Option Investor

Daily Newsletter, Thursday, 4/20/2017

Table of Contents

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

Market Wrap

Earnings,Data and Trump Support Market

by Thomas Hughes

Click here to email Thomas Hughes


Earnings, data and Trump support the market as traders shrug off a host of geopolitical concerns. Today's action reconfirms the theory that earnings drive the market, everything else is noise. While still early in the season the signs are good that yes, 1st quarter earnings growth and forward outlook are as expected, maybe a little better. During the day a triple shot of good news from the Trump administration helped lift indices to the highs of the day. Trump himself gave the steel industry a boost during a speech at a rally, the GOP apparently has a new(er) plan for health care reform and Steve Mnuchin says we're really close to getting tax reform done, hopefully before the end of the year.

International markets were basically flat following yesterday's action, attention firmly focused on the rapidly unfolding earnings season. Asian indices were mixed, the Nikkei falling -0.01% while most others in the region were able to post small gains. European indices were more firmly positive but only in the sense that no losses were present, the average gain close to 0.10%.

Market Statistics

Early futures trading indicated a positive open all morning, about 0.25% for the SPX, with some strength shown following the 8:30AM release of data. Going into the open indications fell back a bit but remained positive. The SPX opened with a gain of about 4 points and spent the first half hour or so testing support before moving up from there. By 12:30 the indices were up more than 0.75%, led by the transports, and looking like they would go higher. Early afternoon comments from the Trump Administration sent the indices up to the highs of the day where they remained until just before the close. A small pullback going into the close left them near the high of the day at the end of trading.

Economic Calendar

The Economy

Today's data was a bit mixed in terms of expectations but 100% positive for the economy. Starting with initial claims, claims fell -10,000 to hit 244,000, slightly less than expected. Last week's data was not revised. The four week moving average of claims fell -4,250 to hit 243,000. On a not adjusted basis claims fell -5.4% versus an expected -9.4% and remain down on a year over year basis. Year over year not adjusted claims are down -6.5%, trending near 43 year lows and consistent with ongoing labor market health.

Continuing claims fell -49,000 to 1.979 million, the lowest level since April, 15th 2000. The 4 week moving average of claims fell to 2.023, also a new 17 year low. Last week's data was not revised. The new low suggests that long-term labor market trends are intact and that further improvement can be expected. As an individual indicator it represents the number of employees who lose a job and don't find a new one within 2 weeks. Declining and low levels of continuing claims indicates those who find themselves out of work are finding new work quickly and is a sign of robust labor market activity.

The total number of jobless claims fell -84,354 to 2.177 million. This decline is as expected and consistent with seasonal and long-term labor market trends, down -6.35% year over year. Based on the historical data and trends we can expect to see this figure continue to drop into the spring and late summer, hitting seasonal and long-term lows in the process.

The Philadelphia Federal Reserve Manufacturing Business Outlook Survey declined nearly -11 points this month but remains firmly expansionary at 22. This is the 9th month of positive reading, the only negatives being declines in the level of expansion in new orders and shipments. Other readings within the report suggest that unfilled orders and delivery times are on the rise, as is employment. The employment index gained 2 points to hit 20, the 5th month of positive reading and the highest level since 2011, while the future employment index held steady at the all-time high.

The Index of Leading Indicators was released at 10AM and came in a bit above expectations. The March read on Leading Indicators is +0.4%, a tenth better than expected and the 4th consecutive positive reading. According to Conference Board economists it indicates continued expansion into the end of the year, with the possibility of acceleration later in the year. The Coincident Index advanced 0.2%, the Lagging Index was unchanged.

The Dollar Index

The Dollar Index was mixed today, opening with a small gain, falling to a three week low and then bouncing back to close near the open. Today's action created a small doji candle just above support at the 38.2% retracement level. Support is just above $99.50, near the bottom of the 5 month trading range, and may be tested again. The indicators are consistent with a test of support within a trading range and rapidly reaching oversold conditions. A break below support would be bearish, a bounce bullish.

Geopolitical tensions, flight-to-safety, French elections and economic outlook have the index winding up with the next FOMC meeting as the likely focal point. The next meeting is May 3rd, only 2 weeks away, and the same week as monthly labor data. The Fed Watch Tool indicates only a 4% chance of hike at this meeting.

The Gold Index

Gold prices held steady in today's action but are down from the high set earlier this week. Prices are inflated on geopolitical driven flight-to-safety that has moderated in the past few days. Spot price is now hovering around the $1,280 level with the possibility of moving down to $1,250 should fears evaporate. That being said, tension is still in the air and could easily drive prices back to retest recent highs. The underlying fundamentals remain bullish, the FOMC is on track to raise rates again this year. The next meeting may not see a hike but it is likely to provide new information to sway outlook.

The Gold Miners ETF GDX held steady after yesterday's fall, sitting just above the short and long-ter moving averages. The ETF remains constrained within a short-term trading range, a range that appears to be getting narrower as we approach the next FOMC meeting. The indicators are consistent with a move lower within a trading range with downside target near $22.00. The caveat is that the geopolitical situation could send gold prices back to retest their highs, which would likely lead this ETF back to retest recent highs as well.

The Oil Index

Oil prices were steady today following their Wednesday decline. WTI fell about -0.25% at the close of trading after wavering around break-even most of the day. Prices are down on over-supply concerns that are driven by rising US production and storage. The OPEC production cut did little to alter the underlying fundamental picture, supply outweighs demand, and talk of an extension is having little effect on prices now. Looking forward I expect further volatility with the possibility of falling below $50.

The Oil Index has fallen to reconfirm support at 1,150. This is consistent with the upper end of the 8 month trading range of 2016 and pre-OPEC production cut levels. The indicators are consistent with support at this level, diverging from the newly set 5 month low. Forward outlook for the sector remains favorable with strong triple digit earnings growth all year so I am bullish for the short to long-term.

In The News, Story Stocks and Earnings

Lots of earnings both before the open and after the close of trading. Before the open Verizon grabbed everyone's attention with a miss on the top and bottom lines. The sector was already expected to be one of the worst performers of the season with tepid forward outlook so news that post-paid subscriptions declined was not taken well. Forward guidance was also weak, roughly in-line with previous, and did not support share prices. Shares fell nearly -3% in the pre-market session to trade at a 3 month low.

Rail carrier CSX reported before the open as well, beating on the top and bottom line. YOY revenues grew nearly 10% on a surge in coal shipments, no doubt thanks to President Trump. The company also reported pricing strength which helped drive results. Sales grew in all segments save one, forest products, with intermodal shipping coming in at 1%. In addition, the company reports it is making efforts to realize cost benefits across its operations under new CEO Hunter Harrison. The news was well received, driving share prices up more than 5% to trade at a new all time high.

American Express reported after the bell yesterday but was no less important to today's trading. The charge card company reported better than expected top and bottom line results driven by a surge in member spending. The news is a sign of increase consumer spending and a positive for AXP, the financial sector and the economy as a whole. Shares of the stock gained at least 2.5% in after-hours trading yesterday and extended those gains to 6.5% in today's action.

Home builder DR Horton reported better than expected top and bottom line results, raised full year guidance and yet the stock fell nearly -3% on the news. The results, while better than consensus, did not blow the market away. Share prices are up more than 22% on expected strength in the sector so this turned out to be a sell-the-news event. Forward outlook remains positive with expected revenue growth in excess of 1.5%.

Visa reported after the closing bell, beating on the top and bottom lines as transactions increase YOY. Shares of the stock jumped 3%.

Mattel reported after the bell and missed on the top and bottom lines. Shares fell more than 6%.

The Indices

The indices got off to a slow start but once the move up began it kept on going with barely a pause. The day's leader is the Dow Jones Transportation Index with a gain near 1.65%. The transports created a medium bodied white candle, moving up and breaking through the short-term moving average, with an eye on testing the 9,250 level. The indicators are mixed but generally consistent with a bullish swing in momentum within a trading range. A break above 9,250 would be bullish with upside target at the all-time high.

The NASDAQ Composite was a distant second with a gain near 0.91%. The tech heavy index created a medium sized white bodied candle and set a new all-time closing high. Price action is not strong but suggests a continuation of near, short and long-term trends. The indicators are still a bit mixed but rolling into a trend following entry signal soon to be confirmed by momentum. Upside target is 6,000 in the near term, 6,200 in the short to long.

The Dow Jones Industrial Average is a close third with a gain of 0.85%. The blue chips created a medium sized white bodied candle that came up to but did not break above the short-term moving average. The index appears to be bottoming along near-term support levels but has yet to definitively move up from said level. The indicators are consistent with support at current levels but have not indicated strength or even upside movement yet. A break below 20,500 would be bearish in the near-term, a continuation of today's bounce trend-following with upside target near 20,900.

The SPX is today's laggard with a gain of only 0.75%. The broad market created a medium size white bodied candle that broke above the short-term moving average but not above an important long-term up trend line. The indicators are consistent with support at current levels but do not indicate strength, or confirm reversal of near-term sideways/down action. A break above 2,360 would be bullish and trend following. A failure to move higher would be bearish in the near to short-term.

The market certainly moved higher today, and looks like it could go further, but some of the euphoria may be misplace. At least some of today's action was driven by the Trump administration and their support of key agenda items. The problem with that is we've heard the talk before, I'd hate to put too much more faith in any rally it inspires before we see a little action. Other than that the fundamentals remains good for bull market. The economy is expanding, labor markets are tightening and earnings growth is at hand. I remain bullish in the short and long-term, a little more cautious in the near. Tomorrow there is one key economic report, Existing Home Sales, and a handful of earnings reports.

Until then, remember the trend!

Thomas Hughes

New Plays

Buying Opportunity?

by Jim Brown

Click here to email Jim Brown
Editor's Note

Buying rallies is not normally a good plan. Buying weakness is normally safer. Don't play in traffic, don't drive on the wrong side of the road and stop at railroad crossings. Those are all ways to avoid event risk. Another way would be not to try and add new positions at market highs on an expiration Friday ahead of weekend event risk. The market has been highly volatile the last week. Friday could be a continuation of that with all the saber rattling currently in progress.

If the market continues higher, we are in good shape since we are overly long. If it makes another nasty reversal, we will have a better buying opportunity for Monday. We do not want to add positions just because the market is open. Be patient and wait for the right pitch.


No New Bullish Plays


No New Bearish Plays

In Play Updates and Reviews


by Jim Brown

Click here to email Jim Brown

Editors Note:

The Russell 2000 broke through downtrend and midrange resistance to close within 4 points of a 7-week high. This was a big day for the small cap stocks with outsized gains on short covering after the big cap indexes rebounded strongly. Comments from Steve Mnuchin about a pending tax reform proposal triggered the short squeeze.

The Nasdaq Composite closed at a new high but only one point from strong resistance. This was a good day all around. Republicans are now starting to talk about a clean continuing resolution to fund the government until they can work out a longer-term proposal. This could prevent any last minute market declines next week and avoid the expected volatility.

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

PTCT - PCT Therapeutics
The long stock position was opened at $11.43.

If you are looking for a different type of trading strategy, try these newsletters:

Short term Calls and Puts on equities = Option Investor Newsletter

Credit spreads and naked puts = OptionWriter

Long term option investments = LEAPS Investor

3-6 month Option Trades = Ultimate Investor

Iron Condors = Couch Potato Trader

BULLISH Play Updates

HABT - Habit Restaurants - Company Profile


No specific news. Excellent gain to break through resistance at $18. If we can continue higher, the next challenge would be $21 and then $24. The historic high in 2014 was $44.

Original Trade Description: March 22nd.

The Habit Restaurants, Inc., a holding company, operates fast casual restaurants under The Habit Burger Grill name. It specializes in offering fresh made-to-order char-grilled burgers and sandwiches featuring choice tri-tip steak, grilled chicken, and sushi-grade albacore tuna cooked over an open flame; and salads, as well as sides, shakes, and malts. As of March 2, 2017, the company operated approximately 170 restaurants in 15 locations in California, Arizona, Utah, New Jersey, Florida, Idaho, Virginia, Nevada, Washington, and Maryland, the United States; and the United Arab Emirates. The Habit Restaurants, Inc. was founded in 1969 and is headquartered in Irvine, California. Company description from FinViz.com.

Habit reported earnings of 7 cents that beat estimates for 3 cents. Revenue rose 21.8% to $73.9 million. Same store sales rose 1.7%. This was the 52nd consecutive quarter of positive same store sales. They opened 11 company stores and 2 franchises in Q4. The CEO said they were proud of their strong beat considering it is a fiercely competitive environment.

For full year 2017, they guided to revenue of $338 to $342 million, which represents 19.8% growth at the midpoint. The guided for 2% same store sales and the opening of 31 to 33 new company stores alony with 5 to 7 franchised stores. Analysts were expecting $339.2 million.

Earnings June 1st.

Shares spiked from $14 to $16 on the news and then pulled back for two weeks on post earnings depression. They have since recovered that $16 level and are about to break out to a new three month high. Shares dipped on Tuesday but very little and the rebound today erased the dip completely.

Position 3/23/17:

Long HABT shares, currently $15.95, see portfolio graphic for stop loss.
Optional: Long June $17 call @ 70 cents, no initial stop loss.

ILG - ILG Inc - Company Profile


ILG revised their earnings date to May 4th. That means we have a week left in this position. Nice gain to a new 52-week high.

Original Trade Description: April 8th.

ILG, Inc., together with its subsidiaries, provides non-traditional lodging covering a portfolio of leisure businesses from vacation exchange and rental to vacation ownership. The company operates through two segments, Exchange and Rental, and Vacation Ownership. The Exchange and Rental segment offers leisure and travel-related products and services to owners of vacation interests and others primarily through various membership programs, as well as related services to resort developer clients; and allows owners of vacation ownership interests to exchange their occupancy rights for alternative accommodations at another resort and/or occupancy period. This segment also provides vacation property rental services for condominium owners, hotel owners, and homeowners' associations. The Vacation Ownership segment engages in the management of vacation ownership resorts; and the sale, marketing, and financing of vacation ownership interests, as well as in the provision of related services to owners and associations. As of December 31, 2016, it provided management services to approximately 250 vacation ownership properties and/or their associations. The company was formerly known as Interval Leisure Group, Inc. and changed its name to ILG, Inc. Company description from FinViz.com.

ILG reported earnings of 48 cents on revenue of $455 million. Net income rose from $16 million to $61 million. Earnings rose from 27 cents to 48 cents. Free cash flow was $180 million. Analysts had expected revenue of $464 million and shares fell sharply over the next week. The company guided for full year revenue of $1.72 to $1.86 billion.

They repurchased 6.5 million shares and paid $52 million in dividends to return $153 million to shareholders. They currently pay a 2.83% dividend.

The company has been on an acquisition and renovation binge. They sometimes acquire properties in great locations that have issues and then spend a few million on renovations to turn them into star attractions. In May they completed the acquisition of Vistana Signature Experiences, formerly known as Starwood Vacation Ownership for $1.15 billion in cash and stock. With the transaction, they acquired an 80-year global license for the use of the Westin and Sheraton brands.

Despite their vast holdings and strong revenue they are still a relative unknown in the investment community. However, with their Vistana acquisition along with the Hyatt and St Regis vacation brands they are starting to become known.

Shares have risen $3 in the last four weeks and have begun to accelerate. The company is a member of the S&P-600 but with the acquisition of Vistana it has a market cap over $3 billion and is eligible for inclusion into the S&P-500. That could provide a nice boost to the stock price but it would be pure speculation.There are many companies with a higher market cap that have not been included.

Earnings May 30th.

Position 4/10/17:

Long ILG shares @ $21.28, see portfolio graphic for stop loss.

Optional: Long June $22 call @ 60 cents.

JUNO - Juno Therapeutics - Company Profile


No specific news. Shares posted another decent gain to stop just under resistance at $25.

Original Trade Description: April 17th.

Juno Therapeutics, Inc., a biopharmaceutical company, engages in developing cell-based cancer immunotherapies. The company develops cell-based cancer immunotherapies based on its chimeric antigen receptor and T cell receptor technologies to genetically engineer T cells to recognize and kill cancer cells. Its CD19 product candidates include JCAR017 that is in Phase I/II trials for adults with relapsed or refractory (r/r) B cell aggressive non-Hodgkin lymphoma (NHL) and pediatric patients with r/r B cell acute lymphoblastic leukemia (ALL); JCAR014, which is in Phase I/II trials to treat various B cell malignancies in patients relapsed or refractory to standard therapies; and JCAR015 that is in Phase II trials for adult patients with r/r ALL. The company's CD22 product candidate comprise JCAR018, which is in Phase I trial for pediatric and young adult patients with CD22-positive r/r ALL or r/r NHL. Its additional product candidates include CD171, a cell-surface adhesion molecule to treat neuroblastoma; Lewis Y for the treatment of lung cancer; JCAR023, which is in Phase I trial for patients with refractory or recurrent pediatric neuroblastoma; MUC-16, a protein for treating ovarian cancers; IL-12, a cytokine to overcome the inhibitory effects; ROR-1, a protein for the treatment of non-small cell lung, triple negative breast, pancreatic, and prostate cancers; WT-1, an intracellular protein that is in Phase I/II clinical trials to treat adult myeloid leukemia and non-small cell lung, breast, pancreatic, ovarian, and colorectal cancers; and IL13ra2 for treating glioblastoma. Juno Therapeutics, Inc. has collaboration agreements with Celgene Corporation, Fate Therapeutics, Inc., Editas Medicine, Inc., MedImmune Limited, and Memorial Sloan Kettering Cancer Center. Company description from FinViz.com.

Juno shares were hammered in March after they reported they were ending a trial early on a hot new CAR-T drug they had expected to do well. The Phase II Rocket Trial of JCAR015 was paused twice and finally ended early after two patients died from swelling in the brain. The CAR-T process involves removing T-cells from their blood and reengineering them to recognize cancer cells from acute lymphoblastic leukemia and kill them. Once the modification is complete, they are re-injected into the patient so they can go to work. In this particular case the brain swelling was a side effect.

However, that is not the only drug in process at Juno. They will have more than 20 trials in progress by the end of 2017 on a variety of anticancer drugs. The company has nearly $1 billion in cash and a burn rate of about $200 million a year. They are in no danger of running out of money and they have dozens of partnerships and collaborations contributing money for research.

Earnings May 31st.

Over the last three weeks Juno has not declined. The stock is continuing to move slowly higher with resistance currently at $25. Once through that level the next resistance is $33.

With the biotech sector selling off every other day you would have expected JUNO to be reactive to those moves but the stock continues to climb.

Position 4/19/17 with a JUNO trade at $24.55

Long JUNO shares, see portfolio graphic for stop loss.

No options due to price and strike availability.

KRNT - Kornit Digital - Company Profile


No specific news. Only a minor gain but a new 52-week high.

Original Trade Description: April 5th.

Kornit Digital develops, manufactures and markets industrial digital printing technologies for the garment, apparel and textile industries. Kornit delivers complete solutions, including digital printing systems, inks, consumables, software and after-sales support. Leading the digital direct-to-garment printing market with its exclusive eco-friendly NeoPigment printing process, Kornit caters directly to the changing needs of the textile printing value chain. Kornit’s technology enables innovative business models based on web-to-print, on-demand and mass customization concepts. With its immense experience in the direct-to-garment market, Kornit also offers a revolutionary approach to the roll-to-roll textile printing industry: Digitally printing with a single ink set onto multiple types of fabric with no additional finishing processes. Founded in 2003, Kornit Digital is a global company, headquartered in Israel with offices in the USA, Europe and Asia Pacific, and serves customers in more than 100 countries worldwide. Company description from Kornit.

The company description pretty much says it all. They have developed a process to print on fabric that is fast and cheap and the company is setting new highs as the demand for their product increases.

The company reported earnings of 16 cents on a 33.4% increase in revenue to $34 million. There was a secondary offering in January that raised $38 million for the company and was very oversubscribed.

The big spike in early January was news the company granted Amazon warrants to buy up to 2.9 million shares at $13. Since KRNT only has 31 million shares outstanding that is nearly a 10% position in the company. The warrants came after Amazon placed an order for a "large number" of textile production systems for Amazon's own use in the Merch by Amazon program.

Earnings May 16th.

Shares made a new high on March 31st and they closed within 10 cents of that high on Thursday. Shares have risen over the available option strikes so this will be a stock only position.

Position 4/7/17:

Long KRNT shares @ $19.00, see portfolio graphic for stop loss.

PTCT - PTC Therapeutics - Company Profile


The company announced they had completed the acquisition of Emflaza earlier than expected.

Original Trade Description: April 19th.

PTC Therapeutics, Inc., a biopharmaceutical company, focuses on the discovery, development, and commercialization of orally administered, small molecule drugs that target post-transcriptional control processes. The company's lead product is Translarna (ataluren), for the treatment of nonsense mutation Duchenne muscular dystrophy in ambulatory patients; and which is in phase III clinical trials to treat cystic fibrosis caused by nonsense mutations. It also develops Translarna, which is in Phase II clinical trials for the treatment of mucopolysaccharidosis type I caused by nonsense mutation, nonsense mutation aniridia, and nonsense mutation Dravet syndrome/CDKL5; and RG7916 that is in Phase I clinical trials to treat spinal muscular atrophy. In addition, the company's product candidate in cancer stem cell program include PTC596, an orally bioavailable and potent small molecule, which has completed phase I clinical trials that targets tumor stem cell populations by reducing the activity and amount of a protein called BMI1. PTC Therapeutics, Inc. has collaborations with F. Hoffman-La Roche Ltd and Hoffman-La Roche Inc., and the Spinal Muscular Atrophy Foundation to develop and commercialize compounds identified under its spinal muscular atrophy sponsored research program; and research collaboration with Massachusetts General Hospital for the treatment of rare genetic disorders resulting from pre-mRNA. Company description from FinViz.com.

PTC suffered two hits in March. The first was a failed drug trial on a Cystic Fibrosis drug. That drop knocked shares down from $13 to $10. Drug trials fail all the time and that is just the risk of owning a drug company.

On March 15th, the company announced it was buying a Duchenne Muscular Dystrophy (DMD) drug named Emflaza from Marathon for cash and stock. Companies buy rare drugs from other companies all the time. This particular drug had just created a hornet's nest of controversy after Marathon priced it at $89,000 per year. There had been a monster uproar over the pricing and even Bernie Sanders got into the act saying it should be $1,000 a year. For PTC to jump into the hornet's nest with a $140 million upfront purchase before the drug even succeeds in the market caused investors to flee the stock.

Here is the key point. The drug is in a class called corticosteroids that are anti inflamatories used all around the world to treat DMD as well as other diseases. The drug can be cross marketed and sold for multiple applications besides DMD.

The drug is new and was just approved by the FDA in February. When Marathon priced it at $89,000 right in the middle of the drug price happenings in Washington, they were forced to pause the launch to re-evaluate the price. PTC arrived on the scene and solved their problem.

Now PTC is evaluating the "correct" pricing for the drug and shares are rebounding from their headline induced crash.

Earnings June 15th.

PTC shares broke through resistance on Wednesday to close at a two month high at $11.39. Resistance is now $14 to give us a potential $2 window.

Position 4/20/17:

Long PTCT shares @ $11.43, see portfolio graphic for stop loss.

No options due to prices and wide spreads.

BEARISH Play Updates

FSLR - First Solar - Company Profile


No specific news. Minor 20 cent rebound after declining for five consecutive days.

Original Trade Description: March 30th.

First Solar, Inc. provides solar energy solutions in the United States and internationally. It operates through two segments, Components and Systems. The Components segment designs, manufactures, and sells cadmium telluride solar modules that convert sunlight into electricity. This segment offers its products to solar power systems integrators and operators. The Systems segment provides turn-key photovoltaic solar power systems or solar solutions, such as project development; engineering, procurement, and construction; and operating and maintenance services to utilities, independent power producers, commercial and industrial companies, and other system owners. The company was formerly known as First Solar Holdings, Inc. and changed its name to First Solar, Inc. in 2006. Company description from FinViz.com.

First Solar shares have been under pressure for months. On March 20th they were removed from the S&P-500 and investors are still selling the shares.

They reported a Q4 loss of $6.92 per share compared to estimates for $1.00 in earnings. The earnings included a $729 million restructuring charge compared to only $4 million in Q3. If we back out the restructuring charges the company would have earned $1.24 and shown a sizeable beat. However, revenue declined from $480 million in Q3 to $208 million in Q4.

Earnings May 23rd.

First Solar is building quality projects but they are facing a stiff headwind. Tax incentives around the world are shrinking and it is becoming increasingly harder to make a profit. Whenever they get a big power generation facility completed they are forced to sell it to recover their money rather than sit back and let the long term profits roll in.

On Thursday, March 30th, they sold the 250-megawatt Moapa Southern Pauite Solar Project in Nevade to Capital Dynamics, a Swiss private equity firm. The facility supplies power to the Los Angles Dept of Water and Power. They did not disclose the terms of the sale and the stock tanked again. By not disclosing the terms, investors always fear the worst, that they were forced to sell at a big discount.

The stance taken by the new Trump administration on EPA restrictions on coal and gas fired electric generation plants will make power cheap again and these massive solar developments will find it harder to break even. Solar power generation is getting cheaper to build but it cannot compete with gas fired plants at $3 or coal fired plants that operate even cheaper.

Shares broke to a five-year low last week and today's decline is a lower low. The prior low back in 2012 was $11.50 and we could be headed to that level long term.

Update 4/7/17: Reportedly FSLR wants to exit its joint venture with Sunpower (SPWR). The two companies package completed utility scale solar farms into a "Yield Co" for sale to investors. Yield Cos have lost favor with the investing public after SunEdison filed bankruptcy in 2016. Shares posted a minor gain.

Update 4/10/17: Despite a negative article on Bloomberg shares still posted a strong gain of $1.16.

Position 3/31/17:

Short FSLR shares @ $27.50, see portfolio graphic for stop loss.

Optional: Long June $25 put @ $1.15, see portfolio graphic for stop loss.

VXX - Volatility Index Futures - ETF Description


Minor decline because there is still some weekend event risk fear in the market. We should expect the potential for a 2-point rise if the market tanks on the fiscal battles next week. Long term, it always goes down.

Original Trade Description: April 12th.

The VXX is a short-term volatility product based on the VIX futures. As a futures product it has the rollover curse. Every time they roll to a new futures contract, they have to pay a premium and that lowers the price of the ETF. It is a flawed product with a perpetual decline built in from the monthly roll over in the futures contracts.

As evidence of this flaw, they have now done four 1:4 reverse stock splits. The last four reverse splits occurred at $13.11 (11/2010), $8.77 (10/2012), $12.84 (11/2013), $9.52 (8/8/16). The prospectus says it can reverse split anytime it trades under $25 for a prolonged period and the splits will always be 1:4.

The VXX has rebounded $3 over the last week as the volatility returned. The VIX traded over 16 today and could hit 18 if there are any geopolitical events over the Easter weekend.

Unfortunately, put options are expensive with a volatility instrument at this price level. The only recommendation is to short the ETF and forget it. If we do get a prolonged rally as some are expecting we could see strong market gains in the next 2-3 months. This will be a long-term position. This is not a 2-3 week play. I can guarantee you, if history holds, we can play this until it splits 1:4 again at $10. Once we are in the position and profitable I will put a trailing stop loss on it. We will take profits and then look for a bounce to get back in.

We know from experience that the VXX always declines. The last time we shorted this ETF we had a $7.23 gain.

Position 4/13/17:

Short the VXX @ $17.98, no stop loss because it always declines eventually.

If you like the trade setups you have been receiving and you are on a free trial then now is the time to subscribe. Do not wait until you miss a newsletter to decide you want to take the plunge.

subscribe now