Editor's Note:
The U.S. market produced a relatively widespread bounce on Wednesday morning. Unfortunately the rally began to fade by lunchtime. Another weak session for crude oil weighed on energy stocks.


Current Portfolio:


BULLISH Play Updates

ConAgra Foods, Inc. - CAG - close: 44.75 change: +0.58

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

Comments:
08/05/15: CAG displayed relative strength today with a +1.3% gain. Unfortunately the rally failed right at the $45.00 mark this morning. If this rally continues tomorrow we could see CAG hit our suggested entry point at $45.25.

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.

Trigger @ $45.25

- Suggested Positions -

Buy CAG stock @ $45.25

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

Buy the SEP $45 CALL (CAG150918C45)

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


Guidewire Software, Inc. - GWRE - close: 58.88 change: +0.56

Stop Loss: 57.75
Target(s): To Be Determined
Current Gain/Loss: +1.1%
Entry on July 23 at $58.25
Listed on July 21, 2015
Time Frame: Exit PRIOR to earnings on Sept. 1st
Average Daily Volume = 368 thousand
New Positions: see below

Comments:
08/05/15: We're not giving up on GWRE yet and today's bounce snapped a three-day losing streak. The stock remains inside its $58-60 trading range.

No new positions at this time!

Trade Description: July 21, 2015:
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.

- Suggested Positions -

Long GWRE stock @ $58.25

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

Long OCT $60 CALL (GWRE151016C60) $2.80

08/04/15 Readers may want to exit early now
08/01/15 new stop @ 57.75
07/25/15 new stop @ 56.90
07/23/15 new stop @ 56.40
07/23/15 triggered @ $58.25
Option Format: symbol-year-month-day-call-strike


The Hartford Financial Services Group - HIG - close: 47.47 chg: -0.30

Stop Loss: 46.40
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on August -- at $---.--
Listed on August 03, 2015
Time Frame: Exit PRIOR to September option expiration
Average Daily Volume = 3.0 million
New Positions: Yes, see below

Comments:
08/05/15: Hmm.... HIG has failed at $48.32 two days in a row. Shares underperformed the major indices with a -0.6% decline. If HIG sinks again tomorrow we may drop it. Currently our suggested entry point is $48.35.

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.

Trigger @ $48.35 *small positions to limit risk*

- Suggested Positions -

Buy HIG stock @ $48.35

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

Buy the SEP $50 CALL (HIG150918C50)

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


The Kroger Co. - KR - close: 39.08 change: +0.52

Stop Loss: 36.95
Target(s): To Be Determined
Current Gain/Loss: +0.1%
Entry on July 30 at $39.05
Listed on July 28, 2015
Time Frame: Exit PRIOR to earnings on Sept. 11th
Average Daily Volume = 3.9 million
New Positions: see below

Comments:
08/05/15: KR recovered over half of yesterday's losses with a +1.3% bounce today. However, today's move is an inside day (inside yesterday's range) and suggests indecision by traders.

I am not suggesting new positions at this time.

Trade Description: July 28, 2015:
If you're looking for a company with consistent growth then look no further. KR appears to be the king of same-store sales and recently announced 46 quarters of consecutive same-store sales growth.

KR is in the services sector. According to the company, "Kroger, one of the world's largest retailers, employs nearly 400,000 associates who serve customers in 2,626 supermarkets and multi-department stores in 34 states and the District of Columbia under two dozen local banner names including Kroger, City Market, Dillons, Food 4 Less, Fred Meyer, Fry's, Harris Teeter, Jay C, King Soopers, QFC, Ralphs and Smith's. The company also operates 780 convenience stores, 327 fine jewelry stores, 1,342 supermarket fuel centers and 37 food processing plants in the U.S."

BusinessInsider ran an interesting article on KR that suggested the grocery chain is shaping up to be growing competition for the fast-food industry. A recent poll showed that 1 out of 4 consumers would choose Kroger instead of McDonald's. KR has become more attractive because they have been expanding their prepared-food selection.

Another interesting tidbit came from CNBC Mad Money's Jim Cramer who said KR has twice the growth of rival Whole Foods Market (WFM). KR's most recent quarterly results showed same-store sales growth of +5.7%, which easily outpaces its rivals.

Speaking of Whole Foods, KR is quickly catching up. WFM built its brand on organic and natural foods, which also happen to have better margins than traditional grocery items. Rivals took notice and KR jumped into organics with both feet. According to JPMorgan, KR is on track to surpass WFM as the biggest seller of organic foods within the next two years. (FYI: Costco actually sells more organic food than anyone else in the U.S. but they are not a traditional grocery story).

KR's most recent earnings report was June 18th. It was their 2016 Q1 report with earnings of $1.25 per share. That beat estimates of $1.22. Revenues were $33.05 billion, which actually missed estimates. The stock rallied anyway. KR management reaffirmed their fiscal year 2016 earnings forecast for $3.80-3.90 per share (essentially +10% growth).

Traders should like this stock since KR is very shareholder friendly. According to a company press release they have returned more than $1.1 billion to shareholders through share buybacks and dividends in the last four quarters. Management recently announced a new $500 million stock buy back program to replace their previous repurchase program, which had been exhausted. They also raised their dividend. On a post-split basis will pay 10.5 cents on per share on September 1st, 2015. KR should begin trading ex-dividend August 12th Speaking of splits, the stock just split 2-for-1 on July 13th. It was their fifth stock split since 1979.

Last week the U.S. stock market was plunging. KR managed to evade most of the damage and essentially traded down from $39.30 to $38.30. Shares did see a spike down on Monday this week but traders bought the dip . We think KR is poised to breakout to new all-time highs soon. Tonight we're suggesting a trigger to open bullish positions at $39.05. More conservative investors might want to actually wait for a new high and use a trigger at $39.40 instead.

- Suggested Positions -

Long KR stock @ $39.05

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

Long SEP $40 CALL (KR150918C40) entry $0.74

07/30/15 triggered @ $39.05
Option Format: symbol-year-month-day-call-strike


21Vianet Group, Inc. - VNET - close: 20.29 change: +0.02

Stop Loss: 19.20
Target(s): To Be Determined
Current Gain/Loss: -2.2%
Entry on July 23 at $20.75
Listed on July 22, 2015
Time Frame: Exit PRIOR to earnings on August 25th
Average Daily Volume = 996 thousand
New Positions: see below

Comments:
08/05/15: The Chinese Shanghai market was down sharply again but VNET seems unaffected. The stock churned sideways inside a relatively narrow range.

No new positions at this time.

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

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




BEARISH Play Updates

Allegheny Technologies - ATI - close: 21.04 change: +0.47

Stop Loss: 22.10
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on August -- at $---.--
Listed on August 04, 2015
Time Frame: Exit PRIOR to September option expiration
Average Daily Volume = 1.5 million
New Positions: Yes, see below

Comments:
08/05/15: Shares of ATI popped higher this morning. I don't see any specific news to explain the gap open higher and surge to $22.25 (a +8% move). The rally faded and shares closed near their open with a +2.2% gain.

At the moment our plan is unchanged. We want to launch bearish positions if ATI trades at $19.85. Keep in mind we want to use small positions to limit risk.

Trade Description: August 4, 2015:
Weak demand and cheaper competition from China has steamrolled shares of ATI down to five-year lows.

ATI is part of the industrial goods sector. According to the company, "Allegheny Technologies Incorporated is one of the largest and most diversified specialty materials and components producers in the world with revenues of approximately $4.3 billion for the twelve months ended June 30, 2015. ATI has approximately 9,600 full-time employees world-wide who use innovative technologies to offer global markets a wide range of specialty materials solutions. Our major markets are aerospace and defense, oil and gas/chemical process industry, electrical energy, medical, automotive, food equipment and appliance, and construction and mining."

ATI was already underperforming the broader market when the company issued an earnings warning on July 14th. Wall Street was estimating a profit of $0.17 per share for ATI's Q2 results. Management said they would post a loss and adjusted their Q2 guidance for a loss of (0.15) to (0.17) per share.

A few days later, on July 21st, ATI reported a Q2 loss of ($0.15) per share and the stock crashed again. Revenues fell -8.6% to $1.02 billion, which was below estimates.

ATI has two main business segments - their High Performance Materials and Components business and their Flat-rolled products business. The company said demand in Q2 was lower for both business segments with sales declines almost across the board. A slowdown in demand from the U.S. oil and gas industry hurt their high-performance unit. Meanwhile a flood of cheap imported steel from China hurt their flat-rolled product business.

Rich Harshman, Chairman, President and CEO of ATI, commented on their quarter, "This was a challenging quarter due to business conditions in the Flat Rolled Products segment and further weakening in demand from the oil & gas market in the High Performance Materials and Components segment."

These results have sparked some downgrades for ATI. The point & figure chart is very bearish and forecasting a $5.00 target. The stock's P/E has soared to 171 so it's not cheap even after a $17 drop in the last three months.

Currently ATI is hovering above major round-number support at $20.00. A breakdown here would be bad news and could signal a drop toward $15.00. Tonight we are suggesting a trigger to launch bearish positions at $19.85. I am suggesting we keep our position size small to limit risk.

Trigger @ $19.85 *small positions to limit risk*

- Suggested Positions -

Short ATI stock @ $19.85

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

Buy the SEP $20 PUT (ATI150918P20)

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


Best Buy Co., Inc. - BBY - close: 32.00 change: +0.04

Stop Loss: 33.05
Target(s): To Be Determined
Current Gain/Loss: +0.3%
Entry on July 27 at $32.10
Listed on July 25, 2015
Time Frame: Exit PRIOR to earnings in late August
Average Daily Volume = 4.3 million
New Positions: see below

Comments:
08/05/15: BBY tried to rally but failed near the top of its current $31.70-32.40 trading range. Shares closed virtually unchanged.

I am amending yesterday's suggestion. Wait for a decline under $31.50 before considering new positions.

Trade Description: July 25, 2015:
Tonight's candidate is almost 50 years old. They were founded under the name "Sound of Music" but changed their name to "Best Buy" in 1983. Today they have over 1,400 locations, employ more than 125,000 people, and generate more than $40 billion in sales annually.

BBY is part of the services sector. According to the company, "Best Buy is a leading provider of technology products, services and solutions. The company offers expert service at an unbeatable price more than 1.5 billion times a year to the consumers, small business owners and educators who visit our stores, engage with Geek Squad Agents or use BestBuy.com or the Best Buy app. The company has operations in the U.S. where more than 70 percent of the population lives within 15 minutes of a Best Buy store, as well as in Canada and Mexico, where Best Buy has a physical and online presence."

The company launched a massive turnaround campaign almost three years ago as they struggled with extremely tough competition from companies like Amazon.com. The biggest problem for BBY is something called "showrooming". This is when customers come into a Best Buy store, they look around at products, ask questions from Best Buy staff, and they compare quality and price. Then they go home and buy what they want online for a cheaper price and have it delivered to their door.

BBY is acutely aware of the showrooming phenomenon. It's hard to compete with someone like Amazon who doesn't have the big overhead for large retail locations. BBY has been trying to compete on service plus they have redesigned their own online e-commerce offerings and they are seeing growth in their own online sales. BBY management has also been slashing expenses.

The turnaround has worked to a point. BBY's focus on cutting expenses is obviously good for profits. Yet sales remain slow. Looking at BBY's last couple of earnings reports their bottom line results have beaten Wall Street estimates (thanks to slashing costs) but revenues have been disappointing.

BBY reported their Q4 results on March 3rd, 2015 and revenues were only up +1.3% to $14.2 billion, which missed expectations. Comparable store sales were only up +1.3%.

BBY's Q1 result was worse. This report was announced on May 21st. They beat the bottom line EPS estimate again but revenues fell -0.9% to $8.56 billion. On the plus side their comparable store sales improved from -1.3% a year ago to +0.6% but this too was disappointing.

Shares of BBY have been in a down trend since they peaked near $42.00 in March this year. The stock has been in a bearish pattern of lower highs and lower lows. It looked like BBY might break this trend and then the stock was downgraded on July 17th.

Bank of America analyst Denise Chai reduced her rating on BBY to the equivalent of a "sell". She believes the company will see a tough second half to 2015. There is no must have product or upgrade cycle to drive customers into the store later this year. Chai expects BBY's sales to turn negative (-1%) in the second half.

BBY's stock collapsed on this downgrade and has been unable to recover. Today shares are poised to breakdown to new 2015 lows. Tonight we are suggesting a trigger to launch bearish positions at $32.15.

FYI: I am listing the October put options. BBY does have September options but the option strikes are at odd prices thanks to a $0.51 special dividend BBY paid in March and the option markets haven't caught up with new (normal) strikes yet.

I also want to point out that the point & figure chart is currently bullish for BBY. If shares traded below $32.00 it should generate a new sell signal.

- Suggested Positions -

Short BBY stock @ $32.15

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

Long OCT $30 PUT (BBY151016P30) entry $1.28

08/01/15 new stop @ 33.05
07/27/15 triggered on gap down at $32.10, trigger was $32.15
Option Format: symbol-year-month-day-call-strike


The Michaels Companies, Inc. - MIK - close: 25.54 change: +0.49

Stop Loss: 26.05
Target(s): To Be Determined
Current Gain/Loss: -3.2%
Entry on July 28 at $24.75
Listed on July 27, 2015
Time Frame: Exit PRIOR to earnings in late August
Average Daily Volume = 729 thousand
New Positions: see below

Comments:
08/05/15: MIK's move today is a bit of a mystery. Shares displayed relative strength with a +1.95% gain. The stock crept higher all day long so it does not appear to be a reaction to one specific event. The close above its 200-dma is potentially bullish.

The level to watch is $25.80. This was previously support and now broken it should be new resistance. I am not suggesting new positions at this time.

Trade Description: July 27, 2015:
It looks like investor sentiment on MIK has turned bearish. The stock produced big gains from its post-IPO lows near $15 in August 2014. The rally peaked in March this year near $30.00 after the company reported earnings.

If you're not familiar with MIK they are in the services sector. They're considered part of the specialty retail industry. According to the company, "The Michaels Companies, Inc. is North America's largest specialty retailer of arts and crafts (based on store count). As of May 2, 2015, the Company owns and operates 1,177 Michaels stores in 49 states and Canada and 118 Aaron Brothers stores, and produces 12 exclusive private brands including Recollections(R), Studio Decor(R), Bead Landing(R), Creatology(R), Ashland(R), Celebrate It(R), ArtMinds(R), Artist's Loft(R), Craft Smart(R), Loops & Threads(R), Imagin8(R) and Make Market(tm)."

The last couple of earnings reports have not been that exciting. MIK reported its 2015 Q4 results on March 19th. They beat estimates by a penny while revenues rose +3.4% to $1.6 billion, which was in-line with estimates. Unfortunately, MIK management lowered their guidance for Q1 and fiscal year 2016.

Even after lowering guidance MIK still missed estimates when they reported their Q1 results on June 4th. Earnings of $0.32 a share missed by a penny. Revenues were up +2.9% to $1.08 billion, which was in-line with estimates. Comparable store sales were up only +0.3%.

Looking at MIK's daily chart you can see that traders have been selling the rallies. Now MIK has a bearish pattern of lower highs. It recently broke down under support in the $26.00 area. Now MIK is testing round-number psychological support at $25.00 and technical support at its simple 200-dma. A breakdown here would definitely look bearish. Tonight we are suggesting a trigger to launch bearish positions at $24.75.

- Suggested Positions -

Short MIK stock @ $24.75

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

Long SEP $25 PUT (MIK150918P25) entry $1.45

08/01/15 new stop @ 26.05
07/28/15 triggered @ $24.75
Option Format: symbol-year-month-day-call-strike


Whiting Petroleum - WLL - close: 17.70 change: -1.28

Stop Loss: 21.25
Target(s): To Be Determined
Current Gain/Loss: +10.8%
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:
08/05/15: Another day of weakness for crude oil and natural gas weighed heavily on shares of WLL. The stock plunged another -6.74% with volume of almost 13 million shares (WLL normally trades about 7 million a day).

Tonight we are adjusting the stop loss to $21.25. More conservative traders may want to lower it even further. No new positions 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 @ 21.25
08/03/15 triggered @ $19.85
Option Format: symbol-year-month-day-call-strike