Option Investor

Daily Newsletter, Tuesday, 4/28/2015

Table of Contents

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

Market Wrap

Rumors of Wars

by Jim Brown

Click here to email Jim Brown

It was a volatile morning because of geopolitical headlines but the markets quickly rebounded from the panic lows. Iran and Russia were making geopolitical waves again but investors continued to use any dip as a buying opportunity.

Market Statistics

News hit the wires shortly after the open that Iran had fired on, boarded and seized a U.S. Navy cargo ship in the Persian Gulf. The Dow immediately sold off from a gain of about 50 points to -122 at the lows. The rumor turned out to be untrue. Iran did fire on, board and seize the Maersk Tigris container ship and forced it deeper into Iranian territorial waters in the vicinity of Larak Island near the Strait of Hormuz. The ship was traveling from Jeddah in Saudi Arabia to Jebel Ali in the UAE.

When it was revealed that it was not a U.S. Navy cargo ship the market rallied off its lows. However, the Maersk vessel is carrying a Marshal Islands flag and the U.S. has "full authority and responsibility for security and defense of the islands" according to the State Department. The Marshal Islands did belong to the USA at one time but are now a sovereign nation under the protection of the USA. The Navy directed the destroyer Farragut to proceed at "best speed" to the location of the Maersk vessel and also sent aircraft to observe the situation. Source

This may be an operation by Iran to save face after their convoy of ships thought to be carrying arms for the Houthi rebels in Yemen was forced to turnaround after a flotilla of U.S. warships arrived on the scene to prevent that from happening. By seizing the unarmed Maersk vessel Iran can make some stupid claim about a violation of its international waters and try to remind countries in the region they still have a military and should not be ignored. Iran constantly threatens to shutdown the Strait of Hormuz as a "countermeasure to Western aggression" but rarely does anything other than talk about it.

With Iran and Saudi Arabia in a proxy war in Yemen this could have been an escalation of that war since the ship was coming from Saudi Arabia. The rules for transiting the strait were set out in a 1982 UN convention. Any vessel can use the strait as long as it proceeds without delay and it not polluting the waters.

I think the Persian Gulf countries are moving ever closer to a real shooting war rather than the proxy war in Yemen where Iran backs the Houthi rebels and Saudi Arabia backs the Yemen government.

Later sources claimed the vessel was seized by the Iranian Revolutionary Guard (IRGC), which is separate from the Iranian navy and is typically more provocative than the Iranian navy. The IRGC has its own fleet of boats that patrol the Strait of Hormuz.

Even later the Iranian Fars News Agency said the "American trade vessel" had been seized and confiscated for trespassing on Iran's territorial waters. No big surprise there since they need to justify the action in some form.

Overnight Finland dropped depth charges on an unidentified submarine off the coast of Helsinki after following the sub on Monday and again on Tuesday morning. The sub was thought to be Russian. The Finish Navy said the depth charges were the size of grenades and not intended to harm the sub but to warn that it had been spotted and should leave the area. Source

Sweden, Norway, Finland, Denmark and Iceland made an unprecedented hawkish joint statement several days ago citing the Russian challenge as grounds to increase defense cooperation. Moscow immediately responding saying moves by Finland and Sweden towards closer ties with NATO was of "special concern" to Russia.

The Dow shook off the Iranian news and rallied to gain +72 points and close right on resistance at 18,100. The Nasdaq gave back -5 to close at 5,055. The Nasdaq loss was due to continued declined in the biotech sector and a -$2 decline in Apple.

Also weighing on the market at the open was some negative economic news. The Consumer Confidence for April declined -6.2 points from 101.4 to 95.2 and a four-month low. Expectations for the labor market worsened and consumers said they were holding off on purchases of cars, appliances and vacations.

The present conditions component declined from 109.5 to 106.8. The expectations component declined from 96.0 to 87.5 and the lowest level since September. Those respondents who thought jobs were plentiful fell from 21.0% to 19.1%. Future income expectations also declined with those expecting an increase falling from 18.8% to 18.3% and those expecting a decrease in income rising from 9.7% to 11.2%.

Those planning on buying a car declined from 12.7% to 10.8%. Those thinking about buying an appliance or big screen TV declined from 49.6% to 46.8%. Those considering a home purchase rose from 4.8% to 5.2%.

