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Newsletter

Daily Newsletter, Tuesday, 7/21/2015

Table of Contents

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

Market Wrap

Earnings Tank Dow

by Jim Brown

Click here to email Jim Brown

Monster declines in IBM and United Technology knocked the Dow for a major loss. 3M, United Health and Boeing were credited with an assist. Suddenly, earnings matter.

Market Statistics

United Technology (UTX) took the elevator down today after the company cited the strong dollar and slowing economies in China and Europe for a drop in revenue and a cut to forward guidance. Q2 earnings of $1.73 beat estimates of $1.72 but revenue declined -5% to $16.3 billion. Second quarter orders from China declined -10% and net sales to China declined -8% to $3.1 billion. The company cut guidance for the full year from $6.35-$6.55 to $6.15-$6.30. The median full year revenue forecast of $57.5 billion was below the prior range at $58.5 billion.

The company said it was acquiring Sikorsky for $9 billion and will close by Q1-2016. The board also approved a 75 million-share buyback to offset the earnings impact of the transaction. The CEO said they were not done with acquisitions and were evaluating targets between $500 million to $5 billion. Shares declined -$7.77 on the news and were responsible for about 60 points of the Dow's loss.


IBM was the other disappointment when they reported earnings after the bell on Monday. Revenue has declined for 13 consecutive quarters. Revenue declined -13% in the quarter to $20.8 billion. Most of that drop was related to the strong dollar and the divestment of the server division. Gross margins declined -2% due to lower realized prices and higher costs. Sales in China declined -25% and Brazil declined -16%. Earnings declined -15% to $3.58 per share. Shares of IBM fell -$10.15 to knock about 78 points off the Dow.


There were no economic reports of note today. The most important report for Wednesday is the Existing Home Sales with New Home Sales coming on Friday. The biggest economic event is the FOMC meeting next week. This could put a damper on the market on worries over a coming rate hike. The fed Funds Futures are only pricing in about a 50% chance of a hike in 2015. About 72% of analysts are expecting a hike in September.


The big earnings report everyone was waiting on was Apple and it was a disappointment. Apple sold 47.5 million iPhones in the quarter, up +35%. Analysts were expecting 48.8 million on average but there were several whisper numbers over 50 million. Earnings of $1.85 beat estimates for $1.81 with revenue rising +33% to $49.6 billion, slightly over estimates for $49.4 billion. Gross margin was 39.7% and above the forecast for 38.5-39.5%. Revenue from China more than doubled to $13.2 billion. Apple did not disclose watch sales and lumped that revenue into the "other" category with iPods, Beats Headphones, etc. That revenue category rose +49% to $2.64 billion. Analysts were expecting watch sales of 3.4 million with an average selling price of $499 according to a Bloomberg survey. That equates to $1.84 billion in Watch sales alone. Since the "other" category totaled only $2.64 billion, up from $1.77 billion in the year ago quarter that suggests watch sales only amounted to $870 million or less than half of estimates.

iPads sold 10.9 million, down -18% but in line with estimates. Mac units sold 4.8 million compared to estimates for 4.9 million. Apple forecast revenue for the current quarter of $49-$51 billion that fell short of analyst estimates for $51.1 billion. Apple shares fell from the $130.75 close to $119.20 at the afterhours low. If that -$11 drop holds it will knock another 85 points off the Dow at the open.


Microsoft (MSFT) reported adjusted earnings after the bell of 62 cents that beat estimates for 58 cents. However, there were some difficult charges. Microsoft took a $780 million charge for restructuring and a $7.5 billion charge to write down the Nokia phone business it bought just over a year ago. Oops! Revenue declined from $23.28 billion to $22.18 billion but beat estimates for $22.05 billion. Device sales declined -13% to $8.7 billion. On the bright side revenue from the cloud business rose +88%. Microsoft Shares of Microsoft declined about $2 in afterhours, which would knock about 15 points off the Dow on Wednesday.


GoPro (GPRO) crushed earnings estimates for 26 cents with earnings of 35 cents, which rose +337%. Revenue rose +72% to $419.9 million and beat estimates for $395 million. The company said the cameras are now sold in more than 40,000 stores worldwide. Gross margin rose from 42.2% to 46.4%. They announced a new deal with Toyota last week where the car company will attach a GoPro camera to every Toyota sold starting with the 2016 models. The GoPro app was downloaded more than 2.5 million times in Q2. Shares fell sharply on the initial report from $62 to $57 but eventually rebounded to more than $64 in afterhours.


Yahoo (YHOO) reported earnings of 16 cents that missed estimates for 18 cents. That is down from 37 cents in the comparison quarter. Revenue of $1.04 billion beat estimates for $1.03 billion. They guided for revenue of $1.0-$1.04 billion for Q3 but that was below analyst estimates for $1.07 billion. Yahoo shares fell -$1 initially but rebound to a 50 cent loss.


Intuitive Surgical (ISRG) may rescue the Nasdaq on Wednesday from the declines in Apple, Microsoft and Yahoo with a +$60 surge in afterhours. Earnings of $4.57 easily beat estimates for $3.98. The company sold 118 systems in Q2 compared to 96 a year ago. Revenue rose +14% to $586 million and beat estimates for $567 million.


Chipolte Mexican Grill (CMG) reported earnings of $4.45 that beat estimates by a penny. That was up from $3.50 in the comparison quarter. Revenue of $1.2 billion missed estimates of $1.22 billion and hurt by the withdrawal of pork products from one third of its stores because of the lack of suppliers. Same store sales came in at +4.3% but less than the +5.8% analysts expected. This was also due to the pork shortage.

Shares immediately declined from the close at $673 to $607 after earnings and then rebounded to close the afterhours session at $681 and a gain of +$8. That is some extreme volatility. The rebound came after the company said on the call that the pork shortage had been resolved and carnitas would be returning to the stores and sales would rebound quickly.


This was a big day for the earnings cycle and Wednesday could be seen as somewhat of a slowdown. However, the next two days are still very busy. About 275 companies report over the next three days.


Tesla (TSLA) shares declined -$15 after UBS cut them to a "sell" rating with a price target of $210. UBS said Tesla shares may have gotten ahead of the company and may disappoint investors. UBS said the company will sell fewer cars and battery systems than Tesla has predicted. Earlier in July Pacific Crest and Deutsche Bank also downgraded Tesla on concerns about valuation.

Tesla said it received $800 million in orders in the first five days of announcing battery systems were available for sale. However, nobody was required to post a deposit so that number may be misleading. UBS said the current price implies deliveries of 1.5 million cars and full utilization of manufacturing capacity on batteries within 10 years and "both are unlikely."


Shake Shack (SHAK) announced a secondary offering of 4 million shares on Monday and the stock sold off. The secondary will be shares held by insiders including the founder and the Shack will not receive any of the proceeds. There is also a lockup expiring on July 29th. Apparently, investors saw that as a buying opportunity with the stock spiking +6.9% today. Shake Shack only has 42 stores and it amazes me they get so much attention in the market. Those hamburgers must really be good.


Late this evening news broke that the FCC was ready to approve the $48.5 billion AT&T/DirecTV merger. The chairman of the FCC, Tom Wheeler, asked fellow commissioners to approve the transaction. In return for the approval, Wheeler demanded AT&T build additional high-speed internet lines to homes and offer broadband at an affordable price. The full FCC committee could vote as early as late this week. The news came too late for shares to trade. The chart is positively boring and I would not own it.


Markets

This was a crazy day in the markets with the Dow down -200 most of the day and the Nasdaq and S&P down only a handful of points. It was clearly a Dow dominated drop due to the big moves in several Dow stocks. I mentioned this risk on Sunday that a couple of Dow stocks could cause dramatic swings and today was that proof.

Travelers (TRV) was the hero with earnings of $2.52 compared to estimates for $2.12. This allowed the Dow component to gain nearly $2 even on a bad day.

Expiring crude futures caused a spike in WTI from a low of $49.77 to a high of $51.02 intraday. That gave Chevron a Dow lifting gain and brought Exxon back to neutral.

The volatility in the Dow was amplified by another failure at the 18,100 resistance level and that encouraged the bears to pile on. The close at 17,919 will be obliterated at the open on Wednesday by the big losses in Apple and Microsoft. We should see another triple digit decline at the open to knock the Dow back to initial support at 17,800. With more Dow components reporting on Thursday we still have the potential for an even lower print before the week is over. McDonalds, Boeing, 3M, American Express, Caterpillar, AT&T, Coke, GM and Visa will report over the next two days.



The S&P tried desperately to close at a new high on Monday but could not quite close the deal. The S&P closed at 2128.28 and just under the 2130.82 high from May. The -9 point decline today was not material and only produced a decline to 2117, which held as interim support for the rest of the day. The S&P is well above any prior support including 2100, 2080, 2040. It will take a lot more selling to push us back to those levels.

The problem with earnings is the volume and the high rate of revenue misses. The S&P should open lower on Wednesday with the futures currently trading at 2107. If we continue to have revenue issues with the morning reports we could see a retest of 2100 but that is still not a crisis level. The S&P declined -4% to 2044 two weeks ago and rebounded to the highs. It would take a lot of negative earnings to knock us back there again.

Keene pointed out last night that the last five months have seen sharp declines on the week after option expiration. July expiration is normally troublesome anyway so our declines for this week may not be over once the Apple driven drop occurs.

Resistance remains 2130 and support, 2110, 2100, 2080, 2040.


The Nasdaq resisted the decline today but Wednesday will be a different story. With Apple the largest component in the index the huge afterhours drop will be damaging. The winners and sinners list below reflects afterhours prices. There are significantly more decliners than advancers.


The Nasdaq futures are showing a -60 point drop as of 7:30 ET with the Dow futures off -63 and S&P futures down -7.50. The Russell futures are continuing their decline with a -10 point drop.

A 60-point drop on the Nasdaq Composite would put the index back to about 5150. That is still above the congestion from 5000-5100. The Nasdaq would still be in an uptrend with plenty of cushion.


The Russell 2000 lost -5 points today and is showing another -10 point drop in the futures. The index closed on support at 1254 so the futures are suggesting a drop back to the mid 1240s. That has been support in the past.

The real problem is that the Russell has been leading to the downside since last Thursday. The dead stop at 1275 was met with a lot of selling and the trend is continuing. We should watch the Russell for a retest of 1230 as a critical level heading into the typically weak August/September period.


Wednesday is shaping up as an ugly open but there are already notes in the news about buying Apple at the 200-day average. That is currently $119.81 and shares are trading in the afterhours session at $121.88. I agree that the 200-day is decent support but it is possible the metrics on Apple have changed. The poor performance on the implied watch sales and the weak guidance could depress Apple shares for more than a day or two.

I would be cautious about adding longs this week unless we get a blowout drop. I cannot imagine what news could be worse than the combination of IBM, AAPL, MSFT and UTX but anything is always possible. This is a week to watch and wait rather than catch falling knives.

Enter passively, exit aggressively!

Jim Brown

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New Plays

Flirting With Record Territory

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Guidewire Software, Inc. - GWRE - close: 57.41 change: -0.53

Stop Loss: 54.95
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on July -- at $---.--
Listed on July 21, 2015
Time Frame: Exit PRIOR to earnings on Sept. 1st
Average Daily Volume = 368 thousand
New Positions: Yes, see below

Company Description

Trade Description:
The NASDAQ composite is up +10% year to date. GWRE is outperforming with a +13.3% gain. Shares spent three months, March-May, consolidating lower after the rally failed at resistance near $55.00. GWRE's direction changed after its latest earnings report.

GWRE is in the technology sector. According to the company, "Guidewire builds software products that help Property/Casualty insurers replace their legacy core systems and transform their business. Designed to be flexible and scalable, Guidewire products enable insurers to deliver excellent service, increase market share and lower operating costs. Guidewire InsuranceSuite provides the core systems used by insurers as operational systems of record. Additional products provide support for data management, business intelligence, anytime/anywhere access and guidance and monitoring. More than 180 Property/Casualty insurers around the world have selected Guidewire."

Last December GWRE reported its fiscal Q1 results that beat Wall Street estimates on both the top and bottom line. Management raised their Q2 guidance. On March 2nd GWRE reported earnings and revenues that beat analysts' estimates again. GWRE management then raised their fiscal year 2015 estimates. This earnings beat was not enough to lift the stock higher. Shares drifted lower for three months.

Shares of GWRE came alive again following its Q3 report on June 2nd. Earnings actually missed estimates by a penny with a profit of $0.04 per share. Revenues were only up +4% to $85.4 million, although that did beat expectations. The company provided lackluster Q4 guidance but guided for +20% revenue growth in fiscal 2016. The stock soared.

The rally off its June lows has pushed GWRE through multiple layers of resistance. Now the stock is setting new all-time closing highs. The point & figure chart is bullish and forecasting a long-term target of $80.00.

On a very short-term basis the $58.00 level appears to be resistance. We are suggesting a trigger to launch bullish positions at $58.25.

Trigger @ $58.25

- Suggested Positions -

Buy GWRE stock @ $58.25

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

Buy the OCT $60 CALL (GWRE151016C60) current ask $2.25
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

Earnings Disappointments Send Stocks Lower

by James Brown

Click here to email James Brown

Editor's Note:
The U.S. market was short-term overbought and due for a dip. Traders seem to be using lackluster earnings results as an excuse to take some money off the table today.

CMRX, NBIX, SPR all hit our stop losses today.


Current Portfolio:


BULLISH Play Updates

Benefitfocus, Inc. - BNFT - close: 45.40 change: +0.43

Stop Loss: 42.85
Target(s): To Be Determined
Current Gain/Loss: +4.0%
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:
07/21/15: BNFT displayed some relative strength with a +0.95% gain today. The rally is encouraging but I would still hesitate to launch new positions.

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: 55.20 change: -0.55

Stop Loss: 53.65
Target(s): To Be Determined
Current Gain/Loss: -1.5%
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:
07/21/15: BURL dipped toward $55.00. I suspect shares are headed for what should be stronger support near $54.00.

I am not suggesting new positions at this time.

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


Coherus Biosciences - CHRS - close: 37.08 change: -0.10

Stop Loss: 34.40
Target(s): To Be Determined
Current Gain/Loss: -1.1%
Entry on July 21 at $37.50
Listed on July 20, 2015
Time Frame: Exit PRIOR to earnings in early August
Average Daily Volume = 327 thousand
New Positions: see below

Comments:
07/21/15: Our new play on CHRS is open. The stock hit an intraday high of $37.72 this morning. Our trigger was $37.50. Unfortunately CHRS failed to maintain these gains. Wait for another rally past $37.50 before initiating positions.

Trade Description: July 20, 2015:
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.

- Suggested Positions -

Long CHRS stock @ $37.50

07/21/15 triggered @ $37.50


Luxoft Holding, Inc. - LXFT - close: 62.14 change: +0.75

Stop Loss: 59.75
Target(s): To Be Determined
Current Gain/Loss: -0.3%
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:
07/21/15: Good news! LXFT did not see any confirmation on yesterday's potential reversal pattern. The stock bounced instead and outperformed the broader market with a +1.2% gain.

Depending on your trading style you could wait for a breakout past $63.00 or a dip near support at $60.00 as potential entry points.

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: 60.57 change: -0.48

Stop Loss: 59.45
Target(s): To Be Determined
Current Gain/Loss: +7.2%
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:
07/21/15: Before the opening bell Deutsche Bank raised their price target on MBLY from $55 to $72. Shares of MBLY reacted with a spike up to $63.17. Sadly the rally didn't last. Shares retreated thanks to the widespread market decline.

I'm worried MBLY could be forming a short-term top. We are raising our stop loss up to $59.45. 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

07/21/15 new stop @ 59.45
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




BEARISH Play Updates

Cabot Corp. - CBT - close: 36.12 change: -0.20

Stop Loss: 38.65
Target(s): To Be Determined
Current Gain/Loss: +0.8%
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:
07/21/15: The early morning bounce in CBT failed. Shares settled at a new 52-week low. 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: 35.59 change: +0.01

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:
07/21/15: CLR tried to rally but failed beneath technical resistance at its descending 10-dma.

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: 35.46 change: -0.82

Stop Loss: 37.65
Target(s): To Be Determined
Current Gain/Loss: +13.8%
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:
07/21/15: MUR underperformed the market again with a -2.2% drop. Shares are down sharply five days in a row. The stock is on track to post its six-weekly decline in a row.

Our put option has surged more than +250% and I suggest option traders take some money off the table.

Tonight we are moving the stop loss down to $37.65.

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

07/21/15 new stop @ 37.65
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: 36.85 change: -0.12

Stop Loss: 39.05
Target(s): To Be Determined
Current Gain/Loss: +4.5%
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:
07/21/15: NBL tried to bounce but only made it to $37.54 before rolling over again. I don't see any changes from my recent comments.

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: 35.35 change: +0.20

Stop Loss: 36.65
Target(s): To Be Determined
Current Gain/Loss: +0.1%
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:
07/21/15: Hmm... for the second time in three days TSRA has bounced from potential round-number support at $35.00. This could be a warning signal for bearish traders. I am not suggesting new positions at this time.

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



CLOSED BULLISH PLAYS

Chimerix, Inc. - CMRX - close: 51.46 change: -1.97

Stop Loss: 51.85
Target(s): To Be Determined
Current Gain/Loss: +12.4%
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:
07/21/15: Biotechs were not immune to the market-wide profit taking today. CMRX was hit hard with a -3.68% decline. Our stop was hit at $51.85.

- Suggested Positions -

Long CMRX stock @ $46.15 exit $51.85 (+12.4%)

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

AUG $50 CALL (CMRX150821C50) entry $2.10 exit $4.40 (+109.5%)

07/21/15 stopped out
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

chart:


Neurocrine Biosciences Inc. - NBIX - close: 52.46 change: -1.05

Stop Loss: 50.85
Target(s): To Be Determined
Current Gain/Loss: +5.3%
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:
07/21/15: NBIX received new bullish analyst comments this morning but they failed to prevent the stock from sinking towards $50.00 this morning. NBIX hit our stop loss at $50.85 before bouncing.

- Suggested Positions -

Long NBIX stock @ $48.15 exit $50.85 (+5.3%)

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

AUG $50 CALL (NBIX150821C50) entry $3.60 exit $3.40 (-5.6%)

07/21/15 stopped out
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

chart:


Spirit AeroSystems - SPR - close: 54.34 change: -1.48

Stop Loss: 54.75
Target(s): To Be Determined
Current Gain/Loss: -3.0%
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:
07/21/15: Today's market-wide drop pushed SPR to a -2.65% decline. Our stop was hit a $54.75.

- Suggested Positions -

Long SPR stock @ $56.35 exit $54.75 (-3.0%)

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

OCT $60 CALL (SPR151016C60) entry $1.60 exit $0.60 (-62.5%)

07/21/15 stopped out
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

chart: