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Daily Newsletter, Saturday, 4/25/2015

Table of Contents

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

Market Wrap

Seattle Wins!

by Jim Brown

Click here to email Jim Brown

Earnings from Seattle companies including Microsoft, Starbucks and Amazon powered the Nasdaq to a new closing high. Jeff Bezos had a very good day with his net worth rising +$4.8 billion thanks to a $55 spike in his 83.9 million Amazon shares. Bill Gates and Steve Ballmer had gains of more than +$1.2 billion each with a $4.50 rally in Microsoft. Howard Schultz saw a gain of $40 million thanks to the +$2.40 rise in Starbucks shares.

Market Statistics

Apparently the strong dollar excuse has worked like a charm and while the dollar may be kryptonite to earnings and revenue it is no longer a problem for investors. Nearly every big cap report has mentioned the impact of the dollar and revenue misses as a result are common. Investors have now discounted that impact and big cap stocks ended the week in rally mode.

The small caps were not so lucky. There is a clear rotation out of the small caps with the Russell 2000 finishing the day in the red with a -4 point decline. Once it became evident that the big caps were still posting earnings growth despite revenue misses the rotation began. Fund managers are always hesitant to hold small caps over the summer doldrums and the earnings relief gives them an excuse to move back into the safety of large caps.

The big gains came from the big caps in the Nasdaq 100 ($NDX) with a +4.25% gain for the week. With stocks like Amazon, Google, Priceline, and others posting double digit point gains for the week the Nasdaq 100 broke out, way out, to a new closing high at 4,538 with a gain of +185 points for the week. Prior resistance at 4,475 was broken on Friday.


The only material economic report on Friday was the March Durable Goods and the headline number came in with a whopping +4.0% gain compared to a -1.4% drop in February. Estimates were for a gain of only +0.6%. The fly in the soup here is that all of that came from a +30.6% increase in civilian aircraft orders. Ex transportation the new orders fell -0.2% and nondefense capital goods ex aircraft fell -0.5%. Shipments excluding transportation declined -0.3% and unfilled orders were flat at zero.

Core capital goods, which are a key component in the GDP calculation, declined -0.4%. This number has declined every month since August and are now -4.6% below year ago levels. Capital goods orders for defense rose +17% after a +7.7% gain in February.

The weakness in durable goods order other than aircraft caused another drop in the Atlanta Fed's GDPnow forecasts for Q1 to only +0.1% growth. The first estimate by the Bureau of Economic Analysis (BEA) is next Wednesday and the consensus of analyst estimates is for only +1.20% growth. It will be interesting to see how the Fed's forecast and the analyst forecasts square up to the government forecast next week.


The calendar for next week is headlined by the Fed meeting and announcement on Wednesday at 2:PM. While there is no change expected in policy the statement is going to be a real stumbling block for the market if there is any mention of June being a possibility for a rate hike. The analyst community and the market has now moved their forecasts out to September as the most likely start of the rate hike cycle. If a hike did occur in September it would probably be the only one this year with the next one in March of 2016 based on current projections. The market can live with that. If the Fed did the unexpected and hiked in June it would open the possibility for another hike late in the year and the market would react negatively. This makes the mention of June as a possible date in the statement as a major event for the market to overcome.

The GDP on Wednesday is second in importance but there has been so much talk about a zero growth or even a negative print for Q1 that it would have to be severely negative to impact the market. Any growth at all in the initial BEA estimate would be market positive. Just remember it will be revised twice more over the next two months.

The Richmond Fed reports on Tuesday are important but the ISM on Friday supersedes all the regional reports because it is a national number. Analysts are expecting a small gain but after the durable goods number on Friday they may revise that estimate lower.


Exponent (EXPO) announced a 2:1 split but it has to be approved by shareholders on May 28th and then they will announce the actual split date. They need to split because their daily volume is only about 125,000 shares with only 13 million shares outstanding. Shares spiked +$7 on the earnings and split announcement.

G-III splits in a week but it is not showing a split run yet although it had a nice gain on Friday.


The earnings calendar is very busy next week with more than 500 companies reporting. While a lot of the blue chips have already reported there are still a few coming out next week. The biggest will be Apple on Monday. If Apple has the same kind of post earnings move as Amazon, Netflix, etc, then the Dow and Nasdaq could be off to the races on Monday. While I would not bet against it I seriously doubt Apple shares are going to soar. The number of shares outstanding at 5.8 billion after their recent split makes it difficult to post big gains unless something truly extraordinary is announced. As a reference Amazon only has 464 million shares outstanding.


Amazon (AMZN) reported earnings after the bell on Thursday and disclosed for the first time the revenue from its cloud business, Amazon Web Services (AWS). The cloud business generated a 49% increase in revenue to $1.57 billion with an operating profit margin of 17%. Compared to Amazon's normal 2.5% retail margin that is a home run. Jeff Bezos said the cloud business is accelerating as more people take advantage of owning a cloud server for pennies a day. The underlying cost of providing these services is also falling so it is a win-win for Amazon. Amazon has cut cloud prices 48 times since 2006.

Microsoft said its cloud revenue for Q1 spiked +111%. The company does not give out current revenue/profit figures on cloud services but Microsoft is on a run rate for $6.3 billion for the full year on cloud offerings. AWS is four times bigger than Amazon on a pure cloud basis. Microsoft counts some of its software as cloud like the Office 365 product. Microsoft is more of a "software as a service" cloud while Amazon is a "hardware as a service" provider.

Amazon received upgrades from JP Morgan, Raymond James and Janney Montgomery Scott and at least five other analysts boosted their price targets. Cantor Fitzgerald hiked to $460 from $385 and RBC Capital to $500 from $400. The highest estimate I heard was $550 but I missed the name. Amazon reported a 15% increase in revenue to $22.72 billion with a loss of -12 cents per share. Amazon is still spending huge amounts of money building out its infrastructure and as long as it can continue adding $3 billion in revenue per quarter investors are going to let Bezos spend as much as he wants. For the current quarter Amazon forecasts revenue between $20.6-$22.8 billion, up 7% to 18%. Analysts expect $22.1 billion but they always over estimate. Amazon just announced a hotel room reservation system for three major cities in the U.S. with more to follow. I expect them to add to their streaming video offerings in 2015 as well to better compete with NetFlix.

Amazon shares are up more than $150 since January. They posted their best weekly gain (+$70) since 1999.


Microsoft (MSFT) shares surged +10.4% to $48 after they reported earnings of 61 cents compared to estimates of 51 cents. Revenue rose +6% to $21.7 billion and above the estimates for $21.1 billion. Revenue in their Windows franchise declined significantly but their cloud software business lifted their earnings. They also inflated earnings by about 4% as a result of their share buybacks reducing the number of outstanding shares.

The company has hedged about $15 billion in revenue against currency risk. That is a huge amount of money but shows how much the strong dollar has impacted overseas revenues.


Thank you Howard Schultz. The CEO of Starbucks retired and then came back to take charge again when Starbucks was languishing several years ago. Since he came back and cured some of the problems, implemented numerous changes and added products the stock has been on the right path.

The company has gone from a morning only coffee shop to an all day restaurant with baked goods, sandwiches, many varieties of iced teas and cold brewed coffees as well as alcoholic beverages in the evenings. In the first quarter same store sales in the U.S. rose +2.7% thanks to a 2% increase in traffic, which translated into an additional 10 million customer visits. Globally same store sales rose +7% with a 12% increase in Asia. Many of those were coming in to redeem the $1.6 billion that was loaded on gift cards in December.

Overall food sales were up +16% while breakfast sandwiches were up +35%. That was bad news for McDonalds and the Egg McMuffin. Starbucks said that about a third of orders now include a food item and that figure is rising.

Earnings rose +16% to 33 cents, which was in line with estimates and revenue rose +18% to $4.56 billion to beat estimates of $4.53 billion. Shares rallied 5% on the news.


It was not all rainbows and buttercups in the earnings cycle. Biogen (BIIB) reported earnings of $3.82 that missed estimates for $3.92 per share. Revenue of $2.55 billion also missed estimates of $2.66 billion. Shares were up +27% in 2015 but they gave back -7% or -$28 after the earnings miss. BIIB traded 6.1 million shares and more than three times the daily average of 1.76 million.

The company said slowing sales of its oral MS drug Tecfidera and a delay in data for its coming Alzheimer's drug were to blame for the low earnings. The company said it sales of Tecfidera do not improve the revenue growth for the coming quarters may come in at the lower end of company projections. Sales of Tecfidera rose from $506 million to $824.9 million in Q1 but well below projections for $931 million.


Tyco International (TYC) reported earnings of 55 cents that beat estimates for 50 cents. However, revenue declined -2% to $2.43 billion and missed estimates slightly for $2.44 billion. The company blamed the stronger dollar since the majority of its business is done outside the U.S. and they were hit with currency issues. They expect the impact to last throughout 2015. They lowered full year guidance from $2.30-$2.40 to $2.23-$2.27 per share. They also blamed low oil prices since they do a lot of business with energy companies. Shares declined -6% on the news.


Xerox (XRX) reported earnings of 21 cents that declined -20% but still matched estimates but revenue fell -6.3% to $4.47 billion and that missed estimates for $4.56 billion. Currency issues accounted for 5% of that decline. Xerox gets about a third of its revenue from outside the USA. Xerox cut full year guidance from $1.00-$1.06 to $0.95-$101 per share. They also cut margin guidance from a midpoint of 9.5% to 8.75%. Shares declined -9% on the news.


Aaron's Inc (AAN), the rent to own company, posted adjusted earnings of 73 cents that rose +37% and beat estimates of 54 cents. Revenue of $821.8 million blew away estimates for $792.8 million. The company raised guidance from $1.90-$2.10 to $2.01-$2.15 for the full year. They also raised revenue guidance from $3.05-$3.25 billion to $3.1-$3.3 billion. Aaron's rents Hewlett Packard computers, Whirlpool refrigerators and GE washing machines as well as numerous other brands. Business must be good with no dollar risk. Shares rallied +12%.


Comcast (CMCSA) and Time Warner (TWC) cancelled their $45 billion merger because of too many concerns from the FCC. The regulator said "the proposed merger would have proposed an unacceptable risk to competition and innovation, including the ability of online video providers to reach and serve consumers." The merger of the top two cable companies in the U.S. would have put 30% of TV viewers and 55% of broadband subscribers into one company. The FCC said this would have given the company unprecedented power over what Americans watch and download.

I thought it was important that the FCC said it was trying to protect "streaming services" (read NetFlix) from onerous payments for the privilege of connecting to the network. Dish, parent of Sling TV, and NetFlix strenuously opposed the deal. Because the companies new in advance it would be a struggle to get the deal approved there was no breakup fee. Many analysts now believe Charter Communications (CHTR) will quickly resurrect its efforts to acquire Time Warner Cable. That combination would have 15 million video customers and 16.5 million broadband Internet customers. Comcast alone has 22.4 million video customers and 22 million broadband customers.

Time Warner rallied $6.50 on the news and Comcast was fractionally positive. Charter gained +$2.


Mylan (MYL) raised its bid for Perrigo (PRGO) but the company immediately declined it saying the $30 billion offer still undervalued all the Perrigo assets. Some believe Mylan raised the bid for Perrigo in order to either scare away the $40.1 billion Teva (TEVA) bid for Mylan or at least force them to raise it significantly. Teva is the world's largest generic drug company by revenue and wants to become even bigger by acquiring Mylan. A combined Teva/Mylan would be able to raise prices for many generic drugs. Regulators would probably require Teva to sell off significant assets in order to get the deal done.

Teva's offer required Mylan to cancel its bid for Perrigo. Teva is bidding $82 for Mylan. The Mylan bid for Perrigo includes $60 in cash and 2.2 shares of Mylan for each Perrigo share or $222.12 per share. Perrigo says the real value of the offer is $205 because the Teva bid for Mylan drove those shares higher. Analysts believe a Mylan/Perrigo deal could get done but a Teva/Mylan deal would face significant regulatory issues.


Crude oil was flat for the week at $57.22 after an intraday high of $58.41 on Thursday. CEOs at the IHS Cera conference in Houston were pretty much in agreement that prices are going to rise through the summer but there were still some negative opinions suggesting we could drift back down to the $40s. The CEO of Core Labs (CLB) said in constant currency numbers WTI could be $70 by year end and Brent in the $80s. That means if the dollar continues its decline from last week we could see even higher prices. The CEO said he expects better than a 200,000 bpd decline in U.S. production by the end of the year to less than 9.0 million bpd.

Note the opposite chart patterns between the dollar and oil. They react the exact opposite of each other.



Active rigs declined by -22 to 932 for last week but that number is distorted. Oil rigs declined -31 to 703 while active gas rigs rose +8 to 225. That brings the total oil rigs lost to -906 or -56.4% from the high of 1,609. The total active rigs fell to 932 and only 66 above the 2009 low at 866. There is no doubt that oil production is going to decline over the next 12 months. This has been the fastest rig decline in history.


Markets

The Nasdaq 100 was the big winner with a new high but the S&P actually got in on the act as well. The S&P closed at 2117.69 and the old high was 2117.39 made back on March 2nd. Unfortunately the Dow is still lagging behind because of the impact of a couple earnings reports every day or two. The Dow transports are still lagging as well.

The Volatility Index ($VIX) closed at 12.29 and a five month low. Average volume for the week of 5.76 billion shares per day is the lowest of the year for a non holiday week. The weak economic data and weak earnings are keeping people on the sidelines.


Art Cashin was right when he said on Friday, "The fear of losing money has lost more money in the last several years than anything else." You may remember the AAII sentiment chart I showed on Tuesday with the number of investors neutral on the market over 45% for the last two weeks. That has not changed. The AAII numbers for Friday show the neutral investors still in the majority. This lack of interest in the market may seem strange with several of the indexes breaking out to new highs.


Mark Hulbert penned an article last week showing that available cash is shrinking. Funds are invested because they have to be invested. They can't afford for the market to run away from them and let their peers post much higher results.

Despite the apparent lack of interest by the individual investor the new highs are the best way to lure investors back into the market. Some individual investors are not sitting out the rally because margin debt at the NYSE is at record highs at $476 billion. That is up +2.5% month over month. That brings up a question of how can margin debt be at records while market participation is so weak?

There are a large number of baby boomers leaving the market every day. After the financial crisis in 2008-2009 cut their accounts in half and the flash crash in 2010 shocked them again they are pulling their retirement funds out to move to safer investments.

At the same time the number of younger investors entering the market is shrinking. People in their 30s and 40s don't have as much money as they did in the late 1990s. Everything costs significantly more but wages have not gone up at the same pace. Thank goodness we didn't have a real inflation problem over the last six years or it would be even worse.

A large number of the younger generation believes the market is rigged and they are not investing individually. They have a 401k or an IRA and they just make contributions and sit on it.

When you think about it there is a lot of gloom and doom being preached in the financial press and this is having a long term impact on the number of investors entering the market and investing once they get there.

Back to the margin debt. So how can margin debt be at record highs if volume is at the lows for the year and sentiment is so neutral? Apparently those investors actually in the market are leveraged to the maximum. The problem is that leverage works both ways. If we ever have another correction the downdraft could be vicious as margin selling eliminates those over leveraged investors.

I know I got off the track there with my explanation of the current factors but it will be relative in the months ahead. Do you remember the taper tantrum when the Fed was "talking" about tapering QE. Well you can bet there will be a super tantrum when the Fed finally begins to hike rates. Investors that have been around the block before understand this and realize it will be a buying opportunity. Historically once the Fed begins a tightening cycle and the initial market reaction is over the market typically rises for the next 12-18 months. The theory is that the Fed would not hike if the economy was not stable and growing to it is a good time to invest.

Deutsche Bank's Joe LaVorgna counted five episodes since 1994 when the yield on the ten-year moved substantially higher because of a change in expectations on the likely path of Fed policy. "If history is a guide, a backup in Treasury yields could be both swift and violent, with most of the move occurring over a short period of time, generally within two months." He cited five examples where the ten-year yield rose from 140-250 basis points in a very short period. That would be a major upheaval in the current treasury market.

I hesitated to discuss this topic this week but we may be nearing the Great Rotation from bonds back into stocks. The ten-year yield has quit going down but that could change if the Fed kicks the can farther down the road next week. Eventually the Fed will hike rates and yields will begin to rise. There are trillions of dollars in the bond/treasury market that will either be faced with a loss of capital or they will rotate out of bonds and back into equities. In order for this to happen the U.S. economy must find its footing and give the Fed a reason to hike rates. That first rate hike could be the starters gun on the Great Rotation and therefore a significant benefit to equities.

The S&P closed at 2117.69 and a new high but for all practical purposes it stopped at the old high levels. Unlike the Nasdaq where the index spiked significantly higher the S&P barely managed to move higher with only a +4 point gain. While this is not specifically bullish or bearish it does pose the potential for a double top at this level. The stocks that exploded the Nasdaq 100 higher are all in the S&P but the S&P only gained +4 points. That means a lot of other stocks were declining. I think everyone would say that Friday was a bullish day in the markets BUT declining volume was actually higher than advancing volume. The indexes were up because of the major gains by a few individual stocks.

This causes me some worries over next week when there is a Fed meeting on Wednesday. Those big gainers from last week should fade now that the shorts have covered. As an example does anyone actually believe that a $55 gain in Amazon on Friday won't result in some profit taking next week?

I don't want us to fall into Art Cashin's comment where the fear of losing money causes us to miss out on making money but we need to be cautious given the weak internals. If the S&P charges higher next week then disregard everything I said above. The market does a good job of making fools out of the most people possible. We do have one really big plus in our favor. New highs are the greatest investor motivator known to man. Investors on the sidelines can't stand to sit in cash while the market makes new highs day after day. When they market is choppy they can convince themselves that it is better to wait than buy something. When the market is making new highs that rational thinking goes out the window.

Support on the S&P is now 2100-2110 after two weeks of fighting to get through that level. Any dip to 2100 is a buying opportunity. Any material dip below 2100 is a game changer.


The Dow is our caution flag. The index failed to even close over near-term resistance at 18,100 and is well below prior highs at 18,200 and 18,288. Obviously this is because the individual stocks in the Dow are much more of an influence on a thin 30 stock index. Microsoft gained +$4.53 on Friday and that added about 35 points to the Dow. Without Microsoft the Dow would have closed negative. There were only 12 gainers and 18 losers in the Dow on Friday.


The downtrend resistance of lower highs is still intact and a warning that the Nasdaq rally may not last. Beware any decline below 18,000 as a potential signal of growing weakness.


The Nasdaq 100 ($NDX) gained +59 points. Amazon was responsible for 22 points, Microsoft added +32, Google +4.5 and Starbucks +1.6. That should be all I need to say about the potential for the Nasdaq to move higher next week. When ONLY 4 stocks were responsible for +60 Nasdaq 100 points the potential for further gains next week are slim because you know traders are going to take profits in those stocks.

The Nasdaq Composite gained +36 points to close at 5092. Overhead resistance is now 5125 and that dates back to September. Like the NDX I would expect the Composite Index to decline next week.

On Friday there were 1,185 advancers and 1,410 decliners on the Nasdaq Composite. It was only because of the giant gains in a few stocks that the Nasdaq remained in the green.


Support is now 5000 followed by 4950 and resistance is 5125.


The Russell 2000 small caps are struggling. After a month of being favored because of their lack of exposure to the dollar that worry is now off the table. With the summer doldrums ahead the urge to own small caps is fading because of the potential risk. If the market volume declines even further this summer it could fall under 5 billion shares per day. Small cap volume would be even worse and that scares fund managers. If a market event occurs and they want to exit they can get killed trying to exit large positions in a low volume small cap stock.

While I am not ready to write off the Russell just yet a decline below 1250 would be the sell signal. Despite the new high in the prior week the Russell was struggling last week. I expect that to continue.


I would continue to be cautious on long positions. Despite the new highs the market is not healthy. Bank of America posted this chart last week showing the enormous outflows of funds from U.S. equities since February. More than $79 billion has flowed out of U.S. equity funds in the last ten weeks. It is a miracle the market is at new highs and it will be another miracle if it stays there. Note the divergence in fund flows compared to the S&P. This is another reason why trading volume is so low and 45% of investors are neutral.


Citi Private Bank and S&P Capital IQ Investment Policy Committee are both recommending that investors cut their exposure to large-cap U.S. equities. Citi global chief investment strategist, Steven Weiting said the market can no longer bet on a combination of ultra-loose monetary policy coming from the Fed or accelerating economic growth this year. Weiting cited the "consequences of the boom and bust in U.S. energy investment as a factor that is contributing to weakening of U.S. equity outperformance." BlackRock's Russ Koesterich also recommended reducing U.S. equities in favor of less expensive international stocks. "Diversification at this point is critical" Koesterich said in an interview.

S&P Capital IQ said, "Reasons for our reduced optimism toward U.S. equities include a traditionally soft seasonal stretch for stocks, the rich forward 12-month valuation, time since the last correction, and the expectation that interest rates and inflation will creep higher in the coming year."

Random Thoughts

Greece negotiators continue to use the "rope a dope" on the EU finance ministers. Meetings are held and talks last for hours but there is no substance. At the meeting last week many of the finance ministers said they were tired of showing up because nothing was ever going to happen. Greece refuses to enact the required economic changes but they are still asking for more money. The finance ministers continue to say no more money until you enact the changes we require. Greece refuses, the finance ministers refuse and everyone goes home frustrated. Greece is playing out the clock. They know they are in trouble but they feel like it will be worse for Europe than for Greece if they default. Meanwhile the clock is counting down to an eventual Greece default. The finance ministers are now talking about a plan B on what they should do if Greece does default.

In the last week the chance of a default has risen to 40% while the chance of an exit from the eurozone is 30%. Much talk has occurred on the potential for Greece to default and NOT leave the eurozone. Analysts now question why they would leave the eurozone because the ECB is still supporting Greek banks. If they leave the zone they will definitely not get any more money. If they default and remain in the eurozone there is still the possibility of some kind of future deal.

Meanwhile everyone in the rest of the world has lost interest and life goes on.


The Bloomberg Economic Surprise Index, which measures whether economic data is missing or beating forecasts, hit a new low last week. This is the lowest level since the financial crisis and suggests the Fed has a lot more to worry about before raising rates. Bloomberg Link



Over the course of this week we have heard Larry Fink of Blackrock talking about the severe risks of investing in Europe; Bill Gross of Janus saying German bonds are the short trader’s dream; Pimco warning that markets have not addressed the potential of a Fed tightening; the incoming CEO of Allianz, that TWO trillion dollar asset manager, saying, "We see generally meager growth prospects, political dangers and risks of a stock market crash." Even Abby Cohen thinks it is a stock pickers world, not a buy anything and kick back world. And yet, the market didn’t even blink.

Central banks are driving all investment decisions, and what this implies is that they are in this trade so deeply that there is no obvious or practical exit. Maybe they think they can just hold all those QE assets to maturity and never be forced to raise rates. Unfortunately that is not an option. Zerohedge: I am not crazy, I am scared


So far this earnings season 67% of the S&P companies that have reported actually beat on earnings. This is far better than analysts expected going into the earnings cycle. However, only 52% have beaten on revenue numbers. Even the energy sector surprised with a 69% beat rate on earnings but only 35% beat on revenue. The best performing sector has been consumer staples with an 81% beat rate on earnings and 69% beat rate on revenue. The worst performing sector has been the telecom sector with a 50% beat rate on earnings and only 33% on revenue.


Are you a rate hike newbie? The Fed has not hiked rates since June 2004 and quite a few of today's investors have never been through a rate hike cycle. This almost guarantees an overreaction of some sort when the Fed eventually announces a rate hike. This is one reason why Janet Yellen is trying so hard to telegraph the rate hike potential and thoroughly explain that it could take a long time before rates return to any kind of normalcy. She is trying to prevent a market meltdown by telegraphing in advance that the 2nd and 3rd rate hikes could be many months away. I wish her luck with that.

While there will be some volatility around the first rate hike the long term performance suggests it is a buying opportunity. Since WWII the S&P has averaged a +2.4% gain in the six months following the first rate hike. Unfortunately the average gain in the six months prior to a rate hike is 9.5%. So there is volatility but it is not the end of the world.

The problem is that the Fed has never tried to come back from a period this long where rates have been this low and the Fed's balance sheet has been this high at $4.5 trillion. It is up 500% from 2008 levels. Yellen does not plan to start dumping treasuries anytime in the near future but most people forget the Fed is still reinvesting its matured treasuries. When they mature the Fed buys more in order to keep its balance sheet flat. It is a stealth QE that most people have forgotten. Once the Fed quits buying those replacement treasuries the interest rates should tick up quickly.


Apple metrics for their earnings on Monday. This is what analysts are expecting.

Earnings per share $2.15 and net profit of $12.5 billion.

Revenue of $55.9 billion, up +22.5%.

iPhone sales of 55 million, up +25%. Down from 74 million in Q4.

iPhone revenue $36.6 billion, up +40%.

iPad sales of 15 million, down -10%. Revenue $6.1 billion, down -20%.

Mac sales of 5 million, up +11%, revenue of $5.8 billion, up +5%.

Apple Watch sales of 5 million. That is a very optimistic estimate.

Revenue guidance for Q2 of $46.9 billion, up +25%.

Cash on hand of close to $200 billion, up from $178 billion in Q4.


The Nasdaq may have closed at a new high but it is not the same Nasdaq as in 2000. There are 2,578 stocks today compared to 4,715 in 2000. The total value of the Nasdaq stocks today is $8.2 trillion, up +24% from 2000.


Pandemic ahead?

The price of chicken and eggs is going up. More than 8 million birds have been killed as a result of the H5N2 strain of bird flu. Minnesota declared a state of emergency and said 2.6 million birds had died from the flu, been exterminated by regulators or slated to be killed.

While this version of the bird flu is not normally transmitted to humans there is always the possibility of another mutation that could be transmitted and that would be a disaster of pandemic proportions. Minnesota has instructed 87 workers to take antiviral medications as a precaution because of direct contact with infected birds.

With modern poultry farming methods in the U.S. the risk of a pandemic is low. However, in China where they have a more hands on method of farming there is an extreme risk of an eventual pandemic in humans. One scientist explained it this way. Every time the virus comes in contact with another species be it monkey, pig, human, etc, the evolutionary dice are rolled and while the odds of a mutation are in the billions there are billions of birds being raised around the world. It only takes ONE successful roll of the dice to see the virus mutate into pandemic status. This is a really scary thought.


Here is another scary thought. According to the WSJ Chinese experts now believe North Korea has 20 nuclear warheads and enough enriched uranium to double that within a year. Prior U.S. estimates were for 10-16 bombs. Experts also believe North Korea is now able to put a nuclear weapon on their improved KN-08 ICBM, which has a range of 5,600-7,000 miles. That is far enough to put a nuclear bomb over our West Coast but not far enough to reach Chicago, New York or Washington DC.

This is a cautionary tale for the Obama administration as it negotiates with Iran. North Korea is the most sanctioned country on the planet and they negotiated for more than ten years as the world tried to keep them from going nuclear. Obviously that did not work. You can't negotiate with a regime that has no morals and lies about everything. Western nations expect other nations to do what they say they will do. That is not the case with North Korea or Iran. We also learned a couple weeks ago that Iran's new missile can reach almost all of Europe and Northern Africa. Put a bomb on that one and the balance of power just changed dramatically.


 

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

"The average man desires to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work."

William LeFevre

 

 


New Plays

Cashing In On The Self-Driving Car

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Mobileye N.V. - MBLY - close: 47.62 change: +0.01

Stop Loss: 44.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 25, 2015
Time Frame: Exit PRIOR to earnings in late May
Average Daily Volume = 3.1 million
New Positions: Yes, see below

Company Description

Why We Like It:
The future of hands free driving is a lot closer than you might think. MBLY is leading the charge. Its technology is already in more than three million cars made by companies like BMW, General Motors, and Tesla.

What exactly does this technology due? DAS stands for driver assistance systems. Sometimes you might see it called ADAS for advanced driver assistance systems. This new technology helps drivers avoid collisions with other vehicles, pedestrians, bicyclists, and more while also alerting the driver to road signs and traffic lights.

The company website describes Mobileye as "a technological leader in the area of software algorithms, system-on-chips and customer applications that are based on processing visual information for the market of driver assistance systems (DAS). Mobileye's technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving."

MBLY said their technology will be available in 160 car models from 18 car manufacturers (OEMs). Further, Mobileye's technology has been selected for implementation in serial production of 237 car models from 20 OEMs by 2016.

The company is already developing a system for autonomous driving or hands free driving. They currently plan to launch an autonomous system in 2016 that will work at highway speeds and in congested traffic situations.

MBLY stock came to market in August 2014. Demand was strong enough that they upped the number of shares available from around 27 million to 35.6 million shares. They raised the IPO price from the $22 range to $25. This valued MBLY at $5.3 billion. The first day of trading saw MBLY opened at $36.00. Two months later MBLY traded at $60.00.

The IPO excitement has faded but MBLY's valuation has grown. There are now 216.6 million shares outstanding and the company's market cap is now more than $10 billion.

It's easy to see why investors are optimistic on MBLY. Annual revenues have soared from $19.2 million in 2011 to $143.6 million in 2014. Their revenues last year rose +77% from 2013. Currently a poll of analysts by Thomson Reuters is forecasting sales to rise +50% in 2015 to $218.3 million. Earnings are forecasted to surge +95%.

Last year the New York Post recently ran an article discussing how the White House might generate a bullish tailwind for MBLY. The National Highway Traffic Safety Administration issued a research report that estimated ADAS type of technology could eliminate almost 600,000 left-turn and intersection crashes a year. They report also suggested that adding FCAM and lane departure technology on big vehicles like over the road trucks could reduce accidents with these huge vehicles by up to 25%. Following this report the White House said they would draft new rules that required this sort of tech in new vehicles.

Most of Wall Street analysts seem bullish. Industry experts forecast the camera-based ADAS market to grow +37% CAGR from 2014 to 2020. Last month Goldman Sachs upgraded the stock to a buy. They believe MBLY will see a 34% CAGR in sales through 2020 and will have 65% of the market by then. A couple of weeks ago a Morgan Stanley analyst raised their price target to $68. They believe the street's 2015 estimates for MBLY are too low after the company delivered super strong growth in the last couple of quarters.

Technically the stock broke out from a five-month down trend in March. The rally has produced a buy signal on the point & figure chart with a $69.00 target. Shorts are probably panicked. The most recent data listed short interest at 15% of the 162.6 million share float. MBLY's stock has been showing relative strength the last few weeks. Currently it's hovering just below the $48.00 level. We are suggesting a trigger to launch bullish positions at $48.25.

Trigger @ $48.25

- Suggested Positions -

Buy MBLY stock @ $48.25

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

Buy the JUN $50 CALL (MBLY150619C50) current ask $2.10
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

Daily Chart:



In Play Updates and Reviews

Earnings Fuel Another Gain For Big Caps

by James Brown

Click here to email James Brown

Editor's Note:
Better than expected Q1 earnings results drove big gains for a handful of high-profile big cap stocks. This helped power the major indices higher.

Our plan was to exit STRA on Friday.
We have removed KKD as a candidate.
We plan to exit VIPS on Monday.


Current Portfolio:


BULLISH Play Updates

CDW Corp. - CDW - close: 38.87 change: -0.15

Stop Loss: 36.40
Target(s): To Be Determined
Current Option Gain/Loss: +0.6%
Entry on April 13 at $38.65
Listed on April 09, 2015
Time Frame: Exit PRIOR to earnings on May 7th
Average Daily Volume = 1.0 million
New Positions: see below

Comments:
04/24/15: After almost a week of gains CDW encountered some profit taking on Friday. Shares slipped 15 cents. While that's not much Friday's decline did produce a technical warning signal with a bearish engulfing candlestick reversal pattern. I wouldn't panic but odds are we'll see CDW retest support at its 10-dma again or potentially the $38.00 level.

Keep in mind that this trade only has a couple of weeks left. CDW has earnings coming up on May 7th and we plan to exit prior to the announcement.

Trade Description: April 9, 2015:
Traders have been consistently buying the dips in information technology stock CDW. Now the stock is poised to breakout to new highs.

The company offers a broad range of hardware, software and integrated IT solutions to its clients. These include mobility, security, cloud computing, virtualization, data center optimization, and more.

Their website describes the company as "CDW is a leading provider of integrated information technology solutions in the U.S. and Canada. We help our 250,000 small, medium and large business, government, education and healthcare customers by delivering critical solutions to their increasingly complex IT needs. A Fortune 500 company, CDW was founded in 1984 and employs more than 7,200 coworkers. In 2014, the company generated net sales of more than $12.0 billion."

Earnings last year were healthy. CDW has consistently beaten Wall Street's earnings and revenue estimates for the last four quarters in a row. Revenues have been showing double-digit growth for the last year. Their most recent report was February 10th when CDW delivered its Q4 results. Analysts were expecting a profit of $0.53 a share on revenues of $2.95 billion. CDW reported $0.59 a share with revenues up +12.4% to $3.05 billion.

Analysts seem optimistic on CDW. Barclays has listed CDW as one of its top picks and noted that the company has very little exposure to Europe or Asia so the strong dollar shouldn't hurt it that bad. Another analyst, with RBC Capital Markets, believes that any softness in the consumer market will be overshadowed by strength in the enterprise market.

Technically the bullish trend of higher lows in CDW has been coiling more tightly. Now, with the stock up four days in a row, CDW is on the verge of breaking through resistance in the $38.00-38.50 area. Tonight we are suggesting a trigger to launch bullish positions at $38.65.

- Suggested Positions -

Long CDW stock @ $38.65

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

Long MAY $40 CALL (CDW150515C40) entry $0.90

04/13/15 triggered @ 38.65
Option Format: symbol-year-month-day-call-strike

chart:


Canadian Solar Inc. - CSIQ - close: 36.36 change: -0.13

Stop Loss: 34.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 23, 2015
Time Frame: Exit prior to earnings in mid May
Average Daily Volume = 2.7 million
New Positions: Yes, see below

Comments:
04/24/15: Shares of CSIQ spent Friday bouncing around the $36.00-37.00 range. I don't see any changes from the Thursday night new play description. Currently our suggested entry point to launch bullish positions is $37.05.

Trade Description: April 23, 2015:
The boom and bust trends in the solar energy industry have been severe. A few years ago there was a supply glut and prices on solar panels plunged by 2/3rds. Investors were fleeing the solar stocks and shares of CSIQ sank toward $2.00 a share. It's a different story today.

China has a HUGE air pollution problem. The country wants to move away from coal-fired energy. That's why China plans to build out 100 gigawatts of solar energy by 2020. India is in a similar bind. They also plan to build out 100 gigawatts of solar energy by 2022. These two countries alone will account for more solar energy production in the next several years than all previous years combined.

China recently announced they had completed 5.04GW of solar capacity in the first quarter of 2015. That puts the country on schedule to meet their 2015 goal of 17.8GW in new solar production.

One company that should benefit from this global build out of solar energy is CSIQ. They are in the technology sector and considered part of the semiconductor industry. According to the company, "Founded in 2001 in Ontario, Canada, Canadian Solar is one of the world's largest and foremost solar power companies. As a leading manufacturer of solar photovoltaic modules and provider of solar energy solutions, Canadian Solar has an industry leading and geographically diversified pipeline of utility-scale solar power projects as well as a track record of successful solar deployment boasting over 9 GW of premium quality modules installed in over 70 countries during the past decade. Canadian Solar is committed to providing high-quality solar products and solar energy solutions to customers around the world."

Their most recent earnings report was March 5th. CSIQ reported Q4 results of $1.28 per share. That missed analysts' estimates. However, revenues soared +84% to $956.2 million, which was above expectations. CSIQ full-year 2014 results saw a record $239 million in earnings with revenues hitting $2.96 billion. They shipped 3.1 gigawatts worth of solar panels. This year CSIQ expects to ship 4.3GW of panels, a +39% improvement.

CSIQ raised their 2015 Q1 guidance above Wall Street estimates, which helps explain the spike in the stock price. Currently the company's full-year guidance is still below street estimates. In spite of this divergence between forecast and analysts' estimates Wall Street is still bullish. All ten of the analysts who cover the stock have a buy rating on CSIQ. The average 12-month price target is near $46.00. The point & figure chart is more optimistic and currently forecasting a long-term target of $66.50.

Technically shares of CSIQ have been building on a bullish trend of higher lows. They're also appear to be breaking out past resistance in the $36.00 area. Further gains could spark some short covering. The most recent data listed short interest at almost 10% of the 41.2 million share float. Tonight I am suggesting a trigger to open bullish positions at $37.05. This will likely be a two or three week trade. CSIQ will report earnings in mid May and we'll plan on exiting prior to the announcement.

Trigger @ $37.05

- Suggested Positions -

Buy CSIQ stock @ $37.05

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

Buy the MAY $37 CALL (CSIQ150515C37)

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

chart:


DTS Inc. - DTSI - close: 37.07 change: +0.24

Stop Loss: 34.95
Target(s): To Be Determined
Current Option Gain/Loss: -0.9%
Entry on April 23 at $37.15
Listed on April 22, 2015
Time Frame: Exit PRIOR to earnings on May
Average Daily Volume = 166 thousand
New Positions: see below

Comments:
04/24/15: Traders bought the dip in DTSI on Friday. Shares rebounded into the weekend to close up +0.65%. Previously I suggested waiting for a rally past $37.15 before initiating new positions but tonight I'd consider new positions now as long as both DTSI and the NASDAQ are positive on Monday.

Trade Description: April 22, 2015:
DTSI is a small-cap technology stock that has rallied to new three-year highs. The small cap Russell 2000 index is up +5% this year. Shares of DTSI are outperforming with a +20% gain in 2015.

The company is considered part of the application software industry. The company describes itself as "DTS, Inc. (DTSI) is a premier audio solutions provider for high-definition entertainment experiences—anytime, anywhere, on any device. DTS' audio solutions enable delivery and playback of clear, compelling high-definition audio, which is incorporated by hundreds of licensee customers around the world, into an array of consumer electronic devices."

If you're curious, here's more details on DTSI, "From a renowned legacy as a pioneer in high definition multi-channel audio, DTS became a mandatory audio format in the Blu-ray Discâ„¢ standard and is now increasingly deployed in enabling digital delivery of compelling movies, music, games and other forms of digital entertainment to a growing array of network-connected consumer devices. DTS technology is in car audio systems, digital media players, DVD players, game consoles, home theaters, PCs, set-top boxes, smart phones, surround music content and every device capable of playing Blu-rayâ„¢ discs. Founded in 1993, DTS' corporate headquarters are located in Calabasas, California."

Earnings results from DTSI have consistently beat analysts' expectations. They have beaten estimates on both the top and bottom line the last four quarters in a row. They raised guidance with their Q2 and Q3 reports last year. Their most recent report was March 2nd when DTSI announced Q4 earnings of $0.34 a share. Revenues were $35.2 million. Their full year 2014 results saw sales up +10% to $130.6 million.

DTSI is forecasting 2015 sales to be in the $148-155 million range (about +14% to +19% growth). Earnings are forecasted to rise +23% in 2015.

The stock exploded higher on its Q4 results. Traders have been buying the dips since then. The point & figure chart is very bullish and projecting a $57.00 target. Shares displayed relative strength today with a +2.6% gain and a close at multi-year highs. Tonight I'm suggesting a trigger to launch small bullish positions at $37.15.

*small positions to limit risk* - Suggested Positions -

Long DTSI stock @ $37.15

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

Long JUN $40 CALL (DTSI150619C40) entry $0.95

04/23/15 triggered @ 37.15
Option Format: symbol-year-month-day-call-strike

chart:


Vipshop Holdings - VIPS - close: 28.95 change: -0.92

Stop Loss: 27.85
Target(s): To Be Determined
Current Option Gain/Loss: -4.0%
Entry on April 09 at $30.15
Listed on April 01, 2015
Time Frame: 8 to 12 weeks (option traders, exit prior to expiration)
Average Daily Volume = 6.3 million
New Positions: see below

Comments:
04/24/15: We are suggesting an immediate exit on our VIPS trade. Shares have done nothing but churn sideways in the $28.00-30.50 range. Friday saw the stock display relative weakness. Furthermore Friday's move has created a potential bearish reversal pattern on the daily chart.

- Suggested Positions -

Long VIPS stock @ $30.15

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

Long MAY $30 CALL (VIPS150515C30) entry $1.94

04/25/15 prepare to exit on Monday morning
04/16/15 new stop @ 27.85
04/09/15 triggered @ $30.15
Option Format: symbol-year-month-day-call-strike

chart:




BEARISH Play Updates

Solera Holdings - SLH - close: 49.54 change: -0.85

Stop Loss: 52.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 20, 2015
Time Frame: Exit PRIOR to earnings on May 6th
Average Daily Volume = 536 thousand
New Positions: Yes, see below

Comments:
04/24/15: It looks like the down trend in SLH is about to resume. Shares underperformed the market on Friday with a -1.68% decline and a breakdown to new three-month lows. Our suggested entry point to launch bearish positions is $49.40. SLH will likely hit that trigger on Monday morning. Please note that this will be a short-term trade. SLH has earnings coming up on May 6th. We plan to exit prior to their announcement.

Trade Description: April 20, 2015:
Investor sentiment appears to have soured on SLH. The longer-term trend is now down. The company is in the technology sector. They're considered part of the application software industry.

Here's a brief company description, "Solera is a leading provider of risk and asset management software and services to the automotive and property marketplace, including the global P&C insurance industry. Solera is active in over 70 countries across six continents. The Solera companies include: Audatex in the United States, Canada, and in more than 45 additional countries; Informex in Belgium and Greece; Sidexa in France; ABZ and Market Scan in the Netherlands; HPI, CarweB and CAP Automotive in the United Kingdom; Hollander serving the North American recycling market; AUTOonline providing salvage disposition in a number of European and Latin American countries; IMS providing medical review services; Explore providing data and analytics to United States property and casualty insurers; Service Repair Solutions, a joint venture with Welsh, Carson, Anderson & Stowe, that provides solutions for the service, maintenance and repair market; and I&S, a provider of software and business management tools, third-party claims administration, first notice of loss and network management services to the U.S. auto and property repair industries, specializing in glass claims."

Their most recent earnings report was the 2014 Q4 results on February 5th. Wall Street was expecting a profit of $0.79 a share on revenues of $283 million. SLH missed estimates with 40.77 a share. Revenues were up +18% but came in just a hair below expectations (essentially in-line). Unfortunately management lowered their earnings and revenue guidance for 2015 below Wall Street estimates.

Today SLH is trading with a bearish trend of lower highs and lower lows. The point & figure chart is bearish and forecasting at $44.00 target. Currently the stock is hovering just above round-number support at the $50.00 level. Last Friday's intraday low was $49.65. Tonight we are suggesting a trigger to launch bearish positions at $49.40. We'll try and limit our risk with an initial stop loss at $52.15. We will plan on exiting prior to earnings in mid May (no official date yet).

Trigger @ $49.40

- Suggested Positions -

Short SLH stock @ $49.40

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

Buy the JUN $50 PUT (SLH150619P50) current ask $2.55

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

chart:


Tessera Technologies Inc. - TSRA - close: 38.40 change: -1.17

Stop Loss: 40.15
Target(s): To Be Determined
Current Option Gain/Loss: -2.7%
Entry on April 17 at $37.40
Listed on April 16, 2015
Time Frame: Exit PRIOR to earnings on May 5th
Average Daily Volume = 585 thousand
New Positions: see below

Comments:
04/24/15: The rebound in TSRA appears to be over. Shares underperformed the market on Friday with a -2.95% plunge. The selling stalled near its 100-dma. I am not suggesting new positions. TSRA has earnings coming up on May 5th and we plan to exit prior to the announcement.

Trade Description: April 16, 2015:
After months of gains and generally bullish news shares of TSRA appear to be correcting lower.

The company is considered part of the semiconductor industry. According to the company, "Tessera Technologies, Inc., including its Invensas and FotoNation subsidiaries, generates revenue from licensing our technologies and intellectual property to customers and others who implement it for use in areas such as mobile computing and communications, memory and data storage, and 3DIC technologies, among others. Our technologies include semiconductor packaging and interconnect solutions, and products and solutions for mobile and computational imaging, including our FaceToolsTM, FacePowerTM, FotoSavvyTM, DigitalApertureTM, face beautification, red-eye removal, High Dynamic Range, autofocus, panorama, and image stabilization intellectual property."

Their earnings report in late October 2014 was better than expected and TSRA raised guidance. They raised guidance again in January. Their earnings news in February helped push the stock to new 52-week highs. Unfortunately momentum appears to have reversed. The semiconductor space has been hit with downgrades and earnings warnings.

Now shares of TSRA has broken below multiple layers of support. The point & figure chart has generated a new triple-bottom breakdown sell signal with a $33.00 target. Today shares of TSRA sit on technical support at the 100-dam. A breakdown from here could portend a drop toward $34 or even $32.00 (near the 200-dma).

Tonight we are suggesting a trigger to launch bearish positions at $37.40. This is going to be a short-term trade. We will plan on exiting prior to earnings on May 5th.

- Suggested Positions -

Short TSRA stock @ $37.40

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

Long MAY $37 PUT (TSRA150515P37) entry $1.55

04/17/15 triggered @ 37.40
Option Format: symbol-year-month-day-call-strike

chart:


Olympic Steel Inc. - ZEUS - close: 11.52 change: +0.04

Stop Loss: 12.30
Target(s): To Be Determined
Current Option Gain/Loss: +7.5%
Entry on April 08 at $12.45
Listed on April 07, 2015
Time Frame: Exit PRIOR to earnings on May 1st
Average Daily Volume = 56 thousand
New Positions: see below

Comments:
04/24/15: If we're lucky the oversold bounce in ZEUS is already over. The stock continued Thursday's bounce into Friday morning but the rebound lost steam near resistance at $12.00. ZEUS closed virtually unchanged on the session. The pullback from its intraday high is good news for bearish traders.

I'm not suggesting new positions. We only have a few days left. ZEUS has earnings coming up on May 1st. I am suggesting we exit on Wednesday, April 29th.

I want to remind readers that this is a higher-risk, more aggressive trade.

Trade Description: April 7, 2015:
We are adding ZEUS to the newsletter as a momentum trade. You could also consider it a hedge against our STLD trade, which hasn't really panned out as expected.

If you're not familiar with ZEUS, here's a brief description: "Founded in 1954, Olympic Steel is a leading U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel and aluminum products. The Company's CTI subsidiary is a leading distributor of steel tubing, bar, pipe, valves and fittings, and fabricates pressure parts for the electric utility industry. Headquartered in Cleveland, Ohio, Olympic Steel operates from 35 facilities in North America."

The steel industry has been really struggling with a flood of cheaper imports. We saw three major steel companies, STLD, NUE, and AKS, all lower guidance in March. The biggest complaint was a surge in imports, which has continued into 2015. The good news is that imports are slowing down because the glut of supply has driven prices lower. The bad news is that steel prices have been crushed.

Shares of ZEUS have been in a bear market for about a year. The earnings picture has not helped with ZEUS missing Wall Street's bottom line earnings estimates the last four quarters in a row.

Steel companies are hoping for the price of steel to find a bottom in the May-June time period. A couple of the companies listed above have suggested that the second half of 2015 will be better. That might just be wishful thinking. The economic slowdown in the first quarter of 2015 doesn't bode well for basic material companies.

Meanwhile the path of least resistance for ZEUS is lower. The point & figure chart is bearish and forecasting at $10.00 target. Today we saw ZEUS breakdown under support near $13.00 on double its average volume.

I consider this a higher-risk, more aggressive trade because ZEUS is not very liquid. The daily volume is exceptionally low. Plus, the options are not tradable because the spreads are too wide. I'm suggesting small bearish positions if ZEUS trades at $12.45 or lower. We're not setting a target tonight but I'd aim for the $10.00 area.

*small positions to limit risk* - Suggested Positions -

Short ZEUS stock @ $12.45

04/25/15 prepare to exit on Wednesday, April 29th.
04/22/15 new stop @ 12.30
04/08/15 triggered @ $12.45

chart:



CLOSED BEARISH PLAYS

Krispy Kreme Doughnuts - KKD - close: 19.34 change: +0.48

Stop Loss: 19.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 21, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 608 thousand
New Positions: see below

Comments:
04/24/15: Shares of KKD appear to be caught up in a halo effect from Starbucks. Shares of Starbucks (SBUX) soared to new all-time highs on a very strong earnings report. SBUX CEO said it was their best non-holiday quarter in the company's history. This may have panicked some shorts in KKD since KKD does sell a lot of coffee to go with its donuts. If SBUX had a great quarter maybe KKD's Q1 will be better than expected too.

Shares of KKD rallied +2.5% on Friday. It's worth noting that the bounce in KKD did stall near its six-week trend of lower highs. However, we are choosing to drop KKD as a candidate.

Trade did not open.

04/25/15 removed from the newsletter, suggested entry was $17.90

chart:


Strayer Education, Inc. - STRA - close: 53.40 change: -0.94

Stop Loss: 56.15
Target(s): To Be Determined
Current Option Gain/Loss: -2.3%
Entry on April 07 at $52.95
Listed on April 06, 2015
Time Frame: Exit prior STRA's earnings report on May 6th
Average Daily Volume = 124 thousand
New Positions: see below

Comments:
04/24/15: STRA looks like it might be building a bottom with shares churning sideways for the last two weeks. In the Thursday newsletter we decided to exit this trade on Friday morning. STRA opened at $54.16.

*small positions to limit risk* - Suggested Positions -

Short STRA stock @ $52.95 exit $54.16 (-2.3%)

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

MAY $50 PUT (STRA150515P50) entry $2.25 exit $1.20 (-46.7%)

04/24/15 planned exit
04/23/15 prepare to exit tomorrow morning.
04/07/15 triggered @ $52.95
Option Format: symbol-year-month-day-call-strike

chart: