Option Investor
Newsletter

Daily Newsletter, Monday, 9/8/2014

Table of Contents

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

Market Wrap

And The Market Churns

by Thomas Hughes

Click here to email Thomas Hughes
The equity markets continued to churn today in the wake of last weeks less than expected jobs report.

Introduction

The week opened with mixed feelings in the wake of last weeks lack luster NFP report. Needless to say, the 142,000 jobs added in August was well below expectations, including my own. Analysts, pundits, the media, you name it all are in dismay over the number. What does it mean and how does it affect the market. The general consensus of opinion is split between a combination of factors that probably all had some affect on today's trading. First, August and September data is always weak and subject to major revisions. Second is that it is an anomaly and likely to be revised higher in next month's data, which jibes with the first opinion. Third is that even if it is real it may not matter that much because despite the low number of new jobs created, overall unemployment fell.

My take on the number; one month's data does not make a trend plus the fall in unemployment along with falling jobless claims and planned layoffs are a combination of signs that job turnover is on the decline and retention is on the rise. In light of overall economic recovery, employment growth and the goal of “full employment” declining job loss is equally as good as increasing job creation.

Market Statistics

Asian and European markets were mixed to start the week. Our NFP data and weaker than expected Chinese trade data were to blame although the tenuous cease fire between the Ukraine and Russia helps to limit the losses. In China exports grew above expectations but imports fell in the face of an expected rise leading to fear of slow down. Market volume was very light across Asian market as some were closed for a holiday. In Europe indices were mostly lower but lifted into the close with some regaining positive territory. EU trade data was strong but not enough to overcome fear of slowing brought on by the weaker than expected Chinese imports.

The data had a little effect on trading here, the early futures trade was slightly lower with the indices indicated only a few points below Friday's close. At the open trading was very light, volume still has not returned to the market, and hung just below flat line for the first 15 minutes before moving down to the early low just above 2000 for the SPX. Later in the day the indices fell to a new intraday low; 1995 for the SPX, 17,080 for DOW and 4570 for the NASDAQ. The late afternoon release of Consumer Credit data put a bottom in and noticeably helped the indices move higher with the SPX regaining the 2000 level.

Economic Calendar

The Economy

As typical for a Monday there were no US economic announcements this morning except for Moody's weekly Survey Of Business Confidence conducted by Mark Zandi. This week's report ready much like it has each week this summer. According to his results business confidence is upbeat and strong looking forward to the end of the year. Hiring intentions among his responders is high, in line with the downtrend in unemployment and unemployment claims and inconsistent with the August jobs report. Mr. Zandi is one opinion I have heard suggesting the NFP will be revised higher next month.

At 3PM consumer credit numbers were released. The number was hotter than expected at 9.7% over last month totaling $3.2 trillion. Both revolving and non revolving credit surged with non revolving topping 10%. The gains were led by a jump in auto loans. The data was encouraging and helped to lift the markets off of the afternoon lows. A rise in consumer credit is a sign that the consumer is spending but also that credit conditions have loosened, the caveat is that credit conditions have loosened.

There are a few important releases scheduled for the week. Tomorrow JOLTs job openings data is followed by Wholesale Inventories on Wednesday. Thursday is the weekly jobless claims data along with Retail Sales, Michigan Sentiment and Business Inventories on Friday. Next week, next week is the next FOMC meeting where there will likely be some new fed speak and another taper of QE.

In the UK a growing chance that Scotland will vote for independence has emerged. Aside from the obvious changes in currency for the pound, euro and whatever the Scots decide to use it is unclear how this may affect the US economy. UK is a large trading partner of course, and Scotland is about 25% of the UK economy so there could be some backlash however small.

The Oil Index

Oil prices fell to a fresh 8 month low today on rising fear of slowing demand growth on top of high supply and storage levels. WTI fell more than $1.25 in early trading, falling below $92 for the first time since early February. Brent also saw a decline but not quite as sharp as West Texas Intermediate. The Oil Index also fell today, dropping -1.75% in today's session. Today's drop was sharp but looking back over the past two months the index is still trading more sideways than down. This is considering the fact that oil prices are down nearly -12% in the last two months compared to the Oil Index less than -6%.

Today's drop has brought the index down into a long term support region marked by the previous all time and all time intraday highs. The indicators are a little bearish but in line with longer term support at these levels. Near term momentum could bring the index down to the bottom of this range or even to the long term trend line but for now, the trend is still up. Current support is indicated about 1,625 and just below along the long term trend line.


The Gold Index

Gold fell another $15 today, on an intraday basis, to move below $1255. This is a continuation of the drop began last week as the flight to safety effect wore off in favor of global macroeconomic conditions. The strengthening US economy helped to boost dollar value and interest rate speculation that had been pressuring gold. The real catalyst though was last weeks move by the ECB that really sent gold to new lows. Spot gold is now trading just above potential long term support at $1250 with no real reason for investors to get long and lower prices indicated on the charts.

The Gold Index responded as expected to today's drop in gold prices and fell another -3%. This is the third down movement out of 5 days and has extended the drop below the 150 day moving average. Momentum is on the rise and could carry it down to the $90 level in the near term. Longer term support is between $85 and $90 for this index and is where I suspect the long term bottom may be located based on the two bounces from that level we saw earlier this year. That being said we'll what happens when and if the index gets there.


In The News, Story Stocks and Earnings

Apple is scheduled to reveal their newest product/innovation or what-have-you tomorrow. There has been a lot of speculation about what is going to be unveiled so there is a huge chance for the market to be disappointed. An iWatch, some other kind of wearable, a larger phone, a new iPhone in general or something else will have to be pretty spectacular to top previous product launches. What really matters though is will whatever it is sell? Will it sell enough to improve earnings, and will it do this without cutting into sales of other products? We'll find out tomorrow. Today the stock lost about -0.70% and traded just under the 30 day moving average. The stock appears to be supported here, at least in the near term, following the drop last week. The market is obviously waiting for the press conference tomorrow and could go either way. I would be careful about any knee jerk type reactions that might ripple through this market tomorrow, especially during the event, and cause false signals. If Apple is still going up there will be plenty of time to get in.


On the earnings front nearly all 500 S&P 500 companies have reported for this cycle. Fact Set reports 74% of them have beaten the mean estimate for earnings growth while 64% have beaten on sales. Looking forward to Q3 the expected earnings growth is 6.5%, down from the 8.9% at the beginning of the quarter and 6.9% for this quarter. This is due to a large number of earnings downgrades that have occurred since late June. Telecom is expected to lead in earnings growth, with consumer discretionary and more specifically Pulte to be the big drag on the index. Currently 76 companies have issued negative guidance for the coming earnings season while only 27 have issued positive expectations.

Campbell's, which reported today, is one of the very last S&P 500 companies to report in the cycle. The company met expectations for earnings and revenues but added another negative guidance for FactSet to put on their list. Reason for the poor guidance, a “challenging consumer environment”. Probably more like consumers are eating fresh soup more than canned. The stock lost more than -2.5% on the news, trading on heavy volume. However, support kicked in at long term support limiting the fall and creating a nice looking doji in the process. The bullish indicators are weakening and about to turn bearish but with the amount of volume, doji candle and proximity to long term support might not stay that way long. Support is around the $43 level with resistance above in the $44-$45 range. Some speculation that Campbell's could be a takeover target emerge today as well which could lend some support to the stock.


Boeing announced a very large order from Ryanair which sent the stock trading higher. Ryanair is going to buy 100 737 MAX jetliners valued at $11 billion. Shares of Boeing moved over 2.5% higher in a climb from the 30 day moving average on the news. The indicators are bullish and in line with an early/weak signal that could take the stock up to test resistance in the range between $130 and $135. Longer term there is resistance ahead.


Darden Restaurants and Olive Garden announced that they would be selling 1000 “all you can eat” coupons for $100. The “all you can eat pasta pass” was made available on line and I am sure by now sold out. The gimmick generated $100,000 in sales and some publicity but compared to the +$3.5 billion brought in by Olive Garden each year is just a drop in the bucket. Shares of the stock popped on the news but fell back from resistance. Resistance is right around $48.50 and the bottom of the gap formed at the last earnings release. The indicators are very weak and do not lead me to believe the stock is moving higher at this time.


The Indices

There really wasn't a whole lot to move the market today or even this week. Early trading was sluggish due at least in part to the NFP numbers and perhaps a little “wait and see”. Later in the day the consumer credit report was enough for near term support to come into the market at least enough for the SPX to regain 2,000. The broad market had lost as much as -0.50% during the day, dropping below 2,000 for a while, but was able to close above it with a loss of only -0.31%. Today's action was yet another spinning top in a series that has been going on for two weeks. The index is trading above the previous all time high and establishing what looks like a solid base of support. The indicators have been in decline and have receded from extreme levels, possibly setting up for another trend following signal.

Support has been evident between 1990 and 2000 several times over the past two weeks and appears to be moving up to the high end of the range over 2,000. A drop below 1990 would be a little bearish at this time but would find the short term moving average in the near term and the long term moving average in the short term so if there were to be any pull back right now I think it would be another buy on the dip opportunity. That said I don't see much catalyst for either rally or reversal this week so the index may just keep churning until the FOMC meeting next week.


The Dow Transports lost -0.32%, just a bit more than the broader S&P 500 index. The transports however have not been trading sideways but are just off an all time high. Today's move brought the index gently down to test support at the recently broken previous all time high. Momentum is bullish and on the rise although there is a possible divergence forming in the MACD. Stochastic is strong in the upper end of the range and producing a follow up signal to the strong trend following signal given off last month.


The Dow Industrials fared a little better in today's action. The blue chip index lost only -0.15% in today's session. This index is trading in a tight sideways range, similar to the broader SPX, but is below resistance instead of above it. Looking to the transports we can see it traded in a similar range as well, just before breaking out to its current high. Since the transports are a recognized leader of the industrials it looks like a break out for the industrials is possible in the near to short term. The indicators are both bullish but showing near term weakness, weakness that is being supported by a rising level of strong support that is now in the 16,750-17,000 range. The index looks like it is being pressed up into resistance and wants to break through, it just needs a reason.


The NASDAQ did not lose in today's session. The tech heavy index traded higher most of the day finishing with a +-0.20 % gain. This is the second day of gains for this index and has it up near the current all time high. The indicators are still bullish here but like the others, are showing some near term weakness. The next couple of days are going to be important simply on a technical basis. Without much catalyst to drive trading the long term trends and fundamentals will have to do it on their own. A pull back from this level will find support around the 4,500 level coincident with the short term moving average with additional support about 100 points below that along the longer term 150 day moving average.


There really isn't much on the horizon that I see as a major catalyst for the market this week. Economic data is very light, earnings is very light and for now, the geopolitical scene is quiet. Traders will have to decide for themselves which way the market is going and that means, I think, more indecision. Looking ahead I see that next week is the September FOMC meeting and that is more than enough in my book to keep the market churning along just the way it has been. This week may just be a gimme while we wait on the fed. Adding to that there is quite a bit of economic data next week including regional manufacturing reports and housing data.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Biotech and Nutrition

by James Brown

Click here to email James Brown


NEW DIRECTIONAL CALL PLAYS

Amgen Inc. - AMGN - close: 139.27 change: +1.39

Stop Loss: 135.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.0 million
Entry on September -- at $---.--
Listed on September 08, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Biotech stocks have been leading the market higher this year. The BTK biotech index is up +32.5% year to date. The IBB biotech ETF is up +19.1%. AMGN is up +20.8% versus the S&P 500's +8% gain in 2014.

The company describes itself as focusing "on areas of high unmet medical need and leverages its biologics manufacturing expertise to strive for solutions that improve health outcomes and dramatically improve people's lives. A biotechnology pioneer since 1980, Amgen has grown to be the world's largest independent biotechnology company, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential."

They are one of the first major biotech firms to go public. Today the California-based company has grown to 20,000 employees with a presense in more than 75 countries. Annual revenues are set to hit $19.5 billion this year. The company invests near $4 billion in R&D every year. AMGN has is a combination of mature drugs and a new stable of treatments working through their pipeline.

The company recently received good news after the FDA granted priority review to AMGN's Ivabradine treatment for chronic heart failure. Wall Street is also eager for AMGN's new cholesterol drug, which could be its next multi-billion blockbuster. This new cholesterol drug, Evolocumab, is a PCSK9 inhibitor to lower LDL cholesterol for patients that can't use statin drugs. AMGN recently filed some key regulatory paperwork with the FDA as it races against rival Regeneron to be the first mover in this new field of cholesterol treatments.

Enthusiasm for AMGN's new pipeline should continue. In addition to Evolocumab and Ivabradine, AMGN should see progress on Kyprolis, Talimogene laherparepvec, Blinatumomab, Trebananib, Brodalumab, and AMG 416 in the next six months.

The company's last earnings report was better than expected. AMGN reported on July 29th. Wall Street was looking for earnings of $2.07 a share on revenues of $4.9 billion. The company reported $2.37 a share with revenues up +10.7% to $5.18 billion. Management also guided higher and raised estimates for 2014 earnings growth and revenue growth. Several analysts have raised their price targets and the point & figure chart is bullish and currently forecasting at $152 target.

Tonight we're suggesting a trigger to buy calls at $140.25.

Trigger @ $140.25

- Suggested Positions -

Buy the 2015 Jan $150 call (AMGN150117C150) current ask $3.25

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

Annotated Chart:




NEW DIRECTIONAL PUT PLAYS

Herbalife Ltd. - HLF - close: 48.77 change: -1.04

Stop Loss: 50.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.5 million
Entry on September -- at $---.--
Listed on September 08, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
HLF calls itself a nutrition company. Most see it as a multi-level marketing firm. Its detractors would call HLF a pyramid scheme.

According to the company's website, "Herbalife is a global nutrition company that has been changing people’s lives with great products since 1980. Our nutrition, weight-management, energy and fitness and personal care products are available exclusively to and through dedicated Independent Herbalife Members in more than 90 countries. We are committed to addressing the global obesity epidemic by offering high-quality products, one-on-one coaching with an Herbalife Member and a community that inspires customers to live a healthy, active life. The company has over 7,400 employees worldwide, and its shares are traded on the New York Stock Exchange (NYSE: HLF) with net sales of $4.8 billion in 2013."

HLF's biggest opponent is influential hedge fund manager Bill Ackman. Ackman's Pershing Square Capital Management has famously bet $1 billion that HLF is an illegal pyramid scheme and once the facts come to light the government will shut it down. Unfortunately for Bill this is a fight he has been waging since late 2012. It has definitely generated a roller coaster ride in HLF's stock price.

Back in July Ackman promised to deliver a death blow to HLF in an over hyped presentation. Unfortunately, Wall Street failed to see the smoking gun and shares of HLF surged about 25% in one day. Yet there hasn't been any follow through. In fact shares of HLF have reversed and are trading near their 2014 lows.

The latest earnings report did not help. HLF reported earnings in late July and missed both the top and bottom line estimates. Management lowered their 2014 guidance. The company seems to be having trouble retaining their independent salesmen. At the same time there is a growing scrutiny of MLMs overseas, especially in big markets like China and India.

The stock is hovering above support near $48.00. A breakdown would look very bearish for HLF. The Point & Figure chart is already bearish and forecasting a $28.00 target. A drop under $48.00 would generate a new triple-bottom breakdown sell signal on the P&F chart.

I do want to caution investors that this should be considered a more aggressive, higher-risk trade due to the high amount of short interest. The most recent data listed short interest at 44% of the 60.0 million share float. I suggest limiting your position size to reduce risk.

Trigger @ $47.90 (small positions)

- Suggested Positions -

Buy the Oct $45 PUT (HLF141018P45) current ask $2.20

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

Annotated Chart:

Weekly Chart:



In Play Updates and Reviews

Monday Delivers A Quiet Session

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market was relatively quiet during Monday's session. Traders did buy the early afternoon dip.

LMT and SAVE hit our entry triggers.

MSI was stopped out. The SPY trade was closed this morning.


Current Portfolio:


CALL Play Updates

Concur Technologies - CNQR - close: 109.76 change: +1.00

Stop Loss: 104.90
Target(s): To Be Determined
Current Option Gain/Loss: +78.2%
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:
09/08/14: CNQR continues to show relative strength with a +0.9% gain. The stock looks poised to breakout past resistance near $110.00 soon. I am not suggesting new positions at this time.

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*

09/03/14 new stop @ 104.90
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: 87.76 change: -0.10

Stop Loss: 86.45
Target(s): To Be Determined
Current Option Gain/Loss: -11.3%
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:
09/08/14: Monday turned out to be a very quiet session for shares of EXPE. I am not suggesting new positions at this time.

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

09/06/14 new stop @ 86.45
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


The Greenbrier Companies - GBX - close: 72.07 change: +0.20

Stop Loss: 69.40
Target(s): To Be Determined
Current Option Gain/Loss: Oct$75c: -43.8% & Dec$80c: -29.7%
Average Daily Volume = 600 thousand
Entry on September 03 at $73.50
Listed on September 02, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/08/14: GBX spent today's session hovering near $72 and its simple 10-dma. Today's intraday high was $73.20. Consider waiting for a move above $73.50 before initiating new positions.

Earlier Comments: September 2, 2014:
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.

- Suggested Positions -

Long OCT $75 call (GBX141018C75) entry $2.85*

- or -

Long DEC $80 call (GBX141220C80) entry $2.99

09/03/14 triggered @ 73.50
*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


Hess Corp. - HES - close: 99.75 change: -1.24

Stop Loss: 98.40
Target(s): To Be Determined
Current Option Gain/Loss: -38.9%
Average Daily Volume = 1.97 million
Entry on August 03 at $101.55
Listed on August 30, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/08/14: Crude oil posted another decline today and that may have weighed on the oil service stocks. Shares of HES briefly traded below the $99.00 level before paring its losses. I am not suggesting new positions at this time. Our stop loss remains at $98.40.

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.

- Suggested Positions -

Long NOV $105 call (HES141122C105) entry $1.95*

09/03/14 triggered @ 101.55
*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


Lockheed Martin - LMT - close: 174.77 change: +0.19

Stop Loss: 169.75
Target(s): To Be Determined
Current Option Gain/Loss: -7.2%
Average Daily Volume = 1.1 million
Entry on September 08 at $175.55
Listed on September 06, 2014
Time Frame: 10 to 14 weeks
New Positions: see below

Comments:
09/08/14: Our new trade on LMT is open but shares didn't perform as well as expected. Our trade was triggered at $175.55 this morning. Yet LMT's intraday rally failed near last week's high. Investors may want to wait for a rise past $175.75 before initiating new positions.

Earlier Comments: September 6, 2014:
A few years ago the word "sequestration" was a buzzword in politics and the defense industry. The defense cuts were supposed to be so bad that it would force the democrats and republicans to work together and prevent the Budget Control Act of 2011 from becoming law. Well we all know how that worked out. Politics won and the budget cuts were enacted. The U.S. is supposed to be cutting $500 billion in defense spending from 2012-2021.

Yet these drastic cuts have not slowed the defense stock's performances. The group had a banner year in 2013 with big stock market gains. They continue to show leadership in 2014. Shares of LMT are up +17.4% in 2014 versus a +8.6% gain for the S&P 500.

According to a company press release LMT describes itself as, "Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 113,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation’s net sales for 2013 were $45.4 billion."

The company has continued to capture a number of big government contracts including a $915 million deal to build a "space fence" for the U.S. Air Force.

It is worth noting that LMT is the U.S. government biggest defense contractor and just over 80% of LMT's revenues come from the U.S. government. The company is being proactive in trying to broaden their customer base and hope to achieve 20% of sales from outside the U.S. At the moment LMT already has sales in 70 different countries. The plan seems to be working with 25% of the company's backlog coming from international orders.

Many believe that LMT's F-35 joint strike fighter program will be a key revenue driver in the future. The F-35 Joint Strike Fighter (JSF) is already the world's most expensive weapons system with a price tag near $400 billion. Earlier this year the JSF program suffered a setback after its engines, built by a subcontractor, caught fire. LMT believes they have solved the engine problem and the JSF program is getting closer to completion with over 19,500 hours of flight time. LMT already has 11 countries planning to purchase the new F-35 JSF planes.

LMT's earnings have been strong in spite of the sequestration. Back in April they report their Q1 results that beat estimates. Wall Street expected a profit of $2.53 a share on revenues of $10.89 billion. LMT beat the bottom line estimate with $2.87 per share but missed the revenue estimate at $10.65 billion for the quarter. However, management gave an optimistic outlook and raised their 2014 guidance on both net profits and revenues. When LMT reported earnings again in July they deliver a profit of $2.76 a share on revenues of $11.31 billion. That beat Wall Street's estimate of $2.66 and revenues of $11.15 billion. Management raised their EPS guidance again. The company has beaten analysts estimates four quarters in a row.

The company is shareholder friendly with a strong stock buyback program and a dividend yield of 3.2%. The point & figure chart is bullish and forecasting at $200 price target. Tonight we're suggesting a trigger to buy calls at $175.55.

- Suggested Positions -

Long DEC $180 call (LMT141220C180) entry $3.45*

09/08/14 triggered @ 175.55
*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


LyondellBasell Industries - LYB - close: 114.00 change: -0.59

Stop Loss: 112.25
Target(s): To Be Determined
Current Option Gain/Loss: +44.0%
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:
09/08/14: LYB continues to trade sideways just above short-term support at its 10-dma. I'm growing concerned that its upward momentum is dying.

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


Nike, Inc. - NKE - close: 82.40 change: +0.36

Stop Loss: 77.95
Target(s): To Be Determined
Current Option Gain/Loss: +37.4%
Average Daily Volume = 2.8 million
Entry on September 05 at $80.50
Listed on September 04, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/08/14: NKE saw some profit taking this morning but an hour into the day traders started buying the dip and shares hit new highs.

Yesterday I suggested looking for a dip near $81.00 as an entry point and NKE provided a dip to $81.09.

Earlier Comments: September 4, 2014:
Nike made headlines earlier this week when there was a bit of a bidding war for NBA star Kevin Durant. Durant's endorsement contract with NKE was coming to an end and rival Under Armour (UA) was trying to steal Durant away from NKE with a $200 million deal. In the end NKE outbid its rival and offered the 25-year old Durant a $300 million deal over the next ten years. Some of suggested that it could be worth a total of $350 million over the next 20 years. While I personally find numbers like these outrageous it's pocket change for NKE, which is sitting on $5.14 billion in cash and brings in a net profit of $2.7 billion a year on revenues of almost $28 billion annually.

Meanwhile the winds of fashion seem to be blowing in NKE's favor. There's a new trend being called "athleisure" where activewear and fashion intersect. Last year apparel sales fell -1%. Yet sales of activewear rose +7%. The activewear market now accounts for 16% of the U.S. market and has grown to almost $34 billion.

NKE's most recent earnings report was better than expected. Wall Street was looking for a profit of $0.75 on revenues of $7.34 billion. The company beat estimates with $0.78 on revenues of $7.42 billion. Gross margins improved 170 basis points to 45.6 percent. Management reported that they spent $912 million on buying back 12.3 million shares of stock last quarter as part of their $8 billion stock buyback program.

Technically shares of NKE have been stuck under major resistance at the $80.00 level since December 2013. Investors have been slowing buying the dips and now the stock looks poised to breakout past resistance. The point & figure chart is bullish and currently forecasting at $98 target.

Tonight I'm suggesting a trigger to buy calls at $80.50. Shares of NKE do not move super fast so we'll use the 2015 January calls.

- Suggested Positions -

Long 2015 Jan $85 call (NKE150117C85) entry $1.95*

09/05/14 triggered @ 80.50
Option Format: symbol-year-month-day-call-strike


O'Reilly Automotive - ORLY - close: 158.24 change: -0.31

Stop Loss: 155.90
Target(s): To Be Determined
Current Option Gain/Loss: + 2.2%
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:
09/08/14: ORLY spent the day in neutral with shares idling near $158.00. Nimble traders could buy dips near the simple 10-dma (currently at $156.75).

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*

09/06/14 new stop @ 155.90
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


Spirit Airlines - SAVE - close: 73.24 change: +0.04

Stop Loss: 69.75
Target(s): To Be Determined
Current Option Gain/Loss: -15.4%
Average Daily Volume = 544 thousand
Entry on September 08 at $73.75
Listed on September 06, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
09/08/14: Our brand new trade on SAVE has been triggered at $73.75. Another drop in crude oil this morning gave the airlines a boost. SAVE hit new highs at $74.00 before trimming its gains.

Earlier Comments: September 6, 2014:
Airline stocks have been some of the best performers in 2014. The XAL airline index is up +26.2% this year versus the +8.6% gain in the S&P 500. A significant drop in crude oil prices has played a big part and should help boost margins for the entire industry.

One stock leading the charge is SAVE. According to a company press release, "Spirit Airlines is committed to offering the lowest total price to the places we fly, on average much lower than other airlines. We operate more than 270 daily flights to over 55 destinations in the U.S., Latin America and the Caribbean." Last year SAVE's average fare was $133. That's 65% lower than the average domestic airline flight. That is just their basic ticket with no frills and they charge you for extras to boost their margins. The strategy seems to be working.

SAVE reported better than expected earnings back in April with revenues up +18.3% from a year ago, beating analysts' expectations. They did it again in July when SAVE reported their Q2 numbers. The company beat estimates on both the top and bottom line with revenues soaring +22.6% from a year ago. Management reported that their adjusted pre-tax margins improved from 17.8% to 21.3%.

The stock is in rally mode with SAVE closing near all-time highs on Friday. The Point & Figure chart is already bullish and forecasting an $82.00 target. Tonight we are suggesting a trigger to buy calls at $73.75.

- Suggested Positions -

Long OCT $75 call (SAVE141018C75) entry $2.13*

09/08/14 triggered @ 73.75
*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


United Rentals, Inc. - URI - close: 118.30 change: -0.21

Stop Loss: 115.65
Target(s): To Be Determined
Current Option Gain/Loss: + 5.3%
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:
09/08/14: URI didn't make any progress on Monday with shares hovering near $118.00 all day.

I am not suggesting new positions at current levels. Readers might want to inch their stop loss higher.

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*

09/04/14 new stop @ 115.65
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




PUT Play Updates

Chart Industries - GTLS - close: 64.74 change: -0.06

Stop Loss: 68.75
Target(s): To Be Determined
Current Option Gain/Loss: + 2.0%
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:
09/08/14: GTLS didn't see much movement either. The stock did manage to tag another relative low.

Keep an eye on the April low near $64.00, which might spark a short-term bounce.

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: 62.43 change: -0.39

Stop Loss: 64.65
Target(s): To Be Determined
Current Option Gain/Loss: +160.0%
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:
09/08/14: LVS is flirting with a breakdown under short-term support near $62.00. Thus far the $62 level is holding.

I am not suggesting new positions at this time.

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*

09/06/14 new stop @ 64.65
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


Pentair Plc - PNR - close: 66.92 change: -0.40

Stop Loss: 68.65
Target(s): To Be Determined
Current Option Gain/Loss: +25.0%
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:
09/08/14: PNR did not see any follow through on Friday's potential bullish reversal candlestick. That's good news for the bears.

I am not suggesting new positions at this time.

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*

09/06/14 new stop @ 68.65
08/26/14 triggered @ 68.90
Option Format: symbol-year-month-day-call-strike


CLOSED BEARISH PLAYS

Motorola Solutions, Inc. - MSI - close: 61.02 change: +2.13

Stop Loss: 60.05
Target(s): To Be Determined
Current Option Gain/Loss: -13.0%
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:
09/08/14: Ouch! After underperforming the market for weeks shares of MSI suddenly rocketed higher. I do not see any news to account for this move. The morning started off quiet. MSI just drifted sideways. Something happened at 11:04 a.m. There was a huge surge in volume with a spike to more than 3.0 million shares. The next minute (11:05) shares of MSI started to rally and they soared the rest of the day.

Our stop loss was hit at $60.05. I'm glad we lowered the stop in the prior newsletter.

- Suggested Positions -

MSI 2015 Jan $60 PUT (MSI150117P60) entry $3.29 exit $2.86* (-13.0%)

09/08/14 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
09/06/14 new stop @ 60.05
08/28/14 triggered @ 59.25
Option Format: symbol-year-month-day-call-strike

chart:


SPDR S&P 500 ETF - SPY - close: 200.59 change: -0.52

Stop Loss: 202.25
Target(s): To Be Determined
Current Option Gain/Loss: -44.5%
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:
09/08/14: We decided in the weekend newsletter to exit our SPY trade at the opening bell today. The SPY gapped down at $200.92.

- Suggested Positions -

Sept. $199 PUT (SPY140920P199) entry $1.84 exit $1.02 (-44.5%)

09/08/14 planned exit this morning.
09/06/14 prepare to exit on Monday morning
08/25/14 triggered on gap higher at $200.14, suggested entry was $199.95
Option Format: symbol-year-month-day-call-strike

chart: