NEW DIRECTIONAL CALL PLAYS

Mobileye N.V - MBLY - close: 55.47 change: +1.22

Stop Loss: 51.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 9.0 million
Entry on October -- at $---.--
Listed on October 07, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The future of hands free driving is a lot closer than you might think. MBLY is leading the charge. Its technology is already in more than three million cars made by companies like BMW, General Motors, and Tesla.

What exactly does this technology due? DAS stands for driver assistance systems. Sometimes you might see it called ADAS for advanced driver assistance systems. This new technology helps drivers avoid collisions with other vehicles, pedestrians, bicyclists, and more while also alerting the driver to road signs and traffic lights.

The company website describe Mobileye as "a technological leader in the area of software algorithms, system-on-chips and customer applications that are based on processing visual information for the market of driver assistance systems (DAS). Mobileye's technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving."

MBLY said their technology will be available in 160 car models from 18 car manufacturers (OEMs). Further, Mobileye's technology has been selected for implementation in serial production of 237 car models from 20 OEMs by 2016.

The company is already developing a system for autonomous driving or hands free driving. They currently plan to launch an autonomous system in 2016 that will work at highway speeds and in congested traffic situations.

MBLY stock came to market in August this year. Demand was strong enough that they upped the number of shares available from around 27 million to 35.6 million shares. They raised the IPO price from the $22 range to $25. This valued MBLY at $5.3 billion. The first day of trading saw MBLY opened at $36.00. Today shares are up more than 50% from their first day of trading and up about +120% from its IPO price of $25. On a side note the float is now 151.7 million shares with outstanding shares at 212 million.

It's easy to see why investors are optimistic on MBLY. Annual revenues have soared from $19.2 million in 2011 to about $120 million a year today. The stock's rally has soared past Wall Street's initial round of price targets in the $42-49 range. There have been a couple of firms raising their targets.

Bears have been arguing that the valuations on MBLY are insane. As of today MBLY's market cap is about $12 billion. Bulls would argue that MBLY has first-mover advantage in this field. That's true. MBLY has a near monopoly on the ADAS market. However, the bearish case here would mean any new competitors could quickly take market share.

The New York Post recently ran an article discussing how the White House might be a bullish tailwind for MBLY. The National Highway Traffic Safety Administration issued a research report that estimated ADAS type of technology could eliminate almost 600,000 left-turn and intersection crashes a year. Following this report the White House said they would draft new rules that required this sort of tech in new vehicles.

The momentum certainly favors the bulls. Traders bought the dip today in spite of the market's weakness. The stock can be volatile and the option spreads are a little wide. I would consider this a more aggressive trade.

We are suggesting a trigger to buy calls at $56.55.

Trigger @ $56.55

- Suggested Positions -

Buy the NOV $60 call (MBLY141122c60) current ask $4.20

Option Format: symbol-year-month-day-call-strike

Daily Chart:




NEW DIRECTIONAL PUT PLAYS

Vulcan Materials Co. - VMC - close: 57.28 change: -1.23

Stop Loss: 60.15
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 976 thousand
Entry on October -- at $---.--
Listed on October 07, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
VMC is in the industrial goods sector. The are the largest producer of construction aggregates in the United States. They are also a major producer of aggregate-based construction materials. Put it altogether and VMC produces crushed stone, sand, gravel, asphalt and ready-mix concrete.

The stock has languished for years after peaking near $125 a share back in 2007. It looked like the stock has turned a corner back in 2011 but that rally now appears to be in trouble. More recently VMC peaked under $70 back in March this year. It's been slowly chopping sideways since then in the $60-70 zone. The recent weakness might suggest a trend change for the worse.

The selling pressure has pushed VMC stock under multiple layers of support. It could get a lot worse. The market's recent weakness has been stoked by fears of a global growth slowdown. Bulls could argue that nearly all of VMC's sales are inside the U.S. and the U.S. economy is still growing. That's true. Evidently investors don't care.

Today's display of relative weakness (-2.1%) left shares of VMC testing its long-term trend line of higher lows dating back to 2011. A breakdown here could mean a much longer and larger correction lower. Tonight we're suggesting a trigger to buy puts at $56.90.

Trigger @ $56.90

- Suggested Positions -

Buy the NOV $55 PUT (VMC141122P55) current ask $1.55

Option Format: symbol-year-month-day-call-strike

Daily Chart:

Weekly Chart: