Option Investor

Daily Newsletter, Tuesday, 7/7/2015

Table of Contents

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

Market Wrap

Miraculous Recovery

by Jim Brown

Click here to email Jim Brown

Greek PM Alexis Tsipras showed up at the meeting of the EU Ministers with what Art Cashin said was an empty briefcase. Tsipras promised the Greek voters he would have a signed deal in 48 hours but he apparently forgot to bring the details with him to Brussels. EU ministers were very upset by the lack of urgency but the market rallied anyway.

Market Statistics

The overnight events in Greece and China caused the U.S. equity markets to dive to four-month lows at the open with the Dow falling -218 points by 11:30. The S&P declined -25 and the Nasdaq fell -90 before a monster buy program hit and caused a major short squeeze. The Dow rebounded to +93, S&P +12 and Nasdaq +5.

It was very easy to tell it was a short squeeze because only the stocks that had the most bearish charts and highest short interest actually rebounded materially. For instance SM Energy (SM) rallied +5.5% after dropping to a five-month low at the open. Stocks with a positive trend over the last two weeks failed to post significant gains because the short interest was low.

Greece did make a short oral presentation to the EU ministers but it contained only generalities about the need for more money in the future. After Tsipras met with Angela Merkel she said Greece would present a new proposal by Thursday evening. However, she said "I am not exaggeratedly optimistic." It was reported later in the day that Tsipras requested an interim loan package to get through the rest of July while the terms of a longer-term loan program were debated. That 48-hour agreement promise just keeps slipping farther into the future.

Multiple EU heads including Merkel reiterated that there could not be any debt restructuring or reduction in the future because it would be illegal under EU treaties. Tsipras has said he would not agree to anything that did not reduce the debt owed by Greece while at the same time he is asking for more money.

EU ministers are scheduled to meet again on Saturday and review a Greek proposal assuming they have actually presented one by then. Multiple EU heads said if there is no "satisfactory" proposal and agreement with Greece by Sunday the EU will proceed to Plan B. While that has not been defined in the press it is widely assumed to be a Greek exit from the eurozone. EU Commission President, Jean-Claude Juncker said, "I am strongly against a Grexit but I cannot prevent it if the Greek government does not do what is asked of it."

Greece voted, Tsipras remains antagonistic, nothing has changed and the outlook for the future of Greece remains grim. Greek banks will probably remain closed for the rest of the week and possibly next week.

Fortunately, the U.S .equity markets may have finally shrugged off the constant drone of negative headlines surrounding the disaster.

European indexes all finished with steep losses because the future of Greece is important for the future of Europe.

The Shanghai Composite lost another -4.74% to close at 3,727 after China said it was ok to margin your home to buy stocks and asked money managers to invest nearly $20 billion in equities to support the market. Chinese demand for oil, copper and iron continue to slide suggesting the economy is slipping fast. The SSEC is now down -28% from its highs in June.

Newbie investors in China were margined to the max as the market rallied +150% over the last nine months. The rapid decline is crushing the wealth out of these investors. Making it worse the government has suspended trading in 745 companies or 26% of the listed firms. More than 200 were halted on Monday alone. The value of the shares is $1.4 trillion or 21% of China's market cap. The stocks are halted to prevent selling in an attempt to slow the market crash. However, by halting some shares and not others it means traders on margin have to sell what they have rather than what they want to sell. It may have made the sell off even worse. The decline in Chinese equities has erased $3.2 trillion in value since the June 12th peak. That is twice the size of the entire Indian stock market.

In the U.S. there was little in the way of economic reports to move the market. The Job Openings and Labor Turnover Survey showed job openings declined slightly in May to 3.6%, down from 3.7%. The number of openings at 5.363 million was still up +16.4% from the same period in 2014. Hires declined from 5.034 million to 5.0 million and separations declined from 4.895 million to 4.743 million. Quits also declined from 2.709 million to 2.699 million. Layoffs fell from 1.784 million to 1.653 million. This is a lagging report for May and it was ignored.

The California Manufacturing Survey for Q3 declined from 61.2 to 59.4 and the lowest level since Q3-2014. Nearly all of the subcomponents declined. The manufacturing sector is still being depressed by the strong dollar and the inability to sell products overseas. Meanwhile the commodity price component rose from 58.2 to 61.0 suggesting profits were getting squeezed. This report was also ignored.

The only material report for Wednesday is the FOMC minutes from the June meeting. Analysts are expecting to see that participants were questioning the wisdom of hiking rates in September without accelerated growth in the economy. The U.S. economy is still limping along and the Fed is expected to use the Greek crisis as an excuse for not hiking rates in September.

The chip sector was knocked for another loss after Advanced Micro Devices (AMD) said sales of personal computers were weaker than expected in Q2 and revenue was down -8% from Q1 levels. Quarterly revenue is expected to be $947.6 million and the first quarter of less than $1 billion in more than a decade. AMD shares declined -15% to $2.08.

Shake Shack (SHAK) lost its last friend in the brokerage community after Morgan Stanley (MS) cut the company to "underweight" from neutral. Not a single analyst currently rates SHAK with a buy rating. Morgan Stanley said the stock is overpriced and put a $38 price target on the stock. SHAK closed at $54.74. The broker said the price was "brand related euphoria" and not supported by market fundamentals.

Tesla (TSLA) shares declined -4% after Deutsche Bank cut the automaker from buy to hold. However, they did raise the price target from $245 to $285, which is about where Tesla was trading on Monday. DB said there was insufficient "risk/reward" to maintain the buy rating at this level. "We believe Tesla could become a dominant player but the shares already reflect that outcome."

Horizon Pharma (HZNP) went hostile in its bid for Depomed (DEPO) with an offer of $29.25. That was a 42% premium to Monday's closing price of $20.63. Shares rallied +39% on the news. Horizon said they had been conversing with Depomed since March but had been rebuffed repeatedly. Both companies have revenue of about $350 million each and Horizon said there would be significant synergies after a merger. Horizon specializes in orphan drugs while Depomed specializes in pain medicine. Depomed recently acquired Nucynta from J&J for $1.05 billion. The company raised the price of the drug by 44% after the acquisition.

Disney (DIS) was upgraded from neutral to overweight by Atlantic Equities with a price target of $150. Shares closed at $117. The company said the Disney franchise strength creates long-term visibility and earnings growth. Disney has so many projects on the calendar that it will be looking for a place to store its excess cash in the years to come. Scrooge McDuck better watch out or Disney will be using his vaults for storage. The movie schedule alone should bring in billions in free cash flow.

Disney Movie Schedule

July 17, 2015 - "Ant-Man"
Dec. 18, 2015 - "Star Wars: Episode VII - The Force Awakens"
2016 - "The Incredibles 2"
April 29, 2016 - "Captain America: Civil War"
June 17, 2016 - "Finding Dory"
Dec. 16, 2016 - "Star Wars Anthology: Rogue One"
May 26, 2017 - "Star Wars: Episode VIII"
June 16, 2017 - "Toy Story 4"
Late 2017 - "Thor: Ragnarok"
May 4, 2018 - "Avengers: Infinity War - Part I"
2018 - "Untitled Star Wars Anthology Project"
May 3, 2019 - "Avengers: Infinity War - Part II"
2019 - "Star Wars: Episode IX"

After the bell VMWare (VMW) reiterated its forecast for revenue for the June quarter. The company expects to report $1.58-$1.60 billion in revenue and 90-92 cents in earnings. The cash flow will be reduced by a $75.5 million settlement with the Dept of Justice. Shares rallied about $2 on the news in afterhours trading.

FBR downgraded VMW on Monday on "questionable growth potential."

The Container Store (TCS) reported a loss of 11 cents that was less than the 13 cents loss analysts expected. Sales declined -2.1% to $169.8 million because of the West Coast port delays. Same store sales declined -0.9%. That was better than the -3%-4% the company had predicted. TCS guided to full year earnings of 30-38 cents and analysts were expecting 32 cents. Shares rose $1 in afterhours trading.

Jared may have lost 200 pounds eating healthy at Subway but he lost more than that this week. Jared Fogel was taken into custody in a child pornography investigation and Subway quickly ended their relationship at least temporarily with their long time advertising spokesman. The FBI raided his home in Indiana on Tuesday and his computers and electronic gadgets were seized. Back in April the former executive director of the Jared Foundation, an organization that aimed to combat childhood obesity, was arrested on child pornography charges. Jared said he was cooperating with authorities and expects no actions to be forthcoming. Subway is not publicly traded. Jared had been the spokesman for 15 years and Subway said one-third to one-half of their growth over that period was due to Jared's commercials.

Jared's home was raided on Tuesday

Oil prices collapsed over the last several days to an intraday low of $50.58 today. The $2 rebound that followed put crude back into positive territory for the day but the damage was already done.

Crude prices were declining on an unexpected build in inventories last Wednesday, price cuts to Europe by Saudi Arabia, record OPEC production over 32 million barrels per day, a rising rig count in the U.S. and falling demand in China and Europe. While some of those items may be insignificant the total proved to be too much of a weight for prices.

Analysts are now predicting a dip into the high $40s because the July 4th weekend is typically the peak in demand in the USA. Inventories could continue to increase as refiners slow production to match demand.

The strong dollar is also a problem. The dollar index jumped a full point intraday on the Greek headlines and that depresses commodity prices.

Iranian nuclear talks continue as the parties extended their deadline for the fifth time. Friday the 10th is now the deadline for an agreement but participants said they would extend it again as long as progress was being made.

Without a deadline, even one that moves every week, it would be impossible to get anything accomplished with Iran. The six nations said sanctions relief could be delayed another month if a deal is not concluded by Friday. Apparently that is the warning they are giving Iran but there is also an implied carrot. The implications are that sanctions could be lifted early if an agreement is reached. Russian Foreign Minister Sergei Lavrov said there were still about 10 issues separating the sides but an agreement is close. "We are not observing artificial deadlines." Iran will get about $100 billion in funds that had been seized once sanctions are lifted.

One of the serious problems still facing the group is the lifting of the arms embargo against Iran. In 2007 and 2010 the UN imposed an embargo against missile technology sent to Iran that could be used in intercontinental missiles. China and Russia want to lift the embargo so they can sell components to Iran. The western nations do not want to lift the embargo because that just gives Iran a delivery vehicle for their eventual nuclear weapons. It also gives Iran missile technology it can use in the various proxy wars it is currently fighting. When all six nations resolved their differences and presented a united front on the issue the Iranian representatives became very heated and it was a "stormy meeting" according to a state department spokesman.

The current agreement being discussed is about 20 pages but also contains 5 annexes that are secret. Those are the documents that concern me the most. Why does there need to be secret documents covering the most hotly contested sections of the deal?


The S&P declined -25 points intraday to a low of 2044. That is just 4 points over the low of 2040 set back in March. This is a significant support point and it appears traders jumped the gun in their eagerness to buy the dip. The 200-day average at 2055 was broken severely intraday, which should have been a sell signal, but the dip was bought and the rebound put the index back +26 points above that critical level.

The challenge here is now the 2081-2085 level where resistance was firm over the last week. The S&P closed at 2081 after the rebound came to a screeching halt at that level at 2:30. Once that level was reached there was no further upward progress.

I really do believe the rebound was mostly short covering. The S&P futures are down -4.50 at 8:PM ET. That could be erased before morning or it could double. We never know and the geopolitical headlines will be our curse overnight.

If we do move over the 2085 level I would be a buyer for a trade. If the S&P weakens tomorrow I would eventually expect a retest of the 2040 level in the days ahead. I do not think the Greek disaster is going to be a continued cloud over the market but we have to assume it will be trouble for the rest of the week. Once into next week we will be back to the heated negotiations in Brussels but maybe the ECB will let Greek banks reopen.

Resistance 2081-2085 with support 2055 and 2040.

The Bullish percent Index continues to deteriorate with only 54.6% of the S&P 500 stocks still showing a buy signal on the P&F charts. Internals are still declining despite the strong rebound.

The Dow also rebounded to prior resistance and stalled. There were far more Dow components in positive territory at day's end but quite a few of those were really ugly charts as of Monday. The shorts were forced to cover and a rebound was born.

Given the number of Dow stocks that were strongly positive, I would have expected an even bigger gain for the index. There were 8 stocks with gains of more than $1 and only one with a loss of more than $1. The Dow chart is not bullish despite the rebound and there are plenty of places for a failed rally including the level at the close.

I would be hesitant to use the Dow as my market guide for Wednesday because there is sure to be volatility.

The Nasdaq Composite was down -90 points intraday and returned to positive territory. That is a remarkable accomplishment even though the total gain was only +5 points. The Nasdaq reversed instantly at the support of the 150-day average at 4902.49 with the low of the day 4902.21. You do not get much better correlation than that. The index failed to close back above 5000 despite 90 minutes of trying at the close. This makes the 5000 level initial resistance on Wednesday and 4950 is initial support. If a real move does appear the 5040 level is resistance and the 4900 level is support.

The problem child on Tuesday was the Russell 2000. The support at 1240 broke and the RUT declined to 1225 with the 150-day at 1227. The rebound took it only back to prior support at the 100-day, which is now resistance at 1249.59.

The Russell is no longer leading. It was the weakest link on Tuesday and could easily return to 1230 with a minimal amount of selling. The 100-day was support since December and is now resistance. That is troubling. Until the Russell moves over 1260 I would be careful about adding to longs in this market.

I would be cautious of this market. I do not think the volatility is over and we are sure the Greek headlines will continue for the rest of the week. The FOMC minutes on Wednesday could provide some support if they are dovish but could also be a weight if the Fed was seen as wanting to hike rates no matter what it takes.

Alcoa reports earnings on Wednesday and then the quarter kicks into high gear next week. The earnings could push the Greek news out of the headlines but we need to wait and see how the earnings develop. We are still a long way from a correction and given the market swings over the last several days the uncertainty is strong and conviction weak.



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New Option Plays

Ready To Breakout Again

by James Brown

Click here to email James Brown


Fiserv, Inc. - FISV - close: 84.96 change: +0.65

Stop Loss: 82.40
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.0 million
Entry on July -- at $---.--
Listed on July 07, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: Yes, see below

Company Description

Trade Description:
Apple isn't the only one with a mobile payments platform. Last year AAPL launched its Apple Pay service, which allows people to use their smart phones (and now smart watches) to pay for stuff at the register. FISV also jumped into the mobile pay industry late last year. That's on top of a growing business of its traditional payment systems.

FISV is part of the services sector. According to the company, "Fiserv, Inc. (FISV) enables clients to achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management, and business insights and optimization."

Earnings have been relatively on track the last couple of quarters. FISV most recent report was announced on May 5th. They reported earnings of $0.89 per share. That was up +8.5% from a year ago and above Wall Street estimates. Revenues were up +3.4% and slightly behind expectations. The company spent $290 million buying back 3.8 million shares last quarter.

Shares of FISV had been slowly drifting higher in the $75-80 zone from February to June. Suddenly things changed. The market's big rally on June 18th helped FISV breakout from its trading range. The next day the stock was upgraded to an "outperform" and given at $95 target. This launched FISV's stock toward $85.00.

Shares have been trading technically and slowly faded back toward its mid-June breakout high. Once FISV had filled the gap it began to rally again. The stock held up well this morning during the market sell-off. When the major indices reversed higher FISV outperformed them with a +0.77% gain. We want to hop on board if FISV can rally past $85.00. Tonight we're suggesting a trigger to buy calls at $85.15. Plan on exiting this trade prior to their earnings report on July 29th.

Trigger @ $85.15

- Suggested Positions -

Buy the AUG $85 CALL (FISV150821C85) current ask $2.70
option price is a current quote and not a suggested entry price.

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

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

Daily Chart:

In Play Updates and Reviews

Stocks Sink On Greece News, Then Rebound

by James Brown

Click here to email James Brown

Editor's Note:

Stocks in Europe closed sharply lower today with the major European markets down -2% or worse. This helped pressure the U.S. market lower. Yet midday the market rebounded in a big way. By the closing bell the major U.S. indices were in positive territory.

HACK hit our stop loss.

Current Portfolio:

CALL Play Updates

Cracker Barrel Old Country Store - CBRL - close: 155.50 change: +3.33

Stop Loss: 147.75
Target(s): To Be Determined
Current Option Gain/Loss: +37.5%
Average Daily Volume = 332 thousand
Entry on July 01 at $150.25
Listed on June 20, 2015
Time Frame: Plan on exiting prior to August 5th
New Positions: see below

07/07/15: It was a strong day for CBRL. Shares did not see the same morning sell-off that hit so much of the market today. When the market reversed higher shares of CBRL just accelerated and ended the session with a +2.1% gain. The stock is nearing what could be potential resistance in the $156.60 area. Above that the $160 level is what I would focus on as potential resistance.

Tonight we'll move the stop loss to $147.75.

Trade Description: June 20, 2015:
It's summertime and that means vacations and road trips for a lot of Americans. That's good news for a company like CBRL because most of their 634 restaurants are located along major highways.

CBRL is in the services sector. According to the company, "Cracker Barrel Old Country Store, Inc. provides a friendly home-away-from-home in its old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping that’s surprisingly unique, genuinely fun and reminiscent of America's country heritage…all at a fair price. Cracker Barrel Old Country Store, Inc. (CBRL) was established in 1969 in Lebanon, Tenn. and operates 634 company-owned locations in 42 states."

Wall Street loves earnings growth and CBRL continues to deliver. Back in February the company beat earnings and revenue estimates and raised their 2015 guidance. Their most recent report was June 2nd. CBRL reported their fiscal third quarter. Analysts were expecting a profit of $1.37 per share on revenues of $680 million. CBRL beat estimates with a profit of $1.49 per share. This is a +21% rise from a year ago and marks the fifth quarter in a row of double-digit earnings growth. Revenues also beat estimates with a +6.3% rise to $683.7 million. CBRL said their comparable store sales were up +5.2%. Their comparable retail store sales were up +4.5%.

Management raised their normal quarterly dividend +10% to $1.10. They also announced a special one-time dividend of $3.00 per share. Both are payable on August 5th, 2015 to shareholders on record as of July 17th. CBRL offered a bullish outlook for both their fourth quarter and 2015. Management raised their 2015 earnings guidance from $6.40-6.50 to $6.60-6.70 per share. Wall Street was only expecting $6.55.

Technically the stock looks bullish. Shares have been consolidating their post-earnings gains the last couple of weeks but traders are buying the dip. Today CBRL is poised for a breakout past short-term resistance near $148.50. If the stock does breakout it could see some short covering. The latest data listed short interest at 17% of its small 18.9 million share float. Meanwhile the point & figure chart is very bullish and forecasting a long-term target at $231.00.

Tonight we are suggesting a trigger to buy calls at $150.25. More aggressive traders may want to jump in early on a rally past $148.75.

- Suggested Positions -

Long SEP $155 CALL (CBRL150918C155) entry $4.00

07/07/15 new stop @ 147.75
07/01/15 triggered @ $150.25
Option Format: symbol-year-month-day-call-strike

The Walt Disney Co. - DIS - close: 117.10 change: +1.40

Stop Loss: 112.25
Target(s): To Be Determined
Current Option Gain/Loss: +84.8%
Average Daily Volume = 5.7 million
Entry on June 18 at $112.25
Listed on June 17, 2015
Time Frame: Exit PRIOR to earnings in August
New Positions: see below

07/07/15: Shares of DIS ended the day at a new record high. The stock gapped open higher thanks to another analyst upgrade. Shares were rated an "overweight" and given a $150 price target.

Traders bought the dip midday at $114.86. Readers may want to start adjusting their stop loss higher.

Trade Description: June 17, 2015:
Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.

The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.

Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. In 2013 they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits in 2014 Captain America: Winter Soldier and Guardians of the Galaxy. Their 2015 Avengers: Age of Ultron was also a big winner at the box office grossing more than $1.3 billion worldwide. Of course not every Disney movie crushes it. Their recent Tomorrowland was a big disappointment and they could lose more than $100 million on the film.

Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. The next Star Wars film it titled "The Force Awakens." It will be episode seven in the franchise. The movie doesn't hit theaters until December 2015 but analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.

DIS management loves movie franchises because they can fuel years of sequels, park rides, and merchandise. The approach seems to be working. Revenues and net income have hit all-time highs for five consecutive quarters. Their 2015 Q1 results saw earnings per share up +23% to $1.27. Their Q2 results saw earnings grow +14% to $1.23 per share. Their domestic theme parks showed a strong surge in both attendance and in customer spending. Analysts are forecasting DIS earnings to grow +17% this year.

The stock surged to new all-time highs back in early May after its Q2 earnings report. Shares have since spent the last six weeks digesting gains in a sideways consolidation that has ignored much of the broader market's volatility. More recently DIS has started to rebound and is now at the top of its trading range. A breakout here could signal the next leg higher.

The point & figure chart is bullish and forecasting at long-term target of $154.00. I personally suspect that DIS could rally toward $120-125 before its next earnings report in August. Credit Suisse recently upped their price target to $130. Tonight we are suggesting a trigger at $112.25 to buy calls.

- Suggested Positions -

Long AUG $115 CALL (DIS150821C115) entry $2.30

06/27/15 new stop @ 112.25
06/18/15 triggered @ $112.25
Option Format: symbol-year-month-day-call-strike

Demandware, Inc. - DWRE - close: 71.27 change: +1.18

Stop Loss: 68.65
Target(s): To Be Determined
Current Option Gain/Loss: -18.6%
Average Daily Volume = 417 thousand
Entry on June 22 at $72.35
Listed on June 20, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in August
New Positions: see below

07/07/15: It was a close call for DWRE. The market's sharp sell-off today pushed DWRE down to $68.65. Our stop loss is at $68.65. DWRE followed the market higher this afternoon and managed to erased yesterday's losses.

No new positions at this time.

Trade Description: June 20, 2015:
2015 is shaping up to be a lot better than 2014 for DWRE investors. The stock delivered a rocky performance last year and spent much of it churning sideways in a huge consolidation pattern (see the weekly chart below). The stock's momentum has turned bullish this year thanks in part to consistently strong revenue growth. The NASDAQ is up +8.0% year to date. DWRE is currently up +23.9%.

DWRE is in the technology sector. According to the company, "Demandware, the category defining leader of enterprise cloud commerce solutions, empowers the world's leading retailers to continuously innovate in our complex, consumer-driven world. Demandware's open cloud platform provides unique benefits including seamless innovation, the LINK ecosystem of integrated best-of-breed partners, and community insight to optimize customer experiences. These advantages enable Demandware customers to lead their markets and grow faster."

With the exception of its Q4 report on February 19th DWRE has beaten Wall Street's earnings estimates on both the top and bottom line the last four quarters in a row. Revenue growth has been +55.6%, +55.9%, +43.4%, and +54.3% for the last four quarters. The only miss was DWRE's bottom line number for the fourth quarter where it missed by a penny.

DWRE's most recent results were May 7th. The company said their Q2 profit was $0.16 per share. That is a big improvement from a ($0.05) loss a year ago and it was 27 cents better than the ($0.11) loss analysts were expecting. Revenues were $50.27 million compared to estimates for $49.5 million. DWRE said their live customers were up +30% from a year ago to 279. The number of live sites surged 42% to 1,241.

Tim Adams, DWRE's CFO, commented on their quarterly results, "During the first quarter, we continued to invest in growth and innovation. We expanded our operations deeper into Europe and Asia. Our R&D team also made considerable progress on their key initiatives – extending our platform deeper into the store, delivering our intelligence solutions and enriching our core commerce capabilities. As we move through 2015, we remain focused on scaling our organization to support the fast pace of our growth."

Back in April Goldman Sachs added DWRE to their conviction buy list. Yet shares didn't start moving until June. A couple of weeks ago shares broke out from a three-month consolidation pattern. The current rally could be getting a boost from short covering. The most recent data listed short interest at 12% of the relatively small 33.48 million share float. Currently the point & figure chart is bullish and forecasting an $85 target. Tonight we're suggesting a trigger to buy calls at $72.35.

- Suggested Positions -

Long OCT $75 CALL (DWRE151016C75) entry $5.28

07/06/15 new stop @ 68.65
06/22/15 triggered @ $72.35
Option Format: symbol-year-month-day-call-strike

Facebook, Inc. - FB - close: 87.22 change: -0.33

Stop Loss: 84.90
Target(s): To Be Determined
Current Option Gain/Loss: -14.4%
Average Daily Volume = 24.5 million
Entry on July 06 at $88.15
Listed on July 04, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: see below

07/07/15: FB dipped toward support in the $85-86 region before finally bouncing. Shares pared their loss to just -0.3% by the closing bell. I am suggesting readers wait for a new rally past $88.15 before initiating new positions.

Trade Description: July 4, 2015:
Facebook probably needs no introduction. It's the largest social media platform on the planet. As of March 31st, 2015 the company reported 1.44 billion monthly active users and 936 million daily active users. If FB were a country that makes them the most populous country on the planet. China has 1.35 billion while India has 1.25 billion people.

Earlier this year (March) the company announced a new mobile payment service through FB's messenger app. The new service will compete with similar programs through PayPal, Apple Pay, and Google Wallet.

Meanwhile business at FB is great. According to IBD, FB's Q4 earnings were up +69% from a year ago. Revenues were up +49%. Q1 results were out on April 22nd. Earnings were up +20% to $0.42 per share, which beat estimates. Revenues were up +41.6% to $3.54 billion in the first quarter. Wall Street is expecting FB's profit to rise +12% in 2015 and +32% in 2016.

FB continues to see growth among its niche properties. The company bought Instragram for $1 billion in 2012. Last late year Instragram surpassed Twitter with more than 300 million active users. FB is also a dominate player in the messenger industry with more than 600 million users on WhatsApp and 145 million users on Facebook Messenger. FB has not yet started to truly monetize its WhatsApp and Messenger properties. It's just now starting to include ads in Instagram. Eventually, with audiences this big, FB will be able to generate a lot of cash through additional advertising.

Speaking of advertising, FB has jumped into the video ad game with both feet and it's off to a strong start. FB claims that it's already up to four billion video views a day. They had 315 billion video views in Q1 2015. That's pretty significant. YouTube had 756 billion video views in Q1 but YouTube has been around for ten years (FYI: YouTube is owned by Google). FB has only recently focused on video.

Wall Street is growing more optimistic as FB develops its blooming video ad business and its Instagram and messaging properties. In the last few weeks the stock has seen a number of price target upgrades. Bank of America upped their FB price target from $95 to $105. Cantor Fitzergerald upped theirs to $100. Brean Capital raised theirs to $108. Piper Jaffray upgraded their FB target to $120. Currently the point & figure chart is bullish with a $113.00 target.

Technically FB was stuck in a trading range for months while still working on a long-term, slow moving up trend of higher lows. That changed a couple of weeks ago with a bullish breakout to new highs. The recent pullback is an opportunity. If traders continue to buy this dip we want to jump on board. Tonight we are listing an entry point to buy calls at $88.15.

- Suggested Positions -

Long AUG $90 CALL (FB150821C90) entry $2.84

07/06/15 triggered @ $88.15
Option Format: symbol-year-month-day-call-strike

INSYS Therapeutics - INSY - close: 36.56 change: +0.06

Stop Loss: 33.85
Target(s): To Be Determined
Current Option Gain/Loss: -51.5%
Average Daily Volume = 607 thousand
Entry on July 01 at $36.30
Listed on June 30, 2015
Time Frame: Exit PRIOR to earnings in August
New Positions: see below

07/07/15: Traders bought the dip in INSY at $35.20 but the rally stalled at its 10-dma. Shares closed virtually unchanged on the session.

Traders may want to wait for a rally past $37.00 as our next entry point.

Trade Description: June 30, 2015:
INSY is probably best known for its synthetic cannabinoid drugs that use THC, the same ingredient in marijuana. Yet it is the company's Subsys treatment, a painkiller several times stronger than morphine, that generates the most revenues for INSY. The marketing practices behind Subsys have generated some scandal-worthy headlines but nothing seems to be slowing down the stock's long-term rally.

INSY is in the healthcare sector, more specifically the biotech industry. According to the company, "Insys Therapeutics is a specialty pharmaceutical company that develops and commercializes innovative drugs and novel drug delivery systems of therapeutic molecules that improve the quality of life of patients. Using our proprietary sublingual spray technology and our capability to develop pharmaceutical cannabinoids, Insys addresses the clinical shortcomings of existing commercial products. Insys currently markets two products: Subsys, which is sublingual Fentanyl spray for breakthrough cancer pain, and a generic version of Dronabinol (THC) capsules. The Company's lead product candidate is Dronabinol Oral Solution, a proprietary, orally administered liquid formulation of dronabinol that Insys believes has distinct advantages over the current formulation of dronabinol in soft gel capsule. Insys is developing a pipeline of sublingual sprays, as well as pharmaceutical cannabidiol."

The company's earnings growth has been impressive. They have consistently beaten Wall Street's bottom line earnings estimates the last six quarters in a row. They normally beat the revenue estimate as well. Looking at the last three quarters INSY has seen its revenues jump +99.7%, +65.4%, and +70.2%. Most of that has been on strong Subsys sales, which were up +69% in the fourth quarter and up +74% in the first quarter.

INSY management is very optimistic and expects to complete four Phase III clinical trials in 2015. If successful it will significantly broaden their product line. The company just recently announced a New Drug Application (NDA) for its "proprietary Dronabinol Oral Solution for anorexia associated with weight loss in patients with AIDS; and nausea and vomiting associated with cancer chemotherapy in patients who have failed to respond adequately to conventional antiemetic treatments. Dronabinol Oral Solution is an orally administered liquid formulation of the pharmaceutical cannabinoid dronabinol, a synthetic version of tetrahydrocannabinol (THC)."

INSY's stock has been a strong performer since the company's IPO in 2013. Shares saw a 3-for-2 split in 2014. They just completed a 2-for-1 split on June 5th.

Before I continue I want to remind traders that biotech stocks can be tough to trade. Normally stocks in this group can be volatile with lots of headline risk. The right headline about a successful test or clinical trial or FDA approval can send shares soaring. The wrong headline could see a biotech stock crash or even gap down several points.

It is important to note that not all the news is good for INSY. In late 2014 the Wall Street Journal (WSJ) ran a story about some shady marketing practices for INSY's Subsys painkiller. This is an under-the-tongue spray version of the painkiller fentanyl. Subsys has a very high risk of dependency and is currently only approved for cancer patients. Yet strangely enough only 1% of prescriptions last year were written by oncologists. Several doctors with the biggest number of Subsys prescriptions have also been under review or disciplined. The WSJ noted that the Office of the Inspector General of the U.S. Department of Health and Human Services and the U.S. Attorneys in the Central District of California and Massachusetts are all looking into the matter. This is significant because Subsys accounts for the vast majority of INSY's revenues.

