Option Investor

Daily Newsletter, Tuesday, 7/14/2015

Table of Contents

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

Market Wrap

The Iranian Battle Begins

by Jim Brown

Click here to email Jim Brown

The long awaited nuclear agreement with Iran was announced this morning. That was the easy part. Now the war of words begins as the various analysts point out all the red lines the administration crossed and Congress begins the task of trying to prevent the deal from being approved.

Market Statistics

On the positive side there was very little news from Greece to disrupt the market. Earnings began to flow and investors began to focus on the market rather than European headlines.

On the negative side, the Iranian agreement is drastically different than the one proposed by President Obama when negotiations began. The president said he would not agree to any deal that did not allow anywhere, anytime inspections. That did not happen. Iran was supposed to come clean about its prior nuclear weapons research. That did not happen. Iran was going to be prevented from enriching uranium. That did not happen. Iran was going to be forced to dismantle its uranium enrichment infrastructure. That did not happen with Iran allowed to keep more than 5,000 operating centrifuges. I could go on with the problems but you get the idea.

Basically the U.S. recognized Iran as a nuclear threshold state and will allow Iran to build nuclear weapons with only a 12-month breakout period. Since Iran has never complied with any prior agreement and was caught just a couple months ago trying to buy prohibited nuclear missile technology, there is no reason to believe that Iran will comply with this new deal. This is strictly a political event and will allow Iran to receive up to $140 billion in funds held up by sanctions and those funds will be used for exporting weapons and terrorism to other nations in the Middle East and for acquiring additional nuclear weapons technology.

Ambaddasor John Bolton called the deal a "tragedy." William Kristol of the Weekly Standard said it was a "very good deal - for Iran. We have a deal. It is a deal worse than even we imagined possible. It’s a deal that gives the Iranian regime $140b in return for … effectively nothing: no dismantlement of Iran’s nuclear program, no anytime/anywhere inspections, no curbs on Iran’s ballistic missile program, no maintenance of the arms embargo, no halt to Iran’s sponsorship of terror."

Complete text of Iranian agreement

Only a couple days ago the Supreme Leader gave another death to America speech. Today an Iranian court fined the U.S. Government $50 billion for killing Iranian nationals and by assisting Iran's enemies. $50 billion fine

This agreement is going to be in the headlines for months to come. Congress has 60 days to review the agreement and either approve or deny it. However, President Obama issued a veto warning this morning saying he would veto any legislation that did not approve the agreement. This means a minimum of 67% of both houses have to vote against it in order to override a presidential veto.

Investor's Business Daily Editorial Cartoon.

The market rallied despite the Iranian news and some weak economics. The retail sales report for June showed that sales declined -0.3% compared to a previously reported +1.2% rise in May. However, that May number was revised down to a +1.0% gain. Analysts were expecting a +0.3% rise in sales in June. This was the second weakest report in more than a year.

Sales declined in almost every category. Motor vehicles declined -1.1%, home furnishings -1.6%, building materials -1.3%, clothing -1.5%, food service and bars -0.2% and non-store retailers -0.4%. The only gainers were gasoline stations +0.8%, appliances +1.0% and general merchandise +0.7%.

The NFIB Small Business Survey declined a whopping -4 points from 98.3 to 98.1 with every internal component worsening. This is the lowest level since March 2014 and only the third time in history that the headline number declined -4 points or more. In the internal components the earnings trends declined from -7 to -17, expectations for the economy to improve dropped from -3 to -9, plans to increase inventories from +4 to -4 and plans to increase employment fell from 12 to 9. A net of 17% of respondents reported weaker earnings in Q2. In a separate survey, QuickBooks found that small business revenue has declined for seven consecutive months.

The NFIB survey showed more layoffs, weaker hiring and weaker hiring plans for the next six months. This is not a good sign for the U.S. economy since small businesses produce the most new jobs.

Import prices declined -0.1% in June, compared to a +1.3% rise in May. This was in line with consensus and suggests May was an outlier. May was the only price rise in more than a year. This drop back into a decline suggests that inflationary pressures have evaporated again. Imported food prices fell -0.6%, nonfuel imports fell -0.2% while petroleum prices rose +0.8%. With oil prices falling again in July this suggests another negative month when the July report arrives in August.

The three economic reports above will have an impact on the Fed's economic outlook at the July FOMC meeting in two weeks. The Fed may want to hike rates in September but with the economic indicators weakening it may be tough to justify.

Yellen's testimony tomorrow morning will probably not mention the weakening economics. That would go against her position that the economy is strengthening enough to allow a rate hike in September. However, the impact will not be lost on the Fed. They will keep their fingers crossed that the economy rises to meet their projections and allow their bias to be proved correct.

The calendar for Wednesday is busy with the Yellen testimony having the biggest potential to move the market. I will be interested to see if the Beige Book shows any weakness from the last report since that is the Fed's analysis of the economy by region.

Earnings finally began today with several major companies reporting. JP Morgan started the ball rolling with earnings of $1.54 compared to estimates for $1.44. Net revenue fell -3.2% to $24.53 billion. Total assets were $2.45 trillion at the end of June compared to $2.58 trillion at the end of March. They made home loans of $29.3 billion, an increase of +74% but mortgage profits declined because of intense competition. Mortgage revenue declined -1% to $1.71 billion. Shares rose $1 on the news.

Wells Fargo (WFC) profits declined for the second consecutive quarter as expenses rose faster than revenue growth. Low interest rates continue to hamper bank profits. Net interest margin, the amount the bank makes between its cost of borrowing and the interest received from loans, fell from 3.15% to 2.97%. Mortgage banking revenue declined -1% but still accounted for 17% of its non-interest income. Wells made $62 billion in mortgage loans for the quarter. Earnings of $1.03 matched analyst estimates. Revenue rose +1% to $21.3 billion but missed estimates for $21.7 billion. Shares rose 50 cents on the news.

Johnson & Johnson (JNJ) reported earnings of $1.71, which beat estimates by 4 cents, with revenue declining -9% to $17.8 billion but still beating estimates. JNJ said the strong dollar was a major headwind knocking -7.2% off of revenue, as well as falling sales on their Hep-C drug because of strong competition from Gilead Sciences. JNJ raised guidance from $6.04-$6.19 to $6.10-$6.20. Shares declined -50 cents.

CSX reported earnings of 56 cents compared to estimates of 53 cents. Revenues of $3.06 billion missed estimates for $3.12 billion. Shipping volumes declined -1% hurt in part by a sharp decline in coal shipments as well as materials used in drilling oil wells like pipe and frac sand. Expenses declined -9% to $2.05 billion thanks to a drop in fuel costs from $416 million to $263 million. CSX maintained its earnings forecast for 2015 but said the high end of the range could be challenging. Shares rose $1 in afterhours to $33.11.

Yum Brands reported after the bell with earnings of 69 cents on revenue of $3.11 billion. That beat estimates of 63 cents but missed revenue estimates for $3.18 billion. KFC sales rose +6%, Taco Bell up +9% and Pizza Hut up +1%.

Same store sales in China declined -10% and slightly worse than the -8.4% analysts expected. Yum is still trying to overcome a problem with a meat supplier from several months ago. The company is opening 700 new stores in China in 2015. Shares were down about $1 after the report.

Earnings for tomorrow include Intel and Netflix. Intel (INTC) was cut to a sell by Bernstein with a $25 price target. The analyst said datacenter growth was slowing with cloud servers becoming more popular. A cloud server can run dozens of virtual machines rather than having those companies pay for an actual server for each one of the applications.

Netflix (NFLX) reports earnings after the close on Wednesday. However, they split the stock 7:1 after the close today with shares will be worth worth $100.36 each based on the $702.53 close today.

Micron (MU) saw its shares rally +11% to $19.61 state-owned Chinese company Tsinghua Unigroup reportedly was preparing a $23 billion bid that would value Micron at $21 per share. There is virtually no chance of this bid being accepted and no chance of the U.S. approving the sale if it was accepted. That price is roughly 8 times Micron's 2014 earnings. Given the cyber security problems with China and the proprietary technology in Micron products, the U.S. is not going to allow a Chinese acquisition.

Analysts said a real bid for Micron would have to be in the $35 per share range to be worthwhile despite Micron's $20 share price today. Micron was $30 in April. They warned of a slowdown in certain sectors in June but said they expect a rebound in 2016.

Twitter (TWTR) shares rallied +10% intraday when a bogus news alert said the company was negotiating with a prospective buyer. The bogus news alert looked like it came from Bloomberg with the website www.Bloomberg.Market.com recently registered by an anonymous party on July 10th. Having a website, it is easy to cut and paste HTML from a real press release to announce anything you want. The headline "Twitter Attracts Suitors" was also too short for a real Bloomberg headline. In the ten-minute period between the first tweet referencing the news alert until it was disavowed by Twitter and Bloomberg, more than 16.3 million shares traded at an average price of $37.83 or $617 million. Twitter shares opened the day at $35.78.

Amazon (AMZN) is having their 20th anniversary on Wednesday and they are celebrating with "Prime Day." They are offering ridiculous discounts on hundreds of items to account holders with Prime subscriptions. For instance a 40-inch HDTV for $115. Many prices are the lowest ever on Amazon. Starting at midnight there will be thousands of bargains and new ones will be listed every ten minutes throughout the day. They are claiming there will be more deals that on Black Friday. Amazon shares soared to another new high at $465. Click here for details

Crude prices rose +1.17 on the details in the Iranian deal. The first date to get sanctions removed is December 15th when the IAEA certifies Iran has complied with the first set of changes they are required to make. Once that certification is complete the next stage begins where sanctions can be removed. There are some doubts Iran will make the December 15th cutoff so expectations for Iranian oil coming to market are six-months at the very earliest and nine-months the most likely. That took the pressure off the oil market and short covering began.

After the bell tonight, the API oil inventories were reported to have declined -7 million barrels for last week. This caused another uptick in the futures of about 35 cents. Investors and speculators pay more attention to the EIA inventories that come out on Wednesday mornings. A big decline there could really get prices moving.


Today was not a short squeeze! For the first time in a long time the markets did not gap open and then hover at the opening high for the rest of the day. We actually saw some real buyers come into the market and the indexes moved over some critical resistance.

We had a -4% correction from the 2130 high in June on the S&P to the 2044 low last Wednesday. After three days of major short squeezes the market actually has some positive momentum. Today was the first four-day gain for the S&P since January. The S&P has now returned to within 1% of its 2130 high close back in May.

2015 has been a rocky market. We have had the most down days in the first six months since 2003. When you consider that period covers the Great Recession that is an amazing statistic.

The resistance at 2100 was broken at the open and the S&P just continued to creep higher the rest of the day. Investors are so thankful that the Greek disaster is almost over that they are celebrating by adding stocks to their portfolio.

The S&P now faces resistance at 2120 and then 2130. Support is well back at 2080.

The Dow had another good day but did not quite make it to resistance at 18,100 with the high at 18,072. The Dow has a little rougher time in trying to move back to its highs because that range from 18,100-18,165 is very congested. With multiple Dow components reporting this week the index could have some anchors.

JP Morgan added $1 to give the Dow roughly +8 points and Goldman Sachs added $2 or about +15 Dow points. Goldman reports earnings on Thursday.

Support is roughly 17,800 and resistance 18,100 and 18,165.

The Nasdaq crept up to resistance at 5100 by 11:AM and held there the rest of the day with a small buy spurt in late afternoon. Google and Amazon were major contributors. With Netflix and Intel reporting after the bell on Wednesday and Ebay, Google on Thursday there could be some challenges in moving much higher unless those companies knock it out of the park.

If the Nasdaq moves convincingly over 5100 the next major hurdle is 5150 and then the historic high close of 5161.

The Russell 2000 is approaching resistance at 1275 after three days of strong gains. This is going to be a crucial resistance point but the small caps should have better earnings than the large caps because of the lack of dollar exposure.

I am encouraged by the four days of gains and the confrontation with new resistance levels. Assuming Greece does not do anything stupid with their vote on Wednesday and Janet Yellen does not press too hard on the potential for a rate hike we could see further gains. However, I would not be surprised to see some profit taking at these levels. We had a sharp rebound off the lows and it would not be unusual to see some profit taking.

Enter passively, exit aggressively!

Jim Brown

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New Plays

Court Decision Powers Rally Higher

by James Brown

Click here to email James Brown


Community Health Systems - CYH - close: 63.25 change: +0.59

Stop Loss: 60.95
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on July -- at $---.--
Listed on July 14, 2015
Time Frame: Exit PRIOR to earnings on August 3rd
Average Daily Volume = 1.3 million
New Positions: Yes, see below

Company Description

Trade Description:
The major healthcare stocks have been in rally mode for the last couple of years. That's not true for CYH. The stock peaked in the third quarter of 2014 and spent months consolidating sideways. The situation changed after the recent court ruling on Obamacare.

CYH is in the hospital industry. According to the company, "Community Health Systems, Inc. is one of the largest publicly-traded hospital companies in the United States and a leading operator of general acute care hospitals in communities across the country. Through its subsidiaries, the Company currently owns, leases or operates 199 affiliated hospitals in 29 states with an aggregate of approximately 30,000 licensed beds. The Company's headquarters are located in Franklin, Tennessee, a suburb south of Nashville."

Looking at CYH's recent earnings history the company has developed a habit of beating the bottom line estimate but missing Wall Street's revenue expectations. The most recent report was May 5th. CYH announced its Q1 results which were $0.85 per share. That beat estimates by 19 cents. Revenues were up +17.6% to $4.91 billion yet that missed the $5.0 billion estimate. CYH's stock initially sold off on this report but a day later investors were buying the dip.

The situation for the healthcare and hospital stocks changed on June 25th. The Supreme Court of the United States voted to uphold subsidies for the Affordable Care Act (a.k.a. Obamacare). Hospital stocks rallied and shares of CYH surged to new all-time highs.

Obamacare should mean more people will have health insurance. That means fewer uninsured people arriving at the hospital. Previously CYH expected 13% of its sales to be written off for bad debts due to uninsured people. That's a huge chunk of money when you consider CYH's annual revenues are more than $5.5 billion. The SCOTUS decision to support the ACA should means millions in profit for CYH as their bad debt write offs decline.

After the SCOTUS decision shares of CYH saw multiple price target upgrades. Currently the point & figure chart is forecasting at $70.00 target. The late June rally produced a move from $55 to $65. Since then CYH has seen a pullback to about $61. This is technically a 38.2% Fibonacci retracement of the rally on the SCOTUS announcement. We see the bounce as a potential entry point. Tonight we're suggesting a trigger to open bullish positions at $63.75. Plan on exiting prior to CYH's earnings on August 3rd.

Trigger @ $63.75

- Suggested Positions -

Buy CYH stock @ $63.75

- (or for more adventurous traders, try this option) -

Buy the AUG $65 CALL (CYH150821C65) current ask $1.75
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:

Weekly Chart:

In Play Updates and Reviews

Stocks Extend Their Rally On Tuesday

by James Brown

Click here to email James Brown

Editor's Note:
The U.S. market's major indices extended their bounce to four up days in a row. Hope for a Greek deal continued to lift the market. We have updated a handful of stop losses tonight.

Current Portfolio:

BULLISH Play Updates

Benefitfocus, Inc. - BNFT - close: 43.17 change: +0.99

Stop Loss: 38.95
Target(s): To Be Determined
Current Gain/Loss: +0.8%
Entry on July 14 at $43.65
Listed on July 13, 2015
Time Frame: Exit PRIOR to earnings in August
Average Daily Volume = 173 thousand
New Positions: see below

07/14/15: It was an exciting day for the BNFT bulls. Shares surged +7.1% before retreating to a +1.94% gain at the closing bell. We were expecting BNFT to breakout higher but I don't see any specific news behind the show of relative strength. Our trigger to launch bullish positions was hit at $43.65.

Readers may want to see if the bounce continues tomorrow morning before considering new positions.

Trade Description: July 13, 2015:
BNFT was founded 15 years ago with a dream to simplify understanding your healthcare benefits. They went public in 2013. Now they're the #1 cloud-based benefits management platform.

The company is considered part of the technology sector, specifically the application software industry. According to the company, "Benefitfocus, Inc. (BNFT) is a leading provider of cloud-based benefits software solutions for consumers, employers, insurance carriers and brokers. Benefitfocus has served more than 25 million consumers on its platform that consists of an integrated portfolio of products and services enabling clients to more efficiently shop, enroll, manage and exchange benefits information. With a user-friendly interface and consumer-centric design, the Benefitfocus Platform provides one place for consumers to access all their benefits. Benefitfocus solutions support the administration of all types of benefits including core medical, dental and other voluntary benefits plans as well as wellness programs."

Revenue growth has been pretty strong. BNFT reported its Q4 results back on February 24th. Earnings were a loss of ($0.39) per share. That was 23 cents better than expected. Revenues were up +32.7% to $40.2 million, which was above estimates. Management raised their Q1 guidance.

On May 6th the company announced its Q1 results, which were a loss of ($0.48) per share. That beat estimates by four cents. Revenues were up +39% from a year ago to $42.7 million, again this was above expectations. This time guidance was a little soft for Q2 and in-line with estimates for 2015.

Shares started to rally in June. That rally accelerated mid June thanks to an analyst upgrade. Now after a -18% correction from its June highs shares of BNFT look poised to run again. A rally from here could spark some short covering. The most recent data listed short interest at 32% of the very small 18.37 million share float. Tonight we are suggesting a trigger to open bullish positions at $43.65. More conservative traders may want to use a trigger at $44.05 instead. Our short-term target is the $50.00 area but we will plan on exiting prior to BNFT's earnings report in mid August (no firm date yet).

- Suggested Positions -

Long BNFT stock @ $43.65

- (or for more adventurous traders, try this option) -

Long AUG $45 CALL (BNFT150821C45) entry $2.85

07/14/15 triggered @ $43.65
Option Format: symbol-year-month-day-call-strike

Chimerix, Inc. - CMRX - close: 48.31 change: +0.10

Stop Loss: 45.25
Target(s): To Be Determined
Current Gain/Loss: +4.7%
Entry on June 26 at $46.15
Listed on June 25, 2015
Time Frame: exit PRIOR to earnings in August
Average Daily Volume = 428 thousand
New Positions: see below

07/14/15: Biotech stocks were showing relative strength today. However, CMRX did not participate. Shares closed with a very minor gain. The good news is that biotech stocks should rally again tomorrow. News out after the closing bell that Celgene (CELG) was buying RCPT could spark another wave higher for the biotechs as investors bet on more mergers and acquisitions in the space.

Tonight we are moving our stop loss on CMRX up to $45.25.

Trade Description: June 25, 2015:
Biotech stocks have been outperforming the broader market for the last couple of years. That outperformance continues in 2015. The IBB biotech ETF is up +23% in 2015 versus a +8% gain in the NASDAQ and a +2% gain in the S&P 500. CMRX has been lagging its peers with a +13.9% gain this year but that could be about to change as the stock looks poised to run.

According to the company, "Chimerix is a biopharmaceutical company dedicated to discovering, developing and commercializing novel, oral antivirals in areas of high unmet medical need. Chimerix's proprietary technology has produced brincidofovir (CMX001), a clinical-stage nucleotide analog lipid-conjugate, which has potent in vitro antiviral activity against many clinically relevant dsDNA viruses and a favorable safety profile in clinical studies conducted to date. Chimerix has completed enrollment of SUPPRESS, a Phase 3 study of brincidofovir for the prevention of cytomegalovirus (CMV) in adult hematopoietic cell transplant (HCT) recipients. In addition, Chimerix is enrolling the Phase 3 AdVise trial of brincidofovir for treatment of adenovirus (AdV) infection. Chimerix is working with BARDA to develop brincidofovir as a potential medical countermeasure to treat smallpox due to a threat of bioterror or accidental release."

In April this year CMRX was award an exclusive contract from the U.S. government to build a new smallpox vaccine. The Biomedical Advanced Research and Development Authority (BARDA) wants another treatment available just in case enemies of the U.S. try to use smallpox as a weapon or if there is some sort of accidental breakout from a lab. The 60-month contract is valued at $100 million but if all the options are awarded it could be worth up to $435 million in revenue to CMRX. The company's revenues for the trailing twelve months are only $4.5 million.

Earlier this month (June) CMRX announced they were going to raise $150 million in capital by selling 3,775,000 shares of stock. That was later bumped up to 4.3 million shares. These priced at $39.75. You can see how CMRX stock briefly dipped toward $39.00 on June 10th and investors immediately bought the dip. It's impressive to see CMRX increase its shares outstanding by 10% and the impact only lasted a few days as buyers gobble up the stock.

Technically CMRX appears to be in breakout mode. The stock consolidated sideways in the $35.00-43.50 range for five and a half months before finally breaking out a few days ago. The stock encountered some profit taking yesterday but traders bought the dip today. The point & figure chart is bullish and forecasting at $61.00 target.

Tonight we are suggesting a trigger to launch bullish positions at $46.15. Plan on exiting prior to CMRX's earnings report in August.

- Suggested Positions -

Long CMRX stock @ $46.15

- (or for more adventurous traders, try this option) -

Long AUG $50 CALL (CMRX150821C50) entry $2.10

07/14/15 new stop @ 45.25
07/11/15 new stop @ 43.75
06/26/15 triggered @ $46.15
Option Format: symbol-year-month-day-call-strike

Mobileye N.V. - MBLY - close: 58.99 change: +0.55

Stop Loss: 55.85
Target(s): To Be Determined
Current Gain/Loss: +4.4%
Entry on July 09 at $56.50
Listed on July 07, 2015
Time Frame: Exit PRIOR to earnings in early August
Average Daily Volume = 3.8 million
New Positions: see below

07/14/15: MBLY inched closer to resistance near $60 with today's +0.94% gain. I'm worried that shares are short-term overbought here and facing what could be significant resistance. Tonight we are raising our stop loss up to $55.85. More aggressive traders may want to give MBLY more room to maneuver and I suggest a stop loss beneath the rising 20-dma (currently $54.75).

No new positions.

Trade Description: July 7, 2015:
The future of hands free driving is a lot closer than you might think. MBLY is leading the charge. Their technology is already in more than three million cars made by companies like BMW, General Motors, and Tesla.

What exactly does this technology do? DAS stands for driver assistance systems. Sometimes you might see it called ADAS for advanced driver assistance systems. This new technology helps drivers avoid collisions with other vehicles, pedestrians, bicyclists, and more while also alerting the driver to road signs and traffic lights.

The company website describes Mobileye as "a technological leader in the area of software algorithms, system-on-chips and customer applications that are based on processing visual information for the market of driver assistance systems (DAS). Mobileye's technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving."

MBLY said their technology will be available in 160 car models from 18 car manufacturers (OEMs). Further, Mobileye's technology has been selected for implementation in serial production of 237 car models from 20 OEMs by 2016.

The company is already developing a system for autonomous driving or hands free driving. They currently plan to launch an autonomous system in 2016 that will work at highway speeds and in congested traffic situations.

MBLY stock came to market in August 2014. Demand was strong enough that they upped the number of shares available from around 27 million to 35.6 million shares. They raised the IPO price from the $22 range to $25. This valued MBLY at $5.3 billion. The first day of trading saw MBLY opened at $36.00. Two months later MBLY traded at $60.00.

It's easy to see why investors are optimistic on MBLY. Annual revenues have soared from $19.2 million in 2011 to $143.6 million in 2014. Their revenues last year rose +77% from 2013. Currently a poll of analysts by Thomson Reuters is forecasting sales to rise +50% in 2015 to $218.3 million. Earnings are forecasted to surge +95%.

MBLY's most recent earnings report was May 11th. They reported their Q1 results of $0.08 per share, which was a penny above estimates. Revenues were up +28% to $45.6 million, also above estimates.

Last year the New York Post ran an article discussing how the White House might generate a bullish tailwind for MBLY. The National Highway Traffic Safety Administration issued a research report that estimated ADAS type of technology could eliminate almost 600,000 left-turn and intersection crashes a year. They report also suggested that adding FCAM and lane departure technology on big vehicles like over the road trucks could reduce accidents with these huge vehicles by up to 25%. Following this report the White House said they would draft new rules that required this sort of tech in new vehicles.

Most of Wall Street analysts seem bullish. Industry experts forecast the camera-based ADAS market to grow +37% CAGR from 2014 to 2020. Goldman Sachs Recently upgraded the stock to a buy. They believe MBLY will see a 34% CAGR in sales through 2020 and will have 65% of the market by then. MBLY also garnered positive comments from a Morgan Stanley analyst who raised their price target to $68. They believe the street's 2015 estimates for MBLY are too low after the company delivered super strong growth in the last couple of quarters. A couple of weeks ago another analyst firm raised their price target on MBLY to $67.00.

The stock has displayed significant strength with a big bounce from its March 2015 lows near $32. The rally accelerated in mid June with a breakout past resistance in the $48.00 area. Traders quickly bought the dip last week on the market's big selloff (June 29th). Bulls bought the dip again today and MBLY looks poised to hit new multi-month highs tomorrow. Tonight we're suggesting a trigger to launch bullish positions at $56.40.

- Suggested Positions -

Long MBLY stock @ $56.40

- (or for more adventurous traders, try this option) -

Long AUG $60 CALL (MBLY150821C60) entry $2.00

07/14/15 new stop @ 55.85
07/11/15 new stop @ 53.85
07/09/15 triggered on gap open at $56.50
Option Format: symbol-year-month-day-call-strike

Neurocrine Biosciences Inc. - NBIX - close: 51.95 change: +1.46

Stop Loss: 47.40
Target(s): To Be Determined
Current Gain/Loss: +7.6%
Entry on July 01 at $48.27
Listed on June 30, 2015
Time Frame: Exit PRIOR to earnings in August
Average Daily Volume = 1.0 million
New Positions: see below

07/14/15: Yesterday's bullish breakout past $50.00 may have sparked some short covering this morning. Shares of NBIX surged +6.2% before peaking midday. The stock settled with a +2.89% gain.

Tonight we are moving the stop loss up to $47.40. No new positions at this time.

Trade Description: June 30, 2015:
Biotech stocks remain one of the best performing groups in the market this year. Year to date the IBB is up +21% versus a +0.2% gain in the S&P 500 and a +5.3% gain in the NASDAQ composite. NBIX is outpacing its peers with a +113% gain in the first half of 2015.

NBIX is in the healthcare sector. According to the company, "Neurocrine Biosciences, Inc. discovers and develops innovative and life-changing pharmaceuticals, in diseases with high unmet medical needs, through its novel R&D platform, focused on neurological and endocrine based diseases and disorders. The Company's two lead late-stage clinical programs are elagolix, a gonadotropin-releasing hormone antagonist for women's health that is partnered with AbbVie Inc., and NBI-98854, a vesicular monoamine transporter 2 inhibitor for the treatment of movement disorders. Neurocrine intends to maintain certain commercial rights to its VMAT2 inhibitor for evolution into a fully-integrated pharmaceutical company."

I like to remind readers that biotech stocks can be tough to trade. Normally they are 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. Due to the nature of biotech work and how many smaller companies get paid with milestone payments as they develop treatments tends to make their earnings are very lumpy.

While we normally don't focus on earnings for the smaller biotech companies, I will point out that NBIX's most recent earnings report was much better than expected. Their 2014 Q1 results were a loss of ($0.17) per share. Analysts were expecting 2015 Q1 results to be a loss of ($0.30). NBIX reported a loss of ($0.01) per share. Revenues were $19.76 million for the first quarter. Management held a successful secondary offering last quarter and raised $270 million. This increased the company's cash and cash equivalents to $518 million. Hopefully investors won't have to worry about NBIX needing to raise capital any time soon.

After NBIX's Q1 results the stock was upgraded by two analysts. One raised their price target to $64. The other raised their price target to $69. Currently the point & figure chart is forecasting at $66 target.

Technically NBIX looks bullish following its breakout past resistance near $45.00. The recent pullback among the biotech stocks saw NBIX dip back toward this area, which is now support. Today's bounce looks like a potential entry point. Tonight we're suggesting a trigger to open bullish positions at $48.15.

- Suggested Positions -

Long NBIX stock @ $48.15

- (or for more adventurous traders, try this option) -

Long AUG $50 CALL (NBIX150821C50) entry $3.60

07/14/15 new stop @ 47.40
07/01/15 triggered on gap open at $48.27
Option Format: symbol-year-month-day-call-strike

Spirit AeroSystems - SPR - close: 55.88 change: +0.39

Stop Loss: 53.75
Target(s): To Be Determined
Current Gain/Loss: -1.0%
Entry on June 22 at $56.44
Listed on June 18, 2015
Time Frame: 6 to 8 weeks, exit prior to earnings in very late July
Average Daily Volume = 1.2 million
New Positions: see below

07/14/15: JPMorgan initiated coverage on SPR with an "overweight" today. The stock drifted higher throughout the session and managed to outpace the S&P 500 with a +0.7% gain. I am still hesitant to launch new positions. SPR's earnings are expected at the end of July.

Trade Description: June 18, 2015:
Airline stocks have gotten crushed lately as investors worry about the airliner industry overbuilding capacity. It's a different story for the airplane makers. Shares of SPR just closed near all-time highs. The Dow Industrial Average is up +1.6% year to date. The S&P 500 is up +3.0%. SPR is outpacing them both with a +30% gain this year.

SPR is in the industrial goods sector. According to the company, "Spirit AeroSystems, with headquarters in Wichita, Kan., USA, is one of the world's largest non-OEM designers and manufacturers of aerostructures for commercial aircraft. In addition to its Wichita and Chanute facilities in Kansas, Spirit has locations in Tulsa and McAlester, Okla.; Kinston, N.C.; Prestwick, Scotland; Preston, England; Subang, Malaysia; and Saint-Nazaire, France.

In the U.S., Spirit's core products include fuselages, pylons, nacelles and wing components. Additionally, Spirit provides aftermarket customer support services, including spare parts, maintenance/repair/overhaul, and fleet support services in North America, Europe and Asia. Spirit Europe produces wing components for a host of customers, including Airbus."

On their website SPR notes that they "have long-term agreements in place with our largest customers, Boeing and Airbus. Other major customers include Bombardier, Rolls-Royce, Mitsubishi, Sikorsky and Bell Helicopter." SPR does so much business with Boeing (BA) that buying SPR is almost a stealth trade on BA's backlog. Looking at BA's most recent earnings report their backlog hit a record high of $495 billion. That's about 5,700 new planes. BA plans to significantly increase production in 2017 and again in 2018, which should mean an increase in revenues for SPR.

Earnings from SPR have been somewhat mixed. On February 3rd they reported their 2014 Q4 results with earnings at $0.87 per share. That was 10 cents better than expected. Yet revenues were only up +5% to $1.57 billion, which missed expectations.

Results improved in the first quarter. On April 29th SPR said earnings were up +18% from a year ago. Their $1.00 per share beat expectations. Revenues were almost flat at $1.74 billion but that still came in better than analysts were expecting. SPR management issued somewhat bullish guidance on 2015 earnings but their revenue estimate was soft.

The stock initially sold off on its Q1 report but traders bought the dip the very next day. SPR continues to build on its bullish pattern of higher lows. Today the stock is poised to breakout past short-term resistance at $56.20. We are suggesting a trigger to launch bullish positions at $56.35. Plan on exiting prior to SPR's Q2 earnings report in very late July or early August.

- Suggested Positions -

Long SPR stock @ $56.35

- (or for more adventurous traders, try this option) -

Long OCT $60 CALL (SPR151016C60) entry $1.60

06/22/15 triggered on gap open at $56.44
Option Format: symbol-year-month-day-call-strike

Tempur Sealy Intl. - TPX - close: 71.01 change: +0.61

Stop Loss: 67.85
Target(s): To Be Determined
Current Gain/Loss: +12.4%
Entry on June 10 at $63.15
Listed on June 08, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 890 thousand
New Positions: see below

07/14/15: Nothing seems to be slowing down the rally in TPX. Shares added another +0.8%, which stretches the current run to four up days in a row. TPX is on track for its seventh weekly gain in a row.

I want to remind readers that TPX is overbought and will eventually see a correction. Tonight we are moving our stop loss to $67.85. More conservative investors may want to take profits right here.

Trade Description: June 8, 2015:
Activist investors seek to influence management to incorporate major changes in a company with the expectation of unlocking shareholder value. Sometimes the mere mention of an activist investor buying a stock can get shares to move. In TPX's case the activists have won a major battle with management.

TPX is in the consumer goods sector. According to the company, "Tempur Sealy International, Inc. (NYSE: TPX) is the world's largest bedding provider. Tempur Sealy International develops, manufactures and markets mattresses, foundations, pillows and other products. The Company's brand portfolio includes many of the most highly recognized brands in the industry, including Tempur, Tempur-Pedic, Sealy, Sealy Posturepedic, OptimumTM and Stearns & Foster. World headquarters for Tempur Sealy International is in Lexington, KY."

TPX's most recent earnings report was April 28th. They announced their 2015 Q1 results with earnings of $0.55 per share. That was seven cents above estimates. Revenues were up +5.4% to $739.5 million. This was also above expectations. Management raised their 2015 forecast for both earnings and sales. The stock popped to new multi-year highs on this news. Yet the real story is probably the activist investors involved.

Hedge fund H Partners has been urging change with TPX management for months. TPX executives choose to fight. It came down to a proxy fight and shareholders voted to oust the CEO. Two more directors, who were under fire by H Partners have also left the board. H Partners built a website to inform shareholders their opinion on the company (www.fixtempursealy.com). There they posted their 90 page slideshow on why TPX needed a management change. You can see their presentation at this webpage.

The stock has been oscillating sideways in the $58-63 zone the last few weeks. It's starting to look like the consolidation may be over. TPX displayed relative strength last week and it held up today as well while the rest of the market was sinking. If TPX can trade over $63.00 it will generate a new quadruple top breakout buy signal on the P&F chart. We are suggesting a trigger to launch bullish positions at $63.15.

- Suggested Positions -

Long TPX stock @ $63.15

- (or for more adventurous traders, try this option) -

Long SEP $65 CALL (TPX150918C65) entry $3.50

07/14/15 new stop @ 67.85
07/11/15 new stop @ 66.40, readers may want to take profits now!
07/08/15 new stop @ 65.65
06/27/15 new stop @ 64.40
06/22/15 new stop @ 61.90
06/10/15 triggered @ $63.15
Option Format: symbol-year-month-day-call-strike

BEARISH Play Updates

Continental Resources, Inc. - CLR - close: 38.28 change: +0.74

Stop Loss: 40.65
Target(s): To Be Determined
Current Gain/Loss: +12.5%
Entry on June 22 at $43.75
Listed on June 20, 2015
Time Frame: Exit prior to earnings on August 5th
Average Daily Volume = 8.8 thousand
New Positions: see below

07/14/15: Crude oil futures bounced in spite of headlines regarding the Iran deal. The bounce in oil helped most of the energy stocks rebound. CLR rallied +1.97% although it stalled under short-term technical resistance at its 10-dma.

Readers may want to take some money off the table. No new positions at this time.

Trade Description: June 20, 2015:
There are a lot of currents moving the oil industry these days. Currency moves, OPEC production, access to capital, falling rig counts, and potential bankruptcies. The stock performance for U.S. shale oil drillers have been suffering. CLR is one such stock.

CLR is in the basic materials sector. According to the company, "Continental Resources (CLR) is a Top 10 independent oil producer in the United States and a leader in America's energy renaissance. Based in Oklahoma City, Continental is the largest leaseholder and one of the largest producers in the nation's premier oil field, the Bakken play of North Dakota and Montana. The Company also has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the Northwest Cana play."

Earnings have taken a hit. CLR reported their Q1 results on May 6th. They reported a net loss of $186 million or 36 cents a share. That's a big drop from a 61-cent profit a year ago. After adjusting for writedowns and one-time items CLR said their quarterly earnings were a loss of ($0.09) per share. That was actually four cents better than analysts' estimates for a ($0.13) loss. Revenues plunged -41% to $592.89 million even though CLR's production surged +36% from a year ago.

Bullish investors could argue that crude oil put in a bottom earlier this year and the commodity should rally toward year end. Bulls can also point to falling production costs as a tailwind for the industry. CLR said their completion costs for wells dropped -15% from the end of 2014. Obviously this makes the company more profitable (or at least cuts their losses). Optimistically CLR expects their cost reductions to hit 20% by mid-year. There are some on Wall Street who think the industry has seen a bottom. Shares of CLR were upgraded by Goldman Sachs to a "buy" in May.

Bulls also note that the plunge in active rigs should be bullish for oil and thus oil companies. Weekly rig count, compiled by Baker Hughes, showed that the number of active oil and gas rigs fell again last week. This is the 28th week in a row that the number of rigs has declined. We're now down to 857 active oil and gas rigs, which hasn't been this low since early 2003.

Naturally you might think that a plunge to 12-year lows for active rigs means that U.S. oil production would shrink as well. That hasn't happened yet. While costs are going down oil producers are actually more efficient at pumping per well so production is going up. The low rig count is a leading indictor that production will eventually decline but it could be months from now. The U.S. EIA doesn't expect U.S. production to fall until early next year.

A bigger problem for the oil industry is competition. The recent OPEC meeting showed that the Saudis are willing to pump as much oil as they can to maintain their market share regardless of the price of oil. These are state-run oil companies and don't have to report to shareholders like American drillers. Plus the average cost per barrel of oil is a lot lower in Saudi than the U.S.

Another challenge for many drillers is capital. Drilling shale oil wells and fracking costs a lot of money. The drop in crude oil prices has made lenders less likely to loan money to drillers. To compensate for the lack of capital the oil drillers might be forced to sell more stock to raise capital and this would dilute current shareholders and drive stock prices lower. This past week the Cowen research company said, ""We expect ... E&Ps to issue additional equity in 2H2015 to fund 2016 capex as borrowing bases will be declining and debt metrics deteriorating."

The issue of debt and access to capital could be a fatal one. There are growing predictions that we will see up to a dozen publicly traded oil and gas companies file for bankruptcy between July 2015 and June 2016. Now CLR is not on the list but if we see smaller rivals start to go bankrupt it is going to put pressure on all the oil-industry stocks.

Oil stocks are also going to react to currency moves. The Federal Reserve wants to raise rates and that will lift the dollar. Even if the Fed doesn't raise rates the QE programs in Japan and Europe could drive the yen and euro lower, which boosts the dollar. A rising dollar pressures commodity prices lower.

A lot of investors are already betting on CLR to decline. The most recent data listed short interest at 17.9% of the 84.8 million share float. We think the bears are right. CLR has been underperforming the broader market. The point & figure chart is bearish and forecasting at $35.00 target. I suspect the 2015 lows near $42.00 could be support. Tonight we are suggesting a trigger to open bearish positions at $43.75.

- Suggested Positions -

Short CLR stock @ $43.75

- (or for more adventurous traders, try this option) -

Long SEP $40 PUT (CLR150918P40) entry $2.00

07/06/15 new stop @ 40.65
07/04/15 new stop @ 43.55
06/27/15 new stop @ 44.85
06/25/15 new stop @ 48.35
06/22/15 triggered @ $43.75
Option Format: symbol-year-month-day-call-strike

Murphy Oil - MUR - close: 40.81 change: +0.36

Stop Loss: 41.55
Target(s): To Be Determined
Current Gain/Loss: +0.8%
Entry on July 01 at $41.15
Listed on June 29, 2015
Time Frame: Exit PRIOR to MUR earnings on July 29th
Average Daily Volume = 1.9 million
New Positions: see below

07/14/15: MUR also bounced toward short-term technical resistance at its 10-dma. Tonight we are adjusting our stop loss down to $41.55. No new positions at this time.

Trade Description: June 29, 2015:
The crash in crude oil prices in the second half of 2014 was pivotal turning point for the U.S. energy industry. Suddenly the booming oil and gas sector had its future being question with the price of oil now unprofitable for many drillers. Oil has managed a bounce from its 2015 lows while many of the oil and gas producers are still seeing their stocks decline.

MUR is in the basic materials sector. According to the company, "Murphy Oil Corporation is an independent exploration and production company with a strong, oil-weighted portfolio of global offshore and onshore assets. Exploration activities are focused in four main regions: Deepwater Gulf of Mexico, the Atlantic Margin, Southeast Asia and Australia."

The company reduced its 2015 capex outlook by -33% when they reported their 2014 Q4 results back in January. MUR's Q1 results came out in May. Profits evaporated with MUR delivering a loss of ($1.11) per shares versus a profit of $0.96 a year ago.

Management is trying to prop up their floundering stock price. On May 20th the company announced an accelerated stock buyback program of $250 million. This is part of a previously announced $500 million repurchase program from August 2014. The buyback doesn't seem to be working.

Goldman Sachs downgraded MUR to a "sell" in late May. Nearly a month later UBS has also downgraded MUR to a "sell". The UBS analyst expressed concern that MUR's production would likely decline in 2015 and 2016 since the company has cut back on investment.

The stock's attempt at an oversold bounce failed near $44 a couple of weeks ago and now shares are breaking down to new multi-year lows. The point & figure chart is bearish and forecasting at $34.00 target. Tonight we are suggesting a trigger to open bearish positions at $41.15.

- Suggested Positions -

Short MUR stock @ $41.15

- (or for more adventurous traders, try this option) -

Long AUG $40 PUT (MUR150821P40) entry $1.30

07/14/15 new stop @ 41.55
07/06/15 new stop @ 42.35
07/01/15 triggered @ $41.15
Option Format: symbol-year-month-day-call-strike

Noble Energy, Inc. - NBL - close: 39.60 change: +0.70

Stop Loss: 41.75
Target(s): To Be Determined
Current Gain/Loss: -2.6%
Entry on July 13 at $38.60
Listed on July 11, 2015
Time Frame: Exit PRIOR to earnings on August 3rd
Average Daily Volume = 4.2 million
New Positions: see below

07/14/15: The bounce in energy stocks helped NBL rally +1.79%. Shares should find short-term resistance at $40.00 and its 10-dma near $40.20.

Readers may want to wait for a new relative low before launching positions tomorrow.

Trade Description: July 11, 2015:
Crude oil prices are down sharply the last two weeks and its putting pressure on the oil stocks. NBL is an oil company who has seen its stock plunge to new multi-year lows.

According to the company, "Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company has core operations onshore in the U.S., primarily in the DJ Basin and Marcellus Shale, in the Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa."

There are several issues impacting the price of oil, which is pressuring oil stocks lower. Back in April we saw crude oil inventories in the U.S. hit 80-year highs. They stayed elevated for awhile before eventually fading. Summer time is driving season. A lot of people are on the road for vacation. The weather is more favorable. This time of year demand for oil rises as oil refiners boost their production of gasoline and other fuels.

Given the seasonality of U.S. oil demand normally rising in summer it was a surprise to see oil inventories rising instead of falling. The U.S. Energy Information Administration (EIA) has reported an inventory build the last two weeks in a row. Their most recent report was for the week ending July 3rd. Analysts were expecting oil inventories to drop 1 million barrels. Yet the EIA said inventories rose almost 300,000 barrels.

This EIA news was followed on Friday with a report from the International Energy Agency (IEA) who downgraded their global oil demand growth forecast from +1.4 million barrels per day in 2015 to +1.2 million barrels in 2016. That is still growth but the world is currently facing oversupply issues. If demand falls it's going to put pressure on oil prices.

Saudi Arabia, the biggest member of Organization of the Petroleum Exporting Countries (OPEC) made it clear that they are willing to sacrifice price to maintain their market share. At the June 4th meeting OPEC left their output quota unchanged at 30 million barrels a day.

Crude oil is off its 2015 lows but the weakness this year has wreaked havoc in the oil sector. NBL reports its Q4 results in February. They beat the bottom line by three cents but revenues were down -19.4% from a year ago to $1.07 billion. That missed estimates by $233 million.

The sales decline accelerated in the first quarter. NBL reported its Q1 results on May 5th. They beat the bottom line by a penny but revenues crashed -45% to $759 million. That was $140 million below estimates.

If the oversupply issue wasn't bad enough the industry now faces a potential deal with Iran and the P5+1 nations. These countries are currently negotiating over Iran's nuclear program. If they do get a deal done it will unlock sanctions on Iran, which would allow the country to bring millions of barrels of oil to a market that is already struggling. Of course the opposite could occur. If the quarrelsome talks breakdown, and they could since they're already on their umpteenth postponed deadline, then crude oil prices could rally. That's probably our biggest risk on a bearish play in the oil sector. If the Iran talks breakdown it could fuel a big spike in the price of oil.

Technically NBL looks very weak. On the weekly chart below you can see the bear-flag consolidation pattern and the breakdown. On the daily chart there is what appears to be a bearish head-and-shoulders pattern. Plus, the simple fact that NBL continues to underperform, continues to sink, with the path of least resistance being lower. The point & figure chart is bearish and forecasting at $34.00 target.

The $38.70-38.80 area appears to be short-term support. Tonight we are suggesting a trigger to launch bearish positions at $38.60.

- Suggested Positions -

Short NBL stock @ $38.60

- (or for more adventurous traders, try this option) -

Long AUG $37.50 PUT (NBL150821P37.5) entry $1.40

07/13/15 triggered @ $38.60
Option Format: symbol-year-month-day-call-strike

Tessera Technologies - TSRA - close: 36.09 change: -0.18

Stop Loss: 37.65
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on July -- at $---.--
Listed on July 09, 2015
Time Frame: Exit PRIOR to earnings in early August
Average Daily Volume = 518 thousand
New Positions: Yes, see below

07/14/15: TSRA underperformed the broader market with a -0.49% loss today. The stock is hovering around support in the $36.00 area.

We are waiting for a new relative low. Our suggested entry point to launch bearish positions is $35.40.

Trade Description: July 9th, 2015:
TSRA claims that their technology is in 100% of today's smartphones. The stock was a pretty big winner last year with a rally from $18 to almost $36 in 2014. Shares appear to have peaked in March this year.

TSRA is in the technology sector. They're considered part of the semiconductor industry. According to the company, "Tessera Technologies, Inc., including its Invensas and FotoNation subsidiaries, generates revenue from licensing our technologies and intellectual property to customers and others who implement it for use in areas such as mobile computing and communications, memory and data storage, and 3DIC technologies, among others. Our technologies include semiconductor packaging and interconnect solutions, and products and solutions for mobile and computational imaging, including our FaceTools, FacePower, FotoSavvy, DigitalAperture, LifeFocus, face beautification, red-eye removal, High Dynamic Range, autofocus, panorama, and image stabilization intellectual property."

TSRA is not a widely followed stock on Wall Street. Their most recent earnings report managed to beat the estimates for the few analysts that follow the stock. Revenues were above expectations at $79.85 million but sales fell -9.6% from a year ago. Management did guide higher for the second quarter but the market reaction to this news was muted.

Shares of TSRA had been stuck under resistance near $40 for weeks. Unfortunately for shareholders TSRA began to breakdown in the last few days, possibly due to weakness in the semiconductor stocks. The point & figure chart has turned bearish and is forecasting at $29.00 target.

Today TSRA is hovering above key support near $35.00 and its simple 200-dma. A breakdown here could signal a drop toward round-number support at $30.00. Tonight we're suggesting small bearish positions at $35.40. We want to limit our positions size because TSRA has seen some sharp one-day spikes in the past.

Trigger @ $35.40 *small positions to limit risk*

- Suggested Positions -

Short TSRA stock @ $35.40

- (or for more adventurous traders, try this option) -

Buy the Aug $35 PUT (TSRA150821P35)

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