NEW DIRECTIONAL CALL PLAYS

Facebook, Inc. - FB - close: 61.35 change: +0.83

Stop Loss: 59.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
FB is in the technology sector. The company operates the largest social network on the planet with monthly active users up +15% year over year to 1.28 billion as of March 31st, 2014. Mobile monthly users were up +34% to 1.01 billion.

When investors started selling the momentum stocks and high-growth names in March shares of FB were not immune. The stock corrected from $72 to $55, a -23.6 percent correction. We suspect when investors return to the high-growth names they will flock to FB.

The company is firing on all cylinders with a strong Q1 report. Analysts were expecting a profit of 24 cents a share on revenues of $2.35 billion. FB delivered a Q1 profit of 34 cents with revenues soaring +71.6% year over year to $2.5 billion. Advertising revenues were up +82% from the same quarter a year ago. Mobile advertising has increased from 30% of ad revenues to 59% of ad revenues.

Wall Street is pretty bullish on shares of FB. Many analysts have price targets in the $75-85 zone. David Tepper's Appaloosa Management initiated a new position in FB last quarter. ITG Research recently offered positive comments on FB suggesting the current quarter could also come in ahead of estimates.

Technically the stock has been consolidating sideways in the $55-64 zone for almost two months. Friday's gain was a bullish close above the 50-dma for the first time in weeks. More aggressive traders may want to launch positions above $62.50. We are suggesting investors wait for FB to trade at $64.25 as our trigger to buy calls. The point & figure chart is bearish but a move above $64.00 would produce a new P&F chart buy signal.

Trigger @ $64.25

- Suggested Positions -

Buy the Sept $70 call (FB140920C70) current ask $2.47

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

Annotated Chart:

Weekly Chart:

Entry on May -- at $---.--
Average Daily Volume = 62 million
Listed on May 24, 2014


MasterCard Inc. - MA - close: 76.45 change: +0.70

Stop Loss: 72.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
MA is in the financial sector. The company provides transaction processing and payment-related services. Globally cash is still the most dominant method of payment. That may not be true in the most developed countries but worldwide there is a long-term trend with consumers moving away from cash more toward cards and electronic payments, which will benefit MasterCard.

MA's latest earnings on May 1st was positive. The company beat Wall Street's estimates on both the top and bottom line. The company said a 14% increase in transactions, on a local currency basis, hit $1.0 trillion. They also saw a +14% jump in processed transactions. Cross border volumes were up +17%.

MA's CEO and President Ajay Banga said the company signed new deals with Wal-Mart (WMT), Sam's Club, and Target (TGT). WMT and Sam's will move their co-brand portfolios to MasterCard. TGT will also shift its co-brand cards to MasterCard and use MA's chip and PIN technology to upgrade their security. Banga said MA will, "continue to invest in technology and acquisitions that will speed our development of mobile and online solutions."

Both Visa and MA were caught up in the sanction backlash between Russia and Europe and the U.S. The two companies were not singled out but new legislation in Russia was going to force the two American companies out of the country. Working with Russian officials MA and Visa have found a way to sidestep the issue by creating a domestic (Russian) payment system within six months and create a Russian company to handle domestic transactions.

Technically shares of MA saw a -20% correction on an intraday basis from its January 2014 highs to the April intraday lows. The stock bounced near its long-term up trend. Now MA appears to be breaking out past resistance near $76, resistance at its 100-dma and 150-dma, and resistance at its five-month trend of lower highs.

Tonight we're suggesting a trigger to buy calls at $77.25. We're not setting an exit target yet but the point & figure chart is bullish with an $87 target.

Trigger @ $77.25

- Suggested Positions -

Buy the Oct $80 call (MA141018C80) current ask $2.61

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

Annotated Chart:

Weekly Chart:

Entry on May -- at $---.--
Average Daily Volume = 5 million
Listed on May 24, 2014