Option Investor
Newsletter

Daily Newsletter, Sunday, 1/19/2014

Table of Contents

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

Leaps Trader Commentary

NASDAQ and Russell 2K See New Highs

by James Brown

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The market endured the first full week of Q4 earnings season and closed relatively flat for the week. We saw some volatility early on with big swings on Monday and Tuesday but there was no follow through either direction. Investors seem to be digesting the mix of earnings news and economic data. The S&P 500 closed Friday with less than a four-point loss for the week. Biotech stocks were some of the best performers (+3.5%) while housing stocks underperformed (-2.1%). The U.S. dollar is bouncing but that has not stopped oil prices from bouncing off their recent lows nor has the dollar rally hindered the rebound in gold prices.

Economic Data

Most of the economic data was positive last week. Housing starts and permits were the exception. New construction permits fell from 1.1 million to a 999 thousand pace in December. Analyst blamed the dip on harsh cold weather. Housing starts slipped with single family starts falling -7% and multi-family starts plunging almost -15%. Consumer sentiment was also an underperformer. The University of Michigan consumer sentiment survey for January fell from 82.5 to 80.4. Economists had been expecting a rise to 83.5. Both the present conditions component and the expectations component stepped backward.

There were two federal reserve surveys. The Philadelphia Fed survey for January improved from 6.4 to 9.4. The New York Empire State manufacturing survey soared from 1.0 to 12.5. Both surveys displayed better than expected readings. The Fed also released their Beige Book report, which showed that economic activity continued to expand at a moderate pace.

Consumer-level inflation in the CPI rose +0.3%, which happened to be the biggest jump since June. Meanwhile wholesale-level inflation in the PPI rose +0.4% with gains being driven by a rise in energy prices. The U.S. continues to see improvement in its industrial production. The December data showed industrial production rising +0.3% following a +1.0% gain in November. This is the fifth consecutive month in a row of gains.

Overseas Data

Most of the economic data overseas was either positive or benign. The Eurozone said their consumer price index (CPI) rose +0.3% for the month, which pushed the year over year reading to +0.8%. Industrial production for the Eurozone zone improved +1.8% for the month, which was better than expected. Great Britain reported that their retail sales rallied +2.6% in December, which is significantly above forecasts.

In the not-so-great news category, rating agency Standard & Poor's lowered their outlook on Portugal from creditwatch negative to negative. We could be hearing a lot more about the PIIGS countries in 2014 as they continue to struggle. The market worried for years that Greece may default on its massive debt. It looks like that could happen in 2014. Greece continues to receive bailout money from the Troika (EC, IMF, and the ECB) yet the vast majority of this assistance goes to paying the interest on the previous bailout loans. It's like Greece is getting a cash advance on its credit card to make the minimum payment on its credit card balance. This can't go on forever. Greece has some significant bills due in May so the situation could implode before summer.

Data out of Asia was quiet last week. Japan said their core machinery orders climbed +9.3% for the month, which was better than expected. Yet household confidence in Japan slipped from 42.5 to 41.3, which was worse than expected. Meanwhile government officials in China reaffirmed their expectations for 2014 GDP to come in around +7.5% growth.

Major Indices:

Last Monday's plunge in the S&P 500 index stopped at its rising 30-dma. There was no follow through lower. Instead the index produced a sharp, two-day bounce but the bounce stalled at resistance near 1850. This large cap index closed the week with a -0.2% decline. The long-term trend is still higher but momentum is clearly slowing.

Looking at price levels on the S&P 500 there is clear resistance at 1580 and you could argue that the index just created a short-term bearish double top although I think it's a bit early to make that declaration. If the S&P 500 does push higher I would look for potential resistance in the 1870-1880 zone. The 1900 mark could definitely be round-number, psychological resistance.

If this index were to see a pullback there seems to be some short-term support near 1815. There is also technical support at its rising 50-dma (currently at 1807). A normal -3% to -5% pullback would mean a drop toward the 1795-1757 range. A -10% correction would be 1665.

chart of the S&P 500 index:

The NASDAQ composite also experienced a sharp sell off on Monday but the two-day bounce that followed lifted the index to new 13-year highs. The NASDAQ ended the week with a +0.5% gain. It's possible the 4180 area might be short-term support but if the market actually dips I would expect a deeper pullback in the NASDAQ. Look for support near 4100 again. If the NASDAQ can keep the rally alive then 4250 and 4300 are natural levels to watch for potential resistance.

chart of the NASDAQ Composite index:



The small cap Russell 2000 index delivered a move similar to the NASDAQ's The big two-day bounce midweek pushed the $RUT to new all-time highs. Big picture the $RUT is still climbing within its long-term bullish channel. On a more short-term basis it is nearing the multi-month trend line of higher highs, which could prove to be resistance again.

I would expect resistance near 1180 and the 1200 levels. Look for support in the 1140 area and/or its simple 50-dma.

chart of the Russell 2000 index



Economic Data & Event Calendar

Ahead of us appears to be a very quiet week for economic data. The only real reports are the Chicago area and Kansas City area Federal Reserve regional surveys. Odds are that the major headlines this week will be dominated by corporate earnings news.

The U.S. markets are closed on Monday for Martin Luther King day. Most of our schools, banks, and the government will be closed for the holiday.

Economic and Event Calendar

- Monday, January 20 -
stock market closed for Martin Luther King day

- Tuesday, January 21 -
Bank of Japan interest rate decision

- Wednesday, January 22 -
HSBC China PMI data

- Thursday, January 23 -
Weekly Initial Jobless Claims
existing home sales
Eurozone PMI data
Chicago Fed national activity index
Kansas Federal Reserve Manufacturing survey

- Friday, January 24 -
(nothing significant)

Additional Events to be aware of:

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:

Looking ahead this coming week should be all about earnings. Normally about 69% to 70% of S&P 500 companies manage to beat Wall Street's earnings estimates. Thus far only about 50% have managed to beat estimates. Corporate guidance has not been very encouraging. Honestly, after just one week of lackluster results I am surprised the market is holding as well as it has. Fortunately the results from the major financial institutions have been generally okay and could be keeping investor bullishness alive.

Odds are we are merely witnessing the growing trend of corporate America beating earnings estimates and then lowering guidance in an effort to lower their bar for the next quarter so they can do it again (beat Wall Street's lowered estimates, lower guidance). The lack of reaction in the stock market might be a reflection of investors who are in on this game or just desensitized to the practice. We still have another three or four weeks full of earnings announcements. Investors could be in a wait-and-see mood. I warned investors last week that the last two weeks of January could be pivotal as the market digests all of the Q4 earnings data and guidance.

I also warned readers last week that Goldman Sachs had issued some cautious comments about the market's ability to keep the bull market alive. Now it is Citigroup's turn to issue a warning that the market could be nearing a top. There has been a growing concern about market breadth. Fewer and fewer stocks are hitting new 52-week highs and fewer stocks are trading above their 50-dma and 200-dma. That means market leadership is narrowing. In the Option Investor newsletter market wrap, Jim pointed out some interesting numbers. He shared, "We have not had a 20% correction in 835 days and no 10% correction since August 2011. We came close in May 2012 at -9.9% so in my book that would be close enough. Even so that means it has been 19 months since a 10% dip. Historically we average a 10% dip about 2.2 times a year. That means we are long overdue."

If we step back from the day to day noise the market's trend is still higher but the equity markets will see a correction eventually. Nearly everyone expects at least a -10% correction some time in 2014. That's not super helpful. That's like saying there will be a big storm sometime in 2014. We don't know when but it's going to show up. Does that mean you carry your umbrella with you every day? Probably not. However, there is a growing list of warning signs that the market seems to be nearing a top. Depending your perspective one could argue it based on technicals or valuations.

The next few weeks could be significant. We will see another FOMC meeting in late January and in February we will see the U.S. debt ceiling debate rise up in Washington again. I am suggesting investors take a step back from the market and take a cautious approach to launching new positions. Let's wait and see if stocks produce a pullback.

James



Portfolio

Portfolio Update

by James Brown

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Current Portfolio


Portfolio Comments:

Earnings season has hit full swing. Q4 earnings results could have a big impact on market direction. Individual names could see big moves if results disappoint. Double check your stop loss placement.

Last week our plan was to exit our MGM and VRSN trades on Monday, January 13th.

This week I am suggesting we exit our DKS and WDC trades on Tuesday, January 21st. (The market is closed on Monday, January 20th.)

I have updated stop losses on: AVGO, DD, FLR, JNPR, MSI, QCOM, WFC, and WYN.

Disclaimer: At any given time the author may have positions in any or all of any companies mentioned in the Leaps Newsletter.

--Position Summary Table--
Table lists Directional CALL or PUT/LEAPS only.
Insurance puts, if applicable, are not shown.

Red symbol/name represents a play or option position exited or closed this week.





New Plays

Small Caps Outperforming

by James Brown

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- New Trades -


Editor's Note:

(January 19, 2014)

The large cap S&P 500 index delivered a mediocre performance last week with a failure to breakout past resistance near 1850. The strength in the small cap Russell 2000 index was much more encouraging with a rally to new all-time highs. While the overall trend for the market's major indices remains higher I am suggesting caution. We are in the midst of Q4 earnings season. We are also approaching potentially market moving events like the FOMC meeting in late January and the U.S. debt ceiling deadline in February.

I am not adding any new trades tonight. We added three new trades last weekend and had another watch list candidate graduate to an active trade last week.

I've added two buy-the-dip watch list candidates tonight and I've updated my radar screen for potential candidates below.

Radar Screen:
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself. In no particular order:

NTGR, JNJ, MYL, BMY, M, MRK, PFE, PCAR, SYK, TRMB, HAIN, SWI, SCTY, JKS, TSCO, BWA, PSX, V, WHR, FB, CMI, BA, LMT, NKE, ESRX, PCLN, ETN, GLW, HPQ, MDR, HAR, VOD,



Play Updates

MGM & VRSN Trades Have Been Closed

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market will be closed on Monday, January 20th.

We want to exit our DKS and WDC trades on Tuesday morning, January 21st. I have updated several stop losses tonight (AVGO, DD, FLR, JNPR, MSI, QCOM, WFC, and WYN).


Closed Plays


Our plan was to close the MGM and VRSN trades on Monday morning, January 13th to lock in potential gains.



Play Updates


American Intl. Group - AIG - close: 50.89

Comments:
01/19/14: The rally in AIG appears to be reversing under resistance near $52.50. There is a risk here that the highs last week are now a low higher in comparison to the October 2013 highs. I would expect AIG to decline toward round-number support near $50.00. I am not suggesting new positions at this time.

- Suggested Positions -
(exit 2014 calls on January 9, 2014)
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 $3.15/3.30

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: 56.14

Comments:
01/19/14: It was a big week for AVGO thanks to a strong two-day rally on Tuesday and Wednesday that pushed shares to new highs. Our target remains $58.50. More aggressive traders may want to aim higher. I am adjusting our stop loss up to $49.75. More conservative investors may want to lock in profits now or raise their stop closer to the $52.00 level. 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 $9.30/10.20

01/19/14 new stop loss @ 49.75
More conservative investors may want to lock in profits now with the bid on our option at $9.30
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: 49.75
Play Entered on: 11/11/13
Originally listed on the Watch List: 09/22/13


Bank of America - BAC - close: 17.01

Comments:
01/19/14: BAC reported better than expected results on Wednesday morning and the stock popped higher to new multi-year highs. BAC beat Wall Street estimates on both the top and bottom line. BAC is now up five weeks in a row. I would not be surprised to see shares pullback a little bit soon.

Please note that I am adjusting our exit target for the 2015 calls to $19.50.

- 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 $2.95/2.98

01/19/14 adjust exit target to $19.50 (from 18.00)
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 @ $19.50 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: 38.78

Comments:
01/19/14: BBT eked out a small gain for the week. Shares tagged new multi-year highs on Friday morning as the stock reacted to multiple analyst upgrades. BBT reported earnings on Thursday and beat estimates by three cents. 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 $1.61/1.70

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: 52.27

Comments:
01/19/14: Ouch! C reversed sharply as investors sold the earnings news. The company reported earnings on Thursday morning and missed bottom line estimates by 16 cents with a profit of 82 cents per share. Revenues were also below Wall Street's estimates at $17.78 billion for the quarter. It's not surprising to see C shares fall on disappointing earnings news. The stock is nearing potential support at its 50-dma (approaching $52). Below the 50-dma is additional support near $50.00 and its 200-dma.

I am not suggesting new positions at this time.

- Suggested Positions -
JAN 08, 2014 - entry price on C @ 54.29, option @ 3.05*
symbol: C1517a60 2015 JAN $60 call - current bid/ask $2.15/2.21

- or -

JAN 08, 2014 - entry price on C @ 54.29, option @ 6.05*
symbol: C1615a60 2016 JAN $60 call - current bid/ask $4.15/4.65

01/16/14 C reports disappointing earnings results
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


Caterpillar - CAT - close: 91.44

Comments:
01/19/14: CAT delivered another weekly gain. This stock is a new play we added last weekend. The trade opened on Monday morning at $90.26. Shares rallied to new 52-week highs on Wednesday and traded above $93. Since then CAT has pared its gains. I would not be surprised to see CAT dip back toward support near $90.00. A dip or a bounce in the $90 area would look like a new entry point. However, CAT is scheduled to report earnings soon on January 27th. More conservative investors may want to wait until after we see how the market reacts to CAT's earnings results before initiating positions.

Earlier Comments:
I do consider this somewhat of an aggressive play. A disappointing report could send the stock plunging lower again. I'm suggesting small positions. Our long-term target is the $105-110 zone. Currently the point & figure chart is forecasting at $110 target.

- Suggested (small) Positions -
JAN 13, 2014 - entry price on CAT @ 90.26, option @ 3.00
symbol: CAT1517a100 2015 JAN $100 call - current bid/ask $ 3.65/ 3.75

- or -

JAN 13, 2014 - entry price on CAT @ 90.26, option @ 5.30*
symbol: CAT1615a105 2016 JAN $105 call - current bid/ask $ 5.35/ 5.80

01/13/14 trade opens. CAT @ $90.26
*option entry price is an estimate since the option did not trade at the time our play was opened.

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


Capital One Financial - COF - close: 72.39

Comments:
01/19/14: Look out below! Our COF trade is in dire trouble. COF reported earnings on Thursday night (Jan. 16th) and the results have sparked a sharp sell off. Wall Street expected profits of $1.57 a share. COF delivered $1.45. Revenues came in better than expected but traders ignored this component.

The market reacted to COF's earnings news with shares gapping down on Friday at $73.88 and plunging past its 50-dma to close with a -5.29% loss. Our stop loss is at $71.75. If COF doesn't bounce soon we will see shares stop out. 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 $5.05/5.15

01/17/14 shares plunge in reaction to earnings news
01/16/14 COF reports disappointing earnings
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: 64.02

Comments:
01/19/14: DD followed the market lower last Monday but shares spent the rest of the week slowly drifting higher. I am not suggesting new positions at this time. I am raising our stop loss to $59.75.

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 $3.80/3.95

01/19/14 new stop loss @ 59.75
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: 59.75
Play Entered on: 10/25/13
Originally listed on the Watch List: 08/11/13


Deer & Co - DE - close: 89.35

Comments:
01/19/14: The action in shares of DE last week has turned bearish. The stock is trading under a growing trend of lower highs. This would suggest DE is poised for a deeper correction. I would expect a pullback into the $86-87 zone. I am not suggesting new positions at this time.

FYI: DE is scheduled to report earnings on February 12th.

- Suggested Positions -
DEC 10, 2013 - entry price on DE @ 87.26, option @ 5.85*
symbol: DE1517a90 2015 JAN $90 call - current bid/ask $6.20/6.35

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: 60.10

Comments:
01/19/14: It was not a great week for shares of DG. Investors continue to worry that the 2013 holiday shopping season did not perform very well for retailers. Shares of both DG and its rival DLTR underperformed the market last week.

More conservative investors may want to raise their stop loss or you could exit now and avoid or minimize any potential losses. We are leaving our stop at $57.45 for now. I am not suggesting new positions.

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 $3.50/4.30

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: 73.98

Comments:
01/19/14: DIS has not had a great 2014 thus far. The stock is retreating, currently down two weeks in a row. I am expecting DIS to find some support inside the $70-72 zone. The simple 50-dma could be support near $72. 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 $6.10/6.25

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: 53.60

Comments:
01/19/14: Ouch! What is going on with shares of DKS? The stock seems to be suffering an earthquake with a violent up and down week. I couldn't find any company-specific news other than an analyst upgrade midweek. All of this selling pressure could be investors worried about the Q4 holiday shopping season results.

There is a chance that DKS will find support inside the $52-54 zone, especially since the simple 200-dma could offer support near $52.00. However, given the relative weakness this past week, I am suggesting an immediate exit on Tuesday morning (the market is closed on Monday).

- Suggested Positions -
NOV 12, 2013 - entry price on DKS @ 54.73, option @ 4.00*
symbol: DKS1517a60 2015 JAN $60 call - current bid/ask $2.80/3.10

01/19/14 Prepare to exit immediately. DKS is not cooperating.
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: 36.19

Comments:
01/19/14: FCX delivered a disappointing session on Friday with a -1.9% decline that erased nearly all of its midweek gains. Normally when the dollar rallies we see precious metals retreat. Yet last week both the dollar and metals rose.

This coming week could be a volatile one for FCX. The company is scheduled to report earnings on Wednesday, January 22nd, before the opening bell. Wall Street is looking for a profit of 80 cents a share. 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 $2.24/2.30

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


Foot Locker, Inc. - FL - close: 38.89

Comments:
01/19/14: We were expecting shares of FL to see a correction lower. Yet the relative weakness last week is somewhat of a surprise since I can't find any news to explain why the stock is falling. It could be a reflection of investor distaste for anything related to retail right now. FL's rival, FINL, also traded lower last week.

We had FL on our watch list with a buy-the-dip trigger to buy calls at $39.25. The stock met that entry point requirement on Friday. Unfortunately shares continued to sink and closed below what should have been technical support at the simple 50-dma. FL is now down -5.7% for the week. The $37-38 area should offer some support. I would not launch new positions until we see FL bounce.

Our long-term target is $48.00 but more aggressive traders could aim higher since the point & figure chart is forecasting a $60 target.

- Suggested Positions -
JAN 17, 2014 - entry price on FL @ 39.25, option @ 3.85*
symbol: FL1517a40 2015 JAN $40 call - current bid/ask $3.40/3.70

01/17/14 triggered @ 39.25
*option entry price is an estimate since the option did not trade at the time our play was opened.

Chart of FL:

Current Target: exit when FL hits $48.00
Current Stop loss: 36.75
Play Entered on: 01/17/14
Originally listed on the Watch List: 12/29/13


Fluor Corp. - FLR - close: 82.05

Comments:
01/19/14: FLR delivered a bullish week. The stock fell to short-term support on Monday, closing near $78 and its 50-dma. Traders bought this dip and FLR posted gains the rest of the week. By Friday FLR was breaking out to new multi-year highs. I am raising our stop loss to $76.75. I am not suggesting new positions at this time.

FYI: FLR is scheduled to report earnings on February 18th.

Earlier Comments:
We will plan to exit our 2015 calls when FLR trades at $88.00.

- Suggested Positions -
(exit 2014 call on Nov. 13th)
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: 12.00/12.30

01/19/14 new stop loss @ 76.75
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
(see earlier updates for older comments)
*option entry price is an estimate since the option did not trade at the time our play was opened.

Current Target: Target for 2015 calls is FLR @ $88.00
Current Stop loss: 76.75
Play Entered on: 09/12/13
Originally listed on the Watch List: 08/11/13


General Electric - GE - close: 26.58

Comments:
01/19/14: Thus far 2014 has not been good for shares of GE. The stock is down three weeks in a row. This past week the stock is reacting to earnings news. GE announced on Friday morning with profits of 53 cents a share. That was in line with estimates. Revenues came in better than expected at $40.38 billion for the quarter. Yet the stock sold off anyway as investors worry about narrowing margins. I suspect that Friday's -2.2% decline is just an overreaction but 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: 0.70/ 0.74

- or -

DEC 27, 2013 - entry price on GE @ 27.84, option @ 1.96
symbol: GE1615a30 2016 JAN $30 call - current bid/ask: 1.53/ 1.55

01/17/14 GE falls following Q4 earnings announcement

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: 81.00

Comments:
01/19/14: HD spent most of last week churning sideways. The simple 10-dma has turned into short-term overhead resistance. I expect shares will test the $80 level soon. I am not suggesting new positions at this time.

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: 2.59/ 2.67

- or -

DEC 27, 2013 - entry price on HD @ 81.65, option @ 6.55
symbol: HD1615a90 2016 JAN $90 call - current bid/ask: 5.40/5.70

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: 48.00

Comments:
01/19/14: Most of the oil service stocks churned sideways last week. HFC underperformed with a drop to three-week lows. Traders did buy the dip near technical support at its 50-dma on Friday. I am not convinced the pullback is over. We could see HFC drop toward the $46.00 area. I am not suggesting new positions at this time.

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

- Suggested Positions -
NOV 26, 2013 - entry price on HFC @ 47.17, option @ 5.00*
symbol: HFC1517a49 2015 JAN $49 call - current bid/ask $5.00/5.40

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: 67.58

Comments:
01/19/14: Buckle your seat belts because HOG could be due for a correction lower. This stock followed the market lower on Monday but the following bounce didn't make it very far. HOG has failed at its 10-dma and looks poised to breakdown below its 50-dma soon. That could portend a retreat toward the $65-66 area. I am not suggesting new positions at this time.

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

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

- or -

SEP 04, 2013 - entry price on HOG @ 61.01, option @ 4.35*
symbol: HOG1517a70 2015 JAN $70 call - current bid/ask $ 5.30/5.50

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
(see older updates for earlier comments)

Current Target: 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: 89.95

Comments:
01/19/14: Upward momentum in HON has clearly stalled. Shares are now down three weeks in a row even though the long-term trend is still higher. On a short-term basis I would expect HON to drift sideways as investors wait for the company's earnings report. HON is scheduled to report earnings on Friday, January 24th. If HON disappoints we could see the stock test technical support at its rising 100-dma (currently near $86.50). I am not suggesting new positions at this time.

Our 2015 call option has more than doubled in value. More conservative investors may want to take profits now, before HON reports earnings.

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 $ 9.25/ 9.40

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: 85.65

Comments:
01/19/14: Traders continue to buy the dips in shares of HP. The stock ended the week poised to breakout past short-term resistance near $86.00. 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 $ 6.50/6.80

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


Juniper Networks - JNPR - close: 26.00

Comments:
01/19/14: Shares of JNPR delivered a bullish week with big gains but we got screwed on our entry point. JNPR was a watch list candidate and the stock met our entry point requirement with the Friday, January 10th close. Our plan was to open positions on Monday morning, January 13th. Unfortunately the stock gapped open higher at $25.07. The sharp move higher was reaction to news that an activist investor, Elliott Management, had acquired a 6.2% stake in JNPR and released a "value plan" in their SEC filing suggesting how JNPR could unlock shareholder value that could drive shares up into the $35-40 range. On the positive side of things JNPR really hasn't seen any profit taking and the stock appears to be coiling for a bullish breakout past the $26.00 level.

Tonight we're adjusting our exit target to $29.75. I am raising our stop loss to $22.75.

- Suggested Positions -
JAN 13, 2014 - entry price on JNPR @ 25.07, option @ 3.95
symbol:JNPR1517a25 2015 JAN $25 call - current bid/ask $ 3.95/4.00

- or -

JAN 13, 2014 - entry price on JNPR @ 25.07, option @ 5.10*
symbol:JNPR1615a25 2016 JAN $25 call - current bid/ask $ 5.05/5.55

01/19/14 new stop loss @ 22.75, adjust target to $29.75
01/13/14 trade opens with JNPR's gap open higher at $25.07
*option entry price is an estimate since the option did not trade at the time our play was opened.
01/10/14 JNPR meets our entry point requirement with a close above $23.25

Current Target: exit calls when JNPR hits $29.75
Current Stop loss: 22.75
Play Entered on: 01/13/14
Originally listed on the Watch List: 01/05/14


JPMorgan Chase & Co. - JPM - close: 58.11

Comments:
01/19/14: It was a big week for bank earnings. JPM reported on Tuesday morning. The company beat estimates by six cents per share. Revenues came in at $23.16 billion for the quarter. The stock managed to hit new multi-year highs on Wednesday and Thursday but the last day and a half has seen profit taking. I would not be surprised to see JPM drift lower for a week or two before resuming its up trend. 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 $ 6.30/6.40

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
(see older updates for earlier comments)
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: 33.96

Comments:
01/19/14: It was a quiet week for LVLT. The stock closed virtually unchanged. If shares see any profit taking I would expect a dip toward $32.00. I am not suggesting new positions at this time.

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 $ 6.40/7.10

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


Motorola Solutions - MSI - close: 66.10

Comments:
01/19/14: MSI has spent the last couple of weeks churning sideways. The stock closed virtually unchanged for last week. It could be that investors are waiting to see MSI's earnings report. The company is scheduled to report on January 22nd (Wednesday). I would expect to see some volatility as traders react to the news. I am not suggesting new positions at this time. Please note that I am adjusting our stop loss to $62.45 so it's below the 100-dma. More conservative investors may want to move their stop higher instead.

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 $ 3.45/3.60

- or -

DEC 23, 2013 - entry price on MSI @ 66.75, option @ 5.10
symbol: MSI1615a75 2016 JAN $75 call - current bid/ask $ 4.20/4.60

01/19/14 adjust stop to $62.45
01/12/14 new stop loss @ 62.75
Current Target: Exit when MSI trades in the $80-90 zone.
Current Stop loss: 62.45
Play Entered on: 12/23/13
Originally listed on the Watch List: 12/08/13


The Manitowoc Co. - MTW - close: 25.60

Comments:
01/19/14: The rally in MTW continues with the stock extending its gains to eight weeks in a row. Shares are looking overbought and due for a pullback. If the stock does see a pullback I would watch for support in the $23-23.50 area. I'm not suggesting new positions at this time. Currently our exit target is $28.00.

- Suggested Positions -
DEC 19, 2013 - entry price on MTW @ 22.33, option @ 2.85*
symbol: MTW1517a25 2015 JAN $25 call - current bid/ask $ 4.20/4.40

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
Current Stop loss: 21.90
Play Entered on: 12/19/13
Originally listed on the Watch List: 12/15/13


QUALCOMM Inc. - QCOM - close: 74.73

Comments:
01/19/14: Shares of QCOM bounced near their 50-dma on Tuesday and the following rebound pushed shares to new multi-year highs. I am raising our stop loss to $69.45. The close at new highs with the breakout from its trading range is a tempting entry point but investors may want to wait until after we see how the market reacts to QCOM's earnings report 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 $5.60/5.75

01/19/14 new stop loss @ 69.45
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: 69.45
Play Entered on: 11/15/13
Originally listed on the Watch List: 11/03/13


SanDisk - SNDK - close: 73.69

Comments:
01/19/14: SNDK is a new play from last week. Our trade opened on Monday, January 13th. Fortunately traders bought the dip near SNDK's rising 10-dma and the stock has rallied to a new high. I would not be surprised to see SNDK move sideways the next couple of sessions while traders wait for earnings. SNDK is scheduled to report on Wednesday, January 22nd, after the closing bell. Wall Street expects a profit of $1.58 a share. As I mentioned earlier more conservative investors may want to wait until after we see how the market reacts to SNDK's earnings before initiating positions.

Earlier Comments:
The plan was to start with small positions. Our long-term target is $90. Coincidentally the point & figure chart is forecasting at $90 target.

- Suggested (small) Positions -
JAN 13, 2014 - entry price on SNDK @ 72.51, option @ 5.80
symbol: SNDK1517a80 2015 JAN $80 call - current bid/ask $ 6.15/6.35

01/13/14 trade opens. SNDK @ 72.51

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


Western Digital Corp. - WDC - close: 88.82

Comments:
01/19/14: All right! It's decision time for WDC investors. The stock has continued to rally with a push to new all-time highs. Earnings are coming up this week on January 22nd (Wednesday). After a huge move from its early November 2013 lows what are the odds of some post-earnings profit taking?

We do still have almost a year left on our 2015 calls. Do we hold on and weather any post-earnings sell off? Or do we exit now to lock in gains ahead of earnings?

I am suggesting we go ahead and lock in potential earnings now with an early exit on Tuesday morning, January 21st (market is closed on Monday). There is a chance that WDC could rally on its earnings news but it could also sell off on its earnings news. We'll exit now and keep an eye on WDC for another entry point down the road.

- Suggested Positions -
DEC 10, 2013 - entry price on WDC @ 77.00, option @ 6.00*
symbol: WDC1517a90 2015 JAN $90 call - current bid/ask $11.20/11.45

01/19/14 prepare to exit on Tuesday morning, Jan. 21st
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.
(see older updates for earlier comments)

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: 46.39

Comments:
01/19/14: WFC continues to show relative strength. The company reports earnings on January 14th and beat estimates by two cents with a profit of $1.00 a share. Revenues came in at $20.66 billion, slightly below expectations. The rally on Wednesday pushed WFC to new all-time highs and the stock has managed to maintain its gains. I am raising our stop loss to $42.90.

- Suggested Positions -
DEC 26, 2013 - entry price on WFC @ 45.50, option @ 1.50
symbol: WFC1517a50 2015 JAN $50 call - current bid/ask $ 1.58/1.60

-- or --

DEC 26, 2013 - entry price on WFC @ 45.50, option @ 2.95*
symbol: WFC1615a50 2016 JAN $50 call - current bid/ask $ 3.05/3.40

01/19/14 new stop loss @ 42.90
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: 42.90
Play Entered on: 12/26/13
Originally listed on the Watch List: 12/08/13


Wyndham Worldwide - WYN - close: 74.37

Comments:
01/19/14: WYN displayed relative strength last week. The stock's big bounce on Tuesday pushed shares toward resistance near $74.00. Friday's advance produced the breakout to close at new highs. I am raising our stop loss to $69.40. 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 $ 5.60/6.40

01/19/14 new stop loss @ 69.40
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: 69.40
Play Entered on: 11/18/13
Originally listed on the Watch List: 11/10/13



CLOSED Plays


MGM Resorts - MGM - close: 26.41

Comments:
01/19/14: Hmm... I am starting to think we were a little premature in exiting our MGM play. This stock has been soaring. As of Friday, January 10th, the stock was up six weeks in a row and looked extremely overbought. In last week's newsletter we decided to exit positions on Monday, January 13th to lock in gains. We were lucky that MGM gapped open higher on the 13th before being dragged down by the market's widespread drop that session. However, the upward momentum has continued. MGM is now up seven weeks in a row. Eventually this stock will see a correction.

I am not complaining about our trade's potential gains in a four-week time frame.

- Suggested Positions -
DEC 17, 2013 - entry price on MGM @ 21.79, option @ 2.00
symbol: MGM1517a25 2015 JAN $25 call - exit @ $3.75 (+87.5%)

01/13/14 planned exit at the opening bell
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


VeriSign, Inc. - VRSN - close: 61.89

Comments:
01/19/14: The slow and steady rise in VRSN continues. The stock is up yet another week. It's been an almost non-stop rally from VRSN's October 2013 low. We had decided in last week's newsletter to exit positions on Monday, January 13th to lock in potential gains. VRSN opened that morning at $61.55.

- 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 - exit @ $9.55** (+124.7%)

01/13/14 planned exit for 2015 calls
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



Watch

Automotive & Biotech

by James Brown

Click here to email James Brown



New Watch List Entries

DLPH - Delphi Automotive

GILD - Gilead Sciences


Active Watch List Candidates

CBI - Chicago Bridge & Iron

ITW - Illinois Tool Works

JBHT - JB Hunt Transport

MU - Micron Technology

SBUX - Starbucks


Dropped Watch List Entries

FL has graduated to our active play list
STX and ZNGA have been removed from the watch list.



New Watch List Candidates:


Delphi Automotive - DLPH - close: 62.70

Company Info

DLPH is in the consumer goods sector. This British company makes automobile parts and components. When DLPH last reported earnings back in November their management guided lower for revenues but this bad news has not stopped the stock's climb to new highs. This past week the company announced an increase to its dividend (25 cents/quarter) and a $1 billion stock buyback program. This news may have helped propel DLPH to a new all-time high this past week.

We don't want to chase it here. Broken resistance near $60.00 should be new support. I am suggesting a buy-the-dip trigger to buy calls at $60.25. If triggered we'll start with a stop loss at $57.25. Our long-term is probably the $75-80 zone.

FYI: DLPH is scheduled to report earnings on February 4th. Investors may also want to note that DLPH will begin trading ex-dividend on February 13, 2014. The quarterly cash dividend should be 25 cents.

Buy-the-Dip trigger: $60.25
start with a stop at $57.25

BUY the 2015 Jan $65 call (DLPH1517a65) current ask $5.80

Chart of DLPH:

Originally listed on the Watch List: 01/19/14


Gilead Sciences - GILD - close: 78.40

Company Info

Biotech stocks were some of the market's best performers last week. GILD helped lead the charge higher with a breakout to new all-time highs. This stock seems to be a darling of Wall Street. The fact that shares almost doubled last year GILD has garnered a number of bullish analyst calls in the last several weeks. All of this bullish sentiment is built on positive expectations for GILD's pipeline of drugs currently in development and a few of them could turn out to be blockbuster drugs. Of course all of this positive spin is a two-edged sword. If GILD announces any sort of negative news about delays or setbacks it could spark significant selling since so many investors are betting on GILD.

I am labeling this a more aggressive, higher risk trade. There is always the risk that the wrong headline sends any biotech stock gapping lower (or higher as the case may be). I'm suggesting small positions to start. Broken resistance near $75.00 should be new support. Therefore we are listing a buy-the-dip trigger at $75.25. If triggered we'll use a stop loss at $69.75. Our long-term target is $95.00. Currently the point & figure chart is bullish and forecasting at $98 target.

FYI: GILD is expected to report earnings in early February but no date has been set.

Buy-the-Dip trigger: $75.25 with a stop at $69.75

BUY the 2015 Jan $85 call (GILD1517a85) current ask $8.80

Chart of GILD:

Originally listed on the Watch List: 01/19/14


Active Watch List Candidates:



Chicago Bridge & Iron - CBI - close: 82.86

Comments:
01/19/14: As promised we're evaluating our entry-point strategy on CBI. Big picture I'd prefer to take a buy-the-dip approach on new plays given the market's recent action. However, CBI could be the exception. Shares continue to hold up well and ended the week poised to breakout to new all-time highs.

I am suggesting we wait for CBI to close above $84.00 a share and then buy calls the next morning with a stop loss at $79.40. If triggered our long-term target is $98.00.

Wait for a close above $84.00,
then buy calls the next morning with a stop at $79.40.

BUY the 2015 Jan $90 call (CBI1517a90) current ask $6.20

01/19/14 adjust entry strategy. Wait for a close above $84.00, move the stop loss to $79.40
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


Illinois Tool Works Inc. - ITW - close: 82.66

Comments:
01/19/14: ITW produced a bounce off the $81.00 level last week. I could see using the bounce as a bullish entry point. However, we are sticking to our plan and keeping the suggested entry point at $80.75. More conservative investors may want to wait until after we see how the market reacts to ITW's earnings results on January 28th before initiating new positions.

If triggered we'll start with a stop loss at $76.85. Our long-term target is $95.00.

Buy-the-Dip trigger: $80.75

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


JB Hunt Transport - JBHT - close: 77.59

Comments:
01/19/14: JBHT displayed some relative weakness on Friday with a -1.1% decline but we're not giving up yet. I don't see any changes from my prior comments.

Earlier Comments:
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)

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


Micron Technology - MU - close: 22.38

Comments:
01/19/14: MU is starting to correct lower as expected. I don't see any changes from my prior comments.

Earlier Comments:
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 $2.84

- or -

BUY the 2016 Jan $30 call (MU1615a30) current ask $3.00

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


Starbucks - SBUX - close: 74.90

Comments:
01/19/14: I am not surprised to see SBUX still retreating lower. We've been looking for a drop toward the $70 area. That could happen soon if SBUX disappoints with earnings. The company is scheduled to report earnings this week on January 23rd. More aggressive investors might want to consider buying calls on a dip at the simple 200-dma, currently near $71.65.

Earlier Comments:
I am suggesting a buy-the-dip trigger to buy calls at $70.50 with a stop loss at $67.00.

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: 61.20

Comments:
01/19/14: STX has continued to rally. The relative strength in this stock is encouraging but I do not want to chase it. We will remove STX as a watch list candidate tonight. Wait to see how STX reacts following its earnings report on January 27th. Then we'll look at the stock again.

Trade did not open.

01/19/14 removed from the watch list
STX too strong. We do not want to chase it.
01/05/14 adjust the buy-the-dip trigger from $51.00 to $52.00

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


Zynga, Inc. - ZNGA - close: 3.55

Comments:
01/19/14: ZNGA is not cooperating. The stock collapsed on Thursday thanks to negative analyst comments. The stock plunged more than -10% as a reaction. It seems unlikely that ZNGA will hit our suggested entry point (a close over $4.25) any time soon. We are removing this stock as a watch list candidate.

Trade did not open.

01/19/14 removed from the watch list

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