Option Investor
Newsletter

Daily Newsletter, Wednesday, 6/24/2015

Table of Contents

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

Market Wrap

And Greece...

by Thomas Hughes

Click here to email Thomas Hughes
Greece deal hopes fade in the wake of comments the latest effort to reach a deal does not meet approval.

Introduction

Greece, the Greek saga has been drawn out once again as the latest 11th hour attempt to reach an agreement with creditors appears to be falling apart. The latest word is that the Monday proposal, offered by Greece on Monday and first received with open arms by the creditors, is not enough. This news comes from sources close to the negotiations and sent the market ducking for cover. The report came too late to affect stocks in Asia which rallied, led by the Nikkei's march to a new 18 year high. The effect was felt worse in Europe where indices fell nearly -1% before finding support.

Market Statistics

Futures trading was in the red from the start of today's early pre-opening session. The indices were all indicated to open lower but the losses were marginal. News, other than Greece, had little affect on early trading which held fairly steady into the opening bell. The indices opened as expected posting mild losses near -0.10% within the first hour.

By 11:30 the indices had managed to move lower, led by the transports -1.35% decline, but on average posting losses in the range of -0.25%. Declines continued into the mid-afternoon, amplified by Carl Icahn's comments about the market being overheated, at which time the indices were down by roughly -0.75%. Selling pressure persisted throughout the day and left the indices near their lows at the close of the day.

Economic Calendar

The Economy

Two bits of economic data today, mortgage applications and the final revision to 1st quarter GDP. Mortgage applications rose by 1.6%, posting a strong gain from last week's decline of -5.5%. The jump was driven by a recent dip in mortgage rates which drove a rise in new buyers and refinances. This, along with better than expected existing and new home sales, points to increased activity and expansion in the housing sector.


GDP, 1st quarter GDP was revised higher, in line with expectations, to -0.2%. This is up a half percent from the previous estimate of -0.7%. The current estimate is based on more complete import/export data which shows that exports decreased less and imports increased more than previously thought. Along with this is an slightly larger increase in Personal Income Expenditures.

The Oil Index

The tug of war over oil prices wages on. Prices got a lift in early trading on the expectation we would see another decline in US stockpiles. Aiding the early lift were signs the US rig count decline has hit bottom, the latest report shows ND rigs holding steady at 77, the third week of stable levels since hitting the low of 76. The early pop, which took WTI over $61, reversed when supplies were reported to have fallen more than expected. This news, otherwise bullish, was tempered by an unexpectedly large rise, double expectations, of gasoline which only served to shift supply, not diminish them. WTI fell by more than -1.25% to trade near $60.

The Oil Index continues to show sign of a potentially strong trend following movement. Today the index traded to the upside, wrestling with near term resistance along the short term moving average. Price action continues to be supported by the indicators which are consistent with a trend following entry. A break above the moving average and the 38.2% retracement level which is just above the EMA would be bullish and carries a target near 1,400 in the near term. Oil prices will continue to have day to day impact on the index but so long as they remain at levels conducive to fulfilling forward earnings outlook should provide long term support.


The Gold Index

Gold prices fell about -0.30% as the market waits on Greece and digested GDP data. The data reveals the economy did not decline as much as expected in the 1st quarter, confirming outlook for economic expansion and the eventuality of rising inflation. It also confirmed expectations for an FOMC rate hike this year. Gold prices are now trading near $1173 and at a three week low. This level has been providing support for 3 months, I see no reason for that to end now.

The gold miners traded up in today's action creating a small bodied white candle just above my support line. Support appears to be forming near $18.50 and is supported by the indicators. MACD momentum remains bearish but the peaks are divergent from price action in the near and short term. Stochastic %K is moving lower and below %D, consistent with a test of support, but %D is on the rise and has crossed above the lower signal line. The sector remains range bound but looks good for a possible rise to the upper end, near $20 or $21, provided gold prices do not fall below support levels near $1170.


In The News, Story Stocks and Earnings

Lennar Corp reported earnings before the bell. The builder of residential homes reported a beat on both the top and bottom lines, posting EPS of $0.79 on revenue of $2.4 billion. Expectations had earnings in the range of $0.65 on revenue of only $2.4 billion. The best news is an 18% rise in new orders and comments from execs expecting "strong future sales". The one bad note was a slight drop in margins due to rising land costs but that was overlooked in favor of strong sales expectations. Shares of the stock rose more than 8% in the pre-market session, opened with a large gap and proceeded to fall from there throughout the day. Selling pressure did not completely overcome buyers leaving the stock up by 4.5%.


The XHB Home Builders Spyder moved up to set a new 8+ year high, a high not seen since the housing bubble pre-2008 financial crisis. Today's action opened with gap driven on momentum from Lennar and others such as KB Homes who reported a 57% increase in back-log and future orders last week. Early action was bullish, pushing prices higher after making a small gap at the open. Late day selling reversed the early rally, resulting in a black candle but leaving the ETF with a small gain for the day. The indicators are bullish but may be indicating a near term peak, MACD retreated with today's action and stochastic is at the upper signal line with near term %K moving lower.


Monsanto, the global farming technology behemoth, reported better than expected earnings this morning. EPS of $2.39 was far ahead of consensus estimates near $2.05 but came on lighter than expected revenue. The company went on to affirm guidance near the low end of the previously stated range, in line with consensus estimates, but did not provide investors with much hope. Shares of the stock tanked on the news, falling nearly 5%, to trade just above the 12 month low.


Bed, Bath&Beyond reported after the bell. Expectations for EPS of $0.94 were barely missed, actual EPS is $0.93, on revenue in line with expectations. Comp store sales are running just over 2% and within the range projected by management for the year. This is up from a 0.4% comp store increase for the same quarter last year and reflect a negative impact from dollar conversion. Shares of the stock fell -2% in after hours trading following a day of trading right around the moving average.


The Indices

The market began a slow decline this morning that slowly extended itself throughout the day. Although selling lasted throughout the day there was none of the feel of imminent doom or panic selling. Today's losses were led by the Dow Jones Transportation Average which posted a decline more than double the next biggest loser. Today's action carried the transports down by -1.86% and back to the bottom of the recent 10% correction. This move is confirming resistance at the short term moving average but did not break long term support. The indicators are still consistent with a bullish entry in line with the underlying trend so today's drop looks more like an entry point that it does the precursor to decline. Support is at 8,250, resistance is at 8,500.


The Dow Jones Industrial Average made the next largest decline, -0.96%, a full point less than the transports. Today's move broke below the short term moving average and may indicate a near term peak but the underlying trend remains bullish. Declining momentum may lead to a further pullback in the near term with possible target near 17,750 and the bottom of the 5 month tradindig range. Greece may influence trading within the range but data and earnings will be the determining factor long term. The index may remain range bound until earnings season starts, about 2.5 weeks away, unless data changes outlook or Greece defaults/deals with its creditors.


The NASDAQ Composite fell -0.73% and could be returning to the moving average. The index flirted with a new high today, the fifth time since breaking out last week, and may have gotten ahead of the broader market. The indicators remain bullish so any pullback would be buying opportunity. Current support target is the 30 day moving average near the 5,050 level and then just below that near 5,025 and the previous all time closing high.


The S&P 500 fell -0.74% in a move confirming resistance and halted by support. Today's action confirms the underside of the broken up trend line as resistance, strength as yet undetermined. It also helps confirm the break above the moving average and support along the moving average, consistent with the trend following signal indicated by MACD and stochastic. This signal is a trend following entry with target near 2,150. Support target is the short term moving average, near 2,106.


Today's action was all Greece, and maybe a little Carl Icahn. Aside from headline fears over Greece the data is good, not strong and not weak but leading to growth, the earnings are better than expected and outlook to the end of the year remains positive. In the short term 2nd quarter earnings have us in a holding pattern, in the long term growth outlook has us in a bull market. In the near term Greece, its creditors, the bail-out deal and media glam have the market's attention. Near term news is going to keep the market churning until negative headlines are gone, so long as the economic trends and earnings expectations are positive I remain a bull.

Until then, remember the trend!

Thomas Hughes


New Plays

Greek Negotiations Deadlocked

by James Brown

Click here to email James Brown

Editor's Note:

After years of bailouts, austerity, and negotiations the Greek debt crisis is climaxing with an epic showdown between Greek leaders and the country's creditors.

Greece only has six days left before a potential credit default.

The Eurogroup meeting of finance ministers failed to reach any sort of resolution today. Greece's creditors rejected the country's debt restructuring proposal. The finance ministers will meet again on Thursday.

There is also a two-day EU summit that begins on Thursday.

The country only has six days left to get a deal done before it likely defaults on its 1.5 billion euro debt payment to the IMF on June 30th (next Tuesday).

The stock market faces potential headline risk as this stalemate continues.
We are not adding any new trades tonight.

Here's a list of stocks that caught my interest as potential trading ideas. Some of these stocks may need to see a break past key support or resistance:

Bearish ideas: FLS, MO, BBY, NTAP, IRM, GGP, NE, XRX, PTEN
(not listed are utility stocks, nearly all of the utilities look like bearish candidates).

Bullish ideas: ATHM, AAN, DNKN, MNRO, USCR, AFMD, SFLY, CYNO




In Play Updates and Reviews

Stocks Retreat On Greek Impasse

by James Brown

Click here to email James Brown

Editor's Note:
Lack of progress between Greece and its creditors is once again influencing the stock market. The major U.S. indices retreated with the transportation stocks leading the way. The transportation average was down -1.86%.

SLAB and ZTS hit our stop loss.


Current Portfolio:


BULLISH Play Updates

Natus Medical Inc. - BABY - close: 43.26 change: +0.01

Stop Loss: 40.75
Target(s): To Be Determined
Current Gain/Loss: +0.4%
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:
06/24/15: BABY managed to tag new all-time highs before retreating back toward unchanged on the session. The lack of follow through on today's breakout past $43.30 makes me a little bit cautious on tomorrow.

No new positions at the moment.

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: 34.11 change: -0.22

Stop Loss: 31.85
Target(s): To Be Determined
Current Gain/Loss: +5.4%
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:
06/24/15: HBI spent Wednesday consolidating sideways in the $34.00-34.50 range. Today's dip snapped a four-day winning streak. HBI looks short-term overbought so don't be surprised to see a dip tomorrow. More conservative investors may want to raise their stop closer to $33.00.

No new positions at this time.

Trade Description: May 20, 2015:
HBI was founded back in 1901. Today you will find Hanes products in more than 80 percent of U.S. homes.

HBI is in the consumer goods sector. According to the company, "HanesBrands, an S&P 500 company, is a socially responsible leading marketer of everyday basic apparel in the Americas, Europe and Asia under some of the world’s strongest apparel brands, including Hanes, Champion, Playtex, DIM, Bali, Maidenform, Flexees, JMS/Just My Size, Wonderbra, Nur Die/Nur Der, Lovable and Gear for Sports.

We sell bras, panties, shapewear, sheer hosiery, men's underwear, children's underwear, socks, T-shirts and other activewear in the United States, Canada, Mexico and other leading markets in the Americas, Asia and Europe. In the United States, we sell more units of intimate apparel, male underwear, socks, shapewear, hosiery and T-shirts than any other company."

What makes HBI different than most of its competitors is that HBI owns and operates its own manufacturing facilities. About 90% of their apparel comes from company-run plants. That helps them control costs throughout the production process.

This year the company has been very shareholder friendly. Back in January they raised their dividend 33% and announced a 4-for-1 split. The stock split took place in March this year.

HBI's most recent earnings report was April 23rd. HBI reported their Q1 earnings were up +16% from a year ago to $0.22 a share. That missed estimates of $0.23. Revenues were up +14% to $1.21 billion. This was just below expectations of $1.22 billion.

In the company press release HBI Chairman and CEO Richard Noll commented on their results, saying, "We are off to a great start in 2015, once again delivering a double-digit increase in EPS, while tracking to our full-year growth plans. Our acquisition strategy continues to create value with DBApparel, Maidenform and Gear for Sports all contributing substantially to our double-digit growth. In addition, we are raising our 2015 performance outlook to reflect the recent acquisition of Knights Apparel."

Management raised their earnings guidance for 2015 from $1.58-1.63 to $1.61-1.66 per share. Wall Street estimates were at $1.64. HBI also raised their 2015 revenue guidance from $5.78-5.83 billion to $5.90-5.95 billion. Consensus estimates were already at $5.95 billion.

The stock was hammered on the earning miss as investors ignored the improved earnings and revenue guidance. The stock corrected from about $34.60 to under $31.00 in four days (-10 correction).

Analysts' reaction to HBI's results have been positive. Some have noted that Q1 is normally a slower season for HBI. They see the pullback in HBI's stock as a buying opportunity. Multiple firms have raised their price target since the earnings report (new targets are $37, $38, and $40 per share).

Technically HBI has been consolidating sideways in the $30.50-32.00 zone the last several days and have just recently started to breakout from this trading range. We want to hop on board if this bounce continues. Tonight we're suggesting a trigger to open bullish positions at $32.35.

Long HBI stock @ $32.35

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

Long JUL $32.50 CALL (HBI150717C32.50) entry $1.05

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: 42.91 change: -0.03

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:
06/24/15: It was a very quiet session for IMAX. The stock tested short-term technical support at its 10-dma and closed relatively unchanged on the day.

Readers may want to consider a higher stop loss near its 20-dma (currently $41.75). I am not suggesting new positions at this time.

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


PacWest Bancorp - PACW - close: 48.14 change: -0.16

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

Comments:
06/24/15: PACW briefly tagged new 52-week high before retreating. The stock spent most of today hovering near the $48.00 level. I don't see any changes from last night's new play description. Our suggested entry point is $48.55.

Trade Description: June 23, 2015:
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)

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


Starbucks Corp. - SBUX - close: 53.71 change: -0.41

Stop Loss: 49.95
Target(s): To Be Determined
Current Gain/Loss: +5.2%
Entry on May 18 at $51.05
Listed on May 15, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 5.8 million
New Positions: see below

Comments:
06/24/15: SBUX was not immune to the market's widespread pullback today. Shares look like they might be headed toward $53.00, which could be short-term support.

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

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

06/16/15 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: 48.02 change: -1.61

Stop Loss: 45.75
Target(s): To Be Determined
Current Gain/Loss: +1.8%
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:
06/24/15: With SGEN approaching resistance at $50 yesterday traders were quick to ring the register today. Shares plunged toward their rising 10-dma and settled with a -3.24% decline. The 10-dma has been support the last few weeks so SGEN should bounce here.

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


Spirit AeroSystems - SPR - close: 55.72 change: -0.51

Stop Loss: 53.75
Target(s): To Be Determined
Current Gain/Loss: -1.3%
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:
06/24/15: SPR slipped -0.9% and closed on its low for the day. That doesn't bode well for tomorrow morning. It looks like SPR should find support in the $55.00-55.25 area. Wait for a bounce 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: 32.05 change: -0.63

Stop Loss: 29.25
Target(s): To Be Determined
Current Gain/Loss: +15.9%
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:
06/24/15: I cautioned readers last night that SRPT was overbought and due for a dip. Today's -1.9% decline snaps a five-day winning streak. SRPT is still overbought and could see more profit taking tomorrow. The nearest support could be $30.00.

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: 33.78 change: -0.87

Stop Loss: 32.95
Target(s): To Be Determined
Current Gain/Loss: -4.0%
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:
06/24/15: In automobile races the yellow flag is a caution warning. Today I'm waving the yellow flag on TASR. There was no follow through on yesterday's bounce. We could blame the widespread market weakness today. However, TASR underperformed with a -2.5% decline. This stock looks poised to drop below yesterday's intraday low ($33.42). More conservative traders may want to abandon ship now or raise their stop.

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

06/24/15 Warning! TASR reversed again
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: 65.41 change: -0.52

Stop Loss: 61.90
Target(s): To Be Determined
Current Gain/Loss: +3.6%
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:
06/24/15: TPX briefly traded above short-term resistance at $66.00 and then quickly reversed lower. The stock looks headed for potential short-term support at the 10-dma near $64.80 or the $64.00 level.

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: 49.43 change: -1.03

Stop Loss: 47.75
Target(s): To Be Determined
Current Gain/Loss: -1.6%
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:
06/24/15: WWAV was unable to escape the market's widespread weakness today. Shares erased yesterday's rally with a -2.0% decline. The next stop could be potential support in the $48.50 area. I would wait for signs of a bounce before considering new bullish positions.

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




BEARISH Play Updates

Continental Resources, Inc. - CLR - close: 44.13 change: -0.14

Stop Loss: 50.65
Target(s): To Be Determined
Current Gain/Loss: -0.9%
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:
06/24/15: CLR didn't move much today. If you look at its intraday chart shares appear to be building a bear-flag pattern. I would be tempted to launch new positions on a drop below $43.75 again.

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: 12.53 change: -0.34

Stop Loss: 13.25
Target(s): To Be Determined
Current Gain/Loss: +12.7%
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:
06/24/15: It was another good day for ONDK bears. The stock is rolling over beneath short-term resistance at its simple 10-dma. ONDK underperformed the market with a -2.6% decline today.

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



CLOSED BULLISH PLAYS

Silicon Laboratories Inc. - SLAB - close: 56.26 change: -0.80

Stop Loss: 56.65
Target(s): To Be Determined
Current Gain/Loss: -0.7%
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:
06/24/15: Semiconductor stocks underperformed the broader market averages. SLAB fared even worse with a -1.4% decline versus the -1.0% drop in the SOX index. SLAB hit our stop loss at $56.65. Shares are on track to break its trend of six up weeks in a row.

- Suggested Positions -

Long SLAB stock @ $57.05 exit $56.65 (-0.7%)

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

OCT $60 CALL (SLAB151016C60) entry $3.10 exit $2.50 (-19.4%)

06/24/15 stopped out
06/23/15 new stop @ 56.65
06/18/15 triggered @ $57.05
Option Format: symbol-year-month-day-call-strike

chart:


Zoetis Inc. - ZTS - close: 49.71 change: -0.76

Stop Loss: 49.85
Target(s): To Be Determined
Current Gain/Loss: -1.3%
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:
06/24/15: ZTS suffered a -1.5% decline and broke down under what should have been round-number support at $50.00. The stock hit our new stop loss at $49.85.

- Suggested Positions -

Long ZTS stock @ $50.50 exit $49.85 (-1.3%)

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

Oct $55 CALL (ZTS151016C55) entry $1.68 exit $1.30 (-22.6%)

06/24/15 stopped out
06/23/15 new stop @ 49.85
06/18/15 triggered @ $50.50
Option Format: symbol-year-month-day-call-strike

chart: