Option Investor
Newsletter

Daily Newsletter, Tuesday, 2/24/2015

Table of Contents

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

Market Wrap

Empress of the Doves

by Jim Brown

Click here to email Jim Brown

Janet Yellen produced no surprises with her Senate testimony today and her dovish posture was in full view. Yellen said a rate hike in the near future was "unwarranted" and future moves would be data dependent suggesting it will be a long time. Consensus estimates immediately moved from a June hike to a September rate hike.

Market Statistics

Yellen told senators that dropping the word "patient" from the FOMC statement did not necessarily mean that rate hikes would follow two meetings later. The existence of the word patient has meant at least two more meetings before a hike but she was careful to say that it could be longer than two meetings. She also emphasized that rate hikes would not be sequential like the past cycle where the Fed raised rates 25 basis points at every meeting. Yellen said the Fed would be slow and suggested a hike followed by several meetings with no change and then repeat the process. She also seemed to indicate the hikes might even be less than 25 basis points. The Fed wants to err on the side of caution and not get locked into some predetermined pattern. Analysts now view the future rate hikes to be episodic rather than routine.

Yellen expressed concern about the economic drag from Europe and Asia and the potential impact on the USA. She also mentioned the slow rebound in the housing market as a concern. Of course there was also a focus on the lack of inflation and the dormant wage growth.

If the Fed is truly going to be data dependent it could be months before patient is removed from the Fed statement. The major economic reports have been weakening and that suggests the Fed should be nervous about rushing the rate hike process. The data is not cooperating with the Fed's desire to hike rates. Before the testimony the Fed Funds futures were predicting a rate hike in August and after the meeting the futures are now pointing to October.

Yellen also reiterated that the sharp decline in oil prices was a major stimulus event for the economy. While oil prices are holding down inflation the cheap fuel will spur additional economic activity in the months ahead.

Art Cashin said it appeared Yellen had taken the Hippocratic Oath of "First do no harm" to the economy. Yellen will have a tougher job on Wednesday with her testimony to the House because there are a lot of members there with strong negative feelings about the Fed. The questioning is likely to run longer and be more heated.

The dovish performance today lifted the markets to new highs once again and powered the Nasdaq to a 10th consecutive day of gains as it moves ever closer to that psychological level at 5,000. The Nasdaq was weak all morning but finally joined the party in late afternoon.

The economic reports today offered a little more in the way of bad news. The Richmond Fed Manufacturing Survey declined from 6 in January to zero for February. This came after setting a four-year high at 20 back in October. At the present rate of decline I would not be surprised if it fell into contraction next month.

New orders fell from +4 into contraction territory at -2 and backorders fell even further from -9 to -10 and the fourth month in contraction territory. The difference between new orders and inventories fell from -21 to -22 and also the fourth month in contraction. The average workweek component declined from +8 to -6 and the employment component declined from 13 in December to 4 in February.

With all the components declining the outlook is weakening. It is possible the port problems over the last 6 months have impacted manufacturing because of missing parts but that would not impact new orders so that excuse may not be valid.

The separate Services Survey rose from 14 to 18 and the second month of gains. However, the employment component fell from 14 to 4 after a high of 24 in November.



After Consumer Confidence hit a seven-year high last month at 103.8 we were due for a pullback. The headline number declined to 96.4 in February with the -7.4 point decline a lot more than analysts expected. The present conditions component declined from 113.9 to 110.2. However, the expectations component was the hardest hit with a -9.8 point decline from 97.0 to 87.2.

Consumers said jobs were harder to get and they did not see any better expectations for the summer months. Those that expected an increase in income declined from 19.5% to 15.1%. Those expecting an income decrease rose from 10.8% to 12.0%.

Consumers planning on buying a car fell from 13.1% to 11.0%. Home buyers increased slightly from 5.4% to 5.6% and appliance buyers rose slightly from 44.4% to 45.8%.

The decline in confidence could have been blamed in part on the severe winter storms and rising gasoline prices but that would be grasping at straws. There were no clear indications of discontent. However, the increase in those that felt jobs were harder to get could mean we are going to see a weaker than expected jobs report on March 6th.


The Texas Service Sector Outlook rebounded slightly from -2.8 to +1.7 for February. These numbers are down from the 27.7 high back in September. The employment component rose from 5.8 to 12.0 and the second biggest gainer in the survey. Input prices rose from 11.4 to 18.9 and wages and benefits rose from 13.5 to 16.4 suggesting profits are getting squeezed.

Eventually Texas is going to start reporting some negative numbers with as many as 100,000 workers being laid off from energy companies according to Dallas Fed projections.

Lastly the Case Shiller home prices for December rose +4.3% YoY and were flat with November. Despite low inventory levels the big rebound in prices from the 2009 lows appears to be over. Four cities in the ten city index saw prices decline in December. Those were Boston, Chicago, Las Vegas and San Diego.

The only material economic event on Wednesday is the New Home Sales for January. The biggest hurdle will be Yellen's testimony to the House. The big worry is that she will reflect on her Senate testimony today and decide she was too dovish and attempt to correct that view on Wednesday. Also, the likelihood of numerous hostile interviewers could also generate some unintentional responses. However, I believe she will tough it out and the market will take the testimony in stride.

The GDP revision on Friday is the next challenge. This is for Q4 so it is past tense. The dock slowdown had not really taken hold and the holiday shopping season was in full bloom. Estimates are for a revision to +2.2% growth. The dock slowdown will have a material impact on the Q1 GDP.


In stock news Toll Brothers (TOL) posted a +76% increase in earnings to 44 cents compared to estimates for 30 cents. Revenue rose +33% to $853 million. The average price of a delivered home rose +13% in Q4. However, in the Case Shiller numbers above the average price was flat at +4.7% YoY in December. This could mean Toll is going to be facing some pricing pressure in the months to come. Toll was positive on the coming selling season and raised guidance for homes sold from 5,000-6,000 to 5,200-6,000 with an average price range of $725k to $760K. Toll does sell to a higher end customer that is somewhat insulated from the problems in the lower end of the housing sector. People buying $750k homes don't normally have credit problems and they are making a lot of money.


Home Depot (HD) posted earnings that rose +43.8% to $1.05 compared to estimates for 89 cents. Revenue rose +8.3% to $19.162 billion and also a beat. Free cash flow jumped to $8.242 billion. The company said Black Friday was the biggest sales day in the company's history. Full year sales rose +5.5% to $83.2 billion.

Home Depot raised its dividend +26% to 59 cents payable on March 26th to holders on March 12th. Management also authorized an $18 billion stock buyback to be completed by 2017. In 2015 they plan on buying back $4.5 billion in shares. Sales are expected to grow 3.5% to 4.7% in 2015. Same store sales in Q4 rose 6.1%.

At the end of 2014 the company said it had 2,269 stores in the USA, Canada, Mexico, Puerto Rico, Guam and the U.S. Virgin Islands. The company said it was hiring 80,000 workers for the spring selling season.

Dow component Home Depot's +4% gain added the equivalent of roughly 30 Dow points to keep the Dow in positive territory most of the morning.


First Solar (FSLR) reported earnings of $1.89 compared to estimates for 71 cents. Revenue of $1.01 billion missed estimates of $1.27 billion by a wide margin. Guidance for revenue in the range of $550-$650 million was also a miss with estimates at $857 million. They expect a per share loss of 25-35 cents in Q1. The earnings report was complicated by Monday's announcement of a spinoff. First Solar identified 13.5 gigawatts of opportunity in new solar projects. By comparison they completed 509 megawatts in Q4.

First Solar will partner with SunPower (SPWR) to spin off a YieldCo vehicle. The assets to be spun off were previously held for sale and this complicated the accounting. The Desert Sunlight and Topaz projects were completed and were expected to be sold. By retaining them for inclusion into the spinoff the company believes it will generate significant value for shareholders in the long-term. Essentially the solar farms will be spun off into a separate company that sells electricity to utility companies and structured to pay a high yield to shareholders in the form of dividends.


Cracker Barrel (CBRL) reported earnings of $1.93 compared to estimates of $1.62. Revenues rose +8.2% to $756 million to beat consensus at $734.1 million. Same store sales tose +7.9% with a +3.2% increase in the average check. In addition the average menu price increased +2.5% for the quarter. CBRL guided to earnings of $1.30-$1.40 compared to estimates for $1.33.

The company credits lower gasoline prices with higher customer traffic and the higher sales per customer. They said in the prior quarter earnings they were already seeing a boost in business from falling gasoline prices so the pattern did continue.


BHP Billiton (BHP) reported earnings of $1.60 that fell -47.3% from the $3.03 in the year ago quarter. Revenues fell -11.9% to $29.9 billion. They produced record amounts of copper, aluminum and nickel but the prices declined in the commodity crunch. BHP said it was shutting down 40% of its shale oil rigs and would operate only 16 by June. The company has seven major projects under development with a combined budget of $13.5 billion.


Trex (TREX) reported earnings of 16 cents that beat estimates by a penny. Revenue rose +16.3% to $74.2 million compared to estimates for $70.3 million. Guidance for revenue of $120-$121 million for Q1 was in line with estimates.

All those details sound very mediocre but I doubt few investors remember this company was on the verge of bankruptcy in 2009. The new CEO Ron Kaplan turned the company around and shares hit a new historic high on today's earnings. The stock is up +1,050% since Kaplan took the helm.


Agrium (AGU) reported earnings misses on both earnings and revenue but the shares still posted a $4.00 gain. Earnings of 46 cents missed estimates for 60 cents. Revenue of $2.71 billion missed estimates of $2.96 billion. However, they guided for full year 2015 earnings of $7.00 to $8.50 and estimates were only $7.54. The company said after the drop in natural gas prices they hedged their 2015 requirements between $2.50 and $4.00 MMBtu. Earnings were not good but the guidance was great.


After the bell Hewlett Packard (HPQ) reported earnings of 92 cents beat estimates of 91 cents. Revenue fell -5% to $26.84 billion and that missed estimated for $27.38 billion. The company warned that earnings for the current quarter would be in the 84-88 cent range and analysts were expecting 96 cents. Shares of HPQ fell -$4 in afterhours.

Hewlett Packard reported flat or lower quarterly revenue in all of its operating units. They blamed the strong dollar for much of the weakness and guided to currency issues in 2015 as well. Two-thirds of their business is international and 50% of that is in Europe. HP expects full year earnings of $3.53-$3.73 with a 30 cent hit due to currency issues. This is well below analyst estimates for $3.95.

There will be a $1.50 hit to earnings for the proposed split of the company later this year. The company will split into HP Inc and Hewlett Packard Enterprises by November 1st. One company will continue in the PC/Printing sector and the other company will concentrate on enterprise hardware and software for the cloud and cloud services.


Casino stocks with operations in Macau received another blow today. A senior Macau official said the city wants to study restrictions on mainland Chinese tourists to ease overcrowding. The government will ask China's central government in Beijing to analyze Macau's capacity for visitors and consider how "too many tourists" impacts the quality of life for residents. China's president has asked Macau to "diversify away from its reliance on casinos and turn the city into a world tourism and leisure center." Macau casino revenue fell for the eighth consecutive month in January due to stricter travel rules from mainland China and a yearlong crackdown on corruption that has high rollers trying to avoid scrutiny, which includes the analysis of money transfers from the mainland to Macau for gambling.

Shares of WYNN fell -5%, LVS -4% and MGM -3%.


Crude oil declined -25 cents to $49.26 and is on the verge of breaking below that short term support at $49. The rebound in oil prices appears to be fading and now traders are betting on a new low in the weeks ahead. The January low was $43.58 on January 29th. Many analysts believe the next decline will see a break of the $40 level.

There was a slight boost to $54 and change on Monday on news the OPEC president may call an emergency meeting in the coming weeks if the price of crude continues to be weak. That $54 level was touched three times in February and that appears to be the short term top.

If crude prices continue to decline the equity market will suffer. We need to watch this over the next few days and act accordingly.

Hedgeye posted this picture last week and it is very appropriate.



In related news President Obama vetoed the Keystone XL pipeline late this afternoon. He said he did not object to the pipeline just the timing. He has had the State Department reviewing the pipeline for the last six years to determine if it was in the national interest.

We entered WWII on December 7th 1941 and the war ended on September 2nd, 1945, a period of four years. During that time we built thousands of tanks, airplanes, ships, millions of guns, uncounted tons of ammo and bombs and trained and transported more than 12 million soldiers and all those supplies to the various countries to fight and win. So why does it take more than six years to decide if a pipeline to transport cheap Canadian oil to the U.S. across only 3 states is in the national interest? TransCanada (TRP) could have actually built the pipeline 3 times in that six year period.


Markets

It was questionable at the open whether the markets were going to rally or not. The negative economics led to lower opens and then the worry over a Yellen surprise kept traders on the sidelines until well into her testimony. Once they decided she was not going to say something negative the shorts began to cover.

Traders coming off the sidelines added to the gains and it turned into a pretty decent market day. Advancers were 2:1 over decliners and all the major indexes closed at new highs. The Nasdaq was a new 15 year high but at 4,968 it is closing in on that March 2000 high at 5,132. It appears to be only a matter of time.

The S&P added a decent +6 points to close at 2,115 and edging closer to resistance at 2,125. The S&P was only up +1 point most of the day but finally moved higher into the close after Yellen quit speaking.

Personally I would be perfectly happy with 6 point gains every day. Slow and steady wins the race and gains that slow allow traders to enter and exit at will without any stomach churning volatility.

While the markets look like they are going to continue moving higher there are some considerations. The Nasdaq is well into overbought territory and it did not really turn positive until early afternoon and then it was shaky. After 10 consecutive days of gains it is time for a rest.

The second problem will be a further decline in crude prices. This will weigh on the energy sector, which is 12% of the S&P and a couple of large stocks in the Dow.

While I believe the market will go higher in the weeks ahead it might not be straight up. March is the 4th best month in the S&P in the third year of an election cycle. Since 1963 the Dow has not had a down March. The S&P has only been down once out of the 13 years. The Nasdaq began in 1971 and has only been down once in March in year three of the election cycle. The Russell 1000 and 2000 came along in 1979 and they have a perfect record of gains in the last 9 cycles. The data is from the Stock Trader's Almanac.

While history does not have to repeat it generally does. The positive March cycle is related to end of Q1 portfolio restructuring and the quarterly expiration of options and futures.

However, March also has a rocky record of losses after expiration Friday. The Dow has been down 17 of the last 27 years in the last week of March.

To put this in perspective the next three weeks should have a bullish bias. That does not mean it won't be choppy with doses of volatility. Once into March expirations I would look to tighten up my stop losses and be prepared for a decent decline. That is of course if we don't get it before then. Once traders figure out market cycles they tend to trade ahead of them and sometimes that disrupts that cycle.

S&P short term support is 2,104 and 2,090. Resistance 2,125.


The Dow is moving through a gauntlet of resistance with the high today at 18,230 and long term uptrend resistance from July. This is a minor range that has been broken before. The next material hurdle will be 18,300 to 18,325. Home Depot was a major support for the Dow this morning and was responsible for keeping it positive in the early going. Once the post Yellen rally really kicked off the number of Dow gainers increased significantly.

Support 18,100 and 17,965. Resistance 18,300 to 18,325.



The Nasdaq may be about ready to give up its leadership role. Since most of the Nasdaq gains have been on the back of Apple (AAPL) and this stock needs a rest the Nasdaq should rest as well. Since year end the Nasdaq 100 has gained about 224 points. More than 218 of those points have been from only five stocks. The Nasdaq 100 is a market capitalization weighted index. That means stocks with large market caps like Apple have a large impact on the index. Since December 31st Netflix has been responsible for 10 Nasdaq points. Gilead added +15, Biogen +17, Amazon +35 and Apple +141 Nasdaq points. Those five stocks were responsible for +218 of the Nasdaq's 224 point gain.

If the Apple rocket finally runs out of fuel it will be hard for the Nasdaq to overcome. Apple is 12% of the index. Apple shares were negative today and could easily give back quite a few points. Apple has gained +23 points or roughly 20% since its earnings.


Coupled with the potential for profit taking in Apple is the psychological resistance at Nasdaq 5,000. While 5,132 is the Nasdaq intraday high from March 10, 2000 and 5,048 was the high close, the 5,000 level is considered milestone resistance. The Nasdaq struggled at that level twice during March before crashing back to reality.

Getting through that 5,000 level could be a real challenge.


We all know that the Nasdaq can remain in rally mode far longer than anyone expects. Most of us have suffered repeatedly from trying to short an "obviously overbought" Nasdaq in the past. Overbought can always become more overbought. However, when reality returns the declines can also be dramatic. I am not predicting one here but we are nearing nosebleed territory.

Support 4,950 and 4,900, resistance 5,000.



The Russell 2000, NYSE Composite, S&P-400 Midcap are all at record highs. The Russell is nibbling away at the new highs by 2-4 points a day rather than taking big bites, which suggests fund managers have not yet gone all in on the small caps. OR, maybe they have gone all in and there is no cash left in the bank.

While I would like to see the Russell continue adding points I would like to see some excitement hit the small caps. Until then I would be cautious. The NYSE Composite is showing the same pattern. Today's new high was only 18 points over Friday's high. This index is creeping higher rather than sprinting.




While I do have a bullish bias for stocks for the next three weeks I do want to emphasize that it may not be straight up. We are due for some negative volatility and it could come at any time. As a trader I would buy the dips but probably not the first day. Remember stocks do go up and down and not always in a straight line.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email

 

 


New Plays

Flying Higher

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Southwest Airlines Co. - LUV - close: 45.35 change: +0.66

Stop Loss: 41.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on February -- at $---.--
Listed on February 23, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 9.2 million
New Positions: Yes, see below

Company Description

Why We Like It:
After years of elevated oil prices in the $80 to $110 a barrel range the airline industry was forced to turn into lean, mean machines. When crude oil prices plunged, almost in half, it was a windfall for the airline business. One firm that outperformed them all was LUV. Shares of LUV were the best performing stock in the S&P 500 last year with a gain of +125%. That rally continues today.

The company describes itself as "In its 44th year of service, Dallas-based Southwest Airlines (LUV) continues to differentiate itself from other air carriers with exemplary Customer Service delivered by more than 46,000 Employees to more than 100 million Customers annually. Southwest operates more than 3,400 flights a day, serving 93 destinations across the United States and five additional countries."

2014 was one for the record books for LUV. The company turned in quarter after quarter of record-breaking numbers. They just completed their 42nd consecutive year of profitability, which is quite a feat for an airline. Plus they're on track to pay their 154th consecutive dividend in March 2015.

LUV has been beating Wall Street's earnings estimates for multiple quarters in a row. They often beat the revenue estimate as well. Their most recent report was January 22nd. LUV's 2014 Q4 earnings soared +78% to $0.59 a share. Revenues were up +4.5% to $4.63 billion. Their load factor, an airline metric, hit a record 82.0 percent.

LUV's management commented on the impact of crude oil's decline and how it affects their business:

"With the collapse in fuel prices since September 2014, fuel prices have declined nearly 50 percent. Based on our existing fuel derivative contracts and market prices as of January 16, 2015, we estimate our first quarter 2015 economic fuel costs to be approximately $1.90 per gallon, which would result in approximately half a billion dollars in year-over-year fuel cost savings for first quarter alone."
LUV's CFO, Tammy Romo, went on to say that 2015 could see fuel savings up to $1.7 billion.

Meanwhile airline travel in general is rising. The International Air Transport Association (IATA) said global passenger traffic for 2014 rose +5.9%, which was above the 10-year average and above the last two years in a row.

Since LUV's earnings report in late January there have been multiple analysts raising their price targets into the $55-$60-$65 range.

Oil production in the U.S. has driven oil inventories to 80-year highs and the country could actually run out of storage. This will likely push oil prices even lower. That would mean even more savings for the airlines.

Technically shares of LUV are bullish with a trend of higher lows and higher highs. Traders just bought the dip (twice) near short-term support at $42.00 and its rising 50-dma. The stock displayed relative strength today with a +1.47% gain and look poised to take off again. Tonight we are suggesting a trigger to open bullish positions at $45.50.

Trigger @ $45.50

- Suggested Positions -

Buy LUV stock @ (trigger)

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

Buy the JUN $50 CALL (LUV150619C50) current ask $1.70

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

Daily Chart:



In Play Updates and Reviews

Stocks Drift Higher Thanks To Yellen

by James Brown

Click here to email James Brown

Editor's Note:
The U.S. market rally continued thanks to dovish comments from Janet Yellen. The Federal Reserve chairman reaffirmed that any interest rate hike was still at least two meetings away, if not more.

Our MCHP trade hit our entry trigger today.


Current Portfolio:


BULLISH Play Updates

Abbott Laboratories - ABT - close: 47.47 change: +0.15

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:
02/24/15: Tuesday turned out to be a quiet session for shares of ABT. The stock managed a +0.3% gain after a mostly sideways session. If you're looking to buy a dip I'd rather wait for a dip closer to support near $46.50 as our next entry point.

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


The ADT Corp. - ADT - close: 39.42 change: -0.42

Stop Loss: 37.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on February -- at $---.--
Listed on February 23, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.5 million
New Positions: Yes, see below

Comments:
02/24/15: The rally in ADT paused today. Shares erased most of yesterday's rally. This isn't too surprising since ADT was testing resistance at $40.00. We want to see a breakout. Our suggested entry point is $40.10.

Earlier Comments: February 23, 2015:
ADT is in the alarm and home monitoring business. It has been a very bumpy ride for investors since the company was spun off from Tyco International back in 2012. Shares of ADT plunged from $50 a share in early 2013 down toward $28 by early 2014. The company has been working on a turnaround and the worst seems to be behind it.

The company describes itself as "The ADT Corporation (ADT) is a leading provider of security and automation solutions for homes and businesses in the United States and Canada. ADT's broad and pioneering set of products and services, including ADT Pulse® interactive home and business solutions, and health services, meet a range of customer needs for today’s active and increasingly mobile lifestyles. Headquartered in Boca Raton, Florida, ADT helps provide peace of mind to nearly seven million customers, and it employs approximately 17,500 people at 200 locations."

ADT has been consistently beating Wall Street's earnings expectations the last few quarters. Their most recent earnings report was ADT's 2015 Q1, which was announced on January 28th. Results were 51 cents a share. That's a +18.6% increase from a year ago. Revenues were up +5.7% to $887 million, above estimates.

Management said their recurring subscription revenues, about 93% of total revenues, were up +6.5% from a year ago. The number of client accounts had risen from 6.4 million to 6.7 million in the last two quarters. ADT reported higher average revenue per customer with an increase of +5.3%. That's likely due to their growth in Pulse subscribers. Pulse is a higher-end subscription for ADT, which now accounts for 19% of its subscription base. Pulse customers have a lower dropout rate and higher margins.

Previously Wall Street was worried that cable giants like Comcast, when they jumped into the home alarm monitoring business, would steal customers and hurt ADT's business. Thus far that has not been the case. Now the race is on to see who can cash in on the "connected home" industry, which will be a big part of the Internet of Things.

Technically shares of ADT have been showing relative strength. They recently broke through resistance near $37.00-38.00 and formed an inverse head-and-shoulders pattern (which is bullish). The point & figure chart is also very bullish with a breakout and a $52.00 target (see below). The most recent data listed short interest at 27% of the 170 million share float. That's plenty of fuel for a short squeeze. Tonight we are suggesting a trigger to open bullish positions at $40.10.

Trigger @ $40.10

- Suggested Positions -

Buy ADT stock @ (trigger)

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

Buy the APR $40 CALL (ADT150417C40)

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


Cree, Inc. - CREE - close: 39.56 change: +1.09

Stop Loss: 34.85
Target(s): To Be Determined
Current Option Gain/Loss: +8.2%
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:
02/24/15: CREE displayed significant strength with a +2.8% gain. However, I want to remind investors that this stock is nearing what could be tough resistance. Not only is $40.00 potential resistance but the 200-dma is also near $40.00. Plus, the top of CREE's big gap down from last October is near $40.00. Do not be surprised to see shares struggle in this area.

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


Linear Technology Corp. - LLTC - close: 48.58 change: +0.66

Stop Loss: 44.90
Target(s): To Be Determined
Current Option Gain/Loss: +2.6%
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:
02/24/15: Semiconductor stocks were showing relative strength today. The SOX index added +1.3%. LLTC managed to keep pace with the group and added +1.3%. There is very short-term resistance near last week's high just under $49.00.

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


Luxoft Holding - LXFT - close: 50.02 change: +0.55

Stop Loss: 47.40
Target(s): To Be Determined
Current Option Gain/Loss: -0.5%
Entry on February 24 at $50.25
Listed on February 19, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 241 thousand
New Positions: see below

Comments:
02/24/15: After coiling beneath resistance at $50.00 the last few days shares of LXFT finally broke through this level. The stock hit $50.50 intraday. Our trigger to launch positions was $50.25. Unfortunately LXFT pared its gains and closed right on resistance at the $50 mark.

There was an afternoon rally up to $50.32. Traders may want to wait for a new rise past $50.32 before initiating new positions.

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.

*small positions to limit risk* - Suggested Positions -

Long LXFT stock @ $50.25

02/24/15 triggered @ $50.25


Microchip Technology - MCHP - close: 51.53 change: +0.91

Stop Loss: 49.25
Target(s): To Be Determined
Current Option Gain/Loss: +0.7%
Entry on February 24 at $51.15
Listed on February 21, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.8 million
New Positions: see below

Comments:
02/24/15: MCHP is another chip stock showing relative strength today. Our trigger to open bullish positions was hit at $51.15. The rally continued and MCHP closed up +1.79%.

Earlier Comments: February 21, 2015:
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.

- Suggested Positions -

Long MCHP stock @ $51.15

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

Long Apr $50 CALL (mchp150417C50) entry $2.40

02/24/15 triggered @ 51.15
Option Format: symbol-year-month-day-call-strike


Altria Group Inc. - MO - close: 55.72 change: +0.21

Stop Loss: 53.85
Target(s): To Be Determined
Current Option Gain/Loss: +0.9%
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:
02/24/15: MO spent most of the day quietly churning sideways. The next hurdle for the bulls appears to be the $56.00 mark.

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


Neurocrine Biosciences - NBIX - close: 38.62 change: -0.48

Stop Loss: 34.90
Target(s): To Be Determined
Current Option Gain/Loss: +2.6%
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:
02/24/15: Biotech stocks did not participate in today's market rally. The group retreated and NBIX followed its peers lower. Shares are currently testing short-term support near $38.00. Investors can use this dip as a new entry point or if you're feeling cautious then wait for a bounce from current levels.

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


Spirit AeroSystems - SPR - close: 50.34 change: -0.01

Stop Loss: 47.65
Target(s): To Be Determined
Current Option Gain/Loss: +0.1%
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:
02/24/15: SPR drifted sideways on Tuesday and closed virtually unchanged. I don't see any changes from my recent comments. The 10-dma near $49.75 and the $50.00 mark should offer some short-term 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


Sensata Technologies - ST - close: 55.30 change: +0.20

Stop Loss: 51.35
Target(s): To Be Determined
Current Option Gain/Loss: +4.6%
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:
02/24/15: ST tagged another new high before paring its gains midday. The stock does look a little bit overbought with the three-day rally from $52.00. I wouldn't be surprised to see a pullback.

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


Total System Services - TSS - close: 38.04 change: +0.14

Stop Loss: 34.90
Target(s): To Be Determined
Current Option Gain/Loss: +2.7%
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:
02/24/15: TSS bounced near its trend of higher lows and rebounded back toward this week's highs. I am not suggesting new positions at current levels.

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




BEARISH Play Updates


None. We do not have any active bearish trades.