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Daily Newsletter, Wednesday, 8/20/2014

Table of Contents

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

Market Wrap

Slow-Volume Melt-Up

by Keene Little

Click here to email Keene Little
This week's rally has been on slow and slowing volume and showing lots of negative divergences in market breadth and momentum. It should be reversing to the downside but the bulls apparently didn't get the memo.

Wednesday's Market Stats

When you look under the hood to see how the market looks it's not a pretty picture. Whether it's fast-slowing volume, deteriorating advance-decline line or bearish divergences on momentum indicators you could be forgiven for feeling bearish about the stock market. But if you look at just price, which is of course the most important indicator, you see bullishness and that's what keeps the buyers coming. But now throw in an overbought market and there are plenty of reasons why bulls need to again be cautious here. It might be time for the bears to get another turn at the feeding trough.

The market started with a gap down this morning, which was different than Monday and Tuesday, but the dipster crowd saw it as a buying opportunity and they pushed the indexes to new trading highs. The one fly in the bull's ointment today (and somewhat yesterday) was the fact that the RUT was not participating in the rally. It's flashing a warning sign but I'm not sure there are many bulls paying much heed. The dip following the FOMC minutes this afternoon was just another dip to be bought. Thursday we'll find out if those buyers might get a little buyer's remorse.

Other than the FOMC minutes this afternoon, letting us know how the last meeting went, there wasn't much in the way of economic reports to jolt the market one direction or the other. The geopolitical news was relatively quiet and that provided a benign environment for the market to continue floating higher into the FOMC minutes. The market finished mostly on a high note for the day other than a brief bout of profit taking in the final 15 minutes. But as I'll review in tonight's charts, that selling might have been the kickoff to what could become more severe selling in the coming weeks. How the market pulls back (impulsive vs. corrective) will provide the clues we'll need to figure out the odds for higher prices into September vs. the start of a more significant decline. For now I urge caution by both sides but feel the bears are getting ready to take control of the ball.

As for the Fed's FOMC minutes for the meeting held three weeks ago, it appears there is more of a shift in the bias toward removing policy accommodations at a faster rate. The feeling is that the employment picture is improving and inflation is ticking higher toward their 2% goal. There is no change of plans to wind down the latest QE program with the elimination of bond purchases after the October meeting.

What's interesting about all this is how well the stock market is taking this. There is a general feeling (acceptance) that the economy is improving, inflation is ticking higher and that both of these are good for the stock market. But what's been good for the stock market is the Fed being highly accommodative and without their monthly priming the pump I'm surprised the stock market isn't more worried. Removing liquidity is likely to cause more problems than the market is currently expecting.

Ironically, the Fed and BOE are moving closer to providing less accommodation and raising rates while the rest of the world (except Europe?) starts tightening the excess credit creation. The BOE reported this morning that some members are dissenting about keeping rates at zero and instead want to raise rates to 0.25% now, not later. Japan's monetary expansion is virtually on hold and China is aggressively reining in it credit expansion program. The world may be much closer to a deflationary cycle than an inflationary one.

So ironically, while the Central Banks of many of the developed countries start removing accommodation they could be doing so at the beginning of a deflationary cycle that will be the first one in 80 years. They could in fact trip the world economies into an unintended slowdown (you mean the Yale-educated economists could make an error of that magnitude? Say it isn't so) just at a time when they should be starting an accommodation program instead of ending one. The only thing I wonder is how quickly the Fed will reverse itself and start up QE5 (or whatever number we're up to).

Looking at the stock market's indexes, the broader averages, and most of the sector averages, have not made new highs yet above their July highs. The banking index hasn't made a new high above its March high, let alone its July high. The techs are out in the lead and that has most everyone feeling bullish again but we have to wonder if it's deja vu all over again, similar to what happened at the October 2007 high where the techs went on to make new highs into the end of the month while most other indexes made lower highs compared to their highs earlier in the month. SPX is the closest to making a new high, having missed by only 3 points today and it will only take a minor bump higher for it to join the techs. That would be important for the bulls to continue here but what a cruel joke on the bulls if today's high was it.

For indexes other than the techs it's still possible to call the bounce off the August lows a correction to the decline off the July highs. That would be a setup for a strong decline to follow, which makes this a very important inflection point for the market. And unless a strong catalyst enters the picture for the bulls to grab hold of and start buying with more enthusiasm I think the rally leg from the August lows is the final one. It has all the signs of being in a termination phase. How high it can continue to melt up with deteriorating market breadth is the big question at the moment. So let's see what the charts are telling us.

Kicking off tonight's chart review with the SPX weekly chart, the past three weeks have brought it back up near its July 24th high at 1991.39, only 3 points above today's high at 1988.57. The July rally attempted to punch up through the trend line along the highs from April 2010 - May 2011, but it was unable to hold even marginally above it. If SPX does push higher, it will again have to deal with the 2010-2011 trend line, currently near 2005. Other than a head-fake break above 2005, it would obviously be more bullish above that level but if it rolls over from anywhere in the current price region it will leave a significant bearish divergence on the weekly chart and likely a double-top completion to its rally.

S&P 500, SPX, Weekly chart

At the August 7th low, at 1904.78, SPX came within about 5-10 points of its uptrend line from October 2011 - November 2012 (using the log price scale and depending on how it's drawn). Most were watching the uptrend line from November 2012 - February 2014, using the arithmetic price scale, which is where SPX found support. Now a drop below the August 7th low would also be a break of the longer-term uptrend line from October 2011 - November 2012, which obviously would be an important clue about the longer-term pattern. In the meantime the uptrend continues to hold and any short plays are therefore by definition counter-trend plays and require greater caution. I like to look for reversal setups, which I'm seeing here, but the risk in catching rising knives should be obvious.

The daily chart below shows the trend line along the highs from April 2010 in gray and another one along the highs from March-May. In case this market is going to rally into September I wanted to see where SPX might be headed to. The first target is near 1995, where the 5th wave of the move up from February would be 62% of the 1st wave (the February-March rally). This would result in SPX making a final high as a double top (like the RUT did at its July high). But if the final 5th wave is to achieve equality with the 1st wave then as depicted on the chart, we could see a rally up to 2050 by mid-September where the projections crosses the trend line along the highs from March-May.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 1995
- bearish below 1941

Because SPX has not made a new high yet above its July 24th high, there is still the possibility that the leg up from August 7th is a correction to the decline and not the completion of the rally. This is potentially important because a correction would be followed by a steep and strong decline in a 3rd wave. The DOW easily supports this interpretation and it makes it a dangerous time to be long the market because of this downside risk.

We can't know yet whether or not we'll get new highs into September or a steep decline instead. The next pullback/decline will be needed to help provide some clues. If the bounce off the August 7th low is a correction to the 1st wave down from July then the next decline will start to kick into high gear and it will be impulsive (sharp decline, small corrections) as the 3rd wave unfolds. But if we get a corrective pullback (choppy, overlapping highs and lows) then it will look like a correction to the rally off the August 7th low and point higher once the pullback is finished. While I lean short the market here, price is king and it will tell us after the next pullback/decline gets started whether to be looking higher or lower.

This week's rally for the DOW has it back above its uptrend line from November 2012 - February 2014, currently near 16825, and that's obviously bullish. But the trend line, using either the arithmetic or log scale, didn't seem to have the same influence as it did for SPX. So at the moment I don't consider it all that relevant. As can be seen on its daily chart below, the uptrend line from October 2011 - November 2012 (green) basically held on August 5th and 6th but then the August 7th close was a break below it. But it was only a 1-day break, which turned into a head-fake break, and there's been a strong recovery since. It closed slightly above price-level resistance near 16970 and 5 points below the 78.6% retracement of its July 17 - August 7 decline, at 16984, after trying to break through both this afternoon. The close correlation here requires close attention to see if it will turn the DOW back down on Thursday.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 16,985
- bearish below 16,575

Looking a little closer at the DOW, the 60-min chart below shows the bounce pattern. The wave count suggests the August 6th low was the completion of its decline and it's been in a correction of the decline since then. For followers of EW counts, I have a double zigzag for the bounce, which consists of two a-b-c's separated by an x-wave. The second a-b-c is the move up from August 12th and the c-wave would be 162% of the a-wave at 16991. Using the August 6th low as the completion of the decline raises the 78.6% retracement of the decline to 16985. Again, close correlation at this level means it could be trouble for the bulls. Between the daily and 60-min patterns we have a potential resistance zone at roughly 16970-16992. Today's high was 16994.89 but it closed at 16979. The DOW has been hugging the top of its up-channel from the August 7th low, which is usually an indication it's in its final leg and the breakdown, when it happens, is usually quick.

Dow Industrials, INDU, 60-min chart

The tech indexes have made new highs, unconfirmed so far by the other indexes. At the moment we're left to wonder if the techs will drag the other indexes higher (SPX being the closest to doing so) or if instead we'll have a repeat of the October 2007 high where the techs made new highs at the end of October after the blue chips topped out on October 11th. The bearish divergence at the current high vs. the July high, as can be seen on the NDX daily chart below, suggests the wave count on the chart is correct. The leg up from August 7th fits well as the 5th wave in the rally from April and it equals the 1st wave at 4044.29 and that was achieved with today's high at 4046.97 before dropping a little into the close, at 4040.70. This level also coincides with the broken uptrend line from June 2013 - February 2014 (an internal trend line that was first broken in April) and the trend line along the highs from March-July. There's good correlation here for a top of significance.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4050
- bearish below 3950

The RUT's weekly chart is shown below to point out the importance of its August low as well -- like SPX, it bounced off its longer-term uptrend line but this one is from March 2009 - October 2011 (log scale). This is the line that defines the bull market since the 2009 low and a break of it would be a strong signal that the bull market has completed and the next bear market has started, especially since the wave count looks complete at its July 1st high. The trend line is still holding and therefore trend followers rightly suggest staying long but a drop below its August 1st low at 1107 would be confirmation of a trendline break (as well as its 50-week MA), in which case the trend will have reached the "bend at the end." Yesterday it was starting to telegraph greater weakness than the other indexes and that was further amplified today.

Russell-2000, RUT, Weekly chart

On the RUT's daily chart below I've added the uptrend line from October 2011 - November 2012, which is a little lower and currently near 1109. I have a key level to the downside at 1127 since that would be a break below the August 12th low at 1129 and the 2009-2011 uptrend line. That would be a good indication the bounce pattern completed and the next leg down is in progress. As I mentioned before, confirmation of a breakdown doesn't come until the RUT drops below its August 1st low at 1107.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1173
- bearish below 1127

Watching the tech indexes head higher this month, I've been curious why the semiconductors haven't been keeping up. With semiconductors in just about every product used today it's a very good economic indicator. If the techs were doing well, so too should the semis. But they haven't kept up and the SOX only today got above its 62% retracement of its decline from July. This is more bearish non-confirmation for the new highs for tech indexes. As can be seen on its weekly chart below, it's been cycling around the 38% retracement of its 2000-2008 decline, which is at 624. The August 7th low was near 598 and today's high was 636. The SOX is still holding inside its parallel up-channel from November 2012, the bottom of which is now near 620, so the uptrend is holding and it might make another stab at the price projection at 656.57. This is the projection for two equal legs up for an A-B-C bounce off the 2008 low and was just missed with the July 16th high at 652. But at the moment I'm thinking the high is in place and the bounce off the August 7th low is a correction to the 1st wave down.

Semiconductor index, SOX, Weekly chart

The banking index, BKX, made a lower high in July vs. its high in March and so far another lower high in August vs. its July high. That defines a downtrend but so far it's not clear what the longer-term pattern is telling us. As drawn on its daily chart below, we could be getting a bullish sideways triangle continuation pattern (the rally into it suggests it's a bullish pattern). Needless to say, this should make bears uncomfortable since a rally in the banks would surely be good for the other indexes as well. The bearish interpretation of the pattern is that it's not a triangle but instead a 1-2, 1-2 wave count to the downside and the next leg down will be a strong 3rd of a 3rd wave and then stair-step lower after that. A break below the triangle would leave a failed bullish pattern and failed patterns tend to fail hard. The bulls want to see a break above the July 3rd high at 72.55. If it is a bullish sideways triangle we'll see price consolidate inside it until at least October before it breaks out to the upside so we've got plenty of time to evaluate its bullish potential.

KBW Bank index, BKX, Daily chart

At its July 23rd high the TRAN did a little throw-over above its trend line along the highs from April 2010 - July 2011 and then declined sharply after that, leaving a head-fake breakout attempt. Now it looks like it wants to at least back-test that trend line again, currently near 8494, which is close to its July 23rd high at 8515. The closing highs around that date were near 8468 and a back-test of this high and the trend line could be too much to break through in an overbought market.

Transportation Index, TRAN, Daily chart

Yesterday we got some good news from the home-building sector with the better-than-expected new starts and permits. And the home builders have enjoyed a strong rally off the August 7th low. As can be seen on the daily chart below, the DJ US Home Construction index (DJUSHB) has made it back up to its 50-dma near 483 and only slightly higher is its broken uptrend line from August-September 2013, near 487. So we've got a setup here for a reversal in the home construction stocks.

DJ US Home Construction index, DJUSHB, Daily chart

The strong home building that was reported yesterday might be a bit of a "build it and they will come" hope and since the chart above suggests we could see a sharp reversal of the high bounce this month I'm wondering if the hope will soon turn to disappointment. The idea of building it with the hope "they" will come hasn't worked too well in China as entire cities remain unoccupied. The chart below shows the steady decline in homeownership rates since 1995 and the decline since 2005 is not encouraging for home owners and builders. Much of the decline in homeownership rates has to do with many Americans opting to rent instead of buy (some by choice, others having been forced into it). Ownership rates have returned to the level last seen in Q3, 1995. Like China, we could end up with a lot of inventory but not enough demand, which will of course depress prices (something I expect to see anyway). I see a fundamental and technical link here that does not bode well for the prices of home construction stocks nor for home prices.

Quarterly Homeownership rates, 1995-July 2014, chart courtesy BusinessInsider.com

The U.S. Dollar has confirmed its breakout from the trading range it was in since October 2013 by firmly breaking above 81.50 this week. It might pull back and test 81.50 but it now looks good for at least a run up to the downtrend line from June 2010 - July 2013, currently near 83.40. I think it will head higher into the end of the year but we'll first have to see how it does with the downtrend line.

U.S. Dollar contract, DX, Weekly chart

Gold is acting weak (the dollar's rally is not helping) and I'm wondering if it will break down from here or after a bump higher. I've been showing an expectation for a bump up to the top of its sideways triangle that has formed since the June 2013 low, which is currently near 1358, before heading lower but a drop below its June low at 1240 would confirm the next leg down is already in progress. One indicator that tells me gold is going to decline from here is the fact that I've been emailed offers in the past week to buy China 1/10-oz gold coins at spot price. This tells me they're trying to offload inventory and it's a good sign prices are heading lower. That's said somewhat tongue-in-cheek but there's probably an element of truth in it.

Gold continuous contract, GC, Weekly chart

I thought oil would hold its uptrend line from June 2012 but it has now been decisively broken with more than a head-fake break. This suggests we'll likely see a test of the January low at 91.24 sooner rather than later. That should be good for a bounce but the pattern has turned bearish for the longer term (sooner than I expected).

Oil continuous contract, CL, Daily chart

We have a couple of reports after the opening bell tomorrow that could move the market. Existing home sales will be an important message following the improved housing starts and building permits. The Philly Fed and Leading indicators will give us some more data points about the economy.

Economic reports and Summary

This week has been bullish in price but bearish in market breadth and momentum, which is usually not a good combination when it comes to the longevity of the rally. Volume picked up significantly with the selling in July and down to the August low but it's been drying up as the rally has progressed. That by itself is not a rally killer; all the rally needs is for the sellers to stay away. Bears are very discouraged and bullish sentiment is again high, just as I had said would happen before the rally off the August 7th low got started. The pieces are now in place for the bulls to get sucker punched and dash their hopes and dreams for a higher stock market. We could still get higher prices but there are a lot of cracks in the dyke and not enough fingers to plug the leaks. And just in time, the central banks are causing some waves that are going to put even more pressure on the dams holding back the water. Be careful out there.

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

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Plays

Gaining Altitude

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Delta Air Lines - DAL - close: 40.52 change: +0.98

Stop Loss: 37.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on August -- at $---.--
Listed on August 19, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 11 million
New Positions: Yes, see below

Company Description

Why We Like It:
Delta is the world's second biggest passenger airliner on the planet. They serve almost 165 million customers a year. Believe it or not but they started back in 1924 as an aerial crop dusting company called Huff Daland Dusters. Now they have almost 80,000 employees and a fleet of more than 700 planes that fly to 334 destinations in 64 countries on six continents.

A lot of investors look at the airline stocks as value plays. That's easy to see given their cheap multiples. DAL has a P/E of 3.1. Yet the company is seeing growth as well. Last year the airlines were big winners with the market's 2013 rally. This year could be another strong one thanks to falling oil prices. There has been a lot of geopolitical headlines but none of them seem to be pushing oil prices higher. Instead crude oil prices are falling. That's a huge deal for the airline companies because fuel is their largest expense. DAL has the lowest fuel costs in the business because they own their own refinery. The company expects that their fuel hedging and refinery operations should cut their fuel costs by $350 million this year.

More than 60% of DAL's business is in the U.S. The country's economic improvement has helped fuel gains for DAL. The airline has beaten Wall Street's bottom line estimates four quarters in a row. Back in June they raised guidance. Their most recent earnings report was July 23rd where they delivered a profit of $1.04 a share, one cent above estimates. DAL management that said their pre-tax profit was $1.4 billion, which is a +70% improvement from a year ago. They ended the second quarter with debt at less than $8 billion, which is a 20-year low. DAL's margins have been improving. Management expects margin improvement to continue and should see a jump from 13.5% to 15-17% in the third quarter.

Technically DAL saw a correction from $42 to $35 (-16%) from its June highs. Investors bought the dip again near $35.00 in early August. Now DAL has built what appears to be a bullish double bottom. The current bounce from its August lows is breaking through resistance.

If this trend continues we want to hop on board. Tonight we're suggesting a trigger at $40.75. The 2014 high near $42.50 could be short-term resistance but longer-term DAL looks poised to breakout.

Trigger @ $40.75

- Suggested Positions -

Buy DAL stock @ $40.75

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

Buy the 2015 Jan $45 call (DAL150117C45) current ask $1.64

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

Annotated Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Mixed Ahead of Jackson Hole

by James Brown

Click here to email James Brown

Editor's Note:
U.S. equities delivered a mixed performance ahead of the Federal Reserve's annual conference in Jackson Hole.

SIX hit our stop loss. We closed YNDX this morning.


Current Portfolio:


BULLISH Play Updates

Green Plains Inc. - GPRE - close: 43.96 change: +0.20

Stop Loss: 39.25
Target(s): To Be Determined
Current Option Gain/Loss: +7.8%
Entry on August 11 at $40.77
Listed on August 09, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.4 million
New Positions: see below

Comments:
08/20/14: GPRE outperformed the major indices with a +0.4% gain but struggled with the $44.60 level for the second day in a row. I am not suggesting new positions at this time.

Earlier Comments: August 09, 2014:
GPRE has been a monster stock for investors over the last couple of years. Summer of 2012 the stock was trading for less than $5.00 a share. Today GPRE is trading at levels not seen since early 2006. The company is considered part of the basic materials sector. They're listed in the specialty chemicals industry. What they do is make ethanol and a lot of it.

According to the company website, "Green Plains is a vertically-integrated ethanol producer based in Omaha, Nebraska. We currently have an ethanol production capacity of approximately 1.0 billion gallons per year with our 12 plants." Another big part of their business is "Distillers grains are an important co-product of Green Plains’ ethanol production. At capacity our plants will produce approximately 2.9 million tons of distillers grains annually that will be used as a high-protein, high-energy animal fodder and feed supplement. Corn oil is also a co-product of ethanol production that is being extracted at all 12 of our plants."

Earlier this year GPRE made headlines when they purchased their own cattle-feed yard. Distiller's grain is a byproduct of the ethanol production process. Previously GPRE would try and sell it to ranchers as cattle feed. Sometimes that proved difficult to sell all of its distiller's grain. GPRE has decided a great way to handle the problem is buy their own cattle yard. They'll be able to raise their own cattle with the byproduct of their main business of ethanol production.

Of course ethanol is their main product and it could be a great year for GPRE. The company's input costs for their main ingredients of corn and natural gas have been falling in 2014. That's going to boost their ethanol margins. Piper Jaffray actually upgraded GBX in July on this dynamic and raised their price target on GPRE to $45.00.

It looks like the ethanol market is pretty healthy. The U.S. saw ethanol exports soar +56% in the first six months of 2014. Most of that went to Canada. Demand for ethanol could go up if some senators have their way. A handful of senators are pushing to boost the EPA's requirement on ethanol in our fuel. If they are successful it would raise the ethanol requirements by +40%.

The stock has displayed significant relative strength. The S&P 500 index is up +4.5% year to date. GPRE is up +108%. More and more mutual funds have been adding GPRE to their portfolio. Yet not everyone agrees with the bullish outlook on GPRE. Short interest is climbing as well. The most recent data listed short interest at 25% of the small 28.6 million share float. If this rally continues it could spark more short covering.

The last few days have seen GPRE consolidating sideways in the $39.50-40.60 zone. Tonight we are suggesting a trigger to open bullish positions at $40.75. We will try and limit our risk with a stop loss at $38.40.

We are not setting an exit target tonight but I will note that the point & figure chart is bullish and suggesting at $69.00 target.

- Suggested Positions -

Long GPRE stock @ $40.77

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

Long Dec $45 call (GPRE141220C45) entry $2.95*

08/14/14 GPRE announces $100 million buy back and doubles dividend to 8c.
08/13/14 new stop @ 39.25
08/11/14 trade opens on gap higher at $40.77, trigger was $40.75
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike


Microsoft Corp. - MSFT - close: 44.95 change: -0.38

Stop Loss: 41.75
Target(s): To Be Determined
Current Option Gain/Loss: +2.0%
Entry on August 14 at $44.08
Listed on August 13, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 36 million
New Positions: see below

Comments:
08/20/14: I have been warning readers to expect a pullback in MSFT. Today's -0.8% decline snaps a six-day winning streak.

More conservative investors may want to raise their stop closer to the simple 50-dma currently near $42.90.

Earlier Comments: August 13, 2014:
Microsoft Corp. is a technology behemoth. The company was founded in 1975. They have grown into a massive company with 128,000 employees around the world. Their software is used by billions of people every day. They also offer technology services, tablets, X-box gaming platform, networking and server software, and their Nokia division. MSFT has jumped head first into the cloud computing industry. Altogether MSFT generated almost $87 billion in sales the past 12 months with a net income of $22 billion.

Investors worried about MSFT and how the death of the PC would slowly chip away at its core products - mainly the Windows operating system and Microsoft Office. However, this past summer there has been evidence that the PC market isn't dead. Intel reported stronger than expected chip sales for PCs, especially to enterprise customers. Meanwhile MSFT stopped supporting the Windows XP operating system. MSFT released the XP system back in 2001. Their decision to stop providing updates means the XP system could become less secure to viruses, malware, and hacking. One analyst estimated that 25% of the PCs currently connected to the Internet were still running XP. That's millions and millions of computers that will need to either upgrade their software or likely be scrapped and upgraded to a new computer with a newer version of MSFT's software. The upgrade cycle could last a while.

Investors have been pretty optimistic since Satya Nadella was crowned CEO of MSFT back in February this year. He has been focusing the company on the cloud and it seems to be working. MSFT's commercial cloud revenues soared +147% with sales on track to exceed $4 billion a year. Even Bing, MSFT's search engine rival to Google, is improving. Bing's ad revenues rose +40% last quarter and snatched almost 20% of the search engine market. MSFT expects their Bing division to turn profitable in 2016.

MSFT's most recent earnings report on July 22nd was mixed. They missed the bottom line estimate by 5 cents. Yet revenues came in ahead of expectations. Wall Street was looking for quarterly revenues of $22.99 billion. MSFT reported $23.38 billion. Several analyst firms upgraded their outlook on MSFT following the earnings report. Many of the new price targets are in the $50 area.

Technically shares of MSFT have a bullish trend of higher lows. The stock saw some post-earnings depression in the second half of July but now that's over and investors are buying the dip.

Tonight I am suggesting investors open bullish positions tomorrow morning. We'll try and limit our risk with a stop loss at $41.75.

- Suggested Positions -

Long MSFT stock @ 44.08

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

Long 2015 Jan $50 call (MSFT150117c50) entry $0.45

08/14/14 trade begins. MSFT opens at $44.08
Option Format: symbol-year-month-day-call-strike


RF Micro Devices Inc. - RFMD - close: 11.97 change: -0.05

Stop Loss: 11.20
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on August -- at $---.--
Listed on August 19, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 14.5 million
New Positions: Yes, see below

Comments:
08/20/14: RFMD did not see any follow through on yesterday's breakout to a new relative high. The stock spent today's session drifting sideways near $12.00. I do not see any changes from last night's new play description.

Earlier Comments: August 19, 2014:
We are more than halfway through 2014 and it's shaping up to be another bullish year for stocks. The S&P 500 index is up +6.6% year to date. The NASDAQ composite is up +7.9%. That's because the NASDAQ is getting a boost from strong groups like biotechs and semiconductors. The SOX semiconductor index is up +17.2% in 2014. Yet one stock in this industry has been sprinting past the competition. That is RFMD with a +128% year to date gain.

According to the company website, "RF Micro Devices, Inc. is a global leader in the design and manufacture of high-performance semiconductor components. RFMD's products enable worldwide mobility, provide enhanced connectivity and support advanced functionality in the cellular handset, wireless infrastructure, wireless local area network (WLAN), CATV/broadband and aerospace and defense markets. RFMD is recognized for its diverse portfolio of semiconductor technologies and RF systems expertise and is a preferred supplier to the world's leading mobile device, customer premises and communications equipment providers."

What you may not know is that RFMD is a big supplier of components to Apple Inc. They provide components and chips for AAPL's iPhones. AAPL is expected to announce their iPhone 6 in September and could sell tens of millions of phones before year end. That could be a boon for companies like RFMD.

This year has also been bullish for mergers and acquisitions with Wall Street applauding a number of deals. One winning deal so far has been RFMD's merger with TriQuint Semiconductor (TQNT). RFMD announced this deal in February this year and the stock soared on this news. Since then both RFMD and TQNT stock have been outperformers. The company expects synergies of $150 million in just the first two years.

Meanwhile RFMD is developing a bullish trend of beating earnings estimates, rising margins, and raising guidance. Back in April they beat estimates and raised guidance. They did it again at their last report on July 24th. Wall Street expected a profit of $0.17 a share on revenues of $304.8 million. RFMD delivered $0.24 cents a share on revenues of $316.3 million. Margins surged to 42%. Management raised their EPS and revenue guidance for the current quarter.

Technically the stock is marching higher and just recently broke out from a two-week consolidation. Today's display of relative strength (+2.0%) left RFMD at multi-year highs. The shorts are getting killed. The most recent data listed short interest at 16% of the 266.7 million share float. If this rally continues the stock could get a boost from short covering.

Today's high was $12.10. We are suggesting a trigger to open bullish positions at $12.15.

NOTE: We will tentatively set a time frame of 8 to 12 weeks but we might choose to exit at Apple's iPhone 6 announcement in September.

Trigger @ $12.15

- Suggested Positions -

Buy RFMD stock @ (trigger)

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

Buy the NOV $12 call (RFMD141122C12)

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


Skyworks Solutions - SWKS - close: 55.82 change: +0.44

Stop Loss: 49.95
Target(s): To Be Determined
Current Option Gain/Loss: +6.0%
Entry on August 07 at $52.65
Listed on August 02, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 4.3 million
New Positions: see below

Comments:
08/20/14: The rally continues for SWKS. The stock outperformed the market with a +0.79% gain. Investors may want to start raising their stop loss.

Earlier Comments: August 2, 2014:
The semiconductor stocks have led the market higher most of the year but the SOX semiconductor index has reversed sharply in the last couple of weeks. This correction in the SOX has shaved its year to date gains to +13.9%. Shares of SWKS have not seen the same pullback and this semiconductor stock is up +82% this year and looks poised to keep the rally going.

Who is SWKS? According to the company website, " Skyworks Solutions, Inc. is an innovator of high performance analog semiconductors. Leveraging core technologies, Skyworks supports automotive, broadband, wireless infrastructure, energy management, GPS, industrial, medical, military, wireless networking, smartphone and tablet applications. The Company's portfolio includes amplifiers, attenuators, circulators, demodulators, detectors, diodes, directional couplers, front-end modules, hybrids, infrastructure RF subsystems, isolators, lighting and display solutions, mixers, modulators, optocouplers, optoisolators, phase shifters, PLLs/synthesizers/VCOs, power dividers/combiners, power management devices, receivers, switches and technical ceramics. Headquartered in Woburn, Mass., Skyworks is worldwide with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America."

SWKS is probably best known for being a component supplier for Apple's iPhones. SWKS is also supplying components to Amazon.com for that company's new Fire Phone.

SWKS soared in mid July following a better than expected earnings report. Wall Street was looking for a profit of 80 cents after SWKS guided higher to 80 cents in June. They still managed to surprise with a bottom line profit of 83 cents a share. Revenues soared almost 35% to $587 million, which was better than the $570 million estimate, up from $535 before SWKS's June guidance. SWKS management also raised their guidance going forward.

Following SWKS's much better than expected report there was a wave of bullish analyst comments. Several firms raised their SWKS price targets into the $60-65 zone. SWKS's bullish guidance is probably due to Apple's new iPhone 6, which is expected to be unveiled in September. Odds are good that SWKS will rally into Apple's product launch in September.

Shares of SWKS were showing relative strength on Friday with a bounce from support near $50.00 and a bullish engulfing candlestick pattern. We are suggesting a trigger to launch bullish positions at $52.65.

- Suggested Positions -

Long SWKS stock @ $52.65

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

Long Nov $55 call (SWKS141122C55) entry $2.86

08/13/14 new stop @ 49.95
08/07/14 triggered @ 52.65
Option Format: symbol-year-month-day-call-strike


WhiteWave Foods Co. - WWAV - close: 35.18 change: +0.56

Stop Loss: 31.40
Target(s): To Be Determined
Current Option Gain/Loss: +0.8%
Entry on August 19 at $34.91
Listed on August 16, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.1 million
New Positions: see below

Comments:
08/20/14: WWAV also displayed relative strength today with a +1.6% gain. There is still a good chance WWAV will fill the gap. Investors may want to wait for a dip near $34.00 before initiating new positions.

Earlier Comments: August 16, 2014:
Consumer tastes and buying habits are changing and more people are opting for more natural and organic foods.

WWAV is in the consumer goods sector. You might not recognize the name but they're behind brands like Silk, Horizon Organic, Land-O-Lakes, International Delight, Alpro, and Earthbound Farm Organic.

WWAV considers themselves "a leading consumer packaged food and beverage company that manufactures, markets, distributes, and sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America and Europe. The Company is focused on providing consumers with innovative, great-tasting food and beverage choices that meet their increasing desires for nutritious, flavorful, convenient, and responsibly-produced products. The Company's widely-recognized, leading brands distributed in North America include Silk plant-based foods and beverages, International Delight and LAND O LAKES* coffee creamers and beverages, Horizon Organic premium dairy products and Earthbound Farm' certified organic salads, fruits and vegetables. Its popular European brands of plant-based foods and beverages include Alpro and Provamel" (The Land-O-Lakes brand is licensed from the owners).

If you're looking for a company that is growing then keep an eye on WWAV. They have beaten Wall Street's estimates on both the top and bottom line at least four quarters in a row. The last three quarters management has been raising their guidance. In Q4 2013 WWAV's revenues were up +11.5%. The first quarter of 2014 saw revenues soared +36.5%.

Their latest report was August 7th. Analysts were looking for a profit of $0.22 on revenues of $815.6 million. WWAV delivered a profit of $0.23 with revenues climbing +39.5% to $837.9 million.

The natural and organic retailers might be facing tougher margins and stronger competition (WFM, SFM, TFM, NGVC) but that doesn't seem to be the case for a producer and distributor like WWAV.

You can see the big surge in the stock price on August 7th as traders reacted to the bullish earnings news and guidance. After consolidating gains the last few days shares of WWAV have started to push higher again. They have been outperforming the major market indices and WWAV closed at a new all-time highs on Friday.

We believe the rally continues but I am labeling this a more aggressive, higher-risk trade due to WWAV's recent volatility. The last several weeks have seen some significant swings.

Friday's intraday high was $34.06. We're suggesting a trigger to open bullish positions at $34.15.

- Suggested Positions -

Long WWAV stock @ $34.91

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

Long OCT $35 call (WWAV141018C35) entry $1.70*

08/19/14 trade opens on gap higher at $34.91, suggested entry point was $34.15.
*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




BEARISH Play Updates

Cepheid - CPHD - close: 38.70 change: +0.83

Stop Loss: 40.25
Target(s): To Be Determined
Current Option Gain/Loss: +1.3%
Entry on July 28 at $39.20
Listed on July 26, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 680 thousand
New Positions: see below

Comments:
08/20/14: Caution! Today's move in CPHD could be a warning signal. The stock surged +2.19% and closed above its 10-dma and 20-dma. Has CPHD found a bottom?

More conservative traders might want to lower their stop loss.

I am not suggesting new positions at this time.

Earlier Comments: July 26, 2014:
CPHD is in the technology sector. If you look deeper the company operates in the scientific and technical instruments industry. According to the company's website, "Cepheid is a leading molecular diagnostics company that is dedicated to improving healthcare by developing, manufacturing, and marketing accurate yet easy-to-use molecular systems and tests. By automating highly complex and time-consuming manual procedures, the company's solutions deliver a better way for institutions of any size to perform sophisticated genetic testing for organisms and genetic-based diseases. Through its strong molecular biology capabilities, the company is focusing on those applications where accurate, rapid, and actionable test results are needed most, such as managing infectious diseases and cancer."

CPHD, like most of the U.S. stock market, had a great 2013. Unfortunately the rally peaked in February-March 2014. This stock set its all-time highs in the $55-56 zone. Market watchers already know that momentum and high-growth names were crushed during the March-April market pullback. CPHD was no exception. The stock corrected from $55 to $40. It looked like CPHD was on the path to recovery but then the stock collapsed again in the last two weeks.

The problem is CPHD's earnings. The company reported earnings on July 17th. Their adjusted results for the second quarter of 2014 was a loss of 10 cents a share. That was better than Wall Street's estimate for a loss of 13 cents a share. CPHD delivered pretty solid revenue growth. Sales in the second quarter surged +21.4% to $116.5 million. That came in better than analysts were expecting. Yet CPHD's net results were down -40% from a year ago.

Listening to the company's management paints an optimistic outlook. CPHD's CEO John Bishop said they sold a record-setting 1,084 of their GeneXpert systems last quarter. That's more than all of 2012. Gross margins improved as well with margins rising from 45% to 49%. So why did the stock fall?

Investors sold the stock on disappointing guidance. CPHD expects 2014 revenues in the 4452-461 million zone. That's relatively close to Wall Street's $459 million estimate. Yet CPHD is forecasting EPS of 10 cents to 13 cents. That is significantly lower than analysts' estimates of 20 cents. You can see the reaction in CPHD stock with the big drop on July 18th.

The post-earnings sell-off continues and now CPHD is breaking down under significant support at the $40.00 level. The next stop could be the $36-35 area or lower. Currently the point & figure chart is bearish and forecasting at $29.00 target.

I would consider this a more aggressive trade. The latest data listed short interest at 16.8% of the 68.9 million share float.

Friday's low was $39.26. We're suggesting a trigger to open bearish positions at $39.00.

- Suggested Positions -

Short CPHD stock @ $39.20

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

Long SEP $40 PUT (CPHD140920P40) entry $2.35

08/13/14 new stop @ 40.25
07/31/14 new stop @ 40.51
07/28/14 triggered @ 39.20
Option Format: symbol-year-month-day-call-strike



Deutsche Bank - DB - close: 33.04 change: -0.06

Stop Loss: 35.55
Target(s): To Be Determined
Current Option Gain/Loss: +1.2%
Entry on August 04 at $33.45
Listed on August 02, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.9 million
New Positions: see below

Comments:
08/20/14: DB spent Wednesday's session drifting sideways. I would wait for a new failed rally near resistance at $34.00 or the 30-dma before considering new positions.

Earlier Comments: August 2, 2014:
Banking scandals continue to plague the financials. Most of us are familiar with the mortgage loan scandal that has haunted the major U.S. banks for the last few years and finally seems to be fading away. Then some of the biggest international banks were hit with the Libor rate fixing scandal. Now some of the big banks are suffering with a dark pool trading scandal. Dark pools are essentially institutional trading that is concealed from the public markets.

If that wasn't bad enough Europe's economy is slowing down. The region was already struggling before the Ukraine-Russian conflict arose. Now with a growing list of sanctions against Russia the impact is starting to accelerate the economic slowdown in Europe. Plus the specter of financial stress in the European financial system has risen again with the recent collapse of Portugal's Banco Espirito Santo, which recently filed for creditor protection.

Add all of these factors together and you can see why shares of DB, one of Germany's biggest banks, might be struggling. The stock Broke down back in March this year and it's been sinking every since. The month of July saw shares consolidate sideways but DB has started to break out of this trading range. The Point & Figure chart is pretty ugly and suggesting a long-term $14 target.

Friday's intraday low was $33.69. I am suggesting a trigger to open bearish positions at $33.45.

- Suggested Positions -

Short DB stock @ $33.45

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

Long Oct $33 PUT (DB141018P33) entry $1.45*

08/07/14 new stop @ 35.55
08/04/14 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


Fifth Third Bancorp - FITB - close: 20.10 change: +0.14

Stop Loss: 20.65
Target(s): To Be Determined
Current Option Gain/Loss: - 2.8%
Entry on August 06 at $19.55
Listed on August 05, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 10.2 million
New Positions: see below

Comments:
08/20/14: It's not looking good for our FITB short. Shares are back above what should have been resistance at $20.00. I am not suggesting new positions.

More conservative investors may want to ratchet down their stop loss.

Earlier Comments: August 5, 2014:
Fifth Third Bancorp started as the Bank of the Ohio Valley in Cincinnati back in 1858. According to the company's press release FITB is now "a diversified financial services company headquartered in Cincinnati, Ohio. The Company has $133 billion in assets and operates 15 affiliates with 1,309 full-service Banking Centers, including 102 Bank Mart® locations, most open seven days a week, inside select grocery stores and 2,619 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina. Fifth Third operates four main businesses: Commercial Banking, Branch Banking, Consumer Lending, and Investment Advisors. Fifth Third also has a 22.8% interest in Vantiv Holding, LLC. Fifth Third is among the largest money managers in the Midwest

The stock market's recent dip has reduced the S&P 500 index's 2014 gains to +4.9%. Yet the financial sector has been underperforming. The XLF financial ETF is only up +2.4%. Many of the banking stocks are weighing on the group. The regional banks have performed even worse with the KRE regional bank ETF down -6.9%. If you look at weekly chart of the KRE you'll notice a big bearish head-and-shoulders pattern that has formed over the last several months. This doesn't bode well for the group.

Banks have been struggling with little to no growth. Most are willing to lend but only to customers with the best credit ratings. Even if they do lend money the interest rates today are so low it's tough to make a profit. Housing prices continue to rise but the number of mortgages is shrinking.

FITB reported earnings on July 17th. Last quarter their mortgage banking revenues collapsed -67% from a year ago. FITB's profits plunged fro $591 million Q2 2013 to $439 million Q2 2014. The company did manage to beat Wall Street's estimates by 4 cents a share. Unfortunately FITB management lowered their revenue guidance.

Technically shares of FITB are bearish. They have broken the long-term bullish trend of higher lows (see the weekly chart). They have also recently broken below key support near $20.00.

Tonight we're suggesting bearish positions at current levels (no trigger). We'll try and limit our risk with a stop loss at $20.65.

- Suggested Positions -

Short FITB stock @ $19.55

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

Long Nov $20 PUT (FITB141122P20) entry $1.20*

08/06/14 trade begins. FITB gaps down at $19.55
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike


Financial Engines, Inc. - FNGN - close: 35.89 change: +0.08

Stop Loss: 36.60
Target(s): To Be Determined
Current Option Gain/Loss: -3.4%
Entry on August 15 at $34.70
Listed on August 11, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 663 thousand
New Positions: see below

Comments:
08/20/14: FNGN continues to hover just below resistance at $36.00. Readers may want to consider a stop loss closer to the $36.00 mark.

I am not suggesting new bearish positions at this time.

Earlier Comments: August 12, 2014:
FNGN is in the financial sector. They provide investment advice, retirement planning services and more. According to the company's press release they describe themselves as "America's largest independent investment advisor, is dedicated to making high-quality retirement help available to everyone — regardless of how much money they have. We’re proudly independent, which means we don’t sell products or earn commissions based on our investment recommendations. The companies that choose to work with us offer our services to their workers as a valuable employee benefit."

Shares of FNGN went public back in 2010 at $12.00. They opened at $15.00 on their first day of trading. Since then the stock has definitely had its ups and downs. Shares took off in July 2012 and soared to a high of $70 in December last year thanks to a very bullish stock market performance in 2013.

Unfortunately 2014 has been a very disappointing year as FNGN continues to frustrate investors. When FNGN reported earnings on February 20, 2014 they missed estimates by a penny, missed the revenue number, and guided lower for 2014. When FNGN reported earnings in May they missed by 2 cents, missed the revenue number, and guided lower for 2014. Their most recent earnings report was July 31st and FNGN managed to beat Wall Street's bottom line estimate by 2 cents. Revenues were in-line with (lowered) expectations. Yet FNGN management lowered their guidance for 2014. Is anyone picking up on a trend here?

The disappointing earnings results have fueled a six-month decline. Shares are now in a bear market. FNGN is currently testing support near the $35.00 level. The recent low was $34.88. Tonight we're suggesting a trigger to open bearish positions at $34.70.

I am tempted to label this a more aggressive, higher-risk trade because of the short interest. The most recent data listed short interest at 16.7% of the 50.8 million share float. That does raise the risk of a short squeeze. If you have noticed investors have been using the rallies to exit.

You could try and limit your risk with put options but the option spreads are pretty wide so we're not listing them here.

We are not setting an exit target tonight but I will point out that the Point & Figure chart is bearish and forecasting a $24.00 target.

- Suggested Positions -

Short FNGN stock @ $34.70

08/15/14 triggered @ 34.70


Natural Grocers by Vitamin Cottage - NGVC - close: 18.42 change: -0.13

Stop Loss: 21.05
Target(s): To Be Determined
Current Option Gain/Loss: +5.3%
Entry on August 12 at $19.45
Listed on August 11, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 209 thousand
New Positions: see below

Comments:
08/20/14: NGVC is still sinking and lost another -0.7% on Wednesday.

I am not suggesting new positions at this time.

Earlier Comments: August 11, 2014:
The last six to nine months have not been good for the natural food and organic-related retail chains. Whole Foods (WFM), The Fresh Market (TFM), Sprouts Farmers Market (SFM), and Natural Grocers have all underperformed the market by a wide margin.

According to NGVC's press release the company was "founded in Colorado by Margaret & Philip Isely in 1955, Natural Grocers was built on the premise that consumers should have access to affordable, high-quality foods and dietary supplements, along with nutrition knowledge to help them support their own health. The family-run store has since grown into a successful national chain with locations across Colorado, Texas, Utah, Wyoming, Oklahoma, Missouri, New Mexico, Montana, Kansas, Idaho, Nebraska, Arizona and Oregon, and employs over 2000 people. Although the company went public in July 2012, Isely family members continue to manage the company day to day, building on the foundation of their parents' business."

The good news is that the natural food and organic food craze is reaching a wider audience and more and more consumers are making healthier choices. The bad news is that this previously higher-margin business, in a notoriously low-margin industry, has drawn tons of competition. That has been the biggest challenge. Big players like Wal-mart and Target in addition to major regional grocery chains are all starting to offer more natural and organic wares. Meanwhile those already in the space are competing with each other as well. Margins are shrinking as competition heats up.

Shares of NGVC plunged back in May after the company lowered its same-store sales forecast for 2014. The stock dropped again on August 1st following its earnings report. Earnings were in-line with estimates but guidance was soft.

The path of least resistance is down and NGVG looks headed for its all-time lows in the $17.00 area.

The biggest risk with this bearish positions on NGVC is the crowd. There are a lot of investors already bearish on this stock. The most recent data listed short interest at 33.3% of the very, very small 5.1 million share float. That significantly raises the risk of a short squeeze.

We are suggesting bearish positions with a trigger to short NGVC at $19.45 but I am labeling this an aggressive, high-risk trade. NGVG does have options but most of the option spreads are too wide. We will try and limit our risk with a stop loss at $21.05.

*Aggressive Trade* Use small positions. - Suggested Positions -

short NGVC @ $19.45

08/12/14 triggered @ 19.45


Sprouts Farmers Market, Inc. - SFM - close: 29.73 change: -0.07

Stop Loss: 30.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on August -- at $---.--
Listed on August 18, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.8 million
New Positions: Yes, see below

Comments:
08/20/14: SFM is still not participating in the market's rally. We are waiting for a new relative low. Our suggested entry point is $28.95.

Earlier Comments: August 18, 2014:
There is a growing pile of evidence that Americans are starting to eat healthier. It's about time. 66% of Americans are overweight and 33% of us are clinically obese. This new trend of healthier eating helps explain falling sales at restaurants like McDonalds and strong sales for rivals like Chipotle (which many consider to be a healthier choice). Today's trade isn't about restaurants. It's about the natural and organic trend in grocery stores.

Most people think of Whole Foods Market (WFM) when they consider natural and organic grocery chains. WFM is a dominant player with 388 stores. Sprouts (SFM) is catching up. The first Sprouts store started in Arizona back in 2002. Today they have more than 180 stores. Unfortunately for SFM they are facing the same issues WFM is.

Natural and organic foods used to offer higher margins in a notoriously low-margin business - grocery. It wasn't long before everyone has started promoting their natural and organic options. Traditional food chains as well as major nationwide players like Wal-Mart and Target. All of this competition is pressuring margins and sales growth.

Keep in mind, SFM is still growing. Their latest earnings report was August 7th and SFM beat estimates with a profit of 20 cents a share. That's a +43% jump in earnings from a year ago. Revenues were up +19.5% to 743.8 million, also above estimates. SFM management raised their 2014 guidance although this didn't have much impact since they only raised guidance to match Wall Street's consensus.

This issue doesn't seem to be growth. Investors are bearish on rising competition. It doesn't help that SFM isn't cheap with a current P/E of almost 52. It also didn't help that several major shareholders just sold 15 million shares at $30 a few days ago. This big sale doesn't breed confidence for investors.

Technically SFM appears to be in a major down trend of lower highs and lower lows. The P&F chart is bearish and forecasting at $23.00 target. SFM barely moved today in spite of a relatively widespread market rally.

Currently SFM is hovering just above support near $29.10. If this stock breaks down it could test its 2014 lows and potentially hit new ones. Tonight we're suggesting a trigger for bearish positions at $28.95.

Trigger @ $28.95

- Suggested Positions -

short SFM stock @ $28.95

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

Buy the DEC $27.50 PUT (SFM141220P27.5)

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


CLOSED BEARISH PLAYS

Six Flags Entertainment - SIX - close: 38.03 change: +0.11

Stop Loss: 38.15
Target(s): To Be Determined
Current Option Gain/Loss: -3.4%
Entry on August 06 at $36.90
Listed on August 02, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 909 thousand
New Positions: see below

Comments:
08/20/14: SIX has not been very cooperative. The oversold bounce continued today and shares tagged $38.22 intraday. Our stop was hit at $38.15.

- Suggested Positions -

Short SIX stock @ $36.90 closed $38.15 (-3.4%)

08/20/14 stopped out
08/18/14 new stop @ 38.15
08/06/14 triggered @ 36.90

chart:


Yandex N.V. - YNDX - close: 30.17 change: -0.56

Stop Loss: 31.10
Target(s): To Be Determined
Current Option Gain/Loss: -5.3%
Entry on August 07 at $28.88
Listed on August 06, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.7 million
New Positions: see below

Comments:
08/20/14: After yesterday's potential bullish reversal higher we decided to close our YNDX trade this morning. The stock gapped down at $30.40 and eventually closed with a -1.8% decline.

- Suggested Positions -

Short YNDX stock @ $28.88 exit $30.40 (-5.3%)

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

NOV $28 PUT (YNDX141122P28) entry $2.40* exit $1.45** (-39.5%)

08/20/14 planned exit this morning
08/19/14 prepare to exit tomorrow morning
08/07/14 trade begins. YNDX opens at $28.88
*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: