Today's Pick: NES

For today I recon NES puts. Here is the deal with NES: Today they announced a deal with an energy company to build and supply a waterway developmental program that will begin in 2015. So as right now this is all on paper with no money coming in and the forward thinking crowd jumped on it. 

First lets take a look at the announcement NES made today:

SCOTTSDALE, Ariz., Nov. 25, 2014 /PRNewswire/ -- Nuverra Environmental Solutions, Inc. (NES) ("Nuverra" or "the Company"), a leading provider of full-cycle environmental solutions to energy end-markets, announced today that it has entered into a long-term definitive agreement with XTO Energy Inc. ("XTO"), a subsidiary of Exxon Mobil Corporation, to provide water-related pipeline services in McKenzie County, North Dakota.

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Under the agreement, Nuverra will build the 150-mile McKenzie County Pipeline Network ("the Network") to provide produced water gathering and disposal services and fresh water delivery. The XTO agreement is a long-term, fee-based gathering agreement.  

"The construction of this pipeline represents a transformational step in our effort to become a fully-integrated environmental solutions provider in North Dakota," said Mark Johnsrud, Chairman of the Board and Chief Executive Officer of Nuverra. "We are pleased to extend our relationship with XTO to serve their growing water management needs."

"With significant increases in well density and growing water volumes, we believe our pipeline network represents an important complement to our transportation capabilities and provides sustainable and efficient water gathering and delivery solutions for our customers," concluded Mr. Johnsrud. 

The Network will serve XTO's dedicated acreage, as well as other operator wells in the area. The Network will feature fixed, buried pipelines, which will include a gathering line to transport produced and flowback water for disposal or recycling and a distribution line for fresh water delivery.

The Network is projected to cost $125 million to $150 million, based on current engineering and construction specifications, with completion during the fourth quarter of fiscal 2015. Construction is expected to begin in May 2015.

So construction is due to start next may and it is gonna hit this company with almost 150 million in costs. While the company is spending this money, remember, there is no money coming in until it is completed and that will be at the end of 2015. So, the jump today is foward looking expectations by investors and not about true money currently coming in. 

Now on to the technical consideration of this stock:

While there is a sudden big white candle showing which is a positive long signal, I notice that at the same time it shows a breakout, it is also showing a top. by having a candle with a short bottom body and a long upper tail. This shows upper weakness as the stock tried pushing up during the day, then collapsed back to a lower price in the area of the short lower white body.

A problem with this is there is two reverse candles side by side the day before and the day before that signaling a bottom. However on the flip side of that, notice that the RSI is now near the top and the macd is near the top.

What I think will happen: I think that this stock will push up for a bit then collapse as the news settles in and people realize that this stock wont get any money coming in from this announcement for a year. Normally I would just issue a put on this, but I am going to try to play this both ways as I see it. So what I am going to do here is a 1:10 call/put ratio spread. A normal 100% sized put and a 10% of that call to take care of any sudden climbing. Then as the stock peaks out in a few days, I am again going to purchase another 100% put and hopefully ride this baby back down. So here is the put, this one at 100%:

NES Dec 2014 10.000 put (NES141220P00010000)

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0.50  0.50(55.56%) 2:29PM EST

Prev Close:	0.90
Open:	0.40
Bid:	0.40
Ask:	0.50
Strike:	10.00
Expire Date:	20-Dec-14

Day's Range:	0.25 - 0.50
Contract Range:	N/A - N/A
Volume:	382
Open Interest:	548

And here is the call, this one at 10% of the amount that I put down on the put:

NES Dec 2014 10.000 call (NES141220C00010000)

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1.45  0.60(100.00%) 2:21PM EST

Prev Close:	0.60
Open:	1.20
Bid:	1.25
Ask:	1.60
Strike:	10.00
Expire Date:	20-Dec-14

Day's Range:	1.20 - 2.60
Contract Range:	N/A - N/A
Volume:	379
Open Interest:	1,445

Hopefully this pans out. The stock has already announced more than two weeks ago along with a issued downgrade so that shouldn't be a factor, this is just solely based on the news and technicals.

Keep the faith and trade on,

Mark

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QQQ issues top signal

This is only in the middle of the day, mind you, but the cubes have isssued a top signal.

Think of it as a red flag. At the end of the trading day today, this technical signal could change, but right now in the middle of the day, this is an advance warning.
Today the update continues, I am currently looking for another stock to bounce. For now we hold both of our coiled springs. VNET has yet to spring and the other is in the process of springing. Heads up on QQQ, do NOT get into anything long at this point.

More in about an hour,
Mark

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A new coiled spring...VNET

I got a new pick for you today, this stock, VNET, reports tomorrow. It is currently in a coiled spring configuration. Lets take a look at this company's chart:

Not a huge coiled spring but this thing could fly either way. Why is this? Look at the below analysts expectations:

You can see that this quarter there isn't anything that is big expected, but next quarter there is. For the last 3 out of 4 quarters there was a negative surprise, plus this quarter the Growth Est is lacking compared to the industry.

What I will issue here is a 2:1 put/call. Both at the money, the call will be 500 dollars, and the put will be 1000 dollars. Or any other 2:1 denomination you want to go with.
Its looking as though the stock could have a limp earnings report. Then again, something could happen early with that 600% growth expected next year, thus the call at half strength. So here is the call and the put:

VNET Dec 2014 21.000 call (VNET141220C00021000)

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1.40  0.25(18.52%) 2:24PM EST

Prev Close:	1.35
Open:	1.60
Bid:	1.15
Ask:	1.40
Strike:	21.00
Expire Date:	20-Dec-14

Day's Range:	1.15 - 1.60
Contract Range:	N/A - N/A
Volume:	585
Open Interest:	329

VNET Dec 2014 20.000 put (VNET141220P00020000)

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1.79  0.13(5.63%) 2:25PM EST

Prev Close:	2.31
Open:	2.44
Bid:	1.55
Ask:	2.00
Strike:	20.00
Expire Date:	20-Dec-14

Day's Range:	1.79 - 2.44
Contract Range:	N/A - N/A
Volume:	4
Open Interest:	2,620

That is all for today, there was nothing to bounce from the gainer's list.

More tomorrow!
Mark

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Outlook for the week ahead 11/23 through Thanksgiving

Hey everyone. Rough week at the close of last week. I finally had to let go of yellow and MMM. Fortunately as I construct my trading neural net, those trades wont happen twice. However the CLDX put? I still stand by that call and would do that again 1000 times. It was the right call. However, options expiration might have had something to do with that.
Enough of the past, lets look at whats coming up in the market for this week:

The Market is now like a runaway train. With runaway trains, there is no rules and you don't know where the top is or when the actual top is going to happen:

As you can see above, the RSI is in the maxed out position, and the MACD is also in the maxed out position and is ready to cross but hasn't yet. Ive see when the market is like this. If it keeps wandering up, you will see the RSI just skirting along the ceiling like smoke and sometimes even going above the ceiling, with the MACD doing the same thing.
How to Play this: In a case like this you really don't know how long the market is going to keep climbing before that big first down day and the beginning of the down over the next week or so. The indicators say reverse and start selling, but the market itself continues to inch up day by day. What I would do is invest long in short little not long term plays, and do so realizing that there could be the big drop any day. It is not time to short, we have to wait for the market to actually tell us when its time. So, exercise caution. Looking at the chart above would be like looking at a stoplight with both the green light and the yellow light on at the same time.

In order to verify the above and make sure what we have called is correct, we go down a layer to the underlying foundation of the matter: and that would be the QQQ weekly. This has the technical build that the upper layer, the daily chart (above) is working on. Lets take a look at that:

Again, you can see that the RSI is right near the top, but actually has a bit more room to go before it hits the ceiling. The same can be said of the MACD.
Now: if the falling trend of the RSI continues, (draw a line across all of the tops of the RSI, you will see that the ruler is angling down) then the RSI should be at the ceiling and this should be it. The same with the MACD. However the daily RSI is still showing up.
With the daily and the weekly still showing up, I say we still have a bit of room to go up. Perhaps a week to be safe. But the daily is showing cracks.
Again: now is not the time to get in long, so play accordingly.
We are going to stay away from CLDX as I believe there is still some action underlying its price movement from the earnings announcement of the 14th, just a week ago. My amended rules are no bouncing a stock for two weeks after an earnings announcement.
ENTA: announces tomorrow, we wait for the price movement. I would expect a 1-3 day hold as we see what shakes out from the coiled spring.

Thats all for tonight, see you in the trenches Monday.

Mark

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enta coiled spring

I see another coiled spring and this one is for enta.

Here is both the put and the call:

ENTA Dec 2014 44.000 put (ENTA141220P00044000)

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2.00 0.00(0.00%) 2:56PM EST

Prev Close:	2.00
Open:	2.00
Bid:	0.30
Ask:	4.90
Strike:	44.00
Expire Date:	20-Dec-14

They are both at 44. Here is the call option:

ENTA Dec 2014 44.000 call (ENTA141220C00044000)

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2.75 0.00(0.00%) 2:56PM EST

Prev Close:	2.75
Open:	2.85
Bid:	0.60
Ask:	4.90
Strike:	44.00
Expire Date:	20-Dec-14

As you can see from the chart below, there is a coiled spring set up;

This spring should give us some leeway as we have time until the end of december exp. If it doesnt pop too much one way, perhaps we will sell and hold for the other side of the spring.

Also to close some things out today,

Yellow and MMM 100% losses as we held for a month: Things never turned around.

Stay tuned for a site redesign.

Mark

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CLDX update

Well, looks like cldx went the wrong way, but the day is still not over yet. It was at even money this morning, but we held looking for the profit, then things started to go the wrong way as volume started to surge. The chart is starting to show a peak technically, but that is too late for us as today is options expiration. Two things we can do:
1) The stock is drifting down today from an earlier high: If it drifts down enough, we will recoop our losses, manybe still putt out a profit.
2) Sell our option for a loss and roll it over to decembers and get our loss back from there as I see a top forming on this stock.

This stuff happens. 8 out of 9 times when a stock makes an announcement like it did yesterday and jumps, the next day the stock deflates because when a company announces stage 1 or 2 results that means there is still a few years left of testing before it can go through the 4 stages of testing What this company did is worse: it was a test result of an exploratory study...it wanst even in the testing pipeline. This should have tanked, but the public incorrectly bought today.
This would be an example where I would seriously decide if I want to double down with Decmebers.
Lets wait and see how things shake out as we get towards close today.

Mark

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