Option Investor
Newsletter

Daily Newsletter, Sunday, 5/6/2012

Table of Contents

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

Leaps Trader Commentary

Market Flashes a Warning Signal

by James Brown

Click here to email James Brown

The U.S. stock market could be flashing a warning sign. Stocks ended April on a down note and April's monthly decline ended a four-month winning streak for the S&P 500. The major indices saw a rally on May 1st but gains started fading before the close and stocks sold off the next three days in a row. By Friday's closing bell the Dow Industrials were down -1.4% for the week. The S&P 500 was down -2.4%, the NASDAQ composite was down -3.7% and the small cap Russell 2000 index fell -4.1% for the week. Looks like the "sell in May" phenomenon might happen again this year.

Two weeks ago the market was ignoring bad news. Unfortunately another week of largely disappointing news was apparently too much for the bulls to endure. We did see some positive surprises. The ISM manufacturing data came in at a better than expected 54.8, up from 53.4 the month before. The weekly initial jobless claims fell from 392,000 a week ago to a much better than expected 365,000. Vehicle sales in the U.S. remain healthy above an annual pace of 14 million. That about ends it for the good news.

The ISM services data fell from 56.0 to a worse than expected 53.5 in April. The Chicago PMI reading plunged to a 29-month low at 56.2, down from April's 62.2. Economists had been expecting a dip toward 60. The ADP employment report was disappointing but it was overshadowed by the government's non-farm payroll data on Friday. Economists had been expecting the U.S. economy to add +170,000 in April, up from 120K in March.

Unfortunately, the Friday morning jobs report showed a gain of just 115,000 new jobs. That's 55,000 less than expected although March's +120K was revised higher to +154K. The unemployment rate is based off the household survey, which showed employment actually fell -169,000. Yet the unemployment rate dropped -0.1% to 8.1% due to another big drop in the labor participation rate. Conspiracy theorists suggest the labor participation numbers are being manipulated to make the unemployment rate look better than it really is. While Friday's report was disappointing it wasn't bad enough to really spur the Federal Reserve into action. Market pundits suggest that we would need to see a string of really bad employment reports before the Fed steps in with more QE to try and stimulate the economy.

Major Indices:

The S&P 500 just delivered its worst weekly performance of the year. Last week I warned readers that if the S&P 500 fails to breakout past its 2012 highs it will look like a bearish double top. The index didn't even make it to its highs near 1420 before rolling over last week. Now the S&P 500 is showing a new lower high. There is still a chance that support near 1360 will hold again. However, if the S&P 500 does break down below 1360 then we're probably looking at a correction toward the 1300 level with possible support or a bounce near 1340 along the way.

Daily chart of the S&P 500 index:

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

The NASDAQ composite continues to see a lot of volatility and fell -3.7% last week. There was no confirmation of the bullish reversal candlestick pattern on the weekly chart. It's back below its simple 50-dma and back below the 3,000 mark. It's possible the NASDAQ could bounce near the prior week's lows around the 2950 level but I suspect we will see the NASDAQ correct lower toward support near 2900. A drop to 2900 will coincide with a decline to the 38.2% Fibonacci retracement level.

Daily chart of the NASDAQ Composite index:

The small cap Russell 2000 index has reversed lower as well. It's back below its 50-dma and just closed under its simple 100-dma on Friday. Last week has created a new lower high. There is a chance that the $RUT will find support again in the 785-780 zone. The exponential 200-dma and its simple 300-dma could add technical support to the area. However, a breakdown at 780 would also be a break below the neckline to a bearish head-and-shoulders pattern that would signal a drop toward the 710 area.

Daily chart of the Russell 2000 index

The economic calendar slows down significantly this week. The major reports for the week will be the PPI and the sentiment numbers, both out on Friday. We will still see a large number of Q1 earnings reports but for the most part earnings season is starting to wind down. Most of this data will likely be ignored for headlines out of Europe given the elections this weekend.

Economic and Event Calendar

- Monday, May 7 -
(nothing significant)

- Tuesday, May 8 -
(nothing significant)

- Wednesday, May 9 -
Wholesale inventories from March

- Thursday, May 10 -
Weekly Initial Jobless Claims
import/export prices
trade balance figures from March

- Friday, May 11 -
PPI for April
Michigan Sentiment for May

The Week Ahead:

Europe remains in focus for investors. This past week the market reacted poorly to news that Spain's economy has officially fallen back into recession although I don't see why that is a surprise. Spain's unemployment is soaring and with so many people out of work how could their economy be anything but in a recession. What is a surprise was improvement in Spanish and Italian bond yields, which both drifted lower last week. Another surprise was an unexpected rise in German unemployment.

The question everyone will be asking is if we will see any surprises in the Greece and French elections this weekend. Both are scheduled to take place on Sunday, May 6th. We have mentioned both elections as potentially market-moving events over the last few weeks. Greece is holding their national elections and people are wondering if the new Greek leadership will honor the prior government's austerity and budget promises or will they choose another path and potentially exit the euro?

The larger event is the French presidential elections. Right now it looks like incumbent Sarkozy will lose to the Socialist candidate Francois Hollande. If Hollande wins the election it will throw doubt on the relationship between France and Germany. The willingness between these two governments to work together politically and economically has been critical in keeping the euro together. With both Spain and Italy still struggling with their debt issues any weakness in the EU leadership could complicate matters.

Seasonally we are in a weak time of year for stocks. May and June are not normally very bullish periods for the stock market. The month of May is only four trading days old and the S&P 500 is already down -2%. I am very cautious on stocks over the next few weeks. We have seen a string of disappointing economic reports. The labor issues in the U.S. are not improving. China is struggling to keep its economy from slowing down too much. Europe remains a trouble spot with concerns over Spain and the possibility of new leadership in both Greece and France. I would hesitate to launch new bullish positions at this time.

- James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

It was a rough week for the bulls. Two weeks ago the U.S. market's major indices all produced a bullish reversal higher as stocks ignored bad news. This past week wasn't the case and there was no follow through. Instead stocks reversed lower with a disappointing jobs number really hammering the market on Friday. The market has now created a lower high as we move into a seasonally weak period of the year for equities.

Last week we decided to take profits on EPD and sell half of our position on Monday morning. We also decided to exit early in our KFT and KMB trades last Monday.

Investors will want to double check their stop loss placement since so many stocks look poised for more weakness.

I have updated stop losses on: CL

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

Troubled Transports

by James Brown

Click here to email James Brown


- New Trades -

CH Robinson Worldwide - CHRW - close: 60.62

Company Info

Why We Like It:
From a technical perspective the outlook for CHRW looks pretty ugly. Shares spent several months building a bearish consolidation pattern with support in the $62.50 area against a trend of lower highs. The April 25th earnings report was the catalyst to push CHRW out of this consolidation pattern. Now the oversold bounce is already starting to fail.

I am suggesting we launch small bearish put positions at the open on Monday morning. We'll use a stop loss at $65.25. More conservative traders may want to use a stop in the $63.50-64.00 area instead. Our multi-month target is a drop to $50.50. We want to keep our position size small to limit our risk.

- Suggested (small) Positions -
May 07, 2012 - entry price on CHRW @ --.--, option @ -.--
symbol:CHRW1319A55 2013 JAN $55 PUT - current bid/ask $ 2.95/ 3.10

Chart of CHRW:

Weekly Chart of CHRW:

Current Target: $50.50
Current Stop loss: 65.25
Play Entered on: 05/07/12
Originally listed in the New Plays 05/05/12



Play Updates

Worst Week of the Year

by James Brown

Click here to email James Brown


Closed Plays


KFT and KMB were closed last Monday as planned.


Play Updates


Archer-Daniels-Midland Company - ADM - close: 32.25

Comments:
05/05/12 update: ADM saw a big rally on May 1st thanks to better than expected earnings news. The company beat estimates by 18 cents with 78 cents a share. The stock surged from $31 to $33.25. The market's three-day sell-off has pulled ADM back down toward $32.00.

I am not suggesting new positions at this time.

Earlier Comments:
We want to keep our new position size small to limit our exposure here. Start with half your normal position size or less.

- Suggested (small) Positions -
Feb 21, 2011 - entry price on ADM @ 31.31, option @ 1.74
symbol: ADM1319A35 2013 JAN $35 call - current bid/ask $ 1.47/ 1.52

05/01/12 ADM beat estimates by 18 cents.
04/28/12 ADM is scheduled to report earnings on May 1st.
02/21/12 trade opened on Tuesday @ 31.31
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.

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


Allergan Inc. - AGN - close: 92.90

Comments:
05/05/12 update: It was not a good week for AGN shares. Not only did the company miss Wall Street's estimate of 87 cents by a penny but management then guided lower for the second quarter. The stock gapped down on May 2nd and plunged toward the $90 level before paring its losses. The larger trend is still up but AGN could easily consolidate back down into the $90-87.50 zone before the correction is over. 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 $ 3.30/ 3.60

05/02/12 AGN missed earnings estimates by a penny, guided lower
04/28/12 Exit strategy adjustment! We are not selling half at $99.00. Instead we'll aim for $109.00 to exit positions. See tonight's note for details on alternative exits
03/31/12 adjusted exit strategy. Sell half at $99.00 and sell the remainder at $109.00
03/10/12 new stop loss at $84.50
02/02/12 earnings in-line but guided lower for 2012
01/28/12 earnings are due on Feb. 2nd. Readers might want to raise their stop or consider some sort of hedge prior to the report.
12/24/11 new stop loss @ 81.60
12/10/11 spreads on our 2013 calls are getting wider!
11/19/11 Taking an aggressive stance on our stop loss and moving it down to $77.45
10/22/11 Earnings are coming up. Readers might want to consider raising their stop loss. We are keeping ours at $79.45.

Current Target:$109.00
Current Stop loss: 84.50
Play Entered on: 10/17/11
Originally listed on the Watch List: 09/24/11


Akamai Technologies - AKAM - close: 32.56

Comments:
05/05/12 update: The situation does not look good for our AKAM trade. The oversold bounce in this stock has failed at its 100-dma. Shares have closed back under their exponential 200-dma. AKAM looks poised to drop toward the $31.00 level or lower. Currently we have a stop loss at $31.75. I do think the $30 level is support but I can't guarantee that AKAM will hold that level. More conservative traders will want to seriously consider an early exit right now. If the market continues to sink this week I would expect AKAM to hit our stop loss. I am not suggesting new positions at this time.

- Suggested Positions -
FEB 10, 2012 - entry price on AKAM @ 37.60, option @ 5.40
symbol:AKAM1319A40 2013 JAN $40 call - current bid/ask $ 1.98/ 2.04

2nd Position (enter on Monday, March 12th)
MAR 12, 2012 - entry price on AKAM @ 36.80, option @ 4.45
symbol:AKAM1319A40 2013 JAN $40 call - current bid/ask $ 1.98/ 2.04

05/05/12 readers may want to exit early now.
04/25/12 AKAM reported earnings after the close, and warned that Q2 earnings and margins could contract. Shares plunged the next day
03/12/12 2nd position opened. AKAM @ 36.80. option @ $4.45
03/10/12 new stop loss @ 31.75
03/10/12 consider adding a second position on Monday morning,
let's keep our position size small.
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: 31.75
Play Entered on: 02/10/12
Originally listed on the Watch List: 02/04/12


Bank of America - BAC - close: 7.74

Comments:
05/05/12 update: It's been an ugly six weeks for BAC. The stock has fallen from $10 to under $8.00 now. I suggested readers take profits back in March when BAC was near $10 because we were expecting some profit taking but I honestly wasn't expecting a correction this deep. This last week's breakdown under support near $8.00 is bearish. Shares closed on their 100-dma and look poised to test the late February support near $7.70 soon. I am not suggesting new positions at this time.

