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Daily Newsletter, Wednesday, 5/27/2015

Table of Contents

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

Market Wrap

The Bulls Came Roaring Back

by Keene Little

Click here to email Keene Little
The market has had a helping hand for a long time from the Fed and government (and globally from all central banks and governments) and today looks to have been another example of that helping hand rescuing the market from another scary 1-day selloff on Tuesday.

Wednesday's Market Stats

Bears that did not look both ways before crossing the street got slammed by the northbound bus today. Road kill is never pretty. But that was after the bulls got body-slammed yesterday by the bears before they sauntered off and got hit by the bus. Now both are lying there wondering what hit them. As for traders watching this slugfest, it's just more of the same choppy whippy price action we've seen since February as the indexes remain trapped inside a relatively small trading range.

As far as keeping score, Tuesday's selling was stronger than today's buying across the various indexes. Yesterday's trading volume was stronger and the internals were weaker, which shows the selling continues to be stronger than the buying. Yesterday's saw more than 5:1 down volume vs. up volume whereas today saw about 3:1 up volume vs. down volume. But short covering continues to be the bear's worst enemy and today was no exception. Except for the tech indexes making new highs and the RUT climbing back above yesterday's close, the blue chips produced inside days and SPX pulled back after closing yesterday morning's gap down. The techs got a big lift from a strong performance by the SOX, which was up +3.9%. The net result is we'll need to see how the next couple of days go before we'll get a better idea as to whether Tuesday's decline was a head-fake move or if instead today's rally was the head fake.

There was very little in the way of economic news this morning and the opening bell was followed by a very brief bout of selling before the buy programs hit. The indexes were popped higher but the initial surge stopped after about 25 minutes. From there the DOW struggled the rest of the day while the others continued to tack on some more points. So what prompted the buy programs just after the open? Need you ask? "Someone" got nervous with yesterday's selloff and decided the market needed a little help in reversing that. Put in some buy programs, throw in some short covering and voila, another rally is born.

Some will say the Greek tragedy prompted today's buying since it's "good" news that they're crafting together some kind of bailout deal. Others credit the news about some kind of Broadcom (BRCM) deal and rumors about Netflix (NFLX) and NVidia (NVDA), all of which had strong days today, which lifted the tech indexes. But some of their bounces look like they could be completions of corrections so how much they'll help the techs tomorrow is another question. With today's slightly lower trading volume, it looks like a lot of today's buying might have been short covering. But there was also some real buying, especially since some strong support levels held against yesterday's selling. The net result, unfortunately for us traders, is more of the same choppy price range that we've been in for a long time.

The weekly chart of the Wilshire 5000 index, shown below, is a good example of how tight the weekly trading range has been -- look at the small, and getting smaller, candles since the February 25th high. Price has been chopping its way higher but there's simply no strength behind the move. The bearish divergence on the momentum indicators (MACD and RSI) is a warning sign to those who wish to chase this higher. It could break out to the upside with a sudden and unexpected catalyst but at the moment that's looking like a lower-odds probability. The rising wedge with bearish divergence warns us that a breakdown, when it happens, will likely go very fast. However, betting on the short side has been an exercise in frustration and today's rally probably just shoved a few more bears to the sidelines. There is potential for the W5000 to rally up to the top of a rising wedge, the top of which is the trend line along the highs from last July, currently near 23000, but again, keep in mind that this could suddenly break down at any time.

Wilshire 5000 index, Weekly chart

Inside the rising wedge shown on the weekly chart there is another one for the choppy move up from the March 11th low, the top of which is near 22600, and is shown on the daily chart below. For the moment I'm showing an expectation for one more leg up to complete a 5-wave move up from March but last week's high fit well as the completion and therefore a new high is not a guarantee. It's possible today's rally completed just a high bounce correction to the decline off last week's high, which suggests another reversal of a reversal (to thoroughly confuse both sides) and start a stronger decline on Thursday and Friday. A break below yesterday's low near 22450 would be bearish while a rally above 22610 would be more bullish.

Wilshire 5000 index, Daily chart

You can see the strong similarity between the W5000 and the SPX daily chart below and the only minor difference is that SPX found support yesterday at its uptrend line from March 2009 - October 2011 while the W5000 was slightly above its trend line. Also, the W5000 tagged its 50-dma yesterday while SPX remained slightly above its 50-dma, but these are minor differences. The bullish setup yesterday was the pullback to support (50-dma and uptrend line) and in an uptrend the bulls did exactly what they're supposed to do -- buy support in a pullback. In a downtrend you want to sell bounces to resistance. If the buyers can keep up today's buying, even if it's after a pullback, the upside potential for SPX is to at least the 2140 area where it would run into the top of its rising wedge pattern for the choppy rally from March (the trend line along the highs from March 23 - April 27, which is where last week's rally stopped). But if today's rally was just a strong bounce correction then a break of support near 2100 would be a bearish sign since last week's high would then look good as THE top.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2142
- bearish below 2099

The 60-min chart below shows today's rally made it above price-level S/R near 2121 so that's a bullish accomplishment. But knowing how many times this market has flushed the stops on both sides I wouldn't be a bit surprised to see the market drop right back down from here and head for new lows. Neither direction from here would surprise me and that makes picking a direction a problem at the moment. Last week's high fit well as the completion of a 3-wave move up from May 6th to complete the 5-wave move up from March (the rising wedge calls for all 3-wave moves for each of the 5 waves inside the wedge). But it's possible we'll get a larger 3-wave move and that's why a new high is certainly possible. It turns more bullish above 2132 and a rally above 2140 would point to 2150-2170.

S&P 500, SPX, 60-min chart

The DOW has been the weaker sister the past week and as I'll show later, the TRAN is even weaker, both of which are another warning sign for the bulls. Coming out of the gate this morning the DOW jumped up about 100 points in the first 25 minutes of trading, hitting a high of 18161. From there it struggled to add 30 more points the rest of the day until just before the close when a selloff dropped it back down to where it was before 10:00 AM, so it netted zero after the initial morning spurt. Not exactly a lot of bullish follow through today on that one. It closed at its previously broken trend line that marked the top of its sideways triangle, as can be seen on its daily chart below, and that leaves a potentially bearish back-test today if it's followed with a kiss goodbye on Thursday.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,350
- bearish below 17,990

NDX made a new high today and is now only about 11 points from a new intraday high above its April 27th high. It did make a new closing high for its current rally and has upside potential to the 4600 area where it would run into the top of the rising wedge for its rally from February (the top of which is the trend line along the highs from March 2 - April 27). It reached the top of a smaller rising wedge for its rally off the May 6th low and we could see it chop higher inside this smaller wedge and not reach 4600 before topping out. A rally above 4620 would be a bullish move (if it can hold above) whereas a drop below yesterday's low (4456) would be a bearish heads up and a drop below its 50-dma would also be a break of its uptrend line from March 2009, both currently near 4431.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4620
- bearish below 4430

The RUT struggled a bit this morning but then when it looked like the rally was going to hold we saw some more buyers come rushing in and push it much higher throughout the day. It finished near its high for the day, which is another sign of short covering (or late-to-the-party bulls). It stopped a little shy of a new downtrend line from April 27th, currently near 1257.50, so a climb above that level, followed by a break above last Thursday's high near 1261 would keep the bulls in the driver's seat. The bears need to see the RUT below yesterday's low near 1233 in order to show us there's a new downtrend for the bulls to contend with.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1261
- bearish below 1233

Initially today the bond market was selling off while the stock market rallied, which was supportive of the stock market. But that reversed around 10:00 AM and the buying drove yields back down to yesterday's lows (the 30-year dropped lower). This is not supportive of the stock market and one more reason to suspect today might have been more about manipulating the stock market, to get some short covering, than about real buying interest.

Two weeks ago, on May 12th, the 30-year yield (TYX) had rallied up to the price projection at 3.089% (with a brief morning high at 3.099) and then was repeatedly tested over the next 5 trading days before dropping over the past week. Yesterday's and today's decline has it back below its broken downtrend line from December 2013, near 2.9%, and so far it's looking like it could continue lower into the summer. The pattern hasn't developed enough to rule out another rally to at least test the May 12th high but the risk from here (for bond bears) is a continuation of the rally in bonds and a decline in yields.

30-year Yield, TYX, Weekly chart

As mentioned earlier, the TRAN has been a warning sign to the bulls and continues to be. Today's rally was relatively strong, up +1.1%, but it was only good enough, so far, for a back-test of its broken uptrend line from March 2009 - November 2012, which it broke yesterday. It remains to be seen if yesterday's break was a head-fake break or if today's bounce back up to support-turned-resistance will be followed by a bearish kiss goodbye. A rally above the trend line along the lows since December 2014, near 8500, would at least be short-term bullish but the bulls will need to see a rally above its May 19th high near 8770 to negate the bearish pattern here.

Transportation Index, TRAN, Daily chart

The U.S. dollar has had a nice bounce off channel support (the top of its broken up-channel from 2008) but it's hard to know if from here it will head immediately to a new high or instead continue to consolidate for months before heading higher. I've been thinking we'll see a multi-month consolidation and at the moment I do not see a reason to change that expectation.

U.S. Dollar contract, DX, Weekly chart

Gold consolidated today following yesterday's relatively strong selloff. Currently it's holding its uptrend line from March 17th so there's still the potential for another bounce up to a minor new high for its bounce (green dashed line), perhaps up to the 1238 area by mid-June. I could see this happening with a stock market rally, if we get one. Otherwise a further breakdown below its uptrend line, near 1184, and its June low near 1179 would likely lead to more selling. I show a decline to about 1155 and then a bounce back up to its broken uptrend line next month before selling off more strongly. That's obviously a guess at the moment but it's a pattern I'll be tracking and I'll update it as price tells me to.

Gold continuous contract, GC, Daily chart

Oil's 3-wave bounce correction off its January low looks like it's finished and could lead to at least a test of its low near 42, if not a minor new low. That would likely be accompanied by a bullish divergence and a good setup for a multi-month trade on the long side. But it's possible we'll see oil trade sideways through the summer (for example, in a sideways triangle as depicted with the red dashed lines) before dropping lower. As with the dollar, it could be a choppy ride for traders over the next few months.

Oil continuous contract, CL, Daily chart

Tomorrow's economic reports will not likely move the market. Pending home sales could move things a little but the market hasn't been paying much attention to housing data. Friday's GDP, Chicago PMI and Michigan Sentiment will be looked at closely.

Economic reports and Summary

Conclusion

The frustration with a market that causes traders to sing "I can't get no satisfaction" continues. The bulls can't get it up and the bears can't get it to go down (get your minds out of the gutter). The choppy price range continues and both sides continue to get whipsawed out of their positions. Selling options above and below resistance and support has worked well and some day traders have done well with the volatility, taking small base hits and getting out of the way. There have been no swing trades for months and it's getting very old.

The first chart I showed tonight, the weekly Wilshire 5000, says it all -- the choppy move higher has been on slowing volume and a narrowing trading range. Momentum is slowing and up volume is not as strong as down volume. We've got all the classic telltale signs of a market top. But tell that to the bulls (and the shorts who keep getting scared out their positions) who don't want to let a good buying opportunity go to waste. As for volume, the declining trading volume can be seen on the SPY daily chart below.

SPDR S&P 500 ETF, SPY, Daily chart

Trading volume has been in decline since last October's volume peak (on the decline) and it's indicative of a problem for the bulls. Lower volume does make it easier to manipulate the market, like this morning, but sooner or later it's going to need stronger buying volume in order to sustain the rally. There's a reason why we're seeing so many rising wedge patterns -- they're very typical at the tops of rallies that have gone too far and when they break they tend to be retraced much faster than it took to build them. The one from last October's low, about eight months, could be completely retraced in a month or two, maybe faster if we get another flash crash in there (a strong possibility since liquidity is drying up).

All of this means bears need to respect the upside while bulls get defensive against a break to the downside. A flash crash will not give you an easy exit from long positions, which is a reason why it makes sense to trim your positions and move to cash. Upside potential is dwarfed by downside risk and you have to ask yourself, when considering holding a position, whether or not you'd be willing to enter a new trade here (in this case on the long side). If not then consider trimming.

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

Medical Device Stock Hitting New Highs

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Thoratec Corp. - THOR - close: 45.84 change: +0.36

Stop Loss: 43.85
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 27, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 602 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
Shares of THOR are trading at multi-year highs thanks to a bullish outlook for 2015 results. THOR is in the healthcare sector. They make medical instruments.

According to the company, "Thoratec is a world leader in therapies to address advanced-stage heart failure. The company's products include the HeartMate II® and HeartMate III™ LVAS (Left Ventricular Assist Systems) and Thoratec® VAD (Ventricular Assist Device) with more than 20,000 devices implanted in patients suffering from heart failure. Thoratec also manufactures and distributes the CentriMag®, PediMag®/PediVAS®, and HeartMate PHP™ product lines. HeartMate III and HeartMate PHP are investigational devices and are limited by US law to investigational use. HeartMate PHP is currently in development and not approved for sale. Thoratec is headquartered in Pleasanton, California."

The last couple of earnings results have come in better than expected. You can see the rally in THOR's chart back in February. This was a reaction to the company's 2014 Q4 results. Analysts were expecting a profit of $0.24 a share on revenues of $106.8 million. THOR's results came in significantly above estimates with a profit of $0.39 on revenues of $127.9 million. Gross margins were 70.5% versus 65.5% a year ago.

The stock popped again on May 8th following another better than expected earnings report. Wall Street was expecting a profit of $0.26 a share on revenues of $111 million. THOR managed to beat estimates with a profit of $0.38 on revenues of $121 million. More importantly management raised their 2015 revenue guidance above estimates. THOR now expects revenues of $465-475 million versus consensus estimates around $463 million.

Yesterday the company announced that the FDA had provided a conditional approval for an IDE clinical trial to "investigate use of the HeartMate PHP acute catheter-based heart pump in patients undergoing a high-risk percutaneous coronary intervention."

Aside from a two-week correction in the second half of April the up trend in THOR's stock price has been pretty steady. The point & figure chart is bullish with a long-term target of $86.00. Currently shares of THOR are hovering just below potential resistance near $46.00. We are suggesting a trigger to launch bullish positions at $46.15.

Trigger @ $46.15

- Suggested Positions -

Buy THOR stock @ $46.15

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

Buy the JUL $45 CALL (THOR150717C45) current ask $2.35
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

Small Caps & The NASDAQ Lead The Rebound

by James Brown

Click here to email James Brown

Editor's Note:
Stocks rebounded after yesterday's widespread decline. Rumors that Greece might be close to a deal helped fuel the rally. The small cap Russell 2000 index and the NASDAQ were showing relative strength.

The $RUT gained +1.25% while the NASDAQ surged +1.46%. The big cap S&P 500 only rose +0.9%.


Current Portfolio:


BULLISH Play Updates

GoPro, Inc. - GPRO - close: 53.28 change: -0.13

Stop Loss: 49.25
Target(s): To Be Determined
Current Gain/Loss: +5.0%
Entry on May 14 at $50.75
Listed on May 13, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 6.5 million
New Positions: see below

Comments:
05/27/15: GPRO's performance today was a bit disappointing. On one hand traders did buy the dip near its rising 10-dma, which is bullish. On the other hand GPRO underperformed the broader market and did not participate in the widespread rally. Shares closed virtually unchanged following its midday bounce.

No new positions at this time.

Trade Description: May 13, 2015:
GPRO looks like a short squeeze waiting to happen. This company is the premier brand for wearable "action" cameras.

Here's the company's rather self-confident description, "GoPro, Inc. is transforming the way consumers capture, manage, share and enjoy meaningful life experiences. We do this by enabling people to self-capture engaging, immersive photo and video content of themselves participating in their favorite activities. Our customers include some of the world's most active and passionate people. The quality and volume of their shared GoPro content, coupled with their enthusiasm for our brand, virally drives awareness and demand for our products.

What began as an idea to help athletes document themselves engaged in their sport has become a widely adopted solution for people to document themselves engaged in their interests, whatever they may be. From extreme to mainstream, professional to consumer, GoPro has enabled the world to capture and share its passions. And in doing so the world, in turn, is helping GoPro become one of the most exciting and aspirational companies of our time."

GPRO came to market with its IPO in June 2014. The stock opened for trading at $28.65 and by October 2014 shares were nearing $100 per share. That proved to be the peak. GPRO spent the next six months correcting lower and finally bottomed near $37 in March this year. Now the stock is building on a steady trend of higher lows as investors digest the company's massive growth.

GPRO reported their 2015 Q1 results on April 28th. Wall Street was expecting a profit of $0.18 per share on revenues of $341.7 million. GPRO beat estimates with a profit of $0.24 a share. Revenues were up +54% from a year ago to $363 million.

Management said it was their second highest revenue quarter in history. Their GAAP results saw gross margins improve from 40.9% in Q1 2014 to 45.1% today. Their net income attributable to common stockholders increased 98.2% compared to the first quarter of 2014. International sales surged +66% and accounted for just over half of total sales in Q1 2015. GPRO shipped 1.3 million devices in the first quarter. This was the third quarter in a row of more than one million units.

GPRO management raised their guidance. They now expect 2015 Q2 revenues in the $380-400 million range with earnings in the $0.24-0.26 region. Analysts were only forecasting $335 million with earnings at $0.16 a share.

The better than expected Q1 results and the upgraded Q2 guidance sparked several upgrades. Multiple analysts raised their price target on GPRO. New targets include: $56, $65, $66, $70, and $76.

There are plenty of bears who think GPRO is overpriced with P/E above 47 and rising competition. The biggest argument against GPRO is competition from a Chinese rival Xiaomi who has produced a competitive action camera that they're selling for less than half of GPRO's similar model. GPRO critics are worried this could kill GPRO's growth in China and the rest of Asia. It's too early to tell who will be right but momentum is currently favoring the bulls.

The most recent data listed short interest at 24% of the 55.5 million share float. That's plenty of fuel to send GPRO soaring. Right now the stock is hovering around the psychological resistance level at $50.00. We are suggesting a trigger to launch bullish positions at $50.75.

- Suggested Positions -

Long GPRO stock @ $50.75

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

Long JUL $55 CALL (GPRO150717C55) entry $2.00

05/20/15 new stop @ 49.25
05/14/15 triggered @ $50.75
Option Format: symbol-year-month-day-call-strike


Hanesbrands Inc. - HBI - close: 31.95 change: -0.05

Stop Loss: 29.95
Target(s): To Be Determined
Current Gain/Loss: -1.2%
Entry on May 21 at $32.35
Listed on May 20, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.74 million
New Positions: see below

Comments:
05/27/15: HBI also delivered a less than ideal performance. Shares quickly rallied off their morning lows but the spike high ran out of steam. HBI closed virtually unchanged, which in today's market is a display of relative weakness.

No new positions at this time.

Trade Description: May 20, 2015:
HBI was founded back in 1901. Today you will find Hanes products in more than 80 percent of U.S. homes.

HBI is in the consumer goods sector. According to the company, "HanesBrands, an S&P 500 company, is a socially responsible leading marketer of everyday basic apparel in the Americas, Europe and Asia under some of the world’s strongest apparel brands, including Hanes, Champion, Playtex, DIM, Bali, Maidenform, Flexees, JMS/Just My Size, Wonderbra, Nur Die/Nur Der, Lovable and Gear for Sports.

We sell bras, panties, shapewear, sheer hosiery, men's underwear, children's underwear, socks, T-shirts and other activewear in the United States, Canada, Mexico and other leading markets in the Americas, Asia and Europe. In the United States, we sell more units of intimate apparel, male underwear, socks, shapewear, hosiery and T-shirts than any other company."

What makes HBI different than most of its competitors is that HBI owns and operates its own manufacturing facilities. About 90% of their apparel comes from company-run plants. That helps them control costs throughout the production process.

This year the company has been very shareholder friendly. Back in January they raised their dividend 33% and announced a 4-for-1 split. The stock split took place in March this year.

HBI's most recent earnings report was April 23rd. HBI reported their Q1 earnings were up +16% from a year ago to $0.22 a share. That missed estimates of $0.23. Revenues were up +14% to $1.21 billion. This was just below expectations of $1.22 billion.

In the company press release HBI Chairman and CEO Richard Noll commented on their results, saying, "We are off to a great start in 2015, once again delivering a double-digit increase in EPS, while tracking to our full-year growth plans. Our acquisition strategy continues to create value with DBApparel, Maidenform and Gear for Sports all contributing substantially to our double-digit growth. In addition, we are raising our 2015 performance outlook to reflect the recent acquisition of Knights Apparel."

Management raised their earnings guidance for 2015 from $1.58-1.63 to $1.61-1.66 per share. Wall Street estimates were at $1.64. HBI also raised their 2015 revenue guidance from $5.78-5.83 billion to $5.90-5.95 billion. Consensus estimates were already at $5.95 billion.

The stock was hammered on the earning miss as investors ignored the improved earnings and revenue guidance. The stock corrected from about $34.60 to under $31.00 in four days (-10 correction).

Analysts' reaction to HBI's results have been positive. Some have noted that Q1 is normally a slower season for HBI. They see the pullback in HBI's stock as a buying opportunity. Multiple firms have raised their price target since the earnings report (new targets are $37, $38, and $40 per share).

Technically HBI has been consolidating sideways in the $30.50-32.00 zone the last several days and have just recently started to breakout from this trading range. We want to hop on board if this bounce continues. Tonight we're suggesting a trigger to open bullish positions at $32.35.

Long HBI stock @ $32.35

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

Long JUL $32.50 CALL (HBI150717C32.50) entry $1.05

05/21/15 triggered @ 32.35
Option Format: symbol-year-month-day-call-strike


Mobileye N.V. - MBLY - close: 47.93 change: +0.45

Stop Loss: 44.95
Target(s): To Be Determined
Current Gain/Loss: -1.5%
Entry on May 15 at $48.65
Listed on May 14, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.2 million
New Positions: see below

Comments:
05/27/15: MBLY looks poised to rally. Shares were initially weak this morning. Traders bought the dip multiple times near its simple 20-dma between 10:15 and 11:15 a.m. The stock then surged and closed near its highs for the session. I would be tempted to launch new bullish positions on a rally past today's intraday peak of $48.06.

Trade Description: May 14, 2015:
The future of hands free driving is a lot closer tha 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%.

MBLY's most recent earnings report was May 11th. They reported their Q1 results of $0.08 per share, which was a penny above estimates. Revenues were up +28% to $45.6 million, also above estimates.

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. Goldman Sachs Recently 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. MBLY also garnered positive comments from a Morgan Stanley analyst who 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 shares of MBLY look attractive with a bullish trend of higher lows. The point & figure chart is bullish and forecasting at $69.00 target. Currently MBLY is hovering just below its late April highs in the $48.00-48.50 zone. We want to launch positions on a breakout past this region. Tonight we're suggesting a trigger at $48.65.

- Suggested Positions -

Long MBLY stock @ $48.65

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

Long JUL $50 CALL (MBLY150717C50) entry $2.10

05/15/15 triggered @ $48.65
Option Format: symbol-year-month-day-call-strike


Starbucks Corp. - SBUX - close: 51.59 change: +0.75

Stop Loss: 48.40
Target(s): To Be Determined
Current Gain/Loss: +1.1%
Entry on May 18 at $51.05
Listed on May 15, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 5.8 million
New Positions: see below

Comments:
05/27/15: SBUX displayed some relative strength today with a +1.47% gain. The stock's recent sideways consolidation may be ending soon. The bullish trend of higher lows looks like it could push SBUX toward its all-time highs near $52.00. A breakout past $52.00 would be very positive for SBUX.

Trade Description: May 16, 2015:
The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.

Five-Year Plan

In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX is having a pretty good 2015 so far with the stock up +23%, outperforming the broader market. A lot of this gain was thanks to a post-earnings pops. SBUX reported its Q1 2015 results on January 22nd. Adjusted earnings, backing out one-time charges, were $0.80 a share. That's in-line with estimates. Revenues were up +13.3% to $4.8 billion, also in-line with estimates.

It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week. Investors applauded the news in spite of the in-line results and sent SBUX soaring to new all-time highs the next day.

This earnings scenario, where SBUX delivers results in-line with estimates and rallies anyway, just happened again in late April. Of course it's worth noting that even in-line results still represent exceptional growth.

SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years. Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

SBUX popped to new highs following its results and then spent the next week consolidating lower. Investors started buying the dips again at its bullish trend of higher lows. It looks like the consolidation is over and SBUX is pushing higher. We want to hop on board. Tonight we are suggesting a trigger to open bullish positions at $51.05.

- Suggested Positions -

Long SBUX stock @ $51.05

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

Long JUL $50 CALL (SBUX150717C50) entry $2.07

05/18/15 triggered @ $51.05
Option Format: symbol-year-month-day-call-strike


Super Micro Computer - SMCI - close: 34.20 change: +0.69

Stop Loss: 31.65
Target(s): To Be Determined
Current Gain/Loss: +1.6%
Entry on May 22 at $33.65
Listed on May 18, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 622 thousand
New Positions: see below

Comments:
05/27/15: SMCI delivered a +2.0% gain, outperforming the major indices. Today's move also generated a breakout past potential resistance at the $34.00 level.

I would be tempted to launch new positions here. Just be aware that SMCI is quickly approaching the trend of lower highs from the February and April peaks.

Trade Description: May 18, 2015:
Sometimes the market's expectations get too high. When a company fails to meet these rising expectations the stock can get punished.

SMCI is in the technology sector. According to the company, "Supermicro® (SMCI), the leading innovator in high-performance, high-efficiency server technology is a premier provider of advanced server Building Block Solutions® for Data Center, Cloud Computing, Enterprise IT, Hadoop/Big Data, HPC and Embedded Systems worldwide. Supermicro is committed to protecting the environment through its 'We Keep IT Green' initiative and provides customers with the most energy-efficient, environmentally-friendly solutions available on the market."

It's easy to see why investors might have big expectations for SMCI. Looking at three of their last four earnings reports SMCI has beaten Wall Street estimates on both the top and bottom line and raised guidance three quarters in a row. It was their most recent report where results seemed to stumble.

SMCI report its fiscal Q3 results on April 21st, after the closing bell. Earnings were up 25% from a year ago to $0.47 a share. Yet analysts were expecting SMCI to report earnings in the $0.49-0.50 range. Revenues were up +26% from a year ago to $471.2 million, but this also missed expectations.

Guidance was also a little soft. Traders were used to SMCI raising their guidance. This time guidance for the current quarter (their Q4) was generally below consensus estimates.

The market overreacted to the disappointment. Shares crashed from $35 to almost $28 following its earnings news. Then traders started buying SMCI in the $29-30 region a couple of weeks ago. The rebound has lifted SMCI back above technical resistance at its 200-dma and back above price resistance near $32.00. We are betting this rebound continues. Tonight we're suggesting a trigger to open bullish positions at $33.65.

- Suggested Positions -

Long SMCI stock @ $33.65

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

Long JUL $35 CALL (SMCI150717C35) entry $1.50

05/22/15 triggered @ 33.65
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

CenturyLink, Inc. - CTL - close: 33.94 change: +0.34

Stop Loss: 35.05
Target(s): To Be Determined
Current Gain/Loss: -0.9%
Entry on May 26 at $33.65
Listed on May 23, 2015
Time Frame: 8 to 12 weeks (less for option traders)
Average Daily Volume = 4.4 million
New Positions: see below

Comments:
05/27/15: It was somewhat surprising to see CTL bounce today after some bearish comments from a Citigroup analyst. Barrons.com noted the call from Citigroup's Michael Rollins who lowered his price target on CTL by $4.00 to $36.00. He thinks the erosion in CTL's revenues could put the company's dividend at risk.

I would wait for a new drop below $33.70 before considering new positions.

Trade Description: May 23, 2015:
The earnings picture for CTL appears to be deteriorating and the stock has fallen as a result. CTL is in the technology sector.

They are part of the telecom services industry. According to the company, "CenturyLink (CTL) is a global communications, hosting, cloud and IT services company enabling millions of customers to transform their businesses and their lives through innovative technology solutions. CenturyLink offers network and data systems management, Big Data analytics and IT consulting, and operates more than 55 data centers in North America, Europe and Asia. The company provides broadband, voice, video, data and managed services over a robust 250,000-route-mile U.S. fiber network and a 300,000-route-mile international transport network."

Looking at the last few earnings reports the guidance picture has been getting worse. Back in November 2014 they reported their Q3 results that beat the bottom line estimate by one cent but management lowered guidance. Then in February this year CTL reported their Q4 results that missed estimates. Revenues were also below estimates and managed lowered their guidance.

Their most recent earnings report was May 5th. CTL delivered their 2015 Q1 report with earnings of $0.67 per share. That was nine cents better than expected. Yet revenues fell -1.9% from a year ago to $4.45 billion and that was below Wall Street estimates. If that wasn't bad enough they also lowered guidance again (if you're counting, that's the third quarter in a row they lowered guidance).

The stock is nearing bear-market territory, down about 19% from its 2014 highs near $42.00 (not counting the spike in July). Bulls could argue that CTL is an income play. They do have a big dividend yield, currently about 6.3%, but their dividend has been this high for weeks and shares have not managed a sustainable rebound.

Technically CTL looks poised to breakdown below support in the $34.00 area and could drop toward the $30-28 region. We are suggesting a trigger to open bearish positions at $33.65.

- Suggested Positions -

Short CTL stock @ $33.65

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

Long JUL $32 PUT (CTL150717P32) entry $0.55

05/26/15 triggered @ $33.65
Option Format: symbol-year-month-day-call-strike


World Fuel Services - INT - close: 50.30 change: -0.02

Stop Loss: 51.25
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 26, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 468 thousand
New Positions: Yes, see below

Comments:
05/27/15: INT flirted with a breakdown below support at $50.00. Shares only hit a low of $49.89. The market's widespread rally was a rising tide that kept INT afloat.

Overall I don't see any changes from last night's new play description. Our suggested entry point for bearish positions is $49.75.

Trade Description: May 26, 2015:
The correction in shares of INT is not over yet. The stock saw a big run from its 2014 lows near $36 to all-time highs near $58 in March this year. That proved to be the peak.

INT is in the basic materials sector. According to the company, "Headquartered in Miami, Florida, World Fuel Services is a global fuel logistics, transaction management and payment processing company, principally engaged in the distribution of fuel and related products and services in the aviation, marine and land transportation industries. World Fuel Services sells fuel and delivers services to its clients at more than 8,000 locations in more than 200 countries and territories worldwide."

Their 2014 Q4 earnings were better than expected with a profit of $0.96 per share versus estimates for $0.77. Yet revenues fell -6.0% from a year ago to $9.78 billion. Analysts had been forecasting $11.36 billion. That's quite a miss.

We see the same pattern in INT's Q1 results. The company reported on April 30th. Analysts were expecting a profit of $0.82 a share on revenues of $9.2 billion. INT delivered $0.83 a share but revenues plunged -30% to $7.34 billion. This time investors took notice and shares of INT dropped sharply on its results.

The stock has been trying to find support near the $50.00 level but traders keep selling the bounces. Now the bearish trend of lower highs is about to push shares of INT through this critical support level at $50.00. Tonight we are suggesting a trigger to launch bearish positions at $49.75.

NOTE: The option spreads are a bit wide. INT does have July options but there's no volume and no open interest on the puts yet.

Trigger @ $49.75

- Suggested Positions -

Short INT stock @ $49.75

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

Buy the AUG $50 PUT (INT150821P50)

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