Option Investor
Newsletter

Daily Newsletter, Sunday, 12/29/2013

Table of Contents

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

Leaps Trader Commentary

2013: Best Year Since 1995

by James Brown

Click here to email James Brown

The last full week of 2013 has come to an end and stocks continued their march higher. As expected volume was very light with many market participants either away on holiday or already done for the year. Unless something drastic happens in the last two days of trading 2013 is poised to deliver the stock market's best year since 1995. The Dow Industrials are up more than +25% for the year. The Dow Transportation Average and the SOX semiconductor index are both up +38% while biotechs were some of the best performing stocks in 2013 with the biotech index up +51.5% year to date. What didn't perform this year was precious metals. Gold ended a 13-year streak of gains with a -29% plunge in 2013.

Economic Data

It was a very quiet week for U.S. economic data. We saw the final December reading for the University of Michigan Consumer Sentiment data, which was unchanged at 82.5. Durable goods orders from October surged +4.5%. Next week the calendar rolls over into a new month and we'll see an increase in economic reports. Yet we will not see the next jobs report until January 10th.

Overseas Data

Economic data out of Europe was quiet. France said their GDP retreated -0.1% quarter over quarter. This negative news was slightly offset by improving consumer spending (+1.4% for the month) and a +0.5% advance in French PPI data. Looking ahead into 2014 it could be a volatile year for Europe and the Eurozone. There seems to be a growing expectation that Italy might default on its debt. Although it's worth noting that the bond markets are not pricing this in. The yield on Italy's 10-year bond is only 4.21% and significantly below its 2013 highs (4.9%). Usually the danger zone is above 7.0%. Italy will bear watching since their debt to GDP is over 125% and they have the third largest bond market in the world. Their economy is struggling. Wages in Italy are near 25-year lows and they are stuck in the longest recession since World War II.

German Chancellor Angela Merkel did win reelection in 2013, which was seen as a positive for the markets. Yet she could face a tough time corralling the rest of the Eurozone into making the necessary changes to keep the Euro experiment afloat. There are a growing number of anti-EU political movements gaining steam in Europe and these could hamper efforts to forge a tighter fiscal union among Eurozone members.

Economic data out of Asia was mostly positive last week. Japan said their housing starts surged +14.1% year over year, which was well above expectations. Japan's manufacturing PMI inched higher from 55.1 to 55.2. Numbers above 50.0 indicate growth. The country's retail sales hit a pace of +4.0% growth. This data helped keep the rally in Japan's stock market going and the NIKKEI index hit six-year highs, closing above psychological resistance at the 16,000 level.

Major Indices:

The S&P 500 index added +1.27% for the week. That lifted its year to date gains to +29.1%. It has truly been an exceptional year for stocks. On a short-term basis the index looks overbought. This past week has seen a breakout above its trend line of higher highs (see chart) but this could be temporary. I would not be surprised to see a correction back toward the 1820-1810 area. However, the calendar still favors an up trend so any pullback may be lighter and shallower than expected.

If this market rally does continue the next levels of potential resistance should be the 1860 and 1880 areas.

chart of the S&P 500 index:

The NASDAQ composite continues to soar with a +1.26% gain last week. Its 2013 gains are a staggering +37.6%. This past week has seen a string of new 13-year highs. Friday's move actually produced a small bearish engulfing candlestick reversal pattern. Combine that with its short-term overbought condition and odds favor a pullback. The next area of potential support is probably the 4,075-4,100 area. Previous dips in the NASDAQ approach the simple 30-dma, which is currently near 4,036.

You can see on the chart below that the NASDAQ is hovering at resistance on its trend line of higher highs. Yet another signal that the NASDAQ may be poised for a dip. If somehow the rally continues then the next level of resistance should be the 4200 mark.

chart of the NASDAQ Composite index:



The small cap Russell 2000 index set a string of new all-time highs last week. Although it looks like Thursday's intraday pullback from its high and Friday's decline is suggesting the rally is out of gas. The $RUT delivered a +1.28% gain last week, which pushed its year to date gains up to +36.7%.

In addition to being short-term overbought the $RUT is also hovering at its trend line of resistance (see chart). If the index sees a pullback we can watch for potential support near 1140 and the 1135 levels.

chart of the Russell 2000 index



Economic Data & Event Calendar

It should be a relatively quiet week for economic data. The biggest report in the U.S. is probably the national ISM index on Thursday. Typically we would see the jobs report on the first Friday of the month but this January we won't get the jobs numbers until January 10th.

Don't forget that the market is closed on January 1st, 2014 for New Year's Day.

Economic and Event Calendar

- Monday, December 30 -
pending home sales data

- Tuesday, December 31 -
Case-Shiller 20-city home price index
Chicago PMI data
Consumer Confidence data for December

- Wednesday, January 01 -
HSBC China manufacturing PMI data
U.S. stock market closed for New Year's Day

- Thursday, January 02 -
Weekly Initial Jobless Claims
Eurozone manufacturing PMI data
ISM index

- Friday, January 03 -
auto & truck sales

Additional Events to be aware of:

Jan. 6th - Janet Yellen should be confirmed as next Fed Chairman
Jan. 10th - December jobs report
Jan. 20th - stock market closed for Martin Luther King day
Jan. 28th - President Obama's state of the union address
Jan. 29th - FOMC policy update
Feb. 7th - U.S. debt ceiling is reached




Looking Ahead:

There are plenty of opinions about where the market might be headed in 2014. Most of the opinions I have heard are positive. Goldman Sachs is expected the S&P 500 index to hit the 2,000 mark in 2014. That would be another +8.6% gain from current levels. It seems like an easy task after this year's +29% gain.

We should remember that markets do not go straight up forever. Market technician Carter Worth pointed out that only seven times in history has the S&P 500 rallied five years in a row and 2013 just marked our fifth up year in a row. Now seven times is not a very large sample of data but history would suggest that the following year, after a five-year rally, tends to be down. Of course everyone has an opinion and other market pundits point out that in 2011 the S&P 500 produced a -20% peak to trough decline, which was enough to "reset" the bull market. Instead of being a five-year old bull market they argue it's only two years old.

On a short-term basis the first week of January should be bullish. Yearend fund flows are normally strong. Money managers will have another round of quarterly contributions to work with plus individuals will be plying some of their yearend bonuses toward their retirement accounts. Yet once we get past the first couple of weeks the market will focus on earnings season.

The Q4 earnings season is only about three weeks away. Alcoa (AA) kicks off earnings season on Thursday, January 9th but the season won't pick up speed until mid-month. Unfortunately the trend of negative guidance for Q4 results has been terrible. The number of companies that have warned versus the number of companies that have issued positive guidance is running at 10:1. That's about three times higher than expected. Now maybe this negative trend will spur analysts to lower their estimates, which would give companies a better chance to meet or exceed them when they actually report. It does cast a black cloud over the Q4 earnings report. More importantly Wall Street will want to hear corporate guidance for 2014. It will be guidance that helps set market direction for the rest of the first quarter.

We have noted in the last few weeks how investor sentiment has been overwhelmingly bullish. The AAII Investor Sentiment survey surged to its highest level in three years with 55.1% of investors saying they are bullish. The number of bears fell to 18.5%. A number of professionals like to use this data as a contrarian signal. When the number of bulls gets too high it's a signal to get out. Unfortunately this is more art than science. There is no black and white sell signal here. The number of bullish investors can go higher and stocks, while overbought, can always grow more overbought. It is a warning signal.

Another warning signal is the CBOE SKEW index. What's the SKEW index? Good question. According to the CBOE website:

" The CBOE SKEW Index ("SKEW") is an index derived from the price of S&P 500 tail risk. Similar to VIX®, the price of S&P 500 tail risk is calculated from the prices of S&P 500 out-of-the-money options. SKEW typically ranges from 100 to 150. A SKEW value of 100 means that the perceived distribution of S&P 500 log-returns is normal, and the probability of outlier returns is therefore negligible. As SKEW rises above 100, the left tail of the S&P 500 distribution acquires more weight, and the probabilities of outlier returns become more significant. One can estimate these probabilities from the value of SKEW. Since an increase in perceived tail risk increases the relative demand for low strike puts, increases in SKEW also correspond to an overall steepening of the curve of implied volatilities, familiar to option traders as the "skew".
This indicator has been popping up in the financial media lately after soaring to its second highest reading ever. J. Lyons Fund Management has a great chart of the SKEW index contrasted with the S&P 500 index. They have pointed out that when the SKEW spikes toward the upper end of its range it tends to be a warning sign that the market is near a top. Again, this is not an immediate sell signal but it is another warning signal that the market could be near a top.

chart of the CBOE SKEW index vs. S&P 500

Looking farther out into 2014 the market could be facing external pressures. Back in 1997 the U.S. market suffered in reaction to the Asian financial crisis sparked by a collapse of the Baht, Thailand's currency. Once again Thailand's Baht is plunging and investors are rushing to pull the money out of the country. Another market that is in trouble appears to be Turkey, which could be way more significant. The Turkish markets have been crashing as the Turkish government struggles with a corruption scandal surrounding its Prime Minister, Mr. Erdogan. Turkey has seen a number of high profile protests in 2013 but this time the Turkish financial markets are plunging. The yield on a 10-year bond in Turkey is 10%, which is well above the normal 7% danger zone.

In summary, the market's momentum is still higher but on a short-term basis we look overbought and the U.S. indices seem poised to retreat from resistance. Early January should be bullish but the second half of January will be dictated by earnings results and guidance. Bigger picture the markets could be jostled by foreign markets and the pace of the Federal Reserve's tapering of their QE program.

James



Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The U.S. market surged to new record highs thanks to a seasonal Santa Claus rally on Wall Street.

Last week our plan was to exit our CZR and DLTR trades on Monday morning, December 23rd. We also closed the 2014 calls on our JPM trade.

GE, HD, MSI, and WFC have graduated from our watch list to our active play list.

I have updated stop losses on: AIG, AVGO, COF, DIS, FCX, HOG, HON, HP, LVLT

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

Is It Time For A Dip Yet?

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(December 29, 2013)

The U.S. market continues to march higher with the major indices hitting new all-time highs and the NASDAQ hitting new 13-year highs (again). The upward momentum is certainly encouraging but the market now looks short-term overbought. Do stocks retreat now or will new yearend and quarter end inflows into mutual funds lift the market higher from here?

The market will see a pullback eventually. It's only a matter of time. After +30% gains in 2013 I am a little hesitant to chase new highs. That's why I am not adding any new plays tonight. It is also why our three new watch list candidates all have a buy-the-dip entry point strategy. We did have another successful week for the LEAPStrader watch list with GE, HD, MSI and WFC all graduate to our active play list.

Look for a fresh list of radar screen candidates next weekend.



Play Updates

Time To Check Your Stops

by James Brown

Click here to email James Brown

Editor's Note:

Our plan was to close our CZR and DLTR trades on Monday, December 23rd. We also closed the 2014 JPM calls for a gain.

The watch list produced four new trades (GE, HD, MSI, and WFC).


Closed Plays


CZR and DLTR were closed as planned.
We also closed the 2014 JPM calls.



Play Updates


American Intl. Group - AIG - close: 51.18

Comments:
12/29/13: The stock market may have marched higher but shares of AIG only saw a minor gain last week. Shares appear to be struggling with resistance near the top of its gap down from late October (51.50-51.65 area).

We are down to the last three weeks on our January 2014 calls. More conservative traders may want to abandon ship. Any drop in AIG shares is going to hurt the 2014 options significantly. I am not suggesting new positions at this time.

Please note our new stop loss at $47.75.

- Suggested Positions -
JUL 15, 2013 - entry price on AIG @ 46.99, option @ 2.50
symbol: AIG1418a50 2014 JAN $50 call - current bid/ask $1.62/1.68

- or -

JUL 15, 2013 - entry price on AIG @ 46.99, option @ 4.05
symbol: AIG1517a55 2015 JAN $55 call - current bid/ask $3.65/3.80

12/29/13 new stop loss @ 47.75
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: 47.75
Play Entered on: 07/15/13
Originally listed on the Watch List: 06/01/13


Avago Technologies - AVGO - close: 52.78

Comments:
12/29/13: AVGO slowly drifted higher this past week. This stock is still arguably overbought here. Do not be surprised to see a pullback. Tonight we're raising the stop loss to $45.90. 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 $7.40/8.30

12/29/13 new stop loss @ 45.90
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: 45.90
Play Entered on: 11/11/13
Originally listed on the Watch List: 09/22/13


Bank of America - BAC - close: 15.67

Comments:
12/29/13: BAC underperformed both the broader market and the financial sector last week. Shares consolidated sideways and BAC almost closed unchanged on the week. 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 $2.07/2.10

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: 37.10

Comments:
12/29/13: BBT extended its rally to four up weeks in a row. That was mainly due to a rally last Monday. The rest of the week saw BBT drift sideways. Shares look short-term overbought. Look for support near $36.00.

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 $1.16/1.24

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: 75.78

Comments:
12/29/13: COF gained just over a dollar for the week. Friday's minor declined snapped a six-day winning streak. I am raising our stop loss to $69.45. I'm not suggesting new positions at current levels.

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 $7.20/7.60

12/29/13 new stop loss @ 69.45
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: 69.45
Play Entered on: 11/29/13
Originally listed on the Watch List: 11/17/13


E.I. du Pont - DD - close: 64.25

Comments:
12/29/13: We have been fortunate with our DD trade. The stock has turned in a strong two-week rally and a bullish breakout to new highs. We only have three weeks left on our 2014 calls. I am suggesting we exit these calls immediately on Monday, December 30th at the opening bell. More aggressive traders can risk holding on to them. They should appreciate quickly once DD rises above the $65.00 level but any decline will produce big drops in the option. 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 $0.69/0.71

- or -

OCT 25, 2013 - entry price on DD @ 62.57, option @ 3.15
symbol: DD1517a65 2015 JAN $65 call - current bid/ask $4.20/4.30

12/29/13 prepare to exit 2014 calls on Monday, Dec. 30th at the open.
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: 90.70

Comments:
12/29/13: DE has produced an impressive rally from its early December lows near $82.25. Yet now it appears that the rally is losing steam. A normal retracement would suggest a pullback toward the $88.00 area. I am not suggesting new positions at this time.

- Suggested Positions -
DEC 10, 2013 - entry price on DE @ 87.26, option @ 5.85*
symbol: DE1517a90 2015 JAN $90 call - current bid/ask $7.30/7.55

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: 60.11

Comments:
12/29/13: Caution! The action in DG last week was not bullish. The stock peaked near $62 and has produced a three-day pullback. In contrast the market has been hitting new highs. I am not suggesting new positions.

We only have three weeks left on our 2014 January options. Investors with these options may want to exit early now.

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

- Suggested Positions -
SEP 06, 2013 - entry price on DG @ 57.61, option @ 2.58
symbol: DG1418a60 2014 JAN $60 call - current bid/ask $1.45/1.60

- or -

SEP 06, 2013 - entry price on DG @ 57.61, option @ 3.48
symbol: DG1517a70 2015 JAN $70 call - current bid/ask $3.30/3.70

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: 74.35

Comments:
12/29/13: DIS delivered another strong week with shares setting new record highs. Broken resistance near $72 and $70 should offer new support if DIS were to see a pullback. Tonight I am adjusting our stop loss to $67.40.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $6.40/6.50

12/29/13 new stop loss @ 67.40
12/08/13 new stop loss @ 65.75
11/24/13 new stop loss @ 64.75

Current Target: DIS @ 84.00
Current Stop loss: 67.40
Play Entered on: 10/23/13
Originally listed on the Watch List: 10/13/13


Dick's Sporting Goods - DKS - close: 57.53

Comments:
12/29/13: DKS only saw minor gains last week. The stock has been testing new short-term resistance near the $58.00 level. If the market sees a pullback I would look for DKS to dip toward the $56.00 level.

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 $4.50/5.00

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


Freeport-McMoRan - FCX - close: 37.50

Comments:
12/29/13: Gold bounced from its mid December lows and copper continued to rally. Together they helped lift FCX to a +5.0% gain last week. FCX looks short-term overbought. I suspect that both gold and copper prices could dip this coming week so expect a pullback in FCX. Tonight I am raising our stop loss to $33.45.

- Suggested Positions -
NOV 13, 2013 - entry price on FCX @ 35.25, option @ 2.60*
symbol: FCX1517a39 2015 JAN $39 call - current bid/ask $2.99/3.10

12/29/13 new stop loss @ 33.45
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: 33.45
Play Entered on: 11/13/13
Originally listed on the Watch List: 09/15/13


Fluor Corp. - FLR - close: 79.76

Comments:
12/29/13: FLR eked out a small gain for the week. Yet shares have been unable to really breakout past resistance at the $80.00 level. I suspect that FLR is due for a pullback soon. Unfortunately a retreat from current levels would almost look like a bearish double top at the $80 mark. I am not suggesting new positions at this time.

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: 10.90/11.20

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


General Electric - GE - close: 27.83

Comments:
12/29/13: GE is a new trade. We added GE as a watch list candidate last week. The plan was to wait for shares to breakout past resistance near $27.50 and close above $27.65. GE met that requirement with Thursday's close at $27.83. Our trade opened on Friday morning at $27.84. I would still consider new positions now. More nimble traders could buy calls on a dip at $27.50, which should be new short-term support.

Earlier Comments:
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.

- Suggested Positions -
DEC 27, 2013 - entry price on GE @ 27.84, option @ 1.19
symbol: GE1517a30 2015 JAN $30 call - current bid/ask: 1.15/ 1.19

- or -

DEC 27, 2013 - entry price on GE @ 27.84, option @ 1.96
symbol: GE1615a30 2016 JAN $30 call - current bid/ask: 1.92/ 1.96

Chart of GE:

Current Target: GE in the $32.50-35.00 zone.
Current Stop loss: 25.95
Play Entered on: 12/27/13
Originally listed on the Watch List: 12/22/13


Home Depot, Inc. - HD - close: 81.64

Comments:
12/29/13: HD is another watch list candidate that met our entry point requirement with the market's post-Christmas rally. We were waiting for HD to close above $81.50. Shares closed at $81.55 on Thursday. Our trade opened Friday morning at $81.65. I would still consider new positions now at current levels.

Earlier Comments:
Our long-term target is $99.00. FYI: The point & figure chart is bullish with a $97 target.

- Suggested Positions -
DEC 27, 2013 - entry price on HD @ 81.65, option @ 3.40
symbol: HD1517a90 2015 JAN $90 call - current bid/ask: 3.25/ 3.40

- or -

DEC 27, 2013 - entry price on HD @ 81.65, option @ 6.55
symbol: HD1615a90 2016 JAN $90 call - current bid/ask: 6.00/6.55

Chart of HD:

Current Target: HD at $99.00
Current Stop loss: 76.75
Play Entered on: 12/27/13

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


HollyFrontier Corp. - HFC - close: 49.30

Comments:
12/29/13: HFC spent last week consolidating sideways in the $49-50 zone. A breakout past round-number resistance at $50.00 could be used as an alternative entry point to launch positions. Bear in mind that I am cautious on this trade given HFC's recent volatility over the last few weeks. If you're launching positions I would start small.

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 $6.10/6.60

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: 69.05

Comments:
12/29/13: HOG managed to gain a dollar for the week. Yet shares remain below round-number resistance at the $70.00 level. I am not suggesting new positions.

I am raising the stop loss up to $63.75.

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 $ 6.40/6.60

12/29/13 new stop loss @ 63.75
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: 63.75
Play Entered on: 09/04/13
Originally listed on the Watch List: 08/25/13


Honeywell Intl. - HON - close: 91.14

Comments:
12/29/13: HON delivered another bullish week with shares breaking out past resistance at $90.00 and setting new all-time highs. Shares look a little short-term overbought with the two-week move from $86 to $91. I would expect a pullback. Tonight we're raising our stop loss to $84.85.

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 $10.40/10.60

12/29/13 new stop loss @ 84.85
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: 84.85
Play Entered on: 05/07/13
Originally listed on the Watch List: 05/04/13



Helmerich & Payne, Inc. - HP - close: 83.96

Comments:
12/29/13: HP set a string of new highs last week. If the market were to see a pullback look for HP to dip back toward the $80 area, which is short-term support. I am raising the stop loss to $77.45.

- Suggested Positions -
DEC 05, 2013 - entry price on HP @ 81.00, option @ 5.60*
symbol: HP1517a90 2015 JAN $90 call - current bid/ask $ 5.60/6.20

12/29/13 new stop loss @ 77.45
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: 77.45
Play Entered on: 12/05/13
Originally listed on the Watch List: 10/27/13


JPMorgan Chase & Co. - JPM - close: 58.14

Comments:
12/29/13: Last week saw JPM breakout past resistance and hit a new multi-year high on Monday, Dec. 23rd. Unfortunately the rally stalled after that and shares consolidated sideways in the $58-58.50 zone. If JPM sees a pullback look for short-term support near $57.00 and then near $55.50.

Our plan was to exit our January 2014 $55 calls on Monday, December 23rd. We still have the 2015 calls.

FYI: JPM is scheduled to report earnings on January 14th.

- Suggested Positions -
JUN 24, 2013 - entry price on JPM @ 50.25, option @ 1.60
symbol: JPM1418a55 2014 JAN $55 call - exit $3.05 (+90.6%)

- or -

JUN 24, 2013 - entry price on JPM @ 50.25, option @ 3.80
symbol: JPM1517a55 2015 JAN $55 call - current bid/ask $ 6.30/6.45

12/23/13 planned exit for 2014 calls, option @ +90.6%
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 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: 32.90

Comments:
12/29/13: The rally in LVLT continued but shares spent most of the week consolidating sideways above the $32.50 level. I am raising our stop loss to $28.75.

- Suggested Positions -
OCT 31, 2013 - entry price on LVLT @ 29.39, option @ 4.40*
symbol:LVLT1517a30 2015 JAN $30 call - current bid/ask $ 5.90/6.30

12/29/13 new stop loss @ 28.75
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: 28.75
Play Entered on: 10/31/13
Originally listed on the Watch List: 10/20/13


MGM Resorts - MGM - close: 23.15

Comments:
12/29/13: MGM has extended its current rally to five up weeks in a row. The rally is starting to look a little bit tired. I would not be surprised to see MGM pull back soon. 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 $ 2.57/2.63

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


Motorola Solutions - MSI - close: 67.33

Comments:
12/29/13: MSI is another watch list candidate that has graduated to our active plays. The plan was to buy calls when MSI hit $66.75. Shares met that trigger on December 23rd (last Monday). I would still consider new positions now. However, if you suspect the market is due for a dip then consider waiting for a dip in MSI near the $66.00-66.50 zone as an alternative entry point to buy calls.

Currently our target is the $80-90 zone but we'll be more specific as the trade progresses. Currently the point & figure chart is bullish with a long-term target at $91.00.

FYI: MSI is scheduled to report earnings on January 22nd.

- Suggested Positions -
DEC 23, 2013 - entry price on MSI @ 66.75, option @ 4.10
symbol: MSI1517a70 2015 JAN $70 call - current bid/ask $ 4.00/4.30

- or -

DEC 23, 2013 - entry price on MSI @ 66.75, option @ 5.10
symbol: MSI1615a75 2016 JAN $75 call - current bid/ask $ 4.60/5.20

Chart of MSI:
Current Target: Exit when MSI trades in the $80-90 zone.
Current Stop loss: 61.90
Play Entered on: 12/23/13
Originally listed on the Watch List: 12/08/13


The Manitowoc Co. - MTW - close: 23.43

Comments:
12/29/13: Like one of the company's giant cranes, the rally in MTW continues to stretch higher. The stock is now up five weeks in a row. I am worried MTW has grown overbought here. Look for support in the $21-22 zone.

If you're looking for a new entry point I would consider waiting to buy calls on a dip near $22.00.

- Suggested Positions -
DEC 19, 2013 - entry price on MTW @ 22.33, option @ 2.85*
symbol: MTW1517a25 2015 JAN $25 call - current bid/ask $ 3.00/3.40

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
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: 15.76

Comments:
12/29/13: I am throwing in the towel on NVDA. The SOX semiconductor index is up +38% year to date. NVDA is up a healthy +28%. However, all the volatility over the last few months makes it a tough investment to sit on. You could argue that NVDA is building an ugly looking inverse head-and-shoulders pattern. That might be true. If you're in this camp than a close above $16.00 or the November highs (near $16.30) could be used as a bullish entry point. I am suggesting instead an immediate exit. We'd rather find something a little less volatile to trade. Plan to exit on Monday, December 30th at the opening bell.

- Suggested *Small* Positions -
SEP 12, 2013 - entry price on NVDA @ 15.63, option @ 0.88
symbol: NVDA1418a16 2014 JAN $16 call - current bid/ask $0.22/0.24

- or -

SEP 12, 2013 - entry price on NVDA @ 15.63, option @ 1.54
symbol: NVDA1517a17 2015 JAN $17 call - current bid/ask $1.26/1.29

12/29/13 prepare to exit on Monday, Dec. 30th at the open
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: 73.80

Comments:
12/29/13: News that Apple (AAPL) and China Mobile (CHL) had finally confirmed a multi-year deal failed to move the needle much for shares of QCOM. Shares of QCOM are drifting higher and look poised to breakout past resistance near $74.00 soon.

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 $5.50/5.70

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: 78.57

Comments:
12/29/13: I am reiterating my cautious stance on SBUX. The stock has continued to bounce from its mid December breakdown. Shares are now testing what I outlined as potential resistance near its 50-dma and the $80.00 level. If Friday's move is any indication then SBUX is poised to fail here at this resistance level. Friday's session created a bearish engulfing candlestick reversal pattern. I am not suggesting new positions.

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 $3.65/3.75

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: 59.45

Comments:
12/29/13: VRSN managed to eke out another weekly gain. Yet shares seem to be slowing as VRSN hovers just below round-number resistance at the $60.00 level. I would not be surprised to see a pullback toward $58 or its 30-dma, closer to $57.

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 $ 8.15/8.35

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: 82.82

Comments:
12/29/13: It was a quiet holiday week for shares of WDC with the stock moving sideways inside the $82-84 zone. I am not suggesting new positions at current levels. If the $82 level fails there could be support near $80. Otherwise WDC could drop toward its 50-dma.

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 $ 8.15/8.35

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


Wells Fargo & Co. - WFC - close: 44.96

Comments:
12/29/13: WFC is another watch list candidate that has jumped to our active play list. The plan was to wait for shares to breakout past their 2013 highs and close above $45.25. WFC met that requirement on Tuesday with a close at $45.39. Our trade opened on December 26th at $45.50. I would still consider new positions now at current levels. However, the broader market does look a bit overbought. If you wait we might see a better entry point on a dip near $45.00 or $44.50 instead.

- Suggested Positions -
DEC 26, 2013 - entry price on WFC @ 45.50, option @ 1.50
symbol: WFC1517a50 2015 JAN $50 call - current bid/ask $ 1.42/1.49

-- or --

DEC 26, 2013 - entry price on WFC @ 45.50, option @ 2.95*
symbol: WFC1615a50 2016 JAN $50 call - current bid/ask $ 2.78/3.00

12/26/13 trade opens with WFC @ $45.50
*option entry price is an estimate since the option did not trade at the time our play was opened.
12/24/13 WFC closed @ 45.39, above our trigger at $45.25

Chart of WFC:

Current Target: Exit WFC hits $54.50
Current Stop loss: 41.95
Play Entered on: 12/26/13
Originally listed on the Watch List: 12/08/13


Wyndham Worldwide - WYN - close: 73.01

Comments:
12/29/13: WYN spent the holiday week churning sideways on either side of the $73.00 level. The stock looks poised to move higher but if the market declines we could see WYN retesting support near $70.00 again.

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 $ 4.80/6.40

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


Caesars Entertainment - CZR - close: 21.03

Comments:
12/29/13: Last weekend we decided to drop CZR as an active trade because shares were not performing. As luck would have it the stock surged last week with a +3.8% gain. Our plan was to exit on Monday, December 23rd. The trade closed at $20.33.

- Suggested Positions -
DEC 03, 2013 - entry price on CZR @ 20.91, option @ 4.70*
symbol: CZR1517a25 2015 JAN $25 call - exit $3.70 (-21.2%)

12/23/13 planned exit on Monday morning
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

Chart of CZR:

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


Dollar Tree, Inc. - DLTR - close: 56.29

Comments:
12/29/13: Last weekend we decided to drop DLTR as the stock was not performing. Shares did manage a gain for the week but our plan was to exit on Monday morning, December 23rd.

- Suggested Positions -
NOV 21, 2013 - entry price on DLTR @ 55.50, option @ 2.75*
symbol: DLTR1517a65 2015 JAN $65 call - exit $1.50 (-45.4%)

12/23/13 planned exit
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

Chart of DLTR:

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



Watch

Consumer Goods, Industrials, & Technology

by James Brown

Click here to email James Brown


New Watch List Entries

FL - Foot Locker, Inc.

ITW - Illinois Tool Works

STX - Seagate Tech.


Active Watch List Candidates

C - Citigroup, Inc.

CBI - Chicago Bridge & Iron

SWN - Southwestern Energy


Dropped Watch List Entries

GE, HD, MSI, and WFC have all graduated to our play list.



New Watch List Candidates:


Foot Locker, Inc. - FL - close: 40.98

Company Info

FL is in the consumer goods sector. The company runs a chain of retail stores selling athletic shoes and apparel. I listed FL as one of my favorite trading ideas in last week's new plays section. The stock's rally off its August, September, and October 2013 lows has been significant. The $38 level was major resistance and FL spent more than two weeks digesting that breakout. FL now sits at all-time highs. I suspect that shares will pullback when the market dips. We want to be ready to take advantage of the decline.

I am suggesting a buy-the-dip entry point at $39.25. If triggered we'll use a stop loss at $36.75. If triggered our target is $48.00. More aggressive traders could aim higher since the point & figure chart is forecasting a $60 target.

Buy-the-Dip trigger: $39.25

BUY the 2015 Jan $40 call (FL1517a40) current ask $5.10

Chart of FL:

Originally listed on the Watch List: 12/29/13


Illinois Tool Works Inc. - ITW - close: 83.59

Company Info

ITW is in the industrial goods sector. The industrials have been showing momentum with the group hitting new highs. ITW has been participating and hit new record highs this past week. We like the momentum but we do not want to chase it. When the market eventually dips, and it will, we want to be ready to buy a dip in ITW. Broken resistance near $80.00 should be support.

I am suggesting a buy-the-dip trigger at $80.25. If triggered we'll start with a stop loss at $76.85. Our long-term target is $95.00.

Buy-the-Dip trigger: $80.25

BUY the 2015 Jan $85 call (ITW1517a85) current ask $5.50

Chart of ITW:

Originally listed on the Watch List: 12/29/13


Seagate Technology - STX - close: 55.66

Company Info

STX is in the technology sector. The company makes electronic data storage devices (hard drives, flash drives, etc.). The stock struggled with resistance near $50.00 for weeks but finally broke free this month (December). This past week saw the rally stall because shares hit the top of its long-term, bullish channel (see chart). I am expecting a pullback toward $50.00, which should be support.

Tonight I am suggesting a buy-the-dip trigger at $51.00. If triggered we'll use a stop loss at $46.75. Our long-term target is $65. More aggressive investors could aim higher. The point & figure chart is predicting a $77 target.

Buy-the-Dip trigger: $51.00

BUY the 2015 Jan $55 call (STX1517a55) current ask $7.40

Chart of STX:

Originally listed on the Watch List: 12/29/13


Active Watch List Candidates:



Citigroup Inc. - C - close: 52.26

Comments:
12/29/13: The holiday week was a quiet one for Citigroup. Shares underperformed both the broader market and the financial sector with a sideways move in the $52.00-52.50 zone. We are waiting on 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


Chicago Bridge & Iron - CBI - close: 82.00

Comments:
12/29/13: CBI eked out a small gain for the week. The broader market indices look overbought and due for a dip. When the market declines I am expecting CBI to dip toward support near $80.00. More conservative traders may want to wait and see if shares dip toward the next level of short-term support near $78.00 as an alternative entry point.

Earlier Comments:
CBI's recent breakout past resistance near $80.00 has created a new triple-top breakout buy signal on its point & figure chart. 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

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


Southwestern Energy Co. - SWN - close: 39.73

Comments:
12/29/13: SWN flirted with a bullish breakout past $40.00. Shares failed at the $40.50 level twice last week. I don't see any changes from my prior comments.

Earlier Comments:
SWN has been stuck in the $35-40 trading range for several months. A breakout here near $40.00 would be big news. 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)

- or -

BUY the 2016 Jan $45 call (SWN1615a45)

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