Option Investor

Daily Newsletter, Thursday, 4/23/2015

Table of Contents

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

Market Wrap

A Brand New High

by Thomas Hughes

Click here to email Thomas Hughes
The market is riding high on earnings and outlook.


The NASDAQ Composite reached a brand new high today despite weaker than expected data from both China and Europe. Early reads on PMI from both regions was much weaker than expected, China's falling below the expansionary 50 level. Europe remains expansionary at 53.5 but the drop from last month's reading indicates activity is declining. Asian indices closed largely higher despite the drop as trader there are betting on increased QE from the PBOC. European traders were not so optimistic, indices in that region fell, led by the German DAX -1.2% decline.

Market Statistics

Our markets were indicated lower in the early pre-opening session. A slew of better than expected earnings and steady labor data failing to provide lift, perhaps due to the weakness in the Europe. Trading remained throughout the early session and into the opening bell. The indices fell when the opening bell sounded but found support almost immediately.

After that the indices bobbed along within a tight range for most of the morning, poking into positive territory once or twice before making a decided move higher just before noon. At that time the indices shot up by a half percent, hitting the daily high mid-afternoon.

Afternoon trading carried the indices up the highs of the day. The NASDAQ and S&P 500 both touching new highs at one point in the day. All the indices finished positive but they all also pulled back from their highs before the close of trading. The after-hours session was pretty active today, much more so than usual. At least four top names released earnings producing an average move near 4%. If this carries into tomorrow's session we could the NASDAQ and SPX reach new highs again.

Economic Calendar

The Economy

Only one economic release before the opening bell today, jobless claims. Initial claims rose by 1,000 from last week's not-adjusted figure to reach 295,000. The four week moving average gained 1,750 but remains just off the 15 year low. Claims were expected to fall by 10,000, regardless this week's figure remains very low and in line with labor trends. On a not-adjusted basis claims fell by -9.1%, slightly less than the -9.6% predicted by the seasonal factors. California and New York led with increases of 10,575 and 8,356 respectively. Illinois and Oregon led with a combined decline less than -2,000.

Continuing claims also rose, by 50,000, from a revision of +7,000. Continuing claims are now 2.35 million and at a three week high. Despite the rise this figure is also very near the long term low and in line with improving/healthy labor markets. The four week moving average of continuing claims is still in decline and another new 15 year low.

The total number of jobless claims for the week ending April 4th fell by -93,051 to hit 2.434 and the lowest level since early December of last year. Total claims are steadily declining since hitting their peak at the first of the year. Based on the steady/low levels of initial and continuing claims and the downward trend in total claims I would have to say that this month's NFP and unemployment figures should be pretty good. We'll get those numbers in two weeks.

Only one economic release tomorrow; durable goods. Expectations are for a decline of -0.5%. This is going to be important because these are March numbers and will tie into GDP and FOMC expectations. GDP first estimate is due out next Wednesday morning; The FOMC statement is scheduled to be released later that afternoon.

New home sales was released at 10AM. The -11% drop in sales was met with positive reaction. Details within the release point to a severe lack of inventory that is expected to lead to increased building. This, coupled with the strength in existing home sales helped put positive spin to the numbers. According to the Census Bureau sales fell to a seasonally adjusted rate of 481,000. This is less than half the sales rate economists would like to see but still nearly 20% higher than this same time last year.

The Oil Index

Oil prices got another dose of fear premium in today's session. The price of WTI and Brent both surged more than 2.5% on escalating violence in Yemen. Today the Saudi's led another strike at Iranian allied militants that could lead to a wider spread conflict in the region. On the fundamental side storage levels for crude and nat gas remain strong with little to no sign of demand increase.

The Oil Index gained about 0.7% in today's session, halted by resistance at 1435. The index moved higher on the surge in oil prices but I remain skeptical about the move. The index doesn't look overly strong at this time, the indicators are bullish, but also showing sharp divergence from prices. The index could move higher but a break above resistance is required. Earnings or another rise in oil prices could provide the catalyst. If the index breaks above resistance on a fear driven spike in oil prices I will be very wary of whipsaw, especially until earnings are released. Earnings for the major integrated oil companies are due out next week.

The Gold Index

Today gold prices regained most of yesterday's decline. Weak data, specifically housing sales, flip-flopped FOMC rate hike expectations to the far end of the spectrum, weakening the dollar and putting a floor in gold. Gold continues to test support in the $1180-$1190 region, and continues to find it there. We could see more of this action over the next 3 trading days and then it will be the FOMC meeting itself. At that time I think we may see a major move in both the dollar and gold. We're on track for a hike, they (the Fed) have said it time and again, and I don't see any reason why it won't happen, only the timing remains to be set.

The gold miners continue to hover in a holding pattern while the market waits on earnings reports. Today the GDX Gold Miners ETF gained 2.5% and confirmed support but remains within a rapidly narrowing range. The ETF has been winding up within this range for about 2 months now and could be gearing up for a more pronounced movement. The indicators are bullish but not strong, steady is a better description. They are consistent with support along the rising trend line connecting the November, December and March troughs and have plenty of room to run should the market make a break in either direction. Resistance is at $20.50 with support along the rising trend line. I am bullish but waiting for earnings which are due to start rolling in next week.

In The News, Story Stocks and Earnings

There was a lot of earnings news today. Today was the busiest day of earnings season with enough names releasing before and after the trading day to fill 4 day's of market wrap. A few names reporting before the open include Pepsi, GM, Dow Chemical and Catepillar. Names reporting after the bell include Amazon, Google and Starbucks. Reports are mixed but on a whole are better than expected.

Pepsico reported a top and bottom line beat with a 1.5% improvement in margins. Organic growth increased by 4% and the stock lost -1.59%.

GM missed but reported an increase in margins. The stock fell -3.34% during today's session.

Dow Chemical beat on the bottom line but missed revenue expectations. The stock gained nearly 2% by the end of today's session, creating a large long legged doji.

After hours action was dominated by tech stocks and will likely have a large positive impact on tomorrows session. All for of the big names expecting to report this evening provided positive reports spurring moves greater than 3%. Google was the first to hit the wires. The search giant report earnings and revenues that were slightly below expectations, $6.57 EPS versus a projected $6.60, but nonetheless produced a surge in stock prices. Shares of Google gained more than 4% after climbing a similar amount in the open session.

Amazon reported a loss of -$0.12 per share, in line with estimates. The company reported that sales were up more than 15% in the first quarter and was able to guide full year results in a range around the consensus. Other positives in the report include a 47% increase in operating cash flow a more than 100% increase in free cash flow. Shares of the stock gained 5% in the after hours session.

Microsoft reported that sales from the same period last year but beat expectations on the top and bottom line. Revenue from devices and consumer grew by 8% while commercial grew 5%. There was an impact from restructuring and the integration of the Nokia unit of -$0.01 to EPS. The news was well received in light of the expectations and helped to send the stock up by 3% in after hours trading.

Starbucks reported earnings in-line with expectations. They also reported 18% growth over the same quarter last year. The results enabled execs to raise full year guidance and send the stock up more than 3.5%.

The Indices

I'll be honest, the way futures were trading before the opening bell I thought we were in for another day of trading within recent ranges and a move lower from resistance. When I hinted earlier this week that earnings might push the market to new highs even before the FOMC meeting little did I know it would happen today. After a brief retreat to support the bulls were able to drag the market higher in today's session, breaking past resistance and setting new all time highs for several of the indices.

The NASDAQ Composite did not make the largest move today but I will start with it anyway. The tech heavy index broke through resistance and marched to a brand new all-time-closing high for the first time since the peak of tech bubble. The index gained 0.41% in today's session and is accompanied by bullish indicators. Both MACD and stochastic are bullish and confirming the break to new highs. The MACD is on the rise, stochastic is crossing the upper signal line. It looks like it will continue to move higher and with the addition of today's after-hours action could do so tomorrow.

Today's action was led by the Dow Jones Transportation Average. The transports gained 0.47% in what appears to be a volatile session. A first glance at today's candle might make you think today's action was more volatile than it was; there are significant shadows on both ends of the candle, the lower one touching support at the short term moving average. The truth is that the index hit support within 2 minutes of the open, moved higher throughout the day and pulled back just before the close. Today's action may have been driven, no pun intended, by some rotation. There are signs that while the rail carriers are struggling with low oil prices the truckers are benefiting from them.

The S&P 500 made the third largest gain today, 0.24%. The broad market broke above the top of the pennant I described on Monday and set a new all-time intraday high only to be halted by resistance and sent back down to support. Today's action has a bit of a Shooting Star look to it but since it is accompanied by bullish indications and closed above the top of the pennant appears to be short term in nature. Both MACD and stochastic are on the rise and stochastic is on the cusp of forming a strong trend following signal; %K is about to make a bullish crossover while %D is making a bullish cross of the upper signal line. A break above resistance has a target near 2,150 in the near term and 2,200-2,300 in the short.

The Dow Jones Industrial Average made the smallest gains today, only 0.11%. The blue chips formed a small bodied, doji like candle just above support. The index is sitting on support with indicators consistent with support, just not showing strength. It looks like it could move up to test resistance at the all-time high, about 200 points above today's close, but more than that may center on the FOMC next week.

Earnings season continues to be better than expected. I'm not saying it's great, but it is better than expected and outlook for the remainder of the year remains positive, enough to keep the bears at bay at least for now. The euphoria, or maybe mass relief is a better way of saying it, has helped to bring support back to market and even provide a little lift. Tomorrow could be another up day but I still have my eye on the FOMC meeting next week. Not all the indices have broken to new highs and the meeting is a fantastic opportunity for resistance to come into the market.

Until then, remember the trend!

Thomas Hughes

New Plays

Gigawatts of Solar Power

by James Brown

Click here to email James Brown


Canadian Solar Inc. - CSIQ - close: 36.49 change: +0.25

Stop Loss: 34.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 23, 2015
Time Frame: Exit prior to earnings in mid May
Average Daily Volume = 2.7 million
New Positions: Yes, see below

Company Description

Why We Like It:
The boom and bust trends in the solar energy industry have been severe. A few years ago there was a supply glut and prices on solar panels plunged by 2/3rds. Investors were fleeing the solar stocks and shares of CSIQ sank toward $2.00 a share. It's a different story today.

China has a HUGE air pollution problem. The country wants to move away from coal-fired energy. That's why China plans to build out 100 gigawatts of solar energy by 2020. India is in a similar bind. They also plan to build out 100 gigawatts of solar energy by 2022. These two countries alone will account for more solar energy production in the next several years than all previous years combined.

China recently announced they had completed 5.04GW of solar capacity in the first quarter of 2015. That puts the country on schedule to meet their 2015 goal of 17.8GW in new solar production.

One company that should benefit from this global build out of solar energy is CSIQ. They are in the technology sector and considered part of the semiconductor industry. According to the company, "Founded in 2001 in Ontario, Canada, Canadian Solar is one of the world's largest and foremost solar power companies. As a leading manufacturer of solar photovoltaic modules and provider of solar energy solutions, Canadian Solar has an industry leading and geographically diversified pipeline of utility-scale solar power projects as well as a track record of successful solar deployment boasting over 9 GW of premium quality modules installed in over 70 countries during the past decade. Canadian Solar is committed to providing high-quality solar products and solar energy solutions to customers around the world."

Their most recent earnings report was March 5th. CSIQ reported Q4 results of $1.28 per share. That missed analysts' estimates. However, revenues soared +84% to $956.2 million, which was above expectations. CSIQ full-year 2014 results saw a record $239 million in earnings with revenues hitting $2.96 billion. They shipped 3.1 gigawatts worth of solar panels. This year CSIQ expects to ship 4.3GW of panels, a +39% improvement.

CSIQ raised their 2015 Q1 guidance above Wall Street estimates, which helps explain the spike in the stock price. Currently the company's full-year guidance is still below street estimates. In spite of this divergence between forecast and analysts' estimates Wall Street is still bullish. All ten of the analysts who cover the stock have a buy rating on CSIQ. The average 12-month price target is near $46.00. The point & figure chart is more optimistic and currently forecasting a long-term target of $66.50.

Technically shares of CSIQ have been building on a bullish trend of higher lows. They're also appear to be breaking out past resistance in the $36.00 area. Further gains could spark some short covering. The most recent data listed short interest at almost 10% of the 41.2 million share float. Tonight I am suggesting a trigger to open bullish positions at $37.05. This will likely be a two or three week trade. CSIQ will report earnings in mid May and we'll plan on exiting prior to the announcement.

Trigger @ $37.05

- Suggested Positions -

Buy CSIQ stock @ $37.05

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

Buy the MAY $37 CALL (CSIQ150515C37) current ask $1.95
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

NASDAQ Sets A New High

by James Brown

Click here to email James Brown

Editor's Note:
Wall Street's expectations for Q1 earnings were pretty low. Stocks have managed to rally on better than expected results. This has fueled another widespread advance. The NASDAQ composite set a new all-time closing high, above its March 2000 closing high.

DQ was stopped out. We closed the PBH trade this morning.

We want to exit the STRA trade tomorrow morning.

Current Portfolio:

BULLISH Play Updates

CDW Corp. - CDW - close: 39.02 change: +0.09

Stop Loss: 36.40
Target(s): To Be Determined
Current Option Gain/Loss: +1.0%
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

04/23/15: CDW is still bouncing off its rising 10-dma. Shares managed another new high by the closing bell. I would consider new positions at this time but keep in mind this trade may only last another 2 or 3 weeks.

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

DTS Inc. - DTSI - close: 36.83 change: -0.11

Stop Loss: 34.95
Target(s): To Be Determined
Current Option Gain/Loss: -0.9%
Entry on April 23 at $37.15
Listed on April 22, 2015
Time Frame: Exit PRIOR to earnings on May
Average Daily Volume = 166 thousand
New Positions: see below

04/23/15: DTSI spiked to a new high this afternoon. Shares hit our suggested entry point at $37.15 before paring its gains and eventually closing in the red. I would wait for a new rally past $37.15 before considering new bullish positions.

Trade Description: April 22, 2015:
DTSI is a small-cap technology stock that has rallied to new three-year highs. The small cap Russell 2000 index is up +5% this year. Shares of DTSI are outperforming with a +20% gain in 2015.

The company is considered part of the application software industry. The company describes itself as "DTS, Inc. (DTSI) is a premier audio solutions provider for high-definition entertainment experiences—anytime, anywhere, on any device. DTS' audio solutions enable delivery and playback of clear, compelling high-definition audio, which is incorporated by hundreds of licensee customers around the world, into an array of consumer electronic devices."

If you're curious, here's more details on DTSI, "From a renowned legacy as a pioneer in high definition multi-channel audio, DTS became a mandatory audio format in the Blu-ray Discâ„¢ standard and is now increasingly deployed in enabling digital delivery of compelling movies, music, games and other forms of digital entertainment to a growing array of network-connected consumer devices. DTS technology is in car audio systems, digital media players, DVD players, game consoles, home theaters, PCs, set-top boxes, smart phones, surround music content and every device capable of playing Blu-rayâ„¢ discs. Founded in 1993, DTS' corporate headquarters are located in Calabasas, California."

Earnings results from DTSI have consistently beat analysts' expectations. They have beaten estimates on both the top and bottom line the last four quarters in a row. They raised guidance with their Q2 and Q3 reports last year. Their most recent report was March 2nd when DTSI announced Q4 earnings of $0.34 a share. Revenues were $35.2 million. Their full year 2014 results saw sales up +10% to $130.6 million.

DTSI is forecasting 2015 sales to be in the $148-155 million range (about +14% to +19% growth). Earnings are forecasted to rise +23% in 2015.

The stock exploded higher on its Q4 results. Traders have been buying the dips since then. The point & figure chart is very bullish and projecting a $57.00 target. Shares displayed relative strength today with a +2.6% gain and a close at multi-year highs. Tonight I'm suggesting a trigger to launch small bullish positions at $37.15.

*small positions to limit risk* - Suggested Positions -

Long DTSI stock @ $37.15

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

Long JUN $40 CALL (DTSI150619C40) entry $0.95

04/23/15 triggered @ 37.15
Option Format: symbol-year-month-day-call-strike

Vipshop Holdings - VIPS - close: 29.87 change: +0.32

Stop Loss: 27.85
Target(s): To Be Determined
Current Option Gain/Loss: -0.9%
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

04/23/15: VIPS did not see any follow through on yesterday's pullback. Once again the stock is poised to breakout past resistance near $30.00. Investors may want to wait for a close above $30.15 before considering new bullish positions.

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

BEARISH Play Updates

Krispy Kreme Doughnuts - KKD - close: 18.86 change: +0.06

Stop Loss: 19.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 21, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 608 thousand
New Positions: Yes, see below

04/23/15: KKD is still drifting sideways under the $19.00 level. There is no change from my prior comments. Our suggested entry point for bearish positions is $17.90.

Trade Description: April 21, 2015:
Earlier this year everyone was speculating that the multi-year lows in gasoline prices would be bullish for consumer spending, especially at restaurants. Thus far that premise hasn't really panned out. Gasoline prices remain $1.00 lower than they were a year ago but restaurant stocks as a whole are not seeing a significant increase in sales. Investor sentiment on shares of KKD seems to have gone stale with shares down -15% from their 2015 highs.

KKD is in the services sector. They're part of the restaurant industry. According to the company, "Krispy Kreme is a leading branded specialty retailer and wholesaler of premium quality sweet treats and complementary products, including its signature Original Glazed® doughnut. Headquartered in Winston-Salem, N.C., the Company has offered the highest quality doughnuts and great tasting coffee since it was founded in 1937. Today, there are over 980 Krispy Kreme shops in more than 20 countries around the world."

Their 2015 Q3 earnings back in December were in-line with estimates while revenues came in below analysts' expectations. Yet KKD offered a bullish guidance for the rest of their fiscal year. Shares sold off anyway in spite of the improved guidance.

Their most recent earnings report was March 11th when KKD announced its 2015 Q4 results. Earnings were up a significant +36% to $0.17 a share. That was one cent above Wall Street estimates. Revenues rose +11.3% to $125.4 million. Unfortunately that missed expectations for $128 million. Domestic same-store sales were up +3.6% while international same-store sales were down -2.6% most likely due to the strong U.S. dollar.

KKD management expects their 2016 fiscal year results to be in the $0.79-0.85 range. That is already accounting for low gasoline prices, which is still expected to boost sales throughout the remainder of the year. The bad news is that Wall Street was looking for earnings of $0.85 per share. The combination of the revenue miss (second quarter in a row) and the lowered guidance helped send KKD's stock lower.

Bulls could argue that KKD is growing and sales will improve as they expand. In fiscal year 2016 KKD does plan to open several new stores including 10 to 15 new company-owned stores, 10 to 20 new domestic franchise stores, and 95 to 110 net new international franchise locations. Unfortunately, if the stock's chart is any indication, investors aren't buying it.

Currently the stock has fallen toward significant support in the $18.00-18.50 zone, which is underpinned by the simple 200-dma. This area is also support on the point & figure chart, which is currently bearish and forecasting at $16.00 target. If KKD breaks down under $18.00 it could signal a drop toward its 2014 lows near $15.00.

Tonight we are suggesting a trigger to open bearish positions at $17.90. I want to point out that April 23rd and 24th could be volatile for KKD. Much larger rivals Dunkin Donuts (DNKN) and Starbucks (SBUX) both report earnings on April 23rd. Their quarterly results could have an influence on shares of KKD.

Trigger @ $17.90

- Suggested Positions -

Short KKD stock @ $17.90

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

Buy the AUG $18 PUT (KKD150821P18)

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

Solera Holdings - SLH - close: 50.39 change: -0.10

Stop Loss: 52.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 20, 2015
Time Frame: 3 to 4 weeks, exit PRIOR to earnings in May
Average Daily Volume = 536 thousand
New Positions: Yes, see below

04/23/15: SLH underperformed the broader market with a minor decline. We are still on the sidelines waiting for a breakdown. Our suggested entry point for bearish positions is $49.40.

Trade Description: April 20, 2015:
Investor sentiment appears to have soured on SLH. The longer-term trend is now down. The company is in the technology sector. They're considered part of the application software industry.

Here's a brief company description, "Solera is a leading provider of risk and asset management software and services to the automotive and property marketplace, including the global P&C insurance industry. Solera is active in over 70 countries across six continents. The Solera companies include: Audatex in the United States, Canada, and in more than 45 additional countries; Informex in Belgium and Greece; Sidexa in France; ABZ and Market Scan in the Netherlands; HPI, CarweB and CAP Automotive in the United Kingdom; Hollander serving the North American recycling market; AUTOonline providing salvage disposition in a number of European and Latin American countries; IMS providing medical review services; Explore providing data and analytics to United States property and casualty insurers; Service Repair Solutions, a joint venture with Welsh, Carson, Anderson & Stowe, that provides solutions for the service, maintenance and repair market; and I&S, a provider of software and business management tools, third-party claims administration, first notice of loss and network management services to the U.S. auto and property repair industries, specializing in glass claims."

Their most recent earnings report was the 2014 Q4 results on February 5th. Wall Street was expecting a profit of $0.79 a share on revenues of $283 million. SLH missed estimates with 40.77 a share. Revenues were up +18% but came in just a hair below expectations (essentially in-line). Unfortunately management lowered their earnings and revenue guidance for 2015 below Wall Street estimates.

Today SLH is trading with a bearish trend of lower highs and lower lows. The point & figure chart is bearish and forecasting at $44.00 target. Currently the stock is hovering just above round-number support at the $50.00 level. Last Friday's intraday low was $49.65. Tonight we are suggesting a trigger to launch bearish positions at $49.40. We'll try and limit our risk with an initial stop loss at $52.15. We will plan on exiting prior to earnings in mid May (no official date yet).

Trigger @ $49.40

- Suggested Positions -

Short SLH stock @ $49.40

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

Buy the JUN $50 PUT (SLH150619P50)

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

Strayer Education, Inc. - STRA - close: 54.34 change: +0.19

Stop Loss: 56.15
Target(s): To Be Determined
Current Option Gain/Loss: -2.6%
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

04/23/15: I am pulling the plug on our STRA trade. Downward momentum has stalled. You could argue shares have found a bottom over the past two weeks. I'm suggesting an immediate exit tomorrow morning.

*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

04/23/15 prepare to exit tomorrow morning.
04/07/15 triggered @ $52.95
Option Format: symbol-year-month-day-call-strike

Tessera Technologies Inc. - TSRA - close: 39.57 change: -0.27

Stop Loss: 40.15
Target(s): To Be Determined
Current Option Gain/Loss: -5.8%
Entry on April 17 at $37.40
Listed on April 16, 2015
Time Frame: Exit PRIOR to earnings on May 5th
Average Daily Volume = 585 thousand
New Positions: see below

04/23/15: The bounce in TSRA finally stalled after a four-day rally. Shares are hovering just below resistance at $40.00.

I am not suggesting new positions at this time.

Trade Description: April 16, 2015:
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.

- Suggested Positions -

Short TSRA stock @ $37.40

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

Long MAY $37 PUT (TSRA150515P37) entry $1.55

04/17/15 triggered @ 37.40
Option Format: symbol-year-month-day-call-strike

Olympic Steel Inc. - ZEUS - close: 11.48 change: -0.69

Stop Loss: 12.30
Target(s): To Be Determined
Current Option Gain/Loss: +7.8%
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

04/23/15: Ouch! ZEUS erased about three day's worth of losses with a big +6.39% bounce. The stock was oversold and due for a relief rally. The advance today stalled at short-term technical resistance at the simple 10-dma.

I'm suggesting we exit near $10.00 if we get the chance. Keep in mind we want to exit prior to earnings on May 1st.

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

04/22/15 new stop @ 12.30
04/08/15 triggered @ $12.45


Daqo New Energy Corp. - DQ - close: 28.86 change: -0.20

Stop Loss: 28.75
Target(s): To Be Determined
Current Option Gain/Loss: -8.9%
Entry on April 20 at $31.55
Listed on April 18, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 127 thousand
New Positions: see below

04/23/15: Our DQ trade did not pan out. We were triggered on April 20th, which happened to be a bearish reversal. Shares of DQ have struggled since then and hit our stop loss at $28.75 today.

*small positions to limit risk* - Suggested Positions -

Long DQ stock @ $31.55 exit $28.75 (-8.9%)

04/23/15 stopped out
04/20/15 Caution: DQ has produced a potential one-day bearish reversal pattern
04/20/15 triggered @ $31.55


Prestige Brands Holdings - PBH - close: 42.73 change: -0.43

Stop Loss: 42.85
Target(s): To Be Determined
Current Option Gain/Loss: +1.9%
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

04/23/15: Shares of PBH unexpectedly started to breakdown yesterday. In last night's newsletter we decided to exit immediately. PBH continued to underperform today with a -0.99% decline. Shares opened at $43.15 this morning.

- Suggested Positions -

Long PBH stock @ $42.35 exit $43.15 (+1.9%)

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

JUL $45 CALL (PBH150717C45) entry $1.55 exit $0.80 (-48.4%)

04/23/15 planned exit
04/22/15 prepare to exit tomorrow morning
04/18/15 new stop @ 42.85
03/21/15 new stop @ 40.35
03/20/15 triggered @ 42.35
Option Format: symbol-year-month-day-call-strike