Option Investor

Daily Newsletter, Monday, 3/30/2015

Table of Contents

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

Market Wrap

The Bounce Is Back

by Thomas Hughes

Click here to email Thomas Hughes
The market bounced back today on dovish, or hawkish, statements from Fed Chair Yellen.


Friday's comments from Fed Chair Yellen reassured the market that rate hikes were on the way, but that the economy was still historically weak. Depending on how you look at it her statements are either dovish or hawkish. What this means exactly in terms of rate hikes is elusive but does not move expectations from the June/September period. It does reaffirm the idea that the pace of rate hikes will be very very slow.

The news helped to lift indices around the world and sent those in Asia and the EU to new highs. Adding support to the market are comments from a People's Bank of China official which have raised the expectations of Chinese QE to new highs. European markets were tempered by the ongoing issues in Greece but nonetheless were able to reach new highs and closed at the highest levels of the day.

Market Statistics

Futures trading indicated a higher open from the start of the electronic session. The S&P was indicated higher by about 0.35% with the indices in similar position. Futures trading remained strong throughout the early pre-market session and were supported by today's economic data. Business confidence remains high and there were surprise gains in personal income and pending home sales.

The bulls took charge as soon as the opening bell sounded. They took the indices more than 1% higher and hit the early peak within the first 30 minutes of trading. At that point the indices pulled back very slightly from the high to trade sideways until noon when buying activity pushed them up to set another intraday high and another until the closing bell. By the end of the day the indices had moved an average 1.20% higher and closed near the highs of the day.

Economic Calendar

The Economy

This is a big week for economic data and today's events are positive. First up is Moody's Survey of Business Confidence. The index retreated by -1.3 points from last weeks all time-high but remains above the previous all-time high. Mark Zandi, Moody's Chief Economist, had this to say.

“Business confidence fell off a bit last week from the record high set the week before. Despite the decline, U.S. sentiment remain notably robust. Businesses remain upbeat about investment and hiring, and demand for office space is strong. Credit is widely available and pricing is firm, despite heightened deflation concerns in much of the developed world.”

Pending Home Sales posted a surprise jump of 3.1% in February, versus an expected flat to negative number. The is the highest level of expected sales since June of 2013 and the first glimmers of the expected uptick in the housing market expected for this spring. The index is now at 106.9, the 6th month of increasing sales and the 10th month of readings above 100, 100 being an average amount of sales traffic. On a year over year basis pending sales are up 12% from this same time last year. Low inventory remains a problem and a factor I think will lead to increased building activity, higher prices and perhaps new sellers entering the market.

Lawrence Yun, NAR chief economist, says “Pending sales showed solid gains last month, driven by a steadily-improving labor market, mortgage rates hovering around 4 percent and the likelihood of more renters looking to hedge against increasing rents....These factors bode well for the prospect of an uptick in sales in coming months. However, the underlying obstacle – especially for first-time buyers – continues to be the depressed level of homes available for sale.” Personal Income also posted a surprising gain. Income rose by 0.4% versus the expected 0.3% but spending only rose by 0.1% which was in line with expectations. The previous months income was revised up to 0.4% as well. The PCE deflator came in at 0.2% for the month and 0.3% year over year. The differential between income and spending can be found in the level of savings, which is at a 2 year high.

There is a lot more data to come out this week. Auto/Truck sales, ISM, construction spending, factory orders and my favorite, the jobs bundle including ADP, Challenger, claims, NFP, unemployment, workweek and earnings. This week is shortened because of the Easter holiday but the NFP data will still be released on Friday. Everything else should be on schedule as well.

According to data from Factset earnings expectations for the first quarter is -4.6%. This is up 0.2% from the -4.8% reported last week. The decline is still being led by the energy sector but all ten S&P sectors have lower expectations now than they did at the start of the quarter. The number of companies with negative guidance remains at 85. So far there have been 16 reports this season, 10 beat on the top and 14 beat on the bottom line.

Looking at expectations ex-energy the projected blended growth rate increased by 0.2% to 1.25%, not huge but a sign that earnings may not be as bad as feared and an example of the importance of looking at the earnings pictures with and without the energy sector. Looking at expectations for the year all-index blended earnings are projected to grow by 2.5% despite a -50% drop in energy sector earnings. Pulling energy out of this projection puts earnings growth in the 7% range for the year, above average. Also, the forward P/E has begun to creep up again indicative of rising expectations of earnings growth relative to the lows set over the past two months.

The Oil Index

Oil prices declined by more than -1.5% today on scuttlebutt Iran could be on the brink of reaching a nuclear agreement with the west. Details are sketchy at best but enough to keep WTI below $48 and Brent below $56 for most of the day. A late day pop driven on rumor put them back near break even. Meanwhile, production in Libya continues to rise but is still only about 50% of capacity and fighting in Yemen drags on.

The Oil Index moved up in today's session, counter to the underlying commodity. The energy sector was one of today's biggest gainers, perhaps on the idea that oil is at or near its bottom. The index gained over 1.75% and regained the upper side of the 30 day moving average but remains weak. Prices have been trending sideways for over a week now and appear to be capped by a Fibonacci Retracement, the 38.2% level of 2009-2014 bull market in oil. The indicators are bullish, but also showing resistance at or just above the current level. MACD is very weak and holding steady just above the zero line while on stochastic %K is horizontal at the upper signal line.

The long term trend is up and the index is bouncing of the trend line but the move is weak and needs confirmation. A break above the retracement, near 1,350, would be bullish but still face resistance near 1,400. Support is currently at the short term moving average, near 1,325, with 1,200 a good target for long term support. This one appears to be making a long term trend bounce but one that may take some more time to develop. Oil prices will likely remain volatile and could lead to another test of the trend line.

The Gold Index

Gold prices retreated over the weekend on Janet Yellen's Friday comments, falling -1.25% and trading near $1185 and possible support. The message, while I'm sure intended to help clarify the rate hike situation, only served to stir speculation on a subject that has been beaten to death for many quarters; when will the first rate hike come, how big will it be and when will the next one be? In any even the near term reaction is a rise in dollar value and a drop in gold prices that could result in another buying opportunity.

The gold miners fell as well, the Gold Miners ETF GDX losing nearly -2%. Today's action opened just above my rising support line near $18.50 and then traded in a tight range around there. The ETF appears to be bouncing off of long term support but the test of that support may not be over. The indicators are bullish now but retreating, in line with the current test of the rising support line, and could easily lead to further downside, particularly if gold prices move lower. If the ETF moves lower it could go as low as $17.50, if it moves higher as high as $20. In either event my long term outlook on this sector remains bullish.

In The News, Story Stocks and Earnings

The Dollar Index got a boost from Janet Yellen's comments and could move up to test the recently set highs. Today the index move up from the short term 30 day moving average and set a new 6 day high. The indicators are still bearish but MACD is retreating from its peak and %K is moving higher so it looks like this bounce could continue to the next likely resistance which happens to be the all time high.

The home builders got a boost from today's housing data. Not only does the data show appetite for buying but supports the need for inventory, which could be new houses just as easily as old. Today the XHB Home Builders ETF gained nearly 2% in a move that brings it just shy of the current 8.5 year high. Both of the indicators are confirming the move providing it can break above $37 which could carry it as high as $39 in the near to short term. If a break does not occur support is between $35 and $36, near the bottom of the 2 month trading range.

Earnings news was quiet today but a name I have traded in the past popped up. Cal-Maine, one of the nations largest shippers of shell and value added eggs, reported earnings in line with expectations on an 11% increase in revenue. The gains were made on declining costs and other favorable conditions. The company expects to see strong volume continue into 2015 and is moving ahead with expansion projects throughout the southeast. The stock moved higher in the pre-market session but sold off during the day closing with a loss near -1.75%. Today's move confirms resistance just below $40 and could keep it range bound into the near term.

Elon Musk announced, through Twitter, that Tesla would be announcing a new product line next week. The only hint is that its not a car. Could be a scooter, moped or bike? Maybe a truck? A personal drone? In any event the stock shot up like it always does when he Tweets, gaining 1.12%.

The Indices

The indices surged at the open and kept moving higher all day. Driving the move was Yellen-speak as well as positive news from China and the EU, positive economic data and expectations of more good data later this week.

Today's move was led by the Dow Jones Industrial Average with a gain of 1.49%. The blue chips created a long white candle that carried it above the short term moving average and fell just short of the 18,000 mark. Today's action moved above 18K for a time but was not able to hold the level. The indicators are mixed but basically neutral and in line with an index moving within a range. MACD is bearish but retreating from a weak peak, consistent with a test of support within a range or uptrend, stochastic is flat in the middle of the range with %K moving higher.

It looks like the index is moving toward the top of the range and the current all time high. This could result in a trend following signal and new all time highs but not without a break above resistance. Until then upside potential is very limited. Resistance is currently 18,000 with additional resistance just above at the current all time high.

The S&P 500 made the next largest gain today, 1.22%. The broad market made a strong move higher with all ten of the component sectors moving into the green. Today's action moved up from the top of the January range, crossed above the 30 day moving average and was then halted by the December 2014 all time high. The indicators are mixed as with the Dow and could be setting up the strong trend following signal but requires a break above resistance, and the signal itself which is yet to appear; MACD is still on the bear side of zero but approaching a bullish crossover while stochastic is flat with %K moving up towards a bullish crossover. Anticipation for data and the data itself may take us up to the all time high but I think it will take earnings to break us above it.

The NASDAQ Composite is second runner up in today's race. The tech heavy index gained 1.15% in a move began above the short term moving average and carried it higher from there. The indicators are set up the same as with the SPX and DJI, mixed but consistent with an impending trend following signal. Like the others it too has resistance just above the current level in the form of the long term high, if broken the index could move as high as 5,250 in the near to short term. If not a move back toward support and the long term trend line near 4,750 could be expected.

The Dow Jones Transportation Average made the smallest move today, only 1.01%. Today's action was a move up from the bottom of the 5 month trading range. The index has been trapped in this range since the fall in oil prices began to impact earnings outlook for the rail carriers and others dependent on energy for income. It could remain so until earnings growth returns, whether from oil or other sources. The indicators are consistent with range bound trading and an index that could be moving toward the top of the range. Stochastic is moving higher and already high in the range which could indicate some underlying strength but that has yet to be seen. Current target is the short term moving average near 8,000 and then the top of the range near 9,250.

The indices bounced back today but I am a little leery of how high they will go. Economic trends are good and the data released today supports the idea of a spring rebound in activity but there is still earnings season to consider. I am not worried about any single piece of data scheduled for release this week and am expecting to see trends upheld. What I am worried about is the expected decline in earnings for the season that starts just next Wednesday. Even with my theory of earnings ex-energy being more important, the trend of blended growth being 2-4% above estimates going into the quarter and the high likelihood that expectations are set too low a quarter of negative earnings growth could keep the market from rallying. At least for a few weeks to a month or more while the market digests the earnings news and assesses the outlook for the rest of the year.

I remain bullish on the economy and the market. I think the S&P 500 could hit its all time high, maybe this week, probably driven on economic data and end of quarter/start of quarter portfolio shuffling. In between all of this market activity are geopolitical events ranging from Saudi Arabia and Iran fighting in Yemen to Iran's nuclear talks with the west and on to Greece/The Grexit and China's talk of QE that could all move the market. What happens then is for another wrap.

Until then, remember the trend!

Thomas Hughes

New Plays

Security Solutions

by James Brown

Click here to email James Brown


Allegion Plc. - ALLE - close: 61.91 change: +0.68

Stop Loss: 59.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on March -- at $---.--
Listed on March 30, 2015
Time Frame: Exit prior to earnings (late April - early May)
Average Daily Volume = 674 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
It feels like the world is growing more dangerous. It was only a few weeks ago that the world was shocked by the terrorist shootings in Paris. It should be no surprise that demand for more security at our homes and places of work is growing.

ALLE provides security solutions. According to the company, "Allegion (ALLE) creates peace of mind by pioneering safety and security. As a $2 billion provider of security solutions for homes and businesses, Allegion employs more than 8,000 people and sells products in more than 120 countries across the world. Allegion has more than 25 global brands, including strategic brands CISA®, Interflex®,LCN®, Schlage® and Von Duprin®."

After a slow start last year ALLE's earnings have improved over the last couple of quarters. Their Q3 report last October showed earnings and revenues coming in above expectations.

They did it again with their Q4 earnings report, released on February 18th. Earnings rose +26.7% to $0.76 a share. Wall Street was only looking for $0.68. Revenues were up +5.5% to $573.5 million, above estimates.

ALLE management provided 2015 guidance. They expect revenues to rise +3% to +4% over last year. However, when you factor in currency headwinds and adjustments for their Venezuelan business, revenues could actually decline -3% to -4%. ALLE is forecasting earnings to grow +12% to +17% in 2015.

Investors took ALLE's cautious guidance in stride. There was a one-day pullback and investors quickly jumped in to buy the dip. A month later ALLE's stock was breaking out past resistance at the $60.00 level. Today ALLE has retested $60.00 as new support and just closed at new record highs. The point & figure chart is very bullish and forecasting a long-term target at $81.00. Tonight we're suggesting a trigger to launch bullish positions at $62.10. We will plan on exiting prior to earnings in very late April or early May.

Trigger @ $62.10

- Suggested Positions -

Buy ALLE stock @ (trigger)

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

Buy the MAY $65 CALL (ALLE150515C65) current ask $1.15
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

In Play Updates and Reviews

Mergers & Stimulus Rumors Fuel Market Rally

by James Brown

Click here to email James Brown

Editor's Note:
This weekend a Chinese banking official suggested their country might introduce even more stimulus. Meanwhile a rash of mergers helped launch the market higher on Monday morning.

WWWW hit our entry trigger today.

We want to exit our ALB trade tomorrow morning.

Current Portfolio:

BULLISH Play Updates

Prestige Brands Holdings - PBH - close: 42.88 change: +0.45

Stop Loss: 40.35
Target(s): To Be Determined
Current Option Gain/Loss: +1.3%
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

03/30/15: PBH gapped open higher and rallied to new record highs. Shares eventually pared their gains but still managed a +1.0% gain on Monday. If you look at the intraday chart PBH seemed to struggle with the $43.00 level. Readers might want to wait for a new rise through $43.10 before initiating positions.

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

Providence Service Corp. - PRSC - close: 51.34 change: -0.01

Stop Loss: 49.85
Target(s): To Be Determined
Current Option Gain/Loss: -2.2%
Entry on March 27 at $52.50
Listed on March 26, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 136 thousand
New Positions: see below

03/30/15: Uh-oh! PRSC did not participate in the market's widespread rally today. This is a warning signal for bullish investors. I suggest waiting for a new breakout past $52.50 before initiating new positions.

Trade Description: March 26, 2015:
PRSC is a small cap momentum stock. Shares are outperforming the broader market with a +40% gain in 2015. The stock has done a pretty good job ignoring the market's recent weakness.

PRSC is in the healthcare sector. According to their marketing materials, "Providence is a Tucson, Arizona-based company that provides and manages government sponsored human services, innovative global employment services, in-home health assessment and care management services, and non-emergency transportation services."

"Providence is unique in that it provides and manages its human services primarily in the client's own home or in community based settings, rather than in hospitals or treatment facilities and provides its non-emergency transportation services clients through local transportation providers rather than an owned fleet of vehicles. The Company provides a range of services through its direct entities to approximately 57,400 and 232,000 human services and workforce development services clients, respectively, with approximately 20.7 million individuals eligible to receive the Company's non-emergency transportation services. Its workforce development services include nearly 180 delivery sites spanning 10 countries and its health assessments are performed by over 700 nurse practitioners in 33 states."