Analysts remain confused on why consumers are not spending their gasoline savings. Retail sales remain weak and confidence is declining.

The Richmond Fed Manufacturing Survey rebounded slightly from -8 in March to -3 for April. New orders improved from -13 to -6 and unfilled orders improved from -12 to -8. This is the third consecutive month that new orders have contracted. Capital expenditure plans declined from 32 to 26 and the lowest reading for 2015. Analysts blame the strong dollar for the decline in manufacturing orders.

In the separate Services Survey the index declined from 12 to 2 and the lowest level since April 2014. Revenues contracted from +12 to -1. This is for April so you can't blame the declining activity on the weather.

The calendar for tomorrow is headed by the FOMC announcement at 2:PM. Analysts don't believe there will be a rate hike until September at the earliest because of the weak economic numbers but they do believe the Fed will further modify their statement to suggest it could come as early as June. This is the Fed trying to talk the market up and warn that time is growing short. They don't want the market to be surprised when the hike finally comes.

The GDP estimates continue to decline in the press but the consensus estimate remains in the +1% growth range. Since the Atlanta Fed real time GDPnow is projecting +0.1% it will be interesting to see what number really appears on Wednesday. Unless it is dramatically different from 0%-1% growth it probably will not phase the market. A weak number is already expected.

The market was roiled by Twitter (TWTR) earnings about 45 min before the close after they were inadvertently released early on the Twitter website. The market was made aware when Data scraper firm Selerity tweeted the numbers. Initially everyone thought there had been a leak but Selerity quickly pointed out that there was "no leak and no hack" as the data was on Twitter's website. The stock imploded and was eventually halted.

Twitter posted earnings of 7 cents compared to estimates for 4 cents. Revenue of $436 million missed estimates for $458 million. The company warned that "ad engagement growth" declined significantly. Twitter cut its full year revenue forecast from $2.3-$2.35 billion to $2.17-$2.27 billion. Analysts were expecting $2.37 billion.

The number of monthly active users rose +18% to 302 million compared with 20% growth in the prior period. Mobile users accounted for 80% of the traffic. Analysts reviewing the report were bearish saying it appeared Twitter was experiencing significant subscriber churn and could not keep new users. With their advertising model failing to grow revenue the outlook is worsening.

Shares declined -18% just before the close.

Aetna (AET) reported earnings of $2.39 that blew away estimates for $1.96. Earnings rose +21% and revenue rose +8% to $15.1 billion but missed estimates for $15.5 billion. They ended the quarter with 23.7 million members, up +4.2%. The company raised guidance from "at least $7.00" to a range of $7.20-$7.40. That is the second guidance raise in 2015.

GoPro (GPRO) reported adjusted earnings of 24 cents that easily beat the estimate for 18 cents. Revenue rose +54% to $363.1 million and beat estimates for $341 million. GoPro has posted record earnings and revenue in each of the three quarters since it went public. Shares declined initially in after hours to $43.57, -$4, but then rallied to $52 after closing the regular session at $47.

The company said it was acquiring Kolor, a French company and a leader in virtual reality and spherical media solutions. GoPro said the combination of several cameras along with the Kolor software would "transform entertainment, education and other industries."

UPS reported earnings that rose +14% to $1.12 that beat estimates for $1.09. Revenue rose +1% to $13.98 billion but missed estimates for $14.32 billion. UPS was hurt by a -5% decline in international revenue, which was due to the strong dollar. The company said it decided not to renew an undisclosed number of shipping contracts that were not profitable enough. They did not identify the shippers but said the packages were light weight and low revenue per box. They forecast full year earnings between $5.05-$5.30. UPS shares rallied $3.34 on the news.

Panera Bread (PNRA) crashed and burned after reporting a -25% decline in earnings to $1.20 per share. Revenue was up +7% to $649 million. Same store sales were up +2% for the current quarter. They reiterated their guidance for earnings to be flat to down in the mid to high single digit percentages from 2014. Shares initially fell -$15 but rebounded to close down -$5.

Buffalo Wild Wings (BWLD) reported earnings of $1.52 that missed estimates for $1.66. Revenue of $440.6 million also missed estimates for $453.9 million. The company said higher chicken wing costs squeezed profits. Wing costs rose +41% from last year and they are only going higher as a result of the 10 million chickens killed by the bird flu. Shares declined -$18 on the news.

Wynn Resorts (WYNN) reported earnings of 70 cents compared to estimates for $1.34. This was a major unexpected loss and shares were crushed in afterhours for a -$13 loss. Revenue of $1.09 billion was also well short of estimates at $1.21 billion. The casino company said a steep decline in betting in Macau was to blame. Steve Wynn said the depression in the VIP market in Macau was ongoing. The company cut its dividend from $1.50 to 50 cents with Wynn saying it was foolish to issue dividends on borrowed money. Revenue in Macau declined -38% to $705.4 million. They have another $4.1 billion property opening there in the first half of 2016. Do you think Steve is having second thoughts about that spending today?

Wednesday's earnings calendar is highlighted by Anthem, Mastercard, MGM and Time Warner. Thursday is the big day this week and then the number of earnings reports begin to decline starting next week.

Of interest to energy investors will be the Conoco and Exxon earnings on Thursday and Chevron on Friday. What they say about the prospects for production and oil prices could set the sector on fire or bury it under a ton of pessimism.

Crude oil continues to hover around the $57 mark ahead of the inventory report on Wednesday. The first time we have a draw from inventories instead of a build we should see crude prices begin to move higher.

The weak economic data finally pushed the dollar below support and this is strange since the Fed is probably going to try and talk up rates on Wednesday. Apparently investors are fixated on the constantly slipping date for the first rate hike. If the Fed itself actually says something about pushing the date farther into the future the dollar could decline significantly.

The falling dollar has lifted the price of gold by $36 in just the last two days. This will impact oil prices as well if the trend continues.


The S&P struggled to recover lost ground from Friday's high close at 2117.69 but was unable to do it. The index gained +6 points to close just under 2115 and remains under the resistance at 2120 for the last four days. The near instant recovery from the Iranian headline drop was encouraging but the constant drone of earnings and revenue misses is a heavy anchor. With the calendar counting down to the sell in May cycle any gain is appreciated.

The intraday decline to just below 2095 gives us a new support level to watch. As long as the lows remain above that level we can continue hoping for a breakout. However, today was a lower high so the chart pattern is slightly bearish.

The Dow managed to squeeze out a minor move over resistance at 18,100 with a close at 18,110. In the greater scheme of things this is insignificant. The solid congestion at the 18,075-18,150 range is going to continue to be a problem until there is a catalyst to catapult the index over congestion of slam it back down to lower lows.

IBM added about 25 points to the Dow by upping their dividend by 18% to $1.30 payable on June 8th to holders on May 8th. Merck added about 21 points thanks to their strong earnings. United Health added about 9 points on the Aetna earnings. UNH is thought to be the weakest in the sector. Apple removed about -15 points despite posting blowout earnings on Monday night. This is called post earnings depression. Expectations were so high it powered the stock to a new high early Monday and this is just profit taking.

There were no Dow components reporting after the bell today so Dow direction will depend on the Nasdaq and the earnings forces there.

The Dow has support at 17,915 and the intraday drop ended at 17,917. This suggests there are plenty of dip buyers still in play.

Nasdaq support is 5000 and the low today was 5006. The rebound covered +49 points but could not manage to make it back into the green. The two days of declines are related to profit taking on the big four names that were up so strongly on Friday. Amazon has declined -$16 since the $445 close on Friday. Google is down -12 and Starbucks -2. Microsoft is actually up about $1.50.

The Nasdaq is still being dragged lower by the biotech correction. You can see all the biotech names in the lowers list below.

The Nasdaq is still in an uptend as long as it remains above 5000. That is the new line in the sand and one that could be tested again soon.

The small cap Russell 2000 rebounded slightly today after dipping below the critical 1250 support level on the morning headlines. The rebound was immediate so the dip did not trigger a bunch of short sellers to pile onto the move. Dip buyers are still alive and active.

The Russell now has to recover the lost ground from the 1259 close to the 1278 high close from two weeks ago. This could be a challenge because there is a lot of congestive resistance between 1260-1275. Continue to watch the Russell for a break below support at 1250 as a sell signal.

There appears to be no fear of the Fed meeting tomorrow. I don't know if that is good or bad. It suggests everyone believes the Fed will say something dovish as a result of the weak economics and the impact of the dollar on this earnings cycle. The lack of consumer spending has got to be a problem for them and I can't imagine that they will hike in June. However, Yellen may want us to think she may hike and that is the danger in tomorrow's announcement.

I was encouraged by the quick rebound from the morning dip. That is not the kind of market action you would see from a market that is about to roll over as the sell in May cycle begins. That was evidence of dip buyers eager to get in at a lower level. That should continue to provide support as long as the headlines don't turn negative.

I have been cautious about holding too many longs and I am still cautious but somewhat encouraged.

Enter passively, exit aggressively!

Jim Brown

Send Jim an email



New Plays

Surviving The Flood

by James Brown

Click here to email James Brown


Nucor Corp. - NUE - close: 49.56 change: +0.96

Stop Loss: 47.85
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 28, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.5 million
New Positions: Yes, see below

Company Description

Why We Like It:
NUE's management is expecting steel prices to stabilize by the end of the year and that has provide hope for investors. The industry is still struggling with a "flood" of imports.

NUE is in the basic materials sector. According to the company, "Nucor and its affiliates are manufacturers of steel products, with operating facilities primarily in the U.S. and Canada. Products produced include: carbon and alloy steel -- in bars, beams, sheet and plate; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating and expanded metal; and wire and wire mesh. Nucor, through The David J. Joseph Company, also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler."

Their 2015 Q1 results were hurt by a -5% drop in average selling price of steel. Wall Street was expecting earnings of $0.14 a share on revenues of $4.66 billion. NUE delivered $0.21, which was a -39% drop from a year ago, but significantly above its mid-March guidance in the $0.10-0.15 range. Revenues were down -14% to $4.4 billion.

NUE management commented on its quarter, "This lower performance is primarily due to lower selling prices and margins resulting from the exceptionally high level of steel imports flooding the domestic market. It is estimated that imports accounted for 33% of the finished steel market in the first quarter of 2015. Import levels in February and March were lower than the peak in January, but remain at the exceptionally high levels experienced during most of 2014. We anticipate selling prices to remain under pressure as the flood of imports continues in the second quarter of 2015. Global overcapacity built by foreign, state-owned enterprises continues to be a significant risk factor to our business."

The stock actually rallied on its earnings report thanks to somewhat optimistic guidance. The company said the automotive market remains strong. They continue to see improving demand in the nonresidential construction markets. NUE did note that the energy market is still troubled. The drop in crude oil and the decline in active rigs has cut demand for tubular goods products (drilling equipment), which has caused a glut of inventory in the sector.

NUE shared the following outlook, "Earnings in the second quarter of 2015 are expected to be somewhat improved from the first quarter of 2015. Although margins in the steel mills segment are expected to improve, they will remain under pressure during the second quarter of 2015 as selling prices have not yet fully stabilized and imports remain at exceptionally high levels. This pricing pressure is expected to mitigate the benefits of lower average raw materials costs in the second quarter. We expect much better performance in the downstream products segment in the second quarter of 2015. The performance of the raw materials segment is expected to decrease in the second quarter of 2015 due to a planned one month outage at our DRI facility in Trinidad. We anticipate an operating loss similar to the first quarter of 2015 at Nucor Steel Louisiana, which, due to the extended length of the time the facility was not operating, will work through higher cost iron ore inventory that was purchased in 2014. Performance in the second half of 2015 is expected to further improve on the strength of continuing improvement in nonresidential construction and its impact on our downstream products businesses and steel mills. Additionally, steel pricing is expected to stabilize and rebound as service center destocking runs its course."

It would appear that the market has priced in the industry's trouble with imports. Now investors are looking ahead toward improvement later this year. The stock has been consolidating sideways in the $46-49 range for several weeks. Shares rallied on its earnings report and now it's on the verge of breaking out from its trading range. The $50.00 level is round-number resistance plus it's strengthened by technical resistance with the simple 200-dma. A breakout past this area would be very bullish. Tonight we're suggesting a trigger to launch bullish positions at $50.50.

Trigger @ $50.50

- Suggested Positions -

Buy NUE stock @ $50.50

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

Buy the JUL $50 CALL (NUE150717C50) current ask $1.73
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

Still Buying The Dips

by James Brown

Click here to email James Brown

Editor's Note:
Traders are still buying the dips. The market's early morning losses reversed. The blue chip indices made it back into positive territory while the NASDAQ closed with a minor loss.

Prepare to exit our ZEUS trade tomorrow at the close

Current Portfolio:

BULLISH Play Updates

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

Stop Loss: 36.40
Target(s): To Be Determined
Current 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

04/28/15: CDW is still quietly consolidating near its highs. Shares recovered from its intraday lows to close unchanged on the session.

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: 37.73 change: +2.08

Stop Loss: 34.75
Target(s): To Be Determined
Current Gain/Loss: +1.8%
Entry on April 28 at $37.05
Listed on April 23, 2015
Time Frame: Exit prior to earnings in mid May
Average Daily Volume = 2.7 million
New Positions: see below

04/28/15: Bloomberg ran an article this morning about how CSIQ, the third biggest solar panel maker in the world, might see a shortage of supply because demand is picking up so much. There was also another story about European solar makers leveling a complaint about Chinese solar makers who have been evading tariffs in Europe by shipping their product through third parties in different countries.

CSIQ surged on these stories today and the stock added +5.8%. Our trigger to launch bullish positions was hit at $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.

- Suggested Positions -

Long CSIQ stock @ $37.05

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

Long MAY $37 CALL (CSIQ150515C37) entry $2.05

04/28/15 triggered @ 37.05
Option Format: symbol-year-month-day-call-strike

DTS Inc. - DTSI - close: 37.26 change: +0.14

Stop Loss: 34.95
Target(s): To Be Determined
Current Gain/Loss: +0.3%
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

04/28/15: DTSI did not participate in the market's spike lower this morning. Instead shares of DTSI were in rally mode and hit new highs. Unfortunately shares pared their gains by the closing bell.

The sharp intraday pullback is actually worrisome. I am not suggesting new positions at this time.

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: 47.24 change: -0.33

Stop Loss: 44.90
Target(s): To Be Determined
Current Gain/Loss: -2.1%
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

04/28/15: MBLY displayed relative weakness on Tuesday. If you're feeling optimistic we did see MBLY find support three times in the $46.60 area. I am suggesting investors wait for a new rally past $48.50 before initiating 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

OvaScience, Inc. - OVAS - close: 27.47 change: -0.86

Stop Loss: 31.55
Target(s): To Be Determined
Current Gain/Loss: +0.7%
Entry on April 28 at $27.65
Listed on April 27, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 725 thousand
New Positions: see below

04/28/15: Our brand new bearish play on OVAS is open. Shares continued to sink and underperformed the market with a -3.0% decline. Shares hit our suggested entry point at $27.65. I would still consider bearish positions at current levels.

Trade Description: April 27, 2015:
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.

- Suggested Positions -

Short OVAS stock @ $27.65

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

Long JUN $25 PUT (OVAS150619P25) entry $2.95

04/28/15 triggered @ 27.65
Option Format: symbol-year-month-day-call-strike

Solera Holdings - SLH - close: 48.35 change: -0.08

Stop Loss: 52.15
Target(s): To Be Determined
Current Gain/Loss: +1.9%
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

04/28/15: The sell-off in SLH slowed down today. Shares essentially churned sideways in the $48.00-48.60 area. I am not suggesting new positions at this time.

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: 37.51 change: -0.68

Stop Loss: 40.15
Target(s): To Be Determined
Current Gain/Loss: -0.3%
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

04/28/15: It's taken almost two weeks but we are almost back to where we started this TSRA trade. The oversold bounce has failed. Shares are about to breakdown to new three-month lows.

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: 11.43 change: -0.04

Stop Loss: 12.05
Target(s): To Be Determined
Current Gain/Loss: +8.2%
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

04/28/15: The bounce in ZEUS failed near short-term resistance around $12.00 again.

We have run out of time. The plan is to exit this trade tomorrow, April 29th, at the closing bell, to avoid holding over earnings on May 1st. I'm moving our stop loss down to $12.05 just in case ZEUS bounces before we exit.

*small positions to limit risk* - Suggested Positions -

Short ZEUS stock @ $12.45

04/28/15 new stop @ 12.05, prepare to exit tomorrow at the closing bell
04/25/15 prepare to exit on Wednesday, April 29th.
04/22/15 new stop @ 12.30
04/08/15 triggered @ $12.45