Option Investor

Daily Newsletter, Thursday, 5/14/2015

Table of Contents

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

Market Wrap

Mixed Data Lifts Markets

by Thomas Hughes

Click here to email Thomas Hughes
A round of mixed economic data lifted the market in another Goldilocks rally.


Mixed economic data in the form of PPI and jobless claims helped to lift the market today. The PPI numbers were much weaker than expected, pushing out FOMC rate hike expectations, while strong jobless claims numbers support labor market health and expectations for economic uptick. The data also helped to weaken the dollar which in turn has sparked moves in gold, foreign exchange and raised speculation that 2nd quarter earnings will not be as bad as first feared. What was as bad as first feared, maybe worse, is earnings from the retail sector. The reports across the sector have been mixed to negative all week and today was no exception.

Market Statistics

International indices were also mixed. In Asia, Chinese indices were mostly higher while Japan lost about -1% on weak earnings and a stronger yen. In Europe indices began in the red and slowly moved higher throughout the day. Futures trading here in the early pre-opening session saw a lift as well, aided by today's economic data. ,

The indices opened strong with an average gain over 0.5%. From that point forward it was steady buying until 1:30PM when the broad market approached its all time. By 3PM the SPX had moved into all-time high territory and was able to hold that level into the end of the day. I wouldn't call it a break out just yet but one may be about to happen. All of the major indices made significant gains today, led by the techs.

Economic Calendar

The Economy

Today's economic calendar include PPI as well as the weekly jobless claims numbers. The Producer Price Index fell by -0.4% on the headline and -0.2% at the core level. The drop is well below expectations which predicted for it to hold steady at 0.2%. The number is low but good enough to stave off fear of a super imminent FOMC interest rate hike. Low or declining inflation takes more pressure off the Fed's decision making process; this data won't drive them to a rate hike. Micro data within the report show that biggest decline was in finished goods (-0.7%) and gasoline (-4.7%). The report also mentioned noteworthy declines in the prices for jet fuel, diesel and pork.

Initial claims fell 1,000 from last week's upward revision of 1,000. Claims this week were reported as 264,000, just off the long term 15 year low. The four week moving average of claims also fell, to 271,750, and set a new 15 year low. The long term down trend in first time claims has resumed after the volatility we saw during the late winter and early part of the spring.

There may be more volatility but so long as the moving average trends flat to lower I think we're OK here. On a not adjusted basis claims rose by 2.6%, a half percent below the expected 3.1% predicted by the seasonal factors. New York led states with increases with a gain of +810, Massachusetts led those with declines posting a drop of -4,191.

Continuing claims remained unchanged from an upward revision of 1,000, a tiny gain from last week's report but not really. Continuing claims remain at the long term low while the moving average has declined, setting a new 15 year low. This is a continuation of it's long term downtrend and sign that those who lose a job find a job.

The declines in first time and second week claims has contributed to a decline in longer term unemployment. The total number of people on unemployment dropped nearly 80,000 to set a new 5 month low as it approaches it's long term 15 year low. Based on today's labor data the labor market is strong. There may not be a lot of jobs being created but other elements of the market are healthy if not robust. In terms of jobless claims labor market turnover is low, people who are out of work one week find jobs are finding jobs within a week or two and that longer term unemployment levels are in decline. If this is true then its only a matter of time before we get additional signs of economic momentum.

The Oil Index

Oil prices fell today. Prices for WTI lost more than -1.5% while Brent lost only about -0.35%. Today's move takes WTI back below $60. Still no sign of demand pick-up, lots of signs supply is still high. There is also ongoing fighting in Yemen, and the Iran nuclear deal is still simmering on the back burner.

