Hillshire Brands (HSH), owner of popular meat brands such as Jimmy Dean and Ball Park, woke up to an enticing offer Tuesday after revealing plans to purchase Pinnacle Foods, Inc. (PF) just a couple of weeks ago. The proposed deal between the two food giants for $4.2 billion dollars was countered by Pilgrim’s Pride Corporation (PPC), which offered Hillshire Brands $6.4 billion—or $45 per share—in cash for the takeover, contingent on Hillshire abandoning its deal with Pinnacle. This represents a heavy premium from HSH’s previous share price and will cost Pilgrim’s Pride an additional $163 MM break-up fee it will cover for HSH if all goes to plan.

Pilgrim’s Pride, the Colorado-based subsidiary of Brazilian food giant JBS, is comfortable doing so as sentiment from its Chief Executive is extremely optimistic. CEO William Lovette said today that the deal, which he hopes to close as soon as Q3 2014 will create a “fully integrated protein leader” (PPC is the largest chicken producer in the US).

Hillshire Brands closed Friday at $37.02 and enjoyed a nice jump at Tuesdays opening bell to $44.75 after the announcement of the proposed deal. HSH has been trading in a 52-week range of $30.35-$45.52 hitting its yearly high Tuesday morning, and up almost 22% YTD.

The proposed acquisition could spell good things for PPC and HSH as both stocks have benefited from the announcement. Pinnacle is wallowing in potential rejection with shares dipping almost 7% today on the news.

The Week Ahead

After the long weekend, we enter a busy week of economic data releases. Durable goods data was released earlier this morning coming in well above expectations, jumping .8 percent after analysts forecast a decline of .8 percent. Ex-transportation numbers show durable goods orders with a tenth of a percent rise. This is a leading indicator of positive economic growth.

The S&P Case-Shiller House Price Index came out this morning, measuring the value of residential real estate. March numbers came in higher than expected with a .9 percent gain. April is expected to show the same home price appreciation and sales jump as we enter the summer selling season.

Analyst forecast a decline in consumer confidence for May by .2 percent from April. This proved to be accurate after the report was released today.

Dennis Lockhart, President of the Federal Reserve Bank of Atlanta will also be speaking tonight from LSU.

Other notable releases such as GDP, Jobless Claims, Crude and Natural Gas, as well as Personal Income reports are scheduled for Thursday and Friday.

Today the news broke that Pilgrims Pride (PPC) has made a cash offer for Hillshire Brands (HSH). Currently (HSH) is up 22% pre-market! Pinnacle Foods inc (PF), which previously made a bid for Hillshire Brands, is currently down 6% pre-market as it looks the Pinnacle’s deal will fall through. Pilgrims Pride Corporation is up about 3.63% after it announced its plan to buy HSH with a cash offer. Hillshire Brands has been trading in a fifty two week range between $30.35-38.08. Hillshire is trading above a neutral cloud and should continue to move through the fifty two week highs. As news and uncertainty surrounding the potential buyout in Hillshire continues; implied volatility should continue to give the options a boost. It is unclear which company will ultimately buyout Hillshire Brands. Pinnacle could still make a counter offer in attempt to save the Hillshire deal. The bids for Hillshire Brands should continue to lift HSH stock bullishly.

Gamestop (GME) seeing some bullish activity after it posted positive earnings. Gamestop video game retailer posted better than expected EPS, beating estimates by .02 cents a share. Gamestop is currently up $2.09 or 5.69% move today. GME is currently trading at $38.98 and has been trading in a fifty two week range between $30.94-57.74. Gamestops earnings call began to break down the various business segments and individual results. The beginning of the call focused on pre-owned physical game titles, digital game sales, and some metrics from next generation console sales. Gamestop is operating a brick and mortar business model in a highly cyclical entertainment environment. Although pre-owned sales margins increased, pre-owned sales are on the decline as the new cycle of game consoles are a hot ticket item. Last generation consoles pre-owned titles aren’t driving sales growth. Digital copy sales on the rise may be good for this quarters sales; however in the long run digital sales cannibalize Gamestops brick and mortar business model. Gamestop is also competing with other retailers such as Amazon (AMZN), Valve and the game console creators for digital sales. Gamestop may be posting positive results but competition will continue to get more intense. Gamestop is currently trading below the Ichimoku cloud with a bearish outlook into the future. In the near term options traders believe Gamestop will continue to move in a short term  bullish trend. Today we saw a trade hit the tape with a trader buying 2000 (GME) Friday 5/30 $40 calls for $0.31. With the big move on earnings, traders are looking for a continuation of the recent Gamestop rally through next week.

Hewlett-Packard, (HPQ) could make new fifty two week highs today after its earnings announcement. HPQ is currently trading at $33.85. Hewlett-Packard has been trading in a fifty two week range between $20.25-34.09. HPQ had a relatively flat quarter overall, the company posted mixed results throughout its many divisions. Hewlett-Pack overall was able to beat EPS expectations by 0.12 cents a share. The company hopes to improve results across the board by cutting cost. By cutting cost the company plans to cut thousands of jobs. Initially the company had plans to cut 34,000 jobs, HPQ has increased that number by 11,00-16,000 additional jobs. The total number of job cuts could be north of 50,000 jobs. When companies are in an expansion phase they typically add jobs and the opposite being true in a contractionary period. A majority of the rest of the HPQ earnings call was dominated by the decision to cut jobs by such a drastic proportions. Looking at HPQ on the Ichimoku cloud, the stock is currently trading way above a thin bullish cloud. Although the stock is ripping to new fifty two week highs, its concerning that the company’s business plan is to cut jobs instead of product cost; or to focus on creating something new and innovative.

The Gap, Inc (GPS) is an apparel and accessories company with operations around the world. The company’s stock is currently trading around $41.00 in a 52 week range of $36.13-$46.56. The stock has been doing relatively well this year with shares of GPS rallying by nearly 5% year to date.  The company is set to release their most recent quarterly earnings today after the bell. Analysts are expecting GPS to report EPS of $0.57 on revenue of $3.7 billion. The stock is a mixed performer on earnings, rallying 4 times and selling off 4 times on earnings over the past 8 quarters. Technically speaking GPS is breaking some key levels to the upside with stock attempting to break above the daily Ichimoku Cloud during today’s session. Currently, the options market is implying a move of $1.50 in GPS by this Friday’s expiration. With this implied move a trader can calculate measured move targets in GPS and use them to set up a trade.

Upside Target: $42.50
Downside Target: $39.50

Bearish Setup:
Buying the GPS May 23^rd Weekly 40.5-39.50 Put Spread for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $40.20

Bullish Setup:
Buying the GPS May 23^rd Weekly 41.50-42.50 Call Spread for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $41.80

Boardwalk Pipeline (BWP) is a natural gas company that specializes in the gathering and processing of natural gas liquids. Boardwalk Pipeline has been trading in a fifty two week range between $11.99-33.00; the stock is currently trading at $18.10. BWP is up $0.64 cents today about a 3.67% move. Year to date the stock has underperformed the market and is down about 29.47% since the start of this year. BWP is currently trading inside the Ichcimoku cloud, however BWP looks like it will break the cloud to the upside. The future cloud also looks to continue this bullish trend. Option traders have a bullish outlook on BWP and think the stock will continue its move upward. Today we saw a trader rolling their 33,000 September 15 calls at $3.30. This trader then purchased 33,000 of the September 17.5 calls for $1.80. Today’s bullish rollover provides a boost of confidence for BWP continued bullish outlook. Today volume has been heavy with 2.9 million shares trading, this is 3X the normal midday trading volume in Boardwalk Pipeline. With today’s big move, an improving cloud set up, and the bullish order flow in BWP; I believe Boardwalk Pipeline is setting up for a long.

Trade: Buy the September 20 calls
Risk: 85 per one lot
Reward: Unlimited
Break-even: 20.85

Micheal Kors expected to report earnings on the 5/28/14. Michael Kors Holdings is a retailer that focuses on higher end fashion apparel and accessories. Although many companies in the retail sector have not posted favorable earnings this past quarter, (KORS) may be an exception. Wednesday May 21 Tiffiny & Co. stock was up about 8.5% after posting better than expected earnings. Tiffiny & Co. and KORS share a similar target market. With an improving economy, Americans may be willing to spend more money on luxury type goods. KORS has been trading in a fifty two week range between $56.15-101.04. KORS is up 13.73% this year and is currently trading just barely above the cloud. The stock has been trading in a neutral trend inside the cloud throughout April. The cloud is trending very neutral with a thin bearish cloud forming ahead of the current stock price. I believe with the stock breaking the cloud to the upside, the cloud will turn to a bullish channel in the near future. Kors has had great earnings history with the stock rallying the last 8 or 8 quarters. The average post earnings move for KORS has been 8% over the last 8 quarters. Last quarter we saw an exceptional move in Kors with the stock moving 17.3% on earnings. I believe the stock is setting up for a long into earnings with great past performance and positive trends in luxury retailers.

Trade: 98-100 bull call spread for 0.40 with a May week 4 expiration.

Risk: 40 per 1 lot

Max Reward: 160 per 1 lot

Break-even: 98.40

Methanex Corporation (MEOH) is a commodity chemicals company supplying methanol to markets around the world. The company’s stock is currently trading around $57.70 in a 52 week range of $40.14-$73.43. The company’s stock has been underperforming the market some this year with shares of MEOH falling by over 2.5% year to date. Options traders seem to expect this will reveres as orders hitting the tape during today’s trading session have been decidedly bullish. Earlier this morning a trader bought 3,100 MEOH June 60 calls for $1.10. This is a very bullish order and this block represents volume in MOEH nearly 5 times its average daily option volume. Although shares of MEOH are trading below the Ichimoku Cloud order flow this strong could signal for a long opportunity in MEOH.

My trade: I bought the MEOH Jun 60 calls for $1.00
Risk: $100 per 1 lot
Reward: Unlimited
Breakeven: $61.00