Editor's Note:

The markets continue to move higher and the NASDAQ is above its 50-dma while small caps actually outperformed today.

CVS hit our entry trigger. TMO has been removed.
We want to exit our PCRX trade tomorrow morning.


Current Portfolio:


CALL Play Updates

CVS Caremark Corp. - CVS - close: 77.21 change: +0.51

Stop Loss: 74.65
Target(s): to be determined
Current Option Gain/Loss: + 0.1%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/22/14: We did not have to wait very long for CVS to hit our suggested entry point. The stock rallied to new highs and hit trigger at $77.25.

In the news today Reuters reported that a Brazilian drugstore chain, DPSP, has rejected at $2 billion offer from CVS. The news failed to have much impact on CVS' stock price today.

I do not see any changes from our Wednesday night new play description.

Earlier Comments:
CVS is in the services sector. The company provides integrated pharmacy healthcare services in addition to running a drug store chain with over 7,600 locations. CVS' largest rival is Walgreen's with 8,650 locations.

The company's most recent earnings report was mixed. CVS delivered a profit of $1.02 per share. That missed estimates by a penny. Revenues came in above expectations at $32.69 billion in the first quarter. Wall Street appears to have accepted CVS's "blame it on the weather" excuse. Last month CVS also disclosed they had finalized a settlement with the SEC over events dating back to 2009 that stemmed from its acquisition of Longs Drug Stores in 2008. In the settlement CVS did not have to admit any wrongdoing and does not have to restate any earnings reports. They're happy to put the ordeal behind them and for investors it's old news.

More importantly the company is seeing strong growth in its PBM business. Its pharmacy services segment saw revenues climb +10.3% to $20.2 billion in the second quarter. Management said CVS is "beginning to develop integrated products for both hospitals and health plans."

They're also growing into a broader healthcare provider with the retail-based clinic subsidiary MinuteClinic. According to CVS' website, "MinuteClinic launched the first retail medical clinics in the United States in 2000 and now has more than 800 locations in 28 states. MinuteClinics are staffed by nurse practitioners and physician assistants who utilize nationally recognized protocols to provide treatment for common family illnesses, skin conditions and injuries, administer vaccinations, conduct physicals and wellness screenings, and offer monitoring for chronic conditions seven days a week without an appointment, including evenings and holidays."

American's growing acceptance of the MinuteClinic for quick healthcare services will grow. Long-term CVS will benefit from an aging population more dependent on their prescriptions. Plus, CVS will benefit from the growing number of new Americans being covered under Obamacare. Payments for these services will be covered by health care plans, Medicaid, and now the Affordable Care Act mandate.

Wall Street is happy with its steady growth. The most recent earnings report showed profits rising 18% year over year for the fifth consecutive quarter of double-digit earnings growth.

We're not setting a bullish exit target yet but the Point & Figure chart for CVS is bullish with a $102 target.

- Suggested Positions -

Long Aug $80 call (CVS140816C80) entry $1.04

05/22/14 triggered @ 77.25
symbol-year-month-day-call-strike

Entry on May 22 at $77.25
Average Daily Volume = 5.1 million
Listed on May 21, 2014


Express Scripts Holding - ESRX - close: 70.25

Stop Loss: 66.90
Target(s): to be determined
Current Option Gain/Loss: +9.3%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/22/14: ESRX continues to push higher and closed above potential round-number resistance at the $70.00 level today. Today's high was $70.49. I have been suggesting that more conservative traders will want to wait and use an entry point at $70.50.

Earlier Comments:
ESRX is in the healthcare sector. The company provides pharmacy benefit management (PBM) services in the U.S. and Canada. Both the NASDAQ and shares of ESRX peaked in early March. It would appear that investors considered ESRX one of the higher-growth, momentum names since it has been sinking with that group over the last couple of months.

That big drop you see on ESRX's daily chart was market reaction to its latest earnings news. The results were disappointing. You could call it a trifecta of bad news. ESRX missed Wall Street's estimates on both the top and bottom line. Management guided lower for 2014. Plus they disclosed three separate subpoenas from different state authorities as the company is investigated for its relationship with drug makers.

Investors already had lowered expectations for ESRX's earnings because the company lost UnitedHealth Group (UNH) as a client last quarter. The loss of UNH accounted for about half of ESRX's lost revenues. ESRX complained that a lot of expected new enrollments had been postponed. They didn't see quite the impact from the new Obamacare exchanges previously expected.

It sounds like plenty of bad news for ESRX. Yet here's the interesting part. The stock lost -6% following its earnings report but there was no follow through lower. Investors have been buying the dip. Shares are up two weeks in a row and slowing chewing through resistance. With a drop from $79 to $65 (-17.7%) it is possible that all the bad news is already priced into ESRX stock price. The long-term trend for ESRX is still higher. As the new affordable healthcare policy changes gain momentum it should mean more enrollments for ESRX.

- Suggested Positions -

Long Aug $70 call (ESRX140816C70) entry $2.45*
option format: symbol-year-month-day-call-strike
05/21/14 triggered @ 69.50
*option entry price is an estimate since the option did not trade at the time our play was opened.
05/19/14 adjust entry trigger from $70.50 to $69.50
adjust the strike price to the August $70s.

Entry on May -- at $---.--
Average Daily Volume = 6.5 million
Listed on May 17, 2014


Gilead Sciences - GILD - close: 82.90 change: +1.09

Stop Loss: 77.90
Target(s): to be determined
Current Option Gain/Loss: +88.6%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/22/14: GILD displayed some relative strength today with a +1.3% gain. The stock is nearing what could be resistance in the $84-85 zone. GILD might spend some time here before eventually breaking out past $85.

I am not suggesting new positions at this time. More conservative traders may want to use a higher stop loss.

- Suggested Positions -

Long Jun $80 call (GILD1421F80) entry $2.12

05/15/14 new stop @ 77.90, readers may want to exit now to lock in potential gains.
05/10/14 new stop @ 75.75
05/01/14 new stop @ 74.45
04/30/14 triggered @ 77.00

Entry on April 30 at $77.00
Average Daily Volume = 23 million
Listed on April 29, 2014


LyondellBasell Industries - LYB - close: 97.70 change: -0.46

Stop Loss: 93.75
Target(s): to be determined
Current Option Gain/Loss: +13.7%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
05/22/14: LYB briefly tagged another all-time high on an intraday basis before paring gains.

Shares are approaching what could be round-number, psychological resistance at the $100.00 level. I am not suggesting new positions at this time.

Earlier Comments:
The Point & Figure chart for LYB is bullish with a $110 target.

- Suggested Positions -

Long Sep $100 call (LYB140920C100)* entry $2.55**

05/15/14 new stop @ 93.75
05/12/14 LYB gapped open higher at $96.20 (+75 cents)
**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-call-strike

Entry on May 12 at $96.20
Average Daily Volume = 3.1 million
Listed on May 10, 2014


3M Company - MMM - close: 140.31 change: -0.35

Stop Loss: 138.75
Target(s): to be determined
Current Option Gain/Loss: -40.0%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/22/14: MMM's action today was not very inspiring if you're a bull. Shares underperformed and look poised to breakdown below support near $140.00.

I am not suggesting new positions at this time.

- Suggested Positions -

Long Jun $140 call (MMM1421F140) entry $3.45*

05/20/14 adjust stop loss to $138.75 due to the dividend
05/15/14 new stop @ 139.49
05/08/14 triggered @ $142.00

Entry on May 08 at $142.00
Average Daily Volume = 2.65 million
Listed on May 07, 2014


Pacira Pharmaceuticals - PCRX - close: 74.79 change: -1.89

Stop Loss: 69.95
Target(s): to be determined
Current Option Gain/Loss: - 31.4%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
05/22/14: We think it's time to let PCRX go. Shares underperformed their peers in the biotech sector today. Technicals are starting to roll over on PCRX.

Tonight we're suggesting an immediate exit tomorrow morning.

- Suggested Positions -

Long Aug $80 call (PCRX1416H80) entry $7.00

05/22/14 prepare to exit tomorrow morning
05/21/14 caution! today's move looks like a potential reversal lower.
05/06/14 triggered on gap higher at $75.32, suggested entry was $74.25

Entry on May 06 at $75.32
Average Daily Volume = 602 thousand
Listed on May 05, 2014


Potasch Corp. of Saskatchewan - POT - close: 36.30 change: -0.75

Stop Loss: 34.90
Target(s): to be determined
Current Option Gain/Loss: -17.3%
Time Frame: 3 to 4 months
New Positions: see below

Comments:
05/22/14: POT hit some profit taking today following POT's comments at the BMO Capital Markets Farm to Market conference. Shares of POT underperformed with a -2.0% drop and a close under short-term support near $36.50 and its 20-dma. The next level of support could be $35.00 or its 50-dma. I am not suggesting new positions at this time.

- Suggested Positions -

Long Sept $35 call (POT1420i35) entry $2.65

05/15/14 new stop @ 34.90
05/02/14 triggered @ 36.50

Entry on May 02 at $36.50
Average Daily Volume = 5.0 million
Listed on April 26, 2014


United Parcel Service - UPS - close: 101.66 change: -0.08

Stop Loss: 97.75
Target(s): to be determined
Current Option Gain/Loss: + 47.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/22/14: Thursday proved to be a quiet day for UPS. The stock drifted sideways inside a relatively narrow range. Lack of follow through on yesterday's bounce is a bit surprising especially with the Dow Jones Transportation Average hitting new all-time highs.

More conservative traders may want to raise their stop loss but I would keep it below $100.

We're not setting an exit target yet but the Point & Figure chart for UPS is bullish with a $114 target.

- Suggested Positions -

Long Jul $100 call (UPS140719C100)* entry $1.98

05/12/14 triggered @ 100.25
*I've provided the more standardized option symbol format.
symbol-year-month-day-call-strike

Entry on May 12 at $100.25
Average Daily Volume = 2.9 million
Listed on May 10, 2014




PUT Play Updates

Athenahealth, Inc. - ATHN - close: 117.57 change: +4.34

Stop Loss: 124.05
Target(s): to be determined
Current Option Gain/Loss: Jun$100put -58.5% & Sep100put: -21.7%
Time Frame: 4 to 12 weeks
New Positions: see below

Comments:
05/22/14: Strength in the biotech stocks is starting to power a bounce in shares of ATHN. The stock surged +3.8% and is testing technical resistance at its 20-dma. The next level of resistance should be the $120.00 level.

More conservative traders may want to abandon ship immediately. A breakout past $120 could spark some short covering.

Earlier Comments:
The plan was to keep our position size small to limit our risk.

*small positions* - Suggested Positions -

Long Jun $100 PUT (ATHN140621P100) entry $2.05**

- or -

Long Sep $100 PUT (ATHN140920P100) entry $6.90**

05/22/14 more conservative traders may want to exit immediately!
05/15/14 trade opened on gap down at $115.66
**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

Entry on May 15 at $115.66
Average Daily Volume = 1.5 million
Listed on May 14, 2014


Chart Industries - GTLS - close: 71.70 change: +0.46

Stop Loss: 75.55
Target(s): to be determined
Current Option Gain/Loss: - 28.8%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
05/22/14: GTLS' attempt to bounce stalled near its 30-dma, a moving average that has been trouble for the bulls. I don't see any changes from my recent comments.

Earlier Comments:
FYI: The Point & Figure chart for GTLS is currently bullish but a drop below $71.00 would produce a new triple-bottom breakdown sell signal.
Update: The P&F chart is now bearish with a $64 target.

- Suggested Positions -

Long Jun $70 PUT (GTLS140621P70) entry $2.25

05/16/14 trade begins. GTLS opened at $72.34
*I've provided the more standardized option symbol format.
symbol-year-month-day-put-strike

Entry on May 16 at $72.34
Average Daily Volume = 652 thousand
Listed on May 15, 2014


Lumber Liquidators - LL - close: 79.53 change: -1.53

Stop Loss: 84.05
Target(s): to be determined
Current Option Gain/Loss: -22.2%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
05/22/14: The bounce in LL failed near its 10-dma and the $82.00 level this morning. Shares still managed to outperform the market with a +1.2% gain.

The late April low was $78.92. I would wait for LL to trade below this level before initiating new bearish positions.

Earlier Comments:
I do consider a more aggressive trade because of LL's short interest. The most recent data listed short interest at 25% of the small 24.3 million share float, which raises the risk of a short squeeze. I am not setting a target yet. The P&F chart is bearish and forecasting at $72 target.

*small positions* - Suggested Positions -

Long Aug $75 PUT (LL140816P75) entry $4.50**

05/15/14 triggered @ 79.75
**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-call-strike

Entry on May 15 at $79.75
Average Daily Volume = 888 thousand
Listed on May 14, 2014


Whole Foods Market, Inc. - WFM - close: 37.50

Stop Loss: 40.25
Target(s): to be determined
Current Option Gain/Loss: + 0.9%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/22/14: The main story behind WFM's decline is rising competition. Bloomberg just put out a new story today saying Sprouts Farmers Market Inc. (SFM) is currently "undercutting the prices of its larger rival by about 13 percent, according to analysis by Bloomberg Industries."

I don't see any changes from my earlier comments.

Earlier Comments:
WFM is in the services sector. The company runs a grocery chain focused on natural and organic foods. As of May 2014 they had 379 stores. Unfortunately their success in the higher-margin organic foods has fueled significant competition.

The stock has been sinking for months as investors worried about growing competition. WFM's recent earnings report confirmed their fears. The stock crashed -19% after WFM missed estimates on both the top and bottom line and confessed they were facing tougher rivals. Management then lowered their 2014 guidance.

WFM said revenues still grew +10% and their same-store comparable sales were up +4.5%. Unfortunately profits were relatively flat and margins are getting squeezed with higher cost of goods sold and rising capex.

WFM is facing competition on all sides. Sprouts Farmers Market (SFM), The Fresh Market (TFM), Kroger (KR), Wal-mart (WMT), and regional competitors like HEB and Trader Joe's are all jumping on the organic and natural food bandwagon.

- Suggested Positions -

Long Aug $35 PUT (WFM140816P35) entry $1.01

05/19/14 trade begins. WFM opens at $37.89

Entry on May 19 at $37.89
Average Daily Volume = 9.2 million
Listed on May 17, 2014



CLOSED BULLISH PLAYS

Thermo Fisher Scientific, Inc. - TMO - close: 115.93

Stop Loss: 116.75
Target(s): to be determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/22/14: TMO is still not recovering as fast as we'd like from Tuesday's reversal lower. While the story has not changed for TMO the technicals are not lining up for a bullish move. Shares may need to retest support near $110.

Tonight we are removing TMO from the newsletter. Our trade did not open.

Trade did not open.

05/22/14 removed from the newsletter, suggested trigger was $120.25

chart:

Entry on May -- at $---.--
Average Daily Volume = 2.0 million
Listed on May 19, 2014