rd attempt since September to get through the trend line. One could argue we now have a topping pattern referred to as a 3-drives-to-a-high pattern (September, November and now). If it can break through resistance, which includes today's high at 1205 and then price-level S/R near 1213 and its 200-dma at 1214, we'd have a bullish breakout. But at the moment it's a bearish setup for a topping pattern that would be confirmed with a drop below its November 16th low near 1150. Watch the whipsaws in between.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1215
- bearish below 1150

Watching the Treasury market, in an attempt to learn what the bond market thinks central banks will or will not do and what that could mean to buying/selling in Treasuries. This whole year has really been nothing more than a big, but contracting, sideways consolidation and that might not change for another month or two. The TNX (10-year yield) daily chart below shows the possibility for a continuation into January in a sideways triangle before heading lower early next year. This sideways triangle is within a longer-term downtrend and therefore fits as a continuation pattern. If TNX drops below 2% I'll turn more bearish sooner whereas a rally above its November 9th high at 2.377% would turn me bullish. At the moment it has found support at its 50- and 200-dma's, at 2.15% and 2.16% resp., but I think it will head down to the bottom of its triangle, which is the uptrend line from January-August and is currently near 2.04%.

10-year Yield, TNX, Daily chart

Following up on last week's update on the TRAN, I had mentioned the high on November 20th was a good fit for the completion of an ascending triangle for the bounce correction off its August low. The little throw-over above the top of the triangle, followed by a close inside the triangle, produced a sell signal. That signal would be confirmed with a drop below the bottom of the triangle, which is the uptrend line from August 24th and today it poked below it but closed above it, currently near today's closing price at 8030. Trendline support will probably be good for at least a bounce and then watch for what follows. Another rally above the November 20th high at 8358 would be a bullish breakout but a bounce and then drop below today's low at 7994 would be bearish, confirmed with a break below its November 16th low at 7921. It has been weaker than the DOW for a long time and it could be the canary index if it continues lower.

Transportation Index, TRAN, Daily chart

The U.S. dollar popped up this morning and made another new high, coming very close to its March high at 100.78 with a high at 100.54. I have a price projection for the 3-wave move up from August at 100.48, which is where the 2nd leg up is 162% of the 1st leg. That projection was achieved today and the rally since November 12th has been very choppy, forming a small rising wedge as shown on the daily chart below. This is typically an ending pattern and with the achievement of the price target followed by a strong intraday reversal I think there's a good chance the dollar is now ready to reverse back down. The intermediate pattern calls for a decline back down to its August low as part of a larger sideways consolidation pattern into 2016 (before heading higher). The more immediate bullish pattern calls for a multi-week choppy consolidation before pressing higher in January. Both patterns suggest a pullback but depending on which larger pattern is playing out we're looking for either a choppy consolidation or something a little stronger to the downside. Each suggests the dollar is not going to rally following either the ECB announcement tomorrow or expected Fed action, which suggests the market has either already priced in an ECB QE increase or the ECB will disappoint. The euro is heavily shorted right now and it could be ready for a short squeeze.

U.S. Dollar contract, DX, Daily chart

The euro shows a high concentration of shorts while the U.S. dollar is just the opposite. If the dollar is ready for at least a pullback we should see the commodities finally bottom and start at least a bounce. That includes gold and as I've been saying for the past couple of weeks, while I'm bearish longer-term for gold I think it's setting up for a bounce before it heads lower. And the COT (Commitment of Traders) report shows it's likely ready for a bounce. The chart below was put together by Tom McClellan (he does a great job showing comparisons) and it clearly shows when you don't want to be trading against the big commercial gold traders. They are almost always on the other end of hedge funds and retail traders (which includes most fund managers).

Gold COT vs. gold price, Weekly chart courtesy mcoscillator.com

The chart shows how short the commercial traders have been during past rallies and I suspect we'll see the same thing again. But by the same token, they get less short (they're almost always hedged somewhat) when gold has been sold off, as it is currently. At the moment these traders at the least net short than they've been in the past two years. Gold looks ripe for a bounce (to another lower high is what I'm projecting). I show an expected rally on my weekly chart, perhaps up to price-level S/R near 1142 where it crosses the top of its down-channel in mid-January. We could see a little more downside, maybe 1140-1145, but I think betting on the downside in gold right now is a risky bet. I'd rather start looking to nibble on some long positions for the expected bounce. Trading the gold miners, or the GDX, could get an even better return.

Gold continuous contract, GC, Weekly chart

Oil continues to struggle to get off the $40 mat and it could drop down to test its November 20th low at 39 but with bullish divergence and an expectation for the dollar to start a pullback/decline I think there's a good chance oil will finally be able to get off the mat and rally up to the $52 area as part of a larger bearish consolidation pattern.

Oil continuous contract, CL, Daily chart

Today's ADP employment report showed +217K jobs added, vs the 185K the market expected and an improvement over November's 196K (revised higher from 182K). This has some speculating that Friday's NFP report will come in stronger than the expect 208K, which would be a decline from November's 271K. We still have a busy week ahead of us for economic reports but in reality the only two things the market is interested in are the ECB QE announcement on Thursday and the NFP report Friday morning. It could produce some wild swings in the market.

Economic reports


The stock market has been rallying recently in anticipation of more drug money from the ECB and Mario Draghi's promise to do more of "whatever it takes," whatever that means. We'll find out tomorrow and any further money printing from the ECB could ignite a continuation of the rally. The one thing to be careful about is the possibility that the anticipatory rally might have already been baked into the cake and now it's time to eat it. Buy the rumor, sell the news.

Friday's NFP report could have just as large an impact on the market but the problem there is trying to figure out how the Fed might react and then how the market might react to the Fed's reaction. It makes my head hurt so I'll simply lie low and react to the market's moves, take my little bit of cheese while avoiding the cat and then scurry back into my hole. And if there are too many cats running around I'll just stay in my hole and wait for it to quiet down. The beauty of what we do is that the market is always there and we're not forced to trade when we don't want to. Wait for the next bus with a prettier bus driver (or a hunkier one for you ladies) to come by and pick you up. It could get wild in the next couple of days so trade safe or stand aside and let the dust settle.

Be sure to take advantage of the end-of-year special for subscription renewals. I firmly believe we are going to have a wild year ahead of us and while I'm bearish for 2016, there will be plenty of trading opportunities in both directions. By the same token, being on the wrong side of a wild swing can make for a very bad day (e.g., bear market rallies can destroy your account if you're on the wrong side). One good trade, or a save from a significant loss, will more than cover the cost of a subscription and often it's just good to read opinions to help you form your own. That's the beauty of the educational effort made by the various OIN writers. We might not be right in our calls but hopefully we give you some things to think about. A second (third, fourth) set of eyeballs watching the market with you can be extremely valuable.

Annual End of Year Subscription Special

It is that time of year again when we offer the best prices of the year on a package of our top newsletters. If you have been a subscriber for several years you know this is the best price and best deal of the year.

Please follow the link below to see for yourself the EOY subscription special for 2016. You will not be disappointed!

Good luck in the coming days and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying

New Option Plays

Don't Disappoint The Street

by James Brown

Click here to email James Brown


Stericycle, Inc. - SRCL - close: 118.77 change: -1.86

Stop Loss: 122.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 941 thousand
Entry on December -- at $---.--
Listed on December 02, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: Yes, see below

Company Description

Trade Description:
Wall Street hates to be disappointed. If companies really disappoint their stocks get hammered. That's what happened to shares of SRCL.

SRCL is in the industrial goods sector. According to the company, "Stericycle, Inc., a U.S.-based business-to-business services company operating in 23 countries, is focused on solutions that protect people and brands, promote health and safeguard the environment." Unfortunately that doesn't really tell us much. The company started as a medical waste management service. Now they cover multiple areas including "complex and heavily regulated arenas, including compliance and sustainability waste services, brand protection solutions, and customer contact solutions."

In mid October, just prior to their Q3 earnings report, SRCL was trading near all-time highs in the $150 area. At the time SRCL was up about +14% for the year. On October 22nd SRCL reported their Q3 results. Wall Street was expecting adjusted earnings of $1.18 per share on revenues of $735.4 million.

Management reported unadjusted earnings fell from 96 cents a year ago to 47 cents a share. Their adjusted earnings came in flat (no growth) at $1.08 a share (a 10-cent miss). Revenue growth was +7.6% to $718.6 million, another miss. The company was hit with a perfect storm in the third quarter. Slower business volumes, higher expenses, and negative foreign currency headwinds all impacted their results.

The next trading day (Oct. 23rd) shares of SRCL plunged -25.8% intraday and settled with a -19% loss near $120 a share. The stock has spent the last six weeks trying to recover but investors have been selling the rallies. Now SRCL is starting to breakdown. The company's management offered slightly bullish 2015 and 2016 revenue guidance but traders don't seem to care. Now the point & figure chart is bearish and forecasting at $73.00 target.

