Option Investor
Newsletter

Daily Newsletter, Sunday, 5/13/2012

Table of Contents

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

Leaps Trader Commentary

New Relative Lows

by James Brown

Click here to email James Brown

The U.S. market's major indices all tagged new relative lows this past week. The big event that stocks reacted to were the elections in France and Greece a week ago. French president Sarkozy lost to his socialist rival Mr. Hollande. Meanwhile Greek voters threw out their old leaders for new ones opposed to the draconian austerity measures currently in place. As this news slowly sank in we saw European markets tumble on Tuesday and that sparked a sharper sell-off here at home in the U.S. Equities spent the rest of the week churning sideways. Concerns over Europe pushed the euro currency lower, which fueled a rally in the U.S. dollar. This strength in the dollar pushed commodities lower with big declines in oil, silver, and gold.

Economic data in the U.S. was relatively light. The University of Michigan consumer sentiment survey unexpectedly improved. April's reading on sentiment was revised to 76.4 and May's reading rose to a four-year high at 77.8. It also marks a nine-month string of gains. The look at inflation at the wholesale level came in benign with the Producer Price Index (PPI) falling -0.2% in April. The year over year rise fell to +1.9%. This is the first time it has been under the 2% level since late 2009. Meanwhile the weekly initial jobless claims slipped to 367,000.

The big story on Friday was Dow-component J.P. Morgan Chase, widely considered the "best in breed" among the major banking firms. On Thursday night the company revealed one of their credit portfolios had developed significant losses over the last several weeks. On Thursday night JPM disclosed those losses had reached $2 billion. This tanked the S&P futures as investors worried that other banks might have similar issues. Since JPM is a Dow-component, its weakness was going to weigh heavily on the index. The stock gapped open lower and post a -9.2% decline on Friday to settle on technical support at its simple 200-dma.

JPM is still expected to post a profit this quarter in spite of the $2 billion loss. The company expects to bring in revenues of $90 billion this year alone. The bigger issue here is this story is yet another blow to investor confidence. The Fitch rating company downgraded JPM's credit rating. Standard & Poor's said they placed JPM on outlook "negative". The event prompted Moody's to warn the top 17 global banks that they would be reviewed again for a possible credit downgrade. Meanwhile the S.E.C. announced they were opening their own review of JPM. It was not a good day for JPM CEO Jamie Dimon.

The bigger issues in the market remain Europe, specially Spain and Greece. Worries that Europe is losing its grip on the toxic debt issues helped push the yield on Spanish 10-year bonds back above 6%. If yields hit 7% or higher it's considered unsustainable and countries usually ask for aid at that point but Spain is considered too big to bail out. Speaking of bailouts the recently issued Greek bonds took a tumble in response to the election results. The dueling parties in Greece tried all week and failed to come together into some sort of coalition government. If they don't find common ground soon there will be more Greek elections in June.

There has been a growing chorus of analysts that are expecting Greece to either leave or get kicked out of the Eurozone (a.k.a. the 17-nation group that uses the euro currency). A recent Bloomberg poll said more than 50% of investors are expecting Greece to leave the euro before the end of the year. Not only would Greece's exit from the euro cause chaos in Greece it would create massive amounts of doubt and fear over the rest of the Eurozone. Greece already has high unemployment, which would only get worse. Businesses would close. The value of Greek savings and retirement accounts would be decimated. Granted a couple of years later Greece would most likely be significantly better off without the massive austerity they're facing now and the ability to print their own money (the drachma).

The bigger issue of a Greek exit from the Eurozone isn't what happens to Greece. It's who would be next? We've talked about this before. If Greece can throw off the shackles of austerity by exiting the euro that's going to make it very tempting for Portugal, Ireland, and Spain to all consider the same idea. Now that Sarkozy has lost the French election there are worries about whether or not Hollande and Germany's Merkel can coordinate on the tough decisions they might have to make going forward to support the euro. This past week concerns over Greece eased a bit when the EFSF announced they were still providing 5 billion euros in aid money to Greece but this remains a temporary band-aid.

Major Indices:

The S&P 500 index fell toward technical support at its rising 100-dma this past week. Tuesday saw a dip to 1343 before it bounced. We've outlined the 1340 level as key support. A breakdown at 1340 will probably signal a drop toward the 1300 level. You could argue that this past week is nothing more than a consolidation before the down trend resumes. A drop to 1300 would be a -8.4% correction off the 2012 highs near 1420. It would take a move to 1280 before the S&P 500 hit a -10% correction.

Daily chart of the S&P 500 index:

The NASDAQ-composite also saw a drop toward technical support at its rising 100-dma. This happened to coincide with a drop to its 38.2% Fibonacci retracement of the prior rally. The recent bounce off this past week's lows could be a bear-flag pattern, which is just a consolidation before the prior trend (down) resumes. Prior support at 2950 and 3000 are now new resistance levels. The next key level to watch for potential support is probably the 2800 area.

Daily chart of the NASDAQ Composite index:

The small cap Russell 2000 index fell toward support near 780 and its exponential 200-dma before bouncing. Unfortunately the index didn't bounce very high. You could argue that the $RUT has formed a bearish head-and-shoulders pattern over the last three plus months. The neckline would be at 780 and a breakdown under this level would forecast a drop toward the 710 area.

Daily chart of the Russell 2000 index

This week we're going to see an increase in economic data. The big events are probably the FOMC minutes released on May 16th. Plus the Philly Fed survey on the 17th could be a market mover. Another high-profile event will be the upcoming Facebook (FB) IPO. It is scheduled for Friday, May 17th but there was word out on Friday that Facebook's entrance to the market might be delayed.

Economic and Event Calendar

- Monday, May 14 -
(nothing significant)

- Tuesday, May 15 -
Retail sales data for April.
Consumer Price Index (CPI)
New York State Empire manufacturing survey
Business inventory data

- Wednesday, May 16 -
Housing starts & Building permits
Industrial Production & Capacity Utilization
FOMC minutes from the last meeting

- Thursday, May 17 -
Weekly Initial Jobless Claims
Philadelphia Fed survey

- Friday, May 18 -
(nothing significant)

Upcoming events:

end of May 2012: IMF's quarterly review of Greece

The Week Ahead:

Looking ahead the short-term outlook is stormy. Investor sentiment has turned bearish. The Economic Cycle Research Institute was reiterating their call that the U.S. will fall back into recession. This time they are predicting we'll fall into a recession within the next three months. The situation in Europe is once again starting to take center stage. If Greece eventually leaves the euro it could signal the beginning of the end for the eurozone. There were even rumors on Friday that Germany might decide to leave the euro to shake off its weaker partners although at this point that seems a bit drastic. Some are suggesting that the eurozone will persist but five years from now the membership list could see a lot fewer southern European countries.

Meanwhile the stream of economic data out of China continues to weaken and suggest the country is still slowing down. Thus it's not surprising that the U.S. might hit another recession if China is slowing down and significant parts of Europe are already in recession. Something else impacting investor sentiment is the U.S. "fiscal cliff" you're going to hear a lot about over the next several months. Currently January 2013 is set to see the expiration of the Bush tax cuts, the end of emergency unemployment benefits, and the end of the payroll tax cuts. Plus, the U.S. debt limit will need to be raised again. Last time the debt limit was raised the U.S. lost its AAA credit rating, which prompted a significant market sell-off. It's certainly possible that congress will merely postpone some or all of these deadlines (again) but it's not solving the problem that the U.S. has its own economic trouble of slow growth, high unemployment, and rising debts.

I remain very cautious on the market and would hesitate to launch new long-term bullish positions. I strongly suspect we will see the S&P 500 correct toward the 1300 level. If we can hold there and build a new base of support near 1300 then we can turn more positive on the market. There will still be individual stocks that outperform but it's going to make bullish trades tougher to find and sustain.

- James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Stocks plunged to new relative lows on Tuesday and spent the rest of the week consolidating sideways. Has the market found support or is it merely tapping the brakes before continuing lower? Given the concerns overseas with trouble in Europe and a slowing China the path of least resistance might be down. We remain in a seasonally weak period of the year for stocks.

Tonight I am suggesting we take profits and exit our 2013 calls in EBAY at the open on Monday morning. We also want to sell half of our position in KO on 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: ADM & LVS

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

Beware the Bounce

by James Brown

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Editor's Note:

The U.S. indices are hovering near technical support. If stocks do manage a bounce here I wouldn't trust it. We are in a seasonally weak period for stocks. There is no catalyst for investors to put money into equities at the moment. Markets are likely to drift lower or chop sideways until the next earnings season in July.

That doesn't mean we can't find new opportunities. While I am not adding any new trades tonight I did add two more stocks to the watch list tonight.

Here is a list of stocks currently on my radar screen as potential candidates to keep an eye on:

CPB, BBBY, BRK.B, PHM, DFS, DIS, MWW


Play Updates

JPM Rattles the Market

by James Brown

Click here to email James Brown

Editor's Note:

The stock market's major indices look vulnerable here. Further weakness could signal a significant correction ahead. Readers may want to scale back the size of their positions or raise their stop losses or possibly exit early.

JPM graduated from our watch list to the play list midweek only to be stopped out on Friday's gap down.


Closed Plays


AKAM, CSCO, JPM, and TEVA were all stopped out.


Play Updates


Archer-Daniels-Midland Company - ADM - close: 32.85

Comments:
05/12/12 update: ADM has continued to outperform the market. Shares spiked to a new 52-week high on Thursday near $34.00. If the market corrects lower I would expect ADM to decline toward the $32.00 area, which should be support. Please note our new stop loss at $29.45.

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 $ 1.83/ 1.89

05/12/12 new stop loss @ 29.45
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: 29.45
Play Entered on: 02/21/12
Originally listed on the Watch List: 01/28/12


Allergan Inc. - AGN - close: 92.97

Comments:
05/12/12 update: AGN spent the week consolidating sideways in the $92-94 zone. Unfortunately shares have a short-term bearish trend of lower highs. This is suggesting that AGN will breakdown further. I am expecting a decline toward the $90.00 level, which should offer some support but we might see AGN dip into the $88-87 zone. 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 $ 3.40/ 3.80

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


Bank of America - BAC - close: 7.55

Comments:
05/12/12 update: The correction in BAC is not slowing down. The $7.65 area should have been support. Granted we can probably blame the $2 billion loss news from JPM on Friday for weakness across the major banking stocks but the trend in BAC has been lower for weeks now.

BAC doubled from $5.00 to $10.00 from December 2011 to March 2012. Since peaking BAC has seen a 50% correction lower. It's possible that the simple 200-dma might offer some support near $7.25 but I'm not betting on it at this point. 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 $ 0.36/ 0.37
(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 $ 0.36/ 0.37
(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: 33.11

Comments:
05/12/12 update: BMY has been slowly drifting lower. The stock tested technical support at its 150-dma on Wednesday. The long-term trend still has a bullish pattern of higher lows but the peak in April looks like a lower high at the moment.

If the market continues to sink then more defensive names like BMY, with its 4% annual dividend yield, should attract more money but that doesn't mean the stock won't decline. The next level of support is $32 with the 200-dma. 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 $ 1.01/ 1.04

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


CH Robinson Worldwide - CHRW - close: 60.81

This is a bearish PUT option trade.

Comments:
05/12/12 update: The Dow Jones Transportation index has continued to slip lower in spite of a big drop in the price of oil these last few days. After months of churning sideways the $TRAN index looks poised to breakdown. Of course CHRW has already broken down. Shares spent the last few days consolidating sideways. I would consider new positions now but readers might want to wait for a drop under $60.00 or its April lows near $58.75 before initiating new bearish put positions.

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.

NOTE: The option symbol uses an "M" not an "A" because it's a put.

- Suggested (small) Positions -
May 07, 2012 - entry price on CHRW @ 60.61, option @ 3.00
symbol:CHRW1319M55 2013 JAN $55 PUT - current bid/ask $ 2.90/ 3.10

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


Colgate-Palmolive Co. - CL - close: 99.31

Comments:
05/12/12 update: CL is another defensive name. Shares managed to eke out a small gain for the week. After its three-month rally it might be time for a correction lower. Look for support near the $96-95 area if the market's decline starts to accelerate lower. 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 $4.55/4.70

- or -

MAR 16, 2012 - entry price on CL @ 95.48, option @ 5.57
symbol: CL1418A100 2014 JAN $100 call - current bid/ask $7.55/8.75

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


The Dow Chemical Co. - DOW - close: 32.11

Comments:
05/12/12 update: DOW looks like it's trying to bounce after falling toward its April lows and its 150-dma. Yet the short-term trend is still down and the larger trend has flattened out into a sideways trading range. If the market sell-off continues there is a good chance we'll see DOW testing support near $30 and its simple 200-dma. Any further declines and the stock would hit our stop loss at $29.45. 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 $ 1.77/ 1.82

- or -

Jan 09, 2012 - entry price on DOW @ 30.46, option @ 2.54
symbol: DOW1418A40 2014 JAN $40 call - current bid/ask $ 1.84/ 1.97

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: 40.74

Comments:
05/12/12 update: EBAY displayed some relative strength last week with a rebound off the $39 level. Shares appear to be trading in a new $39-42 trading range. Should EBAY breakdown under $39 I would expect a dip toward $36.50.

I am suggesting we go ahead and exit our 2013 Jan $40 calls at the open on Monday. Their current bid is $4.90 (+71.9%). We'll keep our 2014 calls. 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 $ 4.90/ 5.00

- or -

Mar 12, 2012 - entry price on EBAY @ 36.36, option @ 5.11
symbol: EBAY1418A40 2014 JAN $40 call - current bid/ask $ 7.85/ 8.05

05/12/12 exit the 2013 Jan $40 calls at the open on Monday. Currently the bid is $4.90
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: 50.66

Comments:
05/12/12 update: I remain defensive on EPD. Shares have continued to pull back but did bounce near technical support at the 100-dma. I am concerned that shares may have formed a bearish double top with the peak two weeks ago. Technical indicators are suggesting further weakness ahead. We did take profits a week ago by selling half of our position. 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 $ 2.65/ 2.85

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: 27.63

Comments:
05/12/12 update: I am reiterating my concerns with Intel. The company did hold an analyst day and reaffirmed their 2012 guidance. Intel also raised their cash dividend to $0.225 a share. Technically the stock looks weak with the bounce on Friday failing at its 50-dma. I am still expecting a correction lower toward $26.00.

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 $ 1.10/ 1.13

- or -

Feb 21, 2011 - entry price on INTC @ 27.34, option @ 2.11
symbol: INTC1418a30 2014 JAN $30 call - current bid/ask $ 2.28/ 2.36

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: 77.47

Comments:
05/12/12 update: Traders bought the dip on Wednesday and KO managed to eke out a gain for the week. Shares appear to be consolidating under new resistance in the $77.75-78.00 area.

The larger trend in KO is very bullish. However, I am concerned about the wider market. Even strong stocks can go down in a weak market. I am suggesting we go ahead and sell half of our 2014 calls at the open on Monday morning to take some money off the table. The bid is currently $6.55 (+81.9%).

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 $ 6.55/ 6.70

05/12/12 prepare to sell half at the open on Monday morning to take some money off the table. Current bid is $6.55.
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: 41.26

Comments:
05/12/12 update: LLY has spent over two weeks now bouncing along the $41.00 level. I suspect this short-term support could fail soon and we'll see LLY dip toward $40 or the $39.50 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 $ 1.53/ 1.60

- or -

Jan 05, 2012 - entry price on LLY @ 39.50, option @ 2.75
symbol: LLY1418A45 2014 JAN $45 call - current bid/ask $ 2.15/ 2.22

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: 51.68

Comments:
05/12/12 update: Our suspicions have come true. LVS continues to correct lower toward prior resistance and what should be significant support at the $50.00 level. There is a good chance LVS might see an intraday dip under the $50.00 mark so I want to tweak our stop loss and move it down to $48.95. I suspect that in a week or two we will be able to use this pullback in LVS as a new entry point to buy calls again.

- Suggested Positions -
Feb 06, 2012 - entry price on LVS @ 51.35, option @ 4.40
symbol: LVS1319A60 2013 JAN $60 call - current bid/ask $ 3.70/ 3.80

05/12/12 tweak our stop loss down to $48.95
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: 86.73

Comments:
05/12/12 update: MMM lost about two points for the week as it retreats from resistance near $90. I previously cautioned readers to expect a dip toward $86.00. If the market continues to sink we can probably look for MMM to dip toward $84.50-84.00.

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 $ 1.92/ 2.00

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: 49.83

Comments:
05/12/12 update: I remain concerned with MSI. Two weeks ago shares appeared to create a new lower high. Now the stock is back under its 50-dma and falling toward its 100-dma near $49.00. Odds are good we will see MSI test prior resistance and what should be significant support near $48.00 if the market continues to sink.

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 $ 1.78/ 1.86

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: 57.26

Comments:
05/12/12 update: Action in NTES last week was bearish. The stock has broken down through the bottom of its bullish channel and broken under its 50-dma. We can expect more volatility this week as NTES reports earnings on May 16th. If the company disappoints on its earnings release and/or the market continues to sink we could see NTES correct toward the $53-52 area and its 100-dma. 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 $ 6.10/ 6.80

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: 40.50

Comments:
05/12/12 update: RAI posted a small gain for the week. I am more concerned with the action on Thursday and Friday. RAI tried to rally each day and both times the rally reversed lower. This action is bearish and might suggest a deeper correction ahead for RAI. More conservative traders may want to abandon ship now. I am not suggesting new positions at this time.

- Suggested Positions -
Nov 18, 2011 - entry price on RAI @ 40.02, option @ 2.00
symbol: RAI1319A42.5 2013 JAN $42.50 call - current bid/ask $ 1.00/ 1.15

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


UnitedHealth Group - UNH - close: 55.20

Comments:
05/12/12 update: It was a quiet week for UNH. Shares consolidated sideways between the $55 and $56 levels. I don't see any changes from my prior comments. I'm still concerned that the peaks in April look like a bearish double top. The stock is still above what should be support near $54.00. Yet if the market continues to sink odds are good we will see UNH hit our stop loss at $52.75. More aggressive traders may want to put their stop loss under $50.00 instead. 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 $ 2.74/ 2.83

- or -

Feb 15, 2012 - entry price on UNH @ 54.53, option @ 5.00
symbol: UNH1418A60 2014 JAN $60 call - current bid/ask $ 5.80/ 6.00

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: 41.16

Comments:
05/12/12 update: VZ displayed relative strength last week. Actually shares were consolidating sideways under their recent highs then on Friday VZ was upgraded, which pushed it to a new multi-year high. I am raising our stop loss up to $37.75. More conservative traders may want to raise their stop loss even higher. 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 $ 2.62/ 2.65

- or -

Dec 23, 2011 - entry price on VZ @ 39.42, option @ 2.87
symbol: VZ1418A40 2014 JAN $40 call - current bid/ask $ 3.50/ 3.60

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: 83.10

Comments:
05/12/12 update: It was a mixed week for the energy sector. Oil service stocks continued to sink while the OIX index managed an oversold bounce. Meanwhile the price of oil was falling thanks to a rise in the U.S. dollar. Shares of XOM have been slipping lower and look poised to test their April lows near $82.00 soon. A breakdown under $82 probably signals a quick drop to the next level of support at $80.00. I am not suggesting new positions at this time.

- Suggested Positions -
Dec 22, 2011 - entry price on XOM @ 83.56, option @ 4.63
symbol: XOM1319A90 2013 JAN $90 call - current bid/ask $ 1.96/ 2.00

- or -

Dec 22, 2011 - entry price on XOM @ 83.56, option @ 6.25
symbol: XOM1418A95 2014 JAN $95 call - current bid/ask $ 3.05/ 3.20

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


Akamai Technologies - AKAM - close: 31.17

Comments:
05/12/12 update: The post-earnings sell-off that started in late April continues. AKAM dipped toward its simple 300-dma this past week. The stock hit our stop loss at $31.75 on Tuesday, May 8th.

- Suggested Positions -
FEB 10, 2012 - entry price on AKAM @ 37.60, option @ 5.40
symbol:AKAM1319A40 2013 JAN $40 call - exit $1.80 (-66.6%)

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 - exit $1.80 (-59.5%)

05/08/12 stopped out at $31.75
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.

Chart of AKAM:

Current Target: $44.00
Current Stop loss: 31.75
Play Entered on: 02/10/12
Originally listed on the Watch List: 02/04/12


Cisco Systems - CSCO - close: 16.51

Comments:
05/12/12 update: CSCO has been a big disappointment. The stock peaked at the end of March. After trading sideways for most of April, shares of CSCO have corrected lower this month. This past week was painful with a -13.6% decline as investors reacted to the earnings news. CSCO reported earnings on May 9th. The beat by a penny with revenues in-line with expectations. Unfortunately management lowered their sales growth forecasts. This prompted shares to gap down sharply on Thursday morning at $17.17. Our stop loss was $17.75. The trade was closed immediately.

- Suggested Positions -
OCT 28, 2011 - entry price on CSCO @ 18.28, option @ 1.68
symbol: CSCO1319A20 2013 JAN $20 call - exit $0.64 (-61.9%)

05/10/12 stopped out as CSCO gapped down at $17.17
05/09/12 CSCO reported earnings, guided lower
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.

Chart of CSCO:

Current Target: $23.00
Current Stop loss: 17.75
Play Entered on: 10/28/11
Originally listed on the Watch List: 10/08/11


JPMorgan Chase & Co - JPM - close: 36.96

Comments:
05/12/12 update: Normally our trades last for months but dramatic events in JPM opened and closed our trade in a matter of days. The $40.00 level looked like round-number, psychological support. Our plan was to buy calls on a dip at $40.25. Shares of JPM hit our buy-the-dip trigger on May 9th. Unfortunately, the very next day, after the closing bell, word hit the street that JPM had amassed $2 billion in losses in one of its credit portfolios. Suddenly JPM, which was considered the "best in breed" for the big banks, looked a lot more riskier than previously thought. Shares of JPM gapped down on Friday to open at $37.14 and closed near technical support at its 200-dma. Our stop loss was $37.25 so the trade was closed at the open.

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

May 09, 2012 - entry price on JPM @ 40.25, option @ 2.00
symbol: JPM1319A45 2013 JAN $45 call - exit $0.89 (-55.5%)

- or -

May 09, 2012 - entry price on JPM @ 40.25, option @ 3.75
symbol: JPM1418A45 2014 JAN $45 call - exit $2.60 (-30.6%)

05/11/12 shares of JPM gap open lower at $37.14, closing our trade
05/10/12 after the closing bell JPM reveals $2 billion in losses in one of its portfolios
05/09/12 triggered on a dip at $40.25

Chart of JPM:

Current Target: $49.25
Current Stop loss: 37.25
Play Entered on: 05/09/12
Originally listed on the Watch List: 04/07/12


Teva Pharmaceuticals - TEVA - close: 41.81

Comments:
05/12/12 update: Ouch! The two-week sell-off in TEVA has been painful with a drop from $46 to $42. The company reported earnings on May 9th. They beat estimates by three cents but missed the revenue number. Investors were not happy and the stock plunged on this news. The sell-off continued on May 10th and TEVA traded under $42.00 and under its 200-dma to hit our stop loss at $41.80.

- Suggested Positions -
Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 2.49
symbol: TEVA1319A50 2013 JAN $50 call - exit $0.55 (-77.9%)

- or -

Jan 19, 2012 - entry price on TEVA @ 45.40, option @ 4.40
symbol: TEVA1418A50 2014 JAN $50 call - exit $2.15 (-51.1%)

05/10/12 stopped out at $41.80
05/09/12 TEVA reported earnings and missed the revenue estimate
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

Chart of TEVA:

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

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



Watch

Energy & Condiments

by James Brown

Click here to email James Brown

Editor's Note:

We are trimming several candidates from the watch list.



New Watch List Entries

ECA - Encana Corp.

HNZ - H.J. Heinz Co.


Active Watch List Candidates

ATVI - Activision Blizzard

AIG - American Intl. Group

CREE - Cree, Inc.

LTD - Limited Brands

MCD - McDonald's Corp

MRK - Merck & Co

MSFT - Microsoft Corp.

PFE - Pfizer Inc.

SBUX - Starbucks Corp.


Dropped Watch List Entries

I am removing AXP, DANG, GLD, HAS, SCHW, and WSM from the watch list.

JPM graduated to the play list.



New Watch List Candidates:


Encana Corp. - ECA - close: 21.20

Company Info

ECA is a Canadian natural gas and oil company. Shares have spent over seven months building a significant base in the $17-22 range. Now shares look poised to finally breakout from this zone. If investors turn more defensive then ECA could attract more attention thanks to its 3.8% annual dividend yield.

I am suggesting we wait for ECA to close over $22.50. We'll buy calls the next day with a stop loss at $18.75. Our long-term targets is 29.00 (although we'll probably exit the 2013 calls before ECA hits $29).

Breakout trigger: close over $22.50, stop loss @ 18.75

BUY the 2013 Jan $25 call (ECA1319A25) current ask $1.10

- or -

BUY the 2014 Jan $25 call (ECA1418A25) current ask $2.35

Chart of ECA:

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


H.J. Heinz Co. - HNZ - close: 54.82

Company Info

Based in Pittsburgh, PA, this company sells its condiments to customers around the globe. Not only is HNZ another defensive stock but it offers investors a 3.6% dividend yield. The date is not confirmed yet but HNZ looks like it will report earnings on May 24th. Readers may want to wait until after the earnings report before considering positions.

I am suggesting we wait for HNZ to close over $55.50 and then buy calls the next day with a stop loss at $51.85 (just under the April low). Our long-term target is $64.00.

Breakout trigger: close over $55.50, stop loss @ 51.85

BUY the 2013 Jan $55 call (HNZ1319A55) current ask $2.45

- or -

BUY the 2014 Jan $60 call (HNZ1418A60) current ask $2.40

Chart of HNZ:

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


Active Watch List Candidates:



American Intl. Group - AIG - close: 31.75

Comments:
05/12/12 update: AIG is holding up pretty well following the news a week ago about the U.S. government selling more stock. While shares of AIG are bouncing off their May 7th lows it might just be a bear-flag pattern. Considering the market's recent weakness we will wait for further weakness.

I am suggesting a buy-the-dip trigger @ 28.25. We also want to keep our position size small to limit our risk. 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: 12.65

Comments:
05/12/12 update: ATVI managed a gain for the week in spite of the company lowering their earnings guidance. There is no change from my prior comments.

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.

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: 59.64

Comments:
05/12/12 update: Hmmm... AXP is actually holding up reasonably well considering the weakness in the financials. This stock still has a bullish trend of higher lows. Yet my concern over the financials and the broader market's major indices prevent me from being more bullish here.

I am going to remove AXP from the watch list. It will remain on my radar screen. The trend is up but I don't see an entry point for long-term positions. Short-term traders might want to buy calls if AXP hits $60.25 and plan an exit in the $62-63 zone.

Trade did not open.

05/12/12 We are removing AXP from the watch list for now. It will be back.
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


Cree, Inc. - CREE - close: 32.07

Comments:
05/12/12 update: CREE is still consolidating sideways. If the market would cooperate I would expect shares to breakout higher. I don't see any changes from my prior comments.

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: 7.08

Comments:
05/12/12 update: Ouch! It was an ugly week for DANG with a plunge from $8 to $7. It is unlikely that shares will hit our trigger to buy calls at $9.25 any time soon. Therefore I am removing DANG from our watch list.

Trade did not open.

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

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


Gold ETF - GLD - close: 153.56

Comments:
05/12/12 update: Weakness in the euro has produced strength in the dollar and that was bad news for the price of gold (if you're trading it in dollars). The breakdown in the GLD is bearish. I am removing GLD from the watch list.

Trade did not open.

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

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


Hasbro Inc. - HAS - close: 35.68

Comments:
05/12/12 update: LEAPS traders need patience but I'm not sure I have the patience for HAS. The stock is moving too slowly. We'll look at it again once the stock nears resistance near $38-39. I am removing HAS from the watch list. HAS does not move very fast so we'll need to be patient.

Trade did not open.

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

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


Limited Brands, Inc. - LTD - close: 48.42

Comments:
05/12/12 update: We have been expecting a pullback in LTD. Shares declined toward technical support at the 50-dma. We're still waiting for a correction toward the $45.00 area. Shares might see some profit taking after LTD reports earnings on May 16th.

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: 91.90

Comments:
05/12/12 update: It was an ugly week for MCD with a breakdown under support near $94.00 and its 200-dma and 200-ema. A week ago we were expecting a deeper correction lower and move the buy-the-dip trigger to $91.00. Shares came close but have not yet hit our trigger. I am adjusting the trigger again. This time look for a dip to $90.00. We will move our buy-the-dip trigger to $90.25 with a stop loss at $87.75.

Buy-the-Dip trigger: $90.25, stop 87.75

BUY the 2013 Jan $ 95 call (MCD1319A95)

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

05/12/12 move the trigger to $90.25, stop loss to $87.75
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


Merck & Co - MRK - close: 38.03

Comments:
05/12/12 update: Hmm... MRK has not acted very defensively the last several days. Shares just broke potential support at the 50 and 100-dma this past week. You could argue MRK has created a bearish double top with the January and May peaks. Short-term the trend is down.

Currently we are waiting to launch positions until MRK can close over $40.00 and then buy calls the next day. 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)

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


Microsoft - MSFT - close: 31.16

Comments:
05/12/12 update: MSFT produced a nice bounce off its midweek lows but I am still expecting the correction to continue. The plan is to buy calls on a dip at $29.00. More conservative traders could wait for a dip to the simple 200-dma instead.

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: 22.65

Comments:
05/12/12 update: Traders bought the dip near $22.00 and PFE closed up for the week. The trend of higher lows remains intact for now.

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


Starbucks Corp. - SBUX - close: 55.01

Comments:
05/12/12 update: SBUX has produced a decent bounce off its May 8th lows but shares have been struggling with resistance at the 50-dma the last couple of days. I am still expecting the correction to continue.

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 (stop loss @ 47.00)

BUY the 2013 Jan $55 call (SBUX1319A55)

- or -

BUY the 2014 Jan $60 call (SBUX1418A60)

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


Charles Schwab Corp. - SCHW - close: 13.11

Comments:
05/12/12 update: I am giving up on SCHW, at least for now. The financial sector looks poised for more weakness. It might take a while for SCHW to find support again. It is unlikely that shares will hit our trigger at $14.75 any time soon. I am removing this stock from the watch list.

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

Our trade did not open.

05/12/12 removed from the watch list.

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


Williams-Sonoma Inc. - WSM - close: 37.31

Comments:
05/12/12 update: I am also giving up on WSM. If you look at the weekly chart WSM still has a bullish pattern of higher lows. However, it could be a while before shares rally back toward resistance near $40.00. Our plan was to buy calls if WSM could close over $40.25. We'll keep it on our radar screen but I am removing WSM from the watch list.

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

Our trade did not open.

05/12/12 removed from the watch list.

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