Option Investor

Daily Newsletter, Saturday, 9/16/2017

Table of Contents

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

Market Wrap

Pivotal Week Ahead

by Jim Brown

Click here to email Jim Brown

The indexes had a good week with the Dow gaining 470 points.

Weekly Statistics

Friday Statistics

That big Dow gain coupled with the S&P closing exactly on round number psychological resistance at 2,500 set the stage for a pivotal week. The Dow has pulled far enough into new high territory that investors are being forced to bite the bullet and buy something. However, with the S&P closing right on 2,500, that will be the deciding factor for a continued rally. If the index pushes through that level at the open on Monday, we could be off to the races. If it fails at that level, investors would be happy to see a minor dip so they can reload at a lower level. Either way, that 2,500 level is going to be the key to the markets for the next week.

The missile launch over Japan tanked the futures on Thursday evening but S&P declined only about 2 points at the open and the dip was immediately bought. North Korea is now old news and short of a military conflict, the problem will be ignored by the markets.

Friday had minimal stock news but a busy economic calendar. The retail sales for August shocked everyone with a -0.2% decline compared to a +0.6% rise in July and consensus estimates for a +0.1% rise. August is back to school shopping season and a drop in sales almost never occurs. Analysts blamed it on Amazon's Prime Day in July pulling purchases forward. They also blamed Hurricane Harvey for shutting down coastal Texas for the last week of August. The hurricanes will impact retail sales for September as well and then we should get a boost in Oct/Nov as people replace everything in their house and buy tons of building supplies.

For August, sales excluding autos rose 0.2% so that somewhat weakens the Amazon/Hurricane argument. Motor vehicles and parts declined -1.6% and the largest hit to the headline number. However, gasoline stations rose 2.5% for the biggest lift. Nonstore retailers, as in internet retailers, declined -1.1% and that is where the Amazon argument gains traction. Building materials were down -0.5% but that number will rise sharply over the rest of the year.

The NY Empire Manufacturing Survey for September declined slightly from 25.2 to 24.4. New orders rose from 20.6 to 24.9 and inventories recovered from -3.1 to +6.5. Backorders rose from -4.7 to +8.9 and employment rose from 6.2 to 10.6. Almost every component posted gains so I do not understand why the headline number dropped a point. The only material decline was six-month expectations for business conditions falling from 45.2 to 39.3.

Industrial Production fell from +0.4% in July to -0.9% in August. This was the first decline in seven months and analysts blamed it on Harvey. Analysts are not too excited because the majority of the decline came from the utility sector with a -5.5% drop thanks to the mild summer weather. Motor vehicles rose 2.2% and the first gain in four months, high-tech equipment rose +1.4%. Non-durable goods fell -0.9%, business equipment -0.4% and mining/energy -0.8%. Overall production is still up +1.3% over the trailing 12 months.

Business Inventories rose +0.24% for July after a +0.49% rise in June. Manufacturing rose 0.22%, wholesale +0.62% and retail inventories fell -0.11%.

Consumer Sentiment for September declined from 96.8 to 95.3 for the first half of the month. The present conditions component rose from 110.9 to 113.9 but the expectations component declined from 87.7 to 83.4. Despite the minor decline, sentiment remains near 10-year highs. The present conditions component at 113.9 is the highest level since 2000. More than 81% of respondents said their financial conditions were better than the same period in 2016.

The calendar for this week will be dominated by the Fed announcement on Wednesday and Yellen's press conference. They are not expected to hike rates but there is a decent chance they will begin tapering QE purchases. It will be interesting to see how the market reacts to that change in policy. Whenever they have changed QE policy in the past it did not go over well.

The Philly Fed survey is the next most important followed by the Home Sales and new construction.

The Atlanta Fed real time GDPNow forecast imploded after Friday's economic reports. The forecast fell from 3.0% to 2.2% growth for Q3. The outlook for real consumer spending growth fell from 2.7% to 2.0% and the outlook for fixed investment growth fell from 2.6% to 1.4%.

Once the impact of the hurricanes becomes evident, we could see a drop of another 1% according to analysts.

In stock news, Carnival Corp (CCL) was downgraded from outperform to neutral by Credit Suisse on worries about losses from cancelled cruises and reduced demand for cruises for the rest of the season. Credit Suisse cut its profit estimates by 10% and price target by 10% to $70. CS cited the natural disasters around the world and the reluctance to travel because of terror attacks. Because of the damage in the Caribbean from Irma, bookings are expected to decline 24%. Cruises in the Eastern Mediterranean have seen bookings decline 60% since 2011 because of terrorist concerns. Terror attacks in Barcelona just caused another wave of cancellations.

Oracle (ORCL) reported earnings after the close on Thursday and crashed on Friday. They reported Q2 earnings of 62 cents that beat by 2 cents. Revenue of $9.21 billion beat estimates for $9.03 billion.

The problem came in the guidance. They guided for earnings of 64-68 cents and analysts were expecting 68 cents. They guided for total cloud revenue to increase 39%-43% and that was lower than the 51.5% growth in Q2. It is only natural for growth to slow as the business gets bigger because the percentages are taken off the larger enterprise. However, investors were not pleased and the stock fell hard.

American Airlines (AAL) and United Continental (UAL) were downgraded to neutral by JP Morgan and they upgraded Southwest (LUV) to overweight. The downgrades were based on higher fuel costs, domestic pricing weakness and excess capacity. The airlines lost millions in the disruptions caused by Harvey and Irma even though they brought in extra planes to allow Floridians to escape the storm. The analyst said Southwest had 22% upside from its current price. He called the airline a "flight to safety" candidate in the airline sector. Current consensus estimates for the sector appear "increasingly unachievable" at current fuel prices. The analyst also warned that tourism to Florida and the Caribbean would be depressed because of the storm damage.

Evercore ISI went all in on Nvidia and boosted their price target from $180 to $250. The company hosted some of Nvidia's senior executives and were very impressed with their outlook for the future. The analyst said Nvidia is "building the industry standard for artificial intelligence or AI." The analyst said the company had built a $10 billion moat around its GPU CUDA Core architecture that would be "nearly impossible to replicate" and will remain in place for the long-term. He said Wall Street's estimates for multiple business segments are looking very conservative. The consensus is for 9% growth in data center revenue and 6% in gaming. The analyst said AI sector is merely in its early stages and Nvidia is "creating THE AI computing industry standard." Shares exploded 6% higher to a new record close.

I am glad to see analysts are finally beginning to understand how far ahead Nvidia is from AMD and Intel. They are not even in the same league. Readers know I have been pounding the table on Nvidia for the last year.

Nvidia's gains helped lift the Semiconductor Index ($SOX) to a new 17-year high close. The chip sector was already rebounding and the Nvidia spike pushed it over the top. Everything you buy today has a chip of some kind.

Gartner Inc said there will be 8.4 billion "connected" devices by the end of 2017. By the end of 2020 there will be 20.4 billion. This includes computers, tablets, phones and the new IoT category of cameras, TVs, refrigerators, home devices like Alexa, Google Home, Apple TV, thermostats, etc. Everything has chips and memory. This is the only sector guaranteed to see exponential growth over the next decade.

Adient Plc (ADNT) previously Johnson Controls Automotive, was spun off from JCI in Oct 2016. Shares spiked 5% on Friday afternoon when a story broke that activist fund Blue Harbor had acquired a 6.2% stake in the company. Blue Harbor said they had acquired the stake, their largest position ever, because they believe Adient can dramatically improve its margins, boost share buybacks and restructure its network of joint ventures in China. The fund is now the third biggest shareholder in Adient. They disclosed a 3.7% stake in August but have ramped up buying to 6.2%.

Hurricane Jose has finally decided to quit wandering in the Atlantic and has taken aim at NJ, NY, CT and MA. There is still a chance it will veer eastward and miss those states with anything except for its outermost winds. Jose has been wandering in circles just north of Puerto Rico for the last week or more.


Behind Jose are Maria and Lee. Maria is expected to run right over Puerto Rico and the Dominican Republic before targeting the east coast of Florida. Lee has a slight northerly track that is still expected to brush Puerto Rico and the Dominican Republic but maybe not hit them dead center.



There has been a lot written over the last week about why there is a sudden flurry of hurricanes. The majority of it blames the sudden flurry on global warming because Florida has not had a hurricane in 12 years. Any actual weather expert knows the storms are formed by the wind blowing off the African desert and fed by ocean currents. If these storms were caused by global warming then what caused the other 119 storms that have hit Florida since 1850? You cannot blame those on global warming. Hurricanes have been hitting Florida since before Columbus discovered America. There are multiple graveyards of fleets of ships that were sunk by hurricanes in the Caribbean and off Florida since the area was discovered in the late 1400s. Global warming did not cause those storms.

Florida has been fortunate over the last 12 years and after this season it could be another 12 years before it is blasted again but storms will continue to form because that is the way the climate works.

If Jose, Maria and Lee make landfall it will be another tragedy but there is nothing we can do about it. Home Depot (HD) and Lowes (LOW) will be the big winners along with the hundred thousand jobs that will be created in the rebuilding effort. Other companies that should benefit would be Lumber Liquidators (LL), Eagle Materials (EXP), Weyerhauser (WY), USG Corp (USG), Boise Cascade (BCC), Generac Holdings (GNRC) and Beacon Roofing (BECN).

Crude prices rebounded back to $50 for multiple reasons. Saudi Arabia said they were going to cut October exports by another 350,000 bpd. The IEA raised demand growth estimates by 100,000 bpd to 1.6 million bpd for 2017. They based this on very strong demand from the OECD countries plus the impact from the hurricanes and the rebuilding effort. They are now projecting demand of 97.7 million bpd for 2017 and 99.1 million bpd for 2018. For the first quarter of 2017, demand rose 1.2 million bpd over the same period in 2016.

The IEA projects a demand drop in the US as a result of the hurricanes of 600,000-800,000 bpd for September but a rebound in Q4. European demand rose 650,000 bpd YoY for June, the last month were records are complete. Chinese demand rose 575,000 bpd in Q2 following a 700,000 bpd rise in Q1. The IEA said global supply declined 720,000 bpd in July as a result of problems in Libya, Nigeria but mostly maintenance and unplanned outages in non-OPEC countries. Unfortunately, global supplies remained unchanged in July at 3.016 billion barrels. Even with all the increased demand and decreased production there was no material decline in inventories.

Yellow = 8-week lows, green = 8-week highs

Active rig counts declined by 8 rigs for the week ended on Friday. Oil rigs fell -7 and gas rigs declined -1. As you can see on the chart, the direction of active rigs has taken a sharp downward trajectory.

Amazon is about to be blamed for another retail disaster. Toys-R-Us is reportedly planning to file bankruptcy. They are in the process of securing a loan to allow them to operate their 1,600 stores after a filing. Retail is hard and getting harder. Toys-R-Us was taken private in 2005 in a $6.5 billion deal by KKR, Bain Capital and Vornado Realty Trust. This saddled the company with billions in debt as we headed into the period where Amazon's growth exploded. Amazon is now responsible for 25% of online retail sales and they are branching out into brick and mortar.

Amazon announced earlier in the week Amazon Web Services had been granted approval by the Dept of Defense to host its Level 5 data. This is the Pentagon's and US Military's most classified information. Amazon is only the third civilian company approved to host data for the DoD. The other two are IBM and Microsoft. Amazon also has a $600 million contract with the CIA to host its data.

Amazon is also in talks with a number of small TV stations about being acquired. Amazon is looking to acquire access to their content to stream on Amazon Prime and there are rumors of an Amazon channel coming to cable, satellite systems. This would feature current events, news, talk shows, etc as well as Amazon ads.


As of Thursday, it has been exactly ten months since the S&P has declined 3%. That is the second longest streak since 1928 and beaten only by an 11-month streak that started in 1994. This is also the fourth longest period in the history of the S&P without a 5% decline. While all streaks will eventually be broken, they tend to self perpetuate longer than most people expect. The constant shorting at what is seen to be a top and then the short covering when that top is broken, tends to keep the streaks alive until some event appears that overcomes the dip buying mentality.

The S&P closed exactly at 2,500 on Friday and this is a huge psychological tipping point. Whichever direction the S&P takes from here could be with us for a while. If it punches through, it could start an entirely new leg higher on short covering and price chasing. If it fails here, we could be headed for a break of one of those streaks I mentioned earlier.

The wild card is the Fed announcement on Wednesday. While no trouble is expected, you never know how the market will react to the wording of the announcement, especially if the Fed begins to taper QE purchases. Anything is possible when the algorithmic computers parse those words and then act on their programming.

Other than the Fed there are no negative catalysts on the calendar. The political crisis events have been pushed out to December. There is nothing that should push the market lower other than normal portfolio restructuring in September. All dips continue to be bought and everyone appears to be afraid of missing out on a Q4 rally.

The Dow posted a decent gain on Friday and pulled away from the prior resistance high. The move came despite weekend event risk. By pulling away from resistance and congestion, the Dow appears to be ready to move significantly higher. One problem could be the 470-point gain for the week. That could generate some profit taking but I would expect it to be light.

Boeing continues to be the strongest Dow stock with a 94-point gain for the year, which equates to 644 Dow points or 26% of the Dow's 2,506-point gain for the year.

Apple rebounded slightly on Friday after declining about 6 points from Tuesday's high. Shares are normally choppy with a negative trend for about three weeks after a product announcement. That suggests there could be further weakness ahead.

Initial support for the Dow is about 22,100 followed by 21,735. Resistance is going to be around 22,500 and another big round number.

The Nasdaq Composite did not close at a new high. Resistance at 6,460 from July remains intact and the mixed numbers on the big cap tech stocks kept the Nasdaq from gaining the required momentum. The index did reach a new intraday high at 6,464 at 10:54 but could only hold it for a very short time with the decline beginning at 10:56.

The mixed results on the big cap techs is a minor warning sign. If Apple weakens again, it will probably contaminate the rest of the big caps and that could lead to further market weakness.

However, it was an expiration Friday with weekend event risk. It would be very hard to apply too much importance to the resistance failure and the mixed results. Next week is going to be the key with S&P 2,500 the signal light for the rest of the market.

Initial support on the Nasdaq is 6,425 followed by 6,350.

The Russell 2000 posted a minor gain on Friday but the index did break through resistance at 1,427. That sets up a run to the old resistance high at 1,450. The Russell is following the big caps rather than leading. I would expect that to continue the rest of September and early October.

The September wall of worry has collapsed and the bears have run out of reasons to be short. Sometimes a lack of obstacles is a negative, despite how strange that would seem. Typically, the markets are flat the day after an expiration and post decent gains the day before a Fed announcement. Since there could be some QE taper announcements on Wednesday, the Tuesday rally could be muted unless there are some positive headlines in advance of the event.

In theory, investors should welcome the taper because it means conditions are slowly returning to normal. However, the dual hurricane impacts with three more on the way, could cause the Fed to do nothing. I am not sure how the market would react since that implies a weaker economy. I would think investors would see it as bullish and assume there will be no changes until December or later. The market likes a dormant Fed.

I would recommend keeping some cash in your account just in case a buying opportunity appears.

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Random Thoughts

Bullish sentiment exploded higher last week with a monster spike of 12%. The last time it was this high was January. This is only the second time in 35 weeks that bullish sentiment has been over its historical average of 38.5%. Bearish sentiment imploded with a -13.8% decline. These were major changes and suggest investors are ready to throw caution to the wind and chase prices higher.

Everyone is buzzing about the new iPhones but the Pixel 2 from Google is just a couple weeks away. According to the rumors, the normal sized Pixel 2 will be built by HTC, the same company that built the two existing models. The Pixel 2 XL or whatever they will call it, will have a larger 6.0 inch screen and be built by LG. The larger phone is rumored to have the OLED screen and be edge-to-edge like its competitors. The Pixel phones will be significantly faster than the iPhone because they will be using next generation Gigabit LTE networks. The iPhone is actually software limited to slower connect speeds because the phones use either a Qualcomm modem or a slower Intel modem. Apple is trying to move away from Qualcomm equipment. They limit the speeds on the Qualcomm modem to match the speed of the Intel modem so that people will not be trying to only buy the phones with Qualcomm inside. The Pixel 2 phone will be wide open and capable of 5-10 times current speeds as the carriers roll out the faster networks.

Most people are very happy that the phone will run the latest Android operating system, Oreo, which is the most powerful and cleanest of any prior OS. By cleanest, that means no bloatware, that carriers normally clutter the phone with when you buy it from a carrier. This phone will be pure Android and you add only the apps you want. You will not find a bunch of carrier supplied apps running in the background and sucking up memory and battery life.

The Pixel 2 launch is scheduled for Oct 4th. The XL is expected to retail for $849 with 32Gb and $949 with 128Gb.

The competition is the Samsung Galaxy S8 Plus 64Gb at $849 and Note 8 64Gb at $959.

Bitcoin had a rough week. JP Morgan CEO Jamie Dimon called it a fraud and said someone is going to get killed. Bitcoin lost -8.7% after his comments. Chinese authorities are rumored to be getting ready to shutdown several exchanges and ban projects that were planning on raising money in Bitcoin. Many so-called "initial coin offerings" or "ICOs" had been launched in recent months. Mohamed El-Erian warned that Bitcoin should be valued at half its current value. He said the current pricing assumes massive adoption that will not happen because governments will intervene to prevent money from leaving the country or to be used in illegal transactions. He said a reasonable price would be a third of its current value.

North Korean state sponsored hackers have an all out push to steal bitcoins as a way to evade the sanctions. North Korean hackers targeted at least three South Korean cryptocurrency exchanges according to FireEye.


Enter passively and exit aggressively!

Jim Brown

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"The difference between who you are and who you want to be is what you do."

Bill Phillips


New Plays

New Lows Ahead

by Jim Brown

Click here to email Jim Brown
Editor's Note

Dean Foods sharply lowered guidance and the CEO warned on product mix and volume declines. We played this last month and were forced to exit on a minor bounce. I am expecting new lows ahead.


No New Bullish Plays


DF - Dean Foods - Company Profile

Dean Foods Company, a food and beverage company, processes and distributes milk, and other dairy and dairy case products in the United States. The company manufactures, markets, and distributes various branded and private label dairy case products, such as fluid milk, ice creams, cultured dairy products, creamers, ice cream mixes, and other dairy products; and juices, teas, bottled water, and other products. It sell its products under approximately 50 national, regional, and local proprietary or licensed brands, and private labels, including DairyPure, TruMoo, Alta Dena, Berkeley Farms, Country Fresh, Dean's, Friendly's, Garelick Farms, LAND O LAKES, Lehigh Valley Dairy Farms, Mayfield, McArthur, Meadow Gold, Oak Farms, PET, T.G. Lee, Tuscan, and others. The company sells its products to retailers, distributors, foodservice outlets, educational institutions, and governmental entities through its sales forces. Company description from FinViz.com.

Dean Foods reported earnings of 21 cents that declined -47.1% and missed estimates for 31 cents. Revenue of $1.93 billion, which also missed forecasts. The CEO warned, that volume and mix challenges are occurring at a higher-than-planned rate. As such, given the resulting volume shortages, they lowered their full-year guidance from $1.35-$1.55 to 80-95 cents. That is a major haircut.

On August 22nd the CFO resigned unexpectedly, effective Sept 1st. That is never good when a CFO exits with only one-week's notice.

Expected earnings Nov 8th.

Dean Foods handles a lot of milk brands and the USDA said milk sales nationwide declined -2.9% in May alone. Management said competitive and volume pressures are hurting the company and the negative dynamics are expected to continue the rest of the year.

Milk has been found to cause diabetes or at least make it worse and the news is spreading fast. I have a friend that has been taking insulin for 20 years. I talked him into dropping milk from his diet and he was able to get off insulin within 3 weeks. A year later he backslid and began to drink milk again and he had to go back on insulin. He was quickly convinced and has sworn off forever and now leads a normal life with no diabetes meds.

Shares fell sharply to a 5-year low but given the severity of the guidance warning and the size of the earnings miss, the stock could continue to decline.

We shorted this stock on August 10th at $11.37 and shared dipped about 60 cents then rebounded to take us out of the short. The long put ended 6 cents in the money after shares began to roll over again. I believe we are going to see new lows.

sell short DF shares, currently $10.93, stop loss $11.45.
Alternate position: Buy Dec $10 put, currently 35 cents, no initial stop loss.

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

In Play Updates and Reviews

Resistance Failure

by Jim Brown

Click here to email Jim Brown

Editors Note:

The Russell pushed through resistance at 1,427 with the old high the next target. The Russell 2000 posted a decent gain of 7 points to close near 1,432. The closing high was 1,450 with the intraday high in July at 1,452. The small cap stocks have been on a good run despite a weak A/D line. With the big cap indexes at new highs, the small caps are following along at a distance.

The S&P came to a dead stop at 2,500 at the close. This is significant round number psychological resistance. A breakthrough here on Monday could be a strong market mover.

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.

Lottery Ticket Plays - Updated only on Weekends

Current Position Changes

DDD - 3D Systems
The Lottery Position call expired.

DF - Dean Foods
The Lottery Position call expired.

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BULLISH Play Updates

ETSY - Etsy Inc - Company Profile


No specific news. Somebody took profits in a big position. Volume tripled from Thursday and it was all negative. Shares fell -3.3% from the new high.

Original Trade Description: Sept 13th.

Etsy, Inc. operates as a commerce platform to make, sell, and buy goods online and offline worldwide. Its platform includes its markets, services, and technology, which enables to engage a community of sellers and buyers. The company offers approximately 45 million items across approximately 50 retail categories to buyers. It also provides various seller services, including direct checkouts, promoted listings, and shipping labels, as well as Pattern by Etsy to create custom Websites; and seller tool and education resources to start, manage, and scale businesses to entrepreneurs primarily through Etsy.com. In addition, the company operates A Little Market, a handmade and supplies market for sellers and buyers. Company description from FinViz.com.

For Q2, the company reported earnings of 10 cents that rose from a 6-cent loss in the year ago quarter. Revenue rose 19.1% to $101.7 million. Active sellers rose 10.9% to 1.83 million. Gross merchandise volume rose 11.7% to $748 million. Sales on mobile devices rose 47%. International sales rose 31% to 32% of gross sales. The number of employees in the workforce declined 23% thanks to an aggressive push by the CEO to expand profitability.

They guided for gross merchandise sales to rise 12% to 14% for the full year, up from prior guidance of 11.7%. Full year revenue is expected to rise 18% to 20% and in line with the 19.1% in Q2.

The company is growing rapidly, especially internationally and they are reducing costs significantly. Over the last several months, they replaced the CEO, CFO and CTO in their push to grow the company and profits quickly.

Expected earnings Nov 2nd.

On Sept 7th a Davidson's analyst, Tim Forte, went all in on ETSY with a glowing forecast. Shares spiked to $17.50 and then faded for a couple days. They have rebounded over the last three days and closed at a new high on Wednesday.

Position 9/14/17:

Long ETSY shares @ $17.79, see portfolio graphic for stop loss.
Alternate position: Long Dec $20 call @ 70 cents, see portfolio graphic for stop loss.

HIMX - Himax - Company Profile


No specific news. Shares of Apple suppliers turned positive along with Apple on Friday and the semiconductor sector was up sharply.

Original Trade Description: Sept 9nd

Himax Technologies, Inc., a fabless semiconductor company, provides display imaging processing technologies to consumer electronics worldwide. The company operates through Driver IC and Non-Driver Products segments. It offers display driver integrated circuits (ICs) and timing controllers used in televisions (TVs), laptops, monitors, mobile phones, tablets, digital cameras, car navigation, and other consumer electronics devices. The company also designs and provides controllers for touch sensor displays, liquid crystal on silicon micro-displays used in palm-size projectors and head-mounted displays, light-emitting diode driver ICs, power management ICs, scaler products for monitors and projectors, tailor-made video processing IC solutions, and silicon IPs. In addition, it offers digital camera solutions, including complementary metal oxide semiconductor image sensors and wafer level optics, which are used in various applications, such as mobile phone, tablet, laptop, TV, PC camera, automobile, security, and medical devices. The company markets its products to panel manufacturers, agents or distributors, module manufacturers, and assembly houses; and camera module manufacturers, optical engine manufacturers, and television system manufacturers. Company description from FinViz.com.

Himax produces video drivers for 4K TVs and that accounted for 36% of total revenue in Q2. However, the big news comes from the 3D sensing chips. They are expecting a 90% increase in revenue from this technology in Q3. There are rumors that Himax is going to supply the 3D sensing technology for the new iPhones. Since several companies are rumored to have been selected, somebody is riding the rumor wave.

Since Himax guided for a 90% increase in revenue in Q3 from those sensors, it would suggest there is a surprise in store for the chip community.

They also provide chips for vehicle display panels and they recently guided for demand to jump from 135 million units in 2016 to 200 million by 2022.

On August 30th, Qualcomm and Himax jointly announced a new high resolution, low power, active 3D depth sensing camera system to enable conputer vision capabilities such as biometric face authentication, 3D reconstruction and scene perception for mobile, IoT, surveillance, automotive and AR/VR. They specifically said it would enable Android smartphones to have unparalleled 3D experiences. They called it "game changing technology for smartphones." This technology is the culmination of 4 years of research and development by these two firms.

Shares rallied on the announcements but then faded last week. The company issued a press release suggesting an Oppenheimer analyst had become too excited about the prospects and they reaffirmed their recent guidance. The fading excitement erased $1.50 in gains but support appeared at $10 and the overall uptrend should resume.

Expected earnings November 7th.

Position 9/11/17:

Long HIMX shares @ $10.31, see portfolio graphic for stop loss.
Alternate position: Long Dec $11 call @ $1.20, see portfolio graphic for stop loss.

KTOS - Kratos Defense - Company Profile


No specific news. Maybe the decline is over. The lows the last three days have only been 10 cents apart. Support has definitely appeared.

Original Trade Description: August 14th.

Kratos Defense & Security Solutions, Inc. provides mission critical products, solutions, and services in the United States. The company operates through three segments: Kratos Government Solutions, Unmanned Systems, and Public Safety & Security. The Kratos Government Solutions segment offers microwave electronic products; satellite communications; technical and training solutions; modular systems; and defense and rocket support services. The Unmanned Systems segment provides unmanned aerial, ground, and seaborne, as well as command, control, and communications systems. The Public Safety & Security segment designs, engineers, deploys, operates, integrates, maintains, and operates security and surveillance solutions for homeland security, public safety, critical infrastructure, government, and commercial customers. The company serves national security related agencies, the department of defense, intelligence agencies, and classified agencies, as well as international government agencies and domestic and international commercial customers; and critical infrastructure, power generation, power transport, nuclear energy, financial, IT, healthcare, education, transportation, and petro-chemical industries, as well as government and military customers. Kratos Defense & Security Solutions, Inc. was founded in 1994 and is headquartered in San Diego, California. Company description from FinViz.com.

Kratos builds drones for target practice for the U.S. military. They are also building drones for combat for air to air and air to land. They also provide communication systems for missiles, satellites and various other platforms.

China and Russia are rapidly militarizing space and Kratos is working with the U.S. military to improve satellite communication to defend against attacks. The DoD is currently spending a lot of money to prepare for war in space. Kratos owns and operates a global satellite demonitoring business with revenues rising 61% in Q1.

Kratos has so many new programs in operation it would be impossible to list them here and several of them are secret programs for unnamed clients.

Kratos guided for a return to profitability in Q2 and sharply rising revenue for the full year. Shares spiked 30% in the four weeks after Q1 earnings. Their next report is August 3rd. I am recommending we buy an option and hold over the report. If the earnings are as positive as they teased in the Q1 report we could see another sharp reaction. This company is in all the right places for the increase in defense department spending.

Kratos unveiled its newest high performance class of military unmanned aerial system technology at the Paris Air Show. The XQ-222 Valkyrie and UTAP-22 Mako drones provide fighter like performance and are designed to function as wingmen to manned aircraft in contested airspace. The Valkyrie can carry various weapons and intelligence systems and has a range of 3,000 miles. The Mako is designed to carry sensors and stealthily infiltrate hostile airspace to gather intelligence. Both are designed to operate with or without manned flights. The Air Force recently pitched the functions of the Valkyrie saying a F-35 with a group of fighter/bomber drones could maximize control of airspace and ground attack operations. The F-35 can select targets and pass information to specific drones while maintaining situational awareness from a stealthy and relatively safe position.

Just over the last couple weeks Kratos announced a $2.9 million order for an airborne communications system, a $10 million order for a ballistic missile defense system, $23 million for a military radar system and $8 million for a GPS Satellite protection system. Analysts are expecting a record $800 million in revenue for 2018. They expect to do $150 million in unmanned revenues in 2018.

Kratos posted earnings of 1 cent and a $10.4% increase in revenue to $186 million. They guided to be free cash flow positive by $25 million in 2017.

Expected earnings Oct 26th.

With the daily new contract awards shares have risen $1.50 in the last week and closed at a 5-week high on Monday. They are very close to breaking out to a new high.

Update 9/5/17: New high in a weak market. Unfortunately, after the close they announced a secondary offering of 12.5 million shares that will increase the float by 14%. If I recommended we sell at the open on Wednesday, we are going to get hit with the normal "sell the news" decline. If we retain the position, stocks normally rise after a secondary is completed. We can either take a loss on Wednesday or hang on for a bigger gain later. I am recommending we hold the position. I am removing the stop loss to avoid being knocked out of the position for a loss. Shares declined to $12.80 in afterhours, a drop of $1. If that is all the decline we get, I would be very happy.

Update 9/6/17: KTOS announced a $46 million contract with the Saudi Royal Navy to assist in increasing military communications and preparedness. They also announced the QWK Integrated Solutions LLC, a partnership of multiple defense firms had won a $3.038 billion five year contract. The partnership will provide for rapid development and integration of space, missile defense, cyber, directed energy and related technologies to support SMDC/ARSTRAT and the warfighter.

Update 9/11/17: The company announced it had successfully completed a required number of missions with their jet powered unmanned drone system. The missions are part of the performance demonstrations prior to delivery of ten drones over the next six months. The customer was not announced for security reasons. However, a program they announced with the Navy several months ago called for delivery of 10 drones in 2017 with the potential for multiple follow on orders in 2018. This could be part of that project.

Position 8/15/17:

Long KTOS shares @ $12.78, see portfolio graphic for stop loss.
Alternate position: Long Nov $15 call @ 65 cents, see portfolio graphic for stop loss.

With shares just crossing the $12.50 strike price, we had to reach out to $15 and a distant month.

MRVL - Marvel Technology - Company Profile


No specific news. New high close above resistance at $18.

Original Trade Description: August 30th.

Marvell Technology Group Ltd. designs, develops, and markets analog, mixed-signal, digital signal processing, and embedded and standalone integrated circuits. It offers a range of storage products, such as hard disk drive (HDD) and solid-state drive controllers, as well as HDD components, such as HDD preamps components; and develops software enabled silicon solutions consisting of serial advanced technology attachment port multipliers, bridges, serial attached SCSI, and non-volatile memory express redundant array of independent disks controllers and converged storage processors for enterprise, data centers, and cloud computing businesses. The company also provides networking products comprising Ethernet solutions comprising Ethernet switches, Ethernet physical-layer transceivers, and single-chip network interface devices; and embedded communication processors. In addition, it offers a portfolio of connectivity solutions, including Wi-Fi, and Wi-Fi/Bluetooth integrated system-on-a-chip products, which are integrated into a variety of end devices, such as enterprise access points, home gateways, multimedia devices, gaming products, printers, automotive infotainment and telematics units, and smart industrial devices. Further, the company provides printer-specific standard products, as well as full-custom application-specific integrated circuits; and communications and applications processors. Company description from FinViz.com.

Marvel reported earnings of 30 cents that beat estimates for 28 cents. Revenue of $605 million beat estimates for $601 million. Free cash flow more than doubled from $38 million to $89 million. Core revenues rose 6%, storage controller revenues rose 13%. SSD chips rose from 20% to 25% or revenue. The new SSD products are rapidly gaining market share and remain a high profit item. Gross margin was 60.4%. They guided for Q3 for revenue of $595-$625 million with earnings of 30-34 cents per share.

Expected earnings Nov 23rd.

The company is in the midst of a restructuring process while they are changing their product mix for the better. Apparently it is working.

Shares spiked from $15.75 to $17.25 after earnings then pulled back slightly on post earnings depression. They rebounded today to a new 2-month high and very close to a new high.

Position 8/31:

Long MRVL shares @ $17.79, see portfolio graphic for stop loss.
Alternate position: Long Oct $18 call @ 64 cents, see portfolio graphic for stop loss.

SYMC - Symantec - Company Profile


No specific news. Minor rebound but still holding the majority of gains from the last 7 days.

Original Trade Description: August 26th.

Symantec Corporation, together with its subsidiaries, provides cybersecurity solutions worldwide. It operates through two segments, Consumer Digital Safety and Enterprise Security. The Consumer Digital Safety segment provides Norton-branded services that provide multi-layer security services across desktop and mobile operating systems, public Wi-Fi connections, and home networks to defend against online threats to individuals, families, and small businesses. This segment also offers LifeLock-branded identity protection services, such as identifying and notifying users of identity-related and other events, and assisting users in remediating their impact; and digital safety platform designed to protect information across devices, customer identities, and the connected homes and families. The Enterprise Security segment provides endpoint protection products, endpoint management, messaging protection products, information protection products, cyber security services, Website security, and advanced Web and cloud security offerings. Its enterprise endpoint, network security, and management offerings supports evolving endpoints and networks, as well as provides an integrated cyber defense platform. This segment delivers its solutions through various methods, such as software, appliance, software-as-a-service, and managed services. The company serves individuals, households, and small businesses; small, medium, and large enterprises; and government and public sector customers. Company description from FinViz.com.

Symantec is the largest provider of security products for retail buyers. They have an excellent suite of firewalls and antivirus programs. I have used everyone in the market at one time or another and Symantec has always been the best for me.

Last week they announced something different. They announced a secure router that handles everything in your house. It has special security for smartphones, tablets, PCs, IoT devices, etc. It has a handy user friendly interface and you can set at the router level, individual passwords for everyone in the family with individual settings by password. Say you have a 12 year old boy in the house. You can set different parental exclusions for him than you would for an 8 year old in the same house. You are in charge of everyone's access regardless of what device they are using.

The secure router blocks attacks before they get to your PC and before Windows has to deal with them. The router is not cheap but compared to what it does, it is cheap for the number of functions. How much does it cost to have your PC compromised? The router is $300 and comes with a year of service. After the year is up it goes to $10 a month. That is an entirely new revenue stream for Symantec. Obviously, it will not show up in their earnings for several quarters but the stock is rising on the news.

You can read the full press release HERE.

Expected earnings Nov 1st.

The stock is at the upper end of the range that I recommend in Premier Investor. With the potential for volatility in September, I am not recommending we go long the shares. This will be an option only position so we can try and ride out some of the volatility with minimum risk.

Update 8/28: Symantec said over the weekend they have identified a sustained cyber spying campaign, likely state sponsored, against Indian and Pakistani entities. The espionage effort began in October. India, China and Pakistan have raised military readiness over the last several weeks.

Update 9/6/27: Symantec said the US and EU power grid had been hacked by state actors and they had gained access to core systems that would have allowed them to be shutdown. The hacks were loosely tied to a recently dormant group called Dragonfly with links to Energetic Bear or Kola, widely believed to be sponsored by Russia.

Update 9/11/17: Shares of Symantec continue to soar after Google reported that searches for "LifeLock" had exploded and surged even higher than after the Anthem hack in 2015. Symantec's LifeLock monitors the credit bureaus and notifies you if anyone tries to open an account in your name. It carries a $25,000 reimbursement for stolen funds and retails for $9.95 a month. This is going to be a boost to Q3 earnings.

Update 9/14/17: The halt to US sales of the Kapersky virus suite, made in Russia, is another plus for Symantec.

Position 8/28/17:

Long Oct $31 call @ 48 cents, see portfolio graphic for stop loss.


BEARISH Play Updates

GE - General Electric - Company Profile


No specific news. Shares declined despite the Dow rally and that is a good sign for this position.

Original Trade Description: September 11th.

General Electric Company operates as an infrastructure and technology company worldwide. Its Power segment offers gas and steam power systems; maintenance, service, and upgrade solutions; distributed power gas engines; water treatment, wastewater treatment, and process system solutions; and nuclear reactors, fuels, and support services. The company's Renewable Energy segment provides wind turbine platforms, and hardware and software; onshore and offshore wind turbines; and solutions, products, and services to hydropower industry. Its Oil & Gas segment offers surface and subsea drilling and production systems, and equipment for floating production platforms; and compressors, turbines, turboexpanders, reactors, industrial power generation, and auxiliary equipment. The company's Aviation segment designs and produces commercial and military aircraft engines, integrated digital components, and electric power and mechanical aircraft systems; and provides aftermarket services. Its Healthcare segment offers diagnostic imaging and clinical systems; products for drug discovery, biopharmaceutical manufacturing, and cellular technologies; and medical technologies, software, analytics, cloud solutions, and implementation services. The company's Transportation segment provides freight and passenger locomotives, and rail and support advisory services; and parts, integrated software solutions and data analytics, software-enabled solutions, mining equipment and services, and marine diesel and stationary power diesel engines and motors, as well as overhaul, repair and upgrade, and wreck repair services. Its Energy Connections & Lighting segment offers industrial, grid, power conversion, automation and control, lighting, and current solutions. The company's Capital segment provides industrial and energy financial services; and commercial aircraft leasing, financing, and consulting services. Company description from FinViz.com.

GE has been struggling for the last several years. They manufacture hundreds of products from $10 items to $10 million items. After the financial crisis they did everything possible to exit their financial divisions and escape the "too big too fail" SIFI designation. They accomplished that in 2016.

Their biggest problem today is negative cash flow. It is a great company and is in no danger of failing but they are not generating enough cash to cover operating expenses, a 4% dividend and a whopping $21.1 billion stock buyback authorization through 2018.

They have been downgraded by almost everyone and JP Morgan said last week the stock needs to fall to the mid to high teens before it will be investible again. Shares closed at $23.72 today. With the stock nearing a three-year low, the odds are good, once that happens, we will see a continued drop into the teens.

JP Morgan suggested they would be forced to A) cut the dividend, which is not going to happen, B) sell something to raise cash, C) stop the $21.1 billion remaining on their stock buyback. Shares closed negative on Monday with the Dow up +259.

Earnings Oct 20th.

Position 9/13/17:

Short GE shares @ $23.93, see portfolio graphic for stop loss.
Alternate position: Long Dec $23 put @ 58 cents, see portfolio graphic for stop loss.

Left Over Lottery Tickets

These positions were left over from prior plays where we had an optional option with no stop after the stock position was closed. Rather than close these for a few cents they are left open as a "Lottery Ticket" play. With months before expiration, anything is possible. A strong move in a single stock can be well worth the additional patience.

These positions are only updated on the weekend.

CIEN - Ciena Corporation - Company Profile


No specific news. Shares rebounded nearly 2% on Friday so support is still holding.

Original Trade Description: Sept 2nd

Ciena Corporation provides equipment, software, and services that support the transport, switching, aggregation, service delivery, and management of voice, video, and data traffic on communications networks worldwide. The company's Networking Platforms segment offers hardware networking solutions optimized for the convergence of coherent optical transport, optical transport network switching, and packet switching. Its products include 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, Waveserver stackable interconnect system, CoreDirector Multiservice Optical Switches, and OTN configuration for the 5410 Reconfigurable Switching System, as well as Z-Series Packet-Optical Platform; 3000 family of service delivery switches and service aggregation switches, and the 5000 family of service aggregation switches, as well as 8700 Packetwave Platform and the Ethernet packet configuration for the 5410 Service Aggregation Switch; and 4200 Advanced Services Platform, Corestream 5100/5200 Advanced Services Platform, Common Photonic Layer, and 6100 Multiservice Optical Platform. This segment also sells operating system software and enhanced software features embedded in each of these products. The company's Software and Software-Related Services segment offers network management solutions, including the OneControl Unified Management System, ON-Center Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release, and Planet Operate; and Blue Planet network virtualization, service orchestration, and network management software platform, as well as related installation, support, and consulting services. Its Global Services segment provides consulting and network design, installation and deployment, maintenance support, and training services. Company description from FinViz.com.

Ciena reported earnings of 51 cents that beat estimates of 49 cents. Revenue rose 9% to $728.7 million and beat estimates for $726.9 million. Gross margins were 45% with an 11.3% operating margin. They ended the quarter with $854.1 million in cash and generated free cash flow of more than $50 million. Shares were knocked for a 15% loss on the news.

They guided for Q3 revenue of $720-$750 million and a record quarter. Analysts were expecting $766 million.

The CEO talked to a Barron's analyst after the earnings call and was very upbeat. He said we are still in bullish mode with 7% annual growth and 5% growth in North America. Compound growth over the last five years is 9%. The Q3 guidance takes into account two factors. Government spending overall has slowed. That means less spent on networking equipment. Secondly, Tier One telecom operators get a lot of government business and the slowing government spend has affected them as well. There has been a lot of regional M&A that is being digested. This impacts the entire networking market not just Ciena. We are still predicting 7% growth and a record quarter despite the temporary government slowdown.

Piper Jaffray reiterated an overweight rating saying they understood the government and regional provider problem and Ciena had a lot of positive signs despite this government slowdown. Ciena is executing well, new product acceptance is good. We believe Ciena is the best positioned system supplier for the two hottest segments of the optical market.

Citi upgraded from neutral to buy. Doughtery reiterated a buy and $27 price target.

Earnings Nov 30th.

Shares declined after earnings to support at $21.50 and rebounded 2% on Friday.

Update 9/7/17: Good article in Barron's on what Wall Street is missing about the Ciena outlook. Full Article

Position 9/5/17:

Long Nov $23 call @ 93 cents, see portfolio graphic for stop loss.

Previously closed 9/13: Long CIEN shares @ $21.89, exit $21.98, +.09 gain.

DDD - 3D Systems - Company Profile


No specific news. Shares finally broke through resistance at $13 and a rebound is in progress. Our long put expired on Friday.

Original Trade Description: August 7th.

3D Systems Corporation, through its subsidiaries, provides 3D printing products and services worldwide. The company's 3D printers transform data input generated by 3D design software, CAD software, or other 3D design tools into printed parts using a range of print materials, including plastic, nylon, metal, composite, elastomeric, wax, polymeric dental materials, and Class IV bio-compatible materials. It offers various 3D printing technologies, such as stereolithography, selective laser sintering, direct metal printing, multijet printing, and colorjet printing. The company also develops, blends, and markets various print materials, such as plastic, nylon, metal, composite, elastomeric, wax, polymeric dental materials, and Class IV bio-compatible materials. It offers its printers under the Accura, DuraForm, LaserForm, CastForm, and VisiJet brand names. In addition, the company provides digital design tools, including software, scanners, and haptic devices, as well as products for product design, mold and die design, 3D scan-to-print, reverse engineering, and production machining and inspection. Further, it offers proprietary software and drivers that provide part preparation, part placement, support placement, build platform management, and print queue management; and 3D virtual reality simulators and simulator modules for medical applications, as well as digitizing scanners for medical and mechanical applications. Additionally, the company provides warranty, maintenance, and training services; on-demand solutions; and software and healthcare services. Company description from FinViz.com.

3D reported adjusted earnings of 8 cents compared to 12 cents in the year ago quarter. Revenue rose less than 1% to $158.4 million but sales of 3D printers declined -4%. Analysts were expecting 12 cents and $162.5 million.

The company guided for the full year for revenue of $643-$671 million, down from $643-$684 million. They guided for earnings of 46 cents, down from 51-55 cents.

3D keeps talking about new products adding to revenue in 2018 but that is a long way off and could be wishful thinking.

Expected earnings November 1st.

Shares fell $5 on the earnings and guidance miss but I expect them to fall further. If shares break support at $12, they could fall to $6 and a 7-year low.

Position 8/8/17:

Closed 9/15: Long Sept $12 put @ 44 cents, expired, -.44 loss.

Previously closed 8/31: Short DDD shares @ $13.00, exit $12.95, +.05 gain.

DF - Dean Foods - Company Profile


No specific news. The decline returned and shares closed 6 cents below our strike price. With the decline returning, I am tempted to reload this position.

Original Trade Description: August 9th.

Dean Foods Company, a food and beverage company, processes and distributes milk, and other dairy and dairy case products in the United States. The company manufactures, markets, and distributes various branded and private label dairy case products, such as fluid milk, ice creams, cultured dairy products, creamers, ice cream mixes, and other dairy products; and juices, teas, bottled water, and other products. It sell its products under approximately 50 national, regional, and local proprietary or licensed brands, and private labels, including DairyPure, TruMoo, Alta Dena, Berkeley Farms, Country Fresh, Dean's, Friendly's, Garelick Farms, LAND O LAKES, Lehigh Valley Dairy Farms, Mayfield, McArthur, Meadow Gold, Oak Farms, PET, T.G. Lee, Tuscan, and others. The company sells its products to retailers, distributors, foodservice outlets, educational institutions, and governmental entities through its sales forces. Company description from FinViz.com.

Dean Foods reported earnings of 21 cents that declined -47.1% and missed estimates for 31 cents. Revenue of $1.93 billion, which also missed forecasts. The lowered their full-year guidance from $1.35-$1.55 to 80-95 cents. That is a major haircut.

Expected earnings Nov 8th.

Dean Foods handles a lot of milk brands and the USDA said milk sales nationwide declined -2.9% in May alone. Management said competitive and volume pressures are hurting the company and the negative dynamics are expected to continue the rest of the year.

Milk has been found to cause diabetes or at least make it worse and the news is spreading fast. I have a friend that has been taking insulin for 20 years. I talked him into dropping milk from his diet and he was able to get off insulin within 3 weeks. A year later he backslid and began to drink milk again and he had to go back on insulin. He was quickly convinced and has sworn off forever and now leads a normal life with no diabetes meds.

Shares fell sharply to a 5-year low but given the severity of the guidance warning and the size of the earnings miss, the stock could continue to decline.

Position 8/10/17:

Closed 9/15: Long Sept $11 put @ 30 cents, exit .05, -.25 loss.

Previously closed 9/7/17: Short DF shares @ $11.37, exit $11.30, +.07 gain.

ECA - Encana Corporation - Company Profile


Nice rally for the week. Bernstein turned bullish on ECA saying production should increase 26% in 2018 and 16% in 2019. The analyst said the Q3 earnings could be the potential catalyst for investors.

Original Trade Description: March 13th

Encana Corporation, together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States. The company owns interests in various assets, such as the Montney in northern British Columbia and northwest Alberta; Duvernay in west central Alberta; and other upstream operations, including Wheatland in southern Alberta, Horn River in northeast British Columbia, and Deep Panuke located offshore Nova Scotia. It also holds interests in assets that comprise the Eagle Ford in south Texas; Permian in west Texas; San Juan in northwest New Mexico; Piceance in northwest Colorado; and Tuscaloosa Marine Shale in east Louisiana and west Mississippi. Company description from FinViz.com.

Encana reported earnings of 9 cents compared to estimates for 3 cents. Revenue of $822 million also beat estimates for $771.9 million. Production averages 237,100 Boepd. Drilling and completion costs declined by 30%. They reduced long term debt by $1.1 billion and net debt by 50%. They replaced 326% of production.

They currently have more than 10,000 premium drilling locations and expect to grow that number in 2017. Since December 31st, they have added more than 50 premium locations in the Eagle Ford alone. They ended 2016 with a whopping $5.3 billion in liquidity and cash of nearly $1 billion. They expect to spend $1.6 to $1.8 billion on capex in 2017 and grow liquids production by 35%. Capex will be funded by cash on hand. Proved reserves were 920 million barrels and 3P reserves were 2.372 billion barrels.

With the cash, production rates, reserves and drilling inventory listed above they are definitely an acquisition candidate with only a $10 billion market cap.

JP Morgan initiated coverage with an overweight rating and $16 price target.

Earnings July 27th.

Over the last couple of weeks an investor built up 7,000 July $11 calls at $1 each and 7,000 October $11 calls at $1.50 each. That is a $1.7 million investment in call options. I am suggesting we follow them in that trade as well as buy the stock. They may know something that is not public information or they just believe that the company is too good to pass up. With the drop in crude prices ECA has fallen to a 5-month low and is resting on the 200-day average.

Update 5/5/17: Encana reported earnings of 11 cents that beat estimates for 4 cents. Revenue of $1.297 billion also beat estimates for $789 million. Production declined 18% due to low prices and depletion. This was an excellent report from a beaten down energy stock.

Update 6/10/17: Encana agreed to sell its Piceance natural gas assets to Caerus Oil for $735 million. There are 3,100 operated wells that produce 240 million cubic feet of gas and 2,178 barrels of natural gas liquids every day.

Update 7/21/17: Encana reported earnings of 18 cents that easily beat analyst estimates for 4 cents. Revenue of $1.08 billion also beat estimates for $773.2 billion. The outlook and long-term projections were also strong. Shares closed positive but were hampered by a -1.32 drop in oil that tanked the sector.

Position 3/14/17:

Long October $11 call @ $1.40, no stop loss.

Previously closed 4/19/17: Long ECA shares @ $10.43, exit $11.15, +.72 gain.

INFY - Infosys - Company Profile


No specific news. Minor rebound on Friday after holding all week at $14.50. I am dropping the position because the odds of moving back over $17 by October expiration, are slim.

Original Trade Description: June 26th.

Infosys Limited, together with its subsidiaries, provides consulting, technology, and outsourcing services in North America, Europe, India, and internationally. It provides business information technology services, including application development and maintenance, independent validation, infrastructure management, and business process management services, as well as engineering services, such as engineering and life cycle solutions; and consulting and systems integration services comprising consulting, enterprise solutions, systems integration, and advanced technologies. The company's products include Finacle, a banking solution that provides analytics, core banking, consumer e-banking, corporate e-banking, Islamic banking, mobile banking, origination, payments, SME enable, treasury, wealth management, and youth banking solutions. Its products also comprise Infosys Mana, a knowledge-based AI platform; Infosys Information Platform, an analytics platform that enables to get insights from various data sources for decisions across industries; AssistEdge, CreditFinanceEdge, ProcureEdge, and TradeEdge that are cloud-hosted business platforms; Panaya that enables various SAP and Oracle EBS changes; and Skava, which are digital experience solutions, as well as analytics, cloud, and digital transformation services. The company serves clients in the financial services, manufacturing, retail, consumer packaged goods and logistics, energy and utilities, communication and services, hi-tech, life sciences, healthcare and insurance, and other industries. Company description from FinViz.com.

Infosys reported earnings of 24 cents that rose 5.8% and beat estimates by a penny. Revenues of $2.651 billion beat estimates for $2.629 billion. Revenues rose 6.3% on a constant currency basis. The company announced numerous wins of high profile contracts.

The company is dilligently following its "Renew Now" program with three offerings. Those are Artificial Intelligence, Knowledge-based IT and Design Thinking. During the reported quarter, Infosys continued to renew traditional services and rolled out others in areas such as Cloud Ecosystem, Big Data and Analytics, API and Micro Services, Cyber Security, and IoT Engineering Services. Also, during the quarter, Infosys launched Boundaryless Data Lake, an offering powered by the Information Grid Solution on Amazon Web Services (AWS).

The company raised 2018 guidance with revenue growth in the range of 7.1% to 9.1%, up from 6.1%-8.1%.

Earnings October 13th.

Shares rebounded over the last week to close at a new 9-month high on Wednesday.

Update 8/18/17: Shares spiked to a new 9-month high on Thursday then collapsed -7% on Friday. The drop came after the CEO quit because of a fight with the founders. CEO Vishal Sikka, resigned as CEO but will remain as executive vice chairman. Interim CEO Pravin Rao will report to Sikka until a new CEO can be found. Sikka had been praised for the transformational changes he was trying to put in place but the founders continually put roadblocks in his path. This was probably the kiss of death for this position but for 25 cents, we will let it ride.

Position 7/27/17:

Dropping 9/15: Long Oct $17 call @ 25 cents. Dropping coverage, -.25 loss.

Previously closed 8/7: Long INFY shares @ $15.66, exit $15.55, -.11 loss.

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