Option Investor
Newsletter

Daily Newsletter, Monday, 1/21/2013

Table of Contents

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

Leaps Trader Commentary

Another Week of Gains & Multi-Year Highs

by James Brown

Click here to email James Brown

The World Bank cut its 2013 global GDP forecasts from +3.0% down to +2.4% growth. China's GDP fell to its lowest levels since 1999. Shares of Apple Inc. (AAPL), the world's largest tech-stock by market cap, are flirting with a breakdown under round-number support at the $500 level. Yet the U.S. market has shrugged off these headlines and disappointing economic data to focus on earnings news.

There have been exceptions but so far the earnings parade has been a positive one. The S&P 500 has rallied to its highest levels since 2007. The Dow Jones Transportation average and the small cap Russell 2000 index have both hit new all-time, record highs. According to a USAtoday article the current bull market, dating back to the "turnaround that began March 9, 2009" has produced +118% gains. That puts it among the top nine bull markets the S&P 500 has ever seen.

It was a busy week for economic data. The Philadelphia Fed survey was a big disappointment. Economists had been expecting the survey to improve from last month's +4.6 reading. Yet January's reading fell into negative territory at -5.8. The New York Empire State fed survey produced a minor bounce from -8.1 to -7.8 but analysts had been forecasting a much bigger improvement. The University of Michigan Consumer Sentiment reading for January fell from 72.9 down to 71.3. Expectations had been for a bounce into the 75 area. It is currently at the lowest levels since December 2011. Many are blaming all the negative hype over the fiscal cliff and the return of the payroll tax reducing consumers' paychecks for the weak sentiment numbers.

We did see a few benign or positive economic reports. The PPI for December fell -0.2%. The Fed's Beige Book showed that all 12 districts were seeing modest growth. Housing starts for December came in at 954,000, which is up significantly from the prior month's 851,000. Building permits edged higher to 903,000 up from 899,000 the month before. I mentioned the China GDP headline earlier. China' National Bureau of Statistics reported that their country's Q4 GDP came in at +7.9%. That was better than the +7.8% estimate and up from Q3's +7.4%. China's GDP growth for all of 2012 fell to the slowest pace in 13 years. The uptick higher late in the year has many believing that China may have finally found a bottom. There is some evidence to suggest that Chinese exports are improving.

Major Indices:

The rally in the S&P 500 continues. After hovering near the 1470 level for a few days, the index bounced off its rising 10-dma and surged to a new multi-year high. The breakout past its 2012 highs is certainly very bullish and the index is up about +6.0% in just over three weeks. You could argue the S&P 500 is short-term overbought here. Yet I don't think it will see a pullback until the S&P 500 tags the 1500 level.

The next resistance level should be round-number, psychological resistance at the 1500 mark. Now that the S&P 500 has broken free of its 2012 highs the 1500 level should act as a magnet, pulling the index higher. Whether or not the index breaks out past the 1500 level may depend on earnings news or the upcoming debt ceiling fight in Washington. Naturally we could expect a pullback once the S&P 500 hits this resistance. Or it could churn sideways for a while as it tries to generate enough momentum to breakout, just like we saw a few days ago with the S&P 500 hovering near 1470.

If the S&P 500 retreats from the 1500 level we can look for potential support near 1470, 1460, and 1450.

chart of the S&P 500 index:

The NASDAQ composite only gained +0.29% for the week, making it the worst performer among the major indices. Big declines for major tech stocks like AAPL and GOOG acted like an anchor. Friday's plunge in shares of Intel (INTC) certainly did not help either. In spite of the high-profile disappointments the trend for the NASDAQ is still higher. It's currently sitting under resistance near the 3150 level. Should it breakout past 3150 the 3200 level is probably even tougher resistance. I would look at the 3050 level as potential support.

chart of the NASDAQ Composite index:

The small cap Russell 2000 index added +1.3% for the week and set new all-time, record highs. The $RUT is up +7.2% from its December 28th close. You could argue this index is overbought here. The 900 level could easily become round-number resistance. The combination of being overbought and about to hit what could be significant resistance raises the risk of a pullback.

On the chart below I have added a Fibonacci retracement tool. If the $RUT does correct from the 900 level I would expect a pullback toward 880 or 875.

chart of the Russell 2000 index

I've still got my eye on the volatility index (VIX). The VIX is typically seen as a "fear gauge". Low levels indicate no fear and high levels indicate significant fear of market declines. The VIX just fell to its lowest level since April 2007. What this is telling you is that investors are very complacent. There is no fear of a market correction. When traders get too comfortable it sets up for a potential reversal in the market.

From a technical standpoint any time the VIX hits a relative extreme it is also signaling a potential reversal. A big surge higher could signal a potential bottom soon. A sharp drop lower could signal a potential top in the market soon. The challenge is how to apply this information. Reading the VIX is more of an art form than a science since it can stay elevated at high levels or stay depressed at very lows levels for many days.

I suspect that the combination of the S&P 500 index nearing what is probably resistance at 1500, the Russell 2000 index nearing probable resistance at 900, and the VIX hitting new multi-year lows, could all be signaling a potential reversal at resistance soon. It may just be a short-term pullback or it might be more significant.

chart of the Volatility Index (VIX)

Economic Data

The economic calendar is pretty light. There is an EU finance ministers meeting on Monday (Jan 21st). The Chinese PMI and Eurozone PMI data come out on Wednesday and Thursday, respectively. ECB President Mario Draghi is due to speak on Tuesday. The IMF will release their world economic forecast on Wednesday. Yet the earnings parade continues, which will likely keep investor focus on corporate results.

Economic and Event Calendar

- Monday, January 21 -
U.S. markets closed for Martin Luther King Day
EU finance minister meeting

- Tuesday, January 22 -
existing home sales
German ZEW (sentiment) index

- Wednesday, January 23 -
China HSBC flash PMI

- Thursday, January 24 -
Weekly Initial Jobless Claims
Eurozone PMI

- Friday, January 25 -
new home sales

The Week Ahead:

Looking ahead the trend is still up. That may change when the S&P 500 and the Russell 2000 indices hit resistance. Stocks don't move in a straight line for very long and I suspect the Dow Jones transportation index will see a pull back soon. The VIX has fallen to multi-year lows, which suggests there is too much bullish sentiment. If everyone is bullish it is a danger sign.

Imagine a boat where one side of the boat says "bullish" and the other side says "bearish". All the traders are in the middle. As more and more investors move to the "bullish" side of the boat that side starts to dip toward the water. If everyone walks to the bullish side of the boat there is a risk it could tip over.

Big picture the global growth situation is still muddy. Europe and Japan remain in recession. China just posted its slowest growth in 13 years. The U.S. is about to see another ugly battle in Washington over the debt ceiling. A couple of days ago Japan decided they need to weaken their currency to make their exports more competitive and boost growth. Russia has warned that the globe is on the verge of a currency war as everyone tries to weaken their currency to keep their own country's exports competitive.

On the positive side of things, China's latest GDP number was slightly better than expected and there are new hopes that China's growth has found a bottom. The Q4 earnings season, thus far, has been relatively bullish. Unfortunately, as we move deeper into the earnings season the results tend to deteriorate. Apple Inc. (AAPL) could be a big disappointment when they report earnings on January 23rd. Wall Street is expecting AAPL to produce earnings of $13.44 a share. If that's true, it would be the first time in nine quarters that earnings declined from the same quarter a year ago. If AAPL breaks down under the long-term bullish trend line of higher lows, it could definitely weigh on investor sentiment.

chart of the Apple Inc (AAPL)

I could be wrong about 1500 being resistance for the S&P 500. It's possible the rally continues. The all-time high is near 1570. Yet with the debt ceiling debate just a few weeks away I don't have a lot of hope that stocks rally during another political battle in Washington.

If you're looking for an entry point for a long-term trade it might pay to just sit back and wait. Otherwise, I would scale into positions slowly. That way if a trade moves against you, you're not 100% invested.

James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The U.S. market continues to rally and the S&P 500 index has hit new five-year highs. The small cap Russell 2000 is at new record highs. Most of our candidates are following the market higher. There are a few exceptions.

JBHT graduated from the watch list to the active play list. VMC met our entry point requirement on Friday so we're moving it to the new play list.

I have updated stop losses on: LEN, MSI, SCCO, VLO.

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

Graduating from the Watch List

by James Brown

Click here to email James Brown


- New Trades -


Vulcan Materials Co. - VMC - close: 56.69

Comments:
01/19/13: VMC has been a watch list candidate. The stock has been consolidating sideways under resistance near $55 for the last couple of weeks. Our plan was to wait for shares to breakout higher and close above $55.25 then buy calls the next day. VMC rallied to resistance at $55.00 on Thursday. Then it broke out on Friday with a +2.8% gain, meeting our entry equipments.

These are new multi-year highs for the stock. I am suggesting we buy calls at the open on Tuesday morning. More nimble traders could wait and try and buy calls on a dip near $55.00 instead. I do expect the $60.00 level to offer some short-term resistance but our long-term target is $68.50.

We want to keep our position size small!

- Suggested Positions -
Jan 22, 2013 - entry price on VMC @ --.--, option @ -.--
symbol: VMC1418a60 2014 JAN $60 call - current bid/ask $ 4.90/5.60

01/22/13 trade opens
01/19/13 moved to the new plays section
01/18/13 VMC rallies past resistance, meets our entry requirements
01/05/12 new strategy. Wait for a close above $55.25 with a stop at $49.75. Our long-term target is $68.50. Small positions.

Chart of VMC:

Current Target:$ 68.50
Current Stop loss: 49.75
Play Entered on: 01/22/13
Originally listed on the Watch List: 12/02/12



Play Updates

Stocks Extend Their Gains

by James Brown

Click here to email James Brown


Closed Plays



None. No closed plays this week.



Play Updates


Adobe Systems - ADBE - close: 37.98

Comments:
01/19/13: ADBE spent the week drifting lower. Traders did buy the dip on Friday at its 30-dma. It seems like the stock has found a top in the $37-38 area. I would expect correction back toward $36.00. More conservative traders may want to raise their stop loss.

- Suggested Positions -
DEC 05, 2012 - entry price on ADBE @ 35.30, option @ 2.32
symbol:ADBE1418a40 2014 JAN $40 call - current bid/ask $ 2.97/3.05

12/15/12 new stop loss @ 33.75
12/13/12 ADBE reports earnings.

Current Target:$ 44.00
Current Stop loss: 33.75
Play Entered on: 12/05/12
Originally listed on the Watch List: 11/03/12


Analog Devices - ADI - close: 43.06

Comments:
01/19/13: ADI shot higher on Thursday morning. The stock has been stuck in a $41.75-43.00 trading range but it looks like shares are ready to break out of that range. Thursday's high was $43.19. Readers may want to wait for a close above $43.25 as a new bullish entry point.

- Suggested Positions -
JAN 03, 2013 - entry price on ADI @ 43.60, option @ 3.10
symbol: ADI1418a45 2014 JAN $45 call - current bid/ask $ 2.35/2.50

Current Target:$ 49.75
Current Stop loss: 39.80
Play Entered on: 01/03/13
Originally listed on the Watch List: 12/22/12


American Intl. Group - AIG - close: 35.09

Comments:
01/19/13: AIG continues to drift lower but shares are still finding support near $34.50, at least for now. Most of the short-term technicals look bearish. I would not be surprised to see another dip toward the $33 area. More conservative traders might want to raise their stops toward the $32.00-32.50 area.

Earlier Comments:
Our plan was to keep our initial position size small to limit our risk. We will plan on exiting our 2014 calls when shares hit $42.50.

- Suggested Positions - (small positions @ first)
(closed on Dec. 24th)
May 18, 2012 - entry price on AIG @ 28.25, option @ 3.40
symbol: AIG1319A30 2013 JAN $30 call - exit @ $5.00 (+47.0%)

- or -

May 18, 2012 - entry price on AIG @ 28.25, option @ 4.20
symbol: AIG1418A35 2014 JAN $35 call - current bid/ask $ 4.15/ 4.30

12/24/12 closed our 2013 call position at the open.
Our exit was at $5.00 (+47.0%)
12/22/12 Exit the 2013 calls immediately on Monday morning
current bid is at $4.80
12/15/12 readers may want to exit our 2013 calls now.
12/08/12 move the target for the 2013 calls to $37.00
11/02/12 AIG gapped down following its earnings report
10/06/12 adjusting our exit targets. Plan on exiting our 2013 calls when AIG hits $39.00. We'll exit our 2014 calls when AIG hits $42.50
09/08/12 Treasury has announced an $18 billion sale of AIG stock
08/18/12 new stop loss @ 29.45
06/16/12 new stop loss @ 26.95
05/18/12 triggered at $28.25
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

Current Target:$ 2013 call: $37.00, 2014 calls: $42.50
Current Stop loss: 29.45
Play Entered on: 05/18/12
Originally listed on the Watch List: 04/07/12


Akamai Technology - AKAM - close: 39.96

Comments:
01/19/13: AKAM has spent a week and a half hovering in the $39-40 zone. It looks like a new short-term bottom but AKAM needs to see a bullish breakout past $40.00 again. I would use a new close above $40.25 as a bullish entry point.

NOTE: AKAM is scheduled to report earnings on Feb. 6th.

- Suggested Positions -
JAN 03, 2013 - entry price on AKAM @ 41.89, option @ 3.60
symbol:AKAM1418a50 2014 JAN $50 call - current bid/ask $ 2.50/2.60

Current Target:$ 52.50
Current Stop loss: 37.75
Play Entered on: 01/03/13
Originally listed on the Watch List: 12/31/12


Alpha Natural Resources - ANR - close: 9.54

Comments:
01/19/13: ANR found support near the $9.00 level and shares are starting to bounce. Readers may want to consider new bullish positions on a close back above the $10.00 mark.

NOTE: ANR is scheduled to report earnings on Feb. 14th.

- Suggested Positions -
JAN 07, 2013 - entry price on ANR @ 10.34, option @ 2.49
symbol: ANR1418a10 2014 JAN $10 call - current bid/ask $ 1.86/1.91

01/07/13 Trade opened with ANR at $10.34
01/04/13 ANR meets our entry requirement with a close "above" $10.15. Our trade will open on Monday morning (Jan. 7th)

Current Target:$ 18.00
Current Stop loss: 8.90
Play Entered on: 01/07/13
Originally listed on the Watch List: 12/31/12


Acme Packet - APKT - close: 23.77

Comments:
01/19/13: APKT is a new play we added last weekend. Shares have been trending higher. Our entry point was on Monday, Jan. 14th. There is some short-term resistance near $24.00 and its 300-dma also near $24.00. If you're looking for a new entry point now I would consider waiting for a close above $24.25 as an entry point. More conservative traders may want to consider a stop closer to the $21 level instead.

Earlier Comments:
I do expect the $30.00 level to offer significant resistance. FYI: The Point & Figure chart is bullish and forecasting a long-term target of $41.

NOTE: APKT is scheduled to report earnings on February 4th. More conservative traders may want to wait until after we see how the market reacts to this earnings report before launching new bullish positions.

- Suggested Positions -
JAN 14, 2013 - entry price on APKT @ 22.83, option @ 2.60
symbol:APKT1418a30 2014 JAN $30 call - current bid/ask $ 2.50/2.80

01/12/13 plan on opening positions on Monday morning (Jan 14th)

Current Target:$ 34.00
Current Stop loss: 19.75
Play Entered on: 01/14/13
Originally listed on the Watch List: 01/05/13


Citigroup - C - close: 41.66

Comments:
01/19/13: Citigroup reported earnings on the 17th and missed estimates by 27 cents! Analysts were expecting 96 cents. C delivered 69 cents. The company did beat the revenue estimates with Q4 revenues at $18.66 billion. The earnings miss sparked the gap down on Thursday morning. Yet there was no follow through lower on Friday. The relatively muted reaction to the earnings miss is good news if you're bullish.

At this point, if you are looking for a new entry point, I would wait for a dip to $40.00 and then buy a bounce.

- Suggested Positions - (small positions)
DEC 18, 2012 - entry price on C @ 39.21, option @ 3.02
symbol: C1418a45 2014 JAN $45 call - current bid/ask $ 3.75/ 3.85

01/05/13 new stop loss @ 37.35

Current Target:$ 47.50-50.00range
Current Stop loss: 37.35
Play Entered on: 12/18/12
Originally listed on the Watch List: 12/08/12


Cree, Inc. - CREE - close: 33.76

Comments:
01/19/13: CREE is showing strength. The stock shrugged off a downgrade last week. Friday saw the stock push up through resistance near $33.00 and several moving averages. The stock looks poised to run toward its recent resistance near $35.00. Whether or not it breaks out might depend on earnings. CREE is scheduled to report on January 22nd. Wall Street expects a profit of 30 cents a share. I am not suggesting new positions at this time.

- Suggested Positions - (small positions)
NOV 01, 2012 - entry price on CREE @ 29.85, option @ 3.80
symbol:CREE1418a35 2014 JAN $35 call - current bid/ask $ 4.65/ 4.85

01/07/13 CREE drops on a downgrade
12/15/12 new stop loss @ 29.45
12/15/12 bid/ask spread on our 2014 calls is too wide!
12/02/12 new stop loss @ 28.45

Current Target:$ 39.00
Current Stop loss: 29.45
Play Entered on: 11/01/12
Originally listed on the Watch List: 10/20/12


Chevron Corp. - CVX - close: 115.24

Comments:
01/19/13: The rally in CVX continues. After breaking out past resistance the stock has been up every day since. Actually CVX is up eight days in a row. Veteran traders know that stocks don't go up in a straight line for very long. If you are looking for an entry point I would wait for a pullback. The $117.50-118.00 zone could be tough resistance for CVX.

NOTE: CVX is scheduled to report earnings on February 1st. More conservative traders may want to wait until after we see how the market reacts to this earnings report before launching new bullish positions.

- Suggested Positions -
JAN 14, 2013 - entry price on CVX @ 111.38, option @ 3.40
symbol: CVX1418a120 2014 JAN $120 call - current bid/ask $ 4.35/4.50

Current Target:$124.50
Current Stop loss: 104.75
Play Entered on: 01/14/13
Originally listed on the Watch List: 12/22/12


Expedia Inc. - EXPE - close: 62.24

Comments:
01/19/13: Hmm... EXPE ignored the new highs in the S&P 500. This stock faded lower instead and tested the $62.00 level as short-term support multiple times. I suspect we could see EXPE dip toward round-number support at $60.00 soon. Earnings are expected in the first week of February.

I am not suggesting new positions at this time.

Earlier Comments:
I would consider this a more aggressive, higher-risk trade because EXPE can be so volatile. We will want to keep our position size small to limit our risk.

- Suggested Positions -
NOV 29, 2012 - entry price on EXPE @ 61.84, option @ 6.00
symbol: EXPE1418a74.48 '14 JAN $74.48 call - current bid/ask $5.00/5.40

01/05/13 new stop loss @ 57.40
12/13/12 EXPE began trading ex-dividend (52cents). The option strike on our 2014 calls moved from $75.00 to $74.48.

Current Target: $79.00
Current Stop loss: 54.40
Play Entered on: 11/29/12
Originally listed on the Watch List: 11/24/12


First Solar Inc. - FSLR - close: 30.08

Comments:
01/19/13: It was not a good week for FSLR. The stock corrected lower for a second week in a row. Now FSLR is testing support near $30.00 again. If the $30 level breaks there might be some support at the 50-dma or the exponential 200-dma, both near $29.00. Below that and FSLR will likely hit our stop loss at $27.75. I am not suggesting new positions at this time.

Earlier Comments:
FYI: Readers will be interested to hear that there seem to be rumors that FSLR might be a takeover candidate and that could be helping fuel gains.

- Suggested Positions -
NOV 28, 2012 - entry price on FSLR @ 26.20, option @ 5.00
symbol: FSLR1418a30 2014 JAN $30 call - current bid/ask $5.65/5.90

01/05/13 new stop loss @ 27.75
12/22/12 new stop loss @ 25.75, FSLR looks poised for more profit taking
12/15/12 readers may want to take profits early. The bid on our call is up to $8.15.
12/08/12 new stop loss @ 24.40

Current Target: $39.75
Current Stop loss: 27.75
Play Entered on: 11/28/12
Originally listed on the Watch List: 11/10/12


General Electric - GE - close: 22.04

Comments:
01/19/13: Shares of GE surged on Friday thanks to a better than expected earnings report. The company beat estimates by a penny. Revenues also beat with Q4 revenues at $39.33 billion. Orders are on the rise and margins are improving. Investors reacted by pushing GE to a +3.4% gain on Friday. Investors may want to buy calls on a dip towards $21.50.

- Suggested Positions -
NOV 14, 2012 - entry price on GE @ 20.25, option @ 0.42
symbol: GE1418a25 2014 JAN $25 call - current bid/ask $0.48/0.50

12/14/12 GE increased its dividend to 19 cents
11/24/12 new stop loss @ 19.75
11/14/12 triggered at $20.25
11/10/12 adjust the trigger down to $20.25, just above the 200-dma, stop to $19.25
10/27/12 move the buy-the-dip trigger down to $20.50
10/20/12 adjust the buy-the-dip trigger to $21.00 and our stop to $19.45

Current Target: $27.50
Current Stop loss: 19.75
Play Entered on: 11/14/12
Originally listed on the Watch List: 09/22/12


SPDR Gold ETF - GLD - close: 163.09

Comments:
01/19/13: Precious metals have been on the rise. The GLD added about two points for the week. Now this ETF is testing technical resistance at its 50-dma and short-term resistance at the $164.00 level.

There are growing fears that the world is on the brink of a currency war with multiple countries trying to weaken their currency to support economic growth. Yet if everyone tries weakening their currency at the same time it could cause problems but it's bullish for precious metals like gold and silver.

Earlier Comments:
Currently our stop loss is at $154.40. More conservative traders may want to raise their stop. I am not suggesting new positions at this time.

- Suggested Positions -
DEC 20, 2012 - entry price on GLD @ 159.87, option @ 2.60
symbol: GLD1418a200 2014 JAN $200 call - current bid/ask $2.65/2.77

12/08/12 removed the 2013 call. Only use the 2014 call
11/03/12 Adjust the entry trigger down to $160.00 and the stop to $154.40
10/27/12 adjust the entry trigger to $162.00 and the stop to $154.90
10/20/12 adjust the buy-the-dip trigger to $163.00, stop to $157.75
adjust the 2013 call from Jan. $175 to June $175
09/15/12 adjust the trigger to $165.50, stop to $159.00.
09/08/12 adjust the buy-the-dip trigger to $164.00 (up from $162)

Current Target: $190.00-200.00 zone
Current Stop loss: 154.40
Play Entered on: 12/20/12
Originally listed on the Watch List: 09/01/12


Honeywell Intl. - HON - close: 67.81

Comments:
01/19/13: Last week was a bullish one for HON. The stock has rallied to new multi-year highs after consolidating sideways for more than a week underneath the $67 level. HON's all-time highs are in the $68-69 area so that might prove to be a challenge. The company is due to report earnings on January 25th.

Our long-term target is $74.50. FYI: The Point & Figure chart is bullish with a long-term $86 target.

- Suggested Positions -
DEC 31, 2012 - entry price on HON @ 62.50, option @ 4.40
symbol: HON1418a65 2014 JAN $65 call - current bid/ask $6.45/6.60

01/05/13 new stop loss @ 59.90

Current Target: $74.50
Current Stop loss: 59.90
Play Entered on: 12/31/12
Originally listed on the Watch List: 12/22/12


JB Hunt Transport - JBHT - close: 63.08

Comments:
01/19/13: JBHT was on our watch list. The plan was to wait for shares to breakout past resistance at $62.00. I suggested waiting for a close above $62.25 and then buy calls the next day. JBHT met that requirement with Thursday's close at $62.78. Our trade opened on Friday morning at $62.72. If you missed it I would consider waiting for a dip back into the $62.50-62.00 zone as an alternative entry point.

NOTE: JBHT is scheduled to report earnings on January 24th and could see some profit taking after its report.

- Suggested Positions -
JAN 18, 2013 - entry price on JBHT @ 62.72, option @ 3.50
symbol: JBHT1317H65 2013 AUG $65 call - current bid/ask 3.50/3.80

Chart of JBHT:

Current Target: $69.75
Current Stop loss: 57.75
Play Entered on: 01/18/13
Originally listed on the Watch List: 01/12/13


Juniper Networks - JNPR - close: 21.49

Comments:
01/19/13: JNPR was upgraded last week. Shares extended their gains and the stock is now up 8 out of the last 9 weeks. JNPR could see some profit taking after the company reports earnings on January 24th.

- Suggested Positions -
DEC 19, 2012 - entry price on JNPR @ 20.39, option @ 1.84
symbol: JNPR1418a25 2014 JAN $25 call - current bid/ask $1.76/1.81

Current Target: $24.75
Current Stop loss: 18.75
Play Entered on: 12/19/12
Originally listed on the Watch List: 12/15/12


Lennar Corp. - LEN - close: 42.08

Comments:
01/19/13: It was an up week for LEN thanks to a positive earnings report. The company announced Q4 earnings on Jan. 15th. LEN beat both the profit and revenue estimates with 56 cents a share and revenues of $1.35 billion. New orders were up +32%. Revenues were up more than 41%. Margins were improving as well. The stock initially saw some profit taking but traders bought the dip near round-number support at $40.00. By week's end LEN was testing its highs near $42.00 again.

Strategy update: I am raising the exit target on our 2014 calls from $44.00 to $46.00. We will raise our stop loss to $37.75.

- Suggested Positions -
(target for 2013 calls was hit at $36.00 on 09/14/2012)
AUG 17, 2012 - entry price on LEN @ 32.72, option @ 2.07
symbol: LEN1319A35 2013 JAN $35 call - exit $3.70 (+78.7%)

- or -

AUG 17, 2012 - entry price on LEN @ 32.72, option @ 3.39
symbol: LEN1418A40 2014 JAN $40 call - current bid/ask $6.75/6.90

01/19/13 new stop loss @ 37.75, adjust exit target on 2014 calls to $46
01/05/13 new stop loss @ 35.75
10/20/12 new stop loss @ 33.90, adjust exit target on 2014 calls to $44.00
09/24/12 LEN reported earnings, investors sell the news
09/22/12 new stop loss @ 33.40
09/15/12 new stop loss @ 31.40
09/14/12 2013 call target hit at $36.00, option @ 3.70 (+78.7%)
...

Current Target: $ 36.00(2013 calls), $46.00 (2014 call)
Current Stop loss: 37.75
Play Entered on: 08/17/12
Originally listed on the Watch List: 08/11/12


L-3 Communications - LLL - close: 78.81

Comments:
01/19/13: LLL is still drifting higher and added about a dollar for the week. Shares are hitting new 52-week highs. I am a little concerned that the $80.00 level could be round-number resistance. There is no change from my prior comments.

Earlier Comments:
I am not suggesting new positions now. Readers may want to exit early due to the political fight on the sequestration (on defense spending), which has not been solved, merely delayed. LLL is scheduled to report earnings on January 30th.

- Suggested Positions - (small positions)
NOV 05, 2012 - entry price on LLL @ 75.64, option @ 4.40
symbol: LLL1418a80 2014 JAN $80 call - current bid/ask $ 4.30/ 4.70

01/05/13 new stop loss @ 73.75. readers may want to just exit early now!

Current Target:$ 85.00
Current Stop loss: 73.85
Play Entered on: 11/05/12
Originally listed on the Watch List: 10/20/12


Motorola Solutions - MSI - close: 59.01

Comments:
01/19/13: It was another up week for MSI. Shares added +$1.50. MSI is up big three weeks in a row. I am concerned that MSI is now short-term overbought and nearing what could be round-number resistance at $60.00. Plus, MSI is scheduled to report earnings on January 23rd and traders could choose to sell the news no matter what MSI reports.

More conservative traders may want to take profits early right now. I am raising our stop loss up to $54.75. I am not suggesting new positions.

- Suggested Positions -
NOV 26, 2012 - entry price on MSI @ 54.11, option @ 2.93
symbol: MSI1418a60 2014 JAN $60 call - current bid/ask $ 4.10/ 4.30

01/19/13 new stop loss @ 54.75
01/12/13 new stop loss @ 53.75

Current Target:$65.00
Current Stop loss: 54.75
Play Entered on: 11/26/12
Originally listed on the Watch List: 11/17/12


Nokia Corp. - NOK - close: 4.43

Comments:
01/19/13: NOK has produced a very impressive eight-week rally with a surge from $2.75 to $4.75. This past week the stock has started to see some profit taking. I suspect that NOK could see more profit taking after the report earnings on January 24th. More conservative traders will want to take profits now, prior to their earnings announcement.

I am not suggesting new positions at this time.

Earlier Comments:
The plan was to buy NOK the stock or the 2014 calls.

- Suggested Positions - (small positions)
NOV 20, 2012 - entry price on NOK @ 2.97, option @ 0.78
symbol: NOK1418a3 2014 JAN $3 call - current bid/ask $ 1.72/ 1.75

- or -

Buy NOK stock: entry @ 2.97

01/19/13 readers may want to take profits now, prior to the earnings announcement.
01/12/13 new stop loss @ 3.65
12/22/12 new stop loss @ 3.40
12/15/12 new stop loss @ 3.25
12/08/12 new stop loss @ $2.95

Current Target:$ 4.95
Current Stop loss: 3.65
Play Entered on: 11/20/12
Originally listed on the Watch List: 11/17/12


Starbucks Corp. - SBUX - close: 54.81

Comments:
01/19/13: SBUX is still consolidating sideways in what looks like a bull-flag shaped pattern. I would expect SBUX to continue churning sideways until the company reports earnings on January 24th. Reaction to its results should send it higher or back toward support near $52.00. I am not suggesting new positions prior to the report.

- Suggested Positions -
DEC 07, 2012 - entry price on SBUX @ 53.43, option @ 3.80
symbol:SBUX1418a60 2014 JAN $60 call - current bid/ask $ 3.40/ 3.55

01/05/13 new stop loss @ 49.85

Current Target:$ 62.00
Current Stop loss: 49.85
Play Entered on: 12/07/12
Originally listed on the Watch List: 12/02/12


Southern Copper Corp - SCCO - close: 41.26

Comments:
01/19/13: SCCO was showing lots of strength this past week with a bullish breakout past resistance at the $40.00 level. The stock is starting to look a little short-term overbought. I am concerned that the stock could see some profit taking if miners at one of its mines in Peru decide to go on strike again. The strike could occur at any time now that negotiations with management have failed.

We will raise our stop loss up to $36.75. I am not suggesting new positions at this time.

Earlier Comments:
The plan was to keep our position size small to start.

- Suggested *SMALL* Positions -
NOV 06, 2012 - entry price on SCCO @ 35.78, option @ 2.30
symbol:SCCO1418a40 2014 JAN $40 call - current bid/ask $ 3.70/ 3.90

01/19/13 new stop loss @ 36.75
01/05/13 new stop loss @ 34.75
12/22/12 SCCO looks poised to correct lower toward $36.00
11/24/12 new stop loss @ 33.25
11/06/12 trade opened on gap down at $35.78, below our trigger.
(gap down was due to SCCO trading ex-dividend)

Current Target: $44.75
Current Stop loss: 36.75
Play Entered on: 11/06/12
Originally listed on the Watch List: 10/20/12


SIRIUS XM Radio - SIRI - close: 3.16

Comments:
01/19/13: SIRI closed unchanged for the week at $3.16 a share as it consolidates sideways under the $3.20 level. More conservative traders may want to raise their stop loss. We might consider an early exit prior to earnings, which are scheduled for February 5th.

- Suggested Positions -
OCT 04, 2012 - entry price on SIRI @ 2.75, option @ 0.38
symbol:SIRI1418A3 2014 JAN $3.00 call - current bid/ask $ 0.52/ 0.55

- or -

Buy the Stock: Entry @ $2.75 on Oct. 4th, 2012

01/05/13 new stop loss on SIRI at $2.75, adjust target to $3.45
01/04/13 LMCA gets permission to take a majority stake in SIRI
12/15/12 new stop loss @ 2.57
12/06/12 SIRI announces a stock buyback program and 5-cent dividend
11/03/12 new stop loss @ 2.45
10/20/12 warning! SIRI is up five weeks in a row and growing overbought. The stock could see a sell-off on its earnings report

Current Target: $ 3.45
Current Stop loss: 2.75
Play Entered on: 10/04/12
Originally listed on the Watch List: 09/29/12


Teck Resources - TCK - close: 37.45

Comments:
01/19/13: TCK posted a minor loss for the week but traders bought the dip near its rising 20-dma again. I am not suggesting new positions at the moment.

UPDATE: TCK plans to release its earnings report on Thursday, Feb. 7th.

- Suggested Positions -
DEC 10, 2012 - entry price on TCK @ 35.19, option @ 3.40
symbol: TCK1418a40 2014 JAN $40 call - current bid/ask $ 3.70/3.80

01/05/13 new stop loss @ 33.85

Current Target: $43.75
Current Stop loss: 33.85
Play Entered on: 12/10/12
Originally listed in the New Plays 12/08/12


Urban Outfitters - URBN - close: 43.39

Comments:
01/19/13: URBN is breaking out to new all-time highs. Traders were buying the dips at its rising 10-dma this past week. Readers may want to start raising their stop loss. I am not suggesting new positions at current levels.

- Suggested Positions -
JAN 03, 2013 - entry price on URBN @ 41.22, option @ 4.20
symbol:URBN1418a45 2014 JAN $45 call - current bid/ask $ 4.90/5.10

Current Target: $48.00
Current Stop loss: 37.85
Play Entered on: 01/03/13
Originally listed on the Watch List: 12/15/12


Valero Energy - VLO - close: 36.76

Comments:
01/19/13: VLO just delivered a strong week with a rally to new multi-year highs. If you look at VLO's chart you'll notice that the stock seems to rally for a week or two and then pause/consolidate for a week, then rally again. Earnings are coming up on January 29th so I would not be surprised to see VLO consolidate sideways as investors wait on the report.

I am raising our stop loss up to $32.45.

- Suggested Positions -
NOV 23, 2012 - entry price on VLO @ 31.25, option @ 3.30*
symbol: VLO1418a35 2014 JAN $35 call - current bid/ask $ 5.15/ 5.30

01/19/13 new stop loss @ 32.45
01/05/13 new stop loss @ 30.85
12/15/12 new stop loss @ 29.75
11/23/12 trade opened on gap open higher at $31.25
*Entry price is an estimate since the option did not trade at the time our play opened.

Current Target: $39.75
Current Stop loss: 32.45
Play Entered on: 11/23/12
Originally listed on the Watch List: 11/10/12


Watch

Industrial Goods & Financials

by James Brown

Click here to email James Brown

Editor's Note:

We have moved VMC to our new play list tonight.



New Watch List Entries

MTW - Manitowoc Inc.

SCHW - Charles Schwab


Active Watch List Candidates

CSCO - Cisco Systems

SOHU - Sohu.com

SYK - Stryker Corp


Dropped Watch List Entries

JBHT graduated to our play list.
VMC has been moved to our new play section



New Watch List Candidates:


The Manitowoc Co - MTW - close: 16.66

Company Info

MTW has two main business divisions. One makes cranes and the other is in the food service equipment business. The stock has been on the upswing but the rally stalled at its 2012 highs near $17.00. Since then MTW has been consolidating sideways. I suspect we will see MTW breakout and make a run towards the 2011 highs above $22.

I am suggesting we wait for MTW to close above $17.10 and then buy calls the next day. We'll start with a stop loss at $15.75. Our long-term target is $21.50. Coincidentally the Point & Figure chart is bullish with a $21 target.

NOTE: MTW is due to report earnings on January 31st. More conservative traders may want to wait until after we see how the market reacts to MTW's earnings before initiating new positions.

Breakout trigger: Wait for a close above $17.10, buy calls the next day, stop loss at $15.75.

BUY the 2014 Jan $20 call (MTW1418a20) current ask $1.70

Chart of MTW:

Originally listed on the Watch List: 01/19/13


The Charles Schwab Corp. - SCHW - close: 15.45

Company Info

SCHW, a large, nationwide investment brokerage, has been following the financial sector higher. Now shares have stalled below their 2012 highs near $15.50. The stock has been consolidating sideways in the $15.00-15.50 zone for the last two weeks. I suspect we'll see it breakout higher soon.

I am suggesting we wait for shares to close above $15.65 and then buy calls the next day. We'll start with a stop loss at $14.70. Our long-term target is $18.75. More aggressive traders can aim higher. The Point & Figure chart is bullish with a $24 target.

Breakout trigger: Wait for a close above $15.65, buy calls the next day, stop loss at $14.70.

BUY the 2014 Jan $17 call (SCHW1418a17) current ask $0.85

Chart of SCHW:

Originally listed on the Watch List: 01/19/13


Active Watch List Candidates:



Cisco Systems - CSCO - close: 21.02

Comments:
01/19/13: CSCO has spent the last few days consolidating sideways near the $21.00 level. These are new multi-month highs for the stock but we want to see a breakout past resistance.

I am suggesting we wait for CSCO to close above $21.25 and then buy calls the next day with a stop loss at $19.25. Our long-term target is $27.00.

FYI: CSCO is due to report earnings in early February.

Breakout trigger: Wait for a close above $21.25, buy calls the next day, stop loss at $19.25.

BUY the 2014 Jan $22 call (CSCO1418a22) current ask $1.47

- or -

BUY the 2015 Jan $25 call (CSCO1517a25) current ask $1.30

Originally listed on the Watch List: 01/12/13


Sohu.com - SOHU - close: 48.28

Comments:
01/19/13: We have been waiting for a correction in SOHU but so far it hasn't happened yet. Thursday's pullback looks like a potential bearish reversal but there hasn't been any follow through yet. I still don't want to chase it with SOHU hovering under resistance near the $50.00 level.

Earlier Comments:
Broken resistance at $45.00 should be new support. I am suggesting we buy calls on a dip a t $45.50. Our long-term target is $58.50.

NOTE: SOHU's earnings are expected in early February.

Buy-the-Dip trigger: $45.50 (stop loss: 42.40)

BUY the 2014 Jan $50 call (SOHU1418a50)

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


Stryker - SYK - close: 61.55

Comments:
01/19/13: Wow! Now I wish we had used a bullish breakout trigger to buy calls on SYK instead of waiting for a dip. The stock has exploded higher. SYK is now up about +14% from its late December low near $54.00. I still don't want to chase it.

We will raise our buy-the-dip trigger from $57.25 to $58.25. Our long-term target is $64.50 for now. We may adjust the exit target down the road.

Buy-the-Dip trigger: $58.25 (stop 54.65)

BUY the 2014 Jan $60 call (SYK1418a60)

01/19/13 adjust the buy-the-dip trigger up to $58.25

Originally listed on the Watch List: 01/12/13