The last few days have seen SRCL testing round-number support at $120.00. Today shares displayed relative weakness with a -1.5% decline and a breakdown below support. This sell-off could accelerate. Tonight we are suggesting a trigger to buy puts at $118.40.

Trigger @ $118.40

- Suggested Positions -

Buy the JAN $115 PUT (SRCL160115P115) current ask $2.05
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

No Follow Through Higher

by James Brown

Click here to email James Brown

Editor's Note:

Yesterday the U.S. market surged with widespread gains. Today saw stocks erase much of those gains as investors worry about weak economic data while also digesting headlines of another mass shooting in California.

CRM hit our entry trigger. ROP hit our stop loss.

Current Portfolio:

CALL Play Updates

ABIOMED, Inc. - ABMD - close: 84.72 change: +0.88

Stop Loss: 79.75
Target(s): To Be Determined
Current Option Gain/Loss: -23.7%
Average Daily Volume = 841 thousand
Entry on November 27 at $83.20
Listed on November 24, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

12/02/15: ABMD displayed relative strength today. Shares added +1.0% versus the broader market's pullback. Shares of ABMD did struggle with technical resistance at its simple 50-dma intraday.

No new positions at this time.

Trade Description: November 24, 2015:
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.

*small positions to limit risk* - Suggested Positions -

Long JAN $90 CALL (ABMD160115C90) entry $3.80

12/01/15 new stop @ 79.75
11/27/15 triggered @ $83.20
Option Format: symbol-year-month-day-call-strike

Alkermes Plc - ALKS - close: 74.32 change: +1.44

Stop Loss: 70.85
Target(s): To Be Determined
Current Option Gain/Loss: -75.5%
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

12/02/15: ALKS also displayed some relative strength with a +1.9% gain. Shares appear to be bouncing off the short-term trend line of higher lows but the $76.00 area remains short-term resistance.

No new positions at this time.

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

12/01/15 new stop @ 70.85
11/17/15 triggered @ $75.25
Option Format: symbol-year-month-day-call-strike

Clovis Oncology - CLVS - close: 33.81 change: +1.76

Stop Loss: 27.75
Target(s): To Be Determined
Current Option Gain/Loss: + 3.4%
Average Daily Volume = 1.4 million
Entry on December 01 at $32.55
Listed on November 28, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

12/02/15: It was a good day for CLVS bulls. Biotech stocks followed the broader market lower today. Yet CLVS surged +5.5% and closed at new two-week highs.

Trade Description: November 28, 2015:
After a -70% plunge all the bad news might be priced in for this biotech stock.

CLVS is in the healthcare sector. According to the company, "Clovis Oncology is a biopharmaceutical company focused on acquiring, developing and commercializing cancer treatments in the United States, Europe and other international markets. Our product development programs target specific subsets of cancer, and we seek to simultaneously develop, with partners, companion diagnostics that direct our product candidates to the patients most likely to benefit from their use. We believe this approach to personalized medicine - to deliver the right drug to the right patient at the right time - represents the future of cancer therapy."

The company has three product candidates in their pipeline. They are rociletinib, rucaparib, and lucitanib. Right now the market is reacting to news on its rociletinib clinical trials, where the drug is being tested on non-small-cell lung cancer.

Several days ago the company issued an update on their Rociletinib NDA filing. CLVS held their regularly scheduled mid-cycle communication meeting with the U.S. Food and Drug Administration (FDA). The current data on the Rociletinib clinical trials was not good enough. The FDA is asking for more data to prove the treatment's efficacy. This will likely push back the time frame on any approval. Investors were expecting a potential approval in the March-April 2016 time frame.

The delay in Rociletinib approval is a serious setback. Rival biotech firm AstraZeneca just got FDA approval for a competing drug, Tagrisso. By the time Rociletinib is approved (if it's approved), it will face serious competition from an already established treatment.

CLVS is a perfect example of why biotech stocks can be high-risk trades. On November 13, 2015 the stock closed at $99.43. The next trading day, Nov. 16th, shares gapped down at $29.27 and closed near $30. The stock traded down to $24.50 on November 23rd and started to reverse higher. CLVS' stock is now up three days in a row.

The current rally could be a combination of short covering and investors bargain hunting. It has been a full two weeks since the sell-off. If investors were going to sell they probably did so already. We think this rebound has a lot further to go but make no mistake CLVS is still a higher-risk trade. Tonight we are suggesting a trigger to buy calls at $32.55.

- Suggested Positions -

Long JAN $35 CALL (CLVS160115C35) entry $2.90

12/01/15 triggered @ $32.55
Option Format: symbol-year-month-day-call-strike

Salesforce.com, Inc. - CRM - close: 80.88 change: -0.13

Stop Loss: $76.65
Target(s): To Be Determined
Current Option Gain/Loss: -8.5%
Average Daily Volume = 3.8 million
Entry on December 02 at $81.35
Listed on December 01, 2015
Time Frame: Exit PRIOR to February option expiration
New Positions: see below

12/02/15: Our new play on CRM is open. The stock continued to rally right on cue and hit our suggested entry point at $81.35. Unfortunately the rally reversed near the $82.00 level. CRM faded back toward unchanged on the session and closed with a minor loss. At this point I'd like to see another rise above $81.25 before initiating positions.

Trade Description: December 1, 2015:
Cloud computing stocks continue to capture investor imaginations and their investment dollars. Founded in 1999 and headquartered in San Francisco, Salesforce.com has become a huge player in the cloud computing industry. The stock has shown significant strength with shares up +36% year to date.

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

CRM's revenues have been consistently growing in the mid +20% range the last few quarters. Their Q4 revenues were up +26%. Q1 revenues were +23%. Q2 revenues, announced in August, were a bit better at +23.5% and management raised their Q3 and 2016 guidance.

Their most recent earnings report was announced on November 18th. Q3 earnings beat estimates at $0.21 a share. Revenues grew +23.7% to $1.71 billion, just ahead of estimates. Management continued to provide an optimistic outlook and raised both their 2016 and 2017 guidance above analysts' estimates.

Shares gapped open higher the next day following its Q3 results and improved guidance. Since then the stock has slowly consolidated lower with very little selling pressure. The point & figure chart is bullish and has seen its price target rise from $85 to $98. Meanwhile Wall Street is bullish too. Multiple firms have upgraded their price targets on CRM with recent price targets at $87, $93, and $96.

We like today's bounce and how CRM has broken the very short-term trend of lower highs. Tonight we are suggesting a trigger to buy calls at $81.35. Our time frame is several weeks. CRM reports earnings in February. We are listing the February calls.

- Suggested Positions -

Long FEB $85 CALL (CRM160219C85) entry $2.83

12/02/15 triggered @ $81.35
Option Format: symbol-year-month-day-call-strike

Global Payments Inc. - GPN - close: 71.67 change: +0.58

Stop Loss: 69.65
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
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

12/02/15: GPN has started to bounce after a its recent pullback. Today's rebound looks like a new entry point but I suggest January or February calls. Our December options expire in less than three weeks.

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

12/01/15 new stop @ 69.65
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: 131.21 change: -2.54

Stop Loss: 129.75
Target(s): To Be Determined
Current Option Gain/Loss: -56.1%
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

12/02/15: The action in HII today is troubling. There was no follow through on yesterday's bounce from support near $130. Instead shares underperformed the market with a -1.9% decline.

No 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

Illinois Tool Works Inc. - ITW - close: 93.38 change: -0.78

Stop Loss: 89.85
Target(s): To Be Determined
Current Option Gain/Loss: -37.1%
Average Daily Volume = 1.7 million
Entry on December 01 at $94.30
Listed on November 30, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

12/02/15: ITW spent most of the day hovering sideways until eventually following the market lower this afternoon. The nearest support appears to be the $92-93 region. No new positions at this time.

Trade Description: November 30, 2015:
The stock market has delivered a pretty good bounce over the last few weeks. The S&P 500 index is up +10% from its late September low. Industrial stocks have fared even better. Shares of ITW are up +14% from their late September low and they look poised to breakout to new five-month highs.

ITW is in the industrial goods sector. According to the company, "ITW is a Fortune 200 global multi-industrial manufacturing leader with revenues totaling $14.5 billion in 2014. The Company's seven industry-leading segments leverage the unique ITW Business Model to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required. ITW has nearly 50,000 dedicated colleagues in operations around the world who thrive in the company's unique decentralized and entrepreneurial culture."

ITW has had a rough time this year. The stock peaked at round-number, psychological resistance near $100 in the first quarter of 2015. Then a series of disappointing revenue numbers and overall weakness in the industrial sector weighed on ITW's stock price.

The company tends to beat Wall Street's earnings estimate but they have been missing the revenue estimates. Revenues have declined the last three quarters in a row. Yet the stock found a bottom in the August-September time frame anyway. Now ITW's stock in a bullish trend of higher lows and higher highs.

Their most recent earnings report was October 21st. Q3 earnings were up +9% from a year ago. However, if you back out negative currency headwinds their earnings growth was +18%. ITW said their operating margin was up 180 basis points to a record 22.7%.

The company is restructuring while also facing headwinds with a strong dollar. Yet investors seem to be looking past these struggles. The stock soared following its Q3 earnings report. The rally has carried ITW back above its 200-dma. Now it's poised to breakout past short-term resistance near $94.00. Tonight we are suggesting a trigger to buy calls at $94.25.

FYI: ITW could get a boost this week. The company is holding its annual investor day on December 4th. The three-hour presentation starts at 9:00 a.m. eastern time.

- Suggested Positions -

Long JAN $95 CALL (ITW160115C95) entry $1.75

12/01/15 triggered on gap open at $94.30, trigger was $94.25
Option Format: symbol-year-month-day-call-strike

Lennox Intl. Inc. - LII - close: 135.45 change: -2.34

Stop Loss: 134.75
Target(s): To Be Determined
Current Option Gain/Loss: -33.3%
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

12/02/15: Warning! LII just reversed at short-term resistance again. The stock underperformed the market with a -1.6% decline and briefly traded below round-number support at $135.00. Our stop loss is at $134.75.

No new positions at this time.

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

12/01/15 new stop @ 134.75
11/23/15 triggered @ $137.25
Option Format: symbol-year-month-day-call-strike

Lam Research Corp. - LRCX - close: 78.65 change: -0.94

Stop Loss: 76.40
Target(s): To Be Determined
Current Option Gain/Loss: -36.4%
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

12/02/15: The rally in LRCX reversed near $80.00 and shares fell -1.1% on the session. If this dip continues LRCX should find short-term support at $78.00 or near the 20-dma near $77.40.

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

12/01/15 new stop @ 76.40
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

Snap-on Inc. - SNA - close: 171.99 change: -1.48

Stop Loss: 167.40
Target(s): To Be Determined
Current Option Gain/Loss: -27.0%
Average Daily Volume = 407 thousand
Entry on November 30 at $172.46
Listed on November 28, 2015
Time Frame: Exit PRIOR to January option expiration
New Positions: see below

12/02/15: SNA followed the market lower today and just erased yesterday's gains. If this dip continues SNA should find support in the $170-171 region. I'd watch for a bounce in this area as our next bullish entry point.

Trade Description: November 28, 2015:
How many car brands can you think of? Every year automobile makers deliver new models designed to be new and improved. Every year cars get more and more complicated. That means more diagnostic and specialty tools to repair them. This trend is driving organic growth for SNA.

SNA is in the industrial goods sector. According to the company, "Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. Snap-on also derives income from various financing programs to facilitate the sales of its products. Products and services are sold through the company's franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.3 billion, S&P 500 company headquartered in Kenosha, Wisconsin."

The company has beaten Wall Street earnings estimates the last four quarters in a row. The revenue number has not been as strong. SNA does get a decent chunk of sales outside the U.S. so the strong dollar does have an impact.

SNA's most recent earnings report was October 22nd. They delivered their Q3 results with earnings of $1.98 a share. That was a +12.5% improvement from a year ago and above expectations. Revenues were only up +1.9% to $821.5 million. However, organic sales were up +7.3%. Their full-year 2015 revenues are expected to rise +3.5% but that is expected to jump to 7% in 2016.

Shares of SNA popped on the earnings report in spite of the revenue miss. Investors have been buying the dips since the October low. Now SNA has broken through resistance near $170.00 to close at all-time highs. The point & figure chart is bullish and forecasting at $207 target.

Traders bought the dip on Friday near $170.00. That's exactly what we want to see. Old resistance should be new support. The high on Friday was $171.91. Tonight we are suggesting a trigger to buy calls at $172.25.

- Suggested Positions -

Long JAN $180 CALL (SNA160115C180) entry $1.85

11/30/15 triggered on gap open at $172.46, suggested entry was $172.25
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Bunge Limited - BG - close: 65.43 change: -0.48

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

12/02/15: The weakness in shares of BG continues with a -0.7% decline today. The stock is on the verge of breaking down below its November lows. 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


Roper Technologies - ROP - close: 188.10 change: -3.58

Stop Loss: 188.90
Target(s): To Be Determined
Current Option Gain/Loss: -34.1%
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

12/02/15: The bullish momentum in ROP has reversed. Shares were hitting all-time highs but the stock has fallen three days in a row. Today ROP traded below short-term support at $190.00 and hit our stop loss at $188.90.

- Suggested Positions -

FEB $200 CALL (ROP160219C200) entry $4.10 exit $2.70 (-34.1%)

12/02/15 stopped out
12/01/15 new stop @ 188.90
11/24/15 triggered @ $192.66
Option Format: symbol-year-month-day-call-strike