Option Investor

Daily Newsletter, Wednesday, 4/15/2015

Table of Contents

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

Market Wrap

Back To the Top of the Trading Range

by Keene Little

Click here to email Keene Little
The indexes have made it back up near the highs of the 2-month trading range (the RUT has done better) and it's now decision time for the market. Only slightly higher would confirm all indexes should rally higher into May but the bears have one shot to make it work here (even if only back to the bottom of the trading range).

Wednesday's Market Stats

After European markets opened our equity futures rallied in the early-morning hours and we were looking for a gap up to start the trading day. Adding to that, in what has become a familiar pattern lately, the market was hit with some buy programs at the open and the market snapped higher in the first few minutes. These buy programs are then typically followed by a reversal back down or a flat market since there's been little follow through to the buy programs. That happened again this morning but following a midday pullback the buyers came back and pushed the indexes a little higher in the afternoon. Some profit taking in the final hour knocked the indexes back down some and it could be argued the market is now ready for a larger pullback, unless of course the bulls have something else in mind.

The market rallied despite the continuing stream of bad economic news (or perhaps I should be saying "because" of the bad economic news). This morning's reports showed the Empire Manufacturing index came in at -1.2 vs. the expected 5.0. The March reading was 6.9 and there's no other way to read this number as another indication of a slowing economy and I'm surprised we're not hearing more talk about a recession (we're likely already in one but it won't be recognized until in hindsight).

Industrial production also came in worse than expected -- for March it was -0.6% vs. expectations for -0.4%. The number was slightly positive, at +0.1%, for February. Capacity utilization also dropped to 78.4% from February's 79.0% (revised up from 78.9%). All signs continue to point to an economic slowdown and possible recession but the stock market cares about only one thing -- will the Fed raise rates 1/8 or 1/4 point in June or will it be later. Pretty silly reason to rally in spite of slowing earnings and a slowing economy but as long as money is being manufactured out of thin air it apparently doesn't matter if real manufacturing is in decline. Welcome to bubbleland in search of a pin.

The Fed's Beige Book was released this afternoon but the market didn't pay any attention to it. The little selloff in the final hour could be blamed on it but in fact there was hardly any reaction at 14:00 when it was released. The economists have been wrong in their forecasts (so what else is new) and the fact that they have failed to predict the current slowdown is what prompts many to blame it on the weather, even though studies have shown weather to have very little influence, especially when the first three months of this year experienced a milder winter than last year (well, except for Boston, wink). "Weather" was mentioned 71 times, according to Bloomberg, as the reason for the underperformance of the economy.

Other negative factors included the strong dollar and the decline in oil prices. Helping the economy was residential real estate, which showed some slow improvement (except for housing starts due to that nasty "weather"). The auto industry saw some strength in the Midwest but not in the Boston, Philly, Richmond and Dallas regions because of the "weather," but don't you think that's a stretch for Dallas to use that excuse? There's been some strength in the retail sector, which is attributed to people having a little more money in their pockets after cheaper gas. The labor market has been stable if not showing modest improvement with pockets of upward wage and price pressures and if this becomes stronger it could actually be negative for the market since it would embolden the Fed to raise rates. I think there's a snowball's chance in hell they'll raise rates before 2017 but if the market thinks they'll raise rates it could put downward pressure on stock prices.

OK, on to the stock market. This week SPX has added about 4 points so far to last week's but as you can see on its weekly chart it remains inside its 2-month trading range between 2040 and 2120. The sideways consolidation looks like a bullish continuation pattern as price works its way over to the uptrend line from March 2009 - October 2011, currently near 2060. We could see one more pullback before proceeding higher and as long as it stays above 2040 it continues to look good for a rally up to the 2175 area by mid-May.

S&P 500, SPX, Weekly chart

My best guess for what's playing out since the February 25th high is a bullish sideways triangle and it would look best with one more leg down to complete the pattern (triangles typically consist of a 5-wave move, labeled a-b-c-d-e, which I show with the green labels). Bulls need to be aware of the potential for another whipsaw move that could shake them out of their positions even if the intermediate pattern remains bullish (into mid-May). The bearish possibility is for the start of a 3rd wave decline following the 3-wave move up from March 12th so keep that in mind when evaluating where you want your stop in order to protect profits in long positions. If we do get a pullback/decline it will be the form of it that will tell us whether to expect further upside (if it pulls back in a corrective pattern) or instead a strong move down (if it starts down with a stronger impulsive pattern). A rally above the February 25th high near 2120 would negate the bearish wave count and confirm new highs are coming, even if we'll first see a stronger pullback before rallying higher.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2120
- bearish below 2045

The 60-min chart shows a fractal pattern between the March 12-23 rally and the one from April 1st. It's one reason why I think we'll see another leg down inside the sideways triangle. The March 12-23 rally is a 7-wave move, which is a corrective move (double zigzag w-x-y) and now the rally from April 1st is the same pattern. Triangle patterns consist of only corrective moves up and down (overlapping highs and lows within the move) and so far that's what we have. This market could surprise to the upside but right now I think the higher-odds probability is for another leg down before starting the rally to a new high into May.

S&P 500, SPX, 60-min chart

At the beginning I mentioned the market is at a fork in the road and as Yogi Berra would tell us, we need to take it. It's decision time and if the indexes head higher from here (above SPX 2120) it would immediately turn the market more bullish but the short-term bearish setup is for a reversal back down. If it does head back down it would leave us guessing whether it will start a more significant decline or just pull back before heading higher. Until I see bearish evidence that tells me otherwise, I think the bullish sideways triangle is the governing pattern at the moment. But the NYSE tells me to be cautious about my bullish expectation, as discussed below.

I mentioned triangle patterns typically have 5 waves to complete the pattern and rising/descending wedges are essentially triangles that have the same 5-wave moves inside them. The NYSE chart below shows a possible rising wedge for the move up from last October (similar to the other indexes) and it now has the requisite 5-wave move. Today's high was a slight throw-over above the top of the rising wedge, which is the trend line along the highs from November-February, and the drop back below the line, near 11188, at the close can be considered the completion of the move and that puts it on a sell signal. What many traders are watching is the horizontal line off the highs from last July and September, just above 11000. This can be interpreted as an inverse H&S continuation pattern (with BIG upside potential). Today's break above that line has many thinking "breakout!" We now wait to see if it will be a head-fake breakout or in fact something more bullish.

NYSE Composite index, NYA, Daily chart

From a bearish perspective, the significance of the rising wedge pattern is that it could be retraced quickly, which means a trip back down to the December low at 10360 (and the 2007 high at 10387) and it could happen in less than a month. A drop below the March 26th low near 10815 would be a bearish heads up and this pattern calls into question the bullish sideways triangle setup shown on the SPX charts. At the moment it's simply another reason why bulls should protect their long positions, especially if that neckline near 11100 doesn't hold on a back-test. If there's another drop back down toward the March 26th lows we'll have an opportunity to evaluate it to help determine if something more bearish can be expected.

A chart I've shown in the past looks at price highs, in this case for NYA, vs. how much support it's getting. As you can see with the declining highs on the 10-day moving averages of new 52-week highs and advance-decline line since last November, the new price highs are occurring on the backs of fewer stocks participating in the rally. This is Not a good sign for the bulls. As we know, this condition can extend much longer than we think possible but consider it a bearish warning sign. If it breaks down we could see the air come out of this balloon very quickly.

NYA vs. 52-week highs and Advancing-Declining Issues, Daily chart

The DOW has the same setup as SPX -- it would look best with a pullback within its slightly down-sloping sideways triangle off its March 2nd high, the bottom of which will be near 17500 early next week. It left a small throw-over above its downtrend line from March 2-23 and then closed on it. If it can continue above today's high at 18160 it could lead to a rally at least up to the trend line along the highs from December-March, which will be near 18450 next week. But if we get the pullback, as depicted on its chart, it would be a good setup for a better long play (assuming the bearish warning from the NYA chart can be held off a little longer).

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,289
- bearish below 17,450

The Nasdaq continues to put pressure on the 5000 level, closing marginally above it today after not being able to hold it on Monday. In addition to the psychologically important level, it's battling its trend line along the highs from January 2004 - October 2007. The Naz will be more bullish above its March 20th high at 5042 but unless it can negate the bearish divergence on its chart it's going to be hard to trust new highs from here. A pullback to its 50-dma and uptrend line from January-March, both near 4914, would be a better setup for a long play. With resistance right here I think it actually makes for a better short play setup.

Nasdaq Composite index, COMPQ, Daily chart

Key Levels for NDX:
- bullish above 5042
- bearish below 4900

The RUT powered higher again today, leading the other indexes to the upside. But I'm thinking further upside for the RUT could be a challenge. Within a rising wedge pattern off the January lows it has now formed a smaller rising wedge for the leg up from March 26th, which internally can be considered complete at any time, including right here following the small throw-over above the top of the small wedge. If it pulls back and uses the uptrend line from January as support it would be a setup for another rally leg but at the moment, like the other indexes, the short-term pattern is looking ready for at least a larger pullback.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1258
- bearish below 1220

Treasuries are looking like they should be ready for another rally leg soon, which would mean another leg down for yields. As shown on the TYX (30-year) chart below, it's likely almost finished with a bear flag pattern that should lead to another leg down at least equal to the March 6-25 decline. That would also be a test of the January 30th low at 2.226 and a rally in bonds could be a result of rotation out of stocks and into bonds.

30-year Yield, TYX, Daily chart

Last week I mentioned the TRAN was skating on thin ice and with the warmer weather the ice is getting thinner. It did bounce off support after leaving a small throw-under finish on April 6th and last week's rally had it following through on the buy signal from that throw-under and recovery back above 8580. But it has not been able to get back above its 20-dma, which was tested again today at 8780. This follows another test of 8580 support with yesterday's low at 8585. Keeping testing that thin ice and it's going to break! Needless to say, the TRAN needs some buyers to step in and do it now.

Transportation Index, TRAN, Daily chart

Last Thursday the U.S. dollar broke out of its sideways triangle consolidation pattern off its March 13th high, as well as climbing back above its 20-dma. It has now pulled back to its 20-dma, at 98.27, and could back-test the apex of its triangle where it crosses the bottom of its up-channel for its rally from October, near 97.65. As long as it doesn't drop below that level there should be a continuation of the dollar's rally and potentially up to about 105 by mid-May where it should then be ready for a larger pullback correction.

U.S. Dollar contract, DX, Daily chart

Gold is currently doing battle between its 20-dma, which are about to cross near 1197. Closing above that level keeps it short-term bullish and we could see another leg up for a test of its 200-dma near 1232. While a rally above that level would start to look more bullish, instead of just a bounce correction as it currently appears, the larger bearish pattern still suggests another leg down once the bounce off the March 17th low completes.

Gold continuous contract, GC, Daily chart

Today's strong rally in oil (+5%) was partly a result of the low crude inventory build number this morning (+1.3M barrels vs. last week's +10.9M barrels) but it might have been good enough to complete its bounce off its March 18th low. It could be in a different pattern than the rising wedge that I've got depicted on its daily chart below but at the moment it's looking vulnerable to a reversal back down. I've been anticipating a rally up to resistance at 58.13-58.50 but a turn back down from here would leave a little throw-over above the top of its rising wedge and put it on a sell signal. It takes a rally above 59 to turn oil more bullish.

Oil continuous contract, CL, Daily chart

Tomorrow's economic reports include the unemployment claims numbers and Housing Starts and Building Permits before the opening bell. After the bell we'll get the Philly Fed, which is expected to be flat from March but the way these economic reports go we'll see if it holds up or joins the others in disappointing the economists.

Economic reports and Summary


Opex week tends to be bullish and so far the bulls haven't been disappointed. But further gains this week could be difficult if the reversal setups on multiple indexes play out. We might see the market at least hold up, if not rally, into the end of the week but the short-term bearish patterns suggest we could start a stronger pullback/decline in the coming week. The intermediate bullish patterns, such as for SPX, suggests a pullback in the next week or two before starting the next rally leg that should take us to new highs (2150-2175) in mid-May, which is when we'll face a major turn window.

The risk for bulls, if the market does start back down, is that some of the more bearish patterns, such as for the NYA, suggest we could be putting in an important top here. Instead of a pullback and then onto new highs in May we could be looking at the start of a much more serious decline. Protection of long positions seems a prudent idea here and then if we get a deeper pullback we can evaluate it for evidence that it will likely be just a pullback or instead something more bearish. If you're itching to get short, this is actually a good place to try it since the March highs, such as SPX 2120 provide a relatively tight stop. If today's high was the completion of the rally then a tighter stop is today's high.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying

New Option Plays

Correction In Progress

by James Brown

Click here to email James Brown


Orbital ATK, Inc. - OA - close: 74.57 change: -1.16

Stop Loss: 76.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = n/a
Entry on April -- at $---.--
Listed on April 15, 2015
Time Frame: 3 to 4 weeks, exit PRIOR to earnings in mid May
New Positions: Yes, see below

Company Description

Why We Like It:
On a long-term basis many of the defense and aerospace companies have been juggernauts with huge gains over the last couple of years. That's in spite of lower U.S. military budgets. Yet on a short-term basis the group is underperforming.

OA is part of the industrial goods sector. The company is a merger between Orbital Sciences and ATK. ATK spun off its small firearms business into a new company called Vista Outdoor. According to OA, "Orbital ATK is a global leader in aerospace and defense technologies. The company designs, builds and delivers space, defense and aviation systems for customers around the world, both as a prime contractor and merchant supplier. Its main products include launch vehicles and related propulsion systems; missile products, subsystems and defense electronics; precision weapons, armament systems and ammunition; satellites and associated space components and services; and advanced aerospace structures. Headquartered in Dulles, Virginia, Orbital ATK employs more than 12,000 people in 20 states across the United States and in several international locations."

I am longer-term bullish on the defense and aerospace stocks. Yet shorter-term they are clearly underperforming the major indices. The S&P 500 and the Dow Industrials are both nearing their all-time highs. The NASDAQ is trading near its 15-year highs and the small cap Russell 2000 just hit a new record high today. Yet the major defense-related names have been trending lower the last couple of weeks.

Technically OA has been developing a trend of lower highs. Today the stock just broke down under key, round-number support at $75.00. If this pullback continues we could see OA drop toward the $69-70 zone.

Tonight we're suggesting a trigger to buy puts at $74.25. We'll try and limit our risk with an initial stop loss at $76.55. Earnings are coming up in mid May. There is no official date set. We will plan on exiting prior to their earnings announcement.

Trigger @ $74.25

- Suggested Positions -

Buy the MAY $75 PUT (OA150515P75) current ask $3.00
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

Energy Stocks Lead The Rally

by James Brown

Click here to email James Brown

Editor's Note:

Another rally in crude oil fueled gains in energy stocks. They helped lead the broader market to a relatively widespread rally. Better than feared earnings results are also playing a part in the market's bullishness.

Prepare to exit our PTCT trade tomorrow morning.

Current Portfolio:

CALL Play Updates

Ambarella, Inc. - AMBA - close: 74.67 change: -0.20

Stop Loss: 72.45
Target(s): To Be Determined
Current Option Gain/Loss: -40.0%
Average Daily Volume = 2.0 million
Entry on April 10 at $76.15
Listed on April 09, 2015
Time Frame: Exit prior to May option expiration
New Positions: see below

04/15/15: AMBA underperformed the broader market today. That's disappointing. On the plus side shares did find support near $74.00 a few times. Consider its relative weakness I'm not suggesting new positions at this time.

Trade Description: April 9, 2015:
If you're looking for relative strength then AMBA has it in spades. Year to date the stock is already up +48%. AMBA is in the technology sector. They're considered part of the semiconductor and semiconductor equipment makers. The company was founded in 2004 and went public in October 2012 at $6.00 a share. That price was significantly below where AMBA was expected to price in the $9-11 range. Investor sentiment has definitely changed since then.

The company has grown from making broadcast-class encoders to making consumer and sports cameras, security cameras, and now automotive cameras. Their high-definition chips are being integrated into security IP cameras and wearable cameras. AMBA is also capturing part of a new market - cameras on consumer-level remote control drones.

The last two plus years have seen a strong performance in AMBA with the stock up more than +600% from its IPO price. AMBA has GoPro, Inc. (GPRO) to thank for part of that rally. GPRO came to market in June 2014 and the stock has been in rally mode since mid August with a rally in GPRO from less than $40 to $90 a share. I mention GPRO because AMBA happens to make the HD camera sensors in many of GPRO's action camera products. GPRO's IPO drew a lot of attention to AMBA. Now GPRO's rally has collapsed while AMBA has continued to climb.

Part of GPRO's trouble is competition from a large Chinese rival - Xiaomi. GPRO is currently seen as best of breed in the action camera market but it may not hold that spot forever. Xiaomi is selling similar cameras at a significant discount to GPRO and both cameras use AMBA's technology. Both camera makers have different models. GPRO's top of the line still has better components than Xiaomi's - at least for now. The real winner is AMBA since they supply to both companies. Multiple analysts have commented on AMBA's relationship with Xiaomi and believe it will bear significant fruit in the future.

AMBA has been killing it on the earnings front. They have beaten Wall Street's earnings and revenue estimates for the last five quarters in a row. Their most recent report was their Q4 results on March 3rd. Analysts were expecting a profit of $0.49 a share on revenues of $59.3 million. AMBA delivered $0.68 a share with revenues soaring +61% to $64.7 million.

Shorts are getting killed. As the rally continues AMBA could see more short covering. The most recent data listed short interest at 27.7% of the small 29.2 million share float. Meanwhile the point & figure chart is very bullish and forecasting a long-term AMBA target at $106.00.

The last few days have seen shares of AMBA consolidate sideways between short-term support at its 10-dma and resistance near $75.00. Tonight we are suggesting a trigger to buy calls on AMBA at $76.15.

NOTE: GPRO, one of AMBA's biggest customers, reports earnings near the end of April. GPRO's results could significantly influence trading in AMBA's stock.

- Suggested Positions -

Long MAY $80 CALL (AMBA150515C80) entry $2.50

04/10/15 triggered @ 76.15
Option Format: symbol-year-month-day-call-strike

Cardinal Health, Inc. - CAH - close: 90.15 change: -0.15

Stop Loss: 87.75
Target(s): To Be Determined
Current Option Gain/Loss: -26.6%
Average Daily Volume = 1.7 million
Entry on March 30 at $90.55
Listed on March 28, 2015
Time Frame: Exit PRIOR to earnings on April 30th
New Positions: see below

04/15/15: Shares of CAH are churning sideways inside a trading range with resistance in the $91.00-91.50 zone. The only good thing is the bullish trend of higher lows, which suggests a likely breakout higher.

I'm not suggesting new positions at this time.

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

Ctrip.com - CTRP - close: 63.75 change: -0.13

Stop Loss: 61.30
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.9 million
Entry on April -- at $---.--
Listed on April 14, 2015
Time Frame: 3 to 5 weeks, Exit PRIOR to earnings in May
New Positions: Yes, see below

04/15/15: Wednesday turned out to be a quiet session for shares of CTRP . The stock found support near $63.00 intraday. I don't see any changes from last night's new play description.

Trade Description: April 14, 2015;
The Chinese economy grew +7.4% last year. Today estimates are suggesting +7.0% for 2015, the slowest pace in 24 years. One area that is outperforming the broader economy is travel. Travel is expected to grow twice as fast. Leading the way is CTRP, China's largest online travel provider.

CTRP is part of the services sector. According to the company, "Ctrip.com International, Ltd. is a leading travel service provider of accommodation reservation, transportation ticketing, packaged tours, and corporate travel management in China. It is the largest online consolidator of accommodations and transportation tickets in China in terms of transaction volume. Ctrip aggregates comprehensive travel related information and offers its services through an advanced transaction and service platform consisting of its mobile apps, Internet websites and centralized, toll-free, 24-hour customer service center. Ctrip enables business and leisure travelers to make informed and cost-effective bookings. It also helps customers book vacation packages and guided tours. In addition, through its corporate travel management services, Ctrip helps corporate clients effectively manage their travel requirements. Since its inception in 1999, Ctrip has experienced substantial growth and become one of the best-known travel brands in China."

The company's most recent earnings report sparked quite a reaction. CTRP reported its Q4 and fiscal year 2014 results on March 19th. Analysts were expecting a loss of $0.09 a share on revenues of $306.29 million. CTRP delivered a loss of $0.11. Investors ignored the miss thanks to revenues rising +33% to $308.37 million.

James Liang, Chairman of the Board and Chief Executive Officer of Ctrip, commented on his company's results saying, "In the fourth quarter of 2014, our main business lines demonstrated strong momentum. Accommodation reservation and transportation ticketing services reached 53% and 102% year-over-year volume growth respectively. Total GMV of packaged tour business reached RMB13 billion in 2014. Our new initiatives have propelled the expansion in our market share. Cumulative mobile app downloads reached nearly 600 million by the end of the year, growing over 70% from the previous quarter. Over 70% of transactions were made through mobile platforms during the Chinese New Year holiday. 2015 could be another exciting year. We will continue to focus on technology, service quality and efficiency, product comprehensiveness and price competitiveness, to create greater value for our customers, our partners, our employees and ultimately, our investors."

What really caught the market's attention was CTRP's guidance. The company expects Q1 revenues to surge +40% to +50%. That would be the highest growth rate since 2010 and above Wall Street's estimates for +30%. Mr. Liang said that CTRP owns about 5% of the travel market in China. Longer-term he believes CTRP could have about 20% of the market but it will be a much bigger market with travel expected to grow +500%.

Shares of CTRP gapped open higher from $46.00 to $55.00 and hit $60 a few days after its earnings report. Today shares are consolidating sideways below resistance near $65.00. Traders just bought the dip at its rising 10-dma this morning.

We want to hop on board if CTRP breaks through $65.00. Tonight we're listing an entry point to buy calls at $65.15.

Trigger @ $65.15

- Suggested Positions -

Buy the MAY $65 CALL (CTRP150515C65)

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

G-III Apparel Group, Ltd. - GIII - close: 117.69 change: +0.21

Stop Loss: 113.85
Target(s): To Be Determined
Current Option Gain/Loss: -15.5%
Average Daily Volume = 207 thousand
Entry on April 09 at $116.77
Listed on April 08, 2015
Time Frame: Exit PRIOR to the 2:1 split on May 4th
New Positions: Yes, see below

04/15/15: GIII spent most of the day consolidating sideways. By the close shares were underperforming with a +0.1% gain. I'm not suggesting new positions at this time.

We want to exit prior to the stock split on May 4th.

Trade Description: April 8, 2015:
GIII has been showing relative strength and could deliver a strong pre-stock split rally. The company is in the consumer goods sector. They make apparel.

The company describes itself as, "G-III is a leading manufacturer and distributor of outerwear, dresses, sportswear, swimwear, women's suits, women’s performance wear, footwear, luggage, women's handbags, small leather goods and cold weather accessories under licensed brands, owned brands and private label brands. G-III sells swimwear, resort wear, and related accessories under our own Vilebrequin brand. G-III also sells outerwear, dresses, and performance wear under our own Andrew Marc and Marc New York brands, and has licensed these brands to select third parties in certain product categories.

G-III has fashion licenses under the Calvin Klein, Kenneth Cole, Cole Haan, Guess?, Tommy Hilfiger, Jones New York, Jessica Simpson, Vince Camuto, Ivanka Trump, Ellen Tracy, Kensie, Levi's and Dockers brands. Through our team sports business, we have licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League, Touch by Alyssa Milano and more than 100 U.S. colleges and universities. Our other owned brands include Bass, G.H. Bass, G-III Sports by Carl Banks, Eliza J, Black Rivet and Jessica Howard. G-III also operates retail stores under the Wilsons Leather, Bass, G.H. Bass & Co., Vilebrequin and Calvin Klein Performance names."

Looking at GIII's earnings performance last year the company has beaten Wall Street's bottom line earnings estimates four quarters in a row and usually by a wide margin. GIII also beat analysts' revenue estimates three out of the last four quarters. When GIII reported its Q3 results back in December they raised guidance above Wall Street expectations.

Their most recent report was their Q4 results on March 24th. Earnings were up +58% from a year ago to $0.98 a share. That was 15 cents above estimates. For their fiscal year 2015, which ended on January 31st, GIII said adjusted earnings were up +21% while revenues were up +23% from a year ago.

In their earnings press release Morris Goldfarb, G-III's Chairman, Chief Executive Officer and President, said, "Fiscal 2015 was another strong year of sales and profit growth for G-III. We drove strong performances across our portfolio of businesses, solidified our market position, and successfully executed across a range of strategic initiatives, including the integration and repositioning of the G.H. Bass business we acquired in the fourth quarter of last year. We are pleased to have achieved another record year for both net sales and net income per share."

The stock did see a little profit taking when management offered conservative guidance but traders bought the dip a couple of days later. Now the stock is hitting new all-time highs.

Yesterday morning, April 7th, GIII announced a 2-for-1 stock split. The shareholder record date is April 20th. GIII should begin trading post-split on Monday, May 4th. Shares look like they could produce a strong pre-split run up. We want to hop on board for the next three weeks and exit prior to the split date. Tonight we're suggesting a trigger to buy calls at $116.65.

- Suggested Positions -

Long MAY $120 CALL (GIII150515C120) entry $2.90

04/13/15 new stop @ 113.85
04/09/15 triggered @ 116.77, on a midday gap higher
Suggested entry was $116.65
Option Format: symbol-year-month-day-call-strike

iShares Russell 2000 ETF - IWM - close: 126.55 change: +0.88

Stop Loss: 122.85
Target(s): To Be Determined
Current Option Gain/Loss: +53.6%
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

04/15/15: The stock market's widespread rally was led by energy and semiconductor stocks. Small caps performed well too with a +0.7% gain. More importantly the IWM has broken out past its March highs.

No new positions at this time.

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

04/07/15 new stop @ 122.85
04/04/15 new stop @ 121.65
03/27/15 triggered @ 123.05
Option Format: symbol-year-month-day-call-strike

Nike, Inc. - NKE - close: 99.83 change: +0.30

Stop Loss: 97.85
Target(s): To Be Determined
Current Option Gain/Loss: -47.8%
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

04/15/15: NKE gapped open higher this morning after Piper Jaffray upgraded the stock from neutral to overweight. They also raised their price target to $115.00.

What worries me is NKE's reaction. The early morning gain faded. Shares are struggling to build on any bullish momentum. I am not suggesting new positions.

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

04/13/15 new stop @ 97.85
03/30/15 triggered on gap open at $101.23, suggested entry was $100.25
Option Format: symbol-year-month-day-call-strike

Palo Alto Networks, Inc. - PANW - close: 144.71 change: +0.17

Stop Loss: 144.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.3 million
Entry on April -- at $---.--
Listed on April 11, 2015
Time Frame: Exit PRIOR to earnings in late May
New Positions: Yes, see below

04/15/15: I was prepared to drop PANW as a candidate tonight. The stock isn't moving. Shares spent today's session hovering near the $144-145 region. It closed with a +0.1% gain versus the NASDAQ's +0.6% rise. However, after discussing it, we decided to give PANW a little more time since the trade is not open yet. Currently our suggested entry point to buy calls is at $150.55.

Trade Description: April 11, 2015:
The world we live in is quickly turning into a digital one. That makes cyber threats and the security to stop them a huge business. Just this past week there were headlines that Russian hackers had invaded the White House and accessed sensitive data.

There is a nearly constant stream of headlines about big name American companies being hacked. Some of the recent ones include Anthem, Home Depot, JPMorgan Chase, and Target. Even the National Oceanic and Atmospheric Administration satellite system has been hacked (allegedly by Chinese hackers). More and more we're seeing sophisticated attacks from unfriendly governments (e.g. Russia, Iran, China, and North Korea).

PANW is cashing in on the growing need for online security. According to the company, "Palo Alto Networks is leading a new era in cybersecurity by protecting thousands of enterprise, government, and service provider networks from cyber threats. Unlike fragmented legacy products, our security platform safely enables business operations and delivers protection based on what matters most in today's dynamic computing environments: applications, users, and content."

Earnings have been skyrocketing. The company has been beating Wall Street's estimates on both the top and bottom line. PANW has also been consistently guiding higher, above analysts' estimates. The last three quarters have seen revenue growth above +50% each.

Their latest report was March 2nd. Analysts were expecting $0.17 a share on revenues of $203.99 million. PANW delivered $0.19 with revenues up +54% to $217.7 million. Management guided the current quarter to $0.19-0.20 a share with revenues of $219-223 million. Wall Street was only expecting $0.19 on revenues of $214 million.

PANW recently held their analyst day on March 30th and the general consensus was pretty optimistic. One firm said PANW's growth opportunities are red hot. PANW also released a new subscription service - the AutoFocus cyber threat intelligence service. PANW's senior VP of product management, Lee Klarich, commented on their new product saying, "The Palo Alto Networks AutoFocus threat intelligence service enables security teams to significantly close the gap on the time it takes to identify and prevent advanced, targeted cyber attacks. By putting cyber threats in a context that speaks specifically to their network and industry, using the largest data set aggregated across customers and industries, we are helping customers around the world take a more strategic approach to securing their organizations."

Technically the long-term trend is higher. Yet shares of PANW have been consolidating sideways in the $135-150.00 zone for the last six weeks. That consolidation is narrowing with shares up sharply this past week. The stock looks poised to breakout past resistance near $150 soon. Wall Street's median price target is currently $165.00. I suspect it could go a lot higher over the next twelve months.

We want to be ready if PANW does break through round-number, psychological resistance at the $150.00 level. Tonight we are suggesting a trigger to buy calls at $150.55.

Trigger @ $150.55

- Suggested Positions -

Buy the JUN $155 CALL (PANW150619C155)

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

PTC Therapeutics, Inc. - PTCT - close: 67.35 change: -1.74

Stop Loss: 64.75
Target(s): To Be Determined
Current Option Gain/Loss: -15.9%
Average Daily Volume = 551 thousand
Entry on April 06 at $65.25
Listed on April 04, 2015
Time Frame: Exit prior to earnings in May
New Positions: see below

04/15/15: That's it! We're throwing in the towel on our PTCT trade. The rally appears to have peaked on April 9th after the stock was upgraded. Shares failed near its March highs. PTCT has been down four days in a row and the profit taking seems to be getting worse.

We're suggesting an immediate exit tomorrow morning.

*small positions* - Suggested Positions -

Long MAY $70 CALL (PTCT150515C70) entry $4.40

04/15/15 prepare to exit tomorrow morning
04/11/15 new stop @ 64.75
04/09/15 DB raised their target from $75 to $115
04/08/15 new stop @ 62.75
04/06/15 triggered @ 65.25
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Big Lots Inc. - BIG - close: 46.55 change: -0.13

Stop Loss: 50.05
Target(s): To Be Determined
Current Option Gain/Loss: -2.6%
Average Daily Volume = 1.1 million
Entry on April 14 at $46.85
Listed on April 13, 2015
Time Frame: Exit PRIOR to May option expiration
New Positions: see below

04/15/15: The early morning gains in BIG faded. Shares retreated back into negative territory. This sort of relative weakness is what we want to see in our bearish candidates. The next challenge is getting through the $46.00 level, which could be support. There are several moving averages, including the 100-dma and 200-dma, that are converging near $46.00.

Trade Description: April 13, 2015:
Momentum for this retail name is clearly rolling over. According to the company's latest press release, "Big Lots Inc. (BIG) is a unique, non-traditional discount retailer operating 1,460 Big Lots stores in 48 states with product assortments in the merchandise categories of Food, Consumables, Furniture & Home Decor, Seasonal, Soft Home, Hard Home, and Electronics & Accessories. Our vision is to be recognized for providing an outstanding shopping experience for our customers, valuing and developing our associates, and creating growth for our shareholders."

The company's earnings results have been mixed. The huge sell-off on December 5th was a reaction to its Q3 earnings. BIG lost $0.06 per share, which was worse than expected and revenues were essentially flat. The fourth quarter was significantly better with BIG delivering a profit of $1.76 per share compared to estimates of $1.75. Revenues were up +1.4% and were in-line with estimates of $1.59 billion. Comparable store sales were up to +2.9% in the fourth quarter.

Unfortunately, management guided lower for Q1 and the rest of their fiscal 2016. Their forecast of $2.75-2.90 in earnings is below Wall Street's $2.96 estimate. Comparable store sales are going to be in the low single digits. The company tried to soften the bad news by raising their dividend and adding to their stock buyback program.

The post-earnings rally didn't last. Shares of BIG have rolled over and now the path of least resistance is lower. The $46.00 level, along with the simple 200-dma, is potential support but we are expecting this weakness in BIG to accelerate. Tonight we are listing a trigger to buy puts at $46.85 with an initial stop loss at $50.05.

- Suggested Positions -

Long MAY $47.50 PUT (BIG150515P4750) entry $1.90

04/14/15 triggered @ $46.85
Option Format: symbol-year-month-day-call-strike

Avis Budget Group, Inc. - CAR - close: 55.43 change: +1.04

Stop Loss: 60.05
Target(s): To Be Determined
Current Option Gain/Loss: +2.6%
Average Daily Volume = 1.7 million
Entry on April 07 at $55.85
Listed on April 06, 2015
Time Frame: exit PRIOR to May option expiration
New Positions: see below

04/15/15: CAR has rebounded back toward resistance near $56.00. I didn't see any news to account for today's display of relative strength (+1.9%). I'm not suggesting new positions at the moment. More conservative traders may want to start lowering their stop loss.

Trade Description: April 6, 2015:
Investors sentiment for CAR seems to have soured. The company operates in a competitive, low-margin industry.

According to the company, "Avis Budget Group, Inc. (CAR) is a leading global provider of vehicle rental services, both through its Avis and Budget brands, which have more than 10,000 rental locations in approximately 175 countries around the world, and through its Zipcar brand, which is the world's leading car sharing network, with more than 900,000 members. Avis Budget Group operates most of its car rental offices in North America, Europe and Australia directly, and operates primarily through licensees in other parts of the world. Avis Budget Group has approximately 30,000 employees and is headquartered in Parsippany, N.J."

Another challenge is the broader transportation industry. Many market analysts view the transportation industries as a barometer of the wider economy. Fuel prices are significantly lower than they were a year ago. This is a net positive for the transports. This effect seems to be priced in. Now the weight of a slowing U.S. economy appears to be dragging the transportation average lower. Today saw the Dow Jones Transportation Average breakdown below key support at the 8,600 level.

Looking at CAR, the company's last three earnings reports have been mixed. They managed to beat Wall Street's earnings estimates on the bottom line three quarters in a row. Revenues are slowing down. Q2 revenues came in above estimates. Q3 revenues were up +6% but were just a hair below estimates. Q4 revenues were up +2% and missed estimates. Part of the problem is currency headwinds. The surging dollar has damaged their revenue growth. CAR's guidance when they reported Q4 earnings in February forecasted 2015 revenues below analysts' estimates.

Meanwhile traders have been selling the rallies. The late December rally failed near $68.00, marking a lower high from its 2014 peak. The rally failed again a few days later. The post-earnings spike in February produced another lower high. Now we see the oversold bounce from support near $56.00 has already rolled over. The point & figure chart is bearish and forecasting at $45.00 target.

Tonight we are suggesting a trigger to buy puts at $55.85. We will plan on exiting prior to May option expiration or CAR's earnings report in May (whichever comes first).

- Suggested Positions -

Long MAY $55 PUT (CAR150515P55) entry $1.95

04/07/15 triggered @ 55.85
Option Format: symbol-year-month-day-call-strike