The Oil Index traded slightly higher today, gaining about a half percent. The index traded in a very tight range just below the short term 30 day moving average and resistance near 1,400. It is indicated lower at this time although momentum is in decline. Stochastic is not yet oversold so it appears as if the index has room to move lower, maybe to 1,350 in the near term. The long term trend is still up but the trend line is about 7.5% below today's closing price so it has room to move down from here. Earnings outlook may weigh it down unless or until the oil sector starts to show signs of the expected earnings rebound. This could begin as early as the 3rd quarter, 2nd quarter earnings are still expected to decline but those estimates are likely to change in the coming weeks and could help support the index.

The Gold Index

The PPI gave gold a boost today via the dollar. The numbers, along with the labor data, combined to create a Goldilocks situation for gold bulls and bulls in general. Basically the economy is still gaining strength with little to no inflation, a situation in which there is little expectation for a rate hike. This in caused the dollar to sink and send gold above $1220 to set a new 3 month high. Now that rate hikes are on the back burner dollar values could remain low and send gold prices higher with a target near $1250 in the near to short term.

The gold miners tried to extend the gains they made yesterday. The Gold Miners ETF closed with barely a gain after opening with a small gap and moving higher on an intraday basis. The ETF has begun to move up as previously indicated and today met with some resistance just above $21. This resistance equal to the March peak and a 2 ½ month high for the sector. Rising gold prices are lifting the sector. This could drive the miners higher on improved earnings expectations, even if gold prices only stay at or near $1220.

In The News, Story Stocks and Earnings

The dollar fell this morning when the PPI was released. The Dollar Index lost more then a half percent in early trading but recovered a lot of the loss before the end of the day. Today's move took the index down to test support near $93.25. This support line marks a 3 month low and is anchored to significant price action which occurred in early February, just after the January FOMC meeting and during the time in which the ECB revealed their QE plans. The indicators are bearish and pointing lower but divergence in MACD suggest this level may hold. Stochastic is weak but also deeply oversold following the recent uptrend. If support is broken it could go down as low as $90 which would really boost gold value, as well as earnings outlook for companies doing business in overseas markets.

Kohl's reported a miss on the revenue side that sent shares tumbling. The company managed to beat earnings expectations with a gain of 2 cents over the same period a year ago. Company CEO said that sales were only “modestly” below expectations, mostly due to a weak February, but had been on the rise in the last two months. The company also reported opening two new stores. Shares fell more than -13% to hit potential support at the top of gap opened following the previous earning release.

The retail sector as a whole did not fare much better. The XRT Retail Spyder fell a little over a half percent in a day of volatile trading. Today's action took the index up to test resistance at the 30 day moving average where it was repelled. Later, after dropping more than -1%, it found support and was able to bounce and then close above the daily low. Today's candle shows indecision in the market while it trades above support at $97 and below resistance near $91. The indicators are consistent with support but mixed in terms of near term direction. Momentum is weak, but currently bearish, stochastic is rising in the short term but falling in the near term. Support could be tested, but for now it looks like it will hold. If it breaks the ETF could fall to $95. Resistance is the moving average until broken.

Avon had a wild day today. Reports emerged early that the company was going to be purchased by an investment group. Later it turned out that the investment group was a hoax. A very long paper trail of false documentation was found but as yet no suspects. In between those events volatility sent the stock shooting higher, then lower, with enough force to trigger safety stops to halt trading at least 3 times. Even with the stops the action didn't really stop until the end of the day. Today's range sent it up by 16%, before falling back to close with a gain of only 6%, with about 8 times 30 day average volume.

The Indices

The markets are reaching new highs but you wouldn't be able to tell by looking at the Dow Jones Transportation Index. The index was able to move higher today, about 0.45% compared to 1% moves for the other major indices, but is doing so from the bottom of a long term trading range and well below the all time highs.

The index is also trading just above the long term trend line, support with which it made contact yesterday and today. The indicators are both pointing lower so support and/or the long term trend line could be tested again. however, over the longer term the indicators are consistent with support so for now the trend line looks strong. If the markets are moving higher the heavily downtrodden transportation sector may be the place to be.

Today's gains were led by the NASDAQ Composite. The tech gained 1.39% and moved above the previous all-time but not the current all-time high. Today's action also tested support at the short term moving average. After testing support it moved higher, crossing above 5050 for the first time since setting its new all time high last month. This move is in line with the trend and accompanied by bullish stochastic so could continue higher MACD is at the zero line so will be in confirmation is it crosses. If the index continues higher potential resistance remains until a break above the current all-time high so caution is still warranted. The index has support just below today's candlestick along the moving average and near 5,000.

The S&P 500 made the second largest gain today, 1.08%. The broad market was today's real leader because it set an actual all-time closing high, but not an all time high. Today's action created a long white candle that moved up from the long term trend line, at the very point of the triangle formation I have been following for the past two months. Stochastic fired a week signal earlier this week and is creating a stronger bullish signal now that both %K and %D are moving higher. This signal is about to be confirmed by MACD; MACD is now exactly at the zero line and will confirm a strong trend following signal if the index continues to move higher.

The question now is if it will move higher or if this is just another whipsaw? Today's action is a very positive sign but I think the true test will be when it tries to cross the all time high, just a few points above. If this is broken the index could move as high as 2,150 in the near term.

The Dow Jones Industrial Average gained a little over 1%, 1.06%. The blue chips created a long white candle and looks even more bullish than the SPX, although it too has resistance at its all time high. Today's action broke potential resistance with indicators that are both bullish and rising. Both MACD and stochastic have been bullish for a couple of days and are both gaining strength, if also both still a little weak. It looks like this index will move up to test the all time high at the least. If a breakout occurs the index could move as much as 500 points in the near to short term. Support remains near 18,000.

The market got a double shot of what it wanted today, positive reinforcement the labor market is improving and signs the FOMC won't raise rates real soon. The down side is that this may be bad for the market down the road. Too much of a good thing, in this case labor market expansion without inflation, could lead to a bad thing. A bad thing might be a sudden burst of economic activity or rise in inflation that leads to a rapid pace of FOMC policy tightening and a shock to the market.

Things are looking OK now, and outlook is positive, so I remain bullish. I also remain very cautious. As much as I want to say the market is about to break out we still need to see a little more commitment, a little more decisiveness in the move, before getting really bullish on the summer. I don't think the Fed will raise rates in June but we shouldn't be surprised if they remain on track for a hike in Septmeber. It is very possible the market could remain range bound with all-time highs as the upper end until those signs begin to emerge.

There is a bit of data due out tomorrow and next week that could help the market extend today's gains. Tomorrow is Empire Manufacturing, Michigan Sentiment, Industrial Production and Capacity Utilization. Next week is the housing data; housing starts, building permits and existing home sales. Next week is also the FOMC minutes, Leading Indicators and Philly Fed.

Until then, remember the trend!

Thomas Hughes

New Option Plays

Industrial Highs

by James Brown

Click here to email James Brown


Martin Marietta Materials - MLM - close: 154.67 change: +0.70

Stop Loss: 149.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 809 thousand
Entry on May -- at $---.--
Listed on May 14, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The Dow Industrials delivered a strong day with a +191 point gain. It's on the verge of breaking out to a new all-time high. Unfortunately the industrials are lagging behind the other major indices with a mere +1.5% gain in 2015.

One industrial sector stock that is really outperforming its peers is MLM. Shares are also near all-time highs and MLM is up about +40% year to date. According to the company, "Martin Marietta, an American-based company and a member of the S&P 500 Index, is a leading supplier of aggregates and heavy building materials, with operations spanning 32 states, Canada and the Caribbean. Dedicated teams at Martin Marietta supply the resources for the roads, sidewalks and foundations on which we live. Martin Marietta's Magnesia Specialties business provides a full range of magnesium oxide, magnesium hydroxide and dolomitic lime products."

You probably noticed the huge rally in MLM back in February. That was a reaction to its 2014 Q4 results. Earnings were above expectations and revenues soared +57% from a year ago to $856 million, which was also above analysts' estimates.

