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Daily Newsletter, Saturday, 6/6/2015

Table of Contents

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

Market Wrap

Jobs Rebound Confuses Market

by Jim Brown

Click here to email Jim Brown

The Dow closed at a 4-week low with a loss of -56 but the Nasdaq Composite rallied +9 to post a minor gain. One payroll report does not make a trend but the strong jobs gain would seem to suggest the Fed is going to get its wish for a rate hike in 2015.

Market Statistics

The yield on the ten-year treasury soared to 2.438% intraday before fading only slightly to close at 2.4%. The soaring interest rates weighed on equities as fears of a Fed rate hike increased sharply.


European indexes were all lower as the game of chicken with Greece moved into a new phase. The Greek Prime Minister said Greece could never agree to some of the conditions required by the EU Finance Ministers and Greece put off making the June 5th payment to the IMF until month end when 1.5 billion euros will be due and Greece only has 300 million. This is also when the second phase of the Greek bailout expires and the 18 billion in funding still on hold will evaporate if not dispensed. Both sides have some serious objections to a deal but both sides agree a deal must be reached by June 30th. This is a game of political chicken and whoever blinks first loses.


The Shanghai Composite broke out to a new seven-year high at 5,023 on Friday as the China bubble continues. The Chinese market is now trading at an average PE of more than 50. This is a bubble in search of a pin but that may not happen for some time because of the bullish sentiment from individual investors. Since they were allowed to invest in the market several months ago the rally has been a rocket ride. The Shanghai Index was the only positive market in Asia on Friday.



The big news in the U.S. was of course the Nonfarm Payrolls. The May number came in much hotter than expected with a gain of +280,000 and well over estimates of 225,000. The April number of +223,000 was revised down only slightly by -2,000 to 221,000 but the March number was revised significantly higher from 85,000 to 119,000 for a net revision for the two month of +32,000 additional jobs.

The internals were very strong. Leisure and hospitality added +74,000, professional and business services added +63,000, healthcare +58,000, retail trade +31,000, construction +17,000. Even government payrolls rose by +18,000. The sector that lost jobs was the energy/mining sector with a loss of -18,000.

The unemployment rate increased slightly from 5.4% to 5.5% because more people entered the workforce. The BLS said 397,000 people decided to get off the couch and look for work. This raised the labor force participation rate from 62.8% to 62.9% and a four-month high.

Before we rush out to celebrate the strong jobs numbers let's remember that 92,986,000 people are still not in the labor force. That includes everyone that are 16 years and older who are not employed and did not look for work in the prior four weeks. Obviously that includes a large number of housewives, retirees, etc, that don't want to be employed. The civilian workforce rose +397,000 in May to 157,469,000 of which 148,795,000 were employed and 8,674,000 were unemployed.

Average hourly earnings rose +2.3%, which was a significant gain and something the Fed was hoping to see. Wages rose +2.2% in April so back to back gains are Fed positive. This could be the result of Walmart giving raises to the majority of its workforce over the last two months. Starting in April Walmart gave raises to more than 500,000 workers. That raised their minimum wage from $7.25 an hour to $9.00 and Walmart said that would rise to $10 an hour by February 2016 for those that complete six months of training.

While that is still far below the national average of $24.96 for private-sector workers it still represents an additional $1 billion in wages according to Walmart. That is a pretty significant injection into the average wage calculation.

Analysts claim the strong payrolls over the last two months are concrete evidence of a rebound from the economic contraction in Q1 and that the economy is beginning to accelerate. It may take 2-3 more months to prove that out but for now the Fed should be relieved.

The broader U6 number for unemployment remained flat at 10.8% or twice the more commonly reported rate of 5.5% this month. The U6 number includes everyone out of work that would take a job if one was offered.


Overall it was a good report and it should give the Fed a reason to relax after the economic contraction in Q1. It was the second month of stronger than expected payrolls and when combined with the strong pending home sales and strong auto sales for May it would appear the economy is rebounding and the Q1 contraction will be an exception caused by weather and the port strike.

The FOMC meets on June 17th and there are no expectations for a rate hike in June. The next meeting is at the end of July and that only gives them one more month of data and it is not followed by a press conference. Analysts believe the Fed will only hike at a quarterly meeting with a press conference especially for the first time. There will be numerous questions and explanations that Yellen will have to answer. That means September is the most likely meeting for the first hike. The Fed does not have to wait but several Fed heads are being overly cautious on making sure the economy is really growing rather than just a short term rebound.

Earlier last week the Director of the IMF, Christine Lagarde, asked Janet Yellen to postpone any rate hikes until the middle of next year because of the impact on the global economy. The IMF believes the conditions that caused the contraction in Q1 will drag U.S. economic growth down to +2.5% for the full year. Previously they were expecting +3.1% for 2015. The IMF also downgraded the global growth outlook from +3.8% to +3.1% for 2015. Lagarde said the dollar was already "moderately overvalued" after a 13% gain in the last 12 months. Hiking rates would send the dollar even higher. The problem with holding off until the middle of 2016 could mean that inflation accelerates and the pace of rate hikes would need to be faster and more damaging to the economy.

Fed Vice Chair Stanley Fischer said last week the Fed was "not the central bank for the world" meaning the Fed was not responsible for what happens to the rest of the world if they raise rates. The next three months should be really interesting.

The pace of economic reports slows dramatically next week with nothing of any importance other than maybe the May Retail Sales on Thursday and Producer Price Index on Friday. Analysts are looking for a huge spike in retail sales of +0.9% after a zero rise in April. There could be a disappointment there.


Energy Transfer Equity LP (ETE) announced a 2:1 split but they are not likely to produce a split run. We are still waiting for the Netflix (NFLX) shareholder meeting on Tuesday to approve the five billion in additional shares. Once the shares are approved the company will announce the split rate and with shares at $633 they could easily do a 10:1 split and that would be a serious event.


There was almost no stock news on Friday. The payroll report overpowered the headlines and pushed the stock news out of the headlines. The big mover was Diageo Plc (DEO) a producer of premium alcoholic beverages. A Brazilian news agency said Brazilian billionaire Jorge Paulo Lemann was considering a takeover bid. Lemann's firm 3G Capital orchestrated the $52 billion buyout that produced Anheuser-Busch InBev (BUD). 3G also worked with Warren Buffett to acquire Heinz and helped combine Burger King with Tim Horton's. DEO is well off its 2014 highs at $133. With a market cap of $74 billion it would be a major deal if 3G could get it done.


Security stocks all rocketed higher after the government disclosed that a government sponsored cyberattack stole information on 4 million people that had applied for various security clearances. The hack was discovered in April and it took the government more than a month to determine which files had been stolen. The security companies helping the government track the hack and remove the code from the government computers said it was clearly a Chinese sponsored cyber attack. The code they left behind was nearly identical to other hacks that were also tracked back to China. The government stopped short of specifically blaming China but the implications were clear.

The specificity of the hack to look for people that had applied for security clearances is troubling. Investigators believe that China targeted them in order to develop some spies in America. Security applications include background checks and interviews with friends and relatives as well as financial information. Applicants with problems in their background could be leveraged or blackmailed to exchange secrets rather than have their background problems exposed to the world. The data could be used to target individuals with access to sensitive information that have financial, marital or other problems and might be subject to bribery, blackmail, entrapment and other espionage tools, according to the spokesman.

FireEye (FEYE) spiked +6.4%, Palo Alto Networks (PANW) rose +3%, Fortinet (FTNT) +4%, Cyberark (CYBR) +7.4% and Proofpoint (PFPT) +6%. The new Purefunds Cyber Security ETF (HACK) gained +3.3%. The fund includes 20 of the top security stocks.



Chinese Internet stocks were soaring on the spike in the Shanghai Composite to a seven-year high. QIHU +7.5%, SINA +7.8% and WBAI +9.9%. Sina and Weibo (WB) gained +39% and +22% respectively after the Sina CEO said on Monday he was investing $456 million in Sina.



Under Armor (UA) spiked +5% on an upgrade from DA Davidson. The broker upgraded the active wear company on strong earnings growth potential, digital health investments and sponsorship of athletes. The company upgraded shares from neutral to buy with a $91 price target. UA has had a 30% compound annual revenue growth since 2010 and "should be able to support 20-25% growth for years to come."


All the stock moves were not bullish. Zumiez (ZUMZ) shares fell -19% after the company guided for Q2 for earnings in a range of 13-16 cents on revenue of $179-183 million. Analysts were expecting 30 cents and $192.8 million. Roth Capital Partners said the forecast missed because weakness in April accelerated in May. Janney Capital said it was due to weak traffic and soft demand for men's seasonal products. Shares fell to a 52-week low.


OPEC met and agreed to do nothing. They maintained their production quota at 30 million barrels per day for the next six months but there is no penalty for pumping over the quota. OPEC produced nearly 31.58 Mbpd in May. That was the 12th consecutive month of over production. Officials expect Iran to bring another 500,000 bpd to market within 90 days of the sanctions being lifted and raise that to 1 million barrels within 6 months.

OPEC is moving to a capacity model rather than a price model. Previously they attempted to restrict production to maintain prices. That model failed as the U.S. shale fields began pouring out millions of barrels of high priced oil. With 1.5 mbpd of excess global production OPEC had the capability of supporting prices as long as Saudi Arabia was willing to be the swing producer that made the biggest cuts. As U.S. production rose from 3.8 mbpd in September 2009 to 9.6 mbpd last week the supply and demand balance was lost.

The U.S. was producing high cost oil with some shale fields as high as $70 and deepwater Gulf of Mexico as much as $100 a barrel. Multiple efforts were underway to explore the Arctic where costs would be well over $100. With the cost for Saudi Arabia at roughly $29 a barrel they decided to ramp up production and sell it for less than everyone else. Their desire today is to make up for lost revenue from lower oil prices by pumping even more oil to increase sales. In May Saudi Arabia pumped 10.38 mbpd and they claim to have the capacity for 12.5 mbpd.

After the OPEC meeting Goldman's chief commodity analyst reiterated their forecast for $45 oil by October, $50 in December and $55 in 12 months. If Libya, Iran and Iraq all increase production as expected we will be floating in oil 12 months from now. Many shale producers will either be out of business, acquired or in a holding pattern waiting for prices to increase.

The rising shale fraclog of wells drilled but not completed is thought to now be as high as 425,000 bpd of new production waiting to be turned on when prices recover. Baker Hughes said active rigs declined another -7 last week to 868, only 2 rigs above the 2009 low at 866. Oil rigs declined -4 to 642, -60% off their highs. Gas rigs declined -3 to 222 and only 5 above a 17 year low. Offshore rigs declined -2 to 27 and well below the recent peak at 60. There has been a serious decline in new offshore projects because of the high cost.

Crude prices declined slightly when the OPEC decision was announced. Apparently there were some hopeful investors wishing for a production cut. When prices did not crash the short covering began and WTI closed at $59.13 in the regular session.

Prices are expected to rise slightly into the July 4th weekend because of higher gasoline prices during the holiday period but once past that weekend I would expect a new decline to begin as demand for fuel declines and inventories begin to build again.



Markets

On the surface the markets showed a confusing picture with the Dow, S&P and Nasdaq 100 declining but the Nasdaq Composite, Russell 2000, S&P-600 and S&P-400 Midcap indexes rising. The biggest gainer was the Russell Microcap ($RUMIC) with a +1.1% gain and closing less than 1 point from a new high.

Traders looking at that mixed picture were likely confused. However, the stocks with the biggest gains were small biotechs and the Chinese Internet stocks. There were dozens upon dozens of small biotechs that exploded higher last week. The cancer conference and all the talk about M&A in the sector has built a fire under those small cap biotechs.

This powered the small cap indexes while the blue chips were still fighting problems over rising interest rates and the stronger dollar.

The Russell Microcaps have an ETF (IWC) but volume is very low at only 67,000 shares on Friday. If you want to play those stocks that is your only choice. The ETF has options but the bid ask spreads are pretty wide because of the low volume.


I mentioned over the last two weeks that I expected fund managers to put their spare cash to work before the end of June in order to window dress their midyear portfolios and corresponding statements. The best way for a manager to increase their beta to the market is with the small caps and apparently that is what they are doing. This is risky but so far it has worked out. If they happen to have a couple of those small biotechs acquired along the way that is just a bonus.


On the big cap indexes the picture is very different. On the S&P-500 the percentage of stocks under their 200-day average fell to 59.4% and the lowest level since October. This is hardly a bullish event. The advance/decline line on the S&P is at two-month lows.



The problem with the big caps is the declining earnings, the strong dollar and the potential for rising interest rates. In theory the small caps would be hurt the most by rising rates since they require more financing against a smaller asset base. A company like Apple or Boeing would not suffer the same spike in rates because they can command the best deals.

The S&P came very close to touching the 100-day average at 2083 with a low of 2085. In early May and April the 100-day served as support. I think the more likely support this time around is 2080 and the combination of that level and the 100-day could be the bottom we are looking for. However, if that level breaks we could be looking at a dip to 2040. Friday's close at a three-week low is a danger signal. Some of that was probably a negative reaction to the payroll report and expectations for the Fed but there could have been some Greek fear mixed in there as well.

The S&P is now 37 points off its high of 2129. That is less than -2% and definitely nothing to be worried about. However, that reduced its gain for the year to only 1.3%. It has been a really slow first half for the bulls even with the new highs.

We need to be concerned about the declining internals on the S&P. The chart below does not tell the entire story. The two above are the more telling and they are telling us support for individual stocks is weakening.


The Dow is in similar shape to the S&P only the Dow is up only 0.15% for the year. It will only take a few points to put it in the red and that is also a sell signal. However, there is strong support at 17,800 and 17,600 so it will take some concentrated selling to produce a major decline from here. The 100-day was broken on Thursday but the Dow is not really reactive to moving averages because of its limited 30 stock composition.

A couple weeks ago I said it was sometimes helpful to go through the charts for each of the Dow 30 stocks to see which are in an uptrend and which are in a downtrend in order to get some idea which way the Dow is headed. Unfortunately I did that exercise again this weekend and it was not pretty. Only TWO Dow stocks were in an uptrend on a 30 min chart. The majority were in a confirmed downtrend that was not hopeful. The two stocks with a positive chart were Goldman Sachs and JP Morgan. I encourage you to try this exercise at home on the 30 min chart.

This does not bode well for our chances of avoiding a continued decline early next week. Of course there is always the potential for a short squeeze Monday but we would need some major headline to provide a catalyst.



The Nasdaq Composite benefitted from the biotech rally with nearly half of the gainers in the list below from that sector. Add in the security stocks and Chinese Internets and that was the majority of the gains.

Can that continue next week? Anything is possible but any continuation in the security sector will probably be muted after the big gains on Friday. The Chinese Internets are a wild card since a new high on the Shanghai Index could easily continue producing new highs. The biotech sector had been somewhat subdued over the last week with the $BTK fading for several days before the spike on Friday. The Nasdaq Biotechnology Index (IBB) rebounded to within .64 of a point of a new closing high. The old high was 367.68. This index could breakout on Monday and that could force some more short covering and price chasing. That would be the best hope for the Nasdaq.



The overhead resistance for the Nasdaq Composite is solid at 5100. It has been solid for three weeks and odds are good that has not changed. The support at 5000 was tested on May 14th and again on the 26th. Friday's early dip did not come close at 5025. Without several sectors providing unexpected lift next week I would expect the Nasdaq to drift lower with the 5000 level again providing material support.



The Russell 2000 had a strong day on Friday and quickly recovered from Thursday's market drop. The Russell closed slightly over resistance at 1260 and the internals were strong. The rebalance trade will pick up late next week when the first official list of additions and deletions is released on Friday. Historically once the list is released it weighs on the Russell. The reason is that the stocks being deleted are still in the Russell and traders will be selling them ahead of the rebalance. The stocks being added, and therefore bought, are not yet in the Russell indexes so gains in those stocks have no impact on the index.

On the positive side the stocks are normally being dropped because they have declined to the point where they no longer qualify. That means it takes a lot of selling in a low dollar stock to make a negative impact on the index. Stocks that are being acquired and no longer qualify for inclusion are probably being acquired by another company already in the index. The selling in one and buying in the other because the weighting increased will offset each other. Confused yet?

I would not worry about the rebalance trades this week. The final list is not published until the 19th and that is when the real selling will increase. Of course a positive market can easily offset the rebalance trading. If funds are trying to window dress with Russell stocks it would have an offsetting positive impact.


Several analysts were trying to claim the rebound in the Transports was positive for the overall market. That is true to some extent but the rebound was lackluster and failed at 8525. It will take a lot more buying here to really influence the broader market. The airline sector is still out of favor because of the increased competition even though another decline in oil prices would be helpful. The railroad sector is going to take another hit if it looks like oil prices will remain low because trainloads of sand and drill pipe will slow even further. The biggest worry on the Transports would be a new decline that takes the index below 8300. A lower low would trigger additional sell signals.


I am no longer in the "cautiously long until proven wrong" camp. The research on the individual Dow stocks has poisoned my mind and until there is some improvement there I am neutral on the market. At this point I would start looking for a capitulation dip to buy. Ideally on the S&P that would be 2040 but we could get a bounce at 2080. While I really don't want to drop to the 2040 level it would clear the weak holders and give us a -4% dip to buy. Over the last year those 3-5% dips have all been bought.

Remember, June is historically the worst month for the Dow in recent years. It has been down 8 of the last 10 years. That does not mean this June will be down as well but defined trends like that tend to be traded.

If you like the market commentary you have been receiving and you are on a free trial then now is the time to subscribe. Don't wait until you miss a newsletter to decide you want to take the plunge.

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Random Thoughts

The Fed's biggest nightmare according to Citigroup is not the date of its first rate hike. The biggest nightmare is what would happen if the economic recovery dies of old age without the Fed having done anything to tighten. "If this were to occur, the dollar would probably fall faster than it rose from July to March." This could be a precursor to a loss of faith in the dollar's reserve currency status.

Normal recession recoveries last 5-7 years. This one is already 6 years old.

The second biggest nightmare is an economic rebound that rises so fast that the Fed's entire carefully planned normalization schedule collapses. "Based on current trends we will be at zero unemployment before we are at 2% inflation." Good article here


Despite the spike in the jobs numbers the Fed is not likely to raise rates until September and maybe not until 2016. Fed head Daniel Tarullo said on Thursday "the economy, moreover, appeared to lose momentum" and "our data dependent orientation is going to be particularly important." Tarullo is a Fed governor and offices in the same building as Yellen. That suggests he is more in tune with what Yellen is thinking.

Fed governor Lael Brainard said on Tuesday, "I think there is value to watchful waiting while additional data help clarify the economy's underlying momentum in the face of headwinds from abroad." James Bullard said, "I think it's very difficult to say that you are trying to normalize interest rates just at the moment where the economy looks a little bit weaker." Source


The nation's debt is roughly $18 trillion. The Fed owns $4.5 trillion or 25%. What is wrong with this picture? If it were not for the Fed's QE purchases the interest on the government debt would 2-3 times what it is today. The concept of normalization of interest rates has got to be a scary thing for the administration because normalization will cause major budget deficits.


Greece postponed its first June payment to the IMF until June 30th and said all 1.5 billion euros of debt will be paid in a lump sum. Since the don't have the money a default on June 30th is guaranteed unless the EU Finance Ministers cave in to Greek demands and release the 18 billion euros of bailout cash that is already in the bank and ready to be released. That is also not likely to happen.

Greece is likely to default because its impact on Europe has declined to almost zero. The GDP of Greece is only about 1.5% of Europe's. The equity markets in Europe have about 10 trillion euros of market cap. The capitalization of the Greek stocks is about 19.7 billion euros or about two one-thousandths of Europe. The vast majority of Greek debt is now held by the ECB or the IMF and a default will be an isolated event. There are some privately held bonds but very few and those investors knew the risk when they bought them.

A Greek default does not mean an exit from the eurozone. It may lead to that but 75% of Greek citizens don't want to leave the eurozone and the rest of the eurozone members don't want them to leave because it would set a bad precedent. Source


Bank of America warned that bond flows were likely to turn negative after the serious whipsaw in yields last week. The expectation for the Fed to hike rates is increasing and bond holders stand to lose enormous amounts of money over the next 6-9 months. BofA said "We expect high-grade fund flows to turn generally negative in line with the initial experience during the Taper Tantrum in 2013." Investors pulled nearly $70 billion from bond funds during the Taper Tantrum selling according to TrimTabs.com. BofA analysts warned that if ten-year yields rose to 2.6% over the next two weeks the outflows from bond funds could rival the bloodbath during the Taper Tantrum. Yields on the ten-year closed at 2.4% on Friday. Source

Gross Says Bond Rout Scary as Hell


As of Friday the U.S. markets have gone 1,340 calendar days without a 10% correction on the S&P. That is the third longest streak on record since 1929. It is only the fifth time that the streaks have exceeded 1,000 days. The longest streak on record was a 7 year rally from October 1990 through October 1997. The second longest was a 4.5 year rally between March 2003 and October 2007. The average market rally without a correction is 357 days so we are long overdue.

The current streak has confused investors into waiting on the sidelines for a correction rather than putting money to work in the market. However, just because a streak is getting old it does not mean it will end soon. If you had exited at this point in the 1990s market you would have missed out on a further +105% gain.

Deutsche Bank warned, "We believe the probability of a 5%+ dip is high this summer." David Bianco, chief U.S. equity strategist said there are three possible sell-off triggers. "The Federal Reserve botching the timing of the first rate hike, the U.S. dollar getting too strong and the bond market -- especially the U.S. 10-year yield -- rising too fast." Source


The AAII Investor Sentiment Survey for last week still has 48% of investors neutral on the market. Bearish sentiment declined slightly to 24.6% and bullish sentiment rose slightly to 27.3% but the undecided group is by far the largest.



I know a lot of our readers don't get out much and when you do it is probably with the family. I doubt many readers have had a chance to pick up the 2015 Hooters calendar. No problem here is a link to the calendar and you can enjoy it on the privacy of your own PC. 2015 Hooters Calendar


Are you a prepper? Email me.


 

Enter passively and exit aggressively!

Jim Brown

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"In any moment of decision, the best thing you can do is the right thing. The next best thing is the wrong thing, and the worst thing you can do is nothing."

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New Plays

Potential Short Squeeze Candidate

by James Brown

Click here to email James Brown

Editor's Note:

Additional Trading Ideas:

In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these may need to see a break past key support or resistance:

Bullish ideas: EBAY, LEG, ACM, TPX, HZNP, DISCA, LYV,




NEW BULLISH Plays

Seattle Geneitcs, Inc. - SGEN - close: 46.87 change: +1.20

Stop Loss: 43.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 06, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.1 million
New Positions: Yes, see below

Company Description

Trade Description:
It has been a very bumpy ride for biotech investors this year. Yet the biotech space continues to outperform the broader market. The IBB biotech ETF is up +20% in 2015 versus the NASDAQ composite's +6.6% gain. SGEN is faring even better with a +45.8% gain this year.

SGEN has been working on its antibody-drug conjugate (ADC) technology for years but it still sounds like science fiction. They can create ADCs that target a specific type of tumor cell in the body. It links up with a cancer cell and then delivers a cytotoxin, which is a cell-killing agent.

According to the company, "Seattle Genetics is a biotechnology company focused on the development and commercialization of innovative antibody-based therapies for the treatment of cancer. Seattle Genetics is leading the field in developing antibody-drug conjugates (ADCs), a technology designed to harness the targeting ability of antibodies to deliver cell-killing agents directly to cancer cells.

The company's lead product, ADCETRIS® (brentuximab vedotin), is a CD30-targeted ADC that, in collaboration with Takeda Pharmaceutical Company Limited, is commercially available for two indications in more than 55 countries, including the U.S., Canada, Japan and members of the European Union.

Additionally, ADCETRIS is being evaluated broadly in more than 30 ongoing clinical trials in CD30-expressing malignancies. Seattle Genetics is also advancing a robust pipeline of clinical-stage programs, including SGN-CD19A, SGN-CD33A, SGN-LIV1A, SGN-CD70A, ASG-22ME, ASG-15ME and SEA-CD40. Seattle Genetics has collaborations for its ADC technology with a number of leading biotechnology and pharmaceutical companies, including AbbVie, Agensys (an affiliate of Astellas), Bayer, Genentech, GlaxoSmithKline and Pfizer."

SGEN has a pretty robust pipeline with multiple therapies in phase 1 to phase 3 trials. That probably makes them a buyout target in this merger happy market. Yet that is just speculation on my part. Here's a list of SGEN's current pipeline (SGEN's pipeline).

I hesitate to mention earnings because most smaller biotech firms don't have any. The earnings they do have tend to be lumpy due to milestone payments from partners. SGEN actually has revenue from sales of its FDA approved therapy (listed above). Yet they continue to run losses every quarter. That's because running so many clinical trials is expensive.

Looking at the last couple of quarters SGEN has reported results that were above Wall Street estimates on both the top and bottom line. Revenues in the fourth quarter were up +10% from a year ago while revenues in the first quarter were up +20% from a year ago.

Recently SGEN has seen some bullish headlines regarding insider buying. The company's largest shareholder, Baker Brothers Advisors, bought more than one million shares of the company. This raised their stake in SGEN from 23.4% to 24.25%. Traditionally insider buying is seen as a big bullish vote of confidence on the company's future.

The stock has been soaring the last few weeks with a run from an intraday low of $33.68 on April 30th to a new 52-week high near $47.00 this Friday. You could definitely argue that SGEN is overbought. I'm sure a big portion of that move could have been short interest. It could be short covering that drives the next move higher. The most recent data listed short interest at 29% of the 92.9 million share float. That's enough for a potential short squeeze. Bears may be panicked with SGEN above resistance near $45.00.

SGEN looks pretty bullish right here. I'd be tempted to buy the stock now. However, tonight we are suggesting bullish positions on SGEN if shares trade at $47.15. Just keep in mind that trading biotech stocks is a higher-risk proposition. Not only do biotech stocks tend to be more volatile but you never know when the right or wrong headline (usually regarding some clinical trial) could send shares of your trade crashing or soaring overnight. Right now the IBB biotech ETF is poised to break through major resistance. That could spark short covering across the biotech space.

Trigger @ $47.15

- Suggested Positions -

Buy SGEN stock @ $47.15

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

Buy the SEP $55 CALL (SGEN150918C55) 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

Chart of the IBB biotech ETF:

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Big Jobs Number Generates Uncertainty

by James Brown

Click here to email James Brown

Editor's Note:
Stocks initially sold off on Friday morning thanks to the better than expected jobs number. However, it was not long before traders stepped in and bought the dip. The small cap Russell 2000 index managed to outperform its big cap rivals.

We have removed GPOR as a candidate.


Current Portfolio:


BULLISH Play Updates

GoPro, Inc. - GPRO - close: 59.41 change: +0.53

Stop Loss: 54.65
Target(s): To Be Determined
Current Gain/Loss: +17.1%
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:
06/06/15: GPRO ended the week on an up note, outperforming the major indices with a +0.9% gain. This marks the stock's third up week in a row. Shares could easily be considered overbought with a $10 move in the last three weeks. Investors may want to take some money off the table here.

More conservative traders will want to consider a higher stop loss. We are not suggesting 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

06/01/15 new stop @ 54.65
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

chart:


Hanesbrands Inc. - HBI - close: 32.35 change: +0.30

Stop Loss: 31.45
Target(s): To Be Determined
Current Gain/Loss: +0.0%
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:
06/06/15: HBI has spent the last several days consolidating sideways. On the plus side shares have been able to ignore most of the market's down days. Friday's display of strength (+0.9%) was encouraging and suggest the stock's consolidation might be over. The next hurdle is potential short-term resistance near the May 21-22 highs around $32.50 and its 50-dma (currently $32.59).

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

05/30/15 new stop @ 31.45
05/21/15 triggered @ 32.35
Option Format: symbol-year-month-day-call-strike

chart:


Hill-Rom Holdings - HRC - close: 52.29 change: -0.07

Stop Loss: 50.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 04, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 335 thousand
New Positions: Yes, see below

Comments:
06/06/15: Traders bought the dip in HRC on Friday near $51.65 and just below its 10-dma. The stock bounced back to close almost unchanged on the session. HRC still looks poised to breakout higher. We are suggesting a trigger to launch bullish positions at $52.55.

Trade Description: June 4, 2015:
HRC is a midcap stock that's outperforming both the big cap indices and the midcap index. The S&P 500 index is up +1.8% year to date The MDY midcap ETF is up +5%. Yet HRC is up +14.7% this year and just set a new multi-year closing high today.

HRC is in the healthcare sector. According to the company, "Hill-Rom is a leading global medical technology company with more than 7,000 employees worldwide. We partner with health care providers in more than 100 countries by focusing on patient care solutions that improve clinical and economic outcomes in five core areas: Advancing Mobility, Wound Care and Prevention, Clinical Workflow, Surgical Safety and Efficiency, and Respiratory Health. Hill-Rom's people, products, and programs work towards one mission: Every day, around the world, we enhance outcomes for patients and their caregivers."

Their most recent earnings report was May 5th. HRC announced its fiscal Q2 results with earnings up +12% to $0.64 a share. Analysts were only expecting $0.60. Revenues were up +14% to $475 million. On a constant currency basis revenues were up +21%. Estimates were at $471.7 million.

HRC President and CEO John Greisch commented on his company's quarterly results, saying, "We are pleased to report another quarter of strong revenue and adjusted earnings growth. Organic revenue growth was the strongest in three years, as our North America and Surgical/Respiratory Care businesses performed well. In addition, we launched several important new products. Despite incremental currency headwinds, we are raising our full-year outlook, reflecting our improved operational execution."

Management lowered their Q3 guidance below estimates but they countered that by raising their full year 2015 guidance above Wall Street expectations. The company now sees revenues growing at +10% to +11% this year.

Investors have been buying the dips in HRC for a long time. That bullish trend of higher lows has pushed the stock toward resistance in the $52.00 area. Today we saw HRC ignore the market's widespread weakness and breakout past this area. We want to hop on board if this momentum continues. Today's intraday high was $52.37. We are suggesting a trigger to open bullish positions at $52.55.

Trigger @ $52.55

- Suggested Positions -

Buy HRC stock @ $52.55
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

chart:


LDR Holding - LDRH - close: 43.94 change: +0.78

Stop Loss: 39.45
Target(s): To Be Determined
Current Gain/Loss: +4.2%
Entry on June 03 at $42.15
Listed on June 02, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 231 thousand
New Positions: see below

Comments:
06/06/15: The relative strength in LDRH continued on Friday with shares up another +1.8%. The stock is up six days in a row and up about +10% from its May 29th low. Shares are short-term overbought and I would not launch new positions at this time. Hopefully broken resistance at $42.00 will be new support. More conservative traders may want to raise their stop loss.

Trade Description: June 2, 2015:
The worldwide market for nonfusion spinal devices is expected to triple by in the next seven years. That's according to Millennium Research Group (MRG), who said, "the global market for spinal nonfusion devices will almost triple in size through 2022, surpassing $1.6 billion. This market will be driven largely by emerging products and approvals, as well as high growth in emerging regions, such as Asia Pacific and Brazil, India and China (BIC)." (
source.)

One company leading the charge in this industry is LDRH. They are in the healthcare sector. According to the company, "LDR Holding Corporation is a global medical device company focused on designing and commercializing novel and proprietary surgical technologies for the treatment of patients suffering from spine disorders. LDR's primary products are based on its exclusive VerteBRIDGE(R) fusion and Mobi non-fusion technology platforms and are designed for applications in the cervical and lumbar spine. These technologies are designed to enable products that are less invasive, provide greater intra-operative flexibility, offer simplified surgical techniques and promote improved clinical outcomes for patients as compared to existing alternatives. In August 2013, LDR received approval from the U.S. Food and Drug Administration (FDA) for the Mobi-C cervical disc replacement device, the first and only cervical disc replacement device to receive FDA approval to treat both one-level and two-level cervical disc disease."

The recent earnings history for LDRH has been very bullish. They have beaten Wall Street's earnings and revenue estimates the last four quarters in a row. Plus, the company has raised its guidance the last four quarters in a row. Revenues have been surging in the +25% to +30% range the last year.

The company's most recent earnings report was May 6th. They reported their Q1 results after the closing bell. Analysts were expecting a loss of ($0.20) per share. LDRH reported a loss of ($0.12). Revenues were up +25.7% to $39.1 million, above the $36.6 million estimate. Gross margins improved from 83.1% to 83.5%.

LDRH management said that foreign exchange rates would hurt revenues by 5% to 6% in 2015. Yet they still raised their 2015 revenue guidance into the $166.7-168.1 million range, above analysts' estimates of $160.5 million.

The stock shot higher on its May 6th earnings report and bullish guidance. Shares recently peaked near $42.00 and spent the last several days consolidating sideways in the $40-42 zone. This sideways consolidation has alleviated some of LDRH's overbought conditions. The point & figure chart is very bullish and forecasting at $64.00 target.

We like how shares were showing relative strength today. The stock is poised to breakout past short-term resistance at $42.00. Tonight we are suggesting a trigger to launch bullish positions at $42.15. The stock does not trade a lot of volume and it has been somewhat volatile in the past. I would consider this a slightly more aggressive, higher-risk trade.

NOTE: Options are available but the spreads are a little too wide to trade comfortably.

- Suggested Positions -

Long LDRH stock @ $42.15

06/03/15 triggered @ $42.15

chart:


Starbucks Corp. - SBUX - close: 52.19 change: +0.47

Stop Loss: 49.95
Target(s): To Be Determined
Current Gain/Loss: +2.2%
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:
06/06/15: SBUX hit its lows for the week on Friday morning. Fortunately traders bought the dip like they tend to do in this stock. Shares reversed into a +0.9% gain. If the market cooperates this week we should see SBUX hitting new all-time highs soon.

No new positions at this time.

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

06/04/15 new stop @ 49.95
05/18/15 triggered @ $51.05
Option Format: symbol-year-month-day-call-strike

chart:


Super Micro Computer - SMCI - close: 33.68 change: +0.16

Stop Loss: 32.45
Target(s): To Be Determined
Current Gain/Loss: +0.1%
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:
06/06/15: After Thursday's big drop I was starting to worry about SMCI. The stock found support near its 20-dma and 50-dma around $33.00 on Friday morning.

I am not suggesting 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

06/04/15 new stop @ 32.45
05/22/15 triggered @ 33.65
Option Format: symbol-year-month-day-call-strike

chart:


Thoratec Corp. - THOR - close: 45.29 change: -0.36

Stop Loss: 44.35
Target(s): To Be Determined
Current Gain/Loss: -1.9%
Entry on June 01 at $46.15
Listed on May 27, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 602 thousand
New Positions: see below

Comments:
06/06/15: It looks like THOR took a week off to rest. After four up weeks in a row shares essentially drifted sideways the last five sessions.

Tonight we are taking a more defensive posture on the stock and raising the stop loss up to $44.35. No new positions at this time.

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.

- Suggested Positions -

Long THOR stock @ $46.15

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

Long JUL $45 CALL (THOR150717C45) entry $2.40

06/06/15 new stop @ 44.35
06/01/15 triggered @ $46.15
Option Format: symbol-year-month-day-call-strike

chart:




BEARISH Play Updates

CenturyLink, Inc. - CTL - close: 32.18 change: -0.65

Stop Loss: 33.65
Target(s): To Be Determined
Current Gain/Loss: +4.4%
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:
06/06/15: The down trend in CTL resumed on Friday with a -1.9% decline. It's encouraging to see shares showing relative weakness. Looking at a long-term chart I do see potential support near $32.00. Don't be surprised if CTL bounces on Monday but the $33 area should be new short-term resistance.

I am not suggesting new positions at this time.

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

06/04/15 new stop @ 33.65
05/26/15 triggered @ $33.65
Option Format: symbol-year-month-day-call-strike

chart:


World Fuel Services - INT - close: 49.76 change: +0.63

Stop Loss: 51.25
Target(s): To Be Determined
Current Gain/Loss: -0.0%
Entry on June 01 at $49.75
Listed on May 26, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 468 thousand
New Positions: see below

Comments:
06/06/15: Friday was a potentially frustrating session if you're bearish on INT. The stock had appeared to finally breakdown on Thursday. Suddenly on Friday shares rebound and almost completely erase Thursday's loss. The $50.00 mark and the 10-dma also near $50 should be overhead resistance. More conservative traders may want to lower their stop loss.

I am not suggesting new positions at this time.

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.

- Suggested Positions -

Short INT stock @ $49.75

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

Long AUG $50 PUT (INT150821P50) entry $2.50

06/01/15 After the close, INT announces a $100 million stock buyback program
06/01/15 triggered @ $49.75
Option Format: symbol-year-month-day-call-strike

chart:


On Deck Capital - ONDK - close: 14.92 change: +0.02

Stop Loss: 16.25
Target(s): To Be Determined
Current Gain/Loss: -4.0%
Entry on June 02 at $14.35
Listed on June 01, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 431 thousand
New Positions: see below

Comments:
06/06/15: Friday was a relatively quiet session for ONDK. The stock closed virtually unchanged on the day. On Thursday I suggested a move under $14.70 as a new entry point for bearish trades. We did see ONDK trade below $14.70 on Friday morning and Friday afternoon but both times traders bought the dip.

I am not suggesting new positions at this time.

Trade Description: June 1, 2015:
You know something is wrong when a stock is down -50% from its post-IPO peak in less than six months.

ONDK is part of the financial sector. Here's how the company describes itself:

"OnDeck (ONDK), a leading platform for small business loans, is committed to increasing Main Street's access to capital. OnDeck uses advanced lending technology and analytics to assess creditworthiness based on actual operating performance and not solely on personal credit. The OnDeck Score®, the company's proprietary small business credit scoring system, evaluates thousands of data points to deliver a credit decision rapidly and accurately. Small businesses can apply for a line of credit or term loan online in minutes, get a decision immediately and receive funds in as fast as the same day. OnDeck also partners with small business service providers, enabling them to connect their customers to OnDeck financing. OnDeck's diversified loan funding strategy enables the company to fund small business loans from various credit facilities, securitization and the OnDeck Marketplace®, a platform that enables institutional investors to purchase small business loans originated by OnDeck.

Since 2007, OnDeck has deployed more than $2 billion to more than 700 different industries in all 50 U.S. states, and also makes small business loans in Canada. The company has an A+ rating with the Better Business Bureau and operates the website BusinessLoans.com which provides credit education and information about small business financing. On December 17, 2014, OnDeck started trading on the New York Stock Exchange under the ticker ONDK."

The company charges outrageous interest rates on its short-term loans. According to the SEC filings these can range from 20% to 99% APRs. They get away with this by only loaning to businesses and not individual consumers. Rising defaults are an issue. The company expects about 7% of their loans to go into default but some of the latest numbers suggest reality is closer to 20%. There is a concern that companies like ONDK will face future regulations that will limit how much interest they can charge. Another bear argument is valuations.

The company was valued around $1.4 billion at its IPO. Even with the decline it's still valued near $1 billion today. That's for a company without any profits. They lost ($0.01) per share in the fourth quarter and that jumped to a loss of ($0.05) per share in the first quarter.

Another potential landmine for shareholders is ONDK's six-month lockup expiration. Currently there are about 13.2 million shares outstanding. On June 15th, 2015 another 56 million shares are unlocked.

The stock broke down on its earnings report in early May. Now it's breaking down below its 2015 lows in the $14.50-15.00 zone. The point & figure chart is bearish and forecasting at $7.00 target.

The stock has seen some volatile moves. I would consider this a more aggressive, higher-risk trade. Tonight I am suggesting a trigger to launch bearish positions at $14.35. Traders may want to use put options to limit their risk.

- Suggested Positions -

Short ONDK stock @ $14.35

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

Long AUG $14 PUT (ONDK150821P14) entry $1.80

06/02/15 triggered @ $14.35
Option Format: symbol-year-month-day-call-strike

chart:



CLOSED BEARISH PLAYS

Gulfport Energy Corp. - GPOR - close: 44.59 change: +1.16

Stop Loss: 45.35
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 30, 2015
Time Frame: 8 to 12 weeks (option traders should exit prior to expiration
Average Daily Volume = 1.5 million
New Positions: see below

Comments:
06/06/15: We are removing GPOR as a candidate. The stock displayed relative strength on Friday with a +2.6% gain. Shares still have a bearish trend of lower highs but we're choosing to drop it for being so uncooperative.

Trade did not open.

06/06/15 removed from the newsletter, suggested entry was $42.75

chart: