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Newsletter

Daily Newsletter, Wednesday, 6/10/2015

Table of Contents

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

Market Wrap

Germany Gives the Markets A Lift

by Keene Little

Click here to email Keene Little
News that Germany is considering additional financial aid to Greece gave the stock markets a lift. This is an on-again/off-again concern by the markets and the end result is just more of the same choppy whippy price action.

Wednesday's Market Stats

This morning's strong rally came courtesy of news out of Europe that Germany might, perhaps, maybe, possibly support financial aid for Greece so that they won't default (yet) on their loans. That's all the stock market needed to hear and it shot higher out of the gate this morning, likely greatly aided by short covering. At the moment it's unclear whether or not it will be a 1-day wonder rally since prices remain inside the 4-month trading range. As for help for Greece, I'm reminded of the old woman on the old Wendy's commercial who looked inside the hamburger bun and yelled out, "Where's the beef?"

Germany is apparently now saying Greece needs to agree to just one of several economic reforms and will then OK the next loan package. To me it sounds like Germany is capitulating and that's apparently a good thing for the markets. It really is amazing how excited the market gets about the game of kick the can. But after four days of selling it's hard to know if today's rally was just an oversold reaction (dead cat bounce) or the start of another rally leg that will take us to new highs. At the moment it looks like the rally should see some follow through after a pullback correction.

There were no significant economic reports this morning so the only news event to spark today's rally was the Germany-Greece news. But helping the market today was news from the Commerce Department's Quarterly Services (QSS) survey, which suggests consumer spending might be a little stronger than had been initially reported last month with the 2nd GDP estimate. That has economists thinking the 3rd estimate, to be published June 24th, will show an improvement by as much as 0.4% to 2.2% annual rate. Viewed slightly differently, the contraction in Q2 could be revised up to -0.2% vs. the 2nd estimate of -0.7%. So it's still a sign of slowing but it could be "less bad." Of course if that's true then the Fed could have an easier path to its first rate increase and the market will probably react badly to any news from the Fed that they're on track to raising rates in September. So it's questionable how a "less bad" GDP number will affect the market, including today's rally.

The market is at a critical point here and the price action on Thursday could tell us what to expect next week and for the rest of the month. As I'll point out on a couple of the short-term intraday charts for the DOW and SPX, what kind of pattern we get off Tuesday morning's low will provide clues for the larger pattern. One points to a rally to new highs next week (opex rally) while the other points hard down from here.

Other than the RUT's relatively stronger picture over the past couple of weeks, the other indexes look similar so analyzing one of their patterns gives us a good idea about the others as well. I'll start tonight's chart review with a look at the most-watched index, the Dow Industrials.

The decline from May resulted in a break of the DOW's uptrend line from February, near 17950 at the time, and that looked like a bearish break below the bottom of a rising wedge pattern. Today's rally has the DOW back up against its broken uptrend line, near 18000, which begs the question -- is this rally going to lead something that will take it to a new high in the coming week(s) or is it just a bounce up to resistance before heading lower?

Dow Industrials, INDU, Weekly chart

As can be more easily seen on the daily chart below, today's rally had the DOW poking above its broken uptrend line from February and its 50-dma, near 18021, but closed on its trend line. The bulls need to see a recovery above this line as well as its broken 50-dma. The bears want to see this back-test followed by a bearish kiss goodbye and stronger selling. The winner of this debate tomorrow should set the tone for next week and the rest of the month.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,168
- bearish below 17,715

From an intraday perspective, with the 60-min chart below, we have a slightly different picture. The break of the uptrend line from February was followed by a pullback to the line so it fits as a bullish back-test and the bulls will want to see a morning rally take it up to a new high. But a new high would then likely lead to a drop back down S/R near 18000 and that would scare away some bulls, just in time for a stronger rally to follow (explained with the chart after this one). If the bears step back in tomorrow and drive the index back down it will keep the bearish pattern alive (labeled in red). This one says this morning's rally was just an oversold short-covering rally to finish another upside correction before selling off strong in a 3rd of a 3rd wave down in the decline from May.

Dow Industrials, INDU, 60-min chart

I don't normally get into studying the veins on the leaves in a market wrap but I think it's worth reviewing what will be important to watch for Thursday morning. The DOW's 10-min chart below shows the rally off Tuesday morning's low and so far it's a 3-wave move up to this morning's high. For the bearish pattern that says it's just a high a-b-c bounce that will be followed by a strong selloff. I think if the DOW gets below 17900 it would negate the bullish pattern (green). The bulls want to see another leg up to give us a 5-wave rally from Tuesday, in which case we'd have a trend reversal back to the upside. Following a 5-wave move will be a corrective (3-wave) pullback, probably into Friday (pre-opex head-fake move?), and then we'd look for another rally leg (strong rally in a 3rd wave higher). This is why Thursday morning's move will be important to watch and see how this will set up the next move and help define what next week will probably go.

Dow Industrials, INDU, 10-min chart

SPX looks the same as the DOW but with different trend lines, none of which were in play today. SPX managed to climb back above its broken 50-dma, near 2102, but stopped short of its 20-dma, near 2111. But we've got the same setup for Thursday as shown for the DOW, which is shown on the 30-min chart after the daily chart below. A rally above 2121 would strongly suggest new highs are coming whereas a drop below Tuesday's low near 2072 would be the fat lady singing the blues for the bulls.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2121
- bearish below 2072

If SPX drops below S/R near 2099 it would keep the bearish pattern alive. But if the bulls can drive the index at least marginally higher, preferably up to its broken uptrend line from March 2009 - October 2011, near 2115, it would give us a bullish move off Tuesday's low. A back-test of the broken uptrend line and then a deeper pullback (to at least 2100) would give the bears a reason to jump in short but it would likely be a big mistake since the pullback would likely lead to a stronger 3rd wave rally as all those bears get chased back out. The next couple of days could look like more of the same choppy whippy volatility that we've seen for more than four months now so traders will need to be careful.

S&P 500, SPX, 30-min chart

Monday's and Tuesday's selloff in NDX had it looking bearish after it broke both its 50-dma and its long-term uptrend line from March 2009 - June 2013, both near 4446 at the time. But bulls made a late-night attack on the bear's camp and caused them to retreat today and both the 50-dma and uptrend line, now near 4450 and 4460, resp., were recovered and that keeps the bulls in the game. But they were only able to back-test a broken uptrend line from February 2 - April 6, which was broken last Friday, as well as its broken 20-dma, both near today's high at 4497. The bulls would look better with a sustained rally above 4500 while the bears would look better with NDX below 4440 and confirmed very bearish below Tuesday's low at 4392. Above 4540 would open the door to new highs, potentially up to the top of a rising wedge pattern near 4660 by the end of the month.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4540
- bearish below 4392

The RUT is now presenting us with an interesting setup, one I've been watching for the past couple of weeks. The pattern since the low on May 6th I've been watching the development of what looks like a bearish rising wedge. Even though the RUT was holding up better than the other indexes it was looking like a bearish pattern and today's rally gave it a little throw-over above the top of the wedge (on news, a typical way these finish). It closed at the top of the wedge near 1267 so it could go either way here. The bulls want to see a sustained rally above 1270, which would be a bullish breakout from the wedge and that would point to a strong rally to follow. But a drop below Tuesday's low near 1242 would confirm a breakdown from the wedge and give us a strong signal that the RUT has seen its final high. Again, the next day or two could give us the answer.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1276
- bearish below 1242

A look at a bigger index, the NYSE Composite, doesn't provide any clearer signal at the moment, except to say it looks bullish if only because important support held in an uptrend. As can be seen on its daily chart below, Tuesday's low was a successful test of support at its 200-dma and uptrend line from December, both near 10884. Today's rally is now approaching its broken 20- and 50-dma's, which are about to cross near 11100 (today's high was 11080). The bears need a break below 10800 otherwise the bulls stay in control and we could see a rally up to the top of a rising wedge pattern (trend line along the highs from November 2014 - April 2015, near 11330 by the end of the month (+2.5% from here).

NYSE Composite index, Daily chart

Key Levels for NYA:
- bullish above 11,150
- bearish below 10,800

Bond prices gapped down this morning which popped yields higher. But the bond market traded sideways following this morning's move and both the 10-year and 30-year yields stopped at/near resistance with little dojis for their daily candles. The TYX daily chart below shows the rally off its January low up has now made it up to the top of a parallel up-channel and today's gap up with a doji could lead to an evening star reversal pattern if today's rally is followed with a gap down and red candle on Thursday. Once again, even for the bond market, Thursday could provide an important clue for what will happen next. TYX would be more bullish above 3.23% but bearish if it gaps down and it would be confirmed bearish (bullish for price) below its May 29th low at 2.842% and its 200-dma, currently 2.843% (and soon to be crossed by its upward trending 50-dma).

30-year Yield, TNX, Daily chart

The TRAN continues to look like the weakling among the bunch. It got a bounce with the market today but its remains in a bearish pattern, especially following the back-test of support-turned-resistance last week near 8515 (price-level S/R and its broken uptrend line from March 2009 - November 2012) and the bearish kiss goodbye that followed. I do see the potential for a higher bounce in the next few weeks, perhaps up to its 200-dma, currently near 8750, before heading lower but that's not how I'd bet on it at the moment.

Transportation Index, TRAN, Daily chart

The U.S. dollar pulled back today, which was supposedly due to an expected debate around the G7 summit regarding the strength of the dollar vs. other currencies. It's all part of the currency wars and there are several countries, especially emerging ones, that are very worried about a stronger dollar. If their currencies are pegged to the U.S. dollar it makes their products much more expensive to export. If the Fed raises rates, as they're threatening to do, it would increase the value of the dollar further and so the discussion about rates and the dollar's value. As for the dollar's pattern, I think it's not going to change value much for the remainder of this year as it hammers out a sideways correction (just a guess about that at the moment but it would fit the larger price pattern) before heading higher.

U.S. Dollar contract, DX, Daily chart

Following last week's low for gold I thought it was ready for a bigger bounce to correct the decline from May 18th. Today's rally had it tagging its broken uptrend line from March-May and that might be all the bounce we'll see. But it would look a little better with a small pullback and then another leg up to again test its broken uptrend line, maybe up near 1200 next week, before starting a stronger decline. Above its June 1st high at 1204.70 would be short-term bullish and above 1245 would make it more bullish but at the moment I'm looking at a bounce in gold as a shorting opportunity.

Gold continuous contract, GC, Daily chart

Oil has been hanging tough since its high on May 6th by trading sideways at price-level S/R near 58.50. The month-long sideways consolidation looks bullish and if oil rallies above the May 6th high at 62.58 it would look bullish for a move up to its broken uptrend line from 1998-2008, near 69.25. Its 50-week MA is coming down toward that level and it makes for a good upside target if it does rally. Otherwise, like the dollar, I see the potential for a big sideways triangle this year before it breaks down next year.

Oil continuous contract, CL, Daily chart

Tomorrow's economic reports include unemployment claims data, retail sales, export/import prices and then business and natural gas inventories. The retail sales data will be important since there's currently a discussion about whether or not the 3rd GDP estimate will be raised based on some improvements seen in consumer spending. That's not what we're seeing in retail sales so a bad number in the morning could torpedo today's rally attempt. But a stronger-than-expected number would help the argument for a "less bad" GDP estimate.

Economic reports and Summary

Conclusion

The stock market got a big boost today and that saved the indexes from confirming a bearish break of important support levels. The recovery keeps the bulls in the game but as shown on the RUT's chart, there is the possibility today's rally was the last hurrah for that index (to finish its rising wedge pattern). And if the market sells off on Thursday it would leave bearish patterns in place for the other indexes as well, which would suggest a strong selloff to follow.

From a short-term perspective Thursday morning's move will be important. A minor new high for the move up from Tuesday, following today's post-rally consolidation, would be bullish. It will lead to a larger pullback correction but that pullback will be a buying opportunity for a stronger rally into opex. It would even fit as the pre-opex head-fake decline followed by an opex rally. But an immediate selloff would keep the bearish pattern intact and I'd be reluctant to buy that kind of pullback since it could lead to much stronger selling into next week.

The bottom line is that we remain inside a 4-month trading range that has been full of choppy whippy price action with little follow through in either direction. Traders get chopped to pieces in this kind of market so it's important to remember rules for capital preservation during times like these.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Option Plays

Consistently Raising Guidance

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these stocks may need to see a break past key support or resistance:

Bullish ideas: UA, MYL, FB, ADI, MA, SIRO, DST, HELE, AVGO




NEW DIRECTIONAL CALL PLAYS

Aetna Inc. - AET - close: 117.94 change: +0.70

Stop Loss: 114.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.0 million
Entry on June -- at $---.--
Listed on June 10, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Trade Description:
Healthcare was big business before Obamacare. Now it's even bigger. AET is the third largest health insurer in the U.S. They added over 950,000 clients thanks to the Affordable Care Act. Naturally it doesn't hurt the healthcare business when the ACA forces you to buy health insurance or pay a tax penalty. Big insurers like AET are also benefitting form an expanding Medicaid program.

If you are not familiar with AET the company describes itself this way: "Aetna is one of the nation's leading diversified health care benefits companies, serving an estimated 46 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities, Medicaid health care management services, workers' compensation administrative services and health information technology products and services. Aetna's customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups and expatriates."

Earnings have been steadily improving for AET. They have a habit of beating estimates. Management has raised their guidance the last three quarters in a row. AET's most recent report was April 28th. The company reported its 2015 Q1 earnings were up +17% from a year ago. Analysts were expecting a profit of $1.94 per share on revenues of $15.5 billion. AET delivered $2.39 per share. Revenues were up +8% to $15.09 billion. The number of medical enrollment members rose +4% to 23.7 million.

AET's management raised their 2015 guidance for the second time in a row. They now expect fiscal 2015 earnings in the $7.20-7.40 range compared to analysts' estimates at $7.17. The stock has been steadily rising thanks to its bullish outlook.

The big insurance stocks surged in late May on M&A rumors. Then on May 29th Humana (HUM) announced they were putting the company up for sale. HUM surged +20% on that one session. AET, Cigna (CI), and Anthem (ANTM) have all been rumored as potential suitors for HUM. Lately Wall Street has been rewarding the acquirer's stock with a rally on any merger news. AET could rally if they turn out to be the buyer.

Shares of AET just recently saw a $5.00 correction fro $120 to $115 and bounced. This rebound looks like a potential entry point. Today's intraday high was $118.53. We are suggesting a trigger to buy calls at $118.75.

Trigger @ $118.75

- Suggested Positions -

Buy the OCT $125 CALL (AET151016C125) current ask $3.80
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

Hopes For Greece Fuel Rally

by James Brown

Click here to email James Brown

Editor's Note:

Hopes for a deal with Greece helped fuel widespread gains both in European and American markets. The Euro Stoxx 50 index was up +2.0%. German was up +2.4%. All the major U.S. indices rallied more than +1%.

SWKS and ZBRA both hit our bullish entry triggers today.


Current Portfolio:


CALL Play Updates

Criteo SA - CRTO - close: 50.68 change: +0.95

Stop Loss: 47.45
Target(s): To Be Determined
Current Option Gain/Loss: -8.9%
Average Daily Volume = 628 thousand
Entry on June 05 at $50.25
Listed on June 04, 2015
Time Frame: Exit PRIOR to July option expiration
New Positions: , see below

Comments:
06/10/15: Bullish analyst comments helped CRTO outperform with a +1.9% gain. The analyst also raised their price target on CRTO from $52 to $60.

Shares look poised to breakout past last week's high.

Trade Description: June 4, 2015:
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.

- Suggested Positions -

Long JUL $50 CALL (CRTO150717C50) entry $2.80

06/05/15 triggered @ $50.25
Option Format: symbol-year-month-day-call-strike


Tableau Software, Inc. - DATA - close: 117.73 change: +1.46

Stop Loss: 111.75
Target(s): To Be Determined
Current Option Gain/Loss: +2.1%
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:
06/10/15: DATA rebounded off its Wednesday morning low and ended the session at a new all-time high. Tonight we will raise the stop loss up to $111.75.

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

06/10/15 new stop @ 111.75
05/28/15 triggered @ $115.25
Option Format: symbol-year-month-day-call-strike


Skyworks Solutions Inc. - SWKS - close: 105.54 change: +3.30

Stop Loss: 97.95
Target(s): To Be Determined
Current Option Gain/Loss: +2.0%
Average Daily Volume = 4.0 million
Entry on June 10 at $103.44
Listed on June 09, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/15: Our brand new play on SWKS is off to a strong start. The plan was to buy calls at $103.25 but SWKS gapped open higher at $103.44. Shares raced to a +3.2% gain on the session. It looks like shares closed just below short-term resistance near $106.00.

I would not chase it here. After a +3% move SWKS could see a dip tomorrow.

Trade Description: June 9, 2015:
SWKS seems to be everywhere. They make semiconductor chips for just about every industry including aerospace, automotive, consumer electronics, wearables, and the Internet of Things. They have been called the leading wireless semiconductor company. They're probably best known for being a component supplier to Apple (AAPL) for the company's iPhones.

The stock has soared from its October 2014 lows near $45 a share to over $100 today (a +126% move). SWKS is up +39.7% year to date versus a +5.5% gain in the NASDAQ composite and a +3.6% gain in the SOX semiconductor index.

If you're not familiar with SWKS they're in the technology sector. According to the company website, "Skyworks Solutions, Inc. is an innovator of high performance analog semiconductors. Leveraging core technologies, Skyworks supports automotive, broadband, wireless infrastructure, energy management, GPS, industrial, medical, military, wireless networking, smartphone and tablet applications. The Company's portfolio includes amplifiers, attenuators, circulators, demodulators, detectors, diodes, directional couplers, front-end modules, hybrids, infrastructure RF subsystems, isolators, lighting and display solutions, mixers, modulators, optocouplers, optoisolators, phase shifters, PLLs/synthesizers/VCOs, power dividers/combiners, power management devices, receivers, switches and technical ceramics. Headquartered in Woburn, Mass., Skyworks is worldwide with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America."

The company is really cashing in on some major global trends including smart phones and smart(er) cars. Data suggests that over 90% of mobile phone users are still using 2G and 3G phones. That means SWKS should benefit as they upgrade to 4G phones. Meanwhile SWKS is also poised to benefit from the surging trend of interconnectivity in automobiles. One forecast estimates that 75% of automobiles in 2020 (about 70 million vehicles) will have Internet-connectivity. Today that number is only around 10 million cars.

The company's earnings growth has been phenomenal. They have beaten Wall Street's earnings and revenues estimates the last four quarters in a row. They have also raised their guidance the last four quarters in a row. Their 2014 Q4 report saw revenues up +50%. Their 2015 Q1 reported revenues were up +59% while earnings were up +88%. SWKS' Q2 report on April 30th delivered earnings growth of +85% on revenue growth of +58%.

Several analysts upgraded their price target on SWKS following the April results. Analysts are expecting strong year-over-year growth for the next several quarters. One reason is the Apple iPhone upgrade cycle. There are about 450 million iPhones in circulation. Thus far only about 20% have upgraded to the iPhone 6 or 6+. That leaves a lot more iPhone sales to come.

A fast-growing company like SWKS can be a buyout target. There have been rumors that QCOM is a potential suitor.

Shares of SWKS have seen an intraday correction from $111.60 on June 1st to $98.07 today. That's a -11% pullback and traders pounced on SWKS when it started to bounce. The $100 region and the 50-dma coincide with the bullish trend of higher lows. We want to hop on board the SWKS train if shares continue to rebound. Tonight we are suggesting a trigger to buy calls at $103.25. I should warn you that SWKS can be a volatile stock. You may want to consider this a higher-risk trade. We'll start this trade with a stop loss under today's low (just below $98.07).

- Suggested Positions -

Long AUG $110 CALL (SWKS150821C110) entry $4.90

06/10/15 triggered on gap open at $103.44, suggested entry was $103.25.
Option Format: symbol-year-month-day-call-strike


Zebra Tech. - ZBRA - close: 115.68 change: +3.20

Stop Loss: 109.85
Target(s): To Be Determined
Current Option Gain/Loss: -17.5%
Average Daily Volume = 475 thousand
Entry on June 10 at $113.54
Listed on June 06, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/15: ZBRA also displayed significant relative strength today. Last night we adjusted our entry trigger to $113.25. ZBRA saw a small gap higher early this morning so our trade opened at $113.54 instead. ZBRA then sprinted to a +2.8% gain and a bullish breakout past resistance near $115.00.

Trade Description: June 6, 2015:
Traditionally known for bar code scanning and RFID technology, ZBRA has changed. They have grown into a company that management says puts them right in the middle of three major tech trends: the Internet of Things, mobility, and cloud computing. Today the company has thousands of customers in more than 100 countries, including more than 95 percent of all Fortune 500 companies.

ZBRA is in the industrial goods sector. In April 2014 they announced a $3.45 billion deal to buy the Motorola Solutions enterprise unit. According to the company, "Zebra Technologies is a global leader in enterprise asset intelligence, designing and marketing specialty printers, mobile computing, data capture, radio frequency identification products and real-time locating systems. Incorporated in 1969, the company has over 7,000 employees worldwide and provides visibility into valued assets, transactions and people The company's extensive portfolio of marking and printing technologies, including RFID and real-time location solutions, illuminates mission-critical information to help customers take smarter business actions."

The company has been consistently delivering on the earnings front. ZBRA has reported seven quarters in a row of double-digit earnings growth. The numbers have boomed since the addition of the enterprise unit in October last year.

Looking at the last few quarterly reports ZBRA has been beating Wall Street estimates on both the top and bottom line . Their most recent report was May 13th where ZBRA announced its 2015 Q1 results of $1.39 per share. That was a +53% improvement from the prior year and 28 cents above estimates. Revenues surged +210% to $893 million, which was above estimates. That was thanks to $561 million in sales from the Motorola solutions business. Even ZBRA's legacy business saw a +15% improvement in sales.

Anders Gustafsson, ZBRA's CEO, commented on his company's report, saying, "We started the year with strong, positive momentum, as business activity remained high specifically in North America and Europe. Our partners and customers are responding enthusiastically to our greatly expanded portfolio of solutions and capabilities, and our enhanced focus on giving them improved visibility into their assets, transactions and people for better enterprise asset intelligence. During the quarter we also made material progress on achieving our cost-synergy targets, pursuing growth initiatives and integrating Zebra with the Enterprise business acquired from Motorola Solutions in October. The favorable business trends are continuing into the second quarter, as Zebra is well positioned to benefit over the long term from the convergence of technology trends in the Internet of Things, mobility and cloud computing."

ZBRA guided in-line with analysts' estimates. Wall Street expects full year 2015 earnings growth of +50% and +24% growth in 2016. This bullish earnings picture has fueled big gains for ZBRA's stock price. The S&P 500 is up +1.6% year to date versus the NASDAQ composite's +6.6% gain. Currently ZBRA is up +47% this year. The stock has almost doubled from its October 2014 lows near $60.

ZBRA produced huge gains after its earnings report in May. After consolidating several days near $110 the stock broke out again on June 2nd. We like how traders bought the dip on Friday morning and expect ZBRA to hit new highs soon. Tonight we are suggesting a trigger to buy calls at $115.15.

- Suggested Positions -

Long AUG $120 CALL (ZBRA150821C120) entry $4.00

06/10/15 triggered @ $113.54 (intraday gap higher)
06/09/15 Entry strategy adjustment: Move the entry trigger from $115.15 to $113.25. Adjust the stop loss from $110.85 to $109.85
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Cerner Corp. - CERN - close: 67.17 change: +1.40

Stop Loss: 68.15
Target(s): To Be Determined
Current Option Gain/Loss: -12.2%
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:
06/10/15: Ouch! CERN just erased the last three days worth of losses with a +2.1% bounce. Broken support near $67.00 should have been resistance. The fact that CERN closed above this level is a potential warning signal for traders.

Tonight I am lowering the stop loss to $68.15. More conservative traders may want to lower their stop even further. No new positions at this time.

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

06/10/15 new stop @ 68.15
06/04/15 triggered @ $66.75
Option Format: symbol-year-month-day-call-strike


Kohl's Corp. - KSS - close: 62.46 change: +0.41

Stop Loss: 66.55
Target(s): To Be Determined
Current Option Gain/Loss: +2.1%
Average Daily Volume = 3.3 million
Entry on June 05 at $63.90
Listed on June 01, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/10/15: KSS was not immune to the market's widespread rally today. Shares produced a meager bounce of just 41 cents or +0.6%. That compares to a +1.2% gain in the S&P 500.

Don't forget that retail-related stocks could see some volatility tomorrow as the market digests the May retail sales data.

No new positions at this time.

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.

- Suggested Positions -

Long OCT $60 PUT (KSS151016P60) entry $2.40

06/09/15 Down 5 days in a row, testing support at $62.00
06/05/15 triggered @ $63.90
Option Format: symbol-year-month-day-call-strike


3M Company - MMM - close: 159.04 change: +2.06

Stop Loss: 160.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.2 million
Entry on June -- at $---.--
Listed on June 08, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
06/10/15: The big bounce in the Dow Industrial Average (+236 points) probably rubbed off on MMM. They were both up +1.3% today.

Shares of MMM still have a bearish trend of lower highs. If this rebound does not roll over tomorrow we might drop MMM as a candidate.

Trade Description: June 8, 2015:
3M, the maker of Post-it notes and thousands of other products, has been a darling on Wall Street the last couple of years. It's not hard to see why. Shares have rallied from the low $90s in early 2013 to $170 per share this spring. That's a +88% gain. That is not counting the company's healthy dividend yield. Unfortunately for the bulls it looks like the rally is in trouble as MMM's business faces some serious headwinds.

MMM is in the industrial goods sector. According to the company, "3M is fundamentally a science-based company. We produce thousands of imaginative products, and we're a leader in scores of markets - from health care and highway safety to office products and abrasives and adhesives. Our success begins with our ability to apply our technologies - often in combination - to an endless array of real-world customer needs. Of course, all of this is made possible by the people of 3M and their singular commitment to make life easier and better for people around the world. We leverage these competencies to create innovative solutions for our customers and to also provide investors with attractive long-term returns." Their annual sales are about $32 billion with 90,000 employees.

MMM's most recent earnings report was April 23rd when the company announced its 2015 Q1 results. Analysts were expecting a profit of $1.93 per share on revenues of $7.83 billion. MMM missed estimates with a profit of $1.85 per share as revenues fell -3.2% to $7.58 billion. A big challenge for MMM was the strong U.S. dollar, which shaved off about $0.10 per share in pre-tax earnings. Management warned that the impact of currency headwinds would be worse than previously thought. They expect 2015 results to fall $0.35-0.40 per share due to currency translation versus prior guidance of -$0.20.

The bad news for MMM is that the U.S. dollar is likely headed for a long-term bull run higher. A weaker euro and yen will accelerate the move higher. Another factor that will drive the dollar higher is the Federal Reserve which will likely raise rates in September. If not September then 2016. Higher rates will boost the dollar. They will also impact MMM's attractiveness as a dividend play.

Right now MMM has an annual yield of 2.6%. As the U.S. bond market sinks the yields on bonds are rising. Today the yield on a 10-year bond is about 2.4%. As this rises it will make MMM less attractive as an income trade.

Shares of MMM broke support when the stock gapped down on its disappointing earnings results in April. Shares bounced back just high enough to fill the gap and then roll over again. This is a very bearish move. On Friday MMM closed below technical support at its simple 200-dma. Now shares are poised to breakdown under support at the $156.00 level. We are suggesting a trigger to buy puts at $155.75. The nearest support appears to be the $146 region.

Trigger @ $155.75

- Suggested Positions -

Buy the OCT $150 PUT (MMM151016P150)

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: 90.54 change: +0.10

Stop Loss: 92.55
Target(s): To Be Determined
Current Option Gain/Loss: +39.6%
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:
06/10/15: Transportation stocks continue to underperform the market. A +2.1% rally in crude oil probably pressured the industry. The Dow Jones Transportation Average was only up +0.6% versus a +1.3% rally in the Dow Industrials and a +1.2% rally in the S&P 500. Shares of NSC were up a very anemic +0.1%.

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

06/09/15 new stop @ 92.55
05/30/15 new stop @ 95.65
05/26/15 triggered @ $94.85
Option Format: symbol-year-month-day-call-strike


Zillow Group - Z - close: 86.44 change: -1.04

Stop Loss: 91.05
Target(s): To Be Determined
Current Option Gain/Loss: +15.4%
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:
06/10/15: Shares of Z tried to rally but it failed at $88.40 pretty early this morning. The stock significantly underperformed with a -1.1% drop to new relative lows.

Tonight we will move the stop loss down to $91.05.

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

06/10/15 new stop @ 91.05
06/04/15 new stop @ 93.55
06/01/15 triggered @ $89.85
Option Format: symbol-year-month-day-call-strike