Option Investor

Daily Newsletter, Wednesday, 5/13/2015

Table of Contents

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

Market Wrap

Wake Me When the Logjam Breaks

by Keene Little

Click here to email Keene Little
To say the choppy go-nowhere market is getting old would be a gross understatement. It would appear many traders are now sitting back and just waiting for the market to make a decision and do something. So far there's no answer from the market.

Wednesday's Market Stats

It's getting very old writing about a choppy market that's been range bound for 2-1/2 months and I know it's even worse if you're trying to trade it. About the only thing that's working is selling options above and below the trading range and then let the options expire worthless. Anyone who's trying to trade the market directionally probably has very little hair left to pull out. Hopefully you haven't been chopped to pieces with multiple stop-outs in both directions (in which case your broker thanks you). This too shall pass but at this point it can't be soon enough.

Equity futures climbed higher during the overnight session but then became a little volatile in the pre-market session, holding just above breakeven until a buy program hit at the opening bell (pretty common lately). But there was no follow through to the buy program (also pretty common lately) and the market sold off before the indexes spent most of the day trying to hold in the green. The techs were a little stronger while the small caps were weaker, which just added to the sense that this market is not going anywhere. The metals were the big movers today (up).

This morning's economic reports included retail sales, which weakened from March into April. Sales dropped from +1.1% in March to flat in April and sales ex-auto dropped from +0.7% to +0.1%. It's just more evidence that the consumer is not consuming enough. Shame on all of you -- do your patriotic duty and get out there and spend!

Export and import prices dropped in April, -0.7% and -0.4%, respectively, which probably frustrates the Fed since it's further evidence of "disinflation." Import prices dropped -0.4% in March, much of which was "blamed" on the drop in oil prices but with the strong bounce back up in oil (+43% from about 42 to 60) they can't use oil as the excuse for an even larger drop in import prices. Global deflation anyone? Nah, the Fed, ECB, BOJ, and the other tens of central banks will surely "protect" us from that with all their money printing.

In reality, despite what the central banks have been attempting to do, the drop in prices shows what a powerful force deflation is and how the central banks have only been able to slow it down (and drag out the correction that could have already been over by now if they let the market dictate the rules). With all of the government debt they're all trying to inflate their way out but they're all failing and the piper will soon have to be paid. The best thing we can all do to be prepared for deflation is to be out of debt since the value of debt increases while all other asset classes depreciate in a deflationary environment.

Heading into today it was important for the bulls to at least prevent any further selling in the techs. I'll start tonight's review with the NDX to show the short-term bullish setup to complete its longer-term rally. But the bulls need to keep the rally going in the coming week in order to prevent it from turning bearish sooner rather than later.

The weekly NDX chart below shows that since August 2014 price has been pressing against the top of its parallel up-channel that it's been in since 2010. From a wave count perspective there are a few ways to count the move up from its low in November 2008 but the best fit has it in its final 5th wave of a big A-B-C corrective rally, which is the leg up from the February 2nd low at 4094. That low was another test of its uptrend line from the March 2009 low through the June 2013 low (labeled in green). The line has been supporting each pullback since February, including Tuesday's low, and it's currently near 4388. Since the November 2014 high it has been making marginal new price highs but with bearish divergence as it hammers out a rising wedge for the final leg of its rally.

Nasdaq-100, NDX, Weekly chart

The rising wedge since the November 2014 high can be better seen on the daily chart below. All of the choppy price action we've seen since last November helps confirm that this final 5th wave, starting off the February 2nd low, is an ending diagonal (rising wedge) and the negative divergence supports the bearish interpretation that we're into the final wave. Ideally we'll see one more new high to complete the pattern, which is depicted in green and points to a final high near 4600, possibly next week.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4511
- bearish below 4333

At the moment NDX is struggling with its short-term downtrend line from April 27th, which it marginally broke above this morning (thanks to the gap up). The failure to close above the line, currently near today's close near 4427, has it looking vulnerable to a further decline but it can't tolerate much more selling before turning more immediately bearish. Two equal legs down from Monday morning's high points to 4372 so a drop below that level would be a bearish heads up, especially since it would be another break of its uptrend line from March 2009. Below 4343 would suggest we're into a least a much larger pullback and further upside would be in doubt.

Nasdaq-100, NDX, Daily chart

Yesterday morning SPX tested its 2009-2011 uptrend line, currently near 2090, and got a strong bounce off it, although the rally then fizzled a bit following the strong buy program and SPX wasn't able to hold above its broken 20-dma, near 2102. Today it gapped up above its 20-dma but again wasn't able to hold above it and instead chopped sideways before dropping back below it this afternoon. It's hard to decipher any small movements in this frustratingly choppy market but so far the pattern remains bullish if the bulls can defend yesterday's low at 2085. One more leg up to about 2135 would do a nice job finishing off the shallow rising wedge pattern for the rally off the March 11th low (bold blue lines on the daily chart below).

S&P 500, SPX, Daily chart

Key Levels for SPX:
- stay bullish above 2078
- bearish below 2067

I hesitate to show anything less than a daily chart because of all the choppy price action. Trying to predict the next move out of this mess is very difficult but I'll try anyway (because I'm a market masochist). In the shallow rising wedge shown on the daily chart, which is shown closer with the 60-min chart below, the 5th wave (the leg up from May 6th) should be a 3-wave move (or something a little more complex but still corrective) and I've currently got it labeled as an a-b-c, with the c-wave being the leg up from Tuesday morning. This afternoon's low held the uptrend line from May 6th and if the buyers return Thursday morning we should see a rally that will likely at least test the 2120 resistance level again.

S&P 500, SPX, 60-min chart

On the chart above I depict a small rising wedge for the final move up from Tuesday but that's obviously just a guess at this time. The way it's starting is what has me thinking it will chop its way up to a final high. Two equal legs up from May 6th points to 2135, which is close to the top of its shallow rising wedge (bold blue line). Note that this pattern suggests a break above 2120 resistance will turn into a bull trap of the worst kind -- a very strong decline should follow it and trap all those who buy the breakout and don't use stops. This of course assumes that we'll get the rally as depicted.

The DOW looks the same as SPX and NDX -- it has been chopping sideways since its March 2nd high but in reality it has been chopping its way marginally higher since jamming higher off last October's low. It too looks to be in an ending diagonal (rising wedge) for its final 5th wave. The final leg up should be the rally off the May 6th low and I have two upside projections for it at 18397 and 18506. Assuming we'll get the rally as depicted I should be able to get a tighter target zone as the rally pattern develops a little further. The bulls would be in serious trouble if the DOW instead breaks down through the May 6th low at 17733.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,289
- bearish below 17,733

The RUT remains odd man out. It's sharp decline from April 27th could have been the 1st wave down in what will become a much more significant decline, in which case the bounce off May 6th low will only be a correction to the decline before heading lower in a 3rd wave. Two equal legs up from May 6th points to 1250.81, which is only slightly higher than price-level resistance near 1248. There's a way to interpret the May decline as the completion of a pullback correction and the RUT will join the others to a new high but at the moment I'm reluctant to suggest the RUT will see a new high from here. Instead I'm watching for a bounce setup to short the RUT.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1262
- bearish below 1206

Bond prices have been crushed over the past 3 weeks and that has driven yields higher. The Fed might not be ready to raise rates but it appears the market is ahead of them on that. But at the moment I'm not sure if the rise in yields is going to hold. I haven't yet abandoned my opinion that we'll see lower yields into the fall of this year but the recent rally in yields is now near a make or break time for the bond market.

The weekly chart of TYX (30-year yield) below shows a price projection at 3.089%, which is where the bounce off the January 30th low has two equal legs up. That level was achieved yesterday with a brief morning high at 3.099% before reversing hard for the rest of the day. Today's rally in TYX (selling in bonds) got it back up to 3.081% so we'll soon find out if the rise will continue or if instead the 3-wave bounce correction off the January low will be followed by another decline, which is what I'm depicting on the chart. TYX has broken its downtrend line from December 2013, near 2.93%, so any pullback to that level and then higher again would leave a bullish pattern and I'd back off my expectation for lower yields (higher bond prices).

30-year Yield, TYX, Weekly chart

The 10-year yield (TNX) has the same pattern as TYX but it hasn't made it up to its similar projection for two equal legs up from January, at 2.451% (yesterday's high was 2.335%). However, yesterday it did tap its downtrend line from December 2-13 and the hard reversal left a bearish candlestick at resistance.

TLT, the 20+ year Treasury ETF, is also near an important level -- 117.23 is where the decline from January 30th would have two equal legs down. Today's low was 118.64 so it's getting close but with short-term bullish divergences staring to show there is the potential for at least a bounce back up. If TLT does start another rally from here it would have an upside target at 141.71, which is where the 2nd leg of its rally from December 2013 would be 62% of the 1st leg. It's also where it would again test the trend line along the highs from December 2008 - July 2012 (and it would likely leave a bearish divergence against the January high).

20+ Year Treasury ETF, TLT, Weekly chart

The banking index, BKX, has a very interesting setup here and we could soon find out which direction it will head. It has now pushed right up against the top of an expanding triangle for price action since March 2014, shown on its weekly chart below. At the same location, near today's high at 75.73, is its broken uptrend line from March 2009 - October 2011. There's also a broken uptrend line from October 2013 - May 2014 (gray) that it's back-testing. That's a lot of trendline resistance for the bulls to punch through. But as highlighted on MACD and RSI, the downtrend lines from August 2013 are now being broken and that's a bullish sign. Now all the bulls need to do is keep the rally in the banks going, which would be a positive sign for the broader indexes.

KBW Bank index, BKX, Weekly chart

Countering the potentially bullish picture for the banks (although admittedly I wouldn't be buying the banks with the index pressed up against resistance) is the potentially bearish pattern for the TRAN. How many times can the TRAN pound on support before it breaks? That's the question that comes to mind as it once again tests price-level support near 8580, which it closed marginally below today. If it breaks below its April 6th low near 8527 it would be a bearish heads up for the rest of the market. I would expect the TRAN to at least then drop to its uptrend line from March 2009 - November 2012, near 8395. Give the bulls a few more Cheerios here and see if that helps.

Transportation Index, TRAN, Daily chart

The U.S. dollar has also now reached an inflection point now that it has dropped back down to the top of its parallel up-channel from 2008-2011, near today's low at 93.50, which is shown on its weekly chart below. The top or bottom of a channel is usually support/resistance after price breaks through and comes back for a retest so the bullish setup here is for the dollar to start back up. Since its March high I've been looking for a multi-month consolidation and we could see price stay trapped between 93.50 and its March high at 100.78 for the rest of this year. That's the bullish pattern. It would turn at least potentially more bearish if it drops below 93.50, in which case I would expect to see it drop down to a price projection and its 200-dma, both near 90.50, over the next couple of weeks, before either setting up another bounce or consolidating before heading lower.

U.S. Dollar contract, DX, Weekly chart

Gold's strong rally today has it looking like it will head for at least the 1251.30 projection for two equal legs up from March 17th. That would be a little better than a 62% retracement of its January-March decline, at 1244. At the moment gold is close to testing its 200-dma near 1220 and if it breaks above it I don't think it will last any longer than it did back in January.

Gold continuous contract, GC, Daily chart

This morning's crude inventories report showed another decline of 2.2M barrels but that didn't help price, which dropped today. After peaking at 62.58 last Wednesday oil pulled back and broke its uptrend line from March 18th, indicating its rally is likely done or very close to being done (it might have one more minor new high to back-test the broken uptrend line and show us bearish divergence in the process). It did find support at price-level S/R near 58.50 on the pullback into last Friday's low but I think the bounce attempt will fail and a drop back below 58.50 will likely lead to another decline. The downside potential is for at least a retest of its March 18th low at 42.03.

Oil continuous contract, CL, Daily chart

Tomorrow morning we'll get some inflation data through the PPI reports before the bell. They're not expected to change from the March readings of +0.2% for both PPI and Core PPI. The market might react a little if the number is way off the mark, especially if the number comes in much higher than expected (prompting worry about the Fed raising rates) but more than likely the market will already be reacting to whatever goes on overseas.

Economic reports and Summary


The market remains a choppy mess and there's very little to recommend at the moment. The larger price pattern suggests to me that we will get one more new high in the next week or two to complete the bull market rally off the 2008/2009 lows. The longer-term setup is therefore very bearish since I don't believe the market highs, once they're put in, will be seen for many years (possibly decades). Predicting the next move this week is hard enough so predicting the next move over the next several years is obviously extremely difficult. But the multi-decade pattern suggests those who hold through the next decline will rue the day they decide to just buy and hold and keep buying on the way down. In the next few years those with capital will have a buying opportunity of a lifetime but we're soon approaching the time when I think we'll have a selling opportunity of a lifetime.

Shorter term (this week and possibly into the end of the month) I'm continuing to expect higher prices but we could see those new highs come with more chop and whipsaw price action. Based on this and the downside risk I don't think it's worth trying the long side. Upside potential is dwarfed by downside risk, especially if new highs don't come in the next week. Keep an eye on the TRAN and RUT since they could be the bear's canary indexes. Playing the short side will take a unique set of brass ones because the central banks around the world will keep trying to goose the market back up, either verbally or with actual money (probably both) and that will mean strong short-lived rallies and then the resumption of selling once the buying fails to get follow through. You'll need to decide how you want to play those moves (sell-and-hold vs. trying to catch all the squiggles). In the meantime let's see if Ms. Market can give us a new high and set us up with a shorting opportunity.

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

I Want A New Drug

by James Brown

Click here to email James Brown


Endo International plc - ENDP - close: 83.89 change: -0.71

Stop Loss: 86.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.7 million
Entry on May -- at $---.--
Listed on May 13, 2015
Time Frame: 6 to 9 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
"I want a new drug, one that does what it should" - Huey Lewis and The News.

A bullish earnings report with better than expected profits and sales should help send a stock higher. That prescription doesn't seem to be working for shares of ENDP. The stock looks broken in spite of bullish earnings news. ENDP is in the healthcare sector. They have a suite of branded and generic pharmaceutical companies under the ENDP umbrella.

According to the company, "Endo International plc is a global specialty pharmaceutical company focused on improving patients' lives while creating shareholder value. Endo develops, manufactures, markets and distributes quality branded pharmaceutical and generic pharmaceutical products as well as over-the-counter medications though its operating companies. Endo has global headquarters in Dublin, Ireland, and U.S. headquarters in Malvern, PA."

ENDP made a lot of headlines earlier this year when it tried to buy Salix Pharmaceuticals (SLXP). ENDP offered a cash and stock offer of $175 a share or SLXP. Yet the company lost the bid to rival Valeant (VRX) who offered an all-cash deal of $173 per share for SLXP. Most believe that ENDP will continue its trend of making acquisitions and losing SLXP to VRX failed to stop the rally in ENDP's stock.

So what did spark the sell-off in ENDP? In late April the entire biotech space was crushed with big declines. There was a flurry of negative headlines among some of the biotech companies and the whole group was sold off sharply. ENDP fell from around $93 to $85 pretty fast. Shares then churned sideways near $85.00 as investors waited for the company's earnings report.

ENDP reported its Q1 earnings on May 11th. The results look pretty good. Analysts were expecting a profit of $1.06 per share on revenues of $711.7 million. ENDP delivered a profit of $1.17 per share compared to a loss a year ago. Revenues soared +52% to $714 million. Management even raised their earnings guidance for 2015. In spite of what appears to be a great earnings report traders sold the news. ENDP reversed and has underperformed the market these last few days.

The stock has broken multiple layers of support in the last few weeks and now it's about to breakdown from its recent sideways consolidation. If shares move below $83.00 it will produce a new triple-bottom breakdown sell-signal on the point & figure chart. Tonight we are suggesting a trigger to open bearish positions at $83.40.

Trigger @ $83.40

- Suggested Positions -

Buy the JUL $80 PUT (ENDP150717P80) current ask $2.40
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

Stocks Deliver Mixed Session

by James Brown

Click here to email James Brown

Editor's Note:

Disappointing economic data and a weak dollar raised some eyebrows today. Yet it was the bond market that continues to have the market's full attention. An oversold bounce in bonds this morning didn't last and yields crept higher on another loss for bonds.

The stock market's early gains faded but selling was muted.

ETN and FDS both hit our bullish entry triggers today.

Current Portfolio:

CALL Play Updates

Apogee Enterprises - APOG - close: 54.27 change: -0.23

Stop Loss: 51.75
Target(s): To Be Determined
Current Option Gain/Loss: -7.3%
Average Daily Volume = 223 thousand
Entry on April 27 at $53.85
Listed on April 25, 2015
Time Frame: Exit PRIOR to earnings in June
New Positions: see below

05/13/15: APOG remains stuck in its narrow, sideways consolidation. We are pulling the plug on this trade and suggesting an immediate exit tomorrow morning. More aggressive traders could let it run but I suggest tightening your stop loss.

Trade Description: April 25, 2015:
The U.S. economy has been limping along with slow growth. During the first quarter earnings season we have heard how the strong dollar has hurt big cap companies' sales and margins. That's one reason why money has been flowing into small cap, domestic companies, which are less impacted by the dollar. Investors are always looking for strong growth as well.

APOG fits the bill. The company is in the industrial goods sector. They are part of the building materials industry. According to the company, "Apogee Enterprises, Inc. (www.apog.com), headquartered in Minneapolis, is a leader in technologies involving the design and development of value-added glass products, services and systems for the architectural and picture framing industries."

Looking at the last four quarters (fiscal year 2015) bottom line results have been mixed. Yet revenues have been consistently showing double-digit growth. Q1 revenues were up +17.6%. Q2 revenues were +30%. Q3 revenues rose +22.6%. The company's most recent earnings report was April 8th. APOG delivered 2015 Q4 results of $0.47 a share, which was +74% higher than a year ago and above analysts' estimates. Q4 revenues were up +15% and above expectations. Margins improved 240 basis points to 8%.

The company said their architectural glass segment's revenues rose +22%. Architectural service revenues were flat. Architectural framing systems rose +22%. Large-scale optical technologies segment reported revenues up +18% last quarter. APOG ended the fourth quarter with a backlog of $491 million, up +49% from a year ago. Their fiscal 2015 results saw revenues up +21% and adjusted EPS up +58%.

Joseph Puishys, APOG's CEO, commented on their results, saying,

"Apogee's growth engine continued in the fourth quarter as we again grew revenues in the double digits and income more than 50 percent. Performance across the company was strong, with double-digit earnings and revenue growth in three of four segments... We built our backlog significantly during the year, giving us momentum moving into fiscal 2016. We expect fiscal 2016 will continue our trend of double-digit top-line growth and very strong bottom-line growth."
APOG provided relatively optimistic guidance for fiscal year 2016. They see revenues rising +10% to +15% and expect to see sales cross the $1 billion mark soon.

