Option Investor
Newsletter

Daily Newsletter, Tuesday, 9/2/2014

Table of Contents

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

Market Wrap

S&P 3000?

by Jim Brown

Click here to email Jim Brown

A major analyst made that prediction today but we have to conquer 2,000 before targeting 3,000.

Market Statistics

Morgan Stanley's Adam Parker, normally one of the most bearish analysts on the street was making headlines again on Tuesday. Several weeks back he upgraded his forecast from the high 1,800's for the S&P at year end to 2,014 at the end of 2014. That was good for a couple days of headlines and appearances on several stock TV shows. This week he made headlines again calling for S&P 3,000. While that sounds outrageous there was a catch. As with most self promoting market calls there was a qualification. He is predicting 3,000 by the year 2020.

While that sounds crazy today it is not that big of an accomplishment. That assumes a 6% annual gain on the S&P and that is easily obtained. I have to hand it to Parker. He has figured out how to attract attention without straying too far off the beaten path. Now the wealth managers at Morgan Stanley have something to pass on to their clients to encourage them to put some more money away for the long term.

Parker was the first to admit the market is not going straight up and will probably see some severe bouts of volatility along the way. However, long term the market should continue to grow from 6-8% per year, which is the historical norm, and S&P 3,000 is the natural outcome.

Unfortunately we need to get convincingly past 2,000 before we can start making plans for 3,000. Traders coming back from their vacations took profits this morning as geopolitical events weighed on the market along with a sharp drop in crude prices. The energy sector had been recovering from the July decline but the drop in crude prices hit energy equities hard this morning.

The drop in crude prices came on the rising dollar because of stronger economics in the U.S. and weaker economics in Europe. Purchasing Managers Indexes in Germany, Italy, the U.K. and China all came in below estimates for August. Add in the future impact for the sanctions on Russia and the European economy is going to be even weaker in the months ahead. Weak overseas economies also suggest weaker demand for crude oil. It all added up to a sharp decline in crude prices.


Crude prices fell -$3 by early afternoon to erase the gains made last week.


The negative economic in Europe and the strong ISM in the U.S. caused a monster +3.2% spike in U.S. yields. This tended to rattle the equity market.


The only material economic report this morning was the ISM Manufacturing Index. The headline number rose sharply from 57.1 to 59.0 and well over the expectations for a decline to 56.9. This was the second monthly increase but more importantly this is the highest level since April of 2011.

The new orders component rose from 63.4 to 66.7 and backorders rose from 49.5 to 52.5. This was the first time in 3 months the backorders have risen above contraction territory. The production component rose from 61.2 to 64.5. The employment component was flat with a minor decline from 58.2 to 58.1.

This was a bullish report suggesting activity in the manufacturing sector is accelerating. Customer inventories rose from 43.5 to 49 with 72% of respondents saying their customer inventories were about right. Customer inventories are used as an indicator of future demand. If inventories are low the manufacturers anticipate future reorders.

The bullish manufacturing report is encouraging after seeing the Citigroup Timbuk2 ad on TV a lot lately claiming from 2001-2011 an average of 17 manufacturers a day closed their doors.


Construction Spending in July rose +1.8% compared to a decline of -0.9% in June. That was originally a -1.8% decline in June but it was revised to only -0.9%. The headline gain was the largest since May 2013. Residential construction rose +0.7%, non-residential rose +2.1% and public construction spending rose +3.0%. This was a pretty good report.

The next three days all have important events that could roil the market. The Fed's Beige Book is expected to show improvement and not be a market drag. If the Fed's outlook changed that could cause some volatility but based on the other reports I don't see that as a potential event.

The ECB meeting is a wildcard and it is tough to draw many conclusions about post meeting results. Suffice to say it is important for market direction over the next month. If Mario Draghi does launch a new QE program it would further depress the euro and spike the dollar. This would make dollar denominated investments like equities move higher.

The ADP Employment and Nonfarm Payrolls are both expected to show gains of more than 200,000 jobs and with weekly jobless claims slipping under 300,000 a week those employment reports are likely to meet the consensus estimates and be market positive.


Tesla Motors (TSLA) hit a new high at $284 with a gain of +$14.42 after Stifel Nicolaus said it could rise to $400. Stifel said their accelerating production capability has allowed it to develop a niche where they would be safe from competition for years to come. The analyst said they had a sizeable head start on production and it was increasing rapidly. He said Tesla was on track to boost production to 1,000 Model S cars per week before the end of the year. This could double again in 2015. Stifel raised the stock from a hold to buy with a target of $400. Tesla is on track to add the Model X SUV in 2015 and the Model 3, a smaller more affordable premium sedan by 2017.


Dollar General (DG) raised its bid for Family Dollar (FDO) from $78.50 to $80 per share or $9.1 billion. DG said it was willing to sell as many as 1,500 locations, up from 700, to obtain regulatory approval. They also offered to pay $500 million as a breakup fee if the deal did not close.

Dollar General is trying to fend off Walmart as that company adds to its smaller-format stores. FDO said its board was reviewing the DG offer. Dollar Tree (DLTR) is also reconsidering its last offer. Analysts believe DLTR could match of even exceed DG's $80 offer because they would face fewer regulatory hurdles. However, DG could afford to offer even more to guarantee it wins the bid. Without a counter offer from DLTR the FDO board may have a hard time turning down the DG bid. FDO has called DG an "unserious suitor" in the past but increasing the number of stores it is willing to sell and offering the $500 million breakup fee kills that argument.


Halliburton (HAL) agreed to pay $1.1 billion to settle most of the lawsuits over the Deepwater Horizon oil spill in the Gulf. Halliburton was blamed for doing defective work on the well before it exploded. The cement job that was supposed to keep the high pressures in the bottom of the well was defective according to the various reviews of the data. Halliburton used an untested cement formula in a rush to get the well completed and move on to the next location.

Settling the majority of the liability is a major cloud off the stock. The judge in the case is scheduled to rule on the liability of the major parties over the next several weeks and a finding of "gross negligence" for Halliburton would have made them liable for billions more in damages. This settlement was a good deal for Halliburton. Shares had moved up over the last six months in anticipation of some resolution.


Apple (AAPL) fought off claims of iCloud being hacked only a week before their big product announcement. Over the weekend nude pictures of actress Jennifer Lawrence and others were posted on the Internet. They were reportedly hacked from iCloud, which is operated by Apple. The company spent the last 48 hours tracking the hack backwards and late in the afternoon they revealed it was not a general hack but was a brute force attack against specific accounts. The brute force attack attempts to discover passwords by constantly trying to log on with all versions of personal data they can come up with. Sara Palin's Yahoo account was hacked once before by a college student that used information on a Wikipedia page to get her birth date and other personal information.

This is a clear reason why you should never use personal info of any kind as part of your username and password. Using some form of your initials, birth date, social security number, street address, middle names, kids names, phone numbers, etc, is extremely unsecure.

However, the easiest way of not having your nude pictures spread all over the web is to NOT put them in the cloud. If you are going to take nude selfies use an actual camera not your smartphone.

