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Newsletter

Daily Newsletter, Wednesday, 6/10/2015

Table of Contents

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

Market Wrap

Germany Gives the Markets A Lift

by Keene Little

Click here to email Keene Little
News that Germany is considering additional financial aid to Greece gave the stock markets a lift. This is an on-again/off-again concern by the markets and the end result is just more of the same choppy whippy price action.

Wednesday's Market Stats

This morning's strong rally came courtesy of news out of Europe that Germany might, perhaps, maybe, possibly support financial aid for Greece so that they won't default (yet) on their loans. That's all the stock market needed to hear and it shot higher out of the gate this morning, likely greatly aided by short covering. At the moment it's unclear whether or not it will be a 1-day wonder rally since prices remain inside the 4-month trading range. As for help for Greece, I'm reminded of the old woman on the old Wendy's commercial who looked inside the hamburger bun and yelled out, "Where's the beef?"

Germany is apparently now saying Greece needs to agree to just one of several economic reforms and will then OK the next loan package. To me it sounds like Germany is capitulating and that's apparently a good thing for the markets. It really is amazing how excited the market gets about the game of kick the can. But after four days of selling it's hard to know if today's rally was just an oversold reaction (dead cat bounce) or the start of another rally leg that will take us to new highs. At the moment it looks like the rally should see some follow through after a pullback correction.

There were no significant economic reports this morning so the only news event to spark today's rally was the Germany-Greece news. But helping the market today was news from the Commerce Department's Quarterly Services (QSS) survey, which suggests consumer spending might be a little stronger than had been initially reported last month with the 2nd GDP estimate. That has economists thinking the 3rd estimate, to be published June 24th, will show an improvement by as much as 0.4% to 2.2% annual rate. Viewed slightly differently, the contraction in Q2 could be revised up to -0.2% vs. the 2nd estimate of -0.7%. So it's still a sign of slowing but it could be "less bad." Of course if that's true then the Fed could have an easier path to its first rate increase and the market will probably react badly to any news from the Fed that they're on track to raising rates in September. So it's questionable how a "less bad" GDP number will affect the market, including today's rally.

The market is at a critical point here and the price action on Thursday could tell us what to expect next week and for the rest of the month. As I'll point out on a couple of the short-term intraday charts for the DOW and SPX, what kind of pattern we get off Tuesday morning's low will provide clues for the larger pattern. One points to a rally to new highs next week (opex rally) while the other points hard down from here.

Other than the RUT's relatively stronger picture over the past couple of weeks, the other indexes look similar so analyzing one of their patterns gives us a good idea about the others as well. I'll start tonight's chart review with a look at the most-watched index, the Dow Industrials.

The decline from May resulted in a break of the DOW's uptrend line from February, near 17950 at the time, and that looked like a bearish break below the bottom of a rising wedge pattern. Today's rally has the DOW back up against its broken uptrend line, near 18000, which begs the question -- is this rally going to lead something that will take it to a new high in the coming week(s) or is it just a bounce up to resistance before heading lower?

Dow Industrials, INDU, Weekly chart

As can be more easily seen on the daily chart below, today's rally had the DOW poking above its broken uptrend line from February and its 50-dma, near 18021, but closed on its trend line. The bulls need to see a recovery above this line as well as its broken 50-dma. The bears want to see this back-test followed by a bearish kiss goodbye and stronger selling. The winner of this debate tomorrow should set the tone for next week and the rest of the month.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,168
- bearish below 17,715

From an intraday perspective, with the 60-min chart below, we have a slightly different picture. The break of the uptrend line from February was followed by a pullback to the line so it fits as a bullish back-test and the bulls will want to see a morning rally take it up to a new high. But a new high would then likely lead to a drop back down S/R near 18000 and that would scare away some bulls, just in time for a stronger rally to follow (explained with the chart after this one). If the bears step back in tomorrow and drive the index back down it will keep the bearish pattern alive (labeled in red). This one says this morning's rally was just an oversold short-covering rally to finish another upside correction before selling off strong in a 3rd of a 3rd wave down in the decline from May.

Dow Industrials, INDU, 60-min chart

I don't normally get into studying the veins on the leaves in a market wrap but I think it's worth reviewing what will be important to watch for Thursday morning. The DOW's 10-min chart below shows the rally off Tuesday morning's low and so far it's a 3-wave move up to this morning's high. For the bearish pattern that says it's just a high a-b-c bounce that will be followed by a strong selloff. I think if the DOW gets below 17900 it would negate the bullish pattern (green). The bulls want to see another leg up to give us a 5-wave rally from Tuesday, in which case we'd have a trend reversal back to the upside. Following a 5-wave move will be a corrective (3-wave) pullback, probably into Friday (pre-opex head-fake move?), and then we'd look for another rally leg (strong rally in a 3rd wave higher). This is why Thursday morning's move will be important to watch and see how this will set up the next move and help define what next week will probably go.

Dow Industrials, INDU, 10-min chart

SPX looks the same as the DOW but with different trend lines, none of which were in play today. SPX managed to climb back above its broken 50-dma, near 2102, but stopped short of its 20-dma, near 2111. But we've got the same setup for Thursday as shown for the DOW, which is shown on the 30-min chart after the daily chart below. A rally above 2121 would strongly suggest new highs are coming whereas a drop below Tuesday's low near 2072 would be the fat lady singing the blues for the bulls.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2121
- bearish below 2072

If SPX drops below S/R near 2099 it would keep the bearish pattern alive. But if the bulls can drive the index at least marginally higher, preferably up to its broken uptrend line from March 2009 - October 2011, near 2115, it would give us a bullish move off Tuesday's low. A back-test of the broken uptrend line and then a deeper pullback (to at least 2100) would give the bears a reason to jump in short but it would likely be a big mistake since the pullback would likely lead to a stronger 3rd wave rally as all those bears get chased back out. The next couple of days could look like more of the same choppy whippy volatility that we've seen for more than four months now so traders will need to be careful.

S&P 500, SPX, 30-min chart

Monday's and Tuesday's selloff in NDX had it looking bearish after it broke both its 50-dma and its long-term uptrend line from March 2009 - June 2013, both near 4446 at the time. But bulls made a late-night attack on the bear's camp and caused them to retreat today and both the 50-dma and uptrend line, now near 4450 and 4460, resp., were recovered and that keeps the bulls in the game. But they were only able to back-test a broken uptrend line from February 2 - April 6, which was broken last Friday, as well as its broken 20-dma, both near today's high at 4497. The bulls would look better with a sustained rally above 4500 while the bears would look better with NDX below 4440 and confirmed very bearish below Tuesday's low at 4392. Above 4540 would open the door to new highs, potentially up to the top of a rising wedge pattern near 4660 by the end of the month.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4540
- bearish below 4392

The RUT is now presenting us with an interesting setup, one I've been watching for the past couple of weeks. The pattern since the low on May 6th I've been watching the development of what looks like a bearish rising wedge. Even though the RUT was holding up better than the other indexes it was looking like a bearish pattern and today's rally gave it a little throw-over above the top of the wedge (on news, a typical way these finish). It closed at the top of the wedge near 1267 so it could go either way here. The bulls want to see a sustained rally above 1270, which would be a bullish breakout from the wedge and that would point to a strong rally to follow. But a drop below Tuesday's low near 1242 would confirm a breakdown from the wedge and give us a strong signal that the RUT has seen its final high. Again, the next day or two could give us the answer.

Russell-2000, RUT, Daily chart

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

A look at a bigger index, the NYSE Composite, doesn't provide any clearer signal at the moment, except to say it looks bullish if only because important support held in an uptrend. As can be seen on its daily chart below, Tuesday's low was a successful test of support at its 200-dma and uptrend line from December, both near 10884. Today's rally is now approaching its broken 20- and 50-dma's, which are about to cross near 11100 (today's high was 11080). The bears need a break below 10800 otherwise the bulls stay in control and we could see a rally up to the top of a rising wedge pattern (trend line along the highs from November 2014 - April 2015, near 11330 by the end of the month (+2.5% from here).

NYSE Composite index, Daily chart

Key Levels for NYA:
- bullish above 11,150
- bearish below 10,800

Bond prices gapped down this morning which popped yields higher. But the bond market traded sideways following this morning's move and both the 10-year and 30-year yields stopped at/near resistance with little dojis for their daily candles. The TYX daily chart below shows the rally off its January low up has now made it up to the top of a parallel up-channel and today's gap up with a doji could lead to an evening star reversal pattern if today's rally is followed with a gap down and red candle on Thursday. Once again, even for the bond market, Thursday could provide an important clue for what will happen next. TYX would be more bullish above 3.23% but bearish if it gaps down and it would be confirmed bearish (bullish for price) below its May 29th low at 2.842% and its 200-dma, currently 2.843% (and soon to be crossed by its upward trending 50-dma).

30-year Yield, TNX, Daily chart

The TRAN continues to look like the weakling among the bunch. It got a bounce with the market today but its remains in a bearish pattern, especially following the back-test of support-turned-resistance last week near 8515 (price-level S/R and its broken uptrend line from March 2009 - November 2012) and the bearish kiss goodbye that followed. I do see the potential for a higher bounce in the next few weeks, perhaps up to its 200-dma, currently near 8750, before heading lower but that's not how I'd bet on it at the moment.

Transportation Index, TRAN, Daily chart

The U.S. dollar pulled back today, which was supposedly due to an expected debate around the G7 summit regarding the strength of the dollar vs. other currencies. It's all part of the currency wars and there are several countries, especially emerging ones, that are very worried about a stronger dollar. If their currencies are pegged to the U.S. dollar it makes their products much more expensive to export. If the Fed raises rates, as they're threatening to do, it would increase the value of the dollar further and so the discussion about rates and the dollar's value. As for the dollar's pattern, I think it's not going to change value much for the remainder of this year as it hammers out a sideways correction (just a guess about that at the moment but it would fit the larger price pattern) before heading higher.

U.S. Dollar contract, DX, Daily chart

Following last week's low for gold I thought it was ready for a bigger bounce to correct the decline from May 18th. Today's rally had it tagging its broken uptrend line from March-May and that might be all the bounce we'll see. But it would look a little better with a small pullback and then another leg up to again test its broken uptrend line, maybe up near 1200 next week, before starting a stronger decline. Above its June 1st high at 1204.70 would be short-term bullish and above 1245 would make it more bullish but at the moment I'm looking at a bounce in gold as a shorting opportunity.

Gold continuous contract, GC, Daily chart

Oil has been hanging tough since its high on May 6th by trading sideways at price-level S/R near 58.50. The month-long sideways consolidation looks bullish and if oil rallies above the May 6th high at 62.58 it would look bullish for a move up to its broken uptrend line from 1998-2008, near 69.25. Its 50-week MA is coming down toward that level and it makes for a good upside target if it does rally. Otherwise, like the dollar, I see the potential for a big sideways triangle this year before it breaks down next year.

Oil continuous contract, CL, Daily chart

Tomorrow's economic reports include unemployment claims data, retail sales, export/import prices and then business and natural gas inventories. The retail sales data will be important since there's currently a discussion about whether or not the 3rd GDP estimate will be raised based on some improvements seen in consumer spending. That's not what we're seeing in retail sales so a bad number in the morning could torpedo today's rally attempt. But a stronger-than-expected number would help the argument for a "less bad" GDP estimate.

Economic reports and Summary

Conclusion

The stock market got a big boost today and that saved the indexes from confirming a bearish break of important support levels. The recovery keeps the bulls in the game but as shown on the RUT's chart, there is the possibility today's rally was the last hurrah for that index (to finish its rising wedge pattern). And if the market sells off on Thursday it would leave bearish patterns in place for the other indexes as well, which would suggest a strong selloff to follow.

From a short-term perspective Thursday morning's move will be important. A minor new high for the move up from Tuesday, following today's post-rally consolidation, would be bullish. It will lead to a larger pullback correction but that pullback will be a buying opportunity for a stronger rally into opex. It would even fit as the pre-opex head-fake decline followed by an opex rally. But an immediate selloff would keep the bearish pattern intact and I'd be reluctant to buy that kind of pullback since it could lead to much stronger selling into next week.

The bottom line is that we remain inside a 4-month trading range that has been full of choppy whippy price action with little follow through in either direction. Traders get chopped to pieces in this kind of market so it's important to remember rules for capital preservation during times like these.

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

Keene H. Little, CMT

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


New Plays

Building The Internet Of Things

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Silicon Laboratories Inc. - SLAB - close: 56.55 change: +0.85

Stop Loss: 53.95
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 10, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 311 thousand
New Positions: Yes, see below

Company Description

Trade Description:
The Internet of Things (IoT) is poised to surge and SLAB plans to capture its chunk of the IoT pie.

Here's an excerpt from SLAB's explanation on the Iot:

The Internet has come a long way over the last 30 years. Old-fashioned IPv4 is giving way to IPv6 so that every device on the Internet can have its own IP address. Machine-to-machine (M2M) communication is on the rise, enabling devices to exchange and act upon information without a person ever being involved. The scope and scale of the Internet have changed as well: industry leaders predict that the number of connected devices will surpass 15 billion nodes by 2015 and reach over 50 billion by 2020. The challenge for the embedded industry is to unlock the value of this growing interconnected web of devices, often referred to as the Internet of Things (IoT). (You can read more about it here.)

SLAB is part of the semiconductor industry. According to the company, "Silicon Labs (SLAB) is a leading provider of silicon, software and system solutions for the Internet of Things, Internet infrastructure, industrial automation, consumer and automotive markets. We solve the electronics industry's toughest problems, providing customers with significant advantages in performance, energy savings, connectivity and design simplicity. Backed by our world-class engineering teams with unsurpassed software and mixed-signal design expertise, Silicon Labs empowers developers with the tools and technologies they need to advance quickly and easily from initial idea to final product."

SLAB has been beating Wall Street's estimates on both the top and bottom line. Revenues were up +10.8% in the fourth quarter and up +12.4% in the first quarter this year.

The company has recently been considered a takeover target. This speculation helped push SLAB through resistance near the $54.00 level. Shares have been able to maintain these gains. Now SLAB is starting to breakout from its recent sideways consolidation. The point & figure chart is bullish and forecasting at long-term target of $70.00. Today's intraday high was $56.75. We are suggesting a trigger to launch bullish positions at $57.05.

Trigger @ $57.05

- Suggested Positions -

Buy SLAB stock @ $57.05

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

Buy the OCT $60 CALL (SLAB151016C60) current ask $2.95
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Soar On Greek News

by James Brown

Click here to email James Brown

Editor's Note:
Rumors that Europe might be close to some sort of a deal with Greece sparked very widespread rallies across the major European markets and that bled over into the U.S. on Wednesday.

SRPT and TPX both hit our bullish entry triggers today.


Current Portfolio:


BULLISH Play Updates

GoPro, Inc. - GPRO - close: 57.91 change: -0.77

Stop Loss: 54.65
Target(s): To Be Determined
Current Gain/Loss: +14.1%
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:
06/10/15: It was a rough morning for GPRO bulls. Shares gapped lower and spiked down toward technical support at its 20-dma. At its worst levels GPRO was off -6% this morning. The sharp move lower was a reaction to bearish comments from Citigroup analysts.

Citigroup did a consumer poll and found that only 5% of U.S. consumers plan on buying an action camera in the next 12 months. That's down from 7% a year ago. The Citi team also felt that GRPO's move to make their own drone was a defensive maneuver because drones with cameras were stealing business from GPRO's main action camera business. The Citigroup team reduced their earnings estimates for 2015.

GPRO did manage to pared its losses to just -1.3% by the closing bell but the action today is definitely bearish. Shares closed below what is now short-term resistance near $58 and its 10-dma and 200-dma.

More conservative investors will want to seriously consider taking profits now and exiting early. 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

06/10/15 The action today is bearish. Traders may want to exit early now to lock in potential gains
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


Hanesbrands Inc. - HBI - close: 32.58 change: +0.29

Stop Loss: 31.45
Target(s): To Be Determined
Current Gain/Loss: +0.7%
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:
06/10/15: Good news! Today's widespread market rally helped HBI break through resistance in the $32.00 area and its 50-dma. Traders could use this move as a new entry point for bullish positions.

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


LDR Holding - LDRH - close: 44.84 change: +0.82

Stop Loss: 41.85
Target(s): To Be Determined
Current Gain/Loss: +6.4%
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:
06/10/15: The relative strength in LDRH continues. Shares surged +1.8% to a new high. The stock tested round-number resistance at the $45.00 mark multiple times this afternoon.

We are raising the stop loss to $41.85. No new positions at this time.

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

06/10/15 new stop @ 41.85
06/03/15 triggered @ $42.15


Starbucks Corp. - SBUX - close: 52.69 change: +1.15

Stop Loss: 49.95
Target(s): To Be Determined
Current Gain/Loss: +3.2%
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:
06/10/15: It was a bullish day for SBUX. Shares outperformed the major indices with a +2.2% Gain and a breakout past resistance near $52.50.

If you were looking for a new entry point then today's move could work!

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


Seattle Geneitcs, Inc. - SGEN - close: 46.45 change: +0.04

Stop Loss: 43.75
Target(s): To Be Determined
Current Gain/Loss: -1.5%
Entry on June 08 at $47.15
Listed on June 06, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.1 million
New Positions: see below

Comments:
06/10/15: It was disappointing to see SGEN fail to participate in today's broad-based market rally. Traders bought the dip at $45.50 for the second day in a row but there was no follow through higher.

Trade Description: June 6, 2015:
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.

- Suggested Positions -

Long SGEN stock @ $47.15

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

Long SEP $55 CALL (SGEN150918C55) entry $2.45

06/08/15 triggered @ $47.15
Option Format: symbol-year-month-day-call-strike


Super Micro Computer - SMCI - close: 34.65 change: +1.21

Stop Loss: 32.45
Target(s): To Be Determined
Current Gain/Loss: +3.0%
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:
06/10/15: After languishing in the $33-34 zone the last few days SMCI finally broke out higher. The stock showed relative strength with a +3.6% gain versus a +1.25% rally in the NASDAQ.

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


Sarepta Therapeutics - SRPT - close: 28.12 change: +1.11

Stop Loss: 24.85
Target(s): To Be Determined
Current Gain/Loss: +1.7%
Entry on June 10 at $27.65
Listed on June 09, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.2 million
New Positions: see below

Comments:
06/10/15: Our new trade on SRPT is open. This stock spent the first hour of trading in a narrow sideways range. Then after 10:30 a.m. SRPT shot higher. SRPT raced to a +4.1% gain and a new 2015 high. Our trigger was hit at $27.65.

Trade Description: June 9, 2015:
Often biotech stocks can turn into a binary trade. You win big or lose big based on the company's clinical trials and success or failure with the FDA. SRPT is one such stock. Shares have seen some tremendous, gut-wrenching moves, both up and down, over the last couple of years.

If you're not familiar with SRPT they are a biotech stock (part of the healthcare sector). According to the company, "Sarepta Therapeutics is a biopharmaceutical company focused on the discovery and development of unique RNA-targeted therapeutics for the treatment of rare, infectious and other diseases. The Company is primarily focused on rapidly advancing the development of its potentially disease-modifying DMD drug candidates, including its lead DMD product candidate, eteplirsen, designed to skip exon 51. Sarepta is also developing therapeutics for the treatment of drug-resistant bacteria and infectious, rare and other human diseases."

SRPT does not have any products on the market, which is another reason they might be viewed as a binary trade. If they don't succeed with their Eteplirsen treatment for Duchenne Muscular Dystrophy (DMD) then its stock could collapse. DMD is a very rare disease. Only about 20,000 people a year are diagnosed with it in the U.S. It can be fatal by age 30.

SRPT made headlines on May 20th and the stock surged almost $10 with a +60% move to new eight-month highs. The reason behind the pop in the stock was the company's plan to submit a rolling New Drug Application (NDA) with the FDA for its Eteplirsen. This is a big deal. SRPT tried to get FDA approval to file an NDA back in 2013 but the regulators rejected their application saying they needed more data.

Now that SRPT can start the NDA process they should be able to meet with an advisory committee in the fourth quarter of this year, which could really generate a lot of volatility based on the committee's decision.

It's important to note that SRPT is facing competition from larger biotech firm BioMarin Pharmaceuticals (BMRN) who is working on a treatment for the same disease. If BMRN's treatment gets approved first it could send SRPT shares crashing.

Canaccord Genuity's analyst, Adam Walsh, issued an opinion on this SRPT news and multiple news outlets quoted him. According to Walsh,

"Looking forward, we see two potential catalysts to drive shares higher: 1) FDA acceptance of the NDA filing (60 days post-filing — est. late third quarter 2015); and 2) FDA announcement of Adcom to review the eteplirsen NDA. On the first, we fully expect FDA to accept the filing for review, given its blessing to submit the NDA. On the second, we believe an Adcom would allow for powerful testimony from DMD patients, parents, and advocacy groups in support of eteplirsen, which could sway committee members toward recommending approval. Thus, while we acknowledge that significant approval risks still remain, we would expect Sarepta shares to trend higher into an expected fourth quarter of 2015 Adcom."
The advisory panel is a major event for SRPT. One analyst suggested that if SRPT won approval their stock could shoot into the $40s. A different analysts said approval could launch SRPT's stock toward $100. Both said that another FDA rejection could send SRPT shares toward $10.

Part of the reason behind SRPT's big move in May was short covering. The most recent data listed short interest at 33% of the relatively small 35.8 million share float. Currently shares of SRPT are consolidating in a bullish pattern with resistance near $27.00-27.50. A breakout here could spark another wave of short covering.

There has been some speculation that SRPT is a buyout target although I did not see a lot of discussion about any potential suitors.

We are suggesting a trigger to launch small bullish positions at $27.65. We want to limit our position size because SRPT can be very volatile. I would consider this a higher-risk, more aggressive trade.

*small positions to limit risk* - Suggested Positions -

Long SRPT stock @ $27.65

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

Long AUG $30 CALL (SRPT150821C30) entry $3.00

06/10/15 triggered @ $27.65
Option Format: symbol-year-month-day-call-strike


Tempur Sealy Intl. - TPX - close: 63.75 change: +1.07

Stop Loss: 59.25
Target(s): To Be Determined
Current Gain/Loss: +1.0%
Entry on June 10 at $63.15
Listed on June 08, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 890 thousand
New Positions: see below

Comments:
06/10/15: TPX has broken out to new multi-year highs thanks to today's widespread market rally. Our trigger to launch bullish positions was hit at $63.15 this morning.

Trade Description: June 8, 2015:
Activist investors seek to influence management to incorporate major changes in a company with the expectation of unlocking shareholder value. Sometimes the mere mention of an activist investor buying a stock can get shares to move. In TPX's case the activists have won a major battle with management.

TPX is in the consumer goods sector. According to the company, "Tempur Sealy International, Inc. (NYSE: TPX) is the world's largest bedding provider. Tempur Sealy International develops, manufactures and markets mattresses, foundations, pillows and other products. The Company's brand portfolio includes many of the most highly recognized brands in the industry, including Tempur, Tempur-Pedic, Sealy, Sealy Posturepedic, OptimumTM and Stearns & Foster. World headquarters for Tempur Sealy International is in Lexington, KY."

TPX's most recent earnings report was April 28th. They announced their 2015 Q1 results with earnings of $0.55 per share. That was seven cents above estimates. Revenues were up +5.4% to $739.5 million. This was also above expectations. Management raised their 2015 forecast for both earnings and sales. The stock popped to new multi-year highs on this news. Yet the real story is probably the activist investors involved.

Hedge fund H Partners has been urging change with TPX management for months. TPX executives choose to fight. It came down to a proxy fight and shareholders voted to oust the CEO. Two more directors, who were under fire by H Partners have also left the board. H Partners built a website to inform shareholders their opinion on the company (www.fixtempursealy.com). There they posted their 90 page slideshow on why TPX needed a management change. You can see their presentation at this webpage.

The stock has been oscillating sideways in the $58-63 zone the last few weeks. It's starting to look like the consolidation may be over. TPX displayed relative strength last week and it held up today as well while the rest of the market was sinking. If TPX can trade over $63.00 it will generate a new quadruple top breakout buy signal on the P&F chart. We are suggesting a trigger to launch bullish positions at $63.15.

- Suggested Positions -

Long TPX stock @ $63.15

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

Long SEP $65 CALL (TPX150918C65) entry $3.50

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.

06/10/15 triggered @ $63.15
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

CenturyLink, Inc. - CTL - close: 32.26 change: +0.19

Stop Loss: 33.65
Target(s): To Be Determined
Current Gain/Loss: +4.1%
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:
06/10/15: CTL shot higher this morning but the initial rally failed at $32.50. CTL spent the rest of the session fading lower and pared its gain to +0.59%. I don't see any changes from my recent comments.

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


On Deck Capital - ONDK - close: 14.07 change: +0.04

Stop Loss: 15.15
Target(s): To Be Determined
Current Gain/Loss: +2.0%
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:
06/10/15: ONDK also rallied off the opening bell. ONDK was up +3.6% this morning but the bounce ran out of steam near $14.50. Shares settled virtually unchanged on the session.

Tonight we will move the stop loss down to $15.15. 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

06/10/15 new stop @ 15.15
06/02/15 triggered @ $14.35
Option Format: symbol-year-month-day-call-strike