NEW DIRECTIONAL PUT PLAYS

Pentair Plc - PNR - close: 69.40 change: -0.62

Stop Loss: 70.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.0 million
Entry on August -- at $---.--
Listed on August 23, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Pentair is considered part of the industrial goods sector. They manufacture industrial equipment across the globe. According to the company website, "Pentair is a global water, fluid, thermal management, and equipment protection partner with industry leading products, services, and solutions. Pentair reports the performance of its business within four reporting segments that focus on five primary verticals."

Long-term the stock has had a strong 2012 and 2013 performance. The rally appears to have peaked in 2014 when the market started pulling back in March this year. If you recall many of the momentum names and higher-growth stocks were hammered lower starting in March. PNR doesn't really qualify as a big momentum name or a high-growth name but shares have been unable to recover anyway. Shares have trended lower from the March peak, currently down -16% from its 2014 highs and down -10.6% year to date.

PNR's earnings results have not helped the stock's performance. Back in April they beat estimates but missed the revenue number and then guided lower for the second quarter. Their most recent earnings report was July 31st. Depending whose estimate you use PNR either reported in-line profits or managed to just beat by a penny. Revenues disappointed again. PNR missed the revenue estimate with a -2.7% decline from a year ago to $1.91 billion. Management lowered guidance again but they also announced they were exiting their struggling water transport business.

PNR collapsed on this late July earnings news and lowered guidance with a drop toward $64. Shares have spent three weeks with an oversold bounce that is just now starting to roll over under resistance. PNR appears to have resistance near $70-71 and its 50-dma and 300-dma (see daily chart below). The point & figure chart is bearish and currently forecasting at $61 target.

Tonight we are suggesting a trigger to buy puts at $68.90.

Trigger @ 68.90

- Suggested Positions -

Buy the Nov $70 PUT (PNR141122P70) current ask $3.50

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

Annotated Chart:

Weekly Chart:


SPDR S&P 500 ETF - SPY - close: 199.19 change: -0.31

Stop Loss: 202.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 99 million
Entry on August -- at $---.--
Listed on August 23, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The U.S. stock market has delivered one of the longest bull markets in recent history and it's still going. The large cap index has gone more than 1,050 days without a normal -10% correction. Typically the market sees a correction about twice a year. What are the chances that tagging major milestone might spark some sell orders?

The S&P 500 is currently at all-time highs but the 2,000 mark might be major round-number, psychological resistance. It would not surprise us to see the index tag 2,000 and then retreat.

Tonight we're suggesting a trigger to buy puts on the S&P 500 ETF (SPY) at $199.95. We'll start this trade with a stop loss at $202.25.

(NOTE: We picked the normal September $199 puts that expire on the 20th. The current open interest is over 43,000.)

Trigger @ $199.95

- Suggested Positions -

Buy the Sept. $199 PUT (SPY140920P199) current ask $2.31

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

Annotated Chart: