Tyson Foods, Inc (TSN) is a food production company that distributes chicken, beef, and pork products along with other prepared foods and related products. The company’s stock is currently trading around $28.85 in a 52 week range of $16.55-$32.40. The stock has massively outperformed the market this year adding over 48% to share prices year to date. TSN is set to report their most recent quarterly earnings results on Monday morning before the market open. Historically, the stock is relatively strong on earnings day. The stock has rallied 6 of the past 8 quarters on earnings day with an average move of 4.6%. On a chart the stock is relatively weak with shares trading below the Ichimoku Cloud and the future cloud sloping downward. Despite the weakness in the chart we believe that the historical movement in TSN is strong enough to justify a long ahead of earnings. When trading earnings it is important to understand that catalyst movement can be completely different from the overall trend. With the options market currently implying a move of around $1.90 by December expiration we can look to set up a trade with a target around $30.75. (more…)

Market Vectors Russia ETF (RSX) seeks to track the performance of the DAXglobal Russia+ Index (DXRPUS). This index is comprised of publically traded companies based in Russia. Shares of RSX are currently trading around $28.65 in a 52 week range of $23.94-$31.15. RSX has been underperforming the broader us equity market this year with shares falling 4.25% year to date. Despite this weakness options traders have been making some very bullish bets on RSX. On Wednesday traders came in and bought several large blocks of Dec 29 calls for $0.40 to $0.45. These trades took place at volume greater than open interest in any line in Jan expiration. Open interest in the Dec 29 call line has now swollen to over 12,000 contracts. This action is very bullish and serves as a signal for a long setup in RSX. We want to look at a covered call set up in RSX. (more…)

WE ARE ALL CONNECTED:  Cisco, Walmart, and the World

There is amazing connectivity in the world around us.  From Bentonville, AK to Beijing to Silcon Valley, CA, actions in one place have a reaction in another.  Specifically, government decisions can have repercussions far beyond their intended effects.  When a person starts to realize this, he or she becomes a smarter, more sophisticated investor.

Two recent examples show this clearly and specifically.  And more examples are right around the corner, waiting to happen.

The first example involves food stamps.  For years R’s have been trying to cut food stamps, believing it to be a costly welfare program.  However, when a food stamp enhancement ran out last month, one of the main entities hurt was Walmart (WMT), whose sales are made to millions of food stamp recipients. Other retailers who also cater to “low price shoppers” were similarly hurt.  It is likely that the R’s pushing against food stamps were not trying to hurt Walmart They likely had not thought through all the economic effects of cutting food stamps.  But what happened, happened.  And there is a lesson to be learned there.

Likewise, some D’s were absolutely thrilled by the recent “whistleblowing” of NSA activities by Edward Snowden.  However, this revelation had many bad effects, one of which was clearly market related.  Both IBM and Cisco (CSCO) reported that their earnings from China were down drastically, because the Snowden episode made China less likely to buy American.  That’s right, Snowden made China more suspicious which directly hurt stockholders of IBM, CSCO, and similar companies.  Connectivity at its most powerful—and in this case not good power at all.

The most classic example of connectivity is sequestration.  Initially agreed on by both the D’s and R’s, it is now heralded by Tea-publicans as an effective tool to cut government spending.  But, as almost all agree, sequester is not efficient. Sequestration’s “across the board” methodology creates many unintended, harmful results, both for the economy and for certain stocks.  For example, the 2014 version of sequester will hit hard on Defense spending. Many D’s and R’s acknowledge that it will cause a substantial setback to our national defenses.

Defense stocks will also be hurt–perhaps substantially.  It is really weird to see  many R’s—typically strong supporters of national defense—touting sequestration.  But they are.  And both our economy and many defense stocks will bear the resultant pain.

In sum, connectivity between politics and the market is here to stay.  Its bad effect on individual stocks can readily occur.  Moreover, it is not the sole province of either D’s or R’s—both parties must deal with it.  But knowledge that such connectivity exists should be taken into consideration by both investors and by our politicians.

Of course, for politicians to do so, they will have to start thinking with their brains, instead of other parts of their anatomy.

Follow me on Twitter @USKOTM.

A trader bought 1,000 BRLI Dec 30 Puts for $0.40 (5.4 times usual volume) with stock at $35.49
A trader bought 11,325 MJN Dec 70 Puts for $0.41 (8.2 times usual volume) with stock at $80.63
A trader bought 26,000 LOW Dec 44 Puts for $0.205 (7.6 times usual volume) with stock at $51.70
A trader bought 10,600 XLV Jan 45 Puts for $0.25 (3.7 times usual volume) with stock at $53.81

A trader bought 10,000 YNDX Dec 38 Calls for $1.50 (5 times usual volume) with stock at $36.82
A trader bought 2,900 VCRA Jan 20 calls for $0.60 (2.7 times usual volume) with stock at $16.95
A trader bought 2,000 CDNS Dec 13 Calls for $0.30 (3.4 times usual volume) with stock at $12.69
A trader bought 4,304 HP Jan 80 Calls for $2.10 (6.8 times usual volume) with stock at $77.44
A trader bought 17,000 FOXA Dec 35 Calls for $0.60 (3.8 times usual volume) with stock at $34.10

A trader bought 4,304 HP Jan 80 Calls for $2.10 (6.8 times usual volume) with stock at $77.44
A trader bought 11,325 MJN Dec 70 Puts for $0.41 (8.2 times usual volume) with stock at $80.63
A trader bought 10,000 YNDX Dec 38 Calls for $1.50 (5 times usual volume) with stock at $36.82
A trader bought 2,900 VCRA Jan 20 calls for $0.60 (2.7 times usual volume) with stock at $16.95
A trader bought 26,000 LOW Dec 44 Puts for $0.205 (7.6 times usual volume) with stock at $51.70

Vocera Communications, Inc (VCRA) provides mobile communication solutions through both voice communications and messaging solutions. The company’s stock is currently trading around $17.15 in a 52 week range of $11.99-$29.47. The stock has been under performing the market this year with shares losing over 30% year to date. Despite this weakness options traders have been placing large bets on further upside in VCRA. Early in today’s session a trader bought 2,900 VCRA Jan 20 calls for $0.60. This block represents volume in 2.7 times the average daily option volume in VCRA. This bullish bet adds to activity we saw earlier this week when a trader bought 1,800 VCRA Dec 20 calls for $0.30. The VCRA chart is relatively neutral but the huge amount of upside call buying we’ve been seeing is more than enough signal to get long VCRA in a stock swing trade. (more…)

Nordstrom, Inc (JWN) is a specialty retailer with 225 stores across the U.S. The company’s stock is currently trading around $77.80 in a 52 week range of $45.82-$79.12. The stock has been performing well this year adding nearly 18% to share prices year to date. JWN is set to report their most recent quarterly earnings today after the market close. JWN has been a weak performer on earnings day over the past 8 quarters. The stock has sold of 6 times rallied 1 time and finished the day unchanged one other time. Despite this weak historical performance the stock is trading just off of its 52 week highs into the release. This Ichimoku Cloud is also indicating further upside in JWN. Shares of JWN competitor Macy’s Inc. (M) rallied this morning on earnings after reporting earnings of $0.47 per share against consensus estimates of $0.38. This should bode well for JWN earnings as they operate in a very similar market space. So despite the weak historical performance in JWN we believe that the chart is strong enough and the sector is strong enough to rationalize a long ahead of earnings. JWN moves 1.9% on earnings day on average. The options market is currently implying a move of $1.45 by tomorrows expiration giving us an upside target around $64.53. Using this target we will set up a trade. (more…)

Cadence Design Systems, Inc (CDNS) designs electronic design software and hardware. The company’s stock is currently trading around $12.75 in a 52 week range of $12.15-$15.96. The stock has been underperforming the broader market this year with share prices falling over 5% year to date. Despite the stocks weak performance this year a trader has stepped in and gotten long CDNS through May of next year.  Earlier in today’s trading session a trader sold 9,800 CDNS May 12 puts for $0.65. This is an extremely bullish trade that also represents volume 13.2 times the average daily option volume in CDNS. The large amount of risk attached to this trade also suggests that this trader has very high conviction. This trader is making a large bet that the stock will close above $12.00 on May expiration, we want to express the same view on CDNS using a covered call. (more…)

Dana Holding Corporation (DAN) provides driveline and thermal management products for vehicle manufacturers. The company’s stock is currently trading around $19.40 in a 52 week range of $12.70-$23.46. The stock has been performing well this year adding more than 24% to share prices year to date. Unusual action in DAN options during today’s trading session indicates there could be further upside in store for DAN. Earlier in today’s session a trader bought 2,288 DAN Jun 19 Calls for $2.15. This is nearly a $500,000 bet on DAN rallying through June expiration and shows this traders relatively high level of bullish conviction in DAN. Technically speaking the stock has been trading in bearish territory, according to the Ichimoku Cloud, since they reported their last quarterly earnings results on October 28^th, but we believe this order is significant enough to serve as a signal for a long swing trade in DAN.  We will use the Ichimoku Cloud to help set stops and targets. (more…)