Option Investor
Newsletter

Daily Newsletter, Monday, 7/20/2015

Table of Contents

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

Market Wrap

A Rally That's Running Out of Steam

by Keene Little

Click here to email Keene Little
Title: Teaser: Today's rally was showing continuing weakness as the advance-decline line and volume showed another effort to rally on the backs of fewer stocks. With indexes pushing up against resistance and showing waning momentum it's looking like we should expect at least a larger pullback.

Wednesday's Market Stats

As can be seen in the table above, decliners finished 2:1 over advancers, the same as Friday, and even when the indexes were rallying (except for the RUT both days) it's another warning sign for bulls to heed. This is a strong warning sign that the rally is on its last legs as the rally is on the backs of fewer and fewer stocks following a rally that has gone too far too fast.

The next two days will be important to see if we have a repeating pattern in progress. In early December there was a sharp selloff and then large rally days with high volume. That was then followed by five more days to the upside but with waning momentum and volume. The same pattern calls for two consecutive down days, which would confirm a top is in place (for at least a larger pullback).

Another interesting timing aspect shows the market has topped between the 20th – 27th in each of the past five months without exception. We are of course now into that same timing window. With waning momentum, lousy market internals for what looks like a strong rally, the non-participation by the small caps and indexes at or approaching previous highs and trendline resistance, it would appear the bears may get their turn soon. Add in a low VIX reading and it makes sense to at least buy some downside protection (puts).

IBM reported after the bell and investors were not happy with the report (IBM missed on revenue). With its pre-earnings run there could be some disappointment tomorrow. The same thing typically happens to AAPL, which reports after the bell tomorrow. Following IBM's negative reaction the futures don't seem to be phased by it and that could be in anticipation for a stronger earnings report from AAPL.

Earnings so far have come in better than expectations but the expectations game is hardly an accurate picture. While 70% have reported earnings above analyst expectations, which is better than the average 63% beat rate since 1994, earnings are expected to show a decline of -2.1% for the quarter. This would be a minor improvement to the July 1st expectations of -3%. But on the flip side, typically we've seen 61% of earnings beat expectations since 2002 but so far that number is 55%. And expectations for sales by U.S. companies are expected to see their worst decline in nearly six years for Q2. The U.S. dollar is getting the blame, even though the dollar had been high since the end of 2014.

There was very little news from overseas (except for Iran balking at the nuclear agreement) and no major economic reports and futures were up marginally from Sunday night. The indexes started off positive but were unable to hold onto their small gains late in the day. The RUT was again relatively weak while the others closed only marginally in the green.

NDX has been stronger than the other indexes and I'll start tonight's review with a top-down look at its charts. The weekly chart below shows its rally since August-September 2014 has repeatedly seen highs along the top of a parallel up-channel for its rally from 2010. At the same time there is a long-term bearish divergence since the high in November 2014. The top of the channel is currently near 4760, not much below its March 2000 high at 4816. That's the upside potential if the bulls can keep this rally alive. But a trend line along the highs from November 2014 - April 2015, which can more easily be seen on the daily chart further below, is where NDX has now made it up to. There might be a little more upside potential but I don't think that little bit of potential is worth the downside risk.

Nasdaq-100, NDX, Weekly chart

The NDX rally has been mostly due to a couple of stocks, such as NFLX and GOOG last week. But at the moment it's looking a bit like a blow-off top following its July 7th low. Reaching its trend line along the highs from November 2014 – April 2015 in front of earnings reports this week will either gap NDX up and over resistance or it's forming a top here. RSI is now as overbought as it was at the end of February so it's an interesting setup for the bears. One could argue the rally has gone too far too fast and getting up and over resistance could be a challenge. But a rally above 4700 that stays above that level (such as using the trend line for support on a back-test) would be more bullish. For those who are interested in shorting the NDX (QQQ) you at least have a tight stop (one way to be sure an intraday high doesn't spike you out is to use an end-of-day stop, but that's obviously riskier, which can be controlled by position size.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4700
- bearish below 4560

The 60-min chart shows the steep climb since the July 9th low, rallying about 350 points in 8 trading days (about 44 points a day). It's obviously bullish until proven otherwise but a break of its uptrend line from July 9th, near 4660, would be the first sign of trouble for the bulls.

Nasdaq-100, NDX, 60-min chart

IBM's after-hours earnings report was not received well (they missed on revenue) and their price dropped about $9 (-5%) after the bell. The stock recovered some before it closed its after-hours session but it's going to be depressing for NDX (and the broader market) if IBM sells off tomorrow. AAPL will be reporting its earnings after the bell tomorrow and considering where price is currently I'd say bulls need to see nothing but a positive response. It obviously will also have a large impact on what NDX does. AAPL is currently back up to its February 23rd high at 133 (with today's high at 132.97), which was also tested in April and May. Only slightly higher, near 134.25, it would back-test its broken uptrend line from April 2014 - January 2015, which was broken in mid-June and back-tested on June 24th before selling off down near its 200-dma on July 9th. The strong rally since then has it back up to resistance and it could be tough to break through. Will the earnings be good enough and will that propel both it and NDX up over resistance? It will make for an interesting bet Tuesday before the close.

Apple Inc., AAPL, Daily chart

The daily chart of SPX shows Friday's doji at its downtrend line from May-June, near 2125, and today's spinning top doji just above the line. A decline on Tuesday would leave a reversal candlestick pattern but the bears need to see a drop below 2118 to confirm a likely top is in place. A pullback less than that could be just a correction to the rally, to be followed by another leg up to the 2150-2160 area before topping out.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2135
- bearish below 2118

The 60-min chart is showing bearish divergence on MACD since July 13th but if the broken downtrend line from May-June acts as support for a pullback it will remain bullish. A drop back below the line, near 2125, would be a bearish heads up (leaving a head-fake breakout attempt) but as mentioned above, the bears need a break below 2118 to more convincingly tell us a top of significance is likely in place.

S&P 500, SPX, 60-min chart

The DOW also poked above its downtrend line from May-June and is holding above the line after back-testing it today. That's bullish if it continues to hold. Bears need to see a firm break of its 50-dma and then below a price projection at 17975 (for a possible a-b-c pullback from last Thursday's high). As long as it holds above that level there remains the potential for a rally to price-level resistance near 18290, which includes its March and May highs.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 18,290
- bearish below 17,975

The RUT has been relatively weak for the past few days and that's been a bearish warning, especially since the RUT has been a leader in reversals. On Friday it held support at its 20-dma but broke it today. It held its 50-dma at today's low and therefore there's still the potential for another rally leg to at least test its April high near 1279 and close its June 29th gap down at 1279.79. Another run up to its broken uptrend line from October 2014 - May 2015, near 1290 by the end of the month, is the bullish potential. But a drop lower tomorrow would be back into its gap up on July 13th, which would be closed at 1251.81. Below its July 7th high near 1249 would be a strong indication that the July 7th low near 1226 will break.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1280
- bearish below 1249

The banking index, BKX, is not quite as stretched as NDX but it too has reached trendline resistance near 79.80 (today's high), which is the trend line along its highs from June-December 2014. Other than minor pokes above the line last month it has held as resistance and that's what bears want to see happen again. A blow-off move for BKX could take it up to the top of a parallel up-channel from January, which will be near 82 at the end of this month. But a test of the trend line, as well as its previous highs at 79.85 on June 23rd and last Thursday's high at 79.84, could be tough resistance after its strong rally from July 8th. It could be forming a double top, especially since it's showing bearish divergence against the June high.

KBW Bank index, BKX, Daily chart

On Friday the TRAN made it up to its downtrend line from April and the rejection from there looks bearish. If it makes a little higher we could see it make it up to the top of a parallel down-channel, near 8430, but it's not the way I'd trade the trannies (such as IYT) here. Another leg down, for a 5th wave in the move down from February, targets the 7800 area in early August.

Transportation Index, TRAN, Daily chart

The weekly pattern I've been tracking for gold has for a long time suggested it will drop below $1000. But the one bullish setup that I see is this morning's poke below the bottom of a shallow descending wedge pattern, the bottom of which is the trend line along the lows from December 2013 – November 2014 and is currently near 1090. This is also the 50% retracement of the 2001-2011 rally and should therefore be strong support. It's possible this morning's bounce off the 1080 low will lead to a much stronger rally back up to the 1400 area before starting back down later this year/next year (dashed lines on the weekly chart). But the bearish wave count suggests we'll see a continuation lower to at least 1000 (price-level support from 2008-2009) and likely down to the 890 area by the end of the year (62% retracement of the 2001-2011 rally).

Gold continuous contract, GC, Weekly chart

Commodities in general have been in decline for a long time but as suggested for gold, we could be nearing the point where we're going to see a big oversold bounce. Lining up with the chart pattern is a very bearish sentiment for commodities, as shown below. This chart by Sentix shows the CRY index vs. sentiment since 2004 with sentiment more bearish than it's been during the past 11+ years, including the commodities low in 2009, and that sets it up for a big reversal. So while I see lower lows for gold (and silver), I'd keep a tight stop on short positions in commodities in general.

Commodities Sentiment, 2004-July 2015, chart courtesy Sentix

Today there we no major economic reports and the same will be true tomorrow. On Wednesday we'll get some more housing data, but the breakdown in housing stocks (in spite of the broader market rally) and its longer-term pattern already tells us the futures is not bright). Now that Greece is behind us the market is paying more attention to earnings.

Economic reports and Summary

Conclusion

The market has been on a tear to the upside for the past two weeks, some of which was based on hope for improved earnings but mostly to relief over Greece not tearing the EU apart. The Iran agreement, which has not been signed off yet by Iran or U.S. Congress, might have been a contributing factor. At the very least it looks like the rally has gone too far too fast and looks to be a lot of short covering in there. The weakness of the rally, especially in the declining number of stocks participating in the rally, indicates strong resistance is likely to hold and that we should therefore be looking for a reversal soon. Playing the long side here seems far riskier than looking to play the short side. It might be good for just a multi-day pullback but we'll get a better sense of that once the pullback/decline begins.

Good luck and I'll be back with you on Thursday and hopefully a clearer idea for what we should expect into the end of the month.

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 Bullish Momentum Continues

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Coherus Biosciences - CHRS - close: 37.18 change: +0.66

Stop Loss: 34.40
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on July -- at $---.--
Listed on July 20, 2015
Time Frame: Exit PRIOR to earnings in early August
Average Daily Volume = 327 thousand
New Positions: Yes, see below

Company Description

Trade Description:
Biotech stocks remain some of the best performers this year. The IBB biotech ETF is up +31% year to date. That compares to +10% for the NASDAQ composite and +3.4% for the S&P 500 index. CHRS is outperforming these indices and ETF by a wide margin with a +127.8% gain year to date.

CHRS is in the healthcare sector. According to the company, "Coherus is a pure-play biosimilar platform company that develops and commercializes high-quality therapeutics for major regulated markets. Biosimilars are intended for use in place of existing, branded biologics to treat a range of chronic and often life-threatening diseases, with the potential to reduce costs and expand patient access. Composed of a team of proven industry veterans with world-class expertise in process science, analytical characterization, protein production and clinical-regulatory development, Coherus is positioned as a leader in the global biosimilar marketplace. Coherus is advancing three late-stage clinical products towards commercialization, CHS-1701 (pegfilgrastim biosimilar), CHS-0214 (etanercept biosimilar) and CHS-1420 (adalimumab biosimilar), as well as developing a robust pipeline of future products."

I see this as a simple momentum play in one of the market's best-performing industries. CHRS is up seven weeks in a row and is not showing any signs of slowing down. The $35.00 level was briefly overhead resistance but now it seems to be support. Traders were quick to buy the dip this morning near CHRS' rising 5-dma.

I consider this an aggressive, higher-risk trade. We're suggesting a trigger to launch bullish positions at $37.50. We'll try and limit our risk with a stop at $34.40. More conservative traders may want to use a higher stop loss. Just remember that biotech stocks carry an added risk. We never know when the wrong headline could send shares gapping lower. Of course the right headline could send it soaring.

FYI: Earnings should be coming up in early August and we'll plan on exiting prior to the announcement. CHRS does have options but the spreads were a little wide. If you're an option trader you may want to use them to limit your risk.

Trigger @ $37.50

- Suggested Positions -

Buy CHRS stock @ $37.50

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

A Slow Start To The Week

by James Brown

Click here to email James Brown

Editor's Note:
It's a busy week for Q2 earnings season. The rally paused a bit on Monday as the market digested earnings news. Investors do not seem very happy with IBM's earnings report released this evening. That doesn't bode well for the market tomorrow.

CBT hit our entry trigger. We have updated a few stop losses tonight.


Current Portfolio:


BULLISH Play Updates

Benefitfocus, Inc. - BNFT - close: 44.97 change: -0.08

Stop Loss: 42.85
Target(s): To Be Determined
Current Gain/Loss: +3.0%
Entry on July 14 at $43.65
Listed on July 13, 2015
Time Frame: Exit PRIOR to earnings on August 3rd
Average Daily Volume = 173 thousand
New Positions: see below

Comments:
07/20/15: It was a quiet day for the broader market and BNFT closed virtually unchanged on Monday.

No new positions at this time.

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

07/16/15 new stop @ 42.85
07/14/15 triggered @ $43.65
Option Format: symbol-year-month-day-call-strike


Burlington Stores, Inc. - BURL - close: 55.75 change: -0.06

Stop Loss: 53.65
Target(s): To Be Determined
Current Gain/Loss: -0.5%
Entry on July 16 at $56.05
Listed on July 15, 2015
Time Frame: Exit PRIOR to earnings in September
Average Daily Volume = 1.6 million
New Positions: see below

Comments:
07/20/15: BURL traded inside an 85-cent range today. Shares closed nearly unchanged on the session. If the market dips I would look for support near $54.00.

I am not suggesting new positions at the moment.

Trade Description: July 15, 2015:
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.

- Suggested Positions -

Long BURL stock @ $56.05

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

Long SEP $60 CALL (BURL150918C60) entry $1.30
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.

07/16/15 triggered @ $56.05
Option Format: symbol-year-month-day-call-strike


Chimerix, Inc. - CMRX - close: 53.20 change: +3.69

Stop Loss: 51.85
Target(s): To Be Determined
Current Gain/Loss: +15.8%
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:
07/20/15: CMRX rallied toward potential round-number resistance at $55.00 and reversed. Fortunately there was no follow through lower. The stock actually managed a +0.4% gain on the session.

More conservative traders may want to take some money off the table and/or raise their stop loss again.

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

07/18/15 new stop @ 51.85
07/16/15 new stop @ 47.65
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


Luxoft Holding, Inc. - LXFT - close: 61.39 change: -1.29

Stop Loss: 59.75
Target(s): To Be Determined
Current Gain/Loss: -1.5%
Entry on July 17 at $62.31
Listed on July 16, 2015
Time Frame: Exit PRIOR to earnings on August 12th
Average Daily Volume = 215 thousand
New Positions: see below

Comments:
07/20/15: LXFT tried to rally but shares failed near last week's highs. LXFT settled with a -2.0% decline on the day, underperforming the broader market.

The $60.00 level should be support. Nimble traders could use a dip near $60 as a new entry point.

Trade Description: July 16, 2015:
Software stocks, based on the big software ETFs, are outperforming the major indices. One stock in that group is LXFT. The NASDAQ is up +8.3% year to date while LXFT is up +60%.

LXFT is part of the application software industry. According to the company, "Luxoft Holding, Inc. is a leading provider of software development services and innovative IT solutions to a global client base consisting primarily of large multinational corporations. Luxoft's software development services consist of core and mission critical custom software development and support, product engineering and testing, and technology consulting. Luxoft's solutions are based on its proprietary products and platforms that directly impact its clients' business outcomes and efficiently deliver continuous innovation. The Company develops its solutions and delivers its services from 24 dedicated delivery centers worldwide. It has over 9,500 employees across 27 offices in 15 countries in North America, Mexico, Western and Eastern Europe, Asia Pacific, and South Africa."

Please note that LXFT is a subsidiary of IBS Group Holding Limited. IBS is a Russian information technology company. Thus far the sanctions from the U.S. and Europe do not seem to be impacting LXFT. However, should the situation get worse between Russia and its neighbors there is no guarantee that LXFT will continue to ignore it.

Earnings and sales growth have been impressive at LXFT. Looking at the last four quarterly reports, LXFT has beaten earnings estimates three out of the last four quarters. They did beat Wall Street revenues estimate four quarters in a row. Revenue growth has been consistently in the +30% range this past year.

LXFT's most recent report was May 13th. The company delivered their 2015 Q4 results with earnings up +27.7% from a year ago to $0.46 per share. This was the first earnings miss in a long time. Analysts were expecting $0.49. Revenues were up +29.2% to $137.3 million, above estimates. Management reported full year sales of $520.5 million in their fiscal 2015. They're forecasting 2016 sales to be $625 million. That's a +20% improvement (actually +26% on a constant currency basis).

The stock's recent breakout past $60.00 is bullish. Traders just bought the dip at $60.00 today and the bounce looks like an entry point. We want to see a little follow through higher before we hop on board. Tonight we're suggesting a trigger to buy the stock at $62.15.

NOTE: LXFT does not trade a lot of volume. Investors may want to limit their position size to reduce risk. Low volume stocks can be more volatile.

*small positions to limit risk* - Suggested Positions -

Long LXFT stock @ $62.31

07/17/15 triggered on an intraday gap higher at $62.31.
Option Format: symbol-year-month-day-call-strike


Mobileye N.V. - MBLY - close: 61.05 change: -0.02

Stop Loss: 57.75
Target(s): To Be Determined
Current Gain/Loss: +8.1%
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:
07/20/15: MBLY spiked higher at the open but the rally failed pretty quickly. Shares pierced the $60.00 level but traders bought the dip twice near $59.80 before lunchtime. By the closing bell MBLY had recovered to virtually unchanged on the day.

There is no change from my prior comments. More conservative traders may want to take profits now. MBLY is up six weeks in a row.

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

07/16/15 new stop @ 57.75, readers may want to take some money off the table right here.
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: 52.46 change: -1.05

Stop Loss: 50.85
Target(s): To Be Determined
Current Gain/Loss: +8.7%
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:
07/20/15: NBIX gapped open higher this morning and spiked to $56.18. I don't see any company-specific news behind the move. This surge was probably a reaction to earnings from another biotech company. Unfortunately the rally faded and NBIX spent most of the day hovering near short-term support near $52.00.

Technically, today's session has created a bearish engulfing candlestick reversal pattern. We'll have to see if NBIX confirms the reversal tomorrow. 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

07/16/15 new stop @ 50.85
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: 55.82 change: +0.04

Stop Loss: 54.75
Target(s): To Be Determined
Current Gain/Loss: -1.1%
Entry on June 22 at $56.44
Listed on June 18, 2015
Time Frame: Exit PRIOR to earnings on July 29th
Average Daily Volume = 1.2 million
New Positions: see below

Comments:
07/20/15: SPR continues to churn sideways in the $55.50-56.00 range. There is no change from my prior comments.

We don't have much time left for this trade with SPR's earnings coming up on July 29th. More conservative traders may want to just abandon ship. SPR has not performed very well the last few weeks.

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

07/16/15 new stop @ 54.75
06/22/15 triggered on gap open at $56.44
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Cabot Corp. - CBT - close: 36.32 change: -0.35

Stop Loss: 38.65
Target(s): To Be Determined
Current Gain/Loss: +0.2%
Entry on July 20 at $36.40
Listed on July 18, 2015
Time Frame: Exit PRIOR to earnings on August 4th
Average Daily Volume = 457 thousand
New Positions: see below

Comments:
07/20/15: Our brand new trade on CBT is open. Shares continued to sink and hit our suggested entry point at $36.40. I would still consider new bearish positions at current levels.

Trade Description: July 18, 2015:
The last couple of years have been rough for CBT investors. The stock peaked near $60.00 a share back in 2014. Today CBT is down -38% from its high and down -16% year to date.

CBT is in the basic materials sector. According to the company, "Cabot Corporation is a global specialty chemicals and performance materials company, headquartered in Boston, Massachusetts. The company is a leading provider of rubber and specialty carbons, activated carbon, inkjet colorants, cesium formate drilling fluids, fumed silica, and aerogel."

CBT's business seems to be slowing down. That's the picture I get looking at their last four earnings reports. 2014 Q3 revenues were up +4.3%. That slowed down to just +1.7% in 2014 Q4. Revenues fell -9.6% in Q1 2015. The slowdown accelerated in the second quarter. CBT reported its Q2 earnings on April 29th and revenues fell -22.7% to $694 million, significantly below analysts' estimates for $824 million. Q2 earnings were $0.53 a share, which missed estimates by 10 cents.

Three of CBT's four business segments saw declining sales. Reinforcement materials saw the biggest drop in the second quarter. Performance chemicals and specialty fluids also saw sales declines. Their purification solutions reported a small rise in sales.

Cabot President and CEO Patrick Prevost commented on his company's results, "We experienced a challenging quarter as the macroeconomic and competitive environment negatively affected our Reinforcement Materials and Specialty Fluids segments. Our volumes held up relatively well on a global basis, but we experienced margin pressure in Reinforcement Materials from lower contract pricing and feedstock-related effects. Purification Solutions results improved as customer orders rose for our mercury removal products in anticipation of the Mercury and Air Toxics Standards (MATS) implementation."

The MATS regulation did not work out well for CBT. That big drop in the stock price on June 29th was a reaction to the U.S. Supreme Court ruling on the EPA's attempt to regulate coal-fired power plant emissions. The market is interpreting the court's decision to mean less demand for CBT's chemicals that help power plants curb mercury emissions.

Technically CBT is in a bear market. The oversold bounce from the late June sell-off just failed. Now CBT is breaking down to new multi-year lows. We want to hop on board since the next support level looks like it could be $32 or lower. Tonight we're suggesting a trigger to launch bearish positions at $36.40. We will plan on exiting prior to CBT's earnings report on August 4th.

- Suggested Positions -

Short CBT stock @ $36.40

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

Long AUG $35 PUT (CBT150821P35) entry $0.75

07/20/15 triggered @ $36.40
Option Format: symbol-year-month-day-call-strike


Continental Resources, Inc. - CLR - close: 35.58 change: -1.25

Stop Loss: 37.75
Target(s): To Be Determined
Current Gain/Loss: +18.7%
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:
07/20/15: Crude oil sank to new relative lows today. That allowed the sell-off in energy stocks to continue. CLR underperformed the broader market with a -3.39% decline to new six-month lows.

Tonight we are moving our stop loss down to $37.75. 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

07/20/15 new stop @ 37.75
07/16/15 new stop @ 39.25
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: 36.28 change: -1.21

Stop Loss: 38.25
Target(s): To Be Determined
Current Gain/Loss: +11.8%
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:
07/20/15: The plunge in MUR continues. Shares lost another -3.2% today. Tonight we are moving the stop loss down to $38.25.

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

07/20/15 new stop @ 38.25
07/16/15 new stop @ 40.85
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: 36.97 change: -1.37

Stop Loss: 39.05
Target(s): To Be Determined
Current Gain/Loss: +4.2%
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:
07/20/15: NBL closed its acquisition of Rosetta Resources (ROSE) but the news did not help the stock price. Shares of NBL followed energy stocks lower and the stock lost -3.5%.

We are moving the stop loss down to $39.05. No new positions at this time.

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

07/20/15 new stop @ 39.05
07/16/15 new stop @ 40.15
07/13/15 triggered @ $38.60
Option Format: symbol-year-month-day-call-strike


Tessera Technologies - TSRA - close: 35.16 change: -0.34

Stop Loss: 36.65
Target(s): To Be Determined
Current Gain/Loss: +0.7%
Entry on July 16 at $35.40
Listed on July 09, 2015
Time Frame: Exit PRIOR to earnings in early August
Average Daily Volume = 518 thousand
New Positions: see below

Comments:
07/20/15: TSRA tried to rally this morning. Shares spiked up to $35.90. The rally stalled under resistance near $36.00 and its 10-dma and 200-dma.

Friday's intraday low was $34.91. I would consider new positions on a drop below $34.90.

Tonight we are moving the stop loss down to $36.65.

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.

*small positions to limit risk* - Suggested Positions -

Short TSRA stock @ $35.40

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

Long Aug $35 PUT (TSRA150821P35) entry $1.20

07/20/15 new stop @ $36.65
07/16/15 triggered @ $35.40
Option Format: symbol-year-month-day-call-strike