Option Investor
Newsletter

Daily Newsletter, Thursday, 8/20/2015

Table of Contents

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

Market Wrap

Confused Market Seeks Support

by Thomas Hughes

Click here to email Thomas Hughes
An unclear Fed message and economic data sent the indices back to support while the market ponders what the future will bring.

Introduction

Wednesday's FOMC minutes gave a less than clear message that only served to confuse the market. They are ready, but not quite ready, and data driven. Today's data helped added to the confusion by showing improvement in one area and contraction in another. Needless to say, the talk about when the first rate hike will come heated up again. Some say September is off the table, others say no way.

The Fed minutes helped send indices lower around the world. The Asian markets fell -1% to -3%, led by the mainland Chinese Shang Hai index. It is now trading at new 6 month lows while the government continues to throw support wherever it can. European markets fared no better, they shed nearly -2% on average aided by negative developments in Greece. Prime Minister Alex Tsipras is resigning after a loss of parliamentary majority. A new election will take place this fall and puts the ongoing bail-out in jeopardy once again. On a positive note the ECB says that Greece paid back all of its bond holders as the latest round of debt repayment comes due.

Market Statistics

Our indices were indicated lower from the earliest and were not helped by today's data. Jobless claims, Philly Fed and Existing Home Sales all point toward continued expansion and looming interest rate hikes, the Leading Indicators declined suggesting a rate hike may be premature. The combination left traders uncertain of what's to come and along with option expiration tomorrow was reason enough to sell off.

The first few minutes after the open saw the indices decline by roughly -0.75%. Selling pressure did not let up for the first hour except for a brief bounce just before 10AM. By 10:30 the morning low had been set and that held until just after lunch. By 1PM the market had retreated down to test and break early support levels and push the indices to declines of -1.5% and more. Market declined continued throughout the afternoon, driving them to new lows several times. By end of the day the indices were down more than 2% and closing at or near the low of the day.

Economic Calendar

The Economy

Lots of data today, starting off with jobless claims. Initial claims for unemployment rose by 4,000 to hit 277,000. This is on top of a +1,000 revision to last week and above expectations. The 4 week moving average of claims rose as well, gaining a little over 5,000 to hit 271,500. Despite the rise claims remain near the long term low and consistent with ongoing labor market recovery. Considering the chances for revision and seasonal adjustments a small miss like today is negligible, so long as it does not become a trend.

On a not adjusted basis claims fell -4.0%, slightly less than the expected -5.5%. On a year over year basis not adjusted claims are down -8%. California and Illinois led with increases of 2,498 and 2,042. Virginia and Kansas led with declines of -329 and -236.


Continuing Claims fell by -24,000 to hit 2.254 million. Last week's number was revised higher by 5,000. This is the fourth week that continuing claims have held near this level. The slight uptick in initial claims has not yet carried through into longer term unemployment. Continuing claims remains low and consistent with labor market health and recovery.

Total claims fell by -5,632 to hit 2.254 million. Total claims have also not been impacted by the rise in initial claims and remain at low levels. On a year over year basis they are down more than -10% and consistent with the ongoing recovery in the labor market.

Philadelphia Federal Reserve Manufacturing Business Outlook Survey shows modest growth in the region. The diffusion index gained 8.3 from 5.7 versus an expected decline and shows that economic activity is expanding, contrary to the Empire State data released on Monday. Positives within the report is a rise in New Order to 5.7 from -1, a rise in Employment to 5.3 from -0.4 and a 12 point gain in shipments to 16.7. The future looking component was also positive, rising to 43.1 from 41.5. All in all showing steady growth and promising more steady growth in the future.

Existing Home Sales rose 2%, more than expected, to an annualized pace of 5.9 million units. Analysts had bee expecting a slight decline from last month, to 5.4 million units. This is the third month of gains and the highest level of existing home sales since 2007. On a year over year basis sales are up more than 10% and are expected to continue into the future. Headwinds include low inventory and rising prices which are keeping first time buyers out of the market. On the flip side the improving market should lead to more building.

Leading Indicators made a slight decline in July, -0.2%. This is following +0.6% in May and June and is the 1st month in 5 to decline. Despite the decline Conference Board economist still say that growth in indicated into the end of the year and beyond. Both the Coincident and Lagging Indicators showed gains supporting this view.

The Oil Index

WTI prices toyed with new lows near $40 but managed to recover the loss before the close of the day. Mid-afternoon trading saw WTI gain $0.50 or about 1.25% to trade near $41. Prices are trending lower on supply/demand issues that are as yet unchanged. Today's rise may be in response to a hurricane brewing in the Atlantic, the first of the season. It's still far away but could easily make landfall in an oil producing or refining region. Prices may rise in the near term, due to weather or other concerns, but long factors remain bearish.

The Oil Index lost nearly a full percent and set a new low. The index fell below my support line near 1,150 and may be heading lower. Low oil prices are having an impact on earnings outlook and by extension oil stocks. The index is now trading at a 2 1/2 year low with declining momentum that could lead to another leg lower. However, there is evidence of support at these levels on both the weekly and the daily charts that make the current short term down trend appear overblown and oversold. This does not mean that the down trend is ending, just that it is weak and highly susceptible to reversal. A change in supply/demand outlook or fear could easily send oil prices back toward $50 and take the index with them. Downside targets is near 1,120 and the next Fibonacci Retracment line. If prices are able to move back above 1,150 they may go as high as 1,235 before hitting resistance.


The Gold Index

Gold gained more than 2% and hit my target at $1150. The metal is getting support from flight-to-safety concerns with China, weakening dollar and diminished, if possibly misplaced, September rate hike outlook. Price has now returned to previous support levels that are a likely target for resistance at this time. A further move upward could take it as high as $1,200 or $1,215. There is no economic data tomorrow so trading will be focused on other news.

The miners got the lift you might expect from such a significant move in gold. The gold miners ETF GDX gained nearly 4.5% in today's session. The move takes the index back above the previous all time low, is a bounce from the 30 day moving average, moves above the 100% retracement line and confirmed by bullish indicators. Higher gold prices mean better revenue for miners and value for investors, the caveat is that significant upside resistance is present in the form of the November 2014 low. The indicators confirm that a test of this resistance is likely but suggest it may be the top of a range, at least for now. The index is closely tied to gold prices, which could reverse on the next piece of data, so a test or fall to support near $15 is also a possibility. Longer term support is near $13.


In The News, Story Stocks and Earnings

Disney got a down grade and was responsible for a lot of today's decline. The company, along with Time Warner, was downgraded at Bernstein after analyst came to some kind of epiphany about how the market has been valuing TV based media. They are going to change the way these companies are valued, they say, and began with lowering Disney to market perform from out perform. Shares of Disney fell more than -6%. Time Warner only fell about -1.6%.


Charlotte based retailer Cato reported earnings before the bell that were in line with expectations. EPS of $0.56 was also flat compared to the same quarter last year although overall sales were up. Guidance for the second half was reaffirmed in a range around $0.50. Shares of the stock fell sharply on the news and extended the drop during today's session, closing with a loss greater than -8.7%. Cato is now trading at a new 10 month low with bearish indications.


Hewlett Packard reported after the bell. The long suffering technology company reported another quarter of declining revenue that led to a miss on revenue. The company was able to beat on the earnings side and reconfirmed its upcoming split. The bad news, or the worse news, is that the company lowered its guidance but the market did not seem to mind. The stock did not lose much ground in after hours trading but is trading at a new 52 week low as of today's close.


Gap Stores reported after the bell and was in-line with expectations. The jeans company reported $0.64 per share on a 2% decline in comp store sales but was able to reaffirm guidance. There several impacts to earnings of which one is not likely to disappear, currency fluctuations. The other is a $0.13 loss associated with port closings. Shares of the stock traded at a new low during the open session but rose in after hours trading following the release.


The Indices

The bulls went ducking for cover today. FOMC minutes, data, earnings and news each put their spin on market sentiment and caused the biggest down day we've seen on many months. The move was sparked, maybe, by the FOMC minutes but I think it has more to do with options expiration that anything else. News from around the world, tepid earnings and confusion about the economy and the Fed rate hike are today's catalyst but you can't ignore that the move is connected to the unwinding of positions.

The tech heavy NASDAQ Composite led today's decline with a loss of -2.82%. The move created a long black candle but not one larger than others seen over the course of the past 12 months. It did break the long term trend line and is setting up for further declines. The indicators are bearish and moving lower with a noticeable spike in MACD momentum. Downside target is near 4,750 where support may be strong. It looks like the index is in for a slightly deeper correction but is approaching additional up trend line, also near 4,750.


The Dow Jones Transportation Average is today's second biggest loser. The transports fell nearly -2.5% and created the longest black candle in several weeks and one of the longest of the last 12 months. Today's action is a move down from the short term 30 day moving average but within the range set over the past three months. The indicators are pointing lower so a further move down is likely but they are not strong and consistent with support forming along the 8,000 or slightly above.


The S&P 500 made the third largest decline in today's session, -2.10%. The broad market created the largest black candle in several months and appears to be heading to test or break the long term trend line. The indicators are making a bearish crossover in confirmation of the move but are not yet strong and more consistent with range bound trading than market reversal. Support levels should start to be hit around 2,020 and get stronger as they break 2,000 and approach 1,950. The caveat is that prices typically snap back after declines of this type, even if they eventually move lower in a few days, so tomorrow is likely to see more volatility.


The Dow Jones Industrial Average made the smallest decline today, only -2.06%. The move created the longest black candle of the year, broke support levels and closed at the low of the day. The indicators are rolling into a bearish crossover and pointing to lower prices with 16,600 as a first target. MACD is weak and stochastic remains near the middle of its range so there is room for it to move lower.


The market sold off with plenty of reason but not reason enough for the depth of the move. Yes, the FOMC rate hike is looming and yes, the Fed is causing some confusion but its only the first of many rate hikes and a sign the economy is healthy. Yes earnings are tepid and the consumer is not showing up the way we'd like to see but labor trends suggest its only a matter of time before that changes. Yes, China and Europe are worries but when is China not a worry and Europe is recovering the same as us.

Eventually market focus will return to the ongoing economic recovery, improving labor markets, expanding housing sector and the expectations for earnings growth by the end of the year and all of next year. Short term concerns have kept the market range bound and near term concerns are causing a dip. This dip may go a little deeper than ones we've seen over the past 6 months but that will just make a better opportunity for bulls.

Until then, remember the trend!

Thomas Hughes


New Plays

Still No Bottom In Sight

by James Brown

Click here to email James Brown


NEW BEARISH Plays

Continental Resources - CLR - close: 30.69 change: -0.80

Stop Loss: 33.05
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on August -- at $---.--
Listed on August 20, 2015
Time Frame: Exit
Average Daily Volume = 3.4 million
New Positions: Yes, see below

Company Description

Trade Description:
Unless you have been living under a rock for the last year then you already know crude oil is getting crushed. Oil is down nearly -60% from its 2014 highs. Today oil closed at $40.94 a barrel. More and more we are hearing analysts forecasting oil in the low $30s. A few outliers are suggesting oil in the $20s or even lower. That's because so far none of the oil producers have been willing to cut production.

OPEC is producing as much oil as they can. Russia is producing as much as they can. Iraq is boosting its production. If the Iran nuclear deal gets approved then they will start unloading more oil on the market. The problem is that all of these producers are desperate. They need the cash flow. OPEC has been trying to price U.S. producers out of the market but American energy companies have been resilient and U.S. production remains near all-time highs.

Put it all together and we have high oil production as demand stalls. The global economy, especially China, is slowing down. That means less demand for oil. Add to that a rising dollar and you have a very bearish recipe for commodities. Today oil is trading at levels not seen since 2009. The market is worried that crude oil won't bottom until we see a number of bankruptcies in the U.S. energy sector. Anyone with a high debt load is being seen as a risk.

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. With a focus on the exploration and production of oil, Continental has unlocked the technology and resources vital to American energy independence and is a strong free market advocate in favor of lifting of the domestic crude oil export ban. In 2015, the Company will celebrate 48 years of operations."

The plunge in oil prices is very evident in CLR's revenues. Their 2014 Q4 results saw revenues down -0.1% to $902.3 million. 2015 Q1 revenues were down -41% to $592.8 million. 2015 Q2 revenues were down -30% to $790 million.

The trend is lower. While we are short-term bearish on the stock I have to give credit to CLR for their ability to manage costs. The company has been doing a great job cutting expenses and boosting efficiencies. Through the first half of 2015 CLR has managed to reduce their costs by -20%. They see further efficiencies throughout 2015 and just lowered their estimated cost per barrel of oil by another $1.00.

When oil finally finds a bottom CLR should be a winner. Unfortunately, in the meantime, investors are selling everything in the oil business. CLR's high debt load, about $7 billion, is a negative. Bulls can argue that yes, CLR has high debt, but none of it is due until 2019. Hopefully by then crude oil will have recovered.

The challenge is that crude oil may not recover any time soon. There is a growing camp of analysts forecasting oil in the $30s for much of 2016. That's bad news for CLR. The company's CEO Harold Hamm said if crude oil is under $50 a barrel they will have cash flow issues (outspending their cash inflow).

Technically the trend for CLR's stock is down. Shares of CLR have declined toward major support near $30.00. A breakdown here would be very bearish. A drop under $30.00 would also generate a new sell signal on the point & figure chart.

My biggest concern is volatility in the stock. There are already a lot of investors who are bearish on CLR. The company has 370 million shares outstanding but only 82 million shares in their float. The most recent data listed short interest at 18% of the float. Traders may want to use options to limit their risk. Tonight I am suggesting a trigger to open bearish positions at $29.85.

Trigger @ $29.85

- Suggested Positions -

Short CLR @ $29.85

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

Buy the DEC $28 PUT (CLR151218P28) current ask $3.00
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Sink Worldwide

by James Brown

Click here to email James Brown

Editor's Note:
Thursday was a rough day for investors. Stocks were sinking around the world with all of the major markets in Asia, Europe, and the U.S. closing in the red.


Current Portfolio:


BULLISH Play Updates

Bright Horizons Family Solutions - BFAM - close: 61.97 change: -0.72

Stop Loss: 59.75
Target(s): To Be Determined
Current Gain/Loss: -1.7%
Entry on August 19 at $63.05
Listed on August 17, 2015
Time Frame: Exit prior to earnings in November
Average Daily Volume = 176 thousand
New Positions: see below

Comments:
08/20/15: BFAM actually held up reasonably well with a -1.1% decline versus the -2.8% plunge in the NASDAQ and -2.1% drop in the S&P 500. The stock should find support in the $61.00 area.

I would hesitate to launch new positions at this time.

Trade Description: August 17, 2015:
BFAM has been a publicly traded company for less than three years. Since its IPO in early 2013 the stock has been marching higher and currently trading near all-time highs. The stock's relative strength is noteworthy with BFAM up +33% in 2015 versus an S&P 500 that's only up +2.1%.

BFAM is in the services sector. According to the company, "Bright Horizons Family Solutions is a leading provider of high-quality child care, early education and other services designed to help employers and families better address the challenges of work and life. The Company provides center-based full service child care, back-up dependent care and educational advisory services to more than 900 clients across the United States, the United Kingdom, Ireland, the Netherlands, Canada and India, including more than 130 FORTUNE 500 companies and more than 80 of Working Mother magazine's 2014 "100 Best Companies for Working Mothers". Bright Horizons is headquartered in Watertown, MA."

The company delivered +26.6% earnings growth in 2014. Their long-term earnings growth is estimated at +19%. However, 2015 is likely to outperform. Looking at BFAM's recent results the company has been beating analysts' estimates on the bottom line while the revenue number has been relatively close to in-line each quarter.

BFAM's most recent report was August 4th. They announced their Q2 earnings rose +29% to $0.53 a share. That was four cents above estimates. Revenues were up +6.4% to $370.5 million. Management raised their 2015 guidance. They now expect 2015 revenues to grow +7-10%. They're guiding for earnings growth to be in the +23-26% range.

Shares of BFAM surged to new highs and hit $66.00 following this earnings report and bullish forecast. The stock held support near its prior highs recently. This is impressive because on August 10th BFAM announced a secondary offering of three million shares. Normally investors tend to sell stocks when a company announces a secondary offering. No one likes seeing their investment diluted. Yet shares of BFAM held support. The secondary, being sold by stock holders and not the company, priced at $61.25 a share.

The trend of higher lows continues and now BFAM looks poised to rally again. Tonight we are suggesting a trigger to open bullish positions at $63.05.

- Suggested Positions -

Long BFAM stock @ $63.05

08/19/15 Triggered @ $63.05


ConAgra Foods, Inc. - CAG - close: 43.95 change: -0.58

Stop Loss: 43.25
Target(s): To Be Determined
Current Gain/Loss: -3.1%
Entry on August 10 at $45.35
Listed on July 30, 2015
Time Frame: Exit PRIOR to earnings on September 22nd,
Average Daily Volume = 3.3 million
New Positions: see below

Comments:
08/20/15: Our CAG trade could be in trouble. Shares only lost -1.3% versus a -2% drop in the S&P 500. The simple 50-dma should be support, currently near $43.65. However, if the market accelerates lower it wouldn't surprise me to see CAG hit our stop at $43.25.

No new positions at this time.

Trade Description: July 30, 2015:
Two years ago CAG spent $5 billion to buy private-label food maker Ralcorp. At the time, CAG called it a "transformational" deal. Unfortunately their private-label business has been nothing but a money pit.

CAG is in the consumer goods sector. According to the company, "ConAgra Foods, Inc., (CAG), is one of North America's leading food companies, with brands in 99 percent of America’s households. Consumers find Banquet, Chef Boyardee, Egg Beaters, Hebrew National, Hunt's, Marie Callender's, Orville Redenbacher's, PAM, Peter Pan, Reddi-wip, Slim Jim, Snack Pack and many other ConAgra Foods brands in grocery, convenience, mass merchandise and club stores. ConAgra Foods also has a strong business-to-business presence, supplying frozen potato and sweet potato products as well as other vegetable, spice and grain products to a variety of well-known restaurants, foodservice operators and commercial customers."

In spite of CAG's troubles with its private-label business the stock was trading at multi-year highs in mid June this year. Then on June 19th the stock soared more than +10%. Shares were already flirting with its all-time highs from the late 1990s in the $38-39 area. They vaulted higher when activist hedge fund JANA Partners announced they had amassed a 7.2% stake in CAG. JANA argued that CAG was undervalued and not doing enough to build shareholder value.

It would appear that CAG's management has embraced JANA's involvement and direction. They have already appointed two of JANA's nominees to the Board of Directors. When CAG reported its Q4 earnings on June 30th they announced they would exit the private-label business.

The private-label business, Ralcorp, makes stuff like cereal, pasta, crackers, jams, jellies, syrups, and frozen waffles. They currently account for about 25% of CAG's sales but they're also the only business segment that lost money last quarter.

Multiple companies, including TreeHouse Foods (THS) and Post Holdings (POST), are said to be bidding for the private-label business. Estimates suggest it could sell for $3.5 billion. That's a big drop from the $5 billion price tag CAG paid.

Shares of CAG saw a two-week correction from its early July highs but traders have started to buy the stock again and recently broke the short-term trend of lower highs. We suspect this activist-investor fueled rally in CAG has further to run. Often activist investors urge companies to break up to unlock shareholder value or push for a company to sell itself. We'll have to see what the next move is. Today's high was $44.51. We are suggesting a trigger to launch bullish positions at $45.25.

- Suggested Positions -

Long CAG stock @ $45.35

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

Long SEP $45 CALL (CAG150918C45) entry $1.35

08/10/15 triggered on gap higher at $45.35, suggested entry was $45.25
Option Format: symbol-year-month-day-call-strike


The Hartford Financial Services Group - HIG - close: 48.44 chg: -0.76

Stop Loss: 47.45
Target(s): To Be Determined
Current Gain/Loss: +0.2%
Entry on August 10 at $48.35
Listed on August 03, 2015
Time Frame: Exit PRIOR to September option expiration
Average Daily Volume = 3.0 million
New Positions: see below

Comments:
08/20/15: Today traders were selling just about everything in a rush to lock in gains. HIG was no exception. Shares fell -1.5%. The 20-dma near $48.00 should be short-term support.

No new positions at this time.

Trade Description: August 3, 2015:
HIG had been hovering near multi-year highs from March through June this year. Then in July the stock began to accelerate higher. The catalyst was merger and acquisition news in its industry.

On July 1st ACE Limited (ACE) announced it would buy Chubb Corp. (CB) for $28.3 billion. This lit a fire under the property and casualty insurance stocks and HIG surged to new highs for the year.

If you're familiar with HIG they are in the financial sector. According to the company, "With more than 200 years of expertise, The Hartford (HIG) is a leader in property and casualty insurance, group benefits and mutual funds. The company is widely recognized for its service excellence, sustainability practices, trust and integrity."

The last couple of earnings reports for HIG have been mixed. They have been beating Wall Street's bottom line estimate but have missed the revenue numbers. Their most recent report was July 27th. Analysts were expecting a profit of $0.77 per share. HIG crushed the number with a profit of $0.91 per share. That is a +193% improvement from the $0.31 profit a year ago. Revenues were up +1.5% to $4.68 billion.

In addition to beating the estimate HIG raised its dividend and boosted its stock buyback program by an additional $1.6 billion. The current repurchase program stands at $2 billion through December 31, 2016.

Shares have garnered a couple of price target upgrades since its earnings report. The new targets are $53 and $55. There has been more chatter and speculation that HIG is a potential takeover target, which is probably why shares are outperforming its peers. The S&P SPDR Insurance ETF is up +7.8% year to date while HIG is up +15.6%.

Tonight we are suggesting small bullish positions if HIG can trade at $48.35 or higher.

*small positions to limit risk* - Suggested Positions -

Long HIG stock @ $48.35

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

Long SEP $50 CALL (HIG150918C50) entry $1.13

08/15/15 new stop @ 47.45
08/10/15 triggered @ 48.35
Option Format: symbol-year-month-day-call-strike


Hologic Inc. - HOLX - close: 40.87 change: -1.34

Stop Loss: 39.70
Target(s): To Be Determined
Current Gain/Loss: -4.2%
Entry on August 17 at $42.65
Listed on August 15, 2015
Time Frame: Exit prior to earnings report in November.
Average Daily Volume = 2.5 million
New Positions: see below

Comments:
08/20/15: Ouch! It was an ugly day for HOLX which fell -3.1% toward its 20-dma. If this market sell-off continues we could see HOLX testing the $40.00 level soon.

No new positions at this time.

Trade Description: August 15, 2015:
HOXL looks like a strong bullish momentum trading candidate. The S&P 500 index is only up +1.6% this year. The NASDAQ is up +6.6%. Yet HOLX is up +58% and has more than doubled from its 2014 lows. That's because the new leadership team has turned things around.

HOLX's CFO was recently interviewed in CNBC. He said that 18 months ago their business was in decline and new leadership has turned things around. They see a lot of growth opportunities both in the U.S. and internationally, especially for their Genius 3D mammography business.

If you're not familiar with HOLX they are in the healthcare sector. According to the company, "Hologic, Inc. is a leading developer, manufacturer and supplier of premium diagnostic products, medical imaging systems and surgical products. The Company's core business units focus on diagnostics, breast health, GYN surgical, and skeletal health. With a unified suite of technologies and a robust research and development program, Hologic is dedicated to The Science of Sure."

The company has beaten Wall Street's bottom line earnings estimates the last four quarters in a row. Their most recent report was July 29th. HOLX reported its Q3 results of $0.43 per share. That's a +16% improvement from a year ago and four cents better than expected. Revenues were up +9.7% to $693.9 million, significantly above the $654 million estimate. GAAP gross margins soared +520 basis points to 54.6%.

Management raised their 2015 sales guidance from +7-7.4% to +9.1-9.5%. They also upgraded their earnings forecast growth from +13-13.7% to +17.1-17.8%. The stock soared almost +10% on this earnings report and bullish outlook.

Shares of HOLX have spent the last couple of weeks consolidating sideways in the $40.00-42.50 zone. This is bullish. Instead of correcting lower the stock has been digesting its gains in a sideways range. What makes this even more impressive is that HOLX has managed to maintain its gains even after legendary investor Carl Icahn said he had trimmed his position in HOLX. Icahn's company sold about six million shares in the $40 range. After this sale Icahn still owns 9.99% of HOLX. It's not like he's bearish on the stock.

Technically HOLX looks poised to breakout past short-term resistance near $42.50. If that occurs we want to jump on board. Tonight we are suggesting a trigger to open bullish positions at $42.65.

- Suggested Positions -

Long HOLX stock @ $42.65

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

Long DEC $45 CALL (HOLX151218C45) entry $1.50

08/17/15 triggered @ $42.65
Option Format: symbol-year-month-day-call-strike


Total System Services, Inc. - TSS - close: 47.47 change: -0.85

Stop Loss: 45.85
Target(s): To Be Determined
Current Gain/Loss: -1.2%
Entry on August 14 at $48.05
Listed on August 12, 2015
Time Frame: Exit 6 to 9 weeks.
Average Daily Volume = 969 thousand
New Positions: see below

Comments:
08/20/15: Uh-oh! The $47.70-47.80 area should have been new support for TSS. The stock sliced through it and its 10-dma with a -1.75% decline. The next support level could be the 20-dma near $46.88. More conservative traders may want to raise their stop loss.

Trade Description: August 12, 2015:
TSS is probably one of the best performing stocks in the S&P 500 this year. The S&P 500 index is up +1.3% year to date. The financial sector is up +1%. Yet TSS has surged +39% in 2015 and shares look poised to keep running.

TSS is in the financial sector. According to the company, "As one of the world's largest payment solutions and services companies, TSYS believes payments should revolve around people, not the other way around. Since we got our start in the payments space more than 30 years ago, we have evolved from a supporting role servicing several hundred bank card issuers and bank acquirers to directly touching hundreds of thousands of merchants and millions of consumers.

TSYS is a global, publicly traded company with operations in more than 80 countries, including many of the world’s most high-growth emerging markets. We provide electronic payment services to financial institutions and companies around the globe with a broad range of issuing and acquiring payment technologies, including consumer, credit, debit, healthcare, loyalty, prepaid, chip and mobile payments."

Earnings are supposed to be the main driver behind stock price appreciation. TSS has not disappointed. The company has beaten Wall Street's estimates on both the top and bottom line the last three quarters in a row. Revenues have grown +8.9%, +11.7%, and +15.1%, respectively over the last three quarters.

TSS' most recent earnings report was July 28th. They announced their Q2 results were $0.58 per share. This was a +29% improvement from a year ago and five cents above expectations. Management then raised their 2015 guidance.

Since this late July earnings report shares of TSS have been consolidating sideways in the $46-48 range and essentially ignoring the market's recent volatility. Shares displayed some relative strength today and we want to be ready to hop on board if TSS can breakout. Tonight we're listing a trigger to open bullish positions at $48.05.

- Suggested Positions -

Long TSS stock @ $48.05

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

Long NOV $50 CALL (TSS151120C50) entry $1.20

08/14/15 triggered @ $48.05
Option Format: symbol-year-month-day-call-strike


21Vianet Group, Inc. - VNET - close: 19.90 change: -0.52

Stop Loss: 19.80
Target(s): To Be Determined
Current Gain/Loss: -4.1%
Entry on July 23 at $20.75
Listed on July 22, 2015
Time Frame: Exit PRIOR to earnings on August 26th
Average Daily Volume = 996 thousand
New Positions: see below

Comments:
08/20/15: The combination of another down day for the Chinese stock market (-3.5%) and a big drop in the NASDAQ (-2.8%) was a one-two punch for VNET. Shares fell -2.5% and closed beneath what should have been support at $20.00 and its 100-dma. The intraday low was $19.88. I strongly suspect that VNET will hit our stop loss at $19.80 tomorrow morning. The bigger risk now is if VNET gaps open lower tomorrow.

Trade Description: July 22, 2015:
Buckle your seatbelt. We are adding a fast-moving Chinese Internet stock to the play list tonight. This trade is not for the faint of heart. The Chinese market has been very volatile in recent weeks. This has been exacerbated by merger and acquisition news.

VNET is in the technology sector. According to the company, "21Vianet Group, Inc. is a leading carrier-neutral internet data center services provider in China. 21Vianet provides hosting and related services, managed network services, cloud services, content delivery network services, last-mile wired broadband services and business VPN services, improving the reliability, security and speed of its customers' internet infrastructure. Customers may locate their servers and networking equipment in 21Vianet's data centers and connect to China's internet backbone through 21Vianet's extensive fiber optic network. In addition, 21Vianet's proprietary smart routing technology enables customers' data to be delivered across the internet in a faster and more reliable manner. 21Vianet operates in more than 30 cities throughout China, servicing a diversified and loyal base of more than 2,000 customers that span numerous industries ranging from internet companies to government entities and blue-chip enterprises to small- to mid-sized enterprises."

The Wall Street Journal recently noted in June that seven U.S.-listed Chinese companies had been approached with offers to go private. That's a big spike in buyout offers. From January through May this year there had only been five such offers. One of the companies recently approached is VNET.

On June 10th VNET was approached with a preliminary non-binding proposal by Kingsoft Corp. and Tsinghua Unigroup International to go private for $23.00 per American depositary share ("ADSs"). That's the stock we can trade on the NASDAQ. Naturally the stock surged on this announcement. On June 16th VNET announced they had formed a special committee to review this proposal.

Unfortunately for shares of VNET and most Chinese stocks the Shanghai market in China had peaked in mid June and began to crash. The next three weeks saw a -30% plunge in the Shanghai market. The sell-off really accelerated in the first week of July. We can see the impact this market plunge was having on VNET with the big declines in early July.

Shares of VNET produced a huge bounce on July 9th when they announced the company had hired financial advisors and legal counsel to help them review the proposal to go private. In their press release they warned investors that "no decision has been made" nor is there any assurance that any "definitive offer will be made". This warning didn't stop the rally in VNET's stock which has continued to rise.

The Chinese government has thrown billions of dollars at their market to stop the crash and it seems to be working. The fever seems to have broken and this should provide a less dangerous environment for shares of VNET to trade in. We suspect VNET will continue to rally as the M&A talk heats up. However, this is an aggressive, higher-risk trade. There is no guarantee of a deal. Shares of VNET are clearly very volatile. I suggest small positions to limit risk.

NOTE: VNET does have options but the spreads are too wide to trade them.

*small positions to limit risk* - Suggested Positions -

Long VNET stock @ $20.75

08/15/15 new stop @ 19.80
08/01/15 new stop @ 19.20
07/27/15 The Chinese Shanghai index plunged -8.48%
07/23/15 triggered @ $20.75




BEARISH Play Updates

FMC Technologies - FTI - close: 30.94 change: -0.67

Stop Loss: 33.15
Target(s): To Be Determined
Current Gain/Loss: +1.2%
Entry on August 20 at $31.30
Listed on August 19, 2015
Time Frame: Exit PRIOR to earnings on October 20th
Average Daily Volume = 3.1 million
New Positions: see below

Comments:
08/20/15: Our new bearish play on FTI is open. As expected the stock continued to sink. Shares lost -2.1% to close at new multi-year lows. Our trigger to launch bearish positions was hit at $31.30. I would still consider new bearish positions at current levels.

Trade Description: August 19, 2015:
The sell-off in energy stocks is heating up again. We are hearing more and more analysts calls for crude oil to fall into the low $30s. Today WTI crude oil closed at $40.66 a barrel. That's after a more than -55% drop from its 2014 highs.

FTI is in the basic materials sector. They're part of the oil services industry and stocks in this group tend to be more volatile than the larger integrated oil names. According to the company, "FMC Technologies, Inc. (FTI) is the global market leader in subsea systems and a leading provider of technologies and services to the oil and gas industry. We help our customers overcome their most difficult challenges, such as improving shale and subsea infrastructures and operations to reduce cost, maintain uptime, and maximize oil and gas recovery."

Like most oil-related businesses FTI has seen its revenues decline as oil companies cut back. FTI reported its Q2 results on July 21st. Net income fell -52% with a profit of $0.52 a share. That was 9 cents worse than expected. Revenues were down -14.6% to $1.7 billion, which was relatively in-line with estimates.

Management said their land technologies business saw sales fall -29% and its energy infrastructure business retreat -32%. Their subsea business only fell -7%. However, FTI management announced they were cutting their workforce in the subsea business. Ocean floor drilling is really expensive and FTI probably sees fewer jobs in the near future as major oil companies cut their capex budgets.

Shares of FTI plunged -10% following its earnings report. Yet there was little follow through lower. FTI spent almost three and a half weeks consolidating sideways in the $32.00-34.00 range. That changed today. The oil-sector weakness today sparked a bearish breakdown in FTI that pushed the stock below its trading range.

We suspect that FTI has just launched into its next leg lower. If $30.00 does not hold as support the next support level could be $25 or $22. The point & figure chart is bearish and forecasting a long-term target of $20.00. Today's low was $31.45. I'm suggesting a trigger to open bearish positions at $31.30.

- Suggested Positions -

Short FTI @ $31.30

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

Long OCT $30 PUT (FTI151016P30) entry $1.40

08/20/15 triggered @ $31.30
Option Format: symbol-year-month-day-call-strike


Marathon Oil Corp. - MRO - close: 16.13 change: -0.10

Stop Loss: 18.15
Target(s): To Be Determined
Current Gain/Loss: +9.4%
Entry on August 14 at $17.80
Listed on August 13, 2015
Time Frame: Exit
Average Daily Volume = 7.8 million
New Positions: see below

Comments:
08/20/15: I am suggesting a little extra caution on our MRO trade. The broader market plunged and most of the energy stocks plunged with it. Yet MRO essentially drifted sideways along the $16.00 level and closed almost unchanged today. This might be a warning signal that MRO is due for a bounce.

No new positions at this time.

Trade Description: August 13, 2015:
Falling crude oil prices are crushing oil-sector stocks. A -50% drop in crude oil that began in the second half of 2014 was horrendous for the U.S. and global oil industry. Oil managed a bounce off its March 2015 lows but that rebound has failed.

Since late June the price of oil has fallen about -30%. Today saw crude oil close near $42.00 a barrel, the lowest since March 2009 (during the bear market in stocks).

Shares of MRO are getting hammered on this oil slide. According to the company, MRO is a global energy company. They explore for, produce, and market oil and natural gas. They are also involved in the oil sands mining in Canada and the big shale oil and gas basins in the United States. The company has operations in Angola, Equatorial Guinea, Ethiopia, Gabon, Kenya, Libya, Norway, the United Kingdom, and the Kurdistan region of Iraq.

There are a ton of factors impacting crude oil and the energy sector. OPEC's largest producer, Saudi Arabia, has decided keep production high. They would rather suffer low oil prices than lose market share to rival producers.

According to CNBC today, "OPEC's second-largest producer, Iraq, plans to export near-record volumes of Basra crude in September, adding to an already oversupplied market." Plus, "The U.S. Energy Information Administration also said on Thursday that Iran's release of oil held in storage could boost global supplies by 100,000 barrels per day this year, and that it had the 'technical capability' to boost output by 600,000 bpd by the end of next year."

If that wasn't enough the recent focus on China is undermining oil prices. China is one of the largest, if not the largest, consumer of commodities on the planet. Their economy has been slowing down for years. The central bank of China's decision to devalue their currency this week stokes fears that China's economy is falling even faster than previously expected. That doesn't bode well for China's future oil demand.

Meanwhile back at home in the U.S. we see crude oil inventories building. Wall Street is worried that domestic oil companies have not cut their spending budgets enough. There is growing concern that MRO may have to slash its dividend. The plunge in MRO's stock price has boosted its dividend yield to more than 4%.

A quick look at MRO's last few earnings reports shows the trend in revenues. Their Q3 2014 results saw revenues fall -5%. Q4 results saw revenues drop -16% from the prior year. Their Q1 2015 report said revenues plunged -46%. Their most recent report, their Q2 report on August 5th, said MRO's revenues dropped -47.9% to $1.53 billion. The company reported a loss of ($0.23) per share. Management has been slashing their budgets and cutting expenses but it wasn't enough.

The last few days have seen MRO's stock hovering above short-term support at $18.00. Unfortunately today's drop (-5.45%) left shares poised for a breakdown. Tonight we are suggesting a trigger to launch bearish positions at $17.80. We're not setting a target tonight but I will point out that the point & figure chart is bearish and forecasting at $5.00 target.

FYI: MRO does have a 21-cent dividend coming up. The stock will trade ex-dividend in the August 17-19th time frame.

- Suggested Positions -

Short MRO stock @ $17.80

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

Long OCT $17 PUT (MRO151016P17) entry $1.03

08/19/15 new stop @ 18.15
08/17/15 began trading ex-dividend today ($0.21)
08/14/15 triggered @ $17.80
Option Format: symbol-year-month-day-call-strike


Micron Technology - MU - close: 14.74 change: -1.16

Stop Loss: 18.25
Target(s): To Be Determined
Current Gain/Loss: +4.0%
Entry on August 20 at $15.35
Listed on August 18, 2015
Time Frame: Exit prior to earnings in late September.
Average Daily Volume = 28.4 million
New Positions: see below

Comments:
08/20/15: Shares of MU were downgraded again this morning. Plus the analyst lowered their price target to $15.00. MU reacted by gapping open lower at $15.35 and then plunging to a -7.29% loss on the session. While I'm happy to see the stock accelerate lower the gap down hurt our entry point.

Our plan was to launch bearish positions at $15.85 but we were triggered on the gap down at $15.35. I would not chase MU here. No new positions at this time.

Trade Description: August 18, 2015:
The tech-heavy NASDAQ composite index is up +6.8% in 2015. Yet a key technology industry the semiconductor stocks are underperforming. The SMH semiconductor ETF is down -8.2% and the SOX semiconductor index is off -9.1% The group is suffering from what one analyst says is an uncertain macroeconomic environment, currency headwinds, and rising competition. One semiconductor stock significantly underperforming its peers is MU, which is down -53% year to date.

If you're not familiar with the company, here's a bit from their press release, "Micron Technology, Inc., is a global leader in advanced semiconductor systems. Micron's broad portfolio of high-performance memory technologies - including DRAM, NAND and NOR Flash - is the basis for solid state drives, modules, multichip packages and other system solutions. Backed by more than 35 years of technology leadership, Micron's memory solutions enable the world's most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications."

MU sparked new concerns after their recent analysts day. The company announced plans to boost their 2016 capex budget by +45% more than 2015's. The company is forecasting a 2016 budget of $5.3-to-$5.8 billion and analysts are worried it's going to hurt their financial results.

Wedbush Securities analyst Betsy Van Hees said, "While we believe [Micron] is laying the right ground work with capex spend for long-term success, until we see signs that DRAM industry supply/demand environment is stabilizing, shares will likely continue to struggle." Van Hees downgraded shares of MU from outperform to a neutral.

Bank of America Merrill Lynch analyst Simon Dong-Je Woo was also cautious on the memory chip sector. Woo is worried that rising capex spending will be a short-term negative. He downgraded MU from a buy to a neutral.

Not everyone agrees. The research team at Wells Fargo actually upgraded MU from an underperform to a market perform. Bulls could argue that MU's stock looks cheap with a P/E ration around 5. However, even CNBC's Jim Cramer warned that cheap stocks tend to stay cheap for a while.

Momentum is bearish and MU underperformed the market today with a -4.8% drop to new multi-year lows. We are suggesting a trigger to launch bearish positions at $15.85.

- Suggested Positions -

Short MU stock @ $15.35

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

Long OCT $15 PUT (MU151016P15) entry $1.26

08/20/15 Triggered on gap down at $15.35, suggested entry was $15.85


Whiting Petroleum - WLL - close: 17.04 change: -0.69

Stop Loss: 20.35
Target(s): To Be Determined
Current Gain/Loss: +14.2%
Entry on August 03 at $19.85
Listed on August 01, 2015
Time Frame: Exit PRIOR to earnings
Average Daily Volume = 7.1 million
New Positions: see below

Comments:
08/20/15: Another day of weakness for the energy stocks helped push WLL to a -3.89% decline. The stock hit levels not seen since mid 2009.

I am not suggesting new positions in WLL at this time.

Trade Description: August 1st, 2015:
The price of crude oil has fallen more than 50% in the last year. It's wreaking havoc on energy company earnings and revenues. Unfortunately the outlook is not very bullish. The global economy is stalling. China, the biggest buyer of commodities, is growing at multi-year lows. The U.S. is creeping along at +2% GDP growth while oil inventories in the U.S are near 80-year highs.

The Middle East OPEC cartel is pumping a high-volume of oil, regardless of price declines, to maintain market share. A recent report showed that OPEC boosted production by +140,000 barrels a day in July from its June production. OPEC is hoping to pressure the U.S. fracking industry out of business but it's not working. U.S. production remains resilient and near record highs.

If that wasn't enough the Federal Reserve is desperate to raise interest rates and would like to raise in September. Rising interest rates usually boost a country's currency. If the Fed does raise rates the U.S. dollar should rally even further. A rising dollar puts downward pressure on commodity prices. This paints a bearish picture for crude oil prices.

Given this outlook for crude we're adding a bearish play in the energy industry. Some view WLL as a barometer of the U.S. shale oil and gas industry. If that's the case the stock price is suggesting a dire forecast.

WLL is in the basic materials sector. According to the company, "Whiting Petroleum Corporation, a Delaware corporation, is an independent oil and gas company that explores for, develops, acquires and produces crude oil, natural gas and natural gas liquids primarily in the Rocky Mountain and Permian Basin regions of the United States. The Company’s largest projects are in the Bakken and Three Forks plays in North Dakota, the Niobrara play in northeast Colorado and its Enhanced Oil Recovery field in Texas."

WLL just reported its Q2 earnings on July 29th. Analysts were only expecting a profit of $0.02 per share. WLL delivered $0.04. However, that's a -97% drop from a year ago. Revenues plunged -29.4% to $590 million, which was significantly below analysts' estimates of $677 million.

We have to give the company credit for cutting costs dramatically during a tough time in the oil industry. Otherwise they would not have managed a profit for the quarter. WLL also managed to set a new company record for production of 170,000 barrels a day in the second quarter. Unfortunately, these positives are not enough to outweigh the overall bearish impact of plunging oil prices.

Plus, investors and analysts might shun WLL as the company is sending mixed messages. The company claimed that based on strong results during the second quarter they were raising their capex budget from $2 billion to $2.3 billion. That was two weeks ago. This past week WLL has already cut its capex budget. Now they're forecasting $2.15 billion. They only plan on running eight drilling rigs in the second half of 2015 instead of their previous guidance of 11 rigs.

Wall Street is turning more cautious on WLL. The stock has seen several downgrades and lowered price targets recently. The stock has been very weak. Momentum is bearish. The oversold bounce last week just failed under technical resistance at its simple 10-dma. Now WLL is testing round-number resistance at $20.00. We are suggesting a trigger to launch bearish positions at $19.85.

- Suggested Positions -

Short WLL stock @ $19.85

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

Long SEP $20 PUT (WLL150918P20) entry $2.05

08/05/15 new stop @ 20.35
08/05/15 new stop @ 21.25
08/03/15 triggered @ $19.85
Option Format: symbol-year-month-day-call-strike