Option Investor

Daily Newsletter, Thursday, 7/30/2015

Table of Contents

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

Market Wrap

GDP And Earnings Lend Support

by Thomas Hughes

Click here to email Thomas Hughes
Earnings and GDP are giving a mixed picture of the economy, but one with positive outlook.


Earnings and GDP data are painting a bit of a mixed picture but it is one with positive outlook. Earnings growth for the broad market is weak but steady and generally better than expected; GDP growth is positive, with some negative revisions to prior years, and expected to continue expanding.

Today's read on GDP, the first for the 2nd quarter, came in at 2.3%. This is a little below consensus but within the range from which consensus is drawn and comes with a positive revision to the first quarter. First quarter GDP rose to +0.8% from the previous -0.2% and is a pretty decent number considering the negative sentiment and first estimates we saw. The down side to these numbers is negative revisions to the past three years, -0.3% to an average 2.1% for the years 2012-2014. The revision is due to a change in the way GDP is calculated, fixing an error.

Market Statistics

Asian indices closed well before the GDP data was released and ended their day mixed. China indices fell -2%, the Japanese Nikkei rose 1%. Chinese markets are still being roiled by government actions to support the market while the Nikkei was driven higher on strong earnings. In Europe things were much the same. A mixed day of trading left most of the indices in positive territory supported by strong earnings. Greece has retreated from the spotlight but is waiting quietly in the wings to step back into the markets attention.

Despite the rush of positive international earnings our indices were indicated to open lower up to and into the opening bell. After the bell the indices declined to hit their low for the day at 9:50AM. From there a bounce ensued that took them back up to break even levels with the NASDAQ Comp and Russell 2000 pushing into the green by noon. By 3PM the Dow Jones and S&P 500 had reached positive territory as well. Highs were hit mid-afternoon and these levels almost held into the close of trading. The NASDAQ and SPX held some of their gains, the transports closed exactly flat and the industrials posted a slight loss. After hours action was on the heavy side as a slew of earnings reports were released.

Economic Calendar

The Economy

2nd quarter GDP was 2.3%, up form the first quarters 0.8% and slightly below expectations. Positive revision to the previous quarter reflect underlying momentum in the economy, if sluggish, that we have seen over the last year or two. The negative revisions to previous years of data is something to take note of but not that big a deal; it happened a long time ago, where we are and where we are going is much more important. What was perhaps the most notable bit of information within the report is the PCE deflator which rose by a stronger than expected 1.8%. This is still a bit below the Fed's target rate but shows a pick up in quarter to quarter inflation that could push them into a rate hike. On a year over year basis PCE is still running at a tepid 1.3% but this would begin to rise if the quarter to quarter numbers keep rising.

Initial claims rose slightly from a new 15 year low it set last week. Claims gained 12,000 to hit 267,000 and remain at long term lows and consistent with labor market improvement. Last week's figure was unrevised, the four week moving average fell -3,750. On a not adjusted basis claims fell -12.4% versus an expected -16.6%. On a year-over-year basis not adjusted claims are down -10%. California and Rhode Island led with increases of +1,948 and +382, NY led with a decline of -21,082.

Continuing claims rose by 46,000 from an upward revision of 9,000. This metric did not set a new low in recent weeks but is hovering just above the long term 15 year low. Total claims also rose in this weeks data gaining 21,802 to hit 2.300 million. This is -11.5% below last year at this time but also the 6th week of gains since hitting a low last month. All in all claims remain at low levels and recent activity suggests that jobs creation remains strong. We'll get the next round of NFP, ADP and unemployment next week, expectations are good for a decent number at least, upwards of 200,000. A really good number could help cement the idea of a 2015 rate hike.

Tomorrow's data includes the Employment Cost Index, Chicago PMI and Michigain Sentiment. Employment costs are expected to rise about 0.7%, in line with last month's gain. PMI and sentiment are both expected to rise slightly, from 49.4 to 50 for PMI and from 93.3 to 93.5 for sentiment.

The US Senate approved a long term version of a highway funding bill just after lunch. The vote went 65-34 and is not expected to pass the House and brings into focus what will perhaps be the next big hurdle for the market to bear... government spending. The next potential government shut down is scheduled for October 1st and could create a lot of day to day volatility as it approaches.

The Oil Index

Oil was volatile today but basically held steady around $48.75. Today's action was focused on yesterday's unexpectedly large draw on US stockpiles that have raised speculation the recent slide in oil prices is nearing an end. Despite the draw production and supply remain high while global demand is weak. Adding to today's activity is expiration in gasoline and diesel contracts tomorrow as well as strengthening dollar value.

The Oil Index lost about a half percent in today's action, falling from the 50% retracement level mentioned previously. Today's action is a confirmation that resistance is present at the retracement that could result in a retest of the recent low. The indicators are mixed and weak in the near term but remain consistent with support in the short to long term. A break above the retracement, near 1,230, would find the next target for resistance at the bottom of my up trend line near 1,300. Earning and outlook will have an impact on this index over the next day or two specifically. Connoco Phillips reported earnings and revenue above expectations, raised their dividend and raised full year guidance. Royal Dutch Shell was also able to produce better than expected results and sent shares of its stock up by by more than 5%. Shares of Connoco fell -1.57% but remain above the recently set low. Look out for Exxon-Mobil and Chevron tomorrow before the bell. Chevron is expected to post $1.15 per share, Exxon-Mobil $1.06.

The Gold Index

Gold prices fell about -0.5% in today's session. Positive GDP as well as the hint of rising inflation has upped the chances for a September/December rate hike and put the pressure back on gold. The metal is now trading just above the +5 year low and indicated lower in both the short and long term. Strengthening dollar due to FOMC rate hike expectations is going to be negative for gold moving forward. Prices could continue to fall until inflation and/or dollar expectations change.

The gold miners did not fare well today, led by earnings and earnings expectations. The GDX Gold Miners ETF fell close to -3.5% as the senior and junior miners begin to report en masse. The sector has been beaten up over the last two months and is now trading at an all time low. The sector is oversold in the long and short term but bearish momentum is on the rise so it looks like it could go lower. Gold prices will lead, if they continue to decline the sector will as well. One factor that may be helping to depress gold prices is production. Production levels have been on the rise over the past few quarters at least and could keep rising based on today's report from GoldCorp.

In The News, Story Stocks and Earnings

GoldCorp reported before the bell and beat expectations for $0.07 by a penny. The company reported record 2nd quarter production, up 40% form 2Q 2014, and reaffirmed production guidance at the high end of the range. The report, save for the low realized prices for gold, is pretty good. The company is increasing production, getting higher than expected realized quality, reducing costs and expanding into new mines. The bad news is that the fall in gold prices has resulted in a 60% decline in comparable quarter earnings despite the 40% increase in production. With prices now hovering near new long term lows that issue could persist or worsen in coming quarters. Shares of the stock fell over -2% in today's session and are now trading at the long term low and below the full retracement of the 2008-2011 bull market I gold. Indicators are weak and pointing lower although momentum is waning and the stock is oversold. Downside targets exist near $10, another 20% below today's levels.

Insurer Cigna reported before the bell, beating on the top and bottom lines. The company reported $2.55 adjusted, a 23% increase over the same quarter last year. The company also raised guidance for the full year to a range of $8.30 to $8.60 per share. Cigna will be merging Anthem into the fold later this year to create one of the largest health care insurers in the country. The stock lost -1% in today's session and is trading at a one month low, below the short term moving average. The indicators are showing weakness which could carry it as $140 - $137.50.

Mondelez, an international diversified food company, reported top and bottom line beats in its release this morning. The company is parent to brands like Kraft, Oreo and Nabisco. Adjusted EPS is $0.47, 20% above estimates but net revenues fell -9.2% due to currency conversion. Organic net revenue grew 4.3%. Margins also narrowed due to rising input prices. The company raised its full year guidance and increased its share repurchase program by $6 billion. Shares of the stock jumped a little more than 5% to hit a new all time high.

LinkedIn reported a major beat on earnings and sparked a round of volatile after hours trading. The company reported $0.55 per share versus expectations of $0.30 and ahead of this same quarter last year. Revenue also beat. User numbers are on the rise and also came in ahead of expectations. Shares of the stock shot higher in after hours trading gaining more than 11% immediately following the announcement. 30 minutes later price had retreat back to today's low greater than -1% below yesterday's close. 30 minutes after that share price was down more than -8%.

The Indices

The market opened lower and appeared to be heading back to support but an early bounce recovered initial losses and propelled the indices back to break even levels. All were able to poke their head into positive territory but not all were able to hold the gains into the close of trading. Today's action was led by the NASDAQ Composite which traded up over a half percent on an intraday basis and closed with a gain of 0.33%. The index tested support at the short term moving average and confirmed with a close above it. The indicators remain mixed but are set up for a trend following bullish crossover that could take it up to test the recent high near 5,250. The high could provide resistance in the near to shot term as earnings projections for the next quarter remain weak.

The S&P 500 made the next biggest gain, 0.01%, and is set up similarly to the tech heavy NASDAQ Composite. The broad market index tested support at the short term 30 day moving average and confirmed with today's bounce from and close above said level. The indicators are mixed but set up for a trend following bullish crossover supported by economic and earnings trends. The index may find resistance at 2,120 and just above that at the current all time high. It may remain range bound in the near to short term while we move past earnings season but I remain bullish long term.

The Dow Jones Transportation Average closed exactly flat from yesterday's action creating a small bodied spinning top with lower shadow. The index is in a bounce originating from the long term low with bullish indicators. It appears to be reversing from the four month downtrend and 13.5% correction we saw this spring and summer. MACD is strong relative to the past 8 months and gaining strengthe while stochastic is confirming the move with a weak bullish crossover. Upside target is the bottom of the November/May trading range near 8,600 with additional targets near the middle of that range should 8,600 be broken.

The Dow Jones Industrials are the only index to close with a loss today, -0.03%. The blue chips made it into positive territory but had a hard time holding the levels. Afternoon action saw it bob above and below break even several times. The indicators are mixed but consistent with a developing trend line bounce. The trend remains up but there is significant resistance at and just above the current levels that needs to be broken before more upside can happen. A break above the 17,750 support/resistance line and then the short term moving average which is just above it could lead to a test of the all time high near 18,350.

The market seems to be focusing on earnings and economics again even though issues in China and Greece remain. These issues may poke their heads back into the spot light at any time but are likely to be near to short term events as they have been all year. US economic trends remain positive and earnings as a whole are better than expected with positive outlook for both so I remain bullish.

The FOMC is still a wild card but it looks more and more certain a rate hike will come in the Sept/December time frame. This may cause some volatility but in the end will be an affirmation of economic health and bullish in my view. A quarter point rise in rates will only be the first of dozens of incremental increases, not the one that breaks the markets back.

In the near term the indices may remain range bound due to 3rd quarter earnings expectations but the bull market is intact so any dips to support remain buying opportunities.

Until then, remember the trend!

Thomas Hughes

New Option Plays

Slow and Steady

by James Brown

Click here to email James Brown


Accenture plc. - ACN - close: 102.66 change: +0.21

Stop Loss: 99.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.3 million
Entry on July -- at $---.--
Listed on July 30, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: Yes, see below

Company Description

Trade Description:
Sometimes slow and steady wins the race. Patient investors have been rewarded in ACN. The stock is up +290% from its 2009 lows. Sales and earnings have also improved. From 2010 to 2014 ACN has seen revenues rise +38% and net income soar +54%. Year to date ACN is up +14%. The S&P 500 index is only up +2.4%.

ACN is in the technology sector. They're considered part of the information technology services industry. According to the company, "Accenture is a global management consulting, technology services and outsourcing company, with more than 336,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world's most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014."

A recent article on Investopedia.com noted that ACN is on a buying spree. "Since the beginning of 2015, Accenture has acquired nine other companies: smart grid company Structure, supply chain analytics company Gaspo, strategy consulting companies Axia and Javelin, Salesforce consulting services provider Tquila UK, digital design company Reactive Media, and digital solutions companies Agilex, Brightstep, and PacificLink Group. All of these acquisitions should strengthen Accenture's position in IT services against rivals like IBM and Infosys."

Last year ACN's earnings progress seemed to slow. Last September they reported their Q4 results that missed estimates by two cents. They beat the revenue number but guided lower. In December they beat analysts' estimates on both the top and bottom line but guided lower again. Guidance improved somewhat with ACN's 2015 Q2 report in March where the company beat estimates and guided in-line.

Their most recent report was June 25th when the company announced its 2015 Q3 results. Earnings were $1.30 per share, which was seven cents above estimates. Revenues were relatively flat (+0.4%) at $7.77 billion but that was significantly above expectations. New bookings last quarter were $8.5 billion. North American sales rose +12% on a local currency basis. Europe sales were up +7% while the rest of the world saw sales rise +13%. Management reaffirmed their fiscal year 2015 guidance and expect new bookings to be $33-to-$35 billion for the year.

The stock has been popping on its recent earnings reports. Then shares fade lower until they hit the long-term up trend and investors buy the dip. The up trend seems to be getting stronger. ACN recently broke out past round-number resistance at $100.00 and managed to hold this level during last week's market sell-off. Now ACN is poised to hit new highs. Tonight we're suggesting a trigger to buy calls at $103.35.

Trigger @ $103.35

- Suggested Positions -

Buy the SEP $105 CALL (ACN150918C105) current ask $1.40
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

S&P 500 Rally Stalls, NASDAQ Rises

by James Brown

Click here to email James Brown

Editor's Note:

The large cap S&P 500 index saw its rally stall today with the index closing virtually flat on the session. The Dow Industrials also closed flat. The small cap Russell 2000 inched higher while the NASDAQ composite managed a +0.33% gain.

Traders bought the dip again this morning but enthusiasm waned this afternoon.

Current Portfolio:

CALL Play Updates

Advance Auto Parts Inc. - AAP - close: 172.54 change: -0.52

Stop Loss: 165.85
Target(s): To Be Determined
Current Option Gain/Loss: +11.4%
Average Daily Volume = 1.0 million
Entry on July 23 at $170.25
Listed on July 18, 2015
Time Frame: Exit PRIOR to earnings on August 13th
New Positions: see below

07/30/15: The rally in the broader market stalled on Thursday. AAP stalled with it. Shares actually spiked lower at the open but traders bought the dip near $170.90 and AAP pared its losses by the close.

Trade Description: July 18, 2015:
If you listen to financial media long enough you will eventually hear pundits talk about "bulletproof stocks". AAP just might be a bulletproof stock. The company has lowered its earnings guidance three quarters in a row and yet traders continue to buy the stock. Today AAP is hovering at all-time, record highs.

AAP is part of the services sector. According to the company, "Headquartered in Roanoke, Va., Advance Auto Parts, Inc., the largest automotive aftermarket parts provider in North America, serves both the professional installer and do-it-yourself customers. As of January 3, 2015, Advance operated 5,261 stores and 111 Worldpac branches and served approximately 1,325 independently owned Carquest branded stores in the United States, Puerto Rico, the U.S. Virgin Islands and Canada. Advance employs approximately 73,000 Team Members."

There seems to be a divergence in the U.S. We are half way through 2015 and new car sales are surging. Dealers have already sold more than 8.5 million vehicles and the industry is on pace to challenge the all-time record of 17.4 million autos in one year. Yet the age of the average car on the road continues to climb. Next time you're stuck in traffic and all you see is a river of cars, bear in mind that the average car is now 11.4 years old. It's forecasted to 11.7 years old by 2019. Americans are keeping their car longer and longer (because most can't afford a new car). That's really good news for car part sales.

I mentioned AAP's earnings guidance earlier. AAP has actually missed Wall Street's bottom line estimates the last two quarters in a row. They have lowered their guidance three quarters in a row. On May 21st AAP reported its Q1 results of $2.39 per share. Revenues were up +2.3% to $3.04 billion. They lowered their fiscal year 2015 earnings guidance from $8.35-8.55 per shares down to $8.10-8.30. Analysts were expecting $8.51. AAP seems to be having a few issues digesting its acquisition of General Parts International, which took place in 2014.

Normally when a company lowers guidance the stock gets crushed. Yet traders keep buying the dips in AAP. Looking at the AAP's recent announcements there is an knee-jerk reaction gap down in their stock price and then shares of AAP immediately rebound. It's happened multiple times. You have to like that kind of resilience. You could say AAP is almost bulletproof.

The stock has been trading off technical support as it climbed from its May 2015 lows. Last week's breakout past resistance near $165.00 is very bullish. The point & figure chart is forecasting at $193.00 target. Odds are AAP will rally up to its earnings report on August 13th. We want to exit prior to the announcement.

- Suggested Positions -

Long AUG $175 CALL (AAP150821C175) entry $3.50

07/25/15 new stop @ 165.85
07/23/15 triggered @ $170.25
Option Format: symbol-year-month-day-call-strike

GoPro, Inc. - GPRO - close: 61.69 change: -0.18

Stop Loss: 58.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 6.1 million
Entry on July -- at $---.--
Listed on July 25, 2015
Time Frame: Exit PRIOR to earnings
New Positions: Yes, see below

07/30/15: This is the second day in a row that shares of GPRO have drifted sideways inside a relatively narrow range. I don't know what investors are waiting on. The $60.00 level is short-term support while $65.00 is overhead resistance.

Let's give GPRO one more day. We will either adjust our entry point strategy or remove it as a candidate.

Trade Description: July 25, 2015:
The U.S. stock market delivered one of its worst weekly performances all year long as investors reacted to disappointing earnings results. GPRO managed to buck the trend and shares rallied to new six-month highs thanks to significantly better than expected earnings results.

Here's the company's rather self-confident description, "GoPro, Inc. is transforming the way consumers capture, manage, share and enjoy meaningful life experiences. We do this by enabling people to self-capture engaging, immersive photo and video content of themselves participating in their favorite activities. Our customers include some of the world's most active and passionate people. The quality and volume of their shared GoPro content, coupled with their enthusiasm for our brand, virally drives awareness and demand for our products.

What began as an idea to help athletes document themselves engaged in their sport has become a widely adopted solution for people to document themselves engaged in their interests, whatever they may be. From extreme to mainstream, professional to consumer, GoPro has enabled the world to capture and share its passions. And in doing so the world, in turn, is helping GoPro become one of the most exciting and aspirational companies of our time."

GPRO came to market with its IPO in June 2014. The stock opened for trading at $28.65 and by October 2014 shares were nearing $100 per share. That proved to be the peak. GPRO spent the next six months correcting lower and finally bottomed near $37 in March 2015.

GPRO reported their 2015 Q1 results on April 28th. Wall Street was expecting a profit of $0.18 per share on revenues of $341.7 million. GPRO beat estimates with a profit of $0.24 a share. Revenues were up +54% from a year ago to $363 million.

Management said it was their second highest revenue quarter in history. Their GAAP results saw gross margins improve from 40.9% in Q1 2014 to 45.1% today. Their net income attributable to common stockholders increased 98.2% compared to the first quarter of 2014. International sales surged +66% and accounted for just over half of total sales in Q1 2015. GPRO shipped 1.3 million devices in the first quarter. This was the third quarter in a row of more than one million units.

GPRO management raised their guidance. They now expect 2015 Q2 revenues in the $380-400 million range with earnings in the $0.24-0.26 region. Analysts were only forecasting $335 million with earnings at $0.16 a share.

The better than expected Q1 results and the upgraded Q2 guidance sparked several upgrades. Multiple analysts raised their price target on GPRO. New targets include: $56, $65, $66, $70, and $76.

GPRO reported its Q2 report on July 21st. Results were way above expectations. Analysts were expecting earnings of $0.26 per shares on revenues of $396 million. GPRO said Q2 earnings came in at $0.35 per shares. That's a +337% improvement from a year ago. Revenues were up +71.7% to $419.9 million, significantly above the estimate. Gross margins improved from 42.2% to 46.4%.

Naturally GPRO management was enthusiastic. GoPro Founder and CEO, Nicholas Woodman, commented on their quarterly results saying, "I couldn't be more proud of our aggressive pace of innovation. With the introduction of HERO4 Session and HERO+ LCD, we've launched five new cameras in the past 10 months, exciting both new and existing customers and contributing to strong second quarter results. Our core business is enjoying terrific momentum as we charge forward into attractive adjacent markets."

This better than expected Q2 result sparked another round of upgrades. Piper Jaffray raised their GPRO target to $72. Barclays bumped theirs to $71. Another firmed raised theirs to $70. Shares of GPRO saw a bit of a short squeeze this past week. There are plenty of traders who think GPRO is overpriced and too rich with a P/E above 42, especially when you consider the company is facing rising competition.

The biggest argument against GPRO is competition from a Chinese rival Xiaomi who has produced a competitive action camera that they're selling for less than half of GPRO's similar model. GPRO critics are worried this could kill GPRO's growth in China and the rest of Asia. It's too early to tell who will be right but momentum is currently favoring the bulls. The point & figure chart is forecasting a long-term target at $95.00.

The stock experienced some profit taking on Friday with a -2.7% decline. Shares failed at the $65.00 level on Thursday and Friday. We want to be ready if GPRO reverses higher again. Tonight we're suggesting a trigger to buy calls at $65.05. We'll start with a wide stop loss at $58.65, making this a more aggressive, higher-risk trade. It might take GPRO a couple of days to get back to $65.00. I don't expect a new relative high on Monday.

Trigger @ $65.05

- Suggested Positions -

Buy the SEP $67.50 CALL (GPRO150918C67.5)

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

Hasbro Inc. - HAS - close: 79.99 change: -0.31

Stop Loss: 78.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.3 million
Entry on July -- at $---.--
Listed on July 29, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: Yes, see below

07/30/15: Shares of HAS dipped toward short-term support near $80.00 this morning and spent the rest of the day hovering near this level. Currently we are suggesting a trigger to launch bullish positions at $81.15.

Trade Description: July 29, 2015:
The huge momentum from Jurassic World, the highest-grossing film this year, which grossed over $1.5 billion, produced a strong tailwind for toymaker HAS. Now the toy and game maker is poised to cash in on its licensing relationship with X-men and Star Wars. The next Star Wars film comes out in December 2015 and Disney is planning three more episodes of the main story and three spin offs. Analysts are predicting the next Star Wars (episode 7) could generate more than $1.5 billion in gross sales by itself. That should produce another strong tailwind for HAS. Meanwhile the next X-men movie comes out next May. The overall success of the film industry this year and its influence on toy sales could boost HAS to record sales in 2015 and 2016.

If you're not familiar with HAS they are in the consumer goods sector. According to the company, "Hasbro (HAS) is a global company committed to Creating the World's Best Play Experiences, by leveraging its beloved brands, including LITTLEST PET SHOP, MAGIC: THE GATHERING, MONOPOLY, MY LITTLE PONY, NERF, PLAY-DOH and TRANSFORMERS, and premier partner brands. From toys and games, television programming, motion pictures, digital gaming and lifestyle licensing, Hasbro fulfills the fundamental need for play and connection with children and families around the world. The Company's Hasbro Studios and its film label, ALLSPARK PICTURES, create entertainment brand-driven storytelling across mediums, including television, film, digital and more."

The earnings picture has improved this year in spite of tough comparisons to a strong 2014. They reported their Q4 results on February 9th. HAS missed estimates by 2 cents. Revenues rose +1.6% but missed estimates. The stock rallied anyway. HAS management announced an additional $500 million stock buyback program and raised their cash dividend +7% to $0.46 per share.

Their Q1 results were a lot better. HAS announced its Q1 report on April 20th. Earnings of $0.21 per shares beat analysts' estimates by 13 cents. Revenues were up +5% to $713.5 million, which was way above estimates of $660 million. Excluding foreign currency headwinds HAS's sales were up +14%.

Foreign currency issues remained a challenge in the second quarter. HAS announced its Q2 results on July 20th. Earnings were down -8% from a year ago to $0.33 per share but that still beat expectations. Revenues fell -3.8% from a year ago to $797.7 million but this was higher than expected. Excluding the effects of the strong dollar HAS' sales would have been up +5% for the quarter.

The last three quarterly earnings reports have all produced significant rallies in HAS' stock. This most recent earnings pop pushed shares to new all-time highs. The stock has seen some downgrades since its July 20th earnings report but HAS has essentially ignored them.

Last week the stock market was selling off and HAS did see some profit taking but shares found support at $79.00 and held there until today. It looks like the post-earnings profit taking is over and HAS is poised to resume its up trend. The point & figure chart is bullish and forecasting an $87 target. Today's intraday high was $80.92. I'm suggesting a trigger to open bullish positions at $81.15.

Trigger @ $81.15

- Suggested Positions -

Buy the SEP $82.50 CALL (HAS150918C82.5)

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

Stryker Corp. - SYK - close: 101.84 change: -0.14

Stop Loss: 99.45
Target(s): To Be Determined
Current Option Gain/Loss: -7.1%
Average Daily Volume = 1.1 million
Entry on July 29 at $102.15
Listed on July 28, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

07/30/15: It was a quiet day for shares of SYK. The stock dipped to very short-term technical support at the simple 5-dma and bounced. Like the S&P 500, shares of SYK closed virtually unchanged today.

I'd wait for a new rally past $102.15 or past yesterday's intraday high of $102.30 before initiating new positions.

Trade Description: July 28, 2015:
The healthcare sector has consistently delivered a strong bullish performance for the last three years in a row. When you think of healthcare you might think health insurance providers. They are not the only healthcare stocks in rally mode. Tonight's candidate is in the medical equipment and supplies industry.

According to the company, "Stryker is one of the world's leading medical technology companies and together with our customers, we are driven to make healthcare better. The Company offers a diverse array of innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine, which help improve patient and hospital outcomes. Stryker is active in over 100 countries around the world."

Late last year the company's earnings growth was lackluster at best but the company has turned things around the last couple of quarters. SYK reported their Q1 results on April 21st. They beat the bottom line estimate. Revenues were only in-line with estimates. Yet management raised the low-end of their 2015 sales and earnings guidance. You can see the reaction to the stock price in April.

Their most recent earnings report was July 23rd. Wall Street was expecting Q2 earnings of $1.17 per share on revenues of $2.41 billion. SYK beat both estimates with earnings growth of +11% to $1.20 per share. Revenues were up +2.9% to $2.43 billion. On a constant currency basis their sales were up +7.6%.

SYK management raised their organic growth forecast to +5.5% to +6.5%. They raised both their Q3 and 2015 earnings forecast above analysts' estimates. SYK now expects full year earnings in the $5.06-5.12 range versus consensus estimates at $5.03 per share. Analyst reaction has been positive with several price target upgrades into the $107-110 range. The point & figure chart is bullish and currently forecasting at $111.00 target.

We like how SYK displayed relative strength last week and resisted most of the market's sell-off (prior to their earnings report). The better than expected Q2 results launched SYK to new all-time highs. Traders bought the dip this morning and today is a new all-time closing high for SYK. Tonight we are suggesting a trigger to buy calls at $102.15.

- Suggested Positions -

Long SEP $105 CALL (SYK150918C105) entry $1.13

07/29/15 triggered @ $102.15
Option Format: symbol-year-month-day-call-strike

Under Armour, Inc. - UA - close: 99.28 change: +0.46

Stop Loss: 93.65
Target(s): To Be Determined
Current Option Gain/Loss: +20.3%
Average Daily Volume = 2.3 million
Entry on July 28 at $97.55
Listed on July 27, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

07/30/15: A directionless session for the broader market did not stop the rally in UA. Shares are inching close to potential round-number, psychological resistance at the $100.00 mark. I wouldn't be surprised to see UA tag $100 and see a brief pullback.

Trade Description: July 27, 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 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's 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 they saw growth of +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. 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 company delivered a repeat performance when they did it again with their Q2 earnings on July 23rd. Analysts were expecting a profit of $0.05 per share on revenues of $761.7 million. UA beat both estimates with a profit of $0.07 per share. Revenues were up +28.5% to $783.5 million. Management raised their 2015 revenue guidance from $3.78 billion to $3.84 billion. That's above analysts' estimates of $3.83 billion.

Wall Street reacted to UA's Q2 report with a wave of price target upgrades. Several firms upped their target on UA into the $105-114 range. Naturally the stock rallied on this bullish earnings report and the analyst outlook. The stock soared past resistance near $90.00. More importantly UA has managed to maintain these gains in the face of a widespread market sell-off. We like that kind of relative strength.

Tonight we are suggesting a trigger to buy calls at $97.55. We'll try and limit our risk with an initial stop loss at $93.65.

- Suggested Positions -

Long SEP $100 CALL (UA150918C100) entry $2.66

07/28/15 triggered @ $97.55
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 65.23 change: +0.29

Stop Loss: 67.65
Target(s): To Be Determined
Current Option Gain/Loss: +17.6%
Average Daily Volume = 2.0 million
Entry on July 24 at $66.80
Listed on July 23, 2015
Time Frame: Exit PRIOR to earnings in late September
New Positions: see below

07/30/15: Hmm... BBBY could be setting up for a bounce. The stock's downward momentum has stalled. Shares did tag new lows this morning but rebounded to a +0.44% gain. The $67.00-67.50 area should be overhead resistance if BBBY bounces. I am not suggesting new positions at this time.

Trade Description: July 23, 2015:
This year is not shaping up very well for bullish investors in BBBY. The stock is down -11.6% year to date. The trouble started with its earnings report back in January.

If you are not familiar with BBBY they are in the services sector. According to the company, "Bed Bath & Beyond Inc. and subsidiaries (the "Company") is a retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in store, online or through a mobile device.

The Company has the developing ability to have customer purchases picked up in store or shipped direct to the customer from the Company's distribution facilities, stores or vendors. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare and other industries.

Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond. Shares of Bed Bath & Beyond Inc. are traded on NASDAQ under the symbol "BBBY" and are included in the Standard and Poor's 500 and Global 1200 Indices and the NASDAQ-100 Index. The Company is counted among the Fortune 500 and the Forbes 2000."

On January 8th BBBY reported its 2014 Q3 results. Earnings were in-line with estimates but revenues missed. Management lowered their same-store sales guidance. The stock plunged the next day. A few weeks later BBBY had managed to recover but the rally failed producing a bearish double top.

The trouble continued in April. BBBY had rallied up into its earnings report and then disappointed. Their 2014 Q4 results were in-line with estimates at $1.80 a share. Yet revenues missed estimates again. They lowered their Q1 guidance. The stock plunged the next day.

On June 24th BBBY reported earnings of $0.93 per share. That was down -1% from a year ago and a penny worse than expected. Revenues were only up +3% to $2.74 billion, which met expectations. Yet comparable store sales were +2.2% when Wall Street was expecting +2.5%. Management lowered their Q2 guidance. Guess what happened the next day? Yup, the stock dropped. Traders immediately sold the bounce and BBBY now has a clearly defined bearish trend of lower highs and lower lows. One has to wonder how bad would BBBY's Q1 results have been had the company not spent $385 million buying back stock last quarter?

In summary, BBBY has been missing Wall Street's revenue or earnings estimates the last three quarters in a row. They have warned twice and same-store sales are disappointing. Technically shares have broken down below multiple layers of support. The company is more of a home furnishing store so back to school season may not give them much of a boost. The point & figure chart is bearish and forecasting at $60.00 target. The last few days have seen some support near $67.00. We are suggesting a trigger to buy puts at $66.80.

- Suggested Positions -

Long NOV $65 PUT (BBBY151120P65) entry $2.55

07/25/15 new stop @ 67.65
07/24/15 triggered @ $66.80
Option Format: symbol-year-month-day-call-strike