Option Investor
Newsletter

Daily Newsletter, Thursday, 9/14/2017

Table of Contents

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

Market Wrap

Inflation Up, Market Holds Steady

by Thomas Hughes

Click here to email Thomas Hughes

Introduction

CPI was hotter than expected; expectations for the next interest rate hike have been stepped up. Based on the CME's Fed Watch Tool there is now slightly greater than 50% chance for the next interest rate hike to come before the end of this year. Looking further out odds increase to 62.5% by March and to near 75% by June, up significantly from the 50% June probability predicted only a week ago. The news did not have much affect on the market other than to reinforce the idea of economic expansion, and the need to pay close attention to the FOMC next week.

International market were mostly lower although losses were minimal. In Asia trading was influenced by weaker than expected data out of China. The industrial production, fixed asset investment and retail sales figures were all about 0.5% below expectations but still quite strong at 6.5%, 7.8% and 10.5% respectively. In Europe traders had their eye on the BOE which held rates steady with no significant changes to their statement. Indices their held close to break even with most posting small gains, the FTSE led decliners with an anomalous -1.14%.

Market Statistics

Futures trading was steady and stable near break even for the better part of the morning. There was a dip between 8AM and 9AM on rumor North Korea was readying for another missile launch but I couldn't find much info about that. The dip bottomed shortly after the CPI data was released and prices moved back toward break even going into the open. The open was a bit hectic. Sellers stepped in on the bell and drove prices down to the low of the day within the first 10 minutes. Bottom on the SPX was hit just before 9:40AM, roughly -0.25%, at which time selling pressure let up and the index was able to return to break even. The rest of the day saw it trend within a narrow range at break even levels and closing near the highs of the day.

Economic Calendar

The Economy

Jobless claims data continues to be impacted by the Hurricanes but has yet to show truly significant damage to labor markets. Initial claims fell by -14,000 to 284,000 from last week's not revised figures. The four week moving average of claims rose 13,000 to 263,250. On a not adjusted basis claims fell -14.6% versus an expected -10.5% but remain up YOY by nearly 10%. From the hurricane perspective; it looks like the affects of Harvey have started to wane while those from Irma have yet to be felt. With this in mind we can expect to see another big jump in claims next week. The bigger picture; long term trends remain intact for now. Looking forward the rise in claims from the storms is much less important than where the figure settles once things get back to "normal".


Continuing claims fell by -7,000 this week and have yet to see the impact from Harvey much less Irma. Those affects should begin to show in the data next week. The previous week was revised up by 11,000, the four week moving average fell by -2,500. Looking at these figures it is easy to see that labor market turnover was low, steady and stable going into the stormy period.

The total number of Americans receiving benefits fell -28,887, in line with seasonal and long term economic trends. It will be at least one more week before we see affects from the storm enter this data. That being said the total claims remains well within trend, in line with healthy labor markets and down -8.3% from last year.


The CPI was hotter than expected. The headline month over month figure is +0.4%, a tenth more than the 0.3% predicted by economists. The rise is due primarily to energy and more specifically gasoline but also includes an increase in the cost of shelter. On a year over year basis headline CPI is up 1.9%, up 0.2% from July and the second month of gains. The energy index rose 2.8% for the month with the gasoline sub-index rising 6.3%. The shelter index rose a more modest 0.5%. On a core basis ex-food&energy CPI rose only 0.2% for the month and 1.7% for the past 12. It has held steady at this level for 4 months.


The Dollar Index

The CPI does not suggest a rate hike is coming real soon. What it does do is suggest that declines in forward FOMC rate hike expectations have come to a halt, setting the stage for a dollar rally should the FOMC sound hawkish next week, or other data begins to come in stronger than expected. There is little in the way of FOMC moving data between now and next Wednesday but there is plenty of other data points that could sway forward economic outlook. The Dollar Index strengthened immediately following the news but resistance was met and the gains were given up. The index remains near the long term low and could remain there into the near term.


The Gold Index

Gold prices held firm even in the face of rising inflation and steadying FOMC outlook. Spot gold gained about $3 to trade in a very tight range near $1,230. The metal is sitting on potential support levels that may keep it range bound in the near term. On the bull side; gold prices are up on a weakened dollar and geopolitical risk that has yet to abate. On the bear side; inflation data suggests a firming in the rate hike timeline that is lending strength to the dollar. A bounce from here will face resistance at $1,350, a fall may find support near $1,320 or $1,300.

The Gold Miners ETF moved lower in early trading as CPI data strengthened the dollar. Those losses were recouped later in the day as the dollar gave up its gains and gold prices steadied. Today's action created a small green candle just above support targets at $24. The visible lower shadow confirms the presence of support at these levels but not its strength. The indicators have both rolled over into bearish signals within a trading range suggesting that support will likely be tested. Support target is further confirmed by the short term moving average, a break below which would be bearish in the near term with downside target at the long term moving average. A bounce from this level would be trend following in the near term but face resistance at the top of the long term trading range near $25.50.


The Oil Index

Oil prices rose to a 6 week high on post-hurricane demand. WTI gained 0.75% to trade above $49.50 an looks like it is heading up. First resistance is near $50 and the top of the near term trading range, next target is near $55 should the $50 level break.

The Oil Index gained a little more than a half percent to test support at the 1,160 level. The index has broken its down trend and entered a new sideways trading range but not yet confirmed reversal. The top of the range is 1,160, a break above which would be bullish. The indicators are bullish and have shown some strength with the caveat they are now rolling over and consistent with the top of a range. First target for support on a pull back is near 1,140 and the short term moving average. Next target below that is near 1,120 and the long term moving average. Longer term I am bullish on this sector and will look to buy on dips and tests of support within the range. Near term I am cautious with an eye on the top of the trading range.


In The News, Story Stocks and Earnings

Whole Food's made the news today as analyst Brian Nowak estimates the newly acquired branch of Amazon can more than double its customer base within the next 2.5 years. The news adds to malaise within the grocery sector as retailers struggle to compete. Kroger for example has quietly launched a new restaurant concept designed to enhance customer appeal. Shares of that stock fell more than -2% on the news and are trading just above a 3 year low. Support is near $20.50, a break below there could take it down to $15 with a quickness.


Oracle reported after the bell and beat estimates of $0.60 by $0.02. This is significant in two respects, first being a positive for Oracle and the second as an indication of the onset of 3rd quarter earnings. Oracle reports midway between cycles and is my signal the season is approaching fast. The results were driven by cloud computing with segment revenues up more than 50% YOY. Total revenues were up 7%. CEO Larry Ellison also announced the unveiling of new cloud based service that is expected to further boost revenues. Shares of the stock rose in after hours trading.


The VIX fell a little more than -0.50% to come to rest on the 10.25 support line. The index has subsided from recent highs and looks like it may dip below support to retest recent lows. The VIX trending at current low levels is consistent with bull market conditions, a dip below support would be consistent with rally.


The Indices

The indices were a bit mixed today but in general held steady at and near current all time highs. The day's leader is the Dow Jones Industrial Average with a gain of 0.20%. The blue chips created a small green bodied candle drifting up from the long term up trend line and set a new all time high. The index is supported by the indicators which are both bullish and rising. Stochastic is showing strength with a strong trend following entry signal and suggests further upside is on the way. Upside target is near 22,600 to 22,800 in the near term.


The NASDAQ Composite is the day's biggest loser with a decline of -0.48%. The tech heavy index created a small red bodied candle just below the current all time and may have hit a near term peak. The indicators are bullish but show near term weakness consistent with consolidation and near term resistance. Resistance is the all time high, a break above which would be bullish. If the index declines support targets are 6,400 and the short term moving average near 6,350.


The Dow Jones Transportation Average posted the 2nd largest decline, 0.22%. The transports created a small doji like candle just below the current high and sideways from the past 2 candles. The indicators remain bullish but do show a slight weakening in the near term consistent with consolidation within an up trend. Near term resistance is at the current level, a move above which would be bullish with upside target at the current all time high.


The S&P 500 made the smallest decline today, only -0.11%. The broad market index created a small doji candle just below the current all time high and appears to be in a near term consolidation. The indicators are bullish and moving higher, consistent with higher prices, and showing some strength. MACD is the weaker of the two but rising to a 6 month high while stochastic makes a bullish crossover of the upper signal line. A break to new highs would be bullish with near term upside targets at 2,540 and 2,580.


Today's action was mixed but still consistent with a rising market. While the Dow Jones Industrials were the only one to make a new all time high the others were still able to hold strong at record levels with indications of underlying strength. With earnings season close at hand, expectations for earnings growth and signs of economic strength we may not need a catalyst to push them to new highs. A crowded market, one eagerly anticipating 6 quarters of double digit earnings growth, could easily move higher on its own. The charts are signaling rally so I am bullish for the near and long term.

Until then, remember the trend!

Thomas Hughes


New Option Plays

Event Risk Arrives

by Jim Brown

Click here to email Jim Brown

Editors Note:

North Korea reportedly launched a new missile over Japan this evening. The details are still unknown but the S&P futures fell -7 on the news. The weekend event risk just increased significantly. The potential for a military response is low but it does exist. There is no reason to enter new positions ahead of this risk and the quadruple witching expiration.



NEW DIRECTIONAL CALL PLAYS

No New Bullish Plays


NEW DIRECTIONAL PUT PLAYS

No New Bearish Plays



In Play Updates and Reviews

Not Convinced

by Jim Brown

Click here to email Jim Brown

Editors Note:

The Dow closed at a new high but not by enough to be convincing. That is especially true when the Nasdaq closed down sharply with a $31 loss. The S&P lost 3 points. The majority of the Dow gains came from Boeing, United Technologies, 3M and JNJ. Those could be seen as defensive stocks in the current environment.

The big cap tech stocks were lower led by Apple as we expected. I wrote last week that a post announcement decline was expected and it would probably contaminate the rest of the big caps, which would fall in sympathy.



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


DVMT - Dell Technologies
The long call position was entered at the open.

SPLK - Splunk
The long call position was closed at the open.

DIA - Dow ETF
The long put position was stopped at $222.25.



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

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Long and short equity trades = Premier Investor



BULLISH Play Updates

A - Agilent Technologies - Company Profile

Comments:

No specific news. Over the past month earnings estimates for the quarter have risen from 59 to 63 cents and for the year from $2.22 to $2.32.

Original Trade Description: September 12th.

Agilent Technologies, Inc. provides application focused solutions to the life sciences, diagnostics, and applied chemical markets worldwide. Its Life Sciences and Applied Markets segment offers liquid chromatography systems and components; liquid chromatography mass spectrometry systems; gas chromatography systems and components; gas chromatography mass spectrometry systems; inductively coupled plasma mass spectrometry instruments; atomic absorption instruments; microwave plasma-atomic emission spectrometry instruments; inductively coupled plasma optical emission spectrometry instruments; laboratory software and informatics systems; laboratory automation and robotic systems; dissolution testing; vacuum pumps; and measurement technologies. The company's Diagnostics and Genomics segment provides reagents, instruments, software, and consumables; arrays for DNA mutation detection, genotyping, gene copy number determination, identification of gene rearrangements, DNA methylation profiling, and gene expression profiling, as well as sequencing target enrichment services; and equipment focused on production of synthesized oligonucleotides for use as active pharmaceutical ingredients. Its Agilent CrossLab segment offers GC and LC columns, sample preparation products, custom chemistries, and various laboratory instrument supplies; and startup, operational, training, and compliance support, as well as asset management and consultation services. The company markets and sells its products through direct sales, electronic commerce, resellers, manufacturers' representatives, and distributors. It has a collaboration agreement with University of Leuven to focus on detecting genetic abnormalities in cell-free DNA and embryo biopsies. Company description from FinViz.com.

Agilent reported earnings of 59 cents that rose 20.4% and beat estimates for 52 cents. Revenue of $1.11 billion rose 6.7% and beat estimates for $1.08 billion. They ended the quarter with $2.56 billion in cash and $1.8 billion in debt. Free cash flow was $228 million. They guided for revenues of $1.15-$1.17 billion for Q3 and earnings of 60-62 cents. Analysts were expecting $1.14 billion and 59 cents. The company raised guidance for the full year from $4.36-$4.38 billion to $4.435-$4.455 billion. Earnings guidance is now $2.29-$2.31, up from $2.15-$2.21. Analysts were expecting $2.22 and $4.39 billion.

Earnings expected on Nov 14th.

Shares spiked on the earnings and have been moving steadily higher. On Monday they gained $1 and closed at a new high. This stock may not be as "exciting" as Alibaba or Amazon but the options are cheap and they rarely decline.

Position 9/13/17:

Long Nov $67.50 call @ $1.70, see portfolio graphic for stop loss.


ALB - Albermarle - Company Profile

Comments:

Shares rose nearly $1 on no news.

Original Trade Description: Aug 21st.

Albemarle Corporation develops, manufactures, and markets engineered specialty chemicals worldwide. The company offers lithium compounds, including lithium carbonate, lithium hydroxide, lithium chloride, and lithium specialties and reagents for applications in lithium batteries, high performance greases, thermoplastic elastomers for car tires, rubber soles and plastic bottles, catalysts for chemical reactions, organic synthesis processes, life science, pharmaceutical, and other markets; cesium products for the chemical and pharmaceutical industries; and zirconium, barium, and titanium products for pyrotechnical applications. It also manufactures cesium products for the chemical and pharmaceutical industries; and zirconium, barium, and titanium products for various pyrotechnical applications, including airbag igniters; and performance catalyst solutions, such as polymer catalysts, curatives, organometallics, and electronic materials for polyolefin polymers, packaging, non-packaging, films, injection molding, alpha-olefins, electronic materials, solar cells, polyurethanes, epoxies, and other engineered resins markets. In addition, the company offers bromine and bromine-based solutions for fire safety, chemical synthesis, mercury control, water purification, beef and poultry processing, and various other industrial applications, as well as for the oil and gas well drilling, and completion fluids applications. Further, Albemarle Corporation provides clean fuels technologies, which is primarily composed of hydroprocessing catalysts; and heavy oil upgrading, which is primarily composed of fluidized catalytic cracking catalysts and additives for application in the refining industry. It serves petroleum refining, consumer electronics, energy storage, construction, automotive, lubricants, pharmaceuticals, crop protection, food safety, and custom chemistry services markets. Company description from FinViz.com.

With production of electric cars exploding with more than 1 million expected to be manufactured in 2018, the demand for Lithium-ion (Li-ion) rechargeable batteries is also exploding. When Tesla's Gigafactory reaches full production in 2020 of 35 gigawatt-hours, that will be more battery capacity than the entire world produced in 2014. Tesla has blamed the battery shortage for misses in auto production and they are already planning on building a second Gigafactory. The demand for lithium is suddenly huge and Albemarle is already responsible for 35% of global production.

They reported Q2 earnings of $1.13, up 22%, that beat estimates for $1.11. However, revenue of $737.3 million missed estimates for $740.6 million. They guided for full year earnings of $4.20-$4.40, a 21% rise and revenue of $2.90-$3.05 billion. The revenue miss was due to a divestiture of a specialty chemicals business and currency exchange issues. They repurchased $250 million in stock in the first 6-months of 2017 and paid dividends of $69.8 million.

Next earnings Nov 6th.

Shares declined after the revenue miss but rebounded exactly from long-term uptrend support.

Position 8/22:

Long Oct $120 call @ $1.75, see portfolio graphic for stop loss.


BBY - Best Buy - Company Profile

Comments:

No specific news. Shares declined slightly after the $1.82 gain on Wednesday.

Original Trade Description: Sept 2nd.

Best Buy Co., Inc. operates as a retailer of technology products, services, and solutions in the United States, Canada, and Mexico. The company operates through two reportable segments, Domestic and International. Its stores provide consumer electronics, such as home theater, home automation, digital imaging, health and fitness, and portable audio products; computing and mobile phones, including computing and peripherals, networking, tablets, smart watches, and e-readers, as well as mobile phones comprising related mobile network carrier commissions; and entertainment products, such as gaming hardware and software, movie, music, technology toy, and other software products. The company's stores also offer appliances, which include refrigeration and laundry appliances, dishwashers, ovens, coffee makers, blenders, etc.; and other products comprising snacks, beverages, and other sundry items. In addition, it provides services, such as consultation, design, delivery, installation, set-up, protection plan, repair, technical support, and educational services. The company offers its products through stores and Websites under the Best Buy, bestbuy.com, Best Buy Mobile, Best Buy Direct, Best Buy Express, Geek Squad, Magnolia Home Theater, Pacific Kitchen and Home, bestbuy.com.ca, and bestbuy.com.mx brand names, as well as through call centers. It has approximately 1,200 large-format and 400 small-format stores. Company description from FinViz.com.

On August 29th, Best Buy reported earnings of 69 cents that beat estimates for 63 cents. Revenue of $8.9 billion also beat estimates for $8.7 billion. Same store sales rose 5.4%. They raised full year guidance for revenue to rise 4% compared to prior guidance for 2.5%. Operating income is expected to rise 4.0-9.0% compared to prior guidance of 3.5-8.5%. Shares were crushed for a $9 loss on the news.

There was no specific reason except that Best Buy had been doing so well and the stock was trading at a record high. Analysts came out after the crash saying the selloff was overdone because the Apple product announcement in mid September would create additional store traffic the rest of the year and likely boost earnings.

Sometimes events cause unexpected reactions. Given their earnings beat, strong comps and raised guidance, I think we should buy the dip. Support has appeared at $54 and the next move should be positive as saner investors realize this is a bargain.

Earnings Nov 24th.

Position 9/5/17:

Long Dec $57.50 call @ $2.59, see portfolio graphic for stop loss.


CAT - Caterpillar - Company Profile

Comments:

No specific news. Shares posted another nice gain to recover much of Wednesday's decline.

Original Trade Description: Aug 29th.

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives for heavy and general construction, rental, quarry, aggregate, mining, waste, material handling, oil and gas, power generation, marine, rail, and industrial markets. Its Construction Industries segment offers backhoe, compact, track-type, small and medium wheel, knuckleboom, and skid steer loaders; small and medium track-type, and site prep tractors; mini, wheel, forestry, small, medium, and large track excavators; and motorgraders, pipelayers, telehandlers, cold planers, asphalt pavers, compactors, road reclaimers, and wheel and track skidders and feller bunchers. The company's Resource Industries segment provides electric rope and hydraulic shovel, landfill and soil compactor, dragline, large wheel loader, machinery component, track and rotary drill, electronics and control system, work tool, hard rock vehicle and continuous mining system, scoop and hauler, wheel tractor scraper, large track-type tractor, and wheel dozer products; longwall, highwall, and continuous miners; and mining, off-highway, and articulated trucks. Its Energy & Transportation segment offers reciprocating engine powered generator set and engine, integrated system, turbine, centrifugal gas compressor, diesel-electric locomotive and component, and other rail-related products and services. The company's Financial Products segment offers finance for Caterpillar equipment, machinery, and engines, as well as dealers; property, casualty, life, accident, and health insurance; and insurance brokerage services, as well as purchases short-term trade receivables. Its All Other operating segments provides parts distribution and digital investments services. Company description from FinViz.com.

CAT has been alternately ignored or talked down for the last couple years but the shares keep rising. Part of the recent gains came from the guidance. The company has been bitten by the global slowdown in construction since the financial crisis. Then it was hit by the slowdown in the energy sector. Every expected rebound falied to appear and CAT continued to give cautious guidance. That changed over the last several months.

The global economy is rebounding. There are massive construction projects now underway in China and Asia. The Eurozone is also seeing a resurgence in consrtuction. Commodity metals are booming and mines are reopening shuttered capacity and opening new mines. Everything is suddenly positive for CAT.

In December they guided for full year 2017 revenues of $38 billion "as a reasonable midpoint expectation." Analyst estimates for earnings of $3.25 were "too optimistic" according to CAT.

In January they guided for $36-$39 billion in revenue and $2.90 in earnings.

In April they guided for $38-$41 billion in revenue and $3.75 in earnings.

In July they guided for $42-$44 billion in revenue and $5 in earnings.

In April they guided for revenue from construction at flat to 5%. In July they guided for 10% to 15% growth.

In April they guided for revenue from mining at 10% to 15%. In July they guided for 20% to 25% growth.

In April they guided for energy revenue at flat to 5%. In July they raised it to 5% to 10%.

After the devastation in Houston, there were new estimates from analysts today for 17% or higher revenue growth in construction equipment.

Shares spiked at the open to a new high before fading slightly with the market. I believe revenue estimates will continue to rise because they are running out of year and their conservative guidance will have to become more accurate.

Earnings October 24th.

CAT is reactive to Dow movement but shares have ignored the recent Dow weakness. Today's close at $116.01 is a record high.

Update 9/13/17: In Tuesday's investor day meeting the new CEO said they were targeting $55 billion in revenue in 2018 with margins of 14%-17% compared to 12% in 2017. That would take them back to 2014 levels before the bear market in commodity/energy began. That is 28% above 2017 levels. He was careful not to call it a target but said that level was achievable if the current rebound in mining, energy and construction continued.

Position 8/30/17:

Long Nov $120 call @ $2.75, see portfolio graphic for stop loss.


DVMT - Dell Technologies - Company Profile

Comments:

Toshiba has reportedly signed a MOU with a consortium led by Bain Capital to sell its memory business. Dell Technologies and Apple are reportedly in that consortium.

Original Trade Description: Sept 13th.

Dell Technologies Inc. provides a range of technology solutions worldwide. It offers client computing devices, including desktop personal computers, notebooks, and tablets; rack, blade, tower, and hyperscale servers for enterprise customers; value tower servers for small organizations, networks, and remote offices; networking solutions; and storage solutions, including storage area networks, network-attached and direct-attached storage, and backup systems. It also sells peripherals, including monitors, printers, projectors, and other client and enterprise peripherals, as well as third-party software products. In addition, the company offers support and extended warranty, enterprise installation, and configuration services; and infrastructure and security managed, cloud computing and infrastructure consulting, and security consulting and threat intelligence services. Further, it provides application services, such as application development, maintenance, migration, management, and consulting, as well as package implementation, testing and quality assurance functions, business intelligence and data warehouse solutions; business process services comprising back office administration, call center management, and other technical and administration services; and system and information management, and security software services. Additionally, the company offers financial services, including originating, collecting, and servicing customer receivables primarily related to the purchase of its products. It serves corporate businesses; educational institutions, government, healthcare, and law enforcement agencies; small and medium-sized businesses; and consumers directly, as well as through retailers, third-party solution providers, system integrators, and third-party resellers. The company was formerly known as Denali Holding Inc. and changed its name to Dell Technologies Inc. in August 2016. Company description from FinViz.com.

Dell suffered from years of banner growth that set it up for years of disappointments when that growth slowed. Dell created a new market niche when it started in 1984 and but by the early 2000s there were dozens of copycat clones. The PC revolution had stalled by 2010 as tablets and smartphones stole market share. Michael Dell organized a buyout and took the company private. They eventually acquired EMC in August 2016 and by doing so returned to the public market as Dell Technologies. Shares closed at a new high on Wednesday.

In its first year as a new public company they paid down $9.5 billion in debt and completed three major divestitures. They created a $35 billion revenue channel and added 10,000 business customers for the year.

They recently signed a long term deal in partnership with GE that is one of the largest non-governmental contracts in Dell or EMC history. Under the agreement Dell becomes the sole source IT infrastructure supplier to GE. The Dell Technologies family of businesses includes Dell, Dell EMC, Pivotal, RSA, SecureWorks, Virtustream and VMware. It stands as a $74 billion market leader with the industry's most expansive portfolio from the edge to the data center to the cloud.

The Dell PowerEdge server is now the largest selling X86 server in the world and Dell is also number one in global workstation shipments and global monitor shipments.

For Q2, they reported adjusted earnings of $1.88 and revenue of $19.3 billion, up 48% from Q2-2016 and +8.3% from Q1-2017.

Expected earnings December 7th.

Shares rallied after earnings and then plateaued at $75 for over a week. They began moving up again this week to close at a new high. With business booming and Q3 normally a strong quarter, they could continue to move higher.

Position 9/14/17:

Long Dec $80 call @ $2.40, see portfolio graphic for stop loss.


SPLK - Splunk - Company Profile

Comments:

No specific news. We closed the position at the open for non-performance. Of course, today it decided to gain 57 cents. If the stock breaks through resistance at $69, I will put it back in the portfolio.

Original Trade Description: Sept 6th.

Splunk Inc. provides software solutions that enable organizations to gain real-time operational intelligence in the United States and internationally. The company's products enable users to collect, index, search, explore, monitor, and analyze data regardless of format or source. It offers Splunk Enterprise, a machine data platform with collection, indexing, search, reporting, analysis, alerting, monitoring, and data management capabilities; and Splunk Cloud service. The company also provides Splunk Light, which offers log search and analysis for small IT environments; and Splunk Analytics for Hadoop, a software for exploring, analyzing, and visualizing data stored in Hadoop and Amazon S3. In addition, it offers Splunk Enterprise Security, which addresses emerging security threats; Splunk User Behavior Analytics that detects cyber-attacks and insider threats; and Splunk IT Service Intelligence, which monitors health and key performance indicators of critical IT services, as well as Splunk App for AWS to ensure cloud security and compliance; Splunk Stream to capture, analyze, and correlate network wire data; and DB Connect to get enterprise context; Palo Alto Networks App for Splunk to gain visibility to Palo Alto Networks firewalls; and Splunk App for Salesforce. Further, the company operates Splunkbase and Splunk Answers Websites, which provide an environment to share apps, collaborate on the use of its software, and provide community-based support, as well as offers application programming interfaces and software development kits. Additionally, it offers maintenance and customer support, training, and consulting and implementation services. The company serves cloud and online services, education, financial services, government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce, technology, and telecommunications industries. Company description from FinViz.com.

Splunk reported earnings on August 24th of 8 cents that beat estimates for 6 cents. Revenue of $280 million beat estimates for $268.8 million. The company guided for the full year for revenue of $1.21-$1.22 billion, up from prior guidance of $1.19 billion. Analysts were expecting $1.2 billion. Billings are projected to be $1.450 billion, up from $1.425 billion in prior guidance.

Revenue rose 31.8% and "billings" rose 32% to $303.4 million. For the current quarter, they guided for revenue of $307-$309 million and analysts were expecting $306.8 million. They added 500 customers in the quarter to bring the base to more than 14,000.

The company has finally caught fire with the corporate sector and 32% sales growth is huge. The CEO said sales in Europe, Middle East and Africa were surging.

Earnings Nov 23rd.

Shares spiked to $66 on the news and faded $2 on post earnings depression for about three days before rising again. They closed at a three month high on Wednesday and are very close to a historic high.

Most importantly, they did NOT decline on Tuesday and showed great relative strength.

Position 9/7/17:

Closed 9/14: Long Nov $70 call @ $2.80, exit $2.20, -.60 loss.


TER - Teradyne - Company Profile

Comments:

No specific news. Shares dipped slightly and closed back below resistance. There is a major battle in progress at that level.

Original Trade Description: Aug 30th.

Teradyne is a leading supplier of automation equipment for test and industrial applications. Teradyne Automatic Test Equipment (ATE) is used to test semiconductors, wireless products, data storage and complex electronic systems which serve consumer, communications, industrial and government customers. Our Industrial Automation products include collaborative robots used by global manufacturing and light industrial customers to improve quality and increase manufacturing efficiency. In 2016, Teradyne had revenue of $1.75 billion and currently employs approximately 4,400 people worldwide. Company description from Teradyne.

For Q2 they reported earnings of 90 cents compared to estimates for 86 cents. Revenue of $696.9 million beat estimates for $684.2 million. They raised revenue guidance to $455-$485 million and analysts were expecting $445 million.

In just the last 30 days analyst estimates for Q3 have risen from 38 cents to 43 cents. Full year estimates have risen from $1.88 t $1.97 per share. Zacks rates the Electronics Testing Equipment sector as #6 out of 250 industry sectors. Every new electronic device manufactured needs a new set of testing equipment.

Earnings October 26th.

Shares have been stuck under resistance at $35 for six weeks and broke out today. Analysts believe they will continue higher and make new highs. The $36 level is the next resistance.

Position 8/31/17:

Long Oct $37 call @ .90, see portfolio graphic for stop loss.


VAR - Varian Medical Systems - Company Profile

Comments:

Varian said it was holding its first workshop in Algeria for clinical teams from seven regional hospitals. The workshop is being supported by two hospitals in the region that already use Varian equipment. Shares closed at a new high.

Original Trade Description: Aug 2nd.

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.

Expected earnings October 25th.

On July 26th, Varian reported earnings of $1.04 that beat estimates for 95 cents. Revenue of $662.4 million just barely missed estimates for $663.2 million due in part to currency translation issues. They sell their high dollar imaging systems all over the world.

The guided for the current quarter for earnings of $1.15-$1.23 and analysts were expecting $1.18. This should have been positive but the stock fell $6 because of the minor revenue miss.

If the market is going to be historically weak in August, shares that have already been beaten up will fare better than the rest of the market. I am choosing the $105 strike instead of the $100 strike for reduced cost/risk going into August.

Position 8/3/17:

Long Nov $105 call @ $1.75, see portfolio graphic for stop loss.


VIX - Volatility Index - Index Profile

Comments:

The VIX declined .06 despite sharp drops in the Nasdaq and a minor decline in the S&P. It appears expectations for volatility in September are decreasing.

We still have plenty of time. North Korea is still a factor and could erupt at any time.

This is the fourth longest period in history of the markets without a 5% decline. While it does not look likely today, it could happen at any time.

Original Trade Description: July 12th.

The CBOE Volatility Index (VIX Index) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, the VIX Index has been considered by many to be the world's premier barometer of investor sentiment and market volatility. Several investors expressed interest in trading instruments related to the market's expectation of future volatility, and so VX futures were introduced in 2004, and VIX options were introduced in 2006.

The VIX closed at a 24-year low on July 14th at 9.51. The index has been spending a lot of time under 10 over the last three months and this is highly abnormal. The VIX typically trades up to 20 or more three times a year or more. That has not happen since the days before the election. This period of abnormal volatility WILL eventually end.

With the Trump administration getting more desperate to achieve some legislative goals there is always the risk they will go to extremes to get them accomplished. Add in the unknown but rapidly expanding Russian probes and anything is possible. We saw the Dow fall triple digits intraday on just the release of 5 emails from Trump Jr. If the probe actually uncovered something material, it could cause a major market meltdown.

The debt ceiling and the budget expire on Sept 31st. If Congress cannot get a budget passed and raise the debt ceiling, the government would shut down on October 1st. We have seen this before. The last time it happened the U.S. lost its AAA credit rating and the market declined sharply for more than a week.

What about North Korea? Military force could be used at any time but North Korea seems dead set on testing another nuke and expanding its ICBM tests. If fighting breaks out between the U.S. and North Korea it would cause a significant market decline because of the geopolitical concerns and the potential loss of life in Seoul, South Korea.

Even if none of those events occurred, there is always the risk of a 10% market decline just because we have not had one in a very long time. With August and September the worst months of the year for the market, the potential for a correction this year could be higher than normal. The Nasdaq is already up 18% and the Dow 9% for the year. The FAANG stocks are at record highs, which many say are unsupported by fundamentals.

There are so many potential opportunities for a market disaster. It only makes sense to take out some protection while the volatility is at record lows. I am recommending a November call to get us past the Aug/Sep period and the potential for a debt ceiling event in early October.

Position 7/20/17:

Long Nov $15 call @ $1.85, no stop loss, see portfolio graphic for stop loss.


XRAY - Dentsply Sirona Inc - Company Profile

Comments:

No specific news. Shares continued to decline on profit taking but the sharp drop in the morning saw a decent afternoon rebound.

Original Trade Description: Sept 9th.

DENTSPLY SIRONA Inc. designs, develops, manufactures, and markets various dental and oral health products, and other consumable healthcare products primarily for the professional dental market worldwide. It operates through two segments, Dental and Healthcare Consumables; and Technologies. The company provides dental consumable products, including endodontic instruments and materials, dental anesthetics, prophylaxis pastes, dental sealants, impression materials, restorative materials, tooth whiteners, and topical fluoride products; and small equipment products comprising dental hand pieces, intraoral curing light systems, dental diagnostic systems, and ultrasonic scalers and polishers. It also offers dental laboratory products, such as dental prosthetics that include artificial teeth, precious metal dental alloys, dental ceramics, and crown and bridge materials. In addition, the company provides dental equipment, such as treatment centers, imaging equipment, and computer aided design and machining systems for dental practitioners and laboratories; and dental implants and related scanning equipment, treatment software, and orthodontic appliances for dental practitioners and specialists, and dental laboratories. Further, it offers healthcare consumable products, such as urology catheters, various surgical products, medical drills, and other non-medical products. DENTSPLY SIRONA Inc. markets and sells its dental products through distributors, dealers, and importers to dentists, dental hygienists, dental assistants, dental laboratories, and dental schools; and urology products directly to patients, as well as through distributors to urologists, urology nurses, and general practitioners. Company description from FinViz.com.

Dentsply reported Q2 earnings of 65 cents that missed estimates by a penny. Revenue of $992.7 million missed the estimate for 1,004 million. Sales in the U.S. fell 9.7% but sales in Europe rose 2.5%. They guided for the full year for earnings of $2.65-$2.75.

The stock was crushed on the miss with a $9 drop over the following week.

However, there was a reason for the miss. Effective September 1st, they moved from a single distributor to multiple distributors. The existing distributor slowed purchases in the quarter in order to reduce inventory before the change in the distribution model.

The CEO said "In September, we should begin to benefit from the expanded distribution of our equipment in North America which should drive growth in the back half of this year and beyond. As we work through the distribution transition and integration initiatives, we are strengthening our foundation for the future. We believe that this should translate into more consistent growth and strong double digit earnings growth in the back half of the year creating momentum exiting the year going into 2018."

Shares have begun to rebound and should return to their highs on the "double digit earnings growth" guidance.

Earnings Nov 8th.

There are no Nov/Dec options. I am using the January but just because we buy time does not mean we have to use it.

Position 9/11/17:

Long Jan $60 call @ $2.70, see portfolio graphic for stop loss.



BEARISH Play Updates (Alpha by Symbol)

DIA - Dow ETF - ETF Profile

Comments:

The Dow rallied to a new high and the DIA hit 222.25 to stop us out. Pushing the budget and debt ceiling battles out to December removed the strong potential for volatility in September.

Original Trade Description: July 27th.

The SPDR Dow Jones Industrial Average ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones Industrial Average (the "Index"). The Dow Jones Industrial Average (DJIA) is composed of 30 "blue-chip" U.S. stocks. The DJIA is the oldest continuous barometer of the U.S. stock market, and the most widely quoted indicator of U.S. stock market activity. The DJIA is a price-weighted index of 30 component common stocks.

The Dow closed at a new high in an ugly market solely because of big gains in Boeing, Disney and Verizon. If the rest of the market continues lower, the Dow will eventually crater as well. I am recommending we enter a put position on the Dow ETF at the current high.

Position 7/28/17:

Closed 9/14: Long Oct $215 put @ $3.33, exit .80, -2.53 loss.
Closed 9/14: Short Oct $205 put @ $1.29, exit .33, +.96 gain.
Net loss $1.57.




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