Option Investor
Newsletter

Daily Newsletter, Monday, 6/9/2014

Table of Contents

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

Market Wrap

Quietly Making New Highs

by Thomas Hughes

Click here to email Thomas Hughes
The market opened without much bang then quietly made its way to another new high.

Introduction

The Dow Jones Industrials, the Dow Jones Transports and the S&P 500 all made their way to new highs today. Last weeks employment data plus some better than expected news from the Asia-Pacific sector over the weekend combined to quietly propel all the major US indices higher in today's session. In China the trade surplus increased more than expected on higher exports and is now up 7% year to date. In Japan 1st quarter GDP was revised higher by nearly a full point to 6.7% from 5.9%. While these two bits of news are positive for the global economy and us in turn what was really important for the market going into the start of this week was the jobs report on Friday. Jobs creation remains steady and somewhat strong if not robust and high enough to support the current rate of expansion.


Futures trading was mostly flat to positive in the early morning hours. The Dow was indicated to open up by about a point, the SPX down by about a point. These levels held pretty steady going into the open. After the bell the indices opened at about these levels, dipped for about three minutes then began a steady march up to the morning high around +6 for the SPX and +45 for the Dow Industrials. There were no economic releases today and no earnings reports of consequence. This week is fairly light in terms of data and earnings but there are a few to be aware of. Tomorrow the JOLTS report on expected job openings, later in the week retail sales, jobless claims, business inventories, PPI and Michigan Sentiment are on the list.


During the afternoon portion of today's session the indices drifted back down to test the early lows. The S&P traded into the red by about a point or two before bouncing once again back into the green around 3PM. The last hour of trading was fairly quiet with the indices holding steady just above last weeks closing prices.

The Economy

According to Moody's weekly survey of Business Confidence administered by Mark Zandi businesses in the US, those participating, remain upbeat. Sentiment remains strong and shows “no sign of wavering”. According to the report this is the 2nd week in which there were no negative responses. Sales, pricing, inventory and hiring are also all still strong.

James Bullard, St Louis Federal Reserve President, spoke today at a conference. Among his statements he said that the US economy is as close “to a normal state” as it has been since the housing bubble. The new challenge for the Fed as he sees it is determining the appropriate pace of accommodation.

The Bank Of Japan is meeting this week. They are scheduled to release their statement early on Thursday morning. The bank is not widely expected to make any sort of move with their current policy. Economic data, most recently the revised 1st quarter GDP, supports earlier comments and statements to the effect that the current QE was enough, that Japan was improving and that the bank saw no need to increase stimulus now or in the near future. The USD/JPY hovered in a tight range just above the 102.50 level and the near the mid point of the 6 month trading range.


Merger Monday

M&A activity was semi hot over the weekend. Several companies announced acquisitions or the advancement of plans for acquisition. Topping the list was Tyson's bid for Hillshire Brands. Tyson beat out rival Pilgrims Pride in a deal worth $8.55 billion. There are still some small hurdles to cross before the deal can be finalized such as Hillshire being released from it's agreement to acquire Pinacle Foods. Today shares of Hillshire surged 5% to trade near $62, the deal values the company at $63. Shares of Tyson and Pilgrims Pride both fell, Tyson by about -2%, Pilgrims Pride by about -5%.

Carl Icahn announced a new 9.4% stake in Family Dollar. The stock surged more than 13% in the pre market and traded even higher during the day. Icahn is seeking to increase shareholder value through several initiatives and may seek a board seat. One possibility is a sale to Dollar General which also surged in today's trading.

Merck agreed to buy Idenix Pharmaceuticals in a deal that values the company at roughly 3.5X Friday's closing price of $7.23. The total value of the deal is roughly $3.85 billion. Shares of Idenix jumped more than 300% in today's session.

Analog Devices agreed to buy Hittite Microwave Corp at $78 a share, a 29% premium to Friday's close. Shares of both stocks traded higher, Analog by about 5%, Hittite by about 30%.

Story Stocks

Apple's much anticipated 7-for-1 stock split went into effect today. The new shares traded opened around $92.50 and showed a little volatility going into the lunch hour. Shares initially traded lower, pushing to an adjusted three day low before rebounding and moving to a new high. I would expect some more volatility in this stock throughout the week simply because of the massive amount of new shares on the market. Some investors will want to take some profits and some investors will want to get in at this new and attractive lower price. For now it looks likes there may be more interested buyers than sellers.


McDonald's announced that global comp store sales increased by 0.9%, about a half % better than expected. There were areas of strength and weakness with the US the notable area of weakness. US comp sales decreased by -1% while Europe and Asia both saw gains. Europe is up 0.4% and the Asia-Pacific region is up more than 2.5%. Shares of McDonald's fell about 1% in today's session but found support around the short term moving average which helped to reduce some of the loss. Momentum is bearish in the near term but there is some evidence of support in the MACD and stochastic. Current resistance is around $102.50 with next support just below the current level around $100.


The Ten Year Treasury

The yield on the ten year treasury note climbed today to near a one month high. The yield is now near 2.610%. Indications are bullish at this time with a potential upside target near the top of the range around 2.750%. Current resistance is the 150 day EMA at 2.644%.


