Option Investor

Daily Newsletter, Tuesday, 5/12/2015

Table of Contents

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

Market Wrap

Uncertainty Rules

by Jim Brown

Click here to email Jim Brown

The Dow dropped -180 points at the open and maintained those losses until somebody bought the dip at 10:30 to rebound the Dow +150 points in only 20 minutes. The index traded sideways for the rest of the day in a tight range from about 18,050 to 18,115. The ten-year yield hit a six-month high yield of 2.335% at the open.

Market Statistics

The selloff in treasuries was blamed on everything you can think of. Some blamed European yields but there was no smoking gun that traders could talk about other than weakness in Europe.

The swoon in equities was blamed on the spike in yields as well as continued profit taking from the Friday short squeeze. In reality the market is doing exactly what it has been doing for the last two months and that is trading in a range with a significant number of reversals for no apparent reason. The uncertainty in the market is rising rather than abating. Eventually a trend will appear.

The economic calendar today was not a factor. The NFIB Small Business Survey Optimism Index rose from 95.2 to 96.9 for April. The internal components were mostly positive but the gains were small. The employment component rose from 10 to 11, job openings rose from 24 to 27, capital expenditure plans rose from 24 to 26. However, those respondents expecting the economy to improve rose from a net of -7% to -6% and hardly a rousing vote of confidence. Those that expected sales to improve declined from 13% to 10%. This report was ignored.

The Job Openings Labor Turnover Survey (JOLTS) showed job openings declined from the 3.5% rate in February to 3.4% in March. Job openings declined from 5.144 million to 4.994 million. However, hires rose from 5.011 million to 5.067 million. Separations rose sharply from 4.793 million to 4.983 million. That is a huge increase and suggests workers are becoming more confident about changing jobs. Layoffs rose from 1.688 million to 1.793 million. That was +6.5% higher than the same period in 2014. This was a lagging report for March and was ignored.

Thanks to everyone paying their taxes the government had a budget surplus in April of $156.7 billion. Since this is a once in a year event I would not get too excited about the government having more money than it spent. They will catch up. April revenue rose +14% to $471.8 billion and spending increased by +2.5% to $315 billion. We are now 7 months into the government's fiscal year and the cumulative deficit is now -$282.8 billion after that "surplus" in April. Net interest payments on the debt grew by +3.4% from the prior April. Social security payments rose +4.3% and Medicare spending rose +1.4%.

Thanks to the dozens of recent tax increases individual tax payments are up +13% and corporate tax payments are up +12%. We are facing another debt limit ceiling that will have to be negotiated before the end of this fiscal year on September 30th. Since we are headed into the 2016 election cycle the battle over the debt ceiling will likely be more subdued and no government shutdown will occur.

The calendar for Wednesday will be focused on the retail sales for April. With warnings from multiple retailers in recent days there is a strong possibility it will miss estimates.

The oil inventories will also be important since last week was the first decline in inventories in 17 weeks and crude prices rebounded back over $60 today in anticipation of further inventory declines. Energy equities spring back to life after several days of declines and that helped support the market today.

Verizon's got mail! The big news in the equity world this morning was Verizon (VZ) buying AOL for $4.4 billion or $50 a share. I know what you are thinking. Why would Verizon buy AOL? They did it to get their mobile advertising capability, cross platform advertising capability and streaming video. The mobile advertising will let Verizon push ads to its millions of cell phone customers. AOL was cheap at $4.4 billion compared to Verizon's $203 billion market cap. AOL generated about $856 million in revenue in 2014.

Verizon wants to push mobile video to its customers because bandwidth is a profit center for Verizon. AOL is one of the biggest video download sites in the USA. If you watch videos you will eat up your monthly data allotment and you have to buy more or pay the overage fees. AOL recently announced a deal with NBC Universal to play video clips from their networks like Bravo, E!, Esquire, NBC and USA. The partnership will also co-develop original online video series.

This is not your father's AOL. That one was sold to Time Warner for $164 billion in 2000 and is considered the worst deal ever. Time Warner stock declined so much ahead of the deal that the value fell to $103.5 billion when it closed. The market cap of the merged companies declined another $100 billion in next 18 months. The companies split again in 2009 and now AOL has been acquired for $4.4 billion or only 2.6% of its Time Warner acquisition price.

AOL is still the 41st most popular website according to Alexa.com. The AOL owned Huffington Post ranks higher at 30th. AOL also owns TechCrunch and Engadget. Those entities are probably going to be sold because they don't fit the Verizon business.

AT&T (T) is buying DirecTV for $49 billion and regulators today said they had almost completed their review and it was "unlikely" they would rule against it. There will be some as yet unannounced conditions. One analyst felt it would be related to how AT&T will deal with streaming video. Ironically the Verizon/AOL deal could help get the AT&T/DTV deal done.

Pall Corp (PLL) rallied +19% on news that an auction for the company could conclude soon. Reportedly Danaher (DHR) and Thermo Fisher Scientific (TMO) are in the running for the winning bid. UBS said a win by TMO could create a bio-production powerhouse. Pall has about $1 billion in biopharma business that would enhance the $600 million owned by TMO. Pall manufactures and markets filtration, separation and purification products and integrated systems worldwide. The Life Sciences segment provides technologies that facilitate the process of drug discovery. Final bids are due later this week with an expected price tag of $13 billion or more.

Humana (HUM) rallied +$7 after Barron's said a bid by Aetna (AET) could be imminent. The article also suggested Cigna (CI) could also be in play. Aetna is turning into a powerhouse in this sector having raised guidance twice already in 2015. The speculation followed an investor meeting. Leerink Partners said Aetna could conceivably offer $200 a share for Humana. The analyst raised his price target for Aetna to $135.

Cal Maine Foods (CALM) rose another 3% on expectations for higher profits as a result of the bird flu epidemic. Research firm Sidoti & Co raised the price target to $67 from $51 on the potential for an increase in pricing power. The bird flu has been confirmed in the 15th state, mostly northern and Midwest states. Cal Maine is an egg producer with operations mostly in southern states. Nearly 30 million birds have been slaughtered because of the disease. An egg shortage is looming. Bakery companies are being squeezed from this shortage. Post Holdings said last week that chickens at one of its suppliers had tested positive for the disease. The latest discovery was in Indiana and so far there have been three strains of the disease identified in North America. Shares of CALM are up nearly 25% in the last two days.

On the earnings front GoDaddy (GDDY) reported a loss of 34 cents that beat by a penny. Revenue rose +13.7% to $498.7 million. The company raised guidance for Q2 to a midpoint of $392.5 million, up from $390.07 million. Fully year guidance rose slightly from $1.59 billion to $1.595-$1.605 billion. Shares were volatile and slightly lower in the afterhours session.

Zillow (Z) reported adjusted earnings of 5 cents that were much better than the expected 12 cent loss. Revenue rose +92% to $127 million but missed estimates for $135 million. They reiterated guidance for the full year. Q2 guidance was fractionally below estimates. The Zillow earnings now include Trulia and the combined companies saw about 140 million unique viewers in March alone. Shares rallied 5% in afterhours but declined after some comments on the conference call. They ended the afterhours session down about 50 cents.

Rackspace (RAX) reported earnings of 20 cents that were in line with estimates but revenue of $480 million was slightly lower than estimates for $482 million. The earnings did not really shake up the stock but the guidance did. The company projected revenue growth of 1.5% to 2.5% in Q2 due to a delay in enterprise bookings and "slower customer installations and customer churn." Multiple analysts downgraded the stock and shares fell -13%.

The earnings cycle is winding down with only three headliners on Wednesday. Shake Shack (SHAK) could probably be included in that list but it has only a narrow but faithful audience.

Crude rallied $1.33 in the regular session and it is up another 65 cents in afterhours to $61.40. The prior resistance at $58 worked perfectly as support on the three days of profit taking. Goldman Sachs must be frustrated today because they just released a report saying the oil rally was premature and we should expect a continued decline. They said the rebound from the lows was probably the result of speculators and current prices were expensive given the fundamentals.

The analysts said unfinished wells (fraclog) could cause shale production to spike again if prices were to rise too quickly. Currently there are about 4,600 drilled but not completed wells in the USA. Drilling is 50% of the cost of a well and fracturing and completing the well is the other 50%. Producers are saving money today by not completing the wells. They cap them and move on to the next hole. This keeps their contracted rigs busy and they avoid paying penalties for sending the rigs back to the owners. In theory when oil prices rise the producers can quickly complete the wells and put them into production. In reality that is not as quick as you would expect. There is a tremendous amount of scheduling for crews, equipment, material, sand, water, etc that has to all come together for each well. Some analysts believe it could take more than 12 months to complete all the drilled wells. Crews have been laid off and equipment moved to holding areas. Plus, the crews that are active will be working on completing new wells that are still being drilled.

This link is a picture of Halliburton fracking a well.

Goldman argued that even after a -56% decline in active rigs that would only stabilize production rather than reduce it. They believe production will not decline significantly until 2016. However, if prices rise over $65 it could prompt drillers to put rigs back to work on expectations for higher prices in the future. Goldman pointed out that low prices have forced low cost producers like Russia, Saudi Arabia and Iraq to increase production in order to replace revenue lost by those low prices.

Wednesday is inventory day and another decline in inventories could lift prices higher.


The European markets had a bad day because their bonds were selling off hard. If you have not been paying attention 30% of the countries in the eurozone had negative yields on their short term bonds. At negative yields they finally ran out of buyers. A correction in bonds began and yields were up sharply. European markets were down 1-2% overnight. This carried over into the U.S. markets with the ten-year treasury selling hard at the open and the yield rising to a six-month high. Goldman exaggerated the situation in Europe with a note saying bonds were in a bubble. Goldman said, "Overblown expectations for the ECB's QE plan helped to push global debt valuations to extreme levels, triggering a large and vicious selloff in European bonds that has infected other markets." The U.S. equity markets started the day off with the same decline as Europe. Once the buyers in treasuries began to appear the equity market stabilized.

Fed heads Bill Dudley and John Williams were also out making comments negative to the market. Dudley said "the beginning of higher rates in the US will reflect a regime shift in thinking and the markets." John Williams said he is for hiking rates "a bit earlier" than other FOMC members.

There was also some concern about Greece defaulting on the 750 million euro payment that was due today. They scraped together enough cash to pay the IMF and put off their eventual demise until another day. While this did not fix their problem it did kick the can a little farther down the road and the market breathed a sigh of relief.

The Dow dropped to 17,925 at the open and the S&P fell to 2085. For the S&P that is still about 17 points above last Wednesday's low of 2068 so it was not a crash but more about headline volatility. The Dow decline to 17,925 was still about 192 points above last week's low at 17,733.

While nobody wants to be holding equities when the Dow drops -180 at the open it was not a disaster. The markets have been making these triple digit moves in alternate directions 2-3 times a week for the last two months. Holding positions in these swings is practically impossible if you are maintaining a strict discipline with stop losses.

Monday's volume at 5.6 billion shares was the fourth lowest day since January. Today's volume was only slightly higher at 5.9 billion shares. There is no conviction in the market in either direction.

Whatever appeared at 10:30 to rebound the Dow +150 points from its lows is to be thanked for saving the day. It appeared to be a buy program because of the speed of the rebound and the weak volume. Up volume in the SPY during the 20 min rebound was only half the down volume in the first 20 minutes of trading. However, the volume in the Dow ETF (DIA) was about 30% higher on the rebound than the decline. If you want to juice the market the best way to do it is to spike the Dow.

I will leave the conspiracy theories to others smarter than me and just say whatever provided the 20 minutes of concentrated buying at 10:30 rescued the market from a bad day.

Tuesday was just one more day in the cycle of volatility we have been trading for the last six weeks. The rebound helped but it did not cure the illness with the S&P stopping right in the middle of the recent congestion range at 2100. Add 20 points and you have significant resistance at 2120. Subtract 20 points and you have significant support at 2080. The close was right in the middle of neutral territory.

Until we get a move that takes us out of this range we are just passing time and driving ourselves crazy trying to trade it. Traders are eventually going to lose patience and move to the sidelines until a direction appears.

The Dow is a similar picture with the 18100/18200 level continuing to be strong resistance and the 17800 level strong support. Only one stock on the Dow gained or lost more than $1 and that was Goldman Sachs. Of course the picture was a lot different at the open and the fractional moves at the close were just stocks returning to neutral territory.

There is no magic number for the Dow or some stock to watch for direction tomorrow. The Dow is suffering from the uncertainty flu and until it passes we just have to watch from the sidelines.

The Nasdaq is no different than the Dow and S&P. The index remains stuck below resistance at 5000, only the Nasdaq is declining less on the down days than the other indexes. The biotechs are holding up the index while the chip stocks are wallowing in their own congestion range.

Support remains 4950, 4900, 4850. Resistance 5000, 5020, 5070.

In case you can't tell from the underlying frustration in my words I am tired of fighting this market. This is just like playing the tables at Vegas. Some hands you win but you lose more often than not. The games of chance have mathematical rules behind them that favor the house. Depending on the game and the bet you can win 35% of the time to as much as 49% of the time. The casinos know if they can keep feeding you a few small wins from time to time they can drain your pockets with the house percentage advantage. You can't win long term. You may have a good run but the house just keeps nipping away at your bankroll.

A choppy market like this is chipping away at our accounts. Win 1 lose 2, win 3 lose 5. There is no future in trying to outsmart a choppy market. This is where the intelligent investor can swing the odds into his favor by not playing the market's game. Step to the sidelines and wait for a fat pitch. It will eventually appear. It may be days from now or even weeks from now but the market can't continue to trade sideways in this current volatility range. It will eventually pick a direction and that will be our signal to move back into the market.

Enter passively, exit aggressively!

Jim Brown

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New Plays

Clinical Stage Biotech

by James Brown

Click here to email James Brown


Atara Biotherapeutics, Inc. - ATRA - close: 40.24 change: +2.54

Stop Loss: 36.85
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 12, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 161 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
Sometimes trading biotech stocks is very binary. They're either on or they're off. You win big or you lose big. Of course we try to limit any potential losses with stop losses but they don't always work as intended. ATRA looks interesting and could be poised for its next big move.

The company was spun off from biotech giant Amgen (AMGN) last year. They were initially funded by Kleiner Perkins Caufield & Byers (KPCB). ATRA is a clinical stage biotech firm. That means they don't have any significant revenues. That makes the stock extremely susceptible to any headline news (good or bad).

The company describes itself here, "Atara Biotherapeutics, Inc. is a biopharmaceutical company focused on developing innovative therapies for patients with debilitating diseases. Atara's lead programs target myostatin and activin, members of the TGF-beta family of proteins that have demonstrated the potential to have therapeutic benefit in a number of clinical indications. In September 2014, Atara Biotherapeutics entered into an exclusive option agreement with Memorial Sloan Kettering Cancer Center (MSK), under which it has the right to license (pursuant to a negotiated form of license agreement) the exclusive, worldwide rights to three clinical stage T-cell programs, including Epstein-Barr virus-targeted cytotoxic T lymphocytes, which recently received breakthrough therapy designation from the Food and Drug Administration, as well as other T-cell programs that are discovered or developed by MSK pursuant to sponsored research funded by the company."

Looking at the daily chart you can see that shares of ATRA took off in early March and rallied from about $21 to $64 in less than two months. That's was a reaction to news out on March 2nd. Here's an excerpt from the company's press release, "Atara Biotherapeutics, Inc. (ATRA) today announced that its collaborative partner, Memorial Sloan Kettering Cancer Center (MSK) has received breakthrough therapy designation from the U.S. Food and Drug Administration (FDA) for Atara's optioned cytotoxic T lymphocytes activated against Epstein-Barr Virus (EBV-CTL) in the treatment of patients with rituximab-refractory, EBV-associated lymphoproliferative disease (EBV-LPD), a type of malignancy occurring after allogeneic hematopoietic cell transplantation (HCT). Allogeneic HCT is also commonly called a bone marrow transplant."

ATRA initial public offering was the middle of October 2014. It's six-month share lock up expiration was April 14th. That probably played a part in the stock's correction lower. They company also raised capital with a secondary offering back in February. Hopefully that means they won't do another secondary for a while.

Without any earnings to speak of it's tough to build a real fundamental story on ATRA. This looks more like a technical trade. The correction from its April high just stopped at the 61.8% Fibonacci retracement level. Now it's starting to bounce. We are suggesting small bullish positions if ATRA trades at $40.50. More conservative traders may want to wait for a rally past its simple 50-dma instead (currently near $41.00). I am labeling this a more aggressive, higher-risk trade. The stock is volatile and doesn't see a lot of volume. Plus the stock could see extreme moves on any positive or negative headlines.

Trigger @ $40.50 (small positions to limit risk)

- Suggested Positions -

Buy ATRA stock @ $40.50

Daily Chart:

In Play Updates and Reviews

Bonds Stole The Spotlight Again

by James Brown

Click here to email James Brown

Editor's Note:
Another sell-off in the bond market stole the spotlight on Tuesday. Meanwhile another drop in the U.S. dollar produced a bounce in the commodity space. Oil's rally helped support some of the energy stocks.

Current Portfolio:

BULLISH Play Updates

Altisource Portfolio Solutions - ASPS - close: 30.43 chg: -0.08

Stop Loss: 27.75
Target(s): To Be Determined
Current Gain/Loss: -2.2%
Entry on May 11 at $31.10
Listed on May 09, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 777 thousand
New Positions: see below

05/12/15: ASPS delivered a relatively quiet session on Tuesday. Shares churned sideways on either side of $30.00. Traders may want to see a new rally past $31.00 before considering new bullish positions.

Don't forget that this is a higher-risk, more aggressive trade.

Trade Description: May 9, 2015:
Shares of ASPS have been crushed from its highs near $170 a share back in late 2013 to almost $12 a share in March this year. That is thanks to the incestuous relationship that ASPS has with a handful of companies all founded by one man - William Erbey. One such company, Ocwen (OCN), is in danger of going out of business as authorities investigate the company on charges of misconduct. There is a risk to ASPS since a large chunk of ASPS revenues come from a relationship it has with OCN. It's not a surprise to see the slide in ASPS shares. However, the sell-off appears to be overdone and the stock may have found a bottom.

ASPS is in the services sector. According to the company, "Altisource Portfolio Solutions S.A. is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. Altisource leverages proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants. Altisource has been named to Fortune’s fastest growing global companies two years in a row."

Their most recent earnings report was April 23rd. Earnings soared +72% from a year ago to $0.56 a share even as revenues fell -1.0% to $207.8 million, which was significantly below estimates.

One of the most alluring features for traders to be short-term bullish on ASPS is the opportunity for a short squeeze. The most recent data listed short interest at 41% of the very small 9.6 million share float. That's very high and provides plenty of fuel for a short-covering fueled rally. Of course there is a risk. If OCN loses its legal battle with authorities it could go out of business and that will crush ASPS but that seems unlikely in the short-term. Meanwhile the broader market is pushing higher and poised to breakout, which could help fuel more short covering in ASPS.

The stock is pushing against resistance near $30-31. We are suggesting a trigger to launch small bullish positions at $31.10. I'm suggesting small positions to limit risk because ASPS can be volatile.

*small positions to limit risk* - Suggested Positions -

Long ASPS stock @ $31.10

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

Long JUN $30 CALL (ASPS150619C30) entry $3.00

05/11/15 triggered @ 31.10
Option Format: symbol-year-month-day-call-strike

Allegheny Technologies - ATI - close: 35.82 change: -0.69

Stop Loss: 33.85
Target(s): To Be Determined
Current Gain/Loss: -0.6%
Entry on May 11 at $36.05
Listed on May 05, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.0 million
New Positions: see below

05/12/15: Stocks had a rough day on Tuesday and ATI almost erased its big rally from Monday. If this pullback continues the nearest support should be the $35.00 level.

Trade Description: May 5, 2015:
It looks like shares of ATI have put in a bottom.

The company is in the industrial goods sector. According to ATI, "Allegheny Technologies Incorporated is one of the largest and most diversified specialty materials and components producers in the world with revenues of approximately $4.4 billion for the last twelve months. ATI has approximately 9,600 full-time employees world-wide who use innovative technologies to offer global markets a wide range of specialty materials solutions. Our major markets are aerospace and defense, oil and gas/chemical process industry, electrical energy, medical, automotive, food equipment and appliance, and construction and mining."

ATI's most recent earnings report was April 21st. Management said their Q1 2015 earnings were $0.09 a share. Depending on who you polled ATI's nine cent profit was either one cent above or one cent below analysts' estimates. Whatever the case their $0.09 profit was a big improvement from the $0.19 loss a year ago. Revenues for Q1 2015 were up +14% from a year ago to $1.13 billion, which was above analysts' estimates.

ATI saw a big improvement from their Q4 with sales up +7% sequentially. This helped drive a +25% improvement in operating profits.

ATI President and CEO Rich Harshman commented on their results, "Aerospace market sales increased 14% in the first quarter 2015 compared to the fourth quarter 2014. We saw double-digit demand growth from both jet engine and airframe customers of 14% and 22%, respectively. First quarter aerospace demand was led by organic growth of our mill products. Sales of our nickel-based alloys and specialty alloys increased 15% and sales of our titanium alloys grew 16% with a good mix of value-added mill products. We expect sales growth of our precision forgings, castings, and components to begin later this year supported by the build ramp of next-generation jet engines."

Looking ahead ATI expects demand from the oil and gas market to remain soft. However, demand from the airframe and jet engine makers should be strong throughout 2015.

The stock broke out from a consolidation pattern on its better than expected Q1 earnings. This helped generate a buy signal on the point & figure chart, which is currently forecasting at $47.00 target. Shares of ATI spent a few days struggling with technical resistance at its 200-dma but they have broken out past this level as well. The past seven months looks like a massive bottoming process for the stock. Now shares are on the verge of breaking out past key resistance in the $35-36 area. We want to use a trigger at $36.05 to launch bullish positions.

FYI: ATI's next dividend ($0.18) is this month. The ex-dividend date is May 22nd. The shareholder record date is May 27th.

- Suggested Positions -

Long ATI stock @ $36.05

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

Long JUL $37.50 CALL (ATI150717C37.50) entry $1.25

05/11/15 triggered $ 36.05
Option Format: symbol-year-month-day-call-strike

JetBlue Airways - JBLU - close: 21.71 change: -0.12

Stop Loss: 20.40
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 11, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 7.9 million
New Positions: Yes, see below

05/12/15: JBLU held up reasonably well during today's market pullback. The stock dipped to short-term technical support at its 10-dma and bounced.

After the closing bell JBLU reported its April traffic numbers. The company said traffic (revenue passenger miles) was up +9.0% from April 2014. Capacity was up +6.6%. Its load factor rose +1.8 points from a year ago to 85.7%. JBLU also reported that year to date their revenue passenger miles were up +10.5% versus the same time a year ago.

Currently we are suggesting a trigger to launch bullish positions at $22.15.

Trade Description: May 11, 2015:
The XAL airline index has been a disappointment this year. The XAL has been churning sideways for all of 2015 and is currently down -1.9% year to date. Meanwhile JBLU is soaring with the stock up +37.6% in 2015. These are ten-year highs.

JBLU is in the services sector. They're part of the regional airline industry. According to the company, "JetBlue is New York's Hometown Airlineâ„¢, and a leading carrier in Boston, Fort Lauderdale-Hollywood, Los Angeles (Long Beach), Orlando, and San Juan. JetBlue carries more than 32 million customers a year to 88 cities in the U.S., Caribbean, and Latin America with an average of 825 daily flights." JBLU is also the first major U.S. airline that has launched flights to Cuba since the U.S. government relaxed travel restrictions a few months ago.

The company has delivered quite a turnaround. They reported their 2015 Q1 results on April 28th. Earnings were one cent above estimates at $0.40 a share. That's a huge jump from a profit of just $0.01 a year ago. JBLU's operating margins surged from 3.1% a year ago to 16.6%. Revenues roes +12.9% to $1.52 billion in the first quarter. Not bad for a first quarter that suffered terrible winter weather on the East Coast.

JBLU said they are seeing success with their premium Mint service. Mint features lie-flat seats and is priced cheaper than rivals' business-class services. JBLU also said that their revenue for every seat flown one mile would rise 3% to 4% in April. That's a stark contrast to American Airlines, Delta, and United who all sais that revenue per seat would decline between 2% to 6% in the second quarter.

Analysts at JPMorgan have turned bullish on the airlines. They believe the U.S. airline industry has evolved. The major players have all matured and with discipline have boosted airline margins to record levels. Combine that with record-setting stock buybacks and the industry's stocks have performed well (i.e. they're up sharply in the last couple of years even though 2015 has been mediocre). The JPM team upgraded shares of JBLU to overweight and raised their price target from $19 to $28.

The rally in JBLU should have the shorts running scared. The most recent data listed short interest at 16% of the 308 million share float. Currently JBLU is hovering just below short-term resistance near $22.00. A breakout here could spark more short covering. Tonight we are suggesting a trigger to open bullish positions at $22.15.

Trigger @ $22.15

- Suggested Positions -

Buy JBLU stock @ $22.15

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

Buy the SEP $24 CALL (JBLU150918C24)

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

Synchronoss Technologies - SNCR - close: 45.77 change: +0.04

Stop Loss: 43.85
Target(s): To Be Determined
Current Gain/Loss: -0.7%
Entry on May 11 at $46.10
Listed on May 09, 2015
Time Frame: Exit prior to June option expiration
Average Daily Volume = 527 thousand
New Positions: see below

05/12/15: SNCR managed to rebound off its morning lows ($44.83) and rally back into positive territory by the closing bell. At this time I would wait for a new rally past $46.10 before considering new positions.

Trade Description: May 9, 2015:
This trade is not for the faint of heart. Shares of SNCR have produced some rollercoaster like moves in the last six months. We want to use that volatility to our advantage.

SNCR is part of the technology sector. According to the company, "Synchronoss Technologies, Inc. (SNCR), is the mobile innovation leader that provides cloud solutions and software-based activation for connected devices across the globe. The company's proven and scalable technology solutions allow customers to connect, synchronize and activate connected devices and services that empower enterprises and consumers to live in a connected world."

Earnings and revenue growth has been impressive. SNCR has beaten Wall Street's earnings estimate the last four quarters in a row. Meanwhile sales have been growing at a strong double-digit pace. Looking at the last four quarters SNCR reported sales growth of +23.6%, +39.6%, +34.7%, and most recently +34.9%.

SNCR's 2015 Q1 report was announced on April 29th. Earnings rose +26% from a year ago. SNCR's Founder and CEO Stephen Waldis commented on his company's results, "Synchronoss delivered a strong start to 2015, highlighted by first quarter results that were at or above the high end of expectations. During the quarter, both sides of our business contributed to the strong performance, particularly our Cloud Services, which grew by 63% year-over-year. Mobile Operators around the world are capitalizing on the success of how personal cloud can drive important benefits to their valuable subscribers. We are pleased with our successful formula for helping our customers gain adoption and success with our personal cloud platform."

The stock was crushed from $52 to $44 (-15%) during the market's most recent swoon in the last several days of April. The sell-off was also a reaction to SNCR's earnings results. It looks like the sell-off was overdone and investors have started buying the stock near technical support at its rising 200-dma.

Tonight we are suggesting a trigger to launch small bullish positions at $46.10. More conservative traders may want to wait for a rally past the 10-dma instead (above 46.33). We'll try and limit our risk with a stop at $43.85. Keep in mind this is an aggressive play due to SNCR's volatility.

*small positions to limit risk* - Suggested Positions -

Long SNCR stock @ $46.10

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

Long JUN $50 CALL (SNCR150619C50) entry $0.90

05/11/15 triggered @ 46.10
Option Format: symbol-year-month-day-call-strike

Total System Services, Inc. - TSS - close: 41.08 change: +0.10

Stop Loss: 39.40
Target(s): To Be Determined
Current Gain/Loss: +0.1%
Entry on May 08 at $41.02
Listed on May 07, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 843 thousand
New Positions: see below

05/12/15: I've been warning readers to expect a dip in TSS. The market's sharp decline this morning pushed TSS to $40.52 intraday. Thankfully shares bounced and managed to outperform the broader market with a +0.24% gain.

Trade Description: May 8, 2015:
Consistently beating Wall Street's earnings estimates has driven shares of TSS to new all-time highs. The company is in the financial sector. The XLF financial ETF is down -1.2% for the year. TSS is up +19% for the year.

According to the company, "At TSYS® (TSS), we believe payments should revolve around people, not the other way around. We call this belief People-Centered Payments®. By putting people at the center of every decision we make, TSYS supports financial institutions, businesses and governments in more than 80 countries. Through NetSpend®, A TSYS Company, we empower consumers with the convenience, security, and freedom to be self-banked. TSYS offers issuer services and merchant payment acceptance for credit, debit, prepaid, healthcare and business solutions. TSYS' headquarters are located in Columbus, Ga., U.S.A., with local offices spread across the Americas, EMEA and Asia-Pacific."

This company has beaten analysts' estimates on both the top and bottom line the last four quarters in a row. Their most recent earnings report was April 28th. Earnings per share soared +41% to $0.54. That was eight cents above estimates. Revenues were up +11.7% to $662.2 million.

A few months ago (January 2015) TSS announced a new 20 million share stock buyback program to replace their old one. Last quarter they repurchased 1.45 million shares. When you include the company's dividend they paid out 73% of their available free cash flow to shareholders.

TSS' President and CEO, Mr. M. Troy Woods, commented on their recent results saying, "As a result of the great start to the year, we are revising our adjusted EPS guidance to grow between 12-14% from the previous range of 11-13%."

Shares of TSS surged to new highs on its earnings report. Since then traders have been buying the dips and the stock set a record closing high today. Tonight we're suggesting a trigger to launch bullish positions at $40.85.

FYI: TSS will hold an analyst day on May 20th.

- Suggested Positions -

Long TSS stock @ $41.02

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

Long AUG $40 CALL (TSS150821C40) entry $2.50

05/08/15 triggered on gap open at $41.02, suggested entry was $40.85
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

Emerge Energy Services - EMES - close: 35.80 change: +0.46

Stop Loss: 41.25
Target(s): To Be Determined
Current Gain/Loss: +4.9%
Entry on May 07 at $37.65
Listed on May 06, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 413 thousand
New Positions: see below

05/12/15: It turned out to be a bumpy ride for EMES on Tuesday. The stock couldn't decide what direction it wanted to go. However, by the closing bell shares had begun to bounce from the $35.00 level. EMES managed to outperform the market with a +1.3% gain. A +1.7% rally in crude oil helped support the oil and energy stocks. I am not suggesting new positions at this time.

Trade Description: May 6, 2015:
The bubble in fracking sand and proppant stocks popped in 2014. The top in the fracking sand producers was just a couple of months after crude oil peaked last year. The impact of crude oil's decline and the industry's reaction to the oversupply-pricing issue will still be felt for months to come. Just as the oil and gas producers are cutting expenses, mothballing rigs, and delaying new projects, the proppant companies are forced to do the same. EMES recently announced they were canceling plans to build a new silica sand processing facility.

EMES is in the basic materials sector. They're part of the oil services industry. According to the company, "Emerge Energy Services LP (EMES) is a growth-oriented limited partnership engaged in the businesses of mining, producing, and distributing silica sand, a key input for the hydraulic fracturing of oil and natural gas wells. Emerge Energy also processes transmix, distributes refined motor fuels, operates bulk motor fuel storage terminals, and provides complementary fuel services. Emerge Energy operates its sand segment through its subsidiary Superior Silica Sands LLC and its fuel segment through its subsidiaries Direct Fuels LLC and Allied Energy Company LLC."

The earnings picture has been damaged by a very rough pricing environment for EMES' sand. Their Q4 2014 earnings, announced on March 2nd, were $1.01 per share. That was 12 cents below expectations. Q4 revenues were down -1.4% to $242.6 million compared to analysts' estimates of $301 million. That's a huge revenue miss.

The weakness continued in the first quarter. Wall Street was expecting EMES to report Q1 2015 earnings of $0.83 a share on revenues of $264 million. The company only delivered $0.39 per share with revenues down -25.5% to $204 million. The rest of 2015 is expected to remain challenging.

The stock was hammered again on April 24th when EMES management reduced their dividend from $1.41 per share down to $1.00.

The $40.00 level has been support and now shares are breaking down. The most recent data listed short interest at 13% of the very small 14.6 million share float. This time the shorts are probably right but the high short interest could make this a volatile trade. EMES' recent attempt at a bounce has been failing. We want to catch the next leg lower. Tonight we are suggesting a trigger to launch bearish positions at $37.65.

- Suggested Positions -

Short EMES stock @ $37.65

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

Long JUN $35 PUT (EMES150619P35) entry $2.35

05/07/15 triggered @ 37.65
Option Format: symbol-year-month-day-call-strike