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Daily Newsletter, Wednesday, 3/22/2017

Table of Contents

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

Market Wrap

Consolidating Tuesday's Decline

by Keene Little

Click here to email Keene Little
The tech indexes had a good day today while the others consolidated yesterday's losses. There are some important support levels that are holding, giving bulls hope that the 1-day selloff is finished, but that will depend on how the consolidation/correction plays out in the next day or two.

Today's Market Stats

Tuesday's decline saw high volume heavily skewed toward selling while today's volume was lower and the internals were only mildly bullish. A bounce attempt was made but on lower volume and relatively flat internals, suggesting the bounce attempt is a correction to the decline and not something more bullish. But we'll know more after another day or two.

There are many concerns that more investors are now talking about and most of them are market negative. The level of bullishness was doused with cold water after Tuesday's decline as the Trump trade starts to fizzle with the reports of difficulty that the Trump administration is having with the health care reform, which is the first major package they're trying to get through Congress.

The CNN Fear & Greed index has dropped from Extreme Greed (78) a month ago to the present Fear reading (32). The index was already pulling back from a month ago, indicating investors were starting to feel more and more nervous about the market. When it started to become apparent that the Trump administration wasn't going to be able to reinvent the Federal government the worries about his programs started to show up in investors' attitudes.

The health care reform is the first major package that Congress is trying to get through and with a Republican-led Congress the inability to push through reform has many wondering what other programs are going to be difficult to get through the sausage-making process. The rally from November was built on hope, not substance. It was the hope that health care reform, new spending programs, tax reform and other incentives for businesses (such as removal of excess regulations) would get done quickly and help the economy, jobs and business profits.

Now it's starting to look like many of those programs will get pushed out and may not even see the light of day if Congress remains locked in debate about everything. Interestingly, a log-jammed Congress is actually better for the economy since they seem only able to screw things up rather than fix them. But it's that expectations thing -- many have been expecting great things out of the Trump administration, hence the "Trump trade" and now that things are looking less hopeful we're starting to see some air let out of the hope-filled balloon.

Hope-filled rallies tend to be the weakest because they're not built on fundamentals. They might be considered fundamentally-supported rallies but they're based on the hope that the fundamentals will improve (with Trump's policies). When the reality hits that those changes will take longer to achieve, if ever, hope can turn to despair and bullish sentiment can evaporate in a heartbeat.

Many were wondering what sparked Tuesday's selloff, especially since the day started with a gap up. When a market is overbought and running on fumes it's a tinder box looking for a match. The catalyst is often something small that would normally not affect the market. But when investors start getting nervous and they pull their stops up tighter it usually doesn't take much to trigger enough selling, which then triggers more selling as stops get hit.

Late-to-the-party buyers also panic quickly and run for the doors at the first sign of trouble. This is why a market that's gone for a long period with practically no corrections is a more dangerous market. A good analogy would be a forest that has grown thick with underbrush because of the years of firefighting control. When the fire does finally get out of control and all that underbrush lights off it becomes a vicious fire.

Controlling the selling has left the market with a lot of underbrush that should have been burned away with regular and deeper corrections than we've seen for the past 4 months. It will only be known in hindsight if we're at the start of that process or if hope will live a little longer and drive the market back up. We still have many looking at this "dip" as a buying opportunity.

I consider the RUT one of the more important indexes to watch currently because of its leadership. It's a more volatile index, which can throw traders off the trail, but at the beginning of what could turn into a more significant decline I think it's important to watch what the RUT does since it's a good reflection of the bullish/bearish mood of the market. So I'll start tonight's review with the RUT.


Russell-2000, RUT, Weekly chart

Just as the RUT did at its June 2015 high when it banged into the trend line along the highs from 2007-2014, it has started a more significant pullback than we've seen since the November 4th low. It's too early to tell if we'll get a stronger pullback, like what happened following the June 2015 high, or if instead we'll see another attempt to get through the 2007-2014-2015 trend line, which will be near 1422 by the first week of April.

The first thing the bears need to do is get the RUT below price-level support at 1296 (it June 2015 high) and its uptrend line from February-November 2016, near the same level. In the meantime the larger trend is still to the upside.


Russell-2000, RUT, Daily chart

The daily chart shows the rejection at the 2007-2015 trend line following the March 1st high. Interestingly, when the chart is viewed with the arithmetic price scale the trend line is lower and acted as resistance to the bounce into the high near 1394 last Friday.

On Tuesday the RUT dropped down to price-level support at 1342-1347, shown with the horizontal red line on the daily chart below. Today it dropped below support but then rallied back up to it this afternoon and the day finished with a bullish hammer candlestick at support. This is generally a good reversal signal so watch for follow through to the upside on Thursday.

I show the potential for a bounce into Friday before heading lower but we'll have to wait to see if the bulls have different plans. If the sellers continue to pressure the market and the RUT drops below this morning's low at 1335 we could see a move down to the uptrend line from February-November 2016 and its 200-dma, maybe near 1290 next week.

Key Levels for RUT:
- bullish above 1394
- bearish below 1347


Russell-2000, RUT, 60-min chart

In addition to the bullish hammer for the daily candlestick, there's another reason why the bulls could get another rally leg. The move down from March 1st is a 3-wave move and the RUT achieved two equal legs down near 1335 today. It could be just an a-b-c pullback correction that's now ready for the next leg of the rally.

It's going to be tough to tell in the short term what it's going to be but if we get an impulsive rally, and certainly if it breaks the downtrend line from March 1st, we'll have a better clue about a new high coming. The bearish setup calls for a higher bounce and then a much stronger decline to follow.


S&P 500, SPX, Daily chart

There are multiple possible paths for the market from here, which is of course no different than any other time. But the challenge at the moment is trying to figure out whether Tuesday's strong decline (strong relative to what we've seen in the past 4 months) was meaningful as far as a trend change or just the completion of a pullback correction.

We've seen multiple times in the past where a strong down day ends up being the completion of a correction instead of something more bearish and that remains possible here. It's why I mentioned the 3-wave pullback on the RUT's 60-min chart -- it's the same pattern for the blue chips as well and it could now lead to another rally to new all-time highs.

But if we've started a more significant pullback/decline, and we're certainly due for one, we should see only corrective (choppy) bounce attempts and then lower. For now watch to see if SPX can make it back above its trend line along the highs from April-August 2016, currently near 2360. If it continues lower, watch for possible support at a short-term uptrend line from December 30 - January 31, near 2330, which coincides with its 50-dma.

Key Levels for SPX:
- bullish above 2390
- bearish below 2330


Dow Industrials, INDU, Daily chart

As mentioned above, the blue chips have the same pattern and at the moment that means a 3-wave pullback from March 1st could now be followed by a new rally to a new high, potentially up to about 21,275 where it would hit an intersection of trend lines shown on the daily chart below. If the sellers continue to apply pressure, maybe after a higher bounce into Thursday or Friday, we should see the Dow drop down to its 50-dma, currently at 20420. Below that there's not much support until price-level S/R near 20K.

Key Levels for DOW:
- bullish above 21,000
- bearish below 20,579


Nasdaq-100, NDX, Daily chart, Arithmetic price scale

Today NDX used its trend line along the highs from April-August 2016 as both support and resistance at its low and high, which sounds a bit strange until you look at the chart with both the log and arithmetic price scales. The first chart below is using the arithmetic price scale and you can see this morning's low at 5327 touched the trend line and then bounced. Near the same level is a potential price-level support zone at 5330-5338, where it closed its March 1st gap up and tested the lows on March 6th and 9th. This looks like a bullish back-test and if support holds we could see the start of another rally leg to new highs. But a close below 5330 would suggest another leg down for the pullback/decline.

Key Levels for NDX:
- bullish above 5440
- bearish below 5330


Nasdaq-100, NDX, Daily chart, Log price scale

Now we look at the same NDX chart but with the log price scale, which shifts the trend line along the highs from April-August 2016 up a little bit. This trend line was broken with Tuesday's decline and today's bounce made it back up to the line, near 5368 (where it closed). Now we have a bearish back-test of the trend line and only slightly higher is its broken 20-dma, near 5371. Following the bearish back-test we could see another leg down for a larger pullback/decline. We are left wondering if this trend line is now support or resistance and it depends on how you view the chart.

We could get a little larger bounce off this morning's low where it would achieve two equal legs up near 5387, which is between a 50% and 62% retracement of its decline (5383 and 5396, resp.). Unless Tuesday's decline completed a sideways correction off the March 1st high we should see the decline continue following this bounce.


10-year Yield, TNX, Weekly chart

Treasury yields peaked on March 10th, a few days before the FOMC announcement to raise rates. Since the announcement on the 15th yields have declined, which leaves us wondering if it's been simply a sell-the-news reaction or something more. The bond market is considered smarter than the stock market and the rally in bonds (decline in yields) could be indicating the start of a more significant shift.

One reason why I suspect we could be starting a more significant shift is because the wave count for the rally from July 2016 looks complete following the triangle consolidation from December into February and then the minor new high into the March 10th high. TNX has since dropped back into the triangle, which is typically a good indication the high is in place.

At a minimum we should expect a larger pullback to at least correct the rally from last July. More bearishly, the larger wave pattern suggests we still have another leg down to new lows coming in 2017-2018. Lower yields would reflect the idea that worries of inflation will shift back to worries about deflation. We have a huge credit bubble (personal, corporate and government) waiting to be popped and a credit collapse is a cause for deflation. I firmly believe we still have that in front of us.


KBW Bank index, BKX, 60-min chart

A rate increase from the Fed is supposed to help banks but like the bond market we've seen the opposite reaction than what was expected. The banks were pulling back marginally since March 1st but then started to accelerate lower after last week's FOMC announcement

What's instructive, from a price pattern perspective, is how price played out this week, which is shown on the BKX 60-min chart below. On Monday I had noted the brief break below the bottom of a bullish descending wedge, which had developed since the March 1st high. The recovery back inside the wedge during the day had it looking like a throw-under finish that would lead to a rally.

As I noted to readers, the one non-confirming signal was the lack of bullish divergence at the lows inside the descending wedge. This suggested the bullish descending wedge was going to fail and that a drop below Monday morning's low at 94.39 would likely see acceleration of the selling. The sudden drop into Monday's close below Monday morning's low was the warning sign that we should expect strong selling on Tuesday, which is exactly what happened.

When a price pattern fails it tends to fail hard and this is a perfect example of it. The drop below 94.39 Monday afternoon resulted in a strong selloff, which was predicted by the failed bullish pattern. BKX then dropped below its uptrend line from June-September 2016, currently near 91.10, and is struggling to bounce back up to it. If it remains resistance on a back-test look for additional selling to follow. A rally back above the trend line would be potentially bullish but only if we see an impulsive move back up.


Transportation Index, TRAN, Daily chart

The TRAN has been another leader to the downside, reflecting concerns that the economy is not doing as well as we've been hearing from economists. The small rising wedge for the last part of its rally from January into the March 1st high was met with significant bearish divergence and once it dropped out of the wedge on March 7th it began to sell off harder.

The TRAN has now made it down to support at its uptrend line from June-October 2016, tagging it with this morning's low at 8903, and could get at least a decent bounce correction. But with a lack of bullish divergence at this morning's low it's looking like trendline support will break.


U.S. Dollar contract, DX, Daily chart

The US$ made a closing low at 99.51 on January 31st (and a lower intraday low at 99.19 on February 2nd) and the dollar is trying to hold at its January 31st closing low, finishing today at 99.48. There are some hints of short-term bullish divergence suggesting a bounce is coming but for now there's downside potential to the uptrend line from May-August 2016, near 98.45, which is coincident with its 200-dma. Below that is a price projection at 97.65 for two equal legs down from its January 3rd high.


Gold continuous contract, GC, Daily chart

Gold rallied fairly strongly on Tuesday as the stock market tumbled. It looked like a safe-haven play. It added a little more today but after a morning pop up (with the stock market's quick decline) it's now looking like the bounce could be topping (bearish divergence last week). If the bounce has a little more life to it we could see gold challenge its broken 200-dma, near 1262.70 (today's high was 1251.50), and its downtrend line from August-September 2016, currently near 1266. Above 1270 would be more bullish but until that happens I'm thinking we have a strong selloff coming.


Silver continuous contract, SI, Daily chart

Silver has a very similar pattern as gold but it didn't quite as strong a rally on Tuesday. Its bounce off the March 15th low is not as strong as gold's rally as it battles its broken 20- and 50-dmas, which are currently at 17.59 and 17.52, resp. Today it closed at 17.55. Only slightly higher is its downtrend line from July 2016, currently near 17.73, and silver would be more bullish above that level, but maybe only for a trip up to its broken 200-dma, near 18.06, before heading back down.


Oil continuous contract, CL, Daily chart

Oil is now nearing its uptrend line from August-November 2016, currently near 46.30, about 70 cents below this morning's low. It's starting to show bullish divergence so I suspect support will hold and it might even get a bounce from here. The moves for oil, like most commodities, are mostly 3-wave and right now we have a 3-wave pullback from its January 3rd high. We could therefore start a bounce back up, a multi-week consolidation on top of its uptrend line from August-November. If it can get back above price-level S/R near 50.90 it would be more bullish but the larger pattern suggests we'll only get a bounce correction before dropping lower.


Economic reports

Thursday will be another quiet day for economic reports. New home sales will be reported, which are expected to have ticked higher in February as compared to January. That wasn't true for existing home sales that were reported this morning so we'll see if new homes are doing a little better than existing. Friday we'll get the durable goods report, which is expected to show improvement in February.


Conclusion

Today started with a little more selling, probably by those who received a few margin calls following Tuesday's strong selling. Margin debt is at record highs and there are a lot of traders using margin to max out their bullish accounts. Any decline is going to hit them with margin calls and that's one of the risks for the current market.

But the morning selling was followed by a bounce and now we need to figure out whether it's going to lead to something more bullish or just one of the dead cat varieties before heading lower. If we see the market consolidate near the lows for a day or two it's going to look more bearish. But if the bounce develops into a sharp move back up we'll then have to think about the possibility for new highs following the corrective pullback off the March 1st highs.

The pattern for the tech indexes suggests we'll get at most a high bounce before dropping back down. How the price pattern develops for the next two days will provide clues for how next week is likely to go.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT


New Option Plays

New Product Surge

by Jim Brown

Click here to email Jim Brown

Editors Note:

This company's new products are causing a surge in revenue. In the networking business if you stand still you are dead. Innovation is the key and Lumentum has it.


NEW DIRECTIONAL CALL PLAYS

LITE - Lumentum - Company Profile

Lumentum Holdings Inc. manufactures and sells optical and photonic products for optical networking and commercial laser customers worldwide. It operates in two segments, Optical Communications and Commercial Lasers. The Optical Communications segment offers components, modules, and subsystems that enable the transmission and transport of video, audio, and text data over high-capacity fiber optic cables. It offers optical communication products, including optical transceivers, optical transponders, and supporting components, such as modulators and source lasers; modules or sub-systems containing optical amplifiers, reconfigurable optical add/drop multiplexers or wavelength selective switches, optical channel monitors, and supporting components; and products for 3-D sensing applications, including a light source product. This segment serves customers in telecom and datacom markets. The Commercial Lasers segment offers diode, direct-diode, diode-pumped solid-state, fiber, and gas lasers; and photonic power products, such as fiber optic-based systems for delivering and measuring electrical power. This segment serves customers in markets and applications, such as manufacturing, biotechnology, graphics and imaging, remote sensing, and precision machining such as drilling in printed circuit boards, wafer singulation, and solar cell scribing. Company description from FinViz.com.

For Q4, Lumentum posted earnings of 57 cents that beat estimates for 51 cents and the 49 cents in the year ago quarter. Revenue rose 21% to $265 million to miss analyst estimates by $700,000.

The company said it was seeing "strong growth in new product revenue, particularly the 100Gb Datacom, which was up 124% sequentially and more than 500% over the year ago quarter.

They guided for Q1 for earnings of 46-54 cents and revenue of $250 million compared to 32 cents in the year ago quarter. Analysts were expecting 47 cents and $263.8 million. That was a guide beat on earnings but miss on revenue. Shares rallied $12 over the next two weeks but they gave most of that back in late February.

Earnings May 19th.

On March 16th, Goldman upgraded the stock saying there was a "wide range" of possible upside if it wins Apple as a customer. Goldman said Lumentum could benefit from the inclusion of 3D sensing in the new crop of smartphones, that could add $273 million to annual revenue starting in July. Goldman's base case was $65 million in additional revenue. Then Jefferies hiked the price target citing a possible design win in the iPhone 8 as well. Lumentum, formerly part of JDS Uniphase, developed the 3D sensing technology back in 2010 so it is a core technology.

They announced some new products on Tuesday at the OFC Conference and shares soared at the open to nearly $52. The Nasdaq selloff knocked it back down to $48. The Nasdaq rally on Wednesday saw it rebound back to $51.50. There was no holding it back. Shares should continue to rise on the new products now that the post earnings depression is over.

Shares are threatening to break out to a new high. When I started writing the play in early afternoon the option was $2.55.

Buy May $55 call, currently $2.90, initial stop loss $47.50.


NEW DIRECTIONAL PUT PLAYS

No New Bearish Plays



In Play Updates and Reviews

Better Than No Rebound

by Jim Brown

Click here to email Jim Brown

Editors Note:

The Nasdaq recovered nearly a third of Tuesday's loss but the other indexes were negative or barely positive. With the Dow down -6, S&P-600 -2, Russell -1, S&P +4 and the Nasdaq +28 and +35, you can definitely tell where investors bought the dip. The big cap tech stocks shifted from sinners to winners and lifted the $NDX and the Composite.

The small caps remained weak and the Dow struggled to keep from posting a larger loss. The markets traded down at the open but struggles back to the flat line by lunch time and the Nasdaq took off in the afternoon.

The weakness in the Dow, S&P and Russell suggest there may be more downside ahead. The Nasdaq cannot support the broader market by itself. However, the big cap tech stocks were probably what kept the S&P from closing negative.

I would remain cautious about adding a lot of positions. The Nasdaq only recovered 30% of its losses and the other indexes did not recover any other than the fractional gain on the S&P. Given the steepness of the decline, we are either going to see a rush back into equities on Thursday on the theory that the lack of a decline today was bullish or we will see a new wave of selling on the theory the rebound was lackluster.



Current Portfolio


Stop Loss Updates

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.


Profit Targets

Check the graphic below for any profit stops in green. We need to always be prepared for a profit exit at resistance.





Current Position Changes


No Changes



If you are looking for a different type of option strategy, try these newsletters:

Credit spreads and naked puts = OptionWriter

Long term option investments = LEAPS Investor

3-6 month Option Trades = Ultimate Investor

Iron Condors = Couch Potato Trader

Long and short equity trades = Premier Investor



BULLISH Play Updates

ADP - Automatic Data Processing - Company Profile

Comments:

No specific news. Minor rebound in a mixed market.

Original Trade Description: March 17th.

Automatic Data Processing, Inc., together with its subsidiaries, provides business process outsourcing services worldwide. The company operates through two segments, Employer Services and Professional Employer Organization (PEO) Services. The Employer Services segment offers a range of business outsourcing and technology-enabled human capital management (HCM) solutions, including payroll services, benefits administration services, talent management, human resources management solutions, time and attendance management solutions, insurance services, retirement services, and tax and compliance solutions. This segment's integrated HCM solutions include RUN Powered by ADP, ADP Workforce Now, ADP Vantage HCM, and ADP GlobalView, which assist employers of all sizes in all stages of the employment cycle from recruitment to retirement; and ADP SmartCompliance and ADP Health Compliance. The PEO Services segment provides a human resources (HR) outsourcing solution through a co-employment model to small and mid-sized businesses. This segment offers ADP TotalSource that provides various HR management services and employee benefits functions, such as HR administration, employee benefits, and employer liability management into a single-source solution. Company description from FinViz.com.

ADP reported earnings of 87 cents that rose 57% and beat estimates for 81 cents. Revenue of $2.99 billion rose 6.4% but missed estimates for $3.01 billion. They surprised analysts with revenue growth guidance for 2017 at 6%, down from prior forecasts of 7% to 8%. They blamed the revenue miss and lowered guidance on uncertainty over the elections and the impact of the Trump election. They also see a 1% revenue hit from the sale of their CHSA and COBRA businesses in 2016. They guided for earnings growth of 15% to 17% for the full year. They currently serve 637,000 clients in 125 nations. The number of employees serviced rose 2.3%. PEO Services employees rose 12% to 452,000. These are "co-owned" employees managed by ADP for clients.

They repurchased 4.6 million shares at a cost of $422 million. They expect to repurchase $1.2-$1.4 billion in shares in 2017.

Earnings May 3rd.

ADP holds a dominant position in the payroll processing sector. With employment expected to rise again in 2017 this could be an attractive investment for funds that are tired of chasing industrials and bank stocks in the current rally.

ADP rallied nearly $1 on Friday in a weak market and closed at $105.12 and a new high. It was also just over the $105 strike. I am recommending we reach out to the $110 strike since it appears ADP is about to move higher after three weeks of consolidation. This option price is very cheap and there will be no initial stop loss.

Position 3/20/17:

Long May $110 call @ 75 cents, see portfolio graphic for stop loss.


AZN - AstraZenaca - Company Profile

Comments:

No specific news. Nice rebound to a new 5-month high.

Original Trade Description: March 2nd

AstraZeneca PLC engages in the discovery, development, and commercialization of prescription medicines for the treatment of respiratory, inflammation, autoimmune, cardiovascular, metabolic, oncology, infection, neuroscience, and gastrointestinal diseases worldwide. Its marketed products comprise Accolate, Bricanyl Respules, Bricanyl Turbuhaler, Daliresp, Duaklir Genuair, Eklira Genuair/Tudorza/Bretaris, Oxis Turbuhaler, Pulmicort Turbuhaler/Pulmicort Flexhaler, Pulmicort Respules, Rhinocort, Symbicort pMDI, and Symbicort Turbuhaler for respiratory, inflammation, and autoimmunity diseases; Atacand1/Atacand HCT/Atacand Plus, Brilinta/Brilique, Crestor2, Plendil, Seloken/Toprol-XL, Tenormin3, and Zestril4 for cardiovascular disease; and Bydureon, Byetta, Farxiga/Forxiga, Kombiglyze XR, Komboglyze, Onglyza, Symlin, Xigduo, and Xigduo XR for metabolic disease. The company's marketed products also include Arimidex, Faslodex, Iressa, Lynparza, Nolvadex, Tagrisso, and Zoladex, as well as Casodex, Cosudex for oncology disease; Fluenz/FluMist, Fluenz Tetra/FluMist Quadrivalent1, Merrem/Meronem2, Synagis3, and Zinforo4 for infection disease; Diprivan, EMLA, Movantik/Moventig, Naropin, Seroquel IR, Seroquel XR, Vimovo1, Xylocaine, and Zomig for neuroscience disease; and Losec/Prilosec and Nexium for gastrointestinal disease. It serves primary care and specialty care physicians through distributors and local representative offices. The company's pipeline includes 146 projects, of which 125 are in the clinical phase of development. It has collaboration agreements with Celgene Corporation; Immunocore Limited; Heptares Ltd.; Foundation Medicine, Inc., French National Institute of Health and Medical Research (Inserm); and FibroGen and Astellas, as well as a research agreement with Eli Lilly. Company description from FinViz.com.

In their recent earnings AZN reported $1.21 compared to estimates for $1.14. Revenue of $5.585 billion was in line with estimates.

Shares fell after the CEO warned that generic sales of Crestor were crushing sales of the original drug. Sales of Crestor were down 53% in the quarter. The company said because of the Crestor decline there would be low to mid single-digit declines in revenue in 2017 and low to mid-teens percentage decline in core EPS.

However, the company has a lot of drugs coming to market and several are "life changing" for cancer, respiratory and metabolic diseases. He said AZN was at an inflection point for the anticipated return to long-term growth built on a solid pipeline.

Earnings May 4th.

AZN just received approval from the FDA on a type-2 diabetes drug called Qtern, a once daily tablet for a disease that affects 29 million Americans. They also said Lynparza, a breast cancer treatment, proved to be more effective than chemotherapy in treating metastic breast cancer.

Investors are buying AZN for the pipeline and ignoring the decline in Crestor. They have had years for that decline to appear and now it is old news.

AZN is a slow mover and the options are cheap. If the market rolls over we will not have much at risk. If the market rebounds we should be in the money in a couple days.

Update 3/3/17: AZN entered into a deal with Sanofi to market MEDI8897 for the prevention of resipiratory synctial virus (RSV) in newborns and infants. AZN will get 120 million euros up front and 495 million upon the achievement of sales related milestones. All costs will be shared equally.

Update 3/13/17: Good article in the WSJ about AZN helped to power the stock through resistance. Read it here.

Update 3/14/17: AZN released results of a study where the ovarian cancer drug Lynparza sharply slowed disease progression. Women with the disease lived an average of 19.1 months on the drug compared to 5.5 months for those on a placebo. Another report by the Society of Gynecologic Oncology said the number was 30.2 months. This is a new class of PARP drug that blocks enzymes involved in repairing damaged DNA and thereby helping to kill cancer cells. This is the first drug of its class to be approved by the FDA and reach the market.

Update 3/17/17: AZN received its second rejection letter from the FDA on the ZS-9 drug intended to treat high potassium levels in the blood. The letter does not require any new trials. The first rejection was due to some manufacturing issues. There are no details on the second letter but analysts believe it is still related to manufacturing controls since there is no requirement for new drugs trials or data. AZN will resubmit a new application when the issues are corrected. Shares still posted a gain even with the rejection.

Update 3/20/17: AZN released the results of a study for type 2 diabetes showing that treatment with SGLT-2 inhibitors reduced the rate of hospitalization for heart problems by 39% and death by any cause by 51%. This was a study with a population of 300,000 across six countries. This could mean that AZN could apply to sell the drug under more than one diagnosis for different types of treatment.

Position 3/3/17:

Long May $30 Call @ $1.10, see portfolio graphic for stop loss.


DIS - Walt Disney - Company Profile

Comments:

No specific news. Shares rebounded slightly and remain above support.

Original Trade Description: March 13th.

The Walt Disney Company, together with its subsidiaries, operates as an entertainment company worldwide. The company's Media Networks segment operates cable programming services, including the ESPN, Disney channels, and Freeform networks; broadcast businesses, which include the ABC TV Network and eight owned television stations; radio businesses consisting of the ESPN Radio Network; and the Radio Disney network. It also produces and sells original live-action and animated television programming to first-run syndication and other television markets, as well as subscription video on demand services and in home entertainment formats, such as DVD, Blu-Ray, and iTunes. Its Parks and Resorts segment owns and operates the Walt Disney World Resort in Florida and the Disneyland Resort in California. This segment also operates Disney Resort & Spa in Hawaii, Disney Vacation Club, Disney Cruise Line, and Adventures by Disney; and manages Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort, as well as licenses its intellectual property to a third party for the operations of the Tokyo Disney Resort in Japan. The company's Studio Entertainment segment produces and acquires live-action and animated motion pictures for distribution in the theatrical, home entertainment, and television markets primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm, and Touchstone banners. This segment also produces stage plays and musical recordings; licenses and produces live entertainment events; and provides visual and audio effects, and other post-production services. Its Consumer Products & Interactive Media segment licenses its trade names, characters, and visual and literary properties; develops and publishes games for mobile platforms; and sells its products through The Disney Store, DisneyStore.com, and MarvelStore.com, as well as directly to retailers. Company description from FinViz.com

Disney reported earnings of $1.55 on revenue of $14.78 billion. Analysts were expecting $1.49 and $15.26 billion. The comparisons to the year ago quarter were tough because of Frozen and Star Wars, The Force Awakens in that period. Star Wars was the first billion dollar film for the current fiscal year. The studio segment generated $2.52 billion in revenue. In January, after the December quarter ended, the company said it had more than $7.6 billion in global box office gross thanks to Star Wars: Rogue One, Captain America: Civil War and Finding Dory. CEO Bob Iger downplayed the concerns over ESPN saying they were very overblown because ESPN was still in demand by consumers, networks and advertisers.

Shares have recovered from the post earnings depression and are poised to continue making new highs, market permitting.

Update 3/15/17: Disney has upped its ownership to 85.7% and said it was going to buy out the rest of the investors and offered them a premium to the current value of their shares. Some investors are complaining. Euro Disney has significant debt and Disney said it would recapitalize 1.5 billion euros once it had full control. The actual park management loves the plan because it would put Disney back into control and provide it solid financial backing. This is just a temporary hiccup in the stock.

Update 3/20/17: Beauty & the Beast took in $170 million in ticket sales on its opening weekend. That was a record high for a family film. Disney has 11 other animated classics that it is planning to remake with human actors. The success of Beauty & the Beast will make theses 11 films a reality.

Mulan, Aladdin, Lion King, 101 Dalmatians, Little Mermaid, Pinocchio, Sword in the Stone, Peter Pan, Snow White and the Seven Dwarfs, Dumbo and a sequel to Marry Poppins.

Earnings May 9th.

Position 3/14/17:

Long May $115 call @ $1.83, see portfolio graphic for stop loss.


FNSR - Finisar Corp - Company Profile

Comments:

No specific news. Decent 2% rebound to close at a 2-week high.

Original Trade Description: March 20th.

Finisar Corporation provides optical subsystems and components for data communication and telecommunication applications in the United States, Malaysia, China, and internationally. Its optical subsystems primarily consist of transmitters, receivers, transceivers, transponders, and active optical cables that provide the fundamental optical-electrical or optoelectronic interface for interconnecting the electronic equipment used in communication networks, including the switches, routers, and servers used in wireline networks, as well as the antennas and base stations used in wireless networks. The company also offers wavelength selective switches, which are used to switch network traffic from one optical fiber to multiple other fibers without converting to an electronic signal. In addition, it provides optical components comprising packaged lasers, receivers, and photodetectors for data communication and telecommunication applications; and passive optical components for telecommunication applications. Finisar Corporation markets its products through its direct sales force, as well as through a network of distributors and manufacturers' representatives to the original equipment manufacturers of storage systems, networking equipment, and telecommunication equipment, as well as to their contract manufacturers. Company description from FinViz.com.

Finisar reported earnings of 59 cents that rose 136% but missed estimates for 62 cents. Revenue rose 23% to $380.6 million but also missed estimates for $389.5 million. They guided for Q1 earnings of 53 cents and revenue of $370 million. Analysts were expecting 58 cents and $393 million.

Despite the enormous improvement in sales and earnings the stock was crushed for a 25% decline from $35 to $26. The damage was worse because competitor Ciena (CIEN) had also reported a weaker quarter the day before. Panic gripped traders that optical networking was somehow slowing down. The pace of sales "growth" in China slowed slightly and that sent investors running for cover. China is building out its 100 gigabit network technology in metropolitan areas and they are consuming enormous amounts of networking equipment.

Earnings June 9th.

Finisar is not a one trick pony. They are also pushing into the smartphone market and will be competing on the 3D sensor components in the next version of smartphones. They are also building out massive networks in the cloud computing datacenters that require miles of fiber and very fast connections.

After the drop, multiple analysts reiterated buys and outperforms on FNSR saying this was just a hiccup and there are far greater earnings in the future. Raymond James upgraded them from outperform to strong buy. Jefferies upgraded from hold to buy. MKM reiterated a buy rating and $41 price target. Needham reiterated a strong buy and $44 target. Stifel, Raymond James and William Blair all reiterated a buy rating.

Shares have rebounded $2 off the lows from last week and should begin to accelerate higher in the days ahead.

Position 3/21/17:

Long June $30 call @ $1.50, see portfolio graphic for stop loss.


HLF - Herbalife - Company Profile

Comments:

No specific news. Only a minor rebound. Hardly any of Tuesday's loss was recovered.

Original Trade Description: March 15th.

Herbalife Ltd., a nutrition company, develops and sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, and personal care products. It offers science-based products in four principal categories, including weight management; targeted nutrition; energy, sports, and fitness; and outer nutrition. The company's weight management product portfolio includes meal replacement products, protein shakes, drink mixes, weight loss enhancers, and healthy snacks; targeted nutrition products comprise dietary and nutritional supplements containing herbs, vitamins, minerals, and other natural ingredients; and outer nutrition products consist of facial skin, body, and hair care products. It also provides literature, promotional, and other materials, including start-up kits, sales tools, and educational materials. The company offers its products through retail stores, sales representatives, sales officers, and independent service providers. It operates in North America, Mexico, South and Central America, Europe, the Middle East, Africa, the Asia Pacific, and China. Company description from FinViz.com.

It is well known that Bill Ackman has a $1.5 billion short on Herbalife. He has had it for a couple years. It is also well known that Carl Icahn does not like Ackman.

Ackman took a major hit in Valeant when he announced on Monday he had closed his 27.2 million share position for a loss of more than a $3 billion. Ackman is hurting because several of his recent high profile positions have gone against him and investors are pulling out their money or at least sending him hate mail suggesting he get his act together. He is also holding a massive long position in Chipotle and the stock is moving lower.

On Monday, Ackman announced he closed the Valeant position. Immediately, Carl Icahn announced he was buying 372,000 more Herbalife shares and had asked the SEC for permission to acquire up to 50% of the company. He already owns 24.6%. This is killing the short position held by Ackman. Shares are rising on the Icahn news.

While this seems like the perfect long position where Icahn is going to force Ackman to cover, there is one big problem. On March 17th a movie called "Betting on Zero" which profiles Ackman's short thesis, will open in a national release. Remember, everyone has known about this movie for a year. It played in a few single venues and the stock did not decline. When it was picked up for national release about 6 months ago, everyone thought this would be the end of the company. However, in late 2016 the company settled with the FTC for $200 million on a probe into their marketing practices. They dodged another large bullet since the probe was also based on Ackman's short thesis.

Shares collapsed in late February on a guidance miss and bottomed last Friday. They have been rebounding since Icahn made his recent announcement.

I am recommending a short term strangle. The odds are good that the stock is going to be directional after the film begins showing on the 17th. Everyone will either say OMG and dump the stock or they will say, "so what is the big deal" and buy the stock. Since Icahn has $1.5 billion invested, you know he is going to be very vocal about it and will probably publicize any further purchases if the stock declines. We do not care which way the stock moves. We just need it to move significantly.

Position 3/16/17:

Long April $57.50 call @ $1.11, no stop loss.
Long April $52.50 put @ $1.36, no stop loss.


ITW - Illinois Tool Works - Company Description

Comments:

No specific news. Minor rebound from support.

Original Trade Description: March 6th.

Illinois Tool Works Inc. manufactures and sells industrial products and equipment worldwide. It operates through seven segments: Automotive OEM; Test & Measurement and Electronics; Food Equipment; Polymers & Fluids; Welding; Construction Products; and Specialty Products. The Automotive OEM segment produces components and fasteners for automotive-related applications. The Test & Measurement and Electronics segment provides equipment, consumables, and related software for testing and measuring of materials and structures. This segment also offers equipment and consumables used in the production of electronic subassemblies and microelectronics. The Food Equipment segment provides commercial food equipment and related services. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Welding segment produces arc welding equipment, consumables, and accessories for various industrial and commercial applications. The Construction Products segment produces engineered fastening systems and solutions. The Specialty Products segment provides beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. Company description from FinViz.com.

ITW reported earnings of $1.39 compared to estimates for $1.37. Revenue of $3.4 billion matched estimates. Earnings were impacted by a 2% hit from the strong dollar.

The company reaffirmed their 2017 guidance for organic revenue growth of up to 3.5% and revenue from $13.8 to $14.1 billion. Operating margin is expected to rise 100 basis points to 23.5%. Free cash flow is expected to be $2 billion and $1 billion will be used in 2017 for stock buybacks. Q1 earnings guidance was $1.39 to $1.49. They ended the quarter with $2.472 billion in cash.

Earnings April 26th.

The commentary was positive and stock spiked sharply after earnings. Over the next four weeks, traders took profits and shares traded sideways. On the February 13th they declared a quarterly dividend of 65 cents payable April 11th to holders on March 31st. Shares ticked higher and began to make new highs.

I believe the economy is accelerating. The Philly Fed Manufacturing Survey last week was the highest since 1984 after three months of rapid growth. The new president is doing everything he can to spur growth in the USA and this is going to be contagious throughout America. Tool demand is going to rise.

Shares spiked to a new high after the president's speech and have held those gains.

Earnings are late April and I am reaching out to June for the option (no May strikes) and because of the market weakness I am putting an entry trigger on the position. We want to make sure the stock and market are moving higher before we enter the play.

Position 3/15/17 with an ITW trade at $135.25

Long June $140 call @ $2.25, see portfolio graphic for stop loss.


SLCA - U.S. Silica Holdings - Company Profile

Comments:

No specific news. Shares rebounded from support despite the 10:30 decline in crude prices.

Original Trade Description: March 9th

U.S. Silica Holdings, Inc. produces and sells commercial silica in the United States. The company operates through two segments, Oil & Gas Proppants and Industrial & Specialty Products. It offers whole grain commercial silica products to be used as fracturing sand in connection with oil and natural gas recovery; and resin coated proppants, as well as sells its whole grain silica products in various size distributions, grain shapes, and chemical purity levels for manufacturing glass products. The company also provides ground commercial silica products for use in plastics, rubber, polishes, cleansers, paints, glazes, textile fiberglass, and precision castings; and fine ground silica for use in premium paints, specialty coatings, sealants, silicone rubber, and epoxies. In addition, it offers other industrial mineral products, such as aplite, a mineral used to produce container glass and insulation fiberglass; and adsorbent made from a mixture of silica and magnesium for preparative and analytical chromatography applications. The company serves oil and gas recovery markets; and industrial end markets with customers involved in the production of glass, building products, foundry products, chemicals, and fillers and extenders. Company description from FinViz.com.

Silica sells sand to drillers. The drilling activity has increased 50% since the low in May. The active rig count declined to 404 on May 27th and has rebounded to 756 as of last week. Many of these reactivated rigs are completing previously drilled wells that were never fracked and put in production. The IEA said there were more than 5,000 of these wells at the end of December. It only takes a few days to reopen a well and prepare it for fracturing and then move to the next. The sand demand to fracture these wells is off the charts.

Since the drilling boom in 2014 the amount of sand used in fracturing a well has risen about 400% because of two years of additional data and refinement of the process. A current well with a two-mile lateral requires as much sand as a 100 rail car train, called a unit train.

Sand providers claim they have drillers trying to lock in sand prices for a year in advance but there is not enough sand available to fill the demand. Prices are expected to rise 40% in the first half of 2017. Multiple analysts predict a sand shortage in 2018 with another 50% or more rise in prices.

U.S. Silica was crushed in late February when they missed on earnings. They spent a lot of money in the quarter acquiring additional sand reserves and merging in acquisitions from earlier in the year. They spent 2016 acquiring other sand companies and operations around the country so they would be ready when the drilling boom returned.

They were crushed again this week when oil prices fell 7% in just two days to the lows for the year.

Oil prices are down on record inventory levels. Inventories rose by 8.2 million barrels to 528.4 million barrels on Wednesday. However, this ALWAYS happens in Feb/Mar. Refiners go offline for spring maintenance in this slow demand period. For two months, inventories build until they restart at the end of March and begin consuming huge amounts of oil to make summer blend gasoline. The price of crude always declines in this period.

If I could, I would buy a longer dated call and hold on to this position until fall. However, this newsletter is not a buy and hold strategy. I am going to recommend the June calls and we will exit before the May earnings.

Earnings May 24th.

The decline over the last two days knocked the stock back to the 200-day and support from November.

Position 3/10/17:

Long June $50 call @ $3.20, see portfolio graphic for stop loss.


SYMC - Symantec - Company Profile

Comments:

No specific news. Excellent rebound to recover nearly all of Tuesday's loss.

Original Trade Description: March 16th

Symantec Corporation, together with its subsidiaries, provides cybersecurity solutions worldwide. It operates through two segments, Consumer Security and Enterprise Security. The Consumer Security segment offers Norton-branded services that provide multi-layer security and identity protection on desktop and mobile operating systems to defend against online threats to individuals, families, and small businesses. Its Norton Security products help customers protect against complex threats and address the need for identity protection, while also managing mobile and digital data, such as personal financial records, photos, music, and videos. The Enterprise Security segment provides threat protection products, information protection products, cyber security services, and Website security offerings. Its products protect customer data from threats, such as advanced protection threats, malicious spam and phishing attacks, malware, drive-by Website infections, hackers, and cyber criminals; prevent the loss of confidential data by insiders; and help customers achieve and maintain compliance with laws and regulations. This segment delivers its solutions through various methods, such as software, appliance, software-as-a-service, and managed services. The company serves individuals, households, and small businesses; small, medium, and large enterprises; and government and public sector customers. It markets and sells its products and related services through direct sales force, e-commerce platforms, distributors, direct marketers, Internet-based resellers, system builders, Internet service providers, wireless carriers, retailers, original equipment manufacturers, and retail and online stores. Company description from FinViz.com.

You cannot even turn on your phone or PC without being subjected to dozens if not hundreds of potential attackers. Worse than stealing your ID and maybe being able to cause you grief down the road, the biggest attacks today are the ransom ware attacks. If you click on an email link or leave your PC unguarded by a security program, the hacker encrypts all your files and charges you a fee to get them back. All of your documents, pictures, bank account info, Quickbooks, etc, all disappear in a heartbeat. Even if you pay the blackmail, you still may not get them back.

Symantec is the leading cybersecurity vendor for personal computers and small business servers. Enterprise class operations will normally go with higher fee organizations like Fire Eye, Palo Alto Networks, etc. Symantec has the entire personal computer space to themselves. There are some competitors like PC Magic and McAfee but they are distant competitors. Since Intel partnered with McAfee an TPG in September, they are improving but Symantec has a big head start.

Because of the daily headlines on cyberattacks, more and more consumers are reaching out and deploying more sophisticated antivirus programs. It is not just for the closet geeks anymore. Everyone needs a real security program.

Strangely, the biggest risk is still the individual. In a recent study of 19,000 individuals by Intel Security they showed each person 10 different emails and asked them to identify the real ones and the fake ones. Only 3% identified all ten correctly. That means 18,430 would have clicked on a phishing email. Clearly, everyone needs a security program to protect us from ourselves.

Symantec should continue to emerge as the big winner in personal computer security.

Earnings May 3rd.

Position 3/17/17:

Long July $32 call @ $1.29, see portfolio graphic for stop loss.


VAR - Varian Medical systems - Company Profile

Comments:

No specific news. Nice rebound and only a few cents away from a new 5-month high.

Original Trade Description: February 18th

Varian Medical Systems, Inc. designs, manufactures, sells, and services medical devices and software products for treating cancer and other medical conditions worldwide. It operates through two segments, Oncology Systems and Imaging Components. The Oncology Systems segment provides hardware and software products for treating cancer with radiotherapy, fixed field intensity-modulated radiation therapy, image-guided radiation therapy, volumetric modulated arc therapy, stereotactic radiosurgery, stereotactic body radiotherapy, and brachytherapy. Its products include linear accelerators, brachytherapy afterloaders, treatment simulation, verification equipment, and accessories; and information management, treatment planning, image processing, clinical knowledge exchange, patient care management, decision-making support, and practice management software. This segment serves university research and community hospitals, private and governmental institutions, healthcare agencies, physicians' offices, oncology practices, radiotherapy centers, and cancer care clinics. The Imaging Components segment offers X-ray imaging components for use in radiographic or fluoroscopic imaging, mammography, special procedures, computed tomography, computer aided diagnostics, and industrial applications. It also provides Linatron X-ray accelerators, imaging processing software, and image detection products for security and inspection purposes. This segment serves original equipment manufacturers, independent service companies, and end-users. In addition, the company offers products and systems for delivering proton therapy; and develops technologies in the areas of digital X-ray imaging, volumetric and functional imaging, and improved X-ray sources. Company description from FinViz.com.

Varian reported lower than expected earnings on January 26th and shares fell -$6 to $87. Two days later, they spun off Varex and shares fell to $77 as a result of the separation. Since that split the stock has been moving higher and the rate of climb has accelerated over the last two weeks as they signed multiple new deals around the world.

Varian guided for earnings of $2.94-$3.06 for Q2 through Q4. For Q2 earnings are expected to be 84-90 cents on a 4% to 5% increase in revenues. The split at the end of January complicates apples to apples comparisons for Q1.

Earnings April 26th.

On February 13th the company announced competitive bid wins for six Shanghai hospitals. Varian is the leading manufacturer of medical devices and software for treating cancer and will provide its state of the art advanced radiotherapy technology to those hospitals. On February 14th, Varian's Eclipse treatment planning software was named the 2017 category leader for oncology treatment planning by KLAS. KLAS is an independent research firm specializing in monitoring and reporting on healthcare vendors.

Varian announced the sale of its advanced linear accelerators to Hungary's National Institute of Oncology.

Varian is on track to return to its pre-split price of $90 if the current rally continues. Because of its decline in February, I believe it offers some protection against a potential market decline.

Position 2/21/17:

Long May $85 call @ $2.75, see portfolio graphic for stop loss.


$VIX - Volatility Index - Index Description

Comments:

It was another surprising day for the VIX. The index closed near their high for the day with a 3% gain despite the rebound in the Nasdaq and S&P. The Tuesday market crash woke up some traders and now they are looking for insurance. While holding the VIX call is an insurance play for us, I hope we are never in a position to profit from it. That would mean a lot of our long positions would be under water or stopped out.

Original Trade Description: Jan 26th

The VIX is a computed index, much like the S&P 500 itself, although it is not derived based on stock prices. Instead, it uses the price of options on the S&P 500, and then estimates how volatile those options will be between the current date and the option's expiration date. The CBOE combines the price of multiple options and derives an aggregate value of volatility, which the index tracks.

The VIX closed at 10.63 and very close to record lows. You have to go back to June of 2014 for a lower recent close at 10.28. Before that, you have to travel back in time to Feb-2007 for a close at 10.05. The next lowest close was 9.48 in Dec-1993.

The point here is that volatility is near record lows only reached four times in the last 23 years. That qualifies for an abnormal event. I believe it is time we bought some VIX calls. The odds of the VIX remaining this low for the next two months are about as close to zero as you can get.

There is a very old saying in the market. "When the VIX is high, it is time to buy. When the VIX is low, it is time to go." You cannot get much lower than this.

The VIX is telling us that everyone expects the market to continue moving higher. Nobody is worried that some unexpected headline or event is going to trigger a significant market decline. When nobody expects an event is when we should be the most concerned.

Position 2/22/17:

Long Apr $13 call @ $2.30, no stop loss, profit target $17.

Previously Closed 2/1/17: Long March $12 call @ $2.60, exit $2.50, -.10 loss.
Previously Closed 2/22/17: Long March $12 call @ $1.75 adj, exit $1.65, -.10 loss.



BEARISH Play Updates (Alpha by Symbol)

TGT - Target Corp - Company Profile

Comments:

Only a minor rebound on the new store concept and the idea that Sears going out of business will remove a major competitor.

Original Trade Description: March 7th

Target Corporation operates as a general merchandise retailer. It offers household essentials, including pharmacy, beauty, personal care, baby care, cleaning, and paper products; music, movies, books, computer software, sporting goods, and toys, as well as electronics, such as video game hardware and software; and apparel for women, men, boys, girls, toddlers, infants, and newborns, as well as intimate apparel, jewelry, accessories, and shoes. The company also provides food and pet supplies comprising dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and pet supplies; and home furnishings and decor, including furniture, lighting, kitchenware, small appliances, home decor, bed and bath, home improvement, and automotive products, as well as seasonal merchandise, such as patio furniture and holiday decor. In addition, it offers in-store amenities, including Target Cafe, Target Photo, Target Optical, Portrait Studio, Starbucks, and other food service offerings. Target Corporation sells products through its stores; and digital channels, including Target.com. Company description from FinViz.com.

Target reported earnings of $1.46 compared with $2.31 in the year ago quarter. Analysts estimates were $1.50. Full year earnings of $4.58 was also below the 2015 total of $5.25. Sales for the holiday quarter declined -4.3% to $20.7 billion and also missed estimates. The company guided for 2017 same store sales to decline in low single digits with earnings at a mid range of $4.00, also below the 2016 total. Q4 same store sales fell -1.5%. For Q1 they guided for earnings of 80 cents to $1, below the year ago $1.29 and analyst estimates for $1.31. For the same period, Walmart saw same store sales rise 11.8%.

Update 3/14/17: German chain Aldi said it was adding $1.6 billion to its already announced $3 billion U.S. expansion. They are remodeling 1,300 existing stores and plan to have 2,000 stores by the end of 2018. Aldi is a sharp discount grocer and this is going to be a major challenge to stores like Target, Walmart and Whole foods. The chain has caused a massive disruption in Britain and was the fastest growing supermarket for the last 12 weeks. They have more than 100,000 stores in 27 European countries with sales of $68.7 billion.

Earnings May 30th.

Shares are crashing because investors are worried Target will turn into Sears with the monster stores becoming ghost towns similar to the deserted stores operated by Sears. With guidance moving lower, analyst estimates moving lower and the biggest shopping quarter of the year behind them, it could be a long hot summer for Target's share price. Shares closed at a five-year low on Tuesday after breaking support at $56.

Position 3/8/17:

Long May $52.50 put @ $1.38, see portfolio graphic for stop loss.




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