Option Investor

Daily Newsletter, Tuesday, 5/19/2015

Table of Contents

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

Market Wrap

Internals Fading

by Jim Brown

Click here to email Jim Brown

The Dow may have set another new high by +13 points but the market internals are fading along with the volume as we head towards a long holiday weekend. There is a lot of red on the graphic below and not what you would expect at new market highs.

Market Statistics

The Dow battled to overcome the loss in Walmart and Home Depot after both components reported earnings. Fortunately McDonalds and DuPont helped offset those losses and allow the Dow to close positive. Now all we need is for a new catalyst to appear tomorrow to duplicate the Dow's miniscule gains.

On the economic front the New Residential Construction report for April showed new home starts increased from an annualized pace of 944,000 to 1,135,000. That is +20.2% above the March numbers and +9.2% above year ago levels. It was a blowout report that may have put the Fed rate hike back on the table for earlier this year.

Housing permits increased from 1.038 million to 1.143 million. Housing permits rose +10.1% compared to a decline of -5.5% in March. Permits are seen as a preview of housing starts for the month ahead. Single family permits rose +3.7% while multi-family permits soared +20.5% after a -16.1% decline in March.

Housing completions also spiked from 819,000 to 986,000. Clearly the severe winter weather than lingered in March finally improved and builders took advantage of it by accelerating their activity.

Before anyone gets too excited about the data you need to realize that the numbers are simply back to where they would have been had there not been a sharp weather related drop in March. The weekly mortgage application index is still holding near its post recession lows. More than 50.9% of applications last week were for refinancing instead of new purchases.

The strong rebound in the housing numbers caused the dollar index to spike along with yields on treasuries. Dollar denominated commodities like gold and oil imploded with huge declines. Gold declined -$20 to $1,207 and oil fell -$2.15 to $57.26. This was also futures expiration for the June contract in oil so there was a double impact there.

After the Housing Starts and the Industrial Production report from Friday the Atlanta Fed GDPnow forecast for Q2 GDP is predicting only +0.7% growth. As of May 1st the consensus forecast of 20 Blue Chip economists was for +3.2% growth.

In Q1 the GDPnow ended the quarter predicting Q1 GDP at +0.2% and that is exactly what the BEA reported on the first estimate for Q1.

This suggests the Q2 consensus will rapidly fall to mirror the GDPnow but today's consensus has only fallen to +2.8% growth and that is a significant difference from the +0.7% in the GDPnow. If we get another flurry of economic reports with missed estimates we could easily see a contraction in Q2 GDP instead of growth. That would really mess up the Fed's rate hike desires and I am sure they are seeing the same thing we are today. The strong housing numbers were a rebound from an ugly, weather related March and not indicative of future improvement along the same lines.

The calendar for Wednesday has the FOMC minutes and given the spike in residential housing starts this will be even more critical for Fed forecasting. The Philly Fed Manufacturing Survey on Thursday is the last major report for the week. A decline there would kill the Fed's rate hike hopes.

The Dow suffered a blow this morning from Walmart (WMT) after the company reported earnings. The -$3.50 drop in Walmart shares knocked about 27 points off the Dow and kept the index in negative territory early in the day. The company reported a 7% decline in Q1 profits as a result of the strong dollar, increased spending on its online business and higher worker wages. Same store sales rose only +1.1% but it was the third consecutive quarter of gains after a long dry spell. Analysts had expected slightly more at +1.5%. Walmart raised the minimum wage for its hourly workers to $9 in April and will increase that to $10 by February 2016.

The company is spending $1.2-$1.5 billion this year to upgrade its online operations ahead of the launch of a preferred customer program for $50 a year to receive free shipping on anything they sell. This is to compete with Amazon's $99 prime membership.

Earnings of $1.03 missed estimates by a penny. Revenue of $114.83 billion missed estimates for $116.27 billion.

Dow component Home Depot (HD) started the day off with a bang and a spike to $116.50 after reporting earnings of $1.16 that beat estimates by a penny. Revenue of $20.891 billion beat estimates for $20.812 billion. Same store sales rose +7.1% and better than the +6.6% analysts expected. The company also raised full year guidance from $5.11-$5.17 to $5.24-$5.27 per share. Analysts were expecting $5.23. They raised revenue estimates from +3.5-4.7% to 4.2-4.8%.

The store said heavy late winter snow in March depressed sales but they rebounded in April. The items in demand in Q1 were tools, decor, lighting, plumbing and accessories. The company said the housing sector is alive and well and people are spending to upgrade/repair their homes.

Shares declined -$4 from the opening spike as sellers appeared all across the retail sector.

The retail sector was hurt after the Walmart earnings and the even bigger disappointment from Urban Outfitters (URBN). Shares of URBN fell -15% after the company reported earnings of 25 cents that missed estimates for 30 cents. Revenue of $739 million also missed estimates for $757.6 million. The biggest challenge came from the Anthropologies brand where sales rose only +1% and analysts were expecting +4.7%.

Another problem is the price point. Urban's prices are higher than some competing chains like H&M or Forever 21, which sell for about 50% of the price at Urban. Consumers can browse Urban and then buy the similar style at other retailers for less. Urban is seen as a style leader but in the fashion world that only buys you a couple months before everyone else has copied your fashions. The 18-28 year-old demographic that shops at Urban is also broke. They have less disposable cash today than in years past and that means they are looking for the stores with the best bargains rather than the trendy high priced clothes.

The cash strapped consumer is becoming a problem for all retailers and not just Urban. This is our new sign of the times.

After the bell Etsy Inc (ETSY) reported a loss of -84 cents compared to expectations for a profit of 3 cents. Revenue of $58 million matched estimates. Gross sales rose +28% to $531.9 million. Etsy only gets a fee off the merchandise it sells rather than counting its sales as revenue. Active sellers increased +26% and active buyers rose +36%. Unfortunately operating expenses rose +73% to $42.7 million. The company said it was going to increase the pace of spending in Q2. Shares fell -20% in afterhours trading.

Red Robin Gourmet Burgers (RRGB) reported earnings that rose +34% to $1.10 and well over estimates for 88 cents. Revenue rose +16% to $394.9 million compared to estimates for $395.5 million. The chain has 517 locations and same store sales rose +3.1% while the average guest check increased +2%. Shares rose +15% on the news.

Social network company Momo (MOMO) certainly gained some momentum after it reported a +383% increase in revenue to $26.3 million. Earnings jumped to $6.7 million, up from a $1.2 million loss in the year ago quarter and a $10.5 million loss in the December quarter. They predicted revenues in Q2 of $32 million, which would be a +275% rise. Monthly active users hit 78.1 million in March, up +83%. Shares rallied +27% on the news. This officially makes them acquisition bait.

Earnings for tomorrow are headlined by Salesforce.com and Low's with Staples and Target filling up the calendar.

Yahoo (YHOO) shares fell -8% just before the close on worries the IRS could be changing the tax consequences of tax-free spinoffs. The proposed change would affect small businesses spinning off larger businesses. Yahoo owns 15% of Alibaba worth about $35 billion. That represents about 92% of Yahoo's market cap of $38 billion. Yahoo is planning to spin off its remaining 384 million Alibaba (BABA) shares later this year in a tax-free deal. If that tax-free status changes it would be a major blow for Yahoo. Starting today the IRS said it was putting any tax-free requests on hold until the issue is studied and a determination is made.

This could also impact Ebay's spinoff of PayPal later this year.

Computer Sciences Corp (CSC) said it was going to split into two companies. One will serve commercial and government clients globally and one to serve public sector clients in the USA. Existing shareholders will own both companies. They also said they declared a $10.50 special dividend as part of the split. The breakup will be completed by the end of October.

They also reported earnings of $1.26 compared to estimates for $1.20. Revenue of $2.91 billion was short of estimates for $2.96 billion as a result of the strong dollar. Shares rallied about $4.50 in afterhours.

Goldman Sachs (GS) has turned into a party pooper. In a note posted on Saturday they predicted the average price for 2015 for Brent crude would be $58, up from $52 and WTI would average $52, up from $48. While they did raise their forecast you probably noticed that it is about $10 below where crude was trading last week.

Goldman said WTI would remain pressured by excess production and Brent would decline over time to reach $55 by 2020. The "lower for longer" oil forecast was a serious drag on energy stocks and they downgraded the sector from neutral to cautious. Last week they said the rebound in oil prices was premature but nobody really paid any attention. This time everyone listened.

Goldman said the U.S. oil shale production would meet global demand needs for the next decade. I don't know what these analysts were smoking but I want some of it. This is probably the worst call Goldman has ever made. While U.S. shale production can continue to grow over the next two years the long term viability is very poor. Initial decline rates are in the 75% range in the first year and then 35% per year after that. We would have to drill wells at the early 2014 rate of about 9,000 per quarter forever to maintain production much less increase it past 2017. Unfortunately there are not enough prospective well locations to maintain that pace. Most shale drillers will have drilled their core locations by the end of 2016 and be forced to move to the fringe areas that produce less and deplete even faster.

I hope Goldman covers their shorts soon because I doubt any serious investor is going to believe this forecast. It will be interesting to see what OPEC does at its June 5th meeting.

Crude did decline -$2 today but the June futures also expired today and that normally produces a spike in volatility. The dollar also spiked on the housing starts and that means it takes less dollars to buy a barrel of oil.


This is not the way new market highs are normally formed. The Dow and S&P closed at new highs on Monday but just barely. Today the Dow barely squeezed out a gain of +13 points to close at a new high while the S&P lost a point. Typically new highs drag cautious fence sitting investors off the sidelines as the indexes surge higher. This is even more common when the old high was weeks in the past and clearly defined resistance.

Volume on Monday was only 5.38 billion shares and the second lightest day of the year. That is hardly a rousing burst of conviction on a day when the Dow and S&P are making new highs. Volume on Tuesday was slightly higher at 6.1 billion but it was roughly 2:1 declining over advancing volume. You want the higher volume on up days and lower volume on down days. That is not what we are seeing today and volume is only going to decline as the week progresses towards the long Memorial Day weekend.

While I would like to be bullish at the new highs the market internals are not confirming a bullish trend. On the S&P only 73.6% of the stocks are trading above their long-term 200-day average. That is hardly bullish. Only 63% of the stocks have a bullish Point and Figure chart.

Obviously these things can change for the better. What we are lacking is a catalyst that makes investors want to buy stocks ahead of the summer doldrums. I don't see what that catalyst will be. We already got news from Europe that they were going to front load their QE purchases so we can mark that off the list. EU officials have given Greece until May 29th to agree to a plan or else. I don't know what that "else" will be but there is an implied threat. Clearing up the Greek issue would be market positive to some extent but I think most U.S. investors have already discounted it and just wish it would go away.

MatlinPatterson's chief risk officer Ashwin Bulchandani said in a note on Monday, "Regardless of how the Greek impasse resolves itself, the global financial markets' ability to blissfully ignore Greece suggests that it expects one of two outcomes: (i) that a Greek default/exit is nowhere in the realm of possibility, or that (ii) even if Greece were to exit the Euro, the authorities have appropriately 'foamed down the runway' to curtail any contagion and the world will emerge largely unscathed from Grexit."

The earnings cycle is basically over. There are a couple of blue chips left to report but there is more downside risk than potential upside surprise. If Hewlett Packard surprised to the upside on Thursday would it really move the market?

The Nasdaq is lagging the other indexes even though the biotechs continue to surge. The tech excitement has left the building. The old tech giants like Microsoft, Intel, Qualcomm, Oracle, barely have a pulse. If it were not for the biotech rally the Nasdaq direction would significantly lower. One sector can't continue to pull the index higher forever. Eventually it will need help.

The S&P has traded above its March high of 2117.69 for three days now and only managed a 10 point gain over that level. This is positively lethargic as new high breakouts go. There were 249 decliners and 209 advancers on the S&P on Tuesday.

Initial support is now that 2117 level followed by 2100. Resistance is 2130 and 2150.

Remember the periods of volatility where the Dow was moving 200-300 points every day and in opposite directions. Just look at all the tall candles on the chart below and it will bring back those memories. Now look at the three tiny candles on the upper right where the Dow limped to a new high. That is hardly encouraging.

On Thursday the Dow closed at 18,246 and it closed at 18,313 today. That is a gain of +67 points and two of those days were new highs. The Dow is barely clinging to that 18,300 level. Of course we can blame Walmart for -27 points on the Dow today. Tomorrow it will be somebody else.

The Dow was also helped by McDonalds and DuPont and that rarely happens. McDonalds was up on falling bacon prices, down -45% at the wholesale level. Expect even more bacon burgers to be sold. They also sold 2 billion in bonds denominated in euros and launched another $2 billion sale in dollars in order to return cash to shareholders. OK, now that is old news. What is going to spike McDonalds tomorrow?

Initial support is 18,225 and then 18,050. Resistance is anything over today's high of 18,350.

The Nasdaq is struggling to move higher. As volume shrinks for the rest of the week it could find gains even more elusive. Stocks with problems are blowing up and the earnings reports that have produced some gains are disappearing. If the biotechs decide to take another rest it could be ugly.

Resistance is 5080 and 5110 with initial support at 5040 and 5000.

The small cap Russell 2000 has begun to inch its way higher but at a snail's pace. There is strong resistance at 1267 and 1272 with the historic high at 1275. The Russell has a tough path to a new high but it is not impossible. Investors simply have to come off the sidelines and start buying stock ahead of the summer doldrums. With investor sentiment 47% neutral something would have to change to make that happen. What would be the catalyst?

Last but not least the Dow Transports slipped again. They lost -66 points on a day when crude oil was down over $2 and Goldman is forecasting a return to $45. In theory they should have been surging higher on cheap fuel and the hope that the housing start rebound was the first sign of an economic rebound. Unfortunately that surge did not happen.

The transports are critical to Dow Theory and should be confirming the new high in the Dow Industrials with a new high of their own. While Dow Theory has been around forever the actual linkage between the two indexes has seemed to weaken in recent years. However, if the transports break below that support at 8600 I think we would immediately see that linkage return and the Dow Industrials decline as well.

While I am not bearish I am becoming concerned. Weak volume at new high breakouts is sending a lack of conviction signal that tells other investors they may be better off waiting on the sidelines a while longer.

Quite a few analysts believe at least a minor correction is imminent. Others are praying for a real correction of 10% to clear out all the uncertainty and produce a significant buying opportunity. Since the market exists to make the most fools possible at any given time I am still cautiously long until proven wrong. As we all know the market conditions can reverse in a heartbeat in either direction.

There is always the potential for the FOMC minutes on Wednesday afternoon to show that the Fed was easing off its "ready to hike" status because of the mixed signals coming from the economy. Whether a more dovish stance by the Fed would lift the markets ahead of the holiday weekend is unknown. However, with the weak volume any increase in buying activity could produce a decent spike. I can't say for sure but I would bet a bacon burger that there are plenty of investors loading up on short positions because of the lackluster gains in the market. Weak highs are bear bait. They always see the glass half full and are ready to pounce on weakness at any resistance. That also means there is a good potential for a short squeeze.

I would keep some powder dry, that is cash in your account for you northerners, just in case we get a buying opportunity in the days ahead.

Enter passively, exit aggressively!

Jim Brown

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New Option Plays

A Winner In Consumer Goods

by James Brown

Click here to email James Brown


Carlisle Companies - CSL - close: 99.97 change: +0.46

Stop Loss: 97.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 417 thousand
Entry on May -- at $---.--
Listed on May 19, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Consistent earnings growth has helped lift CSL to new all-time highs. Year to date shares of CSL are up +10.8% versus a +3.4% gain in the S&P 500.

CSL is in the consumer goods sector. According to the company, "Carlisle Companies Incorporated is a global diversified company that designs, manufactures and markets a wide range of products that serve a broad range of niche markets including commercial roofing, energy, agriculture, mining, construction, aerospace and defense electronics, medical technology, foodservice, healthcare, sanitary maintenance, transportation, general industrial, protective coating, wood, specialty and auto refinishing.

Through our group of decentralized operating companies led by entrepreneurial management teams, we bring innovative product solutions to solve the challenges facing our customers. Our worldwide team of employees, who generated $3.2 billion in net sales in 2014, is focused on continuously improving the value of the Carlisle brand by developing the best products, ensuring the highest quality and providing unequaled customer service in the many industries we serve."

The last three quarters have seen CSL deliver consistent growth. The company has beat Wall Street estimates on both the top and bottom line the last few quarters. If you look at CSL's daily chart you can see the post-earnings rally in October, early February, and again in late April.

Their most recent report was April 23rd. Analysts were expecting a profit f $0.58 a share on revenues of $699 million. CSL delivered $0.59 with revenues up +9.1% to $709 million.

A couple of Q1 highlights include their CCM and CIT segments. Here's a couple of excerpts from their earnings release.

Carlisle Construction Materials (CCM): Net sales in the first quarter 2015 grew 6.9% to $371.3 million, reflecting organic sales growth of 9.3% primarily on higher demand for new commercial construction, partially offset by a 2.4% negative impact from foreign exchange fluctuations in the stronger U.S. dollar versus the Canadian dollar and Euro.

Carlisle Interconnect Technologies (CIT): Net sales in the first quarter 2015 grew 29% to $194.4 million, reflecting organic growth of 12% and acquisition growth of 17%. Sales in CIT’s aerospace market were up 12%. Sales to the military and test and measurement markets were up 12% and 53%, respectively. Sales to the industrial market were down 8%.

CSL does not have a lot of analyst coverage (about eight firms) and currently the consensus is mostly bullish. The median price target is $110.00. That's a little bit less than CSL's point & figure chart, which is bullish and forecasting at $113.00 target.

Goldman Sachs recently studied the global medical technology medical supplies market. The research team sees the global plasma market growing at 6-to-8 percent. They believe that CSL and rival Grifols (GRFS) are the best ways to play this industry and suggested CSL was a "buy".

Technically CSL has digested its post-earnings pop from April. The consolidation appears to be over. Shares have rallied back to round-number, psychological resistance at the $100.00 level. The intraday high was $100.83 on April 24th. We are suggesting a trigger to buy calls at $101.00.

Trigger @ $101.00

- Suggested Positions -

Buy the SEP $105 CALL (CSL150918C105) 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:

Weekly Chart:

In Play Updates and Reviews

Bond Weakness Generates Market Jitters

by James Brown

Click here to email James Brown

Editor's Note:

Once again a sell-off in bonds, both in the U.S. and Europe, seemed to spook equity investors. The major U.S. stock indices struggled to make gains and delivered a mixed performance.

Our SPLK trade was closed this morning.

We have updated multiple stop losses tonight.

Current Portfolio:

CALL Play Updates

Anthem, Inc. - ANTM - close: 164.44 change: +1.19

Stop Loss: 154.85
Target(s): To Be Determined
Current Option Gain/Loss: +9.1%
Average Daily Volume = 1.8 million
Entry on May 18 at $162.00
Listed on May 16, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

05/19/15: The rally continues for ANTM. Shares displayed relative strength today with a +0.7% gain while the rest of the market closed relatively flat. ANTM is up five days in a row so it might be due for a dip. Broken resistance near $160.00 should be support.

Trade Description: May 16, 2015:
One in nine Americans is covered through one of Anthem's affiliated medical plans. The company is only getting bigger. Previously known as Wellpoint (WLP) they officially changed their name to Anthem (ANTM) in December 2014.

Initially both Wall Street and the healthcare industry were worried about Obamacare. Yet the Affordable Care Act has been a strong tailwind for many of the large healthcare insurers adding millions of new customers. Now that the major players have ironed out a lot of the wrinkles any negative impact from the ACA seems to be fading.

If you're not familiar with ANTM they are in the healthcare sector. According to the company, "Anthem is working to transform health care with trusted and caring solutions. Our health plan companies deliver quality products and services that give their members access to the care they need. With nearly 71 million people served by its affiliated companies, including more than 38 million enrolled in its family of health plans, Anthem is one of the nation’s leading health benefits companies."

Looking ANTM's earnings over the past year the company's results have been a little hit or miss. Yet one thing they have consistently done is raise guidance. Since the stock market is always looking forward this bullish outlook from ANTM has helped drive the stock to new all-time highs.

Their most recent earnings report was April 29th. ANTM reported their 2015 Q1 results. Wall Street was looking for $2.69 per share on revenues of $19.28 billion. The company delivered $3.14 per share, which is a +29.8% improvement from a year ago. Revenues were up +6.8% to $18.85 billion (a miss). Management raised their guidance above analysts' estimates for the fourth quarter in a row.

The company has an active stock buyback program. In the first quarter they spent $774 million buying back 5.7 million shares. As of March 31st, 2015 they still had about $4.9 billion left on their board-approved share repurchase program.

Technically the stock has been churning sideways in the $150-160 zone for the last several weeks. ANTM threatened to breakdown under support near its 50-dma and the $150 level in late April but managed to reverse course and now it's breaking out past resistance in the $160 area. Tonight we are suggesting a trigger to buy calls at $161.65.

- Suggested Positions -

Long SEP $170 CALL (ANTM150918C170) entry $4.40

05/18/15 triggered on gap open at $162.00, trigger was $161.65
Option Format: symbol-year-month-day-call-strike

Caterpillar Inc. - CAT - close: 87.24 change: -1.05

Stop Loss: 86.45
Target(s): To Be Determined
Current Option Gain/Loss: -42.0%
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

05/19/15: CAT displayed relative weakness today with a -1.1% decline. The best argument I heard on today's weakness at the opening bell this morning was that CAT is reacting to disappointing economic data out of China.

Today's intraday low was $86.51. Tonight we are moving the stop loss to $86.45. 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

05/19/15 new stop @ 86.45
05/12/15 new stop @ 85.75
05/05/15 triggered @ 88.10
Option Format: symbol-year-month-day-call-strike

Electronic Arts - EA - close: 62.61 change: -0.69

Stop Loss: 59.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.5 million
Entry on May -- at $---.--
Listed on May 18, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

05/19/15: EA did not see any follow through on yesterday's push toward new highs. Instead shares gapped open lower and spent most of the session hovering just below the $63.00 level.

We are on the sidelines and waiting for a new relative high. Our suggested entry point is $63.65.

Trade Description: May 18, 2015:
Video game stocks are hitting high scores this year. The two biggest players in this industry are ATVI and EA. Shares of ATVI are at all-time highs while EA is nearing a new 10-year high.

EA is considered part of the technology sector. According to the company, "Electronic Arts ( EA ) is a global leader in digital interactive entertainment. The Company delivers games, content and online services for Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 300 million registered players around the world. In fiscal year 2015, EA posted GAAP net revenue of $4.5 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality blockbuster brands such as The Sims, Madden NFL, EA SPORTS FIFA, Battlefield, Dragon Age and Plants vs. Zombies."

Shares of EA popped above major resistance near the $60.00 level earlier this month after reporting better than expected Q4 2015 results. Wall Street was looking for EA to deliver a profit of $0.26 a share on revenues of $852.9 million. EA announced a profit of $0.39 a share. Revenues were down -2.0% from a year ago but came in at $896 million, well above estimates.

Their full year results were impressive. EA's net revenues were up almost $1 billion to $4.5 billion. The company's net income soared from $8 million in 2014 to $875 million in 2015. Shares of EA have benefitted from the company's turnaround. The stock is up more than +100% in the last 12 months.

EA's guidance was mixed. They issued bearish guidance for their Q1 2016 (current quarter) and see EPS about flat ($0.00) when Wall Street was expecting $0.19 per share. EA is forecasting Q1 revenues significantly below expectations. However, they raised their fiscal year 2016 profit estimate to $2.75 per share when analysts were only expecting $2.63.

Last quarter EA spent $95 million buying back 1.8 million shares of their stock. When they reported earnings on May 5th they also announced a new $1 billion stock buyback program that expires on May 31, 2017.

EA management sounds pretty optimistic. Here's an excerpt from their earnings press release:

With a clear focus on putting our players first, FY15 was an exceptional year for Electronic Arts. We introduced award-winning games, delivered enduring entertainment in our live services, and forged deeper relationships with a growing global audience across consoles, mobile devices and PC, said Chief Executive Officer Andrew Wilson. EA continues to sharpen our focus and speed, and in the year ahead we will engage more players on more platforms with new experiences like Star Wars Battlefront, FIFA 16, Minions Paradise and more.

Two years ago, we discussed a three-year plan to double non-GAAP operating margins to 20%, said Chief Financial Officer Blake Jorgensen. Today, Im happy to announce that we exceeded our goal a full year ahead of schedule. Looking forward, we anticipate continued earnings growth driven by our strong portfolio, investment in new IP, the market shift to digital, and on-going cost discipline.

Wall Street's analyst community seems bullish on EA as well. Several firms reiterated their bullish ratings and raised price targets.

Shares of EA have been building on a bullish trend of higher lows. The current rally has produced a buy signal on the point & figure chart that is forecasting a long-term target of $110.00. On a short-term basis EA seems to be coiling for a breakout past resistance near $63.50. Tonight we're suggesting a trigger to buy calls at $63.65.

Trigger @ $63.65

- Suggested Positions -

Buy the SEP $70 CALL (EA150918C70)

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

Eaton Corp. - ETN - close: 72.80 change: -0.66

Stop Loss: 69.75
Target(s): To Be Determined
Current Option Gain/Loss: -13.6%
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

05/19/15: Like CAT, shares of ETN shot lower this morning. ETN found support near its 10-dma and spent the rest of the session consolidating sideways.

After today's relative weakness (-0.9%), I am not suggesting new positions at this time.

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: 167.86 change: +1.29

Stop Loss: 163.85
Target(s): To Be Determined
Current Option Gain/Loss: +52.6%
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

05/19/15: FDS ignored the market's lackluster session and continued to push higher. The stock is up 8 out of the last 9 sessions. More conservative traders may want to take some money off the table now. We are raising the stop loss to $163.85.

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

05/19/15 new stop @ 163.85
05/13/15 triggered @ 162.25
Option Format: symbol-year-month-day-call-strike

F5 Networks - FFIV - close: 126.93 change: -0.42

Stop Loss: 121.40
Target(s): To Be Determined
Current Option Gain/Loss: -6.2%
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

05/19/15: It was a relatively quiet session for FFIV. Unfortunately it has some potentially bearish overtones. FFIV tried to rally and failed at short-term resistance near $128.00. That's not a big deal. Yet the gap open higher and then its closer near its lows for the session has generated a potential bearish engulfing candlestick reversal pattern. It's not a very big reversal and it needs to see confirmation but traders may want to start raising their stop loss.

No new positions at this time.

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: 105.38 change: +0.14

Stop Loss: 103.65
Target(s): To Be Determined
Current Option Gain/Loss: +54.4%
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

05/19/15: Another day, another new high. Too bad that pattern doesn't normally last that long. GPN looks great but it's starting to get a little bit overbought. More conservative traders may want to take some money off the table.

Tonight we are moving the stop loss up to $103.65. 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

05/19/15 new stop @ 103.65
05/12/15 new stop @ 99.85
04/21/15 triggered @ 101.05
Option Format: symbol-year-month-day-call-strike

Martin Marietta Materials - MLM - close: 154.26 change: -1.05

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

05/19/15: MLM is still consolidating between short-term support at its 10-dma and overhead resistance near $156.00. My biggest worry would be a spike past $156.00 that fails and sees MLM close back below the $156.00 level (or worse below the 10-dma). That would look like a failed rally, bearish reversal pattern. Our suggested entry point is $156.00.

Trade Description: May 14, 2015:
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)

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: 76.15 change: +0.45

Stop Loss: 73.45
Target(s): To Be Determined
Current Option Gain/Loss: +2.3%
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

05/19/15: Good news! NTRS did rally past its May highs and hit new multi-year highs with today's +0.59% gain. I would be tempted to inch the stop loss closer to the $74.00 level.

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: 92.34 change: -0.19

Stop Loss: 90.45
Target(s): To Be Determined
Current Option Gain/Loss: +14.0%
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

05/19/15: OCR briefly tagged a new all-time high this morning but the rally didn't last very long. Shares faded lower this afternoon.

We are going to try and protect ourselves and move the stop loss up to $90.45. You could argue that is a little too high since $90.00 is the closet level that could be support.

No new positions at this time.

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

05/19/15 new stop @ 90.45
05/06/15 triggered @ 90.35
Option Format: symbol-year-month-day-call-strike

Snap-on Inc. - SNA - close: 157.11 change: +0.88

Stop Loss: 152.25
Target(s): To Be Determined
Current Option Gain/Loss: +41.2%
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

05/19/15: SNA dipped to $155.25 and bounced. This is good news. I was expecting a dip into the $154-155 area. Shares look like they could run toward $160.00 soon.

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

PUT Play Updates

Currently we do not have any active put trades.


Splunk, Inc. - SPLK - close: 67.94 change: +0.91

Stop Loss: 64.85
Target(s): To Be Determined
Current Option Gain/Loss: -7.5%
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

05/19/15: SPLK almost recovered a third of yesterday's big sell-off. Overall today's performance, while better than the broader market, still seems weak.

After yesterday's unexpected drop we had decided to exit this trade at the open today. SPLK opened at $67.75.

- Suggested Positions -

AUG $70 CALL (SPLK150821C70) entry $4.54 exit $4.20 (-7.5%)

05/19/15 planned exit
05/18/15 prepare to exit tomorrow morning
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