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Daily Newsletter, Sunday, 7/5/2015

Table of Contents

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

Leaps Trader Commentary

Greeks Vote No!

by James Brown

Click here to email James Brown

Stocks posted a loss last week as markets reacted to news of the surprise referendum in Greece and expectations that Greece would not make its IMF debt payment. Last Monday was the worst one-day drop for stocks all year. All the major markets around the world plunged. Asian markets were down -2% to -3%. European markets were down -3.5% to -4%. All of the U.S. indices were down more than -2% with Monday's widespread drop toward three-month lows. Fortunately there was no follow through lower in the U.S. The market bounced off Monday lows but gains were mild. Everyone is waiting for the results of the Greek referendum vote.

The market's weakness was broad based. Transports fell -1.4% for the week. The semiconductor SOX index lost -1.8%. The normally bullish biotech stocks dropped -1.6%. Banking stocks fell -1.8%. A -5.1% plunge in WTI crude oil weighed heavily on the energy stocks. The oil index declined -2.2% last week while oil service names fell -3.9%. The U.S. dollar posted a gain for the week and that put pressure on all of the commodities. The safety trade pushed money into U.S. bonds last Monday but the bond market rally had pared its gains by Thursday. Yields on the 10-year note settled at 2.39%. The bond market could see a lot more volatility in the week ahead as investors react to the Greek vote to accept the EU's new bailout terms.

Greece

Greece was the major story last week, which should be no surprise. There was a flurry of attempts at last minute deals by the Greek government. However, after Greek Prime Minister Alexis Tsipras surprised the world with his declaration of a referendum the prior weekend, his country's creditors gave him and any new proposals the cold shoulder. German Chancellor Angela Merkel said that her country cannot evaluate any new proposals until after the July 5th referendum vote. On June 30th Greece failed to make its 1.6 billion euro debt payment to the International Monetary Fund (IMF) essentially creating a sovereign debt default.

One of the biggest surprises last week was the IMF report that Greece will needs tens of billions of euros in additional bailout funds to survive. According to some news reports the EU tried to pressure the IMF to not release this new report before the July 5th referendum for fear it would influence the vote. What's interesting is that multiple news agencies, all quoting the same IMF report, provided different figures. Bloomberg said that the IMF report suggests Greece will need an additional 36 billion euros over the next three years to survive. Reuters said that number was 50 billion euros. The Wall Street Journal reported it was 60 billion euros. The IMF is suggesting that any new bailout agreement has a 20-year grace period before any repayment begins. Plus they're suggesting that the EU and the rest of Greece's main creditors (ECB and IMF) will need to consider some debt forgiveness and reduce Greece's outstanding balance. Different analysts have suggested this haircut on Greek debt could range from 30% to 75% if Greece is ever going to pay it back. Otherwise, with Greece's current debt burden of 185% of GDP, the country will never be able to dig itself out from its debt burdens.

There were a number of protests in the Greek capital throughout the week by different groups. Some were urging a yes vote while others were campaigning for a no vote. The vote is whether to accept new bailout terms but most view it as a vote on whether or not to stay in the Eurozone. Over the last few weeks we have consistently seen polls that suggest 70% of Greeks want to stay in the euro. However, as of this weekend, polls showed Greeks were 41.7% in favor of voting yes and 41.1% in favor of no (virtually dead even). EU leaders are hoping a "yes" vote means that PM Alexis Tsipras will step down and Greece will elect a more cooperative government. Meanwhile Tsipras and his radical leftwing Syriza party has been campaigning for Greeks to vote no.

If the country does vote no it could be an economic and humanitarian disaster. There were multiple stories about how the entire country was shutting down. The banks have been closed all week. Citizens were only allowed to withdraw 60 euros a day and that had been reduced to 50 euros a day by this weekend. The Greek banks were down to their last 500 million euros. Hundreds of ATMs were out of cash. There is a shortage of 20 euro notes. Gas stations had stopped taking credit cards. Restaurants were closing because they couldn't order more food supplies. Businesses were closing because they couldn't import new supplies. Other businesses were closing because they couldn't pay employees. Hospitals were running low on medical supplies and postponing or cancelling medical procedures. Some areas of the country had seen their garbage collection halted.

Greek Bank "Bail-in"?

If the above situation doesn't sound dire enough there were new stories over the weekend that the Greek government was considering a "bail-in" to prevent the banks from failing. The last time we saw a "bail-in" was the island country of Cyprus in 2013. Cyprus went through their own financial meltdown and the government essentially confiscated money from depositors to shore up bank balance sheets and prevent a collapse.

Now Greece might be forced to do the same thing. The Financial Times reported that Greece was considering a "bail-in" of up to 30% on all deposits over 8,000 euros and 10% below that amount. Imagine being a Greek citizen that had saved up 100,000 euros. This Monday you could wake up and find your account balance at 70,000. Greek Finance Minister Yanis Varoufakis reacted to the FT story and called the bail in a "malicious rumor". He may face a credibility issue since last weekend he said Greek banks would open on Monday. The banks did not open and have been closed all week.

Greeks Vote No

As of Sunday night it looks like the Greek people have voted "no" on the referendum. Assuming the ballots have not been tampered with it looks like 61% of the Greek population has voted "no". Only 38% voted yes with 97% of the vote counted so far. It's a bit of a shock with multiple polls prior to the vote suggesting the majority of Greeks saying they want to stay in the Eurozone. This majority vote rejects EU's call for more austerity. Greek PM Tsipras called it a "victory for democracy".

Jeroen Dijsselbloem, President of the Eurozone Finance Ministers meeting known as the Eurogroup, said the vote was "very regrettable for the future of Greece." Other EU finance leaders said that this no vote makes any future negotiations with Greece exceedingly difficult.

This is uncharted territory for the 19-member Eurozone. It is widely assumed that Greece will be forced to leave the euro, which is something no country has done in the 16-year history of the union. The euro currency was down sharply following the referendum results and currently trading near $1.09. Bloomberg is reporting that German Chancellor Merkel has already scheduled a Monday meeting in Paris with French President Hollande to discuss the EU's next move following Sunday's vote in Greece.

Economic Data

There were a number of economic reports out last week. The Chicago PMI improved from 46.2 in May to 49.4 in June. Construction spending in the U.S. rose +0.8% in May, up from +2.1% in April. The Case-Shiller 20-city home price index rose +4.9% in April that follows a +5% jump in March.

The ISM manufacturing index rose from 52.8 in May to 53.5 in June. Numbers above 50 suggest growth in the ISM while the Chicago PMI is still in recession territory. Factory Orders fell -1.0% in May. That follows a -0.4% drop in April. Meanwhile the Conference Board's Consumer Confidence Index surged from 94.6 in May to 101.4 in June.

The U.S. continues to see job growth. The ADP National Employment Report said the country added +237,000 private jobs in June. That boosted confidence for the government's nonfarm payroll (jobs) report on Thursday. Forecasts for the jobs report rose from +225K to +230K. According to the BLS the U.S. only added +223,000, slightly below estimates. May's number was revised lower from +280K to +254K. April was also revised lower from +221K to +187K.

The unemployment rate fell from 5.5% to 5.3%, the lowest level since April 2008. Unfortunately that's not because the labor market improved. It's because over 400,000 people left the labor force. The labor force participation rate dropped from a four-month high in May at 62.9% down to 62.6%, which is a new 38-year low. The broader and likely more accurate reading on unemployment is the U6 rate, which rose from 10.4% to 10.8%.

Overseas Economic Data

It was a quiet week for economic data overseas. Most of it was overshadowed by the Greek story anyway. The Eurozone reported their Producer Price Index (PPI) for May was flat for the month but down -2.0% year over year. Their Consumer Price Index (CPI) for June was up +0.2% for the month. Germany reported their manufacturing PMI for June was flat at 51.9. The Eurozone's manufacturing PMI for June was also flat at 52.5. Numbers above 50.0 suggest growth. The unemployment rate in the Eurozone was unchanged at 11.1%.

Japan reported their industrial production for May was down -2.2% from the prior month. The country's retail sales were up +3.0% in May, which was better than expected. China made a number of headlines last week. The Chinese central bank cut their benchmark lending rate and their deposit rate by 25 basis points to 4.85% and 2.0%, respectively. China's manufacturing PMI was unchanged at 50.2 in June. The HSBC Chinese manufacturing PMI slipped from 49.6 to 49.4.

Chinese Stock Market Crash

The biggest story was the Chinese market crash. The Chinese stock market has been plunging and lost another -5.7% on Friday (July 3rd). The Shanghai index is now down -29% from its peak on June 12th. That's the worst three-week drop since 1992. Right now everyone is focused on Greece but China's main stock market just lost -$2.5 trillion in wealth. That's about ten times Greece's GDP.

A market strategist in Singapore said the mood among investors is verging on panic. That's bad news for the 90 million individual investors in China. The prior twelve months saw the Chinese market more than double. Chinese investors were opening up new accounts by the millions and the use of margin debt exploded. Now most of those investors are facing their first bear market.

The Chinese government is stepping up their attempts to try and stop the sell-off. Authorities have promised to investigate any market manipulation that has fueled the sell-off. This weekend China's biggest brokerage firms promised to spend 120 billion yuan (about $19 billion) to buy stocks and they pledged to not sell with the Shanghai index below 4,500. Today the Shanghai is trading under 3,700. If that wasn't enough 94 Chinese mutual fund companies said they would buy more stock. Unfortunately the amount of money that has been pledged to buy stocks may be a drop in the bucket. Recent estimates suggest that margin debt in the stock market has hit four trillion yuan.




Major Indices:

June does not have a strong history for market gains and this year the seasonal trend took over thanks to Greece. The S&P 500 lost -1.1% for the week and -2.1% for the month of June. That left the big cap index with a -0.24% decline for the quarter, which snaps a winning streak of nine quarterly gains in a row. Year to date the S&P 500's gain is down to +0.8%. At the closing bell on June 30th the S&P 500 was only up +0.2% for the year, which made it the smallest first half gain on record.

Last week the S&P 500 found support near 2,056. On a short-term basis I'm worried the current bounce is only a bear-flag consolidation pattern before the index continues lower. Last week's drop pushed the S&P 500 to new three-month lows.

The next level of support, assuming the 200-dma fails near 2,055, would be the March lows near 2,040. If 2,040 fails then we could be looking at a drop toward the 1,980-2,000 area.

chart of the S&P 500 index:

The NASDAQ did not fare well on Monday's big drop. The NASDAQ composite had already started to contract prior to the sell-off. The index posted a -1.4% loss for the week, which trimmed its 2015 gains down to +5.8%.

Broken support at the 50-dma is now new resistance around 5,050. If the sell-off continues the next support level is probably the 4,900 area. Below that the 4,800 level with its 200-dma is potential support.

chart of the NASDAQ Composite index:

Two weeks ago the small cap Russell 2000 index ($RUT) was hitting all-time highs. It's already seen a -3.6% pullback with declines in five of the last seven trading days. The index fell to technical support at its 100-dma this past week. The bullish trend line of higher lows appears to be in jeopardy. Should this weakness continue the nearest support is probably in the 1,200-1,220 area. Year to date the $RUT's gain has fallen to +3.6%.

chart of the Russell 2000 index



Economic Data & Event Calendar

The week ahead has a few key events although they may not immediately move the market. The G8 meeting starts on Tuesday. Tuesday is also the newest deadline for the Iran nuclear negotiations. Investors will probably pay more attention to the FOMC minutes on Wednesday in hopes of discerning any clues on when the Fed will raise rates next.

The Q2 earnings season officially begins on Wednesday, July 8th. The pace of earnings doesn't really pick up until the next week. There will be multiple Federal Reserve members speaking this week at various events. Fed Chairman Janet Yellen speaks on July 10th, which will likely grab the market's attention.

- Monday, July 06 -
ISM Services

- Tuesday, July 07 -
U.S. Trade Balance data
Latest deadline for Iran nuclear negotiations
G8 Meeting

- Wednesday, July 08 -
FOMC Minutes from last meeting
Q2 earnings season begins

- Thursday, July 09 -
Bank of England rate decision

- Friday, July 10 -
Wholesale Inventory data

Additional dates to be aware of:

July 16th - ECB interest rate decision
July 16th - ECB President Mario Draghi press conference
July 29th - FOMC meeting (end of two-day meeting)

Looking Ahead:

Investors sentiment has flip-flopped. Last weekend we saw a jump in bullish sentiment from about 25% to 35%. This weekend that bullish sentiment has vanished. The latest poll by the American Association of Individual Investors (AAII) shows bullish sentiment falling -12.9 points to 22.6%. It was the biggest one-week drop in over two years. Bearish sentiment surged from 21.7% a week ago to 35.1% today. This is the largest one-week surge in almost two years. Neutral sentiment was nearly unchanged at 42.3%. Last week is the 14th week in a row that bullish sentiment has been under the long-term average of 38.8%. I'm sure that we can blame Greece for this reversal.

Iran Nuclear Negotiations

Investors may want to keep an eye on the Iran nuke talks. The current negotiations have been going on for about two years. June 30th was supposed to be a hard, unflinching deadline to get a deal done. Naturally the deadline failed. The Iranians are experts at delaying any deal. Today the new deadline is July 7th.

Why should traders pay attention to this? If negotiations succeed then crude oil prices will likely plunge. A deal means sanctions on Iran will be relaxed and they'll be able to sell more oil on the global market. If negotiations fail then oil could rise but it will also generate a significant amount of geopolitical risk. This past week there have been multiple stories in the news about how the U.S. is stockpiling bunker-busting bombs if negotiations fail. Short of nuclear weapons, these are the biggest bombs that the U.S. makes. They're 20 feet long and weigh 15 tons each. Odds are the U.S. has been using this story in the press to pressure Iran to agree to a deal.

Russia

The problem with Russia hasn't gone away either. Europe recently renewed their sanctions against Russia. This past week there is new video of a buildup of Russian military equipment inside the Donetsk region of Ukraine. Plus, Russia has cut off natural gas supplies to Ukraine as the two countries bicker over prices again.

This Week

Stocks could see another knee-jerk reaction lower on Monday as investors react to the "no" vote in Greece. Greek PM Tsipras will feel empowered by his people to resist any new austerity suggested by creditors, which will make negotiations likely impossible. Odds of Greece leaving the Eurozone just surged significantly.

On the plus side, if there is a plus side to the Greece news this weekend, is that the Federal Reserve will likely use Greece and any economic fallout from the situation as a reason to delay raising rates in 2015. The U.S. market is still addicted to low rates so this should be bullish.

~ James







Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The American stock market did not see much follow through after last Monday's big sell-off. Everyone was waiting to see the results of Greece's referendum vote. The final result was a "no" vote, which could generate another wave of volatility in the equity and bond markets.

Our plan was to exit the LVLT trade on Monday, June 29th.

We also exited half of our positions on DATA and SBUX on June 29th.

I have updated the stop loss on NKE.

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

Where Does The Knife Fall Next?

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(July 05, 2015)

Welcome to uncharted territory.

After five years of crisis management, two bailout programs, and over 240 billion euros in bailout funds, Greece has finally defaulted on its debt.

The country failed to make its 1.5 billion euro debt payment to the IMF on June 30th.

Now the country moves closer to an exit from the Eurozone after Sunday's historic vote on a referendum to accept the latest bailout agreement from its EU creditors. The country voted "no" with 61% in favor of rejecting the proposal.

Stocks could see another kneejerk reaction lower on Monday. The fallout from Sunday's vote could take a few days to settle. Thus I'm not adding any new trades tonight or any new watch list candidates.

A pullback in the market could be a new entry point for us but I don't want to try and catch any falling knives. That is an exercise where traders normally end up getting hurt.



Play Updates

It Could Have Been Worse

by James Brown

Click here to email James Brown

Monday, June 29th, was the market's worst day of the year (so far). Stocks spent the rest of the week churning sideways. We did not see any of our trades get stopped out.


Closed Plays


Our plan was to exit the LVLT trade on Monday, June 29th. We also closed half of our positions in DATA and SBUX on the 29th.



Play Updates


Apple Inc. - AAPL - close: 126.44

Comments:
07/05/15: AAPL broke down under $125.00 on last Monday's big market sell-off. Fortunately there was no follow through. Shares managed to pare their losses for the week. That doesn't mean AAPL won't hit new relative lows if the market continues to sink.

The nearest support is probably $120.00.

I am not suggesting new positions in AAPL at this time.

FYI: AAPL's earnings are coming up on July 21st.

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 $11.85/12.00

06/20/15 AAPL underperformed the broader market this past week. Shares look like they could break support in the $125 area
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: 80.75

Comments:
07/05/15: ADBE lost $2.00 for the week with shares falling back toward prior resistance and what should be support in the $80-81 region. Thursday's high was $81.29. I am suggesting investors wait for a new close above $81.50 as our next entry point to buy calls.

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 $4.10/4.25

06/28/15 new stop @ 74.75
06/20/15 new stop @ 73.90
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

Current Target: To Be Determined
Current Stop loss: 74.75
Play Entered on: 05/15/15
Originally listed on the Watch List: 05/03/15


Anthem Inc. - ANTM - close: 163.14

Comments:
07/05/15: Last week ANTM and Cigna (CI) resumed their merger talks. At least that's the story on Wall Street. News that Centene just bought Health Net for $6.8 billion and Aetna buying Humana in the last few days may spur ANTM and CI to close a deal.

Meanwhile shares of ANTM have been churning sideways in the $162.00-166.00 range the last few days. If $162 fails the next support level is $160.00.

I am not suggesting new positions at this time.

FYI: ANTM's earnings are July 29th.

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.

- Suggested Positions -
MAY 18, 2015 - entry price on ANTM @ 162.00, option @ 7.95
symbol: ANTM160115C170 2016 JAN $170 call - current bid/ask $8.10/10.20

06/28/15 new stop @ 159.00
06/20/15 ANTM announces a $184 per share bid to buy CI
06/07/15 Caution: ANTM has generated a potential bearish reversal pattern on its weekly chart
05/24/15 new stop loss @ 154.75
05/18/15 trade begins. ANTM opens at $162.00
05/15/15 Trade is triggered. ANTM closes above our $161.00 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 159.00
Play Entered on: 05/18/15
Originally listed on the Watch List: 05/10/15


Capital One Financial - COF - close: 88.32

Comments:
07/05/15: Financial stocks were not immune to the widespread sell-off. COF snapped its four-week winning streak with a minor decline last week. If the market continues to sink we could see COF dip toward support in the $85.00 region.

No new positions at this time.

FYI: COF's earnings are July 23rd.

Trade Description: June 7, 2015:
Interest rates will rise. The Federal Reserve has kept its main interest near zero (0.0%) since December 2008. There has been mountains of speculation on when the fed will finally raise rates. It looks like they could start in September this year. If not this year then definitely next year. Rising rates are going to be bullish for big banks.

COF describes itself as, "Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N. A., had $205.5 billion in deposits and $308.9 billion in total assets as of December 31, 2014. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has branches located primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia."

COF's most recent earnings report was April 23rd. Earnings were $2.00 per share, which was 13 cents above estimates. Management said they saw strong loan growth. The company has recently raised their dividend and they have a big stock buy back program.

The stock has been stuck under resistance near $85.00 for almost a year. The stock's posture changed when it recovered from its January 2015 lows near $73. Since then COF has been rising in a bullish trend of higher lows and higher highs. Now it's poised to breakout past key resistance at $85.00. The point & figure chart is already bullish and forecasting at $97.00 target.

I am suggesting we look for COF to close in the $86.00-87.00 zone as our entry point. Then buy calls the next morning with a stop loss at $81.75. This is a long-term trade. We're using the 2017 calls.

Just a reminder - use 2017 calls.

- Suggested Positions -
JUN 11, 2015 - entry price on COF @ 86.99, option @ 3.95
symbol: COF170120C100 2017 JAN $100 call - current bid/ask $2.90/4.40

06/28/15 new stop @ 83.75
06/11/15 trade begins. COF opens at $86.99
06/10/15 Triggered with COF closing at $86.93
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 83.75
Play Entered on: 06/11/15
Originally listed on the Watch List: 06/07/15


Tableau Software - DATA - close: 117.11

Comments:
07/05/15: A week ago shares of DATA were looking pretty vulnerable after a week-long pullback. In last week's newsletter I suggested we sell half of our position on Monday, June 29th. Unfortunately the market's big drop on Monday impacted our exit and DATA gapped open lower at $115.40. Traders eventually bought the dip in the $113.50 area and DATA managed to pare its losses by Thursday's closing bell.

Our stop is at $109.00. More conservative traders may want to use a higher stop loss. 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 takeover 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 $16.90/18.60

06/29/15 Sell half of position. DATA opens lower at $115.40
2016 Jan $110 call exit $15.31 (+26.5%)
06/28/15 Plan on selling 1/2 of option position on Monday, June 29
06/14/15 new stop @ 109.00
06/07/15 new stop @ 104.85
05/24/15 new stop @ 102.75
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: 109.00
Play Entered on: 04/27/15
Originally listed on the Watch List: 04/26/15


Dunkin' Brands Group - DNKN - close: 55.27

Comments:
07/05/15: Great news! Shares of DNKN held up pretty well during last week's market weakness. Shares consolidated sideways and declined less than 25 cents for the week.

I'd be tempted to launch new positions on a close above $55.65. Alternatively, if the market sinks further then we could watch for DNKN to dip toward support in the $53.75-54.00 area as a buy-the-dip entry point.

Trade Description: May 31, 2015:
Investors appear to be in the mood for donuts this year. Shares of DNKN are significantly outperforming the broader market with its stock up about +26% year to date versus the S&P 500's +2.3% gain.

The company is in the services sector. According to the company, "Founded in 1950, Dunkin' Donuts is America's favorite all-day, everyday stop for coffee and baked goods. Dunkin' Donuts is a market leader in the hot regular/decaf/flavored coffee, iced coffee, donut, bagel and muffin categories. Dunkin' Donuts has earned the No. 1 ranking for customer loyalty in the coffee category by Brand Keys for nine years running. The company has more than 11,300 restaurants in 37 countries worldwide. Based in Canton, Mass., Dunkin' Donuts is part of the Dunkin' Brands Group, Inc. (DNKN) family of companies."

DNKN also owns the Baskin Robbins franchise, which has more than 7,500 retail locations in almost 50 countries.

The company seems to be undergoing a turnaround in its earnings results. Back in December shares plunged on an earnings warning when management lowered their 2015 guidance. When they reported their Q4 results in February they missed by a penny with revenues in-line (+5.5%). Their donut store comps were +1.4% but their ice cream store comps were +9.3%. Management raised their dividend +15% and announced a $700 million stock buy back program.

Results improved significantly in the first quarter of 2015. Analysts were expecting a profit of $0.35 a share on revenues of $180.7 million. DNKN reported earnings of $0.40 a share, which is a +21% improvement from a year ago. Margins improved 310 basis points to 47.1%. Their revenues rose +8.1% to $185.9 million, above estimates. Their donut store comps improved to +2.7% while their ice cream store comps hit +8.0%. Management raised their 2015 earnings estimates above Wall Street's consensus.

The stock soared to new all-time highs following this earnings report in late April. Since then shares have seen a correction but investors have bought the dip. Analysts have begun to raise their price targets. The point & figure chart is very bullish with a long-term target of $78.00. Currently shares of DNKN are hovering below resistance in the $54.00 area. Tonight I am suggesting we wait for DNKN to close above $54.25 and buy calls the next morning.

- Suggested Positions -
JUN 24, 2015 - entry price on DNKN @ 54.83, option @ 1.60
symbol: DNKN160115C60 2016 JAN $60 call - current bid/ask $1.35/1.70

06/24/15 Trade begins. DNKN opens at $54.83
06/23/15 DNKN closed at $54.96, above our trigger of $54.35
06/21/15 adjust entry trigger to a close above $54.35
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 49.65
Play Entered on: 06/24/15
Originally listed on the Watch List: 05/31/15


iShares MSCI Italy Capped ETF - EWI - close: 14.98

Comments:
07/05/15: Our EWI trade is probably dead.

Greece voted "no" on Sunday, July 5th. That means the country will likely be kicked out of the Eurozone. This generates more doubt about the stability of the Eurozone.

Shares of EWI will likely gap open lower on Monday, July 6th. I suspect we will be stopped out. We'll just have to wait and see.

No new positions at this time.

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 $1.60/1.90

07/05/15 EWI will likely gap down on Monday morning in reaction to Greek vote
06/28/15 Warning! EWI could be volatile this week thanks to Greece
06/20/15 Volatility is picking up as Greece gets closer to a default.
06/07/15 Caution: The EWI appears to have formed a bearish double top. Conservative investors may want to exit early now!
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: 87.29

Comments:
07/05/15: Shares of FB received two new price target upgrades last week. One was a bump to $100. The other upgrade was to $105.

Shares of FB found support right where it should have, near prior resistance in the $85-86 area. If the market cooperates FB should rally from here. If not, the next support level could be the $83-84 region.

FYI: FB's earnings are July 29th.

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 $5.55/5.65

06/28/15 new stop @ 78.45
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: 78.45
Play Entered on: 04/01/15
Originally listed on the Watch List: 03/22/15


FireEye Inc. - FEYE - close: 48.19

Comments:
07/05/15: FEYE dipped toward technical support at its 50-dma on last Monday's big market sell-off. Shares trimmed their losses by week's end but the pullback may not be over. No new positions at this time.

Our stop is at $45.85, which may be a little too tight. More aggressive traders might want to move their stop below $45.00 or below the 100-dma near $44.30.

Trade Description: May 31, 2015:
The cyber attack on media giant Sony last year was headline news for weeks. It was a major warning bell for corporations around the world to spend more on cyber security. Today it still seems like every week we hear about some high-profile cyber attack. Online criminals and saboteurs are growing more sophisticated and that's fueling corporate demand for high-tech defenses.

The company describes itself as, "FireEye has invented a purpose-built, virtual machine-based security platform that provides real-time threat protection to enterprises and governments worldwide against the next generation of cyber attacks. These highly sophisticated cyber attacks easily circumvent traditional signature-based defenses, such as next-generation firewalls, IPS, anti-virus, and gateways. The FireEye Threat Prevention Platform provides real-time, dynamic threat protection without the use of signatures to protect an organization across the primary threat vectors and across the different stages of an attack life cycle. The core of the FireEye platform is a virtual execution engine, complemented by dynamic threat intelligence, to identify and block cyber attacks in real time. FireEye has over 3,100 customers across 67 countries, including over 200 of the Fortune 500."

The stock was a real high flyer in late 2013 and into 2014. Shares began to fade in early 2014 and then really got crushed when FEYE issued an earnings warning in May 2014. FEYE spent the rest of 2014 consolidating sideways in a very wide $25-40 trading range.

This year FEYE's stock has seen a reversal of fortunes. Suddenly shares are soaring and up more than +45% thanks to better than expected earnings results. FEYE's reported its 2014 Q4 results on February 11th. Earnings improved from a loss of 50 cents a year ago to a loss of 38 cents in the fourth quarter, which was eleven cents better than expected. Revenues soared a whopping +149% to $143 million, which was above expectations.

Management guided 2015 earnings and revenues essentially in-line with consensus. The company is forecasting revenues in the $605-625 million range. FEYE expects a 2015 loss of $1.80 to $1.90 per share. Gross margins are expected to be in the 71-75 percent range.

Analysts have expressed concern with the surge in FEYE's spending but management said they are spending in-line with the company's growth. FEYE CEO Dave DeWalt said FEYE saw its growth double in 2014 and is up tenfold in the last three years.

The trend of improving results continued in the first quarter of 2015. FEYE reported earnings on April 30th. Wall Street was expecting a loss of ($0.51) a share on revenues of $120.5 million. FEYE delivered a loss of ($0.48) per share. Revenues surged +69.5% to $125.4 million. Guidance was in-line with their prior forecast.

The results were good enough that multiple analysts firms have raised their price target on FEYE in the last month. Jim Cramer talks about cyber security stocks on his CNBC show last week. I don't watch Cramer's show but he essentially said that cyber security stocks like FEYE could be great long-term investments. He's probably right. Hacking attacks on corporations have been getting worse every year. They are not going away. It's a constant arms race between hackers versus security specialists. Cyber security is going to be a long-term need for every corporation big or small.

Meanwhile FEYE has seen great success with its cyber security subscription services. This is great for the company since they get recurring revenues and not a one-time sale. Management also believes they have a ton of opportunity overseas. Most of their sales are in the U.S. but cyber security is a global need.

Technically the stock has been showing relative strength the last couple of weeks. FEYE appears to have broken out from its recent pennant-shaped consolidation pattern over the last three months. The point & figure chart is bullish and forecasting at $61 target.

Tonight I am suggesting we wait for FEYE to close above $47.25 and buy calls the next day. Please note I am setting an entry range to prevent buying a big spike. Wait for FEYE to close inside the $47.25-48.50 range. Then buy calls the next morning. Keep in mind that FEYE can be a volatile stock. Traders may want to consider this a slightly more aggressive trade. Consider smaller positions to limit risk.

- Suggested Positions -
JUN 02, 2015 - entry price on FEYE @ 47.40, option @ 3.90
symbol: FEYE160115C55 2016 JAN $55 call - current bid/ask $3.60/4.00

06/21/15 new stop @ 45.85
06/21/15 FEYE looks overbought after a 5-week surge higher. We should expect some profit taking. Don't be surprised to see a dip back toward $50.00
06/07/15 new stop @ 43.85
06/02/15 Trade begins. FEYE opens at $47.40
06/01/15 Triggered. FEYE closed @ $47.26, inside our $47.25-48.50 entry zone.
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 45.85
Play Entered on: 06/02/15
Originally listed on the Watch List: 05/31/15



Gilead Sciences - GILD - close: 115.04

Comments:
07/05/15: Ouch! We expected more profit taking in GILD. I warned readers to look for a drop toward $115.00. That's exactly where shares fell. Normally I would expect $115 to hold as support. Unfortunately I suspect that stocks will see a spike lower on Monday, July 6th in reaction to the Greece news. We could be stopped out at $113.45 even though the Greek story will likely have little impact on GILD.

No new positions at this time.

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 $9.25/9.45

06/28/15 GILD could see some profit taking this week. Cautious traders may want to take some money off the table or cash out now.
06/21/15 new stop @ 113.45
06/14/15 new stop @ 109.75
06/07/15 new stop @ 106.50
05/31/15 new stop @ 104.00
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

Current Target: To Be Determined
Current Stop loss: 113.45
Play Entered on: 05/15/15
Originally listed on the Watch List: 05/03/15


Hanesbrands Inc. - HBI - close: 33.96

Comments:
07/05/15: HBI dropped toward short-term support near $33.00 midweek. However, by Thursday's closing bell shares had pared their loss to less than 40 cents for the week.

I am not suggesting new positions at this time. The $34.80 level remains overhead resistance.

Trade Description: June 14, 2015:
HBI was founded back in 1901. Today you will find Hanes products in more than 80 percent of U.S. homes.

HBI is in the consumer goods sector. According to the company, "HanesBrands, an S&P 500 company, is a socially responsible leading marketer of everyday basic apparel in the Americas, Europe and Asia under some of the world’s strongest apparel brands, including Hanes, Champion, Playtex, DIM, Bali, Maidenform, Flexees, JMS/Just My Size, Wonderbra, Nur Die/Nur Der, Lovable and Gear for Sports.

We sell bras, panties, shapewear, sheer hosiery, men's underwear, children's underwear, socks, T-shirts and other activewear in the United States, Canada, Mexico and other leading markets in the Americas, Asia and Europe. In the United States, we sell more units of intimate apparel, male underwear, socks, shapewear, hosiery and T-shirts than any other company."

What makes HBI different than most of its competitors is that HBI owns and operates its own manufacturing facilities. About 90% of their apparel comes from company-run plants. That helps them control costs throughout the production process.

This year the company has been very shareholder friendly. Back in January they raised their dividend 33% and announced a 4-for-1 split. The stock split took place in March this year.

HBI's most recent earnings report was April 23rd. HBI reported their Q1 earnings were up +16% from a year ago to $0.22 a share. That missed estimates of $0.23. Revenues were up +14% to $1.21 billion. This was just below expectations of $1.22 billion.

In the company press release HBI Chairman and CEO Richard Noll commented on their results, saying, "We are off to a great start in 2015, once again delivering a double-digit increase in EPS, while tracking to our full-year growth plans. Our acquisition strategy continues to create value with DBApparel, Maidenform and Gear for Sports all contributing substantially to our double-digit growth. In addition, we are raising our 2015 performance outlook to reflect the recent acquisition of Knights Apparel."

Management raised their earnings guidance for 2015 from $1.58-1.63 to $1.61-1.66 per share. Wall Street estimates were at $1.64. HBI also raised their 2015 revenue guidance from $5.78-5.83 billion to $5.90-5.95 billion. Consensus estimates were already at $5.95 billion.

The stock was hammered on the earning miss as investors ignored the improved earnings and revenue guidance. The stock corrected from about $34.60 to under $31.00 in four days (-10% correction).

Analysts' reaction to HBI's results have been positive. Some have noted that Q1 is normally a slower season for HBI. They see the pullback in HBI's stock as a buying opportunity. Multiple firms have raised their price target since the earnings report (new targets are $37, $38, and $40 per share).

Technically HBI has been consolidating sideways the last few weeks. However, this past week the stock displayed relative strength. Not only did it rally past resistance near $32.50 but it closed technical resistance at its 50-dma. Tonight I am suggesting we wait for HBI to close above $33.00 and then buy calls the next morning. The stock does have resistance in the $34.75 area so we'll have to keep an eye on that level. Currently the point & figure chart is forecasting at $41.00 target.

- Suggested Positions -
JUN 17, 2015 - entry price on HBI @ 33.04, option @ 1.85
symbol: HBI160115C35 2016 JAN $35 call - current bid/ask $1.70/2.05

06/28/15 new stop @ 31.25
06/17/15 trade begins. HBI opens at $33.04
06/16/15 triggered. HBI closed @ $33.06, above our trigger at $33.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 31.25
Play Entered on: 06/17/15
Originally listed on the Watch List: 06/14/15


iShares US Home Construction ETF - ITB - close: 27.56

Comments:
07/05/15: The ITB followed the market lower on Monday the 29th. Shares spent the rest of the week churning sideways.

The $27.00 area should be short-term support. Below that the $26 level and its 200-dma should offer support.

No new positions at this time.

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 $0.60/1.00

06/28/15 last week new home sales surged to their best levels since early 2008
06/15/15 the NAHB confidence survey hits 9-month highs
05/31/15 the ITB is not performing well. Investors may want to consider an early exit.
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


MasterCard Inc. - MA - close: 94.24

Comments:
07/05/15: Last week saw shares of MA dip to technical support at its 50-dma and bounce. The stock pared its loss to about 25 cents for the week. The relative strength is encouraging but I'm hesitant to launch positions tomorrow.

FYI: MA's earnings are July 29th.

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 $5.10/5.35

06/21/15 new stop @ 89.75
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: 89.75
Play Entered on: 05/11/15
Originally listed on the Watch List: 05/03/15


Nike, Inc. - NKE - close: 109.87

Comments:
07/05/15: NKE is one of the few stocks to post a gain for the week. Traders bought the dip in the $107.80 area and NKE rebounded to a new high.

The stock received a price target upgrade to $125 a few days ago. Shares also fared well in spite of headlines that NKE's co-founder, Phil Knight, plans to step down. No date was set. The 77-year old Knight started the company back in 1964.

We will raise the stop loss to $103.25. No new positions at this time.

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 $6.25/6.45

07/05/15 new stop @ 103.25
06/28/15 new stop @ 102.25
06/25/15 NKE beats earnings and revenue estimates
06/21/15 new stop @ 99.50
06/07/15 new stop @ 97.85
05/31/15 NKE down last week on rumors it might be involved in the FIFA scandal
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: 103.25
Play Entered on: 05/11/15
Originally listed on the Watch List: 03/29/15


Starbucks Corp. - SBUX - close: 54.62

Comments:
07/05/15: Traders also bought the dip in SBUX. Shares slipped toward their rising 20-dma and bounced, trimming their losses for the week. Goldman Sachs added SBUX to their "conviction buy" list last week. Another firm raised their price target on SBUX to $64.00.

Last weekend we decided to take some money off the table. The plan was to sell half of our positions on Monday morning, June 29th. Unfortunately SBUX gapped open lower like most of the market. SBUX opened at $53.87. The option opened at $2.67 (+67.9%)

No new positions at this time.

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 $2.89/3.05

06/29/15 Sold half, SBUX gapped down. Option exit $2.67 (+67.9%)
06/28/15 Sell half of our call position on Monday, June 29, to lock in a potential gain
06/21/15 new stop @ 49.65
06/07/15 new stop @ 49.25
05/31/15 new stop @ 48.25
04/28/15 triggered @ 50.00
Option Format: symbol-year-month-day-call-strike

Current Target: SBUX @ TBD
Current Stop loss: 49.65
Play Entered on: 04/28/15
Originally listed on the Watch List: 04/26/15


Textron Inc. - TXT - close: 44.49

Comments:
07/05/15: I am really tempted to hit the eject button and close this play. TXT is not performing. More conservative traders may want to go ahead and escape now. If the market sells off on Monday due to the Greeks voting no then we could see TXT hit our stop at $43.80.

I am not suggesting new positions.

FYI: TXT's earnings are July 28th.

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 $1.07/1.34

06/21/15 new stop @ 43.80
06/07/15 new stop @ 42.90
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: 43.80
Play Entered on: 02/25/15
Originally listed on the Watch List: 02/15/15


Under Armour, Inc. - UA - close: 84.59

Comments:
07/05/15: Larger rival Nike (NKE) managed to close up for the week. UA was not so lucky. Shares plunged from $86 to $83 on Monday, the market's worst day of the year. Fortunately traders have been buying the dip.

I am not suggesting new positions at this time.

FYI: UA's earnings are July 23rd.

Trade Description: June 14, 2015:
UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected 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 reported their 2014 Q4 results on February 4th. The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

There was a steady stream of analysts raising their price targets on UA after its February earnings report. The company's most recent earnings report was April 21st when UA announced Q1 results. After raising guidance back in February the company reported earnings of $0.05 per share, which was in-line with Wall Street's new estimates. Revenues were up +25.4% to $804.9 million, which beat expectations.

UA management raised their outlook again. They expect 2015 operating income to improve +13-to-15%. UA expects 2015 revenues to rise +23% to $3.78 billion. The stock has rallied sharply into its earnings report and shares suffered some post-earnings depression with a -$12.00 drop (-13.6%) in the next two weeks. The price target upgrades continued but UA spent most of May consolidating sideways inside a narrow range. Finally on June 5th shares of UA broke out past multiple layers of resistance on another upgrade. The stock was upgraded to a "buy" with a $91 price target. Since then UA has been digesting its gains in a sideways consolidation between what should be support at $80 and short-term resistance near $82.00.

Tonight I am suggesting we wait for UA to close above $82.25 and then buy calls the next morning with a stop loss at $75.90.

FYI: I am listing the 2016 calls but investors may want to consider the 2017 January calls if you're willing to pay for the time premium.

- Suggested Positions -
JUN 17, 2015 - entry price on UA @ 83.06, option @ 4.50
symbol: UA160115C90 2016 JAN $90 call - current bid/ask $4.40/5.10

06/28/15 new stop @ 78.90
06/17/15 trade begins: UA opens at $83.06
06/16/15 Triggered: UA closed at $82.78, above our trigger at $82.25
Option Format: symbol-year-month-day-call-strike

Current Target: UA @ TBD
Current Stop loss: 78.90
Play Entered on: 06/17/15
Originally listed on the Watch List: 06/14/15




CLOSED Plays


Level 3 Communications - LVLT - close: 52.43

Comments:
07/05/15: LVLT was not performing so we decided to close the play in last weekend's newsletter. The plan was to exit on Monday. Unfortunately the market plunged on Monday, June 29th thanks to the Greece story. Shares of LVLT gapped open lower at $53.47.

- Suggested Positions -
MAR 04, 2015 - entry price on LVLT @ 54.71, option @ 3.90
symbol:LVLT160115C60 2016 JAN $60 call - exit $1.65 (-57.7%)

06/29/15 planned exit
06/28/15 Prepare to exit immediately on Monday morning (June 29th)
06/21/15 new stop @ 53.40
06/07/15 new stop @ 52.75
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

Chart

Current Target: LVLT @ TBD
Current Stop loss: 53.40
Play Entered on: 03/04/15
Originally listed on the Watch List: 12/28/14



Watch

A Holding Pattern

by James Brown

Click here to email James Brown


New Watch List Entries


None, no new watch list candidates



Active Watch List Candidates

ADI - Analog Devices Inc.

ATVI - Activision Blizzard Inc.

DIS - The Walt Disney Co.

STZ - Constellation Brands


Dropped Watch List Entries

ADI has been removed.


Active Watch List Candidates:



Analog Devices - ADI - close: 64.38

Comments:
07/05/15: The story for ADI hasn't changed but shares look weak. The SOX semiconductor index looks even weaker.

Last week saw ADI break down form its bullish channel. I suspect ADI could be headed for $60 before it finds support again.

Tonight we are removing ADI as a watch list candidate.

Trade did not open.

07/05/15 removed from the watch list, trade did not open.
06/21/15 Strategy Adjustment: new trigger - wait for ADI to close above $69.00 then buy calls the next morning. Adjust the option strike to 2016 Jan $75 call. Adjust the stop loss to $61.85
06/14/15 adjust the entry trigger lower fro $65.10 to $64.10
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 05/24/15


Activision Blizzard, Inc. - ATVI - close: 24.63

Comments:
07/05/15: ATVI is still holding up reasonably well. We're not giving up on our buy-the-dip strategy yet. The plan is to buy calls on a dip at $23.75.

FYI: ATVI reports earnings on August 4th.

Trade Description: May 24, 2015:
Consumer spend more money on video games than they do at the movie theater. ATVI is the biggest with annual sales of $4.58 billion. Electronic Arts (EA) is hot on its heels with revenues of $4.52 billion a year.

ATVI is home to some of the biggest franchises in video game history. According to the company, "Activision Blizzard, Inc. is the largest and most profitable western interactive entertainment publishing company. It develops and publishes some of the most successful and beloved entertainment franchises in any medium, including Call of Duty , Call of Duty Online, Destiny , Skylanders, World of Warcraft , StarCraft , Diablo, and Hearthstone: Heroes of Warcraft. Headquartered in Santa Monica, California, it maintains operations throughout the United States, Europe, and Asia. Activision Blizzard develops and publishes games on all leading interactive platforms and its games are available in most countries around the world."

Investors have been pretty forgiving when it comes to ATVI's recent earnings reports. On February 5th they beat the bottom line estimate but missed the revenue number. Revenues were down -2.6% from a year ago. ATVI blamed currency headwinds for the revenue miss since half of their sales are outside the U.S. and represent a significant chunk of their profits. Plus, the video game business is prone to lumpy quarters as sales rise and fall on new releases and expansions. Management lowered their Q1 and 2015 guidance.

ATVI just reported its Q1 results on May 6th. Earnings per share fell -15.7% from a year ago to $0.16 but that was actually 9 cents better than expected. Revenues fell again, this time down -8.9%. Management lowered their Q2 guidance but they raised their fiscal 2015 earnings guidance above Wall Street estimates. That was enough to send shares of ATVI higher. A few analysts have commented that ATVI's 2015 guidance is too conservative.

Bobby Kotick, Chief Executive Officer of Activision Blizzard, commented on his company's quarterly results, "...This deepening level of engagement with a widening base of players across our franchises is what drove another successful quarter. We delivered better-than-expected Q1 results, increased our 2015 non-GAAP revenue outlook to $4.425 billion and earnings per share outlook to $1.20. Last quarter, on a non-GAAP basis, we delivered record higher-margin digital revenues of over half a billion dollars a Q1 record on an absolute basis and an all-time high on a percentage basis."

There were a number of headlines about how ATVI's Warcraft MMORPG saw its subscriber numbers fall from 10 million to 7.1 million in the last quarter. Investors don't seem to care. The Warcraft game is a cash cow but it's 11 years old. Investors could be looking forward.

ATVI said their new Destiny sci-fi shooter game and the Blizzard's fantasy card game have more than 50 million registered players (between them) with over $1 billion in sales.

ATVI also has several new titles coming out. They're on the verge of releasing "Heroes of the Storm", which will take on the current category champion "League of Legends" for the MOBA-style video game. More than ten million people have already signed up for the Heroes beta. ATVI has announced the next iteration of their Call of Duty franchise (CoD), which will be "Call of Duty: Black Ops III", which is another major cash-generating franchise. ATVI is also launching a new game called "Overwatch" and they'll release a new version of "Guitar Hero", which had 40 million players at its peak.

Currently shares of ATVI are up three weeks in a row and look a little bit overbought. Broken resistance near $24.00 should be significant support. Tonight I am suggesting a buy-the-dip trigger at $24.25 with a stop loss at $21.85.

Buy-a-dip trigger: $23.75 (intraday trigger, stop 21.85)

BUY the 2016 Jan $25 call (ATVI160115C25)

06/28/15 adjust the entry trigger to $23.75 and the stop to $21.85.
06/21/15 move the stop loss to $22.85
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 05/24/15


The Walt Disney Co. - DIS - close: 114.97

Comments:
07/05/15: DIS weathered last week's market moves reasonably well. Traders quickly bought the dip.

I am not giving up on a buy-the-dip entry point but our suggested trigger at $111.00 might be too low. Tonight we'll move the trigger up to $112.00.

Trade Description: June 28, 2015:
Scrooge McDuck isn't the only one with a wealth of riches these days. Long-term investors in DIS have been rewarded with big gains in recent years. From Mickey Mouse to the thousands of characters owned by Marvel to Pixar, everything DIS touches has turned to gold lately.

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

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

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

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

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

The recent success of movie "Jurassic World", which was produced by Universal (not a Disney company), has generated even more excitement for DIS' upcoming Star Wars films. Jurassic World has broken all sorts of records and was the fastest movie to reach $1 billion in global box office sales. This has analysts expecting even bigger numbers from Star Wars. The next Star Wars film: "The Force Awakens" (episode seven), doesn't hit theaters until December 2015.

Morgan Stanley analyst Benjamin Swinburne is forecasting "Force Awakens" to do almost $2 billion in box office sales. This could boost DIS' bottom line by more than $1 billion. Plus the merchandising associated with Star Wars will bring a bountiful harvest for DIS too. Consumers spend close to $3 billion a year on licensed toys, clothing, and similar merchandise. The Star Wars movies will rake in the money in this category. DIS plans to release a Star Wars movie every year between now and 2020 (six more movies).

The stock surged to new all-time highs back in early May after its Q2 earnings report. Shares followed that rally with a six-week consolidation allowing DIS to digest its gains. A couple of weeks ago DIS started to rally again and broke through major resistance in the $112.00 area. Today the stock is at all-time highs.

Credit Suisse recently upped their price target to $130. Meanwhile the point & figure chart is bullish and forecasting at long-term target of $160.00.

We want to be ready to take advantage of weakness in DIS due to any broader market sell-off. Just because stocks might plunge on the Greece debt story doesn't mean DIS' business is going to change. Any dip near support should be a buying opportunity. Tonight I am suggesting a buy-the-dip trigger at $111.00. We'll start with a stop loss at $107.00.

You could definitely play the 2016 calls but tonight I'm listing the 2017s.

Buy-the-Dip trigger @ $112.00 (use a stop at $107.00)

BUY the 2017 Jan $125 call (DIS170120C125)

07/05/15 move the trigger to $112.00
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 06/21/15


Constellation Brands - STZ - close: 117.09

Comments:
07/05/15: STZ is only down about 30 cents for the week. Shares didn't even hit support at $115.00 before bouncing last week. We're not giving up yet.

The company reported its Q1 earnings on July 1st. Earnings were $1.26 per share, which was two cents better than expected. Revenues were up +7% to $1.63 billion. Management raised their fiscal year 2016 estimates above Wall Street's estimate.

Trade Description: June 7, 2015:
Major beer brands have suffered from the boom in craft beers. Yet STZ's Corona and Modelo have seen significant growth, especially in the U.S. The company's earnings and revenue growth has fueled a rally in the stock that has outpaced the major marker indices.

STZ is in the consumer goods sector. According to the company, "Constellation Brands (NYSE:STZ and STZ.B) is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Canada, Mexico, New Zealand and Italy. In 2014, Constellation was one of the top performing stocks in the S&P 500 Consumer Staples Index. Constellation is the number three beer company in the U.S. with high-end, iconic imported brands including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the world`s leader in premium wine, selling great brands that people love including Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company`s premium spirits brands include SVEDKA Vodka and Black Velvet Canadian Whisky.

Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand-building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, sales in approximately 100 countries, about 40 facilities and approximately 7,200 talented employees."

This past January STZ reported their fiscal year 2015 Q3 results that beat analysts' estimates on both the top and bottom line. Management raised their 2015 guidance. Their Q4 results were announced on April 9th. Earnings were up +37% from a year ago to $1.03 per share. That was 9 cents above estimates. Revenues were up +5% to $1.35 billion. Gross margins improved to 44%.

STZ said they're seeing strong demand for their Mexican beer brands Corona and Modelo. They're gaining market share in both the spirits and wine categories as well.

The company said 2015 sales were up +24% from the prior year to $6.03 billion. STZ's management guided in-line for fiscal 2016 and forecast earnings of $4.70 to $4.90 per share. That compares to 2015's profit of $4.17 per share (essentially +12% to +17.5% earnings growth).

Since their most recent earnings report a couple of analysts have upgraded their price targets for STZ into the $140-142 region.

Technically the stock's pullback this past week actually looks like the second half to a bearish double top pattern. Yet shares have not broken the bullish trend of higher lows just yet. If STZ bounces we could see it hitting new all-time highs soon. The resistance to watch is in the $121.85 region. I am suggesting we wait for STZ to close in the $122.00-123.00 range and then buy calls the next morning with a stop loss at $116.85.

Investors should note that STZ is scheduled to report earnings on July 1st, before the opening bell. More conservative traders may want to hesitate on launching any trades until after we see how the market reacts to this earnings report.

Breakout trigger: Wait for a close in the $122-123 zone
Then buy calls the next day with a stop at $116.85

BUY the 2016 Jan $125 call (STZ160115C125)

07/01/15 STZ reports Q1 earnings above estimates and raises 2016 guidance
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 06/07/15