Option Investor

Daily Newsletter, Monday, 9/28/2015

Table of Contents

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

Market Wrap

Almost Back To Recent Lows

by Thomas Hughes

Click here to email Thomas Hughes
The market continues it corrective action in today's session, the major indices are now approaching the recent lows.


The market continued corrective action in today's session. A slew of headlines ranging from slowing China to economic data to corporate news all playing a part in a sell-off which took the indices down more than -1.25%.

The sell-off began in China where new data renewed fears of a hard-landing for its economy. According to reports Chinese industrial profits fell -8.8% year-over-year, the fastest pace of decline in over 4 years. Markets in Asia were mixed on the news although several key exchanges are closed for holiday's. Japanese stocks sold of the hardest in the Asia region. The Nikkei fell -1.32% but was also heavily impacted by a round of stocks going ex-dividend.

Market Statistics

European indices were hit hard. The China news as well as the ongoing VW scandal, a sharp drop in mining stocks and an expected downgrade in global growth. On the VW front Audi says some of its vehicles are affected while on the growth front Christine Lagarde says slowing in emerging markets is hurting estimates.

All this news had US futures trading in the red from the start of the early session. A few positive bits of corporate news was not enough to off-set other, less positive, news as well as some tepid economic data. Futures weakened going into the open with the SPX indicated down about a half percent. After the open the indices moved lower as expected and kept drifting lower into the early afternoon. Intraday bottom was finally hit in late afternoon but it did not produce a significant bounce, the indices closed near the lows of the day.

Economic Calendar

The Economy

First up on the economic front is Personal Income and Spending, released at 8:30AM. Income rose by 0.3%, slightly below expectations for 0.4% and last month's 0.5%. Spending rose by 0.4%, above expectations for a gain of 0.3% and in line with last months 0.4%. While not robust these numbers remain positive and show continued growth in wages and spending. From my perspective it shows that wage inflation remains steady, if tame, and that the consumer is spending more, both in-line with current trends and future expectations.

Pending Home sales, based on signed contracts and a leading indicator of Existing Home Sales, declined by -1.4% from last month's figures. Despite the decline Pending Sales are up 6.1% year-over-year and this is the 12th month of year-over-year increases. The decline in signed contracts is attributed to tight supply and higher prices by Lawrence Yun, NAR's chief economist. Again, this month's number is not robust but remains positive and consistent with long term recovery in the housing market. Mr. Yun went on to say in his statements that he expects this years pace of sales to remain constant although there are some obstacles ahead.

Moody's Survey Of Business Confidence declined for the fourth week since hitting a peak in late August. The index declined by -1.3 points to hit 39.9, the lowest level since March of this year. Despite the decline the index remains near long term high levels and according to Mark Zandi, Moody's chief economist, indicates strong levels of confidence for international businesses. According to his summary the US leads in sentiment. Fear of Chinese slowing and global financial turmoil are possible causes for the decline in the index but as yet there are signs of sentiment reversing.

According to FactSet the blended rate for Q3 S&P 500 earnings growth is -4.5%. This is steady from last week and down -3.5% from expectations at the start of the third quarter. So far 15 companies have reported with 14 beating on EPS estimates and 10 beating revenue estimates. Bank Of America is expected to have the single largest positive impact on earnings growth. On a sector level Telecom is expected to be the single largest positive contributor, 17%. There are 4 companies reporting this week.

Energy is expected to be the sector with the largest decline in earning growth, over -64%. This is more than the -50% expected earlier this year. Ex-energy growth should be in the range of 2.3%. Based on the four year averages we can expect to see final S&P 500 Q3 growth in the range of -0.5%, with ex-energy earnings in the range of 6.0%.

Looking forward, analysts are still expecting to see earnings growth return in the fourth quarter. According to FactSet this growth could result in record setting EPS for the index. Revenue growth is not expected until next year. Earnigns growth in 2016 has come down a half percent, largely due to revisions in the energy sector, but is still +10%.

This is a big earnings week. Tomorrow is Case-Shiller and Confidence, Wednesday is ADP Employment, and Chicago PMI. Thursday is weekly Jobless Claims, Challenger Lay-off's, Auto/Truck Sales, ISM and Construction Spending. Friday will be the big day with NFP and Unemployment Rates. NFP is expected in the range of 200K and this could be on the weak side. We've gotten good employment data this month, even within the headline poor manufacturing data. Unemployment is expected to hold steady.

Also on tap this week are several, at least 4, speeches from Federal Reserve Governors. Today Dudley spoke and says that an interest rate hike is most likely going to come later this year. He also said that the move would be data dependent, no surprise, and that it would not be driven by the calender. Expect more this week from Janet Yellen, Lael Brainard and Stanley Fischer. The minutes of the last meeting come out next week.

The Oil Index

Oil prices took another hit today. The weak China data is the most likely culprit although the global market sell-off bears some of the blame. WTI fell nearly -3% on an intraday basis to trade below $44.50 and near the bottom of the one month range. The market is still trying to make sense of supply/demand imbalance. A few draw-downs in US supply has been providing support the past couple of weeks, along with a decline in the US rig count, but global production remains high, storage remains high and demand growth is weak with China weighing heavily on it.

The Oil Index fell about -2.75% in today's session. The index is now just a few points above the recently set low and appears to be set up for a full retest of support at that low. Stochastic has been moving steadily lower over the past few weeks, leading the index, and MACD has now confirmed with a bearish crossover. Support target is near 1,020, I will be looking for signs of bounce with next year's earnings growth in mind. However, if oil moves down to retest it's lows or even lower this support may not hold. Earnings are not expected to be good this reporting season, they get better next quarter and next season but a fall in oil prices will hurt that outlook.

The Gold Index

Gold prices fell more than -1%. The move was supported by renewed FOMC rate hike fears which have been whipped up over the past few trading days by Fed Speak. Today's move was a little odd due to the dollar trade. The dollar index lost about a quarter percent on tepid housing and spending data, a move that ordinarily pushes gold higher. The metal is now trading just above $1130 and back near the mid-point of recent trading ranges. Strong dollar or strong FOMC rate hike expectations could send gold down to $1100, weak dollar or dovish FOMC expectations could send it up to $1150, both on knee-jerk reaction and both driven by the data. Without inflation and a rate hike on the horizon gold does not appear to be reversing its down trend. The caveat is that we have a government shut-down looming and that could put a bid into gold regardless of Fed Speak, inflation or dollar strength.

The gold miners have retreat to last week's lows. The Gold Miners ETF GDX lost -4.5% in a move that gapped down from the short term moving average and looks set to test long term support. Support is near $13 and has been tested twice since being set in early August. The indicators are consistent with an index settling down to support levels and rolling over into a possible bearish signal. MACD is retreating from weak bullish peak and looks like a test of support would bring it to the zero line at least, stochastic is forming a bearish crossover in-line with the prevailing down trend in the index. A break below this line would be bearish and could result in a move down as low as $11. If support holds, and there is catalyst to get gold moving to the upside, the ETF could rise to the top of the two month range near $16.00.

In The News, Story Stocks and Earnings

There were several head lines from the corporate front to help get the market moving today, not all of them bearish. Apple reported that it experienced record sales of iPhone 6's over the weekend, pretty much as expected. The company reported sales of 13 million phones, better than last years numbers, and ahead of analysts expectations in the range of 12-13 million phones, but comes with a major caveat. Last year did not include numbers from China, this year they did and reveal slower sales growth than the headline would lead you to believe. The news is nonetheless good for Apple and helped cushion it in today's trading session. Shares of Apple fell about -1.5% to trade below resistance and the short term moving average. The indicators are rolling consistent with a peak and resistance so a retest of support is possible. Support targets are near $110 and $105.

Alcoa announced that it was splitting into two companies, an upstream miner/smelter and a down stream value added products group. The move is and isn't surprising. The company has been scooping up value added businesses for several years in an attempt to diversify into an integrated aluminum company from its historic role as a miner. This move is intended to unlock value and will roughly split the business in two based on annualized revenues. Alcoa was one of very few companies to trade positive today although it did fall from the short term moving average to form a black candle (after gapping open). The stock is forming a potential bottom that as yet is unconfirmed. A break above $10 would be bullish but require the companies to prove their earnings potentials. Support is in the range of $8-$9.

Veleant made the news today as congressional democrats push to have company execs subpoenaed. This is due to the recent price gauging issues that came to light last week in and in the wake of Hillary Clinton's vow to stop such practices. Valeant is accused of buying the rights to two drugs earlier this year and then immediately raising the prices. The news was bearish for the pharma company and not good for Bill Ackman's Pershing Square. The last report I saw says Pershing has invested 20% of its capital in the company, which lost -15% today and -30% over the past week. One report I read today estimates Pershings loss for today at $700 million.

Cal-Maine, one of the nations largest egg producers, reported stellar earnings today but fell short of analysts expectations. The company reported +70% increase in sales, driven by expansion plans and rising egg prices, but the cost of purchased eggs and enhanced bio-security efforts cut into the bottom line. On a split adjusted basis earnings per share rose more than 500%, with additional expansions plans about to begin production, and yet the stock lost more than -12% in today's session. The stock is now trading near the bottom of the 4 month trading range. The indicators are rolling over into a bearish signal with down-side targets near $45. Looking forward, if the US hen flock is able to recover this year, as in no more bird flu outbreaks, then earnings could have a negative impact. So far no new outbreaks are reported, Cal-Maine's flock is untouched as yet, but we are still in a risky part of the season as migratory birds are still moving.

The Indices

The market continued its sell-off today in a move that has taken the indices down to support levels. Today's action was led by the NASDAQ Composite which was led lower by the bio-techs. The tech heavy index fell a little more than -3% in what was the biggest movement of the index in nearly a month. The index created a long black candle and broke through my first support target with indicators in confirmation of the move. Both indicators are bearish, and pointing to lower prices, with next support target just below 4,350. This would put the index back to the low set last month and consistent with the short term MACD analysis which had been indicating a retest was at least possible, if not probable. Once reached support will need to be watched for signs of strength and/or weakness.

The SPX was the next biggest loser in today's session. The broad market shed -2.57% in a move that just about reached the low set in August where the NASDAQ is still well above its low. The indicators are bearish, MACD confirmed with today's action, and are pointing to a retest of the low if not a breach of it. Support is near 1,860 with a possible move below that to 1,850 or even 1,800. Data will be important, but I think earnings and earnings growth and earnings expectations are going to be what makes or breaks support.

The Dow Jones Transportation Average made the third largest decline in today's session. The transports lost -2.23% and are setting up for a retest of support just like the techs and broader market. Today's candle is long and black, not the longest in the last month but pretty close, and broker my first support target near 7,750. The indicators have rolled into a bearish signal with rising momentum with next target at the recent low set last month. Next target for support is just shy of 7,500,

The Dow Jones Industrial Average made the smallest decline in today's session, only -1.92%. The blue chips not only made the least decline, they also have not yet reached first support target which is near 15,750. The indicators are retreating and leading to a possible test of that target but momentum remains bullish at this time, it has not confirmed. A break below this target could take it as far as the intraday low set last month.

The market sold off today, and sold off hard. On a positive note, despite today's decline it still looks like we're in for a retest of support and not a full market reversal. I say this because economic trends remain positive, as do forward earnings expectations. If the economy was in decline with a contraction of revenue and earnings on tap I would probably be singing a different tune. This quarters reporting season is not going to be a good one, but it is expected to be the last bad one ahead of at least 5 quarters of earnings and revenue growth.

There is still a little time before positive forward earnings expectations will become the focus of near term traders so nearer-term issues such as 3rd quarter earnings, slowing China, the as yet unfulfilled promise of an FOMC rate hike, and election hoopla will continue to drive the day to day trade. This being said I am going to be looking for a bounce, a bullish entry and possible rally into the end of the year.

Things to watch out for this week include earnings, as mentioned, but also the end of a quarter. The 3rd quarter ends on Wednesday and could produce a bit of volatility of its own. Economic data is going to be important as well, including Fed Speak. So long as trends remain intact I remain a bull.

Until then, remember the trend!

Thomas Hughes

New Plays

Take Advantage Of The Weakness

by James Brown

Click here to email James Brown


JetBlue Airways - JBLU - close: 25.48 change: -1.18

Stop Loss: 22.45
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on September -- at $---.--
Listed on September 28, 2015
Time Frame: Exit prior to earnings in late October
Average Daily Volume = 8.8 million
New Positions: Yes, see below

Company Description

Trade Description:
Crude oil prices have been depressed for months but airline tickets didn't really start falling until a couple of months ago. The average ticket is now down -6% from a year ago. That sounds like bad news for the airline companies. However, the drop in oil has slashed their fuel costs. Most airlines are spending 40% less on fuel than they were a year ago. That's a massive boost to their bottom line.

JBLU is part of the services sector. According to the company, "JetBlue is New York's Hometown Airline®, and a leading carrier in Boston, Fort Lauderdale-Hollywood, Los Angeles (Long Beach), Orlando, and San Juan. JetBlue carries more than 32 million customers a year to 90 cities in the U.S., Caribbean, and Latin America with an average of 900 daily flights."

The International Air Transport Association (IATA) recently issued a press release stating that customer demand for air travel remains strong. Global passenger traffic for July was up +8.2% from a year ago and an improvement above the +5.5% jump in June.

JBLU jus reported their August numbers, which saw traffic increase +6.7% as capacity rose +8.3%. The company did state that their passenger revenues per available seat mile (PRASM), a key metric for the airlines, did fall -3% in August but that was negatively impacted by a late Labor Day holiday this year. JBLU expects their Q3 PRASM to be relatively flat from a year ago (but still at a healthy pace).

Wall Street remains optimistic on JBLU. Analysts have been raising their earnings estimates on the company, which is usually a good sign. Plus JBLU has garnered some new price targets, one at $28 and another at $32. The point & figure chart is forecasting at $47.50 target.

JBLU hit multi-year highs several days ago and has been relatively resistant to the market's weakness. That changed today when investors were selling everything during the market's widespread decline. We want to take advantage of any temporary weakness in JBLU if this decline continues. Prior resistance near $24.00 should be new support. Tonight I am suggesting a trigger to launch bullish positions if JBLU trades at $24.05.

Buy-the-dip Trigger @ $24.05

- Suggested Positions -

Buy JBLU stock @ $24.05

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

Buy the NOV $25 CALL (JBLU151120C25) current ask $2.05
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Stocks Suffer Another Beating

by James Brown

Click here to email James Brown

Editor's Note:
Markets were down around the globe. All of Europe's major indices and Japan closed deep in the red. China was an exception. The U.S. market accelerated lower in a continuation of last week's sell-off.

Our bullish plays on CDW, GPRO, and SBUX were stopped out today.

We have updated stop losses on almost all of our bearish trades.

Current Portfolio:

BULLISH Play Updates

Ingram Micro Inc. - IM - close: 25.93 change: -0.84

Stop Loss: 25.75
Target(s): To Be Determined
Current Gain/Loss: -6.9%
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

09/28/15: The stock market's sharp decline today pushed IM to a -3.1% loss. Shares are flirting with a breakdown below technical support at the simple 200-dma (near $25.95).

Today's intraday low was $25.80 while our stop is at $25.75. If IM sees any follow through lower we will likely be stopped out.

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

BEARISH Play Updates

Bristow Group, Inc. - BRS - close: 26.12 change: -1.49

Stop Loss: 28.75
Target(s): To Be Determined
Current Gain/Loss: +5.7%
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

09/28/15: The sell-off in BRS continued on Monday with a -5.39% plunge to new lows. Tonight we are adjusting the stop loss down to $28.75.

No new positions at this time.

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

09/28/15 new stop @ $28.75
09/25/15 triggered @ $27.70
Option Format: symbol-year-month-day-call-strike

Hornbeck Offshore Services - HOS - close: 13.75 change: -0.29

Stop Loss: 14.75
Target(s): To Be Determined
Current Gain/Loss: +9.7%
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

09/28/15: HOS lost another -2.0% today. This is the seventh decline in a row. While the close below potential round-number support at $14.00 is encouraging I am not suggesting new positions.

Tonight we are adjusting the stop loss down to $14.75.

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

09/28/15 new stop @ 14.75
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: 46.50 change: -0.59

Stop Loss: $49.35
Target(s): To Be Determined
Current Gain/Loss: +6.4%
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

09/28/15: HP fared better than most of its peers in the energy industry. The XLE fell almost 4% on Monday while HP only lost -1.25%. Tonight we are adjusting the stop loss down to $49.35.

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

09/28/15 new stop @ 49.35
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: 37.48 change: -1.22

Stop Loss: 39.65
Target(s): To Be Determined
Current Gain/Loss: + 5.9%
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

09/28/15: The sell-off in IP accelerated on Monday with a -3.1% decline. These are new multi-year lows. I would not chase IP at this time so no new positions. Tonight we are adjusting the stop loss down to $39.65.

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

09/28/15 new stop @ 39.65
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: 23.76 change: -0.99

Stop Loss: 25.35
Target(s): To Be Determined
Current Gain/Loss: +7.4%
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

09/28/15: MUR continues to underperform both the broader market and its peers. Shares fell -4.0% on Monday. Tonight we are adjusting the stop loss down to $25.35.

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

09/28/15 new stop @ 25.35
09/23/15 triggered @ $25.65
Option Format: symbol-year-month-day-call-strike

QUALCOMM Inc. - QCOM - close: 52.54 change: -0.68

Stop Loss: 54.25
Target(s): To Be Determined
Current Gain/Loss: +3.5%
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

09/28/15: QCOM continued to sink but shares only fell -1.2% versus the NASDAQ's -3.0% decline. I would be tempted to launch new positions here but traders might want to wait for a drop below last Thursday's low (52.96). If you are initiating new positions, do not buy the October options, they expire in less than three weeks.

Tonight we are adjusting the stop loss down to $54.25.

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

09/28/15 new stop @ 54.25
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

Scripps Networks Interative - SNI - close: 48.27 change: -1.31

Stop Loss: 50.55
Target(s): To Be Determined
Current Gain/Loss: +0.9%
Entry on September 28 at $48.70
Listed on September 26, 2015
Time Frame: Exit prior to earnings in early November
Average Daily Volume = 1.3 million
New Positions: see below

09/28/15: Right on cue shares of SNI dropped to new lows. Shares fell -2.6% and hit our suggested entry point for bearish positions at $48.70.

Tonight we are adjusting the stop loss down to $50.55.

Trade Description: September 26, 2015:
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.

- Suggested Positions -

Short SNI stock @ $48.70

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

Long NOV $45 PUT (SNI151120P45) entry $0.95

09/28/15 new stop @ $50.55
09/28/15 triggered @ $48.70
Option Format: symbol-year-month-day-call-strike

Sohu.com Inc. - SOHU - close: 40.73 change: -0.79

Stop Loss: 42.75
Target(s): To Be Determined
Current Gain/Loss: +0.7%
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

09/28/15: Today's market sell-off pushed SOHU below support. The stock closed at new multi-year lows with today's -1.9% decline. I am suggesting new positions at current levels.

We are moving the stop loss down to $42.75.

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

09/28/15 new stop @ $42.75
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: 26.84 change: +1.75

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -23.0%
2nd position Gain/Loss: + 7.5%
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

09/28/15: The market's decline accelerated today. That added fuel to the fire for the volatility gauges The VIX surged +16.9% and the VXX added +6.9%.

We have less than 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


CDW Corp. - CDW - close: 39.33 change: -1.45

Stop Loss: 39.85
Target(s): To Be Determined
Current Gain/Loss: -3.3%
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

09/28/15: Monday's big market drop sparked a -3.5% plunge in CDW. The stock broke down under support at $40.00 and shares hit our stop at $39.85.

- Suggested Positions -

Long CDW Stock @ $41.20 exit $39.85 (-3.3%)

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

DEC $45 CALL (CDW151218C45) entry $1.15 exit $0.40 (-65.2%)

09/28/15 stopped out
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: 29.67 change: -2.64

Stop Loss: $29.85
Target(s): To Be Determined
Current Gain/Loss: -14.0%
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

09/28/15: Our aggressive, higher-risk trade on GPRO has been stopped out.

The volatility in GPRO continued on Monday with shares falling -8.1%. That's on top of Friday's -4.7% drop. Today saw GPRO breakdown below the $30.00 level and hit our stop at $29.85.

- Suggested Positions -

Long GPRO stock @ $34.69 exit $29.85 (-14.0%)

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

NOV $40 CALL (GPRO151120C40) entry $2.00 exit $0.92 (-54.0%)

09/28/15 stopped out
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


Starbucks - SBUX - close: 55.77 change: -2.22

Stop Loss: 56.45
Target(s): To Be Determined
Current Gain/Loss: +2.4%
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

09/28/15: Traders were rushing to lock in profits on SBUX today and shares plunged -3.8%. The stock broke down below multiple layers of short-term support. SBUX hit our stop loss at $56.45.

- Suggested Positions -

Long shares of SBUX @ $55.15 exit $56.45 (+2.4%)

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

NOV $57.50 CALL (SBUX151120C57.5) entry $2.00 exit $1.99 (-0.5%)

09/28/15 stopped out
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