Option Investor
Newsletter

Daily Newsletter, Monday, 5/4/2015

Table of Contents

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

Market Wrap

The Bulls Are Still Trying

by Thomas Hughes

Click here to email Thomas Hughes
The bulls are trying to move the market higher while we wait on more economic data.

Introduction

The bulls were out today, if not in force. The markets moved higher with many of the indices trying to set new highs but volumes were muted, perhaps due to the economic storm scheduled for this week. This is the first full week of May so we are expecting a long list of macro-economic releases later this week including but not limited to the NFP report. Today there was only one major release, Factory Orders, and it was better than expected.

The early pre-opening session was dominated by news from Asia and Europe. A mixed set of PMI readings sent indices higher in both regions, if for different reasons. In China the final reading for HSBC's PMI fell to 48.9. This is down from the flash and official government readings which were both just above 50. This is the second month of weak readings for the country and spurred speculation of increased QE, sending stocks higher. In Germany PMI rose to 52, slightly ahead of expectations, aiding outlook and hopes of rebound, also sending stocks higher.

Market Statistics

Futures trading was positive in early electronic trading. The indices were indicated only marginally higher but this held throughout the morning. The indices moved higher when the opening bell sounded and the bulls took charge from there, driving them up by roughly a half percent. They hit resistance just after 10AM, the SPX at the all time high, and then drifted sideways until the close. Action was light today and could have been influenced by holiday's in Japan and England, another big week of earnings reports as well as the upcoming labor data due out later this week.

Economic Calendar

The Economy

Only one economic release today although there are about 2 dozen scheduled for the week. Today we received factory orders which rose by a slightly better than expected 2.1%. The bad news is that last month was revised down to -0.1% from 0.2%. Ex-auto's orders remained unchanged from last month, but there was a significant downward revision to last month as well. Depending on how you look at it the glass is either half-full or half-empty; there is weakness in the trailing numbers but the current number shows orders rebounding into the spring season.

According to Moody's Survey Of Business Confidence business sentiment slipped a bit this week but remains near the all-time high. The index fell by 0.9 to 44.6 from last weeks high of 45.5. According to Mark Zandi, Moody's chief economist,

“Confidence is especially strong in the U.S., where hiring and investment spending are robust. Credit is also freely flowing. Pricing is sturdy, despite heightened deflation concerns in much of the world, and sales are healthy”

I like the part where he says "hiring and investment spending are robust".


According to FactSet the blended rate for earnings growth in S&P 500 companies is now -0.4%. This is more than 4% better than the -4.8% predicted as the season was getting underway. So far 360 companies have reported earnings with 71% reporting better than expected earnings (average) and 46% reporting better than expected revenue (below average). At the current rate of pace the blended rate is very likely to be above 0% as early as next week, reversing expectations for overall earnings decline in the first quarter. Ex-energy, earnings growth is also much better than expected, 3.1%. This is 2% ahead of expectations at the beginning of the reporting season.

Analysts still expect to see earnings decline in the 2nd quarter but I think this view may change in the coming weeks due to economic trends and expanding margins. Full year growth is still sub 2% but expands to 12.5% in 2016.

Economic reports due out later this week include trade balance, ISM, wholesale inventories and a host of labor data. ADP is on Wednesday morning, Challenger and jobless claims on Thursday and then NFP and unemployment on Friday. Also on tap are unit labor costs, average workweek, participation rate and hourly earnings. There may be bad one-off numbers in individual reports but I expect to see signs of stable labor markets and maybe even a hint of wage/earnings inflation.

The Oil Index

Oil closed with a slight loss today after initially trading higher. WTI closed just below $59 after briefly surging to above $59.50 during the morning hours. The drop occurred shortly after news the Saudis were going to halt their air attacks of Yemen based rebels and alleviating, if only for a short time, some of the fear premium built into the market. There are also more signs that storage levels have stabilized at the Cushing facility but there is still no sign of demand picking up. Also, since Exxon reported increased production in the first quarter I don't really see the fracking slow-down having as much impact as some analysts say so supply could remain high even if storage levels top out.

The Oil index traded near the recent high but is still showing signs of falling from resistance. The index has been trying to move above 1,435 for almost 3 weeks and has failed every time. The indicators have peaked during that time and have now turned bearish. The index looks like it will move lower from here, with a first target near 1,400 and the short term moving average.


The Gold Index

Gold prices climbed nearly 1.25% in today's session as buyers once again step in around the $1180 support zone. Today's move was also supported by slightly weaker dollar value. The metal continues to be influenced in the near term by currency fluctuations and economic data with the longer term outlook based on the FOMC rate hike time line.

The gold miners ETF GDX gained today as well, adding about a half percent. The index is near $20.50 and still struggling with resistance. Today's price action created a small gap to the upside, opening the day's trade above resistance, but was not able to hold the high. The candle is a weak spinning top type so not a strong signal in terms of potential reversal. The index may test support along the short term moving average but I am still bullish longer term. Support, which looks strong at this time, is rising in line with the Nov/Dec 2014 and March 2105 troughs and appears to be pushing price up against resistance. A break above $20.50 would be very bullish in my opinion and could take the index to $22.50 or higher in the near to short term. The indicators are weak but bullish and consistent with a rising market.


In The News, Story Stocks and Earnings

Sysco, not Cisco, reported earnings slightly below estimates. The nations would-be largest food distributor reported adjusted earnings of $0.40, one cent below consensus. According to the release sales were up by 4.2% but profits only rose by 3.1% due to increased “food inflation”. Food costs for the company increased 3.7%, mainly in the meat and poultry category. My first though after reading that was to wonder if this is the first signs of the impact of bird flu in the mid-west. In any event the stock lost over -1% in the pre-opening session, traded back up to resistance during the day and then sold off to set a new low. Today's price action occurred below and tested the resistance level set two years ago when the proposed purchase of US Foods was announced; that deal was nixed by regulators but being fought by Sysco.


The bird-flu problem, mostly in the egg laying population of hens, brings to mind Cal-Maine. Cal-Maine is one of if not the single largest producer/shipper of shell eggs in the country. The company reported a near 18% in quarterly profits just a few days ago and doesn't appear to be hurting from the epidemic just yet. The company's CEO says that they are seeing strong demand across all segments of their business despite record high levels of hens in the national flock. The stock gained 12.5% on the news to reach a 7 month high but fell today, losing nearly 3%. Price appears to have hit resistance and may retreat back to the short term moving average.


Texas Roadhouse reported after the bell and satisfied its buyers. The company reported a 23% increase in EPS on the back of an 8.9% increase in comp store sales that blew away the analysts estimates. The company also reported the opening of 3 new stores which will positively affect earnings moving forward. The one negative was a decline in net margin, due to rising commodity (beef) costs, but this was offset by the increase in traffic. The stock, which had been trading lower during the open session, gained more than 5% in the after hours session.


Anadarko Petroleum reported after the bell and did not beat expectations. The exploration and production company reported a net loss much wider than expected on revenues well below forecast. The results are a big disappointment in light of the company reaching record sales volume for the quarter. One positive is that the company was able to lower costs which will help it return to profitability later in the year. The company also raised production guidance for the full year, another plus in terms of potential profitability. The stock had been trading lower in the open session and fell further in after-hours trading. The stock appears to be making a near term double top confirmed by bearish crossovers in both indicators. First down side target is the short term 30 day moving average with additional targets near $85 and $80 if the EMA doesn't hold. Resistance is just above today's closing price near $95.


The Indices

The bulls were out today. They weren't strong but they were steady and held their ground. The indices moved higher from the start and were able to hold positive ground all day. The indices all held fairly tight ranges and closed within hundredths of a percent of each other. The biggest move was the SPX which rose 0.29%. The broad market moved up to test resistance at the all-time high but was not able to move higher. The move began above the top of my triangle/pennant pattern which may provide support into the coming days. The indicators are weak and mixed but still consistent with support along the long term trend line so I would look for buying opportunities with any declines.


The next largest move was in the Dow Jones Industrial Average. The blue chips made a gain of 0.26% and are also testing resistance although on this index resistance is slightly below the current all time high. The indicators are weak and have turned bearish but at this time are consistent with support. Support is just below the current level, near 18,000 and confirmed by the short term moving average.


The NASDAQ Composite gained 0.23% in today's session to create a very tiny doji candle caught between rising support and the resistance of the previous all-time high. It is not surprising that the previous all-time high is affecting price action but I think by now any resistance there is purely psychological. The index has been trending higher, confirmed by the moving average, and is setting up for a possible trend following signal. The indicators have recently turned bearish but are, at this time, consistent with a near term bearish swing during a longer term up trend and not suggestive of imminent reversal.


The Dow Jones Transportation Average brings up the rear. The transports rose only 0.16% and created a possible shooting star doji with upper shadow crossing the short term moving average. This signal looks bearish but may only be near term in nature based on other factors. The index is trading along the bottom of a long term trading range with indicators confirming support along that level, 8,500. The index has been consolidating within this range long enough to return to trend with the long term trend line adding support just below the bottom of the trading range. The indicators are showing some near term weakness but confirm support so appear to be in a bearish swing rather than full reversal. The index could continue to move sideways within this range, 8500-9250, and/or test support again until a clear direction in earnings growth is established.


The market has digested the FOMC meeting without a hiccup, has gotten over its fear of earnings decline and is now re-focusing on the data. So far data trends are positive and leading the market higher. There are a lot of possible market moving releases scheduled for the week but the NFP remains top on the list. Regardless of what that number is it will be the bigger picture that matters. So long as labor remains steady and the consumer continues to heal I think the bull market will continue.

Until the data is released the market could continue to trend sideways, either testing resistance or bumping along support. Of course, there is still earnings to consider. Most of the important names have reported already but there are still quite a few left and this is a big week for reports. There are 88 S&P 500 companies reporting this week so there is a chance for positive surprises to lift the market to a new high even before the data is released.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Outperforming Its Peers

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Northern Trust Corp. - NTRS - close: 74.55 change: +0.85

Stop Loss: 71.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.1 million
Entry on May -- at $---.--
Listed on May 04, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
NTRS has been around for 125 years. The company looks pretty good for its age. Shares are outperforming the broader market and its peers. Currently NTRS is up +10% in 2015 versus a -0.6% decline in the financial sector.

According to the company, "Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has offices in the United States in 19 states and Washington, D.C., and 20 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2015, Northern Trust had assets under custody of US$6.1 trillion, and assets under management of US$960.1 billion. For 125 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation."

The last couple of earnings reports have been healthy. Their Q4 report in January came in better than expected on both the top and bottom line. NTRS' most recent report was its 2015 Q1 results on April 21st. Wall Street was looking for a profit of $0.87 a share on revenues of $1.12 billion. NTRS said their earnings rose +25% from a year ago to $0.94 and revenues were up +9.0% to $1.13 billion.

NTRS' Chairman and CEO Frederick Waddell commented on his company's performance, "We are pleased with our financial performance in the first quarter of 2015, which reflects continued growth in our business serving personal and institutional clients. Trust, investment and other servicing fees, which represent two-thirds of our revenue, increased 7% compared to last year. New business and higher equity markets contributed to growth in assets under custody and under management of 6% and 5%, respectively. Total revenue grew 9% and we maintained a disciplined focus on expenses, which increased 3%, producing meaningful operating leverage. As a result, our pre-tax profit margin improved to 31.2% in the first quarter and our return on equity was within our target range of 10-15%. We also look forward to returning capital to our stockholders in the year ahead as the Federal Reserve did not object to the proposed capital actions in our 2015 Capital Plan. Our Capital Plan and proposed capital distributions demonstrate the strength of Northern Trust's focused business model, financial position and commitment to stockholders."

Shares of NTRS popped to new multi-year highs on its Q1 report. Instead of giving back its gains the stock has been able to consolidate at these highs. Shares displayed relative strength again with today's +1.1% gain. Today's move is also a bullish breakout past resistance near $74.00. The point & figure chart is bullish and forecasting a long-term target of $86.00. Tonight we're suggesting a trigger to buy calls at $75.05.

Trigger @ $75.05

- Suggested Positions -

Buy the JUL $75 CALL (NTRS150717C75) current ask $1.90
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

Markets Drift Higher Thanks To Overseas Gains

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market's bounce from Friday continued into this week. Stocks may have gotten a boost thanks to widespread gains overseas in Asia and Europe. The S&P 500 is only about four points away from a new record, closing high.

SLB has been removed. BIG and PVH hit our stop loss.


Current Portfolio:


CALL Play Updates

Apogee Enterprises - APOG - close: 53.83 change: -0.59

Stop Loss: 51.75
Target(s): To Be Determined
Current Option Gain/Loss: -9.1%
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:
05/04/15: APOG spiked to a new high and traded above resistance near $55.00 this morning. Sadly the rally didn't last and shares quickly reversed. APOG eventually underperformed the market with a -1.0% decline.

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


Caterpillar Inc. - CAT - close: 87.30 change: -0.07

Stop Loss: 83.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 6.2 million
Entry on May -- at $---.--
Listed on May 02, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
05/04/15: CAT delivered a quiet session. The early morning rally attempt failed at resistance near $88.00. Shares spent the rest of the day in a very narrow range. There is no change from the new play description. Our suggested entry point is $88.10.

Trade Description: May 2, 2015:
Have shares of CAT found a bottom? It's starting to look that way. CAT is still down -21% from its 2014 highs but it's up +12% from its Q1 lows with a steady trend of higher lows as traders buy the dips.

CAT is in the industrial goods sector. According to the company, "For 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2014 sales and revenues of $55.184 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three product segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment."

Earnings results and guidance has been a moving target for CAT. The combination of a slowing global economy, volatile currency fluctuations, and weakness in commodities have generated big swings in their business. In July 2014 CAT lowered guidance. Three months later they raised guidance. The next quarter they lowered guidance. Today the company has raised guidance again.

CAT's most recent earnings report was April 23rd. They announced a Q1 profit of $1.72 a share. That was +16% higher than a year ago and almost +40% above Wall Street estimates. Revenues fell -4% from a year ago but sales of $12.7 billion were still above analysts' expectations.

CAT's Q1 results were all about North America, which saw gains almost across the board. Overall construction sales for CAT in North America were up +9% from a year ago. Unfortunately, this was overshadowed by declines everywhere else. Asia, Europe, Latin America - just about every other region CAT does business saw double-digit sales declines. Yet it appears that investors seem to be willing to look past this weakness.

CAT's CEO commented on their 2015 outlook, "We had a solid first quarter, which led to raising the profit outlook for 2015. However, we continue to face headwinds and uncertainty in 2015, and our outlook for the year reflects that. We expect sales and profit in each of the remaining three quarters of 2015 to be lower than the first quarter. We expect sales for oil applications to decline starting in the second quarter, and from a profit perspective, the first quarter included the gain on the sale of our remaining interest in the logistics business and that won't repeat. The first quarter is usually the most seasonally favorable of the year for costs, and we don't expect the rest of the year to be as favorable."

Most of the major oil and gas companies have reduced their capex spending plans for 2015 and this should be negative for CAT. The stock's reaction is suggesting all the bad news is already priced in.

CAT's management raised their 2015 guidance and adjusted their estimate from $4.65 to $4.75, excluding their restructuring costs they raised their estimate from $4.75 to $5.00. Wall Street's estimate was $4.75 per share. CAT reaffirmed their sales estimate for $50 billion this year.

A couple of analysts with Stifel are bullish on CAT. They believe the combination of the company's big stock buy back program (about $10 billion), a strong dividend (more than 3%), and a healthy North American construction market will buoy CAT's stock while investors wait for a turnaround in commodities.

Technically the stock has been showing relative strength the last few weeks. The point & figure chart has turned bullish and is currently forecasting a long-term target of $108.00. Today CAT is hovering below potential resistance near $88.00. We are suggesting a trigger to buy calls at $88.10.

Trigger @ $88.10

- Suggested Positions -

Buy the JUL $90 CALL (CAT150717C90)

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


The Greenbrier Cos. - GBX - close: 63.42 change: +1.09

Stop Loss: 54.85
Target(s): To Be Determined
Current Option Gain/Loss: +64.3%
Average Daily Volume = 683 thousand
Entry on May 01 at $59.05
Listed on April 30, 2015
Time Frame: Exit PRIOR to June option expiration
New Positions: see below

Comments:
05/04/15: Friday's momentum carried over into Monday's session and GBX added another +1.74%. The stock is near previous resistance in the $66.00 area.

I am not suggesting new positions at this time.

Trade Description: April 30, 2015:
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.

- Suggested Positions -

Long JUN $60 CALL (GBX150619C60) entry $2.90

05/01/15 triggered @ 59.05
05/01/15 U.S. DOT announces new rules on railroad tanker cars
Option Format: symbol-year-month-day-call-strike


Global Payments Inc. - GPN - close: 100.92 change: -0.15

Stop Loss: 98.25
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
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:
05/04/15: GPN is still drifting sideways inside the $100-102 zone. I am suggesting traders wait for a rally past $102.50 before considering new positions.

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

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

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

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

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

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

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

- Suggested Positions -

Long AUG $105 CALL (GPN150821C105) entry $2.85

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


Splunk, Inc. - SPLK - close: 67.17 change: +0.46

Stop Loss: 63.85
Target(s): To Be Determined
Current Option Gain/Loss: +5.7%
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:
05/04/15: SPLK managed to outpace the broader market with a +0.68% gain. Shares did seem to find resistance near the $68.00 level intraday. It would appear that SPLK is on the verge of breaking out from its recent sideways consolidation over the last few days.

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


Currently we do not have any active put trades.




CLOSED BULLISH PLAYS

Schlumberger Ltd. - SLB - close: 92.98 change: -0.02

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: see below

Comments:
05/04/15: SLB underperformed the market for a second day in a row. The story on SLB hasn't changed but shares are not cooperating. We are removing this stock as an active candidate. However, I would keep it on your watch list for a breakout past resistance near $95.00.

Trade did not open.

05/04/15 removed from the newsletter, suggested trigger was $95.25

chart:


CLOSED BEARISH PLAYS

Big Lots Inc. - BIG - close: 46.68 change: +0.55

Stop Loss: 46.55
Target(s): To Be Determined
Current Option Gain/Loss: -26.3%
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:
05/04/15: The bounce in BIG continued with shares up a third day in a row. The stock hit our stop loss at $46.55.

- Suggested Positions -

MAY $47.50 PUT (BIG150515P4750) entry $1.90 exit $1.40 (-26.3%)

05/04/15 stopped out
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

chart:


PVH Corp. - PVH - close: 105.65 change: +1.76

Stop Loss: 105.25
Target(s): To Be Determined
Current Option Gain/Loss: -33.8%
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:
05/04/15: Like BIG, shares of PVH outperformed the broader market with a continuation of last week's bounce. PVH rallied past what should have been resistance near $105.00 today. Our stop was hit at $105.25.

- Suggested Positions -

JUN $100 PUT (PVH150619P100) entry $3.40 exit $2.25 (-33.8%)

05/04/15 stopped out
04/29/15 triggered @ 102.65
Option Format: symbol-year-month-day-call-strike

chart: