Option Investor

Daily Newsletter, Saturday, 12/5/2015

Table of Contents

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

Market Wrap

Rocky Week!

by Jim Brown

Click here to email Jim Brown

Volatility definitely returned with a vengeance over the last week. Just looking at the summary graphic below you would think the week was tame with the Dow up +49 and the Nasdaq +14. Obviously, that was not the case.

Market Statistics

Friday Statistics

In order for the Dow to close up +49 for the week it had to come back +418 points from the 17,425 low on Thursday. That low was -476 points off of Wednesday's high at 17,901. We say all the time to ignore moves on low volume but the last three days have averaged 7.61 billion shares. Anything close to 8 billion is a heavy volume day.

The Dow rose +56 on Monday, +168 on Tuesday, dropped -159 on Wednesday and -252 on Thursday only to rebound +370 on Friday.

Multiple headlines got the blame for the Thursday decline with Mario Draghi the lead event. When the ECB announced their stimulus decision, it fell short of what analysts and the market expected. The market immediately accelerated to the downside and stops were hit as panic took hold.

It was not that the ECB did not take action. They cut the deposit rate another 10 basis points to -30 basis points. They extended their 60 billion euro per month QE for another six months until March 2017. They also expanded the types of securities available for the program to include state and local bonds.

The markets quickly decided those changes did not live up to the "whatever it takes" claims by Draghi and the rest as they say is history. The dollar crashed and the euro soared.

Fast forward to Friday and the situation reversed. Draghi spoke at the Economic Club and said again there was "no limit on using ECB tools...quickly and without delay" if needed. He said "the ECB had the power to act, the determination to act and the commitment to act." The market exploded higher on his comments.

A moderator at the Economic Club asked him in an interview if the comments in his speech today were meant to offset the negative impact of the comments on Thursday. Draghi replied, "not really, (slight pause) well of course." That produced a good laugh all around and the market moved even higher.

Helping to create a positive atmosphere in the market was the Nonfarm Payrolls. The headline number was a gain of +211,000 jobs. The September and October revisions added +35,000 to push the October payroll gain to +298,000 and the highest since last December.

The unemployment rate remained the same at 5.0%. The labor force rose +273,000 as more people decided to look for jobs. Goods producing companies added +34,000 and companies providing services added +177,000 jobs. Private companies accounted for 197,000 of the new jobs.

Leisure and hospitality added +39,000, healthcare +32,000, retail +31,000, professional and business +27,000 and temporary help declined by -12,000. That decline in temporary was strange given the number of temporary workers employed for the holidays.

Construction added +46,000 thanks to the warmest October on record and its extension into early and mid November. Mining/Energy lost another -11,000 as crude prices fell and commodity prices drop below the cost to produce them.

The negative points were a slower gain in hourly earnings at +0.2% compared to +0.4% in October. Also, the number of people forced to take a part time job because full time employment was unavailable rose from 5.78 million to 6.09 million. The broader U6 unemployment rate rose +0.1% to 9.9%.

Unemployment by category, for men 5%, women 4.7%, teenagers 15.7%, white 4.3%, black or African American 9.4%, Asian 3.9% and Hispanic 6.4%.

The three-month moving average rose to 218,000 and well into the range the Fed is looking for as confirmation of an improving labor market. Yellen said last week that a print of only 100,000 jobs would be enough to maintain the long-term average and allow them to hike rates in December.

The December rate hike is now locked in according to most analysts. The payroll report was sufficiently strong enough to offset declining economics elsewhere and the paltry 1.5% Q4 GDP growth as predicted by the Atlanta Fed. That was up slightly after the stronger than expected Factory Orders on Thursday but declined again on the weak international trade numbers on Friday.

If the Fed does hike rates in December, it will be the first time they hiked with manufacturing in a recession since 1981. The ISM Manufacturing on Tuesday dropped to a post recession low of 48.6 and into contraction. The ISM Services declined -3 points on Thursday to 55.9 and only 2 tenths of a point away from an 18-month low. I do not understand how the Fed can hike rates if they are truly data dependent but analysts are already talking about the next hike and whether it will be March or July 2016.

The calendar for next week is lackluster until the PPI and Retail Sales on Friday. Expectations for producer prices are for a decline of -0.2% after a -0.4% drop in October. There are no signs of any inflation on the horizon. The retail sales are expected to have risen +0.3% in November but after the complaints about the Black Friday weekend I would not be surprised to see that estimate missed.

There were no new split announcements last week.

For the full split calendar click here.

Despite the big market rebound there was very little stock news. The main headlines were Draghi, the Fed meeting and the California terror attack.

Ambarella (AMBA) had a volatile day after announcing decent earnings Thursday night. Unfortunately, the guidance was weak and that weighed on the stock. Shares declined to $53.75 at the open before rebounding to $61.16 at 10:AM. They fell back to $55.50 before rebounding back over $58 and then closing under $57. Traders appeared to be confused as to direction.

Deutsche Bank said Q4 guidance was even weaker than expected. Analysts were expecting weaker numbers because of slow sales at GoPro. The bank lowered its target from $70 to $60. Pacific Crest called the weak guidance a "toe stubbing for sure" but maintained a $77 price target and expectations for 15-20% growth in 2016. That is a far cry from the $125 we saw in July.

Shares of GoPro hit a new post IPO low at $18 after R.W. Baird cut its rating from outperform to neutral with an $18 price target. Piper Jaffray reiterated an underweight rating with a price target of $15.

Ambarella's guidance was in part due to rising inventories of unsold chips. This is directly related to sagging GoPro sales. They recently cut the price on their latest Session camera for the second time in five-months. GoPro has been talking a good game for Q4 but it remains to be seen if the sales will actually happen. Earnings estimates for Q4 and 2016 have been cut twice.

Chipotle Mexican Grill (CMG) warned on Friday that sales and earnings would be down sharply as a result of the E.Coli outbreak. The CDC reported early Friday that the same E.Coli strain had infected people in three additional states. The company said earnings for Q4 would be in the range of $2.45-$2.85 per share and well below the $4.09 expected by analysts. Chipotle expects sales to decline 8-11%. They said sales declined -16% in November after being down -22% in the middle of the month when the CDC reported the outbreak had spread.

The current theory is that the infection is coming from tainted celery since that has also impacted Costco, Target and several other firms. Chipotle announced another $300 million stock buyback in an effort to halt the decline in its shares. Chipotle shares closed the regular session at $560 but fell to $518 after the company warned.

Move over UPS, Amazon is coming. The online retailer announced on Friday it was going to put thousands of Amazon branded trucks on the road in a move to increase shipping capacity and shorten delivery times. Amazon currently uses UPS and FedEx to move their packages and they ship millions of packages a day. That means those shippers have to load, sort, ship, etc those millions of packages from Amazon fulfillment centers.

Amazon is not going to use these trucks to deliver to your door. They will be used to transport merchandise from and to their warehouses and to the various fulfillment centers and shipping companies. Instead of asking UPS to handle all the pickup and sorting you can expect to see Amazon trucks delivering presorted packages to various shippers like UPS and FedEx. This will further reduce their freight costs and lighten the load for the shippers that actually deliver to your door.

Amazon is currently leasing a prior DHL facility in Wilmington Ohio and is flying four Boeing 767 freighters a day to airports in California, Florida and Pennsylvania. The project is code-named Aerosmith and is done in partnership with Air Transport Services Group (ATSG).

Amazon has also patented what it calls "Anticipatory Shipping." Using this process Amazon can start shipping a package to you before you even order it. The program tracks what you and others around you normally buy, what is in your shopping cart and even how long you view certain product pages. By accumulating all those potential orders for one geographic location, Amazon can ship a truckload of those products to the closest shipping point to that location. When the order is actually placed, they slap a label on the box and hand it to a waiting UPS truck. Today those orders are shipped one at a time out of one of the main fulfillment centers. That means they are picked up by UPS and transferred from truck to truck as they cross the country in the UPS system until they get to your area. By prepositioning Amazon trucks with products at UPS hubs in every region they will eliminate that long travel time. This will greatly expand their next day delivery options.

Last year Amazon spent $8.7 billion on shipping. That equates to 9.8% of sales. Amazon ships about 5 million packages on an average day. On Cyber Monday alone they sold more than 40 million items giving you an idea on how many packages they ship in December. Slice Intelligence said Amazon captured 36.1% of all Cyber Monday sales with Best buy second at 5.5% and Walmart 3.8% to round out the top 3.

Ultra Salon (ULTA) jumped +13% after reporting earnings. Revenue rose +22% to $911 million and $31 million over estimates. Earnings of $1.11 beat estimates for $1.05. The company provided in line guidance for Q4 but raised guidance for the full year. Same store sales are expected to rise +10-11%, up from 8-10% in the prior estimate. E-commerce sales are expected to rise +40%. That compares to +56% in Q3. EPS growth is expected to rise in the low 20s percentage range.

Relypsa (RLYP) spiked +7% on rumors Merck (MRK) was planning on making an offer to acquire the company. The initial rumor was later redefined as Relypsa putting itself up for sale in an auction including GlaxoSmithKkine, Galencia, Merck and others. The company just received its first drug approval from the FDA and they need deeper pockets to continue development of other drugs.

Pep Boys and the old guy. Auto parts chain Pep Boys (PBY) now have a new partner. Carl Icahn revealed on Friday he had taken a 12.1% stake in the retailer. Icahn's filing said he was involved in active discussions with the company regarding their strategic alternatives. The company had previously tried to sell itself in the past with no bidders in 2006 and a LBO failed in 2012. Last June, Chairman Bob Hotz, bragged about his progress in growing same store sales, increasing gross margins, shrinking inventories and unlocking the value of their real estate. Icahn bought an auto parts supplier now called Auto Plus in June for $340 million. In a Bloomberg article, Icahn is reportedly trying to get Pep Boys to sell itself to Auto Plus.

The catch in Icahn's plan is that Pep Boys agreed to sell the retail chain to a unit of Bridgestone Corp for $835 million in October. The Bridgestone tender offer is set to expire on January 4th. The tender offer was for $15 in cash and a 23% premium over the stock price at the time. Shares closed at $15.69 on Friday with a 3% gain.

McDonalds (MCD) shares spiked to a new high after the company said there were $38.7 billion in bids for its offering of $6 billion in bonds. The five tranches of bonds from 3-years to 30-years went off at a few basis points over the equivalent treasury yields. For instance, the 10-year commanded a 155 bp premium at 3.7% while the 30-year garnered a 195 bp premium at 4.875%. The company is raising cash to give investors a $10 billion cash payment in 2016. This was announced on November 10th. McDonalds could have easily floated the entire $10 billion but it would have required a larger interest rate and they wanted to keep the price low.

OPEC held their regular production meeting on Friday. After much discussion, they did nothing as was expected. They left the production quota at 30.0 million barrels per day even though they are currently producing over 31.5 mbpd. By this time next year that could rise to 32.5 mbpd if Iran, Iraq and Libya increase production as expected. Some analysts thought they would raise the quota to match their production but they could not even agree on that. OPEC as a cartel is dead until they decide to manage production in order to manage prices. The next meeting is June 2nd. Most analysts believe Saudi Arabia will continue to flood the market with oil until at least the end of 2016.

Crude prices fell to close at $40 and traded briefly under $40 several times last week. Now that the threat of an OPEC production cut is over, we could see a continued decline.

OPEC members cannot afford to cut production. Because they have driven the price so low they need to produce every barrel possible to make up for some of the lost revenue. They are hoping the low prices will not only drive high cost producers out of business but also increase the pace of demand growth because of low gasoline prices. We have already seen that here in the U.S. with truck and SUV sales in November surging ahead of car sales because of low gas prices.

Crude inventories rose +1.2 million barrels to 489.4 million and only 1.5 million below an 80 year high. However, refinery utilization rose sharply to 94.5% from 92.0% the prior week. This is up from 86.0% the first week of October when the fall maintenance was underway. With refining demand so high it could slow the inventory buildup but there is still a flotilla of ships outside Houston waiting to unload.

Lipow Oil Associates said on Friday that 36 energy companies have filed bankruptcy so far in 2015. Sixteen were in Texas, 4 in Colorado, 4 in Delaware and 6 in Canada. They expect more in the months ahead because cash flows have been cut by more than half and drilling activity is still crashing.

The U.S. rig count declined -7 to 737 with oil rigs declining -10 to 545 and another decade low with gas rigs rising +3 from an 18-year low to 192. The surprising drop came in the offshore rigs with a decline of -5 to 25 and more than 60% off their highs.


The S&P dipped to a three-week low at 2,042 on Thursday causing numerous stop losses to be triggered. The rebound on Friday was frustrating to those who were stopped out because stocks in some cases rebounded back to the highs from earlier in the week.

Despite the +2% rebound on the S&P there is still the problem of another lower high on the 2nd. The S&P touched resistance at 2,104 and rolled over into that two day crash.

The rebound should have everyone guessing about what is going to happen when it returns to that 2100-2105 level. Will it fail again or will the seasonal trend take control and break through that level? The stronger resistance at 2,116 and 2,128 is still in front of us.

I am worried over the lack of market strength. Friday was mostly short covering after payrolls and Mario Draghi's comments. What will drive the market higher next week? If we do fail at resistance again I seriously doubt there will be a corresponding rebound from any major decline.

The Dow was on a roll on Friday with all the heavyweight stocks powering higher. Note in the graphic below that IBM was the only triple digit stock not in the list of leaders. In a price weighted index the higher the stock price the larger the impact on the index. The two stocks with the heaviest weightings were the top two gainers.

This was purely short covering. Goldman dropped -$10 to a five-week low over the prior two days and rebounded nearly $5. That was short covering on expectations for the Fed to hike rates. The rebound stalled at $190 at 1:PM and went sideways the rest of the day.

Like the S&P the Dow bounced off strong resistance on Wednesday and fell sharply. The rebound took it right back almost to that same resistance making Monday a critical test for the Dow.

The Nasdaq support and resistance was nearly picture perfect. Wednesday's opening high broke through resistance momentarily at 5,160 before falling to 5,011 and only 3 points from solid support. The +104 point rebound on Friday to 5,141 took it almost back to where the volatility started.

There were a lot of stocks with major gains as you can see in the winners list below. Apple is not in the list even though it did gain nearly $4 but not enough to make the top 25.

The key for this week will again be that 5,160 resistance. A breakthrough there should continue higher to a new historic high at least on an intraday basis.

The Nasdaq 100 ($NDX) did make a new intraday high by 2 points at 4739.75 at the open on Wednesday. After the -160 point drop from the high to 4,579 the rebound nearly returned to that new high level. The big cap techs quickly recovered their upward momentum after Thursday's crash. The 4,737 level is still the key for this week. A close over that level would be a new high close.

The Russell 2000 led the prior week, along with the Nasdaq big caps but it was crushed in the Thursday meltdown. The Russell recovered the least of the major indexes with only a +1% gain on Friday compared to 2% or more on the other indexes. Support at 1,165 held but now we have to fight the resistance battles at 1,194 and 1,200 all over again. In theory, the next two weeks are the strongest for the Russell. Let's hope the theory proves to be accurate.

I said last week "This will definitely be a week where we need to trade what the market gives us rather than what we want to see." The market provided some uncharacteristic volatility in a week that is normally bullish. However, other than being stopped out of half my positions, the market is poised to retest those resistance highs and the seasonal trend is for a bullish week ahead. It is the week after that is normally rocky.

I am sure everyone is aware that the seasonal trends are just about as accurate as the weather forecast. Over the very long term, they will prove accurate but any given year can produce a significant exception. I said earlier I was worried about the implied market strength. Until the Dow and S&P can break through that downtrend resistance, we are at risk. This will be another week where we need to trade what we see and not what we want to see.

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Random Thoughts

There is a contingent of analysts that believe Draghi's underwhelming list of new ECB stimulus moves on Thursday was purposeful. Draghi needed to under deliver and disappoint the markets to lift the euro, crash the dollar and give the Federal Reserve room to hike rates. If the ECB had come out with some major program, the euro would have crashed and the dollar exploded to new highs. If the Fed hikes rates on the 16th the dollar would have broken out to even higher highs and depressed the euro.

When Draghi under delivered he reset the dollar/euro ratio so a Fed rate hike will not be so devastating to the euro. The reset on the currencies was so strong that his speech on Friday barely had any impact.

On Wednesday Citi cut its weighting for equities in 2016 to neutral. They cited the sharp drop in corporate profits in recent months.

Credit Suisse has long held that equities peak 12-18 months after a peak in margins. It has now been 15 months since the peak in margins.

Citi also said the probability of a recession in 2016 has risen to 65%. "If this were a typical policy cycle after a typical economic cycle, the Fed would have already raised rates 2-3 years ago. Instead, the US recovery is set to enter its seventh year while the European recovery is still embryonic. So in addition to China sneezing, FI markets need to price the longevity of the cycle."

Following Citi by a day JP Morgan warned of a 76% probability of a recession. JPMorgan's Michael Feroli warns that in the past, a low unemployment rate, rising compensation, falling margins, and elevated durables investment have historically signaled an elevated risk that an expansion is nearing its end... and puts the probability of a US recession within 3 years at 76%.

Yellen was asked about Citi's 65% chance of a recession in her Wednesday testimony. She said she does not see the recession risk as "anything close" to 65% but she did not provide a number she thought was more appropriate. She reiterated that the Fed would not hike rates if the committee did not believe the U.S. would enjoy "at least some above-trend growth" that would result in an improved labor market.

Citi also said, "geopolitical risks likely pose the greatest potential to disrupt markets in terms of event risk." And, "There is also the potential for geopolitical risks to intersect with economic fragility in the event of a downturn, amplifying both."

On Wednesday, both Kansas City Southern (KSU) and CSX (CSX) warned that earnings were slowing. The KSU CFO warned Q4 revenue would decline in the "high single-digit" percentage range from year ago levels. The CSX CFO said rail traffic was slowing more than expected and EPS growth was now forecast to be 3%. As recently as October, the company had predicted "mid single digit" earnings growth.

With the Dow fighting overhead resistance and the Dow Transports moving lower, something has got to give. Whenever the two indexes diverge to this extent, the Dow normally loses the battle and follows the transports lower.


Enter passively and exit aggressively!

Jim Brown

Send Jim an email


"When people see a strong horse and a weak horse, they will naturally want to side with the strong horse. When people of the world look upon the confusion and atheism of the West, they see that Islam is the strong horse."

Osama bin Laden


America needs to be the strong horse!

New Plays

Semiconductor Strength

by James Brown

Click here to email James Brown

Editor's Note:

Additional Trading Ideas:

In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these may need to see a break past key support or resistance:

Bullish ideas: FSLR, IPG, FIX, DHI, MS, SIX,

Bearish ideas: TWTR, TGI, HAIN, CERN, DKS


Qorvo, Inc. - QRVO - close: 59.54 change: +1.45

Stop Loss: 55.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 05, 2015
Time Frame: Exit prior to earnings in late January
Average Daily Volume = 2.2 million
New Positions: Yes, see below

Company Description

Trade Description:
2015 has been a bumpy ride for QRVO investors. Fortunately the stock appears to have found a bottom over the last few months. Right now semiconductors are in rally mode. We could see QRVO break through key resistance soon.

QRVO is in the technology sector. According to the company, "Qorvo is a leading provider of core technologies and RF solutions for mobile, infrastructure and aerospace/defense applications. Qorvo was formed following the merger of RFMD and TriQuint, and has more than 7,000 global employees dedicated to delivering solutions for everything that connects the world. Qorvo has the industry's broadest portfolio of products and core technologies; world-class ISO9001-, ISO 14001- and ISO/TS 16949-certified manufacturing facilities; and is a DoD-accredited 'Trusted Source' (Category 1A) for GaAs, GaN and BAW products and services."

The company has beaten Wall Street's estimates on both the top and bottom line the last three quarters in a row. Their most recent report was November 5th. QRVO announced their Q3 results with earnings of $1.22 a share. That was 11 cents above estimates. Revenues were up +11.6% to $707 million, above the $699 million estimate. The quarter was driven by a +19% jump in their mobile products segment.

QRVO's President and CEO Bob Bruggeworth commented on the quarter, "The Qorvo team delivered a solid September quarter, with quarterly revenue increasing 12% year-over-year, led by strong 19% year-over-year growth in Mobile Products. Design activity during the quarter was particularly robust, as we secured multiple opportunities to expand content in the marquee smartphones launching in calendar 2016 and 2017 and positioned IDP to accelerate growth across its target markets." Steve Buhaly, chief financial officer, said, "In the nine months since Qorvo's formation, revenue has grown 25% from the same period in the prior year while non-GAAP operating income has nearly doubled. We're proud of this performance and are excited about our opportunities in the coming year."

QRVO management raised their Q4 EPS guidance above analysts' estimates but their revenue guidance was below Wall Street expectations. They also announced a one-year $1 billion stock buyback program, which suggest that management believes their stock is too cheap. Shares soared to multi-week highs the next day (Nov. 6th).

Previously there was some concern about Apple's iPhone sales and their impact on QRVO since QRVO is a major component supplier to Apple. Wall Street has been worried that Apple's iPhone sales would slow down, which helped pressure QRVO's stock lower. The company's generally optimistic guidance for Q4 helped soothe these fears. Investors should be aware that QRVO's stock could be sensitive to any news regarding AAPL's iPhone sales.

Technically QRVO's stock is in a new bull market with a rally from its lows near $42. The point & figure chart is bullish and forecasting at $67 target. At the moment QRVO is hovering just below round-number resistance at $60.00. Tonight we are suggesting a trigger to launch bullish positions at $60.25. I will point out that prior support from early 2015 in the $63.00 area is potential resistance but we are expecting a rally toward the $70 area.

Trigger @ $60.25

- Suggested Positions -

Buy QRVO stock @ $60.25

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

Buy the FEB $65 CALL (QRVO160219C65) current ask $3.30
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

Jobs & Draghi Drive Friday's Bounce

by James Brown

Click here to email James Brown

Editor's Note:
After an ugly two-day decline the U.S. market delivered a big bounce on Friday. Better than expected jobs numbers and dovish talk from ECB President Draghi helped fuel the big rebound.

ADSK, ATVI, and NTGR all hit our bullish entry triggers.

We want to exit our BBBY trade on Monday morning.

Current Portfolio:

BULLISH Play Updates

Autodesk, Inc. - ADSK - close: 65.29 change: +0.88

Stop Loss: 61.75
Target(s): To Be Determined
Current Gain/Loss: +0.1%
Entry on December 04 at $65.25
Listed on December 01, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 3.5 million
New Positions: Yes, see below

12/05/15: The combination of bullish analyst comments and the market's widespread rally on Friday helped lift ADSK above resistance at $65.00. Shares hit our suggested entry point at $65.25. I would consider new positions at current levels.

Trade Description: December 1, 2015:
It has been a bumpy ride for ADSK investors this year. The company is in the middle of a transition from selling perpetual software licenses to selling subscriptions. It's a move that mirrors larger rival Adobe Systems's (ADBE) transition to a subscription model.

If you're not familiar with ADSK they are in the technology sector. According to the company, "Autodesk, Inc., is a leader in 3D design, engineering and entertainment software. Since its introduction of AutoCAD software in 1982, Autodesk continues to develop the broadest portfolio of 3D software for global markets. Customers across the manufacturing, architecture, building, construction, and media and entertainment industries-including the last 19 Academy Award winners for Best Visual Effects-use Autodesk software to design, visualize, and simulate their ideas before they're ever built or created. From blockbuster visual effects and buildings that create their own energy, to electric cars and the batteries that power them, the work of our 3D software customers is everywhere you look."

Year to date the stock is up +7.7%. Yet ADSK is up +53% from its October 2015 low. What's driving the rally? It's certainly not revenue growth. The company tends to beat Wall Street's bottom line earnings estimates but revenues have been soft. The company has lowered their guidance multiple times this year.

Their most recent earnings report was November 19th. ADSK reported Q3 results of $0.14 a share. That beat expectations. Revenues fell -2.9% to $600 million. Management lowered their Q4 guidance. Yet they raised their 2016 outlook for the first time in several months. The improved 2016 outlook certainly helped. There was a brief sell-off in the stock (Nov. 20th) but ADSK quickly recovered.

One of the main reasons ADSK has performed so well lately is the market's hope that two major activists investors will do something to unlock more value. Eminence Capital owns a 5.8% stake in ADSK. Sachem Head Capital recently disclosed at 5.7% stake. The two activist funds have teamed up together (a combined stake of 11.5%). Expectations that these activists will drive change in ADSK has fueled a significant rally.

Today shares of ADSK have rallied toward major resistance at the $65.00 level. A breakout here would reaffirm that the bullish trend is still intact. The point & figure chart is bullish and forecasting a long-term target at $103. We want to hop on board if ADSK can break through the $65.00 level. Tonight we are suggesting a trigger to launch positions at $65.25. The stock can be somewhat volatile so I am suggesting small positions to limit risk.

*small positions to limit risk* - Suggested Positions -

Long ADSK stock @ $65.25

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

Long JAN $67.5 CALL (ADSK160115C67.5) entry $1.54

12/04/15 triggered @ $65.25
Option Format: symbol-year-month-day-call-strike


Activision Blizzard, Inc. - ATVI - close: 38.89 change: +1.27

Stop Loss: 36.40
Target(s): To Be Determined
Current Gain/Loss: +1.9%
Entry on December 04 at $38.15
Listed on December 03, 2015
Time Frame: Exit prior to ATVI earnings in early February
Average Daily Volume = 10.0 million
New Positions: Yes, see below

12/05/15: Bingo! Shares of ATVI bounced right on cue. Shares displayed relative strength on Friday with a +3.3% gain. Our trigger to launch bullish positions was hit at $38.15. The stock currently sits just below short-term resistance at $39.00.

Trade Description: December 3, 2015
The movie industry gets a lot of press but the video game market is much bigger. One of the biggest companies in this arena is ATVI and they're about to get a lot bigger.

ATVI is part of the technology sector. According to the company, "Activision Blizzard, Inc. is the largest and most profitable western interactive entertainment publishing company. It develops and publishes some of the most successful and beloved entertainment franchises in any medium, including Call of Duty, Call of Duty Online, Destiny, Skylanders, World of Warcraft, StarCraft®, Diablo®, and Hearthstone. Headquartered in Santa Monica, California, it maintains operations throughout the United States, Europe, and Asia. Activision Blizzard develops and publishes games on all leading interactive platforms and its games are available in most countries around the world."

Revenues for a video game company like ATVI tend to be lumpy based on new releases throughout the year. The company has managed to beat Wall Street's estimates on the bottom line the last four quarters in a row.

On November 2nd, 2015, ATVI announced they had signed a $5.9 billion deal to buy King Digital Entertainment (symbol: KING). This deal should give ATVI a huge boost in its mobile gaming footprint and could add a significant chunk to earnings in 2016. A Wedbush analyst believes the mobile gaming market is about $24 billion and growing at up to 20% a year for the next five years. They see the KING acquisition as a great fit for ATVI.

Several days later, on November 11th, ATVI announced that their new Call of Duty: Black Ops III game was the biggest entertainment launch of the year with a three-day opening weekend sales above $550 million. That surpassed any other entertainment launch of the year including books, music, or movies (surpassing the movie Jurassic World's massive opening weekend).

Recently a Cowen analyst said videogames are going to be another hot seller this year and they listed ATVI as their top pick in the industry. Multiple analysts have upgraded their stock price on ATVI following the KING acquisition news. Shares of ATVI have shown significant strength this year. The stock is trading at all-time highs and up +86% year to date. The point & figure chart is bullish and forecasting at $49.50 target.

Today's widespread market decline sparked some profit taking in ATVI. The stock found support at its rising 10-dma. If shares bounce from here we want to jump on board. Tonight we are suggesting a trigger to launch bullish positions at $38.15.

- Suggested Positions -

Long ATVI stock @ $38.15

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

Long FEB $40 CALL (ATVI160219C40) entry $1.47

12/04/15 triggered @ $38.15
Option Format: symbol-year-month-day-call-strike


FMC Corp. - FMC - close: 42.44 change: +0.52

Stop Loss: 40.85
Target(s): To Be Determined
Current Gain/Loss: -1.4%
Entry on November 25 at $43.05
Listed on November 18, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 1.6 million
New Positions: see below

12/05/15: FMC continued to bounce on Friday but shares underperformed the broader market. The S&P 500 index gained +2.0% while FMC only rose +1.24%. Investors may want to wait for a new relative high above $43.40 before considering new bullish positions. Tonight we are adjusting our stop loss to $40.85.

Trade Description: November 18, 2015:
Shares of FMC have been struggling for a couple of years. The stock peaked near $83.00 in early 2014. Since then FMC traded at a low near $32.60 in late September this year. FMC's performance over the last couple of months looks like the stock has bottomed.

FMC is in the basic materials sector. According to the company, "For more than a century, FMC Corporation has served the global agricultural, industrial and consumer markets with innovative solutions, applications and quality products. FMC acquired Cheminova in April of 2015. Pro forma revenue totaled approximately $4.5 billion in 2014. FMC employs approximately 6,600 people throughout the world and operates its businesses in three segments: FMC Agricultural Solutions, FMC Health and Nutrition and FMC Lithium."

The earnings picture has been disappointing over the last several months. The company reported its Q1 results on May 5th and missed on both the top and bottom line. Management lowered their guidance. FMC's Q2 results were not much better with the company missing analysts' estimates on both the top and bottom line again.

On October 12th FMC warned that Q3 earnings would take a hit due to currency weakness in Brazil. Here's an excerpt from the company's press release, "FMC Corporation (FMC) today announced that, due to the recent rapid devaluation of the Brazilian real, the company is reducing third-quarter and full-year outlook for its Agricultural Solutions segment... A rapid devaluation of the Brazilian real, which depreciated over 50 percent versus the U.S. dollar in the past 12 months, and over 25 percent versus the U.S. dollar during the third quarter alone, has created significant headwinds that will continue to impact Agricultural Solutions segment earnings in the second half of 2015."

Shares of FMC plunged on this news from $37.50 to $35.00 but investors bought the dip. Earnings came out on October 28th. After warning in mid October their final results were above expectations. Q3 earnings fell from 72 cents a year ago to 42 cents but that beat the 38-cent estimate. Revenues were up +1.4% to $830.7 million, which was also above estimates. FMC rallied on this report.

Investors bought the recent dip (last week) and since then FMC has been showing relative strength. The rally has produced a triple-top breakout buy signal on FMC's point & figure chart, which now projects a $57.00 target. The relative strength continued today with a +2.6% gain and a breakout past short-term resistance at $43.00 and its 100-dma.

It's starting to look like all the bad news has been priced in and investors are betting on a turnaround in the company. The stock's recent rallies have been fueled with strong volume, which is normally a good sign. Tonight we are suggesting a trigger to launch bullish positions at $43.55. (Note: FMC is up five days in a row. Patient investors may want to wait for a dip before initiating new positions instead of our trigger at $43.55).

- Suggested Positions -

Long FMC stock @ $43.05

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

Long JAN $45 CALL (FMC160115C45) entry $1.20

12/05/15 new stop @ 40.85
11/25/15 triggered @ $43.05
11/24/15 adjust entry trigger from $43.55 to $43.05
Option Format: symbol-year-month-day-call-strike


Microsoft Inc. - MSFT - close: 55.91 change: +1.71

Stop Loss: 53.20
Target(s): To Be Determined
Current Gain/Loss: +2.4%
Entry on November 04 at $54.60
Listed on November 03, 2015
Time Frame: 6 to 8 weeks.
Average Daily Volume = 35.4 million
New Positions: see below

12/05/15: MSFT displayed relative strength on Friday. Traders bought the dip and shares soared +3.15% to set a new multi-year closing high.

More conservative investors might want to raise their stop loss here. No new positions at this time.

Trade Description: November 3, 2015:
MSFT is more than just a software company. MSFT is in the technology sector. It is considered part of the business software industry. According to the company, "Microsoft is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more."

The company is run under three segments. They have their productivity and business processes segment. This includes commercial office software, personal office software, and more. One of their fastest growing segments is MSFT's Intelligent Cloud business, which includes their server software and enterprise services. Then they have their "More Personal Computing" segment. This includes their Windows operating software, MSN display advertising, Windows phones, smartphones, tablets, PC accessories, Internet search, and their Xbox platform.

The stock has been dead money for almost a year. MSFT peaked near round-number resistance at $50.00 back in November 2014. Shares channeled sideways between support at $40 and resistance at $50 for months. That changed last month.

MSFT reported its 2016 Q1 results on October 22nd. Analysts were expecting a profit of $0.59 a share on revenues of $21.04 billion. MSFT beat both estimates with a profit of $0.67 a share. Revenues came in at $21.66 billion. Their Intelligent Cloud segment saw sales rise +8% but it was actually +14% on a constant currency basis.

Shares of MSFT soared the next day with a surge to 15-year highs. The big rally is based on investors' belief that MSFT and its relatively new management is successfully transitioning away from declining PC sales and moving quickly towards the cloud (and mobile).

Normally I would hesitate to buy a stock like MSFT after a big gap higher. Too often stocks tend to fill the gap. However, shares of MSFT have been able to levitate sideways in the $52.50-54.50 zone as traders keep buying the dips. Odds are growing we could see MSFT rally toward its all-time highs near $60.00 a share from December 1999. The big gain in October produced a buy signal on the point & figure chart, which is now forecasting a long-term target of $82.00. Tonight we are suggesting a trigger to launch bullish positions at $54.60.

- Suggested Positions -

Long MSFT stock @ $54.60

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

Long 2016 JAN $55 CALL (MSFT160115C55) entry $1.54

12/01/15 new stop @ $53.20
11/04/15 triggered @ $54.60
Option Format: symbol-year-month-day-call-strike


Netgear Inc. - NTGR - close: 45.50 change: +0.88

Stop Loss: 43.25
Target(s): To Be Determined
Current Gain/Loss: -0.1%
Entry on December 04 at $45.55
Listed on December 02, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 468 thousand
New Positions: see below

12/05/15: NTGR erased Thursday's decline with a +1.9% gain on Friday. Shares also tagged a new high and hit our suggested entry point at $45.55. I would consider new positions at current levels.

Trade Description: December 2, 2015:
Shares of NTGR have delivered an impressive reversal in the last couple of months. Analysts believe the company is poised to carve out its niche of the Internet of Things (IoT). Meanwhile new products have helped NTGR's retail business soar.

NTGR is in the technology sector. According to the company, "NETGEAR is a global networking company that delivers innovative products to consumers, businesses and service providers. The Company's products are built on a variety of proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease-of-use. The product line consists of wired and wireless devices that enable networking, broadband access and network connectivity. These products are available in multiple configurations to address the needs of the end-users in each geographic region in which the Company's products are sold. NETGEAR products are sold in approximately 39,000 retail locations around the globe, and through approximately 31,000 value-added resellers. The company's headquarters are in San Jose, Calif., with additional offices in approximately 25 countries."

Shares of NTGR are up +57% from their 2015 lows near $28.50. Most of that was thanks to a +40% surge in the month of October. That was due to a strong Q3 earnings report.

Wall Street was expecting Q3 earnings of $0.51 a share on revenues of $322 million. NTGR beat estimates on both counts. Earnings were $0.67 a share. Revenues fell -3.2% but came in at $342 million. Their operating margin surged from 7.1% in Q2 to 10.3% in Q3.

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR, commented, "Our financial results for the third quarter of 2015 exceeded expectations, driven by strength in North America and a robust back-to-school season. Our revenue in Q3 was further augmented by higher than normal demand from our service provider customers. The Retail Business Unit had an all-time record quarter in sales, powered by our fast-growing Arlo and Nighthawk product lines. The success of both product lines continued to drive up average selling prices for NETGEAR retail products, and led to a healthy 24.9% year-over-year increase in revenue for the Retail Business Unit for Q3. We were also pleased with the sequential growth shown by the Commercial Business Unit, which was led by our switching products. With many new products in the pipeline, we see the momentum of our switching products rolling into the coming quarters. Meanwhile, we continued to closely manage the Service Provider Business Unit with a focus on profitability."

Wall Street analysts have been raising estimates since NTGR's Q3 report. The big move in the stock has generated a huge buy signal on the point & figure chart, which is now forecasting a long-term target at $77. The last few weeks have seen NTGR consolidate sideways under the $45.00 area. This is significant since $45.00 (actually $45.31) was the all-time high from July 2011. A breakout past resistance at $45.00 is in progress. Today's intraday high was $45.38. Tonight we are suggesting a trigger to launch bullish positions at $45.55.

- Suggested Positions -

Long NTGR stock @ $45.55

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

Long JAN $45 CALL (NTGR160115C45) entry $1.80

12/04/15 triggered @ $45.55
Option Format: symbol-year-month-day-call-strike


Paychex, Inc. - PAYX - close: 53.71 change: +1.06

Stop Loss: 52.45
Target(s): To Be Determined
Current Gain/Loss: +1.1%
Entry on November 11 at $53.15
Listed on November 09, 2015
Time Frame: Exit PRIOR to earnings on December 22nd
Average Daily Volume = 2.3 million
New Positions: see below

12/05/15: After a sharp decline on Thursday PAYX managed a +2.0% bounce on Friday (in-line with the broader market). Unfortunately the bounce was stuck inside Thursday's range and does not reaffirm the up trend yet. If PAYX fails near $54.00 it could signal a potential short-term top.

No new positions at this time.

Trade Description: November 9, 2015:
Last week the Bureau of Labor Statistics announced that the nonfarm payroll (jobs) report for October showed a gain of +271,000. That was way above expectations. The separate household survey showed a gain of +320,000 jobs. This pushed the unemployment rate down to 5.0%, the lowest reading since early 2008. Many believe that the U.S. has now reached full employment. Do you know what that means? It means more Americans working. That means more paychecks to be delivered and more HR services to be handled.

PAYX is in the services sector. According to the company, "Paychex, Inc. (PAYX) is a leading provider of integrated human capital management solutions for payroll, HR, retirement, and insurance services. By combining its innovative software-as-a-service technology and mobility platform with dedicated, personal service, Paychex empowers small- and medium-sized business owners to focus on the growth and management of their business. Backed by more than 40 years of industry expertise, Paychex serves approximately 590,000 payroll clients across 100 locations and pays one out of every 15 American private sector employees."

PAYX earnings have been slowly and consistently creeping higher. Revenues have been rising about 8% the last couple of quarters. This company's most recent earnings report was September 30th. They beat estimates on both the top and bottom line, which helped fuel another rally in the stock.

PAYX management has been very consistent about paying a dividend. PAYX now sports a dividend yield of 3.7%. That could draw more and more income investors looking for a safe company to buy.

A recent article on Forbes.com, by Brett Owens, noted that "demand for payroll outsourcing (60% of Paychex's latest quarterly revenue) will grow at a 3.9% compound annual rate between 2013 and 2018. HR outsourcing (40% of revenue) is on a stronger tear, with a projected 12.3% yearly gain in the same period" (source)

We like PAYX's relative strength. Shares are up +14.2% year to date. That compares to a +1.0% gain in the S&P 500 and a +7.6% rally in the NASDAQ. The NASDAQ composite is up +18% from its August low but PAYX is up +26.7%. The rally in PAYX has produced a buy signal on the point & figure chart, which is also forecasting a long-term target at $72.00.

On Friday PAYX found short-term support near $53.00. Tonight we are suggesting a trigger to launch bullish positions at $53.15.

- Suggested Positions -

Long PAYX stock @ $53.15

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

Long JAN $55 CALL (PAYX160115C55) entry $0.80

11/11/15 triggered @ $53.15
Option Format: symbol-year-month-day-call-strike


U.S. Silica Holdings - SLCA - close: 21.02 change: -0.53

Stop Loss: 19.20
Target(s): To Be Determined
Current Gain/Loss: -2.5%
Entry on December 01 at $21.55
Listed on November 30, 2015
Time Frame: 8 to 12 weeks
(option traders exit prior to January expiration)
Average Daily Volume = 2.2 million
New Positions: see below

12/05/15: OPEC held its last meeting of the year on Friday. Officially the group left their quotas unchanged but other sources suggested OPEC plans to actually raise production. This helped send crude oil lower on Friday and that weighed on energy stocks including the oil service names. SLCA underperformed the broader market with a -2.45% decline. Nimble traders could watch for a bounce near round-number support at $20.00 as an alternative bullish entry point.

Trade Description: November 30, 2015:
The crash in oil prices to six year lows has crushed the oil and gas industry. It has been especially hard on some of the oil service stocks. SLCA is in that group but the company and the stock is showing signs of a bottom.

SLCA is in the basic materials sector. According to the company, "U.S. Silica Holdings, Inc., a member of the Russell 2000, is a leading producer of commercial silica used in the oil and gas industry, and in a wide range of industrial applications. Over its 115-year history, U.S. Silica has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver over 260 products to customers across our end markets. The Company currently operates nine industrial sand production plants and eight oil and gas sand production plants. The Company is headquartered in Frederick, Maryland and also has offices located in Chicago, Illinois, Houston, Texas and Shanghai, China."

What's great about SLCA versus many of its peers is SLCA's diversity. They do sell a lot of fracking sand to the oil and gas industry but they also sell to a wide range of industries. The company also has one of the strongest balance sheets among its peers.

Year over year results have been rough. SLCA last reported earnings on October 27th. Q3 results were a loss of ($0.03) a share. That was a penny worse than expected. Revenues were down -35% to $155.4 million, which was just below the $155.7 million estimate.

It looks like an ugly earnings report and yet shares of SLCA soared more than 20% the next day. The company said their overall tons of sand sold was down -12% from a year ago but up +16% from the second quarter. Furthermore SLCA management said they were selling more sand to the oil and gas business and essentially stealing market share from competitors.

The outlook for crude oil is still muddy but it looks like shares of SLCA have found a bottom. The last few weeks have developed a trend of higher lows. The point & figure chart is still bearish but a rally above $22.00 would generate a new triple-top breakout buy signal. Plus a breakout past resistance could see some serious short covering. The most recent data listed short interest at 37% of the 49.4 million share float.

SLCA is going to present at the Cowen & Co. Energy Conference on December 1st and again at the Wells Fargo Energy Symposium on December 9th. If investors like what they hear these events could be a catalyst to spark the next leg higher.

Currently shares of SLCA appear to have short-term resistance in the $21.40 area. Tonight we are suggesting a trigger to launch bullish positions at $21.55.

- Suggested Positions -

Long SLCA stock @ $21.55

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

Long JAN $22.50 CALL (SLCA160115C22.5) current ask $1.65

12/01/15 triggered @ $21.55
Option Format: symbol-year-month-day-call-strike


Total System Services, Inc. - TSS - close: 56.23 change: +1.06

Stop Loss: 54.85
Target(s): To Be Determined
Current Gain/Loss: +2.0%
Entry on November 21 at $55.15
Listed on November 19, 2015
Time Frame: 6 to 9 weeks
Average Daily Volume = 1.4 million
New Positions: see below

12/05/15: There was no follow through on Thursday's drop in TSS. Shares bounced back toward their highs with a +1.9% gain on Friday. The stock looks poised to breakthrough short-term resistance at $56.50 soon.

Trade Description: November 19, 2015:
TSS must be doing something right. Earnings and revenues have grown every quarter for the last four quarters. The stock has shown significant relative strength with TSS up +60% year to date.

TSS is part of the financial sector. According to the company, "As one of the world's largest payment solutions and services companies, TSYS® believes payments should revolve around people, not the other way around. Since we got our start in the payments space more than 30 years ago, we have evolved from a supporting role servicing several hundred bank card issuers and bank acquirers to directly touching hundreds of thousands of merchants and millions of consumers.

TSYS is a global, publicly traded company with operations in more than 80 countries, including many of the world's most high-growth emerging markets. We provide electronic payment services to financial institutions and companies around the globe with a broad range of issuing and acquiring payment technologies, including consumer, credit, debit, healthcare, loyalty, prepaid, chip and mobile payments."

As I mentioned earlier the earnings picture has been very healthy. TSS has beaten Wall Street's earnings and revenue estimate the last four quarters in a row. Earlier in the year they announced a 20 million share stock buyback. Plus management has raised guidance the last two quarters in a row.

TSS' most recent earnings report was October 27th. Wall Street was expecting a profit of $0.59 a share on revenues of $668 million. TSS announced that earnings were up +40% from a year ago to $0.78 a share. Revenues were up +15% to $708 million. The company management said, "we are raising our guidance range for revenues before reimbursables to 12-13%, up from the previous range of 10-12%, and our adjusted earnings per share (EPS) guidance range to 24-26%, up from the previous range of 15-17%."

You can see how the stock surged the next day on its strong results and bullish outlook. Since then shares of TSS have been consolidating sideways but it looks like that consolidation is almost over. Shares have rallied back toward round-number resistance at $55.00. Currently the point & figure chart is bullish and forecasting at $65.00 target. Tonight we are suggesting a trigger to launch bullish positions at $55.15.

- Suggested Positions -

Long TSS stock @ $55.15

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

Long FEB $55 CALL (TSS160219C55) entry $2.60

12/01/15 new stop @ 54.85
11/20/15 triggered @ $55.15
Option Format: symbol-year-month-day-call-strike


Yelp Inc. - YELP - close: 30.45 change: -0.18

Stop Loss: 28.85
Target(s): To Be Determined
Current Gain/Loss: + 9.7%
Entry on November 18 at $27.75
Listed on November 17, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 3.5 million
New Positions: see below

12/05/15: Hmm... YELP displayed some relative weakness on Friday. Shares dropped to a two-week low at $29.32. Fortunately YELP managed to pare its losses but still underperformed the market with a -0.58% decline. Tonight were moving the stop loss up to $28.85. No new positions at this time.

Trade Description: November 17, 2015:
It has been a rough ride for YELP investors. The stock is down -50% year to date and off -72% from its all-time highs set in 2014. Yet the action lately is starting to look like all the bad news is priced in.

YELP is considered part of the technology sector. According to the company, "Yelp Inc. (http://www.yelp.com) connects people with great local businesses. Yelp was founded in San Francisco in July 2004. Since then, Yelp communities have taken hold in major metros across 31 countries. Approximately 83 million unique visitors visited Yelp via their mobile device1, including approximately 18 million unique devices accessing the Yelp app2, and approximately 79 million unique visitors visited Yelp via a desktop computer3 on a monthly average basis during the second quarter of 2015. By the end of the same quarter, Yelpers had written approximately 83 million rich, local reviews, making Yelp the leading local guide for real word-of-mouth on everything from boutiques and mechanics to restaurants and dentists."

The earnings picture has struggled this year. YELP's Q1 and Q2 reports both missed analysts' estimates. YELP also guided lower each time. Then there was news in July that YELP had given up on trying to sell itself because they couldn't find a buyer.

The revenue picture improved in the third quarter. YELP reported its Q3 results on October 28th. Earnings of $0.03 a share missed estimates of $0.06. Yet revenues were up +40% to $143.6 million, which was better than expected. Management then raised their 2015 guidance.

On November 13th shares of YELP received a big upgrade from RBC Capital Markets who raised their outlook to "outperform" and upped their price target from $34 to $42. Meanwhile recent news that InterActiveCorp (IACI) had offered to buy Angie's List (ANGI) might restart the M&A speculation on YELP since ANGI and YELP are in similar businesses.

Technically shares of YELP definitely appear to have formed a bottom over the last three months. The rally from its October lows has generated a buy signal on the point & figure chart that is forecasting a long-term target of $37.00. Right now YELP is flirting with a breakout past its early August peak. A breakout could spark some short covering. The most recent data listed short interest at 22% of the 60.8 million share float.

We are listing YELP as an aggressive, higher-risk bullish trade. The stock can be volatile so readers may want to limit their position size. Tonight we are suggesting a trigger to launch positions at $27.75.

*small positions to limit risk*- Suggested Positions -

Long YELP stock @ $27.75

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

Long 2016 JAN $30 CALL (YELP160115C30) entry $1.47

12/05/15 new stop @ 28.85
11/21/15 new stop @ 27.90
11/18/15 triggered @ $27.75
Option Format: symbol-year-month-day-call-strike


BEARISH Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 54.39 change: +1.03

Stop Loss: 56.15
Target(s): To Be Determined
Current Gain/Loss: -3.9%
Entry on November 24 at $52.35
Listed on November 23, 2015
Time Frame: Exit PRIOR to earnings in January
Average Daily Volume = 2.2 million
New Positions: see below

12/05/15: It's time to cut our losses on BBBY. The larger trend is down but the stock is not cooperating. BBBY has bounced three times in the $52.50 area and it's starting to look like a short-term bottom.

Tonight we are suggesting an immediate exit on Monday morning.

- Suggested Positions -

Short BBBY stock @ $52.35

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

Long JAN $50 PUT (BBBY160115P50) entry $1.68

12/05/15 prepare to exit on Monday morning
11/24/15 triggered @ $52.35
Option Format: symbol-year-month-day-call-strike


Leucadia National Corp. - LUK - close: 17.80 change: -0.16

Stop Loss: 18.75
Target(s): To Be Determined
Current Gain/Loss: -0.6%
Entry on November 30 at $17.70
Listed on November 28, 2015
Time Frame: 6 to 9 weeks
Average Daily Volume = 2.1 million
New Positions: see below

12/05/15: Good news! LUK did not participate in the market's big rally on Friday. Shares underperformed with a -0.89% decline. I'm still a little cautious here given its performance this past week. Let's wait and see if there is any follow through lower before considering new bearish positions.

Trade Description: November 28, 2015:
Investors appear to have soured on shares of LUK. The stock is down -20% year to date but it's off -29% from its July 2015 highs. LUK just ended the week at new five-year lows.

LUK is considered part of the financial sector. One of their biggest businesses is their Jefferies Group investment brokerage. Jefferies is only one in a long list of companies that LUK owns. You could argue LUK is more of a holding company or a conglomerate and a very diverse one at that.

Here's a list of some of LUK's businesses:
Berkadia, a full-service mortgage bank
FXCM, an online foreign exchange trading platform (NYSE:FXCM)
HomeFed, a real estate developer (65% owned by LUK)
Foursight Capital, an Auto loan originator and servicer
Leucadia Asset Management, a diversified alternative asset management platform
Folger Hill, a multi-manager discretionary long/short equity hedge fund platform
Topwater Capital, a highly-scalable multi-manager and multi-strategy liquid securities fund
Jefferies, a leading, client-focused global investment banking firm
Jefferies LoanCore, a joint venture between Jefferies and GIC Private Ltd (f.k.a. Government of Singapore Investment Corporation), is a finance company focused on originating and securitizing commercial mortgage loans
National Beef, a beef processing company that processes ~3 million fed cattle per year representing ~12.5% market share
HRG Group, a diversifed holiday company (NYSE: HRG) that operates in four business segments: consumer products - Spectrum Brands (NYSE: SPB, ~58% ownership); insurance - Fidelity & Guaranty Life (NYSE: FGL, ~81% ownership (1)); FrontStreet Re (100% ownership); Energy - Compass Production (~100% ownership); Asset Management (de minimis net book value).
Garcadia, 26 auto dealerships
Vitesse Energy
Juneau Energy
Linkem, a fixed wireless broadband internet provider in Italy
Conwed, a leading manufacturer of extruded, oriented and knitted plastic netting
Idaho Timber
Golden Queen (gold and silver mine)
(more details about LUK company .pdf
The earnings picture for LUK has taken a drastic turn for the worse. Their Q1 report, announced March 17th, showed earnings of $11.7 million versus $112 million a year ago. Q1 revenues were down -34%. LUK delivered similar results with their Q2 earnings, announced August 5th. Earnings per share were $0.11 compared to $1.12 a year ago. Revenues were flat at $2.84 billion. Their most recent earnings report was November 5th, 2015. LUK reported their Q3 results, which was a loss of ($0.47) a share versus a profit of $0.14 a year ago. Revenues plunged -21% to $2.36 billion. You can see why investors might be selling the stock.

Management has been trying to take advantage of their low stock price with an aggressive stock buyback program but it's not making much difference. Technically shares of LUK are in a bear market and showing significant relative weakness.

The point & figure chart is very bearish and forecasting an $11.00 target. The last few days LUK has been trying to hold short-term support near $18.00 but that appears to have failed. Tonight we are suggesting a trigger to launch bearish positions at $17.70.

- Suggested Positions -

Short LUK stock @ $17.70

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

Long MAR $18 PUT (LUK160318P18) entry $1.20

11/30/15 triggered @ $17.70
Option Format: symbol-year-month-day-call-strike


iPath S&P500 VIX Futures ETN - VXX - close: 18.22 change: -1.80

Stop Loss: None, no stop at this time.
Target(s): $16.65
Current Gain/Loss: +16.5%
2nd position Gain/Loss: +37.2%
Entry on August 25 at $21.82
2nd position: September 2nd at $29.01
Listed on August 24, 2015
Time Frame: to be determined
Average Daily Volume = 50 million
New Positions: see below

12/05/15: Stocks reversed higher on Friday and this send the volatility index (VIX) plunging -18%. The VXX fell nearly 9%.

Currently our exit target is $16.65.

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

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

Short the VXX @ $29.01

11/07/15 adjust exit target to $16.65
11/02/15 adjust exit target to $16.50
10/19/15 add an exit target at $16.25
10/15/15 planned exit for the October puts
10/14/15 if you own the options, prepare to exit tomorrow at the close
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