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Daily Newsletter, Saturday, 4/4/2015

Table of Contents

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

Market Wrap

Markets Continue Their Fickle Ways

by Jim Brown

Click here to email Jim Brown

The major indexes posted a minor gain to end a very volatile week. After a solid +263 point Dow gain on Monday as the result of a short squeeze, the index gave it all back by Wednesday's close. Thursday's lackluster rebound managed to turn the index positive for the week with a gain of only +50 points after moving more than 913 points in a zigzag pattern during the week. Volatility is definitely causing investor heartburn.

Market Statistics

Thursday was a lackluster market with the majority of traders already checked out for the long weekend. Volume was weak at 5.8 billion shares. It would have been weaker but traders were likely squaring away positions ahead of Friday's Nonfarm Payroll report. With the market closed on Friday a surprise number on the payroll report would setup a strong move at the open on Monday. Those traders not wanting to be caught on the wrong side of the trade were moving to the sidelines.

The earlier payroll reports both came in weaker than expected. The ADP Employment report on Wednesday came in at 189,000 compared to consensus estimates for 225,000. The Challenger Employment Report on Thursday declined from 50,579 to 36,584. However, the unemployment claims on Thursday came in at 268,000 and the lowest rate for this economic cycle. This suggested Friday's payroll report could be stronger than expected. The uncertainty in the various economic reports put investors on alert for a Friday surprise.

Friday was definitely a surprise. The Nonfarm number for March showed a gain of only +126,000 jobs, the smallest gain since December 2013 and well below the consensus estimate of 248,000. Estimates from 98 economists ranged from 179,000 to 300,000 so nobody came even close to reality. This ended the string of positive monthly gains of more than 200,000 jobs at 12 months. In addition to that surprise the prior numbers were revised down by -69,000. February was revised down -31,000 to 264,000 and January was revised down -38,000 to 201,000. The separate Household Survey reported a gain of only 34,000 jobs. The labor force participation rate declined again to 62.7% with 93,175 million not in the labor force. This is the lowest participation since February 1978. The unemployment rate was flat at 5.5%.

Analysts pointed out that we can't blame the weather in March since it was not nearly as bad as February and that month produced 264,000 new jobs. The strong dollar was blamed because of the decline in manufacturing, exports and corporate profits. I am sure there was a weather component but it was far weaker than February.

Manufacturing jobs declined -13,000 and the first decline since July 2013. Job gains in the restaurant sector were the lowest since June 2012 and this has been a strong gainer in recent months as job seekers took restaurant jobs to pay the bills while they continued to look for full time employment. More than 531,000 people took part time jobs because they could not find full time work. This was up from the recent average of 450,000. Job gains in the construction sector were -30,000 less than February and leisure and hospitality job gains declined -57,000 from February. Restaurants only added 8,700 jobs and the least since June 2012.

Involuntary part time workers rose from 6.6 to 6.7 million and the first rise since June. This indicator was specifically mentioned by Janet Yellen in recent speeches as a troubling sign of excessive slack in the labor market. Rising +100,000 in March it is going to give her no reason to hike rates.

The mining and logging category that includes oilfield workers saw a decline of -11,000 jobs after falling by a similar amount in February. The last three months has seen a decline of -29,000 jobs in that category. That is the worst drop since July 2009.



The odds of a June rate hike declined to 11% as evidenced by the fed funds futures and the odds for September declined from 39% to 35%.

While the equity markets were not open on Friday the futures markets were active until 9:15. The S&P futures declined -20 points from 2059 to 2039. The Dow futures declined -165 points. There is a lot of darkness between now and Monday's open but without a significant rebound it is going to be an ugly Monday.



The dollar declined sharply on Friday morning on expectations that the Fed will not raise rates until September at the earliest and possibly March 2016.


The Atlanta Fed GDPNow forecast rose to 0.1% on April 2nd after being zero on April 1st. Atlanta Fed Link


The economic calendar for next week is nearly devoid of material events. The FOMC Minutes on Wednesday will be the highlight for insight into the conversations behind the formation of the FOMC statement two weeks ago.

The only other report of interest will be the ISM Nonmanufacturing (services) Index on Monday. With the decline in the recent economic reports a positive Nonmanufacturing report will give the economic bulls a life preserver to grasp in a sea of economic misses.

This is the last week before the Q1 earnings cycle kicks off and the list of reports this week is pretty slim. Greenbrier (GBX) on Tuesday, Family Dollar (FDO), Alcoa (AA) and Bed Bath and Beyond (BBBY) report on Wednesday. Thursday has Rite Aid (RAD), Walgreens (WBA) and Constellation Brands (STZ). The following week will begin the flood of reports from the S&P-500 companies.


In stock news Tesla announced on Friday morning it had delivered a record 10,030 vehicles in Q1. That is a 55% increase over Q1-2014. The company had guided for 9,500. Tesla also announced in the future it would release the number of vehicles delivered within three days of quarter end. The company said it had to take this direct approach because of the inaccuracies in the press from analyst estimates. Tesla said a "delivery" is only counted if the car is transferred to the customer and all the paperwork is correct and complete. In the letter to shareholders in July the company said it expected to "end" 2015 with an annual delivery rate of 100,000 units. Tesla expects to lift annual production to 500,000 cars by 2020. The Model X SUV is expected to begin delivering later this year with more than 16,500 already preordered. The mass market Model 3 is expected to begin deliveries in 2017.

The biggest boost to production will come from the completion of the Gigafactory to make batteries in large quantities and significantly cheaper. The factory is ahead of schedule and should be completed in late 2016. The factory will occupy 10 million square feet on a 500 acre parcel and employ 6,500 workers. The cost is expected to be between $4-$5 billion.


Motorola Solutions (MSI) shares declined -6% late Thursday after Bloomberg reported that people with knowledge of the matter said it had failed to find a buyer. The company put itself up for sale in February and approached private equity firms as well as Honeywell (HON) and Tyco (TYC). The rumor in the analyst community is that Motorola is too large for one entity to make an offer despite only a $13 billion market cap. Secondly, they fear that Motorola's technology may become obsolete too quickly to justify a large purchase price. Adjusted earnings declined -45% in 2014 and sales for 2015 are projected to be flat or lower.


Lumber Liquidators (LL) said sales rose +5.6% in Q1 but declined -17.8% in March after the expose about potential carcinogenic flooring aired on 60 Minutes. The company said more than 10,000 customers have asked for free test kits to check their floors for formaldehyde seepage. The company said revenue rose to $260 million and slightly over analyst estimates of $256.8 million. The company will release full results on April 29th.

Despite the sales drop in March the company's revenue held up better than some analysts had expected. The key will be what happens this quarter and whether sales continue to be down that 17% per month. Shares have been trying to recover but struggling.


GoPro (GPRO) shares recovered slightly on Thursday after a -7% drop on Wednesday. There are growing concerns that new Chinese competitor Xiaomi is going to steal market share from GoPro. Xiaomi announced a new 16-megapixel point-of-view camera and Apple has already obtained a patent on a similar camera. The recent unexpected resignation of the COO has also weighed on the shares. After rebounding from $37 to $44 several analysts thought Thursday's decline was just profit taking in an ugly market.


One year ago last week on March 27th Google (GOOGL) split its stock 2:1 but caused significant investor grief because the new shares had no voting rights. In an effort retain total control of the company co-founders Larry Page and Sergey Brin hatched a plan to own as many of the voting shares as possible. They were afraid that the constant outflow of new shares to employees and those used in acquisitions would eventually dilute their voting block and they could lose control. There were already two classes of stock. The A shares have one vote each and the B shares have 10 votes each. Page and Brin own virtually all the class B shares. The new shares given out in the split were C shares with no votes.

The existing A share holders were outraged that their new shares had no votes and sued Google. Page and Brin argued that the A and C shares would basically be worth the same since the pair had majority control just with their B share votes. They agreed to settle the class action suit by paying the A share holders if the price of the C shares fell more than 1% below the A shares in the first year of trading. Google disclosed in a filing that as of December 31st they would owe the A share holders about $593 million in compensation. Since the first full year just ended on March 27th that number could change. Based on the numbers of A shares at the time of the split that would mean they would have received $1.74 per share in compensation had December 31st been the 1-year anniversary.

If the spread between the value of the shares had been more than 5% the amount owed would have been as much as $7.5 billion. That makes the $593 million estimate pocket change. That is of course if you have the $64 billion in cash that Google had on their last statements. The $1.74 compensation is nothing relative to the $541 price on the stock. Since Page and Brin had full control before the split the entire case was a waste of effort.

Shares would return to the $600 level or higher if Google would quit investing in wind energy, moon races, algae farms, contact lenses and high altitude WiFi blimps. Unfortunately without voting rights the shareholders can't force them to rethink their multitude of endeavors.


Garmin (GRMN) was downgraded to neutral from buy at Goldman Sachs. The price target was lowered from $63 to $54 with a close at $47. Shares hit a 52-week low on Thursday. The highest price target on the street is currently $68 but I would expect that to drop soon. Garmin still has a place in the industry but it is shrinking fast. The vast majority of directions now come from your mobile phone. However, I still use my Garmin about once a week and I have had it for nearly 10 years. Maybe that is why their sales are declining. The product last so long they don't get repeat sales.


Micron (MU) was reiterated as a hold at Topeka Capital but the price target was cut from $33 to $30. Credit Suisse reiterated an outperform rating with a $50 target. Needham reiterated its strong buy rating but slashed its target from $60 to $50. I am sure Micron investors would love to see $50 since that is almost a 100% gain from here.


IMAX announced a new laser projection system that will double the size of screens from 75 feet to 140 feet. The older technology was limited to a max width of 86 feet. Only one theater in the U.S. currently has this technology but they are rolling it out to the rest as soon as possible. Analysts that have seen it claim the images are sharper, brighter and with more contrast. Basically they are going from a normal projection system to High Definition. The new movie Furious 7 is the first one to play on the new high def screens. IMAX was started at outperform at Macquarie with a $39 price target.


Allegiant Travel (ALGT) averted disaster late Wednesday when a court blocked a pilot strike over the holiday weekend. However, shares collapsed -10% on Thursday after a -6% decline on Wednesday. The court order saved more than 33,000 passengers from being stuck in airports with more than 250 flights grounded. Unfortunately the restraining order was only temporary and the pilots union will be back in court on April 6th to press their case and the judge said he would rule by April 10th. The odds are pretty good that the pilots will eventually strike. Their list of grievances dates back more than two years and Allegiant has delayed any resolution at any opportunity according to press reports. Allegiant shares could have farther to fall.


Crude prices were very volatile on Thursday as news broke that Iran and the P5+1 nations had arrived at some sort of "framework" agreement to resolve the existing sanctions against them. For oil to move on this news shows how many novice traders were involved. First, the framework is just a set of talking points that will have to be committed to paper by the end of June. This will be a prime example of the devil in the details and the odds of getting an actual agreement completed are very low.

Even if they were to miraculously get some detailed agreement signed by June 30th the sanctions are not going to be lifted until it can be verified that Iran has done everything they claim to be agreeing to today. Some analysts believe it could take a year for the sanctions to be lifted, if ever. Iran has never fulfilled any agreement that it signed with the P5+1 nations and the IAEA. Never! Over the last two weeks they were found to still be violating the last set of agreements they signed. Not releasing the sanctions until they comply could take a very long time. Iran is notorious for "hide and cheat" and the current president has mentioned several times how proud he was at having delayed prior nuclear talks for more than 6 years. He was the nuclear negotiator at the time.

Iran produces about 2.8 mbpd but can only legally export 1.0 mbpd because of the sanctions. It currently has about 30 million barrels stored on tankers and ready to be shipped once the sanctions are lifted. Obviously if the sanctions were lifted tomorrow the price of oil would plunge on the flood of new supply. That is not going to happen but oil prices fluctuated on the uncertainty and came to rest just under $50.


For some reason refiners crashed on the news. Valero (VLO) fell -6%, Tesoro (TSO) declined -5% and Holly Frontier (HFC) dropped -6%.


The drop in active rigs appears to be slowing. Active rigs declined -20 for the week ended on Friday compared to -21 the prior week compared to an average of 67 per week for the previous 7 weeks. Whether this is just a lull in the pace of terminations or a new slowing trend that will eventually fade to nothing is unknown.

Oil rigs declined -11 to 802, gas rigs declined -11 to 222 and offshore rigs declined -3 to 31. Miscellaneous rigs rose +2 to 4. The real problem here is the offshore rig count at 31, down from 60 in January. That is a -50% decline in three months. A drop in offshore activity of that magnitude is going to cause a lot of job losses around the Gulf and some serious red ink on the balance sheets of Transocean Offshore (RIG) and the other drillers. Transocean announced it was scrapping two more rigs, bringing the total to 18 over the last several months. Cowen & Co said "Within the last six-months 32 rigs have been scrapped across all the dillers. Given our outlook for rig demand through the end of 2016, we believe that over 100 rigs should be removed from supply in order to balance the market."

The severity of the pain that this would cause the offshore drillers is unthinkable. However, with oil at $50 it does not pay to spend $500,000 a day to drill deepwater wells and produce oil that costs $75. To modify a book title by Robert Heinlein, "Reality is a Harsh Mistress." The law of supply and demand has caught up with the offshore drillers and it may be a long time before they get out of debtors prison. It is amazing that just two years ago there were not enough rigs to go around and there were bidding wars whenever a rig came off lease.


Markets

The S&P rallied to gain +7 on Thursday and it was probably mostly short covering ahead of the weekend and the payroll report. The only bright side about Thursday's minor gain is that it kept the S&P from making a lower low. Initial support at 2050 held on Wednesday and the stronger support at the 2040 level was not tested.

Unfortunately even before the big futures plunge on Friday the chart pattern was still bearish with a series of lower highs and the complete reversal of the big short squeeze on Monday. On the bright side having that strong support at 2040 may give investors come confidence to buy the dip on Monday. The S&P futures drop on Friday closed at 2039.

We do not want to break below 2040 because that would target 1985. The 100-day average is struggling as support with multiple intraday declines below that level. It we get a close much under 2060 the new support average would be the 150-day at 2029.

Support is 2050, 2040 and resistance 2080, 2090, 2113.


The Dow chart was even more negative with the Wednesday dip coming within only 6 points of a lower low at 17,579. The rebound was lackluster and the index is poised for a potential failure at the 17,600 support level. The Dow futures closed at 17,511 on Friday and that suggests support on the cash index could fail. Gainers far outweighed losers but tech stocks continue to drag the index lower. Microsoft, Cisco and Intel are all showing a negative trend with MSFT closing in on a 52-week low. Fortunately those stocks have relatively low stock prices and they have to move a lot to have any real impact on the index.



We need to focus on the 17,600 level next week for market direction. If support does crack as a result of the payroll report it could be a swift trip to the January lows.


The Nasdaq continues to hold above support at 4850 but it has been a fight. The Nasdaq lost ground for the week with a -4 point loss but the Nasdaq 100 gave back -17 points. The big cap index is clinging to support at 4300 but appears to be lowing its grip. The low on Thursday was 4302 and the close at 4315. If we lose that 4300 level the next stop could be 4085-4100.

The Nasdaq 100 futures declined from 4311 to 4262 on Friday. That is a clear break of that 4300 support mentioned above.

Google has been a drag on the big caps with a $40 drop since early March. Apple has flat lined and is trading in a range from $123-$126. The post Dow entry and post Watch announcement decline has put Apple into consolidation mode and that is actually keeping the Nasdaq from declining further.



The key level to watch was 4300 on the NDX and 4850 on the Nasdaq Composite. If those levels break the broader market is likely to collapse. We are going to have to rebound +40 points in the futures to regain 4300.




The small caps continue to outperform with the Russell 2000 posting a +1.23% gain for the week. The S&P Small Cap 600 ($SML) is also strong with a close only 6 points below a new high. The trend to buy small caps to avoid the impact of the strong dollar is still intact.



The Russell futures imploded to close at 1236 and very close to critical cash support at 1230.


Monday will be interesting to say the least. In the past bad economics were sometimes good for the market because it meant the Fed would wait even longer before raising interest rates. However, at some level of economic decline the fundamentals eventually begin to matter and bad news is actually bad news for the markets.

I have mixed feelings about the payroll numbers. One month does not make a trend and people are going to blame the weather, strong dollar, the west coast port slowdown, etc. They will find something to blame other than the continued decline in the economic numbers that we have been seeing. In other words they will find a reason to blame to support their bullish bias and they will want to buy the dip.

At the same time the market has been weak of late and there is quite a bit of indecision. The payroll news could push some portfolio managers into protection mode and stocks would get sold and bonds bought. We saw some of that on Friday morning when the yield on the ten-year treasury declined about 10 basis points to 1.82% after the payroll numbers.

I would probably be a little more cautious than normal about buying this dip until we see if there is any follow through. It if turns out to be a one day wonder then make a decision about buying the rebound.

Random Thoughts

So far in Q1, 85 companies in the S&P have issued negative earnings guidance. Only 16 have issued positive guidance. That is the lowest number of companies giving positive guidance since Q1-2006. The five-year average is 34 and the average of the prior 4 quarters is 27.

Earnings for Q1 are expected to decline -3% with energy down -63%. Earnings are trending negative, revenue is trending negative and profit margins are trending negative. The only thing rising is valuations.


Russian soldiers have given up pretending they are not fighting in Ukraine. After several thousand photographs and dozens of soldiers being captured the strategic lie is no longer being told. LINK


Margin debt on the Chinese stock market has now passed 1 trillion Yuan or $161 billion. Since July the SSEC is up a whopping 84% and Chinese investors are betting the farm to chase the market higher. The 1 trillion Yuan is four times what it was 12 months ago. Experienced traders in the U.S. know what is about to happen. This spike is similar to the Nasdaq spike in 2000 when margin debt was through the roof. When this house of cards comes tumbling down a lot of Chinese traders are going to lose a lot of money. They will learn that leverage works both ways. Since the government endorsed investing in equities for regular Chinese investors last year the number of trading accounts has soared. Just since mid March more than 2.8 million new accounts have been opened. This is a monster equity bubble and somewhere there is a pin headed their way.



Greece said it will run out of money on April 9th and issued an appeal to the EU finance ministers for more funds. The appeal was denied because Greece has not implemented any of the required reforms to qualify for more bailout funds. Greece has a 450 million euro payment to the IMF due on April 9th as part of a prior bailout. Interior Minister Nikos Voutsis said if it came down to either paying the IMF or salaries and pensions they would pay the people instead of the IMF. Greece can get 7.2 billion euros of previously approved bailout funds if it implements the reforms agreed to by the previous administration. The current administration has refused to enact the reforms saying the prior administration no longer exists and neither does the requirement to enact those reforms. Time is growing short for Greece and we could be watching the last desperate acts before a major change in direction that could include an exit from the eurozone. Reportedly Greece is drawing up drastic plans to nationalize the banking system and reissue the Drachma as a parallel currency in order to pay bills. In other words, a bankrupt country is going to print worthless money to pay its debts.


Everyone has probably seen the Obama administration taking a victory lap on the completion of a "framework" deal on the Iranian nuclear problem. Unfortunately everyone else at the table other than Iran is talking down the deal and saying the U.S. forced the other western nations into accepting the terms, which everyone else considers weak.

In theory the deal contains these points.

Iran will reduce the number of active centrifuges enriching uranium from 19,000 to 6,104.

No enrichment will take place at the heavily fortified underground facility at Fordow for the next 15 years. The 13,000 existing centrifuges at Fordow will remain in place and functional but Iran agreed not to enrich uranium there but use the site for nuclear research.

Enrichment will only occur at Natanz using the older centrifuges.

The Arak heavy water reactor will be redesigned and rebuilt to reduce the amount of plutonium it is capable of producing.

The International Atomic Energy Agency (IAEA) will inspect suspicious sites and activities.

A "possible military dimension" will be addressed in future talks.

Sanctions will be suspended after Iran is found to be in compliance and can be "snapped back" if Iran is found to be cheating.

While President Obama is hailing this as an historic agreement the press keeps replaying his red line speech from 2013 saying he will never accept any agreement that allows Iran to retain any nuclear infrastructure.

The Tehran News, the official government newspaper, said this. "In the framework of the agreement none of Iran's nuclear facilities as well as previous activities will be stopped, shutdown or suspended and Iran's nuclear activities in all of its nuclear facilities including Natanz, Fordow, Lsfahan and Arak will continue." Obviously this is spin for the Iranian people just like President Obama's speech parade this weekend is spin to support the victory photo op.

The real problems are pretty basic. The IAEA said it could not enforce this agreement under the conditions stated in the framework. They will NOT be able to do snap inspections. They have to request permission to visit facilities weeks in advance and permission can be denied for multiple reasons including preserving military secrets. With no snap inspections Iran will be able to play "hide and cheat" almost from day one.

The IAEA has been trying to inspect various sites for the last 12 years under previous agreements and were always denied entry because they were "military locations" and off limits to inspectors. By declaring any location a military location they can avoid inspections.

The snap back sanctions are not really immediate. The P5+1 nations would have to go through the UN and get another resolution to reactivate sanctions. This resolution could be blocked by Russia with its veto power.

Iran says the sanctions will be lifted when the June 30th deal is signed. President Obama says sanctions will only be released over time as Iran complies with the details of the agreement and that could take years. Somebody is fibbing.

The French negotiators wanted to reject the deal for multiple reasons including the potential for a nuclear arms race in the Middle East but Kerry demanded they accept it saying Iran would walk out of the negotiations if the deal was not accepted.

The deal is far from done. Agreeing in principle is easy but the devil is in the details. Committing all of this to paper with detailed steps for compliance and detailed penalties for non compliance is NOT going to be done by the June 30th deadline. Iran understands this is a political badge of honor for President Obama and they are not going to agree to any drastic curtailment of their programs. They will stonewall for the next three months and threaten to end talks at least once a week.

They have the trump cards here because the P5+1 nations led by the U.S. want to just get something on paper so they can claim a win and let the next administration in each country be faced with the actual implementation and noncompliance. The P5+1 nations will be able to say "We signed a historic agreement with Iran" when what they really did was kick the nuclear can down the road so they could put a checkmark on their do list of accomplishments.

Regardless of what is eventually signed the odds of Iran having a nuclear weapon before 2020 are pretty close to 100%. Reportedly they are only 2 months away today and the "deal" hopes to stretch that to 12 months with the restrictions. Of course that assumes Iran complies with the deal. Iran has cheated on every prior agreement and there is no reason to expect they will not cheat on this one.


Nuclear armed Pakistan is on the verge of signing a deal with China to buy eight submarines for up to $5 billion. China has been developing new models of both diesel and nuclear submarines as they rapidly expand their own submarine force, which now outnumbers the U.S. sub fleet. China is now the third largest arms exporter. Pakistan is also talking with Germany, Britain and France about purchasing additional used submarines.


China is one step closer to making the yuan one of the world's reserve currencies. China is expecting a deal with the IMF later this year to include the yuan as a currency in the IMF basket of currencies that make up the IMF Special Drawing Rights or SDR. The basket already includes the dollar, euro, yen and pound sterling. The yuan, otherwise known as the renminbi is already the world's fifth most-used trade currency. The IMF is considering China's request to be added to the SDR and a decision will be made in November.

Germany, France and Italy already support adding the yuan to the SDR. Japan, which has existing conflicts with China, is against the move. It would be the first emerging market currency to be added to the SDR. In order to be added it must be "fully convertible" into other currencies and "freely usable." China has not yet completed its liberalization and still controls its convertibility. Having the yuan added to the SDR is one more step towards China's goal of replacing the dollar as the world's primary currency. Once that happens the world as we know it will change because the dollar could decline 50% or more in the years that follow. With China overtaking the U.S. as the world's biggest economy we may be closer to at dollar devaluation than we think.

China currently has $3.8 trillion in U.S. dollar reserves to "keep the yuan steady" in the global markets but the yuan rose +11% in value in 2014. Offshore trading of the yuan soared more than 350% in 2014 on the Thomson Reuters trading platforms.


 

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

"When all the experts and forecasts agree — something else is going to happen."

Bob Farrell

 

 


Index Wrap

Lower Rally Highs Suggests Trouble For the Bulls

by Leigh Stevens

Click here to email Leigh Stevens
THE BOTTOM LINE:

The major indices have seen repeated lows in the same area but each rally has failed at progressively lower levels. Lower upswing highs suggests diminishing buying interest and also suggests that the recent line of support may not hold.

If so, the major indexes could end up back in a broad trading range; e.g., 1980 on the downside to 2120 on the upside in the S&P 500 (SPX), 17050-17200 to 18200 in the Dow 30 (INDU), 4550-4600 to the 5000 area in the Nasdaq Composite (COMP), 4100 to 4450-4475 in the Nasdaq 100 (NDX).

If the areas that have offered repeated support continue to hold up, that's a bullish plus of course but yet to happen in a rally that goes to higher highs than the prior advance(s). The Russell 2000 (RUT) has had the most bullish looking chart in recent weeks but also seems to be struggling to gain further upside traction. If a 'rising tide lift all boats', a falling one carries all lower too.

At the start of this past week (Monday), bullish sentiment got high enough to suggest the 'seeds of the contrary', a level of bullishness that is unrealistic given how far up all the indices have come already in recent months.

The long-term trend remains strongly up as seen in monthly charts in my month end technical review (Trader's Corner, 3/31/15) but there are levels noted which, if pierced, would suggest a substantial pullback.

Sizable pullbacks would likely still be within broad uptrend price channels. The Market on a long-term basis could be said to be 'too strong for too long' to be expected to carry on to ever higher levels; e.g., a new up leg in COMP above 5000. I refer you to the aforementioned article LINK as an adjunct to my shorter-term daily chart reviews seen next.

Friday's reported drop in job creation might be construed as a longer-term bullish plus in that the Fed may hold off on raising rates. Time will tell if the winter from hell in the East and Mid-west is responsible for the most recent dip in job numbers and therefore a temporary phenomenon. A substantial Market correction could be construed as DUE and overdue. And, there's always an economic reason for it.

You may notice that I now have more 'target'/support levels on the downside than on the upside. If they can't take em up, they'll try to take em down!

Lastly, low bullish expectations/high bearishness is again in evidence as seen on the SPX and COMP charts with the CPRATIO indicator. Normally, dips to an 'oversold' zone in this indicator suggests potential for an upside reversal but trader 'sentiment' seems bearish enough to pull stocks still lower.

The S&P 500 Volatility Index (VIX):

The VIX DAILY chart:

The VIX Index is trending sideways and it tends to spend more time in a lateral non-trending direction overall than it does strongly trending. Rallies to the 22 area have offered good trading opportunities in VIX puts but such extremes are not seen often.

Near-term, an upside penetration of 16 could lead to a test of next 'resistance' at 17.

VIX has been holding 13 on dips, and 12-13 has been the 'support' zone for the SPX Volatility Index. Declines into a typical 'oversold' readings in the RSI, such as on the last two dips to 13, have offered short-term trading opportunities for 2-3 points on the upside.

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX) DAILY CHART:

The S&P 500 (SPX) is mixed in its pattern. Since double highs made in the 2120-2113 area in late-February and late-March, the Index has been in a relatively narrow trading range with support found in the 2040-2050 area twice. SPX again looks headed to a re-test of support in this area.

If buying interest is not enough to carry the S&P to new highs and has resulted in LOWER rally peaks, buying may not be sufficient to stop SPX from sinking to new lows for the current move; i.e., to below 2050-2040. Next support is highlighted at 2020 and lower support/buying interest may not be found again before lows that existed prior to late-February at 1990-1988, extending to the 1975 area.

Near resistance is highlighted in the 2080 to 2090 zone. Next resistance as noted is assumed for the prior intraday highs at 2113-2120. As seen in my monthly review per the LINK above to my end-of-March monthly review, major resistance looks to come in at 2136, then at 2150, at the top end of SPX's broad monthly uptrend price channel.

While on SPX's most recent pullback, the Relative Strength Index (RSI) did not reach an oversold extreme and a possible buy 'signal' there. However, this past week saw my (CPRATIO) sentiment indicator hit an 'overbought' extreme, showing high-bullish expectations sometimes linked to tops.

Most recently, low bullish expectations/high bearishness is again in evidence. Normally, dips to the 'oversold' CPRATIO zone is enough to suggest potential for an upside reversal but trader 'sentiment' may be bearish enough to see stocks down for awhile.

S&P 100 (OEX) INDEX; DAILY CHART

The S&P 100 (OEX) looked bullish on the run up above 920 but this last sizable rally stopped well shy of prior highs in the 932 area. I was bullish then but also assumed the Index would hold above its 21-day moving average which didn't happen. In fact recent rally highs have stopped at resistance implied by the 21-day average.

Near resistance is noted at 910; next resistance then comes in around 920, extending to the 925 area. Near support is highlighted in the 896-893 price zone. Fairly major support then begins at 880, extending to 875.

Continued trade below the 21-day average suggests that this time prior lows in the big cap S&P 100 may not stem a decline.

THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:

The Dow 30 (INDU) Average sank again this past week. I noted the problem of bullish expectations last week when I wrote that: ... "bullish Dow stock patterns don't add up currently to more than about approximately a third of the 30; i.e., stocks without the sharp retreats that others have seen over the past 1-2 weeks. Bullish longer-range uptrends remain mostly intact (only) in: AAPL, DIS, GS, HD, JPM, MMM, NKE, PFE, TRV, UNH, and V."

The aforementioned 'bottoms' up bearish analysis for the 30 Dow stocks continues, especially so as possible interim tops may have been reached in GS, JPM, MMM and V. There's some potential for bottoms to have formed in CAT and IBM but no upside reversals are at hand. On balance currently bullish DOW 30 stock patterns are down to 7 from 11 last week.

Near INDU resistance is at 17800-17875, with next overhead resistance in the 18000 area. Near support comes in at 17600, extending to 17500. Fairly major support begins around 17300.

Given the bearish mood that seems to have gripped the market as lower earnings expectations are feared for the Dow, I doubt that potential for an upside INDU reversal will be seen before a 'fully' oversold reading occurs again in the 13-day RSI. Stay tuned on that!



NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:

The Nasdaq Composite (COMP) chart remains mixed in its sideways to lower decline since the Index failed to climb above the 'milestone' 5000 level. Declining momentum is suggested by the COMP's recent inability to get back above its 21-day moving average.

Overhead resistance is seen in the 4950 area, then at 5000, at what looks to be the start of fairly major resistance. It would take a sustained move above 5000 to suggest upside potential to 5100. Near support is highlighted in the 4850 area, then at 4800, extending to around 4750.

Comp has the somewhat irregular appearance of a Head & Shoulder's top pattern. A decisive downside penetration of 4850 would suggest downside potential to 4700.

