Option Investor
Newsletter

Daily Newsletter, Sunday, 2/5/2012

Table of Contents

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

Leaps Trader Commentary

Five Weeks In A Row

by James Brown

Click here to email James Brown

It was another bullish week for stocks and gains are accelerating. The S&P 500 index just posted its fifth weekly gain in a row. The market has been up every week this year. Investors seemed to ignore the lack of progress with Greece and its talks with creditors. Instead the focus was on better than expected economic data culminating in a much better than expected jobs report on Friday morning. The Dow Industrials index closed at levels not seen since 2008. The NASDAQ composite has broken out to new ten-year highs. The volatility index (VIX) fell to new six-month lows. Gold posted a drop for the week and the sell-off in the dollar seems to have stalled. Meanwhile the bond market plunged on Friday's economic data and bond yields surged.

We had a very busy week for economic data. The Chicago PMI for January came in at 60.2, down from 62.5 a month earlier. Economists had been expecting a reading closer to 63. Analysts had been expecting the Consumer Confidence index for January to rise from 64.8 to 67.0 but January's reading came in at 61.1. January same-store sales data from the retailers that still report these numbers came in mixed. That's about it for the disappointing economic numbers. Almost everything else showed signs of improvement.

Wall Street was expecting the ISM manufacturing data for January to rise from 53.1 to 54.5 but the report came in at 54.1. It's a mild disappointment but still the highest level since June 2011. The weekly initial jobless claims fell -12,000 to 367,000, which was better than expected. The ECRI's leading indicator signal has risen three weeks in a row. Auto and truck sales in January set an annual pace of 14.1 million. That's the best sales month since summer 2009. In Europe the German unemployment rate fell to 6.7%, which is a new record low. British consumer confidence rose to its highest level in seven months. In Asia China's manufacturing PMI data was a bit disappointing but still came in above the 50 line, suggesting growth. China's PMI services index dropped from 56 to 52.9, the lowest level since February 2011.

The big headlines were out Friday morning. The U.S. unemployment rate dropped from 8.5% to 8.3%. The January jobs report surged to +243,000 when economists were only expecting +150,000. The ISM services index surged from 52.6 to 56.8. Economists were only expecting a gain to 53. This is the best reading since February 2011. The headline unemployment rate number of 8.3% was a bit controversial. Evidently the big decline was due to the government using updated population figures from the recent 2010 census. The new numbers allowed for a big drop in the labor force participation rate. Suddenly 1.17 million people dropped out of the labor force. At least that's how the detractors are painting the results. Since the unemployment and jobs data is seasonally adjusted there is skepticism that Friday's numbers were artificially inflated for political gain since this is an election year. At the moment none of that matters since Wall Street decided to buy the news and send stocks higher with a really big short squeeze on Friday morning.

Outside of economic data there was an ocean of digital ink spilt in the fever over Facebook's IPO. The social media giant Facebook formally announced plans for an IPO when they filed paperwork this week. Estimates suggest the IPO could value the company between $75 and $100 billion. Last year's big IPOs all pale in comparison. Groupon (GRPN) was valued at $16.5 billion. LinkedIn (LNKD) was valued at $9 billion. Video game maker Zynga (ZNGA) was valued at $6.6 billion. The closest rival for FaceBook's IPO is Google (GOOG), which came to market at $27.2 billion back in 2004. Today GOOG is valued at $193 billion.

Major Indices:

Bulls continue to stampede over the bears. Stocks rebounded off their Monday morning lows. Friday's jobs-inspired rally pushed the market to new relative highs. The S&P 500 is at six-month highs and rapidly approaching resistance near the 1,350 level. Not only is the S&P 500 up +6.9% in the first five weeks of the year but the index is up +11.8% from its mid December low when this rally actually started.

Is the market overbought? Yes. Can it get more overbought? Absolutely. Now imagine that the market is like a rubber band. The longer you stretch it out the bigger the snap back. Ideally, the trend higher continues and the index produces little -3% to -5% corrections that allow investors a chance to reload positions. Right now a -3% correction would be a dip to 1305. A -5% correction is 1,277. I still think the 1300 level offers some round-number, psychological support.

What is important here is that the trend is up and investors seem to be in a buy-the-dip mode. If the S&P 500 can breakout past 1350 then the next level of resistance is the 2011 highs near 1365.

Daily chart of the S&P 500 index:

Weekly chart of the S&P 500 index:

The NASDAQ has been a very strong performer. The composite index is up +11.5% this year already. It's up +15% from its mid December low. You can that the NASDAQ has broken out past major resistance at its 2011 highs. These are levels the NASDAQ has not seen since very late 2000. Once again, is the NASDAQ overbought? Absolutely. Can it keep going? Yes, but odds are growing every day for a snap back correction. You can see on the daily chart that the NASDAQ has rallied to the top of its narrow bullish channel. A pull back would be normal here. A typical -3% to -5% correction would mean a dip to 2,818 to 2,760. Personally, I would not chase it here.

Daily chart of the NASDAQ Composite index:

Weekly chart of the NASDAQ Composite index:

The small cap Russell 2000 index is up +12% this year and up +17.3% from its mid December lows. You can see on both the daily and weekly chart that gains are accelerating. It's unlikely that the $RUT can keep this momentum going for very long. The next level of overhead resistance is the 850-860 area. Will this index get there before reversing? I don't know but when the correction does occur you can bet the small caps are going to get hit the hardest. A typical -3% to -5% correction would mean a pull back toward the 806 and 790 levels. I would expect the 800 level to offer some psychological support.

Daily chart of the Russell 2000 index

Weekly chart of the Russell 2000 index

The economic calendar this week is very light. It makes me wonder if stocks will stall for lack of positive economic data to fuel the rally. We've got the initial jobless claims and wholesale inventories on Thursday. Michigan Sentiment and trade balance figures are released on Friday. None of these are going to be market moving events. Earnings season is winding down as well. This dearth of data will let the focus fall back on Europe and Greece's inability to make any progress negotiating with its creditors.

- Thursday, February 9 -
Weekly Initial Jobless Claims
wholesale inventory data from December

- Friday, February 10 -
Michigan Sentiment figures for February
trade balance data for December

The Week Ahead:

With nothing else to distract it the stock market might choose to focus on the problems with Greece again. What can I say about Greece that hasn't already been said? We already know the country will default eventually. The question is how long does Europe postpone this problem? The answer to that depends on how long they want to keep paying Greece's bills. A week ago Germany wanted Greece to give up control of its budget, which Greece immediately rejected. Yet the EU members that are writing the biggest checks for Greece's bailout are demanding stricter and tighter controls. They want to lay off government workers and a drop in the minimum wage. That's going to be a tough sell in Greece. It's like Germany has finally seen the writing on the wall for Greece and they're going to make new budget requirements for Greece so uncomfortable that Greece will choose to leave the euro zone, which would prompt an immediate default.

Is a Greek default a problem at this point? It would be painful but ultimately it might prove to be the most healthy for both the EU and Greece. Global markets could see a significant knee-jerk reaction to any Greek default but I am starting to suspect it would be temporary. We've been expecting Greece to go bankrupt for so long now that it might be a relief. The bigger problem is what happens after a Greek default? Portuguese bond yields have pulled back a bit this week but they remain extremely high and suggest Portugal is the next country that could crash even though they've already been bailed out once. My concern is that if Greece decides to leave the euro zone then Portugal, Ireland and Spain could be next. What will that do to the global banking system?

On a short-term basis the bond yields in Spain are ticking lower, which is good. Bond yields around the EU should continue to see pressure lower next month as well. The ECB's LTRO three-year cheap money program for European banks has been credited with solving the area's liquidity issues in addition to bringing down bond yields. It is suspected that European banks are taking this three-year 1% money and buying short-term sovereign debt at higher yields. The ECB is about to do it again with another round of LTRO money in late February. Speculation is that the ECB could lend up to $1 trillion in the next round. Meanwhile Greece continues to argue with the troika over its budget requirements for the next bailout package and it's arguing with private money investors on the details of their bond haircut. Greece has to get a deal done with the private money guys or the EU isn't going to fund the next aid installment loan. We already know that Greece has a $14 billion payment coming up in March.

Elsewhere in the world it seems the Iran/Israel conflict is heating up again. Israel continues to warn the world that we're running out of time to stop Iran from developing a nuclear weapon. Many are speculating that Israel could try some sort of surgical strike at Iran's nuclear complex before summer is over. Iran is not one to sit idly by and the country recently warned the West that a big event was coming. It sounded like more religious rhetoric about the coming 12th Imam, the Islamic Messiah. We've heard this message before yet Israel took it a step further and warned its people around the world that Iran could target Jewish facilities, including those located in North America. Why does this matter to the stock market? Any strike on Iran would send oil prices skyrocketing higher. Iran has promised to cripple the West and shutdown the Strait of Hormuz if attacked. Nearly a third of all oil tankers flow through the Strait of Hormuz. Stopping traffic there would have significant impact on the globe. The U.S. has promised they won't let Iran shut down this key shipping lane. Is this a key issue this week? Unlikely but it's in the background and probably keeping oil prices elevated.

What I would focus on is bond yields. Bond yields are so low right now that there isn't much room left for investors to make a profit. Yes, bonds are "safer" than equities but look at the stock market rally many investors have missed out on this year. It hasn't happened yet but we could see money start to flow out of bonds and into stocks. When that reversal actually happens it could fund the stock market rally for a long time. The key will be economic data. This past week we saw a handful of very positive reports. If this trend continues and the economy starts to gain momentum then investors will feel more confident owning stocks.

On a short-term basis I am concerned the market is overbought. Can it grow more over bought? Yes, it can. However, I'd prefer to wait for some sort of correction before putting any significant amount of money to work.

- James


Portfolio

Portfolio Update

by James Brown

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Current Portfolio


Portfolio Comments:

The S&P 500 index has extended its 2012 gains to five weeks in a row. The market trend is definitely higher but stocks are growing overbought. The S&P 500 is up almost +7% in 2012 already. The small cap Russell 2000 is up over +12%.

Conservative traders may want to start thinking about taking some money off the table since the 1350 area could be tough resistance for the S&P 500. Eventually the market will see a correction, which is healthy and set up for another entry point.

MRVL and RDC have jumped from the watch list to our portfolio.

I have updated stop losses on: BZH, CSCO, CSX, EPD, FDX, HPQ, KFT, LDK, LXK, MMM, NKE, ONNN, PEP, QCOM, TEVA, 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

China & Casinos

by James Brown

Click here to email James Brown

Editor's Note:

FXI and LVS are both watch list candidates that met our entry point requirements at Friday's closing bell. These plays will open on Monday morning.


- New Trades -


iShares China 25 Index ETF - FXI - close: 40.49

Comments:
02/04/12 update: The U.S. stock market's rally has been impressive and it's helping fuel gains overseas. The FXI rebounded off support near $38 and its exponential 200-dma on Monday. It's been up every day since. Friday saw the FXI breakout past resistance near $40.00 and close over our trigger at $40.25.

The plan is to open bullish positions on Monday morning. However, investors should note that the Chinese markets will likely rally on Monday in response to the big move higher in the U.S. on Friday. That will push the FXI to gap open higher more than normal this Monday. Readers may want to wait for a pullback near the $40 area or its simple 10-dma before initiating positions.

We will start this trade with a stop loss at $35.95, under the 50-dma.

Earlier Comments:
There is a growing expectation that the Chinese government will start to fuel growth in an effort to avoid a hard landing. The most recent data listed GDP growth at under 9%, the lowest reading in 10 quarters.

Our target is $49.50.

- Suggested Positions -
Feb 06, 2012 - entry price on FXI @ --.--, option @ -.--
symbol: FXI1319A45 2013 JAN $45 call - current bid/ask $ 1.97/ 2.03

02/04/12 FXI met our entry point requirement at the close on Friday. Open positions on Monday, Feb. 6th.

Chart of FXI:

Current Target: $49.50
Current Stop loss: 35.95
Play Entered on: 02/06/12

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


Las Vegas Sands - LVS - close: 51.91

Comments:
02/04/12 update: The rally in LVS continues. Shares broke out past major resistance in the $50-51 zone last week. After almost a year of consolidating sideways LVS should be ready to run. The Point & Figure chart is bullish and has seen its target rise from $69 to $72.

Our plan was to wait for LVS to close over $51.25 and open positions the next day. LVS met that entry point requirement on Friday. The play will open on Monday morning. You could argue LVS is overbought with its four-week rally. More conservative traders might want to wait for a dip back toward $50.00 or its simple 10-dma as an alternative entry point. We're starting this trade with a stop loss at $47.45. Our long-term target is $69.00.

- Suggested Positions -
Feb 06, 2012 - entry price on LVS @ --.--, option @ -.--
symbol: LVS1319A60 2013 JAN $60 call - current bid/ask $ 4.30/ 4.40

02/04/12 LVS met our entry point requirement at the close on Friday. Open positions on Monday, Feb. 6th.

Chart of LVS:

Current Target: $69.00
Current Stop loss: 47.45
Play Entered on: 02/06/12

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


Play Updates

Update Your Stop Losses

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market continues to rally into 2012. Tonight we are updating several stop losses following the market's recent gains.

You'll also noticed that MRVL and RDC are new stocks on the active trade list.


Closed Plays


None. No closed plays this week.


Play Updates


Allergan Inc. - AGN - close: 86.08

Comments:
02/04/12 update: We may want t re-think our AGN position. The company reported earnings that were in-line with expectations on Feb. 2nd. Yet management guided lower for 2012. The stock sold off on Thursday in reaction to this news. Traders bought the dip near AGN's 100-dma. Now the $86.50-87.00 zone is new overhead resistance. More conservative traders may want to consider an early exit now. 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 $ 1.90/ 2.50

02/02/12 earnings in-line but guided lower for 2012
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: 7.84

Comments:
02/04/12 update: Financials were strong performers last week. BAC gained +7.5% for the week and broke through resistance near the $7.50 level. Shares are now approaching resistance near $8.00 and its simple and exponential 200-dma. Odds are growing that BAC could see some profit taking but the new trend certainly seems to be higher.

