Option Investor

Daily Newsletter, Wednesday, 6/17/2015

Table of Contents

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

Market Wrap

Market Remains Uncertain of Fed's Intentions

by Keene Little

Click here to email Keene Little
Today's FOMC announcement provided little new information but remains on track to raise rates before the end of the year. Or at least that's what they say but the date continues to get pushed out and the market is not sure how to react to the expectations.

Wednesday's Market Stats

The market started the day with a quick pop to the upside but then steadily sold off into the early afternoon before the FOMC announcement at 14:00. Some say it was because of worry about Yellen saying something about raising rates sooner rather than later. But it may have been nothing more than pulling the rubber band back to then launch another leg up as part of the opex shenanigans we've come to know and love so well.

There were no significant economic reports to move the market this morning and the initial pop up at the open had followed an effort to rescue the futures market from a pre-market selloff. A low near 8:00 AM was followed by a pre-market rally and a high in the first 5 minutes of trading. But SPX then dropped about 14 points into a low shortly before the FOMC announcement and the day was starting to look a little more bearish. Following the announcement there was a brief spike down that was then followed by a rally of almost 19 points to a new daily high in the next hour before settling back down to close 4 points in the green.

The initial downside reaction was due to wording in the Fed's statement about the economy being strong enough to withstand an interest rate hike by the end of this year. That's nothing new -- the Fed has been trying to prepare the market for a rate increase even if it doesn't come. The only change is that the market now expects the rate hike to come in December instead of October. Any bets that will get moved out further? The Fed is desperate to get rates back to a more normal level but the economy is not really cooperating. There have been many more signs of economic slowing than of growth and while the labor market has improved some, it likely will not be enough to give the Fed room to maneuver with higher rates. I continue to believe they'll be forced into more QE before they'll be raising rates.

While discussing a tightening labor market the Fed is also hinting that the magnitude of rate-hike expectations may be less than they had been hoping. This hemming and hawing is part of what caused some of the up-and-down movement in the indexes this afternoon. GDP expectations are for an improvement over the 1st quarter's decline but they downgraded their expectations for all of 2015, which is the second downgrade in their forecast this year. I strongly suspect it's not the last downgrade that will be coming from them this year.

The problem for the Fed is that using the labor market for signs of economic strength tends not to be a good predictor of the economy. The unemployment rate is usually at its lowest level following a stock market peak and we've already seen a peak in the economy. The opposite is true at market bottoms and this is likely a result of hiring practices tending to follow about 6 months behind (it takes about that long from approval to hire to actually hiring and also about as long to document reasons for laying off/firing people).

We've had very consistent reports this year that demonstrate we've got a slowing economy. The Fed's monthly index of industrial production is just one example of a slowing economy. The chart below shows the decline in industrial production since it peaked in July last year. For the past six months the number has been negative growth for four months and flat in the other two, which technically puts the manufacturing sector in a recession and the rest of the economy is following right behind. May's decline was -0.2%, which was on top of April's -0.5% and it's weaker than even the most pessimistic estimates of dozens of economists who were polled by Econoday. Not one economist predicted this negative data, which is typical. June's data is so far not promising and as Jim Rickards tweeted Monday morning, "Lots of bad data...we should probably blame it on the warm weather."

Industrial Production, June 2012 - May 2015, chart courtesy MarektWatch/agorafinancial.com

In the meantime the stock market keeps whistling past the graveyard, making believe ghosts (economic contraction) don't really exist. Investors remain so convinced of a continuing rally that they've margined themselves to the hilt. The chart below shows a negative spike in the total credit balance (sum of free cash and available margin minus margin debt) in April (data current through April), which means more margin has been used to buy stock. Most of the negative credit balance is associated with a bull market and is actually supportive of the market. But when it gets excessive it becomes dangerous because of the margin calls that can hit when the market declines. The spike in margin debt in April has not resulted in a continuing market rally and that could be a hint of trouble for investors who might soon regret using too much margin.

SPX vs. NYSE credit balance, chart courtesy dshort.com

We've got plenty of reasons to believe the stock market could soon be in trouble but the bottom line is that it only matters what the charts tell us. As long as there is more buying than selling, and the Fed's liquidity certainly helps in this regard, we will continue to have a bullish market. Only when some key support levels break, especially if with a strong impulsive decline, will we have some information that the bulls are losing it. There are plenty of warning signs that the bulls might soon be in trouble but so far they continue to hold on.

The SPX weekly chart below shows one key support level has broken (on June 4th), which is the uptrend line from March 2009 - October 2011, currently near 2125. There remains a chance for another rally to a new high but if it doesn't get back above 2125 in the next week I think its chances of making a new high become much slimmer. As will be seen more easily on the daily chart next, there's a parallel up-channel for price action since March, the bottom of which was tested with Monday's low at 2072, and I think that's an important level for the bulls to defend. From a weekly perspective it's the March low, near 2040, that's the key level for the bears to break. Its 50-week MA has now moved up to that level as well.

S&P 500, SPX, Weekly chart

The parallel up-channel from March is shown on the daily chart below and a break below it would likely mean a quick trip down to its 200-dma, climbing up to 2050. I suspect that level would only be a speed bump to much lower prices but before worrying about that we'd have to see SPX break below 2072. Today's rally was stopped by resistance near 2106, which includes the downtrend line form May and its 20- and 50-dma's. The bulls would be in better position above today's high at 2106.79 would still need to fight through several layers of resistance to make it up to an upside target near 2150 (potentially higher).

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2121
- bearish below 2072

The price action since the May 20th high, just shy of 2135,has been choppy and at first glance it looks like a corrective pullback that should lead to new highs. But there's a bearish wave count that is very bearish, which suggests a strong breakdown if SPX breaks below 2072. If that happens I would look at small bounce attempts as shorting opportunities and I would not look to buy the "dip" until the February low near 1980 is tested. In the meantime the bulls haven't done anything wrong yet and while I see real danger to the downside (calling for caution trading the long side) this afternoon's spike back up shows why it's dangerous to short this market until we get a clearer signal (with a break below 2072).

S&P 500, SPX, 60-min chart

The DOW has essentially the same pattern as SPX. Other than Monday's intraday break below the bottom of a parallel up-channel from March it is holding above support. Last week's rally and now today's rally both probed above its downtrend line from May and this afternoon's rally attempt failed short of its 20- and 50-dma's, currently near 18006 and 18032, resp. (the 20 crossed down below the 50 yesterday). A rally above price-level resistance near 18205 is needed to clear the way to new highs. The bears need to see a break of Monday's low at 17698 and then the 200-dma, currently near 17645, to prompt stronger selling.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,206
- bearish below 17,698

A parallel up-channel for price action since March is also common to the NDX and Monday's low came close to testing the bottom of the channel. If the bulls can get things going this summer there's upside potential to the top of the channel, currently near 4650. But so far the bulls could be in trouble if today's rally is the best they can do. Today's high is so far just a back-test of its broken uptrend line form March 2009 - June 2013, which was broken last Friday. Today is the 3rd close below the line and that's usually an indication the break is real (as opposed to the head-fake break on June 8-9) and if it's followed by a drop below Monday's low at 4396 it would mean the back-test was followed by a bearish kiss goodbye and likely lead to a stronger selloff. But if the bulls can get the NDX back above its 20-dma and trend lines near 4489 it will then stay bullish.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4540
- bearish below 4392

Today's rally in the RUT took it to the top of a rising wedge pattern off its May 6th low and only 4 points shy of its April 15th high at 1278.63. The tag of the top of the rising wedge after the FOMC announcement followed by the selloff might have been the last rally attempt on a news-related push, which is a common way these patterns finish. A drop below Monday's low near 1247 would indicate the high is in place but beware of the risk of a breakdown from here. I show the potential for a pullback and then one more push higher into early next week to finish the wedge and test the April high but that's not all certain here. It would be more bullish if it can rally above 1279 and hold above (not just an intraday break).

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1279
- bearish below 1247

Treasury yields spiked lower following today's FOMC announcement, which tells us the bond market is thinking a rate increase has been moved out further (if at all). Yields had been rallying during the day but then completely reversed to new lows by the end of the day. Following last Wednesday's high, where TNX (10-year yield) achieved its price projection at 2.453%, it is now back down near its broken downtrend line form January-September 2014 and its 20-dma, both near 2.285%. If a back-test of this level is followed by a rally above last week's high at 2.489% it would keep yields bullish (prices bearish) and that would be supportive for the stock market. But a drop below 2.28% would be a bullish sign that the bounce pattern off the January low has completed.

