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Daily Newsletter, Tuesday, 4/14/2015

Table of Contents

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

Market Wrap

Market Weak on Earnings Fears

by Jim Brown

Click here to email Jim Brown

Mixed results from JPM and WFC and worries over Intel's report after the close caused mixed results in the major indexes. The Dow gained but the Nasdaq declined as the S&P tech sector lost -1.76% for the day.

Market Statistics

The market started off with mixed headwinds with JP Morgan (JPM) beating estimates on earnings but retail sales for March coming in lower than expected. Wells Fargo also broke a streak of 18 quarters of positive earnings growth to leave investors with a dose of negative sentiment.

March retail sales rose +0.9% after declining -0.6% in February. This was only slightly less than the consensus for a +1.0% gain. After three months of declines you would have thought investors would be happy with any gain but treasuries soared on the weakness and yields on the ten-year fell back to 1.85% intraday.

The reason for the frustration was 0.5% came from auto sales. Motor vehicles and parts rebounded +2.7% after a -2.1% decline in February. Electronics and appliances declined -0.5%, food and beverages -0.5% and gasoline stations -0.6%. Building materials rose +2.1%, furniture +1.4% and clothing +1.2%. Overall I thought it was a decent report. However, on a year over year basis March sales were only up +1.3% and the weakest growth since October 2009.

The Fed got some good news with the March Producer Price Index rising +0.2% after four months of declines totaling -1.8%. However, much of the March gain was the rise in fuel prices with a +7.2% spike in gasoline prices. Food prices declined -0.8% and in line with declines over the prior two months. It would appear that commodity deflation may be easing with rising oil prices the main driver. However, food commodities are still declining. The Fed may be somewhat encouraged by this report but the positives were very minor.

The NFIB Small Business Survey declined again in March from 98.0 to 95.2. The recent high was 100.4 in December and the March reading was the lowest since June. All 10 sub components declined. Job openings declined. Credit conditions worsened. Earnings trends, sales trends and expansion plans all declined. Those expecting the economy to improve declined from a net of -1% to -7%. Those planning on raising prices declined from 19% to 15% and those planning on raising compensation declined from 17% in December to 13% in March.

Analysts were quick to blame severe winter weather but this is a nationwide survey not simply the Northeast. They also blamed the West Coast port strike but there was no data to support that claim. While we may not be at the point where recession fears come back into play there is a definite lack of growth drivers in the U.S. economy.

Business Inventories for February rose +0.3% and slightly ahead of expectations for a +0.2% rise compared to -0.02% decline in January. Business sales were unchanged after falling -2.3% in January. This was not a bullish report.

The Atlanta Fed GDPNow forecast ticked down slightly to +0.2% growth after the Retail Sales and Business Inventories reports. Consumption growth declined from 2.1% to 1.9% and the Q1 inventory investment increased slightly from -$5 billion to -$2 billion. That means inventory trends improved slightly but are still negative. As you can see in the chart from the Atlanta Fed the blue chip forecasts for Q1 GDP are dropping rapidly but are still well above the Fed's forecast.


The economic calendar for Wednesday is headlined by the Fed Beige Book and the economic conditions in each of the Fed regions. Typically they try to say something positive about each region but the "modest" growth adjective from last month may have worsened in several regions. I am sure there will be some mention of weather as a cause for weakness but more of an excuse than a real cause.

The NAHB Housing Markets Index is expected to increase slightly as April is the start of the spring buying season. Industrial production is expected to have declined even further and this will weigh on GDP estimates.

The most important report for the rest of the week is the Philly Fed Manufacturing Survey on Thursday. We need to see an improvement in that report or analysts will really start slashing their economic forecasts.


This was the first real day of earnings season with JP Morgan (JPM) leading the parade with earnings before the open. Income rose +11% to $1.45 compared to estimates for $1.39. Revenue was in line at $24.1 billion. Trading revenue was $5.67 billion up from $5.20 billion. Credit card revenue rose from $10.5 billion to $10.7 billion. Chase originated $24.7 billion in mortgages, up from $17 billion in Q1-2014. Legal expenses were $687 million for the quarter.

CEO Jamie Dimon complains constantly about excessive government regulation but the bank still earned $5.9 billion for the quarter. While Dimon is correct about some of the excessive regulation he has skillfully managed to maneuver through the labyrinth of regulations to build a profit machine.

Shares rallied $1 on the news.


Wells Fargo (WFC) reported earnings of $1.04 compared to $1.05 in the year ago quarter. Revenue rose from $20.6 billion to $21.3 billion. Analysts were expecting 98 cents and $21.3 billion.

Net profit of $5.8 billion was down -2% from the year ago quarter and marked the first year on year decline since 2008. The community banking division saw profits drop -5% to $3.7 billion as banking fees declined due to competition. Credit loss reserves rose another $617 million this quarter to total $13 billion. Wells Fargo saw staffing costs rise +6% as they elected to pay more for quality employees. WFC shares declined -40 cents in regular trading.


Dow component Johnson & Johnson (JNJ) reported earnings of $1.56 or $4.32 billion, compared to estimates for $1.54. This was down from the $1.64 it earned in the same quarter in 2014. Global drug sales rose +3% despite a -7.2% hit from the strong dollar. The company said continued dollar strength could knock -42 cents off full year earnings. JNJ gets half its revenue from overseas. U.S. drug sales jumped +17% on demand for new drugs for cancer, blood clots and diabetes.

The company lowered full year estimates from $6.12-$6.27 to $6.04-$6.19. JNJ had previously adjusted forecasts for the 42 cents in currency translation. The company earned $5.97 in 2014. Shares of JNJ declined only fractionally.


After the close Intel (INTC) reported earnings of 41 cents that was in line with analyst estimates. Revenue of $12.8 billion missed estimates of $12.9 billion by a small amount. Intel guided for Q2 for revenue of $12.7 to $13.7 billion and below the analyst estimates for $13.5 billion. Intel said sales from PC processors and chips for smartphones, tablets and mobile devices, declined -8% to $7.4 billion. Intel said, "We see no growth environment for PCs long term, but server growth, expansion in mobility and growth in the Internet of Things will drive revenues higher." The company forecasted full year revenue of $55.87 billion with the consensus at $55.65 billion.

Intel provided chips for 46 million tablets in 2014 but they had to provide manufacturers a subsidy to get them to use Intel chips. Intel is hoping Windows 10 will finally provide a PC upgrade path from older Windows operating systems.

Shares of Intel rose about 95 cents in afterhours.


CSX (CSX) reported earnings of 45 cents or $442 million that beat estimates by a penny. That was an improvement from $398 million and 40 cents in the year ago quarter. Revenue was flat at $3.03 billion and freight volumes only increased +1% for the quarter. The majority of the profit gains came from a -39% decline in fuel costs to $270 million. The company authorized a $2 billion stock buyback program and a dividend increase from 16 to 18 cents. Shares rallied +$1.18 to $34.16 in afterhours. The profit beat was a relief after Norfolk Southern (NSC) warned after the close on Monday.


Norfolk Southern (NSC) shares fell -4% on Tuesday after they warned Monday after the close. The railroad now expects to earn $1 per share and analysts were expecting $1.28. Revenue is expected to decline -5% to $2.6 billion. The railroad said weak coal shipments were to blame as coal exports declined. China imports a lot of coal but with their economy falling sharply the amount of coal imports has declined. Most of that now comes from Australia because of cheaper shipping.

Norfolk is also suffering from declining shipments related to the energy sector. Lower volumes of frac sand and well pipe are also reducing the number of shipments. Not to be left out of the crowd the railroad also blamed the winter weather for delays.


Companies on the earnings calendar for Wednesday include Bank America and US Bank plus tech giant Google and NetFlix.


Shares of Alcatel-Lucent (ALU) rallied +13% after news broke that Nokia (NOK) was in late stage talks to buy the company. This would be the combination of the 3rd and 4th largest wireless equipment makers. It is sure to cause regulatory problems. Alcatel has a market cap of about $14 billion. Alcatel is a major supplier to AT&T and Verizon and that would give Nokia an expanded opportunity in the USA. ALU has about 52,000 employees worldwide. Nokia has about 62,000. Nokia shares declined about 34 cents.


Markets

The broader market rallied today thanks to JPM/WFC earnings that were not a disaster and the rise in the majority of energy stocks after crude prices rallied to four-month high at resistance just under $54. There was no specific news to power the rise in crude but we are approaching the peak refining months from May through July. Investors are expecting a slowdown in inventory gains and even a decline in inventories once May arrives. This should lift oil prices through the high demand summer driving season.


The S&P Oil Exploration ETF is approaching resistance at $54 and any change in the velocity of inventory gains is likely to produce a breakout. Energy names are severely oversold although quite a few have already seen plenty of investors buy the dip.


The Dow and S&P posted minor gains while the Nasdaq struggled in vain to recover morning losses. The S&P tech sector declined -1.76% but there were no really big losers. Apple declined after it announced the acquisition of camera technology firm LinX for $20 million. The camera maker for mobile devices will quickly see its technology migrate into Apple products. Bernstein also published a research note pointing out five reasons why Apple may be exploring its options on manufacturing a car. Bernstein pointed out that China's auto manufacturing capacity would rise to 26 million vehicles a year in 2016 and Apple could easily contract with a Chinese manufacturer to produce an electric car. Apple has declined -$2 from Monday's high at $128.50. Maybe investors don't want Apple to pour billions into an electric car.

The S&P touched the 2100 level on Friday and Monday but failed at the 2107 high to dip back to 2092 today. After about two-hours of weakness at the open the dip was bought and the index closed at 2096. The 2100 level is still resistance followed by 2110 and 2117. Support is now 2090, 2075 and 2050. The S&P may struggle with that 2100-2110 range, which is downtrend resistance from the February high. With the economy weak and S&P earnings expected to decline as much as -5.9% it may be hard for investors to avoid the urge to use the "Sell in May and go away" strategy. The buying in treasuries this morning suggests there may be some rotation in progress.


The Dow was helped by Chevron, Exxon and Goldman Sachs. Obviously the oil companies were up on the +3% rise in crude prices and Goldman Sachs was up on the positive results from JPM and WFC. Goldman reports on Thursday. As the largest component in the Dow and positive earnings surprise could power the Dow higher.

The Dow continues to struggle with the resistance at 18,100 and downtrend resistance from the February highs. Today did not give us a reason to pick a direction. This was a confusing mess as some stocks rose and some declined and there was no overriding theme.

For instance there were far more big gainers on the Nasdaq than big losers but the breadth of the rank and file stocks was negative. On the Dow, were it not for Exxon, Chevron, Goldman and JP Morgan the Dow would have closed in negative territory. You can't say it was a bullish day when only four stocks kept the Dow in positive territory and well off its +99 intraday high.

Resistance on the Dow is 18,100 and 18,200 with support at 17,900 and 17,850.



The Nasdaq Composite touched 5024 on Monday and declined to 4952 today. That is a pretty big spread with no specific news to power the tech stocks lower. With the Nasdaq leading the charge higher in the prior week this could have been simple profit taking. That psychological resistance at 5000 is strong and we have the makings of a head and shoulders pattern if the index does not blast higher over the next several days. Remember, the market does not need a reason to correct. Sometimes things happen for a reason and sometimes it is just the herd moving in the same direction.

Resistance remains 5000 and 5026 and support is 4950 and 4850.



The Russell is also struggling after spiking to a new intraday high on Monday. The selling began at 11:30 on Monday and continued until 10:30 today. The morning dip was bought but the rebound was lackluster and sellers returned around 12:30 and the index drifted lower for the rest of the day. However, a closing decline of only 0.23 points is hardly a material sell off. We need to watch the index for direction for the rest of the week.


Like the Russell the NYSE Composite is struggling at resistance in an attempt to make a new high. The NYSE has closed right below the 11,110 level for the last three days with the historic high closing resistance at 11,122 on February 24th. This broad market index could be an even better market indicator if it were to suddenly breakout OR breakdown.


Goldman Sachs was widely quoted this morning with a market call on overpriced stocks. Goldman said it was time to sell those "overpriced" stocks in the current market. Analyst David Kostin sees the S&P-500 closing at 2100 at year end. That is only +5 points from the market's close today.

Stocks Goldman recommended shorting include:

CELG, KLAC, JEC, COH, DO, HST, NDAQ, TDC, FLS, ARG, DISCA, KSS, CTL, MOS, NVDA, WU, ORLY, RHT, EQR.

Overpriced stocks Goldman recommended selling to take profits.

FB, YELP, TWTR, LNG, LNKD, FEYE, SCTY, V, PANW, Z.

Stocks Goldman thought had the most upside:

DAL, JNPR, LUV, GM, KORS, NFLX, CF, CI, GT, CHK, VLO, BRCM, UHS.

Link to Goldman tables with price targets.

With Goldman suggesting quite a few stocks in addition to those above are also overpriced it put a cloud over the market. Whether that cloud will lift on Wednesday is of course unknown. The S&P has a current forward PE of 18 and that is fairly valued for almost every institutional investor. When stocks like Under Armour (UA) are selling at a PE of 85 it requires a perfect world for the gains to continue.

I would remain cautious about holding too many long positions this week. On Friday it appeared the market was headed for new highs and Monday's intraday spikes on the NYSE and Russell did make those new highs but the selling was immediate. This suggests investors are nervous about the coming earnings cycle and additional gains could be a challenge.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email

 

 


New Option Plays

Growing Faster Than The Economy

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Ctrip.com - CTRP - close: 63.88 change: +0.88

Stop Loss: 61.30
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.9 million
Entry on April -- at $---.--
Listed on April 14, 2015
Time Frame: 3 to 5 weeks, Exit PRIOR to earnings in May
New Positions: Yes, see below

Company Description

Why We Like It:
The Chinese economy grew +7.4% last year. Today estimates are suggesting +7.0% for 2015, the slowest pace in 24 years. One area that is outperforming the broader economy is travel. Travel is expected to grow twice as fast. Leading the way is CTRP, China's largest online travel provider.

CTRP is part of the services sector. According to the company, "Ctrip.com International, Ltd. is a leading travel service provider of accommodation reservation, transportation ticketing, packaged tours, and corporate travel management in China. It is the largest online consolidator of accommodations and transportation tickets in China in terms of transaction volume. Ctrip aggregates comprehensive travel related information and offers its services through an advanced transaction and service platform consisting of its mobile apps, Internet websites and centralized, toll-free, 24-hour customer service center. Ctrip enables business and leisure travelers to make informed and cost-effective bookings. It also helps customers book vacation packages and guided tours. In addition, through its corporate travel management services, Ctrip helps corporate clients effectively manage their travel requirements. Since its inception in 1999, Ctrip has experienced substantial growth and become one of the best-known travel brands in China."

The company's most recent earnings report sparked quite a reaction. CTRP reported its Q4 and fiscal year 2014 results on March 19th. Analysts were expecting a loss of $0.09 a share on revenues of $306.29 million. CTRP delivered a loss of $0.11. Investors ignored the miss thanks to revenues rising +33% to $308.37 million.

James Liang, Chairman of the Board and Chief Executive Officer of Ctrip, commented on his company's results saying, "In the fourth quarter of 2014, our main business lines demonstrated strong momentum. Accommodation reservation and transportation ticketing services reached 53% and 102% year-over-year volume growth respectively. Total GMV of packaged tour business reached RMB13 billion in 2014. Our new initiatives have propelled the expansion in our market share. Cumulative mobile app downloads reached nearly 600 million by the end of the year, growing over 70% from the previous quarter. Over 70% of transactions were made through mobile platforms during the Chinese New Year holiday. 2015 could be another exciting year. We will continue to focus on technology, service quality and efficiency, product comprehensiveness and price competitiveness, to create greater value for our customers, our partners, our employees and ultimately, our investors."

What really caught the market's attention was CTRP's guidance. The company expects Q1 revenues to surge +40% to +50%. That would be the highest growth rate since 2010 and above Wall Street's estimates for +30%. Mr. Liang said that CTRP owns about 5% of the travel market in China. Longer-term he believes CTRP could have about 20% of the market but it will be a much bigger market with travel expected to grow +500%.

Shares of CTRP gapped open higher from $46.00 to $55.00 and hit $60 a few days after its earnings report. Today shares are consolidating sideways below resistance near $65.00. Traders just bought the dip at its rising 10-dma this morning.

We want to hop on board if CTRP breaks through $65.00. Tonight we're listing an entry point to buy calls at $65.15.

Trigger @ $65.15

- Suggested Positions -

Buy the MAY $65 CALL (CTRP150515C65) current ask $3.20
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:



In Play Updates and Reviews

Stocks Pare Morning Losses

by James Brown

Click here to email James Brown

Editor's Note:

The S&P 500 closed with a minor gain after reversing losses from Tuesday morning. Energy stocks led the way with a drop in the dollar fueling a bounce in crude oil prices.

BIG hit our bearish entry point.


Current Portfolio:


CALL Play Updates

Ambarella, Inc. - AMBA - close: 74.87 change: -0.39

Stop Loss: 72.45
Target(s): To Be Determined
Current Option Gain/Loss: -38.0%
Average Daily Volume = 2.0 million
Entry on April 10 at $76.15
Listed on April 09, 2015
Time Frame: Exit prior to May option expiration
New Positions: see below

Comments:
04/14/15: AMBA dipped toward its 10-dma again. The moving average held as support but shares look vulnerable with today's -0.5% decline. I am not suggesting new positions at this time.

Trade Description: April 9, 2015:
If you're looking for relative strength then AMBA has it in spades. Year to date the stock is already up +48%. AMBA is in the technology sector. They're considered part of the semiconductor and semiconductor equipment makers. The company was founded in 2004 and went public in October 2012 at $6.00 a share. That price was significantly below where AMBA was expected to price in the $9-11 range. Investor sentiment has definitely changed since then.

The company has grown from making broadcast-class encoders to making consumer and sports cameras, security cameras, and now automotive cameras. Their high-definition chips are being integrated into security IP cameras and wearable cameras. AMBA is also capturing part of a new market - cameras on consumer-level remote control drones.

The last two plus years have seen a strong performance in AMBA with the stock up more than +600% from its IPO price. AMBA has GoPro, Inc. (GPRO) to thank for part of that rally. GPRO came to market in June 2014 and the stock has been in rally mode since mid August with a rally in GPRO from less than $40 to $90 a share. I mention GPRO because AMBA happens to make the HD camera sensors in many of GPRO's action camera products. GPRO's IPO drew a lot of attention to AMBA. Now GPRO's rally has collapsed while AMBA has continued to climb.

Part of GPRO's trouble is competition from a large Chinese rival - Xiaomi. GPRO is currently seen as best of breed in the action camera market but it may not hold that spot forever. Xiaomi is selling similar cameras at a significant discount to GPRO and both cameras use AMBA's technology. Both camera makers have different models. GPRO's top of the line still has better components than Xiaomi's - at least for now. The real winner is AMBA since they supply to both companies. Multiple analysts have commented on AMBA's relationship with Xiaomi and believe it will bear significant fruit in the future.

AMBA has been killing it on the earnings front. They have beaten Wall Street's earnings and revenue estimates for the last five quarters in a row. Their most recent report was their Q4 results on March 3rd. Analysts were expecting a profit of $0.49 a share on revenues of $59.3 million. AMBA delivered $0.68 a share with revenues soaring +61% to $64.7 million.

Shorts are getting killed. As the rally continues AMBA could see more short covering. The most recent data listed short interest at 27.7% of the small 29.2 million share float. Meanwhile the point & figure chart is very bullish and forecasting a long-term AMBA target at $106.00.

The last few days have seen shares of AMBA consolidate sideways between short-term support at its 10-dma and resistance near $75.00. Tonight we are suggesting a trigger to buy calls on AMBA at $76.15.

NOTE: GPRO, one of AMBA's biggest customers, reports earnings near the end of April. GPRO's results could significantly influence trading in AMBA's stock.

- Suggested Positions -

Long MAY $80 CALL (AMBA150515C80) entry $2.50

04/10/15 triggered @ 76.15
Option Format: symbol-year-month-day-call-strike


Cardinal Health, Inc. - CAH - close: 90.30 change: +0.68

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: -24.8%
Average Daily Volume = 1.7 million
Entry on March 30 at $90.55
Listed on March 28, 2015
Time Frame: Exit PRIOR to earnings on April 30th
New Positions: see below

Comments:
04/14/15: CAH dipped to $89.00 and bounced. Shares managed to outperform the major indices with a +0.75% gain. The stock remains under resistance in the $91.00-91.50 zone.

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


G-III Apparel Group, Ltd. - GIII - close: 117.48 change: -0.73

Stop Loss: 113.85
Target(s): To Be Determined
Current Option Gain/Loss: -19.0%
Average Daily Volume = 207 thousand
Entry on April 09 at $116.77
Listed on April 08, 2015
Time Frame: Exit PRIOR to the 2:1 split on May 4th
New Positions: Yes, see below

Comments:
04/14/15: GIII spent Tuesday's session churning sideways. The stock eventually settled with a -0.6% decline. If this dip continues I'd look for support near $115.00.

We want to exit prior to the stock split on May 4th.

Trade Description: April 8, 2015:
GIII has been showing relative strength and could deliver a strong pre-stock split rally. The company is in the consumer goods sector. They make apparel.

The company describes itself as, "G-III is a leading manufacturer and distributor of outerwear, dresses, sportswear, swimwear, women's suits, women’s performance wear, footwear, luggage, women's handbags, small leather goods and cold weather accessories under licensed brands, owned brands and private label brands. G-III sells swimwear, resort wear, and related accessories under our own Vilebrequin brand. G-III also sells outerwear, dresses, and performance wear under our own Andrew Marc and Marc New York brands, and has licensed these brands to select third parties in certain product categories.

G-III has fashion licenses under the Calvin Klein, Kenneth Cole, Cole Haan, Guess?, Tommy Hilfiger, Jones New York, Jessica Simpson, Vince Camuto, Ivanka Trump, Ellen Tracy, Kensie, Levi's and Dockers brands. Through our team sports business, we have licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League, Touch by Alyssa Milano and more than 100 U.S. colleges and universities. Our other owned brands include Bass, G.H. Bass, G-III Sports by Carl Banks, Eliza J, Black Rivet and Jessica Howard. G-III also operates retail stores under the Wilsons Leather, Bass, G.H. Bass & Co., Vilebrequin and Calvin Klein Performance names."

Looking at GIII's earnings performance last year the company has beaten Wall Street's bottom line earnings estimates four quarters in a row and usually by a wide margin. GIII also beat analysts' revenue estimates three out of the last four quarters. When GIII reported its Q3 results back in December they raised guidance above Wall Street expectations.

Their most recent report was their Q4 results on March 24th. Earnings were up +58% from a year ago to $0.98 a share. That was 15 cents above estimates. For their fiscal year 2015, which ended on January 31st, GIII said adjusted earnings were up +21% while revenues were up +23% from a year ago.

In their earnings press release Morris Goldfarb, G-III's Chairman, Chief Executive Officer and President, said, "Fiscal 2015 was another strong year of sales and profit growth for G-III. We drove strong performances across our portfolio of businesses, solidified our market position, and successfully executed across a range of strategic initiatives, including the integration and repositioning of the G.H. Bass business we acquired in the fourth quarter of last year. We are pleased to have achieved another record year for both net sales and net income per share."

The stock did see a little profit taking when management offered conservative guidance but traders bought the dip a couple of days later. Now the stock is hitting new all-time highs.

Yesterday morning, April 7th, GIII announced a 2-for-1 stock split. The shareholder record date is April 20th. GIII should begin trading post-split on Monday, May 4th. Shares look like they could produce a strong pre-split run up. We want to hop on board for the next three weeks and exit prior to the split date. Tonight we're suggesting a trigger to buy calls at $116.65.

- Suggested Positions -

Long MAY $120 CALL (GIII150515C120) entry $2.90

04/13/15 new stop @ 113.85
04/09/15 triggered @ 116.77, on a midday gap higher
Suggested entry was $116.65
Option Format: symbol-year-month-day-call-strike


iShares Russell 2000 ETF - IWM - close: 125.67 change: -0.03

Stop Loss: 122.85
Target(s): To Be Determined
Current Option Gain/Loss: +30.9%
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:
04/14/15: The IWM rebounded off its test of the rising 20-dma. Shares closed virtually unchanged on the session. The bullish trend of higher lows is still intact and offers hope that the IWM will breakout to new highs soon.

No new positions at this time.

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

04/07/15 new stop @ 122.85
04/04/15 new stop @ 121.65
03/27/15 triggered @ 123.05
Option Format: symbol-year-month-day-call-strike


Nike, Inc. - NKE - close: 99.53 change: +0.26

Stop Loss: 97.85
Target(s): To Be Determined
Current Option Gain/Loss: -48.1%
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:
04/14/15: NKE managed to post a small gain today but I'm still urging caution here. There is no change from my recent comments. I am not suggesting new 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

04/13/15 new stop @ 97.85
03/30/15 triggered on gap open at $101.23, suggested entry was $100.25
Option Format: symbol-year-month-day-call-strike


Palo Alto Networks, Inc. - PANW - close: 144.54 change: -0.61

Stop Loss: 144.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.3 million
Entry on April -- at $---.--
Listed on April 11, 2015
Time Frame: Exit PRIOR to earnings in late May
New Positions: Yes, see below

Comments:
04/14/15: A Piper Jaffray analysts issued bullish comments on PANW yesterday. While today a Goldman Sachs analyst said sell PANW because it's too expensive.

Currently we are on the sidelines. If PANW doesn't show some improvement tomorrow we will probably remove it as a candidate.

Trade Description: April 11, 2015:
The world we live in is quickly turning into a digital one. That makes cyber threats and the security to stop them a huge business. Just this past week there were headlines that Russian hackers had invaded the White House and accessed sensitive data.

There is a nearly constant stream of headlines about big name American companies being hacked. Some of the recent ones include Anthem, Home Depot, JPMorgan Chase, and Target. Even the National Oceanic and Atmospheric Administration satellite system has been hacked (allegedly by Chinese hackers). More and more we're seeing sophisticated attacks from unfriendly governments (e.g. Russia, Iran, China, and North Korea).

PANW is cashing in on the growing need for online security. According to the company, "Palo Alto Networks is leading a new era in cybersecurity by protecting thousands of enterprise, government, and service provider networks from cyber threats. Unlike fragmented legacy products, our security platform safely enables business operations and delivers protection based on what matters most in today's dynamic computing environments: applications, users, and content."

Earnings have been skyrocketing. The company has been beating Wall Street's estimates on both the top and bottom line. PANW has also been consistently guiding higher, above analysts' estimates. The last three quarters have seen revenue growth above +50% each.

Their latest report was March 2nd. Analysts were expecting $0.17 a share on revenues of $203.99 million. PANW delivered $0.19 with revenues up +54% to $217.7 million. Management guided the current quarter to $0.19-0.20 a share with revenues of $219-223 million. Wall Street was only expecting $0.19 on revenues of $214 million.

PANW recently held their analyst day on March 30th and the general consensus was pretty optimistic. One firm said PANW's growth opportunities are red hot. PANW also released a new subscription service - the AutoFocus cyber threat intelligence service. PANW's senior VP of product management, Lee Klarich, commented on their new product saying, "The Palo Alto Networks AutoFocus threat intelligence service enables security teams to significantly close the gap on the time it takes to identify and prevent advanced, targeted cyber attacks. By putting cyber threats in a context that speaks specifically to their network and industry, using the largest data set aggregated across customers and industries, we are helping customers around the world take a more strategic approach to securing their organizations."

Technically the long-term trend is higher. Yet shares of PANW have been consolidating sideways in the $135-150.00 zone for the last six weeks. That consolidation is narrowing with shares up sharply this past week. The stock looks poised to breakout past resistance near $150 soon. Wall Street's median price target is currently $165.00. I suspect it could go a lot higher over the next twelve months.

We want to be ready if PANW does break through round-number, psychological resistance at the $150.00 level. Tonight we are suggesting a trigger to buy calls at $150.55.

Trigger @ $150.55

- Suggested Positions -

Buy the JUN $155 CALL (PANW150619C155)

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


PTC Therapeutics, Inc. - PTCT - close: 69.09 change: -2.03

Stop Loss: 64.75
Target(s): To Be Determined
Current Option Gain/Loss: +6.8%
Average Daily Volume = 551 thousand
Entry on April 06 at $65.25
Listed on April 04, 2015
Time Frame: Exit prior to earnings in May
New Positions: see below

Comments:
04/14/15: The profit taking in PTCT accelerated today with a -2.85% decline. The close under $70.00 could be a warning signal. More conservative traders may want to consider an early exit.

I am not suggesting new positions at this time.

Trade Description: April 4, 2015:
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.

*small positions* - Suggested Positions -

Long MAY $70 CALL (PTCT150515C70) entry $4.40

04/11/15 new stop @ 64.75
04/09/15 DB raised their target from $75 to $115
04/08/15 new stop @ 62.75
04/06/15 triggered @ 65.25
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Big Lots Inc. - BIG - close: 46.68 change: -0.35

Stop Loss: 50.05
Target(s): To Be Determined
Current Option Gain/Loss: -2.6%
Average Daily Volume = 1.1 million
Entry on April 14 at $46.85
Listed on April 13, 2015
Time Frame: Exit PRIOR to May option expiration
New Positions: see below

Comments:
04/14/15: BIG underperformed the market again with a -0.74% decline. Shares also hit our suggested entry point at $46.85 this morning. I would still consider new positions at current levels.

Trade Description: April 13, 2015:
Momentum for this retail name is clearly rolling over. According to the company's latest press release, "Big Lots Inc. (BIG) is a unique, non-traditional discount retailer operating 1,460 Big Lots stores in 48 states with product assortments in the merchandise categories of Food, Consumables, Furniture & Home Decor, Seasonal, Soft Home, Hard Home, and Electronics & Accessories. Our vision is to be recognized for providing an outstanding shopping experience for our customers, valuing and developing our associates, and creating growth for our shareholders."

The company's earnings results have been mixed. The huge sell-off on December 5th was a reaction to its Q3 earnings. BIG lost $0.06 per share, which was worse than expected and revenues were essentially flat. The fourth quarter was significantly better with BIG delivering a profit of $1.76 per share compared to estimates of $1.75. Revenues were up +1.4% and were in-line with estimates of $1.59 billion. Comparable store sales were up to +2.9% in the fourth quarter.

Unfortunately, management guided lower for Q1 and the rest of their fiscal 2016. Their forecast of $2.75-2.90 in earnings is below Wall Street's $2.96 estimate. Comparable store sales are going to be in the low single digits. The company tried to soften the bad news by raising their dividend and adding to their stock buyback program.

The post-earnings rally didn't last. Shares of BIG have rolled over and now the path of least resistance is lower. The $46.00 level, along with the simple 200-dma, is potential support but we are expecting this weakness in BIG to accelerate. Tonight we are listing a trigger to buy puts at $46.85 with an initial stop loss at $50.05.

- Suggested Positions -

Long MAY $47.50 PUT (BIG150515P4750) entry $1.90

04/14/15 triggered @ $46.85
Option Format: symbol-year-month-day-call-strike


Avis Budget Group, Inc. - CAR - close: 54.39 change: -0.50

Stop Loss: 60.05
Target(s): To Be Determined
Current Option Gain/Loss: +25.6%
Average Daily Volume = 1.7 million
Entry on April 07 at $55.85
Listed on April 06, 2015
Time Frame: exit PRIOR to May option expiration
New Positions: see below

Comments:
04/14/15: Shares of CAR sank -0.9% versus the +0.1% gain in the S&P 500. This is a new closing low for CAR in 2015. More conservative traders may want to start lowering their stop loss.

Trade Description: April 6, 2015:
Investors sentiment for CAR seems to have soured. The company operates in a competitive, low-margin industry.

According to the company, "Avis Budget Group, Inc. (CAR) is a leading global provider of vehicle rental services, both through its Avis and Budget brands, which have more than 10,000 rental locations in approximately 175 countries around the world, and through its Zipcar brand, which is the world's leading car sharing network, with more than 900,000 members. Avis Budget Group operates most of its car rental offices in North America, Europe and Australia directly, and operates primarily through licensees in other parts of the world. Avis Budget Group has approximately 30,000 employees and is headquartered in Parsippany, N.J."

Another challenge is the broader transportation industry. Many market analysts view the transportation industries as a barometer of the wider economy. Fuel prices are significantly lower than they were a year ago. This is a net positive for the transports. This effect seems to be priced in. Now the weight of a slowing U.S. economy appears to be dragging the transportation average lower. Today saw the Dow Jones Transportation Average breakdown below key support at the 8,600 level.

Looking at CAR, the company's last three earnings reports have been mixed. They managed to beat Wall Street's earnings estimates on the bottom line three quarters in a row. Revenues are slowing down. Q2 revenues came in above estimates. Q3 revenues were up +6% but were just a hair below estimates. Q4 revenues were up +2% and missed estimates. Part of the problem is currency headwinds. The surging dollar has damaged their revenue growth. CAR's guidance when they reported Q4 earnings in February forecasted 2015 revenues below analysts' estimates.

Meanwhile traders have been selling the rallies. The late December rally failed near $68.00, marking a lower high from its 2014 peak. The rally failed again a few days later. The post-earnings spike in February produced another lower high. Now we see the oversold bounce from support near $56.00 has already rolled over. The point & figure chart is bearish and forecasting at $45.00 target.

Tonight we are suggesting a trigger to buy puts at $55.85. We will plan on exiting prior to May option expiration or CAR's earnings report in May (whichever comes first).

- Suggested Positions -

Long MAY $55 PUT (CAR150515P55) entry $1.95

04/07/15 triggered @ 55.85
Option Format: symbol-year-month-day-call-strike