Option Investor
Newsletter

Daily Newsletter, Thursday, 4/16/2015

Table of Contents

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

Market Wrap

Just Hanging Around

by Thomas Hughes

Click here to email Thomas Hughes
The market is hanging just below the all-time highs.

Introduction

The market pulled back slightly from yesterday's one month high. The morning headlines were mixed but nothing stands out as a reason for the market to pause; China data is not as strong as expected raising hopes for stimulus, Earnings are a little mixed but generally better than expected, economic data is steady and Greece remains in the spotlight.

Asian markets closed largely higher in today's session. The weak round of data put out this week has raised hopes of increased stimulus, driving the mainland index to a new 7 year high and lifting indices elsewhere in the region. European indices began the day near recent highs but quickly fell as the Greek issue takes on a new dimension. Credit rating Standard & Poors reduced Greece's rating to CCC with a negative outlook from the previous B-, compounding a recent stalemate between the country and the rest of the EU. S&P's call; without relief or reform there is no sustainability in Greek finances (they have a big payment due in May). The DAX fell the hardest, losing close to -2% by the end of the day.

Market Statistics

Early futures trading indicated an open about a quarter point below yesterday's close and that level held throughout the pre-opening session. There was quite a bit of information released during this time but it did little to move the market. Once the opening bell sounded the indices moved lower but quickly met support.

The market churned within a very narrow early range, just below break even, until shortly after the 10AM release of Philly Fed Survey. At that time the indices moved off of the low end of their and moved up to flirt with break even levels. The indices held near this level through lunch and into the early afternoon.

Late afternoon trading was much like the morning, only in reverse. The indices poked their heads into positive territory just after 2PM and the proceeded to traded in a very tight range just above break even. Late in the day the indices backed off of the highs, retreated to break even level and below where they remained into the close of trading.

Economic Calendar

The Economy

There was quite a bit of economic data, a bit mixed but relatively stable within current trends and expectations. First up is Housing Starts, Building Permits and Completions for March. Housing starts came in just over 925,000, a 2% increase over the previous month but a little weaker than expected. On a year over year basis starts are -2.5% below last March, but this comes with a +/-11.5% margin of error.

Permits fell, counter to expectations for a slight rise, by -5.7% but are up by 2.9% year over year. There is a 2% margin of error in this figure. Completions also fell, by -3.9%, but this figure lags the others by a month so is for February. On a year over year basis completions are down -5.8% but like with the starts comes with a whopping margin of error, +/-10%. All in all these figures are all a little light and below expectations but not excessively so in light of the margins for error.

Initial claims rose more than expected but remain very low. Claims gained 12,000 versus the expected rise of 2,000 to reach 294,000. This is from an upward revision of 1,000 for a net gain of 15,000 from last week. The four week moving average also rose, by 250, and remains just off the low set in the past few weeks. Even with the unexpected rise claims remain below 300,000 with the moving average trending lower.

On a not adjusted basis claims rose by 21.3% versus the 16% projected by seasonal factors. Pennsylvania and New Jersey led with increases of 3,478 and 2,572, primarily located in transportation, education, accommodations, food service and warehousing. California and New York led with decreases of -3,647 and -1,004.


Both longer term guages of unemployment claims fell this week. Continuing claims fell by 40,000 to 2.268 million, a new 15 year low. The four week moving average of continuing claims also fell to a new 15 year low. The total number of claims for unemployment fell by 90,744 to 2.527 million, a four month low and levels not seen since the early part of December 2014.

Both figures are in line with the long term decline in unemployment and based on them people are either quitting the work force or they are getting jobs. Based on other labor trends it looks like they are getting jobs; this months labor data could be very revealing.


The Philadelphia Federal Reserve Manufacturing Business Outlook Survey was released at 10Am and helped the market to rise off of the day's lows. The headline number of 7.5 is a half point better than expected and 2.5 points above last months reading. This is the second month of increase since last falls peak to 40.2, positive and expanding. Within the report new orders remained flat with a small 0.7% increase while both the employment and hours worked components experienced more robust increases. The employment component gained 8 points rising from 3.5 to 11.5. The forward looking future activity index also saw a rise, +3 to 35, indicating increased expectations for expansion over the next 6 months.


This weeks data flow is not over. There are 3 releases tomorrow including CPI, Michigan Sentiment and the Leading Indicators. Next week the flow is cut to a trickle, there are only 5 releases all week aside from jobless claims.

One other event happened this morning that could be loosely called an economic release. Federal Reserve Bank President Fischer said in a televised interview that he sees an economic rebound about to unfold in the US, and that outside factors were influencing the FOMC's rate hike decision, whatever that means.

The Oil Index

Oil prices pulled back today as well. The price for WTI and Brent both fell in the range of 1.5% after hitting the 2 month high yesterday. Yesterday's high in crude may also have been the top of a range so I remain skeptical of the rally.... As I was writing my notes on oil a head line popped up in mail email. A Yemeni tribal group, part of the ongoing conflict in the region, has taken control of an important oil port. The news reversed oil's early losses sending WTI and Brent both up by more than 1%. WTI is being supported by signs of supply/demand re-balancing linked to US rig counts and geo-political risk but there is little indication rising demand or declining supply.

The Oil Index had already been extending its break above resistance and was then spurred higher by the news out of Yemen. The index gained nearly another full percent in today's session, pushing through another potential line of resistance but not breaking it. The indicators are both bullish, at high levels and on the rise.

With oil prices on the rise now, and earnings growth outlook for the next 12-18 months positive, it is hard to see an end to the rally but it is on shaky ground in the near term. Today's rally is due at least in part to rising oil prices, oil prices are rising, at least today, on geopolitical risk, a that combination leaves both oil prices and the index subject to a potentially rapid decline in fear premium.


The Gold Index

Gold prices continue to hover around the $1200 level today. Today's mixed economic data lead to another round of speculation of when the FOMC will raise interest rates; the range is still June/September. Today's speculation pushed consensus to the far end of the range and weakened the dollar within its trading range and driving today's ripple in gold prices. It appears that gold and the dollar are settling, or have settled, into a near term range while the market assesses data and could them hold unless the market begins to build up some new expectations. Gold is trading around $1200, the Dollar Index between $97 and $100. The next FOMC meeting is only two week away and is the last before we enter the The Rate Hike Zone, my next target for any major shift in dollar or gold values.

The gold miners fell in today's session. The gold miners ETF GDX lost about a half percent after initially testing resistance just above $20. The ETF if drifting higher in the near term with bullish indicators and approaching my resistance line near $20.50. This is near the mid-point of the 6 month range and an important level for me in light of the double bottom reversal I have been watching over the past 6 months. A break above this line would add confirmation to my theories and take the index as high as $22.50 in the near to short term; earnings might be enough. Most of the miners report in two weeks.


In The News, Story Stocks and Earnings

I just saw the trailer for the new Star Wars and I was pretty excited by it. Star Wars was the first movie I ever saw in a theater that I can remember and remains a top favorite. The trailer looked true to the legacy of George Lucas and will no doubt lead to a lot of profits for Walt Disney. I can't wait to see it and will probably have to buy some merchandise too. Today shares of Walt Disney gained more than 1% and are now approaching the all-time high set last month.


Earnings Earnings Earnings, according to Blackrock CEO his company is an earnings machine. The company reported a profits of $4.89 per share, well ahead of expectations, as were revenues. The company was also able to raise the dividend and announce that it is raising another private equity fund. Shares of the stock opened higher but sold off sharply on high volume. Support was found along the short term moving average but was not enough to recover all of today's gains.


Goldman Sachs and Citigroup both beat expectations as well. Citigroup did not beat on the top line but lower costs and restructuring fees helped to drive earnings. Goldman beat on both the top and bottom line and raised it's dividend by a nickel to $0.65. Together these two banks along with BlackRock and the rest of the financial sector have produced earnings growth above expectations with positive forward outlook. In terms of stock performance the two performed not exactly as expected. Goldman opened higher, closed lower and may indicating the top of a range; Citigroup gapped up and moved higher.

The financial sector was one of today's leaders. The XLF Financial Spyder gained about 0.4% after testing support along the short term moving average. The ETF is drifting higher with bullish indicators but faces resistance at $24.75 and $25. The ETF could get additional boost tomorrow from American Express which reported after the bell. The credit company beat expectations for profits and gave decent outlook in light of the loss of exclusivity with Costco.


UnitedHealth Group reported a beat on both the top and bottom lines, and raised guidance. The health management company increased guidance to a range a nickel above the previous and above consensus. The company reported that it added more than 1.6 million more people to its network and that revenues were driven by accelerating growth and strong operating performance. Shares of the stock gained 3.4% in today's session and is approaching a new high.


The Indices

After a day of churning within a very tight range the indices ended the day nearly flat. Not one closed with more than a 0.1% move in either direction, led by a +0.04% gain made by the Dow Jones Transportation Average. The transports created a small doji candle/spinning top just above support and below resistance near the bottom end of its 6 month range. The index trading range is confirmed by the indicators which are consistent with support along 8,575 in both the short and long term. It looks like the index may stay within this range until it meets up with the long term trend line. Based on my charts this could happen sometime in the next 4 – 6 weeks, basically coincident with the remainder of earnings season.

By that time there will have been another 2 months of macro-data to support a trend line bounce or bust. The indicators are pointing up at this time consistent with an index moving up within it range. Current target is the short term moving average, which is just above today's close. A break above the moving average could take it as high as the top of the range near 9,250.


The Dow Jones Industrial Average made a decline of -0.04% and also created a small doji/spinning top candle. Today's action tested the one month high and near term support before closing near to the opening price and yesterday's close. The indicators are bullish and both on the rise so I am expecting at least a test of resistance near the 18,250 level. The index is now sitting on a fairly strong level of support, the December all time high with the short term moving average just beneath it.


The NASDAQ Composite lost -0.06% in today's session. The tech heavy index did not create a doji but the candle is sufficiently small enough to be a spinning top. The index is sitting just above the short term moving average and drifting higher with the only resistance the current long term high. A break above this level could take it up to test the all time high near 5,050. The indicators are bullish and consistent with a trend line bounce with a target at the long term high at least.


The S&P 500 made the largest decline, a whopping -0.08%. The broad market lost just over 1 point in today's session and did create a doji candle. The index is drifting higher, supported by the short term moving average and the long term trend line, with only the current all-time high standing in the way. The indicators are bullish and on the rise so a test of the high looks likely. A break above resistance would be very bullish and could take the index as high as 2,200 in the near to short term.


The indices are on the verge of setting new highs, except for the Transports, and look very ready to break out. The only thing standing in the way are the current highs, earnings season and what the Fed has to say over the next two weeks. Since earnings season is unfolding in a positive way I don't see the highs standing much of a chance in that respect. However, with the next FOMC meeting so close and the market yet to actually break out a little caution may be due. There is absolutely no telling what they will say or do at this time. The data has been weak but trends and outlook support a rate hike. Between then and now is a fair amount of important earnings and a little economic data to sway sentiment and drive the day to day trade.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Selling The Rallies

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Jack in the Box, Inc. - JACK - close: 95.31 change: -0.61

Stop Loss: 95.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 564 thousand
Entry on April -- at $---.--
Listed on April 16, 2015
Time Frame: 2 to 4 weeks, exit PRIOR to earnings in mid May
New Positions: Yes, see below

Company Description

Why We Like It:
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 couple of years 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.

Everything I just wrote about JACK is bullish. The company is growing. They're profitable and seem to be stealing market share from its rivals. Yet right now the market doesn't care. Shares of JACK have been underperforming the major indices since they peaked on March 25th at round-number resistance near the $100.00 level. There was a technical bounce off its 50-dma several days ago but that has faded.

Traders seem to be selling the rallies in JACK now. Today's display of relative weakness (-0.6%) also left JACK below technical support at its 50-dma for the first time since August 2014.

I'm longer-term bullish on JACK. Bloomberg just published an article this week on how consumer spending at restaurants and bars was more than spending on groceries for the first time ever in March 2015. The data suggests that younger, millennial consumers are more willing to spend on eating out. There is a bug in this data. The Commerce Department is not counting companies like Wal-mart, Target, or Costco as grocery stores even though they all have significant grocery businesses.

On a short-term basis JACK looks weak. The point & figure chart just turned bearish this month. We are suggesting a trigger to buy puts at $91.90.

Trigger @ $91.90

- Suggested Positions -

Buy the MAY $90 PUT (JACK150515P90) current ask $2.35
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

The Rally Stalls As Markets Digest Earnings

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market saw its rally stall on Thursday as investors digested another session of corporate earnings. Oil's rally didn't help today like it did yesterday. Meanwhile the situation in Greece appears to be deteriorating quickly.

The PTCT trade was closed this morning.

OA hit our entry trigger.


Current Portfolio:


CALL Play Updates

Ambarella, Inc. - AMBA - close: 74.60 change: -0.07

Stop Loss: 72.45
Target(s): To Be Determined
Current Option Gain/Loss: -42.0%
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:
04/16/15: Shares of AMBA appear to be asleep. The stock seems stuck drifting sideways in the $74-77 zone. I'm 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: 89.66 change: -0.49

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: -38.8%
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:
04/16/15: CAH is fading toward the lower end of its trading range. If $89.00 doesn't hold as support then the 50-dma near $88.50 might.

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


Ctrip.com - CTRP - close: 63.64 change: -0.11

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

Comments:
04/16/15: CTRP was showing relative strength the first half of the day. Unfortunately the rally peaked at resistance near $65.00 and shares faded back toward unchanged.

Our suggested entry point to buy calls is at $65.15.

Trade Description: April 14, 2015;
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)

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


G-III Apparel Group, Ltd. - GIII - close: 118.63 change: +0.94

Stop Loss: 113.85
Target(s): To Be Determined
Current Option Gain/Loss: -6.9%
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:
04/16/15: GIII ended Thursday's session on an upswing and shares outperformed the market with a +0.79% gain. If this momentum continues we could see GIII challenging the $120.00 level tomorrow.

I'm not suggesting new positions at this time. 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: 126.48 change: -0.07

Stop Loss: 122.85
Target(s): To Be Determined
Current Option Gain/Loss: +46.9%
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:
04/16/15: Thursday turned out to be a pretty quiet day for the small cap Russell 2000 index. It traded sideways inside a narrow range and closed almost unchanged.

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: 99.90 change: +0.07

Stop Loss: 97.85
Target(s): To Be Determined
Current Option Gain/Loss: -46.3%
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:
04/16/15: NKE continues to churn sideways inside its neutral pennant-shaped consolidation. These consolidation patterns are supposed to be neutral but more often than not the stock will resume its prior trend and in NKE's case that should be higher.

Since the consolidation is narrowing we can narrow our focus. A drop below $98.50 would be bearish while a rally past $101.00 should be bullish.

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: 146.79 change: +2.08

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:
04/16/15: PANW displayed some relative strength with a +1.4% gain. We're still on the sidelines waiting for a breakout past resistance at $150.00. That means PANW has to rise past shorter-term resistance near $148.00 first.

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




PUT Play Updates

Big Lots Inc. - BIG - close: 46.70 change: +0.15

Stop Loss: 50.05
Target(s): To Be Determined
Current Option Gain/Loss: -7.9%
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:
04/16/15: BIG produced a minor bounce (+0.3%) but that was enough to outperform the broader indices. I am not suggesting new positions at this time.

The simple 10-dma and the $48.00 level should be short-term resistance.

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: 56.04 change: +0.62

Stop Loss: 56.55
Target(s): To Be Determined
Current Option Gain/Loss: -15.4%
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:
04/16/15: Caution! Shares of CAR are up two days I a row. Today's rally left shares above their 10-dma. Plus CAR closed right on resistance at the $56.00 level. This could be a warning signal for the bears.

Tonight we are lowering the stop loss to $56.55. No new positions.

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

04/16/15 new stop @ 56.55
04/07/15 triggered @ 55.85
Option Format: symbol-year-month-day-call-strike


Orbital ATK, Inc. - OA - close: 74.21 change: -0.36

Stop Loss: 76.55
Target(s): To Be Determined
Current Option Gain/Loss: -6.3%
Average Daily Volume = n/a
Entry on April 16 at $74.25
Listed on April 15, 2015
Time Frame: 3 to 4 weeks, exit PRIOR to earnings in mid May
New Positions: see below

Comments:
04/16/15: Our brand new trade on OA is now open. Shares continued to sink and fell to $73.33 intraday. Our trigger to buy puts was hit at $74.25 this morning. The intraday bounce back is a bit worrisome. Readers may want to wait for a new drop under $73.80 before initiating new positions.

Trade Description: April 15, 2015:
On a long-term basis many of the defense and aerospace companies have been juggernauts with huge gains over the last couple of years. That's in spite of lower U.S. military budgets. Yet on a short-term basis the group is underperforming.

OA is part of the industrial goods sector. The company is a merger between Orbital Sciences and ATK. ATK spun off its small firearms business into a new company called Vista Outdoor. According to OA, "Orbital ATK is a global leader in aerospace and defense technologies. The company designs, builds and delivers space, defense and aviation systems for customers around the world, both as a prime contractor and merchant supplier. Its main products include launch vehicles and related propulsion systems; missile products, subsystems and defense electronics; precision weapons, armament systems and ammunition; satellites and associated space components and services; and advanced aerospace structures. Headquartered in Dulles, Virginia, Orbital ATK employs more than 12,000 people in 20 states across the United States and in several international locations."

I am longer-term bullish on the defense and aerospace stocks. Yet shorter-term they are clearly underperforming the major indices. The S&P 500 and the Dow Industrials are both nearing their all-time highs. The NASDAQ is trading near its 15-year highs and the small cap Russell 2000 just hit a new record high today. Yet the major defense-related names have been trending lower the last couple of weeks.

Technically OA has been developing a trend of lower highs. Today the stock just broke down under key, round-number support at $75.00. If this pullback continues we could see OA drop toward the $69-70 zone.

Tonight we're suggesting a trigger to buy puts at $74.25. We'll try and limit our risk with an initial stop loss at $76.55. Earnings are coming up in mid May. There is no official date set. We will plan on exiting prior to their earnings announcement.

- Suggested Positions -

Long MAY $75 PUT (OA150515P75) entry $3.20

04/16/15 triggered @ 74.25
Option Format: symbol-year-month-day-call-strike



CLOSED BULLISH PLAYS

PTC Therapeutics, Inc. - PTCT - close: 70.99 change: +3.64

Stop Loss: 64.75
Target(s): To Be Determined
Current Option Gain/Loss: +20.5%
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:
04/16/15: We were lucky with our exit on PTCT. The stock has been underperforming and last night we decided to exit this trade at the opening bell today. Before the bell PTCT garnered some bullish analyst comments and the stock gapped open higher at $70.16. Shares eventually settled with a +5% gain on the session.

*small positions* - Suggested Positions -

MAY $70 CALL (PTCT150515C70) entry $4.40 exit $5.30 (+20.5%)

04/16/15 planned exit
04/15/15 prepare to exit tomorrow morning
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

chart: