Option Investor

Daily Newsletter, Saturday, 3/21/2015

Table of Contents

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

Market Wrap

Dollar Drop Powers Markets

by Jim Brown

Click here to email Jim Brown

A drop of more than 2% in the dollar for the week, a $4 rebound in crude oil and the dovish comments by the Fed all combined to produce a relief rally, which was led by the small caps. The Russell 2000 and the S&P-600 Small Cap indexes both closed well into new high territory.

Market Statistics

The Dollar Index closed at 100.18 last Friday and declined more than -2% to close at 97.93 this Friday. The decline in the dollar was due to the dovish comments by the Fed that pushed expectations for the first rate hike farther into the future. The declining dollar took pressure off crude oil and despite a monster inventory build of 9.5 million barrels the black gold rallied from a low of $42.03 on Wednesday to close just under $46 on Friday. Numerous analysts were calling a bottom on oil prices.

While I would welcome a bottom in crude oil I believe this is more of a reaction to the falling dollar and short covering in the futures as the April contract expired. Inventories are still building at an enormous rate and refiners have not yet concluded their spring maintenance and started producing gasoline for summer driving. We still have a few more weeks before crude demand increases and they start chipping away at the record inventory levels. There is still the danger of running out of storage space for new production.

However, Brent crude did not make a new low with $52.50 showing solid support and well over the $50 lows from January. This is encouraging for the oil bulls.

There were no economic events of note on Friday. However, the calendar for next week is full with the last revision of the GDP on Friday as the most important. There are quite a few estimates for something less than +2% growth. For Q1 there are forecasts down in the +0.5% growth range because of the severe weather. That first release will not be out until the end of April.

Since the FOMC stressed again that they want to see more job growth it will put more pressure on the ADP/Nonfarm numbers the following week.

This is a calm week for earnings as well and we will probably see more warnings next week than earnings since we are in the warning season. The earnings cycle does not officially start until Alcoa reports on April 8th.

Starbucks was the only new stock split that is worth trading. The 2:1 split is only 2 weeks away and the company closed at a new high on Thursday. Friday saw a little profit taking but given that Starbucks is a crowd favorite we could see a split run, market permitting.

The Fed removed the word patient but Yellen bent over backwards to convince analysts and investors alike that there would be no rate hikes until the economic data improved. Specifically mentioned were jobs, wage growth and inflation but what was not mentioned is the key. The statement reduced the Fed's outlook for economic growth and reduced the Fed's projections for future interest rates. Given the downgrades to the outlook we should not be looking for the Fed to suddenly reverse itself and hike in June.

The consensus for the first hike is in the August/September timeframe but that would still require several months of positive data to lift the Fed's projections before a rate hike could be tolerated. The bottom line is that the Fed will continue to support the market by reinvesting all the proceeds from treasuries and MBS that mature and that will keep real interest rates low. The March FOMC statement and press conference is the gift that keeps on giving.

In the Deutsche Bank projection chart below taken from the actual Fed forecasts you can see how the Fed's projections are declining. The lower blue line on the right is the new projections for growth from last week and heading for 2% in 2017. They can't raise rates in this environment despite what they would like to do.

The Greek bailout story completed another chapter after the EU finance ministers ended an early Friday meeting saying they had reached a breakthrough agreement to unlock much needed funds for Greece. The meeting lasted two days and involved heated discussions before reaching what they said was an agreement. The headlines were triggered all around the world that Greece would get 7 billion euros in aid and markets celebrated. About 12 hours later the agreement was in disarray and the finance ministers were again confused about what everyone had agreed to do.

The center of contention is a 7.2 billion euro rescue payment from the Troika and the conditions Greece must complete before the funds are released. Also unknown is how the ministers are going to verify that Greece has actually complied with the terms. More than once the country has said it took action and completed demands only to find out months later that nothing was ever done and it was just a smoke screen to get money released.

One of the keys is a list of reform demands that the EU gave Greece on December 10th. From that list Greece can complete the ones it wants and replace others will new reforms Greece is willing to add to the list. However, the new list must be approved by the ministers and then be verifies once enacted.

One of the problems is that the new Greek Prime Minister refuses to acknowledge the list. The former PM Antonis Samaras and finance minister Hardouvelis sent a letter to Merkel promising to implement a set of those reforms. Tsipras said last week, "Forget the commitment of the former government. There are no austerity measures. There is no letter of Hardouvelis." Tsipras said "I asked the finance ministers do you expect me to go through this evaluation and implement measures that Mr Samaras was not able to implement? The answer was no." Tspiras used that letter of harsh reforms to ridicule Samaras and win the election by promising they would never be done. Troika inspectors have now been prevented from accessing accounting data and bank records because Tspiras claims it would be a violation of Greek sovereignty.

The EU is stuck between a rock and a hard place. They don't want to give Greece any more money but they have already invested 240 billion euros. If they let Greece fail they will never get any of it back. If they keep the IV drip of cash flowing, even at a reduced rate, they may have a slim chance of some return in the future and not be faced with the disaster a Greek exit from the eurozone would cause.

The market rebound on the Greek headlines is over and the news out next week could be even more negative. The U.S. markets don't really seem to care if Greece stays in the eurozone or leaves but our markets will follow the direction of the European markets unless they are given a reason to do otherwise.

In stock news Biogen Idec (BIIB) soared 10% to $476 and a new high on news a new Alzheimer's drug was more effective than expected in early stage testing. The drug was so successful the company is going to skip the phase II testing and go to final stage testing needed to gain approval. The testing of 166 patients in an early trial reduced plaque buildup in the brain and slowed cognitive decline. Shares rallied $42 on the news.

Prothena (PRTA) shares spiked +32% to $39 on news of an early stage success on a drug to treat Parkinson's disease. The PRX002 drug showed to be safe, without serious side effects and it reduced levels of a protein that builds up in the brain and is associated with the disease. The company has a deal with Roche and could get as much as $600 million in milestone payments as well as a portion of future profits and royalties. Prothena has received $45 million to date on this drug.

Clearly the biotech sector is on fire and odds are good the gains in individual stocks will continue. We are currently experiencing a surge in new drugs that will tackle some of the worst diseases that debilitate those people that contract them. We are living in a period where many of these diseases could be cured or at least lessened. The biotech sector is up +23% year to date. Everyone keeps hoping for a pullback as a buying opportunity and it will come eventually.

Nike shares (NKE) rallied +4% after reporting earnings of 89 cents compared to estimates for 84 cents. Revenue of $7.5 billion missed estimates of $7.60 billion but future orders soared. Orders for delivery from March through July rose +15% compared to estimates for an 11.6% gain. Orders from China rose +11% beating estimates for 9.9%. Orders in the U.S. rose +6% to $3.25 billion for the quarter. Sales in Western Europe rose +10%. Without the impact of the dollar the sales would have risen +21%. The CFO said the impact of the dollar was increasing and would be a continued drag. The company did suffer from the West Coast port dispute. Their shoes are held up on containers yet to be unloaded and that detracted from U.S. sales. Nike said it will take a "few quarters" to get the inventory flow back to normal.

Tiffany (TIF) reported earnings of $1.51 that beat estimates by a penny. Revenue of $1.285 billion missed estimates of $1.311 billion due to weakness in the Americas and Japan. The strong dollar decreased overall sales by -3%. Sales in Europe actually rose by 9%. The guidance was weak. Management said they anticipate minimum earnings growth for 2015 and a decline of -30% in earnings in Q1 followed by a modest decline in Q2. Business is expected to pickup in Q3/Q4. Net sales in Q1 are expected to decline -10%. Shares fell -4% on the news.

KB Home (KBH) reported earnings of 8 cents compared to estimates for 2 cents. Revenue rose +29% to $580 million and beat estimates for $474 million. Gross margins rose +2.6% to 17.7%. The company delivered 1,593 homes in the quarter. The average selling price rose +8% to $329,500. The company guided for sequentially higher revenues in each of the remaining quarters for 2015. Shares rose +8%.

Darden Restaurants (DRI) rallied +3% after reporting adjusted earnings of 99 cents compared to estimates for 84 cents. However, revenue fell -23% to $1.73 billion and just over estimates for $1.72 billion. Darden sold Red Lobster back in July and that accounted for the drop in revenue. Olive Garden sales rose +3% for the quarter to $957 million and they added nine new stores. Longhorn Steakhouse sales rose +11.3% to $404 million and they added 25 new stores. The Specialty Restaurants division saw sales rise +14.7% to $367 million and they added 16 new stores. Darden now has 1,528 stores in total.

Shares of Facebook continued to soar after they announced the person to person payments on Tuesday. Shares hit a historic high of $84.60 intraday on Friday. Analysts were beginning to raise their guidance based on expectations for rising ad sales and whatever toll fee they are planning on charging for the payment function.

Crude oil inventories rose +9.5 million barrels to 458.5 million and an 80 year high. Inventories have increased +76.1 million barrels over the last 10 weeks alone. Inventories at the futures delivery point of Cushing Oklahoma rose +2.9 million barrels to 54.4 million and a record high. Cushing has about 71 million barrels of storage and typically they have cut off inflows when they reached 80% of capacity to maintain operational capability. Since the last record high on January 11th 2013 at 51.9 million barrels several million barrels of additional storage capacity have been added. However, 80% of capacity today would be 56.8 million barrels and just 2.4 million over current levels. Depending on the time of year they could accept a little more oil and this is the right time. Refineries will shift into overdrive in mid to late April and inventories should begin to decline fairly rapidly. While we are approaching a storage capacity problem it may not be for 2-3 more weeks.

U.S. production surged again last week to 9.419 mbpd and a 38 year high. Despite a decline of about 862 active rigs or about a -45% drop, production is still surging as previously drilled wells are put into production.

The active rig count declined -56 rigs last week to 1,069. Oil rigs declined -41 to 825 and gas rigs declined -15 to 242 and a new 18 year low. Offshore rigs plunged a whopping -11 to 37 or -23% in only one week.

In 2009 the rig count low was 866 and we have declined from 1,931 to 1,069 since September. Most companies say they will continue reducing rigs through July so more pain to come for the drilling sector.

This was a quadruple witching option and futures expiration and volume soared from an average of 6.6 billion shares for the first four days of the week to 9.76 billion on Friday. Advancing volume was 7:2 over declining volume. Advancing stocks were 5:2 over decliners. S&P-500 volume was 7:1 advancing over declining and advancing stocks were 7:1 over decliners at 397 to 61. There were 62 new 52-week highs and 1 new low. For the entire market there were 653 new highs and the most since December 23rd with 93 new lows.


It was a small cap week! The S&P SmallCap 600 ($SML) broke out to a new high and there were no doubts. Volume was more than double on Friday. That is no surprise since volume typically doubles with every quadruple witching expiration. The small caps are where it is at with little or no exposure to the strong dollar.

The Russell 2000 also broke out to a new high and did it in a serious manner. Since the 1206 low on March 11th the Russell has rallied +60 points or +5% in only seven days. Investors are moving money from big caps with dollar exposure to small caps that depend on the U.S. economy rather than Europe and Asia. This is a clear breakout and support should now be in the 1240-1250 range and above the prior highs. This is bullish for the broader market but you have to wonder if the small caps have run too far too fast and are due for a short term pullback.

Despite the bullishness in the small caps the S&P and Dow have not been able to return to the February highs. The rotation of money out of the large caps has been a drag on the indexes but the S&P still managed to turn in a respectable +5% gain since the lows on the 13th. The S&P and Dow had declined further than the small caps so they had a bigger deficit to overcome to return to new highs.

The S&P closed at 2108 and has decent resistance at the historic high close at 2117. On the support side there is light support at 2085 and 2065 with the 2040 level the strongest. The 100-day average at 2053 and the 150-day at 2025 should also slow any selling.

The Dow closed at 18,131 with the historic high at 18,288. At the rate we are adding triple digit days that is just one good short squeeze away. The range for the week was only 500 points from 17,700 to 18,200 but the Dow moved nearly 1,600 points within that range. The triple digit moves in alternating directions made it very hard for investors to enter decent positions but day traders probably made a good living.

Apple is now a Dow component and AT&T is not. Visa is only one-fourth its share price from the prior week and Goldman Sachs is now the biggest influence on the Dow with its $193 stock price. A $1 move in any stock now represents about 6.75 Dow points. Apple's decline on Friday removed about -10 Dow points. Apple shares imploded at the close to give back -$2 on very heavy volume in the last few minutes. Apple shares traded 8.7 million shares in the last 10 minutes compared to 68 million for the entire day.

The Dow respected the 100-day average on the March decline and again on the sudden dip on March 18th. I would not expect that to continue but at least it will be a speed bump on the next decline.

Resistance is 18,288 and the old high and support is 17,950.

The Nasdaq exploded over the 5000 mark at the open and despite some initial selling pressure it never fell back below the 5020 level. The February high was 5008.10 so Friday's close was a new 15 year high. We have to close over 5048.62 for a new historic high close and over 5132 for a new intraday high.

The drop in Apple knocked about 7 points off the Nasdaq at the close. Quite a few biotech stocks also lost ground and that pressured the index but Biogen's $38 point gain offset a lot of the losses on the smaller stocks.

In theory the 5000 level should now be support and a drop under 4980 would be a critical level. That was support all day on Thursday and it was a battle. There should still be support there so any failure could trigger a stronger decline.

Initial resistance should be 5040, 5050.

In theory with the market at the highs the internals should be stronger. However, the percentage of S&P stocks currently over their 50-day average is only 70%. This is below the February highs at 77.4% and the November highs at 88.8%. The internals are not confirming the recent rally.

The percentage of stocks currently over their 200-day average is only 73% and as you can see in the chart there has been a steady deterioration since July 2014. This suggests the rally has been led by only a few stocks and either the laggards are going to revive shortly or more likely the number of laggards will increase and drag the indexes lower.

The percentage of S&P stocks with a bullish point and figure chart has declined to 71.8% and well under the prior highs at 85% and 90%. Note that the percentage declined last week rather than rose.

The commodity sector is still trading at its lows. There is no inflation in sight because commodity prices have been driven to multi-year lows. The CRB is down -33% from the July highs, mostly because of the drop in crude prices and the rise in the dollar but also from lack of global demand.

The bottom line for me is that I think the small cap rally can only take us so high. The big cap indexes are nearing significant resistance and all the positive headlines may be behind us. The Fed meeting is in the rearview mirror. Earnings are not going to be pretty with current estimates for a -3% decline in Q1. The economic indicators have been declining for nearly two months and the number of declines and estimate misses are the worst since the summer of 2009.

The Bloomberg ECO U.S. Surprise Index now at the lowest since 2009.

Bloomberg chart (Original Link)

Markets can rally despite negative forces but eventually fundamentals will matter. With the ECB QE just starting, the bond rates for European countries are going to continue falling and dragging the euro lower. That will push the dollar higher and force earnings lower. When this will suddenly matter to the market is unknown but I would be cautious over the next several weeks. This week is the end of the quarter and fund managers will probably be restructuring portfolios to reduce exposure before the normal summer doldrums and investors are going to be taking cash out of the market to pay the tax man.

Random Thoughts

In keeping with the comments above Bank of American Merrill Lynch posted this chart showing that the global earnings revisions are now declining in the fastest pace since the Lehman disaster and to the lowest level since 2011. On a year over year basis forward earnings estimates (red) are now down -6.7%.

China is preparing to loan Venezuela another $10 billion on top of the $50 billion they already owe and have a near zero chance of repayment. About $5 billion will be loaned this month for "various projects" and the other $5 billion in June. That second tranche is expected to be used to hire Chinese firms to boost production in Venezuelan oil fields and that oil will probably make its way to China as part of a loan repayment. Venezuela has been "selling" oil to China in lieu of debt repayments. With Venezuela circling the drain the $5 billion loan will rescue the current Maduro administration for a few more months. I would not be surprised to see a Chinese flag on Venezuela in the years to come. The newly devalued Venezuelan currency is on the verge of becoming worthless and this loan may be the last lifeline for the Maduro regime.

Retired Dallas Fed President Richard Fisher said on Friday, "What worries me is how totally lazy investors have gotten, totally dependent on the Federal Reserve and I find this to be a precarious situation. Are we vulnerable in my personal opinion to a significant equity market correction? I believe we are. I could see a correction taking place of substantial magnitude." The market ignored the comment but it will continue to bounce around in cyberspace until the market trips up then it will be replayed over and over.

After the Wednesday FOMC announcement and Yellen press conference the futures are now predicting there will be no rate hike until at least December. The futures indicating the likelihood of a hike in September declined from 55% to 39%. The futures are also suggesting the likelihood of a hike in June at almost zero at 11% probability. The fed funds futures are now projecting an interest rate at the end of 2015 of 0.625% compared to the 1.125% forecast at the beginning of 2015. The implied yield on the December 2015 Fed funds futures contract declined to 0.42% and the yield on the December 2016 contract declined -0.21 points to 1.15%.

The Atlanta Fed GDPNow real GDP forecast for Q1 has fallen to only +0.3% growth. That is down from +2.3% back in early February. The rate of decline is nothing short of spectacular. The top ten private forecasters are still targeting a consensus of about +2.4% for Q1. That is a significant break with the reality of the Fed's real time calculator. There is no chance of a rate hike in the near future.

Despite the Fed's implied support of the market with continued zero interest and the reinvestment of all the funds from matured securities the market is not bullet proof. If the economy continues to weaken the stock market will pay attention and the Fed could actually be forced to implement a QE4 if the decline became severe. Currently with rates at zero the Fed has no dry powder in the case of further weakness and their only option would be further QE. That is a really scary thought.

Noted bear, Peter Schiff, CEO of Euro Pacific Capital, said the word "patient" was always a straw man and the fed has been bluffing the entire time. They have to pretend they are close to raising rates in order to keep some volatility in the rates and prevent them from declining even further. Some countries in Europe now have negative rates and Yellen does not want that to happen in the USA. Therefore they have to keep up the charade that rate hikes could come at any time even though economics continue to weaken. A large portion of the new jobs each month are part time because people need to eat. People with college degrees are flipping hamburgers because there are no full time jobs available.

Ray Dalio, founder of the $165 billion hedge fund group Bridgewater Associates, said in a note to clients the Fed is risking a 1937 style market slump when it finally raises rates. Christine Lagarde, head of the IMF, warned on Tuesday that US rate increases could trigger instability in emerging markets, leading to a re-run of the Fed-induced "taper tantrum" of 2013.

Dalio said, "If one agrees that either a) we are near the end of the developed country central bankers' ability to be effective in stimulating money and credit growth or b) the dollar is the world's reserve currency and that the world needs easier rather than tighter money policies, then one would hope that the Fed will be very cautious about tightening." For this reason our funds are avoiding concentrated investments at this time.

China finally admitted they lowered their growth targets for 2015 to 7% GDP but they also admitted it would be "tough to reach these levels." Bloomberg's Michael McDonough posted the chart below showing that the Chinese economy, even with all the bogus numbers in the system, is nowhere near 7% GDP. This is important because China is the second largest economy in the world.

Bloomberg Chart (Original Link)

The P5+1 talks with Iran over their nuclear program came to an abrupt halt last week after Iran suddenly demanded that all sanctions be lifted immediately or there would be no deal. The Iranian negotiator said this was a deal breaker and it was not negotiable.

Under the current P5+1 proposal the sanctions would be lifted after Iran complied with all the conditions in the proposal and the IAEA certified their compliance. Since they were caught violating the interim deal just last week and the odds are about 100% that they would violate any new deal that means the sanctions would never be lifted. The western nations believe even in a best case scenario where Iran cooperated fully it could take as much as two years for complete verification of compliance and the sanctions to be lifted.

Western negotiators are kidding themselves if they believe they can do a deal with Iran and that Iran will not cheat. They have always cheated on every deal they ever signed and they are not likely to change that pattern when they are this close to a nuclear weapon.

Former CIA Director, General David Petraeus, said last week that Iran was a much bigger threat to the Middle East and the U.S. than ISIS.

Over the last 25 years the last week of March has been negative 17 times with an average S&P decline of -1.6%. Beware the week after March quadruple option expiration.

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

"The problem with socialism is that you eventually run out of other people's money."

Margaret Thatcher



New Plays

The Bad News Is Baked In

by James Brown

Click here to email James Brown


Steel Dynamics Inc. - STLD - close: 20.20 change: +0.44

Stop Loss: 19.20
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on March -- at $---.--
Listed on March 21, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.6 million
New Positions: Yes, see below

Company Description

Why We Like It:
The bad news in the steel industry might be priced in and some are forecasting another turnaround in the second half of 2015. STLD looks like a bullish candidate as shares are outperforming its peers: U.S. Steel (X), Nucor (NUE), and AK Steel (AKS).

STLD is in the basic materials sector. The company describes itself as "Steel Dynamics, Inc. is one of the largest domestic steel producers and metals recyclers in the United States based on estimated annual steelmaking and metals recycling capability, with annual sales of $8.8 billion in 2014, over 7,700 employees, and manufacturing facilities primarily located throughout the United States (including six steel mills, eight steel coating facilities, two iron production facilities, over 90 metals recycling locations and six steel fabrication plants)."

This past week had a lot of bad news for the steel industry. Three companies issued bearish earnings guidance. STLD, NUE, and AKS all lowered their forecasts. CNBC suggested this industry is on the front lines of the currency war. All three companies blamed a surge in steel imports for hurting results. The rising U.S. dollar makes foreign products cheaper and steel imports into the U.S. rose +38% in 2014. Combine that with a glut of steel from domestic producers and both sales and margins have been hammered lower. The price of rolled steel is already down -20% in 2015. Many analysts are forecasting another tough year for the industry.

On March 18th, 2014, STLD lowered its Q1 guidance into the $0.12-0.16 range compared to Wall Street's estimate of $0.23. This also compares to $0.17 a year ago and $0.40 in the fourth quarter. However, the stock rallied. In addition to its lowered guidance the company offered a positive outlook for the second half of 2015.

Here's an excerpt from the company's press release on March 18th:

"During the first quarter of 2015, two important industry developments occurred:

− Domestic steel product pricing declined to levels that are now globally competitive, which the company believes will result in reduced steel import levels beginning in the second quarter 2015. Despite continued solid domestic steel consumption, product pricing decreased meaningfully due to delayed customer orders caused by the volatility in scrap prices and inventory buildup related to excessive fourth quarter 2014 steel imports. The company believes the surplus inventory can be right-sized in the April and May 2015 timeframe, which coupled with continued demand, should result in increased domestic steel mill utilization.

− Ferrous scrap pricing declined between 25% and 30% during February, which the company believes will benefit metal margin. Ferrous scrap pricing disconnected from iron ore pricing during 2014, as iron ore prices declined dramatically, while scrap prices remained relatively unchanged. Historically these commodities are highly correlated; therefore, a sharp decline in scrap prices was not unexpected.

The company believes these events, coupled with continued strength in domestic steel consumption from the automotive, manufacturing and construction sectors, should support a stronger second quarter, and second half 2015, based on the expectation of reduced domestic steel import levels, reduced raw material costs, and increased orders as customer inventory levels decline. Historically, the construction industry has been the largest single domestic steel consuming sector. The construction market grew during 2014, improving meaningfully from the lows experienced in 2009 and 2010. Despite the first quarter of each year being historically weaker for the construction industry due to seasonality, the company's fabrication operations are expected to achieve solid first quarter 2015 financial results. These results could approach those achieved in the third quarter 2014, which is traditionally the strongest construction quarter of a calendar year. The company believes this is evidence of the continued growth in non-residential construction.

Shares of STLD surged on this outlook and shares are now hovering just below technical resistance at its 200-dma. A breakout here could signal the next leg higher. Currently the point & figure chart is still bearish but a move above $21.00 would generate a new buy signal. Tonight we are suggesting a trigger to open bullish positions at $20.75.

FYI: The stock will begin trading ex-dividend on March 27th. The quarterly cash dividend should be $0.1375 a share.

Trigger @ $20.75

- Suggested Positions -

Buy STLD stock @ (trigger)

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

Buy the MAY $20 CALL (STLD150515C20) current ask $1.20
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

In Play Updates and Reviews

NASDAQ & Russell 2K Lead Stocks Higher

by James Brown

Click here to email James Brown

Editor's Note:
The NASDAQ Composite and the small cap Russell 2000 index helped lead the market higher on Friday. The NASDAQ closed at a 15-year high. The Russell at an all-time high. A drop in the U.S. dollar fueled a bounce in commodities.

The S&P 500 is nearing potential resistance at its recent peak near 2,120. If the index reverses lower we want to try and protect ourselves. Tonight we have updated several stop losses.

Current Portfolio:

BULLISH Play Updates

Best Buy Co. Inc. - BBY - close: 40.79 change: -0.07

Stop Loss: 39.85
Target(s): To Be Determined
Current Option Gain/Loss: +1.3%
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

03/21/15: The gap down in BBY was not profit taking. Shares began trading ex-dividend on Friday morning. Traders bought the dip and shares spent most of the day hovering near $41.00.

If you are looking for a new bullish entry point I would wait for a dip near $40.00. Our stop loss is currently at $39.85.

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


BroadSoft, Inc. - BSFT - close: 35.20 change: +0.38

Stop Loss: 33.45
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
Entry on March 20 at $35.20
Listed on March 17, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 286 thousand
New Positions: see below

03/21/15: Our new trade on BSFT is open. The plan was to open bullish positions at $35.15 but shares saw an intraday gap higher at $35.20 early Friday morning. BSFT has been showing relative strength and shares are up eight days in a row.

We are going to try and reduce our risk by raising the stop loss up to $33.45.

Trade Description: March 18, 2015:
BSFT is in the technology sector. The stock is outperforming the broader market this year and it's up significantly from its 2014 lows.

According to the company, "BroadSoft is the leading provider of software and services that enable mobile, fixed-line and cable service providers to offer Unified Communications over their Internet Protocol networks. The Company's core communications platform enables the delivery of a range of enterprise and consumer calling, messaging and collaboration communication services, including private branch exchanges, video calling, text messaging and converged mobile and fixed-line services."

BSFT has delivered a stomach churning performance since its IPO back in 2010. You can review its performance on the long-term chart below. The stock got off to a slow start but then sprinted from about $9.00 in late 2010 to $55.00 less than six months later. Unfortunately, since the early 2011 peak shares have been nothing but a roller coaster ride of ups and downs (we're talking really, really ugly downs).

It would appear that the tone has changed for BSFT. The company has beaten Wall Street's earnings and revenue estimates the last three quarters in a row. The big rally in early November 2014 was a reaction to its earnings beat with revenues up +27% from a year ago. The prior quarter revenues grew +19%.

The stock rallied big again on February 25th with BSFT reporting Q4 earnings of $0.64 a share, beating estimates by seven cents. Revenues surged +26.5% to $65.8 million. Management offered earnings guidance that was relatively in-line with consensus estimates. However, their revenue guidance was above expectations for both the first quarter and fiscal year 2015. Don't let the in-line earnings guidance fool you. Wall Street is expecting +78% earnings growth this year. The rally off its 2014 lows has produced a long-term target of $51.00 on the point & figure chart.

BSFT has been showing relative strength the last couple of weeks. Tonight we are suggesting a trigger to launch small bullish positions at $35.15. I suggest small positions because shares don't have a lot of volume and history would suggest the stock is prone to wild bouts of volatility.

*small positions to limit risk* - Suggested Positions -

Long BSFT stock @ $35.20

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

Long MAY $35 CALL (BSFT150515C35) entry $2.78

03/21/15 new stop @ 33.45
03/20/15 triggered at $35.20, suggested entry was $35.15
Option Format: symbol-year-month-day-call-strike


Cabela's Inc. - CAB - close: 58.11 change: -0.06

Stop Loss: 56.65
Target(s): To Be Determined
Current Option Gain/Loss: +1.3%
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

03/21/15: CAB managed to tag new five-month highs midday on Friday. Unfortunately shares were unable to hold those gains. If this dip continues I would expect CAB to retest its simple 10-dma near $57.00. We're going to try and reduce our risk by moving the stop loss to $56.65.

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

03/21/15 new stop @ 56.65
03/13/15 triggered @ 57.35
Option Format: symbol-year-month-day-call-strike


Expeditors Intl. of Washington - EXPD - close: 49.27 chg: +0.40

Stop Loss: 48.45
Target(s): To Be Determined
Current Option Gain/Loss: +1.5%
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

03/21/15: EXPD managed to end the week at a new multi-year high. We are adjusting our stop loss up to $48.45. More aggressive traders may want to leave their stop below short-term technical support at the 20-dma (currently near $48.00).

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

03/21/15 new stop @ 48.45
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: 34.05 change: -0.55

Stop Loss: 32.85
Target(s): To Be Determined
Current Option Gain/Loss: -3.4%
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

03/21/15: I'm not worried yet but the recent action in GLNG is disappointing. Thursday's profit taking snapped a six-day winning streak. The profit taking continued on Friday with a -1.58% decline. GLNG found support near $34.00 and its 10-dma on both Thursday and Friday. If shares breakdown under $34.00 it could be a big warning signal for us. I'm not suggesting new positions at this time. Let's see if GLNG can rebound.

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


Prestige Brands Holdings - PBH - close: 42.46 change: +0.62

Stop Loss: 40.35
Target(s): To Be Determined
Current Option Gain/Loss: +0.3%
Entry on March 20 at $42.35
Listed on March 19, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 342 thousand
New Positions: see below

03/21/15: Right on cue shares of PBH continued to rally. The stock gapped open higher at $42.14 and tagged new record highs at $42.88 before paring its gains. Our suggested entry point to launch bullish positions was hit at $42.35. Tonight we are adjusting the stop loss up to $40.35.

Trade Description: March 19, 2015:
Shares of PBH are outperforming the broader market. The relative strength has lifted the stock to new all-time highs and a +20% gain in 2015.

PBH is part of the services sector. According to the company, PBH "markets and distributes brand name over-the-counter and household cleaning products throughout the U.S. and Canada, and in certain international markets. Core brands include Monistat® women's health products, Nix® lice treatment, Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, The Doctor's® NightGuard® dental protector, the Little Remedies® and PediaCare® lines of pediatric over-the-counter products, Efferdent® denture care products, Luden's® throat drops, Dramamine® motion sickness treatment, BC® and Goody's® pain relievers, Beano® gas prevention, Debrox® earwax remover, and Gaviscon® antacid in Canada."

The company's most recent earnings report was noteworthy. Analysts were expecting a profit f $0.40 a share on revenues of $190.2 million. PBH delivered $0.48 a share, which is a +60% improvement from a year ago. Revenues were up +36.4% to $197.6 million, another beat. PBH's OTC products saw +37.2% sales growth in North America and +107.8% growth internationally.

Matthew M. Mannelly, President and CEO of PBH commented on his company's performance, "In light of our excellent year to date and third quarter results, we are updating our previously provided outlook for fiscal year 2015. We are tightening our expected adjusted EPS range from $1.75 to $1.85 per share to $1.82 to $1.85 per share, and anticipate revenue growth at the high end of our previously provided outlook of 15-18%. The update is driven by anticipated organic growth in the legacy business during the fourth quarter."

Wall Street analysts are forecasting 2015 Q1 (PBH's Q4) results to see +29% EPS growth and +30% revenue growth.

It's also worth noting that PBH is a potential buyout target. They have been targeted before. Back in 2012 Genomma Lab offered $834 million in cash but PBH rejected the offer, calling it too low.

The better than expected earnings in early February launched PBH above major resistance in the $37.00 area. Shares spent four weeks digesting those gains and now they're back in rally mode. The point & figure chart is bullish and forecasting at $54.00 target. Tonight we are suggesting a trigger to launch bullish positions at $42.35.

- Suggested Positions -

Long PBH stock @ $42.35

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

Long JUL $45 CALL (PBH150717C45) entry $1.55

03/21/15 new stop @ 40.35
03/20/15 triggered @ 42.35
Option Format: symbol-year-month-day-call-strike


Neurocrine Biosciences - NBIX - close: 43.60 change: -0.65

Stop Loss: 41.85
Target(s): To Be Determined
Current Option Gain/Loss: +15.8%
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

03/21/15: NBIX has delivered an incredible rally from its January 2015 lows near $20.00 a share. The stock saw some profit taking on Friday with a -1.4% decline. We are going to try and protect our potential gains with a new stop at $41.85. More aggressive traders will want to consider keeping their stop loss below technical support at the 20-dma instead.

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

03/21/15 new stop @ 41.85
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


Gentherm Inc. - THRM - close: 48.14 change: -0.51

Stop Loss: 46.85
Target(s): To Be Determined
Current Option Gain/Loss: +1.4%
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

03/21/15: Hmm... THRM did not participate in the market's rally on Friday. That's disappointing following Thursday's bullish breakout from its sideways consolidation. We are going to turn more defensive here and raise the stop loss up to $46.85.

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

03/21/15 new stop @ 46.85
03/06/15 triggered on gap higher at $47.48, trigger was $47.30
Option Format: symbol-year-month-day-call-strike


Wells Fargo & Co - WFC - close: 56.01 change: +0.50

Stop Loss: 54.85
Target(s): To Be Determined
Current Option Gain/Loss: -0.2%
Entry on March 18 at $56.15
Listed on March 17, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 15.8 million
New Positions: see below

03/21/15: Good news! Traders bought the dip on Friday morning and WFC recovered most of Thursday's decline. WFC is once again challenging resistance at the $56.00 level. Friday's intraday high was $56.21. Traders may want to see a rally past this level before initiating new positions. Tonight we are adjusting the stop loss to $54.85.

Trade Description: March 17, 2015:
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.

- Suggested Positions -

Long WFC stock @ $56.15

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

Long MAY $55 CALL (WFC150515C55) entry $2.20

03/21/15 new stop @ 54.85
03/18/15 triggered @ 56.15
Option Format: symbol-year-month-day-call-strike


BEARISH Play Updates

Albermarle Corp. - ALB - close: 52.25 change: +0.58

Stop Loss: 53.45
Target(s): To Be Determined
Current Option Gain/Loss: +1.9%
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

03/21/15: The stock market's widespread bounce on Friday helped fuel a rebound in ALB and shares gained +1.1%. Fortunately the trend remains bearish with a consistent pattern of lower highs. I am not suggesting new positions at this time.

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

03/19/15 new stop @ 53.45
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: 27.61 change: +0.12

Stop Loss: 28.35
Target(s): To Be Determined
Current Option Gain/Loss: -2.6%
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

03/21/15: The S&P 500 snapped a three-week losing streak with a bounce this past week. DDD followed suit and ended a four-week losing streak with an oversold bounce. Thus far the bounce is failing at resistance near $28.00. However, if the broader market continues to rally it could pull DDD higher (essentially spark some short covering).

I am not suggesting new positions at this time.

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