Option Investor

Daily Newsletter, Monday, 3/30/2015

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

The Bounce Is Back

by Thomas Hughes

Click here to email Thomas Hughes
The market bounced back today on dovish, or hawkish, statements from Fed Chair Yellen.


Friday's comments from Fed Chair Yellen reassured the market that rate hikes were on the way, but that the economy was still historically weak. Depending on how you look at it her statements are either dovish or hawkish. What this means exactly in terms of rate hikes is elusive but does not move expectations from the June/September period. It does reaffirm the idea that the pace of rate hikes will be very very slow.

The news helped to lift indices around the world and sent those in Asia and the EU to new highs. Adding support to the market are comments from a People's Bank of China official which have raised the expectations of Chinese QE to new highs. European markets were tempered by the ongoing issues in Greece but nonetheless were able to reach new highs and closed at the highest levels of the day.

Market Statistics

Futures trading indicated a higher open from the start of the electronic session. The S&P was indicated higher by about 0.35% with the indices in similar position. Futures trading remained strong throughout the early pre-market session and were supported by today's economic data. Business confidence remains high and there were surprise gains in personal income and pending home sales.

The bulls took charge as soon as the opening bell sounded. They took the indices more than 1% higher and hit the early peak within the first 30 minutes of trading. At that point the indices pulled back very slightly from the high to trade sideways until noon when buying activity pushed them up to set another intraday high and another until the closing bell. By the end of the day the indices had moved an average 1.20% higher and closed near the highs of the day.

Economic Calendar

The Economy

This is a big week for economic data and today's events are positive. First up is Moody's Survey of Business Confidence. The index retreated by -1.3 points from last weeks all time-high but remains above the previous all-time high. Mark Zandi, Moody's Chief Economist, had this to say.

“Business confidence fell off a bit last week from the record high set the week before. Despite the decline, U.S. sentiment remain notably robust. Businesses remain upbeat about investment and hiring, and demand for office space is strong. Credit is widely available and pricing is firm, despite heightened deflation concerns in much of the developed world.”

Pending Home Sales posted a surprise jump of 3.1% in February, versus an expected flat to negative number. The is the highest level of expected sales since June of 2013 and the first glimmers of the expected uptick in the housing market expected for this spring. The index is now at 106.9, the 6th month of increasing sales and the 10th month of readings above 100, 100 being an average amount of sales traffic. On a year over year basis pending sales are up 12% from this same time last year. Low inventory remains a problem and a factor I think will lead to increased building activity, higher prices and perhaps new sellers entering the market.

Lawrence Yun, NAR chief economist, says “Pending sales showed solid gains last month, driven by a steadily-improving labor market, mortgage rates hovering around 4 percent and the likelihood of more renters looking to hedge against increasing rents....These factors bode well for the prospect of an uptick in sales in coming months. However, the underlying obstacle – especially for first-time buyers – continues to be the depressed level of homes available for sale.” Personal Income also posted a surprising gain. Income rose by 0.4% versus the expected 0.3% but spending only rose by 0.1% which was in line with expectations. The previous months income was revised up to 0.4% as well. The PCE deflator came in at 0.2% for the month and 0.3% year over year. The differential between income and spending can be found in the level of savings, which is at a 2 year high.

There is a lot more data to come out this week. Auto/Truck sales, ISM, construction spending, factory orders and my favorite, the jobs bundle including ADP, Challenger, claims, NFP, unemployment, workweek and earnings. This week is shortened because of the Easter holiday but the NFP data will still be released on Friday. Everything else should be on schedule as well.

According to data from Factset earnings expectations for the first quarter is -4.6%. This is up 0.2% from the -4.8% reported last week. The decline is still being led by the energy sector but all ten S&P sectors have lower expectations now than they did at the start of the quarter. The number of companies with negative guidance remains at 85. So far there have been 16 reports this season, 10 beat on the top and 14 beat on the bottom line.

Looking at expectations ex-energy the projected blended growth rate increased by 0.2% to 1.25%, not huge but a sign that earnings may not be as bad as feared and an example of the importance of looking at the earnings pictures with and without the energy sector. Looking at expectations for the year all-index blended earnings are projected to grow by 2.5% despite a -50% drop in energy sector earnings. Pulling energy out of this projection puts earnings growth in the 7% range for the year, above average. Also, the forward P/E has begun to creep up again indicative of rising expectations of earnings growth relative to the lows set over the past two months.

The Oil Index

Oil prices declined by more than -1.5% today on scuttlebutt Iran could be on the brink of reaching a nuclear agreement with the west. Details are sketchy at best but enough to keep WTI below $48 and Brent below $56 for most of the day. A late day pop driven on rumor put them back near break even. Meanwhile, production in Libya continues to rise but is still only about 50% of capacity and fighting in Yemen drags on.

The Oil Index moved up in today's session, counter to the underlying commodity. The energy sector was one of today's biggest gainers, perhaps on the idea that oil is at or near its bottom. The index gained over 1.75% and regained the upper side of the 30 day moving average but remains weak. Prices have been trending sideways for over a week now and appear to be capped by a Fibonacci Retracement, the 38.2% level of 2009-2014 bull market in oil. The indicators are bullish, but also showing resistance at or just above the current level. MACD is very weak and holding steady just above the zero line while on stochastic %K is horizontal at the upper signal line.

The long term trend is up and the index is bouncing of the trend line but the move is weak and needs confirmation. A break above the retracement, near 1,350, would be bullish but still face resistance near 1,400. Support is currently at the short term moving average, near 1,325, with 1,200 a good target for long term support. This one appears to be making a long term trend bounce but one that may take some more time to develop. Oil prices will likely remain volatile and could lead to another test of the trend line.

The Gold Index

Gold prices retreated over the weekend on Janet Yellen's Friday comments, falling -1.25% and trading near $1185 and possible support. The message, while I'm sure intended to help clarify the rate hike situation, only served to stir speculation on a subject that has been beaten to death for many quarters; when will the first rate hike come, how big will it be and when will the next one be? In any even the near term reaction is a rise in dollar value and a drop in gold prices that could result in another buying opportunity.

The gold miners fell as well, the Gold Miners ETF GDX losing nearly -2%. Today's action opened just above my rising support line near $18.50 and then traded in a tight range around there. The ETF appears to be bouncing off of long term support but the test of that support may not be over. The indicators are bullish now but retreating, in line with the current test of the rising support line, and could easily lead to further downside, particularly if gold prices move lower. If the ETF moves lower it could go as low as $17.50, if it moves higher as high as $20. In either event my long term outlook on this sector remains bullish.

In The News, Story Stocks and Earnings

The Dollar Index got a boost from Janet Yellen's comments and could move up to test the recently set highs. Today the index move up from the short term 30 day moving average and set a new 6 day high. The indicators are still bearish but MACD is retreating from its peak and %K is moving higher so it looks like this bounce could continue to the next likely resistance which happens to be the all time high.

The home builders got a boost from today's housing data. Not only does the data show appetite for buying but supports the need for inventory, which could be new houses just as easily as old. Today the XHB Home Builders ETF gained nearly 2% in a move that brings it just shy of the current 8.5 year high. Both of the indicators are confirming the move providing it can break above $37 which could carry it as high as $39 in the near to short term. If a break does not occur support is between $35 and $36, near the bottom of the 2 month trading range.

Earnings news was quiet today but a name I have traded in the past popped up. Cal-Maine, one of the nations largest shippers of shell and value added eggs, reported earnings in line with expectations on an 11% increase in revenue. The gains were made on declining costs and other favorable conditions. The company expects to see strong volume continue into 2015 and is moving ahead with expansion projects throughout the southeast. The stock moved higher in the pre-market session but sold off during the day closing with a loss near -1.75%. Today's move confirms resistance just below $40 and could keep it range bound into the near term.

Elon Musk announced, through Twitter, that Tesla would be announcing a new product line next week. The only hint is that its not a car. Could be a scooter, moped or bike? Maybe a truck? A personal drone? In any event the stock shot up like it always does when he Tweets, gaining 1.12%.

The Indices

The indices surged at the open and kept moving higher all day. Driving the move was Yellen-speak as well as positive news from China and the EU, positive economic data and expectations of more good data later this week.

Today's move was led by the Dow Jones Industrial Average with a gain of 1.49%. The blue chips created a long white candle that carried it above the short term moving average and fell just short of the 18,000 mark. Today's action moved above 18K for a time but was not able to hold the level. The indicators are mixed but basically neutral and in line with an index moving within a range. MACD is bearish but retreating from a weak peak, consistent with a test of support within a range or uptrend, stochastic is flat in the middle of the range with %K moving higher.

It looks like the index is moving toward the top of the range and the current all time high. This could result in a trend following signal and new all time highs but not without a break above resistance. Until then upside potential is very limited. Resistance is currently 18,000 with additional resistance just above at the current all time high.

The S&P 500 made the next largest gain today, 1.22%. The broad market made a strong move higher with all ten of the component sectors moving into the green. Today's action moved up from the top of the January range, crossed above the 30 day moving average and was then halted by the December 2014 all time high. The indicators are mixed as with the Dow and could be setting up the strong trend following signal but requires a break above resistance, and the signal itself which is yet to appear; MACD is still on the bear side of zero but approaching a bullish crossover while stochastic is flat with %K moving up towards a bullish crossover. Anticipation for data and the data itself may take us up to the all time high but I think it will take earnings to break us above it.

The NASDAQ Composite is second runner up in today's race. The tech heavy index gained 1.15% in a move began above the short term moving average and carried it higher from there. The indicators are set up the same as with the SPX and DJI, mixed but consistent with an impending trend following signal. Like the others it too has resistance just above the current level in the form of the long term high, if broken the index could move as high as 5,250 in the near to short term. If not a move back toward support and the long term trend line near 4,750 could be expected.

The Dow Jones Transportation Average made the smallest move today, only 1.01%. Today's action was a move up from the bottom of the 5 month trading range. The index has been trapped in this range since the fall in oil prices began to impact earnings outlook for the rail carriers and others dependent on energy for income. It could remain so until earnings growth returns, whether from oil or other sources. The indicators are consistent with range bound trading and an index that could be moving toward the top of the range. Stochastic is moving higher and already high in the range which could indicate some underlying strength but that has yet to be seen. Current target is the short term moving average near 8,000 and then the top of the range near 9,250.

The indices bounced back today but I am a little leery of how high they will go. Economic trends are good and the data released today supports the idea of a spring rebound in activity but there is still earnings season to consider. I am not worried about any single piece of data scheduled for release this week and am expecting to see trends upheld. What I am worried about is the expected decline in earnings for the season that starts just next Wednesday. Even with my theory of earnings ex-energy being more important, the trend of blended growth being 2-4% above estimates going into the quarter and the high likelihood that expectations are set too low a quarter of negative earnings growth could keep the market from rallying. At least for a few weeks to a month or more while the market digests the earnings news and assesses the outlook for the rest of the year.

I remain bullish on the economy and the market. I think the S&P 500 could hit its all time high, maybe this week, probably driven on economic data and end of quarter/start of quarter portfolio shuffling. In between all of this market activity are geopolitical events ranging from Saudi Arabia and Iran fighting in Yemen to Iran's nuclear talks with the west and on to Greece/The Grexit and China's talk of QE that could all move the market. What happens then is for another wrap.

Until then, remember the trend!

Thomas Hughes

New Option Plays

Strongest Sales Growth In Its Category

by James Brown

Click here to email James Brown


Monster Beverage - MNST - close: 140.44 change: +2.45

Stop Loss: 136.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on March -- at $---.--
Listed on March 30, 2015
Time Frame: Exit prior to earnings in May
New Positions: Yes, see below

Company Description

Why We Like It:
A recent report by Beverage Digest noted that the sale of carbonated beverages (a.k.a. sodas) has fallen for the tenth year in a row. Consumer spending on traditional soft drinks has plunged to the lowest pace since 1986. One area of the beverage market that is bucking this trend is energy drinks and alternative drinks. Euromonitor said that the energy drink market has soared from $3.8 billion in 1999 to $27.5 billion in 2014. The divergence between traditional sodas and energy drinks is significant. Beverage Marketing Corp. said the sale of energy drinks in the U.S. rose +6.3% in the first six months of 2014 while normal drink sales declined -1%.

One company benefiting from this divergence is MNST. If you're not familiar with the company here's a brief description: "Based in Corona, California, Monster Beverage Corporation is a holding company and conducts no operating business except through its consolidated subsidiaries. The Company's subsidiaries market and distribute energy drinks and alternative beverages including Monster Energy(R) energy drinks, Monster Energy Extra Strength Nitrous Technology(R) energy drinks, Java Monster(R) non-carbonated coffee + energy drinks, M3(R) Monster Energy(R) Super Concentrate energy drinks, Monster Rehab(R) non-carbonated energy drinks with electrolytes, Muscle Monster(R) Energy Shakes, Ubermonster(R) energy drinks, and Peace Tea(R) iced teas, as well as Hansen's(R) natural sodas, apple juice and juice blends, multi-vitamin juices, Junior Juice(R) beverages, Blue Sky(R) beverages, Hubert's(R) Lemonades and PRE(R) Probiotic drinks."

The long-term up trend in MNST's stock accelerated last year. That's because back in August 2014 MNST announced a partnership deal with beverage titan Coca-Cola (KO). MNST's management commented on the deal in their latest earnings report. Here's an excerpt:

In August 2014, Monster Beverage and The Coca-Cola Company entered into definitive agreements for a long-term strategic partnership to accelerate growth for both companies in the global energy drink category. Under the agreements, The Coca-Cola Company will acquire an approximate 16.7 percent ownership interest in Monster (post issuance) and will transfer ownership of its worldwide energy business to Monster, which, in turn, will transfer its non-energy business to The Coca-Cola Company. Monster and The Coca-Cola Company will amend their current distribution coordination agreements to expand distribution with Coca-Cola bottlers into additional territories. Upon closing, The Coca-Cola Company will become Monster's preferred distribution partner globally, and Monster will become The Coca-Cola Company's exclusive energy play. The transaction, which is subject to customary closing conditions, is expected to close in the second quarter of 2015.
This deal with KO is a game changer and will significantly boost MNST's ability to enter international markets. There is a growing camp of speculation that believes KO may end up buying MNST outright to capture the leading player in the energy drink industry to offset declines in KO's traditional soda market.

Meanwhile MNST continues to deliver on the earnings front. The company averaged +42% earnings growth last year. MNST has the highest sales growth in the nonalcoholic beverage industry (+8% to +12%) versus the industry's -2%.

MNST's most recent report was their 2014 Q4 results on February 26th. Earnings soared +63% to $0.72 a share. Analysts were only expecting $0.58. Revenues were up +12% to $605.5 million, which was also above expectations. Their full-year 2014 gross margins improved from 52.2% to 54.4%. Wall Street is forecasting MNST to see earnings grow +21% in 2015.

The stock shot higher on its earnings report in February. Shares have been consolidating sideways the last five weeks. MNST held up pretty well during the market's recent decline. We think the stock could be forming a short-term bottom in the $134-141 range. The March 24th high was $141.28. Tonight we're suggesting a trigger to buy calls at $141.50.

Trigger @ $141.50

- Suggested Positions -

Buy the MAY $145 CALL (MNST150515C145) current ask $4.70
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

Daily Chart:

In Play Updates and Reviews

Merger Monday + Potential Chinese Stimulus = Gains

by James Brown

Click here to email James Brown

Editor's Note:

A governor with the People's Bank of China suggested their country might launch more stimulus to help prop up their economy. Chinese stocks surged to seven-year highs on this news. Meanwhile an outbreak of mergers announced on Monday morning helped fuel the market's gains.

Both CAH and NKE hit our bullish entry triggers today.

Current Portfolio:

CALL Play Updates

Cardinal Health, Inc. - CAH - close: 90.80 change: +1.05

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: -2.1%
Average Daily Volume = 1.7 million
Entry on March 30 at $90.55
Listed on March 28, 2015
Time Frame: We might exit prior to CAH earnings
(potentially April 30th)
New Positions: see below

03/30/15: Our brand new trade on CAH is open. The rebound continued on Monday with shares rising +1.1%. Our trigger to buy calls was hit at $90.55. I would still consider new positions at current levels.

Trade Description: March 28, 2015:
The big healthcare names have shown significant relative strength over the last couple of years. That momentum has carried into 2015 and shares of CAH are outperforming the broader market with a +11% gain year to date.

You might have heard about CAH recently since the company made headlines in early March. Here's a brief description of the company, "Headquartered in Dublin, Ohio, Cardinal Health, Inc. (CAH) is a $91 billion health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals, ambulatory surgery centers, clinical laboratories and physician offices focus on patient care while reducing costs, enhancing efficiency and improving quality. Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products and services to more than 100,000 locations each day and is also the industry-leading direct-to-home medical supplies distributor. The company is a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company operates the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease."

Management has been doing a good job with the earnings game. The last three quarters in a row have seen CAH beat Wall Street estimates on both the top and bottom line. Their next report should be the end of April.

On March 2, 2015 CAH made the news with their $2 billion acquisition of Cordis. Here's an except from the company's press release:

Cardinal Health today announced plans to acquire Johnson & Johnson's Cordis business, a leading global manufacturer of cardiology and endovascular devices, for $1.944 billion in cash, or approximately $1.594 billion, net of the present value of tax benefits. The acquisition is expected to be financed with a combination of $1.0 billion in new senior unsecured notes and the remainder with existing cash. The transaction is expected to close in the United States and key non-U.S. countries towards the end of calendar 2015.
CAH is forecasting this acquisition will add more than $0.20 per share to the company's 2017 earnings. They expect synergies to be more than $100 million by the end of fiscal 2018.

CAH's chairman and CEO, George Barrett, commented on the acquisition,

"We are extremely excited about the acquisition of Cordis. This is a significant step forward in our cardiovascular strategy. Cordis brings with it a long and proud legacy of cardiovascular innovation. This move highlights our commitment to address a major pain point in healthcare systems through innovative new approaches to the management of physician preference items. This acquisition follows a sequence of strategic moves for Cardinal Health in the areas of cardiology, wound management and orthopedics. We are well-positioned to help customers standardize around mature medical devices, while bringing them innovative solutions around supply chain management, inventory optimization, and work flow tools and data to support the most effective management of the patient...

With an aging population and the accompanying demand for less invasive medical treatments, health systems around the world are searching for the best way to bring quality care to their patients in the most cost-effective way. The acquisition of Cordis reinforces our strategic position to address this need and strengthens an important growth driver in the Cardinal Health portfolio."

Moody's Investors Service, a credit rating agency, commented on the deal and said it would be credit positive for CAH. Meanwhile a couple of analyst firms upgraded their price targets on CAH following the story with new targets at $105 and $107.

Technically shares of CAH have been trading in a bullish pattern of higher lows and higher highs. Investors just bought the dip at $88.00 near its trend line of support. We want to hop on board and tonight we are suggesting a trigger to buy calls at $90.55.

- Suggested Positions -

Long MAY $90 CALL (CAH150515C90) entry $2.86

03/30/15 triggered @ 90.55
Option Format: symbol-year-month-day-call-strike

iShares Russell 2000 ETF - IWM - close: 124.77 change: +1.67

Stop Loss: 119.65
Target(s): To Be Determined
Current Option Gain/Loss: +33.5%
Average Daily Volume = 32.7 million
Entry on March 27 at $123.05
Listed on March 26, 2015
Time Frame: Exit prior to May option expiration
New Positions: see below

03/30/15: Small cap stocks displayed relative strength today. The IWM rallied +1.35% and is now testing potential round-number resistance at the $125.00 level.

Trade Description: March 26, 2015:
The IWM is the exchange traded fund (ETF) that mimics the small cap Russell 2000 index ($RUT). Last year we saw the Russell 2000 underperform its large cap rivals. The S&P 500 delivered a +11.5% gain in 2014 while the $RUT only rose +3.6%. The situation has changed this year. As of last week's high the $RUT was up +5.3% compared to a +2.3% gain in the S&P 500.

Investors have been drawn to small cap companies because they will endure the impact of a strong dollar better than the large caps. Many of the large cap S&P 500 companies are big multi-national firms. Almost 50% of revenues for S&P 500 components are overseas. Yet only 20% of revenues for Russell 2000 companies are outside the U.S. At the same time the U.S. economy, while growing slowly, is still growing faster than Europe.

Technically the IWM was holding up pretty well until Wednesday's market-wide plunge. Traders bought the dip today near its trend of higher lows. The point & figure chart for the IWM is still bullish and forecasting a long-term target of $154.00. We think stocks could see a bounce soon and the IWM could be a great way to play it. Tonight we are suggesting a trigger to buy calls at $123.05. We'll start this trade with a stop at $119.65.

- Suggested Positions -

Long MAY $125 CALL (IWM150515C125) entry $1.94

03/27/15 triggered @ 123.05
Option Format: symbol-year-month-day-call-strike

Jack in the Box, Inc. - JACK - close: 97.04 change: +0.73

Stop Loss: 93.85
Target(s): To Be Determined
Current Option Gain/Loss: -5.9%
Average Daily Volume = 616 thousand
Entry on March 27 at $96.25
Listed on March 24, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

03/30/15: JACK's performance on Monday was a little disappointing. The S&P 500 and the NADSAQ were both up more than +1.1% while JACK only gained +0.75%. Traders might want to wait for a rally past $98.00 before initiating new positions.

Trade Description: March 24, 2015:
It's a burger-eat-burger world out there in the fast-food business. Jack in the Box is small fries compared to its larger rivals like McDonalds (36,258 locations) and Wendy's (6,515 locations). Let's not forget heavy weights like Taco Bell, Burger King, Subway, Dairy Queen, and a handful of pizza chains. JACK only has about 2,200 restaurants but it also has a secret weapon and that is the Qdoba Mexican Grill restaurant with about 600 locations. Chipotle Mexican Grill has almost 1,800 locations.

Some of that intense competition being felt by McDonalds and Chipotle Mexican Grill is coming from Jack in the Box and its Qdoba brand, which is growing sharply. A majority of their Qdoba franchisees own multiple stores with 10, 20 even 40 stores common. Enterprising business owners don't open additional stores if the original stores are not working. To have so many owners with high numbers of stores suggests the franchise is consistently profitable.

To be profitable they need solid customer traffic, good food and decent margins. Shares of JACK have been one of the best performers on the S&P over the last year because the company has been posting solid earnings and growth.

With analysts cutting earnings estimates for McDonalds and Chipotle because of competition in the sector it makes sense to look at what has happened at JACK. Over the last quarter and the last year not a single analyst has lowered their earnings estimates for JACK. According to Zacks there has been a noticeable trend of raising estimates. JACK is expected to grow +16% to +20% this year and in 2016. JACK has beaten earnings by an average of 6% over the last four quarters.

Because of the drop in gasoline prices consumers have more money in their pocket. Some of that money is going to end up in the cash registers at these fast food outlets. Customers are also trending towards healthier foods and away from the mass produced burgers and fries at McDonalds. Did you know there are 19 ingredients in McDonalds fries? Surely you didn't think they were just potatoes and grease? Restaurants like JACK and Chipotle are capitalizing on the healthy food craze. JACK store sales rose an average of 5.7% over the last three quarters but Qdoba sales rose +13% for the year and +7.7% in Q4. Zacks rates JACK as a strong buy.

The company plans to open 15 new Jack in the Box stores in 2015. They're also cashing in on Qdoba's success and planning to open 50 to 60 new Qdoba locations. That compares to just 12 new Jacks and 38 new Qdobas in 2014.

It's also worth noting that JACK has an active share buyback program and they reduced the share count by 10% over the last four quarters. Earnings growth rose +20% in Q3 after three years of consecutive earnings growth of more than 30%.

JACK's most recent earnings report was February 17th, when they reported their 2015 Q1 results. Analysts were expecting a profit of $0.87 a share on revenues of $461.2 million. JACK delivered earnings of $0.93 a share. That's a +24% improvement from a year ago. Revenues were up +4.1% to $468.6 million, above estimates. Their operating margins improved 1% to 19.3%.

Management expects same-store sales at Jack in the Box to surge from +0.9% a year ago to +5% to +7% in Q2. Qdoba same-store sales are forecasted to be in the +7% to +9% range. The company raised full-year 2015 guidance to $2.85-2.97 a share compared to Wall Street estimates of $2.84.

Shares of JACK surged on the earnings news and bullish guidance. Since the report that has been almost no profit taking. Now, after more than four weeks of consolidation, the stock looks poised to breakout past major, psychological resistance at the $100.00 mark. Tonight we're suggesting a trigger to buy calls at $100.25.

- Suggested Positions -

Long JUN $100 CALL (JACK150619C100) entry $3.40

03/27/15 triggered @ 96.25
03/26/15 strategy update: Move the entry trigger from $100.25 to $96.25, move the stop loss from $95.75 to $93.85
We will adjust the option strike to the 2015 June $100 call
Option Format: symbol-year-month-day-call-strike

Lennox International - LII - close: 111.37 change: +0.85

Stop Loss: 106.75
Target(s): To Be Determined
Current Option Gain/Loss: -5.9%
Average Daily Volume = 417 thousand
Entry on March 23 at $110.96
Listed on March 19, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

03/30/15: LII has broken out to new highs with today's gain. Sadly our call option is stubbornly still in negative territory but it's improving. Traders might want to consider buying calls if LII fills the gap with a dip near $110.60.

Trade Description: March 19, 2015:
LII has been in business for over one hundred years. Lennox Intl. is part of the industrial goods sector. They offer residential cooling and heating products as well as commercial cooling and heating equipment. They are considered a global leader in the heating, air conditioning, and refrigeration markets. The residential business generates just over half of their annual sales.

The last couple of quarters have seen steady growth for LII. You can see the big gap higher in the stock price back in October 2014. That was a reaction to its Q3 earnings results. Their most recent report was February 2nd, 2015 where LII delivered its Q4 results.

Analysts were expecting a profit of $0.99 a share on revenues of $790 million. LII reported earnings per shares grew +32% to $1.02. Revenues were up +8.4% to $812.8 million, led by +13% sales growth in their residential segment.

Chairman and CEO Todd Bluedorn commented on his company's results,

"2014 was a year of strong growth and record profitability for Lennox International, led by 10% revenue growth at constant currency and 31% profit growth in our Residential business. In the fourth quarter, the company's momentum continued, with revenue up 10% at constant currency and total segment profit up 24%. Growth in the quarter continued to be led by Residential, with revenue up 14% at constant currency and profit up 57% from the prior-year quarter. In Commercial, revenue rose 8% at constant currency. Commercial profit was essentially flat with the prior-year quarter on headwinds from customer mix, foreign exchange, and investments related to our entrance in the VRF market. In Refrigeration, revenue was up 8% at constant currency. As expected, Refrigeration profit was down from the prior-year quarter by 45% due to the repeal of the carbon tax in Australia, North America product mix, and a negative impact from foreign exchange. We continue to expect Refrigeration revenue, margin and profit to be up in 2015 on continued growth in North America and improvement in Australia in the second half of the year. For the company overall in 2015, we expect another strong year of growth and record profitability, with strong cash generation for investments to drive growth as well as to return cash to shareholders."
Last year LII earnings rose more than +20% to $4.23 a share. They are forecasting $5.20-5.60 per shares in 2015 (+22.9% to +32.3%) versus Wall Street estimates of $5.42 per share.

Shares have been a steady performer the last few months with a bullish trend of higher lows and higher highs. The point & figure chart is bullish with a $140 target. Today shares of LII are hovering just below round-number resistance at $110. We are suggesting a trigger to buy calls at $110.25.

- Suggested Positions -

Long JUN $115 CALL (LII150619C115) entry $2.55

03/23/15 triggered on gap open at $110.96, suggested entry was $110.25
Option Format: symbol-year-month-day-call-strike

Nike, Inc. - NKE - close: 100.89 change: +1.01

Stop Loss: 97.40
Target(s): To Be Determined
Current Option Gain/Loss: -11.9%
Average Daily Volume = 3.6 million
Entry on March 30 at $101.23
Listed on March 26, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

03/30/15: Our new trade on NKE is open. The stock gapped open higher thanks to an upgrade from "neutral" to an "outperform" rating by an RW Baird analyst. They also raised their price target from $102 to $115. Healthy consumer spending with a stronger shift toward active lifestyles should benefit NKE.

Our plan was to buy calls at $100.25 and the gap open above that level immediately triggered our play. I would still consider new positions now although odds are good NKE will retest the $100 area so you may want to wait and buy a dip there.

Trade Description: March 26, 2015:
In the athletic footwear and apparel industry Nike is the 800-pound gorilla with annual sales of more than $30 billion. According to the company, "NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories, and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories."

The company's most recent earnings report was March 19th, after the closing bell. NKE reported its Q3 2015 results. Analysts were expecting a profit of $0.84 a share on revenues of $7.62 billion. NKE delivered a profit of +0.89 a share or +16% from a year ago. Revenues were up +7% to $7.46 billion. However, if you back out the currency headwinds, their revenues were up +13%.

The company reported sales growth across every geographical region. Their gross margins improved 140 basis points to 45.9 percent. Management said their online sales are soaring. Nike.com saw its revenues jump +42% last quarter.

The current quarter is NKE's 2015 Q4 (March-July) and the company said orders for Q4 in North America are up +15%, which is above analysts' estimates of +11.6%. Orders from China are up +11%, also above estimates. In the company's earnings release NKE said, "As of the end of the quarter, worldwide futures orders for NIKE Brand athletic footwear and apparel scheduled for delivery from March 2015 through July 2015 were 2 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 11 percent."

One big concern is the U.S. dollar. Sales in Europe were up +21% but when you factor in euro weakness and dollar strength that sales growth drops to +10%. The strength in the U.S. dollar is a major headwind but after NKE's Q3 results Wall Street feels that the company is managing the currency impact very well. The company is forecasting low double digit sales growth in the current quarter.

Wall Street applauded the results and shares of NKE gapped open higher on March 20th to hit all-time highs. There was a parade of bullish analyst comments. Several firms raised their price target on NKE. Here's a brief list of new price target: $106, $110, $115, $116.00. The point & figure chart is more optimistic as it is forecasting at $125.00 target.

Shares of NKE have seen some profit taking, which isn't a surprise considering the market's four-day decline. However, now that NKE has filled the gap, traders bought the dip. This could be an entry point. We are suggesting a trigger to buy calls at $100.25.

- Suggested Positions -

Long MAY $100 CALL (NKE150515C100) entry $3.35

03/30/15 triggered on gap open at $101.23, suggested entry was $100.25
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Alkermes plc - ALKS - close: 62.52 change: -0.81

Stop Loss: 67.65
Target(s): To Be Determined
Current Option Gain/Loss: +25.6%
Average Daily Volume = 1.26 million
Entry on March 25 at $64.90
Listed on March 23, 2015
Time Frame: exit PRIOR to May option expiration
New Positions: see below

03/30/15: ALKS underperformed the market today with a -1.27% decline. Shares tried to rally this morning but failed near the $64.00 level. This is good news for bears. I'm not suggesting new positions at this time.

Trade Description: March 23, 2015:
Biotech stocks have been some of the market's best performers, especially off the October 2014 lows. The group may have gotten ahead of itself with significant gains in recent weeks. The last couple of days the biotech ETFs are flashing what might signal a potential top. Meanwhile one stock that has been underperforming its peers is ALKS.

You might not be familiar with ALKS. The company is part of the healthcare sector. According to their marketing materials, "Alkermes plc is a fully integrated, global biopharmaceutical company developing innovative medicines for the treatment of central nervous system (CNS) diseases. The company has a diversified commercial product portfolio and a substantial clinical pipeline of product candidates for chronic diseases that include schizophrenia, depression, addiction and multiple sclerosis. Headquartered in Dublin, Ireland, Alkermes plc has an R&D center in Waltham, Massachusetts; a research and manufacturing facility in Athlone, Ireland; and manufacturing facilities in Gainesville, Georgia and Wilmington, Ohio."

The company's most recent earnings report was February 24th. They beat expectations on both the top and bottom line. Unfortunate for shareholders management lowered their 2015 revenue guidance. Since its report shares have broken down. The stock has seen a couple of analyst downgrades (or lowered price targets). The point & figure chart has turned bearish and is currently forecasting at $54.00 target.

You can see the gap down on the earnings news. ALKS struggled to rebound and when it did traders immediately sold the stock at resistance. Now it's on the verge of breaking down bellow support near $65.00. The $60.00 level is potential support but there is a chance shares drop toward their 200-dma closer to $55. Tonight we are suggesting a trigger to buy puts at $64.90.

I want to remind readers that biotech stocks can be volatile. We should consider this a more aggressive, higher-risk trade.

- Suggested Positions -

Long MAY $60 PUT (ALKS150515P60) entry $2.15

03/28/15 new stop @ 67.65
03/25/15 triggered @ 64.90
Option Format: symbol-year-month-day-call-strike