Editor's Note:
We would keep an eye on the small cap Russell 2000 index tomorrow. Today saw the $RUT testing resistance at its simple 200-dma. It also has potential resistance near the 1120 level (it's currently at 1113).

A breakout in the $RUT could spark stronger gains across the market.


Current Portfolio:


BULLISH Play Updates

American Airlines Group Inc. - AAL - close $38.72 change: +0.40

Stop Loss: 37.25
Target(s): to be determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 17, 2014
Time Frame: 9 to 12 weeks
Average Daily Volume = 10.3 million
New Positions: Yes, see below

Comments:
05/22/14: AAL has spent a week now consolidating sideways near the $38.00-38.50 zone.

I do not see any changes from our weekend newsletter's new play description.

Earlier Comments:
AAL is in the services sector. AAL is the merger between US Airways and American Airlines (AMR). The new company, American Airlines Group, is the largest carrier with nearly 6,7000 flights a day, over 330 destinations, to more than 50 countries, with over 100,000 employees worldwide.

This $17 billion merger was threatened by the U.S. Justice department last year. Regulators tried to block the merger on fears the new company would be too big, hold too much power, and reduce competitiveness and thus pricing for consumers. A U.S. district judge just recently approved a settlement worked out between AAL and the Justice Department where the new company agreed to sell certain assets to competitors. Getting the legal hurdle for its merger out of the way it's one more worry that investors can forget.

The airlines would also like to forget about winter. The 2014 winter season was brutal for the airline industry. In January and February the Bureau of Transportation Statistics said 6.05% of all domestic flights were cancelled. That number dropped to 4.6% of all flights cancelled in March. Put them all together and you have the worst winter cancellation rate in 20 years. Yet this news has failed to stop the rally in airline stocks. Granted AAL did consolidate sideways for a few weeks but now it is only a couple of points away from new eight year highs.

AAL just recently released data on April. Their revenue passenger miles for April were up 4.7 percent to 18.1 billion in 2014 versus April 2013. Odds are this number is going to improve since summers tend to be more bullish for the airline business.

Wall Street seems keen on shares of AAL. Goldman Sachs recently put a $46 price target on the stock. In the latest 13F filings it was revealed that Paulson & Co had raised their stake in AAL from 8.5 million shares to 12.2 million. Meanwhile David Tepper is the hot fund manager everyone loves and his Appaloosa Management has AAL as its second largest holding. In the last quarter Appaloosa increased their AAL stake by 22.5%.

On a short-term basis shares of AAL are sitting just below resistance at $40.00. I am suggesting a trigger to launch bullish positions at $40.25. We'll start with a stop loss at $37.25, just under this past week's low. I'm not setting an exit target yet but probably somewhere in the $45-50 zone.

Trigger @ $40.25

Suggested Position: buy AAL stock @ (trigger)

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

Buy the Aug $40 call (AAL140816C40)

option format: symbol-year-month-day-call-strike



Arrowhead Research - ARWR - close: 11.46 change: +0.53

Stop Loss: 10.75
Target(s): to be determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 19, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 1.3 million
New Positions: Yes, see below

Comments:
05/22/14: Biotech stocks were showing relative strength today. The group looks like they could breakout from a multi-week sideways consolidation soon. If that happens it could give ARWR a big boost.

There is no change from the Monday night new play description.

Earlier Comments:
ARWR is in the healthcare sector. The company is in the biotech industry. Biotech stocks peaked in early March as investors started selling momentum and high-growth names. ARWR was definitely a target for profit taking after a rally from $2.00 a share back in July 2013 to over $25 in March 2014.

Biotech analysts believe ARWR has a lot of potential. The company is working on a treatment for hepatitis B and should have new data available in the third quarter this year. If successful the hepatitis B treatment could be a multi-billion drug as there are over 300 million patients around the world. ARWR currently has a market cap of about $600 million but a Deutsche bank analysts believes ARWR's market cap could surge to $4-to-$5 billion if its hepatitis B treatment is approved. ARWR is also developing new treatments on its RNAi technology.

Make no mistake, this is an aggressive trade. ARWR is an early stage biotech firm with no revenues. Any investment is a belief they will bring successful clinical data and eventually get FDA approval for its drugs in development.

Technically after a drop from $25 to $10 most of the air has been let out of the prior bubble. As investors return to risk on trades we think ARWR could outperform.

Tonight we're suggesting a trigger to open bullish positions at $12.05. We'll start this trade with a stop loss at $10.75.

Trigger @ $12.05

Suggested Position: buy ARWR stock @ $12.05

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

buy the Sep $12.50 call (ARWR140920C12.5)



Delta Air Lines - DAL - close: 38.63 change: +0.29

Stop Loss: 36.45
Target(s): to be determined
Current Gain/Loss: + 2.6%

Entry on May 05 at $37.65
Listed on May 03, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 13.5 million
New Positions: see below

Comments:
05/22/14: DAL continued to drift higher today. The stock is on track for its sixth weekly gain in a row.

More conservative traders may want to adjust their stop higher. I am not suggesting new positions at this time.

Current Position: long DAL stock @ $37.65

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

Long Sept $40 call (DAL1420i40) entry $2.20*

05/12/14 new stop @ 36.45
05/07/14 new stop @ 35.75
05/05/14 triggered @ 37.65
*option entry price is an estimate since the option did not trade at the time our play was opened.



BEARISH Play Updates

Aegerion Pharma. - AEGR - close: 31.50 change: -0.21

Stop Loss: 32.55
Target(s): to be determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 20, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 1.4 million
New Positions: Yes, see below

Comments:
05/22/14: AEGR underperformed its peers in the biotech industry. Shares also underperformed the broader market after the stock reversed near its 10-dma today.

At the moment I do not see any changes from the Tuesday night newsletter's new play description.

Earlier Comments:
AEGR is in the healthcare sector. The company is a biotech firm that develops treatments for rare diseases. This stock delivered a tremendous rally from October 2012 to October 2013. That's when shares revered at the $100 level and it's been downhill ever since. Exacerbating AEGR's decline has been the company's earnings warning. They lowered guidance back in January and they lowered guidance again when they reported earnings on May 7th.

The stock gapped down sharply following the May 7th report and there has been no oversold bounce. Wall Street was expecting revenues of $33.6 million for the quarter. The company only reported $27 million.

AEGR seems to be facing challenges with its only marketed product, Juxtapid. This is an oral treatment for homozygous familial hypercholesterolemia. This is a genetic disorder characterized by extremely high levels of cholesterol, especially the LDL (bad) cholesterol.

Most of the company's sales are in the U.S. Last quarter a large chunk of its sales in Brazil evaporated with a -70% decline due to an investigation into anticorruption laws in Brazil.

There are concerns that AEGR may have to lower the price for its Juxtapid treatments, which currently cost in the $250,000-$300,000 a year range. There are competing treatments for a lot less money. There is also a worry that there may be fewer customers than previously believed. There were some claims that Juxtapid might have the potential to treat 3,000 patients in the U.S. Yet homozygous familial hypercholesterolemia only affects one in a million people. That means there are closer to 300 potential patients in the U.S.

The company is also facing an investigation from the U.S. Department of Justice for comments made by AEGR's CEO when he appeared on CNBC's Fast Money program last year.

The company seems to be facing a lot of negatives and is clearly in a bear market with lower as the path of least resistance. Currently shares of AEGR are testing round-number support at $30.00. We want to wait for a breakdown below $30.00 and launch bearish positions at $29.50. If triggered we will try and limit our risk with a stop loss at $32.55.

Traders should consider this an aggressive, higher-risk trade. Not only can AEGR see big intraday swings but there is a risk of a short squeeze. The most recent data listed short interest at 30% of the small 28.39 million share float. So far the shorts have been right.

We're not setting an exit target tonight but the $20.00 level looks like it could be significant support.

Trigger @ $29.50

Suggested Position: short AEGR stock @ (trigger)

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

Buy the Sep $30 PUT (AEGR140920P30)



Financial Engines, Inc. - FNGN - close: 40.85 change: +0.99

Stop Loss: 42.25
Target(s): to be determined
Current Gain/Loss: - 5.4%

Entry on May 14 at $38.75
Listed on May 13, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 567 thousand
New Positions: see below

Comments:
05/22/14: FNGN were downgraded this morning but that didn't stop shares from surging +2.48%. The breakout past the $40.00 mark probably sparked some short covering.

FNGN is quickly approaching what should be resistance near the bottom of the gap ($40.95-41.70 zone) and technical resistance at its simple 20-dma. Shares failed near their 20-dma in mid April and early May. Currently this moving average is close to $41.50. These are the levels to watch.

I am not suggesting new positions. (FYI: getting stopped out at $42.25 would be a -9.0% loss)

Earlier Comments:
FYI: The most recent data listed short interest at about 13% of the 50.4 million share float.

current Position: short FNGN stock @ $38.75

05/14/14 triggered @ 38.75



Jacobs Engineering Group - JEC - close: 53.17 change: +0.12

Stop Loss: 54.55
Target(s): to be determined
Current Gain/Loss: + 2.4%

Entry on May 15 at $54.48
Listed on May 14, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 1.4 million
New Positions: see below

Comments:
05/22/14: Bearish momentum in JEC has stalled. Although it is worth noting that the market is rising and JEC is not. My concern is that JEC is short-term oversold and due for a bounce.

Tonight we are moving the stop loss to $54.55.

current Position: short JEC stock @ $54.48

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

Long Jun $55 PUT (JEC140621P55) entry $1.65**

05/22/14 new stop @ 54.55
05/17/14 new stop @ 56.15
05/15/14 trade opened at $54.48
**option entry price is an estimate since the option did not trade at the time our play was opened.
*I've provided the more standardized option symbol format.
symbol-year-month-day-put-strike