The company is not afraid of acquisitions. In the last year they have purchased Matrix Medical Network and Ingeus.

PRSC's most recent quarterly report was March 16th. Analysts were expecting Q4 earnings of $0.29 a share on revenues of $416 million. PRSC delivered $0.45 a share, which is up +87.5% from a year ago. Q4 revenues were up +63.8% to $453.6 million, significantly above estimates. If you exclude the recent acquisitions PRSC's Q4 revenues were up +21.4%. The company's full-year 2014 sales hit $1.5 billion, up +32% from the prior year.

The stock rallied on this better than expected earnings report. The $48-50 area was significant resistance and PRSC has broken out above this zone. As previously mentioned the stock has been able to resist the market's recent sell-off. The point & figure chart is bullish and forecasting a long-term target of $68.00.

Tonight PRSC looks like it's about to break out from its recent consolidation in the $50-52 area. Last week's highs are around $52.30. We are suggesting a trigger to open small bullish positions at $52.50. I'm suggesting small positions because PRSC does not trade a lot of volume and we want to limit our risk.

*use small positions to limit risk* - Suggested Positions -

Long PRSC stock @ $52.50

03/27/15 triggered @ 52.50

Steel Dynamics Inc. - STLD - close: 20.22 change: +0.73

Stop Loss: 19.20
Target(s): To Be Determined
Current Option Gain/Loss: -2.8%
Entry on March 24 at $20.81
Listed on March 21, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.6 million
New Positions: see below

03/30/15: What a difference a day makes! STLD looked poised to breakdown at Friday's closing bell. Shares managed a big reversal higher today with a +3.7% gain. No new positions at this time. We want to see STLD close above its 200-dma before considering new positions.

Trade Description: March 21, 2015:
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.

- Suggested Positions -

Long STLD stock @ $20.81

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

Long MAY $20 CALL (STLD150515C20) entry $1.80

03/24/15 triggered on gap higher at $20.81, trigger was $20.75
Option Format: symbol-year-month-day-call-strike

Web.com Group, Inc. - WWWW - close: 19.09 change: +0.20

Stop Loss: 17.85
Target(s): To Be Determined
Current Option Gain/Loss: +0.5%
Entry on March 30 at $19.00
Listed on March 28, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 533 thousand
New Positions: see below

03/30/15: Our brand new play on WWWW is open. We wanted to launch positions at $18.95 but WWWW gapped higher at $19.00 this morning - immediately triggering our trade. The stock dipped back to $18.50 before rebounding to a new three-month high. I would consider new positions at current levels.

Trade Description: March 28, 2015:
WWWW is a small cap technology company. After a -60% correction from its 2014 highs it looks like the worst might be behind it.

If you're not familiar with WWW here's a brief description, "Web.com Group, Inc. (WWWW) provides a full range of Internet services to small businesses to help them compete and succeed online. Web.com is owner of several global domain registrars and further meets the needs of small businesses anywhere along their lifecycle with affordable, subscription-based solutions including website design and management, search engine optimization, online marketing campaigns, local sales leads, social media, mobile products, eCommerce solutions and call center services."

On the daily chart you can see the big gap down in November 2014. That was a reaction to the company's lowered guidance. The stock appears to have produced a bullish double bottom with its lows in November and January.

Shares surged in mid February with is Q4 earnings results. WWWW beat analysts' estimates on both the top and bottom line. Revenues for the full year were up +14%.

February was also noteworthy for WWWW agreeing to give an activist investor fund two seats on the Board of Directors. Okumus Fund Management is now the largest shareholder in WWWW with almost 15% of its outstanding shares.

Shares of WWWW have been building on a new bullish trend of higher lows and managed to ignore most of the market's sell-off this past week. The point & figure chart is bullish and forecasting a target of $23.00.

If WWWW continues higher it could spark some short covering with the most recent data listing short interest at more than 10% of the 36.5 million share float.

Tonight we are suggesting a trigger to open bullish positions at $18.95 with an initial stop loss at $17.85. I would start with small positions. The $20.00 level and the 200-dma (also nearing $20) could both be overhead resistance.

- Suggested Positions -

Long WWWW stock @ $19.00

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

Long MAY $20 CALL (WWWW150515C20) entry $1.30

03/30/15 triggered on gap open at $19.00, suggested entry was $18.95
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

Albermarle Corp. - ALB - close: 52.43 change: +0.88

Stop Loss: 53.45
Target(s): To Be Determined
Current Option Gain/Loss: +1.5%
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

03/30/15: We think it's time to find an exit door in ALB. Action in the stock over the last two days suggest a potential reversal higher. The long-term trend is still bearish. However, we would rather exit tomorrow morning at the opening bell to lock in a potential gain.

- Suggested Positions -

Short ALB stock @ $53.25

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

Long JUN $50 PUT (ALB150619P50) entry $1.75

03/30/15 prepare to exit tomorrow morning
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

Hornbeck Offshore Services, Inc. - HOS - close: 19.82 change: -0.07

Stop Loss: 20.55
Target(s): To Be Determined
Current Option Gain/Loss: -8.9%
Entry on March 24 at $18.20
Listed on March 21, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 851 thousand
New Positions: see below

03/30/15: The stock market produced a very widespread rally today. Both the XLE oil ETF and the OIH oil services ETF rebounded higher. Fortunately for HOS bears the stock did not participate. Shares closed with a very minor loss. I'm still concerned about HOS' recent performance. We are not suggesting new positions at this time.

Trade Description: March 23, 2015:
The price of crude oil and its crash over the last several months has been a major story for the financial media. Energy stocks have naturally followed the price of oil lower. One company getting crushed by the oil's fall and its impact on the industry is oil services company HOS.

HOS describes itself as "Hornbeck Offshore Services, Inc. is a leading provider of technologically advanced, new generation offshore support vessels primarily in the Gulf of Mexico and Latin America. Hornbeck Offshore currently owns a fleet of 65 vessels primarily serving the energy industry and has eight additional high-spec Upstream vessels under construction for delivery through 2016."

Earnings have taken a dramatic turn for the worse. Last year HOS' Q2 earnings were $0.85 a share. That was 36 cents above estimates with revenues up +24% from a year ago. Their Q3 numbers saw business fade. Earnings were $0.72 a share, which was only one cent above estimates. Q3 revenues did rise +25% but they came in below analysts' estimates. The slowdown really took hold in the fourth quarter. HOS reported earnings of $0.51, which missed estimates by 8 cents. Revenues only rose +10% and again missed expectations.

The problem is low oil prices. The U.S. oil industry has been shutting down oil and gas rigs. Many locations need oil above $60, $70 or even $80 a barrel to make the operation profitable. With oil in the $40 range companies are just shutting down rigs. The number of active rigs has fallen 15 weeks in a row and down -45% from its September 2014 high. Offshore rigs, which really impacts HOS, saw 11 rigs closed down leaving a total of 37. That's a -23% decline in a week.

Wall Street has taken note of falling rig count and analysts have been lowering their earnings expectations for HOS. Traders have noticed as well and the most recent data listed short interest at 16% of the very small 20.4 million share float. That does pose a risk since an unexpected rise could spark a potential short squeeze.

Technically the path of least resistance in shares of HOS has been lower for the last several months. Investors continue to sell the rallies. The bearish trend of lower highs is about to push the stock below key support in the $18.50-19.00 zone. Tonight we're suggesting a trigger to launch bearish positions at $18.20. You may want to use options to limit your risk.

- Suggested Positions -

Short HOS stock @ $18.20

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

Long JUN $17 PUT (HOS150619P17) entry $1.50

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