Option Investor
Newsletter

Daily Newsletter, Sunday, 6/30/2013

Table of Contents

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

Leaps Trader Commentary

Best First Half Since 1998

by James Brown

Click here to email James Brown

Ding! Ding! Ding! That's the end of the first half to 2013. The bulls have delivered an impressive performance but they look like they're getting tired. The S&P 500 managed a +0.8% bounce for the week, ending a two-week retreat. From the May 21st close of 1669 to the June 24th close at 1573 the S&P 500 saw a -5.8% correction before bouncing this past week.

After investors reacted poorly to Ben Bernanke's comments two weeks ago the Federal Reserve came out with a full-court press and every Fed head with a microphone came out defending their QE3 program. They promised the Fed would not start tapering until economic data justified a reduction. This extra effort by the Fed and the combination of end of quarter window dressing helped fuel a three-day bounce in stocks.

It is likely that some of the money hitting equities came out of the bond market. June saw the largest one-month redemptions (outflows) from bond ETFs and bond mutual funds every with investors pulling almost $62 billion out of the bond market. The sell-off in bonds has had a big impact on mortgage rates, which surged at their fastest one-week pace in 26 years and closed at highs not seen since July 2011.

2013 has seen the best yearly start for the S&P 500 index since 1998. Thus far the S&P 500 index is up +12.6% year to date. The Dow Jones Industrial Average is up +13.7%. The NASDAQ composite is up +12.7%. Gold is down -26% and the second quarter was the worst quarterly performance in gold in 45 years! Silver has plunged -35% for the year.


One-Paragraph Market Summary

I am going to try and save you some time with a one-paragraph summary for those that do not want all the details below. Stocks were short-term oversold. Window dressing helped fuel a bounce but the rebound has stalled at technical resistance. The intermediate trend is still bearish with a pattern of lower highs and lower lows. Odds of a retest of the June 24th lows is high. Yet the first week or two of July tend to be moderately bullish. We could see stocks churn sideways until the start of Q2 earnings season, which starts on July 8th but doesn't really pick up speed until the 15th. Volume this week will be light with the July 4th holiday on Thursday. Many market participants will be out of town. Disappointing economic data out of China could spark more weakness on Monday. Friday's session could be very volatile as those traders still watching the market react to June's nonfarm payrolls (jobs) report. That's it! Now on to last week's details.


Economic data was very mixed. The Q1 GDP number was revised lower to +1.8% growth. That's down from the previously reported +2.4% growth. What is troublesome is the slowing consumer spending numbers, which fell from +3.4% to 2.6%. Consumer spending accounts for about 70% of the U.S. economy and this decline doesn't portend good things for the economy. Oddly enough there is a disconnect between spending and confidence. The Conference Board's Consumer Confidence index rose from 74.3 in May to 81.4 in June, which is a 5 1/2 year high. The University of Michigan's Consumer Sentiment Survey advanced from its earlier reading of 82.7 to 84.1. That's just below the six-year high set in May at 84.5. Another sentiment gauge, the Bloomberg confidence survey also rose to its highs levels in over five years.

The Chicago PMI plunged from 58.7 in May to 51.6 in June. That was the biggest one-month drop in four years and below expectations for a pullback to 55. Numbers below 50.0 indicate contraction so this index is almost in contraction territory. The Kansas City Fed regional manufacturing survey fell from +2 to -5. Economists were expecting a bump to +3. Negative numbers here suggest an economic contraction. The new orders component fell from +6 to -10 and the production component plunged from +5 to -17. Bucking the trend was the Richmond Fed survey which rallied from -2 in May to +8 in June. While we're talking about manufacturing the durable goods orders improved +3.6% in May.

On the housing front pending home sales for May surged +6.7%, which was way above expectations. One reason consumers might feel more confident is the rise in home prices. The Case-Shiller 20-city home price index advanced +12.0% year over year. That's a huge move. Odds are this trend is going to slow thanks to surging interest rates. The recent spike in rates has seen mortgage applications crash.

China remains a market mover. Last Monday (June 24th) the Chinese market plunged -5.3% as investors worried over liquidity and a potential credit crunch in the banking system. The weakness last Monday helped fuel the spike lower in U.S. markets that same day. The market has been right to worry over China's slowing economy. The trend continues with Chinese exports falling to +1% in May, which was a 12-month low. This week will see more data out of China with the country's manufacturing PMI data out on Monday. Expectations are for a drop into contraction territory below the 50.0 mark.

China has taken the spotlight off Europe but problems persist for the EU. ECB President Draghi tried to soothe investors fears by repeating his claim that the ECB is poised to act if the system needs it. Yet investors ignored him with European stocks falling to new seven-month lows. If you're living in the EU beware what bank you keep your money. This past week Eurozone officials basically agreed that future bank bailouts will include a "bail-in" component just like the "bail-in" that robbed depositors in Cyprus.

Major Indices:

Last week I warned readers that, "Technically the stock market looks short-term oversold. I am expecting a short-term bounce. Odds are good the S&P 500 may find resistance near its 50-dma and the 1620 area." The index did not disappoint with a clean-cut failure at the 1620 level on Thursday. Another troubling development is that this failure at 1620 also coincides with a 61.8% Fibonacci retracement of the recent sell-off (see chart below). I strongly suspect that we will see the S&P 500 retest its June 24th lows near 1560 and if that level fails the next area of support should be the 1540 level. On the other hand if the market rallies then the mid-June highs near 1650 are likely resistance.

chart of the S&P 500 index:

Intraday chart of the S&P 500 index:

Weekly chart of the S&P 500 index:

The NASDAQ composite bounced toward the bottom of its gap down and stalled. I suspect we will see it retest the trend line of support and its 100-dma.

chart of the NASDAQ Composite index:

The small cap Russell 2000 index outperformed its large-cap peers with a +1.37% bounce for the week. You could still argue the $RUT is forming a bull-flag consolidation pattern but I would be cautious. if the $RUT reverses here it will likely see a retest of the 945 area or hit that trend of lower lows (see chart).

chart of the Russell 2000 index



Economic Data & Event Calendar

It's a holiday shortened week but it will be a busy one for economic data. The ISM and ISM services data will be released. The U.S. markets will be closed on July 4th for the Independence Day holiday. Many traders will make it a four-day weekend and not trade on Friday. That means volume will be weak for the nonfarm payrolls (jobs) report due out Friday morning. Low volume plus the jobs data could spell lots of volatility. Economists are expecting +165,000 new jobs in June. May's number was +175K. Remember, we could see a case of bad news is good news since a low jobs number will keep the Fed on the sidelines and keep QE3 going longer.

Since we're talking about the calendar it's worth noting that the first week or two of July tend to have a slightly bullish bias. It's the beginning of a new quarter and the start to the second half of the year. Money managers will have new money to put to work. Fund managers will still be adjusting for the Russell indices rebalancing that just occurred on Friday.

Economic and Event Calendar

- Monday, July 01 -
ISM index
Eurozone PMI data

- Tuesday, July 02 -
Factory orders
auto & truck sales

- Wednesday, July 03 -
Weekly Initial Jobless Claims
ISM services
ADP Employment Change report
Eurozone services PMI data

- Thursday, July 04 -
U.S. markets closed for holiday
European Central Bank (ECB) interest rate decision
ECB press conference

- Friday, July 05 -
Nonfarm payrolls (jobs) report

Additional Events to be aware of:

July 17th - Fed Chairman Bernanke before congress
September - U.S. debt ceiling deadline

The Week Ahead:

Personally my short-term bias is down for the market. The failed rally in the S&P 500 at resistance is pretty clear cut. Of course that could be the problem. It's so clear cut that everyone can see it and the market likes to make fools of people. There are probably a lot of investors shorting the market at these levels and any strength above 1620 on the S&P 500 could spark some short covering. Combine that with a light-volume week due to the July 4th holiday and any short covering could be exacerbated.

I would bet on a retest of the June 24th (Monday) lows. However, the U.S. markets may be stuck churning sideways as investors wait for the Q2 earnings season to start. Corporate results and guidance could be the next catalyst to propel the market up or down. Will the second half of 2013 be better? Corporate guidance is going to help shape that expectation. Dow-component Alcoa (AA) officially kicks off earnings season on Monday, July 8th but the season won't really start until the following week (July 15th). At the same time Federal Reserve Chairman Ben Bernanke will be testifying before congress on July 17th during what used to be called the Humphrey-Hawkins testimony, his biannual update before congressional leaders.

I am still bullish between now and yearend but July, August and September tend to be weak months for the stock market. Odds are good the correction is not over yet. We will have a much better outlook on the second half after Q2 earnings season is over. There is no reason to rush into trades. Let the market come to you.

James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The stock market rebounded with a three-day rally but the S&P 500 index has stalled at resistance.

BEAV and LOW were stopped out on the last Monday's market volatility.

JPM has graduated from our watch list to an active trade.

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

Looking Ahead to Q2 Earnings Results

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(June 30, 2013)

I am not adding any new trades tonight. After a three-day bounce that was likely fueled by window dressing the rally has stalled at resistance. I suspect the correction will resume but that may depend on Q2 earnings results. Odds are stocks will be lower a month from now. As LEAPS traders we need to be patient for our active trades and our entry points.

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:

ETFC, AMTD, BBRY, ORLY, GRPN, DNKN, NOC, GD, ATK, M, TJX, CY, NKE, UA, CSCO, JDSU, CNQR, SJM, HSY, EA, EXPE, AXP, ANN, STX, CR, HPQ, DLTR, MRVL, MAT, UNH, WLP, CI,



Play Updates

Stocks Rebound From Monday's Lows

by James Brown

Click here to email James Brown

Editor's Note:

JPM has moved from our watch list to active trade.


Closed Plays


BEAV and LOW were stopped out on the market's spike lower on June 24th.



Play Updates


Bank of America - BAC - close: 12.86

Comments:
06/30/13: The financial sector, including BAC, saw a sharp drop two weeks ago. Investors bought the dip on Monday, June 24th. BAC followed the market higher with a three-day bounce but it's worth noting that the rebound has stalled right at resistance near $13.00 (essentially prior support). I suspect that we are about to see BAC retreat lower again and retest the $12.50-12.00 zone (or lower). Look for support near the 200-dma.

FYI: BAC is due to report earnings on July 17th.

- Suggested Positions -
MAR 18, 2013 - entry price on BAC @ 12.29, option @ 0.44
symbol: BAC1418a15 2014 JAN $15 call - current bid/ask $0.39/0.40

- or -

MAR 18, 2013 - entry price on BAC @ 12.29, option @ 1.13
symbol: BAC1517a15 2015 JAN $15 call - current bid/ask $1.20/1.21

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


Citigroup, Inc. - C - close: 47.97

Comments:
06/30/13: The trading action in Citigroup looks a lot like the rest of the financial sector. Investors bought the dip on Monday, June 24th. Yet the rebound has stalled at resistance near prior support. That doesn't bode well and may suggest the correction is not over yet.

Currently we have a stop loss at $41.60 that's just below the simple 200-dma (near $42.00). That might be too wide for some investors and you may want to adjust your stop higher. A pullback to $42 would be a -20% correction from its late May highs near $53.00. I'm not saying that is where Citigroup is headed and hopefully shares find support near $45.00 again.

FYI: earnings are expected on July 15th.

- Suggested Positions -
JUN 21, 2013 - entry price on C @ 46.00, option @ 2.45
symbol: C1418a50 2014 JAN $50 call - current bid/ask $ 3.20/3.30

- or -

JUN 21, 2013 - entry price on C @ 46.00, option @ 3.65
symbol: C1517a55 2015 JAN $55 call - current bid/ask $ 4.25/4.35

06/23/13 adjust stop loss to $41.60
06/21/13 triggered on a dip at $46.00

Current Target:$ 59.00
Current Stop loss: 41.60
Play Entered on: 06/21/13
Originally listed on the Watch List: 05/25/13


Ford Motor Co. - F - close: 15.47

Comments:
06/30/13: Ford had a pretty good week. Shares did pierce technical support at the 50-dma on Monday, June 24th but traders bought the dip. Shares rebounded from $14.30 to $15.70 by Thursday. That's almost a +10% bounce. I would not be surprised to see a dip back toward $15.00 again.

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 $ 2.21/2.27

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: 79.34

Comments:
06/30/13: This past week saw HON rebound from the bottom of its trading range near $76.00 to the top of its trading range near $81.00. The longer-term trend is still up but shares are currently stuck churning sideways. On a short-term basis I would expect another dip back toward $76.00 again. I am not suggesting new positions.

FYI: earnings are due on July 19th.

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 $ 5.80/6.00

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: 24.23

Comments:
06/30/13: Shares of INTC tagged a new relative low on Monday, June 24th but the stock rebounded from its 300-dma. For the week INTC is virtually unchanged. Even though Friday's session was a nice show of relative strength (+0.74%) I actually expect INTC to retreat lower toward the $23.00 area.

FYI: INTC earnings are expected on July 17th.

Earlier Comments:
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 $ 1.20/1.22

- or -

APR 24, 2013 - entry price on INTC @ 23.28, option @ 1.74
symbol:INTC1517a25 2015 JAN $25 call - current bid/ask $ 2.12/2.18

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


JPMorgan Chase & Co. - JPM - close: 52.79

Comments:
06/30/13: JPM is a watch list candidate that has graduated to our active trade list. The plan was to buy calls on a dip near support at $50.00 with an entry trigger at $50.25. The market's spike lower on Monday, June 24th provided that entry point. JPM traded down to $50.11 on Monday before bouncing from support, triggering our play.

JPM has produced a nice bounce but shares still have a four-week trend line of lower highs. That might suggest the correction is not over yet. Thus if you missed our entry near $50.00 you may get another chance.

- Suggested Positions -
JUN 24, 2013 - entry price on JPM @ 50.25, option @ 1.60
symbol: JPM1418a55 2014 JAN $55 call - current bid/ask $ 2.26/2.30

- or -

JUN 24, 2013 - entry price on JPM @ 50.25, option @ 3.80
symbol: JPM1517a55 2015 JAN $55 call - current bid/ask $ 4.55/4.65

Chart of JPM:
Current Target: $64.00
Current Stop loss: 47.40
Play Entered on: 06/24/13
Originally listed on the Watch List: 05/25/13


NetApp, Inc. - NTAP - close: 37.78

Comments:
06/30/13: Last week NTAP delivered a relatively quiet performance. Shares churned sideways with a bounce off its 40-dma. It's worth noting the rebound stalled at its 10-dma. On a short-term basis I do expect NTAP to correct lower. Look for a drop toward the $36.00 level.

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 $2.31/2.39

- or -

MAY 17, 2013 - entry price on NTAP @ 38.93, option @ 5.20
symbol: NTAP1517a40 2015 JAN $40 call - current bid/ask $4.20/4.35

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


CLOSED Plays


B/E Aerospace Inc. - BEAV - close: 63.08

Comments:
06/30/13: Shares of BEAV have been bouncing off technical support at its rising 50-dma for months. Yet Friday, June 21st saw the stock breakdown below this moving average. Monday, June 24th produced a follow-through decline and BEAV hit our stop loss at $61.70. Actually shares gapped down at $61.60. BEAV has bounced since then, finding support near the $60.50 level. Yet the rebound seems to have stalled at the 61.8% Fibonacci retracement level of the mid-June reversal/pullback. That may suggest the correction is not over yet.

- Suggested Positions -
JUN 19, 2013 - entry price on BEAV @ 66.09, option @ 3.50
symbol:BEAV1418a70 2014 JAN $70 call - exit $1.50 (-57.1%)

06/24/13 stopped out on gap down at $61.60
06/19/13 trade opens. BEAV opens at $66.09
06/18/13 BEAV meets our entry requirement (close above $65.75) with a close at $66.11

Chart of BEAV:

Current Target:$ 74.00
Current Stop loss: 61.70
Play Entered on: 06/19/13
Originally listed on the Watch List: 06/08/13


Lowe's Companies - LOW - close: 40.90

Comments:
06/30/13: The stock market's volatility two weeks ago and Monday, June 24th has thrown a wrench in our LOW trade. Shares broke down to a new relative low and fell below technical support at the 100-dma. Our stop loss was hit at $39.00 on the 24th. Unfortunately LOW poured salt on the wound by almost immediately bouncing.

- Suggested Positions -
MAY 07, 2013 - entry price on LOW @ 40.87, option @ 1.57
symbol: LOW1418a45 2014 JAN $45 call - exit $0.91 (-42.0%)

- or -

MAY 07, 2013 - entry price on LOW @ 40.87, option @ 3.52
symbol: LOW1517a45 2015 JAN $45 call - exit $2.90* (-17.6%)

06/24/13 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
06/23/13 If there is any follow through lower we'll see LOW hit our stop
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

Chart of LOW:

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



Watch

Stocks to Watch

by James Brown

Click here to email James Brown


New Watch List Entries


None, no new watch list candidates



Active Watch List Candidates

AIG - Amer. Intl. Group

BZH - Beazer Homes

DIS - Walt Disney

GM - General Motors

JNJ - Johnson & Johnson

K - Kellogg Co.

SBUX - Starbucks Corp.

UNP - Union Pacific

V - Visa

WDC - Western Digital Corp


Dropped Watch List Entries

JPM graduated to our active trade list.
I am removing HOV this evening.



New Watch List Candidates:


Editor's Note:

I looked at over 1,500 stocks this weekend. While I found a few that looked like they might have potential there was nothing that screamed "add me to the watch list now". That's probably because I have a bearish bias for the market and my bias could be getting in the way (see tonight's market commentary for details).

I am not adding any new watch list candidates or new trades tonight. I strongly suspect stocks could be lower a month from now.

I will point out that these four stocks seem to be bucking the trend: AMZN, MNST, NBL, and PRU. You may want to keep an eye on them.

AMZN A close over the January 2013 highs near $285.00 could be used as a bullish entry point. I would target the $325-350 zone.

MNST This can be a volatile stock. A close over $63.00 could be a bullish entry point if you're willing to endure the volatility. I would target the $75.00 region.

NBL This energy-sector stock has definitely been outperforming the energy sector. A close above $61.65 could be used as a bullish entry point. My long-term target would be the $70 area.

PRU This stock is in the financial sector and shares are trading at multi-year highs. A close above $73.50 could be a bullish entry point. I would target the $90 level.


Active Watch List Candidates:



American Intl. Group - AIG - close: 44.70

Comments:
06/30/13: AIG has filled the gap from early May and rebounded. The stock closed just below a few moving averages on Friday. Investors may want to consider buying calls if AIG can close above $46.50. The LEAPStrader newsletter is suggesting investors wait for a dip toward $40.00.

The plan is to buy calls on a dip at $40.00. Our long-term target is the $50 region.

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


Beazer Homes - BZH - close: 17.52

Comments:
06/30/13: It was a quiet week for BZH. The stock posted another loss and underperformed the homebuilder ETF, which rebounded. Right now our plan is to buy calls if BZH can close above $20.50 but we may consider buying calls if BZH can dip to what should be support near $14.00. Rising mortgage rates may continue to put pressure on homebuilders as investors worry about the impact on home sales.

Earlier Comments:
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)

- or -

BUY the 2015 Jan $25 call (BZH1517a25)

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


Walt Disney - DIS - close: 63.15

Comments:
06/30/13: DIS bounced from support near $62.00 but the rally failed at resistance near its 50-dma and its trend line of lower highs. Short-term traders may want to consider buying puts with a stop above Friday's high (target $60 or $58). Currently our plan to buy calls on a correction has not changed.

Earlier Comments:
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


General Motors - GM - close: 33.31

Comments:
06/30/13: Shares of GM produced a pretty strong four-day bounce but I'm not convinced the correction is over. We are expecting a decline toward round-number support at $30.00.

Please note that I am adjusting our buy-the-dip trigger to $30.50.

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: $30.50, stop @ 27.75

BUY the 2014 Jan $35 call (GM1418a35)

BUY the 2015 Jan $35 call (GM1517a35)

06/30/13 adjust buy-the-dip entry trigger to $30.50, from $30.00.

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


Hovnanian Enterprises - HOV - close: 5.61

Comments:
06/30/13: HOV closed virtually unchanged for the week. The oversold bounce already appears to be failing. I am removing HOV as a watch list candidate. The stock is unlikely to meet our entry point requirements any time soon. The plan was to buy calls (or the stock) when shares hit $6.61.

Trade did not open.

06/30/13 removed from the watch list

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


Johnson & Johnson - JNJ - close: 85.86

Comments:
06/30/13: Hmm... JNJ produced a pretty big bounce last week. Yet the rally appears to have failed near $88.00. If you look at the month of June shares of JNJ appear to be building a broadening top formation. I am not changing our strategy. We will wait for a deeper correction. See my earlier comments.

FYI: JNJ is due to report earnings on July 16th.

Earlier Comments:
I am suggesting buy calls on a dip at $77.50. If triggered we'll start with a stop loss at $74.45. Our long-term target is the $85-90 zone.

Buy-the-Dip trigger: $77.50

BUY the 2014 Jan $80 call (JNJ1418a80)

- or -

BUY the 2015 Jan $85 call (JNJ1517a85)

Originally listed on the Watch List: 06/23/13


Kellogg Co. - K - close: 64.23

Comments:
06/30/13: Kellogg delivered a meager bounce last week and was unable to breakthrough the trend of lower highs. There is no change from my earlier comments.

Earlier Comments:
This 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)

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


Starbucks Corp. - SBUX - close: 65.51

Comments:
06/30/13: It looks like SBUX may have just formed a new lower high. Yet it's worth noting that SBUX remains inside a bullish channel. It will take a close below the simple 40-dma (or maybe the 50-dma) to really break the up trend. With the stock market looking weak we don't want to chase SBUX near its highs. We are waiting for a correction back toward support.

Earlier Comments:
I am suggesting a buy-the-dip trigger at $60.25. If triggered we'll start with a stop loss at $55.65.

Buy-the-Dip trigger: $60.25

BUY the 2014 Jan $65 call (SBUX1418a65)

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BUY the 2015 Jan $70 call (SBUX1517a70)

Originally listed on the Watch List: 06/23/13


Union Pacific Corp. - UNP - close: 154.28

Comments:
06/30/13: Hmm... thus far shares of UNP continue to trade within its bull-flag consolidation pattern. You can see how the trend of lower highs and lower lows line up. More aggressive investors may want to consider buying calls if UNP can close above $158.

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.

FYI: UNP is scheduled to report earnings on July 18th.

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

BUY the 2014 Jan $180 call (UNP1418a180)

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BUY the 2015 Jan $200 call (UNP1517a200)

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


Visa Inc. - V - close: 182.75

Comments:
06/30/13: I am tempted to change our strategy. Visa delivered a nice bounce off its 50-dma and is challenging its all-time highs. However, the broader market looks weak. The next two months are not normally a bullish period for stocks. More aggressive investors may want to buy calls anyway if Visa can close above $186.00. For now we will stay with the buy-the-dip entry strategy.

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)

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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: 62.09

Comments:
06/30/13: WDC produced a $5.00 bounce from its Monday, June 24th lows to its Thursday highs. Yet the rebound has stalled at new technical resistance at the simple 20-dma. I am not convinced the correction is over.

Earlier Comments:
I am suggesting we wait and buy a dip at $55.00. The Point & Figure chart is currently forecasting a long-term target of $82.00. We'll start with a stop loss at $52.25.
If triggered our target to exit the 2014 calls is $65.
If triggered our target to exit the 2015 calls is $75 on WDC.

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

BUY the 2014 Jan $65 call (WDC1418a65)

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BUY the 2015 Jan $70 call (WDC1517a70)

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