Option Investor
Newsletter

Daily Newsletter, Monday, 4/20/2015

Table of Contents

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

Market Wrap

What Sell-Off?

by Thomas Hughes

Click here to email Thomas Hughes
Earnings and a surprise move from the PBOC lifted the market and erased Friday losses.

Introduction

The Peoples Bank Of China provided a nice lift for the markets today by lowering their capital requirements by 1%. This is the largest move made by the bank since the depths of the 2008 financial crisis but not enough to lift Chinese stocks. Both the Hang Seng and Shang Hai indices fell more than -1.5% while the rest of the world rallied. European indices climbed on the new led by the German DAX 1.6% gain. Futures trading here at home was also positive and led to a strong day of trading. The S&P and Dow were both indicated to open higher by at least a half percent the entire morning and did not fail to deliver once the opening bell sounded.

Market Statistics

Other news impacting early trading included earnings, several announced stock buybacks, increases in dividends and the NABE Survey of Business Conditions. Earnings continue to come in better than expected, led by the financials, while the NABE survey shows that outlook for the rest of the year remains strong. There was no economic data released today other than Moody's Survey Of Business Confidence which remains near the all-time high.

The market opened as strong as indicated. The SPX, Dow and NASDAQ Composite were all up by a half percent or more in the first 5 minutes, approaching 1% within the first half hour and over 1% higher within the first two hours of trading. The market remained strong all day, trading near the days highs until the closing bell. Today's gains just about erased all of Friday's losses, leaving them just below their current long term and all-time highs.

Economic Calendar

The Economy

The National Association of Business Economists released the results of their quarterly Business Conditions Survey. Their headline “NABE Survey Shows Outlook Remains Strong Despite Weak First Quarter” . Within the results it was revealed that four measures of employment and wages rose in the first quarter and are either holding steady or on the rise going into the 2nd quarter. Growth expectations for the next two quarters remains intact with an expected rebound in sales as well as rising margins.

Two interesting things that stood out to me were that 74% of respondents reported that the slowdown in China has had little to no negative effect on their businesses and may have even positively affected some. Also, 62% report no negative affect from strong dollar values and 49% say the upcoming FOMC rate hike is not expected to have material affect on business.

Moody's Survey Of Business Confidence fell by -0.6% this week but remains near the all-time high. Mr. Zandi's summary of the results is also at or near all-time high levels. His reading of the data shows increased confidence, optimism and business conditions. In the first take he says...

“Business confidence has never been stronger in the more than 12-year history of the survey. Sentiment is strongest in the U.S. but has recently improved in much of the rest of the world. The slowing in U.S. growth is not evident in the survey results. Hiring has never been stronger, and sales and investment spending are robust. Credit is widely available, and pricing is sturdy, despite heightened deflation concerns in much of the developed world”


According to FactSet just over 10% of S&P 500 companies have reported earnings so far this season. There are an additional 25% of them scheduled to report this week making it one of the busiest for the season. Of those who have reported 77% have been above the blended rate for earnings and 46% have beaten the blended rate for revenue. The projected blended rate for 1st quarter earnings growth is now -4.1%, up 0.7% from last week led by strong earnings in the financial sector.

Stripping out the energy sector the blended rate has also increased, by 0.77% to 1.97%. Based on the four year averages and the way the season is going so far we can expect both the full blended rate and the rate ex-energy to increase by another 3% or so. Outlook for the 2nd quarter is still weak with an expected earnings growth rate of -2.6%. Looking out to the end of the year full year earnings growth has also fallen marginally but the 2016 outlook remains above 12.5%.

The rest of the week is pretty light too, probably a good thing because next week is super charged. It's the end of the moth again so the monthly macro-data will start to roll out although the labor numbers won't be released for 2 weeks. On deck are Pending Home Sales, Income & Spending, PMI, Auto Sales, Construction Spending and Michigan Sentiment. What makes next week such a potential powder keg for the market is the FOMC meeting and policy statement, scheduled for Wednesday at 2PM, and the 1st estimate for 1st quarter GDP. The market is looking for 2.2% growth; there is no telling what the FOMC may do. Possibilities include no change to statement all the way through a surprise rate hike however unlikely that is.

The Oil Index

Oil prices were volatile today as a weekend report of near record Saudi output was weighed against rising tensions in the Middle East. The conflict in Yemen between the Saudi's and Iran backed militants rages on and has reached a new intensity. The Saudi's are now on high alert for a terrorist attack, possibly targeting a shopping mall. Prices for Brent and WTI had been done, about -1.25% in the early part of the trading day, and both rebound to new highs. WTI gained more than 1.5% to trade above $56.50 while Brent made a more modest gain of nearly 0.35%.

The oil sector gained on the rise in oil prices, as expected. The Oil Index gained nearly 0.75% in today's session, testing resistance, and then falling back to break even. The index has been trending higher over the past few weeks, is now near a 5 month high and may be about to break to another new high. Both indicators are bullish but have formed a peak consistent with resistance at this level. A break above resistance, near 1,435, would be bullish. Price action is setting up in a potential flag pattern with a target roughly 150 points above the current level. Earnings are likely to be a catalyst for this sector with an eye toward the earnings rebound expected for later this year and next. Speaking of earnings, Haliburton its earnings expectations posting adjusting EPS of $0.76 versus the expected $0.46.


The Gold Index

Gold prices are still dancing to the tune of the dollar. Today the dollar index gained 0.24% in a move confirming support near the bottom of its two month range. The slight rise in dollar value caused gold prices to drift below $1200 and approach support near $1190. This situation, mild fluctuations in the dollar leading to similar fluctuations in gold, could continue until the FOMC next week. At that time there is likely to be some change, either from the FOMC itself or in investor sentiment, that will lead to a more pronounced move in both.

The Gold Index remains within its bottoming pattern and has yet to make a move in either direction. The index is supported by gold prices and by extension earnings outlook. The miners begin reporting next week and may provide additional lift to the overall blended rate for earnings growth. I am specifically looking to production levels and selling prices; production levels have been on the rise and this quarters average selling price for gold is likely to be higher, a combination that could produce positive earnings surprises. Today the index gained just enough to close in the green after opening lower. Today's move found support at the short term moving average with bullish indicators. The MACD and stochastic are both bullish and indicating support at these levels. If the index breaks to the upside my target is $22.50/$23 in the near to short term.


In The News, Story Stocks and Earnings

Lots of business news today including deals, buybacks, dividend increases and earnings. To quickly recap some headlines that do not include earnings; Raytheon is investing $1.7 billion in a cyber unit. Costco is buying back $4 billion in stock. Groupon is also buying back stock, $300 million, and is also selling a 46% stake in Ticket Monster to a group including KKR.

Moving on to earnings. Today Morgan Stanley reported earnings that beat on both the top and bottom line, increasing the boost earnings growth is getting from the financial sector. The company reported a profit of $2.9 billion on $9.9 billion in revenues. The gains were driven by an increase in M&A activity as well as as trading volumes. Shares of Morgan Stanley gained over 1% in today's trading but created a black candle. The stock gapped up to resistance from whence it fell.

The entire financial sector got a boost in today's session. The XLF gained a little over a half percent in a move that regained the upper side of the short term moving average. The ETF is basically trending sideways with indicators that are relatively neutral. Both MACD and stochastic are consistent with a meandering, range bound stock. Over the past month the ETF has traded within the $24-$24.50 range and looks like it could keep doing so... maybe until next week and FOMC meeting? The expected/projected rise in interest rates is pretty important for earnings projections in this sector.


Hasbro reported earnings and revenue above expectations. The company also reported that operating profits increased 25% while net earnings increased 43% excluding a $0.10 per share favorable tax charge. Company execs said they were able to grow sales across all brands and all markets, particularly in Europe and emerging markets, and was able to do so while overcoming “significant exchange headwinds”. Shares of the stock jumped on the news gaining about 5% in the pre-opening session and then doubling that gain and more during the open session. Hasbro is now trading at an all-time high with strongly bullish indicators. Hasbro is the owner of several Disney and Marvel licenses as well as its own classic lines of toys.


Royal Caribbean reported better than expected earnings and a strong first quarter. Results of $0.20 per share are more than a nickel above expectations and likely to continue. However, the company cited currency exchange issues and rising costs as the reason for lowering full year guidance. Guidance was lowered from $4.65-$4.85 to $4.45-$4.65. The news was not met with glee and sent shares tanking in the early session. The stock lost about 5% before the opening bell even sounded and then extend those losses during the day. The indicators are bearish but may be indicating some support at this level with a long lower shadow. My first thought it is that the company could be setting itself up to beat earnings later in the year, if so a support level may form around $71.50.


IBM reported after the closing bell. Big Blue was expected to earn in the range of $2.84, about 45% lower than the previous quarter, and beat them by a nickel. IBM reported earnings of $2.91 on slighly weaker than expected revenues. Shares of the stock rallied all day, positing a gain of nearly 3.5%, and then extended those gains in the after-hours session.


The Indices

The bulls came charging out of the gates today. The fall on Friday turned out to be a pretty good entry for trend followers and resulted in some of the biggest moves the indices have seen in many weeks. Today's move was led by the Dow Jones Transportation Average which made an impressive 1.69% bounce from Friday's lows that helps confirm support at the bottom of the 6 month trading range. The indicators are bullish but showing weakness in the near term consistent with last weeks fall to support. The index continues to trend sideways within the range with a slight upside bias and a target near the top of the range.


The NASDAQ Composite is runner up in today's race. The tech heavy index gained 1.27% but fell short of the 5,000 mark. It looks like the index is making a bounce from the short term moving average in line with the underlying long term trend but resistance is just above so caution is still due. The indicators are bullish but showing near term weakness that could indicate a peak. Longer term indications are consistent with support along the moving average, in line with the trend, but there is still resistance at the 15 year high. A break above the high could take the index as high as 5,250 in the near to short term. Support is still along the moving average, with the long term trend line near 4,750 below that upon a break down.


The Dow Jones Industrial Average gained 1.11% in today's action. The blue chips created a long white candle that regained the high side of the short term moving average and the 18,000 level, confirming support. The index is making a bounce from support with bullish indicators and a target near 18,250. While bullish, the indicators are also very weak and consistent with a trading range. If the index does not break to a new high the 6 month trading range may remain intact.


The S&P 500 brings up the rear today. The broad market gained only 0.92% compared to the +1% moves put in by the other major indices. Today's move confirms support along the long term moving average and is supported by the indicators. Stochastic and MACD are both bullish, although showing near term weakness consistent with Friday's plunge in prices. The index has been winding up over the past 2-3 months and is forming a possible pennant formation. During this time the index has trended sideways, supported by the long term trend line, with consecutively lower peaks. It appears to be bullish but has yet to break out. There is resistance in a narrow range just above the current level with a break above it carrying a target near 2,220 in the near to short term.


The market still looks strong, but it also still looks a little indecisive. Today's action was a good sign for the bulls but until there is a break above resistance at the current all-time/long-term highs the future of the rally is in question. The test and possible break above resistance is likely going to be centered on or around the FOMC meeting next week, no surprise there, this has been the trend for quite some time. A move and then a consolidation and/or correction all timed between earnings seasons and FOMC meeting. Until then the market may continue to do what it has been, churning within a range, looking like it wants to go higher but just not doing it.

Of course, there is the earnings picture to consider. This is a big week filled with big names that could move the market regardless of the FOMC. At this point the idea of a rate hike is so bake into the cake that I think not raising would be worse for the market. If earnings are still good, if expectations continue to be exceeded, if outlook remains rosy then the market could move up. In other words, I'm still bullish, buying on the dips and keeping a very cautious eye on the market.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Cheap Gas & Mother Nature

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Advance Auto Parts - AAP - close: 152.40 change: +2.60

Stop Loss: 147.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 891 thousand
Entry on April -- at $---.--
Listed on April 20, 2015
Time Frame: Exit PRIOR to earnings on May 21st
New Positions: Yes, see below

Company Description

Why We Like It:
According to Sterne Agee analysts Ali Faghri and Michael Ward the combination of cheap gasoline and mother nature have created a bullish environment for auto part retailers.

Gasoline is off its early 2015 lows but it's still trading near four year lows. Today a gallon of gas is more than $1.00 less than the prior three years. Cheaper gas means more miles driven. The number of miles driven by Americans has risen 11 months in a row. The most recent data has hit levels not seen since 2007. Higher miles driven means more demand for replacement parts, maintenance, and repair work. That means more business for companies like AAP.

Meanwhile the weather has been a boon for auto parts makers. The harsh winter tends to reduce traffic but it's harder on vehicles and roads. The snow, gravel, and in some areas of the country road salt, increase wear and tear on your car. The freezing temperatures and precipitation generate more pot holes and road hazards, which also increase wear on your car. Now that we're into spring and the weather is improving we should see miles driven rise even further.

One company that should benefit is AAP. They're in the services sector with a chain of auto parts stores. According to the company, "Headquartered in Roanoke, Va., Advance Auto Parts, Inc., the largest automotive aftermarket parts provider in North America, serves both the professional installer and do-it-yourself customers. As of January 3, 2015 Advance operated 5,261 stores and 111 Worldpac branches and served approximately 1,325 independently-owned Carquest branded stores in the United States, Puerto Rico, the U.S. Virgin Islands and Canada. Advance employs approximately 73,000 Team Members."

It is worth pointing out that AAP's most recent earnings report was a disappointment. They reported Q4 earnings on February 12th. Earnings were up +104% to $1.37 per share. Revenues soared +48% to $2.09 billion. Yet in spite of these huge improvements AAP still missed analysts' expectations. It was the first earnings miss in more than two years. If that wasn't bad enough management then lowered their earnings and revenue guidance for 2015. Not surprisingly the stock was crushed the next day.

RBC Capital Markets analyst Scot Ciccarelli is still bullish on the stock. He noted that AAP's big acquisition of General Parts International last year has delivered cost synergies above expectations. Scot believes AAP offers "the best appreciation potential in the automotive aftermarket retail space."

Not everyone agrees. Daryl Boehringer, with Cleveland Research, believes that AAP is having trouble with its General Parts merger. According to Boehringer, he is, "more cautious on the near-term performance of the company as disruptions associated with the integration of GPI (entering the 'heavy-lifting' stage) appear to be having a fairly meaningful negative impact on the business... the large size and scope of the GPI integration will likely cause disruptions to AAP's business that make an upside earnings scenario less achievable."

If price is truth then the long-term trend favors the bulls. Shares of AAP did see a correction from $163 down to $143 but bounced off technical support at its rising 200-dma (and long-term trend line). Today shares are breaking through resistance at the 50-dma and look poised to keep climbing.

We believe this rebound will continue. However, we want to see a rally past the simple 100-dma, currently at $153.80. Tonight we're suggesting a trigger to buy calls at $154.00.

Trigger @ $154.00

- Suggested Positions -

Buy the JUN $160 CALL (AAP150619C160) current ask $3.30
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

China Sparks Market Bounce

by James Brown

Click here to email James Brown

Editor's Note:

The central bank of China sparked a market bounce on Monday, except for Chinese stocks, which turned lower. The surprise move by China's central bank to boost lending was the main story today.

Our plan was to exit the NKE and CAR trades this morning.


Current Portfolio:


CALL Play Updates

Cardinal Health, Inc. - CAH - close: 90.14 change: +0.59

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: -33.6%
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:
04/20/15: CAH agreed to a $26.8 million fine to the FTC to settle monopoly charges. The news didn't stop shares from bouncing to a +0.65% gain. The key level to watch is resistance near $91.50.

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: 63.55 change: +0.35

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:
04/20/15: Shares of CTRP lagged behind the broader U.S. market. I'm surprised CTRP rallied at all given the widespread declines in the Chinese market today.

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: 116.56 change: +0.49

Stop Loss: 113.85
Target(s): To Be Determined
Current Option Gain/Loss: -41.4%
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:
04/20/15: GIII rebounded off its midday lows but only managed a +0.4% gain versus the NASDAQ's +1.2% rally. In my previous update I suggested that nimble traders could buy calls on a bounce near $115 just remember our time frame.

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


Global Payments Inc. - GPN - close: 100.29 change: +0.54

Stop Loss: 98.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 589 thousand
Entry on April -- at $---.--
Listed on April 18, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
04/20/15: GPN is moving the right direction. Today is a new record closing high. Our suggested entry point to launch bullish positions is $101.05.

Trade Description: April 18, 2015:
GPN is in the services sector. They provide money transfers and electronic payment solutions.

According to the company website, "Global Payments Inc. (GPN) is a leading worldwide provider of payment technology services that delivers innovative solutions driven by customer needs globally. Our partnerships, technologies and employee expertise enable us to provide a broad range of products and services that allow our customers to accept all payment types across a variety of distribution channels in many markets around the world. Headquartered in Atlanta, Georgia with more than 4,300 employees worldwide, Global Payments is a Fortune 1000 Company with merchants and partners in 29 countries throughout North America, Europe, the Asia-Pacific region and Brazil."

The company has been consistently delivering strong earnings growth. GPN has beaten Wall Street's expectations and guided higher the last three quarters in a row. Their most recent report was April 8th when GPN delivered their 2015 Q3 results. Earnings were up +18.7% to $1.14 a share. Revenues were up +8% to $665 million. Growth was driven by strong performances in the U.S. and their Asia-Pacific operations.

Management raised their forecast again. They see 2015 earnings in the $4.77-4.84 range, which would be +8% to +10% growth. They're forecasting 2015 revenues in the $2.75-2.80 billion range or +16% to +18% growth.

GPN management is also shareholder friendly and has been significantly boosting their stock buy back program. They recently announced an accelerated share repurchase program up to $100 million.

The stock has rallied on the strong earnings results and buyback news. Today GPN is hovering near all-time highs around psychological resistance at the $100 level. It was impressive that GPN did not participate in the market's widespread sell-off on Friday. We want to be ready to hop on board if GPN can rally past resistance at $100.

Tonight we're suggesting a trigger to buy calls at $101.05.

Trigger @ $101.05

- Suggested Positions -

Buy the AUG $105 CALL (GPN150821C105)

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


iShares Russell 2000 ETF - IWM - close: 125.65 change: +1.22

Stop Loss: 122.85
Target(s): To Be Determined
Current Option Gain/Loss: +12.9%
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:
04/20/15: The IWM bounced off its trend line of higher lows. The ETF only recovered about 2/3rds of Friday's decline.

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


Palo Alto Networks, Inc. - PANW - close: 146.51 change: +4.01

Stop Loss: 137.45
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:
04/20/15: We decided to adjust our entry point strategy on PANW and the stock rebounds on us. Shares almost erased Friday's loss.

Currently our plan is to buy calls on a dip at $141.45.

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 @ $141.45

- Suggested Positions -

Buy the JUN $150 CALL (PANW150619C150)

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.

04/18/15 Strategy Update: Change the entry trigger from $150.55 to buy a dip at $141.45. change the stop loss to $137.45. change the option strike from June $155 call to the June $150 call
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Big Lots Inc. - BIG - close: 46.72 change: +0.77

Stop Loss: 50.05
Target(s): To Be Determined
Current Option Gain/Loss: -18.4%
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:
04/20/15: BIG rebounded from support with a +1.6% gain. Keep an eye on the simple 10-dma near $47.20, which should be short-term resistance. No new positions at this time.

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


Jack in the Box, Inc. - JACK - close: 91.91 change: +0.05

Stop Loss: 95.05
Target(s): To Be Determined
Current Option Gain/Loss: -21.7%
Average Daily Volume = 564 thousand
Entry on April 17 at $91.88
Listed on April 16, 2015
Time Frame: 2 to 4 weeks, exit PRIOR to earnings in mid May
New Positions: see below

Comments:
04/20/15: Monday's session looks like a victory for the bears. The market's widespread rally had little effect on JACK. The stock's early morning gains faded and shares closed almost unchanged on the session. I would still consider new positions now.

FYI: Big restaurant chains Chipotle (CMG) and YUM! Brands (YUM) both report earnings on April 21st. Their results could influence JACK.

Trade Description: April 16, 2015:
It's a burger-eat-burger world out there in the fast-food business. Jack in the Box is small fries compared to its larger rivals like McDonalds (36,258 locations) and Wendy's (6,515 locations). Let's not forget heavy weights like Taco Bell, Burger King, Subway, Dairy Queen, and a handful of pizza chains. JACK only has about 2,200 restaurants but it also has a secret weapon and that is the Qdoba Mexican Grill restaurant with about 600 locations. Chipotle Mexican Grill has almost 1,800 locations.

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

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

- Suggested Positions -

Long MAY $90 PUT (JACK150515P90) entry $3.00

04/17/15 triggered on gap down at $91.88, trigger was $91.90
Option Format: symbol-year-month-day-call-strike


Orbital ATK, Inc. - OA - close: 74.19 change: +1.23

Stop Loss: 76.55
Target(s): To Be Determined
Current Option Gain/Loss: -18.8%
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:
04/20/15: After a five-day decline OA was due for a bounce. The market's broad-based rebound today helped OA to a +1.6% gain. Broken support near $75.00 should be new resistance. Nimble traders could use a failed rally near $75 as a new entry point for bearish 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

Nike, Inc. - NKE - close: 99.99 change: +1.44

Stop Loss: 97.85
Target(s): To Be Determined
Current Option Gain/Loss: -60.9%
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:
04/20/15: NKE actually managed to erase Friday's loss with its rebound today. Not many stocks were able to accomplish that feat. We had already decided to exit this trade on Monday morning. NKE gapped higher at $99.08.

- Suggested Positions -

MAY $100 CALL (NKE150515C100) entry $3.35 exit $1.31 (-60.9%)

04/20/15 planned exit
04/18/15 prepare to exit on Monday morning
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

chart:


CLOSED BEARISH PLAYS

Avis Budget Group, Inc. - CAR - close: 55.89 change: +0.10

Stop Loss: 56.55
Target(s): To Be Determined
Current Option Gain/Loss: -23.1%
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:
04/20/15: CAR has not been cooperating. In the weekend newsletter we decided to exit this trade on Monday morning. Shares open higher at $56.06. It might be worth noting that CAR did underperform the broader market. There wasn't much follow through on last week's bounce.

- Suggested Positions -

MAY $55 PUT (CAR150515P55) entry $1.95 exit $1.50 (-23.1%)

04/20/15 planned exit
04/18/15 prepare to exit on Monday morning
04/16/15 new stop @ 56.55
04/07/15 triggered @ 55.85
Option Format: symbol-year-month-day-call-strike

chart: