Option Investor
Newsletter

Daily Newsletter, Thursday, 6/4/2015

Table of Contents

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

Market Wrap

Waiting, Watching

by Thomas Hughes

Click here to email Thomas Hughes
The market fell back today while traders wait for NFP/unemployment data, developments from Greece and a meeting of OPEC.

Introduction

The market fell back today while we all wait on several major events scheduled for tomorrow. US non-farm payrolls and a meeting of OPEC members both have the power to move the market and will likely cause some volatility.

Asian indices were mixed, and volatile. Signs of tightening margin requirements in China have spooked investors and increased fear the Chinese bull market is at an end. Indices throughout the region closed flat to slightly positive, led by the Shanghai index. It closed with a gain of 0.76% after dropping more than -4% on an intraday basis.

European markets were jittery as well, spurred by yesterday's comments from Mario Draghi and the ever present Greece debt issue. The news remains mixed; PM Tsipras says negotiations are going well, creditors say they aren't and a deadline scheduled for tomorrow has been postponed until later this month. Greece has chosen to bundle tomorrow's payment to the IMF with others due this month in what could be a sign it isn't able to pay. The move gives them more time to negotiate but also ups the stakes in terms of Greece's need to reach an agreement. If they can't pay now without help they won't be able to pay later without help, and that's not counting payments to the ECB due later this summer.

Market Statistics

Futures were indicating a negative open right from the start. Positive labor data did not have the power to lift them and early lows were held into the opening bell. The initial post opening sell-off was met by buyers who pushed the indices up to break-even levels but were not able to sustain the move. By 10AM the market was moving lower once again and didn't stop until mid afternoon. The drop was slowing by 1PM and may have bottomed but the late day announcement Greece was seeking to bundle payments helped it regain momentum and sent the market to today's lows.

Economic Calendar

The Economy

Challenger Gray & Christmas released their monthly report of planned lay-offs in the early morning. According to them the pace of planned lay-offs fell by -33% from last months peak. The financial and government sectors led with gains in planned job cuts. May's 41,000 is -23% below last May but brings the year to date total to +13% over last year. Oil only accounted for 1,000 lay-offs this month, down from 20,000 last month. So far this year there have been 69,000 job cuts blamed directly on oil prices, up from 3,000 in 2014. If we back out the energy impact on job cuts the year-to-date gain reverses to a decline of -17%.

Initial claims for unemployment fell more than expected. The number of first time claims dropped -8,000 to hit 276,000. This is not a new low but is just above it. Last week's figure was revised up by 2,000. The four week moving average gained 2,750 and is now 274,750. On a not adjusted basis claims fell by -9.2%, the seasonal factors had predicted a decline of -6.7%, and are -15% below last years level. Kansas had the biggest increase in claims, 2,716, Washington had the biggest decline, -507.


Continuing claims shed -30,000 to hit 2.196 million and another new 15+ year low. The four week moving average also hit a new low. Last week's figure was revised up by 4,000 but remains low. Continuing claims have not yet bottomed and are trending lower despite the recent bounce in initial claims, an indication that while the rate of job turnover remains stable it is getting easier and easier to find another job when one is lost.

Total claims also fell, losing a meager -735. Total claims are now at a new 8 month low and approaching the long term low set last September. They are also -15% lower than last year at this time. Based on this and all the other labor data it looks to me like jobs creation remains steady if not strong, and unemployment is still declining. Current estimates for NFP are in the range of 225,000 with the chance it could be higher. Unemployment is expected to remain steady at 5.4%, but I think we could get a surprise drop.


Productivity and labor costs data were also released today. This the final revision to 1st quarter data and shows productivity dropped more than first predicted, -3.1%. This is down from the previous estimate of -1.9% and the second quarter of decline. The decline is due to a -1.6% drop in output, and a +1.6% increase in hours worked. On a year-over-year basis productivity is up when compared to the first quarter of 2014. Labor costs rose by a whopping 6.7% following the 5% increase we saw in the fourth quarter of last year. This is due to a +3.3% increase in hourly earnings and the -3.1% decline in productivity.

Christine Lagarde and the IMF think the Fed shouldn't raise rates until 2016. They think the move should be put on hold until signs of inflation are more evident, and that policy shouldn't be used to stifle growth in the financial sector. They suggest regulation and oversight should be “strengthened”.

The Oil Index

High supply and expectations for OPEC to maintain current production targets combined to cause oil prices to fall sharply today. Both Brent and WTI lost more than -2.7%. Adding to this was an unexpected build in natural gas stockpiles and a new study from the EIA which says US production could rise 5-10% in the next ten years, depending on the level of technological advances. WTI is now trading near $58.

The Oil Index fell more than -1.25% in today's action. The index is extending its recent near term down trend with the long term trend line as a target. Today's decline in oil prices is likely why the index fell today, poor expectations for 2nd quarter earnings are likely why it has been falling over the last few weeks. MACD momentum is still bearish and stochastic is weak at the bottom of the range but divergence in both suggest the downside movement is weakening. However there is no sign of the downswing ending yet. The long term outlook is positive and near term expectations are improving so I will be looking for support and a possible bounce from the trend line, somewhere in the 1,250 to 1,300 range.


The Gold Index

Gold prices fell near -1% today even as the dollar weakened. Positive economic data and Fed rate hike speculation may have played a role. Price fell below $1180 and bounced off support near $1170 to settle at $1177.10. Today's move is the 2nd day of decline from the $1200 level but as yet nothing more than the same churn we have been seeing over the past couple of months. Prices are being affected in the near term by dollar fluctuation and economic data, and will likely continue to be until the next Fed meeting. At that time they may give an indication that will break the dollar and gold out of their trading ranges. Strong NFP and/or unemployment data could send gold back to test $1170 with the chance of a dip back to the long term low near $1150.

The gold miners ETF GDX fell by -1.55% in response to gold's fall to support. The move has taken it below my rising support line and increased the chances the sector will pull back to the long term low near $17.50. The indicators are bearish and ticking lower, pointing to lower prices, but any move is going to be tied to gold prices. I'm still bullish on the sector for the long term but cautious in the near to short term.


In The News, Story Stocks and Earnings

The SEC announced it was filing suit against the people responsible for the fake Avon buy-out offer that hit the market last month. The filing ties the Avon scandal to several other similar events centered on the Tower Group, Rocky Mountain Chocolate and other publicly traded companies. The SEC is targeting 6 firms linked to false press releases and other documents posted on the SEC's EDGAR site. Today Avon lost another -1.23% and hit a new 20 year low.


Dish Network and T-Mobile announced the possibility of merger today. This is the latest in a string of merger/acquisitions between a broadcast and telecommunications company including the ATT purchase of DirectTV. The move is seen as a positive for both companies and not likely to be snubbed by regulators. The news sent both stocks higher. Dish gained more than 5% intraday, closing with a gain of 4.86%. The stock is moving higher with rising indicators and a target about 7% above today's close.


T-Mobile gained close to 5% intraday but sold off from the peak. The stock closed with a gain of 2.6% and bullish indicators but it may pull back to support before moving higher. Momentum is diverging from price, even with today's huge gain, and stochastic is forming a bearish crossover that make a test of support appear likely. Possible targets are near $38.25 which would close the gap opened today, and then below that near $37.50.


Bird flu is still raging through the mid-west. The epidemic is leading to an increase in food prices due to a shortage of eggs that is not expected to end anytime soon. An estimated 10% or more of the egg-laying hen population has been affected with more cases popping up everyday. Egg-producers like Cal-Maine may see a benefit from higher egg prices that could show up in earnings reports as soon as this quarter. The stock has already seen a substantial rally related to positive earnings growth and ongoing expansion plans, rising egg prices could add momentum to this trade. MACD and stochastic are both convergent with the May peak, suggesting a retest of that peak if not a new high is likely. Support is currently near $55.


The Indices

The indices fell today, perhaps farther than would have had not Greece thumbed its nose at the IMF. The declines had been moderating until that news hit the airwaves. At that time early support levels failed and new daily lows, and in some cased a new monthly low, were made. Today's move was led by the Dow Jones Industrial Average which shed -0.94%. Today's move broke support at 18,000 and set a new 4 week low. The indicators are bearish and gaining strength so it looks like a deeper correction is on the way, possibly as deep as 17,500 or to the long term trend line near 17,250 which would be roughly 6% from the peak set last month.


The S&P 500 and Dow Jones Transportation Average tied for 2nd largest decline, -0.86%, but I will start with the transports. Today's move looks ominous for us bulls as it may be confirming the transportation index break below the long term trend line. The index fell from previous support now turned resistance following the break through. The indicators are bearish and could lead to further downside if buyers don't step back in to support the market. The indicators are also consistent with the early stages of a trend following signal so I am not quite ready to go full bear on this index quite yet.


The S&P 500 set a new 3 week low in a move that took it below 2,100 to the 2,095 support level. The indicators are bearish and gaining strength so it looks like support will be tested further. The index is now below the long term trend line and in danger forming a deeper correction. A break below 2,095 could take it as low as 2,050 in the near term. That being said the index is still above long term support with indicators consistent with that support and setting up for a possible trend following entry.


The NASDAQ Composite made the smallest decline, -0.79%, and is the strongest looking index of them all. Today's action was to the downside, but remains above support levels, the 30 day moving average and did not set a new low. This index is still trending higher in the near and short term although, based on the indicators and other indices, it may have crested its peak. MACD has just crossed the zero line and stochastic is dropping below the upper signal line following a bearish crossover, both indications of weakness and possible lower prices. A drop below support and the moving average could take this index down to the long term trend line, about 4% below the recently set all-time high.


The indices are still trending higher in the long term but it is looking increasingly like a correction or pullback of some variety is in the works now. The transports have already made a 10% correction and may be heading lower, the other indices are still near recent peaks but could easily lose 4-5% by simply correcting to trend. This correction could be due to near term fear, poor earnings expectations for the 2nd quarter, Fed rate hike speculation or a combination of all three.

In the mean time there a couple of things to remember. One is that near term fear is near term, and not likely to reverse the market no matter how worrying it may be. Another is that poor 2nd quarter earnings expectations are followed by positive expectations for the 3rd and 4th quarter, and robust expectations for 2016 which fits in with the idea of a correction to trend within a greater bull market. Yet another is that no matter when the Fed raises interest rates, and how it will lead eventually to the end of the bull market, this is just the first of many hikes to come over the next 5-10 years and a sign that our economy is stable with healthy outlook. . . not a reason for the market to reverse.

The NFP report is going to be a big market mover and may wind up confusing the market. A high number is a good sign of economic health and reason to rally, except that it may also mean rate hikes come sooner, which could give the market an excuse to sell-off. A low number is a sign of stalling economic recovery and a reason to sell, except it may mean rate hikes come later than expected, which has been reason enough to rally up until now.

I am betting on the NFP being at least as good as expected with a chance the market will correct regardless of what the number is. I remain bullish long term but cautious at the moment, waiting to see what tomorrow and the next two weeks will bring us. The FOMC meeting is less than two weeks away, June 16th and 17th, which is when I think the market will show us what it really wants to do.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Bullish Earnings Momentum

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Criteo SA - CRTO - close: 49.69 change: +0.68

Stop Loss: 47.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 628 thousand
Entry on June -- at $---.--
Listed on June 04, 2015
Time Frame: Exit PRIOR to July option expiration
New Positions: Yes, see below

Company Description

Trade Description:
Do you know what re-targeting is in the online ad business? It is the strategy of serving an ad to someone who has already been to your website or seen your product. Apparently it works pretty well for CRTO who helped drive $19 billion in post-click sales for its clients in the twelve months preceding March 31, 2015. The company's earnings have boomed with net income up about +2,500% in the last two years.

CRTO is in the technology sector. According to the company, "At Criteo, personalized performance advertising is what we do. And it's what we do best. Measuring return on post-click sales, Criteo makes ROI transparent and easy to measure. Criteo has 1,500+ employees in 23 offices across the Americas, Europe and Asia-Pacific, serving 7,800+ advertisers worldwide with direct relationships with 10,000+ publishers."

The earnings momentum has been impressive. The company has beaten Wall Street's revenue estimates for the last four quarters in a row. They beat the bottom line earnings estimate the last three quarters in a row. CRTO's management has also raised their guidance the last four quarters in a row.

CRTO's most recent report was May 5th where they announced their 2015 Q1 results. Analysts were expecting €0.18 per share. CRTO reported that their net income had jumped +200% from a year ago to €0.28. Revenues surged +59% to €262 million. Adjusted EBITDA results were up +89%. Management raised their guidance again and guided Q2 and 2015 results above Wall Street estimates on both the top and bottom line.

This bullish earnings picture has helped shares of CRTO recover from recent weakness in both the U.S. and European markets. Please note I said "recover" from recent weakness and not avoid. Shares of CRTO can be volatile. Shares surged from just above $40 to almost $50 in about two weeks in the first half of May. They spent the last two weeks of May correcting lower and now CRTO is back in rally mode. The point & figure chart is bullish and forecasting at $68.00 target.

There has been some speculation that CRTO is a takeover target by high-profile names like Amazon.com, Facebook or Google. These rumors have been out for months. Given our short-term time frame the idea of CRTO as a target may not help.

Currently shares of CRTO are hovering just below round-number resistance at the $50.00 level. Tonight we are suggesting a trigger to buy calls at $50.25.

Trigger @ $50.25

- Suggested Positions -

Buy the JUL $50 CALL (CRTO150717C50) current ask $2.50
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

S&P 500 Back Under Its 50-dma

by James Brown

Click here to email James Brown

Editor's Note:

The S&P 500 is poised to mark its second weekly loss in a row if stocks don't bounce tomorrow. The major U.S. indices all closed lower in a widespread decline that pushed the S&P 500 below its 50-dma.

ANTM hit our stop loss. CERN hit our bearish entry point.


Current Portfolio:


CALL Play Updates

Cognizant Technology - CTSH - close: 64.47 change: -1.23

Stop Loss: 63.45
Target(s): To Be Determined
Current Option Gain/Loss: -29.8%
Average Daily Volume = 3.6 million
Entry on June 02 at $65.65
Listed on May 28, 2015
Time Frame: Exit PRIOR to July option expiration
New Positions: see below

Comments:
06/04/15: Ouch! The market's widespread decline today hit CTSH pretty hard. Shares lost -1.87% and erased the prior four days worth of gains. The $64.00 area should be short-term support.

No new positions at this time.

Trade Description: May 28, 2015:
Shares of CTSH are pushing toward new all-time highs as the company continues to deliver better than expected earnings and revenue numbers. The company is in the technology sector. They provide business and technology services.

According to the company, "Cognizant (CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world's leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 100 development and delivery centers worldwide and approximately 217,700 employees as of March 31, 2015, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world."

CTSH popped to new highs back in February after reporting their Q4 results, which beat estimates on both the top and bottom line. Revenues were up +16%. Management raised their Q1 and 2015 estimates.

The stock rallied again when they reported their 2015 Q1 results on May 4th. Earnings rose +14.5% to $0.71 per share, which was a penny above estimates. Revenues soared +23.5% to $2.99 billion, above estimates.

Management raised their 2015 earnings and revenue guidance. They expect earnings growth of +9% and revenues to rise +19% above 2014 levels. Multiple analyst firms raised their price target on CTSH stock into the $70-76 range. Coincidentally the point & figure chart for CTSH is bullish and forecasting at $76.00 target.

At the moment CTSH is hovering just below resistance in the $65.50 area. We are suggesting a trigger to buy calls at $65.65.

- Suggested Positions -

Long JUL $65 CALL (CTSH150717C65) entry $2.28

06/02/15 triggered @ $65.65
Option Format: symbol-year-month-day-call-strike


Tableau Software, Inc. - DATA - close: 113.51 change: -1.36

Stop Loss: 109.85
Target(s): To Be Determined
Current Option Gain/Loss: -28.0%
Average Daily Volume = 1.0 million
Entry on May 28 at $115.25
Listed on May 27, 2015
Time Frame: Exit prior to July option expiration
New Positions: see below

Comments:
06/04/15: The market's broad-based decline put the kibosh on any potential breakout for DATA. The stock erased nearly all of yesterday's gains.

No new positions at this time.

Trade Description: May 27, 2015:
The market for analyzing big business data is growing fast. DATA is leading the charge. According to the company, "Tableau Software (NYSE: DATA) helps people see and understand data. Tableau helps anyone quickly analyze, visualize and share information. More than 26,000 customer accounts get rapid results with Tableau in the office and on-the-go. And tens of thousands of people use Tableau Public to share data in their blogs and websites."

The last few earnings reports have been very impressive. DATA released their Q3 results on November 5, 2014. Results were 12 cents above estimates with revenues up +71% to $104.5 million, also above estimates.

Their Q4 results came out in early February. Analysts were expecting a profit of $0.11 a share on revenues of $122.58 million. DATA delivered $0.42 a share with revenues up +75% to $142.9 million. In the fourth quarter they added 2,600 new customers. They closed 304 transactions worth more than $100,000, a +70% improvement from a year ago.

Christian Chabot, Chief Executive Officer of Tableau. "In 2014, we experienced the strongest demand we've seen in our history, as the move to agile analytics grows faster than ever."

DATA reported their 2015 Q1 results on May 7th. Analysts were looking for a loss of $0.03 per share on revenues of $115.29 million. The company blew away these numbers with a profit of $0.08 per share (11 cents above estimates). The pattern of big revenue growth continued with Q1 revenues up +74.4% to $130.1 million. They added 2,600 new customers putting their total above 29,000. The number of deals above $100,000 hit 249 in the first quarter.

Management provided bullish guidance with estimates for Q2 revenues in the $135-140 million range. That's above Wall Street's estimate of $130.9 million. They also upped their fiscal year 2015 earnings picture and see $600-615 million, which is better than analysts' estimates of $587 million.

Shares of DATA surged on its results and optimistic guidance. Since then traders have been buying the dips pretty quickly. Today's display of relative strength (+1.99%) is also a new all-time closing high for DATA. It's also worth noting that DATA has been talked about as a potential takeover target.

The $115.00 level looks like short-term resistance. We will use a trigger at $115.25 as our entry point to buy calls.

- Suggested Positions -

Long JUL $120 CALL (DATA150717C120) entry $3.82

05/28/15 triggered @ $115.25
Option Format: symbol-year-month-day-call-strike


Electronic Arts - EA - close: 62.63 change: -0.74

Stop Loss: 61.45
Target(s): To Be Determined
Current Option Gain/Loss: -22.3%
Average Daily Volume = 3.5 million
Entry on May 27 at $63.65
Listed on May 18, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/04/15: EA faded back toward short-term technical support at its 20-dma today. If the dip continues EA could be in trouble and plunge back toward $60.00. Tonight we are raising the stop loss to $61.45.

I am not suggesting new positions at this time.

Trade Description: May 18, 2015:
Video game stocks are hitting high scores this year. The two biggest players in this industry are ATVI and EA. Shares of ATVI are at all-time highs while EA is nearing a new 10-year high.

EA is considered part of the technology sector. According to the company, "Electronic Arts ( EA ) is a global leader in digital interactive entertainment. The Company delivers games, content and online services for Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 300 million registered players around the world. In fiscal year 2015, EA posted GAAP net revenue of $4.5 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality blockbuster brands such as The Sims, Madden NFL, EA SPORTS FIFA, Battlefield, Dragon Age and Plants vs. Zombies."

Shares of EA popped above major resistance near the $60.00 level earlier this month after reporting better than expected Q4 2015 results. Wall Street was looking for EA to deliver a profit of $0.26 a share on revenues of $852.9 million. EA announced a profit of $0.39 a share. Revenues were down -2.0% from a year ago but came in at $896 million, well above estimates.

Their full year results were impressive. EA's net revenues were up almost $1 billion to $4.5 billion. The company's net income soared from $8 million in 2014 to $875 million in 2015. Shares of EA have benefitted from the company's turnaround. The stock is up more than +100% in the last 12 months.

EA's guidance was mixed. They issued bearish guidance for their Q1 2016 (current quarter) and see EPS about flat ($0.00) when Wall Street was expecting $0.19 per share. EA is forecasting Q1 revenues significantly below expectations. However, they raised their fiscal year 2016 profit estimate to $2.75 per share when analysts were only expecting $2.63.

Last quarter EA spent $95 million buying back 1.8 million shares of their stock. When they reported earnings on May 5th they also announced a new $1 billion stock buyback program that expires on May 31, 2017.

EA management sounds pretty optimistic. Here's an excerpt from their earnings press release:

With a clear focus on putting our players first, FY15 was an exceptional year for Electronic Arts. We introduced award-winning games, delivered enduring entertainment in our live services, and forged deeper relationships with a growing global audience across consoles, mobile devices and PC, said Chief Executive Officer Andrew Wilson. EA continues to sharpen our focus and speed, and in the year ahead we will engage more players on more platforms with new experiences like Star Wars Battlefront, FIFA 16, Minions Paradise and more.

Two years ago, we discussed a three-year plan to double non-GAAP operating margins to 20%, said Chief Financial Officer Blake Jorgensen. Today, Im happy to announce that we exceeded our goal a full year ahead of schedule. Looking forward, we anticipate continued earnings growth driven by our strong portfolio, investment in new IP, the market shift to digital, and on-going cost discipline.

Wall Street's analyst community seems bullish on EA as well. Several firms reiterated their bullish ratings and raised price targets.

Shares of EA have been building on a bullish trend of higher lows. The current rally has produced a buy signal on the point & figure chart that is forecasting a long-term target of $110.00. On a short-term basis EA seems to be coiling for a breakout past resistance near $63.50. Tonight we're suggesting a trigger to buy calls at $63.65.

- Suggested Positions -

Long SEP $70 CALL (EA150918C70) entry $1.66

06/04/15 new stop @ 61.45
05/27/15 triggered @ 63.65
Option Format: symbol-year-month-day-call-strike


FactSet Research - FDS - close: 165.16 change: -1.64

Stop Loss: 163.85
Target(s): To Be Determined
Current Option Gain/Loss: +13.2%
Average Daily Volume = 302 thousand
Entry on May 13 at $162.25
Listed on May 11, 2015
Time Frame: Exit PRIOR to earnings on June 16th.
New Positions: see below

Comments:
06/04/15: Yesterday's intraday weakness in FDS continued with today's market decline. Shares of FDS were slowly fading all day long and eventually settled near potential support around $165.00 and its 20-dma.

I am not suggesting new positions at this time.

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.

- Suggested Positions -

Long JUN $165 CALL (FDS150619C165) entry $3.80

05/19/15 new stop @ 163.85
05/13/15 triggered @ 162.25
Option Format: symbol-year-month-day-call-strike


PowerShares QQQ ETF - QQQ - close: 109.56 change: -0.84

Stop Loss: 109.40
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 27.4 million
Entry on June -- at $---.--
Listed on June 03, 2015
Time Frame: Exit PRIOR to July expiration
New Positions: Yes, see below

Comments:
06/04/15: Big cap NASDAQ stocks were not spared from the market's selling pressure. The QQQ flirted with a breakdown below the 20-dma.

There is no change from last night's new play description. Our suggested entry point for bullish positions is $111.25.

Trade Description: June 3, 2015:
June does not have a great history for market performance. Stocks tend to move lower. Fortunately that is not a rule set in concrete. The sell in May trade did not show up this year. There's no guarantee that June is going to be a down month either.

As a matter of fact, the path of least resistance remains higher. The NASDAQ 100 index has been consolidating near its recent highs and looks poised to breakout. One way to play it is the QQQ ETF.

The QQQ is one of the largest and most liquid exchange traded funds. This particular ETF tracks the NASDAQ-100 index, which includes 100 of the largest non-financial stocks on the NASDAQ (lots of technology stocks). AAPL, MSFT, AMZN, GOOG, GOOGL, FB, GILD, INTC, CMCSA, CSCO and AMGN are its top holdings. You can see a list of the top twenty five holdings here.

If the market does breakout higher the QQQs could lead the charge. We want to be ready. The April 27th intraday high was $111.16. Tonight we are suggesting a trigger to buy calls at $111.25. We'll try and limit our risk with a relatively tight stop loss at $109.40. This is a short-term trade. We want to be out before the normal July option expiration.

Trigger @ $111.25

- Suggested Positions -

Buy the JUL $112 CALL (QQQ150717C112)

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




PUT Play Updates

Cerner Corp. - CERN - close: 67.06 change: -0.69

Stop Loss: 69.05
Target(s): To Be Determined
Current Option Gain/Loss: -10.2%
Average Daily Volume = 1.7 million
Entry on June 04 at $66.75
Listed on June 02, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/04/15: CERN briefly traded below support near $67.00. Shares hit our suggested entry point at $66.75 before paring its losses. Looking at the intraday chart I am suggesting readers wait for a new decline below $66.80 to launch new positions.

Trade Description: June 2, 2015:
CERN was having a pretty good year. Then the stock started to top out in March and April. Suddenly shares crashed lower in May due to disappointing guidance.

CERN is in the technology sector. According to the company, "Cerner's health information technologies connect people, information and systems at more than 18,000 facilities worldwide. Recognized for innovation, Cerner solutions assist clinicians in making care decisions and enable organizations to manage the health of populations. The company also offers an integrated clinical and financial system to help health care organizations manage revenue, as well as a wide range of services to support clients' clinical, financial and operational needs. Cerner's mission is to contribute to the systemic improvement of health care delivery and the health of communities."

CERN reported its Q1 earnings on May 7th. Just looking at the numbers it appeared to be a pretty good quarter. Earnings were up +22% from a year ago to $0.45 per share. That was only in-line with analysts' expectations. Revenues rose what look like a healthy +27% from a year ago to $996 million. Unfortunately that missed analysts' estimates for $1,084 million.

CERN's management said, "Revenue was below guidance provided by the Company due to a combination of lower than expected revenue from the recently closed acquisition of Siemens Health Services (Health Services) and lower revenue in our existing business." Earlier this year, in February, Cerner Corporation acquired substantially all of the assets, and assumed certain liabilities, of the Siemens Health Services business from Siemens AG.

CERN said their gross margins fell -40 basis points in the first quarter. They expect margins to slide another 100 to 150 basis points by yearend. Management provided Q2 and 2015 guidance that was below Wall Street estimates. This sparked the sell-off. The company is in a highly competitive industry and could definitely see more pricing pressures.

Technically the stock's oversold bounce didn't make it very far. Shares have been consolidating sideways in the $67-69 range for the last three weeks. The point & figure chart is bearish and forecasting at $59.00 target. Currently the stock looks poised to breakdown from this trading range. There is a chance it bounces at its simple 200-dma but we suspect it would be a temporary bounce. Tonight we are suggesting a trigger to buy puts at $66.75.

- Suggested Positions -

Long SEP $65 PUT (CERN150918P65) entry $2.45

06/04/15 triggered @ $66.75
Option Format: symbol-year-month-day-call-strike


Kohl's Corp. - KSS - close: 64.84 change: -0.50

Stop Loss: 66.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.3 million
Entry on June -- at $---.--
Listed on June 01, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
06/04/15: KSS briefly tagged a new two-week low but bounced off technical support at its simple 200-dma. We are looking for a breakdown below $64.00.

We want to buy puts when KSS trades at $63.90.

Trade Description: June 1, 2015:
Most of the big retail names have been disappointing on the sales front. Macy's (M) most recent earnings report saw the company miss analysts' expectations on both the top and bottom line and Macy's lowered their guidance.

J.C. Panney Co (JCP) beat estimates but their same-store sales disappointed and traders sold the stock. Retail titan Wal-Mart (WMT) missed estimates on both the top and bottom line and issued soft guidance. Kohl's (KSS) is suffering from similar results.

Wall Street is somewhat surprised by the retailer's lackluster results. The U.S. consumer is benefitting from significantly lower gas prices from a year ago. We have one of the healthiest job markets in years. Yet consumers are not spending. The U.S. Commerce department said April retail sales were flat (+0%) after a +1.1% rise in March. Today (June 1st), the Commerce Department reported that consumer spending was flat in April. According to Marketwatch.com, the pace of consumer spending has fallen to the lowest level in several years. After another harsh winter many were expecting pent up demand by consumers to produce a surge in spending when the weather warmed up. Thus far consumers are keeping their wallets closed.

KSS is in the services sector. According to the company, "Kohl's (KSS) is a leading specialty department store with 1,164 stores in 49 states. With a commitment to inspiring and empowering families to lead fulfilled lives, the company offers amazing national and exclusive brands, incredible savings and inspiring shopping experiences in-store, online at Kohls.com and via mobile devices."

The first quarter of 2015 was pretty good for KSS' stock. Shares rallied big on its Q4 results announced in early February. Earnings were better than expected. Revenues were just a little bit above expectations. Management raised their fiscal year 2016 guidance and raised their dividend.

Then KSS' upward momentum stalled in April. The stock started to reverse lower. Shares got crushed on May 14th with its biggest ever one-day drop that shaved off $2 billion in market cap. The drop was a reaction to KSS' Q1 results. Earnings were up +5% from a year ago and beat estimates. Yet revenues missed with $4.12 billion in sales versus analysts' estimates of $4.19 billion. Another warning signal was KSS' Q1 comparable store sales were up +1.4% versus expectations for +2.5%.

The disappointing news sparked some analyst downgrades and lower price targets. The point & figure chart is bearish and forecasting at $55.00 target. Technically shares of KSS look weak. The oversold bounce lasted about three days and KSS rolled over again with a steady pattern of lower highs.

Today KSS is poised to breakdown below its trend of higher lows and technical support at its simple 200-dma. We are suggesting a trigger to buy puts at $63.90. I will point out that prior resistance near $62.00 could be support but momentum clearly favors the bears here. We suspect shares could fall into the $56-60 zone.

Trigger @ $63.90

- Suggested Positions -

Buy the OCT $60 PUT (KSS151016P60)

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


Norfolk Southern Corp. - NSC - close: 91.96 change: -0.54

Stop Loss: 95.65
Target(s): To Be Determined
Current Option Gain/Loss: +28.3%
Average Daily Volume = 2.2 million
Entry on May 26 at $94.85
Listed on May 23, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/04/15: So far so good. The bounce attempt in NSC failed intraday and shares dipped to new 52-week lows. NSC looks ready to breakdown from this short-term $92-94 trading range.

No new positions at this time.

Trade Description: May 23, 2015:
The combination of weak fuel prices, lower global demand for fuel, and rising exports from other countries has been hurting U.S. coal exports. The U.S. Energy Information Administration expects U.S. coal exports to fall throughout 2015 before leveling off in 2016. Less exports means less coal that needs to be moved by railroad.

NSC is in the services sector. They're a major player in the railroad industry. According to the company, "Norfolk Southern Corporation (NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products."

Falling coal shipments is not the only problem for the railroads. Crude oil's decline from last year's highs and the massive slowdown in the amount of fracking in the U.S. has also hurt the railroad business. Less drilling means fewer rail cars of oil pipe and drilling equipment to be shipped. Less fracking means less fracking sand and other proppants to be shipped. Less drilling also means less oil produced and thus less oil to be transported by rails.

It's not just NSC that's suffering. In March 2015 railroad company Kansas City Southern (KSU) dramatically reduced their guidance. Two months later (about May 14th) KSU actually revoked its guidance altogether. Management sees no visibility due to so much uncertainty surrounding the energy market. KSU's energy-related business is down -50% from a year ago and carloads are down -38% in Q2 2015. Their utility coal shipments are down -68%.

Another company, Union Pacific (UNP), painted a similar picture of lower shipments and falling demand. The industry is facing difficult year over year comparisons. They have seen 11 weeks of negative rail volume. Industry wide coal shipments are down -15% from a year ago (UNP's was down -25%). Shipments of crude oil are down. Shipments of agriculture products are down.

It could be months before the oil industry in the U.S. recovers. Coal isn't expected to recover this year. That doesn't paint a very rosy picture for the railroads.

On April 13, 2015 NSC issued an earnings warning. They guided their Q1 results to $1.00 per share on revenues of $2.6 billion. That's a -15% drop in earnings from a year ago. Wall Street was expecting $1.29 per share on revenues of $2.68 billion. Shares of NSC crashed on this news and then rebounded but the bounce failed at technical resistance and shares have accelerated lower. NSC has broke down under major support near the $100 level.

Technical traders could argue that NSC has created a giant head-and-shoulders pattern (with two right shoulders) over the last nine months. This H&S pattern would suggest a downside target in the $80-85 region. Tonight we are suggesting a trigger to buy puts at $94.85. We will start this trade with a stop loss at $100.25. More conservative traders may want to use a stop around $98.30 as an alternative.

- Suggested Positions -

Long SEP $90 PUT (NSC150918P90) entry $2.65

05/30/15 new stop @ 95.65
05/26/15 triggered @ $94.85
Option Format: symbol-year-month-day-call-strike


SPX Corp. - SPW - close: 74.39 change: -0.82

Stop Loss: 76.55
Target(s): To Be Determined
Current Option Gain/Loss: -35.5%
Average Daily Volume = 500 thousand
Entry on May 28 at $73.45
Listed on May 26, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/04/15: SPW followed the market lower today but it remains inside this $73.50-76.00 trading range. If shares do not breakdown soon we will likely remove SPW as an active trade.

I am not suggesting new positions at this time.

Trade Description: May 26, 2015:
The business environment for SPW seems to be getting tougher. Their revenue growth has slowed down and now turned negative. Naturally shares of SPW have been under pressure.

SPW is in the industrial goods sector. According to the company, "Based in Charlotte, North Carolina, SPX Corporation (NYSE: SPW) is a global multi-industry manufacturing leader with approximately $5 billion in annual revenue, operations in more than 35 countries and over 14,000 employees. The company's highly-specialized, engineered products and technologies are concentrated in Flow Technology and energy infrastructure. Many of SPX's innovative solutions are playing a role in helping to meet rising global demand for electricity and processed foods and beverages, particularly in emerging markets. The company's key products include food processing systems for the food and beverage industry, critical pumps and valves used in oil & gas processing, power transformers used by utility companies, and heat transfer technology for power plants."

SPW's 2014 Q3 revenues only grew +1.1%. Their 2014 Q4 earnings report showed revenues falling -3.9% and management lowered guidance for fiscal year 2015. They forecasting revenues falling into the $4.48-4.67 billion range, which was below Wall Street's $4.8 billion estimate.

The disappointing performance continued into the first quarter of 2015. SPW reported earnings on April 29th. They missed estimates by three cents. The revenue decline accelerated with revenues down -12.1% from a year ago, and significantly below estimates. Management lowered their 2015 guidance again. They now forecast 2015 revenues in the $4.25-4.44 billion versus Wall Street's adjusted estimate of $4.5 billion.

Traders have been selling the bounces and SPW has a bearish trend of lower highs. Today's display of relative weakness (-2.8%) was significant because it's a breakdown under support at $75.00. I would be tempted to buy puts now but tonight we are listing a trigger to buy puts at $73.45.

FYI: In October 2014 SPW announced a spin-off of its flow business into a new independent company. In their press release SPW said the Future Flow Company will consist of SPX's current Flow segment and its hydraulic technologies business. It is expected to have annual revenue of approximately $3 billion. SPW just recently filed their Form 10 Registration Statement and said the new company's name will be SPX FLOW. The spin-off is expected to be complete in Q3 2015.

- Suggested Positions -

Long JUL $70 PUT (SPW150717P70) entry $1.55

05/28/15 triggered @ $73.45
Option Format: symbol-year-month-day-call-strike


Zillow Group - Z - close: 88.35 change: -2.40

Stop Loss: 93.55
Target(s): To Be Determined
Current Option Gain/Loss: + 7.7%
Average Daily Volume = 2.0 million
Entry on June 01 at $89.85
Listed on May 30, 2015
Time Frame: exit prior to July expiration
New Positions: see below

Comments:
06/04/15: Shares of Z are on the right track. The sell-off accelerated today with a -2.6% decline. Z also broke down under support near $90.00.

Tonight we are moving the stop loss down to $93.55. No new positions at this time.

Trade Description: May 30, 2015:
The National Association of Realtors just announced on May 28th that pending home sales surged to nine-year highs in April. The U.S. real estate market is booming and yet shares of Z are down -31% from their 2015 closing highs. What's wrong with this picture?

Zillow is considered part of the financial sector. They are a free online service for consumers that provides home values, listings, and mortgages. According to the company, "Zillow Group (Nasdaq:Z) houses a portfolio of the largest real estate and home-related brands on mobile and Web. The company's brands focus on all stages of the home lifecycle: renting, buying, selling, financing and home improvement. Zillow Group is committed to empowering consumers with unparalleled data, inspiration and knowledge around homes, and connecting them with the right local professionals to help. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow(R), Trulia(R), StreetEasy(R) and HotPads(R). In addition, Zillow Group works with tens of thousands of real estate agents, lenders and rental professionals, helping maximize business opportunities and connect to millions of consumers. The company operates a number of business brands for real estate, rental and mortgage professionals, including Postlets(R), Mortech(R), Diverse Solutions(R), Market Leader(R) and Retsly(TM). The company is headquartered in Seattle."

The last year has been a rocky one for Zillow investors. The stock rallied from $130 to $160 in about three days back in July 2014 when the company announced a $2.5 billion stock for stock deal to buy its rival Trulia. By January 2015 the stock was bouncing along the $93.00 area.

Shares of Z did spike in February 2015 when they finally announced the completion of the merger. Shares surged more than 15% in one day on the news it had closed the acquisition. Zillow changed their name to Zillow Group. The combined company accounts for about 60% of the online real estate advertising market. It's the biggest U.S. real estate and home-related branding company on the Internet and mobile.

After the February spike higher shares of Zillow did nothing but fall. This culminated into a huge spike down on April 14th. The company issued an earnings warning. Z's management said that 2015 would be a "transition year", which on Wall Street means our quarterly results will stink. The company cut their 2015 revenue estimate down to $690 million. At the time Wall Street analysts were estimating $722-753 million in revenues. Z slashed their EBITDA estimate to $80 million when analysts were expecting $141 million. Zillow blamed the length review process by the FTC over potential anti-trust issues. Z's management was expecting a three-month review. It took nine months. No worries though, Z's management says that 2016 and 2017 will be awesome.

Z's most recent earnings report was May 12th. It was the first report with the combined company's results. Z posted a loss of $1.19 per share versus a 16-cent loss a year ago. Backing out their restructuring costs and stock option expenses their adjusted earnings was a profit of $0.05 per shares. That was 17 cents better than analysts were expecting. Revenues soared +92% to $127.3 million. Yet that wasn't good enough. Wall Street had been forecasting revenues in the $135-141 million range.

Shares of Z popped on its earnings news but they have done nothing but sink since then. Now the stock is poised to breakdown below round-number support at $90.00. The point & figure chart is bearish and forecasting an $86.00 target (which could get worse as Z continues to sink).

Bears point out that Zillow's valuation is very rich at more than 60 times forward earnings. The company also faces competition from the likes of Move.com and Realtor.com, both run by News Corp. My only concern is that there are a lot of bears shooting against this stock. The most recent data listed short interest at 37% of the 46.3 million share float. That's why Z can see huge one-day spikes as shorts panic. Yet overall they have been correct with Z underperforming the market.

Tonight I am suggesting a trigger to launch small bearish positions at $89.85. Odds are pretty good we could see Z retest its lows in the $80-81 area.

- Suggested Positions -

Long JUL $85 PUT (Z150717P85) entry $2.60

06/04/15 new stop @ 93.55
06/01/15 triggered @ $89.85
Option Format: symbol-year-month-day-call-strike



CLOSED BULLISH PLAYS

Anthem, Inc. - ANTM - close: 163.76 change: -0.38

Stop Loss: 161.85
Target(s): To Be Determined
Current Option Gain/Loss: +5.2%
Average Daily Volume = 1.8 million
Entry on May 18 at $162.00
Listed on May 16, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/04/15: ANTM is snapping a four-week winning streak in a big way. The action over the last few days has turned into a short-term bearish reversal. Today's move confirms it with a breakdown below support near $162.00. ANTM hit our stop at $161.85.

- Suggested Positions -

SEP $170 CALL (ANTM150918C170) entry $4.40 exit $4.63 (+5.2%)

06/04/15 stopped out
05/30/15 new stop @ 161.85
05/26/15 new stop @ 159.85
05/18/15 triggered on gap open at $162.00, trigger was $161.65
Option Format: symbol-year-month-day-call-strike

chart: