Option Investor
Newsletter

Daily Newsletter, Tuesday, 7/23/2013

Table of Contents

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

Market Wrap

UTX Wins, TRV Loses

by Jim Brown

Click here to email Jim Brown

The Dow closed with a minor win thanks to gains in UTX offsetting losses in TRV.

Market Statistics

The Dow was the only major index posting gains today with positive earnings from United Technology (UTX) and AT&T (T) offsetting post earnings declines from Travelers (TRV) and DuPont (DD). The mixed earnings offset some negative news from the economic reports.

The Richmond Fed Manufacturing Survey for July plunged unexpectedly into contraction territory. The Richmond headline number declined from +11 in June to -11 for July. New orders declined from -1 to -15 and the eighth consecutive monthly decline. Backorders imploded with a decline from +1 to -24. Employment fell from +11 to zero. This was a very negative report.

The gap between new orders and inventories, a proxy for future activity, fell from -11 to -30. This component has been in negative territory since January 2012.

The separate Richmond Fed Services Survey fell from +12 in June to -6 in July. Six month expected demand fell from +11 to -29. Six of the seven overall components were negative.


Sentiment derived from the Richmond Services Survey suggests consumer spending is starting to slow dramatically. Employment declined, wage gains slowed and shopper traffic slowed. The six month outlook suggests retailers are not expecting conditions to improve for the rest of the year. Because the U.S. consumer is 70% of GDP Moody's believes Q3 is currently running at about a +0.5% GDP growth rate. This is a very negative projection since Q2 GDP is now expected to be less than 1% growth.

The economic calendar for Wednesday has the reaction to the Chinese PMI due out later tonight and the Eurozone PMI. On the U.S. side New Home Sales could show a decline if they follow the path of existing home sales, which declined sharply in June. Builders are fighting the rising interest rates and the flurry of new foreclosures this summer.

The Kansas Fed Manufacturing Survey on Thursday is the most important report for the rest of the week. If that report shows the same kind of decline as the Richmond survey today then the Fed will have a tough time launching any QE taper program when it meets next week.

Economic Calendar

This was a very busy earnings day. Rather than try and spend a couple paragraphs discussing each of the major reporters I am going to just give the bullet points to cut down on the length of this commentary.

AT&T (T) reported earnings of 67 cents compared to estimates of 68 cents. Revenue of $32.08 billion beat estimates for $31.81 billion. The company added 550,000 contract customers in the quarter. Shares declined -30 cents in afterhours.

United Technology (UTX) reported earnings that rose +4% to $1.70 compared to estimates of $1.56. Revenue rose +16% to $16.0 billion but missed estimates slightly at $16.2 billion. New orders were up +23%. Shares of UTX rose +$3 on the news.

DuPont (DD) reported earnings of $1.11 compared to estimates of $1.27. Revenue fell -1% to $9.8 billion compared to estimates for $10.04 billion. DuPont shares ended the day flat. The CEO said the weakness was due to the overall global economic weakness but predicted the second half of 2013 would be significantly better.

Peabody Energy (BTU) reported earnings of 39 cents compared to estimates for a -5 cent loss. Revenue of $1.73 billion missed estimates of $1.82 billion due to lower prices for coal. The earnings beat was made possible by aggressive cost cutting with U.S. costs declining -6% and Australian costs down -20%. Peabody said U.S. demand for thermal coal would grow by 50-70 million tons as the fuel has regained "significant market share" as a result of high natural gas prices. Demand rose +11% in the first half and natural gas demand declined -15%. BTU shares rose +5% for the day.

Advertise for Option Investor

Texas Instruments (TXN) reported a 48% increase in profits and gave a strong forecast for the rest of the year. TXN projected earnings of 49-57 cents in Q3 compared to estimates for 51 cents. Revenue of $3.05 billion missed estimates of $3.06 billion. Earnings of 42 cents beat some street estimates by a penny but were in line with others. TXN reduced costs in research and development by -17% to produce those earnings on declining revenue. Shares of TXN rose +4%.

Altria (MO) reported earnings of 62 cents missing estimates by a penny. Revenue fell -2.5% to $4.5 billion compared to estimates for $4.62 billion. Cigarette volume fell -7% to 33.8 billion. Marlboro volume declined -7% and the other premium brands declined -11%. Older smokers are dying off faster than new smokers are picking up the habit. Shares of MO declined -2.4%.

VMware (VMW) reported earnings that rose +27% to 79 cents compared to estimates of 77 cents. Revenue rose +11% to $1.24 billion beating estimates of $1.23 billion. Future guidance was in line with estimates. Surprisingly shares of VMW spiked +10.5% to $78.75 in afterhours.

Panera Bread (PNRA) reported earnings of $1.74 compared to estimates of $1.77. Revenue of $589 million missed estimates of $596 million. Same store sales rose by +3.7%. Shares declined -$15 in afterhours.

Broadcom (BRCM) posted earnings of 70 cents and revenue of $2.09 billion compared to estimates of 69 cents and revenue of $2.104 billion. Weakness in Broadcom's revenue suggests sales of smartphones are lagging. The company makes 3G chips used in the cheaper phones. Shares of BRCM declined -4.3% during the regular session to $31.81 after a morning downgrade then declined further to $30 in afterhours.

Illumina (ILMN) reported earnings of 43 cents, beating the street by +3 cents. Revenue rose +23.3% to $346.1 million beating consensus of $332 million. Shares rallied +$5 in afterhours.

Discover Financial (DFS) reported earnings of $1.20 that beat the street by 4 cents. Revenues rose +8.2% to $2.04 billion and beat analyst estimates of $2.01 billion. Loans rose by +6% to $61.7 billion. Credit card balances rose by +5% to $49.8 billion. Shares were flat on the day.

Juniper (JNPR) reported earnings of 29 cents compared to estimates of 25 cents. Revenue rose +7% to $1.15 billion and beat consensus estimates of $1.09 billion. Shares ended the afterhours session flat. They also announced the retirement of the CEO.

Electronic Arts (EA) reported a loss of 40 cents but that beat the consensus estimates for a loss of 60 cents. Revenue rose slightly to $495 million compared to consensus of $454 million. Shares of EA rose $1.50 in afterhours to $25.35.

Freeport McMoran (FCX) reported earnings of 49 cents, a nickel better than consensus at 44 cents. Revenue fell -4.2% to $4.29 billion and below consensus of $4.35 billion. They raised Q3 guidance from $5.5 billion to $5.8 billion. FCX shares rallied +3% for the day to $30.00.

Lockheed Martin (LMT) reported earnings of $2.64 that was 43 cents better than estimates of $2.21. Revenue declined -4.3% to $11.41 billion but still ahead of estimates at $11.15 billion. They raised guidance for the full year to $9.20-$9.50 up from $9.01. Analysts were expecting $8.95. LMT shares rallied +2%.

Illinois Toolworks (ITW) reported earnings of $1.08 compared to estimates of $1.10. The company cut its full year estimates from $4.25 to a range of $4.10-$4.30. Revenue declined -5.4% to $4.2 billion. They said weak demand offset strong sales to the auto industry. Shares declined -2.8% on the news.

There were hundreds of additional announcements but I think you get the picture. Companies are beating on earnings thanks to aggressive cost cutting but are missing on revenue due to slowing demand and slowing economy.

The biggest earnings for the day came from Apple (AAPL) after the close. Apple shares rallied +15 after the earnings to $435 after they beat lowered expectations. Apple reported earnings of $7.47 per share or $6.9 billion. That is a decline from year ago levels of $9.32 and $8.8 billion. Analysts were expecting $7.31 per share. That had been drastically lowered from the $9.25 estimate when the quarter began on April 1st.

Apple shipped 31.2 million iPhones compared to the 27 million analysts expected. However, the average selling price plunged -$32 as a result of discounts and promotions. Revenue of $35.3 billion barely beat estimates of $35.2 billion. Shipments of iPads totaled 14.6 million and well short of the 17.5 million analysts expected. Mac shipments were 3.8 million.

Apple guided lower for Q3 to revenue in the range of $34-$37 billion and analysts were looking for $37.1 billion. Gross margins are expected to decline to 36.5% compared to 36.9% in Q2. The company refused to discuss future products on the conference call. Apple is widely expected to announce a new, possibly cheaper iPhone in Q3.

The minor $15 rebound in afterhours suggests investors are growing concerned about the future of the smartphone and tablet market given the big miss in iPad shipments. Apple can always sell more iPhones if they keep discounting the price but tablets are losing to the Android platform and the much cheaper prices. Apple would have to significantly discount the iPad to battle Android and that would impact profit margins. Apple would rather have a higher priced "aspriational" product that everyone wishes they could afford. This way they don't have to produce as many and they can keep margins high.

Apple Chart

Earnings for Wednesday are going to be headlined by Facebook (FB) and Boeing (BA). Qualcomm is going to be watched hard after the weak earnings from Broadcom. Qualcomm makes the faster 4G chips and should do better than BRCM.

Etrade (ETFC) earnings will be compared to the Ameritrade earnings today. AMTD rallied to a 13 year high after they reported an $8 billion increase in assets or +8% gain for the quarter. Average client trades per day rose +6.7% to 399,000. Interest rate sensitive assets rose +19% to $94 billion with client assets totaling $524 billion.

Earnings Calendar

Crude prices rebounded from an overnight drop to $105.50 after Platts reported an 11.7% increase in imports in June. Imports rose to 9.99 mbpd and the highest level since February 2011. Oil product imports spiked +50% in June. That is refined products like diesel, jet fuel and chemicals. For the first half of 2013 China's oil demand has grown by +3.9% compared to +0.7% in the first six months of 2012. Remember, China's economic growth has been declining for the last four quarters and is at the lowest rate today in the last four years. If China was to see growth accelerate we could expect oil demand to accelerate as well.

WTI Crude Chart

The markets have basically traded sideways for the last week. Every day has seen a minor new high for most of the indexes but the momentum appears to be evaporating. This is typical for the Q2 earnings cycle and summer trading.

The S&P has failed for two days to tag the psychologically important 1700 level and sank to close at the lows of the day at 1692. The Apple earnings may provide some upside lift at the open simply because they were not as bad as some whisper numbers expected. It would be a relief rally but we were not seeing that in the late afterhours trading today. Apple closed off its post earnings high of $442 but not by a lot.

With earnings activity peaking this week and plenty of revenue misses piling up along with weak manufacturing reports and the FOMC meeting next week there are plenty of reasons for investors to take some profits.

The S&P has round number resistance at 1700 and initial support at 1670. There is plenty of room for a hiccup in the trend without breaking that trend.

The biggest loss for the day was in the transports at -1%. They tried for three days to break through resistance at 6600 and failed. UPS formerly reported disappointing earnings of $1.13 after warning a couple weeks ago they would miss estimates of $1.20. UPS blamed a slower global economy and the shift to lower cost services by consumers.

The UPS and FDX warnings failed to weaken the transports in early July but reality may be settling in now that the official earnings are out.

S&P Chart

Dow Transports Chart

The Dow has tried for four days to move over round number resistance at 15600 with no success. Every day there is at least one Dow stock that post ugly earnings and holds the index back. The Dow has decent support at 15400 but faces a big drop if that level fails.

Boeing and Caterpillar are the two Dow components reporting on Wednesday and while Boeing could do well thanks to the monster order backlog, Caterpillar could be ugly. With commodity prices falling around the world the need for large earth moving equipment should be weakening. China's slowing economy could be a problem for CAT and its forecast.

Dow Chart

The Nasdaq was the strongest of the big cap indexes in the prior three weeks but it has lost that title this week. The Nasdaq declined to a seven-day low at 3578 at the close. Obviously this was investor caution ahead of the Apple earnings plus numerous other tech stocks reporting after the close. With Apple's earnings just "ok" it remains to be seen if the stock moves higher on Wednesday. The Nasdaq futures are up +12 at 9:PM but there is still a lot of darkness before the dawn.

The closing print at 3578 is critical short term support. If that level breaks we could easily see a -100 point decline or batter. The resistance at 3600 still exists even though we saw two closes slightly above that level. This would be the perfect spot for the Nasdaq to rest or even begin its seasonal late summer decline.

Nasdaq Chart

The momentum in the small cap Russell 2000 has also faded. The index fought resistance at 1050 last week before finally punching through. Now that prior resistance is being used as support and this support is critical to maintaining the momentum. A breakdown here could quickly retest 1040 but that does not mean the rally is over. Initially this would be a bout of profit taking and price discovery. Depending on the reaction to the initial dip trader sentiment could change.

Russell 2000 Chart

I am very cautious on the market in the coming weeks. I believe we are at least going to see some consolidation and possibly a decent pullback as fund managers attempt to capture year to date profits and lock in bonuses ahead of the mutual fund year end in October. August and September are typically weak months for the market as managers shuffle their portfolios ahead of that October year end. Winners have to be sold to cover losses in the losers and that means some of the high flyers get thrown out with the weaker performers.

Will this seasonal scenario take place this year? Nobody knows until it happens. If investors decide to take profits they will find a convenient headline to blame and the red ink will begin piling up. The markets have been flat over the last week. Until a new direction appears I would be cautious about new positions.

Enter passively, exit aggressively!

Jim Brown

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New Option Plays

Consulting & Fertilizer

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Accenture Plc - ACN - close: 74.25 change: -0.75

Stop Loss: 75.21
Target(s): 70.25
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
ACN is a major consulting firm. The stock was hammered lower on June 28th when the company issued an earnings warning for their fourth quarter. Since then the stock has managed a technical bounce back to the 61.8% Fibonacci retracement of the sell-off. Now shares are beginning to roll over. More aggressive traders may want to buy puts now. We want to wait for ACN to trade below potential technical support at the simple 200-dma. Therefore we're suggesting a trigger to buy puts at $73.80. If triggered our short-term target is $70.25. FYI: The Point & Figure chart for ACN is bearish with a $54 target.

Trigger @ 73.80

- Suggested Positions -

Buy the Aug $72.50 PUT (ACN1317T72.5) current ask $0.70

Annotated Chart:

Entry on July -- at $---.--
Average Daily Volume = 4.9 million
Listed on July 23, 2013


The Mosaic Co. - MOS - close: 53.45 change: -0.19

Stop Loss: 54.65
Target(s): 50.25
Current Option Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The trend in MOS is down. The company's recent earnings report showed record volume for its fertilizer products. Unfortunately, excessive supply in the global market has pushed prices down significantly. The stock now looks poised to breakdown below support near $53.00.

We are suggesting a trigger to buy puts at $52.95. If triggered our short-term target is $50.25 but more aggressive traders may want to aim lower. The Point & Figure chart for MOS is bearish with a $45 target.

Trigger @ 52.95

- Suggested Positions -

Buy the Aug $52.50 PUT (MOS1317T52.5) current ask $1.10

Annotated Chart:

Entry on July -- at $---.--
Average Daily Volume = 4.0 million
Listed on July 23, 2013



In Play Updates and Reviews

FIRE Exceeds Our Target

by James Brown

Click here to email James Brown

Editor's Note:

Shares of Sourcefire Inc. (FIRE) exceeded our exit target with the gap open higher this morning.

Lots of changes on our active play list. ADP hit our target on an intraday basis (see closed plays for details). BWA and NBL were closed as planned. TFM and MPC have been removed. We want to exit VC tomorrow morning. New entry strategy on the SPY trade.


Current Portfolio:


CALL Play Updates

Eastman Chemical Co. - EMN - close: 75.81 change: +0.20

Stop Loss: 73.49
Target(s): 79.75
Current Option Gain/Loss: + 0.0%
Time Frame: exit PRIOR to earnings on July 29th
New Positions: see below

Comments:
07/23/13: EMN managed to post another gain on Tuesday. We are running out of time. EMN reports earnings next Monday. We will plan to exit this trade on Friday, July 26 if shares don't hit our target or stop by then.

- Suggested Positions -

Long Aug $75 call (EMN1317H75) entry $2.55

Entry on July 17 at $75.25
Average Daily Volume = 1.3 million
Listed on July 11, 2013


The Hain Celestial Group, Inc. - HAIN - close: 73.85 change: +1.08

Stop Loss: 71.95
Target(s): 79.50
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to August expiration
New Positions: Yes, see below

Comments:
07/23/13: HAIN failed to rally past yesterday's high. The stock slipped to a -0.6% decline today. There is no change from my prior comments.

Earlier Comments:
The most recent data listed short interest at 20% of the relatively small 38.6 million share float. The shorts might be ready to cover again. After a brief, two-day pullback traders are already buying the dip. HAIN outperformed the broader market today. Monday's high was $74.30. I am suggesting a trigger to launch small bullish positions at $74.40. If triggered our target is $79.50.

FYI: The Point & Figure chart for HAIN is bullish with a $99 target.

Trigger @ 74.40

- Suggested Positions -

Buy the Aug $75 call (HAIN1317H75)

Entry on July -- at $---.--
Average Daily Volume = 420 thousand
Listed on July 22, 2013


Harman Intl. Industries - HAR - close: 57.99 change: +0.82

Stop Loss: 55.40
Target(s): 59.50
Current Option Gain/Loss: +36.1%
Time Frame: Exit PRIOR to earnings on August 6th
New Positions: see below

Comments:
07/23/13: HAR extends its gains with a +1.4% rally today. The 10-dma has risen to $55.58. We will raise our stop loss up to $55.40. Please note that I am adjusting our exit target down to $59.50.

Don't forget that we will plan on exiting positions prior to the company's earnings report on August 6th. FYI: The Point & Figure chart for HAR is bullish with a long-term $81 target.

- Suggested Positions -

Long Aug $57.50 call (HAR1317H57.5) entry $1.80*

07/23/13 new stop loss @ 55.40, adjust the exit target to $59.50
*option entry price is an estimate since the option did not trade at the time our play was opened.

Entry on July 18 at $56.10
Average Daily Volume = 785 thousand
Listed on July 13, 2013


Visteon Corp. - VC - close: 65.40 change: +0.19

Stop Loss: 64.40
Target(s): 72.50
Current Option Gain/Loss: -60.7%
Time Frame: Exit PRIOR to earnings on Aug. 8th
New Positions: see below

Comments:
07/23/13: VC has not performed well the last few days. Shares keep failing at the $66 level. Tonight we are suggesting an immediate exit at the opening bell tomorrow morning.

- Suggested Positions -

Long Aug $70 call (VC1317H70) entry $1.40

07/23/13 prepare to exit tomorrow at the open
07/16/13 triggered on gap open higher at $66.89
suggested trigger was $66.75

Entry on July 16 at $66.89
Average Daily Volume = 484 thousand
Listed on July 13, 2013


PUT Play Updates

Questcor Pharma. - QCOR - close: 46.71 change: -0.81

Stop Loss: 47.01
Target(s): 42.25
Current Option Gain/Loss: Unopened
Time Frame: Exit PRIOR to earnings on July 30th
New Positions: Yes, see below

Comments:
07/23/13: QCOR gave back about half of yesterday's gain. Today's move looks like a failed rally. More aggressive traders may want to buy puts now with a stop above today's high. The newsletter will stick to the original plan and wait for QCOR to hit our trigger at $45.30. However, if QCOR does not see any follow through lower tomorrow then we will likely drop it as a candidate. Earnings are coming up soon next week.

Earlier Comments:
Shares have definitely been volatile over the last couple of years. Plenty of investors are bearish. The most recent data listed short interest at 32% of the relatively small 48.6 million share float.

I do consider this an aggressive, higher-risk trade. Friday's low was $45.41. I am suggesting a trigger to buy puts at $45.30. You may want to wait for a drop under $45.00 instead. Our target is $42.25. We don't have much time. QCOR is scheduled to report earnings on July 30th and we do not want to hold over the announcement.

Trigger @ 45.30 *Small Positions*

- Suggested Positions -

buy the Aug $42 PUT (QCOR1317T42)

Entry on July -- at $---.--
Average Daily Volume = 1.2 million
Listed on July 20, 2013


SPDR S&P 500 ETF - SPY - close: 169.14 change: -0.36

Stop Loss: 172.75
Target(s): 165.25
Current Option Gain/Loss: +0.0%
Time Frame: 3 to 4 weeks
New Positions: Yes, see below

Comments:
07/23/13: Sadly the SPY did not hit our entry trigger at $169.90. It came close. The high today was $169.83. The pullback from its high today has created a very small but still bearish engulfing candlestick reversal pattern. We are adjusting our entry point strategy. Instead of waiting for the SPY to hit $169.90 we are suggesting traders buy puts immediately at the opening bell tomorrow.

NOTE: There are a lot of different option symbols for the SPY. Make sure you get the right one. We're choosing the regular August $170 put that expires on the 17th.

- Suggested Positions -

Buy the Aug $170 PUT (SPY1317T170) current ask $2.29

07/23/13 adjust entry strategy. Do not wait for a trigger. Buy puts at the opening bell tomorrow.

Entry on July 24 at $---.--
Average Daily Volume = 123 million
Listed on July 22, 2013



Longer-Term Play Updates



Chicago Bridge & Iron - CBI - close: 62.25 change: -0.50

Stop Loss: 55.75
Target(s): 74.50
Current Option Gain/Loss: +37.2%
Time Frame: 4 to 6 months
New Positions: see below

Comments:
07/23/13: CBI saw a little bit of profit taking today (-0.79%). There might be some short-term support at the 10-dma (near 61.90) and at the 50-dma (near 60.80). We are not suggesting new positions at this time.

The company is expected to report earnings on July 30th.

*Small Positions* - Suggested Positions -

Long 2014 Jan $65 call (CBI1418A65) entry $2.55

07/20/13 new stop loss @ 55.75
06/29/13 CBI might be poised to dip into the $57-55 zone again.
06/24/13 triggered @ 56.75
06/22/13 adjust entry trigger to $56.75
06/15/13 entry strategy change: change the breakout trigger at $65.25 to a buy-the-dip trigger at $56.50. Adjust the stop loss to $53.75.
Adjust the option strike to the 2014 Jan. $65 call

Entry on June 24 at $56.75
Average Daily Volume = 1.8 million
Listed on June 01, 2013


CLOSED BULLISH PLAYS

Automatic Data Processing - ADP - close: 72.49 change: -0.67

Stop Loss: 71.75
Target(s): 74.00
Current Option Gain/Loss: +103.0%
Time Frame: 6 to 8 weeks
New Positions: see below

Comments:
07/23/13: I'm calling it on our ADP trade. Something funny is going on and our trade should have been closed. Two days in a row the intraday chart shows ADP trading above our exit target at $74.00. Yet the normal daily chart and quote feed says ADP did not trade above $74.00. What gives? If you look at the time and sales data for today ADP traded at $74.16 at the 9:30:00 mark this morning. Yesterday on the intraday chart it was 74.01. Our exit target has been $74.00.

The August $70 call supposedly traded at $3.57 this morning, which was seven cents above yesterday's closing ask. We are going to call this one a "win" but it's definitely debatable. If you're still holding calls I would suggest an immediate exit given ADP's relative weakness today (-0.9%).

- Suggested Positions -

Aug $70 call (ADP1317H70) entry $1.65 exit $3.35 (+103.0%)

07/23/13 unofficially traded above our exit target at $74.00
trade closure is debatable. We suggest an early exit now if holding calls
07/20/13 new stop loss @ 71.75
07/19/13 sold half at the open. ADP gapped open higher at $73.14
option exit at $3.20 (+93.9%)
07/18/13 prepare to sell half of our position at the open tomorrow to lock in some gains
07/15/13 new stop loss @ 70.95
07/11/13 new stop loss @ 69.85
07/10/13 new stop loss @ 69.40
07/06/13 new stop loss @ 68.40
06/27/13 new stop loss @ 67.90

chart:

Entry on June 18 at $69.25
Average Daily Volume = 1.8 million
Listed on June 17, 2013


Borg Warner - BWA - close: 91.60 change: -0.06

Stop Loss: 89.75
Target(s): 93.00
Current Option Gain/Loss: +57.1%
Time Frame: exit PRIOR to earnings on July 25th
New Positions: see below

Comments:
07/23/13: BWA tagged another new high intraday before closing down six cents. Our plan was to exit today at the closing bell to avoid holding over the earnings report.

- Suggested Positions -

Long Aug $90 call (BWA1317H90) entry $2.10* exit $3.30 (+57.1%)

07/23/13 planned exit
07/22/13 new stop @ 89.75, ready to exit tomorrow at the close
07/20/13 new stop loss @ 87.75, prepare to exit on Tuesday, July 23rd at the closing bell
07/15/13 new stop loss @ 86.40
07/11/13 trade opened on gap higher at $88.28. Trigger was $87.75
*option entry price is an estimate since the option did not trade at the time our play was opened.

chart:

Entry on July 11 at $88.28
Average Daily Volume = 860 thousand
Listed on July 10, 2013


Sourcefire, Inc. - FIRE - close: 75.49 change: +16.41

Stop Loss: 57.95
Target(s): 64.75
Current Option Gain/Loss: +420.0%
Time Frame: exit PRIOR to the earnings report on July 29th
New Positions: see below

Comments:
07/23/13: Bingo! We hit the jackpot with FIRE today. This morning, before the opening bell, it was announced that Cisco Systems (CSCO) would buy FIRE for $2.7 billion. That is a 29% premium over yesterday's close. The stock gapped open higher at $75.90, exceeding our exit target price, and closing our trade.

The August $65 call gapped open at $10.70. Minus the spread our exit is $10.40.

- Suggested Positions -

Long Aug $65 call (FIRE1317H65) entry $2.00 exit $10.40 (+420.0%)

07/23/13 CSCO to buy FIRE for $2.7 billion. Shares of FIRE gap open above our target.

chart:

Entry on July 18 at $60.25
Average Daily Volume = 431 thousand
Listed on July 17, 2013


Noble Energy - NBL - close: 65.18 change: -0.79

Stop Loss: 64.75
Target(s): 68.00
Current Option Gain/Loss: +29.6%
Time Frame: Exit PRIOR to earnings on July 25th
New Positions: see below

Comments:
07/23/13: Yuck! It was a disappointing session for NBL. The stock underperformed the price of oil, underperformed its peers, and the broader market with a -1.19% decline today. Our plan was to exit today at the closing bell.

- Suggested Positions -

Aug $65 call (NBl1317H65) entry $1.35 exit $1.75 (+29.6%)

07/23/13 planned exit
07/22/13 new stop loss @ 64.75, exit tomorrow at the close
07/20/13 new stop loss @ 63.65, adjust the exit target to $68.00
prepare to exit positions on Tuesday, July 23rd at the close
07/15/13 new stop loss @ 62.45
07/13/13 new stop loss @ 61.40

chart:

Entry on July 09 at $63.05
Average Daily Volume = 1.9 million
Listed on July 06, 2013


The Fresh Market, Inc. - TFM - close: 52.97 change: -1.40

Stop Loss: 53.25
Target(s): 59.50
Current Option Gain/Loss: Unopened
Time Frame: Exit PRIOR to August option expiration
New Positions: see below

Comments:
07/23/13: Shares of TFM are not cooperating. The stock underperformed the market today with a -2.5% decline. We've been waiting for a breakout above $55 but it hasn't happened yet. Tonight we're removing TFM as a candidate with the trade unopened.

Trade did not open.

07/23/13 removed from the newsletter

chart:

Entry on July -- at $---.--
Average Daily Volume = 469 thousand
Listed on July 20, 2013


CLOSED BEARISH PLAYS

Marathon Petroleum - MPC - close: 71.77 change: +1.93

Stop Loss: 70.15
Target(s): 61.00
Current Option Gain/Loss: Unopened
Time Frame: exit PRIOR to earnings on Aug. 1st
New Positions: see below

Comments:
07/23/13: Our MPC trade is not working. The stock continues to bounce from its recent test of support near $68.00. Shares are now back above the $70 level and now they're testing technical resistance at the 200-dma. Our trade has not opened yet (trigger 67.45). Tonight we're removing MPC as an active candidate.

Trade did not open.

07/23/13 removed from the newsletter

chart:

Entry on July -- at $---.--
Average Daily Volume = 3.8 million
Listed on July 18, 2013