Option Investor

Daily Newsletter, Wednesday, 6/3/2015

Table of Contents

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

Market Wrap

Groundhog Day

by Keene Little

Click here to email Keene Little
Groundhog Day was a very funny movie with Bill Murray. Groundhog day with the stock market is hardly funny and it's driving both sides crazy as stops are run and then the market reverses. Neither side can get any traction and traders need to continue exercising patience while we wait for direction.

Wednesday's Market Stats

The market was looking at a positive start this morning as equity futures rallied in the pre-market session. But the release of the ADP employment report at 8:30 caused some selling and futures were back to flat at the open. Buy programs then hit and indexes quickly made highs that broke above recent congestion highs and it was looking like the start of the next rally leg. Unfortunately for the bulls the sellers then came in and drove the indexes back down and it looked like we were going to stay inside the recent trading range. A little bounce in the afternoon continues to leave both sides guessing what the next big move will be.

The ADP employment report came in at 201K vs. expectations for 200K and an improvement from the 165K in April. The initial reaction in the futures was one of disappointment since it doesn't prevent the Fed from continuing on its rate-increase path. But the reversal at the open was either just a helping hand or it was with a belief that the number was not good enough to help the Fed's cause. Hitting the expected number for ADP it helps with expectations that Friday's NFP report will also come in near the expected 225K. But in reality we can't know how the market will react to any number since a strong number could be bad and a weak number could be good (to keep the Fed in accommodation mode). One of these days the market will care about what the number means for the economy and therefore the market.

The ISM Services number came out at 10:00 and that created a jolt higher in the market. The number dropped from 57.8 in April to 55.7 in May, which was weaker than the expected minor drop to 57.1. Once again, a weaker-than-expected number was considered good for the stock market because it helps the Fed's cause. What's really strange is how little the Fed can do at this point and yet the market seems to believe it can. It's probably because market participants have so little to hang their hat on as far as a reason for the market to rally so they desperately cling to the belief that the Fed can still help. Disappointment waits right around the corner...

The ECB's Mario Draghi offered support for the markets today by not mentioning anything about pulling back on their ambitious QE program, even if the European economy improves unexpectedly over the next 15 months. That's further evidence, in my opinion, that they're mostly interested in providing liquidity for the markets, including money for bailing out countries, rather than providing help for the economies. He didn't talk about Greece and any bailout plans (or threats) and the market was relieve by that as well (staying hopeful anyway).

The Fed's Beige Book at 14:00 caused a minor bullish response but the information was nothing new. The Fed expects minor improvements in the economy for the rest of the year. That of course means an economic contraction since the Fed can't get any economic forecast correct. Unfortunately for our economy, the signs of economic slowing are not showing any signs of abating and it probably won't be long before the market is unable to hide behind the Fed's assurances to the contrary.

As always, we defer to the charts to tell us what the market is thinking and which direction appears to have the least resistance. Unfortunately it would appear the market is very confused and has been for a long time. The 3+ months that the market has been chopping sideways doesn't look like it's going to break soon. As traders we just want a direction (unless you just like to sell credit spreads, in which case you're loving this choppy sideways market) and swing and position traders are getting very antsy about being able to trade something. Their request is simply -- just move! But the market is requiring a great deal of patience while waiting for the move. As traders we find patience a hard virtue to follow. In fact, as a fellow trader said to me, "Whoever said 'Patience is a virtue' just never experienced instant gratification." How true.

I'll start tonight's chart review with the weekly chart of the NYSE Composite index (NYA) to give us a little broader market review. It's a good representative of the market and is looks very similar to the other big indexes (W5000, SPX and DOW). As I'll show later, the techs are looking a little stronger and suggest the indexes could push a little higher. For NYA it looked like a good setup for an important high on May 21st but since that high it's unclear whether or not we've had a trend reversal (same with all the other indexes). The weekly chart shows a rising wedge pattern for the "rally" since last October. I use "rally" in quotes because the only thing it's been able to do is consolidate near its July and September 2014 highs near 11,100 and the bearish divergence, along with the rising wedge pattern, says don't trust the upside from here. But the market continues to get a helping hand from central bankers and government intervention so it remains bullish until it's not, and that means the bears need a breakdown below the 50-week MA near 10,900 to turn the table on the bulls.

NYSE Composite index, NYA, Weekly chart

The NYA daily chart focuses on the rising wedge pattern for the 5th wave (the leg up from the October 2014) of the rally from October 2011. A rising wedge (ending diagonal) is a typical pattern for the final 5th wave of a rally that has gone too far (as both sides start to duke it out for control, resulting in a market that chops its way marginally higher with slowing momentum (bearish divergence. As you can see on the weekly chart above and the daily chart below, that's exactly what we've been getting. The loss of momentum since last November's high helps confirm the bearish ending diagonal. It's just a matter of when it will actually break down. I see the potential for another push higher but these rising wedge patterns typically breakdown about 2/3 of the way to the apex, so about here.

NYSE Composite index, NYA, Daily chart

The choppiness of the price action this year has made it more difficult to "define" the shape of the rising wedge patterns, as evidenced by the multiple trend lines around NYA and SPX below. The leg up from March looks like the final 5th of the 5th wave and its May 20th high fit well as the completion of its rally. But as with the NYA, it's not at all clear whether the pullback from that high is part of a larger 3-wave move up from the May 6th low or just a choppy start to what will become a stronger decline. At the moment, price-level S/R near 2121 is holding as resistance (tested again today) and the 50-dma, near 2100, is holding as support (tested yesterday). A break of one of those levels should lead to at least a short-term tradeable move. The first upside target would be near 2145 while the downside target could be the 200-dma near 2045.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2145
- bearish below 2099

This morning's rally broke the short-term downtrend line from May 21st and even though this afternoon's pullback dropped back below the line it was able to close on the line near 2114. Another leg up, especially if it gets above 2121 would have me looking for a rally to the 2140 area (and then maybe higher). Today's close was also on its uptrend line from May 6-26, which is one more reason why the bulls need to rally the market right away on Thursday, which is what the setup is for them. If the bears thwart their setup and SPX drops below 2099 it's likely we would see strong selling from there.

S&P 500, SPX, 60-min chart

With this morning's rally the DOW was able to test the top of its previous sideways triangle with today's high at 18168. This is the triangle it had broken out of on May 14th but then dropped back inside on May 26th. Since then it's been consolidating between its uptrend line from February 2 - May 6 (tested on Tuesday) and the top of the sideways triangle. The bottom of the sideways triangle, which is the uptrend line from April 1 - May 6, is currently near 17875, a break of which would tell us the bears are in control. At the moment it could go either way and there are few clues as to which way it will be (other than the fact that it's bullish if only because it's not breaking down).

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,190
- bearish below 17,875

The rising wedge (ending diagonal) that I've been watching on the NDX chart is for the leg up from May 6th. It fits well as the 5th wave of the move up from February, which is the 5th wave of the move up from November 2012. So when this final 5th of the 5th wave completes we should then start a more serious decline. But for now, until the bears can break NDX below 4440 (where it would break its 50-dma and uptrend line from March 2009 - June 2013), there's further upside potential to the top of its small rising wedge, near 4585, if not up to the top of its larger rising wedge, near 4625.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4630
- bearish below 4440

The RUT's pattern supports the bulls with its stronger performance today. It broke its short-term downtrend line from April 27th and didn't even drop back down for a back-test. I'm depicting a rising wedge for its final 5th wave but at the moment that's just a guess based more on the other indexes. It's possible it will simply blast higher but we have a market that's difficult to trust since so many moves see little follow through and instead get reversed. But at least for now the RUT stays bullish above Monday's low at 1238 and it would turn bearish below 1233.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1276
- bearish below 1233

Bonds have made a huge move this week. TNX (10-year yield) has had a nearly 30% rally, from 1.845% on May 29th to today's high at 2.388% and it might not be finished yet. The rally from January 30th would have two equal legs up, to potentially complete an a-b-c bounce off that low, at 2.451%. Also near that level is its broken uptrend line from July 2012 - May 2013, so it might be setting up for a back-test of that trend line with an a-b-c bounce correction. The strong rally could be nothing more than a little bit of panicking by bond holders as they worry about inflation from the central bank policies. But I don't believe inflation is the problem and when worries over deflation return we should see another drop in yields. But we'll need to see more evidence in the price pattern, such as a corrective pullback in yields before heading higher again, to tell us whether or not we might have a longer-term bottom in place for yields.

10-year Yield, TNX, Weekly chart

The big rally in yields this week has helped the banks rally (with a higher yield spread they make more money) and BKX is back up against the top of its expanding triangle that I've been showing on its weekly chart. At the same time it's back up to its broken uptrend line from March 2009 - October 2011. We could see a breakout from here but at the moment, with it up against resistance, it's not a good time to initiate a new long play. If anything I'd have my stop pulled up tight, as in no lower than Monday's low at 75.

KBW Bank index, BKX, Weekly chart

For the TRAN there's a price range from about 8515 (July 22nd high) to about 8583 (the three lows last December, January and February) that had been acting as support until it was broken last week. This week's rally has brought it back up to this price-level S/R and now we wait to see if it's a back-test, to be followed by a bearish kiss goodbye, or the start of a stronger bounce/rally. Closing above 8583 would be bullish, especially since it would be above its 20-dma, which was tested with today's high near 8554 (but closed at 8510). It deserves close attention here since it's a sign of our economy.

Transportation Index, TRAN, Daily chart

There won't be much to add in the weeks ahead about the U.S. dollar if it just consolidates between its March high at 100.78 and May low at 93.15, as I'm currently expecting. What we can expect is choppy whippy price action in the dollar, which is what we have so far. Trading in the dollar could be hazardous to your health in the meantime.

U.S. Dollar contract, DX, Weekly chart

Gold has been holding price-level support near its June 2013 low, near 1180, since it climbed above that level on March 20th. Today's low at 1179.10 was just another test and I believe that support level will break but it's not clear yet when it will break. We could see volatility in gold for the next month before dropping sharply lower as depicted on its chart.

Gold continuous contract, GC, Daily chart

Oil spiked up this morning on the inventory report showing a drawdown but it didn't hold and it quickly dropped back down and into negative territory. That's a good signal that there could be a deeper pullback in the coming weeks. As with the dollar, we could see oil consolidate for the next few months before picking a direction. Short term I see the potential for at least a little higher for oil, perhaps up to its 200-dma, near 65, or maybe its 50-week MA, near 70, before turning back down. But at the moment it's a good setup for a stronger pullback and that's what I'm waiting to see if it happens.

Oil continuous contract, CL, Weekly chart

Tomorrow's economic reports will not be market movers but Friday's NFP report should cause at least a ripple. Maybe even a ripple with some follow through. After today's ADP report came in line with expectations there might not be much of a surprise with Friday's report. But anything less than 200K, vs. expectations for 225K, could set up a disappointing reaction. Of course if job growth doesn't show up that could be a good thing (keeps the Fed's finger off the raise-rates button). The market is still mostly concerned about central bank accommodation.

Economic reports and Summary


We continue to get signs of an economic contraction. The slowdown in retail sales, even among the well-do-do, is a sure sign the economy is slowing. Our economy is driven by consumer spending and the consumer is doing less consuming. The TRAN, even with this week's bounce, has been an economic canary that has fallen off its perch. The high altitude that the indexes have achieved has sucked the oxygen out of the poor canary and while the broader indexes have not followed the TRAN, I believe they will. But at the moment there are still many who believe accommodation by the Fed will continue to support the market. And who can argue with their logic? It has been working for years and Wall Street has been diverging from Main Street for a long time. Just keep in mind that trusting what mainstream economists tell us is not a good idea since they've been consistently wrong in their projections.

Unfortunately for the majority of people who invest in the stock market, and for people generally, the out-of-balance situation today is worse than it was in 2007. Stock valuations are higher today than they were in 2007. Banks are more vulnerable (they're larger and more highly leveraged) and the stock market is more disconnected from fundamental realities than they were in 2007. There's a good chance the coming breakdown is going to be worse than the 2007-2009 market crash and in fact the long-term EW (Elliott Wave) pattern suggests that's exactly what we should expect (the big expanding triangle since 2000). Today the U6 unemployment rate is already twice what it was back in 2007. The median net worth is down -40% from where it was prior to the last collapse. Individual and public debt levels are at record highs (as is trading margin debt) and the combination of all these facts makes the coming collapse likely to be even worse than last time.

So while the market continues to be propped up with expectations of further liquidity accommodations by central banks, it's unfortunately simply delaying the inevitable. In fact there's strong evidence that liquidity in the market has been drying up, which makes it more vulnerable to downside disconnect. Those in charge are simply hoping a collapse doesn't happen on their watch. But the further the disconnect continues and the higher the stock market goes (or the longer it's held up as the economy deteriorates) the harder the fall will be. Allowing the market to take its medicine years ago would have prevented a situation where no amount of medicine is going to help the disease. In fact the Fed has essentially run out of medicine.

If you're anywhere near retirement I cannot stress strongly enough that you must get out of equities that you're simply holding as an investment. There will of course always be good individual stocks to own but generally speaking a receding tide will lower all boats. There is no safe diversification program since the coming collapse will be a global event, especially in emerging markets. I think bonds will be safe through this year (assuming the recent selloff is soon reversed) but then when deflation really takes hold it's going to be cash and only cash that you'll want to be in.

In the meantime, we as traders should be able to take advantage of the coming "correction." Even if it's just a few put plays while your capital is in cash you'll make money in a decline. I worry about others who don't know how to protect what they've got or how to safely short the market (even if it's in inverse ETFs). But we traders will have an opportunity to make a boatload of money far faster than playing the long side over the past few years. Just don't brag to your friends that you made a killing in the market crash when he/she lost half of their money (wink). But seriously, if you're in good shape after the crash you'll be one of the few with capital to start buying and lift the market back up. It will be a generational buying opportunity that I'm looking forward to. But before that opportunity there's going to be some pain for most people and businesses. Keep those stops tight on long positions.

One last thing, if you're a day trader who catches small moves and then looks for another quick entry/exit you might be able to make money with the small moves we've been getting in the market. If you're a swing or position trader you're likely to be a frustrated group of traders. Selling options have their own unique risks (what doesn't?) but in a range-bound market like we've been in, selling credit spreads has been a good way to chip away at the market and make a little money each week (with the weekly options). But if you're an active day trader I thought you'd appreciate the common descriptions of what you do:

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying

New Plays

The Next 48 Hours

by James Brown

Click here to email James Brown

Editor's Note:

The next few days could see an increase in volatility. There are multiple events that could generate some market-moving headlines.

There is an OPEC meeting on Friday. Their decision on oil production should come out before the U.S. market opens on Friday morning. This could definitely make waves in the oil stocks.

The nonfarm payroll (jobs) number on Friday could definitely move the market. Economic activity in the U.S. has been rather sluggish. There is a good chance the jobs number disappoints and comes in below estimates on Friday. The question is if traders will view a weak jobs number as bearish, since it means a weaker economy, or bullish since it would mean the Federal Reserve will likely delay its next rate hike?

Plus we have the intense situation with Greece. They have a big 300 million euro payment due to the IMF on Friday. They have been waffling on whether or not they can or will make that payment. Greece may choose to miss it as a way to put pressure on its creditors in Europe to make a deal. How will the market react if they miss a payment?

With so much happening in the next 48 hours we are not adding any new trades tonight.

In Play Updates and Reviews

Stocks Rally As Bonds Sink

by James Brown

Click here to email James Brown

Editor's Note:
The U.S. market delivered a relatively widespread rally. The small cap Russell 2000 index managed to breakthrough some short-term resistance. Meanwhile big moves in the bond market were making headlines.

The U.S. bond market sank to new lows for the year with the yield on the 10-year note up sharply in the last three days.

LDRH hit our entry trigger.

Current Portfolio:

BULLISH Play Updates

GoPro, Inc. - GPRO - close: 59.03 change: +0.63

Stop Loss: 54.65
Target(s): To Be Determined
Current Gain/Loss: +16.3%
Entry on May 14 at $50.75
Listed on May 13, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 6.5 million
New Positions: see below

06/03/15: GPRO still climbing. This morning JPMorgan reiterated their overweight rating and upped their price target on GPRO from $70 to $75.

Analysts were analyzing Ambarella's (AMBA) earnings report for clues on GPRO. One analyst suggested that AMBA's strong results is bullish for GPRO. Yet another analyst was arguing that the mix of chips sold by AMBA in the prior quarter may not be so bullish for GPRO since AMBA sells video chips to multiple camera makers.

GPRO rallied anyway but pared its gains by the close.

No new positions at this time.

Trade Description: May 13, 2015:
GPRO looks like a short squeeze waiting to happen. This company is the premier brand for wearable "action" cameras.

Here's the company's rather self-confident description, "GoPro, Inc. is transforming the way consumers capture, manage, share and enjoy meaningful life experiences. We do this by enabling people to self-capture engaging, immersive photo and video content of themselves participating in their favorite activities. Our customers include some of the world's most active and passionate people. The quality and volume of their shared GoPro content, coupled with their enthusiasm for our brand, virally drives awareness and demand for our products.

What began as an idea to help athletes document themselves engaged in their sport has become a widely adopted solution for people to document themselves engaged in their interests, whatever they may be. From extreme to mainstream, professional to consumer, GoPro has enabled the world to capture and share its passions. And in doing so the world, in turn, is helping GoPro become one of the most exciting and aspirational companies of our time."

GPRO came to market with its IPO in June 2014. The stock opened for trading at $28.65 and by October 2014 shares were nearing $100 per share. That proved to be the peak. GPRO spent the next six months correcting lower and finally bottomed near $37 in March this year. Now the stock is building on a steady trend of higher lows as investors digest the company's massive growth.

GPRO reported their 2015 Q1 results on April 28th. Wall Street was expecting a profit of $0.18 per share on revenues of $341.7 million. GPRO beat estimates with a profit of $0.24 a share. Revenues were up +54% from a year ago to $363 million.

Management said it was their second highest revenue quarter in history. Their GAAP results saw gross margins improve from 40.9% in Q1 2014 to 45.1% today. Their net income attributable to common stockholders increased 98.2% compared to the first quarter of 2014. International sales surged +66% and accounted for just over half of total sales in Q1 2015. GPRO shipped 1.3 million devices in the first quarter. This was the third quarter in a row of more than one million units.

GPRO management raised their guidance. They now expect 2015 Q2 revenues in the $380-400 million range with earnings in the $0.24-0.26 region. Analysts were only forecasting $335 million with earnings at $0.16 a share.

The better than expected Q1 results and the upgraded Q2 guidance sparked several upgrades. Multiple analysts raised their price target on GPRO. New targets include: $56, $65, $66, $70, and $76.

There are plenty of bears who think GPRO is overpriced with P/E above 47 and rising competition. The biggest argument against GPRO is competition from a Chinese rival Xiaomi who has produced a competitive action camera that they're selling for less than half of GPRO's similar model. GPRO critics are worried this could kill GPRO's growth in China and the rest of Asia. It's too early to tell who will be right but momentum is currently favoring the bulls.

The most recent data listed short interest at 24% of the 55.5 million share float. That's plenty of fuel to send GPRO soaring. Right now the stock is hovering around the psychological resistance level at $50.00. We are suggesting a trigger to launch bullish positions at $50.75.

- Suggested Positions -

Long GPRO stock @ $50.75

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

Long JUL $55 CALL (GPRO150717C55) entry $2.00

06/01/15 new stop @ 54.65
05/28/15 new stop @ 51.45
05/20/15 new stop @ 49.25
05/14/15 triggered @ $50.75
Option Format: symbol-year-month-day-call-strike

Hanesbrands Inc. - HBI - close: 32.03 change: +0.22

Stop Loss: 31.45
Target(s): To Be Determined
Current Gain/Loss: -1.0%
Entry on May 21 at $32.35
Listed on May 20, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.74 million
New Positions: see below

06/03/15: HBI displayed some relative strength with a +0.69% gain. Sadly shares are still stuck churning sideways in its recent trading range.

Readers may want to consider a rally above $32.20 as a new entry point for bullish positions.

Trade Description: May 20, 2015:
HBI was founded back in 1901. Today you will find Hanes products in more than 80 percent of U.S. homes.

HBI is in the consumer goods sector. According to the company, "HanesBrands, an S&P 500 company, is a socially responsible leading marketer of everyday basic apparel in the Americas, Europe and Asia under some of the world’s strongest apparel brands, including Hanes, Champion, Playtex, DIM, Bali, Maidenform, Flexees, JMS/Just My Size, Wonderbra, Nur Die/Nur Der, Lovable and Gear for Sports.

We sell bras, panties, shapewear, sheer hosiery, men's underwear, children's underwear, socks, T-shirts and other activewear in the United States, Canada, Mexico and other leading markets in the Americas, Asia and Europe. In the United States, we sell more units of intimate apparel, male underwear, socks, shapewear, hosiery and T-shirts than any other company."

What makes HBI different than most of its competitors is that HBI owns and operates its own manufacturing facilities. About 90% of their apparel comes from company-run plants. That helps them control costs throughout the production process.

This year the company has been very shareholder friendly. Back in January they raised their dividend 33% and announced a 4-for-1 split. The stock split took place in March this year.

HBI's most recent earnings report was April 23rd. HBI reported their Q1 earnings were up +16% from a year ago to $0.22 a share. That missed estimates of $0.23. Revenues were up +14% to $1.21 billion. This was just below expectations of $1.22 billion.

In the company press release HBI Chairman and CEO Richard Noll commented on their results, saying, "We are off to a great start in 2015, once again delivering a double-digit increase in EPS, while tracking to our full-year growth plans. Our acquisition strategy continues to create value with DBApparel, Maidenform and Gear for Sports all contributing substantially to our double-digit growth. In addition, we are raising our 2015 performance outlook to reflect the recent acquisition of Knights Apparel."

Management raised their earnings guidance for 2015 from $1.58-1.63 to $1.61-1.66 per share. Wall Street estimates were at $1.64. HBI also raised their 2015 revenue guidance from $5.78-5.83 billion to $5.90-5.95 billion. Consensus estimates were already at $5.95 billion.

The stock was hammered on the earning miss as investors ignored the improved earnings and revenue guidance. The stock corrected from about $34.60 to under $31.00 in four days (-10 correction).

Analysts' reaction to HBI's results have been positive. Some have noted that Q1 is normally a slower season for HBI. They see the pullback in HBI's stock as a buying opportunity. Multiple firms have raised their price target since the earnings report (new targets are $37, $38, and $40 per share).

Technically HBI has been consolidating sideways in the $30.50-32.00 zone the last several days and have just recently started to breakout from this trading range. We want to hop on board if this bounce continues. Tonight we're suggesting a trigger to open bullish positions at $32.35.

Long HBI stock @ $32.35

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

Long JUL $32.50 CALL (HBI150717C32.50) entry $1.05

05/30/15 new stop @ 31.45
05/21/15 triggered @ 32.35
Option Format: symbol-year-month-day-call-strike

LDR Holding - LDRH - close: 42.85 change: +0.97

Stop Loss: 39.45
Target(s): To Be Determined
Current Gain/Loss: +1.7%
Entry on June 03 at $42.15
Listed on June 02, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 231 thousand
New Positions: see below

06/03/15: Our new play on LDRH is off to a strong start. Shares broke through short-term resistance near $42.00 and surged +2.3% to new all-time highs. Our trigger to launch positions was hit at $42.15.

Trade Description: June 2, 2015:
The worldwide market for nonfusion spinal devices is expected to triple by in the next seven years. That's according to Millennium Research Group (MRG), who said, "the global market for spinal nonfusion devices will almost triple in size through 2022, surpassing $1.6 billion. This market will be driven largely by emerging products and approvals, as well as high growth in emerging regions, such as Asia Pacific and Brazil, India and China (BIC)." (

One company leading the charge in this industry is LDRH. They are in the healthcare sector. According to the company, "LDR Holding Corporation is a global medical device company focused on designing and commercializing novel and proprietary surgical technologies for the treatment of patients suffering from spine disorders. LDR's primary products are based on its exclusive VerteBRIDGE(R) fusion and Mobi non-fusion technology platforms and are designed for applications in the cervical and lumbar spine. These technologies are designed to enable products that are less invasive, provide greater intra-operative flexibility, offer simplified surgical techniques and promote improved clinical outcomes for patients as compared to existing alternatives. In August 2013, LDR received approval from the U.S. Food and Drug Administration (FDA) for the Mobi-C cervical disc replacement device, the first and only cervical disc replacement device to receive FDA approval to treat both one-level and two-level cervical disc disease."

The recent earnings history for LDRH has been very bullish. They have beaten Wall Street's earnings and revenue estimates the last four quarters in a row. Plus, the company has raised its guidance the last four quarters in a row. Revenues have been surging in the +25% to +30% range the last year.

The company's most recent earnings report was May 6th. They reported their Q1 results after the closing bell. Analysts were expecting a loss of ($0.20) per share. LDRH reported a loss of ($0.12). Revenues were up +25.7% to $39.1 million, above the $36.6 million estimate. Gross margins improved from 83.1% to 83.5%.

LDRH management said that foreign exchange rates would hurt revenues by 5% to 6% in 2015. Yet they still raised their 2015 revenue guidance into the $166.7-168.1 million range, above analysts' estimates of $160.5 million.

The stock shot higher on its May 6th earnings report and bullish guidance. Shares recently peaked near $42.00 and spent the last several days consolidating sideways in the $40-42 zone. This sideways consolidation has alleviated some of LDRH's overbought conditions. The point & figure chart is very bullish and forecasting at $64.00 target.

We like how shares were showing relative strength today. The stock is poised to breakout past short-term resistance at $42.00. Tonight we are suggesting a trigger to launch bullish positions at $42.15. The stock does not trade a lot of volume and it has been somewhat volatile in the past. I would consider this a slightly more aggressive, higher-risk trade.

NOTE: Options are available but the spreads are a little too wide to trade comfortably.

- Suggested Positions -

Long LDRH stock @ $42.15

06/03/15 triggered @ $42.15

Starbucks Corp. - SBUX - close: 52.12 change: +0.39

Stop Loss: 48.40
Target(s): To Be Determined
Current Gain/Loss: +2.1%
Entry on May 18 at $51.05
Listed on May 15, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 5.8 million
New Positions: see below

06/03/15: SBUX bounced near its rising 10-dma and outpaced the major indices with a +0.75% gain . The stock is poised to hit all-time highs by the weekend if the market cooperates. No new positions at this time.

Trade Description: May 16, 2015:
The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.

Five-Year Plan

In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX is having a pretty good 2015 so far with the stock up +23%, outperforming the broader market. A lot of this gain was thanks to a post-earnings pops. SBUX reported its Q1 2015 results on January 22nd. Adjusted earnings, backing out one-time charges, were $0.80 a share. That's in-line with estimates. Revenues were up +13.3% to $4.8 billion, also in-line with estimates.

It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week. Investors applauded the news in spite of the in-line results and sent SBUX soaring to new all-time highs the next day.

This earnings scenario, where SBUX delivers results in-line with estimates and rallies anyway, just happened again in late April. Of course it's worth noting that even in-line results still represent exceptional growth.

SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years. Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

SBUX popped to new highs following its results and then spent the next week consolidating lower. Investors started buying the dips again at its bullish trend of higher lows. It looks like the consolidation is over and SBUX is pushing higher. We want to hop on board. Tonight we are suggesting a trigger to open bullish positions at $51.05.

- Suggested Positions -

Long SBUX stock @ $51.05

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

Long JUL $50 CALL (SBUX150717C50) entry $2.07

05/18/15 triggered @ $51.05
Option Format: symbol-year-month-day-call-strike

Super Micro Computer - SMCI - close: 34.96 change: +0.36

Stop Loss: 31.65
Target(s): To Be Determined
Current Gain/Loss: +3.9%
Entry on May 22 at $33.65
Listed on May 18, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 622 thousand
New Positions: see below

06/03/15: SMCI challenged technical resistance at its simple 100-dma today. The fact that shares did not see any further profit taking after Monday's big rally is encouraging. More conservative traders may want to raise their stop loss.

Trade Description: May 18, 2015:
Sometimes the market's expectations get too high. When a company fails to meet these rising expectations the stock can get punished.

SMCI is in the technology sector. According to the company, "Supermicro® (SMCI), the leading innovator in high-performance, high-efficiency server technology is a premier provider of advanced server Building Block Solutions® for Data Center, Cloud Computing, Enterprise IT, Hadoop/Big Data, HPC and Embedded Systems worldwide. Supermicro is committed to protecting the environment through its 'We Keep IT Green' initiative and provides customers with the most energy-efficient, environmentally-friendly solutions available on the market."

It's easy to see why investors might have big expectations for SMCI. Looking at three of their last four earnings reports SMCI has beaten Wall Street estimates on both the top and bottom line and raised guidance three quarters in a row. It was their most recent report where results seemed to stumble.

SMCI report its fiscal Q3 results on April 21st, after the closing bell. Earnings were up 25% from a year ago to $0.47 a share. Yet analysts were expecting SMCI to report earnings in the $0.49-0.50 range. Revenues were up +26% from a year ago to $471.2 million, but this also missed expectations.

Guidance was also a little soft. Traders were used to SMCI raising their guidance. This time guidance for the current quarter (their Q4) was generally below consensus estimates.

The market overreacted to the disappointment. Shares crashed from $35 to almost $28 following its earnings news. Then traders started buying SMCI in the $29-30 region a couple of weeks ago. The rebound has lifted SMCI back above technical resistance at its 200-dma and back above price resistance near $32.00. We are betting this rebound continues. Tonight we're suggesting a trigger to open bullish positions at $33.65.

- Suggested Positions -

Long SMCI stock @ $33.65

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

Long JUL $35 CALL (SMCI150717C35) entry $1.50

05/22/15 triggered @ 33.65
Option Format: symbol-year-month-day-call-strike

Thoratec Corp. - THOR - close: 45.99 change: +0.64

Stop Loss: 43.85
Target(s): To Be Determined
Current Gain/Loss: -0.3%
Entry on June 01 at $46.15
Listed on May 27, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 602 thousand
New Positions: see below

06/03/15: It looks like our patience on THOR might pay off. Traders bought the dip again pretty early this morning. The stock rebounded to outperform the major indices with a +1.4% gain. This is a new closing high for the stock.

I would wait for a rally past Monday's intraday high ($46.29) if you're looking for an entry point.

Trade Description: May 27, 2015:
Shares of THOR are trading at multi-year highs thanks to a bullish outlook for 2015 results. THOR is in the healthcare sector. They make medical instruments.

According to the company, "Thoratec is a world leader in therapies to address advanced-stage heart failure. The company's products include the HeartMate II® and HeartMate III™ LVAS (Left Ventricular Assist Systems) and Thoratec® VAD (Ventricular Assist Device) with more than 20,000 devices implanted in patients suffering from heart failure. Thoratec also manufactures and distributes the CentriMag®, PediMag®/PediVAS®, and HeartMate PHP™ product lines. HeartMate III and HeartMate PHP are investigational devices and are limited by US law to investigational use. HeartMate PHP is currently in development and not approved for sale. Thoratec is headquartered in Pleasanton, California."

The last couple of earnings results have come in better than expected. You can see the rally in THOR's chart back in February. This was a reaction to the company's 2014 Q4 results. Analysts were expecting a profit of $0.24 a share on revenues of $106.8 million. THOR's results came in significantly above estimates with a profit of $0.39 on revenues of $127.9 million. Gross margins were 70.5% versus 65.5% a year ago.

The stock popped again on May 8th following another better than expected earnings report. Wall Street was expecting a profit of $0.26 a share on revenues of $111 million. THOR managed to beat estimates with a profit of $0.38 on revenues of $121 million. More importantly management raised their 2015 revenue guidance above estimates. THOR now expects revenues of $465-475 million versus consensus estimates around $463 million.

Yesterday the company announced that the FDA had provided a conditional approval for an IDE clinical trial to "investigate use of the HeartMate PHP acute catheter-based heart pump in patients undergoing a high-risk percutaneous coronary intervention."

Aside from a two-week correction in the second half of April the up trend in THOR's stock price has been pretty steady. The point & figure chart is bullish with a long-term target of $86.00. Currently shares of THOR are hovering just below potential resistance near $46.00. We are suggesting a trigger to launch bullish positions at $46.15.

- Suggested Positions -

Long THOR stock @ $46.15

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

Long JUL $45 CALL (THOR150717C45) entry $2.40

06/01/15 triggered @ $46.15
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

CenturyLink, Inc. - CTL - close: 32.99 change: +0.03

Stop Loss: 35.05
Target(s): To Be Determined
Current Gain/Loss: +2.0%
Entry on May 26 at $33.65
Listed on May 23, 2015
Time Frame: 8 to 12 weeks (less for option traders)
Average Daily Volume = 4.4 million
New Positions: see below

06/03/15: CTL essentially closed unchanged on the session, which is a small victory for the bears. I don't see any changes from last night's comments. If CTL does bounce the nearest resistance is probably $33.50 or the 10-dma near $33.60.

I am not suggesting new positions at this time.

Trade Description: May 23, 2015:
The earnings picture for CTL appears to be deteriorating and the stock has fallen as a result. CTL is in the technology sector.

They are part of the telecom services industry. According to the company, "CenturyLink (CTL) is a global communications, hosting, cloud and IT services company enabling millions of customers to transform their businesses and their lives through innovative technology solutions. CenturyLink offers network and data systems management, Big Data analytics and IT consulting, and operates more than 55 data centers in North America, Europe and Asia. The company provides broadband, voice, video, data and managed services over a robust 250,000-route-mile U.S. fiber network and a 300,000-route-mile international transport network."

Looking at the last few earnings reports the guidance picture has been getting worse. Back in November 2014 they reported their Q3 results that beat the bottom line estimate by one cent but management lowered guidance. Then in February this year CTL reported their Q4 results that missed estimates. Revenues were also below estimates and managed lowered their guidance.

Their most recent earnings report was May 5th. CTL delivered their 2015 Q1 report with earnings of $0.67 per share. That was nine cents better than expected. Yet revenues fell -1.9% from a year ago to $4.45 billion and that was below Wall Street estimates. If that wasn't bad enough they also lowered guidance again (if you're counting, that's the third quarter in a row they lowered guidance).

The stock is nearing bear-market territory, down about 19% from its 2014 highs near $42.00 (not counting the spike in July). Bulls could argue that CTL is an income play. They do have a big dividend yield, currently about 6.3%, but their dividend has been this high for weeks and shares have not managed a sustainable rebound.

Technically CTL looks poised to breakdown below support in the $34.00 area and could drop toward the $30-28 region. We are suggesting a trigger to open bearish positions at $33.65.

- Suggested Positions -

Short CTL stock @ $33.65

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

Long JUL $32 PUT (CTL150717P32) entry $0.55

05/26/15 triggered @ $33.65
Option Format: symbol-year-month-day-call-strike

Gulfport Energy Corp. - GPOR - close: 44.41 change: +0.03

Stop Loss: 45.35
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 30, 2015
Time Frame: 8 to 12 weeks (option traders should exit prior to expiration
Average Daily Volume = 1.5 million
New Positions: Yes, see below

06/03/15: More aggressive traders may want to short GPOR right here. The stock's oversold bounce just reversed at technical resistance at the descending 20-dma. The intraday rally faded and GPOR closed virtually unchanged. You could short GPOR at the open tomorrow with a stop above today's high ($45.26).

That's what you could do. We are not suggesting aggressive traders on GPOR at this time. We will stick to the plan and wait for a new relative low. Our suggested entry point is $42.75.

Trade Description: May 30, 2015:
Normally a weaker dollar is bullish for commodities. Yet the U.S. dollar's decline from March into May did not help the price of natural gas very much. The price of natural gas did bounce for three weeks in May but it's already reversed much of these gains. Now the U.S. dollar is on the rise and expected to keep climbing thanks to weaker foreign currencies.

Another problem for oil and gas explorers like GPOR is falling demand for natural gas. Weather has been mild this spring and that has decreased demand for natural gas from utilities, who are big consumers. At the same time inventories for natgas in the U.S. are building.

The EIA, the U.S. Energy Information Administration, said that current natgas inventories is up +59% from the same time a year ago and it's up +1.7% from the five-year average. Right now natural gas futures are trading around $2.64 per MMBtu (British thermal units in millions) and they look like they're headed for the 2012 lows near $2.00.

GPOR is in the basic materials sector. According to the company, "Gulfport Energy Corporation is an Oklahoma City-based independent oil and natural gas exploration and production company with its principal producing properties located in the Utica Shale of Eastern Ohio and along the Louisiana Gulf Coast. In addition, Gulfport holds a sizeable acreage position in the Alberta Oil Sands in Canada through its 24.9% interest in Grizzly Oil Sands ULC."

Their exposure to Canada's oil sands isn't helping them at the moment. In their most recent earnings report GPOR said that their production in Canada is currently halted due to low commodity prices.

Speaking of earnings, the company has delivered some strong results in recent quarters. Back in November they reported Q3 results above expectations. Revenues soared +146% from the year ago quarter. They reported similar results in February (their Q4 report). This is because GPOR's production has surged. In the fourth quarter of 2014 their oil and gas production was up +282% from the year ago period.

GPOR's most recent earnings report was announced on May 5th. The company reported a loss of ($0.08) per share. Analysts were expecting a loss of ($0.09). Revenues did come in above expectations but traders sold the news. Shares plunged and broke their three-month bullish trend of higher lows.

GPOR's stock price has been unable to recover. Traders have been selling the rallies. Goldman Sachs didn't help when they downgraded GPOR from "neutral" to a "sell" rating on May 18th. The point & figure chart on GPOR is bearish and forecasting at $36.00 target.

This past week was technically bearish with GPOR's relative weakness and breakdown below support in the $44.00 area. Tonight I am suggesting a trigger to open bearish positions at $42.75.

Traders should note that OPEC does have a meeting coming up next Friday. Their decision on oil production could influence the price of natural gas. GPOR produces both oil and gas but most of its business is natural gas.

Trigger @ $42.75

- Suggested Positions -

Short GPOR stock @ $42.75

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

Buy the JUL $40 PUT (GPOR150717P40)

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

World Fuel Services - INT - close: 49.90 change: -0.29

Stop Loss: 51.25
Target(s): To Be Determined
Current Gain/Loss: -0.3%
Entry on June 01 at $49.75
Listed on May 26, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 468 thousand
New Positions: see below

06/03/15: It was encouraging to see INT reverse yesterday's bounce. The stock underperformed the major indices with a -0.5% decline and another close below potential round-number support at $50.00.

I am suggesting traders wait for a new low (under $49.72) before initiating new positions.

Keep in mind that there is an OPEC meeting this Friday in Europe. News from the meeting will likely be out before the opening bell on Friday. No one expects OPEC to cut production. If they maintain their full production outlook it could pressure oil prices lower.

Trade Description: May 26, 2015:
The correction in shares of INT is not over yet. The stock saw a big run from its 2014 lows near $36 to all-time highs near $58 in March this year. That proved to be the peak.

INT is in the basic materials sector. According to the company, "Headquartered in Miami, Florida, World Fuel Services is a global fuel logistics, transaction management and payment processing company, principally engaged in the distribution of fuel and related products and services in the aviation, marine and land transportation industries. World Fuel Services sells fuel and delivers services to its clients at more than 8,000 locations in more than 200 countries and territories worldwide."

Their 2014 Q4 earnings were better than expected with a profit of $0.96 per share versus estimates for $0.77. Yet revenues fell -6.0% from a year ago to $9.78 billion. Analysts had been forecasting $11.36 billion. That's quite a miss.

We see the same pattern in INT's Q1 results. The company reported on April 30th. Analysts were expecting a profit of $0.82 a share on revenues of $9.2 billion. INT delivered $0.83 a share but revenues plunged -30% to $7.34 billion. This time investors took notice and shares of INT dropped sharply on its results.

The stock has been trying to find support near the $50.00 level but traders keep selling the bounces. Now the bearish trend of lower highs is about to push shares of INT through this critical support level at $50.00. Tonight we are suggesting a trigger to launch bearish positions at $49.75.

NOTE: The option spreads are a bit wide. INT does have July options but there's no volume and no open interest on the puts yet.

- Suggested Positions -

Short INT stock @ $49.75

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

Long AUG $50 PUT (INT150821P50) entry $2.50

06/01/15 After the close, INT announces a $100 million stock buyback program
06/01/15 triggered @ $49.75
Option Format: symbol-year-month-day-call-strike

On Deck Capital - ONDK - close: 15.24 change: +0.50

Stop Loss: 16.25
Target(s): To Be Determined
Current Gain/Loss: -6.2%
Entry on June 02 at $14.35
Listed on June 01, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 431 thousand
New Positions: see below

06/03/15: The big bounce in ONDK might be making some shorts sweat. Fortunately the stock stalled at short-term technical resistance at its simple 10-dma. A reversal here would be very encouraging.

I am not suggesting new positions at this time.

Trade Description: June 1, 2015:
You know something is wrong when a stock is down -50% from its post-IPO peak in less than six months.

ONDK is part of the financial sector. Here's how the company describes itself:

"OnDeck (ONDK), a leading platform for small business loans, is committed to increasing Main Street's access to capital. OnDeck uses advanced lending technology and analytics to assess creditworthiness based on actual operating performance and not solely on personal credit. The OnDeck Score®, the company's proprietary small business credit scoring system, evaluates thousands of data points to deliver a credit decision rapidly and accurately. Small businesses can apply for a line of credit or term loan online in minutes, get a decision immediately and receive funds in as fast as the same day. OnDeck also partners with small business service providers, enabling them to connect their customers to OnDeck financing. OnDeck's diversified loan funding strategy enables the company to fund small business loans from various credit facilities, securitization and the OnDeck Marketplace®, a platform that enables institutional investors to purchase small business loans originated by OnDeck.

Since 2007, OnDeck has deployed more than $2 billion to more than 700 different industries in all 50 U.S. states, and also makes small business loans in Canada. The company has an A+ rating with the Better Business Bureau and operates the website BusinessLoans.com which provides credit education and information about small business financing. On December 17, 2014, OnDeck started trading on the New York Stock Exchange under the ticker ONDK."

The company charges outrageous interest rates on its short-term loans. According to the SEC filings these can range from 20% to 99% APRs. They get away with this by only loaning to businesses and not individual consumers. Rising defaults are an issue. The company expects about 7% of their loans to go into default but some of the latest numbers suggest reality is closer to 20%. There is a concern that companies like ONDK will face future regulations that will limit how much interest they can charge. Another bear argument is valuations.

The company was valued around $1.4 billion at its IPO. Even with the decline it's still valued near $1 billion today. That's for a company without any profits. They lost ($0.01) per share in the fourth quarter and that jumped to a loss of ($0.05) per share in the first quarter.

Another potential landmine for shareholders is ONDK's six-month lockup expiration. Currently there are about 13.2 million shares outstanding. On June 15th, 2015 another 56 million shares are unlocked.

The stock broke down on its earnings report in early May. Now it's breaking down below its 2015 lows in the $14.50-15.00 zone. The point & figure chart is bearish and forecasting at $7.00 target.

The stock has seen some volatile moves. I would consider this a more aggressive, higher-risk trade. Tonight I am suggesting a trigger to launch bearish positions at $14.35. Traders may want to use put options to limit their risk.

- Suggested Positions -

Short ONDK stock @ $14.35

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

Long AUG $14 PUT (ONDK150821P14) entry $1.80

06/02/15 triggered @ $14.35
Option Format: symbol-year-month-day-call-strike