As we shared in yesterday’s Tematica Investing, after an upward move over the last few months, the market is once again seesawing following a growing number of uncertainties and concerns. On top of the ones we rattled off yesterday, even more concern has bubbled up over the Retail sector. On the heels of Gap’s (GPS) gloomy outlook, Macy’s (M) cited slow mall traffic as it slashed full year earnings to $3.15 – $3.40 per share, down from an earlier projection of $3.80 to $3.90 per share. Keep in mind, this builds on the dismal retail landscape we’ve seen over the last few months that has included the Sports Authority and Sports Chalet bankruptcies and announced store closures from JC Penney (JCP) and Sears (SHLD). We see these as confirming data points for our Cash Strapped Consumer investing theme as well as the Connected Society.

These announcements from Gap and Macy’s do not suggest a promising April Retail Sales Report later this week. Our insurance inverse ETF positions have continued to rebound, and given all of the above, we will continue to hold them on the Tematica Pro Select List as we  ride out what’s likely to be a bumpy market near-term.

Closing out iShares Barclays 20+ Year Treasury Bond ETF June $135 calls

As the current market environment has shifted sentiment more toward worry than uber bullishness, investors have been seeking proverbial ports for the storm. This has benefited our iShares Barclays 20+ Year Treasury Bond ETF June $135 calls (TLT160617C00135000). Last week we trimmed back our exposure, selling half the TLT position call in the process, which netted us a profit of 58 percent. As the market anxiety continued to climb, and the underlying TLT shares climbed further, so did the remaining portion of our TLT June $135 calls. Last night, those calls closed at $0.81, up 88 percent from our initial buy-in price of $0.43 in late April. While tempting to hang on, we’d rather use the proceeds to be had by exiting the position to fund two new recommendations.

As such, we are selling the remaining portion of our TLT June $135 calls, which will close out the position on the Tematica Pro Select List.

Issuing a Buy on Chipotle Mexican Grill (CMG) June $475 calls

Yesterday, we added Chipotle Mexican Grill (CMG) shares to the Tematica Select List as a Food with Integrity thematic investment. If you missed the analysis in which we discuss how the majority of bad news is priced into the shares, and there is ample upside to be had in the shares over the coming months, you can find it here.

Spinning out of the company’s annual shareholder meeting held late yesterday, Chipotle upsized its already considerable share repurchase program to $2 billion. We discussed the impact of buyback programs in  the Ask Tematica feature in yesterday’s Tematica Investing, and would characterize Chipotle’s program as taking advantage of the significant drop in the shares over the last several months. It also helps solidify management’s confidence in getting the company back on course with consumers.

We see a high probability this news will goose CMG shares and help re-kindle investor appetite for this Food with Integrity investment. Donning our trading hat, our response is to add the CMG June $475 calls (CMG160617C00475000) that last traded at $7.80 to the Tematica Pro Select List. Given the buyback news, we are likely to see CMG shares gap up tomorrow, and we would look to acquire the June $475 calls up to $9.00. Given the volatile nature of the shares, we will prudently set a $5.50 stop loss, which will help limit losses should the market volatility come back with a vengeance in the coming weeks.

Adding PetMeds Express (PETS) June $20 calls

Earlier this week, Tematica Select List holding PetMeds Express (PETS) reported March quarter earnings of $0.27 per share versus expectations of $0.25 and up from $0.25 in the year-ago quarter. March quarter revenue for this online pharmacy and pet product company came in at $55.39 million versus consensus forecast of $50.2 million and $50 million in the year-ago quarter.

On the back of this better-than-forecasted March quarter, Wall Street expectations over the coming quarters have moved up to $1.06 per share for the 12 months ending March 2017 from the prior $0.98 per share.

Two of the tenets behind initially adding PETS shares to the Tematica Select List were the continued secular shift to online and mobile shopping, and the high re-order business that has ensued for the company. During the quarter, we saw the former continue. PetMeds acquired 116,000 new customers, up from 97,000 in the year-ago quarter. As the company continues to reap the benefits of improved customer acquisition costs, the high re-order rate should help drive additional revenue in the coming quarters.

People continue to spend on their pets irrespective of the economy. That’s especially true as we head into the summer months, which is prime flea and tick season and therefore a seasonally strong time of year for PetMeds’ business. The June quarter tends to account for more than 30 percent of the company’s annual revenue and earnings.

In addition to the quarterly results, PetMeds boosted the quarterly dividend to $0.19 per share from the prior $0.18 per share. As we near the payout date (May 27 to shareholders of record as of May 20), we expect dividend yield seeking investors to flock to the shares. This incremental demand for the shares should help drive them higher in the coming weeks.

PETS shares traded off during the last two days along with the market, but in our view that offers a more attractive price point with which to add the PetMeds Express (PETS) June $20 calls (PETS160617C00020000) that closed last night at $0.25. The shares have been rather active the last few days, and we would look to add the position up to $0.30. On the downside, we are instilling a stop loss at $0.17 to manage volatility and limit losses.

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Recap of Action Items from this Week

• Selling the remaining portion of our TLT June $135 calls, which will close out the position on the Tematica Pro Select List.
• Add the CMG June $475 calls (CMG160617C00475000),  last trading at $7.80, up to a price of $9.00, while also setting a $5.50 stop loss.
• Add the PetMeds Express (PETS) June $20 calls (PETS160617C00020000) that closed last night at $0.25 up to a price of $0.30 and set a stop loss at $0.17.