The cloud, unlike most of tech, is less exposed to Chinese revenue and tariffs. The data center is the fastest growing business line that I can think of. That is where the future is, and where valuation is heading. This will also increase demand for those GPU (graphics processing unit) providers that we spoke of yesterday, but that group does have to grapple with tariff-based headlines.


Splunk (SPLK)  has not performed as well as some other cloud names. I picked this name up well after I did other names in the sector. I actually though I was pretty smart, buying it on the dip in late May. The name has trade above $120 and below $95 since then. My basis? $108.65 after messing around a little. The last sale? $107.48. Down 1% on a cloud name. Not a very good job. Not one bit. So, I look out the window. I say to myself, "Are you going to let this stand?" I take a second. The answer is clear. "Heck (I didn't say heck) No."

The firm beat first-quarter expectations for both EPS and revenue on May 24. Splunk increased its own guidance for full-year 2019. Then the stock rolled off of a cliff. The problem? Operating margin came in 4.7%. Never mind that SPLK reaffirmed its prior view for full-year operating margin. Doubts had been raised. Citigroup (C) slapped a sell on the name in June. Evercore downgraded the stock in July. Fear? Fear is for the wicked. Let's get after it.

My Gameplan

Broken Pitchfork, lousy Money Flow, awful Moving Average Convergence Divergence, pedestrian Relative Strength. The 50-day Simple Moving Average rears its ugly head as resistance. That is key. The $95 level has worked as support and has already passed three severe tests, after also working as resistance prior to that. Do we have a plan? We always figure something out. SPLK does not report until August 23.

Risk Management 101

August 24 95 puts did not trade on Wednesday. That series, however, went out with $0.65 bid. Even better, the 93.50 puts (same expiration) went out with a $1.50 bid. Rock on. In fact, a number of way out-of-the-money puts have seen surprisingly large premium bids pop in and out with this expiration date.

Algorithms mess with markets. We know that. They see the same support level that I do. They hire guys like me to read their charts, and other guys to write their codes. Then they go back to looking at kids falling off of skateboards on YouTube. What they don't know is that some of us do this job the old fashioned way. We resent them... and we hunt them. They never see us coming. At some point today, I will have a considerably lower basis for SPLK, and these "geniuses" are going to pay for it. Imbeciles? Certainly not. Idlers? Gotcha.


At the time of publication, Guilfoyle was long SPLK.