Buying a New Software Play and Locking in 2 Double-Digit Percentage Gains

Markets recovered strongly this past week, with the Dow Jones up 3.35%, the S&P 500 recovering 3.27% and the NASDAQ up 3.59%. The MCSI Emerging Markets Index also rose 4.71%.

Overall, it was a very strong week for your Bull Market Alert portfolio. All positions gained and most positions had a tremendous week with significant jumps.

Big gainers included ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA), which jumped 9.86%; Alaska Air (ALK), which added 7.77%; the ProShares Ultra Nasdaq Biotechnology (BIB), which rose 5.99%; and NetEase, Inc. (NTES), which rocketed 10.51% to hit a new 52-week high.

ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA), Alaska Air (ALK) and ProShares Ultra Nasdaq Biotechnology (BIB) all moved back above their 50-day moving averages to a Buy.

Raise your stop on Paycom Software (PAYC) to $41.91 to lock in at least a 10% gain. Raise your stop in NetEase (NTES) to $158.70 to lock in at least a 15% gain in the stock.

This week’s Bull Market Alert recommendation is yet another software stock that has performed well in an otherwise choppy and challenging market. Manhattan Associates (MANH) is a business software maker specializing in supply chain and inventory management software.

Here’s why I think Manhattan is set to jump higher in the coming weeks.

First, Manhattan has developed a strong reputation for giving customers the supply chain management tools they need to maximize their productivity. The company has also done a great job in attracting new customers. In the past quarter alone, Manhattan saw 45% of license revenue and three of its four large license deals come from new customers, such as outdoors apparel specialist L.L. Bean. This presents Manhattan with a significant opportunity to further penetrate these new customers with additional products over time.

Second, Manhattan is a company that consistently under-promises and over-delivers. Most recently, the company beat analysts’ views on both earnings and sales during the third quarter. Revenue climbed more than 13% to $142.3 million — more than $1 million higher than the consensus forecast among investors in the stock. Adjusted earnings of $0.42 per share were $0.06 higher than most analysts had expected.

Looking ahead to the future, the company expects revenue growth of between 12% and 13%. It now expects to earn between $1.47 and $1.49 a share on an adjusted basis, up from its prior prediction of $1.40 to $1.42 a share. That represents an impressive growth rate of 27-28%.

Third, the stock is just emerging from a technically oversold position. This, combined with strong seasonality in the markets, means that the stock should continue to bounce strongly in the coming weeks.

So buy Manhattan Associates (MANH) at market today and place your initial stop at $60.00.

If you want to play the options, I recommend the January $75 calls (MANH160115C00075000), which last traded at $3.10 and expire on Jan. 15.

Portfolio Update

ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA) jumped 9.86% last week. ULTA closed the prior week by dropping 8.36% on Friday. However, all this and then some returned to ULTA’s stock price last week as investors bought the pullback in force, pushing the stock back above its 50-day moving average (MA). Even CNBC’s Jim Cramer said last week that he likes ULTA and thinks it’s time to buy the stock. ULTA will report third-quarter earnings on Dec. 3 after markets close. ULTA moved back to a BUY.

Alaska Air (ALK) also had a great week, adding 7.77%. Standard & Poor’s (S&P) Ratings Services  affirmed its “BBB-” corporate credit ratings for ALK last week, calling its outlook “stable.” S&P also revised ALK’s liquidity rating from “Strong” to “Exceptional” on continued strong credit metrics and free cash flow generation, which is expected to be stable over the next two years. ALK moved above the 50-day MA to become a BUY.

ProShares Ultra Nasdaq Biotechnology  (BIB) rose 5.99% over the past five trading days. The biotech sector continues to emerge from its Hillary Clinton-induced funk and moved above the 50-day MA last week. BIB is now a BUY.

NetEase, Inc. (NTES) rocketed 10.51% last week to hit a new 52-week high. NTES saw strong above-average positive volume every day last week, pushing the stock higher and making “higher highs” each day. NTES will pay a $0.56 dividend on Nov. 24. NTES remains a BUY. Raise your stop to $158.70 to lock in at least a 15% gain in the stock.

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