Option Investor

Daily Newsletter, Tuesday, 6/9/2015

Table of Contents

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

Market Wrap

Searching for Support

by Jim Brown

Click here to email Jim Brown

The markets traded on both sides of zero on Tuesday and after being down significantly moved to nearly flat at the close. Initial support was tested as was resistance and the day ended with a tie.

Market Statistics

The Dow traded down to 17,715 before rebounding +100 points to 17,817 only to give most of it back to close at 17,761 and a -2 point loss. Ditto on the S&P with a drop to 2,072 and a rebound to 2,085 before closing right in the middle at 2,079 with a gain of less than 1 point. The scary index was the Nasdaq with a significant dip under prior support at 5,000 to 4,974 before rebounding to close at 5,013. Apple was the reason with a sharp drop to $125.62 before rebounding back over $128 intraday. Those of us wanting to buy Apple at $120 were cursing the rebound.

There were no earth shaking economics this morning but all the reports were positive. The NFIB Small Business Survey for May rose from 96.9 to 98.3 and the strongest showing since December. The job openings component improved from 27 to 29 and the economic expectations improved from -6 to -3 but still in negative territory. More than 14% of respondents said this was a good time to expand your business. That is the second highest reading since 2009. Everything else was basically flat.

The Job Openings and Labor Turnover Survey (JOLTS) showed a rise in the job opening rate from 3.4% to 3.7%. There are plenty of jobs available and layoffs are declining. Available jobs increased to 5.4 million in April and the highest level since 2000 when the report began. Hiring fell slightly from 5.1 million to 5.0 million. However, quits also declined from 5.1 million to 4.9 million.

The Manpower Employment Survey for Q3 found that 20% of respondents planned to hire in Q3, up from 18% in Q2. Only 4% planed to reduce jobs and that was flat with Q2. Most, more than 70% planned no changes to the number of workers.

Lastly the Wholesale Trade for April rose +0.4% compared to +0.1% in the prior report. Sales increased by +1.6%. Sales of durable goods increased from +0.9% to +1.2% while nondurable sales rose from -1.4% to +2.0%. This was a good report.

There is nothing of importance on the calendar for Wednesday. The retail sales report on Thursday is still the most important report for the rest of the week with expectations for a big rebound of +0.9%. There is a significant risk of disappointment if the number is weak.

The biggest news of the day came after the close when NetFlix (NFLX) announced that shareholders had approved an increase of 5 billion shares in order to split the stock. Currently Netflix only has 170 million shares outstanding. The company said it has no plans for selling shares to raise money or for any contemplated mergers.

Netflix shares rose +$20 ahead of the shareholder vote but unfortunately the company left investors out in the cold. CEO Reed Hastings said after the vote approving the shares that management will seek approval from the board "in due course" to pursue a stock split. Previously they had indicated they would announce a split after the shareholder meeting. I guess they didn't say how long after the meeting that announcement would be.

Target (TGT) increased its dividend by +7.7% to 56 cents and boosted its stock buyback plan by $5 billion to $10 billion. However, a few minutes later Target denied buyback expansion and pulled the press release from the website. The company said human error was to blame for the inadvertent press release. Apparently the board was planning on voting on those changes at the board meeting later tonight. Shares rallied slightly on the news since the odds are good the board will follow though tonight.

Lululemon (LULU) shares spiked $6.75 after the company reported earnings and same store sales that rose +6%. Earnings of 34 cents beat estimates of 33 cents and more than double the 13 cents earned in the year ago quarter. Revenue rose from $384.6 million to $423.5 million.

Shares spiked despite weak guidance for both the current quarter and the full year. For the current quarter LULU is forecasting 31-33 cents on revenue of $442.5 million. Analysts were expecting 34 cents on $439.5 million. For the full year the company is expecting $1.86-$1.91 a penny better than the prior forecast but analysts were expecting $1.90.

GE sold its sponsor finance business, Antares Capital, to Canada Pension Plan Investment for $12 billion. The finance unit had about $10 billion in loans on the books and the pension plan said the premium was justified. The plan has a tough time securing debt deals in the U.S. market that are backed by excellent credits. Canada Pension has about $215 billion in assets. This is the first deal since GE said it was planning on selling $200 billion in assets in its financial services division. Canada Pension said it was still open to talks on the $8 billion joint venture between GE and Ares Management. GE shares were flat on the day. It takes a lot to move GE shares with more than 10 billion shares outstanding.

Sears Holdings (SHLD) lost -$2.40 after reporting earnings Monday night that disappointed. Sears reported a loss of -$2.00 compared to expectations for a -$2.59 loss. Revenue declined -25% to $5.88 billion and missed estimates for $6.08 billion. Some of that miss was related to the separation from Lands End and the Canadian division. Same store sales in the U.S. were hammered with a -14.5% decline. Kmart comps fell -7% after a -2.2% decline in the year ago quarter. Sears said it was selling 235 Sears and Kmart stores to REIT Seritage Growth Properties. Sears will receive $2.6 billion in proceeds. Sears has long term debt of $3.2 billion and revolving debt of $3.275 billion. The company said lenders were willing to amend its current revolving debt facility to 2020.

Sears is still struggling and Eddie Lampert would probably like to just shoot it and put the chain out of its misery. Unfortunately he is into Sears up to his neck and he will have to keep fighting the problems for years to come.

FleetCor (FLT) announced a deal with Uber to provide drivers with a Partner Fuel Card for fuel purchases. Eligible Uber drivers will be able to buy gas on the card and have it deducted from their weekly earnings. It will also function as a loyalty card and provide "cents off" discounts at every station along with additional discounts at Exxon Mobil stations. Hundreds of thousands of Uber drivers will be eligible. FleetCor is a global provider of fuel cards and products to businesses with active fleets of vehicles. Shares rallied about $5 in afterhours.

Mattress Firm (MFRM) reported earnings of 33 cents that missed estimates by 6 cents after the close. They raised guidance for 2015 to a range of $2.50-$2.70 compared to analyst estimates for $2.62. Revenue estimates rose to $2.485-$2.535 billion compared to analyst estimates for $2.49 billion. The company said it was adding 20 new stores. Shares declined $1 in afterhours.

Gulfport Energy (GPOR) said it was purchasing additional acreage from American Eagle Utica and announced a secondary offering of 10 million shares to fund the purchase. The acreage was in three parcels consisting of 38,965 acres, 6,198 acres and 4,950 acres all in Ohio. The deal includes some production and 18 drilled but uncompleted wells. The combined purchase price was around $400 million. Shares fell about $2 in afterhours to $43.50.

Oil prices rallied +3.5% to close at $60.55 despite news from the EIA upgrading production forecasts for the U.S. in 2015. The EIA raised its production growth estimates from 530,000 bpd to 690,000 bpd for the full year. They lowered 2016 growth estimates by -160,000 compared to prior estimates for +20,000 bpd of growth. Basically they are expecting oil production to rise in 2015 and decline in 2016.

Traders blamed the rise in oil prices on the spike in gasoline prices ahead of the July 4th weekend. Gasoline prices tend to peak in early July and refiners are rushing to produce more gasoline to sell into this peak. This consumes more oil and reduces inventories. Once past the holiday we should see crude prices begin to decline.

The rising oil prices did not help the Dow Transports. The index declined again to close at 8,307 and just a handful of points away from a potential support failure that could lead to a drop to 8,000. The airline sector continues to plunge on worries over competition as well as the rising oil prices. The new airline ETF (JETS) hit a new low on the drop in the sector.


The S&P came to a dead stop on support at 2080 and -5 points under the 100-day average at 2085. This represents only a -2% decline from the recent high at 2130.

The low at 2072 was exactly the 150-day average, which has been support since 2012 with one exception last October. This is a key level and probably why the S&P rebounded almost instantly from the touch of that support. Unfortunately one intraday touch does not guarantee a continued rebound. That support level needs to be traded for more than 5 minutes and the rebound needs to be more robust. The initial short covering lasted about 30 minutes until 11:AM but then the index traded sideways the rest of the day.

A -2% decline from the highs is hardly a material correction. That suggests there may be more weakness ahead.

The Dow made another new two-month closing low but it did close well off the intraday lows. The support at 17,800 has failed and suggests we could see 17,600 tested. Much of the Dow's intraday decline was related to a $2 decline in Apple shares. Had Apple shares not rebounded the Dow decline would have been a lot worse. The rest of the Dow components were basically split between winners and losers and most of the moves were only fractional. This shows no conviction by either the buyers or sellers.

Resistance is now 17,800 and 17,900 and support 17,600.

The Nasdaq Composite broke character today with a drop well below support at 5000 to 4974. This was due mostly to the intraday drop in Apple and some weakness in biotechs. Netflix, Lululemon and Ambarella were instrumental in keeping the damage from being much worse. The Nasdaq rebounded to close over 5000 but the damage has been done. Traders will want to see support tested again on decent volume before they will want to buy the dip. The breakdown below 5000 was too easy and that probably put doubts into some investors about its ability to move higher.

Support is 5000 followed by 4975 with resistance 5025.

I have pointed to the strength in the Russell 2000 for the last several days as evidence there was no fear by fund managers. The Russell did decline today and it appears the resistance at 1260 is becoming stronger. Support at 1240 was not tested but the low was 1242 and that is very close.

That should be our directional signal for the rest of the week. If the $RUT moves below 1240 I would be a short term seller. The Russell rebalance trades will begin appearing late in the week and there is an FOMC meeting next week along with option expiration. All should weigh on the small caps.

Conversely should the Russell move over 1260 that would be a buy signal.

Volume continues to be weak with 5.5 billion shares on Monday and 5.8 billion today. The S&P internals are continuing to weaken. The percentage of stocks trading over their 50-day average has fallen to only 34.37% and the lowest level since October.

Those stocks trading over their long term 200-day average have now declined to only 56.91% and other than October that is the lowest level in years. This is a warning that market breadth is shrinking.

The percentage of stocks with a buy signal on the point and figure charts has fallen to 61.8% on the S&P.

All of these charts are telling us to be wary of the market. At this point I would be looking for a drop on the S&P to 2040 for a buy the dip entry. We may never see that level but that would be my ideal buy point.

Enter passively, exit aggressively!

Jim Brown

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New Option Plays

Capturing Major Global Trends

by James Brown

Click here to email James Brown


Skyworks Solutions Inc. - SWKS - close: 102.24 change: -0.08

Stop Loss: 97.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 4.0 million
Entry on June -- at $---.--
Listed on June 09, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Trade Description:
SWKS seems to be everywhere. They make semiconductor chips for just about every industry including aerospace, automotive, consumer electronics, wearables, and the Internet of Things. They have been called the leading wireless semiconductor company. They're probably best known for being a component supplier to Apple (AAPL) for the company's iPhones.

The stock has soared from its October 2014 lows near $45 a share to over $100 today (a +126% move). SWKS is up +39.7% year to date versus a +5.5% gain in the NASDAQ composite and a +3.6% gain in the SOX semiconductor index.

If you're not familiar with SWKS they're in the technology sector. According to the company website, "Skyworks Solutions, Inc. is an innovator of high performance analog semiconductors. Leveraging core technologies, Skyworks supports automotive, broadband, wireless infrastructure, energy management, GPS, industrial, medical, military, wireless networking, smartphone and tablet applications. The Company's portfolio includes amplifiers, attenuators, circulators, demodulators, detectors, diodes, directional couplers, front-end modules, hybrids, infrastructure RF subsystems, isolators, lighting and display solutions, mixers, modulators, optocouplers, optoisolators, phase shifters, PLLs/synthesizers/VCOs, power dividers/combiners, power management devices, receivers, switches and technical ceramics. Headquartered in Woburn, Mass., Skyworks is worldwide with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America."

The company is really cashing in on some major global trends including smart phones and smart(er) cars. Data suggests that over 90% of mobile phone users are still using 2G and 3G phones. That means SWKS should benefit as they upgrade to 4G phones. Meanwhile SWKS is also poised to benefit from the surging trend of interconnectivity in automobiles. One forecast estimates that 75% of automobiles in 2020 (about 70 million vehicles) will have Internet-connectivity. Today that number is only around 10 million cars.

The company's earnings growth has been phenomenal. They have beaten Wall Street's earnings and revenues estimates the last four quarters in a row. They have also raised their guidance the last four quarters in a row. Their 2014 Q4 report saw revenues up +50%. Their 2015 Q1 reported revenues were up +59% while earnings were up +88%. SWKS' Q2 report on April 30th delivered earnings growth of +85% on revenue growth of +58%.

Several analysts upgraded their price target on SWKS following the April results. Analysts are expecting strong year-over-year growth for the next several quarters. One reason is the Apple iPhone upgrade cycle. There are about 450 million iPhones in circulation. Thus far only about 20% have upgraded to the iPhone 6 or 6+. That leaves a lot more iPhone sales to come.

A fast-growing company like SWKS can be a buyout target. There have been rumors that QCOM is a potential suitor.

Shares of SWKS have seen an intraday correction from $111.60 on June 1st to $98.07 today. That's a -11% pullback and traders pounced on SWKS when it started to bounce. The $100 region and the 50-dma coincide with the bullish trend of higher lows. We want to hop on board the SWKS train if shares continue to rebound. Tonight we are suggesting a trigger to buy calls at $103.25. I should warn you that SWKS can be a volatile stock. You may want to consider this a higher-risk trade. We'll start this trade with a stop loss under today's low (just below $98.07).

Trigger @ $103.25

- Suggested Positions -

Buy the AUG $110 CALL (SWKS150821C110) current ask $4.30
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

In Play Updates and Reviews

Stocks Bounce From Short-term Oversold Conditions

by James Brown

Click here to email James Brown

Editor's Note:

The major U.S. indices all rebounded from their intraday lows but only the S&P 500 managed to close in positive territory. It was a relatively quiet day for the market and the news we did get was actually positive economic data. Recently positive data has been a catalyst to sell stocks for fear the Fed will raise rates sooner than expected.

CTSH and EA hit our stop losses today.

We have adjusted our entry strategy on ZBRA.

Current Portfolio:

CALL Play Updates

Criteo SA - CRTO - close: 49.73 change: +0.17

Stop Loss: 47.45
Target(s): To Be Determined
Current Option Gain/Loss: -26.8%
Average Daily Volume = 628 thousand
Entry on June 05 at $50.25
Listed on June 04, 2015
Time Frame: Exit PRIOR to July option expiration
New Positions: , see below

06/09/15: Traders bought the dip in CRTO this morning. Shares bounced to a +0.34% gain, which was enough to outperform the U.S. markets.

Today was CRTO's investor day presentation in Paris. I didn't see any headlines from this event so the company probably didn't say anything new.

A rally above today's intraday high ($50.52) could be use d as a new bullish entry point.

Trade Description: June 4, 2015:
Do you know what re-targeting is in the online ad business? It is the strategy of serving an ad to someone who has already been to your website or seen your product. Apparently it works pretty well for CRTO who helped drive $19 billion in post-click sales for its clients in the twelve months preceding March 31, 2015. The company's earnings have boomed with net income up about +2,500% in the last two years.

CRTO is in the technology sector. According to the company, "At Criteo, personalized performance advertising is what we do. And it's what we do best. Measuring return on post-click sales, Criteo makes ROI transparent and easy to measure. Criteo has 1,500+ employees in 23 offices across the Americas, Europe and Asia-Pacific, serving 7,800+ advertisers worldwide with direct relationships with 10,000+ publishers."

The earnings momentum has been impressive. The company has beaten Wall Street's revenue estimates for the last four quarters in a row. They beat the bottom line earnings estimate the last three quarters in a row. CRTO's management has also raised their guidance the last four quarters in a row.

CRTO's most recent report was May 5th where they announced their 2015 Q1 results. Analysts were expecting €0.18 per share. CRTO reported that their net income had jumped +200% from a year ago to €0.28. Revenues surged +59% to €262 million. Adjusted EBITDA results were up +89%. Management raised their guidance again and guided Q2 and 2015 results above Wall Street estimates on both the top and bottom line.

This bullish earnings picture has helped shares of CRTO recover from recent weakness in both the U.S. and European markets. Please note I said "recover" from recent weakness and not avoid. Shares of CRTO can be volatile. Shares surged from just above $40 to almost $50 in about two weeks in the first half of May. They spent the last two weeks of May correcting lower and now CRTO is back in rally mode. The point & figure chart is bullish and forecasting at $68.00 target.

There has been some speculation that CRTO is a takeover target by high-profile names like Amazon.com, Facebook or Google. These rumors have been out for months. Given our short-term time frame the idea of CRTO as a target may not help.

Currently shares of CRTO are hovering just below round-number resistance at the $50.00 level. Tonight we are suggesting a trigger to buy calls at $50.25.

- Suggested Positions -

Long JUL $50 CALL (CRTO150717C50) entry $2.80

06/05/15 triggered @ $50.25
Option Format: symbol-year-month-day-call-strike

Tableau Software, Inc. - DATA - close: 116.27 change: +2.63

Stop Loss: 109.85
Target(s): To Be Determined
Current Option Gain/Loss: -11.0%
Average Daily Volume = 1.0 million
Entry on May 28 at $115.25
Listed on May 27, 2015
Time Frame: Exit prior to July option expiration
New Positions: see below

06/09/15: The volatile back and forth in DATA continued on Tuesday. Before the opening bell shares were given a new "buy" rating and a $130 price target. That produced a spike toward $116.00, which quickly reversed. DATA Then plunged toward $112.00. This move also reversed. By the closing bell shares had rallied +2.3% and set a new closing high.

Trade Description: May 27, 2015:
The market for analyzing big business data is growing fast. DATA is leading the charge. According to the company, "Tableau Software (NYSE: DATA) helps people see and understand data. Tableau helps anyone quickly analyze, visualize and share information. More than 26,000 customer accounts get rapid results with Tableau in the office and on-the-go. And tens of thousands of people use Tableau Public to share data in their blogs and websites."

The last few earnings reports have been very impressive. DATA released their Q3 results on November 5, 2014. Results were 12 cents above estimates with revenues up +71% to $104.5 million, also above estimates.

Their Q4 results came out in early February. Analysts were expecting a profit of $0.11 a share on revenues of $122.58 million. DATA delivered $0.42 a share with revenues up +75% to $142.9 million. In the fourth quarter they added 2,600 new customers. They closed 304 transactions worth more than $100,000, a +70% improvement from a year ago.

Christian Chabot, Chief Executive Officer of Tableau. "In 2014, we experienced the strongest demand we've seen in our history, as the move to agile analytics grows faster than ever."

DATA reported their 2015 Q1 results on May 7th. Analysts were looking for a loss of $0.03 per share on revenues of $115.29 million. The company blew away these numbers with a profit of $0.08 per share (11 cents above estimates). The pattern of big revenue growth continued with Q1 revenues up +74.4% to $130.1 million. They added 2,600 new customers putting their total above 29,000. The number of deals above $100,000 hit 249 in the first quarter.

Management provided bullish guidance with estimates for Q2 revenues in the $135-140 million range. That's above Wall Street's estimate of $130.9 million. They also upped their fiscal year 2015 earnings picture and see $600-615 million, which is better than analysts' estimates of $587 million.

Shares of DATA surged on its results and optimistic guidance. Since then traders have been buying the dips pretty quickly. Today's display of relative strength (+1.99%) is also a new all-time closing high for DATA. It's also worth noting that DATA has been talked about as a potential takeover target.

The $115.00 level looks like short-term resistance. We will use a trigger at $115.25 as our entry point to buy calls.

- Suggested Positions -

Long JUL $120 CALL (DATA150717C120) entry $3.82

05/28/15 triggered @ $115.25
Option Format: symbol-year-month-day-call-strike

Zebra Tech. - ZBRA - close: 112.48 change: -0.47

Stop Loss: 109.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 475 thousand
Entry on June -- at $---.--
Listed on June 06, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

06/09/15: The stock market's weakness this morning pushed ZBRA toward support in the $110-111 range. When the market bounced ZBRA shot higher again. We want to use this test of support to our advantage.

Tonight we're adjusting our entry trigger. Today's intraday high was $113.10. We will move our entry trigger from $115.15 to $113.25. We'll also adjust the stop loss from $110.85 to $109.85.

Trade Description: June 6, 2015:
Traditionally known for bar code scanning and RFID technology, ZBRA has changed. They have grown into a company that management says puts them right in the middle of three major tech trends: the Internet of Things, mobility, and cloud computing. Today the company has thousands of customers in more than 100 countries, including more than 95 percent of all Fortune 500 companies.

ZBRA is in the industrial goods sector. In April 2014 they announced a $3.45 billion deal to buy the Motorola Solutions enterprise unit. According to the company, "Zebra Technologies is a global leader in enterprise asset intelligence, designing and marketing specialty printers, mobile computing, data capture, radio frequency identification products and real-time locating systems. Incorporated in 1969, the company has over 7,000 employees worldwide and provides visibility into valued assets, transactions and people The company's extensive portfolio of marking and printing technologies, including RFID and real-time location solutions, illuminates mission-critical information to help customers take smarter business actions."

The company has been consistently delivering on the earnings front. ZBRA has reported seven quarters in a row of double-digit earnings growth. The numbers have boomed since the addition of the enterprise unit in October last year.

Looking at the last few quarterly reports ZBRA has been beating Wall Street estimates on both the top and bottom line . Their most recent report was May 13th where ZBRA announced its 2015 Q1 results of $1.39 per share. That was a +53% improvement from the prior year and 28 cents above estimates. Revenues surged +210% to $893 million, which was above estimates. That was thanks to $561 million in sales from the Motorola solutions business. Even ZBRA's legacy business saw a +15% improvement in sales.

Anders Gustafsson, ZBRA's CEO, commented on his company's report, saying, "We started the year with strong, positive momentum, as business activity remained high specifically in North America and Europe. Our partners and customers are responding enthusiastically to our greatly expanded portfolio of solutions and capabilities, and our enhanced focus on giving them improved visibility into their assets, transactions and people for better enterprise asset intelligence. During the quarter we also made material progress on achieving our cost-synergy targets, pursuing growth initiatives and integrating Zebra with the Enterprise business acquired from Motorola Solutions in October. The favorable business trends are continuing into the second quarter, as Zebra is well positioned to benefit over the long term from the convergence of technology trends in the Internet of Things, mobility and cloud computing."

ZBRA guided in-line with analysts' estimates. Wall Street expects full year 2015 earnings growth of +50% and +24% growth in 2016. This bullish earnings picture has fueled big gains for ZBRA's stock price. The S&P 500 is up +1.6% year to date versus the NASDAQ composite's +6.6% gain. Currently ZBRA is up +47% this year. The stock has almost doubled from its October 2014 lows near $60.

ZBRA produced huge gains after its earnings report in May. After consolidating several days near $110 the stock broke out again on June 2nd. We like how traders bought the dip on Friday morning and expect ZBRA to hit new highs soon. Tonight we are suggesting a trigger to buy calls at $115.15.

Trigger @ $113.25

- Suggested Positions -

Buy the AUG $120 CALL (ZBRA150821C120)

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.

06/09/15 Entry strategy adjustment: Move the entry trigger from $115.15 to $113.25. Adjust the stop loss from $110.85 to $109.85
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Cerner Corp. - CERN - close: 65.77 change: -0.32

Stop Loss: 69.05
Target(s): To Be Determined
Current Option Gain/Loss: +14.3%
Average Daily Volume = 1.7 million
Entry on June 04 at $66.75
Listed on June 02, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

06/09/15: CERN has finally closed below short-term support at $66.00. Yet it has not convincingly broken through technical support at its 200-dma, which is currently at $65.83.

Today's intraday low was $65.67. I'd be tempted to use a move under $65.60 as a new entry point.

Trade Description: June 2, 2015:
CERN was having a pretty good year. Then the stock started to top out in March and April. Suddenly shares crashed lower in May due to disappointing guidance.

CERN is in the technology sector. According to the company, "Cerner's health information technologies connect people, information and systems at more than 18,000 facilities worldwide. Recognized for innovation, Cerner solutions assist clinicians in making care decisions and enable organizations to manage the health of populations. The company also offers an integrated clinical and financial system to help health care organizations manage revenue, as well as a wide range of services to support clients' clinical, financial and operational needs. Cerner's mission is to contribute to the systemic improvement of health care delivery and the health of communities."

CERN reported its Q1 earnings on May 7th. Just looking at the numbers it appeared to be a pretty good quarter. Earnings were up +22% from a year ago to $0.45 per share. That was only in-line with analysts' expectations. Revenues rose what look like a healthy +27% from a year ago to $996 million. Unfortunately that missed analysts' estimates for $1,084 million.

CERN's management said, "Revenue was below guidance provided by the Company due to a combination of lower than expected revenue from the recently closed acquisition of Siemens Health Services (Health Services) and lower revenue in our existing business." Earlier this year, in February, Cerner Corporation acquired substantially all of the assets, and assumed certain liabilities, of the Siemens Health Services business from Siemens AG.

CERN said their gross margins fell -40 basis points in the first quarter. They expect margins to slide another 100 to 150 basis points by yearend. Management provided Q2 and 2015 guidance that was below Wall Street estimates. This sparked the sell-off. The company is in a highly competitive industry and could definitely see more pricing pressures.

Technically the stock's oversold bounce didn't make it very far. Shares have been consolidating sideways in the $67-69 range for the last three weeks. The point & figure chart is bearish and forecasting at $59.00 target. Currently the stock looks poised to breakdown from this trading range. There is a chance it bounces at its simple 200-dma but we suspect it would be a temporary bounce. Tonight we are suggesting a trigger to buy puts at $66.75.

- Suggested Positions -

Long SEP $65 PUT (CERN150918P65) entry $2.45

06/04/15 triggered @ $66.75
Option Format: symbol-year-month-day-call-strike

Kohl's Corp. - KSS - close: 62.05 change: -0.66

Stop Loss: 66.55
Target(s): To Be Determined
Current Option Gain/Loss: +10.4%
Average Daily Volume = 3.3 million
Entry on June 05 at $63.90
Listed on June 01, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

06/09/15: KSS continues to sink with the stock notching its fifth decline in a row. Shares ended the session sitting on potential support at the $62.00 level. We should not be surprised if KSS produces an oversold bounce here.

Retail-related stocks could see some volatility on Thursday as the market digests the U.S. retail sales data for May.

No new positions at this time.

Trade Description: June 1, 2015:
Most of the big retail names have been disappointing on the sales front. Macy's (M) most recent earnings report saw the company miss analysts' expectations on both the top and bottom line and Macy's lowered their guidance.

J.C. Panney Co (JCP) beat estimates but their same-store sales disappointed and traders sold the stock. Retail titan Wal-Mart (WMT) missed estimates on both the top and bottom line and issued soft guidance. Kohl's (KSS) is suffering from similar results.

Wall Street is somewhat surprised by the retailer's lackluster results. The U.S. consumer is benefitting from significantly lower gas prices from a year ago. We have one of the healthiest job markets in years. Yet consumers are not spending. The U.S. Commerce department said April retail sales were flat (+0%) after a +1.1% rise in March. Today (June 1st), the Commerce Department reported that consumer spending was flat in April. According to Marketwatch.com, the pace of consumer spending has fallen to the lowest level in several years. After another harsh winter many were expecting pent up demand by consumers to produce a surge in spending when the weather warmed up. Thus far consumers are keeping their wallets closed.

KSS is in the services sector. According to the company, "Kohl's (KSS) is a leading specialty department store with 1,164 stores in 49 states. With a commitment to inspiring and empowering families to lead fulfilled lives, the company offers amazing national and exclusive brands, incredible savings and inspiring shopping experiences in-store, online at Kohls.com and via mobile devices."

The first quarter of 2015 was pretty good for KSS' stock. Shares rallied big on its Q4 results announced in early February. Earnings were better than expected. Revenues were just a little bit above expectations. Management raised their fiscal year 2016 guidance and raised their dividend.

Then KSS' upward momentum stalled in April. The stock started to reverse lower. Shares got crushed on May 14th with its biggest ever one-day drop that shaved off $2 billion in market cap. The drop was a reaction to KSS' Q1 results. Earnings were up +5% from a year ago and beat estimates. Yet revenues missed with $4.12 billion in sales versus analysts' estimates of $4.19 billion. Another warning signal was KSS' Q1 comparable store sales were up +1.4% versus expectations for +2.5%.

The disappointing news sparked some analyst downgrades and lower price targets. The point & figure chart is bearish and forecasting at $55.00 target. Technically shares of KSS look weak. The oversold bounce lasted about three days and KSS rolled over again with a steady pattern of lower highs.

Today KSS is poised to breakdown below its trend of higher lows and technical support at its simple 200-dma. We are suggesting a trigger to buy puts at $63.90. I will point out that prior resistance near $62.00 could be support but momentum clearly favors the bears here. We suspect shares could fall into the $56-60 zone.

- Suggested Positions -

Long OCT $60 PUT (KSS151016P60) entry $2.40

06/09/15 Down 5 days in a row, testing support at $62.00
06/05/15 triggered @ $63.90
Option Format: symbol-year-month-day-call-strike

3M Company - MMM - close: 156.98 change: +0.39

Stop Loss: 160.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.2 million
Entry on June -- at $---.--
Listed on June 08, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

06/09/15: MMM settled near support yesterday. We shouldn't be too surprised to see it attempt a bounce. Shares rallied up to $158.26 and back above its simple 200-dma. Fortunately for the bears this rally faded.

I don't see any changes from last night's new play description. Our suggested entry point is $155.75.

Trade Description: June 8, 2015:
3M, the maker of Post-it notes and thousands of other products, has been a darling on Wall Street the last couple of years. It's not hard to see why. Shares have rallied from the low $90s in early 2013 to $170 per share this spring. That's a +88% gain. That is not counting the company's healthy dividend yield. Unfortunately for the bulls it looks like the rally is in trouble as MMM's business faces some serious headwinds.

MMM is in the industrial goods sector. According to the company, "3M is fundamentally a science-based company. We produce thousands of imaginative products, and we're a leader in scores of markets - from health care and highway safety to office products and abrasives and adhesives. Our success begins with our ability to apply our technologies - often in combination - to an endless array of real-world customer needs. Of course, all of this is made possible by the people of 3M and their singular commitment to make life easier and better for people around the world. We leverage these competencies to create innovative solutions for our customers and to also provide investors with attractive long-term returns." Their annual sales are about $32 billion with 90,000 employees.

MMM's most recent earnings report was April 23rd when the company announced its 2015 Q1 results. Analysts were expecting a profit of $1.93 per share on revenues of $7.83 billion. MMM missed estimates with a profit of $1.85 per share as revenues fell -3.2% to $7.58 billion. A big challenge for MMM was the strong U.S. dollar, which shaved off about $0.10 per share in pre-tax earnings. Management warned that the impact of currency headwinds would be worse than previously thought. They expect 2015 results to fall $0.35-0.40 per share due to currency translation versus prior guidance of -$0.20.

The bad news for MMM is that the U.S. dollar is likely headed for a long-term bull run higher. A weaker euro and yen will accelerate the move higher. Another factor that will drive the dollar higher is the Federal Reserve which will likely raise rates in September. If not September then 2016. Higher rates will boost the dollar. They will also impact MMM's attractiveness as a dividend play.

Right now MMM has an annual yield of 2.6%. As the U.S. bond market sinks the yields on bonds are rising. Today the yield on a 10-year bond is about 2.4%. As this rises it will make MMM less attractive as an income trade.

Shares of MMM broke support when the stock gapped down on its disappointing earnings results in April. Shares bounced back just high enough to fill the gap and then roll over again. This is a very bearish move. On Friday MMM closed below technical support at its simple 200-dma. Now shares are poised to breakdown under support at the $156.00 level. We are suggesting a trigger to buy puts at $155.75. The nearest support appears to be the $146 region.

Trigger @ $155.75

- Suggested Positions -

Buy the OCT $150 PUT (MMM151016P150)

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

Norfolk Southern Corp. - NSC - close: 90.44 change: -0.62

Stop Loss: 92.55
Target(s): To Be Determined
Current Option Gain/Loss: +47.2%
Average Daily Volume = 2.2 million
Entry on May 26 at $94.85
Listed on May 23, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

06/09/15: Transportation stocks continued to sink on Tuesday. NSC fell to another new low with a -0.68% decline. This stock is nearing what could be round-number support at $90.00. We should not be surprised to see an oversold bounce. More conservative traders may want to take some money off the table. Tonight we are moving our stop loss down to $92.55, which is just above technical resistance at its 10-dma.

No new positions at this time.

Trade Description: May 23, 2015:
The combination of weak fuel prices, lower global demand for fuel, and rising exports from other countries has been hurting U.S. coal exports. The U.S. Energy Information Administration expects U.S. coal exports to fall throughout 2015 before leveling off in 2016. Less exports means less coal that needs to be moved by railroad.

NSC is in the services sector. They're a major player in the railroad industry. According to the company, "Norfolk Southern Corporation (NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products."

Falling coal shipments is not the only problem for the railroads. Crude oil's decline from last year's highs and the massive slowdown in the amount of fracking in the U.S. has also hurt the railroad business. Less drilling means fewer rail cars of oil pipe and drilling equipment to be shipped. Less fracking means less fracking sand and other proppants to be shipped. Less drilling also means less oil produced and thus less oil to be transported by rails.

It's not just NSC that's suffering. In March 2015 railroad company Kansas City Southern (KSU) dramatically reduced their guidance. Two months later (about May 14th) KSU actually revoked its guidance altogether. Management sees no visibility due to so much uncertainty surrounding the energy market. KSU's energy-related business is down -50% from a year ago and carloads are down -38% in Q2 2015. Their utility coal shipments are down -68%.

Another company, Union Pacific (UNP), painted a similar picture of lower shipments and falling demand. The industry is facing difficult year over year comparisons. They have seen 11 weeks of negative rail volume. Industry wide coal shipments are down -15% from a year ago (UNP's was down -25%). Shipments of crude oil are down. Shipments of agriculture products are down.

It could be months before the oil industry in the U.S. recovers. Coal isn't expected to recover this year. That doesn't paint a very rosy picture for the railroads.

On April 13, 2015 NSC issued an earnings warning. They guided their Q1 results to $1.00 per share on revenues of $2.6 billion. That's a -15% drop in earnings from a year ago. Wall Street was expecting $1.29 per share on revenues of $2.68 billion. Shares of NSC crashed on this news and then rebounded but the bounce failed at technical resistance and shares have accelerated lower. NSC has broke down under major support near the $100 level.

Technical traders could argue that NSC has created a giant head-and-shoulders pattern (with two right shoulders) over the last nine months. This H&S pattern would suggest a downside target in the $80-85 region. Tonight we are suggesting a trigger to buy puts at $94.85. We will start this trade with a stop loss at $100.25. More conservative traders may want to use a stop around $98.30 as an alternative.

- Suggested Positions -

Long SEP $90 PUT (NSC150918P90) entry $2.65

06/09/15 new stop @ 92.55
05/30/15 new stop @ 95.65
05/26/15 triggered @ $94.85
Option Format: symbol-year-month-day-call-strike

Zillow Group - Z - close: 87.47 change: -0.87

Stop Loss: 93.55
Target(s): To Be Determined
Current Option Gain/Loss: +7.7%
Average Daily Volume = 2.0 million
Entry on June 01 at $89.85
Listed on May 30, 2015
Time Frame: exit prior to July expiration
New Positions: see below

06/09/15: Z underperformed the market today with a -0.98% decline and a new multi-week low. More conservative traders may want to move their stop loss closer to the 10-dma, around $91.00.

Trade Description: May 30, 2015:
The National Association of Realtors just announced on May 28th that pending home sales surged to nine-year highs in April. The U.S. real estate market is booming and yet shares of Z are down -31% from their 2015 closing highs. What's wrong with this picture?

Zillow is considered part of the financial sector. They are a free online service for consumers that provides home values, listings, and mortgages. According to the company, "Zillow Group (Nasdaq:Z) houses a portfolio of the largest real estate and home-related brands on mobile and Web. The company's brands focus on all stages of the home lifecycle: renting, buying, selling, financing and home improvement. Zillow Group is committed to empowering consumers with unparalleled data, inspiration and knowledge around homes, and connecting them with the right local professionals to help. The Zillow Group portfolio of consumer brands includes real estate and rental marketplaces Zillow(R), Trulia(R), StreetEasy(R) and HotPads(R). In addition, Zillow Group works with tens of thousands of real estate agents, lenders and rental professionals, helping maximize business opportunities and connect to millions of consumers. The company operates a number of business brands for real estate, rental and mortgage professionals, including Postlets(R), Mortech(R), Diverse Solutions(R), Market Leader(R) and Retsly(TM). The company is headquartered in Seattle."

The last year has been a rocky one for Zillow investors. The stock rallied from $130 to $160 in about three days back in July 2014 when the company announced a $2.5 billion stock for stock deal to buy its rival Trulia. By January 2015 the stock was bouncing along the $93.00 area.

Shares of Z did spike in February 2015 when they finally announced the completion of the merger. Shares surged more than 15% in one day on the news it had closed the acquisition. Zillow changed their name to Zillow Group. The combined company accounts for about 60% of the online real estate advertising market. It's the biggest U.S. real estate and home-related branding company on the Internet and mobile.

After the February spike higher shares of Zillow did nothing but fall. This culminated into a huge spike down on April 14th. The company issued an earnings warning. Z's management said that 2015 would be a "transition year", which on Wall Street means our quarterly results will stink. The company cut their 2015 revenue estimate down to $690 million. At the time Wall Street analysts were estimating $722-753 million in revenues. Z slashed their EBITDA estimate to $80 million when analysts were expecting $141 million. Zillow blamed the length review process by the FTC over potential anti-trust issues. Z's management was expecting a three-month review. It took nine months. No worries though, Z's management says that 2016 and 2017 will be awesome.

Z's most recent earnings report was May 12th. It was the first report with the combined company's results. Z posted a loss of $1.19 per share versus a 16-cent loss a year ago. Backing out their restructuring costs and stock option expenses their adjusted earnings was a profit of $0.05 per shares. That was 17 cents better than analysts were expecting. Revenues soared +92% to $127.3 million. Yet that wasn't good enough. Wall Street had been forecasting revenues in the $135-141 million range.

Shares of Z popped on its earnings news but they have done nothing but sink since then. Now the stock is poised to breakdown below round-number support at $90.00. The point & figure chart is bearish and forecasting an $86.00 target (which could get worse as Z continues to sink).

Bears point out that Zillow's valuation is very rich at more than 60 times forward earnings. The company also faces competition from the likes of Move.com and Realtor.com, both run by News Corp. My only concern is that there are a lot of bears shooting against this stock. The most recent data listed short interest at 37% of the 46.3 million share float. That's why Z can see huge one-day spikes as shorts panic. Yet overall they have been correct with Z underperforming the market.

Tonight I am suggesting a trigger to launch small bearish positions at $89.85. Odds are pretty good we could see Z retest its lows in the $80-81 area.

- Suggested Positions -

Long JUL $85 PUT (Z150717P85) entry $2.60

06/04/15 new stop @ 93.55
06/01/15 triggered @ $89.85
Option Format: symbol-year-month-day-call-strike


Cognizant Technology - CTSH - close: 63.71 change: +0.12

Stop Loss: 63.45
Target(s): To Be Determined
Current Option Gain/Loss: -49.6%
Average Daily Volume = 3.6 million
Entry on June 02 at $65.65
Listed on May 28, 2015
Time Frame: Exit PRIOR to July option expiration
New Positions: see below

06/09/15: I warned readers yesterday that CTSH looked poised to hit our stop loss. Shares did indeed continue to fall this morning and spiked down to $62.63 before bouncing all the way back to just above unchanged. Our stop was hit at $63.45 pretty early this morning.

- Suggested Positions -

JUL $65 CALL (CTSH150717C65) entry $2.28 exit $1.15 (-49.6%)

06/09/15 stopped out @ 63.45
06/02/15 triggered @ $65.65
Option Format: symbol-year-month-day-call-strike


Electronic Arts - EA - close: 61.78 change: +0.12

Stop Loss: 61.45
Target(s): To Be Determined
Current Option Gain/Loss: -39.2%
Average Daily Volume = 3.5 million
Entry on May 27 at $63.65
Listed on May 18, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

06/09/15: EA is another candidate that I warned readers about last night. Shares continued to slip this morning and hit our stop loss at $61.45. Like the major U.S. indices, shares of EA rebounded off its intraday lows and closed near its highs for the session.

Traders may want to keep an eye on the $60.00 level, which should be support. A bounce there might be a new entry point.

- Suggested Positions -

SEP $70 CALL (EA150918C70) entry $1.66 exit $1.01 (-39.2%)

06/09/15 stopped out
06/04/15 new stop @ 61.45
05/27/15 triggered @ 63.65
Option Format: symbol-year-month-day-call-strike