Earlier Comments:
Currently we do not have a specific exit target. The plan has been to exit in the $12.00-15.00 zone. We still have months left on our 2013 calls so we're not in a rush to exit just yet. However, more conservative traders may want to take some money off the table early since odds of a pullback are pretty high. You could exit now and buy calls again on a dip.

- Suggested Positions -

AUG 29, 2011 - entry price on BAC @ 8.10, option @ 1.50
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.38/ 0.39
(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 $ 0.38/ 0.39
(no stop loss on this position)

03/17/12 BAC has broken out from its multi-week trading range. Broken resistance near $8.30 should be new support.
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: 33.37

Comments:
05/05/12 update: It was a very quiet week for BMY. The stock closed almost unchanged for the week after churning sideways in the $33.15-33.75 zone all week long. If the market continues to sink we should look for BMY to decline toward the $32.50-32.00 area. I am not suggesting new positions at this time.

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

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


Colgate-Palmolive Co. - CL - close: 99.13

Comments:
05/05/12 update: CL tagged another new high, above the $100 level, this past week. Yet the last three days looks like a bearish reversal pattern. On a short-term basis I would expect a dip toward the $98.00 level. If the market really corrects lower we could see CL drop toward the $96-94 zone. I am raising our stop loss up to $91.75. Our long-term target remains $109.

I am not suggesting new positions at this time.

- Suggested Positions -
MAR 16, 2012 - entry price on CL @ 95.48, option @ 2.92
symbol: CL1319A100 2013 JAN $100 call - current bid/ask $4.45/4.55

- or -

MAR 16, 2012 - entry price on CL @ 95.48, option @ 5.57
symbol: CL1418A100 2014 JAN $100 call - current bid/ask $7.40/8.20

05/05/12 new stop loss @ 91.75
04/26/12 CL reports earnings that are in-line with estimates.
03/31/12 CL is performing well but expect resistance at the $100 level and a possible pullback.

Current Target: $109.00
Current Stop loss: 91.75
Play Entered on: 03/16/12
Originally listed on the Watch List: 03/10/12


Cisco Systems - CSCO - close: 19.12

Comments:
05/05/12 update: Warning! Our CSCO trade could be in serious risk. The stock was underperforming on Friday with a -3.0% decline. Shares closed right at support near $19.00 and its 150-dma and exponential 200-dma. Unfortunately you could argue that CSCO is breaking down from a bearish head-and-shoulders pattern formed over the last three months. This could signal a drop toward the $17.50-17.00 area.

Readers will want to seriously consider an early exit right now. I still see potential support in the $18.50-18.00 zone and earnings are coming up on May 9th. I'm not willing to exit just yet. CSCO is due to report earnings on May 9th, after the closing bell. Wall Street expects a profit of 47 cents a share.

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 $1.29/1.31

05/05/12 CSCO is showing weakness. Readers may want to exit early immediately. Earnings are coming up on May 9th.
03/31/12 adjust exit target to $23.00
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: $23.00
Current Stop loss: 17.75
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/08/11


The Dow Chemical Co. - DOW - close: 32.33

Comments:
05/05/12 update: It's been a rough two weeks for shares of DOW. The stock reversed at resistance near $36.00 on the 25th of April. Since then DOW has been sinking through multiple layers of short-term support. The stock looks headed for its April lows near $31.50. If the market really starts to sell-off I would expect DOW to dip toward the $30.00 mark. I'm 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 $ 1.88/ 1.92

- or -

Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.54
symbol: DOW1418A40 2014 JAN $40 call - current bid/ask $ 1.89/ 1.98

04/26/12 DOW reported earnings one cent above expectations but revenues were a miss.
04/14/12 DOW produced a new lower low, last week. The correction may not be over yet.
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


eBay Inc. - EBAY - close: 39.44

Comments:
05/05/12 update: EBAY is starting to see some profit taking after failing at resistance near $42.00 again. I would expect shares to dip toward $38.00 or possibly fill the gap with a dip toward $36.50. I am not suggesting new positions at this time.

- Suggested Positions -
Mar 12, 2012 - entry price on EBAY @ 36.36, option @ 2.85
symbol: EBAY1319A40 2013 JAN $40 call - current bid/ask $ 4.00/ 4.10

- or -

Mar 12, 2012 - entry price on EBAY @ 36.36, option @ 5.11
symbol: EBAY1418A40 2014 JAN $40 call - current bid/ask $ 6.85/ 7.05

04/28/12 EBAY closed near its highs. Readers may want to take profits now. The bid on the 2013 call is at $5.10 (+78.9%), and the bid on the 2014 call is at $7.95 (+55.5%)
04/21/12 new stop loss at $34.90
04/18/12 EBAY reports better than expected earnings and provides stronger 2012 earnings guidance. The stock spikes higher.
04/07/12 EBAY could see a dip toward $34.00
03/31/12 action this past week looks short-term bearish. Look for a pullback

Current Target: $44.50
Current Stop loss: 34.90
Play Entered on: 03/12/12
Originally listed in the New Plays 03/10/12


Enterprise Products Partners - EPD - close: 52.47

Comments:
05/05/12 update: Our plan was to take some money off the table on Monday morning prior to EPD's earnings report. EPD opened on Monday at $58.82 and the 2013 Jan $50 call opened with a bid at $2.85 (+96.5%).

