- New Trades -
(March 23, 2013)
Did you read tonight's LeapsTrader commentary? I hope you did. There is no arguing that the market's trend is up. I fully expect the S&P 500 index to tag a new high soon. Yet that does not mean we should be launching new long-term bullish positions at current levels.
There are a lot of potential headwinds for the market. Technically it's overbought. The number of stocks above their 200-dma is so high that it's a contrarian sell signal. The volatility index (VIX) remains near multi-year lows. Q1 earnings season is just around the corner and it could be a disaster. We've already seen several earnings warnings and disappointments. The situation in Cyprus, while small in the big picture, could have serious consequences for the rest of Europe and thus the globe.
I cannot in good conscience suggest new bullish candidates tonight when I believe there is a correction in the relatively near future. It may not show up for a couple of weeks but it will show up. Why launch bullish positions now when we could see stocks -5%, -10% or even -20% lower by late April or May?
You may completely disagree with me. That's perfectly fine. It takes both buyers and sellers to make a market. I suspect we will be closing several of our current trades in the next couple of weeks. Many of them already sport significant gains. You might want to exit early to lock in a profit.
Just in case you do disagree with me on the proximity of a market correction I am still providing some bullish LEAPS candidates tonight. Here's what caught my eye this weekend:
PAYX - this stock is nearing new multi-year highs. A close over the $35.00 level might be considered a new bullish entry point. You could set your long-term target in the $40-44 area.
UA - NKE just reported strong earnings. UA might follow suit. Shares of UA seem to be building a bottom. I would wait for a close above $52.50 and then buy calls the next day. An easy target would be the $59-60 zone.
TAP - I would almost be tempted to buy calls on a close above short-term resistance at $49.00. There has been resistance in the past near $51.00. If I bought calls my long-term target would be $59.00.
S - Sprint has spent six months consolidating under resistance at the $6.00 level. This past week has produced a bullish breakout. You could launch bullish positions now. Instead of buying calls you may want to just buy the stock. I would probably start with a stop loss under the 100-dma near $5.70. A long-term target could be the $9.00-10.00 zone.
CNQ - this oil stock appears to be breaking out past its long-term trend line of lower highs. You could make an argument to buy calls now. Nimble traders could buy a bounce off the $31.50 level or you could wait for a close above $33.50. It all depends on your risk profile. Consider a stop loss under the $30.00 mark.
V - Visa has a steady long-term up trend. Granted the stock has been consolidating sideways the last several weeks. A close above $163.00 could be used as a bullish trigger to buy calls. Target the $185-200 range.
WLT - the coal industry looks weak so this would be an aggressive, higher-risk trade. WLT has fallen to what looks like significant support near $28.00. You could buy calls now with a stop loss just under last week's low (27.88) or you could wait for a close above $30.00 as your bullish entry trigger. Target a rebound back into the $38-40 zone.
SOHU - check out a long-term target of SOHU and it looks like the stock has found a bottom. The January 2013 high was near $50.70. I'd probably wait for a close above $51.00 as a potential entry point. Keep in mind that SOHU can be a volatile stock. You may want to limit your position size to reduce your risk.
GLW - shares appear to have found a bottom. A close above $13.25 might be a bullish entry point as GLW breaks through the bearish trend of lower highs. This stock doesn't move very fast so you'll have to be patient.
GG - The sell-off in the gold miners appears to be overdone and GG has finally found support near the $32.00 level (check out a weekly chart). A close above $34.00 or a close above its simple 50-dma could be used as a new bullish entry point. I'd probably target a rebound into the $40-42 zone.
HSY - HSY actually looks like a strong bullish candidate right now. The stock has rallied to new all-time highs. If this trend continues we could see HSY challenging the $100 area before the year is over. You could argue that HSY is overbought. It might be too close for a long-term trade but I would be tempted to put my stop loss near its rising 20-dma or 30-dma.
COST - the long-term bullish trend of higher lows continues in shares of COST. The stock is consolidating sideways below resistance near $106. I would wait for a close above $106.00 before considering new bullish positions. With enough patience you could target a move toward the $120 area.
Plus, here's an update on what is on my radar screen.
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself:
SNDK, AZO, LLY, IBM, HOG, SYY, PFE, HON, DG, AXP, NBL, HCN, JBHT, WSM, GLD, TSO, CLX, TJX, F, ODFL,