Everyone should realize by now that ANYTHING you put on the web or in the cloud is NOT secure. It will eventually show up in places you would rather not see it.

The daylong hack attention did not keep Apple shares from making another new high.


Home Depot (HD) shares declined -$2 after news broke the company was cooperating with law enforcement to investigate a possible data breach of the company website and confidential credit information. HD said "we are looking into some unusual activity" and "if we confirm a breach occurred we will make sure customers are notified immediately."

The same investigative reporter that discovered the Target (TGT) breach in 2013 reported that a "massive batch" of stolen credit and debit card information went on sale this morning. Brian Krebs, KrebsOnSecurity.com, said the cards appeared to be linked to Home Depot stores. The stolen cards were marketed online by hackers in two groups called "American sanctions" and "European sanctions." This suggests the hack may have been perpetrated by Russian hackers.


Helen of Troy (HELE), a maker of brand name consumer products, warned their fiscal 2015 outlook would be lower than previously forecast. They blamed it on acquisitions of Healthy Directions, which was completed on June 30th. They also warned they would not be giving future quarterly guidance. Full year earnings are now expected in the range of $3.70-$3.80 compared to prior guidance of $4.30-$4.40. Shares plunged after the close.


Concur Technologies (CNQR) spiked from $101 to $125 in afterhours before dropping back to $113. The company said it was exploring a sale to companies including SAP and ORCL. CNQR has a market cap of $5.7 billion and is working with an investment bank on a potential sale. Shares pulled back slightly after CNQR said ORCL had decided not to pursue a sale.


On the international scene another American journalist, Steven Sotloff, was beheaded on camera by an ISIS fighter. The English speaking terrorist said "I am back, Obama. I am back because of your arrogant foreign policy toward the Islamic State." The journalist was apparently killed several days ago and probably at the same time as Foley. The video was just released to correspond with the end of the U.S. holiday.

Apparently the U.S. has increased its airstrikes and there are German and U.S. Special Forces fighting on the front lines against ISIS. Like the Russian soldiers in Ukraine all identifying insignias have been removed from their uniforms. Story Here

Ukrainian officials claim there are now more than 15,000 Russian troops in the Ukraine and the defense minister said "defenses must be strengthened" in the face of a "full scale" invasion of Ukraine. Numerous headlines cited the comment from Putin that Russia could "take Kiev" in a matter of weeks if it so desired. Putin did not deny the comment but said it had been made in a confidential setting. He reportedly made the threat to the EU Commission president during talks on the Ukraine crisis. It was made in the context of "I can take all of Ukraine if the EU continues to increase its sanctions."

President Obama is reportedly going to warn Putin to back off in a trip to Estonia this week ahead of the NATO summit. NATO officials are said to be preparing a 4,000 man quick reaction force that could be mobilized in 48 hours to defend against any Russian aggression against a NATO country. It would be a delaying force until larger numbers could be delivered to the battlefield.

The geopolitical headlines did not appear to worry the equity markets. There was a dip at the open with the Dow down -88 points but the majority of the indexes returned to positive territory before the close. The Dow closed down -31 points and the S&P down only -1 after being down -8 intraday. The buy the dip strategy still appears to be working.

The S&P closed at 2002 and appears poised for a breakout this week if the headlines cooperate. The next three days each have something to worry about but boots on the ground in Iraq and threat of war with Russia had no material impact on the markets so weak jobs numbers may have no impact either.

Today was a paperwork day. Fund managers coming back from the last holiday of the summer probably spent the day answering emails and cleaning up the pile of paper that accumulated on their desk. They slowly immersed themselves back into the job and the market and they should be ready to begin adding to or restructuring their portfolios on Wednesday. New money end retirement contributions will be put to work.

The intraday dip on the S&P confirmed support at 1195 and resistance is now the 2003 closing high from Friday.


The Dow is the trouble maker this week with multiple levels of converging resistance from 17,075 to 17,150. Until the Dow builds up enough steam to break through that logjam the rest of the indexes may be lackluster.



The Nasdaq Composite closed in on the uptrend resistance at 4,600 and is showing no indications of a potential collapse at that level. Unfortunately sometimes there is no indication of strong resistance until the tripwire is triggered.

The Nasdaq gained +18 points to close only half a point below the high for the day at 4598.64. It is hard to say the market had a bad day when the Nasdaq closed at a new high by +18 points. There were a lot more big winners than sinners in the table below.

Support is now 4,550 and resistance 4,600.



The Russell 2000 shook off the early morning weakness to gain +5 points and a two month high. Not a bad gain when the Dow started off -88 in the hole.


The Dow Transports gained +108 points or +1.3% to close at a new high at 8,516. This is a clue for where the Dow industrials are headed. The positive ISM Manufacturing was bullish for transports and it will be bullish for the Dow once the minor profit taking is over.


Historically the month of September is negative. Dating back to 1950 the average September loss is -0.5%. Dating back to 1990 it is -1.1%. However, four of the last five Septembers have been positive with an average +2% gain. While history is a guide and not a guarantee this is encouraging. Historically when August is positive September is normally positive.

The cloud over September will be the midterm elections. The mudslinging has already begun and it will grow progressively worse over the next ten weeks. However, with the economic reports improving and earnings growth expected to approach double digits in Q3 the market should be positive. I know proclaiming that in print is the kiss of death for any rally but those are the facts as I see them today.

Enter passively, exit aggressively!

Jim Brown

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New Option Plays

A Surging Backlog

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

The Greenbrier Companies - GBX - close: 73.24 change: +1.72

Stop Loss: 69.40
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 600 thousand
Entry on September -- at $---.--
Listed on September 02, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The shale-oil boom in the U.S. has had a number of impacts. Obviously one of them has been a surge in U.S. production. A side effect of all this production has been the use of railroads to transport a lot of this crude oil. The U.S. department of transportation has reported that back in 2008 the railroads averaged about 9,500 carloads of crude oil transport a year. Today that number is closer to 415,000 carloads a year and likely to grow, especially as the U.S. government stalls any decision on new pipeline construction (like the controversial XL Keystone pipeline). Lack of options have driven a big surge in demand for railcars that can transport oil.

According to the company's website, "Greenbrier, headquartered in Lake Oswego, Oregon, is a leading supplier of transportation equipment and services to the railroad industry. We build new railroad freight cars in our 4 manufacturing facilities in the U.S. and Mexico and marine barges at our U.S. manufacturing facility. Greenbrier also sells reconditioned wheel sets and provides wheel services at 9 locations throughout the U.S. We recondition, manufacture and sell railcar parts at 4 U.S. sites. Greenbrier is a 50/50 joint venture partner with Watco Companies, LLC in GBW Railcar Services, LLC which repairs and refurbishes freight cars at 38 locations across North America, including 14 tank car repair and maintenance facilities certified by the Association of American Railroads. Greenbrier builds new railroad freight cars and refurbishes freight cars for the European market through our operations in Poland. Greenbrier owns approximately 8,300 railcars, and performs management services for approximately 235,000 railcars."

GBX's railcar manufacturing business is obviously growing due to the demand to transport oil but don't overlook the reconditioning and refurbishing business. Just two months ago (July 2014) the U.S. DOT proposed new rules on transporting crude oil and flammable materials. That's significant because the oil from the Bakken shale is volatile and prone to combustion. These new standards would phase out the old DOT 111 tank cars. This would force railcar owners to either buy new cars or retrofit the old ones to meet the new standards.

GBX earnings are projected to grow double digits in 2014 and 2015. Their most recent earnings report was July 2nd. Wall Street expected a profit of $0.74 a share on revenues of $572.4 million. GBX beat those estimates with a profit of $1.03 a share on revenues of $593.3 million. That was more than double its $0.50 earnings in the second quarter. Gross margins surged from 11.5% to 16.3%, well above prior growth estimates.

GBX management said their railcar backlog grew from 15,200 units from February 2014 to a backlog of 26,400 units as of May 31st. The estimated value of this railcar backlog is $2.75 billion. Their marine barge backlog hit $110 million. GBX went on to raise their guidance for Q4 and 2014. Management also said they bought back 352,000 shares during the prior quarter and they're only halfway through their $50 million stock buyback program.

Now some traders feel that shares of GBX may have gotten ahead of themselves. That's one potential explanation behind the big short interest. The most recent data listed short interest at 22.4% of the small 22.3 million share float. Further gains in GBX could spark more short covering.

Today's high was $73.29. We're suggesting a trigger to buy calls at $73.50.

Trigger @ $73.50

- Suggested Positions -

Buy the OCT $75 call (GBX141018C75) current ask $2.55

- or -

Buy the DEC $80 call (GBX141220C80) current ask $3.00

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

Annotated Chart:

60-minute Chart:



In Play Updates and Reviews

Economic Data Powers Intraday Gains

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. ISM index hit multi-year highs but gains from this headline were short lived.

Broadly speaking it was a good day with most of our bullish plays moving higher and bearish plays moving lower.


Current Portfolio:


CALL Play Updates

BioMarin Pharmaceutical Inc. - BMRN - close: 70.39 change: -0.83

Stop Loss: 68.90
Target(s): To Be Determined
Current Option Gain/Loss: +13.7%
Average Daily Volume = 1.26 million
Entry on August 14 at $66.55
Listed on August 11, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: BMRN underperformed the market and gave back half of Friday's gains. The intraday low was $69.18. Any follow through lower will see shares hit our stop at $68.90.

Earlier Comments: August 11, 2014:
BMRN is in the healthcare sector, specifically the biotech industry. According to the company's press release they "develop and commercialize innovative biopharmaceuticals for serious diseases and medical conditions. The company's product portfolio comprises five approved products and multiple clinical and pre-clinical product candidates."

The company's strategy is "providing first-in-class or best-in-class treatments for patients with serious unmet medical needs, optimizing powerful biology with demonstrated potential and development clarity, accelerating approval process, strategic pipeline development."

BMRN's current product portfolio looks like this: VIMIZIM™ for Morquio A syndrome (MPS IVA), Naglazyme® for MPS VI, Aldurazyme® for MPS I, Firdapse™ (currently approved in the EU only) for LEMS, KUVAN® Tablets for PKU.

BMRN lists their current clinical pipeline as follows: PEG PAL for PKU, BMN 673 for genetically defined cancers, BMN 701 for Pompe disease, BMN 111 for achondroplasia, BMN 190 for late-infantile neuronal ceroid lipofuscinosis (CLN2), a form of Batten Disease, BMN 270 for hemophilia A and BMN 250 for Sanfilippo Syndrome or MPS IIIB.

The company is developing a trend of beating Wall Street's earnings estimates. Back in February they reported results that bested analysts' estimates by a wide margin. They did it again in May. Wall Street was looking for a loss of 44 cents on revenues of $145.1 million. BMRN reported a loss of just 1 cent with revenues rising +18.5% to $151.6 million. Their most recent earnings report was July 30th. Analysts were expecting a loss of 41 cents on revenues of $159.2 million. BMRN announced a loss of 23 cents with revenues soaring +40.1% to $191.7 million. Furthermore BMRN management raised their 2014 guidance following the July 30th report.

The stock peaked back in February this year. When the market corrected in March most of the high-growth and momentum names were crushed. BMRN was in that group that saw their stock hammered lower. Shares fell from almost $85 to $55.00. Fortunately the $55.00 level has been solid support. Shares have been building a significant base in the $55-65 zone for over three months.

Currently the rebound from its July lows is pushing the stock up against major resistance in the $65.00-66.00 area. This is where BMRN has resistance with its simple 200-dma and its trend line of lower highs. If the stock breaks out it could spark a significant move higher.

Tonight we're suggesting a trigger to buy calls at $66.55. We're not listing an exit target tonight but I will share that the point & figure chart is bullish with a $77.00 target.

- Suggested Positions -

Long Oct $70 call (BMRN141018C70) entry $2.55*

08/26/14 new stop @ 68.90 after BMRN lowers revenue guidance after hours
08/23/14 new stop @ 65.75
08/20/14 new stop @ 64.75
08/14/14 triggered @ 66.55
*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


Concur Technologies - CNQR - close: 100.95 change: +0.57

Stop Loss: 98.40
Target(s): To Be Determined
Current Option Gain/Loss: -20.7%
Average Daily Volume = 576 thousand
Entry on August 19 at $100.50
Listed on August 16, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: Traders bought the dip in CNQR midday near the $100 level. Those that did will be rewarded tomorrow. After the bell it was disclosed that CNQR has been shopping around for someone to buy them. The stock spiked toward $125.00 after hours and is currently trading about $115.00. Shares will likely gap open higher several points tomorrow morning.

Earlier Comments: August 16, 2014:
CNQR is in the technology sector. The company provides travel and expensive management solutions. The company was founded back in 1993. Their focus is helping companies control travel costs. The business has been growing over 23,000 customers and over 25 million users.

The company press release describes Concur as "the leading provider of spend management solutions and services in the world, helping companies of all sizes transform the way they manage spend so they can focus on what matters most. Through Concur's open platform, the entire travel and expense ecosystem of customers, suppliers, and developers can access and extend Concur's T&E cloud. Concur's systems adapt to individual employee preferences and scale to meet the needs of companies from small to large."

There is no denying that it has been a rocky year for CNQR investors. The stock struggled with resistance near $130.00 for over a month earlier this year. When the momentum names corrected lower in March shares of CNQR were crushed. The stock produced a two-month retreat down to $75.00.

Meanwhile earnings continued to improve. When CNQR reported earnings on April 29th they beat estimates by six cents and guided higher for the second quarter. Their most recent earnings report was August 4th. Wall Street expected a profit of $0.16 on revenues of $175.1 million. CNQR delivered a profit of $0.25 with revenues rising +28.6% to $178.4 million. Management also raised their 2014 guidance.

Stocks analysts are starting to notice and a few of them have upgraded their price targets on CNQR into the $110-115 region. If shares of CNQR can breakout past resistance near $100 and its 200-dma then it might sprint towards $110. That's because the stock has a significant chunk of short interest.

The most recent data listed short interest at 12.2% of the relatively small 55.5 million share float. Since the $100 mark is significant resistance a breakout could definitely spark some short covering. The point & figure chart is already bullish and projecting at $108 target.

Tonight we are suggesting a trigger to buy calls at $100.50.

- Suggested Positions -

Long NOV $105 call (CNQR141122C105) entry $5.05*

08/27/14 CNQR is not moving. Investors may want to exit now. We are moving the stop loss up to $98.40
08/19/14 triggered @ 100.50
*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


Expedia Inc. - EXPE - close: 88.29 change: +2.39

Stop Loss: 84.90
Target(s): To Be Determined
Current Option Gain/Loss: - 4.5%
Average Daily Volume = 2.3 million
Entry on August 18 at $86.25
Listed on August 16, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: After underperforming the market last week shares of EXPE were in catch up mode today. The stock surged at the open and kept the rally going almost all day. The stock closed up +2.7% and closed above recent resistance near $88.00

Earlier Comments: August 16, 2014:
EXPE is in the services sector. The company is in the super competitive online travel industry with rivals like Priceline.com (PCLN) and Orbitz Worldwide (OWW).

EXPE is developing a serious trend of beating analysts' estimates with strong profit and revenue growth. EXPE last reported earnings on July 31st. Analysts were expecting a profit of $0.75 a share on revenues of $1.44 billion. EXPE blew those numbers away with a profit of $1.03 a share. Revenues soared +24.0% to $1.49 billion. That's up from $1.2 billion the prior quarter. EXPE has now delivered double-digit year over year revenue growth for six quarters in a row.

EXPE's bookings continue to soar. Gross bookings were up +29%. Domestic gross bookings were up +35% and international gross bookings rose +21%. Both hotel revenues and air travel revenues were up more than +20% each.

Last time we traded EXPE we noted that Billionaire hedge fund manager David Tepper's Appaloosa Management is also bullish on EXPE. The latest 13F filing showed that Appaloosa had initiated a new stake in EXPE in the first quarter of 2014. In the second quarter Appaloosa added another 201,000 shares of EXPE.

The stock popped on its earnings results but have since spent the last two weeks digesting gains in a sideways consolidation. Now it looks like EXPE is poised to breakout and could make a run towards the $95-$100 area. The point & figure chart is bullish and forecasting at $105 target.

Tonight we are suggesting a trigger to buy calls at $86.25.

- Suggested Positions -

Long NOV $90 call (EXPE141122C90) entry $4.40

08/30/14 new stop @ 84.90
08/23/14 new stop @ 83.95
08/18/14 triggered @ 86.25
Option Format: symbol-year-month-day-call-strike


Gilead Sciences, Inc. - GILD - close: 107.56 change: +0.05

Stop Loss: 104.85
Target(s): To Be Determined
Current Option Gain/Loss: +306.7%
Average Daily Volume = 14.1 million
Entry on July 29 at $92.25
Listed on July 28, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: GILD continues to levitate higher and added another +1.6% today. The stock is nearing what could be resistance at the $110.00 level. I am not suggesting new positions at this time.

Earlier Comments: July 28, 2014:
GILD seems to be everyone's favorite biotech stock. I only hear bullish opinions about the future of the company, and for good reason. They have some pretty amazing treatments with products for HIV/AIDS, liver diseases, oncology, cardiovascular, respiratory, and more. GILD has essentially revolutionized how we treat major diseases like HIV and Hepatitis C.

According to the company website, "Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need. We strive to transform and simplify care for people with life-threatening illnesses around the world. Gilead's portfolio of products and pipeline of investigational drugs includes treatments for HIV/AIDS, liver diseases, cancer and inflammation, and serious respiratory and cardiovascular conditions."

This year everyone has been raving over GILD's hepatitis C treatment called Sovaldi. Hepatitis C is a form of viral hepatitis that causes chronic inflammation of the liver. About 185 million people currently suffer with hepatitis C. Previously the most common treatment for hepatitis C had serious side effects and was less than 50% successful. GILD changed that with their Sovaldi drug that not only treats the symptoms but actually cures the patient. The company has drawn some negative publicity over the cost since GILD charges $84,000 for a 12-week course of Sovaldi in the United States. The fact that 80% to 90% of patients who take Sovaldi are cured is a major milestone.

The Financial Times noted that before Sovaldi the impact of hepatitis C in the U.S. took a heavy toll on the healthcare system. The disease can lead to liver failure and cancer, both of which cost significantly more than Sovaldi's $84,000 price target. Hepatitis C is the leading cause for liver transplants in the U.S., which can cost a minimum of $145,000. One consulting firm estimated that the annual cost of hepatitis C to the U.S. healthcare system was going to surge from $30 billion to $85 billion in the next twenty years. Sovaldi has the potential to change. that.

Stocks move on earnings and GILD has plenty of them. They company last reported on July 23rd. Wall Street was expecting a profit of $1.80 a share on revenues of $5.86 billion for the second quarter. GILD delivered a profit of $2.36 a share with revenues soaring +136% to $6.53 billion. Last quarter Sovaldi accounted for $3.5 billion in sales. Management issued bullish guidance on revenues and margins.

GILD has also had good news with both the FDA and the European Committee for Medicinal Products for Human Use approving GILD's Zydelig treatment for chronic lymphocytic leukemia and follicular lymphoma. The European committee's decision will now be sent to the full European Commission and if approved will open up Zydelig to all 28 countries in the EU.

The outlook is pretty bullish for GILD. Traders just bought the dip and shares closed at all-time highs. Today's intraday high was $91.73. We are suggesting a trigger to buy calls at $92.25. We are not setting an exit target tonight but I will point out the point & figure chart is bullish with a $106.00 target. I am concerned that the $100.00 level could be temporary resistance for GILD. We'll have to wait and see.

- Suggested Positions -

Long Oct $95 call (GILD141018C95) entry $3.70*

08/30/14 new stop @ 104.85
08/25/14 new stop @ 102.85
08/23/14 new stop at $99.95
08/16/14 new stop @ 93.45
Investors will want to seriously consider taking profits now with GILD testing potential resistance at the $100.00 mark.
08/14/14 new stop @ 89.95
Investors may want to consider taking money off the table as GILD nears the $99-100 zone.
07/29/14 triggered @ 92.25
*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


Hess Corp. - HES - close: 100.53 change: -0.57

Stop Loss: 98.40
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.97 million
Entry on August -- at $---.--
Listed on August 30, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
09/02/14: A sharp drop in crude oil prices weighed on some of the oil stocks today. HES managed an intraday bounce and pared its loss to -0.5%.

We are suggesting a trigger to buy calls at $101.55.

Earlier Comments: August 30, 2014:
HES started back in 1933 with one man and a used 615-gallon oil delivery truck. Today they have over 700 wells across a dozen different countries around the world, including the U.S., Norway, Iraq, China, and several in Africa. Hess bills itself as a leading global independent energy company that produces oil and natural gas with over 1.3 billion barrels of oil equivalent proven reserves.

The stock has been a decent performer with a strong rally from its 2012 lows. An improving earnings picture has helped. Back in April they reported significantly better than expected EPS growth and revenues for the first quarter. Their second quarter results came out July 30th. Wall Street was looking for a profit of $1.18 on revenues of $2.49 billion. HES delivered a profit of $1.38 with revenues of $2.85 billion.

HES has also announced plans to form an MLP thanks to pressure from activist investor Elliott Management. The company plans to spin off its distribution assets in the North Dakota Bakken shale area. Exploring for oil and gas can be a risky, capital-intensive business. Yet the distribution side is much more stable. MLPs, or master limited partnerships, are much more tax efficient and they pass almost all of their income directly to shareholders as dividends (similar to real estate investment trusts). HES joins a growing crowd of major oil companies forming MLPs like ConocoPhillips (COP), Marathon (MRO), and Royal Dutch Shell (RDS). HES an initial public offering for its MLP in the first quarter of 2015.

Technically shares of HES have been consolidating gains near resistance at $100 for several weeks. You can see the big spike higher in late July as a knee-jerk reaction to its earnings news. Now after a month of churning sideways the consolidation is narrowing. Shares of HES look poised to breakout higher.

Friday's intraday high was $101.22. We're suggesting a trigger to buy calls at $101.55.

Trigger @ 101.55

- Suggested Positions -

Buy the NOV $105 call (HES141122C105)

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


LyondellBasell Industries - LYB - close: 114.19 change: -0.16

Stop Loss: 112.25
Target(s): To Be Determined
Current Option Gain/Loss: +48.0%
Average Daily Volume = 2.5 million
Entry on August 15 at $110.50
Listed on August 04, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: LYB hit new record highs this morning but gains faded and shares spent much of the day churning on either side of $114.00.

I am not suggesting new positions at this time.

Earlier Comments: August 4, 2014:
One way to play the shale-gas boom in the U.S. is plastics. The bloom of natural gas production has been a huge blessing for LYB. According to the company's website, "We participate in the entire petrochemical value chain, from refining to specialized petrochemical product end uses. We are the largest producer of polypropylene and polypropylene compounds; a leading producer of propylene oxide, polyethylene, ethylene and propylene; a global leader in polyolefins technology; and a producer of refined products, including biofuels. Additionally, LyondellBasell is a leading provider of technology licenses and a supplier of catalysts for polyolefin production."

The recent spike in LYB's stock price was a reaction to better than expected earnings results. Wall Street was looking for LYB to deliver a profit of $1.93 a share on revenues of $11.5 billion. LYB surpassed expectations with a profit of $2.22 a share with revenues rising +9.1% to $12.12 billion.

The stock has been an earnings machine with rising earnings the last four years in a row. Analysts are now estimating LYB will see earnings rise 11% in 2014 and 16% in 2015. Jefferies recently raised their price target on LYB from $120 to $125 as they upgraded their EPS estimates on the company.

After a strong rally from $100 to $110 in mid July the stock was short-term overbought and due for a pullback. Traders jumped in to buy the dip near LYB's simple 10-dma last week. Now LYB is rebounding higher.

More aggressive traders may want to buy the bounce today. We are suggesting a trigger to buy calls at $110.50 since the July high is $110.38.

FYI: For more background on the LYB story Forbes.com has a great article that you might find interest. You can read it here.

- Suggested Positions -

Long DEC $115 call (LYB141220C115) entry $2.50*

08/30/14 new stop @ 112.25
08/28/14 new stop @ 109.75
08/23/14 new stop at $108.75
08/15/14 triggered @ 110.50
*option entry price is an estimate since the option did not trade at the time our play was opened.
08/14/14 adjust the stop loss to $107.40 (trade not open yet)
08/14/14 LYB almost hit our trigger but failed at $110.49
Option Format: symbol-year-month-day-call-strike


O'Reilly Automotive - ORLY - close: 156.60 change: +0.62

Stop Loss: 151.49
Target(s): To Be Determined
Current Option Gain/Loss: -11.3%
Average Daily Volume = 626 thousand
Entry on September 02 at $157.50
Listed on August 25, 2014
Time Frame: 6 to 12 weeks
New Positions: see below

Comments:
09/02/14: The stock market's early morning rally helped lift ORLY to new highs. ORLY hit $158.07 before trimming its gains. Our suggested entry point to buy calls was hit at $157.50.

The intraday pullback is a bit concerning. I suggest traders wait for a new rise past $157.25 before considering new positions.

Earlier Comments: August 25, 2014:
The U.S. economy is slowly improving. We are seeing slow but consistent job growth. Yet consumers remain cautious. While there has been a healthy trend of new car sales this year most consumers are keeping their old cars. Of the 247 million cars in the U.S. the average age is at a record high. Passenger cars have hit an average age of 11.4 years while light trucks are at 11.3. If consumers are keeping their cars this long that is going to mean more replacement parts and repairs. That has been good news for the auto part companies.

ORLY is one such company. According to their company website, "O'Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, serving both professional service providers and do-it-yourself customers. Founded in 1957 by the O'Reilly family, the Company operated 4,257 stores in 42 states as of June 30, 2014."

One analysts on Wall Street called ORLY a "well-oiled machine." It's easy to see why. The company has delivered four years of consistent double-digit earnings growth. Steady same-store sales are impressive considering the tough retail environment we've seen over the last few years. The company's margins are expected to grow over the next 12-18 months. ORLY is on track to open 200 new stores in 2014. They have also boosted their stock buyback program. On August 13th ORLY announced an additional $500 million, which bumps their total stock repurchase program to $4.5 billion.

Technically shares have been consistently bouncing off their long-term trend of higher lows (on the weekly chart below). ORLY did spent the last few months consolidating sideways but it has started to breakout past resistance. This is our chance to hop on board. A rally past $158.00 could create a new point & figure chart buy signal.

Tonight we are suggesting a trigger to buy calls at $157.50. We're listing the October $160 call. You may want to consider a longer-dated option (like the Novembers or 2015 Januarys).

- Suggested Positions -

Long Oct $160 call (ORLY141018C160) entry $2.20*

09/02/14 triggered @ 157.50
*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


Schlumberger Limited - SLB - close: 108.06 change: -1.58

Stop Loss: 107.45
Target(s): To Be Determined
Current Option Gain/Loss: -34.0%
Average Daily Volume = 5.5 million
Entry on August 25 at $110.50
Listed on August 20, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: Another rally in the U.S. dollar helped pressure oil prices lower and this weighed on many of the oil stocks. At least that's one potential explanation for the weakness in SLB today.

The stock hit an intraday low of $107.52. Our stop is at $107.45 so any further weakness will likely hit our stop loss.

Earlier Comments: August 20, 2014:
Consistent earnings growth is what investors like to see. SLB has done it eleven quarters in a row. The company is considered best in breed for the oil services industry. This past weekend Barron's ran a story on SLB and suggested the stock has +50% upside (or more) from current levels. That's because SLB has made several acquisitions in North America and is now a major player in the U.S. hydraulic fracking boom.

According to the company's website, "Schlumberger is the world's leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry worldwide. Employing approximately 126,000 people representing over 140 nationalities and working in more than 85 countries, Schlumberger provides the industry's widest range of products and services from exploration through production."

As mentioned above SLB has beaten Wall Street's bottom line earnings estimates eleven quarters in a row. Their most recent earnings report was July 17th. Analysts were expecting a profit of $1.35 a share on revenues of $11.95 billion. The company reported a profit of $1.37 a share, up +19% from a year ago, with revenues up +7.8% to $12.05 billion for the quarter.

Management noted margin improvement. SLB said every geographic area saw growth. On the conference call SLB's CEO said, "Our second quarter results were strong and fully in line with our expectations as international activity rebounded in Russia, Norway and Australia and North American activity grew in both offshore in the U.S. Gulf of Mexico and on land in spite of the Canadian spring breakup."

Looking ahead the company issued a mixed outlook. Management said, "Turning our focus back to the remaining part of 2014, we continue to see a relatively constant mix of headwinds and tailwinds in the global economy and in our industry, which leads us to maintain our already established outlook for the year. The slow and steady recovery in the global economy is continuing and the global oil market remains relatively tight with a solid demand outlook, continued supply uncertainty related to geopolitics and with Brent prices holding steady above $100 per barrel, which should encourage oil directed investments in both the North American and international markets."

Their relatively cautious outlook and falling oil prices in the last several weeks have sparked some profit taking in SLB's stock price. The pullback could be a significant entry point. Long-term SLB is forecasting almost +20% earnings (compound annual growth rate) through 2017.

Wall Street has been very bullish the last couple of months. Several firms have upgraded their price targets on SLB with a few recent upgrades coming in at $132, $138, $140 and $150 a share for SLB.

SLB did make headlines earlier this month regarding Russia. The U.S. and the EU have leveled sanctions against Russia. This is impacting international companies like SLB who do business in Russia and with Russian companies. Fortunately, SLB estimates that any impact from the sanctions will be limited. Management expects a decline of 3 cents per share due to the sanctions. Wall Street hates uncertainty so having SLB actually come out and offer some guidance on the sanctions impact is bullish.

Another potential challenge could be Iraq. SLB does a lot of business in Iraq but most of the oil production is in southern Iraq. Right now the hot zones with fighting between ISIS, the Iraq military and the Kurds, are all in the northern half of Iraq. As long as the violence stays in the northern half of Iraq then the Islamic State terrorists are unlikely to impact SLB's operations in the country.

Shares of SLB hit all-time highs in late June. Since then the stock experienced a six-week correction from $118 to $105. That's a -11% pullback. The stock has begun to bounce and looks poised to break through resistance near $110. Tonight we are suggesting a trigger at $110.55. More conservative investors may want to wait for SLB to rally past its 50-dma before initiating positions (50-dma is currently at $111.30).

- Suggested Positions -

Long NOV $115 call (SLB141122C115) entry $2.00

08/25/14 triggered @ 110.50
Option Format: symbol-year-month-day-call-strike


U.S. Silica Holdings, Inc. - SLCA - close: 71.89 change: +0.08

Stop Loss: 68.85
Target(s): To Be Determined
Current Option Gain/Loss: +135.7%
Average Daily Volume = 1.42 million
Entry on August 19 at $62.05
Listed on August 13, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: Rival sand provider EMES was down sharply today (-6.7%) following last week's big rally. Shares of EMES were downgraded this morning. This weakness likely influenced trading in SLCA, which saw a pullback from its morning highs.

I am not suggesting new positions at this time.

Earlier Comments: August 13, 2014:
We are bringing SLCA back after some post-earnings volatility.

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.

SLCA's most recent earnings report was July 29th. Wall Street expected a profit of $0.47 a shares on revenues of $189.7 million. SLCA beat estimates with a profit of $0.55 and revenues soaring +58.5% from a year ago to $205.8 million.

The company said sales were up sharply both from a year ago and from the first quarter. Management raised its 2014 earnings guidance.

Currently shares of SLCA are hovering just below resistance in the $61.75 area. Tonight we're suggesting a trigger to buy calls at $62.05. We are not setting an exit target tonight but Point & Figure chart for SLCA is bullish with a $69 target.

- Suggested Positions -

Long DEC $65 call (SLCA141220C65) entry $4.20*

08/30/14 new stop @ 68.85, traders will want to seriously consider taking some money off the table right here.
08/28/14 new stop @ 65.75
08/27/14 new stop @ 63.45, investors may want to take profits now
08/26/14 new stop at $61.75
08/23/14 new stop at $59.45
08/19/14 triggered @ 62.05
*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


United Rentals, Inc. - URI - close: 118.84 change: +1.19

Stop Loss: 114.25
Target(s): To Be Determined
Current Option Gain/Loss: +16.0%
Average Daily Volume = 1.0 million
Entry on August 19 at $115.25
Listed on August 18, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: URI displayed some relative strength today. Traders bought the dip midday near $117.50 and the stock rebounded to a +1.0% gain. I am not suggesting new positions at this time.

Earlier Comments: August 18, 2014:
URI is a company that is gaining market share. Traditionally equipment rental has been a very fragmented industry with a lot of mom and pop stores. URI has decided that being the biggest offers a better selection to their clients. Today URI is the biggest equipment rental company in the world.

Twenty years ago commercial construction clients only accounted for about 15% of the equipment rental market. Today that number is closer to 50%. The last few years have seen a strong trend of construction companies choosing to rent equipment instead of buy new equipment due to an uncertain economic outlook.

According to URI's website they were founded in 1997 and have grown into a network of 832 rental locations in 49 states and 10 Canadian provinces. Their rental fleet includes 3,100 classes of equipment.

Earnings are improving. URI's most recent earnings report was July 16th. Wall Street was looking for a profit of $1.50 a share on revenues of $1.36 billion. URI delivered $1.65 a share with revenues hitting $1.399 billion. URI's earnings results were up +47% from a year ago. Margins hit a second quarter record at 47.4%. URI management then raised their 2014 guidance.

In URI's earnings press release their CEO offered a bullish outlook:

Michael Kneeland, chief executive officer of United Rentals, said, "Our strong performance in the quarter reflects significantly more equipment on rent at better margins than a year ago, resulting in a new high water mark for second quarter EBITDA margin. The rebound in non-residential construction is continuing to drive up demand, particularly in the energy and commercial sectors. Given the vigorous activity we're seeing, and the benefit of secular penetration, we've raised our full year outlook - and we concur with the forecasts that show multiple years of healthy industry growth beyond 2014."

URI said their rental revenue was up +16.8% for the quarter. They're also see super growth in their specialty segment. Their trench safety rentals were up +21%. Their power and HVAC rentals were up +54%. URI purchased National Pump on April 1st this year. Now they've renamed it United Rentals Pump Solutions and they're using it as an opportunity to cross sell pumps to their broader customer base.

URI is also on track with their stock buyback program. In October 2013 they announced at $500 million repurchase program that's expected to be completed by April 2015. Thus far URI has bought back $228 million in common stock this year ($185 million of that was in the second quarter).

Technically the post-earnings depression for URI is over. Traders bought the dip near its long-term up trend of higher lows. Now URI is testing resistance at its all-time highs and resistance at the $115.00 level.

We are suggesting a trigger to buy calls at $115.25.

- Suggested Positions -

Long DEC $120 call (URI141220C120) entry $5.60*

08/30/14 new stop @ 114.25
08/28/14 new stop @ 113.25
08/19/14 triggered @ 115.25
*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


Western Digital Corp. - WDC - close: 102.00 change: -1.01

Stop Loss: 99.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.5 million
Entry on August -- at $---.--
Listed on August 30, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
09/02/14: WDC retreated on Tuesday with a dip to its 10-dma. The stock closed down $1.01, which is enough to erase Friday's gains. Overall I don't see any changes from our new play description in the weekend newsletter (below).

Earlier Comments: August 30, 2014:
Hard drives are a critical piece for any computer system. Today hard drives or hard disk drives are not just for computers. They are in tons of consumer products including DVRs, home entertainment centers, game consoles, laptops in addition to your PC. Plus they are a significant portion of the data center business and the cloud computing phenomenon.

A few years ago WDC was neck and neck in a race with its rival Seagate (STX). They were essentially a duopoly in the hard drive business. WDC has slowly stolen market shares from STX thanks to a better product. The outer edge of a normal 7200 RPM hard drive is moving at 67 miles an hour. Eventually something is going to break. Hard drives have a 5% failure rate in the first year. That jumps to almost 12% in the first three years and about a 20% failure rate in four years. Some of you are reading this right now and wondering how long you've had your current hard drive. Whatever the answer is, you'd better back up your data now.

Seagate's drives have a 26.5% failure rate in the first three years. WDC's managed to cut its failure rate to just 5.2% in the first three years. That is significant, especially if you're an enterprise customer with a ton of servers. WDC has been developing a stronger solid-state drive for its big business clients. All the data on the cloud has to sit somewhere. The sea change movement to put more and more data on the cloud will continue to drive need for more storage.

The death of the PC was been a long-term issue for hard drive makers. WDC has developed a strong non-PC related sales that now account for more than 50% of its business. On the plus side earlier this year Intel (INTC) reported a strong surge in PC sales so the death of the PC might be a little premature.

WDC just reported earnings on July 30th and it was a good quarter. For WDC it was their fourth quarter of 2014. Wall Street expected a profit of $1.74 a share on revenues of $3.6 billion. WDC delivered $1.85 a share with revenues of $3.65 billion.

The company said consumer electronics and gaming was a big performer with a +67% surge to 10.9 million units. Their notebook hard drive shipments fell -5% to 22.9 million units but that was better than analysts' expectations. Altogether WDC shipped 63.1 million hard drives with an average selling price of $56 and a gross margin of 28.2 percent.

WDC has also been actively buying back shares. Last quarter the company repurchased 3.2 million shares and for the their fiscal year they bought 10.3 million shares for a total of $816 million.

WDC's guidance was rather lackluster but shares held up well. Barclays raised their outlook for WDC following the earnings report and upped their price target from $98 to $117. The Point & Figure chart is more bullish and currently forecasting at long-term target of $145. A move over $104 would produce a new triple-top breakout buy signal on the P&F chart.

Currently shares of WDC have been inching higher and tagged new all-time highs on an intraday basis this past week. We are suggesting a trigger to buy calls at $103.75.

Trigger @ 103.75

- Suggested Positions -

Buy the OCT $105 call (WDC141018C105)

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




PUT Play Updates

Chart Industries - GTLS - close: 67.44 change: +0.55

Stop Loss: 68.75
Target(s): To Be Determined
Current Option Gain/Loss: -34.0%
Average Daily Volume = 617 thousand
Entry on August 29 at $65.60
Listed on August 28, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: GTLS managed a +0.8% bounce today but the rebound had some trouble between its 10-dma and 20-dma, the area I pointed out in the prior update. Further weakness from current levels could be used as an entry point.

Earlier Comments: August 28, 2014:
If you have seen the 1986 movie Top Gun then you know that Tom Cruise's character "Maverick" and his RIO "Goose" fly through the jet wash of another aircraft and their plane enters a flat spin that Maverick is unable to pull out of. Spoiler - their plane crashes.

Both the stock price and the earnings results for GTLS appear to be in a flat spin that they cannot pull out of. According to the company website, "Chart Industries, Inc. is a leading independent global manufacturer of standard and custom engineered products and systems for a wide variety of cryogenic and gas processing applications. Our equipment is used in the production, storage, distribution and end-use of atmospheric and industrial gases as well as natural gas itself."

A growing portion of their business is natural gas. "Major equipment designed and manufactured by Chart is used in the liquefaction, distribution and storage of LNG, plus we also supply LNG fueling stations and vehicle fueling systems." Considering the huge surge of natural gas demand you might think GTLS business would be booming. Yet the company seems to be struggling.

Shares of GTLS delivered an amazing rally in 2013. That is until late October. GTLS reported earnings in late October 2013 that missed profits estimates, missed the revenue estimate and management lowered guidance. When GTLS reported earnings in February 2014 they missed estimates, missed the revenue number and lowered guidance. In April 2014 they missed estimates, missed the revenue number and lowered guidance. Are you seeing a trend here? Their latest earnings report was July 31st, 2014 and guess what? GTLS missed the EPS estimate, missed the revenue estimate, and lowered guidance.

Technically the oversold bounce from its August lows has completely reversed. Today is worth noting since GTLS has broken down to a new closing low for 2014. This trend will likely continue.

Today's intraday low was $65.70. I am suggesting a trigger to buy puts at $65.60.

- Suggested Positions -

Long OCT $65 PUT (GTLS141018P65) entry $2.50*

08/29/14 triggered @ 65.60
*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


Las Vegas Sands - LVS - close: 63.10 change: -3.41

Stop Loss: 68.25
Target(s): To Be Determined
Current Option Gain/Loss: +136.6%
Average Daily Volume = 4.6 million
Entry on August 27 at $67.40
Listed on August 26, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: Macau's gross gaming revenues for the industry were down -6.1% year over year. This confirmation of a slowdown in the world's biggest gambling hub helped spark a -5% drop in shares of LVS.

Tonight we'll move the stop to $68.25.

Earlier Comments: August 26, 2014:
The high-speed growth in the world's biggest gambling hub is slowing down. Investors are taking notice. It used to be that when the world wanted to gamble the came to Las Vegas. Today the biggest gambling center in the world is Macau, a city in southern China.

LVS describes itself as "the world's leading developer and operator of Integrated Resorts. Our collection of Integrated Resorts in Asia and the United States feature state-of-the-art convention and exhibition facilities, premium accommodations, world-class gaming and entertainment, destination retail and dining including celebrity chef restaurants, and many other amenities." LVS has properties in Vegas, Pennsylvania, Singapore, and Macau.

Macau has been the major focus for casino companies the last few years. The coastal strip of Macau is the only place in China where gambling is legal. Forbes described Macau as "Vegas on steroids." Macau overtook Vegas as the world's biggest gambling center back in 2006 with Chinese tourists accounting for nearly 66% of its traffic.

After years of booming growth in Macau the area is facing a few hurdles. One of them is rising wage costs. Current laws force casino operators to hire locals. This has driven unemployment in Macau down to 1.7%. Employees are unhappy. They make less than half that their counterparts in Vegas make. There has been a number of demonstrations as casino workers demand higher wages. There is currently the threat of a labor strike on August 28th this year.

Macau is also suffering from an economic slowdown in China. The country has been slowing grinding down for years. China is still expected to grow more than +7% this year but that's a multi-year low. Another issue has been China's crackdown on corruption this year. This new pressure from Beijing has thrown a wet blanket on VIP traffic to Macau. Yet another challenge for Macau is growing competition from foreign destinations. Other countries are starting to add gambling resorts, which could pressure traffic to Macau.

Analysts have been adjusting their earnings and revenues estimates lower for the casino stocks. That's not surprising given the recent reports of slowing revenue numbers. Macau's gambling regulators said gross gaming revenues dropped -3.7% in June and -3.6% in July. Morgan Stanley just slashed their 2014 Macau estimates from +12% to +6%.

Technically shares of LVS are bearish. The stock has broken significant support near $70.00. The oversold bounce is starting to roll over under resistance. The point & figure chart is bearish and forecasting at $56.00 target.

Tonight we are suggesting a trigger to buy puts at $67.40.

- Suggested Positions -

Long OCT $65 PUT (LVS141018P65) entry $1.50*

09/02/14 new stop @ 68.25
08/27/14 triggered @ 67.40
*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


Motorola Solutions, Inc. - MSI - close: 59.01 change: -0.39

Stop Loss: 62.05
Target(s): To Be Determined
Current Option Gain/Loss: + 1.8%
Average Daily Volume = 2.0 million
Entry on August 28 at $59.25
Listed on August 27, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: MSI continues to underperform and lost another -0.65% on Tuesday. I would consider new bearish positions at current levels.

Earlier Comments: August 27, 2014:
According to a company press release, "Motorola Solutions is a leading provider of mission-critical communication solutions and services for enterprise and government customers. Through leading-edge innovation and communications technology, it is a global leader that enables its customers to be their best in the moments that matter."

What does that mean in English? The company makes all sorts of devices (scanners, kiosks, mobile computers, pagers, RFID products, tablets, and two-way radios), systems and networks, software and applications, and accessories. MSI has sales in over 100 countries with more than 20,000 employees. The company has over $8 billion in annual revenues.

The challenge now is that those revenues seem to be falling. MSI issued an earnings warning back in April. Their results in May were in-line with these lowered estimates. The most recent earnings report came out on August 5th. Analysts were expecting adjusted earnings per share of $0.62. MSI only delivered $0.47. Revenues were down -7% to $1.39 billion, well below Wall Street's estimate of $1.96 billion.

MSI management then lowered their current quarter guidance into the 35-41 cent range, significantly below Wall Street's $1.01 estimate. Revenue guidance was also forecasted to fall -7% to -9%.

The company used to be a dominant player in wireless communications from two-way radios to mobile phones. Now they're struggling with rising competition. The stock's recent sell-off is starting to break some major support.

Today's display of relative weakness broke down below round-number, psychological support at the $60.00 mark. If this trend continues it could signal a pivotal direction change for MSI. Today's low was $59.46. We're suggesting a trigger to buy puts at $59.25.

- Suggested Positions -

Long MSI 2015 Jan $60 PUT (MSI150117P60) entry $3.29

08/28/14 triggered @ 59.25
Option Format: symbol-year-month-day-call-strike


Pentair Plc - PNR - close: 67.69 change: -0.38

Stop Loss: 70.75
Target(s): To Be Determined
Current Option Gain/Loss: +11.1%
Average Daily Volume = 2.0 million
Entry on August 26 at $68.90
Listed on August 23, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: PNR continued to sink and underperformed the market with a -0.5% decline. The stock is nearing potential (short-term) support in the $67.00-67.25 zone. I would not be surprised to see a short-term bounce.

Earlier Comments: August 23, 2014:
Pentair is considered part of the industrial goods sector. They manufacture industrial equipment across the globe. According to the company website, "Pentair is a global water, fluid, thermal management, and equipment protection partner with industry leading products, services, and solutions. Pentair reports the performance of its business within four reporting segments that focus on five primary verticals."

Long-term the stock has had a strong 2012 and 2013 performance. The rally appears to have peaked in 2014 when the market started pulling back in March this year. If you recall many of the momentum names and higher-growth stocks were hammered lower starting in March. PNR doesn't really qualify as a big momentum name or a high-growth name but shares have been unable to recover anyway. Shares have trended lower from the March peak, currently down -16% from its 2014 highs and down -10.6% year to date.

PNR's earnings results have not helped the stock's performance. Back in April they beat estimates but missed the revenue number and then guided lower for the second quarter. Their most recent earnings report was July 31st. Depending whose estimate you use PNR either reported in-line profits or managed to just beat by a penny. Revenues disappointed again. PNR missed the revenue estimate with a -2.7% decline from a year ago to $1.91 billion. Management lowered guidance again but they also announced they were exiting their struggling water transport business.

PNR collapsed on this late July earnings news and lowered guidance with a drop toward $64. Shares have spent three weeks with an oversold bounce that is just now starting to roll over under resistance. PNR appears to have resistance near $70-71 and its 50-dma and 300-dma (see daily chart below). The point & figure chart is bearish and currently forecasting at $61 target.

Tonight we are suggesting a trigger to buy puts at $68.90.

- Suggested Positions -

Long Nov $70 PUT (PNR141122P70) entry $3.60*

08/26/14 triggered @ 68.90
Option Format: symbol-year-month-day-call-strike


SPDR S&P 500 ETF - SPY - close: 200.61 change: -0.10

Stop Loss: 202.25
Target(s): To Be Determined
Current Option Gain/Loss: -25.0%
Average Daily Volume = 99 million
Entry on August 25 at $200.14
Listed on August 23, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/02/14: The SPY briefly traded to a new all-time high before reversing its gains. It is worth noting that traders bought the dip near its rising 10-dma. I am not suggesting new positions at this time.

Earlier Comments: August 23, 2014:
The U.S. stock market has delivered one of the longest bull markets in recent history and it's still going. The large cap index has gone more than 1,050 days without a normal -10% correction. Typically the market sees a correction about twice a year. What are the chances that tagging major milestone might spark some sell orders?

The S&P 500 is currently at all-time highs but the 2,000 mark might be major round-number, psychological resistance. It would not surprise us to see the index tag 2,000 and then retreat.

Tonight we're suggesting a trigger to buy puts on the S&P 500 ETF (SPY) at $199.95. We'll start this trade with a stop loss at $202.25.

(NOTE: We picked the normal September $199 puts that expire on the 20th. The current open interest is over 43,000.)

- Suggested Positions -

Long Sept. $199 PUT (SPY140920P199) entry $1.84

08/25/14 triggered on gap higher at $200.14, suggested entry was $199.95
Option Format: symbol-year-month-day-call-strike