September 15, 2019 | 11:39 PM by Fahad Khalid | fkhalid@jaguaranalytics.com

JaguarLive – August 26

  • Aug 26 2019 8:18 AM
    Good Morning Jags!
    Fahad
  • Aug 26 2019 8:43 AM
    Regarding Tariffs –
    Friday Evening Chapter: After the close on Friday, President Trump announced that he was increasing tariffs on nearly all Chinese goods. In a pair of tweets, the President said he was raising existing tariffs on $250B of Chinese imports from 25% to 30% beginning October 1st, and raising tariffs planned to start in September on $300B of goods, from 10% to 15%.
    – Weekend Chapter: The White House says President Trump wishes he had raised tariffs on Chinese goods even higher last week. Futures sold off sharply – Reuters
    – Monday Morning Chapter (at 3:00 am ET): President Trump says he received two phone calls from China wanting to restart trade talks as they want to make a trade deal. Futures reversed losses.
    – Monday Morning Chapter (at 5:00 am ET): Chinese state newspaper says that there have been no discussions between two countries for several days. Futures pare back gains. Global Times editor says China preparing for worsening US ties – Bloomberg
    Regarding US Companies Operating in China –
    Friday Afternoon Chapter: Trump on Twitter threatens to take actions against the US companies who are not willing to relocate out of China. You all saw the tweets we discussed.
    Weekend Chapter: Trump tweets again and talks about 1977 Emergency Act that gives his broad executive powers to take such actions against the US companies.
    Monday Morning Chapter: White House officials say Trump is not planning emergency declaration to get US companies out of China – WSJ
    Regarding Federal Reserve –
    Friday Afternoon Chapter: Trump calls Jerome Ppwell the enemy of the state in a tweet storm after Powell doesn’t announce any major policy decisions in Jackson Hole meeting.
    Monday Morning Chapter: Mnuchin says don’t take Trump’s Powell ‘enemy’ jab literally – Bloomberg
    In All Other News –
    – German business confidence extended its decline, falling to the weakest level in almost seven years, as a deepening manufacturing slump put Europe’s largest economy on the brink of recession. Ifo’s business climate index fell to 94.3 in August, marking its fifth straight decline. “The situation is becoming increasingly dire,” Clemens Fuest, president of the Ifo Institute, said in an interview with Bloomberg Television. “The weakness which was focused on manufacturing is now spreading to other sectors.”

    – Amazing how these missile tests don’t get enough coverage anymore. North Korea said Sunday that it successfully tested a “new” super-large multiple rocket launch system the previous day under the guidance of leader Kim Jong-un. Kim “guided the test-fire of newly developed super-large multiple rocket launcher on Saturday,” the Korean Central News Agency (KCNA) said in English. “The test-fire proved that all the tactical and technological specifications of the system correctly reached the preset indexes.” – Yonhap
    – US Durable Goods Orders for July up +2.1% vs +1.2% estimate. However, excluding transportation sector which is often skewed by F-35 and Boeing orders, Durable Goods Orders missed with a decline of -0.4% vs 0% estimate.
    – China announced two stimulus measures over the weekend to boost domestic growth: 1) PBOC unveils new policy to price mortgages closer to market rates – WSJ and 2) China to lower capital requirement ratio for infrastructure projects – Reuters
    Next Up – Chicago National Fed Activity Index (8:30 am ET but report is delayed this morning), and Dallas Fed Manufacturing Activity Index at 10:30 am ET
    Fahad
  • Aug 26 2019 8:47 AM
    After big sell off on Friday, the S&P futures are guided higher by +17 points, Nasdaq up +56 and Dow futures are up +211 points. Deal optimism has returned after these comments from Chinese Vice Premier Liu:
    “We Are Willing To Resolve The Trade Dispute With The US Via Calm Negotiations. We Are Resolutely Opposed To An Escalation Of The Trade War Which Is Not Beneficial To The US Or China.”
    Technically, the S&P continues to play ping pong between the 50-day MA resistance at 2946 and the 200-day MA support at 2802. Let’s see which way the wind blows from here.

    Fahad
  • Aug 26 2019 8:57 AM

    Agnico Eagle Mines (AEM) – Bullish View

    Outlook: Shares of this gold miner are breaking out and have plenty of bullish option flow reflected in open interest. Focus over the next several months will be on its production at Meliadine and Amaruq in Canada’s Nunavut Territory.

    Catalysts to Watch: Production Updates, Q3 Earnings in late-October (Date not confirmed)

    Time Duration: 3 Months

    Trade – I like buying AEM November 60/70 call spread for $3.60 or less.

    Kirby Corp. (KEX) – Bearish View

    Outlook: Keep an eye on this stock going forward as the company lowered its FY Guidance last quarter due to a handful of headwinds within its Marine Transportation segment. In addition, its Distribution and Services segment is closely tied to the oil and gas markets. BAML expects revenues to decline near double-digits and not return to growth until mid-2020.

    Catalysts to Watch: Q3 Earnings in late-October (Date not confirmed)

    Time Duration: 3 Months

    Trade – I like buying KEX December 70 puts for $5.00 and selling September 65 puts for $1.00 credit. The put diagonal spread is going for $4.00 or less.

    Fahad
  • Aug 26 2019 9:12 AM
    Amgen (AMGN) to Acquire Otezla from Celgene (CELG) for $13.4B “The acquisition of Otezla offers a unique opportunity for Amgen to provide patients an innovative oral therapy for psoriasis and psoriatic arthritis that fits squarely within our portfolio and complements our Enbrel® and AMGEVITA® brands,” said Robert A. Bradway, chairman and chief executive officer at Amgen. “We will take advantage of our 20 years of experience in inflammatory disease to realize the full global potential of Otezla as an affordable option for patients with these serious, chronic inflammatory conditions.”

    Bristol-Myers Squibb (BMY) Raises Accelerated Buyback to $7B, to De-Lever Balance Sheet, The share repurchase will be executed following closing of the pending Bristol-Myers Squibb merger with Celgene, subject to Board approval. The additional authorization is based on strong business trends across both Bristol-Myers Squibb and Celgene, encouraging clinical developments across the pipeline of both companies and increased visibility into the closing of the pending merger with Celgene.

    Juan Carlos
  • Aug 26 2019 9:24 AM
    WorkDay (WDAY) – Ahead of earnings on August 29th after market close, RBC Capital is out with earnings preview, see full note HERE.
    Short Term Channel Checks (Strong but cautious in Europe due to management shake up) – Adaptive Insight partners are overwhelmingly positive on the recent pace of business. With regard to mid-market Financials, partners suggest this is also an area of strength. Specifically, RBC believes the business here has been robust at sub 3,500 employee organizations. Partners suggest that a large enterprise pipeline also exists, with big deals targeted in the 4Q period that could prove to be key logos that thaw this market. Partners suggest that the pace of business in Europe has been less than planned, with the U.K. (driven by Brexit issues) being a particularly difficult region for both financials and HCM.
    Long Term View (major penetration still to happen in large and growing TAM) – “With 80%+ of the company’s revenues today coming from HCM, yet only 25% of the company’s TAM penetrated to this segment, we believe there is a large, untapped opportunity supportive of sustained 25%+ subscription revenue growth rates over a multi-year period with Cloud Financials the biggest call option today. We believe this $50B+ opportunity is ripe for disruption, with 50% of the market today owned by ORCL and SAP and the remaining 50% owned by a large number of sub-scale vendors. Additionally, with net new ACV growth in excess of +50% Y/Y in the most recent quarter, and customer count rapidly scaling (from ~200 in mid CY 2016 to 530 in mid CY 2018), we believe Cloud Financials is reaching an inflection point and quickly becoming a meaningful line of business.”
    Overall, very positive view by RBC Capital short and long term and but it does appear that Brexit fears are weighing on European operations. I think investors will look past Brexit fears in earnings reports. Staying bullish into earnings specially considering major valuation disconnect vs peers. See trade idea below that was recommended in webinar on August 13th.

    Fahad
  • Aug 26 2019 9:33 AM
    Wheaton Precious Metals (WPM) – Right out of the gate buyer of 1,500+ October 30 calls pays up to $1.15 offer. Approx $172,000 bullish bet. The gold miner in which we have seen increasing amount of upside call option activity in last two days.
    Fahad
  • Aug 26 2019 9:39 AM
    Wal-Mart (WMT) – Above Friday’s high. This is the spot where it should take next leg higher. Keep an eye on it and seeing early buyers of 900+ August (30) Weekly 112 calls for up to $0.98 offer.
    Company is coming off strong quarter with high volume breakout. Analysts largely upbeat on results, citing the +2.8% domestic Walmart comp topped consensus by 40bps, along with general enthusiasm around ongoing US ecommerce growth – +37% during Q2. While the e-commerce platform remains unprofitable, analysts believe the expansion of marketplace offerings will drive revenues through the 2H19. Majority of analysts see strong management, scale, and global sourcing platform putting WMT in a strong position going forward.

    Fahad
  • Aug 26 2019 9:45 AM
    Activision (ATVI) – The bigger the base, the higher in space. Stock has been building a base in mid $40’s for nearly a year. Call buyer are stepping in here with 1,300+ high delta in the money September 47 calls bought to open for up to $2.52 offer. Approx $327,600 bullish bet with implied volatility rising. Keep an eye on this chart.

    Fahad
  • Aug 26 2019 9:46 AM
    XRT from green to red !
    Juan Carlos
  • Aug 26 2019 9:54 AM
    Inspire Medical (INSP) – Two regional Medicare administrators have proposed coverage of Inspire Therapy system for patients with obstructive sleep apnea. Noridian Healthcare Solutions and Palmetto announced proposed local coverage determination drafts on Friday, up for a 60-day review and public comment period.
    Collectively representing 19 states, this could further streamline the Medicare approval process which currently accounts for around 30% of Inspire’s patients. It is expected that initial coverage denial will be “greatly reduced” from the 30%-35% of applicants who then have to go through appeals processes.
    Post-review timeline, finalization could be around 1Q2020 when both Palmetto and Noridian would issue updated policies.
    Inspire was a previous Top Pick from 4Q2018 quarterly outlook that has held up very well under market selloff pressures, please see our previous notes here.

    Avo
  • Aug 26 2019 10:08 AM
    CarMax (KMX) – Buyers of 2,900+ October 80 puts for $4.20 offer on bid/ask spread of 3.60 x 4.20. Approx $1.2 million bearish bet with stock rolling over and below Friday’s low. Implied volatility is jumping higher by +14% with put volume running 2.4x daily average.
    Manheim Used Vehicle Index – I have mentioned this before that slowing economy will have trickle down negative impact on used car values which is key barometer for margins as well as overall health of used car dealership. The latest Manheim data on August 7th was flat in July sequentially.
    — On a year-over-year basis, most major market segments saw weak seasonally adjusted price gains in July. Vans and pickups outperformed the overall market, while most other major segments underperformed the overall market. Last year is a tough comparison for both prices and sales as we experienced an abnormal increase in consumer demand during the summer driven by tariff fears and rising interest rates.
    — The retail new vehicle market was also soft in July. July total new vehicle sales were up +2.1% year-over-year, with one more selling day compared to July 2018. The July SAAR came in at 16.8 million, declining versus last year’s 16.9 million and down slightly from June’s 17.1 million rate. Cars continue to see declines, as sales in July fell -9% compared to last year. Market share for cars was 27% last month. Light trucks outperformed cars in July, finishing the month up +7% year-over-year.

    Fahad
  • Aug 26 2019 10:18 AM
    BREAKING NEWS –
    – Chicago Fed National Activity Index crashes to -0.36 vs +0.03 estimate vs -0.02 prior month. 3 month moving average falls to -0.14.
    “Production-related indicators, reflecting -0.2% and -0.4% declines in industrial production and manufacturing production, pulled the index down by -0.25 points in July. These declines speak to the effects of slowing global demand and the slowdown in export demand. Personal consumption & housing was the next greatest negative at -0.06 points with sales, orders & inventories close behind at -0.05 points. Employment is another major component and it failed to provide positive support, down -0.01 in the month and reflecting a still solid but slower rate of payroll growth in the month.”

    Fahad
  • Aug 26 2019 10:22 AM
    BAML after macro data today shaving GDP growth estimates –
    “Our latest tracking estimates also reflect our revised trade outlook. Given the recent trade war escalation, we now expect imports to be pulled forward into 3Q to avoid the tariffs. This will result in a significant widening in the trade deficit compared to our previous expectation for little change from 2Q. Collectively, today’s data and our revised trade outlook cut 0.1pp from our 3Q GDP tracking estimate, bringing it down to 2.0% QoQ. 2Q tracking also fell by 0.1pp to 1.7%.”
    Fahad
  • Aug 26 2019 10:23 AM
    JP Morgan today: “The U.S. deficit is expected to hit $1 trillion in fiscal year 2020, or about 4.5% of GDP.  There is no precedent in the modern era for running deficits this large outside of a recession.”

    Fahad
  • Aug 26 2019 10:33 AM
    Westrock (WRK) – The pulp/paper company in which we recommended buying October 35 puts for $2.35 on August 6th in webinar, see HERE. RBC Capital out with a note today talking about deteriorating industry shipments:
    Regarding North America –
    “North American printing and writing paper shipments declined 15% y/y in July – North American printing & writing paper demand declined 10% y/y, owing to a combination of customer destocking, worsening demand for certain end-uses, and difficult y/y comparisons. Declining production pushed operating rates to 87% in July, compared to 92% in July 2018.”
    Regarding Europe –
    “European pulp prices remain under pressure – European NBSK and BEK benchmark grades declined $50/tonne in July to $900/tonne and $800/tonne, respectively, as demand remains lackluster in the region. According to RISI, buyers remain persistent in searching for additional price cuts in August, with some sellers expecting a $30-$35/tonne decline in the month. Europulp data showed some positive signs with a 4.2% m/m decline in port stocks; however, European port inventories remain ~64% higher y/y.”
    Regarding China –
    “Chinese pulp inventories remain high despite producer destocking efforts – Similarly in China, inventories remain high despite large Suzano BEK sales. For Q319, Suzano announced that it will be offering BEK tonnes at $480-$500/tonne, with the intention of stabilizing the Chinese market. In addition, Suzano announced that it plans to take ~750,000 tonnes of production downtime in H219.”

    Fahad
  • Aug 26 2019 10:39 AM
    I am quite surprised that the market lends any credence to Trump’s tweets anymore – or for that matter, anything the WH has to say, especially on the trade topic. This market action is strange, I honestly did not expect a positive reaction to that stupid tweet – getting back to the negotiating table? Really??? Difficult to trade this…
    Mike R
  • Aug 26 2019 10:39 AM
    Does it really matter whether or not Trump says “China wants to negotiate”? I mean really after Friday – Could their positions be any more hardened?
    Rob C
  • Aug 26 2019 10:40 AM
    I do not understand how trump gets away with obvious market manipulation. It is now quite obvious there was no call. I would not be surprised if Chinese actually go after his credibility next. I do not think it’s no surprise he said these comments in premarket. I would think now would be the time the Chinese retaliate as it would hurt trump the most.
    Ed
  • Aug 26 2019 10:40 AM
    Special/weird reactions in market. All weekend long I was thinking today would be a disaster – and look now, markets will open higher?!
    Kristof
  • Aug 26 2019 10:45 AM
    the higher it goes, the harder it falls. Fake tweets only work for so long.
    gary hirsch
  • Aug 26 2019 10:48 AM
    This is exactly why I wanted to start the chatroom today with usual Top Macro News that shows you timeline of events each day and each hour and constantly flip flopping driving investors nuts. Mike said it perfectly, I have no idea how Trump gets away with this. In fact, even Jim Cramer who has been a huge supporter of Trump for pushing against China has said the following in Squawk Box today:
    “You can claim that the president’s a liar, but the futures are up, so I don’t care.” Jim Cramer
    To Rob’s point, you cannot trust anything from Trump administration about discussions with China. It’s all about saving the grace of market. That’s it. He calls Xi an enemy, he increases tariffs on Friday, he trashed China all weekend long at G7, and then when futures were down -400 points Sunday, he says he got a call from China to continue negotiations. It’s all blunt lies.
    Fahad
  • Aug 26 2019 10:49 AM
    Market Internals Update – Roller-coaster ride continues, at a point Dow Jones Futures were down around 360 points shortly after the open Sunday night, reverting to nearly 200-point gain by this morning’s open. Midnight phone calls, tweets, maybe meetings oh my…
    Advancing issues opened at 2600 after which profit-taking (or further exiting) action drove the numbers lower to the current 2200 area. Declining issues up from 400 to 950.
    NYMO up 20 points to -7.42, the morning’s low so far. The opening print was around +2.
    TRIN is neutral at 1.02, as volume builds we’ll get a better representation, currently Up:Down ratio is 2.15:1. TICK early going has a range of -320/+160.
    VIX opened a few ticks in the red then promptly turned up. At this time it is higher by 7% to 21.25.
    SPY up 0.45% but $1.60 lower than the open (16 points on SPX). Volume is tracking to 155% of daily average. Technically there is some support near $285 that was tested already in the past 20-30 minutes.
    Avo
  • Aug 26 2019 11:05 AM
    Fibrogen (FGEN) – Large buyer of 3700 January 45 calls for $5.60 offer on wide bid/ask spread of 4.70 x 5.60. Approx $2.1 million bullish bet on this biotech and both stock and implied volatility spiked higher intra-day with it. Trading 17x daily average call volume.
    Big bet. Add this stock to your watch list. Doing some research. Will get back with more details later.
    Fahad
  • Aug 26 2019 11:10 AM
    Please keep this catalyst in mind at 4:00 pm ET today –
    Judge to Announce Decision in Johnson & Johnson (JNJ) Oklahoma State Opioid Litigation Case today (August 26th) at 4:00 pm ET. This is a widely anticipated decision and could represent a significant catalyst for JNJ and could also have implications for Drug Thieves (CAH, MCK, ABC).
    Fahad
  • Aug 26 2019 11:27 AM
    EMN: Holding a Dec 65/55 put spread that is up +50%. I don’t see any reason not to continue to hold a little longer other than RSI is flirting with oversold territory. Okay to hold or would you recommend adjusting trade here. Current cost at 4.86 is clearly getting close to the 2:1 threshold where I look to take profits via rolling or exit. Thanks
    Kurt
  • Aug 26 2019 11:30 AM
    Eastman Chemical (EMN) – Still see more downside ahead and $65 level is now resistance and December has more time. I suggest closing December 65/55 put spread for $4.85 and buying December 60/50 put spread for $2.80. Giddy up!
    Fahad
  • Aug 26 2019 11:31 AM
    FGEN CEO died over the weekend
    Barry
  • Aug 26 2019 11:33 AM
    Hi F – How to read the macro data … it’s good for 50Bp cut urgently ?
    Filip
  • Aug 26 2019 11:34 AM
    Bond market is still pricing in only 25 bps cut in FOMC meeting on Sep 18th.

    Fahad
  • Aug 26 2019 11:43 AM
    Retail Sector (XRT) – More put buying here. Buyers of 3,000 October 38 puts for $1.31 offer. Approx $393,000 bearish bet with implied volatility rising by +1.3%. Will check OI tomorrow.
    Fahad
  • Aug 26 2019 11:44 AM
    GOOS – Hold puts or take profits?
    Nabeel
  • Aug 26 2019 11:46 AM
    Canada Goose (GOOS) – I suggest take profits and step aside. This $35 level is major VoP support and RSI is getting a bit oversold. A high growth retailer despite weakening international trends, and its entering into strong seasonality. Better opportunities elsewhere to short in specialty retail.
    Fahad
  • Aug 26 2019 12:12 PM
    Buy ZTS on this weakness?
    Matt
  • Aug 26 2019 12:13 PM
    Zoetis (ZTS) – Still needs to shake off the overbought technicals and MACD and RSI have plenty of room to correct. I suggest hold off here, better entry later on further pull back. Love this company though.
    Fahad
  • Aug 26 2019 12:14 PM
    Are we taking any profits on puts or just holding?
    Jeff
  • Aug 26 2019 12:15 PM
    Just holding position for now. Haven’t done much all day in terms of trading. Waiting for right moment to execute buys and sells. Understand we have a huge sell off on Friday on heavy volume and today is light volume attempted rally. This is bear flag potentially in the S&P before another leg down.
    Fahad
  • Aug 26 2019 12:15 PM
    on back oh Juan’s comments IWM flat after being up big premarket!
    Sean
  • Aug 26 2019 12:16 PM
    Yup! Cyclicals are still lagging materially on this dead cat bounce in the market.
    Fahad
  • Aug 26 2019 12:19 PM
    UNP – Has almost lost all of today’s gain.
    Nabeel
  • Aug 26 2019 12:20 PM
    XLI, IWM, IYT, XRT, XOP … all cyclicals with barely any bounces and volume is extremely light. Crude oil just went from green to red again. Session low here.
    Fahad
  • Aug 26 2019 12:24 PM
    hi Fahad, you had mentioned before to exit VEEV calls (holding sept 170 calls) before earnings. That is still the case?
    guest
  • Aug 26 2019 12:25 PM
    Veeva Systems (VEEV) – I believe expectations are high going into earnings. Expect a strong quarter but setup is difficult. Hence I would rather wait for pull back then stepping into calls ahead of earnings.
    Fahad
  • Aug 26 2019 12:32 PM
    The Gap (GPS) – And the bear has returned after silly short covering rally post disaster quarter company posted last week. Block of 5,000 September 16 puts bought to open for $0.58 offer. Approx $290,000 bearish bet on 1x daily average put volume.

    Fahad
  • Aug 26 2019 1:10 PM
    Heads up! Trade idea going out shortly … some of you may already be positioned in this trade.
    Fahad
  • Aug 26 2019 1:45 PM

    Trade Alert: Expect Spike in US Manufacturing Layoffs ... Email sent

    Industrials
    Ticker: XLI
    Current Price: $73.66
    First Target: $67.00
    Stop Loss: $78.50
    Time Duration: 116 Days

    Trade Idea – Buy XLI December 72/62 Put Spread for $2.15 debit or less (currently mark is $2.06)

    I believe we are entering the phase in cycle currently that is not fully acknowledged or reflected in street expectations and investors sentiment. I believe we are going to start seeing a spike in US Manufacturing Sector layoff announcements in coming months, and the August job report next week on Friday, September 6th, could be first highlight of that.

    XLI is trading 1.5x daily average put volume today. One bear is rolling short term puts out and another bear is buying fresh new bearish position:

    • 4,000 Aug (30) W 74 puts sold to close for $1.31 credit
    • 4,000 Sep (13) W 73 puts bought to open for $1.37 offer
    • Buyer of 6,000 October 73/67 put spread paid $1.64 debit

    This follows buyers of 5,000 September (13) W 75 puts for $2.30 offer side last week as recorded in Activity Tracker. Approx $1.15 million bearish bet that remains in open interest.

    Industrial Momentum Turns Negative – While I can point to miss in Durable Goods Orders this morning that crashed to 3-year low, or global PMIs that are below 50 including US reading last week, or other widely followed indicator. But I’ll discuss BAML Industrial Momentum Indicator (IMI) that we usually don’t discuss. The IMI indicator identifies major inflection points for global industrial stocks spanning US, Europe, and Japanese Machinery, Multi-Industry, Transportation, and Aerospace & Defense sectors. It is intended to be a “lead” indicator based on Industrial
    sales revisions, earnings growth, and the Global PMI orders by a two-month basis with 72% correlation. Therefore, this is a leading indicator and its backtest shows that industrials generally tend to underperform the market in periods when IMI is falling. The indicator fell sharply in August to the lowest level since 2015. Below is chart of XLI vs IMI relative test.

    The Indicator’s downtick is primarily driven by investment managers reducing positioning in basic materials stocks. According to the most recent Fund Manager Survey (published August 13), 46% of fund managers think global profits will deteriorate in the next 12 months. This compares to 41% last month. Perhaps most importantly, the indicator is highlighting that in comings months we are going to see significant downward revisions in sales, something I have warned about since beginning of year as analysts have pushed out optimistic assumptions for 2H19 recovery. Put it differently, I expect major earnings misses and guidance cuts from Q3 earnings seasons by US Manufacturing Sector.

    Global Capex Growth Falls Below GDP Growth – After rising by +3.1% in 2018, the forecast for industrial capex growth for full year 2019 is now only at +1%, with further deceleration expected in 2020. The ongoing US China trade war adds another layer of uncertainty to these estimates. The expected slowdown in global capex, particularly in the US, is consistent with what we have heard from companies in 2Q earnings. For example, the Fluid Survey of 53 industrial distributors in North America as of August 12th showed indicators for demand and outlook hitting historical survey lows (50 vs 53.8 prior months survey) and showing continued deceleration off of 2018 levels.

    Industrial Insider Selling Picking Up – Last week, the insider selling of stocks by Dovers (DOV) SVP & CFO Brad Cerepak ($5.9M), Eaton (ETN) Vice Chairman & CFO Richard Fearon ($6.7M), Fortiv (FTV) SVP Stacey Walker ($2.4M), Honeywell (HON) Director Jaime Pardo ($2.3M) and HON Chairman, CEO & Director Darius Adamczyk ($1.2M). These are all components of XLI. Usually, we are not as concerned with insider selling as managements sell for all kinds of reasons (buy a boat, buy a mansion, get divorce, etc). But in this case we are seeing them come in volume across many industrial stocks for several weeks. This tally above is just from last week.

    Fahad

    Fahad
  • Aug 26 2019 1:54 PM
    Market Internals Update – Advancing issues remain green, after the morning’s pullback to 2030 they’ve rebounded to 2280, about mid-point of the day’s range. Declining issues are in a 800/950 range.
    NYMO up 26 points to about Zero.
    TRIN neutral at 0.98, Up:Down volume ratio is at 2.32:1 and we’re looking at a 69% Up volume day, relatively light bounce. TICK range has a slight bearish bias at -235/+155.
    VIX has come down from its early morning gain, it is currently near- flat, up 0.60%.
    SPY is up 0.85%. Price is attempting to get above Friday’s ‘pause’ area after the first big drop – the $288 level also has volume support/resistance built-up in August. Volume is tracking to 82% of daily average.
    Avo
  • Aug 26 2019 2:28 PM
    Hormel Foods (HRL) – At least one bear doesn’t want to give up. Buyer of 1,000 March 40 puts for $2.25 offer on bid/ask spread of 2.15 x 2.25. Approx $225,000 bearish bet or hedge.
    Fahad
  • Aug 26 2019 2:31 PM
    US Steel (X) – Stock has fallen from high of $42 after Trump announced steel and aluminum tariffs in March 2018 to protect domestic industry, to $11 currently. Buyer of 2,000 September 10.5 puts pays $0.47 offer. Small $47,000 bearish bet. BAML believes the industry is full of excess inventory and capacity that needs to be cut sharply before market can balance itself and tariffs haven’t had any positive impact on domestic producers.
    Fahad
  • Aug 26 2019 2:54 PM
    Illinois Tool Works (ITW) – An industrial conglomerate with bearish flow:
    – Buyer of 550 October 130 puts for $1.60 offer
    – Buyer of 330 December 125 puts for $2.55 offer
    Reviewing Q2 Results – On July 26th, company posted -3% YoY decline in earnings and -6% YoY decline in revenues and both missed street expectations. Operating profit of $871mn was also 5% worse than our $920mn estimate, though ITW managed to hold operating margins flattish despite a -6% revenue decline. The company reduced the full year EPS outlook by -4% to $7.70. Sequentially the income statement worsened with organic growth falling by -2.8% in Q2 vs -1.5% reduction in Q1. Among the segments, Auto, Test & Measure, Welding, and Specialty all got worse with Auto -7.1% (v -6.4% in Q1), Test & Measure -1.3% (v -0.5%), Welding -2.4% (v +2.8% in Q1), and Specialty -6.4% (v -1.5%). ITW continues to lag other industrial companies that are deemed high-quality given its back-to-back quarters of negative organic revenue growth. Revenues were down across all 7 segments due to lower volumes and FX. The current economic conditions are either a pause in end market activity or the start of a long-term prolonged decline. I believe it’s the latter.
    So, Q1 organic growth was -1.5% and Q2 worsened to -2.8% but looking forward street is modeling Q3 growth of -1.1% and Q4 growth of -0.8%. Meaning street is expecting sequential improvement and this is where lies risk given global macro deterioration.

    Fahad
  • Aug 26 2019 3:10 PM
    Lincoln National (LECO) – In 2Q19 Outlook I provided bearish “welding” channel checks and suggested buying puts which turned out to be a great trade, see HERE on page 100. This time we have channel checks from Stifel issued on July 8th with a survey of 60 North American welding and cutting distributors representing 11% of total industry’s volume. Survey highlights:
    “Overall, we think domestic volume is likely down low to mid single-digits while organic revenue comparisons are likely to be flat to down low single-digits. Sales, additions to inventory, and price all decelerated relative to our prior survey.”
    There are three companies that these checks apply to: LECO, ITW and CFX and all three of them have been reporting volume declines with deteriorating tend sequentially. LECO is the only welding company that specifically breaks out its Americas welding segment (includes South America).
    Deteriorating Volume:
    Up +7.5% in 1Q18
    Up +7.7% in 2Q18
    Up +5.8% in 3Q18
    Down -0.1% in 4Q18
    Down -2.9% in 1Q19
    Down -5.2% in 2Q19
    Deteriorating Sales Price Realization:
    Up +4.6% in 1Q18
    Up +5.4% in 2Q18
    Up +9.1% in 3Q18
    Up +8.3% in 4Q18
    Up +6.3% in 1Q19
    Up +1.7% in 2Q19

    Fahad
  • Aug 26 2019 3:19 PM
    TNDM still strong great call F
    Matt
  • Aug 26 2019 3:19 PM
    F – did you find any news on TNDM.. nice bounce great trade I dont see anything
    Matt
  • Aug 26 2019 3:19 PM
    Tandem Diabetes (TNDM) – Our favorite play within diabetes management space, shares are up nearly 3% today heading back toward the $70 mark, having broken above a descending trendline from late-May. Technically, above $70 the next resistance is 2019’s high print of $75.We recently discussed TNDM during last Thursday’s Webinar.
    Leerink has a bullish note from August 22nd after hosting investor meetings with the CEO and CFO points to multiple upside catalysts ahead for the company. Most importantly, fundamentals reain very strong leading the analyst to conclude that both his and Street’s FY2020 gorwth projections can not only be met, but  surpassed.
    Looking ahead, Leerink believes that diabetes devices – CGMs and insulin pumps – are currently in an “adoption inflection” with Tandem being the major driver of this move due to recent launch of t:slim Basal.IQ insulin pump. Aside from enticing higher number of patients to switch over from Animas and Medtronic (MDT), new patients adds are ramping up as well, specifically those that require multiple injections every day – remember that along with DexCom (DXCM) G5 and brand-new G6, there aren’t any finger-stick tests required, in fact aside from product replacement every two weeks (the monitor’s approved life-cycle), the system runs by itself through its highly adaptive software and algorithm.
    Longer term, insulin pump and monitor market is being expanded into Type 1 diabetes (formerly called Juvenile diabetes) which, while less common than Type 2, is estimated to have a worldwide TAM of $8B. The overall market is expected to sustain double-digit sales in the foreseeable future, Leerink sees a potential of above-45% CAGR over 2018-2023 timeframe.

    Avo
  • Aug 26 2019 3:25 PM
    #1 Welding Leader Globally:
    Lincoln Electric (LECO) – Global manufacturer of equipment and consumables for the welding, cutting, and brazing market.
    #2 Welding Leader Globally:
    Colfax (CFX) – Manufacturer of welding & cutting equipment, fans, heat exchangers, compressors / blowers, and medical orthopedic solutions.
    #3 Welding Leader Globally:
    Illinois Tool Works (ITW) – It is the most diverse company among the major welding players with 89% of revenue coming from non-welding businesses.
    I discussed LECO and ITW already below with bearish thesis. CFX is also suffering from same weak end markets and its chart is also heading for breakdown (see below). All three of them are industrials. This is why I just went ahead and bought puts in XLI other all three of them can be shorted here.
    About 65% of their businesses is being negatively affected by traditional cyclical slowdown in economy and 20% is affected negatively by tariff. Also they have about 18% exposure to oil/gas industry where rig cuts have been weighing on results. Stifel points all this out in its survey, see full survey results HERE.

    Fahad
  • Aug 26 2019 3:32 PM
    Welbilt (WBT) – Another industrial breaking down today with ugly chart. Company provides commercial food service equipment and machinery and last quarter it missed on revenues and guided FY2019 revenue growth of +3.5% vs +4.5% estimate.

    Fahad
  • Aug 26 2019 3:33 PM
    Hey Fahad, Holding two positions in TNDM, both expiring in November I have 65/85 call spread and 70/90 call spread. Would you close either of the short legs? I’m thinking I should wait for more premium to leech out.
    Cathy N
  • Aug 26 2019 3:35 PM
    Tandem Diabetes (TNDM) – I don’t see a reason to close either spread. Hold both with stock breaking out. Let it run.
    Fahad
  • Aug 26 2019 3:48 PM
    Anaplan (PLAN) – Great looking technical setup ahead of earnings tomorrow morning before market opens and one bull is stepping in with 4,000 September 50 puts sold to open near the bid for $1.00 credit on bid/ask spread of 0.95 x 1.20. Approx $400,000 put premium collected on 10x daily average put volume.

    Background – The cloud based connected planning platform that helps enterprise connect with its customers to streamline decision making. It enables users to manage sales performance, including incentive compensation, territory and quota planning, sales forecasting, account segmentation and scoring, and sales capacity planning.
    Reviewing Last Quarter – We have never covered this stock before so I am a bit lacking views on fundamental views here ahead of earnings tomorrow morning. Looking at last quarter on May 29th, stock ripped higher by +18%. Company posted a record number of new $250K customers during Q1, +42% YoY. Raised Billings growth were huge +57% YoY, above consensus and accelerated for 2nd consecutive quarter. FY20 revenue estimates on improving demand fundamentals and a healthy pipeline of large deals looking out over the next several quarters. I am short on details but company clearly has strong earnings momentum and chart looks great!

    Fahad
  • Aug 26 2019 3:49 PM
    Hey buddy, time to get back into CIEN here sir 🙂
    Brian D
  • Aug 26 2019 3:50 PM
    Ciena (CIEN) – We are holding October 45 calls currently into earnings on September 5th before market opens.
    Fahad
  • Aug 26 2019 3:52 PM
    Fahad
    Has insider selling picked up from baseline trends or the ones you mentioned are normal. Is there a metric that tracks net buying/selling insider. I believe there was a metric in seekingalpha.
    S
  • Aug 26 2019 3:53 PM
    Insider Selling – Trim Trends each month provides data. Corporate insiders have sold an average of $600 million of stock per day in August. August is on track to be the fifth month of the year in which insider selling tops $10 billion. The only other times that has happened was 2006 and 2007, the period before the last bear market in stocks, TrimTabs said.
    Let me see if I can find decent chart on this trend. Will share later.
    Fahad
  • Aug 26 2019 3:54 PM
    Fahad to my earlier question could roll the xli October 75 puts to trade idea and add contracts.
    Ed
  • Aug 26 2019 3:55 PM
    Industrial (XLI) – Yes, roll October 75 puts to December 72/62 put spread.
    Fahad
  • Aug 26 2019 3:55 PM
    is ok to hold dec 73/63 put spread or shall i roll down to your alert, plz reply me, tia.
    sathya
  • Aug 26 2019 3:55 PM
    Industrial (XLI) – Yes, okay to hold that put spread.
    Fahad
  • Aug 26 2019 3:55 PM
    EOG holding sept 77.5 puts. any adjustment? thanks
    bruce
  • Aug 26 2019 3:57 PM
    EOG Resources (EOG) – Roll September 77.5 puts to October 70 strike. More downside ahead and large bear remains in September 80/77.5 bearish risk reversal as we discussed previously. Giddy up!
    Fahad
  • Aug 26 2019 3:57 PM
    MRVL- have you come across any noteworthy channel checks in this one? Reports Thursday I believe. I’m holding Nov $25 calls in this as it hovers right at trend support. I’m a bit concerned about my various semi positions (AMD,MU,MRVL) given the chaos looming around trade.
    Raju
  • Aug 26 2019 4:01 PM
    Semis (SMH) – The unfortunate part is some anecdotal evidence was started to emerge that perhaps semi space was starting to see bottom fundamentally based on pricing strength seen in DRAM and NAND markets. I was just starting to warm up to this sector you may have noticed that in my various commentaries about MU, AMD, etc. All those hopes shattered when Trump announced last week even more tariffs on China and threatened to use executive powers to force American companies to get out of China under name of national security. That led to large put buying in SMH last Friday.
    MRVL chart is now breaking down. I suggest just wait until it goes to $22.40 support.
    Fahad
  • Aug 26 2019 4:02 PM
    FSLY through upper VOP. Target for this one?
    gary hirsch
  • Aug 26 2019 4:02 PM
    Fastly (FSLY) – Going to $30+ stay long
    Fahad
  • Aug 26 2019 4:02 PM
    KMX: Been looking at this since earlier post on big buyer of Oct 80 puts. You like an Oct 80/70 put spread for
    Kurt
  • Aug 26 2019 4:03 PM
    Carmax (KMX) – Yes, like October 80/70 put spread.
    Fahad
  • Aug 26 2019 4:03 PM
    JWN / LB / URBN all in red from last week earnings .
    Juan Carlos
  • Aug 26 2019 4:03 PM
    All three are fading gradually after silly short covering rally post earnings.
    Fahad
  • Aug 26 2019 4:04 PM
    CHDN you like Sept 130/Dec 125 call diagonal or Sep/March 130 calendar here?
    Rob C
  • Aug 26 2019 4:04 PM
    Churchill Downs (CHDN) – I like Dec 125 / Sep 130 call diagonal spread.
    Fahad
  • Aug 26 2019 4:05 PM
    If this ‘trade war’ continues……do you think it may cause unrest in mainland China…? due to losses of income and jobs….etc…?
    Bobby K
  • Aug 26 2019 4:07 PM
    Yes and it will cause unrest in the US too if Trump announces executive orders against American companies. This is a democracy. Not a dictatorship. Consider GM. About 28 million cars are sold in China each year. 4 million by GM. It’s a massive market, much bigger than 2.8 million GM sells in the US. These are global companies with operations everywhere, including China. Disrupting businesses like that with executive actions and we will risk revolt even in the US.
    Fahad
  • Aug 26 2019 4:07 PM

    **OKLAHOMA JUDGE SAYS JOHNSON & JOHNSON MUST PAY $572 MILLION FOR ITS PART IN FUELING OPIOID EPIDEMIC – COURT HEARING

    Fahad
  • Aug 26 2019 4:08 PM
    Small number for JNJ
    Fahad
  • Aug 26 2019 4:20 PM
    Flowserve (FLS) – Another industrial that rarely ever appears on radar. In last 10 minutes of trading buyer of 4,000 November 40 puts paid $2.25 offer on bid/ask spread of 2.05 x 2.25. Approx $900,000 bearish bet on 23x daily average put volume. Big bearish bet.
    It is manufacturer of after-market flow control systems including precision-engineered flow control equipment, pumps, valves, seals, automation, diagnostic equipment, retrofits, and provides repair services for oil and gas, general industries, chemical, power generation and water management.
    Fahad
  • Aug 26 2019 4:21 PM
    All day long today there was one thing pretty consistent in option market. Put buying in industrial stocks, one after another as well as in XLI.
    Fahad
  • Aug 26 2019 4:24 PM
    Pentair (PNR) – Another industrial that should be negatively affected by this hike in tariffs as announced by Trump last Friday. I have written bearish notes about this multiple times, see HERE.

    Fahad
  • Aug 26 2019 4:27 PM
    Signet Jewelers (SIG) – More put buying today. Buyers of 1,100+ April 12 puts for $3.10 offer. Approx $341,000 bearish bet. The way bears have been accumulating puts in this stock all year long is essentially suggesting they see this retailer going bankrupt in 2020, the way of GME, BBBY, SHLD, JCP and others.
    Fahad
  • Aug 26 2019 4:32 PM
    Sir Jags, thanks for all the help, guidance and trade ideas! Wild Monday to start the week. Hoping for a turnaround Tuesday…..to the downside 🙂 Have an awesome rest of you day guys! GOD BLESS YOU ALL! See you tomorrow!
    Brian D
  • Aug 26 2019 4:32 PM
    Have a Great Night Jags!
    Fahad