AAPL Set to Rage Thru September!

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Apple (AAPLE) is the hot stock of the day as traders and investors alike pile on board the train that is up over 30% since its last pullback that rebounded in February.  There’s a myriad of reasons why everyone seems to be getting long the Silicon Valley tech giant. Among them is the general sentiment that Apple has overcome the loss of its late innovator, Steve Jobs, and has found itself once again as a well-oiled machine aimed at creating a complete life experience for its expanding user base.

Apple’s born again innovative mindset is exciting consumers who are waiting patiently for the new iPhone 6, said to have a much larger screen and increased battery capacity. But these features are for the simple-minded compared to the big picture Apple is focused on. They appear to be setting up to create one continuous life experience through their devices, connecting users’ mobile devices not only to each other, but to seemingly anything with some sort of connectivity capacity such as a kitchen appliance or car. These goals are obviously a little farther down the line than the iPhone 6, which is expected to arrive sometime this year, likely September. Apple’s tendency to make the next leap in technology throughout its history is almost weighing the stock down relative to its competitors as they scramble to shrink the time gap between Apple’s innovation and the deployment of their own similar technologies.

Tim Cook is proving to be a very savvy CEO as well. Not only has he been able to refocus the company on integration and mass adoption, but he is also expanding the target consumer base, pledging to double Apple’s presence in China (in terms of the number of stores). The exact timing of this move is uncertain but stores are being built at six new Chinese locations and the search for management is on, according to Apple’s website. This would essentially be the opening of the Bombay doors as Apple was already able to attract 130 million new customers over the last twelve months with the most populous nation in the world still somewhat out of reach. Presumably, these new users are coming from rivals such as Android and Windows, giving reason for Cook to even publicly make fun of Android, calling them a “mistake.”

He certainly has the numbers on his side in this matter, amongst other things. The biggest threat to Apple’s momentum is coming in the form of a no-nonsense smart phone from Chinese-based OnePlus that has an exclusive device that seems to trim the fat in terms of unnecessary software often found on iOS and Android devices. However, Apple appears to be hedging any competition by expanding horizontally, providing the most lucrative app store for developers and apparently making plans to more fully integrate Apple products into the education environment. Both of these undertakings should spell great news for Apple bulls.

This brings me to the technical analysis. The intraday chart is decidedly bullish, with APPL trading well above the Ichimoku cloud and there’s no resistance in sight. I expect the stock to keep climbing through September and the release of the iPhone 6. Institutional order flow is agreeing as major September call activity is coming across the tape today. The first major activity had Sep 105 calls trading for $0.85 and they are $0.97 bid now representing a $120 gain per 1 lot in the time it took to write this article. Keep in mind that the vast majority of open September positions were opened this morning. Let’s take a look at how to get long AAPL:

 

The Trade

Buy AAPL Sep 105 calls for $0.97

Risk: $97 per 1 lot

Reward: Unlimited

 

The Greeks

Delta: Long

Gamma: Long

Theta: Short

Vega: Long

Traders Bet On More COP Upside

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Major bullish activity is coming across the tape today in Conoco Phillips (COP) despite coming off the highs from yesterday. Traders are betting that the generally bullish trend will continue and that this is just a pull back as they take profits and roll positions farther up. Today, we saw a trader close out of Jul 85 calls and open new long positions in Jul 90 calls. In addition to the bullish nature of rolling same-month options up to a higher strike, this trades volume far exceeded the open interest in the contract. That is, this trader opened a position that had very few previously written contracts. This coupled with the roll strategy is very bullish unusual options activity.

Moving on to the technical, we can see that the long term-trend is very bullish with the stock hitting all time highs on heavy volume and trading above the cloud. The daily chart projects this trend to continue as COP is finding strong support well above the cloud. As we analyze a shorter time interval on the chart, we can see that Conoco is definitely going through a small pullback and even showing bearish signals, but this is when we refer back to paper’s big bet on the stock rebounding and this begins to look more like a buying opportunity than a trend reversal.

The Trade

Buy COP Jul 90 Call for $0.21

Risk: $21.00 per lot

Reward: Unlimited

 

The Greeks

Delta: Long

Gamma: Long

Theta: Short

Vega: Long

Trader Takes Bullish-Neutral Stance In WSM

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Williams-Sonoma (WSM) investors have seen nice gains this year, as the stock is up more than 18% and continuing to make new highs. Paper is showing bullish activity as well. The stock has really taken off since beating earnings in May by four cents a share. The premium home goods maker is performing well as the economy improves and is trading well above the Ichimoku cloud on the daily chart.

This bullish activity comes as one if its biggest competitors, Pier 1 Imports (PIR), heads lower after an earnings disappointment and forward guidance projection cuts. Investors see Williams Sonoma as a safe bet in the space and look for it to continue its upward run.

Today a trader sold 2000 WSM Jul 70 puts for $0.95. Going short put options could be either speculation to the upside or a hedge against a long stock position. If the trader doesn’t have a stock position against these options, then this would be considered bullish activity in WSM. The trader collected $190,000 but took on considerable downside risk if the stock goes to zero. This risk-reward setup would be considered unfavorable by itself.

Bullish Activity in HCA Holdings

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HCA Holdings (HCA) is on the highs today and big investors are getting behind it as well. The Nashville-based owner and operator of for-profit hospitals is up 20.6% YTD trading at $57.83. The stock has been performing well over the past year and the bullish trend looks to continue with HCA trading well above the cloud.

The healthcare services provider is looking to benefit from increased volume due to newly insured individuals from the Affordable Care Act. The company’s CFO said last week that they are open to the idea of expanding through M&A activity as well so that could be a reason for the recent spike in the stock. The option activity in the name is strong with traders agreeing with analyst consensus and getting long against small open interest with high volume.

Higher highs and lower lows recently suggest a continuing bull run so we will be keeping our eye on HCA. Let’s look at a trade.

The Trade:

Buy Jul 60 Call for $0.75

Risk: $75 per 1 lot

Reward: Unlimited

Breakeven on expiration: $60.75

 

The Greeks:

Delta: Long

Gamma: Long

Theta: Short

Vega: Long

More Semiconductors!!

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PMC-Sierra Inc (PMCS) is a semiconductor manufacture based in Sunnyvale California. The stock is trading near highs today as big paper is moving into the name. Over the past year, the stock has been making higher highs and higher lows after a tougher winter season selloff. This, as any Ichimoku chartist would say, is indicative of a coming rally. Looking at the daily chart we can see that the stock just broke through long-term resistance to the upside and seems to be setting up for a trend reversal, which we can see from the forward looking cloud. Intraday, PMCS is trading well above the cloud on the five-minute bar. Look for the stock to gain some more momentum, as paper is aggressively long today buying over thirteen thousand (13,000) calls against menial open interest. Based on all this, we can expect PMCS to find new support around its 52-week high of $7.85 and improve on its already impressive 20%+ return. Let’s take a look at the trade:

 

Trade:

Buy November 9 calls for $0.25

Risk: $25 per lot

Reward: Unlimited

Breakeven on expiration: $9.25

 

Greeks:

Delta: Long

Gamma: Long

Theta: Short

Vega: Long

 

 

 

Wall Street Bidding Up SO

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Wall street traders are allocating capital to Southern Company (SO), an electric utilities energy conglomerate based in Georgia. SO is up over a dollar today and trading fairly in the middle of its 52-week range of $40.03-$46.81. Even still, a lot of long calls are coming across the tape from Wall Street.

 

SO has been trading in a bearish pattern this week and broke to the upside on the open this morning. Institutional order flow has been refocusing on the electricity and utility sectors, which may indicate a possible merger in the space. This speculation is likely what broke the trend for SO and has many investors now holding long positions. Bullish signals are coming from the intraday chart with SO trading well above the cloud on the fifteen-minute bar, and testing resistance on the daily chart. If Southern continues to find buyers and break resistance to the upside in the coming days, it could potentially make new highs.

FCS Breakout to Continue?

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Fairchild Semiconductor International, Inc (FCS) saw some bullish action today as the stock makes new highs. FCS opened today at $15.72 and hit its 52-week high of $16.12 this morning before pulling back to $15.86 where it stands now. Even this slight pullback could be seen as a buying opportunity as the new high was made on volume that has already eclipsed its average daily volume, suggesting the only way to go is up, which is a familiar direction for FCS as it has more than doubled the returns of the S&P YTD, up 18.22%.

Technically, FCS looks very strong. The stock broke through decidedly bearish resistance a couple weeks ago on news of a new product launch that tested well above industry competition and may have set a new standard for energy efficiency modules. After breaking through resistance to the upside, the stock continued its parabolic rally as investors piled on board and didn’t find sellers until today. The forward projection of the Ichimoku cloud is signaling a continued rally after this intraday pullback.

 

The Trade: Buying the FCS Aug 17 Calls for $.45

Risk: $45 per 1 lot

Targets: Sell 25% at $.55, Sell 25% at $.65, Sell 25% at $.80, Sell 25% at $1.00

Greeks of this Trade:

Delta: Long

Gamma: Long

Theta: Short

Vega: Long

MHFI Not Looking Back

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Mcgraw Hill Financial, Inc (MHFI) is a financial intelligence and research firm that gets paid for ratings of S&P companies as well as general market research and for providing economic data. We have seen some bullish activity come across the tape in this name today. MHFI has tested new highs recently as it continues its yearlong bull run. It hit its 52-week low almost a year ago at $52.68 and spiked to $84.81 yesterday, representing its 52-week high.

This is a standard growth stock that has only had one major pullback below the cloud in the past year. This was relatively short and MHFI rallied back to where it is now, trading well above the cloud and up almost 8% YTD.

The intraday chart is sending slightly bearish signals, however we can expect the long term trend to continue so this may be a good buying opportunity as that is what we can see from the order flow coming across the tape today.

 

The Trade

Buy Jul 85 Calls for 1.30

Risk: $130 per 1 lot

Reward: Unlimited

Breakeven: $86.30

 

The Greeks

Delta: Long

Gamma: Long

Theta: Short

Vega: Long

 

Orbitz Taking Trip To Upside?

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Orbitz Worldwide, Inc. (OWW) is showing a long setup Friday morning, three days after its annual shareholders meeting that voted on new board members. That shouldn’t act as a huge catalyst for movement. However, we are seeing unusual option activity coming across the tape, as institutional investors are getting long.

Orbitz is a worldwide travel agency that is well known for its advertising campaigns and promises of low prices. Recently, they started an initiative called Orbitz Original which partners with local tourism agencies to showcase all that a given country has to offer with respect to tourism. Recent destinations have included Ireland and Puerto Rico. This is a great new marketing strategy that not only highlights what Orbitz can do to help its customers and all of the insight the company has, but it is also mutually beneficial as it allows countries to showcase their attractions and spur tourism through the online video series. Perhaps moves like this are why people are getting long the travel agency, which has performed almost a point and a half better than the rest of its industry, up 13.5% YTD.

The daily chart is signaling a possible reversal from its recent selloff as it has broken resistance and is trading inside the Ichimoku cloud and testing more upside resistance. Intraday, OWW is trading well above the cloud even with a relatively flat trading day. These are all bullish signals, so let’s look at a trade.

 

The Trade

Buy Nov 10 calls for .65

Risk: $65 per 1 lot

Reward: Unlimited

Breakeven: $10.65

 

The Greeks

Delta: Long

Gamma: Long

Theta: Short

Vega: Long

BJK is Going Higher

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Some bullish activity came across the tape today in BJK, the MarketVectors Gaming ETF, which is a fund comprised of companies that earn more than half their revenue in the gaming industry. This includes casinos, lottery services, racetracks, online sports betting and more. Perhaps some investors see opportunity for growth in the short term with the World Cup approaching and gambling increasing.

BJK is trading in the middle of its 52-week range and gapped up the better half of a dollar overnight and continued to rise this morning with strong volume. A bearish trend can be confirmed by looking at the chart, which shows a break above strong resistance this morning and a climb to well above the cloud, coupled with higher than usual volume.

Let’s take a look at a trade.
The Trade: Buying the BJK July 49-50 Bull Call Spread for $.35 debit

Risk:  $35 per 1 lot

Reward: $65 per 1 lot

 

Greeks of this Trade:

Delta: Long

Gamma; Long

Theta: Short

Vega: Long