Option Investor

Daily Newsletter, Monday, 10/5/2015

Table of Contents

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

Market Wrap

Looking Forward To Earnings

by Thomas Hughes

Click here to email Thomas Hughes
The market opened strong and finished strong in a week largely focused on earnings.


The market opened strong and finished strong despite the surprisingly weak NFP we saw last week. The poor number could be sign the economy is faltering, not ordinarily good for the bulls, but was taken as a sign the FOMC doesn't need to raise rates just yet. The dovish tone set by the NFP, along with a noted absence of other fear inducing headlines, allowed the bulls to march higher and take out near term resistance targets.

Market Statistics

The bad-news-is-good-news effect was not limited to US markets. Asian and European indices were also riding high. Asian indices gained about 1.5%, European indices gained 2.7%-3%.

Futures trading indicated a higher open for the US indices right from the start. The SPX was looking at a 0.75% jump at the start and that held fairly steady throughout the early morning. There was a little new and data in the early hours but nothing to really move the market. On the economic front ISM was weaker than expected but expansionary, on the business front Nelson Peltz took a $2.5 billion stake in GE and on FOMC front Boston Federal Reserve President Rosengren made some comments. He says a 2015 rate is still on the table but if thing change from here he would want to wait until 2016. Changes he is looking for are a rise in unemployment from 5.1% or if GDP slows to less than 2%.

The equity market moved higher right at the start of trading. The SPX gained the indicated 0.75% and more on steady trading. The indices hit a high in the first few minutes and then held those high, and slowly drifted higher, throughout the rest of the morning. The bulls held their ground through the lunch hour and by 1PM were approaching another new intra-day high. Bullish sentiment dominated during the afternoon as well. The indices continued to drift higher and were setting new intra-day highs on a regular basis. Strength held up until the end of the day leaving the indices at or near their highs when the closing bell sounded.

Economic Calendar

The Economy

Only one economic report today, ISM Services Index, and it was not as good as expected. It came in at 56.9%, firmly expansionary and the 68th month of expansion in the non-manufacturing sector, but below the 59% reported last month and the 57.5% expected by the analysts. Within the report 2 of the three major components declines, Business Activity and New Orders, while Employment rose. All three components are above the 50 level.

Later in the week look out for Trade Balance and Consumer Credit coming out tomorrow, the minutes to the last FOMC meeting on Wednesday and Wholesale Inventories on Friday. And of course, the weekly jobless claims on Thursday. Also up this week is earnings from Alcoa which may become the focal point of the week. It is the only major report due out this week, the big banks start reporting next week.

Moody's Survey Of Business Confidence declined for the fifth week. The diffusion index dropped 0.2% to 39.7 and is at the lowest levels since mid March. According to Mark Zandi, Moody's chief economist, global business sentiment has downshifted in recent weeks due to market turbulence. Despite the downturn he says there is no sign businesses are getting "decidedly more cautious". US business sentiment continues to lead with reports of steady hiring and strong sales.

The Moody's report, and in particular Mark Zandi's comments about hiring, remind me of some thoughts I have had in regards to labor trends and jobs creation. Jobs creation is good and we need it, that is without a doubt. However, in light of all the supposed businesses who can't fill jobs they already have is it more important that hiring be strong or job creation? Does it matter if NFP is not above 200K every month if unemployment is declining because people are getting hired into existing jobs rather than new jobs? According to Factset the blended rate for 3rd quarter S&P 500 EPS growth is now -5.1%. This is down -0.6% from last week and is now the lowest level we have seen, the expected decline was closer to -1% at the start of the quarter. The drop this week is due to downward revisions in energy, no surprise, and in materials. The energy sector is now expected to produce earnings growth declines of -64.5%, down from 58.9% at the start of the quarter. The materials sector is now expected to show declines of -13.7%, down from -15% on June 30th.

Ex-energy 3rd quarter earnings growth should be in the range of 1.9%. Factor in the 4% upside as predicted by the four year average difference in the earnings growth rate between the start and end of the quarter and growth in the 3rd quarter should be closer to -1.5%, or 6% ex-energy. So far there have been 19 reports this season, 17 beat on EPS projection and 13 beat on revenue projections. Full year 2015 and 2016 estimates have also fallen, 2015 is now at 0.5%, 2016 at 9.9%.

The Oil Index

Oil prices got a big boost today on talks that Russia was willing to meet with OPEC and non-OPEC countries about stabilizing prices. This comes on top of a big drop in US rig counts last week and fueled speculation of a bottom in oil prices. Despite the talk, and the drop in rigs, supply and production remains high with little sign of demand build up. At best we are on the brink of production coming more into line with demand. WTI gained more than 3% on an intra-day basis to trade above $46.50.

The Oil Index made another nice move higher in today's session, a little more than 3%, and extended its bounce from support levels. The index is now trading above the short term moving average with bullish indicators confirming the move. MACD is pointing up and gaining strength while stochastic makes a strong bullish crossover, both %K and %D are pointing higher, so it looks like this move will continue upward until it hits resistance. Resistance may be found near 1,150, or 1,175 if first target is broken.

The Gold Index

Gold prices held steady near $1135 in today's session. The metal got a big boost on Friday from the weak jobs data but was not able to follow through on the move today. Poor NFP has renewed outlook for a later rather than sooner rate hike and weakened the dollar/strengthened gold, in the near term. Outlook for rate hike remains so upside based on the dovish numbers is limited. Unless the FOMC gets off the rate hike path, which would be wickedly bullish for gold I think, there is going to be a rate hike sometime soon and this expectation could send gold testing its lows if not moving lower. Until then it still looks like gold is consolidating around the $1130 level with support near $1100 and resistance near $1150.

The Gold Miners ETF GDX gained more than 4.25% in a move disconnected from the underlying commodity. This move is taking the miners to a new 6 week high while gold prices remain well within the 6 week range. The indicators have rolled into a bullish signal, MACD is bullish and rising while stochastic is making a bullish crossover, so it looks like this move will continue into the near term. Upside targets are near $15.72 and the previously broken all time low. Resistance could be strong at this level, a break above here would be significantly bullish and highly dependent on gold prices. If prices move to this level and/or surpass it without a similar move higher in gold prices I will be skeptical to say the least.

In The News, Story Stocks and Earnings

GE was the biggest headline in business news this morning. The global conglomerate caught the eye of Nelson Peltz, who decided to take a $2.5 billion stake in the company through his firm Trian. He is expected to push for deeper cost cuts and quicker action from execs in order to boost shareholder value. The announcement was met with approval and sent the stock shooting higher. Shares of GE climbed more than 3% in pre-market trading, gapped open and closed with a gain of nearly 5.5%.

Yum! Brands reports earnings tomorrow, before the bell. The operator of Taco Bell, KFC and Pizza Hut is expected to report $1.08 per share, up from the $0.69 last quarter. The company has been struggling in China and emerging markets so estimates may be high. Today the stock gained 1.62% in a move that appears to confirm support along the short term moving average. The indicators are moving higher in confirmation of the move and point to higher prices, or at least expectations of a decent earnings report. Resistance is just above the current level, near $84, and could be important in tomorrow's action. A break above this level would be bullish, a failure could send it back to test support near $80 or $75.

Pepsico is also expected to report before the bell tomorrow. The international beverage and snack giant, also make Doritos etc, is expected to report $1.27, down from last years $1.36, largely due to emerging markets and currency conversion. Weakness in international business is expected to be offset by US sales, in particular with snacks. Shares of the stock gained about 1.75% in today's session but gains were capped by resistance. Today's action created a medium bodied white candle with rising, strong, bullish momentum but there is still resistance ahead. Resistance is near today's closing price, about $96.25 and top of a gap/open window, and could keep shares from rising further.

Dupont made the news in after hours trading. The company first came out and said that it was lowering guidance for the full year, due to foreign exchange. Second they announced the retirement of CEO which was taken as good news. The stock shot up more than 10% in after hours trading.

The Indices

The bulls came out of the gates strong today and were able to extend the bounce from support which began last week. The indices gained at least 1.5% in today's session and were able to close near the highs of the day. Today's session was led by the Dow Jones Industrial Average which advanced more than 3%. The blue chips created a large white candle with a significant lower shadow to form the largest candle in over a month, and the largest white candle in at least a year. This move confirms support at the 16,000 level, takes the index above the short term moving average and is accompanied by bullish indicators. Both MACD and Stochastic are bullish and moving higher although both are still weak. It looks like we got the test of support I mentioned last week and if so could lead this index back to recent all-time highs. For now upside target is near 17,250 which could be reached in anticipation of the fast approaching earnings season.

The next biggest gain was in the Dow Jones Transportation Average. The transports added close to 2.5% in today's session and created one of the longest candles in over a month. Today's action extends the bounce begun last week and carries the index above the short term moving average. The indicators are mixed but generally bullish as the index advances with upside target near 8,250. MACD is bullish, and rising, and leading stochastic higher; stochastic is rolling over into a stronger bullish signal after making a weak bullish crossover. Although indicated higher, in line with longer term economic and earnings outlook, the move remains weak with significant resistance ahead.

The S&P 500 made the third largest gain in today's session, about 1.75%. Today's move was capped by resistance at 1,990, coincident with the convergence of my resistance line and the bottom of my up trend line, always an interesting occurrence. The move was strong and accompanied by mildly bullish indicators so could break through. I say mildly because while MACD is rising, stochastic has not yet fully rolled over into its bullish signal. A break above the trend line, or at least the resistance level as time wears on, would be bullish and help to confirm further upside. Such a break could lead to a retest of the most recent all time highs. Support may be found along the short term moving average but looks more likely near 1,950 and 1,900.

The NASDAQ Composite was the laggard today and only gained about 1.55%. Regardless, the index made a strong move that carried it higher all day, closing near the high of the day. Today's candle crosses the short term moving average, after making a small gap to the upside, but was capped at resistance. The indicators are weak but rolling into a bullish signal so resistance could be tested at least, at break above this level would be bullish and could take the index up to 4,900 or 5,000. A failure to break above the current level could result in a retreat to support near 4,500.

The indices made a nice move higher and appear to be completing a double bottom type reversal following the August/September correction. Today's action carried them back out of correction territory and is supported by the indicators. The problem is, there is technical resistance ahead and still reason for caution in the market. Number one on the list is earnings; there is reason to believe the season will be better than expected but until then expectations are poor. Outlook beyond this reporting season is good and that I think will lead the market higher but I don't think we are there just yet.

After earnings there is a host of items to be wary of. US economic data has been a little weak the last month, the FOMC rate hike debate is still raging, China is still out there with a sluggish economy, the EU is still on shaky ground, global growth is in question and on and on. What was noticeably absent from today's trading, and from weekend news and news in general, were new headlines to be worried about and that allowed the bulls to move higher as much as anything that spurred them to rally.

The market is rising, and looks like it will continue to rise, but I am not yet ready to go full bull. I'm a cautious bull, to get more bullish I'd like to see the indices breach resistance levels first, I'd also like to see earnings come in better than expected, as expected. It would also be nice to see the pundits and analysts start talking more about Q4 earnings season but it may be a few weeks at least before that starts to happen. In the mean time I am watching resistance levels very closely.

Until then, remember the trend!

Thomas Hughes

New Plays

Investors Are Thirsty For More

by James Brown

Click here to email James Brown


Starbucks Corp. - SBUX - close: 59.04 change: +0.96

Stop Loss: 54.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 05, 2015
Time Frame: Exit
Average Daily Volume = 8.5 million
New Positions: Yes, see below

Company Description

Trade Description:
SBUX has delivered a strong rebound off last week's lows. Once again the stock looks like a bullish candidate.

We recently traded SBUX as a bullish candidate. What follows is an updated play description:

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.

Technical Set Up

Traders bought the dip in SBUX at its rising 100-dma last week. The rebound has lifted SBUX to major resistance in the $59.00-59.30 area. A breakout here would mark new all-time highs. Tonight we are suggesting a trigger to launch bullish positions at $59.55. It is possible that the $60.00 level is round-number resistance so more conservative traders may want to wait for SBUX to close above $60.00 before initiating bullish positions.

We plan to exit prior to SBUX's earnings report in very late October. More aggressive investors might want to consider holding over the announcement.

Trigger @ $59.55

- Suggested Positions -

Buy SBUX stock @ $59.55

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

Buy the NOV $60 CALL (SBUX151120C60) current ask $1.74
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

Energy Leads The Way As Stocks Rally

by James Brown

Click here to email James Brown

Editor's Note:
Another bounce in crude oil fueled widespread gains among energy stocks. The U.S. market delivered a strong session on Monday with all the major indices posting gains.

JBLU has been removed.

Bearish plays stopped out: BDC, BRS, IP, SNI.

Current Portfolio:

BULLISH Play Updates

Ingram Micro Inc. - IM - close: 28.13 change: +0.76

Stop Loss: 25.75
Target(s): To Be Determined
Current Gain/Loss: +1.0%
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

10/05/15: It looks like our patience with IM might pay off. Shares displayed significant relative strength today with a +2.7% surge. IM also broke out past resistance near the $28.00 level.

I would be tempted to launch new bullish positions here but IM actually looks a little short-term overbought with the rally from its recent lows below $26.00.

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

Mobileye N.V. - MBLY - close: 49.00 change: -0.43

Stop Loss: None. No stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -1.5%
Entry on October 05 at $49.75
Listed on October 03, 2015
Time Frame: Exit prior to earnings in mid November
Average Daily Volume = 4.6 million
New Positions: see below

10/05/15: Our new trade on MBLY is open but I worried about today's performance. Shares tagged a new three-week high and hit our suggested entry point at $49.75. However, the stock failed to breakout past round-number resistance at $50.00. Plus MBLY underperformed the broader market with a -0.8% decline by the close. At this point I would wait for MBLY to trade above the $50.00 mark before considering new bullish positions.

Trade Description: October 3, 2015:
The future of hands free driving is a lot closer than you might think. MBLY is leading the charge. Their technology is already in more than three million cars made by companies like BMW, General Motors, and Tesla.

What exactly does this technology do? DAS stands for driver assistance systems. Sometimes you might see it called ADAS for advanced driver assistance systems. This new technology helps drivers avoid collisions with other vehicles, pedestrians, bicyclists, and more while also alerting the driver to road signs and traffic lights.

The company website describes Mobileye as "a technological leader in the area of software algorithms, system-on-chips and customer applications that are based on processing visual information for the market of driver assistance systems (DAS). Mobileye's technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving."

MBLY said their technology will be available in 160 car models from 18 car manufacturers (OEMs). Further, Mobileye's technology has been selected for implementation in serial production of 237 car models from 20 OEMs by 2016.

The company is already developing a system for autonomous driving or hands free driving. They currently plan to launch an autonomous system in 2016 that will work at highway speeds and in congested traffic situations.

MBLY stock came to market in August 2014. Demand was strong enough that they upped the number of shares available from around 27 million to 35.6 million shares. They raised the IPO price from the $22 range to $25. This valued MBLY at $5.3 billion. The first day of trading saw MBLY opened at $36.00. Two months later MBLY traded at $60.00.

It's easy to see why investors are optimistic on MBLY. Annual revenues have soared from $19.2 million in 2011 to $143.6 million in 2014. Their revenues last year rose +77% from 2013. Currently a poll of analysts by Thomson Reuters is forecasting sales to rise +50% in 2015 to $218.3 million. Earnings are forecasted to surge +95%.

MBLY's Q1 report was announced in May. Their Q1 earnings were $0.08 per share, which was a penny above estimates. Revenues were up +28% to $45.6 million, also above estimates.

Q2 results, announced August 6th, were better. Earnings were $0.10 a share, which was two cents better than expected. Revenues were up +56.7% to $52.8 million, above expectations.

Last year the New York Post ran an article discussing how the White House might generate a bullish tailwind for MBLY. The National Highway Traffic Safety Administration issued a research report that estimated ADAS type of technology could eliminate almost 600,000 left-turn and intersection crashes a year. They report also suggested that adding FCAM and lane departure technology on big vehicles like over the road trucks could reduce accidents with these huge vehicles by up to 25%. Following this report the White House said they would draft new rules that required this sort of tech in new vehicles.

A couple of weeks ago the U.S. Department of Transportation and IIHS announced that ten auto manufacturers had agreed to add autonomous emergency breaking to all new U.S. models as a standard feature. This should be a huge bonus for MBLY. The basic autonomous breaking system ranges from $120 to $350 per vehicle (FYI: the U.S. auto market is on pace to sell more than 18 million vehicles this year). MBLY has a history of winning 80 to 90 percent of ADAS contracts so this new push by the government and the auto industry's acceptance could mean billions to MBLY's bottom line going forward.

Naturally, with a high-profile, high-growth stock like MBLY there are critics. Bears point out that MBLY's valuations are sky high and they would be right. MBLY's trailing P/E is over 1,000 while it's forward P/E is about 65. Most of Wall Street seems bullish on MBLY as they can see the long-term growth outlook for MBLY. If this rally continues some of those shorts could panic and fuel a short squeeze. The most recent data listed short interest at 18% of the 163 million share float.

The stock looks ready to sprint higher after a healthy bounce off support. Tonight we are suggesting a trigger to launch bullish positions at $49.75. If triggered I would target a run into the $58-62 region. I am suggesting small positions as this is an aggressive, higher-risk trade. MBLY is a volatile stock. You may want to use the call options to limit your risk. More conservative traders may want to wait for MBLY to rally past $50.00 before initiating positions. Normally the $50.00 level would be round-number, psychological resistance. We're suggesting a trigger just below it since MBLY could move fast once it breaks out. It's worth noting that a rally past $50.00 will generate a new buy signal on the point & figure chart.

*small positions to limit risk* - Suggested Positions -

Long MBLY stock @ $49.75

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

Long NOV $55 CALL (MBLY151120C55) entry $2.30

10/05/15 triggered @ $49.75
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

GNC Holdings - GNC - close: 41.51 change: +0.75

Stop Loss: 42.25
Target(s): To Be Determined
Current Gain/Loss: -4.4%
Entry on September 30 at $39.75
Listed on September 29, 2015
Time Frame: Exit prior to earnings at the end of October
Average Daily Volume = 1.2 million
New Positions: see below

10/05/15: A rising tide lifts all boats and GNC continued to bounce today. Shares added +1.8% and closed above short-term technical resistance at the 10-dma. The $42.00 mark remains overhead resistance.

No new positions at this time.

Trade Description: September 29, 2015:
Tougher competition, increased government scrutiny, and changing consumer habits have not been a good recipe for shares of GNC. The stock is down -14.6% in 2015 and poised to hit new lows.

GNC is in the services sector. According to the company, "GNC Holdings, Inc. - headquartered in Pittsburgh, PA - is a leading global specialty health, wellness and performance retailer. The Company's foundation is built on 80 years of superior product quality and innovation. GNC connects customers to their best by offering a premium assortment of vitamins, minerals, herbal supplements, diet, sports nutrition and protein products. This assortment features proprietary GNC - including Mega Men®, Ultra Mega®, Total Lean®, Pro Performance®, Pro Performance® AMP, Beyond Raw®, GNC Puredge®, GNC GenetixHD®, Herbal Plus® - and nationally recognized third party brands.

GNC's diversified, multi-channel business model generates revenue from product sales through company-owned retail stores, domestic and international franchise activities, third party contract manufacturing, e-commerce and corporate partnerships. As of June 30, 2015, GNC had more than 9,000 locations, of which more than 6,700 retail locations are in the United States (including 1,067 franchise and 2,304 Rite Aid franchise store-within-a-store locations) and franchise operations in more than 50 countries."

GNC faces multiple issues. This year there have been negative headlines for the supplement industry. Testing showed that multiple supplements at various retailers were filled with bogus ingredients. Companies like Wal-mart, Target, Walgreens, and GNC have all come under fire for selling the fraudulent products. This will likely increase government scrutiny for supplements in general.

GNC also faces an issue with changing consumer habits. While most of Americans are overweight and out of shape there is a growing trend of healthier eating. Consumers want to know what they are putting in their bodies. That means less pills and more raw fruits and veggies, especially organic ones.

The biggest challenge could be tough competition. Online rivals can provide supplements at cheaper prices than GNC's retail stores. Best Buy (BBY), the consumer electronics store, has faced this issue for years with consumers coming into a Best Buy store, shopping around, and then going home and buying the product online from Amazon.com for less money and getting it delivered. GNC faces the same issue.

GNC's earnings have struggled. Their Q1 report, announced April 30th, missed estimates. GNC missed on both the bottom line profit estimates and the revenue estimate. Revenues were down -0.6% and same-store sales plunged -4.1%. Management lowered their 2015 guidance following this report.

GNC's Q2 results were not much better. They missed on both the top and bottom line again. Earnings only grew +2.6% from a year ago. Revenues were virtually flat with a +0.5% gain. Same-store sales fell -2.8%.

The stock rallied anyway because management said they would focus on more franchised stores. This news seemed to have sparked some short covering. Shares of GNC soared from $42 to $50 in just a few days but the rally reversed. Now the stock is trading at new 2015 lows. The company's announcement on August 4th to boost their stock buyback program by an additional $500 million did not help the stock very much.

GNC is in a bear market and poised to break major support at the $40.00 level. The point & figure chart is bearish and forecasting at $33.00 target. Tonight I am suggesting a trigger to launch bearish positions at $39.75.

- Suggested Positions -

Short GNC stock @ $39.75

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

Long NOV $37.50 PUT (GNC151120P37.5) entry $1.60

09/30/15 triggered @ $39.75
Option Format: symbol-year-month-day-call-strike

Synchronoss Technologies - SNCR - close: 33.47 change: +0.88

Stop Loss: 35.75
Target(s): To Be Determined
Current Gain/Loss: -3.3%
Entry on October 01 at $32.40
Listed on September 30, 2015
Time Frame: Exit PRIOR to earnings in late October
Average Daily Volume = 603 thousand
New Positions: see below

10/05/15: Earlier today SNCR announced it had won a three-year, $80 million deal with Mobifone. This news may have given SNCR's stock a boost. Shares outperformed the market with a +2.7% gain.

More conservative traders may want to tighten their stop loss. I am not suggesting new positions at this time.

Trade Description: September 30, 2015:
SNCR is a technology company with strong revenue growth and yet investors have been selling the stock anyway.

SNCR is considered part of the application software industry. According to the company, "Synchronoss Technologies, Inc., is the mobile innovation leader that provides cloud solutions and software-based activation for connected devices across the globe. The company's proven and scalable technology solutions allow customers to connect, synchronize and activate connected devices and services that empower enterprises and consumers to live in a connected world."

SNCR has been consistently beating Wall Street's earnings expectations. The last three quarters in a row SNCR has delivered bottom line and top line growth above expectations. 2014's Q4 revenues were up +34.7%. 2015 Q1 sales rose +34.9% and Q2 sales rose +33.2%. Yet with strong results like these the stock is down -21.6% year to date and down -36% from its 2015 high.

Technically SNCR had been churning sideways in a wide consolidation pattern for months. It broke down from this consolidation in August when the broader market corrected lower. When the market produced a big bounce off its August lows SNCR did not participate.

Several days ago shares of SNCR collapsed on worries that they might lose their cloud-storage contract with Verizon (VZ). Several analysts defended SNCR and said the drop was a buying opportunity. Both SNCR and VZ said their contract has not changed and was good until 2018. Yet the oversold bounce from this story only lasted one day. Traders have been selling SNCR on every rally.

There is a risk that SNCR is a takeover target. Back in June and July there were rumors that SNCR was exploring a sale of the company. There were also stories that private equity might be interested in taking SNCR private. Yet this acquisition risk has not generated any new buying interest in the stock. Investors are bearish and the most recent data listed short interest at 17.7% of the 38.0 million share float. That's enough to raise the risk of a short squeeze.

Tonight I am suggesting small bearish positions if SNCR trades at $32.40 or lower. We want to use small positions to limit our risk. Investors might want to stick to put options to really limit risk.

- Suggested Positions - small positions to limit risk.

Short SNCR stock @ $32.40

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

Long NOV $30 PUT (SNCR151120P30) entry $1.90

10/01/15 triggered @ $32.40
Option Format: symbol-year-month-day-call-strike

iPath S&P500 VIX Futures ETN - VXX - close: 22.64 change: -1.39

Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Gain/Loss: -3.8%
2nd position Gain/Loss: +22.0%
Entry on August 25 at $21.82
2nd position: September 2nd at $29.01
Listed on August 24, 2015
Time Frame: Exit prior to October option expiration
Average Daily Volume = 50 million
New Positions: see below

10/05/15: Another rally for the stock market pushed the VXX down to new two-week lows.

We have less than two 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


JetBlue Airways - JBLU - close: 26.49 change: +0.27

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: see below

10/05/15: It looks like JBLU is not going to cooperate with our buy-the-dip strategy.

I would be tempted to launch bullish positions on a breakout to new highs past $27.35. However, we are choosing to remove JBLU as a candidate. The stock has been underperforming the major indices the last couple of sessions.

Trade did not open.

10/05/15 removed from the newsletter, suggested entry was $24.05



Belden Inc. - BDC - close: 49.28 change: +2.30

Stop Loss: 48.51
Target(s): To Be Determined
Current Gain/Loss: -8.2%
Entry on October 02 at $44.85
Listed on October 01, 2015
Time Frame: Exit prior to earnings (late October or early November)
Average Daily Volume = 394 thousand
New Positions: see below

10/05/15: The stock market's widespread rally continued on Monday. Shares of BDC soared +4.89% on what looks like short covering. Today's move higher technically confirms Friday's bullish reversal pattern. BDC hit our stop loss at $48.51.

- Suggested Positions -

Short BDC stock @ $44.85 exit $48.51 (-8.2%)

10/05/15 stopped @ 48.51
10/02/15 triggered @ $44.85
Option Format: symbol-year-month-day-call-strike


Bristow Group, Inc. - BRS - close: 29.87 change: +1.60

Stop Loss: 28.75
Target(s): To Be Determined
Current Gain/Loss: -3.8%
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

10/05/15: Another rally in crude oil today helped fuel big gains in the oil and energy-related stocks. BRS surged +5.6% and challenged round-number resistance at $30.00. Our stop loss was hit at $28.75.

*small positions to limit risk* - Suggested Positions -

Short BRS stock @ $27.70 exit $28.75 (-3.8%)

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

DEC $25 PUT (BRS151218P25) entry $2.10 exit $1.10 (-47.6%)

10/05/15 stopped out
10/02/15 huge reversal higher!
09/28/15 new stop @ $28.75
09/25/15 triggered @ $27.70
Option Format: symbol-year-month-day-call-strike


Intl. Paper Company - IP - close: 39.75 change: +0.83

Stop Loss: 39.65
Target(s): To Be Determined
Current Gain/Loss: + 0.5%
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

10/05/15: The rebound in IP continued on Monday and shares outperformed the major indices with a +2.1% gain. Our stop loss was hit at $39.65.

- Suggested Positions -

Short IP stock @ $39.85 exit $39.65 (+0.5%)

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

2016 Jan $40 PUT (IP160115P40) entry $3.00 exit $2.58 (-14.0%)

10/05/15 stopped out
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


Scripps Networks Interative - SNI - close: 51.30 change: +1.50

Stop Loss: 50.55
Target(s): To Be Determined
Current Gain/Loss: -3.8%
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

10/05/15: Goldman Sachs downgraded SNI to a "sell" today but that didn't stop the oversold bounce. The market's widespread rally helped SNI push through resistance at $50.00 and shares hit our stop loss at $50.55.

- Suggested Positions -

Short SNI stock @ $48.70 exit $50.55 (-3.8%)

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

NOV $45 PUT (SNI151120P45) entry $0.95 exit $0.45 (-52.6%)

10/05/15 stopped out
09/28/15 new stop @ $50.55
09/28/15 triggered @ $48.70
Option Format: symbol-year-month-day-call-strike