Option Investor

Daily Newsletter, Monday, 6/8/2015

Table of Contents

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

Market Wrap

The Correction Deepens

by Thomas Hughes

Click here to email Thomas Hughes
The market continues to retreat while we wait on data, next week's FOMC meeting and the next earnings reporting season.


Strong NFP numbers and positive outlook were not enough to support the market today. Weak outlook for 2nd quarter earnings and global woe are weighing down the market while we wait on even more data, an FOMC meeting, the next round of earnings and a triple witching options expiration at the end of next week. Except for a few earnings and economic reports most of this anticipation will not be satisfied until next week or later, leaving this week relatively light on market moving events. There was no official US economic data released today and only a handful of earnings reports.

Early trading was influenced by data from China and Japan. Chinese import data shows a -17% decline, not a good sign of growth in that country but one that raised hopes of stimulus once again. In Japan GDP estimates for the 1st quarter were revised higher, to 3.9%, in evidence of the success of ongoing stimulus measures there. Indices in the region closed mostly mixed although the mainland Chinese Shang Hai index gained over 2%.

Markets closed lower in Europe as well. The close of the G7 meeting leaves Greece in focus as well as sanctions against Russia. The general consensus is that Greece is running out of time very quickly so expect news to come from that arena at any time. The G7 leaders also reaffirm current sanctions against Russia and threatened more if Putin didn't get back in line.

Market Statistics

Futures were negative for most of the morning but indicating a flat open. The trade weakened going into the opening bell but only slightly with most of the major indices posting initial losses of less than -0.1%. The first 15 minutes of trading were a little volatile with some up and down action testing resistance at last week's closing prices. This didn't last long and left the indices trending lower into the early afternoon. The market hit today's bottom a little after 1:30 and after an hour or so of sideways action moved up to recapture about half of today's losses. The bounce did not find traction however ad the market moved back down to set a new intra-day low by the close of today's trading.

Economic Calendar

The Economy

No data today and not whole lot for the week but it will be important nonetheless. Tomorrow is Wholesale Inventories and JOLTs job openings. Inventories are expected to rise, look for job openings and quits to remain steady or strengthen. Wednesday is Treasury Budget. Thursday Initial Claims, Retail Sales, Import/Export Prices and Business Inventories. Friday is PPI and Michigan Sentiment. I'm looking for PPI to be the big move of the week. Last month it was weaker than expected and precipitated a bottom in the dollar and a top in gold. This month it is expected to grow by at least 0.4% so could spark the opposite move.

Moody's Survey Of Business Confidence remains near record high levels. The index reading jumped by 0.8 points to hit 44.1, just shy of the all-time high set in April. According to Moody's chief economist Mark Zandi global businesses remain positive about current conditions and future expectations. He takes note of a surge in expectations for the second half that runs counter to recent weakness and declining estimates for 2nd quarter quarter growth.

The Oil Index

Oil prices fell more than -1.5% today as OPEC's decision to keep pumping was underscored by a report today China's month to month imports of oil declined by -26%. The combination is evidence of the ongoing supply/demand imbalance that could keep oil prices under pressure. At the same time there are plenty of hot spots in the middle east to help keep prices supported, as well as the upcoming Iranian Nuclear deal deadline.

The Oil Index fell by only a half percent in today's action but continues to exhibit signs the near term decline is reaching bottom. Momentum in the downward movement is in decline and diverging from the current low, an indication of a potential trough if not actual support along the long term trend line. Stochastic is still weak and below the upper signal line but is oversold in relation of the long term trend line. The index could continue to drift lower with a target near the range of 1,250 to 1,300.

The Gold Index

Gold prices got a little lift today as the dollar weakened. Gold gained about a half percent to trade above $1170. Prices have tested support due to the dollars recent rebound but appear to remain range bound ahead of the FOMC meeting and PPI data later this week. Looking back to last month and the PPI data, surprising low producer level inflation helped the dollar to bottom and gold to top so I will be looking for some kind of similar move on Friday. PPI is expected to rise by roughly .4%, up from last month's decline of -0.4%. Even if it only comes as expected it will raise expectations for the Fed rate hike and could strengthen the dollar, but will also put inflation firmly back on the table and could support gold prices at the same time.

The gold miners ETF GDX gained over a full percent in today's session. Today's candle is little more than a spinning top and represents sideways movement from Friday's candle. The indicators remain bearish but with MACD forming only very weak peaks the strength of this break of this dip is questionable. Stochastic is also weak and below and lower signal line but like could be seen as oversold in light of recent price action. Gold prices are the biggest driver of this index so Friday could be a big day for it as well. If gold prices are unable to hold support then the ETF could retreat to it's long term low near $17.50.

In The News, Story Stocks and Earnings

There was no report from Factset this week. Earnings season begins in exactly one month with Alcoa on July 8th. The aluminum giant is expected report earnings of $0.25, a 10% decline from last quarter's $0.28. The company has been faced with currency headwinds and sluggish demand with the added twist of plunging bauxite prices. I say twist because it means lower prices for finished alumina but may also lower input prices for since close to 1/3 of Alcoa's bauxite comes from outside sources. Another factor thatmay affect the bottom line is potential savings in fuel costs. The stock has been trending lower since February and made a new low today. Share prices are now near the middle of the 5 year trading range and a new 15 month low.

McDonald's released global comp store sales this morning and surprised with a better than expected decline. The company reported global comps down by -0.3%, consensus was closer to -1.0%. This was led by decline in Asia/Pacific/Africa of -3.2% but offset by gains in Europe, 2.2%. US comps fell by -2.2%, less than expected. MCD next reports earnings at the end of July and is expected to show an increase over the last quarter. Today the stock lost -0.15%.

Sears reported earnings today. The company reported a loss of -$2.85 per share, much better than expected. Sales for Sears stores declined by -7% in the quarter, in the Kmart line of stores sales declined by -14%. The company also reported the planned spin-off of a large number of stores into a REIT. Management says the company is making progress on its turnaround plans and well positioned to continue doing so. Shares of the stock lost -4.27% in today's session.

Apple held its annual developers conference today. Tim Cook revealed a number of new advancements including updates to iOS 9, a new operating system called el Capitan, updates to Siri and how it interfaces with users, new native apps for the watch and some new functionality for the iPad. Shares of the stock waffled during the conference but ended the day with a loss of -0.74%.

The Indices

The market moved lower today, not so much in a full rout of the bulls but more like a measured retreat. After an initial battle just after the open today's decline was steady and only interrupted by a single bounce. This bounce did not find much traction and soon led to additional selling and new intra-day low.

Today's move was led by the Dow Jones Transportation Average and a loss of over -2.0%. Today's action created a long black candle and confirms resistance at once was support. This move is ominous for the bulls as it could lead to a much deeper correction/reversal for the index but I am still not quite ready to go full bear just yet. The 8,250 level could well prove to provide support. The indicators are still consistent with support on the long term weekly charts and the 2.5 year uptrend. In that light cuurrent action could be swinging into a trend following entry. Until then the index looks set to test 8,250 and is likely to remain weak until earnings expectations in the sector get sorted out.

The NASDAQ Composite made the next largest decline, -0.95, less than half that of the transports. The techs have broken back below support at the 1999 all-time high and the short term moving average with rapidly weakening indicators. Both MACD and stochastic are moving lower and gaining momentum with potential support at 5,000 and a target if that fails near the long term trend line. A dip to the trend line would be a near 5% correction. The long term trend remains up so any dips remain potential buying opportunities.

The S&P 500 comes in third today with a loss of -0.65%. The broad market created a black candle of medium size extending its drop from the 2,093 support line. Although there was a bounce from support in mid-day action the index closed at the low of today's session. The move has taken it down to 2,080 with next possible support near 2,060. The indicators are bearish and gaining momentum so it looks like a deeper correction is on the way. The index has already broken one trend line and is aimed at another, a correction to this line would be just over 7% from the current all-time high, near the 2,000. Between now and that eventuality are potential support at 2060,2050 and 2020.

The Dow Jones Industrial Average made the smallest decline today, only -0.46%. Today's action created a black candle with no lower shadow in extension of the drop from 18,000. The indicators are bearish and gaining strength with a potential support target near 17,600. The index remains well above the long term trend line so any signs of support are potential buying opportunities. A break below 17,600 has a target near the long term trend line around 17,400.

The indices continue to fall through shorter term support levels with longer term support levels in sight. The long term trends remain up, in the indices and the economy but near term expectations for earnings remain poor so a deeper correction appears to be in the offing. It is very possible this correction will take all the indices, not just the transports, back to their trend lines before earnings season even starts unless something happens to change the outlook.

There is not a lot on the schedule to support prices this week but there are some key reports to keep an eye on. Business Inventories, Wholesale inventories, Retail Sales and PPI could all affect expectations for 2nd quarter GDP and they will assuredly affect FOMC rate hike speculation what the FOMC does at their meeting next week.

In the near term it looks like we're in correction with targets near long term support levels. It's unclear just how deep the correction will be but unless the outlook for the end of the year and next year changes I will be buying on the dip.

Until then, remember the trend!

Thomas Hughes

New Plays

Activist Hedge Fund Battles Management

by James Brown

Click here to email James Brown


Tempur Sealy Intl. - TPX - close: 62.61 change: +0.04

Stop Loss: 59.25
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 08, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 890 thousand
New Positions: Yes, see below

Company Description

Trade Description:
Activist investors seek to influence management to incorporate major changes in a company with the expectation of unlocking shareholder value. Sometimes the mere mention of an activist investor buying a stock can get shares to move. In TPX's case the activists have won a major battle with management.

TPX is in the consumer goods sector. According to the company, "Tempur Sealy International, Inc. (NYSE: TPX) is the world's largest bedding provider. Tempur Sealy International develops, manufactures and markets mattresses, foundations, pillows and other products. The Company's brand portfolio includes many of the most highly recognized brands in the industry, including Tempur, Tempur-Pedic, Sealy, Sealy Posturepedic, OptimumTM and Stearns & Foster. World headquarters for Tempur Sealy International is in Lexington, KY."

TPX's most recent earnings report was April 28th. They announced their 2015 Q1 results with earnings of $0.55 per share. That was seven cents above estimates. Revenues were up +5.4% to $739.5 million. This was also above expectations. Management raised their 2015 forecast for both earnings and sales. The stock popped to new multi-year highs on this news. Yet the real story is probably the activist investors involved.

Hedge fund H Partners has been urging change with TPX management for months. TPX executives choose to fight. It came down to a proxy fight and shareholders voted to oust the CEO. Two more directors, who were under fire by H Partners have also left the board. H Partners built a website to inform shareholders their opinion on the company (www.fixtempursealy.com). There they posted their 90 page slideshow on why TPX needed a management change. You can see their presentation at this webpage.

The stock has been oscillating sideways in the $58-63 zone the last few weeks. It's starting to look like the consolidation may be over. TPX displayed relative strength last week and it held up today as well while the rest of the market was sinking. If TPX can trade over $63.00 it will generate a new quadruple top breakout buy signal on the P&F chart. We are suggesting a trigger to launch bullish positions at $63.15.

Trigger @ $63.15

- Suggested Positions -

Buy TPX stock @ $63.15

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

Buy the SEP $65 CALL (TPX150918C65) current ask $3.30
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike

Daily Chart:

Weekly Chart:

In Play Updates and Reviews

Industrials Erase 2015 Gains, Transports Sink

by James Brown

Click here to email James Brown

Editor's Note:
The Dow Jones Transportation Average led the market lower on Monday. Widespread weakness in European market's didn't help either. The Dow Jones Industrial Average has erased its gains for the year. Overall it was a pretty lousy session if you're bullish.

SGEN hit our bullish entry point.

Current Portfolio:

BULLISH Play Updates

GoPro, Inc. - GPRO - close: 59.40 change: -0.01

Stop Loss: 54.65
Target(s): To Be Determined
Current Gain/Loss: +17.0%
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

06/08/15: GPRO started the day on a strong note with shares pushing to new four-month highs. Unfortunately the broader market's weakness weighed on the stock. Shares eventually settled nearly unchanged for the day. Considering the market weakness today's move in GPRO is a small victory for the bulls.

More conservative traders will want to consider a higher stop loss. We are not suggesting 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: 32.30 change: -0.05

Stop Loss: 31.45
Target(s): To Be Determined
Current Gain/Loss: -0.2%
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

06/08/15: HBI is another stock that managed to ignore the market's weakness today. Shares quietly churned sideways and spent most of the session inside a 20-cent range.

I am not suggesting new positions at this time. The $32.50 area, along with the 50-dma in the same region, is overhead resistance.

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

Hill-Rom Holdings - HRC - close: 51.84 change: -0.45

Stop Loss: 50.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 04, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 335 thousand
New Positions: Yes, see below

06/08/15: HRC tried to rally but the stock failed under $52.40 midday. Shares eventually followed the market lower. HRC is poised to test technical support at its 20-dma soon.

Currently we are on the sidelines. Our suggested entry point is $52.55.

Trade Description: June 4, 2015:
HRC is a midcap stock that's outperforming both the big cap indices and the midcap index. The S&P 500 index is up +1.8% year to date The MDY midcap ETF is up +5%. Yet HRC is up +14.7% this year and just set a new multi-year closing high today.

HRC is in the healthcare sector. According to the company, "Hill-Rom is a leading global medical technology company with more than 7,000 employees worldwide. We partner with health care providers in more than 100 countries by focusing on patient care solutions that improve clinical and economic outcomes in five core areas: Advancing Mobility, Wound Care and Prevention, Clinical Workflow, Surgical Safety and Efficiency, and Respiratory Health. Hill-Rom's people, products, and programs work towards one mission: Every day, around the world, we enhance outcomes for patients and their caregivers."

Their most recent earnings report was May 5th. HRC announced its fiscal Q2 results with earnings up +12% to $0.64 a share. Analysts were only expecting $0.60. Revenues were up +14% to $475 million. On a constant currency basis revenues were up +21%. Estimates were at $471.7 million.

HRC President and CEO John Greisch commented on his company's quarterly results, saying, "We are pleased to report another quarter of strong revenue and adjusted earnings growth. Organic revenue growth was the strongest in three years, as our North America and Surgical/Respiratory Care businesses performed well. In addition, we launched several important new products. Despite incremental currency headwinds, we are raising our full-year outlook, reflecting our improved operational execution."

Management lowered their Q3 guidance below estimates but they countered that by raising their full year 2015 guidance above Wall Street expectations. The company now sees revenues growing at +10% to +11% this year.

Investors have been buying the dips in HRC for a long time. That bullish trend of higher lows has pushed the stock toward resistance in the $52.00 area. Today we saw HRC ignore the market's widespread weakness and breakout past this area. We want to hop on board if this momentum continues. Today's intraday high was $52.37. We are suggesting a trigger to open bullish positions at $52.55.

Trigger @ $52.55

- Suggested Positions -

Buy HRC stock @ $52.55
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.

LDR Holding - LDRH - close: 43.82 change: -0.13

Stop Loss: 39.45
Target(s): To Be Determined
Current Gain/Loss: +4.0%
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

06/08/15: Wow! Today's move in LDRH is impressive. The stock is essentially up +10% last week. You might think, that with the market in a widespread decline today, that LDRH would be a target for profit taking. LDRH managed to end the day with a minor -0.28% loss. Of course that doesn't mean shares won't sink tomorrow if the market continues to fall.

We should expect some profit taking. Broken resistance near $42.00 is the closest support. More conservative traders may want to raise their stop loss.

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: 51.53 change: -0.66

Stop Loss: 49.95
Target(s): To Be Determined
Current Gain/Loss: +0.9%
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

06/08/15: SBUX did not escape unscathed from the market's decline. Shares actually underperformed with a -1.26% decline versus the NASDAQ composite's -0.9% loss.

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

06/04/15 new stop @ 49.95
05/18/15 triggered @ $51.05
Option Format: symbol-year-month-day-call-strike

Seattle Geneitcs, Inc. - SGEN - close: 47.80 change: +0.93

Stop Loss: 43.75
Target(s): To Be Determined
Current Gain/Loss: +1.4%
Entry on June 08 at $47.15
Listed on June 06, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.1 million
New Positions: see below

06/08/15: Biotech stocks were some of the market's worst performers today. They were also some of the market's best performers. SGEN fell into the latter category with a +1.98% gain and a new 2015 high. Shares hit our suggested entry point at $47.15 this morning.

Before the opening bell SGEN announced a strategic cancer immunotherapy collaboration with Unum Therapeutics. The two have agreed to partner up and develop a "novel antibody-coupled T-cell receptor (ACTR) therapies for cancer."

If you missed the entry this morning then consider waiting for a dip near $47.00 before launching positions.

Trade Description: June 6, 2015:
It has been a very bumpy ride for biotech investors this year. Yet the biotech space continues to outperform the broader market. The IBB biotech ETF is up +20% in 2015 versus the NASDAQ composite's +6.6% gain. SGEN is faring even better with a +45.8% gain this year.

SGEN has been working on its antibody-drug conjugate (ADC) technology for years but it still sounds like science fiction. They can create ADCs that target a specific type of tumor cell in the body. It links up with a cancer cell and then delivers a cytotoxin, which is a cell-killing agent.

According to the company, "Seattle Genetics is a biotechnology company focused on the development and commercialization of innovative antibody-based therapies for the treatment of cancer. Seattle Genetics is leading the field in developing antibody-drug conjugates (ADCs), a technology designed to harness the targeting ability of antibodies to deliver cell-killing agents directly to cancer cells.

The company's lead product, ADCETRIS® (brentuximab vedotin), is a CD30-targeted ADC that, in collaboration with Takeda Pharmaceutical Company Limited, is commercially available for two indications in more than 55 countries, including the U.S., Canada, Japan and members of the European Union.

Additionally, ADCETRIS is being evaluated broadly in more than 30 ongoing clinical trials in CD30-expressing malignancies. Seattle Genetics is also advancing a robust pipeline of clinical-stage programs, including SGN-CD19A, SGN-CD33A, SGN-LIV1A, SGN-CD70A, ASG-22ME, ASG-15ME and SEA-CD40. Seattle Genetics has collaborations for its ADC technology with a number of leading biotechnology and pharmaceutical companies, including AbbVie, Agensys (an affiliate of Astellas), Bayer, Genentech, GlaxoSmithKline and Pfizer."

SGEN has a pretty robust pipeline with multiple therapies in phase 1 to phase 3 trials. That probably makes them a buyout target in this merger happy market. Yet that is just speculation on my part. Here's a list of SGEN's current pipeline (SGEN's pipeline).

I hesitate to mention earnings because most smaller biotech firms don't have any. The earnings they do have tend to be lumpy due to milestone payments from partners. SGEN actually has revenue from sales of its FDA approved therapy (listed above). Yet they continue to run losses every quarter. That's because running so many clinical trials is expensive.

Looking at the last couple of quarters SGEN has reported results that were above Wall Street estimates on both the top and bottom line. Revenues in the fourth quarter were up +10% from a year ago while revenues in the first quarter were up +20% from a year ago.

Recently SGEN has seen some bullish headlines regarding insider buying. The company's largest shareholder, Baker Brothers Advisors, bought more than one million shares of the company. This raised their stake in SGEN from 23.4% to 24.25%. Traditionally insider buying is seen as a big bullish vote of confidence on the company's future.

The stock has been soaring the last few weeks with a run from an intraday low of $33.68 on April 30th to a new 52-week high near $47.00 this Friday. You could definitely argue that SGEN is overbought. I'm sure a big portion of that move could have been short interest. It could be short covering that drives the next move higher. The most recent data listed short interest at 29% of the 92.9 million share float. That's enough for a potential short squeeze. Bears may be panicked with SGEN above resistance near $45.00.

SGEN looks pretty bullish right here. I'd be tempted to buy the stock now. However, tonight we are suggesting bullish positions on SGEN if shares trade at $47.15. Just keep in mind that trading biotech stocks is a higher-risk proposition. Not only do biotech stocks tend to be more volatile but you never know when the right or wrong headline (usually regarding some clinical trial) could send shares of your trade crashing or soaring overnight. Right now the IBB biotech ETF is poised to break through major resistance. That could spark short covering across the biotech space.

- Suggested Positions -

Long SGEN stock @ $47.15

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

Long SEP $55 CALL (SGEN150918C55) entry $2.45

06/08/15 triggered @ $47.15
Option Format: symbol-year-month-day-call-strike

Super Micro Computer - SMCI - close: 33.54 change: -0.14

Stop Loss: 32.45
Target(s): To Be Determined
Current Gain/Loss: -0.3%
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

06/08/15: SMCI seemed to ignore the market's widespread weakness today. Shares were content to just drift sideways with technical support at its 50-dma must below them.

I am not suggesting new positions at this time.

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

06/04/15 new stop @ 32.45
05/22/15 triggered @ 33.65
Option Format: symbol-year-month-day-call-strike

Thoratec Corp. - THOR - close: 45.27 change: -0.02

Stop Loss: 44.35
Target(s): To Be Determined
Current Gain/Loss: -1.9%
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

06/08/15: THOR tried to rally but failed at the $46.00 level again. If the broader market continues to sink tomorrow I suspect our odds of being stopped out are pretty high.

No new positions at this time.

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

06/06/15 new stop @ 44.35
06/01/15 triggered @ $46.15
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

CenturyLink, Inc. - CTL - close: 32.22 change: +0.04

Stop Loss: 33.65
Target(s): To Be Determined
Current Gain/Loss: +4.2%
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

06/08/15: CTL dipped to new lows this morning. Shares managed a little oversold bounce and closed virtually unchanged on the day. The stock remains oversold and likely due for a bounce back toward its 10-dma near $33.00.

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

06/04/15 new stop @ 33.65
05/26/15 triggered @ $33.65
Option Format: symbol-year-month-day-call-strike

World Fuel Services - INT - close: 50.22 change: +0.46

Stop Loss: 50.70
Target(s): To Be Determined
Current Gain/Loss: -0.9%
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

06/08/15: Our INT trade is in trouble. The stock has outperformed the broader market two days in a row. Shares rallied back above what should have been resistance at $50.00 today. Thankfully the simple 20-dma seemed to stop the rally this morning.

After the closing bell tonight INT announced it had agreed to a $110 million settlement for victims in the Lac-Megantic rail disaster, which killed 47 people. I don't see any reaction to the news in INT's stock price after hours.

Tonight we are moving our stop loss down to $50.70. The intraday high today was $50.60. I am not suggesting new positions at this time.

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

06/08/15 new stop @ 50.70
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: 14.50 change: -0.42

Stop Loss: 16.25
Target(s): To Be Determined
Current Gain/Loss: -1.0%
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

06/08/15: ONDK displayed relative weakness with a -2.8% drop today. Shares did manage to pare its losses with a bounce from its afternoon lows. If the market continues to sink we could see ONDK breakdown below last week's low.

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