Option Investor
Newsletter

Daily Newsletter, Monday, 2/9/2015

Table of Contents

  1. Market Wrap
  2. New Plays
  3. In Play Updates and Reviews

Market Wrap

Greek Drama Deja Vu

by Thomas Hughes

Click here to email Thomas Hughes
Greece and the bail-out dramas once again impede the market.

Introduction

Greece has done it again. The country and its hard-won bail out plan has sent the market lower. The good news is that this time around the market did not react too violently. Last week it seemed as if the new government was back-pedaling on its anit-austerity pledge and coming in line with creditor demands but new comments put that idea to rest. Over the weekend prime Minister Tsipras said that the pledge of anit-austerity was “irrevocable”, a statement at odds with finance minister Varoufakis who still says that Greece will accept “majority” of reforms. EU markets, the German DAX most prominently, fell more than 1% on the news.

Market Statistics

There was no economic data today, and few earnings reports before the bell that grabbed the markets attention. The news and European sell-off had their affect on us but only marginally. The indices were indicated to open lower all morning, and did, but only by a few points. Trading was light after the opening bell sounded, the indices treading water just below last week's closing prices, and remained light all day. The indices began to firm around lunch time sending the SPX and NASDAQ Composite into the green but the break into positive territory did not last long. Early afternoon the indices drifted back to test the early lows and then move lower. The market hit bottom late afternoon and bounced back to recover about half of today's loss before the close of the day.

Economic Calendar

The Economy

As mentioned there was no data released today. There is some due out this week but the list is light. Tuesday is Wholesale Inventories and JOLT's job openings. Wholesale inventory is expected to rise, but not as strongly as the previous month. JOLT's should remain steady but the number to watch will be the quits rate, a gain in quits is bullish for labor and a sign of confidence among participants. Wednesday the KC Fed releases the Index of Labor Market Conditions and the EIA oil inventory. The LMCI has been on the rise for the past three years with momentum at all time highs. Based on last weeks remarkable NFP release I do not expect that to change. I've been commenting for a while on the idea of underlying momentum present in the labor market and I think that the revisions to October and November NFP, as well as the December headline, underscore the idea.

Thursday is the usual jobless claims numbers with the addition of retail sales and business inventories. Friday rounds out the week with Michigan Sentiment and Import/Export Prices. Both sets of inventory data and the JOLTs numbers are for December, the rest of the data is for January except Michigan Sentiment which is the preliminary for February. Rear looking December data is less important to me, the January and February data more important being in the current quarter.

According Moody's Survey of Business Confidence outlook and expectations remain near all time highs. The diffusion index dropped -0.01 to 41.5, one tenth below last week's all time high and are indicative of an optimistic business environment. In the summary report Mark Zandi reports that “Business sentiment remains sky-high, especially in the U.S., where it is consistent with an economy that is expanding above its potential. Hiring intentions are especially strong, and absorption of office space has surged to a record high. Pricing is holding up well despite heightened deflation concerns in much of the developed world. Credit availability has also notably improved, perhaps reflecting recent aggressive actions by the Bank of Japan and European Central Bank.” The bit about “absorption of office space” is a good sign I think. It could mean growth of new businesses as well as more jobs.


The Oil Index

Oil traded up again today as OPEC spun the market again. The cartel announced that it sees “overflowing supply” with no change in sight, but also raised its 2015 forecast for demand. OPEC is now saying that US production is slowing quicker than forecast and will boost demand for other products, namely OPEC oil. WTI and Brent both gained on the news, WTI rising more than 3% to trade above $53.50. Brent only gained 1%.

The oil sector got another boost from oil. The Oil Index traded up by about 1% in today's session. The index created another small candle, just below resistance, making it a week that it as been stuck between 1,350 and 1,400. It was bouncing higher on rebounding oil prices and is now consolidating in what appears to be a potential bullish flag. A break above 1,400 would confirm this pattern and put a target near 1,500. The caveat is that the bullish indicators have made a peak so it is also possible the index will remain range bound. The next clue to direction for this index may come Wednesday with the inventory numbers if some other headline does not come first.


The Gold Index

Today gold traded higher by about a half percent to settle above $1240. This is only a small rebound from last weeks drop and below my previous support target of $1250, which I now have my eye on as possible resistance. Gold prices may continue to trade below $1250 in the near term but my long term view is bullish and getting more so as the data suggests that the FOMC will raise interest rates sooner than expected.

The GDX gold miners ETF moved higher on today's gain in gold, and expected earnings reports due out this week and next. The ETF crept up from the short term moving average in today's action, after testing it last week, and could be setting up for another move higher. Earnings for the past quarter aren't likely to be that great but forward outlook should be better. Early reports are mixed, but only a few have reported so far. At this time the sector is sitting on support, with gold prices under pressure, and indicators moving lower. There could be additional tests of support, particularly if gold prices sink, but so far it has held. Support is near $21.50 with $20 next target should it break.


In The News, Story Stocks and Earnings

African based Randgold Resources reported earnings today. The gold miner reported earnings that were well below expectations but upped the dividend on reported higher production and impressive cash/gold reserves. Randgold reported that production was up 26% in 2014 and indications within the report suggest that it may increase again in 2015. The company also reported it was able to reduce costs by 2% and is debt free. Cash and gold reserves on hand total over $100 million. The stock gained more than 1% today, moving up off of potential support at the $80 line. The indicators are bearish so there could be further testing of this support, with the short term 30 day moving average adding additional support just below it. Longer term, the stock is trading near the top of a 2 year range so resistance to higher prices could be strong, however, bullish momentum is also strong and convergent with a retest of $85.


McDonald's made the news today when it announced comp store sales results for January. Global comps fell by -1.8%, but ex-Asia really weren't bad at all. US sales rose by 0.4%, above estimates, and EU sales were up 0.5% despite weakness in France and Russia. Asia-Pacific, which has been battling image issues and the fall-out from the meat recall in China, fell -12.6% and will be a drag on earnings. The stock fell -1.25% on the news and is now sitting on the short term 30 day moving average and just below the 93.80 resistance line. Indicators are bullish but consistent with resistance at this level.


Diamond Offshore, one of the largest providers of off-shore drilling services, announced earnings before the bell. The report was mixed and came with a little bad news for shareholders but ultimately sent the stock over 2% higher. The company reported a top line miss, a bottom line beat and suspended a special dividend. The regular dividend is still in place, savings from the special one will be saved to help pay for new opportunities as they arise. The stock sank in the pre-market session, opened just above long term support and then rose the rest of the day to close near the daily high and above the 30 day moving average.


Hasbro reported earnings that beat estimates and that revenues grew in all markets, but less than expected. The results were good enough for the board to approve a $500 million dollar share repurchase program and raising the dividend. The combination of news was well received and sent shares higher in the pre-market. The stock gained 4% before the opening bell and then doubled that gain once trading was officially underway. Shares of Hasbro are now trading at a new all time high with strong bullish momentum.


The Indices

There wasn't much direction to trading today. The market got off on a slow, sluggish blah start and then drifted the rest of the day. There was no doubt a bias to the downside but each major index is supported by its short term moving average, except for the Dow Jones Transportation Average, which led today's decline. The Transports shed just over -1% today and broke below the 30 day EMA. The index is basically in the middle of a three month trading range with incredibly neutral indicators. Momentum has slowly equalized around the current level, between the upper and lower ends of the range, and is near equilibrium now. Stochastic is similarly in the the middle of its range after winding up over the last three months and is giving me one of those weird feelings like something is about to happen only I don't know what it is. The long term trends are up, the economic trends are up and last weeks labor data was as strong as ever, if not stronger, so I am still bullish. Current range limits are my support line at 8,550 and resistance line at 9,250.


The rest of the indices were closely matched in terms of % decline but the Dow Jones Industrial Average edged the others out for runner up. The blue chips fell -0.53 in today's session and is approaching the middle of what in hindsight is a trading range comparable to that of the transports. This index is on the high side of the mid point of the range and still above the short term moving average but could easily reach those levels tomorrow. The indicators are less neutral looking on this chart, MACD is weak but steady and stochastic is moving higher in both the short and long terms although it is not very strong. Without some kind of catalyst to move it this index could be stuck in a range with the bottom near 17,250 and the top near 18,000.


The S&P 500 is not far behind the Dow Jones with its loss of -0.42% and is almost dead center of its range. The broad market has been in a sideways consolidation move for the past three months, similar to the other indices, but its trading range is a little tighter than that. This index has been winding up since the first of the year between 1,990 and 2,060 and now that range is getting even tighter. The long term trend line is back in play and is pushing the index up from beneath, even as it is falling back to the moving average. The indicators are mildly bullish, but weak and indecisive so it is possible the index could fall back to the EMA or further, with the trend line as next possible target. If the index were to move higher and break above the top of the 30 day range the all time high near 2,090 is just above and will provide resistance as well.


The NASDAQ Composite brings up the rear in today's action, not a bad thing considering the market lost value. The tech heavy index lost -0.39% and is now trading just above the short term moving average with a tiny doji-like spinning top. This index is also moving lower, near the middle of a three month range, with neutral indicators and no catalyst that I can foresee this week. There is some bullish bias to the indicators but not much and nothing I would call strong. The long term trend line is in play on this chart as well and could begin to pressure the index in the next week if it continues to move lower. The bottom of the range is 4,600, the top is 4,800.


The market seemed to be a little sluggish in its movement today. Perhaps the winter storm that is raging in the north east kept some traders away, perhaps it was worry over Greece, maybe it was something else. I would have guessed that the strong NFP data and revisions would help to stave off any market blahs and spurs the bulls to rally but they didn't. It looks like the indices are range bound and I can't fathom what the next catalyst may be.

The FOMC, minutes and Beige Book are out, We weathered the round of weak December data, we are seeing rebounding in January and earnings are OK. After that the only thing is geopolitics and outlook. Geopolitics may be a factor but the issues at hand, Ukraine and Greece, have been simmering for quite a long timer. That leaves outlook and outlook may be slipping. According the Factset report earnings growth outlook for Q1 and Q2 may turn negative, due to oil, and that is a scary thought for this bull. If this continues to progress, and the indices move lower breaking trend and support, there could be reversal in the market until outlook returns to growth. I don't think we're there yet. I'm still a bull, but more cautious than ever.

Until then, remember the trend!

Thomas Hughes


New Plays

Consistent Double-Digit Sales Growth

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Sensata Technologies - ST - close: 52.58 change: +0.92

Stop Loss: 49.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on February -- at $---.--
Listed on February 09, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.2 million
New Positions: Yes, see below

Company Description

Why We Like It:
ST is a Dutch technology company that makes sensors. According to the company, "Sensata Technologies Holding N.V. is one of the world's leading suppliers of sensing, electrical protection, control and power management solutions with operations and business centers in eleven countries. Sensata's products improve safety, efficiency and comfort for millions of people every day in automotive, appliance, aircraft, industrial, military, heavy vehicle, heating, air-conditioning and ventilation, data, telecommunications, recreational vehicle and marine applications."

ST has been delivering consistently strong revenue growth. Their 2014 Q1 revenues were up +17.3%. Q2 revenues grew +13.7%. Q3 revenues jumped +15.7%. ST reported a significant acceleration in their Q4 revenues with +39.7% growth to $705.3 million, which was above expectations. Management issued relatively cautious guidance for the first quarter and full year 2015 estimates. That did not slow the rally.

Shares of ST were showing relative strength today with a +1.7% gain. The trading in ST over the last few weeks looks like a consolidation and a new base to build its next leg higher on. Tonight I am suggesting a trigger to open bullish positions at $52.85. The $54.00 level is overhead resistance but we are expecting the larger up trend to power ST through this obstacle.

Trigger @ $52.85

- Suggested Positions -

Buy ST stock @ (trigger)

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

Buy the JUN $55 CALL (ST150619C55) current ask $1.85

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

Daily Chart:



In Play Updates and Reviews

Major Indices Drift Lower

by James Brown

Click here to email James Brown

Editor's Note:
Last week was one of the market's best weekly performances in a long time. It's no surprise to see a little profit taking on Monday, especially with so many headlines regarding Ukraine and Greece depressing investor sentiment.


Current Portfolio:


BULLISH Play Updates

Cree, Inc. - CREE - close: 35.94 change: +0.06

Stop Loss: 33.90
Target(s): To Be Determined
Current Option Gain/Loss: -1.7%
Entry on February 05 at $36.55
Listed on February 03, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.8 million
New Positions: see below

Comments:
02/09/15: Monday turned out to be pretty quiet for shares of CREE. The stock hovered near the $36.00 level most of the session.

Nimble traders could wait for a dip near $35.00 and buy a bounce. I'm not suggesting new positions at current levels.

Earlier Comments: February 3, 2015:
Shares of CREE might be seeing a turnaround. The company is part of the technology sector. According to a press release, "Cree is leading the LED lighting revolution and making energy-wasting traditional lighting technologies obsolete through the use of energy-efficient, mercury-free LED lighting. Cree is a market-leading innovator of lighting-class LEDs, lighting products and semiconductor products for power and radio frequency (RF) applications."

Last year was pretty rough on CREE investors. The trouble started back in 2013. Earnings have been sour. Management had developed a habit of missing earnings estimates and then guiding lower. However, after guiding lower the last two quarters in a row CREE finally offered the market some bullish guidance.

Their most recent earnings report was January 20th. Earnings came in at $0.33 a share. That's significant below the year ago period of $0.46 but their 33-cent profit beat Wall Street estimates by 11 cents. Revenues were essentially flat at $413 million.

CREE offered guidance (currently in their Q3) of $0.21-0.25 a share. That compares to analysts' estimates of $0.21. They're forecasting revenues in the $395-414 million range versus estimates of $405 million.

The last few months have been very volatile for CREE but the rally has created a buy signal on the point & figure chart that is forecasting a long-term $56 target. More importantly CREE appears to be breaking out past its long-term trend line of resistance (see weekly chart below). If this rally continues CREE could see a short squeeze. The most recent data listed short interest at 23% of the 109 million share float.

Tonight I am suggesting a trigger to open bullish positions at $36.55. We'll start this trade with a stop loss at $33.90.

- Suggested Positions -

Long CREE stock @ $36.55

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

Long MAR $35 CALL (CREE150320C35) entry $2.80

02/05/15 triggered @ 36.55
Option Format: symbol-year-month-day-call-strike


Interactive Brokers Group - IBKR - close: 31.96 change: -0.57

Stop Loss: 29.80
Target(s): To Be Determined
Current Option Gain/Loss: +2.6%
Entry on February 03 at $31.15
Listed on February 02, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 568 thousand
New Positions: see below

Comments:
02/09/15: I cautioned readers that after a five-day rally IBKR was probably due for a dip. Shares delivered that dip with a -1.75% pullback today. Broken resistance near $31.00 should be new support. It might be time to start raising our stop loss.

Earlier Comments: February 2, 2015
One stock that has been showing some resilience the last few days has been IBKR. The company describes itself as "Interactive Brokers Group, Inc., together with its subsidiaries, is an automated global electronic broker that specializes in catering to financial professionals by offering state-of-the-art trading technology, superior execution capabilities, worldwide electronic access, and sophisticated risk management tools at exceptionally low costs. The brokerage trading platform utilizes the same innovative technology as the Company’s market making business, which executes and processes trades in securities, futures and foreign exchange instruments on more than 100 electronic exchanges and trading venues around the world."

Last month was pretty crazy for many of the brokers, especially if they had any significant forex trading operations. When the Swiss National Bank removed their currency beg it sent shockwaves through the banking, brokerage, and currency world. You can see the big spike down in IBKR on January 16th. Fortunately, IBKR said that while they did have some clients who lost money (their accounts were now negative thanks to the wild currency swings) the total amount of potential losses for IBKR was only $120 million. That is less than 2.5% of their net worth.

The stock quickly recovered. A few days later on January 20th IBKR reported its Q4 earnings results. IBKR's 12 cents per share profit was six cents better than the $0.06 estimates. Investors seemed to ignore that fact that revenues were down -16.7% to $208.1 million and below estimates. That 12-cent profit was a +71% improvement from a year ago. IBKR's average daily trading volume was up +22% from Q4 2013.

It looks like the trading momentum has continued into 2015. IBKR just announced today that their Daily Average Revenue Trades (DARTs) were up +16% from a year ago and +15% from the prior month. Client accounts rose +17% from a year ago to 285 thousand.

Looking at IBKR's performance the last few days is encouraging. The market has been volatile while IBKR has been consolidating sideways in the $30-31 zone. A breakout higher could signal the next leg up. The point & figure chart is bullish and forecasting at long-term target of $48.00.

Friday's intraday high was $31.08. Tonight we are suggesting a trigger to open bullish positions at $31.15. Investors may want to start with small positions. There is a chance that the old 2008 highs in the $32.00-32.50 zone could be overhead resistance.

*start with small positions to limit risk*

- Suggested Positions -

Long IBKR stock @ $31.15

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

Long MAR $30 CALL (IBKR150320C30) entry $1.85

02/03/15 triggered @ 31.15
Option Format: symbol-year-month-day-call-strike


Informatica Corp. - INFA - close: 42.48 change: -0.04

Stop Loss: 40.65
Target(s): To Be Determined
Current Option Gain/Loss: -0.4%
Entry on February 06 at $42.65
Listed on February 04, 2015
Time Frame: 6 to 12 weeks
Average Daily Volume = 1.5 million
New Positions: see below

Comments:
02/09/15: INFA trade sideways in a 50-cent range on Monday. Shares did retest their rising 10-dma again. Traders may want to wait for a new rally past $42.80 or $43.00 before considering new bullish positions.

Earlier Comments: February 4, 2015:
INFA is in the technology sector. The company was getting a lot of attention last week as speculation soared they could be up for sale. The company describes itself as "Informatica Corporation (INFA) is the world's number one independent provider of data integration software. Organizations around the world rely on Informatica to realize their information potential and drive top business imperatives. Informatica Vibe, the industry's first and only embeddable virtual data machine (VDM), powers the unique 'Map Once. Deploy Anywhere.' capabilities of the Informatica Platform. Worldwide, over 5,500 enterprises depend on Informatica to fully leverage their information assets from devices to mobile to social to big data residing on-premise, in the Cloud and across social networks."

The stock had a relatively rough 2014 but appeared to bottom after investors sold the stock following its July earnings report. Things turned interesting last week. On January 26th the stock soared on news an activist investors was getting involved.

Bloomberg news said that hedge fund Elliott Associates was boosting its stake in INFA. This was later confirmed in a 13D filing. Elliott now owns an 8.8% stake in INFA. Elliott's manager, Paul Singer, said he might suggest to INFA management that they sell the company to unlock shareholder value. Shares of INFA soared on this news because Elliott Associates has had previous success pushing other companies to sell themselves.

There are critics. Some analysts believe this story to sell INFA is a fantasy. Wall Street is not a place to let the truth get in the way of a good story. Shares of INFA soared on speculation it could be up for sale (eventually). The very next day INFA reported its Q4 earnings. Results were better than expected.

INFA delivered a profit of $0.56 a share with revenues rising +10% to $303.7 million. That beat analysts' estimates on both the top and bottom line. INFA said their Q4 software revenues hit a record $150.2 million, up +12% from a year ago. They also signed a record-setting 41 deals worth more than $1 million and 145 deals worth more than $300,000. Their subscription revenues rose +53% year over year.

INFA management also announced a $500 million stock buyback program. The Board of Directors approved an additional $337 million to boost their current program. They will spend $300 million in an accelerated share repurchase program.

The combination of the activist investors news and the better than expected earnings results produced a strong one-two punch to the bears. INFA soared. There hasn't been that much profit taking. It looks like traders have started to buy the dip.

Tonight we are suggesting a trigger to open bullish positions at $42.65. We suspect that INFA will be able to breakout past its early 2014 highs in the $43.50 area.

- Suggested Positions -

Long INFA stock @ $42.65

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

Long MAR $42.50 CALL (INFA150320C42.50) entry $1.90

02/06/15 triggered @ 42.65
Option Format: symbol-year-month-day-call-strike


Silicon Motion Technology - SIMO - close: 29.88 change: +0.29

Stop Loss: 27.85
Target(s): To Be Determined
Current Option Gain/Loss: -0.9%
Entry on February 09 at $30.15
Listed on February 07, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 538 thousand
New Positions: see below

Comments:
02/09/15: SIMO tagged new all-time highs this morning. Shares also displayed relative strength with a +0.98% gain. Our suggested entry point to open bullish positions was hit at $30.15. I would wait for a new rally past $30.15 before launching new positions.

Earlier Comments: February 7, 2015:
Shares of this technology stock are trading at all-time highs as sales growth surged last year. SIMO is part of the technology sector. They're considered part of the diversified electronics industry.

The company describes itself as "We are a fabless semiconductor company that designs, develops and markets high performance, low-power semiconductor solutions to OEMs and other customers in the mobile storage and mobile communications markets. For the mobile storage market, our key products are microcontrollers used in solid state storage devices such as SSDs, eMMCs and other embedded flash applications, as well as removable storage products. For the mobile communications market, our key products are LTE transceivers and mobile TV IC solutions. Our products are widely used in smartphones, tablets, and industrial and commercial applications."

Last year (2014) saw SIMO's revenues soar. Their Q2 revenues grew +19% from the year ago period. Q3 revenues were up +51.5%. Their Q4 revenues surged +53.4% to $80.5 million, which was just a hair below expectations.

Earnings are seeing similar improvement. Their most recent earnings report was January 26th. SIMO reported a profit of $40.48 a share. That is a +60% improvement from a year ago and one cent above Wall Street's estimate. Their fourth quarter saw sales of SIMO's embedded storage product soar +70% from a year ago. Their full year 2014 revenues were a company record.

Guidance was mixed. SIMO warned that Q1 could see some seasonal weakness but they still provided guidance that was relatively bullish compared to analysts' estimates. SIMO's 2015 guidance is forecasting revenue growth in the +15% to +25% range.

After peaking in September 2014 the stock did experience a correction but SIMO has since recovered. Actually that's an understatement. The NASDAQ is only up +0.6% in 2015 while SIMO is already up +25% this year. The recent strength has created a buy signal on the point and figure chart that is forecasting a long-term target of $47.00.

Currently SIMO sits just below round-number resistance at $30.00. We are suggesting a trigger to open bullish positions at $30.15.

- Suggested Positions -

Long SIMO stock @ $30.15

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

Long MAR $30 CALL (SIMO150320C30) entry $1.80

02/09/15 triggered @ 30.15
Option Format: symbol-year-month-day-call-strike


Total System Services - TSS - close: 36.07 change: -0.41

Stop Loss: 34.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on February -- at $---.--
Listed on February 05, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 883 thousand
New Positions: Yes, see below

Comments:
02/09/15: TSS dipped to short-term technical support at its 10-dma before paring its losses today. We are on the sidelines waiting for a new high above $37.00.

Earlier Comments: February 5, 2015:
Financial stocks as a group have struggled this year. The sector is down about -4% in 2015. Yet shares of TSS is up +6.4% and trading near all-time highs.

According to a company press release, "At TSYS® (TSS), we believe payments should revolve around people, not the other way around. We call this belief "People-Centered Payments®." By putting people at the center of every decision we make, TSYS supports financial institutions, businesses and governments in more than 80 countries. Through NetSpend®, A TSYS Company, we empower consumers with the convenience, security, and freedom to be self-banked. TSYS offers issuer services and merchant payment acceptance for credit, debit, prepaid, healthcare and business solutions. TSYS' headquarters are located in Columbus, Ga., U.S.A., with local offices spread across the Americas, EMEA and Asia-Pacific."

The last few earnings reports from TSS have come in better than expected. Their most recent earnings report was January 27th. TSS' CEO said, "We finished 2014 on a high note. Organic revenue grew 5.8%, year over year, with total revenues growing 18.5% and revenues before reimbursable items up 20.2%."

Wall Street was looking for a Q4 profit of $0.53 a share on revenues of $620.4 million. TSS delivered a profit of $0.58 with revenues climbing almost 9% to $635 million. The company's guidance was only in-line with Wall Street estimates but that didn't stop shares from soaring on the news. TSS management also announced a new 20 million share stock buyback program. That's significant since the company only has 183 million shares outstanding.

The stock's up trend has created a buy signal on the point & figure chart pointing to at $40.00 target. The last few days have seen traders buying the dip. TSS looks like it's coiling for a breakout past the $37.00 level.

Given the stock's recent volatility I am labeling this a more aggressive, higher-risk trade. Tonight we are suggesting a trigger at $37.05 to buy the stock.

Trigger @ $37.05

- Suggested Positions -

Buy shares of TSS @ 37.05




BEARISH Play Updates

Abercrombie & Fitch Co - ANF - close: 24.11 change: -1.67

Stop Loss: 26.55
Target(s): To Be Determined
Current Option Gain/Loss: +3.2%
Entry on February 02 at $24.90
Listed on January 31, 2015
Time Frame: exit PRIOR to earnings on March 4th
Average Daily Volume = 2.6 million
New Positions: see below

Comments:
02/09/15: It was not a good day for ANF bulls. The stock underperformed the market with a -6.47% drop toward its recent lows. The weakness today was fueled by bearish analyst comments.

This morning a Bank of America/Merrill Lynch analyst downgraded ANF to an "underperform" and reduced their price target from $30 to $20. If that wasn't bad enough an analyst at Wunderlich cut their rating on ANF to a "sell" and reduced their price target from $30 to $17. Wunderlich believes that investor hopes for a turnaround in ANF are overblown. The strong dollar will also hurt ANF's international sales.

FYI: We will plan on exiting positions prior to ANF's earnings report on March 4th.

Earlier Comments: January 31, 2015:
The bear market in shares of ANF continue. ANF used to be one of the hottest brands for the much coveted teenage market. Unfortunately for ANF shareholders the company failed to keep up with the changing tastes of its audience.

For anyone who doesn't know who ANF is here is a bit from the a company press release, "Abercrombie & Fitch Co. is a leading global specialty retailer of high-quality, casual apparel for Men, Women and kids with an active, youthful lifestyle under its Abercrombie & Fitch, abercrombie, Hollister Co. and Gilly Hicks brands. At the end of the third quarter, the Company operated 834 stores in the United States and 166 stores across Canada, Europe, Asia, Australia and the Middle East. The Company also operates e-commerce websites at www.abercrombie.com, www.abercrombiekids.com, www.hollisterco.com and www.gillyhicks.com."

The company has been struggling with weak same-store sales for months, if not years, across all of its brands. Back in November 2014 they company issued an earnings warning (you can see the gap down on the daily chart). They reported earnings on December 3rd that was one cent above analysts' newly lowered estimates. Quarterly revenues were down -11.8%. Management then guided lower yet again.

ANF lowered their 2015 guidance from the $2.15-2.35 range to $1.50-1.65 a share. They continue to expect same-store sales to be negative an in the mid to high single digit percentages.

On December 9th the stock popped from multi-year lows after it was announced that ANF's CEO Michael Jeffries, a man whom many considered to be a terrible CEO, had abruptly retired. The rally from this headline didn't last very long.

It's interesting that consumer sentiment is currently at 11-year highs but we're not seeing that translate into consumer spending. Many have been expecting (hoping) that all the money consumers are saving at the gasoline pump, thanks to oil at six-year lows, would be spent on other items. Thus far we are not seeing any big trends that consumers are spending their savings and it's definitely not going toward teen apparel retailers.

There is a lot of short interest in this stock thanks to the bearish outlook for the company. This time the bears might be right. The most recent data listed short interest at 35% of the 68.1 million share float. That does raise the risk of a short squeeze should ANF suddenly bounce.

Another risk for the bears in ANF is M&A headlines. Now that the old CEO is gone there has been some speculation that ANF is a takeover target. The company also might be a target for a leveraged buy out offer to take ANF private. While this is a risk we can't time it. Any such news, if it ever happens, could be months or years away.

Right now ANF continues to underperform the market and is currently down -10% in 2015. The point & figure chart is forecasting a $17.00 target. Looking at the long-term chart the nearest support might be the $22.50 area or the $17 area.

Tonight I am suggesting a trigger to open bearish positions at $24.90.

- Suggested Positions -

Short ANF stock @ $24.90

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

Long MAR $25 PUT (ANF150320P25) entry $2.20

02/05/15 new stop at $26.55
Option Format: symbol-year-month-day-call-strike


Discovery Communications - DISCA - close: 30.05 change: +0.15

Stop Loss: 30.85
Target(s): To Be Determined
Current Option Gain/Loss: +1.7%
Entry on January 14 at $30.57
Listed on January 13, 2015
Time Frame: Exit PRIOR to earnings on Feb. 19th
Average Daily Volume = 3.8 million
New Positions: see below

Comments:
02/09/15: Shares of DISCA were also downgraded this morning. The stock initially traded lower but the weakness didn't last long. Instead DISCA displayed relative strength with a +0.48% gain. That's worrisome since the rest of the market was sinking. I'm worried DISCA is about to breakout higher from its current sideways trading range.

I am not suggesting new positions at current levels.

Earlier Comments: January 13, 2015:
We have heard for a long time that content is king. Discovery has some great content. So why is the stock suffering so poorly? The stock market posted double-digit gains last year and yet shares of DISCA was one of the market's worst performers with a -23.8% decline.

According to company marketing materials, "Discovery Communications (Nasdaq: DISCA, DISCB, DISCK) is the world's #1 pay-TV programmer reaching nearly 3 billion cumulative subscribers in more than 220 countries and territories. Discovery is dedicated to satisfying curiosity, engaging and entertaining viewers with high-quality content on worldwide television networks, led by Discovery Channel, TLC, Animal Planet, Investigation Discovery and Science, as well as U.S. joint venture network OWN: Oprah Winfrey Network. Discovery also controls Eurosport International, a premier sports entertainment group, including six pay-TV network brands across Europe and Asia. Discovery also is a leading provider of educational products and services to schools, including an award-winning series of K-12 digital textbooks, through Discovery Education, and a digital leader with a diversified online portfolio, including Discovery Digital Networks."

It looks like the revenue picture has soured for DISCA. Back in February 2014 the company reported earnings and raised their revenue guidance. One quarter later, when they reported in July, they lowered the top end of their guidance. Then in November, when they reported earnings, DISCA missed Wall Street's revenue estimate and management lowered their revenue guidance.

In a recent interview Discovery's CEO said they are having trouble monetizing all of their content. The advertising environment has gone soft and they haven't figured out why there is a lull in ad spending.

Research is forecasting that online video watching will more than double by 2020. A USB analyst believes online will eventually pose a significant threat to more traditional TV watching trends and companies. Another analyst, this time with Sanford Bernstein, believes the huge declines in TV viewership will continue. Analyst Todd Juenger said, "We believe ad-supported TV is in the early stages of a structural decline." That's long-term bearish for TV. DISCA needs to do a better job of monetizing their content online.

Technically DISCA looks very bearish. The oversold bounce from November stalled in the $36 area several time. The point & figure chart is bearish and forecasting at $23.00 price target. Today DISCA is breaking down to new 52-week lows.

We are suggesting a trigger to open bearish positions at $30.90. Plan on exiting ahead of DISCA's earnings report in mid February.

- Suggested Positions -

Short DISCA stock @ $30.57

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

Long FEB $30 PUT (DISCA150220P30) entry $1.20

01/15/15 new stop @ 30.85
01/14/15 triggered on gap down at $30.57, trigger was $30.90
Option Format: symbol-year-month-day-call-strike


Greif, Inc. - GEF - close: 39.09 change: -0.30

Stop Loss: 40.35
Target(s): To Be Determined
Current Option Gain/Loss: +2.1%
Entry on January 26 at $39.94
Listed on January 24, 2015
Time Frame: Exit PRIOR to earnings in late February
Average Daily Volume = 177 thousand
New Positions: see below

Comments:
02/09/15: GEF tried to rally midday. Thankfully the stock failed near $40 resistance again. Shares eventually settled with a -0.7% decline. I am not suggesting new positions.

Earlier Comments: January 24, 2015:
Shares of GEF are crumbling like wet cardboard. The company operates in the consumer goods sector. They make packaging and container products. According to a company press release, "Greif is a world leader in industrial packaging products and services. The company produces steel, plastic, fibre, flexible, corrugated and reconditioned containers, intermediate bulk containers, containerboard and packaging accessories, and provides blending, filling, packaging and industrial packaging reconditioning services for a wide range of industries. Greif also manages timber properties in North America. The company is strategically positioned in more than 50 countries to serve global as well as regional customers."

Unfortunately for investors GEF did not have a good 2014 on the earnings front. They missed analysts estimates the last four earnings reports in a row. In August 2014 GEF's management guided earnings lower. In December they lowered guidance again.

GEF's most recent earnings report was January 14th and Q4 earnings plunged -90% to $8.7 million. Revenues dropped -4% to $1.05 billion, below Wall Street estimates. For all of 2014 GEF said profits declined -38% and revenue slipped -3%. Once again management guided earnings lower. They now expected 2015 earnings in the $2.25-2.35 range compared to Wall Street estimates of $2.78 a share.

The company's earnings report provided an outlook where management issued this statement:

The company anticipates the overall global economy to reflect a modest recovery in fiscal 2015, with positive aspects of the improving economy in the United States being offset by the negative trends in other regions, particularly in Europe and Latin America. We anticipate that foreign currency matters will continue to present challenges for the company, as the strengthening of the United States dollar against other currencies will continue to impact the company’s revenues and net income.

Following GEF's Q4 results several analyst downgraded their rating on the stock. The point & figure chart is bearish and currently forecasting at $31.00 target.

Technically Friday's display of relative weakness (-2.7%) broke down through significant support near $40.00. We are suggesting bearish positions immediately on Monday morning. More conservative traders may want to wait for a little confirmation (perhaps a decline below $39.25). The nearest support looks like the $35 and $30 regions.

NOTE: GEF does have options but the spreads are too wide to trade.

- Suggested Positions -

Short GEF stock @ $39.94

02/05/15 new stop at $40.35
01/26/15 trade began this morning. GEF opened at $39.94