Editor's Note:

The market's widespread rally last week was a tide that lifted all boats (unless your boat was biotech or AMBA).

COST, DHI, and FIS have graduated to our active play list.

Closed Plays

None. No closed plays this week.

Play Updates

Ambarella, Inc. - AMBA - close: $57.17

10/11/15: Concerns over GoPro (GPRO) are killing our AMBA trade. Shares of GPRO were downgraded twice last week and this weighed on AMBA. GPRO is a big customer for AMBA and represents about 30% of sales. If these worries persist we could see shares of AMBA break down to new lows. Shares came close to testing their late September low near $54.00 this past week.

I am not suggesting new positions. We currently do not have a stop loss on this trade but more conservative investors may want to add one near $53.00.

Trade Description: September 8, 2015:
Shares of AMBA have come a long way from its IPO in October 2012 when the stock priced at $6.00 a share, below expectations. Even now, after a minus $55 drop from its 2015 highs the stock is still up +41% for the year.

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 2012. That price was significantly below where AMBA was expected to price in the $9-11 range. Investor sentiment has definitely changed since then.

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 more than +600% from its IPO price. AMBA has GoPro, Inc. (GPRO) to thank for part of that rally. When GPRO held its IPO last year (2014) it drew attention to AMBA who makes the chips for the video processing in GPRO's cameras. Shares of GPRO saw a huge decline 2014 highs but shares of AMBA have continued to rally.

Part of GPRO's trouble is competition from a large Chinese rival - Xiaomi. GPRO is currently seen as best of breed in the action camera market but it may not hold that spot forever. Xiaomi is selling similar cameras at a significant discount to GPRO and both cameras use AMBA's technology. Both camera makers have different models. GPRO's top of the line still has better components than Xiaomi's - at least for now. The real winner is AMBA since they supply to both companies. Multiple analysts have commented on AMBA's relationship with Xiaomi and believe it will bear significant fruit in the future.

The company has seen tremendous earnings and revenue growth over the last couple of years. Their most recent earnings report was September 1st, 2015. Revenues were up +79% from a year ago to $84.2 million, which was above expectations. The stock sank because management offered soft guidance. When a high-flying, high-valuation stock like AMBA starts to see revenues slow down their valuations collapse.

After a -42% decline from its highs AMBA is probably still has a rich valuation and that's the biggest complaint about the stock price. Shares will likely maintain a high P/E for a long-time as growth will continue. The pullback is most likely a temporary slowdown.

While we are longer-term bullish on AMBA I suspect the sell-off isn't over yet. We want to take advantage of any volatility.

Momentum stocks like AMBA climb and climb and climb and then suddenly reverse. When momentum stocks reverse lower they often fall farther and further than we might normally expect. Today (Sept. 8th) the broader market delivered a widespread rally with the major indices up +2.5%. Yet AMBA lost ground, losing -0.5%. If shares breakdown under short-term support at $70.00 the next support level is probably $60.00.

Tonight I am listing AMBA as an aggressive, higher-risk trade. We want to use a buy-the-dip trigger at $62.00. Options are expensive because AMBA is so volatile. I suggest small positions to limit risk. We are not listing a stop loss at this time and will and one as the trade progresses.

I am listing the 2016 January calls. I'd like to buy the 2017 Januarys but they are very expensive.

Use small positions to limit risk - AMBA is a volatile stock!

- Suggested Positions -
SEP 24, 2015 - entry price on AMBA @ 61.00, option @ 5.40
symbol: AMBA160115C70 2016 JAN $70 call - current bid/ask $3.30/3.90

10/11/15 worries over GPRO are hurting AMBA. Cautious investors may want to add a stop loss.
09/24/15 triggered @ $61.00
09/13/15 adjust the buy-the-dip trigger to $61.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: n/a
Play Entered on: 09/24/15
Originally listed on the Watch List: 09/08/15

The Clorox Co. - CLX - close: $120.52

10/11/15: CLX continued to show relative strength. The stock has broken through round-number resistance at $120 and closed above its August highs. These are new all-time highs for CLX. The stock is up four weeks in a row so I would not be surprised to see a pullback.

Tonight we are raising the stop loss to $111.85. More conservative investors may want to use a higher stop loss.

Trade Description: September 8, 2015:
Clorox is not just a bleach and cleaners company. They also make food and personal care items. Actually they make a lot more.

CLX is in the consumer goods sector. According to the company, "The Clorox Company is a leading multinational manufacturer and marketer of consumer and professional products with about 7,700 employees worldwide and fiscal year 2014 sales of $5.5 billion. Clorox markets some of the most trusted and recognized consumer brand names, including its namesake bleach and cleaning products; Pine-Sol cleaners; Liquid Plumr clog removers; Poett home care products; Fresh Step cat litter; Glad bags, wraps and containers; Kingsford charcoal; Hidden Valley and KC Masterpiece dressings and sauces; Brita water-filtration products and Burt's Bees natural personal care products. The company also markets brands for professional services, including Clorox Healthcare, HealthLink, Aplicare and Dispatch infection control products for the healthcare industry. More than 80 percent of the company's brands hold the No. 1 or No. 2 market share positions in their categories."

Earnings have been pretty strong when you consider the negative impact of currency fluctuations on a big multi-national like CLX. On February 4th CLX announced its Q2 report and beat Wall Street estimates on both the top and bottom line. Management raised their 2015 guidance and their revenue guidance.

Their Q3 report, on May 1st, was a little bit softer. Earnings of $1.08 per share missed estimates by 2 cents. Revenues were up +2.6% to $1.4 billion but that was above expectations. Management raised their outlook again for their full year 2015 guidance.

Their most recent report was CLX's Q4 results on August 3rd. Earnings of $1.44 per share was seven cents above estimates. Revenues were up +4.0% to $1.56 billion, also better than expected. Management issued soft guidance, below Wall Street estimates, but the stock rallied anyway.

CLX has a strong, long-term up trend. Investors could seek safety in stocks like CLX if the global economy continues to struggle.

The stock market's correction saw CLX plunged back toward technical support near its 200-dma. Now the stock has been consolidating sideways in the $108-112 zone. I'd like to see CLX fill the gap ($112-114) before we launch positions. Therefore the plan is to wait for CLX to close above $114.25 and then buy calls the next morning.

This is a long-term trade. We're using the 2017 calls.

- Suggested Positions -
SEP 22, 2015 - entry price on CLX @ 113.65, option @ 5.25
symbol: CLX170120C125 2017 JAN $125 call - current bid/ask $5.60/7.60

10/11/15 new stop @ 111.85
09/27/15 new stop loss @ 105.85
09/22/15 Trade begins. CLX opens at $113.65
09/21/15 triggered. CLX closed @ $114.47, trigger was a close above $114.25
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 111.85
Play Entered on: 09/22/15
Originally listed on the Watch List: 09/08/15

Costco Wholesale - COST - close: 145.86

10/11/15: COST was a popular stock last week with the bulls. Shares rallied more than $8.00 and broke through resistance near its July and August highs. We had COST on our watch list. The plan was to wait for shares to close above $147.60 and then buy calls the next morning. COST closed at $148.07 on October 5th. Our trade opened the next day at $148.15. Now the stock has surged to new six-month highs and looks poised to challenge the all-time high set in February this year.

I am not suggesting new positions at this time. COST looks short-term overbought. Broken resistance in the $147.00 area should be support. Wait for a pullback.

Trade Description: October 4, 2015:
After five years of solid gains the rally in COST peaked in the $155 area in early 2015. The stock has spent the last several months in a massive consolidation that could be coming to an end.

If you're not familiar with COST they are in the services sector. The company runs a membership warehouse business that competes with the likes of Sam's Club (a division of Wal-Mart). According to the company, "Costco currently operates 686 warehouses, including 480 in the United States and Puerto Rico, 89 in Canada, 36 in Mexico, 27 in the United Kingdom, 23 in Japan, 12 in Korea, 11 in Taiwan, seven in Australia and one in Spain. The Company plans to open up to an additional 16 new warehouses (including one relocation to a larger and better-located facility) prior to the end of its fiscal year on August 30, 2015. Costco also operates electronic commerce web sites in the U.S., Canada, the United Kingdom and Mexico."

Revenue growth has been lackluster this year. COST has managed to beat Wall Street estimates on the bottom line but the revenue number has been soft. Their most recent quarterly report was announced on September 29th. Earnings were up +10% from a year ago to $1.73 a share. That beat estimates. Yet COST said their Q4 revenues were virtually flat (+0.7%) to $35.78 billion. That missed expectations. Comparable store sales were up +2% in the U.S. but down -10% in Canada.

A lot of COST's revenue troubles have come from lower oil, which has pushed gas prices lower. The big drop in gas prices cuts their revenue growth. Plus the stronger dollar hurts their foreign sales. The company continues to expand its presence in the U.S. and overseas. Management plans to launch 12 new warehouses this quarter. Overall COST plans to build 32 new stores in the next 12 months, including its first store in France.

The stock looks poised to breakout past its July, August, and September highs and make a run at its 2015 highs. We suspect COST is going to grab more investor attention as we approach the holiday shopping season. The stock tends to see a rally from September into Black Friday (the day after Thanksgiving).

COST has resistance in the $147.00 area. The August intraday high was $147.59 while the August closing high was $146.89. Tonight I am suggesting we wait for COST to close above $147.60 and buy calls the next morning. More conservative traders may want to wait and make sure COST closes above $148.00 instead since a close above this level would generate a new buy signal on the point & figure chart.

- Suggested Positions -
OCT 06, 2015 - entry price on COST @ 148.15, option @ 8.70
symbol: COST170120C160 2017 JAN $160 call - current bid/ask $9.80/10.35

10/06/15 trade begins. COST @ $148.15
10/05/15 triggered. COST @ $148.07, above trigger @ $147.60
Option Format: symbol-year-month-day-call-strike

Chart of COST:

Current Target: To Be Determined
Current Stop loss: 139.75
Play Entered on: 10/06/15
Originally listed on the Watch List: 10/04/15

DR Horton Inc. - DHI - close: 30.65

10/11/15: Last weekend we added a secondary trigger to our watch list candidate DHI. The plan was to wait for shares to close above $30.65 and then buy calls. The stock closed at $31.07 last Monday. Our trade opened on Tuesday at $31.15. I would still consider new bullish positions now but more conservative investors might want to wait for DHI to close above last week's high ($31.15) before initiating positions.

FYI: DHI is scheduled to report earnings on November 10th.

Trade Description: September 13, 2015:
Believe it or not but homebuilders have been some of the market's better performers this year. The group is up about 15% year to date. DHI has outperformed its peers with a +24% gain in 2015. The stock is poised to breakout past resistance near $32.00 and hit new multi-year highs.

If the Federal Reserve does announce a rate hike on Thursday it could spark a temporary sell-off in the homebuilders. I want to be ready to buy the dip in DHI. The stock should have support in the $27.00-28.00 area. Tonight I am suggesting a buy-the-dip trigger at $28.50 and we'll list a stop loss at $25.75.

- Suggested Positions -
OCT 06, 2015 - entry price on DHI @ 31.15, option @ 3.70
symbol: DHI170120C35 2017 JAN $35 call - current bid/ask $2.43/3.50

10/06/15 Trade begins. DHI @ $31.15
10/05/15 Triggered. DHI @ $31.07, above $30.65 trigger
10/04/15 Add a second trigger - a close above $30.65 as another entry to buy calls
10/04/15 adjust the buy-the-dip trigger from $28.50 to $27.75 and move the stop loss down to $25.45.
Option Format: symbol-year-month-day-call-strike


Current Target: To Be Determined
Current Stop loss: 25.45
Play Entered on: 10/06/15
Originally listed on the Watch List: 09/13/15

Facebook, Inc. - FB - close: 93.24

10/11/15: Last week's market rally was all about an oversold bounce in the market's worst performers. Strong stocks like FB underperformed but shares still managed another gain. Traders bought the dip midweek near $90.00.

I am not suggesting new positions at this time. Tonight we are adjusting the stop loss up to $83.75.

FYI: FB is scheduled to report earnings on November 4th.

Trade Description: September 13, 2015:
We are bring FB back to the LEAPStrader newsletter. Cross your fingers and hope for a big dip!

Facebook probably needs no introduction. It's the largest social media platform on the planet. The company is quickly approaching 1.5 billion monthly active users. A couple of weeks ago they hit a new milestone - one billion people logged into Facebook in a single day.

The company continues to grow. In addition to their Facebook social media powerhouse they also own Facebook Messenger, WhatsApp, and Instagram. Their WhatsApp product is the largest messaging service on the planet with over 900 million monthly active users. Meanwhile FB's photo-sharing Instagram property has more than 300 million active users. The company has been ramping up their advertising efforts to slowly monetize Instagram. FYI: FB also owns Occulus Rift, the virtual reality company, but it's probably a few more years before VR goes mainstream.

Shares of FB have been incredibly volatile over the last few weeks. After surging to all-time highs in July following its earnings report the stock crashed in August. The market's correction lower sparked some extreme moves in FB with a plunge down to $72.00 on August 24th. This past week FB displayed relative strength and has rallied back above its 50-dma. However, I do not want to chase it here.

FB has already demonstrated that it can be volatile when the market sees big moves. If stocks sell-off on the Fed's decision this week we want to be ready to buy it on weakness. I view the $80-85 region as likely support. Tonight I am suggesting a buy-the-dip trigger at $85.00. If triggered we'll start this play with a stop loss at $79.75.

- Suggested Positions -
SEP 29, 2015 - entry price on FB @ 86.50, option @ 9.25
symbol: FB170120C100 2017 JAN $100 call - current bid/ask $11.60/11.90

10/11/15 new stop @ 83.75
09/29/15 Triggered @ $86.50
09/20/15 adjust the buy-the-dip trigger from $85.00 to $86.50
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 83.75
Play Entered on: 09/29/15
Originally listed on the Watch List: 09/13/15

Fidelity National Info. Svcs. - FIS - close: $70.50

10/11/15: FIS' rebound off its late September low continued last week. Shares also garnered some bullish analyst comments. The stock broke through short-term resistance and met our entry point requirement with a close above $71.00. Our trade opened on Friday morning.

Friday saw FIS dip toward $70.00 and start to bounce. I'd watch for another close above $71.00 as our next entry point.

Trade Description: September 8, 2015:
We are adding FIS as a relative strength trade. The stock has been marching higher for years. Shares are outpacing the broader market this year with a +9.0% gain year to date.

FIS is in the technology sector. According to the company, "FIS is a global leader in banking and payments technology as well as consulting and outsourcing solutions. With a long history deeply rooted in the financial services sector, FIS serves more than 14,000 institutions in over 130 countries. Headquartered in Jacksonville, Fla., FIS employs more than 42,000 people worldwide and holds leadership positions in payment processing and banking solutions. Providing software, services and outsourcing of the technology that empowers the financial industry, FIS is a Fortune 500 company and is a member of Standard & Poor’s 500 Index."

FIS just recently announced it was acquiring financial software maker SunGard Data Systems for $9.1 billion in cash and stock. SunGard was about to go public and FIS gobbled them up. The combined company will have $9.2 billion in annual revenues and over 55,000 employees.

The big spike higher on FIS' daily chart was the market's reaction to this acquisition news. Shares of FIS filled the gap during the market's correction lower. Now traders are back to buying FIS. The point & figure chart is bullish and forecasting at $92.00 target.

Tonight I am suggesting we wait for FIS to close above $71.00 and then buy calls the next morning. We will start with a stop loss at $64.75.

- Suggested Positions -
OCT 09, 2015 - entry price on FIS @ 71.26, option @ 2.00
symbol: FIS160115C75 2016 JAN $75 call - current bid/ask $1.20/1.42

10/09/15 trade begins. FIS @ $71.26
10/08/15 triggered. FIS @ $71.30, above $71.00 trigger
Option Format: symbol-year-month-day-call-strike


Current Target: To Be Determined
Current Stop loss: 64.75
Play Entered on: 10/09/15
Originally listed on the Watch List: 09/08/15

Lions Gate Entertainment - LGF - close: $40.10

10/11/15: Early last week stories started to circulate that LGF was in advanced talks to buy (merge) with cable movie channel Starz. Rumors about these two companies getting together have been floating around for months. Wall Street's reaction was positive with shares of LGF surging on the news. The combined company would be a "media powerhouse" according to one analyst that could pursue even more acquisitions. The combined company would have revenues of more than $4 billion.

Shares of LGF are still floating just below resistance in the $40.75 area. I would wait for LGF to close above this level before initiating new bullish positions.

LGF could see a rally ahead of its release of The Hunger Game: Mockingjay, Part 2, which hits theaters on November 4th.

Trade Description: September 8, 2015:
If at first you don't succeed, try, try, try again. We tried trading LGF recently but we were shaken out thanks to the market's late August crash and LGF's spike to 2015 lows. Naturally the stock has recovered and is on the verge of a major breakout past resistance near $39-40.

What follows is an updated version of my original play description:

Have you ever wanted to trade the hype on a particular movie release? We might be able to do just that with LGF.

LGF is in the services sector. According to the company, "Lionsgate is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, new channel platforms, video games and international distribution and sales. Lionsgate currently has more than 30 television shows on over 20 different networks spanning its primetime production, distribution and syndication businesses, including such critically-acclaimed hits as the multiple Emmy Award-winning Mad Men and Nurse Jackie, the broadcast network series Nashville, the syndication success The Wendy Williams Show, the hit series Orange is the New Black, the critically-acclaimed drama Manhattan and the breakout series The Royals."

What that company description neglects to mention is the Hunger Games franchise. LGF makes the movies for the extremely popular franchise and the fourth and final movie is due to hit the U.S. market in November this year. Shares of LGF will likely rally into November as hype builds for the "Hunger Games: Mockingjay - Part 2" movie.

LGF is also considered a takeover target. Everyone is scrambling for quality TV programming and LGF has the awards to prove it can deliver. Potential suitors include any of the major media companies. There are rumors that LGF could be a target by someone like AAPL who wants to jump into media creation or possibly NFLX, who just lost LGF's content when they failed to renew their contract with EPIX.

I am suggesting we wait for LGF to close in the $40.00-41.00 range. If shares close in this range then buy calls the next morning. No initial stop loss.

- Suggested Positions -
SEP 18, 2015 - entry price on LGF @ 39.61, option @ 4.50
symbol: LGF170120C45 2017 JAN $45 call - current bid/ask $3.60/4.90

10/11/15 Rumors are growing that LGF is poised to buy Starz
09/18/15 Trade begins. LGF opens at $39.61
09/17/15 LGF closed at $40.06, inside our $40-41 entry range
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: n/a
Play Entered on: 09/18/15
Originally listed on the Watch List: 09/08/15

Royal Caribbean Cruises - RCL - close: 92.50

10/11/15: Traders bought the dip in RCL on Wednesday and shares slowly rallied the rest of the week. The stock eked out another gain for the week. The $94.00 level looks like short-term resistance. Tonight I am adding a stop loss at $84.75.

Trade Description: September 20, 2015:
If you are looking for stocks with relative strength then RCL fits the bill. Shares tagged new all-time highs last week and posted their third weekly gain in four weeks.

RCL is in the services sector. According to the company, "Royal Caribbean Cruises Ltd. is a global cruise vacation company that owns Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises, Pullmantur and CDF Croisieres de France, as well as TUI Cruises through a 50 percent joint venture. Together, these six brands operate a combined total of 44 ships with an additional eight under construction contracts, and two under conditional agreements. They operate diverse itineraries around the world that call on approximately 480 destinations on all seven continents."

Barclays just upped their outlook on the cruise liners and believes the group is seeing improved strength in pricing. Meanwhile RCL has been cashing in on the growing trend of Chinese tourism. The recent change in ties between the U.S. and Cuba also represents a new opportunity for the cruise lines.

Technically RCL looks very bullish and the point & figure chart is forecasting at $121.00 target. Yet I don't want to buy it here. The market looks poised for a pullback. We will use a buy-the-dip trigger at $90.00. More conservative investors may want to hold out for a dip to $88.00 instead.

- Suggested Positions -
SEP 28, 2015 - entry price on RCL @ 90.00, option @ 6.30
symbol: RCL170120C110 2017 JAN $110 call - current bid/ask $6.10/6.45

10/11/15 new stop @ 84.75
09/28/15 triggered @ $90.00
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: n/a
Play Entered on: 09/28/15
Originally listed on the Watch List: 09/20/15

Visa Inc. - V - close: 73.98

10/11/15: Visa bounced off its 200-dma on October 2nd and hasn't looked back. Shares rallied through resistance in the $71.00-72.00 area and broke out past its 50-dma. Tonight I am adding a stop loss at $66.75, just below its late September low.

Trade Description: August 9, 2015:
The world is moving closer and closer to a cash-less society. Big payment processing companies like Visa and MasterCard will benefit from this transition.

According to the company, "Visa Inc. (NYSE:V) is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world's most advanced processing networks - VisaNet - that is capable of handling more than 56,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products."

It's important to note that V does not extend credit to consumers. There's no credit risk for bad loans here. V makes money on transactions. That business is booming.

On July 23rd V report its Q3 results, which were $0.74 per share. That beat estimates by 16 cents. Revenues were also higher than expected at $3.52 billion, up +11.5%. Management offered strong guidance and upped their EPS estimates into the mid teen percentage range. Long-term V is expected to grow earnings at almost 15%.

One of the big stories to come out of V's recent earnings report was news of a merger brewing. Visa is talking to former subsidiary Visa Europe. Estimates suggest the price target could be in the $15-20 billion range. Wall Street is positive on the deal and Visa expects it would add to earnings in fiscal 2017.

Another reason to be bullish on Visa is the fact that China recently opened its market to foreign companies to participate in clearing domestic bank card transactions. Previously only Chinese companies could do this. Now giants like V and MasterCard can compete in a market valued at more than $6.8 trillion. Considering V's expertise in this field we should expect them to grab a healthy chunk of the market.

Shares of V recently surged to new all-time highs and traded above $76 per share. After four up weeks in a row V posted a loss last week. Technically it produced a bearish engulfing candlestick reversal pattern on its weekly chart. If shares do correct lower we want to take advantage of the pullback. Broken support near $70.00 should be support. Tonight we are suggesting a buy-the-dip trigger at $70.50.

- Suggested Positions -
AUG 24, 2015 - entry price on V @ 64.16, option @ 2.76
symbol: V170120C80 2017 JAN $80 call - current bid/ask $5.35/5.60

10/11/15 new stop @ 66.75
08/30/15 Remove the stop loss
08/24/15 triggered on gap down at $64.16, suggested entry was a buy-the-dip trigger at $70.50.
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 66.75
Play Entered on: 08/24/15
Originally listed on the Watch List: 08/09/15