Editor's Note:

Equity bulls applauded the ECB's new monetary easing policies. The U.S. market responded with widespread gains.

We are setting some exit targets on GILD and MMM.

Bearish play WFM hit our stop loss.


Current Portfolio:


CALL Play Updates

The Boeing Company - BA - close: 136.82 change: +1.49

Stop Loss: 129.90
Target(s): To Be Determined
Current Option Gain/Loss: +16.2%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: BA announced it had received another big order for new plays. Meanwhile the market's widespread rally helped lift shares to new four-month highs.

NOTE: More conservative investors might want to wait for BA to close above $136.50 as an alternative entry point since the top of the January 2014 gap down could be resistance (near $136.00-136.50).

Earlier Comments:
BA is in the industrial goods sector. The company is a major manufacturer for aerospace, aviation, and a defense contractor. The company last reported earnings on April 23rd and held an analyst day in mid May. Earnings results were strong. Wall Street expected a profit of $1.56 per share on revenues of $20.21 billion. BA delivered $1.76 per share with revenues rising to $20.46 billion for the quarter.

BA said their total company backlog had ended the first quarter at $440 billion. That's up from $390 billion a year ago. About $374 billion is for commercial airplanes and the rest is defense and space related. This represents about 5,100 aircraft orders and several years worth of production. BA recently reaffirmed their 2014 guidance and their airplane delivery scheduled.

Analysts have been positive and raising their price targets and earnings estimates thanks to BA's strong Q1 results, their improving margins, and BA's stock buyback program. Margins are a big deal. BA has been slowly growing its margins over the last couple of years and suggested they will continue to see margin improvement in 2014.

There has been some concern that the U.S. defense budget might be cut again and that could impact BA's defense sales. Yet the New York Times recently reported that BA is close to signing another multi-billion deal with the U.S. Navy for 47 more fighter jets. This deal is expected to close over the summer.

BA has also seen strong growth overseas with international sales accounting for 30% of its backlog. China is expected to grow into the largest aircraft market by 2032. BA is strengthening its position in China with another big sale of fifty 737 jets to a new Chinese budget airline. The retail price on this deal is estimated to be in the $3.8 to $5.5 billion. BA's China president said the company will deliver 140 aircraft to China this year following 143 deliveries in 2013.

Asia will also be a growing market for BA's defense and security business. A recent Bloomberg article mentions how territorial disputes in Asia are getting worse and there will be rising demand for maritime and aerial surveillance systems. BA's defense business chief believes aerial surveillance equipment and machines will continue to grow steadily for the "foreseeable future."

Technically shares of BA are on the up swing after spending more than three months consolidating in the $120-132 area. The recent strength has pushed BA through resistance and the stock closed at new four-month highs.

The point & figure chart is bullish and forecasting at $160 target. I do expect BA to see some resistance at its 2014 high near $145.00.

- Suggested Positions -

Long Aug $140 call (BA140816C140) entry $2.25*

06/02/14: Triggered @ 135.55
*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

Entry on June 02 at $135.55
Average Daily Volume = 2.95 million
Listed on May 31, 2014


Biotech ETF - BBH - close: 93.35 chang6: +0.51

Stop Loss: 85.75
Target(s): to be determined
Current Option Gain/Loss: +15.4%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: Biotech stocks continued their rally on Thursday and the BBH added +0.5%. This ETF is now testing technical resistance at its simple 100-dma.

Traders may want to start raising their stop loss!

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.

- Suggested Positions -

Long Sep $95 call (BBH140920C95) entry $3.55*

05/27/14 triggered @ 90.25
*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

Entry on May 27 at $90.25
Average Daily Volume = 119 thousand
Listed on May 22, 2014


Capital One Financial - COF - close: 79.82 change: +0.64

Stop Loss: 74.95
Target(s): To Be Determined
Current Option Gain/Loss: +16.0%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: COF rallied straight to round-number resistance at $80.00 and stalled. I am not suggesting new positions at the moment.

Earlier Comments:
COF is in the financial sector. The company provides financial services and products in the United States, United Kingdom and Canada. They're probably best known for the Capital One credit cards.

The financial sector took a leadership role in today's widespread market rally. The group has been lagging the big cap indices the last few weeks. If financials resume their up trend it's going to be a rising tide that helps lift shares of COF to new highs.

Financials should also benefit from the big picture view that interest rates will rise. Some of the federal reserve governors have been hinting that the Fed may have to raise rates sooner than expected. If rates do start rising then investors could start buying financials ahead of this trend.

Credit card companies are also showing strength in their loan quality. COF said their charge off rates have been dropping (losses from unpaid loans).

Technically shares of COF have a long-term bullish trend of higher lows and it's about to breakout past resistance and hit new multi-year highs. The point & figure chart is already bullish and suggesting an $83 target.

- Suggested Positions -

Long Sep $80 call (COF140920C80) entry $2.30*

05/28/14 triggered @ 78.75
*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

Entry on May 28 at $78.75
Average Daily Volume = 3.0 million
Listed on May 27, 2014


CVS Caremark Corp. - CVS - close: 78.62 change: +0.46

Stop Loss: 74.65
Target(s): to be determined
Current Option Gain/Loss: +31.7%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: Shares of CVS rebounded off its 10-dma again this morning and closed at new all-time highs. Shares are nearing what could be psychological, round-number resistance at the $80.00 mark.

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

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


Express Scripts Holding - ESRX - close: 71.12 change: +0.63

Stop Loss: 66.90
Target(s): to be determined
Current Option Gain/Loss: +24.4%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: Traders are still in a buy-the-dip mood and ESRX rebounded from another test of the $70.00 level. Shares closed right on technical resistance at their 50-dma.

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*

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.

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

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


Facebook, Inc. - FB - close: 63.19 change: -0.15

Stop Loss: 59.45
Target(s): To Be Determined
Current Option Gain/Loss: -16.0%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: FB underperformed the market's widespread rally on Thursday. Shares are still struggling with resistance near $64.00. Today's high was $64.36. Investors may want to look for a rally past $64.50 before initiating new positions.

Earlier Comments:
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.

Update on the P&F chart: The recent rise above $64.00 has created a new P&F chart buy signal with a $79.00 target.

- Suggested Positions -

Long Sept $70 call (FB140920C70) entry $3.42

05/29/14 triggered @ 64.25
Option Format: symbol-year-month-day-call-strike

Entry on May 29 at $64.25
Average Daily Volume = 62 million
Listed on May 24, 2014


Gilead Sciences - GILD - close: 82.80 change: -0.22

Stop Loss: 78.75
Target(s): GILD @ 83.95
Current Option Gain/Loss: +60.3%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
06/05/14: GILD underperformed both its peers in the biotech group and the broad market indices with a -0.2% decline. More conservative investors may want to exit now to lock in potential gains.

We are listing an exit target at $83.95. We'll also raise the stop loss to $78.75.

I am not suggesting new positions at this time.

- Suggested Positions -

Long Jun $80 call (GILD1421F80) entry $2.12

06/05/14 new stop @ 78.75, adjust exit target to $83.95
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


Hanesbrands Inc. - HBI - close: 84.73 change: -0.37

Stop Loss: 81.75
Target(s): To Be Determined
Current Option Gain/Loss: -13.2%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: HBI is still struggling with resistance near the $85.00 level. Today's high was $85.37. Yesterday's intraday high was $85.42. I am suggesting investors wait for a rise above $85.50 before initiating new positions.

Earlier Comments:
HBI is in the consumer goods sector. The company designs and manufacturers apparel. You wouldn't normally think of basic apparel maker as a momentum stock but HBI has been outperforming. Shares just ended the week at a new all-time high.

The company has delivered on its earnings results. When HBI last reported in January and April this year the company beat Wall Street's estimates both times and raised their guidance both times.

Think about that. HBI is not a retailer but their products are sold through retailers. Most of retail got hammered in the first quarter due to lousy winter weather. Yet HBI managed to beat estimates and then raised its guidance.

Jim Cramer has pointed out what many analysts are saying on the company. HBI has strong brand names like Hanes, Champion, Playtex, and Bali. HBI owns most of their supply chain, which allows them to keep and improve their strong margins. Their first quarter saw margins increase 180 points. Most of Wall Street is bullish on HBI's recent acquisition of Maidenform. HBI believes they can generate significant margin improvement in the Maidenform brand by 2016.

The Point & Figure chart for HBI is bullish with a $92 target.

- Suggested Positions -

Long Oct $90 call (HBI141018C90) entry $2.94

06/04/14 triggered @ 85.25
Option Format: symbol-year-month-day-call-strike

Entry on June 04 at $85.25
Average Daily Volume = 690 thousand
Listed on May 31, 2014


LyondellBasell Industries - LYB - close: 99.04 change: -1.09

Stop Loss: 94.75
Target(s): to be determined
Current Option Gain/Loss: +33.3%
Time Frame: 6 to 9 weeks
New Positions: see below

Comments:
06/05/14: Hmm... LYB is not looking healthy. After stalling at resistance near $100 the last few days shares underperformed the market with a -1.0% drop today. Today is the first time LYB has closed beneath its simple 10-dma in weeks. Readers may want to exit immediately!

I am not suggesting new positions.

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

- Suggested Positions -

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

06/03/14 new stop @ 94.75
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


MasterCard Inc. - MA - close: 76.84 change: +0.52

Stop Loss: 72.35
Target(s): To Be Determined
Current Option Gain/Loss: -11.9%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: MA surged midday and closed with a +0.68% gain. The stock looks poised to breakout from its current two-week consolidation phase. Traders may want to use a rally above $77.25 as a new bullish entry point.

Earlier Comments:
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. We're not setting an exit target yet but the point & figure chart is bullish with an $87 target.

- Suggested Positions -

Long Oct $80 call (MA141018C80) entry $2.85*

05/27/14 triggered @ 77.25
*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

Entry on May 27 at $77.25
Average Daily Volume = 5 million
Listed on May 24, 2014


3M Company - MMM - close: 143.71 change: +1.45

Stop Loss: 138.75
Target(s): MMM @ $144.75
Current Option Gain/Loss: +15.9%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
06/05/14: MMM bounced off short-term support near $142 and its 10-dma this morning. The stock ended the session at new all-time highs.

We have June $140 calls, which expire in just over two weeks. Because of our time frame we are adding an exit target at $144.75. If you have longer-dated options then consider aiming higher.

- Suggested Positions -

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

06/05/14 set exit target at $144.75
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

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


PPG Industries - PPG - close: 203.15 change: -0.71

Stop Loss: 192.90
Target(s): To Be Determined
Current Option Gain/Loss: + 1.3%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
06/05/14: After yesterday's rally PPG started the day with some profit taking. Before the opening bell the company announced they were buying The Homax Group, Inc., a specialty coatings supplier. Financial terms were not disclosed.

Earlier Comments:
Big cap industrial names have been leading the market higher. PPG is one of them. The company is in the basic materials sector. PPG manufacturers coatings, specialty materials, and glass products.

PPG has developed a strong trend of beating Wall Street's earnings estimates. They just did it again when they reported earnings on April 17th with EPS coming in 10 cents above estimates. Revenues were up +17% year over year to $3.64 billion. Earnings were up +33% from a year ago at $1.98 per share. The company is also seeing margin improvement.

Last month PPG's management announced a $2 billion stock buyback program and raised their dividend by +10% to $0.61 per share. PPG's CEO said that his company saw volumes improve in Europe for the first time in ten quarters. The tough winter in the U.S. did not hurt them. Thus far PPG has been able to pass along small price increases to offset rising commodity costs.

Technically the stock is in a long-term up trend. Shares have spent the last three months consolidating below the $200 level. Now the bullish pattern of higher lows is about to push PPG through major resistance near $200-201.

The Point & Figure chart is bullish and forecasting at $222.00 target.

- Suggested Positions -

Long Aug $210 call (PPG140816C210) entry $3.65*

05/30/14 triggered @ 202.00
*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

Entry on May 30 at $202.00
Average Daily Volume = 552 thousand
Listed on May 29, 2014


United Parcel Service - UPS - close: 103.62 change: +0.65

Stop Loss: 97.75
Target(s): to be determined
Current Option Gain/Loss: + 76.7%
Time Frame: 4 to 8 weeks
New Positions: see below

Comments:
06/05/14: UPS ended a two-day pullback with a +0.6% bounce but shares underperformed the transportation average. If you look at an intraday chart UPS was struggling with resistance in the $103.65 area.

There is no change from my earlier comments. Readers may want to adjust their stop loss higher.

Earlier Comments:
I am concerned that the $105 level could be resistance. More conservative traders may want to start taking profits now or closer to $105.00.

We're not setting an exit target yet but the Point & Figure chart for UPS is bullish with a $123 target (up from $114 a few weeks ago).

- Suggested Positions -

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

05/29/14 more conservative investors may want to start taking profits now or as UPS gets closer to potential resistance at the $105 level.
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

Bally Technologies - BYI - close: 57.48 change: +0.54

Stop Loss: 60.35
Target(s): To Be Determined
Current Option Gain/Loss: - 13.6%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: Widespread market gains gave shares of BYI a lift this morning. The stock bounced with a +0.9% gain but the rally stalled under short-term resistance near $58.00.

In the news BYI announced they were buying Dragonplay Ltd., a leading online social casino company.

Earlier Comments:
BYI is in the services sector. The company designs, manufactures, and sells gaming equipment (gambling type games, slot machines, etc.). After an incredible run in 2013 shares of BYI have reversed sharply and is in a bear market with a -29.9% drop from its January 2014 highs.

Looking at the earnings news you would think BYI should be doing better. They raised guidance after their Q4 report and offered bullish guidance again when they reported earnings on May 1st. Their most recent results missed Wall Street estimates by two cents with a profit of $1.10 per share but revenues came in better than expected. Revenues were up +30% thanks to its acquisition of SHLF entertainment. In spite of this news investors were not happy with the results and have continued to sell BYI.

It would appear that the game-making business is facing industry-wide headwinds. BYI is considered one of the biggest and strongest in the industry but the big names are losing market share with new comers making an already competitive business even worse. Casino operates are delaying or cutting back on upgrading new machines. Expectations on how many slot machines Vegas is going to replace in 2014 has been downgraded.

A number of analyst firms have been downgrading their price targets on BYI over the last few months. News of a new CEO came as a shock. After less than a year and a half on the job BYI announced they were replacing their CEO with its former CEO effective May 23rd. This was a surprise. As one analyst put it, "You don't change CEOs when things are going well."

FYI: The Point & Figure chart for BYI is bearish with a $50 target.

- Suggested Positions -

Long Oct $55 PUT (BYI141018P55) entry $3.30

06/03/14 triggered @ 57.25
Option Format: symbol-year-month-day-call-strike

Entry on June 03 at $57.25
Average Daily Volume = 697 thousand
Listed on June 02, 2014


Intl. Business Machines - IBM - close: 185.98 change: +1.47

Stop Loss: 187.50
Target(s): To Be Determined
Current Option Gain/Loss: -27.7%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
06/05/14: Widespread market gains are also making it tough on IBM bears. The stock bounced back toward short-term resistance near $186.00. Our stop is currently at $187.50. I am not suggesting new positions at this time.

Earlier Comments:
IBM is in the technology sector. The company has grown from a massive hardware manufacturer into a global information technology services company.

The company reported earnings on April 17th. Results were in-line with Wall Street estimates on the bottom line at $2.54 per shares. Revenues fell -3.9% and missed estimates by a wide margin. Management reaffirmed their 2014 guidance. This was the fifth quarter in a row that IBM missed analysts' revenue estimates and its eight quarter in a row of revenue declines. Shares plunged from $196 to $187 on this earnings news. Since its quarterly report IBM's stock has rallied just high enough to fill the gap and then reverse lower.

The company is currently facing a new problem and that's China pressuring local companies to stop using U.S. technology. Actually it's not a new problem. This has been trending for a couple of years and the issue was exacerbated after the Edward Snowden scandal. Now many foreign governments distrust any tech hardware from big name U.S. corporations for fear there could be U.S. spying malware on it.

This tension between China and U.S. has escalated following America's recent allegations of five Chinese military officers hacking American businesses. In response the story now is China's government is pressuring large state-run banks to stop using IBM servers and replace them with local domestic hardware. Chinese officials are arguing that using IBM machines could be a national security threat. The Chinese market accounts for about 5.5 percent of IBM's total sales.

This political pressure to stop buying U.S. technology could last a while, especially as China takes a more belligerent pose against the west and its neighbors.

Technically shares of IBM are underperforming. The stock just broke down below support near $185.00 and technical support at its simple 200-dma. There appears to be significant support near $172.00. Coincidentally the point & figure chart is bearish and forecasting a $172 target.

We're not setting a target but $175-172 is a good spot to aim. I wouldn't be surprised to see a short-term bounce at $180.

- Suggested Positions -

Long Aug $180 PUT (IBM140816P80) entry $4.50*

05/29/14 trade begins. IBM gapped higher at $183.64
*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

Entry on May 29 at $183.64
Average Daily Volume = 3.2 million
Listed on May 28, 2014


CLOSED BEARISH PLAYS

Whole Foods Market, Inc. - WFM - close: 40.08 change: +1.70

Stop Loss: 40.25
Target(s): to be determined
Current Option Gain/Loss: -40.5%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/05/14: The combination of new bullish analyst comments with a $48 price target and a broad-based market rally proved to be too much for WFM shorts. The stock surged with a +4.4% gain. The intraday high was enough to tag our stop loss at $40.25.

- Suggested Positions -

Aug $35 PUT (WFM140816P35) entry $1.01 exit $0.60* (-40.5%)

06/05/14 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
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