Editor's Note:

The U.S. markets delivered another strong week and ended the month with a surge higher thanks to Japan.

GILD and NOW hit our entry triggers. We've updated several stop losses tonight.


Current Portfolio:


CALL Play Updates

Acuity Brands, Inc. - AYI - close: 139.43 change: +1.11

Stop Loss: 135.25
Target(s): To Be Determined
Current Option Gain/Loss: +23.6%
Average Daily Volume = 485 thousand
Entry on October 28 at $136.25
Listed on October 27, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/01/14: AYI popped at the open on Friday but spent the rest of the day consolidating sideways beneath round-number resistance at $140.00. Investors may want to wait for a new rally past $140.50 before considering new positions.

Tonight we are raising the stop loss to $135.25.

Earlier Comments: October 27, 2014:
AYI is part of the technology sector. The company considers itself the North American market leader and one of the world's biggest providers of lighting solutions. Headquartered in Atlanta, Georgia, AYI does business in North America, Europe, and Asia. Their fiscal 2014 sales hit $2.4 billion.

It has been a rocky year for AYI's stock price but the August low definitely looks like a bottom. Shares have rebounded sharply and investors have been buying the dips. As of today's close AYI is up +23% in 2014.

The last few weeks have been volatile. The early October rally was a reaction to AYI's earnings results. The company reported on October 1st with a profit of $1.26 per share on revenues of $668.7 million. That beat Wall Street's estimates on both the top and bottom line. Sales were up +15% from a year ago and profits were up +22%. The company said they are seeing strong adoption of their LED lighting solutions, which saw sales almost double from a year ago.

AYI said their Q4 and full year 2014 results were both records. AYI's Chairman, President, and CEO, Vernon Nagel, was very optimistic in his outlook. Mr. Nagel said,

"We remain very bullish about our prospects for future profitable growth. Third-party forecasts as well as key leading indicators suggest that the growth rate for the North American lighting market, which includes renovation and retrofit activity, will be in the mid-to-upper single digit range for fiscal 2015 with expectations that overall demand in our end markets will continue to experience solid growth over the next several years.

We believe the lighting and lighting-related industry will experience solid growth over the next decade, particularly as energy and environmental concerns come to the forefront along with emerging opportunities for digital lighting to play a key role in the Internet of Things. We believe we are well positioned to fully participate in this exciting industry."

Since the report Goldman Sachs has added AYI to their conviction buy list and Oppenheimer has raised their price target on AYI to $160. The point & figure chart is bullish and forecasting at $162 target. Zacks is bullish on the account they are seeing analysts revising their earnings estimates for AYI higher.

Currently shares of AYI have been hovering near resistance in the $135.00 area. Today's move is starting to look like a bullish breakout. We are suggesting a trigger to buy calls at $136.25.

- Suggested Positions -

Long DEC $140 call (AYI141220c140) entry $3.80

11/01/14 new stop @ 135.25
10/28/14 triggered @ $136.25
Option Format: symbol-year-month-day-call-strike

chart:


Costco Wholesale - COST - close: 133.37 change: +0.37

Stop Loss: 130.75
Target(s): To Be Determined
Current Option Gain/Loss: +22.7%
Average Daily Volume = 1.9 million
Entry on October 30 at $132.25
Listed on October 29, 2014
Time Frame: Exit prior to earnings in December
New Positions: see below

Comments:
11/01/14: The stock market's gap higher on Friday morning saw COST open at $134.45. Shares eventually filled the gap and traders started buying the dip. The stock underperformed the major indices but still closed at a new record high.

Tonight we are adjusting the stop loss to $130.75.

Earlier Comments: October 29, 2014
COST is part of the services sector. The company runs a discount, membership sales warehouse. The company's latest earnings report said Costco currently operates 664 warehouses, including 469 in the United States and Puerto Rico, 88 in Canada, 33 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, six in Australia and one in Spain.

The company has struggled to hit Wall Street's bottom line estimates for over a year but steady improvement in their same-store sales have helped drive the stock higher. A strong back to school shopping season and higher membership fees fueled a better than expected quarterly report.

COST reported their Q4 numbers on October 8th. After missing estimates for five quarters in a row the company finally beat estimates. Analysts were expecting a profit of $1.52 a share on revenues of $35.3 billion. COST delivered $1.58 a share with revenues up +9.3% to $35.52 billion. The net profit number was up +13% and gross margins improved 15 basis points.

COST also reported that their e-commerce sales continue to grow at a brisk pace and their online sales rose +18% in their fourth quarter. Same-store (comparable store) sales remain a key metric to watch. COST's Q4 same-store sales were up +4% yet if you back out falling gasoline prices and currency effects their comparable store sales were up +6% for the quarter versus +4.5% a year ago. Membership renewal rates remain very strong at 91% in the U.S. and 87% globally. COST plans to open up to eight more locations before the end of the 2014 calendar year.

The company also recently announced their first foray into China. COST has entered the Chinese market with an online store through Alibaba Group's (BABA) Tmall Global platform.

The holiday shopping season is almost upon us with less than 60 days before Christmas. COST is poised to do well since the company caters to the higher-end more affluent customer.

Shares are hovering just below the $132.00 level. Tonight we are suggesting at trigger to buy calls at $132.25. We will plan on exiting positions prior to their December earnings report.

- Suggested Positions -

Long DEC $135 call (COST141220c135) entry $1.54

11/01/14 new stop @ 130.75
10/30/14 triggered @ 132.25
Option Format: symbol-year-month-day-call-strike

chart:


FedEx Corp. - FDX - close: 167.40 change: +2.11

Stop Loss: 163.45
Target(s): To Be Determined
Current Option Gain/Loss: +100.1%
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:
11/01/14: Crude oil posted another decline on Friday and that gave the transport stocks a boost. FDX gapped open higher and briefly traded to a new record high before paring its gains.

This stock is still struggling with its trend line of higher highs and thus more conservative traders will want to seriously consider just taking profits right now. We are moving our stop loss up to $163.45.

I am not suggesting new positions at this time.

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*

11/01/14 new stop @ 163.45
10/28/14 new stop @ 162.65, traders may want to take profits now!
10/25/14 new stop @ 157.85
10/23/14 new stop @ 155.90
FDX is nearing resistance at $164.00. Traders may want to take profits now.
10/21/14 new stop @ 153.45
10/17/14 triggered @ 155.50
Option Format: symbol-year-month-day-call-strike

chart:


Gilead Sciences Inc. - GILD - close: 112.00 change: -2.22

Stop Loss: 107.65
Target(s): To Be Determined
Current Option Gain/Loss: -18.1%
Average Daily Volume = 13.8 million
Entry on October 31 at $115.90
Listed on October 30, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/01/14: Biotech stocks can be volatile. GILD displayed some of that volatility on Friday. The market's gap higher on Friday saw GILD open at a new all-time high at $115.90. Not the best entry point for us since we were hoping to buy calls at $114.45. Our suggested call option opened at $5.50.

The profit taking from the Friday morning high does sting a little bit but our outlook in GILD has not changed.

If you are still looking for an entry point you might want to consider either hoping for a dip toward $110 and its 10-dma or waiting for a bounce above $113.50 as alternative entry points.

Earlier Comments: October 30, 2014:
GILD seems to be everyone's favorite biotech stock. I only hear bullish opinions about the future of the company, and for good reason. They have some pretty amazing treatments with products for HIV/AIDS, liver diseases, oncology, cardiovascular, respiratory, and more. GILD has essentially revolutionized how we treat major diseases like HIV and Hepatitis C.

According to the company website, "Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need. We strive to transform and simplify care for people with life-threatening illnesses around the world. Gilead's portfolio of products and pipeline of investigational drugs includes treatments for HIV/AIDS, liver diseases, cancer and inflammation, and serious respiratory and cardiovascular conditions."

This year everyone has been raving over GILD's hepatitis C treatment called Sovaldi. Hepatitis C is a form of viral hepatitis that causes chronic inflammation of the liver. About 185 million people currently suffer with hepatitis C. Previously the most common treatment for hepatitis C had serious side effects and was less than 50% successful. GILD changed that with their Sovaldi drug that not only treats the symptoms but actually cures the patient. The company has drawn some negative publicity over the cost since GILD charges $84,000 for a 12-week course of Sovaldi in the United States. The fact that 80% to 90% of patients who take Sovaldi are cured is a major milestone.

The Financial Times noted that before Sovaldi the impact of hepatitis C in the U.S. took a heavy toll on the healthcare system. The disease can lead to liver failure and cancer, both of which cost significantly more than Sovaldi's $84,000 price target. Hepatitis C is the leading cause for liver transplants in the U.S., which can cost a minimum of $145,000. One consulting firm estimated that the annual cost of hepatitis C to the U.S. healthcare system was going to surge from $30 billion to $85 billion in the next twenty years. Sovaldi has the potential to change. that.

Stocks move on earnings and GILD has plenty of them. Their Q2 report on July 23rd was a blowout. Wall Street was expecting a profit of $1.80 a share on revenues of $5.86 billion for the second quarter. GILD delivered a profit of $2.36 a share with revenues soaring +136% to $6.53 billion. Last quarter Sovaldi accounted for $3.5 billion in sales. Management issued bullish guidance on revenues and margins.

After the Q2 earnings surprise the market's expectations for GILD were a lot higher this time around. GILD reported earnings on October 28th. They missed Wall Street's EPS number by 6 cents with a profit of $1.84 per share. Quarterly revenues soared +117% to $6.04 billion, which did surpass expectations. Sovaldi sales were a disappointment at $2.80 billion against the street's estimates for $3.1 billion. The EPS number was also negatively impacted by the Obamacare's Branded Prescription Drug Fee.

Most of the analyst commentary on GILD following the third quarter results remain positive. The market is looking forward to GILD's next treatment, Harvoni, which is another drug for chronic hepatitis C infection in adults. Harvoni appears to be off to a strong start, which won FDA approval on October 10th.

Technically shares of GILD have seen a huge rebound from the market-induced October sell-off. A few days ago the stock broke out past resistance near $110 and traders bought the dip. The stock was showing relative strength today with a +3.1% gain. The Point & Figure chart is very bullish and forecasting at long-term target of $159.00.

Tonight we are suggesting a trigger to open bullish positions at $114.45. We'll start this trade with a stop loss at $107.65.

- Suggested Positions -

Long 2015 Jan $120 call (GILD150117c120) entry $5.50

10/31/14 triggered on gap higher at $115.90, suggested trigger was $114.45
Option Format: symbol-year-month-day-call-strike

chart:


Keurig Green Mountain, Inc. - GMCR - close: 151.75 change: +1.77

Stop Loss: 143.25
Target(s): To Be Determined
Current Option Gain/Loss: +46.6%
Average Daily Volume = 1.68 million
Entry on October 28 at $145.75
Listed on October 25, 2014
Time Frame: Exit PRIOR to earnings on November 19th
New Positions: see below

Comments:
11/01/14: GMCR continues to show relative strength and added +1.1% on Friday. Shares are up four out of the last five weeks. You could argue that GMCR might be a little bit short-term overbought. I would not be surprised to see a dip into the $148-150 area.

Strategy Update: We are suggesting investors sell the November $160 call* on Monday morning. The current bid on this option is $4.95. That will significantly reduce our cost on the initial trade, which was buying the Nov. $150 call.

You will want to "sell to open" the Nov. $160 call. Once filled you will be short the Nov. $160 call and long the Nov. $150 call. This will cap our potential gains but also reduce our risk by reducing the cost of our initial trade.

Once the spread is active we will want to close both positions if GMCR hits our stop loss.

* The normal monthly November option that expires on Nov. 22nd.

Earlier Comments: October 25, 2014:
GMCR is labeled as part of the consumer goods business. GMCR describes their company as "a leader in specialty coffee, coffee makers, teas and other beverages, Keurig Green Mountain (Keurig), is recognized for its award-winning beverages, innovative brewing technology, and socially responsible business practices. The Company has inspired consumer passion for its products by revolutionizing beverage preparation at home and in the workplace." GMCR makes almost 300 varieties of coffee, hot cocoa, teas, and other beverages in K-cup and Vue portion packs.

The company's latest earnings report back in August were better than expected but revenues were a disappointment and management guided lower. Yet the stock did see much follow through on the initial post-earnings drop. Then a couple of weeks later shares of GMCR soared to new highs on news it had finally signed a licensing deal with Kraft Foods, the second largest food and beverage company in the world. GMCR already had licensing deals with all the major coffee brands but Kraft was the lone holdout.

Several weeks later shares of GMCR soared again after Goldman Sachs slapped a buy rating on the stock and gave it a 12-month $166 price target. The Goldman analyst believes GMCR will see sales rise at a compounded annual growth rate of almost 30% and profits will soared at 23% per year through 2017.

On a short-term basis the middle of last week was starting to look like a top, especially with Thursday's bearish engulfing candlestick reversal pattern. Yet there was no confirmation on Friday.

Friday's intraday high was $145.54. We are suggesting a trigger to buy calls at $145.75. We'll try and limit our risk with a stop loss at $141.90. We are not setting an exit target yet but I will note the point & figure chart is suggesting a $182.00 target.

Earnings are coming up on November 19th. We will plan on exiting prior to the announcement. More aggressive traders may want to take a longer-term approach and hold over the announcement (and use longer-dated calls).

- Suggested Positions -

Long NOV $150 call (GMCR141122C150) entry $6.17

- plus -

(On November 3rd, 2014, Sell the November $160 call)
Short NOV $160 call (GMCR141122C160) current bid $4.95

11/01/14 Strategy Update: Sell the Nov $160 call on Monday morning, November 3rd
10/30/14 new stop @ 143.25
10/28/14 triggered @ $145.75
Option Format: symbol-year-month-day-call-strike

chart:


iShares Transportation ETF - IYT - close: 156.70 change: +2.20

Stop Loss: 151.85
Target(s): To Be Determined
Current Option Gain/Loss: +285.2%
Current Option/Gain loss if you sold the NOV $159 call: +718.7%
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:
11/01/14: The transportation stocks remain some of the strongest performers in the market. The IYT helped lead the rally on Friday with a +1.4% gain. The group is very short-term overbought and it's nearing potential trouble with its trend of higher highs (see chart).

We have three weeks left on our November options.

I'm not suggesting new positions at this time.

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

- plus -

(sell short the Nov $159 call on October 29th)
Short NOV $159 call (IYT141122c159) entry $1.80

10/29/14 IYT gapped open higher at $157.44 (+56 cents)
10/28/14 Strategy Update: new stop @ 151.85, Plus, we want to sell the November $159.00 call (current bid is $1.75).
10/25/14 new stop @ 148.65, traders may want to take some money off the table now
10/23/14 new stop @ 147.25
10/21/14 new stop @ 144.65
10/18/14 new stop @ 141.75
10/13/14 triggered @ 138.75
Option Format: symbol-year-month-day-call-strike

chart:


ServiceNow, Inc. - NOW - close: 67.93 change: +1.51

Stop Loss: 63.45
Target(s): To Be Determined
Current Option Gain/Loss: -1.7%
Average Daily Volume = 1.4 million
Entry on October 31 at $67.46
Listed on October 30, 2014
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/01/14: The plan was to buy calls at $67.25 but the market's gap higher pushed NOW to open at $67.46. Shares sprinted toward round-number resistance near $70.00 before paring their gains. NOW managed to outperform the major indices with a +2.2% gain.

Shares could fill the gap with a dip to $67.00 before moving higher again.

Earlier Comments: October 30, 2014:
NOW is in the technology sector. The company provides cloud-based IT solutions across most of the world. According to the company website, "ServiceNow is the enterprise IT cloud company. We transform IT by automating and managing IT service relationships across the global enterprise. Organizations deploy our service to create a single system of record for IT and automate manual tasks, standardize processes, and consolidate legacy systems. Using our extensible platform, our customers create custom applications and evolve the IT service model to service domains inside and outside the enterprise."

NOW is less than three years old as a public company. Their IPO price was $18.00 and they opened at $23.75 back June 2012. It's been a roller coaster ride for investors but the trend is higher. NOW is one of the fastest-growing enterprise software companies. They're stealing market share from older, larger firms like CA Technologies, Hewlett-Packard, and BMC Software.

NOW is developing a very bullish pattern of strong revenues and raising guidance. The last four quarterly reports in a row have seen NOW meet or beat Wall Street's earnings estimate, beat the revenue estimate, and raise guidance every time.

Their most recent quarterly report was October 22nd. Wall Street expected a profit of $0.01 per share on revenues of $174.4 million. NOW delivered $0.03 with revenues rising +60% to $178.7 million. They added 150 new customers in the quarter, which puts their total at 2,514 clients. Their renewal rate is 98%. NOW raised their Q4 guidance above Wall Street's estimates.

NOW's President and CEO Frank Slootman said, "We had a solid third quarter as we continued to help our customers extend service management across the enterprise. The opportunities for us to expand within IT, as well as deliver value throughout the business, significantly broaden our addressable market and growth potential." Michael Scarpelli, their CFO, said, "Our strong third quarter performance included a record 11 deals greater than $1 million in annual contract value. We also achieved our first quarter of billings greater than $200 million."

Technically shares of NOW have broken out past resistance in the $65.00 area. The Point & Figure chart is bullish and forecasting at $74 target. The highs this past week have been near $67.00. Tonight I am suggesting a trigger to buy calls at $67.25.

- Suggested Positions -

Long DEC $70 call (NOW141220c70) entry $2.85

10/31/14 triggered on gap higher at $67.46, suggested entry was $67.25
Option Format: symbol-year-month-day-call-strike

chart:


NetEase, Inc. - NTES - close: 94.72 change: +0.71

Stop Loss: 91.45
Target(s): To Be Determined
Current Option Gain/Loss: +22.4%
Average Daily Volume = 430 thousand
Entry on October 21 at $91.59
Listed on Exit PRIOR to earnings on November 12th
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
11/01/14: NTES ended the week at a new record high. Yet shares are still struggling to close above resistance at the $95.00 level.

We only have about seven trading days left before NTES reports earnings on November 12th. I'm not suggesting new positions.

Tonight we'll move the stop loss to $91.45.

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

11/01/14 new stop @ 91.45
10/23/14 new stop @ 89.40
10/21/14 triggered on gap higher at $91.59, trigger was $91.15
Option Format: symbol-year-month-day-call-strike

chart:


Semiconductor ETF - SMH - close: 51.42 change: +1.97

Stop Loss: 48.85
Target(s): To Be Determined
Current Option Gain/Loss: +131.8%
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:
11/01/14: Semiconductor stocks were some of the best performers on Friday. The SMH gapped open higher and ended Friday with a +3.98% gain.

I would not chase it here. We will raise our stop loss to $48.85.

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

11/01/14 new stop @ 48.85
10/25/14 new stop @ 47.85
10/21/14 new stop @ 46.35
10/17/14 triggered @ 47.15
Option Format: symbol-year-month-day-call-strike

chart:


ULTA Salon - ULTA - close: 120.81 change: +0.25

Stop Loss: 117.85
Target(s): To Be Determined
Current Option Gain/Loss: -16.1%
Average Daily Volume = 925 thousand
Entry on October 29 at $121.75
Listed on October 28, 2014
Time Frame: Exit PRIOR to earnings on December 4th
New Positions: see below

Comments:
11/01/14: ULTA's performance these last couple of days has been disappointing. The broader market is surging higher but ULTA's rally has stalled. Shares are just consolidating sideways in the $120-123 area.

I am not suggesting new positions at this time. We will raise our stop loss to $117.85. You may want to raise your stop even higher.

Earlier Comments: October 28, 2014:
ULTA is in the services sector. They're considered a specialty retailer. Founded in 1990 the company is headquartered in Chicago. According to the company website, "ULTA Beauty is the largest beauty retailer that provides one-stop shopping for prestige, mass and salon products and salon services in the United States. Ulta Beauty provides affordable indulgence to its customers by combining unmatched product breadth, value and convenience with the distinctive environment and experience of a specialty retailer. ULTA Beauty, through its stores and ulta.com, offers a unique combination of over 20,000 prestige and mass beauty products across the categories of cosmetics, fragrance, haircare, skincare, bath and body products and salon styling tools, as well as salon haircare products. ULTA Beauty also offers a full-service salon in all of its stores."

The stock had a rough time late last year when ULTA missed earnings estimates and guided lower back in December 2013. Shares collapsed from the $120 area toward the $90-95 zone. They missed and warned again in March. Yet it would appear that ULTA has worked out the kinks as the company's last two earnings reports have been strong. In June and in September ULTA reported quarterly results that were above Wall Street's estimates on both the top and bottom line. More importantly management guided higher for the next quarter both times.

Investors were really impressed with the latest quarterly report in September. You can see the huge gap higher in the stock price. Analysts were expecting a profit of $0.83 a share on revenues of $713.3 million. ULTA delivered $0.94 a share with revenues up +22.2% to $734.2 million. They also reported a very strong +9.6% same-store sales growth versus a tough +8.4% sale growth against the year ago period. Margins also saw improvement in the quarter.

ULTA management also laid out their long-term, five-year estimates. The company is forecasting annual comparable store sales growth in the 5% to 7% range. They expect EPS growth to be in the low 20% area. Their expansion plans include opening 100 stores a year. Jim Cramer lists ULTA as one of his best picks in this industry.

Mary Dillon, ULTA's Chief Executive Office, said, "A significant improvement in traffic, successful new product and brand launches, and rapid e-commerce growth drove better than expected top line performance. As a result, the Ulta team delivered healthy operating margin expansion in the second quarter. We are raising our outlook for the year and now expect to achieve sales and earnings per share growth in the 20% range, reflecting our confidence in continued strong market share gains."

The company is definitely seeing growth in its online sales. Their second quarter saw e-commerce sales soar almost 55%. They plan to grow their e-commerce sales to 10% of total revenues.

Technically shares of ULTA dipped toward support during the market's September-October pullback. Now shares have rebounded back toward resistance in the $120 area. Today saw ULTA showing relative strength and a new 2014 closing high. We want to hop on board if ULTA can breakout past the $120-121 area. We are suggesting a trigger to buy calls at $121.75.

- Suggested Positions -

Long DEC $125 call (ULTA141220C125) entry $6.20

11/01/14 new stop @ 117.85
10/29/14 triggered @ 121.75
Option Format: symbol-year-month-day-call-strike

chart:




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