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Daily Newsletter, Tuesday, 5/12/2015

Table of Contents

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

Market Wrap

Uncertainty Rules

by Jim Brown

Click here to email Jim Brown

The Dow dropped -180 points at the open and maintained those losses until somebody bought the dip at 10:30 to rebound the Dow +150 points in only 20 minutes. The index traded sideways for the rest of the day in a tight range from about 18,050 to 18,115. The ten-year yield hit a six-month high yield of 2.335% at the open.

Market Statistics

The selloff in treasuries was blamed on everything you can think of. Some blamed European yields but there was no smoking gun that traders could talk about other than weakness in Europe.


The swoon in equities was blamed on the spike in yields as well as continued profit taking from the Friday short squeeze. In reality the market is doing exactly what it has been doing for the last two months and that is trading in a range with a significant number of reversals for no apparent reason. The uncertainty in the market is rising rather than abating. Eventually a trend will appear.

The economic calendar today was not a factor. The NFIB Small Business Survey Optimism Index rose from 95.2 to 96.9 for April. The internal components were mostly positive but the gains were small. The employment component rose from 10 to 11, job openings rose from 24 to 27, capital expenditure plans rose from 24 to 26. However, those respondents expecting the economy to improve rose from a net of -7% to -6% and hardly a rousing vote of confidence. Those that expected sales to improve declined from 13% to 10%. This report was ignored.

The Job Openings Labor Turnover Survey (JOLTS) showed job openings declined from the 3.5% rate in February to 3.4% in March. Job openings declined from 5.144 million to 4.994 million. However, hires rose from 5.011 million to 5.067 million. Separations rose sharply from 4.793 million to 4.983 million. That is a huge increase and suggests workers are becoming more confident about changing jobs. Layoffs rose from 1.688 million to 1.793 million. That was +6.5% higher than the same period in 2014. This was a lagging report for March and was ignored.

Thanks to everyone paying their taxes the government had a budget surplus in April of $156.7 billion. Since this is a once in a year event I would not get too excited about the government having more money than it spent. They will catch up. April revenue rose +14% to $471.8 billion and spending increased by +2.5% to $315 billion. We are now 7 months into the government's fiscal year and the cumulative deficit is now -$282.8 billion after that "surplus" in April. Net interest payments on the debt grew by +3.4% from the prior April. Social security payments rose +4.3% and Medicare spending rose +1.4%.

Thanks to the dozens of recent tax increases individual tax payments are up +13% and corporate tax payments are up +12%. We are facing another debt limit ceiling that will have to be negotiated before the end of this fiscal year on September 30th. Since we are headed into the 2016 election cycle the battle over the debt ceiling will likely be more subdued and no government shutdown will occur.

The calendar for Wednesday will be focused on the retail sales for April. With warnings from multiple retailers in recent days there is a strong possibility it will miss estimates.

The oil inventories will also be important since last week was the first decline in inventories in 17 weeks and crude prices rebounded back over $60 today in anticipation of further inventory declines. Energy equities spring back to life after several days of declines and that helped support the market today.


Verizon's got mail! The big news in the equity world this morning was Verizon (VZ) buying AOL for $4.4 billion or $50 a share. I know what you are thinking. Why would Verizon buy AOL? They did it to get their mobile advertising capability, cross platform advertising capability and streaming video. The mobile advertising will let Verizon push ads to its millions of cell phone customers. AOL was cheap at $4.4 billion compared to Verizon's $203 billion market cap. AOL generated about $856 million in revenue in 2014.

Verizon wants to push mobile video to its customers because bandwidth is a profit center for Verizon. AOL is one of the biggest video download sites in the USA. If you watch videos you will eat up your monthly data allotment and you have to buy more or pay the overage fees. AOL recently announced a deal with NBC Universal to play video clips from their networks like Bravo, E!, Esquire, NBC and USA. The partnership will also co-develop original online video series.

This is not your father's AOL. That one was sold to Time Warner for $164 billion in 2000 and is considered the worst deal ever. Time Warner stock declined so much ahead of the deal that the value fell to $103.5 billion when it closed. The market cap of the merged companies declined another $100 billion in next 18 months. The companies split again in 2009 and now AOL has been acquired for $4.4 billion or only 2.6% of its Time Warner acquisition price.

AOL is still the 41st most popular website according to Alexa.com. The AOL owned Huffington Post ranks higher at 30th. AOL also owns TechCrunch and Engadget. Those entities are probably going to be sold because they don't fit the Verizon business.


AT&T (T) is buying DirecTV for $49 billion and regulators today said they had almost completed their review and it was "unlikely" they would rule against it. There will be some as yet unannounced conditions. One analyst felt it would be related to how AT&T will deal with streaming video. Ironically the Verizon/AOL deal could help get the AT&T/DTV deal done.


Pall Corp (PLL) rallied +19% on news that an auction for the company could conclude soon. Reportedly Danaher (DHR) and Thermo Fisher Scientific (TMO) are in the running for the winning bid. UBS said a win by TMO could create a bio-production powerhouse. Pall has about $1 billion in biopharma business that would enhance the $600 million owned by TMO. Pall manufactures and markets filtration, separation and purification products and integrated systems worldwide. The Life Sciences segment provides technologies that facilitate the process of drug discovery. Final bids are due later this week with an expected price tag of $13 billion or more.


Humana (HUM) rallied +$7 after Barron's said a bid by Aetna (AET) could be imminent. The article also suggested Cigna (CI) could also be in play. Aetna is turning into a powerhouse in this sector having raised guidance twice already in 2015. The speculation followed an investor meeting. Leerink Partners said Aetna could conceivably offer $200 a share for Humana. The analyst raised his price target for Aetna to $135.



Cal Maine Foods (CALM) rose another 3% on expectations for higher profits as a result of the bird flu epidemic. Research firm Sidoti & Co raised the price target to $67 from $51 on the potential for an increase in pricing power. The bird flu has been confirmed in the 15th state, mostly northern and Midwest states. Cal Maine is an egg producer with operations mostly in southern states. Nearly 30 million birds have been slaughtered because of the disease. An egg shortage is looming. Bakery companies are being squeezed from this shortage. Post Holdings said last week that chickens at one of its suppliers had tested positive for the disease. The latest discovery was in Indiana and so far there have been three strains of the disease identified in North America. Shares of CALM are up nearly 25% in the last two days.


On the earnings front GoDaddy (GDDY) reported a loss of 34 cents that beat by a penny. Revenue rose +13.7% to $498.7 million. The company raised guidance for Q2 to a midpoint of $392.5 million, up from $390.07 million. Fully year guidance rose slightly from $1.59 billion to $1.595-$1.605 billion. Shares were volatile and slightly lower in the afterhours session.


Zillow (Z) reported adjusted earnings of 5 cents that were much better than the expected 12 cent loss. Revenue rose +92% to $127 million but missed estimates for $135 million. They reiterated guidance for the full year. Q2 guidance was fractionally below estimates. The Zillow earnings now include Trulia and the combined companies saw about 140 million unique viewers in March alone. Shares rallied 5% in afterhours but declined after some comments on the conference call. They ended the afterhours session down about 50 cents.


Rackspace (RAX) reported earnings of 20 cents that were in line with estimates but revenue of $480 million was slightly lower than estimates for $482 million. The earnings did not really shake up the stock but the guidance did. The company projected revenue growth of 1.5% to 2.5% in Q2 due to a delay in enterprise bookings and "slower customer installations and customer churn." Multiple analysts downgraded the stock and shares fell -13%.


The earnings cycle is winding down with only three headliners on Wednesday. Shake Shack (SHAK) could probably be included in that list but it has only a narrow but faithful audience.


Crude rallied $1.33 in the regular session and it is up another 65 cents in afterhours to $61.40. The prior resistance at $58 worked perfectly as support on the three days of profit taking. Goldman Sachs must be frustrated today because they just released a report saying the oil rally was premature and we should expect a continued decline. They said the rebound from the lows was probably the result of speculators and current prices were expensive given the fundamentals.

The analysts said unfinished wells (fraclog) could cause shale production to spike again if prices were to rise too quickly. Currently there are about 4,600 drilled but not completed wells in the USA. Drilling is 50% of the cost of a well and fracturing and completing the well is the other 50%. Producers are saving money today by not completing the wells. They cap them and move on to the next hole. This keeps their contracted rigs busy and they avoid paying penalties for sending the rigs back to the owners. In theory when oil prices rise the producers can quickly complete the wells and put them into production. In reality that is not as quick as you would expect. There is a tremendous amount of scheduling for crews, equipment, material, sand, water, etc that has to all come together for each well. Some analysts believe it could take more than 12 months to complete all the drilled wells. Crews have been laid off and equipment moved to holding areas. Plus, the crews that are active will be working on completing new wells that are still being drilled.

This link is a picture of Halliburton fracking a well.

Goldman argued that even after a -56% decline in active rigs that would only stabilize production rather than reduce it. They believe production will not decline significantly until 2016. However, if prices rise over $65 it could prompt drillers to put rigs back to work on expectations for higher prices in the future. Goldman pointed out that low prices have forced low cost producers like Russia, Saudi Arabia and Iraq to increase production in order to replace revenue lost by those low prices.

Wednesday is inventory day and another decline in inventories could lift prices higher.


Markets

The European markets had a bad day because their bonds were selling off hard. If you have not been paying attention 30% of the countries in the eurozone had negative yields on their short term bonds. At negative yields they finally ran out of buyers. A correction in bonds began and yields were up sharply. European markets were down 1-2% overnight. This carried over into the U.S. markets with the ten-year treasury selling hard at the open and the yield rising to a six-month high. Goldman exaggerated the situation in Europe with a note saying bonds were in a bubble. Goldman said, "Overblown expectations for the ECB's QE plan helped to push global debt valuations to extreme levels, triggering a large and vicious selloff in European bonds that has infected other markets." The U.S. equity markets started the day off with the same decline as Europe. Once the buyers in treasuries began to appear the equity market stabilized.

Fed heads Bill Dudley and John Williams were also out making comments negative to the market. Dudley said "the beginning of higher rates in the US will reflect a regime shift in thinking and the markets." John Williams said he is for hiking rates "a bit earlier" than other FOMC members.

There was also some concern about Greece defaulting on the 750 million euro payment that was due today. They scraped together enough cash to pay the IMF and put off their eventual demise until another day. While this did not fix their problem it did kick the can a little farther down the road and the market breathed a sigh of relief.

The Dow dropped to 17,925 at the open and the S&P fell to 2085. For the S&P that is still about 17 points above last Wednesday's low of 2068 so it was not a crash but more about headline volatility. The Dow decline to 17,925 was still about 192 points above last week's low at 17,733.

While nobody wants to be holding equities when the Dow drops -180 at the open it was not a disaster. The markets have been making these triple digit moves in alternate directions 2-3 times a week for the last two months. Holding positions in these swings is practically impossible if you are maintaining a strict discipline with stop losses.

Monday's volume at 5.6 billion shares was the fourth lowest day since January. Today's volume was only slightly higher at 5.9 billion shares. There is no conviction in the market in either direction.

Whatever appeared at 10:30 to rebound the Dow +150 points from its lows is to be thanked for saving the day. It appeared to be a buy program because of the speed of the rebound and the weak volume. Up volume in the SPY during the 20 min rebound was only half the down volume in the first 20 minutes of trading. However, the volume in the Dow ETF (DIA) was about 30% higher on the rebound than the decline. If you want to juice the market the best way to do it is to spike the Dow.

I will leave the conspiracy theories to others smarter than me and just say whatever provided the 20 minutes of concentrated buying at 10:30 rescued the market from a bad day.

Tuesday was just one more day in the cycle of volatility we have been trading for the last six weeks. The rebound helped but it did not cure the illness with the S&P stopping right in the middle of the recent congestion range at 2100. Add 20 points and you have significant resistance at 2120. Subtract 20 points and you have significant support at 2080. The close was right in the middle of neutral territory.

Until we get a move that takes us out of this range we are just passing time and driving ourselves crazy trying to trade it. Traders are eventually going to lose patience and move to the sidelines until a direction appears.


The Dow is a similar picture with the 18100/18200 level continuing to be strong resistance and the 17800 level strong support. Only one stock on the Dow gained or lost more than $1 and that was Goldman Sachs. Of course the picture was a lot different at the open and the fractional moves at the close were just stocks returning to neutral territory.

There is no magic number for the Dow or some stock to watch for direction tomorrow. The Dow is suffering from the uncertainty flu and until it passes we just have to watch from the sidelines.



The Nasdaq is no different than the Dow and S&P. The index remains stuck below resistance at 5000, only the Nasdaq is declining less on the down days than the other indexes. The biotechs are holding up the index while the chip stocks are wallowing in their own congestion range.



Support remains 4950, 4900, 4850. Resistance 5000, 5020, 5070.


In case you can't tell from the underlying frustration in my words I am tired of fighting this market. This is just like playing the tables at Vegas. Some hands you win but you lose more often than not. The games of chance have mathematical rules behind them that favor the house. Depending on the game and the bet you can win 35% of the time to as much as 49% of the time. The casinos know if they can keep feeding you a few small wins from time to time they can drain your pockets with the house percentage advantage. You can't win long term. You may have a good run but the house just keeps nipping away at your bankroll.

A choppy market like this is chipping away at our accounts. Win 1 lose 2, win 3 lose 5. There is no future in trying to outsmart a choppy market. This is where the intelligent investor can swing the odds into his favor by not playing the market's game. Step to the sidelines and wait for a fat pitch. It will eventually appear. It may be days from now or even weeks from now but the market can't continue to trade sideways in this current volatility range. It will eventually pick a direction and that will be our signal to move back into the market.

Enter passively, exit aggressively!

Jim Brown

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New Option Plays

Ignoring The Market's Volatility

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Helen of Troy Limited - HELE - close: 89.85 change: +1.75

Stop Loss: 87.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 193 thousand
Entry on May -- at $---.--
Listed on May 11, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of HELE are looking pretty good. After bottoming out near $52.00 back in September-October 2014 this stock has soared to new all-time highs. The stock is up +73% from its fall 2014 lows. The last couple of earnings reports have been better than expected.

HELE is in the consumer goods sector. According to the company, "Helen of Troy Limited is a leading global consumer products company offering creative solutions for its customers through a strong portfolio of well-recognized and widely-trusted brands, including: Housewares: OXO®, Good Grips®, Soft Works®, OXO tot® and OXO Steel®; Healthcare/Home Environment: Vicks®, Braun®, Honeywell®, PUR®, Febreze®, Stinger®, Duracraft® and SoftHeat®; and Personal Care: Revlon®, Vidal Sassoon®, Dr. Scholl's®, Pro Beauty Tools®, Sure®, Pert®, Infusium23®, Brut®, Ammens®, Hot Tools®, Bed Head®, Karina®, Ogilvie® and Gold 'N Hot®. The Nutritional Supplements segment was formed with the recent acquisition of Healthy Directions, a U.S. market leader in premium doctor-branded vitamins, minerals and supplements, as well as other health products sold directly to consumers."

On the daily chart you can see how shares of HELE soared back in early January 2015 after report earnings. The company beat estimates by a very wide margin. Wall Street was looking for $1.31 per share and HELE delivered $2.17. Revenues also came in above expectations and management guided higher.

The earnings momentum continued in the last quarter. HELE reported its 2015 Q4 results on April 28th. Earnings soared +311% from a year ago to $1.40 per share. Wall Street was expecting $1.09 a share. Revenues were up +19.7% to $377.7 million, which was significantly above estimates. Their gross margins improved 3.5 percentage points to 43.7%.

Julien R. Mininberg, Chief Executive Officer, stated, "We are pleased to report a strong fourth quarter, capping a successful fiscal year of growth. Fourth quarter revenue rose approximately 21%, building on favorable third quarter results. Our Healthcare/Home Environment and Housewares segments lead our core business sales growth with double digit increases in the fourth quarter. Our Nutritional Supplements segment, acquired in June 2014, grew in line with expectations. Our Personal Care business slowed its decline in the fourth quarter as we make progress toward stabilizing that segment. For the full fiscal year, despite foreign currency headwinds, Helen of Troy grew revenue by 9.7%, adjusted income by 16.6%, and adjusted diluted EPS by 30%."

Management issued a mixed picture for fiscal year 2016. HELE expects earnings in the $4.33-4.73 range, which is below analysts' estimates. Yet they see revenues in the $1.485-1.536 billion zone versus estimates for $1.47 billion.

The stock popped on its Q4 report on April 29th. The point & figure chart is bullish and forecasting at $97.00 target. HELE has managed to ignore most of the market's recent volatility. Instead shares are just consolidating sideways as they try and generate enough steam to breakout past resistance at $90.00. Tonight we are suggesting a trigger to buy calls at $90.25.

Trigger @ $90.25

- Suggested Positions -

Buy the AUG $95 CALL (HELE150821C95) current ask $3.10
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:



In Play Updates and Reviews

Markets Sour On Big Bond Moves

by James Brown

Click here to email James Brown

Editor's Note:

The stock market continues to react negatively to big bond market movements. The sell-off in bonds both in the U.S. and Europe fueled a sharp downdraft in stocks on Tuesday morning.

We have updated a handful of stop losses tonight.


Current Portfolio:


CALL Play Updates

Apogee Enterprises - APOG - close: 54.50 change: +0.14

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:
05/12/15: APOG eked out another gain in the face of the market's widespread declines. Shares still look like they want to breakout 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: 88.16 change: -0.61

Stop Loss: 85.75
Target(s): To Be Determined
Current Option Gain/Loss: -7.0%
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:
05/12/15: CAT suffered some profit taking with the market's big drop this morning. Traders bought the dip at short-term support near CAT's rising 10-dma. CAT managed to pare its loss to -0.68%.

We are raising the stop loss up to $85.75.

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

05/12/15 new stop @ 85.75
05/05/15 triggered @ 88.10
Option Format: symbol-year-month-day-call-strike


Eaton Corp. - ETN - close: 71.94 change: -0.33

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:
05/12/15: ETN followed the market lower this morning. Shares spent most of the day churning sideways in the $71.50-72.00 zone. 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


FactSet Research - FDS - close: 161.57 change: -0.13

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

Comments:
05/12/15: FDS weathered the market's weakness today relatively well. Shares dipped toward $160 and managed to bounce back, almost to unchanged on the day. The company announced it was raising its dividend by +13% to $0.44 a share.

I don't see any changes from last night's new play description. Our suggested entry point is $162.25.

Trade Description: May 11, 2015:
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)

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: 125.03 change: -1.25

Stop Loss: 121.40
Target(s): To Be Determined
Current Option Gain/Loss: -11.4%
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:
05/12/15: Shares of FFIV retreated toward short-term support near $124.00 and its simple 10-dma during the market's drop this morning. FFIV spent the rest of the day consolidating sideways. I'd wait for a new rally past $126.00 before considering new positions.

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: 101.48 change: -0.69

Stop Loss: 99.85
Target(s): To Be Determined
Current Option Gain/Loss: -5.3%
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:
05/12/15: GPN lost -0.6% with today's broad-based market decline. The bottom of its recent trading range is $100.00, which should be support. Tonight we are raising the stop loss to $99.85.

No new positions at this time.

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

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

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

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

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

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

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

- Suggested Positions -

Long AUG $105 CALL (GPN150821C105) entry $2.85

05/12/15 new stop @ 99.85
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: 73.45
Target(s): To Be Determined
Current Option Gain/Loss: -18.6%
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:
05/12/15: NTRS was not immune to the market's decline. Traders bought the dip at short-term technical support at the stock's rising 10-dma. I would wait for a rally above today's high ($75.06) before considering new positions.

Tonight we are moving the stop loss up to $73.45.

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

05/12/15 new stop @ 73.45
05/05/15 triggered @ 75.05
Option Format: symbol-year-month-day-call-strike


Omincare Inc. - OCR - close: 88.67 change: -1.44

Stop Loss: 86.95
Target(s): To Be Determined
Current Option Gain/Loss: -51.8%
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:
05/12/15: Ouch! Our OCR trade could be in trouble. Shares closed below $90.00 and fell below what should have been short-term support at its 10-dma. This stock underperformed the broader market with a -1.59% decline.

I am not suggesting new positions. More conservative traders may want to just abandon ship now or raise their stop closer toward $88.00. Our stop is currently $86.95.

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: 155.50 change: +0.10

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:
05/12/15: SNA is holding up well. Shares bounded at $154.32 this morning. The $154.00 level was short-term support yesterday. SNA rallied back to challenge its highs near $156.00 by the closing bell.

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: 67.67 change: +0.29

Stop Loss: 64.85
Target(s): To Be Determined
Current Option Gain/Loss: +1.3%
Average Daily Volume = 1.9 million
Entry on April 23 at $66.25
Listed on April 22, 2015
Time Frame: Exit PRIOR to earnings on May 28th
New Positions: see below

Comments:
05/12/15: The volatility continues in shares of SPLK. This morning the stock dropped to short-term support near $66.00 and its simple 20-dma before bouncing back into positive territory.

Tonight we are raising the stop loss up to $64.85. 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

05/12/15 new stop @ 64.85
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: 70.14 change: -0.17

Stop Loss: 72.20
Target(s): To Be Determined
Current Option Gain/Loss: -19.5%
Average Daily Volume = 2.3 million
Entry on May 12 at $69.70
Listed on May 06, 2015
Time Frame: exit PRIOR to June option expiration
New Positions: see below

Comments:
05/12/15: We have been patiently waiting for BBBY to breakdown below support near $70.00. Shares provided that breakdown today with a spike down to $69.41. Our trigger to buy puts was hit at $69.70. Unfortunately, BBBY spent the rest of the day slowly inching higher. What concerns me is BBBY's close back above the $70.00 mark. I would look for a new drop to $69.70 before considering new bearish positions.

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.

- Suggested Positions -

Long JUN $70 PUT (BBBY150619P70) entry $1.90

05/12/15 triggered @ 69.70
Option Format: symbol-year-month-day-call-strike