The Gold Index

Gold prices held steady around $1253 today. Early trading saw the price rise a few dollars, later trading saw it fall a few dollars. Although above $1250 the price of gold is still near a four month low. I still can find no reason to get bullish on gold and data from the CFTC released last week shows that fund managers have cut their bullish positions on gold to the lowest levels since January, just before the start of the most recent decline. At the same time the Ukraine situation, which had been driving some money into gold, is quieting down and the global equities markets are rallying to new highs. The Gold Index traded marginally higher today but is still below near and short term resistance. Indicators are turning bullish but without a break above resistance and/or some major shift in the outlook for gold I expect this to be a relief rally and entry point for bearish positions. The BOJ meeting this week could shift gold values but I see the FOMC meeting next week as more of a potential catalyst.


Sector Snap

Among today's leaders, including the industrials and the transports, was the banking sector. The Banking Index surged more than 1.5% today, making a very strong white candle and breaking resistance. The index has been very strong since hitting bottom in mid May and now looks good to test recent highs and potentially break out to new highs. Momentum in the index is very strong and rising in the short and long term. Helping the move today was a string of positive news in the sector. Suntrust, a southeastern regional, received an upgrade. Wells Fargo hit a new all time high and Chase received a new round of tax credits for it's efforts to support jobs in low income areas under the New Markets Tax Credit.


The health sector was today's notable laggard. Among the 9 S&P Spyder Sectors there were four trading in the red today led by the Health Sector, -0.58%, and followed by utilities and consumer staples with roughly a -0.2% drop each. The Health Sector Spyder (XLV) is falling from long term resistance and in danger of a double top. Bullish MACD has peaked and is convergent with a top over the longer term. Stochastic is overbought and making a bearish cross in the top of the upper signal range. These signs do not mean reversal is definite but this sector will bear watching over the next few weeks and months. Current resistance is just above $60 with first support around $57.50 on a drop below the short term 30 day moving average.


The Indices

The S&P 500 made a new high today but did it the hard way. The index opened slightly lower, moved a little lower still, bounced back up, made a new high about 6-7 points above last weeks close, drifted back into the red and then hovered just above break even into the close. Regardless, the index made a new high but now the question of short term pull back or consolidation is in my mind. Today's action was bullish but shows there is some resistance to higher prices. This resistance may be due to earnings expectations, earnings season starts in about 5 weeks, or it could be due to the FOMC meeting next week which I think more likely at this time. Momentum is still bullish and on the rise but stochastic has made a bearish cross. In terms of the trend the stochastic cross is not a bearish entry signal but could be a warning for the bulls; the market is in rally but now may not be the best time to get into new positions. The rest of the week could see the index move more sideways than up until the data comes out on Thursday and Friday. Support is now at 1950 for the near term with stronger support around 1925. My upside targets around 2000-2020 still stand, we probably wont get there in a straight line though.


The Dow Jones Industrials also made a new high today and is also similarly signaling that a near term peak may be at hand. Today's candle was small compared to the last two days with a significant upper wick for its size. This is indicative of selling but not necessarily a sign of reversal. The index is trending up and supported by indicators in the short and long term but is also at a level where some profit taking could be taking place.


The Dow Jones Transports broke out of a near term consolidation just last week, Friday to be exact. Today's action took the index up to yet another new high but similar price action to the blue chips and broad market suggest a possible near term top or peak may have been reached. Looking at the indicators the MACD is most troubling here because it is forming a potential H&S pattern that can precede a correction. I don't see any catalyst for a real reversal in this index but the weeks data could bring some pull back if it is weaker than expected. The long term trend is up and the long term outlook for the economy is up so any pullback or correction that does happen should be a potential buying opportunity.


The Nasdaq Composite climbed marginally higher today, in line with the other indices, and made a similar candle formation. The difference is that with this index the resistance is more tangible. The SPX, the Dow and the Trannies are all wrestling with new all time high resistance, the Techs are fighting with longer term, previous all time high resistance set in March at the beginning of the last correction of this index. The indicators are bullish but also suggest the top of a range is being approached. The Nasdaq could enter a significant period of consolidation once it meets the previous all time high and could in fact be the cause of consolidation in the other indices.


This week is relatively quiet compared to what we have had to deal with over the past two months. If there wasn't data or earnings to contend with it was the Ukraine. For now, the economic calendar is very light, earnings are very light and the Ukraine situation is calm and quiet, which, with the FOMC next week, could keep trading very light. Things to keep an eye on will be the BOJ and then the few points of data we will get on Thursday and Friday. The trends are up but some caution is due.If the economic trends continue as is then it will be time really soon to start talking about earnings expectations and whether or not the current consensus is too low or too high.

Until then, remember the trend!

Thomas Hughes

 


New Option Plays

Poised To Soar Into Summer

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Expedia Inc. - EXPE - close: 74.55 change: -0.54

Stop Loss: 71.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
EXPE is in the services sector. The company is in the super competitive online travel industry with rivals like Priceline.com (PCLN) and Orbitz Worldwide (OWW).

EXPE is developing a trend of beating analysts' estimates with strong profit and revenue growth. This past quarter EXPE reported revenues of $1.2 billion. That is the fifth quarter in a row that EXPE has delivered double-digit year over year revenue growth. The company has also seen surging growth in its bookings. Q3 2014 saw 15% bookings growth. Q4 2014 was +21%. Q1 2014 was +29%.

Analyst firm Cantor Fitzgerald recently offered bullish comments on EXPE and raised their price target. The company is having success with its Expedia Traveler Preference program. In Q3 2013 there were about 35,000 hotels in the program. By Q1 2014 that has grown to 51,000 hotels. As more hotels join it will boost EXPE's room nights metric and sales.

Billionaire hedge fund manager David Tepper's Appaloosa Management is also bullish on EXPE. The latest 13F filing showed that Appaloosa had initiated a new stake in EXPE in the first quarter of 2014.

Bears could argue that EXPE, PCLN and OWW could face competition from companies like Google and Facebook as they seek to boost their ad revenues to their large audiences. Reuters has reported that Google is experimenting with some programs with a few hotels. This threat is probably a few years away and could eventually make EXPE as potential takeover target.

Technically EXPE experienced a correction from $81 to $67 earlier this year. The stock found support in the $67 area and just recently EXPE has broken out past some key resistance.

At the moment shares of EXPE are flirting with a breakout past potential round-number resistance at the $75.00 mark. Today's high was $75.32. I am suggesting a trigger to buy calls at $75.75 with a stop loss at $71.45, just under the simple 50-dma.

The Point & Figure chart is bullish and forecasting at $90.00 target. I do expect the $80.00 area to offer some overhead resistance. We will choose a target later as the play progresses.

Trigger @ $75.75

- Suggested Positions -

Buy the Oct $80 call (EXPE141018C80) current ask $4.10

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

Annotated Chart:

Weekly Chart:

Entry on June -- at $---.--
Average Daily Volume = 1.6 million
Listed on June 09, 2014



In Play Updates and Reviews

MMM Hits Our Bullish Target

by James Brown

Click here to email James Brown

Editor's Note:

Shares of 3M Co. (MMM), a Dow-component, hit our bullish exit target today.

LMT hit our entry trigger while FB, GILD, and BYI hit our stop loss.


Current Portfolio:


CALL Play Updates

The Boeing Company - BA - close: 137.96 change: -0.29

Stop Loss: 129.90
Target(s): To Be Determined
Current Option Gain/Loss: +33.3%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: BA spent most of Monday churning sideways and closed with a minor loss. We can look for short-term support near $136.00 and $134.00. The next level of potential resistance is most likely the $140.00 level.

Earlier Comments:
BA is in the industrial goods sector. The company is a major manufacturer for aerospace, aviation, and a defense contractor. The company last reported earnings on April 23rd and held an analyst day in mid May. Earnings results were strong. Wall Street expected a profit of $1.56 per share on revenues of $20.21 billion. BA delivered $1.76 per share with revenues rising to $20.46 billion for the quarter.

BA said their total company backlog had ended the first quarter at $440 billion. That's up from $390 billion a year ago. About $374 billion is for commercial airplanes and the rest is defense and space related. This represents about 5,100 aircraft orders and several years worth of production. BA recently reaffirmed their 2014 guidance and their airplane delivery scheduled.

Analysts have been positive and raising their price targets and earnings estimates thanks to BA's strong Q1 results, their improving margins, and BA's stock buyback program. Margins are a big deal. BA has been slowly growing its margins over the last couple of years and suggested they will continue to see margin improvement in 2014.

There has been some concern that the U.S. defense budget might be cut again and that could impact BA's defense sales. Yet the New York Times recently reported that BA is close to signing another multi-billion deal with the U.S. Navy for 47 more fighter jets. This deal is expected to close over the summer.

BA has also seen strong growth overseas with international sales accounting for 30% of its backlog. China is expected to grow into the largest aircraft market by 2032. BA is strengthening its position in China with another big sale of fifty 737 jets to a new Chinese budget airline. The retail price on this deal is estimated to be in the $3.8 to $5.5 billion. BA's China president said the company will deliver 140 aircraft to China this year following 143 deliveries in 2013.

Asia will also be a growing market for BA's defense and security business. A recent Bloomberg article mentions how territorial disputes in Asia are getting worse and there will be rising demand for maritime and aerial surveillance systems. BA's defense business chief believes aerial surveillance equipment and machines will continue to grow steadily for the "foreseeable future."

Technically shares of BA are on the up swing after spending more than three months consolidating in the $120-132 area. The recent strength has pushed BA through resistance and the stock closed at new four-month highs.

The point & figure chart is bullish and forecasting at $160 target. I do expect BA to see some resistance at its 2014 high near $145.00.

- Suggested Positions -

Long Aug $140 call (BA140816C140) entry $2.25*

06/02/14: Triggered @ 135.55
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on June 02 at $135.55
Average Daily Volume = 2.95 million
Listed on May 31, 2014


Biotech ETF - BBH - close: 93.42 chang6: -0.03

Stop Loss: 85.75
Target(s): to be determined
Current Option Gain/Loss: + 7.0%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: Biotech stocks delivered a mixed performance on Monday. The BBH struggled with the $94.00 level multiple times before closing virtually unchanged.

