Option Investor
Newsletter

Daily Newsletter, Monday, 6/15/2015

Table of Contents

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

Market Wrap

Greek Drama, Data And The FOMC

by Thomas Hughes

Click here to email Thomas Hughes
Greek drama pushed the indices down to test recent lows while the world waits on the FOMC.

Introduction

It's here again, FOMC week. This one, like each one over the past few years, has the market wound up in expectation as we approach the first interest rate hike since before the financial crisis. Global news had an impact but the focus was on the economic data, the Fed and what they are going to do Wednesday.

Asian markets ended their day flat, although Chinese indices fell sharply. Regulators there have enacted new laws outlining requirements and restrictions to margin lending and fueled fear the liquidity driven rally is coming to an end. In Europe markets were roiled by Greece and its failure to come to terms with its lenders. Greece is now closer than ever to defaulting so I am expecting new headlines just about every day. The surprising thing is that some analysts are now looking past a default to potential positive outcomes, for Greece and the EU, if such a case were to arise.

Market Statistics

Our markets were negative from the earliest. The S&P 500 was indicated to open close to -0.5% lower than last week's closing price for most of the morning and that did not change going into the 9:30 time frame. We got some economic data this morning, mixed as usual, but there was little obvious affect to the indices. The market fell sharply once the opening bell sounded, exceeding early indications. Bottom was found within the first 30 minutes, near last week's low, and the market bounced back to regain more than half of the early morning loss. These levels held throughout the remainder of the day and into the close of trading.

Economic Calendar

The Economy

Empire Manufacturing was released at 8:30AM. The consensus expectation was for a slight rise from last month's 3.1 to 6 but instead retreated by to -2.0. This is the second negative reading in the past three months and counter to ongoing labor trends. Within the report new orders and shipments both declined, new order falling below 0, while the employment index showed a slight gain in hiring and hours worked. The prices indices both held steady near last month's readings indicating that input costs and selling prices remain flat. The future expectation index retreated as well falling -4 to 25.8. The future inventory index fell sharply, to -17, indicating an expectation for inventories to decline.

Industrial Production and Capacity Utilization were released at 9:15AM. The report is consistent with the Empire survey showing a -0.2% decline in production for May. This is following a -0.5% decline in April on top of a downward revision to April. The silver lining is that revisions to February and March lifted the overall reading high enough to leave April's number higher than first reported even with the revised decline. On a year-over-year basis production is 1.4% higher at this time than it was last year. This month's decline is due largely to decreasing production in the mining sector, specifically oil. Capacity Utilization fell -0.2% to 78.1% and is 2% below the long term average.

Positive data came from the housing sector. The NAHB Home Builders Sentiment Index showed a surprising jump of 5 points to hit 59, the highest level since September of last year. This is more than double the expected gain of 2. According to the release this month's gain is due to “serious and committed buyers”. Data within the report reveals current sales rose by 7 to 65 and future sales jumped 6 to 69, underscoring the overall surge in sentiment. The only component to remain below 50 is traffic, which rose 5 points to 44.

Moody's Survey Of Business Confidence retreated by -1.1 points but does not reflect the negative sentiment shown in the Empire report. The index reading of 43.0 is near the all-time high, as it has been all year, and indicating healthy confidence among US and global businesses. Judging by this gauge, and Moody's economist Mark Zandi's summary, US business confidence is strong and steady followed by improving sentiment in the rest of the world. He noted yet again strength in business investment and hiring, as well as a recent surge in year-end growth expectations, that are contrary to weak 1st and 2nd quarter growth.


There is a lot of data due out this week aside from the FOMC meeting. Tomorrow is housing starts and building permits, both expected to hold steady from last month. Looking at the NAHB report, and the last round of existing and new home sales, these figures could be above expectations. Wednesday is the FOMC policy announcement. Thursday is jobless claims and CPI, Philly Fed and Leading Indicators. Friday is data free.

According to FactSet the earnings growth expectation for 2nd quarter 2015 S&P 500 is -4.6%. This is down from the March 31st estimate of -2.3% and up from the low estimate of 4.8% we saw a few weeks ago. Since the start of the quarter 7 sectors have lower growth estimates than first thought and 76 companies have issued negative guidance. Healthcare still has the highest expected growth rate, +7.7%, and if last quarter is any indication could go much higher. Healthcare started the first quarter with an expected earnings growth rate near 11% and doubled that to near 22%, most likely driven by Obamacare. The energy sector is expected to have the worst growth rate, -61%.

Earnings trends over the past 4 years leads me to think the 2nd quarter won't be as bad as expected, just like the 1st quarter wasn't. We can expect the the blended rate for earnings growth to improve roughly 4% by the end of the reporting season which could leave it flat to negative. At the same time, looking at earnings ex-energy, S&P 500 earnings could grow by as much as 2-6% (1st quarter ended with a 0.8% gain, one company left to report, and a 6.3% gain ex-energy).

Earnings are expected to be aided by improving margins into the end of the year. 2nd quarter margins are expected to rise to 10.2 and then 10.5 and 10.6 in the 3rd and 4th quarters, all above the 5 year average of 9.6%. Full year 2015 earnings growth is projected to be 1.6% with a jump to over 12% next year and if trends hold true these estimates will rise.

The Oil Index

The big headline in oil today is Yemen. Peace talks began today at the UN and while it is unlikely a peace will be found soon the talks helped to send oil prices lower. WTI moved down below $60 and Brent below $63. When you look at the players involved it is unlikely the Yemen situation will get resolved anytime soon, on one hand are the Arab/gulf states, on the other is Iran and its allies and in between is the Iranian nuclear issue. With this in mind it is a little surprising the conflict is as small as it is. Regardless the outcome I expect to see new headlines in the coming days that could send oil prices swinging either direction.

The Oil Index opened with a loss of about -0.75% and held that level into the close. Today's action created a tiny spinning top just above the recent low and long term support. The index continues to drift lower on bearish momentum but signs persist that support exists along the long term trend line. MACD momentum has declined to near zero and has diverged from prices while stochastic has made a bullish crossover of the lower signal line, consistent with a trend following entry. The signal is still weak but in line with the trend and forward expectations. The index may continue to retreat to and test support but any such would be a potential entry for long term positions.


The Gold Index

Gold prices got a boost from Greek fall-out and today's data: the Greek news sparked a small flight to safety and the manufacturing data weakened the dollar. The news combined to send gold down to test support at $1175, bounce and move up to the $1190 level. This range is tied to dollar value and Fed expectations, focused on the Wednesday policy release. Gold will no doubt be impacted by the FOMC Wednesday afternoon but appears to be settled into a range in the $1175-$1190 region, what happens then is depends on the statement. Iln my view dovish talk weakens dollar, lifts gold while hawkish talk strengthens the dollar, helps confirm inflation presences and at least supports gold. The CPI data is out later this week and could further affect long term outlook for gold. Last week the PPI showed producer level inflation was higher than expected and helped support prices. CPI is already expected to rise by 0.5%, I think it could go higher if the higher cost of eggs is getting passed through to consumers.

The gold miners got a small boost from today's rise in gold. The gold miners ETF GDX gained just over 0.40% after setting a new 8 week low. Today's action is just above a possible support level near $18. Momentum remains bullish but is very weak and slowly retreating to zero while stochastic shows an asset that is oversold within a four month trading range. It still looks like the sector is at a bottom, whether or not it the previous down trend has reversed comes down to the Fed statement and gold prices. Support is possible near $18 and likely near $17.50, resistance is the underside of my recently broken up trend line near $20 and then above that near $21.


In The News, Story Stocks and Earnings

CVS and Target announced a deal in which the former would buy the latter's pharmacy business and then operate them as a business-within-a-business. The deal is worth about $1.9 billion before taxes and could fund share buy backs, according to company CEO. Target expects the move to help them improve their wellness offering and improve customer experience. Shares of both companies moved higher but gains were capped.

CVS

Target

Boeing announced several new order for jets today at the Paris Airshow. The company also announced several new technologies that are expected to improve the flying experience, cost of production and efficiency. This news comes just days after the company raised its 20 year demand estimate by 3.5%. Shares of the stock were not supported by the news but may be presenting a buying opportunity. Prices are down near the $140 support level with indicators in line with a trend following entry.


Cigna turned down another offer from Anthem today, the second in only a week. The deal upped the stakes to $175 per share but was rebuffed due to control of the combined company. The news was first reported early this morning and sent shares soaring by nearly 20%. After the deal was turned down share prices moderated but retained much of the days gains. Today's activity sparked activity throughout the sector as many analysts are expecting more consolidations.


Gap gained 1.35% in after hours trading when they announced store closures. The company is planning to close 26%, 175, of its stores over the next few years in a move designed to get the "fleet... to the right size". At the same time the company reaffirmed full year guidance in the range of $2.75-$2.80.


The Indices

The market was not thrilled by the Greece news but at the same time did not use it to start a wild sell-off. The indices fell, sharply, down to recent lows and near term support only to hit bottom and bounce right back. They did not regain all of today's losses but did manage to reclaim at least half in most cases.

Today's drop was led by the Dow Jones Industrial Average which lost -0.60%. Today's drop took the index down to support at the 2 month low, near 17,900. The index has bounced from this level five times now so it appears strong in the near term at least. The indicators are mixed but consistent with support at this level or just below near 17,600. MACD is bearish and ticking stronger but divergent from today's new low; stochastic is pointing lower in the near term and higher in the long term, consistent with a retest of support. This could happen over the next two days as we get more Greek news, economic data and wait for the FOMC announcement.


The transports were the next largest decliner in today's session. The Dow Jones Transportation average losing -0.49% in a move that did not even reach the recent lows before bouncing. Today's candle resembles those of the other indices but is much shorter relative to recent price action and met support well above the recent low. The indicators remain consistent with a bullish trend following entry, MACD is steady to the upside and stochastic %D is trending higher following a bullish crossover of the lower signal line. Current set up is bullish and in line with the underlying trend so I am optimistically bullish, but with caveats.

The index is still below the long term trend line, the FOMC meeting is onl days away and we are still a few weeks out from earnings season, which is not expected to be good... all reasons for caution without the addition of Greece, Iran and Yemen. The index is now in the middle of the near term range with support near 8,250 and resistance near 8,500, a break beyond either could lead to a move of 250-500 points in the near to short term.


The S&P 500 made the third largest decline, -0.46%, in a move that reversed within 1 point of the low set last Tuesday. Today's candle is not overly large but significant in terms of its lower shadow, which reveals support at levels where we have seen a lot of price action over the past few months. The indicators are consistent with emerging support and setting up for a potential trend following entry. MACD is diverging from price and stochastic is flat, possibly rolling over, and still well above the lower signal line. The breach of the long term trend line is a red flag, as is the upcoming Fed announcement, but the overall trend is up so I remain cautiously bullish, waiting on the next rally. Today's support was found near 2,070 and last week's low, resistance is just above the current level in the range of 2,080-2,100.


The NASDAQ Composite made the smallest decline in today's session, only -0.42%, and created a green candle despite the fall. Price action fell below the short term moving average with declining indicators but like the other indices support appears to be present. For one, the longish lower shadow on the candle crosses the 5,000 level, a level which has provided resistance as well as support in recent months. Another is the indicators, they are moving lower in the near term but both MACD and stochastic are consistent with support in a longer term uptrend.


The market looks like it has support, but also that support is timid, cautious and intensely focused on news. Not too surprising considering the impending FOMC meeting and the power it has over the market. Regardless of the speculation anything is possible at this meeting. They, the Fed and Janet Yellen, have given a time line that includes June as a possibility for raising interest rates. Based on the, I think it was the February statement, the hike could come as soon as two meetings after changing the statement, which means now. I'm not trying to say it's going to happen now, just that the window is open and anything is possible. The way the labor and housing data has been going I will be surprised if there is no change to statement.

Until then, remember the trend!

Thomas Hughes


New Plays

Rising Demand For Video Evidence

by James Brown

Click here to email James Brown


NEW BULLISH Plays

TASER Intl. Inc. - TASR - close: 34.91 change: +0.92

Stop Loss: 32.25
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 15, 2015
Time Frame: Exit PRIOR to earnings in late July
Average Daily Volume = 2.3 million
New Positions: Yes, see below

Company Description

Trade Description:
50,000 volts. That's what a TASER electro-muscular disruption (EMD) device shoots through your body to override the central nervous system. Your body freezes as all of your skeletal muscles contract at once.

Their website describes the company as "TASER International makes communities safer with innovative public safety technologies. Founded in 1993, TASER first transformed law enforcement with its electrical weapons. TASER continues to define smarter policing with its growing suite of technology solutions, including AXON body-worn video cameras and EVIDENCE.com, a secure digital evidence management platform."

They may have started with electrical weapons but now the company is expanding to mobile video cameras worn on a law enforcement officer's gear. The company was in the news earlier this year thanks to President Obama. Back in January Obama announced he wanted to spend $75 million over the next three years to outfit the nation's police force with body-worn cameras.

The White House believes that body-worn cameras on police will help reduce violence and avoid another event like the one in Ferguson, MO. As of January 2015 estimates suggest there are only 70,000 police wearing cameras now. Obama's plan would almost double that. Industry analysts are forecasting significant growth if the federal government approves Obama's plan. There are nearly 800,000 policemen in the U.S. There's plenty of room to grow. Plus TASR is expanding internationally.

The bears will argue that TASR's stock is priced for perfection and very expensive with a P/E near 77. There is no denying that. However, the body-camera business could soar. Currently it's less than 8% of their annual sales. The real winner could be TASR's Evidence.com ecosystem. This is a subscription service for law enforcement to back up and manage all the data from TASER electric weapons, body-worn cameras, and more.

In the last few months we've seen more and more police departments announcing they are spending millions on body camera systems. It's not just the U.S. The London police force just announced they were buying 20,000 body cameras for their policemen although they didn't say what brand they were choosing. We do know they were testing TASR's products.

Technically shares of TASR have been showing relative strength. The stock is up three weeks in a row and tagged new all-time highs last week. Traders bought the dip today at short-term technical support on the 10-dma. TASR bounced with a +2.69% gain that outperformed the major indices.

If this rally continues it could spark a potential short squeeze. The most recent data listed short interest at 25% of the 52.1 million share float. Tonight we are suggesting a trigger to launch bullish positions at $35.20. Please keep in mind that TASR can be a volatile stock. Traders may want to use small positions to limit their risk.

Trigger @ $35.20 *consider using small positions to limit risk*

- Suggested Positions -

Buy TASR stock @ $35.20

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

Buy the SEP $37 CALL (TASR150918C37) current ask $2.60
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

Greek Fears Persist

by James Brown

Click here to email James Brown

Editor's Note:
The Greek situation seems to be getting worse and that pressured markets lower on Monday. The country is quickly running out of time. Meanwhile back in the U.S. investors are cautious ahead of this week's FOMC meeting.

IMAX hit our bullish entry trigger today.

We want to exit our SMCI trade at the opening bell tomorrow.


Current Portfolio:


BULLISH Play Updates

Hanesbrands Inc. - HBI - close: 32.40 change: -0.28

Stop Loss: 31.45
Target(s): To Be Determined
Current Gain/Loss: +0.2%
Entry on May 21 at $32.35
Listed on May 20, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.74 million
New Positions: see below

Comments:
06/15/15: HBI dipped to short-term support at its 10-dma and settled with a -0.85% decline. I'd prefer to see a rally past $32.75 before considering new 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


IMAX Corp. - IMAX - close: 43.09 change: +0.62

Stop Loss: 39.90
Target(s): To Be Determined
Current Gain/Loss: +0.8%
Entry on June 15 at $42.75
Listed on June 13, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 732 thousand
New Positions: see below

Comments:
06/15/15: Our brand new play on IMAX is off to a strong start. Shares tested $42.00 as new support and then surged to a new high. Our trigger to launch positions was hit at $42.75.

It didn't hurt that the new "Jurassic World" move has dominated the box office this past weekend and set a new record for the highest-grossing opening weekend in the U.S. with $208.8 million. That surpassed the Avengers record. The popularity of Jurassic World created a new record for IMAX with $44.2 million worldwide in an opening weekend.

Trade Description: June 13, 2015:
It's shaping up to be a blockbuster summer for IMAX. First there was the second Avenger movie in May. Now Jurassic World is stomping its way to box office success while IMAX gets to ride its coattails.

The "Avengers: Age of Ultron" delivered the second biggest opening day with $84.4 million in U.S. sales. That's just below the last Harry Potter movie, which brought in $91 million on its first day. The new Jurassic World movie, the fourth Jurassic Park dinosaur flick, notched the third biggest opening day with $82.8 million. The new dinosaur-themed juggernaut is poised to do $200 million over the weekend.

As of early May, this Avengers 2 movie has already raked in $425 million overseas and is poised to do more than $200 million this weekend. Estimates suggest it could hit $600 million in the U.S. It had already crossed the $1 billion mark for worldwide sales by the middle of May. This movie is produced by Marvel Studios, a division of Disney (DIS), but it also means big business for IMAX. The Ultron movie delivered the biggest opening night sales for any IMAX film ever.

IMAX is part of the services sector. They're considered part of the entertainment industry. According to the company, "IMAX, an innovator in entertainment technology, combines proprietary software, architecture and equipment to create experiences that take you beyond the edge of your seat to a world you've never imagined. Top filmmakers and studios are utilizing IMAX theatres to connect with audiences in extraordinary ways, and, as such, IMAX's network is among the most important and successful theatrical distribution platforms for major event films around the globe. IMAX is headquartered in New York, Toronto and Los Angeles, with offices in London, Tokyo, Shanghai and Beijing. As of March 31, 2015, there were 943 IMAX theatres (820 commercial multiplexes, 18 commercial destinations and 105 institutions) in 63 countries."

Today there is a battle for consumer's viewing habits. People consume their content on all sorts of devices from their smartphones, tablets, laptops, desktops, and their big screen TVs at home. Netflix and other streaming services have changed viewer habits and expectations. When consumers choose to go to the movies they want something different. According to IMAX's CEO that's why IMAX tickets are doing so well. It's an experience that can't be replicated at home.

The company had a lot of momentum going into 2015 thanks to huge hits like "American Sniper". IMAX has managed to beat Wall Street's earnings and revenue estimates for the last four quarters in a row. Their most recent earnings report was April 30th. Income surged +50% from a year ago. Analysts were expecting $0.05 a share. IMAX delivered $0.07. Revenues rose +29% to $62.2 million, significantly above estimates for $55.4 million.

IMAX CEO Richard Gelfond commented on their results, "This is a very exciting time for IMAX. Our continued progress in expanding our theatre network globally, along with our strong film performance during the first quarter, resulted in robust financial results with almost 30% revenue growth and over 50% adjusted earnings growth compared to the same period last year. With record results from Furious 7 in April and a great start to the Avenger's sequel internationally, the momentum has continued into the second quarter."

2015 is expected to be a huge year. The "Fast & Furious 7" film kept the momentum going. IMAX will also benefit from high-profile movies like "Avengers: Age of Ultron", Jurassic World, Terminator Genisys, Hunger Games: Mockingjay Part 2, the new James Bond movie, another Mission Impossible film (#5), and the next episode of Star War (#7) this December.

IMAX is rolling out new laser systems and they've signed long-term film deals with Disney and Warner Brothers. IMAX is currently growing at about 120 theaters a year. They're doing well in China. The Chinese movie box office is expected to eclipse the U.S. market by 2020.

Shares of IMAX popped to new all-time highs on May 28th after announcing its majority owned subsidiary, IMAX China Holding Inc., had filed for an IPO in Hong Kong. According to Reuters, IMAX is "looking to benefit from booming entertainment demand in the world's second largest economy." IMAX owns 80% of IMAX China. Shares of IMAX have spent the last couple of weeks churning sideways in the $40-42 zone but with a bullish trend of higher lows.

Friday's breakout past resistance near $42.00 could spark some short covering. The most recent data listed short interest at 18.4% of the 53.7 million share float. We are suggesting a trigger to launch bullish positions at $42.75

- Suggested Positions -

Long IMAX stock @ $42.75

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

Long SEP $45 CALL (IMAX150918C45) entry $1.60

06/15/15 triggered @ $42.75
Option Format: symbol-year-month-day-call-strike


LDR Holding - LDRH - close: 44.70 change: +0.26

Stop Loss: 41.85
Target(s): To Be Determined
Current Gain/Loss: +6.0%
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:
06/15/15: LDRH bounced off its 10-dma for the second day in a row. Shares rebounded to a +0.58% gain, outperforming the major market indices on Monday.

More conservative traders may want to use a higher stop loss.

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: 52.27 change: -0.36

Stop Loss: 49.95
Target(s): To Be Determined
Current Gain/Loss: +2.4%
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:
06/15/15: SBUX dipped to $52.00 before paring its losses. The stock's bullish trend of higher lows should lend support in the $51.50-52.00 region.

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


Seattle Geneitcs, Inc. - SGEN - close: 46.77 change: -0.14

Stop Loss: 43.75
Target(s): To Be Determined
Current Gain/Loss: -0.8%
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:
06/15/15: SGEN managed to ignore most of the market's weakness this morning. Shares did move lower but found support near its 10-dma for the fourth day in a row. By the closing bell SGEN was almost unchanged on the session.

A new rise past $47.15 could be used as a bullish entry point.

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


Silicon Laboratories Inc. - SLAB - close: 56.25 change: +0.17

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

Comments:
06/15/15: The market's widespread decline this morning pushed SLAB toward $55.00 but the stock recovered by the closing bell. We are on the sidelines waiting for a breakout to new highs. Our suggested entry point is $57.05.

Trade Description: June 10, 2015:
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)

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


Super Micro Computer - SMCI - close: 32.92 change: -1.01

Stop Loss: 32.45
Target(s): To Be Determined
Current Gain/Loss: -2.2%
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:
06/15/15: Caution! SMCI displayed relative weakness with a -2.97% decline today. The NASDAQ only fell -0.4%.

Shares closed right on technical support near its 50-dma and 200-dma. The stock could bounce tomorrow. However, we are choosing to cut our losses immediately and exit at the opening bell tomorrow.

- Suggested Positions -

Long SMCI stock @ $33.65

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

Long JUL $35 CALL (SMCI150717C35) entry $1.50

06/15/15 prepare to exit tomorrow morning
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: 28.54 change: +0.85

Stop Loss: 24.85
Target(s): To Be Determined
Current Gain/Loss: +3.2%
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:
06/15/15: SRPT displayed relative strength. Traders bought the dip this morning and SRPT surged to a +3.0% gain and a new 2015 high.

Readers may want to start raising their stop loss.

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: 64.09 change: -0.29

Stop Loss: 59.25
Target(s): To Be Determined
Current Gain/Loss: +1.5%
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:
06/15/15: Today was uneventful for TPX. The stock quietly churned sideways within Friday's trading range.

If you're looking for a new entry point then consider a rally past $64.55 since $64.50 is short-term resistance.

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


Zoetis Inc. - ZTS - close: 49.27 change: +0.19

Stop Loss: 47.90
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 11, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.3 million
New Positions: Yes, see below

Comments:
06/15/15: ZTS bounced off its rising 20-dma this morning. Shares managed to rebound back into positive territory. We are still on the sidelines. Currently our suggested entry trigger is $50.50.

Trade Description: June 11, 2015:
ZTS is in the healthcare sector but they are not your average healthcare stock. The company is the world's biggest manufacturer of medicine and vaccinations for livestock and pets. They were spun off from pharmaceutical giant Pfizer (PFE) back in 2013. Last year ZTS' stock was a big performer with a gain of more than +50%. That outperformance continues this year with ZTS up +15.9% in 2015.

According to the company, "Zoetis is the leading animal health company, dedicated to supporting its customers and their businesses. Building on more than 60 years of experience in animal health, Zoetis discovers, develops, manufactures and markets veterinary vaccines and medicines, complemented by diagnostic products and genetic tests and supported by a range of services. In 2014, the company generated annual revenue of $4.8 billion. With approximately 10,000 employees worldwide at the beginning of 2015, Zoetis has a local presence in approximately 70 countries, including 27 manufacturing facilities in 10 countries. Its products serve veterinarians, livestock producers and people who raise and care for farm and companion animals in 120 countries."

ZTS CEO Juan Ramon Alaix recently spoke at an investor conference. He said the domestic pet and livestock market has hit $100 billion. While the market for animal health is currently at $24 billion and is expected to reach $33 billion by 2020. Alaix told investors that the animal health industry is extremely resilient and has continued to grow regardless of global economic conditions.

While Alaix has a bullish long-term outlook for his industry they company's sales growth seemed to stall last quarter. ZTS reported earnings on May 5th. 2015 Q1 results were $0.41 per share, which beat analysts' estimates. Yet revenues were flat at $1.10 billion. Guidance was in-line with Wall Street estimates.

What is noteworthy is that within their earnings press release the company discussed plans to cut costs and boost profits. ZTS will cut up to 25% of its workforce. They will exit several of its manufacturing plants. Plus they plan to discontinue several underperforming products. This is expected to generate $300 million in cost saves by 2017 and boost their adjusted operating margins from 25% in 2014 to 34% in 2017.

Why is ZTS launching its first major restructuring? Odds are Bill Ackman had an influence here. Mr. Ackman is the founder and CEO of Pershing Square Capital Management, an activist hedge fund. Late last year Pershing bought a big stake in ZTS. They currently own about 8% of the company or 41.8 million shares, valued around $2 billion. Since the hedge fund has jumped into ZTS they now have two board seats.

Looking at the bullish trajectory on ZTS' stock it appears that the rest of Wall Street is along for the ride and they expect Ackman to unlock more shareholder value out of ZTS. There has been some speculation that ZTS is actually a takeover target. Both Bayer and Sanofi have been rumored to be possible suitors.

The rally in ZTS stalled at round-number resistance near $50.00. Now after consolidating sideways in the $48-50 zone for the last several days ZTS looks poised to breakout. We are suggesting a trigger to open bullish positions at $50.50.

Trigger @ $50.50

- Suggested Positions -

Buy ZTS stock @ $50.50

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

Buy the Oct $55 CALL (ZTS151016C55)

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

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




BEARISH Play Updates

CenturyLink, Inc. - CTL - close: 32.37 change: -0.19

Stop Loss: 33.65
Target(s): To Be Determined
Current Gain/Loss: +3.8%
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:
06/15/15: Right on cue CTL continued lower. Of course it's hard to say if that was CTL or just the broader market, which spiked lower at the opening bell.

I don't see any changes from my previous comments. More conservative traders may want to adjust their stop closer to Friday's high ($33.05).

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: 12.48 change: -1.18

Stop Loss: 14.25
Target(s): To Be Determined
Current Gain/Loss: +13.0%
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:
06/15/15: Our ONDK short play is looking good after today's -8.6% plunge to new lows. The stock received another downgrade today. This one was to a "sell" rating.

I would not chase it here. We are moving our stop loss down to $14.25.

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

06/15/15 new stop @ 14.25
06/10/15 new stop @ 15.15
06/02/15 triggered @ $14.35
Option Format: symbol-year-month-day-call-strike