Option Investor
Newsletter

Daily Newsletter, Sunday, 1/12/2014

Table of Contents

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

Leaps Trader Commentary

Jobs? We Don't Need No Stinking Jobs!

by James Brown

Click here to email James Brown

The first full week of trading in 2014 ended on an up note in spite of a disastrous jobs report number. The major U.S. indices with the exception of the Dow Industrials all posted gains for the week. Financial stocks and transportation stocks, two key sectors, were showing relative strength and helped drive the market higher.

The Dow Jones Transportation Average closed Friday at a new all-time high. Meanwhile the bond market rallied on Friday's jobs number and the yield on a 10-year bond plunged to 2.86%. Gold, after suffering a terrible 2013 performance, is now up three weeks in a row. Investors sentiment remains bullish with the volatility index (VIX, a.k.a. fear gauge) closing at its lowest level in five months. If you like contrarian signals then that's probably a sign that investors are too bullish and we're near a market pullback.

Economic Data

We had a lot of economic data released last week but stocks ignored most of it. The last look at wholesale inventories increased +0.5% in November. That's down from a +1.3% gain in October. The ISM non-manufacturing (services) index slipped from 53.9 to 53.0 when economists were expecting a rise to 54.7. Numbers above 50.0 suggest growth.

Employment data was the key metric everyone was watching. The ADP employment change report (private payrolls) said corporations added 238,000 jobs in December, which was better than the 200K estimate. This helped support the expectation that the government's jobs report would come in near the +195,000 estimate. Unfortunately that didn't happen.

The BLS released their non-farm payroll report on Friday morning that showed the U.S. only added +74,000 new jobs in December. This was the lowest jobs number since April 2012, which came in at +68,000. Normally a jobs number this bad would have sparked serious selling in the stock market and yet investor reaction was muted and the major indices all closed higher on Friday, minus the Dow Industrials.

Some of the whisper numbers for Friday's report were as high as +250K. On the positive side we did see November's number get revised from +203K to +241K. On the negative side of the +74K new jobs in December over half of them were all temporary jobs. Now the headline unemployment rate number plunged from 7.0% to 6.7%. That looks like good news and marks the lowest unemployment rate since October 2008. Sadly the reason this number is dropping is disheartening. That's because 347,000 people have dropped out of the workforce and stopped looking for a job. This has pushed the labor participation rate from 63.0% to 62.8%, the lowest level since March 1978. In reality, if we look at the U6 unemployment rate, which also includes the underemployed, then U.S. unemployment is about 13.1%.

The analyst community initially tried to blame the poor jobs number on the extremely cold weather. While December was colder than normal it does not account for the huge miss. After a recent string of relatively decent jobs reports we could argue that one bad report doesn't make a trend. At least one market pundit, the insightful Barry Ritholtz, has suggested that the financial media places too much emphasis on the monthly report. He estimates that trying to calculate the monthly changes between hiring and firing in a labor force of almost 150 million people equates to about one tenth of one percent.

What will be interesting to watch is how the Federal Reserve reacts to the jobs data. This significantly lower December jobs number could be a problem. The Fed has previously suggested that they might start raising interest rates when the unemployment rate hits 6.5%. Suddenly we are at 6.7% and the economy is still slowly trudging along. Prior guidance has suggested that the Fed is still a long way off (at least 2015) before they start raising interest rates. They Fed might be forced to adjust their guidance. Worse case the Fed might choose to actually increase stimulus again instead of tapering their QE program. The next Fed meeting is January 29th.

Overseas Data

Last week saw a lot of economic data overseas. I'll try to just hit the highlights. The European Central Bank (ECB) kept interest rates unchanged at 0.25%. The Eurozone saw its GDP increase +0.1% quarter over quarter. Retail sales in the Eurozone rose +1.4% month over month, which was better than expected. The unemployment rate for the Eurozone was unchanged at its all-time high of 12.1%.

The Eurozone's largest and strongest member, Germany, had lots of good news. Retail sales surged +1.5% for the month, which was above expectations. German industrial production came at +1.9%, also above estimates. Standard & Poor's rating agency said Germany gets to keep their "AAA" credit rating. We also saw good news from France and Spain where both countries said their industrial production improved significantly better than expected. On the downside Italy said unemployment rose from 12.5% to 12.7%. Greece saw its industrial production side for the fifth month in a row and its unemployment hit a new all-time high of 27.8%.

Looking east toward Asia most of the headlines were out of China. The latest look at inflation at the consumer level, the CPI, rose +0.3% in China. The year over year reading put the CPI at +2.5%. Yet the wholesale gauge of inflation, the PPI, dropped -1.4%. China reported that its exports rose +4.3% year over year and its imports rose +8.3%. Concerns over their slowing export numbers helped keep Chinese stocks in the red and the Shanghai composite closed the week at five-month lows.

Major Indices:

The S&P 500 index spent most of the week churning sideways inside the 1830-1843 area. The index posted a +0.6% gain for the week and actually looks poised to breakout past the 1843 level and challenge its Near Year's Even high near 1850.

The 1850 level could be potential round-number resistance. If the S&P 500 does breakout past this level the next resistance level could be 1870. If stocks reverse then we can look for likely support near 1820 or the 1800 level. The simple 50-dma should provide extra support near 1800 if stocks turn lower.

chart of the S&P 500 index:

The NASDAQ composite displayed relative strength with a +1.0% gain for the week. The NASDAQ closed 2013 at 4,176. Friday's intraday bounce leaves the NASDAQ poised for a bullish breakout to new 13-year highs. If this index does push higher then the 4200 level could be round-number, psychological resistance. If stocks reverse on us then we can look for potential support at 4100, 4050 and the 4000 level.

chart of the NASDAQ Composite index:



The small cap Russell 2000 index almost kept pace with the rally in the NASDAQ with a +0.7% gain last week. It was encouraging to see the $RUT close at its high for the week and the index is ready to breakout to new all-time highs. However, I will point out that there is at trend line of higher highs that could prove to be resistance again (see chart). If we're just looking at levels then the 1180 and 1200 levels are the most likely areas to watch for potential resistance. Should the market turn south then watch for potential support in the 1120-1140 zone.

chart of the Russell 2000 index



Economic Data & Event Calendar

We will see another busy week of economic data. The retail sales number on Tuesday could be a disappointment. Federal Reserve Chairman Bernanke will speak on Thursday. The title of his talk is "Challenges for the Central Bank". The Federal Reserve will also release their Beige book and the Philly Fed survey this week. Yet all of this data will likely be overshadowed by earnings season. The pace of earnings picks up significantly. We will hear from a number of large financial companies on Tuesday and Wednesday.

Economic and Event Calendar

- Monday, January 13 -
the pace of Q4 earnings season gets faster

- Tuesday, January 14 -
U.S. retail sales for December
business inventory data

- Wednesday, January 15 -
Producer Price Index (PPI)
New York Empire State manufacturing index
Federal Reserve Beige Book

- Thursday, January 16 -
Weekly Initial Jobless Claims
Ben Bernanke to speak
Consumer Price Index (CPI)
Philadelphia Fed survey
NAHB Housing Market Survey

- Friday, January 17 -
housing starts & building permits from December
U.S. Industrial Production
University of Michigan Consumer Sentiment survey

Additional Events to be aware of:

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:

The last few weeks I've been pointing out multiple warning signals that the market could be nearing a potential top. Yet in spite of all the signs the market continues to drift higher. That's not too surprising. Momentum tends to beget more momentum. When the market is ready to correct lower it will choose some event as a catalyst and suddenly investor sentiment will change. I have suggested that a disappointing Q4 earnings season could be that catalyst for profit taking and we're about to find out. The next two to three weeks could be pivotal for the market as we digest the flood of earnings data and corporate guidance for 2014.

There was an interesting note out from Goldman Sachs this past week that suggested the market is fully valued at current levels. Currently Goldman is only forecast a 1900 price target on the S&P 500 by 2014's yearend. That's only 58 points away (that's another +3.1%). It could be a disappointing year if they're right.

My suggestion is to trade cautiously as we enter earnings season. Individual stocks could get hammered if they disappoint the market. Hopefully some of these post-earnings sell offs might provide us some entry points to buy LEAPS. In the meantime we can only trade the market we see and not the market we expect.

James



Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The market held up very well in spite of a terrible December jobs report of only +74,000 jobs. The volatility index (VIX) is low and we're about to hit earnings season. Those two factors could spell trouble but the market's momentum is still higher.

Last week our plan was to exit our SBUX trade on Monday, January 6th. We also closed the 2014 calls for AIG and DG.

This week I am suggesting we exit our MGM and VRSN trades on Monday, January 13th.

I have updated stop losses on: AVGO, COF, DG, HFC, HOG, HP, LVLT, MSI, MTW, WDC.

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

Industrial Goods & Technology

by James Brown

Click here to email James Brown


- New Trades -


Caterpillar - CAT - close: 90.51

Company Info

Why We Like It:
CAT is in the industrial goods sector. The company makes construction and mining equipment. The stock was dead money for most of 2013. The company suffered a year if disappointing earnings numbers and concerns over its mining equipment sales. Worries remain that mining equipment could be a drag in 2014. However, it would appear that all the bad news has been priced in. Shares of CAT have broken out from a multi-month consolidation and the bounce this past week looks like a bullish entry point.

I do consider this somewhat of an aggressive play. CAT's earnings report is coming up in the next two or three weeks. No date has been announced yet but it's around the end of January. A disappointing report could send the stock plunging lower again. We're going to jump in now but I'm suggesting small positions. We'll use a tighter stop at $87.45.

Our long-term target is the $105-110 zone. Currently the point & figure chart is forecasting at $110 target.

Remember, start with small positions!

- Suggested Positions -
JAN 13, 2014 - entry price on CAT @ --.--, option @ -.--
symbol: CAT1517a100 2015 JAN $100 call - current bid/ask $ 3.20/ 3.30

- or -

JAN 13, 2014 - entry price on CAT @ --.--, option @ -.--
symbol: CAT1615a105 2016 JAN $105 call - current bid/ask $ 4.75/ 5.30

Chart of CAT:

Current Target: $112.00
Current Stop loss: 87.50
Play Entered on: 01/13/14
Originally listed in the New Plays 01/12/14


Juniper Networks - JNPR - close: 23.54

Comments:
01/12/14: Shares of JNPR spent most of the week consolidating sideways inside the $22.50-23.00 zone. Then on Friday afternoon the stock broke out and surged to new two-year highs. We had JNPR on our watch list with a suggested entry point to buy calls if shares closed above $23.25. That condition was met on Friday. Our play opens on Monday morning. However, more conservative investors may want to wait until after JNPR reports earnings on January 23rd. Waiting to see how the market reacts to JNPR's results and guidance before initiating positions might be the wiser move.

Tonight I am adjusting our stop loss to $20.45. Our long-term target is the $28-30 zone. The point & figure chart's target has risen from $29 to $32.

BUY the 2015 Jan $25 call (JNPR1517a25) current ask $2.87

- or -

BUY the 2016 Jan $25 call (JNPR1615a25) current ask $4.75

Chart of JNPR:

Current Target: exit calls when JNPR hits $28
Current Stop loss: 20.45
Play Entered on: 01/13/14
Originally listed on the Watch List: 01/05/14


SanDisk - SNDK - close: 72.60

Company Info

Why We Like It:
SNDK is in the technology sector. The company manufactures flash storage memory drives. A lot of their products are used in smartphones, tablets, and laptops. The stock was a big performer in 2013 and the momentum is still going with a breakout to new all-time highs this past week. The world's demand for memory is only growing and SNDK seems the beneficiary of that trend.

I will point out that SNDK is due to report earnings on January 22nd and after such a strong rally in 2013 any miss in the earnings report would be an excuse to sell. More conservative investors may want to wait until after the earnings report comes out before initiating new positions.

Tonight we're suggesting small bullish positions at the opening bell on Monday morning. We'll try and limit our risk with a stop loss at $67.00. Our long-term target is $90. Coincidentally the point & figure chart is forecasting at $90 target.

- Suggested Positions -
JAN 13, 2014 - entry price on SNDK @ --.--, option @ -.--
symbol: SNDK1517a80 2014 JAN $80 call - current bid/ask $ 5.60/ 5.80

Chart of SNDK:

Current Target: $90.00
Current Stop loss: 67.00
Play Entered on: 01/13/14
Originally listed in the New Plays 01/12/14



Play Updates

Prepare To Lock In Gains

by James Brown

Click here to email James Brown

Editor's Note:

The Q4 earnings season is upon us. Earnings results and guidance can generate significant volatility in individual stocks. Investors will want to double-check their stop loss placement. I am updating several stop losses tonight.

Citigroup graduated from our watch list to our active play list. We want to exit our MGM and VRSN positions on Monday morning, Jan. 13th.


Closed Plays


SBUX was closed on Monday, January 6th.
We also closed our 2014 calls for AIG and DG last week.



Play Updates


American Intl. Group - AIG - close: 52.22

Comments:
01/12/14: AIG and the financial sector continued to drift higher last week. The stock also hit our new exit target for the 2014 calls. In last week's newsletter we adjusted our exit target to close the 2014s at $52.00. AIG hit $52.00 on Thursday. If you're still holding the 2014s you've only got five trading days left.

The 2013 highs in the $52-53 area could be overhead resistance. 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 - exit $2.04 (-18.4%)

- or -

JUL 15, 2013 - entry price on AIG @ 46.99, option @ 4.05
symbol: AIG1517a55 2015 JAN $55 call - current bid/ask $3.90/4.05

01/09/14 AIG hit our $52.00 exit target for the 2014 calls
01/05/14 adjust the exit for the 2014 calls down to $52.00
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 @ 52.00, 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: 53.30

Comments:
01/12/14: AVGO spent most of the week churning sideways below resistance near the $54.00 level. I am raising our stop loss up to $47.25. More conservative investors may want to raise their stop closer to $50.00. 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 $7.50/8.10

01/12/14 new stop loss @ 47.25
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
...see earlier updates for older comments...

Current Target: $58.50
Current Stop loss: 47.25
Play Entered on: 11/11/13
Originally listed on the Watch List: 09/22/13


Bank of America - BAC - close: 16.77

Comments:
01/12/14: BAC managed to keep the rally alive with another gain for the week. These are new multi-year highs for the stock. The company will report earnings on Wednesday, January 15th, before the opening bell. Analysts are expecting a profit of 27 cents a share. I suspect that after BAC's recent rally that the stock will likely see some post-earnings profit taking. Do not be surprised to see a pullback toward support near $16.00 or possibly $15.50. I'm not suggesting new positions.

- 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 $2.83/2.87

01/12/14 don't be surprised to see some post-earnings profit taking
01/05/14 new stop loss @ 14.75
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 @ $18 for 2015 call
Current Stop loss: 14.75
Play Entered on: 03/18/13

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


BB&T Corp. - BBT - close: 38.66

Comments:
01/12/14: BBT continues to show relative strength with a big surge to new multi-year highs last week. The stock is looking short-term overbought here. Odds are good that BBT will see some post-earnings profit taking after they announce. BBT is due to release earnings on Thursday, January 16th, before the opening bell. Current estimates are at 72 cents a share. I would expect a dip back toward the $37.00 area.

Tonight we are raising our stop loss to $34.90. More conservative investors may want to just take profits now with our current position up +70%. If not then you might want to raise your stop loss even higher. I am not suggesting new positions at this time.

- Suggested Positions -
DEC 17, 2013 - entry price on BBT @ 35.81, option @ 0.99
symbol: BBT1517a40 2015 JAN $40 call - current bid/ask $1.69/1.73

01/12/14 new stop loss @ 34.90

Current Target: BBT @ 42.50
Current Stop loss: 34.90
Play Entered on: 12/17/13
Originally listed on the Watch List: 12/15/13


Citigroup Inc. - C - close: 54.72

Comments:
01/12/14: Citigroup has finally graduated from our watch list to our active play list. The financial stocks have been showing relative strength and this bank saw its shares breakout to new multi-year highs. The move above the $53-54 area is a significant (bullish) breakout higher. Our plan was to wait for C to close above $54.00 and then buy calls the next day. C met that requirement on January 7th with a close at $54.18. Our trade opened the next day at $54.29.

Please note that shares of C could be volatile this week. The company is scheduled to report earnings on January 16th. Current estimates are for a profit of $1.03 a share. I am raising our stop loss from $47.90 to $49.45. At this point I would wait until after we see how the market reacts to C's earnings before initiating positions.

- Suggested Positions -
JAN 08, 2014 - entry price on C @ 54.29, option @ 3.05*
symbol: C1517a60 2015 JAN $60 call - current bid/ask $3.05/3.15

- or -

JAN 08, 2014 - entry price on C @ 54.29, option @ 6.05*
symbol: C1615a60 2016 JAN $60 call - current bid/ask $5.70/5.95

01/12/14 new stop loss @ 49.40
01/08/14 trade opens. C @ $54.29
*option entry price is an estimate since the option did not trade at the time our play was opened.
01/07/14 C meets our entry point requirement with a close above $54.00
01/05/14 adjust the trigger to $54.00
...see earlier updates in the watch list section for older comments...

Current Target: C @ 70.00
Current Stop loss: 49.40
Play Entered on: 01/08/14
Originally listed on the Watch List: 11/24/13


Capital One Financial - COF - close: 78.02

Comments:
01/12/14: COF has extended its rally to four up weeks in a row. Yet the rally is starting to look tired with shares struggling near the $78.00 level. The company reports earnings on January 16th, after the closing bell. Wall Street is expecting a profit of $1.55 a share. I do expect COF to see some profit taking after its report. Shares could easily see a drop back toward the $75.00 area. Please note our new stop loss at $71.75. I'm not suggesting new positions at this time.

- Suggested Positions -
NOV 29, 2013 - entry price on COF @ 71.69, option @ 5.80*
symbol: COF1517a75 2015 JAN $75 call - current bid/ask $8.30/8.55

01/12/14 new stop loss @ 71.75
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: 71.75
Play Entered on: 11/29/13
Originally listed on the Watch List: 11/17/13


E.I. du Pont - DD - close: 63.54

Comments:
01/12/14: As we suspected shares of DD did see a pullback toward support near $62.00. Shares are bouncing from that support with a little help from an analyst upgrade. I am not suggesting new positions at this time.

If the $62 level fails the next level of support should be $60.00.

FYI: DD is scheduled to report earnings on January 28th.

- Suggested Positions -
(2014 calls closed on December 30th, 2013)
OCT 25, 2013 - entry price on DD @ 62.57, option @ 0.74
symbol: DD1418a65 2014 JAN $65 call - exit $0.69 (-6.7%)

- or -

OCT 25, 2013 - entry price on DD @ 62.57, option @ 3.15
symbol: DD1517a65 2015 JAN $65 call - current bid/ask $3.70/3.75

12/30/13 planned exit for 2014 calls.
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: 89.76

Comments:
01/12/14: Both CAT and DE experienced some profit taking early last week. Both stocks were also bouncing on Friday but that doesn't mean the correction is over. DE could see some support near $88.00 and should definitely find support in the $85-86 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 $6.55/6.75

01/05/14 new stop loss @ 84.40
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: 84.40
Play Entered on: 12/10/13
Originally listed on the Watch List: 12/08/13


Dollar General Corp. - DG - close: 62.87

Comments:
01/12/14: DG displayed some relative strength last week but most of that was on Thursday and Friday as the market reacted to earnings from a rival company, Family Dollar Store (FDO). The funny thing is that FDO issued bearish earnings guidance, which should have sparked a sell off in the ultra-cheap dollar discount type stores. Instead shares of DG surged higher after the initial knee-jerk drop on Thursday morning. Friday's follow through rally pushed DG through resistance near $62.00 to close at all-time highs.

Unfortunately, due to our lack of time, we had already decided to in last week's newsletter to exit our 2014 calls on Monday, January 6th, at the opening bell. I am not suggesting new positions.

Please note our new stop loss at $57.45.

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

- Suggested Positions -
(exit on 2014 calls was Monday, January 6th, 2014)
SEP 06, 2013 - entry price on DG @ 57.61, option @ 2.58
symbol: DG1418a60 2014 JAN $60 call - exit $1.89 (-26.7%)

- or -

SEP 06, 2013 - entry price on DG @ 57.61, option @ 3.48
symbol: DG1517a70 2015 JAN $70 call - current bid/ask $4.00/4.60

01/12/14 new stop loss @ 57.45
01/06/14 planned exit for the 2014 calls
01/05/14 prepare to exit 2014 calls immediately on Monday morning
11/17/13 new stop loss @ 54.75
09/22/13 new stop loss @ 53.60

Current Target: DG @ 69.00 for the 2015s
Current Stop loss: 57.45
Play Entered on: 09/06/13
Originally listed on the Watch List: 08/04/13


The Walt Disney Co. - DIS - close: 75.39

Comments:
01/12/14: After a three-week rally to new highs shares of DIS hit some profit taking last week. If this pullback continues look for potential support in the $72 area near its rising 50-dma. I am not suggesting new positions at this time.

FYI: DIS is scheduled to report earnings on February 5th.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $7.00/7.15

01/05/14 new stop loss @ 69.40
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: 69.40
Play Entered on: 10/23/13
Originally listed on the Watch List: 10/13/13


Dick's Sporting Goods - DKS - close: 56.76

Comments:
01/12/14: DKS set new closing highs last week but the stock also seems to have peaked. Shares are currently down three days in a row. If this correction continues we can watch for support in the $54-55 area. I am not suggesting new positions at this time.

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 $4.00/4.30

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: 36.17

Comments:
01/12/14: We may want to rethink our FCX trade. I warned readers last weekend that a retreat from resistance near $38.00 would start to look like a bearish double top. Well a pullback is exactly what FCX delivered. Now shares are flirting with a breakdown below their 50-dma in the $36.00 area.

A bounce in gold last week was offset by weakness in copper prices. Most of the opinion I read about gold suggest the precious metal could see new lows in 2014. That could be a problem for FCX. Meanwhile FCX was dealing with a major headache in Indonesia. The country recently enacted a ban on mineral ore exports. It was unclear up until this weekend if FCX would be affected by the ban. The latest reports suggest that FCX will be exempt from this mineral ore export ban and this good news might give the stock price a bump. I am not suggesting new positions at this time.

- Suggested Positions -
NOV 13, 2013 - entry price on FCX @ 35.25, option @ 2.60*
symbol: FCX1517a39 2015 JAN $39 call - current bid/ask $2.21/2.26

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: 78.90

Comments:
01/12/14: Last week was quiet for FLR. The stock has been churning sideways inside the $78-80 zone and closed down 25 cents for the week. I am concerned that if FLR breaks below the $78 level it could signal a drop toward its December lows near $75.00. More conservative investors may want to take profits on our 2015 calls now. 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: 10.00/10.30

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: 26.96

Comments:
01/12/14: Uh-oh! GE has been underperforming all year long (2014). The stock is down two weeks in a row and almost down every day this year with shares settling on technical support near its 50-dma this Friday. The relative weakness is troubling and if this correction continues we could see GE drop toward its December lows near $26.20.

The next move will most likely be driven by earnings. GE is scheduled to report earnings on January 17th. Wall Street is looking for a profit of 53 cents a share. I would not be surprised to see GE drift sideways until the earnings report and then move. I am not suggesting new positions at this time.

Earlier Comments:
Keep in mind that GE doesn't move very fast so we'll need to be patient.

- Suggested Positions -
DEC 27, 2013 - entry price on GE @ 27.84, option @ 1.19
symbol: GE1517a30 2015 JAN $30 call - current bid/ask: 0.83/ 0.86

- or -

DEC 27, 2013 - entry price on GE @ 27.84, option @ 1.96
symbol: GE1615a30 2016 JAN $30 call - current bid/ask: 1.65/ 1.69

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: 82.01

Comments:
01/12/14: Shares of HD have spent the last week consolidating sideways inside the $81-82 zone. Fortunately shares closed near their highs for the week and HD looks poised to breakout higher. Investors might want to wait for a new close above $82.50 before initiating new positions.

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: 3.10/ 3.20

- or -

DEC 27, 2013 - entry price on HD @ 81.65, option @ 6.55
symbol: HD1615a90 2016 JAN $90 call - current bid/ask: 6.10/6.35

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: 49.79

Comments:
01/12/14: Oil prices have continued to plunge from their late December highs and that's putting pressure on some of the energy names. Yet shares of HFC have been relatively resilient. The stock has been consolidating sideways under resistance near the $50 level for the last three weeks. Friday saw HFC testing resistance at its early December intraday high near $50.50-51.00 before paring its gains. A close above $51.00 could be used as an alternative bullish entry point.

Tonight we're adjusting the stop loss to $44.75.

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 $6.00/6.50

01/12/14 new stop loss @ 44.75
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: 44.75
Play Entered on: 11/26/13
Originally listed on the Watch List: 11/24/13


Harley-Davidson - HOG - close: 69.62

Comments:
01/12/14: HOG continues to consolidate sideways below resistance near the $70 level. Fortunately it seems to be doing so with a bullish trend of higher lows. If the market cooperates HOG could breakout higher soon. Tonight we're adjusting our stop to $64.75. More conservative investors may want to move their stop closer to the 50-dma.

FYI: HOG is scheduled to report earnings on January 30th.

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

01/12/14 new stop loss @ 64.75
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 exit 2015 calls @ 74.50
Current Stop loss: 64.75
Play Entered on: 09/04/13
Originally listed on the Watch List: 08/25/13


Honeywell Intl. - HON - close: 90.16

Comments:
01/12/14: Shares of HON were downgraded this past week. The downgrade really didn't have much impact on the stock price but it certainly didn't help. HON has been slowly drifting lower the last couple of weeks. If this continues we might see HON retesting its trend of higher lows in the $86-87 area. I am not suggesting new positions at this time.

FYI: HON is scheduled to report earnings on January 24th.

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

12/29/13 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: 85.55

Comments:
01/12/14: Traders bought the dip in HP on Tuesday morning and the stock has been up every day since. Friday was a new all-time high. We are adjusting our stop loss up to $79.65. I am not suggesting new positions at this time.

FYI: HP is scheduled to report earnings on January 30th.

- Suggested Positions -
DEC 05, 2013 - entry price on HP @ 81.00, option @ 5.60*
symbol: HP1517a90 2015 JAN $90 call - current bid/ask $ 6.40/6.70

01/12/14 new stop loss @ 79.65
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: 79.65
Play Entered on: 12/05/13
Originally listed on the Watch List: 10/27/13


JPMorgan Chase & Co. - JPM - close: 58.49

Comments:
01/12/14: JPM tagged new highs early last week but gains faded. Shares spent the rest of the week churning sideways. Investors are most likely waiting for earnings to come out. JPM will announce earnings on Tuesday morning, January 14th, before the opening bell. Analysts are expecting a profit of $1.32 a share. If JPM disappoints we could see shares drop toward the $55-56 range. I am not suggesting new positions at this time.

- Suggested Positions -
(2014 call exit on Monday, December 23rd)
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 $ 6.60/6.70

01/05/14 new stop loss @ 52.90
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: 52.90
Play Entered on: 06/24/13
Originally listed on the Watch List: 05/25/13


Level 3 Communications - LVLT - close: 34.00

Comments:
01/12/14: LVLT continues to show relative strength with another surge to new two-year highs. The stock is starting to look a little bit overbought with its run from the $30 area in mid December. I am raising our stop loss up to $29.75.

FYI: LVLT is scheduled to report earnings on February 5th.

- Suggested Positions -
OCT 31, 2013 - entry price on LVLT @ 29.39, option @ 4.40*
symbol:LVLT1517a30 2015 JAN $30 call - current bid/ask $ 6.50/6.90

01/12/14 new stop loss @ 29.75
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: 29.75
Play Entered on: 10/31/13
Originally listed on the Watch List: 10/20/13


MGM Resorts - MGM - close: 25.36

Comments:
01/12/14: Wow! The rally in MGM just refuses to slow down. Shares are up another +8% last week. This stock is now up +37.5% from its November 2013 closing low of $18.44. On a purely technical basis this past week's breakout past round-number resistance at $25.00 looks bullish. MGM is definitely showing a lot of momentum but it's also up six weeks in a row. Our long-term target has been the $26-28 area and MGM is almost there!

Tonight we are deciding to lock in profits now and exit immediately on Monday morning, January 13th. You may want to hold on. If you do choose to hold on I would strongly suggest you raise your stop loss. There seems to be short-term technical support at the rising 10-dma, currently near $24.00.

- Suggested Positions -
DEC 17, 2013 - entry price on MGM @ 21.79, option @ 2.00
symbol: MGM1517a25 2015 JAN $25 call - current bid/ask $ 3.80/3.85

01/12/14 prepare to exit positions on Monday morning, Jan. 13th
01/05/14 MGM could be forming a bearish reversal, expect a pullback from here
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


Motorola Solutions - MSI - close: 66.15

Comments:
01/12/14: MSI delivered a lackluster performance. Shares drifted sideways between short-term support near $66 and short-term resistance near its 10-dma. A breakdown from here could be a warning signal. I am not suggesting new positions. I am raising our stop loss to $62.75. Cautious investors might want to move their stop closer to $64 instead.

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

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

- Suggested Positions -
DEC 23, 2013 - entry price on MSI @ 66.75, option @ 4.10
symbol: MSI1517a70 2015 JAN $70 call - current bid/ask $ 3.50/3.70

- or -

DEC 23, 2013 - entry price on MSI @ 66.75, option @ 5.10
symbol: MSI1615a75 2016 JAN $75 call - current bid/ask $ 4.20/4.55

01/12/14 new stop loss @ 62.75
Current Target: Exit when MSI trades in the $80-90 zone.
Current Stop loss: 62.75
Play Entered on: 12/23/13
Originally listed on the Watch List: 12/08/13


The Manitowoc Co. - MTW - close: 24.85

Comments:
01/12/14: Shares of MTW were upgraded on January 8th. Yet the stock accelerated again on Friday the 10th. The rally last week now marks MTW's seventh weekly gain in a row. Shares do look short-term overbought and I would expect some profit taking. Investors might want to consider exiting their calls now to lock in gains and then look for a new entry point on a pullback. I am not suggesting new positions at this time. We are adjusting the stop loss to $21.90.

- Suggested Positions -
DEC 19, 2013 - entry price on MTW @ 22.33, option @ 2.85*
symbol: MTW1517a25 2015 JAN $25 call - current bid/ask $ 3.70/4.00

01/12/14 new stop loss @ 21.90, investors may want to just lock in profits now.
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: 21.90
Play Entered on: 12/19/13
Originally listed on the Watch List: 12/15/13


QUALCOMM Inc. - QCOM - close: 73.87

Comments:
01/12/14: QCOM is finally starting to show a little relative strength and shares flirted with a bullish breakout past resistance near $74 late last week. The CES show in Vegas kept investors focused on technology stocks. QCOM was also in the headlines for news regarding an anti-trust probe from Chinese regulators. QCOM's CEO mentioned in an interview this past week that they still do not know why China is investigating the company. I am not suggesting new positions at this time.

FYI: QCOM is scheduled to report earnings on January 29th.

- Suggested Positions -
NOV 15, 2013 - entry price on QCOM @ 71.34, option @ 4.90
symbol: QCOM1517a75 2015 JAN $75 call - current bid/ask $5.35/5.45

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


VeriSign, Inc. - VRSN - close: 61.46

Comments:
01/12/14: VRSN is the gift that keeps on giving. Shares extended their gains another week to close at new multi-year highs again. We've been planning on exiting our 2015 calls when VRSN hits $64.50. Tonight we're altering that plan. I am suggesting an immediate exit to lock in gains now. VRSN is near its trend line of higher highs. Take the money and run.

- 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 $ 9.55/9.75

01/12/14 prepare to exit 2015 calls on Monday, Jan 13th at the open
01/05/14 new stop loss @ 55.75
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.
...please see older updates for prior comments ...

Chart of VRSN:

Current Target: 2015 calls @ $64.50
Current Stop loss: 55.75
Play Entered on: 09/19/13
Originally listed on the Watch List: 08/18/13


Western Digital Corp. - WDC - close: 85.46

Comments:
01/12/14: It was an up week for shares of WDC. The stock broke through resistance near $84.00 on Tuesday morning. Shares almost hit $88 before finally seeing some profit taking. Technically Thursday's session has created a bearish reversal pattern but it has not been confirmed yet. Look for support in the $82-84 zone if WDC does see any pullback.

Please note our new stop loss at $77.40.

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

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 $ 9.30/9.55

01/12/14 new stop loss at $77.40
01/05/14 new stop loss at $76.40
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: 77.40
Play Entered on: 09/19/13
Originally listed on the Watch List: 11/17/13


Wells Fargo & Co. - WFC - close: 44.94

Comments:
01/12/14: Large financial stocks continued to rally last week. WFC hit new all-time highs on Thursday. The trend is up but WFC could see some profit taking after they report earnings. Wall Street expects a profit of 98 cents a share. The company is scheduled to report earnings on Tuesday, January 14th, before the opening bell. I would wait until after we see how the market interprets WFC's results before considering new positions.

- Suggested Positions -
DEC 26, 2013 - entry price on WFC @ 45.50, option @ 1.50
symbol: WFC1517a50 2015 JAN $50 call - current bid/ask $ 1.49/1.54

-- or --

DEC 26, 2013 - entry price on WFC @ 45.50, option @ 2.95*
symbol: WFC1615a50 2016 JAN $50 call - current bid/ask $ 3.00/3.10

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

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: 72.97

Comments:
01/12/14: Shares of WYN garnered an upgrade last week but the announcement failed to have much impact on the stock price. The stock did find some short-term support near $71.65 this past week but I remain concerned that WYN's upward momentum is stalling. Shares are likely due for a deeper pullback. I am not suggesting new positions at this time.

FYI: WYN is scheduled to report earnings on February 7th.

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 $ 4.80/5.50

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


Starbucks - SBUX - close: 77.67

Comments:
01/12/14: Last weekend shares of SBUX were trending lower. We suggested investors exit immediately on Monday morning, January 6th. Since then SBUX has bounced near its December lows around the $76.00 level, which was a possibility I discussed. However, I am not convinced the correction in SBUX is over. We currently have SBUX on our watch list for a correction closer toward the $70 area.

- Suggested Positions -
DEC 04, 2013 - entry price on SBUX @ 80.00, option @ 4.70
symbol: SBUX1517a90 2015 JAN $90 call - exit $3.00 (-36.1%)

01/06/14 planned exit
01/05/14 prepare to exit positions immediately on Monday, Jan 6th
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

Chart of SBUX:

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



Watch

Transports, Memory, & Games

by James Brown

Click here to email James Brown


New Watch List Entries

JBHT - JB Hunt Transport

MU - Micron Technology

ZNGA - Zynga Inc


Active Watch List Candidates

CBI - Chicago Bridge & Iron

FL - Foot Locker, Inc.

ITW - Illinois Tool Works

SBUX - Starbucks

STX - Seagate Tech.


Dropped Watch List Entries

C has graduated to our active play list.
JNPR hit our entry trigger on Friday so it has moved to our new plays.



New Watch List Candidates:


JB Hunt Transport - JBHT - close: 79.23

Company Info

As the name might imply JBHT is in the transportation industry, more specifically the trucking industry. Back in December the company lowered their earnings guidance but the news had little impact on the stock price. Normally and earnings warning would send a stock sharply lower. Investors could be betting that an improving economy will spell stronger business for the truckers.

JBHT has slowly clawed its way to the top of a major consolidation zone and now it looks poised to breakout. I am suggesting we wait for JBHT to close above $80.50 and then buy calls the next morning with a stop loss at $74.75. If triggered our long-term target is $98.00. Currently the point & figure chart is forecasting at $93 target.

FYI: JBHT is scheduled to report earnings on January 23rd. More conservative investors may want to wait until after we see how the market reacts to JBHT's results before initiating any positions.

Breakout trigger: Wait for a close above $80.50
then buy calls the next day with a stop at $74.75.

BUY the 2015 Jan $85 call (JBHT1517a85) current ask $4.60

Chart of JBHT:

Originally listed on the Watch List: 01/12/14


Micron Technology - MU - close: 23.71

Company Info

MU is in the technology sector. The company makes DRAM memory chips (part of the semiconductor industry). This stock was a huge performer in 2013. Many investors were shooting against it, thinking the stock was overpriced. Then earnings came out. MU just reported earnings this past week and crushed Wall Street's estimates. Analysts were expecting $3.71 in revenues and a profit of 51 cents a share. MU delivered $4.0 billion in revenues and 77 cents in profits. Shares tagged multi-year highs. I suspect we will see MU fill the gap from Wednesday morning.

Use a buy-the-dip entry point at $22.00. If triggered we'll start with a stop loss at $19.75. Our long-term target is the $28-30 area.

Keep in mind that late last year MU saw some volatility around news that a rival chip maker, Hynix, was building a new factory in 2014 and investors worried that might (naturally) impact supply and thus memory pricing. This could be a story that shows up again in 2014 even though the new factory probably won't start producing until 2015.

Buy-the-Dip trigger: $22.00, stop @ 19.75

BUY the 2015 Jan $25 call (MU1517a25) current ask $3.60

- or -

BUY the 2016 Jan $30 call (MU1615a30) current ask $3.50

Chart of MU:

Originally listed on the Watch List: 01/12/14


Zynga, Inc. - ZNGA - close: 4.11

Company Info

ZNGA is part of the technology sector. The company develops online "social" games. They're the geniuses behind games like Farmville, Words with Friends, Mafia Wars, and more. The stock has plunged from its 2012 highs near $15. Shares have been languishing under the $4.00 level for over a year. Yet it looks like ZNGA has finally found a bottom.

It is worth noting that the company is losing money. Investors are betting on a turnaround plan. ZNGA just replaced their CEO about six months ago. Fortunately the latest earnings report, back in October, showed losses less than analysts expected. This was in spite of a massive loss in the number of daily active users. The next earnings report could be key for ZNGA. They should report sometime in early February.

More conservative investors may want to wait until after we see ZNGA's earnings report and after we see how the market reacts to the news. I am suggesting we jump ahead of the numbers. The high this past week was $4.25. Wait for ZNGA to close above $4.25 and then open positions the next morning. We'll use a stop loss at $3.75. I am not setting a hard target yet but it will probably be in the $6.00-8.00 zone.

You'll notice that I am listing both ZNGA's stock and a long-term option. I would choose one or the other.

Breakout trigger: Wait for ZNGA to close over $4.25
then open bullish positions the next morning.

buy ZNGA stock @ (trigger)

- or -

BUY the 2015 Jan $5 call (ZNGA1517a5) current ask $0.70

Chart of ZNGA:

Originally listed on the Watch List: 01/12/14


Active Watch List Candidates:



Chicago Bridge & Iron - CBI - close: 82.22

Comments:
01/12/14: Hmm... the bounce in the market and CBI's bounce from round-number support at $80.00 is creating temptation. Do we buy this rebound from short-term support? Or do we stick to the plan and wait for a deeper pullback closer to its 50-dma? Or do we buy a breakout to new highs? Any of these are potential strategies but my bias right now is to buy on a dip. I am adjusting our suggested entry point to $78.50. If CBI doesn't cooperate this week we'll re-evaluate our entry strategy.

Earlier Comments:
Our long-term target is $98.50.

Buy-the-Dip trigger: $78.50

BUY the 2015 Jan $90 call (CBI1517a90)

01/12/14 move the trigger to $78.50 (from 78.25)
01/05/14 adjust the buy-the-dip trigger to $78.25, from $80.25
adjust the stop loss to $74.45 from $74.75.

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


Foot Locker, Inc. - FL - close: 41.26

Comments:
01/12/14: We were encouraged that FL did not participate in the market's 2014 decline. Yet it's not participating in the market's bounce either. Shares are just consolidating sideways in the $40.50-42.00 area. I don't see any changes from my prior comments. We are waiting for a correction.

I am suggesting a buy-the-dip entry point at $39.25. If triggered we'll use a stop loss at $36.75. 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)

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


Illinois Tool Works Inc. - ITW - close: 82.47

Comments:
01/12/14: ITW's pullback has stalled at short-term support near $82.00. I am almost tempted to buy calls here. However, odds are good that ITW will retest technical support near its 50-dma sooner or later. I am raising our buy-the-dip entry point $80.75.

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)

01/12/14 adjust the buy-the-dip entry point to $80.75 (from 80.25)

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


Starbucks - SBUX - close: 77.67

Comments:
01/12/14: SBUX is trying to bounce from support near its December lows and the $76.00 level. Thus far the rebound is running into trouble at its new trend of lower highs. There is no change from my prior comments.

Earlier Comments:
I am probably a bit early adding SBUX to the watch list but we're listing a buy-the-dip trigger to buy calls at $70.50 with a stop loss at $67.00.

Earnings are expected in late January but no date has been confirmed yet.

Buy-the-Dip trigger: $70.50

BUY the 2015 Jan $75 call (SBUX1517a75)

- or -

BUY the 2016 Jan $80 call (SBUX1615a80)

Originally listed on the Watch List: 01/05/14


Seagate Technology - STX - close: 58.39

Comments:
01/12/14: Memory chip stocks like STX, WDC, and SNDK continued to rally last week. The recent action in STX is starting to look a little bit like a short-term top with Wednesday's intraday pullback from its highs and Thursday's decline. I am leaving our buy-the-dip trigger at $52.00 for now. However, I am adding STX rival, SanDisk (SNDK), to the new plays section tonight.

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: $52.00

BUY the 2015 Jan $55 call (STX1517a55)

01/05/14 adjust the buy-the-dip trigger from $51.00 to $52.00

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