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 $ 0.57/ 0.58
(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 $ 0.57/ 0.58
(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: 32.26

Comments:
02/04/12 update: I am growing more concerned over BMY. The stock market rallied to new highs and BMY failed to participate. Shares are chopping sideways in the $32.00-32.50 zone. More conservative traders may want to exit early here. I am not suggesting new positions at this time.

We have a stop loss at $31.45 but more aggressive traders might want to put their stop under the $30.00 mark or the simple 200-dma.

- Suggested Positions -
SEP 19, 2011 - entry price on BMY @ 30.53, option @ 1.20
symbol: BMY1319A35 2013 JAN $35 call - current bid/ask $ 1.01/ 1.05

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: 3.60

Comments:
02/04/12 update: It was a strong week for BZH with a +10.7% gain. The company reported earnings on Feb. 2nd and beat estimates by a penny. Revenues surged +73% compared to a year ago but still missed estimates. The company's backlog of homes to build rose from 787 homes to 1,307 compared to a year ago.

BZH has surged past resistance in the $3.40-3.50 zone but I am concerned the stock is short-term overbought. We should expect some profit taking. However, the trend is definitely higher. I am raising our stop loss to $2.60.

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 $ 1.60/ 1.75

02/04/12 new stop loss @ 2.60
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: 2.60
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/22/11


Cisco Systems - CSCO - close: 20.09

Comments:
02/04/12 update: CSCO has finally broken out above round-number, psychological resistance at the $20.00 level. Technically this looks like a potential entry point but I wouldn't buy it now. CSCO is due to report earnings on Feb. 8th after the closing bell. Analysts are expecting a profit of 43 cents a share.

We are raising our stop loss up to $17.75.

- Suggested Positions -
OCT 28, 2011 - entry price on CSCO @ 18.28, option @ 1.68
symbol: CSCO1319A20 2013 JAN $20 call - current bid/ask $2.19/2.21

02/04/12 new stop loss @ 17.75
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: 17.75
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/08/11


CSX Corp. - CSX - close: 23.17

Comments:
02/04/12 update: CSX is still lagging behind the market indices and its peers in the railroad industry but the overall pattern still looks bullish. The stock has been consolidating sideways the last few days. The DJUSRR railroad index is about to breakout past major resistance to new highs. If this occurs it should help boost shares of CSX.

We are moving our stop loss higher to $20.75.

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 $ 1.55/ 1.60

- or -

NOV 14, 2011 - entry price on CSX @ 22.59, option @ 3.30
symbol: CSX1418A25 2014 JAN $25 call - current bid/ask $ 2.64/ 2.85

02/04/12 new stop loss @ 20.75
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: 20.75
Play Entered on: 11/14/11
Originally listed in the New Plays 11/12/11


The Dow Chemical Co. - DOW - close: 34.18

Comments:
02/04/12 update: DOW has been struggling to get past resistance near the $34.00 level the past several days. The market's big rally on Friday helped boost DOW past this level. Shares remain arguably overbought here. I am surprised that DOW did not have a really bad week. The company reported earnings on Feb. 2nd and missed estimates by five cents and missed the revenue estimate as well. Management was cautious on the first quarter. Yet the stock refused to sell-off.

I am not suggesting new positions at this time. DOW will see some profit taking eventually.

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 $ 3.35/ 3.45

- or -

Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.54
symbol: DOW1418A40 2014 JAN $40 call - current bid/ask $ 3.00/ 3.20

02/02/12 missed earnings estimates by five cents
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: 49.95

Comments:
02/04/12 update: It was another volatile week for EPD but this time shares rallied to new record highs. The company blew away earnings estimates when it beat by 27 cents on Feb. 1st. Revenues were up more than +20%. Shares seem to be struggling with a little profit taking near round-number resistance at the $50.00 level. I would not be surprised to see a pull back toward $48 or the rising 30-dma. I am raising our stop loss to $44.75.

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 $ 2.50/ 2.70

02/04/12 new stop loss @ 44.75
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: 44.75
Play Entered on: 11/21/11
Originally listed in the New Plays 11/19/11


FedEx Corp. - FDX - close: 94.54

Comments:
02/04/12 update: It was another bullish week for FDX with shares breaking through resistance in the $93.50-94.00 zone. The stock is up five weeks in a row. Shares look free to run toward the next area of resistance at $96.00, $98.00 and the $100 mark. I am not suggesting new positions at this time. We will adjust our stop loss up to $85.75. 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 $ 7.07/ 7.20

02/04/12 new stop loss @ 85.75
01/28/12 new stop loss @ 84.75
01/21/12 new stop loss @ 83.40

Current Target: $98.00
Current Stop loss: 85.75
Play Entered on: 01/11/12
Originally listed on the Watch List: 12/31/11


Hewlett-Packard - HPQ - close: 29.00

Comments:
02/04/12 update: HPQ started the week on a sour note with a gap down toward $27.25 but quickly rebounded. The stock eventually climbed to new five-month highs. The stock looks bullish but I am hesitant to buy calls here with what could be significant resistance in the $30 area with its simple and exponential 200-dma.

We are moving our stop loss to $25.75. FYI: Earnings are coming up on Feb. 22nd.

The P&F chart is bullish with a long-term $44 target.

- 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 $ 5.80/ 5.90
Stop Loss @ 24.75

02/04/12 new stop loss @ 25.75
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: 38.88

Comments:
02/04/12 update: KFT is slowly drifting higher. Shares closed near new multi-year highs but you could argue the stock is essentially still in the $38.00-38.80 trading range. I am raising our stop loss to $35.90. Readers may want to take profits now. The newsletter's exit target is $40.00 but more aggressive investors could aim higher (maybe the $42-44 zone).

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 $ 4.75/ 4.90

02/04/12 new stop loss @ 35.90
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: 35.90
Play Entered on: 09/22/11
Originally listed on the Watch List: 09/17/11


Kimberly-Clark Corp. - KMB - close: 72.23

Comments:
02/04/12 update: Investors bought the dip near KMB's 100-dma on Monday and the stock was up almost every day this week. Shares are testing short-term resistance near the $72.75 level. A failure here might suggest a deeper correction back toward the 200-dma near $69. 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.

- 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 $ 1.95/ 2.05

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: 5.66

Comments:
02/04/12 update: Wow! It was a big week for LDK. Shares gained +15% and closed at new four-month highs. I would not buy it here. The rally stopped right at resistance near the simple and exponential 200-dma(s) on Friday. After such a strong week I would expect some profit taking. I am raising our stop loss to $4.35.

- 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 $ 1.01/ 1.13

02/04/12 new stop loss @ 4.35
01/14/12 new stop loss @ 3.90
01/07/12 new stop loss @ 3.60

Current Target: $ 9.00
Current Stop loss: 4.35
Play Entered on: 12/23/11

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


Eli Lilly - LLY - close: 39.51

Comments:
02/04/12 update: LLY reported earnings on Jan. 31st. The company beat estimates by seven cents but the post-earnings pop was short-lived. Shares reversed at resistance near $40 and continue to churn sideways. I remain cautious here given LLY's failure to rally with the rest of the market. Readers may want to exit early. I am not suggesting new positions at this time.

- Suggested (SMALL) Positions -
Jan 05, 2012 - entry price on LLY @ 39.50, option @ 1.19
symbol: LLY1319A45 2013 JAN $45 call - current bid/ask $ 1.21/ 1.25

- or -

Jan 05, 2012 - entry price on LLY @ 39.50, option @ 2.75
symbol: LLY1418A45 2014 JAN $45 call - current bid/ask $ 1.65/ 1.96

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: 36.94

Comments:
02/04/12 update: Whoa! Looks like we need to buckle our seat belts. It was a very volatile week for LXK. The company reported earnings on Jan. 31st and beat estimates by 9 cents. Management also guided higher for the first quarter. The stock reacted by spiking higher toward $37.50, then immediately reversing to fall to $33 only to bounce again. Shares were showing relative strength on Friday with a +3.8% gain.

I am not suggesting new positions at this time. We are raising our stop loss up to $32.75.

Earlier Comments:
There is some resistance near $40 but our long-term target is $44.00. 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 $ 3.50/ 3.80

02/04/12 new stop loss @ 32.75

Current Target: $44.00
Current Stop loss: 32.75
Play Entered on: 01/19/12
Originally listed on the Watch List: 01/07/12


3M Co. - MMM - close: 87.73

Comments:
02/04/12 update: MMM continues to drift higher but I am disappointed the stock didn't make more progress given the stock market's gains last week. MMM has been struggling with resistance in the $88 level and still can't get past it. Don't be surprised if MMM sees profit taking back toward the $86-85 area. I am not suggesting new positions at this time.

Please note our new stop loss at $81.75.

- Suggested Positions -
Jan 19, 2012 - entry price on MMM @ 85.10, option @ 3.30
symbol: MMM1319A95 2013 JAN $95 call - current bid/ask $ 3.45/ 3.55

02/04/12 new stop loss @ 81.75

Current Target: $97.00
Current Stop loss: 81.75
Play Entered on: 01/19/12
Originally listed on the Watch List: 12/03/11


Marvell Technology - MRVL - close: 16.64

Comments:
02/04/12 update: MRVL has made the jump from our watch list to our play list. The stock climbed +5.3% last week and broke out past resistance to new multi-month highs. Our trigger to open positions as a close over $16.50, which occurred on Feb. 2nd (MRVL closed at $16.51). Our trade opened on Friday morning with the gap higher at $16.74. If you're looking for new positions consider waiting for a new dip and buy a bounce near the $16.00 level.

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.

- Suggested Positions -
Feb 03, 2012 - entry price on MRVL @ 16.74, option @ 2.14
symbol:MRVL1319A17.5 2013 JAN $17.50 call - current bid/ask $ 2.10/ 2.15

Chart of MRVL:

Current Target: $21.75
Current Stop loss: 15.20
Play Entered on: 02/03/12

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


Nike Inc. - NKE - close: 103.50

Comments:
02/04/12 update: NKE rallied to new all-time highs near $105 early last week. Shares have started to correct a little bit. The stock appears to have some short-term support near $101. I would also expect prior resistance near $98 to offer some support. I am not suggesting new positions at this time. We are raising our stop loss to $94.75.

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 $ 6.45/ 6.60

02/04/12 new stop loss @ 94.75

Current Target: $119.00
Current Stop loss: 94.75
Play Entered on: 01/13/12
Originally listed on the Watch List: 12/24/11


ON Semiconductor Corp. - ONNN - close: 9.24

Comments:
02/04/12 update: ONNN has spent the last few days bouncing from the bottom of its two-week trading range and technical support at the 200-dma. Friday's rally looks like a bullish breakout and what could be the beginning of a new leg higher. I do have two concerns. Shares have been struggling with technical resistance at their 300-dma and the stock has not yet escaped the gravitational pull of this moving average. Second, ONNN is due to report earnings on Feb. 8th. I would not launch new positions prior to earnings. I am adjusting our stop loss to $7.90. More conservative traders may want to seriously consider a higher stop loss.

- Suggested (small) Positions -
Jan 19, 2012 - entry price on ONNN @ 8.96, option @ 1.00
symbol:ONNN1319A10 2013 JAN $10 call - current bid/ask $ 1.10/ 1.25

02/04/12 new stop loss @ 7.90

Current Target: $11.45
Current Stop loss: 7.90
Play Entered on: 01/19/12
Originally listed on the Watch List: 12/10/11


Pepsico, Inc. - PEP - close: 66.66

Comments:
02/04/12 update: PEP has bounced back toward resistance near the $67.00 level. Earnings are coming up on February 9th and the results will either push PEP past this level or shares could drop back toward technical support at the rising 50-dma. Speaking of the 50-dma, it's about to cross over the simple 200-dma soon, which is referred to as the "golden cross" since it's normally a bullish development.

I am not suggesting new positions prior to earnings. I am raising our stop loss to $63.75.

- Suggested (SMALL) Positions -
Dec 27, 2011 - entry price on PEP @ 66.47, option @ 2.70
symbol: PEP1319A70 2013 JAN $70 call - current bid/ask $ 1.91/ 1.96

02/04/12 new stop loss at $63.75
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: 63.75
Play Entered on: 12/27/11
Originally listed on the Watch List: 12/10/11


QUALCOMM Inc. - QCOM - close: 61.06

Comments:
02/04/12 update: It was an important week for QCOM. The company reported earnings on Feb. 1st and beat both the earnings and revenue estimates. Management guided higher as well. The stock gapped higher and broke out past major resistance near the $60 level. Shares are trading at ten-year highs.

I am raising our stop loss to $53.75. More conservative traders may want to put their stop closer to $56 or $57 instead.

- Suggested (SMALL) Positions -
NOV 23, 2011 - entry price on QCOM @ 52.50, option @ 4.90
symbol: QCOM1319A60 2013 JAN $60 call - current bid/ask $ 6.75/ 6.85

02/04/12 new stop loss @ 53.75
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: 53.75
Play Entered on: 11/23/11
Originally listed on the Watch List: 11/05/11


Reynolds American Inc. - RAI - close: 39.75

Comments:
02/04/12 update: RAI and most of the tobacco-related stocks have continued to underperform the market in January. It does look like RAI may have found a short-term bottom near $39 this past week. Unfortunately with shares trading under $40 and their 50-dma this stock's posture is still bearish. Whether or not RAI accelerates lower or reverses higher is going to depend on earnings. The company reports on Feb 8th, before the opening bell. Analysts are expecting 68 cents a share. I am not suggesting new positions at this time.

- 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 $ 1.05/ 1.15

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


Rowan Companies - RDC - close: 36.61

Comments:
02/04/12 update: RDC is a new active trade that made the leap from our watch list to play list. Shares broke through major resistance and hit our trigger to open positions when it closed over $36.50. Our entry point was Friday morning at $37.54. At this point I would look for a dip back toward the $35.50-35.00 zone before considering new positions.

Our long-term target is $44.50. FYI: RDC is due to report earnings on Feb. 28th. (2014 calls are also available)

- Suggested Positions -
Feb 03, 2012 - entry price on RDC @ 37.54, option @ 4.30
symbol: RDC1319A40 2013 JAN $40 call - current bid/ask $ 3.80/ 4.20

Chart of RDC:

Current Target: $44.50
Current Stop loss: 33.45
Play Entered on: 02/03/12
Originally listed on the Watch List: 01/28/12


Starbucks Corp. - SBUX - close: 48.32

Comments:
02/04/12 update: SBUX has spent the last couple of weeks quietly consolidating sideways. Shares are still arguably overbought. I would expect a correction toward $45 or the rising 50-dma eventually. I'm not suggesting new positions at this time.

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 $ 4.20/ 4.35

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: 45.71

Comments:
02/04/12 update: TEVA briefly traded to new six-month highs on Wednesday. Shares seem to be struggling with resistance in the $46.00-46.20 area. Earnings are coming up in less than two weeks on Feb. 15th. I am not suggesting new positions prior to earnings. We will raise our stop loss up to $41.40.

FYI: The Point & Figure chart for TEVA is bullish with a $57 target.

- Suggested Positions -
Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 2.49
symbol: TEVA1319A50 2013 JAN $50 call - current bid/ask $ 2.14/ 2.20

- or -

Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 4.40
symbol: TEVA1418A50 2014 JAN $50 call - current bid/ask $ 4.05/ 4.35

02/04/12 new stop loss @ 41.40

Current Target: $54.00
Current Stop loss: 41.40
Play Entered on: 01/19/12

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


Verizon Communications - VZ - close: 37.84

Comments:
02/04/12 update: Traders bought the dip on Monday with VZ bouncing near $37.00 and its 200-dma. This is also near a trend line of higher lows. Unfortunately VZ has been struggling and remains under its 50-dma. I am not suggesting new positions at this time. We are leaving our stop loss under what should be significant support near $37 and several key moving averages.

- Suggested Positions -
Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.17
symbol: VZ1319A40 2013 JAN $40 call - current bid/ask $ 1.12/ 1.14

- or -

Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.87
symbol: VZ1418A40 2014 JAN $40 call - current bid/ask $ 1.88/ 1.97

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: 32.25

Comments:
02/04/12 update: Shares of X are up about +8% for the week. The company reported earnings on Jan. 31st and missed estimates by 30 cents but revenues beat estimates. Investors chose not to punish the stock on this earnings miss. Shares have rallied to new five-month highs. If you look at a chart you'll note that X has closed right under technical resistance at its simple and exponential 200-dma(s). I would expect a correction back toward $30.00 soon. Nimble traders could buy a bounce off the $30 level.

I am raising our stop loss to $26.40.

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 $ 6.85/ 7.00

02/04/12 new stop loss @ 26.40
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: 26.40
Play Entered on: 11/09/11
Originally listed on the Watch List: 11/05/11


Exxon Mobil - XOM - close: 84.92

Comments:
02/04/12 update: XOM reported earnings early last week. Profits were in-line with estimates while revenues came out ahead of expectations. Traders decided to sell the news and shares fell toward their 50-dma but didn't quite get there before bouncing on Friday.

I am not convinced the correction is over. If the market sees any profit taking then we can look for XOM to drop toward what should be support near $82.00. I am not suggesting new positions at this time.

- Suggested Positions -
Dec 22, 2011 - entry price on XOM @ 83.56, option @ 4.63
symbol: XOM1319A90 2013 JAN $90 call - current bid/ask $ 3.60/ 3.75

- or -

Dec 22, 2011 - entry price on XOM @ 83.56, option @ 6.25
symbol: XOM1418A95 2014 JAN $95 call - current bid/ask $ 4.65/ 4.85

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


Watch

Tech & Telecom

by James Brown

Click here to email James Brown

Editor's Note:

In addition to our watch list candidates, readers may want to keep an eye on the following stocks. These are on my radar screen as possible candidates in the next few weeks if not sooner.

On my radar: CCJ, INTC, SCCO, DDD, NWSA, WFR, JDSU, SCHW, AIG, TCK, ADTN, PSS, NAV, XLK, CREE, C, LTD, NVDA, FWLT

I'd keep a close eye on SCHW, AIG, LTD, NVDA, and FWLT.



New Watch List Entries

AKAM - Akamai Technologies

CIEN - Ciena Corp


Active Watch List Candidates

ADM - Archer-Daniel-Midland Co.

MCD - McDonald's Corp

MSI - Motorola Solutions

V - Visa Inc.

YUM - Yum,! Brands


Dropped Watch List Entries

FXI and LVS have been moved to new plays.

MRVL and RDC graduated to the active trade list.

SHAW has been removed from the watch list.



New Watch List Candidates:


Akamai Technologies - AKAM - close: 33.64

Company Info

AKAM is stair stepping higher. Shares outperformed on Friday and look poised to rally past its 2012 highs. Earnings are coming up on Feb. 8th. AKAM reports after the closing bell. Analysts are expecting 40 cents a share. Conservative traders do not want to open positions prior to the earnings report.

I am suggesting readers wait for AKAM to close over $35.25 and then buy calls the next day with a stop at $30.75. Our long-term target is $44.00. FYI: The P&F chart is bullish with a long-term $51 target.
NOTE: 2014 calls are also available.

Breakout trigger:
Wait for AKAM to close over $35.25 and buy calls the next day. Stop loss @ 30.75.

BUY the 2013 Jan $40 call (AKAM1319A40)

Chart of AKAM:

Originally listed on the Watch List: 02/04/12


Ciena Corp. - CIEN - close: 15.46

Company Info

It looks like CIEN has formed a bottom over the last several months with the $10-14 trading range. Now shares are coiling for a breakout past resistance near $16.00 and the simple 200-dma. I am suggesting we wait for CIEN to close over $16.25 and then buy calls the next day with a stop loss at $13.75. Our long-term target is $21.75. The Point & Figure chart is bullish with a $26 target. FYI: CIEN could benefit from a short squeeze. The most recent data listed short interest at 34% of the 75.9 million-share float.
NOTE: 2014 calls are also available.

Breakout trigger:
Wait for CIEN to close over $16.25 and buy calls the next day. Stop loss $13.75.

BUY the 2013 Jan $17.50 call (CIEN1319A17.5)

Chart of CIEN:

Originally listed on the Watch List: 02/04/12


Active Watch List Candidates:



Archer-Daniels-Midland Company - ADM - close: 29.55

Comments:
02/04/12 update: ADM sold off following its earnings miss last week. Shares have started to recover and the stock closed back above its 200-dma on Friday. I'm suggesting we give ADM couple of more weeks to see if the stock can breakout past resistance.

We want to 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.

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


McDonald's Corp. - MCD - close: 100.01

Comments:
02/04/12 update: Is that all the profit taking MCD is going to see? Shares dipped toward $98 following its earnings report two weeks ago. Since then the stock has consolidated along its simple 50-dma for a few days. Friday pushed MCD back above the $100 mark. If I were a short-term trader then Friday's move looks like a potential entry point with a stop under $98.00. However, the market is growing more and more overbought and could see a correction sooner rather than later. We will wait for a bigger pull back in MCD.

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: 47.13

Comments:
02/04/12 update: MSI continues to rebound following the sell-off two weeks ago. The improvement is encouraging so I'm not ready to give up just yet. Wait for the breakout past resistance.

Currently our plan is to open bullish positions when MSI closes over $48.25 with a stop loss at $43.95.

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 43.95

BUY the 2013 Jan $55 call (MSI1319A55)

02/04/12 if triggered, use a stop loss at $43.95
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: 29.34

Comments:
02/04/12 update: SHAW has spent nearly a month churning sideways in the $27-29 zone. Friday's market-wide rally has pushed shares to new six-month highs. Aggressive traders might want to consider new positions now but I still see potential resistance near $30.00.

I am going to drop SHAW from the watch list for now. We'll keep an eye on it for a breakout past $30.00 or a correction back toward the 50-dma.

Our trade did not open.

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


Visa, Inc. - V - close: 107.03

Comments:
02/04/12 update: The recent earnings results from MasterCard (MA) has fueled a big rally in the credit-card related stocks. Visa soared to new highs but we don't want to chase it here. The stock could see some profit taking after it reports earnings on Feb. 8th this week.

We will adjust our buy-the-dip trigger to $97.00 and move our stop loss to $92.00. More aggressive traders may want to consider new positions on a bounce near $100. Our long-term target is $119.00.

Buy-the-Dip trigger: $97.00, with a stop loss @ 92.00

BUY the 2013 Jan $110 call (V1319A110)

02/04/12 adjusted buy-the-dip trigger to $97.00, stop 92.00
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: 63.84

Comments:
02/04/12 update: YUM continues to grow more and more overbought. The stock is essentially up 10 weeks in a row. I strongly suspect that YUM could see some profit taking when it reports earnings on Feb. 6th. I am adjusting our buy-the-dip entry point to $58.50 with a stop loss at $54.75. Our long-term target is $69.50.

FYI: the bullish P&F chart target has risen to $99.

Buy-the-Dip trigger: $58.50, stop loss $54.75

BUY the 2013 Jan $60 call (YUM1319A60)

- or -

BUY the 2013 Jan $65 call (YUM1418A65)

02/04/12 adjusted buy-the-dip trigger to $58.50
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