Option Investor
Newsletter

Daily Newsletter, Tuesday, 4/28/2015

Table of Contents

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

Market Wrap

Rumors of Wars

by Jim Brown

Click here to email Jim Brown

It was a volatile morning because of geopolitical headlines but the markets quickly rebounded from the panic lows. Iran and Russia were making geopolitical waves again but investors continued to use any dip as a buying opportunity.

Market Statistics

News hit the wires shortly after the open that Iran had fired on, boarded and seized a U.S. Navy cargo ship in the Persian Gulf. The Dow immediately sold off from a gain of about 50 points to -122 at the lows. The rumor turned out to be untrue. Iran did fire on, board and seize the Maersk Tigris container ship and forced it deeper into Iranian territorial waters in the vicinity of Larak Island near the Strait of Hormuz. The ship was traveling from Jeddah in Saudi Arabia to Jebel Ali in the UAE.

When it was revealed that it was not a U.S. Navy cargo ship the market rallied off its lows. However, the Maersk vessel is carrying a Marshal Islands flag and the U.S. has "full authority and responsibility for security and defense of the islands" according to the State Department. The Marshal Islands did belong to the USA at one time but are now a sovereign nation under the protection of the USA. The Navy directed the destroyer Farragut to proceed at "best speed" to the location of the Maersk vessel and also sent aircraft to observe the situation. Source

This may be an operation by Iran to save face after their convoy of ships thought to be carrying arms for the Houthi rebels in Yemen was forced to turnaround after a flotilla of U.S. warships arrived on the scene to prevent that from happening. By seizing the unarmed Maersk vessel Iran can make some stupid claim about a violation of its international waters and try to remind countries in the region they still have a military and should not be ignored. Iran constantly threatens to shutdown the Strait of Hormuz as a "countermeasure to Western aggression" but rarely does anything other than talk about it.

With Iran and Saudi Arabia in a proxy war in Yemen this could have been an escalation of that war since the ship was coming from Saudi Arabia. The rules for transiting the strait were set out in a 1982 UN convention. Any vessel can use the strait as long as it proceeds without delay and it not polluting the waters.

I think the Persian Gulf countries are moving ever closer to a real shooting war rather than the proxy war in Yemen where Iran backs the Houthi rebels and Saudi Arabia backs the Yemen government.

Later sources claimed the vessel was seized by the Iranian Revolutionary Guard (IRGC), which is separate from the Iranian navy and is typically more provocative than the Iranian navy. The IRGC has its own fleet of boats that patrol the Strait of Hormuz.

Even later the Iranian Fars News Agency said the "American trade vessel" had been seized and confiscated for trespassing on Iran's territorial waters. No big surprise there since they need to justify the action in some form.


Overnight Finland dropped depth charges on an unidentified submarine off the coast of Helsinki after following the sub on Monday and again on Tuesday morning. The sub was thought to be Russian. The Finish Navy said the depth charges were the size of grenades and not intended to harm the sub but to warn that it had been spotted and should leave the area. Source

Sweden, Norway, Finland, Denmark and Iceland made an unprecedented hawkish joint statement several days ago citing the Russian challenge as grounds to increase defense cooperation. Moscow immediately responding saying moves by Finland and Sweden towards closer ties with NATO was of "special concern" to Russia.

The Dow shook off the Iranian news and rallied to gain +72 points and close right on resistance at 18,100. The Nasdaq gave back -5 to close at 5,055. The Nasdaq loss was due to continued declined in the biotech sector and a -$2 decline in Apple.

Also weighing on the market at the open was some negative economic news. The Consumer Confidence for April declined -6.2 points from 101.4 to 95.2 and a four-month low. Expectations for the labor market worsened and consumers said they were holding off on purchases of cars, appliances and vacations.

The present conditions component declined from 109.5 to 106.8. The expectations component declined from 96.0 to 87.5 and the lowest level since September. Those respondents who thought jobs were plentiful fell from 21.0% to 19.1%. Future income expectations also declined with those expecting an increase falling from 18.8% to 18.3% and those expecting a decrease in income rising from 9.7% to 11.2%.

Those planning on buying a car declined from 12.7% to 10.8%. Those thinking about buying an appliance or big screen TV declined from 49.6% to 46.8%. Those considering a home purchase rose from 4.8% to 5.2%.

Analysts remain confused on why consumers are not spending their gasoline savings. Retail sales remain weak and confidence is declining.


The Richmond Fed Manufacturing Survey rebounded slightly from -8 in March to -3 for April. New orders improved from -13 to -6 and unfilled orders improved from -12 to -8. This is the third consecutive month that new orders have contracted. Capital expenditure plans declined from 32 to 26 and the lowest reading for 2015. Analysts blame the strong dollar for the decline in manufacturing orders.

In the separate Services Survey the index declined from 12 to 2 and the lowest level since April 2014. Revenues contracted from +12 to -1. This is for April so you can't blame the declining activity on the weather.


The calendar for tomorrow is headed by the FOMC announcement at 2:PM. Analysts don't believe there will be a rate hike until September at the earliest because of the weak economic numbers but they do believe the Fed will further modify their statement to suggest it could come as early as June. This is the Fed trying to talk the market up and warn that time is growing short. They don't want the market to be surprised when the hike finally comes.

The GDP estimates continue to decline in the press but the consensus estimate remains in the +1% growth range. Since the Atlanta Fed real time GDPnow is projecting +0.1% it will be interesting to see what number really appears on Wednesday. Unless it is dramatically different from 0%-1% growth it probably will not phase the market. A weak number is already expected.


The market was roiled by Twitter (TWTR) earnings about 45 min before the close after they were inadvertently released early on the Twitter website. The market was made aware when Data scraper firm Selerity tweeted the numbers. Initially everyone thought there had been a leak but Selerity quickly pointed out that there was "no leak and no hack" as the data was on Twitter's website. The stock imploded and was eventually halted.

Twitter posted earnings of 7 cents compared to estimates for 4 cents. Revenue of $436 million missed estimates for $458 million. The company warned that "ad engagement growth" declined significantly. Twitter cut its full year revenue forecast from $2.3-$2.35 billion to $2.17-$2.27 billion. Analysts were expecting $2.37 billion.

The number of monthly active users rose +18% to 302 million compared with 20% growth in the prior period. Mobile users accounted for 80% of the traffic. Analysts reviewing the report were bearish saying it appeared Twitter was experiencing significant subscriber churn and could not keep new users. With their advertising model failing to grow revenue the outlook is worsening.

Shares declined -18% just before the close.


Aetna (AET) reported earnings of $2.39 that blew away estimates for $1.96. Earnings rose +21% and revenue rose +8% to $15.1 billion but missed estimates for $15.5 billion. They ended the quarter with 23.7 million members, up +4.2%. The company raised guidance from "at least $7.00" to a range of $7.20-$7.40. That is the second guidance raise in 2015.


GoPro (GPRO) reported adjusted earnings of 24 cents that easily beat the estimate for 18 cents. Revenue rose +54% to $363.1 million and beat estimates for $341 million. GoPro has posted record earnings and revenue in each of the three quarters since it went public. Shares declined initially in after hours to $43.57, -$4, but then rallied to $52 after closing the regular session at $47.

The company said it was acquiring Kolor, a French company and a leader in virtual reality and spherical media solutions. GoPro said the combination of several cameras along with the Kolor software would "transform entertainment, education and other industries."


UPS reported earnings that rose +14% to $1.12 that beat estimates for $1.09. Revenue rose +1% to $13.98 billion but missed estimates for $14.32 billion. UPS was hurt by a -5% decline in international revenue, which was due to the strong dollar. The company said it decided not to renew an undisclosed number of shipping contracts that were not profitable enough. They did not identify the shippers but said the packages were light weight and low revenue per box. They forecast full year earnings between $5.05-$5.30. UPS shares rallied $3.34 on the news.


Panera Bread (PNRA) crashed and burned after reporting a -25% decline in earnings to $1.20 per share. Revenue was up +7% to $649 million. Same store sales were up +2% for the current quarter. They reiterated their guidance for earnings to be flat to down in the mid to high single digit percentages from 2014. Shares initially fell -$15 but rebounded to close down -$5.


Buffalo Wild Wings (BWLD) reported earnings of $1.52 that missed estimates for $1.66. Revenue of $440.6 million also missed estimates for $453.9 million. The company said higher chicken wing costs squeezed profits. Wing costs rose +41% from last year and they are only going higher as a result of the 10 million chickens killed by the bird flu. Shares declined -$18 on the news.


Wynn Resorts (WYNN) reported earnings of 70 cents compared to estimates for $1.34. This was a major unexpected loss and shares were crushed in afterhours for a -$13 loss. Revenue of $1.09 billion was also well short of estimates at $1.21 billion. The casino company said a steep decline in betting in Macau was to blame. Steve Wynn said the depression in the VIP market in Macau was ongoing. The company cut its dividend from $1.50 to 50 cents with Wynn saying it was foolish to issue dividends on borrowed money. Revenue in Macau declined -38% to $705.4 million. They have another $4.1 billion property opening there in the first half of 2016. Do you think Steve is having second thoughts about that spending today?


Wednesday's earnings calendar is highlighted by Anthem, Mastercard, MGM and Time Warner. Thursday is the big day this week and then the number of earnings reports begin to decline starting next week.

Of interest to energy investors will be the Conoco and Exxon earnings on Thursday and Chevron on Friday. What they say about the prospects for production and oil prices could set the sector on fire or bury it under a ton of pessimism.


Crude oil continues to hover around the $57 mark ahead of the inventory report on Wednesday. The first time we have a draw from inventories instead of a build we should see crude prices begin to move higher.


The weak economic data finally pushed the dollar below support and this is strange since the Fed is probably going to try and talk up rates on Wednesday. Apparently investors are fixated on the constantly slipping date for the first rate hike. If the Fed itself actually says something about pushing the date farther into the future the dollar could decline significantly.

The falling dollar has lifted the price of gold by $36 in just the last two days. This will impact oil prices as well if the trend continues.


Markets

The S&P struggled to recover lost ground from Friday's high close at 2117.69 but was unable to do it. The index gained +6 points to close just under 2115 and remains under the resistance at 2120 for the last four days. The near instant recovery from the Iranian headline drop was encouraging but the constant drone of earnings and revenue misses is a heavy anchor. With the calendar counting down to the sell in May cycle any gain is appreciated.

The intraday decline to just below 2095 gives us a new support level to watch. As long as the lows remain above that level we can continue hoping for a breakout. However, today was a lower high so the chart pattern is slightly bearish.


The Dow managed to squeeze out a minor move over resistance at 18,100 with a close at 18,110. In the greater scheme of things this is insignificant. The solid congestion at the 18,075-18,150 range is going to continue to be a problem until there is a catalyst to catapult the index over congestion of slam it back down to lower lows.

IBM added about 25 points to the Dow by upping their dividend by 18% to $1.30 payable on June 8th to holders on May 8th. Merck added about 21 points thanks to their strong earnings. United Health added about 9 points on the Aetna earnings. UNH is thought to be the weakest in the sector. Apple removed about -15 points despite posting blowout earnings on Monday night. This is called post earnings depression. Expectations were so high it powered the stock to a new high early Monday and this is just profit taking.

There were no Dow components reporting after the bell today so Dow direction will depend on the Nasdaq and the earnings forces there.

The Dow has support at 17,915 and the intraday drop ended at 17,917. This suggests there are plenty of dip buyers still in play.



Nasdaq support is 5000 and the low today was 5006. The rebound covered +49 points but could not manage to make it back into the green. The two days of declines are related to profit taking on the big four names that were up so strongly on Friday. Amazon has declined -$16 since the $445 close on Friday. Google is down -12 and Starbucks -2. Microsoft is actually up about $1.50.

The Nasdaq is still being dragged lower by the biotech correction. You can see all the biotech names in the lowers list below.

The Nasdaq is still in an uptend as long as it remains above 5000. That is the new line in the sand and one that could be tested again soon.



The small cap Russell 2000 rebounded slightly today after dipping below the critical 1250 support level on the morning headlines. The rebound was immediate so the dip did not trigger a bunch of short sellers to pile onto the move. Dip buyers are still alive and active.

The Russell now has to recover the lost ground from the 1259 close to the 1278 high close from two weeks ago. This could be a challenge because there is a lot of congestive resistance between 1260-1275. Continue to watch the Russell for a break below support at 1250 as a sell signal.


There appears to be no fear of the Fed meeting tomorrow. I don't know if that is good or bad. It suggests everyone believes the Fed will say something dovish as a result of the weak economics and the impact of the dollar on this earnings cycle. The lack of consumer spending has got to be a problem for them and I can't imagine that they will hike in June. However, Yellen may want us to think she may hike and that is the danger in tomorrow's announcement.

I was encouraged by the quick rebound from the morning dip. That is not the kind of market action you would see from a market that is about to roll over as the sell in May cycle begins. That was evidence of dip buyers eager to get in at a lower level. That should continue to provide support as long as the headlines don't turn negative.

I have been cautious about holding too many longs and I am still cautious but somewhat encouraged.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email

 

 


New Option Plays

Guiding Lower Again

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

PVH Corp. - PVH - close: 103.24 change: -0.79

Stop Loss: 105.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.2 million
Entry on April -- at $---.--
Listed on April 28, 2015
Time Frame: Exit PRIOR to June option expiration
New Positions: Yes, see below

Company Description

Why We Like It:
Investors have been relatively forgiving when it comes to corporations blaming the strong dollar on poor results. They were not so forgiving with PVH after the company significantly reduced their guidance.

PVH is in the consumer goods sector. According to the company, "PVH Corp., one of the world's largest apparel companies, owns and markets the iconic Calvin Klein and Tommy Hilfiger brands worldwide. It is the world's largest shirt and neckwear company and markets a variety of goods under its own brands, Van Heusen, Calvin Klein, Tommy Hilfiger, IZOD, ARROW, Warner's and Olga, and its licensed brands, including Speedo, Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, MICHAEL Michael Kors, Sean John, Chaps, Donald J. Trump Signature Collection, DKNY, Ike Behar and John Varvatos."

PVH's earnings history has been mixed. They have managed to beat estimates the last four quarters in a row. Yet in three out of the last four quarters they have guided lower.

Their most recent report was March 25th. Analysts were expecting Q4 results of $1.73 a share on revenues of $2.1 billion. PVH delivered $1.76 but revenues were only up +0.8% to $2.07 billion. If you back out the currency headwinds then revenues would have been about +5%.

Management said it has been a highly challenging market environment and noted the strong dollar was a significant headwind. The company lowered their guidance on both the Q1 2016 and for their fiscal year 2016. PVH expects Q1 earnings in the $1.35-1.40 range versus Wall Street's consensus at $1.52. For the whole year PVH is forecasting $6.75-6.90 in earnings per share compared to analysts' estimates at $7.38.

The stock's oversold bounce from its March lows has failed at resistance. We just saw the most recent oversold bounce, on April 23rd, quickly fail at short-term resistance. Longer-term shares appear to have topped out as well. Tonight we are suggesting a trigger to buy puts at $102.65. More conservative traders may want to wait for a decline below $102.00 as an alternative entry point to buy puts.

Trigger @ $102.65

- Suggested Positions -

Buy the JUN $100 PUT (PVH150619P100) current ask $3.20
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Blue Chips Edge Higher, NASDAQ Stalls

by James Brown

Click here to email James Brown

Editor's Note:

The blue chip indices continued to push higher but gains were limited following an early morning spike lower. Meanwhile the NASDAQ composite closed in the red but did pare its midday losses.

CTRP and GIII both hit our stop losses today.


Current Portfolio:


CALL Play Updates

Apogee Enterprises - APOG - close: 53.36 change: +0.28

Stop Loss: 51.75
Target(s): To Be Determined
Current Option Gain/Loss: -12.7%
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:
04/28/15: APOG was somewhat resistant to the market's spike lower this morning. Unfortunately, the midday bounce didn't last. Gains faded to +0.5% but that was better than the NASDAQ's performance. I'd like to see some follow through higher 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


Global Payments Inc. - GPN - close: 100.98 change: -0.38

Stop Loss: 98.25
Target(s): To Be Determined
Current Option Gain/Loss: -7.0%
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:
04/28/15: GPN dipped to round-number support near $100.00 and bounced. Shares managed to pare their loss to -0.3%. If this bounce continues tomorrow morning I'd be tempted to buy calls again. You may want to wait for a rise past $101.65 as your 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: 66.63 change: -0.69

Stop Loss: 62.85
Target(s): To Be Determined
Current Option Gain/Loss: +1.3%
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:
04/28/15: I have been cautioning readers to expect a dip toward $65.00 if SPLK continued to pullback. The stock fell to $64.89 this morning and managed to trim its losses to -1.0% by the closing bell.

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: 211.44 change: +0.67

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:
04/28/15: The four-week trend of higher lows is still intact. The SPY looks poised to rally to a new high tomorrow. Today's bounce should negate yesterday's potential bearish reversal pattern.

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)
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

Bed Bath & Beyond Inc. - BBBY - close: 71.19 change: +0.15

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

Comments:
04/28/15: It was a relatively quiet session for BBBY. The stock traded sideways inside a 50-cent range for hours. There is no change from my prior comments.

Trade Description: April 27, 2015:
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)

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


Big Lots Inc. - BIG - close: 46.70 change: +0.08

Stop Loss: 48.05
Target(s): To Be Determined
Current Option Gain/Loss: -28.9%
Average Daily Volume = 1.1 million
Entry on April 14 at $46.85
Listed on April 13, 2015
Time Frame: Exit PRIOR to May option expiration
New Positions: see below

Comments:
04/28/15: BIG recovered quickly from its morning lows. Fortunately for the bears the intraday bounce didn't make it very far. Shares closed virtually unchanged on the session.

Tonight we're moving the stop loss down to $48.05.

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

04/28/15 new stop @ 48.05
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: 73.87 change: -0.02

Stop Loss: 75.25
Target(s): To Be Determined
Current Option Gain/Loss: -21.9%
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:
04/28/15: OA did not see a lot of movement today. Shares bounced off technical support at the 50-dma this morning. Yet the rebound stalled near the $74.00 level. OA spent the rest of the day in a relatively narrow range.

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



CLOSED BULLISH PLAYS

Ctrip.com - CTRP - close: 64.88 change: -1.40

Stop Loss: 64.75
Target(s): To Be Determined
Current Option Gain/Loss: -27.1%
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:
04/28/15: The market's drop this morning pushed CTRP below support near $65.00 and its 10-dma. Shares hit our stop loss at $64.75.

- Suggested Positions -

MAY $65 CALL (CTRP150515C65) entry $3.29 exit $2.40 (-27.1%)

04/28/15 stopped out
04/25/15 new stop @ 64.75
04/21/15 triggered @ 65.15
Option Format: symbol-year-month-day-call-strike

chart:


G-III Apparel Group, Ltd. - GIII - close: 115.58 change: -2.16

Stop Loss: 114.75
Target(s): To Be Determined
Current Option Gain/Loss: -70.3%
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:
04/28/15: The market's sharp drop this morning also took out our GIII trade. Shares fell below support near $115.00 and hit our stop loss at $114.75.

- Suggested Positions -

MAY $120 CALL (GIII150515C120) entry $2.90 exit $0.86 (-70.3%)

04/28/15 stopped out
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

chart: