Editor's Note:
The U.S. market's major indices continued a slow drift higher on Thursday.


Current Portfolio:


BULLISH Play Updates

American Airlines Group Inc. - AAL - close $39.82 change: +0.02

Stop Loss: 37.25
Target(s): to be determined
Current Gain/Loss: -1.1%

Entry on May 28 at $40.25
Listed on May 17, 2014
Time Frame: 9 to 12 weeks
Average Daily Volume = 10.3 million
New Positions: see below

Comments:
05/29/14: AAL is still hovering just below resistance at the $40.00 level. Investors may want to wait for a close above $40.00 before initiating positions.

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%.

current Position: Long AAL stock @ $40.25

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

Long Aug $40 call (AAL140816C40) entry $2.65*

05/28/14 triggered @ 40.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
option format: symbol-year-month-day-call-strike



Arrowhead Research - ARWR - close: 13.22 change: -0.11

Stop Loss: 10.75
Target(s): to be determined
Current Gain/Loss: + 9.7%

Entry on May 27 at $12.05
Listed on May 19, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 1.3 million
New Positions: see below

Comments:
05/29/14: I cautioned readers yesterday that ARWR might tag its 50-dma and pullback. Sure enough the stock rallied up to technical resistance at its 50-dma, near $13.75, and reversed.

I am not suggesting new positions at this time.

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.

Current Position: Long ARWR stock @ $12.05

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

Long Sep $12.50 call (ARWR140920C12.5) entry $3.40*

05/27/14 triggered @ 12.05
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike



Delta Air Lines - DAL - close: 40.14 change: -0.13

Stop Loss: 36.45
Target(s): to be determined
Current Gain/Loss: + 6.6%

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:
05/29/14: DAL saw a little bit of profit taking after yesterday's rally to new highs.

On CNBC's Fast Money tonight they noted that someone purchased 15,000 January 2015 calls at the $45.00 strike. Someone is making a big bet that DAL will close above $45 over the next several months.

Yesterday I warned readers that DAL is nearing its trend line of higher highs, where shares have failed multiple times. DAL looks like it might hit that trend line (resistance) in the $41.00-41.25 area.

More conservative traders may want to take profits near $41.00.

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*

05/28/14 DAL is nearing potential resistance at its trend line of higher highs.
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.



The Dow Chemical Co. - DOW - close: 52.47 change: +0.70

Stop Loss: 47.90
Target(s): To Be Determined
Current Gain/Loss: + 2.4%

Entry on May 27 at $51.25
Listed on May 24, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 9.5 million
New Positions: see below

Comments:
05/29/14: DOW is still showing relative strength. Shares posted their fourth gain in a row. I am not suggesting new positions at current levels.

Earlier Comments:
DOW is in the basic materials sector. The company supplies chemical products as raw materials. As Wall Street searches for returns and yield DOW will likely continue to show up on their radar screen.

The company has been doing a good jog on maintaining cost controls and returning capital to shareholders. The Q1 2014 earnings report showed net profits surged +75% from a year ago. The first quarter was their sixth consecutive quarter of year-over-year earnings growth.

Dow has raised their dividend by 15% and now sports a 3.0% yield. They plan to complete a $4.5 billion stock buyback program in 2014.

In spite of higher feedstock and energy costs DOW still managed to see margins grow. They expect 2014 to see this margin growth gain further momentum.

Wall Street has been upgrading the stock and raising earnings forecasts.

Shares of DOW are in a long-term up trend (see weekly chart below). Yet the last couple of months have seen shares consolidating gains in a sideways move near $50. This consolidation looks like it's about over. DOW is poised for a breakout higher.

Current Position: Long DOW stock @ $51.25

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

Long Sep $50 call (DOW140920C50) entry $2.88*

05/27/14 triggered @ 51.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike



Extra Space Storage Inc. - EXR - close: 52.31 change: +0.05

Stop Loss: 49.90
Target(s): To Be Determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 28, 2014
Time Frame: Exit PRIOR to June 13th
Average Daily Volume = 583 thousand
New Positions: Yes, see below

Comments:
05/29/14: EXR delivered a relatively mellow performance on Thursday. I do not see any changes from my earlier comments.

Earlier Comments:
EXR is a REIT. The company is in the self-storage business. They currently own and/or operate 1,000 self-storage properties in 38 states with over 59 million square feet of rentable space.

Americans do love their stuff and they have a hard time letting go of it. Their love affair with holding on to more stuff could be a good reason EXR's stock has soared from its 2009 lows. Oh and the company has been consistently performing over and over again. The latest results were in-line with analysts' estimates but it was also their 14th quarter in a row of double-digit growth.

EXR just raised their dividend +17.5% to 47 cents a share. This new dividend is payable on June 30th to shareholders of record on June 13th (the ex-dividend date). We want to exit prior to the ex-dividend date.

Technically EXR is hovering at all-time highs. Traders just bought the dip today near $52 and its simple 10-dma. We are suggesting a trigger to open bullish positions at $53.05 (more aggressive traders can just buy it now). If we are triggered at $53.05 we'll start with a stop loss at $49.90.

Longer-term investors may want to hold on to this stock. The point & figure chart is bullish with a $67 target.

Trigger @ 53.05

Suggested Position: buy EXR stock @ (trigger)



BEARISH Play Updates

Aegerion Pharma. - AEGR - close: 31.63 change: -0.70

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:
05/29/14: AEGR underperformed both the broader market and the biotech stocks today.

We are still on the sidelines and waiting for a new low.

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)



The Fresh Market, Inc. - TFM - close: 30.00 change: +0.08

Stop Loss: 31.55
Target(s): To Be Determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 24, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 995 million
New Positions: Yes, see below

Comments:
05/29/14: TFM was little changed today. Shares continue to drift sideways near $30.00.

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

Earlier Comments:
TFM is in the services sector. The company is considered a specialty retailer in the grocery industry. It's been a rocky, painful road for TFM investors as the stock has produced a roller coaster ride lower from its 2012 highs. This past week saw TFM shares fall to new all-time lows and breakdown below round-number support at the $30.00 level. Shares did pop more than +10% higher on Friday morning as investors reacted to the company's earnings report out Thursday night.

TFM reported Q1 earnings of 43 cents a share. That was down -6.5% from a year ago but was in-line with analysts' estimates. Traders were likely expecting a miss and when TFM met estimates it sparked some short covering. The stock does have a high amount of short interest. Unfortunately for the bulls the rally didn't last and TFM's +10% gains faded to just +1.5% on Friday.

TFM's Q1 revenues did come in better than expected and management reaffirmed their 2014 guidance (near the low end of Wall Street's estimates). Investors were not happy with the big drop in TFM's margins. Q1 gross margins fell from 35.3% a year ago to 34.4%.

TFM is facing the same pressures that its larger rival Whole Foods Market (WFM) is facing. More and more grocers are getting into the fresh and organic food market. Sprouts Farmers Market, Kroger, Wal-mart, and regional competitors like HEB and Trader Joe's are all hopping on the natural food bandwagon. All this competition is going to continue to squeeze TFM's margins.

At least one analyst firm thinks TFM's 2014 outlook is too optimistic and does not take into account tougher competition and the impact that rising food inflation will have on margins.

The trend is down but this could be a volatile short to play. There are already a lot of bears in the name. The most recent data listed short interest at 19% of the small 44.3 million share float. That raises the risk of a short squeeze. TFM can see these sharp three or four day rallies that lift shares more than 10% before they run out of steam again.

Tonight we are suggesting a trigger to open bearish positions at $28.45. That's just below Thursday's all-time low. If triggered we'll use a stop loss at $31.55, above Friday's high. We're not setting an exit target tonight. It's worth noting that the point & figure chart is bearish and forecasting at $20.00 target.

Consider using small positions or use the put option to limit your risk. I want to remind you that this could be a volatile trade.

Trigger @ $28.45 *small positions*

Suggested Position: short TFM stock @ (trigger)

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

Buy the Sep $30 PUT (TFM140920P30)

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



The TJX Companies, Inc. - TJX - close: 54.45 change: +0.15

Stop Loss: 57.10
Target(s): To Be Determined
Current Gain/Loss: +0.3%

Entry on May 28 at $56.41
Listed on May 27, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 4.5 million
New Positions: see below

Comments:
05/29/14: TJX spent Thursday's session drifting sideways.

We would still consider new bearish positions in TJX now at current levels but more conservative traders may want to wait for a drop under last week's low at $53.87 before initiating positions.

Earlier Comments:
TJX is in the services sector. The company runs off-price apparel and home fashion retail outlets with brand names under T.J.Maxx, Marshalls, HomeGoods, and more. TJX has over 1,000 locations.

Retail has had a tough time this year. Disappointing Q4 Christmas shopping season results were then followed by one of the worst winter seasons in years. TJX has not been immune to the issue. The company reported Q4 earnings results and missed estimates and then lowered guidance for Q1 and full year 2015. They did it again just a few days ago when they reported their Q1 results. TJX missed estimates on both the top and bottom line and then management lowered their guidance for 2015 again.

Shares collapsed last week following the new earnings earning and the oversold bounce has already failed. TJX has also broken down through some long-term bullish trend lines (see weekly chart below).

There are a few analysts saying the sell-off is overdone and traders should buy this weakness but no one seems to be listening. There could be more analysts coming out and trying to call a bottom on TJX, which might spark some short-term rallies but the path of least resistance is down.

Currently the point & figure chart is bearish and forecasting at $45 target.

current Position: short TJX stock @ $54.61

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

Long Oct $52.50 PUT (TJX141018P52.50) entry $1.70*

05/28/14 trade begins. TJX opened at $54.61
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike