Option Investor
Newsletter

Daily Newsletter, Sunday, 3/30/2014

Table of Contents

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

Leaps Trader Commentary

2014's First Quarter Fades Lower

by James Brown

Click here to email James Brown

The first quarter of 2014 is essentially over. Monday marks the last day of the quarter but fund managers have already made their end of quarter moves. Instead of window dressing it felt more like undressing and moving money out of small caps and tech names and into big cap industrials.

The biotech stocks continue to crash with another -6.6% plunge last week. Social media names were also hammered lower. Facebook's founder, 29-year old Mark Zuckerberg, lost $3.1 billion last week thanks to FB's $7 drop to the $60 level. The small caps underperformed with a -3.5% drop for the week. The NASDAQ's -2.8% decline marks its worst week in 17 months.

World leaders were meeting in the Dutch city of Hague for G7 meetings while Russia massed more troops on the eastern border of Ukraine. In the states the Federal Reserve said 29 of the 30 largest financial institutions passed their latest stress tests and 25 of 30 received approval to return capital to shareholders. Meanwhile emerging market stocks caught a bid and the EEM emerging market ETF appeared to break through some resistance.

chart of the Emerging Market ETF (EEM):


Economic Data

U.S. economic data remains uneven. The Richmond fed survey slipped from -6 in February to a -7 in March. Numbers under zero suggest economic contraction. The manufacturing PMI reading fell from 57.1 to 55.5. That was worse than expected but still above 50.0, indicating growth. The durable goods orders rose +2.2% in February after a -1.3% drop in January. February's reading was better than expected.

The pace of new home sales fell -3.3% in February to an annual pace of 440,000. That's down from January's 455K pace but better than many analysts were expecting. Pending home sales in February came in worse than expected at -0.8%. That's the eighth monthly decline in a row. The Case-Shiller 20-city home price index came in at +13.2% in January, down slightly from December's 13.4% reading.

Personal income rose +0.3% in February. The final reading for March's University of Michigan consumer sentiment survey was revised higher from 79.9 to 80.00 but still at four-month lows. The third estimate on U.S. Q4 GDP growth was revised from +2.4% to +2.6% growth.

Overseas Data

Eurozone manufacturing PMI slipped from 53.2 to 53.00. Numbers above 50.0 suggest growth. Consumer confidence for the Eurozone reversed from -12.7 to -9.0, which was better than expected but still negative. Stocks in Europe got a boost early on as Jens Weidmann, the president of Deutsche Bundesbank, suggested that the ECB might consider a QE-style program to fight deflation in Europe. This ignited speculation about if and when the ECB might elect to use a quantitative easing stimulus program. Suddenly analysts were suggesting it could be announced at the ECB's next meeting on April 3rd. Meanwhile the Moody's credit rating agency put Russia on review for a potential downgrade.

Economic data in Asia was mixed. Japan said unemployment ticked down from 3.7% to 3.6% and that retail sales improved +3.6%. Yet household spending was down -2.5% year over year, significantly worse than expected. The HSBC Chinese flash PMI came in worse than expected with a drop from 48.5 to 48.1. This is a new eight-month low and numbers below 50.0 indicate economic contraction. This fueled fears that the Chinese economy is slowing down too fast. Investors took comfort in reassurances from the Chinese premier, Li Keqiang, who said the government will proceed with new infrastructure projects to boost the economy.




Major Indices:

The S&P 500 index came close to retesting support near 1840 with Thursday's intraday decline. The big cap index lost -0.48% for the week but is still up +0.5% year to date. It is less than two percent from its all-time highs.

The S&P 500 has essentially churned sideways in the 1840-1885 zone for the month of March. A breakdown under support at 1840 probably leads the index to 1800. If the index can rally from here than a breakout past resistance at 1885 likely signals a run to round-number resistance at the 1900 mark.

chart of the S&P 500 index:

It has not been a great month for the NASDAQ composite with a nearly 5% drop from its early March highs. This past week saw a breakdown below support near 4200 and its 50-dma. The NASDAQ is now -0.5% for the year. The index is testing technical support at its rising 100-dma. If this support fails we could see the NASDAQ fall toward round-number support near 4,000.

chart of the NASDAQ Composite index:

The small cap Russell 2000 index was the worst performer among the major indices with a -3.5% plunge and a breakdown below its 50-dma. It too found support near its 100-dma but the recent sell-off has pushed the index to a -1.0% decline for the year.

You can see on the weekly chart below that the rally has failed at a long-term trend line of higher highs. The $RUT is also on the verge of breaking down below the bottom of its long-term bullish channel.

The 1120 and 1100 levels might offer some support but further weakness could fuel a sell-off toward the February lows.

chart of the Russell 2000 index

Weekly chart of the Russell 2000 index



Economic Data & Event Calendar

It's the first week of a new month and that means lots of economic data. Analysts are hoping for the U.S. manufacturing ISM numbers to rise now that winter is on the way out. The big report for the week will be Friday's jobs report. If the jobs number is too low the market could blame it on the weather again. If it's too hot then investors will worry that the Fed will tighten rates too soon. Estimates are for +185,000 new jobs in March.

Q1 earnings season will start soon on April 8th.

Economic and Event Calendar

- Monday, March 31 -
Federal Reserve Chairman Janet Yellen speaks
China's manufacturing PMI

- Tuesday, April 01 -
Construction spending data
ISM manufacturing data
monthly vehicle sales

- Wednesday, April 02 -
ADP Employment Change Index
U.S. factory orders

- Thursday, April 03 -
Weekly Initial Jobless Claims
ECB interest rate decision
ECB President Mario Draghi's press conference
ISM services index

- Friday, April 04 -
U.S. non-farm payrolls (jobs) report
U.S. unemployment rate

Additional Events to be aware of:

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


Looking Ahead:

Last week's market weakness could have been due to the upcoming April 15th tax deadline. Investors could have been selling stocks to raise capital to pay their taxes. Whatever the reason behind the weakness investors have turned more cautious. The latest American Association of Individual Investors (AAII) survey saw bullish sentiment drop from 36.8% to 31.2%. What is interesting is that these previously bullish investors are not turning bearish. They're merely turning neutral. Bearish sentiment was only up 1.8% to 28.6%.

Business Insider had an interesting article on Seth Klarman. He is considered one of the most successful investors in history. The article suggested that investors should be more cautious on the market because Klarman is. He has reportedly "returned $4 billion of capital to his clients. He also has 40% of his portfolio in cash. Why? Because Klarman can't find anything he is comfortable investing his money in."

Meanwhile the Stock Trader's Almanac says that seasonally April is a bullish time of the year for stocks. Over the last forty years it has been the fourth best month for the NADAQ. Since 1950 it has been the second best month of the year for the S&P 500 index. The almanac does note that midterm-election years tend to be less bullish for the market. We are also just one month away from "Sell in May and Go Away" phenomenon. May starts the worst six months of the year for stocks.

The U.S. market is long overdue for a correction so it's hard to be super bullish on the market. Yet the long-term trend is still higher. Short-term the Russell 2000 and the NASDAQ could drag the rest of the market lower. We are about two weeks away from Q1 earnings season. It would not be surprising to see the market consolidate sideways until earnings season begins.

If Europe and China do announce new stimulus programs they should be bullish for equities. Meanwhile if Russia does something stupid like move across the Ukraine border it could rattle the markets.

On a different note I encourage everyone to be thankful for what we have. The 2014 Retirement Confidence Survey by the Employee Benefit Research Institute uncovered some very sobering numbers. 36% of American workers have less than $1,000 in savings. That's up from 28% in 2013.

James







Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The U.S. market is ending the first quarter relatively flat. The NASDAQ is down -0.5% year to date while the S&P 500 is up +0.5%.

Our plan was to exit the FSLR and MU trades last Monday (March 24th).

We want to exit our BSX trade immediately on Monday morning (March 31st).

A, ANV, and HSP hit our stop loss.

I have updated stop losses on: ALK, BAC, BBT, QCOM, SBUX, TOL, and WFC.

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

Looking For Follow Through

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(March 30, 2014)

I am not adding any new trades tonight. The S&P 500 and the Dow Industrials have held up reasonably well but the NASDAQ and the small cap Russell 2000 both look poised for more weakness.

Seasonally the calendar says stocks should be strong in April but market internals still suggest caution with fewer new highs and fewer stocks above their 50-dma.

That doesn't mean there are not opportunities. We are adding three new candidates to the watch list tonight (AGU, CAT, and WDC). We just need to see some follow through higher.

I am suggesting caution when it comes to new trades. We have a busy week of economic data releases and the monthly jobs report can always be a market mover.



Play Updates

Updating Stop Losses

by James Brown

Click here to email James Brown

Editor's Note:

The market's longer-term up trend seems to be losing momentum. Investors will want to double-check their stop loss placement. We are updating several stops tonight (ALK, BAC, BBT, QCOM, SBUX, TOL, and WFC).


Closed Plays


The plan was to exit our FSLR and MU trades on Monday morning (03/24/2014).

A, ANV, and HSP hit our stop loss.



Play Updates


Alaska Air Group - ALK - close: 90.73

Comments:
03/30/14: ALK ended the week virtually unchanged. The stock has continued to churn sideways inside the $90-94 zone. That's two weeks in a row ALK has been in this range. I am worried about Friday's performance, which looks like a bearish reversal. Move the stop loss to $84.75. If the $90.00 level breaks then ALK is probably headed for the $85-86 zone.

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 $ 9.90/10.50

03/30/14 new stop loss @ 84.75
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: 84.75
Play Entered on: 02/25/14
Originally listed on the Watch List: 02/23/14


Bank of America - BAC - close: 16.98

Comments:
03/30/14: BAC has seen nothing but profit taking since it hit new multi-year highs near $18.00 two weeks ago. The stock is down six days in a row and testing technical support at its 50-dma.

News that BAC had passed the Federal Reserve's stress test did not stop the pullback. Neither did news that the Fed had approved BAC's 2014 capital plans. BAC will raise its stock buyback program and raise its dividend from one cent to five cents.

I am not suggesting new positions at this time. If you're looking for an entry point I would keep an eye on potential support near its 100-dma (currently near 16.20).

Please note our new stop loss at $15.70.

- 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 $2.68/2.69

03/30/14 new stop @ $15.70
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: 15.70
Play Entered on: 03/18/13

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


BB&T Corp. - BBT - close: 39.83

Comments:
03/30/14: BBT managed to hit new five-year highs before succumbing to profit taking near $41.00 with a midweek pullback. It looks like the pullback is not over yet. I would not be surprised to see a dip into the $38-39 zone.

We are moving the stop loss to $36.40.

- Suggested Positions -
DEC 17, 2013 - entry price on BBT @ 35.81, option @ 0.99
symbol: BBT1517a40 2015 JAN $40 call - current bid/ask $2.09/2.17

03/30/14 new stop @ 36.40
03/23/14 adjust exit target to $44.00
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 @ 44.00
Current Stop loss: 36.40
Play Entered on: 12/17/13
Originally listed on the Watch List: 12/15/13


Boston Scientific - BSX - close: 13.20

Comments:
03/30/14: I am growing concerned over BSX's lack of progress. Granted the broader market has not been very helpful these last three weeks. More aggressive investors may want to hold on to it since the long-term trend is still higher. Unfortunately, momentum has stalled.

As a precaution I am suggesting an immediate exit on Monday morning to cut our losses early. We can revisit BSX if shares breakout past $14.00 later.

- Suggested Positions -
MAR 10, 2014 - entry price on BSX @ 13.73, option @ 1.07
symbol: BSX1517a15 2015 JAN $15 call - current bid/ask $0.74/0.82

- or -

MAR 10, 2014 - entry price on BSX @ 13.73, option @ 2.08*
symbol: BSX1615a15 2016 JAN $15 call - current bid/ask $1.50/1.82

03/30/14 prepare to exit on Monday, March 31st at the open
03/23/14 new stop @ 12.40, readers may want to exit early.
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: 12.40
Play Entered on: 03/10/14
Originally listed on the Watch List: 02/09/14


Chicago Bridge & Iron - CBI - close: 85.02

Comments:
03/30/14: It was a rocky week for shares of CBI but the stock ended on an up note. I am not suggesting new positions at this time.

- Suggested Positions -
MAR 07, 2014 - entry price on CBI @ 85.52, option @ 6.85
symbol: CBI1517a90 2015 JAN $90 call - current bid/ask $6.10/6.40

- or -

MAR 07, 2014 - entry price on CBI @ 85.52, option @ 8.50
symbol: CBI1615a100 2016 JAN $100 call - current bid/ask $7.40/8.20

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: 78.99

Comments:
03/30/14: I have been warning readers to look for a pullback in shares of DIS and the stock did not disappoint. DIS tested its 50-dma this past week. There is no guarantee the pullback is over. We can watch for potential support in the $75.00-76.50 area. Our stop remains at $74.75.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $ 8.65/ 8.80

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


Honeywell Intl. - HON - close: 90.89

Comments:
03/30/14: HON has had a hard time these last three weeks with a pullback from $96.00 to $90.00. Shares are testing support near $90.00, near its rising 100-dma, and the trend line of higher lows going back several months. If HON fails here it could be ugly.

Our stop loss is at $89.75. My fear is that HON sees an intraday dip to $89.50-89.00 and then reverses higher. You may want to adjust your stop accordingly. We're leaving ours unchanged. 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 $ 9.20/ 9.35

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



JPMorgan Chase & Co. - JPM - close: 60.04

Comments:
03/30/14: JPM passed the Federal Reserve's stress test. The Fed also approved JPM's 2014 capital plan. The company plans to raise its stock buyback program by another $6.5 billion. They also plan to increase the quarterly dividend to 40 cent a share.

Shares of JPM hit new multi-year highs near $61.00 midweek before profit taking started.

I am not suggesting new positions.

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 $ 6.85/6.90

03/23/14 new stop @ 54.75
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: 54.75
Play Entered on: 06/24/13
Originally listed on the Watch List: 05/25/13


KLA-Tencor - KLAC - close: 68.75

Comments:
03/30/14: KLAC found some resistance at the $70.75 level and has started to retreat. Look for support near $66.00. I would wait for this dip or a bounce from the $66 area before considering new positions.

Earlier Comments:
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 $ 4.70/4.90

- or -

MAR 13, 2014 - entry price on KLAC @ 67.63, option @ 5.50*
symbol:KLAC1615a75 2016 JAN $75 call - current bid/ask $ 6.20/6.50

03/23/14 new stop loss @ 63.90
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
Current Target: exit calls when KLAC hits $79.00
Current Stop loss: 63.90
Play Entered on: 03/13/14
Originally listed on the Watch List: 03/02/14


QUALCOMM Inc. - QCOM - close: 79.28

Comments:
03/30/14: QCOM is still drifting higher. The stock ended the week at another round of multi-year highs. Shares are nearing what could be round-number resistance at $80.00. I would not be surprised to see a pullback soon. I am raising our stop loss to $73.75.

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 $7.65/7.75

03/30/14 new stop @ 73.75
03/23/14 new stop @ 71.75
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: 73.75
Play Entered on: 11/15/13
Originally listed on the Watch List: 11/03/13


Starbucks - SBUX - close: 73.70

Comments:
03/30/14: I don't see any clear reasons for the volatility in SBUX lately. After a sharp three-week bounce SBUX was due for a pullback. I cautioned readers to expect a dip into the $74-75 area. SBUX exceeded that with a plunge toward the $72.70 area.

I am not suggesting new positions at this time. We will adjust the stop loss to $69.75.

NOTE: The $82.00 level is resistance for SBUX but I am raising our long-term target to $89.00 for the 2015 calls and $99.00 for the 2016 calls.

- Suggested Positions -
FEB 03, 2014 - entry price on SBUX @ 70.50, option @ 4.65
symbol: SBUX1517a75 2015 JAN $75 call - current bid/ask $5.40/5.50

- or -

FEB 03, 2014 - entry price on SBUX @ 70.50, option @ 6.75*
symbol: SBUX1615a80 2016 JAN $80 call - current bid/ask $6.70/6.90

03/30/14 new stop @ 69.75
03/23/14 adjust exit targets to $89 for the 2015 calls and $99 for the 2016s
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: exit the 2015 calls when SBUX hits $89.00
exit the 2016 calls when SBUX hits $99.00
Current Stop loss: 69.75
Play Entered on: 02/03/14
Originally listed on the Watch List: 01/05/14


Toll Brothers - TOL - close: 35.72

Comments:
03/30/14: TOL is unchanged for the week. Traders bought the dip near its exponential 200-dma again. Has TOL found a bottom? The price of new home continues to rise, albeit at a slightly slower pace. Yet the pace of new single-family homes fell to five-month lows in February. Homebuilders blamed the weather.

TOL has found support twice near $34.70. I am inching our stop loss up to $34.40. 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 $2.20/2.40

- or -

FEB 27, 2014 - entry price on TOL @ 38.72, option @ 5.35*
symbol: TOL1615a45 2016 JAN $45 call - current bid/ask $2.70/3.50

03/30/14 new stop @ 34.40
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: 34.40
Play Entered on: 02/27/14
Originally listed on the Watch List: 02/16/14


Wells Fargo & Co. - WFC - close: 49.29

Comments:
03/30/14: WFC eked out another small gain for the week. The bank passed the Federal Reserve's stress tests and the Fed approved WFC's 2014 capital plans. WFC plans to increase its stock buyback program and raise its quarterly dividend from 30 cents to 35 cents a share.

Shares less than a dollar away from all-time highs and just below likely round-number resistance at the $50.00 mark. Do not be surprised to see a dip into the $47-48 zone.

I am raising the stop loss to $44.80. More conservative investors may want to use a stop near $46.00 or the 50-dma instead.

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 $ 2.42/2.47

-- or --

DEC 26, 2013 - entry price on WFC @ 45.50, option @ 2.95*
symbol: WFC1615a50 2016 JAN $50 call - current bid/ask $ 4.05/4.15

03/30/14 new stop loss @ 44.80
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: 44.80
Play Entered on: 12/26/13
Originally listed on the Watch List: 12/08/13



CLOSED Plays


Agilent Technologies - A - close: 54.69

Comments:
03/30/14: I've been growing more cautious on A and suggested more conservative traders exit in last week's newsletter. Thanks to a down week for the market shares of A broke support and hit our stop loss at $54.40.

- Suggested Positions -
FEB 14, 2014 - entry price on A @ 55.00, option @ 3.70
symbol: A1517a60 2015 JAN $60 call - exit $2.90* (-21.6%)

- or -

FEB 14, 2014 - entry price on A @ 55.00, option @ 5.10
symbol: A1615a65 2016 JAN $65 call - exit $4.10* (-19.6%)

03/27/14 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
03/23/14 new stop loss @ 54.40
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)

Chart of A:

Current Target: A @ $74.00
Current Stop loss: 54.40
Play Entered on: 02/14/14
Originally listed on the Watch List: 01/26/14


Allied Nevada Gold - ANV - close: 4.64

Comments:
03/30/14: The price of gold fell sharply again, down two weeks in a row. This weighed heavily on the gold mining stocks. Shares of ANV are down -10% for the week and hit our stop loss at $4.95 on Wednesday's breakdown.

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 - exit $0.51* (-15.0%)

- or -

(Buy the stock)
FEB 26, 2014 - entry price on ANV @ $5.00 exit $4.95 (- 1.0%)

03/26/14 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
03/23/14 investors may want to raise their stop loss
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)

Chart of ANV:

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


First Solar, Inc. - FSLR - close: 68.64

Comments:
03/30/14: A week ago FSLR had surged to new highs with a $20 rally. Our plan was to exit positions on Monday, March 24th at the opening bell to lock in gains. FSLR opened on the 24th at $72.86, down 51 cents.

If you did not exit on Monday morning with us, FSLR actually hit our suggested exit target at $74.00 on Monday afternoon.

*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 - exit $19.50 (+91.1%)

03/24/14 planned exit at the open
03/23/14 exit immediately to lock in potential gains.
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.

Chart of FSLR:

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


Hospira Inc. - HSP - close: 42.59

Comments:
03/30/14: HSP managed to close the week with a gain. That hardly tells the whole story. Shares broke support near $42.00 on Monday. HSP broke support near $41.00 on Wednesday. It traded below technical support at its 200-dma on Thursday and then reversed sharply higher.

Our stop loss was hit on Monday at $41.40.

- Suggested Positions -
FEB 03, 2014 - entry price on HSP @ 43.00, option @ 4.60
symbol: HSP1517a45 2015 JAN $45 call - exit $2.50* (-45.6%)

03/24/14 stopped out
*option exit price is an estimate since the option did not trade at the time our play was closed.
03/23/14 new stop @ 41.40, more conservative traders may want to exit early now
02/03/14 triggered at $43.00

Chart of HSP:

Current Target:$ 49.75
Current Stop loss: 41.40
Play Entered on: 02/03/14
Originally listed on the Watch List: 01/26/14


Micron Technology - MU - close: 21.91

Comments:
03/30/14: Shares of MU were looking weak and vulnerable. That's why in last weekend's newsletter we decided to pull the plug. Good thing we did. MU is down -7.4% for the week.

Our plan was to exit on Monday morning, March 24th. MU opened at $24.64 that morning, up 13 cents.

- Suggested Positions -
FEB 10, 2014 - entry price on MU @ 24.64, option @ 3.75*
symbol: MU1517a25 2015 JAN $25 call - exit $3.00** (-20.0%)

- or -

FEB 10, 2014 - entry price on MU @ 24.64, option @ 3.60*
symbol: MU1615a30 2016 JAN $30 call - exit $2.90** (-19.4%)

03/24/14 planned exit
**option exit price is an estimate since the option did not trade at the time our play was closed.
03/23/14 prepare to exit positions immediately on Monday morning (March 24th)
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.

Chart of MU:

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



Watch

Fertilizer, Construction Equipment, & Digital Storage

by James Brown

Click here to email James Brown



New Watch List Entries

AGU - Agrium

CAT - Caterpillar Inc

WDC - Western Digital Corp.


Active Watch List Candidates

ASML - ASML Holdings

HFC - HollyFrontier

NS - NuStar Energy

UPS - United Parcel Service


Dropped Watch List Entries

AEM, EBAY, MA, MPC, and PFE have been removed.



New Watch List Candidates:


Agrium Inc. - AGU - close: 96.41

Company Info

Agrium is in the basic materials sector. The company produces crop nutrients, seeds, and agricultural chemicals, including phosphate, potash and more.

Last year the industry saw some volatility after Russia's Uralkali, a potash producer, decided to break up the Eastern Europe potash cartel. Now it sounds like they might rejoin the group. Meanwhile the potash market has been weak with prices at three-year lows. Analysts suggest that a delayed spring planting season due to a rough winter could rive up prices.

Long-term estimates suggest that food production will need to rise +60% over the near 36 years to feed the growing global population (currently 7.2 million people). This will require crop yield to double from their average annual increase of +1.2%. To do that farmers will need more fertilizer.

Technically shares of AGU have spent several months, building a massive base in the $80-95 zone. The most recent highs in early March produced a new bullish buy signal on the point & figure chart that is forecasting a long-term target of $121.00.

Tonight I am suggesting we wait for AGU to close above $97.50 and then buy calls the next day with a stop loss at $92.45. More conservative investors may want to wait for AGU to close above the $100.00 level as an alternative entry point since $100 could be round-number resistance.

Breakout trigger: Wait for AGU to close above $97.50
then buy calls the next day with a stop loss at $92.45.

BUY the 2015 Jan $110 call (AGU1517a110) current ask $2.40

- or -

BUY the 2016 Jan $110 call (AGU1615a110) current ask $6.10

Chart of AGU:

Originally listed on the Watch List: 03/30/14


Caterpillar Inc. - CAT - close: 99.39

Company Info

CAT is in the industrial goods sector. The company makes construction, farm, and mining equipment. The stock has been able to consistently shrug off bad news lately. Most recently are stories about a U.S. Senate subcommittee to look into CAT's offshore tax strategies scheduled for Tuesday, April 1st. These headlines have failed to stop the relative strength in CAT.

More importantly is the slowdown in China. CAT is the biggest maker of construction and mining equipment in the world and China is a major market for them. Lately the economic data out of China suggest their economy is slowing down. Yet slowing sales of CAT's equipment in China was last year's story. It seems these worries have all be baked into the stock already. News that China's government is ready to launch new infrastructure projects to boost the economy might be good news for CAT.

Technically the stock is pushing higher after a four-week consolidation above the $95.00 level. Now CAT is challenging resistance at $100.00. I am suggesting we wait for CAT to close above $101.00 and then buy calls the next day with a stop loss at $94.90. Our long-term target is the $115-125 zone. Currently CAT's point & figure chart is bullish with a $126 target.

Breakout trigger: Wait for CAT to close above $101.00
then buy calls the next day with a stop loss at $94.90.

BUY the 2015 Jan $110 call (CAT1517a110) current ask $2.68

- or -

BUY the 2016 Jan $110 call (CAT1615a110) current ask $6.25

Chart of CAT:

Originally listed on the Watch List: 03/30/14


Western Digital Corp. - WDC - close: 89.41

Company Info

WDC is in the technology sector. The company makes digital storage devices like hard drives and solid-state drives. For years there has been a worry about the death of the PC and its impact on hard drive sales. Yet this has failed to have an impact on WDC's stock price, currently sitting near all-time highs. That's because the world has a insatiable need for more digital storage.

New estimates suggest that between now and 2020 data storage needs to grow from just under 1,000 exabytes today to almost 6,000 exabytes. That's +34% a year. An exabyte is one million terabytes. One terabyte is one thousand gigabytes. FYI: The Library of Congress' digital collection is about 3,000 terabytes.

Thus far shares of WDC are outperforming the NASDAQ and its major rival Seagate (STX). Investors have shrugged WDC's Q1 earnings warning and pushed the stock to all-time highs. Technically WDC is in a long-term rising channel and looks poised to breakout past resistance near $90.

I am suggesting we wait for WDC to close above $91.25 and buy calls the next day with a stop loss at $85.75. If triggered our long-term target is $110. Currently the point & figure chart is bullish with a $108 target.

Breakout trigger: Wait for WDC to close above $91.25
then buy calls the next day with a stop loss at $85.75.

BUY the 2015 Jan $100 call (WDC1517a100) current ask $6.10

- or -

BUY the 2016 Jan $110 call (WDC1615a110) current ask $8.35

Chart of WDC:

Originally listed on the Watch List: 03/30/14


Active Watch List Candidates:



Agnico Eagle Mines - AEM - close: 31.29

Comments:
03/30/14: Last week was rather ugly for AEM with shares breaking down through multiple layers of support. The stock did bounce from the $30.00 level but we are removing AEM from the watch list. Our suggested entry point was a close over $35.50.

Trade did not open.

03/30/14 removed from the watch list.

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


ASML Holdings - ASML - close: 91.83

Comments:
03/30/14: It was a relatively quiet week for ASML. The stock is testing short-term support at its 10-dma and the $92.00 level. I do not see any changes from my prior comments.

Earlier Comments:
The point & figure chart has recently turned bullish and forecasts a $110 price target (that could grow higher).

There are some concerns that expectations are currently too optimistic for the chip equipment companies. One of ASML's rivals, Taiwan Semiconductor Manufacturing (TSM), recently lowered its capacity over growth concerns.

I am suggesting small bullish positions on ASML if shares can close above $95.25. If triggered our long-term target is $119.50.

Breakout trigger: Wait for ASML to close above $95.25
then buy calls the next day with a stop loss at $89.00.

BUY the 2015 Jan $100 call (ASML1517a100)

- or -

BUY the 2016 Jan $105 call (ASML1615a105)

Remember, small positions to limit risk!

Originally listed on the Watch List: 03/23/14


eBay Inc. - EBAY - close: 55.19

Comments:
03/30/14: EBAY has had a rough go of it in March. The stock is down three weeks in a row after hitting multi-year highs in late February. We are removing EBAY from the watch list. Our suggested entry point was a close above $60.25.

Trade did not open.

03/30/14 removed from the watch list.

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


HollyFrontier Corp. - HFC - close: 47.45

Comments:
03/30/14: The pullback in HFC pushed shares to their 50-dma before bouncing. We do not want to give up yet.

I am suggesting we wait for HFC to close above $50.50 and then buy calls the next day with a stop loss at $47.40. Our target is $59.50. More aggressive investors may want to aim higher since the point & figure chart is forecasting at $65 target.

Breakout trigger: Wait for HFC to close above $50.50
then buy calls the next day with a stop loss at $47.40.

BUY the 2015 Jan $55 call (HFC1517a55)

Originally listed on the Watch List: 03/23/14


Mastercard Inc. - MA - close: 73.22

Comments:
03/30/14: Momentum in MA has reversed sharply in the last several days. The failed rally under resistance at $80.00 has turned into a sell-off.

In December Visa and MA agreed to a $5.7 billion settlement with 19 merchants over card fees. Wal-Mart just launched their own individual $5 billion lawsuit against Visa. Investors might be worried that MA is next.

We are removing MA from the watch list. Our suggested entry point was a close above $80.00.

Trade did not open.

03/30/14 removed from the watch list.

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


Marathon Petroleum - MPC - close: 87.67

Comments:
03/30/14: MPC has reversed from all-time highs and broke down under support near the $90.00 level. We're choosing to remove MPC from the watch list tonight. Our suggested entry point was a close above $95.00. I would still keep MPC on your radar screen.

Trade did not open.

03/30/14 removed from the watch list.

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


NuStar Energy - NS - close: 55.00

Comments:
03/30/14: NS continues to show relative strength. I don't see any changes from my prior comments.

Earlier Comments:
Shares are on the move again and look poised to break out past key resistance at the $55.00 level. If the market turns more volatile NS could benefit from investors seeking safety in high-dividend plays. NS currently offers an 8% dividend.

I am suggesting investors buy calls if NS can close above $55.25. If triggered our target is $64.50. More aggressive investors with a longer time frame may want to aim higher since the point & figure chart is targeting an $87 target.

Breakout trigger: Wait for NS to close above $55.25
then buy calls the next day with a stop loss at $51.75.

BUY the 2015 Jan $55 call (NS1517a55) current ask $3.40

Originally listed on the Watch List: 03/23/14


Pfizer Inc. - PFE - close: 31.88

Comments:
03/30/14: The long-term trend for PFE is still bullish but the momentum has stalled. We're choosing to remove PFE from our watch list. Shares just aren't moving fast enough. Our suggested entry point was a close over $33.00.

Trade did not open.

03/30/14 removed from the watch list.
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: 97.34

Comments:
03/30/14: UPS spent the past week consolidating sideways inside the $96-98 zone. I don't see any changes from my prior comments.

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