Thus far the stock market has managed to ignore the shadow cast by Subsys and how the drug is prescribed and INSY's financial relationship with the doctors who prescribe it.

Last week saw biotech stocks retreat. The IBB biotech ETF had broken out in mid June and rallied to new record highs. The group reversed lower last week with a sharp correction. INSY followed its peers lower with a painful drop from $42 to $34 in about three days. Currently the $34.00 level is holding up as support. If INSY can bounce from current levels the move could be big.

A rally from here could spark a short squeeze. The most recent data listed short interest at 68% of the small 23.6 million share float. Tonight we are suggesting a trigger to buy calls at $36.30.

*Small positions to limit risk* - Suggested Positions -

Long AUG $40 CALL (INSY150821C40) entry $3.40

07/01/15 triggered @ $36.30
Option Format: symbol-year-month-day-call-strike

Under Armour, Inc. - UA - close: 84.94 change: +0.36

Stop Loss: 81.75
Target(s): To Be Determined
Current Option Gain/Loss: -26.1%
Average Daily Volume = 2.0 million
Entry on June 26 at $86.05
Listed on June 23, 2015
Time Frame: Exit prior to August expiration
New Positions: see below

07/07/15: UA held up reasonably well. The market weakness drove shares down to technical support at the 20-dma before UA bounced. The stock looks poised to breakout past the $85.00 level soon, which we can use as a new entry point to buy calls.

Trade Description: June 23, 2015:
UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitnessplatform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it is actively fighting for market share and recently overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but UA grew +32%.

UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance.

UA reported their 2014 Q4 results on February 4th. The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

There was a steady stream of analysts raising their price targets on UA after its February earnings report. Many of these new price targets were in the low $90s ($91-94).

The company's most recent earnings report was April 21st when UA announced Q1 results. After raising guidance back in February the company reported earnings of $0.05 per share, which was in-line with Wall Street's new estimates. Revenues were up +25.4% to $804.9 million, which beat expectations. UA management raised their outlook again. They expect 2015 operating income to improve +13-to-15%. UA expects 2015 revenues to rise +23% to $3.78 billion.

The stock has rallied sharply into its earnings report and shares suffered some post-earnings depression with a -$12.00 drop (-13.6%) in the following two weeks. The price target upgrades continued but UA spent most of May consolidating sideways inside a narrow range. Finally on June 5th shares of UA broke out past multiple layers of resistance on another upgrade. The stock was upgraded to a "buy" with a $91 price target.

UA spent about a week digesting its bullish breakout and then took off. The company recently announced a 2-for-1 stock split. However, instead of a normal split the company is creating a new Class C stock which will have no voting rights.

Why a new class of shares? That's because the company's founder and current CEO Kevin Plank does not want to lose control. This way he can maintain control by keeping his voting shares while still selling the new Class C shares. Just in case you were curious, Class A UA stock has one vote per share. Class B stock has ten votes per share, which Plank owns the majority of.

This stock "split" will be disbursed as a dividend. There's no word yet on the new ticker symbol for the class C shares. There is a special meeting of UA shareholders on August 26, 2015 to approve the necessary changes so they can proceed with this stock split. Google did a similar stock split back in 2014 so the founders could maintain control. Both GOOG's and UA's decision has rankled some shareholders. However, normally stock splits tend to be viewed as a bullish move since stocks don't split if they're not rising. Stocks that split tend to outperform the broader market.

Tonight we are suggesting a trigger to buy calls at $86.05. More conservative traders may want to consider waiting for a dip instead. The nearest support is $82.00. We'll start with a stop loss at $81.75.

- Suggested Positions -

Long AUG $90 CALL (UA150821C90) entry $2.30

06/26/15 triggered @ $86.05
Option Format: symbol-year-month-day-call-strike

PUT Play Updates

Concho Resources - CXO - close: 109.49 change: +2.10

Stop Loss: 112.50
Target(s): To Be Determined
Current Option Gain/Loss: -26.1%
Average Daily Volume = 1.4 million
Entry on July 07 at $106.90
Listed on July 06, 2015
Time Frame: Exit PRIOR to earnings on July 29th
New Positions: see below

07/07/15: Oil continued to fall this morning. Combine that with the market wide sell-off and shares of CXO plunged to $103.97 (-3.1% for the day). Then oil and the stock market bounced. Shares of CXO surged back toward the $110 area. Meanwhile our suggested entry point to buy puts was hit this morning at $106.90.

I am not suggesting new positions at this time. CXO should find resistance in the $110-112 level. Nimble traders could wait for a failed rally as a potential entry point.

Trade Description: July 6, 2015:
It has been a bumpy ride for energy stock traders over the last year. That's especially true for CXO investors. The stock fell from $148 to $80 in less than five months last year. CXO bottomed in December 2014. The stock managed a big bounce from $80 to $130 in the next five months but that rally is over with a big reversal on the company's Q1 earnings report in early May.

CXO is in the basic materials sector. According to the company, "Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties. The Company's operations are primarily focused in the Permian Basin of southeast New Mexico and west Texas."

The last couple of quarters have seen CXO's revenues decline. They reported their 2014 Q4 results on February 25th. Earnings were 88 cents a share, which was four cents above estimates. Yet revenues fell -6.0% to $594 million, way below estimates. Their 2015 Q1 results were announced on May 4th. Earnings per shares was $0.06. That was 17 cents worse than expected. CXO's revenues plunged -37.4% to $413.5 million, another big miss. The stock reacted to this news with a spike higher that quickly reversed.

Today the oil stocks are suffering as the commodity sinks due to oversupply concerns. The weekly Baker Hughes active rig count just turned positive two weeks in a row after a 28-week decline. This would suggest the pullback in the industry is over and the market has found a temporary equilibrium that will allow domestic companies to start launching new oil and gas rigs again. This will continue to boost supply and pressure prices lower.

A bigger problem could be the Iran nuclear negotiations. If Iran does sign a deal with the West then sanctions could be lifted that would allow Iran to sell up to one million barrels of oil per day on the global market. Sources suggest Iran already has dozens of crude oil tankers filled up and ready to go if the sanctions are lifted. This is one reason crude oil has been plunging the last few days. The current deadline (and there have been many) is tomorrow, July 7th. If Iran signs a deal then oil will likely drop again. If they don't then oil could bounce. If talks are postponed again then I suspect the prevailing trend, which is down, will remain in effect for oil and the oil stocks.

CXO has technically broken down below support near $110 and its 200-dma. The point & figure chart looks very bearish and is currently forecasting an $89 target. Tonight we're suggesting a trigger to buy puts at $106.90.

- Suggested Positions -

Long AUG $105 PUT (CXO150821P105) entry $4.60

07/07/15 triggered @ $106.90
Option Format: symbol-year-month-day-call-strike

iShares Transportation - IYT - close: 146.51 change: +1.83

Stop Loss: 150.25
Target(s): To Be Determined
Current Option Gain/Loss: -17.1%
Average Daily Volume = 397 thousand
Entry on June 29 at $146.90
Listed on June 27, 2015
Time Frame: exit PRIOR to August expiration
New Positions: see below

07/07/15: The transportation ETF started to bounce before the broader market did. Shares rallied to a +1.2% gain to close just below short-term resistance at its 10-dma. If this bounce continues the next level of resistance should be $148.00.

No new positions at this time.

Trade Description: June 27, 2015:
The transportation stocks have been a sore spot for the wider bull market. Year to date the Dow Industrials are up +0.7% while the S&P 500 index is up +2.0%. Yet the IYT transportation ETF is down -10% in 2015 and down -12% from its all-time highs set in November 2014.

The IYT is the ETF that tracks the Dow Jones Transportation Average. Both have 20 stocks in them. The biggest components are railroad and trucking companies. Here's the full list of components: FDX, UPS, UNP, KSU, NSC, R, LSTR, JBHT, ALK, CHRW, KEX, UAL, EXPD, CAR, DAL, CNW, MATX, LUV, CSX, and JBLU.

Airlines grabbed a lot of headlines in the last several weeks as their stocks fell sharply. Investors are worried that the airlines will build up too much capacity and oversupply the market forcing them to lower fares and slash their profitability.

Railroad stocks are suffering on multiple fronts. The plunge in crude oil has wiped out demand for drilling new wells. That means less demand to move equipment and less demand for proppants (like fracking sand). Plus coal demand is falling.

Delivery stocks have struggled as well. FedEx (FDX) recently reported earnings that missed expectations on both the top and bottom line. Their previous earnings report the company lowered their 2015 guidance. Back in January UPS lowered their 2015 guidance and their most recent report saw revenues below estimates. The big railroad companies have been missing earnings and lowering estimates as well.

There has been a lot of attention given to the bearish divergence between the transportation stocks and the Dow Industrials. Thus far the broader market has ignored this weakness in transports. Traditionally investors viewed the transports as a thermometer of the market's health. If transports were seeing a healthy business then the economy was healthy. If transports were struggling then the economy was or would struggle. For decades there was a pretty good correlation between the two. These days there has been some doubt over how much this relationship still exists, especially since so much business takes place online.

Tonight we're not arguing if the transports are signaling a decline for the market or the economy. Instead we're looking at the transports themselves and focusing on the IYT. The ETF is clearly underperforming. It looked like it might bottom with support near $148.00. Unfortunately for the bulls the IYT just broke down under this support level. The next support could be down near its October 2014 lows in the $137-138 area. The point & figure chart is suggesting a target of $139.00.

We want to take advantage of this breakdown. Tonight we're suggesting a trigger to buy puts at $146.90. Plan on exiting prior to the August option expiration.

- Suggested Positions -

Long AUG $145 PUT (IYT150821P145) entry $3.50

06/29/15 triggered @ $146.90
Option Format: symbol-year-month-day-call-strike

Southwest Airlines Co. - LUV - close: 33.41 change: +0.38

Stop Loss: 34.05
Target(s): To Be Determined
Current Option Gain/Loss: -6.4%
Average Daily Volume = 7.9 million
Entry on June 16 at $33.85
Listed on June 15, 2015
Time Frame: Exit prior to earnings in late July
New Positions: see below

07/07/15: Hmm...shares of LUV might be showing signs of a short-term bottom. The stock market plunged to new relative lows this morning before bouncing. The weakness in LUV this morning was very mild and the stock did not hit new relative lows. When LUV did bounce it outperformed with a +1.1% gain. Of course we should keep this in context. The trend is still down and the rally stalled at short-term resistance at the 10-dma.

I am not suggesting new positions at this time.

Trade Description: June 15, 2015:
Last year LUV was one of the best performing stocks in the S&P 500 with a +124% gain. Shares are not seeing a repeat this year. In fact the stock is down -19% year to date. Most of the major airline stocks have been suffering as investors fear overcapacity will kill profits.

LUV is in the services sector. They're part of the regional airline industry. According to the company, "In its 44th year of service, Dallas-based Southwest Airlines (LUV) continues to differentiate itself from other air carriers with exemplary Customer Service delivered by more than 46,000 Employees to more than 100 million Customers annually. Southwest operates more than 3,400 flights a day, serving 93 destinations across the United States and five additional countries."

There are plenty of bullish investors rooting for LUV. After years of belt tightening with high oil prices the airline industry finally found some discipline and profits boomed. LUV has been a great example and many consider it the "best-in-breed" among the major airliners. LUV's earnings have surged from $0.43 a share in 2011 to $1.64 per share in 2014.

The big drop in crude oil last year was a major boon for most of the airline companies. Fuel is a huge expense and while oil has bounced off its 2015 lows it is still a lot cheaper than last year's prices. So why are airline stocks getting crushed? The biggest worry is the industry will build into much capacity (over supply) and this will lead to price wars, which could slash profitability.

On May 20th airline stocks were crushed, shares of LUV included, after the American Airlines CEO said they would aggressively compete on price. This is after AAL had already warned that their margins would shrink in 2016 versus 2015. News that LUV was planning to boost capacity by +8% in 2015 also helped spark the plunge lower.

The sell-off in airline stocks has continued as more companies downgrade their outlook. United Airlines (UAL) recently reported that their capacity had outpaced traffic growth. Delta (DAL) warned that their Q2 revenues would decline. Even LUV warned that their May passenger revenue per available seat mile (PRASM) was down -6% from a year ago. They adjusted their 2015 Q2 PRASM estimate to be down -4% to -5% from a year ago.

In spite of all the negativity there are a ton of analysts who are still bullish on the group. If you do any research you'll see a lot of voices shouting that the airline stocks are a buy. You'll hear how the airlines will avoid the mistakes of the past. There are plenty of analysts suggesting the airlines are a buy because their valuations are so cheap. Even the International Air Transport Association (IATA) recently raised their 2015 global estimate on airline profits from $25 billion to 29.3 billion thanks to lower oil prices and record high load factors (near 80%).

On one hand the bullish view point on airline stocks is true. Traffic is still growing. Oil prices remain depressed compared to the last few years. Valuations do look cheap. Eventually this group will get so cheap that they will find a bottom. Unfortunately that could be another -10% to -20% from current levels.

Technically LUV is a sell. The stock produced a bearish double top with its peaks in January and March. It has sliced through multiple layers of support and broken the longer-term up trend. The $34.00 level looks like short-term support. We are suggesting a trigger to launch short-term bearish positions at $33.85. Earnings are coming up in late July and we'll likely exit before LUV reports.

- Suggested Positions -

Long SEP $33 PUT (LUV150918P33) entry $1.87

07/06/15 new stop @ 34.05
06/22/15 new stop @ $35.45
06/16/15 triggered @ $33.85
Option Format: symbol-year-month-day-call-strike

SM Energy Company - SM - close: 44.29 change: +2.31

Stop Loss: 45.25
Target(s): To Be Determined
Current Option Gain/Loss: -27.3%
Average Daily Volume = 1.6 million
Entry on June 19 at $44.49
Listed on June 13, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

07/07/15: Many of the oil and energy stocks produced the biggest bounces today. SM fell to $40.53 at its lows and then ricocheted higher. By the closing bell SM was up +5.5% on the day and up +9.2% from its midday low.

At the moment, this looks like nothing more than an oversold bounce. The bearish trend remains in place. Currently our stop loss is at $45.25. More aggressive traders may want to put their stop above technical resistance at the 20-dma near $46.00 instead.

No new positions at this time.

Trade Description: June 13, 2015:
SM has been around a long time. They were founded back in 1908. The company was formerly known as St. Mary Land & Exploration Company but they changed their name to SM Energy Company about five years ago.

SM is in the basic materials sector. According to the company, "SM Energy Company is an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in onshore North America."

SM operates in the Rocky Mountain region including the Bakken and Three Forks formations. Further south, they drill in the Haynesville and Woodford shales of Texas and Oklahoma. SM also operates in the Permian region of Texas and New Mexico. Even further south SM drills in the South Texas area with the Eagle Ford shale formation.

Crude oil's plunge in late 2014 crushed the oil sector and shares of SM followed it lower. Yet SM appeared to be having trouble before the big drop in oil prices. The company has missed Wall Street's earnings estimates the last four quarters in a row.

The huge drop in oil sparked significant cutbacks across the oil and gas industry with most major exploration companies reducing their capital spending plans. When SM reported their Q4 earnings in February 2015 they missed the EPS number by five cents and revenues were down -6.4% from a year ago. Management also slashed their 2015 investment plans by -44% from $1.9 billion to $1.0 billion.

SM reported its 2015 Q1 numbers on May 5th. Analysts were expecting a profit of $0.29 per share on revenues of $543.1 million. SM delivered a profit of $0.21 as revenues plunged -42% to $365.9 million.

Citigroup issued a research report last month that suggested U.S. oil producers will still be able to profit with oil at depressed prices. Here's a quote from a Bloomberg article, "belt-tightening across the industry and more strategic drilling in prolific areas would deliver ample profits even at $50 crude. The improvement is driven by costs that are expected to fall by 20 to 30 percent and techniques that allow rigs to wring 30 percent more oil or natural gas from each well compared with a year ago." That definitely seems like ammunition for the bulls to be buying some of the oil producers. Yet the group continues to lag. They are facing some stiff headwinds.

Crude oil has produced a +25% bounce off its March 2015 lows. Yet the rally in oil has stalled the last few weeks with the commodity churning sideways. The recent OPEC meeting showed that the Middle East shows no signs of slowing down their production. The world is temporarily facing a small oil glut.

Meanwhile currencies could play an issue here. It is widely accepted that the long-term trend for the U.S. dollar is now higher. The Federal Reserve will eventually raise rates, either later this year or early next year. When they start raising rates it should boost the dollar. At the same time central banks around the world (like Japan and Europe) are in the middle of huge QE programs that will drive their currencies lower. Naturally this will lift the dollar even higher. A rising dollar pushes commodities lower.

Technically shares of SM have been very weak. The broke down from a bullish channel a couple of weeks ago. The stock has also sliced through some psychological support levels. The point & figure chart is currently forecasting at $40.00 target. You could argue that SM is already oversold. However, the path of least resistance is lower. Tonight we are suggesting a trigger to buy puts at $44.90 with a wide stop loss at $50.25 just in case SM does see a little oversold bounce.

- Suggested Positions -

Long AUG $40 PUT (SM150821P40) entry $1.65

07/06/15 new stop @ 45.25
06/23/15 new stop @ 48.75
06/19/15 triggered on gap down at $44.49, suggested entry was $44.90
Option Format: symbol-year-month-day-call-strike


Cyber Security ETF - HACK - close: 30.59 change: -0.18

Stop Loss: 30.45
Target(s): To Be Determined
Current Option Gain/Loss: -62.2%
Average Daily Volume = 769 thousand
Entry on June 30 at $31.55
Listed on June 29, 2015
Time Frame: Exit PRIOR to August expiration
New Positions: see below

07/07/15: It was a volatile morning for the market. The major indices plunged and that helped drive HACK to pierce support near $30.00 and its 100-dma.

We had anticipated more weakness in HACK and raised our stop loss to $30.45 yesterday.

*small positions to limit risk* - Suggested Positions -

AUG $33 CALL (HACK150821C33) entry $0.90 exit $0.34 (-62.2%)

07/07/15 stopped out
07/06/15 new stop @ 30.45
06/30/15 triggered @ $31.55
Option Format: symbol-year-month-day-call-strike