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Newsletter

Daily Newsletter, Wednesday, 7/15/2015

Table of Contents

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

Market Wrap

Rally Running Out of Steam

by Keene Little

Click here to email Keene Little
The strong rally in the past week is showing signs of weakening as indexes hit some lines of resistance. The rally has been enough to open the door to new highs but it remains possible another hopium-induced rally will be followed by a reversal back down as disappointment once again sets in.

Wednesday's Market Stats

This morning started relatively flat with the blue chips flat, techs slightly positive and small caps slightly negative. The picture didn't change much from there although there was a small rally to minor new highs in the morning before pulling back in the afternoon. The RUT struggled in the red for most of the day and closed weaker, which is a warning sign for bulls. A final-hour rally rescued the other indexes from closing in the red as well, except for the S&P 500, which closed marginally in the red. The day essentially finished as a doji day near lines of resistance as traders tried to figure out whether or not there's additional buying power to move the market higher. Part of today's indecision is what's going to happen next with Greece.

The Greek Tragedy
The rally over the past week was brought to us courtesy of a "resolution" for the Greek debt drama. But it's more of another hope-filled rally rather than having something more concrete and the rally has been in the face of further deteriorating economic signs. Rallies on hopium are obviously risky to trade since hope can turn to despair quickly and typically it happens overnight while most U.S. traders are asleep. A bear market, which is not confirmed yet, is often called the "slope of hope" as declines to new lows are often interrupted with spikes to the upside on hope-filled news events.

Waking up to large gaps, up and down, is something we're seeing plenty of times. It seems to be a favored way of getting a lot of volume in the morning, something the HFTs love to trade, and in a decline one could be forgiven for thinking the overnight moves are manipulated but in fact are typically related to news events from overseas. Last Sunday night equity futures gapped down on the news that there was no agreement between Greece and the EU finance heads. Germany had executed their only remaining option, which was to require Greece give up its financial sovereignty in order to receive additional bailout money and this was at first completely rejected by Tsipras. After occupying Greece during WWII it's understandable that the Greeks are not at all comfortable with Germany now occupying their country again, this time financially.

But the EU held the winning cards and Tsipras knew it. He executed his only option, to threaten leaving the EU and declaring bankruptcy (in hopes of scaring the EU into accepting at least a write-down of Greek debt) and when the EU called him on his threat he was forced to back down and accept an early-Monday agreement. The Greek legislature is predicted to approve the agreement that Tsipras reluctantly signed (but does not approve) but the protests on the streets are ramping up. To say an agreement is locked in would be premature at this point and that's what makes the past week's rally dangerous to depend on.

Keep in mind that the agreement hammered out is for 86 billion euros over the next three years. This is primarily to keep the banks from failing but does not help Greece pay its bills (only some interest on their loans). The money loaned to Greece over the years has mostly (more than 90%) been to repay European banks and the Greeks feel the bailout money is mostly to help The EU banks rather than Greece. The early loans to Greece were of course pay used for their own overspending and shame on them for not being more financially responsible (easy cheap debt will do that, including what's been happening in the rest of the world). But lenders also have a responsibility to check the borrower's ability to repay and therefore they should share some of the burden that Greece is now facing. But so far the EU leaders, primarily Germany, have been unwilling to recognize their own culpability and therein lies much of the argument between Greece and the EU banks.

Greece's economy has already shrunk about 25% over the past five years and their economy is hardly strong enough to make much, if any, progress towards paying off their debt. The additional austerity measures being demanded of Greece will only make paying off their debt that much more difficult. That's one reason why Greece has been trying to get the EU banks to write down at least a portion of their debt. But Tsipras was forced to blink first in the showdown with the EU since the EU leaders are worried about contagion (whatever is done to help Greece will be demanded by other weak EU countries.

Germany is the real powerhouse behind the EU and while the Union was designed to ensure Germany and France, long-term enemies in the past 150 years, stay aligned but it is Germany that is running the show. It has now been forced to declare itself publicly as the power behind the EU, which is something it never wanted to do (at least not publicly). And this new "occupation" requirement for more money is what upsets Greece. They will be forced to sell off sovereign assets over the next few years to help pay down their debt. Greece will not have a choice in what assets are sold. They just also accept the following primary points of the agreement (and which the legislature needs to approve) in order to receive another 86 billion euros ($95B) over the next three years (the full text of the agreement can be read here: Eurozone Summit Statement):

-- VAT changes that include: a top rate of 23% for items such as processed food and restaurants; 13% for fresh food, energy, water and hotels (get the tourists to contribute); and 6% for medicines and books
-- The abolition of the VAT discount of 30% for Greek islands
-- An increase in the corporate tax rate from 26% to 29% for small companies
-- A luxury tax increase on big cars, boats and swimming pools
-- An end to early retirement by 2022 and a retirement age increase to 67 (this will really upset public unions and other vocal groups)

The whole agreement is considered by most Greeks to be a public humiliation and even if the Greek government signs off on the deal there will likely be many protests on the street and one can only guess how bad it could become. The Syriza party was voted in because of their anti-austerity position and if they capitulate there could be blood in the streets with demands for a new government. How that could affect the immediate future is one big guess.

What could make matters worse is that Tsipras is telling his people that even if the agreement is ratified the banks could still stay closed for another month before any EU money starts flowing into their country. A bad agreement, in the eyes of the Greek majority (who voted to flip the royal bird to the EU) and a continuation of closed banks probably won't sit well with the people. A month is a long time to see drastic changes made in Greece.

Further confusing matters is an IMF prediction that in two more years Greek debt will reach 200% of GDP. That's considered unrecoverable, especially with the inability to print their way out of debt (with the consequent hyperinflation so for all intents and purposes, 200% of GDP is simply not recoverable). The IMF is therefore recommending a "very dramatic extension" of the maturity dates of Greek debts, such as 30-year extensions. They're also recommending debt write-offs, something Greece has been demanding and EU (Germany) has been adamant about denying. The IMF report is very different from the deal hammered out on Sunday/Monday but while the IMF report deals with straight facts about the debt load and Greece's ability to pay, the EU-Greek deal is purely political. Care to guess which one is more likely to be an accurate assessment of the chances for success with the current agreement?

Well, with all that said, it was a long-winded way of saying the market's rally over the past week could be given up in an instant if the "agreement" suddenly fails. Another hopium-induced rally could turn to dust in a new slope-of-hope bear market decline. But the bears need to be cognizant of the effort being made by central banks around the world working to prevent a market decline. They're not more powerful than the markets but that won't stop them from trying to prop things up. We could still get new market highs for the indexes before a new bear market begins.

Complicating, or at least exacerbating, these issues is the fact that liquidity in the market has been drying up over the past couple of years. This is something that hasn't been reported by many because it's not a concern as long as the market is rallying. But in a selloff, liquidity provides an orderly decline as sellers continue to find buyers. Once the buyers disappear it becomes much more difficult to provide an orderly market and declines can quickly become crashes (we've had tastes of this with previous flash crashes).

Liquidity Issue
Bill Gross, who now manages the Janus Global Unconstrained Bond Fund, came out on Tuesday to warn investors about the vulnerability of the markets due to a pullback in liquidity. He stated the obvious when he said mutual funds, hedge funds and ETFs are most vulnerable when liquidity dries up. While the printing of trillions of dollars by central banks has kept the spigot turned on for the markets, there will be difficult times ahead when the spigot is turned off, or at least partially closed. His point about the funds mentioned above is that they're part of the "shadow banking system" and since they're not required to maintain reserves or even emergency cash they could be especially vulnerable to a market decline.

If a decline prompts selling by all these funds they'll likely find the Fed unable to handle the cash requirement needed to keep the banks liquefied. While the Dodd-Frank bill made banks less risky, that risk has been transferred to these "shadow banks" and the system is at greater risk, not less, than before Dodd-Frank, and we know how vulnerable the banking system was in the 2008 decline. A run on these shadow banks could be unstoppable for a while as the funds try to sell into a market that has insufficient buying power. As an aside, this is why it's extremely important to allow short selling since that group will be one of the few who has buying power.

Gross said trading in investment-grade bonds has declined 35% since 2005 and 55% in high-yield bonds. Since the Fed's ending of bond buying (but they continue to roll out expiring bonds) in 2014, combined with their desire to raise rates, it has made less cash available for the markets, which is only exacerbating a decline in market liquidity. This has resulted in magnified price moves in many bond markets, including "safe" ones such as U.S. Treasuries. What's happening in Greece and the possible ramifications for the EU and the other weak countries and their bonds is only making the situation worse. It's an intricate and tightly connected global financial system, one in which a butterfly flapping its wings in Africa really can make a disturbance half way around the world (chaos theory).

Markets
As always, we can't predict world events and it's even harder to predict the market's reaction to world events. We can only go with the charts and make our best guess based on what we're seeing. The rally from last week's low has been on weaker volume as the bounce has progressed

The SPX weekly chart below shows price stuck in the middle of a trading range since last December's high at 2093 and upside potential is the top of a parallel up-channel from the December high/February low, currently near 2160 and its broken uptrend line from March 2009 - October 2011. The bottom of the channel is near 2030 so about 50 points of upside potential vs. 80 points of downside potential, maybe less since price-level S/R is near 2040 and its 50-week MA, which supported the decline into the July 7th low, is near 2050. So we'll call it even odds for either the bottom or the top of the channel to be hit first. Combine all the choppy price action we've seen for over 6 months now and it's not hard to see the risk in trying for a position trade.

S&P 500, SPX, Weekly chart

It's easier to see the whippy choppy price action over the past many months on the daily chart below. Any solid idea which way it will go from here? I could just as easily argue for a continuation higher, for at least a test of the May high near 2135 before pulling back, as I could argue for a strong decline from here. The important point for short-term traders though is that at this point I believe upside potential is once again dwarfed by downside risk, especially right here. The bearish wave count suggests a strong 3rd of a 3rd wave down in the decline from May is about to start. This would be a move that would likely break down through multiple layers of support and in a hurry. We could see 1850-1900 in a matter of a few weeks, or sooner.

The bulls need to see just a consolidation off today's high, or a continuation higher from here, while the bears need to see a sharp decline below the July 7th high near 2083 in order to confirm the top of the bounce is in place. A double tap at its broken uptrend line from October 2014 - June 2015, yesterday and today, is another warning sign and today's doji at resistance could be the middle candle of a reversal pattern if Thursday's candle is a red one, especially a long red one. The first upside target for the bulls is the downtrend line from May-June (near 2125) followed by June's high (near 2130) and then May's high (near 2135).

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2125
- bearish below 2083

Because of all the choppy price action it's difficult to get a high-confidence wave count but at the moment the bounce off the June 7th low is a 3-wave move and that sets up a possible reversal back down from here. Below 2100 would be a bearish warning sign while below 2083 would leave a confirmed 3-wave (corrective) bounce and it would likely mean a continuation lower below 2040. Additional upside could be choppy from this point.

S&P 500, SPX, 60-min chart

Unlike SPX, the DOW hit its downtrend line from May-June today, near 18085, with a high at 18090. The DOW would be more bullish above 18100 but be careful about a test of its June high near 18189. The bullish wave count suggests a stair-step move higher into the end of the month, with a projected high in the 18400-18600 area. The bears want to see a drop back below the 50-dma at 17973 and especially the July 7th high near 17793. Like SPX, the bearish 1-2, 1-2 wave count to the downside from May suggests a very strong decline to follow this bounce and that's why I think downside potential is much more significant than upside potential. A short play here with a stop at today's high is a very low-risk play.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,100
- bearish below 17,793

The techs were relatively stronger today and the Nasdaq came close to its March 2000 high at 5132 again, with today's high at 5125, but couldn't muster enough buying to break back above that level, which it did briefly on June 22nd and held above it for two days. The highs in April, May and June are now being tested again and the bearish divergence continues. Will the 3rd test be the winner for the bulls? There's additional upside potential but I don't think it's enough to exceed the downside risk.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4562
- bearish below 4435

Yesterday the RUT back-tested its broken uptrend line from October 2014 - May 2015 and today's selloff has it looking like a bearish kiss goodbye, in which case it's the RUT once again leading the way in a reversal. I see the potential for a bounce higher to 1280-1282 and while a rally above 1282 would be more bullish I don't think it would even make it up to its June 23rd high near 1296 before at least pulling back in a larger correction.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1282
- bearish below 1249

Looking at the big index, the NYSE, the picture is no different -- the rally made it up to the broken uptrend line from December, which had been broken with the snap to the downside on Greek news (so what else is new) on June 29th. Back up for a back-test on a supposed Greek settlement would be fitting. Recovery back above the line, near 11000, would be bullish but the bulls would be in better shape above the June 29th gap closure at 11040. The bears of course want to see a bearish kiss goodbye following the back-test, which might have started with today's pullback.

NYSE Composite Index, NYA, Daily chart

Watching the bond market for some clues is not helping at the moment. As can be seen on the TYX (30-year yield) chart below, it's inside a rising wedge pattern but has additional upside potential to the top of the wedge and its downtrend line from February 2011, both of which cross near 3.55% at the end of August. But a 3-wave move up from the January low could be all we'll get before the resumption of the longer-term decline.

30-year Yield, TYX, Weekly chart

The banking index has had a strong bounce back up off last Wednesday's low. It is now back up against its broken uptrend line form March 2009 - October 2011 and the top of a parallel up-channel from October 2013. Additional upside potential is to the top of a parallel up-channel off the January low, which will be near 82 by the end of July. But the near test of June high is so far showing bearish divergence and there is the potential for a failure of the bounce at any time. The top will be in place once BKX drops below last week's low at 74.92.

KBW Bank index, BKX, Weekly chart

The bounce in the U.S. Dollar has continued this week and slightly higher, at 98.02, it would have two equal legs up from May 14th. The top of the sideways triangle that I have drawn on its weekly chart below, which is just a guess at the moment, is near 99.50 in early August. The dollar looks like it has a little more upside potential before pulling back and I continue to watch for signs as to whether or not the sideways triangle is the higher-odds probability.

U.S. Dollar contract, DX, Weekly chart

Gold is again nearing short-term price-level support near 1141 (previous lows since last November. It's also again back-testing its broken downtrend line from September 2012 but it's not showing enough bullish divergence to suggest support is going to hold. If it breaks down from here we should see a drop down to the next support level near 1090 and a break below that would lead to a drop to price-level support near 1000.

Gold continuous contract, GC, Weekly chart

The same shelf of support for silver, near 15.25, was broken last week and then it bounced off price-level support at 14.65 (from 2006-2010), with a low at 14.62. Today's close at 15.05 is another break below 15.25 and could lead to a stronger breakdown from here, in which case the downside target will be near 12.

Silver continuous contract, SI, Weekly chart

The pattern for oil suggests we'll get at least a test of the January-March lows near 42-43, maybe down to about 40, before starting a larger bounce correction. But if the dollar consolidates sideways in a triangle pattern, we could see the same for oil. But there's the potential for a higher bounce and if oil starts back up from here (a lower probability pattern but it can't be ignored) we could see it up to the 71 area for two equal legs up from March and a back-test of its broken uptrend line from 1998-2008.

Oil continuous contract, CL, Weekly chart

Today's economic reports included PPI numbers, which showed a bump up in inflation, as can be seen in the table below. In addition to the inflation numbers the Empire Manufacturing and Industrial Production numbers were better than expected and the numbers should have scared the market into thinking the Fed will be moved closer to raising rates. But has been true for a while, since the Greek tragedy, the market is ignoring economic news. Other than reactions in individual stocks the market is also ignoring earnings news. It's Greece that matters and the news cycle is not over yet for what happens there. Continue to expect gyrations around overseas news instead of what happens domestically.

Economic reports and Summary

Conclusion

Even while the market rallied a little this morning the advance-decline numbers were negative and they got more negative as the day wore on. It was a clear sign that the rally is tiring and it's on the backs of fewer stocks as it makes it higher. Bearish divergences are showing up and trading volume has been declining as the rally off last week's lows has pushed higher. It doesn't prevent the indexes from being pushed higher, especially since this is opex week, which is a week known for manipulation and bullishness. But considering the multiple lines of resistance that the indexes are hitting, on weakening momentum in a rally that might be too much too fast, it's a time for caution by the bulls and a time for the bears to look for a shorting opportunity. We are in a trading range full of choppy price action and therefore the trading opportunity is short term (days, not weeks).

But there is the potential for a strong decline that will last weeks and therefore I like the opportunity for a short trade at this time. A long trade is now the risker side and frankly not worth the risk. Trying to catch rising knives is of course dangerous, especially this week, but if the market holds up through this week I believe next week will not be kind to the bulls. The best case for the bulls will be a choppy consolidation that last a few days followed by a push higher. But a test of the May high at SPX 2135 is about the most I would expect whereas the downside potential is below 2000. Upside potential of about 20 points vs. downside of about 120+ is what we're probably looking at. You can decide which side you'd rather play.

Good luck and I'll be back with you next Monday as I fill in for Todd.

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

The Correction Is Over

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Burlington Stores, Inc. - BURL - close: 55.46 change: +0.57

Stop Loss: 53.65
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on July -- at $---.--
Listed on July 15, 2015
Time Frame: Exit PRIOR to earnings in September
Average Daily Volume = 1.6 million
New Positions: Yes, see below

Company Description

Trade Description:
Investors seem to be in a forgiving mood with BURL. The company's most recent earnings report was a disappointment but the stock has recovered. Now it looks like the longer-term bullish trend is poised to resume.

BURL is in the services sector. According to the company, "The Company, through its wholly-owned subsidiaries, operates a national chain of off-price retail stores offering ladies’, men’s and children’s apparel and accessories, home goods, baby products and coats, principally under the name Burlington Stores."

BURL's Q4 results were pretty good. The company announced these on March 17th. Earnings of $1.43 per share beat estimates and revenues were up +12% to $1.5 billion, also above estimates. Q4 comparable store sales surged +6.7% while gross margins improved 50 basis points. Management did warn that Q1 results would not be so hot but the stock didn't react to the negative guidance.

Shares did react when their chief merchandising officer resigned. This news hit on March 24th and shares of BURL peaked the next day. Shares fell more than 15% with a drop toward round-number support near $50 over the next few weeks. Then BURL reported its Q1 earnings on June 9th. Their bottom line results of $0.41 per share met estimates. Revenues were up +4.9% to $1.18 billion but that missed expectations.

The biggest miss was comps. BURL said their comparable store sales were only +0.8% versus the company's previous guidance of +2-3% and below analysts' estimates of +4%. Management issued mixed guidance for the second quarter and soft guidance for fiscal year 2016. They tried to soften the blow of bad news by announcing a $200 million stock buyback program to be completed over the next 24 months.

Wall Street was not happy over the terrible comps. Analysts are also concerned how a wage hike might impact margins. Wal-Mart, Target, the Gap, and TJX have all raised their minimum wage and other retailers are feeling pressure to raise theirs to retain employees. BURL announced they were raising their minimum wage to at least $9.00 an hour.

BURL's CEO Tom Kingsbury commented on their results, "We are pleased with our 64% increase in adjusted EPS which was driven by a robust gross margin expansion. While our comp sales were positive for the ninth consecutive quarter, we were negatively impacted by the timing of IRS tax refunds, lower markdown sales due to significantly less markdown inventory, increased store closures due to weather, and receipt flow issues in three key Easter businesses."

Naturally the market's reaction to bad news was to sell the stock. BURL plunged more than -8% posting its worst one-day loss since going public in 2013.

Fortunately for investors the sell-off was short-lived. BURL found support near $48.00 and its rising 200-dma. Now six weeks later the stock is above its pre-earnings highs and poised to breakout past potential resistance near $56.00. The long-term up trend looks poised to resume. Tonight we're suggesting a trigger to launch bullish positions at $56.05.

Trigger @ $56.05

- Suggested Positions -

Buy BURL stock @ $56.05

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

Buy the SEP $60 CALL (BURL150918C60) current ask $1.25
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Churn Sideways Ahead of Bailout Vote

by James Brown

Click here to email James Brown

Editor's Note:
The market is waiting for the results of the Greek Parliament vote on the new bailout deal. Meanwhile the Iran deal is pushing crude oil lower and that undercut most of the energy stocks today.


Current Portfolio:


BULLISH Play Updates

Benefitfocus, Inc. - BNFT - close: 43.81 change: -0.20

Stop Loss: 38.95
Target(s): To Be Determined
Current Gain/Loss: +0.4%
Entry on July 14 at $43.65
Listed on July 13, 2015
Time Frame: Exit PRIOR to earnings in August
Average Daily Volume = 173 thousand
New Positions: see below

Comments:
07/15/15: BNFT tried to rally but shares faded from their midday highs. If you're looking for an entry point consider waiting for a rally past the intraday high of $45.25.

Trade Description: July 13, 2015:
BNFT was founded 15 years ago with a dream to simplify understanding your healthcare benefits. They went public in 2013. Now they're the #1 cloud-based benefits management platform.

The company is considered part of the technology sector, specifically the application software industry. According to the company, "Benefitfocus, Inc. (BNFT) is a leading provider of cloud-based benefits software solutions for consumers, employers, insurance carriers and brokers. Benefitfocus has served more than 25 million consumers on its platform that consists of an integrated portfolio of products and services enabling clients to more efficiently shop, enroll, manage and exchange benefits information. With a user-friendly interface and consumer-centric design, the Benefitfocus Platform provides one place for consumers to access all their benefits. Benefitfocus solutions support the administration of all types of benefits including core medical, dental and other voluntary benefits plans as well as wellness programs."

Revenue growth has been pretty strong. BNFT reported its Q4 results back on February 24th. Earnings were a loss of ($0.39) per share. That was 23 cents better than expected. Revenues were up +32.7% to $40.2 million, which was above estimates. Management raised their Q1 guidance.

On May 6th the company announced its Q1 results, which were a loss of ($0.48) per share. That beat estimates by four cents. Revenues were up +39% from a year ago to $42.7 million, again this was above expectations. This time guidance was a little soft for Q2 and in-line with estimates for 2015.

Shares started to rally in June. That rally accelerated mid June thanks to an analyst upgrade. Now after a -18% correction from its June highs shares of BNFT look poised to run again. A rally from here could spark some short covering. The most recent data listed short interest at 32% of the very small 18.37 million share float. Tonight we are suggesting a trigger to open bullish positions at $43.65. More conservative traders may want to use a trigger at $44.05 instead. Our short-term target is the $50.00 area but we will plan on exiting prior to BNFT's earnings report in mid August (no firm date yet).

- Suggested Positions -

Long BNFT stock @ $43.65

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

Long AUG $45 CALL (BNFT150821C45) entry $2.85

07/14/15 triggered @ $43.65
Option Format: symbol-year-month-day-call-strike


Chimerix, Inc. - CMRX - close: 48.94 change: +0.63

Stop Loss: 45.25
Target(s): To Be Determined
Current Gain/Loss: +6.0%
Entry on June 26 at $46.15
Listed on June 25, 2015
Time Frame: exit PRIOR to earnings in August
Average Daily Volume = 428 thousand
New Positions: see below

Comments:
07/15/15: CMRX tested round-number, psychological resistance at the $50.00 mark today. While shares retreated from $50 they did close up +1.3%, outperforming the broader market.

No new positions at this time.

Trade Description: June 25, 2015:
Biotech stocks have been outperforming the broader market for the last couple of years. That outperformance continues in 2015. The IBB biotech ETF is up +23% in 2015 versus a +8% gain in the NASDAQ and a +2% gain in the S&P 500. CMRX has been lagging its peers with a +13.9% gain this year but that could be about to change as the stock looks poised to run.

According to the company, "Chimerix is a biopharmaceutical company dedicated to discovering, developing and commercializing novel, oral antivirals in areas of high unmet medical need. Chimerix's proprietary technology has produced brincidofovir (CMX001), a clinical-stage nucleotide analog lipid-conjugate, which has potent in vitro antiviral activity against many clinically relevant dsDNA viruses and a favorable safety profile in clinical studies conducted to date. Chimerix has completed enrollment of SUPPRESS, a Phase 3 study of brincidofovir for the prevention of cytomegalovirus (CMV) in adult hematopoietic cell transplant (HCT) recipients. In addition, Chimerix is enrolling the Phase 3 AdVise trial of brincidofovir for treatment of adenovirus (AdV) infection. Chimerix is working with BARDA to develop brincidofovir as a potential medical countermeasure to treat smallpox due to a threat of bioterror or accidental release."

In April this year CMRX was award an exclusive contract from the U.S. government to build a new smallpox vaccine. The Biomedical Advanced Research and Development Authority (BARDA) wants another treatment available just in case enemies of the U.S. try to use smallpox as a weapon or if there is some sort of accidental breakout from a lab. The 60-month contract is valued at $100 million but if all the options are awarded it could be worth up to $435 million in revenue to CMRX. The company's revenues for the trailing twelve months are only $4.5 million.

Earlier this month (June) CMRX announced they were going to raise $150 million in capital by selling 3,775,000 shares of stock. That was later bumped up to 4.3 million shares. These priced at $39.75. You can see how CMRX stock briefly dipped toward $39.00 on June 10th and investors immediately bought the dip. It's impressive to see CMRX increase its shares outstanding by 10% and the impact only lasted a few days as buyers gobble up the stock.

Technically CMRX appears to be in breakout mode. The stock consolidated sideways in the $35.00-43.50 range for five and a half months before finally breaking out a few days ago. The stock encountered some profit taking yesterday but traders bought the dip today. The point & figure chart is bullish and forecasting at $61.00 target.

Tonight we are suggesting a trigger to launch bullish positions at $46.15. Plan on exiting prior to CMRX's earnings report in August.

- Suggested Positions -

Long CMRX stock @ $46.15

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

Long AUG $50 CALL (CMRX150821C50) entry $2.10

07/14/15 new stop @ 45.25
07/11/15 new stop @ 43.75
06/26/15 triggered @ $46.15
Option Format: symbol-year-month-day-call-strike


Community Health Systems - CYH - close: 62.41 change: -0.84

Stop Loss: 60.95
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on July -- at $---.--
Listed on July 14, 2015
Time Frame: Exit PRIOR to earnings on August 3rd
Average Daily Volume = 1.3 million
New Positions: Yes, see below

Comments:
07/15/15: There was no follow through on yesterday's rally in CYH. The stock spent nearly all day in decline before finally paring its losses near the closing bell. At the moment I don't see any changes from last night's new play description. Our suggested entry point is $63.75.

Trade Description: July 14, 2015:
The major healthcare stocks have been in rally mode for the last couple of years. That's not true for CYH. The stock peaked in the third quarter of 2014 and spent months consolidating sideways. The situation changed after the recent court ruling on Obamacare.

CYH is in the hospital industry. According to the company, "Community Health Systems, Inc. is one of the largest publicly-traded hospital companies in the United States and a leading operator of general acute care hospitals in communities across the country. Through its subsidiaries, the Company currently owns, leases or operates 199 affiliated hospitals in 29 states with an aggregate of approximately 30,000 licensed beds. The Company's headquarters are located in Franklin, Tennessee, a suburb south of Nashville."

Looking at CYH's recent earnings history the company has developed a habit of beating the bottom line estimate but missing Wall Street's revenue expectations. The most recent report was May 5th. CYH announced its Q1 results which were $0.85 per share. That beat estimates by 19 cents. Revenues were up +17.6% to $4.91 billion yet that missed the $5.0 billion estimate. CYH's stock initially sold off on this report but a day later investors were buying the dip.

The situation for the healthcare and hospital stocks changed on June 25th. The Supreme Court of the United States voted to uphold subsidies for the Affordable Care Act (a.k.a. Obamacare). Hospital stocks rallied and shares of CYH surged to new all-time highs.

Obamacare should mean more people will have health insurance. That means fewer uninsured people arriving at the hospital. Previously CYH expected 13% of its sales to be written off for bad debts due to uninsured people. That's a huge chunk of money when you consider CYH's annual revenues are more than $5.5 billion. The SCOTUS decision to support the ACA should means millions in profit for CYH as their bad debt write offs decline.

After the SCOTUS decision shares of CYH saw multiple price target upgrades. Currently the point & figure chart is forecasting at $70.00 target. The late June rally produced a move from $55 to $65. Since then CYH has seen a pullback to about $61. This is technically a 38.2% Fibonacci retracement of the rally on the SCOTUS announcement. We see the bounce as a potential entry point. Tonight we're suggesting a trigger to open bullish positions at $63.75. Plan on exiting prior to CYH's earnings on August 3rd.

Trigger @ $63.75

- Suggested Positions -

Buy CYH stock @ $63.75

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

Buy the AUG $65 CALL (CYH150821C65)

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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


Mobileye N.V. - MBLY - close: 59.73 change: +0.74

Stop Loss: 55.85
Target(s): To Be Determined
Current Gain/Loss: +5.7%
Entry on July 09 at $56.50
Listed on July 07, 2015
Time Frame: Exit PRIOR to earnings in early August
Average Daily Volume = 3.8 million
New Positions: see below

Comments:
07/15/15: The rally continues in MBLY. Shares are up again for the fifth day in a row. I want to warn readers that MBLY is now testing prior resistance in the $60.00 area. Odds are the stock should see some profit taking here. There is no guarantee MBLY will retreat but it's short-term overbought. More conservative traders may want to consider taking some money off the table.

No new positions.

Trade Description: July 7, 2015:
The future of hands free driving is a lot closer than you might think. MBLY is leading the charge. Their technology is already in more than three million cars made by companies like BMW, General Motors, and Tesla.

What exactly does this technology do? DAS stands for driver assistance systems. Sometimes you might see it called ADAS for advanced driver assistance systems. This new technology helps drivers avoid collisions with other vehicles, pedestrians, bicyclists, and more while also alerting the driver to road signs and traffic lights.

The company website describes Mobileye as "a technological leader in the area of software algorithms, system-on-chips and customer applications that are based on processing visual information for the market of driver assistance systems (DAS). Mobileye's technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving."

MBLY said their technology will be available in 160 car models from 18 car manufacturers (OEMs). Further, Mobileye's technology has been selected for implementation in serial production of 237 car models from 20 OEMs by 2016.

The company is already developing a system for autonomous driving or hands free driving. They currently plan to launch an autonomous system in 2016 that will work at highway speeds and in congested traffic situations.

MBLY stock came to market in August 2014. Demand was strong enough that they upped the number of shares available from around 27 million to 35.6 million shares. They raised the IPO price from the $22 range to $25. This valued MBLY at $5.3 billion. The first day of trading saw MBLY opened at $36.00. Two months later MBLY traded at $60.00.

It's easy to see why investors are optimistic on MBLY. Annual revenues have soared from $19.2 million in 2011 to $143.6 million in 2014. Their revenues last year rose +77% from 2013. Currently a poll of analysts by Thomson Reuters is forecasting sales to rise +50% in 2015 to $218.3 million. Earnings are forecasted to surge +95%.

MBLY's most recent earnings report was May 11th. They reported their Q1 results of $0.08 per share, which was a penny above estimates. Revenues were up +28% to $45.6 million, also above estimates.

Last year the New York Post ran an article discussing how the White House might generate a bullish tailwind for MBLY. The National Highway Traffic Safety Administration issued a research report that estimated ADAS type of technology could eliminate almost 600,000 left-turn and intersection crashes a year. They report also suggested that adding FCAM and lane departure technology on big vehicles like over the road trucks could reduce accidents with these huge vehicles by up to 25%. Following this report the White House said they would draft new rules that required this sort of tech in new vehicles.

Most of Wall Street analysts seem bullish. Industry experts forecast the camera-based ADAS market to grow +37% CAGR from 2014 to 2020. Goldman Sachs Recently upgraded the stock to a buy. They believe MBLY will see a 34% CAGR in sales through 2020 and will have 65% of the market by then. MBLY also garnered positive comments from a Morgan Stanley analyst who raised their price target to $68. They believe the street's 2015 estimates for MBLY are too low after the company delivered super strong growth in the last couple of quarters. A couple of weeks ago another analyst firm raised their price target on MBLY to $67.00.

The stock has displayed significant strength with a big bounce from its March 2015 lows near $32. The rally accelerated in mid June with a breakout past resistance in the $48.00 area. Traders quickly bought the dip last week on the market's big selloff (June 29th). Bulls bought the dip again today and MBLY looks poised to hit new multi-month highs tomorrow. Tonight we're suggesting a trigger to launch bullish positions at $56.40.

- Suggested Positions -

Long MBLY stock @ $56.40

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

Long AUG $60 CALL (MBLY150821C60) entry $2.00

07/14/15 new stop @ 55.85
07/11/15 new stop @ 53.85
07/09/15 triggered on gap open at $56.50
Option Format: symbol-year-month-day-call-strike


Neurocrine Biosciences Inc. - NBIX - close: 52.12 change: +0.17

Stop Loss: 47.40
Target(s): To Be Determined
Current Gain/Loss: +8.0%
Entry on July 01 at $48.27
Listed on June 30, 2015
Time Frame: Exit PRIOR to earnings in August
Average Daily Volume = 1.0 million
New Positions: see below

Comments:
07/15/15: NBIX managed to tag a new multi-year high on both an intraday and closing basis. If shares dip we can look for support near the $50.00 mark.

No new positions at this time.

Trade Description: June 30, 2015:
Biotech stocks remain one of the best performing groups in the market this year. Year to date the IBB is up +21% versus a +0.2% gain in the S&P 500 and a +5.3% gain in the NASDAQ composite. NBIX is outpacing its peers with a +113% gain in the first half of 2015.

NBIX is in the healthcare sector. According to the company, "Neurocrine Biosciences, Inc. discovers and develops innovative and life-changing pharmaceuticals, in diseases with high unmet medical needs, through its novel R&D platform, focused on neurological and endocrine based diseases and disorders. The Company's two lead late-stage clinical programs are elagolix, a gonadotropin-releasing hormone antagonist for women's health that is partnered with AbbVie Inc., and NBI-98854, a vesicular monoamine transporter 2 inhibitor for the treatment of movement disorders. Neurocrine intends to maintain certain commercial rights to its VMAT2 inhibitor for evolution into a fully-integrated pharmaceutical company."

I like to remind readers that biotech stocks can be tough to trade. Normally they are volatile with lots of headline risk. The right headline about a successful test or clinical trial or FDA approval can send shares soaring. The wrong headline could see a biotech stock crash or even gap down several points. Due to the nature of biotech work and how many smaller companies get paid with milestone payments as they develop treatments tends to make their earnings are very lumpy.

While we normally don't focus on earnings for the smaller biotech companies, I will point out that NBIX's most recent earnings report was much better than expected. Their 2014 Q1 results were a loss of ($0.17) per share. Analysts were expecting 2015 Q1 results to be a loss of ($0.30). NBIX reported a loss of ($0.01) per share. Revenues were $19.76 million for the first quarter. Management held a successful secondary offering last quarter and raised $270 million. This increased the company's cash and cash equivalents to $518 million. Hopefully investors won't have to worry about NBIX needing to raise capital any time soon.

After NBIX's Q1 results the stock was upgraded by two analysts. One raised their price target to $64. The other raised their price target to $69. Currently the point & figure chart is forecasting at $66 target.

Technically NBIX looks bullish following its breakout past resistance near $45.00. The recent pullback among the biotech stocks saw NBIX dip back toward this area, which is now support. Today's bounce looks like a potential entry point. Tonight we're suggesting a trigger to open bullish positions at $48.15.

- Suggested Positions -

Long NBIX stock @ $48.15

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

Long AUG $50 CALL (NBIX150821C50) entry $3.60

07/14/15 new stop @ 47.40
07/01/15 triggered on gap open at $48.27
Option Format: symbol-year-month-day-call-strike


Spirit AeroSystems - SPR - close: 55.76 change: -0.12

Stop Loss: 53.75
Target(s): To Be Determined
Current Gain/Loss: -1.2%
Entry on June 22 at $56.44
Listed on June 18, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in very late July
Average Daily Volume = 1.2 million
New Positions: see below

Comments:
07/15/15: It was a quiet day for SPR. Shares churned sideways inside the $55.50-56.00 range.

No new positions at this time.

Trade Description: June 18, 2015:
Airline stocks have gotten crushed lately as investors worry about the airliner industry overbuilding capacity. It's a different story for the airplane makers. Shares of SPR just closed near all-time highs. The Dow Industrial Average is up +1.6% year to date. The S&P 500 is up +3.0%. SPR is outpacing them both with a +30% gain this year.

SPR is in the industrial goods sector. According to the company, "Spirit AeroSystems, with headquarters in Wichita, Kan., USA, is one of the world's largest non-OEM designers and manufacturers of aerostructures for commercial aircraft. In addition to its Wichita and Chanute facilities in Kansas, Spirit has locations in Tulsa and McAlester, Okla.; Kinston, N.C.; Prestwick, Scotland; Preston, England; Subang, Malaysia; and Saint-Nazaire, France.

In the U.S., Spirit's core products include fuselages, pylons, nacelles and wing components. Additionally, Spirit provides aftermarket customer support services, including spare parts, maintenance/repair/overhaul, and fleet support services in North America, Europe and Asia. Spirit Europe produces wing components for a host of customers, including Airbus."

On their website SPR notes that they "have long-term agreements in place with our largest customers, Boeing and Airbus. Other major customers include Bombardier, Rolls-Royce, Mitsubishi, Sikorsky and Bell Helicopter." SPR does so much business with Boeing (BA) that buying SPR is almost a stealth trade on BA's backlog. Looking at BA's most recent earnings report their backlog hit a record high of $495 billion. That's about 5,700 new planes. BA plans to significantly increase production in 2017 and again in 2018, which should mean an increase in revenues for SPR.

Earnings from SPR have been somewhat mixed. On February 3rd they reported their 2014 Q4 results with earnings at $0.87 per share. That was 10 cents better than expected. Yet revenues were only up +5% to $1.57 billion, which missed expectations.

Results improved in the first quarter. On April 29th SPR said earnings were up +18% from a year ago. Their $1.00 per share beat expectations. Revenues were almost flat at $1.74 billion but that still came in better than analysts were expecting. SPR management issued somewhat bullish guidance on 2015 earnings but their revenue estimate was soft.

The stock initially sold off on its Q1 report but traders bought the dip the very next day. SPR continues to build on its bullish pattern of higher lows. Today the stock is poised to breakout past short-term resistance at $56.20. We are suggesting a trigger to launch bullish positions at $56.35. Plan on exiting prior to SPR's Q2 earnings report in very late July or early August.

- Suggested Positions -

Long SPR stock @ $56.35

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

Long OCT $60 CALL (SPR151016C60) entry $1.60

06/22/15 triggered on gap open at $56.44
Option Format: symbol-year-month-day-call-strike


Tempur Sealy Intl. - TPX - close: 70.97 change: -0.04

Stop Loss: 67.85
Target(s): To Be Determined
Current Gain/Loss: +12.4%
Entry on June 10 at $63.15
Listed on June 08, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 890 thousand
New Positions: see below

Comments:
07/15/15: TPX continues to look resilient. With the major indices down today traders could have taken profits in TPX but they did not. The stock closed virtually flat.

There is no change from my prior comments. More conservative investors may want to take profits right here.

Trade Description: June 8, 2015:
Activist investors seek to influence management to incorporate major changes in a company with the expectation of unlocking shareholder value. Sometimes the mere mention of an activist investor buying a stock can get shares to move. In TPX's case the activists have won a major battle with management.

TPX is in the consumer goods sector. According to the company, "Tempur Sealy International, Inc. (NYSE: TPX) is the world's largest bedding provider. Tempur Sealy International develops, manufactures and markets mattresses, foundations, pillows and other products. The Company's brand portfolio includes many of the most highly recognized brands in the industry, including Tempur, Tempur-Pedic, Sealy, Sealy Posturepedic, OptimumTM and Stearns & Foster. World headquarters for Tempur Sealy International is in Lexington, KY."

TPX's most recent earnings report was April 28th. They announced their 2015 Q1 results with earnings of $0.55 per share. That was seven cents above estimates. Revenues were up +5.4% to $739.5 million. This was also above expectations. Management raised their 2015 forecast for both earnings and sales. The stock popped to new multi-year highs on this news. Yet the real story is probably the activist investors involved.

Hedge fund H Partners has been urging change with TPX management for months. TPX executives choose to fight. It came down to a proxy fight and shareholders voted to oust the CEO. Two more directors, who were under fire by H Partners have also left the board. H Partners built a website to inform shareholders their opinion on the company (www.fixtempursealy.com). There they posted their 90 page slideshow on why TPX needed a management change. You can see their presentation at this webpage.

The stock has been oscillating sideways in the $58-63 zone the last few weeks. It's starting to look like the consolidation may be over. TPX displayed relative strength last week and it held up today as well while the rest of the market was sinking. If TPX can trade over $63.00 it will generate a new quadruple top breakout buy signal on the P&F chart. We are suggesting a trigger to launch bullish positions at $63.15.

- Suggested Positions -

Long TPX stock @ $63.15

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

Long SEP $65 CALL (TPX150918C65) entry $3.50

07/14/15 new stop @ 67.85
07/11/15 new stop @ 66.40, readers may want to take profits now!
07/08/15 new stop @ 65.65
06/27/15 new stop @ 64.40
06/22/15 new stop @ 61.90
06/10/15 triggered @ $63.15
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Continental Resources, Inc. - CLR - close: 37.25 change: -1.03

Stop Loss: 40.65
Target(s): To Be Determined
Current Gain/Loss: +14.9%
Entry on June 22 at $43.75
Listed on June 20, 2015
Time Frame: Exit prior to earnings on August 5th
Average Daily Volume = 8.8 thousand
New Positions: see below

Comments:
07/15/15: The Iran deal will eventually allow the country to export a lot more crude oil to a market that is already struggling with too much supply. That pushed crude oil prices lower today. The energy stocks declined and CLR fell -2.69%.

Readers may want to take some money off the table. No new positions at this time.

Trade Description: June 20, 2015:
There are a lot of currents moving the oil industry these days. Currency moves, OPEC production, access to capital, falling rig counts, and potential bankruptcies. The stock performance for U.S. shale oil drillers have been suffering. CLR is one such stock.

CLR is in the basic materials sector. According to the company, "Continental Resources (CLR) is a Top 10 independent oil producer in the United States and a leader in America's energy renaissance. Based in Oklahoma City, Continental is the largest leaseholder and one of the largest producers in the nation's premier oil field, the Bakken play of North Dakota and Montana. The Company also has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the Northwest Cana play."

Earnings have taken a hit. CLR reported their Q1 results on May 6th. They reported a net loss of $186 million or 36 cents a share. That's a big drop from a 61-cent profit a year ago. After adjusting for writedowns and one-time items CLR said their quarterly earnings were a loss of ($0.09) per share. That was actually four cents better than analysts' estimates for a ($0.13) loss. Revenues plunged -41% to $592.89 million even though CLR's production surged +36% from a year ago.

Bullish investors could argue that crude oil put in a bottom earlier this year and the commodity should rally toward year end. Bulls can also point to falling production costs as a tailwind for the industry. CLR said their completion costs for wells dropped -15% from the end of 2014. Obviously this makes the company more profitable (or at least cuts their losses). Optimistically CLR expects their cost reductions to hit 20% by mid-year. There are some on Wall Street who think the industry has seen a bottom. Shares of CLR were upgraded by Goldman Sachs to a "buy" in May.

Bulls also note that the plunge in active rigs should be bullish for oil and thus oil companies. Weekly rig count, compiled by Baker Hughes, showed that the number of active oil and gas rigs fell again last week. This is the 28th week in a row that the number of rigs has declined. We're now down to 857 active oil and gas rigs, which hasn't been this low since early 2003.

Naturally you might think that a plunge to 12-year lows for active rigs means that U.S. oil production would shrink as well. That hasn't happened yet. While costs are going down oil producers are actually more efficient at pumping per well so production is going up. The low rig count is a leading indictor that production will eventually decline but it could be months from now. The U.S. EIA doesn't expect U.S. production to fall until early next year.

A bigger problem for the oil industry is competition. The recent OPEC meeting showed that the Saudis are willing to pump as much oil as they can to maintain their market share regardless of the price of oil. These are state-run oil companies and don't have to report to shareholders like American drillers. Plus the average cost per barrel of oil is a lot lower in Saudi than the U.S.

Another challenge for many drillers is capital. Drilling shale oil wells and fracking costs a lot of money. The drop in crude oil prices has made lenders less likely to loan money to drillers. To compensate for the lack of capital the oil drillers might be forced to sell more stock to raise capital and this would dilute current shareholders and drive stock prices lower. This past week the Cowen research company said, ""We expect ... E&Ps to issue additional equity in 2H2015 to fund 2016 capex as borrowing bases will be declining and debt metrics deteriorating."

The issue of debt and access to capital could be a fatal one. There are growing predictions that we will see up to a dozen publicly traded oil and gas companies file for bankruptcy between July 2015 and June 2016. Now CLR is not on the list but if we see smaller rivals start to go bankrupt it is going to put pressure on all the oil-industry stocks.

Oil stocks are also going to react to currency moves. The Federal Reserve wants to raise rates and that will lift the dollar. Even if the Fed doesn't raise rates the QE programs in Japan and Europe could drive the yen and euro lower, which boosts the dollar. A rising dollar pressures commodity prices lower.

A lot of investors are already betting on CLR to decline. The most recent data listed short interest at 17.9% of the 84.8 million share float. We think the bears are right. CLR has been underperforming the broader market. The point & figure chart is bearish and forecasting at $35.00 target. I suspect the 2015 lows near $42.00 could be support. Tonight we are suggesting a trigger to open bearish positions at $43.75.

- Suggested Positions -

Short CLR stock @ $43.75

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

Long SEP $40 PUT (CLR150918P40) entry $2.00

07/06/15 new stop @ 40.65
07/04/15 new stop @ 43.55
06/27/15 new stop @ 44.85
06/25/15 new stop @ 48.35
06/22/15 triggered @ $43.75
Option Format: symbol-year-month-day-call-strike


Murphy Oil - MUR - close: 39.67 change: -1.14

Stop Loss: 41.55
Target(s): To Be Determined
Current Gain/Loss: +3.6%
Entry on July 01 at $41.15
Listed on June 29, 2015
Time Frame: Exit PRIOR to MUR earnings on July 29th
Average Daily Volume = 1.9 million
New Positions: see below

Comments:
07/15/15: MUR reversed sharply lower with a -2.79% drop to a new multi-year closing low. The stock is on track for its fifth weekly decline in a row. No new positions at this time.

Trade Description: June 29, 2015:
The crash in crude oil prices in the second half of 2014 was pivotal turning point for the U.S. energy industry. Suddenly the booming oil and gas sector had its future being question with the price of oil now unprofitable for many drillers. Oil has managed a bounce from its 2015 lows while many of the oil and gas producers are still seeing their stocks decline.

MUR is in the basic materials sector. According to the company, "Murphy Oil Corporation is an independent exploration and production company with a strong, oil-weighted portfolio of global offshore and onshore assets. Exploration activities are focused in four main regions: Deepwater Gulf of Mexico, the Atlantic Margin, Southeast Asia and Australia."

The company reduced its 2015 capex outlook by -33% when they reported their 2014 Q4 results back in January. MUR's Q1 results came out in May. Profits evaporated with MUR delivering a loss of ($1.11) per shares versus a profit of $0.96 a year ago.

Management is trying to prop up their floundering stock price. On May 20th the company announced an accelerated stock buyback program of $250 million. This is part of a previously announced $500 million repurchase program from August 2014. The buyback doesn't seem to be working.

Goldman Sachs downgraded MUR to a "sell" in late May. Nearly a month later UBS has also downgraded MUR to a "sell". The UBS analyst expressed concern that MUR's production would likely decline in 2015 and 2016 since the company has cut back on investment.

The stock's attempt at an oversold bounce failed near $44 a couple of weeks ago and now shares are breaking down to new multi-year lows. The point & figure chart is bearish and forecasting at $34.00 target. Tonight we are suggesting a trigger to open bearish positions at $41.15.

- Suggested Positions -

Short MUR stock @ $41.15

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

Long AUG $40 PUT (MUR150821P40) entry $1.30

07/14/15 new stop @ 41.55
07/06/15 new stop @ 42.35
07/01/15 triggered @ $41.15
Option Format: symbol-year-month-day-call-strike


Noble Energy, Inc. - NBL - close: 38.75 change: -0.85

Stop Loss: 41.75
Target(s): To Be Determined
Current Gain/Loss: -0.4%
Entry on July 13 at $38.60
Listed on July 11, 2015
Time Frame: Exit PRIOR to earnings on August 3rd
Average Daily Volume = 4.2 million
New Positions: see below

Comments:
07/15/15: NBL is another energy stocks that underperformed the broader market today. Shares fell -2.1% to a new multi-year closing low.

I am suggesting a decline beneath $38.50 as a new entry point for bearish positions.

Trade Description: July 11, 2015:
Crude oil prices are down sharply the last two weeks and its putting pressure on the oil stocks. NBL is an oil company who has seen its stock plunge to new multi-year lows.

According to the company, "Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company has core operations onshore in the U.S., primarily in the DJ Basin and Marcellus Shale, in the Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa."

There are several issues impacting the price of oil, which is pressuring oil stocks lower. Back in April we saw crude oil inventories in the U.S. hit 80-year highs. They stayed elevated for awhile before eventually fading. Summer time is driving season. A lot of people are on the road for vacation. The weather is more favorable. This time of year demand for oil rises as oil refiners boost their production of gasoline and other fuels.

Given the seasonality of U.S. oil demand normally rising in summer it was a surprise to see oil inventories rising instead of falling. The U.S. Energy Information Administration (EIA) has reported an inventory build the last two weeks in a row. Their most recent report was for the week ending July 3rd. Analysts were expecting oil inventories to drop 1 million barrels. Yet the EIA said inventories rose almost 300,000 barrels.

This EIA news was followed on Friday with a report from the International Energy Agency (IEA) who downgraded their global oil demand growth forecast from +1.4 million barrels per day in 2015 to +1.2 million barrels in 2016. That is still growth but the world is currently facing oversupply issues. If demand falls it's going to put pressure on oil prices.

Saudi Arabia, the biggest member of Organization of the Petroleum Exporting Countries (OPEC) made it clear that they are willing to sacrifice price to maintain their market share. At the June 4th meeting OPEC left their output quota unchanged at 30 million barrels a day.

Crude oil is off its 2015 lows but the weakness this year has wreaked havoc in the oil sector. NBL reports its Q4 results in February. They beat the bottom line by three cents but revenues were down -19.4% from a year ago to $1.07 billion. That missed estimates by $233 million.

The sales decline accelerated in the first quarter. NBL reported its Q1 results on May 5th. They beat the bottom line by a penny but revenues crashed -45% to $759 million. That was $140 million below estimates.

If the oversupply issue wasn't bad enough the industry now faces a potential deal with Iran and the P5+1 nations. These countries are currently negotiating over Iran's nuclear program. If they do get a deal done it will unlock sanctions on Iran, which would allow the country to bring millions of barrels of oil to a market that is already struggling. Of course the opposite could occur. If the quarrelsome talks breakdown, and they could since they're already on their umpteenth postponed deadline, then crude oil prices could rally. That's probably our biggest risk on a bearish play in the oil sector. If the Iran talks breakdown it could fuel a big spike in the price of oil.

Technically NBL looks very weak. On the weekly chart below you can see the bear-flag consolidation pattern and the breakdown. On the daily chart there is what appears to be a bearish head-and-shoulders pattern. Plus, the simple fact that NBL continues to underperform, continues to sink, with the path of least resistance being lower. The point & figure chart is bearish and forecasting at $34.00 target.

The $38.70-38.80 area appears to be short-term support. Tonight we are suggesting a trigger to launch bearish positions at $38.60.

- Suggested Positions -

Short NBL stock @ $38.60

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

Long AUG $37.50 PUT (NBL150821P37.5) entry $1.40

07/13/15 triggered @ $38.60
Option Format: symbol-year-month-day-call-strike


Tessera Technologies - TSRA - close: 35.66 change: -0.43

Stop Loss: 37.65
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on July -- at $---.--
Listed on July 09, 2015
Time Frame: Exit PRIOR to earnings in early August
Average Daily Volume = 518 thousand
New Positions: Yes, see below

Comments:
07/15/15: TSRA displayed some relative weakness today with a -1.1% decline. Shares have clearly broken down below their simple 200-dma. The intraday low was $35.49 and the stock looks poised to hit our suggested entry point at $35.40 tomorrow morning.

Trade Description: July 9th, 2015:
TSRA claims that their technology is in 100% of today's smartphones. The stock was a pretty big winner last year with a rally from $18 to almost $36 in 2014. Shares appear to have peaked in March this year.

TSRA is in the technology sector. They're considered part of the semiconductor industry. According to the company, "Tessera Technologies, Inc., including its Invensas and FotoNation subsidiaries, generates revenue from licensing our technologies and intellectual property to customers and others who implement it for use in areas such as mobile computing and communications, memory and data storage, and 3DIC technologies, among others. Our technologies include semiconductor packaging and interconnect solutions, and products and solutions for mobile and computational imaging, including our FaceTools, FacePower, FotoSavvy, DigitalAperture, LifeFocus, face beautification, red-eye removal, High Dynamic Range, autofocus, panorama, and image stabilization intellectual property."

TSRA is not a widely followed stock on Wall Street. Their most recent earnings report managed to beat the estimates for the few analysts that follow the stock. Revenues were above expectations at $79.85 million but sales fell -9.6% from a year ago. Management did guide higher for the second quarter but the market reaction to this news was muted.

Shares of TSRA had been stuck under resistance near $40 for weeks. Unfortunately for shareholders TSRA began to breakdown in the last few days, possibly due to weakness in the semiconductor stocks. The point & figure chart has turned bearish and is forecasting at $29.00 target.

Today TSRA is hovering above key support near $35.00 and its simple 200-dma. A breakdown here could signal a drop toward round-number support at $30.00. Tonight we're suggesting small bearish positions at $35.40. We want to limit our positions size because TSRA has seen some sharp one-day spikes in the past.

Trigger @ $35.40 *small positions to limit risk*

- Suggested Positions -

Short TSRA stock @ $35.40

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

Buy the Aug $35 PUT (TSRA150821P35)

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

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