COMP has been declining on balance but has yet to reach an oversold RSI extreme; if it did, this could suggest a bullish capitulation so to speak and possibly set up an upside reversal. What we have now is a sideways trading range with a slight downward bias in a pattern of lower lows. Ability to hold the 4750 area, if reached, could suggest a bottom was forming.

Bearish sentiment has grown as seen with the CPRATIO indicator but greater extremes of bearishness may be needed to 'signal' a potential bottom.

NASDAQ 100 (NDX); DAILY CHART:

The big cap Nas 100 (NDX) is mixed in its pattern with a similar rationale as the Nas Composite per its commentary above. NDX support is suggested at 4300-4289. A Close below 4300 that continued into a second day would suggest a possible further down leg perhaps one that carried to the 4150 area.

Near resistance is highlighted at 4370-4380, with next resistance suggested at 4420-4430. A sustained move above the 21-day moving average is needed to suggest regained upside momentum in NDX.

Lows in the 4289-4280 area have been seen 3 times now but this implied line of support may not hold up on a re-test of it. If buying interest couldn't take prior rallies to higher highs, support may not hold up on another wave of selling given a current bearish mood. This may continue and 4200 may be a target, possible with dips toward 4150.

I noted last week that "If AAPL saw a decisive downside penetration of 120-116, I'd believe in a possible sizable next down 'leg' ahead." Apple looks vulnerable for that possibility and is a 'bellwether' tech stock to watch. Stay tuned!

The NASDAQ 100 TRACKING STOCK (QQQ); DAILY CHART:

A potential QQQ triple bottom is seen in the 104.6-104.2 area but the failure to gain traction on rally attempts may also mean a failure ahead to maintain prior support also. Next technical support is suggested at 103.4.

Key overhead resistance is suggested at 106.5, at the current 21-day moving average. Next resistance comes in at the 108 'breakdown' point.

The On Balance Volume line is trending sideways to lower. Traders may be turning bearish but as of yet a new down leg has yet to be seen. Any sharp decline to below 104 would likely 'bring out' heavy volume. To date, given the long-standing advance in the big cap Nas 100, bullish QQQ holders are not abandoning ship. Monday should tell the story given Friday's employment numbers as the business media said the sky could be falling on the US economy!

RUSSELL 2000 (RUT); DAILY CHART:

The Russell 2000 (RUT) remains bullish in its chart pattern but has resistance at 1260 that may be tough to overcome. Moreover, it the other major indices start falling under prior lows, RUT may break below support implied by its up trendline and to below support implied by its 21-day moving average.

Pivotal resistance above 1260, is at prior intraday highs at 1268. If the Russell breaks out to new highs and I think it can at some point, next resistance looks to come in around 1280, then at 1300.

Key near support is at 1240, extending to 1230, then to 1220. 1200 begins longer-term support. A weekly Close below 1200 would suggest back to the 1150 area.

The best buying opportunities on pullbacks in RUT have mostly come when this Index has gotten 'fully' oversold in terms of the 13-day Relative Strength Index. Stay tuned on that possibility!


GOOD TRADING SUCCESS!




New Option Plays

Biotech & Luxury Brands

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

PTC Therapeutics, Inc. - PTCT - close: 64.86 change: +2.48

Stop Loss: 59.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 551 thousand
Entry on April -- at $---.--
Listed on April 04, 2015
Time Frame: Exit prior to earnings in May
New Positions: Yes, see below

Company Description

Why We Like It:
Healthcare stocks have been market leaders but biotechs have sprinted past their healthcare brethren. PTCT saw big gains off its 2014 lows and has continued to outperform in 2015, even after its recent correction.

Here's a brief description of PTCT, "PTC is a global biopharmaceutical company focused on the discovery, development and commercialization of orally administered, proprietary small molecule drugs targeting an area of RNA biology we refer to as post-transcriptional control. Post-transcriptional control processes are the regulatory events that occur in cells during and after a messenger RNA is copied from DNA through the transcription process. PTC has received conditional marketing authorization in the European Economic Area for Translarna for the treatment of nonsense mutation Duchenne muscular dystrophy in ambulatory patients aged five years and older.

PTC's internally discovered pipeline addresses multiple therapeutic areas, including rare disorders, oncology and infectious diseases. PTC has discovered all of its compounds currently under development using its proprietary technologies. PTC plans to continue to develop these compounds both on its own and through selective collaboration arrangements with leading pharmaceutical and biotechnology companies."

You can view PTCT's pipeline data on the company's website.

Most of the excitement for PTCT appears to be focused on its Ataluren drug. It's a treatment for Duchenne muscular dystrophy caused by nonsense mutations. The drug is already approved on a conditional basis in Europe. Right now PTCT is performing a Phase III study. Results are expected in the fourth quarter of 2015. This could be a HUGE event for the company and the stock. Success will likely send the stock soaring while disappointing results could crush shares.

A few weeks ago the stock was rocketing higher thanks to takeover speculation. Analysts were painting a takeover target on PTCT and speculating that Biomarin Pharmaceuticals, Shire, or Vertex Pharmaceuticals might be suitors. It is still just speculation at this point. It would be a big gamble to buy PTCT now before its Phase III study was complete but if you are a potential acquirer then the price will go up if the study is a success.

The Street.com published an interesting note on PTCT's CEO Stu Peltz selling all of his stock in the company (about 47,000 shares). If he believes in the future of PTCT's pipeline, why would he sell? If he believes his company could be acquired by a rival, why would he sell? The other side of the coin is that executives with a lot of stock should diversify their wealth. He does still have stock options but selling his current stake could be seen as a big negative.

Technically PTCT has already seen a -20% correction from its March highs. On the plus side the action over the last two weeks looks like a bullish double bottom. Today the point & figure chart is bearish but a move above $65.00 would generate a new buy signal. The most recent data listed short interest at 14% of the very small 25.5 million share float so PTCT could see some short covering on a breakout.

The long-term trend is bullish and short-term PTCT looks ready to bounce. I want to warn readers that this is a higher-risk, more aggressive trade. We always consider biotech stocks to be higher-risk. The news about the CEO selling his stock generates doubt about the company's short-term future. Cautious traders may want to sit this one out. We're suggesting a trigger to launch small positions at $65.25.

Trigger @ $65.25 *small positions*

- Suggested Positions -

Buy the MAY $70 CALL (PTCT150515C70) current ask $4.50
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:




NEW DIRECTIONAL PUT PLAYS

Michael Kors - KORS - close: 63.39 change: -0.69

Stop Loss: 65.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.5 million
Entry on April -- at $---.--
Listed on April 04, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Luxury retail brand names like KORS have seen their stocks get crushed over the last several months. Shares of KORS were big performers for the bulls the first two plus years from its late 2011 IPO. Unfortunately the stock peaked in 2014. Investors worried about over exposure and slowing growth.

According to the company, "Michael Kors is a world-renowned, award-winning designer of luxury accessories and ready-to-wear. His namesake company, established in 1981, currently produces a range of products through his Michael Kors and MICHAEL Michael Kors labels, including accessories, footwear, watches, jewelry, men’s and women’s ready-to-wear and a full line of fragrance products."

Make no mistake, KORS is still growing. Last August they reported a strong earnings report that beat on both the top and bottom line. While management guided lower short-term they raised guidance for 2015. A few months later when KORS reports earnings in November 2014 they beat estimates again with revenues soaring +42% and KORS announced a $1 billion stock buyback program. However, their outlook on 2015 had tarnished a bit and they lowered comparable store sales growth from the high teens to mid teens.

KORS most recent earnings report was February 5th. Earnings per share grew +32%. Their results of $1.48 per share beat estimates by 15 cents. Revenues grew +30.9% to $1.26 billion but that actually missed Wall Street estimates thanks to foreign currency issues.

