Editor's Note:

Stocks experienced some profit taking after yesterday's best day of the year performance.

PANW hit our entry trigger.
SOHU hit our entry trigger.
AAPL and QQQ were closed this morning.


Current Portfolio:


CALL Play Updates

Ambarella, Inc. - AMBA - close: 40.59 change: -0.87

Stop Loss: $37.85
Target(s): To Be Determined
Current Option Gain/Loss: +47.2%
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:
10/22/14: Early gains in AMBA faded and shares treated from a two-week high near $43. The stock looks headed for what could be round-number support at $40.00 and its simple 30-dma.

I'm 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*

10/21/14 new stop @ 37.85. Traders may want to take profits now!
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


FedEx Corp. - FDX - close: 158.47 change: -1.41

Stop Loss: 153.45
Target(s): To Be Determined
Current Option Gain/Loss: +10.3%
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:
10/22/14: FDX provided an optimistic outlook on the holiday season but that didn't stop some profit taking. Shares retreated -0.88% and could be headed for the $156.00 level.

Meanwhile FDX said they expect a one-day peak of 22.6 million shipments on December 15th. Overall FDX is planning to move more than 290 million packages between Black Friday (day after Thanksgiving) and Christmas Eve. That's a +8.8% increase from a year ago.

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*

10/21/14 new stop @ 153.45
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


The Hain Celestial Group, Inc. - HAIN - close: 102.31 change: -1.21

Stop Loss: 100.65
Target(s): To Be Determined
Current Option Gain/Loss: + 7.3%
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:
10/22/14: Considering the market's widespread weakness today it is not surprising to see HAIN pulling back from resistance near $104.00. Technically today's move has also created a bearish engulfing candlestick reversal pattern. If HAIN breaks down under $102.00 I would expect the stock to hit our stop loss.

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*

10/21/14 new stop @ 100.65
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


iShares Transportation ETF - IYT - close: 149.05 change: -2.86

Stop Loss: 144.65
Target(s): To Be Determined
Current Option Gain/Loss: +123.5%
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:
10/22/14: Ouch! The IYT snapped a six-day winning streak with a -1.88% decline. The drop back below $150 and its 50-dma might be considered short-term bearish. Support is probably the $145 area.

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*

10/21/14 new stop @ 144.65
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


NetEase, Inc. - NTES - close: 91.97 change: -0.25

Stop Loss: 87.45
Target(s): To Be Determined
Current Option Gain/Loss: -2.0%
Average Daily Volume = 430 thousand
Entry on October 21 at $91.59
Listed on October 20, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/22/14: NTES was showing strength this morning but the rally failed near $94.20. I am expecting the stock to fill the gap and retest the $90.00-90.50 area.

Nimble traders could use such a dip as a new entry point.

Earlier Comments: October 20, 2014:
NTES is in the technology sector. They are part of the Chinese Internet space. The company operates online video games, an Internet portal and email services in China. Technically the stock has been outperforming most of its peers in the Chinese Internet industry (compare to the performance of the KWEB ETF of which NTES is a component).

Their most recent earnings report was healthy. NTES' quarterly profit was in-line but revenues were up +21% to $475.8 million, beating Wall Street's estimates. NTES' Chief Executive Officer Mr. Ding said, "This quarter we have achieved in three business areas MoM and YoY increase revenue total revenue growth of 17.2%, an increase of 22.3 percent compared with the same period last year, gaming revenues grew 13.1%, advertising services revenue grew 42.9%, mailboxes, electricity suppliers and other business income increased 201.5 percent."

After an initial rally on these results NTES share price stalled out at resistance near $90-91. Here we are more than two months later and NTES is testing resistance near $90-91 again. This time the point & figure chart is suggesting at $102 price target.

We are suggesting a trigger to buy calls at $91.15.

- Suggested Positions -

Long NOV $95 call (NTES141122C95) entry $2.45

10/21/14 triggered on gap higher at $91.59, trigger was $91.15
Option Format: symbol-year-month-day-call-strike


Palo Alto Networks, Inc. - PANW - close: 102.58 change: -2.10

Stop Loss: 99.75
Target(s): To Be Determined
Current Option Gain/Loss: - 23.7%
Average Daily Volume = 2.1 million
Entry on October 22 at $105.25
Listed on October 21, 2014
Time Frame: 4 to 5 weeks
New Positions: see below

Comments:
10/22/14: A late morning rally helped push PANW to new two-week highs and shares hit our suggested entry point at $105.25. Unfortunately the rally reversed near $105.60. Shares ended the day with a -2.0% loss. The next level of support could be the $100.00 mark.

I would hesitate to launch new positions given today's relative weakness.

Earlier Comments: October 21, 2014:
Customer data mining is big business. It doesn't matter of the company is online or a bricks and mortar store they want to know all they can about you. Who are you? How old are you? What zip code do you live? They track your purchases and store your credit card data.

Last year retail giant Target (TGT) disclosed a cyber breach that affected up to 110 million customers to potentially having their credit card data stolen. Months later, Target's president and CEO resigned over the fiasco. Target isn't the only one being targeted.

Several weeks ago banking titan J.P.Morgan Chase (JPM) disclosed that 76 million personal accounts were at risk and seven million small businesses were exposed in a recent cyber security attack.

The list continues with recent cyber security hacking victims including Neiman Marcus, Michaels, P.F.Chang's, Albertons, Supervalu, Home Depot, Kmart, Dairy Queen, and the University of Maryland. Meanwhile, the number of cyber attacks on small business doubled last year.

According to USA Today the U.S. government just warned corporate America that cyber thieves have stolen more than 500 million financial records in the last 12 months.

Sadly it's only getting worse. The Justice Department called the online landscape for cyber threats and hacking extremely dangerous. They used the term "pre-9/11 moment" suggesting that any day now someone could launch a massive cyber attack. The government is worried about protecting our infrastructure and electrical grid. Corporate America wants to protect their data (and your data). That's why cyber security is big business and getting bigger.

PANW is making a splash in the security world. The stock IPO'd in 2012 and while it has been a rocky ride so far the company seems to have found its groove. Founded in 2005 and headquartered in Santa Clara, California, PANW describes their company as, "leading a new era in cybersecurity by protecting thousands of enterprise, government, and service provider networks from cyber threats. Unlike fragmented legacy products, our security platform safely enables business operations and delivers protection based on what matters most in today's dynamic computing environments: applications, users, and content."

More than 70 of the Fortune 100 companies use PANW's products and services. In 2013 PANW saw revenues grow +55% year over year, outpacing their rivals. They have added more than 1,000 customers per quarter for the last ten quarters in a row. PANW most recently reported earnings on May 28th and said it was their "highest rate of new customer acquisition in our history and now serve more than 17,000 customers."

Another important event last quarter was the settlement of a three-year patent lawsuit with rival Juniper Networks (JNPR). Resolving this issue has removed a significant black cloud over PANW.

The market's recent volatility has generated some big swings in PANW. Yet there was no follow through after PANW broke down under its 50-dma. Right now PANW is soaring with a six-day bounce back toward its all-time highs. The relative strength is encouraging.

Today saw shares of PANW spend over half the session consolidating sideways in the $104.00-105.00 zone. A breakout past $105.00 could be our next entry point. We're suggesting a trigger to buy calls at $105.25.

Please note I do consider this a more aggressive trade since PANW is already up more than 10% from its October lows and shares can see some big intraday moves. PANW is expected to report earnings in late November so we'll most likely exit prior to their announcement.

- Suggested Positions -

Long DEC $110 call (PANW141220C110) entry $5.90*

10/22/14 triggered @ 105.25
*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


Semiconductor ETF - SMH - close: 48.25 change: -0.57

Stop Loss: 46.35
Target(s): To Be Determined
Current Option Gain/Loss: - 9.0%
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:
10/22/14: The SMH ended a four-day run of gains with a -1.1% pullback today. Prior resistance in the $47.50 area could be new support.

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

10/21/14 new stop @ 46.35
10/17/14 triggered @ 47.15
Option Format: symbol-year-month-day-call-strike




PUT Play Updates

Sohu.com Inc. - SOHU - close: 42.86 change: -0.86

Stop Loss: 45.65
Target(s): To Be Determined
Current Option Gain/Loss: -8.6%
Average Daily Volume = 393 thousand
Entry on October 22 at $43.25
Listed on October 18, 2014
Time Frame: 2 to 3 weeks
New Positions: see below

Comments:
10/22/14: SOHU's early morning bounce failed at resistance at its 10-dma. Shares reversed into a -1.9% decline. Our suggested entry point to buy puts was hit at $43.25.

Earlier Comments: October 18, 2014:
This is a simple momentum trade on a struggling Chinese Internet name.

Sohu.com is an online media, Internet search, and video gaming company. Unfortunately gaming revenues are becoming a smaller chunk of the overall pie for SOHU. At the same time, while they have seen significant growth in ad revenues from streaming TV shows and movies, the company is facing pressures on this front. The cost of content is rising while the Chinese government is becoming more strict about what shows, especially which American shows, they will allow to be aired (or streamed over the Internet). This is pressuring SOHU's margins.

Bulls can argue that SOHU has already corrected and is now oversold. That's possible. SOHU is down eight weeks in a row. It seems to be slicing through support. The 2014 low didn't hold it. Support near $50.00 didn't hold it. The $45 level has failed. The next stop could be $40.00. SOHU's recent bounce just failed at short-term resistance at the 10-dma.

I do consider this a more aggressive, higher-risk trade because SOHU is so oversold. We'll try and limit our risk with a stop above Friday's high.

*Smaller positions to limit risk* - Suggested Positions -

Long NOV $40 PUT (SOHU141122P40) entry $1.04

10/22/14 triggered @ 43.25
Option Format: symbol-year-month-day-call-strike


CLOSED BEARISH PLAYS

Apple Inc. - AAPL - close: 102.99 change: +0.52

Stop Loss: n/a
Target(s): To Be Determined
Current Option Gain/Loss: -94.2%
Average Daily Volume = 54 million
Entry on October 20 at $98.32
Listed on October 18, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/22/14: AAPL did not see the post-earnings sell-off we were expecting. We decided in last night's newsletter to close this trade. AAPL opened at $102.84 before spiking to a new all-time high above $104.

WEEKLY AAPL puts (that expire after Oct. 31st)

- Suggested Positions -

AAPL Oct 31st $96 PUT (AAPL141031P96) entry $1.40 exit $0.08 (-94.2%)

10/22/14 planned exit this morning.
10/21/14 prepare to exit tomorrow morning,
Option Format: symbol-year-month-day-call-strike

chart:


PowerShares QQQ (NASDQ-100 ETF) - QQQ - close: 96.37 chg: -0.50

Stop Loss: n/a
Target(s): To Be Determined
Current Option Gain/Loss: -88.6%
Average Daily Volume = 36.6 million
Entry on October 20 at $92.96
Listed on October 18, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
10/22/14: After a big three-day bounce it looks like the rebound in the QQQ might be stalling near its 30-dma. However, we had already decided in last night's newsletter to exit this trade. The QQQ opened higher at $97.16 before reversing lower.

- Suggested Positions -

QQQ Oct.31st $92 PUT (QQQ141031P92) entry $1.32 exit $0.15 (-88.6%)

10/22/14 planned exit
10/20/14 play begins. QQQ opens at $92.96
Option Format: symbol-year-month-day-call-strike

chart: