Option Investor

Daily Newsletter, Saturday, 6/27/2015

Table of Contents

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

Market Wrap

Nuclear Option Invoked

by Jim Brown

Click here to email Jim Brown

The Greek crisis was quickly winding down to what everyone thought would be a last minute resolution after the EU, ECB and IMF offered Greece a deal that unlocked 15 billion euros in aid. The deadline for acceptance was Sunday evening in order to get parliament approvals before Tuesday's aid expiration deadline. Instead Tsipras invoked the nuclear option to spoil those plans.

Market Statistics

Late Saturday EU Finance Ministers were due to meet in Brussels for a last minute attempt to get Alexis Tsipras to accept the offer and end current crisis. The current bailout deal that has seen Greece receive over 300 billion euros in bailout loans expires on Tuesday June 30th. Early Saturday Tsipras made a TV appearance and called for a surprise referendum on July 5th to accept or reject the latest offer. No, you did not misunderstand. The deadline for the deal was midnight on June 30th and Tsipras called the referendum for July 5th. At the same time he called on voters to reject the offer.

Tsipras said, "The Greek government has been asked to accept a proposal that places new unbearable burdens on the Greek people. Right now, we bear an historic responsibility concerning ... the future of our country. And this responsibility obliges us to answer the bailout creditors (EU, ECB, IMF) ultimatum based on the sovereign will of the Greek people." He said the Greek government had already rejected the proposals but because of the severity of the repercussions, he felt obligated to let the people decide for themselves. If the offer is rejected, the Greek banks could close, the Greek government could be forced to print its own money, which would be worthless and it could lead to an exit from the eurozone.

Just when everyone thought there would be a last minute deal to rescue Greece from those problems Tsipras effectively killed that option and is apparently committing country suicide. However, there is a catch. While there have been numerous daily demonstrations demanding he reject the deals there is a quiet segment of the public that does not want the country to be dragged down further and forced to leave the eurozone. Some analysts have said as many as 60% of Greek citizens want to continue using the euro and remain in the eurozone.

It is entirely possible that Tsipras knows this and he is holding the election to pacify the highly vocal minority but expecting the majority to take the matter out of his hands and accept the deal. That way he can say "I tried my best" but the voters spoke and I had to do the will of the voters.

The Saturday headlines mean we are going to have yet another week of uncertainty in the financial markets. Late Saturday the EU Finance Ministers shelved efforts to rescue Greece and turned their attention to controlling the collateral damage from the Tsipras move. Greeks of all classes lined up at ATMs to withdraw as much cash as possible ahead of the possible closure of Greek banks next week. By late Saturday the majority of the 7,000 ATMs in Greece were out of cash. The ECB is expected to pull the plug on the continued assistance to the Greek banks because they have little hope of ever seeing that 89 billion euros again. Monday could be a bank holiday as the government tries to find a way to stave off disaster. Some banks are already limiting the amount of money a customer can withdraw. Serious capital controls will probably be imposed next week. The IMF said the referendum was a waste of time because the proposal expires at midnight on Tuesday.

Some FX brokers have already changed the rules on currency transactions to "close only" in an attempt to prevent huge losses in the currency market. (Mayzus.com) Other brokers (FxPro) has raised the margin requirements to trade EUR currencies in order to provide a safeguard against a highly volatile market. "We also reserve the right to limit orders to closing positions."

To say the markets may be volatile on Monday would be an understatement. This could be a Lehman event for the eurozone.

The U.S. markets were already struggling after the Shanghai Composite declined another -6.4% on Friday and is now down -18% from its high just two weeks ago. Another -2% and it will be in bear market territory.

There were no major economic reports on Friday to move the market. The Consumer Sentiment revision for June was revised higher from 94.6 to 96.1. This is up from a drop from 95.9 to 90.7 in May and completely reverses that drop. January's 98.1 was an 11-year high and we are rapidly moving in that direction again.

The present conditions component surged from 100.8 to 108.9 and the expectations component posted a lesser gain from 84.2 to 87.8. More than 44% of respondents said they were better off now than the same period in 2014. That is up from 41% in May. Sixty-three percent said business conditions were better today than a year ago, up from 56% in May.

The calendar for next week is headlined by the payroll reports and the national ISM Manufacturing Index. The ADP Employment is expected to show just over 200,000 job gains in the private sector. The Nonfarm Payrolls on Friday are expecting a gain of 225,000 jobs. That is well below the 280,000 in May. The odds are very good that May number will be revised lower.

The ISM Manufacturing on Wednesday is expected to show only minimal improvement from the 52.8 headline from May. Recently we have seen some positive gains in the regional manufacturing reports so there is the potential for an upside surprise in the ISM. However, the manufacturing sector is still the weakest part of the economy other than energy and much of the manufacturing weakness is due to the slowdown in the energy sector.

Kroger (KR) joined the stock split calendar last week with the announcement of a 2:1 split. The date of the split is July 13th. The announcement was not expected since the stock was only trading at $72 at the time. Full Split Calendar

There were two big names in the news on Friday. One of those was Nike (NKE). After the close on Thursday Nike reported earnings of 98 cents that easily beat the consensus estimates for 84 cents. Revenue of $7.78 billion also beat estimates for $7.68 billion. Future orders for delivery through November rose +2% to $13.5 billion. Without the impact of the strong dollar those orders would have risen +13%.

On a constant currency basis, sales in North America rose +14%, China +22%, Japan +20%, Western Europe +14% and +17% in Central and Eastern Europe. Those are outstanding numbers. Nike was able to sell even its highest priced shoes. Sales in the current quarter are expected to grow in the low to mid single-digit range compared to estimates for 7.4% gains. The headwind preventing that is the strong dollar. Shares spiked $4.50 on the news and provided nearly 35 points of the Dow's gains.

Foot Locker (FL) and Finish Line (FINL) both spiked higher on the Nike news since they are both big sellers of Nike shoes and apparel. Under Armour (UA) was the laggard since they compete with Nike. However, strong sales of athletic apparel by one company suggests the other will also do well. Under Armour reports earnings on July 23rd.

The other big name was Micron (MU). Shares fell -18% after the company warned of slowing PC demand. The company posted earnings and guidance and they were not good. The company said earnings and revenue fell in the quarter as demand for PCs continued to decline. Earnings of 54 cents missed estimates for 57 cents. Revenue of $3.85 billion missed estimates for $3.9 billion.

They guided for the current quarter to revenue of $3.45 to $3.7 billion and that was well below analyst estimates for $4.16 billion. Micron did say demand could improve later in the year when Windows 10 PCs begin shipping for the holidays.

Micron found no love in the analyst community with 13 firms cutting the price target for Micron shares. The general consensus was to avoid Micron shares until later in the year and not try to catch this falling knife.

Volume of 149 million shares was six times normal.

The Micron warning on PC demand crushed the semiconductor sector with the Semiconductor Index ($SOX) falling -2.45%. Even companies like Ambarella (AMBA) that do not make PC chips were knocked for a loss. Intel lost -3%, PMCS -3.8%, XLNX -2%, etc. The SOX was knocked back to the 150-day average, which has been support on all the major dips since October. You can play the Semiconductor Index with the SMH ETF.

Zoetis (ZTS) probably have the most volatility over the last two days of any stock. On Thursday shares spiked from $49 to $55 on headlines that Valeant Pharmaceuticals (VRX) had made a preliminary approach to buy the animal health company. Zoetis was spun off from Pfizer in 2013 and is one of the largest sellers of vaccines and medicines for livestock and household pets. It had a market cap of roughly $25 billion on Thursday.

Bill Ackman took an 8% stake in the company in November and received a seat on the board. Immediately things began to change. They trimmed workers and closed facilities and improved profitability and cash flow. Ackman also teamed with Sachem Head Capital Management, also a large owner of ZTS shares. Ackman has teamed up with Valeant before in an acquisition attempt of Allergan (AGN). About four weeks ago somebody bought $1.1 million in the October $55 calls and rumors began to swirl that a deal was coming.

However, on Friday shares imploded when analysts began to question the metrics and mechanics of any potential deal. Analysts began to question whether Valeant had even made an offer or just expressed interest to see if they were for sale. The Wall Street Journal, which broke the story, said it was unclear whether Zoetis was even receptive to an offer from the serial acquirer. One positive event was the Wednesday expiration of the tax liabilities of the spinoff from Pfizer two years ago. Any acquisition today would not incur any significant tax liability. Other analysts said at the $55 price of ZTS after the spike on Thursday that was a PE of 29 and the potential for a deal over $55 was slim.

However, given the fact that Ackman is in play and somebody bought $1.1 million of the October $55 calls, possibly him, the odds of a deal price over $55 by October would appear to be a pretty good bet. I doubt Ackman or any other major hedge fund would have bought $55 calls in that quantity if they did not think the final price would not be over $55.

With all the confusion on Friday shares of ZTS collapsed -12% to $48.65. That was a $6 move in alternating directions on back-to-back days.

Netflix (NFLX) was awarded another target price increase from MKM Partners on Friday. Their new target price is now $885 because of the potential for significant upside from growth outside the USA. MKM expects international subscribers to exceed 100 million by 2021. Pay TV subscribers are expected to exceed 1 billion by 2020 but the cost of Pay TV is much higher than Netflix making the streaming company a highly desirable alternative. Shares declined on the post split announcement depression.

BTIG Analyst Richard Greenfield raised his price target to $950 earlier in the week on the same international fundamentals.

With the year half over all the analysts are brushing off their end of year forecasts and deciding if they need updating. Currently with the S&P at 2,101 the average of the top 26 analysts is for a rise to 2,229 by the end of December. That would be a +6% gain from here.

Barclays and Goldman Sachs remain the most bearish with 2,100 price targets. Stifel Nicolaus is the most bullish with 2,375 as a target. The forecasts for S&P earnings have not come down that much but after the Q2 earnings cycle that could happen in a hurry. Q2 earnings are expected to decline -4.3%. The energy sector continues to burn cash and reduce activity so that will be a major drag on the overall earnings totals.

At Friday's close the Dow was up only 0.7% for the year or just barely over breakeven. The S&P was up +2% and the Nasdaq +7%. The Russell 2000 gained +6.2%. The big leader was the biotech sector at +22.5% and the biggest loser was the Transports at -9.8%.

The Russell rebalance happened at the close on Friday and volume of 8.66 billion was nearly 3 billion shares higher than Thursday's 5.8 billion. Volume more than doubled in the final 15 minutes of trading as the portfolio restructuring was completed.

Stocks with active buyback programs saw their weightings in the Russell indexes reduced. Those included companies like Exxon and Apple. Stocks that have been issuing shares saw their weightings increased. Examples would be Hyatt and Facebook.

Overall there were 29 stocks that moved from the Russell 2000 to the Russell 1000 because they grew larger during the last 12 months. There were 50 stocks that moved from the Russell 1000 down to the Russell 2000 because they shrank during the year. There were 120 new stocks added to the Russell 2000 and the equivalent number removed.

Everything went as planned for the traders responsible for the restructuring. The Russell 2000 fluctuated in only a 5 point range from 1:PM until the close and the closer to 4:PM the more stable that range became. It is amazing that the markets can reweight 3,000 stocks in the Russell indexes with volume of nearly 3 billion shares and $50 billion in valuation in the last 30 minutes of trading and not have any material move in the indexes.

The Russell indexes declined for the last three days, which is normal for the rebalance week. The stocks being removed or reduced are still in the index so that produces a negative bias. The stocks to be added are not in the index so their individual moves have no impact on the indexes. That is reversed next week. For those slow pokes that did not get their restructuring done last week the purchases of the stocks being added will impact the indexes next week. This gives the Russell indexes a positive bias for next week.

However, if Greece is going down in flames it will take a lot more than a positive bias on the Russell indexes to rescue the market.

Hindsight is 20:20. If you had bought the Russell 3000 index (IWV) in October 2013 you would have had better than a 50% gain. When you look at the long-term charts the moves are really apparent. Unfortunately, we normally get caught up in the daily moves and lose site of the overall picture.

The volatility in crude oil has completely disappeared. The chart pattern suggests a breakout is coming but that would ignore the seasonal weakness that develops after the July 4th holiday. However, there is a bigger event at play here. The negotiations with Iran are not going well. The artificial deadline of June 30th is here and both sides are locked into positions that are not likely to change. President Obama has said more than once that the deadline is firm and will not be changed again. After all they have been working on this for the last five years. However, deadlines and red lines have been changed in the past so expect some can kicking here.

The problem for the oil sector is the Iranian oil that could hit the market if a deal is reached. Iran could almost immediately increase oil production by about one million barrels per day and drop it into an already flooded market. In addition they have between 30-40 million barrels stored on tankers and ready to be sold the instant the sanctions are lifted. An Iranian deal that removes sanctions is going to be very negative to crude prices.

However, both sides seem to have reached an impasse. Iran said they will not sign a deal that does not remove all sanctions upon signing. The P5+1 nations claim that is not going to happen. Sanctions will only be removed after Iran has complied with its requirements to reduce nuclear enrichment capacity and the amount of enriched uranium they have on hand. Last week Iran's supreme leader, Ayatollah Ali Khamenei vowed Iran would not freeze nuclear enrichment.

The P5+1 nations claim they will not sign any deal that does not include unannounced spot checks on any nuclear facility as well as any military site where inspectors believe nuclear testing has been conducted. Khamenei said under no circumstances would inspectors be allowed spot checks without advance notice and no inspectors would ever be allowed on any military site. Iran's parliament passed a bill last week banning nuclear inspections at any military site.

Rational people would look at the facts and assume a deal is not going to be completed. However, in politics nothing is ever rational and there are always handshake deals that circumvent whatever is actually committed to paper and signed. The president has said there will be by necessity secret components to any Iranian deal and those components will not be disclosed to the press, public or Congress. That suggests the 7 nations can sign/say whatever they want in public because the secret side deals could negate the public documents.

Crude prices are flat lining at $60 while we await the resolution of the Iranian negotiations. With no deal and a breakdown in talks prices could rise sharply. With a deal that removes sanctions prices could decline sharply.

Active rigs rose last week for the first time in 28 weeks. The total number of rigs rose by +2 to 859 but oil rigs continued to decline with -3 to 628. Gas rigs rose +5 to 228 and the highest level in several months. We may be nearing the bottom with active rigs at a ten-year low. The results of the Iranian negotiations and their impact on oil prices could have a dramatic impact on active rigs.

U.S. production of 9.604 million barrels per day was only slightly below the 40 year high of 9.610 mbpd from two weeks ago. Oil production is not declining as many expected and that is confusing to analysts.


The historical trend asserted itself and now we have had 23 out of 26 post expiration weeks in June with a loss. Fortunately, it was not as bad as the historical norm of -1.1% on the Dow. The actual decline of -0.38% is just a hiccup rather than a decline. The near term support is still in place although the internals worsened slightly.

The percentage of S&P stocks under their 200-day average declined to 59.6%. The percentage under the shorter 50-day average declined to 45.4% but that was still an improvement over the prior week. The most bearish chart remains the Bullish Percent Index, which declined to 61.6% after only barely rebounding earlier in the week. This is the equivalent of a slightly longer-term look at stocks because it takes a definite move of several dollars to move a stock in or out of the bullish signal position.

Approximately 45% of S&P stocks are already in a bear market with declines of -20% or more.

The S&P itself made a lower high that could be seen as the right shoulder in a head and shoulders formation. However, the decline on Friday stopped right on the 100-day average and the stronger 150-day was still 20 points lower. The 150-day and the horizontal support at 2078 should contain everything except a significant change in market sentiment. Traders are still in buy the dip mode but the lack of volume signifies lack of conviction.

Too many investors are still holding out in hopes or in fear of a 10% correction or worse. Some are afraid we are approaching a correction and some are hoping we will get one for a buying opportunity. Both camps are not buying stocks for obvious reasons.

The Dow picture did not change. The resistance at 18,165 is still rock solid with support at 17,750. That gives the Dow a big range of more than 400 points to swing without causing any material damage. A quick spin through the charts of all 30 stocks told me nothing had changed. The charts are starting to look a little choppier but about 20 of the 30 stocks still have a longer term downtrend in place.

The Nike gains added about 35 points to the Dow on Friday with McDonalds adding about 12 and 3M adding about 8. That is 55 points and the Dow gained 56 so the other 27 stocks were no help.

Note that Apple, Intel and IBM were the bottom three with Cisco and Microsoft at 5 and 6. The tech sector was hit hard by the Micron warning on slowing PC sales.

The Dow chart is an easy one to trade with the clear resistance at 18,165 and support at 17,750. Buy the dips and sell resistance until one direction wins.

The Nasdaq crashed back under support at 5100 on three days of declines. However, despite the change in direction, the Nasdaq Composite only lost 36 points for the week. Considering it was at a new high on Tuesday, we really cannot complain. There is much stronger support at 5000 and that is still 80 points away. The uptrend remains intact.

The big cap Nasdaq 100 failed right at resistance at 4345 and returned to support at 4485. There was no major change since the big caps have been struggling to move higher for some time. A decline under 4485 should target 4400 and the support from the prior week. With big cap earnings expected to be weak it could be a struggle for the index to move to a new high or even hold its gains.

The Russell 2000 remains the winner. Even with a three-day decline, the index still managed to hold the majority of its gains and remain over 1275. The negative bias caused by the rebalance may have knocked a few points off in the last several days but that should shift to a positive bias next week. I would expect to see new highs if it were not for Greece. With Tsipras committing country suicide with his referendum, we could see some serious negativity next week that could weigh on the markets.

The Dow Transports fell back into correction territory with a decline to a new 7-month low. The railroads are a serious drag and the minor airline bounce did not hold. We could be looking at a retest of the October lows and that would be a major drag on the broader market.

Yields on the ten-year Treasury closed at 2.476% and the highest level since September. Bonds were being sold across the board last week on comments from Fed heads and improving economics. The comments regarding the possibility of two rate hikes in 2015 compared to no hikes expected just a few weeks earlier dramatically changed the outlook for rates. With bonds falling and yields rising we could be seeing the start of the great rotation. If Greece self-destructs next week that should lift bonds once again but that spike will probably be sold.

I am in buy the dip mode this week. If it were not for Greece I would be expecting an early week rebound. Because of the Greek referendum we could see some serious market volatility on Monday. I am hoping U.S. investors have grown so tired of this weekly saga that they ignore the negative headlines but we won't know for sure until Monday.

The FBI and Homeland Security are both issuing warnings for this week because of a significant uptick in ISIS chatter on the internet. ISIS is pushing for all out attacks against infidels everywhere. Because it is also the Ramadan holiday they are promising their legion of wannabe terrorists an extra reward in the afterlife if they die in an attack this week. ISIS leaders have called for a time of "calamity for the infidels." If you are going out this week into areas where there are large crowds I would be especially observant of the people around you. Fireworks shows could be an opportunity because they take place outside in the dark and suspicious people would be harder to spot.

We have been lucky in America and have not had any serious attacks since 9/11. That will not last forever. Have fun but be careful.



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Random Thoughts

It must be nice to be a billionaire. Alibaba's Jack Ma bought 28,100 acres in the Adirondacks in New York for $23 million. This includes 9 miles of the St Regis River as well as trout streams, ponds and two homes. The property is heavily wooded and Ma says he plans to make it a conservation project and part time personal retreat. Personal Retreat

It was only a year ago on June 29th that ISIS proclaimed itself and announced a caliphate consisting of portions of Syria and Iraq. To celebrate the anniversary of their coming out party they called for violence on a global scale. The ISIS Ramadan message specifically preaches that jihad is 10 times more obligatory during Ramadan and those who die in jihad will be rewarded by Allah ten times as much as during the rest of the year. There will be ISIS supporters who have waited until now to strike in order to get the maximum reward. Those who were tentatively considering an attack will now feel more pressure to actually do it according to national security analyst Ryan Mauro. ISIS has come a long way in only a year. They started out with only 7-10,000 fighters and are now up to 50-60,000 thanks to their highly publicized victories and no concentrated effort to defeat them. According to Google Ramadan is June 17th to July 17th this year.

The U.S. power grid may be the battlefield for the next war. By destroying or disabling only 9 critical substations in the U.S. power grid the entire system would come crashing down and power could be out for up to 18 months. With this kind of information easily obtainable on the internet, it would be absurd to think that terrorists had not at least thought about attacking the electrical grid. The Federal Energy Regulatory Committee (FERC) released a report claiming the power grid could be knocked out for "weeks if not months" by taking out only 9 substations. How hard is that to do? A lone gunman knocked out one substation last year by shooting 17 large transformers with an AK47 type rifle and was gone long before police arrived. Grid Down Easily

The Chinese markets are crashing. Should you buy this dip? Morgan Stanley Says No

The IMF is suddenly a lot more interested in the Federal Reserve and their plans for rate hikes. A couple weeks ago Christine Lagarde told Janet Yellen not to raise rates until mid 2016 because the strong dollar would be a significant drag on the global economy. Now the IMF staff has asked the Fed to "ditch the dots" referring to the dot plot that shows each person's forecast on what interest rates should be for the next two years.

The "dot plot" is confusing and IMF researchers wrote "It is not straightforward to connect the dots to get a coherent vision of the path ahead," the dots "do not provide a clear picture of the Federal Open Market Committee's majority view." A more transparent forecast, prepared by staff and perhaps presented at least as the majority view of the Fed's policy committee, would make the central bank more effective and is "the main next step for modifying the existing framework at the Fed," the IMF researchers wrote. The IMF is not alone. There are plenty of critics of the dot plot. Ditch the Dots

Each dot represents the forecast of one Fed official for anticipated rates for that period. Four dots on the same line represents 4 officials individually projecting the same interest rate for that period.

There was a huge surge in bullish sentiment last week rising 10.1% to 35.6%. Bearish sentiment declined -12.6% to 21.7%. Neutral rose +2.5% to 42.8%. If you were a contrarian investor, the jump in bullish sentiment and decline in bearish sentiment would be a red flag for the market. Bearish sentiment is now well under the long term average of 30.3% and bullish sentiment is surging. It will be interesting to see how the market plays out in relation to this change in sentiment.

The S&P has now gone 174 days without a 5% dip. That is the longest streak since a 219-day streak that ended on February 11th 2004. While that seems like a long streak, there have been 15 longer since 1957. The longest was 409 days that ended on 8/3/1959.

Deutsche Bank said as of May 23rd there had been 916 trading days since the last 10% correction. Fast forwarding to June 26th that number rises to 941 and the third longest streak since the 1950s. It has been more than 3.5 calendar years since the last correction. This is why everyone is so gun shy about going long the market with earnings declining.

The hard deadline of June 30th for a deal with Iran may "slip a few days but we will be close" according to a senior US official. Based on the increasing hard line stance of Iranian politicians the deadline may slip a lot because they are making it harder to agree as each day passes. If there is a deal within a "few days" of June 30th the odds are very good that it will not be a "good" deal.

France is turning into a hard liner on the side of the P6 nations and said this weekend there will be no deal unless three things are accepted by Iran without any qualifications. Those are suspending a majority of uranium enrichment, agreeing to immediate spot inspections of any facility in Iran including military bases as well as questioning of Iranian scientists and no sanctions relief until all of Iran's responsibilities can be verified by inspectors. Iran has said that under no circumstances will those points be accepted.

On Wednesday, five former members of President Obama's inner circle of advisers on Iran wrote an open letter expressing concerns that a pending deal "may fall short of meeting the administration's own standard of a 'good' agreement." Insiders Warning on Bad Deal

The U.S. has prepared a 30,000 pound bomb that could be used against Iran's underground nuclear facilities if the negotiations fail. The Massive Ordnance Penetrator (MOP) can penetrate 60 feet of concrete and 200 feet of earth before exploding. For massively hardened sites like Fordow they are designed to be dropped back to back with the second bomb hitting in the crater of the first bomb for another 200 feet of penetration before setting off an underground earthquake. Massive Ordnance Penetrator


Enter passively and exit aggressively!

Jim Brown

Send Jim an email

"Your trading emotions are often a reverse indicator of what you ought to be doing."

John F. Hindelong


Index Wrap

Market Continues to 'Churn'

by Leigh Stevens

Click here to email Leigh Stevens

While the longer-term trend remains up, the past 4-month churn of multiple rallies, multiple declines continues. Since the late-February peak the S&P has seen 4 rallies and 5 declines; this last encompasses recent weakness.

The Nasdaq has had 4 rallies, 4 declines in the same period; it's not sure yet if we're really NOW in the midst of another period of much weakness in Nasdaq or not. If another decline takes the Nas Composite (COMP) to the low-5000 area, than COMP will have had its 'plunge' so to speak; down sharply from its highs of this past week and back to the area of its up trendline.

Stocks having a long-term up trend, even if there's been 'churning' in recent months, will continue to benefit stockholders over their 'investment' oriented horizon. A sideways trend with frequent up and down price swings will not always benefit options traders who profit from a dominant up or down trend.

You should recognize the see-saw period we're in and commit little to higher-risk strategies that depend for success on a strong directional movement over weeks and possibly months; e.g., the prolonged and steep advance into Q3-Q4, 2014 dating from lows in early-2013.

I'm generally staying out of the trading fray as I don't want to work as hard at watching the indexes intently, looking for every potential short-term reversal. Better to wait for a stock market trend that trades more on earnings trends than politics and the Fed.

The S&P 500 Volatility Index (VIX):

The VIX Volatility Index remains within the same trading range between 12 and 15.7-16. My view is unchanged to buy the VIX at 12 and exit in the 15.5-16 area.

An eventual breakout above 16 in a volatility 'spike' is a possibility but not anytime soon.



The S&P 500 (SPX) is bullish in its longer-range trend but is in a 'churn' with more up and down price swings than usual than occurred PRIOR to the late-February peak. Since then SPX has seen 5 declines and 4 rallies. I'm counting recent weakness as a possible 'full fledged' decline such as SPX retreating again to its up trendline. After all, the rally back to the prior highs was snuffed convincingly and another fall to SPX's support trendline looks in play. In which case buy the dip.

Near resistance is highlighted at 2110, with pivotal resistance above at 2130-2135. Next key technical resistance is seen at the upper trend channel line currently intersecting at 2150.

Near support comes in at 2100, extending to 2090 and then to SPX's support/up trendline intersecting at 2080.

My short-term trader sentiment indicator, CPRATIO (most bottom part of the chart below) was suggesting risk of more downside to come by greater than average bullishness in terms of calls bought to puts on stocks just ahead of the last slam lower. That last dip to the trendline offered a buy side opportunity. This may come again if the Index falls to 2080 trendline support.

My sentiment model (CPRATIO) seen above is an attempt to gauge 'excessive' bullishness or bearishness implied by the daily ratio of call to put volume in equities options. 'Excess' points, even just a single-day reading, either on the upside or downside are often seen 1-5 days before a trend reversal.


Within the S&P 100 (OEX) overall advance or uptrend, there's been more than usual bounces back and forth between the upper and lower ends of OEX's broad uptrend channel.

It looks like we're in the midst of another downswing headed toward OEX's lower support trendline currently intersecting just over 915. I've noted support starting at 920 but it looks more substantial at 917-915. Even back to the 912 area would likely be a low risk buy, assuming a close by exit point that's adhered to.

Initial resistance/selling pressure may begin at 930 but pivotal resistance comes in at 935 extending to 938. A sustained move above 938 would have a possible target next to 950.


MAYBE, at least for the Dow, I should write biweekly commentaries (every TWO weeks)! It works for the sluggish Dow 30 (INDU) sometimes. I wrote last week that the Dow 30 (INDU) is "bullish in its longer-term trend but faces tests of support in the 18000 area... Assuming 18000 gives way, next support is seen at 17900 then at 17800-17780." My not so unusual 'script' was followed!

I ended up concluding that what is "remaining is whether the Average can maintain recent upside momentum; OR, is likely to see more of the sideways/lateral trend of the past few months."

More of a sideways/lateral trend is what's looking most likely ahead. 'Ahead' for me means usually looking out over a 2-3 week time horizon; an especially strong trend might see me with a strong 2-3 month view.

Near support in the Dow is at 17900, more so around 17800, extending to the low-17700 area. Near INDU resistance comes in at 18100, with pivotal resistance near 18200. Fairly major resistance is expected at 18350, extending to the 18400 area.


The Nasdaq Composite (COMP) is bullish in its broad advance within COMP's uptrend price channel. There have been fewer sustained rallies of late suggesting slowing upside momentum.

Look for buying interest/support in the low-5000 area. Initial support however is highlighted at 5050. Near resistance comes in around 5100, with pivotal next resistance at a line of recent highs in the 5160 area. Major resistance would look to come in around 5220 currently.

One way of gauging Nasdaq buying or selling opportunities has been, per a survey of the COMP daily chart below, to sell on moves to or near the upper channel and to buy dips to the lower trendline. The lower trendline is COMP's UP trendline and the key trendline in an advance; traced out by the pattern of successively higher pullback lows.

Thought for the day: When everyone gets wildly bullish get wildly cautious!


The big cap Nasdaq 100 (NDX) is mixed in its short to intermediate term picture; i.e., looking out 2-3 days to 2-3 weeks. The sideways trend predominates currently, albeit within NDX's longer-term multiweek uptrend channel.

Lows continue to hold at higher levels but the two key rallies of late failed in the 4550 area which is bearish for those playing for more upside, ok if this was the high end of the range that maintains a profitable spread.

Strong resistance is seen at 4550 but an eventual break out move could carry next to as high as the 4650 area.

Chart/technical support comes in near 4400. Risk to reward considerations plus technical aspects favor bullish plays on dips to the 4400 area and lower such as toward or to 4350.


The Nasdaq 100 tracking stock (QQQ) came under increasing selling pressure after the third inability to climb above 111 key resistance, making for a 'triple top' in this area. Sellers came in increasingly from mid-week on as buyers stepped back and then came the good sized plunge on Friday carrying the stock to below its 21-day moving average. Trade below this average suggests downside momentum predominating.

Technical support and bullish rebound potential is suggested at QQQ's up trendline at 108; support extends to 107.3

No doubt piercing 111 could trigger strong buying and set up a possible move, a next up leg, to the 113 area.


The Russell 2000 (RUT) hasn't seen more than a minor pullback recently from its very strong advance and the chart remains bullish. However, potential for a pullback to technical support in the 1263-1260 area has increased.

I wrote last week that "RUT will likely encounter significant technical resistance at 1290-1292, at the top (resistance) end of the Index's uptrend price channel." AND ... "For those who have profited from RUT's steady advance (dating back to early-May), it looks advisable to take money off the table." Seems so!

A strongly bullish chart would be seen in a continued rally from the 1280 area to 1300 and possibly above although seemingly unlikely without a pullback first. A still-bullish chart picture would result from a successful re-test of support at RUT's up trendline (1263-1260) followed by another rally. A neutral outlook ahead would be suggested in a sideways drift between 1280 and 1270. A sustained dip below 1240 flips the chart bearish.

Lastly, an overbought (13-day) RSI 'extreme' such as highlighted below, so often leads to a sell off in RUT that the same pattern is also probably 'dangerous'; as in, you 'bet the ranch' on it!


New Option Plays

A Bad Bet

by James Brown

Click here to email James Brown


iShares Transportation - IYT - close: 147.64 change: +0.09

Stop Loss: 150.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 397 thousand
Entry on June -- at $---.--
Listed on June 27, 2015
Time Frame: exit PRIOR to August expiration
New Positions: Yes, see below

Company Description

Trade Description:
The transportation stocks have been a sore spot for the wider bull market. Year to date the Dow Industrials are up +0.7% while the S&P 500 index is up +2.0%. Yet the IYT transportation ETF is down -10% in 2015 and down -12% from its all-time highs set in November 2014.

The IYT is the ETF that tracks the Dow Jones Transportation Average. Both have 20 stocks in them. The biggest components are railroad and trucking companies. Here's the full list of components: FDX, UPS, UNP, KSU, NSC, R, LSTR, JBHT, ALK, CHRW, KEX, UAL, EXPD, CAR, DAL, CNW, MATX, LUV, CSX, and JBLU.

Airlines grabbed a lot of headlines in the last several weeks as their stocks fell sharply. Investors are worried that the airlines will build up too much capacity and oversupply the market forcing them to lower fares and slash their profitability.

Railroad stocks are suffering on multiple fronts. The plunge in crude oil has wiped out demand for drilling new wells. That means less demand to move equipment and less demand for proppants (like fracking sand). Plus coal demand is falling.

Delivery stocks have struggled as well. FedEx (FDX) recently reported earnings that missed expectations on both the top and bottom line. Their previous earnings report the company lowered their 2015 guidance. Back in January UPS lowered their 2015 guidance and their most recent report saw revenues below estimates. The big railroad companies have been missing earnings and lowering estimates as well.

There has been a lot of attention given to the bearish divergence between the transportation stocks and the Dow Industrials. Thus far the broader market has ignored this weakness in transports. Traditionally investors viewed the transports as a thermometer of the market's health. If transports were seeing a healthy business then the economy was healthy. If transports were struggling then the economy was or would struggle. For decades there was a pretty good correlation between the two. These days there has been some doubt over how much this relationship still exists, especially since so much business takes place online.

Tonight we're not arguing if the transports are signaling a decline for the market or the economy. Instead we're looking at the transports themselves and focusing on the IYT. The ETF is clearly underperforming. It looked like it might bottom with support near $148.00. Unfortunately for the bulls the IYT just broke down under this support level. The next support could be down near its October 2014 lows in the $137-138 area. The point & figure chart is suggesting a target of $139.00.

We want to take advantage of this breakdown. Tonight we're suggesting a trigger to buy puts at $146.90. Plan on exiting prior to the August option expiration.

Trigger @ $146.90

- Suggested Positions -

Buy the AUG $145 PUT (IYT150821P145) current ask $2.90
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:

Wynn Resorts - WYNN - close: 96.50 change: -1.49

Stop Loss: 100.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.47 million
Entry on June -- at $---.--
Listed on June 27, 2015
Time Frame: exit PRIOR to WYNN's earnings report (late July)
New Positions: Yes, see below

Company Description

Trade Description:
Casino stocks have been a bad bet this year. Shares of WYNN are down -35% in 2015. The bear market started last year. Shares of WYNN peaked just below $250.00 in early 2014 and now they're down -60% from the highs. The catalyst for this dramatic decline is a plunge in gaming revenues from Macau.

WYNN is in the services sector. According to the company, "Wynn Resorts, Limited, owns 72.2% of Wynn Macau, Limited (www.wynnmacaulimited.com), which operates a casino hotel resort property in the Macau Special Administrative Region of the People's Republic of China. The Company also owns and operates a casino hotel resort property in Las Vegas, Nevada.

Our Macau resort is a resort destination casino with two luxury hotel towers (Wynn Macau and Encore) with a total of 1,008 spacious rooms and suites, approximately 280,000 square feet of casino space, casual and fine dining in eight restaurants, approximately 57,000 square feet of retail space, and recreation and leisure facilities, including two health clubs and spas and a pool.

Our Las Vegas operations (Wynn Las Vegas and Encore) feature two luxury hotel towers with a total of 4,748 spacious hotel rooms, suites and villas, approximately 186,000 square feet of casino space, 34 food and beverage outlets featuring signature chefs, an on-site 18-hole golf course, meeting space, a Ferrari and Maserati dealership, approximately 96,000 square feet of retail space, two showrooms, three nightclubs and a beach club."

The problems started in June 2014. China launched a nationwide crackdown on corruption. This had a huge impact on how many government officials decided to vacation and gamble in Macau. The region also saw a drop in other high rollers not wanting to be seen tossing money around. Plus the Chinese government enacted harsh no-smoking rules in Macau. There was a direct impact on gambling revenues that is still being felt today.

WYNN reported its 2015 Q1 results on April 28th. Analysts were expecting a profit of $1.33 per share on revenues of $1.17 billion. The company delivered a profit of $0.70 (big miss) and revenues plunged -27.8% to $1.09 billion. It's Macau revenues were down -37.7%. Management also announced they were reducing their quarterly dividend.

The earnings news was a couple of months ago. More recently (this month) there has been a number of bearish analyst calls on the gambling companies with exposure to Macau. A Sterne Agee analyst noted that table-only gross gaming revenues in Macau were down -46% from a year ago in the first week of June. They estimate that June 2015 will see Macau gambling revenues fall -33% to -38%. June is on track to be the 13th monthly decline in gambling revenues and the tenth month in a row of double-digit declines.

A Susquehanna Financial Group analyst also warned that the region could suffer further declines. There are rumors of an complete smoking ban and there seems to be no let up on the government's anti-corruption efforts. Meanwhile a Wells Fargo analyst is forecasting June gambling revenues in Macau to plunged -30% to -40% to about $2 billion. This would be the lowest monthly total in more than four years.

There seems to be no end in sight for the slowdown in Macau and that's driving shares of WYNN to new multi-year lows. The stock recently broke down below short-term support at $98.00. The point & figure chart is forecasting an $85.00 target. Tonight we are suggesting a trigger to buy puts at $96.20. Plan on exiting prior to WYNN's earnings in very late July or early August.

Trigger @ 96.20

- Suggested Positions -

Buy the AUG $90 PUT (WYNN150821P90) current ask $2.93
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

In Play Updates and Reviews

Greece Continues To Drag Stocks Lower

by James Brown

Click here to email James Brown

Editor's Note:

As the calendar marches closer and closer to June 30th investors are growing concerned about any unintended consequences that a Greek default might produce. This uncertainty is weighing on stocks.

DATA and SWKS hit our stop losses.

Current Portfolio:

CALL Play Updates

Aetna Inc. - AET - close: 130.05 change: -2.55

Stop Loss: 125.85
Target(s): To Be Determined
Current Option Gain/Loss: +136.2%
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

06/27/15: AET received a price target upgrade on Friday. A broker upped their AET target to $150 and this may have helped shares tag a new record at $134.40 on Friday morning. Unfortunately traders were in the mood to do some profit taking before the weekend. AET reversed into a -1.9% decline.

More conservative traders will want to seriously consider taking some money off the table here. I am not suggesting 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

06/25/15 new stop @ 125.85, healthcare stocks rally on SCOTUS decision
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: 149.16 change: +1.18

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

06/27/15: Traders bought the dip in CBRL on Friday morning and shares rallied to a +0.79% gain. The stock is poised to challenge round-number resistance at $150.00. 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


The Walt Disney Co. - DIS - close: 114.99 change: +0.54

Stop Loss: 112.25
Target(s): To Be Determined
Current Option Gain/Loss: +24.3%
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

06/27/15: DIS spent Friday's session churning sideways in the $114.40-115.20 zone. The stock managed to end on an upswing and outperform the major indices with a +0.47% gain. Shares are arguably short-term overbought with a nearly non-stop rally over the past two weeks from $109 to $115. We should expect some profit taking if the broader market sees any sort of pullback.

Tonight we are going to try and reduce our risk by moving the stop up to $112.25. No new positions at this time.

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

06/27/15 new stop @ 112.25
06/18/15 triggered @ $112.25
Option Format: symbol-year-month-day-call-strike


Demandware, Inc. - DWRE - close: 72.50 change: +0.00

Stop Loss: 67.75
Target(s): To Be Determined
Current Option Gain/Loss: -5.3%
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

06/27/15: DWRE ended Friday unchanged on the session. Shares did manage a gain for the week. This puts the current streak at four up weeks in a row for DWRE.

Traders may want to look for a rally past $72.85 before considering new bullish 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: 91.72 change: -0.03

Stop Loss: 89.65
Target(s): To Be Determined
Current Option Gain/Loss: +6.8%
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

06/27/15: MAN spent Friday's session coiling sideways in a narrow range. The stock looks poised to breakout higher if the broader market will cooperate.

If you're looking for an entry point then consider waiting for a rally past $92.30.

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: 101.64 change: +0.59

Stop Loss: 99.65
Target(s): To Be Determined
Current Option Gain/Loss: -31.0%
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

06/27/15: SIRO looks healthier after some follow through on Thursday's bounce from the $100 level. This stock spent most of Friday consolidating sideways but started to rally again late in the session and outperformed the market with a +0.58% gain.

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


Under Armour, Inc. - UA - close: 85.93 change: +0.78

Stop Loss: 81.75
Target(s): To Be Determined
Current Option Gain/Loss: -10.9%
Average Daily Volume = 2.0 million
Entry on June 26 at $86.05
Listed on June 23, 2015
Time Frame: Exit prior to August expiration
New Positions: see below

06/27/15: Right on cue shares of UA rallied on the heels of Nike's better than expected earnings. Both Nike (NKE) and UA were outperformers on Friday. UA gapped open higher at $85.71 and rallied to $86.30 before paring its gains. Our trigger to buy calls was hit at $86.05.

I would consider new positions at current levels or you could wait for some follow through higher on Monday morning.

Trade Description: June 23, 2015:
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 Fitnessplatform 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.

- Suggested Positions -

Long AUG $90 CALL (UA150821C90) entry $2.30

06/26/15 triggered @ $86.05
Option Format: symbol-year-month-day-call-strike


PUT Play Updates

Entergy Corp. - ETR - close: 70.51 change: +1.04

Stop Loss: 72.55
Target(s): To Be Determined
Current Option Gain/Loss: -35.3%
Average Daily Volume = 1.2 million
Entry on June 26 at $69.25
Listed on June 25, 2015
Time Frame: Exit PRIOR to earnings on August 4th
New Positions: Yes, see below

06/27/15: The action in ETR on Friday was a bit of a mystery. The yield on the U.S. 10-year bond surged higher to close at 2.47%. We could see this bond yield breakout past 2.5% for the first time in months. This trend is bearish for ETR. Yet shares of ETR rallied on Friday.

Actually ETR dipped to a new low, hit our suggested bearish trigger at $69.25 and then bounced. ETR lost -$1.04 on Thursday and it erased that move with a +$1.04 gain on Friday.

Our put play is open but if you're looking for an entry point I suggest waiting for a new relative low. No new positions at current levels.

Trade Description: June 25, 2015:
Dividend lovers and income investors often consider the utility stocks. Many have hefty dividends that are considered safe and reliable. When the bond market peaked in January this year the utility sector reversed as well.

According to the company, "Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, including nearly 10,000 megawatts of nuclear power, making it one of the nation's leading nuclear generators. Entergy delivers electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $12 billion and approximately 13,000 employees."

Earnings have been mixed. Back in February ETR reported its Q4 results where earnings missed estimates but revenues came in better than expected. That switched in the first quarter. ETR reported its Q1 results on April 28th. Earnings soared past expectations but revenues fell -9.0% and came in below estimates.

Most utility stock investors are not looking at earnings so much as they are looking at yields. ETR still has a dividend yield near 4.8%. That's about twice the U.S. 10-year bond yield, which closed at 2.39%. Investors are selling the utility stocks anyway because expectations are growing for the Federal Reserve to raise rates this year or early next year. History shows that the Fed almost never raises just once. It's always a series of rate hikes. This will boost bond yields and make high-dividend stocks less attractive.

ETR's recent oversold bounce just failed near $72.50 last week. Now the stock has reversed and broken down below round-number support at $70.00. The next support level could be $65.00 or it could be $60.00. We are suggesting a trigger to buy puts at $69.25.

I will issue one caveat. The Greece situation is a wildcard. It looks like Greece is headed for a default. If the world reacts poorly to this long-expected event we could see central banks, including the Fed, remain extraordinarily dovish in their monetary policy to reduce any impact of Greece's implosion. This could push the next Fed rate hike farther into the future and might be interpreted as bullish for utilities. I doubt this is a serious threat to our bearish play over the next two months but it could happen.

- Suggested Positions -

Long AUG $67.50 PUT (ETR150821P67.5) entry $1.70

06/26/15 triggered @ $69.25
Option Format: symbol-year-month-day-call-strike


Southwest Airlines Co. - LUV - close: 34.32 change: -0.17

Stop Loss: 35.45
Target(s): To Be Determined
Current Option Gain/Loss: -27.8%
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

06/27/15: LUV's performance on Friday looked a lot like Thursday. Traders sold the opening rally and shares spent the rest of the day slowing fading lower.

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: 47.35 change: +0.15

Stop Loss: 48.75
Target(s): To Be Determined
Current Option Gain/Loss: -54.5%
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

06/27/15: SM produced a +0.3% gain on Friday. Yet shares remain sandwiched between short-term bearish resistance at its 20-dma near $47.85 and potentially new short-term support at its 10-dma near $46.70. SM has been stuck between these two moving averages for the last three days.

Last week's bounce in SM snapped a six-week losing streak but the overall trend remains lower for now.

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



Tableau Software, Inc. - DATA - close: 116.86 change: -3.70

Stop Loss: 116.75
Target(s): To Be Determined
Current Option Gain/Loss: -41.1%
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

06/27/15: The selling pressure in shares of DATA continued on Friday. The stock plunged toward round-number resistance at $115.00 before paring its loss to -3.0%. Our stop was hit at $116.75.

The pullback this past week has generated a bearish engulfing candlestick reversal pattern on DATA's weekly chart.

- Suggested Positions -

JUL $120 CALL (DATA150717C120) entry $3.82 exit $2.25 (-41.1%)

06/26/15 stopped out
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


Skyworks Solutions Inc. - SWKS - close: 106.90 change: -2.97

Stop Loss: 107.85
Target(s): To Be Determined
Current Option Gain/Loss: +10.2%
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

06/27/15: SWKS suffered some profit taking last week and the stock accelerated lower on Friday with a -2.7% decline. SWKS hit our recently adjusted stop loss at $107.85.

Our play is closed but I'd keep SWKS on your watch list. The long-term bullish trend is still intact (for now).

- Suggested Positions -

AUG $110 CALL (SWKS150821C110) entry $4.90 exit $5.40 (+10.2%)

06/26/15 stopped out
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