The stock shot higher following its Q4 report in April. The last couple of weeks have seen shares consolidate a bit but traders have started to buy the pullback. We think the rally continues. Tonight we're suggesting a trigger to buy calls at $53.85. We'll try and limit our risk with an initial stop loss at $51.75.

- Suggested Positions -

Long AUG $55 CALL (APOG150821C55) entry $2.75

05/13/15 prepare to exit tomorrow morning
04/27/15 triggered @ 53.85
Option Format: symbol-year-month-day-call-strike

Caterpillar Inc. - CAT - close: 88.44 change: +0.28

Stop Loss: 85.75
Target(s): To Be Determined
Current Option Gain/Loss: -3.5%
Average Daily Volume = 6.2 million
Entry on May 05 at $88.10
Listed on May 02, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

05/13/15: CAT continued to rise and managed to outperform the major big cap indices with a +0.3% gain. It looks like shares might be having some trouble with its simple 150-dma (currently at $89.00).

Trade Description: May 2, 2015:
Have shares of CAT found a bottom? It's starting to look that way. CAT is still down -21% from its 2014 highs but it's up +12% from its Q1 lows with a steady trend of higher lows as traders buy the dips.

CAT is in the industrial goods sector. According to the company, "For 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2014 sales and revenues of $55.184 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three product segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment."

Earnings results and guidance has been a moving target for CAT. The combination of a slowing global economy, volatile currency fluctuations, and weakness in commodities have generated big swings in their business. In July 2014 CAT lowered guidance. Three months later they raised guidance. The next quarter they lowered guidance. Today the company has raised guidance again.

CAT's most recent earnings report was April 23rd. They announced a Q1 profit of $1.72 a share. That was +16% higher than a year ago and almost +40% above Wall Street estimates. Revenues fell -4% from a year ago but sales of $12.7 billion were still above analysts' expectations.

CAT's Q1 results were all about North America, which saw gains almost across the board. Overall construction sales for CAT in North America were up +9% from a year ago. Unfortunately, this was overshadowed by declines everywhere else. Asia, Europe, Latin America - just about every other region CAT does business saw double-digit sales declines. Yet it appears that investors seem to be willing to look past this weakness.

CAT's CEO commented on their 2015 outlook, "We had a solid first quarter, which led to raising the profit outlook for 2015. However, we continue to face headwinds and uncertainty in 2015, and our outlook for the year reflects that. We expect sales and profit in each of the remaining three quarters of 2015 to be lower than the first quarter. We expect sales for oil applications to decline starting in the second quarter, and from a profit perspective, the first quarter included the gain on the sale of our remaining interest in the logistics business and that won't repeat. The first quarter is usually the most seasonally favorable of the year for costs, and we don't expect the rest of the year to be as favorable."

Most of the major oil and gas companies have reduced their capex spending plans for 2015 and this should be negative for CAT. The stock's reaction is suggesting all the bad news is already priced in.

CAT's management raised their 2015 guidance and adjusted their estimate from $4.65 to $4.75, excluding their restructuring costs they raised their estimate from $4.75 to $5.00. Wall Street's estimate was $4.75 per share. CAT reaffirmed their sales estimate for $50 billion this year.

A couple of analysts with Stifel are bullish on CAT. They believe the combination of the company's big stock buy back program (about $10 billion), a strong dividend (more than 3%), and a healthy North American construction market will buoy CAT's stock while investors wait for a turnaround in commodities.

Technically the stock has been showing relative strength the last few weeks. The point & figure chart has turned bullish and is currently forecasting a long-term target of $108.00. Today CAT is hovering below potential resistance near $88.00. We are suggesting a trigger to buy calls at $88.10.

- Suggested Positions -

Long JUL $90 CALL (CAT150717C90) entry $2.00

05/12/15 new stop @ 85.75
05/05/15 triggered @ 88.10
Option Format: symbol-year-month-day-call-strike

Eaton Corp. - ETN - close: 72.81 change: +0.87

Stop Loss: 69.75
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
Average Daily Volume = 2.6 million
Entry on May 13 at $72.75
Listed on May 09, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

05/13/15: ETN displayed relative strength today with a +1.2% gain. The stock shot higher this morning and broke out to new two-month highs and above short-term resistance near $72.50. Our trigger to launch bullish positions was hit at $72.75. We would still consider new positions now at current levels although more conservative traders may want to wait for a rally past today's high $73.26.

Trade Description: May 9, 2015:
ETN is in the industrial goods sector. The company makes products for a wide variety of industries including: aerospace, electrical equipment, filtration systems, hydraulics, plastic extrusion, industrial clutches and brakes, and vehicles.

According to the company, "Eaton is a power management company with 2014 sales of $22.6 billion. Eaton provides energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton has approximately 102,000 employees and sells products to customers in more than 175 countries."

When the market ignores negative earnings news it could be a signal that all the bad news is priced in to a stock and the path of least resistance is higher. That appears to be the case for ETN.

In July 2014 the stock was crushed after the company reported earnings that were only in-line with estimates and the management lowered their 2014 Q3 guidance. Three months later ETN reported its Q3 results that missed expectations on both the top and bottom line. What did the stock do? It rallied.

Fast forward another few months and in early February ETN reported better than expected earnings but revenues were just a hair below estimates. Management lowered their 2015 Q1 estimates due to currency headwinds. They were expecting a -4% impact do to the strong dollar in 2015. What did the stock do on this negative forecast? It rallied.

Several days ago ETN reported its Q1 results on April 29th. Earnings were 3 cents better than expected even as revenues fell -5% to $5.22 billion. This was a result of +1% organic growth offset by -6% decline due to currency translation.

The company's management readjusted their forecast and now expect a -5% impact due to currency headwinds for 2015. With this adjustment they lowered their Q2 and 2015 guidance. Since this earnings report the stock has rallied. Last week shares were upgraded by J.P.Morgan from neutral to overweight who adjusted their ETN price target from $70 to $84. The point & figure chart is even more optimistic and forecasting an $89 target.

If investors are going to be this forgiving then we think there might be an opportunity here. The recent rally in ETN has pushed shares toward resistance near its February highs around $72.50(ish). We are suggesting a trigger to buy calls at $72.75.

- Suggested Positions -

Long JUL $75 CALL (ETN150717C75) entry $1.10

05/13/15 triggered @ 72.75
Option Format: symbol-year-month-day-call-strike

FactSet Research - FDS - close: 162.85 change: +1.28

Stop Loss: 157.45
Target(s): To Be Determined
Current Option Gain/Loss: -18.4
Average Daily Volume = 302 thousand
Entry on May 13 at $162.25
Listed on May 11, 2015
Time Frame: Exit PRIOR to FDS earnings in late June or plan on exiting prior to JUNE option expiration on June 19th
New Positions: see below

05/13/15: FDS appears to be breaking out from its multi-week consolidation near $160. The stock pushed higher today, ignoring the market's lackluster session, and hit our suggested entry point at $162.25. We would still consider new positions at current levels.

Trade Description: May 11, 2015:
FDS has provided data, analytics and research to the Wall Street crowd for more than 35 years. Today their software provides a host of services for investment managers, hedge funds, bankers, wealth managers, private equity, buy-side traders, sell-side traders, and more.

FDS is considered part of the technology sector. According to the company, "FactSet, a leading provider of financial information and analytics, helps the world's best investment professionals outperform. More than 50,000 users stay ahead of global market trends, access extensive company and industry intelligence, and monitor performance with FactSet's desktop analytics, mobile applications, and comprehensive data feeds."

The company has been delivering pretty consistent sales growth around +9% every quarter. They raised guidance back in December with their Q1 report. FDS' most recent earnings report was March 17th. The company announced their Q2 results of $1.39 per share, which was up +13.9% from a year ago. Unfortunately that missed analysts' estimates by two cents. Revenues grew +9.2% and kept the trend alive of FDS delivering revenues just above expectations.

The company has an active stock buyback program. Management boosted their repurchase program back in December by $300 million. At the time that meant their buyback program was almost $339 million. Keep in mind that FDS only has 41.7 million shares outstanding.

Following FDS' March 17th Q2 report the company raised their guidance for Q3. They now estimate earnings will grow +12.8% into the $1.40-1.42 per share range. This is above Wall Street estimates. Shares of FDS rallied on this report but they've spent the last several weeks consolidating sideways on either side of $160.00. The good news is that FDS is building a bullish trend of higher lows. Today the stock is poised to breakout past resistance and hit new record highs. We are suggesting a trigger to buy calls at $162.25.

- Suggested Positions -

Long JUN $165 CALL (FDS150619C165) entry $3.80

05/13/15 triggered @ 162.25
Option Format: symbol-year-month-day-call-strike

F5 Networks - FFIV - close: 126.24 change: +1.21

Stop Loss: 121.40
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
Average Daily Volume = 1.2 million
Entry on May 08 at $125.15
Listed on May 07, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

05/13/15: FFIV surged toward new three-month highs with a +0.96% gain on Wednesday. The last couple of years there have been rumors that Cisco Systems (CSCO) had considered buying FFIV. That rumor resurfaced today ahead of CSCO's earnings report.

We would consider new positions on FFIV here or you could look for some follow through and use a move past $126.75 instead.

Trade Description: May 7, 2015:
It has become a hostile world for corporations and their biggest weakness is online security. It feels like every day we hear about another company getting hacked. In recent years there have been a number of high-profile hacking attacks like Target (TGT), Home Depot (HD), and Sony (SNE). Fortunately for FFIV all of this plays to their strength as more corporations seek to beef up their cyber security.

According to company marketing, "F5 provides solutions for an application world. F5 helps organizations seamlessly scale cloud, data center, and software defined networking (SDN) deployments to successfully deliver applications to anyone, anywhere, at any time. F5 solutions broaden the reach of IT through an open, extensible framework and a rich partner ecosystem of leading technology and data center orchestration vendors. This approach lets customers pursue the infrastructure model that best fits their needs over time. The world's largest businesses, service providers, government entities, and consumer brands rely on F5 to stay ahead of cloud, security, and mobility trends."

After strong earnings and sales growth in 2014 the company hiccupped in Q1 2015 (which was the last quarter of 2014). FFIV beat estimates on the bottom line but management guided lower for Q2. You can see how the market reacted to this news with the big gap down in mid January.

Their most recent earnings report was April 22nd. FFIV reported their 2015 Q2 results of $1.59 per share. That was nine cents better than expected. Revenues were up +12.4% to $472.1 million, just above estimates. Wall Street's biggest concerns following these results are the impact of currency headwinds (thanks to the strong dollar) and FFIV's falling revenue growth. They're still growing but momentum seems to be slowing a bit.

The stock rallied on its earnings news and burst through major resistance near $120 and several key moving averages. The last couple of weeks have looked like a consolidation period where FFIV digested its post-earnings pop. Now FFIV is poised for the next leg higher. The point & figure chart is very bullish and forecasting a long-term target of $193.00. Tonight we're suggesting a trigger to buy calls at $125.15.

- Suggested Positions -

Long JUL $130 CALL (FFIV150717C130) entry $3.25

05/08/15 triggered @ 125.15
Option Format: symbol-year-month-day-call-strike

Global Payments Inc. - GPN - close: 102.73 change: +1.27

Stop Loss: 99.85
Target(s): To Be Determined
Current Option Gain/Loss: +5.3%
Average Daily Volume = 589 thousand
Entry on April 21 at $101.05
Listed on April 18, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

05/13/15: GPN is looking healthier thanks to a +1.25% rally today. The stock has closed at new all-time highs. We would consider new positions at current levels.

Trade Description: April 18, 2015:
GPN is in the services sector. They provide money transfers and electronic payment solutions.

According to the company website, "Global Payments Inc. (GPN) is a leading worldwide provider of payment technology services that delivers innovative solutions driven by customer needs globally. Our partnerships, technologies and employee expertise enable us to provide a broad range of products and services that allow our customers to accept all payment types across a variety of distribution channels in many markets around the world. Headquartered in Atlanta, Georgia with more than 4,300 employees worldwide, Global Payments is a Fortune 1000 Company with merchants and partners in 29 countries throughout North America, Europe, the Asia-Pacific region and Brazil."

The company has been consistently delivering strong earnings growth. GPN has beaten Wall Street's expectations and guided higher the last three quarters in a row. Their most recent report was April 8th when GPN delivered their 2015 Q3 results. Earnings were up +18.7% to $1.14 a share. Revenues were up +8% to $665 million. Growth was driven by strong performances in the U.S. and their Asia-Pacific operations.

Management raised their forecast again. They see 2015 earnings in the $4.77-4.84 range, which would be +8% to +10% growth. They're forecasting 2015 revenues in the $2.75-2.80 billion range or +16% to +18% growth.

GPN management is also shareholder friendly and has been significantly boosting their stock buy back program. They recently announced an accelerated share repurchase program up to $100 million.

The stock has rallied on the strong earnings results and buyback news. Today GPN is hovering near all-time highs around psychological resistance at the $100 level. It was impressive that GPN did not participate in the market's widespread sell-off on Friday. We want to be ready to hop on board if GPN can rally past resistance at $100.

Tonight we're suggesting a trigger to buy calls at $101.05.

- Suggested Positions -

Long AUG $105 CALL (GPN150821C105) entry $2.85

05/12/15 new stop @ 99.85
04/21/15 triggered @ 101.05
Option Format: symbol-year-month-day-call-strike

Helen of Troy Limited - HELE - close: 87.62 change: -2.23

Stop Loss: 87.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 193 thousand
Entry on May -- at $---.--
Listed on May 11, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

05/13/15: Uh-oh! It was a rough day for HELE. Shares opened higher but failed at resistance near $90.00. The stock reversed and underperformed the market with a -2.48% decline. Technically today's move has generated a bearish engulfing candlestick reversal pattern, which needs to see confirmation.

If HELE continues to sink tomorrow then we'll drop it.

Trade Description: May 12, 2015:
Shares of HELE are looking pretty good. After bottoming out near $52.00 back in September-October 2014 this stock has soared to new all-time highs. The stock is up +73% from its fall 2014 lows. The last couple of earnings reports have been better than expected.

HELE is in the consumer goods sector. According to the company, "Helen of Troy Limited is a leading global consumer products company offering creative solutions for its customers through a strong portfolio of well-recognized and widely-trusted brands, including: Housewares: OXO®, Good Grips®, Soft Works®, OXO tot® and OXO Steel®; Healthcare/Home Environment: Vicks®, Braun®, Honeywell®, PUR®, Febreze®, Stinger®, Duracraft® and SoftHeat®; and Personal Care: Revlon®, Vidal Sassoon®, Dr. Scholl's®, Pro Beauty Tools®, Sure®, Pert®, Infusium23®, Brut®, Ammens®, Hot Tools®, Bed Head®, Karina®, Ogilvie® and Gold 'N Hot®. The Nutritional Supplements segment was formed with the recent acquisition of Healthy Directions, a U.S. market leader in premium doctor-branded vitamins, minerals and supplements, as well as other health products sold directly to consumers."

On the daily chart you can see how shares of HELE soared back in early January 2015 after report earnings. The company beat estimates by a very wide margin. Wall Street was looking for $1.31 per share and HELE delivered $2.17. Revenues also came in above expectations and management guided higher.

The earnings momentum continued in the last quarter. HELE reported its 2015 Q4 results on April 28th. Earnings soared +311% from a year ago to $1.40 per share. Wall Street was expecting $1.09 a share. Revenues were up +19.7% to $377.7 million, which was significantly above estimates. Their gross margins improved 3.5 percentage points to 43.7%.

Julien R. Mininberg, Chief Executive Officer, stated, "We are pleased to report a strong fourth quarter, capping a successful fiscal year of growth. Fourth quarter revenue rose approximately 21%, building on favorable third quarter results. Our Healthcare/Home Environment and Housewares segments lead our core business sales growth with double digit increases in the fourth quarter. Our Nutritional Supplements segment, acquired in June 2014, grew in line with expectations. Our Personal Care business slowed its decline in the fourth quarter as we make progress toward stabilizing that segment. For the full fiscal year, despite foreign currency headwinds, Helen of Troy grew revenue by 9.7%, adjusted income by 16.6%, and adjusted diluted EPS by 30%."

Management issued a mixed picture for fiscal year 2016. HELE expects earnings in the $4.33-4.73 range, which is below analysts' estimates. Yet they see revenues in the $1.485-1.536 billion zone versus estimates for $1.47 billion.

The stock popped on its Q4 report on April 29th. The point & figure chart is bullish and forecasting at $97.00 target. HELE has managed to ignore most of the market's recent volatility. Instead shares are just consolidating sideways as they try and generate enough steam to breakout past resistance at $90.00. Tonight we are suggesting a trigger to buy calls at $90.25.

Trigger @ $90.25

- Suggested Positions -

Buy the AUG $95 CALL (HELE150821C95) current ask $3.10

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

Northern Trust Corp. - NTRS - close: 74.73 change: +0.09

Stop Loss: 73.45
Target(s): To Be Determined
Current Option Gain/Loss: -20.9%
Average Daily Volume = 1.1 million
Entry on May 05 at $75.05
Listed on May 04, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

05/13/15: NTRS delivered a quiet session. The stock consolidated sideways in a narrow range just below the $75.00 mark. I am suggesting traders wait for a new rally past $75.05 before considering new positions.

Trade Description: May 4, 2015:
NTRS has been around for 125 years. The company looks pretty good for its age. Shares are outperforming the broader market and its peers. Currently NTRS is up +10% in 2015 versus a -0.6% decline in the financial sector.

According to the company, "Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has offices in the United States in 19 states and Washington, D.C., and 20 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2015, Northern Trust had assets under custody of US$6.1 trillion, and assets under management of US$960.1 billion. For 125 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation."

The last couple of earnings reports have been healthy. Their Q4 report in January came in better than expected on both the top and bottom line. NTRS' most recent report was its 2015 Q1 results on April 21st. Wall Street was looking for a profit of $0.87 a share on revenues of $1.12 billion. NTRS said their earnings rose +25% from a year ago to $0.94 and revenues were up +9.0% to $1.13 billion.

NTRS' Chairman and CEO Frederick Waddell commented on his company's performance, "We are pleased with our financial performance in the first quarter of 2015, which reflects continued growth in our business serving personal and institutional clients. Trust, investment and other servicing fees, which represent two-thirds of our revenue, increased 7% compared to last year. New business and higher equity markets contributed to growth in assets under custody and under management of 6% and 5%, respectively. Total revenue grew 9% and we maintained a disciplined focus on expenses, which increased 3%, producing meaningful operating leverage. As a result, our pre-tax profit margin improved to 31.2% in the first quarter and our return on equity was within our target range of 10-15%. We also look forward to returning capital to our stockholders in the year ahead as the Federal Reserve did not object to the proposed capital actions in our 2015 Capital Plan. Our Capital Plan and proposed capital distributions demonstrate the strength of Northern Trust's focused business model, financial position and commitment to stockholders."

Shares of NTRS popped to new multi-year highs on its Q1 report. Instead of giving back its gains the stock has been able to consolidate at these highs. Shares displayed relative strength again with today's +1.1% gain. Today's move is also a bullish breakout past resistance near $74.00. The point & figure chart is bullish and forecasting a long-term target of $86.00. Tonight we're suggesting a trigger to buy calls at $75.05.

- Suggested Positions -

Long JUL $75 CALL (NTRS150717C75) entry $2.15

05/12/15 new stop @ 73.45
05/05/15 triggered @ 75.05
Option Format: symbol-year-month-day-call-strike

Omincare Inc. - OCR - close: 91.24 change: +2.57

Stop Loss: 86.95
Target(s): To Be Determined
Current Option Gain/Loss: -16.7%
Average Daily Volume = 921 thousand
Entry on May 06 at $90.35
Listed on May 05, 2015
Time Frame: Exit prior to June option expiration
New Positions: see below

05/13/15: What a difference a day makes! Yesterday OCR appeared to be breaking down. Today shares outperformed the market after shooting higher this morning. The stock tagged new all-time highs before settling with a +2.89% gain on the session. I don't see any company-specific news behind the big rally this morning.

Trade Description: May 5, 2015:
Wall Street loves mergers and acquisitions. OCR has put itself up for sale.

OCR is in the healthcare sector. According to the company, "Omnicare, Inc., a Fortune 500 company based in Cincinnati, Ohio, provides comprehensive pharmaceutical services to patients and providers across the United States. As the market-leader in professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other chronic care institutions, Omnicare leverages its unparalleled clinical insight into the geriatric market along with some of the industry's most innovative technological capabilities to the benefit of its long-term care customers. Omnicare also provides specialty pharmacy and key commercialization services for the bio-pharmaceutical industry through its Specialty Care Group."

Most of OCR's sales are in the long-term care group. This business essentially helps nursing homes with their resident's medications and dispensed more than 110 million prescriptions last year.

The company has been a consistent earnings producer. OCR has beaten Wall Street's estimates on both the top and bottom line the last four quarters in a row. Their most recent report was April 29th. OCR announced its 2015 Q1 results with earnings up +12% from a year ago at $1.02 per share. Revenues were up +5.7% to $1.66 billion. The company is forecasting 2015 earnings in the $4.08-4.16 per share range with sales in the $6.50-6.70 billion zone.

Currently the spark behind OCR's surge to new highs is M&A speculation. Around April 21st it was disclosed that OCR was exploring a sale of the company. Potential bidders include Cardinal Health (CAH), CVS, Express Scripts (ESRX), McKesson (MCK), and Walgreens Boots Alliance (WBA). Initial bids are expected in May. One analyst has estimated the company could go for $101.00 per share. It's important to note that there is no guarantee OCR will reach a deal and none of the potential bidders are talking to reporters.

Technically shares of OCR have been showing relative strength. At the moment OCR is on the verge of breaking out past resistance near $90-91. Tonight we're suggesting a trigger to buy calls at $90.35. More conservative traders may want to use a trigger closer to $91.00. The stock has been volatile since it was discovered the company is for sale. Investors may want to use small positions to limit risk.

- Suggested Positions -

Long JUN $95 CALL (OCR150619C95) entry $2.28

05/06/15 triggered @ 90.35
Option Format: symbol-year-month-day-call-strike

Snap-on Inc. - SNA - close: 156.40 change: +0.90

Stop Loss: 149.40
Target(s): To Be Determined
Current Option Gain/Loss: +29.4%
Average Daily Volume = 346 thousand
Entry on May 07 at $153.50
Listed on May 06, 2015
Time Frame: exit PRIOR to June option expiration
New Positions: see below

05/13/15: SNA managed to push past short-term resistance near $156.00 this morning and the stock closed at a new all-time high.

I am not suggesting new positions at this time.

Trade Description: May 6, 2015:
Steady earnings growth, a consistent dividend, and a positive outlook are three things investors like to see. SNA delivers on all three counts. The company is in the industrial goods sector.

According to the company, "Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. Snap-on also derives income from various financing programs to facilitate the sales of its products. Products and services are sold through the company’s franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.3 billion, S&P 500 company headquartered in Kenosha, Wisconsin."

SNA has been consistently beating analysts expectations. Prior to their Q1 report the company was delivering results above estimates on both the top and bottom line. That changed with the April 23rd announcement of its Q1 results. Earnings rose +15.4% from a year ago to $1.87 per share. This was above Wall Street estimates and the eight consecutive quarter in a row that SNA has beaten analysts' expectations. Unfortunately, revenues only rose +5.1% to $827.8 million and that missed estimates of $834.4 million.

The market's didn't seem to care. Shares of SNA rallied anyway in spite of the earnings miss. Management said their Q1 2015 saw strong organic growth in sales of +9.9%. One analyst raised their price target on SNA to $180 per share. The point & figure chart is even more optimistic and forecasting at $191 target.

SNA has also announced another dividend. Here's a quick excerpt from the company press release, SNA has declared a "quarterly common stock dividend of $0.53 per share payable June 10, 2015 to shareholders of record on May 20, 2015. Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939."

Technically shares of SNA look bullish with a strong pattern of higher lows. It's currently poised to breakthrough short-term resistance near $153.25 soon. We are suggesting at rigger to buy calls at $153.50.

- Suggested Positions -

Long JUN $155 CALL (SNA150619C155) entry $2.55

05/07/15 triggered @ 153.50
Option Format: symbol-year-month-day-call-strike

Splunk, Inc. - SPLK - close: 69.71 change: +2.04

Stop Loss: 64.85
Target(s): To Be Determined
Current Option Gain/Loss: +25.6%
Average Daily Volume = 1.9 million
Entry on April 23 at $66.25
Listed on April 22, 2015
Time Frame: Exit PRIOR to earnings on May 28th
New Positions: see below

05/13/15: Bullish momentum from yesterday's intraday rebound continued today. SPLK raced higher with a +3.0% gain. The stock stalled just below resistance at the $70.00 level.

I am not suggesting new positions at this time.

Trade Description: April 22, 2015:
Big data and cyber security are buzzwords in the information technology industry. One firm appears to have found its niche providing solutions for both of them.

SPLK is in the technology sector. They are considered part of the application software industry. According to the company, "Splunk Inc. (SPLK) provides the leading software platform for real-time Operational Intelligence. Splunk® software and cloud services enable organizations to search, monitor, analyze and visualize machine-generated big data coming from websites, applications, servers, networks, sensors and mobile devices. More than 9,000 enterprises, government agencies, universities and service providers in more than 100 countries use Splunk software to deepen business and customer understanding, mitigate cybersecurity risk, prevent fraud, improve service performance and reduce cost. Splunk products include Splunk® Enterprise, Splunk Cloud™, Hunk®, Splunk Light™, Splunk MINT and premium Splunk Apps."

The company is seeing significant earnings momentum. Their FY2015 Q2 report in August beat analysts' estimates on both the top and bottom line. Revenues were up +51.7% from the year ago period. Management raised their guidance. They did it again with their Q3 results in November with a beat on both the top and bottom line with revenues rising +47.6% and SPLK raised their guidance.

The company's most recent report was February 26th, 2015. SPLK delivered their fiscal year 2015 Q4 results. Analysts were looking for earnings of $0.04 a share on revenues of $136.98 million. SPLK delivered $0.09 a share. Revenues soared +47.5% to $147.4 million. For the whole year (FY2015) SPLK's revenues were up +49%.

SPLK CEO and Chairman, Godfrey Sullivan, commented on their performance, saying, "We are proud to welcome more than 600 new customers to the Splunk family, which now includes over 9,000 customers around the world. We finished FY15 with strong performance across the board and posted our best quarter yet for both Splunk Cloud and the Splunk App for Enterprise Security. Our investments in cloud and solutions are helping to drive global customer adoption."

SPLK management raised guidance again for FY2016 Q1 and for the full year. They now forecast revenues above Wall Street estimates. SPLK expects 2016 sales to hit $600 million, which is a +33% improvement from 2015.

Wall Street is very bullish on the stock. Shares have seen a parade of upgrades and raised price targets. Here's a brief list of price targets: Deutsche Bank $80, JMP Securities $81, Citigroup $81, Wedbush $82, Morgan Stanley $84, Credit Suisse $85, Canaccord $86, and FBR Capital with a $90 price target on SPLK shares. The point & figure chart is only forecasting at $76 target but it could grow.

Technically SPLK has been consolidating sideways in the $60-65 zone the last couple of weeks. Today shares displayed relative strength with a +2.6% gain and a breakout past resistance near $65.00. I'm suggesting a trigger to launch bullish positions at $66.25. The levels to watch are potential overhead resistance at $70 and $75.

- Suggested Positions -

Long AUG $70 CALL (SPLK150821C70) entry $4.54

05/12/15 new stop @ 64.85
05/09/15 adjust time frame, plan on exiting prior to earnings on May 28th
04/30/15 new stop @ 63.85
04/23/15 triggered @ 66.25
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 69.76 change: -0.38

Stop Loss: 72.20
Target(s): To Be Determined
Current Option Gain/Loss: -12.6%
Average Daily Volume = 2.3 million
Entry on May 12 at $69.70
Listed on May 06, 2015
Time Frame: exit PRIOR to June option expiration
New Positions: see below

05/13/15: It was an encouraging day if you are bearish on BBBY. The rally this morning failed near $71.00 and technical resistance at its simple 200-dma. BBBY reversed to close below support at $70.00 for the first time in over five months. We would consider new positions at this time.

Trade Description: May 6, 2015:
We are bringing BBBY back as a put candidate. Here is our recent trade description with a new entry trigger:

Retailers like BBBY suffered a number of challenges last quarter. Naturally the strong U.S. dollar hurt their international sales. Their U.S. operations were hurt by the West Coast port slowdown. Management also blamed bad weather in February for a significant slowdown.

If you're not familiar with BBBY they are in the services sector. According to the company, "Bed Bath & Beyond Inc. and subsidiaries (the "Company") is a retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in store, online or through a mobile device.

The Company has the developing ability to have customer purchases picked up in store or shipped direct to the customer from the Company's distribution facilities, stores or vendors. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare and other industries. Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond. Shares of Bed Bath & Beyond Inc. are traded on NASDAQ under the symbol 'BBBY' and are included in the Standard and Poor's 500 and Global 1200 Indices and the NASDAQ-100 Index. The Company is counted among the Fortune 500 and the Forbes 2000.

The Company operates websites at bedbathandbeyond.com, worldmarket.com, buybuybaby.com, christmastreeshops.com, and harmondiscount.com. As of February 28, 2015, the Company had a total of 1,513 stores, including 1,019 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada, 270 stores under the names of World Market, Cost Plus World Market or Cost Plus, 96 buybuy BABY stores, including its first in Canada, 78 stores under the names Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, and 50 stores under the names Harmon or Harmon Face Values."

BBBY's 2015 Q3 results were reported in January this year. Earnings were in-line with estimates. Revenues only saw low single-digit growth and came in slightly below analysts' estimates. This trend continued with their Q4 results BBBY delivered on April 8th.

Earnings of $1.80 a share were in-line with estimates. Revenue growth improved a little bit to +4.2% but still came in below Wall Street estimates at $3.34 billion. Q4 comparable store sales were up +3.7% but management is forecasting comps to fall into the +2-3% range for fiscal 2016. Another challenge for BBBY is margins, which are getting squeezed. Margins fell -77 basis points in Q4 following a similar decline in Q3. BBBY also lowered their Q1 2016 guidance to $0.90-0.95 a share versus analysts' estimates of $1.01.

In their Q4 earnings report BBBY said they spent $947 million buying back approximately 11.8 million shares of the company's stock. This is part of a $2 billion stock buyback program. A Bank of America analyst noted that without BBBY's stock buyback the company would not have seen any earnings growth. As of February 28, 2015, BBBY's remaining balance on its repurchase program was about $884 million.

Technically the stock has broken down. The path of least resistance is lower. The point & figure chart is bearish and forecasting at $64.00 target. Shares recently bounced near support at $70.00 and its simple 200-dma but that bounced has failed at its trend of lower highs. Now BBBY is threatening to break key support at $70.00 again. We want to be ready when it does. Tonight I am suggesting at trigger to buy puts at $69.70. We'll try and limit our risk with a stop loss at $72.20.

- Suggested Positions -

Long JUN $70 PUT (BBBY150619P70) entry $1.90

05/12/15 triggered @ 69.70
Option Format: symbol-year-month-day-call-strike