Option Investor
Newsletter

Daily Newsletter, Thursday, 5/28/2015

Table of Contents

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

Market Wrap

Global Worries Weigh On Markets

by Thomas Hughes

Click here to email Thomas Hughes
Global worries continue to weigh on markets while traders await more data.

Introduction

A host of global worries weighed the market down today. Starting in Asia news that brokerage houses were reducing the availability of margin sent mainland China shares sinking by -6.5%. Other indices in the region were affected but managed to shrug off the news. European indices were hit by the sell-off in China, and also by another downbeat headline about the Greek debt negotiations.

Officials within the European Commission, and other Greek creditors, do not see the same progress as officials from Greece. They say there is still a long way to go, and were surprised by the positive spin put on by the Greek government. The IMF's Lagarde went so far as to say a Grexit was possible. Needless to say the news sent European indices lower

Market Statistics

The international news was not inspiring so futures trading was negative right from the start. The indices were indicated marginally lower, less than a quarter percent, and held this level for most of the early pre-opening session. Today's jobless claims data, as good as it was, was not enough to reverse the tone of trading. The market opened as indicated and moved lower from there. The first bounce occurred at 10AM and set the level from which several attempts to rally were made. The market was never able to recover the day's losses but it was able to move off the lows and close near the top of today's range.

Economic Calendar

The Economy

Initial claims for unemployment rose by 7,000 versus an expected decline of 5,000. Last week's claims were revised up, by 1,000, making this week's gain a total of 8,000. Claims are now 282,000, the third week of increases but still well below 300K. The four week moving average also rose, by 5,000, but is still sitting near the 15 year low. On a not adjusted basis claims gained 3.3% versus an expected gain of only 0.8%. Michigan and Oregon led with increases totaling 2,384. California and South Carolina led with declines totaling -3,235. Claims have been on the rise in recent weeks but not alarmingly so, claims are still trending lower over the long term and consistent with a healthy labor market.


Continuing claims also rose, by 11,000, to hit 2.222 million. Last week's figures were not revised. The four week moving average continued to fall and it a new 15 year low. Continuing claims may be led higher by initial claims in the next few weeks but remains at/near the long term low and consistent with ongoing improvements in labor market conditions.

Total claims reflects labor market improvement as well, falling -68,872 to 2.126 million. This is the 11th week of decline since hitting peak earlier this year, the lowest level since October of last year and 13% lower than last year at this time. T


Pending home sales was released at 10AM, adding further evidence the housing market is bouncing back. Pending sales rose by 3.4%, well ahead of the 1% consensus estimate and the 1.2% gain last month. Last month's figure was revised higher, adding upward momentum as well. This is the fourth month of increasing sales which are now at a 9 year high. This is a measure of signed contracts for existing single family homes so is indicative of rising existing home sales figures for May and June. According to NAR economists demand is strong and homeowners are in control of the market.

On deck tomorrow, the 2nd estimate for 1st quarter GDP. Estimates have declined to a consensus near -1.0%, more than a full percent below the previously released estimate. Also scheduled for tomorrow ar Chicago PMI and Michigan Sentiment.

The Oil Index

Oil prices traded around $57.50 as supply and production weigh on prices. Today's report from the EIA shows that US production rose to 9.5 million barrels last week, a 43 year high. This news is a mild surprise, the rig count has been dropping steadily over the past few months, but nonetheless shows that supply is ample. We already know that Saudi Arabia/OPEC production are at/near record high levels. Prices may slide further, but there is also still plenty of geopolitical issues adding fear to the market as well.

The Oil Index drifted lower, falling about a quarter percent in today's action. The indicators remain bearish and pointing to lower prices but there is also evidence the move may be running out of steam, primarily diverging momentum. Potentially strong support exists along the long term trend line, about 50 points or 3.5% below today's closing price. The index could continue to drift down to support, particularly if oil prices move lower, where I will be looking for signs of bullish activity.


The Gold Index

Gold prices held steady above $1185 today. Prices are sitting on support levels following last week's sharp rise in the dollar. Strong, stronger than expected, CPI strengthened the dollar, providing a near term catalyst for lower gold prices but at the same time it providing catalyst for long term buyers; inflation is rising or on the cusp or rising and rising inflation is bullish for gold. Gold prices may remain volatile and tied to dollar moves with support in the range of $1180-$1185 and resistance near $1225.

The gold miners were able to move higher today, the GDX Gold Miners ETF gaining a little of a half percent. Today's action held a tight range, just below my rising support line. This line has provided support for 3 months, confirmed by indicators on both the weekly and daily charts, and so looks fairly strong. Gold prices will of course play a big role here, if they are not able to hold support levels the GDX will likely not either. I remain bullish longer term and looking for a bounce back above support/trend with upside target near $21.15. If support fails it could move as low as $17.50.


In The News, Story Stocks and Earnings

GoPro CEO made a hero of himself announcing two new product developments during an interview yesterday. He revealed plans to enter the drone space as well as products designed to work with those filming for virtual reality. The new was well received, analysts like the fact the company is trying to diversify itself, and sent the stock up by nearly 7%. Shares have been moving higher since hitting bottom in early March and could continue. Momentum is bullish however weak and stochastic is making a bullish crossover of the upper signal line. Next potential resistance I see is just above $60.


Abercrombie & Fitch continues the parade of retailers earnings reports. Today the company reported a wider than expected loss but better than expected comp store sales that sent shares of the stock flying higher. The increase in comp store sales is seen as a positive development in the company's ongoing strategy to re-position itself in the new era of teen retail. Shares initially traded lower, the report came out well before the opening bell, but sentiment had changed by the time the market opened. The stock gapped up at the bell and then gained more than 13%. Today's move is on high volume and driven in large part by short covering.


The retail sector as a whole has held up fairly well over the past three weeks. The sector has had an onslaught of mixed earnings reports that have left one question unanswered, when is the consumer going to start spending some of the money the labor data suggest is being earned? Today the XRT Retail Spyder gained about a tenth of a percent in a session of light trading. The ETF is trading just under the short term moving average and near the middle of the 30 day range. The indicators are neutral with a bullish bias and indicate support near $97.50. Without any catalyst and no major earnings expected tomorrow a test of support is very possible. The trend is up with positive expectations into the end of the year so any test of support would be a potential entry point.


The S&P China ETF GXC lost 3.25% in today's session. The ETF traded down to a support level near $95 with momentum turning bearish and stochastic making a bearish crossover near the middle of the range. It looks likely that this sector will continue to trade lower and possibly move below $95. Next targets for support near $92.


The Indices

The market moved lower today but remains near long term all time highs. All except the transports which for some reason continue to move lower. While the rest of the market declined by more modest amounts, the Dow Jones Transportation Index lost nearly a full percent, -0.91%. Today's move set another new low, below the long term trend line, and increases the chance of reversal. The index is also back in correction territory with a net loss greater than 10% from its high. The indicators are bearish and point to lower prices but are yet to show much strength. This, along with the lower shadow on today's candle, make the 8,250 level look like a candidate for potential support. The trend line is broken, but the trend is not yet reversed and requires a retest of resistance and rejection at the trend line/bottom of the previous trading range. Until then I am neutral on this index.


The Dow Jones Industrial Average was the next largest decliner with a loss of only -0.20%. The blue chips continue to test support, today at the 30 day moving average, and support is holding. Today's action crossed the moving average, approached the 18,000 mark and bounced back. The indicators are both moving lower but momentum is so weak it does not look like support will fall. If it were to be broken it would help confirm a possible double top forming on the index. Target for this move would be the long term trend line, about 5.5% below the current level.


The NASDAQ Composite made the next largest decline, about -0.17%. The techs were not able to hold the new all time high set yesterday which, depending on how you look at it, is either good or bad. Its natural for a market to periodically pull back from new highs during a rising trend: lack of follow through could mean the new highs are more whipsaw than break out. The indicators are bullish so I am leaning toward the former rather than latter. Support is along the short term moving average and near the previous all time high around 5,050, upside target is near 5,250.


The S&P 500 suffered the smallest loss today, only -0.13%, less than a quarter the loss experienced by the transports. The broad market is also testing support, support which is still looks strong, at least for now. The index is trying to bounce from an area of potentially very strong support, the intersection of two major trend lines, with indicators that help underscore the potential for strength. MACD momentum is bullish, weak but bullish, and stochastic is holding above the upper signal line. Support is along the trend line and the short term moving average in a tight range around the previous all-time high near 2,120.


The market continues to churn and, except for the transports, are looking as if they might maintain their current levels. Causing the churn is a mountain of global fears, lack luster data and FOMC rate hike speculation.

Tomorrow's data has a high potential to add to the churn. The GDP revision is expected to be weak, very weak, but is also very rear looking. The Chicago PMI and Michigan Sentiment are less important in the macro sense but are current and could point to rebound, not to mention the fact that next week is the next round of monthly labor data, auto sales, ISM, construction spending, the Fed's Beige Book and many other reports that could renew belief in ongoing economic expansion.

Until then, remember the trend!

Thomas Hughes


New Plays

Cloud-Based Payroll

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Paylocity Holding Corp. - PCTY - close: 33.97 change: +0.62

Stop Loss: 31.45
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 28, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 206 thousand
New Positions: Yes, see below

Company Description

Trade Description:
PCTY is delivering strong double-digit revenue growth and has consistently been raising guidance. This has pushed shares to new highs this year.

PCTY is in the technology sector. According to the company, "Paylocity is a provider of cloud-based payroll and human capital management, or HCM, software solutions for medium-sized organizations. Paylocity's comprehensive and easy-to-use solutions enable its clients to manage their workforces more effectively. Paylocity's solutions help drive strategic human capital decision-making and improve employee engagement by enhancing the human resource, payroll and finance capabilities of its clients."

Back in November they reported their 2015 Q1 results that beat estimates on both the top and bottom line. Revenues were up +38.8% from a year ago. Management raised guidance.

PCTY delivered a similar performance in February. The company reported its Q2 results that beat Wall Street's estimates on both the top and bottom line. Revenues were up +54.9% and managed raised guidance.

Their most recent report was May 7th. You can see the stock's big reaction on the daily chart (likely a short squeeze). Analysts were expecting a profit of $0.05 on revenues of $44.5 million. PCTY delivered $0.11 per share with revenues up +40% to $47.3 million. This time management raised their Q4 revenue guidance above analysts' estimates.

Technically the stock has spent the last several days building a bull-flag consolidation pattern. Today's display of relative strength looks like a breakout from the flag. The point & figure chart is forecasting at $53.00 target. If this rally continues PCTY could see some short covering. The most recent data listed short interest at 12% of the 15.47 million share float.

Bears could argue that PCTY is near the top of its long-term bullish channel (see weekly chart). This would suggest that short-term upside would be limited to a couple of dollars.

NOTE: PCTY does have options but the spreads look too wide to trade them.

Trigger @ $34.15

- Suggested Positions -

Buy PCTY stock @ $34.15

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.

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

GPRO Soars On New Product Ideas

by James Brown

Click here to email James Brown

Editor's Note:
Shares of GoPro (GPRO) ignored the market's widespread weakness and soared to new relative highs. GPRO's management unveiled new product ideas that appears to have the market's approval (at least for now).


Current Portfolio:


BULLISH Play Updates

GoPro, Inc. - GPRO - close: 56.81 change: +3.53

Stop Loss: 51.45
Target(s): To Be Determined
Current Gain/Loss: +11.9%
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:
05/28/15: GPRO was one of the market's biggest winners today. The stock gapped open higher and spiked toward technical resistance at its 200-dma pretty quickly this morning. Gains faded and GPRO ended the session with a +6.6% advance.

Critics have called GPRO a one-trick pony with its action camera product. Today GPRO's CEO is trying to escape that label by announcing two new products. One is a new multi-camera rig to produce content for virtual reality. GPRO actually has two multi-camera rigs. One is a six-camera set up while the other is a 16-camera design. GPRO has already partnered with Google to work on producing content for VR.

The company also plans to get into the drone market. GPRO's CEO called aerial drones the "ultimate GoPro accessory". They hope to introduce their first quadcopter in the first half of 2016. These new product announcements were enough to launch GPRO's stock to new four-month highs.

Tonight we will raise the stop loss to $51.45. 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

05/28/15 new stop @ 51.45
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: 31.93 change: -0.02

Stop Loss: 29.95
Target(s): To Be Determined
Current Gain/Loss: -1.3%
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:
05/28/15: I'm starting to worry about our HBI trade. The stock closed virtually unchanged on the session but it is HBI's fourth decline in a row. More conservative traders may want to raise their stop loss.

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: 46.86 change: -1.07

Stop Loss: 44.95
Target(s): To Be Determined
Current Gain/Loss: -3.7%
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:
05/28/15: Ouch! It was a disappointing session for MBLY bulls. Today's -2.2% decline erased the last three days worth of gains.

I am not suggesting new positions at this time.

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: 51.81 change: +0.22

Stop Loss: 48.40
Target(s): To Be Determined
Current Gain/Loss: +1.5%
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:
05/28/15: SBUX continues to percolate higher. The stock bucked the market's down trend today. Shares are on the verge of breaking out to new all-time highs.

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: 33.77 change: -0.43

Stop Loss: 31.65
Target(s): To Be Determined
Current Gain/Loss: +0.4%
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:
05/28/15: SMCI did not see any follow through on yesterday's breakthrough the $34.00 level. SMCI saw a very brief pop to $34.46 and then immediately reversed. We could blame the broader market's weakness. The question is if SMCI will find support near its 10 and 50-dma around the $33.40 area.

No new positions at this time.

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


Thoratec Corp. - THOR - close: 45.77 change: -0.07

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

Comments:
05/28/15: Shares of THOR bounced between short-term support at its 10-dma and short-term resistance at the $46.00 level. Our suggested entry point to open bullish positions is $46.15.

Trade Description: May 27, 2015:
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)

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

CenturyLink, Inc. - CTL - close: 34.06 change: +0.12

Stop Loss: 35.05
Target(s): To Be Determined
Current Gain/Loss: -1.2%
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:
05/28/15: CTL displayed relative strength with a +0.35% gain on Thursday. Shares are up two days in a row. The stock is nearing what should be technical resistance at its 10-dma (near 34.15).

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: 50.51 change: +0.21

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:
05/28/15: INT also showed some relative strength with a +0.4% gain. If INT doesn't breakdown below support at $50.00 tomorrow we might drop it as a candidate. Wait for the breakdown. Our suggested entry point 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