Editor's Note:

The U.S. market ended the week on an up note. It looks like shorts were covering positions ahead of the long weekend.

We closed our PCRX trade on Friday morning.

The U.S. market will be closed on Monday for Memorial Day.


Current Portfolio:


CALL Play Updates

Biotech ETF - BBH - close: 88.64 change: -0.28

Stop Loss: 85.75
Target(s): to be determined
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
05/24/14: The rally in biotechs paused on Friday. The BBH slipped -0.3%. Shares still look poised to breakout higher. I do not see any changes from our Thursday night newsletter's new play description.

Earlier Comments:
Last year the biotech industry doubled the market's growth with +60% gains in the BBH. The rally continued into January and February with almost another +20%. Then sentiment reversed. Suddenly traders did not want to own the momentum names or the high-growth names. News articles and debates about the extremely high costs of some biotech treatments like Sovaldi helped feed the sell-off. Biotech experienced 20 percent correction (actually -22.6%) in less than two months.

Now it appears that investors are losing their fear over the growth names again. The BBH has been consolidating sideways the last several weeks. Many believe the correction in biotech is providing a great entry point. There are plenty of high-profile biotech firms with low multiples. A lot of the big names have high-quality pipelines. The group could see more M&A activity as older firms seek to buy up younger rivals.

We want to be ready to buy calls if the BBH can breakout from this consolidation phase. Currently shares of this ETF are testing resistance near $90.00 and its 50-dma and 150-dma. I am suggesting a trigger to buy calls at $90.25.

Bear in mind that biotech stocks can be volatile. The BBH does not see a lot of volume and the option spreads are wide. Add it all up and I would label this a more aggressive, high-risk/high-reward trade. Investors may want to start with small positions.

Trigger @ $90.25

- Suggested Positions -

Buy the Sep $95 call (BBH140920C90) current ask $3.50

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

chart:

Entry on May -- at $---.--
Average Daily Volume = 119 thousand
Listed on May 22, 2014


CVS Caremark Corp. - CVS - close: 77.12 change: -0.09

Stop Loss: 74.65
Target(s): to be determined
Current Option Gain/Loss: - 5.7%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/24/14: Shares of CVS briefly touched a new all-time high on Friday before paring its gains. The stock essentially closed unchanged for the session. I would still consider new bullish positions at current levels. If you're concerned about a market pullback then consider waiting for CVS to dip into the $75-76 zone as an alternative entry point.

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

chart:

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


Express Scripts Holding - ESRX - close: 70.14 change: -0.11

Stop Loss: 66.90
Target(s): to be determined
Current Option Gain/Loss: +6.9%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/24/14: After ESRX's two-month correction lower the stock's rebound continued last week. Shares are now up three weeks in a row. This past week saw ESRX break through resistance near its 200-dma and the $70 level.

Nimble traders may want to look for a dip near its 200-dma (about $69.00) as an alternative entry point to launch new positions.

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.

chart:

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


Gilead Sciences - GILD - close: 80.94 change: -1.96

Stop Loss: 77.90
Target(s): to be determined
Current Option Gain/Loss: +38.6%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/24/14: We have been warning readers that GILD could find resistance in the $84-85 zone. Shares definitely saw some profit taking on Friday ahead of the long weekend with a -2.3% pullback.

After a six-week rally GILD is probably due for a pullback. I would not be surprised to see GILD dip into the $78-80 zone before moving higher again.

I am not suggesting new positions at this time.

NOTE: since we only have June calls, readers may want to take some money off the table now.

- 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

chart:

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


LyondellBasell Industries - LYB - close: 98.78 change: +1.08

Stop Loss: 93.75
Target(s): to be determined
Current Option Gain/Loss: +25.4%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
05/24/14: LYB continues to show relative strength with a +1.1% gain on Friday and a new all-time high.

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

chart:

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


3M Company - MMM - close: 141.14 change: +0.83

Stop Loss: 138.75
Target(s): to be determined
Current Option Gain/Loss: -28.4%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/24/14: MMM is still holding support near the $140 level. If the market continues to push higher we could see MMM resume its up trend as well. Readers may want to wait for a rally past $142.00 before considering new positions.

If you do choose to open new positions I the July or October calls.

- Suggested Positions -

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

05/24/14 if you open new positions, use the July or October calls
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

chart:

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


Potasch Corp. of Saskatchewan - POT - close: 36.32 change: +0.02

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:
05/24/14: POT encountered some profit taking on Thursday but traders bought the dip near the $36.00 level on Friday. The pullback might not be over yet. Investors may want to look for a dip near the 50-dma (about 35.45) or the $35.00 level as an alternative entry point to buy calls.

- Suggested Positions -

Long Sept $35 call (POT1420i35) entry $2.65

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

chart:

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


United Parcel Service - UPS - close: 102.73 change: +1.07

Stop Loss: 97.75
Target(s): to be determined
Current Option Gain/Loss: + 81.8%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
05/24/14: The Dow Jones Transportation Average ended the week at new all-time highs. This helped give shares of UPS a boost. UPS managed a +1.0% gain on Friday and closed at new four-month highs.

The next area of resistance appears to be the $105 level.

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

chart:

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: 120.92 change: +3.35

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:
05/24/14: Some short covering ahead of the long weekend helped fuel gains in ATHN. Shares are back above their 20-dma and now above potential resistance at the $120 level. More conservative traders may want to exit immediately. We labeled this an aggressive, higher-risk trade. If this bounce continues on Tuesday we could see ATHN hit our stop loss.

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

chart:

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


Chart Industries - GTLS - close: 74.72 change: +2.69

Stop Loss: 75.55
Target(s): to be determined
Current Option Gain/Loss: - 62.2%
Time Frame: 4 to 6 weeks
New Positions: see below

Comments:
05/24/14: GTLS was another big performer on Friday with a +3.7% bounce. The stock is testing resistance near a trend line on its daily chart (near its 40-dma).

The long-term trend is down but that doesn't mean GTLS can't see a short-term rebound. Currently our stop loss is at $75.55. More aggressive traders may want to move their stop above the 50-dma (currently at 76.12).

I am not suggesting new positions at this time.

- 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

chart:

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


Lumber Liquidators - LL - close: 81.05 change: +0.54

Stop Loss: 84.05
Target(s): to be determined
Current Option Gain/Loss: -24.4%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
05/24/14: LL has spent the majority of the last three days inside the $79.00-82.00 zone. Shares still look poised for a breakdown.

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

chart:

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


Whole Foods Market, Inc. - WFM - close: 37.78

Stop Loss: 40.25
Target(s): to be determined
Current Option Gain/Loss: - 7.9%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/24/14: Shares of WFM's smaller rival TFM gapped open higher on Friday morning in reaction to its earnings report. WFM also gapped on TFM's news but the rally faded for TM while WFM slowly drifted higher.

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

chart:

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



CLOSED BULLISH PLAYS

Pacira Pharmaceuticals - PCRX - close: 76.22 change: +1.47

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:
05/24/14: We were growing concerned with PCRX's performance midweek and decided in the Thursday newsletter to exit positions on Friday morning.

The stock opened at $74.70 before outperforming the market with a +1.9% gain.

- Suggested Positions -

Aug $80 call (PCRX1416H80) entry $7.00 exit $4.80* (-31.4%)

05/23/14 planned exit
*option exit price is an estimate since the option did not trade at the time our play was closed.
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

chart:

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