Option Investor
Newsletter

Daily Newsletter, Sunday, 1/29/2012

Table of Contents

  1. Leaps Trader Commentary
  2. Portfolio
  3. New Plays
  4. Play Updates
  5. Watch

Leaps Trader Commentary

Gains Appear to Slow

by James Brown

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Stocks continue to climb with the major U.S. indices up four weeks in a row. It's a pretty good start for 2012. Last week the market digested a massive number of earnings announcements. Apple Inc. (AAPL) was probably the highlight. The company blew away estimates and the stock gapped higher to new all-time highs near $450 a share, making it the most valuable company with a market cap of $417 billion. Exxon Mobil (XOM), with a market cap of $411 billion, had held that title for ages. Also making headlines was the FOMC meeting, a handful of economic reports, and more downgrades for Europe. One issue that seemed to hold the market back was Greece's inability to make any progress on its debt haircut with private sector investors.

Fed chairman Ben Bernanke and the U.S. Federal Reserve held a two-day meeting last week. Bernanke said that the FOMC would leave rates unchanged in the 0.00% to 0.25% zone. Furthermore they will likely leave rates at these levels well into 2014. Why? Because economic conditions are unlikely to improve. The Fed lowered their 2012 GDP forecast to 2.2%-to-2.7%, down from 2.5%-to-2.9%. The Fed is also worried that falling inflation could turn into deflation. It is the fear of deflation that could force the Fed to move again. Bernanke hinted at another round of easing in the future. The next FOMC meeting is in March.

Economic data last week was mostly disappointing. The big report was the Q4 GDP estimate. Economists had been expecting Q4 GDP growth at +3.0%. The data came in at +2.75%, which is improvement from Q3's +1.8%. Unfortunately if you dig underneath the headline number a large chunk of the Q4's growth was due to expanding inventories. Durable goods orders for December rose +3.0%, which was better than expected. Last week's initial jobless claims were in-line with estimates with a jump of +21,000 to 377,000. The latest housing data was disappointing. Pending home sales in December fell -3.5% when analysts were only expecting a drop of -3.0%. December is not a very hot month for home sales anyway. New home sales fell -2.2% to a seasonally adjusted annual pace of 307,000 homes. What's really frustrating for home owners was news that median home prices in the U.S. fell -12.8% to $210,300.

Major Indices:

The flood of earnings last week created a lot of individual stock volatility yet the volatility index (VIX), based on options for the S&P 500, is still drifting lower and hit new six-month lows last week. That could change soon. Some of the momentum indicators are suggesting the rally in stocks is running out of steam. The S&P 500 index only gained a single point last week. If I were a short-term trader I would be tempted to look at calls on the VIX soon.

Technically the S&P 500 continues to climb in a narrow channel with short-term support at its rising 10-dma. If stocks did pull back there could be some support at 1300 but I would focus on the 1280 level for any real dip. It looks like the next level of significant resistance is still the 1350 area.

Daily chart of the S&P 500 index:

Intraday chart of the S&P 500 index:

The NASDAQ composite continues to climb as well. It's up four weeks in a row and up five out of the last six weeks. The 2830-2880 zone is layered with multiple levels of potential resistance. Further gains could be a lot tougher here. Now that most of the major tech companies have reported, what catalyst is left to drive it higher?

You can see from the intraday chart that the NASDAQ is trading in a narrow channel. A dip to 2775 would still keep it in the bullish trend. On a breakdown I would look for potential support near 2750 and then the 2715-2700 zone.

Intraday chart of the NASDAQ Composite index:

The trend in the small cap Russell 2000 index looks similar. This index is also up five out of the last six weeks and closed near six-month highs. The 800 level could be round-number, psychological resistance. If the market does see a correction I would look for the $RUT to dip toward 775 or possibly the 760 level.

Daily chart of the Russell 2000 index

I am still watching the $SOX semiconductor index too. Right now it's consolidating along support near 410. A breakdown here could see the SOX plunge back toward the 390 area.

Looking ahead we have a very busy week for economic data. The reports to watch are the Chicago PMI, the national ISM and ISM services data, the ADP employment number, and of course the big one is the jobs report on Friday. Last month the jobs report showed +200,000 jobs. This month economists are only expecting +125,000. We need about +150K just to keep pace with population growth in the U.S.

- Monday, January 30 -
PCE prices
personal income and spending

- Tuesday, January 31 -
Case-Shiller 20-city home price index
Consumer Confidence for January
Chicago PMI

- Wednesday, February 01 -
ADP Employment report
construction spending
ISM (manufacturing) index for January
vehicle sales

- Thursday, January 02 -
Weekly Initial Jobless Claims

- Friday, January 03 -
Non-farm payrolls (jobs) report for January
unemployment rate
ISM services index for January

The Week Ahead:

As we look ahead what do we need to watch out for? We are still in the midst of Q4 earnings season but this is the back half of the season. Earnings announcements will continue to move individual stocks but they are unlikely to have a market-moving impact. Aside from the economic reports outlined above I am sorry to tell you that headlines out of Europe will likely be the market drivers.

Last week there was an underlying current of frustration with Greece's lack of progress in negotiations with private sector investors. At this point people are starting to come to grips with the idea that Greece may not last in the EU for much longer. I've been telling readers for a long time that Greece will eventually default. There were rumors out on Friday that Germany's leader Angela Merkel had confessed that Greece will default. You will probably hear a lot about Greece and Germany on Monday. There were headlines out late Friday that Germany wanted Greece to hand over its national budgetary controls to a third party appointed by the EU. You know that's not going to go over very well in Greece.

If Greece throws in the towel and says, "We give up. We can't pay our debts!" and essentially declares bankruptcy it would set a dangerous precedent. The markets can probably survive Greece leaving the Eurozone. It's been speculated and discussed for two years. What happens if Spain or Portugal decide to surrender as well? Bond yields on Portugal have been soaring lately. Portugal has already received one bailout. Now with yields on their 10-year bond near 15% they cannot afford to pay the interest on their debt. Spanish yields are not that high but growth is falling. There was data out last week showing unemployment in Spain was rising toward 23%. It's hard to grow your way out of debt if almost one in four citizens are not working. We've said it before. Parts of Europe and the EU will likely be mired in deep recessions for a long time to come as they deal with impact of their austerity measures. A recessionary Europe does not help the global economy since they're the largest trading partner with China.

I am also concerned about a potential disconnect between investors and stock prices. The latest investor sentiment data is showing bullish sentiment continues to grow while bearish sentiment has fallen toward multi-year lows. When everyone is standing on the same side of the boat there is a risk it will capsize. From a contrarian standpoint this is indicating a potential market top soon.

Here's an interesting thought: why are stock prices climbing while U.S. equity funds continue to see outflows. Investors are taking money out of equities and pumping it into bonds even though the yield on the 10-year bond is less than 1.9%. If everyone is so bullish on stocks why are they not putting more money toward stocks?

There is no denying the market's trend is still up but there are a lot of dark clouds on the horizon. It will be interesting to see what the market moving headlines will be this week. Some of the internals are not suggesting further gains. Of course we already know that the market can stay illogical for much longer than we think it can.

I am suggesting caution and would not be in a rush to open bullish positions.

- James


Portfolio

Portfolio Update

by James Brown

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Current Portfolio


Portfolio Comments:

The S&P 500 index managed to extend its gains to four weeks in a row but just barely. If you look at the weekly chart of the S&P 500 you'll notice that last week looks like a potential top. It could be time for some profit taking, which is a normal part of stock market cycles.

This past week saw SHW hit our exit target at $99.00. We also had our FXE put get stopped out.

Several of our candidates will report earnings this week. Readers will want to take another look at their stop loss placement or possibly consider some sort of short-term hedge.

I have updated stop losses on: CSX, DOW, EPD, FDX, LLY, SBUX, and X.

Disclaimer: At any given time the author may have positions in any or all of any companies mentioned in the Leaps Newsletter.

--Position Summary Table--
Table lists Directional CALL or PUT/LEAPS only.
Insurance puts, if applicable, are not shown.

Red symbol/name represents a play or option position exited or closed this week.



New Plays

No Rush

by James Brown

Click here to email James Brown

Editor's Note:

Stocks continue to run higher. Investors are ignoring the lack of progress in Europe, which has allowed the major U.S. indices to rally to new six-month highs. Some of the momentum indicators are suggesting the rally is losing steam and could peak soon. The S&P 500 only gained a single point last week. We're also facing another heavy week of earnings announcements. Plus we have a busy week of economic data.

I am not in a rush to add new positions if the market is tired and due for a pull back. Thus no new positions tonight. However, we did add four new watch list candidates in tonight's newsletter.

The list below are stocks on my radar screen. They're not trades yet but we could see an entry point in the next few weeks. Keep an eye on them:

WFR, NVDA, ADTN, PSS, NAV, WYNN, CREE, OMX, JCP, HSY, M, JPM


Play Updates

Sherwin Williams (SHW) Hits Our Exit Target

by James Brown

Click here to email James Brown

Editor's Note:

Shares of SHW spiked toward $100 and hit our exit at $99.00 this past week. Meanwhile, a weak dollar helped fuel an oversold bounce in the euro and the FXE hit our stop loss, closing our put trade.

We will continue to see a lot of earnings reports this week and that means individual stock volatility.


Closed Plays


FXE was stopped out. SHW hit our target.


Play Updates


Allergan Inc. - AGN - close: 88.82

Comments:
01/28/12 update: AGN managed to post another gain for the week but shares can't seem to get past resistance near $90. I would expect shares to continue to trade sideways up to its earnings report on Feb. 2nd. The announcement comes out that morning before the bell. More conservative traders might want to raise their stop loss significantly or consider some sort of hedge prior to the announcement. I am not suggesting new positions at this time.

Earlier Comments:
Option spreads are wide for these LEAPS. We want to keep our position size pretty small to limit our risk.

- Suggested Positions -
OCT 17, 2011 - entry price on AGN @ 85.46, option @ 5.10
symbol: AGN1319A100 2013 JAN $100 call - current bid/ask $ 2.85/ 3.50

01/28/12 earnings are due on Feb. 2nd. Readers might want to raise their stop or consider some sort of hedge prior to the report.
12/24/11 new stop loss @ 81.60
12/10/11 spreads on our 2013 calls are getting wider!
11/19/11 Taking an aggressive stance on our stop loss and moving it down to $77.45
10/22/11 Earnings are coming up. Readers might want to consider raising their stop loss. We are keeping ours at $79.45.

Current Target: $99.00
Current Stop loss: 81.60
Play Entered on: 10/17/11
Originally listed on the Watch List: 09/24/11


Bank of America - BAC - close: 7.29

Comments:
01/28/12 update: BAC continue to do well adding another +3% for the week. Although if you look at the intraday chart BAC seems to be moving sideways in the $7.00-7.50 zone. The financials are arguably overbought given their rally in January. BAC is up five out of the last six weeks. If the banks do see a correction I would look for BAC to find support near $6.50.

I am not suggesting new positions at this time.

- Suggested Positions -

AUG 29, 2011 - entry price on BAC @ 8.10, option @ 1.50
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.47/ 0.48
(No stop loss on this position)

(2nd Position, bought the dip at $5.15)

NOV 23, 2011 - entry price on BAC @ 5.15, option @ 0.35
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.47/ 0.48
(no stop loss on this position)

01/28/12 financials seem a bit overbought here.
01/21/12 2012 Jan. $10 calls have expired (-100%)
01/14/12 earnings are due out on Jan. 19th
01/07/12 BAC broke out past its 50-dma and the $6.00 this past week
12/17/11 expect BAC to retest the $5.10-5.00 zone.
11/23/11 BAC hits new trigger @ 5.15 to buy calls.
11/19/11 New trigger to buy calls @ $5.15 (see 2nd position)
10/03/11 Sept. 26th position stopped out at $5.75.
2012 Jan. $7.50 call @ 0.48 (-27.2%)
2013 Jan. $10 call @ 0.74 (-26%)
10/01 raising our stop loss on the Sep. 26th position to $5.75
09/24 adding 2nd position, stop loss at $5.40
09/03 no stop loss on this trade at this time.

Current Target: $12.00-to-$15.00
Current Stop loss: see details above
Play Entered on: 08/29/11
Originally listed in the New Plays 08/27/11


Bristol Meyers Squibb - BMY - close: 32.29

Comments:
01/28/12 update: BMY is still slowly drifting lower. The company reported earnings on Jan. 26th and missed estimates by 2 cents. BMY also missed on the revenue estimate. The stock actually spiked higher on the news but quickly reversed lower with what looks like a failed rally under its 10-dma. You can see on the daily chart that the 10-dma has been resistance for three weeks in a row. At the moment BMY has seen a -9% correction in the last four weeks.

We have a stop loss at $31.45 but more aggressive traders might want to put their stop under the $30.00 mark. I am not suggesting new positions at this time.

- Suggested Positions -
SEP 19, 2011 - entry price on BMY @ 30.53, option @ 1.20
symbol: BMY1319A35 2013 JAN $35 call - current bid/ask $ 1.10/ 1.13

01/03/12 planned exit, sell half, bid on 2013 Jan $35 call @ 2.58 (+115%)
12/31/11 new stop loss @ 31.45.
12/31/11 Prepare to lock in gains and sell half of our position on Tuesday morning (Jan 3rd, 2012). The 2013 Jan $35 call currently has a bid at $2.60 (a +116.6% gain).
12/16/11 BMY hit our previous exit target at $34.50, more conservative traders may want to take profits now and exit early.
12/10/11 adjust exit target to $37.50
12/03/11 reduce our two exit targets to just one at $34.50
10/22/11 BMY is due to report earnings this week on Oct. 27th. Readers may want to take profits now or prior to the report.
10/08/11 new stop loss @ 29.40
09/16 Friday's close at $30.53 is our trigger to buy calls. Our entry will be Monday morning.

Current Target: $37.50
Current Stop loss: 31.45
Play Entered on: 09/19/11
Originally listed on the Watch List: 09/10/11


Beazer Homes - BZH - close: 3.25

Comments:
01/28/12 update: BZH continues to show relative strength and added +8% last week. Shares are currently trading under resistance in the $3.30 area. I would expect shares to keep moving sideways until its earnings report, which is due Feb. 2nd. BZH will announce before the opening bell. Wall Street is expecting a loss of 39 cents a share.

If BZH disappoints or if investors choose to sell the news then I would expect BZH to fall back toward support near $2.80 and its exponential 200-dma. If the sell-off gets really ugly then look for a drop toward the 50-dma near $2.50. We will raise our stop loss to $2.40. More conservative traders may want to raise their stop loss even higher or just exit now prior to the earnings report. Our call LEAP has virtually doubled (+92.8%).

I am not suggesting new positions at this time.

- Suggested Positions -

(stock position)
OCT 28, 2011 - entry price on BZH @ $2.12

(option position)
OCT 28, 2011 - entry price on BZH @ 2.12, option @ 0.70
symbol: BZH1319A2.5 2013 JAN $2.50 call - current bid/ask $ 1.35/ 1.45

01/14/12 new stop loss @ 2.30, adjust exit target to $4.75
01/07/12 new stop loss @ 2.15
12/24/11 new stop loss @ 1.95
12/03/11 new stop loss @ 1.85
11/26/11 new stop loss at $1.75
11/15/11 BZH reports a loss of 57 cents a share, worse than expected
11/12 BZH has seen a big bounce. Cautious investors may want to take profits now before BZH reports earnings on Nov. 15th. (BZH +13.2%, option +21.4%)
10/28 trade begins: BZH opens @ $2.12
10/27 BZH meets our entry point requirement with a close over $2.05

Current Target: $4.75
Current Stop loss: 2.30
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/22/11


Cisco Systems - CSCO - close: 19.56

Comments:
01/28/12 update: The rally in CSCO has stalled with overhead resistance near the $20 level. That's not surprising and I cautioned readers that $20 was likely resistance. On a positive note the consolidation looks like a bull-flag pattern. I am not suggesting new positions at this time. CSCO is due to report earnings in about eight trading days on Feb 8th.

- Suggested Positions -
OCT 28, 2011 - entry price on CSCO @ 18.28, option @ 1.68
symbol: CSCO1319A20 2013 JAN $20 call - current bid/ask $1.97/2.00

01/21/12 new stop loss @ 17.20
10/29/11 new stop loss @ 16.40
10/28/11 stock opens at $18.28
10/27/11 CSCO meets our entry requirement: close at $18.44
10/22/11 Added entry to buy a close over $17.75
10/15/11 We are adjusting our entry point. Wait for a dip to $16.65
10/14/11 CSCO hit our entry point requirement for a close over $17.50.

Current Target: $21.75
Current Stop loss: 17.20
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/08/11


CSX Corp. - CSX - close: 22.76

Comments:
01/28/12 update: CSX reported earnings on Jan. 23rd and missed. The company missed both the EPS estimate and the revenue estimate. The stock sold off the next day with a gap down and drop toward $21.60 but has since recovered and filled the gap. CSX is now testing resistance near its 200-dma.

More conservative traders might want to raise their stop loss closer to the $21.00 or $21.50 level. We will move our stop to $19.95 instead. I am not suggesting new positions at this time.

Earlier Comments:
I do see potential resistance at the $24.00 level and the $26.75-27.00 zone. Yet the Point & Figure chart for CSX is bullish with a $33.50 target.

- Suggested Positions -
NOV 14, 2011 - entry price on CSX @ 22.59, option @ 2.24
symbol: CSX1319A25 2013 JAN $25 call - current bid/ask $ 1.47/ 1.50

- or -

NOV 14, 2011 - entry price on CSX @ 22.59, option @ 3.30
symbol: CSX1418A25 2014 JAN $25 call - current bid/ask $ 2.46/ 2.72

01/28/12 adjust stop loss to $19.95
12/17/11 CSX is starting to bounce from support near $20. This can be used as a new entry point
11/26/11 I had cautioned readers to expect a potential dip to $20.00. CSX hit this level on Friday.

Current Target: $29.75
Current Stop loss: 19.95
Play Entered on: 11/14/11
Originally listed in the New Plays 11/12/11


The Dow Chemical Co. - DOW - close: 33.46

Comments:
01/28/12 update: DOW only rose seven cents for the week. Shares have been consolidating sideways in the $33-34 zone. After a big rally off the December lows I suspect that DOW has run out of gas. Earnings are coming up on Feb. 2nd and there is no reason to buy DOW prior to the report. More conservative traders will want to seriously consider taking profits right now, especially prior to the earnings report. The earnings announcement will be the perfect excuse to sell DOW and lock in gains. I would expect a dip back toward the $31-30 zone.

I am not suggesting new positions at this time. We will adjust our stop loss higher to $29.75. Let me repeat that I am expecting some profit taking after the earnings report on Feb. 2nd. Wall Street is expecting a profit of 30 cents a share.

Earlier Comments:
The Point & Figure chart for DOW is bullish with a $46 target.

- Suggested Positions -
Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.40
symbol: DOW1319A35 2013 JAN $35 call - current bid/ask $ 3.20/ 3.25

- or -

Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.54
symbol: DOW1418A40 2013 JAN $40 call - current bid/ask $ 2.86/ 3.00

01/28/12 Readers will want to seriously consider taking profits right now, prior to the earnings report on Feb. 2nd.
01/28/12 new stop loss @ 29.75
01/21/12 new stop loss @ 28.40
01/14/12 new stop loss @ 27.75
01/06/12 DOW meets our entry requirement with a close over $30.25. Plan is to buy calls on Monday morning (01/09/12).

Current Target: $39.50
Current Stop loss: 29.75
Play Entered on: 01/09/12

Originally listed on the Watch List: 12/31/11


Enterprise Products Partners - EPD - close: 48.06

Comments:
01/28/12 update: EPD has risen to new record highs and almost hit the $50 level on Thursday. I can't find any news to explain the big volume on Thursday that was three times the normal. Nor could I find any news to account for the relative weakness and profit taking on Friday. If the profit taking continues we can look for short-term support near $46 and its 50-dma.

Readers should note that EPD is due to report earnings on Feb. 1st, prior to the opening bell. Analysts are expecting a profit of 55 cents a share. I am raising our stop loss up to $43.75 and would buy any dips near support at $44.00.

Earlier Comments:
Our long-term target is $59.00 but bear in mind that EPD doesn't normally move very fast. FYI: The Point & Figure chart for EPD is bullish with a $69 target. I am listing the 2013 calls but there are also 2014s available (with a much wider spread).

- Suggested Positions -
Nov 21, 2011 - entry price on EPD @ 45.17, option @ 1.45
symbol: EPD1319A50 2013 JAN $50 call - current bid/ask $ 1.85/ 1.90

01/28/12 new stop loss @ 43.75
01/21/12 new stop loss @ 43.40
01/06/12 EPD (and PAA) both see sharp intraday dips (-5% or more)
12/31/11 2013 Jan $50 call spreads have improved significant.
12/24/11 spreads on the 2013 Jan $50 calls have widened significantly.
12/08/11 EPD gapped down on news of a 9 million share secondary price at $44.68.

Current Target: $59.00
Current Stop loss: 43.75
Play Entered on: 11/21/11
Originally listed in the New Plays 11/19/11


FedEx Corp. - FDX - close: 92.95

Comments:
01/28/12 update: FDX continues to drift higher with another weekly gain. Shares are now up four weeks in a row. Although if you study the intraday chart you can see that FDX has been struggling with resistance near the $93.50 level.

I am not suggesting new positions at this time but short-term traders could use a breakout past $93.50 as an entry point and target a run towards $99. We will raise our stop loss to $84.75. More conservative investors might want to raise their stop even higher. FYI: The Point & Figure chart for FDX is bullish with a $101 target.

- Suggested Positions -
Jan 11, 2011 - entry price on FDX @ 88.08, option @ 5.52
symbol: FDX1319A100 2013 JAN $100 call - current bid/ask $ 6.60/ 6.80

01/28/12 new stop loss @ 84.75
01/21/12 new stop loss @ 83.40

Current Target: $98.00
Current Stop loss: 84.75
Play Entered on: 01/11/12
Originally listed on the Watch List: 12/31/11


Hewlett-Packard - HPQ - close: 27.88

Comments:
01/28/12 update: HPQ's rally hit a new relative high on Monday and then shares spent the rest of the week fading lower. HPQ should find support near $27.00. More conservative investors might want to raise their stop loss closer to the $26.00 area. I am not suggesting new positions at this time.

- Suggested (SMALL) Positions -
Longer-term Trade
Sep 26, 2011 - entry price on HPQ @ 22.59, option @ 3.75
symbol: HPQ1319A25 2013 JAN $25 call - current bid/ask $ 5.05/ 5.15
Stop Loss @ 24.75

12/03/11 new stop loss @ 24.75
11/19/11 Readers need to decide: Take profits now (+76%) or hold on and expect some volatility following HPQ's earnings report on Nov. 21st
10/31/11 scheduled exit for the remainder of our 2012 calls @ the open. Options opened at $5.40 (+100%), plus we sold half of our 2013 $25 calls, which opened at $5.70 (+52%).
10/29/11 new stop loss on 2013 calls at $23.90
10/29/11 prepare to exit remainder of 2012 position on Monday @ open
prepare to sell 1/2 (half) of 2013 position on Monday at open
10/17/11 Planned exit, sell 1/2 of 2012 position, bid @ 4.10 (+52.4%)
10/15/11 new stop loss for the 2012 position @ 22.85
10/15/11 Plan to sell 1/2 of 2012 calls on Monday
10/08/11 new stop loss (both positions) at $21.40

Current Target: 2013 call target: 32.50
Play Entered on: 09/26/11
Originally listed in New Plays: 09/24/11


Kraft Foods Inc. - KFT - close: 38.47

Comments:
01/28/12 update: KFT tagged a new multi-year high on Thursday but could not hold on to these gains. Shares settled down -20 cents for the week. You could argue that KFT is overbought given its multi-week rally. If stocks see a correction then look for support near $37 or $36. Readers may want to go ahead and take profits now.

Earlier Comments:
The Point & Figure chart is forecasting a long-term target at $49.50. KFT is normally a very slow moving stock. It will take months to make any progress. Once a position is open readers may want to turn these into calendar spreads (a.k.a. vertical spreads).

- Suggested (SMALL) Positions -
Sep 22, 2011 - entry price on KFT @ 32.71, option @ 2.35
symbol: KFT1319A35 2013 JAN $35 call - current bid/ask $ 4.55/ 4.70

01/21/12 new stop loss @ 35.40
Readers may want to exit now with the call +102%
12/31/11 Investors may want to take profits now.
12/28/11 begins trading ex-dividend
12/24/11 new stop loss @ 34.25
12/03/11 new stop loss @ 33.85, adjusted exit target to $40.00
11/12/11 new stop loss @ 32.40

Current Target: $40.00
Current Stop loss: 35.40
Play Entered on: 09/22/11
Originally listed on the Watch List: 09/17/11


Kimberly-Clark Corp. - KMB - close: 71.13

Comments:
01/28/12 update: It was not a great week for KMB. The company reported earnings on Jan. 24th. KMB missed by 2 cents and then guided lower. The stock spiked down toward technical support at its rising 100-dma and has since churned sideways. If the pull back continues then look for support near $70 or the $69.00 area, where KMB's 200-dma is rising to.

I am not suggesting new positions at this time.

Earlier Comments:
KMB does have long-term resistance in the $73.00-73.50 area. Therefore we will only start with small (half-sized) positions. When KMB closes above $74.00 we'll reconsider adding new positions to this play. Our long-term target is $79.75 but we'll readjust it as the play progresses. The Point & Figure chart is currently suggesting a long-term target of $109. NOTE: KMB does not move very fast. Investors may want to try and maximize their returns by changing this into a vertical (a.k.a. calendar) spread.

FYI: The P&F chart's bullish target has risen from $98 to $109.

- Suggested Positions -
(half sized position)
Nov 07, 2011 - entry price on KMB @ 69.50, option @ 2.05
symbol: KMB1319A75 2013 JAN $75 call - current bid/ask $ 1.65/ 1.75

12/24/11 New stops loss @ 68.25. KMB has broken out to all-time highs.

Current Target: $79.75
Current Stop loss: 68.25
Play Entered on: 11/07/11
Originally listed in the New Plays 11/05/11


LDK Solar Co. Ltd. - LDK - close: 4.91

Comments:
01/28/12 update: The profit taking that began two weeks ago continued into last week. Although it looks like LDK has started to reverse higher in just the last couple of sessions. Aggressive traders could buy this bounce but if you do I would consider a stop loss closer to $4.20 or $4.40 instead of our stop at $3.90.

- Suggested Positions -
(buy LDK stock)
Dec 23, 2011 - entry price on LDK @ 5.31

- or -

Dec 23, 2011 - entry price on LDK @ 5.31, option @ 0.89
symbol: LDK1319A5 2013 JAN $5 call - current bid/ask $ 0.61/ 0.87

01/14/12 new stop loss @ 3.90
01/07/12 new stop loss @ 3.60

Current Target: $ 9.00
Current Stop loss: 3.60
Play Entered on: 12/23/11

Originally listed on the Watch List: 12/17/11


Eli Lilly - LLY - close: 39.20

Comments:
01/28/12 update: It's not looking so hot for LLY. After a two-week consolidation sideways the stock is breaking down into a bearish trend of lower highs and lower lows. LLY is now testing support near $39.00. If this level breaks then it's probably a quick drop toward the next level of support near $38.00 instead. I am raising our stop loss up to $37.75. I am not suggesting new positions at this time. LLY is due to report earnings on Jan. 31st, before the opening bell. Wall Street expects a profit of 80 cents a share.

- Suggested (SMALL) Positions -
Jan 05, 2012 - entry price on LLY @ 39.50, option @ 1.19
symbol: LLY1319A45 2013 JAN $45 call - current bid/ask $ 1.23/ 1.35

- or -

Jan 05, 2012 - entry price on LLY @ 39.50, option @ 2.75
symbol: LLY1418A45 2014 JAN $45 call - current bid/ask $ 1.37/ 2.10

01/28/12 new stop loss @ 37.75

Current Target: $44.75 & 48.00
Current Stop loss: 37.40
Play Entered on: 01/05/12

Originally listed on the Watch List: 12/17/11


Lexmark Intl. Inc. - LXK - close: 35.99

Comments:
01/28/12 update: After a midweek pull back shares of LXK surged on Friday with a +2.5% gain. The stock looks poised to breakout to new relative highs. However, investors need to be aware that LXK is due to report earnings on Jan. 31st, before the opening bell. Analysts estimates are at $1.16 a share. I am not suggesting new positions in front of earnings and I would not be surprised to see some profit taking on the news. Look for support near $34.0 or its 50-dma. More conservative traders might want to raise their stop loss.

Earlier Comments:
There is some resistance near $40 but our long-term target is $44.00. NOTE: LXK is scheduled to report earnings on January 31st, before the opening bell. More conservative traders might want to wait and see how the market reacts to LXK's results before considering new positions. FYI: The Point & Figure chart on LXK is bullish with a $51 target.

- Suggested Positions -
Jan 19, 2012 - entry price on LXK @ 35.46, option @ 3.40
symbol: LXK1319A40 2013 JAN $40 call - current bid/ask $ 3.30/ 3.60

Current Target: $44.00
Current Stop loss: 31.75
Play Entered on: 01/19/12
Originally listed on the Watch List: 01/07/12


3M Co. - MMM - close: 87.46

Comments:
01/28/12 update: It was another bullish week for MMM. A better than expected earnings report on Jan. 26th helped propel the stock to new relative highs. Nimble traders might want to consider buying calls on a dip near the 10-dma or the $85.00 level.

- Suggested Positions -
Jan 19, 2012 - entry price on MMM @ 85.10, option @ 3.30
symbol: MMM1319A95 2013 JAN $95 call - current bid/ask $ 3.50/ 3.60

Current Target: $97.00
Current Stop loss: 78.90
Play Entered on: 01/19/12
Originally listed on the Watch List: 12/03/11


Nike Inc. - NKE - close: 102.11

Comments:
01/28/12 update: NKE continues to drift higher. You could argue that the stock is short-term overbought here. If you're looking for a new entry point I'd prefer to see a new dip and bounce in the $100-99 area.

NOTE: Our call price has not moved from last week's close.

Earlier Comments:
FYI: The Point & Figure chart for NKE is bullish with a $115 target.

NOTE: 2014 calls are available but they are high-dollar options.

- Suggested Positions -
Jan 13, 2012 - entry price on NKE @ 98.39, option @ 4.95
symbol: NKE1319A110 2013 JAN $110 call - current bid/ask $ 6.00/ 6.15

Current Target: $119.00
Current Stop loss: 92.25
Play Entered on: 01/13/12
Originally listed on the Watch List: 12/24/11


ON Semiconductor Corp. - ONNN - close: 8.86

Comments:
01/28/12 update: After the breakout higher two weeks ago shares of ONNN have been stuck moving sideways. Shares have resistance at their 300-dma (near $9.15). The stock should have support at prior resistance near $8.50. One of these levels will likely get broken this week after ONNN reports earnings. Unfortunately, I can't find a confirmed earnings date but the company will probably announce in the first week of February. If I had to guess I'd look for ONNN to announce on Thursday or Friday (Feb. 2nd or 3rd). At this point we want to wait and see how the market reacts to ONNN's report before considering new bullish positions.

- Suggested (small) Positions -
Jan 19, 2012 - entry price on ONNN @ 8.96, option @ 1.00
symbol:ONNN1319A10 2013 JAN $10 call - current bid/ask $ 1.00/ 1.15

Current Target: $11.45
Current Stop loss: 7.70
Play Entered on: 01/19/12
Originally listed on the Watch List: 12/10/11


Pepsico, Inc. - PEP - close: 65.81

Comments:
01/28/12 update: Uh-oh! The rally last week failed at resistance near $67.00. Is PEP forming another top? I am not suggesting new positions at this time. Should the market dip then look for PEP to retest support near its 50-dma, currently near $65.00.

FYI: PEP is due to report earnings on Feb. 9th.

- Suggested (SMALL) Positions -
Dec 27, 2011 - entry price on PEP @ 66.47, option @ 2.70
symbol: PEP1319A70 2013 JAN $70 call - current bid/ask $ 1.65/ 1.75

01/14/12 PEP and its rivals are all showing weakness. Readers may want to raise their stop loss
12/27/11 launch positions at the open on Tuesday
12/23/11 PEP meets our entry point requirements at the closing bell.

Current Target: $71.75
Current Stop loss: 62.75
Play Entered on: 12/27/11
Originally listed on the Watch List: 12/10/11


QUALCOMM Inc. - QCOM - close: 57.79

Comments:
01/28/12 update: QCOM rallied to new six-month highs and reversed. Shares still managed to eke out a small gain for the week but the action last week was bearish. Earnings are coming up on February 1st. QCOM will report after the closing bell and Wall Street expects a profit of 90 cents a share. I am not suggesting new positions ahead of the earnings report. If the stock corrects then look for a dip toward the $55-54 zone.

- Suggested (SMALL) Positions -
NOV 23, 2011 - entry price on QCOM @ 52.50, option @ 4.90
symbol: QCOM1319A60 2013 JAN $60 call - current bid/ask $ 5.20/ 5.30

01/07/12 new stop loss @ 51.45. Investors may want to exit early. The worry of potential accounting risks have cast a shadow over QCOM.
11/23/11 QCOM hits our trigger @ 52.50

Current Target: $74.50
Current Stop loss: 51.45
Play Entered on: 11/23/11
Originally listed on the Watch List: 11/05/11


Reynolds American Inc. - RAI - close: 39.42

Comments:
01/28/12 update: Hmm... the trading in RAI has definitely taken a turn for the worst. As a matter of fact almost all of the tobacco stocks (MO, PM, and LO) are underperforming. MO just reported earnings that beat by a penny but investors sold the news anyway. Unfortunately for us shares of RAI have broken down under support at its 50-dma two weeks ago and under the $40.00 level this past week. Now shares are testing the simple 100-dma and look poised to drop toward the 200-dma near $38.25 soon.

More conservative investors will want to seriously consider an early exit right now given this relative weakness and bearish breakdown in RAI. I'm not ready to give up just yet. We will leave our stop loss at $37.85 for now.

- Suggested Positions -
Nov 18, 2011 - entry price on RAI @ 40.02, option @ 2.00
symbol: RAI1319A42.5 2013 JAN $42.50 call - current bid/ask $ 1.10/ 1.20

01/28/12 RAI and the rest of the tobacco stocks are underperforming. Readers might want to exit early now given RAI's relative weakness.

Current Target: $49.00
Current Stop loss: 37.85
Play Entered on: 11/18/11
Originally listed on the Watch List: 10/22/11


Starbucks Corp. - SBUX - close: 47.85

Comments:
01/28/12 update: SBUX delivered a strong earnings report this past week. The company beat Wall Street's estimates by 2 cents and beat the revenue estimate. SBUX management raised their 2012 guidance as well. Yet after a multi-week rally off its late November lows SBUX didn't move much on the news. The initial reaction was to sell but SBUX bounced near short-term support in the $47.00 area. I am still concerned that SBUX is overbought and I'm not suggesting new positions at this time.

I am raising our stop loss up to $42.40.

FYI: The Point & Figure chart for PEP is bullish with a long-term $75 target.

NOTE: 2014 calls are also available.

- Suggested (SMALL) Positions -
Dec 27, 2011 - entry price on SBUX @ 45.40, option @ 4.00
symbol: SBUX1319A50 2013 JAN $50 call - current bid/ask $ 4.15/ 4.25

01/28/12 new stop loss at $42.40
12/27/11 launch positions at the open on Tuesday

Current Target: $55.00
Current Stop loss: 42.40
Play Entered on: 12/27/11
Originally listed on the Watch List: 12/10/11


Teva Pharmaceuticals - TEVA - close: 44.91

Comments:
01/28/12 update: TEVA has spent several days trying to get past the $46.00 but finally ran out of steam. The stock dipped toward short-term support at $44.00 on Friday before paring its losses. On the weekly chart the action last week has painted a bearish engulfing candlestick pattern. Odds seem to be growing for a deeper pull back in TEVA. I am not suggesting new positions at this time. Let's wait and see if shares correct toward the $43-42 area first. FYI: The Point & Figure chart for TEVA is bullish with a $57 target.

NOTE: TEVA is due to report earnings on Feb. 15th.

- Suggested Positions -
Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 2.49
symbol: TEVA1319A50 2013 JAN $50 call - current bid/ask $ 1.86/ 1.91

- or -

Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 4.40
symbol: TEVA1418A50 2014 JAN $50 call - current bid/ask $ 3.45/ 3.90

Current Target: $54.00
Current Stop loss: 39.75
Play Entered on: 01/19/12

Originally listed on the Watch List: 01/14/12


Verizon Communications - VZ - close: 37.21

Comments:
01/28/12 update: Uh-oh! VZ is sinking and appears to be taking on water pretty fast. Shares already looked vulnerable prior to its earnings report on Jan. 24th. The company reported results that missed by a penny. The stock spiked down on this news, breaking support near $38.00 and its 50-dma. Now shares are sinking toward the next level of support at $37 and its 200-dma.

More conservative investors will want to strongly consider an early exit right now. I am not suggesting new positions but I am expecting a bounce near $37.00.

- Suggested Positions -
Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.17
symbol: VZ1319A40 2013 JAN $40 call - current bid/ask $ 1.04/ 1.07

- or -

Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.87
symbol: VZ1418A40 2014 JAN $40 call - current bid/ask $ 1.80/ 1.90

01/28/12 readers may want to consider an early exit immediately
01/24/12 VZ reported earnings and missed by a penny. Shares broke down on this news.

Current Target: $45.00
Current Stop loss: 36.75
Play Entered on: 12/23/11

Originally listed on the Watch List: 12/17/11


U.S. Steel Corp. - X - close: 29.88

Comments:
01/28/12 update: It turned out to be a bullish week for X. The stock broke through resistance near $29.00. Shares are currently flirting with a bullish breakout past the $30.00 level and its 150-dma. The trend of higher lows is definitely bullish. However, this could all change if X disappoints. The company is due to report earnings on Jan. 31st, before the opening bell. Analysts are expecting X to deliver a loss of -83 cents a share.

I am not suggesting new positions prior to the earnings report. Conservative investors might want to exit early now to lock in a +10% gain. Personally, we are hanging on although this could be a volatile week. If the stock sells off I would look for support near $27 and its 50-dma.

We will raise our stop loss to $24.75.

Earlier Comments:
This is an aggressive trade because X can be volatile and we have a wide stop loss. That's why we're using small positions to limit our risk.

- Suggested (SMALL) Positions -
Nov 09, 2011 - entry price on X @ 25.50, option @ 5.00
symbol: X1319A30 2013 JAN $30 call - current bid/ask $ 5.50/ 5.60

01/28/12 new stop loss @ 24.75
01/14/12 new stop loss @ 23.60
12/03/11 new stop loss at $21.90
11/09/11 Trade opened at $25.50 (small positions)

Current Target: $37.50
Current Stop loss: 24.75
Play Entered on: 11/09/11
Originally listed on the Watch List: 11/05/11


Exxon Mobil - XOM - close: 85.83

Comments:
01/28/12 update: Earnings out of the energy sector have not been that great thus far. Rival CVX reported on Friday and missed by 36 cents. Of course I am not surprised to see profit taking in XOM with shares hovering under resistance near $88 and its 2011 highs. This week it's XOM's turn. The company reports earnings on Jan. 31st, prior to the opening bell. Wall Street is looking for a profit of $1.97 a share. If XOM does see more profit taking we can look for support near $84 or $82. I am not suggesting new positions at this time.

Earlier Comments:
There is potential resistance at $85 and $87.50 but our long-term target is $94.00.

- Suggested Positions -
Dec 22, 2011 - entry price on XOM @ 83.56, option @ 4.63
symbol: XOM1319A90 2013 JAN $90 call - current bid/ask $ 4.40/ 4.50

- or -

Dec 22, 2011 - entry price on XOM @ 83.56, option @ 6.25
symbol: XOM1418A95 2014 JAN $95 call - current bid/ask $ 5.35/ 5.55

01/28/12 readers may want to raise their stop prior to earnings
01/21/12 new stop loss at $79.40
01/07/12 new stop loss @ 77.90

Current Target: $94.00
Current Stop loss: 79.40
Play Entered on: 12/22/11

Originally listed on the Watch List: 12/03/11


CLOSED Plays


CurrencyShares Euro ETF - FXE - close: 131.63

Comments:
01/28/12 update: Our FXE put play did not last very long. The beleaguered euro currency finally produced an oversold bounce. Yet there were so many shorts that the rebound continued. Then the U.S. Federal Reserve announced this past week that they were keeping rates near zero for the next two years (into 2014) and hinted at further quantitative easing. That helped push the U.S. dollar lower and the euro rallied in response in spite of all the unsolved problems in Europe.

Let's be clear about the situation in Europe. Greece still hasn't agreed to the details on their debt haircut announced months ago. Meanwhile bond yields in Portugal are soaring and well above sustainable levels. The latest data from Spain shows unemployment rising back toward 23%. The long, drawn out EU nightmare is not over yet. I do expect the FXE to hit new relative lows. I suggest keeping it on your watch list for a new bearish entry point, maybe on a failed rally near the $135 area.

Our recent trade was stopped out on Jan. 26th when the FXE hit our stop at $131.25. The bid on our 2013 Jan $120 put was trading at $3.15.

- Suggested Positions - (This is a bearish PUT trade)

Jan 06, 2012 - entry price on FXE @ 127.01, option @ 5.60
symbol: FXE1319M120 2013 JAN $120 PUT - exit $3.15 (-43.7%)

01/26/12 stopped out at $131.25.

Chart of FXE:

Current Target: $120.00
Current Stop loss: 131.25
Play Entered on: 01/06/12

Originally listed on the Watch List: 12/31/11


Sherwin-Williams Co. - SHW - close: 97.20

Comments:
01/28/12 update: Target achieved.

A week ago we were concerned that SHW was overbought and might see some profit taking so we planned to go ahead and take profits by selling half at the open on Monday (Jan 23rd). SHW opened a bit down on Jan. 23rd at $95.67 and the bid on our 2013 Jan. $100 call was at $5.75 (+47.4%).

The stock spiked higher on Thursday morning following its earnings report. The funny thing is that SHW actually missed estimates by 9 cents. Yet the stock spiked to $99.60. Our target was hit at $99.00. The bid on our call hit $7.50 (+92.3%).

- Suggested Positions -
Dec 23, 2011 - entry price on SHW @ 88.92, option @ 3.90
symbol: SHW1319A100 2013 JAN $100 call - exit $7.50 (+92.3%)

01/26/12 final exit target hit @ 99.00, bid @ 7.50* (+92.3%)
*option did not trade at the time our exit was hit. this is an estimate
01/23/12 take profits at the open. Bid @ $5.75 (+47.4%)
01/21/12 sell half on Monday, Jan. 23rd at the open
01/21/12 new stop loss @ 87.75
01/14/12 new stop loss @ 86.75, adjust exit target to $99.00
01/07/12 new stop loss @ 84.40

Chart of SHW:

Current Target: $99.00
Current Stop loss: 86.75
Play Entered on: 12/23/11

Originally listed on the Watch List: 12/03/11



Watch

Four New Candidates

by James Brown

Click here to email James Brown


New Watch List Entries

ADM - Archer-Daniel-Midland Co.

LVS - Las Vegas Sands

MRVL - Marvell Technologies

RDC - Rowan Companies


Active Watch List Candidates

FXI - iShares China ETF

MCD - McDonald's Corp

MSI - Motorola Solutions

SHAW - Shaw Group

V - Visa Inc.

YUM - Yum,! Brands


Dropped Watch List Entries

ATVI has been removed.



New Watch List Candidates:


Archer-Daniels-Midland Company - ADM - close: 29.82

Company Info

ADM is in the consumer goods sector and more specifically in the agriculture and farm products industry. Shares have been slowly chewing their way higher. The last several days have seen ADM break through resistance near $29.50 and its simple and exponential 200-dma. Now the stock will soon be challenging resistance in the $30.50-31.00 zone. ADM might be able to break out higher on a strong earnings report. The company is due to report on January 31st. The announcement comes out before the opening bell. Analysts are expecting 77 cents a share.

I am suggesting we open small bullish positions if ADM can close over $31.00. We'll use a stop loss at $28.40. Our long-term target is $37.75.

Breakout trigger: Wait for ADM to close over $31.00 and then buy calls the next day with a stop loss at $28.40.

BUY the 2013 JAN $35 CALL (ADM1319A35)

FYI: 2014 calls are also available.

Chart of ADM:

Originally listed on the Watch List: 01/28/12


Las Vegas Sands - LVS - close: 49.52

Company Info

This casino and gambling stock has been stuck in a $35-50 trading range for over a year. Now LVS is on the verge of a breakout past major resistance near $50.00. That could happen if the company delivers good news when they report earnings on Feb. 1st. The earnings announcement comes out after the closing bell. Wall Street is expecting a profit of 56 cents a share.

I am suggesting we wait for LVS to close over $51.25 and then buy calls the next day with a stop loss at $47.45. Our long-term target is $69.00. Coincidentally the P&F chart is bullish with a $69 target.

Breakout trigger: Wait for LVS to close over $51.25 and then buy calls the next day with a stop loss at $47.45.

BUY the 2013 Jan $60 call (LVS1319A60)

Chart of LVS:

Originally listed on the Watch List: 01/28/12


Marvell Technology - MRVL - close: 15.79

Company Info

Shares of this semiconductor stock have been stuck under resistance near the $16.00 area for almost a year. Now MRVL is on the verge of a breakout. I am suggesting we wait for MRVL to close over $16.50 and then buy calls the next day with a stop loss at $15.20. Our target is $21.75.

FYI: The Point & Figure chart is bullish with a $21 target. Meanwhile MRVL is due to report earnings on Feb. 23rd.

Breakout trigger: Wait for MRVL to close over $16.50 and then buy calls the next day with a stop loss at $15.20.

BUY the 2013 Jan $17.50 call (MRVL1319A17.5)

Chart of MRVL:

Originally listed on the Watch List: 01/28/12


Rowan Companies - RDC - close: 35.12

Company Info

RDC is in the energy sector. The company provides drilling services. This past month has seen RDC breakout past a multi-month trend line of resistance. Yet the rally has stalled near $35 and its simple 200-dma. This high this past week was $36.25.

I am suggesting we wait for RDC to close over $36.50 and then buy calls the next day with a stop loss at $33.45. Our long-term target is $44.50.

FYI: RDC is due to report earnings on Feb. 28th.

Breakout trigger: Wait for RDC to close over $36.50 and then buy calls the next day with a stop loss at $33.45.

BUY the 2013 Jan $40 call (RDC1319A40)

FYI: 2014 calls are also available.

Chart of RDC:

Originally listed on the Watch List: 01/28/12


Active Watch List Candidates:



Activition/Blizzard, Inc. - ATVI - close: 12.15

Comments:
01/28/12 update: I have run out of patience with ATVI. The market's major indices hit new relative highs this past week but ATVI is not participating. We are removing ATVI from the watch list. Our trade never opened.

Readers may want to keep an eye on this stock. The company will report earnings on Feb. 9th.

Wait for a close over $12.75 (stop 11.90)

Our trade did not open.

01/28/12 removed from the watch list.

Originally listed on the Watch List: 11/19/11


iShares China 25 Index ETF - FXI - close: 39.60

Comments:
01/28/12 update: The FXI has continued to drift higher. Shares are nearing what should be resistance near $40.00. The plan is to wait and buy calls only when the FXI has closed above $40.25. More conservative investors may want to wait for a close over $40.50 instead.

Earlier Comments:
After three years of trying to cool off its economy it looks like China has succeeded. This past week the government reported Q4 GDP growth at 8.9%, the slowest pace in ten quarters. Last month the People's Bank of China (PBOC) cut their reserve ratio requirement for banks and many analysts believe they are about to do it again. Cutting the ratio lower provides banks with more cash to loan out. China has already told banks to increase lending in the first quarter. It seems that China has engineered their soft landing, in spite of stories about ghost cities fueled by their need to build to keep workers busy. If the Chinese government starts stoking their economic fire again then their stock market should also heat up.

The FXI China ETF is on the verge of a breakout above resistance in the $39-40 area. You could also argue that the FXI has created an inverse head-and-shoulders pattern and if the neckline is broken (near $39) then it forecasts a bullish target to $49.

Our target is $49.50.

Breakout trigger: Wait for a Close over $40.25, then buy LEAPS the next day. Stop loss at $35.75.

BUY the 2013 Jan $45 call (FXI1319A45)

Originally listed on the Watch List: 01/21/12


McDonald's Corp. - MCD - close: 98.69

Comments:
01/28/12 update: MCD reported earnings on Jan. 24th that beat estimates by 3 cents. The revenue numbers also edged past analyst expectations. Management remains bullish on same-store sales growth. Yet investors sold the news. MCD is back under the $100 level and looks poised to test and break the simple 50-dma.

I am leaving our buy-the-dip trigger at $95.50. More conservative investors may want to wait for MCD to hit the rising 100-dma (approaching $94) before considering new positions. Our long-term target is $108.00.

Buy-the-Dip trigger: $95.50, stop 89.50

BUY the 2013 Jan $100 call (MCD1319A100)

12/24/11 adjusted entry point to $95.50, stop loss to $89.50
12/17/11 adjusted entry point to $91.50, stop loss to $87.25
11/26/11 adjusted stop loss to $86.45

Originally listed on the Watch List: 11/05/11


Motorola Solutions, Inc. - MSI - close: 45.80

Comments:
01/28/12 update: MSI reported earnings on Jan. 25th and beat estimates by five cents. Yet management issued bearish guidance for the first quarter. Shares of MSI plunged from the $48 area toward $44.50 and technical support at its simple 200-dma. Since then MSI has managed to bounce. I'm not ready to give up quiet yet. We'll give MSI another week. If the bounce rolls over or stalls then we'll drop this stock from the watch list.

Currently our plan is to open bullish positions when MSI closes over $48.25 with a stop loss at $43.99.

Our long-term target is $64.50. FYI: 2014 calls are also available.

Wait for MSI to close over $48.25, buy calls the next day, stop 43.75

BUY the 2013 Jan $55 call (MSI1319A55)

01/28/12 MSI underperformed as investors sold the stock following its earnings report. If MSI doesn't improve this week we'll drop it as a candidate.

Originally listed on the Watch List: 12/10/11


Shaw Group Inc. - SHAW - close: 28.08

Comments:
01/28/12 update: SHAW is still hovering near its six-month highs. The stock has found support in the $27.00-27.50 zone. We still don't want to chase it here. We are waiting for a dip back to $25.00 with a stop loss at $22.35. If we do not see SHAW pull back this week we'll re-evaluate and potentially drop it from the watch list.

If triggered I would start with small positions to limit risk. FYI: The Point & Figure chart on SHAW is bullish with a $37 target.

Buy-the-Dip trigger: $25.00, stop loss @ 22.35 (small positions)

BUY the 2013 Jan $30 call (SHAW1319A30)

- or -

BUY the 2014 Jan $30 call (SHAW1418A30)

Originally listed on the Watch List: 01/07/12


Visa, Inc. - V - close: 101.05

Comments:
01/28/12 update: Shares of Visa are still bouncing around the $100 level. Nothing has changed for us. We're still waiting for a pull back toward the $95.00 area. More conservative traders may want to wait for a dip closer to the rising 150-dma instead as your entry point. Keep in mind that Visa has earnings coming out on February 8th and the stock could definitely see some post earnings volatility either direction.

Our long-term target is $119.00.

NOTE: Rival MasterCard (MA) reports earnings on February 2nd.

Buy-the-Dip trigger: $95.50, with a stop loss @ 89.40

BUY the 2013 Jan $110 call (V1319A110)

01/21/12 adjusted buy-the-dip trigger down to $95.50, stop 89.40
01/07/12 Adjusted entry point strategy to buy a dip at $96.00 with a stop at $89.75.

Originally listed on the Watch List: 12/24/11


Yum! Brands, Inc. - YUM - close: 62.85

Comments:
01/28/12 update: YUM is up seven out of the last nine weeks. Shares remain overbought and due for some profit taking. I suspect that profit taking will occur after YUM reports earnings on Feb. 6th.

The plan is to buy a dip at $57.50 with a stop loss at $53.75. Our long-term target is $69.00.

FYI: The Point & Figure chart on YUM is bullish with an $84 target.

Buy-the-Dip trigger: $57.50, stop loss $53.75

BUY the 2013 Jan $60 call (YUM1319A60)

- or -

BUY the 2013 Jan $65 call (YUM1418A65)

01/14/12 adjusted entry point strategy to use a trigger at $57.50 and a stop at $53.75

Originally listed on the Watch List: 01/07/12