Option Investor
Newsletter

Daily Newsletter, Sunday, 2/19/2012

Table of Contents

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

Leaps Trader Commentary

Better Economic Data Overpowers Greek Concerns

by James Brown

Click here to email James Brown

A parade of better than expected economic data in the U.S. overpowered any negative headlines about Europe. Stocks managed to rally past a week with bearish news from the Moody's credit rating agency, Q4 GDP declines in Europe, and a growing unease that Greek may not have the will power to follow through on its austerity measures. All the major U.S. indices rose over +1% and the S&P 500 index is up six out of the last seven weeks to close at eight-month highs.

The U.S. dollar managed a bounce but it's off its best levels of the week. Gold prices drifted lower for the third week in a row. Yields on the 10-year U.S. bond continue to drift sideways in the 1.8% to 2.1% range. Oil was a standout performer with a bullish breakout higher thanks in part to escalating tensions with Iran. Thus far the S&P 500 has produced its best year to date performance in twenty five years. The index is currently up +8.2% in 2012. It's up +12.2% from the December low and up +26.6% from the 2011 October lows. The NASDAQ composite index closed at levels not seen since late 2000. If there is one thing technicians could complain about is the low volume that continues to plague the market's advance.

The Moody's rating agency made headlines early last week when they downgraded the credit ratings on Italy, Portugal, Spain, Slovakia, Slovenia, and Malta. Moody's also changed their outlook from "stable" to "negative" on Austria, Britain, and France, which means there is a 40% chance that these countries could see their credit rating downgraded over the next 18 months. Later in the week Moody's announced they were reviewing the ratings on several major banks. Elsewhere the Q4 GDP data out of the Europe area was disappointing. The Eurozone's Q4 GDP fell -0.3%. The two largest countries in the Eurozone, Germany and France, reported -0.3% and -0.2% declines, respectively.

Overall economic data out of the U.S. was positive. The New York Empire State manufacturing survey rose from 13.5 to 19.5 when analysts were only expecting a rise to 14.0. The Philly Fed survey improved from 7.3 to 10.2, which was better than expected. Weekly initial jobless claims fell past expectations of 365,00 to 348,000. This is the lowest level since March 2008. Continuing jobless claims dropped 100K to 3.43 million.

Home builders seem to be growing more confident. The housing market index rose from 25 to 29 when analysts were only expecting this confidence number to rise to 26. The January housing starts number rose to an annual pace of 699,000, which is up from an upwardly revised rate of 689,000 the month before. Economists had been expecting a number closer to the 670,000 pace. The three-month average for housing starts, which helps smooth out the month to month volatility, set a three-year high at 697,000.

Inflation data last week was generally tame. The Producer Price Index (PPI), which looks at inflation on a wholesale level, saw January's number come in at 0.1% when economists were expecting 0.3%. The core PPI rose 0.4%, which was higher than the 0.2% expected. The Consumer Price Index (CPI) saw January rise 0.2%, which was better than the 0.3% expected. The core CPI also rose 0.2% versus estimates of 0.1%.

Meanwhile the monthly retail sales figures for January came in at +0.4%. Business inventory data from December rose 0.4%. Industrial production in January was unchanged. All of these came in less than expected. Speaking of expectations the FOMC minutes was a non-event last week.

Major Indices:

Traders remain in a "buy the dip" mentality. The S&P 500 index found short-term support near the 1340 level twice last week. The Thursday-Friday bounce lifted the S&P 500 to new eight-month highs. The 1350 area was expected to be major resistance. Now that we're above it the next level of overhead resistance is the 2011 closing high at 1,363.61 and the intraday high at 1,370.58 set near the beginning of May. Once past this area the next likely resistance level is the 1,400 area.

Stocks are way overdue for a correction. I mentioned last week that corrections in a bull market tend to fall in the -3% to -5% range. A -3% pull back from current levels would be 1,320. A -5% drop would be 1,292 although I'd probably look for support at 1,300 instead.

A few weeks ago I mentioned the S&P 500's point & figure chart and how it set a new triple-top breakout buy signal. Well the P&F chart's long-term bullish target created with this new buy signal has risen from 1,430 to 1,670. I wouldn't get too excited about that since it's just a forecast off the current rally and likely to change but it remains an interesting observation. For the record the S&P 500's all time high is 1,576 set in 2007.

Daily chart of the S&P 500 index:

Weekly chart of the S&P 500 index:

The NASDAQ composite index continues to impress with a rally to levels not seen since late 2000. You can see on the daily chart how the NASDAQ is still inside its narrow, bullish channel. If the market were to suddenly see a correction a -3% pullback would be 2,862 and a -5% pullback would be 2,803. The drop toward 2,860 would be close enough to fill the early February gap higher and the 2,800 level could act as round-number support.

Of course there is no guarantee that a correction would stop at -5%. Some like to compare the markets to a rubber band. The farther the band is stretched the harder and faster it snaps back. The good news is that everyone who bought the market, in this case the NASDAQ, near the 2011 highs has had their chance to sell and get their money back. At this point overhead resistance is probably the 3,000 level.

Daily chart of the NASDAQ Composite index:

Investors should take a moment to check out the Apple Inc. (AAPL) chart. It's the biggest stock by market cap at $468 billion and the biggest NASDAQ component. The incredible rise in shares of AAPL have played a key role in the NASDAQ's rally. Wednesday's performance in AAPL has created a bearish reversal pattern. Traders bought the dip on Thursday at the rising 10-dma so there hasn't been that much follow through yet but it does look like a classic blow-off top on both the daily and weekly chart. Fundamentally you could argue that AAPL is still cheap with a forward P/E of just 10.5 but that doesn't mean this stock can't see a correction. Of course the question is how big of a pullback would it see since so many investors would like to buy a dip.

FYI: AAPL has a shareholder meeting this week. The hot question is what will AAPL do with its $100 billion in cash? Will they buy somebody or issue some sort of special dividend or stock buyback program?

Daily chart of the AAPL:

Weekly chart of AAPL:

It was a bit of a rocky week for the small cap Russell 2000 index but the big bounce on Thursday helped push the $RUT to a +1.8% gain on the week. This index is now testing the top of its two-week trading range. A breakout higher will likely send it toward 850 or the 2011 highs. You can see on the weekly chart that the rally has stalled at the trend line of lower highs.

If the market should suddenly see a correction then a -3% pullback would be the 803 level and a -5% pullback would be 786. Of course the small cap index tends to be more volatile than the rest of the major indices. If stocks truly corrected lower I would not be surprised to see the $RUT drop toward the 775 area. Currently the $RUT is up 11.8% year to date, +16.9% from its December lows, and +37% off last October's low.

The recent sideways consolidation is arguably bullish and if the $RUT can break out higher it could lead the market's next charge. Further strength in small caps would also be a positive sign on money manager sentiment toward the market in general.

Daily chart of the Russell 2000 index

Weekly chart of the Russell 2000 index

One area of concern that does worry me is the action in the Dow Jones Transportation index. Traditionally Dow Theory suggests that we cannot have a prolonged market rally without participation in the transports. Unfortunately this sector has been drifting lower the last couple of weeks. This past week the underperformance rally stood out. Readers should note this as a potential warning sign that some of the market's internals are starting to falter.

Daily chart of the Transportation Average

The economic calendar this week is a lot quieter than last week. Honestly none of these reports will really matter with the market still focused on the upcoming deadlines for Greece.

- Monday, February 20 -
U.S. markets closed for holiday
an EU meeting on Greece

- Tuesday, February 21 -
weekly chain store sales

- Wednesday, February 22 -
MBA mortgage index
Existing home sales for January

- Thursday, February 23 -
Weekly Initial Jobless Claims
FHFA housing price index
Apple Inc. (AAPL) shareholder meeting

- Friday, February 24 -
(Final) Michigan Consumer Sentiment for February
New Home Sales for January

Additional key dates coming up:

Feb. 29th, ECB's 2nd round of LTRO 1% money offering
Mar. 1st, EU Summit Meeting
Mar. 20th, Greek deadline for $19 billion debt payment

The Week Ahead:

I have no doubt that you are sick of hearing about Greece but it remains front and center for investors. Last weekend Greece approved the latest round of austerity measures but that wasn't good enough. The new problem is doubts by the rest of the EU and eurozone that Greece will actually follow through on these austerity commitments. On Monday is a key meeting by EU finance ministers to vote on approval for the next bailout to Greece. Unfortunately a "yes" vote doesn't mean it's over. Greece still hasn't sealed the deal with its private investors who are now looking at a 70% haircut on their Greek bond holdings.

It seems that every day there are new twists in this Greek tragedy. This past week a major story was news that the ECB is swapping its $66 billion in Greek bonds for new ones that can't be restructured. If you're a private sector investors would you worry about Greece defaulting if suddenly you saw the ECB trying to protect itself from a Greek default by swapping its old Greek bonds for new ones that are guaranteed? That certainly doesn't paint a picture of confidence. Of course readers of this newsletter already know we are expecting Greece to default sooner or later.

Right now the big challenge is the upcoming March 20th deadline for Greece to make a 14.5 billion euro ($19 billion) debt payment. The Troika (EC, IMF, & ECB) is considering their options. One of them might be some sort of bridge loan to get Greece past this deadline before committing to any sort of larger bailout package. It's a question of how much money are you willing to throw away at this problem trying to kick the can down the road before you finally give up. Stocks could rally if there is some sort of decision made to get Greece past this March 20th deadline.

In other news we could see more and more headlines about oil. The situation with Iran is escalating. The country has been considering plans to cut its exports to certain European nations in retaliation for the West's growing sanctions against the country. There were headlines on Saturday that Iran had decided to stop selling crude oil to Britain and France. Oil exports account for the majority of Iran's revenue. Odds are they have already made agreements to sell this oil to someone like China. This news could produce a spike in oil prices, which have already been on the rise. This past week there have been a growing number of stories about record high gasoline prices this coming summer. A few analysts are expecting gasoline to rise from $3.50 a gallon to $4.25 in just the next six weeks. Many are expecting $4.50 to $5.00 a gallon by the middle of summer. If gasoline does hit $4.00 a gallon (or higher) it will be a major challenge for the U.S. economy since over 70% of the U.S. GDP is driven by consumer spending. Definitely something to think about as you make plans for summer.

The U.S. stock market's trend is still higher and there is nothing to stop it from growing more overbought. If EU ministers vote in favor of more aid to Greece on Monday then our markets could rally when they open on Tuesday. However, eventually stocks will see a correction. As LEAPS traders I would prefer to wait for some sort of correction before initiating new long-term positions. At the same time we have to weigh our desire to buy a pullback versus the reality of the bullish market in front of us. If you choose to put money to work in this market I would definitely start small to limit your risk.

- James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The U.S. market continues to rally with the S&P 500 and NASDAQ indices in narrow, bullish channels. The Dow Industrials just broke out from a two-week sideways consolidation and the small cap Russell 2000 index looks poised to do the same.

The S&P 500 is up six out of the last seven weeks and comfortably above what was expected to be major resistance near the 1350 level. The trend is up but every week the market grows more overbought. Eventually the market will see a correction.

Our portfolio continues to grow. Both MSI and UNH made the jump from watch list to active trades. ADM and INTC, two more watch list stocks, have been moved to the "new plays" section of the newsletter.

I have updated stop losses on: EPD, LXK, NKE, 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

Early Graduation

by James Brown

Click here to email James Brown

Editor's Note:

Our new play candidates are making the jump from our watch list. ADM hit our entry point requirements on Friday at the closing bell. INTC is breaking out instead of correcting lower. We are graduating them to active trades tonight.


- New Trades -


Archer-Daniels-Midland Company - ADM - close: 31.35

Comments:
02/18/12 update: We have had ADM on our watch list with plans to buy calls if shares can close over $31.25. The stock has been flirting with a breakout past this level the last few days and finally closed above our trigger on Friday. This trade should open on Tuesday morning (since the market is closed on Monday).

After months of consolidating under resistance in the $30.00-30.50 zone ADM looks poised to run. The P&F chart is bullish with a $40 target. We are aiming for $37.75. We will start this play with a stop loss at $28.40.

NOTE: The U.S. market looks overbought and will correct eventually. We want to keep our new position size small to limit our exposure here. Start with half your normal position size or less.

- Suggested Positions -
Feb 21, 2011 - entry price on ADM @ --.--, option @ -.--
symbol: ADM1319A35 2013 JAN $35 call - current bid/ask $ 1.74/ 1.78

02/18/12 start with small positions to limit our exposure.
02/17/12 ADM meets our entry point requirements with a close over $31.25. Open positions the next day (Feb. 21st).
02/11/12 adjust entry trigger to wait for close over $31.25
FYI: 2014 calls are also available.

Chart of ADM:

Current Target: $37.75
Current Stop loss: 28.40
Play Entered on: 02/21/12
Originally listed on the Watch List: 01/28/12


Intel Corp. - INTC - close: 27.37

Comments:
02/18/12 update: Shares of INTC have been consolidating sideways under resistance near $27.00 for over three weeks. We had this stock on our watch list with a buy-the-dip trigger in hopes of catching it during a market sell-off. Yet now INTC has broken out past resistance. We don't want to wait for the pull back that may not show up.

I am suggesting we open small bullish positions at the opening bell on Tuesday morning with a stop loss at $24.75. Our long-term target is $34.00. The P&F chart is bullish with a $31.50 target. We want to keep our initial position size small to limit our risk (start with half your normal trade size or smaller).

- Suggested Positions -
Feb 21, 2011 - entry price on INTC @ --.--, option @ -.--
symbol: INTC1319A30 2013 JAN $30 call - current bid/ask $ 1.29/ 1.32

- or -

Feb 21, 2011 - entry price on INTC @ --.--, option @ -.--
symbol: INTC1418a30 2014 JAN $30 call - current bid/ask $ 2.22/ 2.28

02/18/12 start with small positions to limit our exposure.

Chart of INTC:

Current Target: $34.00
Current Stop loss: 24.75
Play Entered on: 02/21/12

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



Play Updates

Stocks Continue to Drift Higher

by James Brown

Click here to email James Brown

Editor's Note:

We want to close our CSX positions at the open on Tuesday.

MSI and UNH have joined the active trade list.


Closed Plays


None. No closed plays this week.


Play Updates


Allergan Inc. - AGN - close: 87.91

Comments:
02/18/12 update: AGN managed a gain for the week but shares also produced a new lower high near the $89.00 level. I am still concerned that the upward momentum has definitely stalled and AGN look poised for another pull back probably toward $85 or possibly its simple 200-dma near $83.

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 $ 2.65/ 3.40

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: 37.80

Comments:
02/18/12 update: We have been expecting some profit taking in AKAM after the big gap open higher two weeks ago. Thus far AKAM is holding up pretty well. We should still expect shares to fill the gap. Wait for a bounce near the $35-34 area before considering new positions.

- Suggested Positions -
FEB 10, 2012 - entry price on AKAM @ 37.60, option @ 5.40
symbol:AKAM1319A40 2013 JAN $40 call - current bid/ask $ 5.00/ 5.20

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.

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: 8.02

Comments:
02/18/12 update: After a multi-week rally BAC was due for some profit taking yet shares only lost five cents last week. The trend is still up but I am not convinced the profit taking is over. I would expect a dip into the $7.50-7.00 zone once the market finally corrects.

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 $ 0.71/ 0.72
(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 $ 0.71/ 0.72
(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: 33.12

Comments:
02/18/12 update: After weeks of underperforming BMY finally bounced. Shares spent most of the week in the $32.00-31.60 zone but Friday saw the stock soaring with a gap higher and r ally past its 100-dma and a +3.3% gain. Even news that BMY had received a subpoena last month over its Abilify drug did not stop the rally on Friday (fyi: Ability account for $2.8 billion in sales last year).

Big picture the bounce on Friday reaffirms the long-term up trend but readers may want to wait for a dip and then buy a new bounce in the $32.50 area before considering bullish positions.

- Suggested Positions -
SEP 19, 2011 - entry price on BMY @ 30.53, option @ 1.20
symbol: BMY1319A35 2013 JAN $35 call - current bid/ask $ 1.34/ 1.36

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: 3.49

Comments:
02/18/12 update: I cautioned readers a week ago that BZH could see more profit taking. The mid-week bounce stalled in what might be considered a new lower high. Shares are still respecting technical support at the 20-dma for now but when the market finally corrects I expect this technical support to break. Look for a dip toward $3.20 to the $3.00 area. If you look at the weekly chart the action two weeks ago looks like a potential top. That's not surprising. BZH is up big this year and due for a correction.

More conservative traders may want to just exit now and lock in gains before the pullback gets any worse.

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 $ 1.50/ 1.65

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: 17.00

Comments:
02/18/12 update: CIEN continues to drift higher. The stock is up three weeks in a row and up six out of the last seven weeks. When the market finally corrects I am expecting CIEN to dip back into the $15.75-15.00 zone. Readers may want to wait for the correction before considering new positions. On a positive note it looks like we'll see the simple 50-dma cross over its 200-dma in a few weeks. This "golden cross" is normally a bullish development.

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 $3.05/3.15

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: 20.29

Comments:
02/18/12 update: Shares of CSCO continue to drift higher as well. If CSCO can breakout past its February highs the next level of significant resistance is probably the $22 area. If the market were to correct lower then CSCO might dip to its simple 50-dma near $19.20.

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 $2.20/2.24

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: 21.59

Comments:
02/18/12 update: Ouch! Railroad stocks were hammered on Wednesday after Norfolk Southern (NSC) announced that coal shipments were down. CSX gave us a scare with a drop toward $21.00 on Wednesday. I am concerned about our CSX trade. The rebound on Friday stalled near $22 and its simple 50-dma. On a short-term basis the path of least resistance looks like down. With the market due for a correction lower how low will CSX falls when the market finally pulls back?

I am suggesting we go ahead and cut our losses now and exit positions at the opening bell on Tuesday. More aggressive traders could leave this play open but I would place your stop loss under support near $20.00 (maybe at $19.80 so it's under the December low).

- Suggested Positions -
NOV 14, 2011 - entry price on CSX @ 22.59, option @ 2.24
symbol: CSX1319A25 2013 JAN $25 call - current bid/ask $ 1.00/ 1.05

- or -

NOV 14, 2011 - entry price on CSX @ 22.59, option @ 3.30
symbol: CSX1418A25 2014 JAN $25 call - current bid/ask $ 2.12/ 2.23

02/18/12 prepare to exit. Close positions at the open on Tues. Feb. 21st
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.

Chart of CSX:

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: 35.00

Comments:
02/18/12 update: DOW continues to climb and shares added another point last week. Friday's gain is a bullish breakout from its recent trading range but the $35.00 level might be round-number resistance. The stock remains overbought and due for a correction. More conservative traders may want to take profits now or raise their stops closer to the $32 area.

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 $ 3.90/ 4.00

- or -

Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.54
symbol: DOW1418A40 2014 JAN $40 call - current bid/ask $ 3.45/ 3.55

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: 52.29

Comments:
02/18/12 update: It was another bullish week for EPD with shares up six days in a row. The stock hit new record highs at $52.95 on Friday. Readers may want to consider taking profits now. I am raising our stop loss to $46.75. More conservative traders may want to consider stops closer to the 50-dma instead. 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.

- Suggested Positions -
Nov 21, 2011 - entry price on EPD @ 45.17, option @ 1.45
symbol: EPD1319A50 2013 JAN $50 call - current bid/ask $ 3.80/ 4.00

02/18/12 new stop loss @ 46.75
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: 46.75
Play Entered on: 11/21/11
Originally listed in the New Plays 11/19/11


FedEx Corp. - FDX - close: 92.99

Comments:
02/18/12 update: Transportation stocks have been underperforming recently. That's a warning sign for the broader market. The action in FDX last week looks like a bearish reversal pattern, especially with the bearish engulfing candlestick pattern on the weekly chart (see below). I would expect a pullback in FDX toward $90 or its 50-dma.

I am not suggesting new positions at this time. FYI: The Point & Figure chart for FDX is bullish with a $101 target.

- Suggested Positions -
Jan 11, 2011 - entry price on FDX @ 88.08, option @ 5.52
symbol: FDX1319A100 2013 JAN $100 call - current bid/ask $ 6.70/ 6.85

02/18/12 caution: FDX has produced a bearish reversal on the weekly chart
02/04/12 new stop loss @ 85.75
01/28/12 new stop loss @ 84.75
01/21/12 new stop loss @ 83.40

Chart of FDX:

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: 40.26

Comments:
02/18/12 update: The Chinese FXI ETF has recovered from last Friday's declines. Shares are back above round-number resistance near $40 and the FXI, if the market cooperates, looks poised for further gains. I'd be tempted to launch new positions but I am concerned the U.S. markets look overbought and any correction could definitely impact investor sentiment toward the FXI.

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 $ 1.92/ 1.98

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: 29.59

Comments:
02/18/12 update: HPQ continues to climb and shares are testing major resistance near its 200-dma and the $30.00 level. I suspect the stock will trade sideways until its earnings report on February 22nd (this Wednesday). I am not suggesting new positions prior to the report. Please note that I am adjusting our upside exit target to $33.75.

- 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 $ 6.20/ 6.35
Stop Loss @ 25.75

02/18/12 adjusted exit target to $33.75.
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: 33.75
Play Entered on: 09/26/11
Originally listed in New Plays: 09/24/11


Kraft Foods Inc. - KFT - close: 38.01

Comments:
02/18/12 update: It certainly looks like upward momentum in KFT has run out of gas. Shares have spent the last two weeks drifting lower and KFT is now testing support near $38 and its simple 50-dma. If the market corrects we could see KFT drop toward the $36.00 area.

Keep in mind that KFT is due to report earnings on February 21st (Tuesday) after the closing bell. More conservative traders may want to take profits now versus risk holding over the earnings report.

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 $ 4.30/ 4.45

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: 71.57

Comments:
02/18/12 update: It was a quiet week and KMB is virtually unchanged after traders bought the dip at Wednesday's low. I don't see any changes from my comments a week ago. If the stock market corrects we can look for KMB to pullback toward the $70.00 area or its simple 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.

- 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/ 1.90

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: 5.97

Comments:
02/18/12 update: It was another volatile week for LDK but this time it was big declines. Monday's early gains faded and shares plunged on Tuesday. Traders did end up buying the dip multiple times near support at $5.50 and its simple 200-dma.

Tuesday's solar-industry declines were fueled by worries that Germany would cut solar subsidies worse than previously expected. Friday the group rallied on positive earnings news and expectations, which doesn't match up with concerns Germany could cut subsidies. Investors can't quite decide what direction to go here.

I am not suggesting new positions at this time.

- 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 $ 1.34/ 1.43

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: 39.26

Comments:
02/18/12 update: Most of LLY's action last week was bearish. LLY broke down to new multi-week lows and broke down under what should have been support near $39.00 and its simple 100-dma. Fortunately the stock reversed higher on Friday with a +1.3% gain and a rally back above $39.00. LLY still has a trend of lower highs but the weekly chart's newest candlestick looks like a potential bullish reversal.

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 $ 1.24/ 1.30

- or -

Jan 05, 2012 - entry price on LLY @ 39.50, option @ 2.75
symbol: LLY1418A45 2014 JAN $45 call - current bid/ask $ 1.72/ 1.77

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: 52.79

Comments:
02/18/12 update: LVS kept the rally alive and hit new 52-week highs. However, Friday's action might be a short-term top with a failure at the $54.00 level. LVS could easily correct back toward what should be support near $50.00. I'd prefer to wait for a bounce off support before considering new positions.

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 $ 4.40/ 4.55

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: 37.91

Comments:
02/18/12 update: Another week, another gain for LXK. The stock is up seven weeks in a row and up eight out of the last nine weeks. The trend is bullish but the stock and the market are overbought. Readers may want to wait for a dip or a bounce near $36.00 or $35.00, either level could prove to be support. Please note our new stop loss at $33.75.

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 $ 3.80/ 4.20

02/18/12 new stop loss @ 33.75
02/04/12 new stop loss @ 32.75

Current Target: $44.00
Current Stop loss: 33.75
Play Entered on: 01/19/12
Originally listed on the Watch List: 01/07/12


3M Co. - MMM - close: 87.56

Comments:
02/18/12 update: I am somewhat concerned with MMM's performance. The major indices are hitting new relative highs. Yet MMM has been stuck going sideways the last three weeks in a row. What sort of catalyst is going to break MMM out of this trading range? If the market corrects how low will MMM go? The stock has short-term support near $86.70. Beyond that I see potential support near $85-84 and at $82.50ish.

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 $ 3.65/ 3.80

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: 16.37

Comments:
02/18/12 update: MRVL was showing some volatility last week. Monday saw a drop under the $16.00 level. Thursday saw a big surge higher. Friday MRVL gave back -2.1%. Is this just traders trying to position themselves ahead of MRVL's earnings report? The company is due to announce on February 23rd after the closing bell.

I am not suggesting new positions this close to the earnings announcement.

Our target is $21.75. FYI: The Point & Figure chart is bullish with a $21 target.

- 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 $ 1.89/ 1.95

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


Motorola Solutions, Inc. - MSI - close: 50.63

Comments:
02/18/12 update: MSI is a graduate from our watch list. We've been waiting for a breakout past major resistance near $48.00. The plan was to wait for MSI to close over $48.25 and then buy call LEAPS the next day. MSI hit our entry point requirements with Thursday's close at $49.13. Our trade opened on Friday morning at $49.35 and MSI rallied to $51.06 intraday. Since MSI normally doesn't move that fast you could argue shares are short-term overbought here. Readers may want to look for a dip into the $49.00-48.00 zone before considering new bullish positions. Our long-term target is $64.50. We are raising the stop loss to $45.75 .

- Suggested Positions -
Feb 17, 2012 - entry price on MSI @ 49.35, option @ 2.27
symbol: MSI1319A55 2013 JAN $55 call - current bid/ask $ 2.82/ 2.99

02/18/12 new stop loss @ 45.75
02/17/12 trades opens on Friday morning at $49.35
02/16/12 MSI meets our requirement to open positions
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.

Chart of MSI:

Current Target: $64.50
Current Stop loss: 45.75
Play Entered on: 02/17/12

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


Nike Inc. - NKE - close: 106.68

Comments:
02/18/12 update: NKE continues to move higher in a narrow bullish channel. A breakdown under $105 will probably signal a bigger drop toward $100 or its 50-dma. I am adjusting our stop loss higher to $96.75. I am not suggesting new positions at this time.

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

- Suggested Positions -
Jan 13, 2012 - entry price on NKE @ 98.39, option @ 4.95
symbol: NKE1319A110 2013 JAN $110 call - current bid/ask $ 8.20/ 8.35

02/18/12 new stop loss @ 96.75
02/04/12 new stop loss @ 94.75

Current Target: $119.00
Current Stop loss: 96.75
Play Entered on: 01/13/12
Originally listed on the Watch List: 12/24/11


ON Semiconductor Corp. - ONNN - close: 9.38

Comments:
02/18/12 update: ONNN spent the week consolidating sideways in the $9.20-9.50 zone and closed virtually unchanged for the week. I am still concerned that the market and ONNN could see some profit taking. ONNN should find support near $9.00 and $8.50 on any significant pull back. On a positive note the 50-dma is about to cross above the 200-dma, which is normally a bullish development.

I am not suggesting new positions at this time.

- 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

02/11/12 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: 62.52

Comments:
02/18/12 update: QCOM spent several days consolidating sideways in the $61-62 zone. The Thursday-Friday rally pushed QCOM past resistance to new ten-year highs. The stock continues to look somewhat overbought here. I would prefer to see a correction before we consider new bullish positions. Please note our new stop loss at $55.75.

I am not suggesting new positions at this time.

- Suggested (SMALL) Positions -
NOV 23, 2011 - entry price on QCOM @ 52.50, option @ 4.90
symbol: QCOM1319A60 2013 JAN $60 call - current bid/ask $ 7.55/ 7.65

02/18/12 new stop loss @ 55.75
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: 40.89

Comments:
02/18/12 update: RAI posted a decent gain for the week but shares are still lagging behind some of its peers in the tobacco industry. The close back above its 50-dma and short-term resistance near $40.50 is short-term bullish but 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 $ 1.45/ 1.55

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: 37.27

Comments:
02/18/12 update: RDC spent the week consolidating sideways under the $38.00 level. Earnings are coming up on February 28th. I am not suggesting new positions this close to the earnings announcement. Plus, I'd like to see the market and RDC correct lower a little bit before we consider new bullish positions.

- Suggested Positions -
Feb 03, 2012 - entry price on RDC @ 37.54, option @ 4.30
symbol: RDC1319A40 2013 JAN $40 call - current bid/ask $ 3.90/ 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: 48.45

Comments:
02/18/12 update: The rally in SBUX took a week off with shares consolidating sideways in the $48.00-49.25 zone. Shares look very overbought with the rally off its November lows. If and when the market corrects we can look for SBUX to test its 50-dma or the $45.00 area.

I'm not suggesting new positions at this time.

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

- Suggested (SMALL) Positions -
Dec 27, 2011 - entry price on SBUX @ 45.40, option @ 4.00
symbol: SBUX1319A50 2013 JAN $50 call - current bid/ask $ 4.45/ 4.60

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: 44.65

Comments:
02/18/12 update: It proved to be another volatile week for TEVA. The stock saw a drop toward technical support near its 50 and 200-dma. Speaking of which the 50-dma's cross above the 200-dma is normally considered bullish. Meanwhile TEVA reported earnings on Feb. 15th. The company beat estimates by one cent with revenues that were just slightly ahead of expectations. The stock surged on these results but traders took profits on Thursday.

I am a little hesitant to launch new positions at current levels.

- Suggested Positions -
Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 2.49
symbol: TEVA1319A50 2013 JAN $50 call - current bid/ask $ 1.80/ 1.83

- or -

Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 4.40
symbol: TEVA1418A50 2014 JAN $50 call - current bid/ask $ 3.70/ 3.95

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


UnitedHealth Group - UNH - close: 54.68

Comments:
02/18/12 update: UNH is another graduate from our watch list. The plan was to wait for UNH to close over $54.25. Shares met that goal on February 14th with a close at $54.46. Our position opened the next day with UNH opening at $54.53. The rally has stalled the last couple of days with a sideways move in UNH. If the market opens higher on Tuesday I would be tempted to open positions here. If the market corrects we can look for UNH to test technical support near its 50-dma instead (near 51.60ish). FYI: The Point & Figure chart is bullish with a $62 target.

- Suggested Positions -
Feb 15, 2012 - entry price on UNH @ 54.53, option @ 3.25
symbol: UNH1319A60 2013 JAN $60 call - current bid/ask $ 3.15/ 3.25

- or -

Feb 15, 2012 - entry price on UNH @ 54.53, option @ 5.00
symbol: UNH1418A60 2014 JAN $60 call - current bid/ask $ 5.25/ 6.20

Chart of UNH:

Current Target: $63.00
Current Stop loss: 49.45
Play Entered on: 02/15/12

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


Verizon Communications - VZ - close: 38.46

Comments:
02/18/12 update: VZ was showing some relative strength on Friday. After two weeks of seeing VZ bouncing along technical support at its 100-dma it's was nice to see the bounce on Friday. Unfortunately Friday's move stalled at technical resistance at the 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 $ 1.41/ 1.44

- or -

Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.87
symbol: VZ1418A40 2014 JAN $40 call - current bid/ask $ 2.21/ 2.30

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: 28.41

Comments:
02/18/12 update: The sell-off that started two weeks ago continued early this past week. Fortunately X seemed to find some support in the $27.50 area. You could argue that Thursday was just an oversold bounce so I am cautious here although it's worth noting that the correction stopped exactly at X's trend line of higher lows (see chart). More conservative traders may want to tighten stops. I am concerned that X could break this trend line if and when the stock market finally corrects lower. 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 $ 4.40/ 4.50

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)

Chart of X:

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: 85.62

Comments:
02/18/12 update: Shares of XOM managed a bounce off its 50-dma. The bearish head-and-shoulders pattern has not been negated yet but it's less of an ominous sign with the recent bounce. The bottom of XOM's wide bullish channel is now near the $82 level, which as prior resistance, should be new support.

Given the up trend in oil prices we could see XOM challenging its recent highs soon but 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 $ 4.30/ 4.40

- or -

Dec 22, 2011 - entry price on XOM @ 83.56, option @ 6.25
symbol: XOM1418A95 2014 JAN $95 call - current bid/ask $ 5.15/ 5.35

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

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

No Sell-off on the Warning

by James Brown

Click here to email James Brown

Editor's Note:

In addition to tonight's new watch list candidate, readers may want to add these symbols to their radar screen as stocks to watch (on top of last week's list of radar screen candidates):

CCJ, JNPR, F, MON, APKT, EBAY, TIVO, CVX, AXP, DELL, TER, FNSR, FWLT, & SFY



New Watch List Entries

NVDA - NVIDIA Corp


Active Watch List Candidates

MCD - McDonald's Corp


Dropped Watch List Entries

ADM and INTC have been moved to "new plays"

MSI and UNH graduated to our active trade list.



New Watch List Candidates:


NVIDIA Corp. - NVDA - close: 15.85

Company Info

This past week NVDA reported earnings that were two cents better than expected. Revenues were slightly above expectations but management guided lower for the first quarter. Normally you would expect a stock to plunge on the earnings warning. Yet traders bought the dip in NVDA near support at $15.00 and the simple and exponential 200-dma. The stock managed a gain for the week.

We don't want to buy calls yet. Let's wait for NVDA to build on this recent action. I am suggesting we wait for NVDA to close over $17.05 before we initiate positions the next day with a stop loss at $15.40. Our long-term target is $21.75.

FYI: The Point & Figure chart is bullish with a long-term $23 target.

Wait for a close over: $17.05, buy calls the next day.
stop loss @ 15.40.

BUY the 2013 Jan $20 call (NVDA1319A20)

Chart of NVDA:

Originally listed on the Watch List: 02/18/12


Active Watch List Candidates:



McDonald's Corp. - MCD - close: 99.99

Comments:
02/18/12 update: MCD broke down under technical support at its 50-dma on Wednesday but traders quickly bought the dip. Currently it looks like MCD is working on a new bearish trend of lower highs within its larger longer-term up trend. We still want to wait for a correction lower.

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