Option Investor
Newsletter

Daily Newsletter, Sunday, 5/17/2015

Table of Contents

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

Leaps Trader Commentary

Full Speed Ahead

by James Brown

Click here to email James Brown

The tug of war between bulls and bears continued last week. Lack of follow through on the prior Friday's job-report-inspired rally made it look like the bears might take control. Fortunately buyers stepped back into the market after a three-day decline. The S&P 500 ended the week at a new record high above resistance near 2,120. Both the big cap S&P 500 and the small cap Russell 2000 are up two weeks in a row. The biggest market-moving event was the huge moves in the bond market both domestically and in Europe. A widespread sell-off in bonds definitely had equity investors spooked for a few days.

The U.S. bond market fell to five-month lows before bouncing. Yields on the 30-year U.S. note traded above 3.0% for the first time since December 2014. The 10-year yield hit 2.33% midweek. On Friday it settled at 2.1%. In addition to a weak bond market the U.S. dollar continued to sink and marked its fifth weekly loss in a row. We haven't seen a move this steep in a long time. Normally a weak dollar is bullish for commodities. Precious metals like gold and silver definitely rallied on the dollar weakness. Gold rose +3.0% and silver rallied +6.5% last week. Oddly enough crude oil rose +0.9%. After a +25% bounce off crude oil's low in March the rally in oil looks tired. Oil stocks and oil service stocks underperformed the broader market with declines last week.

Chart of the German 10-year bond yield

Chart of the U.S. 10-year bond yield

Chart of the U.S. bond market ETF

Chart of the U.S. dollar and the Euro

Economic Data

Another challenge for the market was a new parade of disappointing economic data. There seems to be a growing mound of evidence the U.S. economy is slowing down. Investors seem to believe that this will keep the Federal Reserve from raising rates any time soon and thus bullish for stocks.

U.S. retail sales for March was revised higher from +0.9% to +1.1% but April's retail sales number was flat (+0%). This weakness was due to a slowdown in auto sales. The latest data saw the pace of automobile sales in the U.S. drop from 17.1 million to 16.5 million seasonally adjusted annual rate.

Consumer sentiment numbers were a shocker! The University of Michigan Consumer Sentiment Index fell from 95.9 in April to 88.6 in May. Economists were expecting it to be unchanged at 95.9. This was a huge miss and a new six-month low (last October this index was 86.9). Analysts were quick to blame part of the problem on rising gasoline prices. Looking at the internals the present conditions component fell from 107.0 to 99.8. The expectations component of the survey dropped from 88.8 to 81.5.

Speaking of the consumer there were a number of retail-industry related earnings reports last week. BusinessInsider ran an article on Macy's and the state of the American consumer. Macy's (M) missed Wall Street estimates on both the top and bottom line. Management blamed lousy weather and steeper competition for their results. They also feel that the consumer has failed to "bounce back" and they are just not spending like they used to. In the article BusinessInsider noted that "every group surveyed by the Federal Reserve Board had a lower mean income in 2013 than the did in 2007." This would suggest that consumers' purchasing power is just not keeping up. Yet in contract to Macy's concerns about the consumer its rival Kohl's (KSS) thinks the consumer is fine. KSS reported earnings last week too. KSS beat estimates on the bottom line but their stock was crushed as the company missed analysts' sales estimates. Plus their comparable store sales were significantly weaker than expected. KSS management doesn't think there is anything wrong with the consumer. Overall they believe the retail environment is better than last year.

U.S. industrial production was another disappointment. April's reading was -0.3%. That's an improvement from March's -0.6% but analysts were expecting April to be +0.1%. Capacity utilization declined to a new 12-month low of 78.2%. April was the fifth month in a row that industrial production has declined. The slowdown in the oil and gas drilling industry might be the main culprit behind the weakness.

We also got a look at the wholesales producer price index. March's +0.2% gain in the PPI was reversed with a -0.4% decline in April. Food prices accelerated lower with a -0.9% drop in April after a -0.8% loss in March. The core PPI, which excludes food and energy, rose +0.2%.

The New York Empire State Manufacturing Survey did see some improvement. May's number was +3.1 compared to April's -1.2. Readings above 0.0 are bullish but analysts were expecting May to be 5.0.

The labor market continues to improve. The weekly initial jobless claims fell to 264,000. This is the third week in a row it has been under 270,000. The four-week moving average has fallen to 271,750, which is a new 15-year low.

Overseas Economic Data

Economists were expecting Eurozone Q1 GDP to see a +0.5% improvement over Q4. The current estimate came in at +0.4%. Year over year 2015 Q1 GDP for the Eurozone rose +1.0%. Germany's quarter-over-quarter Q1 GDP growth was +0.3%, which was a little bit below estimates. France's Q1 GDP rose +0.6% while Italy's improved +0.3%. The Eurozone's industrial production number for March fell -0.3%, which was a sharp drop from the prior month's +1.0% gain.

The latest news on Greece saw the country make its €750 million payment to the International Monetary Fund last week but only by using its reserves held at the IMF. As of this weekend Greece's Syriza government refuses to back down from its pledge to end austerity. The next meeting with Eurogroup members is May 21-22. There's going to be another round of hard-line negotiating with Greece as the country quickly runs out of money.

According to a recent Bloomberg article "more than 110 days of talks between Greece and its creditors have failed to produce an agreement to unlock additional aid from a 240 billion-euro ($275 million) bailout." Greece's creditor's are refusing to lend the country any more aid without new reforms. Both sides are talking about how this is the end game. Someone has to cave in. ING Germany Chief Economist Carsten Brzeski said, "It's either a third bailout backage, or it's a Grexit, no matter how you look at it." He does not see any alternatives. Greece has some huge debt payments coming up in the next few months (starting with a big one on June 5th). Without a compromise they are not expected to make that payment.

European Central Bank President Mario Draghi was making headline last week. There had been some growing speculation that the ECB's QE program, only a couple of months old, was already successful. There was speculation that maybe they should end their QE program early. Draghi put that rumor to rest. He said the €1 trillion asset-buying program will run its course and it's not supposed to end until September 2016. That's bullish for European stocks.

China made headlines early last week (actually last weekend) when their People's Bank of China cut rates again. It was their third rate cut in the last six months. The government is desperately trying to stimulate their economy as the slowdown worsens. Their steel consumption fell -3.4% last year, which was the first decline in thirty years. Morgan Stanley warned that after China's recent surge in national debt has set the country up for a potential crisis. The firm's research suggests that when a country's debt surges over a five-year period the next five years there is a 70% chance of a financial crisis and a 100% chance of a major economic slowdown.




Major Indices:

The S&P 500 index recovered from its midweek lows and finally broke through resistance at the 2,120 level. The index gained +0.31% for the week. This pushed its 2015 gain to +3.0%.

I would be a little bit hesitant to call this a breakout. Yes, the index is technically above resistance but it's less than three points above the 2,120 level and still below its intraday high from April 27th (2,125).

The pattern of resistance every 20 points would suggest 2,140 is the next resistance level for the S&P 500. Short-term support is probably in the 2,080 region.

Five-Day chart of the S&P 500 index:

chart of the S&P 500 index:

The NASDAQ's bounce last week (+0.9%) has broken the two-week trend of lower highs. If this rally continues the overhead levels to watch are 5,100 and 5,150. The 5,000 level has not done a very good job acting like support so I wouldn't count on it now.

Year to date the NASDAQ is outperforming with a +6.2% gain.

chart of the NASDAQ Composite index:

The small cap Russell 2000 index bounced near 1,220 on Tuesday and ended the week with a +0.73% gain. Like the S&P 500 the $RUT is up two weeks in a row. Unlike the S&P 500 the $RUT is not at a new all-time high. This small cap index has stalled just below its simple 50-dma.

A breakout higher could signal a run toward its April highs in the 1,270-1,280 region. If the $RUT rolls over then odds are good we could see it drop toward the 1,200 level.

chart of the Russell 2000 index



Economic Data & Event Calendar

This week we will get more data on the U.S. housing market. The big event could be the FOMC minutes from the last meeting. Traders are desperate for any clues on when the Fed might raise rates next.

- Monday, May 18 -
NAHB housing market index

- Tuesday, May 19 -
Housing starts and building permits for April

- Wednesday, May 20 -
FOMC minutes

- Thursday, April 21 -
Existing home sales
Philadelphia Fed survey

- Friday, May 22 -
Consumer Price Index (CPI)
Bank of Japan interest rate decision

Additional Events to be aware of:

May 29th - next Q1 GDP estimate

Looking Ahead:

Looking ahead to next week you might hear more about a divergence between the Dow Industrial Average and the Dow Transportation Average. The Industrial average is on the verge of breaking out to new record highs while the transportation average is bouncing from support near six-month lows.

Dow Theory suggest we can't have a sustained market rally without participation in the transport stocks. There might be some truth to that. If we are seeing fewer goods being moved by trucks, trains, and ships then it would suggest a weaker economy. We should also consider that this Dow Theory is about 100 years old. Today were are much more of a services economy. That doesn't mean the issue of fewer goods being shipped isn't real. It's just that the transports are a smaller portion of the economy than they were a hundred years ago.

Seeing the transports breakdown below support would still be psychologically bad for the market but it doesn't spell the end of the bull market. It's just something to keep an eye on. The big bounce in crude oil over the last two months could have put some pressure on the transport stocks. Plus the railroads are suffering with less demand from the energy sector to transport materials and drilling equipment.

The idea that a slowdown in the transportation sector signals an economic downturn is still worth considering. We have seen economic data in the U.S. deteriorate over the last few months. Economists have recently started downgrading their outlook on the economy again. A recent Bloomberg survey shows that consensus estimate has fallen from +2.7% growth in the second quarter down to +2.3%. I want to remind readers that the Atlanta Federal Reserve is only forecasting +0.7% growth in the second quarter.

Here's another interesting contrarian indicator. Normally a bull market tops out when everyone is overwhelmingly bullish. The crowd is so enthusiastic that stocks accelerate higher at an unsustainable pace. The folks at Bespoke Investment Group have been analyzing the AAII investor sentiment data. Bullish sentiment fell to 26.7%. This is the tenth week in a row that bullish sentiment has been under the long-term bull market average. It's also the tenth week out of the last twelve that sentiment has declined. A quick translation would suggest we are nowhere close to any kind of major top in the stock market based on current investor sentiment. The most hated bull market in history marches on.

Last week I suggested the path of least resistance was higher. That's still the case. Both the big cap indices, the Dow Industrials and the S&P 500, look pretty bullish. The sell-off in the small cap Russell index that occurred three weeks ago may have been exactly what the Russell 2K needed to adjust from overbought conditions.

I almost hate to say it for fear of jinxing the rally but it looks like full speed ahead for the bull market. The only iceberg in our path is the Greece situation. May 20th through the 22nd will produce a lot of headlines as the game of brinkmanship hits epic proportions between Greece and its creditors in the Eurogroup.

~ James







Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Investors were nervous over bond market weakness but stocks recovered from their midweek lows. Buyers stepped in and the big cap indices ended the week at or new near highs.

ADBE, ASH, GILD, and SCTY have graduated from our watch list.

AKAM, DATA, and EWI have new stop losses.

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

Video Chips & Healthcare

by James Brown

Click here to email James Brown


- New Trades -


Ambarella, Inc. - AMBA - close: 79.86

Comments:
05/17/15: AMBA is finally breaking out from its recent consolidation under the $77.50 area. The stock had a pretty good week with a surge from almost $70 toward $80.00. We had AMBA on our watch list. The plan was to wait for shares to close above $77.50 and then buy calls. Well AMBA met that requirement with Friday's +5.2% surge to new all-time highs and its close near $80.00.

This trade will open on Monday morning, May 18th. However, after a +10% gain last week, traders may want to wait for a dip. It would not surprise me to see AMBA retest the $77.00-77.50 area as new support so you could use a dip in that area as an alternative entry point.

I also want to caution readers about AMBA's earnings report. AMBA makes video chips for GoPro (GPRO) and GPRO recently announced a very strong quarterly report. I expect AMBA to also deliver a strong report. They will announce on June 2nd, after the closing bell. However, the earnings report is not just about the EPS number. Wall Street is looking at revenues, margins, growth rates, and AMBA's guidance. There is a risk that if AMBA disappoints on one of those factors it could spark a sharp decline since the stock is at record highs.

Trade Description: May 3, 2015:
If you're looking for relative strength then AMBA has it in spades. Year to date the stock is already up +50%. AMBA is in the technology sector. They're considered part of the semiconductor and semiconductor equipment makers. The company was founded in 2004 and went public in October 2012 at $6.00 a share. That price was significantly below where AMBA was expected to price in the $9-11 range. Investor sentiment has definitely changed since then.

The company has grown from making broadcast-class encoders to making consumer and sports cameras, security cameras, and now automotive cameras. Their high-definition chips are being integrated into security IP cameras and wearable cameras. AMBA is also capturing part of a new market - cameras on consumer-level remote control drones.

The last two plus years have seen a strong performance in AMBA with the stock up more than +600% from its IPO price. AMBA has GoPro, Inc. (GPRO) to thank for part of that rally. GPRO came to market in June 2014 and the stock has been in rally mode since mid August with a rally in GPRO from less than $40 to $90 a share. I mention GPRO because AMBA happens to make the HD camera sensors in many of GPRO's action camera products. GPRO's IPO drew a lot of attention to AMBA. Now GPRO's rally has collapsed while AMBA has continued to climb.

Part of GPRO's trouble is competition from a large Chinese rival - Xiaomi. GPRO is currently seen as best of breed in the action camera market but it may not hold that spot forever. Xiaomi is selling similar cameras at a significant discount to GPRO and both cameras use AMBA's technology. Both camera makers have different models. GPRO's top of the line still has better components than Xiaomi's - at least for now. The real winner is AMBA since they supply to both companies. Multiple analysts have commented on AMBA's relationship with Xiaomi and believe it will bear significant fruit in the future.

AMBA has been killing it on the earnings front. They have beaten Wall Street's earnings and revenue estimates for the last five quarters in a row. Their most recent report was their Q4 results on March 3rd. Analysts were expecting a profit of $0.49 a share on revenues of $59.3 million. AMBA delivered $0.68 a share with revenues soaring +61% to $64.7 million.

AMBA's next earnings report is not until June 2nd. However, GPRO's recent earnings could be an early look at AMBA's business. GPRO just reported its Q1 results on April 28th. Earnings were better than expected and revenues soared +54% to $363 million. GPRO beat Wall Street estimates on both the top and bottom line. GPRO's management raised their 2015 Q2 guidance significantly above analysts' estimates. That's bullish news for AMBA. Shares of AMBA rallied on GPRO's results.

Currently AMBA is sitting just below resistance in the $76-77 area. I am suggesting we wait for AMBA to close above $77.50 and then buy calls the next morning with an initial stop loss at $69.00. More aggressive traders may want to use an intraday trigger instead since AMBA could breakout and surge higher. I am putting a limit on this trade. We do not want to open positions if AMBA spikes above $81.00. Essentially our entry window to launch bullish positions is the $77.50-81.00 zone.

Breakout trigger: Wait for a close above $77.50,
Then buy calls the next morning with a stop at $69.00.

BUY the 2016 Jan $90 call (AMBA160115C90) current ask $7.60

05/18/15 Trade begins.
05/15/15 Triggered. AMBA closed at $79.86, above our trigger of $77.50
Option Format: symbol-year-month-day-call-strike

Chart

Originally listed on the Watch List: 05/03/15


Anthem Inc. - ANTM - close: 161.37

Comments:
05/17/15: ANTM is another watch list candidate that graduated with Friday's rally. We were waiting for ANTM to close above $161.00. Shares closed at $161.37 on Friday. Our plan is to buy calls on Monday morning (May 18th).

Trade Description: May 10, 2015:
The Affordable Care Act (a.k.a. Obamacare) was first feared by healthcare companies. Now they have embraced it. Obamacare has definitely been good for ANTM with waves of new enrollees.

ANTM, previously known as Wellpoint, is in the healthcare sector. According to the company, "Anthem is working to transform health care with trusted and caring solutions. Our health plan companies deliver quality products and services that give their members access to the care they need. With nearly 71 million people served by its affiliated companies, including more than 38 million enrolled in its family of health plans, Anthem is one of the nation’s leading health benefits companies."

ANTM has raised its guidance the last four quarters in a row! Their most recent earnings report was April 29th. ANTM delivered their 2015 Q1 results of $3.14 per share. That was 45 cents above estimates. Revenues came in below expectations but traders didn't care because ANTM raised their guidance above Wall Street's estimate.

Now analysts are starting to raise their price targets on the stock. Shares have broken out of a multi-week consolidation pattern. ANTM is poised to rally through resistance near $160.00 and hit new all-time highs.

Tonight I am suggesting we wait for ANTM to close above $161.00 and then buy calls the next morning with a stop loss at $152.00.

Breakout trigger: Wait for a close above $161.00
Buy calls the next morning with a stop at $152.00

BUY the 2016 Jan $170 call (ANTM160115C170) current ask $7.70

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

Chart of ANTM:

Originally listed on the Watch List: 05/10/15



Play Updates

Bulls Score Another Up Week

by James Brown

Click here to email James Brown

Editor's Note:

ADBE, ASH, GILD, and SCTY have all graduated from our watch list to our active play list in the past week.


Closed Plays



None. No closed plays this week.




Play Updates


Apple Inc. - AAPL - close: 128.77

Comments:
05/17/15: AAPL bounced off the $125.00 level last week. The three-day rebound pushed shares to a minor gain for the week. This snapped a two-week losing streak. The next challenge is potential round-number resistance at $130.00. I am not suggesting new positions at this time.

Trade Description: 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 $15.10/15.25

04/27/15 AAPL crushes earnings estimates (again)
04/12/15 new stop @ 118.00
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: 118.00
Play Entered on: 12/09/14
Originally listed on the Watch List: 11/02/14


Adobe Systems - ADBE - close: 78.92

Comments:
05/17/15: ADBE finally broke through resistance in the $77.50 area and surged toward its recent highs. We had ADBE on our watch list. The plan was to wait for shares to close above $77.75 and then buy calls. The stock surged on Thursday and almost hit $80.00 a share before settling at $79.43. Our trade opened on Friday morning with ADBE gapping higher to resistance at $80.00.

This stock got a boost thanks to JP Morgan initiating coverage with an overweight rating and a $91.00 target.

I would still consider new positions now. However, odds are pretty good we might get a better entry point as ADBE could dip back toward the $77-78 zone and retest the $77.50 area as support. Consider waiting for a dip into the $77-78 region as an alternative entry point.

Trade Description: May 3, 2015:
ADBE is in the technology sector. According to the company's website, "Adobe is changing the world through digital experiences. Content built and optimized with Adobe products is everywhere you look — from websites, video games, and smartphones to televisions, tablets, and beyond. Adobe® Creative Cloud® software offers the most innovative tools for creating digital media, while Adobe Marketing Cloud delivers groundbreaking solutions for data-driven marketing. Our leadership in these two emerging categories, Digital Media and Digital Marketing, provides our customers with a real competitive advantage, positioning Adobe for continued growth well into the future. As one of the largest software companies in the world, Adobe achieved revenue of more than US$4 billion in 2013."

The company's most recent earnings report was March 17th. Results were $0.44 a share, which was five cents better than expected. Revenues were up +10.9% to $1.11 billion, also above expectations. The company continues to see success with their subscription model and added 517,000 new creative cloud subscriptions, a +28% improvement from a year ago.

Technically the stock is in a long-term up trend. Shares just spent the last few weeks consolidating sideways and looks ready for the next move higher. A rise past $78.00 would generate a new buy signal on the point & figure chart.

I am suggesting we wait for ADBE to close above $77.75 and then buy calls the next morning with a stop loss at $71.85. More conservative investors may want to wait for ADBE to close over short-term resistance at $80.00 as an alternative entry point for bullish positions.

- Suggested Positions -
MAY 15, 2015 - entry price on ADBE @ 80.00, option @ 4.60
symbol: ADBE160115C85 2016 JAN $85 call - current bid/ask $3.75/4.00

05/15/15 trade begins. ADBE opens at $80.00
05/14/15 triggered. ADBE closed @ $79.43, above our trigger of $77.75
Option Format: symbol-year-month-day-call-strike

Chart:

Current Target: To Be Determined
Current Stop loss: 71.85
Play Entered on: 05/15/15
Originally listed on the Watch List: 05/03/15


Akamai Technology - AKAM - close: 77.96

Comments:
05/17/15: AKAM displayed relative strength last week. The stock surged past its April peak and ended the week at multi-year highs. Tonight we are raising the stop loss to $71.75. More conservative investors may want to use a stop closer to $74.00 instead.

I am not suggesting new positions at this time.

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 $5.70/5.95

05/17/15 new stop @ 71.75
05/02/15 new stop @ 69.00
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

Current Target: To Be Determined
Current Stop loss: 71.75
Play Entered on: 03/25/15
Originally listed on the Watch List: 03/08/15


Ashland, Inc. - ASH - close: 127.38

Comments:
05/17/15: It was a pretty volatile week for shares of ASH. After weeks of churning sideways the stock finally pushed through resistance in the $130-131 region. ASH closed at all-time highs on Monday, May 11th, at $131.52. Our suggested entry point was to wait for ASH to close above $131.25 and then buy calls the next day.

The very next day, Tuesday morning, shares of ASH crash. The stock opened lower at $127.49 and fall to $124.77 before closing at $125.02. The sell-off appears to be a reaction to an SEC filing that Jana Partners, an activist hedge fund, had sold all of its 8.4% stake in ASH.

Our entry point in this trade is $127.49. ASH almost hit our stop loss at $127.75. Since Tuesday's decline ASH has managed a little bit of an oversold bounce. I am suggesting caution here. No new positions at this time. Let's see if ASH can recover the $130 level.

Trade Description: April 12, 2015:
ASH is in the basic materials sector. The XLB materials ETF is up +2.3% this year. Shares of ASH are outperforming their peers with a +8% gain in 2015.

According to the company, "Ashland Inc. (ASH) is a global leader in providing specialty chemical solutions to customers in a wide range of consumer and industrial markets, including architectural coatings, automotive, construction, energy, food and beverage, personal care and pharmaceutical. Through our three commercial units - Ashland Specialty Ingredients, Ashland Performance Materials and Valvoline - we use good chemistry to make great things happen for customers in more than 100 countries."

Looking at the last couple of earnings reports ASH has been beating estimates on the bottom line. Their most recent report was January 26th where ASH reported a profit of $1.46 per share on revenues of $1.39 billion. Earnings beat estimates by four cents while revenues were down -2.9% from a year ago thanks to foreign currency headwinds (i.e. impact of the strong dollar). Management said that last quarter their strongest growth was in many of the company's higher-margin products.

Technically shares have been building on a bullish trend of higher lows. The point & figure chart is very bullish and forecasting a long-term target of $200 a share.

The all-time high was set on March 2nd, 2015 at $130.66. Tonight I am suggesting we wait for ASH to close above $130.75 and then buy calls the next morning with a stop loss at $124.75.

- Suggested Positions -
MAY 12, 2015 - entry price on ASH @ 127.49, option @ 4.00
symbol: ASH160115C140 2016 JAN $140 call - current bid/ask $3.30/3.50

05/12/15 Trade begins. ASH gaps lower at $127.49
05/11/15 Triggered. ASH closed at $131.52, above our trigger of 131.25
05/10/15 Adjust entry trigger to a close above $131.25 (was 130.75)
04/26/15 Do not open positions if ASH gaps open above $132.50
Option Format: symbol-year-month-day-call-strike

Chart:

Current Target: To Be Determined
Current Stop loss: 124.75
Play Entered on: 05/12/15
Originally listed on the Watch List: 04/12/15


Tableau Software - DATA - close: 110.09

Comments:
05/17/15: It was a relatively quiet week for DATA. The stock did tag a new high but after big gains the previous week DATA essentially churned sideways in the $107-113 region. Tonight we will raise the stop loss to $97.40.

I am still warning investors that DATA could see a retracement into the $100-105 region. No new positions at this time.

Trade Description: April 26, 2015:
The market for analyzing big business data is growing fast. DATA is leading the charge. According to the company, "Tableau Software (NYSE: DATA) helps people see and understand data. Tableau helps anyone quickly analyze, visualize and share information. More than 26,000 customer accounts get rapid results with Tableau in the office and on-the-go. And tens of thousands of people use Tableau Public to share data in their blogs and websites."

The last couple of earnings reports have been very impressive. DATA released their Q3 results on November 5, 2014. Results were 12 cents above estimates with revenues up +71% to $104.5 million, also above estimates.

Their Q4 results came out in early February. Analysts were expecting a profit of $0.11 a share on revenues of $122.58 million. DATA delivered $0.42 a share with revenues up +75% to $142.9 million. In the fourth quarter they added 2,600 new customers. They closed 304 transactions worth more than $100,000, a +70% improvement from a year ago.

Christian Chabot, Chief Executive Officer of Tableau. "In 2014, we experienced the strongest demand we've seen in our history, as the move to agile analytics grows faster than ever."

Management offered earnings guidance that was in-line with Wall Street estimates but they see revenues coming in above expectations.

Wall Street is bullish and the last couple of weeks have seen new price targets at $115 and $127. The point & figure chart is forecasting at $117.00 target.

DATA has been talked about as a potential take over target and that might be why their options are so expensive. DATA's next earnings report is coming up on May 7th. More conservative traders may want to sit this one out until we see how the market reacts to DATA's Q1 results.

I am labeling this a more aggressive play because shares can be volatile with multi-point single-day moves. Tonight we want to buy calls on a dip at $100.00.

- Suggested Positions -
APR 27, 2015 - entry price on DATA @ 100.00, option @ 12.10
symbol: DATA160115C110 2016 JAN $110 call - current bid/ask $14.50/16.00

05/17/15 new stop @ 97.40
05/10/15 new stop loss @ 94.75
05/08/15 the stock soars to new highs in reaction to earnings and a couple of upgrades.
05/07/15 DATA delivered better than expected earnings and raises guidance above Wall Street expectations
04/27/15 triggered @ $100.00
Remember, this is a higher-risk trade. Consider small positions to limit risk.
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 97.40
Play Entered on: 04/27/15
Originally listed on the Watch List: 04/26/15


iShares MSCI Germany - EWG - close: 30.46

Comments:
05/17/15: The EWG is still churning sideways but it ended the week on an up note. This ETF is hovering near the top of its $29.25-30.60 trading range. A close above $30.65 could be used as a new entry point.

More conservative investors may want to use a higher stop loss.

Don't forget - We should assume that if Greece does leave the euro or defaults on its debt that this trade gets stopped out due to volatile movement in the European markets.

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 $1.65/1.80

05/10/15 new stop @ 28.40
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: 28.40
Play Entered on: 03/23/15
Originally listed on the Watch List: 02/22/15


iShares MSCI Italy Capped ETF - EWI - close: 16.05

Comments:
05/17/15: Our Italy ETF is outperforming the German ETF.

The Eurozone has been struggling with slow growth and economic contraction for years. It looks like that could be changing. This past week several key countries including Germany, France, Italy, and Spain all reported Q1 GDP growth.

Another factor boosting European stock markets was ECB President Mario Draghi who ended rumors that the ECB might end its QE program sooner than expected. He said no, the one trillion euro QE program, which just started this year, would go full term (September 2016).

Shares of the EWI have surged to new 2015 highs. I would expect a pullback. Tonight we'll raise our stop loss to $14.70.

FYI: This EWI trade suffers the same risk that the EWG trade does. If Greece ends up leaving the Eurozone or defaults on its debt it will generate significant market volatility in Europe. I would expect EWI to hit our stop if we do see a Greek exit.

Trade Description: April 5, 2015:
Italy could be on the brink of an economic turnaround. The Wall Street Journal recently reported that Italy could escape from its chronic economic fatigue. The country's economic growth has been slowing down for years with growth falling from +2% in the 1980s to +1.4% in the 1990s to just +0.6% in the 2000s. The country has averaged -0.5% growth since 2010.

The situation appears to be changing. Markit's manufacturing PMI data for March hit 53.3, an 11-month high. Numbers above 50.0 suggest growth. UniCredit is forecasting Italian GDP growth of +0.2% in Q1 2015, which would snap the country out of its three-year recession.

The Organization for Economic Cooperation and Development (OECD) has upgraded their forecast on Italy for 2015 and 2016. They now see growth of +0.6% in 2015 and +1.3% in 2016.

The combination of lower oil prices and a weaker euro to boost exports should boost European economic growth. Plus, the European Central Bank (ECB) just launched a 60 billion euro QE program in March 2015 that will last at least through September 2016 or longer if they don't hit their 2% inflation target.

Investors know that QE helped fuel a multi-year rally in the U.S. stock market and they are expecting a similar reaction in the European stock markets.

The EWI could be a way to play it. This is an ETF that mimics the MSCI Italy 25/50 index. Underlying stocks are traded on the Milan stock exchange. It's one of the most liquid ETFs focused on Italy.

Technically the EWI appears to have formed an inverse (bullish version) of a head-and-shoulders pattern. It's also on the verge of breaking out past its simple 200-dma. Tonight I am suggesting investors wait for the EWI to close above $15.25 and then buy calls the next morning.

Warning: The biggest risk is probably a Greek exit from the Eurozone. Negative headlines that suggest the Greek might exit could generate a lot of volatility in the EWI.

- Suggested Positions -
APR 07, 2015 - entry price on EWI @ 15.31, option @ 2.35
symbol: EWI170120C15 2017 JAN $15 call - current bid/ask $2.05/2.40

05/17/15 new stop @ 14.70
05/03/15 new stop @ 14.40
04/07/15 trade begins. EWI opens at $15.31
04/06/15 EWI closed @ 15.29, above our trigger of $15.25
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 14.70
Play Entered on: 04/07/15
Originally listed on the Watch List: 04/05/15


Facebook, Inc. - FB - close: 80.42

Comments:
05/17/15: It was encouraging to finally see shares of FB participate in the market's rally. The stock has been underperforming the broader market since its March high. These last couple of weeks have seen FB flirting with technical support at its simple 200-dma.

I am still suggesting caution here. FB displayed relative weakness on Friday. I am not suggesting new positions at this time.

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.

- Suggested Positions -
APR 01, 2015 - entry price on FB @ 81.00, option @ 4.92
symbol: FB160115C90 2016 JAN $90 call - current bid/ask $3.30/3.40

04/23/15 Q1 earnings report
04/01/15 triggered @ 81.00
03/29/15 move the buy-the-dip trigger from $82.00 down to $81.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 74.75
Play Entered on: 04/01/15
Originally listed on the Watch List: 03/22/15


Gilead Sciences - GILD - close: 109.30

Comments:
05/17/15: GILD is another watch list candidate that has graduated to our active play list. Shares surged +$5.45 or about +5.25% last week. Our play was to wait for shares to close above $106.50 and then buy calls the next day. The stock closed at $108.74 on Thursday. Our traded opened on Friday morning at $109.05.

The relative strength is great but GILD could be due for a dip. The stock is now up six days in a row. Tonight I am suggesting traders look for a dip in the $106-108 area as a potential entry point to buy calls.

Trade Description: May 3, 2015:
GILD seems to be everyone's favorite biotech stock. I only hear bullish opinions about the future of the company, and for good reason. They have some pretty amazing treatments with products for HIV/AIDS, liver diseases, oncology, cardiovascular, respiratory, and more. GILD has essentially revolutionized how we treat major diseases like HIV and Hepatitis C.

According to the company website, "Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need. We strive to transform and simplify care for people with life-threatening illnesses around the world. Gilead's portfolio of products and pipeline of investigational drugs includes treatments for HIV/AIDS, liver diseases, cancer and inflammation, and serious respiratory and cardiovascular conditions."

Last year (2014) everyone has been raving over GILD's hepatitis C treatment called Sovaldi. Hepatitis C is a form of viral hepatitis that causes chronic inflammation of the liver. About 185 million people currently suffer with hepatitis C. Previously the most common treatment for hepatitis C had serious side effects and was less than 50% successful. GILD changed that with their Sovaldi drug that not only treats the symptoms but actually cures the patient. The company has drawn some negative publicity over the cost since GILD charges $84,000 for a 12-week course of Sovaldi in the United States. The fact that 80% to 90% of patients who take Sovaldi are cured is a major milestone.

The Financial Times noted that before Sovaldi the impact of hepatitis C in the U.S. took a heavy toll on the healthcare system. The disease can lead to liver failure and cancer, both of which cost significantly more than Sovaldi's $84,000 price target. Hepatitis C is the leading cause for liver transplants in the U.S., which can cost a minimum of $145,000. One consulting firm estimated that the annual cost of hepatitis C to the U.S. healthcare system was going to surge from $30 billion to $85 billion in the next twenty years. Sovaldi has the potential to change. that.

The company is a cash machine. Their Q2 2014 revenues soared +136%. Q3 revenues were up +117%. Q4 2014 sales were +134%. They also announced a $15 billion stock buyback program.

GILD's most recent earnings report was their 2015 Q1 announcement on April 30th. Wall Street was expecting a profit of $2.32 per share on revenues of $6.89 billion. GILD delivered $2.94 per share with revenues rising +51.9% to $7.59 billion. Management then raised their 2015 sales forecast from $26-27 billion to $28-29 billion.

Technically shares of GILD have been consolidating sideways under a trend of lower highs for months. The last half of April appears to have produced a bullish breakout but GILD still has resistance in the $106 area. Tonight I am suggesting we wait for GILD to close above $106.50 and then buy calls the next morning.

- Suggested Positions -
MAY 15, 2015 - entry price on GILD @ 109.05, option @ 7.75
symbol: GILD160115C115 2016 JAN $115 call - current bid/ask $7.00/7.20

05/15/15 Trade begins. GILD opens at $109.05
05/14/15 Triggered. GILD closed @ 108.74, above our trigger of $106.50
Option Format: symbol-year-month-day-call-strike

Chart:

Current Target: To Be Determined
Current Stop loss: 99.00
Play Entered on: 05/15/15
Originally listed on the Watch List: 05/03/15


iShares US Home Construction ETF - ITB - close: 26.88

Comments:
05/17/15: Good news! The bounce in the ITB continues. This home construction ETF suffered a sharp, four-week decline but that ended with a bounce two weeks ago. The rebound continued this past week.

This week we will see a lot more data on the housing market with the NAHB home builder index released on Monday. If that's positive it could helped fuel the rally here in the ITB.

I'd like to see this ETF close above the 50-dma, currently at $27.25, before considering new bullish positions.

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 $0.60/0.95

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



Level 3 Communications - LVLT - close: 55.48

Comments:
05/17/15: LVLT suffered a little bit of profit taking last week. Shares snapped a three-week winning streak. If this dip continues I would look for support in the $52-54 zone. I am not suggesting new positions at this time.

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 $2.85/3.40

05/10/15 new stop @ 51.45
04/29/15 Better than expected earnings
04/12/15 Caution! LVLT looks weak. A breakdown under $53.00 probably portends a drop to support at $50.00
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: 51.45
Play Entered on: 03/04/15
Originally listed on the Watch List: 12/28/14


MasterCard Inc. - MA - close: 93.22

Comments:
05/17/15: Shares of MA managed to tag new all-time highs on Friday morning. Unfortunately the stock reversed. Profit taking on Friday erased its gains for the week although the decline was pretty minor. I would still consider new positions at current levels. Nimble investors might want to wait and try and buy a dip near $92.00, which should be new short-term support.

Trade Description: May 3, 2015:
We are adding MA back to the watch list. Here's our recent watch list play description from April:

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."

Shares of MA look like a potential trade again. The company recently reported earnings on April 29th. The beat estimates on the bottom line with a profit of $0.89 per share. Revenues were only up +2.7% to $2.23 billion, which was below expectations. Part of the challenge were currency headwinds.

Wall Street seems to think that MA will do well in spite of the tough business environment. The spike higher on April 22nd was news that the country of China was going to open up their market to foreign companies. Previously companies like MA and Visa could only do business in China by partnering with a domestic firm (China UnionPay). Now the Chinese government is opening up the bank card-clearing market to foreigners. This is huge. The Chinese market for this business was $6.8 trillion in transactions last year. Now MA gets a chance to compete for its share of this business.

Shares of MA still have resistance near $93.00. We want to see MA close above $93.25 and then buy calls the next morning with a stop loss at $88.00.

- Suggested Positions -
MAY 11, 2015 - entry price on MA @ 93.48, option @ 5.95
symbol: MA160115C95 2016 JAN $95 call - current bid/ask $5.45/5.65

05/11/15 trade begins. MA opens at $93.48
05/08/15 triggered with a close @ $93.51 (above $93.25)
Option Format: symbol-year-month-day-call-strike

Current Target: MA @ TBD
Current Stop loss: 88.00
Play Entered on: 05/11/15
Originally listed on the Watch List: 05/03/15


Nike, Inc. - NKE - close: 104.98

Comments:
05/17/15: Shares of NKE sprinted higher last week. The stock has broken out past its March 2015 highs. Friday's close is a new record. More conservative investors might want to move their stop closer to the $100 level. I would not chase NKE at the moment. Wait for a pullback before considering new positions.

Earlier Comments: March 29, 2015:
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.

- Suggested Positions -
MAY 11, 2015 - entry price on NKE @ 102.42, option @ 4.20
symbol: NKE160115C110 2016 JAN $110 call - current bid/ask $4.60/4.75

05/11/15 trade begins. NKE opens at $102.42
05/08/15 Triggered with a close @ $102.44 (above 102.00)
05/03/15 move the stop loss from 95.75 to 97.45
04/12/15 Strategy update: adjust the trigger to a close above $102.00 and the stop loss to $95.75 (from a close above $101.00 and a stop at $94.45)
Option Format: symbol-year-month-day-call-strike

Current Target: NKE @ TBD
Current Stop loss: 97.45
Play Entered on: 05/11/15
Originally listed on the Watch List: 03/29/15


Starbucks Corp. - SBUX - close: 50.80

Comments:
05/17/15: Traders bought the dip in SBUX near its trend of higher lows. The stock rebounded and managed to end a two-week decline. I would consider new positions at current levels.

Trade Description: April 26, 2015:
SBUX shares are soaring to new all-time highs.

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. 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.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 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 the consolidation is over.

Five-Year Plan

Late last year SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like 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. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX is having a pretty good 2015 so far with the stock up +26%, outperforming the broader market. A lot of this gain was thanks to a post-earnings pops. SBUX reported its Q1 2015 results on January 22nd. Adjusted earnings, backing out one-time charges, were $0.80 a share. That's in-line with estimates. Revenues were up +13.3% to $4.8 billion, also in-line with estimates. It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week. Investors applauded the news anyway and sent SBUX soaring to new all-time highs the next day.

That whole scenario just happened again on Friday with the company delivering exceptional growth. SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years. Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

The stock market applauded SBUX's results and shares popped to new highs. We do not want to chase it. Shares will likely fill the gap from Friday morning. Tonight I am suggesting a buy-the-dip trigger at $50.00. More nimble traders may want to consider a trigger closer to $49.70 instead.

- Suggested Positions -
APR 28, 2015 - entry price on SBUX @ 50.00, option @ 1.59
symbol:SBUX160115C55 2016 JAN $55 call - current bid/ask $1.77/1.80

04/28/15 triggered @ 50.00
Option Format: symbol-year-month-day-call-strike

Current Target: SBUX @ TBD
Current Stop loss: 47.25
Play Entered on: 04/28/15
Originally listed on the Watch List: 04/26/15


SolarCity Corp. - SCTY - close: 62.51

Comments:
05/17/15: SCTY is another watch list candidate that graduated last week. The plan was for shares to close above $62.50 and then buy calls the next day. SCTY closed at $62.72 on Thursday. Our trade opened on Friday morning at $62.62. I would consider new positions at current levels.

Trade Description: May 10, 2015:
SCTY is the largest solar panel installer in the U.S. The company has grown thanks to its business model that leases the solar panel system to homeowners over a twenty year period instead of a large upfront cost in the $20K to $30K range. Meanwhile margins have improved as the price of solar panels plunged -80% in the last few years.

SCTY currently has more than 217,000 customers. They are aiming for one million customers by the middle of 2018. The company's most recent earnings report was May 5th. The company reported a loss of $1.52 per share, which was better than Wall Street's estimate for a loss of $1.60 per share. Revenues were up +6.3% to $67.5 million, which was +17% above analysts' estimates. The company added 28,000 new customers last quarter.

Bears will argue that the company's costs and expenses are soaring. That's true. SCTY has boosted its sales force by almost 90% in the last year. Their sales and marketing expenses grew from about $47 million a year ago to $86.7 million.

The company is forecasting they will install 180 megawatts of solar systems in the second quarter. They're aiming for 920MW to 1,000 MW for all of 2015. They just recently expanded into New Hampshire, which is their 17th state for residential installations. There is talk that SCTY could expand overseas in the next year or two.

One analysts just raised their price target on SCTY to $99.00 per share. The point & figure chart is forecasting at $92.00 target. The last several days have seen shares of SCCTY consolidate sideways in the $58-62 zone. A breakout here could spark the next leg higher. I am suggesting we wait for SCTY to close above $62.50 and then buy calls the next day with a stop loss at $57.40. However, please note that I am putting a condition on this trade. We want to see SCTY close in the $62.50-64.00 range. If SCTY spikes higher and closes above this region then no trade. We'll re-evaluate next weekend.

- Suggested Positions -
MAY 15, 2015 - entry price on SCTY @ 62.62, option @ 5.40
symbol:SCTY160115C70 2016 JAN $70 call - current bid/ask $4.80/5.40

05/15/15 trade begins. SCTY opens at $62.62
05/14/15 triggered. SCTY closed @ $62.72, above our trigger of $62.50
Option Format: symbol-year-month-day-call-strike

Chart:

Current Target: SCTY @ TBD
Current Stop loss: 57.40
Play Entered on: 05/15/15
Originally listed on the Watch List: 05/10/15


Toyota Motor Corp. - TM - close: 139.37

Comments:
05/17/15: Whew! We have had a couple of really close calls this month in TM. Twice the stock has tested the $136.50 area and both times it has bounced. Our stop loss is $136.40. More conservative investors may want to take profits now or on a bounce near recent resistance in the $142.50 region. I am not suggesting new positions at this time.

Last week TM was in the news thanks to another recall. Faulty airbags made by Takata Corp. have plagued the car industry. More than ten auto makers have already recalled 25 million cars due to faulty airbags made by Takata since 2008. This past week TM and Nissan Motor Co. added another 6.5 million vehicles to the recall list.

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 $12.25/13.65

04/26/15 new stop @ 136.40
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: 136.40
Play Entered on: 12/02/14

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


Textron Inc. - TXT - close: 46.62

Comments:
05/17/15: The up trend in TXT accelerated last week. These are new multi-year highs for the stock. TXT is now up +10.7% year to date versus the +2.5% for the Dow Industrials and the +3.1% gain in the S&P 500. We expect this outperformance to continue. However, Goldman Sachs introduced some interesting data this past week.

Here's a link to a story on CNBC ( source) where Goldman Sachs picked stocks that have a history of declining over the summer. Based on their research TXT has fallen from May to August in eight of the last twelve years and is not currently rated a "buy" by their analysts.

I am 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 $2.08/2.34

05/03/15 new stop @ 42.40
04/12/15 new stop @ 41.85
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: 42.40
Play Entered on: 02/25/15
Originally listed on the Watch List: 02/15/15




Watch

A Super Successful Week for The Watch List

by James Brown

Click here to email James Brown


New Watch List Entries


None, no new watch list candidates



Active Watch List Candidates

JCI - Johnson Controls Inc.


Dropped Watch List Entries

ADBE, ASH, GILD, and SCTY all graduated to our active play list.

AMBA and ANTM both met our entry point requirement with Friday's rally and have been moved to the new play section.



New Watch List Candidates:

No new watch list candidates tonight.

We just had a GREAT week for our watch list. Our of seven watch list candidates, six of them have graduated. ADBE, ASH, GILD and SCTY all graduated to active plays this past week. Plus, AMBA and ANTM met our entry point requirement with Friday's rally. These two will begin as new plays on Monday morning.

The recent action in the stock market has been encouraging and the big cap indices like the S&P 500 and the Dow Industrials could lead the market higher.

I am not adding any new candidates tonight. It would be great to see some follow through on the S&P 500's breakout to a new record high.

I will share one stock, SWKS, looks like it has some potential. SWKS could be on the verge of breaking out from an eight-week consolidation phase. I'm a little bit concerned that the options on it might be expensive.

Additional stocks I have listed on my radar screen are: ASML, MPC, RE, JPM, GS, DNKN, WMT, JBL, HAIN, RIG,

Active Watch List Candidates:



Johnson Controls Inc. - JCI - close: 50.48

Comments:
05/17/15: JCI is still consolidating sideways. The good news is that the consolidation is narrowing and shares should breakout one way or the other pretty soon. JCI still has a bullish trend of higher lows. Last week the latest industrial production numbers in the U.S. were a disappointment. Yet the auto production component rose +1.3%, which should be a good sign for JCI. I'd like to give it another week before we toss it as a potential candidate.

Trade Description: April 26, 2015:
Shares of JCI hit all-time highs last week. The company is in the consumer goods sector. They are the largest auto parts supplier in the U.S. According to the company, "Johnson Controls is a global diversified technology and industrial leader serving customers in more than 150 countries. Our 170,000 employees create quality products, services and solutions to optimize energy and operational efficiencies of buildings; lead-acid automotive batteries and advanced batteries for hybrid and electric vehicles; and interior systems for automobiles."

JCI just reported earnings on April 23rd. The company delivered $0.73 a share, which was a +20% improvement from a year ago. Depending on who you polled that was either one cent above or below Wall Street estimates. Revenues dropped -2.8% to $9.2 billion, which was significantly below estimates. Currency headwinds were a major issue.

Management offered cautious guidance for the current quarter with an earnings forecasting of 90-92 cents a share. Analysts are expecting 92 cents. JCI's full-year guidance expects earnings growth in the +10% to +15% range.

Alex Molinaroli, JCI's Chairman and CEO, commented on his company's quarter, "I am very pleased with our second quarter results. Our businesses showed increased underlying growth and delivered higher margins that we believe are sustainable. We saw broad-based order growth in Building Efficiency, continuing a trend that we began to see at the end of the first quarter. Despite foreign currency headwinds, profitability increased across the business segments. This is, in part, a result of the early benefits from the Johnson Controls Operating System which is improving our manufacturing and procurement efficiencies. We expect those benefits to increase in value and broaden in scope over the next several years as we continue to invest in these areas."

Technically shares have been consolidating under major resistance in the $52.00 area for months. The current rally is a major breakout to new highs. The point & figure chart is optimistic with a $69.00 target.

The high on Thursday was $53.40. I am suggesting we wait for JCI to close above $53.50 and then buy calls the next morning with a stop loss at $49.65.

Breakout trigger: Wait for a close above $53.50
Then buy calls the next morning with a stop at $49.65

BUY the 2016 Jan $55 call (JCI160115C55)

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

Originally listed on the Watch List: 04/26/15