Option Investor
Newsletter

Daily Newsletter, Sunday, 3/16/2014

Table of Contents

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

Leaps Trader Commentary

Russia & China Drag Markets Lower

by James Brown

Click here to email James Brown

Stock markets around the globe retreated before a wave of growing concerns over China's slowing economy and rising tensions between Russia and the West over its invasion of Crimea and the upcoming referendum (vote) in Crimea. News that a six-hour talk in London between U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov failed to produce any progress on the situation didn't help matters. The U.S. indices were down about -2% for the week or more with the small cap Russell 2000 delivering the best performance, down -1.8%. European markets were down -3% or more for the week, their worst one-week performance in several months.

Crude oil futures fell -3.6% last week in spite of potential sanctions against Russia, the world's largest oil and gas exporter. Meanwhile precious metals like silver and gold were in rally mode thanks to rising geopolitical tensions. Gold hit seven-month highs above $1,380 an ounce. A falling U.S. dollar has been an additional boost for commodities. One commodity not on the rise is copper, which crashes to new four-year lows last week.

chart of the gold ETF:

chart of the copper ETN:

Ukraine-Russian Conflict

The situation with Russia, Ukraine, and the Crimea-region of Ukraine is getting worse, not better. This Sunday, March 16th, 2014, is a pivotal point in this conflict with a referendum (vote) in Crimea. The vote itself is a fraud. Crimea citizens only get two choices. They can choose to vote in favor of joining the Russian federation or they can choose to vote in favor of restoring Crimea's 1992 constitution, which makes the country autonomous, in which case the Crimea parliament would vote to join the Russian federation. There is no choice to vote no and stay with the Ukraine. Keep in mind that over 50% of the population in Crimea already considers themselves Russian.

map of the Eastern Europe:

Two weeks ago Russian President Vladmir Putin said that Russia had no plans to annex Crimea. Unfortunately actions speak louder than words. There have been several photos of Russian tanks massing on the border of Eastern Ukraine. Oleksandr Turchynov, the current acting president of Ukraine, told reporters on Thursday that Russia is gathering troops and weapons on their border and plan to invade. Ukraine's northern neighbor Estonia also warned that Russia was planning to invade Ukraine. One train of thought suggests that the eastern half of Ukraine is already pro-Russian. Putin might be planning to invade Ukraine and annex the eastern half of the country in addition to Crimea. Russia's Foreign Minster Sergei Lavrov told reports on Friday that Russia had no intentions of invading Eastern Ukraine but does anyone believe him?

map of the Russian Forces on Ukraine border:

(image from Zerohedge.com)

There is additional evidence that Russia is preparing for conflict with the West and at the very least preparing for sanctions by Europe and the United States. There were a number of headlines out on Friday focused on a record-breaking decline in U.S. treasuries held by the Federal Reserve. Last week saw $104 billion in treasures leave the Fed. That is a huge number. Prior to last week's $104 billion, the next biggest one-week decline was about $30 billion during the financial crisis in 2008. Since Russia held about $138 billion in U.S. treasuries financial analysts speculate that Russia has moved these assets (or sold some of them) in advance of any U.S. sanctions that might freeze their assets.

There are also examples of Russian oligarchs moving money out of western nations and back into Russia. Another example of money on the move was Viktor Zubkov, chairman of Russia's energy giant Gazprom, who sold his entire stake in Gazprom stock the week before Putin invaded Crimea. His timing was perfect since Gazprom stock is now down -25% in the last two weeks. The Russian stock market is getting crushed with their main stock market index down -22% since February 18th. Yields on Russian 10-year bonds are close to 10%. Normally bond yields above 7% suggest investors are very worried about a government default.

Chart of the Russian market ETF (RSX):

The United States and the European Union are preparing sanctions against Russia. Economists in Russia have been speculating on how bad sanctions might impact the Russian economy, especially if Russia decides to retaliate with sanctions of their own. We don't have details yet on any sanctions but some are already estimating -$200 billion a year for Russia's $2.5 trillion economy. The real question will be Russian energy exports, which accounts for a massive chunk of revenues for the Russian government.

There are growing worries that this could turn into a military conflict. John Kerry has warned Russia all week that there will be consequences if Russia proceeds with this fake vote in Crimea on Sunday. The U.S. and NATO have been sending more fighter jets to Ukraine's neighbors and Russia is responding after Belarus "asked" Russia for support to bolster their military and Russia replied with half a dozen fighter jets. Two Russian commercial airlines, Aeroflot and S7, have been altered their air routes to avoid flying through Ukraine air space, which could be a sign they have been warned of potential conflict ahead.

Unknown hackers have targeted some Russian websites and taken Putin's presidential website and the Russian central bank website down several times on Friday. Meanwhile the U.S. State Department has issued a travel alert for any Americans in the region and warned of potential "military clashes". Here is a link to the travel alert.

Economic Data

It was a quiet week for economic data in the U.S. Wholesale inventories rose +0.6% in January following an upwardly revised +0.4% gain in December. The Producer Price Index (PPI), a look at inflation at the wholesale level, fell for the first time in three months with a -0.1% drop. Year over year numbers for the PPI are at a very low +0.9%. The University of Michigan consumer sentiment survey declined. Economists were expecting a small rise to 82.0. The latest survey fell from 81.6 to 79.9, a new four-month low.

Overseas Data

The European markets had a rough week with most markets down more than -3%. Germany is one of the biggest trading partners with Russia and the German DAX fell -4% last week. It's down -8% in the last two weeks. Speaking of Germany, their CPI data rose +0.5% for the month. Year over year German CPI is at +1.2%. Elsewhere Eurozone industrial production declined -0.2% last month while Eurozone employment inched higher +0.1% for the quarter.

Asian markets have also been weak. The Japanese NIKKEI fell -6.1% for the week thanks in part to a rally in their currency the yen. Japan said their core machinery orders came in better than expected with a +13.4% gain for the month. Japan's industrial production rose +3.8%, which was slightly below expectations. Japanese GDP was also slightly below expectations with +0.2% growth for the quarter.

Chinese markets were not immune to the global market weakness. The Hong Kong Hang Seng fell -3.6% last week. The Chinese Shanghai is off -2.6%. The entire week was overshadowed by last weekend's disclosure that Chinese exports fell -18.1% in February, to their lowest level since 2009. The disappointing economic numbers just kept coming. Chinese industrial production hit 8.6% growth, which was less than expected. Retail sales fell to their slowest pace in ten years with a +11.8% gain. Fixed asset investment in China fell to its slowest pace since 2002 at 17.9% growth.

The aftershocks of China's first corporate default in 17 years earlier this month continue to ripple out into the market. After years of government bailouts the Chinese government admitted that "this year's challenges are severe" and there could be more defaults. Thus far there has only been one corporate credit default but if we start to see more they could cascade into a market meltdown that brings the Chinese economy down with it.

Last year China's GDP growth target was +7.7%. This year they have lowered it to +7.5%, the slowest growth rate in twenty years. Recent comments from Chinese leaders this past week suggest that they will not meet their GDP growth targets during the first quarter of 2014.

Major Indices:

Believe it or not but in spite of all the hand wringing and worry last week the S&P 500 index is only down -2% from its all-time highs earlier this month. The breakdown below support near 1850 is technically bearish. If this pullback continues the S&P 500 could find technical support at its 50-dma (near 1828) or the 100-dma (near 1808). A -5% correction would mean a dip to 1786.

chart of the S&P 500 index:

The NASDAQ composite just snapped a five-week winning streak with a pullback to short-term support near 4240. If this dip continues we can look for potential support at 4200 and its 50-dma. Below that there should be additional support at its 100-dma near 4100 and below that the 4,000 mark.

chart of the NASDAQ Composite index:

Thanks to the +0.39% bounce on Friday the small cap Russell 2000 index delivered the best performance among the major U.S. indices with a -1.8% decline for the week. You'll notice on the chart below how the $RUT failed at its trend line of higher highs. If this correction lower continues then the 1160 and 1140 area could be support. A drop to 1150 would be a -5% pullback from its highs.

chart of the Russell 2000 index



Economic Data & Event Calendar

The economic reports and events this week will likely be overshadowed by any geopolitical events in Ukraine. Assuming we do not see a military conflict erupt with Russia then the event to watch will be the FOMC meeting on Wednesday followed by Janet Yellen's press conference.

Economic and Event Calendar

- Monday, March 17 -
New York Empire State manufacturing index
Industrial production

- Tuesday, March 18 -
Consumer Price Index (CPI)
Housing Starts & Building Permits

- Wednesday, March 19 -
FOMC rate decision and economic projections
new Fed Chairman Yellen's first press conference

- Thursday, March 20 -
Weekly Initial Jobless Claims
Existing home sales
Philadelphia Fed survey

- Friday, March 21 -

Additional Events to be aware of:

April 18th - U.S. markets closed
April 30th - FOMC interest rate decision and outlook




Looking Ahead:

Will Russian aggression kill the bull market that just hit its fifth birthday a few days ago? We knew the bull market was mature but a month ago investor sentiment was pretty positive with a big bounce in progress off the February low. Thus far the reaction in the U.S. stock market has been relatively mild with Asian and European markets suffering bigger declines. That could change rapidly and Monday could be a volatile session.

Russia will decree Crimea's vote on Sunday to be a success while the Western world will consider it illegal. What happens on Monday is the real question. Does Russia send troops into Eastern Ukraine? Does NATO respond with force? Let's assume for a moment that the situation does not turn violent. Then we could see U.S. stocks bounce. Yet until the situation with Crimea is actually resolved then Russia will remain a new bogeyman for the bull market to fear.

In the meantime the situation in China could have larger implications for the global economy. The latest string of economic data has all been bearish. If the Chinese economy sees a sharp decline then all the countries they buy raw materials from could see a sharp decline. Taiwan has got to be very worried over this Crimea event. If the West does not defend Crimea from being annexed by Russia then why would they expect the West to defend Taiwan from being annexed by China (China already claims ownership of Taiwan but that's a rather murky subject)?

James



Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Stock markets around the globe posted declines last week, some of them pretty sharp declines, thanks to dour economic data and the winds of war blowing from Russia.

Our plan was to exit our FL trade on Monday, March 10th, to lock in potential profit.

KBH and RYL were stopped out.

We added KLAC from our watch list to the active play list.

I have updated stop losses on: ALK and ANV.

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

Markets Await The Vote

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(March 16, 2014)

Stocks had a down week thanks to a variety of issues. Most traders were blaming disappointing economic data out of China and the rising tensions between Russia and the West over the Crimea vote.

Monday morning could be volatile given the outcome of the "vote" in Crimea on Sunday. Evidence that Russia was massing troops on the eastern border of Ukraine doesn't bode well either. It would appear that there is a growing risk of an actual military conflict with Russia. An economic conflict is all but guaranteed with both U.S. and Europe drawing up sanctions against Russia.

Considering all of the unknowns at the moment I am not suggesting new positions tonight. However, that doesn't mean there aren't opportunities. We are adding three new candidates to the watch list (AEM, MPC, and NKE). Plus, last week saw KLAC graduate from our watch list to our active play list.

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:

UA, LMT, CBOE, KKD, STX, PSX, V, HFC, ATVI, NEM, GLD, NS, AGU, LSTR, HSY, CAB, UNP, NSC, CR, MAR, UPL, M, ZNGA, FB, PCAR, GE, LAMR, BWA, BDX, ROST,



Play Updates

Closed FL to Lock In Gains

by James Brown

Click here to email James Brown

Editor's Note:

Last week we closed our Foot Locker (FL) trade to lock in potential gains.

KLAC has graduated from our watch list to our active play list below.


Closed Plays


Our plan was to close the FL trade on Monday, March 10th

KBH and RYL were stopped out.



Play Updates


Agilent Technologies - A - close: 55.44

Comments:
03/16/14: Shares of Agilent have reversed sharply with a plunge back below its 50-dma and 100-dma. The stock is now retesting round-number support near $55.00. If there is any follow through lower this week we could see A hit our stop loss at $53.80.

Earlier Comments:
FYI: Agilent is planning to spin off its electronic measurement company, Keysight Technologies, toward the end of 2014.

- Suggested Positions -
FEB 14, 2014 - entry price on A @ 55.00, option @ 3.70
symbol: A1517a60 2015 JAN $60 call - current bid/ask $3.55/3.70

- or -

FEB 14, 2014 - entry price on A @ 55.00, option @ 5.10
symbol: A1615a65 2016 JAN $65 call - current bid/ask $4.65/5.40

03/02/14 new stop loss @ 53.80
02/16/14 new stop loss @ 52.90 (was 52.40)
02/14/14 triggered at $55.00
02/09/14 adjust the entry trigger to $55.00 (from $55.50)

Current Target: A @ $74.00
Current Stop loss: 53.80
Play Entered on: 02/14/14
Originally listed on the Watch List: 01/26/14


Alaska Air Group - ALK - close: 91.49

Comments:
03/16/14: ALK was slowly losing altitude all week. Then on Friday morning one analyst slapped a $100 price target on the stock and shares rallied +4.66%. I am raising our stop loss to $83.40.

Earlier Comments:
The point & figure chart is already bullish with a $98.00 target. Our long-term target is $99.00.

- Suggested Positions -
FEB 25, 2014 - entry price on ALK @ 85.88, option @ 8.00
symbol: ALK1517a90 2015 JAN $90 call - current bid/ask $10.40/11.40

03/16/14 new stop loss @ 83.40
03/09/14 Friday's move is a potential reversal pattern
02/25/14 trade opens with ALK gapping higher at $85.88
02/24/14 ALK meets our entry requirement with a close above $82.50

Current Target: ALK @ $99.00
Current Stop loss: 83.40
Play Entered on: 02/25/14
Originally listed on the Watch List: 02/23/14


Allied Nevada Gold - ANV - close: 6.39

Comments:
03/16/14: A surge in gold prices helped fuel big moves in shares of ANV. The stock rallied +15.9% last week and that's after the intraday pullback from its Friday highs.

I would not be surprised to see ANV dip back toward the $6.00 level, which should be new support. I am raising our stop loss to $4.95.

Earlier Comments:
This is an aggressive play . Gold and the miners can be volatile I am suggesting small positions to limit our risk. I am also suggesting investors buy the stock as an alternative to buying the options.

- Suggested Positions -
FEB 26, 2014 - entry price on ANV @ 5.00, option @ 0.60
symbol: ANV1517a7.5 2015 JAN $7.50 call - current bid/ask $1.05/1.20

- or -

(Buy the stock)
FEB 26, 2014 - entry price on ANV @ $5.00

03/16/14 new stop @ 4.95
02/26/14 triggered @ 5.00
02/23/14 Adjust the buy-the-dip entry to $5.00 (from $5.25)

Current Target: ANV @ $9.50
Current Stop loss: 4.95
Play Entered on: 02/26/14
Originally listed on the Watch List: 02/16/14


Bank of America - BAC - close: 16.80

Comments:
03/16/14: After leading the market higher in early March the financial sector reversed sharply. BAC was no exception with a drop back toward its 50-dma. If this market pullback continues we could see BAC retesting support near $16.00.

- 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 $2.62/2.65

02/03/14 move stop loss to $15.35, investors may want to just exit now to lock in potential gains
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
...please see earlier updates for older comments...

Current Target: BAC @ $19.50 for 2015 call
Current Stop loss: 15.35
Play Entered on: 03/18/13

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


BB&T Corp. - BBT - close: 38.47

Comments:
03/16/14: Uh-oh! The pullback in BBT suddenly looks like a bearish double top. I warned investors about this last weekend. The $38.00 level should offer some short-term support. If shares close below $38.00 it could be a warning signal. 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 $1.60/1.69

03/16/14 BBT has formed a potential bearish double top.
03/02/14 new stop loss @ 35.80
02/03/14 conservative investors may want to exit now to avoid a potential loss (or raise their stop loss)
01/12/14 new stop loss @ 34.90

Current Target: BBT @ 42.50
Current Stop loss: 35.80
Play Entered on: 12/17/13
Originally listed on the Watch List: 12/15/13


Boston Scientific - BSX - close: 13.01

Comments:
03/16/14: Ouch! Two weeks ago BSX was breaking out past resistance. This past week has seen a sharp reversal lower and a close below its 50-dma. BSX remains inside the long-term bullish channel on its weekly chart but any further weakness could spell trouble. More conservative investors may want to raise their stop loss closer to the $12.50 level. I am not suggesting new positions at this time.

Earlier Comments:
Our long-term target is the $17-18 area. More aggressive investors, with a longer time frame, may want to aim higher. The Point & Figure chart is very bullish and forecasting at $32 target.

NOTE: More conservative investors might want to wait for BSX to close above potential resistance at $14.00 before launching positions.

- Suggested Positions -
MAR 10, 2014 - entry price on BSX @ 13.73, option @ 1.07
symbol: BSX1517a15 2015 JAN $15 call - current bid/ask $0.74/0.79

- or -

MAR 10, 2014 - entry price on BSX @ 13.73, option @ 2.08*
symbol: BSX1615a15 2016 JAN $15 call - current bid/ask $1.41/1.68

03/10/14 trade opens.
*option entry price is an estimate since the option did not trade at the time our play was opened.
03/09/14 Move BSX from watch list to new plays
03/07/14 BSX closes above $13.60
03/02/14 adjust entry trigger. Wait for close above $13.60 (instead of 13.50)

Current Target: BSX @ 17.50
Current Stop loss: 11.90
Play Entered on: 03/10/14
Originally listed on the Watch List: 02/09/14


Chicago Bridge & Iron - CBI - close: 81.70

Comments:
03/16/14: CBI is pulling back and looks like it could retest round-number support near $80.00 soon. At the moment I am not suggesting new positions. More aggressive traders may want to jump in on a dip near $80.00. Our stop is currently at $79.45.

- Suggested Positions -
MAR 07, 2014 - entry price on CBI @ 85.52, option @ 6.85
symbol: CBI1517a90 2015 JAN $90 call - current bid/ask $5.00/5.30

- or -

MAR 07, 2014 - entry price on CBI @ 85.52, option @ 8.50
symbol: CBI1615a100 2016 JAN $100 call - current bid/ask $6.60/7.10

03/07/14 trade opens with CBI @ $85.52
03/06/14 CBI closes above our entry requirement of $85.00

Current Target: CBI @ 99.50
Current Stop loss: 79.45
Play Entered on: 03/07/14
Originally listed on the Watch List: 03/02/14


The Walt Disney Co. - DIS - close: 80.07

Comments:
03/16/14: I warned readers last week to expect some profit taking. DIS shares have given up three dollars in the last six trading days. If this pullback continues we should not be surprised to see a decline toward the December-January highs near $76.50.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $ 9.75/10.00

03/09/14 new stop loss @ 74.75, traders may want to take some money off the table here. DIS is overbought and due for a dip.
03/02/14 new stop loss @ 71.75
02/16/14 more conservative traders may want to take profits now.
We are adjusting our long-term target from $84 to $89
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 @ 89.00
Current Stop loss: 74.75
Play Entered on: 10/23/13
Originally listed on the Watch List: 10/13/13


First Solar, Inc. - FSLR - close: 54.03

Comments:
03/16/14: FSLR pulled back toward technical support near its 50-dma. Shares have started to bounce but investors may want to wait for a close above $55.00 before considering new positions.

Currently our stop loss is at $51.75 but that might be too high. More aggressive traders may want to keep their stop below $50 and below its 200-dma (currently 49.57).

Earlier Comments:
FSLR can be a volatile stock so I consider this an aggressive, higher-risk trade. Our long-term target is $74.00.

*Use small positions to limit risk*

- Suggested Positions -
FEB 19, 2014 - entry price on FSLR @ 56.63, option @ $10.20
symbol: FSLR1517a60 2015 JAN $60 call - current bid/ask $ 7.35/ 7.75

03/09/14 recent action looks short-term bearish, expect a pullback
03/02/14 new stop loss @ 51.75. The earnings call last week was very disappointing and does not bode well for FSLR. More conservative traders may want to just exit early now.

Current Target: exit when FSLR hits $74.00
Current Stop loss: 51.75
Play Entered on: 02/19/14
Originally listed on the Watch List: 02/16/14


Gilead Sciences - GILD - close: 75.05

Comments:
03/16/14: GILD has seen a two-week correction lower. This past week shaved off almost five points. The breakdown below its 50-dma is bearish but shares settled on Friday near its 100-dma and price support near $75.00. If there is any follow through lower on Monday we could see GILD hit our stop loss at $74.00. I am not suggesting new positions at this time.

Earlier Comments:
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. Currently the point & figure chart is bullish and forecasting at $98 target.

- Suggested Positions -
FEB 07, 2014 - entry price on GILD @ 76.25, option @ 7.30
symbol: GILD1517a85 2015 JAN $85 call - current bid/ask $6.35/6.60

02/16/14 new stop loss @ 74.00
02/07/14 triggered @ 76.25
01/26/14 move the buy-the-dip trigger from 75.25 to 76.25

Current Target: exit when GILD hits $95.00
Current Stop loss: 74.00
Play Entered on: 02/07/14
Originally listed on the Watch List: 01/19/14


Honeywell Intl. - HON - close: 92.01

Comments:
03/16/14: HON has given up more than three points with last week's dip toward support near $92 and its 50-dma. The next level of support is $90.00 and the 100-dma. I am not suggesting new positions.

Earlier Comments:
Our initial plan was to keep our position size small to limit risk.

- Suggested Positions -
(closed the 2014 calls on May 20th at the open)
MAY 07, 2013 - entry price on HON @ 76.20, option @ 2.68
symbol: HON1418a80 2014 JAN $80 call - exit $5.10 (+90.2%)

- or -

MAY 07, 2013 - entry price on HON @ 76.20, option @ 4.10
symbol: HON1517a85 2015 JAN $85 call - current bid/ask $10.30/10.60

03/02/14 new stop loss @ 89.75, adjust target to $99.00
02/09/14 new stop loss @ 87.45
12/29/13 new stop loss @ 84.85
12/22/13 adjust the exit target to $98.00
...please see earlier newsletter for prior comments...

Current Target: exit when HON hits $99.00
Current Stop loss: 89.75
Play Entered on: 05/07/13
Originally listed on the Watch List: 05/04/13



Hospira Inc. - HSP - close: 42.10

Comments:
03/16/14: HSP has dipped to support near $42.00 again. If shares break down below this level the next area of support is $40.00 and its 200-dma. Currently our stop loss is at $39.90. More conservative investors may want to use a higher stop loss.

Earlier Comments:
Our long-term target is $49.75. You may want to aim higher since the point & figure chart is forecasting at $69 target but I do see potential resistance at $50.00.

FYI: Earnings are scheduled for February 12th.

- Suggested Positions -
FEB 03, 2014 - entry price on HSP @ 43.00, option @ 4.60
symbol: HSP1517a45 2015 JAN $45 call - current bid/ask $ 3.00/3.30

02/03/14 triggered at $43.00

Current Target:$ 49.75
Current Stop loss: 39.90
Play Entered on: 02/03/14
Originally listed on the Watch List: 01/26/14


JPMorgan Chase & Co. - JPM - close: 56.80

Comments:
03/16/14: Financial stocks were hit with profit taking last week. Shares of JPM fell five days in a row. If this market pullback continues we could see JPM retest its 200-dma near $55.00. I am not suggesting new positions at this time.

FYI: JPM is scheduled to report earnings on April 11th.

- 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 $ 4.90/5.00

03/09/14 adjust target from $64.00 to $69.00
02/09/14 new stop loss @ 53.65
01/26/14 a dip or a bounce near $54.00 could be used as a new bullish entry point
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 $69.00
Current Stop loss: 53.65
Play Entered on: 06/24/13
Originally listed on the Watch List: 05/25/13


KLA-Tencor - KLAC - close: 66.88

Comments:
03/16/14: KLAC is a watch list candidate that has graduated to our active play list. The plan was to wait for shares to close above $67.50 and then buy calls the next day. The stock met our entry requirement on March 12th with a close at $67.63. Our trade opened on Thursday morning. If you're looking for a new entry point investors might want to wait for a new close above $67.25.

Earlier Comments:
More conservative investors may want to use a stop closer to $64 instead. Our long-term target is $79.00. Currently the point & figure chart is bullish with an $82 target.

- Suggested Positions -
MAR 13, 2014 - entry price on KLAC @ 67.63, option @ 4.50*
symbol:KLAC1517a70 2015 JAN $70 call - current bid/ask $ 4.10/4.30

- or -

MAR 13, 2014 - entry price on KLAC @ 67.63, option @ 5.50*
symbol:KLAC1615a75 2016 JAN $75 call - current bid/ask $ 5.00/5.30

03/13/14 trade opens with KLAC @ 67.63
03/12/14 KLAC closes @ 67.63, above our suggested entry, a close above $67.50

Chart of KLAC:
Current Target: exit calls when KLAC hits $79.00
Current Stop loss: 61.90
Play Entered on: 03/13/14
Originally listed on the Watch List: 03/02/14


Micron Technology - MU - close: 23.96

Comments:
03/16/14: MU ended the week still clinging to support near $24 and its 50-dma. A bounce from here could be used as a new entry point but investors may want to wait for a rally past $25.20 before considering new positions.

Keep in mind that MU is due to report earnings on April 3rd, 2014 and you might want to wait until after the announcement before considering new positions (previously earnings were expected on March 20th).

Earlier Comments:
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.

- Suggested Positions -
FEB 10, 2014 - entry price on MU @ 24.64, option @ 3.75*
symbol: MU1517a25 2015 JAN $25 call - current bid/ask $ 3.30/3.35

- or -

FEB 10, 2014 - entry price on MU @ 24.64, option @ 3.60*
symbol: MU1615a30 2016 JAN $30 call - current bid/ask $ 3.05/3.40

02/10/14 trade opens, MU @ $24.64
*option entry price is an estimate since the option did not trade at the time our play was opened.
02/07/14 MU meets our entry point requirement with a close above $24.50
02/03/14 adjust entry strategy. Instead of a buy-the-dip trigger at $22.00, wait for MU to close above $24.50 and then buy calls the next day.

Current Target: MU @ $29.75
Current Stop loss: 21.75
Play Entered on: 02/10/14
Originally listed on the Watch List: 01/12/14


QUALCOMM Inc. - QCOM - close: 74.74

Comments:
03/16/14: QCOM had been holding up reasonably well until the market's sharp sell-off on Thursday. The stock ended the week sitting on technical support at its 50-dma. If this market decline continues we could see QCOM testing its early March low near $73.00. I am not suggesting new positions at this time.

- Suggested Positions -
NOV 15, 2013 - entry price on QCOM @ 71.34, option @ 4.90
symbol: QCOM1517a75 2015 JAN $75 call - current bid/ask $5.25/5.40

03/04/14 QCOM raises dividend and buyback program
02/19/14 QCOM being investigated by Chinese authorities
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


Starbucks - SBUX - close: 74.27

Comments:
03/16/14: It was an interesting week for shares of SBUX but first there were a few headlines. SBUX and GMCR amended their five-year deal signed last year. In the new deal SBUX gives up exclusivity for Green Mountain's Keurig K-cup high-end coffee pods while SBUX gains a wider selection of coffees to sell through GMCR's system and better business terms. Shares of GMCR reacted more strongly than SBUX.

Meanwhile shares of SBUX rallied through key resistance levels last week like its 50-dma, 200-dma and the $74.00 level in addition to its trend of lower highs. However, the rally reversed near resistance at $76.00 and Thursday's move produced a bearish engulfing candlestick reversal pattern. On a short-term basis I would not be surprised to see a dip back toward $72.00. Technically seeing the 50-dma cross under the 200-dma is traditionally a bearish signal.

I am not suggesting new positions at this time.

- Suggested Positions -
FEB 03, 2014 - entry price on SBUX @ 70.50, option @ 4.65
symbol: SBUX1517a75 2015 JAN $75 call - current bid/ask $5.95/6.10

- or -

FEB 03, 2014 - entry price on SBUX @ 70.50, option @ 6.75*
symbol: SBUX1615a80 2016 JAN $80 call - current bid/ask $7.25/7.45

03/16/14 SBUX rallied through several resistance levels last week but the pullback is already starting to reverse.
02/23/14 SBUX is rolling over and looks headed for the February low
02/09/14 new stop loss @ 67.90
02/03/14 triggered at $70.50
*option entry price is an estimate since the option did not trade at the time our play was opened.

Current Target: $82.00
Current Stop loss: 67.90
Play Entered on: 02/03/14
Originally listed on the Watch List: 01/05/14


Toll Brothers - TOL - close: 36.21

Comments:
03/16/14: TOL was not immune to the bloodbath in the homebuilder stocks and shares were downgraded on March 12th. Last week's sell-off erased about four weeks of gains. More conservative investors will want to seriously consider raising their stop loss. I am not suggesting new positions at this time.

- Suggested Positions -
FEB 27, 2014 - entry price on TOL @ 38.72, option @ 4.25*
symbol: TOL1517a40 2015 JAN $40 call - current bid/ask $2.70/3.10

- or -

FEB 27, 2014 - entry price on TOL @ 38.72, option @ 5.35*
symbol: TOL1615a45 2016 JAN $45 call - current bid/ask $3.40/4.00

02/27/14 trade opens with TOL @ 38.72
*option entry price is an estimate since the option did not trade at the time our play was opened.
02/26/14 TOL closes above our trigger (38.50)

Current Target: RYL @ $49.00
Current Stop loss: 34.30
Play Entered on: 02/27/14
Originally listed on the Watch List: 02/16/14


Wells Fargo & Co. - WFC - close: 47.40

Comments:
03/16/14: WFC weathered last week's market pullback very well. That doesn't mean the pullback in WFC is over. I would not be surprised to see a decline into the $46.50-46.00 zone.

FYI: WFC is scheduled to report earnings on April 11th.

- Suggested Positions -
DEC 26, 2013 - entry price on WFC @ 45.50, option @ 1.50
symbol: WFC1517a50 2015 JAN $50 call - current bid/ask $ 1.79/1.83

-- or --

DEC 26, 2013 - entry price on WFC @ 45.50, option @ 2.95*
symbol: WFC1615a50 2016 JAN $50 call - current bid/ask $ 3.25/3.45

03/09/14 new stop loss @ 43.90
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: 43.90
Play Entered on: 12/26/13
Originally listed on the Watch List: 12/08/13



CLOSED Plays


Foot Locker, Inc. - FL - close: 45.07

Comments:
03/16/14: Last week, after FL's big rally higher, we decided to lock in potential profits and exit on Monday, March 10th, at the opening bell. FL has been drifting lower since then. The stock opened at $46.62 on the 10th.

- Suggested Positions -
JAN 17, 2014 - entry price on FL @ 39.25, option @ 3.85*
symbol: FL1517a40 2015 JAN $40 call - exit $7.90 (+105.1%)

03/10/14 planned exit
03/09/14 prepare to exit immediately on Monday morning to lock in potential gains.
03/02/14 new stop loss @ 37.45
02/16/14 recent performance has been disappointing. Investors may want to exit early now.
02/03/14 adjust stop loss to $36.49
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: 37.45
Play Entered on: 01/17/14
Originally listed on the Watch List: 12/29/13


KB Home - KBH - close: 17.51

Comments:
03/16/14: The homebuilders have been terrible performers in March. After breaking out to new relative highs in late February the group has reversed lower. KBH has been one of the worst performers with a crash from $20.75 to $17.00. Shares hit our stop loss at $18.45 on March 10th.

- Suggested Positions -
FEB 27, 2014 - entry price on KBH @ 20.15 option @ 3.09
symbol: KBH1517a20 2015 JAN $20 call - exit $2.04* (-33.9%)

03/10/14 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
03/09/14 KBH has reversed sharply with a -8.7% plunge last week. Any further weakness will hit our stop loss at $18.45.

Chart of KBH:
Current Target: KBH @ $25.00
Current Stop loss: 18.45
Play Entered on: 02/27/14
Originally listed on the Watch List: 02/03/14


Ryland Group - RYL - close: 43.41

Comments:
03/16/14: RYL is another housing stock that has suffered a brutal two-week decline. Last week shares fell -6.9% and RYL is down -13% from its early March high. Our stop loss was hit at $41.25 on March 12th. You'll notice on the weekly chart below that RYL settled on its long-term trend line of higher lows.

- Suggested Positions -
FEB 27, 2014 - entry price on RYL @ 45.78, option @ 4.85*
symbol: RYL1517a50 2015 JAN $50 call - exit $2.75** (-43.2%)

03/12/14 stopped out
**option exit price is an estimate since the option did not trade at the time our play was closed.
02/27/14 trade opens with RYL @ 45.78
*option entry price is an estimate since the option did not trade at the time our play was opened.
02/26/14 RYL closes above our trigger (45.75)

Chart of RYL:

Current Target: $55.00-60.00 range
Current Stop loss: 41.25
Play Entered on: 02/27/14
Originally listed on the Watch List: 02/09/14



Watch

Miners, Oil, & Consumer Goods

by James Brown

Click here to email James Brown



New Watch List Entries

AEM - Agnico Eagle Mines

MPC - Marathon Petroleum

NKE - Nike Inc.


Active Watch List Candidates

EBAY - eBay Inc.

KMB - Kimberly-Clark Corp.

MA - MasterCard

PFE - Pfizer Inc.

UPS - United Parcel Service


Dropped Watch List Entries

KLAC graduated to our play list.



New Watch List Candidates:


Agnico Eagle Mines - AEM - close: 34.62

Company Info

AEM is in the basic materials sector. The company is a gold miner. They also produce silver, copper, zinc and lead. AEM was a significant underperformer in 2013. However, on a big picture basis the stock has built a bottom in the $25-35 zone over the last several months. Recent momentum in 2014 is bullish.

Currently the stock is poised to breakout past resistance near $35.00. As geopolitical tensions rise the price of gold has also broken out past resistance, which is a strong undercurrent for AEM.

Friday's high was $35.46. I am suggesting investors wait for AEM to close above $35.50 and then buy calls the next morning with a stop loss at $31.75. If triggered our long-term target is $48.50. Currently the point & figure chart is bullish with a $46 target.

Breakout trigger: Wait for a close above $35.50
then buy calls the next day with a stop loss at $31.75

BUY the 2015 Jan $40 call (AEM1517a40) current ask $3.15

- or -

BUY the 2016 Jan $45 call (AEM1615a45) current ask $4.55

Chart of AEM:

Originally listed on the Watch List: 03/16/14


Marathon Petroleum - MPC - close: 93.98

Company Info

MPC is in the basic materials sector. The company is in the oil industry with an oil refining and an oil pipeline business. Many investors view MPC as a value stock with is low P/E ratio (near 9) and a dividend yield close to 2%. Technically the stock has been showing relative strength. Shares closed the week at all-time highs.

I am suggesting investors wait for MPC to close above $95.00 and then buy calls the next day with a stop loss at $89.65. It is possible that the $100.00 mark could be round-number resistance but we are setting our long-term target at $115.00.

Breakout trigger: Wait for a close above $95.00
then buy calls the next day with a stop loss at $89.65

BUY the 2015 Jan $100 call (MPC1517a100) current ask $8.40

- or -

BUY the 2016 Jan $110 call (MPC1615a110) current ask $10.20

Chart of MPC:

Originally listed on the Watch List: 03/16/14


Nike, Inc. - NKE - close: 78.32

Company Info

NKE is in the consumer goods sector. Named after the Greek goddess of victory, the company has built an empire on athletic footwear and apparel. The stock's big bounce from its February lows near $70.00 has stalled under resistance near $80.00 and its 2013 highs. Shares spent last week consolidating sideways in the $78-80 zone while the rest of the market sold off.

NKE could be coiling for a breakout higher. However, investors might wait to buy NKE until after the company reports earnings, which will be announced on Thursday, March 20th, after the closing bell.

I am suggesting we buy calls but only after NKE shares close above $81.00 and only after NKE reports earnings. That means we are about one week early adding NKE to the watch list but I wanted to give readers an early warning.

If this play is triggered our long-term target is $99.00. Currently the point & figure chart is bullish with a $108 target.

Breakout trigger: Wait for a close above $81.00
but do not launch positions until after we see NKE's earnings on March 20th
start with a stop loss at $75.75.

BUY the 2015 Jan $85 call (NKE1517a85) current ask $3.85

- or -

BUY the 2016 Jan $90 call (NKE1615a90) current ask $5.65

Chart of NKE:

Originally listed on the Watch List: 03/16/14


Active Watch List Candidates:



eBay Inc. - EBAY - close: 56.74

Comments:
03/16/14: EBAY has retreated nearly $3 from its recent highs. More aggressive investors might want to consider buying a dip in the $55-56 zone. I am suggesting we wait for a breakout higher.

Earlier Comments:
I am suggesting we wait for EBAY to close above $60.25 and buy calls the next morning with a stop loss at $54.75. If triggered our long-term target is the $70 - $80 range. Currently the Point & Figure chart is bullish and forecasting at $74 target. Our $79 target might be a little too optimistic if you're buying the 2015 calls but a move $70 would still be profitable.

Breakout trigger: Wait for a close above $60.25
then buy calls the next day with a stop loss at $54.75

BUY the 2015 Jan $65 call (EBAY1517a65)

- or -

BUY the 2016 Jan $70 call (EBAY1615a70)

Originally listed on the Watch List: 03/09/14


Kimberly Clark Corp. - KMB - close: 109.66

Comments:
03/16/14: KMB is holding up pretty well and shares managed to post a gain last week. We are still waiting for a breakout higher.

Earlier Comments:
The stock's recent rally has lifted shares to key resistance near $110-111. A breakout here could signal the next big leg higher. The point & figure chart is already very bullish forecasting a $145 target.

I am suggesting we wait for KMB to close above $112.00 and then buy calls the next day with a stop loss at $107.00. If triggered our long-term target is $128.00.

FYI: KMB is planning to spin off its health care business by the end of Q3 2014.

Breakout trigger: Wait for a close above $112.00
buy calls the next day. stop loss @ 107.00.

BUY the 2015 Jan $115 call (KMB1517a115)

- or -

BUY the 2016 Jan $120 call (KMB1615a120)

Originally listed on the Watch List: 02/23/14


Mastercard Inc. - MA - close: 76.34

Comments:
03/16/14: The recent action in MA is short-term bearish, especially the failed rally at its 50-dma on Thursday. If shares do not improve soon we will likely drop it as a watch list candidate. Currently I don't see any changes from my earlier comments.

Earlier Comments:
The stock recently held a 10-for-1 stock split on January 21st, 2014. During the market's January sell-off MA corrected from $85 to $72.50. The bounce has stalled beneath resistance in the $78-80 zone but the point & figure chart is still bullish with a $89.00 target.

I am suggesting investors wait for MA to close above $80.00 and buy calls the next morning with a stop loss at $74.75. Our long-term target is $99.00.

Breakout trigger: Wait for MA to close above $80.00
then buy calls the next morning with a stop at $74.75.

BUY the 2015 Jan $85 call (MA1517a85)

- or -

BUY the 2016 Jan $90 call (MA1615a90)

Originally listed on the Watch List: 03/09/14


Pfizer Inc. - PFE - close: 31.23

Comments:
03/16/14: PFE suffered some bad news on the legal front this past week. A U.S. district judge ruled that PFE's reissued patent on its Celebrex drug, due to expire on December 2nd, 2015, is no good. The company will face competition from generic versions of the drug sooner than expected.

This news along with the market's plunge on Thursday pushed shares below their 50-dma. If PFE does not recover soon then I'll likely drop it as a candidate.

Currently I am suggesting investors wait for PFE to close above $33.00 and then buy calls the next morning.

Earlier Comments:
Our long-term target is the $38-40 zone. I prefer the 2016 calls but I'm listing both the 2015s and 2016s.

Breakout trigger: Wait for PFE to close above $33.00
then buy calls the next morning with a stop at $29.75.

BUY the 2015 Jan $35 call (PFE1517a35)

- or -

BUY the 2016 Jan $35 call (PFE1615a35)

03/09/14 adjust the entry trigger to a close above $33.00 (instead of $32.75)
03/05/14 PFE closed @ 32.75 but not above $32.75, no trade.

Originally listed on the Watch List: 03/02/14


United Parcel Service - UPS - close: 96.27

Comments:
03/16/14: On Friday UPS announced they are raising their freight shipping rate by 4.4%. That's more than the 3.9% rise FedEx announced a couple of weeks ago.

We are still waiting for a breakout higher. I am suggesting investors wait for UPS to close above $100.25 then buy calls the next day with a stop at $94.75. Our long-term target is the $115-120 zone.

Breakout trigger: Wait for a close above $100.25
then buy calls the next day with a stop loss at $94.75

BUY the 2015 Jan $105 call (UPS1517a105)

- or -

BUY the 2016 Jan $110 call (UPS1615a110)

Originally listed on the Watch List: 03/09/14