Betting on a Bounce in Cybersecurity

U.S. stock markets recovered somewhat last week with the Dow Jones up 0.69%, the S&P 500 rising 1.16% and the NASDAQ recovering 0.78%. The MCSI Emerging Markets Index ended the week 0.16% higher.

Your biggest gainer was Halyard Health Inc. (HYH), which added 1.17%.

You were also stopped out of Ambarella Inc. (AMBA) for a 20% gain in the stock.

All of your Bull Market Alert positions are trading below their 50-day moving averages and are a HOLD.

This week’s Bull Market Alert recommendation is Silicon Valley-based Infoblox (BLOX).

Firmly ensconced in the red-hot cybersecurity space, this tech company sells network appliances that manage Internet addresses and identify devices connected to corporate networks. These appliances help IT departments manage complex, related groups of technologies together including DNS, or domain name system; DHCP, or dynamic host configuration protocol; and IPAM, or Internet protocol address management.

Up over 16% this year, here’s why I expect Infoblox’s stock to continue on its upward trend in the next few months.

First, the company’s new CEO Jesper Andersen is already having a positive impact on the direction of the company. After only six months, Andersen has focused the company on network growth and complexity as it targets larger, more strategic customers, including telecom service providers and larger enterprises. Four of the Fortune 10 companies are already using Infoblox for security, but only 500 of the 8,100 customers of BLOX are using its secure DNS products. So there is plenty of room for expansion.

Second, Infoblox looks like it will easily deliver sustained 20%-plus revenue growth through new marketing initiatives and a push into security products. Most recently, reported fiscal Q3 revenue and profit beat expectations and forecast current-quarter results above consensus estimates.

Finally, Infoblox’s stock is technically oversold and is due for a bounce. This is based on several of my favorite technical indicators, including slow stochastics and MACD. In addition, the stock bounced off a long-time technical support level last week and has begun to recover over the past few days.

So buy BLOX at market today and place your stop at a relatively tight $21.

If you want to play the options, I recommend the October $25 calls (BLOX151016C00025000), which last traded at $1.25 and expire on Oct. 16.

Portfolio Update

Halyard Health Inc. (HYH) added 1.17%. HYH will report earnings on Tuesday before markets open. The analysts’ consensus estimate is $0.52 earnings per share (EPS) with revenue expected at $401.7 million for the quarter. HYH has its fiscal year 2015 guidance projected between $2.30-$2.50 EPS. HYH is a HOLD.

iShares MSCI Hong Kong (EWH) dipped 0.36%. EWH traded sideways last week as Chinese markets continued to pull back. Chinese stocks saw their worst single day of declines in more than eight years over the prior week as brokerages tightened margin requirements. Many stocks lost the maximum regulatory amount of 10%. EWH remains near its 200-day moving average (MA). EWH is a HOLD.

Vipshop Holdings Limited (VIPS) lost 3.75%. VIPS will report earnings on Aug. 12 and the analysts’ consensus estimate is $0.10 EPS. VIPS reported $0.11 EPS last quarter. The analysts’ consensus rating on VIPS is a “Strong Buy,” with the most bullish firm setting a price target of $35.00 — a whopping 80% above last Friday’s close. VIPS is a HOLD.

Avago Technologies Limited (AVGO) fell 2.60% last week. AVGO is up 25% year to date and up 75% over the previous one-year period. Avago currently has nearly 6% of its stock’s float sold short, which is a 14% dip month over month. AVGO is expected to announce earnings on Aug. 27, and the analysts’ consensus estimate is $1.94 EPS. AVGO is a HOLD.

Upcoming Appearance

Join me on “Straight Talk Money” in Houston and Denver at 9:20 AM (EST) on Wednesday, Aug. 5 to talk about the latest in the markets from a global perspective.

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