hey there, we are live from the nasdaq marketsite. and look who i found. our resident chartist, carter braxtonworth. while these guys are getting ready for the show, here's what's coming up. >> people want leadership, mr. president. >> no, they don't, michael. because the winners have been taken to the woodshed. and we'll tell you which name could be next. plus -- ♪ one is the loneliest number that you'll ever do ♪ >> and that's just how far away twitter shares are from its ipo price. but there's one thing that could set it up for a surge and we'll tell you what it is. and -- >> we have a problem. >> that's what traders are saying about transports and small caps. and we'll tell you what it could mean for the rally. the action starts right now. let's get right to it. the big question this week, are

we starting to see a change in leadership in the market? let's get in the money and find out. and obviously we talk about apple a lot but apple was down 5% on the week, mike. >> i mean, apple obviously has been looking miserable ever since earnings. that is clearly a place where we're seeing a lot of weakness. disney's disappointment, all of that obviously, this was one of the bellwether stocks. the move we saw to the downside in disney we haven't seen in a decade. there is clearly a reversal where we're seeing money come out of these high-flying names. but what's interesting to me is i'm not sure the panic has bled into that portion of the market overall. take a look where the vix closed just over 13. this isn't a market looking terribly panicked. >> not at all. i would say the disney thing is important because i think it was a very crowded sector. people felt comfortable in media stocks and it was names like comcast that didn't have results that were actually down in sympathy and then disasters out of viacom, cbs, fox a. so you had a massive part of the consumer discretionary space just get taken to the woodshed

and then you saw a name like tesla. i know a lot of people are focused on the netflixs and amazons. tesla was down-10% in the week. that's a name i think people have disregarded valuation. they love the story and they felt comfortable until today. >> disregard the valuation in a lot of these stocks. disney for all the good things you can say about it was trading at or near all-time highs in terms of valuation. and that was true for a lot of the high-flying stocks in the s&p. >> just because people are complacent about the markets that doesn't necessarily mean the markets are okay. >> the issue is that if you have a steady uptrend over several years which is the case in the market in general and you have leaders that we've had and then certain leaders start to falter which we're seeing, apple and certain biotech and disney among others, it leaves you with fewer and fewer individual players to move the team forward. or said differently we have heretofore winners that have faulted or winners that are exhausted, google that can't help us.

so, in order for the market to keep going, tough exploitative moves at the strong end you have dwromt at the weak end. we're not seeing that. the energy got worse today. so there's no offset to the coming in of the -- >> that's a really good point. we are in a late stage bull market. there's no doubt about it. the s&p has been going sideways for six months now. and if we had seen the move in apple this week, okay? and we saw money moving into another sector that maybe looked pois poises poised for a breakout, that sort of thing, i'd say that's perfectly. you're seeing rotation out of a very crowded long positive sentiment story. we didn't see it and carter mentioned biotech. that's a large segment, especially in large cap biotech but also smaller company that's been so wrapped up in an m & a frenzy. the xbi the way that fell apart 10% the last few days that's troubling. i would have thought some of this money would have gone into that space. >> with all this said we asked the question what could be next and chartmaster, you say

starbucks could get ugly. >> this has been priced for perfection as disney was. this selling spills over names like this, this is one we think could take it on the chin. meaning it's steep, it's uncorrected and when people get margin calls they want to raise capital they sometimes go after expensive names or at least extended names whatever nomenclature you want to use. here's a fairly long-term chart going back to the prior bear market low in '02. '02 low, '09 low. you can draw the lines any way you want of course. and that's how i draw them. meaning we've got a well-defined trend, we bounce off that trend, and now we're pretty far above trend. so the presumption is some sort of mean reversion. now, just looking at a few other things to put in context, this is the current move. this move then highlighted. and this is almost a 100% move. 35 to 60. the risk is that we're going to breach this line. and any breach here, the implications are something down even to this gap. and that would give us something

in the order of a break closer to the major trend line. now, two other things i think that are relevant. coffee, as opposed to most other commodities which keeps going lower, looks to me as though it's just starting to maybe come out of this downtrend. if that's the case and coffee really is bottoming, that also is not good for starbucks. so here is a five-year chart of the relationship, or inverse relationship between starbucks and coffee. and obviously whenever coffee has had a great sell-off starbucks has done the reciprocal and when coffee was actually spiking in 12 it stumbled starbucks. so here the presumption is that that risk is also in, has nothing to do with extended stocks and extended market. but if that goes against starbucks that's not going to help the story either. >> all right, so, mike. >> this is one of -- starbucks is in a really hard place to make bearish bets because obviously from a fundamental standpoint we've seen double-digit eps growth basically ever since the credit crisis. they continue to hit their numbers again and again.

but what is interesting to me is when air starts to come out of a stock you ask where you can start to buy it and one of the things you would normally look for is to look to buy it where you can start to buy it at historical valuations or at some discount. the reason is it's trading at a 15% to 20% premium to historical averages and this when most of the people are look probably for some of that top line growth to actually decelerate. i look at starbucks, i agree with carter, i think the valuation is awfully rich here. they can continue to perform. but that doesn't mean the stock's a buy. >> so, the trade. >> the trade very simply, 57 1/2, 52 1/2 put spread, you can spend a dollar and a half for that. you're spending about 3% of the current stock price to make a bearish bet. and that actually is going to get down. $49, $48 is about the historical number and you'd expect if it does continue to show weakness for it to go below historical numbers. >> here is a stock that is much like disney was prior to the sell-off. nobody thought that disney could sell off 10% in a weak and it

actually sold -- >> except disney sold off on earnings and starbucks already reported earnings and they were good. >> when disney report td gapped up after its report, gave back all the gains in one day and it since made a new high. and now it's come back here. the thing i would say is the more people that crowd in these names, i'll throw nike in there, i'll throw chipotle in there, it makes them more dangerous, especially in a market where there's no leadership to make new highs. so, at some point a stock like starbucks becomes as good as it gets. >> just quickly, the catalyst to the downside in your view is basically a market downturn overall? >> i think it's a combination of weakness in these high-flying stocks, people taking money out of somewhere their winners and we're seeing that. we're seeing it in fundamentally some of the analysts are saying there's limited upside here and to take profits. when you start seeing institutions saying there's no upside they're going to start taking money out. >> you don't need a catalyst. look at biotech, xbi. you do not need a catalyst for names when too many people head for the door at the same time in a crowded name like this that's what happens.

>> let's move on to twitter here. the shares of a beaten social giant fell 2%, coming right off its ipo level. the sell-off prompted silicon valley capitalist and twitter shareholder chris sacka to take to what else, twitter, to tweet this. "twitter's board of directors should put this looming uncertainty to rest by naming jack dorsey bane and evan williams as the company's leaders and let everybody go back to work. dan. >> i don't think there's anything new here. i think chris saka has been very smart about what he's been critical about as it relates to the company. he's not been dogging them. i think with the stock making a new all-time low today, $1 above their november 2013 ipo price i think investors are really -- they need to see more clarity. the company has not done that so far. but i will say that expectations may be low enough now, 26 bucks, if it hits there early next week you may see some bells ring in some people's heads. roundtrip the whole move from the ipo. so i think you have a situation where you have very poor sentiment, the stock is amazingly oversold and you have some catalysts in the near future.

>> so, what's the trade? >> listen, this is one where i don't think carter and mike nailed this one a couple weeks ago prior to the earnings event. i think buying this stock right here i think you're throwing something up against the wall. what i would do is look out. you need some sometime to have this thing play out. if you think that ceo announcement is going to be positive and you still think there's takeover premium that should be in this stock and you think it's a scarce social media property as i do, you could look out to january expiration. when the stock was 27 today, the january 30-40 call spread cost $1.80. that's buying one of the january 2016 30 calls for 2.45, selling one of the january 40 calls at 65 cents. your max risk is a $1.80. that breaks even. the stock's at 40. let's be honest with the stock at 37, 40 seems leek a long ways to go here but you do have a couple pieces of news that could catalyze this sort of move. the stock was trading at 40 just a couple months ago. >> you do have these two

potential catalysts which are very well known and the stock keeps going lower. what does that say in the sentiment? nobody believes the catalyst will actually be a catalyst as every day passes. it is less likely that a buyer is going to step in and buy -- >> i don't agree with that. >> i disagree with that also. look, they are growing top line revenues. they could have free cash flow next year. where can you find social media property that has this kind of cachet that could generate half a billion dollars' worth of free cash flow next year and it's growing the top line at 50% to 60%. if it continues to do that, and you're looking at probably free cash of maybe 700, $800 million in 201, it probably should trade at something like 20 times that tub -- >> you sound more confidence than anthony noto did on that periscope conference call, mike. >> there's no technique to saying today's the day that we should buy these weakness. all these things might be true but every day the stock goes lower and now there's no reference point at all. we're getting to where no one-run has ever owned it except ipo price. there's weakness to take advantage of from a stock stock that dips and there's weakness

to stay away from and i would be in the latter category. >> wow. >> i think there's very few opportunities on the long side right now and this is the potential for some torque if you get a few things right. i want to make one important point. remember facebook in the six, seven months after its ipo people were calling for zuckerberg's head, "barron's" put a $15 price target on it and they got some things right and i'll just mention, this what's app was bought for 22 billion. this company has a $17 billion enterprise value right now. i think it's probably worth a lot more to a larger property at some point very soon. >> only risking 5% of the current stock price doing this trade. even if you think the thing's got 10% to the downside you can still make a bullish bet here in case it comes back. got a question send us a tweet to @optionsaction. for everything "options action" check out our website, optionsaction.cnbc.com. it also contains the secret to life itself. obviously you want to check it out. here's what else is coming up next. that sums up tech this week, and if you think it's going to get worse we've got a way to protect your portfolio.

plus, it's the one sector that could be signaling more pain to come and we'll tell you what it is when "options action" returns. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. i'm here at the td ameritrade trader offices.

ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this. small cap stocks are running into some big problems. the russell 2000 is down 3% in the past month alone and the chartmaster sees bigger problems on the horizon. so, carter, what do you see?

>> a bunch of charts. this was a leading area of the market that's now completely faltered and that's now part of the problem. let's look at a few. the setup working backwards. this is the long-term chart since the prior bull market peak, not '07 but '99-2000. and we know that of course small caps have tripled the performance of the s&p. that's part of the problem. but anyway, here and now, this is the daily chart. and what my eye sees is after breaking out we're starting to falter. so, if you're going to break out from a well-designed top you don't want to give it back so quickly. one way to draw the line is this. and it's not ideal that we started to cut below that line. another way to draw the lines, like this. meaning we've got sort of wedge and hedge here and we're breaking out of this to the down side. not ideal. here's the long-term chart. since basically the 2011 so-called quick bear market when the s&p dropped 22%, and if we're just to get back to trend, well, that's going to give us

something in the order of a minimum of another sort of 5%, 6%. perfectly reasonable and hardly excessive. and then two other things for fun. let's talk about a couple of the fundamentals. here is the trend in earnings revisions from all southside analysts that cover the stocks in the russell 2000. so, a year ago the consensus was that this index would earn basically $56 a share. and now they've revised it down to 43. that's a 21% decline. so overly optimistic and now down to this, which leaves us with the following multiple. so here's our consensus now. 43. again, having come from 60. so quite an error rate, yes. and then here's our price of the russell, which gives us a p/e of forward, not factual -- but the end of this year. who knows if that's right. of almost 28. it's all yours. >> mike. >> look, this is one of those situations -- i mean, this index

has obviously fallen a lot more than the s&p. we're only off about 3% in the s&p. and the market isn't, like i said, not showing a whole lot of alarm bells here. i think the way you want to do, this, look out to october, buy the 120-110 put spread. you can spend about $2.85 for that. a little over 2 1/2% of the current level of the index. the protection kicks in essentially right where we are right now and we're going to get protection down about 5%, 7%, which is the level carter is targeting. >> i bet you like this. >> i love it. i love carter's charting on the iwm and russell. i think the most important chart he put up was the earnings revision one. when you think about what's going on, there's a lot of expectations built into the second half for some sort of pickup as far as earnings and remember in the russell 2000 they have far less dollar exposure than the large caps do, than the u.s. multinational. the s&p, that sort of thing. you have this expectation now that seemed out of whack to me and i suspect that the selling that you're seeing right here, the people who've really

sharpened their pencils about the second half as far as a pickup in earning growth they just don't see it. to me i think you can pick on the russell, you can also pick on the nasdaq 100 because i think it's lost a lot of leadership there and the s&p's going to be the last soldier to fall. >> other sectors within the iwm, carter, that look the most troubled or vulnerable. >> the thing about this is think about it. it's where there's the future, right? it's idiosyncratic growth. each thing is a gopro. a new mousetrap that's working and not so mature as to have been picked over. and stocks in this index don't care about currencies, they don't care about putin, they don't care about the ukraine, they don't care about china they're basically domestic and the fact that they're faltering is an issue. and also there's this. in any general drawdown of the level of prices for equities, small caps underperform. >> these things trade on hope of course. and take a look at some of the names that are in here. tiny stocks like retail me not which happens to be based in austin. karats pharmaceuticals down 60% from their highs earlier this year. those types of moves are

reflected in the fact these hold 'em and hope types of trades, people have already started to sell them. that's one of the reasons the index is down much more than the s&p. >> this is really a sentiment gauge for the entire markets, we're seeing trouble in the small caps. >> solar. here's a sector we just saw sunedison got cut in half since july 20th. so, when you think about those sorts of moves, carter said the word idiosyncratic. i didn't know what it meant until i just googled it. but that is idiosyncratic risk. if you start seeing rolling sell-offs on different sectors, it bottles up. coming up next, crude oil fell more than 7% this week and that means slick profits for mike. we'll tell you how he's cashing in coming up. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies

to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this.

ahh... steve, other than making me move stuff, ces. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this. go to ziprecruiter.com and post your job

to over one hundred of the web's leading job boards with a single click. then simply select the best candidates from one easy to review list. and now you can use zip recruiter for free. go to ziprecruiter.com. time for the upside call. energy stocks fell more than 3% this week and that's great news for mike kuo. take a listen. >> i think the simple thing to do if you have these things in your book, you're concerned about future declines, you can look out at the xle, and by the september 70-65 put spread paid 2.20 for those 70 puts, sell the other against it for 70 -- >> that trade is looking good. mike, what do you do? >> you have to stay bearish in the xle right here. there doesn't seem to be any

support for crude. if the sanctions are lifting in iran we're going to see an extra half a million barrels a day. in a week we're going to see a million barrels a day. in a month. so, you know, look out below. i would actually just take the spread and roll down and out. october probably the 65-60. >> do you concur? >> yeah. short, stay short. christmas crude made a new contract low. something's wrong. >> all right, let's move on here and talk about dan's qqq trade. mike's not the only one profiting from the market sell-off. two weeks ago dan made a bearish bet on tech. take a listen. >> the trade that i'm looking at is almost you could use it as a hedge. what i'm looking for ais a retest of the 200-day moving average down toward 105. so today when the etf was about 112 i bought the september 110 put. >> well, the 5% sell-off in apple this week put hurting on the nasdaq. you can call it that, dan. >> yeah, it did. and you know what's keeping it above that 200-day, while we've seen the s&p sit on it and the iwm, the russell break it, is amazon and it's facebook and it's netflix.

you know, those three names are really kind of holding it in here. to me i want to see those things get weak. they were a little bit weak today. if you do see them break or give back mf those recent gains you do look to spread this one. but this is september expiration. i really do want to keep it on. i expect increased down side volatility in the nasdaq. >> do the charts of the generals look weak? >> the q has that little gap i'm sure you're looking at at 107. that's an easy objection there. this is the problem with so many parts. everywhere you look there's a little problem here, a little question there, i little fissure there, something's wrong. >> let me ask you one more question. facebook. apple. what do the charts look like? >> apple is a broken uptrend. facebook clearly is. that begs the question is facebook going to do what disney and apple have already done or is it somehow going to maintain? at some point, if selling in general gets to everybody nobody is immune.

>> all right. coming up next, reach deep into your pockets. pull out your phones. think nice thoughts. because we're taking your tweets coming up. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. i'm here at the td ameritrade trader offices.

ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings.

impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this. let's take a tweet. tony says "the u.p.s. short trade is not work out. hang on or bail out?" that was your trade, right, mike? >> it was. we clearly got the direction on this one wrong. and at this point because we're long the 92 1/2 puts those are too far out of the money. i think what you want to do is just blow that trade out and take what little is left of it. >> what happened, chartmaster? >> he's being generous, tony. it was day one, meaning soon as you put this on the thing gapped up. 7% people used everyone -- 35's too tied, 10 is a little too wide. but once something's 6 1/2, 7%, you have to do something. that happened instantaneous lei. that's. move on to the next. >> next up, david asks when will

shak trade options? is the stock going 100 bucks? >> here's the deal. options were supposed to be listed on july 28th. they actually pushed it out. the company has a very, very small float. it has very high short interest. they registered 4 million shares on july 20th. four shareholders. they got to their six-month ipo lockup. they haven't brought the shares yet. i think you need to see that float increase to shares outstanding are kind of double the float here. right now it seems like it's really tough liquidity. i can't tell you about 100. i know the stock's up 50% independent last few weeks -- >> short interest that high it's going to be tough because the options will be priced a little funkily as a result. >> as for the 100, carter, you see that? >> that's aggressive stuff. that's the prior peak and so forth. the thing about a stock that doesn't have a lot of trading history is if the premise is looking at where a lot of shares would have changed hands and where levels are, there's no real reference point here. so it would be just i would say this is take your chances. >> time for the final call. carter braxtonworth, what do you say? >> all sorts of things to do in the market. starbucks had a low of 4 and

think where it is now after five, six years. take some profits. >> starbucks, put spreads, that's the way to do it. >> dan. >> twitter it's contrarian. define your risk give yourself some time. >> our time has expired. i'm melissa lee. thanks so much for watching. we'll see you back here monday at 5:00 p.m. for "fast money" meantime, "mad money" with jim cramer starts right now. >> announcer: the following is a paid advertisement for dr-ho's physio belt, brought to you by dr-ho's. >> hi. i'm john cremeans. welcome to our show, "living without back pain." do you suffer with back pain, hip pain, or shooting pain that runs down your legs? well, stay tuned and discover how others just like you have found the new way to relieve their back pain. >> it's really funny. i just put the belt on. i've had it on for about a minute, and already, there is a reduction in pain that i have in a particular spot on my back. it's weird. i didn't think it would work so fast. >> the belt allowed me to walk for the first time in a year without a cane.