we are live at the nasdaq market site in new york city. dan nathan is back, did you miss us? >> yup. >> of course he did. dan and the rest of the guys are getting ready, here's what sells coming up. >> let's make a deal! >> that's what some traders think gm is about to say and we'll explain how you can cash in. and is it time to get out of oil stocks? >> stay away from the cans! >> one energy name could see serious downside ahead. we'll tell you which one. plus, what do apple and biotech stocks have in common? >>. ♪ absolutely nothing >> that's what we thought, too, until we saw this crazy chart. we'll tell you what it means for your money. the action begins right now. here's something you may

have missed today. honeywell, cummins and joy global following sharply today. does the market have a industrial sized problem? dan, what does this news tell you? >> the s&p has very few problems. it's down 1.25% from the all time high in the last couple weeks but when you look under the hood there are rotations and then there's stock sectors that act poorly. you just mentioned industrials. on a day like today, those stocks were really headed -- a couple of them were headed to 52-week lows and when you have cummins, naff star, joy global, you mentioned honeywell, you had ge down 1%, you would think the s&p is reflecting a better economic environment going forward but off very economically sensitive sector that doesn't act particularly well. that can be troubling. >> this is a space, first of all, that was fuelled largely by a huge commodity run that had gone on for the better part of a decade. now you add to that the fact that you have a strengthening dollar, these two things combine and one could argue these stocks

haven't come off anywhere near enough. obviously if the commodity bubble hasn't completely deflated in south america, for example, caterpillar gets a lot of its revenues from overseas. that's a real problem and, of course, if we are going to see a rate hike later in the year that also is going to pressure them as the dollar strengthens as a result. >> within the sector there's two types. the names are highly correlated with crude that have never come to life and have been digging down. then there high fliers which are rolling, big prominent names like united technologies, honeywell, and we know the transport has been under pressure for now six months. it's not a good space. making new relative strength lows compared to the stock market. just this week. >> you guys are so down on this entire space. there's no sign of life. >> let's talk about caterpillar, this is what we're talking about. caterpillar was a company that literally bought accelerated bye backs in late 2013 to 2014 over $4 billion in stock. that fuelled a massive rally. i think we have a chart since the start of january, 2014. what has happened? as you've seen commodity prices

come in and you've seen the dollar strengthen. the stock has cratered. 55% of their sales, as mike said, come from overseas here. so to me i think you have a situation -- that is a nasty looking down trend when you think about it. so if rates go higher for any reason and companies are less inclined to basically buy back their stock with debt then you could see this thing make lower loans, especially commodity prices don't rebound and the dollar stays strong. >> was that a good assessment of the chart? >> for sure. we know it bounced simultaneously with crude, a low of 78, it hit about 89 and we've retraced about a third of that move. typically we retrace half or down to the lows. it's a bad situation. >> so what's the trade? >> well, here's the thing, the stock has gone from 90 to 85 in the last week and a half or so. i don't think this is the sort of thing you want to press at 85 which is a near term little support level. if you get a bounce next week, this is the trade that i'm looking at. i want to look out to august, that will catch the q-2 earnings event which will likely show disappointing sales and possibly weak guidance and really i just want to buy the august 85/77

half spread paying 2.5 for that put-spread. buying one of the august 85 puts for $3.50, $2.550 is my max risk. that's my break even and my max gain of $5 at 77.5 245r, that's 9%, that represents a meaningful breakdown below this 85 range. this stock is found support over the last year and a half. >> this thing will capitalize on the first 10% down and that lower put strike he's selling is a meaningful amount of people are dwroum collect that dollar, especially during the summer when we're not expecting anything huge to break. maybe we'd wait until after labor day if you want to look for an opportunity to roll. but using a put spread in this situation makes sense. >> is there any concern at all that if we see any uptick in minors then cat will move to the upside. maybe that the a.g. trade is terrible and that's a head win but the minors could be -- >> if you look at this track,

the correlation are so high the presumption is lower because they're acting the same. >> first of all, a lot of construction in mining revenues come if overseas and if you're going to see the dollar strengthen, that will mitigate any boost you get there. also look at what the home builder sentiment was. that reflects construction spending in the united states and then finally oil, which is another place. caterpillar does a lot of the repowers for the land drilling rigs. if you're looking at that situation you need to see the rig counts rise. they won't repower the rigs so i'm trying to figure out where the propellant comes for this thing. >> it's not all dire in this space. deere made a 505-2-week high but they get 35% of their sales from overseas, they're much more levered to the u.s. here and that make sense. it looks like the s&p chart so maybe that's a good -- >> but the revenues weren't great. the reason it outperformed was because deere's earnings came out better, they managed to trim expenses. >> shares of bristol-myers selling off hard today after the company announced results from a new cancer drug. the move illustrates just how much is at stake as the asco conference kicks off in chicago. megaterrell is breaking down the

other names to watch as the biggest cancer research meeting gets under way. >> well, the news is already coming out this afternoon, bristol-myers reporting some results of its a immunotherapy drug opdivo showing it improved overall you are a diver compared with chemotherapy dose attacks but companies that move the most are the smaller ones. on monday analysts are looking at clovis and puma. clovis is in a race with astrazeneca in lung cancer so we should see updates on that. it should be a mover on monday. and puma was one that fell when the initial data sets were released a couple weeks ago, potentially disappointing data on its breast cancer drug. an onlyist with rbc capital markets says monday could see a turn around as the full data set is presented. those are the ones to watch. bristol-myers, roche, merck, astrazeneca, they will be there but the smaller guys puma and

clovis the biggest movers. back to you. >> thank you, megan. carter is looking at a striking similarity between biotech stocks and apple. explain. >> well, these are the leaders. and we know that the sector is great, health care sector, and we know also that within the sector biotech is particularly good. let's look at some of the charts and we'll try to figure this out together. what i have is a few comparative charts just for fun because our thought here is apple is going to break out. look at this correlation year to date. i mean, remarkably similar. the king and the queen. let's call it that, the king being apple. two best areas of the market, well, it's not just year to date, here's over the past 12 months. virtually identical, well, here it is over two years, meaning relative strength is an important thing, money favors these assets and it's not as though it's so ahead of itself which we'll see on the daily chart. here now is the same picture without -- with the s&p. it's a blowout. one could say well, it's ahead of itself but it isn't if you

look at the day to day. so long-term chart over the last several years and what my eye sees is this -- a well-defined channel. we know typically you respond to the top and bottom,s et cetera and so forth. we think we'll make it to the top of the channel, perfectly normal. now here's the daily setup. we have well-defined tops at a common level and the presumption the that we are going to break out here, we like this long. if you go to the top of the channel you can project for a 10% move. we would buy the ibb. >> all right, so, mike, what do you think? >> i'm just taking a look at the names that are in here. why we sit here with the s&p treading around all-time highs and a lot of those companies are looking expensive, one of the other thing this is space has in common with apple is it isn't that expensive. i'm looking at one of the larger constituents of that index, gilead. this company has more than doubled its revenues in the last two years, trading at less than 11 times next 12 month

anticipated earnings. so what you have here is a growth story that's trading cheap. so when i look at this base i think there aren't a whole lot of places you can kick around and try to find value and find growth at the same time in the market right now. this is one of them. >> so what's your trade? >> the simple trade is to go to july and look at the 115/120 call spread. spend a little over $1.30 for that. it looks like the 115 cost about $2. this is a way you can do the same thing that dan was doing with the put spread on cat, sell a little bit of people are dwroum help finance that trade, make a bullish bet and risk a small percentage of what have the stock cost. >> that's it. you are risking a small percentage to make a small percentage of what it's up. it's already up 19%. this is a $165 billion market cap stock. you said they doubled their sales in the last few years. when you look at that chart, and carter failed to mention one quick thing. the stocks sold off in late december 20% on hep c pricing issues. i think it's a crowded stock.

i believe it's obviously hep-c is going to be a massive market. but when you look at sales expectations going forward, they were growing sales dramatically and they'll be flat. the pricing issues ever come back in here, i think it's a crowded trade. the way they're playing it for the breakout makes sense. i don't think you commit new capital to the stock. >> it's not overbought here. it's allowed itself to rest and that's what breakouts come from. >> and if growth is flat we're talking about a 10% corporate earnings yield so you are spending 2.5% of the current stock price and you can only collect a small percentage. we're talking about 6.5%. >> i like this trade for a breakout, i just don't think you buy bigilead right here. >> gilead and cellgene are the ibb. i wouldn't want to be in the small cap stuff that has the potential to be down 50% one morning. >> it's all driven by amgen and pa few others. >> got a question, send us a

treat at options action. if it's nice, we'll read it later on in the show. for everything options action, only one place to go, optionsaction.cnbc.com. sign up for newsletter, some have likened it to war and peace. i call it a great read. here's what's coming up next. are gm investors about to get a big prize? >> a new car! >> actually, we're talking about something even more exciting. a potential deal. we've got a special report. and are google shares about to soar? no need to ask jeeves because we've got the trade right here. stick around for more options action. here at td ameritrade, they work hard. wow, that was random. random? no it's all t ing patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies

to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this.

ahh... steve, other than making me move stuff, ces. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.

welcome back to "options action." continued chatter in the auto industry about the possibility of one of the large automakers hooking up with another one of the large automakers. but at this point only one of the automakers is talking. we know it's fiat chrysler, there have been comments all week from sergio marcione. the chairman saying to reporters in turin that the e-mail that was sent to gm ceo mary barra was not the only e-mail, he said it was not the only conversation. in fact, he said there have been many conversations. so when it comes to sergio march yoen and his feelings about president potential for mergers in the auto industry, he said yesterday he expects one by 2018. didn't get into specifics about whether it would be his company or two other automakers. he did, however, e-mail gm ceo mary barra back in march and

said let's talk about possibilities here. however barra and gm are not interested in the deal right now. the big concern for sergio, the cost of capital for the auto industry. look at shares of fiat chrysler, they have been moving higher over the last week as more of this talk has been swirling around the industry but again, melissa, at this point it's sergio talking, not a lot of people listening. >> and fiat is much smaller than the other two automakers so it's basically fiat saying "i volunteer to be taken out"? >> i don't know if they're volunteering completely but they are saying something will have to change because although they have ram and jeep, some of their big markets like brazil, they're hurting right now. >> phil, thank you. a lot of chatter around this. we had the morning stanley note yesterday from adam jonas saying gnl could do a deal. >> i think this is not out of the position of strength. i think the auto industry

realizes the ground is moving below their feet and they have to move. so when you talk about 2018, something will happen because you know what? there's a massive secular shift going on in this space and it's likely to manifest itself over the next few years. >> there's no question that that's a cry for help and there's also no question that scale works in the auto industry. if you look at the good things volkswagen has done, building common platforms across lines, there's no question that scale works. but i actually wonder whether eventually you'll start getting into a regulatory issue. if you start having essentially going from what we have now, the big three to the big two to the big one, well, come on. i mean, it seems a little far-fetched. >> the chart speaks for itself. gm is almost as bad. even the big moves we've seen in daimler and bmw, it's all currency. so if you put in the dollar there is's no move at all. there's nothing leer. this is a dead space and i think gm looks as bad as any of them. >> with that said -- >> i would say the range in gm

this year has been 33 to 39. i don't find it compelling to step in. >> this is the ipo crisis. >> it's basically flat lined since 2010, it's massively underperformed in the s&p so if you believe gm -- maybe there's joint venture, maybe there's some cost-cutting things that you want to be involved. i much prefer looking at -- along premium strategies, applied volatility, the price of options is very low, look out to september with the stock at 36, you could pay $1.50 for the september 36 calls that break even up about 4% at 37.5 and it's stopping you out right below what would be that breakdown level here that the stock is hovering above. >> for all of the pessimism that we were just articulating, i think it's fair to say a lot of the automakers, including general motors, are trading quite cheap. there's a lot of pessimism baked in. if anything should get people thinking they could reverse it would be for a sharp move to the upside which is why an outright

call makes sense. >> we're at or near peak sales, and the quality of sales are very poor in the sense that if you look at how much of it's subprime, it's at a record, the duration of the loans is at a maximum. people are lending longer at lower quality at or near peak. i wouldn't touch this. >> we've been talking about trends affecting the entire industry but is ford in a better position than gm? >> we're talking about debt loads here. gm is the one that had it wiped out. they were bankrupt and i think that's an important point that these companies were a ward of the state for all intents and purposes six years ago. these companies could be thinking about when is the next downturn globally and then we also have this really strong secular shift technologically so if anything i think the moves that are going to be made are going to be very defensive and i think they're probably all not in a great scenario if you think out to what could be worse case scenarios in the next few years. up next, oil surged more than 4% today but energy stocks can't rally. what's up with that? we'll explain when we come right back. here at td ameritrade, they work hard.

wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this.

ahh... steve, other than making me move stuff, ces. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim?

for all the confidence you need. td ameritrade. you got this. three weeks ago, mike said the oil rally was due for a breather, take a listen. >> i'm not sure i feel like crude has more legs here. i think it will preble be above 60 at the end of next year so i'm looking at exxonmobil out to the july 87.5 put, you can spend $2.35. >> trade looks pretty good, mike. you looked spiffy in that that shot, also. tie. tuck sxed tuxedo. >> got all dressed up to talk about oil. >> i don't know if goldman sachs $45 price target for oil will hold up or not but i will say this, this is a situation where along these puts they here in the money. i think the best play at this point is probably to roll down and out. you can either go to the august 58s or even out as far as october because that's approximately what those july

87.5s are worth. >> why do the equities move with oil? >> in general they do. today we have a big ricochet in crude. but the energy stocks had their bounce if you will. >> meaning it's done? >> meaning after long precipitous decline, you get a violent ricochet up some 16% off the low, you reach an equilibrium price and that's what's happened with the energy sector. right now just stay away from it. >> o other point is that oil is off a lot from its all time highs and these integrated names are off 15% when it isn't that much when you consider basically that they are is preserves. >> also three weeks ago dan made a bullish call on google. >> i think they'll start to focus on the potential for cash returns so i want to set up eening calls for that july q-2 report. the stock was 550 today.

i sold the may 29 weekly 570 call at two bucks and i used that proceed to help pay for the july 570 call. >> so far the stock hasn't moved much. >> we sold the may 29 weekly, today's expiration called to help finance the longer data. so it would be fine if the stock traded within this range, moved up a bit. yesterday we tweeted out make sure to check the options action twitter feed that i sold now i own the june 570, july 570 call spread. so i want to keep chipping away at this and when we get out to june expiration in a few weeksly look to turn into it a vertical spread. >> what will happen between now and then? >> i don't think a heck of a lot. google has underperformed. we were talking about this off camera. apple just told us last month they've spend 0 billion in the last couple years buying back their own stock.

google has $70 billion cash on their balance sheet burning a hole. they have not bought a share back here. look at the underperformance at google. with the new cfo, investors will start getting focused, i know they have no voting rights but it doesn't matter. we know what pressure activists or just an investor base in general can put on management. >> you will have literally been on the job, ruth, for two months or so? >> not expecting anything. just want a sentiment shift. >> that makes sense where she is concerned but the founders of this company are entrepreneurs, that i seem like venture capitalists so it doesn't surprise me they like to have that forward as they think about their different enterprises. that could be as we were talking about also off camera self-driving cars for all we know. >> i mean something has to happen. this is analogous to the market. this stock is a big name, it's just stuck. you cannot stay in a period of equilibrium. >> so it will be a breakout or breakdown. >> what we try to do -- i say

"we" meaning someone who respects price action and nothing else -- wait for it to tell you and go in the direction it's going. up next, your tweets tweete final call from the options pits. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. choose, choose, choose. but at bedtime? ...why settle for this? enter sleep number... don't miss the memorial day special edition mattress with sleepiq technology. sleepiq tells you how well you slept and what adjustments you can make. you like the bed soft.

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ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series.

okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this. time for a tweet. steve says "love the show, guys, i'm long june 135 apple calls, should i lick my wounds or wait for a possible breakout?" >> i still like apple on the long side. i think the play, though, you want to go further out in time, look to july call spreads, neighbor 130, 135 call spread. >> last word from the options. carter? >> we like biotech and we would be long ibb. >> mike? >> vertical spreads are the way to make the play during the summer months. gilead. >> dan? >> caterpillar. this is one -- i want to press this short, you wait for a little bit of a bounce, target august, that's the earnings event. looks like our time has

expired. thanks for watching. i'm melissa lee. check out the web site and also, of course, check out our daily segment "inside fast money." see you back here next friday at 5:30. make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts right now. welcome to "mad money" and i'm trying to savia a little money. my job is to save you money and educate you. so, call me or tweet me at jim cramer. if you didn't know any better, you might think the federal reserve should be cutting rates