Papaer Buys 1,912 ILMN Jun 60 Calls for $2.35 (2.5 times usual volume) with stock trading at $57.23
Paper Buys 700 PWER Jul 5 Calls for $0.25 (2.6 times usual volume) with stock at $4.02
Paper Buys 2,500 EWT Jun 14 Calls for $0.10 (3.5 times usual volume) with stock trading at $13.16
Paper Buys 29,990 ACAD Jan 12-15 Call Spreads for $1.40 (7 Times usual volume) wuth stock at $12.11
Paper Sells 6,106 ACI Jul 6 Puts for $1.46 (2.2 times usual volume) with stock at $4.92

Paper Buys 29,990 ACAD Jan 12-15 Call Spreads for $1.40 (7 Times usual volume) wuth stock at $12.11
Paper Sells 22,578 NOK May 3.5 Calls for $0.07 (2.6 time usual volume) with stock trading at $3.15
Paper Buys 37,500 XOP May 53 Puts for $1.23 (3.7 times usual volume) with stock trading at $54.77
Paper Sells 6,106 ACI Jul 6 Puts for $1.46 (2.2 times usual volume) with stock at $4.92
Paper Sells 12,351 NBG Aug Calls for $0.05 (4.1 times usual volume) with stock at $0.69

First off, the chart seemed to be in a nice rounded bottom pattern, as indicated by the red lines smoothing out recent action.  While this is far from a textbook pattern, the trend is undeniable, until it is broken at least, which may have been yesterday. The recent low of about $420 will prove to be a massively important resistance level in the short term, especially as we go into earnings and volatility picks up as markets attempt to find equilibrium.

The analyst community is expecting about $50 in EPS from the iPhone maker in the next fiscal year and the quarter coming in the next few trading days has consensus at $10.11 in EPS.  Furthermore, the analyst community is still super bullish, with 40 buys, 9 holds, and 2 sells.

In addition to the rounded bottom chart, the bonus chart is that of Bloomberg’s issuer default-risk. This model takes into account the recent change in market cap, share price, and IV. Moreover the amount of short & long term debt and interest expense. According to the model, the likelihood that AAPL will default in the next year is 0.0023%… minimal, but interesting none-the-less.  The model also suggests the 5yr CDS to be around 33 bps.

Paper Bought 20,000 AGNC May 32 Puts for $0.66 (5 times usual volume) with stock trading at $32.08
Paper Bought 3,571 TSN Apr 23 Puts for $0.15 (2.1 times usual volume) with stock trading at $23.48
Paper Bought 500 ANH Oct 6 Puts for $0.35 (4.5 times usual volume) with stock trading $6.09
Paper Bought 1,700 IRM Jul 32.5 Puts for $0.75 with stock trading at $36.45
Paper Bought 800 DBC Jul 22 Puts for $0.16 (9.5 time usual volume) with stock trading $25.55

Year to date, gold has averaged $1,611/oz on the front month futures. Assuming these prices, ABX can be expected to earn around $3.38 in EPS. This puts the company at 5.6x forward earnings. This figure seems super cheap, but when in the context of mid-single digit production growth it makes sense. Gold production is only expected to grow 4.9% in 2013, and the average production growth until 2017 is expected to be flat 0.7%. Moreover, at these prices ABX is expected to be FCF negative this year.

From the prospective of technical analysis, the October low of 2008 will prove to be an important pivot point. This low is roughly $17.27 and it seems as though we are destined to touch it.  Should ABX and the mining sector snap back, a decent target could be the 50 DMA at $29, while this may seem aggressive, it only took 12 trading days to get to this level from the aforementioned level.

All things considered, the mining sector is full of problems, but when everyone is looking down, maybe it is prudent to look up…with a tight stop.

salerno.mark.a@gmail.com