The company's earnings results were better than expected. Wall Street was looking for a profit of 57 cents a share on revenues of $11.0 billion. EPD delivered 73 cents on $11.25 billion. This news helped lift shares toward their 2012 highs near $53.00 but the market's widespread declines slowed EPD's ascent.

A failure here would look like a potential bearish double top pattern. 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 $ 3.60/ 3.80

05/02/12 EPD beat earnings and revenue estimates
04/30/12 sold half on Monday at the open. option bid @ 2.85 (+96.5%)
04/28/12 plan to sell half of our position on Monday morning. Current option bid is $2.95 (+103%)
04/21/12 readers may want to take profits now. The bid on our call option is at $3.10 (+113%)
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


Intel Corp. - INTC - close: 27.90

Comments:
05/05/12 update: Warning! INTC may have just produced a short-term top. Shares were hitting new multi-year highs on Wednesday. Thursday produced a bearish engulfing candlestick reversal pattern and Friday is confirmation. The decline looks like a top on the weekly chart too. At this point I would expect a correction lower, probably toward the $26.00 area.

I am not suggesting new positions at this time.

- Suggested (small, half-sized) Positions -
Feb 21, 2011 - entry price on INTC @ 27.34, option @ 1.30
symbol: INTC1319A30 2013 JAN $30 call - current bid/ask $ 1.17/ 1.19

- or -

Feb 21, 2011 - entry price on INTC @ 27.34, option @ 2.11
symbol: INTC1418a30 2014 JAN $30 call - current bid/ask $ 2.32/ 2.41

02/21/12 INTC opened at $27.34.
02/18/12 start with small positions to limit our exposure.

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

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


Coca-Cola Company - KO - close: 77.00

Comments:
05/05/12 update: The rally in KO has been a lot faster than expected. Readers may want to take profits early with our 2014 call already up +72%. Shares of KO drifted higher this past week, outperforming the market's major indices, but it looks like the $78.00 area could be resistance.

I am expecting some profit taking soon. Look for support around the $74 area.

Earlier Comments:
We will plan to exit positions prior to KO's proposed 2-for-1 split scheduled for August.

- Suggested Positions (start with small positions) -
Mar 29, 2012 - entry price on KO @ 72.35, option @ 3.60
symbol: KO1418A75 2014 JAN $75 call - current bid/ask $ 6.20/ 6.30

04/28/12 new stop loss @ 69.75
More conservative traders may want to take profits now, bid @ $5.90
04/25/12 KO's BoD has recommended a 2-for-1 split subject to shareholder approval in July. Split to occur in August.

Current Target: $87.00
Current Stop loss: 69.75
Play Entered on: 03/29/12
Originally listed on the Watch List: 03/17/12


Eli Lilly - LLY - close: 41.28

Comments:
05/05/12 update: LLY is virtually unchanged for the week after consolidating sideways in the $41.00-41.50 zone the last few days. If the market corrects lower I would expect LLY to dip toward the $40.00 area. 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 $ 1.45/ 1.49

- or -

Jan 05, 2012 - entry price on LLY @ 39.50, option @ 2.75
symbol: LLY1418A45 2014 JAN $45 call - current bid/ask $ 2.03/ 2.19

04/25/12 LLY beat earnings estimates by 12c and raised guidance
03/17/12 LLY's close over $40.00 looks like a new bullish entry point
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: 54.13

Comments:
05/05/12 update: We have been expecting LVS to correct lower so this decline isn't a surprise. That's why we sold half of our position three weeks ago to lock in a gain. I'm looking for LVS to find support in the $52-50 zone.

I am not suggesting new positions at this time.

- Suggested Positions -
Feb 06, 2012 - entry price on LVS @ 51.35, option @ 4.40
symbol: LVS1319A60 2013 JAN $60 call - current bid/ask $ 4.70/ 4.80

04/28/12 expecting a correction lower into the $52.50-50.00 zone
04/16/12 Sold half of our position. Bid opened at $7.45 (+69.3%)
04/14/12 Prepare to sell half on Monday morning at the open. Current bid on the 2013 Jan $60 call is $8.30 (+88.6%).
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: 49.75
Play Entered on: 02/06/12

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


3M Co. - MMM - close: 88.67

Comments:
05/05/12 update: MMM has spent two weeks now consolidating sideways under resistance near $90.00. There is short-term support at $88 and its 50-dma but if the market really starts correcting lower then we should probably expect a decline toward the $86 area.

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 $ 2.51/ 2.58

04/14/12 Readers will want to seriously consider an early exit right now. The short-term trend for MMM is down.
03/17/12 new stop loss @ 83.75
02/04/12 new stop loss @ 81.75

Current Target: $97.00
Current Stop loss: 83.75
Play Entered on: 01/19/12
Originally listed on the Watch List: 12/03/11


Motorola Solutions, Inc. - MSI - close: 50.61

Comments:
05/05/12 update: MSI only los 15 cents for the week but the stock did produce a new failed rally near the $52.00 level a few days ago. I am concerned this could be a new lower high. If the market starts to accelerate lower we should expect MSI to dip toward technical support at its rising 100-dma. More conservative traders may want to move their stop loss closer to the $48 level. I am not suggesting new positions at this time.

- Suggested Positions -
Feb 17, 2012 - entry price on MSI @ 49.35, option @ 2.27
symbol: MSI1319A55 2013 JAN $55 call - current bid/ask $ 1.89/ 1.96

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.

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

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


NetEase.com - NTES - close: 59.78

Comments:
05/05/12 update: It was a very quiet week for NTES. The stock consolidated sideways in a narrow range near the $60.00 level. Shares remain inside a bullish channel higher but it's nearing the bottom of that channel (essentially near the 30-dma). A breakdown from the channel would be bearish but NTES should find support in the $55-54 area.

Currently we have a very wide stop loss at $49.40. More conservative traders may want to raise their stop loss or exit now to lock in a gain. I am expecting some volatility in NTES after the company reports earnings on May 16th. I am not suggesting new positions at this time.

Earlier Comments:
Our long-term target is $64.00. Currently the Point & Figure chart is bullish with a $68 target. I want to remind readers that NTES can be volatile so we want to start with small positions (at least half your normal trade or smaller).

- Suggested (Small) Positions -
Feb 29, 2012 - entry price on NTES @ 52.74, option @ 4.70
symbol:NTES1319A60 2013 JAN $60 call - current bid/ask $ 7.20/ 7.90

05/05/12 readers may want to take profits now or raise their stop loss prior to the earnings report on May 16th. Option bid @ 7.20 (+53.1%)
03/24/12 new stop loss @ 49.40
Nimble traders may want to take profits now (current bid $7.80, +66%) and they re-enter positions on a correction.

Current Target: $ 64.50
Current Stop loss: 49.40
Play Entered on: 02/29/12

Originally listed on the Watch List: 02/25/12


Reynolds American Inc. - RAI - close: 40.37

Comments:
05/05/12 update: I remain concerned about RAI. As we suspected the $41 level did act as resistance. The fact that RAI raised its quarterly dividend and now has an annual yield of 5.5% is not helping the stock price. Now shares are starting to slide lower. Odds are we will see RAI retest technical support at its rising 200-ema near $39.50 soon. More conservative traders may want to throw in the towel right now and exit early. 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 $ 0.90/ 1.00

05/05/12 the oversold bounce is reversing. readers may want to exit lower
04/24/12 RAI reports earnings and misses. Shares spike lower!
03/10/12 another close over $42.50 could be used as a bullish entry point.
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


Teva Pharmaceuticals - TEVA - close: 44.44

Comments:
05/05/12 update: It was not a good week for TEVA. Shares briefly traded above resistance near $46.00 but the move proved to be a bull-trap pattern. Then on Friday the stock gapped down and closed under some short-term support. Traders bought the dip at its 100-dma, which is near the trend line of higher lows. If we see TEVA close under $43.50 then more conservative traders may want to exit early. The company is due to report earnings soon on May 9th and that could give shares a big push either way. I am not suggesting new positions prior to earnings.

- Suggested Positions -
Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 2.49
symbol: TEVA1319A50 2013 JAN $50 call - current bid/ask $ 1.16/ 1.20

- or -

Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 4.40
symbol: TEVA1418A50 2014 JAN $50 call - current bid/ask $ 2.97/ 3.30

03/24/12 new stop loss @ 41.80
03/24/12 TEVA is still underperforming. Consider an early exit
03/17/12 TEVA is underperforming. Readers may want to exit early or raise their stop loss.
02/04/12 new stop loss @ 41.40

Current Target: $54.00
Current Stop loss: 41.80
Play Entered on: 01/19/12

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


UnitedHealth Group - UNH - close: 54.72

Comments:
05/05/12 update: UNH lost more than three points for the week. More importantly Shares have broken down under technical support at the 50-dma and under one of its trend lines of higher lows. There didn't appear to be any specific news behind the relative weakness in UNH these last two days. The stock should find support in the $54-53 area. If it does not then UNH will hit our stop loss at $52.75. I am not suggesting new positions at this time.

- Suggested Positions -
Feb 15, 2012 - entry price on UNH @ 54.53, option @ 3.25
symbol: UNH1319A60 2013 JAN $60 call - current bid/ask $ 2.59/ 2.68

- or -

Feb 15, 2012 - entry price on UNH @ 54.53, option @ 5.00
symbol: UNH1418A60 2014 JAN $60 call - current bid/ask $ 5.55/ 5.80

04/19/12 UNH reported earnings that beat estimates and raised guidance
03/31/12 new stop loss @ 52.75. Adjust exit to $64.00
03/24/12 action this past week has turned bearish. expecting a correction toward the $50 area.

Current Target: $64.00
Current Stop loss: 52.75
Play Entered on: 02/15/12

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


Verizon Communications - VZ - close: 40.26

Comments:
05/05/12 update: I am worried that VZ may be forming a short-term top. The stock rallied to new multi-year highs early in the week but have since pulled back. Shares closed virtually unchanged week over week. The stock remains overbought given its big bounce from the $37 level. I am expecting a pullback. I am not suggesting new positions at this time.

- Suggested Positions -
Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.17
symbol: VZ1319A40 2013 JAN $40 call - current bid/ask $ 1.99/ 2.02

- or -

Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.87
symbol: VZ1418A40 2014 JAN $40 call - current bid/ask $ 2.93/ 3.05

04/05/12 VZ began trading ex-div for its upcoming April 30th dividend
03/10/12 VZ is starting to see some positive momentum higher
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


Exxon Mobil - XOM - close: 84.57

Comments:
05/05/12 update: XOM had rallied back toward resistance in the $87.50-88.00 zone only to reverse again. Crude oil prices plunged on the disappointing jobs numbers Friday morning and the drop in oil weighed on the energy sector. XOM looks poised to correct lower toward $82 again. 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 $ 2.27/ 2.30

- or -

Dec 22, 2011 - entry price on XOM @ 83.56, option @ 6.25
symbol: XOM1418A95 2014 JAN $95 call - current bid/ask $ 3.50/ 3.55

04/26/12 XOM missed earnings estimates by 9 cents
04/14/12 XOM has broken down from its 3-month trading range.
03/17/12 XOM has bounced off the bottom of its bullish channel.
03/03/12 bears could argue that XOM is forming a potential double top pattern with the peak in late January and late February
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


CLOSED Plays


Kraft Foods Inc. - KFT - close: 39.25

Comments:
05/05/12 update: We have been aiming for the $40.00 level and KFT hit $39.99 on May 1st, which proved to be the high for the week. However, our plan was to exit positions on Monday morning to avoid holding over the earnings report. KFT opened on Monday at $39.75 and the bid on our call opened at $5.05.

- Suggested (SMALL) Positions -
Sep 22, 2011 - entry price on KFT @ 32.71, option @ 2.35
symbol: KFT1319A35 2013 JAN $35 call - exit $5.05 (+114.8%)

04/30/12 planned exit at the open on Monday.
04/28/12 prepare to exit early on Monday morning to lock in a gain. Current bid on our call is at $4.90 (+108.5%)
03/31/12 short-term action is bearish. readers may want to exit early
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

Chart of KFT:

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: 78.29

Comments:
05/05/12 update: We wanted to lock in a gain after KMB's big rally a week ago. The plan was to exit on Monday morning at the open. Unfortunately KMB gapped down at $77.90. The bid on our 2013 Jan $75 call opened at $4.70 (+129.2%).

- Suggested Positions -
(half sized position)
Nov 07, 2011 - entry price on KMB @ 69.50, option @ 2.05
symbol: KMB1319A75 2013 JAN $75 call - exit $4.70 (+129.2%)

04/30/12 planned exit at the open.
04/28/12 prepare to exit on Monday morning. current bid on our call is at $5.00 (+143.9%)
04/21/12 new stop loss @ 69.95
03/31/12 KMB is testing major resistance near $74.00
12/24/11 New stops loss @ 68.25. KMB has broken out to all-time highs.

Chart of KMB:

Current Target: $79.75
Current Stop loss: 69.95
Play Entered on: 11/07/11
Originally listed in the New Plays 11/05/11



Watch

Major Drugs & Coffee Drinks

by James Brown

Click here to email James Brown

Editor's Note:

MRK - Merck & Co

SBUX - Starbucks Corp.



New Watch List Entries


Active Watch List Candidates

ATVI - Activision Blizzard

AIG - American Intl. Group

AXP - American Express

CREE - Cree, Inc.

DANG - DangDang Inc.

GLD - Gold ETF

HAS - Hasbro

LTD - Limited Brands

MCD - McDonald's Corp

MSFT - Microsoft Corp.

PFE - Pfizer Inc.

SCHW - Charles Schwab

WSM - Williams-Sonoma Inc.


Dropped Watch List Entries

CI, RIG, URBN, and WMT were all removed from the watch list.



New Watch List Candidates:


Merck & Co - MRK - close: 38.84

Company Info

Investors could start focusing on defensive names if the market's major indices start setting new lower lows. MRK could benefit from that attention. Drugs are traditionally considered safe haven names and with a 4.3% annual dividend yield it's a spot investors can get paid to wait.

The stock doesn't move very fast but shares are consolidating sideways and look poised to move higher. I am suggesting we wait for MRK to close over $40.00 and buy calls the next day with a stop loss at $37.75. Our long-term target is $47.50. FYI: The Point & Figure chart has a long-term target of $60.00.

Breakout trigger: Wait for close over $40.00, stop loss @ 37.75

BUY the 2014 Jan $40 call (MRK1418A40) current ask $2.63

Chart of MRK:

Originally listed on the Watch List: 05/05/12


Starbucks Corp. - SBUX - close: 55.56

Company Info

The ubiquitous coffee giant saw its stock rally to new record highs just three weeks ago. Currently shares have corrected lower toward their 50-dma. After such an impressive run higher over the last several months I suspect the correction has farther to go. We want to be ready to buy the dip.

I am suggesting we buy calls if SBUX trades down to $50.25. The $50.00 level should be round-number support. We'll use a stop loss at $47.00. Our long-term target is $64.00.

Buy-the-Dip trigger: $50.25

BUY the 2013 Jan $55 call (SBUX1319A55)

- or -

BUY the 2014 Jan $60 call (SBUX1418A60)

Chart of SBUX

Originally listed on the Watch List: 05/05/12


Active Watch List Candidates:



American Intl. Group - AIG - close: 32.83

Comments:
05/05/12 update: Once again shares of AIG are declining on news that the U.S. Treasury plans to sell more of its stock in AIG. On Friday and again over the weekend there were press releases regarding the government's plan to sell part of their equity stake in AIG. It looks like this secondary offer is going to be 163.9 million shares at $30.50 a share. AIG plans to buy about $2.0 billion worth of this secondary (about 65.5 million shares worth). Odds are we are going to see AIG gap down near $30.00 on Monday morning. Combine that with an already weak stock market and we could see AIG over correct. Therefore I am adjusting our buy-the-dip strategy.

We will move our buy-the-dip trigger down to $28.25 and move our stop loss down to $25.75. We also want to keep our position size small to limit our risk. I am moving our 2013 call strike to the $30.00 strike. Our long-term target is $39.00.

Buy-the-Dip trigger: $28.25, stop $25.75 (small positions only!)

(Small Positions)

BUY the 2013 Jan $30 call (AIG1319A30)

- or -

BUY the 2014 Jan $35 call (AIG1418A35)

05/05/12 The U.S. government is planning to sell 164 million shares at $30.50 and AIG will probably gap down on this news.
Move the trigger down to $28.25, and move the stop loss to $25.75.
04/28/12 adjust buy-the-dip trigger to $30.00 and stop to $27.40

Originally listed on the Watch List: 04/07/12


Activision Blizzard, Inc. - ATVI - close: 12.36

Comments:
05/05/12 update: ATVI had rallied right to resistance near $13.00 but couldn't breakout. Now shares are retreating as the market corrects lower. The company is due to report earnings soon on May 9th and the results could give ATVI a big push either way.

I am suggesting we wait for ATVI to close over $13.25. We will buy calls the next day with a stop loss at $12.25. Our long-term target is the $16-18 range.

FYI: ATVI is due to report earnings on May 9th.

Breakout trigger: Wait for ATVI to close over $13.25, buy calls the next day with a stop at $12.25

BUY the 2013 Jan $15 call (ATVI1319A15)

- or -

BUY the 2014 Jan $15 call (ATVI1418A15)

Originally listed on the Watch List: 03/24/12


American Express - AXP - close: 60.10

Comments:
05/05/12 update: AXP had held up pretty well considering the market's recent weakness. I remain concerned that the financial sector could see a correction lower. I am temporarily removing our trigger to buy calls. For the next five trading days we are just spectators watching to see how AXP performs. We will re-evaluate a potential entry point next weekend.

- or -

BUY the 2014 Jan $65 call (AXP1418A65)

-->

No entry this week. Just watch AXP. We will re-evaluate next weekend.

05/05/12 I am temporarily removing our trigger to open positions on AXP. For the next five days we're just watching and will re-evaluate next weekend.
04/28/12 adjust buy-the-dip trigger to $57.50, stop to $53.40, adjusted strike prices.

Originally listed on the Watch List: 04/14/12


Cigna Corp. - CI - close: 45.26

Comments:
05/05/12 update: I am removing CI from the watch list. The stock is down three weeks in a row and breaking several layers of support.

Our trade did not open.

05/05/12 Removed CI from the watch list.

Originally listed on the Watch List: 04/21/12


Cree, Inc. - CREE - close: 31.83

Comments:
05/05/12 update: CREE is holding up reasonably well. Shares came close to breaking out past technical resistance at its simple 300-dma on Thursday. More aggressive traders might want to consider buy call LEAPS on a breakout past the $33.50 level. We are keeping our trigger unchanged at $34.50.

Actually, I am suggesting we launch small bullish positions if CREE can close over $34.50. We'll buy calls the next morning with a stop loss at $29.45. Our long-term target is $44.50.

Breakout trigger: a close over $34.50 (small positions)

BUY the 2013 Jan $40 call (CREE1319A40)

Originally listed on the Watch List: 04/14/12


DangDang Inc. - DANG - close: 8.13

Comments:
05/05/12 update: DANG spent the week churning sideways between overhead resistance and support. I don't see any changes from my prior comments.

Keep in mind that DANG is a volatile stock. I do consider this an aggressive trade. Readers will want to consider keeping position size small to limit risk. Another reason to be cautious is DANG's earnings report is coming up in a couple of weeks (date not yet confirmed).

I am suggesting we wait for DANG to close over $9.25 and then buy call LEAPS the next day with a wide stop loss at $7.25. Our long-term target is $14.50.

Breakout trigger: close over $9.25, stop $7.25

BUY the 2013 Jan $10 call (DANG1319A10)

Originally listed on the Watch List: 04/28/12


Gold ETF - GLD - close: 159.47

Comments:
05/05/12 update: The consolidation in the GLD continues to narrow. You can see the ETF has a pattern of lower highs and higher lows. Traders have been buying the dips near technical support at the GLD's rising 300-dma. This ETF is nearing a major turning point that should send it marching higher or crashing lower.

Nimble traders might want to consider some sort of neutral option straddle or option strangle play since I'm expecting a big move in the next month or two.

The LeapsTrader newsletter's strategy is unchanged.

Earlier Comments:
Currently I am suggesting we wait for the GLD to close over $165.50 and we'll buy calls the next morning with a stop loss at $154.90. This is an aggressive entry point since the inverse H&S pattern would not be complete until shares breakout past the $175 area. The U.S. dollar is likely to see a lot of movement over the next several months, which could cause volatility in gold. Therefore we want to keep our position size small. Our long-term target is $195.

Breakout trigger: A close over $165.50 (small positions)

BUY the 2013 Jan $190 call (GLD1319A190)

- or -

BUY the 2014 Jan $190 call (GLD1418A190)

Originally listed on the Watch List: 04/14/12


Hasbro Inc. - HAS - close: 36.09

Comments:
05/05/12 update: The sharp bounce in HAS is starting to falter. A downgrade on Friday morning didn't help matters. We are waiting for a breakout past resistance.

Earlier Comments:
I am suggesting we launch bullish positions when HAS closes above $39.25. More aggressive traders might want to jump in early when HAS closes over $38.00 instead. Our long-term target is $44.75.

HAS does not move very fast so we'll need to be patient.

Breakout trigger: wait for a close over $39.25, stop 36.25

BUY the 2013 Jan $40 call (HAS1319A40)

- or -

buy the 2014 Jan $45 call (HAS1418A45)

Originally listed on the Watch List: 04/07/12


JPMorgan Chase & Co - JPM - close: 41.75

Comments:
05/05/12 update: JPM is still correcting lower and the stock accelerated on Friday with a -2.9% decline.

I am suggesting we buy calls on a dip at $40.25 with a stop loss at $37.25. Our long-term target is $49.75.

Buy-the-Dip trigger: $40.25, stop loss 37.25

BUY the 2013 Jan $45 call (JPM1319A45)

- or -

BUY the 2014 Jan $45 call (JPM1418A45)

Originally listed on the Watch List: 04/07/12


Limited Brands, Inc. - LTD - close: 50.27

Comments:
05/05/12 update: LTD continues to show strength and the stock hit a new record high on Thursday near $51.85. I don't want to chase it especially with LTD's earnings report coming up in the next two weeks (date is still unconfirmed).

Currently the plan is to buy a dip at $45.50.

Buy-the-Dip trigger: $45.50 (stop loss @ 41.50)

BUY the 2013 Jan $45 call (LTD1319A45)

04/28/12 adjust entry point to buy a dip at $45.50, stop $41.50
03/24/12 adjusted buy-the-dip trigger to $44.00 with a stop at $39.75

Originally listed on the Watch List: 03/10/12


McDonald's Corp. - MCD - close: 95.87

Comments:
05/05/12 update: Investors have to ask themselves, do you think MCD is going to hold support near $94.00 and its simple 200-dma? Or do you think MCD's three-month consolidation lower is going to keep going, especially with the market poised to breakdown?

I want to play defensively here. Based on the stock market's recent weakness we want to make an adjustment. I'm bullish long-term on MCD the current trend is lower. I am adjusting our buy-the-dip trigger down to $91.00 with a stop loss at $88.40. I am adjusting our option strikes as well.

If we see MCD reverse higher and close above the trend of lower highs then we'll reconsider buying a breakout instead.

Buy-the-Dip trigger: $91.00, stop 88.40

BUY the 2013 Jan $ 95 call (MCD1319A95)

- or - BUY the 2014 Jan $100 call (MCD1418A100)

05/05/12 another adjustment. move the trigger to $91.00, stop to $88.40, adjusted the option strikes.
04/28/12 adjust the buy-the-dip trigger to $95.00
04/14/12 adjust buy-the-dip trigger to $94.00.

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


Microsoft - MSFT - close: 30.98

Comments:
05/05/12 update: You could argue that MSFT has created a bearish double top with the peak in March and the failed rally in mid April. I suspect the correction is going to accelerate lower soon. We are adjusting our buy-the-dip trigger from $29.50 to $29.00.

Buy-the-Dip trigger: $29.00 (stop @ $26.75)

BUY the 2013 Jan $30 call (MSFT1319A30)

- or -

BUY the 2014 Jan $30 call (MSFT1418A30)

05/05/12 adjust the trigger to $29.00
04/28/12 adjust buy-the-dip trigger to $29.50, stop to $26.75

Originally listed on the Watch List: 04/14/12


Pfizer Inc. - PFE - close: 22.38

Comments:
05/05/12 update: PFE reported earnings on May 1st and beat estimates by a penny. The news failed to inspire any new buyers. Shares have been drifting lower as the market sinks. The larger trend is still bullish but PFE could see a deeper correction.

For the moment we will leave our trigger unchanged. I am suggesting we wait for PFE to close over $23.20 and then launch positions the next morning.

Our long-term target is $28.00. I will list the 2013 calls but I prefer the 2014 because PFE does not move very fast.

Breakout trigger: Wait for a close over $23.20, use a stop at $20.65

BUY the 2013 Jan $22.50 call (PFE1319A22.5)

- or -

BUY the 2014 Jan $25 call (PFE1418A25)

04/28/12 do not launch positions prior to the earnings report on May 1st.

Originally listed on the Watch List: 04/21/12


Transocean Ltd. - RIG - close: 47.95

Comments:
05/05/12 update: RIG has created a dramatic reversal lower with the failed rally on Thursday under its 50-dma. Now shares look poised to breakdown under its April low. Short-term traders might want to buy May or June puts if RIG drops below $47.40. Based on the stock's recent performance I am dropping it as a watch list candidate.

Our Trade Did Not open.

05/05/12 removed RIG from the watch list.

Originally listed on the Watch List: 04/28/12


Charles Schwab Corp. - SCHW - close: 13.53

Comments:
05/05/12 update: SCHW has also produced a sharp reversal lower. The stock failed near resistance at $14.50 and now it's testing support near $13.50. I'm not making any changes tonight but odds are, if SCHW continues to sink, we will drop it next weekend. Currently I am suggesting we wait for SCHW to close above $14.75 and then launch positions the next morning with a stop loss at $13.35. Our long-term target is the $17.50-19.50 zone.

Breakout trigger: Wait for a close over $14.75, stop 13.35

BUY the 2013 Jan $15 call (SCHW1319A15)

- or -

BUY the 2014 Jan $20 call (SCHW1418A20)

Originally listed on the Watch List: 04/28/12


Urban Outfitters Inc. - URBN - close: 28.31

Comments:
05/05/12 update: URBN continues to see a lot of volatility. This past week saw a rally past resistance at $30.00 and then the stock immediately reversed lower the next day. I am removing URBN from the watch list.

Trade never opened.

05/05/12 removed URBN from the watch list
04/07/12 URBN broke out above resistance at $30.00 this past week but it has yet to close over our trigger at $30.50.

Originally listed on the Watch List: 03/31/12


Wal-Mart Stores - WMT - close: 58.70

Comments:
05/05/12 update: The oversold bounce in WMT is already losing steam. Shares look poised to drop back toward $57.00 and its simple 200-dma again. It could be weeks before we see WMT build a new base or rally back toward its highs so I am removing WMT from the watch list.

Trade did not open.

05/05/12 removed WMT from the watch list.

Originally listed on the Watch List: 04/21/12


Williams-Sonoma Inc. - WSM - close: 38.55

Comments:
05/05/12 update: WSM has seen some dramatic moves the last few days. Wednesday produced a big surge higher but shares failed to close over resistance at $40.00. Thursday did see a breakout above $40.00 but again WSM failed to close over this level. Friday the stock collapsed with a -3.0% decline. The move looks like a bull trap pattern and bearish reversal. If WSM continues lower this week I will likely drop it next weekend.

Currently, I am suggesting we wait for WSM to close over $40.25 and then buy calls the next day. We'll start with a stop loss at $36.90. FYI: Investors should note that WSM is due to report earnings in a couple of weeks but the May 17th date is not yet confirmed.

Breakout trigger: Wait for close over $40.25, stop 36.90

BUY the 2013 Jan $45 call (WSM1319A45)

Originally listed on the Watch List: 04/28/12