Option Investor

Daily Newsletter, Thursday, 6/30/2016

Table of Contents

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

Market Wrap

A Third Day Of Gains

by Thomas Hughes

Click here to email Thomas Hughes


The market moved higher as Brexit fears recede. Global markets have recovered most of the losses post-Brexit but worry remains over the future impact of Britain's historic vote. Today is also the last day of the 2nd quarter and the 1st half of 2016, so portfolio re-shuffling is surely having an effect on prices too. The Dow Jones Industrial Average and S&P 500 both ended the quarter with small gains.

Asian indices were quiet today, closing mostly flat after trading higher in the early part of the session. EU markets were a little more lively. The early part of the session saw them trade mostly flat but a late day rally sparked by comments from the BOE helped to push them firmly into positive territory. The DAX gained a little more than 0.70% while the FTSE 100 was able to gain about 2.25% and close at a new high for the year. While there is evident relief the Brexit will not have major impact on the near term longer term outlook remains negative. The BOE's Carney said in statements that "the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer".

Market Statistics

Futures trading indicated a flat to mildly positive open for the US market all morning. Along with global markets, M&A activity and some better than expected economic data helped to support prices. At the open of trading indices opened higher but held a tight range, just above break even levels, for the first hour, up to and until the statements from the BOE. By 10:30AM a near term bottom had been hammered out resulting in a mild rally which lasted for about an hour. By 11:30AM the indices had reached a high and begun to consolidated near those levels, about 0.55% for the broad market.

After a quick consolidation today's rally was able to move higher. By 1PM another intraday high was hit, about +1%, at which time another consolidation took place. By 2PM those highs were being tested and by 2:30 the market was reaching new highs once again. The remainder of the afternoon saw the indices move sideways within a narrow range until the final minutes of trading. The market gave a final surge into the close leaving the indices at the high of the day.

Economic Calendar

The Economy

Initial jobless claims rose by 10,000, in line with expectations, to hit 268,000. This is the 69th week of claims below 300,000, the longest streak since 1973. The prior week's data was revised down by -1,000, the 4 week moving average remains unchanged. On a not adjusted basis claims rose 5.3%, more than the 1.2% predicted by the seasonal factors. Not adjusted claims are now -5.3% below last years level. New Jersey and Connecticut had the largest increases in claims, +3,210 and +2,612, while California and New York had the largest declines, -9,516 and -2,446. Initial claims remains low relative to the long term trends, trending near the long term low and consistent with labor market health.

Continuing claims fell by -20,000 from a downward revision to last week of -2,000 to hit 2.120 million. The four week moving average of continuing claims fell -13,000 to hit 2.133 million, the lowest level since November of 2000. While it appears as if initials claims may be stabilizing around the 270K mark, continuing claims appears to still be in down trend and consistent with ongoing labor market recovery.

The total number of jobless claims rose by 8,569 to hit 2.032 million. This gain was expected and is consistent with historic/seasonal trends. Based on the historical data we can expect this figure to continue rising over the next 5-6 weeks. Regardless, total claims are -5.3% below last years level and consistent with labor market recovery and declining unemployment. We'll get the next round of monthly labor data next week, we may not get a jump in job creation but I expect to see unemployment at least remain steady if not decline.

Chicago PMI was released at 9:45AM and rose a surprising 7.5 points to 56.8. This is the highest level since January 2015. The gains were made on increases in new orders, the highest level since 10/2014, backlog orders, the highest level since 3/11, and productivity, a new high for 2016. Inventories, which had posted declines for the past 7 months, saw double digit increases from May's 6.5 year low. Employment was the only gauge to decline, falling below the expansionary 50 level.

Tomorrow be on the look out for Auto/Truck sales, ISM Manufacturing and Construction Spending.

The Dollar Index

The Dollar Index jumped a little more than 0.5% today, making most the gains following the BOE comments. The index appears to be setting up for another move higher, perhaps as high as the $100 level. Price action is forming a nice little flag at this time, with a $3.50 flag pole, that is confirmed by bullish indicators. Driving the move is an expected rate hike from the FOMC sometime this year and dovish expectations for just about every other major central bank. Today's BOE statements have put easing firmly on their table, the ECB is already considering some form of action and the BOJ is expected to do some easing later this summer or during the fall at latest, all of which will help to strengthen the dollar. For now, the 50% retracement level, near $96.50, is resistance. A break above there would be bullish.

The Oil Index

Oil prices fell nearly -3% in today's action as fading supply disruptions over shadow hopes for supply/demand rebalancing. WTI fell about $1.50 to trade near the $48.50 level. Issues putting downward pressure on prices include but not are not limited to Nigerian supply coming back online after the recent round of attacks, OPEC's June Output hitting a new high and improving Canadian output. Adding to the downward pressure on prices is the BOE's outlook on economic risk and profit taking related to end-of-quarter activity and the 3 day holiday weekend. Prices will likely remain volatile and susceptible to news driven moves but it looks like $50 is gaining strength as resistance, support is evident just above $45.

The Oil Index gained about 0.75%, extended the move above the short term moving average and 1,120 level and looks set to move higher. Even so, the index remains range bound with upper resistance near 1,175 and lower support just below the 1,100 level. The indicators are mixed and support range bound trading, both trending near the middle of their respective ranges and consistent with a market trading around a point of equilibrium, roughly the 1,120 level. This range is likely to continue until more concrete evidence of rebalance/imbalance comes to light.

The Gold Index

Gold prices pulled back by a half percent in today's action. Rising dollar value and profit taking following the massive rise in spot prices both had an impact. At the same time declining fear of Brexit fall-out have sapped some of the safety trade. Spot price fell about $8 to trade below $1320, near the middle of a possible new range. Near term support is near $1300, previous resistance, with new resistance targets near $1,350. In terms of catalysts Brexit news could spark a renewed flight to safety, a strengthening dollar could cap gains and send gold moving lower

The gold miners were able to post some small gains today despite the pull-back in gold prices. The miners ETF GDX rose about 0.75% to set a new multi-year high. The indicators are bullish so a continuation of the rally is possible but divergences are present so caution is due. Next target for resistance is just above today's close, near $28.

In The News, Story Stocks and Earnings

Mondelez made big news today when it announced it was in talks to purchase Hershey's. The deal is reported to be worth $107 per share in cash and stock and would result in a new company named Hershey's with headquarters in Pennsylvania. The news hit the wires in the pre-opening session and cause shares of Hershey's to jump as much as 20%, and for circuit breakers to halt trading at least twice. The deal is not yet finalized, the board rejected this offer later in the day saying there was no basis for further discussion. Based on Hershey's closing prices, above $113, the market thinks the Mondelez bid could be raised.

ConAgra, one of the largest makers of packaged food products, reported earnings before the bell. The company missed revenue expectations but produced EPS in-line with estimates. The results were driven by a -6% drop in commercial food sales, a -12% drop in consumer food sales and 110 basis point improvement in margins. Guidance for the coming quarter is positive, slightly above consensus, and is expecting double digit growth. Shares of the stock fell in the pre-market session, opened lower than yesterday's close, and then rose throughout the day to close with a gain of 0.44% and just below the all-time high.

The financials were one of today's leading sectors. The entire sector saw gains in the wake of yesterday's CCAR results led by JPM (+1.70%), Chubb (+1.75%) and Goldman Sachs (+2.15%). Today's gains made up nearly all of the losses incurred post Brexit, the Financial Sector SPDR XLF rising more than 1.5% in the session and just over 6% for the week. Prices are above the $22 support target but below the short term moving average which may provide resistance. The indicators are mixed but are generally consistent with a market rising from a low; stochastic is firing a strong signal that is not yet confirmed by MACD. If the ETF continues to move higher and break above the short term moving average it could go to $24.

After the close of today's session the National Highway Safety Administration reported that Tesla was under an investigation focused on 25,000 of its Model S cars. The investigation is in response to a traffic fatality related to use of the auto-pilot feature. Tesla says this is the first know fatality in over 130 million miles of auto-pilot use, compared to 1 fatality in every 60 million miles worldwide. Shares of the stock fell -3% on the news.

Williams Companies reported that 6 of its 13 board members resigned after ETE withdrew from the planned merger of the two companies.

Micron Technology reported earnings after the bell and missed on the top and bottom lines. The company reported a net loss of -$0.09 per share, well below consensus estimates, with revenue falling -25% below the comparable quarter last year. Due to declining sales and "challenging market conditions" the company is going to cut an unspecified number of jobs from the global workforce in an attempt to save $300 million annually. The stock fell -8% in after hours trading.

The Indices

The indices were able to march higher today despite what at first looked to be a lack luster day of trading. The day's leader was the S&P 500 with a gain of 1.36%. The broad market created a third large white candle in a row, completing what might normally be strong bullish signal if not for the fact that the market is rebounding from the wild Brexit driven sell-off and on the cusp of a weak earnings season. The index broke above the short term moving average and looks set to move up to retest resistance, near the 2,120 level, but will need a new bullish catalyst to move much higher. The indicators are mixed and do not show much strength in the market, stochastic is firing an early buy but MACD has yet to confirm, both more consistent with range bound trading than anything else. I may be wrong, the rally may turn into a sustained move higher, but I would like to see how the market reacts to the pre-Brexit resistance before getting overly bullish.

The Dow Jones Industrial Average and NASDAQ Composite both closed with a gain of 1.33%. The difference is that the Dow Jones closed positive for the quarter while the NASDAQ remained in negative territory. The blue chips created a third long white candle, not overly strong, breaking above the short term moving average in a move that looks set to test resistance at the 18,000 level. This resistance is the same level at which the index was trading last Thursday and a possible area of reversal. The indicators are mixed, stochastic is pointing higher following a bullish crossover but MACD remains in bearish territory, so a break above resistance does not look likely at this time. If the industrials are able to break above 18,000 next resistance target is near 18,350 and the all time high.

The tech heavy NASDAQ Composite also closed with a gain of 1.33% but was not able to move into positive territory for the quarter. The index is moving higher off of the Brexit Bottom and may continue to do so, today's action broke above the short term moving average which may help propel it higher. The indicators are rolling into what could be a buy signal but has not yet been confirmed by MACD leaving them consistent with range bound trading. First target for resistance is near 4,859, the high set last Friday, with next target near 4,950.

The Dow Jones Transportation Average made the smallest gain today, only 0.97%. This index is set up much the same as the others but appears to have already met its resistance. Today's action created a small white candle with long lower shadow that closed just shy of the 7,500 resistance line. The candle's lower shadow is indicative of some weakness in the market and helps with the idea that the market is at resistance. A move above 7,500 would be bullish and could take it up to the short term moving average near 7,600. A failure to break above this level may result in a retreat to lower support levels, first target is near 7,250.

To put it mildly, the market has seen quite a bit of volatility over the past week due to the Brexit and I don't think it is over. This week's rally off the Brexit Bottom looks promising but is driven by short covering and relief and not sound market fundamentals which makes it highly questionable in my view. The market has shrugged off the Brexit vote but the risk associated with it remain. Not only are the full effects unknown, the actual event has not even begun. Invoking Article 50, the official request from Britain to the EU to begin the process, may not occur until later this fall and when it does we could see another big sell-off.

More important to short term direction is the upcoming earnings season. The cycle is not expected to be good and estimates continue to fall so there is little reason for the market to be in rally mode now. If Micron can be used as a gauge there is a real chance that earnings could be worse than expected. I still see a chance for an earnings driven correction and am waiting patiently for the season to unfold.

Looking forward, the market is expected to return to earnings growth in the second half but with the dollar gaining strength and poised to move higher it could have a negative impact on outlook, not to mention the possible economic effects of Brexit. When, if, earnings outlook brightens it will be time for the market to move to new all time highs. Until then I expect to see more of the sideways range bound trading we've seen over the past 18 months.

Don't forget that tomorrow is the first day of a new quarter. It's very possible that we'll see some volatility as managers put money to work getting ready for the second half of the year. I remain very cautious for the near term and optimistic the market will rally later in the year.

Until then, remember the trend!

Thomas Hughes



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New Plays

Looking for a Top

by Jim Brown

Click here to email Jim Brown
Editor's Note

With strong overhead resistance and multiple negative factors ahead, we should plan for weakness. The Dow has strong resistance at 18,000, S&P-500 at 2100-2115 and Nasdaq 4,900 we should consider a possible trend change.


No New Bullish Plays


QQQ - Nasdaq 100 ETF - ETF Profile

The Dow has struggled with the 18,000 level since last November. Eventually there will be a breakout but I strongly doubt it will be during the summer doldrums between July 4th and Labor Day. The volume will be to low and other factors are weighing on the index. The 30 Dow stocks are all exposed to the strong dollar and falling pound as a result of the Brexit. I would be very surprised if less than two-thirds of the Dow stocks did not warn for Q3 on the strong dollar problem. With Q2 earnings starting on July 11th i would expect some investors to begin moving to the sidelines to avoid the rush.

The S&P 500 has solid resistance from 2,100 to 2,115. It has failed at those levels on every attempt since August of last year. With earnings expected to be weak, economics weak and Europe weak, I would expect the S&P to fail at those levels again.

The Nasdaq has strong resistance at 4,900 and 4968. These are lower highs from the peak last November. The biotech sector is still weak and Merrill Lynch just downgraded the semiconductors. Oil prices are likely to remain around $50 for the rest of the year and that means the bloom is fading on the energy stocks.

The Nasdaq 100 ETF (QQQ) is approaching solid resistance at $110. I actually doubt it will get there but that appears to be the target. If the QQQ reaches that level I would recommend shorting the ETF. I know that is a big ticket item for Premier Investor readers but there are no low dollar index ETFs that will accomplish the same thing. I am going to recommend a long put in place of the actual short.

I would like to enter the position at $110 but that would take about a 200 point gain on the Nasdaq 100 ($NDX) and I seriously doubt that will happen.

Since we cannot count on that $110 level being reached I am going to recommend buying the put with a trade at $106.85. If the index does go higher then we can target the $110 level as well.

With a QQQ trade at $106.85

Buy August $106 put, currently $2.05. No initial stop loss.

With a QQQ trade at $109.50

Buy August $108 put, estimated to be $2.05. No initial stop loss.

In Play Updates and Reviews

Only 71 Points to Go

by Jim Brown

Click here to email Jim Brown

Editors Note:

After three days of 200+ point gains, the Dow is only 71 points below critical resistance at 18,000. The odds are very slim we are going much higher over that level. This is major resistance along with the 2,100 level on the S&P and that index closed at 2,099.

The factors that lifted the market over the last three days are gone. The quarter-end window dressing by equity funds is over. The pension funds rebalanced their bond/equity ratios at the end of June and analysts said that created an influx of $18 billion into equities at month end. Volume was very high again at 8.8 billion shares and without those quarter end buying pressures it could fall off a cliff on Friday and again next week.

The real question today is whether traders/investors will buy or sell heading into the long three day weekend with the potential for terror attacks in the USA. The S&P futures are down -3 tonight but that could be erased in an instant with a positive headline.

Next week begins the summer doldrums between July 4th and Labor Day. Volume will evaporate and with the lingering uncertainty in Europe, weak earnings, rising dollar, falling pound and weak economics, there is little in the way of fundamentals to support the market. I would be careful about holding too many long positions over the next few weeks.

There is nothing to prevent the market from moving higher but little to provide lift.

Current Portfolio

Current Position Changes

ATHM - Autohome
The short position in ATHM shares was opened at $20.50.

Profit Targets

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

Stop Loss Updates

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

BULLISH Play Updates

EXAS - Exact Sciences -
Company Profile


No specific news. Major 8.5% gain and that was still $1 below the intraday high.

Original Trade Description: June 25th.

Exact Sciences Corporation, a molecular diagnostics company, focuses on developing products for the early detection and prevention of various cancers. The company develops the Cologuard, a non-invasive stool-based DNA screening test for the early detection of colorectal cancer and pre-cancer. Its Cologuard test includes a protein marker to detect blood in the stool, utilizing an antibody-based fecal immunochemical test. The company has a collaboration, license, and purchase agreement with Genzyme Corporation, as well as with MAYO Foundation for Medical Education and Research for developing tests to detect lung, pancreatic, and esophageal cancers.

Shares of EXAS fell from $18.50 to $7 in October after the U.S. Preventative Services Task Force, an independent panel of health care experts, issued preliminary screening test recommendations that did not include Cologuard as a recommended product. The draft listed Cologuard as an "alternative" screening test. Exact Sciences protested strongly about the classification.

On June 14th, the same task force issued its final cancer screening recommendations and clarified the inclusion of Cologuard. The information was accidentally leaked and the panel had to release the report earlier than the planned June 21st date. With the final recommendation for Cologuard the company has begun advertising strongly and sales should increase. Cologuard is now an A-rated preventative service under the Affordable Care Act.

Earnings July 26th.

Shares have broken out of their 9-month consolidation base and could close the gap back to $18 in the coming weeks.

Position 6/27/16:

Long EXAS shares @ $11.50, stop loss $9.45.

No options recommended.

HPE - Hewlett Packard Enterprise - Company Profile


Oracle was ordered by a California jury to pay HPE $3 billion in damages in a case over HP Itanium servers. Oracle had a contract to support the software on the Itanium servers and it told HP it was dropping support in 2011. The jury found the contract to be valid and awarded the damages. Oracle said it would appeal.

Original Trade Description: June 2nd.

Hewlett Packard Enterprise was spun off from Hewlett Packard (HPQ) to be the high growth segment of the company. The remaining HPQ was the slower growing PC and printer company.

HPE reported adjusted Q1 earnings of 42 cents and in line with estimates. Revenue of $12.711 billion would have been up +4% on a constant currency basis. Analysts were expecting $12.419 billion.

For the current quarter, HPE guided to earnings of $1.10 to $1.14. For the full year, they expect $1.85-$1.95 and that was more than analysts expected at $1.89. They increased free cash flow +101% to $1.1 billion for the quarter.

The good news came from their plans for the cash flow. HPE expects to generate $2.0-$2.2 billion in free cash flow in 2016. They are receiving $2 billion from the Tsinghua transaction which closed in early May and the money will be used for share repurchases. In 2016, HPE is increasing its commitment to return 100% of the free cash flow to investors in dividends and buybacks.

This means over the next couple of months we should see significant share activity as funds position themselves to be the beneficiaries of all this buyback/dividend activity that could exceed $4 billion in 2016. $2.5 billion of that is in an "accelerated" buyback program. The board authorized another $3 billion in buybacks to bring the current authorization to $4.8 billion.

They also announced a tax-free spinoff of their services division to Computer Sciences Corporation (CSC), which is expected to close in March 2017. This will produce another $8.5 billion in value to HPE shareholders in the form of $4.5 billion in equity in the combined company and $1.5 billion in a cash dividend and the removal of $2.5 billion in debt from HPE.

Earnings Aug 23rd.

HPE shares have shaken off their May weakness and closed today at a historic high. I am recommending we buy this stock in anticipation of additional fund investors moving in ahead of future dividends, buybacks and the spinoff.


Position 6/28/16: Long HPE shares @ $17.50, see portfolio graphic for stop loss.

Position 6/3/16: Long August $20 call @ 40 cents. No stop loss.

Previously closed 6/24/16: Long HPE shares @ $18.40, exit $18.61, +.21 gain

SCTY - Solar City - Company Profile


SCTY gave back 36 cents and then declined slightly after the close on news Tesla was under investigation in a fatal accident while a Model S was on autopilot. Tesla shares fell $6 after the close. Musk said it was the first fatality in a Model S while on autopilot after 130 million miles of operation.

Original Trade Description: June 27th.

SolarCity Corporation designs, manufactures, installs, monitors, maintains, leases, and sells solar energy systems to government, residential, and commercial customers in the United States. The company provides solar energy systems; solar lease and solar power purchase agreements; mypower loan agreements; grid control/energy storage systems; zep solar mounting systems; and proprietary software, including SolarBid sales management platform, SolarWorks customer management software, PowerGuide proactive monitoring solutions, and Energy Designer, a proprietary software application used by field engineering auditors to collect site-specific design details on a tablet computer. It also sells electricity generated by solar energy systems to customers.

SolarCity has had a troubled past with the rise and fall of solar based on the whims of governments and the on again-off again investment credits and tax rebates. SolarCity is still humming right along and building up their base of installed systems into one giant annuity that will pay for decades to come. The problem is that it takes cash to build and install those systems that they sell to customers. Cash up front for a long and profitable payout.

SolarCity was co-founded by Elon Musk. He also started Paypal, SpaceX and Tesla. Last week he (Tesla) offered to buy SolarCity, where he is the largest stockholder and Chairman of the board, for $26-$28. Tesla shares cratered. SolarCity shares spiked for one day then fell back again. Numerous analysts were against the plan. Now shares are rising again.

Elon Musk believes he can marry his battery business with the solar business and have a winning combination. He already makes battery backups for your home but they run off regular utility company power. With SolarCity he can power those battery systems with solar and it makes a lot more sense for customers.

Shares have established a base at $21 and with the $26-$28 offer under consideration along with "other strategic alternatives" it would appear there is limited downside.

Earnings August 8th.

Position 6/28/16:

Long SCTY shares @ $23.40, see portfolio graphic for stop loss.

BEARISH Play Updates

ATHM - AutoHome - Company Profile


No specific news. Shares closed at a new low and the trend has not changed.

Original Trade Description: June 29th.

Autohome Inc. operates as an online destination for automobile consumers in the People's Republic of China. The company, through its Websites, autohome.com.cn and che168.com, delivers comprehensive, independent, and interactive content to automobile buyers and owners, including professionally produced content that comprises automobile-related articles and reviews, pricing trends in various markets, and photos and video clips; automobile library, which includes a range of specifications covering performance levels, dimensions, powertrains, vehicle bodies, interiors, safety, entertainment systems, and other unique features, as well as manufacturers suggested retail prices; new and used automobile listings, and promotional information; and user forums and user generated content. Autohome Inc. also offers advertising services for automakers and dealers; dealer subscription services that allow dealers to market their inventory and services through its Websites; used automobile listings services, which allow used automobile dealers and individuals to market their automobiles for sale on its Websites.

In April, Telstra Corp, which owns 55% of Autohome, said it was going to sell a 48% stake to Ping An Insurance Group for $1.6 billion. CEO James Qin is now leading a revolt against his previous benefactor that helped launch the company and get it listed on the NYSE. There is a suit and Qin is launching a rival bid. When the company needed startup capital Telstra was the investor. Qin and other minority shareholders representing 11% of the outstanding shares have lodged a petition with the Grand Court of the Cayman Islands where the company is registered. The suit claims Telstra's representatives on the board of Autohome allegedly acted in bad faith and breached the rules. Qin is trying to form a coalition with multiple private equity firms to launch a competing bid. Qin made a firm offer of $31 a share in April including a bank letter of credit to finance the deal and it was rejected. The next day Telstra said it was selling its shares for $29.55 to Ping An. Qin's group countered at $31.50 that caused a peak in Autohome shares at $32.15 in expectations for a bidding war that never appeared.

The board is deeply divided and Telstra will not provide any supporting documents for the "purported" sale to Ping An. Telstra has 5 directors on the board and there are 5 independent directors. On May 13th Telstra convened a board meeting to approve the deal. The 5 independent board members refused to show up so there was no majority. The 5 Telstra directors appointed a 6th director on the spot, completely against the corporate rules, and the 6 directors approved the deal. The group aligned with Qin filed the petition with the court to put a hold on any acquisition until the proper documents are submitted and the full board can review the documents vote on the matter. Telstra still refuses to provide any documentation and the fight continues.

Meanwhile shares are crashing. On Monday, the company reported the CEO Qin and the CFO had been replaced and five new directors had been appointed. The company stated the sale of 47.4% of the outstanding shares to Ping An had been completed on June 22nd. It appears the hostile takeover has been completed but the court fight is ongoing.

On Wednesday, shares closed at a historic low at $20.54. This company appears broken and normal shareholders are fleeing to the exits. There was no bounce on either is the last two days when the markets were up big.

Zacks changed their rating to Strong Sell. Credit Suisse changed their rating to Sell.

Earnings August 3rd.

Position 6/30/16:

Short ATHM shares @ $20.50, initial stop loss $22.15.

QURE - UniQure - Company Profile


No specific news. QURE looks like it is trying to form a bottom at $7. Maintain the current stop loss. If the market weakens that support may evaporate.

Original Trade Description: June 20th.

UniQure is a biopharmaceutical company, engages in the discovery, development, and commercialization of gene therapies in the Netherlands. The company offers Glybera, a gene therapy product for the treatment of patients with lipoprotein lipase deficiency. They have multiple drugs in development for a variety of illnesses.

In their recent earnings they reported a loss of 92 cents that missed estimates for a loss of 82 cents. Revenue of $4.3 million did beat estimates for $2.9 million. This is a very small company and since the ASCO conference their shares have been in crash mode.

Losses appear to be accelerating and they lost $22.69 million in Q1. Their market cap is only $204 million.

There was no gap open today despite the major gap higher in the market. They closed at a historic low at $8.20. They have only been public for 2 years and from the chart today it looks like they are going significantly lower. Normally when a stock hits the prior historic low there is a rebound or at least a pause. Neither occurred and that suggests it will go lower.

Position 6/21/16 with a QURE trade at $8.00

Short QURE shares @ $8, initial stop loss $9.25.

No options recommended.

VXX - Ipath VIX Short Term Futues ETN - ETN Profile


The bullish market and the futures roll over are taking their toll. I removed the secondary entry recommendations. If it does spike back up I will reconsider them later. We are probably going to be in this position for a long time as it declines to new lows under $13 this summer.

Original Trade Description: June 22nd.

The VXX is a ETF type product that is based on the Volatility Index futures. It is a flawed product with a perpetual decline built in from the monthly roll over in the futures contracts.

We have played the VXX before with big gains. The object is to short it on a bounce and then hold the position until the volatility fades again.

On the big declines last week the VXX spiked to $17. Back in January and February is spiked to $30 on the market corrections. While I do not expect that to happen from this lower level, I do expect some volatility to appear regardless of the vote outcome.

I am recommending we enter a short position with a return to $17. If it continues higher I would add to that short at $20 and again at $25 and then we wait for the post event decline in the volatility and the return to $13 or lower.

Because this is a flawed product it will always go lower. It has already had several 1:4 reverse splits to keep it from being delisted back in November 2010, October 2012 and November 2013. If it falls under $10, they will do another reverse split and start the decline all over again.


6/24/15: With a VXX trade at $17, now short VXX @ $17, no stop loss.

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