Option Investor
Newsletter

Daily Newsletter, Monday, 4/27/2015

Table of Contents

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

Market Wrap

Trying To Break Out

by Thomas Hughes

Click here to email Thomas Hughes
Another mixed day of trading as earnings support the market and the FOMC provides resistance

Introduction

The bulls charged right out of the gates today as earnings trends help buoy stocks. The downside is that resistance was met and sent the bulls ducking for cover. The FOMC meeting starts tomorrow, the policy statement due out in less than two days, and may be the reason why the bulls were unable to sustain this mornings rally.

International indices were largely higher in today's session. In Asia/Pacific China and Australia hit new highs while Japan held steady just below last week's break-even point. In Europe indices closed more than 1% higher on earnings and a change in the Greek debt negotiations; the Greek prime minister has replaced the team handling the negotiations. The move is seen as a positive and possibly leading to rapid progress in the talks.

Market Statistics

Futures traded to the upside throughout the early pre-opening session. The S&P was indicated about 0.25% higher and showed some strengthening into the opening bell. There was little in the way of market moving news during the early morning, no economic reports and no significant earnings reports, to help or hinder trading.

The bulls started their charge as soon as the opening bell sounded. The indices set a new intra-day high, and today's daily high, within the first three minutes of trading. From that point the market trend sideways until just after lunch when the indices fell below break-even levels. Afternoon trading saw the indices move lower and reach today's low around 3:30PM. The indices bounced from there and into the close but did not regain today's losses.

Economic Calendar

The Economy

Moody's Survey of Business Confidence has surged to a new high. The index jumped 2.1 points from last week's figures continuing the trend set last year. The index has been making new highs steadily since the end of last year. In his summary Mr. Zandi, Moody's Chief Economist, reports that ...

“Global business sentiment remains unwavering, at close to record highs, especially in the U.S. Weaker U.S. economic growth in recent months 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.”


There was no economic data released today but the rest of the week is going to be jam packed. Tomorrow is consumer confidence and the Case-Shiller 20 City Index. Wednesday is the first estimate for 1st quarter GDP as well as the FOMC meeting and Pending Home Sales. Thursday is weekly jobless claims, personal income/spending, Employment Cost Index and Chicago PMI. Friday wraps up the week with Auto Sales, ISM, Construction Spending and Michigan Sentiment.

I am leaning toward the FOMC meeting, PMI and Michigan Sentiment as being most important. The FOMC meeting will have a very large impact on forward outlook. The PMI and Sentiment numbers are for April, all other data is 1st quarter related and comes after the GDP announcement so I think will affect the revisions to GDP more than future outlook.

FactSet reports that 201 S&P 500 companies have reported earnings so far this season. According to them 73% of those reporting so far have beaten projections for average earnings growth while only 47% are beating expectations for revenue. The current blended rate for 1st quarter earnings growth is now -2.8%, 2% better than at its lowest level of -4.8%. On the downside the expected blended rate for revenue growth is worsening, but only marginally. Ex-energy, by my calculation, earnings growth is now 3.6% and could go as high as 6%, Factset is projecting 5.6%. I find it amusing that they are now providing data on earnings growth ex-energy, as I have been tracking for some time.


The Oil Index

Oil prices held near to flat in today's session despite choppy trading. WTI moved marginally higher to test current resistance while Brent fell just below Friday's settlement price. There are growing signs that production in the US could be nearing a peak but so far supply remains high and steady. Rig counts have fallen for the past 5 months, and there are isolated areas of disruption in global production such as in Libya, but still no real sign of declining supply. WTI is now trading about a dollar below the 6 month high with support in the range of $50-$52.50.

The Oil Index gained just over 0.25% to trade at resistance. The index is now making the 2nd of two attempts to move above the 5 month high with weakening indicators. Both the MACD and stochastic have peaked in the near term and suggestive of a possible top. Resistance is at 1,435 with support near 1,400, 1,350 and 1,300. This week is going to be important for the energy sector as many of the top integrated oil companies will be reporting earnings. Tomorrow we get BP, Thursday is Connoco-Phillips and Exxon-Mobil, Friday is Chevron.I think it may be expected these companies will do better than projected, if they do not deliver on this expectation we could see a retreat to the long term trend line near 1,300.


The Gold Index

Gold prices remain volatile as traders and investors weigh the upcoming FOMC meeting against economic trends, dollar strength and the longer term outlook for inflation. The metal retested support in the $1175-$1185 range last Friday and as expected support was found. Today the metal shot up by nearly 2.5% to regain the upper side of $1200. I am expecting more volatility this week, FOMC related to be sure, with near term direction dependent on their stance on interest rates. If they are dovish the dollar may weaken and gold may go up; if they are hawkish the dollar may strengthen and gold may retest support.

The gold miners are getting a boost from what I will call relatively stable gold prices. There is volatility in price but it has been hanging near $1200 and above the long term low for over a month. Today the Gold Miners ETF GDX gained over 4% intra-day in a move confirming support along the short term moving average and the rising support line connecting the Nov/Dec and March bottoms. Today's action also confirms resistance at the $20 level.

The ETF is winding up within a narrowing range with bullish indicators and looks likely to retest resistance in the near term. This move may be sparked or hindered by earnings which are due out this week from a number of top producers including GoldCorp and Randgold, both scheduled for Thursday. Barrick Gold reported after the closing bell today and while earnings were a bit weak forward guidance is positive.


In The News, Story Stocks and Earnings

Barrick Gold traded more than 5% higher in today's session, driven on the spike in gold prices as well as positive earnings expectations, but closed with a gain of only 2.5%. Earnings were reported after the closing bell and did not meet expectations. The company was expected to post earnings of $0.10 per share and fell short by a nickel. Despite the miss execs say production levels and all-in-sustained-costs are within targets in a reaffirmation of full year guidance. The company is expecting cost to decline and production to increase in the second of half of the year.


Apple also reported after the closing bell. The world's largest company by market cap was expected to earn $2.19 per share and blew away the estimates on sales of iPhones. Earnings and revenue were both better than expected; EPS was $0.17 ahead of estimates with revenue more than $1 billion ahead of estimates. The company had only been expected to report about 55 million iPhone units shipped; actual shipments were closer to 63 million. The company also increased its capital return program, by $200 billion, and is increasing the dividend by 11%. Shares of the stock traded higher throughout the day, testing the current all-time high, and then moved higher in the after-hours session.


Overstock.com reported weaker than expected earnings. The company was expected to report $0.20 per share but fell well short despite notable increases in revenue, gross profit and margins. Revenue increased 17%, gross profits increased 18% and margins increased by 18 basis points. The stock had been trading down all day and moved lower after the report. This one is looking weak with support targets near $22.50 and $22.00.


Rent-A-Center is another name making headlines in after-hours trading. The company reported a bottom line beat that helped to send the stock higher. EPS beat by a penny on revenues which increased by 5.9% but fell short of estimates. The company reported that initiatives to increase profitability are in progress with no changes to forward guidance. Shares of the stock gained 1.88% in today's session and shot higher in after hours trading.


The Indices

The indices tried to move higher today, the SPX and NASDAQ Composite at least setting new intraday highs, before resistance took over and sent testing support. The transports have been the laggard of late and today was no different. Today's losses were led by the Dow Jones Transportation Average with a -0.86% decline. The index fell just below the short term 30 day moving average and may experience some more near term weakness. The indicators are both bullish yet consistent with a peak that may indicate a return to support or a consolidation. The index is sitting on near term support, near 8,800, with longer term support at the bottom of the 6 month trading range near 8,600.


The NASDAQ Composite was the next biggest decliner in today's session. The tech heavy index lost -0.63% and is now sitting just above potential support at the recently broken all time high. The indicators are bullish but also consistent with a peak that could lead to a further test of support or consolidation. I am leaning toward consolidation at this time due to strength in the stochastic oscillator and today's report from Apple. There may be near term weakness with support targets near 5,055, 5,000 and just below that near the short term moving average but I remain bullish and looking to buy on the dip.


The S&P 500 dropped only -0.41% today in a move that highlights resistance at the current all-time high. The index moved up to set a new intra-day high but was pushed back down to support. The indicators are still bullish so it may be a near term event. However, stochastic has started to roll over at the upper signal line which is a concern. If this continues it would be a confirmation of resistance at the all-time high and may lead to further downside. Current support target is the long term trend line confirmed by the short term moving average.


The Dow Jones Industrial Average brings up the rear in today's decline. The blue chip index lost -0.23% in a move that leaves it at support. The index is sitting just above the the 18,000 level, the December all-time high and the short term moving average so support looks strong. The indicators are bullish but weak right now so upside movement is questionable. If it is able to move up off of support next resistance is near 18,250.


The indices are still in a holding pattern. They are trying to break out to new highs but there are headwinds, namely the FOMC, rate hike speculation and a mild first quarter. The thing to remember is that trends are up, both in the market and in the economy, with positive earnings expectations into the end of the year and next year. Because of this I remain bullish; because of the FOMC I remain wary and cautious.

The market can be crazy and irrational, the FOMC holds a lot of power over that craziness, so with the meeting starting tomorrow, and with all the speculating about interest rate increases, Wednesday could turn into a wild day of trading. On one extreme is them backing off from their intention to raise rates this year, on the other is a firm indication rates will rise in June. In between lie many possibilities all with the power to move the market. . . in one direction or the other.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Buy Backs vs. Earnings Growth

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Bed Bath & Beyond Inc. - BBBY - close: 71.04 change: -1.48

Stop Loss: 72.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.4 million
Entry on April -- at $---.--
Listed on April 27, 2015
Time Frame: Exit PRIOR to June option expiration
New Positions: Yes, see below

Company Description

Why We Like It:
Retailers like BBBY suffered a number of challenges last quarter. Naturally the strong U.S. dollar hurt their international sales. Their U.S. operations were hurt by the West Coast port slowdown. Management also blamed bad weather in February for a significant slowdown.

If you're not familiar with BBBY they are in the services sector. According to the company, "Bed Bath & Beyond Inc. and subsidiaries (the "Company") is a retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in store, online or through a mobile device.

The Company has the developing ability to have customer purchases picked up in store or shipped direct to the customer from the Company's distribution facilities, stores or vendors. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare and other industries. Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond. Shares of Bed Bath & Beyond Inc. are traded on NASDAQ under the symbol 'BBBY' and are included in the Standard and Poor's 500 and Global 1200 Indices and the NASDAQ-100 Index. The Company is counted among the Fortune 500 and the Forbes 2000.

The Company operates websites at bedbathandbeyond.com, worldmarket.com, buybuybaby.com, christmastreeshops.com, and harmondiscount.com. As of February 28, 2015, the Company had a total of 1,513 stores, including 1,019 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada, 270 stores under the names of World Market, Cost Plus World Market or Cost Plus, 96 buybuy BABY stores, including its first in Canada, 78 stores under the names Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, and 50 stores under the names Harmon or Harmon Face Values."

BBBY's 2015 Q3 results were reported in January this year. Earnings were in-line with estimates. Revenues only saw low single-digit growth and came in slightly below analysts' estimates. This trend continued with their Q4 results BBBY delivered on April 8th.

Earnings of $1.80 a share were in-line with estimates. Revenue growth improved a little bit to +4.2% but still came in below Wall Street estimates at $3.34 billion. Q4 comparable store sales were up +3.7% but management is forecasting comps to fall into the +2-3% range for fiscal 2016. Another challenge for BBBY is margins, which are getting squeezed. Margins fell -77 basis points in Q4 following a similar decline in Q3. BBBY also lowered their Q1 2016 guidance to $0.90-0.95 a share versus analysts' estimates of $1.01.

In their Q4 earnings report BBBY said they spent $947 million buying back approximately 11.8 million shares of the company's stock. This is part of a $2 billion stock buyback program. A Bank of America analyst noted that without BBBY's stock buyback the company would not have seen any earnings growth. As of February 28, 2015, BBBY's remaining balance on its repurchase program was about $884 million.

Technically the stock has broken down. The path of least resistance is lower. Last week BBBY tried to produce an oversold bounce but it didn't get very far. The point & figure chart is bearish and forecasting at $64 target. More aggressive traders may want to buy puts now. I'd prefer to see a drop below possible support at $70.00 and its simple 200-dma. Therefore we are suggesting a trigger to buy puts at $69.75.

Trigger @ $69.75

- Suggested Positions -

Buy the JUN $70 PUT (BBBY150619P70) current ask $1.61
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

Biotechs Weigh On The Market

by James Brown

Click here to email James Brown

Editor's Note:

A sell-off in biotech stocks appeared to spoil the mood on Monday. The market's early morning gains reversed. The major indices all closed in the red. Investors might be a little cautious ahead of the two-day FOMC meeting as well.

APOG hit our entry trigger.


Current Portfolio:


CALL Play Updates

Apogee Enterprises - APOG - close: 53.08 change: -0.40

Stop Loss: 51.75
Target(s): To Be Determined
Current Option Gain/Loss: -21.8%
Average Daily Volume = 223 thousand
Entry on April 27 at $53.85
Listed on April 25, 2015
Time Frame: Exit PRIOR to earnings in June
New Positions: see below

Comments:
04/27/15: The market's early morning rally boosted APOG and shares gapped open higher. The stock quickly hit our suggested entry point at $53.85. Unfortunately, like the broader market, APOG's gains faded and shares closed in the red.

I would wait for a new rally above $53.85 before considering new positions.

Trade Description: April 25, 2015:
The U.S. economy has been limping along with slow growth. During the first quarter earnings season we have heard how the strong dollar has hurt big cap companies' sales and margins. That's one reason why money has been flowing into small cap, domestic companies, which are less impacted by the dollar. Investors are always looking for strong growth as well.

APOG fits the bill. The company is in the industrial goods sector. They are part of the building materials industry. According to the company, "Apogee Enterprises, Inc. (www.apog.com), headquartered in Minneapolis, is a leader in technologies involving the design and development of value-added glass products, services and systems for the architectural and picture framing industries."

Looking at the last four quarters (fiscal year 2015) bottom line results have been mixed. Yet revenues have been consistently showing double-digit growth. Q1 revenues were up +17.6%. Q2 revenues were +30%. Q3 revenues rose +22.6%. The company's most recent earnings report was April 8th. APOG delivered 2015 Q4 results of $0.47 a share, which was +74% higher than a year ago and above analysts' estimates. Q4 revenues were up +15% and above expectations. Margins improved 240 basis points to 8%.

The company said their architectural glass segment's revenues rose +22%. Architectural service revenues were flat. Architectural framing systems rose +22%. Large-scale optical technologies segment reported revenues up +18% last quarter. APOG ended the fourth quarter with a backlog of $491 million, up +49% from a year ago. Their fiscal 2015 results saw revenues up +21% and adjusted EPS up +58%.

Joseph Puishys, APOG's CEO, commented on their results, saying,

"Apogee's growth engine continued in the fourth quarter as we again grew revenues in the double digits and income more than 50 percent. Performance across the company was strong, with double-digit earnings and revenue growth in three of four segments... We built our backlog significantly during the year, giving us momentum moving into fiscal 2016. We expect fiscal 2016 will continue our trend of double-digit top-line growth and very strong bottom-line growth."
APOG provided relatively optimistic guidance for fiscal year 2016. They see revenues rising +10% to +15% and expect to see sales cross the $1 billion mark soon.

The stock shot higher following its Q4 report in April. The last couple of weeks have seen shares consolidate a bit but traders have started to buy the pullback. We think the rally continues. Tonight we're suggesting a trigger to buy calls at $53.85. We'll try and limit our risk with an initial stop loss at $51.75.

- Suggested Positions -

Long AUG $55 CALL (APOG150821C55) entry $2.75

04/27/15 triggered @ 53.85
Option Format: symbol-year-month-day-call-strike


Ctrip.com - CTRP - close: 66.28 change: +0.71

Stop Loss: 64.75
Target(s): To Be Determined
Current Option Gain/Loss: -2.7%
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:
04/27/15: I'm starting to worry about our CTRP play. Shares tried to rally again this morning. The stock failed at resistance near $67.50 for the third time in the last four sessions. It is worth noting that CTRP displayed relative strength today with a +1.0% gain.

No new positions at this time.

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

04/25/15 new stop @ 64.75
04/21/15 triggered @ 65.15
Option Format: symbol-year-month-day-call-strike


G-III Apparel Group, Ltd. - GIII - close: 117.74 change: -0.79

Stop Loss: 114.75
Target(s): To Be Determined
Current Option Gain/Loss: -43.1%
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:
04/27/15: GIII faded lower and closed with a -0.6% decline. We are quickly running out of time with only three days left on this trade. GIII is set to split 2-for-1 on May 1st and we do not want to hold over the split. Plan on exiting before Friday.

I'm not suggesting new positions at current levels.

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

04/25/15 Only four days left on this trade.
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: 101.36 change: -0.43

Stop Loss: 98.25
Target(s): To Be Determined
Current Option Gain/Loss: -1.8%
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:
04/27/15: GPN is still drifting sideways in the $100-102 zone. I'm not suggesting new positions at the moment. More conservative traders might want to move their stop loss closer to $100.00.

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: 67.32 change: -0.56

Stop Loss: 62.85
Target(s): To Be Determined
Current Option Gain/Loss: +7.9%
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:
04/27/15: Shares of SPLK spiked toward $70 this morning. Like most of the market SPLK erased its early gains and closed in the red. If this dip continues I'd watch for potential support near $65.00. I'm not suggesting new positions at the moment.

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


SPDR S&P 500 ETF - SPY - close: 210.77 change: -0.88

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

Comments:
04/27/15: The SPY traded above resistance at $212.00 this morning but could not maintain its gains. Technically today's move has created a bearish engulfing candlestick reversal pattern but it needs to see confirmation.

Trade Description: April 23, 2015:
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 $2.03
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




PUT Play Updates

Big Lots Inc. - BIG - close: 46.62 change: -0.95

Stop Loss: 49.05
Target(s): To Be Determined
Current Option Gain/Loss: -21.1%
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:
04/27/15: The oversold bounce in BIG is rolling over. Shares underperformed the market with a -1.99% decline. The next challenge for the bears is getting BIG through support near $46.00.

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


Orbital ATK, Inc. - OA - close: 73.89 change: +0.98

Stop Loss: 75.25
Target(s): To Be Determined
Current Option Gain/Loss: -15.6%
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:
04/27/15: OA did not see any follow through on Friday's decline. Instead shares bounced from support near its 50-dma. Tonight we are moving the stop loss down to $75.25, just above resistance near $75.00.

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

04/27/15 new stop @ 75.25
04/16/15 triggered @ 74.25
Option Format: symbol-year-month-day-call-strike