Option Investor
Newsletter

Daily Newsletter, Monday, 5/11/2015

Table of Contents

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

Market Wrap

Still No Follow Through

by Thomas Hughes

Click here to email Thomas Hughes
The bulls tried to hang on to last Friday's gains but were just not able to do it.

Introduction

There were no official economic reports and very little in the way of earnings to move the market today. There was some news on an international level but it did not appear to have a serious impact on today's trading. In Asia the People's Bank of China made a surprise move to lower its key interest rate by 25 basis points. In Europe the Greece debacle wears on; Greece appears to be avoiding default on its IMF payment but it is still far from being out of the woods.

Market Statistics

Futures trading indicated a mixed day of trading right from the start. There was some fluctuation in prices during the early pre-market session but for the most part the indices were trading flat. After the open the indices tried to make a move higher, led by the NASDAQ, but that move was short lived.

The first hour of trading after the open saw a lot of volatility, the indices moved up and down within a tight range until hitting the early high shortly after 10. After that they slowly declined until all four of the major indices were in the red. The slow, steady decline hit bottom around 2pm and despite a late afternoon attempt to move higher closed near the lows of the day.

Economic Calendar

The Economy

No official economic reports were released today but we always get a new Moody's Survey Of Business Confidence each week. This week the index declined by -1.1 points, the second week of decline, but remains near the all time high set two weeks ago. In his summary Moody's Chief Economist Mark Zandi says

“Business sentiment remains steadfastly near a record high. An astounding more than half of the responses to the survey are positive, while less than one-tenth are negative. 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. The only lackluster responses are with respect to assessments of present conditions, likely reflecting the recently soft global economy”


According to FactSet 447(89%) of the S&P 500 companies have reported earnings so far this season. Of those 71% have reported earnings above estimates while only 45% have beaten on revenues. As it currently stands, the blended rate for earnings growth is now positive, 0.1%. This is nearly 5% better than expected and well above the average improvement expected based on the 4 year averages. On an ex-energy basis earnings growth is 5.6%, also much better than first predicted. The reason for the improvement is a higher than average number of companies beating estimates, an those that are beating are beating by rates higher than average.

Eight sectors are now reporting better than expected, led by energy. So far, the energy sector has produced an aggregate earnings surprise of +28.7%. The next largest surprise is coming from the health care sector, about 10.5%. Looking forward analysts are predicting that revenue growth is going to remain weak into the end of the year but pick up starting in 2016. Also, margins are expected to rise by an average 0.1% on a quarter to quarter basis into the end of the year. There is some important data to watch out for this week. Tomorrow is the JOLTs report on job openings and labor turnover. Later in the week look out for retail sales, import/export prices, business inventories, jobless claims, PPI, TIC flows, Empire Manufacturing, industrial production, capacity utilization and Michigan Sentiment. As always, take the rear looking data with a grain of salt and focus on the more forward looking data points. JOLTS, business inventories and TIC flows are all for March/Q1, the rest is for April/May/Q2. Next week is the start of this month's round of housing data as well as the FOMC minutes.

The Oil Index

Oil traded choppy today and ended with a slight loss. The price of WTI fell -0.19%, the price of Brent -0.75%. Today's action was impacted by increasing reports that the shale producers may be ramping up production in response to higher prices. This is a bearish turn of events in my opinion and will only serve to increase supply/stockpiles if true. Additionally, OPEC output remains high and may even be on the rise.

On the flip-side, one of Libya's oil fields remains closed do to violence in that country and fighting is still raging in Yemen. Today the Yemen rebels took responsibility for shooting down a Moroccan jet fighter just days before the humanitarian cease-fire is set to begin. Yemen itself is a small country but when you consider that over 4 million Yemeni live and work in the Saudi oil fields the scope of the issue takes on a slightly more ominous tone.

The energy sector fell more than -2% in today's session despite the relatively high price of oil and better than expected earnings results. The Oil Index dropped back below the short term moving average and my support/resistance line 1,400. The indicators are bearish and gaining strength pointing to lower prices in the near to short term. Downside targets remains near 1,350 and then 1,300 where the long term trend line comes into play. The long term trend is up, and with earnings expectation for next year so strong, any near term sell-off will be a buying opportunity.


The Gold Index

Gold prices fell by about a half percent today on a stronger dollar. The dollar gained against the euro and the yen on the heels of last weeks NFP report. The NFP was only as-expected but as-expected is perfect for telling the market that the labor market and the economy is not dead and adding some strength to the dollar. Gold is now trading below $1190 and very near to $1180. This level has provided support over the past two months and could do so again.

The gold miners managed to hold last week's closing prices despite the drop in gold prices. Today's action created a small bodied candle on the GDX Gold Miners ETF and closed with a gain of 0.25%. The index is still winding up within its narrowing range and is currently moving up from my rising support line. The indicators are consistent with support along the rising support line with MACD momentum approaching equilibrium. I'm still bullish on the sector and waiting for a break out.


In The News, Story Stocks and Earnings

Earnings continue to roll in. The sector to watch this week will be the retailers. There are at least a dozen scheduled to report over the course of the week including Nordstrom's, Kohls, JC Penny and Macy's. Today the retail sector Spyder XRT lost -0.03% in a move that created a doji candle right at the short term 30 day moving average. This is the second day in a row that the ETF has traded at the moving average and created a doji. It looks like it is trying to move higher but has not quite been able to overcome resistance. The indicators are still bearish but momentum is on the verge of shifting to the upside, stochastic is consistent with a supported market and may be rolling over. Resistance is at $100 with support near $97-$97.50. If earnings for the sector are decent then this one could easily move above resistance with a target near $102.50 in the near term.


Dean Foods reported a top and bottom line beat this morning. The dairy processor and specialty foods maker also provided upbeat guidance for the next quarter. Consensus estimates were in the $0.19 per share range, the company guidance is in the range of $0.20-$30. The stock surged on the news, gaining more than 10% to hit resistance near $18.00.


Rackspace reported after the bell today. The cloud based web hosting company reported earnings in-line with estimates on lower than expected revenue. The company also provided guidance that was below analysts estimates and sent shares falling in the after hours session. Company guidance is a full 10% below consensus driven by declining margins. Currency conversions also had a negative impact on earnings and guidance. The stock lost more than 10% after the report was released, falling to a three month low.


Dish Network reported before the bell. The pay-TV provider reported earnings and revenue basically in-line with expectations driven on an increase in subscriber fees. The company reported revenue of $3.7 billion, up 3% from last year at this time, but also reported lower than expected new subscribers for both TV and internet services and a net decline in users. Shares of the stock lost -0.75%, extending the recent downtrend and setting a new 6 month low. The indicators are bearish and stochastic has just made a bearish crossover indicating potentially lower prices.


The Indices

The indices tried to move higher but failed, then they tried to hang near last week's closing prices and also failed. By the end of the day the majors were all in the red led by the S&P 500. The broad market lost just over a half percent, -0.51%, in a move down from resistance, halted by support. The index is still winding up within it rapidly narrowing range, squeezed between the long term trend line and the resistance of the all-time high. The indicators are mixed but still consistent with support along the rising trend line and possibly rolling into a potential trend following entry. MACD is very near to zero, following a bearish peak, and may shift to the upside.

The caveat is that even with a shift, momentum has been weak, in both directions, over the past few months and is likely not enough to break the market to new highs by itself. Stochastic is forming an early, weak, trend following signal, the caveat being that resistance is just above the current level. It looks like the index could move higher but without additional catalyst resistance will likely continue to keep prices from breaking to new all-time highs.


The Dow Jones Industrial Average made the next largest move today and in fact led the losses for most of the session. The blue chips lost -0.47% after trading as low as -0.5% and lower during the session. Today's action is a retreat from resistance that halted above support levels with indicators that suggest a retest of the highs could be developing. MACD momentum has just turned positive and stochastic is making a weak trend following signal. As with the SPX, the Dow has been halted at resistance several times over the past month or two so without additional catalyst could easily be halted again.


The NASDAQ Composite closed with a loss of -0.20% after spending most of the day trading in the green. The tech heavy index created a very small bodied candle, just above the short term moving average. Today's action was centered on the 5,000 level which did not hold. The indicators are bearish in the near term but still show support in-line with the trend over the short to long term. Bearish momentum is in decline and stochastic is showing a weak trend following bullish crossover so for now at least it looks like the index will move up to test resistance at the all time high. Near term support is along the moving average, with longer term support about 5% lower along the long term up trend line.


The Dow Jones Transportation Average made the smallest decline today, only -0.14%. Today's action created a doji candle at the moving average, with a close below the average, which makes it look like the index could retreat back to support along the bottom of the 6 almost 7 month trading range. The indicators are weakly bullish, MACD has just turned positive and stochastic is making a weak bullish crossover which makes it look as if it could move higher within the range. Support target is down along the bottom of the range near 8,600, possible upside target is 8,900.


The market is still waiting. Waiting for the signal to move up, or to move down. In the near term the indices continue to wind up within recent trading ranges with little strength. In the short to long term the indices are still trending higher. The economic trends are positive, as are the earnings trends despite this quarters low rate of growth, so I remain bullish as well.

The trends are supporting the market while it is fear of economic slow down, earnings declines, geopolitical risk and FOMC interest rate hikes that are providing resistance. If the trends break down so too may the market. The NFP provided one clue to the state of the economic trends and this weeks data will provide more.

In terms of earnings trends this season was weak, but much much better than expected. Not to mention the fact that the season is not yet over and will likely continue to improve. The next season may show more weakness but looking beyond that, to the end of the year and next year, expectations are quite good. There may be correction, consolidation or pull-back between now and then but the secular bull market is not over, not yet.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Poised To Hit New Records

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

FactSet Research - FDS - close: 161.70 change: +0.63

Stop Loss: 157.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 302 thousand
Entry on May -- at $---.--
Listed on May 11, 2015
Time Frame: Exit PRIOR to FDS earnings in late June or plan on exiting prior to JUNE option expiration on June 19th
New Positions: Yes, see below

Company Description

Why We Like It:
FDS has provided data, analytics and research to the Wall Street crowd for more than 35 years. Today their software provides a host of services for investment managers, hedge funds, bankers, wealth managers, private equity, buy-side traders, sell-side traders, and more.

FDS is considered part of the technology sector. According to the company, "FactSet, a leading provider of financial information and analytics, helps the world's best investment professionals outperform. More than 50,000 users stay ahead of global market trends, access extensive company and industry intelligence, and monitor performance with FactSet's desktop analytics, mobile applications, and comprehensive data feeds."

The company has been delivering pretty consistent sales growth around +9% every quarter. They raised guidance back in December with their Q1 report. FDS' most recent earnings report was March 17th. The company announced their Q2 results of $1.39 per share, which was up +13.9% from a year ago. Unfortunately that missed analysts' estimates by two cents. Revenues grew +9.2% and kept the trend alive of FDS delivering revenues just above expectations.

The company has an active stock buyback program. Management boosted their repurchase program back in December by $300 million. At the time that meant their buyback program was almost $339 million. Keep in mind that FDS only has 41.7 million shares outstanding.

Following FDS' March 17th Q2 report the company raised their guidance for Q3. They now estimate earnings will grow +12.8% into the $1.40-1.42 per share range. This is above Wall Street estimates. Shares of FDS rallied on this report but they've spent the last several weeks consolidating sideways on either side of $160.00. The good news is that FDS is building a bullish trend of higher lows. Today the stock is poised to breakout past resistance and hit new record highs. We are suggesting a trigger to buy calls at $162.25.

Trigger @ $162.25

- Suggested Positions -

Buy the JUN $165 CALL (FDS150619C165) current ask $3.40
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Bond Weakness Spooks Stocks

by James Brown

Click here to email James Brown

Editor's Note:

Weakness in the bond market is generating jitters among stock investors. Lack of follow through on Friday's job-report inspire rally is another disappointment.


Current Portfolio:


CALL Play Updates

Apogee Enterprises - APOG - close: 54.36 change: +0.66

Stop Loss: 51.75
Target(s): To Be Determined
Current Option Gain/Loss: -3.6%
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:
05/11/15: Shares of APOG displayed some relative strength today. The stock managed a +1.2% gain but continues to struggle with resistance near $55.00.

A close above $55.25 could jump start the next leg higher. 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: 88.77 change: +1.46

Stop Loss: 83.85
Target(s): To Be Determined
Current Option Gain/Loss: +4.5%
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:
05/11/15: Shares of CAT were upgraded this morning. That helped the stock gap open higher and break through resistance near $88.00. CAT ended the session with a +1.6% gain. Now shares face potential resistance at its 150-dma (near $89.00) and the $90.00 level. We do expect this rally to continue.

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


Eaton Corp. - ETN - close: 72.27 change: +0.17

Stop Loss: 69.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.6 million
Entry on May -- at $---.--
Listed on May 09, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
05/11/15: ETN continued to push higher but shares are still hovering below their recent highs. Our plan is to buy calls when ETN hits $72.75.

Trade Description: May 9, 2015:
ETN is in the industrial goods sector. The company makes products for a wide variety of industries including: aerospace, electrical equipment, filtration systems, hydraulics, plastic extrusion, industrial clutches and brakes, and vehicles.

According to the company, "Eaton is a power management company with 2014 sales of $22.6 billion. Eaton provides energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton has approximately 102,000 employees and sells products to customers in more than 175 countries."

When the market ignores negative earnings news it could be a signal that all the bad news is priced in to a stock and the path of least resistance is higher. That appears to be the case for ETN.

In July 2014 the stock was crushed after the company reported earnings that were only in-line with estimates and the management lowered their 2014 Q3 guidance. Three months later ETN reported its Q3 results that missed expectations on both the top and bottom line. What did the stock do? It rallied.

Fast forward another few months and in early February ETN reported better than expected earnings but revenues were just a hair below estimates. Management lowered their 2015 Q1 estimates due to currency headwinds. They were expecting a -4% impact do to the strong dollar in 2015. What did the stock do on this negative forecast? It rallied.

Several days ago ETN reported its Q1 results on April 29th. Earnings were 3 cents better than expected even as revenues fell -5% to $5.22 billion. This was a result of +1% organic growth offset by -6% decline due to currency translation.

The company's management readjusted their forecast and now expect a -5% impact due to currency headwinds for 2015. With this adjustment they lowered their Q2 and 2015 guidance. Since this earnings report the stock has rallied. Last week shares were upgraded by J.P.Morgan from neutral to overweight who adjusted their ETN price target from $70 to $84. The point & figure chart is even more optimistic and forecasting an $89 target.

If investors are going to be this forgiving then we think there might be an opportunity here. The recent rally in ETN has pushed shares toward resistance near its February highs around $72.50(ish). We are suggesting a trigger to buy calls at $72.75.

Trigger @ $72.75

- Suggested Positions -

Buy the JUL $75 CALL (ETN150717C75)

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


F5 Networks - FFIV - close: 126.28 change: +0.23

Stop Loss: 121.40
Target(s): To Be Determined
Current Option Gain/Loss: +3.1%
Average Daily Volume = 1.2 million
Entry on May 08 at $125.15
Listed on May 07, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/11/15: Traders bought the dip in FFIV near round number support at $125.00 today. The stock managed to close the session in positive territory. I would still consider new positions now or you could wait for a rise past today's high ($126.60).

Trade Description: May 7, 2015:
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.

- Suggested Positions -

Long JUL $130 CALL (FFIV150717C130) entry $3.25

05/08/15 triggered @ 125.15
Option Format: symbol-year-month-day-call-strike


Global Payments Inc. - GPN - close: 102.17 change: +0.29

Stop Loss: 98.25
Target(s): To Be Determined
Current Option Gain/Loss: +3.5%
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:
05/11/15: GPN almost tagged a new high today. The rally rolled over beneath short-term resistance near $102.60. At this point I would wait for a close above $102.60 before considering new bullish 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: 75.05 change: -0.20

Stop Loss: 71.75
Target(s): To Be Determined
Current Option Gain/Loss: -11.6%
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:
05/11/15: Hmm... today was not the most inspiring session if you're long NTRS. Shares did hit new highs but like the broader market the stock retreated. NTRS is still holding the $75.00 level for now but I would expect a dip toward the simple 10-dma near $74.25.

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: 90.11 change: -0.23

Stop Loss: 86.95
Target(s): To Be Determined
Current Option Gain/Loss: -21.1%
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:
05/11/15: OCR lost 23 cents today. Overall shares held up reasonably well with a -0.25% decline versus the -0.5% drop in the S&P 500. What worries me is how momentum seems to be stalling. I suspect we will see OCR test short-term technical support at its rising 10-dma near $89.00 soon.

I am not suggesting new positions at this time.

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: 155.40 change: -0.08

Stop Loss: 149.40
Target(s): To Be Determined
Current Option Gain/Loss: +15.7%
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:
05/11/15: I cautioned readers that SNA might fill the gap with a drop toward $154.00. That did indeed happen but it occurred a lot faster than expected. Shares spiked down to $153.93 this morning and immediately rebounded. SNA spent most of the day hovering near its highs just below $156.00.

I am not suggesting new positions at this time.

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: 67.38 change: -1.18

Stop Loss: 63.85
Target(s): To Be Determined
Current Option Gain/Loss: -0.9%
Average Daily Volume = 1.9 million
Entry on April 23 at $66.25
Listed on April 22, 2015
Time Frame: Exit PRIOR to earnings on May 28th
New Positions: see below

Comments:
05/11/15: Shares of SPLK also tried to fill the Friday morning gap. Unfortunately SPLK did not rebound like SNA did. SPLK underperformed the broader market with a -1.7% decline.

I am not suggesting new positions at this time.

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

05/09/15 adjust time frame, plan on exiting prior to earnings on May 28th
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: 70.30 change: -1.14

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:
05/11/15: The oversold bounce in BBBY is rolling over. Shares underperformed the market with a -1.59% decline. Once again the stock is poised to breakdown below support near $70.00. Our suggested entry point for bearish positions is $69.70.

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