Option Investor
Newsletter

Daily Newsletter, Thursday, 4/30/2015

Table of Contents

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

Market Wrap

And The Fed Says...

by Thomas Hughes

Click here to email Thomas Hughes
The market sold off as market participants weigh past weakness, future outlook and another FOMC statement that doesn't really say anything new.

Introduction

Yesterday the Fed delivered more or less as expected, neither raising rates or indicating exactly when a hike would come. The statement was both negative and positive at the same time, noting past weakness and positive expectations in regards to the economy and the rate-hike-time-line. I think, regardless of how you look at it, a June hike is still a possibility and if today's jobless claims numbers are any indication that chance has increased.

Market Statistics

Our indices were indicated lower throughout the early pre-opening session. The trade moderated on the labor data but then retreated back to the early low going into the opening bell. At the bell the indices did indeed open lower and moved lower from there. The SPX found some early support almost precisely at 10AM, near the 2090 level, and began a consolidation that lasted for just over an hour. A little past 11AM the market began to move higher and regained more than half of today's losses before resuming its plunge to support. The selling never really let up, driving the market to its daily low in late afternoon.

Economic Calendar

The Economy

There was quite a bit of data today aside from the weekly jobless claims. On a whole it gave a mixed view of the economy in that it confirmed the weakness we already know occurred in the first quarter as well as positive expectations for rebound this quarter and later in the year.

Personal Income and spending were both in line with expectations. Income held steady with a 0% increase while spending rose by 0.4%. This follows a +0.4% increase in February income and a +0.2% increase in spending.

The employment cost index rose by 0.7% in the first quarter. This is a little hotter than expected and above the previous reading of 0.5%. The increase is attributed to a 0.7% increase in wages/salaries and a 0.6% increase in benefits. I take this as a good sign, in my view it looks like employers are paying up for good help and a sign of underlying economic strength.


On to the labor data. This week initial jobless claims fell by -34,000, about 30,000 more than expected, to a brand new 15 year low. Claims are now 262,000, the four week moving average of claims 283,750. The average did not make a new low this week but I am confident it will in the next week or two providing there is not a huge snap-back in claims. Regardless, the initial claims numbers continue to trend lower despite recent volatility. The volatility could be due to the shift of Easter week this year, it was earlier on the calendar than it was last year.


On a not adjusted basis claims fell by -10.4% versus the 1.2% gain expected by the seasonal factors. On a year over year basis not adjusted claims are -21% lower than this week last year although have been trending relatively flat in between. New York and Connecticut led with increases of +8,902 and +1,831 blamed on lay-offs in transportation, education (Corinthian College?) and warehousing. New Jersey and Pennsylvania led with decreases in claims of -5,997 and -5,566 due to hiring in transportation, education, warehousing, food service and construction.

Continuing claims, the less volatile and slightly more accurate view of labor market turnovers, also made a substantial decline. Continuing claims fell by -74,000 to 2.253 million, another new 15 year low. The four week moving average also fell, making another new 15 year low.

Total claims for unemployment made a slight gain this week, +6,021. This is just off the three month low and in line with the recent down trend in total claims. On a year over year basis total claims are down -13.5% from last this at this time and appear to be heading lower. This figure lags initial claims by 2 weeks so will likely show decline over the next two weeks if not longer.


The monthly macro-labor data is due out next week and I am as eager as ever to see it. Based on the claims data, Moody's weekly Survey of Business Confidence and other forward looking surveys of business I think they, as a bundle will be good if not really good. There could be significant revisions to last month's ADP and NFP as well, both were way below consensus last month and we have seen large revisions just about every month for the past year. I'll be looking to job gains, planned lay-offs, unemployment levels, participation rates, hourly earnings and hours worked. The Fed said they saw softening in the labor market, I just don't buy it. Of course, I'm only an observer of the market and not a maker of policy.

The final piece of today's economic puzzle was the Chicago PMI, released at 9:45AM. The headline number of 52.3 was better than expected, the highest level this year and the second month of advance since hitting the long term low in February. Consensus estimates called for a reading near 50, the previous month's figure was 46.3. Four of the five sub-components made gains this month, led by a double digit increase in new orders which should result in higher production levels in the near future. Also, the employment and production numbers both made substantial increases as well, employment to the highest level this year and production returned to expansion.

The Oil Index

Oil prices rose today, supported by weakening dollar and lower than expected inventory levels. We may have seen the peak in US inventory as declining rig counts begin to have an impact on US production. WTI gained more than 1% today to trade just shy of $60 for the first time since mid-December 2014. There are still no indications of demand pick-up but declining production and supply could support prices in the near to short term. There may also be some fear premium built into the price although it is not getting much coverage. Fighting continues in Yemen and Libya, ISIS is still out of control throughout parts of the middle east.

The Oil Index traded lower today despite the boost in oil prices and much better than expected earnings from Exxon-Mobil. The index was able to open with a small gain and move marginally higher to set a new 5 month intra-day high but was not able to hold the level. This move is indicative of resistance around the 1,430 level which is increasingly looking like a near term top.

The indicators continue to decline and add to this analysis. The MACD is very near to making its bearish crossover, the stochastic already has. This could lead the index to test support near 1,400 and the short term moving average. The long term trend in the index is still up and earnings projections for the sector are positive so any dips will likely be buying opportunities.


The Gold Index

Gold prices took a big hit today despite yesterdays drop in dollar value. The Fed's statement, combined with today's labor data, has led to speculation of future dollar strength and drove the price of gold down by more than -2.5%. Prices dipped into the $1175 region but, as expected, buyers stepped in and pushed prices back above $1180. Day to day gold prices are still being driven by dollar strength and weakness but I remain bullish and a prospective buyer at these levels. My thoughts; an indication the Fed is going to be raising rates is dollar strong and bad for gold, the Fed actually raising the rates will be a sign of strengthening inflation and gold strong.

The gold miners ETF GDX fell a little over -2.25% today but was halted at the short term moving average. Today's drop is in response to the decline in gold prices as well as weaker than expected earnings from GoldCorp and a few of the junior miners. The index is now trading just above $20 and is still being squeezed between rising support and my resistance line at $20.50. Although earnings among the miners have been weaker than expected so far, as a group, they have been indicating an expectation of rising production levels into the end of the year.

The indicators are bullish and still consistent with support although they lack strength. The index still looks like it wants to break higher but I remain cautious while it remains within its narrowing range. I've got a close on eye on resistance as well as support which, for now, is along the short term moving average in the range between $19.50 and $20. Gold prices will of course be the deciding factor, if gold prices move lower future profits among the miners will remain flat at best.


In The News, Story Stocks and Earnings

GoldCorp reported increases in production and cash flow from the comparable period last year but lower earnings due to low realized prices for gold. This is up from $281 million reported last year. Earnings per share came in at $0.01 on an adjusted basis versus the $0.10 predicted by analysts. The company reported sales of 827,500 ounces of gold with cash flow totaling $366 million. All in sustained costs totaled $885 per ounce of gold and are expected to remain in a range between that number and $950 for the full year.

Positives within the report include lower cost and increasing production that is expected to deliver expected full year results. The company reiterated its full year production guidance and announced that several of their ongoing projects have reached commercial production status. The stock lost over -6% in today's session in a move that took it below the short term moving average. The stock is near the long term with indicators consistent with support. Near term support is around $18.50 with longer term support near my line just below $17.50.


Exxon-Mobil reported earnings much better than expected. The world's largest integrated oil company reported earnings of $1.17 versus the expected $0.80. This is still a 46% decline in earnings, not good, but when put in perspective of FactSet's expected decline for the sector (-65%), looks real good. Production for the quarter was up by 2.3% showing the positive addition of upstream projects and the potential for future profits. Shares of the stock responded positively after the news, rising nearly 1% before the market opened to gap open inside a resistance range between $88 and $89. The stock sold off from those levels during the day and closed with a loss near a half percent. The indicators are bullish but weak and losing strength so it looks like this could be a near term peak with possible downside target near $85.


Cardinal Health reported a top and bottom line beat in its earnings statement. The results were so good that company execs reaffirmed guidance in the upper half of the previously given range but the stock sold off anyway. The stock lost a little more than -5% in today's session and looks like it is going lower. The indicators are weak and support a further test of support with a possible target near $80 should the current level not hold.


Visa reported after the bell and beat on the top and bottom lines. The credit and payment processor produced earnings one penny above consensus. The beat was driven by a 7.8% increase in processing fees as card holders made more transactions. The news was not enough to support share prices however, sending the stock down by over 2% in after hours trading.


The Indices

The indices sold off today on a variety of reasons including the Fed, the economy and earnings. The FOMC meeting for one gave us little information beyond what we already knew leaving the market to ponder earnings, the economy and what they mean for the future. On top of that is end of month portfolio reshuffling and the question, “is it time to sell in May and go away”.

Today's move was led by the NASDAQ Composite index and a loss of -1.64%. The tech heavy index moved below the short term moving average and created a candle with wicks on both end suggestive of an active market. The indicators are rolling over and have now confirmed a near term peak. MACD momentum and stochastic are both forming bearish crossovers with today's action, indicative of weakness and possible further weakness, but also possibly leading to another trend following entry. The index may find support tomorrow but if not I now have a downside target near the long term trend line.


The next largest decline in today's session was in the Dow Jones Transportation Average. The Transports fell exactly -1.25% and are now testing support at the bottom of the 6 month range. The indicators are rolling over in indication of that weakness and could lead to a further test. A break below support, along my line near 8,600, would find additional support just below that level along the long term trend line near 8,500. Taking a step back from today's action and looking over the past 6 months it is becoming more and more clear that the index has been in a long term consolidation and return to trend. The trend is still up so I am still bullish but looking for confirmation.


The Dow Jones Industrial Average made the third largest decline today, -1.08%. Today's action took the blue chip index below the 18,000 mark and the short term moving average to tentatively find support near 17,750. The index is accompanied by weakening indicators suggestive of further testing of support. 17,750 may be prove to be support but it looks like stronger support is closer to 17,500 and then near 17,250. This index is still about 4% above its long term trend line which is down around 17,100-17,250 so has plenty of room to run without breaking trend.


The S&P 500 made the smallest decline, only -1.01%. Today's move broke the short term moving average and pierced the long term trend line. The indicators are rolling over and confirm near term weakness in the index. The index is likely to continue testing support along the trend line, which may be broken in the near term. Additional support is just below near 2,050 and a more critical level in terms of potential reversal. The long term trend is still up so until further developments I will be watching for entry points.


We may have begun the next correction but just how deep it may go is questionable. Some of the indices are well above their trend lines while others are already trading near or are testing them. This combination could mean today was the brunt of the move, or it is the precursor to another 3-5% decline. The trends are up so any decline that does occur is a potential buying opportunity.

Today's decline may be more of an unwinding of pre-FOMC positioning than the beginnings of a correction. It also may be due to sector rotations as traders move out of this quarters winners in anticipation of earnings growth in other sectors later this year. At the same time it is the end of the month which can add volatility for a number of reasons including aforementioned portfolio reshuffling and positioning ahead of the macro-economic data due out next week.

I'm still bullish, as hopeless as it may seem, because of labor trends and earnings expectations. Labor trends are good; they're building slowly but I think reaching a critical mass. Earnings expectations are also good, at least positive, for the broad market into the end of the year and will probably increase as we move into the summer. This combination makes it easy for me to think that the bull market is not over despite whatever correction may occur now.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Consistently Raising Guidance

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

The Greenbrier Cos. - GBX - close: 57.69 change: -0.05

Stop Loss: 54.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 683 thousand
Entry on April -- at $---.--
Listed on April 30, 2015
Time Frame: Exit PRIOR to June option expiration
New Positions: Yes, see below

Company Description

Why We Like It:
Currently shares of GBX are up +7.3% in 2015. That's after a -$10.00 drop from its April highs. I'm surprised shares aren't doing better as the earnings picture continues to improve. The recent pullback looks like an opportunity for bullish investors.

GBX is in the services sector. They manufacture and service railroad cars. According to the company, "Greenbrier, (www.gbrx.com), headquartered in Lake Oswego, Oregon, is a leading supplier of transportation equipment and services to the railroad industry. Greenbrier builds new railroad freight cars in our 4 manufacturing facilities in the U.S. and Mexico and marine barges at our U.S. manufacturing facility. Greenbrier also sells reconditioned wheel sets and provides wheel services at 9 locations throughout the U.S. We recondition, manufacture and sell railcar parts at 4 U.S. sites. Greenbrier is a 50/50 joint venture partner with Watco Companies, LLC in GBW Railcar Services, LLC, which repairs and refurbishes freight cars at 34 locations across North America, including 14 tank car repair and maintenance facilities certified by the Association of American Railroads. Greenbrier builds new railroad freight cars and refurbishes freight cars for the European market through our operations in Poland. Greenbrier owns approximately 8,300 railcars, and performs management services for approximately 241,000 railcars."

Looking at the last few quarterly reports from GBX the company tends to beat Wall Street's earnings estimates. Their Q4 2014 report, last October, was an exception. Yet GBX has still raised their guidance the last four earnings reports in a row. Their backlog of business is booming!

GBX's most recent report was April 7th. The company delivered their 2015 Q2 results with a profit of $1.57 per share. That was 37 cents better than analysts expected. Revenues were up +27% to $630 million, also above estimates. GBX said their aggregate gross margin improved from 17.8% to 19.9%. Their new railcar deliveries improved from 4,000 units in the prior quarter to 5,200 units. Their new railcar backlog is up to 46,000 units, valued at $4.78 billion.

GBX's Chairman and CEO William Furman commented on his company's results, "Our record results this quarter, including margin expansion and earnings growth, reflect the soundness of our diversified and integrated business model, improved business execution and greater scale. Our aggregate gross margin in the second quarter grew to 19.9%, nearly twice last year's level; at the same time we continue to execute on ramping up production on new manufacturing lines."

Furman also commented on their order growth, saying, "Our diverse new railcar backlog of 46,000 units represents the sixth consecutive quarter where the quantity and value of our backlog has increased. It is now more than triple the size of just one year ago, with production on certain production lines stretching into 2019. Nearly 80% of our year-to-date orders for 24,200 railcars are non-energy related, including orders for double stack intermodal cars, grain hopper cars, automotive carrying cars, non-energy related tank cars, boxcars, and mill gondola cars for scrap steel. These orders, along with others in our backlog, include multi-year orders for various car types, a positive indication that our customers believe, as do we, that end-user demand for new railcars will remain solid for the foreseeable future. The regulatory picture for tank cars transporting hazardous materials should be clarified no later than May. We expect Greenbrier's Tank Car of the Future will be the new standard, and that additional new car and retrofit orders will occur regardless of oil prices."

Furman pointed out that most of their new orders are for non-energy related cars. That's because the energy (i.e. oil production) business in the U.S. has been depressed given last year's slide in crude oil. Energy companies have been cutting back on spending. On the plus side, when the energy sector rebounds, it will be a bonus for GBX. The U.S. government is working on new requirements for oil-tanker railcars. When the government regulations on oil-tanker safety is finalized GBX will see a surge in orders for new tanker cars over the next few years.

GBX managed raised their guidance again. They now expected 2015 earnings in the $5.65-5.95 range versus Wall Street's estimate around $5.42. GBX also raised their sales guidance into the $2.6-2.7 billion zone versus analysts' estimates of $2.62 billion.

We don't see any catalyst for the recent pullback in GBX shares. It looks like a correction toward the stock's bullish trend of higher lows. If shares bounce it could fuel some short covering. The most recent data listed short interest at 33% of the small 22.3 million share float.

I will issue one caveat. The broader Dow Jones Transportation Average looks weak. While the story on GBX is bullish that doesn't mean shares will be able to resist a broader sell-off among the transport stocks. Traders may want to start with small positions considering the recent weakness in the transportation average.

Tonight we are suggesting a trigger to buy calls on GBX at $59.05. More conservative traders may want to wait for a breakout past the simple 200-dma (near $60.00) as an alternative entry point.

Trigger @ $59.05

- Suggested Positions -

Buy the JUN $60 CALL (GBX150619C60) current ask $2.25
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:



In Play Updates and Reviews

The Selling Accelerates

by James Brown

Click here to email James Brown

Editor's Note:

Investors seem to be growing more nervous as the market digests economic data and corporate earnings. The NASDAQ is down four days in a row while the S&P 500 and Russell 2000 are both down three out of the last four sessions.

Biotech stocks led the market lower. Plus, AAPL's relative weakness (-2.7%) did not help the major indices it is a component of (NASDAQ 100, Dow Jones Industrials, & S&P 500).


Current Portfolio:


CALL Play Updates

Apogee Enterprises - APOG - close: 52.62 change: -0.52

Stop Loss: 51.75
Target(s): To Be Determined
Current Option Gain/Loss: -30.9%
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:
04/30/15: APOG held up reasonably well. Shares slipped -0.9% versus the NASDAQ's -1.6% decline. The stock is consolidating sideways in the $52-54 zone.

I am not suggesting new positions at this time.

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: 100.28 change: -1.62

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:
04/30/15: The market's widespread decline today pulled GPN back toward round-number support at the $100.00 level. More conservative traders may want to inch their stop loss a little bit higher.

I am not suggesting new positions at this time.

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


Schlumberger Ltd. - SLB - close: 94.61 change: +0.33

Stop Loss: 91.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 8.75 million
Entry on April -- at $---.--
Listed on April 29, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
04/30/15: SLB displayed relative strength today with a +0.35% gain versus the broader market's weakness. Today is also another close above the 200-dma and a close above short-term resistance near $94.00. If this strength continues we could see SLB hit our suggested entry point at $95.25 tomorrow.

Trade Description: April 29, 2015:
It is finally time to buy energy stocks? It's starting to look that way. Crude oil prices were crushed with a -60% drop from June 2014 to January 2015. This has done significant damage to the oil industry in the U.S. and around the world. Companies have been trying to slash costs and shut down rigs. Yet crude oil production, especially in the U.S., has continued to climb.

U.S. oil inventories just rose for a record-breaking 16 weeks in a row. The good news is that the +1.9 million barrel build in inventory was less than expected. Inventories are at record highs and significantly above the five-year average. At the same time the number of active rigs has been plummeting.

Active rigs have dropped for a record 20 weeks in a row. The current total of active oil and gas rigs in the U.S. is 932. This is the lowest level since 2010. The number of active rigs peaked at 1,609 in October 2014 and this has been the fastest decline in history. We're quickly approaching the 2009 low of 866 active rigs.

Why do I bring up oil inventories and active rigs in the U.S.? Because eventually the trend on these two numbers will reverse. Sooner or later the oil inventory build will end and the number of active rigs will bottom. If trading in the oil service stocks is any indication then the market is banking on sooner instead of later.

The price of crude oil has already seen a +25% bounce off its March lows. We're starting to hear speculation that the action in crude over the last three months might be a bottom. There is also growing speculation that the decline in active rigs will reach a bottom in Q2 2015.

The stock market is always looking forward. It appears investors are looking past the current tough spot for oil producers and oil service companies. SLB is the world's largest oilfield services company.

According to the company, "Schlumberger is the world's leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry worldwide. Employing approximately 115,000 people representing over 140 nationalities and working in more than 85 countries, Schlumberger provides the industry's widest range of products and services from exploration through production. Schlumberger Limited has principal offices in Paris, Houston, London and The Hague, and reported revenues of $48.58 billion in 2014."

There was a lot of focus on SLB's most recent earnings report. SLB delivered its Q1 results on April 16th. Wall Street was expecting earnings of $0.91 a share on revenues of $10.35 billion. SLB delivered $1.06 a share with revenues down -8.8% to $10.25 billion. The difference from Q4 to Q1 is dramatic. SLB saw a -19% drop in revenues from Q4 and a -29% drop in earnings.

SLB's Chairman and CEO Paal Kibsgaard commented on his company's Q1 results, "Schlumberger first-quarter revenue decreased 19% sequentially driven by the severe decline in North American land activity and associated pricing pressure. International operations were impacted by reduced customer spend in addition to seasonal effects in the Northern Hemisphere and the fall in value of the Russian ruble and the Venezuelan bolivar. Three-quarters of the overall sequential decline was due to lower activity and pricing, while the remainder was the result of currency effects and non-recurring year-end sales."

Kibsgaard continued, saying, "Despite the severity of the sequential revenue decline, we have been able to minimize its impact on our margins through prompt and proactive cost management as well as through acceleration of our transformation program across product lines and GeoMarkets. These actions have successfully improved financial performance compared to previous industry cycles... In spite of the detailed preparations we made in the fourth quarter, the abruptness of the fall in activity, particularly in North America, required us to take additional actions during the quarter. These included the difficult decision to make a further reduction in our workforce of 11,000 employees, leading to a total reduction of about 15% compared to the peak of the third quarter of 2014."

Kibsgaard provided his outlook on their business, "In this environment, we remain confident in our ability to grow market share, deliver superior performance in earnings per share compared to industry peers, and reduce working capital and capex intensity. Our favorable international leverage, our technological differentiation in North America, the acceleration of our transformation program and our unmatched execution capabilities continue to provide the foundations for our financial and technical outperformance."

Wall Street analysts were very optimistic on SLB. They applauded the company's fast response to cutting cost and reducing their workforce so quickly to changing market conditions. Analysts believe that SLB will be able to maintain strong margins compared to their peer group and that earnings will likely come in better than most expect. Analysts have also commented on how SLB is essentially the best in class for this industry and will take market share from weaker competitors. Several firms upgraded their price targets on SLB following the Q1 report and the new targets are: $100, $105, $107, and $110. The point & figure chart is more optimistic and is currently forecasting a rally to $122.00.

Shares of SLB spiked higher following its Q1 report but the rally failed at its simple 200-dma. Since then the stock has been consolidating sideways and building up steam for a bullish breakout higher. It looks like that breakout has started with today's display of relative strength (+1.7%) and a close above technical resistance at its 200-dma. The intraday high on April 17th was $94.89. We are suggesting a trigger to buy calls at $95.25.

Trigger @ $95.25

- Suggested Positions -

Buy the AUG $100 CALL (SLB150821C100)

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


Splunk, Inc. - SPLK - close: 66.35 change: -1.58

Stop Loss: 63.85
Target(s): To Be Determined
Current Option Gain/Loss: -3.1%
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:
04/30/15: It was disappointing to see SPLK erase all of yesterday's gains. Shares underperformed with a -2.3% decline. On the plus side traders did buy the dip near $65.00 this afternoon.

Tonight we are moving the stop loss up to $63.85. 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

04/30/15 new stop @ 63.85
04/23/15 triggered @ 66.25
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 70.46 change: -0.51

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:
04/30/15: Good news - it looks like the bounce from $70.00 support in BBBY is already rolling over. Shares retreated from their intraday high. The stock could hit our suggested entry point at $69.75 tomorrow.

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: 45.57 change: +0.24

Stop Loss: 46.55
Target(s): To Be Determined
Current Option Gain/Loss: +7.9%
Average Daily Volume = 1.1 million
Entry on April 14 at $46.85
Listed on April 13, 2015
Time Frame: Exit PRIOR to May option expiration
New Positions: see below

Comments:
04/30/15: Hmm... shares of BIG outperformed the market with a +0.5% gain. I don't see any specific news behind the rally. Broken support at $46.00 should be new resistance.

Trade Description: April 13, 2015:
Momentum for this retail name is clearly rolling over. According to the company's latest press release, "Big Lots Inc. (BIG) is a unique, non-traditional discount retailer operating 1,460 Big Lots stores in 48 states with product assortments in the merchandise categories of Food, Consumables, Furniture & Home Decor, Seasonal, Soft Home, Hard Home, and Electronics & Accessories. Our vision is to be recognized for providing an outstanding shopping experience for our customers, valuing and developing our associates, and creating growth for our shareholders."

The company's earnings results have been mixed. The huge sell-off on December 5th was a reaction to its Q3 earnings. BIG lost $0.06 per share, which was worse than expected and revenues were essentially flat. The fourth quarter was significantly better with BIG delivering a profit of $1.76 per share compared to estimates of $1.75. Revenues were up +1.4% and were in-line with estimates of $1.59 billion. Comparable store sales were up to +2.9% in the fourth quarter.

Unfortunately, management guided lower for Q1 and the rest of their fiscal 2016. Their forecast of $2.75-2.90 in earnings is below Wall Street's $2.96 estimate. Comparable store sales are going to be in the low single digits. The company tried to soften the bad news by raising their dividend and adding to their stock buyback program.

The post-earnings rally didn't last. Shares of BIG have rolled over and now the path of least resistance is lower. The $46.00 level, along with the simple 200-dma, is potential support but we are expecting this weakness in BIG to accelerate. Tonight we are listing a trigger to buy puts at $46.85 with an initial stop loss at $50.05.

- Suggested Positions -

Long MAY $47.50 PUT (BIG150515P4750) entry $1.90

04/29/15 new stop @ 46.55
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: 73.16 change: -0.51

Stop Loss: 74.45
Target(s): To Be Determined
Current Option Gain/Loss: -7.8%
Average Daily Volume = n/a
Entry on April 16 at $74.25
Listed on April 15, 2015
Time Frame: 3 to 4 weeks, exit PRIOR to earnings in mid May
New Positions: see below

Comments:
04/30/15: Shares of OA were rebuffed twice at resistance near $74.00 today. A breakdown under $72.50 would be a new relative low and a potential entry point for bearish positions.

Bear in mind that this play may only last another two or three weeks. OA should report earnings in mid May. No date has been set yet.

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

04/29/15 new stop @ 74.45
04/27/15 new stop @ 75.25
04/16/15 triggered @ 74.25
Option Format: symbol-year-month-day-call-strike


PVH Corp. - PVH - close: 103.35 change: +0.46

Stop Loss: 105.25
Target(s): To Be Determined
Current Option Gain/Loss: -13.2%
Average Daily Volume = 1.2 million
Entry on April 29 at $102.65
Listed on April 28, 2015
Time Frame: Exit PRIOR to June option expiration
New Positions: see below

Comments:
04/30/15: It was surprising to see PVH showing relative strength today. The stock added +0.4% after churning sideways in the $102.50-104.00 range all day. Investors might want to wait for a new low under $102.00 before initiating new positions.

Trade Description: April 28, 2015:
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.

- Suggested Positions -

Long JUN $100 PUT (PVH150619P100) entry $3.40

04/29/15 triggered @ 102.65
Option Format: symbol-year-month-day-call-strike