Option Investor

Daily Newsletter, Thursday, 4/16/2015

Table of Contents

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

Market Wrap

Just Hanging Around

by Thomas Hughes

Click here to email Thomas Hughes
The market is hanging just below the all-time highs.


The market pulled back slightly from yesterday's one month high. The morning headlines were mixed but nothing stands out as a reason for the market to pause; China data is not as strong as expected raising hopes for stimulus, Earnings are a little mixed but generally better than expected, economic data is steady and Greece remains in the spotlight.

Asian markets closed largely higher in today's session. The weak round of data put out this week has raised hopes of increased stimulus, driving the mainland index to a new 7 year high and lifting indices elsewhere in the region. European indices began the day near recent highs but quickly fell as the Greek issue takes on a new dimension. Credit rating Standard & Poors reduced Greece's rating to CCC with a negative outlook from the previous B-, compounding a recent stalemate between the country and the rest of the EU. S&P's call; without relief or reform there is no sustainability in Greek finances (they have a big payment due in May). The DAX fell the hardest, losing close to -2% by the end of the day.

Market Statistics

Early futures trading indicated an open about a quarter point below yesterday's close and that level held throughout the pre-opening session. There was quite a bit of information released during this time but it did little to move the market. Once the opening bell sounded the indices moved lower but quickly met support.

The market churned within a very narrow early range, just below break even, until shortly after the 10AM release of Philly Fed Survey. At that time the indices moved off of the low end of their and moved up to flirt with break even levels. The indices held near this level through lunch and into the early afternoon.

Late afternoon trading was much like the morning, only in reverse. The indices poked their heads into positive territory just after 2PM and the proceeded to traded in a very tight range just above break even. Late in the day the indices backed off of the highs, retreated to break even level and below where they remained into the close of trading.

Economic Calendar

The Economy

There was quite a bit of economic data, a bit mixed but relatively stable within current trends and expectations. First up is Housing Starts, Building Permits and Completions for March. Housing starts came in just over 925,000, a 2% increase over the previous month but a little weaker than expected. On a year over year basis starts are -2.5% below last March, but this comes with a +/-11.5% margin of error.

Permits fell, counter to expectations for a slight rise, by -5.7% but are up by 2.9% year over year. There is a 2% margin of error in this figure. Completions also fell, by -3.9%, but this figure lags the others by a month so is for February. On a year over year basis completions are down -5.8% but like with the starts comes with a whopping margin of error, +/-10%. All in all these figures are all a little light and below expectations but not excessively so in light of the margins for error.

Initial claims rose more than expected but remain very low. Claims gained 12,000 versus the expected rise of 2,000 to reach 294,000. This is from an upward revision of 1,000 for a net gain of 15,000 from last week. The four week moving average also rose, by 250, and remains just off the low set in the past few weeks. Even with the unexpected rise claims remain below 300,000 with the moving average trending lower.

On a not adjusted basis claims rose by 21.3% versus the 16% projected by seasonal factors. Pennsylvania and New Jersey led with increases of 3,478 and 2,572, primarily located in transportation, education, accommodations, food service and warehousing. California and New York led with decreases of -3,647 and -1,004.

Both longer term guages of unemployment claims fell this week. Continuing claims fell by 40,000 to 2.268 million, a new 15 year low. The four week moving average of continuing claims also fell to a new 15 year low. The total number of claims for unemployment fell by 90,744 to 2.527 million, a four month low and levels not seen since the early part of December 2014.

Both figures are in line with the long term decline in unemployment and based on them people are either quitting the work force or they are getting jobs. Based on other labor trends it looks like they are getting jobs; this months labor data could be very revealing.

The Philadelphia Federal Reserve Manufacturing Business Outlook Survey was released at 10Am and helped the market to rise off of the day's lows. The headline number of 7.5 is a half point better than expected and 2.5 points above last months reading. This is the second month of increase since last falls peak to 40.2, positive and expanding. Within the report new orders remained flat with a small 0.7% increase while both the employment and hours worked components experienced more robust increases. The employment component gained 8 points rising from 3.5 to 11.5. The forward looking future activity index also saw a rise, +3 to 35, indicating increased expectations for expansion over the next 6 months.

This weeks data flow is not over. There are 3 releases tomorrow including CPI, Michigan Sentiment and the Leading Indicators. Next week the flow is cut to a trickle, there are only 5 releases all week aside from jobless claims.

One other event happened this morning that could be loosely called an economic release. Federal Reserve Bank President Fischer said in a televised interview that he sees an economic rebound about to unfold in the US, and that outside factors were influencing the FOMC's rate hike decision, whatever that means.

The Oil Index

Oil prices pulled back today as well. The price for WTI and Brent both fell in the range of 1.5% after hitting the 2 month high yesterday. Yesterday's high in crude may also have been the top of a range so I remain skeptical of the rally.... As I was writing my notes on oil a head line popped up in mail email. A Yemeni tribal group, part of the ongoing conflict in the region, has taken control of an important oil port. The news reversed oil's early losses sending WTI and Brent both up by more than 1%. WTI is being supported by signs of supply/demand re-balancing linked to US rig counts and geo-political risk but there is little indication rising demand or declining supply.

The Oil Index had already been extending its break above resistance and was then spurred higher by the news out of Yemen. The index gained nearly another full percent in today's session, pushing through another potential line of resistance but not breaking it. The indicators are both bullish, at high levels and on the rise.

With oil prices on the rise now, and earnings growth outlook for the next 12-18 months positive, it is hard to see an end to the rally but it is on shaky ground in the near term. Today's rally is due at least in part to rising oil prices, oil prices are rising, at least today, on geopolitical risk, a that combination leaves both oil prices and the index subject to a potentially rapid decline in fear premium.

The Gold Index

Gold prices continue to hover around the $1200 level today. Today's mixed economic data lead to another round of speculation of when the FOMC will raise interest rates; the range is still June/September. Today's speculation pushed consensus to the far end of the range and weakened the dollar within its trading range and driving today's ripple in gold prices. It appears that gold and the dollar are settling, or have settled, into a near term range while the market assesses data and could them hold unless the market begins to build up some new expectations. Gold is trading around $1200, the Dollar Index between $97 and $100. The next FOMC meeting is only two week away and is the last before we enter the The Rate Hike Zone, my next target for any major shift in dollar or gold values.

The gold miners fell in today's session. The gold miners ETF GDX lost about a half percent after initially testing resistance just above $20. The ETF if drifting higher in the near term with bullish indicators and approaching my resistance line near $20.50. This is near the mid-point of the 6 month range and an important level for me in light of the double bottom reversal I have been watching over the past 6 months. A break above this line would add confirmation to my theories and take the index as high as $22.50 in the near to short term; earnings might be enough. Most of the miners report in two weeks.

In The News, Story Stocks and Earnings

I just saw the trailer for the new Star Wars and I was pretty excited by it. Star Wars was the first movie I ever saw in a theater that I can remember and remains a top favorite. The trailer looked true to the legacy of George Lucas and will no doubt lead to a lot of profits for Walt Disney. I can't wait to see it and will probably have to buy some merchandise too. Today shares of Walt Disney gained more than 1% and are now approaching the all-time high set last month.

Earnings Earnings Earnings, according to Blackrock CEO his company is an earnings machine. The company reported a profits of $4.89 per share, well ahead of expectations, as were revenues. The company was also able to raise the dividend and announce that it is raising another private equity fund. Shares of the stock opened higher but sold off sharply on high volume. Support was found along the short term moving average but was not enough to recover all of today's gains.

Goldman Sachs and Citigroup both beat expectations as well. Citigroup did not beat on the top line but lower costs and restructuring fees helped to drive earnings. Goldman beat on both the top and bottom line and raised it's dividend by a nickel to $0.65. Together these two banks along with BlackRock and the rest of the financial sector have produced earnings growth above expectations with positive forward outlook. In terms of stock performance the two performed not exactly as expected. Goldman opened higher, closed lower and may indicating the top of a range; Citigroup gapped up and moved higher.

The financial sector was one of today's leaders. The XLF Financial Spyder gained about 0.4% after testing support along the short term moving average. The ETF is drifting higher with bullish indicators but faces resistance at $24.75 and $25. The ETF could get additional boost tomorrow from American Express which reported after the bell. The credit company beat expectations for profits and gave decent outlook in light of the loss of exclusivity with Costco.

UnitedHealth Group reported a beat on both the top and bottom lines, and raised guidance. The health management company increased guidance to a range a nickel above the previous and above consensus. The company reported that it added more than 1.6 million more people to its network and that revenues were driven by accelerating growth and strong operating performance. Shares of the stock gained 3.4% in today's session and is approaching a new high.

The Indices

After a day of churning within a very tight range the indices ended the day nearly flat. Not one closed with more than a 0.1% move in either direction, led by a +0.04% gain made by the Dow Jones Transportation Average. The transports created a small doji candle/spinning top just above support and below resistance near the bottom end of its 6 month range. The index trading range is confirmed by the indicators which are consistent with support along 8,575 in both the short and long term. It looks like the index may stay within this range until it meets up with the long term trend line. Based on my charts this could happen sometime in the next 4 – 6 weeks, basically coincident with the remainder of earnings season.

By that time there will have been another 2 months of macro-data to support a trend line bounce or bust. The indicators are pointing up at this time consistent with an index moving up within it range. Current target is the short term moving average, which is just above today's close. A break above the moving average could take it as high as the top of the range near 9,250.

The Dow Jones Industrial Average made a decline of -0.04% and also created a small doji/spinning top candle. Today's action tested the one month high and near term support before closing near to the opening price and yesterday's close. The indicators are bullish and both on the rise so I am expecting at least a test of resistance near the 18,250 level. The index is now sitting on a fairly strong level of support, the December all time high with the short term moving average just beneath it.

The NASDAQ Composite lost -0.06% in today's session. The tech heavy index did not create a doji but the candle is sufficiently small enough to be a spinning top. The index is sitting just above the short term moving average and drifting higher with the only resistance the current long term high. A break above this level could take it up to test the all time high near 5,050. The indicators are bullish and consistent with a trend line bounce with a target at the long term high at least.

The S&P 500 made the largest decline, a whopping -0.08%. The broad market lost just over 1 point in today's session and did create a doji candle. The index is drifting higher, supported by the short term moving average and the long term trend line, with only the current all-time high standing in the way. The indicators are bullish and on the rise so a test of the high looks likely. A break above resistance would be very bullish and could take the index as high as 2,200 in the near to short term.

The indices are on the verge of setting new highs, except for the Transports, and look very ready to break out. The only thing standing in the way are the current highs, earnings season and what the Fed has to say over the next two weeks. Since earnings season is unfolding in a positive way I don't see the highs standing much of a chance in that respect. However, with the next FOMC meeting so close and the market yet to actually break out a little caution may be due. There is absolutely no telling what they will say or do at this time. The data has been weak but trends and outlook support a rate hike. Between then and now is a fair amount of important earnings and a little economic data to sway sentiment and drive the day to day trade.

Until then, remember the trend!

Thomas Hughes

New Plays

Momentum Has Reversed

by James Brown

Click here to email James Brown


Tessera Technologies Inc. - TSRA - close: 37.82 change: -0.91

Stop Loss: 40.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 16, 2015
Time Frame: Exit PRIOR to earnings on May 5th
Average Daily Volume = --- thousand
New Positions: Yes, see below

Company Description

Why We Like It:
After months of gains and generally bullish news shares of TSRA appear to be correcting lower.

The company is considered part of the semiconductor industry. According to the company, "Tessera Technologies, Inc., including its Invensas and FotoNation subsidiaries, generates revenue from licensing our technologies and intellectual property to customers and others who implement it for use in areas such as mobile computing and communications, memory and data storage, and 3DIC technologies, among others. Our technologies include semiconductor packaging and interconnect solutions, and products and solutions for mobile and computational imaging, including our FaceToolsTM, FacePowerTM, FotoSavvyTM, DigitalApertureTM, face beautification, red-eye removal, High Dynamic Range, autofocus, panorama, and image stabilization intellectual property."

Their earnings report in late October 2014 was better than expected and TSRA raised guidance. They raised guidance again in January. Their earnings news in February helped push the stock to new 52-week highs. Unfortunately momentum appears to have reversed. The semiconductor space has been hit with downgrades and earnings warnings.

Now shares of TSRA has broken below multiple layers of support. The point & figure chart has generated a new triple-bottom breakdown sell signal with a $33.00 target. Today shares of TSRA sit on technical support at the 100-dam. A breakdown from here could portend a drop toward $34 or even $32.00 (near the 200-dma).

Tonight we are suggesting a trigger to launch bearish positions at $37.40. This is going to be a short-term trade. We will plan on exiting prior to earnings on May 5th.

Trigger @ $37.40

- Suggested Positions -

Short TSRA stock @ $37.40

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

Buy the MAY $37 PUT (TSRA150515P37) current ask $1.35
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

No Follow Through Higher

by James Brown

Click here to email James Brown

Editor's Note:
The stock market's rally has already stalled after just two days of gains. Fortunately the profit taking was pretty mild with the major indices only posting minor declines.

IMKTA hit our stop loss. SWIR hit our entry trigger.

Current Portfolio:

BULLISH Play Updates

CDW Corp. - CDW - close: 38.19 change: -0.27

Stop Loss: 36.40
Target(s): To Be Determined
Current Option Gain/Loss: -1.2%
Entry on April 13 at $38.65
Listed on April 09, 2015
Time Frame: Exit PRIOR to earnings in mid May
Average Daily Volume = 1.0 million
New Positions: see below

04/16/15: CDW did not see any follow through on yesterday's bounce, which is disappointing. I am suggesting investors wait for a rally past $38.65 before considering new bullish positions.

Trade Description: April 9, 2015:
Traders have been consistently buying the dips in information technology stock CDW. Now the stock is poised to breakout to new highs.

The company offers a broad range of hardware, software and integrated IT solutions to its clients. These include mobility, security, cloud computing, virtualization, data center optimization, and more.

Their website describes the company as "CDW is a leading provider of integrated information technology solutions in the U.S. and Canada. We help our 250,000 small, medium and large business, government, education and healthcare customers by delivering critical solutions to their increasingly complex IT needs. A Fortune 500 company, CDW was founded in 1984 and employs more than 7,200 coworkers. In 2014, the company generated net sales of more than $12.0 billion."

Earnings last year were healthy. CDW has consistently beaten Wall Street's earnings and revenue estimates for the last four quarters in a row. Revenues have been showing double-digit growth for the last year. Their most recent report was February 10th when CDW delivered its Q4 results. Analysts were expecting a profit of $0.53 a share on revenues of $2.95 billion. CDW reported $0.59 a share with revenues up +12.4% to $3.05 billion.

Analysts seem optimistic on CDW. Barclays has listed CDW as one of its top picks and noted that the company has very little exposure to Europe or Asia so the strong dollar shouldn't hurt it that bad. Another analyst, with RBC Capital Markets, believes that any softness in the consumer market will be overshadowed by strength in the enterprise market.

Technically the bullish trend of higher lows in CDW has been coiling more tightly. Now, with the stock up four days in a row, CDW is on the verge of breaking through resistance in the $38.00-38.50 area. Tonight we are suggesting a trigger to launch bullish positions at $38.65.

- Suggested Positions -

Long CDW stock @ $38.65

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

Long MAY $40 CALL (CDW150515C40) entry $0.90

04/13/15 triggered @ 38.65
Option Format: symbol-year-month-day-call-strike

Cognex Corp. - CGNX - close: 51.30 change: -0.10

Stop Loss: 49.45
Target(s): To Be Determined
Current Option Gain/Loss: -0.1%
Entry on April 09 at $51.35
Listed on April 08, 2015
Time Frame: Exit PRIOR to earnings in May
Average Daily Volume = 515 thousand
New Positions: see below

04/16/15: It was another very quiet day for CGNX. Shares are hovering near their simple 10-dma.

No new positions at this time.

CAUTION: I am urging caution if you're trading the options. The option spreads have widened significantly. You may want to consider limit orders (you'll risk not being filled) instead of market orders.

Trade Description: April 8, 2015:
Shares of CGNX are trading at all-time highs and with good reason. The company has been consistently beating analysts' earnings estimates and guiding higher.

CGNX is in the technology sector. According to the company's marketing materials, "Cognex Corporation designs, develops, manufactures and markets a range of products that incorporate sophisticated machine vision technology that gives them the ability to 'see.' Cognex products include barcode readers, machine vision sensors and machine vision systems that are used in factories, warehouses and distribution centers around the world to guide, gauge, inspect, identify and assure the quality of items during the manufacturing and distribution process. Cognex is the world's leader in the machine vision industry, having shipped more than 1 million vision-based products, representing over $4 billion in cumulative revenue, since the company's founding in 1981. Headquartered in Natick, Massachusetts, USA, Cognex has regional offices and distributors located throughout the Americas, Europe and Asia."

Research is forecasting the machine vision industry to grow more than +12% a year for the next six years. By 2020 the market for this business could be more than $9 billion. CGNX appears to be leading the pack. Looking at the last three quarters they have beaten earnings estimates. Revenues have consistently been in the double-digit growth range. The company has raised their guidance twice. In their last quarter gross margins hit 75%. The biggest customer is Apple (AAPL).

In CGNX's earnings report Dr. Robert Shillman, Chairman of Cognex commented on their results saying, "2014 was a fabulous year for Cognex! We reported the highest annual revenue, net income and earnings per share in our 34-year history. In addition, operating margin expanded to 30% driven by the substantial leverage in our business model. That level is a dramatic increase over the 24% reported for 2013 and was achieved despite the significant investments that we made in sales and engineering during the year."

CGNX guided Q1 above Wall Street estimates. They expect strong revenue growth year-on-year and gross margins in the mid 70% range.

Technically shares of CGNX just recently broke out above round-number resistance at $50.00. The point & figure chart is very bullish and forecasting a long-term target at $79.00. Traders quickly bought the dip today. Tonight I am suggesting a trigger to open bullish positions at $51.35.

- Suggested Positions -

Long CGNX stock @ $51.35

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

Long MAY $50 CALL (CGNX150515C50) entry $5.20

04/09/15 triggered @ 51.35
Option Format: symbol-year-month-day-call-strike

Prestige Brands Holdings - PBH - close: 44.50 change: -0.19

Stop Loss: 40.35
Target(s): To Be Determined
Current Option Gain/Loss: +5.1%
Entry on March 20 at $42.35
Listed on March 19, 2015
Time Frame: Exit PRIOR to earnings on May 14th
Average Daily Volume = 342 thousand
New Positions: see below

04/16/15: PBH bounced off short-term support at its 10-dma and managed to pare its losses to -0.4%. I don't see any changes from my recent comments. More conservative traders may want to raise their stop loss (maybe near $42 or the 20-dma near $42.85). I would not launch new positions at this time.

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

Steel Dynamics Inc. - STLD - close: 20.92 change: -0.32

Stop Loss: 19.95
Target(s): To Be Determined
Current Option Gain/Loss: +0.5%
Entry on March 24 at $20.81
Listed on March 21, 2015
Time Frame: Exit prior to earnings on April 20th
Average Daily Volume = 3.6 million
New Positions: see below

04/16/15: Our time is about up for this STLD trade. Earnings are due out on Monday, April 20th. We do not want to hold over the announcement.

We will plan on exiting this trade tomorrow (Friday) at the closing bell. I'm raising the stop loss to $19.95 until we exit.

Technically today's session has created a potential bearish reversal pattern.

- Suggested Positions -

Long STLD stock @ $20.81

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

Long MAY $20 CALL (STLD150515C20) entry $1.80

04/16/15 new stop @ 19.95, prepare to exit tomorrow at the closing bell
03/24/15 triggered on gap higher at $20.81, trigger was $20.75
Option Format: symbol-year-month-day-call-strike

Sierra Wireless - SWIR - close: 39.07 change: +1.14

Stop Loss: 36.45
Target(s): To Be Determined
Current Option Gain/Loss: +1.3%
Entry on April 16 at $38.55
Listed on April 15, 2015
Time Frame: Exit PRIOR to earnings on May 7th
Average Daily Volume = 712 thousand
New Positions: see below

04/16/15: Our new trade on SWIR is open. The stock displayed relative strength with a +3.0% surge to new six-week highs. Our trigger to launch bullish positions was hit at $38.55.

Trade Description: April 15, 2015:
The Internet of Things (IoT) is going to be huge. Depending on who is making the forecast the size of just how huge it can become is staggering. Last year (2013) there were an estimated 300 million embedded connected devices in the IoT. IDC is estimating that could reach 15 billion connected devices by 2015. Cisco Systems (CSCO) is forecasting 25 billion devices connected to the Internet of Things by 2015 and 50 billion by 2020. Intel is forecasting up to 200 billion connected devices by 2020.

The backbone of the IoT is M2M communication. That's machine-to-machine communication. SWIR is the market leader with 34% of the market for cellular M2M embedded module market.

According to the company, "Sierra Wireless is building the Internet of Things with intelligent wireless solutions that empower organizations to innovate in the connected world. Over the past 20 years, Sierra Wireless has built a proven track record of developing innovative products and solutions for its customers. We offer the most comprehensive portfolio of wireless machine-to-machine (M2M) devices including 2G, 3G, and 4G embedded modules and gateways that are seamlessly integrated with our secure cloud and connectivity services. OEMs and enterprises worldwide trust our innovative solutions to get their connected products and services to market faster. Our devices are operating on more than 80 networks globally and we have shipped more than 100 million M2M devices worldwide."

Earnings have been improving. Back in July they reported their Q2 results that beat Wall Street's estimates on both the top and bottom line and management guided higher. SWIR announced their Q3 results on November 5th. Even after guiding higher the prior quarter they still beat estimates. SWIR raised their guidance again for the fourth quarter of 2014.

The string of earnings beats continued when SWIR reported its Q4 earnings on February 5th. The company delivered better than expected results on both the top and bottom line. Revenues were up +25.7%. Unfortunately management lowered their Q1 guidance below analysts' estimates. The stock dropped quickly on this new forecast.

The weeks since its February earnings report have been a bit rocky for SWIR. On the plus side the stock appears to have found a new bottom with support in the $32.00 area. After some profit taking yesterday traders bought the dip at technical support near its 10-dma and 50-dma this morning. If this bounce continues SWIR could see some short covering. The most recent data listed short interest a 14% of the relatively small 30.9 million share float.

We are suggesting a trigger to launch bullish positions at $38.55. We'll try and limit our risk with an initial stop loss at $36.45. Please note that this will be a short-term trade. SWIR has earnings coming up on May 7th. We'll plan on exiting prior to their announcement.

- Suggested Positions -

Long SWIR stock @ $38.55

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

Long MAY $40 CALL (SWIR150515C40) entry $1.55

04/16/15 triggered @ 38.55
Option Format: symbol-year-month-day-call-strike

Vipshop Holdings - VIPS - close: 29.16 change: -0.20

Stop Loss: 27.85
Target(s): To Be Determined
Current Option Gain/Loss: -3.3%
Entry on April 09 at $30.15
Listed on April 01, 2015
Time Frame: 8 to 12 weeks (option traders, exit prior to expiration)
Average Daily Volume = 6.3 million
New Positions: see below

04/16/15: Hmm... VIPS performance today is a bit worrisome. The rally attempt rolled over beneath resistance near the $30.00 level. Tonight I'm raising the stop loss to $27.85. More conservative traders may want to raise their stop even higher.

No new positions at this time.

Trade Description: April 1, 2015:
The main Chinese stock market has broken out to multi-year highs. This has provided fertile ground for shares of VIPS to grow. The company is an online retailer that specializes in flash sales of female-oriented products.

According to the company, "Vipshop Holdings Limited is China's leading online discount retailer for brands. Vipshop offers high quality and popular branded products to consumers throughout China at a significant discount to retail prices. Since it was founded in August 2008, the Company has rapidly built a sizeable and growing base of customers and brand partners."

Earnings have been strong. Looking at the last four quarterly report VIPS has beaten Wall Street estimates and raised guidance four quarters in a row. We're talking triple-digit growth for earnings and revenues.

VIPS' most recent report was its Q4 results on February 17th. Earnings were 12 cents a share, which was actually two cents below expectations. However, revenues soared +109% to $1.36 billion. Gross margins improved from 24.5% to 24.9%. Active customers grew +114% to 12.2 million (plenty of room to grow).

In their earnings press release Mr. Donghao Yang, chief financial officer of Vipshop, commented, "We are very proud of our fourth quarter financial results, which exceeded our prior expectations. Our progress in mobile, market expansion, along with our long-standing commitment to customers enabled us to further boost both the total net revenue and the net income attributable to our shareholders. During the fourth quarter of 2014, the mobile contribution of our platform reached approximately 66% of our gross merchandise volume. Looking ahead, we are firmly confident that by executing our growth strategies and further investing judiciously in fulfillment, technology and talent, we will be able to further fortify our position as the leading online discount retailer in China and continue delivering a satisfying shopping experience to our growing base of customers."

Management issued bullish guidance again. They see 2015 Q1 revenues in the $1.25-1.30 billion range, which suggest +78% to +85% growth from a year ago. Analysts estimates were at $1.21 billion. You can see how the stock reacted to the news and optimistic guidance.

Chinese stocks got another pop recently when a Chinese official suggested their government might provide even more stimulus. Here's a quote from a recent Bloomberg article, "China has room to act with both interest rates and 'quantitative' measures, People's Bank of China chief Zhou Xiaochuan said in remarks at the Boao Forum for Asia, an annual conference on the southern Chinese island of Hainan. Analysts surveyed by Bloomberg expect the PBOC will lower both benchmark lending rates and banks’ required reserve ratios, adding to cuts made in recent months." Link to the Bloomberg article.

Technically shares of VIPS have broken out past all of its major resistance levels and now it's flirting with a breakout past round-number resistance at $30.00. The point & figure chart is bullish and forecasting at $38.50 target. Tonight we are suggesting a trigger to launch bullish positions at $30.15.

- Suggested Positions -

Long VIPS stock @ $30.15

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

Long MAY $30 CALL (VIPS150515C30) entry $1.94

04/16/15 new stop @ 27.85
04/09/15 triggered @ $30.15
Option Format: symbol-year-month-day-call-strike

Web.com Group, Inc. - WWWW - close: 19.16 change: -0.18

Stop Loss: 18.45
Target(s): To Be Determined
Current Option Gain/Loss: +0.8%
Entry on March 30 at $19.00
Listed on March 28, 2015
Time Frame: Exit PRIOR to earnings near the end of April
Average Daily Volume = 533 thousand
New Positions: see below

04/16/15: WWWW tried to rally but failed at its 200-dma again.

I am not suggesting new positions at this time.

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

04/11/15 Caution: WWWW just produced a potential candlestick reversal pattern.
04/01/15 new stop @ 18.45
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

Strayer Education, Inc. - STRA - close: 52.79 change: -0.29

Stop Loss: 56.15
Target(s): To Be Determined
Current Option Gain/Loss: +0.3%
Entry on April 07 at $52.95
Listed on April 06, 2015
Time Frame: Exit prior STRA's earnings report on May 6th
Average Daily Volume = 124 thousand
New Positions: see below

04/16/15: Good news! STRA did not see any follow through on yesterday's oversold bounce. I don't see any changes from my recent comments.

More conservative traders may want to lower their stop loss. I'm not suggesting new positions at this time.

Trade Description: April 6, 2015:
The for-profit education stocks have not had a good year. The group is getting crushed. Student enrollments are falling as the labor market improves. Last week we saw the March jobs report was a disaster but the prior 12 months were all above +200,000 jobs a month, the best string of job growth in years. The unemployment rate has fallen to six-year lows. This is reducing the number of potential students for companies like STRA.

STRA was founded back in 1892. According to the company, "Strayer Education, Inc. (Nasdaq: STRA) is an education services holding company that owns Strayer University. Strayer's mission is to make higher education achievable for working adults in today's economy. Strayer University is a proprietary institution of higher learning that offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, public administration, and criminal justice to working adult students. Strayer University also offers an executive MBA online and corporate training programs through its Jack Welch Management Institute. The University is committed to providing an education that prepares working adult students for advancement in their careers and professional lives."

Another challenge for the for-profit industry is the U.S. government. Plenty of students are graduating with piles of debt and still can't get a job. Some schools have unusually high dropout rates. The authorities are investigating some schools for predatory enrollment practices. A new challenge is President Obama's proposal to make community college free for everyone, for the first two years. Of course "free" is a relative term since tax payers will be paying for it. No word yet on if or when this proposal gets off the ground but it generates headwinds for the for-profit educators.

STRA has been struggling with falling student enrollments and lower revenue per student. They reported Q4 earnings results on February 6th. STRA's $1.32 per share beat estimates by 14 cents. However, revenues plunged -6.4% to $116.1 million. Their fiscal 2014 earnings were down -7.8% from the prior year. Revenues dropped -11.4% in 2014.

The company is hoping that enrollment trends will turn positive in the first half of 2015 but they don't expect revenues to turn positive until the second half of the year.

Investors are bearish on the stock with short interest at 15% of the very, very small 10.0 million share float. This time the bears are probably right. Technically STRA looks ugly with a clear trend of lower highs and lower lows. You can see the sell-off on its Q4 report in the daily chart. The weakness accelerated in late March. The point & figure chart is bearish and forecasting at $46.00 target.

We are suggesting bearish positions with an entry trigger at $52.95. Investors will want to keep their position size small to limit risk. The small float and the high short interest could make this stock volatile. I suggest the put option, which would limit your risk to the cost of the option.

*small positions to limit risk* - Suggested Positions -

Short STRA stock @ $52.95

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

Long MAY $50 PUT (STRA150515P50) entry $2.25

04/07/15 triggered @ $52.95
Option Format: symbol-year-month-day-call-strike

Olympic Steel Inc. - ZEUS - close: 11.57 change: -0.46

Stop Loss: 13.55
Target(s): To Be Determined
Current Option Gain/Loss: +7.1%
Entry on April 08 at $12.45
Listed on April 07, 2015
Time Frame: Exit PRIOR to earnings on May 1st
Average Daily Volume = 56 thousand
New Positions: see below

04/16/15: More good news! ZEUS did not see any follow through on its oversold bounce either. The stock reversed with a -3.8% decline on Thursday.

No new positions at this time.

I want to remind readers that this is a higher-risk, more aggressive trade.

Trade Description: April 7, 2015:
We are adding ZEUS to the newsletter as a momentum trade. You could also consider it a hedge against our STLD trade, which hasn't really panned out as expected.

If you're not familiar with ZEUS, here's a brief description: "Founded in 1954, Olympic Steel is a leading U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel and aluminum products. The Company's CTI subsidiary is a leading distributor of steel tubing, bar, pipe, valves and fittings, and fabricates pressure parts for the electric utility industry. Headquartered in Cleveland, Ohio, Olympic Steel operates from 35 facilities in North America."

The steel industry has been really struggling with a flood of cheaper imports. We saw three major steel companies, STLD, NUE, and AKS, all lower guidance in March. The biggest complaint was a surge in imports, which has continued into 2015. The good news is that imports are slowing down because the glut of supply has driven prices lower. The bad news is that steel prices have been crushed.

Shares of ZEUS have been in a bear market for about a year. The earnings picture has not helped with ZEUS missing Wall Street's bottom line earnings estimates the last four quarters in a row.

Steel companies are hoping for the price of steel to find a bottom in the May-June time period. A couple of the companies listed above have suggested that the second half of 2015 will be better. That might just be wishful thinking. The economic slowdown in the first quarter of 2015 doesn't bode well for basic material companies.

Meanwhile the path of least resistance for ZEUS is lower. The point & figure chart is bearish and forecasting at $10.00 target. Today we saw ZEUS breakdown under support near $13.00 on double its average volume.

I consider this a higher-risk, more aggressive trade because ZEUS is not very liquid. The daily volume is exceptionally low. Plus, the options are not tradable because the spreads are too wide. I'm suggesting small bearish positions if ZEUS trades at $12.45 or lower. We're not setting a target tonight but I'd aim for the $10.00 area.

*small positions to limit risk* - Suggested Positions -

Short ZEUS stock @ $12.45

04/08/15 triggered @ $12.45


Ingles Market, Inc. - IMKTA - close: 47.55 change: -2.93

Stop Loss: 49.75
Target(s): To Be Determined
Current Option Gain/Loss: -5.0%
Entry on April 06 at $52.35
Listed on April 04, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 159 thousand
New Positions: see below

04/16/15: IMKTA has been a big disappointment. The bullish trend has reversed. Shares are down six days in a row. Today's breakdown below what should have been support at $50.00 has sparked even more selling. IMKTA underperformed with a -5.8% plunge. Our stop was hit pretty early at $49.75.

*small positions* - Suggested Positions -

Long IMKTA stock @ $52.35 exit $49.75 (-5.0%)

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

AUG $55 CALL (IMKTA150821C55) entry $3.50 exit $2.50 (-28.6%)

04/16/15 stopped out @ 49.75
04/15/15 IMKTA is not cooperating. Traders may want to exit early now before the stock breaks below $50.00
04/06/15 triggered @ 52.35
Option Format: symbol-year-month-day-call-strike