The Dow remains the market leader and helped to lift the other indexes on Tuesday.
The Dow gapped up to 21,988 and held its gains but could not move higher. The round number resistance at 22,000 is encouraging traders to light up on longs and enter speculative short positions. The Dow range after the opening spike was only 50 points the rest of the day.
Apple beat on earnings and gained $9 in afterhours. That is good for nearly 50 Dow points at the open on Wednesday if the gains hold overnight. That would put the Dow right back at 22,000 once again.
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.
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
ARNC - Arconic Inc
The long position was stopped at $24.50.
AOBC - American Outdoor
The short stock position was stopped at $20.95.
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BULLISH Play Updates
ARNC - Arconic Inc - Company Profile
No specific news. Shares declined sharply at the open to stop us out then rebounded to close with a gain of 31 cents.
Original Trade Description: June 24th.
Arconic creates breakthrough products that shape industries. Working in close partnership with our customers, we solve complex engineering challenges to transform the way we fly, drive, build and power. Through the ingenuity of our people and cutting-edge advanced manufacturing techniques, we deliver these products at a quality and efficiency that ensure customer success and shareholder value. Arconic Inc develops and manufactures engineered products and solutions for the aerospace, industrial gas turbine, commercial transportation and oil and gas markets. (description from company release)
For Q2, Arconic reported earnings of 32 cents that beat estimates for 27 cents. Revenue of $3.261 billion beat estimates for $3.233 billion. Since the breakup of Alcoa, Arconic has been focused on reducing costs, reducing debt and expanding their product line. They guided for the full year for revenues of $12.3-$12.7 billion, up from prior guidance at $11.8-$12.4 billion. Earnings guidance was raised to $1.15-$1.20, up from $1.10-$1.20. They ended the quarter with $1.8 billion in cash. They declared a 6-cent quarterly dividend payable August 25th to holders on August 4th.
Expected earnings Oct 24th.
After the breakup of Alcoa, Arconic saw their share price double because this was the high tech portion of the business. They make complex aluminum components for airplanes, aerospace, autos and just about everything that needs a high performance, lightweight component. After the big ramp higher they traded sideways for three months along with the market, Shares declined sharply after the high rise fire in England because one of their components was used in the cladding that had recently been added to the building. Investors did not know if Arconic had any liability risk. The answer is probably not.
The contractor on the building combined multiple components in an unsafe manner to cover the outside of the building. It was not an Arconic component that failed and their products conformed to all the building codes. Once that was established shares began to rise again in late June.
Shares closed at $25 on Monday and resistance is $28. They reported earnings before the bell and after a pre-market spike they traded flat for the day with an uptick at the close. I am going to put an entry trigger on this position just in case there is a delayed reaction to the earnings.
Position 7/25/17 with an ARNC trade at $25.35
Closed 8/1: Long ARNC shares @ $25.35, exit $24.50, -.85 loss.
Closed 8/1: Long Oct $27 call @ $.42, exit .20, -.22 loss.
GIII - G-III Apparel - Company Profile
No specific news. Shares posted a decent gain to push through resistance.
Original Trade Description: June 29th.
G-III Apparel Group, Ltd. designs, manufactures, and markets men's and women's apparel. It operates in two segments, Wholesale Operations and Retail Operations. The company's products include outerwear, dresses, sportswear, swimwear, women's suits, and women's performance wear; and women's handbags, footwear, small leather goods, cold weather accessories, and luggage. It markets swimwear, resort wear, and related accessories under the Vilebrequin brand; footwear, apparel, and accessories under the G.H. Bass brand; and proprietary products under the DKNY, Donna Karan, Andrew Marc, Marc New York, Black Rivet, Wilsons, Eliza J, Jessica Howard, G-III Sports by Carl Banks, and G-III for Her brands. G-III Apparel Group, Ltd. also licenses its products under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Guess?, Kenneth Cole NY, Cole Haan, Levi's, Vince Camuto, Ivanka Trump, Ellen Tracy, Kensie, and Jessica Simpson brands, as well as has licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League, Hands High, Touch by Alyssa Milano, Collegiate Licensing Company, Major League Soccer, Starter, and Warrior by Danica Patrick, as well as approximately 140 U.S. colleges and universities. The company offers its products to department, specialty, and mass merchant retail stores in the United States and internationally. As of January 31, 2017, it operated 411 leased retail stores, which included 190 Wilsons Leather stores, 163 G.H. Bass stores, 50 DKNY stores, 5 Calvin Klein Performance stores, and 3 Karl Lagerfeld Paris stores. The company also operates Wilsons Leather, G.H. Bass, and DKNY branded online stores. Company description from FinViz.com.
G-III shares were pressured in May by the weakness in the retail sector in general. They rebounded in early June on better than expected earnings but were hit again in early July by the next wave of retailer warnings.
In the last quarter, G-III saw sales rise 16% to $529 million. Because of costs associated with the acquisition of Donna Karan they posted a loss of 18 cents but analysts were expecting a loss of 37 cents. Wholesale sales are growing by double digits in most brands. The Wilsons Leather and Bass Stores are the exception and they said they were closing some stores and repurposing some others. The Donna Karan brand is rapidly expanding with new merchandise and G-III thinks it could eventually be their biggest brand. The company is expected to earn $1.27 in 2017 and $1.72 in 2018.
Expected earnings September 5th.
Shares have risen over the last three weeks despite the market volatility. They closed only 20 cents below a five-month high on Friday. A breakout could trigger short covering and additional buying.
Long GIII shares @ $26.10, see portfolio graphic for stop loss.
Long Sept $30 call @ 72 cents, see portfolio graphic for stop loss.
INFY - Infosys - Company Profile
No specific news. Minor rebound but still fighting resistance.
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.
Long INFY shares @ $15.66, see portfolio graphic for stop loss.
Alternate position: Long Oct $17 call @ 25 cents. See portfolio graphic for stop loss.
KR - Kroger - Company Profile
No specific news. Minor gain but still a gain.
Original Trade Description: July 31st.
The Kroger Co., together with its subsidiaries, operates as a retailer in the United States. It also manufactures and processes food for sale in its supermarkets. The company operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; multi-department stores provide general merchandise items, such as apparel, home fashion and furnishings, outdoor living, electronics, automotive products, toys, and fine jewelry; and price impact warehouse stores offer grocery, and health and beauty care items, as well as meat, dairy, baked goods, and fresh produce items. The company's marketplace stores comprise full-service grocery, pharmacy, health and beauty departments, and perishable goods, as well as general merchandise, including apparel, home goods, and toys. It operates under the banner brands, such as Kroger, Ralphs, Fred Meyer, King Soopers, etc., as well as Simple Truth and Simple Truth Organic brands. As of January 28, 2017, the company operated 2,796 retail food stores, including 1,445 fuel centers; 784 convenience stores; and 319 fine jewelry stores and an online retail store, as well as franchised 69 convenience stores. The Kroger Co. was founded in 1883. Company description from FinViz.com.
Expected earnings September 14th.
Shares crashed from $30 to $20 on the Amazon announcement but over the last week a strong rebound has begun. Whole Foods has 340 stores. Kroger has 2,796 stores. Whole Foods sells to a high dollar consumer, thus the nickname Whole Paycheck Foods. They have an estimates 12 million potential customers. Kroger sells to everyone with a potential customer base of more than 200 million. Amazon is not going to be a threat to Kroger for a long time even if the acquisition gets approved and that is still an unknown with multiple committees researching antitrust issues and the current administration clearly anti-Amazon.
I am recommending we ride the stock back up until reality returns to the price.
Long KR shares @ $24.50, see portfolio graphic for stop loss.
Alternate position: Long Sept $25 call @ $.98, see portfolio graphic for stop loss.
BEARISH Play Updates
AOBC - American Outdoor Brands - Company Profile
No specific news. Shares spiked at the open to stop us out of the short stock position for a minor 17 cent loss. The long put is still in play and will move to the Lottery Play section next weekend.
Original Trade Description: July 22nd.
American Outdoor Brands Corporation, formerly Smith & Wesson Holding Corporation, is a manufacturer of firearms and a provider of accessory products for the shooting, hunting and outdoor enthusiast. The Company operates through two segments. The Firearms segment manufactures handgun and long gun products sold under the Smith & Wesson, M&P and Thompson/Center Arms brands, as well as providing forging, machining and precision plastic injection molding services. The Outdoor Products & Accessories segment provides shooting, hunting and outdoor accessories, including reloading, gunsmithing, gun cleaning supplies, tree saws, vault accessories, knives, laser sighting systems and tactical lighting products. Brands in Outdoor Products & Accessories include Crimson Trace, Caldwell Shooting Supplies, Wheeler Engineering, Lockdown Vault Accessories, BOG POD and Golden Rod Moisture Control, as well as knives and specialty tools under Schrade, Old Timer, Uncle Henry and Imperial. Company description from FinViz.com.
Smith and Wesson saw the future when they changed names to American Outdoor Brands. President Obama was the best firearms salesman ever. He never missed an opportunity to talk down firearms and talk up gun control. Consumers, worried there would be a change in policy, rushed out to buy guns every time there was a new verbal assault on the second amendment. Gun sales hit record levels year after year.
When President Trump was elected as a pro-gun president, the urgency to buy more guns, faded. 2017 is still going to be another record year but only by a thin margin.
Smith & Wesson realized while President Obama was in power they needed to rebrand themselves to avoid the curse of being a prominent gun company in case the laws changed. They changed names to American Outdoor Brands and began a concentrated campaign to acquire a bunch of outdoor brands for products that had nothing to do with the shooting sports but they acquired some of those as well. Scopes, knives, safes, reloading, camping supplies, etc. Unfortunately, their main product line still depended on a continuing rise in firearms sales.
They reported earnings in late June of 57 cents that easily beat estimates for 37 cents. Revenue of $229.2 million beat estimates for $211 million. However, they guided for the current quarter for earnings of 7-12 cents and revenue in the $140-$150 million range. For the full year, they guided for $1.42 to $1.62 and revenue of $750-$790 million. Analysts were expecting $1.61 and $827.8 million. They said gun sales had slowed because of the new president. Secondly, they said they were going to use their unused portion of their $500 million line of credit to acquire additional growth opportunities. That means they were going to leverage up to their max debt to acquire new brands.
The CEO said, "Although good for the long-term viability of the industry, we believe that the election results coupled with a Republican Congress and choice of Supreme Court justice(s) could be a net-negative for [American Brands] as it eliminates any realistic fear of gun regulation, which has been a major driver of gun sales over the past eight years."
Shares declined sharply to $21. Over the last three weeks they have tried to rebound from that level but there is no excitement left. There have been a series of lower highs and Friday's close was below support and a three-month low.
Expected earnings September 24th.
I believe AOBC is going to retest the March lows at $18 if not lower. There are no positive catalysts on the horizon.
Closed 8/1: Short AOBC shares @ $20.78, exit $20.95, -.17 loss.
Long Sept $20 put @ $1.00, see portfolio graphic for stop loss.
VXX - Volatility Index Futures - ETF Description
Only a minor decline. This week could see volatility spike starting on Wednesday. We will ride it out.
The VIX historical low close was 9.31 on Dec 22nd, 1993. We are at those levels now.
Fundstrat said "go long volatility" because there is a 50% chance of a 10% correction in the S&P over the next three months.
We are nearing the point where the ETF will do a 1:4 reverse split. That will be an excellent opportunity for us to get short again at a higher level.
Shortsqueeze.com is reporting current short interest at 63 million shares out of 88 million outstanding.
Original Trade Description: April 12th.
The VXX is a short-term volatility product based on the VIX futures. As a futures product it has the rollover curse. Every time they roll to a new futures contract, they have to pay a premium and that lowers the price of the ETF. It is a flawed product with a perpetual decline built in from the monthly roll over in the futures contracts.
As evidence of this flaw, they have now done four 1:4 reverse stock splits. The last four reverse splits occurred at $13.11 (11/2010), $8.77 (10/2012), $12.84 (11/2013), $9.52 (8/8/16). The prospectus says it can reverse split anytime it trades under $25 for a prolonged period and the splits will always be 1:4.
Unfortunately, put options are expensive with a volatility instrument at this price level. The only recommendation is to short the ETF and forget it. If we do get a prolonged rally as some are expecting we could see strong market gains in the next 2-3 months. This will be a long-term position. This is not a 2-3 week play. I can guarantee you, if history holds, we can play this until it splits 1:4 again at $10. Once we are in the position and profitable I will put a trailing stop loss on it. We will take profits and then look for a bounce to get back in.
We know from experience that the VXX always declines. The last time we shorted this ETF we had a $7.23 gain.
Short the VXX @ $17.98, no stop loss because it always declines eventually.
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