Option Investor

Daily Newsletter, Tuesday, 3/17/2015

Table of Contents

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

Market Wrap

Fed Losing Patience

by Jim Brown

Click here to email Jim Brown

The Fed is likely to remove the word patient from its post meeting statement but then try to convince investors that it will remain patient for months to come and there are no rate hikes on the horizon. The Fed will stress its data dependence as that economic data is weakening as each day passes.

Market Statistics

The Fed talked itself into a box with the "considerable period" phrase and then replaced it with the "FOMC can remain patient" phrase. This gave the markets something to key on in the language of the Fed statement rather than the economic reality. On Wednesday the Fed will try to extract itself from the terminology box and stress data dependence but that will only shift the focus to specific data points and create an entirely new set of worries for the Fed.

You may remember they originally said they would not raise rates as long as the unemployment rate remained above 6.5%. When the rate plunged below that level they had to change the guidance because the rate fell for the wrong reason. People were leaving the workforce at an accelerated rate and the falling Labor Force Participation Rate was forcing the unemployment rate lower.

Having endured countless questions and been forced to change three focus points in the statement over the last 18 months they will be trying to craft a new statement that soothes fears about an imminent rate hike but does not contain any specific terminology that could force another statement change in the future. At the same time they want to introduce some volatility into the treasury market and have no written barriers to a rate hike at any point in the future.

This is going to be a challenge for a Fed that has tried to be more than open about its goals and guidance. It will be interesting to see how they say "rate hikes are coming but not any time soon."

The markets were confused over how they should be reacting ahead of Wednesday's statement given the continued economic disappointments. The economic data over the last six weeks has been the worst in terms of missed estimates since 2009. Today was no different. The Dow declined nearly -200 points after the Housing Starts missed estimates by a mile.

New housing starts for February declined from 1,081,000 to 897,000 or a drop of -17%. Single family starts declined -15% from 697,000 to 593,000. That is roughly only two-thirds the normal pace. Of course everyone was quick to blame the winter weather in February. I guess it has never snowed before in February.

Housing starts in the Northeast declined -56%, Midwest -37%, West -18% and South -2.5%. Clearly the weather did impact the Northeast and Midwest but they only provide about 10% of starts in a typical February and 20% of the starts nationwide in June. Yes, the weather had an impact but starts still declined in the West and South where weather was not an issue.

On the bright side overall permits, an indicator of future starts, rose slightly from 1.06 million to 1.092 million. However, it was heavily weighted to multi-family units with a +18.3% jump. Single-family permits declined -6.2% from 661,000 to 620,000.

Analysts are confused given the demand for new homes as to why the builders are not in any hurry to accelerate construction. Some believe the builders were burned so badly in the Great Recession that they are holding back and building at a much slower pace so they can better manage cash flow, raise prices, increase profits and reduce debt. Others believe we are nearing another recessionary cycle after a six-year expansion. The builders don't want to end up with a lot of inventory if the economy pulls back again. With more than 90% of the economic reports over the last six-weeks either declining or missing estimates there is a decent risk that we could see some weakness ahead.

Housing completions declined sharply at -13% from 986,000 to 850,000. With the pace of starts and permits declining along with completions we can bet that housing prices are going higher. Coupled with the difficulty of normal people getting a home loan this may be only what the rate of home builders can bear. Anecdotal reports claim more than 50% of new home purchasers are declined for their loans. That is a serious headwind for builders and the pace of building is reflecting that problem.

The State and Regional Employment report for January showed that jobs increased in 39 states, fell in 10 states and was unchanged in North Carolina. California, Michigan and Ohio had the largest increases and 24 states reported lower unemployment. This covered the January period and was ignored.

The big event on the calendar for Wednesday is of course the FOMC announcement and probably more important is the Yellen press conference. She will have to explain whatever new language they put in the FOMC statement. Analysts will be trying to determine what the next key phrase is going to be.

The FedEx earnings will also be watched closely for signs of economic weakness and lower shipments.

Another pothole for the week could be the Greek debt payment due on Friday. Greece can't access any additional funds from the 240 billion euro bailout program until certain conditions are met and that is not going to happen in the near future. The government is grabbing cash from every source possible including trying to plunder private retirement accounts held at the Bank of Greece. They are also transferring 556 million euros from a bank recapitulation fund to the state coffers. Unfortunately there is no plan B or for that matter no plan A either. The original plan was not to pay or get the Troika to postpone the debt payments. Greece is going to try and auction $1 billion euros in short term notes on Wednesday. With Greece about to default on the Troika payments the auction may not go well. Currently the yield on the 2yr notes is 20.22%. There are frantic phone calls in progress and there is an EU summit on Thursday to discuss Greek finances.

In a survey of economists 41% believe Greece will eventually leave the eurozone within 3 years. Another 25% believe Greece will remain in the EU but will be forced to implement capital controls to prevent capital from leaving Greece. The Grexit problem is not as bad as it would have been three years ago because eurozone banks no longer hold a lot of Greek debt. Recent comments from Greek officials include "The EU finance ministers know we can never repay our debt" and "The EU got themselves into this mess because they knew Greece was bankrupt." Those are odd comments from a country that is still dependent on future handouts from those ministers. It would not encourage me as a finance minister to give them billions in additional loans.

In stock news Alibaba (BABA) received an upgrade from hold to buy from Stifel Nicholas with a price target of $99. This is unusual timing given the lockup expiration of 437 million shares on Wednesday, which is more than the 330 million currently available to trade. Just over 100 million of those belong to employees and will still have some trading restrictions until after the company reports earnings in May. The analyst said negative concerns are overblown and the company has an 80% market share in China with a relatively low PE of 25.

Short interest in BABA shares has risen to 57 million as of February 27th. Put option volume dominates the option volume on BABA as investors protect their positions and speculators bet on a decline. The $80 puts were the most actively traded. However, there is only a 50:50 chance of a BABA decline after the expiration. In the hundreds of lockup expirations since 2000 it turned into a coin toss for direction. The lockups are so well publicized that the bad news is already priced in for many of the lockups. I also believe that most BABA investors believe the stock is going higher so the rush to sell may be over hyped. However, the expiration of another 1.2 billion shares in September is going to be a problem.

GM shares declined on Tuesday one day after announcing a $5 billion buyback program and raising their dividend. News broke that 4,342 families had filed claims associated with the faulty ignition switch problem. So far there have been 475 death claims, 289 disastrous injury claims and 3,578 less serious injuries that required hospitalization. So far GM has only approved 67 death claims, 11 severe injuries and claims for 102 other injuries. Previously GM had said there were only 67 death claims.

Pushing GM lower were claims by two lawyers that recent proof had surfaced that showed GM tried to cover up the problem switches. If they can prove their case that puts the potential payouts into an entirely new range and they will not be cheap. Just yesterday one family settled a suit for $5 million. GM claims the slow reaction to the problem was just incompetence rather than an attempt to cover it up. The lawyers said the evidence of the cover up will come out when the first class action suit begins in January 2016. Attorneys are in the midst of discovery and exchanging documents. They are currently deposing current and former GM engineers and executives.

Shares only declined -29 cents on the news but analysts are turning cautious on the car company.

Vivint Solar (VSLR) was upgraded to outperform at Credit Suisse with a $22 price target. The stock is currently $12 even after a +12% gain today. The CEO was bullish on Friday saying 2015 was going to be a banner year. When the company reported earnings on March 4th revenue rose +248%. The company's cost per watt has fallen from $4.25 at the beginning of 2014 to $2.96 at the end of December. They expect it to decline to as low as $2.80 in the months ahead.

Facebook (FB) made news today with a blog post saying it is rolling out a payment process as part of the Messenger app. Last year Facebook hired former Paypal president David Marcus to run the Messenger division. Astute investors realized there was probably a payment system in Facebook's future.

Facebook said the Messenger app will allow users to send and receive money from other Facebook users. Marcus wrote in the post, "Excited to start rolling out person-to-person payments in Messenger! It’s an easy, secure, truly frictionless, and almost magical experience that happens in-line with existing conversations where all of your friends and family already are."

To send money on Facebook users will have to add a Visa or MasterCard debit card issued by a U.S. bank to their Facebook account. Once they start a message with a friend they tap a money sign, enter the amount they want to send and tap pay to send the money. Facebook said the card information will be encrypted and stored behind software and hardware firewalls and will be very secure. Users can add a unique PIN number when they add their debit card for an extra level of protection. You can watch a video HERE on how it works.

After the bell Adobe (ADBE) reported adjusted earnings of 44 cents compared to analyst estimates for 39 cents. Revenue of $1.11 billion also beat estimates of $1.09 billion. However, they guided to a range of 41-47 cents for the current quarter and analysts were expecting 48 cents. They generated 517,000 Creative Cloud subscriptions for the quarter and analysts were expecting 573,000. Shares declined -$3 in afterhours to $76.75.

Oracle (ORCL) reported adjusted earnings of 68 cents that was in line with estimates. Revenue of $9.33 billion fell short of estimates at $9.46 billion. They said dollar strength cost them earnings growth. The company said cloud revenues rose +30% to $372 million. The company said it was poised for a significant increase in its cloud business in 2015 and it was growing a lot faster than Salesforce.com and they were taking market share from their competitor. They expect to sell more than $1 billion in cloud products in 2015 and surpass Salesforce. They also raised their dividend +25% to 15 cents. Shares traded in a $6 range after the report but settled with only a 60 cent gain at $43.50.

Crude oil declined to $42.50 after the close and a new 6-year low. Today was expiration day for crude options and that could have influenced the regular session trading. There was no news that would have impacted crude prices other than expectations for another large build in inventories with they are reported on Wednesday. The shrinking storage capacity problem continues to make headlines as well as the end of the refiner strike. Crude demand in the U.S. is going to pickup once the refineries finish their maintenance cycle and begin producing summer blend gasoline. Right now we are importing gasoline and distillates from places as far away as Saudi Arabia, South Korea and Brazil. Once refiners return to normal operating status the crude oil inventories will begin to decline. That normally begins in late April and early May as shown in the EIA inventory chart below. The gray area is the five-year average range and the blue line is the current inventory level.


It was another triple digit reversal for the Dow. Over the last nine trading days the Dow has traded in a triple digit range 8 times with four days up and four days down. The ninth day was also down but it was not a triple digit day. The key here is that Q1 earnings estimates are falling and the dollar is rising. As each day passes the earnings estimates become more depressed because of the dollar's impact. The Dow stocks are all international companies and they are the most impacted by the dollar so they are the most volatile.

Of the Dow stocks there is also a group that is at or approaching 52-week lows for various reasons. This is a continued drag on the index. Some of those stocks include PG, IBM, GE, JNJ, VZ, T, CAT, KO, XOM, CVX, MSFT and AXP. It is hard for the Dow to maintain positive momentum when one-third of the index is at or near their 52-week lows. At the same time more than half of the S&P-500 stocks are also in a negative trend.

The S&P also declined sharply at the open but recovered somewhat to close down only -7 points and retain most of Monday's gain. Only 45% of the S&P derive a substantial portion of their revenue from overseas. Resistance at 2080 remained firm and that will be the challenge once the Fed news passes. We still have the same range I mentioned last week between 2040-2080 and until that is broken we are just passing time waiting for the next headline.

The S&P did honor its 100-day average at 2042 when it was tested last week. That average has risen to 2048 at today's close so that is the initial support point on any further declines. If the 2040 level is broken on a future decline the 150-day average, currently 2021, becomes support.

American Airlines (AAL) will be added to the S&P-500 after the market close on Friday. American will replace Allergan (AGN) that is being acquired by Actavis.

The Dow will undergo a significant transformation at Wednesday's close. Apple will replace AT&T (T) and Visa (V) will split its stock 4:1. Visa currently carries the heaviest weighting in the Dow and was responsible for about -30 points of the Dow's decline on Tuesday. After the split it will only carry about a 4% weighting. This will reduce the Dow volatility significantly. The swings on a $265 stocks are much larger than an $85 stock and price movement is what it is all about. After Wednesday's close a $1 move in any Dow stock will be worth about 6.75 Dow points.

Today the Dow declined -192 points just after the open and struggled to move off of those lows even though the Nasdaq turned positive in mid-afternoon. A downgrade on Dupont and the pre-split decline in Visa shares were the biggest drag. The rebound could not quite make it to the resistance at 18,000 on Monday and it could not get back to 17,900 on Tuesday. The 17,800 level was intraday support and the index was barely able to recover 50 points from that level to close at 17,847 and a loss of -128 points.

The international blue chips are simply carrying the weight of the strong dollar on their shoulders. Levels to watch on Wednesday are 17,800 and 18,000 with real support at 17,640 and the lows from last week.

The Nasdaq is coming back to life after the battle at 5000 and the fall from grace all the way back to 4845. The index declined only about -20 points at the open and dip buyers appeared at 11:AM and it gained steadily the rest of the day. With the close just under 4940 the next material resistance is 4950 and then on to 5000.

The biotechs were the leaders once again. Apple shares gained on news of a new streaming TV service and the stock rose +$2.33 but that only garnered it the 25th spot on the Nasdaq gainers list. It was enough to help power the Nasdaq back into the green for the day.

Initial support is 4912 followed by 4845. Resistance 4950 and 5000.

The Russell 2000 small caps also managed a gain to close at 1241.71. That is less than a point below their historic high close at 1242.61. The small caps have very little exposure to the strong dollar and this has become the investment bunker for those investors looking for a place to hide from the currency wars. Assuming the Fed does nothing stupid I would expect the Russell to make a new high at some point this week. We considered a long position in the Russell IWM ETF tonight but passed because of the unknowns about the post Fed market and the potential for a weak market after option expiration.

Typically on Fed announcement days there is a period of volatility after the news and then a minimal move of .3% to .6% depending on the news. It is the day after the Fed statement that we typically see a strong directional move. However, Friday is quadruple witching and that could foul up the historical trends. This is also the end of the quarter and conventional wisdom suggests portfolio managers will be taking profits and setting up their portfolios for the summer doldrums. With the economic news weakening every day this will put even more importance on how the Fed changes their statement and how fund managers setup for the summer months.

If crude oil were to find a bottom here around $40 I am sure a lot of that excess cash would be headed for energy stocks. Most managers I have heard are still scared of energy stocks until that bottom appears.

We are also approaching tax day and traders will be taking funds out of the market to pay their tax bill. Some years experience more selling than others depending on the gains from the prior year. Given the volatility in the market since October there may have been enough losses to offset gains and maybe we won't see any major tax selling in early April.

In an interesting news headline today the Secret Service wants to build a duplicate of the White House about 20 miles away in Beltsville Maryland at a cost of about $8 million. This would be on a 500 acre Secret Service training site and the replica would allow agents to train better to protect the occupants of the real White House. Right now they train on a parking lot where they have marked off the ranges of fences, trees, bushes, fountains, etc. The service said the addition of a more realistic environment would go a long way towards allowing the agents and tactical teams real life training to repel attacks. Recent breaches of the White House grounds suggest agents need additional training.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email



New Plays

Leading The Pack

by James Brown

Click here to email James Brown


Wells Fargo & Co - WFC - close: 55.91 change: +0.18

Stop Loss: 53.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on March -- at $---.--
Listed on March 17, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 15.8 million
New Positions: Yes, see below

Company Description

Why We Like It:
Banks had a rough start to the year but one stock leading the pack is WFC. Shares of WFC are up about +2% in 2015 versus a virtually flat financial sector.

According to the company, "Wells Fargo & Company (WFC) is a nationwide, diversified, community-based financial services company with $1.7 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,700 locations, 12,500 ATMs, and the internet (wellsfargo.com), and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2014 rankings of America’s largest corporations."

WFC is very shareholder friendly. Back in 2014 the company said they wanted to pay out 55% to 75% of their net income to shareholders, which was a +34% jump from the prior year. This year WFC's CFO John Shrewsberry said they would like to distribute 50% to 70% of net income through dividends and stock buy backs. The amount of money they can pay in dividends is regulated by the Federal Reserve but WFC has raised their dividend six times in the last five years.

The Fed's annual bank stress test is a big deal and this was just completed a week ago. WFC passed the Fed's very severe stress test. The bank has asked permission to raise their dividend +7% to $0.375 a share (up from $0.35). WFC's consistent dividend might be a reason the stock is one of Warren Buffet's biggest holdings in Berkshire Hathaway.

Some have suggested that WFC could be a way to play the improving U.S. economy and consumer spending. That is because WFC is the biggest residential lender and largest auto lender in America.

The stock's rally has produced a buy signal on the point & figure chart that is forecasting a long-term target of $74.00. Currently the stock is hovering just below resistance at the $56.00 level. We are suggesting a trigger to open bullish positions at $56.15.

Trigger @ $56.15

- Suggested Positions -

Buy WFC stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the MAY $55 CALL (WFC150515C55) current ask $1.97

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

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Stocks Stumble Ahead Of Fed Statement

by James Brown

Click here to email James Brown

Editor's Note:
The U.S. market slipped on Tuesday morning but stocks did manage to pare their losses by the closing bell. The NASDAQ and the Russell 2000 actually closed in positive territory.

GLNG hit our entry trigger.

Tomorrow afternoon could be volatile as the market reacts to the FOMC statement.

Tonight we have updated a few stop losses to try and reduce our risk.

Current Portfolio:

BULLISH Play Updates

Best Buy Co. Inc. - BBY - close: 41.64 change: +0.01

Stop Loss: 39.85
Target(s): To Be Determined
Current Option Gain/Loss: +3.5%
Entry on March 06 at $40.25
Listed on March 04, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 6.2 million
New Positions: see below

03/17/15: Some bullish commentary on CNBC about BBY didn't help much. Shares spent today's session drifting sideways and closed almost unchanged. We are adjusting the stop loss up to $39.85. If you're looking for a new entry point you may want to wait for a dip.

Trade Description: March 4, 2015:
BBY has got a bullish recipe brewing. The company has rising sales, rising earnings, rising dividends, and rising stock buybacks. The company launched a massive turnaround effort when they changed management in 2012. According to Fortune, BBY has "turned around its U.S. operations., shed assets abroad and trimmed expenses to help lift profitability."

If you're not familiar with BBY the company describes itself as "one of the world's largest consumer electronics retailers, offering expert service and unbeatable prices to the consumers who visit its websites and stores more than 1.5 billion times each year. In the United States, more than 70 percent of Americans are within 15 minutes of a Best Buy store. Additionally, the company operates businesses in Canada and Mexico. Altogether, Best Buy employs more than 125,000 people and earns annual revenues of more than $40 billion."

This week BBY has been making headlines thanks to its better than expected Q4 earnings results, which came out on March 3rd. Wall Street was expecting a profit of $1.35 a share on revenues of $14.33 billion. BBY said earnings hit $1.48 a share. That's a +23% increase from a year ago. Their unadjusted earnings were up +75% from a year ago. Q4 revenues were up +1.3% to $14.21 billion. BBY's U.S. same-store sales were up +2.8%. International was down -4% but their online sales surged +9.7%. Their U.S. same-store sales results are noteworthy because it's the second consecutive quarter of same-store sales growth for the first time in five years.

BBY's CEO and President Hubert Joly commented on his company's results saying,

"In the fourth quarter, our teams delivered positive comparable sales, improved profitability and continued progress in our Renew Blue transformation. This resulted in a 1.3% increase in revenue to $14.2 billion and a 23% increase in non-GAAP diluted EPS to $1.48 versus $1.20 last year, primarily driven by growth in the Domestic segment. A compelling merchandise assortment and strong multi-channel execution drove these better-than-expected results as we capitalized on the product cycles in large screen televisions and mobile phones. These two categories were the primary drivers of our year-over-year revenue growth, and more than offset weakness in the tablet category which was impacted by material industry declines."
Joly did warn that in fiscal 2016 BBY will "be facing industry and economic pressures on our business related to deflationary pricing and weak industry demand in certain product categories." However, investors didn't care. They didn't care about the revenue miss or the negative foreign currency headwinds. Everything was overshadowed by BBY's very shareholder friendly capital return initiatives.

The company said they are raising their normal dividend by +21% to 23 cents a share effectively immediately. They are also going to pay a special, one-time dividend of $0.51 a share. Plus they are re-starting their stock buyback program. Previously BBY had a $5 billion stock repurchase program but that halted it back in 2012 to work on their turnaround strategy. Management announced they plan to spend $1 billion on stock buybacks over the next three years.

Multiple analysts firms raised their price target on BBY following the company's earnings results and dividend news. Most of the new targets were in the $45-50 range.

Currently shares of BBY are trading just below key round-number resistance at the $40.00 mark. A breakout here could spark some short covering. The most recent data listed short interest a 10% of the 304 million share float. Tonight we're suggesting a trigger to launch bullish positions at $40.25.

- Suggested Positions -

Long BBY stock @ $40.25

- (or for more adventurous traders, try this option) -

Long MAY $40 CALL (BBY150515C40) entry $1.99

03/17/15 new stop 39.85
03/06/15 triggered @ $40.25
Option Format: symbol-year-month-day-call-strike

Cabela's Inc. - CAB - close: 57.64 change: -0.01

Stop Loss: 53.95
Target(s): To Be Determined
Current Option Gain/Loss: +0.5%
Entry on March 13 at $57.35
Listed on March 09, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.0 million
New Positions: see below

03/17/15: Another stock in the services sector (and retail industry) is CAB and shares also closed Tuesday's session virtually unchanged. Shares quietly drifted sideways below the $58.00 level. Traders may want to wait for a breakout past $58.00 to initiate new positions.

Trade Description: March 9, 2015:
Outdoor gear and hunting equipment retailer CAB has been misfiring the last few quarters. They have missed analysts estimates three out of the last four quarters but the stock could be mounting a turnaround.

If you're not familiar with the company, "Cabela's Incorporated, headquartered in Sidney, Nebraska, is a leading specialty retailer, and the world’s largest direct marketer, of hunting, fishing, camping and related outdoor merchandise. Since the Company’s founding in 1961, Cabela’s® has grown to become one of the most well-known outdoor recreation brands in the world, and has long been recognized as the World's Foremost Outfitter®. Through Cabela's growing number of retail stores and its well-established direct business, it offers a wide and distinctive selection of high-quality outdoor products at competitive prices while providing superior customer service. Cabela's also issues the Cabela's CLUB® Visa credit card, which serves as its primary customer loyalty rewards program.

The company has been struggling with slowing sales and disappointing comparable same-store sales growth. They're not the only one. Companies like Dick's Sporting goods have also noted that sales in their hunting category were slow last year.

CAB's most recent report was its 2014 Q4 announcement on February 12th. Earnings of $1.11 a share missed estimates by a wide margin. Revenues were up +7.2%, which met expectations at $1.27 billion. Management said they expect a "return to a low-double-digit growth rate in revenue and a high-single to low-double-digit growth rate in diluted earnings per share for full-year 2015 as compared to full-year 2014 non-GAAP diluted earnings per share of $2.88."

The good news is that firearm sales appear to be stabilizing. After years of torrid sales during Obama's first term as president the pace of firearm sales slowed significantly. The latest data on background checks to buy a gun showed February 2015 to be the second strongest February on record. More than 1.28 million background checks were performed. That's up +1.3% from a year ago. December saw +7.5% surge in checks and January 2015 reported a +8.5% increase in background checks.

On March 3rd, 2015, gun maker Smith & Wesson (SWHC) just reported earnings that were significantly better than expected. SWHC management raised their guidance. That should bode well for CAB too.

Currently shares of CAB have bounced back toward resistance near $57.00 and its simple 200-dma. The stock appears to be breaking through resistance at its year-long trend of lower highs as well. If CAB can breakout the stock might see some short covering. The most recent data listed short interest at 16% of the 51.3 million share float. Currently CAB's point & figure chart is bullish and forecasting at $65.00 target.

Tonight I'm suggesting a trigger to open bullish positions at $57.35, which could be a new four-month high and a breakout past its January resistance.

- Suggested Positions -

Long CAB stock @ $57.35

- (or for more adventurous traders, try this option) -

Long JUN $60 CALL (CAB150619C60) entry $2.70

03/13/15 triggered @ 57.35
Option Format: symbol-year-month-day-call-strike

Expeditors Intl. of Washington - EXPD - close: 48.71 chg: -0.31

Stop Loss: 47.45
Target(s): To Be Determined
Current Option Gain/Loss: +0.3%
Entry on March 13 at $48.55
Listed on March 12, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.3 million
New Positions: see below

03/17/15: EXPD is still hovering near its February high around $49.00. Shares eventually underperformed the market with a -0.6% decline. We are raising the stop loss to $47.45. I'm not suggesting new positions at this time.

Trade Description: March 12, 2015:
EXPD is showing relative strength. The stock is up +8% in 2015 versus an S&P 500 that is virtually flat. Meanwhile the Dow Jones Transportation Average is down -1.4%.

EXPD is part of the services sector. According to the company, "Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 186 full-service offices and numerous satellite locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, domestic time-definite transportation services, purchase order management, warehousing and distribution and customized logistics solutions."

The first half of 2014 was forgettable. EXPD delivered mediocre results with earnings a penny above or below estimates and revenues in-line with expectations. Business improved in the second half of last year. EXPD beat earnings estimates by four cents in the third quarter and by two cents in the fourth quarter. Revenues were up almost +11% in Q3 2014 and up +8.8% in the fourth quarter. Both were above Wall Street estimates.

Bradley Powell, Senior Vice President and CFO commented on the fourth quarter, "During the 2014 fourth quarter we saw strong year-over-year increases in both air and ocean freight volumes. Despite the 10 basis point reduction in overall net revenue margin, airfreight and ocean freight net revenues both managed double digit increases, up 10% and 11%, respectively, as overall net revenue increased 9%."

The stock shot higher on its Q4 results. Shares have been relatively resistant to any profit taking during the market's recent pullback. Traders bought the dip exactly where they should have - at prior resistance. Today's bounce looks like a bullish entry point. The stock's rally in 2015 has helped produce a buy signal on the point & figure chart that is forecasting at $66.00 target. Tonight I am suggesting a trigger to open bullish positions at $48.55.

- Suggested Positions -

Long EXPD stock @ $48.55

- (or for more adventurous traders, try this option) -

Long May $50 CALL (EXPD150515C50) entry $1.06

03/17/15 new stop @ 47.45
03/13/15 triggered @ 48.55
Option Format: symbol-year-month-day-call-strike

Golar LNG Ltd - GLNG - close: 35.93 change: +0.96

Stop Loss: 32.85
Target(s): To Be Determined
Current Option Gain/Loss: +1.9%
Entry on March 17 at $35.25
Listed on March 16, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.3 million
New Positions: Yes, see below

03/17/15: Our new trade on GLNG is off to a good start. Shares hit our entry trigger at $35.25 and ended the day with a +2.74% gain. We are raising the stop loss up to $32.85.

Trade Description: March 16, 2015:
GLNG is part of the shipping industry. Unfortunately demand for shipping has been crushed thanks to a slowing global economy. The surging dollar doesn't help when it comes to commodity prices. Shares of GLNG have seen a significant sell-off with the stock down from $74 in September 2014 to less than $30 in January this year.

According to the company, "Golar is one of the world's largest independent owners and operators of LNG carriers with over 40 years of industry experience. Golar's innovation delivered the world's first Floating Storage and Regasification Units (FSRU) based on the conversion of existing LNG carriers. Golar's latest strategic move is to extend its business model further upstream by deploying its floating liquefaction technology (GoFLNG). The objective is to become the industry's leading integrated midstream LNG services provider, supporting resource owners, gas producers and gas consumers."

Management confessed that demand for charting LNG shipping will likely be weak in the first half of 2015. They expect a significant improvement in the second half of the year. What investors should note is that all the bad news over the last several months seems to be priced in. Cautious comments from management failed to send GLNG stock to new lows.

Earlier this month the stock soared (on March 5th) after GLNG announced it had signed a memorandum of understanding with Russian natural gas giant Rosneft. The company press release states that Rosneft is the third largest gas producer in Russia. Rosneft gas production reached 42.1 bcm in 2013, while the recoverable natural gas reserves topped 6.5 tcm. The company target is to reach 100 bcm of annual gas production by 2020. As investors it's worth noting that Rosneft is 75% owned by the Russian government. The two companies are going to be working together on some of Rosneft's natural gas assets. Shares of GLNG soared on this news.

GLNG did see some profit taking on the big move but investors are have started buying the dip. Now GLNG is poised to breakout past resistance at the $35.00 level. The point & figure chart looks very bullish with a triple-top breakout buy signal forecasting at $48.00 target.

Tonight I'm suggesting a trigger to launch small bullish positions at $35.25. We want to limit our position size to reduce risk. Energy-related names have been tough to trade lately.

*small positions to limit risk* - Suggested Positions -

Long GLNG stock @ $35.25

- (or for more adventurous traders, try this option) -

Long JUN $40 CALL (GLNG150619C40) entry $2.40

03/17/15 new stop @ 32.85
03/17/15 triggered @ 35.25
Option Format: symbol-year-month-day-call-strike

Neurocrine Biosciences - NBIX - close: 42.53 change: +0.62

Stop Loss: 40.65
Target(s): To Be Determined
Current Option Gain/Loss: +13.0%
Entry on February 17 at $37.65
Listed on February 14, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 937 thousand
New Positions: see below

03/17/15: It was a good day for NBIX bulls. Shares outperformed the broader market with a +1.4% gain. Plus, the stock has closed above short-term resistance near $42.00. These are multi-year highs for NBIX. Tonight we are raising the stop loss to $40.65.

I am not suggesting new positions at this time.

Earlier Comments: February 14, 2015:
Biotech stocks were big performers last year outpacing the broader market. It looks like that outperformance will continue in 2015 with the major biotech indices and ETFs already up +5% to +7% this year. One biotech that's really outperforming its peers in NBIX, with shares already up more than +60% in 2015.

According to the company's marketing materials, "Neurocrine Biosciences, Inc. discovers and develops innovative and life-changing pharmaceuticals, in diseases with high unmet medical needs, through its novel R&D platform, focused on neurological and endocrine based diseases and disorders. The Company's two lead late-stage clinical programs are elagolix, a gonadotropin-releasing hormone antagonist for women's health that is partnered with AbbVie Inc., and a wholly owned vesicular monoamine transporter 2 inhibitor for the treatment of movement disorders. Neurocrine intends to maintain certain commercial rights to its VMAT2 inhibitor for evolution into a fully-integrated pharmaceutical company."

NBIX has two therapies planned for phase III trials in 2015. You can see NBIX's pipeline on this web page.

The drug making headlines for NBIX this year is Elagolix, a treatment for endometriosis. Shares of NBIX soared on January 8th after the company and its partner on this treatment, AbbVie, announced positive results for their latest Phase 3 trials. Endometriosis could affect up to 10% of all women in their reproductive years. That's a pretty big market. You can see why Wall Street is so excited about this news and sent shares of NBIX soaring.

Make no mistake, this is an aggressive, higher-risk trade. Biotech stocks can be volatile. The right or wrong headline can send the stock soaring or crashing. NBIX is already very, very overbought with a run from $20 to $37 since its early January lows. Yet that doesn't mean it won't keep running. Sometimes biotech stocks have a mind of their own. There is not any clear resistance. You have to go back more than ten years and you might find resistance in the $42.50-45.00 area. Should this rally continue NBIX could see more short covering. The most recent data listed short interest at 12% of the small 66 million share float.

I'm going to repeat myself. This is an aggressive play. NBIX does have options but the spreads are too wide to trade. The intraday bounce on Friday looks like a test of short-term support near $35.00. You can see on the intraday chart that NBIX has a very short-term pattern of lower highs. Therefore, we are suggesting a trigger to open small bullish positions at $37.65. If triggered we'll start with a stop loss at $34.90.

*small positions to limit risk* - Suggested Positions -

Long NBIX stock @ $37.65

03/17/15 new stop @ 40.65
03/03/15 new stop @ 38.45
03/02/15 new stop @ 35.75
02/17/15 after the close, announces a secondary offering
02/17/15 triggered @ 37.65
Option Format: symbol-year-month-day-call-strike

The Fresh Market, Inc. - TFM - close: 41.27 change: -0.30

Stop Loss: 39.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on March -- at $---.--
Listed on March 14, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 628 thousand
New Positions: Yes, see below

03/17/15: TFM encountered some profit taking this morning but traders bought the dip at $40.75 midday. We are still on the sidelines and waiting for a breakout higher. Our suggested entry point to launch bullish trades is $42.50.

Trade Description: March 14, 2015:
Shares of TFM appear to have turned things around after a bumpy decline from its 2012 highs. This company is in the services sector. According to the company website, "The Fresh Market, Inc. is a high-growth specialty retailer focused on creating an extraordinary food shopping experience for its customers. Since opening its first store in 1982, The Fresh Market has offered high-quality food products, with an emphasis on fresh, premium perishables and an uncompromising commitment to customer service. The Fresh Market currently operates over 160 stores in 27 states across the United States."

The company's 2014 Q3 earnings report in November was better than expected. Both earnings and revenues beat Wall Street estimates with sales up +15%. That trend continued in the fourth quarter. TFM reported its 2014 Q4 results on March 5th. Analysts were looking for $0.51 a share on revenues of $482.99 million. TFM delivered earnings of $0.55 cents, which is a +41% improvement from a year ago. Revenues were up +12.8% to $480.4 million, which is a miss. However, comparable store sales were up +3.0% and gross margins improved 80 basis points to 34.3%.

TFM issued fiscal year 2016 guidance that was mostly in-line with Wall Street estimates. They also announced they were closing all their stores in California. The company will choose to focus on higher-growth opportunities in the eastern half of the United States. Management felt that their organic growth in California wasn't strong enough. Investors seem pleased with the overall earnings report as TFM surged toward resistance near $42.00.

I will point out that the big drop in early January was news TFM's CEO and President had left the company. The sudden departure sent TFM plunging more than -10% on the day. Now shares of TFM have produced a bullish double bottom near the $35.50 area.

Today TFM looks poised to breakout past key resistance at the $42.00 level. It's also nearing major resistance on its weekly chart (see the trend line). Based on this weekly chart resistance we'll set the entry trigger to launch bullish positions at $42.50.

The point & figure chart for TFM is already bullish with a breakout past resistance and a current price target at $52.00. If TFM can rally past the $42.00 level shares could see a short squeeze. The most recent data listed short interest a 23% of the relatively small 40 million share float.

Trigger @ $42.50

- Suggested Positions -

Buy TFM stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the JUN $45 CALL (TFM150619C45)

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

Gentherm Inc. - THRM - close: 45.89 change: -1.35

Stop Loss: 44.75
Target(s): To Be Determined
Current Option Gain/Loss: -3.3%
Entry on March 06 at $47.48
Listed on March 05, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 456 thousand
New Positions: see below

03/17/15: Like most of the market today shares of THRM shot lower this morning. Unfortunately, THRM didn't see much of a bounce and underperformed with a -2.85% decline. The stock looks like it will retest support near the $45.00 mark soon. I'm not suggesting new positions at this time.

Trade Description: March 5, 2015:
I remember the first time I bought a car with heated seats. I vowed to never own another automobile without them. Considering how cold the last couple of winters have been I'm sure a lot of consumers feel the same way. One company that makes the technology behind heated seats and other products is Gentherm.

THRM is in the consumer goods sector. According to the company's marketing material, "Gentherm (THRM) is a global developer and marketer of innovative thermal management technologies for a broad range of heating and cooling and temperature control applications. Automotive products include actively heated and cooled seat systems and cup holders, heated and ventilated seat systems, thermal storage bins, heated automotive interior systems (including heated seats, steering wheels, armrests and other components), cable systems and other electronic devices. The Company's advanced technology team is developing more efficient materials for thermoelectric and systems for waste heat recovery and electrical power generation for the automotive market that may have far-reaching applications for consumer products as well as industrial and technology markets. Gentherm has more than 9,000 employees in facilities in the U.S., Germany, Mexico, China, Canada, Japan, England, Korea, Malta, Hungary and the Ukraine."

THRM has been consistently beating Wall Street's on both the top and bottom line the last four quarters in a row. The exception was their Q4 revenue number. They raised guidance twice last year. Their most recent report was 2014 Q4 earnings announced on February 24th. Earnings were $0.56 a share on revenues of $205.2 million. That beat estimates of $0.48. Revenues were just a hair under estimates of $207 million. Management said their "adjusted EBITDA for the 2014 fourth quarter was $35.7 million, up $10.0 million or 39 percent, compared with Adjusted EBITDA of $25.6 million for the 2013 fourth."

THRM's 2014 gross margins grew to 29.8 percent versus 26.4 percent in 2013. Last year saw THRM's revenues rise +23% over the prior year. Their net income more than doubled. Management expects 2015 to see revenues grow +10-15% above 2014 levels.

Last month saw shares of THRM breakthrough technical resistance at its simple 200-dma. It has also rallied past price resistance near the $44.00 level. Traders just bought the dip at its 10-dma and now THRM looks poised to make a run towards its 2014 highs near $52.00. Tonight we're suggesting a trigger to open bullish positions at $47.30.

- Suggested Positions -

Long THRM stock @ $47.48

- (or for more adventurous traders, try this option) -

Long Jun $50 CALL (THRM150619C50) entry $2.98

03/06/15 triggered on gap higher at $47.48, trigger was $47.30
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

Albermarle Corp. - ALB - close: 52.49 change: -0.30

Stop Loss: 54.65
Target(s): To Be Determined
Current Option Gain/Loss: +1.4%
Entry on March 12 at $53.25
Listed on March 11, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.7 million
New Positions: see below

03/17/15: The sell-off in ALB continues with a slow and steady march lower. Shares did rebound intraday and pared their losses to -0.5%. ALB is arguably short-term oversold here and I wouldn't be surprised to see a bounce, especially if the market rallies on the FOMC statement tomorrow. We will try and reduce our risk with a new stop at $54.65.

Trade Description: March 11, 2015:
There's a bear market in this specialty chemical stock. The company has a history of paying a dividend and they just raised their dividend for the 21st year in a row. Unfortunately, that's not drawing much investor attention. High-dividend stocks could become less attractive with the Federal Reserve poised to raise interest rates.

Officially the company describes itself as, "Albemarle Corporation, headquartered in Baton Rouge, Louisiana, is a premier specialty chemicals company with leading positions in attractive end markets around the world. With a broad customer reach and diverse end markets, Albemarle develops, manufactures and markets technologically advanced and high value added products, including lithium and lithium compounds, bromine and derivatives, catalysts and surface treatment chemistries used in a wide range of applications including consumer electronics, flame retardants, metal processing, plastics, contemporary and alternative transportation vehicles, refining, pharmaceuticals, agriculture, construction and custom chemistry services."

They are in the final stages of its acquisition of Rockwood Holdings. They announced the $6 billion deal last July and it's expected to close in the first quarter of 2015. Bulls will argue this deal is positive for ALB due to the expected demand for lithium batteries. Rockwood has one of the of the biggest lithium producing operations in North America. On a short-term basis we're not seeing any impact in the stock.

ALB most recent earnings report was January 28th. Wall Street was expecting ALB's Q4 results to be $1.02 a share on revenues of $637 million. The company disappointed with a profit of $0.99 as revenues dropped -6.4% to $598.5 million. Management offered lackluster guidance. Multiple analyst firms have downgraded the stock and started lowering their earnings estimates.

You can see the huge sell-off on the earnings report in late January. During the market's big rally in February ALB slowly climbed back to where it was trading just before the earnings announcement. Now ALB is rolling over again. This conforms to the stock's larger bearish trend (seen on the weekly chart). The point & figure chart is forecasting at $45.00 target.

Tonight I'm suggesting a trigger to open bearish positions at $53.25.

- Suggested Positions -

Short ALB stock @ $53.25

- (or for more adventurous traders, try this option) -

Long JUN $50 PUT (ALB150619P50) entry $1.75

03/17/15 new stop @ 54.65
03/12/15 triggered @ $53.25
Option Format: symbol-year-month-day-call-strike

3D Systems Corp. - DDD - close: 26.70 change: -0.22

Stop Loss: 28.35
Target(s): To Be Determined
Current Option Gain/Loss: +0.7%
Entry on March 16 at $26.90
Listed on March 10, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.0 million
New Positions: see below

03/17/15: DDD managed to trade at new multi-year lows before paring its loss today. Shares still underperformed the broader market with a -0.8% decline. Tonight we are adjusting the stop loss down to $28.35.

Trade Description: March 10, 2015:
Expectations for DDD are still too high. The stock has been crushed from an early 2014 high near $96.00 a share down to $27.50. Even here, at multi-year lows, the stock has a P/E of 250.

The company describes itself as, "3D Systems provides the most advanced and comprehensive 3D digital design and fabrication solutions available today, including 3D printers, print materials and cloud-sourced custom parts. Its powerful ecosystem transforms entire industries by empowering professionals and consumers everywhere to bring their ideas to life using its vast material selection, including plastics, metals, ceramics and edibles. 3DS' leading personalized medicine capabilities save lives and include end-to-end simulation, training and planning, and printing of surgical instruments and devices for personalized surgery and patient specific medical and dental devices. Its democratized 3D digital design, fabrication and inspection products provide seamless interoperability and incorporate the latest immersive computing technologies. 3DS' products and services disrupt traditional methods, deliver improved results and empower its customers to manufacture the future now."

Last year was pretty tough for DDD. The company has delivered disappointing earnings and revenue growth. They issued an earnings warning back in October. DDD has been reporting +20% revenue growth the last couple of quarters but it's not enough. Management issued 2015 guidance that was in-line with analysts' estimates. Shares initially bounced because guidance wasn't worse than many had feared. However, currency headwinds are going to be an issue in 2015. A couple of analysts have slashed their price target on DDD's stock following the earnings report.

This time the bears might be right. Margins were hurt last year. The company is forecasting organic sales to improve in the second half of 2015. However, they are facing what will be major competition when Hewlett-Packard (HPQ) launches their commercial 3D printers in 2016. The most recent data listed short interest at 38% of the 105 million share float. That much short interest makes DDD a volatile stock to trade. We never know when something might spark a short squeeze. Traders may want to limit their risk by using options.

The stock's sell-off has produced a sell signal on the point & figure chart that is forecasting at $17.00 target. Currently DDD is hovering near support in the $27.50-28.00 region. A breakdown here could signal the next major leg lower. Tonight we're suggesting a trigger to open bearish positions at $26.90. Consider small positions to limit risk.

*small positions to limit risk* - Suggested Positions -

Short DDD stock @ $26.90

- (or for more adventurous traders, try this option) -

Long MAY $25 PUT (DDD150515P25) entry $1.56

03/17/15 new stop @ 28.35
03/16/15 triggered @ $26.90
Option Format: symbol-year-month-day-call-strike