Option Investor
Newsletter

Daily Newsletter, Monday, 11/11/2013

Table of Contents

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

Leaps Trader Commentary

Better Than Expected Data

by James Brown

Click here to email James Brown

The stock market's upward momentum stalled last week in spite of a parade of better than expected economic data. The jobs report was significantly better than expected and the U.S. Q3 GDP estimate blew past estimates. Stocks plunged on Thursday on fears that stronger economic data might lead the Federal Reserve to taper their QE program sooner than expected. Yet there was no follow through on the sell off and the market rebounded quickly.

Economic Data

The October reading for the ISM services index (non manufacturing) improved from 54.4 to 55.5. Numbers above 50.0 indicate growth. One of the few negative economic data points last week was the sentiment number. The University of Michigan Consumer Sentiment survey fell from 73.2 in October to 72.0 in November. Analysts had been expecting a rise toward 75.0. October's reading is a two-year low.

The first look at U.S. Q3 GDP growth was a shocker on Thursday. Economists were expecting +2.0% growth. Yet the government said the country's GDP surged to a +2.8% pace. Unfortunately the rise in business activity was not due to stronger consumer spending or business investment. Instead the move appeared to be a reflection of rising inventories. That's not a good sign. Rising inventories might suggest a struggling consumer. Speaking of consumers, consumer spending rose at its slowest pace in three years.

The non-farm payrolls (jobs) report for October was another big surprise. Wall Street was only expecting +120,000 new jobs. The BLS reported +204,000 with 212,000 of that in new private sector jobs (the government lost jobs). The September jobs number was revised higher from +148K to +163K and the August number was revised to +238K, a +45K jump. Unfortunately the unemployment rate ticked higher from 7.2% in September to 7.3% in October. The labor force participation rate dropped from 63.2% to 62.8%, a new 35-year low.

Overseas Data

Most of the data overseas was positive. China's official non-manufacturing PMI data rose from 55.4 to 56.3, a new 14-month high. The HSBC China services PMI inched up from 52.4 to 52.6. Numbers above 50.0 indicate growth. There were a number of data points out of Europe. Germany's manufacturing PMI rose from 51.0 to 51.7. That helped fuel a Eurozone manufacturing PMI number of 51.3. Germany also said their factor orders in September surged +3.3%, well above expectations. Eurozone services PMI advanced from 50.9 to 51.6, which was better than expected.

There was some concern over retail sales, which fell -0.6% month over month for the Eurozone area. The Eurozone Producer Price Index (PPI) rose +0.1%, which was below expectations and helped fuel fears of deflation. It was deflation concerns that sparked the European Central Bank (ECB) to cut its main interest rate from 0.5% to a new record low of 0.25%. In other news Standard & Poor's downgrade France's credit rating from "AA+" to "AA".

Major Indices:

The S&P 500 index delivered a +1.34% bounce on Friday. That lifted its gain for the week to +0.5%. This large-cap index is now up five weeks in a row. It's currently up +24.2% year to date, which marks the index's fifth best performance from January through October in the history of the index.

Thursday's session looked like an ugly bearish reversal lower but there was no follow through. The 1775 level remains overhead resistance. If the S&P 500 can breakout past this level then the 1800 mark becomes the next likely target and resistance level. If stocks reverse lower again I would look for support near 1730 and 1700.

chart of the S&P 500 index:

The NASDAQ composite index produced an even uglier drop on Thursday with a breakdown below the 3900 level. Friday saw a big bounce and a move back above 3900 but Friday's session was an "inside day". That means Thursday's potential bearish reversal has not been canceled yet.

The 3960 area remains overhead resistance and if the NASDAQ can breakout then I would expect the 4,000 mark to act as both a magnet and a resistance level for the index. If the NASDAQ rolls over then look for support near 3800 and its simple 50-dma. Year to date the NASDAQ is up +29.8%. If we could end the year right here it would be a very successful year.

chart of the NASDAQ Composite index:

The small cap Russell 2000 index managed to eke out +0.39% gain for the week thanks to a big +1.9% bounce on Friday. On a short-term basis the $RUT seems to be forming a bearish trend of lower highs and lower lows over the last couple of weeks. Yet this is taking place within the $RUT's larger and longer-term bullish channel.

The index bounced right were it was support to near support in the 1080 area and its 50-dma. If this bounce fails then we can expect a drop toward the bottom of the bullish channel, currently near 1060. Year to date the $RUT is up +29.5%.

chart of the Russell 2000 index

Weekly chart of the Russell 2000 index



Economic Data & Event Calendar

The pace of economic data slows down considerably this week. I don't see anything that will be a real market mover. Q3 earnings are all but over but there will be a few stragglers.

Economic and Event Calendar

- Monday, November 11 -
(nothing significant)

- Tuesday, November 12 -
(nothing significant)

- Wednesday, November 13 -
weekly MBA mortgage application index
import/export prices
Japan's GDP estimate

- Thursday, November 14 -
Weekly Initial Jobless Claims
Eurozone GDP estimate

- Friday, November 15 -
New York Empire State Fed survey
U.S. industrial production data
wholesale inventory data

Additional Events to be aware of:

Nov. 20th - FOMC minutes from the last meeting.
Nov. 28th - U.S. markets are closed for Thanksgiving holiday
Nov. 29th - U.S. markets close early.




The Week Ahead:

It's hard to say what the week ahead will bring. All of the major U.S. indices produced big bounces on Friday. Yet some of these bounces were "inside days" where Friday's trading took place inside of Thursday's range. That does not negate Thursday's potential sell signal. It is noteworthy that the Dow Industrials managed to rally and close at a new all-time high on Friday. I do believe the path of least resistance is up for the market but that doesn't mean we can't see a two or three week correction before resuming the up trend.

Looking farther ahead there are some concerns about 2014. An analyst at Nomura Securities was making headlines on Friday with their research report sharing their opinion that stocks could see a -25% to -50% correction in the second half of 2014 (and into 2015). Another concern is the record high margin debt that investors have racked up. If stocks actually see a real correction lower it could be very fast and sharp since investors with borrowed money are going to be quick to try and sell and limit losses. Yet another worry is investor sentiment. The latest AAII investor survey is overwhelmingly bullish. Plus, equity allocations from the retail investor have hit 6-year highs. Money flowing into ETFs and stock funds has hit their highest levels since the tech bubble of the year 2000. These are contrarian indicators that the market is getting frothy and could be near a top.

Odds are really good that the U.S. markets are going to close 2013 in positive territory. If that happens the market will have notched a five-year winning streak, which is very rare. According to Yale University's Professor Shiller there has only been one time that the market rallied six years in a row. That was over 100 years ago. Historically the odds of the market being up in 2014 are not good.

I would not get too concerned just yet. Just because stocks are acting a little top heavy doesn't mean the market can't extend their gains. Looking at the past suggests that 2013's rally isn't over yet. Currently the S&P 500 is up +24% for the year. History says that when the index is up more than +10% in the first ten months of the year (through October) then the last two months of the year will see a rise of +4.5% over the last two months of the year. Granted those are averages and there are exceptions to this rule but it does put things in the bull's favor.

The wild card for the market is probably the Fed's QE taper issue. Previously investors were growing pretty comfortable with the idea that any reduction in the Fed's QE program might not happen until Q2 of 2014. Yet now with a rush of improving economic data the odds of the taper happening sooner than that just increased. How the market chooses to interpret this issue will impact market direction. More importantly if the Fed is going to taper because the economy is improving then investors could choose to focus on the improving economy as a new catalyst to buy stocks instead of the taper as a catalyst to sell stocks.

James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Once again the bulls save the day with a Friday rally. The bounce is impressive but will stocks see any follow through higher?

WFM was stopped out.

NOV is offering investors a new entry point.

I have updated stop losses on: FLR, HAL, and HON.

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

Close Enough!

by James Brown

Click here to email James Brown


- New Trades -


Avago Technologies - AVGO - close: 44.72

Comments:
11/10/13: AVGO has been on our watch list since late September. The company is in the technology sector. AVGO makes semiconductor devices, including parts for some very poplar smartphones. Once the stock broke through resistance near $40.00 back in September the stock set a string of new record highs. We've been waiting for a correction to buy on weakness. The plan was to buy calls if AVGO could dip to $43.00. Well shares hit $43.10 on Friday morning before bouncing. That's close enough for us.

I am suggesting we take advantage of AVGO's three-week correction lower. We want to buy calls at the opening bell on Monday, November 11th. We will start with a stop loss at $39.40. More conservative traders may want to use a stop closer to the $41.50-42.00 area instead. Our long-term target is $55.00.

Please note that AVGO is due to report earnings in late November. There is no confirmed date yet. Investors may want to keep their position size small to limit risk since AVGO could see increased volatility surrounding their earnings report.

BUY the 2015 Jan $50 call (AVGO1517a50) current ask $3.70

11/10/13 promoted from watch list to new play.
11/03/13 adjust trigger to $43.00
10/27/13 removed the 2014 call
10/20/13 adjust the buy-the-dip trigger to $43.50
adjust the stop loss to $39.40 & adjust the option strikes
adjust the 2014 exit target to $49.50
adjust the 2015 exit target to $54.00
10/13/13 adjust the buy-the-dip trigger from $40.00 to $40.50

Chart of AVGO:

Weekly chart:

Originally listed on the Watch List: 09/22/13



Play Updates

It Could Have Been Worse

by James Brown

Click here to email James Brown

Editor's Note:

Thursday's sell off looked pretty ugly but there was no follow through lower on Friday.


Closed Plays


WFM was stopped out.



Play Updates


American Intl. Group - AIG - close: 48.54

Comments:
11/10/13: Financials were some of the market's best performers last week. Yet AIG really didn't participate until Friday. The stock added +2.6% on Friday, which was enough to push it to a gain for the week. The mid-week drop below $48 and its 100-dma looked pretty ominous. More conservative investors might want to adjust their stop toward Thursday's low ($47.11).

- Suggested Positions -
JUL 15, 2013 - entry price on AIG @ 46.99, option @ 2.50
symbol: AIG1418a50 2014 JAN $50 call - current bid/ask $1.10/1.13

- or -

JUL 15, 2013 - entry price on AIG @ 46.99, option @ 4.05
symbol: AIG1517a55 2015 JAN $55 call - current bid/ask $2.79/3.00

10/20/13 new stop loss @ 46.40
10/13/13 exit strategy update: exit 2014 calls at $54.50
adjust the exit target for the 2015 calls to $59.00
09/15/13 new stop loss @ 44.65
08/04/13 new stop loss @ 43.75
...please see earlier updates for more history...

Current Target:$ exit 2014 calls @ 54.50, exit 2015 calls @ 59.00
Current Stop loss: 46.40
Play Entered on: 07/15/13
Originally listed on the Watch List: 06/01/13


Bank of America - BAC - close: 14.32

Comments:
11/10/13: We have a similar story with BAC. This banking stock was slipping lower until the banking sector reversed sharply higher on Friday. BAC surged +3.7% on Friday's session, which was enough to lift the stock back above its simple 50-dma. Given BAC's long-term bullish trend of higher lows I would almost be tempted to buy calls again here. More conservative investors might want to adjust their stop loss closer to the $13.25 or $13.50 levels.

- Suggested Positions -
(exit target hit on 07/23/13 @ $15.00)
MAR 18, 2013 - entry price on BAC @ 12.29, option @ 0.44
symbol: BAC1418a15 2014 JAN $15 call - exit $1.04 (+136.3%)

- or -

MAR 18, 2013 - entry price on BAC @ 12.29, option @ 1.13
symbol: BAC1517a15 2015 JAN $15 call - current bid/ask $1.26/1.27

07/23/13 $15.00 exit target hit for the 2014 Jan. $15 calls.
07/20/13 new stop loss @ 12.75. Adjust the exit target for the 2014 calls to exit when BAC hits $15.00. Our exit for the 2015 calls is $18.00 on BAC
07/07/13 new stop loss @ 11.35
05/04/13 BAC did not participate in the market's rally this past week. Investors should turn more defensive here.

Current Target: BAC @ 15.00 for 2014 calls. BAC @ $18 for 2015 call
Current Stop loss: 12.75
Play Entered on: 03/18/13

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


E.I. du Pont - DD - close: 62.00

Comments:
11/10/13: DD flirted with a break below the $60 level early in the week but there was no follow through lower. When the market plunged on Thursday DD actually managed a gain. Shares continued to show relative strength on Friday with a +1.8% gain. Previously I suggested buying a dip near $60 and we got it.

- Suggested Positions -
OCT 25, 2013 - entry price on DD @ 62.57, option @ 0.74
symbol: DD1418a65 2014 JAN $65 call - current bid/ask $0.52/0.53

- or -

OCT 25, 2013 - entry price on DD @ 62.57, option @ 3.15
symbol: DD1517a65 2015 JAN $65 call - current bid/ask $3.10/3.20

10/25/13 trade opens. DD gaps higher a $62.57
10/24/13 DD closed above our trigger @ 60.75
09/22/13 adjust entry: wait for a close above $60.75
instead of a close above $60.50

Current Target: DD @ 69.00
Current Stop loss: 57.90
Play Entered on: 10/25/13
Originally listed on the Watch List: 08/11/13


Dollar General Corp. - DG - close: 57.28

Comments:
11/10/13: Retail-related stocks were crushed on Thursday's market sell-off. The same day DG broke down below technical support at its 50-dma. The stock underperformed the market's bounce on Friday, which doesn't bode well for the bulls. I would expect shares to retest support near the $56.00 area soon.

Earlier Comments:
Our long-term target is $64.00 for the 2014 calls. Our target is $69.00 for the 2015 calls. FYI: The point & figure chart is bullish with a $78.00 target.

- Suggested Positions -
SEP 06, 2013 - entry price on DG @ 57.61, option @ 2.58
symbol: DG1418a60 2014 JAN $60 call - current bid/ask $1.45/1.55

- or -

SEP 06, 2013 - entry price on DG @ 57.61, option @ 3.48
symbol: DG1517a70 2015 JAN $70 call - current bid/ask $2.30/2.50

09/22/13 new stop loss @ 53.60

Current Target: 64.00 for the 2014s, 69.00 for the 2015s
Current Stop loss: 53.60
Play Entered on: 09/06/13
Originally listed on the Watch List: 08/04/13


The Walt Disney Co. - DIS - close: 68.58

Comments:
11/10/13: DIS had a rough day on Thursday. Not only did the market see a sell off but DIS shares were reacting to the company's latest earnings report. The company beat Wall Street's profit estimates by a penny and also beat the revenue estimate. Traders sold the news and DIS closed below support near $68.00. Yet there was no follow through on Friday and shares produced a pretty good bounce.

Investors might want to wait for DIS to close above the $70.00 level before initiating new positions.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $3.50/3.55

Current Target: DIS @ 84.00
Current Stop loss: 62.90
Play Entered on: 10/23/13
Originally listed on the Watch List: 10/13/13


Eastman Chemical Co. - EMN - close: 79.11

Comments:
11/10/13: EMN spent most of the week churning sideways. The stock was upgraded on Friday morning and that accelerated EMN's bounce. The stock ended Friday with a +2.99% gain for the day. There is still short-term overhead resistance near the $80.00 mark. I am not suggesting new positions at this time.

Earlier Comments:
Our long-term target for the 2015 call is $95.00. FYI: The Point & Figure chart is bullish with a $91 target.

- Suggested Positions -
(2014 call position closed on Oct. 21st)
JUL 18, 2013 - entry price on EMN @ 75.34, option @ 3.60*
symbol: EMN1418a80 2014 JAN $80 call - exit $4.90 (+36.1%)

- or -


JUL 18, 2013 - entry price on EMN @ 75.34, option @ 4.90*
symbol: EMN1517a90 2015 JAN $90 call - current bid/ask $ 4.80/5.00

10/21/13 planned exit for the 2014 calls. $4.90 (+36.1%)
10/20/13 prepare to exit the 2014 calls on Monday. Oct. 21st at the opening bell
08/04/13 new stop loss @ 74.40
07/18/13 Trade opened. EMN opens at $75.34
*option entry price is an estimate since the option did not trade at the time our play was opened.
07/17/13 EMN meets our entry requirement with a close above $75.25

Current Target: 2014 calls: target $84 on EMN. 2015 calls: target $95
Current Stop loss: 74.40
Play Entered on: 07/18/13
Originally listed on the Watch List: 07/14/13


Ford Motor Co. - F - close: 16.85

Comments:
11/10/13: The S&P 500 managed to post a gain for the week. Unfortunately the same cannot be said for Ford although losses were pretty mild. Thursday's session was ugly with a break below its 100-dma. Friday's bounce (+1.8%) is an inside day, which doesn't qualify as a reversal. At the moment F's long-term trend is up but the three-week trend is still down. More conservative investors may want to raise their stop loss. 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 $ 2.84/2.87

10/20/13 new stop loss @ 15.65
09/15/13 adjust exit target on 2015 calls to $19.50 (on Ford stock)
09/08/13 new stop loss @ 15.35
08/04/13 new stop loss @ 14.85
07/07/13 new stop loss @ 14.25
...please see earlier updates for more history...

Current Target:$ 19.50
Current Stop loss: 15.65
Play Entered on: 04/29/13
Originally listed on the Watch List: 04/20/13


Fluor Corp. - FLR - close: 77.92

Comments:
11/10/13: It was a good week for shares of FLR. Traders bought the bounce from Friday the first. Shares were showing relative strength on Friday the 8th. The stock is on the verge of a breakout past resistance near $78.00. Our exit target for the 2014 calls is $79.00. More aggressive traders may want to aim higher.

Please note the new stop loss at $71.40.

Earlier Comments:
We want to exit our 2014 calls when FLR trades at $79.00. We will plan to exit our 2015 calls when FLR trades at $88.00.

- Suggested Positions -
SEP 12, 2013 - entry price on FLR @ 67.14, option @ 2.90
symbol: FLR1418a70 2014 JAN $70 call - current bid/ask: 8.50/8.70

- or -

SEP 12, 2013 - entry price on FLR @ 67.14, option @ 5.70*
symbol: FLR1517a75 2015 JAN $75 call - current bid/ask: 10.50/10.60

11/10/13 new stop loss @ 71.40
10/31/13 FLR reported earnings and management lowered guidance
10/20/13 new stop loss @ 68.80
adjust exit targets: Target for 2014 call is $79.00
target for 2015 call is $88.00
09/22/13 new stop loss @ 64.75
09/22/13 adjust exit target from $74.75 to $79.50
09/20/13 high for the day was $74.72
*option entry price is an estimate since the option did not trade at the time our play was opened.

Current Target:$ Target for 2014 call is $79.00, Target for 2015 is $88.00
Current Stop loss: 71.40
Play Entered on: 09/12/13
Originally listed on the Watch List: 08/11/13


Halliburton Company - HAL - close: 55.32

Comments:
11/10/13: HAL was also a strong performer last week. Shares continued to rally and surged to new two-year highs. Midweek HAL announced that they were raising their quarterly cash dividend by 20% to 15 cents a share.

Please note our new stop loss at $49.40.

- Suggested Positions -
AUG 21, 2013 - entry price on HAL @ 47.22, option @ 1.82
symbol: HAL1418a50 2014 JAN $50 call - exit @ $4.00 (+119.7%)

- or -

AUG 21, 2013 - entry price on HAL @ 47.22, option @ 4.80
symbol: HAL1517a50 2015 JAN $50 call - current bid/ask $ 8.85/9.00

11/10/13 new stop loss @ 49.40
11/03/13 new stop loss @ 47.25
10/20/13 new stop loss @ 45.75
10/18/13 target hit to exit our 2014 calls at $52.50
2014 Jan. $50 call exit @ $4.00 (+119.7%)
09/08/13 new stop loss @ 44.75

Current Target: $52.50 for the 2014 call, $56.00 for the 2015 call
Current Stop loss: 49.40
Play Entered on: 08/21/13
Originally listed on the Watch List: 08/18/13


Harley-Davidson - HOG - close: 64.26

Comments:
11/10/13: Hmm... it looks like HOG's upward momentum has stalled. Shares actually delivered a relatively quiet week. Shares are flirting with a breakdown below their simple 50-dma. I would not be surprised to see a correction toward what should be support near $60.00. I am not suggesting new positions at this time.

If you're holding the 2014 calls you may want to take some money off the table.

- Suggested Positions -
SEP 04, 2013 - entry price on HOG @ 61.01, option @ 2.36
symbol: HOG1418a65 2014 JAN $65 call - current bid/ask $ 1.94/1.99

- or -

SEP 04, 2013 - entry price on HOG @ 61.01, option @ 4.35*
symbol: HOG1517a70 2015 JAN $70 call - current bid/ask $ 4.55/4.70

10/20/13 do not be surprised to see some profit taking after HOG reports earnings on Oct. 22nd.
09/22/13 new stop loss @ 59.00
*note the entry price on our 2015 call is an estimate since the option did not trade at the time our play opened.

Current Target: 69.00
Current Stop loss: 59.00
Play Entered on: 09/04/13
Originally listed on the Watch List: 08/25/13


Honeywell Intl. - HON - close: 87.44

Comments:
11/10/13: HON managed to eke out a gain for the week thanks to a big bounce on Friday (+2.3%). Shares are still facing short-term resistance near $88.00. Please note our new stop loss at $81.75.

Earlier Comments:
Our initial plan was to keep our position size small to limit risk.

- 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 $ 8.25/8.40

11/10/13 new stop loss @ 81.75
10/20/13 new stop loss @ 79.40
10/13/13 investors might want to take profits on our 2015 calls, which have doubled in value.
08/25/13 new stop loss @ 78.40
08/04/13 new stop loss @ 77.45
07/14/13 new stop loss at $75.75
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: 81.75
Play Entered on: 05/07/13
Originally listed on the Watch List: 05/04/13



Intel Corp. - INTC - close: 24.09

Comments:
11/10/13: It was a choppy week for shares of INTC. I am not convinced the correction is over. INTC underperformed the broader market with its bounce on Friday. I am not suggesting new positions at this time.

- Suggested Positions -
SEP 16, 2013 - entry price on INTC @ 23.63, option @ 0.93
symbol: INTC1418a24 2014 JAN $24 call - current bid/ask $0.88/0.90

- or -

SEP 16, 2013 - entry price on INTC @ 23.63, option @ 1.75
symbol: INTC1517a25 2015 JAN $25 call - current bid/ask $1.60/1.64

10/27/13 new stop loss @ 22.40

Current Target: $26-29 zone
Current Stop loss: 22.40
Play Entered on: 09/16/13
Originally listed on the Watch List: 09/08/13


JPMorgan Chase & Co. - JPM - close: 53.96

Comments:
11/10/13: JPM spent last week churning sideways above technical support at its simple 200-dma. That changed on Friday when the banking stocks led the market higher. JPM outperformed with a +4.4% gain. I am not suggesting new positions at this time.

- Suggested Positions -
JUN 24, 2013 - entry price on JPM @ 50.25, option @ 1.60
symbol: JPM1418a55 2014 JAN $55 call - current bid/ask $ 1.21/1.22

- or -

JUN 24, 2013 - entry price on JPM @ 50.25, option @ 3.80
symbol: JPM1517a55 2015 JAN $55 call - current bid/ask $ 3.90/4.00

09/01/13 adjust stop loss to $48.99
07/21/13 new stop loss @ 49.65
07/14/13 new stop loss @ 48.75
Current Target: $64.00
Current Stop loss: 48.99
Play Entered on: 06/24/13
Originally listed on the Watch List: 05/25/13


Level 3 Communications - LVLT - close: 30.11

Comments:
11/10/13: LVLT held up relatively well last week. Shares essentially consolidated sideways and digested its previous gains. If you are looking for a new entry point you may want to wait for a pullback into the $28.00-29.00 area.

- Suggested Positions -
OCT 31, 2013 - entry price on LVLT @ 29.39, option @ 4.40*
symbol:LVLT1517a30 2015 JAN $30 call - current bid/ask $ 4.50/4.80

*option entry price is an estimate since the option did not trade at the time our play was opened.
Current Target: $39.00
Current Stop loss: 25.75
Play Entered on: 10/31/13
Originally listed on the Watch List: 10/20/13


National Oilwell Varco - NOV - close: 82.20

Comments:
11/10/13: NOV's performance last week is encouraging. The stock held support near $80.00 (actually there were a couple of intraday dips to $79.80). Shares outperformed the major indices on Friday with a +2.2% gain. If you were looking for a new bullish entry point then I would consider buying calls now!

Earlier Comments:
FYI: NOV is planning a spinoff of its oilfield production equipment business by late 2014. We will likely exit positions prior to the spinoff.

- Suggested Positions -
OCT 17, 2013 - entry price on NOV @ 81.00, option @ 5.00
symbol: NOV1517a90 2015 JAN $90 call - current bid/ask $ 5.05/5.15

Current Target: $89.75
Current Stop loss: 76.75
Play Entered on: 10/17/13
Originally listed on the Watch List: 10/13/13


NVIDIA Corp. - NVDA - close: 15.56

Comments:
11/10/13: NVDA delivered a 30-cent gain for the week all thanks to a huge move (+6.9%) on Friday. Shares were actually sinking and breaking down through support prior to its earnings report. The stock almost hit our stop loss on Thursday. The company reported earnings on Thursday night. NVDA's profit and revenues were in-line with estimates. Management issued cautious, arguably bearish guidance going forward. The stock rallied anyway. The bounce could have been a reaction to management raising their dividend and a stock buyback program. Volume was pretty strong on Friday's rally, which is a good sign. NVDA still has overhead resistance near $16.00. I am not suggesting new positions prior to earnings.

Earlier Comments:
Due to NVDA's recent volatility I am labeling this a more aggressive, higher-risk trade and thus suggest we use smaller positions to limit our risk. Our target to exit the 2014 calls is $18.00. Our target to exit the 2015 calls is $19.75. Currently the point & figure chart is bullish and forecasting at $23 target.

- Suggested *Small* Positions -
SEP 12, 2013 - entry price on NVDA @ 15.63, option @ 0.88
symbol: NVDA1418a16 2014 JAN $16 call - current bid/ask $0.42/0.45

- or -

SEP 12, 2013 - entry price on NVDA @ 15.63, option @ 1.54
symbol: NVDA1517a17 2015 JAN $17 call - current bid/ask $1.21/1.26

09/22/13 new stop loss @ 14.45

Current Target: exit for 2014 calls is $18.00, exit for 2015s is $19.75
Current Stop loss: 14.45
Play Entered on: 09/12/13
Originally listed on the Watch List: 08/18/13


Old Dominion Freight Line - ODFL - close: 47.58

Comments:
11/10/13: It was another quiet week for shares of ODFL. The stock was bouncing off its rising 50-dma on Friday. I am not suggesting new positions.

- Suggested Positions -
AUG 14, 2013 - entry price on ODFL @ 45.62, option @ 1.25
symbol: ODFL1418a50 2014 JAN $50 call - current bid/ask $0.80/1.00

10/27/13 new stop loss @ 44.75
10/20/13 new stop loss @ 43.75
09/15/13 What a difference two weeks can make.
09/01/13 conservative traders may want to cut their losses now
08/14/13 trade opens. ODFL opens at $45.62.
08/13/13 ODFL meets our entry requirement with close at $45.65
08/11/13 adjust the entry trigger. Wait for ODFL to close above $45.50 instead of $45.25.

Current Target: $54.00
Current Stop loss: 44.75
Play Entered on: 08/14/13
Originally listed on the Watch List: 07/28/13


Constellation Brands - STZ - close: 66.76

Comments:
11/10/13: STZ is still flexing its relative strength muscle. Traders continue to buy the dips at STZ's rising 10-dma and the stock closed the week at a new all-time high. More conservative investors may want to raise their stop loss.

- Suggested Positions -
SEP 06, 2013 - entry price on STZ @ 57.56, option @ 2.00
symbol: STZ1418a60 2014 JAN $60 call - exit $5.55 (+177.5%)

- or -

SEP 06, 2013 - entry price on STZ @ 57.56, option @ 4.35*
symbol: STZ1517a65 2015 JAN $65 call - current bid/ask $8.90/9.20

10/27/13 new stop loss @ 59.00
10/17/13 target hit @ 64.00 to exit the 2014 calls
2014 January $60 call exit @ $5.55 (+177.5%)
10/13/13 new stop loss @ 55.90
10/06/13 new stop loss @ 54.90
adjust exit target to 64.00 for the 2014 calls
adjust exit target to 69.00 for the 2015 calls
09/29/13 new stop loss @ 52.90
09/22/13 new stop loss @ 52.45
09/08/13 new stop loss @ 51.75
*option entry price is an estimate since the option did not trade at the time our play was opened.

Current Target: Exit 2014 calls @ 64.00, exit 2015 calls @ 69.00
Current Stop loss: 59.00
Play Entered on: 09/06/13
Originally listed on the Watch List: 08/25/13


VeriSign, Inc. - VRSN - close: 54.15

Comments:
11/10/13: After some volatility on Thursday (down) and Friday (up) VRSN is virtually unchanged for the week. If the market rolls over again we can watch for likely support near $52 and $50. I am not suggesting new positions at current levels.

Earlier Comments:
Our target to exit the 2014 calls is $57.50. Our target to exit the 2015 calls is $64.50. Currently the point & figure chart is bullish with a $76 target.

- Suggested Positions -
SEP 19, 2013 - entry price on VRSN @ 51.40, option @ 1.16
symbol:VRSN1418a55 2014 JAN $55 call - current bid/ask $ 1.46/1.50

- or -

SEP 19, 2013 - entry price on VRSN @ 51.40, option @ 4.25*
symbol:VRSN1517a55 2015 JAN $55 call - current bid/ask $ 5.30/5.50

11/03/13 new stop loss @ 48.40
*option entry price is an estimate since the option did not trade at the time our play was opened.
09/15/13 adjust entry trigger: wait for a close over $50.50 instead of $50.25

Current Target:
Exit 2014 calls when VRSN hits $57.50, 2015 calls @ $64.50
Current Stop loss: 48.40
Play Entered on: 09/19/13
Originally listed on the Watch List: 08/18/13


CLOSED Plays


Whole Foods Market - WFM - close: 58.55

Comments:
11/10/13: WFM was crushed following its earnings report. The company reported earnings on November 6th. They beat profit estimates by a penny but revenues were a miss. Management lowered their 2014 guidance. The company acknowledged that there is growing competition in the organic food space. Shares gapped down from $64.47 on Wednesday night to open at $58.00 on Thursday morning. Since our stop loss was at $59.00 our play was closed immediately.

- Suggested Positions -
(2014 calls closed on Oct. 2nd @ 59.75 target)
JUL 10, 2013 - entry price on WFM @ 54.53, option @ 2.10
symbol: WFM1418a60 2014 JAN $60 call - exit $2.85 (+35.7%)

- or -

JUL 10, 2013 - entry price on WFM @ 54.53, option @ 6.20
symbol: WFM1517a60 2015 JAN $60 call - exit $5.75 (-7.2%)

11/07/13 stopped out on gap down at $58.00. Stop was $59.00
11/06/13 WFM reports earnings and guides lower.
10/27/13 new stop loss @ 59.00
10/20/13 new stop loss @ 57.40
10/13/13 new stop loss @ 55.75,
adjust exit target for 2015 calls to $69.00
10/06/13 new stop loss @ 53.85
10/02/13 correction: WFM hit our $59.75 exit target for the 2014 calls.
exit 2014 Jan. $60 call @ 09/22/13 new stop loss @ 52.40

Chart of WFM:

Current Target: $59.75 for the 2014 calls, $69.00 for the 2015 calls
Current Stop loss: 59.00
Play Entered on: 07/10/13
Originally listed on the Watch List: 07/07/13


Watch

Personal Products & Vacations

by James Brown

Click here to email James Brown


New Watch List Entries

CL - Colgate-Palmolive

WYN - Wyndham Worldwide


Active Watch List Candidates

ATI - Allegheny Tech.

CBI - Chicago Bridge & Iron

DKS - Dick's Sporting Goods

DLTR - Dollar Tree Inc.

FCX - Freeport McMoRan

HP - Helmerich & Payne

NOC - Northrop Grumman

QCOM - QUALCOMM Inc.

SBUX - Starbucks

WAG - Walgreen Co.


Dropped Watch List Entries

AVGO has been moved to our new play section.



New Watch List Candidates:


Colgate-Palmolive - CL - close: 64.83

Company Info

CL is in the consumer goods sector. The stock is seen as a more defensive trade since people continue to buy personal products with little regard for the health of the economy. The company delivered a lackluster earnings report in late October but that didn't stop the stock from surging to new all-time highs.

CL's relative strength is impressive but this past week's decline ended a four-week winning streak. This could be the beginning of a correction and we want to be ready to buy a pullback. I am suggesting we buy calls on a dip at $62.25. If triggered our long-term target is $75.00

Buy-the-Dip trigger: $62.25, stop loss @ 59.40

BUY the 2015 Jan $70 (CL1517a70) current ask $2.22

Chart of CL:

Originally listed on the Watch List: 11/10/13


Wyndham Worldwide - WYN - close: 66.20

Company Info

WYN is in the services sector. They operate in three segments: lodging, vacation exchange and rentals, and vacation ownership. The company's most recent earnings report was bullish. WYN beat analysts expectations on both the top and bottom line. Management then raised their guidance. The stock reacted with a surge past resistance to close at new all-time highs. The same move higher produced a triple-top breakout buy signal on its point & figure chart with an $84 target.

WYN has spent the last two weeks stuck under resistance at $67.50. I am suggesting we wait for shares to close above $68.00 and buy calls the next day. If triggered we will start with a stop loss at $63.75. Our long-term target is $85.00.

Breakout trigger: Wait for a close above $68.00,
then buy calls the next day. Stop loss @ 63.75.

BUY the 2015 Jan $75 call (WYN1517a75) current ask $3.50

Chart of WYN:

Originally listed on the Watch List: 11/10/13


Active Watch List Candidates:



Allegheny Technologies - ATI - close: 33.82

Comments:
11/10/13: ATI has spent the last two weeks consolidating sideways in the $33-34 zone. Shares look poised to breakout higher. We want to be ready if that happens.

I am suggesting we buy calls if ATI can close above $34.50. Wait for it to close above this level and buy calls the next day with a stop loss at $30.40. Our long-term target is $44.00.

Breakout trigger: Wait for a close above $34.50
then buy calls the next morning with a stop loss @ 30.40

BUY the 2015 Jan $40 call (ATI1517a40)

Originally listed on the Watch List: 11/03/13


Chicago Bridge & Iron - CBI - close: 76.26

Comments:
11/10/13: Shares of CBI have been more volatile lately. That could indicate the stock is near a short-term top. However, for the moment the trend is still higher and we do not want to chase it.

We're suggesting a trigger to buy calls at $68.50. If triggered use a stop loss at $63.75. Our long-term target for the 2015 calls is $84. Our long-term target for the 2016 calls $94.

Buy-the-Dip trigger: $68.50

BUY the 2015 Jan $75 call (CBI1517a75)

- or -

BUY the 2016 Jan $80 call (CBI1615a80)

11/03/13 adjust the stop loss to $63.75
10/20/13 adjust the buy-the-dip trigger to $68.50 from $66.00.
adjust the stop loss to $62.40

Originally listed on the Watch List: 10/06/13


Dick's Sporting Goods - DKS - close: 54.11

Comments:
11/10/13: DKS is flirting with a bullish breakout over major resistance near $54.00. The stock hit a new all-time high on an intraday basis at $54.86 on Thursday morning. I do not see any changes from my prior comments.

NOTE: More conservative investors may want to wait until after we see how the market reacts to DKS' earnings results before initiating positions. There is no date set but DKS will likely announce in mid November.

Earlier Comments:
The stock has been consolidating sideways inside the $45-54 trading range for about a year and a half. The most recent bounce off the bottom of the range has produced a five-week rally. Now DKS is sitting just below major resistance. A breakout here could launch a significant move higher. The point & figure chart is already bullish and forecasting at $71 target.

DKS has failed at $54.25 more than once. I am suggesting we wait for DKS to close above $54.50 and then buy calls the next day with a stop loss at $49.95. Please note that I am putting a limit on this entry point. We do not want to initiate positions if we see DKS close above $56.50 so I'm giving the stock a $2.00 window for us to launch positions.

Buy-the-Dip trigger: Wait for DKS to close above $54.50
then buy calls the next day. use an initial stop at $49.95.

BUY the 2015 Jan $60 call (DKS1517a60)

10/27/13 removed the 2014 call.

Originally listed on the Watch List: 10/06/13


Dollar Tree, Inc. - DLTR - close: 58.66

Comments:
11/10/13: The action in DLTR last week looks bearish with a failed rally at resistance near $60.00. Yet there hasn't been any follow through lower. We're hoping for a correction toward support near $56.00. More conservative investors could wait and hope for a dip closer to $55.00 before initiating positions.

Earlier Comments:
Our long-term target is the $65 area. FYI: The point & figure chart is bullish with a $78 target.

Buy-the-Dip trigger: $56.25, stop loss @ 52.40

BUY the 2015 Jan $65 call (DLTR1517a65)

10/27/13 removed the 2014 call
10/20/13 adjust the trigger to $56.25 and the stop to $52.40

Originally listed on the Watch List: 09/22/13


Freeport-McMoRan - FCX - close: 36.58

Comments:
11/10/13: FCX is down two weeks in a row. If this correction continues we could see the stock hit our buy-the-dip entry point at $35.25 soon. More conservative traders may want to wait for a dip near the 50-dma instead as an alternative entry point.

We want to buy calls on a dip at $35.25. If triggered our long-term target is $42.50.

Buy-the-Dip trigger: $35.25, small positions!
start with a stop loss at $32.25.

BUY the 2015 Jan $39 call (FCX1517a39)

10/27/13 strategy update: removed the 2014 calls
adjust the buy-the-dip trigger to $35.25 and the stop to $32.25.
adjust the option strike to the 2015 Jan $39 call

Originally listed on the Watch List: 09/15/13


Helmerich & Payne, Inc. - HP - close: 77.43

Comments:
11/10/13: HP managed another gain for the week but shares look vulnerable to more profit taking. Thursday's drop erased almost two weeks worth of gains. The stock did see a big bounce on Friday but it proved to be an inside day.

We are still expecting a pullback. I am suggesting we wait and buy calls on a dip at the $72.25 mark. if triggered we'll start with a stop loss at $67.75. Our long-term target is $85.00.

NOTE: HP is scheduled to report earnings on November 14th.

Buy-the-Dip trigger: $72.25, stop loss 67.75

BUY the 2015 Jan $80 call (HP1517a80)

Originally listed on the Watch List: 10/27/13


Northrop Grumman - NOC - close: 110.73

Comments:
11/10/13: NOC continues to show relative strength and closed at a new all-time high on Friday. We do not want to chase it. Let's give NOC another week and then we'll re-evaluate our entry strategy.

We want to wait for a correction and buy calls on a dip at $102.25. If triggered I am suggesting a stop loss at $97.75. Our long-term target is $118.00. FYI: The Point & Figure chart is bullish with a $160 target.

Buy-the-Dip trigger: $102.25, stop @ 97.75

BUY the 2015 Jan $110 call (NOC1517a110)

Originally listed on the Watch List: 10/27/13


QUALCOMM Inc. - QCOM - close: 69.90

Comments:
11/10/13: A disappointing earnings report and a down day for the market on Thursday double-teamed QCOM for a big loss on Thursday. I am suggesting we give QCOM a week or two to recover. At the moment our plan is unchanged.

If QCOM can breakout past resistance at $70.00 it will look like a buy. The intraday high on September 10th was $70.37. I am suggesting we wait for QCOM to close above $70.50 and buy calls the next day. If triggered our long-term target is $85.00.

Breakout trigger: Wait for QCOM to close above $70.50 (see details)
if triggered start with a stop loss at $66.75

BUY the 2015 Jan $75 call (QCOM1517a75)

Originally listed on the Watch List: 11/03/13


Starbucks - SBUX - close: 81.20

Comments:
11/10/13: Believe it or not but SBUX is up ten weeks in a row. I am adjusting our buy-the-dip entry point to $78.00 and moving the stop loss up to $74.75.

Our long-term target is $98.00.

Buy-the-Dip trigger: $78.00, stop loss @ 74.75

BUY the 2015 Jan $85 call (SBUX1517a85)

11/10/13 adjust the buy-the-dip entry to $78.00 and stop to $74.75
11/03/13 adjust buy-the-dip entry from $76 to $77.00

Originally listed on the Watch List: 10/27/13


Walgreen Co. - WAG - close: 59.70

Comments:
11/10/13: WAG snapped a five-week winning streak. We are hoping the profit taking continues. Currently our plan is to wait for a correction and buy calls at $55.00.

Buy-the-Dip trigger: $55.00, use a stop at $49.75

BUY the 2015 Jan $65 call (WAG1517a65)

10/27/13 removed the 2014 calls
10/20/13 adjust the buy-the-dip trigger to $55.00 and move the stop loss to $49.75. Plus we will adjust our option strikes higher.
09/22/13 adjust entry strategy: move the trigger to $52.25
adjust the stop loss to $48.40
(previous trigger and stop was $51.50 & 47.40)

Originally listed on the Watch List: 09/15/13