Investors may want to raise their stop loss.

Earlier Comments:
Last year the biotech industry doubled the market's growth with +60% gains in the BBH. The rally continued into January and February with almost another +20%. Then sentiment reversed. Suddenly traders did not want to own the momentum names or the high-growth names. News articles and debates about the extremely high costs of some biotech treatments like Sovaldi helped feed the sell-off. Biotech experienced 20 percent correction (actually -22.6%) in less than two months.

Now it appears that investors are losing their fear over the growth names again. The BBH has been consolidating sideways the last several weeks. Many believe the correction in biotech is providing a great entry point. There are plenty of high-profile biotech firms with low multiples. A lot of the big names have high-quality pipelines. The group could see more M&A activity as older firms seek to buy up younger rivals.

We want to be ready to buy calls if the BBH can breakout from this consolidation phase. Currently shares of this ETF are testing resistance near $90.00 and its 50-dma and 150-dma. I am suggesting a trigger to buy calls at $90.25.

Bear in mind that biotech stocks can be volatile. The BBH does not see a lot of volume and the option spreads are wide. Add it all up and I would label this a more aggressive, high-risk/high-reward trade. Investors may want to start with small positions.

- Suggested Positions -

Long Sep $95 call (BBH140920C95) entry $3.55*

05/27/14 triggered @ 90.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on May 27 at $90.25
Average Daily Volume = 119 thousand
Listed on May 22, 2014


Capital One Financial - COF - close: 81.99 change: +1.19

Stop Loss: 74.95
Target(s): To Be Determined
Current Option Gain/Loss: +67.3%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: Shares of COF were upgraded this morning and the stock surged +1.4% on the news. COF is now up five days in a row. It might be time for a little pullback. The $80.00 level should be new support.

Earlier Comments:
COF is in the financial sector. The company provides financial services and products in the United States, United Kingdom and Canada. They're probably best known for the Capital One credit cards.

The financial sector took a leadership role in today's widespread market rally. The group has been lagging the big cap indices the last few weeks. If financials resume their up trend it's going to be a rising tide that helps lift shares of COF to new highs.

Financials should also benefit from the big picture view that interest rates will rise. Some of the federal reserve governors have been hinting that the Fed may have to raise rates sooner than expected. If rates do start rising then investors could start buying financials ahead of this trend.

Credit card companies are also showing strength in their loan quality. COF said their charge off rates have been dropping (losses from unpaid loans).

Technically shares of COF have a long-term bullish trend of higher lows and it's about to breakout past resistance and hit new multi-year highs. The point & figure chart is already bullish and suggesting an $83 target.

- Suggested Positions -

Long Sep $80 call (COF140920C80) entry $2.30*

05/28/14 triggered @ 78.75
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on May 28 at $78.75
Average Daily Volume = 3.0 million
Listed on May 27, 2014


CVS Caremark Corp. - CVS - close: 78.55 change: -0.37

Stop Loss: 74.65
Target(s): to be determined
Current Option Gain/Loss: +25.9%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: CVS is off to a slow start this week with a -0.4% decline. After several weeks of gains we shouldn't be surprised to see a little pullback. Watch for potential support at its 10-dma near $78 and its 20-dma near $77.25.

Earlier Comments:
CVS is in the services sector. The company provides integrated pharmacy healthcare services in addition to running a drug store chain with over 7,600 locations. CVS' largest rival is Walgreen's with 8,650 locations.

The company's most recent earnings report was mixed. CVS delivered a profit of $1.02 per share. That missed estimates by a penny. Revenues came in above expectations at $32.69 billion in the first quarter. Wall Street appears to have accepted CVS's "blame it on the weather" excuse. Last month CVS also disclosed they had finalized a settlement with the SEC over events dating back to 2009 that stemmed from its acquisition of Longs Drug Stores in 2008. In the settlement CVS did not have to admit any wrongdoing and does not have to restate any earnings reports. They're happy to put the ordeal behind them and for investors it's old news.

More importantly the company is seeing strong growth in its PBM business. Its pharmacy services segment saw revenues climb +10.3% to $20.2 billion in the second quarter. Management said CVS is "beginning to develop integrated products for both hospitals and health plans."

They're also growing into a broader healthcare provider with the retail-based clinic subsidiary MinuteClinic. According to CVS' website, "MinuteClinic launched the first retail medical clinics in the United States in 2000 and now has more than 800 locations in 28 states. MinuteClinics are staffed by nurse practitioners and physician assistants who utilize nationally recognized protocols to provide treatment for common family illnesses, skin conditions and injuries, administer vaccinations, conduct physicals and wellness screenings, and offer monitoring for chronic conditions seven days a week without an appointment, including evenings and holidays."

American's growing acceptance of the MinuteClinic for quick healthcare services will grow. Long-term CVS will benefit from an aging population more dependent on their prescriptions. Plus, CVS will benefit from the growing number of new Americans being covered under Obamacare. Payments for these services will be covered by health care plans, Medicaid, and now the Affordable Care Act mandate.

Wall Street is happy with its steady growth. The most recent earnings report showed profits rising 18% year over year for the fifth consecutive quarter of double-digit earnings growth.

We're not setting a bullish exit target yet but the Point & Figure chart for CVS is bullish with a $102 target.

- Suggested Positions -

Long Aug $80 call (CVS140816C80) entry $1.04

05/22/14 triggered @ 77.25
option format: symbol-year-month-day-call-strike

Entry on May 22 at $77.25
Average Daily Volume = 5.1 million
Listed on May 21, 2014


Delphi Automotive - DLPH - close: 70.24 change: -0.50

Stop Loss: 67.75
Target(s): To Be Determined
Current Option Gain/Loss: - 24.8%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: The $70.00 level should offer some support so investors might want to consider buying calls here. I would suggest waiting for a rise above $71.25 instead.

Earlier Comments:
DLPH is a British company. They're also one of the largest auto parts suppliers on the planet. The stock has been a strong and steady performer for bullish investors.

The recovery in the U.S. auto market and the booming growth in the Chinese auto market has been a boon for DLPH. Wall Street analysts believe that DLPH benefits from its product mix that are focused on fuel economy, car safety, and automotive electronics. U.S. regulators are demanding a significant upgrade in fuel economy from American carmakers, which should be a tailwind for DLPH. The future of automobiles is more and more electronics, which is bullish for DLPH as well.

China will prove to be a big market for DLPH. The Wall Street Journal reports that DLPH believes its business in China could double to almost $5.5 billion by 2016.

DLPH's Q1 earnings report was strong. Analysts were expecting a profit of $1.08 per share on revenues of $4.29 billion. DLPH delivered $1.20 per share with revenues rising more than 6% to $4.28 billion. The company issued generally bullish guidance for 2014's profit and revenue estimates. DLPH also bought back 2.38 million shares of its own stock in the first quarter of 2014.

Wall Street analysts are bullish with price targets in the $84-90 range. The Point & Figure chart is bullish and forecasting at $81 target.

- Suggested Positions -

Long Aug $72.50 call (DLPH140816C72.50) entry $1.93

06/06/14 triggered @ 71.15
Option Format: symbol-year-month-day-call-strike

Entry on June 06 at $71.15
Average Daily Volume = 1.4 million
Listed on June 05, 2014


Express Scripts Holding - ESRX - close: 71.67 change: +0.29

Stop Loss: 66.90
Target(s): to be determined
Current Option Gain/Loss: +38.7%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: Traders bought the dip in ESRX near $71.00 this morning. A rally late this afternoon lifted shares above short-term resistance at $71.50.

More conservative investors might want to move their stop loss closer to the 200-dma (currently at 69.25).

Earlier Comments:
ESRX is in the healthcare sector. The company provides pharmacy benefit management (PBM) services in the U.S. and Canada. Both the NASDAQ and shares of ESRX peaked in early March. It would appear that investors considered ESRX one of the higher-growth, momentum names since it has been sinking with that group over the last couple of months.

That big drop you see on ESRX's daily chart was market reaction to its latest earnings news. The results were disappointing. You could call it a trifecta of bad news. ESRX missed Wall Street's estimates on both the top and bottom line. Management guided lower for 2014. Plus they disclosed three separate subpoenas from different state authorities as the company is investigated for its relationship with drug makers.

Investors already had lowered expectations for ESRX's earnings because the company lost UnitedHealth Group (UNH) as a client last quarter. The loss of UNH accounted for about half of ESRX's lost revenues. ESRX complained that a lot of expected new enrollments had been postponed. They didn't see quite the impact from the new Obamacare exchanges previously expected.

It sounds like plenty of bad news for ESRX. Yet here's the interesting part. The stock lost -6% following its earnings report but there was no follow through lower. Investors have been buying the dip. Shares are up two weeks in a row and slowing chewing through resistance. With a drop from $79 to $65 (-17.7%) it is possible that all the bad news is already priced into ESRX stock price. The long-term trend for ESRX is still higher. As the new affordable healthcare policy changes gain momentum it should mean more enrollments for ESRX.

- Suggested Positions -

Long Aug $70 call (ESRX140816C70) entry $2.45*

05/21/14 triggered @ 69.50
*option entry price is an estimate since the option did not trade at the time our play was opened.
05/19/14 adjust entry trigger from $70.50 to $69.50
adjust the strike price to the August $70s.

option format: symbol-year-month-day-call-strike

Entry on May -- at $---.--
Average Daily Volume = 6.5 million
Listed on May 17, 2014


Hanesbrands Inc. - HBI - close: 86.24 change: -0.08

Stop Loss: 81.75
Target(s): To Be Determined
Current Option Gain/Loss: + 2.0%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: HBI briefly tagged new highs before paring its gains. I don't see any changes from my prior comments although nimble traders may want to look for a dip closer to $85.00 before initiating new positions.

Earlier Comments:
HBI is in the consumer goods sector. The company designs and manufacturers apparel. You wouldn't normally think of basic apparel maker as a momentum stock but HBI has been outperforming. Shares just ended the week at a new all-time high.

The company has delivered on its earnings results. When HBI last reported in January and April this year the company beat Wall Street's estimates both times and raised their guidance both times.

Think about that. HBI is not a retailer but their products are sold through retailers. Most of retail got hammered in the first quarter due to lousy winter weather. Yet HBI managed to beat estimates and then raised its guidance.

Jim Cramer has pointed out what many analysts are saying on the company. HBI has strong brand names like Hanes, Champion, Playtex, and Bali. HBI owns most of their supply chain, which allows them to keep and improve their strong margins. Their first quarter saw margins increase 180 points. Most of Wall Street is bullish on HBI's recent acquisition of Maidenform. HBI believes they can generate significant margin improvement in the Maidenform brand by 2016.

The Point & Figure chart for HBI is bullish with a $92 target.

- Suggested Positions -

Long Oct $90 call (HBI141018C90) entry $2.94

06/04/14 triggered @ 85.25
Option Format: symbol-year-month-day-call-strike

Entry on June 04 at $85.25
Average Daily Volume = 690 thousand
Listed on May 31, 2014


Lockheed Martin Corp. - LMT - close: 168.08 change: +0.91

Stop Loss: 163.95
Target(s): To Be Determined
Current Option Gain/Loss: - 5.5%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: LMT did see some volatility this morning with a spike down to $165.70 that quickly reversed and shares rallied to a new high. Our trigger to buy calls was hit at $168.55.

Earlier Comments: June 7, 2014:
LMT is in the industrial goods sector. The company is a major players in aerospace technology and the defense industry. Business has been booming for this defense contractor. Q4 earnings came in better than expected on both the top and bottom line. The trend continued when LMT reported its Q1 results on April 22nd. Wall Street expected a profit of $2.53 a share on revenues of $10.89 billion. LMT beat the bottom line estimate with $2.87 per share but missed the revenue estimate at $10.65 billion for the quarter. However, management gave an optimistic outlook and raised their 2014 guidance on both net profits and revenues.

Zacks had some interesting numbers on LMT's Q1 results. LMT's operating margins were at record highs and the first quarter of 2014 saw LMT's free cash flow hit a record $2.0 billion. LMT spent $1.1 billion buying back 7.0 million shares of stock and another $500 million on dividends.

It's not surprising to hear LMT management raising guidance. The company has been on a huge roll with a series of big contract wins from the U.S. Department of Defense. Just this past week LMT beat out Raytheon Company (RTN) for a $915 million contract to build a "space fence" for the U.S. Air Force. This "fence" is actually a radar system that will track and categorize up to 500,000 pieces of space junk orbiting the earth.

LMT is also seeing strong business overseas. Right now they're rumored to be the top pick for Canada to buy 65 new fighter jets. Canada's decision is expected in the new few weeks. Right now they're reviewing bids from LMT's rivals. Russia recent actions may have also generated more business for LMT. Since Russia invaded and annexed Crimea earlier this year LMT said they've seen a lot more interest from European countries looking to upgrade their defenses.

Technically shares of LMT are in a long-term up trend. They have spent the last three months consolidating gains and building a new base. A breakout past its recent highs could launch the next leg higher.

The Point & Figure chart for LMT is bullish with an $188 target.

- Suggested Positions -

Long Sep $175 call (LMT140920C175) entry $2.70*

06/09/14 triggered @ 168.55
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on June 09 at $168.55
Average Daily Volume = 1.2 million
Listed on June 07, 2014


LyondellBasell Industries - LYB - close: 98.92 change: -0.08

Stop Loss: 98.45
Target(s): to be determined
Current Option Gain/Loss: +29.4%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
06/09/14: Warning! LYB's intraday attempt at a bounce failed at its simple 10-dma. This is short-term bearish. I strongly suggest more conservative investors exit immediately.

- Suggested Positions -

Long Sep $100 call (LYB140920C100)* entry $2.55**

06/07/14 new stop @ 98.45
06/03/14 new stop @ 94.75
05/15/14 new stop @ 93.75
05/12/14 LYB gapped open higher at $96.20 (+75 cents)
**option entry price is an estimate since the option did not trade at the time our play was opened.
*I've provided the more standardized option symbol format.
symbol-year-month-day-call-strike

Entry on May 12 at $96.20
Average Daily Volume = 3.1 million
Listed on May 10, 2014


MasterCard Inc. - MA - close: 76.86 change: -0.61

Stop Loss: 75.75
Target(s): To Be Determined
Current Option Gain/Loss: -13.6%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: MA's bounce is reversing under the $78.00 level. We want to try and reduce our risk so we're moving the stop loss to $75.75.

Earlier Comments: May 24, 2014:
MA is in the financial sector. The company provides transaction processing and payment-related services. Globally cash is still the most dominant method of payment. That may not be true in the most developed countries but worldwide there is a long-term trend with consumers moving away from cash more toward cards and electronic payments, which will benefit MasterCard.

MA's latest earnings on May 1st was positive. The company beat Wall Street's estimates on both the top and bottom line. The company said a 14% increase in transactions, on a local currency basis, hit $1.0 trillion. They also saw a +14% jump in processed transactions. Cross border volumes were up +17%.

MA's CEO and President Ajay Banga said the company signed new deals with Wal-Mart (WMT), Sam's Club, and Target (TGT). WMT and Sam's will move their co-brand portfolios to MasterCard. TGT will also shift its co-brand cards to MasterCard and use MA's chip and PIN technology to upgrade their security. Banga said MA will, "continue to invest in technology and acquisitions that will speed our development of mobile and online solutions."

Both Visa and MA were caught up in the sanction backlash between Russia and Europe and the U.S. The two companies were not singled out but new legislation in Russia was going to force the two American companies out of the country. Working with Russian officials MA and Visa have found a way to sidestep the issue by creating a domestic (Russian) payment system within six months and create a Russian company to handle domestic transactions.

Technically shares of MA saw a -20% correction on an intraday basis from its January 2014 highs to the April intraday lows. The stock bounced near its long-term up trend. Now MA appears to be breaking out past resistance near $76, resistance at its 100-dma and 150-dma, and resistance at its five-month trend of lower highs. We're not setting an exit target yet but the point & figure chart is bullish with an $87 target.

- Suggested Positions -

Long Oct $80 call (MA141018C80) entry $2.85*

06/09/14 new stop @ 75.75
05/27/14 triggered @ 77.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on May 27 at $77.25
Average Daily Volume = 5 million
Listed on May 24, 2014


PPG Industries - PPG - close: 205.11 change: +0.18

Stop Loss: 192.90
Target(s): To Be Determined
Current Option Gain/Loss: +20.5%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
06/09/14: PPG delivered a relatively quiet session with shares drifting on either side of the $205 level.

Earlier Comments:
Big cap industrial names have been leading the market higher. PPG is one of them. The company is in the basic materials sector. PPG manufacturers coatings, specialty materials, and glass products.

PPG has developed a strong trend of beating Wall Street's earnings estimates. They just did it again when they reported earnings on April 17th with EPS coming in 10 cents above estimates. Revenues were up +17% year over year to $3.64 billion. Earnings were up +33% from a year ago at $1.98 per share. The company is also seeing margin improvement.

Last month PPG's management announced a $2 billion stock buyback program and raised their dividend by +10% to $0.61 per share. PPG's CEO said that his company saw volumes improve in Europe for the first time in ten quarters. The tough winter in the U.S. did not hurt them. Thus far PPG has been able to pass along small price increases to offset rising commodity costs.

Technically the stock is in a long-term up trend. Shares have spent the last three months consolidating below the $200 level. Now the bullish pattern of higher lows is about to push PPG through major resistance near $200-201.

The Point & Figure chart is bullish and forecasting at $222.00 target.

- Suggested Positions -

Long Aug $210 call (PPG140816C210) entry $3.65*

05/30/14 triggered @ 202.00
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on May 30 at $202.00
Average Daily Volume = 552 thousand
Listed on May 29, 2014


Thermo Fisher Scientific, Inc. - TMO - close: 119.58 change: -0.23

Stop Loss: 115.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
06/09/14: TMO spent Monday's session consolidating sideways below resistance at the $120.00 level. There is no change from my earlier comments.

Earlier Comments:
TMO is in the healthcare sector. The company makes analytical instruments, equipment, reagents and consumables. Plus they provide software, and services for research, manufacturing, analysis, discovery, and diagnostics in the United States and abroad. The story looks pretty simple. TMO is executing its business well. The company is developing a trend of beating analysts' estimates on both the top and bottom line and raising guidance. They've done it two quarters in a row.

TMO reported its Q1 results on April 23rd. Analysts were expecting a profit of $1.40 per share on revenues of $3.78 billion. TMO delivered $1.53 per share and revenues grew +22.3% from a year ago to $3.9 billion. How many companies are growing that fast? Shares did see a pullback when the markets were selling all the high-growth names in March and April. Investors have stepped up to buy the pullback.

At its Q1 earnings announcement TMO's management also raised their 2014 guidance on both the top and bottom line. A few weeks later at least one analyst firm issued bullish comments on TMO stating their opinion that TMO's management is being too conservative, even with their raised guidance.

Wall Street seems pretty happy with TMO's recent acquisition of Life Technologies for $13.6 billion. The deal is accretive to TMO's bottom line and should generate significant synergies. The new, combined company is seeing strong growth in Asia, especially in China. TMO is currently aiming to generate 25% of its annual revenues from China by 2016.

Technically shares of TMO are bouncing from its long-term up trend. They have also just recently broken out from its three-month consolidation and down trend of lower highs. Right now TMO is trading just below $120.00. We're suggesting a trigger to buy calls at $120.50.

Trigger @ $120.50

- Suggested Positions -

Buy the Sept $125 call (TMO140920C125)

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

Entry on June -- at $---.--
Average Daily Volume = 1.7 million
Listed on June 07, 2014


United Parcel Service - UPS - close: 103.49 change: -0.10

Stop Loss: 97.75
Target(s): to be determined
Current Option Gain/Loss: + 96.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
06/09/14: UPS only lost 9 cents today but it was a bearish session with shares retreating from their morning highs near $104.

Readers may want to take some money off the table now.

Earlier Comments:
I am concerned that the $105 level could be resistance. More conservative traders may want to start taking profits now or closer to $105.00.

We're not setting an exit target yet but the Point & Figure chart for UPS is bullish with a $123 target (up from $114 a few weeks ago).

- Suggested Positions -

Long Jul $100 call (UPS140719C100)* entry $1.98

05/29/14 more conservative investors may want to start taking profits now or as UPS gets closer to potential resistance at the $105 level.
05/12/14 triggered @ 100.25
*I've provided the more standardized option symbol format.
symbol-year-month-day-call-strike

Entry on May 12 at $100.25
Average Daily Volume = 2.9 million
Listed on May 10, 2014




PUT Play Updates

Currently we do not have any active put trades.



CLOSED BULLISH PLAYS

Facebook, Inc. - FB - close: 62.88 change: +0.38

Stop Loss: 61.85
Target(s): To Be Determined
Current Option Gain/Loss: -28.3%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: We were concerned with FB's lack of participation in the market's rally. Over the weekend we raised the stop loss to $61.85. Shares of FB displayed some weakness this morning and hit our stop before bouncing.

Our trade is closed but I would keep FB on your watch list for a close above $64.50 or $65.00 as a potential entry point.

- Suggested Positions -

Sept $70 call (FB140920C70) entry $3.42 exit $2.45 (-28.3%)

06/09/14 stopped out
06/07/14 new stop @ 61.85
05/29/14 triggered @ 64.25
Option Format: symbol-year-month-day-call-strike

chart:

Entry on May 29 at $64.25
Average Daily Volume = 62 million
Listed on May 24, 2014


Gilead Sciences - GILD - close: 79.01 change: -3.39

Stop Loss: 78.75
Target(s): GILD @ 83.95
Current Option Gain/Loss: -52.8%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
06/09/14: Shares of GILD lost more than four percent today on headlines that Merck & Co (MRK) is buying Idenix Pharmaceuticals (IDIX) for $3.85 billion. This deal makes MRK a stronger competitor for GILD in the hepatitis C treatment industry. Plus, together MRK and IDIX have a stronger legal case to challenge GILD's patents on its Sovaldi hepatitis C cure.

Shares of GILD gapped down below technical support at its 20-dma and then plunged over three points. Our stop loss was hit at $78.75 near its lows for the session.

The big drop, this close to June option expiration, crushed our options.

- Suggested Positions -

Jun $80 call (GILD1421F80) entry $2.12 exit $1.00 (-52.8%)

06/09/14 stopped out on news MRK was buying IDIX (tougher competition)
06/07/14 Consider taking profits now
06/05/14 new stop @ 78.75, adjust exit target to $83.95
05/15/14 new stop @ 77.90, readers may want to exit now to lock in potential gains.
05/10/14 new stop @ 75.75
05/01/14 new stop @ 74.45
04/30/14 triggered @ 77.00

chart:

Entry on April 30 at $77.00
Average Daily Volume = 23 million
Listed on April 29, 2014


3M Company - MMM - close: 145.32 change: +0.68

Stop Loss: 138.75
Target(s): MMM @ $144.75
Current Option Gain/Loss: +43.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
06/09/14: Target achieved.

MMM continued to show relative strength on Monday and added another +0.47%. Shares rallied past potential resistance at $145.00. Our exit target was hit at $144.75.

- Suggested Positions -

Jun $140 call (MMM1421F140) entry $3.45* exit $4.95 (+43.4%)

06/09/14 target hit
06/05/14 set exit target at $144.75
05/24/14 if you open new positions, use the July or October calls
05/20/14 adjust stop loss to $138.75 due to the dividend
05/15/14 new stop @ 139.49
05/08/14 triggered @ $142.00

chart:

Entry on May 08 at $142.00
Average Daily Volume = 2.65 million
Listed on May 07, 2014


CLOSED BEARISH PLAYS

Bally Technologies - BYI - close: 59.85 change: +0.61

Stop Loss: 60.35
Target(s): To Be Determined
Current Option Gain/Loss: - 39.3%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/09/14: Our BYI trade has been stopped out.

Casino stocks were weak over concerns about the growth of gambling in Macau (China). That should have put pressure on the game makers too. BYI stock was falling most of the session.

Then in the last hour of the trading days headlines surfaced that International Game Technology (IGT), a rival to BYI, was considering a sale of the company. That buoyed game-maker stocks.

Shares of BYI spiked above resistance at $60.00 and its 30-dma before paring its gains. Our stop was hit at $60.35.

- Suggested Positions -

Long Oct $55 PUT (BYI141018P55) entry $3.30 exit $2.00* (-39.3%)

06/09/14 stopped out
06/03/14 triggered @ 57.25
Option Format: symbol-year-month-day-call-strike

chart:

Entry on June 03 at $57.25
Average Daily Volume = 697 thousand
Listed on June 02, 2014