What troubles investors is the slowdown in KORS' growth. Globally their comparable store sales grew +8.6%. Most companies would probably be excited for that number. Yet analysts were expecting +12.6%. The slowdown appeared to accelerate in North America. Same-store sales plunged from +24% growth to +6.8%. KORS is also facing margin pressure with both gross margin and its operating profit sliding.

KORS management will tell you that the company is doing great and just reported its 35th quarter in a row of same-store sales growth. However, the number crunchers on Wall Street will point out that it was the first time in five years that same-store sales growth did not rise by double-digit percentages.

A big concern among analysts is that KORS could be losing its appeal because it's growing so fast. Last year they added 114 new stores and ended 2014 with 509 retail locations. They're starting to become too common. KORS is losing its cachet.

Management also lowered their guidance for Q4 (current quarter) to $0.89-0.92 a share versus estimates of $0.94. They also see revenues below expectations.

A Credit Suisse analyst is worried that KORS is depending too much on its promotions and discounts to generate sales. Meanwhile a Piper Jaffray analyst just downgraded KORS on April 1st because they see domestic sales sliding sharply with North America comparable store sales falling from 21% to 6% in the last three quarters.

Technically shares of KORS are in a bear market. They also have a bearish trend of lower highs and lower lows. The point & figure chart is bearish and forecasting at $54.00 target. Thursday's low was $63.21. We are suggesting at trigger to buy puts at $62.90.

Trigger @ $62.90

- Suggested Positions -

Buy the MAY $60 PUT (KORS150515P60) current ask $0.95
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Churn Ahead of Long Weekend

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. stock market consolidated sideways ahead of the long, three-day Easter weekend. There was also the rare occasion of the market being closed for Good Friday and the job report being released at the same time. That left investors feeling cautious ahead of the weekend.

Our CPA trade was triggered on Thursday.

We have removed MNST as a candidate.


Current Portfolio:


CALL Play Updates

Cardinal Health, Inc. - CAH - close: 89.60 change: +0.75

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: -23.1%
Average Daily Volume = 1.7 million
Entry on March 30 at $90.55
Listed on March 28, 2015
Time Frame: We might exit prior to CAH earnings
(potentially April 30th)
New Positions: see below

Comments:
04/04/15: CAH managed to recover about half of Wednesday's decline. The stock is currently hovering between short-term support at $88.00 and resistance at $90.00 with additional resistance in the $91.50 area. I'm not suggesting new positions at this time.

Trade Description: March 28, 2015:
The big healthcare names have shown significant relative strength over the last couple of years. That momentum has carried into 2015 and shares of CAH are outperforming the broader market with a +11% gain year to date.

You might have heard about CAH recently since the company made headlines in early March. Here's a brief description of the company, "Headquartered in Dublin, Ohio, Cardinal Health, Inc. (CAH) is a $91 billion health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals, ambulatory surgery centers, clinical laboratories and physician offices focus on patient care while reducing costs, enhancing efficiency and improving quality. Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products and services to more than 100,000 locations each day and is also the industry-leading direct-to-home medical supplies distributor. The company is a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company operates the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease."

Management has been doing a good job with the earnings game. The last three quarters in a row have seen CAH beat Wall Street estimates on both the top and bottom line. Their next report should be the end of April.

On March 2, 2015 CAH made the news with their $2 billion acquisition of Cordis. Here's an except from the company's press release:

Cardinal Health today announced plans to acquire Johnson & Johnson's Cordis business, a leading global manufacturer of cardiology and endovascular devices, for $1.944 billion in cash, or approximately $1.594 billion, net of the present value of tax benefits. The acquisition is expected to be financed with a combination of $1.0 billion in new senior unsecured notes and the remainder with existing cash. The transaction is expected to close in the United States and key non-U.S. countries towards the end of calendar 2015.
CAH is forecasting this acquisition will add more than $0.20 per share to the company's 2017 earnings. They expect synergies to be more than $100 million by the end of fiscal 2018.

CAH's chairman and CEO, George Barrett, commented on the acquisition,

"We are extremely excited about the acquisition of Cordis. This is a significant step forward in our cardiovascular strategy. Cordis brings with it a long and proud legacy of cardiovascular innovation. This move highlights our commitment to address a major pain point in healthcare systems through innovative new approaches to the management of physician preference items. This acquisition follows a sequence of strategic moves for Cardinal Health in the areas of cardiology, wound management and orthopedics. We are well-positioned to help customers standardize around mature medical devices, while bringing them innovative solutions around supply chain management, inventory optimization, and work flow tools and data to support the most effective management of the patient...

With an aging population and the accompanying demand for less invasive medical treatments, health systems around the world are searching for the best way to bring quality care to their patients in the most cost-effective way. The acquisition of Cordis reinforces our strategic position to address this need and strengthens an important growth driver in the Cardinal Health portfolio."

Moody's Investors Service, a credit rating agency, commented on the deal and said it would be credit positive for CAH. Meanwhile a couple of analyst firms upgraded their price targets on CAH following the story with new targets at $105 and $107.

Technically shares of CAH have been trading in a bullish pattern of higher lows and higher highs. Investors just bought the dip at $88.00 near its trend line of support. We want to hop on board and tonight we are suggesting a trigger to buy calls at $90.55.

- Suggested Positions -

Long MAY $90 CALL (CAH150515C90) entry $2.86

03/30/15 triggered @ 90.55
Option Format: symbol-year-month-day-call-strike

chart:


iShares Russell 2000 ETF - IWM - close: 124.65 change: +0.23

Stop Loss: 121.65
Target(s): To Be Determined
Current Option Gain/Loss: +32.0%
Average Daily Volume = 32.7 million
Entry on March 27 at $123.05
Listed on March 26, 2015
Time Frame: Exit prior to May option expiration
New Positions: see below

Comments:
04/04/15: The pop Wednesday afternoon in the IWM continued on Thursday morning but gains eventually faded ahead of the three-day weekend.

The disappointing jobs data could spark some selling pressure on Monday. We are not suggesting new positions at this time. Tonight we're adjusting the stop loss to $121.65.

Trade Description: March 26, 2015:
The IWM is the exchange traded fund (ETF) that mimics the small cap Russell 2000 index ($RUT). Last year we saw the Russell 2000 underperform its large cap rivals. The S&P 500 delivered a +11.5% gain in 2014 while the $RUT only rose +3.6%. The situation has changed this year. As of last week's high the $RUT was up +5.3% compared to a +2.3% gain in the S&P 500.

Investors have been drawn to small cap companies because they will endure the impact of a strong dollar better than the large caps. Many of the large cap S&P 500 companies are big multi-national firms. Almost 50% of revenues for S&P 500 components are overseas. Yet only 20% of revenues for Russell 2000 companies are outside the U.S. At the same time the U.S. economy, while growing slowly, is still growing faster than Europe.

Technically the IWM was holding up pretty well until Wednesday's market-wide plunge. Traders bought the dip today near its trend of higher lows. The point & figure chart for the IWM is still bullish and forecasting a long-term target of $154.00. We think stocks could see a bounce soon and the IWM could be a great way to play it. Tonight we are suggesting a trigger to buy calls at $123.05. We'll start this trade with a stop at $119.65.

- Suggested Positions -

Long MAY $125 CALL (IWM150515C125) entry $1.94

04/04/15 new stop @ 121.65
03/27/15 triggered @ 123.05
Option Format: symbol-year-month-day-call-strike

chart:


Jack in the Box, Inc. - JACK - close: 95.34 change: +0.03

Stop Loss: 94.45
Target(s): To Be Determined
Current Option Gain/Loss: -26.5%
Average Daily Volume = 616 thousand
Entry on March 27 at $96.25
Listed on March 24, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
04/04/15: JACK has spent the last couple of sessions hovering just above support at the bottom of its $95-100 trading range. If there is any follow through lower we'll see JACK hit our stop at $94.45.

I am not suggesting new positions at this time.

Trade Description: March 24, 2015:
It's a burger-eat-burger world out there in the fast-food business. Jack in the Box is small fries compared to its larger rivals like McDonalds (36,258 locations) and Wendy's (6,515 locations). Let's not forget heavy weights like Taco Bell, Burger King, Subway, Dairy Queen, and a handful of pizza chains. JACK only has about 2,200 restaurants but it also has a secret weapon and that is the Qdoba Mexican Grill restaurant with about 600 locations. Chipotle Mexican Grill has almost 1,800 locations.

Some of that intense competition being felt by McDonalds and Chipotle Mexican Grill is coming from Jack in the Box and its Qdoba brand, which is growing sharply. A majority of their Qdoba franchisees own multiple stores with 10, 20 even 40 stores common. Enterprising business owners don't open additional stores if the original stores are not working. To have so many owners with high numbers of stores suggests the franchise is consistently profitable.

To be profitable they need solid customer traffic, good food and decent margins. Shares of JACK have been one of the best performers on the S&P over the last year because the company has been posting solid earnings and growth.

With analysts cutting earnings estimates for McDonalds and Chipotle because of competition in the sector it makes sense to look at what has happened at JACK. Over the last quarter and the last year not a single analyst has lowered their earnings estimates for JACK. According to Zacks there has been a noticeable trend of raising estimates. JACK is expected to grow +16% to +20% this year and in 2016. JACK has beaten earnings by an average of 6% over the last four quarters.

Because of the drop in gasoline prices consumers have more money in their pocket. Some of that money is going to end up in the cash registers at these fast food outlets. Customers are also trending towards healthier foods and away from the mass produced burgers and fries at McDonalds. Did you know there are 19 ingredients in McDonalds fries? Surely you didn't think they were just potatoes and grease? Restaurants like JACK and Chipotle are capitalizing on the healthy food craze. JACK store sales rose an average of 5.7% over the last three quarters but Qdoba sales rose +13% for the year and +7.7% in Q4. Zacks rates JACK as a strong buy.

The company plans to open 15 new Jack in the Box stores in 2015. They're also cashing in on Qdoba's success and planning to open 50 to 60 new Qdoba locations. That compares to just 12 new Jacks and 38 new Qdobas in 2014.

It's also worth noting that JACK has an active share buyback program and they reduced the share count by 10% over the last four quarters. Earnings growth rose +20% in Q3 after three years of consecutive earnings growth of more than 30%.

JACK's most recent earnings report was February 17th, when they reported their 2015 Q1 results. Analysts were expecting a profit of $0.87 a share on revenues of $461.2 million. JACK delivered earnings of $0.93 a share. That's a +24% improvement from a year ago. Revenues were up +4.1% to $468.6 million, above estimates. Their operating margins improved 1% to 19.3%.

Management expects same-store sales at Jack in the Box to surge from +0.9% a year ago to +5% to +7% in Q2. Qdoba same-store sales are forecasted to be in the +7% to +9% range. The company raised full-year 2015 guidance to $2.85-2.97 a share compared to Wall Street estimates of $2.84.

Shares of JACK surged on the earnings news and bullish guidance. Since the report that has been almost no profit taking. Now, after more than four weeks of consolidation, the stock looks poised to breakout past major, psychological resistance at the $100.00 mark. Tonight we're suggesting a trigger to buy calls at $100.25.

- Suggested Positions -

Long JUN $100 CALL (JACK150619C100) entry $3.40

04/01/15 new stop @ 94.45
03/27/15 triggered @ 96.25
03/26/15 strategy update: Move the entry trigger from $100.25 to $96.25, move the stop loss from $95.75 to $93.85
We will adjust the option strike to the 2015 June $100 call
Option Format: symbol-year-month-day-call-strike

chart:


Lennox International - LII - close: 112.06 change: +0.12

Stop Loss: 106.75
Target(s): To Be Determined
Current Option Gain/Loss: -2.0%
Average Daily Volume = 417 thousand
Entry on March 23 at $110.96
Listed on March 19, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
04/04/15: LII continues to push higher. Not only is the stock up five weeks in a row but these are new record highs. Shares have been doing a decent job of ignoring the market's recent weakness. However, I would not chase LII here. The nearest support could be $110.00 or the 20-dma near $109.35.

Trade Description: March 19, 2015:
LII has been in business for over one hundred years. Lennox Intl. is part of the industrial goods sector. They offer residential cooling and heating products as well as commercial cooling and heating equipment. They are considered a global leader in the heating, air conditioning, and refrigeration markets. The residential business generates just over half of their annual sales.

The last couple of quarters have seen steady growth for LII. You can see the big gap higher in the stock price back in October 2014. That was a reaction to its Q3 earnings results. Their most recent report was February 2nd, 2015 where LII delivered its Q4 results.

Analysts were expecting a profit of $0.99 a share on revenues of $790 million. LII reported earnings per shares grew +32% to $1.02. Revenues were up +8.4% to $812.8 million, led by +13% sales growth in their residential segment.

Chairman and CEO Todd Bluedorn commented on his company's results,

"2014 was a year of strong growth and record profitability for Lennox International, led by 10% revenue growth at constant currency and 31% profit growth in our Residential business. In the fourth quarter, the company's momentum continued, with revenue up 10% at constant currency and total segment profit up 24%. Growth in the quarter continued to be led by Residential, with revenue up 14% at constant currency and profit up 57% from the prior-year quarter. In Commercial, revenue rose 8% at constant currency. Commercial profit was essentially flat with the prior-year quarter on headwinds from customer mix, foreign exchange, and investments related to our entrance in the VRF market. In Refrigeration, revenue was up 8% at constant currency. As expected, Refrigeration profit was down from the prior-year quarter by 45% due to the repeal of the carbon tax in Australia, North America product mix, and a negative impact from foreign exchange. We continue to expect Refrigeration revenue, margin and profit to be up in 2015 on continued growth in North America and improvement in Australia in the second half of the year. For the company overall in 2015, we expect another strong year of growth and record profitability, with strong cash generation for investments to drive growth as well as to return cash to shareholders."
Last year LII earnings rose more than +20% to $4.23 a share. They are forecasting $5.20-5.60 per shares in 2015 (+22.9% to +32.3%) versus Wall Street estimates of $5.42 per share.

Shares have been a steady performer the last few months with a bullish trend of higher lows and higher highs. The point & figure chart is bullish with a $140 target. Today shares of LII are hovering just below round-number resistance at $110. We are suggesting a trigger to buy calls at $110.25.

- Suggested Positions -

Long JUN $115 CALL (LII150619C115) entry $2.55

03/23/15 triggered on gap open at $110.96, suggested entry was $110.25
Option Format: symbol-year-month-day-call-strike

chart:


Nike, Inc. - NKE - close: 99.66 change: +0.11

Stop Loss: 97.40
Target(s): To Be Determined
Current Option Gain/Loss: -34.3%
Average Daily Volume = 3.6 million
Entry on March 30 at $101.23
Listed on March 26, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
04/04/15: Thursday was a relatively quiet day for the stock market. Shares of NKE just hovered near round-number resistance at the $100.00 mark.

Business Insider published an article on Friday detailing four reasons why Nike should be able to dominate its market. Briefly the four reasons are:
1. Young shoppers are more focused on health and wellness.

2. More competition is leading to better products.

3. People like being comfortable.

4. Athletic apparel is going international.

You can read BI's article on Nike here.

NKE seems to be having trouble getting past the $100.00 level gain. Thursday's intraday high was $100.32. Consider waiting for a rally past $100.50 before initiating new bullish positions.

Trade Description: March 26, 2015:
In the athletic footwear and apparel industry Nike is the 800-pound gorilla with annual sales of more than $30 billion. According to the company, "NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories, and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories."

The company's most recent earnings report was March 19th, after the closing bell. NKE reported its Q3 2015 results. Analysts were expecting a profit of $0.84 a share on revenues of $7.62 billion. NKE delivered a profit of +0.89 a share or +16% from a year ago. Revenues were up +7% to $7.46 billion. However, if you back out the currency headwinds, their revenues were up +13%.

The company reported sales growth across every geographical region. Their gross margins improved 140 basis points to 45.9 percent. Management said their online sales are soaring. Nike.com saw its revenues jump +42% last quarter.

The current quarter is NKE's 2015 Q4 (March-July) and the company said orders for Q4 in North America are up +15%, which is above analysts' estimates of +11.6%. Orders from China are up +11%, also above estimates. In the company's earnings release NKE said, "As of the end of the quarter, worldwide futures orders for NIKE Brand athletic footwear and apparel scheduled for delivery from March 2015 through July 2015 were 2 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 11 percent."

One big concern is the U.S. dollar. Sales in Europe were up +21% but when you factor in euro weakness and dollar strength that sales growth drops to +10%. The strength in the U.S. dollar is a major headwind but after NKE's Q3 results Wall Street feels that the company is managing the currency impact very well. The company is forecasting low double digit sales growth in the current quarter.

Wall Street applauded the results and shares of NKE gapped open higher on March 20th to hit all-time highs. There was a parade of bullish analyst comments. Several firms raised their price target on NKE. Here's a brief list of new price target: $106, $110, $115, $116.00. The point & figure chart is more optimistic as it is forecasting at $125.00 target.

Shares of NKE have seen some profit taking, which isn't a surprise considering the market's four-day decline. However, now that NKE has filled the gap, traders bought the dip. This could be an entry point. We are suggesting a trigger to buy calls at $100.25.

- Suggested Positions -

Long MAY $100 CALL (NKE150515C100) entry $3.35

03/30/15 triggered on gap open at $101.23, suggested entry was $100.25
Option Format: symbol-year-month-day-call-strike

chart:




PUT Play Updates

Alkermes plc - ALKS - close: 60.10 change: -0.84

Stop Loss: 64.15
Target(s): To Be Determined
Current Option Gain/Loss: +58.1%
Average Daily Volume = 1.26 million
Entry on March 25 at $64.90
Listed on March 23, 2015
Time Frame: exit PRIOR to May option expiration
New Positions: see below

Comments:
04/04/15: Good news! The fact that ALKS did not see any follow through on Wednesday's intraday reversal higher is bearish. Shares actually underperformed the market again on Thursday with a -1.37% decline.

I am not suggesting new positions.

Trade Description: March 23, 2015:
Biotech stocks have been some of the market's best performers, especially off the October 2014 lows. The group may have gotten ahead of itself with significant gains in recent weeks. The last couple of days the biotech ETFs are flashing what might signal a potential top. Meanwhile one stock that has been underperforming its peers is ALKS.

You might not be familiar with ALKS. The company is part of the healthcare sector. According to their marketing materials, "Alkermes plc is a fully integrated, global biopharmaceutical company developing innovative medicines for the treatment of central nervous system (CNS) diseases. The company has a diversified commercial product portfolio and a substantial clinical pipeline of product candidates for chronic diseases that include schizophrenia, depression, addiction and multiple sclerosis. Headquartered in Dublin, Ireland, Alkermes plc has an R&D center in Waltham, Massachusetts; a research and manufacturing facility in Athlone, Ireland; and manufacturing facilities in Gainesville, Georgia and Wilmington, Ohio."

The company's most recent earnings report was February 24th. They beat expectations on both the top and bottom line. Unfortunate for shareholders management lowered their 2015 revenue guidance. Since its report shares have broken down. The stock has seen a couple of analyst downgrades (or lowered price targets). The point & figure chart has turned bearish and is currently forecasting at $54.00 target.

You can see the gap down on the earnings news. ALKS struggled to rebound and when it did traders immediately sold the stock at resistance. Now it's on the verge of breaking down bellow support near $65.00. The $60.00 level is potential support but there is a chance shares drop toward their 200-dma closer to $55. Tonight we are suggesting a trigger to buy puts at $64.90.

I want to remind readers that biotech stocks can be volatile. We should consider this a more aggressive, higher-risk trade.

- Suggested Positions -

Long MAY $60 PUT (ALKS150515P60) entry $2.15

04/01/15 new stop @ 64.15, potential bullish reversal, consider an immediate exit to lock in potential gains now.
03/31/15 new stop @ 65.25
03/28/15 new stop @ 67.65
03/25/15 triggered @ 64.90
Option Format: symbol-year-month-day-call-strike

chart:


Copa Holdings - CPA - close: 97.53 change: -0.72

Stop Loss: 103.05
Target(s): To Be Determined
Current Option Gain/Loss: -13.9%
Average Daily Volume = 624 thousand
Entry on April 02 at $97.75
Listed on April 01, 2015
Time Frame: Exit prior to earnings in May
New Positions: see below

Comments:
04/04/15: Our new trade on CPA is off to a good start. Shares underperformed the market again on Thursday with a -0.7% decline. The stock tried to rally but failed at resistance near $100 and sank to a new three-month low. Our trigger to buy puts was hit at $97.75. I would still consider new positions at current levels.

Trade Description: April 1, 2015:
There are plenty of opinions on oil and if the commodity has found a bottom or not. The plunge in oil prices last year was a huge boon for the airlines as jet fuel is a major expense. The impact of low oil prices may already be factored in. It's worth noting that the price of crude oil hit new relative lows in mid March while the XAL airline index formed a new lower high instead.

CPA is a regional airline. Here's a brief description, "Copa Holdings is a leading Latin American provider of passenger and cargo services. The Company, through its operating subsidiaries, provides service to 73 destinations in 30 countries in North, Central and South America and the Caribbean with one of the youngest and most modern fleets in the industry."

CPA has been underperforming its peers in the airline industry for a while. Thus far the XAL airline index is down -4.4% in 2015 and down about -8% from its multi-year highs in January. CPA is down -5.2% for the year but it's down -19% from its 2015 highs and down -40% from its early 2014 highs.

Earnings have been a mixed bag the last couple of quarters. CPA reported its 2014 Q3 results on November 20th. Earnings beat estimates. Yet revenues were down -0.5% and below Wall Street estimates. CPA's Q4 report was February 12th. Earnings plunged from $3.20 a year ago down to $2.83 (-11.5%). Revenues fell -3.9%.

This week Deutsche Bank has downgraded the airlines as a group. Rising capacity and a slowing global economy will hurt business. Traders are bearish on CPA. The most recent data listed short interest at 14% of the small 33.3 million share float.

Technically CPA is bearish with a pattern of lower highs and lower lows. Today the stock broke down below key support at the $100.00 mark. The point & figure chart is bearish and forecasting an $80.00 target. Today's low was $98.03. We are suggesting a trigger to buy puts at $97.75.

- Suggested Positions -

Long MAY $95 PUT (CPA150515P95) entry $3.60

04/02/15 triggered @ 97.75
Option Format: symbol-year-month-day-call-strike

chart:



CLOSED BULLISH PLAYS

Monster Beverage - MNST - close: 135.66 change: -0.99

Stop Loss: 136.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on March -- at $---.--
Listed on March 30, 2015
Time Frame: Exit prior to earnings in May
New Positions: see below

Comments:
04/04/15: We are removing MNST as an active candidate. The stock is not cooperating and our trade did not open.

Shares are near the bottom of its recent trading range. More aggressive traders may want to consider buying calls now with MNST sitting on short-term support but if you do I suggest very tight stops. Should MNST breakdown from here it could try and fill the gap with a drop toward the $122-123 area.

Trade did not open.

04/04/15 removed from the newsletter, suggested entry trigger was $141.50

chart: