Option Investor

Daily Newsletter, Monday, 4/27/2015

Table of Contents

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

Market Wrap

Trying To Break Out

by Thomas Hughes

Click here to email Thomas Hughes
Another mixed day of trading as earnings support the market and the FOMC provides resistance


The bulls charged right out of the gates today as earnings trends help buoy stocks. The downside is that resistance was met and sent the bulls ducking for cover. The FOMC meeting starts tomorrow, the policy statement due out in less than two days, and may be the reason why the bulls were unable to sustain this mornings rally.

International indices were largely higher in today's session. In Asia/Pacific China and Australia hit new highs while Japan held steady just below last week's break-even point. In Europe indices closed more than 1% higher on earnings and a change in the Greek debt negotiations; the Greek prime minister has replaced the team handling the negotiations. The move is seen as a positive and possibly leading to rapid progress in the talks.

Market Statistics

Futures traded to the upside throughout the early pre-opening session. The S&P was indicated about 0.25% higher and showed some strengthening into the opening bell. There was little in the way of market moving news during the early morning, no economic reports and no significant earnings reports, to help or hinder trading.

The bulls started their charge as soon as the opening bell sounded. The indices set a new intra-day high, and today's daily high, within the first three minutes of trading. From that point the market trend sideways until just after lunch when the indices fell below break-even levels. Afternoon trading saw the indices move lower and reach today's low around 3:30PM. The indices bounced from there and into the close but did not regain today's losses.

Economic Calendar

The Economy

Moody's Survey of Business Confidence has surged to a new high. The index jumped 2.1 points from last week's figures continuing the trend set last year. The index has been making new highs steadily since the end of last year. In his summary Mr. Zandi, Moody's Chief Economist, reports that ...

“Global business sentiment remains unwavering, at close to record highs, especially in the U.S. Weaker U.S. economic growth in recent months is not evident in the survey results. Hiring has never been stronger, and sales and investment spending are robust. Credit is widely available, and pricing is sturdy, despite heightened deflation concerns in much of the developed world.”

There was no economic data released today but the rest of the week is going to be jam packed. Tomorrow is consumer confidence and the Case-Shiller 20 City Index. Wednesday is the first estimate for 1st quarter GDP as well as the FOMC meeting and Pending Home Sales. Thursday is weekly jobless claims, personal income/spending, Employment Cost Index and Chicago PMI. Friday wraps up the week with Auto Sales, ISM, Construction Spending and Michigan Sentiment.

I am leaning toward the FOMC meeting, PMI and Michigan Sentiment as being most important. The FOMC meeting will have a very large impact on forward outlook. The PMI and Sentiment numbers are for April, all other data is 1st quarter related and comes after the GDP announcement so I think will affect the revisions to GDP more than future outlook.

FactSet reports that 201 S&P 500 companies have reported earnings so far this season. According to them 73% of those reporting so far have beaten projections for average earnings growth while only 47% are beating expectations for revenue. The current blended rate for 1st quarter earnings growth is now -2.8%, 2% better than at its lowest level of -4.8%. On the downside the expected blended rate for revenue growth is worsening, but only marginally. Ex-energy, by my calculation, earnings growth is now 3.6% and could go as high as 6%, Factset is projecting 5.6%. I find it amusing that they are now providing data on earnings growth ex-energy, as I have been tracking for some time.

The Oil Index

Oil prices held near to flat in today's session despite choppy trading. WTI moved marginally higher to test current resistance while Brent fell just below Friday's settlement price. There are growing signs that production in the US could be nearing a peak but so far supply remains high and steady. Rig counts have fallen for the past 5 months, and there are isolated areas of disruption in global production such as in Libya, but still no real sign of declining supply. WTI is now trading about a dollar below the 6 month high with support in the range of $50-$52.50.

The Oil Index gained just over 0.25% to trade at resistance. The index is now making the 2nd of two attempts to move above the 5 month high with weakening indicators. Both the MACD and stochastic have peaked in the near term and suggestive of a possible top. Resistance is at 1,435 with support near 1,400, 1,350 and 1,300. This week is going to be important for the energy sector as many of the top integrated oil companies will be reporting earnings. Tomorrow we get BP, Thursday is Connoco-Phillips and Exxon-Mobil, Friday is Chevron.I think it may be expected these companies will do better than projected, if they do not deliver on this expectation we could see a retreat to the long term trend line near 1,300.

The Gold Index

Gold prices remain volatile as traders and investors weigh the upcoming FOMC meeting against economic trends, dollar strength and the longer term outlook for inflation. The metal retested support in the $1175-$1185 range last Friday and as expected support was found. Today the metal shot up by nearly 2.5% to regain the upper side of $1200. I am expecting more volatility this week, FOMC related to be sure, with near term direction dependent on their stance on interest rates. If they are dovish the dollar may weaken and gold may go up; if they are hawkish the dollar may strengthen and gold may retest support.

The gold miners are getting a boost from what I will call relatively stable gold prices. There is volatility in price but it has been hanging near $1200 and above the long term low for over a month. Today the Gold Miners ETF GDX gained over 4% intra-day in a move confirming support along the short term moving average and the rising support line connecting the Nov/Dec and March bottoms. Today's action also confirms resistance at the $20 level.

The ETF is winding up within a narrowing range with bullish indicators and looks likely to retest resistance in the near term. This move may be sparked or hindered by earnings which are due out this week from a number of top producers including GoldCorp and Randgold, both scheduled for Thursday. Barrick Gold reported after the closing bell today and while earnings were a bit weak forward guidance is positive.

In The News, Story Stocks and Earnings

Barrick Gold traded more than 5% higher in today's session, driven on the spike in gold prices as well as positive earnings expectations, but closed with a gain of only 2.5%. Earnings were reported after the closing bell and did not meet expectations. The company was expected to post earnings of $0.10 per share and fell short by a nickel. Despite the miss execs say production levels and all-in-sustained-costs are within targets in a reaffirmation of full year guidance. The company is expecting cost to decline and production to increase in the second of half of the year.

Apple also reported after the closing bell. The world's largest company by market cap was expected to earn $2.19 per share and blew away the estimates on sales of iPhones. Earnings and revenue were both better than expected; EPS was $0.17 ahead of estimates with revenue more than $1 billion ahead of estimates. The company had only been expected to report about 55 million iPhone units shipped; actual shipments were closer to 63 million. The company also increased its capital return program, by $200 billion, and is increasing the dividend by 11%. Shares of the stock traded higher throughout the day, testing the current all-time high, and then moved higher in the after-hours session.

Overstock.com reported weaker than expected earnings. The company was expected to report $0.20 per share but fell well short despite notable increases in revenue, gross profit and margins. Revenue increased 17%, gross profits increased 18% and margins increased by 18 basis points. The stock had been trading down all day and moved lower after the report. This one is looking weak with support targets near $22.50 and $22.00.

Rent-A-Center is another name making headlines in after-hours trading. The company reported a bottom line beat that helped to send the stock higher. EPS beat by a penny on revenues which increased by 5.9% but fell short of estimates. The company reported that initiatives to increase profitability are in progress with no changes to forward guidance. Shares of the stock gained 1.88% in today's session and shot higher in after hours trading.

The Indices

The indices tried to move higher today, the SPX and NASDAQ Composite at least setting new intraday highs, before resistance took over and sent testing support. The transports have been the laggard of late and today was no different. Today's losses were led by the Dow Jones Transportation Average with a -0.86% decline. The index fell just below the short term 30 day moving average and may experience some more near term weakness. The indicators are both bullish yet consistent with a peak that may indicate a return to support or a consolidation. The index is sitting on near term support, near 8,800, with longer term support at the bottom of the 6 month trading range near 8,600.

The NASDAQ Composite was the next biggest decliner in today's session. The tech heavy index lost -0.63% and is now sitting just above potential support at the recently broken all time high. The indicators are bullish but also consistent with a peak that could lead to a further test of support or consolidation. I am leaning toward consolidation at this time due to strength in the stochastic oscillator and today's report from Apple. There may be near term weakness with support targets near 5,055, 5,000 and just below that near the short term moving average but I remain bullish and looking to buy on the dip.

The S&P 500 dropped only -0.41% today in a move that highlights resistance at the current all-time high. The index moved up to set a new intra-day high but was pushed back down to support. The indicators are still bullish so it may be a near term event. However, stochastic has started to roll over at the upper signal line which is a concern. If this continues it would be a confirmation of resistance at the all-time high and may lead to further downside. Current support target is the long term trend line confirmed by the short term moving average.

The Dow Jones Industrial Average brings up the rear in today's decline. The blue chip index lost -0.23% in a move that leaves it at support. The index is sitting just above the the 18,000 level, the December all-time high and the short term moving average so support looks strong. The indicators are bullish but weak right now so upside movement is questionable. If it is able to move up off of support next resistance is near 18,250.

The indices are still in a holding pattern. They are trying to break out to new highs but there are headwinds, namely the FOMC, rate hike speculation and a mild first quarter. The thing to remember is that trends are up, both in the market and in the economy, with positive earnings expectations into the end of the year and next year. Because of this I remain bullish; because of the FOMC I remain wary and cautious.

The market can be crazy and irrational, the FOMC holds a lot of power over that craziness, so with the meeting starting tomorrow, and with all the speculating about interest rate increases, Wednesday could turn into a wild day of trading. On one extreme is them backing off from their intention to raise rates this year, on the other is a firm indication rates will rise in June. In between lie many possibilities all with the power to move the market. . . in one direction or the other.

Until then, remember the trend!

Thomas Hughes

New Plays

Broken Biotech

by James Brown

Click here to email James Brown


OvaScience, Inc. - OVAS - close: 28.33 change: -2.07

Stop Loss: 31.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 27, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 725 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
A report published by Allied Market Research suggested the global in-vitro fertilization (IVF) market was about $9 billion in 2012. Demand is expected to grow the market to more than $21 billion by 2020. OVAS believes their AUGMENT treatment is a huge step in boosting a woman's ability to get pregnant.

Here's a brief description of the company, "OvaScience (OVAS) is a global fertility company dedicated to improving treatment options for women around the world. OvaScience is discovering, developing and commercializing new fertility treatments because we believe women deserve more options. Each OvaScience treatment is based on the Company’s proprietary technology platform that leverages the breakthrough discovery of egg precursor (EggPCSM) cells – immature egg cells found inside the protective ovarian lining. The AUGMENTSM treatment, a fertility option specifically designed to improve egg health, is available in certain IVF clinics in select international regions outside of the United States. OvaScience is developing the OvaPrimeSM treatment, which could increase a woman's egg reserve, and the OvaTureSM treatment, a potential next-generation IVF treatment that could help a woman produce healthy, young, fertilizable eggs without hormone injections."

Excitement over the company's prospects helped drive the stock from less than $10 in August 2014 to an all-time high of $55 in late March 2015. Unfortunately, the stock has reversed lower as the market tries to decipher the data on OVAS' progress. The FDA has prevented OVAS' treatment in the U.S. Critics complain that OVAS has not published any animal studies. There is concern that the procedure might endanger the child. Thus far the handful of tests done outside the U.S. look more like experiments than clinical trials.

Investors have decided to shoot first and ask questions later. That explains the sudden and sharp reversal lower in OVAS' stock. It's not just traders who have turned cautious. Zacks noted that multiple analysts have reduced their estimates on the company.

Technically OVAS is in a bear market with a -47% drop from its closing high. The point & figure chart is bearish with a long-term target at $7.00. The oversold bounce in early April failed and now OVAS is about to breakdown below technical support at its 200-dma. The next stop could be $20.00 if OVAS does close below support near $28.00.

Tonight we are suggesting a trigger to launch small bearish positions at $27.65. We want to limit our position size because this is a high-risk, more aggressive trade. Biotech stocks are normally risky since we never know when the next headline might send the stock soaring or crashing. Traders may want to use options to limit their risk.

Trigger @ $27.65

- Suggested Positions -

Short OVAS stock @ $27.65

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

Buy the JUN $25 PUT (OVAS150619P25) current ask $2.80
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

Early Gains Fade As Stocks Reverse

by James Brown

Click here to email James Brown

Editor's Note:
Monday's early morning rally reversed. All of the major indices closed in the red. The small cap Russell 2000 is flirting with a bearish breakdown below Its trend line of support.

We closed the VIPS trade this morning.
MBLY and SLH both hit our entry triggers.

Current Portfolio:

BULLISH Play Updates

CDW Corp. - CDW - close: 38.73 change: -0.14

Stop Loss: 36.40
Target(s): To Be Determined
Current Option Gain/Loss: +0.2%
Entry on April 13 at $38.65
Listed on April 09, 2015
Time Frame: Exit PRIOR to earnings on May 7th
Average Daily Volume = 1.0 million
New Positions: see below

04/27/15: CDW dipped to short-term technical support at its 10-dma and bounced. The stock did not make it back into positive territory. I don't see any changes from my previous comments.

This trade only has a couple of weeks left. CDW has earnings coming up on May 7th and we plan to exit prior to the announcement.

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

Canadian Solar Inc. - CSIQ - close: 35.65 change: -0.71

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

04/27/15: Solar energy stocks had a rough day. CSIQ lost -1.95%. If this weakness continues tomorrow we might remove CSIQ as a candidate. Currently our suggested entry point to launch bullish positions is $37.05.

Trade Description: April 23, 2015:
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)

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

DTS Inc. - DTSI - close: 37.12 change: +0.05

Stop Loss: 34.95
Target(s): To Be Determined
Current Option Gain/Loss: -0.1%
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

04/27/15: DTSI dipped to its 10-dma and rebounded back toward its recent highs. The stock did struggle near last week's highs. Investors may want to look for a rise past $37.40 before initiating new 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

Mobileye N.V. - MBLY - close: 47.57 change: -0.05

Stop Loss: 44.90
Target(s): To Be Determined
Current Option Gain/Loss: -1.4%
Entry on April 27 at $48.25
Listed on April 25, 2015
Time Frame: Exit PRIOR to earnings in late May
Average Daily Volume = 3.1 million
New Positions: see below

04/27/15: Our new play on MBLY is open. Shares rallied to new highs this morning. Unfortunately, like most of the market, MBLY's gains faded. Shares held up reasonably well to close virtually unchanged.

Traders may want to look for a new rally past $48.50 before initiating new positions.

Trade Description: April 25, 2015:
The future of hands free driving is a lot closer than you might think. MBLY is leading the charge. Its technology is already in more than three million cars made by companies like BMW, General Motors, and Tesla.

What exactly does this technology due? DAS stands for driver assistance systems. Sometimes you might see it called ADAS for advanced driver assistance systems. This new technology helps drivers avoid collisions with other vehicles, pedestrians, bicyclists, and more while also alerting the driver to road signs and traffic lights.

The company website describes Mobileye as "a technological leader in the area of software algorithms, system-on-chips and customer applications that are based on processing visual information for the market of driver assistance systems (DAS). Mobileye's technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving."

MBLY said their technology will be available in 160 car models from 18 car manufacturers (OEMs). Further, Mobileye's technology has been selected for implementation in serial production of 237 car models from 20 OEMs by 2016.

The company is already developing a system for autonomous driving or hands free driving. They currently plan to launch an autonomous system in 2016 that will work at highway speeds and in congested traffic situations.

MBLY stock came to market in August 2014. Demand was strong enough that they upped the number of shares available from around 27 million to 35.6 million shares. They raised the IPO price from the $22 range to $25. This valued MBLY at $5.3 billion. The first day of trading saw MBLY opened at $36.00. Two months later MBLY traded at $60.00.

The IPO excitement has faded but MBLY's valuation has grown. There are now 216.6 million shares outstanding and the company's market cap is now more than $10 billion.

It's easy to see why investors are optimistic on MBLY. Annual revenues have soared from $19.2 million in 2011 to $143.6 million in 2014. Their revenues last year rose +77% from 2013. Currently a poll of analysts by Thomson Reuters is forecasting sales to rise +50% in 2015 to $218.3 million. Earnings are forecasted to surge +95%.

Last year the New York Post recently ran an article discussing how the White House might generate a bullish tailwind for MBLY. The National Highway Traffic Safety Administration issued a research report that estimated ADAS type of technology could eliminate almost 600,000 left-turn and intersection crashes a year. They report also suggested that adding FCAM and lane departure technology on big vehicles like over the road trucks could reduce accidents with these huge vehicles by up to 25%. Following this report the White House said they would draft new rules that required this sort of tech in new vehicles.

Most of Wall Street analysts seem bullish. Industry experts forecast the camera-based ADAS market to grow +37% CAGR from 2014 to 2020. Last month Goldman Sachs upgraded the stock to a buy. They believe MBLY will see a 34% CAGR in sales through 2020 and will have 65% of the market by then. A couple of weeks ago a Morgan Stanley analyst raised their price target to $68. They believe the street's 2015 estimates for MBLY are too low after the company delivered super strong growth in the last couple of quarters.

Technically the stock broke out from a five-month down trend in March. The rally has produced a buy signal on the point & figure chart with a $69.00 target. Shorts are probably panicked. The most recent data listed short interest at 15% of the 162.6 million share float. MBLY's stock has been showing relative strength the last few weeks. Currently it's hovering just below the $48.00 level. We are suggesting a trigger to launch bullish positions at $48.25.

- Suggested Positions -

Long MBLY stock @ $48.25

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

Long JUN $50 CALL (MBLY150619C50) entry $2.40

04/27/15 triggered @ 48.25
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

Solera Holdings - SLH - close: 48.43 change: -1.11

Stop Loss: 52.15
Target(s): To Be Determined
Current Option Gain/Loss: +1.8%
Entry on April 27 at $49.30
Listed on April 20, 2015
Time Frame: Exit PRIOR to earnings on May 6th
Average Daily Volume = 536 thousand
New Positions: see below

04/27/15: Our SLH is open and off to a good start. The plan was to launch positions at $49.40 but our play was triggered with the gap down at $49.30 this morning. SLH fell to a -2.2% decline on the session.

Please note that this will be a short-term trade. SLH has earnings coming up on May 6th. We plan to exit prior to their announcement.

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).

- Suggested Positions -

Short SLH stock @ $49.30

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

Long JUN $50 PUT (SLH150619P50) entry $2.85

04/27/15 triggered on gap down at $49.30, trigger was $49.40
Option Format: symbol-year-month-day-call-strike

Tessera Technologies Inc. - TSRA - close: 38.19 change: -0.21

Stop Loss: 40.15
Target(s): To Be Determined
Current Option Gain/Loss: -2.1%
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

04/27/15: The early morning rally attempt in TSRA faded near Friday's highs. Shares reversed into a -0.5% decline.

I am not suggesting new positions. TSRA has earnings coming up on May 5th and we plan to exit prior to the announcement.

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: 11.47 change: -0.05

Stop Loss: 12.30
Target(s): To Be Determined
Current Option Gain/Loss: +7.9%
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

04/27/15: ZEUS rallied up to tag technical resistance at its 20-dma and then reversed. Shares closed virtually unchanged on the day but the action is definitely bearish.

I'm not suggesting new positions. We only have a few days left. ZEUS has earnings coming up on May 1st. I am suggesting we exit on Wednesday, April 29th.

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

04/25/15 prepare to exit on Wednesday, April 29th.
04/22/15 new stop @ 12.30
04/08/15 triggered @ $12.45


Vipshop Holdings - VIPS - close: 29.81 change: +0.86

Stop Loss: 27.85
Target(s): To Be Determined
Current Option Gain/Loss: -3.5%
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

04/27/15: It was another volatile day for shares of VIPS. The stock gapped open higher at $29.09 and then sprinted to a new all-time high at $30.72 in the first 45 minutes of trading. The rally faded but shares still posted a +2.9% gain on the session.

We had already decided to close this trade at the opening bell this morning after VIPS' lack of direction.

- Suggested Positions -

Long VIPS stock @ $30.15 exit $29.09 (-3.5%)

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

MAY $30 CALL (VIPS150515C30) entry $1.94 exit $0.85 (-56.2%)

04/27/15 planned exit
04/25/15 prepare to exit on Monday morning
04/16/15 new stop @ 27.85
04/09/15 triggered @ $30.15
Option Format: symbol-year-month-day-call-strike