. i am coming to you live from the nasdaq markets, the guys are getting ready behind me. while they are to go that, here is what is coming up. >> what's that? >> antidote. >> to what? >> the poison you just drank. >> investors were shockedly the drop in chinese shocks and we'll tell you by dow stock could be most vul officerable to the shanghai swoon. plus, snoeb. because there is one sector that is setting up for an effect fieg trade, we'll shine a light on it and show you how to profit. and which large cap tech

stock is set for a big surge? >> please tell me. >> we will and we'll tell you how to make money, too. the action starts though. ♪ we all know about the sell off in chip stocks today. what we don't know is what it could mean for the broader tech rally going forward. let's get in the money and find out. tan, does this signal trouble ahead for tech? >> it definitely could. it's not just micron today, after sentiment was amazingly poor heading into that report and into that guidance i don't think anyone thought there was going to be a beat there, but the drumming that stock took i think you have to think about some of the other moves. oracle, here is a stock that had traded well in the date range for a couple of months and that guidance sent their stock down 10%. and j bill, they make large equipment and that stock got drilled after its poor earnings. it's across the pc and smartphone supply chain and will appear to be some problems.

so to me i think you really have to be careful here. when you start to see the magnitudes of those sorts of sell office increasing over time as we head into q 2 reports season next month, i think you really have to be cautious here. >> we saw all sorts of effects not just in the chip makers but houle let pack card, adobe. >> first of all, houle let pack card has been getting hit for, what, the last decade on pc sales. >> another reminder. >> we're making this out like it's all a big surprise, but the interesting thing is this is a snow motion train wreck that's been going on quite some time. there's only one name that seems to be holding in on the approximate. c side and that's actually apple, guys that make this computer right here because basically all of these sales are going down, they are picking up a little bit of what's being lost. when i take a look at the space if i had to be in somewhere that's ard ware related that would be the name i would have to be in. >> that was an ugly drop for mic

ron. >> despite the resilience of the index itself. qualcomm peaked a year ago so even as things like avago and xpi have kept this going a little bit some of the heavier names have come apart. >> you just mentioned avago, free scale -- i mean, there was $60 billion worth of m of a in the last two months and in a lot of ways that has kept tech afloat here. tech is the largest weighted sector in the s&p 500 and you mentioned apple. well, that's the largest weight in the s&p and nasdaq. it's got all those biotech stocks taf done well, too. large cap tech stocks act poorly a brings us to intel and that's the one i want to focus on. i think it has the potential -- the stock is down it 14% on the year, i think it's incorporated a couple guide downs over the last two quarters, we got one in this january and april and the stock has acted okay, but now

really it's down -- it's approaching a very, very key technical sport level. we have a chart right there. to me whether you like this stuff or not this has the potential to be a textbook head and shoulders took. that neckline is $30 that's the line in the sand. if they miss and guide down on july 15 when they report their q 2 this stock is breaking that way and it's probably going down towards 26. i have a very simple trade here. this this is a trade i put on a few weeks ago, but now that the stock has come back the options are about the same level i was literally just targeting that reporting date. i'm looking at the july regular 30 puts today when the stock was 31 you could buy those for 45 dents. your break even is down 4.5% at 2955, between 2955 and 30, you can lose that premium but that is your max risk, you're risk 1.5% of the underlying stock price. that seems like a relatively cheap way to play for a breakdown. >> this is one of those situations as you you point out

1.5% basically the current stock price to buy a put strike that's less than a dollar out on the money. if this does start to move down one of the things you will be able to do with this had, you you could look to roll this into a spread by selling a lower strike put. i think this is a good way to play it. >> head and shoulders exactly what it's called, this reversal formation is what this is. the presumption is -- >> he is autoey to see. >> you can see the shoulders and the head and that gap is interesting to you from 28 back it in june, a gap fill would take us down there and then some with a little luck. >> i can't put too fine a point on this. it seems that a lot of stocks in the nasdaq, specifically the large cap tech act very poorly when the s&p is within a couple percent of the all time highs. if the market is going to roll at some point it feels like technology is the place and there's a lot of money concentrated in things like al. apple may continue to outperform but tease other ones are showing

signs of weakness. >> the yield on the ten year treasury tpg to rise and that has weighed on utilities, but our chart master is sensing a turning point this this relationship. >> we have had a big bump up in yields, but home builders and utilities are starting to shake that off a little bit. what i thought i could do is take a look at the charts and figure this out together. we know the relationship is inverse but at some point a lot of it or at least most of it is priced in on an intermediate wrat basis. i have a comparative chart, utilities versus ten year yields, we know that yields have gone from 1.6 to 2.5 and utilities have dropped 17%. actually weets have done the exact same thing. here is a longer term picture, inversion correlation again, rates higher, interest rate sensitive stocks, reaching utilities lower of course. what we know is that this a five year chart. this is the down trend in yields which is the same as the uptrend in utilities. presumptively after you reach a

difficult level or close to it you basically either back away, yields yields or you back and fill. so the reciprocal the implication being that we get a bounce off our friend line in utilities over and over and over and the presumption is we can get a little bit of a bounce here, 4, 5% off of the excel use so we like this long. one more heart. here is our trend line. here are the advances and the declines. town 20%, down 14, down 12, down 14, down 10, down 17. it's all quite symmetrical. what we play for is the countertrend move back. off the line. we take a shot here at xlu. >> very interesting to see that relationship break up a bit. do you agree or is it too risky to be buying utilities? >> it might be too risky to go out and buy the stocks. the u ilts it unlike bonds themselves are actually kind of an inflation adjusted income producing instrument.

they are heavily regulated that's one of the things that weighs on them a little bit and actually because we have had very low rates and very low inflation that meant that a lot of the things that the power companies sell, gas and power, have been low and that's actually been hurting them a little bit. if we to see rates going up, economic growth, the prices of power and gas go up, that could actually benefit them. so the nice thing about utilities here, too, is the fact that utilities because they are regulated and are very low volatility the options premiums are exceptionally low. we don't need to sit here and worry about whether or not the rates can do that we can risk very little money. buy the 42 calls, you can spend $1.05 for that, basically risking a little over 2% to make a bullish bet. if it does make a rally you're going to have an opportunity pain you can spread this. >> i do like this. here is the thing, we know treasuries are the only true save haven asset that exists. if the market were to get more

volatile and we did have some situation where u.s. equities started to sell off i think you're going to see investors move back towards treasury. even if they are he' one and done in the fall, here is a sector that has come full circle over the course of the last year. it's giving it all back. i actually think that some of the stock about with that 5% testify depend yield at 52 week lows, southern is one of them, maybe you can take a shot on you have a 5% buffer to the downturn. >> today with rates moving up progressively, utilities best performing sector. it's priced in a lot. >> that's just today. >> that's just today. >> a lot of these are trading below their historical valuation, that weakness has made them relatively cheap. even if you do see small increases by the fed globally rates are not going to only be influenced by the fed. the spread between booms and feds is not going to get at that great. that also keeps a lid on rates. >> utilities or home builders?

>> so the initial pressure as rates quickly come off the bottom, utilities, homeowners all sunk but then they've started to find their footing. >> got a question? send us a tweet to @options action. if it's nice we will consider reading it later in the show for the guys. and for everything options action you can always check out our website optionsaction.cnbc.com. we've got the hottest options, news, videos, trades from awful our guys here throughout the week and also exclusive trades there so check it out. here is what's coming up next. >> yep, that pretty much sums up the chinese stock market and we will tell you which dow tok could fall in sympathy. and looking for a stock that's ready to join the rally? here is a hint. and we will tell you how to trade it when we come 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. i'm here at the td ameritrade trader offices.

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. some some surprising names have been lagging the overall a market. back at cnbc headquarters. name some names for us. >> let's hit both sides of the coin. momentous week for facebook, the biggest social network company. it passed the market cap of the world's largest retailer, walmart. that stikd walmart out of the s&p 500's top ten markets by market value. apple and facebook real stand outs on the up side.

apple up 15%, facebook up 13%. that's a lot of firepower for large cap stocks and technology not all those large caps have kept up. check out like is semiconductor stock, intel down 15%, qualcomm down 13%. oracle down 9%, large cap technology stocks that are lacking. then there's google. the second biggest stock in the s&p. shares are positive, but lagging behind some of toes other tech giants. the class a voting shares up just 4% so far this year, still beating the s&p. the nonvoting shares, c class up 1%. google one of those stocks that's trying to find its footing here and trying to keep pace with some of those other large cap brethren out there. >> we're going to hone this on google here, swrund performance has caught the attention of our chart master carter who has already made his way over to the board. >> it's been literally frozen. so the opportunity if you're a

short seller is the resolution is down, if you are a buyer up. we think it's up let's make our bets. a big sideways period, you can see this clearly. here is the trend line that's been in effect since essentially the stock came public. we are on this line, on this line, we are on this line. so here is our sideways a, there is our trend line. now you make your bets. is the resolution up or down? what we're keying in on here, i'm working backwards, over the last five years is our equilibrium again and here is how i would say one can draw the lines. again, we're reaching the point where something has to happen and plenty of bearish people i'm sure i'm going to take the other side of at that. and then the short term chart. again, drawing the lines. so what we're looking for is a resolution of this standoff, the short term, the long-term, the really long-term and we're playing for a move out of this range, up to just where we were

at 580. so 5, 6% move bringing us out of this final wedge just to where we were early in the year. >> all right. thanks, carter. mike, how are you turning this fundamentally? >> there's a legitimate debate going on. for a long time it was a growth company. and it sp really. they have not made a decent play in social media at all, google glass, what happened to that thing by the way? there's a couple of things we could concern ourselves with. you take a look at the valuation and it's trading cheaper because i don't think people are expecting a lot of growth out of this business right now and trying to figure out whether they're going to get on board. you've suggested possibly buying twitter but the price is probably onerous. >> google buying twitter. >> that's right. when i take a look at this one of the things you also see there's a little extra concern in the options market. even though the stock is moving in that narrow band. when i take a look at this i think the way to play this is to go and buy call spread that's

going to mitigate those high remember priced options. pay 15.20 for the 560,and sell the 600 for 3 that have bucks and we can see how it's going to play out. >> i like the trade, i can that's the way to play it, but here is what's going to happen for this stock to break to the upside, they have to do is something bold in in my opinion approximate. you talked about maybe some sort of transformative acquisition, they have $70 billion in cash on their balance sheet that they don't buy their stock back with. every other stock in the top ten in the nasdaq 100 they buy it back hand over fist that's probably one of the largest reasons why this stock has underperformed over the last year. something has got to give mere and i'm not certain -- mike, you talk about the growth, it's still growing and that's pretty good, the stock is reasonably valued but i think investors have gotten used to 20% growth and they're not going to get that anymore. >> a little financial

engineering, but they height very well get that so they have new appointments and that might actually help change things. if they do start returning cash to shareholders in the form of buy backs the only resolution is to the upside, but they haven't said absolutely that's how they plan to handle it >> i know you mentioned the missteps but this is a company that still gets 90% of its revenues from search and that's really the story with the business. >> it's a dom napt business >> it's only going to get its revenues for that if every other idea they have done generate any. >> carter, final word. >> the point of equilibrium is it never lasts it can persist for a while but this is as long as it can go. you've got to make your bets or stay away and wait for the action to start and go with it and a momentum tra id. >> and your bet is higher. >> higher. >> chinese stocks are tanking we will tell you why the sell off could mean big trouble for one dow component when options action returns. 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. george johnson can not fly. he can not see through doors.

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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. ♪ what if we finally had a backyard? at'd be amazing. ♪ hey, what if we took down this wall? ♪ what if this was my art studio? what if we were pre-approved? ♪ shut up. from finding, to financing. how'd you do that? zillow. a scary a scary picture. that is the shanghai composite down more than 20% from its recent high. dan, what names here in the u.s. stand to suffer from the china plunge? >> i think it's important to separate the volatility in the stock market and the speculation

that has existed there and then from what's going on in the client ease economy. we really don't know. it's a sently planned economy but that volunteer tilt is night thing. there was a -- if it goes down a lot it's also going to destroy a lot of wealth. when you think about it here, think about u.s. multi-nationals and where some of them are expected to get their growth. we talk about cat it seems like every quarter on this desk here. this is one that's been stuck in the mud, down 23% from the 52 week highs, down 5% on the year. very -- in stark contrast to deer which has just today made a new 52-week high. cat gets more than 2/3 of their sales from outside the u.s. so the dollar and emerging markets that's a big one here. if you see this stock back towards 90 prior to their q 2 report in late july i think you want to think about as a trade shorting it and trying to make a break below this 80 level. >> before we talk about

caterpillar let's go to the newsroom, kate rogers has breaking news on greece. >> reuters is citing a government source that the greek prime minister will speak any moment to reporters on a pros pod bail out deal for greece. this is something we are going to be continuing to monitor and we are all awaiting his statement on that. so, again, the greek prime minister will be giving a referendum shortly on the situation in greece and bring you any swrup dates. >> a tense weekend in greece. thanks very much. let's talk about the market risk for a moment. we were talking about that china slide. we are going into another weekend where we do not have a reese pollution here on greece. >> honestly i'm a little bit less concerned about greece than i am about what's going on am in china. i mean, greece is a blip, we're probably going to get some kind of can kicking exercise here. we're either going to find a resolution or kick the can. >> what go f. they don't? >> we have a grexit. 3% of the eurozone --

>> china is growing at 4, greece is a year. >> it's not about the size of greece it's about the structure of the euro which is the second most lively held currency. >> and portugal and spain, then you have a big problem. >> if they have an organized exit of greece, that could actually ultimately be viewed as a positive. they condition be hotel california or a roach motel -- >> how can it be organized? >>. >> that doesn't give the eurozone the flexibility it requires and if they demonstrated that they have that flexibility, ultimately that could make the eurozone stronger. >> i think what sara is getting to we can sit on the desk and opine on what an orderly exit looks likes. at the end of the day we don't really know what the unforeseen circumstances are, there's a whole let of unforeseen potential outcomes here. when you think about just our markets in the u.s. we've exhibited no volatility as far as equities, but we've seen volatility in global equities, in currencies, commodities, in basically every other risk

asset. this approximate nds bo, you know, other than u.s. equity. i think if you do have something that is unexpected and kind of negative i think there is a potential for a greater than expected move in the u.s. stock market. >> we could see -- i mean, we're waiting for news all through this weekend. it's past midnight in greece and we have this news on the prime minister. we will continue to monitor it. up next, your tweets and the final call from the options pits. when we come 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. let's take a tweet now. scott says great show, everyone. what effect does the netflix stock split have on holders of options? is it just x times more calls, seven times i guess. >> you would have seven times as many options but you have to adjust the strike. you divide the strike by how much the split is. if you own the 630 puts right now you are going to own seven times as many of the 90 puts. if you own 7 times of the 100

then 100 strike calls. you are going to have more of them and might be a little more volatility. >> next up, the retail trader says, any thoughts on the rails? i like csx. carter, what do you think the dharts say on rails? >> the rails are poor, the airlines are joining, the transports was the single best with the exception of biotech area over the two year period '13 '14 now it is a full-fledged reversal, we think the whole thing goes lower. i wouldn't buy it. >> i would say the rails should be doing better. if all the slack that exists that the fed is telling us about this in economy you would think that cyclical sectors like the rails would be doing better, the transports are not. i'm not a tou near wrist but i think there's something to this time for the final call. carter, first to you. >> well, xlu take some, buy come, get off. >> if you're inclined to be long google the way to do it is with call spreads. >> and dan. >> we are in a market where they're punishing disappointing that i am, i think intel sets up

for that way into your july q 2 report. >> all right. looks like our time has expired, i'm sara eyesen, melissa lee back next week. next up, jim cramer, "fast money." >> male announcer: the following program is a commercial presentation of total gym fitness. >> what happens when people want to get results? well, we're putting total gym to the test. >> 14 people, all with different goals. what can total gym do to your body in only 14 workouts? >> cardio, strength, stretching. one machine does it all. >> hi. i'm chuck norris. >> and i'm christie brinkley. >> do you want to make a change in your life? >> we want to introduce you to 14 people, each one with a different goal. >> to lose weight, build muscle, tone up, or just feel better. >> working with trainer rosalie brown, they committed to