Option Investor
Newsletter

Daily Newsletter, Thursday, 5/7/2015

Table of Contents

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

Market Wrap

The Yellen Entry?

by Thomas Hughes

Click here to email Thomas Hughes
Yesterday Janet Yellen spooked the market but today it bounced back, is this the Yellen entry?

Introduction

I have to say that I was pretty upset yesterday when Fed Chair Janet Yellen said the market was overvalued. Her comments led to a sharp sell-off in the equities market and a bounce back rally today. I understand that she and the Fed are trying to help us along but really, there are just too many Fed officials giving their opinions on a day to day basis causing unnecessary volatility. Yesterday was no exception, what did she really say.... stocks are overvalued but not really.

Global equity markets did not fare so well. Both Asian and European suffered big losses today. Asian indices closed near the lows of the day, European indices at least were able to recover enough to close near to break even. Futures trading here at home was also negative in the early part of the morning. The major indices were indicated to open about a half percent lower but this moderated after the mornings economic data was released.

Market Statistics

Futures remained weak going into the opening bell but the market was able to hold its head above water at least once the open session got underway. The indices bobbed along break even levels for the our or so of trading until making a decided move higher. Around 10:45 the SPX made a new high, about +4, and proceeded to advance from there. The other indices followed suit and moved up to hit the early high around 12:45. After that the market spent the rest of the day in churn mode, trading up and down in a tight range just below the daily high.

Economic Calendar

The Economy

The Challenger Gray & Christmas report on planned lay-offs was a little bit of a surprise. The number of planned lay-offs surged by 68% to a new 3 year high. The number of lay-offs planned jumped to 61,582 in April from the 36,594 announced in March. This is 53% higher than this same month last year which puts the number of lay-offs 25% higher on a year-to-date basis than the first four months of 2014. Contributing to the jump are the retail and energy sectors. The retailers are laying off at a slightly faster rate than last year but it is the energy sector that is mostly to blame.


When looking with the data the energy sector contributed over 20,000 job losses this month and account for 34% of the gains. Excluding the energy sector job losses are more in line with trends, about 40,000. To date there have been 68,285 job losses directly attributable to the declining price of oil which is well within the expectations. If you will recall I have in previous Wraps outlined how the expected number of energy related job losses are less than 1/10th of 1% of the entire US working population so not a major threat to the labor picture. Recent talk is that shale oil rigs may come back on-line now that prices have rebound. If that is true then the hemorrhage of jobs may stop or even reverse.

While reading the Challenger press release I stumbled across two other reports from the job out-placement resources company. These reports addressed the health of the younger end of the employment spectrum. According to these releases college graduates in the age group 20-24 face the best prospects for employment since the 2008 crisis, as do teens seeking employment. Economic trends as well as an increasing pace of retirements are two factors cited. The pace of retirements is leading to better opportunities for advancement as well as increased availability of entry level jobs for new employees.


Looking at the teens the numbers reveal that while the participation rate among those younger than 20 is declining, the number of people in that cohort who are working has increased. This increase is directly related to the size of the Millennial population in America, there are simply more teenagers now that there were 10 years ago.

The jobless claims numbers remain good. The pace of initial claims is low and trending lower, this week coming in at 265,000. This is a mild increase from last weeks unrevised 262,000. The four week moving average declined by 4,250 to hit a new 15 year low. Initial claims are often seen as a measure of labor turnover, which appears to be very low despite the jump in planned lay-offs. On a not adjusted basis claims fell by -6.0% versus the expected -6.9% predicted by the seasonal factors.


Continuing claims also fell this week, losing just over -28,000 to hit a new 15 year low. This is down from last weeks upwardly revised figure. Last week was adjusted up by 3,000 but remains a 15 year low. The four week moving average also fell to a new low. The total number of claims also fell, by -105,948. This is the 9th week of declines and the low since late November of last year. Total claims are now -17.5% from last year at this time and near the long term low.

Tomorrow the big data is going to be the NFP, unemployment and labor participation rates. NFP may not be as strong as the +200K currently predicted by the consensus but I expect to see unemployment and labor participation rates to remain steady of improve. The data, last month and so far this month, suggests that the pace of job creation slowed during the winter months but that the labor market remained healthy. Turnover is low and hiring is steady to strengthening with an eye on expected improvements to the labor market, and possibly the consumer, in the next few months.

The Oil Index

Oil prices fell today, more than -2%, with WTI falling back below $60. Today's drop is not related to any one headline that I could see but likely in response to the recent run up in prices. The run was driven on international fears and dubious signs of slackening supply. There is a little indication that crude supply in the US has leveled, but also the first whispers that shale oil producers could come back on line soon, because of higher oil prices. Using the USO oil ETF as a proxy it is easy to see that price is well above resistance with increasingly divergent indicators.

The oil sector sold off today as well. The Oil Index lost about -1.75% in a move that took the index below support and below the short term moving average. The indicators are not both moving lower and pointing to potentially lower prices. Next support target is about 30 points below today's close near the 1,350 level. A break below that could go as low as 1,300 or a little lower before meeting up with the long term trend line. The long term trend is up and earnings outlook into the short to long term is positive so I will be watching this pullback for potential entry point for bullish positions.


The Gold Index

Bond prices came out of nowhere to influence the gold trade. Yields on the 10 year have risen steadily over the past two weeks but are still below resistance levels seen earlier in the year. This may be due to the dollars decline which would otherwise have helped to support gold. In any event it is now going to be necessary to keep an eye on yields as well as the dollar in terms of near term movement of gold prices. Today gold prices traded in a volatile range that once again tested support near the $1180 level. Prices fell to support, at which time volatility set in, driving them up and down in a range just above $1180 into the close of today's session.

The gold miners traded lower today on the weakness in gold but bounced back in late day trading. The Gold Miners ETF GDX gained just over a half percent in a move that took it down to retest support along my rising support line. The ETF continues to wind up within the rapidly narrowing range with bias to the upside. The indicators are currently pointing lower but are very weak. They are consistent in the longer term with support in the range between the rising support line and resistance near $20.50, and in the shorter term with testing of support. I'm still watching for a confirmed break out of this range but bullish on the sector overall.


In The News, Story Stocks and Earnings

Randgold Resources reported earnings roughly in line with expectations. The miner, which operates primarily in Africa, reported a 5% increase in profits despite a slight drop in production. Lower production levels were down due to expected lower grades of ore which has led the company to ramp up its exploration activities. Exploration had a negative impact on this quarters results as well. Offsetting the increased cost of exploration was lower cost of production which fell to $708 per ounce. Shares of the stock lost -1.5% in today's session and fell below the short term moving average.


Priceline, the darling of the internet travel space, reported better than expected revenue and earnings for the first quarter but failed to impress investors. The company provided guidance well below consensus estimates and sent shares of the stock down more than 5%. Share price fell to test support near $1,200 where they made a small bounce. Prices were able to hold above the support line at $1,200 but not below the short term moving average. The indicators are very weak and pointing lower so a further test of support should be expected.


Alibaba beat revenue and earnings estimates, sending the stock shooting higher. Shares jumped more than 7% in the pre-opening session to trade just shy of the IPO price. Shares managed to hold on to most of the gains but sold of from the early peak. This level attracted sellers, perhaps early owners seeking to get out, and created a strong black candle just under resistance.


The Indices

Except for a brief dip in to the red following the start of today's session the indices were able to trade higher all day. Today's move was led by the Dow Jones Transportation Index which gained more than twice the amount of any of the other indices, about 1.13%. The transports bounced off the bottom of the 6 month trading range, forming a relatively but not overly strong candle halting just below the short term moving average.

The indicators are currently pointing lower, suggesting that support could be tested again. Support is currently between 8,500 and 8,600, consistent with the bottom of the consolidation range. The index has been in this range long enough for it to return to its long term trend line which it will reach in the next week or so, if it continues to bounce along the bottom of the range. I remain bullish longer term, but still wary of near term weakness and potential Fed induced volatility.


The next largest move was made by the NASDAQ Composite. The tech heavy index gained only 0.53%, less than half that of the transports. Today's move was halted by the short term moving average and accompanied by bearish indicators which suggest it may move lower again. The NFP is a big question right now and could easily spark a sell-off, regardless of the forward outlook, if it is below expectations. If the index does move lower support target is the long term trend line near 4,750 or 4,800.

There is some sign in the indicators that the index may have reached the peak of a near term bearish swing, MACD has flattened out and stochastic %K is oversold. If this is a near term peak and start of a swing higher the index will need to break resistance at the short term moving average, the 5,000 level, the previous all-time high and the current all-time which are clustered together just above the current levels.


The Dow Jones Industrial Average is also looking a little weak despite today's gains. The blue chip index rose 0.46% in today's session only to be halted by the shot term moving average and my resistance line marking the December 2014 all-time high. The indicators are consistent with support over the short to long term, in line with the long term trend, but are bearish in the near term. MACD and stochastic are both pointing to a further test of support, along 17,750, but are weak at best. Momentum is very weak and stochastic indicates a market that is supported, but without strong direction.


The S&P 500 made the smallest gains today, only 0.38%. The broad market continued its bounce back from yesterday's low but failed to regain the upper side of the long term trend line. This is not enough to reverse my overall bullish stance but it does raise my caution levels. The indicators are similar to the other indices; they are weak and bearish in the near term, but consistent with a potential near term peak and onset of a trend following swing. The trend line will have to be watched closely, especially tomorrow, because a failure to break back above it could lead to technical selling.


The indices were able to bounce back from yesterday's sell-off. The Yellen comments and the fear they inspired proved to be short lived, at least for now. I think it safe to say that we can expect more of this type of comment from her and the Fed up to and until they do actually raise interest rates, whenever that is. Until then we need to keep our eyes on the trends.

The labor data this week has so far been on the weak side but still well within trend. Jobs are still being created, much more than are being lost, turnover remains low and longer term unemployment is in decline. So long as this continues I think we can expect a slow, steady improvement in the economy, the consumer and corporate earnings.

Speaking of earnings the earnings season is much better than expected. It is very likely that we will not see earnings decline this quarter and if we do it will be well below the -4.8% predicted as the season was beginning. The expectations for future earnings growth are still strong and that, along with economic trends, are what I am keeping my attention focused on. Where we go tomorrow is not clear but I remain bullish longer term and aiming to use any correction, or break of resistance, as a buying op.

A final thought. Tomorrow's NFP number carries a lot of meanings. It can mean economic strength, it can mean economic weakness. It can mean an early rate hike, it can mean a later hike. With so much nuance in the meaning it isn't hard to make a bullish case no matter which way the wind blows. If its a good number then the economy is on track and we can expect things to keep getting better. If it is a bad number and shows declining economic momentum it could mean the FOMC will keep rates where they are for a while in bad-news-is-good-news type of scenario.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Cloud Computing + Cyber Security

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

F5 Networks - FFIV - close: 124.43 change: +1.45

Stop Loss: 121.40
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.2 million
Entry on May -- at $---.--
Listed on May 07, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
It has become a hostile world for corporations and their biggest weakness is online security. It feels like every day we hear about another company getting hacked. In recent years there have been a number of high-profile hacking attacks like Target (TGT), Home Depot (HD), and Sony (SNE). Fortunately for FFIV all of this plays to their strength as more corporations seek to beef up their cyber security.

According to company marketing, "F5 provides solutions for an application world. F5 helps organizations seamlessly scale cloud, data center, and software defined networking (SDN) deployments to successfully deliver applications to anyone, anywhere, at any time. F5 solutions broaden the reach of IT through an open, extensible framework and a rich partner ecosystem of leading technology and data center orchestration vendors. This approach lets customers pursue the infrastructure model that best fits their needs over time. The world's largest businesses, service providers, government entities, and consumer brands rely on F5 to stay ahead of cloud, security, and mobility trends."

After strong earnings and sales growth in 2014 the company hiccupped in Q1 2015 (which was the last quarter of 2014). FFIV beat estimates on the bottom line but management guided lower for Q2. You can see how the market reacted to this news with the big gap down in mid January.

Their most recent earnings report was April 22nd. FFIV reported their 2015 Q2 results of $1.59 per share. That was nine cents better than expected. Revenues were up +12.4% to $472.1 million, just above estimates. Wall Street's biggest concerns following these results are the impact of currency headwinds (thanks to the strong dollar) and FFIV's falling revenue growth. They're still growing but momentum seems to be slowing a bit.

The stock rallied on its earnings news and burst through major resistance near $120 and several key moving averages. The last couple of weeks have looked like a consolidation period where FFIV digested its post-earnings pop. Now FFIV is poised for the next leg higher. The point & figure chart is very bullish and forecasting a long-term target of $193.00. Tonight we're suggesting a trigger to buy calls at $125.15.

Trigger @ $125.15

- Suggested Positions -

Buy the JUL $130 CALL (FFIV150717C130) 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:



In Play Updates and Reviews

Bouncing Ahead Of The Jobs Number

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market bounced on Thursday, ending a two-day decline. Asian markets were down while Europe was mixed. Investors will be focused on the jobs number out tomorrow morning. Current estimates are for +224,000 jobs in April with the unemployment rate slipping to 5.4%.

GBX hit our new stop loss.


Current Portfolio:


CALL Play Updates

Apogee Enterprises - APOG - close: 53.80 change: +0.35

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:
05/07/15: Once again APOG tried to breakout past resistance near $55.00. The rally failed but shares still managed a +0.65% gain.

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: 86.43 change: -0.56

Stop Loss: 83.85
Target(s): To Be Determined
Current Option Gain/Loss: -28.0%
Average Daily Volume = 6.2 million
Entry on May 05 at $88.10
Listed on May 02, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/07/15: Hmm... is the rally in CAT over? The stock failed at resistance near $88.00 for five out of six sessions. Now the stock is underperformer the broader market with a -0.64% decline and a close its 10-dma.

I am not suggesting new positions at this time.

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.

- Suggested Positions -

Long JUL $90 CALL (CAT150717C90) entry $2.00

05/05/15 triggered @ 88.10
Option Format: symbol-year-month-day-call-strike


Global Payments Inc. - GPN - close: 101.36 change: +0.07

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:
05/07/15: GPN is working on its third week in a row for consolidating sideways in 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


Northern Trust Corp. - NTRS - close: 74.64 change: +0.41

Stop Loss: 71.75
Target(s): To Be Determined
Current Option Gain/Loss: -16.3%
Average Daily Volume = 1.1 million
Entry on May 05 at $75.05
Listed on May 04, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/07/15: NTRS bounced right on cue today. If you're looking for a new entry point then consider waiting for a rally past $75.00.

Trade Description: May 4, 2015:
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.

- Suggested Positions -

Long JUL $75 CALL (NTRS150717C75) entry $2.15

05/05/15 triggered @ 75.05
Option Format: symbol-year-month-day-call-strike


Omincare Inc. - OCR - close: 90.14 change: -0.33

Stop Loss: 86.95
Target(s): To Be Determined
Current Option Gain/Loss: -10.1%
Average Daily Volume = 921 thousand
Entry on May 06 at $90.35
Listed on May 05, 2015
Time Frame: Exit prior to June option expiration
New Positions: see below

Comments:
05/07/15: OCR experienced some volatility this morning with multiple one-dollar swings. Shares hit new all-time highs but eventually retreated to a minor loss (-0.3%).

Technically today's session has created a bearish engulfing candlestick reversal pattern. I would wait to see OCR bounce near $90.00 before considering new positions.

Trade Description: May 5, 2015:
Wall Street loves mergers and acquisitions. OCR has put itself up for sale.

OCR is in the healthcare sector. According to the company, "Omnicare, Inc., a Fortune 500 company based in Cincinnati, Ohio, provides comprehensive pharmaceutical services to patients and providers across the United States. As the market-leader in professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other chronic care institutions, Omnicare leverages its unparalleled clinical insight into the geriatric market along with some of the industry's most innovative technological capabilities to the benefit of its long-term care customers. Omnicare also provides specialty pharmacy and key commercialization services for the bio-pharmaceutical industry through its Specialty Care Group."

Most of OCR's sales are in the long-term care group. This business essentially helps nursing homes with their resident's medications and dispensed more than 110 million prescriptions last year.

The company has been a consistent earnings producer. OCR has beaten Wall Street's estimates on both the top and bottom line the last four quarters in a row. Their most recent report was April 29th. OCR announced its 2015 Q1 results with earnings up +12% from a year ago at $1.02 per share. Revenues were up +5.7% to $1.66 billion. The company is forecasting 2015 earnings in the $4.08-4.16 per share range with sales in the $6.50-6.70 billion zone.

Currently the spark behind OCR's surge to new highs is M&A speculation. Around April 21st it was disclosed that OCR was exploring a sale of the company. Potential bidders include Cardinal Health (CAH), CVS, Express Scripts (ESRX), McKesson (MCK), and Walgreens Boots Alliance (WBA). Initial bids are expected in May. One analyst has estimated the company could go for $101.00 per share. It's important to note that there is no guarantee OCR will reach a deal and none of the potential bidders are talking to reporters.

Technically shares of OCR have been showing relative strength. At the moment OCR is on the verge of breaking out past resistance near $90-91. Tonight we're suggesting a trigger to buy calls at $90.35. More conservative traders may want to use a trigger closer to $91.00. The stock has been volatile since it was discovered the company is for sale. Investors may want to use small positions to limit risk.

- Suggested Positions -

Long JUN $95 CALL (OCR150619C95) entry $2.28

05/06/15 triggered @ 90.35
Option Format: symbol-year-month-day-call-strike


Snap-on Inc. - SNA - close: 153.85 change: +0.90

Stop Loss: 149.40
Target(s): To Be Determined
Current Option Gain/Loss: -5.9%
Average Daily Volume = 346 thousand
Entry on May 07 at $153.50
Listed on May 06, 2015
Time Frame: exit PRIOR to June option expiration
New Positions: see below

Comments:
05/07/15: The rally in SNA continues and shares hit our suggested entry point to buy calls at $153.50. We would still consider new positions at current levels.

Trade Description: May 6, 2015:
Steady earnings growth, a consistent dividend, and a positive outlook are three things investors like to see. SNA delivers on all three counts. The company is in the industrial goods sector.

According to the company, "Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. Snap-on also derives income from various financing programs to facilitate the sales of its products. Products and services are sold through the company’s franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.3 billion, S&P 500 company headquartered in Kenosha, Wisconsin."

SNA has been consistently beating analysts expectations. Prior to their Q1 report the company was delivering results above estimates on both the top and bottom line. That changed with the April 23rd announcement of its Q1 results. Earnings rose +15.4% from a year ago to $1.87 per share. This was above Wall Street estimates and the eight consecutive quarter in a row that SNA has beaten analysts' expectations. Unfortunately, revenues only rose +5.1% to $827.8 million and that missed estimates of $834.4 million.

The market's didn't seem to care. Shares of SNA rallied anyway in spite of the earnings miss. Management said their Q1 2015 saw strong organic growth in sales of +9.9%. One analyst raised their price target on SNA to $180 per share. The point & figure chart is even more optimistic and forecasting at $191 target.

SNA has also announced another dividend. Here's a quick excerpt from the company press release, SNA has declared a "quarterly common stock dividend of $0.53 per share payable June 10, 2015 to shareholders of record on May 20, 2015. Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939."

Technically shares of SNA look bullish with a strong pattern of higher lows. It's currently poised to breakthrough short-term resistance near $153.25 soon. We are suggesting at rigger to buy calls at $153.50.

- Suggested Positions -

Long JUN $155 CALL (SNA150619C155) entry $2.55

05/07/15 triggered @ 153.50
Option Format: symbol-year-month-day-call-strike


Splunk, Inc. - SPLK - close: 66.59 change: +0.53

Stop Loss: 63.85
Target(s): To Be Determined
Current Option Gain/Loss: -5.3%
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:
05/07/15: SPLK looks a little bit healthier today. Shares managed to outpace the broader market with a +0.8% gain. However, SPLK still has a very short-term bearish trend of lower highs. I suggest we wait for a rally past today's high (67.38) before considering new positions.

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: 70.60 change: +0.11

Stop Loss: 72.20
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.3 million
Entry on May -- at $---.--
Listed on May 06, 2015
Time Frame: exit PRIOR to June option expiration
New Positions: Yes, see below

Comments:
05/07/15: BBBY produced another bounce near support at $70.00. It's worth noting that the bounce didn't make it very far and BBBY underperformed the market with a +0.15% gain.

Trade Description: May 6, 2015:
We are bringing BBBY back as a put candidate. Here is our recent trade description with a new entry trigger:

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. The point & figure chart is bearish and forecasting at $64.00 target. Shares recently bounced near support at $70.00 and its simple 200-dma but that bounced has failed at its trend of lower highs. Now BBBY is threatening to break key support at $70.00 again. We want to be ready when it does. Tonight I am suggesting at trigger to buy puts at $69.70. We'll try and limit our risk with a stop loss at $72.20.

Trigger @ $69.70

- 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




CLOSED BULLISH PLAYS

The Greenbrier Cos. - GBX - close: 63.25 change: +0.05

Stop Loss: 61.65
Target(s): To Be Determined
Current Option Gain/Loss: +32.1%
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:
05/07/15: GBX was underperforming the market this morning. Shares dipped to $61.59 before reversing course midday. The stock ended back in positive territory. Unfortunately the morning weakness was enough to tag our new stop loss at $61.65.

- Suggested Positions -

JUN $60 CALL (GBX150619C60) entry $2.90 exit $3.70 (+32.1%)

05/07/15 stopped
05/06/15 new stop @ 61.65
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

chart: