Editors Note:

The accelerating gains in the small cap stocks came to an abrupt halt on Wednesday. The Russell 2000 lost -1.3% and the S&P-600 lost -1.4%. Both indexes erased the last three days of gains and that should be a blow to market sentiment.

The big cap indexes all closed below critical support and the charts took a decidedly bearish turn. Thursday we could see investors move to the sidelines ahead of the three-day weekend where event risk is significantly elevated because of the major North Korean holiday on the 15th. Normally they celebrate by setting off bombs or launching missiles. This year the U.S. carrier strike force is cruising offshore as an implied threat to avoid violating any UN sanctions. This could be a rocky Thursday as investors move to the sidelines ahead of the weekend.





Current Portfolio


Stop Loss Updates

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.


Profit Targets

Check the graphic below for any profit stops in green. We need to always be prepared for a profit exit at resistance.





Current Position Changes


No Changes



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BULLISH Play Updates

CPE - Callon Petroleum Company - Company Profile

Comments:

No specific news. Down slightly with the market.

Original Trade Description: April 3rd.

Callon Petroleum Company, an independent oil and natural gas company, acquires, explores for, develops, and produces oil and natural gas properties in the Permian Basin in West Texas. As of December 31, 2016, its estimated net proved reserves totaled 91.6 million barrel of oil equivalent. The company was founded in 1950 and is headquartered in Natchez, Mississippi. Company description from FinViz.com.

This is a small oil producer with 66 years of experience. They reported Q4 earnings of 8 cents that missed estimates for 10 cents. Revenue of $69.1 million also missed estimates for $71.8 million. However, that is not the real picture.

Production for the full year increased 59% with 77% oil. Q4 production increased 11% with 76% oil. Reserves increased 69% to 91.6 million Boe with 78% oil. They replaced 311% of production with new wells and new discoveries. Their finding and developing costs are very low at $8.77 per barrel. They increased their Permian acreage by 41,000 acres through multiple acquisitions. They raised 2017 production guidance by 60% to 24,000 Boepd. Callon ended the quarter with $653 million in cash.

Earnings May 29th.

Shares hit a low of $11 on March 14th and began to rebound. That rebound has begun to accelerate over the last week with oil prices rising back over $50. With refiners restarting after the Feb/March maintenance cycle, oil inventories should begin to decline. That always lifts prices in the spring and summer months and rising oil prices lifts equities.

Position 4/4/17:

Long CPE shares @ $13.31, see portfolio graphic for stop loss.

Optional: Long May $14 call @ .55, see portfolio graphic for stop loss.



ECA - Encana Corporation - Company Profile

Comments:

No specific news. New 7-week closing high on Tuesday. Slight decline today.

Original Trade Description: March 13th

Encana Corporation, together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States. The company owns interests in various assets, such as the Montney in northern British Columbia and northwest Alberta; Duvernay in west central Alberta; and other upstream operations, including Wheatland in southern Alberta, Horn River in northeast British Columbia, and Deep Panuke located offshore Nova Scotia. It also holds interests in assets that comprise the Eagle Ford in south Texas; Permian in west Texas; San Juan in northwest New Mexico; Piceance in northwest Colorado; and Tuscaloosa Marine Shale in east Louisiana and west Mississippi. Company description from FinViz.com.

Encana reported earnings of 9 cents compares to estimates for 3 cents. Revenue of $822 million also beat estimates for $771.9 million. Production averages 237,100 Boepd. Drilling and completion costs declined by 30%. They reduced long term debt by $1.1 billion and net debt by 50%. They replaced 326% of production.

They currently have more than 10,000 premium drilling locations and expect to grow that number in 2017. Since December 31st, they have added more than 50 premium locations in the Eagle Ford alone. They ended 2016 with a whopping $5.3 billion in liquidity and cash of nearly $1 billion. They expect to spend $1.6 to $1.8 billion on capex in 2017 and grow liquids production by 35%. Capex willbe funded by cash on hand. Proved reserves were 920 million barrels and 3P reserves were 2.372 billion barrels.

With the cash, production rates, reserves and drilling inventory listed above they are definitely an acquisition candidate with only a $10 billion market cap.

JP Morgan initiated coverage with an overweight rating and $16 price target.

Earnings May 18th.

Over the last couple of weeks an investor built up 7,000 July $11 calls at $1 each and 7,000 October $11 calls at $1.50 each. That is a $1.7 million investment in call options. I am suggesting we follow them in that trade as well as buy the stock. They may know something that is not public information or they just believe that the company is too good to pass up. With the drop in crude prices ECA has fallen to a 5-month low and is resting on the 200-day average.

Position 3/14/17:

Long ECA shares @ $10.43, see portfolio graphic for stop loss.

Optional: Long October $11 call @ $1.40, no stop loss.



HABT - Habit Restaurants - Company Profile

Comments:

No specific news. New three-month high. Habit is nearing resistance at $18. If we can get through that level, the next challenge would be $21 and then $24. The historic high in 2014 was $44.

Original Trade Description: March 22nd.

The Habit Restaurants, Inc., a holding company, operates fast casual restaurants under The Habit Burger Grill name. It specializes in offering fresh made-to-order char-grilled burgers and sandwiches featuring choice tri-tip steak, grilled chicken, and sushi-grade albacore tuna cooked over an open flame; and salads, as well as sides, shakes, and malts. As of March 2, 2017, the company operated approximately 170 restaurants in 15 locations in California, Arizona, Utah, New Jersey, Florida, Idaho, Virginia, Nevada, Washington, and Maryland, the United States; and the United Arab Emirates. The Habit Restaurants, Inc. was founded in 1969 and is headquartered in Irvine, California. Company description from FinViz.com.

Habit reported earnings of 7 cents that beat estimates for 3 cents. Revenue rose 21.8% to $73.9 million. Same store sales rose 1.7%. This was the 52nd consecutive quarter of positive same store sales. They opened 11 company stores and 2 franchises in Q4. The CEO said they were proud of their strong beat considering it is a fiercely competitive environment.

For full year 2017, they guided to revenue of $338 to $342 million, which represents 19.8% growth at the midpoint. The guided for 2% same store sales and the opening of 31 to 33 new company stores alony with 5 to 7 franchised stores. Analysts were expecting $339.2 million.

Earnings June 1st.

Shares spiked from $14 to $16 on the news and then pulled back for two weeks on post earnings depression. They have since recovered that $16 level and are about to break out to a new three month high. Shares dipped on Tuesday but very little and the rebound today erased the dip completely.

Position 3/23/17:

Long HABT shares, currently $15.95, see portfolio graphic for stop loss.
Optional: Long June $17 call @ 70 cents, no initial stop loss.



ILG - ILG Inc - Company Profile

Comments:

No specific news. Minor 3 cent decline from the new 52-week high.

Original Trade Description: April 8th.

ILG, Inc., together with its subsidiaries, provides non-traditional lodging covering a portfolio of leisure businesses from vacation exchange and rental to vacation ownership. The company operates through two segments, Exchange and Rental, and Vacation Ownership. The Exchange and Rental segment offers leisure and travel-related products and services to owners of vacation interests and others primarily through various membership programs, as well as related services to resort developer clients; and allows owners of vacation ownership interests to exchange their occupancy rights for alternative accommodations at another resort and/or occupancy period. This segment also provides vacation property rental services for condominium owners, hotel owners, and homeowners' associations. The Vacation Ownership segment engages in the management of vacation ownership resorts; and the sale, marketing, and financing of vacation ownership interests, as well as in the provision of related services to owners and associations. As of December 31, 2016, it provided management services to approximately 250 vacation ownership properties and/or their associations. The company was formerly known as Interval Leisure Group, Inc. and changed its name to ILG, Inc. Company description from FinViz.com.

ILG reported earnings of 48 cents on revenue of $455 million. Net income rose from $16 million to $61 million. Earnings rose from 27 cents to 48 cents. Free cash flow was $180 million. Analysts had expected revenue of $464 million and shares fell sharply over the next week. The company guided for full year revenue of $1.72 to $1.86 billion.

They repurchased 6.5 million shares and paid $52 million in dividends to return $153 million to shareholders. They currently pay a 2.83% dividend.

The company has been on an acquisition and renovation binge. They sometimes acquire properties in great locations that have issues and then spend a few million on renovations to turn them into star attractions. In May they completed the acquisition of Vistana Signature Experiences, formerly known as Starwood Vacation Ownership for $1.15 billion in cash and stock. With the transaction, they acquired an 80-year global license for the use of the Westin and Sheraton brands.

Despite their vast holdings and strong revenue they are still a relative unknown in the investment community. However, with their Vistana acquisition along with the Hyatt and St Regis vacation brands they are starting to become known.

Shares have risen $3 in the last four weeks and have begun to accelerate. The company is a member of the S&P-600 but with the acquisition of Vistana it has a market cap over $3 billion and is eligible for inclusion into the S&P-500. That could provide a nice boost to the stock price but it would be pure speculation.There are many companies with a higher market cap that have not been included.

Earnings May 30th.

Position 4/10/17:

Long ILG shares @ $21.28, see portfolio graphic for stop loss.

Optional: Long June $22 call @ 60 cents.



KRNT - Kornit Digital - Company Profile

Comments:

No specific news. Rebound from support. The stock closed at a new high last Friday.

Original Trade Description: April 5th.

Kornit Digital develops, manufactures and markets industrial digital printing technologies for the garment, apparel and textile industries. Kornit delivers complete solutions, including digital printing systems, inks, consumables, software and after-sales support. Leading the digital direct-to-garment printing market with its exclusive eco-friendly NeoPigment printing process, Kornit caters directly to the changing needs of the textile printing value chain. Kornit’s technology enables innovative business models based on web-to-print, on-demand and mass customization concepts. With its immense experience in the direct-to-garment market, Kornit also offers a revolutionary approach to the roll-to-roll textile printing industry: Digitally printing with a single ink set onto multiple types of fabric with no additional finishing processes. Founded in 2003, Kornit Digital is a global company, headquartered in Israel with offices in the USA, Europe and Asia Pacific, and serves customers in more than 100 countries worldwide. Company description from Kornit.

The company description pretty much says it all. They have developed a process to print on fabric that is fast and cheap and the company is setting new highs as the demand for their product increases.

The company reported earnings of 16 cents on a 33.4% increase in revenue to $34 million. There was a secondary offering in January that raised $38 million for the company and was very oversubscribed.

The big spike in early January was news the company granted Amazon warrants to buy up to 2.9 million shares at $13. Since KRNT only has 31 million shares outstanding that is nearly a 10% position in the company. The warrants came after Amazon placed an order for a "large number" of textile production systems for Amazon's own use in the Merch by Amazon program.

Earnings May 16th.

Shares made a new high on March 31st and they closed within 10 cents of that high on Thursday. Shares have risen over the available option strikes so this will be a stock only position.

Position 4/7/17:

Long KRNT shares @ $19.00, see portfolio graphic for stop loss.




BEARISH Play Updates

FSLR - First Solar - Company Profile

Comments:

No specific news. Shares spiked to $28.17 and missed our stop loss by 8 cents. I was tempted to raise it to $28.65 but decided to let it ride. That would just be another 40 cent loss if we get a sudden spike.

Original Trade Description: March 30th.

First Solar, Inc. provides solar energy solutions in the United States and internationally. It operates through two segments, Components and Systems. The Components segment designs, manufactures, and sells cadmium telluride solar modules that convert sunlight into electricity. This segment offers its products to solar power systems integrators and operators. The Systems segment provides turn-key photovoltaic solar power systems or solar solutions, such as project development; engineering, procurement, and construction; and operating and maintenance services to utilities, independent power producers, commercial and industrial companies, and other system owners. The company was formerly known as First Solar Holdings, Inc. and changed its name to First Solar, Inc. in 2006. Company description from FinViz.com.

First Solar shares have been under pressure for months. On March 20th they were removed from the S&P-500 and investors are still selling the shares.

They reported a Q4 loss of $6.92 per share compared to estimates for $1.00 in earnings. The earnings included a $729 million restructuring charge compared to only $4 million in Q3. If we back out the restructuring charges the company would have earned $1.24 and shown a sizeable beat. However, revenue declined from $480 million in Q3 to $208 million in Q4.

Earnings May 23rd.

First Solar is building quality projects but they are facing a stiff headwind. Tax incentives around the world are shrinking and it is becoming increasingly harder to make a profit. Whenever they get a big power generation facility completed they are forced to sell it to recover their money rather than sit back and let the long term profits roll in.

On Thursday, March 30th, they sold the 250-megawatt Moapa Southern Pauite Solar Project in Nevade to Capital Dynamics, a Swiss private equity firm. The facility supplies power to the Los Angles Dept of Water and Power. They did not disclose the terms of the sale and the stock tanked again. By not disclosing the terms, investors always fear the worst, that they were forced to sell at a big discount.

The stance taken by the new Trump administration on EPA restrictions on coal and gas fired electric generation plants will make power cheap again and these massive solar developments will find it harder to break even. Solar power generation is getting cheaper to build but it cannot compete with gas fired plants at $3 or coal fired plants that operate even cheaper.

Shares broke to a five-year low last week and today's decline is a lower low. The prior low back in 2012 was $11.50 and we could be headed to that level long term.

Update 4/7/17: Reportedly FSLR wants to exit its joint venture with Sunpower (SPWR). The two companies package completed utility scale solar farms into a "Yield Co" for sale to investors. Yield Cos have lost favor with the investing public after SunEdison filed bankruptcy in 2016. Shares posted a minor gain.

Update 4/10/17: Despite a negative article on Bloomberg shares still posted a strong gain of $1.16.

Position 3/31/17:

Short FSLR shares @ $27.50, see portfolio graphic for stop loss.

Optional: Long June $25 put @ $1.15, see portfolio graphic for stop loss.





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