After a big open the indexes fell back to the flat line before rising into the close. The Dow spiked 227 points at the open only to fall back into negative territory by 11:30. After a couple hours of stagnation there was buying into the close but not enough to extend the Dow's winning streak to 10 weeks.
Resistance at 2,815, 26,191, 7,600 and 1,600 remain firm on the respective indexes. The markets are going to need a new catalyst to catapult over those levels.
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
If you are looking for a different type of trading strategy, try these newsletters:
Short term Calls and Puts on equities = Option Investor Newsletter
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3-6 month Option Trades = Ultimate Investor
Full updates on all plays on Wednesday and Saturday. Only closed plays are updated on other days.
BULLISH Play Updates
EGHT - 8X8 Inc - Company Profile
No specific news. Missed our stop loss by a penny.
Original Trade Description: Feb 9th.
8x8, Inc. provides enterprise cloud communications and customer engagement solutions for small and mid-size businesses, mid-market, and distributed enterprises worldwide. It offers unified communications, team collaboration, conferencing, contact center, analytics, and other services to various business customers on a software-as-a-service (SaaS) model. The company provides 8x8 Virtual Office, a self-contained and end-to-end solution that delivers high quality voice and unified communications-as-a-service; 8x8 Virtual Contact Center, a multi-channel cloud-based contact center solution; and 8x8 Virtual Office Meetings, a cloud-based video conferencing and collaboration solution that enables secure and continuous collaboration with borderless high definition (HD) video and audio communications from mobile and desktop devices. It also offers 8x8 Sameroom, an interoperability platform, which enables cross-team messaging and collaboration within a large organization and between organizations; and Script8, a communications flow and routing engine that offers a scripting environment for routing communications data for specific workflows, as well as allows end-users to create simple, personalized, and customizable communications experiences, such as communications control, external data source integration, and intelligent routing. The company integrates its services with third-party applications and platforms, including enterprise resource planning, customer relations management, human capital management, and other proprietary application suites. It markets its services to end users through direct sales organization, Website, and channel partners. As of March 31, 2018, the company serves approximately 53,800 business customers. 8x8, Inc. was founded in 1987 and is headquartered in San Jose, California. Company description from FinViz.com.
8X8 was punished severely for earnings that missed only fractionally. The company reported a loss of 6 cents on revenue of $89.9 million. Analysts were expecting a loss of 6 cents on revenue of $88.6 million. No problems there except that matching on earnings normally produces a decline in the stock.
They lowered guidance for 2019 from $334-$338 million to $334-$335 million. Still not a major decline but the stock was hammered.
Service revenue rose 20% with a 61% increase in customers billing more than $10,000 in monthly recurring charges. Average monthly service revenue per business customer rose to $5,211.
The CEO said, "we are disrupting a $50 billion addressable market that is shifting toward cloud solutions with a preference for a single technology platform."
Shares fell from $19.50 to $16.50 on the earnings. They have recovered to $18.79 and continue to move higher.
Earnings April 30th.
Update 2/13: 8x8 announced the offering of $200 million in convertible senior notes. Over the next 40 days the company will enter into agreements with option counterparties to create "capped calls." This process is an attempt to limit the impact of any future conversion of the notes on the number of shares outstanding.
Long EGHT shares @ $18.88, see portfolio graphic for stop loss.
Optional: Long May $20 call @ $1.05, see portfolio graphic for stop loss.
BEARISH Play Updates
VXXB - Barclays VIX Futures ETN - ETN Description
Choppy market is preventing a material decline in the VXXB but Friday was a good day. We just need to be patient.
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.
Short VXXB shares @ $35.33, see portfolio graphic for stop loss.