Option Investor
Newsletter

Daily Newsletter, Sunday, 2/12/2012

Table of Contents

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

Leaps Trader Commentary

Greek Worries Stall Market Advance

by James Brown

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The ongoing trials and tribulations in Greece continue to be a wet blanket on the stock market. Readers were cautioned last week that without any distractions the market would focus on Greece. Yet in spite of growing worries in Europe the S&P 500 still managed to hit new seven-month highs on Thursday. Unfortunately escalating worries over the Greek situation produced a widespread sell-off on Friday. It was the worst one-day session for the markets since December. Overall profit taking was relatively mild. The S&P 500 lost -0.1% for the week. The NASDAQ lost -0.06%, the Dow Industrials fell -0.4% and the small cap Russell 2000 index dropped -2.1%. Gold followed the market lower as the U.S. dollar rallied off its Thursday lows.

Last week was relatively quiet for economic news. Federal Reserve Chairman Ben Bernanke spoke before the Senate Budget Committee on Tuesday but he didn't say anything new. The weekly initial jobless claims fell to 358,000, another move in the right direction. One of the biggest surprises was the big jump in consumer credit. It looks like Americans put Christmas on their credit cards with consumer credit surging to $19.3 billion in December. Economists were only expecting a number in the $9 billion range. Speaking of credit card bills, they might account for a drop in consumer sentiment. Friday saw the preliminary look at February's University of Michigan Consumer Sentiment numbers. Economists had been hoping for a breakout past the 75.0 level. Yet sentiment fell from 75.0 to 72.5. This was likely due to seasonal adjustments. It's not surprising. Consumers have to start making payments on their Christmas shopping spree in February so they probably feel a little poorer. Plus, we're looking at tax day coming up soon in April.

Elsewhere in the news the European Central Bank kept rates unchanged at 1.0%. This was a bit disappointing but the ECB did relax some of its collateral guidelines. There had been growing speculation that the ECB would loosen their collateral requirements to provide banks more opportunity to take advantage of the 1% LTRO money deal. The Bank of England also kept rates unchanged at 0.5%. The only surprise was an increase in the BoE's quantitative easing program by another 50 billion to 225 billion pounds. Meanwhile in Asia there were raised eyebrows over higher than expected inflation data with China's CPI rising +4.5% in January.

Major Indices:

The S&P 500 was down -1.1% intraday on Friday but traders bought the dip again and pared Friday's declines to -0.68%. After a week of very small gains Friday's nine-point decline was enough to break the five-week winning streak. If you look at the intraday 90-minute chart below you can see the S&P 500 is still trading inside its bullish channel. You can also note that a traditional 38.2% Fibonacci retracement of the current rally would mean a pull back toward the 1300-1295 area.

In a bull market environment (if we can call it that), corrections tend to be in the -3% to -5% range. A 3% pull back would be 1,311. A 5% pull back would be a dip to 1,284. Personally, I would focus on potential support near 1,320 and the 1,300 level for the S&P 500. If the index breaks down under 1,300 again it could mean a much bigger correction (-8% to -10%).

A decline from current levels would not be that shocking. The 1350 area has been overhead resistance for a while and stocks are overbought after a multi-week rally higher. Earnings season is winding down and we have growing concerns over Europe again. Seems like a good spot to expect a correction. If stocks surprise us with more gains we can look for potential resistance at its 2011 highs near 1,365.

Intraday 90-minute chart of the S&P 500 index:

Daily chart of the S&P 500 index:

The NASDAQ composite almost made it six weeks in a row. The index hit new ten-year highs on Thursday. You can see from the daily chart below that the NASDAQ is trading in a very narrow, bullish channel. After a move from 2518 to 2930 (+16.3%) Friday's profit taking was pretty mild with a drop toward the 2900 level and the middle of its channel.

Even though the trend is clearly higher you can see that the NASDAQ is very overbought here. A normal 3% pull back would mean a dip to 2839. A 5% correction would be 2780. That would be almost low enough to hit the 38.2% Fib retracement of the current rally, which would be 2775.

Can the NASDAQ grow more overbought? Absolutely, but everyday odds of a correction are growing.

Intraday 90-minute chart of the NASDAQ index:

Daily chart of the NASDAQ Composite index:

I warned readers last week that when the profit taking began the small caps would underperform. Sure enough the Russell 2000 underperformed the major indices with a -2.1% drop last week. Almost all of that was on Friday. The $RUT essentially drifted sideways Monday through Thursday. After a +17% rally from its mid December lows the $RUT is way overdue for a pullback.

The 800 level is probably round-number, psychological support but a 38.2% Fib retracement of the rally would mean a dip toward 785. A typical 5% pullback would mean a dip toward 789.

Intraday 90-minute chart of the Russell 2000 index

Daily chart of the Russell 2000 index

The rally in the semiconductors is meeting resistance with the SOX index pausing at a prior trend line of support. The transportation average is flashing a warning signal with a breakdown under one of its trend lines of support. That's not to say a pull back in the transports would not be healthy but they could be a leading indicator that the market is tired and about to correct.

Weekly chart of the SOX semiconductor index

Daily chart of the Transportation Average

The economic calendar is a bit busier than last week. The major reports to watch are Empire state survey and Philly Fed survey. Plus the PPI and CPI data on inflation. I suspect the FOMC minutes will be a non-event given all the air time Mr. Bernanke has had recently. Of course all of these reports will be overshadowed by any progress or lack thereof in Greece.

- Tuesday, February 14 -
January retail sales
Import/Export prices
Business inventories for December

- Wednesday, February 15 -
New York Empire State manufacturing data
Industrial production & Capacity Utilization
FOMC minutes from the last meeting

- Thursday, February 16 -
Weekly Initial Jobless Claims
Housings starts & Building permits
Producer Price Index (PPI)
Philly Fed survey

- Friday, February 17 -
Consumer Price Index (CPI)

The Week Ahead:

Two weeks ago the markets were ignoring Greece and its failure to make any progress negotiating with private sector investors on its debt restructuring. Yet this past week concerns over Greece have escalated. The EU members that are paying for Greece's bailout are demanding stricter regulations on Greece's budget cutbacks. That should not be a surprise. Greece has a terrible track record when it comes to implementing prior austerity measures.

This past week it was big news when Greek politicians approved significant cut backs on Thursday, which sparked new riots and strikes across the tiny nation. That wasn't enough. The Troika (EC, IMF, & ECB) wants the new budget cuts written into Greek law, they want thousands more Greek government jobs cut, and they want a drop in the minimum wage. The Troika is also asking for an additional 325 million euros in budget cuts before they approve the next tranche of bailout money.

Unfortunately this process is tearing the Greek government apart. Several leaders and cabinet members stepped down in protest. Greek Prime Minister Papademos has a tough week in front of him. EU regulators want these additional budget cuts approved by Wednesday this week. Of course the challenge here is a looming deadline in March where Greece has to pay a $14 billion debt payment.

Expectations that Greece will stay in the Eurozone are dropping. The Fitch rating agency expects Greece will default even if they do get the next bailout payment. Two more analysts raised their estimates that Greece would leave the Eurozone to 50% in the next 18 months. That might be a bit optimistic. It seems like the EU members who are writing the checks for this bailout have suddenly decided that they don't want throw any more money at this deal if all they're doing is delaying the inevitable.

If you are Greece you have to ask yourself, is it better to just default and suffer two or three years of chaos and depression before finding a new equilibrium with your own devalued currency, or is it better to stay in the eurozone and suffer super strict austerity measures and a massive debt load for the next 10 to 20 years. Readers of this column know we are expecting Greece to default eventually. The question is a matter of when.

The bigger question I keep asking is what happens after Greece leaves the eurozone? What stops Portugal, Ireland and Spain from giving up, defaulting on their debt obligations, and trying to start over? Let's not forget about Italy, with the biggest debt load in the EU. On Friday Standard & Poor's downgraded 34 of the 37 Italian banks they rate. S&P believes that risks are rising for Italy's ability to roll over its massive debt load. The country has to refinance hundreds of billions of euros worth of debt this year (113 billion euros worth just in the first quarter this year).

This coming week the focus will be on Greece's ability to get these new budget cuts passed by its very divided government. We also want to keep in mind that the ECB is going to launch another round of its cheap 1% three-year LTRO loans in late February, which should be seen as a positive for the European banking system and will likely have a soothing affect on the global stock markets.

Currently my outlook on the U.S. market is bullish but short-term the market looks poised for a pullback. Corrections are a normal part of market cycles. There are plenty of investors looking to buy the dip. The wildcard is Greece. You could argue that a Greek default has already been priced into the market but when it actually occurs the market will probably see a sharp knee-jerk reaction lower. No one is expecting a default this week or even this month but it's a dark cloud on the horizon that won't go away.

- James


Portfolio

Portfolio Update

by James Brown

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Current Portfolio


Portfolio Comments:

The NASDAQ composite hit new ten-year highs. The Dow Industrials hit new three-year highs. The S&P 500 index tagged new six-month highs this past week. Yet momentum was slowing all week long and profit taking on Friday finally snapped 2012's win streak at five weeks in a row. The trend is up but stocks are overbought and overdue for some profit taking. Plenty of analysts and traders are expecting a normal -3% pull back. Market direction will depend on headlines regarding progress in Greece and its upcoming deadlines.

Our portfolio continues to grow. Both AKAM and CIEN made the jump from watch list to active trades.

I have updated stop losses on: BMY, BZH, DOW, LDK, MRVL, ONNN, and QCOM.

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

Time to Exercise

by James Brown

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Editor's Note:

Worries over the situation with Greece are escalating again. Concerns fueled the market decline on Friday. Of course after a nearly six-week rally investors could have been looking for an excuse to lock in gains.

Stocks remain overbought and could easily see a -3% to -5% pull back. With stocks looking this tired I am not in a rush to add new bullish positions. It's a good time to exercise some patience, which is what LEAPS investors need to have (patience). I am not adding any new trades tonight but this could also be a great opportunity to look at stocks we might want to buy on a dip.

Currently on my radar screen as potential bullish LEAPS candidates: JPM, SCHW, AIG, SYK, NAV, LTD, BRK.B, ITRI, WFR, CREE, JDSU, NVDA, BWC, OMX, and FWLT


Play Updates

Market Rally Stalls

by James Brown

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Editor's Note:

Stocks looks more than a little tired here. After a five-week rally the U.S. indices finally stalled. A -3% to -5% correction would be normal and healthy at this point.

Double check your stop loss placement.


Closed Plays


PEP hit our stop loss.


Play Updates


Allergan Inc. - AGN - close: 87.05

Comments:
02/11/12 update: I remain concerned with AGN. The stock gained about $1.00 on the week. Yet shares have been stuck churning sideways for the last six weeks. The long-term trend and the point & figure chart are both still bullish but the trend seems like it's in jeopardy. I would not be surprised to see AGN dip toward technical support at its 200-dma near the $83-82 area. A breakout past resistance at $90.00 would reaffirm the stock's long-term up trend.

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 $ 2.10/ 3.20

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


Akamai Technologies - AKAM - close: 38.43

Comments:
02/11/12 update: AKAM is a new edition to the play list. We added it to the watch list a week ago expecting a breakout past $34.00. We were not expecting the big gap higher following AKAM's earnings report on Feb. 8th. The company beat Wall Street estimates by five cents and beat the revenue estimates. The stock gapped open on February 9th and closed at $38.06. Our plan was to launch bullish positions when AKAM closed above $35.25. It's not the ideal entry point for us but the trade opened on Friday morning at $37.60.

Personally, I would not launch new positions now. AKAM will likely fill the gap with a pull back toward the $36-35 zone. Wait for a bounce from this area (near $35) before considering new bullish positions.

- Suggested Positions -
FEB 10, 2012 - entry price on AKAM @ 37.60, option @ 5.40
symbol:AKAM1319A40 2013 JAN $40 call - current bid/ask $ 5.55/ 5.75

02/10/12 trade is opened on Friday morning
02/09/12 AKAM gapped higher in reaction to strong earnings news. The stock closed above our trigger at $35.25.

Chart of AKAM:

Current Target: $44.00
Current Stop loss: 30.75
Play Entered on: 02/10/12
Originally listed on the Watch List: 02/04/12


Bank of America - BAC - close: 8.07

Comments:
02/11/12 update: BAC continues to climb. The stock is now up six weeks in a row. Currently BAC is up +45% for the year, making it the best performing S&P 500 component thus far.

Technically the rally past $8.00 and its simple and exponential 200-dma is certainly bullish but BAC is also very overbought. This past week the big news was a $25 billion settlement between the government and five major U.S. banks. The money supposed to help millions facing foreclosure or who had their homes foreclosed. It's also supposed to release these banks from further prosecution from the government over thousands of mishandled foreclosures and loan modification deals.

The settlement is good news and helps lessen the dark cloud of mortgage-related risk hanging over BAC. However, we can't expect BAC to keep up this phenomenal pace. Shares will eventually correct. After such a big bounce the pull back is going to feel painfully sharp. Of course we want to see a pull back since it will provide the next entry point.

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 $ 0.76/ 0.78
(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 $ 0.76/ 0.78
(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: 31.90

Comments:
02/11/12 update: Our BMY trade is in danger. Shares continue to drift lower while the market hits new relative highs. Based on BMY's relative weakness readers may want to abandon ship right now. I suspect that BMY could dip toward the $31.00 area before it starts rebounding again. To avoid getting stopped out prematurely I am adjusting our stop loss to $30.90. 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 $ 0.94/ 0.98

02/11/12 adjust stop loss to $30.90
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: 30.90
Play Entered on: 09/19/11
Originally listed on the Watch List: 09/10/11


Beazer Homes - BZH - close: 3.63

Comments:
02/11/12 update: I am urging caution here with BZH. Last week is starting to look like a blow-off top on the weekly chart. BZH surged $3.98 on Tuesday. At $4.00 BZH would be up almost +90% from our entry point. The stock has started to see some profit taking with an -8.7% pullback from last week's high. Shares only gained three cents for the week. I would expect the profit taking to continue. We can look for potential support in the $3.40-3.00 range.

More conservative traders may want to just exit now and lock in gains before the pullback gets any worse. I am raising our stop loss to $2.75.

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 $ 1.65/ 1.75

02/11/12 new stop loss @ 2.75
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: 2.75
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/22/11


Ciena Corp. - CIEN - close: 16.24

Comments:
02/11/12 update: The stock market's rally this past week was enough to lift CIEN past resistance near $16.00 and its simple 200-dma. Our entry point requirement for CIEN to close over $16.25 occurred on February 8th. We opened positions the following morning (Feb. 9th) at $16.66.

The trend is up but the market looks ripe for a pullback. Readers may want to wait for CIEN to dip toward the $15.50 area near its simple 200-dma before considering new bullish positions.

NOTE: CIEN will most likely report earnings in early March. No date has been confirmed yet.

Earlier Comments:
Our long-term target is $21.75. The Point & Figure chart is bullish with a $29 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.

- Suggested Positions -
Feb 09, 2012 - entry price on CIEN @ 16.66, option @ 2.89
symbol: CIEN1319A17.50 2013 JAN $17.50 call - current bid/ask $2.72/2.81

Chart of CIEN:

Current Target: $21.75
Current Stop loss: 13.75
Play Entered on: 02/09/12
Originally listed on the Watch List: 02/04/12


Cisco Systems - CSCO - close: 19.90

Comments:
02/11/12 update: CSCO rallied to new multi-month highs this past week as traders took positions ahead of the earnings report. The company reported on February 8th and beat Wall Street's earnings and revenue estimates. It was a bullish report but investors have been selling the news. If the market continues to slip lower I would not be surprised to see CSCO pull back toward its 50-dma near $19.00.

I am not suggesting new positions at this time.

- Suggested Positions -
OCT 28, 2011 - entry price on CSCO @ 18.28, option @ 1.68
symbol: CSCO1319A20 2013 JAN $20 call - current bid/ask $2.05/2.09

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: 22.05

Comments:
02/11/12 update: It was a disappointing week for the railroad stocks and the transports in general. After weeks of churning sideways near resistance at its old highs the DJUSRR railroad index turned lower. CSX followed the sector's weakness. On a short-term basis CSX looks weak and we could see it drop toward $21.00 or its simple 100-dma. If the stock declines much further than this it could hit our stop loss at $20.75. 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 $ 1.19/ 1.24

- or -

NOV 14, 2011 - entry price on CSX @ 22.59, option @ 3.30
symbol: CSX1418A25 2014 JAN $25 call - current bid/ask $ 2.28/ 2.40

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: 34.00

Comments:
02/11/12 update: Shares of DOW lost 18 cents for the week but our LEAP options actually rose in value. Shares of DOW continue to build on a bullish pattern of higher lows. However, upward momentum has clearly stalled. I am expecting a correction lower. The most likely spot for any significant support is the $30.00 level. I am adjusting our stop loss down to $29.45. More conservative traders may want to take the opposite approach and go ahead and take profits now with an early exit.

I am not suggesting new positions at this time.

- Suggested Positions -
Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.40
symbol: DOW1319A35 2013 JAN $35 call - current bid/ask $ 3.45/ 3.55

- or -

Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.54
symbol: DOW1418A40 2014 JAN $40 call - current bid/ask $ 3.10/ 3.25

02/11/12 adjust stop loss to $29.45. Readers may want to take profits now.
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: 29.45
Play Entered on: 01/09/12

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


Enterprise Products Partners - EPD - close: 50.19

Comments:
02/11/12 update: EPD spent the week consolidating sideways. Traders bought the dip twice near its simple 10-dma. Yet if the market corrects lower we should expect EPD to follow. Look for support near the 50-dma around the $47.50 area. I am not suggesting new positions at this time.

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 $ 2.70/ 2.85

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: 95.27

Comments:
02/11/12 update: FDX managed another weekly gain, which stretches its win streak to six weeks in a row. Shares have essentially consolidated sideways this past week. If the market is positive then FDX looks poised to rally and make a run at its highs near $98-99. If the market corrects then FDX might find support near $92 or $90.

Currently our exit target is $98.00. More aggressive traders may want to aim higher.

I am not suggesting new positions at this time. 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 $ 7.70/ 7.85

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


iShares China 25 Index ETF - FXI - close: 38.93

Comments:
02/11/12 update: Our bullish trade on the FXI opened on Monday, February 6th. Shares chopped sideways on either side of $40.00 until Friday saw this ETF gap down. If the stock market continues to correct lower the FXI could easily drop toward the $38.00-37.00 zone. Readers may want to wait for a dip or a bounce near the rising 50-dma before considering new bullish positions. Our stop loss is at $35.75.

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 for the FXI is $49.50.

- Suggested Positions -
Feb 06, 2012 - entry price on FXI @ 39.80, option @ 1.81
symbol: FXI1319A45 2013 JAN $45 call - current bid/ask $ 1.48/ 1.54

02/06/12 FXI gapped open lower at $39.80.
02/04/12 FXI met our entry point requirement at the close on Friday. Open positions on Monday, Feb. 6th.

Current Target: $49.50
Current Stop loss: 35.75
Play Entered on: 02/06/12

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


Hewlett-Packard - HPQ - close: 28.70

Comments:
02/11/12 update: HPQ rallied to new five-month highs near $29.50 midweek. The stock began to see some profit taking and ended the week down 30 cents. Earnings for HPQ are still several days away. I am not suggesting new positions ahead of earnings. If the market does correct we could see HPQ fall toward the $27.00 area.

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 $ 5.55/ 5.65
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: 38.58

Comments:
02/11/12 update: KFT also lost 30 cents for the week. Shares have been churning sideways on either side of the $38.50 level. Momentum appears to have stalled. I would give some serious thought to exiting early right now to lock in gains. I am not suggesting new positions at this time.

We will definitely think about exiting prior to the earnings report on Feb. 21st.

Currently 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 $ 4.55/ 4.75

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: 71.56

Comments:
02/11/12 update: KMB spent the week drifting lower and shares settled on technical support near its rising 100-dma again. If the correction continues we can look for KMB to drop toward $70.00. 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.

- 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 $ 1.75/ 1.85

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: 6.34

Comments:
02/11/12 update: It was a very bullish week for LDK. The stock surged higher and closed at $6.70 on Thursday, which would have been a +18.3% gain for the week but profit taking on Friday knocked that down to +14%.

While the trend is up I would not chase LDK here, especially with the broader market looking vulnerable. The $5.50 level should offer some support. We are raising our stop loss to $4.75.

- 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 $ 1.48/ 1.69

02/11/12 new stop loss @ 4.75
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: 4.75
Play Entered on: 12/23/11

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


Eli Lilly - LLY - close: 39.31

Comments:
02/11/12 update: LLY continues to underperform and I am tempted to close this trade early right now to cut our losses quickly. However, LLY has not yet convincingly broken support near $39.00 and there is additional support near $38.00.

We will leave this trade active but I am not suggesting new positions at this time.

NOTE: We can expect LLY to gap down about 50 cents on Monday morning as shares begin trading ex-dividend.

- Suggested (SMALL) Positions -
Jan 05, 2012 - entry price on LLY @ 39.50, option @ 1.19
symbol: LLY1319A45 2013 JAN $45 call - current bid/ask $ 1.15/ 1.21

- or -

Jan 05, 2012 - entry price on LLY @ 39.50, option @ 2.75
symbol: LLY1418A45 2014 JAN $45 call - current bid/ask $ 1.60/ 1.86

01/28/12 new stop loss @ 37.75

Current Target: $44.75 & 48.00
Current Stop loss: 37.75
Play Entered on: 01/05/12

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


Las Vegas Sands - LVS - close: 51.59

Comments:
02/11/12 update: LVS didn't make much progress last week. The stock was drifting higher but Friday's -1.8% pull back set the stock for a loss on the week. After a large four-week rally it was time for a little profit taking and the correction may not be over yet. While broken resistance near $50.00 should be new support it may not hold. We are expecting a deeper pull back. I am not suggesting new positions at this time.

Earlier Comments:
The Point & Figure chart is bullish and has seen its target rise from $69 to $72. Our long-term target is $69.00.

- Suggested Positions -
Feb 06, 2012 - entry price on LVS @ 51.35, option @ 4.40
symbol: LVS1319A60 2013 JAN $60 call - current bid/ask $ 4.20/ 4.35

02/06/12 LVS gapped open lower at $51.35
02/04/12 LVS met our entry point requirement at the close on Friday. Open positions on Monday, Feb. 6th.

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

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


Lexmark Intl. Inc. - LXK - close: 37.32

Comments:
02/11/12 update: LXK continues to drift higher and extending its gains to six weeks in a row. I would prefer to wait for a dip or a bounce near $35.00 before considering new bullish positions.

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 $ 3.70/ 3.90

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: 87.14

Comments:
02/11/12 update: After drifting sideways all week MMM lost ground on Friday. Shares have been struggling with resistance near $88.00. I suspect we'll see this Dow-component correct lower. Look for support near $85.00 and its simple 200-dma. I am not suggesting new positions at this time.

- Suggested Positions -
Jan 19, 2012 - entry price on MMM @ 85.10, option @ 3.30
symbol: MMM1319A95 2013 JAN $95 call - current bid/ask $ 3.40/ 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: 16.05

Comments:
02/11/12 update: MRVL lost about 60 cents for the week and the stock is testing short-term support near $16.00. If the market continues to correct I would expect a pull back toward the $15.50-15.00 zone. I suspect our stop loss is a little too high at $15.20. We're going to move it down to $14.75 so it's under the exponential 200-dma.

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 $ 1.83/ 1.89

02/11/12 adjust stop loss down to $14.75

Current Target: $21.75
Current Stop loss: 14.75
Play Entered on: 02/03/12

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


Nike Inc. - NKE - close: 105.41

Comments:
02/11/12 update: Nike continues to show relative strength with a surge to new record highs on Wednesday. Shares have since begun to pull back a little bit. The stock is overbought considering its six-week rally. We can look for support near $100 should the market really correct lower. I am not suggesting new positions at this time.

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 $ 7.45/ 7.60

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: 9.39

Comments:
02/11/12 update: It was a volatile week for ONNN. The stock soared to $9.85 on Thursday after beating earnings estimates by seven cents. Traders immediately started taking profits. Shares still look poised for a pullback. I am not suggesting new positions at this time but we will raise our stop loss to $8.35.

- Suggested (small) Positions -
Jan 19, 2012 - entry price on ONNN @ 8.96, option @ 1.00
symbol:ONNN1319A10 2013 JAN $10 call - current bid/ask $ 1.15/ 1.25

02/11/12 new stop loss @ 8.35
02/04/12 new stop loss @ 7.90

Current Target: $11.45
Current Stop loss: 8.35
Play Entered on: 01/19/12
Originally listed on the Watch List: 12/10/11


QUALCOMM Inc. - QCOM - close: 61.73

Comments:
02/11/12 update: QCOM post another gain for the week but has been unable to rally past its early February high near $62.00. I don't see any changes from my prior comments. The breakout past major resistance near $60.00 is bullish but the stock is overbought and needs to consolidate. That could be sideways or it could be a pullback lower.

I am not suggesting new positions at this time. We will raise our stop loss to $54.75.

- Suggested (SMALL) Positions -
NOV 23, 2011 - entry price on QCOM @ 52.50, option @ 4.90
symbol: QCOM1319A60 2013 JAN $60 call - current bid/ask $ 7.30/ 7.40

02/11/12 new stop loss @ 54.75
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: 54.75
Play Entered on: 11/23/11
Originally listed on the Watch List: 11/05/11


Reynolds American Inc. - RAI - close: 39.74

Comments:
02/11/12 update: RAI is virtually unchanged for the week. Shares reported better than expected earnings on February 8th but revenues missed estimates. I am concerned that RAI is lagging behind the major indices and its peers (like PM and MO). There is still a chance that RAI corrects lower toward its 200-dma or the $38.00 level. More conservative traders might want to consider an early exit now. 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 $ 0.95/ 1.05

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: 37.06

Comments:
02/11/12 update: Traders continue to buy the dips in RDC. The stock managed another weekly gains thanks to Friday's big bounce off the simple 10-dma. If the broader market corrects we could see RDC test the $35.00 area and its simple 200-dma. Readers may want to wait for this dip before considering new bullish 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 $ 4.00/ 4.30

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: 48.82

Comments:
02/11/12 update: A midweek rally in SBUX pushed shares to new record highs. Yet Friday's pull back cut the stock's gains for the week to half a point. After three weeks consolidating in the $47-48 zone I'd argue SBUX is ready to run again but if the market's major indices correct lower we should expect SBUX to follow. Look for support at the 50-dma near $46 or price support near $45.00. 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 $ 4.75/ 4.90

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: 44.16

Comments:
02/11/12 update: Hmm... TEVA continues to correct lower but shares are testing support near $44.00 and its exponential 200-dma. The question is will this support hold after the company reports earnings. TEVA is scheduled to announce earnings on February 15th. I am not suggesting new positions prior to the announcement. More conservative traders might want to consider some sort of hedge. The only good bet here is that TEVA will gap open one way or the other on Wednesday morning.

- Suggested Positions -
Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 2.49
symbol: TEVA1319A50 2013 JAN $50 call - current bid/ask $ 1.69/ 1.77

- or -

Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 4.40
symbol: TEVA1418A50 2014 JAN $50 call - current bid/ask $ 3.55/ 3.80

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: 37.69

Comments:
02/11/12 update: VZ just spent another week consolidating sideways between resistance near its 50-dma and support near its 100-dma. My concern is that this is starting to look like a bear-flag consolidation pattern. 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 $ 1.17/ 1.20

- or -

Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.87
symbol: VZ1418A40 2014 JAN $40 call - current bid/ask $ 1.90/ 2.00

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: 29.40

Comments:
02/11/12 update: Ouch! Shares of X are down almost -9% for the week. This erases the +8% the week before. The rally stalled and reversed under technical resistance near the simple and exponential 200-dma (approximately $32.50). On a short-term basis the breakdown under $30.00 is bearish. Look for support near $29.00 or its 50-dma near $28.00. I am not suggesting new positions at this time.

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 $ 5.15/ 5.25

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: 83.80

Comments:
02/11/12 update: Readers have a decision to make. The recent action in XOM is bearish. Not only has the stock reversed at major resistance near $88.00 but the last few weeks have produced a bearish head-and-shoulders pattern with support near the $84 area. This pattern would suggest XOM is about to correct lower toward the $80.00 level.

Readers can choose to exit now and reconsider new positions on a bounce near $80.00 or you can hold on and just endure the volatility. The newsletter is going to hold on. We will leave our stop loss at $79.40 for now. The $82.00 level should offer some short-term support. 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 $ 3.70/ 3.80

- or -

Dec 22, 2011 - entry price on XOM @ 83.56, option @ 6.25
symbol: XOM1418A95 2014 JAN $95 call - current bid/ask $ 4.65/ 4.80

02/11/12 recent action looks like a bearish H&S pattern with an $80 target.
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

Chart of XOM:

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


Pepsico, Inc. - PEP - close: 63.95

Comments:
02/11/12 update: Investors were not happy with PEP's earnings results. The company reported on Feb. 9th before the opening bell. The company actually beat expectations by three cents and beat the revenues estimates yet management guided lower for 2012. The stock gapped down on Thursday at $64.86 and dropped to $63.81 before bouncing off its intraday lows. Friday saw shares break down under support near its 100-dma and hit our stop loss at $63.75.

- Suggested (SMALL) Positions -
Dec 27, 2011 - entry price on PEP @ 66.47, option @ 2.70
symbol: PEP1319A70 2013 JAN $70 call - exit $1.00 (-62.9%)

02/10/12 stopped out at $63.75
02/09/12 PEP reports earnings. Beats by 3 cents, warns for 2012
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.

Chart of PEP:

Current Target: $71.75
Current Stop loss: 63.75
Play Entered on: 12/27/11
Originally listed on the Watch List: 12/10/11



Watch

Big Cap Tech & Healthcare

by James Brown

Click here to email James Brown


New Watch List Entries

INTC - Intel Corp.

UNH - UnitedHealth Group


Active Watch List Candidates

ADM - Archer-Daniel-Midland Co.

MCD - McDonald's Corp

MSI - Motorola Solutions


Dropped Watch List Entries

AKAM & CIEN graduated to the play list. V and YUM were removed.



New Watch List Candidates:


Intel Corp. - INTC - close: 26.69

Company Info

This big cap tech stock (semiconductors) has produced an impressive rally off its 2011 lows. The stock broke out to multi-year highs in January. Now the rally has stalled. We want to be ready to take advantage of a dip if the market produces one.

I am suggesting we buy call LEAPS on a dip at $24.50. The $24.00-23.00 zone should offer strong support. We'll use a stop loss at $21.90. Our long-term target is $32.50.

Buy-the-Dip trigger: $24.50 (stop loss 21.90)

BUY the 2013 Jan $25 call (INTC1319a25)

- or -

BUY the 2014 Jan $30 call (INTC1418a30)

Chart of INTC:

Originally listed on the Watch List: 02/11/12


UnitedHealth Group - UNH - close: 53.32

Company Info

We are expecting a market pull back but there is no guarantee we're going to see one. Currently UNH is ignoring any slow down in the stock market. Shares were rebounding last week and look poised to breakout from its recent consolidation. This healthcare stock has major resistance near the $54.00 level. I am suggesting we open bullish positions if UNH can close over $54.25. We'll use a stop loss at $49.45. Our long-term target is $63.00. FYI: The Point & Figure chart is bullish with a $62 target.

Breakout trigger: Wait for close over $54.25, stop 49.45

BUY the 2013 Jan $60 call (UNH1319A60)

- or -

Chart of UNH:

Originally listed on the Watch List: 02/11/12


Active Watch List Candidates:



Archer-Daniels-Midland Company - ADM - close: 30.57

Comments:
02/11/12 update: ADM made significant progress last week. Shares rallied to $31.09 intraday on Thursday before trimming its gains. ADM does look like it's ready to break higher. It just needs the market to cooperate. I am adjusting our entry point to wait for a close over $31.25 instead of a close over $31.00.

We want to open small bullish positions. We'll use a stop loss at $28.40. Our long-term target is $37.75.

Breakout trigger:
Wait for ADM to close over $31.25 and then buy calls the next day with a stop loss at $28.40.

BUY the 2013 JAN $35 CALL (ADM1319A35)

02/11/12 adjust entry trigger to wait for close over $31.25
FYI: 2014 calls are also available.

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


McDonald's Corp. - MCD - close: 99.47

Comments:
02/11/12 update: It was a bit of a rocky week for MCD. The stock appears to have set a new lower high but traders continue to buy dips near the rising 50-dma. I suspect that if MCD does break technical support at its simple 50-dma it will drop toward the simple 100-dma, currently near $95.00.

I am leaving our buy-the-dip trigger at $95.50. 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: 47.40

Comments:
02/11/12 update: MSI also made progress this past week. Shares rallied toward major resistance near the $48.00 level. If the market cooperates MSI could see a bullish breakout soon.

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


Visa, Inc. - V - close: 113.90

Comments:
02/11/12 update: Shares of Visa soared following its earnings report on February 8th. While the trend is bullish we don't want to chase it. Visa looks overbought and extended here. I am removing it from our watch list but I'd keep it on your radar. A pull back toward the 50-dma or 100-dma might be a bullish entry point (although I would be surprised if we saw Visa breakdown under the $100 level again).

Our trade never opened.

Our buy-the-dip entry was never hit.

02/11/12 Removed Visa from the watch list.
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: 64.74

Comments:
02/11/12 update: YUM's earnings report last week pushed the stock to new highs but it wasn't anything out of the ordinary. Shares just continue to drift higher. You could definitely argue that momentum has stalled.

We have been waiting for a pull back in YUM for a long time. It hasn't happened yet. While I suspect it could happen soon after what has been essentially an eleven week rally there is no guarantee YUM will pull back. I am removing YUM from our watch list but I would keep it on your radar screen. A dip near $60 or the 50-dma might prove to be an entry point.

Our buy-the-dip strategy was never triggered.

02/11/12 Removed YUM from the watch list.
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