Option Investor
Newsletter

Daily Newsletter, Monday, 6/30/2014

Table of Contents

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

Market Wrap

Old Quarter, Old Half

by Thomas Hughes

Click here to email Thomas Hughes
The 2nd quarter comes to an end while the market quietly awaits on this week's data.

Introduction

Today is the end of June, the end of the month, the end of the quarter and the end of the half. The markets opened with a whimper but were able to drag themselves higher, at least for a while. The same was basically true around the world during the overnight session. Asian market began the week in the green ahead of a big round of data including official Chinese PMI tomorrow and US data later in the week. European markets were mixed but basically flat on average with the ECB meeting on the table in that arena. The ECB is having their regular monthly policy meeting is largely unexpected to do anything after last months round of stimulating actions. Although recent data including today's EU CPI readings suggest that deflation is still a risk for the region it is likely the ECB will wait at least another month before making further moves if they do anything at all. EU CPI was reported at 0.5%, in line with expectations but well below the target rate of 2.0% which could lead to some speculation.


Futures trading was essentially flat this morning as well. Early trading had the S&P 500 down about 2 points but going into the close there was a pick up in activity. All the major indices moved close to flat line and even poked into the green ahead of the 9:30AM opening. After that trading was weak with the indices tread water once again around the 1960 level; this is now the 9th day of trading above 1950 for the SPX. The first 30 minutes of trading had the index under water but the 9:45AM release of PMI and then the 10AM release of pending home sales provided enough support to keep the index in the green for most of the rest of the day. There was a brief dip back below break even that hit bottom at 11:08AM just above 1959 and then later, during a press conference at the White House, the index also touched into the red along with the Dow. Late afternoon saw the market struggle and the SPX fall to about -2 before moving back up to close just shy of break even. The Nasdaq Composite was able to hold onto positive territory for the day and set a new high along with Transports.


Traders and the market are waiting for what this week will bring. It's just another week of data but this data could have a domino affect in terms of how this month turns out, this quarter and this half of the year not to mention the state of the economy going into the summer and the second half. The big focus of the week will be the NFP as usual but as always I put more faith in the data as a whole than in any one piece. This week, because of the July 4th holiday, there is no trading on Friday so the NFP data will be released on Thursday. Tomorrow there is auto/truck sales, ISM, and construction spending. Wednesday is the ADP employment change, Challenger Gray & Christmas survey of planned job cuts and factory orders. Thursday the usual jobless claims numbers plus the addition of NFP, unemployment, trade balance and ISM services index. And the ECB meeting/announcement on Thursday. And earnings season starts next week. What didn't seem to affect the market today was news of increased ISIS control in Iraq.

The Economy

Chicago PMI was reported at 9:45AM. This forward looking gauge of manufacturing declined, but less than expected, depending on which estimate you look at. Basically the reported 62.6 is in line with expectation but less than last month's 65. New orders did not expand as much as last month but the production component surged to 70. All in all the report points to rebound in the 2nd quarter that is carrying over into the third.

Pending home sales jumped more than expected. Analysts had been looking for a gain of about 1% but the actual 6.1% is the biggest gain since June of 2010. Pending home sales is a gauge of signed contracts that could lead to an increase in existing and new home sales in for June and more likely July. All four regions showed increases in pending sales but on a year over year basis we're still down 5.2%.

I really like the first sentence of Moody's weekly survey of business confidence created by Mark Zandi. It starts of with “Businesses couldn't be more upbeat”. The verbiage of the survey changed significantly for the first time weeks noting how current sentiment is in “stark contrast” to the revised first quarter GDP. Most importantly I think is that the hiring component of his survey has risen to a record high with more than half of respondents reporting they are intending to hire more employees.

In The News

The Supreme Court handed out two decisions on the eve of the summer break. The first to be announced was a 5 to 4 decision to prevent unions from forcing home based workers to join. This is in response to an Illinois case in which home based care workers were being forced to join a union against their will.

The second was concerning the Hobby Lobby case against Obamacare. Again in a 5-4 decision the justices ruled in favor of Hobby Lobby in saying that the corporation could in fact opt out of paying for certain benefits under Obamacare due to religious freedoms.

GM made the news all day, more or less. Early in the day the compensation plan was revealed by Kevin Feinberg. In his plan any previous settlements are still included in the new plan which could pay approved claims in as little as 180 days. Expected payouts range from $2 million to $8 million depending on the individual case. Later in the day shares of GM were halted pending a news announcement at 2:30PM. GM announced another 6 recalls affecting 8.6 million vehicles on top of all the other recalls they have already announced. This brings the 2nd quarter total for recall charges up to $1.2 billion and $2.5 billion for the first half of the year. Shares of GM traded down today but were supported at the 30 day EMA. The indicators are weak and turning bearish so a retest of longer term support around $35 and $33.50 is not out of the question. It looks like GM will weather this scandal, they are certainly trying to stay ahead of the curve with all the recalls.


Obama held a press conference at 3PM today announcing an order to Homeland Security and the Attorney General to send interior assets to the borders to help strengthen border patrols. The focus is to be focuses on preventing the influx being experienced along the southern borders. During his statements the markets dipped back down to break even and into the red.

US Steel is being dropped from the S&P 500 tomorrow afternoon. The steel maker is being replaced by a crushed stone and gravel producer from NC, my home state. US Steel is being moved to the S&P Mid Cap 400. Shares of X opened lower and then regained break even by the close of the day.


The Gold Index

Gold lost a few dollars in the early morning session but regained that lost ground after the open. Gold trading was fairly stable throughout the day, holding around $1315 for most of the day. Then, during the Obama press conference gold prices spiked up to trade above $1325. I guess this move was based on Obama sending more forces to help along the border.... Any way, gold has been testing $1320 for about 2 weeks now and has not been able to hold above that level yet.

The Gold Index opened the week down from the Friday close but moved higher throughout the day. Resistance was met once again at the $100 with deteriorating technicals. The index is at long resistance, in a long term down trend with indicators that are setting up for a bearish trend following signal. I may be wrong and reading this from the wrong side of the action but I just don't see a reason to get long on gold, or much reason to expect significant earnings growth from the gold miners. If the index were to break through $100 it could easily carry to about $110 on momentum. If the index fails to break then a near to short term double top could form with a potential target as low as $85 with supports at $95, $92.50 and $90 along the way.


The Oil Index

Oil prices fell today as the Iraq premium lost a little more value. There was more news of ISIS and the insurgency in Iraq but the oil infrastructure remains as yet unharmed and traders are slowly beginning to believe it. I think now there may be risk of an actual threat to oil which could cause oil to spike even higher than before but that is just a random thought. WTI fell about a quarter percent with Brent shedding just a little more. The Oil Index lost about -0.15% in today's trading but held above long term resistance turned support at the previous all time intraday high. The indicators are bearish now but so long as the index holds this level then that is OK. High oil prices will lead to higher oil earnings, lets wait to see how the oil companies, and the oil services companies, fare this time around. The big oil companies report about a month in to the season so we should see those around the first week of August.


The Indices

The Transports led the market higher today, gaining more about 0.33% in today's session. The index is still inside what looks to be a potentially bully flag/triangle formation that could send the index higher provided it can break above resistance. I think the only thing holding it back right now is the week ahead, the data could help or hinder the rally providing catalyst for correction or bricks in the wall of worry. Momentum is still a little bearish but declining and very nearly at zero while stochastic is still showing the strong trend following signal.


The Nasdaq continues to be a market leader and set a new 14 year high today. The tech heavy index climbed by 10 points or roughly 0.23% extending its reach above previous resistance. Momentum is mildly bullish but basically neutral while stochastic is producing a decent trend following signal but one that usually appears later in a rally. The indicator is overbought in the longer term as %D is high in the range and has been so for almost a month. This doesn't mean a rally can't follow, just that the market has already rallied some already. In a protracted rally the market can remain overbought or near overbought with dips to or below the upper signal line for many months. 4370 and 4250 are potential areas of support with the 30 day moving average wedged in between.


The SPX was first loser in today's action with a loss of -0.04. The broad market is trading just beneath the current all time highs with mildly bearish momentum and a stochastic that is wiggling right at the upper signal line. Both %K and %D lines are together at the signal line and overlapping. The indicator is in mid signal but not quite and this index, like the transports and the Nasdaq, is still beneath resistance and in need of break out for confirmation. What we need to keep in mind through all this near term consolidation is that the SPX just had the 6th straight quarter of gains and the best 2nd quarter since 2009.


The Dow Jones Industrials led the losers today with a drop of -0.15. The blue chips traded down but were supported by the 30 day moving average which is a good sign for the bulls going into this big week of data. The indicators here are not so rosy with momentum a little more bearish than the rest and stochastic doing something weird pointing higher in the longer term but also indicating near term weakness. Current support is the 30 day EMA and just below that level around 16,750.


This week will be a big one for economic data and the market. The data is nothing unusual, just monthly data. In terms of the rally, the first quarter revisions, the expected 2nd quarter rally and how the third quarter projections the data is huge. This week, and even today with the CPI and Pending Home Sales, will be a glimpse into the final numbers revealing how much the economy rebounded during the quarter. Today's data was better than expected and that is what I expect tomorrow and the rest of the week. The indices closed the quarter at another high while longer term economic indicators are pointing to more of the same. There is some concern that the second quarter won't be as strong as projected and that is likely to be right given the revision to 1st quarter numbers. Just how strong was the bounce, and how strong relative to the 1st quarter is the question to be answered.

Until then, remember the trend!

Thomas Hughes


New Option Plays

$RUT: Eight Quarters In A Row

by James Brown

Click here to email James Brown

Editor's Note:

The NASDAQ composite managed to keep the rally going with a close above potential resistance at the 4,400 mark. Meanwhile the Dow Industrials and S&P 500 index drifted quietly lower to end the second quarter of 2014.

June marked the S&P 500's fifth monthly gain in a row. The small cap Russell 2000 index is up eight quarters in a row.

Meanwhile investors were ignoring news headlines. General Motors (GM) announced another automobile recall, this time for 7.6 million vehicles.

The ISIS jihadist rebels made headlines when they declared a new Islamist caliphate across large sections of Iraq and into parts of Syria.

Overall the general market trend remains higher but we didn't see any compelling buys tonight.

No new plays.




In Play Updates and Reviews

A Quiet Quarter End

by James Brown

Click here to email James Brown

Editor's Note:

The stock market ended the second quarter and first half of 2014 on a quiet note.

AAPL and LNG both hit our entry point triggers today.


Current Portfolio:


CALL Play Updates

Apple Inc. - AAPL - close: 92.93 change: +0.95

Stop Loss: 88.80
Target(s): To Be Determined
Current Option Gain/Loss: + 3.0%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/30/14: The bounce in AAPL continued on Monday and shares outpaced the broader market with a +1.0% gain. The stock also hit our suggested entry point at $92.75. I would still consider new positions now but it looks like AAPL might dip back into the $92.00-92.50 zone so you could buy calls on the dip.

Earlier Comments: June 28, 2014:
You don't get any more high-profile than Apple Inc. (AAPL). Many consider AAPL a technology company but they are known for their consumer electronics. Their ecosystem continues to grow with iPods, iPads, iPhones, Macintosh computers, Apple TV, and soon Beats music headphones and possibly an iWatch.

Right now the market is focused on Apple's upcoming launch of its next iPhone, rumored to be the iPhone 6. It's also rumored to be coming out on September 19th. Everything seems to be a rumor these days when it comes to Apple's next product. Right now the big rumor is that Apple might introduce two different iPhone 6s. One with a 4.7 inch display and one with a 5.5 inch display.

It really doesn't matter what the display size is. There is a legion of loyal iPhone customers that will jump at the chance to upgrade. One analyst firm is estimating that iPhone 6 sales could hit a record-breaking 80 million units in 2014 alone. That's amazing if the phone doesn't come out until mid September.

Why do we care about Apple's next iPhone launch? We care because the stock tends to see a pre-launch rally in its stock price. Now that shares have split 7-for-1 just a few weeks ago we can actually trade it. AAPL stock rallied seven out of eight weeks in a row until it peaked at round-number resistance near $95.00 on June 10th. The stock split was June 6th.

Since peaking at $95.00 AAPL has slowly consolidated sideways. I heard a lot of traders on CNBC saying they wanted to buy it at $85.00. It looks like that may not happen. Investors have jumped in to buy the dip at $90.00. The point & figure chart is bullish and forecasting at $131.00 target. I think AAPL can rally toward $100 before its iPhone launch in mid September as long as the broader market cooperates.

Be careful when choosing an option strike. There are a lot of weird strikes due to AAPL's 7:1 split. We are listing the October $95.00 call. (FYI: Look for the Oct. $95 call with more than 22,000 in open interest)

- Suggested Positions -

Long Oct $95 call (AAPL141018C95) entry $3.93

06/30/14 triggered @ 92.75
Option Format: symbol-year-month-day-call-strike

Entry on June 30 at $92.75
Average Daily Volume = 38 million
Listed on June 28, 2014


Ameriprise Financial - AMP - close: 120.00 change: +0.19

Stop Loss: 114.40
Target(s): To Be Determined
Current Option Gain/Loss: +11.1%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/30/14: AMP is still trying to get past resistance at $120.00. The stock rallied past its twice today but couldn't close above it. If the market cooperates tomorrow I would expect AMP to breakout higher.

Earlier Comments: June 18, 2014:
AMP is in the financial sector. The company, and its subsidiaries, provides a range of financial products including advice and wealth management. The company had a record year in 2013 and it looks like the momentum has continued into 2014. The company' last earnings report was its Q1 results, reported on April 28th. Wall Street was expecting a profit of $1.88 per share on revenues of $2.84 billion. AMP delivered $2.04 with revenues rising +11% to $3 billion.

AMP's Q1 results were a +19% improvement from a year ago. Furthermore both revenues and margins are improving. AMP raised its dividend 12 percent to 58 cents (currently at a 2.0% yield) and announced a $2.5 billion stock buy back program.

Technically shares of AMP are in a long-term up trend and just recently broke out from a five-month consolidation. Traders have already jumped in to buy the dip at prior resistance near $115.00.

- Suggested Positions -

Long Sep $120 call (AMP140920c120) entry $3.60

06/20/14 triggered @ 118.80
Option Format: symbol-year-month-day-call-strike

Entry on June 20 at $118.80
Average Daily Volume = 823 thousand
Listed on June 18, 2014


Anadarko Petroleum - APC - close: 109.47 change: -0.03

Stop Loss: 102.40
Target(s): To Be Determined
Current Option Gain/Loss: + 55.2%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/30/14: APC delivered a quiet session. Shares hovered under the $110 level and closed virtually unchanged on the session. Traders may want to wait for a rally above $110 before considering new positions.

Earlier Comments: June 10, 2014:
APC is in the basic materials sector. The company is a very active oil and natural gas producer. They have assets in the Rocky Mountains, the Southern U.S., the Gulf of Mexico, and Alaska. Plus, APC is active internationally with assets in Algeria, Brazil, China, Colombia, Ghana, Liberia, Mozambique, New Zealand, Sierra Leone, and South Africa. Altogether APC has a strong onshore and off-shore portfolio.

The company's latest earnings report on May 5th was better than expected. Wall Street was expecting $1.14 per share. APC delivered $1.26. APC said they set record volumes in the quarter at 819,000 barrels of oil equivalent (BOE) per day. Management went on to raise their full-year sales-volume. A week later they increased their dividend by 50% from 18 cents to 27 cents per share.

APC could end up a big liquefied natural gas (LNG) producer with their assets in Mozambique (Southeast Africa). Last year APC drilled two natural gas off-shore wells. This year they could drill up to eight new wells. The company recently upgraded their view on how much recoverable gas in their northern Mozambique assets to 50 trillion to 70 trillion cubic feet. APC is developing an LNG project and plan to deliver their first LNG cargo in 2018.

One of the biggest headlines for APC has been its settlement over the TROX litigation. This refers to a large lawsuit over the bankrupt Tronox company, which was spun-off from APC's Kerr-McGee division. Previously the estimated penalty range for this TROX lawsuit was in the $5.15 billion to $14.17 billion with many analysts estimating the final results would probably be around $10 billion. On April 3rd this year APC reported they would settle this for $5.15 billion, the very low end of the range and the stock exploded higher. Getting past this TROX liability has removed a very dark cloud for the company and the stock price.

It is worth noting that APC still has potential legal risk from the April 2010 Macondo well blow out. BP Plc was the operator and majority owner of the well but APC did own 25% of it. The U.S. judges are arguing that APC will be held responsible for its 25% of the penalties. The final numbers could be huge. The U.S. Clean Water Act allows the government to fine the companies $1,100 per barrel of oil spilled into the Gulf. Plus, they could add another $4,300 penalty per barrel for gross negligence. Right now BP is arguing with the courts over how much oil was spilled. The U.S. is claiming 4.2 million barrels of oil escaped into the Gulf of Mexico. BP estimates only 2.45 million barrels. APC management has suggested they may not be fined for any gross negligence penalties since they did not have any direct operational involvement. The penalty phase for this lawsuit is scheduled for January 2015. This issue is clearly not stopping the rally in shares of APC today.

Technically shares of APC have been consolidating sideways under resistance near $105 with a bullish trend of higher lows. Now the stock is on the verge of breaking out.

- Suggested Positions -

Long NOV $110 call (APC141122C110) entry $4.80*

06/28/14 new stop @ 102.40
06/11/14 APC hit our trigger at $105.25
rumors this morning that XOM might buy APC.
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on June 11 at $105.25
Average Daily Volume = 2.8 million
Listed on June 10, 2014


Capital One Financial - COF - close: 82.60 change: -0.41

Stop Loss: 77.95
Target(s): To Be Determined
Current Option Gain/Loss: + 76.0%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/30/14: COF was slowly drifting lower on Monday. Shares might retest the $81.00 or $82.00 levels again on any dip tomorrow. Last Friday the stock bounced at its 20-dma near $81.00.

Earlier Comments:
COF is in the financial sector. The company provides financial services and products in the United States, United Kingdom and Canada. They're probably best known for the Capital One credit cards.

The financial sector took a leadership role in today's widespread market rally. The group has been lagging the big cap indices the last few weeks. If financials resume their up trend it's going to be a rising tide that helps lift shares of COF to new highs.

Financials should also benefit from the big picture view that interest rates will rise. Some of the federal reserve governors have been hinting that the Fed may have to raise rates sooner than expected. If rates do start rising then investors could start buying financials ahead of this trend.

Credit card companies are also showing strength in their loan quality. COF said their charge off rates have been dropping (losses from unpaid loans).

Technically shares of COF have a long-term bullish trend of higher lows and it's about to breakout past resistance and hit new multi-year highs. The point & figure chart is already bullish and suggesting an $83 target.

- Suggested Positions -

Long Sep $80 call (COF140920C80) entry $2.30*

06/28/14 new stop @ 77.95
05/28/14 triggered @ 78.75
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on May 28 at $78.75
Average Daily Volume = 3.0 million
Listed on May 27, 2014


Demandware, Inc. - DWRE - close: 69.37 change: +1.53

Stop Loss: 62.45
Target(s): To Be Determined
Current Option Gain/Loss: + 2.6%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/30/14: DWRE rallied to the top of its recent trading range with a +2.2% gain on Monday. The stock is facing short-term resistance at $70.00. Traders could use a rally past $70.25 as an alternative entry point or look for a move past last week's intraday high of $70.68.

Earlier Comments: June 17, 2014:
DWRE provides cloud-based digital commerce solutions. They first introduced their platform in 2004. According to DWRE's website they "power more than 200 retail brands across more than 800 sites around the globe."

The stock was hammered lower this spring as investors sold everything that might be considered high-growth or a momentum-stock. DWRE corrected from $80 to $45 but shares have since rebounded.

Earnings have been strong. The company reported Q4 numbers in February that beat estimates and DWRE management raised their Q1 and 2014 guidance. DWRE reported their Q1 numbers on May 6th. Wall Street was expecting a loss of 9 cents per share on revenues of $29.0 million. DWRE delivered a loss of 7 cents. Revenues were up +57% to $32.2 million. DWRE's CEO said their momentum from 2013 carried over into 2014. The first quarter this year saw record subscription revenues.

Technically shares of DWRE have broken through resistance in the $60-65 zone and all of its major moving averages. The stock also has short interest that is about 8.5% of the small 31.8 million share float. New relative highs could spark more short covering. Currently the point & figure chart is bullish and suggesting a long-term target of $99.00.

I would consider a more aggressive, higher-risk trade. DWRE can be volatile and the options are not cheap. I'm suggesting small positions to limit our risk.

*small positions* - Suggested Positions -

Long Oct $70 call (DWRE141018c70) entry $6.92

06/28/14 new stop @ 62.45
06/18/14 triggered @ 66.75
Option Format: symbol-year-month-day-call-strike

Entry on June 18 at $66.75
Average Daily Volume = 705 thousand
Listed on June 14, 2014


Cheniere Energy, Inc. - LNG - close: 71.70 change: +1.75

Stop Loss: 64.90
Target(s): To Be Determined
Current Option Gain/Loss: + 5.7%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/30/14: This morning LNG announced it has signed a 20-year deal to sell 0.85 million tonnes a year of liquid natural gas to Woodside Energy Trading Singapore Ltd from its Corpus Christi LNG project still under construction.

The stock market approved and shares of LNG shot higher this morning. Our suggested entry point to buy calls at $70.25 was hit right after the opening bell.

Earlier Comments: June 28, 2014:
According to LNG's website, Cheniere Energy, Inc. is a Houston-based energy company primarily engaged in LNG-related businesses, and owns and operates the Sabine Pass LNG terminal and Creole Trail Pipeline in Louisiana. Cheniere is pursuing related business opportunities both upstream and downstream of the Sabine Pass LNG terminal. Through its subsidiary, Cheniere Energy Partners, L.P., Cheniere is developing a liquefaction project at the Sabine Pass LNG terminal adjacent to the existing regasification facilities for up to six LNG trains, each of which will have a design production capacity of approximately 4.5 mtpa ("Sabine Pass Liquefaction Project"). Cheniere has also initiated a project to develop liquefaction facilities near Corpus Christi, Texas. The Corpus Christi Liquefaction Project is being designed and permitted for up to three LNG trains, with aggregate design production capacity of up to 13.5 mtpa of LNG and which would include three LNG storage tanks with capacity of approximately 10.1 Bcfe and two berths.

Why is Cheniere's ability to turn natural gas into liquefied natural gas (LNG) important? Natural gas has to be turned into LNG to be transported. The oil and natural gas boom in the United States thanks to technology and hydraulic fracturing rigs that access tight oil in shale rock formations has generated a huge supply. Right now the price of natural gas in the U.S. is less than $5.00 per million British thermal units (BTUs) or mmbtu. In Europe the cost per mmbtu is over $10.00 and in Japan the cost is almost $16 per mmbtu. There is a huge opportunity if producers can export natural gas to these markets. Unfortunately, building an LNG terminal that can export natural gas is a massive undertaking. It takes years to build them and there is a very long permit process from the government. Cheniere is quickly becoming the major player in this space in the U.S.

Cheniere recently moved one step closer to a FERC approval on the Corpus Christi LNG facility. The Federal Energy Regulatory Commission draft review said the project will result in the permanent loss of more than 25 acres of wetlands, but measures Cheniere plans to take will minimize any further disturbance. FERC will take public comments until August 4th and then issue a final review by Oct 8th.

They are building the largest LNG facility in the U.S. and it takes time. They are building six trains with annual production of 4.5 million tons per annum each (MTPA). Trains 1&2 began in August 2012 and are 63% complete. First production is expected in late 2015. Trains 3&4 began construction in May 2013 and are 27% complete. First production is expected in late 2016, early 2017. Purchase orders for 7.7 MTPA have been received for trains 1&2 and another 8.3 MTPA for trains 3&4. Trains 5&6 are still in permit mode with 3.75 MTPA of purchase agreements already being approved to Free Trade Agreement (FTA) countries and the non FTA authorization is pending. Trains 1-4 already have that authorization.

The three trains to be constructed in Corpus Christi for 13.5 MTPA are nearing the end of the permit approval process. Full approvals are expected not later than January 6th 2015. Purchase agreements for 5.53 MTPA have already been signed and the DOE has approved 767 Bcf per year for export to FTA countries with the authorization for non FTA countries still pending.

You might be wondering, "what is an LNG train?" According to Cheinere, The LNG industry has adopted the analogy of a "train" meaning the series of processes and equipment units that individually remove elements from raw inlet natural gas that would otherwise plug or freeze the small passages in the downstream heat exchangers that in a cascade fashion reduces the temperature from ambient to -260 F. Each of these processes and equipment units are sequentially arranged, similar to cars of a railroad train.

Just a couple of days ago the House of representatives voted to fast track more LNG export projects, which if signed into law, should be beneficial for Cheniere's current projects under review.

Technically shares of LNG have been consolidating sideways the last few weeks after the sharp end of May rally. That big pop at the end of May was market reaction to news that the U.S. Department of Energy proposed new rules to streamline their approval process and focus on projects with the best chance of actually getting built. That was good news for LNG and the company is on track to be the first to export LNG produced in the U.S.

- Suggested Positions -

Long Sep $75 call (LNG140920C75) entry $3.45

06/30/14 triggered @ 70.25
Option Format: symbol-year-month-day-call-strike

Entry on June 30 at $70.25
Average Daily Volume = 3.0 million
Listed on June 28, 2014


PPG Industries - PPG - close: 210.15 change: +6.10

Stop Loss: 200.75
Target(s): To Be Determined
Current Option Gain/Loss: +50.6%
Time Frame: 8 to 10 weeks
New Positions: see below

Comments:
06/30/14: PPG gapped open higher on news of an acquisition. The company announced it is buying Comex for $2.3 billion. Comex is based in Mexico. The company has eight manufacturing plants and six distribution centers with about $1 billion in sales a year.

Today's acquisition will be accretive to PPG's earnings and PPG expects synergies of 3% to 4% of sales over the next two years.

I am not suggesting new positions in PPG at this time.

Earlier Comments:
Big cap industrial names have been leading the market higher. PPG is one of them. The company is in the basic materials sector. PPG manufacturers coatings, specialty materials, and glass products.

PPG has developed a strong trend of beating Wall Street's earnings estimates. They just did it again when they reported earnings on April 17th with EPS coming in 10 cents above estimates. Revenues were up +17% year over year to $3.64 billion. Earnings were up +33% from a year ago at $1.98 per share. The company is also seeing margin improvement.

Last month PPG's management announced a $2 billion stock buyback program and raised their dividend by +10% to $0.61 per share. PPG's CEO said that his company saw volumes improve in Europe for the first time in ten quarters. The tough winter in the U.S. did not hurt them. Thus far PPG has been able to pass along small price increases to offset rising commodity costs.

Technically the stock is in a long-term up trend. Shares have spent the last three months consolidating below the $200 level. Now the bullish pattern of higher lows is about to push PPG through major resistance near $200-201.

The Point & Figure chart is bullish and forecasting at $222.00 target.

- Suggested Positions -

Long Aug $210 call (PPG140816C210) entry $3.65*

06/19/14 new stop @ 200.75
05/30/14 triggered @ 202.00
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on May 30 at $202.00
Average Daily Volume = 552 thousand
Listed on May 29, 2014


Starbucks Corp. - SBUX - close: 77.38 change: -0.56

Stop Loss: 73.40
Target(s): To Be Determined
Current Option Gain/Loss: +19.8%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/30/14: SBUX saw some profit taking today but traders bought the dip near its simple 10-dma this morning. If this dip continues the $76.00 level could be support.

I am not suggesting new positions at the moment.

Earlier Comments: June 14, 2014:
The twin-tailed siren of Stabucks could be ready to sing for investors again. The company is named after the first mate in Herman Melville's Moby Dick. According to company literature their mission is "to inspire and nurture the human spirit - one person, one cup and one neighborhood at a time."

Notice it didn't say one cup of coffee at a time. Make no mistake. Coffee is big business. According to Business Insider coffee is worth about $100 billion globally and planet earth drinks about 500 billion cups of coffee every year. Quite a few of those cups are consumed at Starbucks' ubiquitous coffee chain, which now has over 10,000 company-run stores and over 9,500 licensed stores.

Believe it or not but tea is a bigger market. Tea producers churn out more than 4 billion kilograms of tea every year. Tea is the second-most consumed beverage behind water. Several months ago SBUX purchased the Teavana chain for $620 million. Now they're planning to update and expand the brand into 1,000 tea bars in the next five years.

SBUX recently said that food remains a big opportunity and currently food sales are only 22% of its U.S. business. SBUX purchased the French bakery chain "La Boulange" in 2012 and they've started distributing some of the bakery's products in more than 6,000 Starbucks stores. These should reach all of their coffee stores by the end of this year. They're also testing lunch items and testing alcohol sales in certain states. That means Malbec wines and bacon-wrapped dates could be available at a Starbucks store near you soon. The company said that adding food items has increased purchases and boosting ticket growth.

This past week SBUX said they're going to roll out wireless charging mats for smartphones in some of their stores soon.

Put it altogether and the company has big plans. Their latest earnings report in late April was mixed. Profits were in-line with estimates but revenues were a miss although same-store sales came in above expectations. SBUX management raised their Q4 guidance and 2014 guidance following its results.

- Suggested Positions -

Long OCT $80 call (SBUX141018c80) entry $1.66

06/28/14 new stop @ 73.40
06/17/14: triggered @ 75.65
Option Format: symbol-year-month-day-call-strike

Entry on June 17 at $75.65
Average Daily Volume = 3.5 million
Listed on June 14, 2014


U.S. Silica Holdings - SLCA - close: 55.44 change: +1.57

Stop Loss: 48.40
Target(s): To Be Determined
Current Option Gain/Loss: +36.5%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/30/14: SLCA displayed relative strength today with a +2.9% gain. The stock has also broken through resistance near $55.00, which has been a ceiling on the stock this past month.

The rally might continue tomorrow. After hours SLCA announced it had received approval to build a new, three million ton-per-year sand mine. The new facility should be operational by fourth quarter 2015.

Today's breakout past $55.00 looks like a new bullish entry point.

Earlier Comments: June 14, 2014:
There is a new gold rush going on for sand! America's shale oil and gas boom has created another boom for sand producers. Energy companies use hydraulic fracking to mine oil and gas out of tight shale formations. This fracking technique blasts millions of gallons of water at high pressure into shale rock where the oil and gas is trapped. These wells can cost between $4 million and $12 million each. In order to maximize their returns drillers use proppants to help "prop" open these minute cracks in the shale rock to help the oil and gas escape to the surface.

The cheapest and one of the most effective proppants has been fine sand. SLCA has been providing sand for industrial use for over 100 years. The company currently has 297 million tons in reserve. Oil and gas industry demand for proppants is expected to rise +30% between 2013 and 2016. That might be underestimated. The energy industry consumed 56.3 billion pounds of sand for fracking in 2013. That's up 25% from 2011.

According to SLCA they saw a +45% increase in demand for their sand. SLCA's CEO reported that some hydraulic fracking wells have doubled their use of sand from 2,500 tons per well to 5,000 tons. There are some wells using up to 8,000 tons.

Demand has been so strong that SLCA is actually sold out of some grades of sand and they're raising prices (about +20%) on non-contracted silica. SLCA believes demand for their products will rise another 25% this year alone.

Wall Street has taken notice of the dynamics of the sand industry and shares of SLCA have soared from their February 2014 lows. It may not be a coincidence that the stock was added to the S&P 600 smallcap index in February this year.

We are not setting an exit target tonight but Point & Figure chart for SLCA is bullish with a $69 target.

- Suggested Positions -

Long Sep $55 call (SLCA140920C55) entry $3.15*

06/17/14 triggered @ 52.15
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Entry on June 17 at $52.15
Average Daily Volume = 1.2 million
Listed on June 14, 2014


United Rentals, Inc. - URI - close: 104.73 change: -0.16

Stop Loss: 101.80
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
06/30/14: I am starting to worry about URI. The stock has been drifting sideways the last few days. If you look closely it has a bearish trend of lower highs.

Currently we are still on the sidelines waiting for a move higher. Our suggested entry point is $106.70.

Earlier Comments: June 25, 2014:
URI is the 800 pound gorilla in the rental space. With almost $5 billion in annual sales they have become the largest equipment rental company in the world. URI offers 3,100 categories of construction and industrial equipment for rent, including a number of specialty equipment. They have over 870 locations in 49 U.S. states and 10 Canadian provinces.

URI claims a diverse customer base that includes construction and industrial companies, utilities, local municipalities, government agencies and independent contractors.

Business must be good because URI is developing a trend of beating analysts' estimates. Their most recent earnings report in April was 90 cents a share on revenues of $1.18 billion. Wall Street was only looking for 76 cents a share on revenues of $1.17 billion. Management reaffirmed their full year outlook. Last year URI delivered earnings growth of 30 percent. They're on track to hit almost 32% EPS growth this year.

If you believe the economy is improving then URI should continue to benefit as construction picks up. The relatively slow growth the U.S. has seen so far has promoted a more cautious stance on companies in the construction and industrial space. That means more of them have chosen to just rent equipment instead of buying it. This has fueled strong time utilization rates for URI.

URI reported they spent $43 million of their $500 million stock buyback program in the first quarter. They expect to complete the program by April 2015.

Technically shares of URI are in a long-term up trend as investors continue to buy the dips. Tonight we are suggesting a trigger to open bullish positions at $106.70. We are not setting an exit target tonight but the point and figure chart is bullish with a $114.00 target.

Trigger @ $106.70

- Suggested Positions -

Buy the Sep $110 call (URI140920C110)

Option Format: symbol-year-month-day-call-strike

Entry on June -- at $---.--
Average Daily Volume = 1.6 million
Listed on June 25, 2014




PUT Play Updates

Tractor Supply Co. - TSCO - close: 60.40 change: +0.20

Stop Loss: 64.10
Target(s): To Be Determined
Current Option Gain/Loss: +20.4%
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
06/30/14: I cautioned readers in the weekend newsletter that TSCO might see a bounce from round-number support at $60.00. Shares did manage to outpace the broader market with a +0.3% gain today.

The bounce may not be over yet. I am not suggesting new positions at this time.

Broken support near $62.50 should be overhead resistance.

Earlier Comments: June 24, 2014:
TSCO has everything from cowboy boots to chicken coops and everything you might possibly need on the farm. The company has over 1,300 stores in 48 states. This specialty retailer is focused on the "lifestyle needs of recreational farmers and ranchers and others who enjoy the rural lifestyle, as well as tradesmen and small businesses."

A lot of things are on the rise for TSCO. They have rising sales, a rising dividend, rising stock buyback program. What is not rising is their stock price. Shares peaked in January this year after surging to all-time highs in 2013. The company has been raising its dividend, now up to 16 cents a share. They also recently announced another $1 billion to their stock buyback program. Unfortunately these do not seem to be helping the share price.

Their last earnings report was April 23rd. TSCO reported Q1 earnings of 35 cents a share on revenues of $1.18 billion. That missed estimates of 37 cents on revenues of $1.21 billion. To be fair the terrible weather in the first quarter really did affect their sales, given their farm and rancher focus. Management believes these sales will return as the weather improves. TSCO reaffirmed their 2014 sales guidance of $5.62 billion to $5.7 billion and same-store sales of 2.5% to 4%. The company plans to open over 100 new stores this year.

Not everyone on Wall Street believes TSCO is a buy. The company was recently downgraded thanks to its high valuation (over 26 times its 2014 earnings estimates) and weaker gross margins. TSCO also seems to be suffering from slowing same-store sales. Last year their average same-store sales growth was +4.8%. The fourth quarter's was +3.5%. The first quarter of 2014 it was down to +2.2%. Again, you could blame that on the weather but it's not a good trend.

We are not setting an exit target tonight. It is worth noting that the point & figure chart is bearish and suggesting a $46 target.

- Suggested Positions -

Long Oct $60 PUT (TSCO141018P60) entry $2.45

06/26/14 triggered
Option Format: symbol-year-month-day-call-strike

Entry on June 26 at $61.90
Average Daily Volume = 871 thousand
Listed on June 24, 2014