Option Investor
Newsletter

Daily Newsletter, Saturday, 2/21/2015

Table of Contents

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

Market Wrap

Greece Release

by Jim Brown

Click here to email Jim Brown

After watching the Dow and S&P trade in a narrow range all week on worries over the negotiations with Greece the announcement of a deal on Friday released the indexes to make new highs. While the Greek problem is not over the can has been kicked down the road for another four months. Traders breathed a sigh of relief and celebrated by adding to long positions.

Market Statistics

The EU and Greece hammered out a tentative four month extension to their existing bailout program. Apparently Greece caved in to almost everything they said they would not accept. Greece will be supervised over this four month period by the EU, ECB and IMF otherwise known as the Troika. Greece said it would never agree to continue the current bailout program with severe austerity measures and yet when the smoke cleared they were forced to agree. The extension still has to be approved by the parliaments of the EU countries by next Friday but officials expect that to happen.

Greece was backed into a corner because they have no money, major bills were coming due and the banks were hemorrhaging cash. The ECB had been supporting the banks with temporary loans of about $4 billion a week. If Greece had not agreed to the extension the ECB loans would have stopped and the banks would have failed. Greece had no money to pay government workers, military and to keep the government services running. This is why traders had assumed a compromise agreement would be reached because the new government in Greece had no real options except for the nuclear option of leaving the eurozone and crashing their economy even worse.

Shares in the National Bank of Greece (NBG) rallied +22% on news of the bailout deal. However if you look at the last 5-6 days on the chart you can easily see that traders were already betting a deal would get done. Traders have been assuming all week that a deal would happen and that is what kept the indexes from slipping to far below their early week highs.


Once the rumors began to break that a deal had been done the markets rallied with the Dow rising from 17,992 at 12:00 to close at 18,140. Basically 148 points of the Dow's 154 point gain came after the first rumor broke. The Dow close was a new historic high and the first new high for 2015 for the Dow. Even with the big gain and the new high the Dow only gained +121 points for the week.

There were no economic reports of note on Friday. Next week's calendar is highlighted by the Yellen testimony on Tuesday and Wednesday. Tuesday is important because the first day tends to suffer from foot in mouth disease. Sometimes answers to questions don't come out exactly as she would have phrased them in a prepared speech. On Wednesday she will get a chance to correct any mistakes after she has had an opportunity to ponder her Tuesday answers. The actual testimony is the same but the answers to questions are unscripted. Analysts will be watching closely for clues to her rate hike bias to see if it has changed.

There are several housing reports and a couple of Fed manufacturing sector reports. The week ends with a GDP revision and it is expected to decline to just over 2% growth for Q4.

Analysts are starting to worry about Q1 and the impact of the severe weather. You may remember last year that Q1 GDP declined -2.11% in Q1 as a result of the polar vortex shutting down a lot of the Northeast for weeks at a time.


No new split announcements this week.


Other than the news on Greece it was a very quiet day. The highlight in the earnings category was Deere (DE). Earnings were $1.12 compared to estimates for 83 cents. Revenue fell -19% to $5.61 billion. The company said farm income will drop the most this year since the Great Depression. Deere has cut production and laid off hundreds of workers as demand for farm equipment declines. The number of combines sold in the U.S. declined -25% in 2014 and sales of tractors with at least 100 horsepower fell -12%.

Commodity prices have crashed with corn prices falling -50% and soybeans down -40% from the record prices seen in 2012. Farm income is expected to decline in 2015 for the third consecutive year. Deere guided for 2015 income to about $1.8 billion and less than the prior projection in November of $1.9 billion. Shares declined sharply at the open but rebounded to close slightly positive. Warren Buffet said in the recent SEC filing that Berkshire increased its stake in Deere to 5%.


Intuit (INTU) shares rallied +6% after reporting a loss of 6 cents that beat expectations for a loss of 13 cents. Revenue of $808 million beat forecasts of $784 million. For the current quarter the company expects earnings of $2.70-$2.75 and analysts expected $2.90. The real power behind the stock spike was a 50% increase in Quickbooks subscribers compared to a 43% gain in the prior period. TurboTax subscribers rose +19%. Sales from TurboTax rose +54%.


Lab Corp (LH) reported adjusted earnings of $1.65 compared to estimates for $1.63. Revenue of $1.51 billion beat estimates for $1.49 billion. On Thursday the company completed the acquisition of Covance for $5.7 billion. Based on post acquisition metrics the company guided for revenue growth of 40-44%. Full year earnings are expected to be $7.35-$7.70 compared to analyst estimates for $7.33. Free cash flow is expected in the $1.1 billion range. Shares spiked +3% on the news.


Iron Mountain (IRM) reported earnings of 25 cents that missed estimates of 31 cents. Revenue of $778 million missed estimates for $787 million. They guided for full year earnings from $1.15 to $1.30 and revenue from $3.03 to $3.15 billion. This midpoint was a decline from 2014 revenue of $3.12 billion. Shares fell -5% on the news.


The Barnes Group (B), an industrial and aerospace parts supplier, reported earnings of 62 cents compared to estimates for 61 cents. Revenue of $310 million missed estimates for $315 million. They guided to full year earnings in the $2.42 to $2.57 range. Investors must have liked the numbers because shares rose almost 8%.


Cheniere Energy (LNG) reported a loss of 50 cents compared to estimates for a loss of 29 cents. Revenue was $66 million. The loss was related to the early extinguishment of debt and write off of costs associated with that debt. Cheniere is not currently an operating company. They are building the largest LNG export facility in the U.S. in Louisiana and another facility in Corpus Christi Texas. Their first exports are expected in late 2015 and volume will grow as additional trains come online over the next 4 years. Sabine Pass is scheduled for 6 trains with the capacity of 4.5 million tons of LNG per annum each (MTPA). Corpus Christi is scheduled for 3 trains at 4.5 MTPA each.

Cheniere has already presold roughly $7 billion a year in LNG for the next 20 years at Henry Hub prices plus a fee. The cost of natural gas is immaterial to them because they collect a fee per Mcf for acquiring and liquefying the gas. Actually if gas remains cheap they will be at a significant competitive advantage to almost every other LNG exporter in the world. I strongly recommend Cheniere for a long term investment.


Cyberark Software (CYBR) is on fire. Since bottoming at $33 on February 2nd the stock has more than doubled. Analysts are saying that Cyberark, FireEye (FEYE) and Palo Alto Networks (PANW) are the best of breed in the security business. The gains have been powered by funds with Friday's volume over 6 million shares. This is not your father's software security stock. I can't imagine anyone buying this spike but I have been saying that for a week. This looks like a dot com stock back in 2000. They also blew out earnings on two weeks ago with 21 cents compared to estimates for 5 cents.


Salix Pharmaceuticals (SLXP) shares surged again with a +5% gain to $158. Reuters said Valeant (VRX) was close to acquiring the company for $160 per share. The deal could come as early as next week. Salix has been in play for several weeks with various rumored partners but Valeant has always been the top contender. At $160 the deal would be worth $10.2 billion and the largest deal Valeant has ever done and they have done a lot of deals. The CEO recently said they expected to complete several smaller deals in 2015 but did not rule out a big deal. Shire Plc (SHPG) said last week it was also taking the initial steps to bid on Salix. Endo International (ENDP) also said it wanted Salix but the company said no thanks.


Shares of Noodles & Co fell -32% after reporting earnings of 13 cents that missed estimates by a penny. Revenue of $108.5 million also missed estimates of $110 million. The biggest problem was 2015 guidance for growth around 20% when analysts were expecting 34%. Same store sales remained lackluster at +1.3%. Baird downgraded them from outperform to neutral and Janney Capital cut them from buy to neutral.


Rocket Fuel (FUEL) ran out of fuel after reporting a loss of 18 cents compared to estimates for a loss of 25 cents. Revenue of $139.5 million also missed estimates of $145.5 million. The company is a big data, artificial intelligence, advertising placement company. In theory they can mine the data and determine which ads will work in which position. However, costs surged in the latest quarter and revenues did not keep pace. The stock has been on a downward trajectory since January 2014. Shares fell -27% on Friday.


Boeing (BA) is flying high after an entire year of consolidation. On Wednesday the company said it will keep returning significant amounts of cash to shareholders and promised a painless transition from the 777 to the 777X in the next couple of years. Boeing said there would be no decline in production rates on the existing 777 model. The company also signed a new order for (6) 737s valued at $594 million from Alaska Airlines (ALK). Alaska Air is taking delivery of 19 new planes in 2016. Including the new deal Alaska Air has ordered 79 jets from Boeing and is replacing all its 737-400s with 737-900ERs, which carry 25% more passengers on the same amount of fuel.

Last week Boeing announced a $1.6 billion order for (17) 737-800s from Transavia, a subsidiary of Air France. Korean Air also ordered (5) 777 freighters valued at $1.5 billion. Business is booming for Boeing. Sterne Agee reiterated a buy rating with a price target of $196. Boeing will generate $23 billion in free cash flow for the period 2015-2017 and have $16 billion available for buybacks after paying generous dividends.


Next week is small cap earnings week. There are several hundred companies reporting and most I don't recognize. I did pull out more than I expected out of the list and there are some big caps mixed in with the unknowns. There are several retailers including Target, TJX, Sears, Kohl's and Macys. Building supply heavyweights Home Depot and Lowes will tell us how the home selling season is shaping up. Hewlett Packard, Express Scripts, SalesForce.com, Budweiser and Berkshire Hathaway round out the top names.


Apple may or may not be planning an electric car and they have declined to comment on "rumors and speculation." However, Apple has hired so many engineers from electric car battery maker A123 Systems that A123 has sued Apple over the poaching. A123 said Apple was on the verge of gutting A123 completely. The lithium batteries from A123 are found in several hybrid cars including the BMW and Chevy Spark. Apple also tried to hire battery experts from LG Chem Ltd, Samsung Electronics, Panasonic, Toshiba and Johnson Controls according to the lawsuit.

Apple also hired Johann Jungwirth who for six years led research and development for Mercedes-Benz in North America. He joined Apple in September. He specializes in building internet connected cars and autonomous driving.

Elon Musk has also complained that Apple has been hiring away his engineers at a record pace. Musk said Apple was offering $250,000 signing bonuses and 60% increase in salaries to Tesla engineers. Musk also admitted he spoke with Apple's acquisitions team last year but would not disclose the topic.

Based on publicly available employment records Apple has hired dozens of executives and engineers from other auto companies. A longtime engineer at Autoliv, a maker of automobile safety systems, joined Apple to work in their special projects group in January. The special projects car team now has more than 200 employees.

Two vans registered to Apple and covered with sensors similar to the early Google prototypes have been spotted in San Francisco and Brooklyn. This suggests they are experimenting with self driving cars as well.

Analysts believe Apple could not actually produce a car until about 2020 because of all the engineering that needs to be done and manufacturing of the individual parts as well as building the manufacturing facilities.

Apple may not want to admit it but there are far too many signs that they are headed towards producing a prototype car. They may not want to produce it but they could easily license the production to somebody already in the business.

Apple shares rallied to a new high and a market cap of $754 billion. Since January 1st the Nasdaq has gained +207 points and 106 of those points were added by Apple.


All the talk about Apple getting into the electric car business and Elon Musk admitting he spoke with Apple's acquisition team has rocketed Tesla shares higher as well. TSLA shares have gained +13 points in the last two days. Tesla's market cap is only $27 billion and Apple has $180 billion in cash. They could snap up Tesla in a heartbeat and even pay a huge premium and not break the bank. However, I doubt Elon Musk wants to work for Apple.


Crude oil prices declined -$2 for the week to close at $50.34. Two of the factors affecting prices included another surge of 7.7 million barrels into U.S. inventories pushing them to 425.6 million barrels and the highest level since 1930. Cushing inventories rose nearly 4 million barrels to 46.3 million and a six-year high. Cushing Oklahoma is the futures delivery point for WTI.


Secondly it appears China has completed filling their strategic oil reserves and the number of Very Large Crude Carriers (VLCC) either unloading in China or headed for China fell to 62 and the lowest since September 19th. Each tanker carries 2 million barrels. China began filling its reserves in early October when a record 89 tankers were making trips to China with an average of 76. The country imports an average of 6 mbpd in normal times. If China has finished its four month stocking binge then the biggest surplus buyer in the market may no longer be in the market. This would mean that the surplus oil being produced every day has to find someplace else to go.

I have written about this problem over the last couple weeks. When the global tank farms reach capacity and there is no place to store oil the price could drop sharply. This could happen in the weeks ahead.

The U.S. produced a record 9.28 mbpd last week despite the continued drop in active rigs. It will be another 3-6 months before U.S. production slows appreciably because wells that have already been drilled still need to be completed and connected to pipelines and gathering systems. U.S. inventories have grown by 43.3 million barrels (12%) over the last six weeks.

Table for week ended 2/13. Green is a recent high, yellow a recent low.


For the week ended 2/20 active rigs declined another -48 rigs to 1,310 and the lowest since 2009. Oil rigs declined -37 to 1,019 and gas rigs declined -11 to 289 and a new 18-year low. Offshore rigs rose +2 to 54. Since the 1,931 high in September active rigs have declined by -621 rigs (-32.2%) and the fastest decline on record.


Oil inventories are going to continue to rise after the U.S. refinery strike expanded this weekend to include largest U.S. refinery at Port Arthur and others. The Motiva Port Arthur refinery processes 600,250 bpd. The union also included the Motiva Convent, Louisiana plant with 235,000 bpd and the 238,000 bpd Norco, Louisiana refinery. The new strike orders also covered the Shell chemical plant in Norco. If no agreement is reached by Sunday morning 6,550 workers at 15 plants, including 12 refineries accounting for 18.5% of U.S. production will be on strike. That is the largest strike since 1980. In theory the plants will keep running with management operating the controls but the longer the strike runs the more production will be shutdown due to equipment problems and maintenance issues. Gasoline prices will be rising.

Markets

Now we have a confirmed breakout to new highs. I warned last Sunday that a new high by only a couple points was not really a breakout. The indexes, with the exception of the Nasdaq, weakened and lost a few points throughout the week while the drama played out surrounding Greece.

The S&P finally surged over the psychological resistance at 2,100 and "should" be targeting the next resistance level at 2,125. The S&P traded in a very narrow 8 point range Monday through Thursday. Friday's open saw a -12 point gap down open to 2,085 related to option expiration and the continued drama over Greece. That one move was larger than the range for the entire week. That dip was immediately bought but the rebound stalled at 2,095 for 90 minutes until the Greek rumors began to break. The S&P range for Friday was 25 points and we closed on the highs.

In theory this combined surge by all the indexes has pushed us over the psychological threshold and we could continue moving higher, headlines permitting.

Support is now 2,090 and resistance 2,125.


The Dow finally punched through the 18,100 level but it is not clear sailing from here. There are multiple longer term uptrend levels of resistance that could cause trouble. One of them is 18,140 and that is exactly where the Dow stopped at the close. The next level is 18,212 followed by 18,325. I would love to see each of those tested next week.

I view the narrow range over the last week as a consolidation phase that built a higher base and could give us a launch point for future gains. The earnings from Dow stocks are now behind us and events like the -$4 drop by Walmart are hopefully in the past.

Support 17,950 and resistance 18,140 and 18,212.



The Nasdaq bulls have been charging higher with the index adding another +62 points to the +149 last week and +109 the week before. The tech stocks are on fire but this week most of the power came from the biotech sector.

Of the +207 points gained by the Nasdaq since December 31st, 106 of those points were due to Apple's gains.

It is even more impressive that the Nasdaq tacked on big gains with GOOG/GOOGL both losing ground for the last four days. That was a huge drag on the index but the Nasdaq was still up for the last eight consecutive days.

However, in the process of looking for plays for the various newsletters I scan between 500-800 charts every weekend. There were a huge number of charts this weekend that contained very large spikes over the last several days. I can't conceive a scenario where these rocket stocks don't pause for several days for profit taking. An example would be Charles River Labs (CRL) and yes I know it is not a Nasdaq stock but it is just an example. Another would be Cognizant Tech (CTSH). The gains on these stocks are begging for a week of profit taking.




The Nasdaq did break through uptrend resistance at 4,929 and did it with authority. However, in order to make it to the 5,132 high set on March 10th, 2000 it will need to rest and eventually build a base at a higher level. I seriously doubt we are sprint another 200 points without profit taking.

There is no clearly defined resistance in our path but 5,000 would be a huge psychological hurdle. Support is 4,890.


The S&P-400 Mid-Cap has spiked well beyond prior resistance and surged to a big new high. The Russell 2000 has not moved as strongly but it still closed at a historic high with a gain of +4 points. I would be perfectly happy if the Russell continued to gain 4-5 points every day. Slow and steady wins the race. However, we could be reaching the point where traders are forced to decide if they are going to catch a shooting star or be left holding a bag of cash on the sidelines.

Now that the Dow has broken out and the uncertainty has eased we could see the small cap stocks accelerate.



The Transports are still fighting an uphill battle but succeeding one step at a time. Until they close over 9,150 it is still a lower high. The old high at 9,217 is the next target with stiff resistance at 9,230. We need the Transports to make a new high to confirm the Dow Industrials high.


Even the NYSE Composite closed at a new high on Friday. The close at 11,108.67 barely eclipsed the old high close at 11,104.72 but it is still a record. The energy stocks and financials have been holding back the NYSE.


The new highs all around and the temporary resolution of the Greek bailout should provide some bullish sentiment for the market. However, our next hurdle will be the Yellen testimony on Tuesday. Yellen has been strongly dovish in the past and you can bet she does not want to trip up this rally. A strong stock market lifts economic sentiment and she needs the economy to be strengthened. She will probably make her token comments about future rate hikes but emphasize the Fed needs to be patient. With the severe winter weather causing analysts to cut their Q1 GDP forecasts and the memory of Q1-2014 hopefully she will maintain her dovish posture.

Random Thoughts

Goldman Sachs has already cut their estimates for GDP for Q1 as a result of the weather. If it continues as expected over the next two weeks they may cut it even further. They reduced their estimate from +3.0% to +2.8%. It was not a big cut but it is the direction that matters. Add in the $2 billion a day impact from the dockworker problem on the west coast and we could lose a few more points. Add in the dramatic decline in activity in the energy sector and we lose another couple of points. It will be really interesting to see how Q1 really ends up but that final number is 5 months from now.

This time they are calling the waves of severe cold the Siberian Express because they are coming straight over the pole and through the middle of Canada into our Midwest as shown in the NOAA chart below.


The China Business Cycle Index is a composite index of 10 "official" government indicators. Most are probably fictitious to some extent but the composite of all the indicators still gives us a clue to the direction of China's economy. If you consider that some or most of the individual indicators have probably been "adjusted" to show a more favorable outlook yet the overall picture is still bad then imagine how bad it really would be if the data was not adjusted.

The Chinese economy is back at the level of the 2009 financial crisis and the Nasdaq crash in 2001. If we had the real data it would probably show the economy to be back at the Asian crisis levels in 1998 and the low on the chart.


The U.S. markets just made new highs across the board but look at the earnings estimates for 2015 from Morgan Stanley. The S&P forecast has crashed from nearly $135 to $120.62 and some analysts are projecting it could even come in below 2014 levels. Why is the market so bullish when earnings growth could actually be negative in 2015?


The following is an interesting chart from Gerard Minack of Minack Advisors. The Fed is adverse to raising rates unless wage growth is rising. Wages have been flat lining since 2011 and without a jump in wages the Fed is unlikely to hike rates. There are still analysts that believe the U.S. economy is declining rather than growing and expect no rates hikes and QE4 in 2016. (Simon Hunt) Different viewpoints make a market.


Following on that same thought here is a chart from the St Louis Fed showing the falling unemployment rate in blue and wages in red. Since 1985 falling unemployment has been met with rising wage growth. Note the absence of wage growth in the current cycle. Hiking interest rates would be even more damaging to wages.


The FOMC minutes on Wednesday actually showed the Fed may be inclined to be even more patient in considering future rate increases. The Fed said bond yields fell again not only in the U.S. but other sovereign nations. "These moves were attributed in part to a deterioration in market sentiment associated with downward pressure on inflation, increased concern about the global economic outlook, and announced and anticipated foreign central bank policies. The Fed also said "financial uncertainty" in Greece, as well as geopolitical instability in the Middle East and Ukraine, remained as risks to the international outlook. The minutes showed the Fed is inclined to keep rates near zero for longer. On its outlook for raising rates, the minutes indicate that a number of FOMC members saw the risks as weighted towards raising rates too early, with at least one FOMC member recommending more not less monetary policy accommodation

How stable can the world economy be when 90% of the industrialized world economy is anchored by near-zero or negative short term rates? David Rosenberg, chief economist at Gluskin Sheff, believes "worry over global deflation with interest rates at zero is certainly not a confidence builder."


Sam Stovall, chief equity strategist at S&P, put together this table of market moves since 1946 in the six months before and after the first Fed rate hike. Nineteen times the market declined more than 5%. Obviously any accounting for 12 months periods in the market is going to show a 5% drop or more in most years. However, the before column is still telling.


Matt O'Brien published an article in the Washington Post last week showing that global inflation is dead. This is related to a drop in global demand and buying power. Commodities are crashing and interest rates are zero. This chart alone is a very visual case that deflation could be the common enemy in the next world war in the very near future.


MarketWatch posted a series of charts that show the market diverging significantly from the economic fundamentals. The 7 charts are too big to repost here so follow this LINK

After the close on Friday Moody's downgraded Russia's sovereign debt to junk at Ba1 with a negative outlook. The agency cited the falling oil prices, currency issues, the crisis in Ukraine and the potential for additional sanctions. Moody's said, "Russia is expected to experience a deep recession in 2015 and a continued contraction in 2016." Also, "The risk is rising, although still very low, that the international response to the military conflict in Ukraine triggers a decision by the Russian authorities that directly or indirectly undermines timely payments on external debt service."

The fighting in the Ukraine did not cease and Russia was seen sending additional tanks and artillery into Ukraine as Putin tries to seize more of Ukraine in order to secure a land bridge to the deepwater naval port in Crimea. I am sure nobody actually thought Putin would honor the agreement he signed with Merkel and Hollande the prior week.

The "swag bags" for the 2015 Oscars have risen in value to $167,000 in goodies. The 21 actors/actresses that don't win a best or supporting Oscar will have this year's swag bag delivered to their door on Monday. Included in the bag is a three-night stay at a resort in Tuscany valued at $1,500; a luxury train ride through the Canadian Rockies worth more than $14,500; natural French Mediterranean sea salts worth $1,500; a custom silver necklace inscribed with the latitude and longitude coordinates of the Dolby Theater from Lat & Lo at $150; a "glamping" trip valued at $12,500; a $800 gift certificate for a custom candy and dessert buffet; a $250 Haze vaporizer; a $250 Afterglow personal laser vibrator; a Wellness 360 gift pack worth $1,200; a year's worth of all-Audi A4 car rental from Silvercar valued at $20,000; a Reset Yourself lifestyle makeover package worth more than $14,200; and so much more. The most highly valued item in this year's bag, according to the press release from Distinctive Assets, the bag's creator, is a $20,000 gift certificate to have Enigma Life founder Olessia Kantor fly out to meet with each nominee "to discuss their 2015 horoscope, analyze dreams and teach them mind control techniques."

The CEO of Vice Media, Shane Smith, paid $300,000 to take 11 associates to dinner in Las Vegas in early January. The meal was at Bellagio's Prime Steakhouse and there were $21,000 bottles of wine.

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

"Things may come to those who wait, but only the things left by those who hustle."

Abraham Lincoln

 

 


New Plays

Catching Up To Its Peers

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Microchip Technology - MCHP - close: 50.92 change: +0.40

Stop Loss: 49.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on February -- at $---.--
Listed on February 21, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.8 million
New Positions: Yes, see below

Company Description

Why We Like It:
Semiconductor stocks have been big winners for investors over the last couple of years. Last year saw sales for the whole industry hit a record-breaking $335 billion. That's up almost +10% from 2013. While the SOX semiconductor index is currently trading at multi-year highs it did see a sharp sell-off in October 2014. That was thanks to MCHP.

MCHP is considered a bellwether for the industry. According to the company, "Microchip Technology Incorporated is a leading provider of microcontroller, mixed-signal, analog and Flash-IP solutions, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide. Headquartered in Chandler, Arizona, Microchip offers outstanding technical support along with dependable delivery and quality."

Last October MCHP shocked the market when they lowered their earnings guidance and warned of an industry wide slowdown. This sparked an industry-wide sell-off. Shares of MCHP plunged. The stock spent the rest of the year trying to climb out of that hole. By the end of 2014 the stock had recovered enough to close essentially breakeven on the year.

Helping shares recover was an update in December. Management provided a slightly better earnings and revenue picture. MCHP said that business had improved significantly from early October. They now believed that the worst of the industry downturn was already behind them. This helped fuel gains for the semiconductor stocks while MCHP shares languished.

Fortunately today MCHP is playing catch up to its peers. The company reported its Q3 2015 results on January 29th. Wall Street was expecting a profit of $0.62 a share on revenues of $525.5 million. MCHP beat estimates with $0.64 a share as revenues grew +11.1% to $535.8 million.

MCHP said that calendar year 2014 was a strong one for their microcontroller business, which was up +13.8% overall. Their 8-bit, 16-bit, and 32-bit microcontroller segments all hit record sales with 16-bit sales up +27.7% and 32-bit sales up +41%. Management said overall they did witness broad-based growth across all their product lines. MCHP then raised their dividend and raised their guidance. They expected Q4 2015 earnings (current quarter) to be in the $0.65-0.67 range and revenues in the $541-551.9 million range. That's above analysts' estimates of $0.65 and $538.8 million.

Steve Sanghi, MCHP's President and CEO, commented on their quarterly results, "We are very pleased with our execution in the December quarter. Our original revenue guidance was to be down 4.5% sequentially and in early December we improved our guidance for revenue to be down only 3.5% at the midpoint. Our actual non-GAAP revenue results were down only 1.9%, which was better than what is seasonally normal. Calendar year 2014 was Microchip's first year above the $2 billion revenue mark and was up 12.8% from calendar year 2013 as a result of very strong performance from our microcontroller and analog product lines."

Investors cheered and the stock has soared from a low near $44 in early February to a new multi-year high above resistance at $50.00. The point & figure chart is forecasting a target at $56.00. Tonight we are suggesting a trigger to open bullish positions at $51.15.

Trigger @ $51.15

- Suggested Positions -

Buy MCHP stock @ (trigger)

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

Buy the Apr $50 CALL (mchp150417C50) current ask $2.35

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Applaud Greek Deal

by James Brown

Click here to email James Brown

Editor's Note:
It looks like Greece caved in to its creditors demands and the EU granted the country a loan deadline extension. Stocks rallied on the news and the major U.S. indices hit new highs.

Several of our candidates surged to new highs as well. Unfortunately IBKR did hit our stop loss first.


Current Portfolio:


BULLISH Play Updates

Abbott Laboratories - ABT - close: 47.48 change: +0.87

Stop Loss: 44.75
Target(s): To Be Determined
Current Option Gain/Loss: +1.8%
Entry on February 19 at $46.65
Listed on February 17, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 5.34 million
New Positions: see below

Comments:
02/21/15: The rally in ABT continued with shares accelerating higher on Friday. The stock added another +1.8% and marked its eight gain in a row. If you are looking for a new entry point then you might want to consider buying a dip in the $46.60 area.

In other news ABT announced its 365th consecutive quarterly dividend. The company has been paying quarterly dividends since 1924. The current dividend is $0.24 a share payable on May 15th to shareholders on record as of April 15th.

Earlier Comments: February 17, 2015:
ABT is in the healthcare sector. With a history that starts back in the late 1880s this is one of the oldest publicly traded companies in the U.S. The company has grown to a global giant with sales of more than $20 billion a year. About 70% of sales are outside the United States.

According to the company, "Abbott is a global healthcare company devoted to improving life through the development of products and technologies that span the breadth of healthcare. With a portfolio of leading, science-based offerings in diagnostics, medical devices, nutritionals and branded generic pharmaceuticals, Abbott serves people in more than 150 countries and employs approximately 77,000 people."

The most recent earnings report was January 29th. ABT's earnings rose +22% from a year ago to $0.71 a share. That beat estimates of $0.68. Revenues were up +5.6% to $5.36 billion. Unfortunately that did miss estimates of $5.43 billion. The company did raise its annual dividend from $0.88 to $0.96 and revenues were up +10% for the whole year (2014). ABT also said its adjust net margins grew over 200 basis points for the full year.

Here's the interest part, ABT management issued 2015 guidance of $2.10-2.20 per share. That is growth of about +6% to +11% while facing significant currency challenges due to the strong dollar (near 11-year highs). Wall Street was estimating $2.25 per shares for 2015. The stock rallied in spite of this lowered outlook.

The following day a Bank of America/Merrill Lynch analyst upgraded the stock from "neutral" to a "buy" and raised their price target because they believe that ABT will see strong revenue growth and margin improvement in 2015.

Shares of ABT have definitely been showing relative strength with the stock up four weeks I a row. These are all-time highs for the stock and ABT is in the process of breaking out past its December 2014 highs. Tonight we are suggesting a trigger to open bullish positions at $46.65.

- Suggested Positions -

Long ABT stock @ $46.65

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

Long AUG $50 CALL (ABT150821C50) entry $0.91

02/19/15 triggered @ $46.65
Option Format: symbol-year-month-day-call-strike

chart:


Cree, Inc. - CREE - close: 39.19 change: +0.93

Stop Loss: 34.85
Target(s): To Be Determined
Current Option Gain/Loss: +7.2%
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:
02/21/15: Shares of CREE were showing relative strength on Friday. The stock surged +2.4% and finally broke free of resistance in the $38.00 area.

The next challenge for the bulls is potential resistance in the $40.00 area, which includes the descending 200-dma (currently $40.25).

I am not suggesting new positions at this time.

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

02/12/15 new stop @ 34.85
02/05/15 triggered @ 36.55
Option Format: symbol-year-month-day-call-strike

chart:


Informatica Corp. - INFA - close: 43.90 change: -0.03

Stop Loss: 43.35
Target(s): To Be Determined
Current Option Gain/Loss: +2.9%
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:
02/21/15: Uh-oh! INFA did not participate in the market's broad-based rally on Friday. Shares spiked higher on Friday morning while the rest of the market was sinking and then INFA traded lower while the rest of the market rallied.

We are turning more defensive and moving the stop loss up to $43.35. I am not suggesting new positions at this time.

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

02/21/15 new stop @ 43.35
02/17/15 new stop @ 42.65
02/12/15 new stop @ 41.85
02/06/15 triggered @ 42.65
Option Format: symbol-year-month-day-call-strike

chart:


Linear Technology Corp. - LLTC - close: 48.25 change: +0.38

Stop Loss: 44.90
Target(s): To Be Determined
Current Option Gain/Loss: +1.9%
Entry on February 11 at $47.35
Listed on February 10, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.7 million
New Positions: see below

Comments:
02/21/15: LLTC is starting to recover from the Wednesday morning gap down. Traders bought the dip at short-term technical support on the 10-dma Friday morning and LLTC bounced to a +0.7% gain. This bounce from support can be used as a new bullish entry point.

Earlier Comments: February 10, 2015:
LLTC is part of the technology sector. The company makes an array of semiconductor products.

According to the company, "Linear Technology Corporation, a member of the S&P 500, has been designing, manufacturing and marketing a broad line of high performance analog integrated circuits for major companies worldwide for over three decades. The Company’s products provide an essential bridge between our analog world and the digital electronics in communications, networking, industrial, automotive, computer, medical, instrumentation, consumer, and military and aerospace systems. Linear Technology produces power management, data conversion, signal conditioning, RF and interface ICs, µModule® subsystems, and wireless sensor network products."

Back in October 2014 LLTC reported earnings that were in-line with estimates but management guided lower. They tried to soften this disappointing news by announced a 10 million share stock buyback program over the next two years (the company has about 239 million shares outstanding).

The earnings picture improved with their most recent report. LLTC reported Q4 earnings (its fiscal Q2) on January 13th. Earnings were up +16% from a year ago with a profit of $0.51 a share. That was two cents above estimates. Revenues were up +5.4% to $352.5 million, which was just a hair below expectations.

The company has retired its debt and management said they plan to increase the amount of cash they return to shareholders. With their earnings report they also announced the Board of Directors had bumped their quarterly dividend from $0.27 to $0.30. That's the 23rd year in a row LLTC has raised its dividend. Management also offered a bullish outlook on their current quarter. LLTC now expects revenues to improve +4% to +7% sequentially. That's about $366-377 million, which is above the $364 million analyst estimate.

Technically shares of LLTC have been consolidating sideways below resistance in the $47.00-47.25 zone for about eight weeks. If you look closely you can see an inverse head-and-shoulders pattern (a bullish formation). The stock was definitely showing some relative strength today with a +2.7% gain. Now LLTC is poised for a bullish breakout past resistance. We are suggesting a trigger to open bullish positions at $47.35.

- Suggested Positions -

Long LLTC stock @ $47.35

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

Long May $50 CALL (LLTC150515C50) entry $0.85

02/11/15 triggered @ $47.35
Option Format: symbol-year-month-day-call-strike

chart:


Luxoft Holding - LXFT - close: 49.86 change: +0.14

Stop Loss: 47.40
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on February -- at $---.--
Listed on February 19, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 241 thousand
New Positions: Yes, see below

Comments:
02/21/15: Last weekend's cease-fire deal, brokered by Germany and France, has failed. Fighting continues in Eastern Ukraine. It's just not making front page news and the U.S. market clearly doesn't care.

Meanwhile shares of LXFT appear to be coiling for a bullish breakout past resistance at $50.00. Our suggested entry point is $50.25.

Earlier Comments: February 19, 2015:
LXFT is a technology company with a stock hitting all-time highs. You may not be familiar with LXFT since the company became public in mid 2013. "Luxoft Holding, Inc. is a leading provider of software development services and innovative IT solutions to a global client base consisting primarily of large multinational corporations." The company sells its services around the globe as it "develops its solutions and delivers its services from 18 dedicated delivery centers worldwide. It has over 8,600 employees across 22 offices in 14 countries in the North America, Mexico, Western and Eastern Europe, and Asia Pacific."

Last year shares of LXFT closed virtually unchanged for all of 2014. That surprises me. The company has raised its earnings guidance the last four quarterly reports in a row. They have beaten Wall Street's estimates on both the top and bottom line the last three quarters in a row.

On the daily chart you can see the big rally on February 12th. That was a reaction to LXFT's most recent earnings report. Management said earnings grew +50% to $0.81 a share last quarter. That was 21 cents above analysts' expectations. Revenues rose +31.8% to $145.75 million, also above estimates. LXFT raised their 2015 guidance from $2.00 a share to $2.15.

The stock is up significantly from its late January low near $37.00 so it wasn't a surprise to see shares correct after trading near $50 on February 13th (last Friday). What's interesting is how fast traders bought the dip. LXFT is now challenging round-number, psychological resistance at $50.00 again.

Tonight I am suggesting small bullish if LXFT can breakout higher. We'll start with an entry trigger at $50.25. We're not setting a target tonight but the point & figure chart is very bullish and forecasting a long-term target of $76.00.

Please note I am labeling this a slightly more aggressive trade and thus we want to keep our position size small to limit risk. Not only has LXFT been volatile the last couple of weeks but it might have exposure to geopolitical risk with Russia. LXFT is headquartered in Switzerland and does business around the globe. They are a subsidiary of IBS Group, which is a Russian company. LXFT also does business in Ukraine. Shares dropped sharply last March as the Ukraine situation heated up. Right now the most recent cease-fire attempt in Eastern Ukraine appears to have failed. That could prompt more sanctions from the West against Russia. We can't tell if new sanctions would hurt LXFT or not but it remains a potential risk.

Trigger @ $50.25 *small positions to limit risk*

- Suggested Positions -

Buy LXFT stock @ (trigger)

chart:


Altria Group Inc. - MO - close: 55.61 change: +0.13

Stop Loss: 53.85
Target(s): To Be Determined
Current Option Gain/Loss: +0.7%
Entry on February 12 at $55.25
Listed on February 11, 2015
Time Frame: 10 to 16 weeks
Average Daily Volume = 7.8 million
New Positions: see below

Comments:
02/21/15: Shares of MO ended the week at all-time highs. Investors have been buying the dips and MO is up four days in a row (actually up seven out of the last eight sessions). I would consider new bullish positions at current levels. Just remember this is a slower-moving trade.

Earlier Comments: February 11, 2015:
The yield on the U.S. 10-year note is trading just below 2%. Two weeks ago the 30-year U.S. note had dropped to multi-decade lows. Yields on sovereign debt from healthy European countries like Germany are trading near all-time lows near zero. Last week saw yields on huge European corporate debt, like Nestle, actually go negative.

Super low or negative yields paints a picture that investors are nervous. Smart money is looking for safety. They would rather park their money in bonds with little to zero yield (or even negative yield in some cases) just to know their money is safe. This is one reason why shares of MO look so attractive. Even at all-time highs, like it is now, MO has a 3.9% dividend yield.

The traditional cigarette industry is slowly dying. That's a good thing since the practice is so poisonous. The cigarette industry saw the volume of cigarettes decline -2.5% in the Q4 2014 and down -3.5% in all of 2014. The drop in volume for MO was not quite that bad. Yet even though the number of cigarettes being sold is falling the company continues to make money and a lot of money at that!

One secret to MO's profitability has been price increases and stealing market share from its rivals. A strong stock buyback program also helped its earnings numbers. Last quarter the company spent $260 million buying about 5.3 million shares of its stock. This helped boost its earnings per share growth to +15.8% in the fourth quarter. Results were $0.66 a share, in-line with estimates. Revenues grew +4.7% to $4.61 billion, which beat analysts' expectations.

Almost 90% of MO's business is still in the smokeable category (i.e. traditional cigarettes). They managed +3.3% revenue growth even though their volumes were down -1.7%. They're also seeing growth in their smokeless products, namely the e-cigarette business. Management offered bullish guidance of +7% to +9% growth in their earnings per share for 2015.

MO is likely to stay a popular investment among yield-conscious traders, especially since their business is so addictive, I mean predictable. The stock has been consolidating sideways in the $53.00-55.00 zone the last couple of weeks. Today shares displayed relative strength with a surge toward the top of this range. We want to be ready if MO breaks out. Tonight I am suggesting a trigger to open bullish positions at $55.25. Keep in mind that MO is something of a slow-moving stock. We will need to be patient for this trade to pay off.

- Suggested Positions -

Long MO stock @ $55.25

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

Long JUN $55 CALL (MO150619C55) entry $2.00

02/14/15 new stop @ 53.85
02/12/15 triggered @ 55.25
Option Format: symbol-year-month-day-call-strike

chart:


Neurocrine Biosciences - NBIX - close: 39.40 change: +1.98

Stop Loss: 34.90
Target(s): To Be Determined
Current Option Gain/Loss: +4.6%
Entry on February 17 at $37.65
Listed on February 14, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 937 thousand
New Positions: see below

Comments:
02/21/15: A couple of days can make a big difference. This past week the biotech stocks have been in rally mode. The last couple of sessions saw the rally accelerate and NBIX decided to participate. Shares surged +5.29% on Friday to close at multi-year highs.

I would not chase this big two-day move, especially with NBIX testing potential round-number resistance at the $40.00 mark.

Earlier Comments: February 14, 2015:
Biotech stocks were big performers last year outpacing the broader market. It looks like that outperformance will continue in 2015 with the major biotech indices and ETFs already up +5% to +7% this year. One biotech that's really outperforming its peers in NBIX, with shares already up more than +60% in 2015.

According to the company's marketing materials, "Neurocrine Biosciences, Inc. discovers and develops innovative and life-changing pharmaceuticals, in diseases with high unmet medical needs, through its novel R&D platform, focused on neurological and endocrine based diseases and disorders. The Company's two lead late-stage clinical programs are elagolix, a gonadotropin-releasing hormone antagonist for women's health that is partnered with AbbVie Inc., and a wholly owned vesicular monoamine transporter 2 inhibitor for the treatment of movement disorders. Neurocrine intends to maintain certain commercial rights to its VMAT2 inhibitor for evolution into a fully-integrated pharmaceutical company."

NBIX has two therapies planned for phase III trials in 2015. You can see NBIX's pipeline on this web page.

The drug making headlines for NBIX this year is Elagolix, a treatment for endometriosis. Shares of NBIX soared on January 8th after the company and its partner on this treatment, AbbVie, announced positive results for their latest Phase 3 trials. Endometriosis could affect up to 10% of all women in their reproductive years. That's a pretty big market. You can see why Wall Street is so excited about this news and sent shares of NBIX soaring.

Make no mistake, this is an aggressive, higher-risk trade. Biotech stocks can be volatile. The right or wrong headline can send the stock soaring or crashing. NBIX is already very, very overbought with a run from $20 to $37 since its early January lows. Yet that doesn't mean it won't keep running. Sometimes biotech stocks have a mind of their own. There is not any clear resistance. You have to go back more than ten years and you might find resistance in the $42.50-45.00 area. Should this rally continue NBIX could see more short covering. The most recent data listed short interest at 12% of the small 66 million share float.

I'm going to repeat myself. This is an aggressive play. NBIX does have options but the spreads are too wide to trade. The intraday bounce on Friday looks like a test of short-term support near $35.00. You can see on the intraday chart that NBIX has a very short-term pattern of lower highs. Therefore, we are suggesting a trigger to open small bullish positions at $37.65. If triggered we'll start with a stop loss at $34.90.

*small positions to limit risk* - Suggested Positions -

Long NBIX stock @ $37.65

02/17/15 after the close, announces a secondary offering
02/17/15 triggered @ 37.65
Option Format: symbol-year-month-day-call-strike

chart:


Spirit AeroSystems - SPR - close: 51.27 change: +0.30

Stop Loss: 47.65
Target(s): To Be Determined
Current Option Gain/Loss: +1.9%
Entry on February 19 at $50.30
Listed on February 18, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.3 million
New Positions: see below

Comments:
02/21/15: SPR continued to gain altitude on Friday. The stock is now up six days in a row. If you are looking for a new entry point I suggest waiting for a dip near $50.00. The $49.50-50.00 zone should be new support.

Earlier Comments: February 18, 2015:
Aerospace and defense stocks have been very strong performers the past couple of years. The defense cuts from Washington a couple of years ago prompted defense companies to diversify their customer base. Meanwhile airline companies had grown lean and mean to work in a high-priced oil environment. Now with oil near five-year lows their margins are improving. This is the backdrop that SPR operates.

You may not be familiar with SPR but they were spun off from Boeing (BA) back in 2005. SPR went public with their own IPO in November 2006. According to the company, "Spirit AeroSystems, with headquarters in Wichita, Kan., USA, is one of the world's largest non-OEM designers and manufacturers of aerostructures for commercial aircraft. In addition to its Wichita and Chanute facilities in Kansas, Spirit has locations in Tulsa and McAlester, Okla.; Kinston, N.C.; Nashville, Tenn.; Prestwick, Scotland; Preston, England; Subang, Malaysia; and Saint-Nazaire, France. In the U.S., Spirit's core products include fuselages, pylons, nacelles and wing components. Additionally, Spirit provides aftermarket customer support services, including spare parts, maintenance/repair/overhaul, and fleet support services in North America, Europe and Asia. Spirit Europe produces wing components for a host of customers, including Airbus."

Last year was a record-breaker for SPR's sales. Their third quarter earnings report in late October was the third quarter in a row that SPR crushed Wall Street's earnings estimates by a wide margin. Their Q3 earnings were up +79% on revenues up +12.6%. Management then raised their 2014 guidance.

SPR ended the year with a strong quarter as well. Q4 earnings were announced on February 3rd. Earnings grew +39% to $0.87 a share, which beat estimates by 10 cents. Revenues were up +5.4% to $1.57 billion. The revenue number did miss expectations but the stock rallied anyway. That's probably because SPR provided bullish guidance.

The company sees 2015 revenues in the $6.6-6.7 billion zone. That's slightly below analysts' estimates of $6.95 billion. However, SPR is forecasting 2015 earnings in the $3.60-3.80 range compared to Wall Street estimates of $3.63 a share. SPR management said their order backlog jumped 7% to $47 billion. That's about eight years worth of business. Following its Q4 results analysts have started raising their price targets on SPR.

There is a risk that rising oil prices could depress aerospace-related names. However, right now oil is likely headed even lower. Oil inventories inside the U.S. are at record highs and we're quickly running out of room to store crude oil. If we do actually run out of storage the price of oil is going to plummet, which will just be one more tailwind for SPR.

SPR has spent several days following its earnings report in a sideways consolidation. It's bullish to see the lack of profit taking from its late January and early February rally. Now shares are challenging round-number resistance at $50.00. Tonight we are suggesting a trigger to open bullish positions at $50.30.

- Suggested Positions -

Long SPR stock @ $50.30

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

Long APR $50 CALL (SPR150417C50) entry $2.09

02/19/15 triggered @ $50.30
Option Format: symbol-year-month-day-call-strike

chart:


Sensata Technologies - ST - close: 53.39 change: +0.71

Stop Loss: 51.35
Target(s): To Be Determined
Current Option Gain/Loss: +1.0%
Entry on February 10 at $52.85
Listed on February 09, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.2 million
New Positions: see below

Comments:
02/21/15: ST ended the week on an up note. Traders bought the dip on Friday near $52.00 and shares rebounded to a new six-week high. Friday's move looks like a potential entry point for new bullish positions.

Earlier Comments: February 9, 2015:
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.

- Suggested Positions -

Long ST stock @ $52.85

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

Long JUN $55 CALL (ST150619C55) entry @ $1.85

02/17/15 new stop @ 51.35
02/10/15 triggered @ 52.85
Option Format: symbol-year-month-day-call-strike

chart:


Total System Services - TSS - close: 38.03 change: +0.51

Stop Loss: 34.90
Target(s): To Be Determined
Current Option Gain/Loss: +2.6%
Entry on February 13 at $37.05
Listed on February 05, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 883 thousand
New Positions: see below

Comments:
02/21/15: TSS saw its rally accelerate on Friday with a +1.35% gain. I want to caution readers that TSS is looking short-term overbought. Not only is the stock up eight trading days in a row but it's also up six weeks in a row. I would not chase it here. If shares sees any pullback the nearest support is probably $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.

- Suggested Positions -

Long shares of TSS @ 37.05

02/21/15 Caution: TSS is starting to look short-term overbought.
02/13/15 triggered @ 37.05

chart:




BEARISH Play Updates


None. We do not have any active bearish trades.




CLOSED BULLISH PLAYS

Interactive Brokers Group - IBKR - close: 32.53 change: +0.29

Stop Loss: 31.85
Target(s): To Be Determined
Current Option Gain/Loss: +2.2%
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:
02/21/15: The market delivered widespread gains on Friday but stocks were initially weak Friday morning. Shares of IBKR dipped to new lows for the week and hit our stop loss at $31.85 before reversing higher.

*start with small positions to limit risk*

- Suggested Positions -

Long IBKR stock @ $31.15 exit $31.85 (+2.2%)

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

MAR $30 CALL (IBKR150320C30) entry $1.85 exit $1.95 (+5.4%)

02/20/15 stopped out
02/17/15 new stop @ 31.85
02/12/15 new stop @ 30.90
02/03/15 triggered @ 31.15
Option Format: symbol-year-month-day-call-strike

chart: