Option Investor
Newsletter

Daily Newsletter, Monday, 6/29/2015

Table of Contents

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

Market Wrap

The Market Slips On Greece

by Thomas Hughes

Click here to email Thomas Hughes
It is the eve of Greek default to the IMF, the country has capital controls in place, no deal is at hand and global markets fall.

Introduction

Greece dominated the news and the market today. Capital controls for banks were announced during the overnight hours and sparked another round of protests. The news, not unexpected, comes on the eve of an apparent to default to the IMF. Controls will keep banks closed for the next few days, limit the amount of ATM withdrawals by Greek citizens to 60 euros, prevent the transfer of money out of the country and large transactions to electronic means only.

Early afternoon S&P lowered Greece's credit rating to CCC- with negative outlook. They say a Greek exit from the Euro stands at 50% and that without changes a default is inevitable, likely to occur within the next 6 months. Later in the day Fitch downgraded the Greek banks to restricted default. Greece, or PM Tsipras at an rate, continues to snub creditors and is urging the people to vote no on a referendum to accept terms.

Puerto Rico added a little downdraft to today's sell-off. The governor of the heavily indebted island territory announced today, of all day's, that the debt load was unpayable. The island needs debt restructuring and reforms, long overdue, and is not expecting to receive aid from the federal government.

Market Statistics

Equity markets around the world fell on Greece' apparent imminent default. Asian indices fell nearly -3% in a volatile day of trading, led by the Shang Hai Composite. European indices fared no better, the DAX closed with a loss greater than -3.5% after hitting a low greater than -6% in intraday action.

Our markets were not immune, futures trading indicated an opening near -1% lower than last week's closing prices and that did not moderate into the open. There was little data and few earnings reports to influence early morning action leaving the indices trading lower once the opening bell sounded. The early low was hit soon after the open, followed by a small bounce and then another intraday low around 11:30. The morning low did not find support, selling continued throughout the day with the market hitting new lows more than once and leaving the indices at the lows of the day.

Economic Calendar

The Economy

Pending Home Sales was released at 10AM, rising 0.9% in May from a mild downward revision to April. Despite April's revision this is the 9th month of year-over-year increases in pending sales and the highest level since April 2006. The May gain is a little below expectations for 1.2% but explained away by the uptick in mortgage rates we saw during the month. According to NAR economist Lawrence Yun 2015 should be the best year in housing since the bubble burst but rising prices and tight inventory remain a concern.

Moody's Survey Of Business Confidence remains near all time highs and, according to survey moderator Mark Zandi, is led by businesses in the US. The index fell by -0.2%, the fourth week of decline, and hit the lowest level in three months. Despite the drop results show that hiring and business spending are strong.


According to data from FactSet the expected blended rate for S&P 500 earnings growth in the 2nd quarter has risen a tenth of a percent to -4.5%. This is still double the expectation at the start of the quarter but the first of what I suspect will be multiple upward revisions. So far 15 companies have reported with 11 beating earnings estimates and 7 beating on revenue. Oil companies and those with international exposure are expected to see the largest declines in year-over-year earnings growth, -60% for energy and an average -12.6% for those with international exposure.

Looking at earnings growth ex-energy, the 2nd quarter is expected to see growth of +2.1% at current projections and could go as high as +6% if earnings trends hold true. There are a handful of S&P companies reporting this week, the season kicks off next week on Wednesday with Alcoa, the big banks will release the week after.

This is a big data week. Tomorrow is the end of the month, the end of a quarter, the end of the first half of the year and the start of a new round of macro data. My top picks are the employment bundle including ADP, Challenger, claims, NFP and unemployment. Also on deck are auto sales, PMI, Consumer Confidence, Construction Spending, ISM and many others. Friday the market is closed for the July 4th holiday so many of the releases we usually see on Friday will come out on Thursday.

The Oil Index

Oil prices fell more than -2% to hit a three week low in today's session. Greek default has cast a shadow on global growth outlook which, along with high supply/production, has tipped the scales in favor of the bears. However, even with today's drop to $58.30 for WTI, prices remain well within the 3 month trading range because the Iran nuclear talks, which are reported to go beyond tomorrow's June 30 deadline, and violence throughout the middle east continue to support prices.

It will be interesting to see oil/gas storage numbers this week and next. This weekend, the three day July 4th holiday, is expected to be one of if not the biggest driving weekends ever.

The Oil Index fell a little over -2% and set a new 3 1/2 month low. The fall has taken the index down to just above the long term trend line. The indicators are rolling over into a bearish crossover, consistent with a test of support, but are also consistent with that support over the longer term.

Second quarter earnings outlook has had the sector trending lower over the past month, approaching the long term trend line, and could be setting us up for another bounce. Poor earnings could see the trend line tested but once we get past 2nd quarter season outlook begins to brighten and should provide support for the sector. In the near term the trend line my get tested but such a test is likely a good entry point for bullish positions.


The Gold Index

Gold prices got a lifted and pressure by Greece today. Fear sparked a flight to safety trade that helped to support prices while at the same time the news helped to weaken the euro, strengthen the dollar and cap gold's gains. Today's move carried gold higher by roughly $5 to trade around $1179. The gain is small but illustrates support action at previously indicated levels.

The gold miners did not get a boost from higher gold prices. The miners ETF GDX closed with a loss, but only about -1.0% compared to the -2% loss experienced by the broader market. The ETF is trying to break support along my line at $18.00 but has not done so yet. The indicators are showing near term bearishness but remain consistent with that support. This test of support could continue with $16.50 potential target if it is broken. In the long term it still looks like this sector is in a bottom/reversal and this dip to support an entry opportunity. Of course, gold prices will play a big role here and will likely add volatility as this week's data is released, and Greek news come out.


In The News, Story Stocks and Earnings

Sysco announced it would end its bid to buy US Foods. The move was sparked by the recent FTC injunction to prevent said purchase. Company CEO said based on the ruling it was in the best interest of shareholders to move on. The deal, if completed, would have created the largest food distributor in North America. At the same time the company also announced a new $3 billion share repurchase program. The news caused Sysco to drop more than -2.25%, coming to rest on the $37.50 support line which, coincidentally, I drew the day the proposed purchase of US Foods was announced.


The Supreme Court released its final opinion of the session this morning, siding in favor of utility companies and against the EPA. The opinion, 5-4, says the EPA did not take the financial impact of new regulation into account when issuing pollution controls for power plants. The utilities sector was one of very few to trade in the green today, the Utilities Spyder XLU gained about a quarter percent. Today's action is a move up from support levels near $41.50.


Old Dominion Freight Line got an upgrade at Stifel today. I thought it interesting in light of the ongoing correction in the transportation sector. Old Dominion is a less-than-truckload shipper with positive fundamentals. The upgrade, from hold to buy, carries a price target potentially 22% above today's close based on consensus estimates. Stifel's target is $80, a gain of near 17%. Shares of the stock got a pop in the premarket, opened with a small gap but sold off during the day to close the gap and end with a loss.


There were a slew of downgrades in the financial sectors. Names ranging from JP Morgan to Suntrust and a number of smaller regional banks were lowered from Outperform/Buy to hold/neutral ratings. The news, along with fear of Greek fallout/contagion in the finance sector had the entire sector trading lower. The XLF Financial Sector Spyder lost more than -2.4% in today's action and fell to a new two month low. The indicators are rolling over into a bearish crossover so appear to be leading prices lower. Today's action broke potential support around the $24.50 level with $24 next target should the sell-off continue.


The Indices

The indices began their fall in the early hours and did not stop until the closing bell. The loses, while bad news for bulls, were not as bad as they could have been. Indices in Asia an Europe lost over -3%, ours, led by the NASDAQ Composite, lost an average near -2%. Today's action carried the tech heavy index -2.4% lower and below the short term moving average in a move that looks intent on reaching the long term trend line. The indicators have completed a bearish crossover with today's price action and point to lower prices in the near term. Current target is the long term trend line, near the 4800 level, with 4700 next target should the first one not hold. The long term trend remains up so the move down to support is a potential buying opportunity that may be sparked by the upcoming earnings season.


The S&P 500 made the next largest move and perhaps the most notable candlestick. Today's action carried the index down -2.09% and created the longest black candle for at least the last 12 months. Price action broke support levels at the short term moving average, 2090, 2080 and 2060 coming to rest just above 2050. The indicators have rolled into a bearish crossover and are pointing to lower prices so a test of 2050 at least is likely. A break below this level, 2050, could carry the index down to the long term trend line near the 2000 level for a total correction near 7%. The long term trend remains up with positive forward outlook so I am on the lookout for the next bullish signal.


The Dow Jones Transportation Average fell -1.96%, the third largest decline in today's session, and appears to be heading for a much deeper correction than 10%. Today's candle is a break below the 8250 support line and an extension of the drop below the short term moving average and confirmation of trend line break which has been forming over the past month. On the longer term charts of weekly prices the indicators are gaining strength, convergent with the move lower, so I see a good chance of this index continuing its fall with potential targets near 8,000 and 7,500.


The Dow Jones Industrial Average made the smallest decline today but that is not saying much. The blue chips fell -1.95%, a hair less than the transports, and broke beneath support at 17600 and 17500. Today's action is confirmed by a bearish crossover in both MACD and stochastic that is not in line with the underlying trend. This move appears to be a correction to support/trend with a possible target along the my long term trend line near 17250.


There are a lot of possible reasons why the market sold off the way that it did today. Last week's reshuffling of the Russell indices could have a had ripple effect that carried into today, the ongoing Greek issue, the Puerto Rico news, the coming end to the quarter, the coming end to the half and an impending earnings season are all on the list. Most likely it is a combination of them all that are adding up to a correction back to trend.

Except for the transports, which for some reason have already corrected and appear to be heading lower, all the indices remain above long term trend lines and trending higher on ongoing economic recovery, improving labor markets and rising earnings. The long term trends have not ended, outlook has not turned negative or cloudy, so I expect the long term trend in the market to regain control of the market sooner or later.

The question is when will the long term trends take over? The answer could come soon since we're getting a substantial dose of economic data this week with earnings season starting next week. Data is expected to be decent and expansionary if not good, earnings expected to be poor with a good chance of being better than expected, a combination that could easily result in upside movement to the market. The caveats are two. In the near term of course is Greece, who knows what will happen next, tomorrow is their deadline to pay the IMF, Sunday is the scheduled referendum and a new headline could come at any time. In the longer term is the FOMC, rate hikes and how the market will react to lift off.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Look For A Bounce

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Cyber Security ETF - HACK - close: 30.93 change: -1.27

Stop Loss: 29.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 769 thousand
Entry on June -- at $---.--
Listed on June 29, 2015
Time Frame: Exit PRIOR to August expiration
New Positions: Yes, see below

Company Description

Trade Description:
Cyber security is a huge business because the threat is so large. Criminals and unfriendly foreign countries can wreak havoc and damage anyone. Victims include individuals, small businesses, large businesses, schools, organizations, and governments. The FBI Internet Crimes Complaint Center registered almost 270,000 complaints in 2014. McAfee reported that cyber crime cost the global economy $400 billion last year. Another report, by KPMG, suggests damages by online criminal activity could reach $560 billion in 2015.

We constantly hear about successful hacking attacks against large U.S. companies like Target, Home Depot, and JPMorgan Chase. Just recently there was a massive scandal where Chinese hackers allegedly stole extremely confidential information on tens of millions of U.S. government employees. Cyber crime is a constant threat. It's no surprise that investors have flocked to a relatively new ETF focused on cyber security.

Here's a description of HACK and why it was created:

The World's first Cyber Security ETF, the PureFunds ISE Cyber Security ETF (HACK) was created to provide the market with a transparent vehicle to invest in the increasingly important Cyber Security industry. Anyone that has fallen victim to a cyber attack understands that the fear, consequences and helplessness associated are real. Hundreds of millions of people around the world have suffered from some form of cyber attack. Although a personal cyber attack can seem overwhelming and significant, those that happen on a corporate or government level can be disastrous. In addition to financial losses, cyber attacks have the ability to shut down or manipulate energy infrastructure, weapons defense systems, medical devices, financial markets, transportation networks/vehicles, or harvest highly personal or secret information and a constantly growing amount of other potential threats.

Given the devastating effects cyber attacks can present, it is no coincidence that both corporations and governments around the globe have committed billions of dollars annually in hopes of preventing future attacks. This ongoing digital arms and defense race has vastly grown the size and importance of the Cyber Security industry. This constantly evolving battle will force efforts and capital to focus on this essential space. An increased spending and demand for cyber security solutions may benefit the always morphing Cyber Security Industry.

The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Cyber Security Index.

HACK currently has 32 components. The top ten stocks are: IL, PFPT, SAIC, IMPV, SPLK, VDSI, FTNT, BLOX, AVG, and PANW. You can see all the components here, scroll to the bottom and select "show all".

This ETF already has more than $1 billion in assets, which is shocking since it just debuted about eight months ago.

The ETF was a strong performer from early May until mid June. Last week shares began to see some profit taking. Today's market-wide sell-off has pushed HACK toward support at its trend line of higher lows (support) and technical support at the 50-dma. After a -8% correction the pullback may be over. We want to be ready if HACK rebounds from here. Tonight we're suggesting a trigger to buy calls at $31.55.

Please note this should be considered a higher-risk trade. The option spreads on HACK's options are wide. The spreads have probably been exaggerated today due to the surge in volatility. We are suggesting the August $33 calls. You may want to use a different strike.

Trigger @ $31.55 *small positions to limit risk*

- Suggested Positions -

Buy the AUG $33 CALL (HACK150821C33) current ask $1.05
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

Greece Sparks Worldwide Sell-off

by James Brown

Click here to email James Brown

Editor's Note:

Stocks were down around the globe from Asia to Europe to the U.S. The impending Greece default sparked widespread profit taking. European markets were hit the hardest with major indices down -3% or more.

MAN hit our stop loss. WYNN violated our entry requirements and has been removed.


Current Portfolio:


CALL Play Updates

Aetna Inc. - AET - close: 127.28 change: -2.77

Stop Loss: 125.85
Target(s): To Be Determined
Current Option Gain/Loss: +112.0%
Average Daily Volume = 2.0 million
Entry on June 15 at $118.75
Listed on June 10, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/29/15: The profit taking in AET continued on Monday thanks to widespread market declines. Shares lost -2.1%, which is inline with the S&P 500's -2.08% loss. If there is any follow through lower tomorrow we could see AET hit our stop loss at $125.85.

No new positions at this time.

Trade Description: June 10, 2015:
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 from 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 from $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.

- Suggested Positions -

Long OCT $125 CALL (AET151016C125) entry $4.34

06/25/15 new stop @ 125.85, healthcare stocks rally on SCOTUS decision
06/20/15 WSJ reporting that AET has made a bid for HUM 06/16/15 new stop @ 119.85
06/15/15 triggered @ $118.75 thanks to M&A speculation
Option Format: symbol-year-month-day-call-strike


Cracker Barrel Old Country Store - CBRL - close: 147.14 change: -2.02

Stop Loss: 144.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 332 thousand
Entry on June -- at $---.--
Listed on June 20, 2015
Time Frame: Plan on exiting prior to August 5th
New Positions: Yes, see below

Comments:
06/29/15: CBRL held up pretty well. Most of the major indices were down more than -2% while CBRL only fell -1.35%. We are still on the sidelines waiting for a rally past $150. Our suggested entry point is $150.25.

Trade Description:
It's summertime and that means vacations and road trips for a lot of Americans. That's good news for a company like CBRL because most of their 634 restaurants are located along major highways.

CBRL is in the services sector. According to the company, "Cracker Barrel Old Country Store, Inc. provides a friendly home-away-from-home in its old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping that’s surprisingly unique, genuinely fun and reminiscent of America's country heritage…all at a fair price. Cracker Barrel Old Country Store, Inc. (CBRL) was established in 1969 in Lebanon, Tenn. and operates 634 company-owned locations in 42 states."

Wall Street loves earnings growth and CBRL continues to deliver. Back in February the company beat earnings and revenue estimates and raised their 2015 guidance. Their most recent report was June 2nd. CBRL reported their fiscal third quarter. Analysts were expecting a profit of $1.37 per share on revenues of $680 million. CBRL beat estimates with a profit of $1.49 per share. This is a +21% rise from a year ago and marks the fifth quarter in a row of double-digit earnings growth. Revenues also beat estimates with a +6.3% rise to $683.7 million. CBRL said their comparable store sales were up +5.2%. Their comparable retail store sales were up +4.5%.

Management raised their normal quarterly dividend +10% to $1.10. They also announced a special one-time dividend of $3.00 per share. Both are payable on August 5th, 2015 to shareholders on record as of July 17th. CBRL offered a bullish outlook for both their fourth quarter and 2015. Management raised their 2015 earnings guidance from $6.40-6.50 to $6.60-6.70 per share. Wall Street was only expecting $6.55.

Technically the stock looks bullish. Shares have been consolidating their post-earnings gains the last couple of weeks but traders are buying the dip. Today CBRL is poised for a breakout past short-term resistance near $148.50. If the stock does breakout it could see some short covering. The latest data listed short interest at 17% of its small 18.9 million share float. Meanwhile the point & figure chart is very bullish and forecasting a long-term target at $231.00.

Tonight we are suggesting a trigger to buy calls at $150.25. More aggressive traders may want to jump in early on a rally past $148.75.

Trigger @ $150.25

- Suggested Positions -

Buy the SEP $155 CALL (CBRL150918C155)

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


The Walt Disney Co. - DIS - close: 113.05 change: -1.94

Stop Loss: 112.25
Target(s): To Be Determined
Current Option Gain/Loss: -6.1%
Average Daily Volume = 5.7 million
Entry on June 18 at $112.25
Listed on June 17, 2015
Time Frame: Exit PRIOR to earnings in August
New Positions: see below

Comments:
06/29/15: DIS was not immune to the market's sell-off on Monday. However, DIS shares only fell -1.6% versus the -2.0% in the S&P 500.

If there is any follow through lower tomorrow we could definitely see DIS hit our stop at $112.25. No new positions at this time.

Trade Description: June 17, 2015:
Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.

The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.

Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. In 2013 they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits in 2014 Captain America: Winter Soldier and Guardians of the Galaxy. Their 2015 Avengers: Age of Ultron was also a big winner at the box office grossing more than $1.3 billion worldwide. Of course not every Disney movie crushes it. Their recent Tomorrowland was a big disappointment and they could lose more than $100 million on the film.

Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. The next Star Wars film it titled "The Force Awakens." It will be episode seven in the franchise. The movie doesn't hit theaters until December 2015 but analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.

DIS management loves movie franchises because they can fuel years of sequels, park rides, and merchandise. The approach seems to be working. Revenues and net income have hit all-time highs for five consecutive quarters. Their 2015 Q1 results saw earnings per share up +23% to $1.27. Their Q2 results saw earnings grow +14% to $1.23 per share. Their domestic theme parks showed a strong surge in both attendance and in customer spending. Analysts are forecasting DIS earnings to grow +17% this year.

The stock surged to new all-time highs back in early May after its Q2 earnings report. Shares have since spent the last six weeks digesting gains in a sideways consolidation that has ignored much of the broader market's volatility. More recently DIS has started to rebound and is now at the top of its trading range. A breakout here could signal the next leg higher.

The point & figure chart is bullish and forecasting at long-term target of $154.00. I personally suspect that DIS could rally toward $120-125 before its next earnings report in August. Credit Suisse recently upped their price target to $130. Tonight we are suggesting a trigger at $112.25 to buy calls.

- Suggested Positions -

Long AUG $115 CALL (DIS150821C115) entry $2.30

06/27/15 new stop @ 112.25
06/18/15 triggered @ $112.25
Option Format: symbol-year-month-day-call-strike


Demandware, Inc. - DWRE - close: 68.95 change: -3.55

Stop Loss: 67.75
Target(s): To Be Determined
Current Option Gain/Loss: -31.8%
Average Daily Volume = 417 thousand
Entry on June 22 at $72.35
Listed on June 20, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in August
New Positions: see below

Comments:
06/29/15: Ouch! It was a rough day for DWRE shares. The stock erased all of last week's gains and more with a -4.89% plunge today.

More conservative traders may want to inch their stop loss higher again. No new positions at this time.

Trade Description: June 20, 2015:
2015 is shaping up to be a lot better than 2014 for DWRE investors. The stock delivered a rocky performance last year and spent much of it churning sideways in a huge consolidation pattern (see the weekly chart below). The stock's momentum has turned bullish this year thanks in part to consistently strong revenue growth. The NASDAQ is up +8.0% year to date. DWRE is currently up +23.9%.

DWRE is in the technology sector. According to the company, "Demandware, the category defining leader of enterprise cloud commerce solutions, empowers the world's leading retailers to continuously innovate in our complex, consumer-driven world. Demandware's open cloud platform provides unique benefits including seamless innovation, the LINK ecosystem of integrated best-of-breed partners, and community insight to optimize customer experiences. These advantages enable Demandware customers to lead their markets and grow faster."

With the exception of its Q4 report on February 19th DWRE has beaten Wall Street's earnings estimates on both the top and bottom line the last four quarters in a row. Revenue growth has been +55.6%, +55.9%, +43.4%, and +54.3% for the last four quarters. The only miss was DWRE's bottom line number for the fourth quarter where it missed by a penny.

DWRE's most recent results were May 7th. The company said their Q2 profit was $0.16 per share. That is a big improvement from a ($0.05) loss a year ago and it was 27 cents better than the ($0.11) loss analysts were expecting. Revenues were $50.27 million compared to estimates for $49.5 million. DWRE said their live customers were up +30% from a year ago to 279. The number of live sites surged 42% to 1,241.

Tim Adams, DWRE's CFO, commented on their quarterly results, "During the first quarter, we continued to invest in growth and innovation. We expanded our operations deeper into Europe and Asia. Our R&D team also made considerable progress on their key initiatives – extending our platform deeper into the store, delivering our intelligence solutions and enriching our core commerce capabilities. As we move through 2015, we remain focused on scaling our organization to support the fast pace of our growth."

Back in April Goldman Sachs added DWRE to their conviction buy list. Yet shares didn't start moving until June. A couple of weeks ago shares broke out from a three-month consolidation pattern. The current rally could be getting a boost from short covering. The most recent data listed short interest at 12% of the relatively small 33.48 million share float. Currently the point & figure chart is bullish and forecasting an $85 target. Tonight we're suggesting a trigger to buy calls at $72.35.

- Suggested Positions -

Long OCT $75 CALL (DWRE151016C75) entry $5.28

06/22/15 triggered @ $72.35
Option Format: symbol-year-month-day-call-strike


Sirona Dental Systems - SIRO - close: 100.05 change: -1.59

Stop Loss: 99.65
Target(s): To Be Determined
Current Option Gain/Loss: -43.1%
Average Daily Volume = 316 thousand
Entry on June 15 at $101.05
Listed on June 11, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/29/15: SIRO has erased its two-day bounce with a -1.5% drop back toward round-number support at $100.00. The intraday low was $99.95. Our stop is at $99.65 so any follow through lower tomorrow might stop us out.

Trade Description: June 11, 2015:
Revenue growth in SIRO's business has been disappointing due to foreign currency headwinds thanks to the strong dollar. Yet investors seem to be ignoring this issue. Shares of SIRO have outperformed the broader market with a +15.3% gain this year.

SIRO is in the healthcare sector. They sell dental equipment. According to the company, "Sirona, the dental technology leader, has served dealers and dentists worldwide for more than 130 years. Sirona develops, manufactures, and markets a complete line of dental products, including CAD/CAM restoration systems (CEREC), digital intra-oral, panoramic and 3D imaging systems, dental treatment centers and handpieces."

The last couple of earnings reports for SIRO have only been mediocre. The company has been meeting analysts estimates on the bottom line (earnings). Unfortunately revenues have been seeing declines in U.S. dollar terms. On a local currency basis their sales have grown. One positive that helps the bullish picture for SIRO is margin growth. The company has seen margin growth improve the last two quarters in a row.

Shares of SIRO spiked down on May 8th, its most recent earnings report, but traders immediately bought the dip at technical support on its 50-dma. The stock seems to be stair stepping higher with a rally, then a week or two of consolidation that breaks out into another rally. Shares just broke through major round-number resistance at the $100.00 mark today. Tonight we are suggesting a trigger to buy calls at $101.05. Volume on SIRO's stock and its options is a little light. I would start this trade with small positions to limit risk.

*small positions to limit risk* - Suggested Positions -

Long SEP $105 CALL (SIRO150918C105) entry $2.90

06/23/15 new stop @ 99.65
06/15/15 triggered @ $101.05
Option Format: symbol-year-month-day-call-strike


Under Armour, Inc. - UA - close: 82.93 change: -3.00

Stop Loss: 81.75
Target(s): To Be Determined
Current Option Gain/Loss: -43.5%
Average Daily Volume = 2.0 million
Entry on June 26 at $86.05
Listed on June 23, 2015
Time Frame: Exit prior to August expiration
New Positions: see below

Comments:
06/29/15: UA suffered some profit taking with a -3.5% plunge that erased all of last week's gains. The stock looks headed for what should be short-term support at $82.00.

Trade Description: June 23, 2015:
UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitnessplatform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it is actively fighting for market share and recently overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but UA grew +32%.

UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance.

UA reported their 2014 Q4 results on February 4th. The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

There was a steady stream of analysts raising their price targets on UA after its February earnings report. Many of these new price targets were in the low $90s ($91-94).

The company's most recent earnings report was April 21st when UA announced Q1 results. After raising guidance back in February the company reported earnings of $0.05 per share, which was in-line with Wall Street's new estimates. Revenues were up +25.4% to $804.9 million, which beat expectations. UA management raised their outlook again. They expect 2015 operating income to improve +13-to-15%. UA expects 2015 revenues to rise +23% to $3.78 billion.

The stock has rallied sharply into its earnings report and shares suffered some post-earnings depression with a -$12.00 drop (-13.6%) in the following two weeks. The price target upgrades continued but UA spent most of May consolidating sideways inside a narrow range. Finally on June 5th shares of UA broke out past multiple layers of resistance on another upgrade. The stock was upgraded to a "buy" with a $91 price target.

UA spent about a week digesting its bullish breakout and then took off. The company recently announced a 2-for-1 stock split. However, instead of a normal split the company is creating a new Class C stock which will have no voting rights.

Why a new class of shares? That's because the company's founder and current CEO Kevin Plank does not want to lose control. This way he can maintain control by keeping his voting shares while still selling the new Class C shares. Just in case you were curious, Class A UA stock has one vote per share. Class B stock has ten votes per share, which Plank owns the majority of.

This stock "split" will be disbursed as a dividend. There's no word yet on the new ticker symbol for the class C shares. There is a special meeting of UA shareholders on August 26, 2015 to approve the necessary changes so they can proceed with this stock split. Google did a similar stock split back in 2014 so the founders could maintain control. Both GOOG's and UA's decision has rankled some shareholders. However, normally stock splits tend to be viewed as a bullish move since stocks don't split if they're not rising. Stocks that split tend to outperform the broader market.

Tonight we are suggesting a trigger to buy calls at $86.05. More conservative traders may want to consider waiting for a dip instead. The nearest support is $82.00. We'll start with a stop loss at $81.75.

- Suggested Positions -

Long AUG $90 CALL (UA150821C90) entry $2.30

06/26/15 triggered @ $86.05
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Entergy Corp. - ETR - close: 69.95 change: -0.56

Stop Loss: 72.55
Target(s): To Be Determined
Current Option Gain/Loss: -20.6%
Average Daily Volume = 1.2 million
Entry on June 26 at $69.25
Listed on June 25, 2015
Time Frame: Exit PRIOR to earnings on August 4th
New Positions: Yes, see below

Comments:
06/29/15: ETR tried to rally this morning and made it as far as $71.19 before rolling over. More aggressive traders could launch bearish positions on today's move since it looks like another lower high. More conservative traders may want to wait for a new relative low (under $69.45).

Trade Description: June 25, 2015:
Dividend lovers and income investors often consider the utility stocks. Many have hefty dividends that are considered safe and reliable. When the bond market peaked in January this year the utility sector reversed as well.

According to the company, "Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, including nearly 10,000 megawatts of nuclear power, making it one of the nation's leading nuclear generators. Entergy delivers electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $12 billion and approximately 13,000 employees."

Earnings have been mixed. Back in February ETR reported its Q4 results where earnings missed estimates but revenues came in better than expected. That switched in the first quarter. ETR reported its Q1 results on April 28th. Earnings soared past expectations but revenues fell -9.0% and came in below estimates.

Most utility stock investors are not looking at earnings so much as they are looking at yields. ETR still has a dividend yield near 4.8%. That's about twice the U.S. 10-year bond yield, which closed at 2.39%. Investors are selling the utility stocks anyway because expectations are growing for the Federal Reserve to raise rates this year or early next year. History shows that the Fed almost never raises just once. It's always a series of rate hikes. This will boost bond yields and make high-dividend stocks less attractive.

ETR's recent oversold bounce just failed near $72.50 last week. Now the stock has reversed and broken down below round-number support at $70.00. The next support level could be $65.00 or it could be $60.00. We are suggesting a trigger to buy puts at $69.25.

I will issue one caveat. The Greece situation is a wildcard. It looks like Greece is headed for a default. If the world reacts poorly to this long-expected event we could see central banks, including the Fed, remain extraordinarily dovish in their monetary policy to reduce any impact of Greece's implosion. This could push the next Fed rate hike farther into the future and might be interpreted as bullish for utilities. I doubt this is a serious threat to our bearish play over the next two months but it could happen.

- Suggested Positions -

Long AUG $67.50 PUT (ETR150821P67.5) entry $1.70

06/26/15 triggered @ $69.25
Option Format: symbol-year-month-day-call-strike


iShares Transportation - IYT - close: 144.79 change: -2.85

Stop Loss: 150.25
Target(s): To Be Determined
Current Option Gain/Loss: +11.4%
Average Daily Volume = 397 thousand
Entry on June 29 at $146.90
Listed on June 27, 2015
Time Frame: exit PRIOR to August expiration
New Positions: see below

Comments:
06/29/15: Our new bearish play on the transports is open. The plan was to buy puts if shares hit $146.90. The IYT just happened to gap open lower at $146.90. Shares quickly filled the morning gap and then resumed its trek lower. The IYT ended the session with a -1.9% loss and at new 2015 lows.

Trade Description: June 27, 2015:
The transportation stocks have been a sore spot for the wider bull market. Year to date the Dow Industrials are up +0.7% while the S&P 500 index is up +2.0%. Yet the IYT transportation ETF is down -10% in 2015 and down -12% from its all-time highs set in November 2014.

The IYT is the ETF that tracks the Dow Jones Transportation Average. Both have 20 stocks in them. The biggest components are railroad and trucking companies. Here's the full list of components: FDX, UPS, UNP, KSU, NSC, R, LSTR, JBHT, ALK, CHRW, KEX, UAL, EXPD, CAR, DAL, CNW, MATX, LUV, CSX, and JBLU.

Airlines grabbed a lot of headlines in the last several weeks as their stocks fell sharply. Investors are worried that the airlines will build up too much capacity and oversupply the market forcing them to lower fares and slash their profitability.

Railroad stocks are suffering on multiple fronts. The plunge in crude oil has wiped out demand for drilling new wells. That means less demand to move equipment and less demand for proppants (like fracking sand). Plus coal demand is falling.

Delivery stocks have struggled as well. FedEx (FDX) recently reported earnings that missed expectations on both the top and bottom line. Their previous earnings report the company lowered their 2015 guidance. Back in January UPS lowered their 2015 guidance and their most recent report saw revenues below estimates. The big railroad companies have been missing earnings and lowering estimates as well.

There has been a lot of attention given to the bearish divergence between the transportation stocks and the Dow Industrials. Thus far the broader market has ignored this weakness in transports. Traditionally investors viewed the transports as a thermometer of the market's health. If transports were seeing a healthy business then the economy was healthy. If transports were struggling then the economy was or would struggle. For decades there was a pretty good correlation between the two. These days there has been some doubt over how much this relationship still exists, especially since so much business takes place online.

Tonight we're not arguing if the transports are signaling a decline for the market or the economy. Instead we're looking at the transports themselves and focusing on the IYT. The ETF is clearly underperforming. It looked like it might bottom with support near $148.00. Unfortunately for the bulls the IYT just broke down under this support level. The next support could be down near its October 2014 lows in the $137-138 area. The point & figure chart is suggesting a target of $139.00.

We want to take advantage of this breakdown. Tonight we're suggesting a trigger to buy puts at $146.90. Plan on exiting prior to the August option expiration.

- Suggested Positions -

Long AUG $145 PUT (IYT150821P145) entry $3.50

06/29/15 triggered @ $146.90
Option Format: symbol-year-month-day-call-strike


Southwest Airlines Co. - LUV - close: 33.18 change: -1.14

Stop Loss: 35.45
Target(s): To Be Determined
Current Option Gain/Loss: +1.6%
Average Daily Volume = 7.9 million
Entry on June 16 at $33.85
Listed on June 15, 2015
Time Frame: Exit prior to earnings in late July
New Positions: see below

Comments:
06/29/15: LUV plunged back toward its June lows with a -3.3% drop today. A breakdown below the June 18th low of $33.02 would reaffirm the bearish trend. A bounce there would start to look like a short-term bullish double bottom.

No new positions at this time.

Trade Description: June 15, 2015:
Last year LUV was one of the best performing stocks in the S&P 500 with a +124% gain. Shares are not seeing a repeat this year. In fact the stock is down -19% year to date. Most of the major airline stocks have been suffering as investors fear overcapacity will kill profits.

LUV is in the services sector. They're part of the regional airline industry. According to the company, "In its 44th year of service, Dallas-based Southwest Airlines (LUV) continues to differentiate itself from other air carriers with exemplary Customer Service delivered by more than 46,000 Employees to more than 100 million Customers annually. Southwest operates more than 3,400 flights a day, serving 93 destinations across the United States and five additional countries."

There are plenty of bullish investors rooting for LUV. After years of belt tightening with high oil prices the airline industry finally found some discipline and profits boomed. LUV has been a great example and many consider it the "best-in-breed" among the major airliners. LUV's earnings have surged from $0.43 a share in 2011 to $1.64 per share in 2014.

The big drop in crude oil last year was a major boon for most of the airline companies. Fuel is a huge expense and while oil has bounced off its 2015 lows it is still a lot cheaper than last year's prices. So why are airline stocks getting crushed? The biggest worry is the industry will build into much capacity (over supply) and this will lead to price wars, which could slash profitability.

On May 20th airline stocks were crushed, shares of LUV included, after the American Airlines CEO said they would aggressively compete on price. This is after AAL had already warned that their margins would shrink in 2016 versus 2015. News that LUV was planning to boost capacity by +8% in 2015 also helped spark the plunge lower.

The sell-off in airline stocks has continued as more companies downgrade their outlook. United Airlines (UAL) recently reported that their capacity had outpaced traffic growth. Delta (DAL) warned that their Q2 revenues would decline. Even LUV warned that their May passenger revenue per available seat mile (PRASM) was down -6% from a year ago. They adjusted their 2015 Q2 PRASM estimate to be down -4% to -5% from a year ago.

In spite of all the negativity there are a ton of analysts who are still bullish on the group. If you do any research you'll see a lot of voices shouting that the airline stocks are a buy. You'll hear how the airlines will avoid the mistakes of the past. There are plenty of analysts suggesting the airlines are a buy because their valuations are so cheap. Even the International Air Transport Association (IATA) recently raised their 2015 global estimate on airline profits from $25 billion to 29.3 billion thanks to lower oil prices and record high load factors (near 80%).

On one hand the bullish view point on airline stocks is true. Traffic is still growing. Oil prices remain depressed compared to the last few years. Valuations do look cheap. Eventually this group will get so cheap that they will find a bottom. Unfortunately that could be another -10% to -20% from current levels.

Technically LUV is a sell. The stock produced a bearish double top with its peaks in January and March. It has sliced through multiple layers of support and broken the longer-term up trend. The $34.00 level looks like short-term support. We are suggesting a trigger to launch short-term bearish positions at $33.85. Earnings are coming up in late July and we'll likely exit before LUV reports.

- Suggested Positions -

Long SEP $33 PUT (LUV150918P33) entry $1.87

06/22/15 new stop @ $35.45
06/16/15 triggered @ $33.85
Option Format: symbol-year-month-day-call-strike


SM Energy Company - SM - close: 45.54 change: -1.81

Stop Loss: 48.75
Target(s): To Be Determined
Current Option Gain/Loss: -33.3%
Average Daily Volume = 1.6 million
Entry on June 19 at $44.49
Listed on June 13, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/29/15: It was a good day for SM bears. The stock underperformed the broader market and its peers with a -3.8% decline. I'm still cautious on this trade though.

No new positions at this time.

Trade Description: June 13, 2015:
SM has been around a long time. They were founded back in 1908. The company was formerly known as St. Mary Land & Exploration Company but they changed their name to SM Energy Company about five years ago.

SM is in the basic materials sector. According to the company, "SM Energy Company is an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in onshore North America."

SM operates in the Rocky Mountain region including the Bakken and Three Forks formations. Further south, they drill in the Haynesville and Woodford shales of Texas and Oklahoma. SM also operates in the Permian region of Texas and New Mexico. Even further south SM drills in the South Texas area with the Eagle Ford shale formation.

Crude oil's plunge in late 2014 crushed the oil sector and shares of SM followed it lower. Yet SM appeared to be having trouble before the big drop in oil prices. The company has missed Wall Street's earnings estimates the last four quarters in a row.

The huge drop in oil sparked significant cutbacks across the oil and gas industry with most major exploration companies reducing their capital spending plans. When SM reported their Q4 earnings in February 2015 they missed the EPS number by five cents and revenues were down -6.4% from a year ago. Management also slashed their 2015 investment plans by -44% from $1.9 billion to $1.0 billion.

SM reported its 2015 Q1 numbers on May 5th. Analysts were expecting a profit of $0.29 per share on revenues of $543.1 million. SM delivered a profit of $0.21 as revenues plunged -42% to $365.9 million.

Citigroup issued a research report last month that suggested U.S. oil producers will still be able to profit with oil at depressed prices. Here's a quote from a Bloomberg article, "belt-tightening across the industry and more strategic drilling in prolific areas would deliver ample profits even at $50 crude. The improvement is driven by costs that are expected to fall by 20 to 30 percent and techniques that allow rigs to wring 30 percent more oil or natural gas from each well compared with a year ago." That definitely seems like ammunition for the bulls to be buying some of the oil producers. Yet the group continues to lag. They are facing some stiff headwinds.

Crude oil has produced a +25% bounce off its March 2015 lows. Yet the rally in oil has stalled the last few weeks with the commodity churning sideways. The recent OPEC meeting showed that the Middle East shows no signs of slowing down their production. The world is temporarily facing a small oil glut.

Meanwhile currencies could play an issue here. It is widely accepted that the long-term trend for the U.S. dollar is now higher. The Federal Reserve will eventually raise rates, either later this year or early next year. When they start raising rates it should boost the dollar. At the same time central banks around the world (like Japan and Europe) are in the middle of huge QE programs that will drive their currencies lower. Naturally this will lift the dollar even higher. A rising dollar pushes commodities lower.

Technically shares of SM have been very weak. The broke down from a bullish channel a couple of weeks ago. The stock has also sliced through some psychological support levels. The point & figure chart is currently forecasting at $40.00 target. You could argue that SM is already oversold. However, the path of least resistance is lower. Tonight we are suggesting a trigger to buy puts at $44.90 with a wide stop loss at $50.25 just in case SM does see a little oversold bounce.

- Suggested Positions -

Long AUG $40 PUT (SM150821P40) entry $1.65

06/23/15 new stop @ 48.75
06/19/15 triggered on gap down at $44.49, suggested entry was $44.90
Option Format: symbol-year-month-day-call-strike



CLOSED BULLISH PLAYS

ManpowerGroup Inc. - MAN - close: 88.90 change: -2.82

Stop Loss: 89.65
Target(s): To Be Determined
Current Option Gain/Loss: -17.7%
Average Daily Volume = 697 thousand
Entry on June 18 at $90.25
Listed on June 16, 2015
Time Frame: Exit PRIOR to earnings in very late July
New Positions: see below

Comments:
06/29/15: The market's big decline today knocked MAN below the $90.00 level. Our stop loss was hit at $89.65.

I would keep MAN on your watch list. The $87-88 zone was major resistance so it should be new support.

- Suggested Positions -

SEP $95 CALL (MAN150918C95) entry $2.20 exit $1.81 (-17.7%)

06/29/15 stopped out
06/23/15 new stop @ 89.65
06/18/15 triggered @ $90.25
Option Format: symbol-year-month-day-call-strike

chart:


CLOSED BEARISH PLAYS

Wynn Resorts - WYNN - close: 93.93 change: -2.57

Stop Loss: 100.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.47 million
Entry on June -- at $---.--
Listed on June 27, 2015
Time Frame: exit PRIOR to WYNN's earnings report (late July)
New Positions: see below

Comments:
06/29/15: The entry point on our WYNN trade did not work out, which is too bad since WYNN could have much further to fall.

The plan was to buy puts if shares hit $96.20. However, our entry point disclaimer says do not open the trade if the stock gaps open more than $1.00 past our entry trigger. This morning WYNN gapped open lower at $93.78.

I'm still bearish on WYNN and suggest readers keeping it on your watch list. A failed rally in the $98 area could be a new entry point for bearish positions.

Since our trade did not open as expected we are removing WYNN from the newsletter.

Trade did not open.

06/29/15 Trade did not open. Removed from the newsletter

Daily Chart: