Option Investor

Daily Newsletter, Monday, 12/15/2014

Table of Contents

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

Market Wrap

Oil Sinks To New Low

by Thomas Hughes

Click here to email Thomas Hughes
The bulls started off strong but failed to hold the gains as oil plummets and traders wait on the FOMC.


There were many things for traders to take note of today but media attention was dominated by two things; events in Australia and falling oil prices.

A hostage situation in Australia resulted in several deaths unfolded throughout the morning hours. A lone gunman held dozens of hostages in a popular cafe for upwards of 16 hours. The situation came to a head around 10:15AM, right around the time the market started to fall. Also affecting early trading were volatile oil price which began the day in positive territory but sank to new lows following OPEC statements defending current oil production.

Even without this tragic event the day was full of news. Starting in Japan weak manufacturing sentiment sent the Nikkei plunging even as Shinzo Abe receives renewed support. Prime Minister Abe was elected to a new term over the weekend and is expected to begin enacting Abenomics 2.0 as early as this month. Not only that, the BOJ is meeting this week with a scheduled policy release for Thursday and could surprise the markets. The Japanese data, along with declining oil prices helped to send the entire region lower. European markets were able to shrug off the Asian decline but eventually fell into the red. A,lso on tap this week, a meeting of the ECB but I don't expect much from them.

Our markets were strongly higher from the earliest of electronic trading. The S&P 500 future was trading between 12 and 16 points above last week's close with the Dow Jones Industrials and NASDAQ Composite trading at relative levels. The FOMC meeting, scheduled for Tuesday and Wednesday of this week, were the focus of early trading despite the unfolding situation in Australia and poor Japanese data.

Market Statistics

Economic data was largely as expected, despite one spot of weakness, and helped to support early pre-market trading. The markets held pre-market levels and opened as indicated. The opening bell was followed by a rally that carried the indices roughly 0.75% higher within the first five minutes. Unfortunately, these levels did not hold. After 30 minutes of testing resistance the indices began to fall back.

It was about this time that the Australian hostage situation began to heat up. Shots were fired, we saw action on TV and the market went with it. However, what really had the market down was oil. New comments from OPEC, released about the same time, have them in support of current production levels. This sent prices for WTI and Brent seeking new lows and the broad market with it. The SPX was testing break even by 10:45 and then falling down to test long term support near 1985 by 11:30. The low of the day was reached by 12:00 noon at which time the indices began to recover some of the loss. Selling moderated during the afternoon but the decline was not recovered. The market was able to move off of the lowest levels of the day but still closed with most indices in the red.

Economic Calendar

The Economy

There was quite a bit of economic data released for it being a Monday, and not all of it positive. Empire State Manufacturing Survey being first on the list and the negative bit. The Empire State Manufacturing diffusion index fell 14 points to -3.6. This is the first negative reading, the lowest reading, in roughly two years. The drop was unexpected as general consensus was around 14 and the previous reading was 10.2. New orders and shipments both fell into negative territory, leading the decline, but labor remained steady at 8.7 despite a drop in the number of hours worked. The six month outlook remains positive but slightly muted from previous months.

Industrial production and capacity utilization were released at 9:15AM. Industrial production rose by 1.3% in November, following an upward revision for the June-October period. The upward revisions are not surprising in light of positive revisions we have been seeing in labor data as well as GDP in general. Output also increased, by more than 1%, and is above the long term average. Industrial production itself is nearly 7% above its long running average and more than 5% levels at this same time last year. Capacity utilization also increased, gaining 0.8%, and is now equal to its long running average.

The National Association of Home Builders released their gauge of home builder sentiment. Builder sentiment fell one point in November, to 57, from last month's reading of 58. This is the 6th month of positive sentiment and is expected to remain steady if not strengthen into the first half of next year. Two of the three sub indicators declined slightly, current conditions (-1) and future expectations (-1) while traffic remained steady at 45. Traffic is the only indicator to remain below the expansionary 50 and is expected to improve, outlook into 2015 remains positive.

Moody's Survey Of Business Confidence has reached new highs, according to Chief Economist Mark Zandi. His summary states that "Business sentiment is ending 2014 on a very high note. Confidence has surged to a new record high... consistent with an economy that is expanding well above its potential (and)... expectations regarding the economy’s prospects into next year are especially strong." He also notes that spending, hiring and sales are very strong.

The Oil Index

Wow, oil, it's still slipping. Early indications that prices may bounce were dashed when OPEC stood tall and defended current out put levels. Early on, prices were being supported by news Libyan ports were closed but this was not enough to keep them up. Brent had been up by nearly 1.5% in the early session with WTI lagging with a gain near 0.65% when OPEC announced it would not be making any production cuts. Oil prices, both Brent and WTI, then proceeded to fall with no bottom in sight. WTI led the decline with a drop of more than 3% followed by Brent's drop of just over 1%. WTI is now trading at new lows below $55 per barrel, Brent just above $60.

The Oil Index fell in tandem with the underlying commodity. The index fell a little more than 1% and dropped below a previous support line at $1250. This line was also my most recent target and now may provide additional resistance. Bearish indicators continue to gain strength, led by stochastic and a drop below into the lower signal zone. The index looks incredibly bearish at this time, but also extended from the moving averages and the trend line. There could be a snap back or consolidation but I am not holding my breath, while oil is falling the index will not doubt fall as well. Based on the height of the bearish MACD momentum is at least as strong now as during the previous low set in October.

The Gold Index

Gold sold off more than 2% as central bank expectations have dollar value firming. The triple shot of central bank meetings being a major cause for speculation this week. Not only is the Fed expected to increase hawkish verbiage, the other central banks are at least expected to defend current dovish policy if not increase it. This is a combination which could send the dollar even higher and gold potentially lower.

Gold prices fell more than $20 by 3PM, dropping back below $1200, and could go lower but I think that will depend on what the FOMC actually says. Most importantly what they say about inflation and interest rate expectations. If the interest rate time line gets pushed up gold prices could go up as well. Current expectation is for the first hike to be around mid 2015 with the bias leaning to the early side, ie the June meeting.

The Gold Index held support for the first half of the day but it did not last. Long term support at the 100% retracement line was broken by today's 4.5% decline. The indicators are now bearish and confirming the break but not overly strong. The index is moving lower with next target at or near the long term low, just below $60, set at the beginning of November. A move down to support is now likely, but a break below support is needed for a longer term bearish outlook. Gold prices will lead with the FOMC policy statement a high probability catalyst for either event.

In The News, Story Stocks and Earnings

Alcoa announced that it is buying a German titanium and aluminum casting company in order to exand its global aerospace foot print. The financial details of the deal were not disclosed but the announcement itself is important. It underscores the growing nature of the aerospace industry. There have been several deals announced this year, most of which include Alcoa already, and this move may help secure some more. Shares of the stock traded higher during the morning but fell back to support later in the day. The stock is now sitting on long term support and the bottom of a 6 month trading range. The indicators are bearish and at an extreme so support needs to be closely watched. If Alcoa recovers from the recent pull pack to support upside targets, near the top of the 6 month range, are near $17.75 or +18%. If support should fail next target for support is near $14. Alcoa is scheduled to report earnings ina about four weeks, 1/8/2015.

Today is supposed to be the biggest shipping day of the holiday season. It is the last week, very nearly the last day, to be sure you packages get to where they are supposed to be going by the 25th. And that is if there are no SNAFU's like last year. FedEx alone is expected to ship a record setting 22.6 million packages, an estimate based on industry wide projections of a 16% increase in on line sales. The jump in sales and shipping led FedEx to increase seasonal workers. Shares of FedEx were one stock to buck today's sell off, gaining a little over a half percent. The stock traded in a wide range and tested support at the 30 day moving average. The indicators are bearish but weak and in line with a pull back to support. FedEx is scheduled to report earnings on Wednesday.

According to FactSet earnings for the S&P 500 are expected to run an average of 3.0%. This is down from the 8.0% estimated earlier this year, led by downward revisions in the energy sector. This will likely move higher as more companies report; the actual average earnings usually running about 5 points above estimate and will rise over the course of the season. So far three S&P companies have reported, all three reporting sales and earnings above the mean estimate. Telecom is expected to lead earnings this quarter, energy is expected to lag.

Interestingly enough, FactSet is scheduled to report earnings tomorrow. The data analyst is expected to report EPS of $1.33 versus the previous quarter's earnings of $1.31. Today the stock traded to the upside, barely hanging on to positive territory and the 30 day moving average. The stock is testing support at $135.

Looking over the earnings calendar for the week I see that Oracle is scheduled for Wednesday as well. Oracle always stands out for me, no special reason, but it also marks the onset of an upcoming earnings season. It reports earnings roughly 4 weeks ahead of Alcoa. It was, surprisingly, another stock to buck today's sell off. Surprising as the tech's were one of today's hardest hit indices. Today Oracle gapped back up from a low set last Friday and moved back above the 30 day moving average. The stock appears to be bouncing from a test of support but is still well within the 12 month range and beneath technical resistance. Resistance is just above the current level near $42.

The Indices

The day started off strong. Futures were strong, data was largely positive and supported futures trading, the open was positive and the first five minutes of open trading was real strong. The strength did not last because the market is still waiting on the Fed and there were other events to grab attention.The events in Australia and the drop in oil each played a part, mostly the drop in oil, but the Fed I think is the underlying reason.

Today's drop was led by the NASDAQ Composite. The tech sector shed more than 1%, falling down to test support at 4,600 and stopping there. The index is now below the 30 day moving average with bearish indicators and looking like it is heading down to the long term trend line. Both MACD and stochastic are both moving lower suggesting that current support, 4,600, will be further tested at least.

The S&P 500 was next biggest loser today, dropping 0.64%. The broad market fell to test support consistent with the July all-time highs and the long term trend line. Support appears to be holding but as of now the indicators are still bearish. Today's candle is bearish, as it is long and dark, but has both long upper and lower wicks which lead me to think there is also indecision in the market. I see the FOMC meeting as the next likely catalyst so tomorrow could see another test of support. Support is currently in the range of 1980-1990.

The Dow Jones Industrial Average made today's smallest decline, dropping a little more than a half percent. The blue chip index also created a bearish candle with long wicks and retested the July all-time highs. The indicators are in decline and suggest that support will continue to be tested, perhaps until the FOMC report is released. Support is currently around 17,150 with a next possible target at 17,000 if broken.

The Dow Jones Transportation Average did not decline today. It did not close at the highs of the day but it not close in the red either. The trannies created a small doji today, with equal length candles, just below the 30 day moving average and just above the 8,750 support line. The indicators are bearish, but unlike the others, are once again showing early signs of rolling over. If support is broken next potential support is 8,500 with upside targets for a bounce near 9,000 and 9,250.

Once again the FOMC meeting is upon us and once again I think it no coincidence the markets are testing long term support just before. The trends are up, outlook is good and expectations are for policy to show this. The question is, will the statements and forward outlook support the low-interest-rate-low-inflation Goldilocks rally we are in? Along with the Fed meeting is a plethora of economic data as well. Tomorrow are two key gauges of the housing sector with CPI, Philly Fed and Leading Indicators due out later in the week.

Regardless of the Fed there are still some head winds to keep in mind, primarily Obamacare. It is still unclear how negatively it will impact job creation and the consumer, two segments of the economy important to the recovery.

Long term economic trends are still positive, and showing underlying strength. The Empire Manufacturing number is a an isolated spot of weakness for now so not alarming by itself. Outlook for next year is positive, as evidenced by numerous forward looking reports released last week. I am bullish, but still waiting to buy on the dip.

Until then, remember the trend!

Thomas Hughes

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New Plays

Lower Highs and Lower Lows

by James Brown

Click here to email James Brown


NCR Corp. - NCR - close: 27.18 change: -0.34

Stop Loss: 28.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 15, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.25 million
New Positions: Yes, see below

Company Description

Why We Like It:
NCR is part of the technology sector. Company marketing material describes NCR as "the global leader in consumer transaction technologies, turning everyday interactions with businesses into exceptional experiences. With its software, hardware, and portfolio of services, NCR enables more than 485 million transactions daily across retail, financial, travel, hospitality, telecom and technology, and small business. NCR solutions run the everyday transactions that make your life easier. NCR is headquartered in Duluth, Georgia with approximately 29,000 employees and does business in 180 countries."

It has not been a good year for shares of NCR. The stock is down -19% in 2014. NCR's stock was already in a bearish trend of lower highs and lower lows before the company issued an earnings warning on October 20th. You can see the big gap down and plunge toward $23 on that session. Since the stock has seen a technical rebound that was boosted by the market's widespread surge off the October lows. Unfortunately for NCR the rally reversed at resistance near $30.00 while the broader market broke out to new highs.

Management lowered their Q3 and 2014 guidance on the 20th and essentially warned that Q4 would be disappointing as well. Chairman and CEO Bill Nuti commented on their results saying, "Our Retail Solutions business was challenged by customers spending more cautiously than anticipated and further delaying solution rollouts. These trends, along with difficult global macroeconomic conditions and foreign currency headwinds, had significant impacts on our performance in the third quarter, and we expect they will continue to impact our Retail Solutions business in the fourth quarter."

Traders have been selling every bounce with new resistance at the descending 10-dma. The point & figure chart is very bearish with a $20.00 target. The stock closed at new six-week lows today. Tonight I'm suggesting a trigger to open bearish positions at $26.95.

Trigger @ $26.95

- Suggested Positions -

Short NCR stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the Jan $27 PUT (NCR150117P27) current ask $1.20

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Early Gains Fade As Oil Hits New Lows

by James Brown

Click here to email James Brown

Editor's Note:
The stock market's early gains faded as crude oil sank to new multi-year lows.

ISIS hit our new stop loss.

Current Portfolio:

BULLISH Play Updates

Columbia Sportswear Co. - COLM - close: 43.86 change: -0.19

Stop Loss: 43.45
Target(s): To Be Determined
Current Option Gain/Loss: + 9.0%
Entry on Novo:tember 06 at $40.25
Listed on November 04, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 138 thousand
New Positions: see below

12/15/14: The market weakness is starting to get to COLM. Shares tagged a new relative low today. The rally attempt failed at its 10-dma. Both are signs of potential weakness ahead. The intraday low was $43.52 and our stop is at $43.45.

I am not suggesting new positions.

Earlier Comments: November 5, 2014:
COLM has been consistently beating earnings expectations all year long. The company is part of the consumer goods sector.

According to a company press release, "Columbia Sportswear Company is a leader in the global outdoor and active lifestyle apparel, footwear, accessories and equipment industry. Founded in 1938 in Portland, Oregon, the company has assembled a portfolio of global brands whose products are sold in approximately 100 countries. In addition to the Columbia brand, Columbia Sportswear Company also owns the Mountain Hardwear, Sorel, prAna, Montrail and OutDry brands."

The trend of earnings in 2014 has been strong with COLM beating Wall Street's earnings estimates four quarters in a row and raising guidance three out of four quarters. Their most recent earnings report was October 30th. Analysts were looking for a profit of $0.87 per share on revenues of $632.29 million. COLM delivered earnings growth of +20% to $0.93 a share. Revenues soared +29% to $675.3 million.

Management then raised their full year 2014 earnings and revenue guidance above analysts' estimates. COLM expects 2014 sales to hit $2.06 billion, which is +22% improvement above 2013. They also expect gross margins to rise 130 basis points from a year ago. COLM is guiding 2014 net income to rise +35% to $1.80 per share.

COLM's president and chief executive office, Tim Boyle, said they expect 2015 net sales to grow at a double-digit rate above their new 2014 estimate of $2.06 billion. They plan to hit mid-teen operating margins.

COLM appears to have strong sales momentum as we head into the crucial holiday shopping season. Retail analysts are expecting industry wide sales to be above average this year. Low gasoline prices provide a great tailwind for all the consumer goods companies.

Technically shares of COLM found support near $34-35 dating back to their prior highs (see the long-term chart below). The rebound has accelerated thanks to the company's earnings report and bullish guidance. Now COLMN is breaking out past resistance at $40.00 and its simple 200-dma. We are suggesting a trigger to open bullish positions at $40.25.

- Suggested Positions -

Long COLM stock @ $40.25

- (or for more adventurous traders, try this option) -

Long 2015 Jan $40 call (COLM150117C40) entry $1.75

12/11/14 new stop @ 43.45
11/29/14 new stop @ 42.85
11/25/14 new stop @ 42.25
11/24/14 new stop @ 41.85
11/19/14 new stop @ 41.45, readers may want to take some money off the table right here.
11/12/14 new stop @ 39.25
11/06/14 triggered @ $40.25
Option Format: symbol-year-month-day-call-strike

Barracuda Networks - CUDA - close: 36.65 change: +0.15

Stop Loss: 34.85
Target(s): To Be Determined
Current Option Gain/Loss: + 2.8%
Entry on November 18 at $35.65
Listed on November 12, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 247 thousand
New Positions: see below

12/15/14: CUDA performed relatively well today. Shares bounced off short-term technical support at the 10-dma this morning. The stock managed to outperform the major indices with a +0.4% gain.

The relative strength is encouraging but I would still hesitate to launch new positions given the broader market weakness.

Earlier Comments: November 15, 2014:
CUDA is part of the technology sector. This is a small cap company in the cloud computing space. According to the website, "Barracuda provides cloud-connected security and storage solutions that simplify IT. These powerful, easy-to-use and affordable solutions are trusted by more than 150,000 organizations worldwide and are delivered in appliance, virtual appliance, cloud and hybrid deployments. Barracuda's customer-centric business model focuses on delivering high-value, subscription-based IT solutions that provide end-to-end network and data security."

CUDA has only been a public company for little more than a year. Lately they have been on a roll with their earnings reports. CUDA has beaten Wall Street's estimates on both the top and bottom line four quarters in a row. The last two reports also included bullish guidance.

CUDA's most recent report was October 9th when they reported their Q2 results. Analysts were expecting a profit of $0.04 a share on revenues of $66.7 million. CUDA delivered a big beat with a profit of $0.8 on revenue growth of +18.9% to $68.7 million.

Management said their active subscribers grew +18% and their renewal rate was 96.5%. Their Next Generation Firewall solutions saw sales up +50% in the quarter. CUDA said sales were up across all geographically regions. Plus their gross margins were strong with an improvement to 81.7%. That's above the prior quarter's 80.4% and the year ago period 79.8%.

CUDA's guidance was bullish. Their Q3 estimates are for revenues in the $69-70 million range versus Wall Street's $69 million estimate. They expect a profit in the $0.04-0.05 zone compared to estimates of only $0.03. They raised their 2015 revenue guidance above their prior estimates but this was slightly below Wall Street's estimate. They also raised their 2015 earnings growth into the $0.22-0.24 range compared to analysts' consensus estimates of only $0.17.

Technically the stock has been soaring from its double bottom in the $24.00 area. The point & figure chart is bullish and forecasting a long-term target of $56.00. Right now CUDA is testing resistance in the $35.00 area. A breakout here could spark some short covering. The most recent data listed short interest at 9.7% of the very, very small 9.9 million share float.

We are suggesting a trigger to open bullish positions at $35.65.

- Suggested Positions -

Long CUDA stock @ $35.65

- (or for more adventurous traders, try this option) -

Long 2015 Jan $35 call (CUDA150117c35) entry $3.15

12/11/14 new stop @ 34.85
12/06/14 new stop @ 33.85
11/22/14 new stop @ 33.65
11/18/14 triggered @ $35.65
Option Format: symbol-year-month-day-call-strike

Cynosure, Inc. - CYNO - close: 28.72 change: +0.02

Stop Loss: 26.75
Target(s): To Be Determined
Current Option Gain/Loss: + 9.4%
Entry on November 12 at $26.25
Listed on November 11, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 201 thousand
New Positions: see below

12/15/14: CYNO closed virtually unchanged on Monday and that happens to be a minor victory for the bulls. The broader market continued to sink while CYNO churned sideways.

More conservative traders may want to move their stop closer to $28.00. I am not suggesting new positions at this time.

Earlier Comments: November 11, 2014:
CYNO is in the healthcare sector. The company is part of the medical equipment industry. According to a company press release, "Cynosure designs, manufactures and markets medical devices for aesthetic procedures and precision surgical applications worldwide that enable plastic surgeons, dermatologists and other medical practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascular and benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, liquefy and remove unwanted fat through laser lipolysis, reduce cellulite, clear nails infected by toe fungus and ablate sweat glands."

Their flagship product is the PicoSure laser workstation, designed to remove tattoos. This laser technology produces ultra-short bursts of energy to the skin in trillionths of a second. The company recently gained FDA approval to use their PicoSure system to treat acne scars and wrinkles.

CYNO's earnings results have been mixed. Their Q1 report back in May missed estimates by four cents even though revenues were up +52% from a year ago. The stock sold off on this report. They followed that with a Q2 report in July that beat estimates as revenues soared +45% from a year ago. Growth slowed a bit in their latest report in October.

Analysts were expecting 25 cents a share on revenues of $70 million. CYNO met expectations on the bottom line while the top line grew +18% to $71.5 million.

CYNO's Chairman and CEO Michael Davin commented on the quarter saying, "Cynosure delivered record third-quarter revenue of $71.5 million, up 18 percent year-over-year as revenue in each of our direct sales channels improved from the same period in 2013. North American laser revenue increased 17 percent, revenue from our Asia Pacific subsidiaries rose 46 percent, while our European direct sales channel was up 7 percent. Product and technology innovation, expanded indications and new international marketing clearances continue to drive favorable results for the Company."

Discussing his company's outlook Davin said, "We are on schedule to launch our next flagship platform in 2015 for non-invasive fat removal, and we believe this large addressable market represents a significant growth opportunity for the Company."

Technically shares have broken out from a six-month consolidation in the $19-24 range. The rally following its October earnings report lifted CYNO above key resistance at $24.00 and its 200-dma. Shares have already retested this level as support and now the stock is breaking out to multi-month highs. The point & figure chart is bullish with a $31.50 target.

Tonight I am suggesting small bullish positions if CYNO can trade at $26.25. We want to keep our position size small to limit our risk.

*small positions* - Suggested Positions -

Long CYNO stock @ $26.25

12/13/14 new stop @ 26.75
11/19/14 new stop @ 25.90
11/18/14 caution: potential bearish reversal today
11/15/14 new stop @ $25.35
11/12/14 triggered @ 26.25

Sealed Air Corp. - SEE - close: 40.74 change: -0.18

Stop Loss: 39.95
Target(s): To Be Determined
Current Option Gain/Loss: -0.8%
Entry on December 09 at $41.05
Listed on December 08, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.1 million
New Positions: see below

12/15/14: SEE spent most of Monday's session trading sideways near short-term support at its simple 10-dma. I suspect that if the market continues to sink tomorrow we could see the stock test support at $40.00. Any lower and SEE will hit our stop at $39.95.

Earlier Comments: December 8, 2014:
SEE is part of the consumer goods sector. They're in the packaging and containers industry. The company describes itself as "Sealed Air is a global leader in food safety and security, facility hygiene and product protection. With widely recognized and inventive brands such as Bubble Wrap brand cushioning, Cryovac brand food packaging solutions and Diversey brand cleaning and hygiene solutions, Sealed Air offers efficient and sustainable solutions that create business value for customers, enhance the quality of life for consumers and provide a cleaner and healthier environment for future generations. On a pro forma basis, Sealed Air generated revenue of $8.1 billion in 2011 and has approximately 26,300 employees who serve customers in 175 countries."

The U.S. economy is improving and that should mean a strong tailwind for SEE. The company has seen earnings growth improve. The last two quarters in a row SEE has beaten Wall Street's estimates on both the top and bottom. If that wasn't good enough they also raised their guidance two quarters in a row.

SEE's most recent earnings report was October 29th. Analysts were expecting a profit of $0.45 a share on revenues of $1.94 billion. SEE said earnings were up +24% from a year ago to $0.52 a share. Revenues rose +3.3% to $1.98 billion.

Jerome A. Peribere, President and Chief Executive Officer of SEE commented on their quarterly performance. He said, "Our financial and operational performance in the third quarter exceeded our expectations across all key metrics. Net sales increased 3.6% on a constant dollar basis, Adjusted EBITDA margin surpassed 15%, and Adjusted EPS increased 24%. Adjusted gross profit margin increased 120 basis points as a result of our continued disciplines and value-added selling approach across all regions and divisions. Despite macro-economic uncertainties, currency headwinds and volume declines in the North American protein market, we are increasing our 2014 outlook for Adjusted EBITDA and Adjusted EPS and expect to generate approximately $540 million in free cash flow."

SEE's new 2014 guidance is $1.70-1.75 a share versus Wall Street's $1.65-1.70 estimate. The stock has been strong following this report. Instead of correcting lower in mid November SEE merely consolidated sideways. Now it's rested and ready to run. Shares are up five days in a row and ignored the market-wide weakness today.

Today's intraday high was $40.87. I am suggesting a trigger at $41.05 to open bullish positions. We're not setting a target tonight but I will note the point & figure chart is forecasting a long-term target of $61.00.

- Suggested Positions -

Long SEE stock @ $41.05

- (or for more adventurous traders, try this option) -

Long Jan $40 CALL (SEE150117C40) entry $1.90

12/11/14 new stop @ 39.95
12/09/14 triggered @ 41.05
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

Cabot Corp. - CBT - close: $39.94 change: +0.30

Stop Loss: 42.05
Target(s): To Be Determined
Current Option Gain/Loss: -0.5%
Entry on December 12 at $39.75
Listed on December 11, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 414 thousand
New Positions: see below

12/15/14: Hmm... CBT did not participate in the market's decline on Monday. Shares merely churned sideways. Friday's intraday low was $39.41. Traders might want to wait for a new relative low before initiating positions.

Earlier Comments: December 11, 2014:
CBT got its start over 130 years ago. Today they are a chemical company with a wide range of products and sales of more than $3.6 billion annually. Company literature describes Cabot as "a global specialty chemicals and performance materials company, headquartered in Boston, Massachusetts. The company is a leading provider of rubber and specialty carbons, activated carbon, inkjet colorants and cesium formate drilling fluids and has market-leading positions in fumed silica, aerogel, and elastomer composites."

It is worth noting that CBT does have exposure to the oil and gas drilling industry. CBT makes a number of products involved in the process of drilling and treating oil and gas. Given the weakness in the oil and gas industry it could be accelerating CBT's decline.

Their earnings results have not been very inspiring. Their most recent report was October 28th. CBT managed to beat the bottom line but revenues came in below estimates. Management warned the company is facing "uncertain global macroeconomic conditions." CBT pointed to slowing growth in China, Europe, and South America as potential hazards.

Technically the stock looks like a bearish momentum candidate with a steady stream of lower lows and lower highs. The last half of October and the first half of November formed a pennant consolidation pattern. CBT's breakdown from the consolidation also broke through what should have been significant support in the $41.50-42.00 zone. Now shares of CBT are poised to breakthrough round-number support at the $40.00 level. The stock has also broken down below some very long-term trend lines dating back to 2009 (not shown on the chart below).

Tonight we are suggesting a trigger to launch bearish positions at $39.75. The option spreads are too wide to trade so we'll have to trade the stock.

- Suggested Positions -

Short CBT @ $39.75

12/12/14 triggered @ $39.75

TimkenSteel Corp. - TMST - close: 31.19 change: -0.15

Stop Loss: 33.35
Target(s): To Be Determined
Current Option Gain/Loss: - 0.01%
Entry on December 15 at $31.15
Listed on December 13, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 449 thousand
New Positions: see below

12/15/14: Our new play on TMST has been triggered. Steel stocks continued to sink on Monday and TMST hit our suggested entry point at $31.15. I would still consider new bearish positions at current levels.

