Option Investor
Newsletter

Daily Newsletter, Wednesday, 4/29/2015

Table of Contents

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

Market Wrap

FOMC Announcement Leaves Market Floundering

by Keene Little

Click here to email Keene Little
The market lost some ground this week as we headed for the Fed's latest decision on rates and learn how they see the current economy. The FOMC announcement left the market hanging with little information.

Wednesday's Market Stats

Following a volatile Monday and Tuesday, equity futures had sold off some in the early-morning pre-market session but then got hit harder following the GDP report at 8:30 AM, which was a miss. It's pretty clear that the economy is slowing but the market has been basically ignoring the signs in favor of an expectation that the Fed will be forced to stay on the sidelines (no rate increase). This morning's negative reaction to the weaker-than-expected GDP report was followed by a few buy programs at the open but by 9:45 AM there were no takers on the long side and the market sold off again. There was general weakness into a midday low and even though there was a bounce into the FOMC announcement at 14:00, the entire day was spent in the red. There was the usual volatility post-FOMC but prices stabilized and finished close to where they were prior to the FOMC announcement.

The advance estimate for GDP came in at +0.2% for Q1 vs. expectations for +1.0%, which is down significantly from 2.2% for Q4 and it was the weakest reading in a year. Blame for the slowdown was placed on the usual culprits -- the weather, the strong dollar and for good measure the West Coast port strikes got some of the blame. The government report did not cite the shutdown of local kids' lemonade stands by local authorities (for having no business license) but I'm sure that was also a factor (said tongue-in-cheek).

Consumer spending increased +1.9% in Q1 but that's a slowdown from +4.4% in Q4 2014, even after factoring in the reduction in gas and home heating oil prices. This factor was also cited by the Fed this afternoon as one of the reasons why they're concerned about the economy, although they call the slowdown "transitory." They love that word when they have to explain bad economic news. Factoring in the lower prices, nominal consumption actually declined $2B in Q1, which was the first decline since Q2 2009 (and Q2 2009 was the first positive quarter for the stock market following the March 2009 low).

The other economic report this morning included Pending Home Sales at 10:00 AM. It was largely ignored since the +1.1% for March was in line with expectations although it was down from 3.1% in February. Interestingly, the home builder stocks continued their selloff from the April 6th high, as I'll show later, and this continues to be a warning sign about housing in general.

Crude inventories were released at 10:00 AM, which increased marginally (+1.910M barrels) and that gave oil a boost this morning. It was one of the few things in the green today.

Other than that there was little to move the market today. The morning decline in the stock market was probably more about worry about the Fed than anything in particular. And once we got through the FOMC announcement there wasn't much of a change in the prices into the end of the day. The Fed has left us hanging by removing forward guidance from their statement. Their next meeting, in June, will be the next opportunity for the Fed to review more data to see if and when a rate increase will soon be justified. Don't hold your breath.

The Fed has maintained that their policy decisions are data dependent and basically told the market that they're removing any reference to the calendar for what and when their next move might be. They instead said, "The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term."

What the Fed really said is that they're scared silly that the deflation monster is coming and they're out of ammunition. And rather than offer any guidance about when they're thinking of raising rates, they instead are now simply saying they'll review the data at each future meeting and make decisions based on the new data. In the meantime, don't call us, we'll call you when there's something important to report. The bond market is now projecting December as the earliest we'll see a rate increase. Those who believe we're in a deflationary cycle that can't be stopped by the Fed also believe the Fed will be forced to start QE4, QE5 ... QE to infinity and beyond long before rates will be raised. They'll have no choice but to keep doing the same thing in hopes they can keep things elevated on their watch.

All of this uncertainty has left the market rudderless since the end of February. The economy is weakening but the Fed remains supportive. The short-term moves in the stock market have left both sides feeling a little whipsawed as the market continues its directionless consolidation. It's getting old but I suspect the market is going to soon pick a direction. As for what direction that will be, I'm waiting for the snow to settle in my crystal ball before I'll have a better clue.

I'll start off tonight's chart review with another top-down look at SPX. While I've been short-term bullish, with the expectation for another rally leg into May, it's not something I think is a slam-dunk kind of trade. In fact I consider the upside potential to be dwarfed by downside risk. But for swing traders there might be one more move higher in the next couple of weeks. I see the potential for a quick drop down to the 2060-2075 area before rallying but the short-term pattern is not clear enough to make a confident projection.

The SPX monthly chart below shows the big bad bearish rising wedge for the rally from 2009. It's hard to pick out the smaller wave movements on a monthly chart but I'm looking for only one more leg up to complete the final 5th wave of wave-C of the A-B-C move up from March 2009. The c-wave would equal 162% of the a-wave at 2213.50, which I consider the highest potential for another rally leg, especially since it crosses the top of its rising wedge pattern next month. Once the A-B-C rally from 2009 finishes, which could happen at any time (even without another rally leg), it could get completely retraced in the next bear market decline. Rising (and descending) wedges tend to be completely retraced much more quickly than it takes to build them.

S&P 500, SPX, Monthly chart

Many Elliotticians believe the big (a)-(b)-(c) correction off the 2000 high into the 2009 low completed the bear market correction but I think the 2009-2015 rally is wave-(d) in a larger expanding triangle correction pattern off the 2000 high. I don't believe the secular bear ended in 2009 and the only reason the rally has become so stretched to the upside is because of the massive liquidity injections of free money from central banks around the world. The net result is a bigger bubble than we had at either the 2000 or 2007 high and the reaction to the downside could make the 2000-2002 and 2007-2009 declines look like child's play.

Instead of a new bull market starting off the 2009 low the 3-wave start of the rally off the 2009 low into the May 2011 high (my wave-A) suggests we have a very large corrective move up from 2009 instead of a more bullish 1-2-3. And if I'm correct, anyone who believes in buy-and-hold is going to get crushed in the next decline. Part of the reason for a very large decline would likely be a result of the market realizing once and for all that their Emperor (the Fed) wears no clothes.

The weekly chart below is the one I've been using for the weekly updates and you can see more clearly how the bottom of the rising wedge, which is the uptrend line from 2009-2011, has been supporting the sideways consolidation off the February high. It looks like it's trying to break out of the consolidation but so far it's been a weak attempt. There's a trend line along the highs since last December-February, currently near 2150, and that would be the first, maybe final, target for a rally from here.

S&P 500, SPX, Weekly chart

Not shown on the weekly chart above, but is shown on the daily chart below, is another trend line along the highs from July-December 2014, which will be near 2180 by mid-May. This trend line and the one along the highs from December-February gives us a target zone of roughly 2150-2180, with an outside chance it will rally up to the 2213 projection mentioned on the monthly chart above. If we get another rally leg I expect to be able to narrow the upside target range once it gets closer. The bulls are not in trouble until price drops below 2045, which would signify the top is likely already in place.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2126
- bearish below 2045

The intraday pattern leaves me scratching my head as I wonder who's in control. Movement in both directions remains choppy and corrective and that leaves the short-term (next few days) direction unclear. There's a parallel up-channel for the move up from the end of March, the bottom of which is currently near 2090. Two equal legs down from Monday morning's high points to 2085 so that gives us a downside target zone for a deeper pullback that would still remain bullish. Below 2085 would suggest a drop down to the uptrend line from 2009-2011 (2073) or the bottom of its triangle pattern off the February high, near 2060. There are plenty of support levels to make the bear's job more difficult but if the bulls can get SPX above Monday's high at 2123 we should see it work its way higher into an important turn window in mid-May (there will also be a new moon on May 18th and this market has often topped on new moons).

S&P 500, SPX, 60-min chart

The DOW has been weaker than SPX since it hasn't been able to make new highs since February (except for the very brief high on Monday morning that made it above its April 16th high). It has been trapped below the downtrend line from February but mostly supported by its 20- and 50-dma's, which are currently crossing near 17980 (today's low was 17953 but it closed at 18035). It's barely holding onto its uptrend line from October-February, currently near 18100. The 2-week consolidation appears more bullish than bearish but only marginally so. All of the choppy moves still leaves its next direction somewhat of a guess but at the moment, gun to my head, I'd choose the long side (and then quickly buy some puts for downside protection when the gun-holder wasn't looking). Upside potential is first to the trend line along the highs from December-March, near 18500 in early May, and perhaps up to the trend line along the highs from December 2013 - December 2014, near 18700 in mid-May. The bulls would be in at least short-term trouble below the April 22nd low at 17887.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,289
- bearish below 17,887

Last Friday the tech indexes got a big boost, thanks to some big jumps in a few stocks like AMZN (+16%). That had NDX popping up out of its sideways consolidation that followed its March 2nd high (bull flag pattern). Its rally peaked on Monday morning and it has since pulled back to the top of its bull flag, near 4466, and if today's back-test of the top of the channel is followed by a rally on Thursday we'd have a buy signal. In that case I would expect to see a rally at least up to the trend line along the highs from November-March, near 4597 next week. There's higher potential, such as up to the trend line along the highs from March-November 2014, near 4760 by mid-May, but I'd want to first see how it does near 4600. A drop below its April 17th low at 4333 would tell us the high is already in place.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4466
- bearish below 4333

As mentioned above, AMZN had quite the rally last Friday and it gapped up and rallied about 62 points (16%) to put in a quick high that morning. It's been all downhill since that high but it was good for the techs. But look where AMZN stopped -- with a high at 452.65 it achieved its 450 price objective out of the descending triangle that ran from January 2014 to January 2015 (width of the triangle projected from the breakout level). It also came very close to back-testing its broken uptrend line from June 2010 - December 2011. It's a very interesting setup for a final high for AMZN, although I do see the potential for one more ride up to a minor new high to complete the leg up from March.

Amazon, AMZN, Weekly chart

The RUT is threatening to break down and if it does it's going to be a bearish warning for the rest of the stock market. At the moment, with Tuesday morning's low, it has achieved a 3-wave correction off the April 15th high and did so at its 50-dma, where it essentially closed today. The short-term pattern is looking more bearish than the others, which suggests it's going to break down rather than start another rally leg, but Thursday should provide more clues in that regard. The bulls need to so some buying right here, right now.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1276
- bearish below 1242

Bonds sold off strongly today, presumably on the disappointing GDP report and weaker dollar. It's looking like TLT (20+ year Treasury ETF) could soon test its uptrend line from December 2013, currently near 123.84 (today's low was 125.28). Its 200-dma is currently 123.40 so that's also within striking range. A drop below its March 6th low, near 123, would likely mean a trip down to a price projection at 117.23, which is where it would have two equal legs down from its January 30th high. I continue to believe we have not yet seen THE high for bond prices (lows for yields) but at the moment it's looking like we might get at least a little more selling in bonds before starting another rally. Selling in the bond market is generally supportive for the stock market but that wasn't true for today.

20+ Year Treasury ETF, TLT, Weekly chart

The transports have been relatively weak for a long time -- since the November high for the TRAN it has made a series of lower highs. But it keeps finding support at its December low at 8580 and it has created a descending triangle in the process. This is typically a bullish continuation pattern following a rally (October-November) but it keeps struggling to get a rally going. Following its April 6th low it got a 3-wave bounce (corrective pattern) and is now dropping back down toward 8580 support. It is again threatening to break its uptrend line from November 2012 - October 2014 (near 8780, it closed below it again) as well as its 200-dma, now near 8713 (today's close was 8701). Another drop below 8580 might not recover this time and it would leave a failed bullish pattern in its wake. Failed patterns tend to fail hard so keep an eye on this index for some clues. It now needs to get above 9125 to turn the pattern back to bullish.

Transportation Index, TRAN, Daily chart

I had mentioned earlier that the home builders sold off some more today, presumably on the pending home sales report. The decline from the high on April 6th looks impulsive, which suggests the trend is now down. From a wave count perspective there is a way to consider it as a bullish setup following a 3-wave correction off the February 25th high but at the moment it's looking more bearish than bullish. On April 23rd, following the new-home sales report, it broke its uptrend line from October-January and then dropped below price-level support near 553 (which had held the pullback in mid-March), which includes its May 2013 high. A bounce back up to resistance on Monday has been followed by more selling and we could see the index drop down to its 200-dma, near 516 before it will be ready for a bigger bounce into May.

DJ U.S. Home Construction index, DJUSHB, Daily chart

Following this morning's GDP report there was a selloff in the U.S. dollar as traders become more convinced that the Fed will not be thinking of raising rates anytime soon. The pullback from the dollar's high on March 13th is so far a 3-wave pullback and two equal legs down points to 94.25. With today's low at 94.75 it's now close to achieving that level and we could see a bounce back up from there. The top of a previous parallel up-channel from 2008-2011 (blue line on the weekly chart below) is near 93.50 so that's another potential support level. If the dollar drops below 93.50 we could see a drop down to the 90 area. It's still early in the pullback pattern to determine the longer-term pattern but at the moment I'm expecting the dollar to consolidate for much of this year before heading higher next year.

U.S. Dollar contract, DX, Weekly chart

Gold had a nice rally Monday and Tuesday and now has it looking like we could get another leg up for its bounce off the March 17th low. Two equal legs up would take gold up to 1257, which is what I'm showing on its daily chart below. It's possible gold will instead chop sideways in a larger bearish consolidation pattern but in either case I don't believe gold has put in its bear-market low yet.

Gold continuous contract, GC, Daily chart

How silver does from here should provide more clues for gold. Notice how silver has bounced back up to its broken uptrend line from November-January and stalled. A turn back down from here would leave a bearish kiss goodbye and the selling could become accelerated, especially if it breaks below its uptrend line from November-March, near 15.35, which could be the neckline of a H&S continuation pattern. An upside break through its downtrend lines from January-March, near 16.86, and from November 2012 - July 2014, near 17, would help keep the bulls in control.

Silver continuous contract, SI, Daily chart

Oil got a bump back up this morning on the crude inventory report that showed a slower build than we've seen in the past. Traders are hoping to catch a ride higher on hopes that we'll soon see a report that shows an inventory draw rather than a build. It continues to push up against price-level resistance near 58.50 (it closed at 58.55 today) and if it can break through this time there is upside potential to at least 62.50 where it would run into the top of a rising wedge pattern for the leg up from March 18th. This leg continues to fit well as the c-wave of an a-b-c bounce off its January low and once complete we should see a larger pullback/consolidation in what I think will be a multi-month consolidation for oil before it drops lower (essentially the opposite of what I'm expecting to see for the dollar). A drop below its April 21st low at 55.01 would be a good indication the leg up from March 18th completed.

Oil continuous contract, CL, Daily chart

Tomorrow's economic reports include unemployment claims and more importantly, personal spending and PCE prices. A continued slowing in consumer spending (contracting economy) and a drop in PCE prices (deflationary) would likely worry the market even more. Shortly after the opening bell we'll get the Chicago PMI, which is expected to be right at the border of expansion/contraction (50).

Economic reports and Summary

Conclusion

In reality we still have a market that is trapped in a sideways trading range since the end of February. The choppy whipsaw moves have shaken the trees on both sides of the fence, shaking loose the stops of both the bulls and bears. This could continue for a little longer, especially if we get a drop this week. I remain intermediate-term bullish for higher prices into mid-May but short term (the next few days) could literally go either way. I would be careful about getting bearish too early but by the same token I'd be very careful about the long side.

The longer-term pattern remains bullish and the sideways consolidation continues to point to higher prices, especially with longer-term uptrend lines still holding. Banks got a nice boost today and that's bullish for the market. But the TRAN is threatening to break down and that would be a bearish warning sign. Part of the problem at the moment is that it appears money is sloshing around from sector to sector and in the meantime the major indexes have been marking time. We've seen several important highs get put in place with this kind of sideways consolidation, which turns out to be topping patterns instead. That's a possibility here and just one more reason to be careful and manage your stops with discipline. While I like the potential for a rally into mid-May, the downside risk means light trading -- smaller than usual trade size and/or tighter stops.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Plays

Tug Of War: Big Caps vs. Small Caps

by James Brown

Click here to email James Brown

Editor's Note:

Investors may want to take a more cautious approach to the market. A few of the market's major indices are flashing potential warning signals.

The NASDAQ composite's trend is higher but on a short-term basis it is retreating from a trend line of resistance.

NASDAQ chart:

The small cap Russell 2000 index looks vulnerable. It has broken below its trend line of higher lows and is now flirting with a potential breakdown below technical support at its 50-dma. If the Russell ends the week at current levels it would generate a bearish engulfing candlestick reversal pattern on its weekly chart.

Russell 2000 chart:

I'm also worried about the Dow Jones Transportation Average. The bounce appears to be failing. The last four weeks is starting to look like a bear-flag consolidation pattern. If crude oil continues to rise it could be the spark that sends the transports lower.

Transportation average chart:

We are not adding any new trades to the Premier Investor newsletter tonight. It's time to be patient. Will the small caps drag the rest of the market lower or will the big caps catch a second wind and lift the rest of the market higher?




In Play Updates and Reviews

Stocks Struggle After Q1 GDP Plunges

by James Brown

Click here to email James Brown

Editor's Note:
Economists were expecting U.S. Q1 GDP to be about +1.0%. Today's report showed growth at +0.2%. The FOMC statement seemed to acknowledge that the U.S. economy remains fragile.

ZEUS hit our stop loss before our planned exit at the close.

Several stop losses have been updated tonight.


Current Portfolio:


BULLISH Play Updates

CDW Corp. - CDW - close: 38.59 change: -0.14

Stop Loss: 37.40
Target(s): To Be Determined
Current Gain/Loss: -0.2%
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:
04/29/15: If we're lucky today is a new short-term bottom for CDW. Traders bought the dip twice near $38.20. If shares see some follow through I'd be tempted to buy this stock. Just keep in mind that we plan on exiting prior to its earnings report on May 7th.

Tonight we will raise the stop loss to $37.40.

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

04/29/15 new stop @ 37.40
04/13/15 triggered @ 38.65
Option Format: symbol-year-month-day-call-strike


Canadian Solar Inc. - CSIQ - close: 37.12 change: -0.61

Stop Loss: 34.75
Target(s): To Be Determined
Current Gain/Loss: +0.2%
Entry on April 28 at $37.05
Listed on April 23, 2015
Time Frame: Exit prior to earnings in mid May
Average Daily Volume = 2.7 million
New Positions: see below

Comments:
04/29/15: After yesterday's big rally CSIQ encountered some profit taking today (-1.6%). The stock had trouble with the $38.00 level as resistance this morning.

Friday morning could be interesting. Solar energy rival FSLR reports earnings on Thursday night. FSLR's results could influence trading in all the solar stocks.

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.

- Suggested Positions -

Long CSIQ stock @ $37.05

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

Long MAY $37 CALL (CSIQ150515C37) entry $2.05

04/28/15 triggered @ 37.05
Option Format: symbol-year-month-day-call-strike


DTS Inc. - DTSI - close: 36.56 change: -0.70

Stop Loss: 35.85
Target(s): To Be Determined
Current Gain/Loss: -1.6%
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:
04/29/15: I warned readers last night that yesterday's sharp intraday pullback signaled trouble. Today's display of relative weakness (-1.8%) on top of yesterday's pullback is starting to look like a bearish reversal in progress.

More conservative traders may want to abandon ship now. The 20-dma has been support in the past so we will raise our stop loss to $35.85. No new positions at this time.

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

04/29/15 new stop @ 35.85, caution: DTSI acts like it could be reversing lower
04/23/15 triggered @ 37.15
Option Format: symbol-year-month-day-call-strike


Mobileye N.V. - MBLY - close: 46.30 change: -0.94

Stop Loss: 45.35
Target(s): To Be Determined
Current Gain/Loss: -4.0%
Entry on April 27 at $48.25
Listed on April 25, 2015
Time Frame: Exit PRIOR to earnings in late May
Average Daily Volume = 3.1 million
New Positions: see below

Comments:
04/29/15: The rally in MBLY is starting to look tired. Shares underperformed the broader market with a -1.98% decline and closed below its 10-dma. We are raising the stop loss up to $45.35. I am not suggesting new positions at this time.

Trade Description: April 25, 2015:
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.

- Suggested Positions -

Long MBLY stock @ $48.25

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

Long JUN $50 CALL (MBLY150619C50) entry $2.40

04/29/15 new stop @ 45.35
04/27/15 triggered @ 48.25
Option Format: symbol-year-month-day-call-strike


Nucor Corp. - NUE - close: 49.19 change: -0.37

Stop Loss: 47.85
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 28, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.5 million
New Positions: Yes, see below

Comments:
04/29/15: Shares of NUE gapped down at the open as the market reacted to disappointing earnings from U.S. Steel (X). Traders bought the dip in NUE and the stock pared its loss to -0.74%. There is no change from last night's new play description.

Trade Description: April 28, 2015:
NUE's management is expecting steel prices to stabilize by the end of the year and that has provide hope for investors. The industry is still struggling with a "flood" of imports.

NUE is in the basic materials sector. According to the company, "Nucor and its affiliates are manufacturers of steel products, with operating facilities primarily in the U.S. and Canada. Products produced include: carbon and alloy steel -- in bars, beams, sheet and plate; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating and expanded metal; and wire and wire mesh. Nucor, through The David J. Joseph Company, also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler."

Their 2015 Q1 results were hurt by a -5% drop in average selling price of steel. Wall Street was expecting earnings of $0.14 a share on revenues of $4.66 billion. NUE delivered $0.21, which was a -39% drop from a year ago, but significantly above its mid-March guidance in the $0.10-0.15 range. Revenues were down -14% to $4.4 billion.

NUE management commented on its quarter, "This lower performance is primarily due to lower selling prices and margins resulting from the exceptionally high level of steel imports flooding the domestic market. It is estimated that imports accounted for 33% of the finished steel market in the first quarter of 2015. Import levels in February and March were lower than the peak in January, but remain at the exceptionally high levels experienced during most of 2014. We anticipate selling prices to remain under pressure as the flood of imports continues in the second quarter of 2015. Global overcapacity built by foreign, state-owned enterprises continues to be a significant risk factor to our business."

The stock actually rallied on its earnings report thanks to somewhat optimistic guidance. The company said the automotive market remains strong. They continue to see improving demand in the nonresidential construction markets. NUE did note that the energy market is still troubled. The drop in crude oil and the decline in active rigs has cut demand for tubular goods products (drilling equipment), which has caused a glut of inventory in the sector.

NUE shared the following outlook, "Earnings in the second quarter of 2015 are expected to be somewhat improved from the first quarter of 2015. Although margins in the steel mills segment are expected to improve, they will remain under pressure during the second quarter of 2015 as selling prices have not yet fully stabilized and imports remain at exceptionally high levels. This pricing pressure is expected to mitigate the benefits of lower average raw materials costs in the second quarter. We expect much better performance in the downstream products segment in the second quarter of 2015. The performance of the raw materials segment is expected to decrease in the second quarter of 2015 due to a planned one month outage at our DRI facility in Trinidad. We anticipate an operating loss similar to the first quarter of 2015 at Nucor Steel Louisiana, which, due to the extended length of the time the facility was not operating, will work through higher cost iron ore inventory that was purchased in 2014. Performance in the second half of 2015 is expected to further improve on the strength of continuing improvement in nonresidential construction and its impact on our downstream products businesses and steel mills. Additionally, steel pricing is expected to stabilize and rebound as service center destocking runs its course."

It would appear that the market has priced in the industry's trouble with imports. Now investors are looking ahead toward improvement later this year. The stock has been consolidating sideways in the $46-49 range for several weeks. Shares rallied on its earnings report and now it's on the verge of breaking out from its trading range. The $50.00 level is round-number resistance plus it's strengthened by technical resistance with the simple 200-dma. A breakout past this area would be very bullish. Tonight we're suggesting a trigger to launch bullish positions at $50.50.

Trigger @ $50.50

- Suggested Positions -

Buy NUE stock @ $50.50

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

Buy the JUL $50 CALL (NUE150717C50)

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




BEARISH Play Updates

OvaScience, Inc. - OVAS - close: 26.86 change: -0.61

Stop Loss: 29.45
Target(s): To Be Determined
Current Gain/Loss: +2.9%
Entry on April 28 at $27.65
Listed on April 27, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 725 thousand
New Positions: see below

Comments:
04/29/15: The relative weakness in OVAS continues with a -2.2% decline today. Shares are down four days in a row. We are moving our stop loss to $29.45.

Trade Description: April 27, 2015:
A report published by Allied Market Research suggested the global in-vitro fertilization (IVF) market was about $9 billion in 2012. Demand is expected to grow the market to more than $21 billion by 2020. OVAS believes their AUGMENT treatment is a huge step in boosting a woman's ability to get pregnant.

Here's a brief description of the company, "OvaScience (OVAS) is a global fertility company dedicated to improving treatment options for women around the world. OvaScience is discovering, developing and commercializing new fertility treatments because we believe women deserve more options. Each OvaScience treatment is based on the Company’s proprietary technology platform that leverages the breakthrough discovery of egg precursor (EggPCSM) cells – immature egg cells found inside the protective ovarian lining. The AUGMENTSM treatment, a fertility option specifically designed to improve egg health, is available in certain IVF clinics in select international regions outside of the United States. OvaScience is developing the OvaPrimeSM treatment, which could increase a woman's egg reserve, and the OvaTureSM treatment, a potential next-generation IVF treatment that could help a woman produce healthy, young, fertilizable eggs without hormone injections."

Excitement over the company's prospects helped drive the stock from less than $10 in August 2014 to an all-time high of $55 in late March 2015. Unfortunately, the stock has reversed lower as the market tries to decipher the data on OVAS' progress. The FDA has prevented OVAS' treatment in the U.S. Critics complain that OVAS has not published any animal studies. There is concern that the procedure might endanger the child. Thus far the handful of tests done outside the U.S. look more like experiments than clinical trials.

Investors have decided to shoot first and ask questions later. That explains the sudden and sharp reversal lower in OVAS' stock. It's not just traders who have turned cautious. Zacks noted that multiple analysts have reduced their estimates on the company.

Technically OVAS is in a bear market with a -47% drop from its closing high. The point & figure chart is bearish with a long-term target at $7.00. The oversold bounce in early April failed and now OVAS is about to breakdown below technical support at its 200-dma. The next stop could be $20.00 if OVAS does close below support near $28.00.

Tonight we are suggesting a trigger to launch small bearish positions at $27.65. We want to limit our position size because this is a high-risk, more aggressive trade. Biotech stocks are normally risky since we never know when the next headline might send the stock soaring or crashing. Traders may want to use options to limit their risk.

- Suggested Positions -

Short OVAS stock @ $27.65

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

Long JUN $25 PUT (OVAS150619P25) entry $2.95

04/29/15 new stop @ 29.45
04/28/15 triggered @ 27.65
Option Format: symbol-year-month-day-call-strike


Solera Holdings - SLH - close: 48.90 change: +0.55

Stop Loss: 49.45
Target(s): To Be Determined
Current Gain/Loss: +0.8%
Entry on April 27 at $49.30
Listed on April 20, 2015
Time Frame: Exit PRIOR to earnings on May 6th
Average Daily Volume = 536 thousand
New Positions: see below

Comments:
04/29/15: Uh-oh! The action in SLH doesn't look good if you're bearish. Shares outperformed the market with a +1.1% gain and generated a bullish engulfing candlestick reversal pattern. This pattern needs to see confirmation but we are going to play cautiously here and lower our stop loss to $49.45. More aggressive traders may want to keep their stop above $50.00 since $50.00 should be resistance.

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).

- Suggested Positions -

Short SLH stock @ $49.30

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

Long JUN $50 PUT (SLH150619P50) entry $2.85

04/29/15 new stop @ 49.45
04/27/15 triggered on gap down at $49.30, trigger was $49.40
Option Format: symbol-year-month-day-call-strike


Tessera Technologies Inc. - TSRA - close: 37.36 change: -0.15

Stop Loss: 38.45
Target(s): To Be Determined
Current Gain/Loss: +0.1%
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:
04/29/15: TSRA tagged new relative lows but shares spent most of the day drifting sideways. We are going to try and reduce our risk by moving the stop loss down to $38.45.

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

04/29/15 new stop @ 38.45
04/17/15 triggered @ 37.40
Option Format: symbol-year-month-day-call-strike



CLOSED BEARISH PLAYS

Olympic Steel Inc. - ZEUS - close: 10.95 change: -0.48

Stop Loss: 12.05
Target(s): To Be Determined
Current Gain/Loss: +3.2%
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:
04/29/15: ZEUS continues to show relative weakness. The stock fell another -4.19% today. The stock is down -9.9% from its intraday high today. Unfortunately that spike higher this morning was bad news for us.

The plan was to exit this trade at the closing bell today. I lowered our stop loss to $12.05 last night to reduce our risk just in case ZEUS bounced. The intraday rally to $12.16 this morning stopped us out.

*small positions to limit risk* - Suggested Positions -

Short ZEUS stock @ $12.45 exit $12.05 (+3.2%)

04/29/15 stopped out @ 12.05
04/28/15 new stop @ 12.05, prepare to exit tomorrow at the closing bell
04/25/15 prepare to exit on Wednesday, April 29th.
04/22/15 new stop @ 12.30
04/08/15 triggered @ $12.45

chart: