Option Investor
Newsletter

Daily Newsletter, Sunday, 12/22/2013

Table of Contents

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

Leaps Trader Commentary

Stocks Surge On Taper News

by James Brown

Click here to email James Brown

It looks like Santa showed up on Wall Street after all. The stock market's underwhelming performance in December, prior to the 18th, had many worried that the seasonal Santa Claus rally may not show up this year. As expected last week was all about the Fed meeting and Wednesday's event moved the market - just not as expected.

Stocks were relatively quiet on Monday and Tuesday as market participants were waiting for the Wednesday afternoon Fed decision and if the FOMC would announce a taper to their QE program. The Federal Reserve announced a $10 billion a month reduction in their QE program. The stock market reacted by exploding higher with the S&P 500 surging +1.7% on Wednesday to completely erase all of its December losses. This move higher surprised a lot of people! If there was a theme to the market's reaction to the taper news it was a "reduction of uncertainty". By Friday's closing bell the NASDAQ composite had rallied to a new 13-year high while the Dow Industrials, the S&P 500, the small cap Russell 2000, and the Dow Transportation average had all set new record closing highs.

Why was the market rally to the taper news a surprise? Previously when the Fed had hinted it would taper (a.k.a. reduce) its $85 billion-a-month QE program the market sank on the news. Analyst coined the term "taper tantrum" for the market declines back in May and August this year. The majority of analysts and economists surveyed were expecting the Fed to postpone any taper announcement until March 2014. Thus the expectation was a taper announcement in December would be too soon and spark a market sell off.

Spoonful of Sugar

The fictional Mary Poppins wisely stated that a spoonful of sugar helps the medicine go down. It looks like Federal Reserve Chairman Ben Bernanke is following her lead. Bernanke appears to have convinced the market that tapering their QE program (the medicine) is not the same thing as tightening monetary policy. The QE is a form of extraordinary stimulus above and beyond the Fed's normal monetary action (i.e. raising and lowering interest rates). In Bernanke's press conference the Chairman said the Fed would remain accommodative and likely leave rates unchanged (currently in the 0.0% to 0.25% range) for the foreseeable future.

Currently the U.S. unemployment rate is at 7.0%. Previously the Fed had suggested that they would not raise rates until unemployment fell to 6.5%. After Bernanke's press conference on Wednesday he hinted that the new target could be unemployment at 6.0% before the Fed raises rates (the sugar). Analysts are now forecasting that the Fed could leave rates unchanged well into 2015.

In summary the market has chosen to interpret the Fed's decision to taper as a vote of confidence for the U.S. economy. The data does suggest that our economic situation is improving, just very slowly. The labor market is still weak. If you ignore the plunging labor participation rate then the headline unemployment numbers have hit their lowest level in five years. The latest Q3 GDP numbers have been upgrade twice (more on that in a moment). Plus the stock market is at record highs and should be generating a "wealth effect" at least for those Americans with money in the market.

Economic Data

The regional Fed surveys last week showed improvement. The New York Empire State manufacturing survey rose from -2.2 in November to +1.0 in December. The Philadelphia Fed survey came in at a better than expected reading of 7.0, up from the prior month's 6.5. Numbers above zero indicate growth for these surveys.

Inflation at the consumer level, in the national CPI data, was flat on a month over month basis. Meanwhile the industrial production data for November came in better than expected with +1.1% growth. The U.S. capacity utilization improved to 79.0%.

Housing data was mixed. The homebuilder confidence index surged to a four-month high. Housing starts supported this data with U.S. housing starts soaring to their highest levels since February 2008. The Commerce Department reported a +22.7% jump in housing starts to an annual pace of 1.09 million units. Unfortunately the recent rise in mortgage rates pushed the MBA mortgage application index to a -5.5% drop last week. The number of Existing Home sales plunged -4.3% last month to an annual pace of 4.9 million.

In positive news the U.S. Q3 GDP estimate was upgraded again. The Commerce Department now believes that the U.S. grew +4.1% last quarter, up from the prior estimate of +3.6%. We should not forget that a good portion of the third quarter's improvement was due to rising inventories, which is not necessarily a good thing. Fortunately, the latest estimate of +4.1% growth got a boost from improving consumer spending, which is a good thing. Unfortunately there always seems to be a fly in the soup as you drill down into these numbers it would appear that more and more of this consumer spending was spent on gasoline and healthcare.

Overseas Data

Economic data overseas remained mixed as well. The Eurozone CPI (consumer level inflation) declined -0.1% month over month. The annual reading inched up to +0.9%. Germany saw its manufacturing PMI rise from 52.7 to 54.2, which was above expectations. The German ZEW economic sentiment poll surged from 54.6 to 62.0. In the United Kingdom their GDP came in at +0.8% for the quarter, which lifted the year over year reading to +1.9%. The U.K. also said their retail sales improved to +0.3% for the month.

The data turned soft in Italy with industrial new orders falling -2.5% for the month. Retail sales in Italy slipped -0.1% for the month and that pushed the year over year reading to -1.6%. Elsewhere the Standard & Poor's rating agency downgraded the European Union's (EU) credit rating from the highest level of AAA to AA+. At the moment both Fitch and Moody's still rate the EU with an AAA but that could change. Lower credit ratings usually mean higher borrowing costs.

We are seeing two very different markets in Asia. Japan released its Tankan survey and the Tankan Large Manufacturers index improved from 12 to 16 while the non-manufacturers index rallied from 14 to 20. Both readings were better than expected. This past week the Bank of Japan left interest rates unchanged in the 0.0% to 0.1% range. Together this news has helped lift the Japanese NIKKEI index to a new six-year high. Year to date the NIKKEI is up more than +50%.

In contrast the Chinese Shanghai market is negative for the year and Friday marked its ninth decline in a row. The latest HSBC manufacturing PMI data was a disappointment with a drop from 50.8 to 50.5. Economists were expecting a rise to 51.0. Numbers below 50.0 indicate economic contraction and this index is moving closer to negative territory. The Chinese markets are also reacting to growing worries over a liquidity crunch that is pushing up short-term interest rates.

Major Indices:

It was a strong week for the S&P 500 with a +2.4% gain and most of that came from Wednesday afternoon. The index briefly dipped toward its 50-dma following the Fed's taper announcement and then surged toward its recent highs. The rally continued on Friday with the large cap S&P 500 closing at a new record high and pushing its year to date gains to +27.5%.

The path of least resistance should be up. The next level of potential resistance is probably at 1840 or 1850. If the market were to see a pullback we can watch for possible support at 1800, 1790 and 1770.

chart of the S&P 500 index:

The NASDAQ's rally was equally impressive with a +2.5% gain for the week. The index briefly dipped to a new relative low at 3979 on Wednesday afternoon before reversing higher. This index displayed relative strength on Friday with a +1.1% gain that left it as a new 13-year high.

The next level of likely resistance is probably the 4150 area. Support is near the 4,000 level. Year to date the NASDAQ composite is up +35.9%.

chart of the NASDAQ Composite index:



The small cap Russell 2000 index outperformed its large cap rivals with a +3.5% gain for the week. The $RUT rallied past multiple layers of short-term resistance and ended the week testing its all-time high near 1147. Friday's close is a new all-time closing high.

If the $RUT can push past the 1150 level then potential resistance could be one of its trend lines of higher highs (see chart) or the 1160-1180 area. If the market were to see a pullback I would watch for potential short-term support near 1135 and 1120. Year to date the $RUT is up +35.0%.

chart of the Russell 2000 index



Economic Data & Event Calendar

It should be a relatively quiet week for the market as far as data and events go. We only have six trading days left for 2013. The U.S. stock market will close early on December 24th at 1:00 p.m. The market will be closed all day on Christmas (December 25th). None of the events or reports listed below should be market movers.

Economic and Event Calendar

- Monday, December 23 -
Personal income & spending data from November
University of Michigan consumer sentiment survey

- Tuesday, December 24 -
MBA mortgage application index
U.S. stock market closes early
Durable Goods orders
New home sales data

- Wednesday, December 25 -
U.S. stock market closed for Christmas

- Thursday, December 26 -
Weekly Initial Jobless Claims
Boxing Day holiday
(United Kingdom, Canada, Australia, New Zealand)

- Friday, December 27 -
(nothing significant)

Additional Events to be aware of:

Jan. 1st - U.S. markets closed for New Year's Day
Feb. 7th - U.S. debt ceiling is reached




Looking Ahead:

As we look ahead to the rest of 2013 the trend should be higher. Seasonality favors the bulls. Most of the market's largest participants have already closed their books for the year. Trading desks will be staffed by skeleton crews and volume should decline since most traders will be on vacation. It is worth noting that a lack of volume could exaggerate any moves in individual stocks.

Looking into next year we will soon hear more about the January effect, which tends to benefit the small caps, and the historical patterns associated with an up or down January. Thankfully the U.S. Senate passed the two-year budget deal this past week. That means we will not see another budget battle in January. However, politicians in Washington will soon be gearing up for another fight over the U.S. debt ceiling with its deadline in February.

Believe it or not but the Q4 earnings season is only about four weeks away. Corporate earnings and more importantly corporate guidance for 2014 could dictate market direction for the first quarter of 2014.

Thus far 2013 has been an exceptional year for stocks. No one is predicting another banner year in 2014 but the general consensus is that it should be another up year. One phrase I heard a lot this past week was that "good" years can follow "great" years. 2013 has been a great year and market pundits are expecting (hoping) 2014 to be a good one.

This newsletter would not exist without the wonderful subscribers who read it each week. I want to personally say thank you and wish you a merry Christmas and a happy New Year. Take a moment and count your blessings of family, friends, and freedom. I know that I am very blessed.

Merry Christmas,

James



Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Stocks snap back with the market moving from one of its worst weekly declines of the quarter to one of its best weekly gains. The major market averages have rallied to new all-time closing highs (the NASDAQ hit new 13-year highs).

NOTE: We want to exit (close) our CZR and DLTR trades on Monday morning, December 23rd. We also want to exit our JPM 2014 calls on Monday morning to lock in gains.

BBT, MGM, and MTW have graduated from our watch list to our active play list.

I have updated stop losses on: AVGO, COF, DE, FLR, VRSN, WDC, and WYN.

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

The Last Six Days of 2013

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(December 22, 2013)

Surprise! The market did not see another taper tantrum. Many were expecting stocks to move lower on a December announcement that the Federal Reserve would reduce their QE program. The market rallied instead as Ben Bernanke assured investors that interest rates would remain low for a long time.

The breakout to new all-time highs is certainly bullish. Bigger picture I do expect the path of least resistance to remain higher. Yet the next several days could be random as most market participants are on vacation and volume will be light. I suspect there is a good chance that stocks just meander sideways until yearend. Then the first several days of January could be bullish as mutual funds put new money to work.

Our watch list had another successful week with all three of our new candidates graduating to the active play list (BBT, MGM, and MTW). Tonight I am not adding any new trades although I would be tempted to go ahead and buy calls on the bullish breakout in CBI (one of our new watch list candidates).

On the radar screen below I do have a few favorites.
BA looks tempting and a close above $138 or $140 could be a potential entry point.
FL has been showing a lot of relative strength this past week. A dip back toward $40.00 might be an entry point.
UNP is a railroad and rail traffic has been improving. Shares of UNP are on the verge of a bullish breakout past $165.00. The recent consolidation in SNDK looks a bit like a bull-flag consolidation pattern. I would be tempted to buy calls on a close above $71.00.

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

BA*, FL*, UNP*, CAT, STX, MA, V, MSFT, INTC, LUV, ATVI, PII, TSCO, ITW, XLF, CAH, UA, CMI, ETN, JNPR, WNR, GRPN, NDAQ, SNDK*,



Play Updates

Stocks Surge To New Highs

by James Brown

Click here to email James Brown

Editor's Note:

We added three new trades from our watch list. BBT, MGM, and MTW all graduated to our active play list.

NOTE: We want to exit our CZR and DLTR trades on Monday morning, Dec. 23rd. We also want to exit our JPM 2014 calls on Monday morning.


Closed Plays


F & NOV hit our stop loss.



Play Updates


American Intl. Group - AIG - close: 51.03

Comments:
12/22/13: It was a good week for AIG. The trend of higher lows has produced a trend of higher highs. Shares also broke out past resistance near $50 and its 50-dma. We only have four weeks left on our 2014 January calls. I am not suggesting new positions at this time.

- Suggested Positions -
JUL 15, 2013 - entry price on AIG @ 46.99, option @ 2.50
symbol: AIG1418a50 2014 JAN $50 call - current bid/ask $1.74/1.78

- or -

JUL 15, 2013 - entry price on AIG @ 46.99, option @ 4.05
symbol: AIG1517a55 2015 JAN $55 call - current bid/ask $3.65/3.75

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: 51.65

Comments:
12/22/13: AVGO produced big gains last week. Just Monday and Tuesday last week saw a +17.3% gain in AVGO. The move appears to be a positive reaction to news that AVGO is buying LSI Logic. Normally the stock of the acquiring company goes down but this time Wall Street applauded the merger.

Tonight we are raising the stop loss to $44.90. More conservative investors may want to raise their stop higher. I am also adjusting our exit target to $58.50 from $55.00. 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 $7.00/7.40

12/22/13 new stop loss @ 44.90, adjust exit target to $58.50
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: $58.50
Current Stop loss: 44.90
Play Entered on: 11/11/13
Originally listed on the Watch List: 09/22/13


Bank of America - BAC - close: 15.60

Comments:
12/22/13: As expected shares of BAC bounced from support near the $15.00 level. On a short-term basis I would not be surprised to see another dip near $15.50. 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 $2.10/2.15

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


BB&T Corp. - BBT - close: 36.38

Comments:
12/22/13: BBT is a new watch list candidate that has graduated to our active play list. The plan was to wait for shares to close above $35.75 and then buy calls the next day. BBT closed at $35.87 on December 16th. Our trade opened on Tuesday at $35.81. Shares have since continued to climb and Friday's close is a new multi-year closing high. If you're looking for an entry point I would consider buying dips near the $36.00 level.

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

- Suggested Positions -
DEC 17, 2013 - entry price on BBT @ 35.81, option @ 0.99
symbol: BBT1517a40 2015 JAN $40 call - current bid/ask $1.12/1.20

Chart of BBT:

Current Target: BBT @ 42.50
Current Stop loss: 32.95
Play Entered on: 12/17/13
Originally listed on the Watch List: 12/15/13


Capital One Financial - COF - close: 74.73

Comments:
12/22/13: COF has been showing relative strength once the market started to rally on Wednesday afternoon. Shares have broken out past resistance to close at new multi-year highs. Tonight I am raising our stop loss to $68.35.

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 $6.95/7.15

12/22/13 new stop loss @ 68.35
*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: 68.35
Play Entered on: 11/29/13
Originally listed on the Watch List: 11/17/13


Caesars Entertainment - CZR - close: 20.26

Comments:
12/22/13: Caution! I am disappointed with CZR's performance last week. The market is breaking out to new highs and yet CZR barely moved. We should take this relative weakness as a warning signal. I am suggesting an immediate exit on Monday morning. There are better candidates for our capital.

- Suggested Positions -
DEC 03, 2013 - entry price on CZR @ 20.91, option @ 4.70*
symbol: CZR1517a25 2015 JAN $25 call - current bid/ask $3.70/4.20

12/22/13 prepare to exit immediately on Monday morning, Dec. 23rd
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: 62.55

Comments:
12/22/13: We were running out of time on our 2014 DD calls. The rally this past week was a gift from the trading gods. Shares have rallied toward their October high near $62.50. More conservative investors may want to exit these calls now. We only have four weeks left before the 2014 January options expire. I am not suggesting new positions.

- Suggested Positions -
OCT 25, 2013 - entry price on DD @ 62.57, option @ 0.74
symbol: DD1418a65 2014 JAN $65 call - current bid/ask $0.30/0.34

- or -

OCT 25, 2013 - entry price on DD @ 62.57, option @ 3.15
symbol: DD1517a65 2015 JAN $65 call - current bid/ask $3.40/3.55

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: 90.08

Comments:
12/22/13: DE extended its rally last week. Shares are up three weeks in a row and up five out of the last six weeks. The stock added almost three points and is hovering near round-number resistance at the $90.00 level. While the trend is up DE is due for a pullback. I am raising our stop loss to $83.75. More conservative investors might want to raise their stop closer to $86.00 since broken resistance at $86 should be new support.

- Suggested Positions -
DEC 10, 2013 - entry price on DE @ 87.26, option @ 5.85*
symbol: DE1517a90 2015 JAN $90 call - current bid/ask $6.90/7.05

12/22/13 new stop loss @ 83.75
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

Current Target: DE @ 98.50
Current Stop loss: 83.75
Play Entered on: 12/10/13
Originally listed on the Watch List: 12/08/13


Dollar General Corp. - DG - close: 60.08

Comments:
12/22/13: Last week saw DG dip toward technical support near its 50-dma and bounce. Overall shares actually lost ground for the week (about 40 cents). The relative weakness is a bit worrisome but I'm not willing to give up just yet. I am not suggesting new positions.

We only have four weeks left before our 2014 January options expire.

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

- Suggested Positions -
SEP 06, 2013 - entry price on DG @ 57.61, option @ 2.58
symbol: DG1418a60 2014 JAN $60 call - current bid/ask $1.65/1.75

- or -

SEP 06, 2013 - entry price on DG @ 57.61, option @ 3.48
symbol: DG1517a70 2015 JAN $70 call - current bid/ask $3.30/3.60

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: 72.40

Comments:
12/22/13: DIS had a good week with shares up Monday through Thursday. After hitting new all-time highs the stock experienced a little profit taking on Friday. I am not suggesting new positions at this time. More conservative investors may want to consider adjusting their stop loss closer to the $68.00 level.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $5.55/5.70

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: 57.11

Comments:
12/22/13: DKS is looking a lot better with its rebound off of Tuesday's low near $55.00. The last four weeks is looking like a consolidation phase and DKS is poised to breakout from this range. I would be tempted to buy calls on a close above $57.50 or you could wait for a rally past the intraday high from November 19th at $58.40.

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 $4.50/4.80

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: 55.45

Comments:
12/22/13: DLTR is not working for us. Shares seem stuck under resistance near $56 and its 100-dma. The market's rally to new highs failed to inspire any bargain buying in this stock. I am suggesting an immediate exit to cut our losses on Monday morning, Dec. 23rd.

- Suggested Positions -
NOV 21, 2013 - entry price on DLTR @ 55.50, option @ 2.75*
symbol: DLTR1517a65 2015 JAN $65 call - current bid/ask $2.00/2.20

12/22/13 prepare to exit immediately on Monday morning, Dec. 23rd
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


Freeport-McMoRan - FCX - close: 35.69

Comments:
12/22/13: Good news! It looks like FCX could be turning the corner after a seven-week correction lower. Shares held support near $34.00 for two weeks in a row. This past week saw the stock rebound and appear to break through the intermediate trend of lower highs.

We still need to be careful here given the volatility in gold and copper. Gold has been weak but it's near support. Meanwhile copper has been rising but this last week saw a pullback.

I am not suggesting new positions in FCX at the moment. I might reconsider launching bullish positions if FCX can close above $36.00 again.

- Suggested Positions -
NOV 13, 2013 - entry price on FCX @ 35.25, option @ 2.60*
symbol: FCX1517a39 2015 JAN $39 call - current bid/ask $2.29/2.36

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: 79.37

Comments:
12/22/13: FLR was an outperformer last week with a big bounce. The stock added almost five points. Shares are once again nearing overhead resistance at the $80.00 level. I am not suggesting new positions at this time. I am raising our stop loss to $74.40.

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: 10.80/11.10

12/22/13 new stop loss @ 74.40
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: 74.40
Play Entered on: 09/12/13
Originally listed on the Watch List: 08/11/13


HollyFrontier Corp. - HFC - close: 48.39

Comments:
12/22/13: HFC produced a nice bounce last week. Yet the volatility continues. I was tempted to drop HFC as a trade due to all the erratic movement. I remain cautious here and we're not suggesting new positions.

Earlier Comments:
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 $5.70/6.20

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: 68.05

Comments:
12/22/13: Gains in HOG were pretty mild last week. Shares underperformed on Friday with a -0.2% decline. Overall the bullish trend of higher lows remains in place. I am not suggesting new positions.

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 $ 5.95/6.20

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: 89.55

Comments:
12/22/13: Hmm... the trading gods have blessed us again. On Wednesday HON lowered their 2014 earnings guidance. News like this normally sparks a big drop lower. Yet HON barely moved on this news. Instead when the market rallied on the taper news HON outperformed to the upside. When investors are buying bad news it's a good sign for the stock. HON shares surged to new all-time highs. The $90.00 level could be round-number resistance so don't be surprised to see a short-term dip.

Please note that I am adjusting our exit target to $98.00.

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 $ 9.55/9.70

12/22/13 adjust the exit target to $98.00
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:$ 98.00
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: 82.03

Comments:
12/22/13: Shares of oil and gas drilling company HP continued to push higher and ended the week at all-time highs. Momentum traders looking for a breakout higher now have their entry point.

- Suggested Positions -
DEC 05, 2013 - entry price on HP @ 81.00, option @ 5.60*
symbol: HP1517a90 2015 JAN $90 call - current bid/ask $ 5.30/5.70

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: 57.70

Comments:
12/22/13: JPM produced a big bounce following the Fed's taper news. The stock has continued to rally and is now testing resistance near $58.00 at multi-year highs. Please note that we only have about four weeks left on our 2014 January calls. They currently trade with a bid/ask of $3.00/3.10. I am suggesting an immediate exit for these 2014 calls to lock in gains. More aggressive traders may want to risk it and hold on for the potential for more gains before expiration.

I am not suggesting new positions.

Earlier Comments:
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 $ 3.00/3.10

- or -

JUN 24, 2013 - entry price on JPM @ 50.25, option @ 3.80
symbol: JPM1517a55 2015 JAN $55 call - current bid/ask $ 6.25/6.40

12/22/13 prepare to exit the 2014 calls on Monday morning, Dec. 23rd
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: 32.21

Comments:
12/22/13: LVLT spent weeks consolidating below resistance at the $31.00 level. Shares finally broke out this past week to close at new multi-year highs. Nimble traders could use a dip near $31.00, which should now be support, as an alternative entry point.

- Suggested Positions -
OCT 31, 2013 - entry price on LVLT @ 29.39, option @ 4.40*
symbol:LVLT1517a30 2015 JAN $30 call - current bid/ask $ 5.40/5.80

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


MGM Resorts - MGM - close: 22.72

Comments:
12/22/13: MGM is a new trade from our watch list. The plan was to wait for shares to close above $21.50 and then buy calls the next morning. MGM closed at $21.71 on December 16th. Our trade opened on Tuesday at $21.79. MGM has continued to see upward momentum with a strong three-week rally.

Our trade is open but if you're just now looking at MGM you might want to wait for a dip. The stock looks short-term overbought here. Consider waiting to buy calls on a dip in the $21.50-21.00 zone. Look for broken resistance near $21.00 to offer some support.

- Suggested Positions -
DEC 17, 2013 - entry price on MGM @ 21.79, option @ 2.00
symbol: MGM1517a25 2015 JAN $25 call - current bid/ask $ 2.42/2.47

12/17/13 trade opens. MGM @ 21.79
12/16/13 MGM meets our entry requirement with a close above $21.50

Chart of MGM:
Current Target: $26.00-28.00 zone
Current Stop loss: 19.35
Play Entered on: 12/17/13
Originally listed on the Watch List: 12/15/13


The Manitowoc Co. - MTW - close: 22.50

Comments:
12/22/13: MTW displayed relative strength with a +4.65% gain last week. MTW was a watch list candidate. Our plan was to buy calls if shares could close above $22.10. MTW closed at $22.36 on December 18th. Our trade opened on the 19th at $22.33. The move past $22.00 is a bullish breakout past resistance and a new multi-year high for MTW.

If you're looking for a new entry point I would consider waiting to buy calls on a dip near $22.00 or its simple 10-dma.

- Suggested Positions -
DEC 19, 2013 - entry price on MTW @ 22.33, option @ 2.85*
symbol: MTW1517a25 2015 JAN $25 call - current bid/ask $ 2.80/2.85

12/19/13 trade opens. MTW @ 22.33
*option entry price is an estimate since the option did not trade at the time our play was opened.
12/18/13 triggered with MTW close at $22.36, above our $22.10 trigger

Chart of MTW:
Current Target: $28.00-30.00 zone
Current Stop loss: 19.90
Play Entered on: 12/19/13
Originally listed on the Watch List: 12/15/13


NVIDIA Corp. - NVDA - close: 15.69

Comments:
12/22/13: The up and down whipsaws in NVDA continues. I am tempted to drop NVDA as an active trade based on all the volatility. This past week shares tested round-number support near $15.00 and bounced. I am not suggesting new positions.

Don't forget that we only have about four 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 $0.25/0.26

- or -

SEP 12, 2013 - entry price on NVDA @ 15.63, option @ 1.54
symbol: NVDA1517a17 2015 JAN $17 call - current bid/ask $1.25/1.31

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: 72.91

Comments:
12/22/13: QCOM's performance last week was a little bit disappointing. Shares did bounce near the $72 area and its rising 30-dma. If you're looking for a new entry point you might want to consider waiting for a close above $74.00. Otherwise, a dip near $70.00 would be an attractive entry point.

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 $5.25/5.40

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: 77.66

Comments:
12/22/13: SBUX did manage a gain last week but it looks more like an oversold bounce. I am not suggesting new positions. I'm worried that the $80 level and the simple 50-dma are now new overhead resistance.

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.

- Suggested Positions -
DEC 04, 2013 - entry price on SBUX @ 80.00, option @ 4.70
symbol: SBUX1517a90 2015 JAN $90 call - current bid/ask $3.55/3.70

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: 59.27

Comments:
12/22/13: You could say slow and steady wins the race for VRSN. Yet the stock's rally has accelerated this past week. The stock is nearing what could be round-number resistance at the $60.00 level and more conservative investors may want to exit their 2015 calls to lock in gains now. I am raising our stop loss to $54.40.

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 $ 8.15/8.40

12/22/13 new stop loss @ $54.40
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: 54.40
Play Entered on: 09/19/13
Originally listed on the Watch List: 08/18/13


Western Digital Corp. - WDC - close: 82.68

Comments:
12/22/13: The rally in WDC continues. Shares surged to new highs before the market moved on Wednesday. WDC almost hit $85 as the stock reacted to an analyst upgrade. The stock actually garnered a lot of bullish analyst comments this past week. I am raising our stop loss up to $74.25.

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 $ 8.25/8.50

12/22/13 new stop loss at $74.25
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

Current Target: Exit 2015 calls when WDC hits $94.00
Current Stop loss: 74.25
Play Entered on: 09/19/13
Originally listed on the Watch List: 11/17/13


Wyndham Worldwide - WYN - close: 72.97

Comments:
12/22/13: WYN was another strong performer last week. The stock bounced from support near $70.00 and closed at a new high. Shares look ready for the next leg higher. I am raising our stop loss to $67.40.

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 $ 5.50/6.10

12/22/13 new stop loss @ 67.40
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: 67.40
Play Entered on: 11/18/13
Originally listed on the Watch List: 11/10/13



CLOSED Plays


Ford Motor Co. - F - close: 15.42

Comments:
12/22/13: Ouch! It was an ugly week for shares of Ford. Ford held an analyst meeting on Wednesday. The company issued a profit warning for 2014 as Ford expects North American sales could see a drop in their profit margins thanks in part to tougher competition. The stock plunged on this outlook. Shares gapped down on Wednesday morning at $15.99 and then spiked down to $15.17. Our stop loss was hit at $15.65.

We were fortunate that our remaining position, the 2015 calls, still managed a potential gain (+59.0%).

- 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 - exit $1.94 (+59.0%)

12/18/13 stopped out
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...

Chart of F:

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


National Oilwell Varco - NOV - close: 78.37

Comments:
12/22/13: The correction in NOV continued last week and the stock broke down under support near $78.00. Our stop loss was hit at $76.75 on December 18th. NOV didn't hit our stop loss until the brief little spike lower that the market produced just after the Fed's taper announcement. The market, and NOV, spiked to new relative lows and then immediately reversed higher. That was the move that stopped us out.

- Suggested Positions -
OCT 17, 2013 - entry price on NOV @ 81.00, option @ 5.00
symbol: NOV1517a90 2015 JAN $90 call - exit $3.15* (-37.0%)

12/18/13 NOV hit our stop loss at $76.75

Chart of NOV:

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



Watch

Another Successful Week

by James Brown

Click here to email James Brown

Editor's Note:

It was another successful week for our watch list. All three of last week's new candidates have graduated to our active play list (BBT, MGM, and MTW).

Tonight we're adding three more.



New Watch List Entries

CBI - Chicago Bridge & Iron

GE - General Electric

SWN - Southwestern Energy


Active Watch List Candidates

C - Citigroup, Inc.

HD - Home Depot, Inc.

MSI - Motorola Solutions

WFC - Wells Fargo & Co


Dropped Watch List Entries

BBT, MGM, and MTW have graduated to our active play list.

Tonight we're removing ATI as a watch list candidate.



New Watch List Candidates:


Chicago Bridge & Iron - CBI - close: 81.69

Company Info

CBI is in the industrial goods sector. The company is a major player in large energy infrastructure construction. 2013 has been a great year for the stock and momentum has pushed it to a new high. As the global economy slowly improves it should mean more business for CBI.

This past week saw CBI breakout past resistance near $80.00. The move has created a new triple-top breakout buy signal on its point & figure chart. Investors may want to just jump in now and buy calls at the open on Monday. Tonight we're suggesting a buy-the-dip trigger to buy calls at $80.25 since broken resistance at $80.00 should be support.

If triggered we'll use a stop loss at $74.75. Our long-term target is $98.50.

Buy-the-Dip trigger: $80.25

BUY the 2015 Jan $90 call (CBI1517a90) current ask $6.50

Chart of CBI:

Originally listed on the Watch List: 12/22/13


General Electric - GE - close: 27.36

Company Info

It has been a very long time since we have played GE on the LEAPStrader newsletter. The stock suffered terribly during the 2007-2008 bear market. Shares found a bottom in late 2011 but the move up has been very slow. This most recent quarter the rally in GE accelerated following its earnings report in October. The last few weeks have seen shares consolidate below resistance near $27.50. A breakout here could signal the next leg higher.

I am suggesting we wait for GE to close above $27.65 and then buy calls the next day. If triggered our long-term target is the $32.50-35.00 zone. I do expect to see some resistance near the $30.00 level. Keep in mind that GE doesn't move very fast so we'll need to be patient.

FYI: GE is scheduled to report earnings on January 17th. We can expect to see an increase in volatility following the announcement.

Breakout trigger: Wait for a close above $27.65,
buy calls the next morning with a stop loss at $25.95.

BUY the 2015 Jan $30 call (GE1517a30) current ask $1.03

- or -

BUY the 2016 Jan $30 call (GE1615a30) current ask $1.86

Chart of GE:

Originally listed on the Watch List: 12/22/13


Southwestern Energy Co. - SWN - close: 39.32

Company Info

SWN is in the basic materials sector. The company is an independent energy company developing oil and natural gas resources in the U.S. The stock has underperformed its peers this year. It looks like that could change soon. SWN has been stuck in the $35-40 trading range for several months. A breakout here near $40.00 would be big news.

The intraday high for 2013 was $40.34. I am suggesting we wait for SWN to close above $40.50 and then buy calls the next morning with a stop loss at $37.45. If triggered our long-term target is $49.50.

Breakout trigger: Wait for SWN to close over $40.50
then buy calls the next morning with a stop at $37.45

BUY the 2015 Jan $45 call (SWN1517a45) current ask $2.40

- or -

BUY the 2016 Jan $45 call (SWN1615a45) current ask $4.55

Chart of SWN:

Originally listed on the Watch List: 12/22/13


Active Watch List Candidates:



Allegheny Technologies - ATI - close: 33.10

Comments:
12/22/13: ATI managed a small gain for the week but shares are not working for us. I am removing ATI as a watch list candidate. The stock never met our entry point requirement with a close above $34.50.

Trade did not open.

12/22/13 removed from the watch list.

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


Citigroup Inc. - C - close: 52.21

Comments:
12/22/13: The financial sector delivered a decent bounce last week. C rebounded from the prior week's lows near its 100-dma (jus below $50.50). I am still suggesting we wait for a new relative high.

Earlier Comments:
We want to wait for C to close above $53.60 and then buy calls the next morning. 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: 80.04

Comments:
12/22/13: HD seems to be slowly improving. Shares are inching higher and getting closer to a bullish breakout.

Earlier Comments:
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: 65.61

Comments:
12/22/13: MSI bounced back to test resistance near its recent highs in the $66.25 area. If this market rally continues we could see MSI breakout soon.

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: 44.96

Comments:
12/22/13: Strength in the financial sector lifted WFC to a new all-time high. Yet shares stalled near round-number resistance at the $45.00 level. There is no change from my earlier 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) current ask $1.46

- or -

BUY the 2016 Jan $50 call (WFC1615a50) current ask $2.89

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