Option Investor
Newsletter

Daily Newsletter, Monday, 7/21/2014

Table of Contents

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

Market Wrap

GeoPolitics Or Earnings

by Thomas Hughes

Click here to email Thomas Hughes
The market was once again impacted by geopolitics but earnings prospects helped lift the indices by day's end.

Introduction

Trading was once again impacted by geopolitical tensions. In eastern Europe the stand off over the shot down Malay airlines flight drags on as pro-Russian militants keep international teams from the site. The details are still unclear but mounting evidence puts the blame on a missile fired by those same pro-Russian militants. Asian and European indices were both hammered by fears the situation could spin out of control while in Japan trading was suspended for a national holiday. The most heavily affected being the German DAX with a -1.11% drop. Here at home early trading was indicated lower as the day and week began. The futures trade had the SPX down about -5 points with some fluctuation throughout the pre market session.

Market Statistics

There were no economic reports today and few this week but the lack went unnoticed in the face of the earnings onslaught scheduled over the next couple of days. Today only a few dozen reports were released but there are hundreds scheduled for the week. By the Friday more than 1/2 of all S&P companies will have reported. With this mornings additions earnings growth among them has risen to 6.9%, above the expectation and an improvement from last week.

Even with the improvement to earnings growth the market was not able to open positive. Trading was quiet over the first hour, the SPX hovered in a tight range just above 1975, about 5 points lower than last week's close. Almost exactly at 10:30AM the market began to extended the drop, doubling the early losses, until hitting intraday bottom around 10:45, coincident with a statement from President Obama concerning the downing of Malay Airlines Flight 17. From that point on the market was able to regain its footing and climb higher but was not able to make it into positive territory.

Economic Calendar

The Economy

There is very little economic data this week and none today save two unofficial survey's of the economy. First up is Moody's Survey Of Business Confidence conducted by Mark Zandi. According to his results “U.S. business confidence remains buoyant... Sentiment in the U.S. is consistent with an economy that is expanding well above its potential... Sentiment is strong across the board, but hiring intentions are especially robust; more than half of respondents to the survey are hiring. Sentiment is less upbeat in the rest of the world, especially in South America, where it is weakest.” The full report can be read at Moody's Analytics.

The National Association Of Business Economists released its survey of business. Among those participating 57% saw an increase of business in the second quarter. Another 36% of business say they are hiring more workers while a slightly larger 43% say they are increasing wages.

Other data released this week includes CPI and existing home sales tomorrow. CPI is expected to rise about 0.4%, in line with last months rise of 0.4%. Core CPI is expected to rise a more modest 0.2%. Existing home sales are expected to rise to just shy of 5 million. Later in the week, along with the usual mortgage index, energy inventories and jobless claims there will be new home sales on Thursday and Durable goods on Friday. New homes sales are expected to fall about -25,000 to around 475,000. Durable goods orders are expected to rise 0.3% but 0.8% ex-transportation. Most importantly though is what is on the calendar for next week, the FOMC meeting Tuesday and the first estimate for 2nd quarter GDP on Wednesday.

The Oil Index

Oil prices surged today as the Ukraine situation added some fear to the market while other areas of concern continue to recede from importance. The Iraq crisis is no longer making headlines and in Libya production is still ramping up even though there has been some renewed violence there as well. WTI climbed about 1.5% in today's session while prices for Brent did not see quite so large a gain. WTI is now trading back above $104.

The Oil Index traded lower today, in line with the general market, but remains above long term support. The index is now sitting on that support with indicators that may be setting up for a trend following signal. The long term trend is still up and stochastic has already given off the early signal. Bearish momentum is declining and could return to bullishness very soon. This could be another week of sideways trading and consolidation for the index as traders await earnings due at the end of the month. In the near term Ukraine is the biggest concern followed by economic data, earnings and Libya, not necessarily in that order. A break below the current support level, coincident with previous long term resistance dating back to the 2008 market crash, would have down side targets near 1,600 and 1,550.


The Gold Index

Gold prices traded higher today but only by a few dollars. Prices were lifted by the threat of rising geo political tensions but failed to make a significant move. Today's action tested $1315 early in the morning but failed to break through. Flight to safety is the only thing I can see keeping gold at the current levels. Nothing has changed to the underlying fundamentals except that the future of interest rate hikes is still in question. I can't help but think that gold will tumble again once the current geo-political fears subside.

The Gold Index traded lower today, opposite the underlying metal, losing about 1%. The index is falling inside a resistance zone with bearish indicators. Momentum has crossed the zero line after a week of neutral momentum while stochastic is moving lower in the longer term and rolling into bearishness in the nearer term. If %K confirms the downward trending %D line on the stochastic indicator this would be a strong signal in the longer term down trend. Near term targets are only a few points lower, along the $100 level and just below at the short term moving average. If a break of these supports occurs then longer term targets around $95 and $90 would be in play. There is risk of gold prices rising, and lifting the Gold Index, if the situation in the Ukraine deteriorates further or other fear inducing factors emerge. However, the longer term fundamentals that have brought gold prices to where they are persist as does the longer term down trend in the Gold Index.


In The News, Story Stocks and Earnings

Here's a quick recap of headlines in the news this morning. First, GM is telling Cadillac dealers to stop selling CTS models until they can come up with a fix for the ignition switch problem. As of yet they have not been able to correct it.

The fight between Valeant and Allergan has taken on a playground overtone as Allergan makes a complaint to the SEC. The company alleges that Valeant is “cherry picking data” in order to paint a negative picture of the company. This is after Valeant made its claims that Allergan was misleading investors.

21st Century Fox may sell some of its European assets in order to raise money for its Time Warner bid. The original offer, made last week, was rejected.

OAO Severstal, Russian owned steel giant, agrees to sell two of its plants to us companies. The companies are Steel Dynamics and AK Steel Holding Corporation. The deal is worth $2.3 billion and marks Severstal's departure from the US. This move may be in response to US sanction althought the steel industry has yet to be targeted.

Elliot Management has taken a $1 billion, or 2%, stake in data storage company EMC. The firm is looking to break up EMC in order to unlock value. EMC shares jumped more than 5% today and were able to break above long term resistance.


A new scandal centered around food safety broke in China over the weekend. A supplier of meat to Chinese based McDonald's and Yum! Brands stores was caught selling out of date meat to the two companies. The meat was sold by a Shanghai based subsidiary of a US supplier. This is just after Yum reported earnings growth of 19% based on a 15% increase of comp store sales in China. Shares of Yum fell hard last week when the earnings report was released and fell again today. Shares fell close to 4% on heavy volume and are now trading near a potential long term support line. This scandal may have provided an entry into Yum but it would be wise to wait for some signs of support before pulling the trigger. This is not the first time there has been an issue like this, Yum and McDonald's have bounced back, it will just take some time.


McDonald's is scheduled to release earnings this week, on Thursday. Yum's report last week leads me to think that MCD could produce similar results in China, if it is enough to get investors into the stock is a different question. Today's news was not good for MCD and drove stock prices 1.32% lower, extending a drop that began last week. The stock is now sitting on a potential support level with declining indicators. Current support is the $97.50 level but it does look like it will be tested. As I said before, the news today may have provided an entry into this name but more sign of support is needed. If MCD breaks current support the next target is around the $95 level.


Halliburton rose 1.5% to $72 in premarket trading after the oil services company reported second-quarter earnings that met expectations and revenue that exceeded forecasts. Profit for the quarter rose to $776 million, or 91 cents a share, from from $623 million, or 73 cents a share in the prior comparable period. The stock made a new intraday all time high but was not able to hold it into the close. The trend in the stock is bullish but the indicators are bearish at this time. They are rolling over into a potential trend following entry signal but it is not confirmed as yet. One analyst has already upped the target for this stock which may provide additional catalyst moving forward.


Netflix reported earnings after the bell but the stock was moving long before that. Shares of the stock traded as much as 2.5% higher during the day and extended those gains after the bell. Netflix met earnings expectations with EPS of $1.15 but beat on the top line with revenue of $1.34 billion. The really important number for investors in the stock is the subscriber number which topped 50 million for the first time. The company says that Orange Is The New Black was a driver of the gains. Netflix is now bouncing from the short term moving average and approaching resistance at the current all time high near $475.


Chipolte Mexican Grill also reported after the bell. The fast casual chain reported top and bottom line numbers far beyond the expectations driven on a positive pass through of price increases and a +17% gain in comp store sales. The company reported earnings of $3.50 versus the expectations of $3.08. Revenue also topped expectations sending shares more than 8% higher in after hours trading.

The Indices

The Dow Jones Transportaton Average led today's losses although the drop was small. The index closed with a loss of only -0.29% after trading lower on an intraday basis. The index has been consolidating between the current all time high and the rising short term 30 day EMA since breaking out of a flag pattern at the beginning of the month. The indicators are bullish but weak and close to neutral when looking back over the past few weeks. The MACD peaks are all small and very shallow while stochastic is obviously trending to the side. The market is waiting for something, earnings is part of it but next weeks FOMC, GDP estimate and new jobs data are a bigger part of it I think. There may be more of this side to side backing and filling until then.


The blue chip Dow Jones Industrial Average also fell by more than a quarter percent today, losing -0.28%. The index fell below 17,000 for a brief time, testing support, before moving back up to today's closing level. Near term support held and is aided by the short term moving average which is just below. Looking at the moving average it appears to be trending higher in a near straight line that is suggestive to me of steady buying. The indicators are mildly bearish but more neutral than not. This is good provided the index maintains support levels as it allows the market to cool off and set up for stronger trend following signals. Earnings are still a concern but today's reports have helped to alleviate some of that worry.


The SPX did not quite lose a quarter percent, falling -0.23%. The index is also trending in a sideways range, consolidating above near term support and below current all time highs. Geo politics are helping to keep resistance in place but the rising tide of earnings is pushing up against that resistance. This week and next are important for the index in terms of earnings, but also for economic data and the FOMC. The index has been in this range for about a month now and it is narrowing as the short term moving average pushes prices against the upper boundary. It is possible for the index to continue on in this manner for a few more days, maybe a week but a break of one or the other is eminent. The indicators are bearish at this time but over sold in the near term. A break below the moving average would find support at the lower end of the current trading range and then just below that at the long term trend line.


The tech heavy Nasdaq lost the least today, only -0.17%. The index opened lower and closed lower but was able to create a white candle at the close. The index appears to be bouncing, or about to bounce, from long term support. Long term support on this chart is coincident with the short term moving average. The indicators are more bearish here than with the other indices but still indicate there is some support at the current levels. In the end it will come down to earnings and tomorrow is going to be a big day. There are too many to list but one to take note of will be Apple, after the bell.


Global events are plenty scary, enough to grab the markets attention but not so scary as to impact earnings or economic outlook. The market reaction last Friday and today show that there are buyers waiting for stocks when prices fall. Whether or not the buyers stick around will come down to earnings, the FOMC and the economic data. Earnings are rolling in just fine, the economic trends are up and the FOMC sees growth through the end of the year. If this has changed we will find out very soon. Either this week with earnings or next week from the Fed and/or the data. For now I am still a buyer on the dips.

Until then, remember the trend!

Thomas Hughes


New Plays

Specialty Retailer

by James Brown

Click here to email James Brown


NEW BEARISH Plays

Five Below, Inc. - FIVE - close: 34.40 change: -1.30

Stop Loss: 36.10
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
Entry on July -- at $---.--
Average Daily Volume = 1.0 million
Listed on July 21, 2014
New Positions: Yes, see below

Company Description

Why We Like It:
Five Below is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandise targeted at the teen and pre-teen customer. We offer a dynamic, edited assortment of exciting products, all priced at $5 and below, including select brands and licensed merchandise across a number of our category worlds: Style, Room, Sports, Media, Crafts, Party, Candy and Seasonal (which we refer to as "Now"). We believe we are transforming the shopping experience of our target demographic with a unique merchandising strategy and high-energy retail concept that our customers consider fun and exciting. Based on management's experience and industry knowledge, we believe our compelling value proposition and the dynamic nature of our merchandise offering has fostered universal appeal to teens and pre-teens, as well as customers across a variety of age groups beyond our target demographic (source: company website).

FIVE has been suffering from a multi-year trend of lower same-store sales growth. The first quarter of 2014 broke that down trend with same-store sales growth of +6.2%. Management had previously guided in the 3-4% range and analysts were only expecting +3.8%. Meanwhile total sales surged +31.8% to $126 million, beating estimates of $121.9 million. The overall sales growth was a combination of adding new stores and the better same-store sales. Unfortunately FIVE guided lower in its Q1 report (June 4th). Management also guided for full-year 2014 same-store sales growth of just 4%.

FIVE opened 19 new stores in the first quarter bumping its total to 323 stores. Their long-term plan is 2,000 stores. That might be a warning signal. The FIVE co-founders have tried retail before with the Zany Brainy chain that sold toys and games. Zany Brainy eventually went bankrupt and one of the reasons blamed for the failure was growing too fast.

There have been plenty of bears claiming that shares of FIVE are too rich. The company's P/E is about 55. That is pretty expensive but growth names tend to carry high valuations. They are seeing strong revenue growth. That growth could face tough competition.

Wal-Mart (WMT) unveiled plans to start building smaller "neighborhood" stores in an effort to win back some market share. WMT plans to boost these smaller stores from 346 in 2014 to over 500 in 2015. Given WMT's strength in this industry they could squeeze FIVE's margins.

Shares of FIVE has been underperforming the major indices. The stock peaked near $55 a share back in November 2013. Since then investors have been selling the rallies and FIVE now has a bearish trend of lower highs. Today shares of FIVE are hovering above major support near $34.00. A breakdown could launch the next leg lower. The Point & Figure chart is currently bearish and forecasting at $28 target.

The February 2014 low was $33.94. We are suggesting a trigger to open bearish positions at $33.75.

Trigger @ $33.75

- Suggested Positions -

short FIVE stock @ (trigger)

- or -

buy the Nov $30 PUT (FIVE141122P30) current ask $1.40

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

Annotated Chart:

Weekly Chart:



In Play Updates and Reviews

Locking In Potential MSFT Gains

by James Brown

Click here to email James Brown

Editor's Note:

We closed the MSFT trade at the closing bell tonight.

MU and COH were stopped out. FRGI hit our entry trigger.


Current Portfolio:


BULLISH Play Updates

SoftBank Corp. - SFTBY - close: 37.90 change: -0.16

Stop Loss: 35.35
Target(s): To Be Determined
Current Gain/Loss: +3.3%

Entry on June 17 at $36.68
Listed on June 16, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 499 thousand
New Positions: see below

Comments:
07/21/14: SFTBY followed the market lower this morning and then spent the rest of the day slowly drifting higher. I do not see any changes from my prior comments. SFTBY remains underneath resistance near $38.50.

Keep in mind that Alibaba is still expected to IPO this summer. There has been some speculation it could happen later this month. Others believe Alibaba wants to IPO on the "lucky" date of August 8th. The number eight is considered a lucky number is Chinese culture. However, there has been new speculation that Alibaba may not IPO until after Labor Day (September 1st).

Earlier Comments: June 16, 2014:
SoftBank Corp. has been referred to as the Warren Buffet of Technology although a better comparison is probably to Buffet's Berkshire Hathaway. They are a holding company with hundreds of businesses. According to the company website SFTBY has 235 subsidiaries and 108 affiliates (including 150 consolidated subsidiaries and 83 equity method companies). SoftBank Group possesses both advanced infrastructure and diverse services and content, and invests in promising companies working in the Internet field.

SFTBY owns 80.2% of Sprint Corp., 33.3% of eAccess Ltd., 100% of WILLCOM, Inc., 33.3% of Wireless City Planning Inc., 58.5% of GungHo Online Entertainment, and 42.5% of Yahoo Japan Corp. They also own 34% of Renren Inc., which is considered the Chinese version of Facebook. They also own 36.7% of Alibaba Corp., which is a much larger and more profitable version of Amazon.com. That's on top of owning SoftBank Telecom, SoftBank BB Corp. and SoftBank Mobile.

SFTBY's combined telecom assets makes the company one of the largest telecom/wireless players in Japan. In 2013 they added 4.1 million new subscribers and more than double the 1.19 million subscriber gain by NTT DoCoMo and 2.8 million for AU, which is owned by KDDI. Softbank added 47% of the Android phones activated in Japan and 39% of the iPhone 4s and 5c models. Both metrics are the largest in Japan and shows how Softbank is gaining market share.

Their Renren investment could be a big. China already has the largest Internet audience on the planet and it's only going to get bigger. Currently Renren has about 200 million users. This will grow. Like Facebook, Renren is developing its mobile platform. Renren is currently valued at about $8 per user but this seems extremely low considering what Facebook paid for WhatsApp.

SFTBY's majority stake in Sprint is starting to pay off. Sprint has had a rough few years working through its merger with Nextel. Sprint later acquired Clearwire. It looks like Sprint is now in recovery mode after adding +477,000 subscribers in Q4 2013 versus losing -337,000 in Q4 2012. SFTBY wants to acquire T-Mobile and combine it with Sprint. Currently 75% of U.S. customers are on AT&T or Verizon. SFTBY calls them an American duopoly but they believe by combining Sprint, the third largest carrier, with T-Mobile, the fourth largest, the combined company could compete with AT&T and Verizon, which would be good for competition and ultimately consumers.

Today the real allure of SFTBY is its 37% ownership of Alibaba. Amazon.com (AMZN) is an Internet powerhouse with sales of $86 billion in 2013 and a net profit of $274 million. Alibaba dwarfs AMZN with 2013 sales of $160 billion and a profit of $2.16 billion. Right now it looks like Alibaba will IPO this summer. Analysts have been estimating they could be the biggest IPO in history with a value of $160 to 185 billion.

There were new numbers out on Alibaba today with the company stating that its Q4 revenues only rose +39% to $1.9 billion. That's down from 62% growth in Q3. Margins retreated from 51.3% to 45.3% on higher marketing costs. This spooked investors today into thinking that maybe the valuation may not be in the $160-185 billion range.

We believe that SFTBY's shares are very undervalued and when the Alibaba IPO does hit this stock could soar. Tonight we're suggesting investors launch positions tomorrow morning at current levels. Depending on your trading style this could be an aggressive entry point. Technically SFTBY still has resistance in the $38-39 zone. More conservative investors may want to wait for SFTBY to close above $39.00 before initiating new positions. The risk of not launching positions now is that we do not know when Alibaba is going to announce its IPO. It could be any day and likely in the next few weeks. We will plan on exiting after Alibaba's first day of trading.

Current Position: Long SFTBY stock @ $36.68

07/11/14 News hits that SFTBY might buy T-Mobile soon.
06/30/14 new stop $ 35.35
06/17/14 trade opens. SFTBY gapped down at $36.68
note: SFTBY does not have options.



BEARISH Play Updates

DSW Inc. - DSW - close: 27.65 change: -0.01

Stop Loss: 28.25
Target(s): To Be Determined
Current Gain/Loss: - 2.8%

Entry on July 16 at $26.90
Listed on July 12, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.5 million
New Positions: see below

Comments:
07/21/14: The XRT retail ETF lost -0.7% today. Yet DSW closed virtually unchanged. That is a potential warning signal for DSW bears. I am not suggesting new positions at this time.

Earlier Comments: July 12, 2014:
DSW Designer Shoe Warehouse runs over 400 company-owned stores. They also participate in hundreds of other shoe departments in regional department stores through their Affiliated Business Group.

There appears to be a bear market in designer shoes. At least that is the picture if you're looking at shares of DSW Inc. The stock has actually been a big winner for investors if you have owned it the past few years. On a post 2-for-1 split adjusted basis DSW traded down to $3.33 in 2009. It peaked in 2013 with a close at $47.22 in November last year. That's a huge run (more than 1,400%). Unfortunately last November was indeed the peak. DSW has been stuck in a bearish trend of lower highs and lower lows since then.

DSW lowered its earnings guidance back in February 2014. Of course back then just about all of the retail companies were warning about lack of sales and blaming it on the extremely cold winter weather. That was after weeks of worry over the 2013 holiday shopping season.

The U.S. economy is slowly recovering but consumer spending has not. There are still large chunks of the consumer who continue to struggle. The sharp rise in food prices this year combined with elevated gasoline prices has not helped. There seems to be a bifurcation in the consumer spending. There has been strong demand for big ticket items like housing and cars. Yet smaller discretionary spending is just not there.

The overall retail industry saw some improvement in May. There was hope that June same-store sales would come in better than expected. Analysts and investors were a bit disappointed when the retail industry delivered June numbers that were only in-line with estimates.

Meanwhile DSW continues to struggle. The company reported earnings on May 28th. Wall Street was expecting a profit of $0.48 per share on revenues of $622.9 million. DSW announced earnings of 42 cents on revenues of $599 million. A miss on both counts. Management then lowered their 2015 guidance. The company blamed the weather (again) and said they were facing an intense promotional retail environment. The Container Store (TCS) has a completely different product mix but recently mirrored DSW's troubles and said they were experiencing a retail "funk" (i.e. lack of sales).

Shares of DSW dropped from $32.50 to $23.60 on its earnings miss and earnings warning late May. Since then the stock has bounced but it has found new resistance in the $28.50 area. Now DSW looks like it is rolling over again.

Friday's low was $27.20. I am suggesting a trigger to open bearish positions at $26.90. If triggered I'm expecting DSW to at least test its May lows if not breakdown to new lows.

We will plan on exiting prior to DSW's late August earnings report.

current Position: short DSW stock @ $26.90

- (or for more adventurous traders, try this option) -

Long OCT $25 PUT (DSW141018P25) entry $1.05

07/18/14 new stop @ 28.25
07/16/14 triggered @ 26.90
Option Format: symbol-year-month-day-call-strike



Fiesta Restaurant Group Inc. - FRGI - close: 42.84 change: -1.31

Stop Loss: 45.75
Target(s): To Be Determined
Current Gain/Loss: +2.1%

Entry on July 21 at $43.75
Listed on July 19, 2014
Time Frame: Exit PRIOR to earnings on Aug 5th
Average Daily Volume = 271 thousand
New Positions: see below

Comments:
07/21/14: Our brand new play on FRGI is off to a good start. Shares opened at $43.85 and quickly hit our suggested entry point at $43.75. The breakdown under support near $44.00 and its simple 200-dma is bearish. I do not see any changes from the weekend newsletter's new play description.

Earlier Comments: July 19, 2014:
Fiesta Restaurant Group, Inc. (FRGI) specializes in fast-casual, ethnic restaurant brands. They currently own, operate, and franchise the Taco Cabana and Pollo Tropoical brands with more than 300 locations across the southern United States, the Caribbean, Central and South America. Most of their stores are located in Florida.

FRGI was the best performing restaurant stock last year with a gain of 240%. Yet shares have been seriously underperforming this year with a -15.5% decline and that's after the eight-week rally from its May 2014 lows.

The company is growing. They're expected to boost their store growth by 17 percent this year. Their latest earnings report was mixed. FRGI delivered a profit of 33 cents per share when Wall Street was looking for 30 cents. Revenues were up +8.8% year over year to $145.4 million. That's nice growth but analysts were expecting revenues of $147.5 million.

Same-store sales and traffic were up +6.3% and 4.6%, respectively at the Pollo Tropical brand. Yet the Taco Cabana brand only saw +0.8% sales growth and traffic was negative.

The U.S. restaurant industry saw first quarter traffic decline. It looks like the trend continues in the second quarter. Industry wide traffic declined -1.7% in June. That's the 19th consecutive month of negative traffic. Now FRGI does seem to be outperforming its peers in the restaurant industry but it does seem to be swimming up stream against a cautious consumer spending environment.

The rally off FRGI's May lows appears to be breaking down. FRGI has been consolidating sideways the last few days and looks poised to break support at its simple 200-dma soon.

We think it will break down. I would consider this more of a short-term technical trade than a bearish call on FRGI's fundamental business. The $35-37 area looks like it could be significant support. We'd like to try and capture the drop.

Tonight I'm suggesting a trigger to open bearish positions at $43.75 with a stop loss at $45.75.

FRGI is scheduled to report earnings on August 5th and we do not want to hold over the announcement.

Current Position: short FRGI stock @ $43.75

07/21/14 triggered @ 43.75




CLOSED BULLISH PLAYS

Microsoft Corp. - MSFT - close: 44.84 change: +0.15

Stop Loss: 43.85
Target(s): To Be Determined
Current Gain/Loss: + 7.1%

Entry on June 17 at $41.85
Listed on June 14, 2014
Time Frame: 10 to 12 weeks
Average Daily Volume = 23 million
New Positions: see below

Comments:
07/21/14: MSFT bounced off its morning lows to outperform the market with a +0.3% gain. Our plan was to exit today at the closing bell to avoid holding over MSFT's earnings report due out tomorrow night.

closed Position: long MSFT stock @ $41.85 exit $44.84 (+7.1%)

- (or for more adventurous traders, try this option) -

2015 Jan $45 call (MSFT150117c45) entry $1.16 exit $2.19 (+88.7%)

07/21/14 planned exit at the close
07/19/14 prepare to exit on Monday at the close
07/17/14 new stop @ 43.85
06/30/14 new stop @ 39.90
06/17/14 triggered @ 41.85
Option Format: symbol-year-month-day-call-strike

chart:



Micron Technology - MU - close: 33.07 change: -0.08

Stop Loss: 32.65
Target(s): To Be Determined
Current Gain/Loss: - 5.6%

Entry on July 16 at $34.60
Listed on July 15, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 31 million
New Positions: see below

Comments:
07/21/14: I cautioned readers in the weekend newsletter that our stop loss on MU might be a little too tight. The stock spiked lower at the open and hit our stop loss at $32.65. MU remains inside the multi-month bullish channel but it is on the verge of a possible breakdown.

closed Position: Long MU stock @ $34.60 exit $32.65 (-5.6%)

- (or for more adventurous traders, try this option) -

Oct $35 call (MU141018C35) entry $2.59* exit $1.72 (-33.5%)

07/21/14 stopped out
07/19/14 new stop @ 32.65
07/16/14 triggered @ 34.60
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

chart:



CLOSED BEARISH PLAYS

Coach, Inc. - COH - close: 34.32 change: +0.07

Stop Loss: 34.60
Target(s): To Be Determined
Current Gain/Loss: -3.4%

Entry on July 16 at $33.45
Listed on July 14, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 10.7 million
New Positions: see below

Comments:
07/21/14: Most of the market was retreating lower this morning. Not COH! After a very brief dip the stock rallied, on no apparent news, and hit our stop loss at $34.60 before paring its gains.

closed Position: short COH stock @ $33.45 exit $34.60 (-3.4%)

- (or for more adventurous traders, try this option) -

AUG $33 PUT (COH140816P33) entry $1.10* exit $0.75** (-31.8%)

07/21/14 stopped out
**option exit price is an estimate since the option did not trade at the time our play was closed.
07/16/14 triggered @ 33.45
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

chart: