Option Investor
Newsletter

Daily Newsletter, Sunday, 12/15/2013

Table of Contents

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

Leaps Trader Commentary

Taper Worries Keep Santa Away

by James Brown

Click here to email James Brown

Fears that the Federal Reserve might taper their QE program in December fueled broad-based selling and postponed any Santa Claus rally on Wall Street. There seems to be a growing camp of analysts suggesting that the Fed might taper at the December meeting this week and that has market participants on edge. Stocks could also be suffering from tax loss selling and fund rebalancing before year end.

By Friday's closing bell the S&P 500 was down -1.65% for the week. The NASDAQ composite lost -1.5% and the small cap Russell 2000 index lost -2.1%. The transportation average lost -1.5%. The semiconductor index slipped -1.9%. A drop in crude oil helped fuel a -2.4% pullback in oil stocks. Biotechs really underperformed with a -2.8% decline for the week. Yet in spite of this weakness the Russell 2000 is holding at round-number support near the 1100 mark. The NASDAQ is holding near the 4,000 mark. The S&P 500 index is hovering above short-term support near 1,775. The volatility index may have bounced but there still is not much fear in this market.

Economic Data

U.S. economic data continues to come in mixed. We should be used to that by now. Overall retail sales numbers for November came in better than expected with a +0.7% gain. That follows an upwardly revised October reading of +0.6%, up from +0.4%. That's encouraging since consumer spending is believed to account for almost 70% of the U.S. economy.

The ISM services (non-manufacturing) index data for November was not quite so promising. This index fell to a new five-month low at 53.9. Numbers above 50.0 indicate growth. The Producer Price Index is a look at inflation at the wholesale level. November's PPI reading dropped -0.1%, marking its third monthly decline in a row. This is quietly fueling fears of deflation and provides another reason for the Fed to be in no hurry to taper their QE program.

Overseas Data

Economic data out of Europe seems to be slowing down. Industrial production for the EU plunged -1.1% compared to estimates for +0.3% growth. Helping fuel that decline was a -1.2% month-over-month drop in Germany's industrial production. Investor sentiment toward Europe has been positive in recent months because of the perception that the debt crisis has cooled. That confidence might be misplaced. Both Italy and Spain saw their debt levels hit new record highs. Italy has a GDP of $2.06 trillion. Their government debt just hit $2.85 trillion. According to a new Reuters article Spain's debt hit 93.4% of its GDP. The Spanish government expects its debt-to-GDP ratio to hit 101% between the years 2015 and 2016. Everyone knows that U.S. interest rates will rise, likely starting in 2014. Rising interest rates in the U.S. will also put pressure on interest rates in European markets. If they rise too high or too fast it will jeopardize the already struggling EU members with too much debt.

Meanwhile in Asia the Japanese economy's Q3 GDP growth was revised down from +1.9% to +1.1% year over year growth. It's a significant drop from their Q2 growth of +3.6%. Japan did say their industrial production rose +1.0% month-over-month, which was better than expected. The Japanese yen fell to a new five-year low against the dollar, which should be bullish for Japanese exporters. Speaking of exports, China said their exports rose +12.7% in November, which was significantly better than the +7% estimate. China also reported that their November retail sales came in at a better than expected +13.7% and their industrial production rose +10%.

Major Indices:

Last week's pullback in the S&P 500 has pared its year to date gains to +24.5%. The index did breakdown below prior support near 1780 but it is holding near the prior highs from late October and early November (see chart). I suspect that if the S&P 500 can hold the 1770 level it will bounce. Otherwise a breakdown below 1770 probably means we'll see a drop toward 1750.

If the S&P 500 index does bounce then look for potential resistance at 1800 and 1810.

chart of the S&P 500 index:

Weekly chart of the S&P 500 index:

The NASDAQ composite's -1.5% decline has trimmed its year to date gains down to a still impressive +32.5%. Most of last week's losses were from Wednesday's drop. The fact that the NASDAQ has been able to hold on to round-number support at the 4,000 mark is encouraging. However, I will point out that on the weekly chart, last week's pullback has created a bearish engulfing candlestick reversal pattern. It's a pattern that does need to see confirmation so no need to panic yet.

If the NASDAQ continues to fall we can watch for potential support at 3950, the 50-dma near 3935, and the 3900 level.

chart of the NASDAQ Composite index:

Weekly chart of the NASDAQ Composite index:



The small cap Russell 2000 index was one of the worst performers among the major indices with a -2.1% decline last week. Fortunately the $RUT has managed to hold at round-number support near the 1100 mark, a level that is underpinned by a trend line of higher lows (see chart).

The long-term trend is still up. However, the $RUT could drop toward the next level of support near 1080 and still maintain its up trend. If the $RUT can bounce from here then we're back to watching for potential resistance at 1120 and 1140 again. Year to date the $RUT is up +30.3%.

chart of the Russell 2000 index

Weekly chart of the Russell 2000 index



Economic Data & Event Calendar

Last week we had some great news with the democrat and republican negotiators coming together on a two-year U.S. budget deal. In the true spirit of compromise both sides were relatively unhappy with the details of the deal. Congress approved the new budget deal with a 332-94 vote. The budget now moves to the Senate, which should vote on it Tuesday. While there are plenty of opponents the budget is expected to pass. Should the Senate fail to approve it the news would be negative for the stock market.

There are plenty of economic reports coming out this week but there is only one event that matters. That event is the two-day FOMC meeting that concludes on Wednesday afternoon. It is Federal Reserve Chairman Ben Bernanke's last meeting. No one expects the fed to alter interest rates and the focus will be on their statement and if they decide to taper their $85 billion-a-month QE program. Bernanke will have a press conference on Wednesday after the FOMC meeting.

A Reuters poll of sixty economists found that one month ago only three were expecting the Fed to taper in December versus 37 that expected the Fed to taper in March 2014. The most recent poll now shows that 12 expect the Fed to taper in December and 32 expect March. The rest were expecting the Fed to taper in January. Some have suggested that the Fed might only reduce their QE program by $5 billion. That wouldn't be very significant except that it would signal that the taper has begun and the Fed will slowly be removing the punchbowl from the QE party. It probably doesn't matter how much they taper but if they taper that will move the market.

Those against a December taper will point out that the Fed has consistently claimed any decision would be data dependent. The Fed said they wanted to see the unemployment rate at 6.5% and job growth at +200,000 a month or more. Currently the unemployment rate is at 7% and over the last three months we are averaging +193K new jobs a month. That's close to their stated goals but is that close enough?

Something else to consider is the new two-year budget deal did not address the U.S. debt ceiling. This issue returns in February 2014 and it will be hotly debated in Washington. The Fed may want to wait until after the debt ceiling issue has been resolved before tapering any QE program.

Economic and Event Calendar

- Monday, December 16 -
New York Empire State manufacturing survey
U.S. industrial production data
Eurozone manufacturing PMI data

- Tuesday, December 17 -
Consumer Price Index (CPI) on retail level inflation
FOMC meeting (two-day meeting begins)
U.S. Senate expected to vote (and pass) two-year budget deal

- Wednesday, December 18 -
housing starts and building permits
FOMC rate decision (two-day meeting ends)
Post-Fed meeting Ben Bernanke press conference

- Thursday, December 19 -
Weekly Initial Jobless Claims
Philadelphia Fed survey
existing home sales data

- Friday, December 20 -
U.S. Q3 GDP estimate (previously +3.6%)
Eurozone consumer confidence

Additional Events to be aware of:

Dec. 24th - U.S. stock market closes early
Dec. 25th - U.S. stock market closed for Christmas
Jan. 1st - U.S. markets closed for New Year's Day
Feb. 7th - U.S. debt ceiling is reached




Looking Ahead:

All of the potential warning signals discussed in late week's commentary remain. As a matter of fact the bullish-bearish investor sentiment numbers have gotten worse. The Investor's Intelligence sentiment poll has seen the number of bulls rise from an extreme 57.1 to a new high at 58.2. We haven't seen this much bullish sentiment since October 2007. If you recall that was the top of the market right before the financial crisis and -50% drop in the market. The number of bearish investors remained unchanged at 14.3%, a low not seen since 1987. These extremes do not mean the market is going to reverse immediately but they are a warning signal.

Another troubling observation last week was data from Reuters, who has been tracking earnings guidance and earnings warnings. Thus far the number of earnings warnings in Q4 are the worst on record. Historically for every one company that raises their earnings guidance there are 2.2 companies that issue negative guidance. Currently the numbers for this quarter have soared to 11.4 companies issuing negative guidance for every positive guidance.

Reuters chart: negative guidance

Looking at the week ahead we should be in the midst of a Santa Claus rally on Wall Street. Unfortunately, Santa is likely to avoid the corner of Broad and Wall until after the FOMC decision on Wednesday. If the Fed does decide to taper their QE program then they could scare Santa away completely. It really does boil down to the FOMC meeting. I would not be surprised to see stocks drift sideways until Wednesday afternoon. Then the markets will move based on if there is a taper or not. No taper likely sparks a rally that lasts until yearend. If there is a taper then stocks will most likely see a knee-jerk reaction sell off lower.

James



Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The market just delivered its worst weekly decline of the fourth quarter. Sentiment remains bullish but traders are anxious ahead of this week's FOMC meeting.

Our plan was to exit our 2014 HOG calls on Monday, December 9th.

DE and WDC have graduated from our watch list to our active play list.

I have updated stop losses on: HFC.

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

All Eyes On The Fed

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(December 15, 2013)

The U.S. stock markets have had an incredible year. The S&P 500 index is up +24.5%. The NASDAQ is up more than +32% year to date. Yet fears that the Federal Reserve might taper their QE program sooner than expected have overpowered bullish sentiment, at least on a short-term basis. The average mutual fund and hedge fund managers has drastically underperformed the broader market. They need to chase the market higher. Yet investors are hesitant to launch positions ahead of this Wednesday's FOMC decision and statement.

Odds are that stocks could see a sharp sell off if the Fed does announce a taper on Wednesday. We have certainly heard multiple analysts suggest that a taper is baked into the market. Another suggestion is that if the Fed tapers for the right reason it would be good for stocks. That might be true. Yet stocks could still see a short-term sell off that slices through support only to bounce back. Thus we are reluctant to add new plays tonight in front of Wednesday's FOMC statement.

On a positive note I am encouraged that congress has agreed to a two-year budget deal since that's one less black cloud on the horizon. Let's just hope the Senate votes to approve the budget deal on Tuesday.

Normally I would provide my radar list of symbols in this section but if the Fed does taper on Wednesday the list could prove worthless. Wednesday and Thursday could be volatile sessions for the market. It might be best to just take a step back away from stocks this week and see how the dust settles next weekend.



Play Updates

Stocks Retreat From Their Highs

by James Brown

Click here to email James Brown

Editor's Note:

Warning for Wednesday

Investors need to be aware that Wednesday, December 18th could be a pivotal day for the stock market. If the Federal Reserve does announce a taper to their QE program on Wednesday afternoon it could spark a significant sell off in equities.

You may want to try and reduce your risk by adjusting your stop loss on bullish positions. Another idea might be some sort of hedge, maybe put options on the S&P 500 or similar index or ETF.


Closed Plays


YUM was stopped out.

We closed the 2014 calls on HOG on December 9th.



Play Updates


American Intl. Group - AIG - close: 49.73

Comments:
12/15/13: AIG managed to eke out a small gain for the week, which was enough to outperform the broader market. Shares remain stuck inside its $47-50 trading range. More conservative traders may want to raise their stops closer to the simple 150-dma nearing $48.00. I am not suggesting new positions at this time.

NOTE: We only have about five weeks left on our 2014 January calls.

- Suggested Positions -
JUL 15, 2013 - entry price on AIG @ 46.99, option @ 2.50
symbol: AIG1418a50 2014 JAN $50 call - current bid/ask $1.20/1.23

- or -

JUL 15, 2013 - entry price on AIG @ 46.99, option @ 4.05
symbol: AIG1517a55 2015 JAN $55 call - current bid/ask $3.30/3.40

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: 45.65

Comments:
12/15/13: AVGO's big gains from December 5th are fading. The stock is down four days in a row and failed to move on a new analyst upgrade this past Friday. This stock should see short-term support near $45.00 and its 50-dma. I am not suggesting new positions at this time.

- Suggested Positions -
NOV 11, 2013 - entry price on AVGO @ 44.44, option @ 3.60
symbol: AVGO1517a50 2015 JAN $50 call - current bid/ask $3.40/3.90

12/08/13 new stop loss @ 42.40
11/24/13 AVGO is not participating in the market rally.
investors may want to exit early now to cut their losses.
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: 42.40
Play Entered on: 11/11/13
Originally listed on the Watch List: 09/22/13


Bank of America - BAC - close: 15.18

Comments:
12/15/13: Financial stocks continued to drift lower and BAC followed suit. The stock is now down two weeks in a row following a four-week rally. Broken resistance near $15.00 should be new support for BAC. I'm not suggesting new positions.

FYI: BAC is scheduled to report earnings on January 15th.

- 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 $1.90/1.92

11/24/13 new stop loss @ 13.70
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: 13.70
Play Entered on: 03/18/13

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


Capital One Financial - COF - close: 71.47

Comments:
12/15/13: COF also followed the financial sector lower. On the weekly chart last week's decline looks like a bearish engulfing candlestick reversal pattern. Fortunately, COF still has a long-term bullish trend of higher lows. I would not be surprised to see COF dip toward round-number support near $70.00. Nimble traders could use a bounce from $70.00 as a new bullish entry point.

FYI: COF is scheduled to report earnings on January 16th.

- Suggested Positions -
NOV 29, 2013 - entry price on COF @ 71.69, option @ 5.80*
symbol: COF1517a75 2015 JAN $75 call - current bid/ask $5.50/5.65

*option entry price is an estimate since the option did not trade at the time our play was opened.

Current Target: COF @ 84.00 for 2015 calls
Current Stop loss: 66.95
Play Entered on: 11/29/13
Originally listed on the Watch List: 11/17/13


Caesars Entertainment - CZR - close: 20.16

Comments:
12/15/13: CZR was making headlines last week with the company filing a lawsuit against the state of Massachusetts's gaming commission chairman claiming he was biased in a recent decision. Shares of CZR didn't move much on the news. CZR actually held support near $19.00 and was on the rise later in the week.

I would be tempted to buy calls on this bounce or investors could wait for a new relative high above $21.30.

STRATEGY NOTE: (December 8th) I think it is important that investors re-evaluate this trade. Initially the market was bullish about the impact and opportunity that online gaming might offer CZR. Yet on Thursday morning CZR came out with a warning that said online gaming could actually hurt their business. The company said that online gaming is not only additional competition but CZR's own online business could cannibalize its traditional revenue sources. This new disclosure changes the impetus for the stock to climb. More conservative investors may just want to abandon ship and exit positions now. If this stock does not recover soon I will consider dropping it.

- Suggested Positions -
DEC 03, 2013 - entry price on CZR @ 20.91, option @ 4.70*
symbol: CZR1517a25 2015 JAN $25 call - current bid/ask $3.80/4.30

12/05/13 CZR warns that online gaming could negatively impact its business. Investors should re-evaluate their strategy
12/03/13 trade opens. CZR @ $20.91
12/02/13 CZR closes at $21.01, above our close above $21.00 trigger

Current Target: CZR @ 26.00
Current Stop loss: 18.75
Play Entered on: 12/03/13
Originally listed on the Watch List: 12/01/13


E.I. du Pont - DD - close: 60.24

Comments:
12/15/13: The recent action in DD does not bode well for the bulls. The stock failed at its six-week trend of lower highs. DD has been trying to hold at support near $60.00. A breakdown here could put its long-term up trend in jeopardy.

Last week we raised our stop to $58.90. I am not suggesting new positions. At this point our 2014 calls will likely expire worthless unless DD sees a dramatic move higher.

We only have about five weeks left on our 2014 January calls.

- Suggested Positions -
OCT 25, 2013 - entry price on DD @ 62.57, option @ 0.74
symbol: DD1418a65 2014 JAN $65 call - current bid/ask $0.15/0.18

- or -

OCT 25, 2013 - entry price on DD @ 62.57, option @ 3.15
symbol: DD1517a65 2015 JAN $65 call - current bid/ask $2.65/2.73

12/08/13 new stop loss @ 58.90
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: 58.90
Play Entered on: 10/25/13
Originally listed on the Watch List: 08/11/13


Deer & Co - DE - close: 87.18

Comments:
12/15/13: DE is a watch list candidate that has graduated to our active play list. Shares of DE had spent months consolidating sideways in the $80-86 zone. We wanted to wait for shares to close above $86.25. The stock shot higher early last week and closed at $87.20 on December 9th. Our trade opened on Dec. 10th at $87.26. Since then DE has seen a little bit of profit taking. Broken resistance in the $85-86 area should be new support so more nimble traders might want to consider buying calls on a dip near $86.00 as an alternative entry point.

Earlier Comments:
DE recently displayed strength following news that its board of directors approved an $8 billion stock buyback program. That's on top of the $1 billion they had left in their existing buyback program.

- Suggested Positions -
DEC 10, 2013 - entry price on DE @ 87.26, option @ 5.85*
symbol: DE1517a90 2015 JAN $90 call - current bid/ask $5.60/5.75

12/10/13 trade opens. DE @ 87.26
*option entry price is an estimate since the option did not trade at the time our play was opened.
12/09/13 DE closed @ 87.20, above our suggested entry of a close above $86.25

Chart of DE:

Current Target: DE @ 98.50
Current Stop loss: 81.75
Play Entered on: 12/10/13
Originally listed on the Watch List: 12/08/13


Dollar General Corp. - DG - close: 60.48

Comments:
12/15/13: DG displayed some strength last week with a rally to new all-time highs. Yet gains faded late in the week after news surfaced that private equity firm KKR and Goldman Sach's private equity division both sold their stakes in DG.

At the moment I am not suggesting new positions in DG. Please note that we only have about five weeks left on our 2014 calls.

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 $2.10/2.20

- or -

SEP 06, 2013 - entry price on DG @ 57.61, option @ 3.48
symbol: DG1517a70 2015 JAN $70 call - current bid/ask $3.50/4.00

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: 69.62

Comments:
12/15/13: The trading action in DIS last week was short-term bearish. Wednesday morning saw a spike to a new all-time high that quickly failed. That same day shares closed near their lows and in doing so created a bearish engulfing candlestick reversal pattern. Additional declines confirmed the reversal. At this point I would not be surprised to see DIS retest what should be significant support near the $68.00 level. Investors may want to wait for a new bounce from $68 before considering 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 $4.35/4.50

12/08/13 new stop loss @ 65.75
11/24/13 new stop loss @ 64.75

Current Target: DIS @ 84.00
Current Stop loss: 65.75
Play Entered on: 10/23/13
Originally listed on the Watch List: 10/13/13


Dick's Sporting Goods - DKS - close: 55.66

Comments:
12/15/13: DKS posted a gain for the week but shares peaked on Wednesday. Shares almost appear to be trading under a new short-term trend of lower highs. I would not be surprised to see DKS drop back toward support near $54.00 again.

The market seems either confused or possibly apathetic to many of the retail names over worries that this holiday season may not meet expectations. At the moment I am not suggesting 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 $3.80/4.10

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.

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


Dollar Tree, Inc. - DLTR - close: 55.72

Comments:
12/15/13: Shares of DLTR snapped a three-week losing streak. Gains were mild. DLTR has been struggling to breakout past short-term technical resistance at its simple 100-dma (near $56.25). The $55.00 area remains short-term support.

More conservative investors might want to just abandon ship. I am not suggesting new positions at this time.

- Suggested Positions -
NOV 21, 2013 - entry price on DLTR @ 55.50, option @ 2.75*
symbol: DLTR1517a65 2015 JAN $65 call - current bid/ask $2.25/2.45

12/08/13 DLTR is not performing. Investors may want to exit early now. I am raising the stop loss to $54.45
11/21/13 trade opened on gap down at $55.50. Trigger was $56.25.
gap down was a reaction to earnings news
10/27/13 removed the 2014 call
10/20/13 adjust the trigger to $56.25 and the stop to $52.40

Current Target: DLTR @ 65.00
Current Stop loss: 54.45
Play Entered on: 11/21/13
Originally listed on the Watch List: 09/22/13


Ford Motor Co. - F - close: 16.59

Comments:
12/15/13: Ford's stock sank to new three-month lows before bouncing on Friday. It looks like the short-term trend is down. Ford's stock now has overhead resistance near $17.00 with a small cloud of moving averages in that area. The $15.75-16.00 area should be support and an area underpinned by the rising 200-dma. At the moment I am not suggesting new positions.

In the news this past week Ford has announced an aggressive schedule for 2014. The company plans to launch 23 new vehicles making it the first time in over a century they have released that many new products in one year. Ford is also planning to build two new facilities in Asia and one in South America to keep up with demand. The company also said they will be adding 5,000 new jobs in the U.S. We may hear more details after Ford's analyst meeting coming up on December 18th (this Wednesday).

- 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 $ 2.60/2.65

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: 34.34

Comments:
12/15/13: Gold and silver prices continue to struggle and remain in a down trend but copper is rising and on the verge of a bullish break higher. This could be helping shares of FCX. The stock really didn't move much last week as it bounced along short-term support near $34.00.

I am concerned that new weakness in gold could hurt FCX but it could be counter balanced by the rally in copper. Investors may want to wait for a new close above the 50-dma (above $35.50) before considering new bullish positions on FCX.

- Suggested Positions -
NOV 13, 2013 - entry price on FCX @ 35.25, option @ 2.60*
symbol: FCX1517a39 2015 JAN $39 call - current bid/ask $1.95/1.99

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

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: 74.79

Comments:
12/15/13: Uh-oh! It was not a good week for FLR. Wednesday's drop broke support near $78.00 and its simple 50-dma. Shares have continued to fall and are now down three days in a row. The next level of support could be as low as $70.00 and currently our stop loss is at $72.75. I am not suggesting new positions at this time. More conservative traders may want to exit now to lock in gains.

Earlier Comments:
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: 8.20/8.50

11/24/13 new stop loss @ 72.75
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.

Current Target:$ Target for 2014 call is $79.00,
Target for 2015 is $88.00
Current Stop loss: 72.75
Play Entered on: 09/12/13
Originally listed on the Watch List: 08/11/13


HollyFrontier Corp. - HFC - close: 45.32

Comments:
12/15/13: I am worried about our HFC trade. The stock is on the verge of breaking down below support near $45.00 and its 50-dma. More conservative investors might want to just go ahead and exit now. I am not suggesting new positions. We will raise the stop loss to $43.75.

NOTE: The options for HFC have changed. Due to a 50-cent special dividend the option strikes have all been adjusted down by 50 cents. Our listed option strike 2015 January $49.50 has become $49.00.

- Suggested Positions -
NOV 26, 2013 - entry price on HFC @ 47.17, option @ 5.00*
symbol: HFC1517a49 2015 JAN $49 call - current bid/ask $4.40/4.70

12/15/13 new stop loss @ 43.75
*option entry price is an estimate since the option did not trade at the time our play was opened.

Current Target: HFC @ 59.00
Current Stop loss: 43.75
Play Entered on: 11/26/13
Originally listed on the Watch List: 11/24/13


Harley-Davidson - HOG - close: 67.51

Comments:
12/15/13: HOG rallied to new multi-year highs and almost made it to $70.00 before paring its gains. Our plan was to exit our 2014 January calls on Monday, December 9th at the opening bell. HOG opened at $68.46 (down 7 cents).

Earlier Comments:
Our exit target for the 2015 calls remains $74.50 for now.

- Suggested Positions -
(exited 2014 calls on Monday, December 9th, 2013)
SEP 04, 2013 - entry price on HOG @ 61.01, option @ 2.36
symbol: HOG1418a65 2014 JAN $65 call - closed @ 3.70 (+56.7%)

- or -

SEP 04, 2013 - entry price on HOG @ 61.01, option @ 4.35*
symbol: HOG1517a70 2015 JAN $70 call - current bid/ask $ 5.85/6.00

12/09/13 planned exit for 2014 calls. option @ $3.70 (+56.7%)
12/08/13 prepare to exit 2014 calls immediate on Monday morning
12/08/13 new stop loss @ 62.75
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: 62.75
Play Entered on: 09/04/13
Originally listed on the Watch List: 08/25/13


Honeywell Intl. - HON - close: 86.61

Comments:
12/15/13: HON made headlines on Friday with news of a new $5 billion stock buyback program but the rally on this headline struggled to make any real gains. Shares appear to be correcting lower and I would expect a drop toward what should be support near $85.00 and its 100-dma.

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 $ 7.85/8.10

11/24/13 new stop loss @ 83.75
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.
...please see earlier newsletter for prior comments...

Current Target:$ 95.00
Current Stop loss: 83.75
Play Entered on: 05/07/13
Originally listed on the Watch List: 05/04/13



Helmerich & Payne, Inc. - HP - close: 79.52

Comments:
12/15/13: Oil related stocks struggled last week but the pullback in HP wasn't that bad. The stock has been churning sideways inside the $78-81 zone for almost two weeks. I would wait for a new close above $81.50 before considering new bullish positions.

- Suggested Positions -
DEC 05, 2013 - entry price on HP @ 81.00, option @ 5.60*
symbol: HP1517a90 2015 JAN $90 call - current bid/ask $ 4.70/5.00

12/05/13 trade opens with HP opening at $81.00
*option entry price is an estimate since the option did not trade at the time our play was opened.
12/04/13 HP closes at $80.97, above our suggested trigger @ 80.25
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

Current Target:$ 95.00
Current Stop loss: 74.75
Play Entered on: 12/05/13
Originally listed on the Watch List: 10/27/13


JPMorgan Chase & Co. - JPM - close: 56.17

Comments:
12/15/13: It was a quiet week for JPM with shares consolidating sideways between short-term support near $56.00 and its short-term bearish trend line of lower highs. This pattern is bearish and would suggest a drop toward the $55-54 area soon. With only five weeks left on our 2014 calls investors have a decision to make. Do you exit those 2014 calls now and lock in a gain or do you hold on expecting JPM to rally before January expiration? That could depend on if the Federal Reserve announces a taper on Wednesday. We are expecting the Fed to not taper and the market to rally on the no taper headline. Thus we're suggesting investors hold on but it's a decision each investors has to make individually.

Earlier Comments:
Plan to exit the 2014 calls when JPM hits $59.50.
Our target to exit the 2015 calls is $64.00.

- Suggested Positions -
JUN 24, 2013 - entry price on JPM @ 50.25, option @ 1.60
symbol: JPM1418a55 2014 JAN $55 call - current bid/ask $ 2.06/2.08

- or -

JUN 24, 2013 - entry price on JPM @ 50.25, option @ 3.80
symbol: JPM1517a55 2015 JAN $55 call - current bid/ask $ 5.50/5.60

12/01/13 adjust exit target for the 2014 calls to exit when JPM hits $59.50
11/24/13 new stop loss @ 51.95
Consider taking profits on the 2014 calls now
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: exit 2014 calls when JPM hits $59.50
exit 2015 calls when JPM hits $64.00
Current Stop loss: 51.95
Play Entered on: 06/24/13
Originally listed on the Watch List: 05/25/13


Level 3 Communications - LVLT - close: 30.41

Comments:
12/15/13: Traders bought the dip on Thursday and Friday's bounced lifted LVLT to a gain for the week. The stock remains under resistance near the $31.00 level. Investors may want to consider launching new bullish positions if we see LVLT close above $31.00.

- Suggested Positions -
OCT 31, 2013 - entry price on LVLT @ 29.39, option @ 4.40*
symbol:LVLT1517a30 2015 JAN $30 call - current bid/ask $ 4.50/4.70

12/08/13 new stop loss @ 27.75
11/24/13 new stop loss @ 26.75
*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: 27.75
Play Entered on: 10/31/13
Originally listed on the Watch List: 10/20/13


National Oilwell Varco - NOV - close: 78.74

Comments:
12/15/13: Ouch! It was a down week for oil stocks but NOV underperformed with a plunge toward new support near $78.00 and its 100-dma. On a short-term basis the stock is oversold and poised for a bounce but broken support near $81.00 is now new overhead resistance (as well as the simple 50-dma).

Currently our stop is at $76.75. More conservative investors might want to adjust their stop closer to the $78.00 level. I am not suggesting new positions. Given the recent breakdown I would seriously consider exiting bullish positions on a bounce back toward the $81.00 area.

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 $ 3.75/3.90

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: 15.02

Comments:
12/15/13: I warned readers right from the start that NVDA was a volatile stock. Unfortunately all of the volatility over the last several weeks could make you seasick. This last week we can blame a widespread sell off in the semiconductor industry and not just NVDA alone. Shares ended the week at round-number support near $15.00. I'm not suggesting new positions.

Don't forget that we only have about five weeks left on the 2014 January options.

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 $0.13/0.15

- or -

SEP 12, 2013 - entry price on NVDA @ 15.63, option @ 1.54
symbol: NVDA1517a17 2015 JAN $17 call - current bid/ask $1.01/1.06

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


QUALCOMM Inc. - QCOM - close: 72.58

Comments:
12/15/13: Overall sentiment for QCOM stock remains very bullish but technically the action last week was bearish. QCOM produced a failed rally and bearish reversal pattern at resistance near $74.00 on Wednesday. The reversal was confirmed. Shares now look poised to drop back toward what should be significant support near $70.00. I would wait for that dip near $70 before considering new bullish positions.

Earlier Comments:
I want to remind readers that QCOM does a lot of business with Apple (AAPL), and if AAPL encounters any bad news (example: lower iPhone sales) it could influence trading in shares of QCOM.

- Suggested Positions -
NOV 15, 2013 - entry price on QCOM @ 71.34, option @ 4.90
symbol: QCOM1517a75 2015 JAN $75 call - current bid/ask $5.35/5.50

12/08/13 new stop loss @ 67.75
11/15/13 trade opens. QCOM @ 71.34
11/14/13 QCOM closes above entry trigger (above 70.50)

Current Target: $85.00
Current Stop loss: 67.75
Play Entered on: 11/15/13
Originally listed on the Watch List: 11/03/13


Starbucks - SBUX - close: 76.35

Comments:
12/15/13: It looks like we were too early to buy the dip in shares of SBUX. In this business being early means you're wrong. The stock accelerated lower with a breakdown below technical support at its 50-dma. Shares have spent the last couple of days trying to hold at new support near its 100-dma (around the $76.00 level). The recent weakness in SBUX may have been exacerbated by a bounce in coffee prices. The JO coffee ETN is up five days in a row and breaking out past its simple 50-dma. If this rally in JO continues it could put more pressure on SBUX.

More conservative investors will want to seriously consider an early exit from our SBUX trade or as an alternative consider raising your stop closer to the $76.00 level. I am not suggesting new positions.

- Suggested Positions -
DEC 04, 2013 - entry price on SBUX @ 80.00, option @ 4.70
symbol: SBUX1517a90 2015 JAN $90 call - current bid/ask $3.45/3.55

12/15/13 The breakdown in SBUX this past week throws the up trend in question. Investors might want to exit early now to minimize losses
12/04/13 triggered on a dip at $80.00
12/01/13 adjust the trigger to $80.00
11/24/13 adjust the trigger to $79.25
adjust the option strike to the 2015 January $90 call
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

Current Target: exit calls when SBUX hits $98.00
Current Stop loss: 74.75
Play Entered on: 12/04/13
Originally listed on the Watch List: 10/27/13


VeriSign, Inc. - VRSN - close: 57.05

Comments:
12/15/13: A bounce on Friday helped pare VRSN's loss for the week to just 15 cents. The up trend remains intact but VRSN is facing short-term resistance near $57.50. Investors might want to consider a stop loss closer to the $55.00 level.

Earlier Comments:
We will still have the 2015 calls and our exit target remains $64.50 for this position.

- Suggested Positions -
(option exit on December 2nd, 2013)
SEP 19, 2013 - entry price on VRSN @ 51.40, option @ 1.16
symbol:VRSN1418a55 2014 JAN $55 call - exit @ $2.80** (+141.3%)

- or -

SEP 19, 2013 - entry price on VRSN @ 51.40, option @ 4.25*
symbol:VRSN1517a55 2015 JAN $55 call - current bid/ask $ 6.80/7.05

12/02/13 planned exit for the 2014 calls, option @ +141.3%
**option exit price is an estimate since the option did not trade at the time our play was closed.
12/01/13 prepare to exit our 2014 Jan. $55 calls on Monday, Dec. 2nd.
11/24/13 new stop loss @ 52.40
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: 52.40
Play Entered on: 09/19/13
Originally listed on the Watch List: 08/18/13


Western Digital Corp. - WDC - close: 79.05

Comments:
12/15/13: WDC has finally graduated from our watch list to our active play list. Volatility on Tuesday pushed WDC toward its simple 10-dma. Shares hit our buy-the-dip trigger at $77.00. Since then WDC has continued to consolidate sideways below round-number resistance at the $80.00 level. If you missed our buy-the-dip entry point I would also consider buying calls on a close above $80.25.

Our long-term target is $94.00. FYI: The Point & Figure chart is bullish with a $91 target.

- Suggested Positions -
DEC 10, 2013 - entry price on WDC @ 77.00, option @ 6.00*
symbol: WDC1517a90 2015 JAN $90 call - current bid/ask $ 6.70/7.00

12/10/13 triggered on our buy-the-dip entry at $77.00
*option entry price is an estimate since the option did not trade at the time our play was opened.
12/08/13 adjust the entry point strategy to buy calls on a dip at $77.00 since we missed the breakout (see the December 8th, watch list update)
12/01/13 adjust entry point to a close above $76.50 instead of 76.25
adjust the stop loss to $69.75

Chart of WDC:

Current Target: Exit 2015 calls when WDC hits $94.00
Current Stop loss: 69.75
Play Entered on: 09/19/13
Originally listed on the Watch List: 11/17/13


Wyndham Worldwide - WYN - close: 70.59

Comments:
12/15/13: Double-check your stop loss placement because WYN could be headed for a correction. After a four-week rally the stock hit some profit taking last week. Shares did find support near $70.00. Yet last week's pullback has created a bearish engulfing candlestick reversal pattern on the weekly chart. The next level of support, if the $70 level fails, is the $67.50-68.00 area. I am not suggesting new positions at this time.

Earlier Comments:
The point & figure chart is bullish and currently forecasting a $93.00 target.

- Suggested Positions -
NOV 18, 2013 - entry price on WYN @ 68.97, option @ 4.20
symbol: WYN1517a75 2015 JAN $75 call - current bid/ask $ 4.50/5.20

12/01/13 new stop loss @ 65.40
11/24/13 new stop loss @ 64.75
11/18/13 trade opens. WYN opens @ 68.97

Current Target: 85.00
Current Stop loss: 65.40
Play Entered on: 11/18/13
Originally listed on the Watch List: 11/10/13



CLOSED Plays


Yum! Brands - YUM - close: 71.81

Comments:
12/15/13: It also looks like we were too early to buy the dip in shares of YUM. Normally broken resistance becomes new support so we were expecting broken resistance in the $74-75 zone to hold as new support. Unfortunately the reversal in YUM actually picked up speed.

YUM hit our stop loss at $71.90 on Thursday.

- Suggested Positions -
DEC 03, 2013 - entry price on YUM @ 75.25, option @ 3.75
symbol: YUM1517a85 2015 JAN $85 call - exit @ $2.50** (-33.3%)

- or -

DEC 03, 2013 - entry price on YUM @ 75.25, option @ 6.65*
symbol: YUM1615a85 2016 JAN $85 call - exit @ $4.35** (-19.5%)

12/12/13 stopped out at $71.90
**option exit price is an estimate since the option did not trade at the time our play was closed.
12/03/13 trade opened on buy-the-dip trigger at $75.25
*option entry price is an estimate since the option did not trade at the time our play was opened.

Chart of YUM:

Current Target: 95.00
Current Stop loss: 71.90
Play Entered on: 12/03/13
Originally listed on the Watch List: 12/01/13



Watch

Banks, Casinos, & Industrial Goods

by James Brown

Click here to email James Brown


New Watch List Entries

BBT - BB&T Corp.

MGM - MGM Resorts

MTW - Manitowoc Co.


Active Watch List Candidates

ATI - Allegheny Tech.

C - Citigroup, Inc.

HD - Home Depot, Inc.

MSI - Motorola Solutions

WFC - Wells Fargo & Co


Dropped Watch List Entries

DE and WDC both graduated to our active play list.



New Watch List Candidates:


BB&T Corp. - BBT - close: 35.34

Company Info

BBT is in the financial sector. The company is a regional bank headquartered in North Carolina. The stock has been showing relative strength. The financial sector is down two weeks in a row. Shares of BBT are up over that time period. The stock was recently upgraded with a $43 target. Its point & figure chart is bullish and forecasting at $57 target.

This past week saw BBY breakout past resistance near $35.00. More aggressive investors might want to buy calls now. I am suggesting we wait for BBT to close above $35.75, which could happen soon, and buy calls the next day with a stop loss at $32.95. Our long-term target is $42.50.

Keep in mind that if the Federal Reserve announces a taper to their QE program on Wednesday it could be a game changer for the market. Investors may not want to open any new positions ahead of the Fed statement.

FYI: BBT is scheduled to report earnings on January 16th.

Breakout trigger: Wait for a close above $35.75
buy calls the next day with a stop loss at $32.95

BUY the 2015 Jan $40 call (BBT1517a40) current ask $0.82

Chart of BBT:

Originally listed on the Watch List: 12/15/13


MGM Resorts - MGM - close: 21.20

Company Info

MGM is considered part of the services sector. The company runs several casinos including properties here in the U.S., in China, and in Macau. Plus they've also expected to the newly opened online gambling in New Jersey. The stock has been surging in recent weeks with a three-week climb that has completely ignored the market's recent weakness. This past week saw MGM breakout to new multi-year highs.

I am suggesting that we wait for MGM to close above $21.50 and buy calls the next day with a stop loss at $19.35. Our long-term target is the $26-28 zone.

Breakout trigger: Wait for a close above $21.50
buy calls the next day with a stop loss at $19.35

BUY the 2015 Jan $25 call (MGM1517a25) current ask $1.78

Chart of MGM:

Originally listed on the Watch List: 12/15/13


The Manitowoc Co. - MTW - close: 21.50

Company Info

MTW is in the industrial goods sector. The company makes cranes and has another unit that makes foodservice equipment. Shares have been showing relative strength. The stock is just finished its third weekly gain while ignoring the broader market's weakness. MTW is quickly approaching major resistance near the $22.00 level. A breakout there could herald the next major leg higher.

I am suggesting we wait for MTW to close above $22.10 and then buy calls the next morning with a stop loss at $19.90. If triggered our long-term target is the $28-30 zone. Currently the point & figure chart is bullish and forecasting at $26.50 target.

Breakout trigger: Wait for a close above $22.10
buy calls the next day with a stop loss at $19.90

BUY the 2015 Jan $25 call (MTW1517a25) current ask $2.55

Chart of MTW:

Originally listed on the Watch List: 12/15/13


Active Watch List Candidates:



Allegheny Technologies - ATI - close: 32.77

Comments:
12/15/13: ATI ended unchanged on the week thanks to a two-day bounce from short-term support near $32.00. Reversing its losses is a bit of a show of relative strength. We'll hold on to ATI for another week and see how shares progress.

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


Citigroup Inc. - C - close: 50.97

Comments:
12/15/13: The financial sector is down two weeks in a row and Citigroup is no exception. I am expecting a bounce from the $50 area but we will still wait for a breakout to new highs before considering new positions. I don't see any changes from my prior comments.

We want to wait for C to close above $53.60 and then buy calls the next morning. I am adjusting our stop loss to $47.90. Our long-term target is the $70.00 area.

FYI: C is scheduled to report earnings on January 16th.

Breakout trigger: Wait for C to close above $53.60
buy calls the next morning with a stop loss at $47.90

BUY the 2015 Jan $60 call (C1517a60)

- or -

BUY the 2016 Jan $60 call (C1615a60)

12/08/13 if triggered start with a stop loss at $47.90
12/01/13 adjust the entry trigger: wait for a close above $53.60 instead of a close above $53.50

Originally listed on the Watch List: 11/24/13


Home Depot, Inc. - HD - close: 79.01

Comments:
12/15/13: This past week saw HD reaffirm its prior earnings guidance for 2014. The stock didn't move much on this news. The sideways consolidation in shares of HD appears to be narrowing. That means we should see this stock breakout one way or the other pretty soon. I do not see any changes from last week's new watch list entry for HD.

I am suggesting we wait for HD to close above $81.50 and buy calls the next morning with an initial stop loss at $76.75. Our long-term target is $99.00. FYI: The point & figure chart is bullish with a $97 target.

Breakout trigger: Wait for HD to close above $81.50
then buy calls the next morning.

BUY the 2015 Jan $90 call (HD1517a90)

- or -

BUY the 2016 Jan $90 call (HD1615a90)

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


Motorola Solutions - MSI - close: 65.05

Comments:
12/15/13: The pullback in MSI has been relatively minor. I don't see any changes from my earlier comments.

I am suggesting a trigger to buy calls at $66.75. If triggered our long-term target is the $80-90 zone but we will adjust this as needed. The point & figure chart is bullish with a long-term target at $91.00.

Breakout trigger: $66.75, start with a stop loss at $61.90.

BUY the 2015 Jan $70 call (MSI1517a70)

- or -

BUY the 2016 Jan $75 call (MSI1615a75)

Originally listed on the Watch List: 12/08/13


Wells Fargo & Co. - WFC - close: 43.73

Comments:
12/15/13: WDC only lost 38 cents for the week. That's less than one percent. Overall I do not see any changes from my prior comments.

Earlier Comments:
The $44.50-45.00 zone appears to be major resistance. A reversal here would look like a potential bearish double top pattern. Yet a breakout could signal the next major leg higher.

I am suggesting we wait for WFC to close above $45.25 and then buy calls the next day with a stop loss at $41.90. Our long-term target is $54.50.

Breakout trigger: Wait for WFC to close above $45.25
then buy calls the next day with a stop at $41.90

BUY the 2015 Jan $50 call (WFC1517a50)

- or -

BUY the 2016 Jan $50 call (WFC1615a50)

Originally listed on the Watch List: 12/08/13