Option Investor

Daily Newsletter, Thursday, 8/28/2014

Table of Contents

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

Market Wrap

Putin's At It Again

by Thomas Hughes

Click here to email Thomas Hughes
Reports from NATO that 1,000 Russian troops were operating on Ukrainian soil sent the market diving to support.


Reports from NATO that include satellite photos have at least 1,000 Russian regulars engaged in military operations within the Ukraine. This, along with statements from the Ukrainian government to the effect Russia had invaded its territory, is what caused today's dive to support. The seemingly positive summit between Putin and the Ukrainian PM turned out to be the usual smoke screen for Putin's real objectives. The market reaction however, was not typical. Instead of moving sharply lower on the flight to safety we moved down only a little, did not break support and made up most of the losses before the close.

It appears as if the Putin effect is wearing off. As for reports of troops inside Ukrainian borders, didn't we already know that, or at least accept it as likely? An additional drag on Europe and early pre open trading here was weaker than expected German inflation data which raises speculation of whether the ECB will act to install new QE measures as hinted in Jackson Hole. The data, coupled with talks of further increased sanctions against Russia and rumors Russia would turn off the flow of natural gas to Europe this winter sent the DAX down by -1.12%.

Market Statistics

In other news, there were some positive developments that helped the market shrug off the newest Russian incursion, at least for now. The 2nd estimate to 2nd quarter GDP was above expectation and along with another good jobless claims report helped to lift futures off their lows during the early session. The markets were indicated down by about -7 points for the SPX and -75 for the Dow ahead of the data, afterward this moderated to about -4 for the SPX and -50 for the Dow and held going into the open. At the bell there was a broad move lower but one that quickly found support. The markets found intraday bottom and begun to move higher by 9:45, bolstered by better than expected pending home sales data. After that the indices moved higher and then tread water the rest of the day with the SPX hovering just shy of 2000.

Economic Calendar

The Economy

The 2nd estimate for 2nd quarter GDP rose by 0.2% to 4.2%. This is better than the expected 4.0% and has already caused a shift in estimates for the third quarter. The improvement is due to increases in corporate profits and spending and was aided by less drag from the trade component. The average estimated for the 3rd quarter was about 3.2% but now may get revised lower.

Initial claims for unemployment fell by -1,000 from an upward revision of 1,000 to hold flat from last weeks reported 298,000. This below the expected gain of 3,000 and the second week of claims below 300,000 since moving back above that level earlier this month. The four week moving average of claims also fell below 300,000 to 299,750 putting the average below 300,000 for the month. Initial claims are basically flat over the past 2 to 3 months but remain at low levels relative to the recovery. On an unadjusted basis claims fell by -841 or -0.3% versus the expectations for them to hold steady from last week. On a state by state basis GA and AL had the biggest increases in claims with 874 and 575. California and Fl had the biggest decreases with -8771 and -1462.

Continuing claims rose by 25,000 to 2.527 on top of a +2,000 revision to last weeks figures. This is just off of the 7 year low set last week and remains in line with the downtrend in claims. The total number of American receiving unemployment fell, by -50,674 to 2.466 million. This is just off the long term low set earlier this summer. Based on these numbers it appears as if the labor market is still improving. The number of claims on a near and long term basis continue to trend lower which points to increased activity in jobs availability and hiring. Next week we will find out the state of the labor market as it is the end of the month and the next round of ADP/Challenger/NFP/Unemployment is due out. The current expectation is for NFP to remain strong, above 200,000, with unemployment holding steady. This may be a low ball estimate considering that every piece of jobs data I have seen suggests that hiring has been steadily on the upswing.

Pending home sales, and index based on the number of contracts signed, was also a positive surprise. The index rose last month 3.3% to 105.9 from the previous 102.5. This makes the 4th out 5 months the index has risen. All regions but one experienced strong growth in pending sales except the mid west which suffered a mild contraction. The July reading is also the highest level since August of last year ad the third month it has been above 100. 100 is accepted as being average pending sales with readings above that showing strength. An analyst quoted within the report says that “favorable conditions” led to the increase including lower interest rates, greater inventory, lower median prices and other improvements in the economy such as jobs.

The Oil Index

Oil prices held steady today as geopolitical risk trumped rising supply. Current estimates have this years supply of crude exceeding demand but with ongoing issues in eastern Europe, Iraq and Libya that could change. Today's catalyst was of course the newest round of headlines centered on the Ukraine and sent oil prices slightly higher. Benchmark WTI crude gained about $0.65 in today's session matched by a -$0.25 decline in Brent.

The Oil Index traded higher today, perhaps because the thought that low oil prices could turn into increased sales and revenues. Regardless, the index gained just over a tenth of a percent in today's session. The index is moving up to the upper boundary of a recent trading range with bullish indicators. MACD is on the rise and so is stochastic, pointing to a retest of resistance around 1,700. Support is located just below the current level at 1,650. The test of 1,700 will be important as a break above would be an indication the longer term uptrend in the index is still in play.

The Gold Index

Gold prices reacted as expected to the news coming out of the Ukraine. The spot price for gold jumped more than $15 immediately following the news but that moderated to about $7.50 by late afternoon. It seems as if gold traders are becoming equally numb to Putin antics as equities traders. Today's action brought gold up to just shy of $1300 but was not able to cross over. Shortly after reaching the high prices fell quickly back to just above $1290. The positive revision to GDP and better than expected unemployment claims are the reason gold prices were not able to hold the highs. Improving US economics are boosting dollar value and is a dead weight for gold prices.

The Gold Index was carried higher with the price of gold but met with resistance. The index is still trapped within the trading range I have been following the last few weeks. This range, between $100 and $105, is coincident with long term support/resistance that has been important many times over the past 16 months. The index is trapped between a long term down trend tied to the price of gold and growing support, support that may be tied to expectations for improvement in the gold sector. In any event, the index has been in this range for two months now and has been churning inside it, driven by volatile gold prices and the Putin effect. The indicators are neutral at this time and without direction, a break out of the range is needed at this time to get bullish or bearish. Gold prices will likely dictate which direction that is. The longer term trend is still down and I don't see reason besides flight to safety for gold prices to go higher so I remain skeptical of any rallies here.

In The News, Story Stocks and Earnings

JP Morgan confirmed this morning that it had experienced a hacker attack and breach of data. The bank, along with four others, was targeted by an as yet unnamed source. JP Morgan said in it's statements that it was not witnessing any increased levels of fraud and that, “unfortunately”, companies of its size experience attacks nearly every day. The stock was negatively impacted by the news, dropping nearly a full percent and falling from a longer term resistance level dating back to March of 2003. The stock has been doing well since releasing earnings and finalizing its settlements with the DOJ and was indicated higher until this newest development. According to data from Factset the banking sector is expected to be one of the earnings leaders this quarter so today's drop may be presenting an opportune time to get in. JPM's next scheduled release is October 14th, about 6 weeks away. Current resistance is at $60 with strong support indicated a few dollar below along the $57.50 level.

Apple announced today, or at least confirmed, that it was holding a special release or announcement on September 9th. Speculation abounds that the company will be releasing it version of the iWatch or some other wearable device. They put up a message on their website that says that the media is invited to a special event 9/9/2014 “wish we could say more”. The news was enough for shares of the stock to buck today's trend and move higher, gaining more than a quarter percent. The stock has been trending higher ever since the split and is still bullish. At $102 per share the stock is highly affordable compared to pre split prices and could be attracting a whole new round of buyers. The product launch will be important for the company as a hot new product could put Apple firmly back at the top of the tech/gadget sector. Sales of a new device will have a positive impact on revenue and earnings. Not to mention that at these levels the dividend is still paying about 1.9%.

Abercrombie & Fitch reported earnings today in the wake of disappointing releases from Guess and Williams Sonoma yesterday. Abercrombie reported earnings of $0.17 per share, basically in line with consensus estimates, on weaker than expected sales. The company earned $12.9 million in the quarter and reaffirmed its current guidance to previously stated range. The expected range is below the current consensus estimates, a detail that helped to send the stock down by 10% in the pre market session. The stock fell only 5% at the open and created a long legged doji on high volume, 4 times the 30 day average. It is not clear where this one is going but it is clear there is interest here and deserves further watching.


The VIX spiked today but nothing compared to the beginning of the month when Putin first sent his aid convoy towards the Ukraine. Today the fear index jumped only 3% to test resistance at the 12.50 level, not blow right through it. After the open the index moved higher,crossing above the resistance line only to be halted at the 30 day moving average. The index fell back from this resistance and ended the day below 12.50. It is possible that Putin will do something to increase fear in the market but right now it looks as if fear tested tested the market and failed. Thinking conversely, if a spike in the VIX matches a drop in the SPX a test/confirmation of resistance on the VIX would equate to a test of support in the SPX and that is what looks like happened today.

The Indices

The SPX opened a few points lower in today's action and then proceeded to move even lower, until hitting support. The index found support within 15 minutes of opening and traded above that level the rest of the day. Suppot kicked in right around 1991 and the previous all time high, an all time high the index broke just this week. Volume in the market is still low but the index appears to be moving higher without it. The indicators are bullish in the short term and consistent with higher prices in the long term although there is some weakness in the near term. There may be more testing of support tomorrow and into next week but it looks to me as if the index has reached a consolidation level during a longer upward movement above solid support. Near term resistance is of course Putin but also the fact we are waiting for important monthly macroeconomic data due out next week which is reason enough to wait and see what happens.

The Dow Jones Industrial Average fell -0.25% in today's session. The blue chip index opened just below the current all time high and traded down to near term support along the 17,000 level. The indicators are bullish though showing some near term weakness. However, like the SPX, the indicators are also consistent with higher prices in the short to long term. Current resistance is at 17,062 with near term support at 17,000 and short to long term support below that around the 30 day EMA moving average in the 16,800 region. Resistance may keep the index capped for now but the long term trend is still up and the index is indicated higher.

The Dow Jones Transportation Average also declined today, by -0.27%. Today's action brought the index down from that resistance, if marginally, before finding support. The transports have been trading up against resistance near the current all time high for a week and a half in a series of spinning tops. At best, today's candle is yet another spinning top in the series and not overly indicative of direction. The index appears to be consolidating beneath resistance following the recent trend line bounce and is above strong support. The short term moving average is just below the current level, providing near term support, as is the previous all time high, long term trend line and long term moving average. The Russian incursion and waiting for data will likely keep this index trading in the near term consolidation range but it looks like it is setting up for an additional bounce and break to new highs.

The NASDAQ Composite also fell about a quarter percent, logging in a drop of -0.26%. The tech heavy index, which has been a leader in the recent bounce, has made 8 new highs out of the last 9 sessions and was due for a little pullback. The indicators are bullish but weakening in the near term so there could be some more downside and/or consolidation. In the longer term the trend is up so I will be awaiting the next catalyst.

There is growing risk that the Russian incursion is going to impact the global economy. The build up of sanctions has been growing and is going to get bigger after today's developments. Just how it will affect the US economy is uncertain but one thing is certain, it'not affecting it now.

Volume was very light today and will likely remain so tomorrow and into next week. Monday is the official end of summer and could signal the return of the big money to the market. Also on the horizon is economic data. Tomorrow there are several key reports including personal income/spending, Chicago PMI and Michigan Sentiment but I think it is next weeks data that is more important. On top of the jobs bundle there is also other important macro data that will influence 3rd quarter GDP and prospects for the future.

The markets look like they are in a holding pattern right now, waiting to see what Russia will do, the volume to return and the data to be released.

Until then, remember the trend!

Thomas Hughes

New Option Plays

Crash and Burn

by James Brown

Click here to email James Brown


Chart Industries - GTLS - close: 66.34 change: -0.85

Stop Loss: 68.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 617 thousand
Entry on August -- at $---.--
Listed on August 28, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
If you have seen the 1986 movie Top Gun then you know that Tom Cruise's character "Maverick" and his RIO "Goose" fly through the jet wash of another aircraft and their plane enters a flat spin that Maverick is unable to pull out of. Spoiler - their plane crashes.

Both the stock price and the earnings results for GTLS appear to be in a flat spin that they cannot pull out of. According to the company website, "Chart Industries, Inc. is a leading independent global manufacturer of standard and custom engineered products and systems for a wide variety of cryogenic and gas processing applications. Our equipment is used in the production, storage, distribution and end-use of atmospheric and industrial gases as well as natural gas itself."

A growing portion of their business is natural gas. "Major equipment designed and manufactured by Chart is used in the liquefaction, distribution and storage of LNG, plus we also supply LNG fueling stations and vehicle fueling systems." Considering the huge surge of natural gas demand you might think GTLS business would be booming. Yet the company seems to be struggling.

Shares of GTLS delivered an amazing rally in 2013. That is until late October. GTLS reported earnings in late October 2013 that missed profits estimates, missed the revenue estimate and management lowered guidance. When GTLS reported earnings in February 2014 they missed estimates, missed the revenue number and lowered guidance. In April 2014 they missed estimates, missed the revenue number and lowered guidance. Are you seeing a trend here? Their latest earnings report was July 31st, 2014 and guess what? GTLS missed the EPS estimate, missed the revenue estimate, and lowered guidance.

Technically the oversold bounce from its August lows has completely reversed. Today is worth noting since GTLS has broken down to a new closing low for 2014. This trend will likely continue.

Today's intraday low was $65.70. I am suggesting a trigger to buy puts at $65.60.

Trigger @ $65.60

- Suggested Positions -

Buy the OCT $65 PUT (GTLS141018P65) current ask $2.30

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

Annotated Chart:

60-minute Chart:

In Play Updates and Reviews

Russia Trumps Higher GDP Growth

by James Brown

Click here to email James Brown

Editor's Note:

Growing concerns over the Ukraine-Russia conflict trumped a better than expected Q2 GPD estimate of +4.2%.

MSI hit our entry trigger.

Current Portfolio:

CALL Play Updates

BioMarin Pharmaceutical Inc. - BMRN - close: 69.62 change: -1.18

Stop Loss: 68.90
Target(s): To Be Determined
Current Option Gain/Loss: +17.6%
Average Daily Volume = 1.26 million
Entry on August 14 at $66.55
Listed on August 11, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: BMRN is down two days in a row. More importantly shares have closed under what should have been short-term support at $70.00 and its 10-dma. If there is any follow through lower we could see BMRN hit our stop loss at $68.90 tomorrow.

Earlier Comments: August 11, 2014:
BMRN is in the healthcare sector, specifically the biotech industry. According to the company's press release they "develop and commercialize innovative biopharmaceuticals for serious diseases and medical conditions. The company's product portfolio comprises five approved products and multiple clinical and pre-clinical product candidates."

The company's strategy is "providing first-in-class or best-in-class treatments for patients with serious unmet medical needs, optimizing powerful biology with demonstrated potential and development clarity, accelerating approval process, strategic pipeline development."

BMRN's current product portfolio looks like this: VIMIZIM™ for Morquio A syndrome (MPS IVA), Naglazyme® for MPS VI, Aldurazyme® for MPS I, Firdapse™ (currently approved in the EU only) for LEMS, KUVAN® Tablets for PKU.

BMRN lists their current clinical pipeline as follows: PEG PAL for PKU, BMN 673 for genetically defined cancers, BMN 701 for Pompe disease, BMN 111 for achondroplasia, BMN 190 for late-infantile neuronal ceroid lipofuscinosis (CLN2), a form of Batten Disease, BMN 270 for hemophilia A and BMN 250 for Sanfilippo Syndrome or MPS IIIB.

The company is developing a trend of beating Wall Street's earnings estimates. Back in February they reported results that bested analysts' estimates by a wide margin. They did it again in May. Wall Street was looking for a loss of 44 cents on revenues of $145.1 million. BMRN reported a loss of just 1 cent with revenues rising +18.5% to $151.6 million. Their most recent earnings report was July 30th. Analysts were expecting a loss of 41 cents on revenues of $159.2 million. BMRN announced a loss of 23 cents with revenues soaring +40.1% to $191.7 million. Furthermore BMRN management raised their 2014 guidance following the July 30th report.

The stock peaked back in February this year. When the market corrected in March most of the high-growth and momentum names were crushed. BMRN was in that group that saw their stock hammered lower. Shares fell from almost $85 to $55.00. Fortunately the $55.00 level has been solid support. Shares have been building a significant base in the $55-65 zone for over three months.

Currently the rebound from its July lows is pushing the stock up against major resistance in the $65.00-66.00 area. This is where BMRN has resistance with its simple 200-dma and its trend line of lower highs. If the stock breaks out it could spark a significant move higher.

Tonight we're suggesting a trigger to buy calls at $66.55. We're not listing an exit target tonight but I will share that the point & figure chart is bullish with a $77.00 target.

- Suggested Positions -

Long Oct $70 call (BMRN141018C70) entry $2.55*

08/26/14 new stop @ 68.90 after BMRN lowers revenue guidance after hours
08/23/14 new stop @ 65.75
08/20/14 new stop @ 64.75
08/14/14 triggered @ 66.55
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Concur Technologies - CNQR - close: 99.15 change: -0.76

Stop Loss: 98.40
Target(s): To Be Determined
Current Option Gain/Loss: -24.7%
Average Daily Volume = 576 thousand
Entry on August 19 at $100.50
Listed on August 16, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: CNQR is still inching lower. The intraday low was $98.57. If there is any follow through tomorrow we'll likely see CNQR hit our stop loss at $98.40.

Earlier Comments: August 16, 2014:
CNQR is in the technology sector. The company provides travel and expensive management solutions. The company was founded back in 1993. Their focus is helping companies control travel costs. The business has been growing over 23,000 customers and over 25 million users.

The company press release describes Concur as "the leading provider of spend management solutions and services in the world, helping companies of all sizes transform the way they manage spend so they can focus on what matters most. Through Concur's open platform, the entire travel and expense ecosystem of customers, suppliers, and developers can access and extend Concur's T&E cloud. Concur's systems adapt to individual employee preferences and scale to meet the needs of companies from small to large."

There is no denying that it has been a rocky year for CNQR investors. The stock struggled with resistance near $130.00 for over a month earlier this year. When the momentum names corrected lower in March shares of CNQR were crushed. The stock produced a two-month retreat down to $75.00.

Meanwhile earnings continued to improve. When CNQR reported earnings on April 29th they beat estimates by six cents and guided higher for the second quarter. Their most recent earnings report was August 4th. Wall Street expected a profit of $0.16 on revenues of $175.1 million. CNQR delivered a profit of $0.25 with revenues rising +28.6% to $178.4 million. Management also raised their 2014 guidance.

Stocks analysts are starting to notice and a few of them have upgraded their price targets on CNQR into the $110-115 region. If shares of CNQR can breakout past resistance near $100 and its 200-dma then it might sprint towards $110. That's because the stock has a significant chunk of short interest.

The most recent data listed short interest at 12.2% of the relatively small 55.5 million share float. Since the $100 mark is significant resistance a breakout could definitely spark some short covering. The point & figure chart is already bullish and projecting at $108 target.

Tonight we are suggesting a trigger to buy calls at $100.50.

- Suggested Positions -

Long NOV $105 call (CNQR141122C105) entry $5.05*

08/27/14 CNQR is not moving. Investors may want to exit now. We are moving the stop loss up to $98.40
08/19/14 triggered @ 100.50
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Expedia Inc. - EXPE - close: 86.40 change: -0.10

Stop Loss: 83.95
Target(s): To Be Determined
Current Option Gain/Loss: -22.7%
Average Daily Volume = 2.3 million
Entry on August 18 at $86.25
Listed on August 16, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: EXPE held up reasonably well on Thursday with a fractional loss. Shares held short-term support near $86.00.

I am not suggesting new positions at this time.

Earlier Comments: August 16, 2014:
EXPE is in the services sector. The company is in the super competitive online travel industry with rivals like Priceline.com (PCLN) and Orbitz Worldwide (OWW).

EXPE is developing a serious trend of beating analysts' estimates with strong profit and revenue growth. EXPE last reported earnings on July 31st. Analysts were expecting a profit of $0.75 a share on revenues of $1.44 billion. EXPE blew those numbers away with a profit of $1.03 a share. Revenues soared +24.0% to $1.49 billion. That's up from $1.2 billion the prior quarter. EXPE has now delivered double-digit year over year revenue growth for six quarters in a row.

EXPE's bookings continue to soar. Gross bookings were up +29%. Domestic gross bookings were up +35% and international gross bookings rose +21%. Both hotel revenues and air travel revenues were up more than +20% each.

Last time we traded EXPE we noted that Billionaire hedge fund manager David Tepper's Appaloosa Management is also bullish on EXPE. The latest 13F filing showed that Appaloosa had initiated a new stake in EXPE in the first quarter of 2014. In the second quarter Appaloosa added another 201,000 shares of EXPE.

The stock popped on its earnings results but have since spent the last two weeks digesting gains in a sideways consolidation. Now it looks like EXPE is poised to breakout and could make a run towards the $95-$100 area. The point & figure chart is bullish and forecasting at $105 target.

Tonight we are suggesting a trigger to buy calls at $86.25.

- Suggested Positions -

Long NOV $90 call (EXPE141122C90) entry $4.40

08/23/14 new stop @ 83.95
08/18/14 triggered @ 86.25
Option Format: symbol-year-month-day-call-strike

Gilead Sciences, Inc. - GILD - close: 107.51 change: +0.10

Stop Loss: 102.85
Target(s): To Be Determined
Current Option Gain/Loss: +235.1%
Average Daily Volume = 14.1 million
Entry on July 29 at $92.25
Listed on July 28, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: GILD spent the day churning sideways and closed virtually unchanged on the session.

There is no change from my prior comments.

More conservative traders may want to take profits now. I am not suggesting new positions at this time.

Earlier Comments: July 28, 2014:
GILD seems to be everyone's favorite biotech stock. I only hear bullish opinions about the future of the company, and for good reason. They have some pretty amazing treatments with products for HIV/AIDS, liver diseases, oncology, cardiovascular, respiratory, and more. GILD has essentially revolutionized how we treat major diseases like HIV and Hepatitis C.

According to the company website, "Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need. We strive to transform and simplify care for people with life-threatening illnesses around the world. Gilead's portfolio of products and pipeline of investigational drugs includes treatments for HIV/AIDS, liver diseases, cancer and inflammation, and serious respiratory and cardiovascular conditions."

This year everyone has been raving over GILD's hepatitis C treatment called Sovaldi. Hepatitis C is a form of viral hepatitis that causes chronic inflammation of the liver. About 185 million people currently suffer with hepatitis C. Previously the most common treatment for hepatitis C had serious side effects and was less than 50% successful. GILD changed that with their Sovaldi drug that not only treats the symptoms but actually cures the patient. The company has drawn some negative publicity over the cost since GILD charges $84,000 for a 12-week course of Sovaldi in the United States. The fact that 80% to 90% of patients who take Sovaldi are cured is a major milestone.

The Financial Times noted that before Sovaldi the impact of hepatitis C in the U.S. took a heavy toll on the healthcare system. The disease can lead to liver failure and cancer, both of which cost significantly more than Sovaldi's $84,000 price target. Hepatitis C is the leading cause for liver transplants in the U.S., which can cost a minimum of $145,000. One consulting firm estimated that the annual cost of hepatitis C to the U.S. healthcare system was going to surge from $30 billion to $85 billion in the next twenty years. Sovaldi has the potential to change. that.

Stocks move on earnings and GILD has plenty of them. They company last reported on July 23rd. Wall Street was expecting a profit of $1.80 a share on revenues of $5.86 billion for the second quarter. GILD delivered a profit of $2.36 a share with revenues soaring +136% to $6.53 billion. Last quarter Sovaldi accounted for $3.5 billion in sales. Management issued bullish guidance on revenues and margins.

GILD has also had good news with both the FDA and the European Committee for Medicinal Products for Human Use approving GILD's Zydelig treatment for chronic lymphocytic leukemia and follicular lymphoma. The European committee's decision will now be sent to the full European Commission and if approved will open up Zydelig to all 28 countries in the EU.

The outlook is pretty bullish for GILD. Traders just bought the dip and shares closed at all-time highs. Today's intraday high was $91.73. We are suggesting a trigger to buy calls at $92.25. We are not setting an exit target tonight but I will point out the point & figure chart is bullish with a $106.00 target. I am concerned that the $100.00 level could be temporary resistance for GILD. We'll have to wait and see.

- Suggested Positions -

Long Oct $95 call (GILD141018C95) entry $3.70*

08/25/14 new stop @ 102.85
08/23/14 new stop at $99.95
08/16/14 new stop @ 93.45
Investors will want to seriously consider taking profits now with GILD testing potential resistance at the $100.00 mark.
08/14/14 new stop @ 89.95
Investors may want to consider taking money off the table as GILD nears the $99-100 zone.
07/29/14 triggered @ 92.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

LyondellBasell Industries - LYB - close: 113.48 change: -0.12

Stop Loss: 109.75
Target(s): To Be Determined
Current Option Gain/Loss: +40.0%
Average Daily Volume = 2.5 million
Entry on August 15 at $110.50
Listed on August 04, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: LYB bounced off its early morning lows near $112.60 and rallied back toward unchanged on the session.

Tonight we'll try and reduce our risk by moving the stop loss up to $109.75.

I am not suggesting new positions at this time.

Earlier Comments: August 4, 2014:
One way to play the shale-gas boom in the U.S. is plastics. The bloom of natural gas production has been a huge blessing for LYB. According to the company's website, "We participate in the entire petrochemical value chain, from refining to specialized petrochemical product end uses. We are the largest producer of polypropylene and polypropylene compounds; a leading producer of propylene oxide, polyethylene, ethylene and propylene; a global leader in polyolefins technology; and a producer of refined products, including biofuels. Additionally, LyondellBasell is a leading provider of technology licenses and a supplier of catalysts for polyolefin production."

The recent spike in LYB's stock price was a reaction to better than expected earnings results. Wall Street was looking for LYB to deliver a profit of $1.93 a share on revenues of $11.5 billion. LYB surpassed expectations with a profit of $2.22 a share with revenues rising +9.1% to $12.12 billion.

The stock has been an earnings machine with rising earnings the last four years in a row. Analysts are now estimating LYB will see earnings rise 11% in 2014 and 16% in 2015. Jefferies recently raised their price target on LYB from $120 to $125 as they upgraded their EPS estimates on the company.

After a strong rally from $100 to $110 in mid July the stock was short-term overbought and due for a pullback. Traders jumped in to buy the dip near LYB's simple 10-dma last week. Now LYB is rebounding higher.

More aggressive traders may want to buy the bounce today. We are suggesting a trigger to buy calls at $110.50 since the July high is $110.38.

FYI: For more background on the LYB story Forbes.com has a great article that you might find interest. You can read it here.

- Suggested Positions -

Long DEC $115 call (LYB141220C115) entry $2.50*

08/28/14 new stop @ 109.75
08/23/14 new stop at $108.75
08/15/14 triggered @ 110.50
*option entry price is an estimate since the option did not trade at the time our play was opened.
08/14/14 adjust the stop loss to $107.40 (trade not open yet)
08/14/14 LYB almost hit our trigger but failed at $110.49
Option Format: symbol-year-month-day-call-strike

O'Reilly Automotive - ORLY - close: 156.46 change: +1.16

Stop Loss: 151.49
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 626 thousand
Entry on August -- at $---.--
Listed on August 25, 2014
Time Frame: 6 to 12 weeks
New Positions: Yes, see below

08/28/14: ORLY spiked lower at the open but found support above $154. The rebound pushed shares back toward the highs of the week.

Any follow through higher could hit our trigger. Our suggested entry point is $157.50.

Earlier Comments: August 25, 2014:
The U.S. economy is slowly improving. We are seeing slow but consistent job growth. Yet consumers remain cautious. While there has been a healthy trend of new car sales this year most consumers are keeping their old cars. Of the 247 million cars in the U.S. the average age is at a record high. Passenger cars have hit an average age of 11.4 years while light trucks are at 11.3. If consumers are keeping their cars this long that is going to mean more replacement parts and repairs. That has been good news for the auto part companies.

ORLY is one such company. According to their company website, "O'Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, serving both professional service providers and do-it-yourself customers. Founded in 1957 by the O'Reilly family, the Company operated 4,257 stores in 42 states as of June 30, 2014."

One analysts on Wall Street called ORLY a "well-oiled machine." It's easy to see why. The company has delivered four years of consistent double-digit earnings growth. Steady same-store sales are impressive considering the tough retail environment we've seen over the last few years. The company's margins are expected to grow over the next 12-18 months. ORLY is on track to open 200 new stores in 2014. They have also boosted their stock buyback program. On August 13th ORLY announced an additional $500 million, which bumps their total stock repurchase program to $4.5 billion.

Technically shares have been consistently bouncing off their long-term trend of higher lows (on the weekly chart below). ORLY did spent the last few months consolidating sideways but it has started to breakout past resistance. This is our chance to hop on board. A rally past $158.00 could create a new point & figure chart buy signal.

Tonight we are suggesting a trigger to buy calls at $157.50. We're listing the October $160 call. You may want to consider a longer-dated option (like the Novembers or 2015 Januarys).

Trigger @ $157.50

- Suggested Positions -

Buy the Oct $160 call (ORLY141018C160)

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

Schlumberger Limited - SLB - close: 110.16 change: -0.88

Stop Loss: 107.45
Target(s): To Be Determined
Current Option Gain/Loss: -8.5%
Average Daily Volume = 5.5 million
Entry on August 25 at $110.50
Listed on August 20, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: SLB retreated back toward the $110 level today and spent almost the entire session testing this support level. Traders could use a bounce from current levels as a new entry point although I would hesitate to launch new positions if the major indices are negative.

Earlier Comments: August 20, 2014:
Consistent earnings growth is what investors like to see. SLB has done it eleven quarters in a row. The company is considered best in breed for the oil services industry. This past weekend Barron's ran a story on SLB and suggested the stock has +50% upside (or more) from current levels. That's because SLB has made several acquisitions in North America and is now a major player in the U.S. hydraulic fracking boom.

According to the company's website, "Schlumberger is the world's leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry worldwide. Employing approximately 126,000 people representing over 140 nationalities and working in more than 85 countries, Schlumberger provides the industry's widest range of products and services from exploration through production."

As mentioned above SLB has beaten Wall Street's bottom line earnings estimates eleven quarters in a row. Their most recent earnings report was July 17th. Analysts were expecting a profit of $1.35 a share on revenues of $11.95 billion. The company reported a profit of $1.37 a share, up +19% from a year ago, with revenues up +7.8% to $12.05 billion for the quarter.

Management noted margin improvement. SLB said every geographic area saw growth. On the conference call SLB's CEO said, "Our second quarter results were strong and fully in line with our expectations as international activity rebounded in Russia, Norway and Australia and North American activity grew in both offshore in the U.S. Gulf of Mexico and on land in spite of the Canadian spring breakup."

Looking ahead the company issued a mixed outlook. Management said, "Turning our focus back to the remaining part of 2014, we continue to see a relatively constant mix of headwinds and tailwinds in the global economy and in our industry, which leads us to maintain our already established outlook for the year. The slow and steady recovery in the global economy is continuing and the global oil market remains relatively tight with a solid demand outlook, continued supply uncertainty related to geopolitics and with Brent prices holding steady above $100 per barrel, which should encourage oil directed investments in both the North American and international markets."

Their relatively cautious outlook and falling oil prices in the last several weeks have sparked some profit taking in SLB's stock price. The pullback could be a significant entry point. Long-term SLB is forecasting almost +20% earnings (compound annual growth rate) through 2017.

Wall Street has been very bullish the last couple of months. Several firms have upgraded their price targets on SLB with a few recent upgrades coming in at $132, $138, $140 and $150 a share for SLB.

SLB did make headlines earlier this month regarding Russia. The U.S. and the EU have leveled sanctions against Russia. This is impacting international companies like SLB who do business in Russia and with Russian companies. Fortunately, SLB estimates that any impact from the sanctions will be limited. Management expects a decline of 3 cents per share due to the sanctions. Wall Street hates uncertainty so having SLB actually come out and offer some guidance on the sanctions impact is bullish.

Another potential challenge could be Iraq. SLB does a lot of business in Iraq but most of the oil production is in southern Iraq. Right now the hot zones with fighting between ISIS, the Iraq military and the Kurds, are all in the northern half of Iraq. As long as the violence stays in the northern half of Iraq then the Islamic State terrorists are unlikely to impact SLB's operations in the country.

Shares of SLB hit all-time highs in late June. Since then the stock experienced a six-week correction from $118 to $105. That's a -11% pullback. The stock has begun to bounce and looks poised to break through resistance near $110. Tonight we are suggesting a trigger at $110.55. More conservative investors may want to wait for SLB to rally past its 50-dma before initiating positions (50-dma is currently at $111.30).

- Suggested Positions -

Long NOV $115 call (SLB141122C115) entry $2.00

08/25/14 triggered @ 110.50
Option Format: symbol-year-month-day-call-strike

U.S. Silica Holdings, Inc. - SLCA - close: 70.72 change: +2.72

Stop Loss: 65.75
Target(s): To Be Determined
Current Option Gain/Loss: +109.5%
Average Daily Volume = 1.42 million
Entry on August 19 at $62.05
Listed on August 13, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: Bullish analyst comments on SLCA helped boost the stock this morning. Shares surged +4% and rallied past the $70.00 mark. Tonight we are raising the stop loss to $65.75.

Earlier Comments: August 13, 2014:
We are bringing SLCA back after some post-earnings volatility.

There is a new gold rush going on for sand! America's shale oil and gas boom has created another boom for sand producers. Energy companies use hydraulic fracking to mine oil and gas out of tight shale formations. This fracking technique blasts millions of gallons of water at high pressure into shale rock where the oil and gas is trapped. These wells can cost between $4 million and $12 million each. In order to maximize their returns drillers use proppants to help "prop" open these minute cracks in the shale rock to help the oil and gas escape to the surface.

The cheapest and one of the most effective proppants has been fine sand. SLCA has been providing sand for industrial use for over 100 years. The company currently has 297 million tons in reserve. Oil and gas industry demand for proppants is expected to rise +30% between 2013 and 2016. That might be underestimated. The energy industry consumed 56.3 billion pounds of sand for fracking in 2013. That's up 25% from 2011.

According to SLCA they saw a +45% increase in demand for their sand. SLCA's CEO reported that some hydraulic fracking wells have doubled their use of sand from 2,500 tons per well to 5,000 tons. There are some wells using up to 8,000 tons.

Demand has been so strong that SLCA is actually sold out of some grades of sand and they're raising prices (about +20%) on non-contracted silica. SLCA believes demand for their products will rise another 25% this year alone.

Wall Street has taken notice of the dynamics of the sand industry and shares of SLCA have soared from their February 2014 lows. It may not be a coincidence that the stock was added to the S&P 600 smallcap index in February this year.

SLCA's most recent earnings report was July 29th. Wall Street expected a profit of $0.47 a shares on revenues of $189.7 million. SLCA beat estimates with a profit of $0.55 and revenues soaring +58.5% from a year ago to $205.8 million.

The company said sales were up sharply both from a year ago and from the first quarter. Management raised its 2014 earnings guidance.

Currently shares of SLCA are hovering just below resistance in the $61.75 area. Tonight we're suggesting a trigger to buy calls at $62.05. We are not setting an exit target tonight but Point & Figure chart for SLCA is bullish with a $69 target.

- Suggested Positions -

Long DEC $65 call (SLCA141220C65) entry $4.20*

08/28/14 new stop @ 65.75
08/27/14 new stop @ 63.45, investors may want to take profits now
08/26/14 new stop at $61.75
08/23/14 new stop at $59.45
08/19/14 triggered @ 62.05
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

United Rentals, Inc. - URI - close: 117.10 change: -0.54

Stop Loss: 113.25
Target(s): To Be Determined
Current Option Gain/Loss: + 0.0%
Average Daily Volume = 1.0 million
Entry on August 19 at $115.25
Listed on August 18, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: I have cautioned readers to expect a pullback in URI. Shares are testing short-term technical support at its 10-dma. If this level fails then $114.00 and $115.00 are the next potential support levels. We will raise the stop loss to $113.25.

Earlier Comments: August 18, 2014:
URI is a company that is gaining market share. Traditionally equipment rental has been a very fragmented industry with a lot of mom and pop stores. URI has decided that being the biggest offers a better selection to their clients. Today URI is the biggest equipment rental company in the world.

Twenty years ago commercial construction clients only accounted for about 15% of the equipment rental market. Today that number is closer to 50%. The last few years have seen a strong trend of construction companies choosing to rent equipment instead of buy new equipment due to an uncertain economic outlook.

According to URI's website they were founded in 1997 and have grown into a network of 832 rental locations in 49 states and 10 Canadian provinces. Their rental fleet includes 3,100 classes of equipment.

Earnings are improving. URI's most recent earnings report was July 16th. Wall Street was looking for a profit of $1.50 a share on revenues of $1.36 billion. URI delivered $1.65 a share with revenues hitting $1.399 billion. URI's earnings results were up +47% from a year ago. Margins hit a second quarter record at 47.4%. URI management then raised their 2014 guidance.

In URI's earnings press release their CEO offered a bullish outlook:

Michael Kneeland, chief executive officer of United Rentals, said, "Our strong performance in the quarter reflects significantly more equipment on rent at better margins than a year ago, resulting in a new high water mark for second quarter EBITDA margin. The rebound in non-residential construction is continuing to drive up demand, particularly in the energy and commercial sectors. Given the vigorous activity we're seeing, and the benefit of secular penetration, we've raised our full year outlook - and we concur with the forecasts that show multiple years of healthy industry growth beyond 2014."

URI said their rental revenue was up +16.8% for the quarter. They're also see super growth in their specialty segment. Their trench safety rentals were up +21%. Their power and HVAC rentals were up +54%. URI purchased National Pump on April 1st this year. Now they've renamed it United Rentals Pump Solutions and they're using it as an opportunity to cross sell pumps to their broader customer base.

URI is also on track with their stock buyback program. In October 2013 they announced at $500 million repurchase program that's expected to be completed by April 2015. Thus far URI has bought back $228 million in common stock this year ($185 million of that was in the second quarter).

Technically the post-earnings depression for URI is over. Traders bought the dip near its long-term up trend of higher lows. Now URI is testing resistance at its all-time highs and resistance at the $115.00 level.

We are suggesting a trigger to buy calls at $115.25.

- Suggested Positions -

Long DEC $120 call (URI141220C120) entry $5.60*

08/28/14 new stop @ 113.25
08/19/14 triggered @ 115.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Las Vegas Sands - LVS - close: 67.65 change: +0.11

Stop Loss: 70.55
Target(s): To Be Determined
Current Option Gain/Loss: - 9.3%
Average Daily Volume = 4.6 million
Entry on August 27 at $67.40
Listed on August 26, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: The casino stocks got some good news with the U.S. government reporting rising gross gambling revenues for Vegas. Unfortunately investors are focused on Macau, not Vegas. Shares of LVS bounced toward $68 before trimming its gains. The trend remains bearish. I would still consider new positions at current levels.

Earlier Comments: August 26, 2014:
The high-speed growth in the world's biggest gambling hub is slowing down. Investors are taking notice. It used to be that when the world wanted to gamble the came to Las Vegas. Today the biggest gambling center in the world is Macau, a city in southern China.

LVS describes itself as "the world's leading developer and operator of Integrated Resorts. Our collection of Integrated Resorts in Asia and the United States feature state-of-the-art convention and exhibition facilities, premium accommodations, world-class gaming and entertainment, destination retail and dining including celebrity chef restaurants, and many other amenities." LVS has properties in Vegas, Pennsylvania, Singapore, and Macau.

Macau has been the major focus for casino companies the last few years. The coastal strip of Macau is the only place in China where gambling is legal. Forbes described Macau as "Vegas on steroids." Macau overtook Vegas as the world's biggest gambling center back in 2006 with Chinese tourists accounting for nearly 66% of its traffic.

After years of booming growth in Macau the area is facing a few hurdles. One of them is rising wage costs. Current laws force casino operators to hire locals. This has driven unemployment in Macau down to 1.7%. Employees are unhappy. They make less than half that their counterparts in Vegas make. There has been a number of demonstrations as casino workers demand higher wages. There is currently the threat of a labor strike on August 28th this year.

Macau is also suffering from an economic slowdown in China. The country has been slowing grinding down for years. China is still expected to grow more than +7% this year but that's a multi-year low. Another issue has been China's crackdown on corruption this year. This new pressure from Beijing has thrown a wet blanket on VIP traffic to Macau. Yet another challenge for Macau is growing competition from foreign destinations. Other countries are starting to add gambling resorts, which could pressure traffic to Macau.

Analysts have been adjusting their earnings and revenues estimates lower for the casino stocks. That's not surprising given the recent reports of slowing revenue numbers. Macau's gambling regulators said gross gaming revenues dropped -3.7% in June and -3.6% in July. Morgan Stanley just slashed their 2014 Macau estimates from +12% to +6%.

Technically shares of LVS are bearish. The stock has broken significant support near $70.00. The oversold bounce is starting to roll over under resistance. The point & figure chart is bearish and forecasting at $56.00 target.

Tonight we are suggesting a trigger to buy puts at $67.40.

- Suggested Positions -

Long OCT $65 PUT (LVS141018P65) entry $1.50*

08/27/14 triggered @ 67.40
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Motorola Solutions, Inc. - MSI - close: 59.37 change: -0.31

Stop Loss: 62.05
Target(s): To Be Determined
Current Option Gain/Loss: - 4.2%
Average Daily Volume = 2.0 million
Entry on August 28 at $59.25
Listed on August 27, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: Our new trade on MSI has been triggered. Shares continued to sink and hit our suggested entry point at $59.25. I would still consider new positions now at current levels.

Earlier Comments: August 27, 2014:
According to a company press release, "Motorola Solutions is a leading provider of mission-critical communication solutions and services for enterprise and government customers. Through leading-edge innovation and communications technology, it is a global leader that enables its customers to be their best in the moments that matter."

What does that mean in English? The company makes all sorts of devices (scanners, kiosks, mobile computers, pagers, RFID products, tablets, and two-way radios), systems and networks, software and applications, and accessories. MSI has sales in over 100 countries with more than 20,000 employees. The company has over $8 billion in annual revenues.

The challenge now is that those revenues seem to be falling. MSI issued an earnings warning back in April. Their results in May were in-line with these lowered estimates. The most recent earnings report came out on August 5th. Analysts were expecting adjusted earnings per share of $0.62. MSI only delivered $0.47. Revenues were down -7% to $1.39 billion, well below Wall Street's estimate of $1.96 billion.

MSI management then lowered their current quarter guidance into the 35-41 cent range, significantly below Wall Street's $1.01 estimate. Revenue guidance was also forecasted to fall -7% to -9%.

The company used to be a dominant player in wireless communications from two-way radios to mobile phones. Now they're struggling with rising competition. The stock's recent sell-off is starting to break some major support.

Today's display of relative weakness broke down below round-number, psychological support at the $60.00 mark. If this trend continues it could signal a pivotal direction change for MSI. Today's low was $59.46. We're suggesting a trigger to buy puts at $59.25.

- Suggested Positions -

Long MSI 2015 Jan $60 PUT (MSI150117P60) entry $3.29

08/28/14 triggered @ 59.25
Option Format: symbol-year-month-day-call-strike

Pentair Plc - PNR - close: 68.51 change: -0.13

Stop Loss: 70.75
Target(s): To Be Determined
Current Option Gain/Loss: + 0.0%
Average Daily Volume = 2.0 million
Entry on August 26 at $68.90
Listed on August 23, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: PNR is still slowly drifting lower. Shares briefly traded below $68 and its 20-dma before paring its losses.

Earlier Comments: August 23, 2014:
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.

- Suggested Positions -

Long Nov $70 PUT (PNR141122P70) entry $3.60*

08/26/14 triggered @ 68.90
Option Format: symbol-year-month-day-call-strike

SPDR S&P 500 ETF - SPY - close: 200.14 change: -0.11

Stop Loss: 202.25
Target(s): To Be Determined
Current Option Gain/Loss: -7.0%
Average Daily Volume = 99 million
Entry on August 25 at $200.14
Listed on August 23, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

08/28/14: The stock market remains relatively resilient in the face of growing geopolitical risks. The SPY continues to hold the 200 mark.

We would still consider new bearish positions while more conservative investors may want to wait for a drop under $199.86 as a new entry point (Monday's low).

Earlier Comments: August 23, 2014:
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.)

- Suggested Positions -

Long Sept. $199 PUT (SPY140920P199) entry $1.84

08/25/14 triggered on gap higher at $200.14, suggested entry was $199.95
Option Format: symbol-year-month-day-call-strike