Option Investor
Newsletter

Daily Newsletter, Sunday, 3/29/2015

Table of Contents

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

Leaps Trader Commentary

Stocks Retreat From Their Highs

by James Brown

Click here to email James Brown

The stock market has been very mercurial the last few weeks. The S&P 500 has gone a 28 trading days in a row without back to back gains. That's how indecisive and erratic trading has been. Stocks gave back most of their gains from two weeks ago. All of the major U.S. indices posted losses for the week. The worst performing industries included transportations stocks (-4.89%), semiconductors (-5.0%), banking stocks (-3.4%), and biotechs (-4.89%). Meanwhile commodities bounce. Gold and silver both rose +1.3%. Crude oil managed a +4.29% rally for the week and that's after factoring in Friday's -5.8% plunge.

The number of active oil rigs in the U.S. declined for the 15th week in a row. Last week the number of active rigs dropped -21, which is the slowest decline in the last 16 weeks. It's possible we are nearing a bottom in the number of active rigs. The last time this happened, back in 2008-2009, the number of active rigs dropped for 18 weeks in a row with a -57% correction over a 41-week time frame. Currently the number of active rigs is down -45.7% from the September high and sits at 1,048 (includes both oil and natural gas rigs).

The rally in oil was all about geopolitical risk since U.S. production remains super strong and inventories continue to build. The main story was violence in the country of Yemen. Saudi Arabia led a coalition of ten Sunni Muslim nations in a military offensive to bomb Shiite rebels in the neighboring country of Yemen. There was speculation that these rebels could try and attack major oil production and processing facilities in Saudi. There was also a concern that the rebels might try and close the 20-mile strait of Bab-el-Mandeb, which is at the southern entrance to the Red Sea. More than 3.8 million barrels of oil per day flows through this strait on oil tankers headed for the Suez Canal to the north. It appears that Saudi has military equipment and men massing on the border of Yemen so this story isn't over yet. Many are calling this conflict a proxy war between Saudi and its archrival Iran.

Economic Data

It was a quiet week for economic data in the United States. The Consumer Price Index (CPI) showed its first increase since October with a +0.2% rise in February. This followed a -0.7% decline in January. A bounce in energy prices are behind the increase. If you're worried about deflation, then this report is a step in the right direction.

Overall U.S. economic data continues to disappoint. The regional Richmond Fed survey dropped to -8 when analysts were expecting +3. The durable goods orders, which tracks products that are expected to last at least three years, fell -1.4% in February. Economists were expecting a +0.2% improvement. Meanwhile the final estimate on 2014 Q4 GDP growth was revised from +2.19% to +2.22% but that's still below expectations for +2.4% growth. It's also less than half the +4.97% pace we saw in Q3.

On the plus side the latest revision on the University of Michigan Consumer Sentiment survey was revised higher from 91.2 to 93.0 for March but that's down from February's 95.4 and the recent high of 98.1 in January. One bright spot in the flow of economic data was new home sales, which surged +7.8% to an annual rate of 539,000. That's the hottest pace since March 2008.

Federal Reserve Chairman Janet Yellen was making news again when she spoke on Friday morning. She reiterated that the Fed could raise interest rates at any time. However, she believes the U.S. economy is still weak. Considering the fed's "level of accommodation the economy should be booming." Yellen noted that the Fed is still struggling to get the inflation level back toward 2%. She very much wants to avoid the fate of Japan and Sweden. The central banks of these two countries tightened monetary policy too soon and crushed their recoveries.

Overseas Economic Data

Japan reported their manufacturing PMI data for March declined from 51.6 to 50.4. Economists were expecting a rise above 52. The HSBC China Flash Manufacturing PMI dropped from 50.7 to 49.2. Numbers above 50.0 suggest growth and below 50.0 indicate economic contraction.

The Eurozone manufacturing PMI improved from 51.0 to 51.9, which was better than expected. Their services PMI rose from 53.7 to 54.3. The Markit Eurozone PMI hit 54.1, the highest reading since May 2011.

According to a recent article in Bloomberg ECB President Mario Draghi's QE in Europe has already seen success. The program started three weeks ago. The reaction has been steep. Bond yields in Europe have dropped. The euro currency has continued to slide, making exports more competitive. Stock markets in Europe have soared. Economists at Deutsche Bank believe that the ECB's QE has already helped reduce the risk of a deflationary spiral in Europe.

Unfortunately for Europe the situation with Greece remains a nightmare that they can't wake up from. Greece is desperate for cash. The Financial Times noted that Greek citizens and companies pulled €7.6 billion out of Greek banks in February. The pace of withdrawals has slowed from January's €20.4 billion but the amount of cash inside Greek banks has plunged to €140.5 billion. That's the lowest level in ten years. Now the Greek government has started stealing money, excuse me, borrowing money from its public health service funds. The country is quickly running out of money while they negotiate with the troika for additional bailout funds.

It was recently estimated that Greece could run out of money by April 9th but the current estimate is April 20th. Part of the challenge is coming up with money to pay some debt payments on April 14th and 17th. Europe knows this and they're still playing hardball. After loaning Greece hundreds of billions of euros they want proof that the country is going to follow through on new reforms before lending Greece any more cash. Right now Greece has a new deadline. On Wednesday, March 25th, the 18 members of the Eurozone told the Greek government that they had five days to show them exactly how they would follow through on the required reforms. Otherwise, no more bailout cash. The five days is up this Monday (March 30th).




Major Indices:

Friday's bounce snapped a four-day losing streak for the S&P 500 index. If it can bounce on Monday it would be the first back-to-back gain since February 17th. On a short-term basis the 2,040 level is support. The 2,080, 2,100, and the 2,120 levels are all potential overhead resistance. Should the S&P 500 continue to fall then its 200-dma near 2,010 or the December and February lows is the next area of potential support. Year to date the S&P 500 is essentially unchanged.

chart of the S&P 500 index:

The rally in the NASDAQ composite failed at its multi-month trend line of higher highs (see daily chart below). The reversal lower was pretty dramatic with Wednesday's plunge. Thursday morning saw a break below short-term support near 4,850 but it recovered. At the moment it's down -2.6% from its March closing high (which was 15-year highs). I would keep an eye on the 4,800-4,850 zone. This area should be support. A breakdown under 4,800 might signal a drop toward 4,600 and its simple 200-dma.

8-month chart of the NASDAQ Composite index:

chart of the NASDAQ Composite index:

Believe it or not but the small cap Russell 2000 index probably looks the best. It found support at its trend line of higher lows and looks ready to rebound. The 1,220 area is additional support. Should that level break the $RUT could find support at 1,200. Overhead resistance is way up near 1,270. Year to date the $RUT is still up +2.9%.

chart of the Russell 2000 index



Economic Data & Event Calendar

It's a busy week for economic data. The first week of the month always brings a rush of new data. The national ISM index will give us another look at the U.S. economy. The car sales numbers are expected to show improvement and indicate a healthy consumer. Of course the real focus will be on jobs. The nonfarm payroll report for March will come out on Friday but the U.S. stock market is closed for Good Friday (Easter is Sunday). That means the stock market will not be able to react to the jobs data until Monday morning.

It's also worth noting that several Federal Reserve members will be speaking this week. No one is expecting any fireworks from their talks but you never know when someone could say something market-moving.

Economic and Event Calendar

- Monday, March 30 -
Personal Income & Spending
Pending Home Sales

- Tuesday, March 31 -
Case-Shiller 20-city Home Price index
Chicago PMI

- Wednesday, April 01 -
ADP Employment Report
ISM Index
Auto & Truck sales

- Thursday, April 02 -
Factory Orders

- Friday, April 03 -
Non-farm payrolls (jobs) report
Unemployment Rate
Good Friday - U.S. stock market is closed

Additional Events to be aware of:

April 29th - FOMC policy update
May 7th - Election in the United Kingdom

Looking Ahead:

The relative weakness in the Dow Jones Transportation Average ($TRAN) is a worry signal for investors. The big transportation companies that make up this index are considered a good barometer of the U.S. economic health. Unfortunately United Parcel Services (UPS), the nation's largest package delivery company, has already guided lower for the current quarter. Another challenge is the railroad companies. The plunge in oil and gas drilling activity is hurting railroad traffic. The number of active rigs has been cut in half and that reduces demand for railcars to move drilling pipe and fracking sand. The Bureau of Transportation Statistics believes that a downturn in the transports leads a decline in economic activity. "According to BTS research, over the past three decades the freight TSI [index] led slowdowns in the economy by an average of 4-5 months." You can read their note on their website.

chart of the Dow Jones Transportation Average

Q1 GDP Estimates Falling

The last few weeks we have noted how the Atlanta Federal Reserve has a very dismal outlook for Q1 GDP growth. They have downgraded their outlook several times. Last week they did it again. Three weeks ago their Q1 estimate was +1.2%. Then they dropped it to +0.6% and again to +0.3%. This past week they reduced their Q1 estimate to +0.2% growth.

Most of Wall Street is still expecting Q1 GDP growth above +2.0% but a few are starting to take notice of the Fed's outlook. Now we are seeing some adjustments lower. Morgan Stanley just reduced their Q1 estimate from +1.2% to +0.9%. They're worried that low business inventories, the harsh winter weather on the East Coast and the port slowdown on the West Coast has hampered GDP growth. Barclays just lowered their estimate to +1.2%. J.P.Morgan Chase has downgraded their Q1 estimate from +2.0% to +1.5%.

An Earnings Recession

Another challenge facing the stock market is what some are calling an earnings recession. Expectations are growing for earnings to fall for two or more quarters this year. Standard & Poor's is forecasting Q1 earnings growth to decline -5.6%. If we do see earnings growth turn negative it will be the first decline since 2012's Q3. Estimates also suggest -4.0% earnings growth in Q2 2015 and -0.8% in Q3.

The U.S. dollar has seen a pullback from 12-year highs but the long-term trend is higher. The ECB's QE in Europe will continue to pressure the euro lower. Japan's central bank is still working on a massive QE program that has kept the yen low. With these major central banks pushing their currency lower the dollar can't help but rise, especially since the Federal Reserve has ended its QE program and wants to raise rates. A rising dollar will continue to hurt profits for big multi-national companies. About 50% of revenues for the S&P 500 companies are outside the U.S. When earnings growth turns negative investors turn more cautious and we could see a correction in the stock market.

April

The Stock Trader's Almanac says that April is the best performing month for the Dow Jones Industrial Average since 1950. Looking at just the last 20 years the $INDU is up 80% of the time in April. However, the day after Easter is consistently the worst "post holiday" performance all year long. It's also worth noting that April is the last month in the best six months of the year pattern. Pretty soon we're going to hear people talking about "sell in May and go away".

The stock market has been indecisive lately but we shouldn't forget that the U.S. markets were hitting new highs less than two weeks ago. A pullback may not be out of the question here. It would not surprise me to see stocks churn sideways until Q1 earnings season starts. Corporate earnings results and guidance will have a major influence on market direction over the next few months. Earnings season starts on April 8th but doesn't really kick into full swing until the following week. My concern is that weeks and weeks of disappointing earnings reports could send the market lower.

~ James







Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Investors turned cautious last week and stocks retreated from their mid-March highs. All of the major U.S. indices posted weekly declines.

We had previously planned to exit AET, ANTM, CHL, and HUM on Monday, March 23rd.

The market's widespread decline pushed CSCO, FDX, and SBUX to our stop losses.

I have updated the stop loss on NOW.

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

Another Successful Week for The Watch List

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(March 29, 2015)

No new plays tonight. Our watch list is doing a good job launching new trades. Last week we added EWG, AKAM , and COH to the active play list.

Tonight I'm adding NKE and TJX as new watch list candidates.

I'm still encouraged by the relative strength in the small cap Russell 2000. However, the weakness in the large caps is troubling. If the transportation average breaks down it could lead the market lower.

Radar Screen:
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself. In no particular order:

NOC, HBI, GILD, WWAV, COST, CBI, FDS, ASH, PANW,



Play Updates

Double-Check Your Stop Loss

by James Brown

Click here to email James Brown

Editor's Note:

The stock market can't seem to decide what direction it wants to go. Last week's market-wide decline was pretty sharp. Now would be a great time to double check your stop loss placement.

AKAM, COH, and EWG are new graduates from the watch list.


Closed Plays


Our active play list is a lot smaller. We closed AET, ANTM, CHL, and HUM on Monday, March 23rd. CSCO, FDX, and SBUX were stopped out during the market's decline.



Play Updates


Apple Inc. - AAPL - close: 123.25

Comments:
03/29/15: I have been cautioning investors that AAPL was likely headed toward support near $120.00. Last week the stock found support at its rising 50-dma. Unfortunately the stock failed to see any follow through on Thursday's bounce. AAPL is down four out of the last five weeks. I'm still expecting a dip near $120.00. More conservative investors may want to raise their stop loss. Our stop is at $114.00.

If you're looking to initiate new positions in AAPL then consider a dip near $120.00 as a new entry point. This last week Kensho published some new data on AAPL and how its stock performs around a new product launch. According to their research if you buy AAPL one month before a big product release it is up 77.7% of the time (one month later) with an average gain of +4.68%. Meanwhile if you buy AAPL the day of an (original product) launch, one month later it's up +55.5% of the time with an average gain of +4.87%.

This is significant today because AAPL's new watch comes out on April 24th.

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 $13.30/13.45

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


Akamai Technology - AKAM - close: 71.29

Comments:
03/29/15: AKAM was on our watch list. The plan was to buy calls on a dip at $71.50. The market's widespread sell-off pulled AKAM back toward $70 and shares hit our entry trigger on March 25th. Currently our stop loss is at $67.90.

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.

- Suggested Positions -
MAR 25, 2015 - entry price on AKAM @ 71.50, option @ 4.15
symbol: AKAM160115C80 2016 JAN $80 call - current bid/ask $4.10/4.30

03/25/15 Triggered at $71.50
03/22/15 Strategy update: Move the buy-the-dip trigger to $71.50, move the stop loss to $67.90, adjust the option to the 2016 Jan. $80.00 call
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: To Be Determined
Current Stop loss: 67.90
Play Entered on: 03/25/15
Originally listed on the Watch List: 03/08/15


Coach, Inc. - COH - close: $41.31

Comments:
03/29/15: COH is another watch list candidate that has graduated to an active play. We wanted to see COH close above $42.00 and then buy calls the next day. COH managed to close at $42.01 on March 23rd. Our trade opened the next day at $42.00. The market's sharp sell-off on Thursday last week send COH lower. Tonight I would wait for another close above $42.00 before initiating positions. While more nimble traders may want to consider buying a dip or a bounce near the $40.00 mark as an alternative entry point.

Earlier Comments: March 15, 2015:
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.

- Suggested Positions -
MAR 24, 2015 - entry price on COH @ 42.00, option @ 2.80
symbol: COH160115C45 2016 JAN $45 call - current bid/ask $2.35/2.50

03/24/15 Trade begins. COH opens at $42.00
03/23/15 COH closed @ $42.01, above our trigger of $42.00
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: To Be Determined
Current Stop loss: 39.65
Play Entered on: 03/24/15
Originally listed on the Watch List: 03/15/15


iShares MSCI Germany - EWG - close: 30.10

Comments:
03/29/15: Smart money continues to think European stocks look attractive compared to U.S. equities. The ECB has just started its QE program that will last over a year (if not more). That will keep the euro low and help boost asset prices will making European exports more attractive.

Our EWG play began on Monday morning, March 23rd. I would still consider new positions at current levels.

FYI: I want to remind readers that this is ETF is not hedged against weakness in the euro. The trend is up but its performance will lag the major European markets. You could look at hedged European ETFs but many of them have very low volume and do not have options (especially LEAPS). If you're curious check out these symbols: HEWG, DBGR, DXGE. Be sure to do your homework.

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.

- Suggested Positions -
MAR 23, 2015 - entry price on EWG @ 30.24, option @ 1.95
symbol: EWG160115C30 2016 JAN $30 call - current bid/ask $1.65/1.85

03/23/15 Trade begins. EWG opens at $30.24
03/20/15 EWG closed @ $30.26, above our suggested entry: a close above $30.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 26.85
Play Entered on: 03/23/15
Originally listed on the Watch List: 02/22/15


iShares US Home Construction ETF - ITB - close: 27.79

Comments:
03/29/15: The ITB spent last week consolidating sideways between $27 and its February highs near $28.20. Traders bought the dip on Friday and the ETF looks ready to breakout. I would consider new bullish positions if we see the ITB close above $28.25.

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 $1.10/1.65

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: 202.23

Comments:
03/29/15: Traders bought the dip in LMT near its mid-March low. The stock has produced a strong, two-day rebound. The $204 level is short-term resistance. I am encouraged by the recent performance. LMT still has a strong long-term up trend. I'd like to see some follow through higher before considering new positions.

FYI: I do want to offer one warning for investors. The U.S. Air Force is expected to make a big decision in spring or summer this year. That decision is who will make America's next-generation bomber. The program is called the Long Range Strike-Bomber (LRS-B) and will be worth tens of billions of dollars to the winning contractor. This is a major fight between rival defense contractors like Lockheed Martin (LMT), Boeing (BA) and Northrop Grumman (NOC). The companies that do not win this program could see their stocks decline on the news.

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 $5.20/5.70

03/22/15 new stop @ 194.00
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: 194.00
Play Entered on: 02/20/15
Originally listed on the Watch List: 01/18/15


Lowe's Companies - LOW - close: 73.67

Comments:
03/29/15: LOW was testing new highs just before the market's sell-off accelerated lower. Shares found support at the rising 50-dma. 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 $3.25/3.35

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: 53.95

Comments:
03/29/15: Last week's market pullback drug LVLT back toward its 50-dma. I am not suggesting new positions at this time. If the market continues to sink we could see LVLT decline toward strong support near $50.00.

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 $3.00/3.50

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: 78.47

Comments:
03/29/15: I cautioned readers that NOW might be forming a bearish double top if the stock reversed near its February highs. It did reverse lower, thanks to the market's widespread decline, but traders bought the dip near support at $75.00 and its 50-dma. The bullish trend is still intact for now.

Tonight I am raising our stop loss to $74.00. More aggressive traders may want to keep their stop loss lower. No new positions at this time.

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 $ 8.40/ 9.40

03/29/15 new stop @ 74.00
03/22/15 new stop @ 71.85
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: 74.00
Play Entered on: 02/13/15
Originally listed on the Watch List: 02/08/15


Toyota Motor Corp. - TM - close: 142.40

Comments:
03/29/15: TM started last week with new all-time highs thanks to a gap higher above $145.00 a share. The stock spent the rest of the week slowly fading lower as the market declined. Traders started to buy the dip on Friday near its rising 10-dma.

The week ahead will shed new light on the pace of automobile sales in the U.S. They're expected to be healthy and that could fuel another rally in TM.

More conservative investors may want to take some money off the table. You could sell half your position now (recoup nearly all of our initial investment) and then let the play ride with our unrealized profits.

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 $15.30/16.85

03/22/15 new stop @ 133.45
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: 133.45
Play Entered on: 12/02/14

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


Textron Inc. - TXT - close: 44.19

Comments:
03/29/15: TXT found support near its 50-dma last week. I don't see any changes from my prior comments. I would wait for a close above $45.50 before considering new bullish positions.

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 $1.71/2.18

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: 79.70

Comments:
03/29/15: UA was holding reasonably well until the market plunged on Wednesday and Thursday last week. I warned readers last weekend to expect a pullback. The stock dropped toward short-term technical support at its 20-dma. Shares essentially retested its prior highs near $77.50 as new support.

I would be tempted to buy calls if UA closed above $80.00 again but I'm worried about the broader market, which makes me hesitant to launch new positions.

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 $6.60/6.80

03/22/15 new stop @ 72.45
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: 72.45
Play Entered on: 02/24/15
Originally listed on the Watch List: 02/22/15




CLOSED Plays


Aetna Inc. - AET - close: 107.40

Comments:
03/29/15: I have to say we timed our exit on AET pretty well. The plan was to close positions on Monday, March 23rd.

AET still has potential but shares need a correction. I'd keep it on your radar screen.

- Suggested Positions -
JAN 22, 2015 - entry price on AET @ 95.52, option @ 6.05
symbol: AET160115C100 2016 JAN $100 call - exit $13.00 (+114.8%)

03/23/15 planned exit
03/22/15 prepare to exit on Monday morning
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

Chart

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: 156.27

Comments:
03/29/15: ANTM is another play we had planned to exit on Monday, March 23rd. Shares saw a drop from $160 to $152.64 midweek.

ANTM still has potential but shares need a correction. I'd keep it on your radar screen.

- Suggested Positions -
JAN 16, 2015 - entry price on ANTM @ 133.75, option @ 11.40
symbol: ANTM160115C140 2016 JAN $140 call - exit $21.70 (+90.3%)

03/23/15 planned exit
03/22/15 prepare to exit on Monday morning
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

Chart

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: $64.25

Comments:
03/29/15: CHL is another trade we had planned to exit on Monday, March 23rd. Unfortunately we were closing it because shares were underperforming. The stock is correcting lower and looks like it's headed for the $60 area.

- Suggested Positions -
NOV 11, 2014 - entry price on CHL @ 61.39, option @ 2.80
symbol: CHL160115C70 2016 JAN $70 call - exit $2.10 (-25.0%)

03/23/15 planned exit on Monday
03/22/15 prepare to exit on Monday morning
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

Chart

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: 27.13

Comments:
03/29/15: CSCO is a casualty of the market's sharp decline last week. We were stopped out at $26.85 on Thursday.

- Suggested Positions -
DEC 23, 2014 - entry price on CSCO @ 28.22, option @ 1.40
symbol: CSCO160115C30 2016 JAN $30 call - exit $0.82 (-41.4%)

03/26/15 stopped out on gap down at $26.85
03/22/15 new stop @ 26.85
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

Chart

Current Target: To Be Determined
Current Stop loss: 26.85
Play Entered on: 12/23/14
Originally listed on the Watch List: 12/21/14


Fedex Corp. - FDX - close: 164.59

Comments:
03/29/15: We have been cautious on FDX for a while. The stock managed to survive the company's recent earnings report. Unfortunately last week saw a sharp sell-off in the transportation average and FDX followed it lower. The breakdown under support at $170.00 is bearish and FDX hit our stop at $168.00.

- Suggested Positions -
JAN 27, 2015 - entry price on FDX @ 175.00, option @ 6.90
symbol: FDX160115C200 2016 JAN $200 call - exit $2.67 (-61.3%)

03/25/15 stopped out @ 168.00
03/22/15 FDX is not really performing and more conservative investors might want to hit the eject button
03/18/15 EPS was above estimates at $2.01/share but revenues came in light.
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

Chart

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: 177.52

Comments:
03/29/15: HUM is another healthcare stock that we planned to exit on Monday, March 23rd.

Shares still have potential down the road but HUM needs to see a correction lower. I'd keep it on your radar screen.

- Suggested Positions -
OCT 22, 2014 - entry price on HUM @ 133.75, option @ 13.25*
symbol: HUM160115C140 2016 JAN $140 call - exit $44.70 (+237.3%)

03/23/15 planned exit
03/22/15 prepare to exit immediately on Monday morning
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

Chart

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


Starbucks - SBUX - close: 95.07

Comments:
03/29/15: We raised our stop loss on SBUX just in time for the market's big decline. Shares broke down under what should have been support near $95.00 and hit our stop loss on Thursday.

I'm still longer-term bullish on SBUX but shares might need to see a real correction lower. The stock has its 2-for-1 split coming up on April 9th.

- Suggested Positions -
DEC 15, 2014 - entry price on SBUX @ 82.00, option @ 4.30
symbol:SBUX160115C90 2016 JAN $90 call - exit $9.71 (+125.8%)

03/26/15 stopped out @ 94.40
03/22/15 Set exit target at $99.75, raise the stop to $94.40
03/18/15 SBUX announced 2:1 split for April 9th
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

Chart

Current Target: SBUX @ 99.75
Current Stop loss: 94.40
Play Entered on: 12/15/14
Originally listed on the Watch List: 12/07/14



Watch

Athletic Wear and Off-Price Retail

by James Brown

Click here to email James Brown


New Watch List Entries

NKE - Nike Inc.

TJX - The TJX Companies, Inc.


Active Watch List Candidates

CVS - CVS Health

FB - Facebook

MA - MasterCard Inc.


Dropped Watch List Entries

AKAM and COH have graduated to our active play list.

EXPD has been removed.



New Watch List Candidates:

Nike, Inc. - NKE - close: 99.88

Company Info

In Greek mythology Nike is the winged goddess of victory. It's an appropriate brand name for the American athletic wear giant. Nike is the 800-pound gorilla in the industry with annual sales of more than $30 billion.

If you're not familiar with the company, "NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories, and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories."

The company's most recent earnings report was March 19th, after the closing bell. NKE reported its Q3 2015 results. Analysts were expecting a profit of $0.84 a share on revenues of $7.62 billion. NKE delivered a profit of +0.89 a share or +16% from a year ago. Revenues were up +7% to $7.46 billion. However, if you back out the currency headwinds, their revenues were up +13%.

The company reported sales growth across every geographical region. Their gross margins improved 140 basis points to 45.9 percent. Management said their online sales are soaring. Nike.com saw its revenues jump +42% last quarter.

The current quarter is NKE's 2015 Q4 (March-July) and the company said orders for Q4 in North America are up +15%, which is above analysts' estimates of +11.6%. Orders from China are up +11%, also above estimates. In the company's earnings release NKE said, "As of the end of the quarter, worldwide futures orders for NIKE Brand athletic footwear and apparel scheduled for delivery from March 2015 through July 2015 were 2 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 11 percent."

One big concern is the U.S. dollar. Sales in Europe were up +21% but when you factor in euro weakness and dollar strength that sales growth drops to +10%. The strength in the U.S. dollar is a major headwind but after NKE's Q3 results Wall Street feels that the company is managing the currency impact very well. The company is forecasting low double digit sales growth in the current quarter.

Wall Street applauded the results and shares of NKE gapped open higher on March 20th to hit all-time highs. There was a parade of bullish analyst comments. Several firms raised their price target on NKE. Here's a brief list of new price target: $106, $110, $115, $116.00. The point & figure chart is more optimistic as it is forecasting at $125.00 target.

Shares of NKE have seen some profit taking, which isn't a surprise considering the market's recent decline. However, now that NKE has filled the gap, traders jumped in to buy the dip. The stock looks poised to breakout past round-number resistance at $100.00 (again). Tonight I am suggesting investors wait for NIKE to close above $101.00 and then buy calls the next morning with a stop loss at $94.45.

Breakout trigger: Wait for a close above $101.00
Then buy calls the next morning with a stop loss at 94.45

BUY the 2016 Jan $110 call (NKE160115C110) current ask $3.70

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

Chart of NKE:

Originally listed on the Watch List: 03/22/15


The TJX Companies, Inc. - TJX - close: 69.59

Company Info

Investors should take notice when a company lowers guidance but the market doesn't care. Normally when a company lowers their earnings forecast their stock gets clobbered. That hasn't been the case for TJX.

The company describes itself as, "The TJX Companies, Inc. is the leading off-price retailer of apparel and home fashions in the U.S. and worldwide. As of January 31, 2015, the end of the Company’s fiscal year, the Company operated a total of 3,395 stores in six countries, the United States, Canada, the United Kingdom, Ireland, Germany, and Poland, and three e-commerce sites. These include 1,119 T.J. Maxx, 975 Marshalls, 487 HomeGoods and 6 Sierra Trading Post stores, as well as tjmaxx.com and sierratradingpost.com, in the United States; 234 Winners, 96 HomeSense, and 38 Marshalls stores in Canada; and 407 T.K. Maxx and 33 HomeSense stores, as well as tkmaxx.com, in Europe."

Management is increasingly shareholder friendly. They just recently announced a +20% increase to their dividend (now $0.21 a share). TJX also announced they plan to spend $1.8 to $1.9 billion buying back their stock in fiscal year 2016 (ends January 30, 2016). That's about $100 to $200 million more than last year's stock buyback program.

Of course the real question is earnings. TJX reported their Q3 results on November 18th. Earnings were in-line with estimates at $0.85 a share while revenues were up +5.5% to $7.37 billion. Comparable stores sales came in at the high-end of guidance at +2.0%. Unfortunately management guided lower due to currency headwinds. The market didn't care about this lowered guidance and soon TJX stock was at new highs.

The company reported their 2015 Q4 results on February 25th. Earnings were up +15% from a year ago to $0.93. That beat estimates by three cents. Revenues were up +6.3% to $8.3 billion, above estimates. Comparable store sales surged +4%, well above expectations. Their margins improved from 12.0% to 12.4%.

Carol Meyrowitz, Chief Executive Officer of The TJX Companies, Inc., stated, "We are very pleased to end 2014 with excellent results in the fourth quarter! Our EPS growth of 15% and comp increase of 4% significantly exceeded our expectations. We are particularly pleased our comps were almost entirely driven by customer traffic, as consumers responded to our exciting merchandise assortments, amazing values and effective marketing. Merchandise margins were also very strong. We are also very pleased with our full year 2014 performance. Our adjusted earnings per share growth of 12% over last year's 15% increase marks our sixth consecutive year of double-digit EPS increases."

She went on to say, "Like other major international retailers, our 2015 plans also reflect an expected negative impact from foreign currency exchange rates. Our underlying business remains very strong and we are reiterating our 10% to 13% long-term annual EPS growth model. We see tremendous U.S. and international potential for our Company. We are excited to be entering our seventh country, Austria, this spring, and to announce our plans to expand into our eighth country, The Netherlands, later this year. We are growing TJX as a global, value retailer and are well on our way to becoming a $40 billion company and beyond!"

TJX management lowered their 2016 Q1 and full year guidance with expectations for currency headwinds at 5%. They also announced they were raising their minimum wage for workers in the U.S. to $9.00 an hour. This matches a move by larger rival Wal-mart who announced a wage hike. Investors seem unconcerned with the lowered earnings guidance. Traders bought the initial dip and now TJX is trading near new highs.

Technically the stock has been consolidating just below major resistance at $70.00 for weeks. Today it is poised for a bullish breakout. The point & figure chart displays a quadruple top breakout buy signal with an $89.00 target. I am suggesting we wait for TJX to close above $70.50 and buy calls the next morning with a stop loss at $66.25.

Breakout trigger: Wait for a close above $70.50
Then buy calls the next morning with a stop loss at 66.25

BUY the 2016 Jan $75 call (TJX160115C75) current ask $3.10

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

Chart of TJX:

Originally listed on the Watch List: 03/22/15


Active Watch List Candidates:



CVS Health - CVS - close: 102.50

Comments:
03/29/15: CVS flirted with a breakout past $105.00 but couldn't quite commit. Shares retreated to technical support at the 50-dma with the market's widespread decline. I don't see any changes from last week's comments.

Earlier Comments: March 22, 2015:
We just removed WBA as a watch list candidate but we are replacing it with CVS. Both companies are in the drug store business. Both stocks have been showing significant strength the past couple of years. Fortunately for us CVS stock hasn't sprinted away from us like WBA.

The company describes itself as "CVS Health (CVS) is a pharmacy innovation company helping people on their path to better health. Through our 7,800 retail pharmacies, more than 900 walk-in medical clinics, a leading pharmacy benefits manager with nearly 65 million plan members, and expanding specialty pharmacy services, we enable people, businesses and communities to manage health in more affordable, effective ways. This unique integrated model increases access to quality care, delivers better health outcomes and lowers overall health care costsj."

The most recent earnings report was 2014 Q4 numbers on February 10th. CVS' earnings were in-line with estimates. Revenues were up +12.9% to $37.0 billion, which beat estimates for $36.0 billion. Their pharmacy services revenues were up +21.7%.

Full year 2014 earnings were up +13.5% to $4.49 a share. Management guided 2015 earnings in the $5.05-5.19 range (+12% to +15.5%), which is in-line with estimates. Following the earnings report a couple of analysts upgraded their price targets into the $114-115 range. The point & figure chart is very bullish with a long-term target of $141.00.

Currently shares of CVS are hovering just below resistance at the $105.00 level. Tonight I am suggesting we wait for shares of CVS to close inside the $105.00-106.00 zone and buy calls the next day with a stop loss at $99.85.

Breakout trigger: Wait for CVS to close in the $105.00-106.00 zone
Buy calls the next morning with a stop at $99.85.

BUY the 2016 Jan $110 call (CVS160115C110)

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

Originally listed on the Watch List: 03/22/15


Expeditors Intl. - EXPD - close: 47.97

Comments:
03/29/15: We have been expecting shares of EXPD to pull back. I've been suggesting we buy calls on a dip to support near $46.00. However, I'm growing increasingly concerned about relative weakness in the overall transportation industry.

Tonight I am removing EXPD as a watch list candidate. We can keep it on our radar screen and if shares bounce near $46.00 then we might reconsider it as a candidate.

Trade did not open.

03/29/15 removed from the watch list

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


Facebook, Inc. - FB - close: 83.30

Comments:
03/29/15: We wanted to buy calls on a dip at $82.00. FB almost made it but the stock bounced at $82.14 on Thursday. I would be seriously tempted to just buy calls right here but there is still a good chance FB retreats on broader market weakness.

Tonight I am moving the buy-the-dip trigger to $81.00 in hopes of getting a better entry point.

Earlier Comments: March 22, 2015:
Facebook probably needs no introduction. It's the largest social media platform on the planet. As of December 31st, 2014 the company reported 1.19 billion monthly active users and 890 million daily active users. If FB were a country that probably puts them as the third most populous country on the planet (behind India and China).

This past week 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.

The announcement combined with a broad market rally helped fuel a +7% gain in FB's stock last week. FB's market cap has risen past $230 billion making it the tenth largest company in the S&P 500.

Growth has been phenomenal. According to IBD, FB's Q4 earnings were up +69% form a year ago. Revenues were up +49%. Wall Street is expecting FB's profit to rise +12% in 2015 and +32% in 2016.

Technically shares of FB have broken out from a very significant consolidation pattern. The point & figure chart is bullish and forecasting at $96.00 target. I think it will go higher. After a five-day run we do not want to chase it here. I'm suggesting a buy-the-dip entry trigger at $82.00 with a stop loss at $74.75.

Buy the dip trigger at $81.00 with a stop at $74.75

BUY the 2016 Jan $90 call (FB160115C90)

03/29/15 move the buy-the-dip trigger from $82.00 down to $81.00
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 03/22/15


MasterCard Inc. - MA - close: 87.25

Comments:
03/29/15: Financial stocks had a rough week and MA followed the group lower. It's currently trading near short-term support around $87.00 and its 50-dma. I don't see any changes from my recent comments.

Earlier Comments: March 22, 2015:
Do you have a credit card? How about a debit card? Odds are you do. About 70% of Americans have a credit card and many have more than one. Inside the United States there are over 500 million credit cards between American Express, MA, and Visa. There's more than 1.12 billion globally (not counting the U.S.). There's also another 572 million MA or Visa debit cards in the U.S. (MasterCard has more than 144 million). Not counting America there are more than 1.2 billion debit cards around the world.

Now what if you could charge a small percentage for consumers using their plastic every time they make a purchase? That's MA's business model. As of 2013 their market share of global transactions (credit or debit) was about 27%. They are the second biggest credit and debit card company behind Visa (V). According to the company, "MasterCard (MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world's fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard's products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone."

MA has been delivering steady growth. They reported their Q3 results on October 30th with earnings up +19% from a year ago to $0.87 a share. That beat estimates. Revenues were up +12.8% to $2.5 billion, also above expectations. The bullish trend continued when MA reported its 2014 Q4 results on January 30th. Earnings per share soared +32% from a year ago to $0.69 and revenues grew +13.6% to $2.42 billion. Both metrics were above Wall Street expectations.

The company did warn that the surge in the U.S. dollar was impacting results but they still see strong single-digit revenue growth for 2015. They reaffirmed +20% earnings growth.

Meanwhile one of MA's biggest rivals, American Express (AXP), is not having a good year. AXP lost its exclusive deal with Costco (COST) last month. This deal generated 20% of AXP's loans and about 10% of their annual card growth. AXP is also losing its partnership with JetBlue (JBLU). AXP's losses will likely be MA's and Visa's gain.

Recently MA announced it had signed a 10-year deal with Citigroup. Not only is Citigroup one of the biggest banks on the planet they are the largest credit card issuer in the world. The press release states "Citi will begin aligning the company's consumer proprietary credit and debit portfolios to the MasterCard network in 2015." One analyst has already opined that the deal should provide a "decent tailwind for EPS growth" (for MA). Speaking of opinions, a couple of analysts at Nomura believe that MA is cheap at current valuations and could be seen as safe haven investment given their steady earnings growth.

“Despite a mixed global economy, we delivered solid results for the quarter and for the full year in 2014,” said Ajay Banga, president and CEO, MasterCard. “This year is off to a good start with several new wins, as well as renewals of some important customer agreements, with more in the pipeline. Looking ahead, we will continue to be at the forefront of our industry by driving payment innovation with solutions such as MasterPass, and by increasing electronic payments usage globally as demonstrated by our significant expanded acceptance footprint across Africa.”

Technically shares of MA have started to bounce after a 50% correction of its February rally. The rising 50-dma also provides technical support. The point & figure chart is bullish and currently forecasting at $118.00 target. Aggressive investors might want to consider launching bullish positions on a close above Friday's high of $90.36. I am suggesting we wait for MA to close at a new high above $93.15. Then buy calls the next morning with a stop loss at $86.40.

Breakout trigger: Wait for a close above $93.15
Then buy calls the next morning with a stop at $86.40

BUY the 2016 Jan $100 call (MA160115C100)

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

Originally listed on the Watch List: 03/22/15