Option Investor
Newsletter

Daily Newsletter, Sunday, 3/15/2015

Table of Contents

  1. Leaps Trader Commentary
  2. Portfolio
  3. New Plays
  4. Play Updates
  5. Watch

Leaps Trader Commentary

A Fistful Of Dollars

by James Brown

Click here to email James Brown

Fears over the Federal Reserve raising rates too soon combined with worries over the surging U.S. dollar and its impact on corporate profits. Together they helped push the big cap S&P 500 index to its third weekly loss in a row. Transportation and biotech stocks were a couple of exceptions to the market's decline. Small caps also managed to buck the market's trend with the Russell 2000 index posting a gain for the week.

The main story last week seemed to be the rally in the U.S. dollar and with good reason. The European Central Bank (ECB) started their QE program on March 9th. This accelerated the decline in the euro and in response the dollar surged to new 12-year highs.

Almost half of the S&P 500 companies get their sales outside the United States. A stronger dollar makes American products and services more expensive. The big complain during the Q4 earnings season was how currency headwinds hurt results. This is going to be an even bigger concern in the first quarter of 2015. Many thought the euro/dollar pair might find support near $1.10 or possibly $1.06 (1.00 euro for $1.06 dollars). Today it's down to $1.0497 and now it is virtually consensus that it's heading to parity ($1.00). There are new forecasts suggesting the euro could fall toward $0.80 in the next couple of years.

Chart of the U.S. dollar

Long-Term Chart of the U.S. dollar

The dollar index is up +23 percent against a basket of currencies in the last eight months. That is a HUGE move in the currency world. Most commodities are traded in dollars. That means a rising dollar pushes commodity values lower. Last week's rally in the dollar saw gold lose -0.7% to close near three-month lows in the $1,150 an ounce region. Silver had a rough week with a -1.5% drop to five-year lows near $15.50 an ounce. It was crude oil that really suffered. Concerns over vanishing storage and strong U.S. production combined with the dollar rally to push WTI crude oil down -9.3% last week. Oil-relate stocks dropped -3.1% while the oil service stocks plunged -6.6%.

Crude oil has fallen below $45.00 a barrel. Two months ago we saw crude oil hit a five-year low near $43.60 a barrel. Odds are really good we're going to see a new low soon, especially since U.S. inventories continue to climb with a successive string of 80-year record highs.

Meanwhile the number of active oil and gas rigs dropped for the 14th week in a row. Drilling companies shut down another 56 oil rigs and another 11 natural gas rigs. The number of active rigs is now off -806 from the September 2014 high of 1,931. The company that keeps this rig count is Baker Hughes and they're predicting a drop of 50% from the high. We're currently at 1,125 so we're getting close.

Economic Data

Economic data in the United States continues to disappoint forecasters. February retail sales was a shock with a -0.6% decline. Economists were expecting +0.3% increase. January saw a -0.8% decline and February's reading is the third monthly drop in a row. Vehicle sales were very weak with a -2.5% decline. Plenty of analysts blamed the weather. East of the Mississippi river saw 23 states experience one of the "top-10-coldest" Februarys on record, according to the National Oceanic and Atmospheric Administration.

Essentially it was so cold that consumers just stayed inside. They might be right. We did see online retail sales increase +2.2% in February, which was the biggest jump in about a year. However, there is also a camp of analysts that believe consumers are just saving more and spending less. There was a big expectation that super low gasoline prices would help boost consumer spending but we just didn't see any evidence this occurred.

The Producer Price Index (PPI), a look at wholesale inflation, was another shocker. Economists were expecting the PPI to rise +0.5% in February. Instead we got a -0.5% drop. This is the fourth decline in a row and February was the biggest drop since 2009. Surprisingly the reason behind February's drop appears to be food prices. Food prices are down three months in a row.

Another missed estimate was the Consumer Sentiment reading for March. Analysts were expecting the University of Michigan Consumer Sentiment survey to rise from 95.4 to 95.5. Unfortunately the March number dropped four points to 95.4. It was the biggest miss against expectations since February 2006.

Overseas Economic Data

Japan seems to be showing some improvement. Their Q4 GDP estimate was revised from +1.5% growth to +2.2% (year over year). Their industrial production from January surged +3.7% from the prior month. Japan's core machinery orders from January did fall -1.7% but that was better than the -4.1% estimate.

The Consumer Price Index (CPI) inflation gauge in China rose +1.4% in February from a year ago. That was significantly above expectations. Yet their PPI fell -4.8%.

Central banks around the world are desperate to fight off falling inflation (and/or deflation for some regions) on top of a slowing global economy. Their main weapon to fight falling inflation is easy monetary policy. This past week saw the central bank of Thailand, South Korea, and Russia all cut their interest rates. This pushes the number of central banks that have eased policy in 2015 up to 25. It was Russia's second interest rate cut this year.

Economic data out of Europe was a little bit quiet. The Eurozone Industrial Production slipped -0.1% for the month but it was still up +1.2% from a year ago. The Eurozone Sentix Investor Confidence survey came in better than expected with a rise from 12.4 to 18.6. I'm sure the Europeans expect their markets to rally the way U.S. markets did when the Fed launched its QE program. The German DAX stock market index hit new all-time highs last week.

Greece continues to haunt Europe. The European Commission launched into the technical details with Greece on how to met the requirements for the latest loan extension. Unfortunately European Commission President Jean-Claude Juncker express his frustration that Greece is not making enough progress. Meanwhile the new Greek leadership is still mouthing off and making its European partners uneasy. Last week the Greek Finance Minister Yanis Varoufakis said, "Greece is the most bankrupt country in the world and European leaders knew all along that Athens would never repay its debts." Naturally if you're in the rest of Europe, hearing comments like that from Greece, does not inspire you to loan them more money. Speaking of money, the Greek parliament is working on new laws that would allow the government to "use" private cash deposits and pension funds in the Bank of Greece to spend them on Greek bonds. You know the situation is getting pretty dire when the government is about to steal your bank deposits to pay their bills.




Major Indices:

It felt like a rough week for the S&P 500 but the index only lost -0.8%. That drop did erase its gains for 2015. The index found support near 2,040 on Wednesday and Friday. However, I'm not convinced the pullback is over. Investors should not be surprised if we see the S&P 500 drop toward the 2,000 mark and its simple 200-dma (near 2,003). This index is only down -3% from its all-time high set on March 2nd. A -5% pullback would mean a dip to 2,011.

chart of the S&P 500 index:

Intraday chart of the S&P 500 index:

Last week I warned readers that if the NASDAQ broke down under the 4,900 level it was probably headed for 4,800. That's still possible. However, you can see on the daily chart below the NASDAQ found short-term support near 4,845 and its 38.2% Fibonacci retracement of the February rally. Currently the NASDAQ composite is down about 137 points from its closing high of 5,008 set two weeks ago. I am expecting a dip to 4,800.

chart of the NASDAQ Composite index:

The chart of the small cap Russell 2000 index might be the most encouraging. The $RUT produced a big two-day bounce midweek and actually closed up +1.2% for the week. This index appears to be bouncing from a bullish trend of higher lows. It's only a few points away from a new all-time high.

The 1,240 area is short-term resistance. Should the index reverse we can watch for support near 1,200 and 1,160.

chart of the Russell 2000 index



Economic Data & Event Calendar

The week ahead is relatively quiet for economic data except for one major event. That will be the Federal Reserve's FOMC meeting on Wednesday. Their interest rate decision and statement should come out at 2:00 p.m. Eastern time. This week the Fed is also updating their economic forecast. This is followed by a press conference with Fed Chairman Janet Yellen at 2:30 p.m. Nothing else really matters. The market is constantly debating what the Fed will or will not do and when they might do it. This will be the one and only story for financial media this week.

In other news you might see headlines about Israel's big election on March 17th. Europe will be talking about a big solar eclipse on March 20th, which will block out 95% of sunlight for a big region. The options market should see a lot of volume since Friday is a quadruple witching expiration that only happens four times a year.

Economic and Event Calendar

- Monday, March 16 -
New York Empire State manufacturing survey
Industrial production

- Tuesday, March 17 -
Building Permits & Housing Starts

- Wednesday, March 18 -
Crude oil inventories
Federal Reserve policy update
Fed Chairman Yellen press conference

- Thursday, March 19 -
Philadelphia Fed manufacturing survey

- Friday, March 20 -
Quadruple-witching options and futures expiration

Additional Events to be aware of:

May 7th - Election in the United Kingdom

Looking Ahead:

Looking ahead there is only one story that matters this week and that's the FOMC meeting. The Federal Reserve has not raised rates since 2006. Their federal funds rate has been hovering at zero since December 2008. Everyone wants to know when the Fed will raise rates. We've talked about it ad nauseam and sadly it will remain the topic of conversation.

The better than expected February jobs report sparked big fears that the Fed might raise rates in June this year. Yet jobs is just one component the Fed needs to consider. Right now there is no inflation in the U.S. Wages are not rising too fast. U.S. economic activity seems to be falling. The U.S. dollar is skyrocketing. The rest of the world is seeing an economic slowdown. Raising rates now could be serious trouble and there is no reason to do so. The odds of the Fed raising rates in June "should" be zero (notice I said should).

The super spike in the U.S. dollar is a major factor here. According to Ellen Zentner, an economist with Morgan Stanley, the Fed will not raise their federal funds rate until March 2016. Zentner noted that every 1% rise in the U.S. dollar is the equivalent of a 14 basis point rise in interest rates because of the negative impact a rising dollar has on the economy. Currently the dollar is up more than +26% in the last nine months. That would be the equivalent of a +3.72% rise in interest rates. The Fed wants to raise rates but the dollar is already doing it for them.

There will be a ton of speculation about if the Fed removes the word "patient" from their language on Wednesday. It is believes that "patient" means any rate hike is still two meetings away. We have to remember the Fed likes to get creative with their language. They could remove the word patient and replace it with something else that suggests they are in no rush to raise rates. The Fed claims that their decisions are "data dependent" and right now all the data should be telling them to leave rates alone. We don't have to look any further than the Fed's own Atlanta Fed, who just reduced their Q1 GDP growth estimate from +1.2% to +0.6% last week.

This week the market is going to worry about the Fed's statement but what they should worry about is earnings. We've discussed this before. Analysts estimates for corporate earnings are plunging. At the beginning of 2015 consensus estimates for annual earnings growth was +8.1%. Today Wall Street is forecasting 2015 earnings growth of +1.7%. The first and second quarter estimates have turned negative. The biggest anchor weighing down earnings is the energy industry. Analysts are forecasting a -55% drop in earnings for oil companies. If the overall picture doesn't improve then 2015 could be the worst year for earnings growth since 2009.

The last week I suggested patience. The market pullback is actually a good thing for us as LEAPS traders. It can provide a better entry point for our next investment. Stocks might trade sideways on Monday and Tuesday as investors wait for the Fed policy statement. Then Wednesday afternoon and Thursday could be volatile. I would not be in a rush to launch new positions.

~ James







Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Investors suffered another volatile week for the stock market. Big caps underperformed with the S&P 500 falling for a third week in a row. Small caps managed to outperform.

Our plan was to close the NXPI trade on Monday, March 9th.

We have new stop losses on AET, ANTM, HUM, LOW, and TM.

Disclaimer: At any given time the author may have positions in any or all of any companies mentioned in the Leaps Newsletter.

--Position Summary Table--
Table lists Directional CALL or PUT/LEAPS only.
Insurance puts, if applicable, are not shown.

Red symbol/name represents a play or option position exited or closed this week.





New Plays

All Eyes On The Fed

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(March 15, 2015)

This week could be pivotal for the U.S. stock market. The FOMC meeting is Wednesday. The Fed's statement and Yellen's press conference on Wednesday afternoon could generate a lot of volatility.

Considering how much anxiety the market has already seen ahead of this meeting I'm reluctant to add new trades tonight. After a three-week decline the S&P 500 might rally if the Fed remains dovish.

I am encouraged by the relative strength in the small cap Russell 2000 index. This might suggest there is still a bullish undercurrent to the market.

No new trades tonight. I've added COH and EXPD as new watch list candidates.

I would keep a close eye on the U.S. dollar and euro. The dollar's move is starting to turn parabolic and a trend like that doesn't last very long. What happens to stocks if the dollar suddenly reverses (on a short-term basis, long-term it's probably still headed higher).

Chart of the U.S. dollar & the Euro



Play Updates

Healthcare Continues To Outperform

by James Brown

Click here to email James Brown


Closed Plays


We closed the NXPI trade on Monday, March 9th.

SWI hit our stop loss.



Play Updates


Apple Inc. - AAPL - close: 123.59

Comments:
03/15/15: AAPL's big event was Monday, March 9th. The company announced the new iOS 8.2 was available. They unveiled a 13-inch MacBook Pro. Of course the big reveal was the Apple Watch. While the company grabbed a lot of headlines it didn't do much for the stock. Shares continued to sink. AAPL is down three weeks in a row. I have been warning investors that shares were likely headed to $120.00 and I still expect AAPL will test the $120 level.

Earlier Comments: November 2, 2014:
Love it or hate it AAPL always has Wall Street's attention. It has a cult-like following. The company's success has turned AAPL's stock into the biggest big cap in the U.S. markets with a current valuation of more than $633 billion.

The company is involved in multiple industries from hardware, software, and media but it's best known for its consumer electronics. The iPod helped perpetuate the digital music revolution. The iPhone, according to AAPL, is the best smartphone in the world. The iPad helped bring the tablet PC to the mass market. The company makes waves in every industry they touch with a very distinctive brand (iOS, iWork, iLife, iMessage, iCloud, iTunes, etc.) and they've done an amazing job at building an Apple-branded ecosystem. Now they're getting into the electronic payments business with Apple Pay.

The company's latest earnings report was super strong. AAPL reported its Q4 (calendar Q3) results on October 20th. Wall Street was expecting a profit of $1.31 a share on revenues of $39.84 billion. The company delivered a profit f $1.42 a share with revenues up +12.4% to $42.12 billion. The EPS number was a +20% improvement from a year ago. Gross margins were up +1% from a year ago to 38%. International sales were 60% of the company's revenues.

AAPL's iPhone sales exceeded estimates at 39.27 million in the quarter and up nearly 16% from a year ago. The only soft spot in their ecosystem seems to be iPad sales, which have declined several quarters in a row. The company hopes to rejuvenate its tablet sales with a refresh of the iPad models. More importantly AAPL management raised their Q1 (calendar Q4) guidance as they expect revenues in the $63.5-66.5 billion in the quarter. Recent news would suggest that AAPL might deliver an incredible 50 million iPhone 6s in 2014. That's not counting their new iPhone 6+.

The better than expected results and bullish guidance sent the stock to new highs. The rally has created a quadruple top breakout buy signal on its point & figure chart that is currently forecasting at $133 target. Yet we do not want to chase AAPL here. The stock is up $12 from its October low. We do want to be ready if shares see a pullback.

Tonight I am suggesting a buy-the-dip trigger to buy calls at $103.50 with a stop loss at $98.90. (We amended the buy-the-dip trigger to $111.00 on Nov. 30th).

- Suggested Positions -
DEC 09, 2014 - entry price on AAPL @ 110.19, option @ 9.55
symbol: AAPL160115C120 2016 JAN $120 call - current bid/ask $13.85/14.05

03/01/15 Caution: AAPL could be poised for a pullback. Consider taking profits now and then re-enter this trade later.
02/22/15 new stop @ 114.00
02/15/15 new stop @ 109.50
12/09/14 triggered on gap down at $110.19, trigger was $111.00
11/30/14 raise the buy-the-dip entry trigger to $111.00
11/16/14 raise the buy-the-dip entry trigger to $108.00
Adjust the strike price to the 2016 Jan $120 call.
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 114.00
Play Entered on: 12/09/14
Originally listed on the Watch List: 11/02/14


Aetna Inc. - AET - close: 104.09

Comments:
03/15/15: AET continues to show relative strength. The stock has rallied off support near $100 to close at new highs. This is the sixth weekly gain in a row. I'm raising the stop loss up to $97.45.

No new positions at this time.

Earlier Comments: December 7, 2014:
AET is in the healthcare sector. According to a recent press release, "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'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."

If you study a one-year chart of AET the stock has definitely seen its ups and downs. That's because the healthcare industry has faced a number of issues. AET's CEO commented on this past year in their latest post-earnings conference call.

Mark T. Bertolini, Aetna chairman, CEO and president, said, "some of the challenges we face this year, including pricing solving for nearly $1 billion in ACA related industry fees and taxes, solving for the largest rate cuts to the Medicare Advantage program in our recent history, navigating a host of new regulatory requirements in our small group and individual businesses, managing through a turbulent launch in public exchanges and controlling pharmacy costs in a year where heavy priced Hepatitis C treatments first became available and treatment guidelines changed in unforeseen ways." (ACA stands for Affordable Care Act, a.k.a. Obamacare).

In spite of all these challenges shares of AET are outperforming the major indices with a +32% gain in 2014 compared to a +12% gain in the S&P 500. AET's strength is due to the company's earnings performance. They have beaten Wall Street's earnings estimates and raised guidance three quarters in a row.

AET's most recent quarterly report was October 28th. Analysts were expecting a profit of $1.58 a share on revenues of $14.7 billion. AET delivered a profit of $1.79 a share. Revenues were up +13% to match estimates. The company said they added 470,000 new medical insurance customers in the third quarter, putting the total at 23.6 million.

Bertolini commented on their results, "Aetna reported solid third-quarter results, including our 10th consecutive quarter of membership growth, record quarterly operating revenues, and continued high single-digit pretax operating margin."

The major healthcare companies are reaping the benefits of Obamacare as more people sign up. Management raised their full year 2014 earnings guidance into the $6.60-6.70 zone versus Wall Street's estimate of $6.57.

Just last month AET raised their quarterly dividend 11% to 25 cents a share and added $1 billion to its stock buyback program, up from $464 million. In the last two months the stock has received multiple price target upgrades into the $95-100 zone. The point & figure chart is bullish with a $112.00 target.

The breakout past resistance near $85.00 looks like a significant buy signal. Yet after four weeks of gains I don't want to chase AET here. Tonight I am suggesting a buy-the-dip entry point at $86.00. Eventually AET will see a pullback and we want to be ready. It may not happen soon so we just need to be patient.

01/18/15 Strategy Update: Instead of waiting for a dip we will look for AET to close above $93.00 and buy calls the next morning. We will adjust the stop loss to $84.90 and move the option strike from the 2016 January $90 call to the $100 call.

- Suggested Positions -
JAN 22, 2015 - entry price on AET @ 95.52, option @ 6.05
symbol: AET160115C100 2016 JAN $100 call - current bid/ask $10.65/10.95

03/15/15 new stop @ 97.45
02/22/15 new stop @ 91.40
02/15/15 new stop @ 88.50
01/22/15 Trade begins. AET gaps open higher at $95.52
01/21/15 AET closes at $94.74, above our trigger of $93.00.
01/18/15 Move the trigger to a close above $93.00 with a stop at $84.90 and use the 2016 January $100 call.
12/28/14 adjust the buy-the-dip trigger to $86.00 and raise the stop loss to $83.45
12/14/14 adjust the buy-the-dip trigger from $86.00 to $84.25. Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 97.45
Play Entered on: 01/22/15
Originally listed on the Watch List: 12/07/14


Anthem, Inc. - ANTM - close: 150.01

Comments:
03/15/15: Big healthcare names continued to rally and ANTM rallied from $144 to $150 in the last few days. This is a new record high. We will raise the stop loss to $139.00. I am not suggesting new positions at this time.

Earlier Comments: January 11, 2015:
Anthem, Inc. is one of the largest healthcare insurance companies in the world. The company recently changed its name from Wellpoint to Anthem. They currently offer healthcare plans to almost 68 million people.

Healthcare names displayed significant strength last year as Obamacare added millions of new customers to the health insurance industry. That trend should continue into 2015. ANTM's long-term bullish trend has been butting up against major resistance at $130. That resistance broke on Thursday.

We'd like to see some follow through higher. Tonight I'm suggesting we wait for ANTM to close above $132.00 and then buy calls the next morning with a stop loss at $122.45.

FYI: ANTM is scheduled to report earnings on January 28th and shares could be volatile that morning as investors digest the results.

- Suggested Positions -
JAN 16, 2015 - entry price on ANTM @ 133.75, option @ 11.40
symbol: ANTM160115C140 2016 JAN $140 call - current bid/ask $15.75/17.85

03/15/15 new stop @ 139.00
03/01/15 new stop @ 134.65
02/22/15 new stop @ 132.40
02/15/15 new stop @ 129.50
01/25/15 new stop loss @ 126.75
01/16/15 Trade begins. ANTM opens at $133.75
01/15/15 triggered. ANTM closed at $134.09, above our trigger of $132.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 139.00
Play Entered on: 01/16/15
Originally listed on the Watch List: 01/11/15


China Mobile Limited - CHL - close: $63.73

Comments:
03/15/15: Our CHL trade is not performing as expected. Shares continued to drift lower and CHL is now down four weeks in a row. CHL briefly traded under $63.00 on March 11th and missed our stop loss by 10 cents (current stop $62.75).

The story behind CHL hasn't changed and after a four-week pullback it's time for a bounce. A new close above $65.00 could be used as a bullish entry point.

Earlier Comments: November 9, 2014:
China Mobile (CHL) is the boasts both the largest mobile network on the planet and the biggest mobile customer base. At the end of the third quarter they had 799.1 million customers. Of that 244.4 million are 3G users and 40.9 million are new 4G users. That last number is significant since the Chinese government just approved 4G licenses this year. CHL had zero 4G customers at the start of 2014 and only 13.9 million at the end of the second quarter.

CHL reported earnings on October 20th and the results were worse than expected. Q3 revenues were down -2% from a year ago to 156.6 billion yuan. That was below analysts' estimates. Yet profits managed to beat expectations at 24.9 billion yuan. The company said that the big drop was due to a sharp decline in SMS (text message) usage. This is due to strong competition in the SMS market from other companies like Tencent's WeChat application. A new VAT tax that started in June also hurt results.

Investors seem to be ignoring CHL's recent earnings miss and focusing on their 4G growth. The company has been investing heavily in its 4G networking and it seems to be paying off. The shocking growth of CHL's 4G customer basis has analysts raising estimates. One firm was estimating 50 million 4G customers this year but have since raised that to 70 million. They also expect CHL will add another 130 million next year to end 2015 at 200 million new 4G customers. This should boost the company's profitability since 4G customers use more data.

The stock bounced near $56.60-57.00 last month, which was a 50% retracement of the July-September rally. The lows in October look like a bullish double bottom and the point & figure chart is bullish and forecasting a long-term target of $108.

Tonight I am suggesting we wait for CHL to close above $62.65 and buy calls the next morning with a stop loss at $56.40. However, I am suggesting we keep our position size small. CHL is a foreign company and its stock will gap open, up or down, every morning as it adjusts for trading in the Chinese markets.

- Suggested Positions -
NOV 11, 2014 - entry price on CHL @ 61.39, option @ 2.80
symbol: CHL160115C70 2016 JAN $70 call - current bid/ask $2.30/2.85

03/01/15 new stop @ 62.75
02/15/15 new stop @ 61.75
01/25/15 new stop at $59.50
12/28/14 Caution! CHL is struggling with resistance near $60.
12/14/14 adjust stop loss down to $55.95
11/11/14 trade begins. CHL gaps down at $61.39
11/10/14 CHL closes at $62.68, above our trigger of $62.65
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined (likely the $75-85 range)
Current Stop loss: 62.75
Play Entered on: 11/11/14
Originally listed on the Watch List: 11/09/14


Cisco Systems - CSCO - close: 27.94

Comments:
03/15/15: Bullish analyst comments for CSCO did not stop the sell-off. CSCO, just like the S&P 500, is down three weeks in a row. I cautioned readers last week that CSCO was probably headed toward $27.50. Friday's low was $27.57. If this level does not hold as support then the next support level is probably $26.00.

I am not suggesting new positions at this time.

Earlier Comments: December 21, 2014:
It seems that 2014 delivered a resurgence for old guard, big cap, technology names. CSCO is one of them and the stock has shined this year with a +23.8% gain versus the +14% gain in the NASDAQ Composite.

The company continues to struggle with strong earnings growth and management has been cautious with their guidance. It seems that investors don't care. The stock is sporting a 2.8% dividend yield. That's not bad when the 10-year U.S. bond has a yield near 2.1%.

Analysts are starting to speculate that 2015 could be a good year for earnings since 2014 was so tough (that makes for easier comparisons). The recent strength in shares of CSCO have produced a buy signal on the point & figure chart that's forecasting at $43 price target. The stock has garnered a number of bullish analyst calls since their earnings report in mid November.

The $26.00 level was key resistance for CSCO. Normally broken resistance turns into new support and the stock found support there during the market's recent pullback. Right now CSCO is poised to breakout past $28.00. Tonight I am suggesting we wait for CSCO to close above $28.15 and then buy calls the next morning with a stop loss at $25.75.

- Suggested Positions -
DEC 23, 2014 - entry price on CSCO @ 28.22, option @ 1.40
symbol: CSCO160115C30 2016 JAN $30 call - current bid/ask $1.23/1.26

03/08/15 Shares appear to be correcting lower. Look for potential support in the $27.50-28.00 area.
02/11/15 CSCO reports better than expected earnings and revenues, raises dividend
12/23/14 Our trade begins. CSCO opens at $28.22
12/22/14 CSCO closed at $28.22, above our trigger of $28.15
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 25.75
Play Entered on: 12/23/14
Originally listed on the Watch List: 12/21/14



Fedex Corp. - FDX - close: 173.32

Comments:
03/15/15: Our FDX trade is still alive. Shares dipped to support at $170.00 and bounced. The long-term trend of higher lows remains intact. The question is if this bullish trend will survive the week.

FDX has earnings coming up on March 18th. They report before the opening bell. Analysts are expecting a profit of $1.88 a share. If FDX disappoints or provides disappointing guidance then shares will likely breakdown and hit our stop at $168.00. If you prefer, you might consider buying some short term puts to hedge your bullish positions the day before earnings.

I am not suggesting new positions at this time.

Earlier Comments: January 18, 2015:
FDX is part of the services sector. They're one of the largest air delivery and freight delivery service providers in the world. They have 62,000 vehicles and 370 service centers around the globe.

The stock was a strong performer last year with a +20% gain, outpacing the major market indices. Recently a few Wall Street analysts have turned increasingly bullish on FDX. The global economy might be slowing but the U.S. continues to see economic improvement. At the same time gasoline prices have crashed and this is a favorable environment for shipping companies where fuel is a major expensive.

It's a new year and both UPS and FDX have raised their prices by 5%. FDX has also started charging customers with their new dimensional pricing strategy. That means the size of the package in addition to the weight determines the price to ship it. This is specifically targeting online shippers who have shipping small light weight items in big bulky boxes. The industry is calling this new system dim weight pricing and it should boost revenues for FDX.

Shares of FDX found support near $170 multiple times this January. Friday's breakout past several moving averages looks bullish. The stock has also broken the six-week trend of lower highs. However, instead of chasing FDX here, after a $10 rally, I am suggesting we buy calls on a dip.

Tonight I'm suggesting a buy-the-dip trigger at $175.00 with a stop loss at $168.00.

- Suggested Positions -
JAN 27, 2015 - entry price on FDX @ 175.00, option @ 6.90
symbol: FDX160115C200 2016 JAN $200 call - current bid/ask $4.60/4.80

03/15/15 Earnings are coming up on March 18th.
03/08/15 FDX looks headed for what should be short-term support near $170.00
01/27/15 FDX hits our buy-the-dip trigger at $175.00
Option Format: symbol-year-month-day-call-strike

Current Target: FDX @ TBD
Current Stop loss: 168.00
Play Entered on: 01/27/15
Originally listed on the Watch List: 01/18/15


Humana Inc. - HUM - close: 166.50

Comments:
03/15/15: Investors continue to pour money into the big healthcare names and HUM surged to new highs. Tonight we'll raise the stop loss to $154.00. More aggressive investors might want to keep their stop below the 50-dma instead. Meanwhile conservative investors might want to bump their stop closer to $158.00.

I am not suggesting new positions at this time.

Earlier Comments: October 19, 2014:
HUM is in the healthcare sector. The company offer health insurance. Right now that's a good spot to be as the system irons out the kinks in the Affordable Care Act (a.k.a. Obamacare). Thus far Obamacare has been a boon to insurers as more and more Americans sign up for health insurance.

Shares of HUM did see a pullback from its recent highs near $136 down to $121 (a -11% correction) but now HUM is on the rebound. Even with the pullback HUM still has a long-term bullish trend of higher lows. The point & figure chart is bullish and suggesting a long-term target of $173.00.

Tonight I am suggesting we wait for HUM to close above $130.25 and then buy calls the next morning with a stop loss at $119.75. I do want to warn you that HUM is scheduled to report earnings on November 7th but several of its peers (AET, CI, and WLP) will report earnings in the next two weeks (before the end of October). Their quarterly results and guidance (good or bad) could influence shares of HUM.

- Suggested Positions -
OCT 22, 2014 - entry price on HUM @ 133.75, option @ 13.25*
symbol: HUM160115C140 2016 JAN $140 call - current bid/ask $30.40/32.40

03/15/15 new stop @ 154.00
03/08/15 Investors may want to take some money off the table here
03/01/15 new stop @ 149.00
02/22/15 new stop @ 142.00
02/04/15 HUM reports earnings and misses estimates by six cents
01/18/15 new stop @ 137.40
12/07/14 new stop @ 134.00
11/09/14 new stop @ 124.00
10/22/14 trade begins. HUM opens at $133.75
*option entry price is an estimate since the option did not trade at the time our play was opened.
10/21/14 triggered. HUM closed @ 133.27, above our suggested entry above $130.25
Option Format: symbol-year-month-day-call-strike

Current Target: HUM @ TBD
Current Stop loss: 154.00
Play Entered on: 10/22/14
Originally listed on the Watch List: 10/19/14


iShares US Home Construction ETF - ITB - close: 26.96

Comments:
03/15/15: ITB eked out a small gain for the week. More importantly it may have found a short-term bottom. I am suggesting a close above $27.75 as a new bullish entry point.

Earlier Comments: January 11, 2015:
The ITB is an exchange traded fund that mimics the Dow Jones U.S. Select Home Construction Index. The top 12 holdings are DHI, LEN, PHM, TOL, NVR, HD, TPH, LOW, RYL, SHW, KBH and MTH.

This index has been stuck in a trading range for years. That looks like it's about to change. Have you looked at a chart of the 10-year bond yield lately? Bond yields are going lower. That's going to pressure mortgage rates lower and that's bullish for home sales. This past week saw 30-year mortgage rates dip below 3.6%. That's a 19-month low.

If that wasn't enough of a tailwind President Obama wants to help. On January 7th the White House announced plans to reduce the government mortgage insurance premiums in an effort to boost home ownership. Another positive for the homebuilders is the U.S. Federal Reserve. We just had two fed governors come out last week saying they think the Fed should hold off on raising rates. The longer the Fed waits to start raising rates the better it will be for homebuilders.

Currently the ITB appears to be breaking out past major resistance and closed at multi-year highs. I'd like to see a little bit more follow through. Tonight I'm suggesting we wait for the ITB to close above $27.00 and then buy calls the next morning with a stop loss at $23.95.

- Suggested Positions -
FEB 11, 2015 - entry price on ITB @ 27.09, option @ 1.70
symbol: ITB160115C30 2016 JAN $30 call - current bid/ask $1.05/1.50

03/01/15 new stop @ $25.45
02/11/15 trade begins. ITB opens at $27.09
02/10/15 ITB closes at $27.10, above our trigger at $27.00
Option Format: symbol-year-month-day-call-strike

Current Target: ITB @ TBD
Current Stop loss: 25.45
Play Entered on: 02/11/15
Originally listed on the Watch List: 01/11/15


Lockheed Martin - LMT - close: 197.11

Comments:
03/15/15: LMT spent the week hovering between support at its 50-dma near $196 and resistance near $200. Shares did lose 55 cents for the week and that marks the third weekly loss in a row (just like the S&P 500). At this point I would wait for a close above $201.00 before considering new bullish positions. Or as an alternative, nimble traders could buy dips near the 100-dma, near 192.00.

Earlier Comments: January 18, 2015:
Defense stocks have delivered exceptional gains for investors in spite of the dreaded sequestration budget cuts from Budget Control Act of 2011. Granted the cuts have been delayed and adjusted many times but it still put a crimp in U.S. government defense spending. In response many of America's biggest defense contractors have focused on building up their international business instead of relying on the U.S.

LMT is one such defense contractor. According to a company press release, " Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 113,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation's net sales for 2013 were $45.4 billion."

Right now one of their biggest projects is the massive F-35 Joint Strike Fighter system. It's the most expensive weapons system the U.S. has ever built with an estimated cost of over $1 trillion over its 50-year lifespan.

If you haven't noticed the world seems to be getting more dangerous. The U.S. is facing a growing military rivalry with China, a belligerent and dangerous Russia, and war in the Middle East with ISIS. This sort of environment will likely keep investors focused on defense stocks.

Looking at LMT's earnings results they have beaten Wall Street's estimates for the last four reports in a row. They raised their guidance in two of the last four earnings reports. The rally in the stock has created a buy signal on the point & figure chart with a $240 target. Currently shares are consolidating sideways and appear to be building up steam for a breakout past round-number resistance at $200. I suspect that LMT's earnings on January 27th might be the catalyst needed to push shares higher.

Tonight I am suggesting we wait for LMT to close above $201.00 and then buy calls the next morning with a stop loss at $189.00.

- Suggested Positions -
FEB 20, 2015 - entry price on LMT @ 200.86, option @ 6.40
symbol: LMT160115C220 2016 JAN $220 call - current bid/ask $4.30/4.90

02/20/15 trade begins. LMT opens at $200.86
02/19/15 triggered. LMT closed at $201.75, above our trigger of $201.
Option Format: symbol-year-month-day-call-strike

Current Target: LMT @ TBD
Current Stop loss: 189.00
Play Entered on: 02/20/15
Originally listed on the Watch List: 01/18/15


Lowe's Companies - LOW - close: 74.16

Comments:
03/15/15: LOW has spent the majority of its time over the last three weeks inside the $73.00-75.25 zone. That's not bad considering the broader sell-off among the big caps. If the market decline accelerates I'd look for LOW to find support near $70.00. We will move our stop loss to $69.00. I'm not suggesting new positions at this time.

Earlier Comments: January 25, 2015:
LOW is the second biggest player in the home improvement retail business. Their main rival is Home Depot. LOW currently has more than 1,800 stores across the United States, Canada, and Mexico.

The stock has been a great performer the last couple of years, significantly outperforming the broader market. Their most recent earnings report was November 19th and results were one cent above expectations with a profit of $0.59 a share. Revenues also beat expectations with +5.6% growth to $13.68 billion. Same-store sales were up +5.1%.

Management issued bullish guidance for 2015 and raised their earnings estimate above Wall Street's forecast. LOW also raised their revenue guidance above analysts' estimates. The company expects revenues to grow +4.5% to 5% in 2015 with same-store sales growth in the +3.5% to 4% range.

The stock is often influenced by trading and news out of the homebuilders. This year there have been a couple of bombs in the homebuilding industry with both KBH and LEN warning on potential margin pressures in 2015. Shares of LOW, a retailer, shrugged off this headlines.

The U.S. economy grew +4.9% in the third quarter last year and is expected to grow about +3% in 2015. The slow and steady improvement in the U.S. economy is a tailwind for LOW. Another bonus is low gas prices. While we have not seen a lot of evidence that consumers are spending their savings at the pump eventually that money, amounting to hundreds of dollars a year for the average driver, will be spent. Americans love to spend money on their homes, which is bullish for LOW.

We are quickly approaching the spring residential real estate selling season. That means consumers will be spending money on fixing up their homes to go on the market. Those people who buy a home will spend money on their new purchase.

Technically LOW's stock has been consolidating sideways between support near $65 and resistance near $70 the last few weeks. The point & figure chart has already produced a new triple-top breakout buy signal with a $75 target (that could grow). Tonight I am suggesting we wait for LOW to close above $70.75 and then buy calls the next morning with a stop loss at $64.90.

- Suggested Positions -
FEB 06, 2015 - entry price on LOW @ 71.53, option @ 3.45
symbol: LOW160115C80 2016 JAN $80 call - current bid/ask $3.65/3.85

03/15/15 new stop @ 69.00
03/01/15 new stop @ 67.00
02/25/15 LOW reports earnings. Results beat expectations, Management raises guidance above Wall Street estimates
02/06/15 trade begins. LOW opens at $71.53
02/05/15 LOW closed at $71.47, above our trigger of $70.75
Option Format: symbol-year-month-day-call-strike

Current Target: LOW @ TBD
Current Stop loss: 69.00
Play Entered on: 02/06/15
Originally listed on the Watch List: 01/25/15


Level 3 Communications - LVLT - close: 54.41

Comments:
03/15/15: Traders bought the dip in LVLT midweek and shares closed almost unchanged for the week. I am suggesting investors wait for a close above $55.15 before considering new bullish positions.

Earlier Comments: December 28, 2014:
LVLT is a communication services company. Their marketing material describes LVLT as "Level 3 Communications, Inc. is a Fortune 500 company that provides local, national and global communications services to enterprise, government and carrier customers. Level 3's comprehensive portfolio of secure, managed solutions includes fiber and infrastructure solutions; IP-based voice and data communications; wide-area Ethernet services; video and content distribution; data center and cloud-based solutions. Level 3 serves customers in more than 500 markets in over 60 countries over a global services platform anchored by owned fiber networks on three continents and connected by extensive undersea facilities."

They just recently completed a merger with TW Telecom. Earnings have been improving. LVLT has beaten Wall Street's earnings estimates the last three quarters in a row. Technically shares have been outperforming the broader market. The NASDAQ composite is up +15% in 2014 while LVLT is up +50%. The point & figure chart is bullish and forecasting a long-term target at $75.00.

Currently shares of LVLT are hovering just below key resistance at the $50.00 mark. I am suggesting we wait for LVLT to close above $50.50 and then buy calls the next morning with a stop loss at $45.45.

- Suggested Positions -
MAR 04, 2015 - entry price on LVLT @ 54.71, option @ 3.90
symbol:LVLT160115C60 2016 JAN $60 call - current bid/ask $3.10/3.50

03/04/15 trade begins. LVLT opens at $54.71
03/03/15 Triggered. LVLT closed at $54.90, above our trigger of $54.50
02/22/15 Strategy update: Wait for LVLT to close above $54.50, then buy calls the next morning with a new stop at $49.45. Adjust the option strike to 2016 Jan $60 call
02/08/15 Adjust entry point strategy: Buy calls on a dip at $50.75 with a stop loss at $46.25. Option Format: symbol-year-month-day-call-strike

Current Target: LVLT @ TBD
Current Stop loss: 49.45
Play Entered on: 03/04/15
Originally listed on the Watch List: 12/28/14


ServiceNow, Inc. - NOW - close: 76.92

Comments:
03/15/15: It looks like the correction in shares of NOW is over. After a two-week decline the stock has bounced. Last week's rebound has created a bullish engulfing candlestick reversal pattern on the weekly chart. I am suggesting a close above $77.50 as a new entry point.

Earlier Comments: February 8, 2015:
Shares of NOW are trading at all-time highs thanks to significant earnings growth. The company expects to see growth of more than +40% in 2015.

NOW describes itself as "ServiceNow is changing the way people work. With a service-orientation toward the activities, tasks and processes that make up day-to-day work life, we help the modern enterprise operate faster and be more scalable than ever before. Customers use our service model to define, structure and automate the flow of work, removing dependencies on email and spreadsheets to transform the delivery and management of services for the enterprise. ServiceNow provides service management for every department in the enterprise including IT, human resources, facilities, field service and more. We deliver a 'lights-out, light-speed' experience through our enterprise cloud – built to manage everything as a service."

This company has been consistently guiding their earnings forecast higher. They've done it at least the last four earnings reports in a row. Their most recent earnings report was January 28th. NOW reported their Q4 results of $0.03 a share compared to a loss of 2 cents a year ago. Analysts were expecting a profit of 2 cents a share. Q4 revenues soared +58% to $198 million, which was above expectations.

Some of the highlights from their fourth quarter include billings up +62% year over year and up +34% quarter over quarter. Deferred revenues were up +20% for the quarter. NOW added 211 net new customers, bumping their total to 2,725. Their customer renewal rate was 97%.

NOW said their 2014 revenues soared +61% compared to 2013. Their backlog at the end of 2014 hit $1.4 billion. That's a +57% jump from a year ago. NOW's President and CEO Frank Slootman said, "We finished 2014 with strong metrics across the board, maintaining consistently high year-over-year growth rates. In addition to a growing list of new customers that now includes more than 25% of the Global 2000, we continue to see existing customers expand their relationship with us, resulting in the highest quarterly upsell rate since our IPO." NOW's CFO Michael Scarpelli said, "Within the Global 2000, annualized contract value per customer has increased 40% year-over-year. These expanding contracts have helped us grow our combined backlog and deferred revenue 57% year-over-year."

NOW offered bullish guidance. They expected Q1 revenues to grow +50% in the $207-212 million range compared to Wall Street's estimates of $202.4 million. NOW's 2015 guidance is forecasting revenue growth in the +41% to +47% range in the $960-1,000 million zone versus analysts' estimates of $948 million.

These strong numbers and the consistent growth makes them a popular candidate among Wall Street analysts. After NOW's most recent earnings report several analyst firms raised their price target on NOW's stock.

Technically shares have just recently broken out through major resistance near $70.00. The point & figure chart is bullish and forecasting a long-term target of $97.00. The last few days have seen shares consolidating sideways in the $70-75 range. Tonight I am suggesting investors wait for NOW to close above $75.50 and then buy calls the next morning with a stop loss at $68.90. More nimble traders could wait and cross your fingers for a dip near support at $70.00 as an alternative entry point.

- Suggested Positions -
FEB 13, 2015 - entry price on NOW @ 76.25, option @ 10.00
symbol: NOW160115C80 2016 JAN $80 call - current bid/ask $ 8.10/9.00

03/01/15 Warning! NOW has produced a bearish reversal and is probably headed for the $70.00 region.
02/13/15 trade begins. NOW opens @ $76.25
02/12/15 NOW closed at $75.95, above our $75.50 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: NOW @ TBD
Current Stop loss: 68.90
Play Entered on: 02/13/15
Originally listed on the Watch List: 02/08/15


Starbucks - SBUX - close: 93.29

Comments:
03/15/15: The pullback in SBUX might be over. After a very mild two-week decline shares have started to bounce. It didn't hurt that late last week SBUX received a new analyst' price target at $97 and another at $100.

I am not suggesting new positions at this time.

Earlier Comments: December 7, 2014:
I listed SBUX as on my radar screen a couple of weeks ago in the new plays section. The rally has continued and shares have broken through major resistance at their 2013 highs.

The company is in the services sector. They're considered part of the specialty eateries industry. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

Earnings have only been so-so this year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. The good news is that looks like it's about to change.

The company recently announced a five-year plan to boost its profits and market share. They're going to be expanding deeper into China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years. They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. SBUX also plans to significantly increase its food revenues.

The company is also building on its Starbucks Evening experience where they will offer alcohol (mainly wine). SBUX was also making headlines on Friday when they launched their first Starbucks Reserve Roastery and Tasting Room in Seattle. The new roastery is supposed to be the ultimate coffee lovers experience.

Analysts came away from SBUX's recent investor day pretty bullish. One firm expects SBUX's stock to double in the next four years. I certainly think SBUX will be higher a year from now. The point & figure chart is bullish and forecasting at $105 target.

SBUX is currently up five weeks in a row. Tonight I am suggesting a buy-the-dip trigger to buy calls at $82.00. More patient investors may want to consider buying a dip closer to $80.00 instead.

- Suggested Positions -
DEC 15, 2014 - entry price on SBUX @ 82.00, option @ 4.30
symbol:SBUX160115C90 2016 JAN $90 call - current bid/ask $ 9.00/9.15

03/01/15 new stop @ 88.45
03/01/15 Consider exiting early now to lock in potential gains
02/22/15 new stop @ 87.40
01/25/15 new stop loss @ 79.65
01/23/15 SBUX soars on strong earnings results
12/15/14 triggered at $82.00
Option Format: symbol-year-month-day-call-strike

Current Target: SBUX @ TBD
Current Stop loss: 88.45
Play Entered on: 12/15/14
Originally listed on the Watch List: 12/07/14


Toyota Motor Corp. - TM - close: 136.17

Comments:
03/15/15: Asian stock markets rallied on Thursday after the South Korean central bank cut rates. Shares of TM surged and the stock ended a two-week decline. Tonight we'll adjust our stop loss to $129.00.

I am not suggesting new positions at this time.

Earlier Comments: November 30, 2014:
TM is considered part of the consumer goods sector. The company is a major automotive manufacturer. Headquartered in Japan, TM was founded back in the 1930s. The company now has sales around the globe.

The company led the industry in greener cars with their Prius model of electric-gasoline hybrids. Now they're leading the industry again with a hydrogen fuel cell vehicle. TM unveiled the Mirai, which means "future" in Japanese, as is the first zero-emission vehicle for consumers. The vehicle will go from 0 to 60 MPH in 9 seconds. It has a range of 400-430 miles. The only emission is water vapor.

The Mirai will not be a big seller to start. TM only expects to sell a few hundred units next year. The challenge is the infrastructure so consumers can refuel the hydrogen fuelcell. It will take a few years to really catch on but they're going to get help from various government agencies. The state of California is one example. California hopes to have 1.5 million zero-emission cars on the road by 2025.

I'm not suggesting bullish positions on TM for the Mirai. Hydrogen fuelcell vehicles are not even a drop in the bucket for the global auto market. What should capture investor attentions is the combination of TM's strong sales combined with a central bank stimulus efforts.

TM has already seen strong sales this year. They reported their first half results on November 5th. TM beat estimates and raised their revenue guidance. Falling gas prices boosted sales of SUVs. TM is also seeing sharp growth in China. This past October TM saw their sales in China soar +27% from a year ago. That is on top of a +26% increase in September and a +9% jump in August. New estimates suggest TM is poised to outsell most of its rivals in the U.S. in November too, including big competitors like General Motors, Ford, and Nissan.

TM's secret weapon could be the currency devaluation by the Bank of Japan. The Japanese government is desperate to jump start their economy and avoid deflation. They have launched a massive QE program that is crushing the value of their currency. The yen ended the week at multi-year lows. This is an advantage for a company like TM who exports a lot of their product.

I do have to mention the risk of recall headlines. It seems that the big automakers are being super careful after seeing the Ford fiasco in the last couple of years. Now companies are recalling vehicles all the time. Right now the entire industry is dealing with a defective Takata airbag recall. The top ten automakers all use Takata airbags so it's something that will affect everyone. There is always the risk of another company-specific recall that could hurt TM.

Technically shares of TM have been showing strength and outperforming many of its peers. Shares have actually broken out past resistance near its 2014 July and early November highs. I would be tempted to buy calls now. However, I'd like to see a little more follow through. Tonight I am suggesting we wait for TM to close above $124.00 and then buy calls the next day.

I will warn investors that the prior highs near $135 and $138 could be potential resistance but the point & figure chart is very bullish and forecasting a long-term target of $160.00.

- Suggested Positions -
DEC 02, 2014 - entry price on TM @ 126.56, option @ 8.75
symbol: TM160115C130 2016 JAN $130 call - current bid/ask $10.05/11.85

03/15/15 new stop @ 129.00
03/03/15 U.S. sales +13.3% in February
02/22/15 new stop @ 127.25
02/15/15 new stop @ 124.50
02/04/15 TM delivers better than expected earnings results and raises guidance
12/07/14 new stop @ $119.00
12/02/14 trade begins. TM opens at $126.56
12/01/14 trade is triggered. TM closes at $124.94, above our 124.00 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: TM @ TBD
Current Stop loss: 129.00
Play Entered on: 12/02/14

Originally listed on the Watch List: 11/30/14


Textron Inc. - TXT - close: 42.80

Comments:
03/15/15: TXT did not have a good week. The market's big drop on Tuesday pushed TXT below its 50-dma and it is having trouble getting back above the moving average. The nearest support could be the $40.00-41.00 region. I'm not suggesting new positions at this time.

Earlier Comments: February 15, 2015:
TXT is in the industrial goods sector. They deal mostly in the aerospace industry. According to the company, "Textron Inc. is a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its powerful brands such as Bell Helicopter, Cessna, Beechcraft, Hawker, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, and Textron Systems."

The earnings picture last year was mixed. Better than expected results and bullish guidance helped power a big rally last October. Their most recent earnings report was January 28th. TXT's earnings of $0.76 a share were up +26% from a year ago but 1 cent worse than Wall Street estimates. Revenues were up +16.8% to $4.1 billion, also below estimates.

It's interesting how TXT missed Wall Street's earnings estimates on both the top and bottom line and management lowered their guidance for all of 2015. Yet the stock did not sell off. Normally an earnings miss or weak guidance would spark significant selling. Instead investors just calmly bought the dip and now TXT is breaking out to new multi-year highs.

If bad news like that can't shake the stock lower then the path of least resistance is definitely higher. The last couple of months look like a significant consolidation pattern and now TXT has produced a bullish breakout past resistance in the $44.00-44.50 zone. The point & figure chart is bullish and forecasting a long-term target at $67.00.

Tonight I am suggesting small bullish positions if TXT can close above $45.10. Wait for shares to close above this level and then buy calls the next morning.

- Suggested Positions -
FEB 25, 2015 - entry price on TXT @ 45.30, option @ 3.00
symbol: TXT160115C50 2016 JAN $50 call - current bid/ask $1.70/1.97

02/25/15 trade begins. TXT opens at $45.30
02/24/15 TXT closed @ $45.33, above our trigger of $45.10
Option Format: symbol-year-month-day-call-strike

Current Target: TXT @ TBD
Current Stop loss: 39.90
Play Entered on: 02/25/15
Originally listed on the Watch List: 02/15/15


Under Armour, Inc. - UA - close: 76.05

Comments:
03/15/15: Shares of UA garnered bullish analyst comments and a new higher price target but the stock did not really react to this news. It was the market's big bounce on Thursday that boosted UA. Shares tagged resistance in the $77.00-77.50 area on Friday and retreated.

I would be tempted to buy calls here but investors may want to see a new high (I suggest a close over $77.50) as a potential entry point. If the market sell-off continues then UA might dip toward support in the $72-73 area.

Earlier Comments: February 22, 2015:
We have had UA on our radar screen for a long time. Now we're finally seeing an entry point. 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 Fitnessâ„¢ platform 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's 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 they saw growth of +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's most recent earnings report was 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.

Technically shares of UA have recently broken through resistance in the $73.00 area. Now after consolidating sideways the last couple of weeks the stock ended at all-time closing highs. The point & figure chart is bullish and forecasting at $101.00 target.

Wait for UA to close above $75.75 and then buy calls the next morning with a stop loss at $68.25.

- Suggested Positions -
FEB 24, 2015 - entry price on UA @ 75.87, option @ 5.60
symbol: UA160115C85 2016 JAN $85 call - current bid/ask $5.00/5.30

02/24/15 Trade begins. UA opened at $75.87
02/23/15 UA closed at $75.87, above our trigger at $75.75
Option Format: symbol-year-month-day-call-strike

Current Target: UA @ TBD
Current Stop loss: 68.25
Play Entered on: 02/24/15
Originally listed on the Watch List: 02/22/15




CLOSED Plays


NXP Semiconductors - NXPI - close: 98.48

Comments:
03/15/15: Our plan was to exit the NXPI trade on Monday morning, March 9th. The market looked vulnerable to more selling (it was) and we wanted to lock in potential gains for our NXPI trade.

This was a successful trade but after Friday's rally in NXPI I'm suffering from a little seller's remorse. Shares were upgraded again on Friday and given a new $140 price target.

- Suggested Positions -
JAN 12, 2015 - entry price on NXPI @ 81.00, option @ 11.90
symbol:NXPI160115C85 2016 JAN $85 call - exit $18.10 (+52.1%)

03/09/15 planned exit
03/08/15 prepare to exit on Monday to lock in potential gains
03/02/15 NXPI soars on news it is buying FSL
03/01/15 new stop @ 78.75
02/15/15 new stop @ 74.00
02/08/15 new stop @ 71.90
02/05/15 NXPI beat estimates on both the top and bottom line
01/25/15 NXPI shares could react to AAPL's earnings this week. Expect some volatility
01/12/15 Trade begins.
01/09/15 NXPI closed at $80.32, above our trigger, which was a close above $78.50
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: NXPI @ TBD
Current Stop loss: 78.75
Play Entered on: 01/12/15
Originally listed on the Watch List: 01/04/15


SolarWinds, Inc. - SWI - close: 48.61

Comments:
03/15/15: The weakness in SWI continued and shares have now fallen three weeks in a row. Last week the stock hit our stop loss at $47.65. I'm concerned that the peak in December and March is a new bearish double top.

- Suggested Positions -
FEB 20, 2015 - entry price on SWI @ $51.54, option @ 5.20
symbol: SWI160115C55 2016 JAN $55 call - exit $2.80 (-46.1%)

03/11/15 stopped out
03/08/15 new stop @ 47.65
02/20/15 trade begins. SWI opens at $51.54
02/19/15 SWI closed at $51.68, above our trigger of $51.25
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: SWI @ TBD
Current Stop loss: 47.65
Play Entered on: 02/20/15
Originally listed on the Watch List: 02/15/15



Watch

Brand Turnaround & Logistics

by James Brown

Click here to email James Brown


New Watch List Entries

COH - Coach Inc.

EXPD - Expeditors Intl.


Active Watch List Candidates

AKAM - Akamai Technologies

AMBA - Ambarella Inc.

EWG iShares Germany ETF

SWKS - Skyworks Solutions

WBA - Walgreens Boots Alliance



New Watch List Candidates:

Coach, Inc. - COH - close: $41.24

Company Info

COH has experienced a rough couple of years. Shares were trading near $80 back in 2012 and they bottomed out in the $33-34 region last year. The big drop was thanks to multiple factors. Investors expectations were pretty high after years of incredible growth. Then COH started to struggle. They had luxury items had started to lose their appeal. Suddenly everyone had a Coach bag so it was no longer a coveted item. Today the company is trying to turn things around.

The company is still suffering from lost market share and falling sales. Their comparable store sales are terrible. Yet after months of bearish reports it looks like all the bad news might be factored in. Wall Street analysts are starting to upgrade the stock because they see the Coach brand finally stabilizing.

Technically shares just started to bounce from support near $40.00. I am suggesting we launch small bullish positions if COH can close above $42.00. However, please note that I consider this a more aggressive, higher-risk trade. We'll try and keep a relatively tight stop loss on this trade.

Breakout trigger: Wait for a close above $42.00
Then buy calls the next day with a stop at $39.65.

BUY the 2016 Jan $45 call (COH160115C45) current ask $2.55

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

Chart of COH:

Originally listed on the Watch List: 03/15/15


Expeditors Intl. - EXPD - close: 48.04

Company Info

EXPD is showing relative strength. The stock is up +8% in 2015 versus an S&P 500 that is virtually flat (-0.3%). Meanwhile the Dow Jones Transportation Average is down -2%.

EXPD is part of the services sector. According to the company, "Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 186 full-service offices and numerous satellite locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, domestic time-definite transportation services, purchase order management, warehousing and distribution and customized logistics solutions."

The first half of 2014 was forgettable. EXPD delivered mediocre results with earnings a penny above or below estimates and revenues in-line with expectations. Business improved in the second half of last year. EXPD beat earnings estimates by four cents in the third quarter and by two cents in the fourth quarter. Revenues were up almost +11% in Q3 2014 and up +8.8% in the fourth quarter. Both were above Wall Street estimates.

Bradley Powell, Senior Vice President and CFO commented on the fourth quarter, "During the 2014 fourth quarter we saw strong year-over-year increases in both air and ocean freight volumes. Despite the 10 basis point reduction in overall net revenue margin, airfreight and ocean freight net revenues both managed double digit increases, up 10% and 11%, respectively, as overall net revenue increased 9%."

EXPD has been relatively resistant to any profit taking during the market's decline in March. I'm partially tempted to buy calls here at current levels. However, I'm not convinced the market sell-off is over. Therefore I'd rather use the market's weakness to our advantage. Broken resistance near $46.00 should be support for EXPD. We'll list a buy-the-dip entry point at $46.25 with a stop loss at $43.75.

Buy-the-dip: Buy calls if EXPD dips to $46.25

BUY the 2016 Jan $50 call (EXPD160115C50) current ask $2.85

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

Chart of EXPD:

Originally listed on the Watch List: 03/15/15


Active Watch List Candidates:



Akamai Technology - AKAM - close: 70.81

Comments:
03/15/15: The S&P 500 just produced its third weekly decline in a row so I'm not giving up on a buy-the-dip entry for AKAM yet. However, investors might want to consider a close above $72.00 as an alternative entry point to launch bullish positions (we would need to adjust our option strike and stop loss).

Earlier Comments: March 8, 2015:
If you surf the Internet then you're probably seeing content delivered by AKAM's technology. They help customers speed up online content and have a fast-growing security business.

The company is part of the technology sector. They provide cloud services for delivering content across the Internet. Customers include 47% of the Global 500 companies.

AKAM describes itself as "the global leader in Content Delivery Network (CDN) services, Akamai makes the Internet fast, reliable and secure for its customers. The company's advanced web performance, mobile performance, cloud security and media delivery solutions are revolutionizing how businesses optimize consumer, enterprise and entertainment experiences for any device, anywhere."

Last year was a strong one for earnings and revenue growth. AKAM beat Wall Street estimates on both the top and bottom line the past four quarters in a row. They raised guidance twice. AKAM's average revenue growth last year was +24.5%. Their most recent report was on February 10th where AKAM delivered a profit and revenue number above expectations. Several analyst firms raised their price target on AKAM following its Q4 results.

Management hosted an investor day in late February. They expect sales growth to be in the high teens for 2015. They forecasting sales to hit $5 billion by 2020 compared to about $2 billion in 2014. AKAM reported that their cyber security business is surging with +191% growth last year.

This week AKAM disclosed in their 10-K filing that they were conducting an internal probe into their sales practices in a foreign country. They didn't say which country. This is a potential risk if the U.S. government decides to do their own investigation but the stock didn't really react that much to the news.

It is worth noting that there has been some speculation that AKAM is a buyout target. One analyst suggested that Amazon.com (AMZN) could be a suitor.

After a big rally in February the upward momentum in AKAM has stalled. Shares look like they could see a correction lower. If that occurs then prior resistance near $65.00 should be significant support. We want to be ready to take advantage of the weakness.

Tonight I'm suggesting a buy-the-dip trigger to buy calls if AKAM dips to $65.25. We'll start this trade with a stop at $59.75.

Buy-the-dip trigger @ $65.25
Start with a stop at $59.75

BUY the 2016 Jan $75 call (AKAM160115C75)

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

Originally listed on the Watch List: 03/08/15


Ambarella, Inc. AMBA - close: 68.44

Comments:
03/15/15: We were expecting traders to buy the dip but we wanted to see a dip near $60.00 first. AMBA did not show any weakness with shares up four out of the last five days and now up four weeks in a row.

We didn't want to chase it last week and still don't want to chase it now. Let's give it another week and we'll re-evaluate our entry point strategy.

Earlier Comments: March 8, 2015:
2014 was a great year for AMBA with significant sales growth. The company is part of the technology sector. They're probably best known for making the low-power, HD video and image processing semiconductors that go inside GoPro's (GPRO) action cameras.

According to the company, "Ambarella, Inc. (AMBA), is a leading developer of low-power, high-definition (HD) and Ultra HD video compression and image processing solutions. The company's products are used in a variety of professional and consumer applications including security IP-cameras, sports cameras, wearable cameras, flying cameras and automotive video processing solutions. Ambarella compression chips are also used in broadcasting TV programs worldwide."

Looking at the last four quarters for AMBA the company beat Wall Street's earnings estimates on both the top and bottom line. They guided higher the last three quarters in a row. 2014 Q2 revenues were up +24.7%. Q3 revenues grew +42.8%. Their most recent earnings report was March 3rd. AMBA announced their Q4 2014 revenues soared +61.8% to $64.7 million, above estimates for $59.3 million. Their Q4 earnings surged +161% to $0.68 a share. That's 19 cents above expectations. Q4 gross margins were 64.3% versus 64.1% a year ago.

AMBA's CEO Fermi Wang commented on their results saying, "Our strong fourth quarter and fiscal year results reflect the steady expansion of our product offerings and customer growth across our core markets, as well as early growth in new markets. During the fourth quarter we had strong year-over-year growth in our wearable, IP Security and automotive aftermarket revenues."

AMBA expects a lot more growth and opportunity in the body-worn security cameras (think police officers), consumer home security cameras, intelligent cameras for the automobile market, as well as cameras for drone. The company guided Q1 revenues in the $64-68 million range versus analysts' estimates of $59 million. They're growth to remain above 50%. Multiple analysts raised their price target on AMBA's stock after these strong Q4 results.

The stock soared to new record highs thanks in part to short covering. The most recent data listed short interest at 37% of the small 29 million share float. The point & figure chart is bullish and forecasting a long-term target of $107.00. AMBA's growth should continue. They don't just provide video chips to GoPro but they're also selling them to GoPro rivals like Xiaomi.

We don't want to launch positions yet. The stock looks short-term overbought and the market's weakness could be used to our advantage. Tonight I am suggesting a buy-the-dip entry point at $60.00. We'll start this trade with a stop loss at $54.00. More conservative traders could cross their fingers and hope for a dip close to $58-59 as an entry point instead of $60.

Buy-the-dip trigger @ $60.00
Start with a stop at $54.00

BUY the 2016 Jan $75 call (AMBA160115C75)

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

Originally listed on the Watch List: 03/08/15


iShares MSCI Germany - EWG - close: 29.19

Comments:
03/15/15: Hmm... I'm losing a little enthusiasm for the EWG. The German DAX stock market index hit new all-time highs last week. Yet the EWG struggled to post a gain. Granted the EWG does not track the DAX index but I expected better performance from this ETF.

One issue that could be hurting the EWG is the currency difference between the U.S. dollar and the European euro. One way to account for that would be using a currency-hedged ETF, and there are several of them. Check out charts on HEWG, DBGR, and DXGE. These are currency-hedged ETFs and they're soaring. Unfortunately they have really low volume and do not have options available to trade. If these interest you, do your homework!

I'm not giving up on the EWG just yet.

Earlier Comments: February 22, 2015:
The EWG is an exchange traded fund (ETF) that mimics the MSCI Germany index. This includes small, mid, and large-cap companies.

The U.S. market has enjoyed several years worth of QE programs that helped fuel market gains. Now that the U.S. QE program is over Europe is about to start on their own QE program. The European Central Bank (ECB) will start its quantitative program in March this year. The central bank will purchase about €60 billion a month through September 2016 but they've already announced that they will extend this deadline if they need to.

This is significant. After years of promising to do something about the Eurozone economy and fight the threat of deflation the ECB is finally acting. They might be too late to fend off deflation but investors seem to have hope that Europe can turn things around.

Germany should be a prime beneficiary of this program. The ECB's QE will continue to pressure the euro lower and that makes Germany's exports more competitive. Investors are have already starting betting on an improvement in the Germany market with a significant bounce in the EWG.

Today the EWG has broken through technical resistance at its simple 200-dma. Now it's about to challenge resistance near the $30.00 mark. Tonight I am suggesting investors wait for the EWG to close above $30.00 and then buy calls the next morning with a stop loss at $26.85.

FYI: If you want a broader European ETF I did consider the VGK but about half of its holdings are British and Swiss companies and may not see the same benefit from a weaker euro.

Breakout trigger: Wait for EWG to close above $30.00
Then buy calls the next morning with a stop at $26.85 .

BUY the 2016 Jan $30 call (EWG160115c30)

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

Originally listed on the Watch List: 02/22/15


Skyworks Solutions - SWKS - close: 92.92

Comments:
03/15/15: SWKS continues to show relative strength and just posted its fifth weekly gain in a row. We didn't want to chase it last week so we don't want to chase it now. Wait for a pullback. Currently our suggested entry point is $85.00.

Earlier Comments: March 1, 2015:
SWKS is in the semiconductor industry. They're probably best known for being a supplier to Apple Inc. (AAPL).

According to the company, "Skyworks Solutions, Inc. is empowering the wireless networking revolution, connecting virtually everyone and everything, all the time. Our highly innovative analog semiconductors are linking people, places, and things spanning a number of new and previously unimagined applications within automotive, broadband, cellular infrastructure, the connected home, industrial, medical, military, smartphone, tablet and wearable markets."

The stock has been soaring from its 2013 lows. That's because business is booming. SWKS has beaten Wall Street's earnings estimates and raised guidance for the last four earnings reports in a row. Their sales growth is accelerating with sales up +13.1%, 34.6%, 50%, and 59.4% over the last four quarters (results are year over year).

SWKS' most recent report was January 22nd. Earnings were $1.26 a share on revenues of $805.5 million. Management guided higher and expects Q2 results of $1.12 a share on revenues of $750 million. That's versus Wall Street estimates of $1.04 and revenues of $707 million.

Today shares of SWKS are at all-time highs. We don't want to chase it. I suspect the market could see a pullback soon. We want to be ready to take advantage of any pullback. Tonight I am suggesting a buy-the-dip trigger to buy calls at $83.00. We'll try and limit our risk with a stop loss at $79.00.

NOTE: I would start with small positions. SWKS could be volatile after such strong gains.

Buy-the-dip trigger @ $85.00, use a stop at $79.00

BUY the 2016 Jan $100 call (SWKS160115c100)

03/08/15 adjust the trigger from $83.00 to $85.00
03/08/15 adjust the option strike from the 2016 $90 to the January $100 calls
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 03/01/15


Walgreens Boots Alliance - WBA - close: $83.72

Comments:
03/15/15: On Friday it was announced that WBA is being added to the NASDAQ-100 index on March 23rd. That should be bullish for the stock. There is a lot of money that tracks the NASDAQ-100 so funds will be forced to buy WBA.

WBA ended the week at new highs. More aggressive traders may want to consider buying calls if WBA can close above $84.50 or $85.00. Tonight I am not giving up on a buy-the-dip entry point at $80.00 (yet).

Earlier Comments: March 1, 2015:
Drug store stocks have been healthy this year. Both CVS and WBA are trading near all-time highs. WBA is now an international competitor after completing its merger with Boots.

According to a company press release, "Walgreens Boots Alliance (WBA) is the first global pharmacy-led, health and wellbeing enterprise in the world.

The company was created through the combination of Walgreens and Alliance Boots in December 2014, bringing together two leading companies with iconic brands, complementary geographic footprints, shared values and a heritage of trusted health care services through pharmaceutical wholesaling and community pharmacy care, dating back more than 100 years.

The company employs over 370,000 people and has a presence in more than 25 countries; it is the largest retail pharmacy, health and daily living destination in the USA and Europe. Including its equity method investments, Walgreens Boots Alliance is the global leader in pharmacy-led, health and wellbeing retail with over 12,800 stores in 11 countries. The company includes the largest global pharmaceutical wholesale and distribution network with over 340 distribution centers delivering to more than 180,000† pharmacies, doctors, health centers and hospitals each year in 19 countries. In addition, Walgreens Boots Alliance is the world's largest purchaser of prescription drugs and many other health and wellbeing products.

Its portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No7 and Botanics. More company information is available at www.walgreensbootsalliance.com."

This stock has been showing significant relative strength. Their last earnings report was back in December and they beat analysts' estimates on both the top and bottom line. That was before Walgreens had finished its merger. Expectations are building for margins to improve thanks to synergies between the two companies. In the prior quarter synergies were about $140 million. The company is estimating synergies could reach $650 million in fiscal 2015.

The trend is obviously bullish. The point & figure chart is forecasting at $95.00 target. You could argue that WBA is a buy right now with last week's breakout past resistance near $80.00. However, instead of chasing new highs I am suggesting a buy-the-dip trigger to buy calls at $80.00. More conservative traders could aim lower and hope for a dip near $78 or $79 instead.

Buy-the-dip trigger @ $80.00, use a stop at $74.75

BUY the 2016 Jan $90 call (WBA160115c90)

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

Originally listed on the Watch List: 02/22/15