Option Investor

Daily Newsletter, Tuesday, 12/8/2015

Table of Contents

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

Market Wrap

Tax Loss Selling?

by Jim Brown

Click here to email Jim Brown

A wave of what appears to be tax loss selling has gripped the market and the major indexes are suffering. However, the Nasdaq struggled back from a -57 point loss to close near positive territory thanks to the biotech sector.

Market Statistics

The Dow Transports are headed in the opposite direction from the Nasdaq. The transports lost -221 points despite oil prices touching a 7-year low intraday at $36.64. Earnings warnings from the railroads and the airlines are calling into question the rate of economic growth. Rail car loadings are declining according to CSX last week. Southwest Airlines (LUV) warned today that revenue per passenger mile would decline -1% in Q4 compared to prior forecasts for a +1% rise.

Further research found that on Monday Southwest cancelled 22 of 79 flights to Chicago that were scheduled to arrive after 6:PM. The reason given was fog but none of the other major airlines reported any problems. The airport claimed visibility was ten miles. Some analysts believe Southwest was cancelling flights with few passengers.

With terrorist worries causing passengers to rethink their travel plans and competition rising the price for travel is crashing. I bought tickets from Denver to Seattle this week for $89. Southwest recently dropped prices from Chicago to the West coast to just over $100. That is the lowest prices since the Great Recession. Allegiant (ALGT) has also warned on weaker earnings.

This suggests the traveling public is planning to fly less this holiday season. It could be terrorist worries or simply economic issues since average annual income is down about $4,000 over the last 7 years. Whatever the reason the Dow Transports are at four-month lows and apparently headed lower. This is weighing on the broader market.

The U.S. economics were not exciting. The hiring intentions for Q2 declined for the second consecutive quarter according to the Manpower Employment Survey. The net number of respondents planning on hiring in Q1 declined from 15% to 14%. That is down from 20% in Q3 over Q4. Those planning no changes totaled 72% with those planning to reduce employment at 6%.

The Job Openings and Labor Turnover Survey (JOLTS) showed a 3.6% openings rate in October, down from 3.7% in September. Job openings totaled 5,383,000 an 11% gain from the same period in 2013. This report is a lagging report for October and was ignored.

The NFIB Small Business Survey for November declined from 96.1 to 94.8 and a five-month low. Those respondents planning on increasing employment remained flat at 11%. Capital expenditure plans declined slightly from 26% to 25%. For the second month, nobody was planning on increasing inventories. Those expecting the economy to improve declined from -4 to -7. Sales forecasts declined from +4 to -1. This was not a good report but it was also ignored.

Depressing the market at the open was the trade data from China. Exports declined -6.8% and worse than the -5% analysts expected. Imports declined -8.7% but better than expected. Imports have now been done for 13 consecutive months and analysts were expecting a -12.6% decline. Imports declined -18.8% in October.

The calendar for Wednesday and Thursday is lackluster with nothing that should be market moving. Everyone will remain focused on the Fed rate decision next week.

Other big news out before the open was Morgan Stanley's (MS) announcement of a layoff of 1,200 workers. That is 2% of their global workforce and the layoffs were concentrated in fixed income, commodities and currency trading. The company will take a $150 million charge for the layoffs. The company said the trading environment in Q4 has been lower than expected and not much better than Q3. Fixed income trading revenue declined -42% in Q3. Fixed income revenue over the first nine-months was $3.75 billion compared to $6.31 billion revenue from equity trading. That was the most equity revenue of all the banks. Shares declined -2% on the news.

UK miner Anglo American beat Morgan Stanley in the layoff department. Anglo American announced they were laying off 85,000 workers and reducing their total workforce to 50,000. They are also planning on selling off major chunks of their business as a result of the crash in commodity prices. Iron ore prices have declined from a peak near $200 a ton in 2011 to $39.60 today. Copper prices have declined from $4.65 a pound in 2011 to $2 today. This is killing the mining sector with Rio Tinto (RIO) falling -8% today and BHP Billiton falling -4% to a ten-year low. Anglo American is not traded in the USA.

Chipotle Mexican Grill (CMG) took another hit today after 80 Boston College students became sick after eating at a Chipotle. Early tests indicated this was an outbreak of norovirus, which causes severe vomiting and diarrhea. The company closed the single store temporarily and said it had no plans to close any other Boston locations.

The norovirus is highly contagious and can live on surfaces as well as foods. The virus is the largest blame for food borne disease outbreaks in the U.S. with more than 21 million cases annually. Hospitals, cruise ships and universities are prime breeding grounds where people work and live in close quarters. The Chipotle location was closed while they wait the result of the tests. Since the virus could have been transmitted in the school or dorms they do not know for sure how it originated or spread. Hundreds of students eat at this store daily so this could be a coincidence where blame was immediately put on Chipotle because of their recent E.Coli outbreaks. I doubt that but is is possible.

Chipotle had another norovirus outbreak in August that sickened over 100 customers at a location in Simi Valley California.

Shares declined -$31 at the open but improved to close down only $9.

Autozone (AZO) reported earnings of $8.29 that beat estimates for $8.20 and $7.27 in the year ago quarter. Revenue of $2.39 rose +5.6% and matched estimates. The company opened 22 stores in the U.S. during the quarter to bring its total to 5,163 of the 5,635 total stores globally. Shares rallied +6% or +$44.

Homebuilder Toll Brothers (TOL) reported earnings of 80 cents that rose +12.7% but missed estimates by 3 cents. Revenue rose +6.4% to $1.44 billion and beating estimates for $1.43 billion. Home deliveries rose +0.7% to 1,820 units. Signed contracts rose +29% to $1.25 billion with prices rising +15% to an average of $872,000. Order backlogs rose +10% to 4,064 homes. Shares fell -7% on the news despite the strong orders and sales.

Smith & Wesson (SWHC) reported earnings of 25 cents compared to estimates for 20 cents. Revenue of $143.2 million rose +32% and beat estimates for $139 million. The company said gun sales were soaring thanks to President Obama's push for gun control and the threat of U.S. terrorist attacks. On Black Friday alone a record of more than 185,000 background checks were conducted for people buying guns. Shares declined slightly after the earnings but they were up nearly 18% since the California shootings six days ago.

Dave & Busters (PLAY) reported earnings of 12 cents compared to estimates for 3 cents. Revenue of $193 million beat estimates for $185 million. Same store sales rose +8.8% compared to estimates for a 4.9% gain. The company guided higher for the full year. Shares rebounded to $42 in afterhours.

Krispy Kreme Doughnuts (KKD) reported earnings of 19 cents that was in line with estimates. Revenue of $129 million missed estimates for $133 million. However, same store sales rose 3.4% compared to +2.8% estimates. They guided higher for earnings in the 78-80 cent range for the full year compared to estimates for 78 cents. Shares were volatile in afterhours but closed with no material change.

Mastercard (MA) said it was increasing its dividend +19% to 19 cents. They also said they were adding $4 billion to their existing share buyback program with $786 million unspent. Even with the increase in the dividend their annual yield is still a paltry 0.77%. The dividend will be paid on Feb 16th to holders on Jan 8th. Shares gained about 50 cents in afterhours.

Bristol Myers Squibb (BMY) announced a 3% increase in their dividend to 38 cents. The dividend will be payable Feb 1st to holders on Jan 4th. The company expects the full year dividend to be $1.52. Shares did not move on the news.

CNBC broke the news that Yahoo (YHOO) had decided not to spin off its 384 million Alibaba shares. The actual announcement is expected to be made on Wednesday. It was also reported that the company was considering spinning off the core business in order to create value in the shares. The noncore business would essentially be the Alibaba shares. By splitting out the core in a tax-free spinoff the remaining business would continue to control the shares and trade in tandem with Alibaba. If a core split is announced it will probably take about a year to iron out all the details.

The problem with the spinoff of the BABA shares is the massive tax bill that could be incurred. A core spin should not incur any taxes. Shares rose $1 in afterhours.

Kinder Morgan (KMI) announced after the close they were slashing the dividend by 75% from 51 cents to 12.5 cents a quarter. In the first nine months of 2015 the partnership had paid out dividends of $1.48 and more than three times their reported earnings of 43 cents. This cut had been widely rumored and led to a steep decline in shares over recent weeks. The company said the cut was necessary to maintain its investment grade bond rating. KMI has $41 billion in debt and a market cap of only $35 billion. They need to maintain their credit rating to keep their interest rates low. They said they also needed to preserve cash for acquisitions in this time of real opportunity. Shares declined $1 in afterhours to give a prospective yield of 3.4% at the new stock price.

The company said business was good and cash flow was expected to increase 8% in 2016 with distributable cash flow around $5 billion. They paid $3.08 billion in dividends in 2014. Capital spending was $3 billion, which they raised with a share sale.

Steve Wynn said he bought more than 1 million shares of Wynn Resorts (WYNN) stock so far in December. He now owns or controls 11.07 million shares or roughly 10% of the outstanding shares. Wynn shares have been under substantial pressure because of the challenges in Macau. Steve has been known to buy shares at the lows and sell them at the highs and with the stock down from $249 in 2014 to $62 today, this is definitely a low. Shares rose 10% in afterhours.

Carl Icahn said he boosted his stake in Hertz (HTZ) from 11% to 14.3%. This is another attempt to buy low or in this case average down. Hertz shares have declined from $20 to $13 over the last month. Jana Partners said recently they cut their stake in Hertz by half to 4.8%. Unless something happens to Hertz soon this could be a loser for Icahn. I would avoid this stock. Car services Uber and Lyft are killing this sector.

Crude oil declined intraday to $36.64 and a post recession low. Without OPEC cutting production there is nothing to support oil prices long term. However, in the API inventory report tonight after the close they showed a -1.9 million barrel decline. With refiners raising their utilization to a three-month high of 94.5% last week I am not surprised there is a decline. Refiners are rebuilding supplies of refined products that shrank in Sept/Oct while they were in the Fall maintenance cycle. This utilization will slow once the winter blend fuels are replenished. Crude rebounded to $38 on the API report. The EIA report on Wednesday is the one that moves the market. If it shows a similar decline, we could see some short covering.


Most of the market damage was done at the open as stocks reacted to the negative trade news out of China. The Dow declined -245 at its lows but despite the recovery to close at -162 there was never any concentrated buying.

The S&P dipped to 2,052 at the open and quickly rebounded but the rebound was short lived. The second dip stopped at 2,060 and that remained support the rest of the day. The S&P closed at 2,063 and right below the 200-day average at 2,064.

The Dow and S&P have a series of lower highs and higher lows. It would take a close under 2,020 to make a lower low and break the uptrend from September but the market is looking a little shaky this week.

We would need a close over downtrend resistance at about 2,109 and then a confirmation close over 2,116 to really energize the bulls. This market appears to be in the throes of some serious tax loss selling and the lack of material rebounds either today or yesterday is troubling. The middle of December is known for declines due to tax loss selling so that is being blamed for the market weakness.

The Dow was handicapped by Exxon and Chevron as crude prices fell to seven-year lows. They rebounded late in the day but still remained at the bottom of the losers list. Goldman Sachs continues to be in a steep decline with another -$2.50 drop.

It was simply an ugly day for the Dow stocks as investors sold to either raise cash or offset gains elsewhere. The Dow has very pronounced downtrend resistance just below 17,900 and that will be the critical point once a rebound begins.

Support today was 17,500 with the dip last week to 17,425. Those are the critical levels if the selling continues.

The Nasdaq returned to positive territory late in the day after being down 57 points at the open. A late flurry of selling caused a close with a -3 point loss but traders should be happy. The majority of the gains came from a resurgence of biotech stocks with many posting really nice gains. The biotech index gained +1.8% for the day.

Apple announced a case for the iPhone with an extra battery attached for $99 but still finished negative. There is also a rumor that the second generation Watch will be announced in March with the first deliveries in April. Analysts believe Apple sold between 5 and 6 million of the first edition. There are also rumors about an iPhone 6c with longer battery life in the same time frame.

Without Apple leading the charge higher, it was remarkable that the Nasdaq 100 did finish in the green with a minor gain. Both tech indexes appear poised to make new highs if the market decides to move higher in late December.

The Nasdaq Composite has strong resistance at 5,160 and closed right at the lesser resistance at 5,100.

If the Russell 2000 is going to make a late December run, it needs to get started soon. The index declined to support at 1,150 and rebounded only slightly. I believe the market weakness has scared investors and they are afraid to buy the small caps. The strength in the Nasdaq big caps indicates fund managers are looking for end of December window dressing with high liquidity. However, if we could post a couple days of gains that liquidity fear could evaporate.

In my last couple of commentaries, I have cautioned that the market was risky and warned that we should be careful despite seasonal trends that suggest the market will recover before December was over. I recommended using the expected mid month weakness as a buying opportunity.

That weakness arrives earlier than expected and I am not yet suggesting we load up on longs. I think we could be near a bottom but I would like to actually see that bottom form before rushing into new positions.

Obviously, with the amount of shorts in the market we are rapidly approaching a monster short squeeze. If we wait for that squeeze, we could be left waiting on the sidelines. That is a chance we need to be willing to take. I have no problem with nibbling at certain big cap tech stocks given the performance today. Netflix would be my first choice. Amazon and Google are too expensive for me and Facebook needs to trade over $108 before I would be a buyer. This makes the QQQs the obvious choice for a speculative trade. With the Nasdaq 100 near a breakout to a new high that would be the least risky bet for the end of December.

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Jim Brown

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New Plays

Big Returns With This Big Cap

by James Brown

Click here to email James Brown


Starbucks Corp. - SBUX - close: 62.16 change: +0.27

Stop Loss: 58.95
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 08, 2015
Time Frame: Exit prior to earnings in January
Average Daily Volume = 8.8 million
New Positions: Yes, see below

Company Description

Trade Description:
Do you know someone giving or getting a Starbucks gift card for the holidays this year? Odds are you do (see below). The recent action in SBUX looks like another bullish entry point.

We have traded SBUX more than once this year. Here is an updated play description and entry point on the stock:

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.

Sales Growth:

SBUX is a big company and yet they continue to deliver strong earnings and revenue growth. Their Q2 2015 results, released in April, saw revenues up +17.8%. Q3 results, announced in July, saw revenues up +17.5%. Their Q4 results were announced on October 29th. Revenues grew +17.5% again. The company has been killing it with strong same-store sales. Q1's global same-store sales were +7%. Q2's same-store sales were also +7%. Q3's rose to +8%. What's impressive is SBUX is able to deliver this sort of sales growth in spite of the strong dollar and its negative foreign currency impact.

SBUX management provided guidance for Q1 2016 with earnings just below analysts' estimates. They still see double-digit revenue growth next year. The company plans to open about 1,800 new locations in fiscal 2016.

SBUX continues to build out their technology improvements. They see millions of orders a week on their mobile transactions platform. Currently they are testing a delivery service in Seattle.

It's also worth mentioning that the holiday season is normally a strong one for SBUX. Last year one in seven Americans received a Starbucks gift card.

We should also note that there is currently an E. Coli scare going around. Chipotle (CMG) is getting hammered on this story. Other companies like Costco and Starbucks have also had issues with E. Coli in a few products recently but thus far the impact has been very limited for SBUX.

Technically SBUX is in an up trend. It is also one of the best performing stocks in the S&P 500 this year with SBUX up +50% year to date. The point & figure chart is forecasting at $68.00 target. The stock peaked in late October and has spent the last few weeks consolidating sideways. The dips below $60 found support near prior resistance and now SBUX has built a potential bullish double bottom pattern. Tonight we are suggesting a trigger to launch bullish positions at $62.65.

Trigger @ $62.65

- Suggested Positions -

Buy SBUX stock @ $62.65

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

Buy the FEB $65 CALL (SBUX160219C65) current ask $1.49
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Stocks Slip Lower Again

by James Brown

Click here to email James Brown

Editor's Note:
Yesterday the main culprit behind the market's decline was crude oil. Today oil continued to plain a main part in the market's weakness but disappointing economic data out of China also fueled the selling pressure.

COLM hit our entry trigger.

FMC and SLCA hit our stop losses.

Current Portfolio:

BULLISH Play Updates

Autodesk, Inc. - ADSK - close: 63.96 change: +0.21

Stop Loss: 61.75
Target(s): To Be Determined
Current Gain/Loss: -2.3%
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

12/08/15: ADSK dipped to technical support at its 20-dma this morning and bounced. Shares managed to outperform the broader market with a +0.3% gain today.

The intraday high was $64.27. I would be tempted to launch new positions on a rally above $64.50 but only if the NASDAQ is also up on the session.

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: 39.36 change: +0.67

Stop Loss: 36.40
Target(s): To Be Determined
Current Gain/Loss: +3.2%
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

12/08/15: ATVI delivered a strong performance today. Traders bought the dip near $38 and its 10-dma this morning. Shares rebounded sharply higher and broke through short-term resistance at $39.00. ATVI ended the session with a +1.7% gain.

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

Microsoft Inc. - MSFT - close: 55.79 change: -0.02

Stop Loss: 53.20
Target(s): To Be Determined
Current Gain/Loss: +2.2%
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

12/08/15: MSFT weathered the market's dip this morning pretty well. Shares fell toward round-number support at $55.00 and bounced. The stock closed virtually unchanged on the session. Investors may want to wait for a new high (above $56.25) before initiating new positions.

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: 45.14 change: -0.10

Stop Loss: 43.25
Target(s): To Be Determined
Current Gain/Loss: -0.9%
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

12/08/15: NTGR spiked down toward $44.50 this morning. Shares bounced from this level and managed to pare its loss to just 10 cents by the closing bell. I'd like to see some follow through higher before considering new bullish positions.

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: 53.48 change: -0.03

Stop Loss: 52.45
Target(s): To Be Determined
Current Gain/Loss: +0.6%
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

12/08/15: PAYX didn't make much progress today. Shares slipped toward $53.00 during the market's decline this morning. The stock rebounded off these lows to close virtually unchanged on the session.

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

Qorvo, Inc. - QRVO - close: 57.28 change: -0.35

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

12/08/15: QRVO dipped toward $56.00 this morning. Shares bounced off this level but still lost -0.6% by the closing bell. Technically today's decline is a breakdown below the 10-dma but we are not giving up yet. Currently we want to see a breakout past resistance at $60.00. Our suggested entry point is $60.25.

Trade Description: December 5, 2015:
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)

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

Total System Services, Inc. - TSS - close: 56.14 change: +0.30

Stop Loss: 54.85
Target(s): To Be Determined
Current Gain/Loss: +1.8%
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

12/08/15: TSS displayed some relative strength today. The stock spiked down to $55.32 this morning but TSS bounced and ended the session with a +0.5% gain. If the market cooperates we should see TSS challenge resistance and breakout past $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: 30.92 change: +0.88

Stop Loss: 28.85
Target(s): To Be Determined
Current Gain/Loss: +11.4%
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

12/08/15: YELP found support near $29.50 this morning. The stock rallied off this level and outperformed the broader market with a +2.9% gain on the session.

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

Columbia Sportswear - COLM - close: 45.92 change: +0.53

Stop Loss: 48.05
Target(s): To Be Determined
Current Gain/Loss: -2.6%
Entry on December 08 at $44.75
Listed on December 07, 2015
Time Frame: Exit prior to earnings in February
Option traders exit prior to January expiration
Average Daily Volume = 284 thousand
New Positions: see below

12/08/15: Ouch! Our new COLM trade is open but shares are not cooperating. The plan was to launch bearish positions on a breakdown below $45.00 with a trigger at $44.75. The market's widespread drop this morning pushed COLM down to $44.64, triggering our play. Then COLM reversed higher with a sharp rally back to $46.26. Shares spent the rest of the day hovering just below the $46.00 level. I couldn't find any news that might explain the relative strength today.

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

Trade Description: December 7, 2015:
The pace of consumer spending has been disappointing this year. Overall retail sales have been slow. Plus the warmer weather has been a major set back for outerwear and winter clothing a lot of retailers are dealing with high levels of unsold inventory.

COLM is in the consumer goods sector. According to the company "Columbia Sportswear Company has assembled a portfolio of brands that connect active people with their passions, making it a leader in the global active lifestyle apparel, footwear, accessories and equipment industry. Founded in 1938 in Portland, Oregon, the company's brands are today sold in approximately 100 countries. In addition to the Columbia® brand, Columbia Sportswear Company also owns the Sorel®, Mountain Hardwear®, prAna®, Montrail® and OutDry® brands."

Bullish COLM investors have got to be frustrated. It's true that a lot of retailers have struggled. Yet COLM has had pretty good results this year. Their Q4 report from 2014, announced in February, was above estimates and management raised guidance. The stock soared on the bullish report and guidance.

Their Q1 results, on April 30th, beat estimates and guidance was in-line. Then on July 30th, COLM reported their Q2 results. Again earnings and revenues beat estimates by a wide margin. Management raised their guidance again. Shares of COLM exploded to new all-time highs and almost hit $75.00. That has proven to be the peak.

Since COLM's report in July the market has begun selling COLM's stock. The up trend reversed with COLM sinking under a bearish pattern of lower highs and lower lows. They reported their Q3 results on October 29th. They beat estimates again and raised their full-year guidance. The stock gapped higher nearly $10 the next day only to reverse lower.

Dick's Sporting Goods (DKS) really shook up the retail industry when they reported their earnings on November 17th. DKS missed Wall Street estimates on both the top and bottom line and DKS guided lower. The company blamed warm fall weather on their disappointing results. DKS also warned that Q4 would likely be very promotional, which would hurt margins. A few days later Bank of America Merrill Lynch downgraded COLM from "buy" to "neutral" over similar worries.

Technically COLM is in a bear market. The point & figure chart is forecasting at $36.00 target. COLM bounced off the $45.00 level in November. That bounce has failed. Now shares are about to breakdown under key support at $45.00. We are suggesting a trigger to launch bearish positions at $44.75.

- Suggested Positions -

Short COLM stock @ $44.75

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

Long JAN $45 PUT (COLM160115P45) entry $2.80

12/08/15 triggered @ $44.75
Option Format: symbol-year-month-day-call-strike

Leucadia National Corp. - LUK - close: 17.64 change: +0.11

Stop Loss: 18.75
Target(s): To Be Determined
Current Gain/Loss: +0.3%
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

12/08/15: LUK did not cooperate either. Shares spiked down to new lows this morning. Shares ht $17.28, a level not seen since early 2009. Then LUK rebounded to close up +0.6% on the session.

No new positions at this time.

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: 19.23 change: +0.58

Stop Loss: None, no stop at this time.
Target(s): $16.65
Current Gain/Loss: +11.9%
2nd position Gain/Loss: +33.7%
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

12/08/15: Another widespread market decline fuels another bounce in the VXX. Stocks are having a hard time picking a direction.

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


FMC Corp. - FMC - close: 40.01 change: -1.40

Stop Loss: 40.85
Target(s): To Be Determined
Current Gain/Loss: -5.1%
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

12/08/15: It was a disappointing session for FMC. Shares broke down below short-term support at $41.00. The stock underperformed the market with a -3.3% drop that eventually settled on round-number support at $40.00. Our stop loss was hit at $40.85.

- Suggested Positions -

Long FMC stock @ $43.05 exit $40.85 (-5.1%)

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

JAN $45 CALL (FMC160115C45) entry $1.20 exit $0.15 (-87.5%)

12/08/15 stopped out
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


U.S. Silica Holdings - SLCA - close: 19.32 change: -0.53

Stop Loss: 19.20
Target(s): To Be Determined
Current Gain/Loss: -10.9%
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

12/08/15: The plunge in crude oil is killing energy stocks. Oil-service stocks are getting hammered as well. Shares of SLCA gapped open lower at $19.24 and fell to $18.77 intraday. Our stop loss was hit pretty early at $19.20.

SLCA is still one of the healthiest sand producer and proppant makers in the country but that hasn't stopped the stock's volatile reaction to the oil market.

Our trade has been stopped out but I would keep SLCA on your radar screen. When oil eventually finds a bottom this stock should be a bullish candidate.

- Suggested Positions -

Long SLCA stock @ $21.55 exit $19.20 (-10.9%)

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

JAN $22.50 CALL (SLCA160115C22.5) entry $1.70 exit $0.55 (-67.6%)

12/08/15 stopped out
12/07/15 Oil dropped to 7-year lows and pushed energy-related stocks sharply lower.
12/01/15 triggered @ $21.55
Option Format: symbol-year-month-day-call-strike