Option Investor

Daily Newsletter, Thursday, 9/10/2015

Table of Contents

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

Market Wrap

Wind Up To The Fed

by Thomas Hughes

Click here to email Thomas Hughes
Economic data drives volatility as the world winds up for the FOMC meeting.


Economic data from Japan, China and here at home helped drive today's volatility. However, despite signs of global weakness eyes remained focused on the FOMC meeting and possible rate hike scheduled for next week.

Asian indices fared worse in today's session, led by a -2.57% drop in the Heng Seng. Weak data from Japan and China both contributing to the declines. In Japan, Machine Orders fell -3.6% versus and expected gain of 3.7%, in China PPI fell -5.9%, about -5% more than expected. EU indices also fell, losing about -1% on average, but news from that region was light.

Market Statistics

Futures trading indicated some indecision in the pre-market session. When I first checked the indices were set for a positive open, up a bout 0.5%. Going into the 8AM hour, just before Jobless Claims data, futures reversed course and were soon indicating a down open, near -0.5%. At the open trading was just as manic. The indices opened with a small loss, made a quick test of support and then moved into positive territory, all within the first 30 minutes.

By late morning the market was firmly in positive territory but it was a case of two steps forward, one step back. Two distinct rallies, one before lunch and one after, both took the market to intra-day highs but neither held. At end of the day indices were positive, but showing only half of the intra-day gain.

Economic Calendar

The Economy

Not too much economic data today, Jobless Claims, Import/Export prices and Wholesale Inventories. Initial Claims for unemployment benefits fell by -6,000 from a downward revision of -1,000 to hit 275,000. The four week moving average also fell, shedding -1,000, to hit 281,000 but is basically flat due to revision. Regardless, initial claims are trending near 15 year lows and consistent with ongoing recovery in the labor market.

On a state by state basis New York and Ohio led with increases of 4,642 and 1,027, Pennsylvania and California led with declines of -1,549 and -1,301. On a not adjusted basis claims rose by 0.8%, less than the 3.3% predicted by seasonal factors. On a year over year basis not adjusted claims down -1.5%.

Continuing Claims gained 1,000 on top of an upward revision of 2,000 to hit 2.260 million in this week's data. The four week moving average fell, dropping -4,500. The changes in continuing claims data is minuscule and is the fourth week it has trended near flat at this level. I looks like claims have stabilized and may be a sign of increasing strength in the labor market.

Total Claims fell by -56, 574 to hit 2.153 million. This is the lowest level of total claims in 7 weeks and a contributing factor to the 5.1% unemployment rate we saw two weeks ago. Overall, the labor market appears to be stronger than ever with upward momentum. The JOLTs report yesterday is further evidence. According to it job opening are at an all time high while separations declined.

Import prices fell -1.8%, curbing expectations for inflation once again. The decline is primarily fuels but other, non-energy, prices are falling as well. Over the past year import prices have fallen nearly -11.5%. Prices for export also fell in this month's data, declining -1.4%. Over the past year export prices have declined -7%.

Wholesale Inventory fell -0.1% versus an expected gain of +0.3%. Last month's figure was revised lower, to 0.7% from 0.9%. This is weak data, but needs to be compared to business inventories and other data before a final verdict is made.

Not much data tomorrow either, just PPI and Michigan Sentiment. PPI could have an impact on FOMC outlook, gold and the dollar. Next week the economic calendar is super charged. Retail Sales, Empire Manufacturing, Industrial Production, Business Inventories, TIC Flows, CPI, Jobless Claims, Housing Starts, Building Permits, Philly Fed, the Leading Indicators and most importantly, the FOMC meeting on Wednesday. . . and a possible interest rate hike.

The Oil Index

Oil prices held firm in the face of another build in stockpiles. EIA data for crude was released today due to the Monday holiday and revealed a build of 2.6 million barrels. Natural gas inventory also rose, more than expected, which only adds to the over-supply/under-demand environment we are in. Supporting prices are a recent drop in the US rig count and a round of downward revisions to US production over the next 12 months.Prices for WTI closed the day with gains near 3.5% and trading above $45.50.

The Oil Index gained a little over 1% in today's session but remains below resistance. The indicators are pointing higher, suggesting that resistance will continue to be tested, but are weak at this time. It still looks like a retest of support near the recent low is likely based on the MACD peaks, and expected weakness in oil prices. Support target is near 1,020 with resistance just above the current levels along the 61.8% retracement level. A break above that level is not necessarily bullish, additional resistance exists in the form of the 30 day moving average.

