Option Investor
Newsletter

Daily Newsletter, Monday, 7/13/2015

Table of Contents

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

Market Wrap

Greek Deal! Rally On!

by Thomas Hughes

Click here to email Thomas Hughes
Greece got a deal and the market rallied.... now it's time to focus on earnings and data.

Introduction

They announced a Greek deal, an Agreekment as one official put it, and global markets rallied. The really amazing thing is the deal is worse, not better, than the deal offered two weeks ago and refused through referendum. The news was well received by global markets and somehow made PM Tsipras even more popular with the Greek people. Of course, the deal still has to pass parliamentary approval, there are at least 6 major reforms that must be passed this week with more on the way, so it is possible it could still fall apart. As of now the Greek banks are still closed with Thursday the earliest day mentioned to expect an opening.

In any event global markets rallied on the news and are already refocusing attention their attention. China remains a concern but their market seems to be bouncing back on the combination of moves over the past week that have so far supported the market. The mainland Shang Hai index led with gains near 2.5% followed by the Nikkei and Hang Seng. European markets also rallied, primarily on relief for the Greek deal, with gains in the range of 1-1.8%.

Market Statistics

Index futures for US markets were positive all morning. The S&P was indicated higher by 15 points or more for most of the morning and that held into the opening bell. No data was released today and earnings were light although the calendar is full of both later in the week.

The market opened strong on today's news and kept on climbing. The broad market gained about 0.85% within the first half hour trading and hit the morning high around 10:15AM. Once the high was hit trading consolidated just below those levels. The indices tread water throughout the afternon but held near their early highs. Just before 3PM the bulls got their wind back and were able to push to another new high, extending today's gains. The pop lasted the entire final hour of trading leaving the indices at their highs for the day when the closing bell sounded.

Several headlines about the Iran deal crossed the wires throughout the day as well. None seemed to impact the broad market but oil prices were volatile. The pendulum swung both ways, at one point no deal was expected today, at another a deal was seen to come soon but sticking points remained. The last I heard was that a deal would likely be announced by morning.

Economic Calendar

The Economy

No data today but it is a big week for releases. We're mid month which means that housing data starts coming out, as well as CPI/PPI and the Beige Book with this go round. Tomorrow is Retail Sales, Import/Export Prices and Business Inventories. Wednesday PPI, Empire Manufacturing and Industrial Production/Capacity Utilization come out in the morning with the Fed's Beige Book scheduled for the afternoon. Thursday the weekly jobless claims are rounded out by the Philly Fed survey and the Home Builders index. Friday caps the week with CPI, Housing Starts, Building Permits and Michigan Sentiment. No one data point really stands out as most important but the Beige Book and CPI/PPI could have the most impact on FOMC rate hike outlook.

Moody's Survey Of Business Confidence continues to decline from its all time high but remains strong and above the 40 level. This week the diffusion index fell by -0.6% to 40.2, the lowest level since March. Despite the decline Moody's economist Mark Zandi says the survey shows strength in the global economy. Strength is led by the US where business spending and hiring are notably strong.


According to FactSet the expected blended rate for S&P 500 Q2 earnings growth is now -4.4%. This is up slightly from last week when it was -4.5%. Based on the four year averages this could rise to as high as -1.1% with a chance of turning positive by seasons end. Ex-energy the blended growth rate rises to +1.75%. So far 24 S&P 500 companies have reported with 16 beating estimates for EPS and 12 beating estimates for sales. Another 42 are scheduled to report this week. Healthcare, Financials and Consumer Discretionary are expected to lead with earnings growth of 8.2%, 4.5% and 4.5% this quarter.

It is time to start looking toward third quarter earnings in earnest. The blended rate for the quarter is projected at -1% with that rising to +4.8% ex-energy. Based on the four year average for earnings growth we can expect the blended rate to rise into the range of +3%-+8% by the end of the 3rd quarter reporting season. The Consumer Discretionary sector is expected to lead with earnings growth of +12.6%, followed by the Financials and Healthcare with growth of +10.5% and 9.3% respectively.

The Oil Index

Oil prices fell in early trading as supply outweighs demand and the Iran nuke deal looms closer. Late day prices rebound to post a small gain only to retreat back to early lows by days end. The Iran deal still has significant sticking points, according to reports, but is closer than ever to becoming reality. At last report it could be announced as early as tomorrow morning. Once signed Iranian supply could add as much as 200,000 barrels a day to an already oversupplied market, with that rising to an additional 1 million per day in as little as a year. Meanwhile, fighting in Yemen rages on between Saudi and Iranian backed forces and could escalate if the deal goes through. WTI closed the day just above $52.

The Oil Index was able to squeak out a gain just over 0.5% in today's action. The index created a small doji candle just beneath my rising trend line with indicators consistent with an upward swing in momentum. The bottom of the trend line is potential resistance, near 1290, and needs to be watched as it could keep prices in check. The long term trend is up but a failure to break back above this line could indicate another move to test long term support near 1250 or lower, to the long term low near 1200. Earnings are going to be bad for this sector and could lead to further downside pressure in the near term but long term outlook remains positive. Reports from the major names in this sector are due out the last week of this month and first week of August. I'll be looking for indications of next year's expectations.


The Gold Index

Gold traded down today on rising dollar value but lost only -0.20%. Prices bounced off the long term low, near $1150, for the third time five days and so far appear to be supported. Janet Yellen's comments from Friday, indicating a rate hike was needed this year, has helped to strengthen the dollar while at the same time raising the specter of inflation which is pressuring and supporting gold at the same time. This week's Beige Book as well as the CPI and PPI data are potential movers of gold. The $1150 level could prove to be very important in the short to long term. A break below this level would be bearish and take the metal to new 5 year lows.

The miners remain under pressure as gold trades near its long term low. The miners ETF GDX gained a little over 0.30% after an early loss greater than -1% in a move confirming long term support. This support is coincident with two previous bottoms and the base line of a possible market reversal I have been tracking since last year. Support is near $16.50 and also coincident with the possible bottom gold has been building along the $1150 level.

This third pullback to support by the miners is much deeper than I first anticipated and could move lower if gold prices do not hold their support levels. The indicators are bearish but consistent with a retreat to support within a trading range. If support is broken next target is near $15.75 and the 100% retracement of the previous bull market.


In The News, Story Stocks and Earnings

Earnings this week will be dominated by the financials although there are some other important names and sectors on the list as well. The financials are expected to produce earnings growth near 4.5% this quarter and could easily beat this as expectations are low. Tomorrow JP Morgan and Wells Fargo lead off, both expected to produce earnings in-line with the past quarter but showing gains in the range of 5% over last year at this time. The XLF Financial Spyder gained 1.22% in today's session and looks like it will move higher. The ETF has moved above the short term 30 day moving average and looks like it will retest resistance at the top of the 7 month trading range. The indicators are mixed but rolling into a bullish signal, consistent with a move to the upper end of a trading range. Earnings will play a big part in this move, better than expect and/or positive forward outlook could help break it to new highs.


The Consumer Discretionary sector was a top performer today. The XLY Consumer Discretionary Spyder gained over 1.4%, closed at today's high and set a new all time high. Today's move was led by moves in Amazon and Priceline which both jumped by more than 2%. Amazon is getting a lift from its upcoming Amazon Day sales event and set a new high in today's session. Priceline got an upgrade from Cantor Fitzgerald giving a target 18% above last week's closing price. Priceline is also expected to see a near 50% jump in earnings from last quarter to this. Significant moves in Starbucks, Walt Disney and Nike also contributed to today's move. The ETF is now trading at all time highs confirmed by bullish indicators and positive outlook. The indicators are signaling a bullish trend following entry, MACD has just confirmed a stochastic bullish crossover which triggered at the end of last week. Upside target is now near $80.


Johnson&Johnson reports tomorrow as well. The healthcare conglomerate is expected to report earnings that are 2.4% above last year at this time and 9% higher than the first quarter. Today the stock traded up, gaining a little over 0.70%. It is now trading above the short term moving average with bullish indicators. The indicators are pointing to higher prices with $102.50 as an upside target, dependent on earnings results. A fall from this level could take it down to $97.50 in the near to short term.


Rail carrier CSX is expected to report tomorrow as well. The carrier is unique in its global reach, acquired through use of intermodal shipping container technology, is expected to net $0.53/share for investors. This is up $0.08 from last quarter, in-line with earnings last year at this time and the highest quarterly earnings for at least the last two years. The results are expected despite the drop in oil prices. In a recent report the company financial officer reaffirmed full year guidance and said that based on current traffic volumes 2nd quarter earnings could be flat to slightly up, putting CSX in position to possibly beat expectations. Today the stock lost close to -0.75% and is trading at a long term support level. The indicators are mixed but consistent with support, bearish MACD is receding while stochastic is forming a bullish crossover low in the oversold range. Positive earnings could produce a bounce from this level, negative could help prices fall through.


The Indices

The market rallied throughout the day. While the Greece news appears to be the catalyst I think today's move was more than just Greece. The move started early, hit a high, consolidated for several hours and then broke out to new highs and all led by the tech heavy NASDAQ Composite. The index gained 1.48% in today's session, extending its bounce from the long term trend line and breaking above resistance. Resistance was the previous all-time high, near 5050, and the short term moving average, with next resistance at the current all time high. The indicators are mixed but rolling into what could be a trend following signal. MACD remains bearish but is fast approaching the zero line while stochastic has made a weak bullish crossover. The move is to the upside, in line with underlying trends, with the current all time as target.


The Dow Jones Industrial Average made the next largest gain, 1.22%. The blue chips created a long white candle, extending Friday's bounce, and broke above the short term moving average. The indicators are confirming the move with a weak bullish trend following signal that points to a test of resistance at least. Resistance is just above the current level, near 18,000, with next resistance above that near 18,350.


The broad market S&P 500 made the third largest move in today's session, 1.22%. The index created a long white candle and broke above the short term moving average. The move is in line with the underlying trend and appears to be strong but still has resistance above it. One resistance was broken today with next target about 20 points above today's close. The indicators are rolling over into a trend following signal and will likely confirm with a MACD crossover in tomorrow's action.


The Dow Jones Transportation Average made the smallest gain today, only 1.11%. The transports were however able to close above resistance near 8280 and the short term moving average. The indicators are confirming this break with bullish crossovers on MACD and stochastic with a target near 8500. This signal is in line with the underlying long term uptrend and could result in significant upside, if the nearer term down trend is reversed. At this time the upside move is still in its early phases so caution remains a must.


Now that we are able to see past Greece economic and earnings trends are going to become the focus again. So long as they remain positive the long term trends in the market should remain positive as well. Today's action is an early indication that the bull market is still intact, but it is only an early indication, there are still risks that could wreck the market including earnings, data and global news. Earnings begin to roll out in force with reports from several important sectors, I don't expect much from reports this quarter but I would like to see positive outlook. We will also get a lot of important macro data, some of which having a direct impact on GDP estimates, so it will be nice to see improvement here as well. As for global news, such as Greece or Iran deals, headlines could flash at an time so be wary.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Billings and Guidance Below Expectations

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: HAIN, WSM, CAN, ADBE, HSIC, VLO, AMCX




NEW DIRECTIONAL PUT PLAYS

Barracuda Networks, Inc. - CUDA - close: 30.34 change: -1.21

Stop Loss: 32.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 512 thousand
Entry on July -- at $---.--
Listed on July 13, 2015
Time Frame: 2 or 3 weeks
New Positions: Yes, see below

Company Description

Trade Description:
Cyber-security is a hot industry right now. We constantly hear about hackers stealing information from major corporations. There has also been a high-profile attack on U.S. government employee data. This has driven gains for a number of cyber security stocks. Yet one security firm is underperforming its peers. That is CUDA.

CUDA is in the technology sector. According to the company, "Barracuda (CUDA) provides cloud-connected security and storage solutions that simplify IT. These powerful, easy-to-use and affordable solutions are trusted by more than 150,000 organizations worldwide and are delivered in appliance, virtual appliance, cloud and hybrid deployments. Barracuda's customer-centric business model focuses on delivering high-value, subscription-based IT solutions that provide end-to-end network and data security."

They reported their 2016 Q1 earnings on July 9th. Earnings rose +39% from a year ago to $0.09 per share. That beat estimates of $0.08. Revenues were up +17.8% to $78 million, also above expectations. Their subscribers grew +18% to 252,000 and their subscription revenue was up +19.6%.

It looks like a pretty good report. So why did the stock plunge -19% on Friday? That's because Wall Street was not happy with CUDA's gross billing number or its soft Q2 guidance.

CUDA reported their Q1 gross billings were up +7.6% to $94.3 million. Yet that was below expectations in the $103 million region. Management also guided Q2 revenue estimates into the $78-79 million range. That's below estimates of $80.4 million.

Shares were crushed on Friday and there was no oversold bounce today. CUDA continued to underperform with a -3.8% drop in spite of the market's widespread rally today. The point & figure chart is now bearish and forecasting a $26.00 target. We think CUDA could drop toward $25.00. However, I will warn you that CUDA does have potential support in the $29.50-30.00 range.

Tonight we are suggesting small bearish positions to buy puts at $29.75. More conservative traders may want to sit this one out or wait for a drop below $29.00 as an alternative entry point. I consider this a higher-risk, more aggressive trade.

Trigger @ $29.75 *small positions to limit risk*

- Suggested Positions -

Buy the AUG $30 PUT (CUDA150821P30) current ask $1.60
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

Stocks Pop On Potential Greek Deal

by James Brown

Click here to email James Brown

Editor's Note:

After a marathon negotiation this weekend it appears that the EU has finally reached a deal with Greece to keep it in the Eurozone. The U.S. market gapped open higher on this news. Let's hope the deal doesn't fall apart before it's signed.

Our plan was to close the DWRE trade this morning. We have removed FOSL as a candidate.

IYT and LUV were stopped out on the gap higher this morning.


Current Portfolio:


CALL Play Updates

Cracker Barrel Old Country Store - CBRL - close: 160.75 change: +3.61

Stop Loss: 152.40
Target(s): To Be Determined
Current Option Gain/Loss: +110.0%
Average Daily Volume = 332 thousand
Entry on July 01 at $150.25
Listed on June 20, 2015
Time Frame: Plan on exiting prior to August 5th
New Positions: see below

Comments:
07/13/15: CBRL is starting the week on a strong note. Shares soared +2.29% to close at new highs. Traders may want to raise their stop loss again. CBRL is arguably short-term overbought here.

No new positions at this time.

Trade Description: June 20, 2015:
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.

- Suggested Positions -

Long SEP $155 CALL (CBRL150918C155) entry $4.00

07/11/15 new stop @ 152.40
07/07/15 new stop @ 147.75
07/01/15 triggered @ $150.25
Option Format: symbol-year-month-day-call-strike


The Walt Disney Co. - DIS - close: 118.05 change: +1.61

Stop Loss: 112.25
Target(s): To Be Determined
Current Option Gain/Loss: +100.0%
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:
07/13/15: DIS added another +1.38% to close at another record high. Shares are testing a three-week trend line of higher highs so the next move should be a dip lower.

No new positions at this time. Readers may want to start adjusting their stop loss higher.

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


Facebook, Inc. - FB - close: 90.10 change: +2.15

Stop Loss: 84.90
Target(s): To Be Determined
Current Option Gain/Loss: +16.2%
Average Daily Volume = 24.5 million
Entry on July 06 at $88.15
Listed on July 04, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: see below

Comments:
07/13/15: Bulls were in control of FB shares today. The stock leapt past short-term resistance near $88.00 and surged to new all-time highs. I would not chase it here at current levels.

Trade Description: July 4, 2015:
Facebook probably needs no introduction. It's the largest social media platform on the planet. As of March 31st, 2015 the company reported 1.44 billion monthly active users and 936 million daily active users. If FB were a country that makes them the most populous country on the planet. China has 1.35 billion while India has 1.25 billion people.

Earlier this year (March) the company announced a new mobile payment service through FB's messenger app. The new service will compete with similar programs through PayPal, Apple Pay, and Google Wallet.

Meanwhile business at FB is great. According to IBD, FB's Q4 earnings were up +69% from a year ago. Revenues were up +49%. Q1 results were out on April 22nd. Earnings were up +20% to $0.42 per share, which beat estimates. Revenues were up +41.6% to $3.54 billion in the first quarter. Wall Street is expecting FB's profit to rise +12% in 2015 and +32% in 2016.

FB continues to see growth among its niche properties. The company bought Instragram for $1 billion in 2012. Last late year Instragram surpassed Twitter with more than 300 million active users. FB is also a dominate player in the messenger industry with more than 600 million users on WhatsApp and 145 million users on Facebook Messenger. FB has not yet started to truly monetize its WhatsApp and Messenger properties. It's just now starting to include ads in Instagram. Eventually, with audiences this big, FB will be able to generate a lot of cash through additional advertising.

Speaking of advertising, FB has jumped into the video ad game with both feet and it's off to a strong start. FB claims that it's already up to four billion video views a day. They had 315 billion video views in Q1 2015. That's pretty significant. YouTube had 756 billion video views in Q1 but YouTube has been around for ten years (FYI: YouTube is owned by Google). FB has only recently focused on video.

Wall Street is growing more optimistic as FB develops its blooming video ad business and its Instagram and messaging properties. In the last few weeks the stock has seen a number of price target upgrades. Bank of America upped their FB price target from $95 to $105. Cantor Fitzergerald upped theirs to $100. Brean Capital raised theirs to $108. Piper Jaffray upgraded their FB target to $120. Currently the point & figure chart is bullish with a $113.00 target.

Technically FB was stuck in a trading range for months while still working on a long-term, slow moving up trend of higher lows. That changed a couple of weeks ago with a bullish breakout to new highs. The recent pullback is an opportunity. If traders continue to buy this dip we want to jump on board. Tonight we are listing an entry point to buy calls at $88.15.

- Suggested Positions -

Long AUG $90 CALL (FB150821C90) entry $2.84

07/06/15 triggered @ $88.15
Option Format: symbol-year-month-day-call-strike


Fiserv, Inc. - FISV - close: 87.09 change: +0.74

Stop Loss: 82.40
Target(s): To Be Determined
Current Option Gain/Loss: +9.4%
Average Daily Volume = 1.0 million
Entry on July 10 at $85.41
Listed on July 07, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: see below

Comments:
07/13/15: We saw a similar move in FISV today. Shares gapped open higher and ended the session at new highs.

I would not launch new positions at this time. Traders may want to move their stop loss closer to $84.00 or even $85.00.

Trade Description: July 7, 2015:
Apple isn't the only one with a mobile payments platform. Last year AAPL launched its Apple Pay service, which allows people to use their smart phones (and now smart watches) to pay for stuff at the register. FISV also jumped into the mobile pay industry late last year. That's on top of a growing business of its traditional payment systems.

FISV is part of the services sector. According to the company, "Fiserv, Inc. (FISV) enables clients to achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management, and business insights and optimization."

Earnings have been relatively on track the last couple of quarters. FISV most recent report was announced on May 5th. They reported earnings of $0.89 per share. That was up +8.5% from a year ago and above Wall Street estimates. Revenues were up +3.4% and slightly behind expectations. The company spent $290 million buying back 3.8 million shares last quarter.

Shares of FISV had been slowly drifting higher in the $75-80 zone from February to June. Suddenly things changed. The market's big rally on June 18th helped FISV breakout from its trading range. The next day the stock was upgraded to an "outperform" and given at $95 target. This launched FISV's stock toward $85.00.

Shares have been trading technically and slowly faded back toward its mid-June breakout high. Once FISV had filled the gap it began to rally again. The stock held up well this morning during the market sell-off. When the major indices reversed higher FISV outperformed them with a +0.77% gain. We want to hop on board if FISV can rally past $85.00. Tonight we're suggesting a trigger to buy calls at $85.15. Plan on exiting this trade prior to their earnings report on July 29th.

- Suggested Positions -

Long AUG $85 CALL (FISV150821C85) entry $3.20

07/10/15 triggered on gap open at $85.41, trigger was $85.15
Option Format: symbol-year-month-day-call-strike


INSYS Therapeutics - INSY - close: 38.27 change: +0.74

Stop Loss: 33.85
Target(s): To Be Determined
Current Option Gain/Loss: -39.7%
Average Daily Volume = 607 thousand
Entry on July 01 at $36.30
Listed on June 30, 2015
Time Frame: Exit PRIOR to earnings in August
New Positions: see below

Comments:
07/13/15: INSY outperformed the major indices with a +1.9% gain. The stock also closed above short-term resistance at the $38.00 level. While the trend is up I would not launch new positions at this time.

Trade Description: June 30, 2015:
INSY is probably best known for its synthetic cannabinoid drugs that use THC, the same ingredient in marijuana. Yet it is the company's Subsys treatment, a painkiller several times stronger than morphine, that generates the most revenues for INSY. The marketing practices behind Subsys have generated some scandal-worthy headlines but nothing seems to be slowing down the stock's long-term rally.

INSY is in the healthcare sector, more specifically the biotech industry. According to the company, "Insys Therapeutics is a specialty pharmaceutical company that develops and commercializes innovative drugs and novel drug delivery systems of therapeutic molecules that improve the quality of life of patients. Using our proprietary sublingual spray technology and our capability to develop pharmaceutical cannabinoids, Insys addresses the clinical shortcomings of existing commercial products. Insys currently markets two products: Subsys, which is sublingual Fentanyl spray for breakthrough cancer pain, and a generic version of Dronabinol (THC) capsules. The Company's lead product candidate is Dronabinol Oral Solution, a proprietary, orally administered liquid formulation of dronabinol that Insys believes has distinct advantages over the current formulation of dronabinol in soft gel capsule. Insys is developing a pipeline of sublingual sprays, as well as pharmaceutical cannabidiol."

The company's earnings growth has been impressive. They have consistently beaten Wall Street's bottom line earnings estimates the last six quarters in a row. They normally beat the revenue estimate as well. Looking at the last three quarters INSY has seen its revenues jump +99.7%, +65.4%, and +70.2%. Most of that has been on strong Subsys sales, which were up +69% in the fourth quarter and up +74% in the first quarter.

INSY management is very optimistic and expects to complete four Phase III clinical trials in 2015. If successful it will significantly broaden their product line. The company just recently announced a New Drug Application (NDA) for its "proprietary Dronabinol Oral Solution for anorexia associated with weight loss in patients with AIDS; and nausea and vomiting associated with cancer chemotherapy in patients who have failed to respond adequately to conventional antiemetic treatments. Dronabinol Oral Solution is an orally administered liquid formulation of the pharmaceutical cannabinoid dronabinol, a synthetic version of tetrahydrocannabinol (THC)."

INSY's stock has been a strong performer since the company's IPO in 2013. Shares saw a 3-for-2 split in 2014. They just completed a 2-for-1 split on June 5th.

Before I continue I want to remind traders that biotech stocks can be tough to trade. Normally stocks in this group can be volatile with lots of headline risk. The right headline about a successful test or clinical trial or FDA approval can send shares soaring. The wrong headline could see a biotech stock crash or even gap down several points.

It is important to note that not all the news is good for INSY. In late 2014 the Wall Street Journal (WSJ) ran a story about some shady marketing practices for INSY's Subsys painkiller. This is an under-the-tongue spray version of the painkiller fentanyl. Subsys has a very high risk of dependency and is currently only approved for cancer patients. Yet strangely enough only 1% of prescriptions last year were written by oncologists. Several doctors with the biggest number of Subsys prescriptions have also been under review or disciplined. The WSJ noted that the Office of the Inspector General of the U.S. Department of Health and Human Services and the U.S. Attorneys in the Central District of California and Massachusetts are all looking into the matter. This is significant because Subsys accounts for the vast majority of INSY's revenues.

Thus far the stock market has managed to ignore the shadow cast by Subsys and how the drug is prescribed and INSY's financial relationship with the doctors who prescribe it.

Last week saw biotech stocks retreat. The IBB biotech ETF had broken out in mid June and rallied to new record highs. The group reversed lower last week with a sharp correction. INSY followed its peers lower with a painful drop from $42 to $34 in about three days. Currently the $34.00 level is holding up as support. If INSY can bounce from current levels the move could be big.

A rally from here could spark a short squeeze. The most recent data listed short interest at 68% of the small 23.6 million share float. Tonight we are suggesting a trigger to buy calls at $36.30.

*Small positions to limit risk* - Suggested Positions -

Long AUG $40 CALL (INSY150821C40) entry $3.40

07/01/15 triggered @ $36.30
Option Format: symbol-year-month-day-call-strike


Jack In The Box Inc. - JACK - close: 92.10 change: +2.21

Stop Loss: 87.45
Target(s): To Be Determined
Current Option Gain/Loss: +34.4%
Average Daily Volume = 600 thousand
Entry on July 13 at $90.25
Listed on July 11, 2015
Time Frame: Exit PRIOR to earnings
New Positions: see below

Comments:
07/13/15: Our brand new play on JACK is off to a healthy start. Shares opened at $90.00 and rallied to a +2.45% gain on the day. Our trigger to buy calls was hit at $90.25. If you missed the entry point consider waiting for a pullback.

Trade Description: July 11, 2015:
It's a burger-eat-burger world out there in the fast-food business. Jack in the Box is small fries compared to its larger rivals like McDonalds (36,258 locations) and Wendy's (6,515 locations). Let's not forget heavy weights like Taco Bell, Burger King, Subway, Dairy Queen, and a handful of pizza chains. JACK only has about 2,200 restaurants but it also has a secret weapon and that is the Qdoba Mexican Grill, a fast-casual restaurant with about 600 locations. Fast-casual restaurant rival Chipotle Mexican Grill has almost 1,800 locations.

Some of that intense competition being felt by McDonalds and Chipotle Mexican Grill is coming from Jack in the Box and its Qdoba brand, which is growing sharply. A majority of their Qdoba franchisees own multiple stores with 10, 20 even 40 stores common. Enterprising business owners don't open additional stores if the original stores are not working. To have so many owners with high numbers of stores suggests the franchise is consistently profitable.

To be profitable they need solid customer traffic, good food and decent margins. Shares of JACK have been one of the best performers on the S&P over the last couple of years because the company has been posting solid earnings and growth.

With analysts cutting earnings estimates for McDonalds and Chipotle, earlier this year, because of competition in the sector it makes sense to look at what has happened at JACK. Over the last quarter and the last year not a single analyst has lowered their earnings estimates for JACK. According to Zacks, analysts are expecting JACK to grow earnings +11.7% in the current quarter and +22% for 2015.

Customers are trending towards healthier foods and away from the mass produced burgers and fries at McDonalds. Did you know there are 19 ingredients in McDonalds fries? Surely you didn't think they were just potatoes and grease? This trend may not help the Jack in the box brand but it's good news for Qdoba. Restaurants like Qdoba and Chipotle are capitalizing on the healthy food craze.

The company plans to open 15 new Jack in the Box stores in 2015. They're also cashing in on Qdoba's success and planning to open 50 to 60 new Qdoba locations. That compares to just 12 new Jacks and 38 new Qdobas in 2014.

Management is trying to be shareholder friendly. They have an active share buyback program and they reduced the share count by 10% over the last few quarters. In their most recent earnings report (May 13th) the company raised their quarterly dividend by +50%.

JACK reported its Q1 2015 earnings on February 17th. Analysts were expecting a profit of $0.87 a share on revenues of $461.2 million. JACK delivered earnings of $0.93 a share. That's a +24% improvement from a year ago. Revenues were up +4.1% to $468.6 million, above estimates. Their operating margins improved 1% to 19.3%. Management raised their 2015 guidance.

The company did it again in May with their Q2 report. Estimates were for $0.66 per share on revenues of $356 million. JACK reported $0.69 per share with revenues up +5.0% to $358 million. That is a +35.2% earnings improvement from a year ago. Their consolidated restaurant operating margins improved 210 basis points to 20.6%. Plus, management raised their 2015 guidance again.

The stock has ignored a lot of the market's recent volatility. Shares of JACK seem to be marching to the beat of their own drummer. You can see the market reaction to its Q1 earnings report in February with the big surge higher. The rally reversed in late March and shares found support near $86.00. The stock has been bouncing along the 486.00 level for more than two months. Its consolidation has narrow over the last few weeks. It used to be the $86-90 range. The last few days the consolidation has been in the $88-90 zone. JACK looks like it could breakout past $90.00 soon.

We want to be ready if JACK does breakout. Tonight we're suggesting a trigger to buy calls at $90.25. Plan on exiting prior to earnings in early August.

- Suggested Positions -

Long AUG $95 CALL (JACK150821C95) entry $1.60

07/13/15 triggered @ $90.25
Option Format: symbol-year-month-day-call-strike


Under Armour, Inc. - UA - close: 89.35 change: +3.11

Stop Loss: 83.75
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:
07/13/15: UA raced higher today after the stock had its price target upgraded to $95. Shares gapped open at $87.16 and sprinted to a +3.6% gain. This is a new all-time high. UA no looks short-term overbought and could retreat since it's near potential round-number resistance at $90.00.

I would expect a little pullback before moving higher. More conservative traders may want to up their stop again.

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

07/11/15 new stop @ 83.75
06/26/15 triggered @ $86.05
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Concho Resources - CXO - close: 110.17 change: +1.73

Stop Loss: 112.50
Target(s): To Be Determined
Current Option Gain/Loss: -41.3%
Average Daily Volume = 1.4 million
Entry on July 07 at $106.90
Listed on July 06, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: see below

Comments:
07/13/15: Oil and energy-related stocks were not immune to the market's big rally today but they are still underperforming. CXO managed to fare a lot better than its peers with a +1.5% gain.

We're not giving up yet with short-term resistance in the $111-112 area and its 200-dma at $111.90.

No new positions at this time.

Trade Description: July 6, 2015:
It has been a bumpy ride for energy stock traders over the last year. That's especially true for CXO investors. The stock fell from $148 to $80 in less than five months last year. CXO bottomed in December 2014. The stock managed a big bounce from $80 to $130 in the next five months but that rally is over with a big reversal on the company's Q1 earnings report in early May.

CXO is in the basic materials sector. According to the company, "Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties. The Company's operations are primarily focused in the Permian Basin of southeast New Mexico and west Texas."

The last couple of quarters have seen CXO's revenues decline. They reported their 2014 Q4 results on February 25th. Earnings were 88 cents a share, which was four cents above estimates. Yet revenues fell -6.0% to $594 million, way below estimates. Their 2015 Q1 results were announced on May 4th. Earnings per shares was $0.06. That was 17 cents worse than expected. CXO's revenues plunged -37.4% to $413.5 million, another big miss. The stock reacted to this news with a spike higher that quickly reversed.

Today the oil stocks are suffering as the commodity sinks due to oversupply concerns. The weekly Baker Hughes active rig count just turned positive two weeks in a row after a 28-week decline. This would suggest the pullback in the industry is over and the market has found a temporary equilibrium that will allow domestic companies to start launching new oil and gas rigs again. This will continue to boost supply and pressure prices lower.

A bigger problem could be the Iran nuclear negotiations. If Iran does sign a deal with the West then sanctions could be lifted that would allow Iran to sell up to one million barrels of oil per day on the global market. Sources suggest Iran already has dozens of crude oil tankers filled up and ready to go if the sanctions are lifted. This is one reason crude oil has been plunging the last few days. The current deadline (and there have been many) is tomorrow, July 7th. If Iran signs a deal then oil will likely drop again. If they don't then oil could bounce. If talks are postponed again then I suspect the prevailing trend, which is down, will remain in effect for oil and the oil stocks.

CXO has technically broken down below support near $110 and its 200-dma. The point & figure chart looks very bearish and is currently forecasting an $89 target. Tonight we're suggesting a trigger to buy puts at $106.90.

- Suggested Positions -

Long AUG $105 PUT (CXO150821P105) entry $4.60

07/07/15 triggered @ $106.90
Option Format: symbol-year-month-day-call-strike


SM Energy Company - SM - close: 42.42 change: -0.05

Stop Loss: 45.25
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
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:
07/13/15: Energy stocks underperformed the broader market today. SM closed in the red with a -0.1% decline.

I don't see any changes from my recent comments. 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

07/06/15 new stop @ 45.25
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

Demandware, Inc. - DWRE - close: 70.66 change: +1.67

Stop Loss: 68.65
Target(s): To Be Determined
Current Option Gain/Loss: -39.4%
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:
07/13/15: After a big loss on Friday DWRE managed a +2.4% bounce today. Our plan was to exit positions at the opening bell. DWRE's gap open higher at $69.77 was a gift.

- Suggested Positions -

OCT $75 CALL (DWRE151016C75) entry $5.28 exit $3.20 (-39.4%)

07/13/15 planned exit this morning
07/11/15 prepare to exit on Monday morning
07/06/15 new stop @ 68.65
06/22/15 triggered @ $72.35
Option Format: symbol-year-month-day-call-strike

chart:


CLOSED BEARISH PLAYS

Fossil Group, Inc. - FOSL - close: 71.41 change: +2.33

Stop Loss: 71.55
Target(s): To Be Determined
Current Option Gain/Loss: -----
Average Daily Volume = 1.0 million
Entry on July -- at $---.--
Listed on July 09, 2015
Time Frame: Exit PRIOR to earnings on August 11th
New Positions: see below

Comments:
07/13/15: The stock market's big rally today boosted FOSL to a +3.3% gain. We are dropping this stock as a bearish candidate.

Trade did not open.

07/13/15 removed from the newsletter, suggested entry was $68.40

chart:


iShares Transportation - IYT - close: 148.40 change: +1.53

Stop Loss: 148.35
Target(s): To Be Determined
Current Option Gain/Loss: -42.9%
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:
07/13/15: The market reaction to news of a potential deal for Greece produced a gap open higher for most stocks and ETFs this morning. The IYT gapped open higher at $148.40. That was above our stop loss at $148.35 and immediately closed our play.

- Suggested Positions -

AUG $145 PUT (IYT150821P145) entry $3.50 exit $2.00 (-42.9%)

07/13/15 stopped out on gap open at $148.40
07/11/15 new stop @ 148.35
06/29/15 triggered @ $146.90
Option Format: symbol-year-month-day-call-strike

chart:


Southwest Airlines Co. - LUV - close: 33.93 change: +0.10

Stop Loss: 34.05
Target(s): To Be Determined
Current Option Gain/Loss: -36.9%
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:
07/13/15: LUV ended the day with a 10-cent gain (a +0.29% rise) but shares gapped open higher at $34.87 (a +3.1% rally). The rally failed near prior resistance from late June. Unfortunately the gap higher stopped us out since our stop was $34.05.

- Suggested Positions -

SEP $33 PUT (LUV150918P33) entry $1.87 exit $1.18 (-36.9%)

07/13/15 stopped out on gap open higher at $34.87
07/06/15 new stop @ 34.05
06/22/15 new stop @ $35.45
06/16/15 triggered @ $33.85
Option Format: symbol-year-month-day-call-strike

chart: