Option Investor
Newsletter

Daily Newsletter, Sunday, 11/17/2013

Table of Contents

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

Leaps Trader Commentary

Poised For A Trifecta

by James Brown

Click here to email James Brown

It was a week of new highs for the big cap U.S. indices. The S&P 500 extended its run to six weekly gains in a row. The S&P 500, Dow Industrials and Dow Transportation average all hit new record highs. The NASDAQ hit new 13-year highs. The small cap Russell 2000 index has been lagging but the trend remains higher. The bond market had a shortened week after being closed for Veteran's day. U.S. treasuries managed a small bounce with the yield on the 10-year note at 2.70%. The U.S. dollar spent most of last week drifting lower but that failed to have much impact on commodities like gold, silver, and oil. Crude oil is actually posting its longest losing streak since 1998. Some of the market's best performers last week were the transportation stocks (+2.76%), the brokers (+2.39%), housing stocks (+3.5%) and the biotech industry (+4.4%).

Economic Data

U.S. economic data was mixed last week. Industrial production actually fell -0.1% in October. This was after the September reading was revised higher from +0.6% to +0.7%. Considering the first half of October was plagued by the partial government shutdown this report could be seen as positive. U.S. wholesale inventory data showed an increase of +0.4% in September. The August reading was adjusted higher from +0.5% to +0.8%. Meanwhile the New York Empire State manufacturing survey was a negative surprise. Economists were expecting this fed regional survey to improve from 1.5 to 4.5 but the New York area saw a drop to -2.2. This is the lowest level since January.

The U.S. markets were also digesting the Janet Yellen Federal Reserve Chairman nomination hearings before the U.S. Senate. Yellen offered a dovish tone and stocks rallied. She acknowledged that QE can not last forever but it would be dangerous to taper the program while the economic recovery was still fragile. This could have been a hint that the Fed is worried about how another U.S. budget and debt ceiling battle in December and January could hurt the economy and the markets. When asked if the stock market was a bubble Yellen responded with a no and argued that valuations do not appear to be extreme. We can sum up her nomination hearing with one sentence. According to Yellen the Federal Reserve still has more work to do. The stock market decided to interpret her comments to mean that any taper to the Fed's QE program is still months away and unlikely to happen any time soon. Or as Wayne Campbell used to say, "Party on, Garth!"

Overseas Data

Economic data overseas was also mixed. Eurozone industrial production contracted -0.5%, which was worse than expected. Germany's Q3 GDP came in at +0.3%, which was in line with estimates. Yet France and Italy's GDP both contracted -0.1%. Overall Eurozone GDP inched up +0.1%, which is its second quarter of positive growth in a row (assuming it doesn't get revised lower in the future). We could be hearing more about Italy soon. The EU gave Italy a warning about its excessive debt load.

In Asia the data was mixed as well. China said its industrial production rose +10.3%, which was better than expected. The latest inflation data for China came in at +0.1%. Japan said their core machinery orders plunged from +5.4% to -2.1%, which was worse than expected. Japan's GDP growth has slowed from an annual pace of +3.8% down to +1.9%, which is a bit alarming. Yet it does mark the fourth quarter in a row of positive GDP growth. The Japanese NIKKEI stock index hit new four-month highs last week.

Major Indices:

The S&P 500 index helped lead the way higher with a bullish breakout past resistance near the 1775 mark. For the week the S&P 500 is up +1.5% but it's up +9.2% from its early October intraday low at 1646. I mentioned earlier that the S&P 500 is now up six weeks in a row. Odds of it hitting seven up weeks in a row is slim. The index is about to test round-number, psychological resistance at the 1800 mark. There is a good chance that the S&P 500 could tag this level and then retreat as traders take profits. Fortunately, broken resistance near 1775 should be new support.

This index is at new all-time, record highs and it's hard to say what resistance might be above 1800. Should we see the index breakout past this level I would expect potential resistance in the 1820-1825 area. Year to date the S&P 500 is up +26.1%.

chart of the S&P 500 index:

The NASDAQ has continued to bounce following its November 7th plunge. The index spent a couple of days retesting the 3900 level as support and then surged to a new 13-year high. Now the NASDAQ composite is nearing likely round-number, psychological resistance at the 4,000 mark. Just like the S&P 500 the NASDAQ could tag the 4,000 level and then retreat as investors take some money off the table. If the NASDAQ does see a pullback we can look for short-term support near 3900. Year to date the NASDAQ is up +32.0%.

chart of the NASDAQ Composite index:

The large cap S&P 500 index is hitting new all-time highs and the NASDAQ is hitting new 13-year highs. Yet the small cap Russell 2000 index is lagging. The index has been bouncing from its November 7th lows but it has yet to breakout to a new high. Fortunately the overall trend remains very bullish. I would be worried if we saw the $RUT fail near its late October highs in the 1120-1125 area, which is the next level of resistance. Beyond that the 1140, 1160 or the top of its bullish channel is the next level of overhead resistance (see chart). Year to date the $RUT is up +31.4%.

chart of the Russell 2000 index



Economic Data & Event Calendar

We have a relatively quiet week for economic data. The biggest reports are probably the FOMC minutes and the Philly Fed survey. Honestly I don't expect either to be a real market mover. We will see the latest U.S. inflation data with the CPI and PPI.

Economic and Event Calendar

- Monday, November 18 -
NAHB housing market index

- Tuesday, November 19 -
employment cost index
German ZEW index
Federal Reserve Chairman Ben Bernanke speaks

- Wednesday, November 20 -
Retail sales data for October
Consumer Price index (CPI) inflation data
existing home sales data for October
FOMC Minutes from the last meeting
weekly MBA mortgage application index

- Thursday, November 21 -
Weekly Initial Jobless Claims
Producer Price Index (PPI) wholesale inflation data
Philadelphia Fed survey

- Friday, November 22 -
(nothing significant)

Additional Events to be aware of:

Nov. 28th - U.S. markets are closed for Thanksgiving holiday
Nov. 29th - U.S. markets close early.
Dec. 17th - FOMC meeting & economic forecasts update
Dec. 17th - post-FOMC meeting Ben Bernanke press conference
Dec. 24th - U.S. stock market closes early
Dec. 25th - U.S. stock market closed for Christmas




Looking Ahead:

Looking ahead I see challenges in just the next few days, potential challenges between now and the end of the year, and challenges in early 2014. On a short-term basis the S&P 500 index, the Dow Industrials, and the NASDAQ composite index are all about to hit potential round-number resistance. The S&P 500 is poised to hit 1800. The Industrials are about to hit 16,000. The NASDAQ is about to hit 4,000. There is a good chance this could all happen on Monday.

Now there is nothing magical about these levels. It's just that humans like big round numbers to aim for. Once the index (or stock) gets there it could be an excuse or target to sell and take some money off the table. It's possible the indices tag these levels and just keep right on climbing. However, I would bet that we see the indices hit these levels and then retreat. I suspect any pullback will be shallow. Most fund managers are dreadfully behind the gains seen in the market this year and they will be buying any dip to try and accelerate their gains between now and year end.

It just so happens that the major U.S. indices could hit these big round-number resistance levels following a multi-week rally. Thus the market is already overbought and due for a little correction. The S&P 500 is up six weeks in a row. According to Tom Bulkowski, of the Encyclopedia of Chart Patterns, the odds of the market stretching their gains to seven weeks in a row is just five percent. It has only happened twice in the last ten years and we've already seen it happen once this year (about January 2013). Another issue is investor sentiment. A poll of financial newsletter writers has seen the level of bearish sentiment hit the lowest levels since 1989. From a contrarian standpoint this is a sell signal.

Potential challenges we face between now and yearend is the Christmas holiday shopping season and more fireworks out of Washington D.C. This year there are six less shopping days before Christmas, making it the shortest holiday shopping season since 2002. Fewer days means fewer opportunities for consumers to shop and likely less spur of the moment purchases. One positive factor for the holiday shopping season is gas prices. Fuel prices have been falling for weeks and gas is down more than -10% in less than three months. Cheaper gas prices means more discretionary funds for gift buying. Unfortunately, the drop in gas prices may not help. A recent Gallup poll found out that U.S. consumers are actually planning on spending -10% less on Christmas than they did last year. They plan to spend almost -20% less than they did from 2007 spending levels. I applaud the idea of consumers spending less as a matter of personal discipline but it does not bode well for the U.S. economy that is fueled by consumer spending.

We also face another showdown in Washington over the U.S. budget and debt ceiling debate. The last showdown merely kicked the can down the road a few weeks. Back in October our politicians agreed to fund the U.S. budget through January 15th, 2014 and raised the debt ceiling through February 7th, 2014. The democrats and republicans are supposed to compromise on a new budget by Friday, December 13th. That just happens to be the target date for congress' last day of work this year (before their holiday recess). Odds of the two sides coming together on an agreement by December 13th is virtually zero. The negative headlines from this even could sour any potential yearend market rally.

Looking out farther into the first quarter of 2014 the market will likely obsess over when the Federal Reserve might taper its current QE program. Currently most pundits are expecting the Fed to begin tapering in late Q1 2014 or some time in Q2 but that could change if we see another government shutdown or the U.S. economy stall. Although at the moment the U.S. economy seems to be picking speed, albeit very slowly.

I mentioned last week that historically when the market is up more than +10% through October the last two month of the year tend to average another +4.5% gain. Thus far we are definitely on track to see the rally continue through year end.

James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Big cap stock indexes continue to lead the market higher. The S&P 500, NASDAQ, and Dow Industrials are all poised to tag round-number resistance soon.

HAL & STZ hit our bullish exit targets. FLR also hit a bullish exit target for our 2014 calls.

DKS, FCX, and QCOM graduated to our active play list from our watch list.

I have updated stop losses on: BAC, DG, HOG, HON, and VRSN

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

Services Sector Winner

by James Brown

Click here to email James Brown


- New Trades -


Wyndham Worldwide - WYN - close: 68.92

Company Info

Comments:
11/17/13: WYN is a new watch list candidate we added last week. The company operates 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.

We had WYN listed on the watch list with a plan to buy calls if shares could close above resistance at $68.00. WYN met that requirement on Friday, November 15th with a close at $68.92. Thus our trade will open on Monday morning at the opening bell. More nimble investors might want to wait for a potential dip back toward the $68.00 level, which should be new short-term support.

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 $4.20

Chart of WYN:

Current Target: 85.00
Current Stop loss: 63.75
Play Entered on: 11/18/13
Originally listed on the Watch List: 11/10/13



Play Updates

FLR, HAL, and STZ Hit Targets

by James Brown

Click here to email James Brown

Editor's Note:

Shares of Flour (FLR), Halliburton (HAL), and Constellation Brands (STZ) hit our bullish exit targets. FLR only hit the exit target for our 2014 calls.

I have updated a number of stop losses tonight.

Plus, we've seen three stocks graduate from our watch list to our active play list.


Closed Plays


HAL and STZ hit our exit targets.



Play Updates


American Intl. Group - AIG - close: 49.30

Comments:
11/17/13: AIG managed a gain for the week but shares remain below likely short-term resistance at its 50-dma and the $50.00 mark. I am not suggesting new positions at this time. More conservative investors might want to adjust their stop toward the recent low at $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 $1.31/1.35

- or -

JUL 15, 2013 - entry price on AIG @ 46.99, option @ 4.05
symbol: AIG1517a55 2015 JAN $55 call - current bid/ask $3.20/3.35

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


Avago Technologies - AVGO - close: 44.61

Comments:
11/17/13: It's been a volatile week for shares of AVGO. We had this stock on our watch list a couple of weeks ago. Shares came super close to hitting our buy-the-dip trigger at $43.00. We decided to promote AVGO to an active play last weekend. Unfortunately since then the bounce has reversed. Something happened on Wednesday night or Thursday morning that sparked a steep sell-off on Thursday. I can't seem to find any news to account for the sharp drop where AVGO plunged to close below its 50-dma. Thankfully AVGO produced a pretty hefty bounce on Friday (+3.8%) but I am still not seeing a lot of news behind these moves. For the moment AVGO is still trading in a bull-flag type of consolidation pattern of lower highs and lower lows. Traders may want to wait for a close above $45.50 before considering new positions. More conservative investors might want to wait until after we see AVGO's earnings report on December 4th before considering new positions.

- Suggested Positions -
NOV 11, 2013 - entry price on AVGO @ 44.44, option @ 3.60
symbol: AVGO1517a50 2015 JAN $50 call - current bid/ask $3.30/3.70

11/11/13 trade opens.
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

Current Target: $55.00
Current Stop loss: 39.40
Play Entered on: 11/11/13
Originally listed on the Watch List: 09/22/13


Bank of America - BAC - close: 14.92

Comments:
11/17/13: It was a good week for the financials and shares of BAC were showing relative strength with a +4.1% gain for the week. The stock is up five out of the last six sessions. Shares are nearing significant resistance at the $15.00 mark.

I am raising our stop loss to $13.35.

- 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 $1.68/1.70

11/17/13 new stop loss @ 13.35
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: 13.35
Play Entered on: 03/18/13

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


E.I. du Pont - DD - close: 62.11

Comments:
11/17/13: DD went ex-dividend on November 13th, which helps explain the gap down. Traders bought the dip and shares bounced back toward their recent highs. I don't see any changes from my earlier comments.

- Suggested Positions -
OCT 25, 2013 - entry price on DD @ 62.57, option @ 0.74
symbol: DD1418a65 2014 JAN $65 call - current bid/ask $0.58/0.61

- or -

OCT 25, 2013 - entry price on DD @ 62.57, option @ 3.15
symbol: DD1517a65 2015 JAN $65 call - current bid/ask $3.45/3.55

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: 59.26

Comments:
11/17/13: The discount retailers like DG were consistently showing strength last week. This stock is quickly approaching its recent highs and likely resistance near the $60.00 level. I am not suggesting new positions at this time. We will raise our stop loss to $54.75.

Investors should note that DG is scheduled to report earnings on December 5th.

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 $2.30/2.45

- or -

SEP 06, 2013 - entry price on DG @ 57.61, option @ 3.48
symbol: DG1517a70 2015 JAN $70 call - current bid/ask $3.10/3.30

11/17/13 new stop loss @ 54.75
09/22/13 new stop loss @ 53.60

Current Target: 64.00 for the 2014s, 69.00 for the 2015s
Current Stop loss: 54.75
Play Entered on: 09/06/13
Originally listed on the Watch List: 08/04/13


The Walt Disney Co. - DIS - close: 70.00

Comments:
11/17/13: Great news! The post-earnings bounce continues and DIS has rallied to a new all-time high. Shares are testing round-number resistance near the $70.00 level. I would be tempted to launch new positions now or more conservative investors could wait for DIS to close above the $70.25 level as an alternative entry point.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $4.05/4.10

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


Dick's Sporting Goods - DKS - close: 55.83

Comments:
11/17/13: DKS is a watch list candidate that has graduated to our active play list. The stock has been consolidating sideways in the $45-55 zone for almost two years. Our plan was to wait for shares to breakout past resistance and close above $54.50 and then buy calls the next day. DKS closed at $54.86 on November 11th. Our trade opened the next day at $54.73. I would still consider new positions now or nimble traders could wait and try to buy dips in the $54.00-55.00 zone.

It's important to note that more conservative investors might want to wait until after we see how the market interprets DKS' upcoming earnings report due out on November 19th before initiating new positions.

Our long-term target is $65.00. More aggressive traders could aim higher. The point & figure chart is already bullish and forecasting at $71 target.

- Suggested Positions -
NOV 12, 2013 - entry price on DKS @ 54.73, option @ 4.00*
symbol: DKS1517a60 2015 JAN $60 call - current bid/ask $4.30/4.50

11/12/13 trade opens. DKS opens at $54.73
*option entry price is an estimate since the option did not trade at the time our play was opened.
11/11/13 closed about our suggested entry trigger (above 54.50)
10/27/13 removed the 2014 call.

Chart of DKS:

Current Target: DKS @ 65.00
Current Stop loss: 49.95
Play Entered on: 11/12/13
Originally listed on the Watch List: 10/06/13


Eastman Chemical Co. - EMN - close: 78.71

Comments:
11/17/13: It was a disappointing week for EMN. The major indices are breaking out to new highs and yet EMN can't seem to breakout past resistance at the $80.00 level. I find last week's action to be a potential warning signal. 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 $ 4.60/4.80

11/17/13 the action this past week is worrisome!
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: 17.07

Comments:
11/17/13: After a two-week pullback shares of Ford are trying to bounce. The stock struggled with short-term resistance near $17.20 and its 50-dma this past week. 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 $ 3.00/3.05

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


Freeport-McMoRan - FCX - close: 36.58

Comments:
11/17/13: Bingo! Thus far shares of FCX are following our script perfectly. We wanted to catch a dip near what should be support at $35.00. FCX hit our buy-the-dip entry point trigger at $35.25 on November 13th and immediately bounced. The rebound is no three days old and FCX appears to be trading in a bull-flag shaped consolidation pattern. If you missed our entry point I would be tempted to buy dips near $36.00.

- Suggested Positions -
NOV 13, 2013 - entry price on FCX @ 35.25, option @ 2.60*
symbol: FCX1517a39 2015 JAN $39 call - current bid/ask $3.05/3.15

11/13/13 FCX hits our buy-the-dip entry point at $35.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
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

Chart of FCX:

Current Target:$ 42.50
Current Stop loss: 32.25
Play Entered on: 11/13/13
Originally listed on the Watch List: 09/15/13


Fluor Corp. - FLR - close: 79.36

Comments:
11/17/13: Target hit!

FLR produced a big rally on Wednesday and broke through resistance near the $78.00 level. The stock ended the week at new multi-year highs. The next challenge is potential round-number resistance at $80.00.

Our target to exit the 2014 Jan. $70 calls was hit at $79.00 on November 13th.

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 - exit $9.30 (+220.6%)

- or -

SEP 12, 2013 - entry price on FLR @ 67.14, option @ 5.70*
symbol: FLR1517a75 2015 JAN $75 call - current bid/ask: 11.30/11.50

11/13/13 exit target hit for 2014 Jan. $70 calls
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.

Chart of FLR:

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


Harley-Davidson - HOG - close: 66.72

Comments:
11/17/13: HOG shares revved higher last week. After a three-week consolidation the stock suddenly came alive and ended the week at new multi-year highs. I am raising our stop loss up to $61.45. 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.

NOTE: I am adjusting our exit target for the 2015 calls to $74.50. We will still plan to exit our 2014 calls when HOG hits $69.00.

- Suggested Positions -
SEP 04, 2013 - entry price on HOG @ 61.01, option @ 2.36
symbol: HOG1418a65 2014 JAN $65 call - current bid/ask $ 3.15/3.25

- or -

SEP 04, 2013 - entry price on HOG @ 61.01, option @ 4.35*
symbol: HOG1517a70 2015 JAN $70 call - current bid/ask $ 5.65/5.80

11/17/13 new stop loss @ 61.45
adjust the exit target for 2015 calls to $74.50
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: exit 2014 calls @ 69.00, exit 2015 calls @ 74.50
Current Stop loss: 61.45
Play Entered on: 09/04/13
Originally listed on the Watch List: 08/25/13


Honeywell Intl. - HON - close: 88.62

Comments:
11/17/13: HON displayed some strength midweek and broke out past resistance near the $88 level. I am raising our stop loss to $82.75. Investors may want to take note that HON will begin trading ex-dividend on November 19th. The quarterly cash dividend should be 45 cents.

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 $ 8.90/9.05

11/17/13 new stop loss @ 82.75
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: 82.75
Play Entered on: 05/07/13
Originally listed on the Watch List: 05/04/13



Intel Corp. - INTC - close: 24.52

Comments:
11/17/13: INTC spent most of last week rebounding. Shares are poised to test and likely breakout past its late October highs near $24.70 soon. 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 $1.12/1.14

- or -

SEP 16, 2013 - entry price on INTC @ 23.63, option @ 1.75
symbol: INTC1517a25 2015 JAN $25 call - current bid/ask $1.85/1.88

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: 54.87

Comments:
11/17/13: The financial sector is in rally mode. The bounce in JPM continues, which helped push the sector higher. The latest headlines for this titanic bank involved a $4.5 billion deal to settle claims on a mortgage-backed securities case. 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 $ 1.67/1.69

- or -

JUN 24, 2013 - entry price on JPM @ 50.25, option @ 3.80
symbol: JPM1517a55 2015 JAN $55 call - current bid/ask $ 4.65/4.75

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: 30.30

Comments:
11/17/13: I was starting to worry about our LVLT trade. The stock's rally seemed to have stalled and shares were drifting sideways while the major averages surged to new highs. It looks like LVLT may have awoken from its recent sleep on Friday.

I am not suggesting new positions at this time. If LVLT were to see a pullback we can watch for support near $28.00.

- Suggested Positions -
OCT 31, 2013 - entry price on LVLT @ 29.39, option @ 4.40*
symbol:LVLT1517a30 2015 JAN $30 call - current bid/ask $ 4.60/4.90

*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: 84.30

Comments:
11/17/13: NOV spent a few days testing support near $82.00 and then surged to a new 52-week high later in the week. More conservative traders may want to start raising their stop loss. I am not suggesting new positions at this time.

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 $ 5.95/6.10

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: 16.17

Comments:
11/17/13: The post-earnings rally in NVDA continued last week. Shares surged past resistance near the $16.00 level to hit new 18-month highs. The stock is arguably short-term overbought here. I am not suggesting new positions.

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 $0.67/0.69

- or -

SEP 12, 2013 - entry price on NVDA @ 15.63, option @ 1.54
symbol: NVDA1517a17 2015 JAN $17 call - current bid/ask $1.51/1.57

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: 49.50

Comments:
11/17/13: Strength in the transportation stocks helped push ODFL to a new high. The stock is approaching what could be round-number resistance at the $50.00 mark. More conservative investors might want to consider an early exit now to lock in a small gain and free up capital. 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 $1.45/1.65

11/17/13 investors may want to consider an early exit now to lock in a small gain.
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


QUALCOMM Inc. - QCOM - close: 72.17

Comments:
11/17/13: QCOM is another watch list candidate that has graduated to our active play list. The plan was to wait for shares to breakout past major resistance at $70.00 and closed above $70.50. QCOM closed at $71.22 on November 14th. Our trade opened on Friday morning at $71.34.

Shares of QCOM are up six days in a row and looking short-term overbought here. If you're looking for a new entry point I would seriously consider waiting for a dip back into the $70.00-71.00 zone. QCOM will eventually see a dip and broken resistance at $70.00 should be new support.

- Suggested Positions -
NOV 15, 2013 - entry price on QCOM @ 71.34, option @ 4.90
symbol: QCOM1517a75 2015 JAN $75 call - current bid/ask $5.25/5.35

11/15/13 trade opens. QCOM @ 71.34
11/14/13 QCOM closes above entry trigger (above 70.50)

Chart of QCOM:

Current Target: $85.00
Current Stop loss: 66.75
Play Entered on: 11/15/13
Originally listed on the Watch List: 11/03/13


VeriSign, Inc. - VRSN - close: 55.65

Comments:
11/17/13: It was a good week for VRSN bulls. The stock finally broke out past resistance near the $55.00 level. I am raising our stop loss to $49.75. More conservative investors may want to raise their stop even higher. 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 $ 2.10/2.14

- or -

SEP 19, 2013 - entry price on VRSN @ 51.40, option @ 4.25*
symbol:VRSN1517a55 2015 JAN $55 call - current bid/ask $ 6.15/6.35

11/17/13 new stop loss @ 49.75
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: 49.75
Play Entered on: 09/19/13
Originally listed on the Watch List: 08/18/13


CLOSED Plays


Halliburton Company - HAL - close: 56.23

Comments:
11/17/13: Target achieved.

The rally continues for HAL with shares hitting new two-year highs again. The stock is now up six out of the last seven weeks. We were planning to exit our 2015 calls when HAL hit $56.50, although I see that we had a typo at the bottom of our play update that said the exit target was $56.00. If you were aiming for $56.00 then HAL hit our exit target on Monday November 11th and again on Thursday the 14th. HAL hit $56.52 on Friday the 15th.

The option high for the day was $9.75 on Friday but it was $9.89 on Thursday.

- 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 - exit $9.70 (+ 102.0%)

11/15/13 2015 target hit at $56.50
(note: play had a typo listing exit target at $56.00)
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

Chart of HAL

Current Target: $52.50 for the 2014 call, $56.50 for the 2015 call
Current Stop loss: 49.40
Play Entered on: 08/21/13
Originally listed on the Watch List: 08/18/13


Constellation Brands - STZ - close: 69.14

Comments:
11/17/13: Target achieved.

Shares of STZ raced higher this past week. The stock hit our suggested exit target for the 2015 calls at $69.00 on Friday. I remain longer-term bullish on STZ but shares are definitely overbought and need to see a correction.

- 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 - exit $10.20 (+134.4%)

11/15/13 target hit at $69.00 to exit the 2015 calls
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.

Chart of STZ

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



Watch

Financials & Technology

by James Brown

Click here to email James Brown


New Watch List Entries

COF - Capital One Financial

WDC - Western Digital Corp.


Active Watch List Candidates

ATI - Allegheny Tech.

CL - Colgate-Palmolive

DLTR - Dollar Tree Inc.

HP - Helmerich & Payne

NOC - Northrop Grumman

SBUX - Starbucks

WAG - Walgreen Co.


Dropped Watch List Entries

WYN hit our trigger on Friday and has been moved to the new play section.

DKS, FCX, and QCOM were all triggered last week and added to the active play list.
CBI has been removed from the watch list.



New Watch List Candidates:


Capital One Financial - COF - close: 70.37

Company Info

Financial stocks have been showing strength and the sector is breaking out to new multi-year highs. COF has been lagging the group with a pullback from its October peak but traders have been buying the dips near its rising 50-dma. Now after the recent consolidation shares could be presenting a new entry point for bullish positions.

I am suggesting we wait for COF to close above $71.00 and buy calls the next morning with a stop loss at $66.95. Our long-term target is $84.00.

Breakout trigger: Wait for COF to close above $71.00
buy calls the next day with a stop loss at $66.95

BUY the 2015 Jan $75 call (COF1517a75) current ask $5.40

Chart of COF:

Originally listed on the Watch List: 11/17/13


Western Digital Corp. - WDC - close: 75.55

Company Info

WDC is in the technology sector. The company makes data storage devices (like hard drives and solid state drives). The company's latest earnings report was only in line with expectations but shares didn't see much selling on the news. The stock spent a few days consolidating sideways and then resumed its up trend. This past week saw WDC surge to a new all-time high. Traders were already buying the dip near prior resistance on Friday around the $74.00 area.

More aggressive traders may want to just buy calls now. I am suggesting we wait for WDC To close above $76.25 and launch positions the next morning with a stop loss at $69.45. If triggered our long-term target is $94.00. FYI: The Point & Figure chart is bullish with a $91 target.

NOTE: I am putting a condition on this entry point. We want to wait for a close above $76.25 but we do not want to launch positions if WDC closes above $77.50.

Breakout trigger: Wait for a close above $76.25
buy calls the next morning with a stop loss at $69.45

BUY the 2015 Jan $90 call (WDC1517a90) current ask $5.55

Chart of WDC:

Originally listed on the Watch List: 11/17/13


Active Watch List Candidates:



Allegheny Technologies - ATI - close: 33.75

Comments:
11/17/13: ATI continues its sideways consolidation below resistance near the $34.00 level. I don't see any changes from my earlier comments.

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: 79.03

Comments:
11/17/13: CBI continues to race higher without us and I am reluctant to chase it. It is possible that CBI might see some resistance at the $80 level but there is no guarantee.

We are going to remove CBI from the watch list. I remain very bullish on the stock but after a $20 rally from its early September lows we want to see some sort of pullback first before initiating positions.

Trade did not open.

11/17/13 removed from the watch list
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


Colgate-Palmolive - CL - close: 65.78

Comments:
11/17/13: Traders bought the dip in CL near $64 and the stock has bounced back toward its recent highs and resistance near $66.00. More aggressive traders may want to consider buying a breakout above $66.00. At the moment, I don't want to chase it. We will leave our strategy unchanged and re-evaluate next week.

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)

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


Dollar Tree, Inc. - DLTR - close: 59.91

Comments:
11/17/13: DLTR is slowly drifting higher and shares look poised to breakout past resistance at $60.00. Yet I would be reluctant to buy a breakout at least not until we see how the market reacts to DLTR's earnings report. The company is due to report earnings on November 21st. Shares could see some post-earnings profit taking that hopefully hits our buy-the-dip trigger.

If DLTR does not see a post-earnings sell-off then we'll re-evaluate next week.

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


Helmerich & Payne, Inc. - HP - close: 79.27

Comments:
11/17/13: Trading in HP has been choppy the last couple of weeks. Strength in the energy stocks has lifted HP to a new high. The stock looks poised to breakout past the $80 level.

Tonight we are adjusting our entry point strategy and listing a more aggressive entry idea. Wait for HP to close above $80.25 and then buy calls the next day with a stop loss at $74.75. If triggered our long-term target is $95.00.

I am updating the strike price to the 2015 $90 call.

Wait for a close above $80.25, stop loss @ 74.75

BUY the 2015 Jan $90 call (HP1517a90) current ask $5.10

11/17/13 strategy change: Wait for HP to close above $80.25 and then buy calls the next day with a stop loss at $74.75. Our new long-term target is $95.00. New option strike at 2015 $90 call

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


Northrop Grumman - NOC - close: 109.53

Comments:
11/17/13: The rally in NOC has stalled with shares struggling near resistance in the $110 area. We are not giving up on a buy-the-dip entry point but I will raise the entry trigger to $103.50.

We want to wait for a correction and buy calls on a dip at $103.50. 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: $103.50, stop @ 97.75

BUY the 2015 Jan $110 call (NOC1517a110)

11/17/13 new buy-the-dip trigger at $103.50. old one was $102.25.

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


Starbucks - SBUX - close: 81.19

Comments:
11/17/13: The rally in SBUX has also stalled in spite of new highs in the major averages. SBUX is virtually unchanged for the week. I am adjusting our buy-the-dip trigger to $78.25.

Our long-term target is $98.00.

Buy-the-Dip trigger: $78.25, stop loss @ 74.75

BUY the 2015 Jan $85 call (SBUX1517a85)

11/17/13 adjust the trigger to $78.25
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: 60.28

Comments:
11/17/13: WAG has spent almost three weeks in the $59-61 zone. Currently we're waiting for a pullback but more aggressive traders may want to consider buying calls on a breakout above the $61.00 level.

Please note our new buy-the-dip trigger at $56.00.

Buy-the-Dip trigger: $56.00, use a stop at $49.75

BUY the 2015 Jan $65 call (WAG1517a65)

11/17/13 new trigger at $56.00, up from $55.00
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