There are signs of slowing production but supply remains high, in the US and abroad. Production in the US has been slowing all year but has yet to create a sustained drop in storage levels. Until then I think oil prices will remain under pressure and the Oil Index with them.

The Gold Index

Gold prices bounced from this week's low to gain 0.75% in today's session as weak Import/Export Price and Wholesale Inventory data helped depress FOMC rate hike speculation and weaken the dollar. Gold prices remain tied to the dollar and the FOMC, but I don't think today's data significantly changes expectations for next week's meeting. Along with FOMC outlook there is more and more evidence that other central banks, ie the ECB, BOJ and PBOC, will increase their efforts at QE which could further strengthen the dollar. Gold could easily retest lows below $1100 over the next week with additional lows possible after the FOMC meeting. . . if they raise rates.

The gold miners remain under pressure. Low prices for the underlying commodity are dragging them lower even as production levels rise. The Gold Miners ETF GDX traded flat to yesterday's action, creating a near identical candle and falling to support. The ETF is just off the long term low, within a long term down trend, with bearish indicators and weak outlook for gold prices. Current support is at the long term low, near $13.00, with both indicators pointing lower. Support may hold in the near term but gold prices will be the key, if they fall below $1100 the GDX could easily set a new low.

In The News, Story Stocks and Earnings

Lululemon reported earnings today before the bell. The ultra trendy maker of yoga apparel reported earnings and revenue in line with estimates and were able to raise full year guidance. The catch is that guidance fell short of expectations and was not received well. Shares of the stock fell -3% in pre-market trading and extended that loss to -16% by end of the day. Prices are now trading at an 8 month low.

Grocery chain Kroger reports earnings tomorrow. The grocery chain has been able to beat analyst estimates the past four quarters and is expected to do so again. Revenue and earnings have both been rising, along with comp store sales, which will all be closely watched. The stock has been trending sideways the last 6 months and is trading near the bottom of the range. Today it gained nearly 3% in move up from support with mixed indicators.

Shoe maker Zumiez reported after the bell. Expectations for $0.12 were not met. Revenue was in line but earnings missed by a penny. Comps fell by -7% versus an expected drop of -1% and were a major cause for decline. Guidance also came in weak, and helped to send shares lower in after hours trading. If after hour prices hold into tomorrow's open the stock will open at a new 52 week low.

The Indices

Volatility remains in the market and today's action is evidence of it. Futures trading was first up, then down, the open session characterized by wide swings within the daily range. Despite the volatility the market continues to move up from the recently hit bottom and today was led by the Dow Jones Transportation Average. The transports gained 0.93% in today's session but was capped by the shot term moving average. The moving average may continue to provide resistance but the indicators are on the rise so it looks like it will be tested further. If broken the index could move up to 8,250 or 8,500.The risk lies in possible retest of the recently set low. The bear MACD peak, coincident and convergent with the recent low, point to it.

The NASDAQ Composite posted the 2nd largest gain in today's session, 0.84%. The tech heavy index crossed resistance lines at 4,800 and approached the short term moving average but was not able to hold those levels. The indicators are beginning to show some strength following a bullish crossover but need to cross the short term average to confirm. Regardless, there remains risk of a retest of the recent low as indicated by convergence in MACD.

The S&P 500 made the third largest gain in today's trading, 0.53%. The broad market moved up to test resistance below the recently broken long term trend line and was held back. The indicators are moving higher, the recent stochastic crossover now confirmed by MACD, so a further test is looking likely. If prices are able to break above the trend line it could take the index up to 2,050 or higher. A failure to break could result in a test of support near 1,875. A retest of this level is also suggested by the MACD peak coincident and convergent with that low.

The Dow Jones Industrial Average made the smallest gains in today's session. The blue chips closed with a gain just short of a half percent, 0.47%, but fell short of resistance targets for the day. The indicators are on the rise so it looks like resistance will be tested but without a break above chances for range bound trading and/or test of the recent lows remains.

The indices are trying to move higher but with the FOMC just a few trading days away significant risk remains in the market. The recent bottom and subsequent bounce could keep going higher, but until resistance levels are broken the bounce looks just like that, a bounce. We may have already had our retest of support, but I think not.

The FOMC is just next week. It is one of the most highly anticipated meetings we've had, in a long string of highly anticipated meeting, has caused a lot of volatility, has a lot of impact on market direction and just happens to come the same week as options expiration. This combination is set up for volatility regardless of ultimate market direction.

Even discounting the possible affect of the FOMC meeting, another earnings season begins in a few weeks and expectations for it are not good. This could keep the market below resistance and trading sideways until we get a clearer picture of what 3rd quarter earnings really look like, and what to expect in the 4th quarter. For now, 4th quarter and full year 2016 earnings and economic growth expectations are good, so long as they stay that way the bull market should remain intact.

Until then, remember the trend!

Thomas Hughes

New Plays

The Burger Wars Rage On

by James Brown

Click here to email James Brown


Restaurant Brands Intl. - QSR - close: 37.35 change: -0.83

Stop Loss: 39.25
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on September -- at $---.--
Listed on September 10, 2015
Time Frame: Exit
Average Daily Volume = 1.0 million
New Positions: Yes, see below

Company Description

Trade Description:
The burger wars continue as McDonald's recently rejected Burger King's proposal for a "peace day" offering to create the McWhopper. More on the McWhopper in a moment. Most of the fast food or quick service stocks seem to be struggling and the group displayed relative weakness today.

QSR is in the services sector. According to the company, "Restaurant Brands International Inc. is one of the world's largest quick service restaurant companies with more than $23 billion in system sales and over 19,000 restaurants in approximately 100 countries and U.S. territories. Restaurant Brands International owns two of the world's most prominent and iconic quick service restaurant brands - TIM HORTONS® and BURGER KING®. These independently operated brands have been serving their respective guests, franchisees and communities for over 50 years."

A couple of weeks ago QSR's Burger King brand launched a short-lived PR campaign to raise aware for "Peace Day" on September 21st. Peace Day actually started back in 1999 and approved by the United Nations as a day of ceasefire and non-violence.

QSR took out a full-page ad in the New York Times and the Chicago Tribune on Wednesday, August 26th, proposing a ceasefire in the burger wars between McDonald's and Burger King. QSR claims they are trying to raise aware of Peace Day but it sure looks like a clever way to get a lot of publicity.

Just for fun you can see the ad campaign here:

QSR's McWhopper website: www.McWhopper.com
And this YouTube video (1:37 minutes) Burger King - McWhopper Proposal

McDonald's rejected the idea and suggested a simple phone call will do next time (instead of full page ads). A simple phone call

The whole McWhopper story is just a sideshow and will not have any impact on QSR's business.

QSR's most recent earnings report (late July) came in better than expected. Earnings of $0.30 per share beat estimates by six cents. Revenues did fall -1.6% but at $1.04 billion it was better than expected. Both the Tim Horton and Burger King businesses saw mid-single digit comparable store sales gains on a constant currency basis. Shares of QSR rallied on this news but the surge ran out of gas in early August.

When the market corrected lower in late August shares of QSR just collapsed with a drop of -17.8% in less than three days. The oversold bounce in QSR failed at resistance near $40.00 and is 50-dma. Now shares are on the verge of breaking down below key support at $37.00.

If QSR breaks down the next support level could be the late 2014 low near $33.00. The point & figure chart is a lot more pessimistic and forecasting at $26.00 target. Tonight we are suggesting a trigger to launch bearish positions at $36.85.

Trigger @ $36.85

- Suggested Positions -

Short QSR stock @ $36.85

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

Buy the OCT $35 PUT (QSR151016P35) current ask $0.75
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Stocks Deliver A Choppy Session

by James Brown

Click here to email James Brown

Editor's Note:
After yesterday's widespread decline it seemed that traders were in a buy-the-dip mood this morning. Conviction started to fade this afternoon and the market's bounce faded toward the closing bell.

HP hit our entry trigger.

Current Portfolio:

BULLISH Play Updates

Keurig Green Mountain, Inc. - GMCR - close: 60.89 change: +2.30

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: +10.5%
Entry on August 31 at $55.10
Listed on August 29, 2015
Time Frame: Exit prior to earnings in November
Average Daily Volume = 2.6 million
New Positions: see below

09/10/15: GMCR was making headlines today. The company announced they had finally launched their hot soup K-cup product. Back in 2013 GMCR announced they were working with Campbell's Soup Co. to make hot single-serving soups to go in the Keurig coffee machines.

Evidently Wall Street approved. Shares of GMCR rallied off their morning low near $57.40 to close up +3.9% and above round-number resistance at $60.00.

No new positions at this time. Readers may want to add a stop loss.

Trade Description: August 29, 2015:
When everyone has the same opinion on a stock sometimes shares will move the opposite direction.

It has not been a good year for GMCR. Shares are down -59% year to date and off -65% from its all-time high set on November 18, 2014 ($157.10). After months and months of declines GMCR could be poised for a big bounce.

If you're not familiar with GMCR they are in the consumer goods sector. When they launched their single-serving coffee brewer it changed the coffee world forever.

According to the company, "As a leader in specialty coffee, coffee makers, teas and other beverages, Keurig Green Mountain (Keurig) (GMCR), is recognized for its award-winning beverages, innovative brewing technology, and socially responsible business practices. The Company has inspired consumer passion for its products by revolutionizing beverage preparation at home and in the workplace. Keurig supports local and global communities by investing in sustainably-grown coffee and by its active involvement in a variety of social and environmental projects. By helping consumers drink for themselves, we believe we can brew a better world."

The company is suffering from heavy competition in the single-serving coffee/hot beverage pod business. The consumer market did not react well when GMCR introduced their Keurig 2.0 brewer, which was designed to only work with company-specific pods. They have also suffered multiple delays on introducing their Keurig Kold machine, which is a cold beverage machine similar to Sodastream.

The stock peaked in November 2014 right before its quarterly earnings report. They beat earnings and revenue estimates but management guided lower. GMCR has guided lower every quarter since then.

In February 2015 they reported earnings and revenues that missed estimates (and guided lower). In early May they reported earnings and revenues that missed estimates (and guided lower). On May 15th the stock sank after the company's presentation on its new Keurig Kold machine. Wall Street is worried that GMCR is pricing their Kold machine too high (around $300) when rival Sodastream's cold beverage maker is only $99.

GMCR's most recent earnings report was August 5th. They reported Q3 earnings of $0.80 per share, which actually beat estimates by a penny but revenues were down -5.2% to $970 million, which was a miss. Management lowered their Q4 guidance. The company said brewer machine sales were down -26%.

Management tried to soften the blow of this disappointing quarterly report and lowered guidance by announcing a $1 billion stock buyback program. The stock collapsed anyway with a plunge from $75 to $52.65.

Everything looks bearish for GMCR. So why are we suggesting a bullish trade? Basically GMCR's stock is so oversold that when it bounces it could see a big bounce. Wall Street analysts have been downgrading GMCR's stock and lowering price targets for the last several months. Everyone is so bearish that an unexpected rally could spark some serious short covering.

When the market collapsed on Monday, August 24th, GMCR fell from $50 to $45.25 but ended the day at $$51.30. That's right. GMCR actually ended Monday with a gain. Shares are now up five days in a row. The $55.00-56.00 area is resistance but a breakout could spark a rally toward $60-65 or its simple 50-dma (currently near $66.50). Technically, last week's bounce, has produced a bullish engulfing candlestick reversal pattern on GMCR's weekly chart. This pattern needs to see confirmation and we want to be ready if this rebound continues.

Friday's high was $54.46. Thursday's high was $54.61. Tonight we are suggesting a trigger to launch bullish positions at $55.10. More aggressive traders might want to consider jumping in early around the $54.75 area. GMCR can be very volatile. I do consider this an aggressive, higher-risk trade.

*small positions to limit risk* - Suggested Positions -

Long GMCR stock @ $55.10

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

Long NOV $60 CALL (GMCR151120K60) entry $3.07

08/31/15 triggered @ $55.10
Option Format: symbol-year-month-day-call-strike

Ingram Micro Inc. - IM - close: 27.31 change: +0.04

Stop Loss: 25.75
Target(s): To Be Determined
Current Gain/Loss: -1.9%
Entry on September 09 at $27.85
Listed on September 8, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 1.0 million
New Positions: see below

09/10/15: IM's performance today was discouraging. The stock rallied up to $27.68 only to give back nearly all of its gains for the session and close virtually unchanged.

No new positions at this time. Let's wait and see if IM can rally past yesterday's high ($27.89).

Trade Description: September 8, 2015:
IM looks like it is about to break out from a huge consolidation pattern.

The company operates in the services sector. According to the company, "Ingram Micro helps businesses fully realize the promise of technology® - helping them maximize the value of the technology that they make, sell or use. With its vast global infrastructure and focus on cloud, mobility, supply chain and technology solutions, Ingram Micro enables business partners to operate more efficiently and successfully in the markets they serve.

No other company delivers as broad and deep a spectrum of technology and supply chain services to businesses around the world. Founded in 1979, Ingram Micro's role as a leader and innovator in technology and supply chain services has fueled its rise to the 69th ranked corporation in the FORTUNE 500.

Ingram Micro amplifies the value of its position at the intersection of thousands of vendor, reseller and retailer partners by customizing and delivering highly targeted applications for industry verticals, business to business customers and commercial needs. From provisioning solutions for system integrators working at the heart of the network to offerings through the full lifecycle of mobile devices, SMB to global enterprise software and computing, point of sale to cloud services, professional AV to physical security-Ingram Micro is trusted by customers to have the expertise and resources to help them define and push the boundaries of what's possible.

The company supports global operations by way of an extensive sales and distribution network throughout North America, Europe, Middle East and Africa, Latin America and Asia Pacific."

The company's most recent earnings report was July 30th. Wall Street was expecting a profit of $0.54 per share on revenues of $10.9 billion. IM delivered $0.55 cents. Revenues were down -3.3% to $10.55 billion. However, if you back out the impact of currency headwinds then IM's results look a lot better. Negative currency translations shaved off -8% from their revenues.

IM management's guidance was a little soft but they announced the initiation of a $0.10 per share dividend and that they were boosting their stock buyback program by $300 million. The stock soared on this news. Shares rallied from $24.50 to $27.25 the next day.

IM was not immune to the market's late-August crash but investors bought the dip at support near its July lows. Shares have since erased the sell-off. Now IM is poised to breakout past resistance and what looks like a consolidation that started in early 2014.

A rally past $28.00 would generate a new buy signal on the point & figure chart. We want to jump in a little earlier. Tonight we are suggesting a trigger to open bullish positions at $27.85.

NOTE: I want to caution readers about the options. The spreads on most of IM's options are a little bit wide. Actually some of them are probably too wide. Be careful with the options.

- Suggested Positions -

Long IM stock @ $27.85

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

Long DEC $30 CALL (IM151218C30) entry $1.15

09/09/15 triggered @ $27.85
Option Format: symbol-year-month-day-call-strike

Oshkosh Corp. - OSK - close: 39.57 change: -0.25

Stop Loss: 38.85
Target(s): To Be Determined
Current Gain/Loss: -6.5%
Entry on August 31 at $42.30
Listed on August 27, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.1 million
New Positions: see below

09/10/15: OSK underperformed the market with a -0.6% loss. Shares look poised to breakdown under their 50-dma. More conservative traders may want to abandon ship.

No new positions at this time.

Trade Description: August 27, 2015:
The future looks a little brighter for OSK after a big contract win from the U.S. military. OSK has been making vehicles for the military for over 90 years. Earlier this year (January) the military tested new prototypes for a new Humvee design from the likes of Lockheed Martin, AM General, and OSK. This week the Wall Street Journal reported that OSK had won the contract.

OSK is in the consumer goods sector. According to the company, "Oshkosh Corporation is a leading designer, manufacturer and marketer of a broad range of specialty access equipment, commercial, fire & emergency and military vehicles and vehicle bodies. Oshkosh Corporation manufactures, distributes and services products under the brands of Oshkosh®, JLG®, Pierce®, McNeilus®, Jerr-Dan®, Frontline®, CON-E-CO®, London® and IMT®. Oshkosh products are valued worldwide in businesses where high quality, superior performance, rugged reliability and long-term value are paramount."

The new Humvee contract is a big deal. The Pentagon has been cutting back on spending the last few years. This new contract could last 25 years. OSK won with its design that is lighter in weight, providers greater range, and better protection against mines and roadside bombs. Officially the vehicle is called a Joint Light Tactical Vehicle (JLTV).

The initial contract is valued at $6.75 billion for 17,000 vehicles. It could be extended out to year 2040 since the U.S. army wants to buy almost 50,000 new JLTVs for itself and about 5,500 for the Marines. The overall program could be worth $30 billion over 25 years.

OSK's revenues last year were only $6.2 billion so this is a nice boost.

Technically shares of OSK appear to have produced a bullish double bottom. The stock market's spike lower on Monday morning pushed OSK toward its late July lows. This week's rebound in the market has seen OSK breakout past resistance near $40.00 and its 50-dma. This reversal higher has produced a new buy signal on the point & figure chart, which is forecasting a long-term $63.00 target.

Today's high was $42.21. Tonight we are suggesting a trigger to launch bullish positions at $42.30.

- Suggested Positions -

Long OSK stock @ $42.30

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

Long 2016 Jan $45 CALL (OSK160115C45) entry $3.30

09/09/15 new stop @ 38.85
09/05/15 new stop loss @ 37.45
08/31/15 triggered @ $42.30
Option Format: symbol-year-month-day-call-strike

Starbucks - SBUX - close: 55.37 change: +0.68

Stop Loss: 51.15
Target(s): To Be Determined
Current Gain/Loss: +0.4%
Entry on August 27 at $55.15
Listed on August 25, 2015
Time Frame: Exit prior to earnings in October
Average Daily Volume = 8.0 million
New Positions: see below

09/10/15: Traders bought the dip in SBUX this morning and shares rallied back toward yesterday's highs. The stock outperformed the broader market with a +1.24% gain.

I would wait for a rally past $56.00 before considering new positions. More conservative investors may want to wait for SBUX to close above $56.00 before considering new positions.

Trade Description: August 25, 2015:
The sell-off in shares of SBUX is a bit ridiculous. The Thursday-Friday-Monday sell-off in the market saw SBUX fall from $57.59 to $42.05. That was a -27% drop in less than three days. The company's fundamentals didn't deteriorate -27%. The recent market turmoil presents an opportunity to buy SBUX. Jump to the bottom of this play description for details.

Here's a little bit about SBUX and the company's performance:

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.

Five-Year Plan

In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

Earnings results:

It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week.

SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years. Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

The trend of earnings pops continued in July with shares gapping up to new all-time highs following its Q2 report on July 23rd. Earnings were $0.42 per share, a penny above estimates. Revenues were up +17.5% to $4.88 billion, just a hair above expectations. Global same-store sales were up +7% and their non-GAAP operating margin improved 100 basis points to 19.5%. Management is still guiding 2015 revenues to rise +17% in the $19.1-19.4 billion range.

Recent Sell-off & Entry Point

The recent stock market bloodletting saw SBUX breakdown below a multitude of support levels. The weakness on Monday morning was just ridiculous. SBUX opened on Monday, August 24th near technical support at its 200-dma and then it plunged to $42.05. The stock bounced back to $50 by the closing bell. The rebound struggled today but SBUX displayed relative strength with a +1.48% gain versus a -1.35% drop in the S&P 500 and a -0.4% decline in the NASDAQ.

If the stock market continues to sink we want to take advantage of the weakness in SBUX and launch bullish positions on a dip near its 200-dma. Today the simple 200-dma is at $48.04. We will set our entry trigger at $48.00. We are starting this play without a stop loss. More conservative investors might want to wait on launching positions since the next few days could be volatile for the broader market (SBUX included).

- Suggested Positions -

Long shares of SBUX @ $55.15

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

Long NOV $57.50 CALL (SBUX151120C57.5) entry $2.00

08/29/15 new stop at $51.15
08/27/15 Triggered @ $55.15
08/26/15 Entry point adjustment - move the buy-the-dip trigger from $48.00 to $50.00. Plus, add a secondary trigger to open bullish positions at $55.15.
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

Helmerich & Payne, Inc. - HP - close: 51.29 change: +0.63

Stop Loss: $55.15
Target(s): To Be Determined
Current Gain/Loss: -3.2%
Entry on September 10 at $49.70
Listed on September 9, 2015
Time Frame: Exit prior to earnings in November
(option traders exit prior to October expiration)
Average Daily Volume = 2.1 million
New Positions: see below

09/10/15: Our new bearish trade on HP is open. Shares broke down below support near $50.00 and tagged new multi-year lows. HP hit our suggested entry point for bearish positions at $49.70. Unfortunately the stock reversed. Shares actually outperformed the market with a +1.24% gain by the closing bell. Suddenly today's move looks like a potential bear trap.

Wait for a new decline under $49.70 before considering new bearish positions.

Trade Description: September 9, 2015:
The bear market in crude oil has crushed shares of HP, an oil driller. The stock has fallen from its 2014 highs near $118.00 down to $50.00.

HP is in the basic materials sector. According to the company, "Helmerich & Payne, Inc. is primarily a contract drilling company. As of July 30, 2015, the Company's existing fleet includes 342 land rigs in the U.S., 40 international land rigs, and 9 offshore platform rigs. In addition, the Company is scheduled to complete another 12 new H&P-designed and operated FlexRigs, all under long-term contracts with customers. Upon completion of these commitments, the Company's global fleet is expected to have a total of 394 land rigs, including 373 AC drive FlexRigs."

You have to give HP's management team credit for slashing expenses. The company managed to turn out an adjusted profit of $0.27 a share in the third quarter during a very tough period for the industry.

HP reported its Q3 results on July 30th. Wall Street was only expecting $0.14-to-0.17 per share. Revenues still fell -30% from a year ago to $659 million but that was much better than expected.

Unfortunately for HP the oil market has not recovered. After a huge bounce from its August lows the price of oil has begun to slide. Global oil production is still near record highs while consumption has been weak. An economic slowdown in China and much of the world is hurting demand for oil.

If oil prices stay depressed it's going to hurt business for drillers. The sell-off in HP's stock price has boosted the dividend yield to 5.2%. The current dividend is about $2.75 a year. Rival driller Transocean (RIG) recently cut their dividend. Slower business for drillers could lead HP to reduce its dividend too, which should send the stock lower.

Technically shares of HP are in a bear market and hovering near support at $50.00. A breakdown below $50 could spark a drop toward the next support level around $40.00. The point & figure chart is bearish and forecasting at $38.00 target. Tonight we are suggesting a trigger to launch bearish positions at $49.70.

- Suggested Positions -

Short HP Stock @ $49.70

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

Long OCT $45 PUT (HP151016P45) entry $1.75

09/10/15 triggered @ $49.70
Option Format: symbol-year-month-day-call-strike

Ingersoll-Rand - IR - close: 54.29 change: +0.03

Stop Loss: 55.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on September -- at $---.--
Listed on September 5, 2015
Time Frame: Exit
Average Daily Volume = 2.3 million
New Positions: Yes, see below

09/10/15: IR spent most of Thursday's session churning sideways in the $54.00-55.00 range. I do not see any changes from my recent comments.

Our suggested entry point is $52.40.

Trade Description: September 5, 2015:
In the last week of August the second estimate on U.S. Q2 GDP growth was revised higher from +2.3% to +3.7%. Q3 GDP is expected to dip down to +1.5%. The good news is that the U.S. is still growing. The bad news is that much of the world is slowing down. Big companies that do a lot of business overseas are seeing their sales slow. That's in addition to the negative impact of currency headwinds.

Industrial stocks have suffered this year. Sector ETFs like the XLI and IYJ are down about -9% year to date. IR is in the industrial sector and it is underperforming its peers with a -16% decline in 2015.

Here's a brief description of the company, "Ingersoll Rand (IR) advances the quality of life by creating comfortable, sustainable and efficient environments. Our people and our family of brands-including Club Car®, Ingersoll Rand®, Thermo King® and Trane®-work together to enhance the quality and comfort of air in homes and buildings; transport and protect food and perishables; and increase industrial productivity and efficiency. We are a global business committed to a world of sustainable progress and enduring results."

That big drop on IR's daily chart was the market's reaction to their earnings report. Wall Street was expecting a profit of $1.23 a share on revenues of $3.69 billion. IR missed on both counts with a profit of $1.20 on revenues of $3.6 billion. Management lowered their guidance for the current quarter below analysts' expectations.

Technically the oversold bounce from this post-earnings drop didn't make it very far. Then the broader market started correcting lower in a violent fashion and shares of IR plunged to new 52-week lows. The oversold bounce from the late-August crash has already failed. This decline has generated an ugly sell-signal on the point & figure chart, which is forecasting at $36.00 target for IR.

Currently IR appears to have short-term support at $52.50. We are suggesting a trigger to launch bearish positions at $52.40.

FYI: IR will begin trading ex-dividend on September 9th. The dividend is $0.29 a share.

Trigger @ $52.40

- Suggested Positions -

Short IR stock @ $52.40

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

Buy the OCT $50 PUT (IR151016P50)

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

QUALCOMM Inc. - QCOM - close: 55.33 change: +1.01

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -1.6%
Entry on September 04 at $54.45
Listed on September 1, 2015
Time Frame: 4 to 6 weeks
Average Daily Volume = 12.5 million
New Positions: see below

09/10/15: QCOM bounced with a +1.85% gain on Thursday. The stock remains inside its recent $54-56 trading range.

A drop below $54.00 could be used as a new bearish entry point.

Trade Description: September 1, 2015:
There seem to be a ton of bulls shouting at everyone to buy QCOM even though the stock is in a bear market. QCOM peaked in early 2014 around $81-82 a share. Since then it has been a very bumpy decline lower.

The company is facing rising competition. More importantly some of that competition is coming from its own customers. QCOM has been a very dominant player in the mobile phone chipset market. Yet lately the company has been facing competition from mobile phone manufacturers choosing to use their own chips instead of QCOM's.

Almost half of QCOM's revenues come from two companies: Apple (AAPL) and Samsung. Both of these mobile phone makers have been slowly beefing up their own in-house chip design and production abilities. Earlier this year QCOM lost out when Samsung picked its own chip sets for a handful of new mobile phone models instead of QCOM's.

The rising competition is taking a bite out of sales. QCOM's earnings performance has been mixed over the last year. It tends to beat estimates on the bottom line but revenues have been disappointing. After a couple of quarters of revenue growth in the +7-8% range QCOM just reported Q3 revenues fell -14.3%, which was worse than expected. Another big challenge is management's guidance. QCOM has lowered its guidance the last four quarterly reports in a row!

The company has tried to soften the bad news by announcing a massive $15 billion stock buyback program but that was back in March this year. They promised to spent $10 billion on buybacks between March 2015 and March 2016. The big buyback has not stopped QCOM's stock from falling to new multi-year lows.

Bullish investors have tried to argue that QCOM might split up the company to unlock value. That was a very popular idea when activist investors Jana Partners got involved in QCOM. Jana is one of the reasons QCOM did such a big stock buyback earlier this year.

Right now the market's focus on China's weakness could be killing QCOM's stock. The company does a huge amount of business with China.

Meanwhile technically QCOM looks very weak. The point & figure chart is bearish and forecasting at $48.00 target. The oversold bounce from last week's lows appears to be rolling over. Today's intraday low was $54.69. We are suggesting a trigger to launch bearish positions at $54.45. We'll plan on exiting in the next four to six weeks.

Please note that I do want to offer one potential warning. Apple Inc. (AAPL) has a special event scheduled for September 9th. We do not know what AAPL will announce. If they happen to announce something that uses QCOM equipment then it could be a bullish catalyst for QCOM but that's probably a big "if" at the moment.

- Suggested Positions -

Short QCOM stock @ $54.45

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

Long OCT $50 PUT (QCOM151016P50) entry $0.96

09/04/15 triggered @ $54.45
Option Format: symbol-year-month-day-call-strike

iPath S&P500 VIX Futures ETN - VXX - close: 26.68 change: -0.67

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -22.3%
2nd position Gain/Loss: +8.0%
Entry on August 25 at $21.82
2nd position: September 2nd at $29.01
Listed on August 24, 2015
Time Frame: Exit prior to October option expiration
Average Daily Volume = 50 million
New Positions: see below

09/10/15: The VXX gapped open higher and then spent the rest of the session fading lower.

No new positions at this time.

Trade Description: August 24, 2015
The U.S. stock market's sell-off in the last three days has been extreme. Most of the major indices have collapsed into correction territory (-10% from their highs). The volatile moves in the market have investors panicking for protection. This drives up demand for put options and this fuels a rally in the CBOE volatility index (the VIX).

You can see on this long-term weekly chart that the VIX spiked up to levels not seen since the 2008 bear market during the financial crisis. Moves like this do not happen very often. The VIX rarely stays this high very long.

(see VIX chart from the August 24th play description)

How do we trade the VIX? One way is the VXX, which is an ETN but trades like a stock.

Here is an explanation from the product website:

The iPath® S&P 500 VIX Short-Term Futures® ETNs (the "ETNs") are designed to provide exposure to the S&P 500 VIX Short-Term FuturesTM Index Total Return (the "Index"). The ETNs are riskier than ordinary unsecured debt securities and have no principal protection. The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Any payment to be made on the ETNs, including any payment at maturity or upon redemption, depends on the ability of Barclays Bank PLC to satisfy its obligations as they come due. An investment in the ETNs involves significant risks, including possible loss of principal and may not be suitable for all investors.

The Index is designed to provide access to equity market volatility through CBOE Volatility Index® (the "VIX Index") futures. The Index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects market participants' views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the Index. Owning the ETNs is not the same as owning interests in the index components included in the Index or a security directly linked to the performance of the Index.

I encourage readers to check out a long-term chart of the VXX. This thing has been a consistent loser. One market pundit said the VXX is where money goes to die - if you're buying it. We do not want to buy it. We want to short it. Shorting rallies seems to be a winning strategy on the VXX with a constant trend of lower highs.

Today the VXX spiked up to four-month highs near $28.00 before fading. We are suggesting bearish positions at the opening bell tomorrow. The market volatility is probably not done yet so we are not listing a stop loss yet. Our time frame is two or three weeks (or less).

- Suggested Positions -

Short the VXX @ $21.82

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

Long OCT $20 PUT (VXX151016P20) entry $2.93

Sept. 2nd - 2nd position (Double Down On The September 1st Spike)

Short the VXX @ $29.01

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

Long OCT $20 PUT (VXX151016P20) entry $0.78

09/02/15 2nd position begins. VXX gapped down at $29.01
09/01/15 Double down on this trade with the VXX's spike to 6-month highs
08/25/15 trade begins. VXX gaps down at $21.82
Option Format: symbol-year-month-day-call-strike