Option Investor

Daily Newsletter, Saturday, 9/26/2015

Table of Contents

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

Market Wrap

Headline Overload

by Jim Brown

Click here to email Jim Brown

There was no shortage of headlines on Friday with John Boehner resigning, Xi Jinping at the White House, the Pope in New York, Volkswagen imploding, biotechs crashing and Janet Yellen having health issues.

Market Statistics

The markets got a heavy dose of news on Friday but none of it was particularly important to the market. The indexes opened higher with the Dow up +264 at the highs. The Dow and S&P traded sideways until mid afternoon when they rolled over to give back much of their gains. The Nasdaq did not wait for the afternoon. The opening print was the high of the day and the selling accelerated as the day progressed. The majority of the decline was the biotech sector dragging the Nasdaq lower.

The biotechs declined -5% on Friday and -11.56% for the week. The IBB ETF has 144 companies with 72% already in a bear market and 96% in correction or worse. The biotech index is -22% off its July highs.

The news broke just before the open that House Speaker John Boehner was resigning at the end of October and would leave Congress. The speculation was rampant on whether this would alter the odds of a government shutdown on October 1st or December 11th. Congress needs to vote on a continuing budget resolution before October or risk a shutdown. Currently a large number of congressmen and senators want to link a budget bill with defunding Planned Parenthood. President Obama has pledged to veto any bill with a defunding clause.

With Boehner announcing his resignation, it frees him to work with the democrats to get a clean bill passed and avoid a shutdown. However, it may only be a short-term bill because the debt ceiling battle will return again on December 11th. There are rumors that the House could pass a budget bill with an addendum saying they were going to bring up defunding again with the bigger debt ceiling battle in December. With Boehner's resignation, we may skip the October drama but face a bigger debate in December.

These events complicate the Fed's plans to hike rates. Yellen implied on Thursday there was still the potential for a hike in October or at least by December. The exact language was "Most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime this year."

After the speech, she had to be helped from the stage after she became weak and paramedics were called. They later determined it was dehydration, heat and stress. Later she was seen having dinner with others and walking to her car alone to return to the airport. Apparently, there was nothing serious but any unexpected health issue with Yellen could throw the market into turmoil.

The president of China met with President Obama at the White House and while the public comments were cordial, the presentations were stiff and appeared to be forced. Reportedly they agreed to a cyber warfare truce but Obama said the equivalent of "talk is cheap let's see if there is any follow through."

Volkswagen is replacing officers daily in an effort to head off a terminal prosecution for criminal wrongdoing. Europe said it was going to impose tougher inspections on all automakers and the EPA in the U.S. was quick to notify automakers that it would also aggressively inspect vehicles to make sure they complied with emission rules.

President Obama is scheduled to meet with Putin at the U.N. meeting in New York and there are rumors he may also meet with Iranian officials in an effort to develop a strategy for Syria. The Ayatollah must be giddy with his newly found status as a world power.

There were plenty of headlines to keep investors distracted including an update for Q2 GDP. The headline number was revised up again from 3.7% to 3.92%. That is up from the initial estimate at 2.3% and the final Q1 growth rate at +0.64%. The upward revisions were due to increased consumer spending on services, business investment and residential investment. Increased consumer spending added +2.4% to growth. That was up from +1.2% in the prior quarter. Final sales rose +3.9% compared to a -0.2% decline in Q1. Apparently, the savings from cheaper gasoline is finally finding its way into the economy in the form of spending.

Corporate profits rose +3.5% after falling -5.8% in Q1. Inventory growth also added to the overall number but those high inventories will also detract from growth in future quarters.

Q2 was a strong quarter and significantly out of context with the prior two quarters. However, the Atlanta Fed is only forecasting 1.4% growth for Q3 compared to analyst forecasts of 2.5%. The economy is still in a muddle through period of economic volatility and has not yet found any real traction.

The final revision of Consumer Sentiment for September rose slightly from the initial report. The headline number inched up from 85.7 to 87.2 but was still well off the recent highs at 98.1 in January. This was the third consecutive monthly decline and a 12-month low. Volatility in the equity markets was blamed since equity prices in retirement accounts are directly related to how consumers feel about their finances.

The present conditions component declined from 105.1 to 101.2 and the expectations component declined from 83.4 to 78.2. Roughly 43% of respondents expect financial conditions to deteriorate and an equal 43% expect conditions to improve. Twenty-seven percent expect rising unemployment while 19% expect jobs to improve.

The calendar for next week is heavily weighted to payrolls for September. The ADP Employment on Wednesday is expected to be flat at +191,000. The Nonfarm Payrolls on Friday are expected to rise slightly from +173,000 to +203,000.

Multiple analysts have said that any Nonfarm number over 225,000 with a big upward revision to August will guarantee a rate hike in October. For the prior two months, the revisions have been positive.

Numerous analysts believe the Fed made a mistake not hiking in September and now the Fed has realized it. Yellen's speech on Thursday was somewhat hawkish as though she was trying to warn that October was back on the table.

The ISM Manufacturing on Thursday is a national report and it has been in a downtrend since last October when it topped at 57.9 and has declined to 51.1 in August. If this manufacturing index falls into contraction below 50 it would severely crimp the Fed's plans to hike in 2015.

There is an abnormally high number of Fed heads speaking this week. The market is going to be totally confused about Fed intentions by the end of the week.

There were no split announcements last week. Full Stock Split Calendar

The markets would have been a lot worse on Friday were it not for Dow component Nike (NKE). Shares rallied +9% to $125 after they reported a 23% rise in earnings to $1.34 per share, up from $1.09 in the comparison quarter. Analysts were expecting $1.19. Revenue of $8.4 billion beat estimates for $8.2 billion. The company said it sold more higher-margin shoes and other apparel. Sales of footwear in China rose +36% and apparel increased +22% and erased the fears that Chinese consumers were cutting back on purchases. Their future orders, a proxy for future earnings, rose +17%. The spike in shares put Nike at a forward PE of 28 and they may struggle to add to their gains without a pause for profit taking. Nike's $10.21 gain added roughly 79 points to the Dow or 70% of the Dow's gain.

Canaccord Genuity, Stifel, FBR Capital Markets, Cowen and Jefferies hiked target prices on Nike.

Jabil Circuit (JBL) shares rallied +12% after reporting earnings of 48 cents that beat estimates for 35 cents. Revenues of $4.68 billion beat estimates for $4.59 billion. Revenues were up +15.5% because the company makes phone casings for Apple. Electronics manufacturing services revenue rose to +59% to $2.8 billion. Diversified manufacturing services surged +47% to 41% of the total at $1.19 billion. Jabil had $914 million in cash at the end of the quarter with free cash flow at $293 million. The company guided for the current quarter to be in the range of 72-88 cents with 16 cents of charges. That compares to analyst estimates for 51 cents. Even with the charges that will be another big beat.

Dow component Caterpillar (CAT) was downgraded again with William Blair doing the honors on Friday. The analyst said "there are too many headwinds to ignore" and that downside risk outweighs upside potential. On Thursday, Caterpillar warned that revenue would be $1 billion below prior forecasts, 2016 sales would also decline and it would reduce its workforce by another 4,000-5,000 employees. Blair cut CAT from outperform to neutral and dropped the price target from $90 to $60. The analyst said weakness from China, Brazil, the energy sector and the commodity sector would last at least until next year. Caterpillar's main focus now is "managing the downturn" and it will be "challenging" according to Blair.

This was the first weekend of the Apple iPhone 6s sales. Social app company Foursquare said Apple will sell between 13-15 million phones. The company said Apple stores registered a 360% increase in customer traffic over the last week. Compared to the September 2014 release of the 6 and 6+ models with a 330% increase in foot traffic. Apple sold 10 million phones in that weekend. Most analysts are expecting 12-13 million phones to be sold.

The company tracked foot traffic in prior launches and uses that to predict sales. In 2012 traffic increased 2.4 times and in 2013 3.5 times the prior 12-week average. Foursquare has 50 million users that "check in" to businesses and other locations. They currently track traffic at 65 million businesses in 100-plus countries.

There were long lines outside all the Apple stores on Friday morning. There were some analysts questioning whether Apple could keep up with initial demand. Some colors like the rose gold (sparkling pink) were sold out very early. However, some trackers said the lines at some of the regional stores were a lot shorter than the lines at major stores in New York and California. Reston VA only had about 75 people and that was 25% of the year ago numbers. Most (87%) planned on buying the iPhone 6S Plus, which is a high profit item for Apple. Apple shares declined fractionally on the crowd news. As of Sept 15th, there were 92.636 million Apple shares short. That was the highest number since October 31st, 2014 at 99.5 million.

Apple component makers had a good day. Those include Avago (AVGO), Qualcomm (QCOM), Texas Instruments (TXN) and Skyworks Solutions (SWKS). Cirrus Logic (CRUS) spiked 15% after an iFixit tear-down showed Apple used its chips in the phones.

Shares of the CME Group (CME) rallied after the company announced a joint venture to explore opportunities with the China Foreign Exchange Trade System (CFETS). That is the major trading platform and pricing center for RMB and related products. The pair will participate in the joint development of offshore RMB products. The CME Group will also facilitate its customers trading of Chinese interbank products and CFETS will do the same for CME products. This is a major development for CME and equates to the expanding of China's currency market to global traders. Obviously, it has not happened yet but this is the first step.

Galapagos NV (GLPG) shares fell -27% after AbbVie (ABBV) said it was scrapping a deal to license a rheumatoid arthritis drug from GLPG and use one of its own instead. The AbbVie drug ABT-494 is in mid-stage studies. If it succeeds it will save AbbVie more than $1 billion a year it would have had to pay to GLPG for licensing their drug. Both drugs are a new class of medicine that blocks an inflammation-causing enzyme known as JAK1. Galapagos said it was already in talks with more than half a dozen companies about licensing filgotinib and advancing it into late stage studies. The news did not help their stock.

Coca-Cola (KO) was started with a buy rating and $45 price target at Deutsche Bank. Shares rose 1%.

3M (MMM) was upgraded from neutral to outperform at Credit Suisse with a price target of $155. The consensus target is $159.50.

Bed Bath & Beyond (BBBY) was upgraded from underperform to market perform by Telsey Advisory.

Nomura upgraded Cyberark Software (CYBR) from neutral to buy with a $62 price target.

PayPal (PYPL) was started with a buy rating at Canaccord with a $43 target.

Swift Transportation (SWFT) warned on earnings. They are now expecting 30-33 cents for the current quarter with consensus at 44 cents. They are predicting 48-54 cents for Q4 and analysts were expecting 59 cents. Full year guidance was cut from $1.64-$1.74 to $1.43-$1.52 and analysts were expecting $1.69. Shares fell -5% on the lowered guidance.

Sequenom (SQNM) warned that revenue for 2015 is now expected to be in the range of $127-$130 million. Analysts were expecting $144.9 million. Shares fell -7% on the news.

Frac sand provider Emerge Energy Services (EMES) was cut from hold to sell at Piper Jaffray with a price target of $8. Shares were already lower after the company withdrew its expected distribution guidance due to "difficult" market conditions. Emerge is a limited partnership and removing distribution guidance is the kiss of death. The company said it would not release guidance for the rest of the year.

Blackberry (BBRY) reported a loss of -24 cents compared to -39 cents in the year ago quarter. However, the adjusted loss of -13 cents was still almost double the consensus estimate for a -7 cent loss. Revenue was $490 million compared to $916 million in the year ago quarter. Analysts were expecting $622 million. Hardware contributed 41% of the revenue, services 43% and 15% from software and technology licensing. They sold 800,000 phones during the quarter. Free cash flow was $223 million. Long-term debt declined from $1.707 million to $1.322 million. The company still expects to be profitable in 2016. The Blackberry Enterprise Server, BES12, is becoming more widely accepted and could help turn the company back to profitability. However, shares closed at a 52-week low.

The earnings calendar for next week is light with only a couple big names. With the quarter ending on Wednesday, the real earnings parade will not begin until the following week.

Crude oil continued to hold over support at $44 despite negative news. There was another small decline in inventories of -1.9 million barrels but the fat lady is about to sing. Two weeks of unexpected declines should come to a halt soon.

Refinery utilization fell from 93.1% to 90.9% as the maintenance period kicks into gear. This should decline to 85-86% in the weeks ahead. Nearly 2.0 million barrels per day will be taken offline at the peak.

The bad news came from Iran. A top Iranian official said Iran was planning on increasing its oil sales by 500,000 bpd by late November or early December even before the western sanctions were expected to be removed. Ali Kardor said Iranian exports would grow by 1.0 million barrels per day by mid 2016. OPEC had not expected any additional exports to begin until Q2-2016.

The new exports would be to Asian nations with the most going to China. The Asian nations did not impose the same kind of sanctions as the western nations. China, India and South Korea still import about 1.0 mbpd even though the sanctions still exist. Iran currently produces about 3.0 mbpd with 2.0 mbpd consumed internally. Before the sanctions they produced about 4.0 mbpd.

Kardor expects only a $3-$4 drop in prices when Iran increases its exports. The official said he expects to talk to OPEC members at the December meeting about reducing their output to accommodate the additional Iranian oil in the market. Good luck with that. I doubt they will voluntarily agree to just cut production so Iran can earn more money to export terrorism in the Middle East.

The critical part for WTI prices will actually be the arrival of Iranian oil on the market. With current supply about 2.0 mbpd more than demand and global inventories rising about 25 million barrels a month there will have to be some involuntary production cuts soon. With Iran adding 500,000 bpd to start and increasing to 1.0 mbpd the high cost suppliers are going to be in serious pain.

Active rig counts declined by -4 to 838 and another decade low for the week ended on Friday. Oil rigs declined -4 to 640 and gas rigs fell -1 to 197. Miscellaneous rigs rose +1 to 1. The offshore rig count rose +2 to 33 and -29 rigs below year ago levels.


On Tuesday, I wrote that S&P 1,950 would be the level to watch to see if any rebound had legs. Apparently, there were no legs. On Wednesday and again on Friday the S&P stalled at the 1,950 level before declining significantly after both tests.

On Thursday, the S&P declined to support at 1,912 and rebounded immediately. On Thursday night, I thought we had a good chance of a decent move higher. That move appeared on Friday morning but it failed with the decline in the biotechs crushing the Nasdaq and dragging the S&P back into negative territory.

The S&P is now showing a potential failure of that 1,912 level for next week. The double test and failure of 1,950 on decent volume suggests there will be another test of 1,912 and it may not hold. On the daily chart the formation has turned into a continuation pattern and it should continue in the direction of the primary trend and that means a move lower.

Investors have become frustrated with dip buying not working and every decent rebound being sold on the slightest weakness. The historical trend for the week after September option expiration has added one more decline to the count. Now only five of the last 18 years have posted a gain.

Next week is not any better. The average decline is about 1.2% and there is nothing on the horizon to act as a catalyst to lift us out of our slump.

Q3 earnings are now expected to decline -4.5% and revenues -3.3%. More than 110 S&P 500 companies have warned or lowered guidance. Negative guidance announcements are now running 3.2 to 1 over positive announcements.

The Dow is a similar chart to the S&P except the 79-point jump from Nike's gain helped push it back over resistance at 16,335 at the open. The short covering in the other 29 stocks began to fade in the afternoon and the Dow fell back below the 16,335 level.

The Dow is stuck in the range between 16,030 and 16,666 while we wait for some headline to give us direction. Without a positive headline, the path of least resistance is down. Without some stock to give the Dow a 50-60 point spike every day the shorts will be loading up again.

The Nasdaq was crushed by the -11% biotech drop over the last week and -5% on Friday alone. If that sector does not find a bottom soon it will drag the Nasdaq back to critical support in the 4545-4605 range.

The majority of tech stocks are listless but still volatile. One-dollar gains are followed by $2 losses then repeat. Intel was upgraded on Friday and it managed a whopping 30-cent gain. More than 45% of the Nasdaq 100 stocks are in a bear market with losses of more than 20%.

The tech sector needs a leader. That can be the biotechs, chips, computers, software, etc, but somebody needs to lead. If Apple's iPhone sales are not incredibly strong on Monday we are going to see Apple's shares weaken and probably take the Nasdaq lower. The 4,635 level is key support and a break there targets 4,500.

The Russell 2000 is broken. The index is well below support at 1,150 and appears to be targeting 1,100. Should that fail the next support is 1,082. The small cap index has a lot of biotech stocks so the Russell is suffering the same fate as the Nasdaq. The problem is that the Russell 2000 is the sentiment index and right now, the sentiment is bearish.

With the next nine trading days typically bearish and every uptick being sold the outlook is negative. However, market lows are typically made in the first 10 trading days of October with strong rebounds through month end. This means investors with a longer time horizon should be making a shopping list for the first week of October. If we do get a retest of the August lows, we should be ready to profit from that dip.

If you like the market commentary you have been receiving and you are on a free trial then now is the time to subscribe. Don't wait until you miss a newsletter to decide you want to take the plunge.

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Random Thoughts

The AAII Sentiment Survey was barely changed in the week ended on Wednesday. The markets returned to the middle of their prior range and neutral sentiment rose as investors were undecided about the eventual direction.

The top ten global equity markets are suffering their biggest losses since 2008. Is this the start of something bigger or just a bump in the road?

USA - Dow -2,000 points, -10.9%
China - Shanghai -40%, Manufacturing PMI at 78-month low.
Japan - Nikkei -3,000 points, More QE ahead.
Germany - DAX -25%, auto scandal pushing it lower.
UK - FTSE -16%.
France - CAC-40 -18%, following the Greek debt path.
Brazil - Market down -12,000 points from peak.
Italy - Stocks down -15%, economic trouble coming.
India - Sensex down -4,000 points from its high.
Russia - RTS only down -10% but low oil prices crushing economy.

Ten Largest Economies Crashing

Murray Gunn, head of technical analysis at HSBC warned that the U.S. market is putting in a bigger top than eight years ago. Based on his analysis the Dow "could have put in an historic top, one that may well turn out to be more significant than the top in 2007." Colossal Market Top

Over the last 21 years the equity markets have averaged a low for the month in the first ten days of October and then closed the month at the highs. Early weakness as Q4 begins has proven to be a great buying opportunity. Over the last 21-year period October has risen to be the third strongest month of the year for the S&P and second best for the Nasdaq. October Trading Trends

October is Bear Killer Month

How many iCars will Apple sell? A team of analysts from Jefferies released a report saying Apple will probably sell 200,000 self driving electric cars that cost $55,000 on average in 2019. That will add $11 billion in revenue and $1.6 billion in profits. That will be just a drop in the proverbial bucket since Apple is expected to generate $244 billion in revenue for 2019 with $54 billion in profits. Apple iCar

The most popular Halloween costume this year turns the wearer into Donald Trump. The most popular piñata in Mexico is a caricature of Donald Trump. MaxWigs.com cannot keep its Donald Trump Deluxe wig in stock because the demand is so strong. Trump Deluxe

Sunday night at 10:47 PM ET there will be a "Blood Moon" eclipse. The moon will be low on the horizon and the earth's atmosphere will make the moon look red. This will be a rare "supermoon" eclipse. There have only been five since 1900. Those were in 1910, 1928, 1946, 1964 and 1982. The next one will be in 2033. Supermoon Eclipse


Enter passively and exit aggressively!

Jim Brown

Send Jim an email

"Yogi Berra top 50 Berra-isms from USA Today.

Berra-isms (colloquial expressions that lack logic) are now countless, and many of them are just attributed to Berra, even if he never actually said them. As he so perfectly put it: "I never said most of the things I said." Here are 50 of USA Today favorites.

1. When you come to a fork in the road, take it.

2. You can observe a lot by just watching.

3. It ain't over till it's over.

4. It's like deja vu all over again.

5. No one goes there nowadays, it's too crowded.

6. Baseball is 90% mental and the other half is physical.

7. A nickel ain't worth a dime anymore.

8. Always go to other people's funerals, otherwise they won't come to yours.

9. We made too many wrong mistakes.

10. Congratulations. I knew the record would stand until it was broken.

11. You better cut the pizza in four pieces because I'm not hungry enough to eat six.

12. You wouldn't have won if we'd beaten you.

13. I usually take a two-hour nap from one to four.

14. Never answer an anonymous letter.

15. Slump? I ain't in no slump… I just ain't hitting.

16. How can you think and hit at the same time?

17. The future ain't what it used to be.

18. I tell the kids, somebody's gotta win, somebody's gotta lose. Just don't fight about it. Just try to get better.

19. It gets late early out here.

20. If the people don't want to come out to the ballpark, nobody's going to stop them.

21. We have deep depth.

22. Pair up in threes.

23. Why buy good luggage, you only use it when you travel.

24. You've got to be very careful if you don't know where you are going, because you might not get there.

25. All pitchers are liars or crybabies.

26. Even Napoleon had his Watergate.

27. Bill Dickey is learning me his experience.

28. He hits from both sides of the plate. He's amphibious.

29. It was impossible to get a conversation going, everybody was talking too much.

30. I can see how he (Sandy Koufax) won twenty-five games. What I don't understand is how he lost five.

31. I don't know (if they were men or women fans running naked across the field). They had bags over their heads.

32. I'm a lucky guy and I'm happy to be with the Yankees. And I want to thank everyone for making this night necessary.

33. I'm not going to buy my kids an encyclopedia. Let them walk to school like I did.

34. In baseball, you don't know nothing.

35. I never blame myself when I'm not hitting. I just blame the bat and if it keeps up, I change bats. After all, if I know it isn't my fault that I'm not hitting, how can I get mad at myself?

36. I never said most of the things I said.

37. It ain't the heat, it's the humility.

38. If you ask me anything I don't know, I'm not going to answer.

39. I wish everybody had the drive he (Joe DiMaggio) had. He never did anything wrong on the field. I'd never seen him dive for a ball, everything was a chest-high catch, and he never walked off the field.

40. So I'm ugly. I never saw anyone hit with his face.

41. Take it with a grin of salt.

42. (On the 1973 Mets) We were overwhelming underdogs.

43. The towels were so thick there I could hardly close my suitcase.

44. Little League baseball is a very good thing because it keeps the parents off the streets.

45. Mickey Mantle was a very good golfer, but we weren't allowed to play golf during the season; only at spring training.

46. You don't have to swing hard to hit a home run. If you got the timing, it'll go.

47. I'm lucky. Usually you're dead to get your own museum, but I'm still alive to see mine.

48. If I didn't make it in baseball, I won't have made it workin'. I didn't like to work.

49. If the world were perfect, it wouldn't be.

50. A lot of guys go, 'Hey, Yog, say a Yogi-ism.' I tell 'em, 'I don't know any.' They want me to make one up. I don't make 'em up. I don't even know when I say it. They're the truth. And it is the truth. I don't know.


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New Plays

Slicing Through Support Levels

by James Brown

Click here to email James Brown


Scripps Networks Interative - SNI - close: 49.58 change: -0.26

Stop Loss: 51.55
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on September -- at $---.--
Listed on September 26, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 1.3 million
New Positions: Yes, see below

Company Description

Trade Description:
The television media space is extremely competitive. Investors have really started to worry about the future of broadcast television. There are very significant trends with younger consumers watching less and less TV. Plus there is a growing trend of consumers "cutting the cord" with their cable company and choosing to watch most of their content online, on their tablet, or on their smartphone. These concerns have depressed some stocks in the media industry. Less TV watching means weaker advertising dollars for TV content.

SNI is in the services sector. According to the company, "Scripps Networks Interactive (SNI) is one of the leading developers of engaging lifestyle content in the home, food and travel categories for television, the Internet and emerging platforms. The company's lifestyle media portfolio comprises popular television and Internet brands HGTV, DIY Network, Food Network, Cooking Channel, Travel Channel and Great American Country, which collectively engage more than 190 million U.S. consumers each month. International operations include TVN, Poland's premier multi-platform media company; UKTV, an independent commercial joint venture with BBC Worldwide; Asian Food Channel, the first pan-regional TV food network in Asia; and lifestyle channel Fine Living. The company's global networks and websites reach millions of consumers across North and South America, Asia, Europe, the Middle East and Africa. Scripps Networks Interactive is headquartered in Knoxville, Tenn. For more information, please visit http://www.scrippsnetworksinteractive.com."

SNI's earnings performance has generally been okay. Looking at the last three quarters SNI has beaten analysts' bottom line estimates. Management did warn and lowered their 2015 guidance back in February. However, SNI raised their guidance with their most recent quarterly report in early August.

The bullish view on SNI is the stock's valuation. It is cheaper than its peers in the television industry. Plus, management sees stronger revenues for 2015. However, this is not translating into strength for the stock. When SNI reported its better than expected earnings and raised guidance in early August traders sold the news and shares broke down to new lows.

Bears can argue that SNI's expansion into Europe will mean more currency risk as the dollar rises. Plus, fundamental traders might be concerned about the company's debt more than doubling from $1.5 billion to $3.44 billion in the last year. Moody's Investor Service recently downgraded SNI's credit rating to Baa3 due to SNI's surge in debt. Shorts seem to be winning the day with SNI in a bear market.

Technically SNI peaked with a huge bearish double top in the $86 region in the late 2013-to mid 2014 time frame. Since then shares have plunged with a bearish pattern of lower highs and lower lows. Short interest is currently at 18.5% of the 73.4 million share float. This past week saw SNI breakdown under short-term support near $51.00. Now the stock is flirting with a breakdown below round-number support at $50.00.

The intraday low on Thursday was 48.80. I am suggesting a trigger to launch bearish positions at $48.70.

Trigger @ $48.70

- Suggested Positions -

Short SNI stock @ $48.70

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

Buy the NOV $45 PUT (SNI151120P45) 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 Notch Fourth Decline In A Row

by James Brown

Click here to email James Brown

Editor's Note:
The S&P 500 index posted its fourth decline in a row on Friday. Another notable move was the NASDAQ's decline into negative territory for the year. Now all the major U.S. indices are in the red for 2015. The small cap Russell 2000 index underperformed on Friday with a -1.29% loss.

Current Portfolio:

BULLISH Play Updates

CDW Corp. - CDW - close: 40.78 change: +0.19

Stop Loss: 39.85
Target(s): To Be Determined
Current Gain/Loss: -1.0%
Entry on September 14 at $41.20
Listed on September 12, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 1.1 million
New Positions: see below

09/26/15: CDW's performance on Friday is somewhat encouraging. Shares rallied like most of the market on Friday morning but when stocks retreated in the afternoon CDW filled the morning gap and bounced. CDW outperformed the major indices with a +0.4% gain.

Trade Description: September 12, 2015:
Consistent earnings and revenue growth have helped drive shares of CDW to new all-time highs.

CDW is in the technology sector. According to the company, "CDW (NASDAQ: CDW) is a Fortune 500 company and a leading provider of integrated information technology (IT) solutions in the U.S. and Canada. We help our customer base of approximately 250,000 small, medium and large business, government, education and healthcare customers by delivering critical solutions to their increasingly complex IT needs. Founded in 1984, CDW employs more than 7,200 coworkers. In 2014, the company generated net sales of more than $12.0 billion.

Our broad array of offerings range from discrete hardware and software products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration. We are technology 'agnostic,' with a product portfolio that includes more than 100,000 products from more than 1,000 brands. We provide our products and solutions through our sales force and service delivery teams, consisting of more than 4,500 coworkers, including over 1,800 field sellers, highly skilled technology specialists and advanced service delivery engineers."

Recent quarterly reports have seen CDW beating Wall Street estimates on both the top and bottom line. Investors were very happy to see the company's most recent report on August 3rd. Earnings were up +20% from a year ago and revenues beat expectations. Management said they expect to grow +2-to-3% above the U.S. IT market in 2015.

Shares of CDW surged on its August 3rd report. When the market corrected sharply lower in late August shares of CDW actually weathered the storm relatively well. The stock filled the gap from its August 3rd earnings pop and then bounced. Now shares have broken through major resistance at $40.00.

Friday's high was $41.11. We are suggesting a trigger to open bullish positions at $41.20.

- Suggested Positions -

Long CDW Stock @ $41.20

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

Long DEC $45 CALL (CDW151218C45) entry $1.15

09/19/15 new stop @ 39.85
09/14/15 triggered @ $41.20
Option Format: symbol-year-month-day-call-strike


GoPro, Inc. - GPRO - close: 32.31 change: -1.61

Stop Loss: $29.85
Target(s): To Be Determined
Current Gain/Loss: - 6.9%
Entry on September 25 at $34.69
Listed on September 22, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 8.0 million
New Positions: see below

09/26/15: After Thursday's rally in GPRO the stock looked poised to run higher. We adjusted our entry trigger to buy a rally at $34.25 instead of a dip at $30.00. After Friday's performance we might have been better off waiting for the dip.

The market popped on Friday morning and GPRO followed suit. Shares gapped higher at $34.69. Unfortunately the rally failed at round-number resistance at the $35.00 mark and GPRO reversed hard. Shares closed down -4.7% on the day and off -7.6% from its intraday high.

Our trade opened on Friday morning at $34.69. I'm not suggesting new positions at current levels but nimble traders may want to consider buying a dip in the $30.00-30.25 area. We are adding a stop loss at $29.85 just in cease GPRO breaks below $30.00.

Trade Description: September 22, 2015:
GPRO is down nearly 50% from its early August highs. All the bad news might be baked into the stock as shares near their IPO first day's closing price of $31.34.

If you're not familiar with GPRO here is the company's rather self-confident description, "GoPro, Inc. is transforming the way consumers capture, manage, share and enjoy meaningful life experiences. We do this by enabling people to self-capture engaging, immersive photo and video content of themselves participating in their favorite activities. Our customers include some of the world's most active and passionate people. The quality and volume of their shared GoPro content, coupled with their enthusiasm for our brand, virally drives awareness and demand for our products.

What began as an idea to help athletes document themselves engaged in their sport has become a widely adopted solution for people to document themselves engaged in their interests, whatever they may be. From extreme to mainstream, professional to consumer, GoPro has enabled the world to capture and share its passions. And in doing so the world, in turn, is helping GoPro become one of the most exciting and aspirational companies of our time."


GPRO came to market with its IPO in June 2014. The stock priced at $24.00 a share and opened for trading at $28.65. Shares closed at $31.34 on their first day of trading. A few months later (October) GPRO was challenging $100 a share. That proved to be the peak (so far) for the stock. As a high-growth, momentum name, investors will eventually jump back in.

GPRO's Earnings Growth

GPRO reported their 2015 Q1 results on April 28th. Wall Street was expecting a profit of $0.18 per share on revenues of $341.7 million. GPRO beat estimates with a profit of $0.24 a share. Revenues were up +54% from a year ago to $363 million.

Management said it was their second highest revenue quarter in history. Their GAAP results saw gross margins improve from 40.9% in Q1 2014 to 45.1% today. Their net income attributable to common stockholders increased 98.2% compared to the first quarter of 2014. International sales surged +66% and accounted for just over half of total sales in Q1 2015. GPRO shipped 1.3 million devices in the first quarter. This was the third quarter in a row of more than one million units.

GPRO management raised their guidance. They adjusted their Q2 revenue forecast to be in the $380-400 million range with earnings in the $0.24-0.26 region. Analysts were only forecasting $335 million with earnings at $0.16 a share.

GPRO reported its Q2 report on July 21st. Results were way above expectations. Analysts were expecting earnings of $0.26 per shares on revenues of $396 million. GPRO said Q2 earnings came in at $0.35 per shares. That's a +337% improvement from a year ago. Revenues were up +71.7% to $419.9 million, significantly above the estimate. Gross margins improved from 42.2% to 46.4%.

Naturally GPRO management was enthusiastic. GoPro Founder and CEO, Nicholas Woodman, commented on their quarterly results saying, "I couldn't be more proud of our aggressive pace of innovation. With the introduction of HERO4 Session and HERO+ LCD, we've launched five new cameras in the past 10 months, exciting both new and existing customers and contributing to strong second quarter results. Our core business is enjoying terrific momentum as we charge forward into attractive adjacent markets."

Bearish Argument

The biggest argument against GPRO is competition from a Chinese rival Xiaomi who has produced a competitive action camera that they're selling for about half of GPRO's similar model. GPRO critics are worried this could kill GPRO's growth in China and the rest of Asia.

This past weekend Barron's published a bearish thesis on GPRO suggesting the company was a one-trick pony. Actually the article said GPRO was a "one product wonder" and compared it to companies like Blackberry who lost to competitors who came after Blackberry had already established the market.

The Barron's analyst also suggested that GPRO was still overvalued and could fall to $25.00 a share. Shares of GPRO plunged more than -8% on Monday in reaction to the Barron's article.

Today GPRO CEO Nick Woodman defended his company and said, "I think to say that we're a one-trick pony is shortsighted. The content that the world loves has grown so much value into our brand." Woodman is suggesting that GPRO is more than a product company and should also be considered a media company. We are not going to argue either way on the media versus consumer products company debate. Tonight's trade is more technical.

The Trade

The selling in GPRO may be nearing a capitulation. Average daily volume is about 8 million shares. These past three weeks has seen volume surge into the 13-19 million zone almost every day. Shares are also down -48% from their August 10th, 2015 high of $64.74. That's a pretty sharp decline in only six weeks.

We suspect that bulls will defend GPRO near its IPO debut in the $28-30 range. Tonight we are suggesting a buy-the-dip entry point to open bullish positions at $30.00. This is a speculative, higher-risk trade. Use small positions to limit risk.

- Suggested Positions -

Long GPRO stock @ $34.69

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

Long NOV $40 CALL (GPRO151120C40) entry $2.00

09/26/15 new stop loss @ $29.85
09/25/15 triggered on gap higher at $34.69, trigger was 34.25
09/24/15 Entry Strategy Update: Instead of a trigger at $30.00, use a trigger at $34.25
Update the option from the November $35 call to the Nov. $40 call
Option Format: symbol-year-month-day-call-strike


Ingram Micro Inc. - IM - close: 26.77 change: +0.01

Stop Loss: 25.75
Target(s): To Be Determined
Current Gain/Loss: -3.9%
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

09/26/15: IM's performance on Friday is not very encouraging. The rally on Friday morning failed near Tuesday's highs. The $27.15-27.20 area looks like new resistance. Shares settled virtually unchanged, which doesn't tell us much.

No new positions at this time.

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

09/15/15 Caution - IM did not participate in the market's rally today
09/09/15 triggered @ $27.85
Option Format: symbol-year-month-day-call-strike


Starbucks - SBUX - close: 57.99 change: -0.38

Stop Loss: 56.45
Target(s): To Be Determined
Current Gain/Loss: +5.1%
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

09/26/15: The Friday morning rally in SBUX almost hit $59.00 before shares reversed. The stock ended the session with a -0.65% loss but SBUX did post its third weekly gain in a row.

The stock's all-time highs near $59.30 do represent resistance. I would not be surprised to see SBUX experience some profit taking here. More conservative traders may want to take some money off the table. We are going to keep the play open but we'll try and reduce our risk by raising the stop loss to $56.45.

No new positions at this time.

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

09/26/15 new stop @ 56.45
09/16/15 new stop @ 54.75
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

Bristow Group, Inc. - BRS - close: 27.61 change: -0.51

Stop Loss: 32.85
Target(s): To Be Determined
Current Gain/Loss: +0.3%
Entry on September 25 at $27.70
Listed on September 24, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 553 thousand
New Positions: see below

09/26/15: Our new trade on BRS is open. Shares continued to sink on Friday and hit new lows with a -1.8% decline. Our trigger to launch positions was hit at $27.70. I would still consider new positions at current levels.

Trade Description: September 24, 2015:
The collapse in crude oil hasn't not just hurt the energy producers but also the oil services company that support the energy sector. This has driven BRS to five-year lows.

BRS is part of the basic materials sector. According to the company, "Bristow Group Inc. is a leading provider of helicopter services to the worldwide offshore energy industry based on the number of aircraft operated and one of two helicopter service providers to the offshore energy industry with global operations. The Company has major transportation operations in the North Sea, Nigeria and the U.S. Gulf of Mexico, and in most of the other major offshore oil and gas producing regions of the world, including Australia, Brazil, Canada, Russia and Trinidad."

The prolonged drop in oil prices has forced most energy companies to cut their capex budgets and expenses. That means less demand for oil services like BRS. The company has missed Wall Street's earnings estimates and lowered guidance the last three quarters in a row.

On February 5, 2015, BRS lowered their 2015 guidance from $4.70-5.20 down to $4.05-4.45 compared to estimates of $4.92 per share. On August 6th BRS lowered their 2016 guidance to $3.10-3.75 versus Wall Street estimates of $4.01 per share.

Unfortunately there appears to be no end in sight for the downturn in energy and crude oil. BRS could have much farther to fall. The last couple of days have seen shares of BRS breakdown below their prior September low. Today's intraday low was $27.83. I am suggesting a trigger to launch small bearish positions at $27.70. We want to start with small positions since BRS is already oversold (there is nothing stopping it from getting a lot more oversold).

*small positions to limit risk* - Suggested Positions -

Short BRS stock @ $27.70

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

Long DEC $25 PUT (BRS151218P25) entry $2.10

09/25/15 triggered @ $27.70
Option Format: symbol-year-month-day-call-strike


Hornbeck Offshore Services - HOS - close: 14.04 change: -0.22

Stop Loss: 17.05
Target(s): To Be Determined
Current Gain/Loss: +7.8%
Entry on September 22 at $15.22
Listed on September 21, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 925 thousand
New Positions: see below

09/26/15: HOS spent most of Friday hovering above the $14.00 level. Shares underperformed the broader market with a -1.5% decline. Investors may want to lower their stop loss. Broken support near $16.00 should be new resistance.

No new positions at this time.

Trade Description: September 21, 2015:
HOS has been crushed over the last couple of years and there appears to be no end in sight.

HOS is part of the basic materials sector. They're in the oil equipment and services industry. According to the company, "Hornbeck Offshore Services, Inc. is a leading provider of technologically advanced, new generation offshore service vessels primarily in the Gulf of Mexico and Latin America. Hornbeck Offshore currently owns a fleet of 66 vessels primarily serving the energy industry and has eight additional ultra high-spec Upstream vessels under construction for delivery through 2016."

The energy sector has been hurt by the bear market in crude oil. The sell-off in crude started in June 2014. Yet the sell-off in HOS started in late 2013, more than six months before crude oil turned lower. Falling oil prices make it unprofitable for companies to do a lot of drilling offshore, which is significantly more expensive than normal drilling methods. Today there are only 31 active offshore oil rigs. That's down from 66 offshore rigs a year ago.

HOS management seems to be doing a good job in slashing expenses. They have managed to beat Wall Street's estimates on the bottom line number. Yet HOS has been unable to stop the plunge in revenues. Last quarter revenues fell -20% from a year ago.

Moody's just downgraded HOS' credit rating and changed their outlook to negative. Here is an excerpt from the Moody's press release,

"Hornbeck benefits from the scale and quality of its fleet, and good liquidity, but its credit metrics will continue to be negatively impacted by the very challenging environment facing the offshore sector through 2017" said Sreedhar Kona, Moody's Senior Analyst. "The negative outlook reflects our expectation of continued deterioration in the utilization of offshore supply vessels and their day rates"
The bearish conditions in the energy sector are not secret. Investors have been selling the rallies. Bears have piled on HOS with short interest at 33% of the small 25.5 million share float. That does raise the risk of a short squeeze.

Technically the trend is down. It was just a few days ago that Goldman Sachs outlined their worst-case scenario that saw crude oil falling to $20 a barrel. It could take years for the world to work through the current supply glut that will keep oil prices depressed.

HOS' point & figure chart is forecasting at $12.00 target. Today HOS displayed relative weakness with a -4.3% decline. Tonight we are suggesting a trigger to launch bearish positions at $15.30. More conservative traders might want to wait for a breakdown below $15.00 before launching bearish positions.

*Due to the high short interest I am suggesting small positions to limit risk*

*small positions to limit risk* - Suggested Positions -

Short HOS stock @ $15.22

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

Long DEC $15 PUT (HOS151218P15) entry $2.15

09/22/15 triggered on gap down at $15.22, suggested entry was $15.30
Option Format: symbol-year-month-day-call-strike


Helmerich & Payne, Inc. - HP - close: 47.09 change: -0.29

Stop Loss: $54.35
Target(s): To Be Determined
Current Gain/Loss: +5.3%
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

09/26/15: HP's bounce on Friday failed at short-term resistance near $48.00. Shares erased Thursday's bounce by the closing bell.

More conservative traders may want to lower their stop again. No new positions at this time.

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

09/19/15 new stop @ 54.35
09/10/15 triggered @ $49.70
Option Format: symbol-year-month-day-call-strike


Intl. Paper Company - IP - close: 38.70 change: -0.23

Stop Loss: 42.35
Target(s): To Be Determined
Current Gain/Loss: +2.9%
Entry on September 22 at $39.85
Listed on September 19, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 2.9 million
New Positions: see below

09/26/15: It was encouraging to see the bounce attempt in IP fail. I was concerned that Thursday's session was a potential reversal. Fortunately the rally on Friday failed pretty quickly.

No new positions at this time.

Trade Description: September 19, 2015:
Over supply issues and currency headwinds are hurting IP's results.

IP is in the consumer goods business. According to the company, "International Paper (IP) is a global leader in packaging and paper with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include industrial and consumer packaging along with uncoated papers and pulp. Headquartered in Memphis, Tenn., the company employs approximately 58,000 people and is strategically located in more than 24 countries serving customers worldwide. International Paper net sales for 2014 were $24 billion."

The last few earnings reports have seen IP beat Wall Street's bottom line estimate but that was mainly due to cost cutting. Revenues have been slowing down. Their 2014 Q4 revenues were only up +1.6%. Q1 revenues fell -3.6%. Their most recent report saw Q2 revenues fall -3.6%. The last two quarters saw revenues come in below analysts' expectations.

IP's management did manage to slash selling and administrative costs by almost -8% last quarter. Unfortunately their international packaging, consumer packaging, and printing papers businesses all saw sharp sales declines.

Dividend investors might be drawn to this stock. IP currently has a yield near 4%. Is it worth buying a big yield when the stock has fallen -30% from its 2015 highs and shows no signs of stopping? A Bank of America analysts said their previously bullish thesis for IP doesn't work anymore. Over supply issues in the containerboard industry remain a trouble spot.

The stock is bearish with a clear trend of lower highs and lower lows. Today shares are poised to breakdown under round-number support at $40.00. We are suggesting a trigger to launch bearish positions at $39.85.

- Suggested Positions -

Short IP stock @ $39.85

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

Long 2016 Jan $40 PUT (IP160115P40) entry $3.00

09/24/15 Caution - the big intraday bounce is a potential warning for bears
09/22/15 triggered @ $39.85
Option Format: symbol-year-month-day-call-strike


Murphy Oil Corp. - MUR - close: 24.75 change: +0.07

Stop Loss: 29.05
Target(s): To Be Determined
Current Gain/Loss: +3.5%
Entry on September 23 at $25.65
Listed on September 22, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 2.4 million
New Positions: see below

09/26/15: After big losses last week MUR spent Friday's session drifting sideways. The stock eked out a small gain. The simple 20-dma near $27.65 should be resistance so more conservative traders might want to use that as a guide to adjust their stop loss.

No new positions at this time.

Trade Description: September 22, 2015:
The outlook for crude oil continues to worsen. We are bringing MUR back to the Premier Investor newsletter.

Here's an updated trade description:

The crash in crude oil prices in the second half of 2014 was pivotal turning point for the U.S. energy industry. Suddenly the booming oil and gas sector had its future being questioned with the price of oil now unprofitable for many drillers. Oil has managed a bounce from its 2015 lows while many of the oil and gas producers are still seeing their stocks decline.

MUR is in the basic materials sector. According to the company, "Murphy Oil Corporation is an independent exploration and production company with a strong, oil-weighted portfolio of global offshore and onshore assets. Exploration activities are focused in four main regions: Deepwater Gulf of Mexico, the Atlantic Margin, Southeast Asia and Australia."

The company reduced its 2015 capex outlook by -33% when they reported their 2014 Q4 results back in January. MUR's Q1 results came out in May. Profits evaporated with MUR delivering a loss of ($1.11) per shares versus a profit of $0.96 a year ago.

Management is trying to prop up their floundering stock price. On May 20th the company announced an accelerated stock buyback program of $250 million. This is part of a previously announced $500 million repurchase program from August 2014. The buyback doesn't seem to be working.

Goldman Sachs downgraded MUR to a "sell" in late May. Nearly a month later UBS has also downgraded MUR to a "sell". The UBS analyst expressed concern that MUR's production would likely decline in 2015 and 2016 since the company has cut back on investment. (edit: UBS later pulled its "sell" rating after MUR reported earnings on July 30th). Soon other analysts jumped on the downgrade bandwagon. Morgan Stanley and Oppenheimer have both downgraded MUR in the last several weeks. The Oppenheimer analyst expressed concern that MUR would face a significant cash flow deficit and would need to fund operations through cash on hand and additional debt.

MUR's most recent earnings report on July 30th did beat Wall Street estimates but the company posted a loss of $0.48 per share versus estimates for a loss of $0.54.

Shares of MUR have continued to race lower with investors selling every rally. The trend of lower highs and lower lows has pushed MUR to levels not seen since early 2004. The point & figure chart is bearish and forecasting a long-term target of $12.00. I see potential support at $20.00. The September 11th low was $25.77. Tonight we are suggesting a trigger to launch bearish positions at $25.65.

- Suggested Positions -

Short MUR stock @ $25.65

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

Long 2016 JAN $25 PUT (MUR150115P25) entry $2.40

09/23/15 triggered @ $25.65
Option Format: symbol-year-month-day-call-strike


QUALCOMM Inc. - QCOM - close: 53.22 change: -0.05

Stop Loss: 56.65
Target(s): To Be Determined
Current Gain/Loss: +2.3%
Entry on September 04 at $54.45
Listed on September 1, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 12.5 million
New Positions: see below

09/26/15: QCOM gapped higher on Friday thanks to the market's widespread bounce. However, broken support at $54.00 acted as new resistance, and the stock reversed lower. This move looks like a new entry point for bearish positions.

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

09/23/15 QCOM's breakdown below support at $54.00 is bearish
09/12/15 new stop @ 56.65
09/04/15 triggered @ $54.45
Option Format: symbol-year-month-day-call-strike


Sohu.com Inc. - SOHU - close: 41.52 change: -0.60

Stop Loss: 45.30
Target(s): To Be Determined
Current Gain/Loss: -1.2%
Entry on September 24 at $41.03
Listed on September 23, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 607 thousand
New Positions: see below

09/26/15: Good news! SOHU did not see any follow through on Thursday's bounce. Shares actually erased Thursday's gain. Tonight I am suggesting a drop below $41.00 as our next entry point for bearish positions.

Trade Description: September 23, 2015:
China's economy is slowing down. Earlier today the country said their manufacturing growth fell to six-year lows. This slowdown is being felt throughout the economy, including the technology space and Internet companies.

SOHU is considered part of the technology sector. I'd consider them a Chinese Internet stock. According to the company, "Sohu.com Inc. is China's premier online brand and indispensable to the daily life of millions of Chinese, providing a network of web properties and community based/web 2.0 products which offer the vast Sohu user community a broad array of choices regarding information, entertainment and communication. Sohu has built one of the most comprehensive matrices of Chinese language web properties and proprietary search engines, consisting of the mass portal and leading online media destination www.sohu.com; interactive search engine www.sogou.com; developer and operator of online games www.changyou.com/en/ and leading online video website tv.sohu.com .

Sohu corporate services consist of online brand advertising on its matrix of websites as well as bid listing and home page on its in-house developed search directory and engine. Sohu also provides multiple news and information service on mobile platforms, including Sohu News App and mobile news portal WAP.Sohu.com. Sohu's online game subsidiary, Changyou.com (CYOU) has a diverse portfolio of popular online games , such as Tian Long Ba Bu, one of the most popular massively multi-player online ('MMO') games in China, as well as a number of mobile games. Changyou also owns and operates the 17173.com Website, a leading game information portal in China. Sohu.com, established by Dr. Charles Zhang, one of China's internet pioneers, is in its nineteenth year of operation."

Looking at SOHU's recent earnings reports the company has been beating estimates on the bottom line but business is slowing down. SOHU has guided lower three of the last four quarterly reports. Their most recent earnings report was July 27th when SOHU announced their Q2 results.

Wall Street expected a loss of ($0.81) per share on revenues of $479.5 million. SOHU delivered a loss of just ($0.37) while revenues grew +23% to $493.6 million. Unfortunately management lowered their guidance again. SOHU expects Q3 revenues to come in the $470-500 million range. That's below analysts' estimates of $530 million. SOHU is also forecasting Q3 earnings in the minus $0.55 to minus $0.80 per share versus Wall Street's estimate for minus $0.39. This is SOHU's lowest revenue growth in the last three years.

Technically the stock is in a bear market with a -40% drop from its June highs (SOHU is down -21% year to date). The stock has been trading with a bearish trend of lower highs. Now SOHU is poised to breakdown under significant support in the $42 area. A drop below $41.00 would generate a new triple-bottom breakdown sell signal on its Point & Figure chart. Tonight I am suggesting a trigger to launch bearish positions at $41.35. If shares break down the next support level could be the $35 region.

FYI: Investors should be aware that SOHU has been rumored to be an acquisition target or a target to be taken private. That's our biggest risk. The cheaper this stock gets the more attractive it might become as a target. However, this is just speculation and it may never happen.

- Suggested Positions -

Short SOHU stock @ $41.03

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

Long DEC $35 PUT (SOHU151218P35) entry $2.00

09/24/15 triggered on gap down at $41.03, trigger was $41.35
Option Format: symbol-year-month-day-call-strike


iPath S&P500 VIX Futures ETN - VXX - close: 25.09 change: +0.65

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -15.0%
2nd position Gain/Loss: +13.5%
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

09/26/15: The stock market's drop midday on Friday fueled a rise in the volatility gauges. The VXX bounced off its lows to close up +2.65%.

We only have three weeks left on our October options.

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