Earlier Comments: December 13, 2014:
TMST is in the basic materials sector. They were spun off into their own company back in July 2014 and after a +25% rally the stock peaked near round-number resistance at $50 a share in September. Then two things happened. The stock market corrected lower (mid September through mid October) and crude oil prices started dropping in earnest. While the market recovered from its correction the steel industry stocks did not.

According to company marketing materials, "TimkenSteel creates tailored steel products and services for demanding applications, helping customers push the bounds of what's possible within their industries. The company reaches around the world in its customers' products and leads North America in large alloy steel bars (6"+) and seamless mechanical tubing made of its special bar quality steel, as well as supply chain and steel services. Operating from six countries, TimkenSteel posted sales of $1.4 billion in 2013."

U.S. steel companies have been facing pricing pressures from cheaper imported steel. This has been a factor for the industry for a while. This year steel stocks are getting melted by the bear market in crude oil. Why is oil dragging steel stocks lower? That's because for companies like U.S. Steel (X) and Timkensteel (TMST) they do big business making steel products for the energy industry.

The energy exploration, drilling, and production accounts for 10% of the steel used inside the U.S. each year. There's a lot of metal on all of these oil and gas rigs. They put a lot of metal into the ground for drilling, especially fracking rigs with their horizontal drilling. The energy boom in the U.S. has been a boon for steel companies because the steel products they make for the energy sector have been a higher-margin business.

This year the price of oil has been cut in half with Saudi Arabia launching a not so secret war against all rivals in the oil industry including Iran, Russia, and the surging U.S. shale oil industry. If oil prices get too low the Saudis know that that U.S. oil production will fall when it becomes unprofitable. That's bad news for steel companies.

Shale oil and shale gas wells have a high depletion rate. That means drilling companies are constantly drilling new wells to keep up production. Yet if they stop or slow production because oil prices are too low that's going to cut demand for steel products, which is going to hurt companies like TMST in some of their highest margin business.

Shares of TMST just spent the last two weeks consolidating sideways in the $32-33 zone. Friday's move is a bearish breakdown under support at $32.00. Tonight we are suggesting a trigger to launch bearish positions at $31.15.

- Suggested Positions -

Short TMST stock @ $31.15

- (or for more adventurous traders, try this option) -

Long FEB $30 PUT (TMST150220P30) entry $2.55

12/15/14 triggered at $31.15
Option Format: symbol-year-month-day-call-strike

Voxeljet AG - VJET - close: 7.70 change: -0.57

Stop Loss: 8.65
Target(s): To Be Determined
Current Gain/Loss: +22.2%
Entry on December 04 at $ 9.90
Listed on December 01, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 372 thousand
New Positions: see below

12/15/14: 3-D printing stocks crumbled lower on Monday. Shares of VJET sank to $7.13 intraday before paring its losses. The stock underperformed the major indices as it closed with a -6.9% decline.

More conservative investors may want to either take some money off the table and/or lower their stop loss again.

I am not suggesting new positions at the moment.

Earlier Comments: December 2, 2014:
VJET is in the technology sector. The company is part of the 3D printer industry. A company press release describes VJET as "a leading provider of high-speed, large-format 3D printers and on-demand parts services to industrial and commercial customers. The Company's 3D printers employ a powder binding, additive manufacturing technology to produce parts using various material sets, which consist of particulate materials and proprietary chemical binding agents. The Company provides its 3D printers and on-demand parts services to industrial and commercial customers serving the automotive, aerospace, film and entertainment, art and architecture, engineering and consumer product end markets."

Unfortunately this industry has been struggling. Q3 earnings results were disappointing almost across the board with 3D printing companies either posting earnings misses, lowering guidance, or both. VJET happens to fall in the both category.

VJET reported its Q3 results on November 13th. Analysts were expecting a loss of €0.03 for the quarter. The actual results were significantly worse with VJET reporting a loss of €0.41. That compares to a profit of €0.11 in Q3 2013. Management lowered their guidance following the Q3 earnings report.

The industry is facing a new competition in printer giant Hewlett-Packard (HPQ). Everyone knew that HPQ would eventually jump into the 3D printer market and HPQ has finally announced they will next year. HPQ recently gave a presentation saying their 3D printer technology will use "multi-jet fusion" which will generate speeds 10 times faster than current 3D printers.

Shares of VJET have been underperforming the market with a bearish trend of lower highs and lower lows. The point & figure chart is bearish and forecasting at $6.00 target.

Today VJET is setting at all-time lows and poised to break what should be round-number, psychological support at the $10.00 mark. Tonight we are suggesting a trigger to open bearish positions at $9.90.

Please note I do consider this a more aggressive, higher-risk trade. There is already a lot of short interest in this name. The most recent data listed short interest at 22% of the very small 12.4 million share float. That poses the risk of a short squeeze should VJET ever bounce. You may want to use put options to limit your risk to the cost of the option.

*higher-risk, more aggressive trade* - Suggested Positions -

Short VJET stock @ $9.90

- (or for more adventurous traders, try this option) -

Long 2015 Jan $10 PUT (VJET150117P10) entry $1.05

12/11/14 new stop @ 8.65
12/08/14 new stop @ 9.65
12/04/14 triggered @ $9.90
Option Format: symbol-year-month-day-call-strike

Zulily, Inc. - ZU - close: 24.00 change: -0.51

Stop Loss: 27.30
Target(s): To Be Determined
Current Option Gain/Loss: + 7.3%
Entry on December 08 at $25.90
Listed on December 06, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.3 million
New Positions: see below

12/15/14: ZU is still marching to new lows. Shares lost another -2.0% on Monday versus the S&P 500's -0.6% decline. I don't see any changes from my weekend comments.

Traders may want to start lowering their stop loss. I am not suggesting new positions at current levels.

Earlier Comments: December 6, 2014:
ZU is in the services sector. They're considered part of the discount variety store industry. Yet the company doesn't have any retail locations. Instead they operate online. ZU focuses on the "flash sales" model with 72 hour sales (and occasionally 24 hour sales).

The website describes the company as follows, "zulily (http://www.zulily.com) is a retailer obsessed with bringing moms special finds every day—all at incredible prices. We feature an always-fresh curated collection for the whole family, including clothing, home decor, toys, gifts and more. Unique products from up-and-coming brands are featured alongside favorites from top brands, giving customers something new to discover each morning. zulily was launched in 2010 and is headquartered in Seattle with offices in Reno, Columbus and London."

If you do any research on ZU you'll hear a lot about the business model. It makes sense. The company doesn't suffering from all the hassles and expenses of normal retail locations. The constantly rotating nature of their flash sales model generates a sense of urgency for the buyer. It seems like a great idea. The last couple of earnings reports have been better than Wall Street expected. Yet the stock is getting crushed.

ZU's most recent report was their Q3 results on November 4th. Wall Street was expecting ZU to lose between 3 to 4 cents per share on revenues of $285.4 million. ZU reported a profit of $0.02, which is up from $0.00 a year ago. Revenues soared +71.5% to $285.8 million.

Management said it was a good quarter for ZU. Darrell Cavens, CEO of zulily, said, "This was a strong quarter where we hit several key milestones— the business reached a billion dollars in revenue on a trailing 12 month basis and the majority of our North American orders now come from mobile." They also saw their active customers surge +72% from a year ago to 4.5 million. Their average purchase was up +4%. In spite of all the good news the stock plunged -20% the next day.

The reason appears to be guidance and valuations. ZU issued Q4 guidance, the critical holiday shopping season, that was below analysts' estimates. Another major issue is valuation. At current prices ZU is still valued at $2 billion for a company with a net income of only $11.5 million. Their current P/E is about 202. They do seem to be growing rapidly but evidently not enough to justify current valuations.

Eventually shares will get cheap enough that the selling stops. Where that bottom is no one knows yet. The point & figure chart is bearish and forecasting at $14.00 target. There are a lot of investors betting on new lows. The latest data listed short interest at 31% of the 41.7 million share float.

We think ZU heads lower but I consider this a more aggressive, higher-risk trade. The big short interest could make ZU volatile. Tonight we're suggesting small bearish positions if ZU can trade at $25.90. You may want to use the put options to limit your risk.

NOTE: ZU's IPO priced at $22.00. It's possible that $22 could be potential support.

*small positions to limit risk* - Suggested Positions -

Short ZU stock @ $25.90

- (or for more adventurous traders, try this option) -

Long Jan $25 PUT (ZU150117P25) entry $1.15

12/10/14 Caution! The recent action in shares of ZU could spell trouble.
12/08/14 triggered @ 25.90
Option Format: symbol-year-month-day-call-strike


Isis Pharmaceuticals - ISIS - close: 56.93 change: -5.39

Stop Loss: 57.25
Target(s): To Be Determined
Current Option Gain/Loss: + 7.5%
Entry on November 25 at $53.25
Listed on November 24, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.5 million
New Positions: see below

12/15/14: Ouch! It was a terrible day for bullish ISIS investors. The stock reversed sharply with a -8.6% plunge toward its simple 10-dma. The stock hit our new stop loss at $57.25 along the way.

- Suggested Positions -

Long ISIS stock @ $53.25 exit $57.25 (+7.5%)

- (or for more adventurous traders, try this option) -

2015 Jan $55 call (ISIS150117C55) entry $3.15 exit $5.10 (+61.9%)

12/15/14 stopped out
12/13/14 new stop @ 57.25
12/09/14 new stop @ 54.85
12/08/14 ISIS soars +8% on clinical trial data and bullish analyst price upgrades
11/25/14 triggered @ 53.25
Option Format: symbol-year-month-day-call-strike