Option Investor

Daily Newsletter, Saturday, 6/20/2015

Table of Contents

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

Market Wrap

Russia, China, Greece

by Jim Brown

Click here to email Jim Brown

The headline standoff between Greece and the IMF, EU and ECB continues as the countdown clock continues to wind down. Another series of emergency meetings are scheduled for Monday and the outlook has not changed despite the severity of the looming disaster. Equities sold off ahead of the weekend event risk.

Market Statistics

Speaking at an economic forum in St Petersburg Greek Prime Minister Alexis Tsipras warned that Greece had other "friends" it could turn to for help if the talks with the Troika failed next week. He was implying that Russia and China would kick in some cash in exchange for some future favors. He has held several meetings with Putin and while nobody has said so publicly the price for a Russian bailout is probably an agreement to base a Russian fleet in Greek harbors. That would be a major security issue for the eurozone and something they do not want to happen. The Chinese could offer Greece a bailout in exchange for a similar foothold in Southern Europe. This is also a nonstarter for the EU.

When Tsipras spoke he said the problem of Greece was not a Greek problem but a European one. Putin repeated that claim saying Tsipras was right. "If you owe someone a lot, then it is already not your problem but the problem of the one you owe. That is an absolutely correct approach."

However, the EU cannot keep pouring money into Greece because it is a bottomless pit. The money they are fighting about today is about 7 billion euros of undistributed cash from prior agreements. Greece has a 1.5 billion euro payment due to the IMF on June 30th and 7.5 billion due to the EU and ECB in July and August. If a deal is struck the funds will only rest in the Greek accounts for a few days before going right back to the IMF and EU/ECB. Loaning Greece money to pay interest payments on the existing loans is like getting a cash advance on your credit card to make the monthly payment.

Greece is bankrupt and everyone knows it. Tsipras said it is the fault of the Troika. They should have never loaned us the money because they knew we could not pay it back. His solution is for the Troika to forgive the debt of about 340 billion euros or at least reduce the principal amount significantly.

Greece cannot pay its own government expenses much less pay interest on the bailout debt. This entire process over the last five years has been a slow motion train wreck. What happens next week will only be one more step in the Greek exit process.

I do not expect the Greek headlines to go away. I believe we will see another interim deal where the EU kicks the can down the road to give everyone some breathing room. They will continue to extend the terms on the debt and pretend Greek will eventually pay it off. At this point, hope should not be a strategy for the EU. Unfortunately, they have too much wrapped up in this eurozone experiment and they cannot afford to abandon it. Spain, Italy and Portugal are waiting patiently and watching to see what happen to Greece. If the EU reduces the principal on the existing bailout loans those other countries will immediately demand a principal reduction on their bailouts as well.

While Greece has reached the 11th hour in the negotiations, it is a bogus deadline. Regardless of what happens the problem will remain. Greece will still be bankrupt. The equity market will just have to get over it and move forward. Traders are already fatigued over the multiyear process. They are somewhat complacent that a deal will get done or extended because it has always happened in the past. Over the last five years the Greek debt has been restructured to where the IMF, EU and ECB own 90% of it. The equivalent of a Greek bankruptcy should be relatively contained and not impact the rest of Europe. Draghi will dump several hundred billion euros of QE into the market and the Greek impact will only be a blip on the chart.

I am done with Greece. I am sure our readers are done also. I wish there was really going to be a resolution next week and the problem disappear. Unfortunately, that is not going to happen and we just have to ignore the headlines in the months ahead. I believe that once the disaster headline appears the market will get over it quickly. I just wish the EU would rip the Band-Aid off and end the uncertainty.

There were no material economic reports in the U.S. on Friday. Next week is a full calendar with Greece the headliner on Monday. The EU Finance Ministers are holding an emergency meeting at 9:AM ET on Monday. About four hours later the EU leaders will meet and decide how they want to proceed. After these meetings the ECB will make a decision on how much longer they are going to continue supporting the Greek banks. Reuters said another 2.2 to 2.7 billion euros were withdrawn on Thursday and Friday. That is in addition to 2 billion that were withdrawn in the first three days of the week. The ECB gave them another 3 billion on Friday in order to keep them open through the weekend. The ECB has advanced the banks 83.7 billion euros under the emergency liquidity assistance (ELA) program to prevent the banks from failing. Without the daily support of the ECB the Greek banks could not open for business and the disaster would begin.

Donald Tusk, the head of the EU Council put out a video on Friday. He said on the video, "This game of chicken needs to end. The blame game also needs to end. This is not a game and there is no time left for games." He warned that there would be catastrophic consequences if there were no resolution. Tusk Warns on Default

There is a flurry of economic reports with home sale, Richmond Fed Manufacturing and the GDP revision the most important for me.

UnderArmour announced a 2:1 split but the new shares will be class C shares with no voting rights. Google did this a year ago and was sued for it but they won the suit. UnderArmour will announce the split dates after the board meeting on August 26th.

Netflix is the most heavily anticipated split but still no word on the date or ratio.

The European markets closed mostly positive so it did not appear they were too concerned about the impending crisis over Greece. The German DAX has been weak because investors are afraid Merkel will do something to end the Greek problem and it will cost Germany some more money.

The Chinese markets are in correction mode with a -13% decline for the week on the Shanghai Composite. It was way overdue after a +160% rally over the last 12 months. It is too soon to know if the bubble is bursting of if this is just a needed pause. Chinese citizens have been opening new brokerage accounts at the rate of 3 million a week and a clear example of irrational exuberance. This comes at a time when the Chinese economy is declining to the lowest level in 19 years. This was the worst week for the Shanghai market since 2008.

The U.S. equity market may have sold off on Friday but investors were buying treasuries in a flight to quality ahead of what could be a rocky week. Yields have fallen from 2.49% on the 10th to 2.267% at Friday's close. If Europe self-destructs next week because of Greece, some investors wanted to be in the safety of treasuries. With the FOMC statement and Janet Yellen avoiding any direct mention of timing for the first rate hike some investors felt the coast was clear for at least three more months.

San Francisco Fed President John Williams was not following the party line on Friday. In a speech he said the Fed should raise interest rates twice this year. "My own forecast would be having us raise rates two times this year, but that would depend on the data." His expectations for economic growth are better than Yellen's. Williams wants the Fed to raise rates earlier so it can afford to tighten gradually. He is worried that rising oil prices and the dollar could cause inflation to rise faster than expected and force the Fed to tighten faster and that would disrupt the markets.

In the Fed's dot-plot seven officials projected fewer than two rate hikes in 2015. Five projected two increases and another five projected three increases. Clearly some on the Fed are way out in left field based on the economic data. You have to wonder if they are "projecting" those extra rate hikes to shock the markets and create volatility on purpose. There are no names attached to the plots so the survey is anonymous.

Basically each Fed official places a dot where they think the interest rates will be at the end of each year. By assuming each rate hike will be 25 basis points you can calculate how many rate hikes would be needed to reach the average.

There was little news in the equity market and that probably accounted for some of the profit taking. There was nothing to keep investors enthused after the new highs on Thursday. Ambarella (AMBA) was a big mover after short seller Citron Research called the share price "ridiculous" and slapped a $60 price target on the stock. Citron is known for high profile short calls and quite a few fail to decline as Citron expects. I guess loading up on shorts and then making a high profile and highly questionable claim is one way to invest.

Ambarella makes chips for high definition audio and video cameras. One of their major customers is GoPro. Citron said their chips are becoming a commodity item and they are "coming up short in the innovation department." Most analysts disputed the Citron call as just another headline grab.

They IPOed in October 2012 at $6 and shares are up +1880% to $128 on Thursday. I had been hoping for a correction to get an entry point since mid May when they began exploding higher and broke above uptrend resistance. Maybe this is going to be my chance. They will have to drop about $20 more to make it interesting enough to go long.

Twitter shares rose +3.5% in a bad tape. MKM partners put out a note saying the social networking company could grow to a valuation of $100 billion if it executes on its strategy to grow and monetize its user base. Twitter's market cap was $23 billion on Friday. Analysts also liked the new changes Twitter announced in Project Lightning that include ways to monetize users that don't have accounts and increase the stickiness to the Twitter website through curated events. Twitter editors would pull together related threads and content surrounding high profile events like a music awards show, price fight or sporting event. Twitter also bid on streaming NFL games.

Twitter is also testing product pages that would make it easier to shop. The new feature would organize tweets on dedicated pages which feature images and video of the product along with the description, price and an option to buy or visit the website for more information. I think it is way too early to count Twitter out. Whether they rebound and thrive on their own or are acquired by somebody like Google, Microsoft or Apple, they will be around for a long time and once they figure out the right combination of features the users will come.

Hershey (HSY) shares declined -3.5% after they warned on full year earnings. The company said sales growth would be 2.5% to 3.5% compared to prior forecasts for 4.5-5.5%. Earnings per share forecasts were cut from $4.30-$4.38 to $4.10-$4.18. The company said weak sales in China were to blame. Q1 sales in China were only half the same period in 2014 and missed forecasts for April and May. Hershey said slowing economic growth in China had forced consumers to cut back on spending even during the festive holiday seasons.

The company is also struggling in the U.S. because health conscious consumers are buying less candy. Hershey said it was also reassessing the value of Shanghai Golden Monkey Food, which it had agreed to buy for $584 million in 2014. Hershey is scheduled to acquire the remaining 20% stake in September. I suspect a problem for Golden Monkey in getting that final 20% without a haircut.

Micron (MU) was cut to a sell by Morgan Stanley on Monday and shares fell to a 52-week low at $23.70. On Friday Topeka Capital Markets upgraded the company from hold to buy and raised the price target from $30 to $34. Shares closed at $24.47. The analyst said he was encouraged by the cost improvements in the DRAM chips, steady improvement in TLC 3D NAND that could drive an inflection point and a commitment to returning capital while maintaining a competitive capex level. Improvement in technology is reducing costs and improving margins.

KB Homes (KBH) reported earnings of 10 cents compared to estimates for 8 cents. Revenue of $623 million rose +10.3% and beat estimates for $619 million. Net orders rose +33% to 3,015 homes. They delivered 1,787 in Q1 with an average selling price of $338,500. Net orders rose +38%. Shares rallied +9% on the news.

Conagra (CAG) shares rallied +11% after activist investor Jana Partners disclosed a 7% stake and intentions to nominate three board members. Jana accused the company of underperforming and shareholder wealth destruction. Conagra markets dozens of brands of prepared foods from Peter Pan, Reddi Whip, Hunts ketchup, Slim Jim jerky, Snack Pack pudding, Rotel, Healthy Choice, Swiss Miss, Wesson Oil, La Choy, Orville Redenbacher, Tennessee Pride, Egg Beaters, Wolf Brand Chili, Manwhich, Pam, Van Camps, Rosarita Beans, Ranch Style Beans, Fleischmann's, Blue Bonnet, Parkay, etc. Conagra said it would be willing to engage with Jana after their earnings on June 30th.

Oppenheimer raised the price target on Netflix (NFLX) from $610 to $800 and maintained the outperform rating. Analysts said this was based on the aggressive plans to enter multiple overseas markets in 2015. Netflix plans on entering Spain, Cuba, Japan, Italy and Portugal in 2015. They already launched in Australia and New Zealand in March. The majority of the costs were incurred in building out the original platform in the U.S. and additional costs to expand into other countries are minimal. Still no word on the pending stock split.

Martha Stewart Living Omnimedia (MSO) shares rallied +12% on Friday after a +26% spike on Thursday. Sequential brands (SQBG), owners of Linens N Things and the Franklin Mint, appears to be near a deal to acquire MSO. All I can say is thank you. Martha Stewart has posted losses in three of the last five quarters and revenue growth has declined every quarter for the last 14 quarters. It is about time somebody put MSO out of its misery. No price was given and no deal has been completed but talks are nearing completion.

There are 17 IPOs scheduled for next week that will raise a total of about $2.5 billion. That alone will take some of the air out of the market as discretionary funds are used to purchase those shares. There are three energy stocks, three cloud stocks and four healthcare stocks plus credit reporter TransUnion and a variety of others.

Companies scheduled to price this week:

Xactly Corp
CNX Coal Resources LP
AppFolio Property Manager
Pieris Pharmaceuticals
Green Plains Partners LP
Catabasis Pharmaceuticals
Wayne Farms
Seres Therapeutics
Gener8 Maritime
Principal Solar
Lantheus Holdings
Ritter Pharmaceuticals
Yulong Eco-Materials

Read these next paragraphs carefully there will be a test at the end.

Baxalta (BXLT) will replace QEP Resources (QEP) in the S&P-500 after the close of trading on June 30th. Priceline (PCLN) will replace Baxter International (BAX) in the S&P-100. Baxter is spinning off Baxalta later this month.

QEP will replace Itron Inc (ITRI) in the S&P Midcap 400 and Itron will replace Arch Coal (ACI) in the S&P Small Cap 600.

Skechers (SKX) will replace Rock-Tenn (RKT) in the Midcap 400. MiMedx (MDXG) will replace Skechers in the Small cap 600. MeadWestVaco (MWV) is merging with Rock-Ten and the merged company will change its name to WestRock and remain in the S&P-500.

HealthEquity (HQY) will replace Zep (ZEP) in the Small cap 600. PE firm New Mountain Capital is acquiring Zep in a transaction to be completed on June 25th.

Test question: Who is on first? (Abbott & Costello skit)

Crude prices were flat for the week with only a 29-cent decline. The volatility in crude prices has evaporated and the narrow range is shrinking ahead of the July 4th weekend. This is typically the peak for prices in both gasoline and oil. The U.S. average for gasoline rose to $2.80 per gallon but that is still well below the same period in 2014.

There is also a new challenge for the oil market. The International Energy Agency (IEA) tracks oil production and demand all around the world. In their monthly numbers there is an "adjustment" for barrels they can't find or don't know where they went. In Q1 that adjustment was 1.2 million barrels per day or Mbpd. In Q4 it was 1.6 Mbpd. Those are the highest numbers since reporting began in 1998. The IEA claims there is 2.0 mbpd of excess production today. In theory if there was that much excess then global inventories should be rising by 2.0 mbpd. Unfortunately, they are only rising by 800,000 bpd so the IEA has to reconcile this discrepancy.

If they revise the Q1 numbers as they have in the past then demand estimates could rise by as much as 1.2 mbpd and that would be a monster plus for the oil market. Oil prices could explode higher if it was learned that excess production had declined to only 800,000 bpd and demand was significantly higher. While we wait for the IEA to balance their numbers the oil market is in limbo with prices hovering right at $60.

Because of the potential impact to prices I expect the IEA to cover over their accounting irregularities and modify the results on a monthly basis as we move through the year. "Discovering" an error that large would hurt their credibility but they can fix it by adjusting the numbers by a smaller amount every month.

The active rig count declined by -2 rigs last week to 857. Active oil rigs declined by -4 to 631 and a ten-year low. Gas rigs gained +2 to 223. Offshore rigs declined -2 to 27 and are now -32 rigs lower than the same period in 2014.


The S&P lost -11 points to close at 2109 on Friday. That ended the streak of positive gains at three days. The S&P has not been up four consecutive days since January. That should give you some clue as to how volatile yet range bound we have been over the last three months.

The S&P rebounded to resistance at 2120 in the Thursday short squeeze and immediately began to weaken. The selling on Friday was persistent and volume was high at 8 billion shares. Volume should have been high because of the quadruple witching options expiration and a minor rebalance of the S&P-500 at the close.

If we only look at the chart and not try to pin any historical trends to the week's trading then the outlook remains slightly bullish for the big caps. However, the week after June expiration is historically negative with declines in 22 of the last 25 years. I chalk that up to funds restructuring and window dressing their portfolios ahead of the midyear statements. That is just my opinion.

In late May I discussed the possibility for June to end higher in contradiction to various historical patterns. If we ended the month here that prediction would have come true. However, there are seven trading days left in June and anything is possible. That is especially true given the disaster playing out in Greece.

The internals on the S&P improved slightly with Thursday's short squeeze but not enough to proclaim the worst is over. The percentage of S&P stocks under their 200-day average fell to 61.8% at Friday's close. The 50-day percentage improved a little more from the 34.3% reading early in the week to 52.4% on Friday. However, that is a short-term average and changes should be more dramatic.

The volume was 3:1 in favor of advancers on Thursday and not as strong as you would have expected given the big gains in the indexes. Volume on Friday was just over 2:1 in favor of decliners. It was hardly a landslide but a lot of that volume was rebalance shares and that skews the ratios.

Possibly a more revealing chart is the Bullish Percent ratio for the S&P. Only 62.2% of the S&P stocks have a buy signal on a point and figure chart. That is the second lowest reading for the year and the third lowest over the last two years. This chart is not bullish.

There is the potential for a head and shoulders formation using the rally to 2120 back in April as the left shoulder. If that pattern completes with the neckline at 2080 we could easily be looking at a drop to 2040. I am not claiming that as a pattern today but the possibility exists.

Support is now 2100, 2090 and 2075. Resistance is 2120 and 2130.

The Dow punched through resistance at 18,100 on Thursday but then fell back to close at 18,113 and just above that prior resistance. It gapped down on Friday and never looked back to close at the low of the day at 18,011. That 18,100 level has been resistance since December and although it has been pierced numerous times the Dow always fell back below almost immediately. The two major breakouts lasted about a week before giving back their gains.

Support at 17,800 eroded to 17,750 but it also has been firm except for some intraday incursions. That gives us a range of about 17,750 to 18,150 for the Dow to wander without having to pick a direction.

I went through the charts for all 30 Dow stocks again and conditions have improved. There were five with an uptrend, six neutral and 19 with a negative trend. Many with a prior negative trend had 2-3 day spikes but were not enough to make a higher high and break them out of their downward trajectory. The neutral stocks did have bounces that put their prior trends in jeopardy but not enough to class them as positive. With 19 in a negative trend and only 5 positive, the Dow is going to have a tough time punching through overhead resistance without a breakthrough resolution in Greece.

The Nasdaq is giving us mixed signals. The Nasdaq Composite broke out to a new high, thanks to the biotechs, but the Nasdaq 100 is still lagging. The big caps are struggling with things like earnings and the strong dollar while the broader composite has a lot of smaller stocks that are not exposed to those overseas concerns.

The Composite index declined only slightly on Friday with a -16 point drop but remained over prior resistance at 5100. The composite index is still in breakout mode.

The NDX is still fighting resistance at 4540 and it declined a steeper -18 points on Friday. Until big caps come back into vogue, the NDX is going to be challenged.

The Russell 2000 small caps were the picture of strength on Friday. After surging to a new high close at 1284.68 on Thursday, they declined only -0.0154 points on Friday. That is as close to breakeven as you can get. They held their gains despite a negative day on the big cap indexes.

This has to be window dressing by the funds for small caps to be favored ahead of the summer doldrums when they do not normally perform well. We stand a good chance of seeing some window undressing in early July.

The Dow Transports are trying to recover but are really struggling. Three times now they have rebounded off the 8260 level but after the first bout of short covering they turn negative again. Friday's high was another lower high and the index closed on the low for the day. Despite their attempt to pull themselves back into relevance the Transports still lost -5 points for the week and the only major index to lose ground.

If the Transports dip back to that 8260 level again I would not expect it to hold. The fourth time is rarely the charm.

With the market historically weak after June options expiration, I would not be too positive about our chances for a continued rally. With the potential for Greece to self-destruct early in the week that is another negative influence.

However, if by chance the EU decided to kick the can farther down the road and throw Greece a lifeline on Monday the markets could explode higher on short covering. This continues to be the most hated bull market in history and investor participation is very light. That means there are a lot of investors on the sidelines waiting for the eventual correction. The S&P averages a 15% correction every 430 days and we are well over 900 with not a dip in sight.

On the plus side Bank of America said $10.3 billion in cash flowed out of the bond market last week and $10.8 billion flowed into equities. There is a chance the "great rotation" is near. Bank America Risk has Been Reset If that is the case there is plenty of firepower still lurking in the bond market. Since the 2009 lows more than $600 billion has flowed into the equity market. Over the same period more than $1.3 trillion flowed into bond funds. Once interest rates really do begin to rise a lot of that cash is going to rotate into equities and the rally will be huge. That could be triggered by Fed action in September, which is the worst month for the equity market with many market lows set in September and October. What a perfect time for cash to come roaring out of the bond market.

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Random Thoughts

Apple (AAPL) is suffering from the Dow Curse. Historically companies tend to rally in the three months before they are included in the Dow but then underperform in the months that follow. I wrote about this when the announcement about Apple's inclusion was made. Since 1999 sixteen stocks have joined the Dow not counting Apple. On average those 16 stocks gained only +1% in the six months that followed compared to an average 11% gain in the six months prior to inclusion. The theory is that the outperformance in the stocks brings them to the attention of the Dow committee. Once they are included the news fades and so does their stock price.

Apple is three months into its Dow experience and shares have declined -0.5% compared to a 13% gain in the prior three months before their addition. Birinyi Associates carried the analysis one-step further. According to Birinyi the 16 companies added after 1999 declined on average -7% over the next year after rising an average of +25% in the year before their addition. Dow Curse Alive and Well

I guess the play here would be to short every Dow addition with a 12 month time horizon.

Greece has already spent all its available funds for salaries, pensions, expenses and prior bailout payments. They have already pillaged the funds held by banks and many suppliers have not been paid in months. Tax revenue is rapidly declining because of the expected government default. Everyone is holding what cash they have rather than pay their taxes and see the money evaporate just when they need it the most. Greece has ordered all public authorities to hand over all spare cash to the central bank. That means government services have no money. Every euro that comes into the service goes straight to the government. Every month sees tax debts to Greece rise by 1 billion euros because nobody is paying. Tax Debt Rises 1 Billion Euros a Month

Even if a deal was reached next week the country is still bankrupt. Giving them the 7 billion euros of previously authorized bailout funds only pays for the interest payments due on the bailout through July. There would be no money to operate Greece and pay salaries, etc. This will eventually end badly regardless of what happens this week. The most likely resolution is another extension of some kind to kick the can farther down the road. Everyone knows Greece cannot pay. The EU either kicks Greece to the curb or makes a conscious decision to support them for years to come.

Alexis Tsipras said on Thursday, "Without a deal that undoes some of the punishing austerity, we will assume the responsibility to say 'the great no' to a continuation of the catastrophic policies." That means without reducing the principal on the 340 billion euros of debt and ending the austerity demands currently levied on Greece, he will just default and let the chips fall where they may. Understanding Greek Demands

JP Morgan warned that "the collateral has run out" and the ECB will use the nuclear option if no deal on Monday. If no deal is reached the ECB will likely cut off aid to Greek banks under the ELA program. That would mean bank closures in Greece and bring the economy to a screeching halt. Nuclear Option

The FOMC post meeting statement is always scrutinized word by word for any minor changes that could suggest the Fed's next move. They normally only change a few sentences and a word here and there. The only way you can really understand what changed is to compare each sentence with the same sentence in the prior report. I know that sounds really boring but people do it. Fortunately, some of this analysis is posted online for the rest of us. Here is the word for word comparison with notes supplied by David Merkel. Worth a read. Redacted FOMC Statement

"The Fed itself doesn’t know where the economy will be next month, quarter or year. It never has. It never will. Economists don’t know either." Josh Brown.

Goldman said after the Fed statement and press conference the Fed will not raise rates until December or later. This was a change in their earlier forecast for a September rate hike. Prior to Wednesday 72% of economists projected a rate hike in September. Goldman said Yellen's characterization of the economy as "lukewarm" caused a reset in the outlook for a September move. Goldman - No Hike until December

It is probably not a surprise that the AAII Sentiment Survey changed dramatically last week. The very high neutral readings at 47.4% declined sharply to 40.3%. However, not all of those investors rushed into the bullish camp. Of the 7.1% that changed their neutral view, only 5.4% turned bullish to push the bullish sentiment to 25.4%. Another 1.7% turned bearish to lift the bearish total to 34.3%. The long-term bullish average is 38.8%, bearish 30.3% and neutral 30.9%. We are still above normal on neutral and bearish and well below normal on bullish.

The record string of 10 straight weeks of neutral sentiment over 45% was broken this week. The prior record was six weeks in 1998.

Quite a few traders are betting on a monster market drop. The Put/Call ratio on the Volatility Index ($VIX) at 0.28 is the lowest since the summer of 2008. That means there are more call bets on a rising VIX than put bets on a falling VIX. The VIX goes up when markets go down.

This could be insurance bets against a long portfolio or simply bets that we are headed for a significant decline. There is a mixed opinion on what this means for market direction. On a contrarian basis it would appear everyone is leaning bearish and we could be setting up for a decent rally. OR, a lot of traders are right about market direction and the market is about to decline. Good analysis here with pros and cons

Frank Zorilla had a good article on Thursday about fund managers being prepared for a correction. Various surveys making the rounds in the analyst community show that active managers have the least amount of equity exposure since the October dip.

He points out that large speculators held about 12,000 more short positions in the S&P futures than long ones as of June 9th. That is the highest number of bearish bets since October. Funds Prepared for Correction

Number of fund managers that have bought protection for the next three months.

National Association of Active Investment Managers Exposure Index (NAAIM) shows equity exposure at 60% despite the market being at record highs.


Enter passively and exit aggressively!

Jim Brown

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"If you don’t have integrity, you have nothing. You can’t buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing."

Henry Kravis


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New Plays

Breakdown In Progress

by James Brown

Click here to email James Brown


Continental Resources, Inc. - CLR - close: 43.98 change: -1.48

Stop Loss: 50.65
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 20, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in August
Average Daily Volume = 8.8 thousand
New Positions: Yes, see below

Company Description

Trade Description:
There are a lot of currents moving the oil industry these days. Currency moves, OPEC production, access to capital, falling rig counts, and potential bankruptcies. The stock performance for U.S. shale oil drillers have been suffering. CLR is one such stock.

CLR is in the basic materials sector. According to the company, "Continental Resources (CLR) is a Top 10 independent oil producer in the United States and a leader in America's energy renaissance. Based in Oklahoma City, Continental is the largest leaseholder and one of the largest producers in the nation's premier oil field, the Bakken play of North Dakota and Montana. The Company also has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the Northwest Cana play."

Earnings have taken a hit. CLR reported their Q1 results on May 6th. They reported a net loss of $186 million or 36 cents a share. That's a big drop from a 61-cent profit a year ago. After adjusting for writedowns and one-time items CLR said their quarterly earnings were a loss of ($0.09) per share. That was actually four cents better than analysts' estimates for a ($0.13) loss. Revenues plunged -41% to $592.89 million even though CLR's production surged +36% from a year ago.

Bullish investors could argue that crude oil put in a bottom earlier this year and the commodity should rally toward year end. Bulls can also point to falling production costs as a tailwind for the industry. CLR said their completion costs for wells dropped -15% from the end of 2014. Obviously this makes the company more profitable (or at least cuts their losses). Optimistically CLR expects their cost reductions to hit 20% by mid-year. There are some on Wall Street who think the industry has seen a bottom. Shares of CLR were upgraded by Goldman Sachs to a "buy" in May.

Bulls also note that the plunge in active rigs should be bullish for oil and thus oil companies. Weekly rig count, compiled by Baker Hughes, showed that the number of active oil and gas rigs fell again last week. This is the 28th week in a row that the number of rigs has declined. We're now down to 857 active oil and gas rigs, which hasn't been this low since early 2003.

Naturally you might think that a plunge to 12-year lows for active rigs means that U.S. oil production would shrink as well. That hasn't happened yet. While costs are going down oil producers are actually more efficient at pumping per well so production is going up. The low rig count is a leading indictor that production will eventually decline but it could be months from now. The U.S. EIA doesn't expect U.S. production to fall until early next year.

A bigger problem for the oil industry is competition. The recent OPEC meeting showed that the Saudis are willing to pump as much oil as they can to maintain their market share regardless of the price of oil. These are state-run oil companies and don't have to report to shareholders like American drillers. Plus the average cost per barrel of oil is a lot lower in Saudi than the U.S.

Another challenge for many drillers is capital. Drilling shale oil wells and fracking costs a lot of money. The drop in crude oil prices has made lenders less likely to loan money to drillers. To compensate for the lack of capital the oil drillers might be forced to sell more stock to raise capital and this would dilute current shareholders and drive stock prices lower. This past week the Cowen research company said, ""We expect ... E&Ps to issue additional equity in 2H2015 to fund 2016 capex as borrowing bases will be declining and debt metrics deteriorating."

The issue of debt and access to capital could be a fatal one. There are growing predictions that we will see up to a dozen publicly traded oil and gas companies file for bankruptcy between July 2015 and June 2016. Now CLR is not on the list but if we see smaller rivals start to go bankrupt it is going to put pressure on all the oil-industry stocks.

Oil stocks are also going to react to currency moves. The Federal Reserve wants to raise rates and that will lift the dollar. Even if the Fed doesn't raise rates the QE programs in Japan and Europe could drive the yen and euro lower, which boosts the dollar. A rising dollar pressures commodity prices lower.

A lot of investors are already betting on CLR to decline. The most recent data listed short interest at 17.9% of the 84.8 million share float. We think the bears are right. CLR has been underperforming the broader market. The point & figure chart is bearish and forecasting at $35.00 target. I suspect the 2015 lows near $42.00 could be support. Tonight we are suggesting a trigger to open bearish positions at $43.75.

Trigger @ $43.75

- Suggested Positions -

Short CLR stock @ $43.75

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

Buy the SEP $40 PUT (CLR150918P40) current ask $2.05
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

Greek Worries Fuel Friday's Dip

by James Brown

Click here to email James Brown

Editor's Note:
Worries over Greece fueled some profit taking on Friday. The major U.S. indices were down across the board but selling was mild. Our play list held up pretty well.

We closed the LDRH and CTL trades on Friday.

Current Portfolio:

BULLISH Play Updates

Natus Medical Inc. - BABY - close: 42.38 change: -0.19

Stop Loss: 40.75
Target(s): To Be Determined
Current Gain/Loss: -1.7%
Entry on June 18 at $43.10
Listed on June 16, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 249 thousand
New Positions: see below

06/20/15: BABY tried to rally on Friday morning but shares followed the market lower. Fortunately traders bought the dip near short-term support around $42 and its 10-dma. Friday's intraday high was $43.01. I'd wait for a rally past this level before considering new bullish positions.

Trade Description: June 16, 2015:
Healthcare stocks are getting a lot of press because of the merger speculation among the big healthcare insurers. One area of healthcare that's doing well without the press is medical equipment makers. The S&P 500 index is up +1.8% year to date. The XHE healthcare equipment ETF is up +8.9%. BABY is in this industry and their stock is up +18% in 2015.

Here is a brief company description, "Founded in 1989, Natus Medical Incorporated is a leading manufacturer of medical devices and software and a service provider for the Newborn Care, Neurology, Sleep, Hearing and Balance markets. Natus products are used in hospitals, clinics and laboratories worldwide. Our mission is to improve outcomes and patient care in target markets through innovative screening, diagnostic and treatment solutions."

BABY has been steadily growing earnings. They have beaten Wall Street's bottom line earning estimate the last four quarters in a row. They raised guidance the last three quarters in a row. Their most recent earnings report was April 22nd.

BABY reported that their Q1 earnings were up +19% from a year ago to $0.31 per share. Revenues were up +3.7% to $94.0 million. Management raised their 2015 guidance above analysts' estimates.

Jim Hawkins, President and Chief Executive Officer of BABY, commented on his company's results, "I am very pleased with our first quarter results as we achieved record revenues and earnings. Revenue came in at the high end of our guidance while earnings exceeded our guidance. I am most satisfied that we were able to achieve these results in the face of approximately $2 million of negative currency effects on revenue during the quarter."

Earlier this month (June 5th) BABY announced they were increasing their stock buyback program. A year ago they launched a $10 million share repurchase program. They just added another $20 million to their program.

Technically BABY has been showing relative strength the last three weeks. The point & figure chart is very bullish and forecasting a long-term target of $73.00. At the moment BABY is hovering just below resistance in the $42.75-43.00 area. Tonight I am suggesting a trigger to launch bullish positions at $43.10. FYI: I am urging caution on the options. The spreads are pretty wide for all of BABY's October calls.

- Suggested Positions -

Long BABY stock @ $43.10

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

Long OCT $45 CALL (BABY151016C45) entry $2.85

06/18/15 triggered @ $43.10
Option Format: symbol-year-month-day-call-strike


Hanesbrands Inc. - HBI - close: 33.77 change: +0.22

Stop Loss: 31.85
Target(s): To Be Determined
Current Gain/Loss: +4.4%
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

06/20/15: HBI delivered a strong performance last week. The relative strength continued on Friday with a +0.65% gain versus the market's widespread decline. The stock is up three weeks in a row and now firmly in the middle of no man's land between $33 and $34.75. Broken resistance near $33.00 should be support while $34.75 was unbreakable resistance earlier this year.

More conservative traders may want to consider taking profits when HBI near $34.50.

Tonight we'll raise the stop loss to $31.85.

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

06/20/15 new stop @ 31.85
05/30/15 new stop @ 31.45
05/21/15 triggered @ 32.35
Option Format: symbol-year-month-day-call-strike


IMAX Corp. - IMAX - close: 43.22 change: +0.13

Stop Loss: 40.90
Target(s): To Be Determined
Current Gain/Loss: +1.1%
Entry on June 15 at $42.75
Listed on June 13, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 732 thousand
New Positions: see below

06/20/15: IMAX ended the week at record highs. Last week's gain put the current streak to six up weeks in a row. Tonight we'll raise the stop loss up to $40.90. More conservative traders may want to use a stop closer to $42.00 instead.

Trade Description: June 13, 2015:
It's shaping up to be a blockbuster summer for IMAX. First there was the second Avenger movie in May. Now Jurassic World is stomping its way to box office success while IMAX gets to ride its coattails.

The "Avengers: Age of Ultron" delivered the second biggest opening day with $84.4 million in U.S. sales. That's just below the last Harry Potter movie, which brought in $91 million on its first day. The new Jurassic World movie, the fourth Jurassic Park dinosaur flick, notched the third biggest opening day with $82.8 million. The new dinosaur-themed juggernaut is poised to do $200 million over the weekend.

As of early May, this Avengers 2 movie has already raked in $425 million overseas and is poised to do more than $200 million this weekend. Estimates suggest it could hit $600 million in the U.S. It had already crossed the $1 billion mark for worldwide sales by the middle of May. This movie is produced by Marvel Studios, a division of Disney (DIS), but it also means big business for IMAX. The Ultron movie delivered the biggest opening night sales for any IMAX film ever.

IMAX is part of the services sector. They're considered part of the entertainment industry. According to the company, "IMAX, an innovator in entertainment technology, combines proprietary software, architecture and equipment to create experiences that take you beyond the edge of your seat to a world you've never imagined. Top filmmakers and studios are utilizing IMAX theatres to connect with audiences in extraordinary ways, and, as such, IMAX's network is among the most important and successful theatrical distribution platforms for major event films around the globe. IMAX is headquartered in New York, Toronto and Los Angeles, with offices in London, Tokyo, Shanghai and Beijing. As of March 31, 2015, there were 943 IMAX theatres (820 commercial multiplexes, 18 commercial destinations and 105 institutions) in 63 countries."

Today there is a battle for consumer's viewing habits. People consume their content on all sorts of devices from their smartphones, tablets, laptops, desktops, and their big screen TVs at home. Netflix and other streaming services have changed viewer habits and expectations. When consumers choose to go to the movies they want something different. According to IMAX's CEO that's why IMAX tickets are doing so well. It's an experience that can't be replicated at home.

The company had a lot of momentum going into 2015 thanks to huge hits like "American Sniper". IMAX has managed to beat Wall Street's earnings and revenue estimates for the last four quarters in a row. Their most recent earnings report was April 30th. Income surged +50% from a year ago. Analysts were expecting $0.05 a share. IMAX delivered $0.07. Revenues rose +29% to $62.2 million, significantly above estimates for $55.4 million.

IMAX CEO Richard Gelfond commented on their results, "This is a very exciting time for IMAX. Our continued progress in expanding our theatre network globally, along with our strong film performance during the first quarter, resulted in robust financial results with almost 30% revenue growth and over 50% adjusted earnings growth compared to the same period last year. With record results from Furious 7 in April and a great start to the Avenger's sequel internationally, the momentum has continued into the second quarter."

2015 is expected to be a huge year. The "Fast & Furious 7" film kept the momentum going. IMAX will also benefit from high-profile movies like "Avengers: Age of Ultron", Jurassic World, Terminator Genisys, Hunger Games: Mockingjay Part 2, the new James Bond movie, another Mission Impossible film (#5), and the next episode of Star War (#7) this December.

IMAX is rolling out new laser systems and they've signed long-term film deals with Disney and Warner Brothers. IMAX is currently growing at about 120 theaters a year. They're doing well in China. The Chinese movie box office is expected to eclipse the U.S. market by 2020.

Shares of IMAX popped to new all-time highs on May 28th after announcing its majority owned subsidiary, IMAX China Holding Inc., had filed for an IPO in Hong Kong. According to Reuters, IMAX is "looking to benefit from booming entertainment demand in the world's second largest economy." IMAX owns 80% of IMAX China. Shares of IMAX have spent the last couple of weeks churning sideways in the $40-42 zone but with a bullish trend of higher lows.

Friday's breakout past resistance near $42.00 could spark some short covering. The most recent data listed short interest at 18.4% of the 53.7 million share float. We are suggesting a trigger to launch bullish positions at $42.75

- Suggested Positions -

Long IMAX stock @ $42.75

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

Long SEP $45 CALL (IMAX150918C45) entry $1.60

06/20/15 new stop @ 40.90
06/15/15 triggered @ $42.75
Option Format: symbol-year-month-day-call-strike


Starbucks Corp. - SBUX - close: 53.93 change: -0.18

Stop Loss: 49.95
Target(s): To Be Determined
Current Gain/Loss: +5.6%
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

06/20/15: SBUX remains a steady performer for the bulls. After a three-day rally the stock encountered some mild profit taking on Friday. Shares are still up for the week and actually up six weeks in a row. The level to watch for support is $52.00, which is close to SBUX's trend line of higher lows.

More conservative traders may want to consider a new stop in the $51.50-52.00 area.

No new positions at this time.

FYI: The July option only has four weeks left. Traders may want to take profits on these call options now since they are up +90%.

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

06/16/15 SBUX expands it mobile service app coverage to more than 4,000 locations
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: 48.29 change: -0.07

Stop Loss: 45.75
Target(s): To Be Determined
Current Gain/Loss: +2.4%
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

06/20/15: If recent history is any guide then the week ahead of us could be a quiet one for SGEN. The stock has developed a seven-week pattern of up big one week followed sideways to slightly down the next week then up again the follow weeks. If this pattern continues then the week ahead will be quiet. However, I suspect SGEN could see its rally continue thanks to the bullish breakout in the biotechs. Traders were buying the dip on Friday and SGEN looks poised to rally on Monday.

I am not suggesting new positions at this time.

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

06/16/15 new stop @ 45.75
06/08/15 triggered @ $47.15
Option Format: symbol-year-month-day-call-strike


Silicon Laboratories Inc. - SLAB - close: 57.38 change: -1.07

Stop Loss: 53.95
Target(s): To Be Determined
Current Gain/Loss: +0.6%
Entry on June 18 at $57.05
Listed on June 10, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 311 thousand
New Positions: see below

06/20/15: Ouch! There was no follow through on SLAB's big rally from Thursday. Instead shares gave back a good chunk of its gains on Friday (-1.8%). Keep an eye on the $57.00 level. Prior resistance at $57 should be new short-term support.

Trade Description: June 10, 2015:
The Internet of Things (IoT) is poised to surge and SLAB plans to capture its chunk of the IoT pie.

Here's an excerpt from SLAB's explanation on the Iot:

The Internet has come a long way over the last 30 years. Old-fashioned IPv4 is giving way to IPv6 so that every device on the Internet can have its own IP address. Machine-to-machine (M2M) communication is on the rise, enabling devices to exchange and act upon information without a person ever being involved. The scope and scale of the Internet have changed as well: industry leaders predict that the number of connected devices will surpass 15 billion nodes by 2015 and reach over 50 billion by 2020. The challenge for the embedded industry is to unlock the value of this growing interconnected web of devices, often referred to as the Internet of Things (IoT). (You can read more about it here.)

SLAB is part of the semiconductor industry. According to the company, "Silicon Labs (SLAB) is a leading provider of silicon, software and system solutions for the Internet of Things, Internet infrastructure, industrial automation, consumer and automotive markets. We solve the electronics industry's toughest problems, providing customers with significant advantages in performance, energy savings, connectivity and design simplicity. Backed by our world-class engineering teams with unsurpassed software and mixed-signal design expertise, Silicon Labs empowers developers with the tools and technologies they need to advance quickly and easily from initial idea to final product."

SLAB has been beating Wall Street's estimates on both the top and bottom line. Revenues were up +10.8% in the fourth quarter and up +12.4% in the first quarter this year.

The company has recently been considered a takeover target. This speculation helped push SLAB through resistance near the $54.00 level. Shares have been able to maintain these gains. Now SLAB is starting to breakout from its recent sideways consolidation. The point & figure chart is bullish and forecasting at long-term target of $70.00. Today's intraday high was $56.75. We are suggesting a trigger to launch bullish positions at $57.05.

- Suggested Positions -

Long SLAB stock @ $57.05

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

Long OCT $60 CALL (SLAB151016C60) entry $3.10

06/18/15 triggered @ $57.05
Option Format: symbol-year-month-day-call-strike


Spirit AeroSystems - SPR - close: 55.99 change: -0.03

Stop Loss: 53.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on June -- at $---.--
Listed on June 18, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in very late July
Average Daily Volume = 1.2 million
New Positions: Yes, see below

06/20/15: Shares of SPR just slept through all the excitement on Friday. The stock drifted sideways in a very narrow range and closed almost unchanged on the day. There is no change from the Thursday night new play description. Our suggested entry point is $56.35.

Trade Description: June 18, 2015:
Airline stocks have gotten crushed lately as investors worry about the airliner industry overbuilding capacity. It's a different story for the airplane makers. Shares of SPR just closed near all-time highs. The Dow Industrial Average is up +1.6% year to date. The S&P 500 is up +3.0%. SPR is outpacing them both with a +30% gain this year.

SPR is in the industrial goods sector. According to the company, "Spirit AeroSystems, with headquarters in Wichita, Kan., USA, is one of the world's largest non-OEM designers and manufacturers of aerostructures for commercial aircraft. In addition to its Wichita and Chanute facilities in Kansas, Spirit has locations in Tulsa and McAlester, Okla.; Kinston, N.C.; Prestwick, Scotland; Preston, England; Subang, Malaysia; and Saint-Nazaire, France.

In the U.S., Spirit's core products include fuselages, pylons, nacelles and wing components. Additionally, Spirit provides aftermarket customer support services, including spare parts, maintenance/repair/overhaul, and fleet support services in North America, Europe and Asia. Spirit Europe produces wing components for a host of customers, including Airbus."

On their website SPR notes that they "have long-term agreements in place with our largest customers, Boeing and Airbus. Other major customers include Bombardier, Rolls-Royce, Mitsubishi, Sikorsky and Bell Helicopter." SPR does so much business with Boeing (BA) that buying SPR is almost a stealth trade on BA's backlog. Looking at BA's most recent earnings report their backlog hit a record high of $495 billion. That's about 5,700 new planes. BA plans to significantly increase production in 2017 and again in 2018, which should mean an increase in revenues for SPR.

Earnings from SPR have been somewhat mixed. On February 3rd they reported their 2014 Q4 results with earnings at $0.87 per share. That was 10 cents better than expected. Yet revenues were only up +5% to $1.57 billion, which missed expectations.

Results improved in the first quarter. On April 29th SPR said earnings were up +18% from a year ago. Their $1.00 per share beat expectations. Revenues were almost flat at $1.74 billion but that still came in better than analysts were expecting. SPR management issued somewhat bullish guidance on 2015 earnings but their revenue estimate was soft.

The stock initially sold off on its Q1 report but traders bought the dip the very next day. SPR continues to build on its bullish pattern of higher lows. Today the stock is poised to breakout past short-term resistance at $56.20. We are suggesting a trigger to launch bullish positions at $56.35. Plan on exiting prior to SPR's Q2 earnings report in very late July or early August.

Trigger @ $56.35

- Suggested Positions -

Buy SPR stock @ $56.35

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

Buy the OCT $60 CALL (SPR151016C60)

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


Sarepta Therapeutics - SRPT - close: 30.35 change: +0.61

Stop Loss: 26.75
Target(s): To Be Determined
Current Gain/Loss: +9.8%
Entry on June 10 at $27.65
Listed on June 09, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.2 million
New Positions: see below

06/20/15: Biotech stocks had a good week. SRPT surged toward new one-year highs and outperformed the market and its peers on Friday with a +2.0% gain.

Broken resistance near $27.00 should be new support. We will raise the stop loss up to $26.75. More conservative traders may want to use a higher stop.

Trade Description: June 9, 2015:
Often biotech stocks can turn into a binary trade. You win big or lose big based on the company's clinical trials and success or failure with the FDA. SRPT is one such stock. Shares have seen some tremendous, gut-wrenching moves, both up and down, over the last couple of years.

If you're not familiar with SRPT they are a biotech stock (part of the healthcare sector). According to the company, "Sarepta Therapeutics is a biopharmaceutical company focused on the discovery and development of unique RNA-targeted therapeutics for the treatment of rare, infectious and other diseases. The Company is primarily focused on rapidly advancing the development of its potentially disease-modifying DMD drug candidates, including its lead DMD product candidate, eteplirsen, designed to skip exon 51. Sarepta is also developing therapeutics for the treatment of drug-resistant bacteria and infectious, rare and other human diseases."

SRPT does not have any products on the market, which is another reason they might be viewed as a binary trade. If they don't succeed with their Eteplirsen treatment for Duchenne Muscular Dystrophy (DMD) then its stock could collapse. DMD is a very rare disease. Only about 20,000 people a year are diagnosed with it in the U.S. It can be fatal by age 30.

SRPT made headlines on May 20th and the stock surged almost $10 with a +60% move to new eight-month highs. The reason behind the pop in the stock was the company's plan to submit a rolling New Drug Application (NDA) with the FDA for its Eteplirsen. This is a big deal. SRPT tried to get FDA approval to file an NDA back in 2013 but the regulators rejected their application saying they needed more data.

Now that SRPT can start the NDA process they should be able to meet with an advisory committee in the fourth quarter of this year, which could really generate a lot of volatility based on the committee's decision.

It's important to note that SRPT is facing competition from larger biotech firm BioMarin Pharmaceuticals (BMRN) who is working on a treatment for the same disease. If BMRN's treatment gets approved first it could send SRPT shares crashing.

Canaccord Genuity's analyst, Adam Walsh, issued an opinion on this SRPT news and multiple news outlets quoted him. According to Walsh,

"Looking forward, we see two potential catalysts to drive shares higher: 1) FDA acceptance of the NDA filing (60 days post-filing — est. late third quarter 2015); and 2) FDA announcement of Adcom to review the eteplirsen NDA. On the first, we fully expect FDA to accept the filing for review, given its blessing to submit the NDA. On the second, we believe an Adcom would allow for powerful testimony from DMD patients, parents, and advocacy groups in support of eteplirsen, which could sway committee members toward recommending approval. Thus, while we acknowledge that significant approval risks still remain, we would expect Sarepta shares to trend higher into an expected fourth quarter of 2015 Adcom."
The advisory panel is a major event for SRPT. One analyst suggested that if SRPT won approval their stock could shoot into the $40s. A different analysts said approval could launch SRPT's stock toward $100. Both said that another FDA rejection could send SRPT shares toward $10.

Part of the reason behind SRPT's big move in May was short covering. The most recent data listed short interest at 33% of the relatively small 35.8 million share float. Currently shares of SRPT are consolidating in a bullish pattern with resistance near $27.00-27.50. A breakout here could spark another wave of short covering.

There has been some speculation that SRPT is a buyout target although I did not see a lot of discussion about any potential suitors.

We are suggesting a trigger to launch small bullish positions at $27.65. We want to limit our position size because SRPT can be very volatile. I would consider this a higher-risk, more aggressive trade.

*small positions to limit risk* - Suggested Positions -

Long SRPT stock @ $27.65

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

Long AUG $30 CALL (SRPT150821C30) entry $3.00

06/20/15 new stop @ 26.75
06/10/15 triggered @ $27.65
Option Format: symbol-year-month-day-call-strike


TASER Intl. Inc. - TASR - close: 34.56 change: -0.40

Stop Loss: 32.25
Target(s): To Be Determined
Current Gain/Loss: -1.8%
Entry on June 16 at $35.20
Listed on June 15, 2015
Time Frame: Exit PRIOR to earnings in late July
Average Daily Volume = 2.3 million
New Positions: see below

06/20/15: TASR has been stuck churning sideways the last few days. The stock did manage a gain for the week and is now up three weeks in a row. The $36.00 level has turned into overhead resistance. Traders may want to wait for a rally past $36 before considering new positions.

Trade Description: June 15, 2015:
50,000 volts. That's what a TASER electro-muscular disruption (EMD) device shoots through your body to override the central nervous system. Your body freezes as all of your skeletal muscles contract at once.

Their website describes the company as "TASER International makes communities safer with innovative public safety technologies. Founded in 1993, TASER first transformed law enforcement with its electrical weapons. TASER continues to define smarter policing with its growing suite of technology solutions, including AXON body-worn video cameras and EVIDENCE.com, a secure digital evidence management platform."

They may have started with electrical weapons but now the company is expanding to mobile video cameras worn on a law enforcement officer's gear. The company was in the news earlier this year thanks to President Obama. Back in January Obama announced he wanted to spend $75 million over the next three years to outfit the nation's police force with body-worn cameras.

The White House believes that body-worn cameras on police will help reduce violence and avoid another event like the one in Ferguson, MO. As of January 2015 estimates suggest there are only 70,000 police wearing cameras now. Obama's plan would almost double that. Industry analysts are forecasting significant growth if the federal government approves Obama's plan. There are nearly 800,000 policemen in the U.S. There's plenty of room to grow. Plus TASR is expanding internationally.

The bears will argue that TASR's stock is priced for perfection and very expensive with a P/E near 77. There is no denying that. However, the body-camera business could soar. Currently it's less than 8% of their annual sales. The real winner could be TASR's Evidence.com ecosystem. This is a subscription service for law enforcement to back up and manage all the data from TASER electric weapons, body-worn cameras, and more.

In the last few months we've seen more and more police departments announcing they are spending millions on body camera systems. It's not just the U.S. The London police force just announced they were buying 20,000 body cameras for their policemen although they didn't say what brand they were choosing. We do know they were testing TASR's products.

Technically shares of TASR have been showing relative strength. The stock is up three weeks in a row and tagged new all-time highs last week. Traders bought the dip today at short-term technical support on the 10-dma. TASR bounced with a +2.69% gain that outperformed the major indices.

If this rally continues it could spark a potential short squeeze. The most recent data listed short interest at 25% of the 52.1 million share float. Tonight we are suggesting a trigger to launch bullish positions at $35.20. Please keep in mind that TASR can be a volatile stock. Traders may want to use small positions to limit their risk.

*consider using small positions to limit risk*

- Suggested Positions -

Long TASR stock @ $35.20

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

Long SEP $37 CALL (TASR150918C37) entry $2.65

06/16/15 triggered @ $35.20
Option Format: symbol-year-month-day-call-strike


Tempur Sealy Intl. - TPX - close: 64.44 change: -0.44

Stop Loss: 59.25
Target(s): To Be Determined
Current Gain/Loss: +2.0%
Entry on June 10 at $63.15
Listed on June 08, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 890 thousand
New Positions: see below

06/20/15: TPX experienced a little bit of profit taking on Friday. The stock looks like it will test its 10-dma near $64.00 soon. If that level fails then prior resistance in the $62.75 area should be support.

More conservative investors might want to move their stop closer to the $62.00 area. No new positions at this time.

Trade Description: June 8, 2015:
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.

- Suggested Positions -

Long TPX stock @ $63.15

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

Long SEP $65 CALL (TPX150918C65) entry $3.50

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.

06/10/15 triggered @ $63.15
Option Format: symbol-year-month-day-call-strike


Zoetis Inc. - ZTS - close: 50.24 change: -0.26

Stop Loss: 47.90
Target(s): To Be Determined
Current Gain/Loss: -0.5%
Entry on June 18 at $50.50
Listed on June 11, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 3.3 million
New Positions: see below

06/20/15: It was a good week for ZTS bulls. The stock broke through round-number, psychological resistance at $50.00 and hit new highs. After four up days in a row ZTS slipped -0.5% on Friday.

Nimble traders could use a dip near $50.00 as a new entry point for bullish positions.

Trade Description: June 11, 2015:
ZTS is in the healthcare sector but they are not your average healthcare stock. The company is the world's biggest manufacturer of medicine and vaccinations for livestock and pets. They were spun off from pharmaceutical giant Pfizer (PFE) back in 2013. Last year ZTS' stock was a big performer with a gain of more than +50%. That outperformance continues this year with ZTS up +15.9% in 2015.

According to the company, "Zoetis is the leading animal health company, dedicated to supporting its customers and their businesses. Building on more than 60 years of experience in animal health, Zoetis discovers, develops, manufactures and markets veterinary vaccines and medicines, complemented by diagnostic products and genetic tests and supported by a range of services. In 2014, the company generated annual revenue of $4.8 billion. With approximately 10,000 employees worldwide at the beginning of 2015, Zoetis has a local presence in approximately 70 countries, including 27 manufacturing facilities in 10 countries. Its products serve veterinarians, livestock producers and people who raise and care for farm and companion animals in 120 countries."

ZTS CEO Juan Ramon Alaix recently spoke at an investor conference. He said the domestic pet and livestock market has hit $100 billion. While the market for animal health is currently at $24 billion and is expected to reach $33 billion by 2020. Alaix told investors that the animal health industry is extremely resilient and has continued to grow regardless of global economic conditions.

While Alaix has a bullish long-term outlook for his industry they company's sales growth seemed to stall last quarter. ZTS reported earnings on May 5th. 2015 Q1 results were $0.41 per share, which beat analysts' estimates. Yet revenues were flat at $1.10 billion. Guidance was in-line with Wall Street estimates.

What is noteworthy is that within their earnings press release the company discussed plans to cut costs and boost profits. ZTS will cut up to 25% of its workforce. They will exit several of its manufacturing plants. Plus they plan to discontinue several underperforming products. This is expected to generate $300 million in cost saves by 2017 and boost their adjusted operating margins from 25% in 2014 to 34% in 2017.

Why is ZTS launching its first major restructuring? Odds are Bill Ackman had an influence here. Mr. Ackman is the founder and CEO of Pershing Square Capital Management, an activist hedge fund. Late last year Pershing bought a big stake in ZTS. They currently own about 8% of the company or 41.8 million shares, valued around $2 billion. Since the hedge fund has jumped into ZTS they now have two board seats.

Looking at the bullish trajectory on ZTS' stock it appears that the rest of Wall Street is along for the ride and they expect Ackman to unlock more shareholder value out of ZTS. There has been some speculation that ZTS is actually a takeover target. Both Bayer and Sanofi have been rumored to be possible suitors.

The rally in ZTS stalled at round-number resistance near $50.00. Now after consolidating sideways in the $48-50 zone for the last several days ZTS looks poised to breakout. We are suggesting a trigger to open bullish positions at $50.50.

- Suggested Positions -

Long ZTS stock @ $50.50

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

Long Oct $55 CALL (ZTS151016C55) entry $1.68

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.

06/18/15 triggered @ $50.50
Option Format: symbol-year-month-day-call-strike


BEARISH Play Updates

On Deck Capital - ONDK - close: 12.85 change: +0.53

Stop Loss: 13.25
Target(s): To Be Determined
Current Gain/Loss: +10.5%
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

06/20/15: Caution! ONDK finished another down week on an up note.

The stock is down five weeks in a row and down seven out of the last eight weeks. Shares decided to bounce on Friday and rallied +4.3%. Last week saw ONDK find support four times in the $12.10-12.25 region. On the 30-minute chart (below) it almost looks like a bullish double bottom.

More conservative traders may want to exit now to lock in potential gains.

No 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

06/20/15 Caution! ONDK may have formed a bullish double bottom
06/16/15 new stop @ 13.25
06/15/15 new stop @ 14.25
06/10/15 new stop @ 15.15
06/02/15 triggered @ $14.35
Option Format: symbol-year-month-day-call-strike



LDR Holding - LDRH - close: 43.12 change: -0.87

Stop Loss: 41.85
Target(s): To Be Determined
Current Gain/Loss: +4.6%
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

06/20/15: The upward momentum in LDRH started to wane this week. We decided in Thursday's newsletter to exit on Friday morning. Thank goodness we did. LDRH opened at $44.10, rallied toward its recent highs above $45.00, and then reversed sharply to close down -1.97%.

The $42.00 level might offer some support but $40.00 should be stronger support.

- Suggested Positions -

Long LDRH stock @ $42.15 exit $44.10 (+4.6%)

06/19/15 planned exit
06/18/15 prepare to exit tomorrow morning (Friday)
06/10/15 new stop @ 41.85
06/03/15 triggered @ $42.15



CenturyLink, Inc. - CTL - close: 32.46 change: +0.10

Stop Loss: 33.65
Target(s): To Be Determined
Current Gain/Loss: +3.5%
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

06/20/15: The bearish momentum in CTL seems to be waning. The long-term pattern still looks bearish but the stock has found support near $32.00 for the second week in a row.

We decided in the Thursday night newsletter to exit this trade on Friday at the closing bell. CTL outperformed the market with a +0.3% gain.

- Suggested Positions -

Short CTL stock @ $33.65 exit $32.46 (+3.5%)

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

JUL $32 PUT (CTL150717P32) entry $0.55 exit $0.40 (-27.3%)

06/19/15 planned exit at the closing bell
06/18/15 prepare to exit this trade tomorrow (Friday) at the closing bell
06/04/15 new stop @ 33.65
05/26/15 triggered @ $33.65
Option Format: symbol-year-month-day-call-strike