Option Investor
Newsletter

Daily Newsletter, Tuesday, 6/10/2014

Table of Contents

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

Market Wrap

Summer Slumber

by Jim Brown

Click here to email Jim Brown

The markets wandered aimlessly on light volume as prior gains were consolidated.

Market Statistics

Today could have been a summer Friday with the low volume and the lack of headlines to move the market. The indexes spent most of the day in negative territory but they returned to the flat line at the close. The Dow squeezed out another new high on a +2 point gain. Volume was almost nonexistent and the Volatility Index ($VIX) dipped to close under 11 once again.

Those traders actually in the market were apparently taking profits from the prior week's gains but they did not appear to be in any hurry to jump back into the market. We are still in a buy the dip market until proven wrong.

The economic reports were slightly bullish but there were no market moving releases. The NFIB Small Business Optimism Index rose slightly from 95.2 to 96.6 in May to the highest level since September 2007. The internals in the survey were very mixed with several components still in contraction territory. I am surprised the headline number posted a gain.

This was the third consecutive monthly gain since the low of 91.4 in February. Respondents said credit was becoming easier to get and a net of 10% of businesses are planning on hiring more workers over the next several months. More than 15% said they were planning on raising wages and that was the largest number in six years. Respondents were evenly split on the direction of the economy over the next six months.

Since small companies create more than 80% of new jobs we need for these entrepreneurs to feel good about the future of the economy.

The Job Openings Labor Turnover Survey (JOLTS) showed a jump in job openings from 4.166 million to 4.455 million. Hires increased slightly from 4.706 to 4.708 million but separations also rose from 4.491 to 4.496 million. Quits also rose from 2.461 to 2.473 million. Layoffs increased from 1.638 to 1.651 million. What this shows us is that employees were more open to changing jobs and that suggests the job market is improving. This is a lagging report for April and it is normally ignored.

The Manpower Employment Outlook Survey for Q3 showed 18% of employers were expecting to add employees compared to 15% for Q2 and 10% for Q1. This was a positive report but is pretty generic and is just one more indicator that the economy is growing slowly.

The weekly chain store sales fell -2.8% after a +2.9% gain the prior week. That was simply a blip caused by the Memorial Day weekend sales. This report should be ignored.

Wholesale Trade inventories for April rose +1.1% and above the consensus for a +0.5% gain. Sales rose +1.3% and down slightly from the +1.6% rise in March. The stronger than expected rise in inventories is positive for the Q2 GDP.

There is nothing on the calendar for Wednesday that will move the market. The next material report is the Retail Sales for May on Thursday. Sales are expected to have risen from +0.1% in April to +0.6% in May. This could be a minor market mover if the number deviates significantly from expectations.


This was a VERY slow news day for stocks as well. If this is any indication of how the summer is going to shape up we are going to be asleep at our computers for most of the summer.

Amazon (AMZN) was making news after news broke that they were planning on launching a marketplace for local services to compete with Yelp (YELP) and Angie's List (ANGI). They will offer everything from clowns, redecorating services, yard work, remodeling, photographers, tutors, etc. They are going to test their concept in several major markets before rolling it out nationwide. This is similar to how they rolled out the Amazon Fresh grocery delivery service. The Amazon services effort will be backed by their "A-Z Guarantee" of satisfaction. That will separate the Amazon product from every other service currently in operation. Most are simply referral services and get their revenue from advertising the vendors. There is no real guarantee.

Amazon is well on its way to being everything for everybody and the next big money maker for them could be Amazon Payments to compete with PayPal. I am surprised they have not branched into this area yet. They recently announced the product and have been testing it on several third party websites. It will not be long before all retail websites will be asking how you want to pay and the options will be credit card, PayPal or Amazon Payments. With Amazon's more than 150 million customers and their broad retail reach is going to make them a serious competitor to Paypal.

Amazon shares rallied +$5 on the news.


While on the same topic of electronic payments we learned today that PayPal's President, David Marcus, is leaving PayPal to join Facebook (FB). That should give you some clue where Facebook is going with payments. One analyst speculated Facebook might make a run at buying Ebay where they could monetize Facebook's one billion users in Ebay sales and more importantly by integrating PayPal into Facebook. PayPal has 340 million users but Facebook has over one billion. Even if Zuckerberg did not want Ebay he could buy the company, split off PayPal and then spinoff Ebay again. The problem with that idea is the $61 billion market cap of Ebay. That would be a huge acquisition for Facebook with a market cap of $131 billion.

Now that he has the brains of PayPal inside Facebook he could also simply create a Facebook payment system. That would be a lot of work, involve a lot of hurdles and then have to overtake PayPal in the marketplace. He would have to pay more to go the PayPal route but the system is already in place worldwide and readily accepted. With Amazon announcing the payments push it makes it even more important for Facebook to acquire PayPal.

Facebook shares rallied +4.6% on the news and broke out of a consolidation range and resistance at $64. Ebay (EBAY) shares declined -2.7% and should continue lower.



On Friday Green Mountain (GMCR) rallied from $112 to $123 in only a few minutes late in the afternoon. After the spike there were numerous rumors trying to put a reason behind the spike. Nothing showed up in the headlines and the stock lost nearly all its gains on Monday.

Today Green Mountain announced a partnership with Subway to put the single serve brewers in thousands of Subway locations. By introducing the single serve brewers customers can have any kind of coffee they deserve that is brewed on demand especially for them. More than half of Subway stores have already adopted the Keurig K150 single serve brewer after Subway offered the Keurig option to franchisees last year. The agreement today will put the brewers in the remaining stores and create a high volume sales outlet for Green Mountain.

Shares spiked on the news today but not really to the extent of the spike on Friday. GMCR shares gained only $1 at the close after being up more than $3 intraday.


UBS downgraded Las Vegas Sands (LVS) because of the recent headlines about the UnionPay terminals and slowing VIP betting trends in Macau. The Macau Monetary Authority ordered jewelry stores and pawnshops to remove the UnionPay card terminals by July 1st. Some analysts believe the UnionPay card terminals provided as much as 30% of the cash for the mass market, low dollar gamblers. Also starting July 1st China will limit transit visas to 2-3 days, down from 7 days before. This should not impact the mass market players but VIP players tend to stay longer than 3 days. The visa change could further pressure revenue from VIP customers.


Receptos (RCPT) reported successful results from a trial for a multiple sclerosis drug. The results of the phase 2 trial met endpoint goals with statistical significance. The double blind test covered 258 patients across 77 sites in 13 countries. Patients experienced an 86% reduction in brain lesions compared to patients on placebos. Shares of RCPT spiked +37% on the news.


Apple (AAPL) shares made it through their second day of trading without falling prey to the normal post split depression. Volume has been relatively low at 62.8 million today and 75 million on Monday. I still believe that once the influx of new investors fades we will see shares move lower. There are simply too many new shares on the market and odds are good there will be significant profit taking once the stock split news fades.


Since Friday's gap open to 1,948 on the S&P the index has traded in a very narrow range to close at 1,950 today. The high for those three days was 1,955 and the low 1,945. Nobody is selling and nobody is buying. At least there is not enough pressure from either side to knock the S&P out of its pattern. There are no headlines that give the bulls a reason to push stocks higher and none to energize the sellers to push it lower.

Considering we are at historic highs after a big gain this is extended hang time at this level is bullish. We remain in a buy the dip market until proven wrong. The lack of volume is a problem. Only 5.1 billion shares were traded and that is the lowest in a week. Volume represents conviction in either direction. No volume means no conviction. This could mean the market is being held at this level by a lot of weak holders that could be shaken out by the arrival of a small amount of volatility.

Personally I believe there are a lot of investors that are now looking for a decent dip to buy where in the past they were looking for a price spike to sell. While new highs attract new money there are a significant amount of investors who would rather buy a dip than a new high.

The 1,950 level is acting like a price magnet despite not being material support or resistance. It is simply a round number that happens to be very close to the 1,957 average yearend estimates from most analysts. The next real resistance is in the 1,963-1,965 range with ultimate resistance at 2,000. If that target is hit I think we can count on some significant selling.

The S&P is overextended so consolidation and/or profit taking are always a possibility.


Like the S&P the Dow has moved in a very narrow 70 point range for the last three days. The 17,000 target is looming and could be reached any day. Other than being round number psychological resistance the number is not material. The next real resistance is around 17,200 but that would add another +250 points to the +600 points gained since May 20th. The index is already extended and adding another couple hundred points without a dip is going to be a challenge.

Initial support is now 16,900.



The Nasdaq 100 ($NDX) has found resistance at 3,800 and came to a dead stop at that level at the close. The NDX move from early May paused for consolidation at the 3,750 level for a couple days and it appears to be doing the same thing at 3,800. As long as Apple does not spoil the party a breakout could be imminent.


