Option Investor

Daily Newsletter, Tuesday, 6/23/2015

Table of Contents

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

Market Wrap

Uncertainty Fading

by Jim Brown

Click here to email Jim Brown

The news out of Greece suggests there may be some kind of deal this week to kick the can farther down the road. That is ok with traders because it removes the short-term uncertainty. A couple of decent economic reports in the U.S. have increased bullish sentiment despite the expectations for faster rate hikes.

Market Statistics

The markets started strong on Tuesday but faded intraday on protests in Greece and some analysts downplaying internals in the economic reports. Fed governor Jerome Powell depressed the markets when he said he favored two rate hikes this year in September and December. When pressed he repeated the party line about data dependence but at this point he thought the chance of a September hike was 50%.

He said he was forecasting stronger growth in the second half, a stronger labor market and a "greater basis in confidence" in inflation returning to 2%. His comments put him in a group of five Fed officials that expect two rate hikes in 2015. However, there are seven officials predicting less than two hikes in 2015. That was up from only three in Q1.

He said conditions in Europe were improving and China's economic decline was slowing. However, if the dollar remained strong it would be a "big headwind for the U.S. economy" and the Fed would have to take that into account in their rate hike decision. If the Fed hikes, the dollar will spike even higher.

If there is a resolution in Greece it will accelerate the chance of a Fed rate hike because that uncertainty will have been removed. News out of Greece is mixed with alternating demonstrations by various groups either for or against a deal.

There are no copies of the Greek proposal circulating and EU finance ministers have been working on the numbers and projections for about 48 hours now. Since there have been no obvious sticking points in the headlines there is a good chance something will get done. Reportedly the Greece proposal called for 8 billion euros in tax hikes from the wealthy, middle class and businesses as well as a hike in the national sales tax. The national tax would tax be 23% on nearly everything but food, energy, medicine, restaurants, books and theaters, which would be taxed at 11%. There would be some modifications in the pension program but details are sketchy.

Reportedly Greece would gradually raise the retirement age to 67 but no time frame for that adjustment was given. Currently the earliest retirement age is 55. The proposal calls for additional contributions by workers to the pension plan.

The basic theme in European headlines is that Prime Minister Alexis Tsipras surrendered. When it came right down to the deadline where Greek banks were going to be closed, he capitulated and relented on multiple policy fronts. While there is no deal yet the majority of analysts believe they will escape doom this cycle but there is no scenario where Greece will not need to borrow more money and the Troika is going to demand further austerity measures and we will get to replay this crisis all over again.

For now, the markets are assuming there will be a resolution because the ECB is holding the trump card. They can force a closure of the Greek banking system at any time and that would be catastrophic. Tsipras had run out of options and was forced to surrender.

In the U.S. this was a busy day economically. The New Home Sales for May rose to an annual pace of 546,000 units and well over estimates for 525,000. That was a 19.5% jump from May of 2014 and up +2.2% from April. New home sales for April were revised up from 517,000 to 534,000. Sales rose in the Northeast +87.5% and West +13.1% and declined in the South -4.3% and Midwest -5.7%. Strong sales in the Northeast were due to the June expiration of New York's Program 421-A, which offered significant tax incentives to developers.

The Richmond Fed Manufacturing Survey Index rose from 1.0 to 6.0 and a five-month high. The index had dipped to contraction at -8.0 in March and has been struggling back into positive territory.

The new order component rose from 2.0 to 11.0 after a -13.0 low in March. The backorder component rebounded from -10.0 to +6.0. The rest of the components showed only minimal gains.

The separate Richmond Services Index rose from 13 to 19. The only real negative was a drop in the employment component from 8 to 3 but the wages component soared from 11 to 20 for an interesting contrast.

The Durable Goods Orders for May declined -1.8% compared to -0.5% in April and consensus estimates for a -0.5% decline. Excluding transportation orders rose +0.5%. The big drag on the headline number came from the transportation sector with a -6.4% decline in orders. That came mostly from a -35.3% drop in aircraft orders. The drop was due to Boeing. They received orders for 60 planes in April and only 11 in May.

New orders are down -2.5% over May 2014 with nondefense capital goods orders down -7.8%. Transportation orders are down -9.6% from a year ago.

These internals helped to depress the market mid morning.

The major report due out on Wednesday is the GDP revision for Q1. Expectations are for a slight improvement from -0.75% to -0.2% but I would not rule out a disappointment.

The Kansas Fed Manufacturing Survey on Thursday is the only other report left this week that could move the market but it would have to be significantly different from the -13 in May. The Kansas survey is in dive mode having fallen from +8 in December to the low of -13 last month. Analysts are blaming the decline on the energy sector and the lack of new orders for equipment used in drilling and producing oil.

Moody's Chart

The biggest news of the day came after the bell when Netflix (NFLX) announced a 7:1 stock split. With shares just under $700 today that means they would decline to $100 each and allow investors with smaller accounts to participate in the stock's growth. Shares rallied from $681 to $704 after the announcement.

In theory this could be quite a split run since the stock has been rising nonstop since early April. However, some investors could be disappointed because Netflix had enough shares authorized for a 10:1 split and quite a few investors may have been hoping for the bigger split and cheaper shares.

Just yesterday, BTIG raised their price target on Netflix to $950. This is one of those stocks that once split could see a substantial amount of buying interest. The record date is July 2nd and split date July 14th.

The UnderArmour board is not due to approve the UA split until late August and that is the only other currently announced stock that could produce a split run.

Facebook (FB) finally got some traction on the news of a more immersive advertising platform for video. The news allowed Facebook to breakout to a new high on more than twice the daily volume. The company showed off the new advertising platform that will allow short films and pictures to be embedded in the stream of content. Facebook said it will allow advertisers to engage users on a deeper and more personal level than traditional display and banner ads.

Facebook already displays more than 4 billion videos daily. The company also showed a new search feature that was much more comprehensive and broader reaching. They also showed a new pattern recognition feature that can automatically tag people in a Facebook post even if their faces are hidden. Facebook tested the feature on 40,000 public images on Flickr and the algorithm recognized the individuals 83% of the time. The system cues on things like hair, clothing and the shape of people's bodies. Is it my imagination or if Facebook turning into Skynet from the Terminator movies?

The surge in price to a new high also catapulted Facebook into the top ten largest market cap companies in the S&P. Facebook's market cap is now more than $238 billion and a record high. The new market cap knocked Walmart out of the top ten. Who would have ever thought that Facebook would be bigger than Walmart? Of course market cap is a lot different than enterprise value. Walmart has more than 11,000 stores in 28 countries and revenue of nearly $500 billion a year with earnings of nearly $16 billion. Facebook is only expecting revenue of $16 billion and earnings of $6 billion in 2015.

Apparently friends are more valuable than family at least to Mark Zuckerberg. Mark jumped to the world's 11th richest person at $38.6 billion thanks to the spike in Facebook shares today. That puts him only $1.4 billion away from being in the top ten. He jumped ahead of the four Waltons (Walmart heirs) with his $5 billion spike in net worth in 2015. Christy Walton is the richest of the four relatives with $37.1 billion in net worth. According to Bloomberg each of the Waltons has lost $5 billion so far this year. In order for Mark to break into the top ten he will have to surpass Jeff Bezos at $40 billion.

Facebook shares have been slowly edging higher over the last year with $85 as strong resistance. That resistance is history after the breakout today.

Blackberry (BBRY) reported a loss of 5 cents compared to estimates for a loss of 3 cents. However, shares spiked higher at the open on a headline that software sales had risen +150% to $137 million. CEO Chen said he was targeting $600 million in software sales in 2015. He is trying to turn the company from primarily a phone maker into a service company for corporate enterprises.

Blackberry sold one million phones in Q1. Chen was asked if they were going to make an Android version of the Blackberry. He said, "If I can secure Android, I will make an Android phone. If I can't, then I won't." The Blackberry platform is the most secure phone platform in existence today according to Chen.

He also reiterated that Blackberry was not for sale "at this current price." We have put in a lot of hard work and "we are not done yet, not by any stretch of the imagination." Obviously the phrasing left the door open to a sizeable offer. They still have a market cap of $5 billion. Shares are really close to breaking support at $8.75.

Darden Restaurants (DRI) reported earnings of $1.08 on a +13.8% rise in revenue to $1.88 billion. Same store sales at Olive Garden rose +3.4%. Unfortunately the majority of those comp gains came from hiking the prices.

The company saw its entire board replaced last year after the old board sold off the Red Lobster chain against shareholder wishes. Darden said it was going to spinoff 430 of its more than 1,500 stores into a REIT to be complete before year-end. Darden will then lease them back from the REIT. The spinoff will give Darden enough cash to retire more than $1 billion in debt and give them the opportunity to acquire some more stores. Shares rocketed higher at the open but faded to gain only a penny on the day.

Amazon (AMZN) announced a new pay program for authors. For books that are loaned or sold under the Kindle Unlimited program the company will pay authors by the page instead of buy the book. In an effort to slow the flood of inexpensive serial novelettes or just plain crap literature the company is going to pay by how many pages are read rather than by the book. Thankfully, they are not going to pay by the number of pages in the book or we would have thousands of thousand page books to wade through.

By compensating authors by how many pages are read it means the books will have to be more entertaining in order to maintain reader interest. In the old system the authors got the same whether it was a small serial novel that took a month to write or a serious 500 page novel that took years to write. I think this is a good idea because I read about 75 books a year. I have downloaded dozens where I never made it past the first few chapters because the book description was written much better than the book. I just deleted it and went on to something else. Hopefully this payment structure will eventually improve the quality of books on the Amazon website.

In the shortest time span I could imagine Verizon (VZ) has closed its acquisition of AOL (AOL) in only 42 days since the announcement. This is warp speed in the world of acquisitions. According to Dealogic this was the 11th fastest billion-dollar deal closing in 2015. For a list of the top 20 deals this year and their size and speed click HERE. Verizon paid $4.4 billion for AOL. The odds are VERY good we will never see the symbol AOL on a stock again.

Ambarella (AMBA) rebounded +8.4% after multiple analysts called the -$25 drop on Monday a huge buying opportunity. Canaccord Genuity said, "Finally a pullback and a buying opportunity." The company rates Ambarella as a buy with a $115 price target. "We maintain our belief Ambarella's portfolio of highly differentiated application-specific video encode, compression, and analytics processors positions the company for strong sales and earnings growth as HD and Ultra HD video capture and compression become increasingly important across several consumer and enterprise markets."

FBN Securities said the sell off creates a "compelling buying opportunity." They rate the stock a buy with a price target of $110. They also said Ambarella could be an acquisition target by Qualcomm.

Shares declined sharply after short seller Citron called the company ridiculously overpriced. Shares rebounded +$8 today.


On Monday the S&P rebounded on another short squeeze generated by hopes over Greece. However, the S&P only closed ONE point over the closing high for Thursday. The Friday decline was erased but there were no added gains. The Dow also erased its losses but only closed FOUR points over the Thursday close. This was hardly a monster rebound with a lot of buying conviction.

Monday's volume was weak at 5.61 billion shares and today's volume was only 5.64 billion. Advancers were 4:3 over decliners and only slightly below Monday's ratio of 4.5:2.6.

The market opened up sharply with the Dow reaching 18,188 but then faded to negative territory at 18,108 by noon. The S&P rallied only +5 points at the open to 2128 before fading to 2119 and -4 points at noon.

I am boring you with this trivial number listing to show that there was no conviction in either direction. The market is still in wait and see mode over Greece. This is also earnings warning week and S&P Capital IQ is projecting a -4.9% decline in Q2 earnings. This suggests there are plenty of warnings ahead. Lastly, this is the window dressing week. For fund managers that have already dressed up their portfolios their objective now is to keep the stocks and indexes pinned to these levels. They do not care if there are no further gains they just want to try and prevent further declines. This sets up a pretty boring week if they are successful.

However, the major indexes appear to be setting up for a move higher as long as Greek negotiations are successful. Markets hate uncertainty and removing that geopolitical uncertainty would be a relief. I just hope that did not happen on Monday and now we are waiting for a sell the news event.

Resistance at 2129 continues to hold on the S&P but today was the highest close in five weeks. The 2130 level and the historic high close from May is the target and the S&P is inching slowly in that direction.

The Dow chart is very easy to read. The resistance for the last three months is still resistance and every intraday spike is immediately sold. However, today was a four-week high close so point by point we are chipping away at that 18,180 resistance level. There was good participation in the Dow stocks but the leaders were clearly UnitedHealth and Goldman Sachs. Goldman is in breakout mode ahead of the expected rate hikes. UnitedHealth is up on the M&A in the sector.

Note that Apple is near the bottom even with their new music service coming out this week. Investors are favoring biotechs rather than big tech.

The move over 18,100 over the last two days is material. This has been resistance in the past and now it appears to be support. This could be a launching pad on some decent headlines.

The Nasdaq Composite squeezed out another new high at 5160 and it does not appear to be looking back. That was just below the high for the day at 5163, which was a new intraday high.

However, the Nasdaq 100 stalled once again at the resistance at 4545. The big caps are simply getting no love from investors and the broader Composite Index is benefitting from the biotechs and the small caps.

If the NDX can achieve breakout status we could see some short covering to help push the market higher.

The heroes of the market remain the small caps. The Russell 2000 closed at a new high and only 1 point from the intraday high. Multiple analysts are calling 1300 strong resistance and the Russell is only -5 points away. It will be interesting to see if they are right. Remember, next week the bias on the Russell turns positive due to the rebalance purchases. Funds that do not complete their rebalancing by Friday will be adding to positions all week next week in order to get their weightings correct. The majority of the buying will be this Friday at the close but there are always some late comers the following week. Just because the rebalance bias turns positive does not mean the index can't decline. This is a negative bias week and the index is setting new highs so we obviously can't depend on historical trends.

On the negative side the Dow Transports lost momentum again. This was especially troubling since there were multiple upgrades on the airline sector this week. The transports are not confirming decent economic data or the near high on the Dow industrials.

I have been in wait and see mode for the last two weeks with a slightly negative bias. While this week is typically negative for the markets, the potential ending of the uncertainty surrounding Greece has given them a lift. Whether a deal in Greece will lift the markets higher is unknown.

However, the indexes are definitely shifting to a bullish bias and the breakout on the Russell and Nasdaq tell us we should be long. Even the sudden revival of the potential for two rate hikes in 2015 could not slow the market gains. If the big cap indexes finally gain some traction and move to new highs the resulting rally could be strong. Summer rallies to happen but not often and not normally with big moves. There are always exceptions and I hope this is one for the record books if the breakout occurs.

Enter passively, exit aggressively!

Jim Brown

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New Option Plays

+20% Growth In 2015

by James Brown

Click here to email James Brown


Under Armour, Inc. - UA - close: 85.39 change: +0.49

Stop Loss: 81.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.0 million
Entry on June -- at $---.--
Listed on June 23, 2015
Time Frame: Exit prior to August expiration
New Positions: Yes, see below

Company Description

Trade Description:
UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitness platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it is actively fighting for market share and recently overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but UA grew +32%.

UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance.

UA reported their 2014 Q4 results on February 4th. The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

There was a steady stream of analysts raising their price targets on UA after its February earnings report. Many of these new price targets were in the low $90s ($91-94).

The company's most recent earnings report was April 21st when UA announced Q1 results. After raising guidance back in February the company reported earnings of $0.05 per share, which was in-line with Wall Street's new estimates. Revenues were up +25.4% to $804.9 million, which beat expectations. UA management raised their outlook again. They expect 2015 operating income to improve +13-to-15%. UA expects 2015 revenues to rise +23% to $3.78 billion.

The stock has rallied sharply into its earnings report and shares suffered some post-earnings depression with a -$12.00 drop (-13.6%) in the following two weeks. The price target upgrades continued but UA spent most of May consolidating sideways inside a narrow range. Finally on June 5th shares of UA broke out past multiple layers of resistance on another upgrade. The stock was upgraded to a "buy" with a $91 price target.

UA spent about a week digesting its bullish breakout and then took off. The company recently announced a 2-for-1 stock split. However, instead of a normal split the company is creating a new Class C stock which will have no voting rights.

Why a new class of shares? That's because the company's founder and current CEO Kevin Plank does not want to lose control. This way he can maintain control by keeping his voting shares while still selling the new Class C shares. Just in case you were curious, Class A UA stock has one vote per share. Class B stock has ten votes per share, which Plank owns the majority of.

This stock "split" will be disbursed as a dividend. There's no word yet on the new ticker symbol for the class C shares. There is a special meeting of UA shareholders on August 26, 2015 to approve the necessary changes so they can proceed with this stock split. Google did a similar stock split back in 2014 so the founders could maintain control. Both GOOG's and UA's decision has rankled some shareholders. However, normally stock splits tend to be viewed as a bullish move since stocks don't split if they're not rising. Stocks that split tend to outperform the broader market.

Tonight we are suggesting a trigger to buy calls at $86.05. More conservative traders may want to consider waiting for a dip instead. The nearest support is $82.00. We'll start with a stop loss at $81.75.

FYI: Traders should note that larger rival Nike (NKE) will report earnings on June 25th, after the closing bell. NKE has been doing well and I expect a bullish report but if NKE misses or warns it could definitely influence trading in UA's stock.

Trigger @ $86.05

- Suggested Positions -

Buy the AUG $90 CALL (UA150821C90) current ask $2.10
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

Check Your Stop Loss

by James Brown

Click here to email James Brown

Editor's Note:

Double check your stop loss placement. Stocks managed another gain on continued hopes for a Greek deal and better than expected new home sales. The Greece story could unravel by the weekend. Markets could be volatile over the next few days.

We have updated several stop losses tonight.

Current Portfolio:

CALL Play Updates

Aetna Inc. - AET - close: 128.20 change: +0.15

Stop Loss: 119.85
Target(s): To Be Determined
Current Option Gain/Loss: +88.9%
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

06/23/15: AET suffered some profit taking this morning but traders bought the dip (twice) near $126.50.

Readers may want to raise their stop closer to the $125.00 level. No new positions at this time.

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

06/20/15 WSJ reporting that AET has made a bid for HUM 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

Cracker Barrel Old Country Store - CBRL - close: 147.92 change: -0.30

Stop Loss: 144.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 332 thousand
Entry on June -- at $---.--
Listed on June 20, 2015
Time Frame: Plan on exiting prior to August 5th
New Positions: Yes, see below

06/23/15: It was a quiet Tuesday for CBRL. Shares consolidating sideways near the $148.50 area. I don't see any changes from last night's new play description. Our suggested entry point is $150.25.

Trade Description:
It's summertime and that means vacations and road trips for a lot of Americans. That's good news for a company like CBRL because most of their 634 restaurants are located along major highways.

CBRL is in the services sector. According to the company, "Cracker Barrel Old Country Store, Inc. provides a friendly home-away-from-home in its old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping that’s surprisingly unique, genuinely fun and reminiscent of America's country heritage…all at a fair price. Cracker Barrel Old Country Store, Inc. (CBRL) was established in 1969 in Lebanon, Tenn. and operates 634 company-owned locations in 42 states."

Wall Street loves earnings growth and CBRL continues to deliver. Back in February the company beat earnings and revenue estimates and raised their 2015 guidance. Their most recent report was June 2nd. CBRL reported their fiscal third quarter. Analysts were expecting a profit of $1.37 per share on revenues of $680 million. CBRL beat estimates with a profit of $1.49 per share. This is a +21% rise from a year ago and marks the fifth quarter in a row of double-digit earnings growth. Revenues also beat estimates with a +6.3% rise to $683.7 million. CBRL said their comparable store sales were up +5.2%. Their comparable retail store sales were up +4.5%.

Management raised their normal quarterly dividend +10% to $1.10. They also announced a special one-time dividend of $3.00 per share. Both are payable on August 5th, 2015 to shareholders on record as of July 17th. CBRL offered a bullish outlook for both their fourth quarter and 2015. Management raised their 2015 earnings guidance from $6.40-6.50 to $6.60-6.70 per share. Wall Street was only expecting $6.55.

Technically the stock looks bullish. Shares have been consolidating their post-earnings gains the last couple of weeks but traders are buying the dip. Today CBRL is poised for a breakout past short-term resistance near $148.50. If the stock does breakout it could see some short covering. The latest data listed short interest at 17% of its small 18.9 million share float. Meanwhile the point & figure chart is very bullish and forecasting a long-term target at $231.00.

Tonight we are suggesting a trigger to buy calls at $150.25. More aggressive traders may want to jump in early on a rally past $148.75.

Trigger @ $150.25

- Suggested Positions -

Buy the SEP $155 CALL (CBRL150918C155)

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

Tableau Software, Inc. - DATA - close: 122.16 change: +0.62

Stop Loss: 116.75
Target(s): To Be Determined
Current Option Gain/Loss: +30.9%
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

06/23/15: DATA spent most of the day churning sideways. However, shares managed to outperform the major indices with a +0.5% gain. Traders will want to consider raising their stop loss. 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

06/18/15 new stop @ 116.75
06/10/15 new stop @ 111.75
05/28/15 triggered @ $115.25
Option Format: symbol-year-month-day-call-strike

The Walt Disney Co. - DIS - close: 114.41 change: +0.88

Stop Loss: 108.75
Target(s): To Be Determined
Current Option Gain/Loss: +26.1%
Average Daily Volume = 5.7 million
Entry on June 18 at $112.25
Listed on June 17, 2015
Time Frame: Exit PRIOR to earnings in August
New Positions: see below

06/23/15: The rally in DIS continues with shares outpacing the market with a +0.77% gain on Tuesday. I wouldn't chase it here. The stock is up six out of the last seven days. Wait for a dip if you're looking for a new entry point.

Trade Description: June 17, 2015:
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.

- Suggested Positions -

Long AUG $115 CALL (DIS150821C115) entry $2.30

06/18/15 triggered @ $112.25
Option Format: symbol-year-month-day-call-strike

Demandware, Inc. - DWRE - close: 72.28 change: +0.36

Stop Loss: 67.75
Target(s): To Be Determined
Current Option Gain/Loss: -7.2%
Average Daily Volume = 417 thousand
Entry on June 22 at $72.35
Listed on June 20, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in August
New Positions: see below

06/23/15: This is the second day in a row that DWRE has been consolidating sideways in the $71.00-72.50 region. Broken resistance near $70.00 looks like new support.

Today's high was $72.38. Consider waiting for a rally past $72.50 before initiating new positions.

Trade Description: June 20, 2015:
2015 is shaping up to be a lot better than 2014 for DWRE investors. The stock delivered a rocky performance last year and spent much of it churning sideways in a huge consolidation pattern (see the weekly chart below). The stock's momentum has turned bullish this year thanks in part to consistently strong revenue growth. The NASDAQ is up +8.0% year to date. DWRE is currently up +23.9%.

DWRE is in the technology sector. According to the company, "Demandware, the category defining leader of enterprise cloud commerce solutions, empowers the world's leading retailers to continuously innovate in our complex, consumer-driven world. Demandware's open cloud platform provides unique benefits including seamless innovation, the LINK ecosystem of integrated best-of-breed partners, and community insight to optimize customer experiences. These advantages enable Demandware customers to lead their markets and grow faster."

With the exception of its Q4 report on February 19th DWRE has beaten Wall Street's earnings estimates on both the top and bottom line the last four quarters in a row. Revenue growth has been +55.6%, +55.9%, +43.4%, and +54.3% for the last four quarters. The only miss was DWRE's bottom line number for the fourth quarter where it missed by a penny.

DWRE's most recent results were May 7th. The company said their Q2 profit was $0.16 per share. That is a big improvement from a ($0.05) loss a year ago and it was 27 cents better than the ($0.11) loss analysts were expecting. Revenues were $50.27 million compared to estimates for $49.5 million. DWRE said their live customers were up +30% from a year ago to 279. The number of live sites surged 42% to 1,241.

Tim Adams, DWRE's CFO, commented on their quarterly results, "During the first quarter, we continued to invest in growth and innovation. We expanded our operations deeper into Europe and Asia. Our R&D team also made considerable progress on their key initiatives – extending our platform deeper into the store, delivering our intelligence solutions and enriching our core commerce capabilities. As we move through 2015, we remain focused on scaling our organization to support the fast pace of our growth."

Back in April Goldman Sachs added DWRE to their conviction buy list. Yet shares didn't start moving until June. A couple of weeks ago shares broke out from a three-month consolidation pattern. The current rally could be getting a boost from short covering. The most recent data listed short interest at 12% of the relatively small 33.48 million share float. Currently the point & figure chart is bullish and forecasting an $85 target. Tonight we're suggesting a trigger to buy calls at $72.35.

- Suggested Positions -

Long OCT $75 CALL (DWRE151016C75) entry $5.28

06/22/15 triggered @ $72.35
Option Format: symbol-year-month-day-call-strike

ManpowerGroup Inc. - MAN - close: 91.60 change: -0.40

Stop Loss: 89.65
Target(s): To Be Determined
Current Option Gain/Loss: +4.5%
Average Daily Volume = 697 thousand
Entry on June 18 at $90.25
Listed on June 16, 2015
Time Frame: Exit PRIOR to earnings in very late July
New Positions: see below

06/23/15: The rally in MAN paused today. Shares settled with a -0.4% decline. If you're looking for an entry point then consider waiting for a dip near $90.00.

Tonight we are raising the stop loss to $89.65.

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.

- Suggested Positions -

Long SEP $95 CALL (MAN150918C95) entry $2.20

06/23/15 new stop @ 89.65
06/18/15 triggered @ $90.25
Option Format: symbol-year-month-day-call-strike

Sirona Dental Systems - SIRO - close: 101.74 change: -0.51

Stop Loss: 99.65
Target(s): To Be Determined
Current Option Gain/Loss: -20.7%
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

06/23/15: SIRO seems to be consolidating sideways in the $102 area the last few days. I suspect we could see it dip toward round-number support at $100.00. The bullish trend of higher lows, near its 20-dma, should be around $99.85.

We are raising the stop loss up to $99.65.

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

06/23/15 new stop @ 99.65
06/15/15 triggered @ $101.05
Option Format: symbol-year-month-day-call-strike

Skyworks Solutions Inc. - SWKS - close: 110.28 change: -0.64

Stop Loss: 107.85
Target(s): To Be Determined
Current Option Gain/Loss: +34.7%
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

06/23/15: SWKS is still digesting its gains in a sideways move over the last couple of sessions. Traders bought the dip midday but SWKS failed to make it back into positive territory.

Tonight we are going to try and reduce our risk by raising the stop loss up to $107.85. More aggressive traders may want to give SWKS more room since the nearest support looks like $107.00.

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

06/23/15 new stop @ 107.85
06/10/15 triggered on gap open at $103.44, suggested entry was $103.25.
Option Format: symbol-year-month-day-call-strike

Universal Health Services - UHS - close: 134.37 change: -0.80

Stop Loss: 131.45
Target(s): To Be Determined
Current Option Gain/Loss: +1.9%
Average Daily Volume = 697 thousand
Entry on June 19 at $132.75
Listed on June 18, 2015
Time Frame: 6 to 8 weeks, exit prior to Q2 earnings
New Positions: see below

06/23/15: UHS experienced a little bit of profit taking today with a -0.59% decline. The stock seemed to find short-term support near $134.00. If this dip continues I'd expect a drop toward what should be support in the $132.50 area.

Tonight we're raising the stop loss to $131.45.

Trade Description:
The Affordable Care Act, a.k.a. Obamacare, has been a boon for the health insurance companies. Another industry that has profited from the ACA is hospitals. Stocks like UHS and HCA are outperforming the broader market. The S&P 500 is up +3.0% year to date. UHS is up +18.7%.

According to the company's website, "Universal Health Services, Inc. (UHS) is one of the nation's largest and most respected healthcare management companies, operating through its subsidiaries, behavioral health facilities, acute care hospitals and ambulatory centers throughout the United States, the United Kingdom, Puerto Rico and the U.S. Virgin Islands. UHS was founded in 1978 by Alan B. Miller, Chairman and CEO, and today has more than 68,000 employees. UHS maintains one of the strongest balance sheets and is rated amongst the highest in the hospital services industry by Moody's and Standard & Poor's. This strong capital position has enabled the company to develop and acquire many new facilities over the past few years.

The UHS strategy is to build or purchase healthcare properties in rapidly-growing markets and create a strong franchise based on exceptional service and effective cost control. UHS owes its success to a responsive management style and to a service philosophy that is based on integrity, competence and compassion."

UHS owns and operates more than 235 acute care and behavioral health locations and surgery centers. Together they generated annual revenues of $8.0 billion in 2014.

Looking at the last couple of quarters the company's revenues have been improving. Their Q4 results were out on February 26th. Earnings were in-line with expectations at $1.51 per share. That's a +46% improvement from a year ago. Revenues were up +7.0% and above estimates at $2.26 billion.

The trend continued in the first quarter. UHS reported its Q1 results on April 27th. Earnings were up +30% to $1.78 per share. That was 21 cents better than expected. Revenues rose +10.9% to $2.38 billion, also above estimates.

In their earnings press release the company said, "The increased operating performance experienced at our acute care facilities during the first quarter of 2015, as compared to the comparable quarter in 2014, was due in part to continued improvement in general economic conditions as well as a decrease in the number of uninsured patients treated at our hospitals. The decrease in the number of uninsured patients treated at our acute care hospitals was due primarily to the favorable impact of the Affordable Care Act which includes the expansion of Medicaid in certain states in which we operate and the enrollment of patients in newly created commercial exchanges."

This trend should continue but there is a risk. The U.S. Supreme Court is currently mulling a decision on Obamacare subsidies. If they decide that the current structure of the law makes these subsidies illegal it could bring down the entire piece of legislation and that would hurt the healthcare industry. The major healthcare and hospital stocks could all drop if this were to occur.

Technically shares of UHS look very bullish with trend of higher lows and higher highs. The point & figure chart is bullish and forecasting at $147.00 target. On a short-term basis UHS is hovering just below resistance in the $132.50 area. Today's intraday high was $132.70. We are suggesting a trigger to buy calls at $132.75. Plan on exiting prior to UHS' next earnings report in very late July or early August.

- Suggested Positions -

Long OCT $140 CALL (UHS151016C140) entry $5.20

06/23/15 new stop @ 131.45
06/19/15 triggered @ $132.75
Option Format: symbol-year-month-day-call-strike

Zebra Tech. - ZBRA - close: 117.92 change: -0.28

Stop Loss: 113.85
Target(s): To Be Determined
Current Option Gain/Loss: -7.5%
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

06/23/15: ZBRA rallied this morning but the rally failed under $119.50. Shares reversed lower but fortunately traders bought the dip at $116.50 late this morning. ZBRA was on the rebound heading into the closing bell. If the market cooperates we could see ZBRA challenging $120 soon.

Tonight we are moving the stop loss up to $113.85.

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.

- Suggested Positions -

Long AUG $120 CALL (ZBRA150821C120) entry $4.00

06/23/15 new stop @ 113.85
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

Southwest Airlines Co. - LUV - close: 34.58 change: -0.21

Stop Loss: 35.45
Target(s): To Be Determined
Current Option Gain/Loss: -30.5%
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

06/23/15: The XAL airline index continued to rally although gains were limited. The XAL is up five days in a row and nearing resistance. Meanwhile LUV did not participate in the airline rally today. Shares slowly drifted lower and underperformed with a -0.6% decline. It didn't help that Morgan Stanley started coverage on LUV today with an "underweight".

No new positions at this time.

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

06/22/15 new stop @ $35.45
06/16/15 triggered @ $33.85
Option Format: symbol-year-month-day-call-strike

SM Energy Company - SM - close: 47.30 change: +1.39

Stop Loss: 48.75
Target(s): To Be Determined
Current Option Gain/Loss: -51.5%
Average Daily Volume = 1.6 million
Entry on June 19 at $44.49
Listed on June 13, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

06/23/15: The oversold bounce in SM continued on Tuesday. Shares accelerated higher with a +3.0% gain. Yet SM remains under its bearish trend of lower highs. The rally "should" fail in the $48.00 area. Tonight we are lowering the stop loss to $48.75 just in case this bounce does not roll over.

No new positions at this time.

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.

- Suggested Positions -

Long AUG $40 PUT (SM150821P40) entry $1.65

06/23/15 new stop @ 48.75
06/19/15 triggered on gap down at $44.49, suggested entry was $44.90
Option Format: symbol-year-month-day-call-strike