Option Investor

Daily Newsletter, Sunday, 5/10/2015

Table of Contents

  1. Leaps Trader Commentary
  2. Portfolio
  3. New Plays
  4. Play Updates
  5. Watch

Leaps Trader Commentary

Big Caps Lead The Way

by James Brown

Click here to email James Brown

The stock market choppiness continued last week. Monday's early gains faded and traders were starting to turn sour by Wednesday's lows. Big moves in the bond market both here and in Europe were generating concern. Fortunately stocks started to bounce on Thursday and then the goldilocks jobs report on Friday morning helped send stocks higher. The widespread rally on Friday saved the S&P 500 from another losing week.

The stock market spent the week essentially waiting for the jobs report on Friday morning. Midweek Federal Reserve Chairman Janet Yellen raised some eyebrows with her comments that stock valuations were "generally quite high." There were comparisons to Fed Chairman Greenspan's "irrational exuberance" speech where the market continued to rally for years afterward. Investors also recalled how Yellen warned about potential asset bubbles in biotech stocks and social media stocks last summer. Most of these stocks continued to surge throughout 2014 in spite of her comments.

The U.S. dollar continued to sink and posted its fourth weekly loss in a row. This helped fuel more gains for crude oil but crude suddenly reversed lower after its pop higher on Wednesday morning. WTI oil hit new 2015 highs near $62.50 a barrel on Wednesday. Now it's back in the $58-59 a barrel range.

Wednesday was noteworthy for oil because U.S. inventories posted their first decline (-3.9 million barrels) in 17 weeks. The weekly Baker Hughes rig count hit another record with 22 weeks in a row of declines in active rigs. Last week's drop was only -11, which is the smallest decline since early December 2014. The number of active rigs is down -58% from its recent high and we're getting close to the multi-year low of 866. Investors are starting to speculate that the buildup in U.S. oil inventories is over and that is going to be bullish for the price of oil going forward.

Economic Data

The economic data in the U.S. was light and what we got was mixed (as usual). The ISM non-manufacturing index improved from 56.5 in March to 57.8 in April. Numbers above 50.0 suggest growth. The ADP National Employment Report came out on Wednesday. March's report was revised lower from 189K to 175K. Economists were forecasting +200K for the April ADP number but the headline was only +169,000 private-sector jobs. This miss generated more fear over the government's jobs report for Friday.

Last month the market was shocked by the March nonfarm payroll number completely missing expectations with only +126,000 new jobs. That number was revised even lower to +85,000, the smallest monthly gain since June 2012. A week ago analysts were estimating +245,000 new jobs in April. That estimate had fallen to 220-225K by Friday morning. The headline number was +223,000 for April. Everyone considered it a "goldilocks" report that wasn't too hot or too cold.

The unemployment rate fell -0.1% as expected to 5.4%. The U.S. labor force grew by +166,000 workers and the labor force participation rate inched up +0.1% to 62.8%, still near 35-year lows. Since our population keeps growing the number of Americans not in the labor force actually hit a new high of 93, 194,000. The average hourly earnings rate ticked up +0.1% in April when economists were hoping for +0.2%.

The unemployment rate at 5.4% is close to a seven-year low. It's also nearing the Fed's 5.0% to 5.2% range that they consider full employment. The uneven job growth, lack of rising wages, and low labor force participation are all factors that would suggest the Federal Reserve is in no rush to raise rates. Thus the jobs data sparked a massive rally on Friday morning.

Overseas Economic Data

Economic data in Europe was overshadowed by the election in the U.K. and the Greece situation. We did see Eurozone services PMI improve from 53.7 to 54.1 in April. That was better than expected. Unfortunately retail sales in the Eurozone slipped -0.8% last month. Germany said their industrial production figures for March fell -0.5%, which was worse than expected.

The big story last week was the election in the United Kingdom. It was expected to be the most divided election in the country's recent history. Yet when it was all over the conservative party won by a large margin. The election results were so dramatic that leaders from the rival parties (Liberal Democrats, UKIP, and the Labour parties) all resigned.

Meanwhile the situation in Greece continues to slowly boil in the background. The country made their €200 million payment to the International Monetary Fund. Now they have a €780 million payment coming up on May 12th. Greece continues to defy its creditors who are pushing for the country to cut its pensions and lay off workers as conditions for additional financial aid.

Looking East there were headlines in Japan that the country's debt hit a new record of 1.053 quadrillion yen. Odds of them paying that back are close to zero. Meanwhile the country's government is spending huge amounts of money on their own QE program that includes buying both domestic and foreign bonds and stocks.

China's HSBC services PMI improved from 52.3 to 52.9 but that was actually below expectations. Numbers above 50.0 suggest growth. The Chinese stock market experienced some volatility last week as investors reacted to new rules about tighter margin requirements for trading.

Asian markets are likely to rally on Monday as investors react to news that the Chinese central bank has cuts its interest rates. The People's Bank of China moved their rate to a new four-year low with another 25 basis point reduction. This is the third cut in six months as they try and stimulate their economy out of the slowest growth in years.

Major Indices:

The S&P 500's +1.34% rally on Friday pushed the index to a +0.37% gain for the week. Year to date the index is now up +2.7%. It's less than two points from a new all-time closing high and less than ten points from a new all-time intraday high.

The 2,120 level is resistance but I'd like to see a close above 2,125 before calling it a breakout. If the current bounce fails then we can look for potential support in the 2,040-2,070 area. The simple 200-dma could offer additional support near 2,030.

The fear of missing out (FOMO) could fuel another big rally if the S&P 500 can just break free of the 2,120 area.

chart of the S&P 500 index:

The NASDAQ composite rebounded from about 115 points from Wednesday's intraday low near 4,888. Yet in spite of this big rebound it still posted a loss for the week. Year to date the NASDAQ is still outperforming with a +5.4% gain.

Gaps tend to get filled so we should not be surprised if the NASDAQ dips back into the 4,950-4,960 range. Thus far this index continues to trade with a bullish trend of higher lows and higher highs.

chart of the NASDAQ Composite index:

The small cap Russell 2000 index ($RUT) still looks vulnerable after its big breakdown of the trend line of higher lows (see chart). This index spent last week churning sideways in the 1,210-1,240 range. Friday's +0.74% bounce pushed it to a +0.5% gain on the week. Year to date it's only up +2.3%.

If the market rolls over then we should look for the $RUT to dip toward support near 1,180 or 1,200. On the other hand, if the large caps can breakout higher they could drag the small caps with them. The $RUT has overhead resistance about every 20 points (1,240; 1,260; 1,280).

chart of the Russell 2000 index

Economic Data & Event Calendar

The pace of economic data slows down this week. The real market mover could be Greece if they fail to make their debt payment on Tuesday.

Believe it or not but Q1 earnings are still going. This week we will hear from several large retailers like (KSS, JWN, DDS, and JCP).

- Monday, May 11 -
Bank of England interest rate decision

- Tuesday, May 12 -
Greek deadline to make a 780 million euro payment

- Wednesday, May 13 -
U.S. Retail Sales (April)
Business Inventory data
Eurozone GDP estimate

- Thursday, April 14 -
Producer Price Index (PPI)

- Friday, May 15 -
New York Empire State fed survey
Industrial production
University of Michigan Consumer Sentiment

Looking Ahead:

Stock market technicians are surprised to see how well the major U.S. indices are performing when so many investors are pulling money out of the market. TrimTabs reported that the month of April saw U.S.-focused equity mutual funds and ETFs suffered $35.8 billion in outflows. Investors have not retreated from U.S. stocks at this pace since October 2008 during the financial crisis. A recent Bank of America Merrill Lynch survey unveiled that U.S. investors have pulled $99 billion out of stocks this year. If Americans are pulling money out of U.S. stocks then who is buying them to keep prices near all-time highs?

Another question to ponder is why were the markets so excited about a jobs report that only showed +223,000 new jobs? That is woefully inadequate. Larry McDonald, the managing director at Societe General, made some interesting observations. The U.S. Federal Reserve has kept interest near zero for six years. The Fed also spent $4 trillion on QE programs. The rest of the world has also launched their own QE programs (amounting to almost $20 trillion). The U.S. population has grown by more than 14 million people in the last six years. Yet the number of full time jobs has fallen from 23 million in 2008 to only 21 million today. Considering all the QE and easy monetary policy to stimulate growth the U.S. economy should be racing.

McDonald has a point. Growth is significantly lower than what it should be, especially considering everything the Federal Reserve has done to try and stimulate growth. Our Q1 GDP growth was +0.2%. That's down from almost +5% in Q3 2014. The current Q2 2015 estimate is about +0.8%. What happens if the Q1 GDP estimate is revised negative? I suspect if Q1 is revised into negative territory that odds of a Fed rate hike are pushed out into 2016. The next U.S. GDP estimate is May 29th.

Of course it's good to remember that bull markets are always climbing the wall of worry. It's been six years from the bear market low and stocks have overcome wave after wave of worries. The S&P 500 has gone more than 1,300 days without a -10% correction. The average bull market lasts about 165 weeks. The current bull market is 321 weeks old and it's still going.

I suspect the path of least resistance is still higher. Pre-election year summers don't have a great record but that doesn't mean stocks can't post gains. My biggest worry is Greece. If they don't make their debt payment on Tuesday, May 12th, it's going to generate some volatility as investors try to price in the ramifications.

~ James


Portfolio Update

by James Brown

Click here to email James Brown

Current Portfolio

Portfolio Comments:

Stocks end the week with a widespread rally. Big cap stocks are outperforming and the S&P 500 is on the verge of a new all-time high.

DATA, EWG, and LVLT have new stop losses.

Disclaimer: At any given time the author may have positions in any or all of any companies mentioned in the Leaps Newsletter.

--Position Summary Table--
Table lists Directional CALL or PUT/LEAPS only.
Insurance puts, if applicable, are not shown.

Red symbol/name represents a play or option position exited or closed this week.

New Plays

Financial Services & Sports Apparel

by James Brown

Click here to email James Brown

- New Trades -

MasterCard Inc. - MA - close: 93.51

05/10/15: Shares of MA were slowly building on their bullish trend of higher lows last week. Then the market surged on Friday's jobs report. MA rallied past resistance at $93.00. Our trigger to open bullish positions was met with a close above $93.25. Our plan is to launch bullish positions on Monday morning (May 11th). Nimble investors might want to wait and try and buy a dip near $92.00, which should be new short-term support.

Trade Description: May 3, 2015:
We are adding MA back to the watch list. Here's our recent watch list play description from April:

Do you have a credit card? How about a debit card? Odds are you do. About 70% of Americans have a credit card and many have more than one. Inside the United States there are over 500 million credit cards between American Express, MA, and Visa. There's more than 1.12 billion globally (not counting the U.S.). There's also another 572 million MA or Visa debit cards in the U.S. (MasterCard has more than 144 million). Not counting America there are more than 1.2 billion debit cards around the world.

Now what if you could charge a small percentage for consumers using their plastic every time they make a purchase? That's MA's business model. As of 2013 their market share of global transactions (credit or debit) was about 27%. They are the second biggest credit and debit card company behind Visa (V). According to the company, "MasterCard (MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world's fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard's products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone."

MA has been delivering steady growth. They reported their Q3 results on October 30th with earnings up +19% from a year ago to $0.87 a share. That beat estimates. Revenues were up +12.8% to $2.5 billion, also above expectations. The bullish trend continued when MA reported its 2014 Q4 results on January 30th. Earnings per share soared +32% from a year ago to $0.69 and revenues grew +13.6% to $2.42 billion. Both metrics were above Wall Street expectations.

The company did warn that the surge in the U.S. dollar was impacting results but they still see strong single-digit revenue growth for 2015. They reaffirmed +20% earnings growth.

Meanwhile one of MA's biggest rivals, American Express (AXP), is not having a good year. AXP lost its exclusive deal with Costco (COST) last month. This deal generated 20% of AXP's loans and about 10% of their annual card growth. AXP is also losing its partnership with JetBlue (JBLU). AXP's losses will likely be MA's and Visa's gain.

Recently MA announced it had signed a 10-year deal with Citigroup. Not only is Citigroup one of the biggest banks on the planet they are the largest credit card issuer in the world. The press release states "Citi will begin aligning the company's consumer proprietary credit and debit portfolios to the MasterCard network in 2015." One analyst has already opined that the deal should provide a "decent tailwind for EPS growth" (for MA). Speaking of opinions, a couple of analysts at Nomura believe that MA is cheap at current valuations and could be seen as safe haven investment given their steady earnings growth.

"Despite a mixed global economy, we delivered solid results for the quarter and for the full year in 2014," said Ajay Banga, president and CEO, MasterCard. "This year is off to a good start with several new wins, as well as renewals of some important customer agreements, with more in the pipeline. Looking ahead, we will continue to be at the forefront of our industry by driving payment innovation with solutions such as MasterPass, and by increasing electronic payments usage globally as demonstrated by our significant expanded acceptance footprint across Africa."

Shares of MA look like a potential trade again. The company recently reported earnings on April 29th. The beat estimates on the bottom line with a profit of $0.89 per share. Revenues were only up +2.7% to $2.23 billion, which was below expectations. Part of the challenge were currency headwinds.

Wall Street seems to think that MA will do well in spite of the tough business environment. The spike higher on April 22nd was news that the country of China was going to open up their market to foreign companies. Previously companies like MA and Visa could only do business in China by partnering with a domestic firm (China UnionPay). Now the Chinese government is opening up the bank card-clearing market to foreigners. This is huge. The Chinese market for this business was $6.8 trillion in transactions last year. Now MA gets a chance to compete for its share of this business.

Shares of MA still have resistance near $93.00. We want to see MA close above $93.25 and then buy calls the next morning with a stop loss at $88.00.

Breakout trigger: Wait for a close above $93.25
Then buy calls the next morning with a stop at $88.00.

BUY the 2016 Jan $95 call (MA160115C95) current ask $5.95

05/11/15 trade begins
05/08/15 triggered with a close @ $93.51 (above $93.25)
Option Format: symbol-year-month-day-call-strike

Chart of MA:

Originally listed on the Watch List: 05/03/15

Nike, Inc. - NKE - close: 102.44

05/10/15: NKE is finally starting to move again. We have been patiently waiting for a breakout from its $98-102 trading range. Our plan was to wait for NKE to close above $102.00 and then buy calls the next day.

Friday's market rally pushed NKE to $103.30 intraday. The stock settled at $102.44. Our plan is to launch positions on Monday morning (May 11th).

Earlier Comments: March 29, 2015:
In Greek mythology Nike is the winged goddess of victory. It's an appropriate brand name for the American athletic wear giant. Nike is the 800-pound gorilla in the industry with annual sales of more than $30 billion.

If you're not familiar with the company, "NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories, and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories."

The company's most recent earnings report was March 19th, after the closing bell. NKE reported its Q3 2015 results. Analysts were expecting a profit of $0.84 a share on revenues of $7.62 billion. NKE delivered a profit of +0.89 a share or +16% from a year ago. Revenues were up +7% to $7.46 billion. However, if you back out the currency headwinds, their revenues were up +13%.

The company reported sales growth across every geographical region. Their gross margins improved 140 basis points to 45.9 percent. Management said their online sales are soaring. Nike.com saw its revenues jump +42% last quarter.

The current quarter is NKE's 2015 Q4 (March-July) and the company said orders for Q4 in North America are up +15%, which is above analysts' estimates of +11.6%. Orders from China are up +11%, also above estimates. In the company's earnings release NKE said, "As of the end of the quarter, worldwide futures orders for NIKE Brand athletic footwear and apparel scheduled for delivery from March 2015 through July 2015 were 2 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 11 percent."

One big concern is the U.S. dollar. Sales in Europe were up +21% but when you factor in euro weakness and dollar strength that sales growth drops to +10%. The strength in the U.S. dollar is a major headwind but after NKE's Q3 results Wall Street feels that the company is managing the currency impact very well. The company is forecasting low double digit sales growth in the current quarter.

Wall Street applauded the results and shares of NKE gapped open higher on March 20th to hit all-time highs. There was a parade of bullish analyst comments. Several firms raised their price target on NKE. Here's a brief list of new price target: $106, $110, $115, $116.00. The point & figure chart is more optimistic as it is forecasting at $125.00 target.

Shares of NKE have seen some profit taking, which isn't a surprise considering the market's recent decline. However, now that NKE has filled the gap, traders jumped in to buy the dip. The stock looks poised to breakout past round-number resistance at $100.00 (again). Tonight I am suggesting investors wait for NIKE to close above $101.00 and then buy calls the next morning with a stop loss at $94.45.

Breakout trigger: Wait for a close above $102.00
Then buy calls the next morning with a stop loss at 97.45

BUY the 2016 Jan $110 call (NKE160115C110) current ask $4.00

05/11/15 trade begins
05/08/15 Triggered with a close @ $102.44 (above 102.00)
05/03/15 move the stop loss from 95.75 to 97.45
04/12/15 Strategy update: adjust the trigger to a close above $102.00 and the stop loss to $95.75 (from a close above $101.00 and a stop at $94.45)
Option Format: symbol-year-month-day-call-strike

Chart of NKE:

Originally listed on the Watch List: 03/29/15

Play Updates

Toyota Drives Another Record Year

by James Brown

Click here to email James Brown

Closed Plays

None. No closed plays this week.

Play Updates

Apple Inc. - AAPL - close: 127.62

05/10/15: It's been a wild couple of weeks for AAPL. The stock has seen multiple swings of several dollars since its earnings peak on April 28th. At the moment this stock is on the up swing with a bounce from Wednesday's intraday low.

Technically some of the short-term momentum oscillators look bullish but I would hesitate to launch new positions.

Trade Description: November 2, 2014:
Love it or hate it AAPL always has Wall Street's attention. It has a cult-like following. The company's success has turned AAPL's stock into the biggest big cap in the U.S. markets with a current valuation of more than $633 billion.

The company is involved in multiple industries from hardware, software, and media but it's best known for its consumer electronics. The iPod helped perpetuate the digital music revolution. The iPhone, according to AAPL, is the best smartphone in the world. The iPad helped bring the tablet PC to the mass market. The company makes waves in every industry they touch with a very distinctive brand (iOS, iWork, iLife, iMessage, iCloud, iTunes, etc.) and they've done an amazing job at building an Apple-branded ecosystem. Now they're getting into the electronic payments business with Apple Pay.

The company's latest earnings report was super strong. AAPL reported its Q4 (calendar Q3) results on October 20th. Wall Street was expecting a profit of $1.31 a share on revenues of $39.84 billion. The company delivered a profit f $1.42 a share with revenues up +12.4% to $42.12 billion. The EPS number was a +20% improvement from a year ago. Gross margins were up +1% from a year ago to 38%. International sales were 60% of the company's revenues.

AAPL's iPhone sales exceeded estimates at 39.27 million in the quarter and up nearly 16% from a year ago. The only soft spot in their ecosystem seems to be iPad sales, which have declined several quarters in a row. The company hopes to rejuvenate its tablet sales with a refresh of the iPad models. More importantly AAPL management raised their Q1 (calendar Q4) guidance as they expect revenues in the $63.5-66.5 billion in the quarter. Recent news would suggest that AAPL might deliver an incredible 50 million iPhone 6s in 2014. That's not counting their new iPhone 6+.

The better than expected results and bullish guidance sent the stock to new highs. The rally has created a quadruple top breakout buy signal on its point & figure chart that is currently forecasting at $133 target. Yet we do not want to chase AAPL here. The stock is up $12 from its October low. We do want to be ready if shares see a pullback.

Tonight I am suggesting a buy-the-dip trigger to buy calls at $103.50 with a stop loss at $98.90. (We amended the buy-the-dip trigger to $111.00 on Nov. 30th).

- Suggested Positions -
DEC 09, 2014 - entry price on AAPL @ 110.19, option @ 9.55
symbol: AAPL160115C120 2016 JAN $120 call - current bid/ask $14.45/14.55

04/27/15 AAPL crushes earnings estimates (again)
04/12/15 new stop @ 118.00
03/01/15 Caution: AAPL could be poised for a pullback. Consider taking profits now and then re-enter this trade later.
02/22/15 new stop @ 114.00
02/15/15 new stop @ 109.50
12/09/14 triggered on gap down at $110.19, trigger was $111.00
11/30/14 raise the buy-the-dip entry trigger to $111.00
11/16/14 raise the buy-the-dip entry trigger to $108.00
Adjust the strike price to the 2016 Jan $120 call.
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 118.00
Play Entered on: 12/09/14
Originally listed on the Watch List: 11/02/14

Akamai Technology - AKAM - close: 76.43

05/10/15: Shares of AKAM were upgraded by Deutsche Bank last week. The stock has continued to build on its short-term bullish trend of higher lows. Friday's breakout over resistance near $75.50 is also bullish.

More conservative investors may want to consider a stop closer to the 50-dma, currently near $72.50 instead.

I am not suggesting new positions at this time.

Earlier Comments: March 8, 2015:
If you surf the Internet then you're probably seeing content delivered by AKAM's technology. They help customers speed up online content and have a fast-growing security business.

The company is part of the technology sector. They provide cloud services for delivering content across the Internet. Customers include 47% of the Global 500 companies.

AKAM describes itself as "the global leader in Content Delivery Network (CDN) services, Akamai makes the Internet fast, reliable and secure for its customers. The company's advanced web performance, mobile performance, cloud security and media delivery solutions are revolutionizing how businesses optimize consumer, enterprise and entertainment experiences for any device, anywhere."

Last year was a strong one for earnings and revenue growth. AKAM beat Wall Street estimates on both the top and bottom line the past four quarters in a row. They raised guidance twice. AKAM's average revenue growth last year was +24.5%. Their most recent report was on February 10th where AKAM delivered a profit and revenue number above expectations. Several analyst firms raised their price target on AKAM following its Q4 results.

Management hosted an investor day in late February. They expect sales growth to be in the high teens for 2015. They forecasting sales to hit $5 billion by 2020 compared to about $2 billion in 2014. AKAM reported that their cyber security business is surging with +191% growth last year.

This week AKAM disclosed in their 10-K filing that they were conducting an internal probe into their sales practices in a foreign country. They didn't say which country. This is a potential risk if the U.S. government decides to do their own investigation but the stock didn't really react that much to the news.

It is worth noting that there has been some speculation that AKAM is a buyout target. One analyst suggested that Amazon.com (AMZN) could be a suitor.

After a big rally in February the upward momentum in AKAM has stalled. Shares look like they could see a correction lower. If that occurs then prior resistance near $65.00 should be significant support. We want to be ready to take advantage of the weakness.

Tonight I'm suggesting a buy-the-dip trigger to buy calls if AKAM dips to $65.25. We'll start this trade with a stop at $59.75.

- Suggested Positions -
MAR 25, 2015 - entry price on AKAM @ 71.50, option @ 4.15
symbol: AKAM160115C80 2016 JAN $80 call - current bid/ask $5.20/5.40

05/02/15 new stop @ 69.00
03/25/15 Triggered at $71.50
03/22/15 Strategy update: Move the buy-the-dip trigger to $71.50, move the stop loss to $67.90, adjust the option to the 2016 Jan. $80.00 call
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 69.00
Play Entered on: 03/25/15
Originally listed on the Watch List: 03/08/15

Tableau Software - DATA - close: 110.69

05/10/15: Friday was a big day for shares of DATA. On Thursday night the company reported earnings. Analysts were expecting a loss of $0.03 per share on revenues of $115.29 million. DATA reported a profit of $0.08 cents with revenues soaring +74.4% from a year ago to $130.1 million.

Management then raised their Q2 and 2015 revenue guidance above analysts' expectations. This sparked a couple of analysts to upgrade their price targets on DATA on Friday morning. Combine that with the market's reaction to the jobs report on Friday and shares of DATA soared.

The stock gapped open higher at $106.66 and then ended Friday's session with a +13.6% gain and a new all-time high.

More conservative investors will want to seriously consider taking some money off the table right now. Tonight I am raising our stop loss to $94.75 since the $95.00 level was support last week.

I am warning you now that DATA will likely see some profit taking. It would not surprise me to see a dip back toward the $103.50-105.00 area.

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

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

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

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

Management offered earnings guidance that was in-line with Wall Street estimates but they see revenues coming in above expectations.

Wall Street is bullish and the last couple of weeks have seen new price targets at $115 and $127. The point & figure chart is forecasting at $117.00 target.

DATA has been talked about as a potential take over target and that might be why their options are so expensive. DATA's next earnings report is coming up on May 7th. More conservative traders may want to sit this one out until we see how the market reacts to DATA's Q1 results.

I am labeling this a more aggressive play because shares can be volatile with multi-point single-day moves. Tonight we want to buy calls on a dip at $100.00.

- Suggested Positions -
APR 27, 2015 - entry price on DATA @ 100.00, option @ 12.10
symbol: DATA160115C110 2016 JAN $110 call - current bid/ask $14.40/17.10

05/10/15 new stop loss @ 94.75
05/08/15 the stock soars to new highs in reaction to earnings and a couple of upgrades.
05/07/15 DATA delivered better than expected earnings and raises guidance above Wall Street expectations
04/27/15 triggered @ $100.00
Remember, this is a higher-risk trade. Consider small positions to limit risk.
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 94.75
Play Entered on: 04/27/15
Originally listed on the Watch List: 04/26/15

iShares MSCI Germany - EWG - close: 30.38

05/10/15: The German ETF delivered a weekly gain in spite of the situation with Greece. The country of Greece continues to defy its creditors who are calling for cuts to Greek pensions and more layoffs of government workers. The next several weeks could be volatile. Greece has a big debt payment to the IMF coming up on May 12th. If they miss this payment it could generate more volatility in European markets.

meanwhile shares of the EWG look like they could be breaking out from its six-week consolidation in the $29.30-30.50 area.

Tonight we'll move the stop loss up to $28.40. More conservative investors might want to consider a stop closer to $29.00-29.25.

Don't forget - We should assume that if Greece does leave the euro or defaults on its debt that this trade gets stopped out due to volatile movement in the European markets.

FYI: I want to remind readers that this is ETF is not hedged against weakness in the euro. The trend is up but its performance will lag the major European markets. You could look at hedged European ETFs but many of them have very low volume and do not have options (especially LEAPS). If you're curious check out these symbols: HEWG, DBGR, DXGE. Be sure to do your homework.

Earlier Comments: February 22, 2015:
The EWG is an exchange traded fund (ETF) that mimics the MSCI Germany index. This includes small, mid, and large-cap companies.

The U.S. market has enjoyed several years worth of QE programs that helped fuel market gains. Now that the U.S. QE program is over Europe is about to start on their own QE program. The European Central Bank (ECB) will start its quantitative program in March this year. The central bank will purchase about €60 billion a month through September 2016 but they've already announced that they will extend this deadline if they need to.

This is significant. After years of promising to do something about the Eurozone economy and fight the threat of deflation the ECB is finally acting. They might be too late to fend off deflation but investors seem to have hope that Europe can turn things around.

Germany should be a prime beneficiary of this program. The ECB's QE will continue to pressure the euro lower and that makes Germany's exports more competitive. Investors are have already starting betting on an improvement in the Germany market with a significant bounce in the EWG.

Today the EWG has broken through technical resistance at its simple 200-dma. Now it's about to challenge resistance near the $30.00 mark. Tonight I am suggesting investors wait for the EWG to close above $30.00 and then buy calls the next morning with a stop loss at $26.85.

FYI: If you want a broader European ETF I did consider the VGK but about half of its holdings are British and Swiss companies and may not see the same benefit from a weaker euro.

- Suggested Positions -
MAR 23, 2015 - entry price on EWG @ 30.24, option @ 1.95
symbol: EWG160115C30 2016 JAN $30 call - current bid/ask $1.65/1.90

05/10/15 new stop @ 28.40
03/23/15 Trade begins. EWG opens at $30.24
03/20/15 EWG closed @ $30.26, above our suggested entry: a close above $30.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 28.40
Play Entered on: 03/23/15
Originally listed on the Watch List: 02/22/15

iShares MSCI Italy Capped ETF - EWI - close: 15.63

05/10/15: Thanks to a big two-day rally and a +2.5% surge on Friday the EWI delivered its third weekly gain in a row. These are new seven-month highs. Another positive for us is how the EWI has been building on its bullish trend of higher lows.

On a short-term basis I would expect a little pullback after last week's rally.

FYI: This EWI trade suffers the same risk that the EWG trade does. If Greece ends up leaving the Eurozone or defaults on its debt it will generate significant market volatility in Europe. I would expect EWI to hit our stop if we do see a Greek exit.

Trade Description: April 5, 2015:
Italy could be on the brink of an economic turnaround. The Wall Street Journal recently reported that Italy could escape from its chronic economic fatigue. The country's economic growth has been slowing down for years with growth falling from +2% in the 1980s to +1.4% in the 1990s to just +0.6% in the 2000s. The country has averaged -0.5% growth since 2010.

The situation appears to be changing. Markit's manufacturing PMI data for March hit 53.3, an 11-month high. Numbers above 50.0 suggest growth. UniCredit is forecasting Italian GDP growth of +0.2% in Q1 2015, which would snap the country out of its three-year recession.

The Organization for Economic Cooperation and Development (OECD) has upgraded their forecast on Italy for 2015 and 2016. They now see growth of +0.6% in 2015 and +1.3% in 2016.

The combination of lower oil prices and a weaker euro to boost exports should boost European economic growth. Plus, the European Central Bank (ECB) just launched a 60 billion euro QE program in March 2015 that will last at least through September 2016 or longer if they don't hit their 2% inflation target.

Investors know that QE helped fuel a multi-year rally in the U.S. stock market and they are expecting a similar reaction in the European stock markets.

The EWI could be a way to play it. This is an ETF that mimics the MSCI Italy 25/50 index. Underlying stocks are traded on the Milan stock exchange. It's one of the most liquid ETFs focused on Italy.

Technically the EWI appears to have formed an inverse (bullish version) of a head-and-shoulders pattern. It's also on the verge of breaking out past its simple 200-dma. Tonight I am suggesting investors wait for the EWI to close above $15.25 and then buy calls the next morning.

Warning: The biggest risk is probably a Greek exit from the Eurozone. Negative headlines that suggest the Greek might exit could generate a lot of volatility in the EWI.

- Suggested Positions -
APR 07, 2015 - entry price on EWI @ 15.31, option @ 2.35
symbol: EWI170120C15 2017 JAN $15 call - current bid/ask $1.80/2.10

05/03/15 new stop @ 14.40
04/07/15 trade begins. EWI opens at $15.31
04/06/15 EWI closed @ 15.29, above our trigger of $15.25
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 14.40
Play Entered on: 04/07/15
Originally listed on the Watch List: 04/05/15

Facebook, Inc. - FB - close: 78.51

05/10/15: FB has been a noteworthy underperformer. Shares have fallen from $85 to $77 in about ten trading days. If you're feeling optimistic FB still has a long-term bullish trend of higher lows. Plus, the sell-off stalled when shares hit technical support at its rising 200-dma. It is possible the post-earnings depression is over.

I'm still not suggesting new positions at this time. However, if we see FB close above $80 for a couple of days then we can re-evaluate a potential entry point for new positions.

Earlier Comments: March 22, 2015:
Facebook probably needs no introduction. It's the largest social media platform on the planet. As of December 31st, 2014 the company reported 1.19 billion monthly active users and 890 million daily active users. If FB were a country that probably puts them as the third most populous country on the planet (behind India and China).

This past week the company announced a new mobile payment service through FB's messenger app. The new service will compete with similar programs through PayPal, Apple Pay, and Google Wallet.

The announcement combined with a broad market rally helped fuel a +7% gain in FB's stock last week. FB's market cap has risen past $230 billion making it the tenth largest company in the S&P 500.

Growth has been phenomenal. According to IBD, FB's Q4 earnings were up +69% form a year ago. Revenues were up +49%. Wall Street is expecting FB's profit to rise +12% in 2015 and +32% in 2016.

Technically shares of FB have broken out from a very significant consolidation pattern. The point & figure chart is bullish and forecasting at $96.00 target. I think it will go higher. After a five-day run we do not want to chase it here. I'm suggesting a buy-the-dip entry trigger at $82.00 with a stop loss at $74.75.

- Suggested Positions -
APR 01, 2015 - entry price on FB @ 81.00, option @ 4.92
symbol: FB160115C90 2016 JAN $90 call - current bid/ask $2.92/2.97

04/23/15 Q1 earnings report
04/01/15 triggered @ 81.00
03/29/15 move the buy-the-dip trigger from $82.00 down to $81.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 74.75
Play Entered on: 04/01/15
Originally listed on the Watch List: 03/22/15

iShares US Home Construction ETF - ITB - close: 26.69

05/10/15: We almost lost our ITB trade. Shares of this ETF dipped to $25.67 on Wednesday. Our stop loss is at $25.45. Fortunately, the ITB bounced off this intraday low and has continued to rally since. The bounce helped ITB produce its first weekly gain in five weeks.

Right now I'd keep an eye on the simple 50-dma currently near $27.40. A close above the 50-dma might be a new bullish entry point.

Earlier Comments: January 11, 2015:
The ITB is an exchange traded fund that mimics the Dow Jones U.S. Select Home Construction Index. The top 12 holdings are DHI, LEN, PHM, TOL, NVR, HD, TPH, LOW, RYL, SHW, KBH and MTH.

This index has been stuck in a trading range for years. That looks like it's about to change. Have you looked at a chart of the 10-year bond yield lately? Bond yields are going lower. That's going to pressure mortgage rates lower and that's bullish for home sales. This past week saw 30-year mortgage rates dip below 3.6%. That's a 19-month low.

If that wasn't enough of a tailwind President Obama wants to help. On January 7th the White House announced plans to reduce the government mortgage insurance premiums in an effort to boost home ownership. Another positive for the homebuilders is the U.S. Federal Reserve. We just had two fed governors come out last week saying they think the Fed should hold off on raising rates. The longer the Fed waits to start raising rates the better it will be for homebuilders.

Currently the ITB appears to be breaking out past major resistance and closed at multi-year highs. I'd like to see a little bit more follow through. Tonight I'm suggesting we wait for the ITB to close above $27.00 and then buy calls the next morning with a stop loss at $23.95.

- Suggested Positions -
FEB 11, 2015 - entry price on ITB @ 27.09, option @ 1.70
symbol: ITB160115C30 2016 JAN $30 call - current bid/ask $0.65/1.05

03/01/15 new stop @ $25.45
02/11/15 trade begins. ITB opens at $27.09
02/10/15 ITB closes at $27.10, above our trigger at $27.00
Option Format: symbol-year-month-day-call-strike

Current Target: ITB @ TBD
Current Stop loss: 25.45
Play Entered on: 02/11/15
Originally listed on the Watch List: 01/11/15

Level 3 Communications - LVLT - close: 56.42

05/10/15: So far so good. Broken resistance near $55.00 turned into new support this past week. Traders bought the dip on Wednesday and Thursday and LVLT is now up three weeks in a row. A close above short-term resistance near $57.00 could be used as a new bullish entry point.

Tonight we'll raise our stop loss to $51.45.

Earlier Comments: December 28, 2014:
LVLT is a communication services company. Their marketing material describes LVLT as "Level 3 Communications, Inc. is a Fortune 500 company that provides local, national and global communications services to enterprise, government and carrier customers. Level 3's comprehensive portfolio of secure, managed solutions includes fiber and infrastructure solutions; IP-based voice and data communications; wide-area Ethernet services; video and content distribution; data center and cloud-based solutions. Level 3 serves customers in more than 500 markets in over 60 countries over a global services platform anchored by owned fiber networks on three continents and connected by extensive undersea facilities."

They just recently completed a merger with TW Telecom. Earnings have been improving. LVLT has beaten Wall Street's earnings estimates the last three quarters in a row. Technically shares have been outperforming the broader market. The NASDAQ composite is up +15% in 2014 while LVLT is up +50%. The point & figure chart is bullish and forecasting a long-term target at $75.00.

Currently shares of LVLT are hovering just below key resistance at the $50.00 mark. I am suggesting we wait for LVLT to close above $50.50 and then buy calls the next morning with a stop loss at $45.45.

- Suggested Positions -
MAR 04, 2015 - entry price on LVLT @ 54.71, option @ 3.90
symbol:LVLT160115C60 2016 JAN $60 call - current bid/ask $3.40/3.90

05/10/15 new stop @ 51.45
04/29/15 Better than expected earnings
04/12/15 Caution! LVLT looks weak. A breakdown under $53.00 probably portends a drop to support at $50.00
03/04/15 trade begins. LVLT opens at $54.71
03/03/15 Triggered. LVLT closed at $54.90, above our trigger of $54.50
02/22/15 Strategy update: Wait for LVLT to close above $54.50, then buy calls the next morning with a new stop at $49.45. Adjust the option strike to 2016 Jan $60 call
02/08/15 Adjust entry point strategy: Buy calls on a dip at $50.75 with a stop loss at $46.25. Option Format: symbol-year-month-day-call-strike

Current Target: LVLT @ TBD
Current Stop loss: 51.45
Play Entered on: 03/04/15
Originally listed on the Watch List: 12/28/14

Starbucks Corp. - SBUX - close: 49.78

05/10/15: Traders bought the dip in SBUX near its rising 30-dma last week. Shares are up about +2.5% from Wednesday's intraday low but SBUX still lost ground for the week.

This pullback is an opportunity. However, I would wait for a close above $50.00 to launch new bullish positions.

Trade Description: April 26, 2015:
SBUX shares are soaring to new all-time highs.

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. The good news is that looks the consolidation is over.

Five-Year Plan

Late last year SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX is having a pretty good 2015 so far with the stock up +26%, outperforming the broader market. A lot of this gain was thanks to a post-earnings pops. SBUX reported its Q1 2015 results on January 22nd. Adjusted earnings, backing out one-time charges, were $0.80 a share. That's in-line with estimates. Revenues were up +13.3% to $4.8 billion, also in-line with estimates. It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week. Investors applauded the news anyway and sent SBUX soaring to new all-time highs the next day.

That whole scenario just happened again on Friday with the company delivering exceptional growth. SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years. Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

The stock market applauded SBUX's results and shares popped to new highs. We do not want to chase it. Shares will likely fill the gap from Friday morning. Tonight I am suggesting a buy-the-dip trigger at $50.00. More nimble traders may want to consider a trigger closer to $49.70 instead.

- Suggested Positions -
APR 28, 2015 - entry price on SBUX @ 50.00, option @ 1.59
symbol:SBUX160115C55 2016 JAN $55 call - current bid/ask $1.51/1.56

04/28/15 triggered @ 50.00
Option Format: symbol-year-month-day-call-strike

Current Target: SBUX @ TBD
Current Stop loss: 47.25
Play Entered on: 04/28/15
Originally listed on the Watch List: 04/26/15

Toyota Motor Corp. - TM - close: 142.12

05/10/15: It was a critical week for shares of TM. The sell-off on Tuesday and Wednesday had me worried. TM had broken down below its multi-month trend line of support (higher lows). Wednesday saw U.S.-traded shares of TM fall to $136.50 before bouncing. Our stop loss is at $136.40. Fortunately TM bounced on Thursday and then soared on Friday thanks to better than expected earnings news.

The company reported its fiscal 2015 and Q4 results on Thursday night (May 7th). Their Q4 (January-March) quarter delivered a profit of 446.4 billion yen ($3.7 billion), which is a +50% improvement from a year ago.

TM's 2015 full-year results were also impressive. The Japanese yen has been floating near multi-year lows the last few months. That has helped the company's exports and boosted sales. Strong sales in the U.S. helped offset weakness overseas.

The company sold 8.97 million cars and trucks in their fiscal 2015. That was actually about 144,000 cars less than the prior year but profits were up. Their FY2015 revenues were 27.23 trillion yen (about $227 billion). That's a +6% increase from the prior year. Their 2015 profit was 2.17 trillion yen (or $18 billion), which is a +19% improvement. J

TM management expects the bullish momentum to continue. They are forecasting +1% increase in revenues to 27.5 trillion yen for fiscal 2016 (around $229.6 billion). TM is forecasting profits to rise +3.5% to 2.25 trillion yen ($18.8 billion). Management also said they will pay a $1.04 annual dividend and will propose a $2.5 billion stock buyback program at their annual shareholder meeting in June.

These better than expected results combined with an up market on Friday to produce a +3.0% rally on Friday and a breakout back above its 50-dma. I am not suggesting new positions at this time.

Earlier Comments: November 30, 2014:
TM is considered part of the consumer goods sector. The company is a major automotive manufacturer. Headquartered in Japan, TM was founded back in the 1930s. The company now has sales around the globe.

The company led the industry in greener cars with their Prius model of electric-gasoline hybrids. Now they're leading the industry again with a hydrogen fuel cell vehicle. TM unveiled the Mirai, which means "future" in Japanese, as is the first zero-emission vehicle for consumers. The vehicle will go from 0 to 60 MPH in 9 seconds. It has a range of 400-430 miles. The only emission is water vapor.

The Mirai will not be a big seller to start. TM only expects to sell a few hundred units next year. The challenge is the infrastructure so consumers can refuel the hydrogen fuelcell. It will take a few years to really catch on but they're going to get help from various government agencies. The state of California is one example. California hopes to have 1.5 million zero-emission cars on the road by 2025.

I'm not suggesting bullish positions on TM for the Mirai. Hydrogen fuelcell vehicles are not even a drop in the bucket for the global auto market. What should capture investor attentions is the combination of TM's strong sales combined with a central bank stimulus efforts.

TM has already seen strong sales this year. They reported their first half results on November 5th. TM beat estimates and raised their revenue guidance. Falling gas prices boosted sales of SUVs. TM is also seeing sharp growth in China. This past October TM saw their sales in China soar +27% from a year ago. That is on top of a +26% increase in September and a +9% jump in August. New estimates suggest TM is poised to outsell most of its rivals in the U.S. in November too, including big competitors like General Motors, Ford, and Nissan.

TM's secret weapon could be the currency devaluation by the Bank of Japan. The Japanese government is desperate to jump start their economy and avoid deflation. They have launched a massive QE program that is crushing the value of their currency. The yen ended the week at multi-year lows. This is an advantage for a company like TM who exports a lot of their product.

I do have to mention the risk of recall headlines. It seems that the big automakers are being super careful after seeing the Ford fiasco in the last couple of years. Now companies are recalling vehicles all the time. Right now the entire industry is dealing with a defective Takata airbag recall. The top ten automakers all use Takata airbags so it's something that will affect everyone. There is always the risk of another company-specific recall that could hurt TM.

Technically shares of TM have been showing strength and outperforming many of its peers. Shares have actually broken out past resistance near its 2014 July and early November highs. I would be tempted to buy calls now. However, I'd like to see a little more follow through. Tonight I am suggesting we wait for TM to close above $124.00 and then buy calls the next day.

I will warn investors that the prior highs near $135 and $138 could be potential resistance but the point & figure chart is very bullish and forecasting a long-term target of $160.00.

- Suggested Positions -
DEC 02, 2014 - entry price on TM @ 126.56, option @ 8.75
symbol: TM160115C130 2016 JAN $130 call - current bid/ask $13.50/15.75

04/26/15 new stop @ 136.40
03/22/15 new stop @ 133.45
03/15/15 new stop @ 129.00
03/03/15 U.S. sales +13.3% in February
02/22/15 new stop @ 127.25
02/15/15 new stop @ 124.50
02/04/15 TM delivers better than expected earnings results and raises guidance
12/07/14 new stop @ $119.00
12/02/14 trade begins. TM opens at $126.56
12/01/14 trade is triggered. TM closes at $124.94, above our 124.00 trigger
Option Format: symbol-year-month-day-call-strike

Current Target: TM @ TBD
Current Stop loss: 136.40
Play Entered on: 12/02/14

Originally listed on the Watch List: 11/30/14

Textron Inc. - TXT - close: 45.19

05/10/15: TXT is slowly looking better. The stock didn't move much last week. Shares were chewing through resistance in the $44-45 zone in addition to several key moving averages that converged in this region. Friday's rally looks like a bullish breakout past short-term resistance.

I would like to see some follow through. No new positions at this time.

Earlier Comments: February 15, 2015:
TXT is in the industrial goods sector. They deal mostly in the aerospace industry. According to the company, "Textron Inc. is a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its powerful brands such as Bell Helicopter, Cessna, Beechcraft, Hawker, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, and Textron Systems."

The earnings picture last year was mixed. Better than expected results and bullish guidance helped power a big rally last October. Their most recent earnings report was January 28th. TXT's earnings of $0.76 a share were up +26% from a year ago but 1 cent worse than Wall Street estimates. Revenues were up +16.8% to $4.1 billion, also below estimates.

It's interesting how TXT missed Wall Street's earnings estimates on both the top and bottom line and management lowered their guidance for all of 2015. Yet the stock did not sell off. Normally an earnings miss or weak guidance would spark significant selling. Instead investors just calmly bought the dip and now TXT is breaking out to new multi-year highs.

If bad news like that can't shake the stock lower then the path of least resistance is definitely higher. The last couple of months look like a significant consolidation pattern and now TXT has produced a bullish breakout past resistance in the $44.00-44.50 zone. The point & figure chart is bullish and forecasting a long-term target at $67.00.

Tonight I am suggesting small bullish positions if TXT can close above $45.10. Wait for shares to close above this level and then buy calls the next morning.

- Suggested Positions -
FEB 25, 2015 - entry price on TXT @ 45.30, option @ 3.00
symbol: TXT160115C50 2016 JAN $50 call - current bid/ask $1.80/1.97

05/03/15 new stop @ 42.40
04/12/15 new stop @ 41.85
02/25/15 trade begins. TXT opens at $45.30
02/24/15 TXT closed @ $45.33, above our trigger of $45.10
Option Format: symbol-year-month-day-call-strike

Current Target: TXT @ TBD
Current Stop loss: 42.40
Play Entered on: 02/25/15
Originally listed on the Watch List: 02/15/15


Healthcare & Solar Energy

by James Brown

Click here to email James Brown

New Watch List Entries

ANTM - Anthem Inc.

SCTY - SolarCity Corp.

Active Watch List Candidates

ADBE - Adobe Systems

AMBA - Ambarella Inc.

ASH - Ashland Inc.

GILD - Gilead Sciences

JCI - Johnson Controls Inc.

Dropped Watch List Entries

MA and NKE both met our entry point requirements with Friday's rally. The plan is to launch positions on Monday morning. I've moved them to the new play section.

IR has been removed.

New Watch List Candidates:

Anthem Inc. - ANTM - close: 158.40

Company Info

The Affordable Care Act (a.k.a. Obamacare) was first feared by healthcare companies. Now they have embraced it. Obamacare has definitely been good for ANTM with waves of new enrollees.

ANTM, previously known as Wellpoint, is in the healthcare sector. According to the company, "Anthem is working to transform health care with trusted and caring solutions. Our health plan companies deliver quality products and services that give their members access to the care they need. With nearly 71 million people served by its affiliated companies, including more than 38 million enrolled in its family of health plans, Anthem is one of the nation’s leading health benefits companies."

ANTM has raised its guidance the last four quarters in a row! Their most recent earnings report was April 29th. ANTM delivered their 2015 Q1 results of $3.14 per share. That was 45 cents above estimates. Revenues came in below expectations but traders didn't care because ANTM raised their guidance above Wall Street's estimate.

Now analysts are starting to raise their price targets on the stock. Shares have broken out of a multi-week consolidation pattern. ANTM is poised to rally through resistance near $160.00 and hit new all-time highs.

Tonight I am suggesting we wait for ANTM to close above $161.00 and then buy calls the next morning with a stop loss at $152.00.

Breakout trigger: Wait for a close above $161.00
Buy calls the next morning with a stop at $152.00

BUY the 2016 Jan $170 call (ANTM160115C170) current ask $6.55

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

Chart of ANTM:

Originally listed on the Watch List: 05/10/15

SolarCity Corp. - SCTY - close: 61.21

Company Info

SCTY is the largest solar panel installer in the U.S. The company has grown thanks to its business model that leases the solar panel system to homeowners over a twenty year period instead of a large upfront cost in the $20K to $30K range. Meanwhile margins have improved as the price of solar panels plunged -80% in the last few years.

SCTY currently has more than 217,000 customers. They are aiming for one million customers by the middle of 2018. The company's most recent earnings report was May 5th. The company reported a loss of $1.52 per share, which was better than Wall Street's estimate for a loss of $1.60 per share. Revenues were up +6.3% to $67.5 million, which was +17% above analysts estimates. The company added 28,000 new customers last quarter.

Bears will argue that the company's costs and expenses are soaring. That's true. SCTY has boosted its sales force by almost 90% in the last year. Their sales and marketing expenses grew from about $47 million a year ago to $86.7 million.

The company is forecasting they will install 180 megawatts of solar systems in the second quarter. They're aiming for 920MW to 1,000 MW for all of 2015. They just recently expanded into New Hampshire, which is their 17th state for residential installations. There is talk that SCTY could expand overseas in the next year or two.

One analysts just raised their price target on SCTY to $99.00 per share. The point & figure chart is forecasting at $92.00 target. The last several days have seen shares of SCCTY consolidate sideways in the $58-62 zone. A breakout here could spark the next leg higher. I am suggesting we wait for SCTY to close above $62.50 and then buy calls the next day with a stop loss at $57.40. However, please note that I am putting a condition on this trade. We want to see SCTY close in the $62.50-64.00 range. If SCTY spikes higher and closes above this region then no trade. We'll re-evaluate next weekend.

Breakout trigger: Wait for a close above $62.50 (but not above $64.00)
Buy calls the next morning with a stop at $57.40

BUY the 2016 Jan $70 call (SCTY160115C70) current ask $4.75

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

Chart of SCTY:

Originally listed on the Watch List: 05/10/15

Active Watch List Candidates:

Adobe Systems - ADBE - close: 76.31

05/10/15: Shares of ADBE soared +2.1% on Friday but shares still ended the week with a minor loss. The stock is nearing resistance in the $77.00-77.50 zone again so ADBE could meet our entry point requirement soon.

Trade Description: May 3, 2015:
ADBE is in the technology sector. According to the company's website, "Adobe is changing the world through digital experiences. Content built and optimized with Adobe products is everywhere you look — from websites, video games, and smartphones to televisions, tablets, and beyond. Adobe® Creative Cloud® software offers the most innovative tools for creating digital media, while Adobe Marketing Cloud delivers groundbreaking solutions for data-driven marketing. Our leadership in these two emerging categories, Digital Media and Digital Marketing, provides our customers with a real competitive advantage, positioning Adobe for continued growth well into the future. As one of the largest software companies in the world, Adobe achieved revenue of more than US$4 billion in 2013."

The company's most recent earnings report was March 17th. Results were $0.44 a share, which was five cents better than expected. Revenues were up +10.9% to $1.11 billion, also above expectations. The company continues to see success with their subscription model and added 517,000 new creative cloud subscriptions, a +28% improvement from a year ago.

Technically the stock is in a long-term up trend. Shares just spent the last few weeks consolidating sideways and looks ready for the next move higher. A rise past $78.00 would generate a new buy signal on the point & figure chart.

I am suggesting we wait for ADBE to close above $77.75 and then buy calls the next morning with a stop loss at $71.85. More conservative investors may want to wait for ADBE to close over short-term resistance at $80.00 as an alternative entry point for bullish positions.

Breakout trigger: Wait for a close above $77.75,
Then buy calls the next morning with a stop at $71.85.

BUY the 2016 Jan $85 call (ADBE160115C85)

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

Originally listed on the Watch List: 05/03/15

Ambarella, Inc. - AMBA - close: 72.07

05/10/15: Ouch! It was a painful week for AMBA. The stock tagged a new high last Monday and then reversed. Shares lost about $4.00 by Friday's closing bell. The 50-dma might offer some support so I'm not ready to give up just yet. Our suggested entry point is a close above $77.50.

Trade Description: May 3, 2015:
If you're looking for relative strength then AMBA has it in spades. Year to date the stock is already up +50%. AMBA is in the technology sector. They're considered part of the semiconductor and semiconductor equipment makers. The company was founded in 2004 and went public in October 2012 at $6.00 a share. That price was significantly below where AMBA was expected to price in the $9-11 range. Investor sentiment has definitely changed since then.

The company has grown from making broadcast-class encoders to making consumer and sports cameras, security cameras, and now automotive cameras. Their high-definition chips are being integrated into security IP cameras and wearable cameras. AMBA is also capturing part of a new market - cameras on consumer-level remote control drones.

The last two plus years have seen a strong performance in AMBA with the stock up more than +600% from its IPO price. AMBA has GoPro, Inc. (GPRO) to thank for part of that rally. GPRO came to market in June 2014 and the stock has been in rally mode since mid August with a rally in GPRO from less than $40 to $90 a share. I mention GPRO because AMBA happens to make the HD camera sensors in many of GPRO's action camera products. GPRO's IPO drew a lot of attention to AMBA. Now GPRO's rally has collapsed while AMBA has continued to climb.

Part of GPRO's trouble is competition from a large Chinese rival - Xiaomi. GPRO is currently seen as best of breed in the action camera market but it may not hold that spot forever. Xiaomi is selling similar cameras at a significant discount to GPRO and both cameras use AMBA's technology. Both camera makers have different models. GPRO's top of the line still has better components than Xiaomi's - at least for now. The real winner is AMBA since they supply to both companies. Multiple analysts have commented on AMBA's relationship with Xiaomi and believe it will bear significant fruit in the future.

AMBA has been killing it on the earnings front. They have beaten Wall Street's earnings and revenue estimates for the last five quarters in a row. Their most recent report was their Q4 results on March 3rd. Analysts were expecting a profit of $0.49 a share on revenues of $59.3 million. AMBA delivered $0.68 a share with revenues soaring +61% to $64.7 million.

AMBA's next earnings report is not until June 2nd. However, GPRO's recent earnings could be an early look at AMBA's business. GPRO just reported its Q1 results on April 28th. Earnings were better than expected and revenues soared +54% to $363 million. GPRO beat Wall Street estimates on both the top and bottom line. GPRO's management raised their 2015 Q2 guidance significantly above analysts' estimates. That's bullish news for AMBA. Shares of AMBA rallied on GPRO's results.

Currently AMBA is sitting just below resistance in the $76-77 area. I am suggesting we wait for AMBA to close above $77.50 and then buy calls the next morning with an initial stop loss at $69.00. More aggressive traders may want to use an intraday trigger instead since AMBA could breakout and surge higher. I am putting a limit on this trade. We do not want to open positions if AMBA spikes above $81.00. Essentially our entry window to launch bullish positions is the $77.50-81.00 zone.

Breakout trigger: Wait for a close above $77.50,
Then buy calls the next morning with a stop at $69.00.

BUY the 2016 Jan $90 call (AMBA160115C90)

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

Originally listed on the Watch List: 05/03/15

Ashland, Inc. - ASH - close: 130.50

05/10/15: Our ASH trade might be open soon. We have been patiently waiting for ASH to breakout from its consolidation beneath resistance at $130-131. The stock is up three days in a row and Friday's market rally pushed shares above the $130.00 mark.

I am adjusting our entry trigger. The April 30th intraday high was $131.25. Friday's intraday high was $131.30. I am suggesting a close above $131.25 as our entry point.

Trade Description: April 12, 2015:
ASH is in the basic materials sector. The XLB materials ETF is up +2.3% this year. Shares of ASH are outperforming their peers with a +8% gain in 2015.

According to the company, "Ashland Inc. (ASH) is a global leader in providing specialty chemical solutions to customers in a wide range of consumer and industrial markets, including architectural coatings, automotive, construction, energy, food and beverage, personal care and pharmaceutical. Through our three commercial units - Ashland Specialty Ingredients, Ashland Performance Materials and Valvoline - we use good chemistry to make great things happen for customers in more than 100 countries."

Looking at the last couple of earnings reports ASH has been beating estimates on the bottom line. Their most recent report was January 26th where ASH reported a profit of $1.46 per share on revenues of $1.39 billion. Earnings beat estimates by four cents while revenues were down -2.9% from a year ago thanks to foreign currency headwinds (i.e. impact of the strong dollar). Management said that last quarter their strongest growth was in many of the company's higher-margin products.

Technically shares have been building on a bullish trend of higher lows. The point & figure chart is very bullish and forecasting a long-term target of $200 a share.

The all-time high was set on March 2nd, 2015 at $130.66. Tonight I am suggesting we wait for ASH to close above $130.75 and then buy calls the next morning with a stop loss at $124.75.

Breakout trigger: Wait for a close above $131.25
Then buy calls the next morning with a stop at $124.75.

BUY the 2016 Jan $140 call (ASH160115C140)

05/10/15 Adjust entry trigger to a close above $131.25 (was 130.75)
04/26/15 Do not open positions if ASH gaps open above $132.50
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 04/12/15

Gilead Sciences - GILD - close: 103.85

05/10/15: Biotech stocks can be volatile. GILD is no exception. The stock fell from $107.50 to $99.66 last week. I don't see any changes from last week's new watch list description.

Trade Description: May 3, 2015:
GILD seems to be everyone's favorite biotech stock. I only hear bullish opinions about the future of the company, and for good reason. They have some pretty amazing treatments with products for HIV/AIDS, liver diseases, oncology, cardiovascular, respiratory, and more. GILD has essentially revolutionized how we treat major diseases like HIV and Hepatitis C.

According to the company website, "Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need. We strive to transform and simplify care for people with life-threatening illnesses around the world. Gilead's portfolio of products and pipeline of investigational drugs includes treatments for HIV/AIDS, liver diseases, cancer and inflammation, and serious respiratory and cardiovascular conditions."

Last year (2014) everyone has been raving over GILD's hepatitis C treatment called Sovaldi. Hepatitis C is a form of viral hepatitis that causes chronic inflammation of the liver. About 185 million people currently suffer with hepatitis C. Previously the most common treatment for hepatitis C had serious side effects and was less than 50% successful. GILD changed that with their Sovaldi drug that not only treats the symptoms but actually cures the patient. The company has drawn some negative publicity over the cost since GILD charges $84,000 for a 12-week course of Sovaldi in the United States. The fact that 80% to 90% of patients who take Sovaldi are cured is a major milestone.

The Financial Times noted that before Sovaldi the impact of hepatitis C in the U.S. took a heavy toll on the healthcare system. The disease can lead to liver failure and cancer, both of which cost significantly more than Sovaldi's $84,000 price target. Hepatitis C is the leading cause for liver transplants in the U.S., which can cost a minimum of $145,000. One consulting firm estimated that the annual cost of hepatitis C to the U.S. healthcare system was going to surge from $30 billion to $85 billion in the next twenty years. Sovaldi has the potential to change. that.

The company is a cash machine. Their Q2 2014 revenues soared +136%. Q3 revenues were up +117%. Q4 2014 sales were +134%. They also announced a $15 billion stock buyback program.

GILD's most recent earnings report was their 2015 Q1 announcement on April 30th. Wall Street was expecting a profit of $2.32 per share on revenues of $6.89 billion. GILD delivered $2.94 per share with revenues rising +51.9% to $7.59 billion. Management then raised their 2015 sales forecast from $26-27 billion to $28-29 billion.

Technically shares of GILD have been consolidating sideways under a trend of lower highs for months. The last half of April appears to have produced a bullish breakout but GILD still has resistance in the $106 area. Tonight I am suggesting we wait for GILD to close above $106.50 and then buy calls the next morning.

Breakout trigger: Wait for a close above $106.50
Then buy calls the next morning with a stop at $99.00.

BUY the 2016 Jan $115 call (GILD160115C115)

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

Originally listed on the Watch List: 05/03/15

Ingersoll-Rand - IR - close: 67.44

05/10/15: I am removing IR as a watch list candidate. Shares appear stuck in the $65-69 trading range.

Trade did not open.

05/10/15 removed from the watch list, suggested entry was a close above $70.25
04/26/15 Adjust the entry point trigger to a close above $70.25 (from $69.25)
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 04/12/15

Johnson Controls Inc. - JCI - close: 50.22

05/10/15: Shares of JCI underperformed last week but traders started buying the dip on Wednesday. Let's give JCI another week to recover. Next weekend we'll re-evaluate our entry point strategy or remove JCI as a candidate.

Trade Description: April 26, 2015:
Shares of JCI hit all-time highs last week. The company is in the consumer goods sector. They are the largest auto parts supplier in the U.S. According to the company, "Johnson Controls is a global diversified technology and industrial leader serving customers in more than 150 countries. Our 170,000 employees create quality products, services and solutions to optimize energy and operational efficiencies of buildings; lead-acid automotive batteries and advanced batteries for hybrid and electric vehicles; and interior systems for automobiles."

JCI just reported earnings on April 23rd. The company delivered $0.73 a share, which was a +20% improvement from a year ago. Depending on who you polled that was either one cent above or below Wall Street estimates. Revenues dropped -2.8% to $9.2 billion, which was significantly below estimates. Currency headwinds were a major issue.

Management offered cautious guidance for the current quarter with an earnings forecasting of 90-92 cents a share. Analysts are expecting 92 cents. JCI's full-year guidance expects earnings growth in the +10% to +15% range.

Alex Molinaroli, JCI's Chairman and CEO, commented on his company's quarter, "I am very pleased with our second quarter results. Our businesses showed increased underlying growth and delivered higher margins that we believe are sustainable. We saw broad-based order growth in Building Efficiency, continuing a trend that we began to see at the end of the first quarter. Despite foreign currency headwinds, profitability increased across the business segments. This is, in part, a result of the early benefits from the Johnson Controls Operating System which is improving our manufacturing and procurement efficiencies. We expect those benefits to increase in value and broaden in scope over the next several years as we continue to invest in these areas."

Technically shares have been consolidating under major resistance in the $52.00 area for months. The current rally is a major breakout to new highs. The point & figure chart is optimistic with a $69.00 target.

The high on Thursday was $53.40. I am suggesting we wait for JCI to close above $53.50 and then buy calls the next morning with a stop loss at $49.65.

Breakout trigger: Wait for a close above $53.50
Then buy calls the next morning with a stop at $49.65

BUY the 2016 Jan $55 call (JCI160115C55)

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

Originally listed on the Watch List: 04/26/15