Option Investor

Daily Newsletter, Saturday, 3/16/2019

Table of Contents

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

Market Wrap

Five Month Recovery

by Jim Brown

Click here to email Jim Brown

It has been five months since the October 10th crash and most of the losses have finally been erased.

Weekly Statistics

Friday Statistics

The S&P has recovered the 14% decline since October 10th, but it still has about 4% to go to reach the 2,930 high close from September 20th. I would say as long as we can avoid a headline disaster over the next couple weeks, the odds are good we will retest that high. The hard part is over with the close over 2,815. If the market can confirm on Monday with an added gain, the price chasing should begin. The break over 2,815 should trigger a fear of missing out (FOMO) response. The prior high is now so close it will become an even stronger price magnet for the index.

The Nasdaq Composite lost 1,919 points since the August 29th high at 8,109. That is a 31.0% decline. Since the Christmas bottom the Nasdaq has rebounded 1,497 points or 24.2%.

Those two indexes have recovered the majority of their losses and are moving towards a retest of the highs. The Russell 2000 fell from 1,740 to 1,267 or -473 points, -37.3%. It has yet to rebound through 1,600 and Friday's performance was disappointing. The index rallied 14 points intraday then gave it all back. Only a last-minute surge kept the Russell from closing negative.

Here is the key point. The Russell is 2,000 stocks, mostly domestic companies and representative of all sectors. The broader market is not participating to the degree of a few big cap stocks. The rally this week was liquidity driven and led by a few large cap techs. Next week's market performance will depend on the small caps participating to some extent. The Russell is the sentiment indicator for fund managers. If sentiment does not improve, the big cap rally will falter.

Here is a risk. The high in January 2018 was 2,872. What is the possibility for a head and shoulders pattern at that level given the negative earnings forecast for Q1 and the delays in a China trade agreement? While this is a possibility, I think there is a greater chance of testing the 2,930 high and then failing for those same reasons. Hopefully, I am wrong.

Friday was a good news, bad news day for economics. The Job Openings Labor Turnover Survey (JOLTS) for January showed a near record 7.581 million job openings. That is 4.8% of all current employment and a monster number. This is also 15% higher than January 2018. The record was 7.626 million in November. There was a drop to 7.479 million in December but that looks like just a blip in the trend. There are more jobs than there are unemployed workers looking for jobs with only 0.9 workers for available job.

Hires rose from 5.717 million to 5.801 million. Separations rose from 5.469 to 5.550 million. Quits rose from 3.391 to 3.490 million. Layoffs declined from 1.751 to 1.723 million. The gap between openings, 7.581 million and hires at 5.717 million is a clear indication of how difficult it is to find qualified workers.

This report confirms the big Nonfarm Payroll miss at 20,000 jobs last Friday was a complete fluke. There is something wrong with the data because this report spans the survey period for the payroll report. If there was a dramatic change it would have been reflected here.

Consumer sentiment for March rose from 93.8 to 97.8 as the effects of the government shutdown fade away. Tax refunds are starting to appear and that always lifts sentiment. The present conditions component rose from 108.5 to 111.2 and the expectations component rose from 84.4 to 89.2. The delay in refunds due to the government shutdown will delay the rebound in sentiment and likely depress retail sales and GDP for Q1.

Those respondents expecting wages to rise over the next year rose from 51.6% to 54.6%. Once we get out of tax season and the China trade agreement is completed, we should see a significant spike in sentiment. When the political campaigns shift into high gear late in the year, sentiment will fall again. Politicians get elected by telling people how bad things are and how they will fix them when they get to Washington. Consumers remember the bad points. With 14 announced democrats and another 17 likely to announce there will be an unbelievable amount of mud slinging against each other and against president Trump. This is going to be a very ugly campaign that will depress consumer sentiment.

Industrial production for February rose from -0.6% to +0.1%. It is hard to get excited about 0.1% especially when analysts expected a 0.4% reading. As always, I think this is a bogus number. Utility production rose 3.7% due to the abnormally cold weather. That lifted the headline number significantly. I do not think utility production should be included in this report.

The Empire State Manufacturing Survey for March fell from 8.8 to 3.7. This was the weakest number since May 2017 and analysts were expecting 8.5. This is down from 21.4 as recently as November. New orders fell from 7.5 to 3.0. Backorders rose slightly from -0.7 to +2.2. Employment spiked from 4.1 to 13.8 and was the most bullish component. Bearish components included a rise in prices paid from 27.1 to 34.1 and a decline in prices received from 22.9 to 18.1. They paid more and sold for less. That is not a good scenario.

The recent string of negative economic reports has depressed the real time Atlanta Fed GDPNow forecast to 0.4% growth for Q1. This is a direct result of the government shutdown, a month without spending by 800,000 workers and the delay in millions of tax refunds. This will improve but not materially until Q2. The Fed is still expecting 1.4%-1.6% growth in Q1 and they will update those numbers next week.

The yield on the ten-year fell to 2.58% intraday on Friday as the economic outlook soured, China's industrial production fell to a 17-year low and a complicated Brexit is looking more likely as each day passes. The 52-week low is 2.55%.

The US pulled all its administrative people out of Venezuela saying their presence limited our response to the humanitarian disaster. The president sent 5,000 troops to neighboring Columbia as a rapid reaction force. Russia sent several thousand Spetsnaz special forces troops into Venezuela to support the Maduro regime. China has several thousand troops in country for "humanitarian" reasons. China wants to protect its $20 billion in oil backed loans. Cuba has over 1,000 troops working as presidential protection details and to maintain civil order. The potential for a violent conflict in Venezuela is growing by the day. That is causing a flight to safety in treasuries.

The economic calendar for next week is uninspiring. The biggest event is of course the FOMC decision and press conference on Wednesday. Normally the day before a FOMC meeting is positive. In the current market I believe we could see Monday positive as well assuming we can avoid a headline disaster over the weekend.

The Fed is not expected to change rates. The current consensus does not expect a rate hike until December. That target is slowly moving into the future and quite a few analysts now believe it could be mid 2020 and others believe the next rate change could be a rate cut.

With China pouring on stimulus and the EU facing a stimulus situation as a result of Brexit concerns and a slowing economy, the Fed is not going to raising rates in that environment.

Analysts are hoping the Philly Fed Business Survey will return to expansion after falling into contraction in February. The Philly Fed survey is the most important of the regional reports. Another month in contraction could easily turn equities negative.

As you can tell by the small graphic below the earnings cycle is over. The three big names for this week are FedEx, Micron and Nike. These are all Q1 reports, actually for the three months ending on February 28th. They are considered Q1 reports for our purposes. Nine S&P companies will report earnings next week.

To date, 496 S&P companies have reported Q4 earnings. The final total is expected to show 16.8% earnings growth and 5.1% revenue growth. The current PE is 16.7. There have been 79 guidance warnings for Q1 and 30 guidance upgrades.

The current forecast for Q1 earnings growth is a decline of -1.5% but it has stabilized at that level for the last week. It has stopped moving lower at least in the short term. Since earnings estimates normally rise about 4% during the reporting cycle, Q1 could still end up with positive earnings growth. Q2 earnings growth is projected at 3.1%, Q3 2.9% and Q4 9.3%. The earlier quarters have much higher comps. For all of 2018, earnings are expected to rise 24.0%. For 2019 the forecast is 3.6% and a significant difference. Actual S&P earnings in 2018 were (projected) $162.03. They are forecast to rise to $167.93 in 2019 and $168.05 in 2020. That is VERY slow growth through 2020 and not much to power the market.

There were no earnings of consequence on Friday. There were four big reports Thursday evening that moved those stocks.

Broadcom (AVGO) reported earnings of $5.55 per share that beat analyst estimates for $5.22. Revenue was $5.79 million and narrowly missed estimates for $5.82 billion. The company no longer provides quarterly guidance, but they reaffirmed full year revenue guidance for $24.5 billion. They also said they would return $12.5 billion to shareholders through buybacks and dividends in 2019. They said chip sales would bottom in Q2 during the seasonal smartphone slump but then accelerate sharply in Q3/Q4.

Deutsche Bank raised their price target to $330 and Barclays's raised their target to $275. Credit Suisse raised their target to $320. Shares rallied 8% on the results to $290.

Shares of Ulta Beauty (ULTA) spiked 8.3% after the company reported earnings of $3.61 that beat estimates for $3.56. Revenue of $2.12 billion rose 10% and beat estimates for $2.11 billion. Same store sales rose 9.4% with a 25% jump in online sales. Analysts were expecting 7.9%. Amazon is starting to be a challenge. Ulta offers more than 20,000 products from 500+ brands including their private label. Amazon is gaining market share in the cosmetics sector. Despite the broadening product line at Amazon, Ulta said they are holding their own because customers want to come into their stores and shop. "Four out of five millennials enjoy experimenting with different brands" and they can do that in the store.

The company guided for full year earnings of $12.65-$12.85 based on a 24% tax rate and share reductions from a $700 million stock buyback program.

Oracle (ORCL) reported earnings of 87 cents and analysts expected 84 cents. Revenue declined from $9.68 billion to $9.61 billion but still beat estimates for $9.58 billion. The company guided for a current quarter drop in revenue below estimates for $11.15 billion. The Co-CEO said the strengthening dollar would be a 3-cent headwind to earnings.

On the positive side, cloud services revenue rose 27.9% and slightly better than the 21.5% industry average. Shares fell $2 at the open but rebounded to close flat.

Adobe Systems (ADBE) reported earnings of $1.71 that beat estimates for $1.62. Revenue of $2.6 billion beat estimates for $2.55 billion. The company guided for current quarter earnings of $1.77 on revenue of $2.70 billion. Analysts were expecting $1.88 on $2.72 billion. Shares fell -4% on the news.

All of Adobe's segments grew sharply with overall revenue up 25%. They blamed some of the Q1 weakness on a shift in accounting standards from ASC 605 to ASC 606. We will see multiple companies mention this in their 2019 reports.

S&P announced that Adobe will be added to the S&P-100 at the open on March 20th. They are replacing Twenty-First Century Fox that is being acquired by Disney.

Tesla (TSLA) announced its new Model Y crossover SUV and was met with poor reviews. The car will use 75% of the parts used in a Model 3 and analysts said the new car looked like an oversized Model 3. In theory it seats 5 but it would be a very crowded trip.

Deliveries of the high-end version will begin in late 2020 with a price tag in the $69,000 range. Deposits to place a reservation rose to $2,500 compared to the $1,000 for a Model 3. There were no comments about how many people had reserved, unlike the constant bragging about the 400,000 people that reserved a Model 3. Analysts said the higher deposit suggested a cash bind since the car will not be available until late 2020. The car is expected to be built at Gigafactory 1 in Nevada. When completed, Gigafactory 1 will have 15 million square feet and be the largest building in the world. Tesla just broke ground on Gigafactory 3 in Shanghai. Gigafactory 2 is in Buffalo NY.

There was a lot of negative press about the enthusiasm for the new car. The presentation was low key and Musk was even heckled from the audience at the invitation only event. The cult of Musk appears to be fading. Cowen reaffirmed their sell rating and $200 price target.

If you are thinking about buying an EV checkout the Jaguar I-Pace.

Apple shares had a good week with a surge from 170 to $186. It was not that all the news was good but there was enough to create a buying frenzy. A judge ruled that Qualcomm had to pay Apple $1 billion in rebates that had been withheld because of Apple's nonpayment of royalties due to Qualcomm. This is just a temporary ruling since the bigger cases against Apple are still in progress.

In another court a jury found in favor of Qualcomm claiming Apple violated three patents and awarded Qualcomm $1.41 for each phone manufactured with that technology. The total was $31 million but this is just one more small step as the big cases wind through the courts. With every patent case Qualcomm wins against Apple, that is one more patent claim they do not have to litigate in the big cases. That becomes settled law.

The competition watchdog for the EU is considering a probe against Apple and monopoly concerns over the App Store. Spotify filed a complaint against Apple saying the company should not get to charge the 30% fee on customers making Spotify purchases because Apple had its own music service. US lawmakers have been talking about splitting up Apple and breaking out the app store because of its unfair advantages. Apple gets to decide who is allowed into the store and then charge them the 30% fee on purchases.

Morgan Stanley analyst Katy Huberty said she was seeing signs of iPhone stabilization in China. She said Apple gained market share in January and February after losing share in December. They also did not revise estimates lower for builds after a long string of cuts. She said estimate cuts have "overshot to the downside" and replacement cycles have converged. She reiterated an overweight rating and $197 price target.

The Apple Watch was found to be able to detect irregular heartbeats that signal the need for further monitoring and investigation. The Atrial Fibrillation study with 400,000 participants was funded by Apple. Patients with AFib are five times more likely to have a stroke. About 2,000 study participants received notifications to be tested and one third of them were found to have AFib. This study was done with the prior version of the watch and not the current Series 4 model, which has the ability to take an electrocardiogram to detect heart problems.

Bank of America upgraded Apple from neutral to buy and raised their price target from $180 to $210. Cowen initiated coverage with an outperform and $220 price target.

Facebook (FB) did not have a good week. The service suffered a major outage on Wednesday that lasted most of the day. The company blamed it on a server configuration change.

They also announced the chief product officer, Chris Cox, who has been with Facebook since 2005 was leaving along with VP of WhatsApp, Chris Daniels. Zuckerberg's pivot to a "privacy focused social platform" with encrypted communications has created some internal unrest. This privacy pivot is an effort to head off attacks by dozens of regulators around the world on Facebook's lack of privacy and sale of customer data.

According to the NYT, federal prosecutors are looking into partnerships and data distribution agreements for Facebook and others. We know from recent disclosures more than 150 companies had access to user data on Facebook despite prior claims from Facebook that the data was private or had been restricted at some point in the past. Apparently, nearly every retailer including Amazon had nearly full access. For instance, Amazon was able to see friends and family data while Netflix and Spotify were able to see private messages between friends.

On Friday, Apple released a 60 second commercial suggesting Apple was the only company that took customer privacy seriously. It is a humorous plug in a crowded sector. See it here.

Crude prices rallied to a four-month high at $59 on Friday as the production outages in Venezuela continued. The power outage across most of Venezuela is impacting production, which is now around 900,000 bpd, down from 2.5 million bpd about two years ago.

Natural gas prices remained flat despite a 204 Bcf decline in inventories last week. Current inventories in the US fell to 1,184 BCF, only about five weeks of supply if the cold weather continues to plague the Midwest and Northeast. Investors are betting warmer weather will appear before we run out of gas. With the first day of spring on Wednesday, the odds are good warmer weather is coming soon.

The rig count only declined by one rig after a -24 rig drop over the prior three weeks. With oil prices beginning to rise into the Memorial Day peak we are not likely to see any major rig declines in the weeks ahead.


The quadruple witching option expiration and the quarterly rebalance of the S&P caused a 4 billion share spike in volume on Friday. Nearly 11 billion shares traded.

S&P rebalances their indexes to account for the reduction in outstanding shares as company's buyback their stock.

There were more than $1 trillion in buybacks announced in 2018. In the 4-6 week period surrounding earnings, most corporations respect a blackout period on buybacks. They do not want to be blamed for trying to influence their stock prices around an earnings report. With buybacks currently running about $265 billion a quarter, they are a major support for the market. If you take that support away from April 1st to May 15th at a time when investors are selling stock to pay their tax bills, we could see some market weakness.

The S&P movement on Friday was no doubt influenced in part by the rebalancing. In theory it should be a zero-sum day. Index funds must sell stocks that have bought back a lot of shares and then buy stocks that did not pursue buybacks because their weighting rose by default. In theory a fund selling $50 million in stocks with reduced weightings, should have spent that same $50 million on stocks with increased weightings. As Yogi Berra once said, theory never works in practice.

Regardless of the reason for the rally, we did get a strong close over the 2,815 resistance on the S&P. Now we need some confirmation on Monday with a higher close. If we fall back below 2,815 because the Friday factors are no longer lifting the market when we get to fight that resistance all over again. The next material resistance is the prior high at 2,930 and that is a big target. Normally when the indexes get this close to those major levels, they succeed in touching them but it is the post touch reaction that counts. Breakout to new highs or failure at a double top? Time will tell.

The Dow has a way to go to retest resistance at 26,191. The decline in Boeing erased more than 300 points from the Dow and that made the Dow fall behind the Nasdaq and S&P. Boeing appears to have bottomed at $370 and gained more than $5 on Friday, so its drag on the Dow should be over. Since this is a liquidity driven rally, the large caps are being favored and the Dow should catch up with the S&P in the days ahead.

The Nasdaq closed over prior resistance and appears poised for a run to the prior high at 8,109. The A/D line was not overly positive at 3:2 advancers over decliners but there were 112 new 52-week highs. Considering the declined in ADBE, FB and GOOGL, I am surprised the index did so well, but Broadcom and Amazon overcame the weakness in those stocks.

As I said earlier, this has been a liquidity driven rally led by a few large cap stocks, mostly in the tech sector. The Russell has not participated and traded almost perfectly flat for the last four days. As the fund manager sentiment indicator, we need for the Russell to wake up quickly or the big cap rally could fail.

I am positive on the market ahead of the FOMC decision. Tuesday before a decision is normally positive and recently Monday has tended to be positive as well although not with a lot of conviction. The Monday after a quadruple witching expiration is normally flat as investors clean up their portfolios from the expiration leftovers. People who wrote options can wake up on Monday with stock in their account that they need to sell. Others that saw a lot of margin freed up by expiration can begin establishing new positions for the April option cycle.

The wild card here remains the China trade talks. I am shocked that moving the target date for a meeting into April was not met with more selling. Obviously, the claims of "concrete progress" and that President Xi wanted to conclude negotiations with a state visit to the US, offset any concerns that the talks could fail. This remains a risk until a deal is completed.

Enter passively and exit aggressively!

Jim Brown

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Index Wrap

Big Cap Rally

by Jim Brown

Click here to email Jim Brown
The Nasdaq and S&P closed at 5-month highs as money poured into big cap tech stocks. Despite the new highs it was a reluctant rally. Breadth was minimal and the gains were led by only a few stocks. Across the entire market advancers only had a 5:3 advantage over decliners. The Nasdaq gains were led by chip stocks with the Semiconductor Index rising 100 points in a week to close at a 6-month high. Broadcom helped lead the charge with an 8% gain on Friday. Note that the Nasdaq and $SOX were in lock step at the close on Friday, but the Nasdaq was ahead earlier in the week. The decline in Facebook and Adobe caused the Nasdaq to slow its gains on Friday.

Much of the Nasdaq's gains came from Apple and Amazon. Apple, the black line on the chart, had been trading sideways for five weeks. Shares exploded higher last week and that lifted the Nasdaq from its decline the prior Friday.

On the FANG chart, Amazon had been the nonperformer since early February, but it finally turned positive as Facebook and Google turned negative. Netflix in pink continues to hold its recent gains.

The decline in the Nasdaq A/D line the prior week was material. It was deep enough that the strong gains last week did not recover the prior strength. The A/D was only 3:2 positive on Friday despite the decent gain. This was led by a very few stocks with a few troops following along. Out of the 3,116 stocks on the Nasdaq 1,198 were negative on Friday.

The Nasdaq was the market leader despite the weak breadth. The five-month high close puts the index above all the material resistance until it moves well over 8,000. There is some congestive resistance, but it should not be material.

The A/D on the S&P was 2:1 positive on Friday and the A/D line broke out to a new high. There were 320 advancers and 169 decliners. It was far from a bullish market, but it was nicely positive. I am sure a lot of the breadth issues were related to the S&P rebalance at the close.

Strangely, the percentage of S&P stocks over their 50-day average declined by more than 10%. This was due to the week of profit taking compared to a rising average. The 3% dip in the S&P the prior week put many stocks with larger declines back below their short-term average. With the averages rising from the 10-weeks of gains, it will be tough for this percentage to return to the highs.

With the resistance at 2,815 broken the next major target is the historic high at 2,930. It is almost clear sailing to that level if we can avoid a headline disaster.

The Volatility index has also declined to 5-month lows and just over 12. The support from last September is around 11.75. The VIX can go lower but typically when we dip under 12 investors begin to get cautious. When the Vix is low it is time to go. When the Vix is high, it is time to buy.

The confirmation of the market direction comes from the Russell 3000. This is the 3,000 largest, tradable stocks in the market. This IS the market. Everything else is noise. The R3K closed over final resistance and the next target should be the historic high at 1,738.

I get concerned when everything appears to be lining up for a run to new highs. The distance on the major indexes suggests about three weeks at the current rate of advance. We know the odds of another three-week rally are slim but still possible. There is more than likely another bout of profit taking somewhere in the middle. Let's call it four weeks and that puts us right at April option expiration and income Tax Day.

April can be volatile because of selling to pay taxes. Normally it is more volatile if the prior year saw big gains. There are more taxes to pay so more selling is required. Last year there were no big gains. May to September were up but Jan-Apr and Oct-Dec were down. That suggests maybe April will not be especially volatile this year.

I am positive for the next couple weeks, but I am worried about the potential for a head and shoulders or double top formation. With earnings and economics weak, we are at increased risk for a negative headline to push us off the cliff.

Enter passively and exit aggressively!

Jim Brown

Send Jim an email

New Option Plays


by Jim Brown

Click here to email Jim Brown

Editors Note:

Time to return to this prior favorite. We were bumped out of SalesForce a couple weeks ago and now they are starting to rally again. If the Nasdaq is going to retest its highs, SalesForce should make new highs as well.


New positions are only added on Wednesday and Saturday except in special circumstances.


CRM - SalesForce.com - Company Profile

Salesforce.com, Inc. develops enterprise cloud computing solutions with a focus on customer relationship management. The company offers Sales Cloud to store data, monitor leads and progress, forecast opportunities, and gain insights through analytics and relationship intelligence, as well as deliver quotes, contracts, and invoices. It also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as a field service solution that enables companies to connect agents, dispatchers, and mobile employees through a centralized platform, which helps to schedule and dispatch work, and track and manage jobs in real-time. In addition, the company offers Marketing Cloud to plan, personalize, and optimize one-to-one customer marketing interactions; Commerce Cloud, which enables companies to enhance engagement, conversion, revenue, and loyalty from their customers; and Community Cloud that enables companies to create and manage branded digital destinations for customers, partners, and employees. Further, it provides Quip collaboration platform, which combines documents, spreadsheets, apps, and chat with live CRM data; Salesforce Platform for building enterprise apps, as well as artificial intelligence (AI), no-code, low-code, and code development and integration services, including Trailhead, Einstein AI, Lightning, Internet of Things, Heroku, Analytics, and AppExchange; and solutions for financial services, healthcare, and government. Additionally, the company offers cloud services, such as consulting and implementation services; training services, including instructor-led and online courses; and support and adoption programs. It provides its services through direct sales; and consulting firms, systems integrators, and other partners. salesforce.com, inc. has a partnership with Apple Inc. to develop customer relationship management platform. The company was founded in 1999 and is headquartered in San Francisco, California. Company description from FinViz.com.

Shares fell from $165 to $150 after the company reported earnings of 70 cents that beat estimates for 55 cents. Revenue of $3.6 billion beat estimates for $3.56 billion. The problem came on the guidance. They projected earnings of 60-61 cents on $3.67-$3.68 billion. Analysts were expecting 63 cents on $3.69 billion. For the full year the company projected $2.74-$2.76 on a 20% increase in revenue to $15.95-$16.05 billion. Analysts expected $2.75 and $15.97 billion. SalesForce also projected revenue of $26-$28 billion in 2023.

The company said it was fighting headwinds because of the strong dollar. However, billings rose 22% to $6.79 billion and beat estimates for $6.43 billion. Their future unearned contract revenue rose 25% to $25.7 billion. This is money that will become due in future months. If a customer signs a 24 month deal for $1,000 a month, SalesForce only gets to count that revenue as it is earned at $1,000 a month. They have $25.7 billion in contracted but unearned revenue. Their RPO, contracted revenue expected to be earned within 12 months, rose 24% to $11.9 billion. They also expect that number to be up 24% at the end of the April quarter.

The "SalesForce Platform and Other" segment saw revenue grow 54% to $825 million. Revenue from the EMEA region rose 25%. Revenue from Asia-Pacific rose 25%. Contracts over $20 million rose 48%. There were two deals over $100 million signed last quarter.

Yes, shares fell after earnings but who would not want to own a business that is growing this fast? It was just a knee jerk reaction and I wish I had recommended it again the prior week.

Buy May $170 call, currently $2.99, stop loss $155.85.


No New Bearish Plays

In Play Updates and Reviews

Fingers Crossed

by Jim Brown

Click here to email Jim Brown

Editors Note:

The resistance at 2,815 was broken but is it a one-day wonder? I would be very excited to see the market tack on some additional gains on Monday after closing above S&P resistance on Friday. The index closed 8 points off its intraday high so there were some sellers. This is a positive development and confirmation of the move on Monday could trigger a lot of price chasing as we close in on the prior high at 2,930.

Current Portfolio

Stop Loss Updates

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

Profit Targets

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

Current Position Changes

No Changes

Full updates on all plays on Wednesday and Saturday. Only closed plays are updated on other days.

BULLISH Play Updates

CAT - Caterpillar - Company Profile


No specific news. Shares trading sideways while we wait for a trade deal.

Original Trade Description: March 2nd

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Its Construction Industries segment offers asphalt pavers, compactors, cold planers, feller bunchers, harvesters, motorgraders, pipelayers, road reclaimers, skidders, telehandlers, and utility vehicles; backhoe, knuckleboom, compact track, multi-terrain, skid steer, and track-type loaders; forestry and wheel excavators; and site prep and track-type tractors. The company's Resource Industries segment provides electric rope and hydraulic shovels, draglines, rotary drills, hard rock vehicles, track-type tractors, mining trucks, longwall miners, wheel loaders, off-highway and articulated trucks, wheel tractor scrapers, wheel dozers, landfill and soil compactors, machinery components, electronics and control systems, select work tools, and hard rock continuous mining systems. Its Energy & Transportation segment offers reciprocating engine powered generator sets; reciprocating engines and integrated systems for the power generation, marine, oil, and gas industries; turbines, centrifugal gas compressors, and related services; remanufactured reciprocating engines and components; and diesel-electric locomotives and components, and other rail-related products. The company's Financial Products segment provides operating and finance leases, installment sale contracts, working capital loans, and wholesale financing; and insurance and risk management products. Its All Other operating segment manufactures filters and fluids, undercarriage, ground engaging tools, fluid transfer products, precision seals, and rubber sealing and connecting components; parts distribution; integrated logistics solutions and distribution services; and digital investments services. The company was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. The company was founded in 1925 and is headquartered in Deerfield, Illinois. Company description from FinViz.com.

Caterpillar has had a rough five months. Shares were testing $160 when the China tariff problem began, and they have languished as low as $112 in the aftermath. Every time it looks like the China talks are progressing, shares run up to about $140. Every time it looks like talks are breaking down, they pullback to $130 or lower. If we ever get an actual agreement, they should blast higher to the $150-$160 level once again.

Shares fell from $142 to $130 over the last two weeks on the latest headlines about negotiations. With the president continually saying there will be a meeting with President Xi in March, that gives us a short-term window for success. CAT also has reasonably priced options.

Earnings April 29th.

Position 3/11/19:
Long May $140 Call @ $3.25 , see portfolio graphic for stop loss.

INTC - Intel - Company Profile


No specific news. Intel did declare a 31.5 cent dividend payable June 1st to holders on May 7th.

Original Trade Description: Feb 16th

Intel Corporation designs, manufactures, and sells computer, networking, data storage, and communication platforms worldwide. The company operates through Client Computing Group, Data Center Group, Internet of Things Group, Non-Volatile Memory Solutions Group, Programmable Solutions Group, and All Other segments. Its platforms are used in notebooks, desktops, and wireless and wired connectivity products; enterprise, cloud, and communication infrastructure market segments; and retail, automotive, industrial, and various other embedded applications. The company offers microprocessors, and system-on-chip and multichip packaging products. It also provides NAND flash memory products primarily used in solid-state drives; and programmable semiconductors and related products for communications, data center, industrial, military, and automotive markets. In addition, the company develops computer vision and machine learning, data analysis, localization, and mapping for advanced driver assistance systems and autonomous driving. It serves original equipment manufacturers, original design manufacturers, industrial and communication equipment manufacturers, and cloud service providers. Intel Corporation has collaboration with Tata Consultancy Services to set up a center for advanced computing that develops solutions in the areas of high performance computing, high performance data analytics, and artificial intelligence. The company was founded in 1968 and is based in Santa Clara, California. Company description from FinViz.com.

In November Intel announced a $15 billion share buyback program. Intel had $4.7 billion remaining under a prior authorization putting them just shy of $20 billion. This represents almost 10% of the outstanding shares. Six years ago, Intel had 6.5 billion shares outstanding. If they complete this buyback program, they will have just over 4 billion shares outstanding.

Intel is poised to profit from the coming 5G revolution. Apple has already said they are going to use Intel's 5G model in their 2020 phones. Intel has participated in more than 25 5G trials with potential partners. In the last quarter Intel said revenue from communications service providers rose 30%. The company said in August it is pursuing the $24 billion communications infrastructure segment of the market and expects to gain significant market share by 2022. Intel is not just a PC and server processor company any more.

Intel reported Q4 earnings of $1.28 that beat estimates for $1.22. However, revenue of $18.66 billion missed estimates for $19.02. Their biggest problem was guidance for Q1 of 87 cents on $16 billion in revenue. Analysts were expecting $1 on $17.29 billion.

Intel is poised to benefit from a trade agreement with China. They currently get 24% of their revenue from China. With the advent of 5G, Intel is poised to be a leading player. They bill themselves as an "end to end" provider. The 5G revolution is not only going to replace nearly every piece of networking gear on the planet, every cellphone owner will be upgrading to a new 5G phone, many with an Intel modem. Remember the old commercials from the 2000's, "Intel Inside?" With Intel's new push into the internet of things (IoT), smartphone communications and self-driving vehicles, they really will be inside most electronic products.

Intel is expected to grow revenue by 5% in 2019. That is better than the sector forecast for 2% growth.

Earnings April 25th.

We have to reach out to the June option cycle to get a strike that comes after earnings and will keep the premiums inflated. We can buy time, but we do not have to use it.

Position 2/19:
Long June $55 call @ $1.53, see portfolio graphic for stop loss.

NTNX - Nutanix - Company Profile


The company announced an analyst day to be broadcast live on the web for Wednesday at 1:PM ET. That should cause some volatility. Hopefully in our direction.

Original Trade Description: March 13th

Nutanix, Inc., together with its subsidiaries, develops and provides an enterprise cloud platform in North America, Europe, the Asia Pacific, the Middle East, Latin America, and Africa. Its solution addresses a range of workloads, including enterprise applications, databases, virtual desktop infrastructure, unified communications, and big data analytics. The company offers Acropolis, an open platform comprising hyperconvergence, native virtualization, enterprise storage, virtual networking, and platform services; and Prism, an end-to-end consumer-grade management plane providing management and analytics across its software products and services. It also provides Nutanix Calm that offers native application orchestration, automation, and lifecycle management to its enterprise cloud platform. In addition, the company offers Beam, a multi-cloud optimization service; and Frame, a desktop-as-a-service. It serves customers in a range of industries, including automotive, consumer goods, education, energy, financial services, healthcare, manufacturing, media, public sector, retail, technology, and telecommunications, as well as service providers. The company was founded in 2009 and is headquartered in San Jose, California. Company description from FinViz.com.

Nutanix shares were crushed on March 1st after they posted an adjusted loss of 14 cents. Analysts were expecting 25 cents, so this was a beat. Revenue of $335.4 million beat estimates for $331 million. However, billings rose from $355.9 million to $413.4 million. Analysts were expecting $416.5 million and not a big miss.

The problem came from guidance. They guided for the current quarter for a loss of 60 cents on revenue of $290-$300 million and billings of $360-$370 million. Analysts were expecting 28 cents on revenue of $348 million and billings of $430.2 million. That was a major miss.

The CFO said, "The guidance reflects the impact of inadequate marketing spending for pipeline generation and slower than expected sales hiring." "We took a critical look at these areas and have taken actions to address them."

Shares fell $17 to $33 on the news. After a week of sideways consolidation shares have started to move higher. The CFO said they corrected the problem. That may not mean there will be a recovery in the current quarter but there will be a recovery. I am recommending we buy the dip.

The first option cycle out of the 30-day premium depreciation window is July. We can buy time, but we do not have to use it.

Position 3/14/19:
Long July $42.50 call @ $3.25, see portfolio graphic for stop loss.

BEARISH Play Updates

No Current Puts