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Daily Newsletter, Tuesday, 6/23/2015

Table of Contents

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

Market Wrap

Uncertainty Fading

by Jim Brown

Click here to email Jim Brown

The news out of Greece suggests there may be some kind of deal this week to kick the can farther down the road. That is ok with traders because it removes the short-term uncertainty. A couple of decent economic reports in the U.S. have increased bullish sentiment despite the expectations for faster rate hikes.

Market Statistics

The markets started strong on Tuesday but faded intraday on protests in Greece and some analysts downplaying internals in the economic reports. Fed governor Jerome Powell depressed the markets when he said he favored two rate hikes this year in September and December. When pressed he repeated the party line about data dependence but at this point he thought the chance of a September hike was 50%.

He said he was forecasting stronger growth in the second half, a stronger labor market and a "greater basis in confidence" in inflation returning to 2%. His comments put him in a group of five Fed officials that expect two rate hikes in 2015. However, there are seven officials predicting less than two hikes in 2015. That was up from only three in Q1.

He said conditions in Europe were improving and China's economic decline was slowing. However, if the dollar remained strong it would be a "big headwind for the U.S. economy" and the Fed would have to take that into account in their rate hike decision. If the Fed hikes, the dollar will spike even higher.

If there is a resolution in Greece it will accelerate the chance of a Fed rate hike because that uncertainty will have been removed. News out of Greece is mixed with alternating demonstrations by various groups either for or against a deal.

There are no copies of the Greek proposal circulating and EU finance ministers have been working on the numbers and projections for about 48 hours now. Since there have been no obvious sticking points in the headlines there is a good chance something will get done. Reportedly the Greece proposal called for 8 billion euros in tax hikes from the wealthy, middle class and businesses as well as a hike in the national sales tax. The national tax would tax be 23% on nearly everything but food, energy, medicine, restaurants, books and theaters, which would be taxed at 11%. There would be some modifications in the pension program but details are sketchy.

Reportedly Greece would gradually raise the retirement age to 67 but no time frame for that adjustment was given. Currently the earliest retirement age is 55. The proposal calls for additional contributions by workers to the pension plan.

The basic theme in European headlines is that Prime Minister Alexis Tsipras surrendered. When it came right down to the deadline where Greek banks were going to be closed, he capitulated and relented on multiple policy fronts. While there is no deal yet the majority of analysts believe they will escape doom this cycle but there is no scenario where Greece will not need to borrow more money and the Troika is going to demand further austerity measures and we will get to replay this crisis all over again.

For now, the markets are assuming there will be a resolution because the ECB is holding the trump card. They can force a closure of the Greek banking system at any time and that would be catastrophic. Tsipras had run out of options and was forced to surrender.

In the U.S. this was a busy day economically. The New Home Sales for May rose to an annual pace of 546,000 units and well over estimates for 525,000. That was a 19.5% jump from May of 2014 and up +2.2% from April. New home sales for April were revised up from 517,000 to 534,000. Sales rose in the Northeast +87.5% and West +13.1% and declined in the South -4.3% and Midwest -5.7%. Strong sales in the Northeast were due to the June expiration of New York's Program 421-A, which offered significant tax incentives to developers.


The Richmond Fed Manufacturing Survey Index rose from 1.0 to 6.0 and a five-month high. The index had dipped to contraction at -8.0 in March and has been struggling back into positive territory.

The new order component rose from 2.0 to 11.0 after a -13.0 low in March. The backorder component rebounded from -10.0 to +6.0. The rest of the components showed only minimal gains.

The separate Richmond Services Index rose from 13 to 19. The only real negative was a drop in the employment component from 8 to 3 but the wages component soared from 11 to 20 for an interesting contrast.


The Durable Goods Orders for May declined -1.8% compared to -0.5% in April and consensus estimates for a -0.5% decline. Excluding transportation orders rose +0.5%. The big drag on the headline number came from the transportation sector with a -6.4% decline in orders. That came mostly from a -35.3% drop in aircraft orders. The drop was due to Boeing. They received orders for 60 planes in April and only 11 in May.

New orders are down -2.5% over May 2014 with nondefense capital goods orders down -7.8%. Transportation orders are down -9.6% from a year ago.

These internals helped to depress the market mid morning.

The major report due out on Wednesday is the GDP revision for Q1. Expectations are for a slight improvement from -0.75% to -0.2% but I would not rule out a disappointment.

The Kansas Fed Manufacturing Survey on Thursday is the only other report left this week that could move the market but it would have to be significantly different from the -13 in May. The Kansas survey is in dive mode having fallen from +8 in December to the low of -13 last month. Analysts are blaming the decline on the energy sector and the lack of new orders for equipment used in drilling and producing oil.

Moody's Chart


The biggest news of the day came after the bell when Netflix (NFLX) announced a 7:1 stock split. With shares just under $700 today that means they would decline to $100 each and allow investors with smaller accounts to participate in the stock's growth. Shares rallied from $681 to $704 after the announcement.

In theory this could be quite a split run since the stock has been rising nonstop since early April. However, some investors could be disappointed because Netflix had enough shares authorized for a 10:1 split and quite a few investors may have been hoping for the bigger split and cheaper shares.

Just yesterday, BTIG raised their price target on Netflix to $950. This is one of those stocks that once split could see a substantial amount of buying interest. The record date is July 2nd and split date July 14th.


The UnderArmour board is not due to approve the UA split until late August and that is the only other currently announced stock that could produce a split run.


Facebook (FB) finally got some traction on the news of a more immersive advertising platform for video. The news allowed Facebook to breakout to a new high on more than twice the daily volume. The company showed off the new advertising platform that will allow short films and pictures to be embedded in the stream of content. Facebook said it will allow advertisers to engage users on a deeper and more personal level than traditional display and banner ads.

Facebook already displays more than 4 billion videos daily. The company also showed a new search feature that was much more comprehensive and broader reaching. They also showed a new pattern recognition feature that can automatically tag people in a Facebook post even if their faces are hidden. Facebook tested the feature on 40,000 public images on Flickr and the algorithm recognized the individuals 83% of the time. The system cues on things like hair, clothing and the shape of people's bodies. Is it my imagination or if Facebook turning into Skynet from the Terminator movies?

The surge in price to a new high also catapulted Facebook into the top ten largest market cap companies in the S&P. Facebook's market cap is now more than $238 billion and a record high. The new market cap knocked Walmart out of the top ten. Who would have ever thought that Facebook would be bigger than Walmart? Of course market cap is a lot different than enterprise value. Walmart has more than 11,000 stores in 28 countries and revenue of nearly $500 billion a year with earnings of nearly $16 billion. Facebook is only expecting revenue of $16 billion and earnings of $6 billion in 2015.

Apparently friends are more valuable than family at least to Mark Zuckerberg. Mark jumped to the world's 11th richest person at $38.6 billion thanks to the spike in Facebook shares today. That puts him only $1.4 billion away from being in the top ten. He jumped ahead of the four Waltons (Walmart heirs) with his $5 billion spike in net worth in 2015. Christy Walton is the richest of the four relatives with $37.1 billion in net worth. According to Bloomberg each of the Waltons has lost $5 billion so far this year. In order for Mark to break into the top ten he will have to surpass Jeff Bezos at $40 billion.

Facebook shares have been slowly edging higher over the last year with $85 as strong resistance. That resistance is history after the breakout today.


Blackberry (BBRY) reported a loss of 5 cents compared to estimates for a loss of 3 cents. However, shares spiked higher at the open on a headline that software sales had risen +150% to $137 million. CEO Chen said he was targeting $600 million in software sales in 2015. He is trying to turn the company from primarily a phone maker into a service company for corporate enterprises.

Blackberry sold one million phones in Q1. Chen was asked if they were going to make an Android version of the Blackberry. He said, "If I can secure Android, I will make an Android phone. If I can't, then I won't." The Blackberry platform is the most secure phone platform in existence today according to Chen.

He also reiterated that Blackberry was not for sale "at this current price." We have put in a lot of hard work and "we are not done yet, not by any stretch of the imagination." Obviously the phrasing left the door open to a sizeable offer. They still have a market cap of $5 billion. Shares are really close to breaking support at $8.75.


Darden Restaurants (DRI) reported earnings of $1.08 on a +13.8% rise in revenue to $1.88 billion. Same store sales at Olive Garden rose +3.4%. Unfortunately the majority of those comp gains came from hiking the prices.

The company saw its entire board replaced last year after the old board sold off the Red Lobster chain against shareholder wishes. Darden said it was going to spinoff 430 of its more than 1,500 stores into a REIT to be complete before year-end. Darden will then lease them back from the REIT. The spinoff will give Darden enough cash to retire more than $1 billion in debt and give them the opportunity to acquire some more stores. Shares rocketed higher at the open but faded to gain only a penny on the day.


Amazon (AMZN) announced a new pay program for authors. For books that are loaned or sold under the Kindle Unlimited program the company will pay authors by the page instead of buy the book. In an effort to slow the flood of inexpensive serial novelettes or just plain crap literature the company is going to pay by how many pages are read rather than by the book. Thankfully, they are not going to pay by the number of pages in the book or we would have thousands of thousand page books to wade through.

By compensating authors by how many pages are read it means the books will have to be more entertaining in order to maintain reader interest. In the old system the authors got the same whether it was a small serial novel that took a month to write or a serious 500 page novel that took years to write. I think this is a good idea because I read about 75 books a year. I have downloaded dozens where I never made it past the first few chapters because the book description was written much better than the book. I just deleted it and went on to something else. Hopefully this payment structure will eventually improve the quality of books on the Amazon website.


In the shortest time span I could imagine Verizon (VZ) has closed its acquisition of AOL (AOL) in only 42 days since the announcement. This is warp speed in the world of acquisitions. According to Dealogic this was the 11th fastest billion-dollar deal closing in 2015. For a list of the top 20 deals this year and their size and speed click HERE. Verizon paid $4.4 billion for AOL. The odds are VERY good we will never see the symbol AOL on a stock again.


Ambarella (AMBA) rebounded +8.4% after multiple analysts called the -$25 drop on Monday a huge buying opportunity. Canaccord Genuity said, "Finally a pullback and a buying opportunity." The company rates Ambarella as a buy with a $115 price target. "We maintain our belief Ambarella's portfolio of highly differentiated application-specific video encode, compression, and analytics processors positions the company for strong sales and earnings growth as HD and Ultra HD video capture and compression become increasingly important across several consumer and enterprise markets."

FBN Securities said the sell off creates a "compelling buying opportunity." They rate the stock a buy with a price target of $110. They also said Ambarella could be an acquisition target by Qualcomm.

Shares declined sharply after short seller Citron called the company ridiculously overpriced. Shares rebounded +$8 today.


Markets

On Monday the S&P rebounded on another short squeeze generated by hopes over Greece. However, the S&P only closed ONE point over the closing high for Thursday. The Friday decline was erased but there were no added gains. The Dow also erased its losses but only closed FOUR points over the Thursday close. This was hardly a monster rebound with a lot of buying conviction.

Monday's volume was weak at 5.61 billion shares and today's volume was only 5.64 billion. Advancers were 4:3 over decliners and only slightly below Monday's ratio of 4.5:2.6.

The market opened up sharply with the Dow reaching 18,188 but then faded to negative territory at 18,108 by noon. The S&P rallied only +5 points at the open to 2128 before fading to 2119 and -4 points at noon.

I am boring you with this trivial number listing to show that there was no conviction in either direction. The market is still in wait and see mode over Greece. This is also earnings warning week and S&P Capital IQ is projecting a -4.9% decline in Q2 earnings. This suggests there are plenty of warnings ahead. Lastly, this is the window dressing week. For fund managers that have already dressed up their portfolios their objective now is to keep the stocks and indexes pinned to these levels. They do not care if there are no further gains they just want to try and prevent further declines. This sets up a pretty boring week if they are successful.

However, the major indexes appear to be setting up for a move higher as long as Greek negotiations are successful. Markets hate uncertainty and removing that geopolitical uncertainty would be a relief. I just hope that did not happen on Monday and now we are waiting for a sell the news event.

Resistance at 2129 continues to hold on the S&P but today was the highest close in five weeks. The 2130 level and the historic high close from May is the target and the S&P is inching slowly in that direction.


The Dow chart is very easy to read. The resistance for the last three months is still resistance and every intraday spike is immediately sold. However, today was a four-week high close so point by point we are chipping away at that 18,180 resistance level. There was good participation in the Dow stocks but the leaders were clearly UnitedHealth and Goldman Sachs. Goldman is in breakout mode ahead of the expected rate hikes. UnitedHealth is up on the M&A in the sector.

Note that Apple is near the bottom even with their new music service coming out this week. Investors are favoring biotechs rather than big tech.

The move over 18,100 over the last two days is material. This has been resistance in the past and now it appears to be support. This could be a launching pad on some decent headlines.



The Nasdaq Composite squeezed out another new high at 5160 and it does not appear to be looking back. That was just below the high for the day at 5163, which was a new intraday high.

However, the Nasdaq 100 stalled once again at the resistance at 4545. The big caps are simply getting no love from investors and the broader Composite Index is benefitting from the biotechs and the small caps.

If the NDX can achieve breakout status we could see some short covering to help push the market higher.




The heroes of the market remain the small caps. The Russell 2000 closed at a new high and only 1 point from the intraday high. Multiple analysts are calling 1300 strong resistance and the Russell is only -5 points away. It will be interesting to see if they are right. Remember, next week the bias on the Russell turns positive due to the rebalance purchases. Funds that do not complete their rebalancing by Friday will be adding to positions all week next week in order to get their weightings correct. The majority of the buying will be this Friday at the close but there are always some late comers the following week. Just because the rebalance bias turns positive does not mean the index can't decline. This is a negative bias week and the index is setting new highs so we obviously can't depend on historical trends.


On the negative side the Dow Transports lost momentum again. This was especially troubling since there were multiple upgrades on the airline sector this week. The transports are not confirming decent economic data or the near high on the Dow industrials.


I have been in wait and see mode for the last two weeks with a slightly negative bias. While this week is typically negative for the markets, the potential ending of the uncertainty surrounding Greece has given them a lift. Whether a deal in Greece will lift the markets higher is unknown.

However, the indexes are definitely shifting to a bullish bias and the breakout on the Russell and Nasdaq tell us we should be long. Even the sudden revival of the potential for two rate hikes in 2015 could not slow the market gains. If the big cap indexes finally gain some traction and move to new highs the resulting rally could be strong. Summer rallies to happen but not often and not normally with big moves. There are always exceptions and I hope this is one for the record books if the breakout occurs.

Enter passively, exit aggressively!

Jim Brown

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New Plays

Regional Bank Strength

by James Brown

Click here to email James Brown

Editor's Note:

Additional Trading Ideas:

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

Bullish ideas: PLCE, SUNE, GIL, MBLY, ATHM, AAN, DNKN, MNRO, USCR

Bearish ideas: WM




NEW BULLISH Plays

PacWest Bancorp - PACW - close: 48.30 change: +0.80

Stop Loss: 46.40
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 23, 2015
Time Frame: Exit prior to earnings in late July
Average Daily Volume = 771 thousand
New Positions: Yes, see below

Company Description

Trade Description:
There has been a lot of expectations for the financial stocks to outperform once the Federal Reserve starts raising rates. While the actual date of the Fed's first rate hike since 2006 is still not clear yet it's widely believed that higher rates are coming. If not this year then early next year.

Robert Albertson, at Sandler O'Neill, was recently quoted by CNBC. Albertson said, "if the Fed funds rate goes to 0.6 percent by the end of this year, and 1.7 percent by the end of next year, which is pretty much what the Fed is projecting, you could get a 20 to 30 percent increase in the bottom line of many banks."

The XLF financial ETF is trading at multi-year highs but it's only up +1.7% this year. Meanwhile the smaller regional bank ETF, the KRE, is outperforming with a +11.4% gain year to date. PACW is a regional bank and so far it's only up +6.2% but there is a good chance it could play catch up with its peers.

According to the company, "PacWest Bancorp (PacWest) is a bank holding company with over $16 billion in assets with one wholly-owned banking subsidiary, Pacific Western Bank (Pacific Western). Through 80 full-service branches located throughout the state of California, Pacific Western provides commercial banking services, including real estate, construction, and commercial loans, to small and medium-sized businesses. Pacific Western and its CapitalSource Division deliver the full spectrum of financing solutions nationwide across numerous industries and property types."

PACW is actively growing through acquisitions. In the last fifteen years they have made 27 acquisitions and are currently digesting another one (Square 1 Bank, SQBK).

Net interest margin (NIM) is a key component to a bank's profitability. The five largest U.S. banks (U.S. Bancorp, Wells Fargo, Citigroup, Bank of America, and JPMorgan) have been struggling to build their NIM. According to Forbes, the weighted average for the five banks for fiscal year 2014 was 2.5% while Q4 2014 was 2.55%. That's down from a 2.8% average in 2012. ( source). PACW's most recent quarterly results reported their NIM above 5.0%.

Technically shares of PACW have been showing relative strength the last few weeks and just broke out past major resistance at $48.00 today. The point & figure chart is very bullish and forecasting a long-term target at $64.00. Today's breakout could signal the next leg higher. We are suggesting a trigger to open bullish positions at $48.55.

Trigger @ $48.55

- Suggested Positions -

Buy PACW stock @ $48.55

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

Buy the SEP $50 CALL (PACW150918C50) current ask $1.20
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

New Highs For The NASDAQ

by James Brown

Click here to email James Brown

Editor's Note:
The major U.S. indices managed widespread gains although gains were relatively mild. Both the NASDAQ composite and the small cap Russell 2000 index hit new all-time highs.

WWAV hit our bullish entry trigger.

We have updated a handful of stop losses tonight.


Current Portfolio:


BULLISH Play Updates

Natus Medical Inc. - BABY - close: 43.25 change: +0.31

Stop Loss: 40.75
Target(s): To Be Determined
Current Gain/Loss: +0.3%
Entry on June 18 at $43.10
Listed on June 16, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 249 thousand
New Positions: see below

Comments:
06/23/15: BABY spent Tuesday slowly drifting higher and closed right at short-term resistance at the $43.25 mark. The stock looks poised to hit new all-time highs tomorrow. I would consider new positions on a rally past $43.30.

Trade Description: June 16, 2015:
Healthcare stocks are getting a lot of press because of the merger speculation among the big healthcare insurers. One area of healthcare that's doing well without the press is medical equipment makers. The S&P 500 index is up +1.8% year to date. The XHE healthcare equipment ETF is up +8.9%. BABY is in this industry and their stock is up +18% in 2015.

Here is a brief company description, "Founded in 1989, Natus Medical Incorporated is a leading manufacturer of medical devices and software and a service provider for the Newborn Care, Neurology, Sleep, Hearing and Balance markets. Natus products are used in hospitals, clinics and laboratories worldwide. Our mission is to improve outcomes and patient care in target markets through innovative screening, diagnostic and treatment solutions."

BABY has been steadily growing earnings. They have beaten Wall Street's bottom line earning estimate the last four quarters in a row. They raised guidance the last three quarters in a row. Their most recent earnings report was April 22nd.

BABY reported that their Q1 earnings were up +19% from a year ago to $0.31 per share. Revenues were up +3.7% to $94.0 million. Management raised their 2015 guidance above analysts' estimates.

Jim Hawkins, President and Chief Executive Officer of BABY, commented on his company's results, "I am very pleased with our first quarter results as we achieved record revenues and earnings. Revenue came in at the high end of our guidance while earnings exceeded our guidance. I am most satisfied that we were able to achieve these results in the face of approximately $2 million of negative currency effects on revenue during the quarter."

Earlier this month (June 5th) BABY announced they were increasing their stock buyback program. A year ago they launched a $10 million share repurchase program. They just added another $20 million to their program.

Technically BABY has been showing relative strength the last three weeks. The point & figure chart is very bullish and forecasting a long-term target of $73.00. At the moment BABY is hovering just below resistance in the $42.75-43.00 area. Tonight I am suggesting a trigger to launch bullish positions at $43.10. FYI: I am urging caution on the options. The spreads are pretty wide for all of BABY's October calls.

- Suggested Positions -

Long BABY stock @ $43.10

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

Long OCT $45 CALL (BABY151016C45) entry $2.85

06/18/15 triggered @ $43.10
Option Format: symbol-year-month-day-call-strike


Hanesbrands Inc. - HBI - close: 34.33 change: +0.21

Stop Loss: 31.85
Target(s): To Be Determined
Current Gain/Loss: +6.1%
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:
06/23/15: HBI is starting to look overbought with shares up four days in a row and on track for its fourth weekly gains in a row. I'm concerned that HBI will hit resistance at $34.75 and reverse. That's why I'm suggesting more conservative traders take some money off the table now. However, we're not giving up in HBI. We're betting the stock will see a breakout higher (although probably not on its first try).

No new positions at this time. Readers may want to raise their stop loss.

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

06/20/15 new stop @ 31.85
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: 42.94 change: -0.12

Stop Loss: 40.90
Target(s): To Be Determined
Current Gain/Loss: +0.4%
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:
06/23/15: IMAX experienced a little profit taking today. If recent history is any guide the stock should bounce at its rising 10-dma (currently at $42.60).

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

06/20/15 new stop @ 40.90
06/15/15 triggered @ $42.75
Option Format: symbol-year-month-day-call-strike


Starbucks Corp. - SBUX - close: 54.12 change: +0.22

Stop Loss: 49.95
Target(s): To Be Determined
Current Gain/Loss: +6.0%
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:
06/23/15: SBUX is still hovering near its recent highs. Shares displayed some relative strength with a +0.39% gain.

More conservative traders may want to consider a new stop in the $51.50-52.00 area.

No new positions at this time.

FYI: The July option has less than four weeks left. Traders may want to take profits on these call options now since they are up +90% or more.

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

06/16/15 SBUX expands it mobile service app coverage to more than 4,000 locations
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: 49.63 change: +0.44

Stop Loss: 45.75
Target(s): To Be Determined
Current Gain/Loss: +5.3%
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:
06/23/15: SGEN managed to outperform its peers in the biotech industry with shares rising +0.89%. SGEN is nearing what could be round-number resistance at $50.00. More conservative traders might want to take some money off the table (and/or raise their stop loss).

I am not suggesting new positions at this time.

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

06/16/15 new stop @ 45.75
06/08/15 triggered @ $47.15
Option Format: symbol-year-month-day-call-strike


Silicon Laboratories Inc. - SLAB - close: 57.06 change: -0.16

Stop Loss: 56.65
Target(s): To Be Determined
Current Gain/Loss: +0.0%
Entry on June 18 at $57.05
Listed on June 10, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 311 thousand
New Positions: see below

Comments:
06/23/15: We are growing more cautious on SLAB. The stock has underperformed the broader market the last three days. Tonight we're moving the stop loss up to $56.65. No new positions at this time.

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.

- Suggested Positions -

Long SLAB stock @ $57.05

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

Long OCT $60 CALL (SLAB151016C60) entry $3.10

06/23/15 new stop @ 56.65
06/18/15 triggered @ $57.05
Option Format: symbol-year-month-day-call-strike


Spirit AeroSystems - SPR - close: 56.23 change: -0.12

Stop Loss: 53.75
Target(s): To Be Determined
Current Gain/Loss: -0.4%
Entry on June 22 at $56.44
Listed on June 18, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in very late July
Average Daily Volume = 1.2 million
New Positions: see below

Comments:
06/23/15: SPR tagged a new high this morning and then reversed lower. Fortunately it looks like the $56.00 level might be new support. SPR was bouncing this afternoon but I would wait for a rally past $56.50 before considering new positions.

Trade Description: June 18, 2015:
Airline stocks have gotten crushed lately as investors worry about the airliner industry overbuilding capacity. It's a different story for the airplane makers. Shares of SPR just closed near all-time highs. The Dow Industrial Average is up +1.6% year to date. The S&P 500 is up +3.0%. SPR is outpacing them both with a +30% gain this year.

SPR is in the industrial goods sector. According to the company, "Spirit AeroSystems, with headquarters in Wichita, Kan., USA, is one of the world's largest non-OEM designers and manufacturers of aerostructures for commercial aircraft. In addition to its Wichita and Chanute facilities in Kansas, Spirit has locations in Tulsa and McAlester, Okla.; Kinston, N.C.; Prestwick, Scotland; Preston, England; Subang, Malaysia; and Saint-Nazaire, France.

In the U.S., Spirit's core products include fuselages, pylons, nacelles and wing components. Additionally, Spirit provides aftermarket customer support services, including spare parts, maintenance/repair/overhaul, and fleet support services in North America, Europe and Asia. Spirit Europe produces wing components for a host of customers, including Airbus."

On their website SPR notes that they "have long-term agreements in place with our largest customers, Boeing and Airbus. Other major customers include Bombardier, Rolls-Royce, Mitsubishi, Sikorsky and Bell Helicopter." SPR does so much business with Boeing (BA) that buying SPR is almost a stealth trade on BA's backlog. Looking at BA's most recent earnings report their backlog hit a record high of $495 billion. That's about 5,700 new planes. BA plans to significantly increase production in 2017 and again in 2018, which should mean an increase in revenues for SPR.

Earnings from SPR have been somewhat mixed. On February 3rd they reported their 2014 Q4 results with earnings at $0.87 per share. That was 10 cents better than expected. Yet revenues were only up +5% to $1.57 billion, which missed expectations.

Results improved in the first quarter. On April 29th SPR said earnings were up +18% from a year ago. Their $1.00 per share beat expectations. Revenues were almost flat at $1.74 billion but that still came in better than analysts were expecting. SPR management issued somewhat bullish guidance on 2015 earnings but their revenue estimate was soft.

The stock initially sold off on its Q1 report but traders bought the dip the very next day. SPR continues to build on its bullish pattern of higher lows. Today the stock is poised to breakout past short-term resistance at $56.20. We are suggesting a trigger to launch bullish positions at $56.35. Plan on exiting prior to SPR's Q2 earnings report in very late July or early August.

- Suggested Positions -

Long SPR stock @ $56.35

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

Long OCT $60 CALL (SPR151016C60) entry $1.60

06/22/15 triggered on gap open at $56.44
Option Format: symbol-year-month-day-call-strike


Sarepta Therapeutics - SRPT - close: 32.68 change: +1.92

Stop Loss: 29.25
Target(s): To Be Determined
Current Gain/Loss: +18.2%
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:
06/23/15: The rally in SRPT is accelerating. Shares soared another +6.2% today on top of its current streak of three up weeks in a row. SRPT is very short-term overbought. More conservative may want to take some money off the table. We are raising our stop loss to $29.25.

No new positions at this time.

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

06/23/15 new stop @ 29.25
06/20/15 new stop @ 26.75
06/10/15 triggered @ $27.65
Option Format: symbol-year-month-day-call-strike


TASER Intl. Inc. - TASR - close: 34.65 change: +0.65

Stop Loss: 32.95
Target(s): To Be Determined
Current Gain/Loss: -1.6%
Entry on June 16 at $35.20
Listed on June 15, 2015
Time Frame: Exit PRIOR to earnings in late July
Average Daily Volume = 2.3 million
New Positions: see below

Comments:
06/23/15: TASR slipped to $33.42 before bouncing. That was a -1.7% drop for the day and a -6.6% drop from last week's high. Shares managed a healthy bounce and outperformed the market with a +1.9% gain on the session. We're still cautious here and would like to see some follow through higher. No new positions at this time.

Trade Description: June 15, 2015:
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.

*consider using small positions to limit risk*

- Suggested Positions -

Long TASR stock @ $35.20

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

Long SEP $37 CALL (TASR150918C37) entry $2.65

06/22/15 new stop @ 32.95
06/16/15 triggered @ $35.20
Option Format: symbol-year-month-day-call-strike


Tempur Sealy Intl. - TPX - close: 65.93 change: +0.26

Stop Loss: 61.90
Target(s): To Be Determined
Current Gain/Loss: +4.4%
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:
06/23/15: TPX spent today hovering just below the $66.00 level. The stock looks poised to breakout past this area tomorrow.

No new positions at this time.

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

06/22/15 new stop @ 61.90
06/10/15 triggered @ $63.15
Option Format: symbol-year-month-day-call-strike


The WhiteWave Foods Co. - WWAV - close: 50.46 change: +0.72

Stop Loss: 47.75
Target(s): To Be Determined
Current Gain/Loss: +0.4%
Entry on June 23 at $50.25
Listed on June 22, 2015
Time Frame: Exit prior to earnings in August
Average Daily Volume = 1.9 million
New Positions: see below

Comments:
06/23/15: Our new play on WWAV is off to a good start. We wanted to see a breakout past round-number resistance at $50.00. Our suggested entry point was $50.25. The stock gapped open higher at $49.97 and then rallied to a +1.4% gain. Our trigger was hit this morning. I would consider new positions at current levels.

Trade Description: June 22, 2015:
Consumer tastes and buying habits are changing and more people are opting for more natural and organic foods.

WWAV is in the consumer goods sector. You might not recognize the name but they are behind brands like Silk, Horizon Organic, Land-O-Lakes, International Delight, Alpro, and Earthbound Farm Organic.

WWAV considers themselves "a leading consumer packaged food and beverage company that manufactures, markets, distributes, and sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America and Europe. The Company is focused on providing consumers with innovative, great-tasting food and beverage choices that meet their increasing desires for nutritious, flavorful, convenient, and responsibly-produced products. The Company's widely-recognized, leading brands distributed in North America include Silk plant-based foods and beverages, International Delight and LAND O LAKES* coffee creamers and beverages, Horizon Organic premium dairy products and Earthbound Farm' certified organic salads, fruits and vegetables. Its popular European brands of plant-based foods and beverages include Alpro and Provamel" (The Land-O-Lakes brand is licensed from the owners).

If you're looking for a company that is growing then keep an eye on WWAV. They have beaten Wall Street's estimates on both the top and bottom line relatively consistently for the last six quarters. In February they did miss the bottom line EPS number by three cents but beat the revenue estimate (with +34% growth). Then in May this year they beat on the bottom line but their revenue number was murky.

Looking at WWAV's most recent report (May 8th) the company delivered earnings of $0.24 per shares versus estimates for $0.22. Revenues were up +9.8% to $911 million. Depending who you ask this revenue number is either a small miss or it was in-line with estimates. One thing worth noting is that sales in Europe were hurt by currency headwinds.

WWAV management offered a bullish outlook on their fiscal Q2 earnings. They raised their 2015 sales estimate as well.

This month WWAV announced a big acquisition with a $550 million deal to buy plant-based nutrition maker Vega. Initially there was some concern that WWAV paid too much for Vega but the smaller company has seen its sales grow +50% in 2016. WWAV expects the Vega deal to close in the third quarter and it will add six cents per share to WWAV's 2016 earnings.

The stock has been a big winner this year. The S&P 500 is up +3.1% year to date. The NASDAQ is up +8.8%. Shares of WWAV are up +43% and show no signs of slowing down. The company has been mentioned as a potential acquisition target by multiple people this year.

Currently WWAV is hovering just below round-number resistance at $50.00. We are suggesting a trigger to launch bullish positions at $50.25.

- Suggested Positions -

Long WWAV stock @ $50.25

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

Long OCT $55 CALL (WWAV151016C55) entry $1.69

06/23/15 triggered @ $50.25
Option Format: symbol-year-month-day-call-strike


Zoetis Inc. - ZTS - close: 50.47 change: +0.25

Stop Loss: 49.85
Target(s): To Be Determined
Current Gain/Loss: -0.1%
Entry on June 18 at $50.50
Listed on June 11, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.3 million
New Positions: see below

Comments:
06/23/15: ZTS broke through resistance at $50.00 four days ago. Yet the stock seems to be having trouble building on that bullish move. Shares are just churning sideways in the $50.00-51.00 zone. The lack of follow through higher could be a warning signal. We're going to try and reduce our risk with a new stop at $49.85.

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.

- Suggested Positions -

Long ZTS stock @ $50.50

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

Long Oct $55 CALL (ZTS151016C55) entry $1.68

06/23/15 new stop @ 49.85
06/18/15 triggered @ $50.50
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Continental Resources, Inc. - CLR - close: 44.27 change: +0.21

Stop Loss: 50.65
Target(s): To Be Determined
Current Gain/Loss: -1.2%
Entry on June 22 at $43.75
Listed on June 20, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in August
Average Daily Volume = 8.8 thousand
New Positions: see below

Comments:
06/23/15: CLR spent today's session trying to rebound and it eventually settled with a +0.47% gain.

More conservative traders may want to lower their stop closer to the $48.00 level, which looks like it should be overhead resistance.

Trade Description: June 20, 2015:
There are a lot of currents moving the oil industry these days. Currency moves, OPEC production, access to capital, falling rig counts, and potential bankruptcies. The stock performance for U.S. shale oil drillers have been suffering. CLR is one such stock.

CLR is in the basic materials sector. According to the company, "Continental Resources (CLR) is a Top 10 independent oil producer in the United States and a leader in America's energy renaissance. Based in Oklahoma City, Continental is the largest leaseholder and one of the largest producers in the nation's premier oil field, the Bakken play of North Dakota and Montana. The Company also has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the Northwest Cana play."

Earnings have taken a hit. CLR reported their Q1 results on May 6th. They reported a net loss of $186 million or 36 cents a share. That's a big drop from a 61-cent profit a year ago. After adjusting for writedowns and one-time items CLR said their quarterly earnings were a loss of ($0.09) per share. That was actually four cents better than analysts' estimates for a ($0.13) loss. Revenues plunged -41% to $592.89 million even though CLR's production surged +36% from a year ago.

Bullish investors could argue that crude oil put in a bottom earlier this year and the commodity should rally toward year end. Bulls can also point to falling production costs as a tailwind for the industry. CLR said their completion costs for wells dropped -15% from the end of 2014. Obviously this makes the company more profitable (or at least cuts their losses). Optimistically CLR expects their cost reductions to hit 20% by mid-year. There are some on Wall Street who think the industry has seen a bottom. Shares of CLR were upgraded by Goldman Sachs to a "buy" in May.

Bulls also note that the plunge in active rigs should be bullish for oil and thus oil companies. Weekly rig count, compiled by Baker Hughes, showed that the number of active oil and gas rigs fell again last week. This is the 28th week in a row that the number of rigs has declined. We're now down to 857 active oil and gas rigs, which hasn't been this low since early 2003.

Naturally you might think that a plunge to 12-year lows for active rigs means that U.S. oil production would shrink as well. That hasn't happened yet. While costs are going down oil producers are actually more efficient at pumping per well so production is going up. The low rig count is a leading indictor that production will eventually decline but it could be months from now. The U.S. EIA doesn't expect U.S. production to fall until early next year.

A bigger problem for the oil industry is competition. The recent OPEC meeting showed that the Saudis are willing to pump as much oil as they can to maintain their market share regardless of the price of oil. These are state-run oil companies and don't have to report to shareholders like American drillers. Plus the average cost per barrel of oil is a lot lower in Saudi than the U.S.

Another challenge for many drillers is capital. Drilling shale oil wells and fracking costs a lot of money. The drop in crude oil prices has made lenders less likely to loan money to drillers. To compensate for the lack of capital the oil drillers might be forced to sell more stock to raise capital and this would dilute current shareholders and drive stock prices lower. This past week the Cowen research company said, ""We expect ... E&Ps to issue additional equity in 2H2015 to fund 2016 capex as borrowing bases will be declining and debt metrics deteriorating."

The issue of debt and access to capital could be a fatal one. There are growing predictions that we will see up to a dozen publicly traded oil and gas companies file for bankruptcy between July 2015 and June 2016. Now CLR is not on the list but if we see smaller rivals start to go bankrupt it is going to put pressure on all the oil-industry stocks.

Oil stocks are also going to react to currency moves. The Federal Reserve wants to raise rates and that will lift the dollar. Even if the Fed doesn't raise rates the QE programs in Japan and Europe could drive the yen and euro lower, which boosts the dollar. A rising dollar pressures commodity prices lower.

A lot of investors are already betting on CLR to decline. The most recent data listed short interest at 17.9% of the 84.8 million share float. We think the bears are right. CLR has been underperforming the broader market. The point & figure chart is bearish and forecasting at $35.00 target. I suspect the 2015 lows near $42.00 could be support. Tonight we are suggesting a trigger to open bearish positions at $43.75.

- Suggested Positions -

Short CLR stock @ $43.75

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

Long SEP $40 PUT (CLR150918P40) entry $2.00

06/22/15 triggered @ $43.75
Option Format: symbol-year-month-day-call-strike


On Deck Capital - ONDK - close: 12.87 change: -0.01

Stop Loss: 13.25
Target(s): To Be Determined
Current Gain/Loss: +10.3%
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:
06/23/15: ONDK continues to struggle with short-term resistance at $13.00. There is no change from my recent comments.

More conservative traders may want to exit now to lock in potential gains.

No 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

06/20/15 Caution! ONDK may have formed a bullish double bottom
06/16/15 new stop @ 13.25
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