Option Investor
Newsletter

Daily Newsletter, Monday, 3/16/2015

Table of Contents

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

Market Wrap

The Bulls Are Ready

by Thomas Hughes

Click here to email Thomas Hughes
Monday bulls drove the markets higher for the second week in a row as the market gets ready for the FOMC.

Introduction

Monday trading resulted in a +1% rally for the second week in a row. The markets are gearing up for another FOMC meeting and seem euphoric in the face of a possible change of statement. Today's rally was global, starting in Asia and working its way through Europe and into our markets. Indices in both overseas regions reached new highs; China hit a five year high, Japan closed flat after touching an all time high and Germany closed at an all time high. Our indices did not reach the all time highs but are set to possibly test resistance tomorrow or Wednesday and up to and until the FOMC policy statement is released.

Market Statistics

There was a fair amount of economic data released today. A lot of it was weaker than expected but the gist is that we are still in the winter slump, but expectations for the upcoming spring, summer and 2nd half are positive if not strong. There were also a number of earnings releases but nothing to grab the markets interest. The official “season” is over, there are only 2 S&P companies left to report for the 4th quarter of 2014 and this week will see the first half dozen or so report on the 1st quarter of 2015.

Futures were up right from the start but not overly strong. The pre-opening session was relatively quiet as I think attention is focused on the chance of fundamental change by the FOMC and not on individual data points released today. After the open the bulls moved higher, slowly, until they got their feet under them. Around 9:15 they began a march higher that lasted all day. The indices reached a high around noon that held until 2PM and then reached new highs afterward.

Economic Calendar

The Economy

Empire Manufacturing was reported at 6.9, this is below last month's 7.8 and the expected rise to 8.8. On top of that last month was revised lower to 7.4. Within the report new orders declined -2.4, shipments fell -7.9 and prices paid were down but labor saw “solid increases” in employment levels and hours worked. While down, the number is still positive and shows expansion within the New York area of the Federal Reserve System. The 6th month outlook also remains positive and has rebound from a low set last month.


Industrial Production rose by a tenth in February versus an expected rise of 0.3%. This is below expectations but still positive, and a gain of 0.4% from last month's downward revision. While production rose output declined for the 3rd month in a row, falling -0.2% in February. Capacity utilization also fell in February and is now only 78.9%, 1.2% below the long term average. This isn't a great report but it looks like industry could be getting ready to ramp up production; production is on the rise while at the same time hiring remains strong and capacity utilization is declining, at this point a pick up in utilization would be indicative/symptomatic of a rise in production.

The National Association of Home Builders released their monthly survey of builder sentiment this morning as well. The index fell by 2 to 53, positive but revealing what the association refers to as “supply chain issues”. Shortages of lots and labor, as well as strict underwriting, are hurting current conditions. Within the index current conditions and traffic both fell, to 58 and 37, but the 6 month outlook remained steady at 59. The NAHB also says that it is expecting improvements in the spring and “solid gains” for the year.

Moody's Survey of Business Confidence rebound this week to near record highs. The index gained 1.6 points to hit 39.8. This is a nice surprise in light of last weeks drop and shows that sentiment among businesses who participate remains high. The summary is positive and optimistic about the future but subdued from past weeks. Mr. Zandi, Moody's chief economist, says that -

Business confidence rebounded last week back close to record highs. Confidence is especially strong in the U.S., where businesses are feeling good about sales, hiring and investment. Pricing is holding up well despite heightened deflation concerns in much of the developed world. The survey results are consistent with an economy that is expanding well above its potential.


According to FactSet 498 of the 500 S&P 500 companies have reported for the fourth quarter of 2015 and at least one of the last two is scheduled to report this week. Of those, 75% have beaten the blended average for earnings and 58% have beaten the blended average for revenue. The blended rate for the fourth quarter is going to end up right around 3.7%, above the 1.7% expected at the start of the reporting period and in line with recent trends.

The 1st quarter is not expected to be good; 1st quarter earnings are expected to decline by -4.9%, led by a -63.5% decline in the energy sector. The next largest decline is expected in the utilities sector, -6.3% a tenth of the decline expected for the energy sector, which is why I think that earnings ex-energy will be more important than the overall blended average.

Looking back at the 4th quarter of 2014 the blended rate ex-energy jumps to 7.5%, looking ahead to projections for the 1st quarter of 2015 the blended rate ex-energy jumps from -4.9% to +1.05%. Now think about this; on average, over the past few years, the final S&P 500 blended growth rate has been 3-5% higher than estimated at the beginning of the quarter. This past quarter saw a rise of 2% from the initial estimate, and 3% from the low estimate. With this in mind I think it safe to say that earnings are going to decline, but the overall earnings picture might not be that bad.


Looking beyond 1st quarter earnings to the second half of the year things begin to perk up. The second half is expected to see a return to overall earnings growth and expanding corporate margins.

Tomorrow is light on data, only two releases, housing starts and building permits. These could give indication of rebound in home building but its probably too early for that. Wednesday is FOMC day, the release expected at 2PM. Thursday is the usual jobless claims and the Friday wraps it up with Leading Indicators and the Philly Fed Survey.

The Oil Index

Oil, it fell, again, by more than 2% to a new 6 year low. Whatever you may think about the supply/demand picture there are no buyers for oils right now. Storage remains high and building, supply and production also remains high and so far there is no indication that anybody wants to buy, or even needs to buy. Until this changes oil could continue to move lower and will no doubt influence earnings expectations for the energy sector. It is quite possible that projected earnings decline for the sector and for the broader S&P 500 could move lower before they move higher.

The Oil Index, surprisingly, moved higher today. The index gained nearly a full percent in a move that began at the long term trend line. Today's action confirms support at the trend line following the test of support last Friday. The indicators are still weak but also in the early stages of the trend following signal set up; MACD is retreating from its bearish peak while stochastic is making a weak bullish crossover. This is not a strong signal and if oil prices do not stabilize or rebound could result in a false signal. However, the trend is up and this early signal is in line with that trend so as such will be my signal to start looking deeper into the sector.


The Gold Index

Gold prices held steady today, just above $1150. A swirling combination of economic outlook, FOMC statements, inflation and interest rate speculation has brought gold back to this level after causing it to bounce from this level just a few months ago. Strong dollar is hurting gold value in the near term but the expected FOMC change to statement is a sign inflation is on the horizon. Raising the rates is strong for the dollar, but also indicative of an environment in which inflation needs to be controlled. That expectation is, I think, what caused gold to end it long term down trend in the first place and could cause it to bounce again now. That and an expected increase in physical demand from Asia, aided by a recent cut to the gold tariff in India.

The gold miners ETF GDX gained 0.75% today. Today's action was up but is really just another day of sideways trading, beneath potential resistance and near the long term bottom. This action appears to be a consolidation but whether it is a precursor to a test of the long term low or a bounce from support is yet to be seen. The indicators are retreating from bearish peaks which shows that selling pressure is letting off but those same peaks are convergent with lower prices so a move down to the long term low looks more likely than not. Support target is the long term low, near $16.50, with resistance along my rising trend line near $18.25. A break above resistance could take the index up to the top of the 5 month range near $21. All of this does of course depend on the FOMC and the affect they have on the gold market.


In The News, Story Stocks and Earnings

This is a big central bank week for more than just the United States. The Bank of Japan and the Swiss National Bank are also both meeting but both expected to make no market moving changes. The FOMC on the other hand is expected to make changes and those expectations, along with economic trends, have been driving the dollar higher versus the euro and other currencies as well.

Today the Dollar Index fell from its all time high by -0.75% and created a moderately sized black candle. Today's action is not a full blown Dark Cloud Cover but does appear to be indicating a possible peak. The indicators are strongly bullish but also indicative a peak has been reached; MACD is in retreat from an extreme peak and stochastic is making a bearish crossover. These don't mean there will be reversal but they are a good indication that the rally may be over, at least for a time, and I tend to agree with this assessment. The dollar has been driven to this level on expected QE from the ECB and expectation of a change to the FOMC statement. There is no more additions to QE expected and a change to statement is not a change of policy. Without a change of policy I see no reason for the dollar rally to continue.


Apple will enter the Dow Jones Industrial Average at the end of the week, replacing AT&T. This move will likely spur some serious buying in Apple which in turn could help the index to reach a new high. Today Apple gained close to 1% and moved above the short term moving average. The stock appears to be consolidating just above the previous all time high with indicators rolling into a trend following buy. MACD momentum is retreating from a bearish peak while stochastic is making a weak bullish crossover.


AT&T is being replaced and will remove a drag on the Dow. The telecom giant has been trending in a very choppy range over the past 12 months at least and is now just off the bottom of the range. Today's action carried the stock up by just over 0.9% but leaves it well below the 30 day moving average. This one could be setting up for a test of the 12 month low, near $32.


The Indices

The indices moved higher today, averaging more than 1% and in most cases moving above the 30 day EMA, if not already above it. Today's move was led by the Dow Jones Transportation Average and a 1.69% gain. Today's move created a long white candle and completed a three day continuation pattern that could lead to further upside. The index is moving up from the short term moving average near the middle of the 5 month trading range toward the top of the range at the all time high. The indicators are very weak but about to confirm an bullish trend following signals that could also lead to further upside. Current resistance is the all time high and could be reached before the FOMC meeting on Wednesday.


The S&P 500 made the next largest move today gaining 1.35%. The broad market also created a long white candle and completed a three candle continuation pattern. Today's action carried the index above one resistance line and the short term moving average and looks more bullish because of it. The indicators are weak, but like on the transports, rolling into a trend following buy signal. The MACD is about to make the zero line crossover and stochastic is forming a weak bullish crossover. Resistance is between 2090 and 2100 with next resistance at the all time near 2120. Based on today's action I think it possible resistance is tested in the next two days.


The Dow Jones Industrial Average made the third largest gain today, 1.29%. The blue chips also made a long white candle and crossed above the short term moving average. Today's action has also completed the three day continuation pattern mentioned above and has brought the index to meet possible resistance at 18,000. If the index crosses this level next resistance will be the all time high, about 260 points higher. The indicators are consistent with an early/weak trend following signal that could lead to a test of resistance in the least.


The NASDAQ Composite brings up the rear today with a gain of only 1.19%. The tech heavy index did not form a long white candle but price action is bullish nonetheless. Today's action is a move up from the short term moving average in line with underlying trend. The indicators are similar to the other indices but a little weaker, stochastic is not yet making the bullish crossover but it looks very likely to come. A move up to resistance just above 5,000 is likely with a break above that possible.


Here we go again. We are on the cusp of an FOMC meeting, the indices are recovering from a small correction and the indications are good the rally will continue. The caveat is that this time the risk, if you want to call it that, that the FOMC raises rates will grow and it is unclear exactly what the market is going to do when that happens. Until the market breaks out to new highs there is a chance that the statement could put an end to the rally.

They won't raise the rate this time but there is a very large chance they will change their statements and this means the hike is very very close and could come at any time. According to Janet Yellen the change to statement won't mean the market should expect a rate hike at any specific meeting ie June or September...but that a rate hike could come at any meeting should the data warrant it. In any event, the trends are up, the data is stable and expectations are good; I remain bullish.

Until then, remember the trend!

Thomas Hughes


New Plays

All The Bad News

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Golar LNG Ltd - GLNG - close: 34.97 change: +0.61

Stop Loss: 30.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on March -- at $---.--
Listed on March 16, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.3 million
New Positions: Yes, see below

Company Description

Why We Like It:
GLNG is part of the shipping industry. Unfortunately demand for shipping has been crushed thanks to a slowing global economy. The surging dollar doesn't help when it comes to commodity prices. Shares of GLNG have seen a significant sell-off with the stock down from $74 in September 2014 to less than $30 in January this year.

According to the company, "Golar is one of the world's largest independent owners and operators of LNG carriers with over 40 years of industry experience. Golar's innovation delivered the world's first Floating Storage and Regasification Units (FSRU) based on the conversion of existing LNG carriers. Golar's latest strategic move is to extend its business model further upstream by deploying its floating liquefaction technology (GoFLNG). The objective is to become the industry's leading integrated midstream LNG services provider, supporting resource owners, gas producers and gas consumers."

Management confessed that demand for charting LNG shipping will likely be weak in the first half of 2015. They expect a significant improvement in the second half of the year. What investors should note is that all the bad news over the last several months seems to be priced in. Cautious comments from management failed to send GLNG stock to new lows.

Earlier this month the stock soared (on March 5th) after GLNG announced it had signed a memorandum of understanding with Russian natural gas giant Rosneft. The company press release states that Rosneft is the third largest gas producer in Russia. Rosneft gas production reached 42.1 bcm in 2013, while the recoverable natural gas reserves topped 6.5 tcm. The company target is to reach 100 bcm of annual gas production by 2020. As investors it's worth noting that Rosneft is 75% owned by the Russian government. The two companies are going to be working together on some of Rosneft's natural gas assets. Shares of GLNG soared on this news.

GLNG did see some profit taking on the big move but investors are have started buying the dip. Now GLNG is poised to breakout past resistance at the $35.00 level. The point & figure chart looks very bullish with a triple-top breakout buy signal forecasting at $48.00 target.

Tonight I'm suggesting a trigger to launch small bullish positions at $35.25. We want to limit our position size to reduce risk. Energy-related names have been tough to trade lately.

Trigger @ $35.25 *small positions to limit risk*

- Suggested Positions -

Buy GLNG stock @ (trigger)

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

Buy the JUN $40 CALL (GLNG150619C40) current ask $2.40

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Markets Bounce Ahead Of FOMC

by James Brown

Click here to email James Brown

Editor's Note:
Stocks rebounded in front of a two-day Fed meeting. A drop in the U.S. dollar failed to stop the sell-off in crude oil, which hit new six-year lows. Meanwhile small cap stocks continued to inch toward new highs.

DDD hit our bearish entry point.


Current Portfolio:


BULLISH Play Updates

Best Buy Co. Inc. - BBY - close: 41.63 change: +1.10

Stop Loss: 37.75
Target(s): To Be Determined
Current Option Gain/Loss: +3.4%
Entry on March 06 at $40.25
Listed on March 04, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 6.2 million
New Positions: see below

Comments:
03/16/15: The relative strength in BBY continues. Shares rallied +2.7% to close at new 52-week highs. If you're looking for a new entry point you may want to wait for a dip.

Trade Description: March 4, 2015:
BBY has got a bullish recipe brewing. The company has rising sales, rising earnings, rising dividends, and rising stock buybacks. The company launched a massive turnaround effort when they changed management in 2012. According to Fortune, BBY has "turned around its U.S. operations., shed assets abroad and trimmed expenses to help lift profitability."

If you're not familiar with BBY the company describes itself as "one of the world's largest consumer electronics retailers, offering expert service and unbeatable prices to the consumers who visit its websites and stores more than 1.5 billion times each year. In the United States, more than 70 percent of Americans are within 15 minutes of a Best Buy store. Additionally, the company operates businesses in Canada and Mexico. Altogether, Best Buy employs more than 125,000 people and earns annual revenues of more than $40 billion."

This week BBY has been making headlines thanks to its better than expected Q4 earnings results, which came out on March 3rd. Wall Street was expecting a profit of $1.35 a share on revenues of $14.33 billion. BBY said earnings hit $1.48 a share. That's a +23% increase from a year ago. Their unadjusted earnings were up +75% from a year ago. Q4 revenues were up +1.3% to $14.21 billion. BBY's U.S. same-store sales were up +2.8%. International was down -4% but their online sales surged +9.7%. Their U.S. same-store sales results are noteworthy because it's the second consecutive quarter of same-store sales growth for the first time in five years.

BBY's CEO and President Hubert Joly commented on his company's results saying,

"In the fourth quarter, our teams delivered positive comparable sales, improved profitability and continued progress in our Renew Blue transformation. This resulted in a 1.3% increase in revenue to $14.2 billion and a 23% increase in non-GAAP diluted EPS to $1.48 versus $1.20 last year, primarily driven by growth in the Domestic segment. A compelling merchandise assortment and strong multi-channel execution drove these better-than-expected results as we capitalized on the product cycles in large screen televisions and mobile phones. These two categories were the primary drivers of our year-over-year revenue growth, and more than offset weakness in the tablet category which was impacted by material industry declines."
Joly did warn that in fiscal 2016 BBY will "be facing industry and economic pressures on our business related to deflationary pricing and weak industry demand in certain product categories." However, investors didn't care. They didn't care about the revenue miss or the negative foreign currency headwinds. Everything was overshadowed by BBY's very shareholder friendly capital return initiatives.

The company said they are raising their normal dividend by +21% to 23 cents a share effectively immediately. They are also going to pay a special, one-time dividend of $0.51 a share. Plus they are re-starting their stock buyback program. Previously BBY had a $5 billion stock repurchase program but that halted it back in 2012 to work on their turnaround strategy. Management announced they plan to spend $1 billion on stock buybacks over the next three years.

Multiple analysts firms raised their price target on BBY following the company's earnings results and dividend news. Most of the new targets were in the $45-50 range.

Currently shares of BBY are trading just below key round-number resistance at the $40.00 mark. A breakout here could spark some short covering. The most recent data listed short interest a 10% of the 304 million share float. Tonight we're suggesting a trigger to launch bullish positions at $40.25.

- Suggested Positions -

Long BBY stock @ $40.25

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

Long MAY $40 CALL (BBY150515C40) entry $1.99

03/06/15 triggered @ $40.25
Option Format: symbol-year-month-day-call-strike


Cabela's Inc. - CAB - close: 57.65 change: +0.15

Stop Loss: 53.95
Target(s): To Be Determined
Current Option Gain/Loss: +0.5%
Entry on March 13 at $57.35
Listed on March 09, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.0 million
New Positions: see below

Comments:
03/16/15: CAB did not see any follow through on Friday's bullish breakout to new highs. Shares just drifted sideways. That's worrisome considering the market's widespread rally today. Traders may want to wait for a breakout past $58.00 to initiate new positions.

Trade Description: March 9, 2015:
Outdoor gear and hunting equipment retailer CAB has been misfiring the last few quarters. They have missed analysts estimates three out of the last four quarters but the stock could be mounting a turnaround.

If you're not familiar with the company, "Cabela's Incorporated, headquartered in Sidney, Nebraska, is a leading specialty retailer, and the world’s largest direct marketer, of hunting, fishing, camping and related outdoor merchandise. Since the Company’s founding in 1961, Cabela’s® has grown to become one of the most well-known outdoor recreation brands in the world, and has long been recognized as the World's Foremost Outfitter®. Through Cabela's growing number of retail stores and its well-established direct business, it offers a wide and distinctive selection of high-quality outdoor products at competitive prices while providing superior customer service. Cabela's also issues the Cabela's CLUB® Visa credit card, which serves as its primary customer loyalty rewards program.

The company has been struggling with slowing sales and disappointing comparable same-store sales growth. They're not the only one. Companies like Dick's Sporting goods have also noted that sales in their hunting category were slow last year.

CAB's most recent report was its 2014 Q4 announcement on February 12th. Earnings of $1.11 a share missed estimates by a wide margin. Revenues were up +7.2%, which met expectations at $1.27 billion. Management said they expect a "return to a low-double-digit growth rate in revenue and a high-single to low-double-digit growth rate in diluted earnings per share for full-year 2015 as compared to full-year 2014 non-GAAP diluted earnings per share of $2.88."

The good news is that firearm sales appear to be stabilizing. After years of torrid sales during Obama's first term as president the pace of firearm sales slowed significantly. The latest data on background checks to buy a gun showed February 2015 to be the second strongest February on record. More than 1.28 million background checks were performed. That's up +1.3% from a year ago. December saw +7.5% surge in checks and January 2015 reported a +8.5% increase in background checks.

On March 3rd, 2015, gun maker Smith & Wesson (SWHC) just reported earnings that were significantly better than expected. SWHC management raised their guidance. That should bode well for CAB too.

Currently shares of CAB have bounced back toward resistance near $57.00 and its simple 200-dma. The stock appears to be breaking through resistance at its year-long trend of lower highs as well. If CAB can breakout the stock might see some short covering. The most recent data listed short interest at 16% of the 51.3 million share float. Currently CAB's point & figure chart is bullish and forecasting at $65.00 target.

Tonight I'm suggesting a trigger to open bullish positions at $57.35, which could be a new four-month high and a breakout past its January resistance.

- Suggested Positions -

Long CAB stock @ $57.35

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

Long JUN $60 CALL (CAB150619C60) entry $2.70

03/13/15 triggered @ 57.35
Option Format: symbol-year-month-day-call-strike


Expeditors Intl. of Washington - EXPD - close: 49.02 chg: +0.98

Stop Loss: 46.45
Target(s): To Be Determined
Current Option Gain/Loss: +1.0%
Entry on March 13 at $48.55
Listed on March 12, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.3 million
New Positions: see below

Comments:
03/16/15: Transportation stocks displayed strength today and EXPD soared +2.0% to challenge its recent highs near $49.00. This is a multi-year closing high for the stock.

Trade Description: March 12, 2015:
EXPD is showing relative strength. The stock is up +8% in 2015 versus an S&P 500 that is virtually flat. Meanwhile the Dow Jones Transportation Average is down -1.4%.

EXPD is part of the services sector. According to the company, "Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 186 full-service offices and numerous satellite locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, domestic time-definite transportation services, purchase order management, warehousing and distribution and customized logistics solutions."

The first half of 2014 was forgettable. EXPD delivered mediocre results with earnings a penny above or below estimates and revenues in-line with expectations. Business improved in the second half of last year. EXPD beat earnings estimates by four cents in the third quarter and by two cents in the fourth quarter. Revenues were up almost +11% in Q3 2014 and up +8.8% in the fourth quarter. Both were above Wall Street estimates.

Bradley Powell, Senior Vice President and CFO commented on the fourth quarter, "During the 2014 fourth quarter we saw strong year-over-year increases in both air and ocean freight volumes. Despite the 10 basis point reduction in overall net revenue margin, airfreight and ocean freight net revenues both managed double digit increases, up 10% and 11%, respectively, as overall net revenue increased 9%."

The stock shot higher on its Q4 results. Shares have been relatively resistant to any profit taking during the market's recent pullback. Traders bought the dip exactly where they should have - at prior resistance. Today's bounce looks like a bullish entry point. The stock's rally in 2015 has helped produce a buy signal on the point & figure chart that is forecasting at $66.00 target. Tonight I am suggesting a trigger to open bullish positions at $48.55.

- Suggested Positions -

Long EXPD stock @ $48.55

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

Long May $50 CALL (EXPD150515C50) entry $1.06

03/13/15 triggered @ 48.55
Option Format: symbol-year-month-day-call-strike


Neurocrine Biosciences - NBIX - close: 41.91 change: +0.95

Stop Loss: 38.45
Target(s): To Be Determined
Current Option Gain/Loss: +11.3%
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:
03/16/15: Most of the biotech stocks had a good day. Shares of NBIX rallied +2.3%. Now they sit just below short-term resistance in the $42.00 area. More conservative traders may want to raise their stop again.

I am not suggesting new positions at this time.

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

03/03/15 new stop @ 38.45
03/02/15 new stop @ 35.75
02/17/15 after the close, announces a secondary offering
02/17/15 triggered @ 37.65
Option Format: symbol-year-month-day-call-strike


The Fresh Market, Inc. - TFM - close: 41.57 change: +0.20

Stop Loss: 39.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on March -- at $---.--
Listed on March 14, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 628 thousand
New Positions: Yes, see below

Comments:
03/16/15: TFM is up three days in a row but today's rally failed to breakout past resistance near $42.00. There is no change from the weekend newsletter's new play description. Our suggested entry point to launch bullish trades is $42.50.

Trade Description: March 14, 2015:
Shares of TFM appear to have turned things around after a bumpy decline from its 2012 highs. This company is in the services sector. According to the company website, "The Fresh Market, Inc. is a high-growth specialty retailer focused on creating an extraordinary food shopping experience for its customers. Since opening its first store in 1982, The Fresh Market has offered high-quality food products, with an emphasis on fresh, premium perishables and an uncompromising commitment to customer service. The Fresh Market currently operates over 160 stores in 27 states across the United States."

The company's 2014 Q3 earnings report in November was better than expected. Both earnings and revenues beat Wall Street estimates with sales up +15%. That trend continued in the fourth quarter. TFM reported its 2014 Q4 results on March 5th. Analysts were looking for $0.51 a share on revenues of $482.99 million. TFM delivered earnings of $0.55 cents, which is a +41% improvement from a year ago. Revenues were up +12.8% to $480.4 million, which is a miss. However, comparable store sales were up +3.0% and gross margins improved 80 basis points to 34.3%.

TFM issued fiscal year 2016 guidance that was mostly in-line with Wall Street estimates. They also announced they were closing all their stores in California. The company will choose to focus on higher-growth opportunities in the eastern half of the United States. Management felt that their organic growth in California wasn't strong enough. Investors seem pleased with the overall earnings report as TFM surged toward resistance near $42.00.

I will point out that the big drop in early January was news TFM's CEO and President had left the company. The sudden departure sent TFM plunging more than -10% on the day. Now shares of TFM have produced a bullish double bottom near the $35.50 area.

Today TFM looks poised to breakout past key resistance at the $42.00 level. It's also nearing major resistance on its weekly chart (see the trend line). Based on this weekly chart resistance we'll set the entry trigger to launch bullish positions at $42.50.

The point & figure chart for TFM is already bullish with a breakout past resistance and a current price target at $52.00. If TFM can rally past the $42.00 level shares could see a short squeeze. The most recent data listed short interest a 23% of the relatively small 40 million share float.

Trigger @ $42.50

- Suggested Positions -

Buy TFM stock @ (trigger)

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

Buy the JUN $45 CALL (TFM150619C45)

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


Gentherm Inc. - THRM - close: 47.24 change: +0.91

Stop Loss: 44.75
Target(s): To Be Determined
Current Option Gain/Loss: -0.5%
Entry on March 06 at $47.48
Listed on March 05, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 456 thousand
New Positions: see below

Comments:
03/16/15: THRM has bounced back toward its recent highs with today's +1.9% gain. A breakout past $48.00 would be used as a new bullish entry point.

Trade Description: March 5, 2015:
I remember the first time I bought a car with heated seats. I vowed to never own another automobile without them. Considering how cold the last couple of winters have been I'm sure a lot of consumers feel the same way. One company that makes the technology behind heated seats and other products is Gentherm.

THRM is in the consumer goods sector. According to the company's marketing material, "Gentherm (THRM) is a global developer and marketer of innovative thermal management technologies for a broad range of heating and cooling and temperature control applications. Automotive products include actively heated and cooled seat systems and cup holders, heated and ventilated seat systems, thermal storage bins, heated automotive interior systems (including heated seats, steering wheels, armrests and other components), cable systems and other electronic devices. The Company's advanced technology team is developing more efficient materials for thermoelectric and systems for waste heat recovery and electrical power generation for the automotive market that may have far-reaching applications for consumer products as well as industrial and technology markets. Gentherm has more than 9,000 employees in facilities in the U.S., Germany, Mexico, China, Canada, Japan, England, Korea, Malta, Hungary and the Ukraine."

THRM has been consistently beating Wall Street's on both the top and bottom line the last four quarters in a row. The exception was their Q4 revenue number. They raised guidance twice last year. Their most recent report was 2014 Q4 earnings announced on February 24th. Earnings were $0.56 a share on revenues of $205.2 million. That beat estimates of $0.48. Revenues were just a hair under estimates of $207 million. Management said their "adjusted EBITDA for the 2014 fourth quarter was $35.7 million, up $10.0 million or 39 percent, compared with Adjusted EBITDA of $25.6 million for the 2013 fourth."

THRM's 2014 gross margins grew to 29.8 percent versus 26.4 percent in 2013. Last year saw THRM's revenues rise +23% over the prior year. Their net income more than doubled. Management expects 2015 to see revenues grow +10-15% above 2014 levels.

Last month saw shares of THRM breakthrough technical resistance at its simple 200-dma. It has also rallied past price resistance near the $44.00 level. Traders just bought the dip at its 10-dma and now THRM looks poised to make a run towards its 2014 highs near $52.00. Tonight we're suggesting a trigger to open bullish positions at $47.30.

- Suggested Positions -

Long THRM stock @ $47.48

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

Long Jun $50 CALL (THRM150619C50) entry $2.98

03/06/15 triggered on gap higher at $47.48, trigger was $47.30
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Albermarle Corp. - ALB - close: 52.79 change: -0.15

Stop Loss: 55.65
Target(s): To Be Determined
Current Option Gain/Loss: +0.9%
Entry on March 12 at $53.25
Listed on March 11, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.7 million
New Positions: see below

Comments:
03/16/15: ALB's failure to rally with the rest of the market today is a victory for the bears. Shares slipped -0.28%. I would consider new positions here. However, if you're worried ALB is short-term oversold then look for a failed rally in the $54.50 area as an alternative entry point.

Trade Description: March 11, 2015:
There's a bear market in this specialty chemical stock. The company has a history of paying a dividend and they just raised their dividend for the 21st year in a row. Unfortunately, that's not drawing much investor attention. High-dividend stocks could become less attractive with the Federal Reserve poised to raise interest rates.

Officially the company describes itself as, "Albemarle Corporation, headquartered in Baton Rouge, Louisiana, is a premier specialty chemicals company with leading positions in attractive end markets around the world. With a broad customer reach and diverse end markets, Albemarle develops, manufactures and markets technologically advanced and high value added products, including lithium and lithium compounds, bromine and derivatives, catalysts and surface treatment chemistries used in a wide range of applications including consumer electronics, flame retardants, metal processing, plastics, contemporary and alternative transportation vehicles, refining, pharmaceuticals, agriculture, construction and custom chemistry services."

They are in the final stages of its acquisition of Rockwood Holdings. They announced the $6 billion deal last July and it's expected to close in the first quarter of 2015. Bulls will argue this deal is positive for ALB due to the expected demand for lithium batteries. Rockwood has one of the of the biggest lithium producing operations in North America. On a short-term basis we're not seeing any impact in the stock.

ALB most recent earnings report was January 28th. Wall Street was expecting ALB's Q4 results to be $1.02 a share on revenues of $637 million. The company disappointed with a profit of $0.99 as revenues dropped -6.4% to $598.5 million. Management offered lackluster guidance. Multiple analyst firms have downgraded the stock and started lowering their earnings estimates.

You can see the huge sell-off on the earnings report in late January. During the market's big rally in February ALB slowly climbed back to where it was trading just before the earnings announcement. Now ALB is rolling over again. This conforms to the stock's larger bearish trend (seen on the weekly chart). The point & figure chart is forecasting at $45.00 target.

Tonight I'm suggesting a trigger to open bearish positions at $53.25.

- Suggested Positions -

Short ALB stock @ $53.25

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

Long JUN $50 PUT (ALB150619P50) entry $1.75

03/12/15 triggered @ $53.25
Option Format: symbol-year-month-day-call-strike


3D Systems Corp. - DDD - close: 26.92 change: -0.31

Stop Loss: 30.15
Target(s): To Be Determined
Current Option Gain/Loss: -0.1%
Entry on March 16 at $26.90
Listed on March 10, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.0 million
New Positions: see below

Comments:
03/16/15: DDD ignored the market's broad-based gains. Shares broke down to new relative lows and hit our entry point at $26.90. I would consider new bearish positions at current levels.

Trade Description: March 10, 2015:
Expectations for DDD are still too high. The stock has been crushed from an early 2014 high near $96.00 a share down to $27.50. Even here, at multi-year lows, the stock has a P/E of 250.

The company describes itself as, "3D Systems provides the most advanced and comprehensive 3D digital design and fabrication solutions available today, including 3D printers, print materials and cloud-sourced custom parts. Its powerful ecosystem transforms entire industries by empowering professionals and consumers everywhere to bring their ideas to life using its vast material selection, including plastics, metals, ceramics and edibles. 3DS' leading personalized medicine capabilities save lives and include end-to-end simulation, training and planning, and printing of surgical instruments and devices for personalized surgery and patient specific medical and dental devices. Its democratized 3D digital design, fabrication and inspection products provide seamless interoperability and incorporate the latest immersive computing technologies. 3DS' products and services disrupt traditional methods, deliver improved results and empower its customers to manufacture the future now."

Last year was pretty tough for DDD. The company has delivered disappointing earnings and revenue growth. They issued an earnings warning back in October. DDD has been reporting +20% revenue growth the last couple of quarters but it's not enough. Management issued 2015 guidance that was in-line with analysts' estimates. Shares initially bounced because guidance wasn't worse than many had feared. However, currency headwinds are going to be an issue in 2015. A couple of analysts have slashed their price target on DDD's stock following the earnings report.

This time the bears might be right. Margins were hurt last year. The company is forecasting organic sales to improve in the second half of 2015. However, they are facing what will be major competition when Hewlett-Packard (HPQ) launches their commercial 3D printers in 2016. The most recent data listed short interest at 38% of the 105 million share float. That much short interest makes DDD a volatile stock to trade. We never know when something might spark a short squeeze. Traders may want to limit their risk by using options.

The stock's sell-off has produced a sell signal on the point & figure chart that is forecasting at $17.00 target. Currently DDD is hovering near support in the $27.50-28.00 region. A breakdown here could signal the next major leg lower. Tonight we're suggesting a trigger to open bearish positions at $26.90. Consider small positions to limit risk.

*small positions to limit risk* - Suggested Positions -

Short DDD stock @ $26.90

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

Long MAY $25 PUT (DDD150515P25) entry $1.56

03/16/15 triggered @ $26.90
Option Format: symbol-year-month-day-call-strike