Option Investor
Newsletter

Daily Newsletter, Sunday, 6/16/2013

Table of Contents

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

Leaps Trader Commentary

Waiting for Wednesday

by James Brown

Click here to email James Brown

Traders are selling the rallies as investors turn nervous ahead of this week's upcoming FOMC meeting. The June 6th rebound in the S&P 500 off its rising 50-dma didn't get very far before rolling over. This past Thursday saw a similar bounce but there was no follow through higher on Friday. For the week the S&P 500 lost -1.0%. The U.S. dollar continues to plunge, with the dollar now down four weeks in a row. Normally this dollar weakness would be bullish for commodities but the precious metals are not really moving. Gold managed a meager +0.4% gain for the week while silver, which was oversold, turned in a +1.5% oversold bounce. Oil rallied but the gains in oil could have been boosted by rising geopolitical worries in the Mid East.

It was a quiet week for economic data. The Producer Price Index (PPI) showed wholesale-level inflation rising +0.5% in May after a two-month decline. Core-PPI only rose +0.1%. The weekly initial jobless claims came in at 334,000, which was down from 346K. The University of Michigan Consumer Sentiment index fell from a five-year high in May of 84.5 to 82.7 at June's preliminary report. Economist were expecting a rise to 86.0 but the present conditions component reversed with plunge from 98.0 to 92.1. That's the biggest one-month drop since August 2011.

CNBC ran a story most of the week about the early release of economic data to high-end (mostly institutional) traders willing to pay for the information to get it prior to the public. We are not talking about very much time. In some cases the difference was only two seconds but when Wall Street firms are trading in nanoseconds it seems to be an unfair advantage. This revelation could negatively affect retail investor sentiment who might feel the markets are rigged against them. Another downer was the International Monetary Fund (IMF) and their growth downgrade. The IMF has kept their 2013 U.S. growth forecast at +1.9% but they lowered their 2014 forecast down to +2.7% from +3.0%.

It was a quiet week in Europe and Asia as well. The Eurozone industrial production numbers rose +0.4%, which was improvement. The Eurozone CPI rose +1.4% year over year. This week we will see headlines when President Obama meets with German Chancellor Angela Merkel.

The Chinese markets were closed most of the week for the nation's dragon boat festival. Most of the fireworks were in Japan. The NIKKEI index saw a -6.4% plunge on Thursday, pushing the Japanese market deeper into bear-market territory. The recent peak for the NIKKEI was May 22nd. Japanese investors were unhappy with the Bank of Japan's latest policy statement. Plus, investors now have to worry about their bank deposits. A story surfaced last week that the Japanese Financial Services Agency might consider a "bail in" strategy if the country sees any bank failures. It was only a few months ago that the small European country of Cyprus robbed their own citizens to save the banks. Instead of calling it a bail out the term bail in was used since they strategy uses depositor money to support the failing bank.

Looking at China the country said their Consumer Price Index (of inflation) only rose +2.1%, which was less than expected. The World Bank lowered its Chinese growth forecasts from +8.4% to +7.7% for all of 2013. Elsewhere in the region there was good news with North Korea and South Korea agreeing to hold talks to help alleviate the latest escalation between the two countries.

Major Indices:

The S&P 500 index continues to bounce off technical support at the 50-dma. Traders should note that multiple tests of support tend to weaken it. While the index bounced off its midweek lows it failed to break through the four-week trend of lower highs. This narrowing or coiling in the index between short-term lower highs and longer-term higher lows will eventually see a breakout one way or the other. The catalyst for the breakout will likely be the FOMC decision on Wednesday or Bernanke's testimony that same afternoon.

If the large-cap S&P 500 index can breakout higher past the trend of lower highs then it might retest resistance in the 1675-1680 region. If that level falls then 1700 could be round-number resistance. On the other hand if the index breaks down then 1600 could be round-number support but I would expect it to fail. That probably means a dip to the 1550-1540 area before finding support.

chart of the S&P 500 index:

The NASDAQ composite lost -1.3% for the week. It too has a short-term four-week trend of lower highs. Although the consolidation in the NASDAQ looks more like a bull-flag consolidation pattern. A breakout through the trend of lower highs would be a new bullish buy signal.

Technically there is probably resistance at 3500 and 3525. Meanwhile the 50-dma near 3375 could be support. The 3350 level and the 3300 level are also potential support on a pullback.

chart of the NASDAQ Composite index:

Surprisingly the small cap Russell 2000 index is holding up the best. That's a good sign since it suggests that mutual fund managers haven't panicked yet. The four-week consolidation has been a low more shallow. If the $RUT can break the trend of lower highs it might spark a wider bullish move higher for the market.

The 1000-1008 area is still overhead resistance. If that level breaks then the next resistance area could be 1020 or even the 1040-1050 zone. The 960-950 area is probably short-term support. If the market breaks down then look for support near the 900 level or its 200-dma.

chart of the Russell 2000 index



Economic Data & Event Calendar

This week we will see both the Philly Fed and New York regional surveys. Yet the real event this week will be the two-day FOMC meeting. No one expects the Federal Reserve to change interest rates (currently in the 0.0% to 0.25% zone). However, what the Fed says in its policy statement on Wednesday afternoon will be a market moving event. Although any reaction to the Fed statement might be postponed until after the Fed chairman Ben Bernanke holds his press conference later that afternoon.

Everyone wants to know when the Fed will begin "tapering" their QE purchases. Will be it be soon? Will it be next year? What is the Fed looking for before they begin tapering? Of course the Fed has already said they want to see a few months of +200K job growth or unemployment at 6.5% or inflation above 2.5% before they make any moves but it seems like Wall Street has forgotten these prior guidelines. It is worth noting that Wednesday's Fed statement will also provide the Fed's updated economic forecast for U.S. growth.

Believe it or not but Q2 earnings season will be here in a month. The next two or three weeks could see a number of corporations warning prior to their official results.

Economic and Event Calendar

- Monday, June 17 -
G-8 meeting continues
New York Empire State manufacturing survey

- Tuesday, June 18 -
Consumer Price Index (CPI)
housing starts & building permits
FOMC two-day meeting begins
German ZEW sentiment numbers

- Wednesday, June 19 -
HSBC Chinese manufacturing PMI data
FOMC two-day meeting ends: interest rate decision
Fed Chairman Ben Bernanke's press conference

- Thursday, June 20 -
Weekly Initial Jobless Claims
Eurogroup meeting
existing home sales
Philly Fed regional survey
Eurozone manufacturing PMI data
Eurozone consumer confidence

- Friday, June 21 -
The first official day of summer (summer solstice)

Additional Events to be aware of:

July 4th, U.S. markets closed for holiday
September - U.S. debt ceiling deadline

The Week Ahead:

The week ahead will be all about the Federal Reserve and what the Fed and Bernanke may or may not say in their official statement and his press conference. Seriously, it will be the topic for Wall Street 24/7 for the next three days. I would expect the U.S. stock market to trade sideways until Wednesday afternoon. How the market chooses to interpret the Fed's statement will be the catalyst for market direction, potentially for the rest of the summer.

Elsewhere geopolitical risks are rising. I've been warning readers that if the U.S. or Russia gets involved with the civil war in Syria it could have much larger consequences for everyone. Just this past week President Obama announced that the U.S. would indeed get involved by providing arms to the Syrian "rebels" fighting President Assad's regime.

Why is the U.S. getting involved? According to the U.N. they have proof that the Syrian government (Assad's government) used chemical weapons on its people. More specifically, out of the 92,000 dead over the last two years, there is evidence of 100 to 150 people dying from chemical weapons. According to Obama, this is the "red line" that Syria was not supposed to cross or we would get involved.

Part of the problem is that almost no one in the region believes this whole "red-line" being crossed story. Many see it as just an excuse for the U.S. to get involved and justify its actions. Think about it. Who would have more to gain from Syria using chemical weapons on its enemies? Would it be the Syrian government or the rebels? Some have suggested the "rebels" used chemical weapons just to get the U.S. involved.

I warned you that this was quickly becoming a proxy war between the west (the U.S. and U.K.) and the east (Russian and Iran and Hezbollah). In reality we are getting involved in a massive Sunni-Shiite Muslim conflict that's been going on for over 1,500 years. The U.S. just picked sides with the Sunnis. That means we will be supplying arms to the "rebels". Unfortunately these rebels are essentially "al Qaeda". Can you imagine how surreal this is to see the U.S. giving arms to al Qaeda when it was al Qeada who flew planes into the World Trade Center on 9/11?

Russia has consistently warned us not to get involved or they would have to step in and support their ally Syria (Assad's government). Iran has also pledged support and new headlines suggest that Iran has promised to send 4,000 Iranian Revolutionary Guards to Syria to help Assad win. You can also bet that this is going to cause trouble in Iraq since Iraq is mostly Shiite. I will confess I am not a Mid East policy expert but whatever your beliefs this situation is about to escalate and it could have unintended consequences.

When it comes to my market outlook, the larger trend is up but everything depends on the Fed statement and Bernanke's press conference on Wednesday. If the Fed disappointments the market we could see a painful sell-off by week's end.

James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The U.S. market resumed its drift lower as nervous investors wait for the next FOMC meeting this week and Bernanke's press conference on Wednesday afternoon.

Our USO trade was stopped out on Friday.

There are no stop loss changes tonight.

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

Potential for More Volatility

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(June 16, 2013)

Volatility spiked last week as stocks churned sideways in choppy trading. Investors are nervous about what the Federal Reserve might say about the future of its QE3 program. If you step back from the day to day gyrations the market has been consolidating sideways, although it has been with a short-term bearish trend of lower highs. On a positive note the U.S. markets managed to ignore the latest market plunge in Japan.

This week could be pivotal as the Fed either soothes investor fears or fuels them. Market direction will likely depend on the FOMC statement and Bernanke's press conference on Wednesday afternoon. With the potential for significant volatility this week I am not adding any new trades tonight. However, I did add three new candidates to the watch list. Plus, I've added a few more stocks to my radar screen.


Radar Screen:
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself:

PHM, RYL, KBH, KSU, WSM, ORLY, KR, SNDK, SYK, APA, XOM, HAL, TJX, JDSU, MSFT, DNKN, FRX, WHR, CBI, BA, NOC, LLL, RTN, M, PNRA, SBUX, GRPN, CY, NKE, UA, WFR, GS, ODFL, JNJ, BIDU, HD, TM, AXP, AMZN, GOOG,


Play Updates

Markets Turn Bumpy

by James Brown

Click here to email James Brown


Closed Plays


USO has been stopped out.



Play Updates


Bank of America - BAC - close: 13.07

Comments:
06/16/13: The financial sector was one of the market's worst performers last week. Yet it looks like the group is consolidating sideways, albeit with a bearish trend of lower highs. BAC is following suit. Currently BAC is down two weeks in a row but it's holding above short-term resistance in the $12.85 area. If this level breaks then look for a pullback toward the $12.00 mark.

Note: you could argue that BAC has formed a bearish head-and-shoulders pattern over the last five to six weeks. If that's true it would signal a drop toward the $11.00-10.75 area.

I am not suggesting new positions at this time.

- Suggested Positions -
MAR 18, 2013 - entry price on BAC @ 12.29, option @ 0.44
symbol: BAC1418a15 2014 JAN $15 call - current bid/ask $0.47/0.48

- or -

MAR 18, 2013 - entry price on BAC @ 12.29, option @ 1.13
symbol: BAC1517a15 2015 JAN $15 call - current bid/ask $1.29/1.30

05/04/13 BAC did not participate in the market's rally this past week. Investors should turn more defensive here.

Current Target:$ 18.00
Current Stop loss: 10.90
Play Entered on: 03/18/13

Originally listed on the Watch List: 03/09/13


Ford Motor Co. - F - close: 15.37

Comments:
06/16/13: Ford produced a quiet week of consolidating lower. The last couple of days has seen the stock fail at its simple 10-dma, which is short-term bearish. A dip back toward $15.00 is likely but I would not be surprised to see a correction toward $14.00 if the market breaks down.

I am not suggesting new positions at this time.

- Suggested Positions -
(closed the 2014 calls on May 20th, at the open)
APR 29, 2013 - entry price on F @ 13.73, option @ 0.60
symbol: F1418a15 2014 JAN $15 call - exit $1.18 (+96.6%)

- or -

APR 29, 2013 - entry price on F @ 13.73, option @ 1.22
symbol: F1517a15 2015 JAN $15 call - current bid/ask $ 2.17/2.20

06/01/13 investors may want to exit our 2015 calls now with a bid at $2.34 (+91.8%)
06/01/13 adjust long-term target to $17.75
05/20/13 closed the 2014 calls at the open. Option @ +96.6%
05/18/13 prepare to exit the 2014 calls on Monday, May 20th
05/18/13 new stop loss @ 13.40

Current Target:$ 17.75
Current Stop loss: 13.40
Play Entered on: 04/29/13
Originally listed on the Watch List: 04/20/13


Honeywell Intl. - HON - close: 78.18

Comments:
06/16/13: HON continued drifting lower last week yet traders were buying dips near its 40-dma. Very similar to the S&P 500 index, shares of HON have a three-week trend of lower highs that is running counter to the longer-term up trend of higher lows. I would still expect HON to find support in the $76-75 zone but if the market rally breaks down we will probably see HON hit our stop at $74.50.

Earlier Comments:
Let's keep our position size small to start.

- Suggested Positions -
(closed the 2014 calls on May 20th at the open)
MAY 07, 2013 - entry price on HON @ 76.20, option @ 2.68
symbol: HON1418a80 2014 JAN $80 call - exit $5.10 (+90.2%)

- or -

MAY 07, 2013 - entry price on HON @ 76.20, option @ 4.10
symbol: HON1517a85 2015 JAN $85 call - current bid/ask $ 5.30/5.50

05/20/13 closed the 2014 calls at the open. option @ +90.2%
05/18/13 prepare to exit 2014 Jan. calls immediately on Monday, May 20th
05/18/13 new stop loss @ 74.50
05/07/13 Our trade opens
05/06/13 HON meets our entry requirement with a close above $76.00

Current Target:$ 95.00
Current Stop loss: 74.50
Play Entered on: 05/07/13
Originally listed on the Watch List: 05/04/13


Intel Corp. - INTC - close: 24.92

Comments:
06/16/13: INTC managed a gain for the week thanks to investors still buying dips at its rising 20 & 30-dma. Yet the stock has found new short-term resistance in the $25.10 area. If the market breaks down I would expect INTC to correct lower into the $23.50-23.00 zone.

Earlier Comments:
Please note that I am adjusting our exit strategy. We want to exit our 2014 calls when INTC hits $26.50. We will plan to exit our 2015 calls at $28.00.

- Suggested Positions -
APR 24, 2013 - entry price on INTC @ 23.28, option @ 0.89
symbol:INTC1418a25 2014 JAN $25 call - current bid/ask $ 1.62/1.64

- or -

APR 24, 2013 - entry price on INTC @ 23.28, option @ 1.74
symbol:INTC1517a25 2015 JAN $25 call - current bid/ask $ 2.52/2.55

06/08/13 adjust exit strategy:
plan to exit the 2014 calls when INTC hits $26.50
plan to exit the 2015 calls when INTC hits $28.00
05/18/13 The rally has stalled. INTC might correct lower soon
05/11/13 new stop loss @ 21.90

Current Target: $26.50 & $28.00 (see above)
Current Stop loss: 21.90
Play Entered on: 04/24/13
Originally listed on the Watch List: 04/20/13


Lowe's Companies - LOW - close: 41.16

Comments:
06/16/13: After chopping sideways the last few days LOW posted a small loss for the week. Shares are now down three weeks in a row but up from the June 6th low. The $39.50 level should be support and it's now bolstered by the rising 100-dma. If LOW breaks down below this level it will hit our stop loss at $39.00. Given the uncertainty surrounding the Fed meeting this week I am not suggesting new positions at this time.

- Suggested Positions -
MAY 07, 2013 - entry price on LOW @ 40.87, option @ 1.57
symbol: LOW1418a45 2014 JAN $45 call - current bid/ask $ 1.51/1.55

- or -

MAY 07, 2013 - entry price on LOW @ 40.87, option @ 3.52
symbol: LOW1517a45 2015 JAN $45 call - current bid/ask $ 3.75/3.85

05/22/13 LOW reported earnings and missed estimates.
05/18/13 new stop loss @ 39.00, LOW could see a pullback after its earnings report
05/07/13 Our trade opens.
05/06/13 LOW meets our entry requirement with a close above $40.25

Current Target: $49.50
Current Stop loss: 39.00
Play Entered on: 05/07/13
Originally listed on the Watch List: 05/04/13


NetApp, Inc. - NTAP - close: 37.90

Comments:
06/16/13: It was a bumpy week for shares of NTAP. Shares closed the week almost unchanged and still respecting the trend of higher lows, at least for now. If the stock were to break down, look for support near $36 and its 50-dma. I am not suggesting new positions at this time.

Earlier Comments:
FYI: NTAP's point & figure chart is bullish with a $58 target.

- Suggested *Small* Positions -
MAY 17, 2013 - entry price on NTAP @ 38.93, option @ 3.35
symbol: NTAP1418a40 2014 JAN $40 call - current bid/ask $2.52/2.57

- or -

MAY 17, 2013 - entry price on NTAP @ 38.93, option @ 5.20
symbol: NTAP1517a40 2015 JAN $40 call - current bid/ask $4.35/4.50

05/18/13 adjust stop loss to $34.90
05/17/13 trade opens on NTAP's gap open higher at $38.93
05/16/13 NTAP met our entry requirement with a close above $37.15

Current Target: $44.75
Current Stop loss: 34.90
Play Entered on: 05/17/13
Originally listed on the Watch List: 05/11/13


Wal-Mart Stores - WMT - close: 74.87

Comments:
06/16/13: Our WMT trade could be in trouble. There was no follow through on the bounce two weeks ago. Instead WMT has rolled over again and is back to testing support near $74.50 and its simple 100-dma. There is possible support at $74.00 and likely support at the 200-dma but the 200-dma is at $73.40. Our stop loss is at $73.45.

Recently there has been more evidence that the global economy and even the U.S. economy is slowing down. If this trend of negative economic data continues it could weigh on shares of WMT and drag the stock lower. I am not suggesting new positions at this time.

- Suggested Positions -
(exited 2014 Jan. $75 calls on Monday, April 29th, 2013)
MAR 05, 2013 - entry price on WMT @ 73.47, option @ 3.10
symbol: WMT1418a75 2014 JAN $75 call - exit $6.05*(+95.1%)

- or -

MAR 05, 2013 - entry price on WMT @ 73.47, option @ 2.97
symbol: WMT1517a80 2015 JAN $80 call - current bid/ask $ 3.80/3.95

06/07/13 WMT announces another $15 billion stock buyback program
06/01/13 WMT has pulled back just as expected.
05/16/13 WMT reports earnings that miss estimates, miss revenues, and guides lower.
05/11/13 adjust exit target to $89.00.
04/29/13 planned exit for 2014 calls
*exit price is an estimate. The option did not trade when we closed this part of the play.
04/27/13 prepare to exit our 2014 calls immediately on Monday morning (04/29/13)
04/13/13 new stop loss @ 73.45
04/06/13 new stop loss @ 71.40
03/30/13 new stop loss @ 69.45

Current Target: $89.00
Current Stop loss: 73.45
Play Entered on: 03/05/13
Originally listed on the Watch List: 02/02/13


CLOSED Plays


U.S. Oil (ETF) - USO - close: 34.74

Comments:
06/16/13: We have been concerned with our USO trade for a while. I recently outlined the risk that the USO could be forming an inverse (bullish version) of a head-and-shoulders pattern. Oil has rallied two weeks in a row. Friday crude oil prices rallied on geopolitical worries with the U.S. getting involved with the civil war in Syria.

Friday morning saw the USO oil ETF gap open higher at $34.76. Our stop loss was $34.75 so the trade closed immediately. This rally is a bullish breakout over one of the USO's long-term trend of lower highs.

NOTE: Right now this is a put play with 2013 September puts.

This is a PUT play

- Suggested Positions -
APR 15, 2013 - entry price on USO @ 31.94, option @ 1.39
symbol: USO1321u30 2013 SEP $30 PUT - exit $0.26 (-81.2%)

06/14/13 stopped out on gap higher at $34.76
06/08/13 adjust the stop loss strategy to $34.75, exit on an intraday trade at this level or higher
05/18/13 adjust stop loss strategy to: if we see the USO close above $34.50, then exit immediately the next day!

Chart of USO:

Current Target:$ 29.50
Current Stop loss: 34.75
Play Entered on: 04/15/13
Originally listed on the Watch List: 04/06/13



Watch

Homebuilders & Consumer Goods

by James Brown

Click here to email James Brown

Editor's Note:

Tonight I have removed CS, EL, and LULU as active watch list candidates.



New Watch List Entries

BZH - Beazer Homes

HOV - Hovnanian Enter.

K - Kellogg Co.


Active Watch List Candidates

AIG - Amer. Intl. Group

BEAV - B/E Aerospace

C - Citigroup Inc

DIS - Walt Disney

GM - General Motors

JPM - JPMorgan Chase & Co

UNP - Union Pacific

V - Visa

WDC - Western Digital Corp


Dropped Watch List Entries

LULU, , CS, and EL have been removed.



New Watch List Candidates:


Beazer Homes - BZH - close: 19.82 change: +0.55

Company Info

The bear case on the homebuilders looks pretty daunting. First and foremost the rise in mortgage rates are likely to impact housing sales. 30-year fixed rates hit a new one-year high this past week near 4.0%. Worries that the Federal Reserve might start cutting back on its QE program is also weighing on the homebuilders. Plus, there are concerns about rising material costs and potential shortages in labor. If that wasn't enough there are new concerns about the sudden rise in foreclosures that could put pressure on pricing for new homes. Fundamental investors are concerned about rising stock valuations for the homebuilders.

As an industry most of the homebuilding stocks have seen a three or four week correction lower. BZH is one of them. Yet it looks like shares of BZH may have found a bottom this past week with support in the $18.50-19.00 zone. Right now BZH looks poised to breakout past round-number resistance at $20.00.

I am suggesting investors wait for BZH to close above $20.50 and then buy calls the next day. If triggered we will start with a stop loss at $18.45. Our long-term target is $26.00.

Please note that I am suggesting we keep our position size small to limit our risk.

Breakout trigger: Wait for a close above $20.50, stop $18.45

BUY the 2014 Jan $22 call (BZH1418a22) current ask $2.25

- or -

BUY the 2015 Jan $25 call (BZH1517a25) current ask $3.70

Chart of BZH:

Originally listed on the Watch List: 06/16/13


Hovnanian Enterprises - HOV - close: 6.28

Company Info

HOV is another homebuilder. All the risks I mentioned in the BZH trade above certainly apply to HOV. Investors bought the dip in HOV this past week and now shares are poised for a breakout past resistance near $6.50.

I am suggesting we buy calls on HOV (or buy HOV stock) if shares hit $6.61. No waiting for a close above a certain level. If HOV hits our trigger at $6.61 our long-term target is $8.75. However, I will point out that HOV could have significant resistance in the $7.00 region. Therefore I am suggesting we keep our position size small to limit our risk.

Breakout trigger: $6.61, stop loss @ 5.98

BUY the 2014 Jan $7.00 call (HOV1418a7) current ask $0.85

- or -

BUY the 2015 Jan $7.00 call (HOV1517a7) current ask $1.60

- or -

BUY HOV stock @ $6.61

Chart of HOV:

Originally listed on the Watch List: 06/16/13


Kellogg Co. - K - close: 64.24

Company Info

Kellogg is probably best known for its many brands of breakfast cereals but the company makes a variety of food products. The stock produced a very impressive rally from its July 2012 lows that pushed the stock to new all-time highs. Shares peaked in April 2013 but the consolidation has taken the shape of a bull-flag pattern. We want to be ready if K can breakout higher.

Aggressive investors may want to buy calls on a move above $65.50. The newsletter is suggesting investors wait for shares of K to close above $67.00 and then buy calls the next morning.

Breakout trigger: Wait for a close above $67.00, stop loss $63.75.

BUY the 2015 Jan $75 call (K1517a75) current ask $1.35

Chart of K:

Originally listed on the Watch List: 06/16/13


Active Watch List Candidates:



American Intl. Group - AIG - close: 45.38

Comments:
06/16/13: Believe it or not but AIG managed to post a gain for the week. It wasn't much, just 10 cents. Friday's move looks like another failed rally at resistance near $46.50. More aggressive investors might want to consider buying calls if AIG can close above $46.50.

Tonight I am adjusting our buy-the-dip trigger to $40.00, up from $38.50. We will raise the stop loss to $36.35. Our long-term target is the $45-50 zone.

Buy-the-Dip trigger: $40.00, stop loss @ 36.35

BUY the 2014 Jan $45 call (AIG1418a45)

- or -

BUY the 2015 Jan $50 call (AIG1517a50)

06/16/13 adjust entry strategy: move the buy-the-dip trigger to $40.00, from 38.50. Move the stop loss to $36.35 from 34.75.

Originally listed on the Watch List: 06/01/13


B/E Aerospace Inc. - BEAV - close: 63.98

Comments:
06/16/13: Shares of BEAV hit some profit taking last week. The stock reversed until traders bought the dip at its rising 50-dma. Thus the longer-term trend of higher lows remains intact. More aggressive investors may want to buy calls now given the bounce from the 50-dma. I am suggesting readers wait for BEAV to close above $65.75 before initiating positions.

Earlier Comments:
Wait for a close above $65.75 and then buy calls the next day. We will start with a stop loss at $61.70. Our long-term target is $74.00.

Breakout trigger: Wait for a close above $65.75, then buy calls the next day.

BUY the 2014 Jan $70 call (BEAV1418a70)

Originally listed on the Watch List: 06/08/13


Citigroup, Inc. - C - close: 49.22

Comments:
06/16/13: Financial stocks were some of the market's worst performers last week. Citigroup lost more than a $1.00. There is potential support near $48 and its 50-dma but we're waiting for a dip to $46.00.

Earlier Comments:
Currently the plan is to wait for a correction lower and buy calls on a dip at $46.00. If triggered we want to start with small positions. Our long-term target is $59.00.

Buy-the-Dip trigger: $46.00, stop loss @ 42.40

BUY the 2014 Jan $50 call (C1418a50)

- or -

BUY the 2015 Jan $55 call (C1517a55)

Originally listed on the Watch List: 05/25/13


Credit Suisse Group - CS - close: 28.29

Comments:
06/16/13: I am removing CS as a watch list candidate. Shares have continued to trend lower over the last four weeks.

Our trade did not open. The plan was to wait for a close above $30.75.

Trade did not open.

06/16/13 removed from the newsletter
06/01/13 adjust entry point: wait for a close above $30.75

Originally listed on the Watch List: 05/18/13


Walt Disney - DIS - close: 63.80

Comments:
06/16/13: There was no follow through on DIS' bounce from the $62 level. Shares gave back more than a $1.00 last week. Currently we are waiting on a correction lower. More aggressive investors could jump in on a dip or a bounce near $60.00. The newsletter is suggesting readers use an entry trigger to buy calls on a dip at $57.00. If triggered we'll use a stop loss at $53.75. Our long-term target is the $75-80 zone.

Buy-the-Dip trigger: $57.00, stop @ 53.75

BUY the 2014 Jan $65 call (DIS1418a65)

- or -

BUY the 2015 Jan $65 call (DIS1418a65)

Originally listed on the Watch List: 06/01/13


The Est - EL - close: 68.41

Comments:
06/16/13: EL managed to show a little bit of relative strength and close up for the week. Yet shares remain stuck under its 50-dma.

Tonight I am removing EL from the watch list. Our trade did not open.

Trade did not open.

06/16/13 removed from the newsletter
06/06/13 EL dips to $65.23 and bounces
06/01/13 adjust the entry trigger to $65.00 (from 65.50)
add the 2015 calls options
05/18/13 strategy change: switch entry point to buy-the-dip at $65.50, move the stop loss to $62.25. Move the option strike to 2014 Jan $75 call

Originally listed on the Watch List: 05/04/13


General Motors - GM - close: 34.29

Comments:
06/16/13: GM was finally starting to correct lower. Then the stock produced a big bounce off its 30-dma thanks to the market's rebound on Thursday. Just like the market's major indices GM did not see any follow through higher on Friday. We are waiting for a correction lower.

Earlier Comments:
Currently I am suggesting investors use a buy-the-dip trigger at $30.00 to launch call positions on GM. If triggered we'll use a stop loss at $27.75. Our long-term target is the $36-40 zone.

Buy-the-Dip trigger: $30.00, stop @ 27.75

BUY the 2014 Jan $35 call (GM1418a35)

BUY the 2015 Jan $35 call (GM1517a35)

Originally listed on the Watch List: 06/01/13


JPMorgan Chase & Co. - JPM - close: 53.13

Comments:
06/16/13: JPM is another financial stock that trended lower last week. I don't see any changes from my prior comments. I am expecting a correction back toward $50.00, which should be significant support.

We want to be ready to buy calls on a dip near support. I am suggesting a buy-the-dip trigger at $50.25. If triggered we will use a stop loss at $47.40. Our long-term target is $64.00.

Buy-the-Dip trigger: $50.25, stop 47.40

BUY the 2014 Jan $55 call (JPM1418a55)

- or -

BUY the 2015 Jan $55 call (JPM1517a55)

Originally listed on the Watch List: 05/25/13


Lululemon Athletica - LULU - close: 66.15

Comments:
06/16/13: I warned readers that LULU could see a gap move after the earnings report on Monday, June 10th. I was worried about a gap open higher. Instead shares of LULU gapped down sharply on Tuesday, June 11th. LULU's earnings numbers were actually bullish but the CEO said she was resigning. CEO Christine Day said she will remain on board until the company can find a replacement.

Our trade did not open. I am removing LULU as a watch list candidate.

Trade did not open.

06/16/13 removed from the watch list.

Originally listed on the Watch List: 06/08/13


Union Pacific Corp. - UNP - close: 157.02

Comments:
06/16/13: UNP only suffered a minor decline for the week. Traders bought the dip at its rising 40-dma again on Thursday. The stock looks like it's consolidating sideways within its larger up trend but future direction may depend on how the market chooses to interpret the Fed's action this week. I don't see any changes from my prior comments.

Earlier Comments:
I am suggesting investors wait for UNP to close above $161.00 and then buy calls the next morning. If triggered we will start with a stop loss at $151.00. Our long-term target is $185.00 for the 2014 calls and $200 for the 2015 calls.

Breakout trigger: Wait for a close above $161.00
stop loss @ 151.00

BUY the 2014 Jan $180 call (UNP1418a180)

- or -

BUY the 2015 Jan $200 call (UNP1517a200)

Originally listed on the Watch List: 06/08/13


Visa Inc. - V - close: 180.93

Comments:
06/16/13: Visa delivered a gain for the week. More aggressive investors may want to consider buying calls if V can breakout past its May highs near $184.50ish. Personally, I would rather buy a dip so we're sticking with the current plan for now.

Earlier Comments:
The newsletter is suggesting investors buy calls on a dip at $171.00. Our long-term target is $198.50.

Buy-the-Dip trigger: $171.00, stop loss $164.50.

BUY the 2014 Jan $180 call (V1418A180)

- or -

BUY the 2015 Jan $200 call (V1517A200)

06/16/13 I am adjusting the stop loss to $164.50 from 164.75.

Originally listed on the Watch List: 05/11/13


Western Digital Corp. - WDC - close: 63.88

Comments:
06/16/13: Shares of WDC may have just peaked. After seven weeks of gains the stock finally posted a weekly loss. Wednesday's session is a bearish reversal candlestick pattern. Hopefully the correction lower begins soon. I am suggesting we wait and buy a dip at $55.00. If WDC hits our buy-the-dip trigger at $55.00 our long-term target is $70.00. The Point & Figure chart is currently forecasting a long-term target of $82.00. We'll start with a stop loss at $52.25.

Buy-the-Dip trigger: $55.00, stop loss @ 52.25

BUY the 2014 Jan $65 call (WDC1418a65)

- or -

BUY the 2015 Jan $70 call (WDC1517a70)

Originally listed on the Watch List: 05/18/13