Trade Summary: October 26, 2015

| October 26, 2015

October 26, 2015

 

 Trade Rationale

The tech sector got a huge boost last week due to great earnings from several key players.  The Nasdaq 100 index actually gapped higher at one point last week, something you don’t see an index do all that often.  The tech benchmark is now up nearly 10% for the year and over 4% in just a week.

It helps that the Nasdaq 100 is top heavy, and the big earnings beats came from giants like Google/Alphabet (GOOGL), Amazon (AMZN), and Microsoft (MSFT).  Still, it’s a great sign for tech, which has had a strong year relative to the rest of the market.

However, because of the top heavy nature of the tech sector, some investors haven’t been paying attention to some of the less well-known companies in tech.  Because of this, there may be some opportunities to capitalize on some underperforming tech companies whose time is yet to arrive.

We’re going to buy calls in three different potentially, under the radar tech stocks.

The first company we’ll buy calls in is FireEye (FEYE).  FEYE develops cybersecurity solutions for combating cyber-attacks.  Preventing cyber-attacks has become a huge deal across the globe, and it’s certainly a major growth industry.  Meanwhile, FEYE is a whopping 50% below its 52-week high.

Next, let’s grab calls in Nuance Communications (NUAN).  The company basically provides speech recognition software to the healthcare sector.  There could be massive growth opportunities here, and the stock is very cheap at current levels.

Finally, we’re also going to buy calls on Rackspace Hosting (RAX).  RAX provides cloud computing services and Web-based IT services for small/medium businesses, as well as large enterprises.  The company was once a higher flier when cloud-computing starting becoming popular.  Now, the stock looks attractive at these levels.

 

Trade Details

#1) Buy FireEye (FEYE) December 18th 30 Calls up to $2.40

For this trade, we’re looking for an up move in FEYE.  Our first profit point for conservative traders is at $33.  For aggressive traders, you can hold up to $37.  For risk control, the conservative exit level is $26.50.  $24 is the final exit level for aggressive traders.

FireEye

#2) Buy Nuance Communications (NUAN) December 18th 17 Calls up to $1.25

With this trade, we’re also looking for a move higher.  Our first exit point for conservative traders is at $18.50.  For aggressive traders, you can hold to $20.  For risk control, the conservative exit level is $15.  And, $14 is the final exit level for aggressive traders.

Nuance Communications

#3) Buy Rackspace (RAX) December 18th 28 Calls up to $1.95

Finally, we’re looking for another up move in RAX.  Our first profit-taking exit point for conservative traders is at $30.  For aggressive traders, you can hold to $34.  For risk control, the conservative exit level is $24.  $22 is the final exit point for aggressive traders.

Rackspace

 

Category: AOA Trade Summary