New Watch List Entries

ANTM - Anthem Inc.

SCTY - SolarCity Corp.


Active Watch List Candidates

ADBE - Adobe Systems

AMBA - Ambarella Inc.

ASH - Ashland Inc.

GILD - Gilead Sciences

JCI - Johnson Controls Inc.


Dropped Watch List Entries

MA and NKE both met our entry point requirements with Friday's rally. The plan is to launch positions on Monday morning. I've moved them to the new play section.

IR has been removed.



New Watch List Candidates:

Anthem Inc. - ANTM - close: 158.40

Company Info

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

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

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

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

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

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

BUY the 2016 Jan $170 call (ANTM160115C170) current ask $6.55

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

Chart of ANTM:

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


SolarCity Corp. - SCTY - close: 61.21

Company Info

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

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

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

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

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

Breakout trigger: Wait for a close above $62.50 (but not above $64.00)
Buy calls the next morning with a stop at $57.40

BUY the 2016 Jan $70 call (SCTY160115C70) current ask $4.75

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

Chart of SCTY:

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


Active Watch List Candidates:



Adobe Systems - ADBE - close: 76.31

Comments:
05/10/15: Shares of ADBE soared +2.1% on Friday but shares still ended the week with a minor loss. The stock is nearing resistance in the $77.00-77.50 zone again so ADBE could meet our entry point requirement soon.

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.

Breakout trigger: Wait for a close above $77.75,
Then buy calls the next morning with a stop at $71.85.

BUY the 2016 Jan $85 call (ADBE160115C85)

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

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


Ambarella, Inc. - AMBA - close: 72.07

Comments:
05/10/15: Ouch! It was a painful week for AMBA. The stock tagged a new high last Monday and then reversed. Shares lost about $4.00 by Friday's closing bell. The 50-dma might offer some support so I'm not ready to give up just yet. Our suggested entry point is a close above $77.50.

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

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

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

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

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

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

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

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

BUY the 2016 Jan $90 call (AMBA160115C90)

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

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


Ashland, Inc. - ASH - close: 130.50

Comments:
05/10/15: Our ASH trade might be open soon. We have been patiently waiting for ASH to breakout from its consolidation beneath resistance at $130-131. The stock is up three days in a row and Friday's market rally pushed shares above the $130.00 mark.

I am adjusting our entry trigger. The April 30th intraday high was $131.25. Friday's intraday high was $131.30. I am suggesting a close above $131.25 as our entry point.

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

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

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

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

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

Breakout trigger: Wait for a close above $131.25
Then buy calls the next morning with a stop at $124.75.

BUY the 2016 Jan $140 call (ASH160115C140)

05/10/15 Adjust entry trigger to a close above $131.25 (was 130.75)
04/26/15 Do not open positions if ASH gaps open above $132.50
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 04/12/15


Gilead Sciences - GILD - close: 103.85

Comments:
05/10/15: Biotech stocks can be volatile. GILD is no exception. The stock fell from $107.50 to $99.66 last week. I don't see any changes from last week's new watch list description.

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.

Breakout trigger: Wait for a close above $106.50
Then buy calls the next morning with a stop at $99.00.

BUY the 2016 Jan $115 call (GILD160115C115)

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

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


Ingersoll-Rand - IR - close: 67.44

Comments:
05/10/15: I am removing IR as a watch list candidate. Shares appear stuck in the $65-69 trading range.

Trade did not open.

05/10/15 removed from the watch list, suggested entry was a close above $70.25
04/26/15 Adjust the entry point trigger to a close above $70.25 (from $69.25)
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 04/12/15


Johnson Controls Inc. - JCI - close: 50.22

Comments:
05/10/15: Shares of JCI underperformed last week but traders started buying the dip on Wednesday. Let's give JCI another week to recover. Next weekend we'll re-evaluate our entry point strategy or remove JCI as a candidate.

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

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

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

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

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

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

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

BUY the 2016 Jan $55 call (JCI160115C55)

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

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