Option Investor

Daily Newsletter, Thursday, 12/17/2015

Table of Contents

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

Market Wrap

Fed Driven Gains Gone

by Thomas Hughes

Click here to email Thomas Hughes
The market gave up yesterday's Fed driven gains as focus shifts back to economic data and earnings.


It looked at first as if there would be some follow through to yesterday's Fed driven rally but it didn't happen. Volatile oil prices and a quadruple witching options expiration both played a part in erasing all of yesterday's gains. Oil prices fell hard on oversupply and high storage levels to retouch the long term lows set earlier this week.

International markets were higher in today's session, led by our rally post-FOMC announcement. Asian and European indices made gains greater than 1% in most cases, led by the German DAX 2.57%. The positive vibe carried over into our markets, at least through the early pre-market session, with little data or other news to impact the early part of today's session.

Market Statistics

Futures trading was mild all morning, positive but only barely so. The S&P 500 was indicated to open with gains of only a few points, the Dow about 30. These levels held right up and into the open at which time the indices posted gains as early indications suggested. This lasted for about 5 minutes and then a steady sell-off began that took them down to hit the morning low, near -1%, just after 11:15AM. The low held for most of the day but a round of selling late in the day set a new low and left the indices at the lows of the day when the closing bell sounded.

Economic Calendar

The Economy

Unemployment claims were in line with expectations. On an adjusted basis initial claims fell -11,000 to 271,000 from last week's not revised figure. On a not adjusted basis they fell -18.7%, more than the -15.3% predicted by the seasonal factors, and -4.5% lower than last year at this time. The four week moving average of adjusted claims also fell, by -250, to 270,750. The states with the largest increases in claims were California, New York and Pennsylvania with gains of 22,487, 13,113 and 12,021. The states with the largest decreases in claims were Kentucky and Arkansas with declines of -1,256 and -533. While still above the long term low and the moving average initial claims remain low compared to historic levels, near the long term low and consistent with healthy labor markets.

Continuing claims also fell, shedding -7,000 to hit 2.238 million. This is from a slight upward revision to last week of 2,000. The four week moving average of continuing claims rose however, adding 16,250 to hit 2.199 million. Continuing claims are above the moving average and off the recently set lows but remain near the long term low and consistent with labor market health.

Total claims posted what at first looks like an astonishing increase but when compared to historical data and expectations is not to alarming. Total claims gained 419,000 to hit 2.353 million and an 8 month high. This is an increase of 22%. Last year, in the comparable week, claims jumped 423,000 or 19.6% to hit 2.576 million. This years number, in that light, is not surprising, in line with expectations and down -8.6% year over year. We are entering a seasonal period of increased lay-offs so expect to see all the unemployment claims numbers rise over the next few weeks. The thing to watch will be how high they rise, how long they remain elevated and to what levels they retreat come the spring.

The Philadelphia Federal Reserve Manufacturing Business Outlook Survey was released at 8:30AM and was weaker than expected. The diffusion index fell nearly 8 points to -5.9 from last month's reading of 1.9, analysts had been expecting it to rise slightly to 2.0. Within the data new orders fell 6 points to -9.5 while shipments and employment both made gains. Shipments rose 6 points to 3.7 while both gauges of labor rose. Employment rose 2 points to 4.1 and hours worked rose a whopping 22 points to 5.5, its first positive reading in three months. Most disturbing is the fall in future indicators. The diffusion index of future conditions fell 23 points to 20.4. Outlook remains positive but at three year lows.

The Index of Leading Indicators rose by 0.4%, better than the expected 0.2% and down from last months 0.6%, showing the economy is expanding in December at a slightly slower rate than last month, but faster than expected. The Coincident Index rose by 0.1%, down from last months 0.2% and the lowest level in three months. The Lagging Index rose by 0.3%, up a tenth from last months 0.2%.

There are no economic releases tomorrow. Next week the calendar is light but includes the third revision to 3rd quarter GDP, existing and new home sales, durable goods and personal income.

The Oil Index

Oil prices tanked, no pun intended, with WTI and Brent both near 11 year lows. A stronger dollar had something to do with it but the underlying fundamentals are what's really to blame. Supplies and production are high, demand is low and there is little to suggest that situation is going to change soon. Next year, maybe, but in the next few weeks I don't think so. Prices may not fall much further but there is still no reason to get bullish on oil.

The Oil Index fell about -2% and looks like it will retest 1,050 if not move down to support targets between 1,000 and 1,025. Today's candle helps confirm resistance at the 1,100 level with low oil prices dragging the index down. The indicators are both bearish and pointing lower although there is some sign that support will hold or at least produce a bounce before being broken. MACD and stochastic are both bearish but momentum is weakening and stochastic is reaching oversold conditions so a bounce, relief rally or consolidation is highly likely once support is reached.

The Gold Index

Gold produced one of those wow moves that you think might happen but are still surprised when they actually do. The FOMC not only strengthened the dollar, they reduced inflation expectations, or at least alleviated fear of rising inflation, for the immediate future. This combination has sent gold back to its long term low with spot prices falling more than $25 or 2.5% to $1,050. Gold is now trading at support with bearish outlook. If the data starts to look like the Fed could raise rates at a quicker pace than expected gold could move to new lows.

The gold miners fell along with gold, the miners ETF GDX shedding more than -5.5%. Even with today's decline the ETF remains above its long term low but looks set to test it and soon. The prevailing trend in the sector is down and the indicators have just confirmed a trend following move so support at the low could easily be broken, especially if gold falls below $1,050. Current downside target is $13, a break below that could take it down to $12.50 or $12.

In The News, Story Stocks and Earnings

The dollar got a big lift from the FOMC rate hike. The Dollar Index gained nearly 1.5% today and broke back above the short term moving average. The index looks set to retest resistance at the recent high near 100.50. The indicators are rolling into a bullish signal, in line with the underlying trend in the index, so this move could be strong. Policy between the ECB and FOMC has officially diverged and this could drive the dollar index to new highs.

There were a couple of big stories in the news today; first the dirt. The CEO of Turing Pharmaceuticals, the guy who made the news when he jacked up the price of a commonly used drug, Martin Shkreli, got arrested. Not for his role as head of Turing, but for frauds he committed while head of hedge fund MSB Capital Management and later at Retrophin Inc. The gist of the story is that the hedge fund lost millions and tha Shkreli paid back investors with funds looted from Retrophin. KaloBios, a company Shkreli recently invested in, had its shares halted in pre-market trading due to volatility related to the arrest.

RiteAid reported earnings this morning and beat consensus by a penny. The company reported earnings of $0.06 on income of $373 million. Total earnings are up $40.4 million and driven by an increase in comp store sales of 0.9%. The company reaffirmed guidance for 2016 in a range around consensus saying they were “comfortable” with it. Shares of the stock jumped nearly 1% in the pre-market session only to fall during the day to post a loss at the close. RiteAid is involved in a possible buy-out by Walgreens for $9 a share announced at the end of October. The deal is expected to close late next year and is pending shareholder and regulatory approvals.

Disney. Star Wars opens tonight and is expected to post the largest box office opening weekend sales ever. Pre-sales have already topped $200 million and, according to Fandango, ticket sales have already surpassed their all-time record. I know I've go my ticket, I'm going on Saturday. This movie is going to be a huge hit for Disney across its entire footprint. They've already said there will be one movie a year indefinitely, they've got the toys, the TV, the merchandise, amusement parks the works. Shares of the stock fell -1.25% in today's session, dropping below the short term moving average, but appear to be moving higher in the near term. Resistance is near $115, if broken the stock could go to $120.

Redhat reported earnings after the bell. The open source software provider reported better than expected on the top and bottom lines. The results were driven by increased subscription revenues, up 22%, and deferred revenue, up 14% , with total revenues up 15% from last year. Results were good enough for execs to up guidance to a range more in line with consensus and sent shares of the stock shooting up more than 5% in after hours trading.

The Indices

Today's losses were led by the Dow Jones Industrial Average drop of -2.00%. The transports created a long black candle falling from the 7,750 level confirming resistance at previous support. The indicators are bearish and pointing lower so a test of 7,500 is likely with a chance of a move to 7,250. Looking back over the past few months it looks like 7,500 could be a bottom so a move below it could lead to further selling.

The next biggest decline was only -1.50%, posted by the S&P 500. The broad market created a long black candle and dark cloud cover pattern that could lead to another test of support along the long term trend line. The indicators are mixed but remain consistent with a market trading above support. First target for support is between 2,015 and 2,030 with a possible move down to 2,000.

The Dow Jones Industrial Average fell -1.43% and closed at the low of the day. Today's candle completely encompasses yesterday's and appears to confirm resistance above 17,600. The indicators are mixed however, consistent with a trading range or consolidation, so the depth of any downside movement is questionable. Support target is near 17,250 and the bottom of the 2 month range. A break below this level could take the index down to 16,750 and the long term up trend line.

The NASDAQ Composite made the smallest gain in today's session. The tech heavy index lost -1.35% and broke the short term 30 day moving average to end the day just above the long term up trend line. The indicators are pointing lower, consistent with lower prices, so a test of the trend line is looking likely. A break below the trend line could take the index down 4,950 or 4,900 in the near term.

They did it, the FOMC has raised rates and erased the uncertainty of when they would. Now we can begin to worry about when the next one will be but I think it safe to assume we have a meeting or two before that happens. Until then the focus will return to the fundamentals, the data and the earnings.

The fundamentals have been altered, if every so slightly, and it will take a little time to see how that will affect the economy and this could produce some market volatility. The economy is still in uptrend and expectations for next year are still positive so I am still bullish overall. The question is if expansion is hot enough for the economy take another rate hike, or need another rate hike, or if the recovery will falter. As for earnings, we've got another bad season to look forward to but this could be the last one of negative growth for a while so any earnings driven market down turn is a buying opportunity in my view.

Today's action was probably influenced by quadruple witching options expiration more than anything else. Expiration is tomorrow, tomorrow's action could be the same and may easily see a continuation of today's move, or a swing back to yesterday's high, or both.

Until then, remember the trend!

Thomas Hughes

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New Plays

Breaking Down To 2-Year Lows

by James Brown

Click here to email James Brown


Western Digital Corp. - WDC - close: 59.40 change: -1.56

Stop Loss: 62.35
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 17, 2015
Time Frame: Exit PRIOR to earnings in late January
Average Daily Volume = 3.5 million
New Positions: Yes, see below

Company Description

Trade Description:
Increased competition has turned hard drives into a commodity business. Prices for drives are falling. WDC is trying to move into higher-margin business with its acquisition of SanDisk (SNDK) but the action in the stock suggest Wall Street is concerned.

WDC is in the technology sector. According to the company, "Founded in 1970, Western Digital Corp., Irvine, Calif., is an industry-leading developer and manufacturer of storage solutions that enable people to create, manage, experience and preserve digital content. It is a long-time innovator in the storage industry. Western Digital Corporation is responding to changing market needs by providing a full portfolio of compelling, high-quality storage products with effective technology deployment, high efficiency, flexibility and speed. Its products are marketed under the HGST and WD brands to OEMs, distributors, resellers, cloud infrastructure providers and consumers."

WDC, and its rivals, face an industry wide challenge. Consumer demand for personal computers (PCs) has been slowing down for years. PCs were replaced by laptops. Now laptop demand is in jeopardy because they are being replaced by tablet PCs. At the same time growth in technology and disk drive creation has generated the ability to produce huge disk drives with massive amounts of storage. That means consumers and businesses need to buy fewer drives for the storage they need.

Another issue has been the trend in solid state drives (SSD). Buyers prefer SSD drives because normally they are faster, thinner, and use less power than traditional spinning hard drives. Selling hard drives to PC and laptop makers is the majority of WDC's business (more than 40%). WDC recently announced plans to buy SanDisk (SNDK) who has a strong SSD business. That makes sense because demand for SSDs are replacing demand for normal hard drives. One problem is just like all computer hardware, it becomes cheaper to make as technology improves. The price of SSD drives has fallen sharply and the spread between SSD and normal hard drives will continue to narrow.

WDC's deal to buy SNDK is valued around $19 billion. The company is planning to borrow $17-to-$18 billion for the deal. The surge in debt has some analysts concerned about WDC. Another potential challenge is that WDC is also in the process of a deal with Unisplendour, which is a China-based company trying to make a $3.8 billion investment into WDC. At the time this Unisplendor investment was valued at $92.50 per share (for about 15% of WDC). You may have noticed that shares of WDC are now trading near $60.

WDC announced the SNDK deal on October 21st. Shares declined on the news. Actually shares of WDC were already in decline on speculation they might buy SNDK (for the record, the NASDAQ was in rally mode). There are concerns that WDC may have paid too much for SNDK.

Shares of WDC have been trying to find support in the $60-65 zone for the last few weeks. Now it looks like WDC is breaking down from this trading range and the next support level could be $50.00. Shares underperformed the market today with a -2.5% decline. Any further weakness could be an entry point for bearish trades. The point & figure chart is bearish and forecasting at $36.00 target. Monday's intraday low (Dec. 14th) was $59.06. Tonight we are suggesting a trigger to launch bearish positions at $58.85.

Trigger @ $58.85

- Suggested Positions -

Short WDC stock @ $58.85

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

Buy the FEB $55 PUT (WDC160219P55) current ask $2.45
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

Crude Oil Resumes Its Decline, Stocks Follow

by James Brown

Click here to email James Brown

Editor's Note:
Yesterday's rally is already history. The post-FOMC surge has been erased as investors sold stocks in a broad-based decline today. Crude oil plunged again trading back to six-year lows.

Current Portfolio:

BULLISH Play Updates

Activision Blizzard, Inc. - ATVI - close: 38.87 change: -0.34

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

12/17/15: ATVI managed to breakout to new all-time highs, past the $39.50 level, but gains faded by the closing bell. Shares settled with a -0.8% decline. That was better than the NASDAQ's -1.35% decline.

No new positions at this time.

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

Fortune Brands Home & Security - FBHS - close: 55.30 change: -0.77

Stop Loss: 53.85
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 16, 2015
Time Frame: Exit PRIOR to earnings in February
Average Daily Volume = 1.4 million
New Positions: Yes, see below

12/17/15: Thursday's session looked kind of ugly for FBHS. The early morning gains faded and shares closed on their lows for the day. Technically the move looks like a bearish engulfing candlestick reversal pattern.

Currently we are on the sidelines. Our suggested entry point to launch bullish positions is at $56.65.

Trade Description: December 16, 2015:
FBHS is a relative strength trade. The S&P 500 is up +0.7% year to date thanks to the strong three-day rally this week. Yet shares of FBHS are up +23% in 2015 and poised to close the year at all-time highs.

FBHS is in the consumer goods sector. According to the company, "Fortune Brands Home & Security, Inc., headquartered in Deerfield, Ill., creates products and services that help fulfill the dreams of homeowners and help people feel more secure. The Company's trusted brands include MasterBrand cabinets, Moen faucets, Therma-Tru entry door systems, and Master Lock and SentrySafe security products. Fortune Brands holds market leadership positions in all of its segments."

Their most recent earnings report was October 21st. FBHS said their Q3 earnings per share rose +17.3% to $0.64 a share. That actually missed Wall Street estimates of $0.65. Revenues were up +17% to $1.24 billion. Management guided in-line with estimates. The stock rallied anyway in spite of the miss.

Fast-forward to December and FBHS raised their dividend +14% to $0.16 a share. Chris Klein, FBHS CEO, commented on the move, "This represents the third consecutive year of a double digit increase in our dividend rate. We are continuing to deliver profitable growth and are following through on our commitment to use our strong balance sheet, capital structure and free cash flow to drive incremental shareholder value."

Technically shares have developed a bullish trend of higher lows and higher highs. The $52-53 area was major resistance and FBHS broke out in mid November. The stock held up very well during the market's December weakness. Now shares are bouncing along the trend line of support and poised to hit new all-time highs. The point & figure chart is very bullish and forecasting at long-term $74.00 target. Tonight we are suggesting a trigger to open bullish positions at $56.65.

Trigger @ $56.65

- Suggested Positions -

Buy FBHS stock @ $56.65

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

Buy the MAR $60 CALL (FBHS160318C60)

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

iShares Russell 2000 ETF - IWM - close: 113.21 change: -1.22

Stop Loss: 111.45
Target(s): To Be Determined
Current Gain/Loss: +0.5%
Entry on December 15 at $112.65
Listed on December 12, 2015
Time Frame: 4 to 8 weeks
Option traders: exit prior to January option expiration
Average Daily Volume = 36 million
New Positions: see below

12/17/15: Ouch! The action in the IWM today looks like a short-term bearish reversal. The IWM only lost -1.0%. That was better than the S&P 500's -1.5% decline. Closing near its low for the day doesn't bode well for tomorrow morning.

No new positions at this time.

Trade Description: December 12, 2015:
Stocks were hammered last week. The small caps really underperformed with the Russell 2000 small cap index plunging 60 points or -5%. The last two weeks have seen an 80-point drop (-6.7%) in the $RUT.

Last week's sell-off looks pretty ugly especially with Friday's breakdown below short-term support near 1,140 on the $RUT index. We think the weakness is overdone.

Normally the middle of December sees some tax-loss selling ahead of yearend. Last week the tax-loss selling was exacerbated by serious weakness in crude oil. Oil's plunge to new seven-year lows crushed the energy sector. There is also some general uneasiness about the Fed's likely decision to raise rates in the week ahead.

Historically the mid-December dip is a buying opportunity. The next two or three weeks is typically bullish and small caps often outperform. We want to be ready if that happens. One way to play the small caps is the Russell 2000 ETF, the IWM.

Friday saw the IWM sink -2.2% to close at $111.91. Tonight we are suggesting a trigger to launch bullish positions at $112.65. If triggered we'll try and limit our risk with a tight stop loss at $111.45, just under Friday's low.

- Suggested Positions -

Long the IWM @ $112.65

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

Long JAN $115 CALL (IWM160115C115) entry $1.18

12/15/15 triggered @ 112.65
Option Format: symbol-year-month-day-call-strike

Microsoft Inc. - MSFT - close: 55.70 change: -0.43

Stop Loss: 53.20
Target(s): To Be Determined
Current Gain/Loss: +2.0%
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

12/17/15: MSFT rallied to new 15-year highs this morning. The stock peaked at $56.79 and reversed into a -0.76% decline on the session. If this dip continues I'd look for a drop toward the $55.00 level.

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

Starbucks Corp. - SBUX - close: 59.52 change: -0.84

Stop Loss: 58.45
Target(s): To Be Determined
Current Gain/Loss: -1.7%
Entry on December 15 at $60.45
Listed on December 08, 2015
Time Frame: Exit prior to earnings in January
Average Daily Volume = 8.8 million
New Positions: see below

12/17/15: SBUX delivered another disappointing session. The NASDAQ composite lost -1.3% and SBUX followed suit. Shares tried to rally this morning but reversed at its simple 10-dma. Odds are good we could see SBUX dip toward support in the $59.00 area and its 100-dma soon.

No new positions at this time although nimble traders might want to consider buying a bounce near $59.00 (like the one from December 14th).

Trade Description: December 8, 2015:
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.

- Suggested Positions -

Long SBUX stock @ $60.45

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

Long FEB $65 CALL (SBUX160219C65) entry $1.07

12/15/15 triggered @ $60.45
12/14/15 adjust stop loss to $58.45
12/12/15 Entry adjustment - move the trigger from $62.65 to $60.45. Adjust the stop loss down to $58.65.
Option Format: symbol-year-month-day-call-strike

SolarCity Corp. - SCTY - close: 57.26 change: +3.57

Stop Loss: 51.85
Target(s): To Be Determined
Current Gain/Loss: +50.1%
Entry on December 14 at $38.15
Listed on December 12, 2015
Time Frame: 6 to 8 weeks
Option traders: Exit prior to January option expiration
Average Daily Volume = 3.7 million
New Positions: see below

12/17/15: The short covering in SCTY continued on Thursday with shares gaining another +6.6%. Some bullish analyst comments this morning didn't hurt. It was interesting to hear that Jim Chanos, considered by many to be a short-selling specialist, is still short SCTY and wishes he could borrow more shares to short even more of the stock.

Tonight we are raising the stop loss to $51.85. I suggest more conservative investors raise their stop closer to the $55.00 level instead. Actually more conservative traders may want to just cash out now after a +50% rally. The early August highs near $60-62 could be resistance.

No new positions at this time.

Trade Description: December 12, 2015:
If you looked at the news this weekend then you probably noticed the headlines regarding the COP 21 UN climate change conference in Paris. Almost 200 countries signed the pledge to help fight global warming. It's a long road from promises to implementation and enforcement but it does signal a big step away from burning fossil fuels in the future. That should bode well for solar power stocks.

SCTY is in the technology sector. Officially it's part of the semiconductor industry. They bill themselves as "America's #1 full-service solar provider." According to the company, "SolarCity® provides clean energy. The company has disrupted the century-old energy industry by providing renewable electricity directly to homeowners, businesses and government organizations for less than they spend on utility bills. SolarCity gives customers control of their energy costs to protect them from rising rates. The company makes solar energy easy by taking care of everything from design and permitting to monitoring and maintenance. SolarCity currently serves 19 states."

The earnings picture is improving. Their most recent earnings report was October 29th. SCTY reported their Q3 results. Wall Street was expecting a loss of ($1.94) a share on revenues of $111.4 million. SCTY blew away the EPS estimate with a loss of just ($0.20) a share. Revenues were up +95% to $113.85 million.

The company provided bullish guidance. They see Q4 installations up +58-69% over a year ago. They introduced 2016 guidance of +40% growth for full-year installations. They have also driven their cost per watt to a new low of $2.84. The company is focused on reducing overall costs even more.

The stock initially sold off on this news but shares bottomed in mid November near $25.00. That looks like a bottom with shares of SCTY up four weeks in a row now. Currently SCTY is hovering near its 50-dma and just below resistance near $38.00. A rally above $38.00 will produce a new buy signal on the point & figure chart. It could also spark some short covering.

The most recent data listed short interest at 54% of the 50 million share float. That's plenty of fuel for a short squeeze. I wouldn't be surprised to see SCTY rally into the $45-50 zone. Tonight we are suggesting a trigger to launch small bullish positions at $38.15. We want to keep positions small to limit risk because SCTY is a volatile stock. This should be considered a higher-risk, more aggressive trade.

*small positions to limit risk* - Suggested Positions -

Long SCTY stock @ $38.15

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

Long JAN $40 CALL (SCTY160115C40) entry $2.78

12/17/15 new stop @ 51.85
12/16/15 new stop @ 50.85
12/14/15 new stop @ 35.85
12/14/15 triggered @ $38.15
Option Format: symbol-year-month-day-call-strike

SolarEdge Technologies - SEDG - close: 26.08 change: +0.33

Stop Loss: 24.95
Target(s): To Be Determined
Current Gain/Loss: +21.6%
Entry on December 15 at $21.45
Listed on December 14, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 790 thousand
New Positions: see below

12/17/15: The rally in solar stocks lifted SEDG to a +1.28% gain in spite of the market's sharp decline today. The stock was up +10% intraday before paring its gains.

Currently our stop loss is at $24.95. More conservative investors may want to exit early to lock in a potential gain.

No new positions at this time.

Trade Description: December 14, 2015:
The world is changing. Over the weekend 195 countries signed a pledge to help cut greenhouse gas emissions and stall global warming. It doesn't matter if you're a climate change skeptic or a diehard supporter, governments are going to implement policies that change how we consume energy. It should be bullish for solar energy companies.

SEDG is in the technology sector. They're considered part of the semiconductor industry. According to the company, "SolarEdge provides an intelligent inverter solution that has changed the way power is harvested and managed in solar photovoltaic systems. The SolarEdge DC optimized inverter system maximizes power generation at the individual PV module-level while lowering the cost of energy produced by the solar PV system. The SolarEdge system consists of power optimizers, inverters and a cloud-based monitoring platform and addresses a broad range of solar market segments, from residential solar installations to commercial and small utility-scale solar installations."

The company is growing fast. Their Q2 results, announced on August 12th, beat estimates on both the top and bottom line. Revenues were up +120% from the prior year and management raised their Q3 guidance.

Q3 results were announced on November 4th. Analysts were expecting a profit of $0.29 a share on revenues of $110 million. SEDG beat both estimates. Earnings were $0.36 a share. Revenues were up +16.9% from the prior quarter and up +71.8% from a year ago to $115.1 million. Gross margins improved from 28.7% in Q2 to 29.1% in Q3.

Guy Sella, the founder, Chairman, and CEO of SolarEdge, commented on their quarter, "We are very satisfied with another strong quarter of record revenues and improved gross margins. In addition to our very positive financial results, this quarter we introduced our new HD Wave inverter topology, demonstrating our technological leadership in the market. We are confident that our global presence and expanded product offering position us well for continued growth." Management then raised their full-year 2015 revenue guidance.

The stock appears to have bottomed with the lows in the $15-16 area. The last few weeks have seen the trend reverse higher with a pattern of higher lows and higher highs. Shares recently broke through significant resistance at $20.00, at its 50-dma, and its trend line of lower highs. The point & figure chart is bullish and forecasting at $27.00 target.

The stock displayed relative strength today. We are suggesting a trigger to launch small bullish positions at $21.20. SEDG has been volatile in the past. I consider this a more aggressive, higher-risk trade.

- Suggested Positions -

Long SEDG stock @ $21.45

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

Long MAR $25 CALL (SEDG160318C25) entry $2.10

12/16/15 new stop @ 24.95
12/15/15 new stop @ 19.25
12/15/15 triggered on gap open at $21.45, trigger was $21.20
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

Columbia Sportswear - COLM - close: 43.98 change: -0.45

Stop Loss: 46.25
Target(s): To Be Determined
Current Gain/Loss: +1.7%
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

12/17/15: COLM drifted lower today. The stock lost -1.0% and looks poised to break down to new multi-month lows soon.

I would consider new bearish positions at current levels. More conservative traders might want to wait for a new drop below $43.50 before initiating positions.

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

12/16/15 new stop @ 46.25
12/08/15 triggered @ $44.75
Option Format: symbol-year-month-day-call-strike

Ctrip.com International - CTRP - close: 48.41 change: -1.42

Stop Loss: 50.55
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 15, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 3.7 million
New Positions: Yes, see below

12/17/15: The bounce in CTRP failed near round-number resistance at $50.00. Shares gave back nearly all of yesterday's gains. The stock looks poised to break down below support near $48.00 soon. Our entry point to launch bearish positions is currently at $47.65.

Trade Description: December 15, 2015:
Occasionally stocks can get ahead of themselves. Investor enthusiasm can become too frothy that drives a stock too high and shares eventually fall back to earth. That could be the case with CTRP.

CTRP is part of the services sector. According to the company, "Ctrip.com International, Ltd. is a leading travel service provider of accommodation reservation, transportation ticketing, packaged tours, and corporate travel management in China. It is the largest online consolidator of accommodations and transportation tickets in China in terms of transaction volume. Ctrip enables business and leisure travelers to make informed and cost-effective bookings by aggregating comprehensive travel related information and offering its services through an advanced transaction and service platform consisting of its mobile apps, Internet websites and centralized, toll-free, 24-hour customer service center. Ctrip also helps customers book vacation packages and guided tours. In addition, through its corporate travel management services, Ctrip helps corporate clients effectively manage their travel requirements."

First the good news, CTRP is in a growing business. According to a Goldman Sachs analyst, the online travel market in China could triple to $200 billion by 2020. In October this year CTRP made a deal with rival online Chinese travel company Qunar, which was owned by Baidu.com (BIDU). The two companies merged and together will control 70% to 80% of the hotel and air ticket market in China. BIDU now owns 25% of CTRP. Larger rival Priceline.com (PCLN) is also investing in CTRP. PCLN recently invested $500 million in a convertible bond deal with CTRP, which could eventually lead to PCLN owning about 15% of CTRP.

CTRP is also seeing strong business results. Their Q3 earnings, which came out on November 18th, were way above expectations. Management then raised their Q4 guidance above Wall Street estimates. The stock also had a 2-for-1 split, which occurred on December 1st. If that wasn't enough good news the stock is also being added to the NASDAQ-100 on Monday, December 21st.

The merger news with Qunar produced the gap higher in October. The strong Q3 earnings and bullish guidance produced the big gap higher in November. With a rally from $30 in late September to $57 in mid November it appears CTRP just ran too far too fast. The stock has started to correct lower.

The stock split has taken place and it is common for stocks to see a post-split depression. They can also see a post-earnings depression after a big rally on the news. One could argue that all the good news has been priced into CTRP. What's the next catalyst to buy it?

Technically shares are breaking down. The bounce today failed at round-number resistance at $50.00. Shares did not participate in the market's rally yesterday or today. It looks like the pullback in CTRP is not over yet. The point & figure chart is bearish and forecasting at $41.00 target.

Now eventually CTRP will find support and shares will rebound again but support could be all the way down in the $37-40 zone. Yesterday's intraday low was $47.74. We are suggesting a trigger to launch bearish positions at $47.65. Please note this is an aggressive, higher-risk trade. The stock can be very volatile. Use small positions to limit risk.

Trigger @ $47.65 *small positions to limit risk*

- Suggested Positions -

Short CTRP stock @ $47.65

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

Buy the MAR $45 PUT (CTRP160318P45)

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

GameStop Corp. - GME - close: 29.05 change: -1.51

Stop Loss: 31.25
Target(s): To Be Determined
Current Gain/Loss: +3.9%
Entry on December 11 at $30.22
Listed on December 10, 2015
Time Frame: 6 to 8 weeks
Option traders exit prior to January expiration
Average Daily Volume = 2.1 million
New Positions: see below

12/17/15: GME accelerated lower on Thursday. Shares underperformed the market with a -4.9% decline and a breakdown to new multi-year lows. Tonight we are adjusting the stop loss down to $31.25.

No new positions at this time.

Trade Description: December 10, 2015:
The future of video game purchases is digital downloads. That is why shares of GME have struggled the last couple of years. Their retail business model is in serious jeopardy.

GME is in the services sector. According to the company, "GameStop Corp., a Fortune 500 and S&P 500 company headquartered in Grapevine, Texas, is a global, multichannel video game, consumer electronics and wireless services retailer. GameStop operates more than 6,800 stores across 14 countries. The company's consumer product network also includes www.gamestop.com; www.Kongregate.com, a leading browser-based game site; Game Informer® magazine, the world's leading print and digital video game publication and the recently acquired Geeknet, Inc., parent company of ThinkGeek, www.thinkgeek.com, the premier retailer for the global geek community featuring exclusive and unique video game and pop culture products. In addition, our Technology Brands segment includes Simply Mac and Spring Mobile stores. Simply Mac, www.simplymac.com, operates 72 stores, selling the full line of Apple products, including laptops, tablets, and smartphones and offering Apple certified warranty and repair services. Spring Mobile, http://springmobile.com, sells post-paid AT&T services and wireless products through its 590 AT&T branded stores and offers pre-paid wireless services, devices and related accessories through its 69 Cricket branded stores in select markets in the U.S."

The company's earnings results have been mixed. Their Q2 report, announced on August 27th, came in better than expected. GME beat analysts' estimates on both the top and bottom line. Management raised their 2016 guidance. Guess what? Traders sold the news anyway.

Fast-forward to November. The stock has already reversed under major resistance near $48 again. Shares plunge on November 13th following an analyst downgrade. Ten days later GME reports their Q3 earnings results. Their profit was $0.54 a share. Not only is that 5% decline from a year ago but it's five cents below estimates. Revenues were down -3.6% to $2.02 billion, another miss. Hardware sales plunged -20% in the third quarter. Software sales were down -9%. GME's comparable store sales fell -1.1%, which was below guidance. If that wasn't enough management lowered their Q4 guidance below Wall Street estimates. Following this Q3 report the stock garnered several analyst downgrades.

One of GME's biggest challenges is digital downloads where customers do not have to leave their home (or dorm room) to purchase new games. They can just purchase it online over the Internet and have it immediately downloaded and start gaming. Not only does this jeopardize GME's new game sales but it also hurts a major portion of their business, which is reselling used games. If fewer people are buying hard copy discs of their video games then that means fewer people selling their used games back to GME, which the company resells at a healthy margin.

The trend of digital downloads started years ago but they are growing in popularity. The bearish story on GME is not a secret. That's probably the biggest risk. There are already a lot of bears in the name. The most recent data listed short interest at 53% of the 103 million share float. That much short interest can make the stock volatile to any potentially positive headlines. I think the bears are right and GME is headed lower as their business continues to struggle.

Another risk is valuation. The stock has fallen -33% in the last few weeks. Most of the analyst action in GME has been bearish with several downgrades. The stock currently trades with a P/E around 8.6. Eventually some analyst firm might decide to upgrade it on a valuation basis and the stock could see a short-term rally on this sort of headline. Fortunately traders usually sell the rallies in GME.

Currently GME is flirting with a breakdown below major support in the $31.50-32.00 area. A breakdown here could see the current downtrend accelerate. The point & figure chart is bearish and forecasting at $19.00 target. Tonight we are suggesting a trigger to open bearish positions at $31.40. Please note that this is an aggressive, higher-risk trade. GME can be a volatile stock. I am removing our normal entry point disclaimer regarding gap downs. Due to potential volatility traders may want to use the options instead of trying to short the stock. I am listing the January puts. You might want to consider the April puts (next available month).

- Suggested Positions -

Short GME stock @ $30.22

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

Long JAN $30 PUT (GME160115P30) entry $2.44

12/17/15 new stop @ 31.25
12/11/15 triggered on gap down at $30.22, suggested entry was $31.40
Option Format: symbol-year-month-day-call-strike

Harley-Davidson, Inc. - HOG - close: 45.42 change: -1.41

Stop Loss: 47.35
Target(s): To Be Determined
Current Gain/Loss: +0.7%
Entry on December 11 at $45.75
Listed on December 09, 2015
Time Frame: Exit prior to earnings in January
Average Daily Volume = 3.15 million
New Positions: see below

12/17/15: HOG also underperformed the market. The S&P 500 lost -1.5% today. HOG plunged -3.0% back toward its recent lows. Today's low was $45.10. If you're looking for an entry point consider waiting for a drop under $45.00.

Trade Description: December 9, 2015:
HOG was a big winner during the market's rally off the 2009 bear-market low. Shares surged from about $8 in early 2009 to over $74.00 in 2014. Unfortunately that bullish momentum is long gone.

HOG is in the consumer goods sector. According to the company, "Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Since 1903, Harley-Davidson Motor Company has fulfilled dreams of personal freedom with custom, cruiser and touring motorcycles, riding experiences and events and a complete line of Harley-Davidson motorcycle parts, accessories, general merchandise, riding gear and apparel. Harley-Davidson Financial Services provides wholesale and retail financing, insurance, extended service and other protection plans and credit card programs to Harley-Davidson dealers and riders in the U.S., Canada and other select international markets."

The company has seen sales slow down. Their most recent earnings report was October 20th. Q3 earnings growth was flat (+0%) from a year ago at $0.69 a share. That missed estimates by 8 cents. Revenues only rose +0.9% to $1.14 billion, which also missed estimates. The company said their dealer new motorcycle sales were down -1.4% worldwide from a year ago. Their U.S. sales fell -2.5%. Shipments came in below guidance.

Matt Levatich, President and Chief Executive Officer, said, "We expect a heightened competitive environment to continue for the foreseeable future." The company lowered their shipment guidance for 2015. They also lowered their margin guidance. The stock reacted with a big drop on the earnings miss and lowered guidance. Multiple analyst firms downgraded the stock in response to the news.

Technically HOG is in a bear market. Shares have a bearish trend of lower highs and lower lows. HOG spent most of November struggling with resistance at $50.00. The recent weakness has pushed shares to new two-year lows. The next drop could push HOG toward $40 or lower. Tonight we are suggesting a trigger to launch bearish positions at $45.75.

My biggest concern is some analyst deciding that HOG looks "cheap" on valuation. At this point HOG could be a value trap. Cheap stocks can always get cheaper.

- Suggested Positions -

Short HOG stock @ $45.75

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

Long FEB $45 PUT (HOG160219P45) entry $2.59

12/16/15 new stop @ 47.35
12/11/15 triggered @ $45.75
Option Format: symbol-year-month-day-call-strike

Leucadia National Corp. - LUK - close: 16.36 change: -0.13

Stop Loss: 17.16
Target(s): To Be Determined
Current Gain/Loss: +7.6%
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

12/17/15: LUK lost another -0.7% on top of yesterday's reversal lower. The path of least resistance is down but I would not start 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

12/14/15 new stop @ 17.16
12/12/15 new stop @ 17.55
11/30/15 triggered @ $17.70
Option Format: symbol-year-month-day-call-strike

iPath S&P500 VIX Futures ETN - VXX - close: 20.16 change: +0.82

Stop Loss: None, no stop at this time.
Target(s): $16.65
Current Gain/Loss: + 7.6%
2nd position Gain/Loss: +30.5%
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

12/17/15: The sharp reversal lower in stocks on Thursday fueled another bounce in the volatility indices. The VXX gained +4.2%.

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