The company also announced a 20 million share stock buyback program back in February. Now 20 million shares may not sound like much but MLM only has 67.48 million shares outstanding.

The stock spent the following eight weeks slowly drifting lower. It finally found support in the $135.00 area. Then suddenly MLM found its mojo again when the company reported its 2015 Q1 results on April 30th. The funny thing is MLM actually missed Wall Street estimates. Analysts were expecting a profit of $0.09-0.12 a share for the first quarter. MLM only delivered $0.07 but it was better than a loss of $0.47 a year ago. 2015 Q1 was the first time MLM had reported a profit in the first quarter since 2008.

MLM said revenues rose +61% from a year ago to $691.4 million. That too was below expectations but traders didn't care. Management said their margins improved 500 basis points. Business was strong enough they were able to raise prices +11%. Here's an excerpt from the company's press release:

Ward Nye, Chairman, President and CEO of Martin Marietta, stated: "We are pleased to report improved margins and increased profitability, both considerably ahead of our internal plans, and a first-quarter profit for the first time since 2008. These quarterly results serve as a further validation of our success in executing on our strategic objectives, as well as our relentless commitment to operational excellence and cost discipline. Notably, we achieved volume growth and reported a double-digit pricing increase in our heritage aggregates product line despite severe late winter weather in many markets and significant rainfall in Texas. We view this volume and pricing momentum as an indication of a more construction-centric phase of economic recovery. Our first-quarter results and outlook for the full year have led us to increase our annual aggregates product line pricing guidance from an increase of 4% to 6% to an increase of 7% to 9% over 2014."
Shares of MLM soared on its Q1 report and now the stock has broken through resistance near $150.00. The point & figure chart is bullish and forecasting a long-term target of $221.00. The stock tested $150 as new support three days ago and looks poised to continue its climb. We are suggesting a trigger to buy calls at $156.00.

Trigger @ $156.00

- Suggested Positions -

Buy the JUL $160 CALL (MLM150717C160) current ask $3.50
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

Big Caps Close At New Highs

by James Brown

Click here to email James Brown

Editor's Note:

Stocks delivered a widespread rally on Thursday. Another down day in the dollar boosted commodities, although oil was an exception. It was a quiet day in the bond market and that let traders focus on equities.

The S&P 500 managed to set a new all-time closing high above resistance near 2,120.

APOG was closed this morning. HELE did not open.

Current Portfolio:

CALL Play Updates

Caterpillar Inc. - CAT - close: 88.74 change: +0.30

Stop Loss: 85.75
Target(s): To Be Determined
Current Option Gain/Loss: -1.0%
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

05/14/15: CAT briefly tagged a new three-month high. Unfortunately shares retreated back to a +0.33% gain on the session. The 150-dma and the $90.00 level could be acting as overhead resistance.

No new positions at this time.

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: 73.50 change: +0.69

Stop Loss: 69.75
Target(s): To Be Determined
Current Option Gain/Loss: +18.2%
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

05/14/15: ETN rallied to new 2015 highs with today's +0.9% gain. Shares are up four out of the last five sessions. The next level of resistance might be $75.00 so hopefully this momentum continues.

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: 165.11 change: +2.26

Stop Loss: 157.45
Target(s): To Be Determined
Current Option Gain/Loss: +5.3%
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

05/14/15: Shares of FDS raced higher. The stock is surging now that FDS has broken through resistance and closed at another new high. Traders may want to start raising their stop loss.

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: 127.60 change: +1.36

Stop Loss: 121.40
Target(s): To Be Determined
Current Option Gain/Loss: +15.4%
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

05/14/15: Traders bought the dip near $126.00 twice this morning. FFIV then rallied to a +1.0% gain and a new three-month high. Readers might want to start raising their stop loss.

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: 104.56 change: +1.83

Stop Loss: 99.85
Target(s): To Be Determined
Current Option Gain/Loss: +40.4%
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

05/14/15: GPN appears to be getting stronger. Shares outperformed the market for the second day in a row with a +1.78% gain today. Broken resistance near $102.00 should be new support. I am not suggesting new positions at this time.

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

Northern Trust Corp. - NTRS - close: 75.01 change: +0.28

Stop Loss: 73.45
Target(s): To Be Determined
Current Option Gain/Loss: -18.6%
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

05/14/15: NTRS bounced off short-term technical support at its simple 10-dma again. It is a little disappointing to see the stock only rally +0.37%. Today's intraday high was $75.17. I'd wait for a rally past this level before initiating 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: 91.81 change: +0.57

Stop Loss: 86.95
Target(s): To Be Determined
Current Option Gain/Loss: -7.9%
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

05/14/15: OCR delivered a choppy session. The first half of Thursday produced $1.00 swings between $91 and $92. OCR eventually closed up with a +0.6% gain but was unable to rally past yesterday's high ($92.30).

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: 157.59 change: +1.19

Stop Loss: 152.25
Target(s): To Be Determined
Current Option Gain/Loss: +56.9%
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

05/14/15: The bullish momentum in SNA continues. The stock is up six out of the last seven days. Tonight we'll move the stop loss to $152.25, just below the rising 20-dma.

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

05/14/15 new stop @ 152.25
05/07/15 triggered @ 153.50
Option Format: symbol-year-month-day-call-strike

Splunk, Inc. - SPLK - close: 70.42 change: +0.71

Stop Loss: 64.85
Target(s): To Be Determined
Current Option Gain/Loss: +32.2%
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

05/14/15: SPLK suffered some profit taking this morning but traders jumped in to buy the dip around $68.60. By the closing bell SPLK had broken out past round-number resistance at $70.00. This should bode well for tomorrow.

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: 69.65 change: -0.11

Stop Loss: 72.20
Target(s): To Be Determined
Current Option Gain/Loss: -11.1%
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

05/14/15: BBBY continues to underperform the market. Shares lost -0.15% today. However, it's tough for BBBY to muster up any downward momentum with the broader market breaking out to new highs. It was encouraging to see the intraday bounce struggle with resistance near $70.00 this afternoon.

I would hesitate to launch new positions here.

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

Endo International plc - ENDP - close: 85.02 change: +1.13

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

05/14/15: With the market in rally mode we shouldn't be surprised to see ENDP bounce a little bit. The stock added +1.3% and rallied toward the $85.00 level.

After the closing bell ENDP issued a press release about two Phase 3 trials on its Buprenorphine HCL buccal film for the management of chronic pain. The results appear to be favorable but I'm not seeing any reaction to ENDP's stock after hours.

We still have a trigger to launch bearish positions at $83.40.

Trade Description: May 13, 2015:
"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

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


Apogee Enterprises - APOG - close: 54.56 change: +0.29

Stop Loss: 51.75
Target(s): To Be Determined
Current Option Gain/Loss: -20.0%
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

05/14/15: Shares of APOG have been stuck under resistance near $55.00 for about six weeks. Last night we decided to abandon this trade and exit this morning. Readers may want to keep an eye on APOG for a close above $55.25 as a potential entry point down the road.

- Suggested Positions -

AUG $55 CALL (APOG150821C55) entry $2.75 exit $2.20 (-20.0%)

05/14/15 planned exit
05/13/15 prepare to exit tomorrow morning
04/27/15 triggered @ 53.85
Option Format: symbol-year-month-day-call-strike


Helen of Troy Limited - HELE - close: 88.19 change: +0.57

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 12, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

05/14/15: We are removing HELE as a candidate. Shares did bounce (+0.65%) today but they failed to keep pace with the broader market. The stock remains under resistance at $90.00.

Trade did not open.

05/14/15 removed from the newsletter, suggested entry was $90.25