U.S. stock markets bounced strongly last week, with the Dow Jones up 1.84%, the S&P 500 up 2.41% and the NASDAQ up 4.25%. The MCSI Emerging Markets Index also rose 0.83%.
Two positions in your Bull Market Alert portfolio — the ProShares Ultra Nasdaq Biotechnology ETF (BIB) and Ambarella Inc. (AMBA) — rocketed by double-digit percentages, soaring 13.84% and 11.56%, respectively.
The ProShares Ultra Nasdaq Biotechnology ETF (BIB) also hit a new 52-week high. Raise your stop in this position to $104.70 to lock in a 20% gain.
Also raise your stop in Ambarella (AMBA) to $108.55 to lock in at least a 10% gain in the stock.
This week, I am going to recommend that you re-enter a stock that you were stopped out of recently.
On June 22, I recommended that you buy Apple supplier Avago Technologies (AVGO).
As bad luck would have it, you were stopped out of the stock on July 9 based on a sharp intraday move below its stop price of $125. This had everything to do with the broader market sell-off and nothing to do with the company’s fundamentals. Sure enough, since then the stock has bounced back strongly.
The investment case for AVGO remains unchanged since my initial recommendation.
First, spin-offs such as Avago have a strong record of outshining the market. An index of just such companies has outperformed the broader S&P 500 by over 50% in the past five years.
Second, Avago recently announced a $37 billion acquisition of Broadcom (BRCM), another Apple supplier. The combined company will have annual revenue of $51 million, behind only Qualcomm (QCOM) and Intel (INTC). After the deal closes in Q1 of 2016, the combined company will keep the Broadcom name.
Third, Avago also recently announced better-than-expected quarterly results. Earnings per share (EPS) rose 151% from a year earlier, keeping intact a long streak of accelerating earnings growth. Analysts forecast a 70% EPS increase in the next report. They also see a 77% increase in earnings this fiscal year.
Technically, the stock is in a solid uptrend and, ideally, is slightly oversold in the short term. The stock boasts very high relative strength versus the broader U.S. market and is ranked #1 in its group by Investors’ Business Daily.
Out of 20 analysts covering the stock, 18 have a “buy” recommendation. The average price target for the firm is $170.29 with a median target estimate of $170. That’s 27% upside from Friday’s closing levels.
So buy Avago Technologies (AVGO) at market today and place your stop at a wide $112.
If you want to play the options, I recommend that you buy the October $135 calls (AVGO151016C00135000), which last traded at $9.30 and expire on Oct. 16.
ProShares Ultra Nasdaq Biotechnology ETF (BIB) soared 13.84% last week to hit a new 52-week high. BIB once again showed its tenacity when dealing with its own 50-day moving average (MA). As last week’s price action and historical chart show, when BIB gets to this level, it tends to bounce strongly. This also helps confirm that the months-long bull run in biotech likely still has some considerable steam left. Raise your stop in this position to $104.70 to lock in a 20% gain. BIB is a BUY.
iShares MSCI Hong Kong (EWH) added 2.95%. After a dizzying dip several weeks ago, the rubber band on EWH’s stock price is snapping back. EWH has regained nearly half of its recent losses, and momentum appears to be holding up well. EWH is a HOLD.
Silicon Motion Technology (SIMO) dipped 0.91%. SIMO traded sideways for a second week after its early-July pullback. SIMO will report earnings on July 27 after markets close. If SIMO’s quarterly earnings report falls in line with the company’s recent guidance, SIMO is ripe for a jump in its stock price. SIMO is a HOLD.
Qualys, Inc. (QLYS) also consolidated last week, dipping just 0.54% in sideways trading. QLYS’ chart is portraying a situation similar to your position in Silicon Motion Technology (SIMO). QLYS is severely oversold with an earnings report coming up on Aug. 3 after markets close. Good news could trigger a significant upwards move for this stock. QLYS is a HOLD.
Ambarella Inc. (AMBA) rocketed 11.56% last week. This chip technology name used the previous positive week in the markets to regain some ground from its recent sharp pullback. As I recommended in Friday’s “special alert,” you sold half of your options position to take advantage of this jump and book some profits. Raise your stop in AMBA to $108.55. AMBA remains a strong BUY.
Vipshop Holdings Limited (VIPS) sputtered a bit for its first week in the portfolio as it gave back 4.83%. This is likely a typical response to its strong move the week prior. VIPS is at an excellent entry point and should be a positive addition to your holdings over the weeks to come. VIPS is a BUY.
As a courtesy, I want to bring to your attention the newest version of The Top 15 Stocks for 2015, which features three of my top investment recommendations, as well as bonus picks from each of my fellow investment newsletter editors at Eagle. This report and others are available FREE on my website to you.
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