Option Investor
Newsletter

Daily Newsletter, Thursday, 4/23/2015

Table of Contents

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

Market Wrap

A Brand New High

by Thomas Hughes

Click here to email Thomas Hughes
The market is riding high on earnings and outlook.

Introduction

The NASDAQ Composite reached a brand new high today despite weaker than expected data from both China and Europe. Early reads on PMI from both regions was much weaker than expected, China's falling below the expansionary 50 level. Europe remains expansionary at 53.5 but the drop from last month's reading indicates activity is declining. Asian indices closed largely higher despite the drop as trader there are betting on increased QE from the PBOC. European traders were not so optimistic, indices in that region fell, led by the German DAX -1.2% decline.

Market Statistics

Our markets were indicated lower in the early pre-opening session. A slew of better than expected earnings and steady labor data failing to provide lift, perhaps due to the weakness in the Europe. Trading remained throughout the early session and into the opening bell. The indices fell when the opening bell sounded but found support almost immediately.

After that the indices bobbed along within a tight range for most of the morning, poking into positive territory once or twice before making a decided move higher just before noon. At that time the indices shot up by a half percent, hitting the daily high mid-afternoon.

Afternoon trading carried the indices up the highs of the day. The NASDAQ and S&P 500 both touching new highs at one point in the day. All the indices finished positive but they all also pulled back from their highs before the close of trading. The after-hours session was pretty active today, much more so than usual. At least four top names released earnings producing an average move near 4%. If this carries into tomorrow's session we could the NASDAQ and SPX reach new highs again.

Economic Calendar

The Economy

Only one economic release before the opening bell today, jobless claims. Initial claims rose by 1,000 from last week's not-adjusted figure to reach 295,000. The four week moving average gained 1,750 but remains just off the 15 year low. Claims were expected to fall by 10,000, regardless this week's figure remains very low and in line with labor trends. On a not-adjusted basis claims fell by -9.1%, slightly less than the -9.6% predicted by the seasonal factors. California and New York led with increases of 10,575 and 8,356 respectively. Illinois and Oregon led with a combined decline less than -2,000.


Continuing claims also rose, by 50,000, from a revision of +7,000. Continuing claims are now 2.35 million and at a three week high. Despite the rise this figure is also very near the long term low and in line with improving/healthy labor markets. The four week moving average of continuing claims is still in decline and another new 15 year low.

The total number of jobless claims for the week ending April 4th fell by -93,051 to hit 2.434 and the lowest level since early December of last year. Total claims are steadily declining since hitting their peak at the first of the year. Based on the steady/low levels of initial and continuing claims and the downward trend in total claims I would have to say that this month's NFP and unemployment figures should be pretty good. We'll get those numbers in two weeks.


Only one economic release tomorrow; durable goods. Expectations are for a decline of -0.5%. This is going to be important because these are March numbers and will tie into GDP and FOMC expectations. GDP first estimate is due out next Wednesday morning; The FOMC statement is scheduled to be released later that afternoon.

New home sales was released at 10AM. The -11% drop in sales was met with positive reaction. Details within the release point to a severe lack of inventory that is expected to lead to increased building. This, coupled with the strength in existing home sales helped put positive spin to the numbers. According to the Census Bureau sales fell to a seasonally adjusted rate of 481,000. This is less than half the sales rate economists would like to see but still nearly 20% higher than this same time last year.

The Oil Index

Oil prices got another dose of fear premium in today's session. The price of WTI and Brent both surged more than 2.5% on escalating violence in Yemen. Today the Saudi's led another strike at Iranian allied militants that could lead to a wider spread conflict in the region. On the fundamental side storage levels for crude and nat gas remain strong with little to no sign of demand increase.

The Oil Index gained about 0.7% in today's session, halted by resistance at 1435. The index moved higher on the surge in oil prices but I remain skeptical about the move. The index doesn't look overly strong at this time, the indicators are bullish, but also showing sharp divergence from prices. The index could move higher but a break above resistance is required. Earnings or another rise in oil prices could provide the catalyst. If the index breaks above resistance on a fear driven spike in oil prices I will be very wary of whipsaw, especially until earnings are released. Earnings for the major integrated oil companies are due out next week.


The Gold Index

Today gold prices regained most of yesterday's decline. Weak data, specifically housing sales, flip-flopped FOMC rate hike expectations to the far end of the spectrum, weakening the dollar and putting a floor in gold. Gold continues to test support in the $1180-$1190 region, and continues to find it there. We could see more of this action over the next 3 trading days and then it will be the FOMC meeting itself. At that time I think we may see a major move in both the dollar and gold. We're on track for a hike, they (the Fed) have said it time and again, and I don't see any reason why it won't happen, only the timing remains to be set.

The gold miners continue to hover in a holding pattern while the market waits on earnings reports. Today the GDX Gold Miners ETF gained 2.5% and confirmed support but remains within a rapidly narrowing range. The ETF has been winding up within this range for about 2 months now and could be gearing up for a more pronounced movement. The indicators are bullish but not strong, steady is a better description. They are consistent with support along the rising trend line connecting the November, December and March troughs and have plenty of room to run should the market make a break in either direction. Resistance is at $20.50 with support along the rising trend line. I am bullish but waiting for earnings which are due to start rolling in next week.


In The News, Story Stocks and Earnings

There was a lot of earnings news today. Today was the busiest day of earnings season with enough names releasing before and after the trading day to fill 4 day's of market wrap. A few names reporting before the open include Pepsi, GM, Dow Chemical and Catepillar. Names reporting after the bell include Amazon, Google and Starbucks. Reports are mixed but on a whole are better than expected.

Pepsico reported a top and bottom line beat with a 1.5% improvement in margins. Organic growth increased by 4% and the stock lost -1.59%.

GM missed but reported an increase in margins. The stock fell -3.34% during today's session.

Dow Chemical beat on the bottom line but missed revenue expectations. The stock gained nearly 2% by the end of today's session, creating a large long legged doji.


After hours action was dominated by tech stocks and will likely have a large positive impact on tomorrows session. All for of the big names expecting to report this evening provided positive reports spurring moves greater than 3%. Google was the first to hit the wires. The search giant report earnings and revenues that were slightly below expectations, $6.57 EPS versus a projected $6.60, but nonetheless produced a surge in stock prices. Shares of Google gained more than 4% after climbing a similar amount in the open session.


Amazon reported a loss of -$0.12 per share, in line with estimates. The company reported that sales were up more than 15% in the first quarter and was able to guide full year results in a range around the consensus. Other positives in the report include a 47% increase in operating cash flow a more than 100% increase in free cash flow. Shares of the stock gained 5% in the after hours session.


Microsoft reported that sales from the same period last year but beat expectations on the top and bottom line. Revenue from devices and consumer grew by 8% while commercial grew 5%. There was an impact from restructuring and the integration of the Nokia unit of -$0.01 to EPS. The news was well received in light of the expectations and helped to send the stock up by 3% in after hours trading.


Starbucks reported earnings in-line with expectations. They also reported 18% growth over the same quarter last year. The results enabled execs to raise full year guidance and send the stock up more than 3.5%.


The Indices

I'll be honest, the way futures were trading before the opening bell I thought we were in for another day of trading within recent ranges and a move lower from resistance. When I hinted earlier this week that earnings might push the market to new highs even before the FOMC meeting little did I know it would happen today. After a brief retreat to support the bulls were able to drag the market higher in today's session, breaking past resistance and setting new all time highs for several of the indices.

The NASDAQ Composite did not make the largest move today but I will start with it anyway. The tech heavy index broke through resistance and marched to a brand new all-time-closing high for the first time since the peak of tech bubble. The index gained 0.41% in today's session and is accompanied by bullish indicators. Both MACD and stochastic are bullish and confirming the break to new highs. The MACD is on the rise, stochastic is crossing the upper signal line. It looks like it will continue to move higher and with the addition of today's after-hours action could do so tomorrow.


Today's action was led by the Dow Jones Transportation Average. The transports gained 0.47% in what appears to be a volatile session. A first glance at today's candle might make you think today's action was more volatile than it was; there are significant shadows on both ends of the candle, the lower one touching support at the short term moving average. The truth is that the index hit support within 2 minutes of the open, moved higher throughout the day and pulled back just before the close. Today's action may have been driven, no pun intended, by some rotation. There are signs that while the rail carriers are struggling with low oil prices the truckers are benefiting from them.


The S&P 500 made the third largest gain today, 0.24%. The broad market broke above the top of the pennant I described on Monday and set a new all-time intraday high only to be halted by resistance and sent back down to support. Today's action has a bit of a Shooting Star look to it but since it is accompanied by bullish indications and closed above the top of the pennant appears to be short term in nature. Both MACD and stochastic are on the rise and stochastic is on the cusp of forming a strong trend following signal; %K is about to make a bullish crossover while %D is making a bullish cross of the upper signal line. A break above resistance has a target near 2,150 in the near term and 2,200-2,300 in the short.


The Dow Jones Industrial Average made the smallest gains today, only 0.11%. The blue chips formed a small bodied, doji like candle just above support. The index is sitting on support with indicators consistent with support, just not showing strength. It looks like it could move up to test resistance at the all-time high, about 200 points above today's close, but more than that may center on the FOMC next week.


Earnings season continues to be better than expected. I'm not saying it's great, but it is better than expected and outlook for the remainder of the year remains positive, enough to keep the bears at bay at least for now. The euphoria, or maybe mass relief is a better way of saying it, has helped to bring support back to market and even provide a little lift. Tomorrow could be another up day but I still have my eye on the FOMC meeting next week. Not all the indices have broken to new highs and the meeting is a fantastic opportunity for resistance to come into the market.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Ignoring The Critics

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

SPDR S&P 500 ETF - SPY - close: 211.16 change: +0.53

Stop Loss: 206.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 128 million
Entry on April -- at $---.--
Listed on April 23, 2015
Time Frame: Exit PRIOR to June option expiration
New Positions: Yes, see below

Company Description

Why We Like It:
It's hard to argue with a market that refuses to go down. When traders buy every dip it's a signal the market wants to go higher. The S&P 500 midcap ETF (MDY) just closed at an all-time high. The Russell 2000 index ETF (IWM) just closed less than half a point from a new all-time closing high. The NASDAQ composite index just set a new all-time closing high. Meanwhile the S&P 500 ETF (SPY) is on the verge of breaking out to a new all-time high.

I know there are skeptics out there who believe, for whatever reason, that the market should be headed lower. CNBC reporter Bob Pisani shared his thoughts on what the bears or at least the less bullish investors have been saying lately. (You can read Pisani's thoughts at this link.)

You could argue that the S&P 500 has been in a trading range. Currently that's true with the S&P 500 churning between 2,040 and 2,120 the last several weeks. There is the complaint that there has been no volume. That's true as well but the market has been able to rally on less than ideal volume for years. Traders could argue there is no volatility - another truth. Right now it is earnings season and individual stocks are seeing some huge volatility as the market reacts to earnings results. Yet the major indices have not seen any volatility. The S&P 500 has gone more than 80 days without a 2% move.

Bears could argue that valuations on stocks are too high. The P/E ratio can tell you if a stock or market is expensive, cheap, or fairly valued compared to its historical average. On a short-term basis it's a terrible predictor of performance.

According to FactSet the current forward P/E of the S&P 500 is about 17. Over the last five years the valuation has been closer to a P/E of 14. With earnings poised for their first decline since 2012 that P/E will likely go even higher. Therein is part of the problem. Earnings in the energy sector, a significant chunk of the S&P 500, are going to be terrible thanks to oil's decline. This doesn't mean the market can't continue to rally. Stocks can stay expensive for a long time.

Market critics can definitely argue that U.S. and global economic data is unhealthy. There's no denying that. China is growing at its slowest pace in years. Europe has been struggling for years. The economic data in the U.S. has been limping along. Fortunately, we have a Chinese government that recognizes the issue and is actively trying to stimulate its economy. At the same time Europe is doing the same. The European Central Bank just started its QE program last month that will last until September 2016 or longer.

The biggest hammer bears could use on the market is disappointing earnings growth. Estimates suggest that both Q1 and Q2 will show earnings declines. Yet thus far, the pace of earnings, has not been as weak as expected. Of course it's important to note we are still early in the Q1 earnings season. The deeper we go into earnings season the quality of earnings tends to go down. That's what normally happens. This time may be an exception. Big cap earnings are being squeezed by the strong dollar. Small caps see less sales outside the U.S. and thus the strong dollar has a smaller impact on overall sales.

Here's the plan. The ETF for the S&P 500 is the SPY. Currently the SPY is hovering just below resistance at its all-time highs from February and March near 212.00. I want to avoid being triggered on an intraday spike higher that reverses lower. Therefore the strategy for this trade is to wait for the SPY to close above $212.25 then buy calls the next morning.

Trigger @ Wait for a close above $212.25, then buy calls.

- Suggested Positions -

Buy the JUN $215 CALL (SPY150619C215) current ask $1.84
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

Bulls Push Stocks Higher

by James Brown

Click here to email James Brown

Editor's Note:

The theme of earnings coming in better than feared continued on Thursday. The NASDAQ stole a lot of attention with its rally to a new all-time closing high. Today's close of 5,056 is above the previous high close of 5,048 set in March 2000.

AAP hit our stop loss.


Current Portfolio:


CALL Play Updates

Analog Devices, Inc. - ADI - close: 63.59 change: -0.90

Stop Loss: 62.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.0 million
Entry on April -- at $---.--
Listed on April 21, 2015
Time Frame: Exit PRIOR to earnings in late May
New Positions: Yes, see below

Comments:
04/23/15: Semiconductor stocks gapped down this morning. ADI opened lower at technical support at its rising 20-dma. Shares managed to pare their losses to -1.39%. We are on the sidelines with a suggested entry point for bullish positions at $65.25.

Trade Description: April 21, 2015:
ADI looks like a strong relative strength trade. The SOX semiconductor index is up +3.0% year to date. The NASDAQ composite is up +5.8%. Yet shares of ADI have surged +15.9% to hit new 14-year highs.

The company's products convert analog signals into digital information. These signal processing integrated circuits are used in just about everything from industrial equipment, automobiles, consumer equipment, and communication products.

According to the company, "Innovation, performance, and excellence are the cultural pillars on which Analog Devices has built one of the longest standing, highest growth companies within the technology sector. Acknowledged industry-wide as the world leader in data conversion and signal conditioning technology, Analog Devices serves over 100,000 customers, representing virtually all types of electronic equipment. Analog Devices is headquartered in Norwood, Massachusetts, with design and manufacturing facilities throughout the world."

Looking at ADI's earnings performance last year they tended to be relatively flat or slightly above analysts' estimates. Business seemed to be improving last quarter. ADI reported their Q1 results on February 17, 2015. Wall Street was expecting $0.61 a share on revenues of $760.5 million. ADI beat the estimates with a profit of $0.63 a share, a +18.8% improvement from a year ago. Revenues grew +23% to $772 million.

Management raised their dividend by 8% to $0.40 a share. They also raised their Q2 guidance above Wall Street expectations. Following this February earnings report the stock received a parade of price target upgrades. Wall Street now expects ADI earnings to rise from $1.98 a share in 2014 to $2.92 a share in 2015. According to Thomson Reuters estimates for 2016 are $3.23 a share (+11%) on revenues of $3.5 billion (+6%).

The stock surged to new highs again on March 30th. This was a reaction to a big upgrade from Barclays' analyst Blayne Curtis. Curtis said, "We believe Analog Devices has secured a win with a high accuracy converter to drive 3D touch in upcoming (Apple) iPhones and iPads." This design win will mean big business for ADI. It will also allow Apple introduce their new 3D/Force Tough technology. This allows users to do different tasks based on how much pressure they apply to their touch screen. Curtis also raised his price target on ADI from $55 to $70.

Technically shares of ADI are consolidating below resistance near $65.00 with a bullish pattern of higher lows. The point & figure chart is already bullish and forecasting a long-term target of $81.00. If ADI can breakout past $65.00 we want to jump on board. Tonight we're suggesting a trigger to buy calls at $65.25.

Trigger @ $65.25

- Suggested Positions -

Buy the JUN $65 CALL (ADI150619C65)

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


Ctrip.com - CTRP - close: 65.62 change: -0.52

Stop Loss: 61.30
Target(s): To Be Determined
Current Option Gain/Loss: -5.8%
Average Daily Volume = 2.9 million
Entry on April 21 at $65.15
Listed on April 14, 2015
Time Frame: 3 to 5 weeks, Exit PRIOR to earnings in May
New Positions: see below

Comments:
04/23/15: CTRP failed to participate in the stock market's widespread rally on Thursday. The early morning gains faded and shares settled with a -0.7% decline. Watch for broken resistance near $65.00 to be new support. Traders could use a bounce from $65.00 as a new entry point.

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.

- Suggested Positions -

Long MAY $65 CALL (CTRP150515C65) entry $3.29

04/21/15 triggered @ 65.15
Option Format: symbol-year-month-day-call-strike


G-III Apparel Group, Ltd. - GIII - close: 116.63 change: +0.31

Stop Loss: 114.75
Target(s): To Be Determined
Current Option Gain/Loss: -50.0%
Average Daily Volume = 207 thousand
Entry on April 09 at $116.77
Listed on April 08, 2015
Time Frame: Exit PRIOR to the 2:1 split on May 4th
New Positions: Yes, see below

Comments:
04/23/15: GIII delivered a disappointing performance. The stock held short-term support but the rally struggled under the $118.00 level, which was been resistance this week.

I'm not suggesting new positions at current levels. 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

04/22/15 new stop @ 114.75
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: 101.71 change: -0.16

Stop Loss: 98.25
Target(s): To Be Determined
Current Option Gain/Loss: +8.8%
Average Daily Volume = 589 thousand
Entry on April 21 at $101.05
Listed on April 18, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
04/23/15: GPN quietly drifted sideways just below what appears to be new short-term resistance at the $102.00 level. Investors might want to look for a dip in the $100-101 zone as a new entry point.

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.

- Suggested Positions -

Long AUG $105 CALL (GPN150821C105) entry $2.85

04/21/15 triggered @ 101.05
Option Format: symbol-year-month-day-call-strike


Splunk, Inc. - SPLK - close: 67.81 change: +1.89

Stop Loss: 62.85
Target(s): To Be Determined
Current Option Gain/Loss: +14.5%
Average Daily Volume = 1.9 million
Entry on April 23 at $66.25
Listed on April 22, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
04/23/15: Our brand new play on SPLK is off to a strong start. The stock hit our suggested entry point at $66.25 and continued to a +2.86% rally. These are new multi-week highs.

Trade Description: April 22, 2015:
Big data and cyber security are buzzwords in the information technology industry. One firm appears to have found its niche providing solutions for both of them.

SPLK is in the technology sector. They are considered part of the application software industry. According to the company, "Splunk Inc. (SPLK) provides the leading software platform for real-time Operational Intelligence. Splunk® software and cloud services enable organizations to search, monitor, analyze and visualize machine-generated big data coming from websites, applications, servers, networks, sensors and mobile devices. More than 9,000 enterprises, government agencies, universities and service providers in more than 100 countries use Splunk software to deepen business and customer understanding, mitigate cybersecurity risk, prevent fraud, improve service performance and reduce cost. Splunk products include Splunk® Enterprise, Splunk Cloud™, Hunk®, Splunk Light™, Splunk MINT and premium Splunk Apps."

The company is seeing significant earnings momentum. Their FY2015 Q2 report in August beat analysts' estimates on both the top and bottom line. Revenues were up +51.7% from the year ago period. Management raised their guidance. They did it again with their Q3 results in November with a beat on both the top and bottom line with revenues rising +47.6% and SPLK raised their guidance.

The company's most recent report was February 26th, 2015. SPLK delivered their fiscal year 2015 Q4 results. Analysts were looking for earnings of $0.04 a share on revenues of $136.98 million. SPLK delivered $0.09 a share. Revenues soared +47.5% to $147.4 million. For the whole year (FY2015) SPLK's revenues were up +49%.

SPLK CEO and Chairman, Godfrey Sullivan, commented on their performance, saying, "We are proud to welcome more than 600 new customers to the Splunk family, which now includes over 9,000 customers around the world. We finished FY15 with strong performance across the board and posted our best quarter yet for both Splunk Cloud and the Splunk App for Enterprise Security. Our investments in cloud and solutions are helping to drive global customer adoption."

SPLK management raised guidance again for FY2016 Q1 and for the full year. They now forecast revenues above Wall Street estimates. SPLK expects 2016 sales to hit $600 million, which is a +33% improvement from 2015.

Wall Street is very bullish on the stock. Shares have seen a parade of upgrades and raised price targets. Here's a brief list of price targets: Deutsche Bank $80, JMP Securities $81, Citigroup $81, Wedbush $82, Morgan Stanley $84, Credit Suisse $85, Canaccord $86, and FBR Capital with a $90 price target on SPLK shares. The point & figure chart is only forecasting at $76 target but it could grow.

Technically SPLK has been consolidating sideways in the $60-65 zone the last couple of weeks. Today shares displayed relative strength with a +2.6% gain and a breakout past resistance near $65.00. I'm suggesting a trigger to launch bullish positions at $66.25. The levels to watch are potential overhead resistance at $70 and $75.

- Suggested Positions -

Long AUG $70 CALL (SPLK150821C70) entry $4.54
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.

04/23/15 triggered @ 66.25
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Big Lots Inc. - BIG - close: 47.73 change: +0.58

Stop Loss: 49.05
Target(s): To Be Determined
Current Option Gain/Loss: -50.0%
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:
04/23/15: BIG is not cooperating. The stock's bounce has produced a four-day rally. Shares are testing the $48.00 level. Tonight we are moving the stop loss down to $49.05.

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

04/23/15 new stop @ 49.05
04/14/15 triggered @ $46.85
Option Format: symbol-year-month-day-call-strike


Jack in the Box, Inc. - JACK - close: 94.32 change: +3.00

Stop Loss: 95.05
Target(s): To Be Determined
Current Option Gain/Loss: -53.3%
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:
04/23/15: JACK did not react to earnings results from big restaurant names on Tuesday but it seems to be reacting today. The stock had been underperforming the market all week long. Suddenly today shares surged +3.28% and closed just below what should be resistance near $95.00 and its 50-dma.

If there is any follow through higher tomorrow we could see JACK hit our stop loss. No new positions at this time.

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: 74.24 change: -0.26

Stop Loss: 76.55
Target(s): To Be Determined
Current Option Gain/Loss: -23.4%
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:
04/23/15: It was encouraging to see the rally in OA fail at resistance near $75.00 again. Shares underperformed with a -0.3% loss.

No new positions at this time.

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

Advance Auto Parts - AAP - close: 151.51 change: -0.89

Stop Loss: 147.75
Target(s): To Be Determined
Current Option Gain/Loss: -48.7%
Average Daily Volume = 891 thousand
Entry on April 21 at $154.00
Listed on April 20, 2015
Time Frame: Exit PRIOR to earnings on May 21st
New Positions: see below

Comments:
04/23/15: Two of AAP's biggest competitors both rallied to new highs today. Yet shares of AAP reversed sharply lower. Last night ORLY reported earnings that was better than expected on both the top and bottom line. ORLY management guided lower for the second quarter. Yet shares of ORLY gapped open higher this morning and closed with a +5% gain. I can't find any other news that might influence AAP today.

Shares of AAP failed at technical resistance at the 100-dma and spent the rest of the day trading lower. It eventually broke down below multiple layers of support and hit our stop loss at $147.75.

The story behind the auto part stocks has not changed. I'd keep an eye on ORLY or AZO as potential bullish candidates.

- Suggested Positions -

JUN $160 CALL (AAP150619C160) entry $3.80 exit $1.95 (-48.7%)

04/23/15 stopped out
04/21/15 triggered @ $154.00
Option Format: symbol-year-month-day-call-strike

chart: