P.S: When the market begins correcting, you can bet overvalued high-flying momentum stocks like NFLX and AMZN will sell-off. For this reason, we are only interested in buying and holding undervalued growth stocks like JPM, FNMA, SPCB and CLNT.
JPM - gapped down a bit after dividends but held up and continued to new highs (since the recession). We have a starter position in $60Mar2014 calls and plan to add more this week into a breakout. Our goal is to sell near 62/65 resistance zone. We have a hard stop under $58.2.
GE - sold off with the overall market/tech sector until we got stopped out for modest gains. We plan to rebuy Mar2014 call options once the tech sector (index: XLK) bottoms out. We still see short term upside to $29/30.
SCTY - The solar sector is awake once again and SCTY is setting up for breakout into new all time highs with tremendous upside to $80 in the medium term. Coincidentally, Monday morning Goldman Sachs upgraded it with an $80 price target. We are prepared to buy Feb2014 call options after it tests res at $63. Be prepared.
NFLX (short/puts) - Netflix has been overvalued for too long. Its got too much competition and faces a growth challenge. The chart is near broken so I expect this stock to correct over the next few weeks/months. We are prepared to buy $300March2014 puts.
SPCB - SuperCom are basically a security software company that acquired a major competitors business thru a very efficient deal that could triple revenue, thus making the stock much cheaper than it already is. I encourage you to read this recent seeking alpha article on Supercom. SPCB is currently trading at P/E 9 while the industry average P/E is 36. At P/E 20, which is broadly considered fair value, SPCB would be valued over $11/shr. However, if we look forward ahead of the acquisition, SPCB would be valued well over $20/shr. Anything is possible considering that technically there is no historical resistance once SPCB hits new 52wk highs at 6.13. We are long SPCB from avg $4.93 (currently $5.47). Our medium-term target is $8-10/share. Our stop is near 4.85 support.
FNMA- still consolidating under 3.3 as finance sector shows strength. We are prepared to buy the 3.3 breakout with upside short/medium term upside to $7/shr.
CLNT- Chinese stocks are heating up again. Clean Tech is a Chinese growth and value stock trading cheaply with P/E 2.7. This stock is valued somewhere in the $20s-30s (currently $5.80). Short-term upside to 7, medium-term upside to 11-13. Stop-loss is near 5/5.3
VNDA- still waiting for the breakout above neckline at $13.