NEW BULLISH Plays

Flextronics Intl. - FLEX - close: 10.17 change: -0.02

Stop Loss: 9.45
Target(s): To Be Determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 31, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 6.9 million
New Positions: Yes, see below

Company Description

Why We Like It:
FLEX is in the technology sector. The company is the second largest contract electronics manufacturer. They make electronic components for some of the world's biggest companies like Apple, Samsung, Cisco Systems, Google, IBM, and Microsoft.

FLEX reported earnings on April 30th and results beat Wall Street's estimates on both the top and bottom line. EPS was 24 cents, 4 cents above consensus estimates. Revenues rose 27% from a year ago to $6.72 billion for the quarter, well above analysts' estimates. Operating income surged +72% from a year ago.

Just a few days ago the stock broke out past major resistance in the $9.75 region following its analysts day. FLEX appears to be making improvements that will bring about better margins and earnings growth. The most recent quarter saw gross margins improve 170 basis points.

The company ended the quarter with $1.59 billion in cash and cash equivalents and have continued to deliver on their strong stock buyback program. FLEX has already repurchased 9% of its outstanding shares in fiscal 2014. Value investors also love FLEX's strong free cash flow, which is the highest among its peers at more than 12% FCF. The company looks poised to outperform its peers with EPS growth of +27% by the end of 2016 versus average growth of +20% from its rivals.

Currently shares of FLEX are hovering just below short-term resistance near $10.25. We are suggesting a trigger to open bullish positions at $10.30. We'll start with a stop loss at $9.45. More conservative investors may want to consider a higher stop loss.

Trigger @ $10.30

Suggested Position: buy FLEX stock @ (trigger)

- (or for more adventurous traders, try this option) -

buy the Oct $10 call (FLEX1018C10) current ask $0.76

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

Annotated chart:

Weekly chart:



Wells Fargo & Co - WFC - close: 50.78 change: +0.51

Stop Loss: 47.40
Target(s): To Be Determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 31, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 13.5 million
New Positions: Yes, see below

Company Description

Why We Like It:
WFC is in the financial sector. They are a major, money center bank, headquarter in San Francisco with annual revenues of $81.72 billion and net income of over $21.5 billion. The financial sector has been a strong performer these last couple of weeks and WFC has helped lead the group higher.

Currently WFC is up +11.8% year to date. Its closest rivals are all negative for the year. Bank of America (BAC) is down -2.75%. JPMorgan Chase (JPM) is off -4.98%. Citigroup (C) is down -8.7% for 2014. WFC says business is good and they expect it to get better. The bank reported that credit quality has been improving. They managed to reduce their loan loss reserves in the first quarter and they expect this trend to continue in 2014.

At WFC's recent analyst day their CFO said they want to raise how much money they return to shareholders. They'd like to pay out 55 percent to 75 percent of net income back to shareholders as dividends and stock buybacks. That's up from 34% in 2013 but the new capital plans are subject to regulator approval.

The shareholder friendly management at WFC is probably just one reason that Warren Buffet likes this company. WFC is Berkshire Hathaway's largest holding. Some have suggested that WFC is the best way to benefit from any long-term rebound in the U.S. housing market and consumer spending.

In recent news WFC says it is poised to end some of its legal troubles surrounding the robo-signing scandal during the housing crisis. It could final settle this issue for $67 million fine and put this issue behind it.

Technically shares of WFC looks very bullish with a long-term up trend. This past month has seen WFC breakout past key resistance at the $50.00 level. Shares ended the week at a new all-time high.

We are suggesting new bullish positions now, at current levels, with a stop loss at $47.40, just below its 100-dma. More conservative investors may want to consider a stop loss higher (maybe in the $48.50-49.00 area).

*Launch positions on Monday morning*

Suggested Position: buy WFC stock @ (the open)

- (or for more adventurous traders, try this option) -

Buy the Oct $50 call (WFC141018C50) current ask $2.25

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

Annotated chart:

Weekly chart: