Option Investor
Newsletter

Daily Newsletter, Saturday, 5/4/2019

Table of Contents

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

Market Wrap

Sentiment Improving

by Jim Brown

Click here to email Jim Brown

The markets closed at the highs once again as sentiment spiked on the payroll numbers.

Weekly Statistics

Friday Statistics

It was a rough week for the major indexes with multiple triple digit declines on the Dow. They did manage to overcome the early week negativity and rebound back to the highs. The S&P came within a quarter of a point of a record close. The Nasdaq closed at a record by only three points. The Dow has been a victim of multiple earnings disappointments and remains -324 points from its prior record high.

The strong payroll numbers triggered short covering on the Russell, which had been the laggard index for weeks. After spending time over long-term resistance at 1,600 on Monday the index fell back below 1,570 on Thursday. The payroll numbers triggered a sharp 31-point gain of 2% that outperformed the other indexes and closed well above 1,600.



Meanwhile the Dow remains stuck in a head and shoulders pattern with no material progress over the last three weeks. Since the small caps are supposed to lead the market, traders are hoping the Russell rebound continues and lifts the Dow out of its doldrums.


The boost to small cap sentiment with 10:1 advancers to decliners came after the nonfarm employment showed a gain of 263,000 jobs for April. This was well above the 180,000 analysts expected. This should not have been a surprise after the ADP report on Wednesday showed a gain of 275,000 jobs with estimates at 180,000.

The unemployment rate fell to 3.6% and the lowest level since 1969. Black, Hispanic, Asian and female unemployment are at record lows. The March payrolls were revised down from 196,000 to 189,000 but the February number was revised up from 33,000 to 56,000 for a net gain from the revisions of 16,000 jobs.

Healthcare added 53,000 jobs, professional/business services 76,000, leisure and hospitality 34,000 and construction 33,000. Retailers continue to lag with a decline of 12,000 jobs.

Earnings rose 0.2% for the month and up 3.2% for the trailing 12 months. It may have been higher, but the survey week did not include the 15th and the semimonthly pay period.

Household employment declined for the second month and the labor force contracted by 490,000. The labor force participation rate dropped to 62.8% and the employment to population ratio was unchanged at 60.6%.

Analysts credited the lack of any extraneous events like storms, floods or shutdowns for strong headline number. There was nothing to impact the data during the survey week. There were some soft spots in the survey. More people took part time jobs instead of full time for economic reasons. That means they had to pay the bills while they are looking for full time work.


The nonmanufacturing ISM Index for April posted another decline with the lack of available workers given as the primary excuse. The headline number declined from 56.1 to 55.5 and missed expectations for 57. A reading above 50 indicates continued expansion but is well below the cycle peak reading of nearly 61 back in September.

New orders declined from 59.0 to 58.1 and backorders fell from 56.5 to 55.0. New export orders picked up from 52.5 to 57.0. Business activity rose from 57.4 to 59.5.


The Atlanta Fed real time GDPNow forecast for Q2 is just getting started with the current estimates at 1.7%. It should be noted that the Q1 GDP result of 3.2% started out with a GDPNow projection of only +0.3%. Anything is possible and we have two months for this projection to firm.


The FOMC meeting squashed hopes for a Fed rate cut in the near future but the long-term outlook is still for the next Fed move to be a cut. This is a chart of the FedWatch Tool at the CME and there is only a 47.7% chance that the rate will remain at the current level through next January. That means there is a 52.3% chance the next move will be a cut. The difference in projections is minimal and January is a long way off. If Q2 GDP were to come in at the 3.0% level, the Fed's anxiety level would rise even if inflation remained stable. The Fed is always worried that they will wait too long to hike rates and inflation will spike. It takes about six months for a Fed rate hike to be felt in the financial system, so they are always trying to project conditions 6-9 months into the future.


We have a skinny calendar for next week. The two price indexes are the main points on the schedule. If these indexes remain stable and show no signs of inflation the Fed will remain on hold. At least that is the theory.

Fed Chairman Powell will speak next Thursday but this soon after the FOMC press conference he is not likely to say anything different.


Some 388 S&P companies have reported Q1 earnings. Of those, 76% have beaten estimates and 18% have disappointed. Current earnings projections for Q1 have risen to +0.8% growth with a 5.1% rise in revenue. The guidance warnings have pushed the forecast for Q2 down to +1.6% growth and +1.9% for Q3. The Q4 projection rebounds to +8.2% due to lower comps from 2018. For Q2 there have been 36 guidance warnings compared to 9 guidance upgrades. That is the worst ratio in several years. In Q2 2018 the ratio was 30 negative to 25 positive. When 70.6% of Q2 guidance is negative, it does not build a lot of investor confidence.

The number of high-profile companies reporting next week has diminished significantly. I included Lyft as a highlight since it will be their first quarterly earnings as a public company and Uber is expected to price this week.


There were some high-profile events last week and none higher than Apple's earnings on Tuesday after the bell. The company reported $2.42 compared to estimates for $2.36. Revenue of $58.02 billion beat estimates for $57.37 billion. iPhone revenue of $31.05 billion missed estimates slightly of $31.10 billion. Services revenue of $11.45 billion beat estimates for $11.37 billion. They guided for the current quarter for revenue of $52.5-$54.5 billion compared to estimates for $51.94 billion.

iPhone revenue was down -17.33% year over year. As a percentage of total revenue at 53.4% it was a record low. Tim Cook said the drop in iPhone sales in China was abating and they saw some strength returning at the end of the quarter. The company had $10.22 billion in revenue in the Greater China category.

The company authorized a $75 billion stock buyback and approved a 77-cent dividend. The buyback was less than the $100 billion authorized in the same period in 2018. Apple returned $27.5 billion to shareholders in Q1. By the end of 2019, Apple will have revenue from Apple Arcade, Apple TV+ and the Apple Card. Cook said Apple had a record installed base across all categories but did not elaborate. Previously they had said they had 1.4 billion users. Saying a record base across all categories suggests that an iPhone user with a Mac, a watch and iPod could be considered 4 users rather than one user with four devices. Apple has always played games with semantics.

Shares spiked $10 on the earnings and have held those gains for three days. Bank America reiterated a buy and raised the price target from $220 to $230. Maxim Group reiterated a hold but raised the target from $197 to $217.


Former Apple foe, Qualcomm (QCOM), reported earnings of 77 cents that beat estimates for 71 cents. Revenue of $4.98 billion beat estimates for $4.8 billion. The company guided for the current quarter for earnings of 70-80 cents and revenue of $4.7-$5.5 billion. Analysts were expecting $5.08 billion. They guided for revenue from patent licensing in the current quarter from $1.23-$1.33 billion and analysts were expecting $1.01 billion.

The company said it expects to receive $4.5-$4.7 billion in revenue from Apple in the current quarter as a resolution of the various legal issues. Qualcomm gave some cautionary guidance about the weak smartphone market but suggested it was just a pause before the flood of 5G phones begin hitting the market later in the year. They predicted chip set sales of only 50 million units for the rest of 2019 due to smartphone weakness. Shares closed at a new high on Friday.

Canaccord raised their target from $89 to $105. Cowen raised from $91 to $100. Bank of America upgraded from neutral to buy. Raymond James upgraded from outperform to strong buy and raised the price target from $85 to $115.


Arista Networks (ANET) had a bad day on Friday. The company reported earnings of $2.31 that beat estimates for $2.07. Revenue of $595.4 million rose a whopping 26% but narrowly beat estimates for $595.0 million. The challenge came from the guidance. They guided for $600-$610 million in revenue and analysts were expecting $640 million.

The stock was crushed after they said a "cloud titan" had paused spending. Analysts believe that customer was Microsoft since Arista had recent disclosed Microsoft was 10% of their total business. An analyst asked on the call if they expected the same 10% from Microsoft and the CEO said they would know more in the second half of the year, which was clearly a "NO we don't" answer. Later an investor relations spokesperson said they intentionally did not disclose the customer's name. When he got continued pressure from analysts he said, "We are not commenting on which customer saw softness in Q2." A Piper Jaffray analyst said orders slowed in Q1 and specifically from Microsoft. The Arista CEO said the sudden halt in orders came in mid-March and other large cloud companies also slowed orders in March. As the CEO pressure continued, she said two providers slowed orders, two were doing well and one particular cloud titan put most of their orders on hold. The term "cloud titan" was repeated nearly 20 times on the call as they tried to deflect their order weakness towards this mystery titan.

Arista said the early 2019 build in inventory by cloud providers had slowed demand as they digested those purchases. Arista is only one of several hardware providers that warned of slowing demand by cloud providers. If the cloud boom is fading that would be a major problem for the hardware companies that have ramped up production to accommodate the rapid growth. Arista predicted a "speed bump" in Q2. That bump turned into a $32 drop or -10%.


Activision Blizzard (ATVI) reported earnings of 78 cents compared to estimates for 23 cents. There were numerous charges and additions even though this was the adjusted number. The comparison is not apples to apples. Revenue declined from $1.97 billion to $1.83 billion but beat estimates for $1.22 billion. The company guided for current quarter earnings of 35 cents and revenue of $1.32 billion. Analysts were expecting 37 cents and $1.27 billion.

The company said it had sold the first five franchises in the Call of Duty esports league. They did not give a price, but analysts said they were shopping them at $25 million each several weeks ago. The cities that won a franchise already had an existing franchise for the Overwatch league. Shares fell 5% post earnings.


Shoe maker Adidas (ADDYY) reported a 17% rise in profits to $638 million. Revenue rose 4% to $6.57 billion. Analysts were expecting $5.8 billion and $567 million. They warned that supply chain issues would curb growth in North America where it has doubled business in the last three years. The company is taking market share from Nike in all geographies. The CEO said investors should get used to high single-digit growth rates because 4% was only a temporary position while they worked on the supply chain. He said their biggest challenge was lack of supply. They could sell far more shoes than they can make.

They just announced a marketing deal with Beyonce. On the day of the announcement they saw more than one billion clicks on the news. That could turn into one of the best marketing deals ever if they can produce enough shoes to fill that billion-fan demand. Shares spiked $12 to a new high.


Monster Beverage (MNST) reported earnings of 48 cents that rose 26.7% and beat estimates for 42 cents. Revenue rose 11% to $946 million and easily beat estimates for $914 million. Gross profit was 60.6%. International sales rose 17.4% to $284.1 million. During the quarter they bought back $139 million in shares. There is $520.6 million in outstanding buyback authorizations. Shares spiked 9% on the news.


Dentsply Sirona (XRAY) reported earnings of 49 cents that beat estimates for 38 cents. Revenue of $946.2 million beat estimates for $917.1 million. They raised 2019 earnings guidance from $2.25-$2.40 to $2.30-$2.40 and revenues of $3.95-$4.05 billion. Shares spiked 7%. XRAY was a position in Option Investor a couple weeks ago but was stopped on that big red candle only to see the shares rebound sharply.


Latin American internet retailer MercadoLibre (MELI) reported a 48% jump in revenue to $473.8 million. The dollar was a problem. On a currency neutral basis that would have been a 93% spike in revenue. The Argentine peso subtracted $3.7 million from earnings. Earnings of 13 cents easily beat estimates for a 13-cent loss.

The sharp jump in fortunes came from their payment service MercadoPago. Total payment volume rose 35% in dollar terms and 82% in local currency terms to a record $5.6 billion. Total payment transactions rose 94% to 143.9 million. Payments outside the MercadoLibre platform totaled 88.2 million and more than $2.5 billion in dollar volume. The number of items sold rose 3% to 82.8 million. Unique buyers rose 11% and listings are now over 200 million, a 58% increase. Items shipped rose 19% to 62.9 million. Shares spiked $96 on the news.


Berkshire Hathaway (BRK.B) reported earnings on Saturday of $21.66 billion. That is a monster amount of money for a single quarter. The company is sitting on $114 billion in cash. Buffett said he has been unsuccessful in his "elephant" hunt and will hold the cash until an opportunity arises. Warren bought back $1.7 billion in Berkshire shares when the price declined in Q1.

Operating earnings rose 5% to $5.56 billion or $3,388 per Class A share. That is up from $3,215 in the year ago quarter. Analysts were expecting $3,399. However, results did not include Kraft Heinz because the company has not released audited Q1 results. He said there is something going on at Kraft, so their earnings were not included. That would have easily lifted Berkshire earnings over estimates. Berkshire took a $3 billion write-down on Kraft Heinz in Q4 saying we paid too much.

Geico profits rose 14% as rising rates easily offset higher accident claims. BNSF saw profits rise 9% to $1.25 billion.


Berkshire committed $10 billion to Occidental Petroleum (OXY) to help with their hostile offer for Anadarko Petroleum (APC). The deal is contingent on OXY completing the APC purchase. Reportedly he was willing to invest $20 billion in the transaction if needed. For the $10 billion Berkshire will receive warrants for 80 million shares of Occidental at $62.50 each plus some preferred stock that will accrue dividends at 8% per year. OXY shareholders are against the deal because the loan is expensive and it will dilute their positions. Occidental will have to increase total debt by $40 billion to complete the deal.


Warren Buffett said Berkshire finally bought shares of Amazon (AMZN). He stressed that he personally did not buy the shares for Berkshire but one of his investment managers made the purchase. He is famous for not buying technology. He has developed a 5% stake in Apple but was killed when he took a big position in IBM several years ago. He does not understand technology.

Jefferies said it was a good purchase because the stock is going a lot higher. They have a $2,300 short term price target and $3,000 sum of the parts target for 2022.

Shares of Amazon soared on the Buffett comments.


The best IPO performer of the year goes to Beyond Meat (BYND). Shares rocketed 135% above its IPO price on Thursday to close at $66. Shares spiked to $74 on Friday but fell back to $67 at the close. The company is not trying to take market share from other meat substitutes but is taking on meat products directly. That is a $1.4 trillion dollar market. The products have no soy, no gluten an no GMO. Products are flying off grocery shelves and based on the demand for the shares in the IPO, it has a good future ahead.


Crude prices took a dive for the week after inventories rose by 9.9 million barrels in Wednesday's EIA report. Refiners are still struggling with some unplanned outages and utilization fell under 90% last week when it should be rising to 95% ahead of Memorial Day.

Prices should rise next week on news that Russia will have to curtail one million bpd because oil for export through the Transneft pipeline was contaminated with corrosive organic chloride. The contamination was on purpose. A week ago, the Druzhba pipeline was also contaminated and had to be shutdown. Belarus said it could take months to fix the Druzhba pipeline. It should take a couple weeks to eliminate the contaminated oil in the Transneft pipeline and repair damaged refineries. Poland, the Czech Republic and Hungary were forced to release 8 million barrels of reserves to offset the decline in exports.

The chloride is used to enhance production but must be removed from the oil before shipment because it is extremely corrosive. About 36.7 million barrels of oil have been contaminated. Russian oil sellers claim there are no buyers for the contaminated oil because they do not know what would be required to cover purification costs. The contaminated oil is clogging up export terminals and preventing clean oil from being exported. Some 15 tankers with contaminated oil had already sailed before the problem was discovered. Refiners taking delivery of the oil will be forced to down blend it with millions of barrels of clean oil in order to limit the corrosion when it is processed. That requirement means that those who took delivery now have bad oil clogging up their facilities while they decide how to handle the problem.

Oil prices tend to peak around Memorial Day and then linger at those levels until after July 4th before beginning a decline into fall.

There was no material change in rigs last week with a decline of only 1 rig compared to a drop of 21 rigs the prior week. With oil prices weak, there is even less interest in drilling new wells.




Thought for the week: There are more than three million people over the age of 60 with student loan debt of more than $86 billion.


Markets

I went into this weekend with a cautious outlook until I saw the 10:1 advancers over decliners in the small cap stocks. Most investors do not realize but we are very close to a record in small cap earnings and not a good record. We are very close to a record number of small cap companies with no earnings. The positive internals mean investors are ignoring the lack of earnings in hopes of a brighter future in the months ahead. The 3.2% GDP growth in Q1 must have been the encouragement they needed to buy small cap stocks in anticipation of further economic growth.

Don't get me wrong. I am very happy to see the Russell breakout over 1,600. We should buy stocks when others are fearful, and the Russell has been a laggard for weeks. I just hope the unexpected breakout continues and lifts the broader market.


The S&P is fighting a two week long battle to breakout to new highs. The index has closed over prior resistance multiple times but immediately pulled back again. Friday's move was a fight to close a quarter of a point below a new high. The morning move was a short squeeze on the payroll numbers and the big decline on Thursday, which setup the shorts for pain. The squeeze ended at 1:PM and the index limped into the close.

We need a convincing breakout to trigger the bigger short squeeze at 2,950. That is where the rally stalled on Wednesday. A 20-point breakout would do wonders for market sentiment.



The Dow continues to struggle as individual components post large losses. Friday was a good day for the Dow with only two decliners, but it was only one day. The index is still fighting right shoulder resistance at 26,616 with support at 26,191. There is one Dow component reporting this week and given its gains from the streaming announcement the odds are not good that Disney will shoot up another $5 on the earnings. Comments about the record $1.2 billion weekend for Avengers Endgame could be support but they are also going to talk about losing money in streaming for the next 3-5 years. That could kill the streaming bubble.



Both Nasdaq indexes closed at new highs but only barely. The Nasdaq Composite squeezed out a record by 3 points and the Nasdaq 100 by 6 points. We will take whatever the market gives us, but I would like it to be a little more convincing. The A/D on the Nasdaq Composite was 2,361 to 633 or almost 4:1 advancers to decliners. That is a good ratio, but it did have a lot to do with the morning short squeeze. I would love to see a 4:1 ratio on a day when there was no news powering it higher.

Both indexes are poised for a breakout with the potential for a new leg higher. I really hope it comes soon before the smoke cloud increases from the China negotiations.




Last week the president said the Chinese trade talks would be over "either way" within two weeks. That suggests there could still be a disaster. Then White House chief of staff Mick Mulvaney said the administration would know if there was going to be a trade deal within two weeks. The keyword there was "if." He said at some point, if you are not making any progress, you have to just quit."

Both of those statements were meant to send a message to China. Time is growing short. We are done negotiating. Make a decision or we are going to start playing hardball again. This is also a warning for investors. The long-awaited trade deal may not happen, and it could turn ugly again. While I have no clue which way this will evolve, we should not be overly long until it is resolved. Even if an agreement is reached the press is going to dissect it immediately and point out all the bad parts. I have said for weeks there is always the potential for a sell the news event in the days after a trade announcement.

I want to believe the strong internals on the Russell are suggesting a real breakout to new highs is just ahead. I just suggest we be careful until we see how the trade deal plays out. The Q1 earnings cycle will be over this week and that sets us up for the sell in May and go away cycle if it is going to happen this year. The trend happens more frequently when the first four months of the year have been bullish.

Volume was 5.8 billion shares on Monday and rose to 7.3 billion (avg) on Tue/Wed/Thr before shrinking back to 6.4 billion shares on Friday as the market closed at new highs. Be concerned when volume increases on down days.

Enter passively and exit aggressively!

Jim Brown

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New Plays

Chips and Trains

by Jim Brown

Click here to email Jim Brown
Editor's Note

There are positive chip stocks and railroad demand is rising. I am reloading the Cypress position and recommending a rebound play for Trinity Industries.



NEW BULLISH Plays

CY - Cypress Semiconductor - Company Profile

Comments:

We were stopped out by 4 cents on our May option last week. Cypress beat estimates and has rebounded to a 7-month high. I am recommending we reload this position with a longer dated option.

Original Trade Description: May 4th.

Cypress Semiconductor Corporation designs, develops, manufactures, markets, and sells embedded system solutions worldwide. It operates in two segments, Microcontroller and Connectivity Division, and Memory Products Division. The Microcontroller and Connectivity Division provides microcontroller (MCU), analog, and wireless and wired connectivity solutions, including Traveo automotive MCUs; programmable system-on-chip and general-purpose MCUs; analog power management integrated circuits and energy harvesting solutions; CapSense capacitive-sensing controllers; TrueTouch touchscreens; Wi-Fi, Bluetooth, and Bluetooth low energy; and USB controllers comprising solutions for the USB-C and USB power delivery standards, as well as wireless Internet of things connectivity solutions. The Memory Products Division provides NOR and NAND flash memories, static random access memory (SRAM) products, HyperRAm, synchronous and asynchronous SRAMs, nonvolatile SRAMs, F-RAM ferroelectric memory devices, and other specialty memories and clocks. The company serves various markets, including automotive, industrial, consumer, computation, white goods, communications, handset, PC peripherals, mobile devices, networking, telecommunications, video, data communications, computation, and medical markets. Cypress Semiconductor Corporation sells its semiconductor products through distributors and manufacturing representative firms, as well as through sales force directly to original equipment manufacturers and their suppliers. The company was founded in 1982 and is headquartered in San Jose, California. Company description from FinViz.com.

Cypress makes chips for the Internet of Things or IoT. That has evolved into automotive uses as well as today's cars are connected to the internet in multiple ways. Self-driving cars obviously have more chips but many cars today function as their own WiFi hotspot for the occupants. I am sure the explosion of IoT devices we have seen over the last several years is just the tip of the iceberg for the years to come.

Cypress reported adjusted earnings of 27 cents that beat estimates for 24 cents. Revenue of $539 million beat estimates for $535 million. The company guided for Q2 revenue of $515-$545 million and earnings of 22-26 cents. Analysts were expecting $528 million and 24 cents. That put them right in line with estimates.

Buy Sept $18 call, currently $1.10, stop loss $16.65.
(3,819 of these calls were traded on Friday compared to open interest of 6,795.)



TRN - Trinity Industries - Company Profile

Trinity Industries, Inc. provides rail transportation products and services in North America. It operates through three segments: Railcar Leasing and Management Services Group, Rail Products Group, and All Other. The Railcar Leasing and Management Services Group segment leases freight and tank railcars; originates and manages railcar leases for third-party investor-owned fund; and provides fleet maintenance and management services to industrial shippers. As of December 31, 2018, it had a fleet of 99,215 owned or leased railcars. This segment serves industrial shipper and railroad companies operating in agriculture, construction and metals, consumer products, energy, and refined products and chemicals markets. The Rail Products Group segment provides freight and tank railcars for transporting various liquids, gases, and dry cargo; and offers railcar maintenance services. Its railcars include autorack, box, covered hopper, gondola, intermodal, open hopper, and tank cars. This segment serves railroads, leasing companies, and industrial shippers of products in the agriculture, construction and metals, consumer products, energy, and refined products and chemicals markets. The All Other segment manufactures guardrail, crash cushions, and other highway barriers; and engages in the captive insurance, transportation, and other peripheral businesses. The company sells or leases products and services through its own sales personnel and independent sales representatives. Trinity Industries, Inc. was founded in 1933 and is headquartered in Dallas, Texas. Company description from FinViz.com.

This is a simple play. Trinity reported earnings of 24 cents that beat estimates for 20 cents. Revenue of $604.8 million missed estimates for $674.9 million. They guided for full year earnings of $1.15-$1.35 and that put the midpoint of $1.25 below analyst estimates for $1.31.

They also affirmed full year production targets of 23,500-25,500 railcars. However, they deleted 3,050 railcars from their backlog because of the weak financial condition of the buyer. It was assumed to be an energy company. The cars were not scheduled to be delivered in 2019 so it has no impact on their earnings forecast.

Shares were hammered for a $3 loss to $21. After spending five days in the doghouse shares are starting to rebound. Analysts believe the price drop was an over reaction on a solid company with a great business.

Buy July $23 call, currently 70 cents, no initial stop loss.



NEW BEARISH Plays

No New Bearish Plays



In Play Updates and Reviews

Breakout

by Jim Brown

Click here to email Jim Brown

Editors Note:

The Russell posted a major 31-point gain to close well over resistance at 1,600. This is a major breakout and suggests bullish sentiment is suddenly improving. While Friday's move was outstanding, we need to add to this gain to really trigger some price chasing. The magnitude of the breakout was clearly short covering but that initial burst is now behind us. We need some follow on buying and we could see a real broad market rally.



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


CY - Cypress Semiconductor
The long call position was stopped at $16.85.

AOBC - American Outdoor Brands
The long position was entered at the open on Monday.

SIG - Signet Jewelers
Close the short stock position.


BULLISH Play Updates

AOBC - American Outdoor Brands - Company Profile

Comments:

No specific news. The gun headlines faded, and the stock went dormant. If it does not move this week, I will close it next weekend.

Original Trade Description: April 27th.

American Outdoor Brands Corporation designs, manufactures, and sells firearms worldwide. The company's Firearms segment offers handguns, long guns, handcuffs, suppressors, and other firearm-related products under the Smith & Wesson, M&P, Performance Center, Gemtech, and Thompson/Center Arms brands. It also sells parts purchased through third parties; operates a private law enforcement training facility; and provides manufacturing services to other businesses under the Smith & Wesson and Smith & Wesson Precision Components brands. This segment sells its products to gun enthusiasts, collectors, hunters, sportsmen, competitive shooters, individuals desiring home and personal protection, law enforcement and security agencies and officers, and military agencies. The company's Outdoor Products & Accessories segment offers reloading, gunsmithing, and gun cleaning supplies; stainless steel cutting tools and accessories; flashlights, tree saws, and related trimming accessories; shooting supplies, rests, and other related accessories; apparel; vault accessories; laser grips and laser sights; and a range of products for survival and emergency preparedness, as well as field rests, knives, gun vises, hearing protection products, camping and survival gears, and case tumblers. It provides its products under the Caldwell, Wheeler, Tipton, Frankford Arsenal, Smith & Wesson, M&P, Thompson/Center, Lockdown, Hooyman, BOG-POD, Golden Rod, Non-Typical, Crimson Trace, Imperial, Schrade, Old Timer, Bubba Blade, UST, and KeyGear brands. The company markets its products through dealers, retailers, in-store retail channels, and range operations; social and electronic media; in-store retail merchandising systems and strategies; and Websites and online retail stores. The company was formerly known as Smith & Wesson Holding Corporation and changed its name to American Outdoor Brands Corporation in January 2017. The company was founded in 1852 and is based in Springfield, Massachusetts. Company description from FinViz.com.

Every time some idiot goes berserk with a firearm the anti-gun crowd ramps up their attack on lawful gun owners. It does not seem to matter that 270 million gun owners in the US have not broken the law but they want to change the laws because of individuals that don't obey the laws anyway. Murder is against the law, but these violators do not care.

The ensuing efforts to ban guns always sends millions of people into the gun stores to buy guns while they are still legal. The stocks of gun makers rally for 6-9 months and then fall back into dormancy.

The shooting in New Zealand and others have triggered the current wave of proposed laws. The FBI reported that Federal background checks rose from 2,053,886 in February to 2,644,851 in March. That is the biggest spike in Feb-Mar number since the reporting began in 1998. April is likely to be even larger.

Shares of Ruger gained $3 for the week and AOBC, formerly Smith and Wesson, closed at a two-month high. As these numbers are more widely reported and the April numbers show another increase, the gun stocks are likely to continue higher.

Earnings June 6th.

Position 4/29:
Long AOBC shares @ $9.97, see portfolio graphic for stop loss.
Optional: Long June $11 call @ 30 cents, see portfolio graphic for stop loss.



CY - Cypress Semiconductor - Company Profile

Comments:

This is very frustrating. The intraday low on Thursday was $16.81 and our stop loss was $16.85. Shares immediately rebounded to close at a new 7-month high.

Original Trade Description: April 5th.

Cypress Semiconductor Corporation designs, develops, manufactures, markets, and sells embedded system solutions worldwide. It operates in two segments, Microcontroller and Connectivity Division, and Memory Products Division. The Microcontroller and Connectivity Division provides microcontroller (MCU), analog, and wireless and wired connectivity solutions, including Traveo automotive MCUs; programmable system-on-chip and general-purpose MCUs; analog power management integrated circuits and energy harvesting solutions; CapSense capacitive-sensing controllers; TrueTouch touchscreens; Wi-Fi, Bluetooth, and Bluetooth low energy; and USB controllers comprising solutions for the USB-C and USB power delivery standards, as well as wireless Internet of things connectivity solutions. The Memory Products Division provides NOR and NAND flash memories, static random access memory (SRAM) products, HyperRAm, synchronous and asynchronous SRAMs, nonvolatile SRAMs, F-RAM ferroelectric memory devices, and other specialty memories and clocks. The company serves various markets, including automotive, industrial, consumer, computation, white goods, communications, handset, PC peripherals, mobile devices, networking, telecommunications, video, data communications, computation, and medical markets. Cypress Semiconductor Corporation sells its semiconductor products through distributors and manufacturing representative firms, as well as through sales force directly to original equipment manufacturers and their suppliers. The company was founded in 1982 and is headquartered in San Jose, California. Company description from FinViz.com.

Cypress makes chips for the Internet of Things or IoT. That has evolved into automotive uses as well as today's cars are connected to the internet in multiple ways. Self-driving cars obviously have more chips but many cars today function as their own WiFi hotspot for the occupants. I am sure the explosion of IoT devices we have seen over the last several years is just the tip of the iceberg for the years to come.

Shares spiked in early February after the company reported earnings of 35 cents compared to estimates for 33 cents. Revenue of $604.5 million also beat estimates for $599 million.

After several days of gains the stock rolled over with the chip sector in early March. Over the last several days shares have rallied to close at a 6-month high on Friday.

Earnings May 7th.

More than 7,800 of these calls were bought on Friday compared to an open interest of only 257. Somebody is betting a lot that the stock will go up. Because of the cheap price we may hold over earnings unless we have a decent profit to protect before they report. We will NOT hold the stock over the earnings.

Update 4/27: Cypress reported adjusted earnings of 27 cents that beat estimates for 24 cents. Revenue of $539 million beat estimates for $535 million. The company guided for Q2 revenue of $515-$545 million and earnings of 22-26 cents. Analysts were expecting $528 million and 24 cents. That put them right in line with estimates. Shares spiked 7% on Friday. This is a May option so I put a tight stop loss on it.

Position 4/8/19:
Closed 5/2: Long May $17 call @ 40 cents, exit 35 cents, -.05 loss.

Previously closed: Closed 4/24: Long CY shares @ $15.90, exit $16.30, +.40 gain.



INO - Inovio - Company Profile

Comments:

No specific news. Shares are $3.89 and we have a $4 May call. It will only take a minor gain to put us into the money and we still have a chance of making a profit. It is a May call, so it has to be this week. I put a 75 cent exit target on the option.

Original Trade Description: April 3rd.

Inovio Pharmaceuticals, Inc., a late-stage biotechnology company, focuses on the discovery, development, and commercialization of DNA-based immunotherapies and vaccines to prevent and treat cancers and infectious diseases. Its SynCon immunotherapy design has the ability to break the immune system's tolerance of cancerous cells, as well as is intended to facilitate cross-strain protection against known, as well as new unmatched strains of pathogens, such as influenza. The company is involved in conducting and planning clinical studies of its proprietary SynCon immunotherapies for human papillomavirus-caused pre-cancers and cancers; bladder cancer; glioblastoma multiforme; hepatitis B virus; hepatitis C virus; human immunodeficiency virus; Ebola virus; middle east respiratory syndrome; and Zika virus. Its partners and collaborators include MedImmune, Limited; The Wistar Institute; University of Pennsylvania; GeneOne Life Science Inc.; ApolloBio Corporation; Regeneron Pharmaceuticals, Inc.; Genentech, Inc.; Plumbline Life Sciences, Inc.; Drexel University; National Institute of Allergy and Infectious Diseases; United States Military HIV Research Program; U.S. Army Medical Research Institute of Infectious Diseases; National Institutes of Health; HIV Vaccines Trial Network; Defense Advanced Research Projects Agency; the Parker Institute for Cancer Immunotherapy; and Coalition for Epidemic Preparedness Innovations. Inovio Pharmaceuticals, Inc. was founded in 1979 and is headquartered in Plymouth Meeting, Pennsylvania. Company description from FinViz.com.

Inovio is developing new cancer treatments that deliver coded DNA to cells so they can create their own antibodies against the invading cancer cells. They have multiple trials in progress and the success of any one trial will catapult INO significantly higher.

The drawback is money. They ended the year with $85.5 million after burning through $69 million in 2018. In February they announced a secondary to raise another $82 million. The secondary was convertible notes at $5.38 in 2023. Since that is almost a slam dunk deal, investors trashed the stock because of the 17% dilution in 2023. I think that is very short sighted since we could see three years of stock gains before that comes to pass.

Earnings May 8th.

After crashing to $3.30 on the secondary announcement shares have started to rebound. Wednesday's close was a two-month high. They announced the early closing for enrollment on two different cancer trials. They also announced a new therapy against respiratory tract tumors in a new study. Good things are breaking out all over.

Update 4/20: Inovio published new data on their cancer killing T-Cell engagers. The DNA encoded Bi-specific T Cell Engagers cleared established tumors in preclinical studies. One dose of the drug lasted for months compared to only hours for the current versions.

Position $4/4/19:
Closed 4/17: Long INO shares @ $3.86, exit $3.85, -.01 loss.
Optional: Long May $4 call @ 30 cents, see portfolio graphic for stop loss.



PSTG - Pure Storage - Company Profile

Comments:

No specific news. Resistance held once again. This is a May option worth only a nickel so there is no reason to close it. We could get lucky.

Original Trade Description: April 5th.

Pure Storage, Inc. engages in building a data platform that enables businesses to enhance performance and reduce complexity and costs worldwide. The company delivers its data platform through Purity Operating Environment, an optimized software for solid-state memory that offers enterprise-class storage and protocol services; FlashArray and FlashBlade optimized hardware products for solid-state memory to enhance the performance and density of flash, optimize its advanced software services, and reduce solution cost for customers; Pure1, a cloud-based management and support software; and FlashStack and Artificial Intelligence Ready Infrastructure converged infrastructure solutions. Its data platform is used for a range of use cases, including database applications, large-scale analytics, artificial intelligence/machine learning, private and public cloud infrastructure and webscale applications, virtual server infrastructure, and virtual desktop infrastructure; and helps customers scale their businesses through real-time and accurate analytics, increase employee productivity, improve operational efficiency, and deliver compelling user experiences to their customers and partners. The company serves enterprise and commercial organizations, cloud, global systems integrators, and service providers across various set of industry verticals, consumer web, education, energy, financial services, governments, healthcare, manufacturing, media, retail, and telecommunications through a network of distribution and channel partners. The company was formerly known as OS76, Inc. and changed its name to Pure Storage, Inc. in January 2010. Pure Storage, Inc. was founded in 2009 and is headquartered in Mountain View, California. Company description from FinViz.com.

Their memory management products are state of the art and their acquisition of Compuverde will increase those capabilities. Compuverde is a leading developer of file software solutions for enterprises and cloud providers. The combination of the two companies will allow customers to implement true hybrid architectures in on premise or cloud applications or a mix of both.

They reported earnings of 14 cents that missed estimates for 19 cents. However, the miss was due to a breakdown at a contract manufacturer and prevented them from shipping a large number of orders. Revenue still rose 24% to $422.2 million despite missing estimates for $443 because of the supplier breakdown.

Shares dipped on the initial earnings results but have rebounded to six month high. Shares have been consolidating for the last six days but appear to be ready for a breakout.

Earnings May 30th.

Position 4/11/19:
Long May $25 call @ 40 cents, see portfolio graphic for stop loss.

Previously Closed 4/22: Long PSTG shares @ $23.40, exit $22.45, -.95 loss.



VIPS - Vipshop Holdings - Company Profile

Comments:

JP Morgan upgraded VIPS from neutral to overweight and shares finally broke through resistance.

Original Trade Description: March 30th.

Vipshop Holdings Limited operates as an online discount retailer for various brands in the People's Republic of China. It operates in two segments, Vip.com and Internet Finance Business. The company offers women's apparel, such as casual wear, jeans, dresses, outerwear, swimsuits, lingerie, pajamas, and maternity clothes; men's apparel comprising casual and smart-casual T-shirts, polo shirts, jackets, pants, and underwear; women and men shoes for casual and formal occasions; and accessories that include belts, jewelry, watches, and glasses for women and men. It also provides handbags, which comprise purses, satchels, duffel bags, and wallets; apparel, gears and accessories, furnishings and decor, toys, and games for boys, girls, infants, and toddlers; sports apparel, sports gear, and footwear for tennis, badminton, soccer, and swimming; and consumer electronic products, including computers, mobile handsets, digital cameras, and home appliances. In addition, the company offers skin care and cosmetic products, such as cleansers, lotions, face and body creams, face masks, sunscreen, foundations, lipsticks, eye shadows, and nail polish; and home furnishings comprising bedding and bath products, home decors, dining and tabletop items, and small household appliances. Further, it provides designer apparel, footwear, and accessories; and snacks and health supplements, and occasion-based gifts. Additionally, the company offers Internet finance services, which comprise consumer and supplier financing, and wealth management services. It provides its branded products through its vipshop.com, vip.com, and lefeng.com online platforms, as well as through its cellular phone application. Additionally, the company offers warehousing, logistics, procurement, research and development, consulting, and software development and information technology support services. Vipshop Holdings Limited was founded in 2008 and is headquartered in Guangzhou, the People's Republic of China. Company description from FinViz.com.

In late February, the company reported earnings of 19 cents that beat estimates for 18 cents. However, revenue of $3.80 billion missed estimates for $3.96 billion. The 8.1% rise in revenue was down from a 16.4% rise in the prior quarter. The CEO said the weak quarter was the result of the company shifting some low margin categories from the "first-party business" and into the "marketplace platform." He said the move would result in a positive improvement in earnings beginning next quarter. For the current quarter they were only targeting 1-5% revenue growth and analysts were expecting 11.6%. The CEO cautioned that revenue growth was not the metric to worry about. The company is now focused on increasing profits rather than increasing revenue at any cost.

Zacks reiterated a buy rating saying earnings estimates had risen 5.9% over the last 60 days which includes the post earnings commentary. VIPS only has a 9.7 PE compared to 29.4 for the rest of the industry.

After the Zacks comments on the 25th the stock began escalating sharply and closed at an 8-month high on Friday. The stock is now over the 50, 100 and 200 day averages.

Position 4/1/19:
Long August $9 call @ 75 cents, see portfolio graphic for stop loss.

Previously closed 4/15: Long VIPS shares @ $8.19, exit $7.85, -.34 loss.



BEARISH Play Updates

BHGE - Baker Hughes GE - Company Description

Comments:

BHGE reported earnings of 15 cents that nearly doubled the year ago quarter at 9 cents. However, cash flow was negative -$419 million compared to estimates for +$188.5 million. Shares declined sharply on the news but rebounded slightly on Friday.

Original Trade Description: April 20th.

Baker Hughes, a GE company provides integrated oilfield products, services, and digital solutions worldwide. Its Oilfield Services segment offers drilling, wireline, evaluation, completion, production, and intervention services; and drilling and completions fluids, completions tools and systems, wellbore intervention tools and services, artificial lift systems, pressure pumping systems, and oilfield and industrial chemicals for integrated oil and natural gas, and oilfield service companies. The company's Oilfield Equipment segment designs and manufactures products and services, including pressure control equipment and services, subsea production systems and services, drilling equipment, and flexible pipeline systems; and onshore and offshore drilling and production systems, and equipment for floating production platforms, as well as provides a range of services related to onshore and offshore drilling activities. Its Turbomachinery & Process Solutions segment provides equipment and related services for mechanical-drive, compression, and power-generation applications across the oil and gas industry, as well as products and services to serve the downstream segments of industry. Its product portfolio includes drivers, compressors, and turnkey solutions; and pumps, valves, and compressed natural gas and small-scale liquefied natural gas solutions. This segment serves upstream, midstream, onshore and offshore, industrial, engineering, procurement, and construction companies. The company's Digital Solutions segment provides sensor-based measurement, non-destructive testing and inspection, turbine, generator and plant controls, and condition monitoring, as well as pipeline integrity solutions for a range of industries, including oil and gas, power generation, aerospace, metals, and transportation. It serves through direct and indirect channels. The company is based in Houston, Texas. Baker Hughes, a GE company is a subsidiary of General Electric Company. Company description from FinViz.com.

On Thursday energy services giant Schlumberger (SLB) reported earnings of 30 cents that matched estimates. Revenue rose only slightly to $7.879 billion but it was enough to beat estimates for $7.810 billion. Both numbers were lower than the prior quarter. The company projected lower activity in land rigs in North America and seasonal slowness in international markets. North American revenue was down -3% because of pricing weakness. They do expect the overall market to improve as production cuts overseas take effect. They also warned that four years of slowing investment in the sector would result to lower services activity in the years ahead.

If Schlumberger is struggling in this energy market then Baker Hughes GE will be struggling as well. Shares rallied with oil prices early in 2019 but now that prices have stabilized and we are losing 10 active rigs a week, their earnings should be suffering.

They make a lot of money from fracking and completing wells. With drilled and uncompleted wells now over 8,500 there is plenty of work but that number is growing instead of declining. That means production companies are not completing them. With pipelines at capacity there is no reason to spend a couple million dollars completing a well only to have it sit idle because you can't get the oil to market.

I suspect Baker Hughes is going to disappoint when they report earnings on April 30th. I am recommending we buy an inexpensive put option and hold over the report. The May $25 put is relatively inexpensive.

Position 4/22:
Long May $25 put @ 65 cents, no stop loss.



GME - Gamestop - Company Description

Comments:

Telsey Advisory reiterated a neutral and lowered the price target to $10. Bank of America reiterated a sell and lowered the price target to $5. Shares rose on Friday despite the downgrades. I have to leave the stop loss tight because this is a May option.

Original Trade Description: March 23rd.

GameStop Corp. operates as a multichannel video game, consumer electronics, and wireless services retailer. It operates in five segments: United States, Canada, Australia, Europe, and Technology Brands. The company sells new and pre-owned video game hardware; video game software; pre-owned and value video games; video game accessories, including controllers, gaming headsets, virtual reality products, memory cards, and other add-ons; and digital products, such as downloadable content, network points cards, prepaid digital and prepaid subscription cards, and digitally downloadable software. It also sells wireless products, services, and accessories; collectibles, such as licensed merchandise primarily related to the video game, television, and movie industries, as well as pop culture themes; gaming-related print media, and mobile and consumer electronics products; PC entertainment software in various genres comprising sports, action, strategy, adventure/role playing, and simulation; and carry strategy guides, magazines, and interactive game figures. In addition, the company operates e-commerce sites under the GameStop, EB Games, Micromania, and ThinkGeek brands; collectibles stores under the Zing Pop Culture and ThinkGeek brands; and Spring Mobile, an authorized AT&T reseller operating AT&T branded wireless retail stores. Further, it provides Game Informer magazine, a print and digital video game publication; and operates Simply Mac, an authorized Apple reseller that sells Apple products, including desktop computers, laptops, tablets and smart phones, and related accessories and other consumer electronics products, as well as training, warranty, and repair services. As of March 28, 2018, the company operated approximately 7,200 stores across 14 countries. It primarily operates its stores under the GameStop, EB Games, and Micromania brands. The company was formerly known as GSC Holdings Corp. GameStop Corp. was founded in 1994 and is headquartered in Grapevine, Texas. Company description from FinViz.com.

Gamestop is headed to the same fate as Blockbuster. Gamestop sells preowned game consoles and video games. With Google announcing Stadia where all games are browser based and run on any device and computing power is not important, this is a major hurdle for Gamestop.

Microsoft announced a similar fate with plans on moving the Xbox to the cloud, called Project XCloud, and there will be no game consoles or game CDs.

With these two giants eliminating the hardware and software that is resold by Gamestop, this company is in a world of trouble. They do sell other products but consumers come into their stores for the games. With 7,200 stores they have a lot of overhead and their biggest revenue items are disappearing.

Granted, this will not happen overnight. These game conversions to the cloud will take months to take hold and many months to become the majority of market share. However, investors will see the future, with Blockbuster a prime example, and Gamestop shares are going to bleed value in the months ahead.

Earnings April 2nd. Normally we would not take a position in front of earnings but there will be analyst questions about the path of progress. The answers may be hard for investors to handle. I am recommending we own a put and hold it over the earnings report.

Update 4/3: Gamestop (GME) reported earnings of $1.60 that matched estimates but was down from $2.02 in the year ago quarter. Revenue declined from $3.32 billion to $3.06 billion and missed estimates for $3.28 billion. Even worse they projected a 5% to 10% decline in revenue in 2019 and losses of up to 5 cents per share in Q1. The company is struggling to adapt to changes in the video game industry.

Microsoft has announced a new Xbox game console that only uses downloaded games. That prevents users from reselling the games to Gamestop on CDs as in the past. Apple and Google also announced new video game offerings that stream games through your browser and the game does not reside on your computer or mobile device. That means no CDs and no consoles needed to play the games. That means no resale opportunities for Gamestop. This is also going to impact the resale value of existing games and consoles. In addition to their woes, Activision Blizzard announced today they were going to release a battle-royale version of Call of Duty that would be free online in the month of April.

Shares fell below $9 at the open but rebounded sharply in what should be a dead cat bounce.

Update 4/6/19: After the disappointing earnings Bank of America reiterated an underperform (sell) with a price target of $5. However, Telsey Advisory reiterated a market perform and a $10 target. The stock closed at $9.86.

Position 3/25/19:
Long May $10 put @ 65 cents. see portfolio graphic for stop loss.



SIG - Signet Jewelers - Company Description

Comments:

No specific news. Testing 52-week lows. Close the short stock position.

Original Trade Description: April 13th.

Signet Jewelers Limited engages in the retail sale of diamond jewelry, watches, and other products. As of February 02, 2019, it operated 3,334 stores and kiosks. The company operates through three segments, North America, International, and Other. The North America segment operates stores in malls and off-mall locations primarily under the Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria Of Jewelry, Jared Vault, Zales Jewelers, Zales Outlet, Piercing Pagoda, Peoples Jewellers, Gordon's Jewelers, and Mappins Jewellers regional banners; and JamesAllen.com, an online jewelry retailer Website. This segment operated 2,729 locations in the United States and 128 locations in Canada. The International segment operates stores in shopping malls and off-mall locations, principally under the H.Samuel and Ernest Jones brands. This segment operated 477 stores in the United Kingdom, the Republic of Ireland, and the Channel Islands. The Other segment is involved in the purchase and conversion of rough diamonds to polished stones, as well as provision of diamond polishing services. Signet Jewelers Limited was founded in 1950 and is based in Hamilton, Bermuda. Company description from FinViz.com.

On April 4th, Signet Jewelers reported earnings of $3.96 that beat estimates for $3.77 but that was still a decline of 7.5% from the year ago quarter. Revenue of $2.154.7 billion beat the estimates for $2.142 billion but declined 6% year over year.

Globally same store sales declined -2% with sales in North America down -5.5%. The average number of transactions declined 4%. Sales at Zales stores declined -2% and Piercing Pagoda sales declined -17.1%. Kay stores fell -1.6%, Jared -8.4% and James Allen -1.4%. international sales declined -16.6% to $195 million and same store sales fell -7.3%. Average transaction values declined -5.4% and the number of transactions declined -2.3%.

They guided for Q2 for a loss of 17-28 cents and analysts were expecting a loss of 6 cents. Same store sales are expected to decline between 0.5% and 1.5%. For the full year they guided for earnings of $2.87-$3.45 and analysts were expecting $3.53. Same store sales are expected to be down -2.5% for the year. They closed 262 stores in 2018 and plan to close another 150 in 2019.

There was NOTHING to like about these earnings. Shares have fallen $5 since April 4th and with metrics like those they could fall significantly lower. Shares closed at a new 52-week low on Friday.

Position 4/15/19:
Short SIG shares @ $23.18, see portfolio graphic for stop loss.
Optional: Long July $20 put @ $1.35, see portfolio graphic for stop loss.



VXXB - Barclays VIX Futures ETN - ETN Description

Comments:

The VXXB can't seem to break through that $25 support level. There is still too much uncertainty in the market.

Original Trade Description: Nov 17th.

The investment seeks return linked to the performance of the S&P 500 VIX Short-Term Futures Index TR. The ETN offers exposure to futures contracts of specified maturities on the VIX index and not direct exposure to the VIX index or its spot level. The index is designed to provide investors with exposure to one or more maturities of futures contracts on the CBOE Volatility Index. Company description from FinViz.com.

The VXXB is a short-term volatility ETN 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 ETN. 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, the prior VXX ETN had done five 1:4 reverse stock splits. The last five reverse splits occurred at $13.11 (11/2010), $8.77 (10/2012), $12.84 (11/2013), $9.52 (8/8/16), $12.77 (8/22/17). The prospectus says it can reverse split anytime it trades under $25 for a prolonged period and the splits will always be 1:4.

We know from experience that the VXXB and its predecessor the VXX always decline long term.

Unfortunately, put options are expensive with a volatility instrument at this price level. The only recommendation is to short the ETN and forget it. 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 may put a trailing stop loss on it. We will take profits and then look for a bounce to get back in. We could keep this play in the portfolio on a trading basis permanently.

The VXXB will be hard to short. The shares are out there and being traded because the volume on Thursday was 22.1 million. You have to tell your broker you really want to short it and make them find the shares. Sometimes it takes days or even a week before your broker will find you the shares. Trust me, be persistent and it will be worth the effort.

Position 2/1/19:
Short VXXB shares @ $35.33, see portfolio graphic for stop loss.