Editor's Note:

The short covering in stocks continued on Friday. A lot of beaten down equities produced big bounces into the weekend. It looks like traders wanted to reduce their bearish positions ahead of the weekend.

We have been expecting a bounce and lowering stops on our bearish plays to protect gains and limit losses. Friday saw all of our bearish plays get stopped out.

Friday's session also saw FDX, HAIN and SMH hit our entry triggers.


Current Portfolio:


CALL Play Updates

Ambarella, Inc. - AMBA - close: 38.44 change: -0.32

Stop Loss: $34.90
Target(s): To Be Determined
Current Option Gain/Loss: +16.6%
Average Daily Volume = 2.4 million
Entry on October 13 at $35.25
Listed on October 08, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/18/14: AMBA underperformed the market on Friday. The major averages all posted gains. AMBA rallied Friday morning but failed near round-number resistance in the $40.00 area.

Tonight we are moving the stop loss up to $34.90. More conservative traders may want to use a stop closer to $36.00. I am not suggesting new positions at this time.

Earlier Comments: October 8, 2014:
AMBA is in the technology sector. They're considered part of the semiconductor and semiconductor equipment makers. The company was founded in 2004 and went public in October 2012 at $6.00 a share. That price was significantly below where AMBA was expected to price in the $9-11 range.

The company has grown from making broadcast-class encoders to making consumer and sports cameras, security cameras, and now automotive cameras. Their high-definition chips are being integrated into security IP cameras and wearable cameras. AMBA is also capturing part of a new market - cameras on consumer-level remote control drones.

The last two plus years have seen a strong performance in AMBA with the stock up +633% from its IPO price. AMBA has GoPro, Inc. (GPRO) to thank for part of that rally. GPRO came to market in June this year and the stock has been in rally mode since mid August with a rally in GPRO from less than $40 to $90 a share. AMBA happens to make the HD camera sensors in many of GPRO's products. As GPRO rallies it could be giving AMBA a boost and GPRO expects record sales this holiday season.

It's also worth noting that AMBA's rally has been helped by consistent earnings growth. The company has beat Wall Street's estimates on both the top and bottom line for the last four quarters in a row. Their most recent earnings report in September saw AMBA's management raise their revenue guidance.

Shorts are getting killed. As the rally continues AMBA could see more short covering. The most recent data listed short interest at 21.7% of the small 28.0 million share float.

We think the bullish momentum continues. Tonight we're suggesting a trigger to buy calls at $44.65.

- Suggested Positions -

Long NOV $40 call (AMBA141122C40) entry $1.80*

10/18/14 new stop @ 34.90
10/15/14 new stop @ 34.25
10/13/14 triggered at $35.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
10/11/14 new entry strategy: move the entry trigger from $44.65 to $35.25 and move the stop loss from $40.45 to $31.90.
We will adjust the option strike from the NOV $46 call to the NOV $40 call
Option Format: symbol-year-month-day-call-strike

chart:


FedEx Corp. - FDX - close: 156.12 change: +4.19

Stop Loss: 148.75
Target(s): To Be Determined
Current Option Gain/Loss: +2.8%
Average Daily Volume = 1.5 million
Entry on October 17 at $155.50
Listed on October 15, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/18/14: Crude oil bounced for the second day in a row but that did not stop the relative strength in the transportation stocks. Shares of FDX delivered a strong session with a +2.75% gain and a breakout past resistance near $155.00. Our trigger to buy calls was hit at $155.50.

Earlier Comments: October 15, 2014:
Last year a last minute surge of online shoppers overwhelmed the system and thousands of Christmas presents were delivered late. Part of the problem was terrible weather. The other challenge was the growth in online shopping. Amazon.com (AMZN) blamed UPS for the mass of delayed deliveries last year. You can bet that UPS' rival FDX has taken notice and plans to be ready this year.

Market research firm EMarketer is estimating that retail online shopping will surge +17% in 2014 to $72.4 billion. That might be under estimating the growth, especially this year as many consumers might opt to shop online instead of face the crowds and risk being a target for terrorism or catching Ebola. Granted neither a terrorist event inside the U.S. and a widespread outbreak of Ebola in the states has happened yet but people are already afraid with the daily headlines about the virus.

UPS and FDX hope to be ready. UPS is hiring up to 95,000 seasonal workers and FDX is hiring 50,000 holiday workers this year. That's 10K more than last year for FDX.

In addition to the surge in online shopping FDX should also benefit from the multi-year lows in oil prices. Low oil prices means lower fuel costs, one of FDX's biggest expenses.

It would appear that FDX has fine tuned its earnings machine as well. Their latest earnings report was September 17th. Wall Street was expecting a profit of $1.95 a share on revenues of $11.46 billion. FDX delivered a profit of $2.10 a share with revenues up to $11.7 billion. That's a +24% increase in earnings from a year ago and the second quarter in a row that FDX beat EPS estimates.

FDX chairman, president, and CEO Frederick Smith said, "FedEx Corp. is off to an outstanding start in fiscal 2015, thanks to very strong performance at FedEx Ground, solid volume and revenue increases at FedEx Freight and healthy growth in U.S. domestic volume at FedEx Express." Business has been strong enough that a few weeks ago FDX started raising prices on some services.

Since that September earnings report Wall Street analysts have been raising price targets. Some of the new price targets for FDX stock are $175, $180 and $183 a share.

The recent sell-off in the market and FDX could be an opportunity. FDX has already seen a -10% correction from its intraday high near $165 to today's low near $149. Right now FDX sits just below resistance near $155.

We're suggesting a trigger to buy calls at $155.50.

- Suggested Positions -

Long 2015 Jan $160 call (FDX150117c160) entry $5.30*

10/17/14 triggered @ 155.50
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

chart:


The Hain Celestial Group, Inc. - HAIN - close: 100.23 change: +1.54

Stop Loss: 96.75
Target(s): To Be Determined
Current Option Gain/Loss: -2.5%
Average Daily Volume = 632 thousand
Entry on October 17 at $100.25
Listed on October 14, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/18/14: HAIN was also in rally mode on Friday. After spending most of last week consolidating near its 50-dma shares finally moved and rallied back above the $100 mark. Our entry trigger was hit at $100.25.

Earlier Comments: October 14, 2014:
Looking at the world economies the U.S. is the cleanest shirt in the dirty clothes hamper. Every economy needs to see improvement but the U.S. is looking the healthiest. If U.S. growth continues to improve it should bode well for consumer spending. That should lead to strength in organic food sales.

There has been a strong trend of consumers moving more and more toward natural and organic foods. That's where HAIN is a major player. The company website describes HAIN as, "The Hain Celestial Group, headquartered in Lake Success, NY, is a leading natural and organic food and personal care products company in North America and Europe. Hain Celestial participates in almost all natural food categories with well-known brands that include Celestial Seasonings, Terra, Garden of Eatin', Health Valley, WestSoy, Earth's Best, Arrowhead Mills, DeBoles, Hain Pure Foods, FreeBird, Hollywood, Spectrum Naturals, Spectrum Essentials, Walnut Acres Organic, Imagine Foods, Rice Dream, Soy Dream, Rosetto, Ethnic Gourmet, Yves Veggie Cuisine, Linda McCartney, Realeat, Lima, Grains Noirs, Natumi, JASON, Zia Natural Skincare, Avalon Organics, Alba Botanica and Queen Helene."

HAIN's results have definitely confirmed the trend in consumer spending. They have beaten Wall Street's estimates and guided higher in three out of the last four earnings reports. Their most recent report was August 20th. You can see the big move in the stock after HAIN reported a profit of 90 cents a share on revenues that rose +26% to $583.8 million. Analysts were only expecting $0.89 cents a share on revenues of $577 million.

HAIN's management then raised their guidance again. They expect 2015 earnings to be in the $3.72-3.90 range compared to analysts' estimates around $3.73. HAIN is anticipating sales growth of +27% to +30% in 2015.

The bullish outlook for 2015 did not completely HAIN from the market's recent sell-off. Shares broke support near $100 and dipped to their 50-dma before bouncing. Altogether the stock has weathered the market's correction pretty well. The point & figure chart is still bullish and forecasting a long-term target at $131.00.

We want to be ready to buy calls if HAIN can rally back above the $100 level. Tonight we're suggesting a trigger to buy calls at $100.25. Earnings are expected in November so this might only be a 2-to-4 week trade.

- Suggested Positions -

Long NOV $105 call (HAIN141122c105) entry $2.05*

10/17/14 triggered @ 100.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

chart:


iShares Transportation ETF - IYT - close: 145.88 change: +2.11

Stop Loss: 141.75
Target(s): To Be Determined
Current Option Gain/Loss: +61.7%
Average Daily Volume = 320 thousand
Entry on October 13 at $138.75
Listed on October 11, 2014
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
10/18/14: The rebound in the transportation stocks was picking up speed on Friday. The IYT added +1.4% and closed above potential resistance at its 10-dma, its 150-dma, and the $145.00 level.

Tonight we are moving the stop loss to $141.75.

Earlier Comments: October 11, 2014:
The IYT is an exchange traded fund (ETF) that tries to mimic the performance of the Dow Jones Transportation Average index.

Stocks have been sinking as investors worry about a global slowdown, especially in Europe. Yet the U.S. economy is still growing. Plunging oil prices should be great news for both business and consumers. Lower fuel costs means more money to spend elsewhere. Lower fuel prices also mean better margins for transportation companies.

The IYT has hit correction territory with a -10% pullback from its September highs about four weeks ago. When the market finally bounces the transports should lead the market higher thanks to the U.S. economy and low oil prices.

It looks like IYT's current drop could be near a bottom. Volume was almost three times the norm on Friday and shares settled near technical support at its simple 200-dma. We suspect the market will see another push lower before bouncing. That could see the IYT pierce the $140 level.

Tonight we're suggesting a trigger to buy calls at $138.75 with a stop loss at $134.45. This should be considered a higher-risk, more aggressive trade. You've heard the term "catching a falling knife" and that's what we're trying to do. You may want to wait for the IYT to pierce $140.00 and then buy the rebound back above this level as an alternative strategy.

*Higher-risk, more aggressive trade* - Suggested Positions -

Long NOV $143 call (IYT141122c143) entry $3.40*

10/18/14 new stop @ 141.75
10/13/14 triggered @ 138.75
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

chart:


Semiconductor ETF - SMH - close: 46.91 change: +0.49

Stop Loss: 44.90
Target(s): To Be Determined
Current Option Gain/Loss: -36.3%
Average Daily Volume = 2.4 million
Entry on October 17 at $47.15
Listed on October 16, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/18/14: The rebound in the SMH continued on Friday. Chart readers will notice the rally stalled near its gap down and its simple 10-dma. While that might be considered short-term bearish the close above its 200-dma is encouraging.

The SMH gapped open at $47.09 and quickly hit our suggested entry point at $47.15. More conservative investors might want to wait for a rally past Friday's high ($47.48) before initiating new positions.

Earlier Comments: October 16, 2014:
It looks like the correction in the semiconductor stocks might be done.

The SMH is the Market Vectors Semiconductor Exchange Traded Fund (ETF) that tries to mimic the performance of the Market Vectors Semiconductor 25 index. Semiconductors as a group had been strong performers with the SMH up +73% from its late 2012 lows.

A few weeks ago the industry started to see some profit taking. MCHP issued an earnings warning last week that that sparked the massive plunge in the SMH. The SMH has witnessed a -15% correction from its 2014 closing high to the closing low on Monday this week. Now it has started to bounce. It's possible all the panic selling is over.

Intel (INTC), a much bigger company than MCHP, just reported earnings on October 14th and the results were better than Wall Street expected. More importantly INTC offered slightly bullish guidance.

Bloomberg noted that INTC said its PC-processor business rose +8.9% last quarter. Sales for INTC's chips for notebook computers soared +21%. Even chips for desktop PCs rose +6% in the third quarter.

The strong results from INTC have helped buoy the SMH, which is starting to rebound after testing (and piercing) long-term support on its weekly chart (shown below).

We suspect the worst might be over. However, this could be a volatile trade. There are a lot of semiconductor companies who have yet to report their results.

The SMH saw its rally stall under $47 and near its 200-dma. Tonight we are suggesting a trigger to buy calls at $47.15.

- Suggested Positions -

Long 2015 Jan $50 call (SMH150117c50) entry $1.10

10/17/14 triggered @ 47.15
Option Format: symbol-year-month-day-call-strike

chart:




PUT Play Updates


Currently we do not have any active put trades.

Please see tonight's new play section.



CLOSED BEARISH PLAYS

Starbucks Corp. - SBUX - close: 73.54 change: +0.90

Stop Loss: 73.25
Target(s): To Be Determined
Current Option Gain/Loss: +30.0%
Average Daily Volume = 3.6 million
Entry on September 23 at $74.25
Listed on September 22, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/18/14: We were concerned the market might bounce on Friday and lowered our stop loss on SBUX to $73.25 in Thursday's newsletter. The stock gapped open higher at $73.35, immediately closing our play.

The bottom of SBUX's recent trading range near $74.00 could be overhead resistance.

- Suggested Positions -

NOV $72.50 PUT (SBUX141122P72.5) entry $1.60* exit $2.08 (+30.0%)

10/17/14 stopped out on gap open at $73.35
10/16/14 new stop @ 73.25
10/15/14 new stop @ 73.75
10/13/14 new stop @ 74.55
09/23/14 triggered @ 74.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

chart:


Tupperware Brands Corp. - TUP - close: 68.61 change: +0.34

Stop Loss: 69.15
Target(s): To Be Determined
Current Option Gain/Loss: +54.4%
Average Daily Volume = 399 thousand
Entry on September 22 at $71.75
Listed on September 20, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/18/14: We had recently lowered our stop loss on TUP to $69.15 in order to try and protect our gains. The market's bounce on Friday morning pushed TUP above the $69.00 level. Our stop was hit at $69.15.

- Suggested Positions -

2015 Jan $70 PUT (TUP150117P70) entry $2.59 exit $4.00* (+54.4%)

10/17/14 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
10/15/14 new stop @ 69.15
10/13/14 new stop @ 70.15
10/11/14 new stop @ 71.05
09/23/14 new stop @ 72.25
09/22/14 new stop @ 72.80
09/22/14 triggered @ 71.75
Option Format: symbol-year-month-day-call-strike

chart:


Vulcan Materials Co. - VMC - close: 59.09 change: +2.32

Stop Loss: 57.55
Target(s): To Be Determined
Current Option Gain/Loss: - 1.1%
Average Daily Volume = 976 thousand
Entry on October 08 at $56.90
Listed on October 07, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/18/14: The market's bounce on Friday fueled a big rebound in shares of VMC. Shares gapped open higher at $57.50 and soared to a +4.0% gain. Our stop was hit early at $57.55.

- Suggested Positions -

NOV $55 PUT (VMC141122P55) entry $1.67* exit $1.65** (-1.1%)

10/17/14 stopped out
**option exit price is an estimate since the option did not trade at the time our play was closed.
10/15/14 new stop @ 57.55
10/13/14 new stop @ 58.10
10/08/14 triggered @ 56.90
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

chart:


WESCO Intl. - WCC - close: 73.72 change: +1.73

Stop Loss: 72.55
Target(s): To Be Determined
Current Option Gain/Loss: + 79.4%
Average Daily Volume = 306 thousand
Entry on October 01 at $77.75
Listed on September 30, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/18/14: WCC, like so many stocks on Friday morning, gapped open higher. Shorts were in a rush to cover positions and WCC opened at $72.97. That was well above our suggested stop loss at $72.55.

- Suggested Positions -

NOV $75 PUT (WCC141122P75) entry $1.95* exit $3.50** (+79.4%)

10/17/14 stopped out on gap open at $72.97, stop was $72.55
**option exit price is an estimate since the option did not trade at the time our play was closed.
10/15/14 new stop @ 72.55
10/13/14 new stop @ 73.75
10/11/14 new stop @ 76.25, traders may want to take some money off the table here.
10/01/14 triggered @ 77.75
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

chart: