Back into Chipmaker and Booking 42.86% Gains

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Global stock markets ended the week slightly higher, with the Dow Jones up 0.45%, the S&P 500 climbing 0.31% and the NASDAQ rising 0.89%. The MCSI Emerging Markets Index gained 0.65%.

Your Bull Market Alert portfolio performed much better overall, with big gainers that included Integrated Device Technology (IDTI), which jumped 9.02%; Direxion Daily Small Cap Bull 3x ETF (TNA), which added 2.46%; and the ProShares Ultra Nasdaq Biotechnology ETF (BIB), which gained 2.23%.

Both Integrated Device Technology (IDTI) and Regeneron (REGN) hit new 52-week highs.

With Integrated Device Technology (IDTI) up so sharply last week, I am recommending that you sell all of your August $20 call options (IDTI150821C00020000) to lock in a 42.86% gain. Also, raise your stop to $21.35 to lock in at least a 10% gain in the stock.

You also hit your tightened stop in MasterCard (MA), which locked in a 10% gain on this position.

This week’s Bull Market Alert recommendation, Ambarella Inc. (AMBA), revisits a previous recommendation based on the “Internet of Everything.”

As I noted in my original recommendation, Ambarella designs system-on-a-chip (SOC) semiconductor technology used in cameras for the sports, surveillance, automotive and security markets. The company is also an indirect play on GoPro (GPRO), the action camera maker that uses Ambarella chips for cameras that let people take shots while surfing or snowboarding.

Here’s why I am recommending that you get back into Ambarella, even having already booked an 11% gain in the stock and 63.10% gains in the options.

First, Ambarella’s fundamentals were never in doubt. The company saw earnings grow 162% last quarter. Ambarella also issued strong forward guidance with earnings expected to climb 132%. Last quarter’s results beat consensus analysts’ views on both revenues and earnings by a comfortable margin. That’s why I expect the stock to jump when it announces Q1 results on June 2 after the close.

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Second, Ambarella just broke out of a trading range on Friday that extended back into late March. That’s a significant technical move and suggests that the stock has resumed another leg higher.

Ambarella is a hot stock in a hot sector — and one that has defied sustained pullbacks in the broader market. Its recent breakout means it’s a good time to re-enter the stock.

So buy Ambarella Inc. (AMBA) at market today, and place your stop at $66.00.

With the stock moving so sharply in the past few trading days, the options are overvalued at the moment. So, I am going to hold off on recommending any options at least until next week.

Portfolio Update

Halyard Health Inc. (HYH) fell 6.10%. HYH reported successful trial data last Thursday regarding the use of its ON-Q* Pain Relief System. This device is a pump that automatically delivers a measured flow of anesthetic to a surgical site, helping with pain relief. This position is remarkably oversold and way, way overdue for a bounce. HYH is a HOLD.

ProShares Ultra Nasdaq Biotechnology ETF (BIB) gained 2.23% last week. BIB has spent the bulk of the past year above the 50-day moving average (MA), and its recent dip below that level was an excellent indication that it was due for a rebound. BIB is once again making steady gains, and this should continue as the biotech bull further regains its footing. BIB is a BUY.

Integrated Device Technology (IDTI) jumped 9.02% last week as it continued to benefit from its recent earnings report. Buying has been steady over the past two weeks on excellent volume. IDTI also hit a new 52-week high early last week. IDTI is a BUY.

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WisdomTree Europe Hedged Equity Fund (HEDJ) dipped 1.13% as it continued to trade sideways and consolidate after its recent correction. HEDJ is likely building steam for its next move higher, right alongside the European recovery. HEDJ is a HOLD.

Direxion Daily Small Cap Bull 3x ETF (TNA) added 2.46%. TNA’s trading pattern closely mirrors that of the Russell 2000 Index (RUT), the big daddy of the small-cap indexes. The primary difference is that the 3x leveraging of TNA added 2.46% last week as compared to RUT’s 0.73%. TNA is resting just below the 50-day MA and remains a HOLD.

Regeneron (REGN) added 1.60%. This newest addition to the Bull Market Alert portfolio hit a new 52-week high just last Friday as it touched the $500 upper resistance level. JP Morgan recently raised its price target on the stock, and Credit Suisse says Regeneron is now worth $550 per share and maintained its “Outperform” rating on the stock. The $550 price target represents a potential 12.5% move above last Friday’s close. REGN is a BUY.

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Nicholas Vardy

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