10-year Yield, TNX, Daily chart

I like to keep an eye on the home builders index because it helps provide some information what investors think about the housing market, which in turn provides additional clues about the economy. The housing market is a huge component of the economy, which is one reason why the Fed has worked hard to keep interest rates low and why they've bought so many mortgage-backed securities over the years (in an attempt to free up money for the banks to lend to home owners). Yesterday's housing numbers were positive for the industry and as can be seen on the chart below, building permits saw a nice bump in May. So far the recovery off the 2009 low has retraced a Fibonacci 38.2% of the decline. Housing starts (bar chart at the bottom) have been running an average annual rate of about 1 million for more than a year and the data is supportive of a market that's at least holding its own, if not improving.

Housing Starts, May 2013 - May 2015, chart courtesy briefing.com

While the housing numbers above show the potential for higher numbers, the same thing can't be said with certainty about the home builders and it's a little concerning about what investors see with these companies. At the moment the home builders index is dancing on support and it's decision time for investors in this sector, which in turn will tell us whether or not they believe the home construction market will rise or fall from here. As can be seen on the weekly chart below, it has been supported by both its 50-week MA and uptrend line from October 2011 - October 2014, near 520 and 530, resp. To the upside, the bounces since the May 6th low have been blocked by its 50-day MA, currently near 551 and coming down (daily chart now shown). It also has price-level S/R near 553 (its May 2013 high). Price is getting pinched between support and resistance and will soon break in one direction or the other and give us a clue for what the next month or more should look like. At the moment the daily pattern suggests it will break down and a drop below its June 9th low near 528 would trigger a sell signal. From there the decline could be quick and a 100-point drop over the next month or two is something I would expect to see. Waiting now to see if the bulls can thwart the bearish setup.

DJ Home Construction index, DJUSHB, Weekly chart

Unless the U.S. dollar breaks out from its recent high and low at 100.78 (March) and 93.17 (April) I'll continue to look for the dollar to consolidate sideways this year.

U.S. Dollar contract, DX, Weekly chart

Last week I had mentioned that I thought gold would look better with another leg up to complete a larger a-b-c bounce off its June 5th low. If we get another leg up I'll be looking for a rally to the 1200 area before setting up the next decline, one which should take gold below 1140 and potentially below 1000 before the end of the year.

Gold continuous contract, GC, Daily chart

So far silver is confirming my bearish interpretation for gold. It has been chopping sideways/up since last week as it tests support at its uptrend line from March-April. The choppy consolidation looks like a bearish continuation pattern that should lead to a break lower. A drop below a neckline (uptrend line from November 2014 - March 2015), near 15.40, would likely lead to a strong selloff.

Silver continuous contract, SI, Daily chart

Oil has been consolidating in a tight range of about 57-61.75 and looks like a bullish continuation pattern following its March-May rally. If it pops higher it would first hit its declining 200-dma, which is dropping down toward 63. Above that level it would have clear sailing up to about 68-69 where it would run into its declining 50-week MA and broken uptrend line from 1998-2008, both shown on its weekly chart below. But a drop below its June 5th low would be a confirmed break of its 50-day MA, currently nearing its price-level S/R near 58.50, and that would likely lead to a drop back down.

Oil continuous contract, CL, Weekly chart

Thursday's economic reports will finish this week's reports as Friday will have no important ones. We'll get the unemployment numbers and then more importantly the CPI numbers before the open. The Philly Fed and Leading Indicators will be reported at 10:00 AM. The Fed has already made their statement and therefore the CPI numbers probably won't have much of an impact in the futures market. The Philly Fed number is expected to show improvement and if it doesn't then we'd have more evidence of economic contraction so the market could react to disappointment there. But then again it could react opposite to what would normally be expected since it's still more concerned about the Fed than the actual economy.

Economic reports and Summary


The price consolidation over the past four months has made it very difficult for traders to figure out where this market is headed next. Even day to day we constantly find reversals of reversals. Today was an example of intraday reversals mimicking all of the daily and weekly reversals. If you feel like you've been beating your head against the wall trying to figure out this market you're not alone. There's a reason why participation in the market has been drying up and why many are becoming increasingly worried about liquidity drying up and how that could negatively impact the market, especially in any kind of panic selling environment.

Compounding the problem is the excessive use of margin debt right now -- it's a dangerous combination that many participants are simply not aware of. The next flash crash, and there will be one, will have many recognizing the situation in hindsight.

Because the bulls are simply hanging on in a bullish market there is the potential for higher prices this month and possibly into next. But so far the bounces following May's high have led to a series of lower highs and by definition that puts us in a downtrend since May. The exception is the RUT but it has formed a bearish rising wedge for what looks like its final 5th wave in its rally. The breakdown from rising wedge patterns tends to lead to a fast retracement of the wedge.

The choppy pullback pattern for the other indexes can easily be interpreted as a bullish continuation pattern and that's what's leaving me guessing which direction the market will choose next. The one caution is that the series of lower highs in the pullback could be a very bearish pattern (a series of 1st and 2nd waves to the downside), which calls for a strong selloff to follow. That's why Monday's lows are important -- break those and it could be a flush to the downside. It's why I keep saying upside potential is dwarfed by downside risk. Trade carefully and know your downside risk (and of course upside risk if you're trying to get into a short position), since your stops might not trigger or you won't like the price you stopped out at.

Good luck and I'll be back with you in two weeks (traveling next week).

Keene H. Little, CMT

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

New Option Plays

The Force Is Strong With This One

by James Brown

Click here to email James Brown


The Walt Disney Co. - DIS - close: 111.49 change: +0.43

Stop Loss: 108.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.7 million
Entry on June -- at $---.--
Listed on June 17, 2015
Time Frame: Exit PRIOR to earnings in August
New Positions: Yes, see below

Company Description

Trade Description:
Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.

The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.

Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. In 2013 they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits in 2014 Captain America: Winter Soldier and Guardians of the Galaxy. Their 2015 Avengers: Age of Ultron was also a big winner at the box office grossing more than $1.3 billion worldwide. Of course not every Disney movie crushes it. Their recent Tomorrowland was a big disappointment and they could lose more than $100 million on the film.

Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. The next Star Wars film it titled "The Force Awakens." It will be episode seven in the franchise. The movie doesn't hit theaters until December 2015 but analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.

DIS management loves movie franchises because they can fuel years of sequels, park rides, and merchandise. The approach seems to be working. Revenues and net income have hit all-time highs for five consecutive quarters. Their 2015 Q1 results saw earnings per share up +23% to $1.27. Their Q2 results saw earnings grow +14% to $1.23 per share. Their domestic theme parks showed a strong surge in both attendance and in customer spending. Analysts are forecasting DIS earnings to grow +17% this year.

The stock surged to new all-time highs back in early May after its Q2 earnings report. Shares have since spent the last six weeks digesting gains in a sideways consolidation that has ignored much of the broader market's volatility. More recently DIS has started to rebound and is now at the top of its trading range. A breakout here could signal the next leg higher.

The point & figure chart is bullish and forecasting at long-term target of $154.00. I personally suspect that DIS could rally toward $120-125 before its next earnings report in August. Credit Suisse recently upped their price target to $130. Tonight we are suggesting a trigger at $112.25 to buy calls.

Trigger @ $112.25

- Suggested Positions -

Buy the AUG $115 CALL (DIS150821C115) current ask $2.11
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

Stocks Rally On Dovish Fed

by James Brown

Click here to email James Brown

Editor's Note:

Federal Reserve Chairman Yellen seemed to take a dovish tone on raising rates after the central bank downgraded their GDP forecast for 2015. The S&P 500 rallied this afternoon but gains stalled at the four-week trend of lower highs.

Current Portfolio:

CALL Play Updates

Aetna Inc. - AET - close: 123.86 change: -1.11

Stop Loss: 119.85
Target(s): To Be Determined
Current Option Gain/Loss: +45.2%
Average Daily Volume = 2.0 million
Entry on June 15 at $118.75
Listed on June 10, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

06/17/15: AET popped higher this morning but shares succumbed to some profit taking after two big up days in a row.

No new positions at this time. More conservative traders may want to take some money off the table here.

Trade Description: June 10, 2015:
Healthcare was big business before Obamacare. Now it's even bigger. AET is the third largest health insurer in the U.S. They added over 950,000 clients thanks to the Affordable Care Act. Naturally it doesn't hurt the healthcare business when the ACA forces you to buy health insurance or pay a tax penalty. Big insurers like AET are also benefitting from an expanding Medicaid program.

If you are not familiar with AET the company describes itself this way: "Aetna is one of the nation's leading diversified health care benefits companies, serving an estimated 46 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities, Medicaid health care management services, workers' compensation administrative services and health information technology products and services. Aetna's customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups and expatriates."

Earnings have been steadily improving for AET. They have a habit of beating estimates. Management has raised their guidance the last three quarters in a row. AET's most recent report was April 28th. The company reported its 2015 Q1 earnings were up +17% from a year ago. Analysts were expecting a profit of $1.94 per share on revenues of $15.5 billion. AET delivered $2.39 per share. Revenues were up +8% to $15.09 billion. The number of medical enrollment members rose +4% to 23.7 million.

AET's management raised their 2015 guidance for the second time in a row. They now expect fiscal 2015 earnings in the $7.20-7.40 range compared to analysts' estimates at $7.17. The stock has been steadily rising thanks to its bullish outlook.

The big insurance stocks surged in late May on M&A rumors. Then on May 29th Humana (HUM) announced they were putting the company up for sale. HUM surged +20% on that one session. AET, Cigna (CI), and Anthem (ANTM) have all been rumored as potential suitors for HUM. Lately Wall Street has been rewarding the acquirer's stock with a rally on any merger news. AET could rally if they turn out to be the buyer.

Shares of AET just recently saw a $5.00 correction from $120 to $115 and bounced. This rebound looks like a potential entry point. Today's intraday high was $118.53. We are suggesting a trigger to buy calls at $118.75.

- Suggested Positions -

Long OCT $125 CALL (AET151016C125) entry $4.34

06/16/15 new stop @ 119.85
06/15/15 triggered @ $118.75 thanks to M&A speculation
Option Format: symbol-year-month-day-call-strike

Tableau Software, Inc. - DATA - close: 120.75 change: +0.15

Stop Loss: 111.75
Target(s): To Be Determined
Current Option Gain/Loss: +25.7%
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

06/17/15: DATA tagged another record high this morning but the rally faded. The stock closed virtually unchanged on the session. If shares do retreat the nearest support is probably the 10-dma near $117.50.

No new positions at this time.

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

06/10/15 new stop @ 111.75
05/28/15 triggered @ $115.25
Option Format: symbol-year-month-day-call-strike

ManpowerGroup Inc. - MAN - close: 88.76 change: -0.03

Stop Loss: 85.70
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 697 thousand
Entry on June -- at $---.--
Listed on June 16, 2015
Time Frame: Exit PRIOR to earnings in very late July
New Positions: Yes, see below

06/17/15: Wednesday turned out to be a quiet session for shares of MAN. The stock spent almost the entire day within a $1.00 range and closed almost unchanged on the session.

Our suggested entry point is $90.25.

Trade Description: June 16, 2015:
The U.S. Q1 GDP growth estimate was a dismal -0.7%. Yet Q2 estimates have been rising the last few weeks. It looks like the U.S. will avoid a recession. The average estimate is above +2.0%. Most believe that if the Federal Reserve is going to raise rates they will only do so because they believe the economy is healthy enough and growing fast enough to endure higher rates. At the same time we are hearing improving economic data out of Europe thanks to the ECB's massive QE program. While growth in Europe is expected to be slow it is still growth and the ECB's QE program is set to last through September 2016.

One way to play improving economies in U.S. and Europe is the staffing industry. MAN is part of the services sector. According to the company, "ManpowerGroup (MAN) is the world's workforce expert, creating innovative workforce solutions for more than 65 years. As workforce experts, we connect more than 600,000 people to meaningful work across a wide range of skills and industries every day. Through our ManpowerGroup family of brands – Manpower®, Experis, Right Management and ManpowerGroup Solutions – we help more than 400,000 clients in 80 countries and territories address their critical talent needs, providing comprehensive solutions to resource, manage and develop talent."

Their most recent earnings report was April 21st. MAN announced their 2015 Q1 results were $0.83 per share. That was down -3.4% from a year ago but it was four cents better than analysts were expecting. Revenues were down -7.4% to $4.5 billion but this too was above expectations. The EPS and revenues declines were "significantly impacted" by the strong U.S. dollar. On a constant currency basis MAN's earnings were up +16% and revenues were up +7%.

Jonas Prising, ManpowerGroup CEO, said, "2015 is off to a strong start as we built on the progress we made last year delivering good results in the first quarter. It is encouraging to see the early signs of more broad based improvement in Europe, setting the stage for what we believe could be a slow but sustained labor market recovery in that region. The strong start to the year gives us confidence that we are on the right track and that our focus on permanent recruitment and our market leading solutions offerings continues to pay off. We are well placed to seize further opportunities as economic trends improve."

MAN has recently upped their semiannual dividend +63% from $0.49 to $0.80 per share. They're also making acquisitions. The company recently purchased the Australian and Singapore divisions of Greythorn, a professional services and recruiting firm. They just announced they were buying the 7S Group in Germany for 136.5 million euros.

Most of Wall Street is bullish on MAN. The last few months have seen a parade of upgraded price targets. Some of the new analyst price targets are: $89, $94, $95, $98, $99, and $103. Currently the point & figure chart is only forecasting a $94.00 target I suspect that if shares of MAN can breakout past $90.00 the stock is headed for $100.00.

Technically shares have been consolidating sideways beneath resistance near $87.00-88.00 for more than two months. The rally last week and this week looks like a bullish breakout past this level. The $87.00 region has been resistance going back to late 2013 so a breakout here could be significant. Tonight we're suggesting a trigger to buy calls at $90.25.

Trigger @ $90.25

- Suggested Positions -

Buy the SEP $95 CALL (MAN150918C95)

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

Sirona Dental Systems - SIRO - close: 100.70 change: +0.33

Stop Loss: 97.85
Target(s): To Be Determined
Current Option Gain/Loss: -34.5%
Average Daily Volume = 316 thousand
Entry on June 15 at $101.05
Listed on June 11, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

06/17/15: SIRO also spent today churning sideways. Most of the day was inside a $1.00 range between $100.40-101.40. I would be tempted to buy calls again on a rally past $101.50.

Trade Description: June 11, 2015:
Revenue growth in SIRO's business has been disappointing due to foreign currency headwinds thanks to the strong dollar. Yet investors seem to be ignoring this issue. Shares of SIRO have outperformed the broader market with a +15.3% gain this year.

SIRO is in the healthcare sector. They sell dental equipment. According to the company, "Sirona, the dental technology leader, has served dealers and dentists worldwide for more than 130 years. Sirona develops, manufactures, and markets a complete line of dental products, including CAD/CAM restoration systems (CEREC), digital intra-oral, panoramic and 3D imaging systems, dental treatment centers and handpieces."

The last couple of earnings reports for SIRO have only been mediocre. The company has been meeting analysts estimates on the bottom line (earnings). Unfortunately revenues have been seeing declines in U.S. dollar terms. On a local currency basis their sales have grown. One positive that helps the bullish picture for SIRO is margin growth. The company has seen margin growth improve the last two quarters in a row.

Shares of SIRO spiked down on May 8th, its most recent earnings report, but traders immediately bought the dip at technical support on its 50-dma. The stock seems to be stair stepping higher with a rally, then a week or two of consolidation that breaks out into another rally. Shares just broke through major round-number resistance at the $100.00 mark today. Tonight we are suggesting a trigger to buy calls at $101.05. Volume on SIRO's stock and its options is a little light. I would start this trade with small positions to limit risk.

*small positions to limit risk* - Suggested Positions -

Long SEP $105 CALL (SIRO150918C105) entry $2.90

06/15/15 triggered @ $101.05
Option Format: symbol-year-month-day-call-strike

Skyworks Solutions Inc. - SWKS - close: 106.57 change: +0.24

Stop Loss: 97.95
Target(s): To Be Determined
Current Option Gain/Loss: +8.2%
Average Daily Volume = 4.0 million
Entry on June 10 at $103.44
Listed on June 09, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

06/17/15: We see more of the same here. SWKS spent today drifting sideways. If you're looking for a bullish entry point I would be tempted to buy calls on a rally past short-term resistance at $107.00.

Readers may want to move their stop loss closer to $100.00.

Trade Description: June 9, 2015:
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).

- Suggested Positions -

Long AUG $110 CALL (SWKS150821C110) entry $4.90

06/10/15 triggered on gap open at $103.44, suggested entry was $103.25.
Option Format: symbol-year-month-day-call-strike

Zebra Tech. - ZBRA - close: 112.97 change: -0.72

Stop Loss: 111.85
Target(s): To Be Determined
Current Option Gain/Loss: -38.8%
Average Daily Volume = 475 thousand
Entry on June 10 at $113.54
Listed on June 06, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

06/17/15: Hmm.... ZBRA displayed some relative weakness today. The early morning attempt at a rally failed near $115. The stock slipped to a -0.6% decline. If there is any follow through lower tomorrow we could see ZBRA hit our stop loss at $111.85.

No new positions at this time.

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.

- Suggested Positions -

Long AUG $120 CALL (ZBRA150821C120) entry $4.00

06/16/15 new stop @ 111.85
06/10/15 triggered @ $113.54 (intraday gap higher)
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: 67.81 change: +0.30

Stop Loss: 68.15
Target(s): To Be Determined
Current Option Gain/Loss: -22.4%
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

06/17/15: CERN is not cooperating. Shares outperformed the major indices with a +0.44% gain. The stock is challenging short-term resistance near $68.00 again. Any follow through higher tomorrow probably means CERN hits our stop at $68.15.

I am not suggesting new positions.

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

06/11/15 CERN is not cooperating and traders may want to exit early now
06/10/15 new stop @ 68.15
06/04/15 triggered @ $66.75
Option Format: symbol-year-month-day-call-strike

Kohl's Corp. - KSS - close: 62.76 change: +0.68

Stop Loss: 66.55
Target(s): To Be Determined
Current Option Gain/Loss: -6.3%
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

06/17/15: KSS also outperformed the market. Shares bounced toward the top of its $62.00-63.20 trading range and closed with a +1.0% gain.

More conservative traders may want to lower their stop loss. 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

Southwest Airlines Co. - LUV - close: 33.84 change: -0.07

Stop Loss: 36.05
Target(s): To Be Determined
Current Option Gain/Loss: -9.1%
Average Daily Volume = 7.9 million
Entry on June 16 at $33.85
Listed on June 15, 2015
Time Frame: Exit prior to earnings in late July
New Positions: see below

06/17/15: The transportation average continued to underperform the market today. The XAL airline index posted a very minor gain but LUV slipped -0.2% (essentially unchanged). Readers might want to wait for a new drop under $33.50 before considering new bearish positions.

Trade Description: June 15, 2015:
Last year LUV was one of the best performing stocks in the S&P 500 with a +124% gain. Shares are not seeing a repeat this year. In fact the stock is down -19% year to date. Most of the major airline stocks have been suffering as investors fear overcapacity will kill profits.

LUV is in the services sector. They're part of the regional airline industry. According to the company, "In its 44th year of service, Dallas-based Southwest Airlines (LUV) continues to differentiate itself from other air carriers with exemplary Customer Service delivered by more than 46,000 Employees to more than 100 million Customers annually. Southwest operates more than 3,400 flights a day, serving 93 destinations across the United States and five additional countries."

There are plenty of bullish investors rooting for LUV. After years of belt tightening with high oil prices the airline industry finally found some discipline and profits boomed. LUV has been a great example and many consider it the "best-in-breed" among the major airliners. LUV's earnings have surged from $0.43 a share in 2011 to $1.64 per share in 2014.

The big drop in crude oil last year was a major boon for most of the airline companies. Fuel is a huge expense and while oil has bounced off its 2015 lows it is still a lot cheaper than last year's prices. So why are airline stocks getting crushed? The biggest worry is the industry will build into much capacity (over supply) and this will lead to price wars, which could slash profitability.

On May 20th airline stocks were crushed, shares of LUV included, after the American Airlines CEO said they would aggressively compete on price. This is after AAL had already warned that their margins would shrink in 2016 versus 2015. News that LUV was planning to boost capacity by +8% in 2015 also helped spark the plunge lower.

The sell-off in airline stocks has continued as more companies downgrade their outlook. United Airlines (UAL) recently reported that their capacity had outpaced traffic growth. Delta (DAL) warned that their Q2 revenues would decline. Even LUV warned that their May passenger revenue per available seat mile (PRASM) was down -6% from a year ago. They adjusted their 2015 Q2 PRASM estimate to be down -4% to -5% from a year ago.

In spite of all the negativity there are a ton of analysts who are still bullish on the group. If you do any research you'll see a lot of voices shouting that the airline stocks are a buy. You'll hear how the airlines will avoid the mistakes of the past. There are plenty of analysts suggesting the airlines are a buy because their valuations are so cheap. Even the International Air Transport Association (IATA) recently raised their 2015 global estimate on airline profits from $25 billion to 29.3 billion thanks to lower oil prices and record high load factors (near 80%).

On one hand the bullish view point on airline stocks is true. Traffic is still growing. Oil prices remain depressed compared to the last few years. Valuations do look cheap. Eventually this group will get so cheap that they will find a bottom. Unfortunately that could be another -10% to -20% from current levels.

Technically LUV is a sell. The stock produced a bearish double top with its peaks in January and March. It has sliced through multiple layers of support and broken the longer-term up trend. The $34.00 level looks like short-term support. We are suggesting a trigger to launch short-term bearish positions at $33.85. Earnings are coming up in late July and we'll likely exit before LUV reports.

- Suggested Positions -

Long SEP $33 PUT (LUV150918P33) entry $1.87

06/16/15 triggered @ $33.85
Option Format: symbol-year-month-day-call-strike

SM Energy Company - SM - close: 48.10 change: +0.92

Stop Loss: 50.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.6 million
Entry on June -- at $---.--
Listed on June 13, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

06/17/15: The oversold bounce in shares of SM appears to be rolling over. Shares underperformed the market by a wide margin with a -3.8% drop. More aggressive traders could buy puts now. We are suggesting a trigger to buy puts at $44.90.

Trade Description: June 13, 2015:
SM has been around a long time. They were founded back in 1908. The company was formerly known as St. Mary Land & Exploration Company but they changed their name to SM Energy Company about five years ago.

SM is in the basic materials sector. According to the company, "SM Energy Company is an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in onshore North America."

SM operates in the Rocky Mountain region including the Bakken and Three Forks formations. Further south, they drill in the Haynesville and Woodford shales of Texas and Oklahoma. SM also operates in the Permian region of Texas and New Mexico. Even further south SM drills in the South Texas area with the Eagle Ford shale formation.

Crude oil's plunge in late 2014 crushed the oil sector and shares of SM followed it lower. Yet SM appeared to be having trouble before the big drop in oil prices. The company has missed Wall Street's earnings estimates the last four quarters in a row.

The huge drop in oil sparked significant cutbacks across the oil and gas industry with most major exploration companies reducing their capital spending plans. When SM reported their Q4 earnings in February 2015 they missed the EPS number by five cents and revenues were down -6.4% from a year ago. Management also slashed their 2015 investment plans by -44% from $1.9 billion to $1.0 billion.

SM reported its 2015 Q1 numbers on May 5th. Analysts were expecting a profit of $0.29 per share on revenues of $543.1 million. SM delivered a profit of $0.21 as revenues plunged -42% to $365.9 million.

Citigroup issued a research report last month that suggested U.S. oil producers will still be able to profit with oil at depressed prices. Here's a quote from a Bloomberg article, "belt-tightening across the industry and more strategic drilling in prolific areas would deliver ample profits even at $50 crude. The improvement is driven by costs that are expected to fall by 20 to 30 percent and techniques that allow rigs to wring 30 percent more oil or natural gas from each well compared with a year ago." That definitely seems like ammunition for the bulls to be buying some of the oil producers. Yet the group continues to lag. They are facing some stiff headwinds.

Crude oil has produced a +25% bounce off its March 2015 lows. Yet the rally in oil has stalled the last few weeks with the commodity churning sideways. The recent OPEC meeting showed that the Middle East shows no signs of slowing down their production. The world is temporarily facing a small oil glut.

Meanwhile currencies could play an issue here. It is widely accepted that the long-term trend for the U.S. dollar is now higher. The Federal Reserve will eventually raise rates, either later this year or early next year. When they start raising rates it should boost the dollar. At the same time central banks around the world (like Japan and Europe) are in the middle of huge QE programs that will drive their currencies lower. Naturally this will lift the dollar even higher. A rising dollar pushes commodities lower.

Technically shares of SM have been very weak. The broke down from a bullish channel a couple of weeks ago. The stock has also sliced through some psychological support levels. The point & figure chart is currently forecasting at $40.00 target. You could argue that SM is already oversold. However, the path of least resistance is lower. Tonight we are suggesting a trigger to buy puts at $44.90 with a wide stop loss at $50.25 just in case SM does see a little oversold bounce.

Trigger @ $44.90

- Suggested Positions -

Buy the AUG $40 PUT (SM150821P40)

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

Zillow Group - Z - close: 86.99 change: +1.28

Stop Loss: 88.25
Target(s): To Be Determined
Current Option Gain/Loss: +19.2%
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

06/17/15: Z managed an oversold bounce today with a +1.49% gain. Yet the rally stalled near its bearish trend line of lower highs (and its 10-dma). The intraday high was $88.04. If there is any follow through higher our stop is at $88.25.

No new trades at this time.

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

06/16/15 new stop @ 88.25
06/10/15 new stop @ 91.05
06/04/15 new stop @ 93.55
06/01/15 triggered @ $89.85
Option Format: symbol-year-month-day-call-strike