The Nasdaq composite has not changed much since Friday. The dead stop at 4,346 and the bottom of the new high resistance range is a pause for consolidation. Getting though that resistance could be a challenge and the index will need a fresh start. I like the fact that investors are not rushing to take profits at this resistance barrier. That means the bullish sentiment has not changed.



The Russell 2000 declined about -1% intraday but the dip was bought. The resistance at 1,180 is solid and it will take a new surge in bullish sentiment to push the index over that level. The Russell is over extended after a +5% gain in four days. Today was a pause to regroup. I would use today's low at 1,167 as a signal of increasing weakness. If that low were to break I think it would change the underlying sentiment and likely drag the other indexes lower.


The Dow Transports are really over extended and well above the historical support of the 100-day average. I scanned several of the component charts like UPS and FDX and they appear to be weakening. The airlines ad railroads are providing support but they can't lift the index higher by themselves.


As I said earlier I believe we are in "buy the dip" mode until proven wrong. The indexes are over extended but they could still move higher if the consolidation dips continue to be bought. There are no headlines on the horizon to push the market in either direction but the ones that count are never expected. We are headed into the summer doldrums season so try not to overload your accounts with longs. Summer corrections can be ugly. However, summer rallies are always unexpected and the short squeezes on low volume are always fun.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email

Click the advertisement below for a free trial to the OilSlick.com newsletter.

 


New Option Plays

Dark Clouds Fading

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Anadarko Petroleum - APC - close: 103.92 change: +0.85

Stop Loss: 99.90
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:
APC is in the basic materials sector. The company is a very active oil and natural gas producer. They have assets in the Rocky Mountains, the Southern U.S., the Gulf of Mexico, and Alaska. Plus, APC is active internationally with assets in Algeria, Brazil, China, Colombia, Ghana, Liberia, Mozambique, New Zealand, Sierra Leone, and South Africa. Altogether APC has a strong onshore and off-shore portfolio.

The company's latest earnings report on May 5th was better than expected. Wall Street was expecting $1.14 per share. APC delivered $1.26. APC said they set record volumes in the quarter at 819,000 barrels of oil equivalent (BOE) per day. Management went on to raise their full-year sales-volume. A week later they increased their dividend by 50% from 18 cents to 27 cents per share.

APC could end up a big liquefied natural gas (LNG) producer with their assets in Mozambique (Southeast Africa). Last year APC drilled two natural gas off-shore wells. This year they could drill up to eight new wells. The company recently upgraded their view on how much recoverable gas in their northern Mozambique assets to 50 trillion to 70 trillion cubic feet. APC is developing an LNG project and plan to deliver their first LNG cargo in 2018.

One of the biggest headlines for APC has been its settlement over the TROX litigation. This refers to a large lawsuit over the bankrupt Tronox company, which was spun-off from APC's Kerr-McGee division. Previously the estimated penalty range for this TROX lawsuit was in the $5.15 billion to $14.17 billion with many analysts estimating the final results would probably be around $10 billion. On April 3rd this year APC reported they would settle this for $5.15 billion, the very low end of the range and the stock exploded higher. Getting past this TROX liability has removed a very dark cloud for the company and the stock price.

It is worth noting that APC still has potential legal risk from the April 2010 Macondo well blow out. BP Plc was the operator and majority owner of the well but APC did own 25% of it. The U.S. judges are arguing that APC will be held responsible for its 25% of the penalties. The final numbers could be huge. The U.S. Clean Water Act allows the government to fine the companies $1,100 per barrel of oil spilled into the Gulf. Plus, they could add another $4,300 penalty per barrel for gross negligence. Right now BP is arguing with the courts over how much oil was spilled. The U.S. is claiming 4.2 million barrels of oil escaped into the Gulf of Mexico. BP estimates only 2.45 million barrels. APC management has suggested they may not be fined for any gross negligence penalties since they did not have any direct operational involvement. The penalty phase for this lawsuit is scheduled for January 2015. This issue is clearly not stopping the rally in shares of APC today.

Technically shares of APC have been consolidating sideways under resistance near $105 with a bullish trend of higher lows. Now the stock is on the verge of breaking out. We're suggesting a trigger to buy calls at $105.25.

We are not setting an exit target tonight but I would not be surprised to see APC above $115 by year end.

Trigger @ $105.25

- Suggested Positions -

Buy the NOV $110 call (APC141122C110) current ask $4.15

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

Annotated Chart:

Weekly Chart:

Entry on June -- at $---.--
Average Daily Volume = 2.8 million
Listed on June 10, 2014



In Play Updates and Reviews

Traders Buy Tuesday's Dip

by James Brown

Click here to email James Brown

Editor's Note:

Traders are still in a buy-the-dip mood and most of the market rebounded off their Tuesday morning lows.


Current Portfolio:


CALL Play Updates

The Boeing Company - BA - close: 137.25 change: -0.71

Stop Loss: 129.90
Target(s): To Be Determined
Current Option Gain/Loss: +18.2%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/14: BA saw some profit taking this morning but traders bought the dip at short-term technical support on its simple 10-dma. I am not suggesting new positions at this time.

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: 93.81 chang6: +0.39

Stop Loss: 85.75
Target(s): to be determined
Current Option Gain/Loss: +12.6%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/14: BBH continues to hover just below short-term resistance at $94.00.

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: 81.71 change: -0.28

Stop Loss: 74.95
Target(s): To Be Determined
Current Option Gain/Loss: +58.6%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/14: COF snapped a five-day rally with some minor profit taking on Tuesday. The nearest support is probably the $80.00 mark.

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: 78.02 change: -0.53

Stop Loss: 74.65
Target(s): to be determined
Current Option Gain/Loss: + 3.5%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/14: CVS is testing short-term support at its rising 10-dma today. While I expect a bounce I will point out that the MACD indicator on CVS' daily chart is about to roll over into a new bearish signal.

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: 69.95 change: -0.29

Stop Loss: 67.75
Target(s): To Be Determined
Current Option Gain/Loss: - 30.0%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/14: DLPH is also testing short-term support near $70.00 and its 10-dma. I am suggesting traders wait for a new rally above $71.25 before considering new bullish positions.

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: 71.65 change: -0.02

Stop Loss: 66.90
Target(s): to be determined
Current Option Gain/Loss: +26.5%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/14: ESRX spent today's session churning sideways and closed virtually unchanged.

More conservative investors might want to move their stop loss closer to the 200-dma (currently at 69.35).

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


Expedia Inc. - EXPE - close: 75.09 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

Comments:
06/10/14: EXPE displayed relative strength with a +0.7% gain on Wednesday. Shares are trying to breakout past the $75.00 level and almost hit our suggested entry point at $75.75.

There is no change from my earlier comments.

Earlier Comments: June 9, 2014:
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

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


Hanesbrands Inc. - HBI - close: 86.25 change: +0.01

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:
06/10/14: Tuesday proved to be a quiet session for HBI and the stock closed almost unchanged. I don't see any changes from my prior comments.

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: 167.34 change: -0.74

Stop Loss: 163.95
Target(s): To Be Determined
Current Option Gain/Loss: -16.6%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/14: Defense-related names were seeing some profit taking today and LMT was no exception. The stock slipped but pared its loss to -0.4% by the close.

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: 99.95 change: +1.03

Stop Loss: 98.45
Target(s): to be determined
Current Option Gain/Loss: +37.2%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
06/10/14: Good news! Traders bought the dip in LYB and shares outperformed the market with a +1.0% gain. The stock looks poised to challenge its recent highs near $101 soon.

- 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: 77.36 change: +0.50

Stop Loss: 75.75
Target(s): To Be Determined
Current Option Gain/Loss: - 6.6%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/14: MA saw some volatility this morning but shares bounce near the rising 150-dma and closed up +0.65%. Investors may want to wait for a rally past $78.00 before considering new positions.

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: 205.80 change: +0.69

Stop Loss: 192.90
Target(s): To Be Determined
Current Option Gain/Loss: + 1.3%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
06/10/14: Shares of PPG shot lower this morning most likely a reaction to news the company was buying Pittsburgh-based Masterwork, an independent architectural paint distributor. Financial terms were not disclosed.

Traders did buy the dip at short-term support at PPG's rising 10-dma.

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: 119.29 change: -0.29

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:
06/10/14: TMO is still struggling with resistance near $120. Traders did buy the dip at $118.35 this morning. 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: 102.91 change: -0.58

Stop Loss: 97.75
Target(s): to be determined
Current Option Gain/Loss: + 79.2%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
06/10/14: I am growing more concerned about our UPS trade. Shares underperformed the transportation average today. This stock is also underperforming its closest rival FedEx. Traders might want to consider exiting UPS now and buying calls on FDX if shares of FDX can breakout past resistance at $145.00.

I am not suggesting new positions in UPS.

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.