Option Investor
Newsletter

Daily Newsletter, Sunday, 8/10/2014

Table of Contents

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

Leaps Trader Commentary

The Market Endures Another Wave of Headlines

by James Brown

Click here to email James Brown

The first full week of August 2014 was a busy one with the market digesting a lot of headlines. If you recall the prior week (last week of July) was the stock market's worst weekly drop in two years. There was a growing sense of fear that Russia was preparing to invade Ukraine (again). The last week of July apparently spooked retail investors with U.S. stock funds seeing their worst weekly outflows in six months.

Last week was not a good one for mergers and acquisitions. Two high profile deals fell apart. 21st Century Fox (FOXA) abandoned its attempt to buy Time Warner (TWX). Meanwhile Sprint (S), which is a subsidiary of Japan's SoftBank Corp., gave up its attempted acquisition of T-Mobile (TMUS). In non-market news the World Health Organization (WHO) declared the Ebola outbreak in Africa an international health emergency. WHO director general Dr. Margaret Chan said this is the worst Ebola outbreak since the disease was discovered 40 years ago. It could take months to try and contain it. The virus can incubate inside a person for 21 days so it's hard to detect. Almost 1,000 people have died this year and Guinea has closed its borders with Sierra Leone and Liberia in an attempt to stop further infection across its borders.

The biggest market moving news came from the Ukraine-Russian conflict. After days of mounting concern that Russia was building up troops on the Ukraine border to invade suddenly fears eased thanks to a single tweet. A Russian news agency tweeted on their Twitter account that Russia's military exercises on the Ukraine border were over and they would be sending troops back to their bases. Whether you believe this bit of news or not is a good question but the market accepted it and stocks rebounded sharply on Friday. Skeptics are still concerned that Russia could send troops into Ukraine on a "peace keeping" mission as an excuse.

Headlines that the U.S. has started bombing Islamic State terrorists (a.k.a. ISIS) currently operating in Iraq was also seen a bullish sign. ISIS insurgents had been active this past week. They captured Iraq's biggest dam near Mosul. Now they control the water and power for millions of Iraqis. If they choose to destroy it the flood would create a 65-foot wave that would wash over Mosul, just 31 miles away. Even Baghdad, 200 miles downstream, would see severe flooding. Part of the problem is the dam itself. It's poorly constructed and just failing to maintain it properly could cause a failure. This puts an estimated 500,000 Iraqis at risk.

ISIS also captured a couple of Kurdish towns to the north. They have threatened many with the ultimatum of converting to Sunni Islam or die. Between 40,000 and 50,000 Christian refugees have fled to a northern Iraq mountain to avoid ISIS. These refugees were slowly starving to death before the U.S. and U.K. airdropped supplies. There have also been a flood of stories of ISIS beheading Christian children, shooting scores of men in the dessert execution style, and generally terrorizing anyone not of their religious sect. A lot of the evidence comes from ISIS themselves as they publish photos and videos on online and social media.

The U.S. does not want to reengage in a Iraq war and there is no stomach to put "boots on the ground" in Iraq again. ISIS leaders are calling out the American government for cowardly dropping bombs and not sending in soldiers to fight. The terrorists have also threatened to raise their flag over the White House. The really scary issue is the unsecure border between U.S. and Mexico. Border patrol agents only capture a fraction of those crossing illegally into the U.S. and they've found people from almost every country on earth crossing into the country. There is tons of evidence of Muslims crossing into the U.S. through our southern border. We don't know if they're trying to reach the U.S. in search of a better life or if they're here to perform terrorist activities.

All of this geopolitical uncertainty combined with disappointing economic data out of Europe helped push stocks lower through Thursday. According to Bloomberg, by Thursday night, almost 80 percent of the S&P 500 index was trading below their simple 50-dma. Rising risk and falling stocks helped push money into safe haven trades like U.S. bonds. Bonds have been rising with their fourth gain in the last five weeks. Yields on the 10-year note fell to 2.37% on Friday morning, a new 12-month low, before bouncing back to 2.41%.

Weekly chart of the U.S. 10-year bond yield

Economic Data

Most of the economic data in the U.S. was positive last week. The ISM services (non-manufacturing) index rose from 56.0 in June to 58.7 in July. That was better than expected and the highest reading since early 2008. Factory orders were also better than expected with an increase from a -0.6% drop in May to a +1.1% gain in June. Durable orders also improved with a +1.7% gain in June following a -0.9% drop in May. The weekly initial jobless claims hit eight and a half year lows at 289,000. Plus the four-week moving average on jobless claims hit its lowest level since 2006.

Overseas Economic Data

Unfortunately it was a different story in Europe. There was some positive news with a 5 billion euro bailout for the failing Portuguese Banco Espirito Santo. This news was overshadowed by a slowdown in Italy and Germany. Italy reported a Q2 GDP growth of -0.2%. This pushes the country back into recession. Actually this is Italy's third recession in the last several years and Italy has erased all of its growth since the year 2000.

Germany announced that their factory orders fell two months in a row with the latest reading down -3.2%. Germany also said their trade surplus fell worse than expected from 18.8 billion euros to 16.2 billion. The German DAX stock index is down -10% from its early July highs. Germany is the Eurozone's biggest and strongest economy so if Germany is slowing down that doesn't bode well for the rest of the continent.

European Central Bank President Mario Draghi borrowed a phrase from the U.S. Federal Reserve and said the ECB would keep rates low for an "extended period". Mario noted that the Eurozone's recovery is weak, fragile, and very uneven. Mr. Draghi told reporters, "Heightened geopolitical risks, as well as developments in emerging-market economies and global financial markets, may have the potential to affect economic conditions negatively."

Market analysts remain worried about a slowdown in China but the latest report on Chinese exports was positive. China said their exports soared +14.5% in July. That's the biggest jump since April 2013. Economists were only expecting Chinese exports to increase +7.5%. According to Beijing their trade surplus hit a record $47.3 billion, up from $31.6 billion. This is encouraging news for the global economy and might overshadow the weakness in Europe.





Major Indices:

The S&P 500 index flirted with a breakdown below technical support at its 100-dma and the 1900 level. Fortunately investors were in a buy-the-dip mood following the Russian headlines above. The low on Thursday was about 1905. It was also a dip to the bottom of the S&P 500's bullish channel on the weekly chart (shown below).

If you believe the trend is your friend then this bounce from support on the S&P 500 could be a new bullish entry point. I cautioned readers last weekend that I expected a bounce from 1900 and the real question is whether or not the rebound sees any follow through higher.

On a short-term basis the 1950 area and the 50-dma are overhead resistance. The 1900 area remains the support level to watch. Last week's +0.33% bounce in the S&P 500 bumped its year-to-date gain to +4.5%.

chart of the S&P 500 index:

Weekly chart of the S&P 500 index

The NASDAQ composite spent most of the week churning sideways in the 4320-4390 zone. If you look at an intraday chart you'll see the short-term trend of lower highs, which is technically bearish. Lack of follow through on the prior week's drop is encouraging but that doesn't mean I'm bullish on the NASDAQ. A dip to support near 4200 would look like a better entry point. If the NASDAQ can rally past resistance near 4400 then it will likely shoot back toward its recent highs in the 4485 range.

chart of the NASDAQ Composite index:

Weekly chart of the NASDAQ Composite index

After a four-week drop the small cap Russell 2000 index ($RUT) managed a bounce. It rebounded +1.48% and that reduces its 2014 loss to -2.7%. Unfortunately I don't trust this bounce in the $RUT. The last few days looks like a bear-flag consolidation pattern. The 1140 mark and the 200-dma near 1145 are probably short-term resistance. The support levels to watch are still 1100 and 1080.

chart of the Russell 2000 index

Weekly chart of the Russell 2000 index



Economic Data & Event Calendar

Most of the economic data this week will be overseas. We still have a few late-season Q2 earnings reports as well.

Economic and Event Calendar

- Monday, August 11 -
Japan's industrial production data

- Tuesday, August 12 -
Japan GDP estimate
Germany's ZEW survey

- Wednesday, August 13 -
U.S. Retail Sales data for July
Business inventory data for June
China's retail sales data
Eurozone's industrial production

- Thursday, August 14 -
Weekly Initial Jobless Claims
Eurozone GDP estimate

- Friday, August 15 -
Producer Price Index (PPI) for July
New York Empire State manufacturing survey
Industrial production & Capacity Utilization
University of Michigan Consumer Sentiment survey

Additional Events to be aware of:

Aug. 28th - 2nd estimate on U.S. Q2 GDP growth
Sept. 1st - U.S. market closed for Labor Day

Looking Ahead:

Looking ahead the trading picture looks a little bit better than last week. The S&P 500 index is bouncing from support near 1900 and the bottom of its bullish channel. The Dow Industrials are bouncing from technical support at its simple 200-dma. Investors are cautious. The latest AAII trading poll saw bearish sentiment spike to the highest level in a year. A healthy dose of caution is probably good news for the bull market.

Goldman Sachs put out a note that said the market's biggest concerns are geopolitical risks, China, and interest rates. Essentially Goldman is saying the situation in Ukraine and Iraq are wildcards. As long as they don't escalate out of control then they will likely have little impact on the stock market. China remains pivotal to the global economy and the situation there seems to be improving. Meanwhile interest rates, the constant focus for market watchers, will be the catalyst that could influence stocks the most either direction. We already know that analysts are keenly focused on when the Federal Reserve will start raising rates in 2015.

Overall the market's trend is still higher with the exception of the Russell 2000. That doesn't mean it's easily sailing ahead. Actually the next couple of months could see rough waves. Seasonally August and September are not a great environment for the stock market. We have a midterm election coming up in the U.S. While the situation in Ukraine looks like it might cool off the situation in Iraq is heating up.

I suspect the market will see an elevated level of volatility for the next few weeks.

James







Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

The U.S. market managed a bounce follow its worst week in two years. Can the rebound continue?

AAL and HAL hit our stop loss.

DECK graduated from our watch list to our active play list

There are new stop losses on FFIV 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

Seeing Opportunities

by James Brown

Click here to email James Brown


- New Trades -


Editor's Note:

(August 10, 2014)

Dip buying is not dead. Investors bought the dip on Friday after headlines suggested Russia will pull back from the brink on out right war with Ukraine. Whether or not you believe Russian media or trust President Putin is another question but stocks rallied anyway. We'll have to wait and see if U.S. satellites confirm that Russian troops are indeed retreating from the Ukraine border.

Positive economic data in the U.S. was offset by negative data from Europe. While the situation between Ukraine and Russia is hopefully cooling off it's being replaced with an escalation with Sunni terrorists in Iraq.

Lack of follow through lower on the prior week's sell-off is encouraging but that doesn't mean we want to back up the truck on new bullish positions. This is a challenging time of year for stocks. Fortunately we do see opportunities. Tonight we're adding three new candidates to the watch list (CMI, CSX, and TMO). We are not adding any immediate trades tonight. I'd like to see some follow through on Friday's rebound.



Play Updates

Potential Entry Points

by James Brown

Click here to email James Brown

Editor's Note:

DECK has graduated from our watch list to our active play list (below).


Closed Plays


AAL and HAL hit our stop loss.



Play Updates


American Intl. Group - AIG - close: 52.45

Comments:
08/10/14: Financials produced a bounce after the prior week's sell-off. AIG reported earnings on Monday, August 4th. Wall Street was looking for a profit of $1.05 a share on revenues of $8.56 billion. AIG reported $1.25 a share with revenues hitting $8.53 billion. Management announced a $2 billion stock buyback program. Following these results one analyst raised their price target on AIG to $65.00.

Unfortunately shares didn't see that big of a reaction. AIG has been churning sideways between $52.00 and $53.00 the last few days.

More conservative investors may want to raise their stop loss closer to the $51.00 area. I am not suggesting new positions at this time.

- Suggested Positions -
May 14, 2014 - entry price on AIG @ 53.94, option @ 1.50*
symbol: AIG150117C60 2015 JAN $60 call - current bid/ask $0.68/0.71

- or -

May 14, 2014 - entry price on AIG @ 53.94, option @ 4.35*
symbol: AIG160115C60 2016 JAN $60 call - current bid/ask $3.20/3.35

08/04/14 AIG beats earnings estimates, announces $2 billion stock buyback
05/14/14 trade opens. AIG opens at $53.94
*option entry price is an estimate since the option did not trade at the time our play was opened.
05/13/14 AIG closed at $53.96, above our suggested trigger above $53.75
Please note I'm listing the standardized option symbol:
symbol-year-month-day-call-strike

Current Target: AIG 65.00
Current Stop loss: 49.75
Play Entered on: 05/14/14
Originally listed on the Watch List: 05/11/14


Deckers Outdoor Corp. - DECK - close: 93.47

Comments:
08/10/14: DECK is a new watch list candidate that has already graduated to our active plays. The stock displayed relative strength last week with a nearly $5.00 bounce. The plan was to wait for shares to close above $91.25 and then buy calls the next morning. DECK closed at $91.71 on August 5th. Our traded opened on the 6th at $91.54.

Investors looking for a new entry point might want to wait for a dip into the $91-92 zone.

Earlier Comments: August 3, 2014:
The 40-year old Deckers Corp. is headquartered in California. The company considers itself "a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The Company's portfolio of brands includes UGG®, Teva®, Sanuk®, TSUBO®, Ahnu®, MOZO®, and HOKA ONE ONE®. Deckers Outdoor products are sold in more than 50 countries and territories through select department and specialty stores, 126 Company-owned and operated retail stores, and select online stores, including Company-owned websites."

DECK might also be an exception to the struggling retail space this year. The company just reported its 2015 fiscal year first quarter on July 24th. Spring happens to be the worst season for DECK's sales but they still turned in a strong report. Wall Street was expecting a loss of $1.29 a share. DECK reported a loss of $1.07. Revenues soared +24.3% from a year ago to $2.11.5 million, significantly above expectations. Their Q1 gross margins were 41.% Management raised their 2015 guidance and expect gross margins to rise to 49%. DECK is still planning on adding 30 to 35 new stores this year. Management is also forecasting +18% sales growth for the year. Altogether it was a bullish report and shares soared to new multi-year highs and almost tagged $95 a share.

The post-earnings profit taking is normal. Prior resistance in the $87.50-90.00 zone should be support. Seeing DECK rebound from its 10-dma on Friday is encouraging if you're bullish. If you're bearish, well, it could be a painful year. The long-term trend is bullish with a strong pattern of higher lows. The most recent data listed short interest at 19% of the small 33.4 million share float. If the up trend continues it could pressure more shorts to cover.

I am cautious on the broader market so we want to be patient with our entry point on DECK. I am suggesting we wait for DECK to close above $91.25 and then buy calls the next morning with a stop loss at $86.90. I'm suggesting a target in the $110-115 zone.

- Suggested Positions -
AUG 06, 2014 - entry price on DECK @ 91.54, option @ 5.05*
symbol: DECK150117c100 2015 JAN $100 call - current bid/ask $5.40/6.10

- or -

AUG 06, 2014 - entry price on DECK @ 91.54, option @ 13.30*
symbol: DECK160115c100 2016 JAN $100 call - current bid/ask $12.50/15.20

08/06/14 trade begins @ 91.54
*option entry price is an estimate since the option did not trade at the time our play was opened.
08/05/14 triggered with a close at $91.71 (above trigger $91.25)
Option Format: symbol-year-month-day-call-strike

Chart of DECK:

Current Target: DECK @ 110-115
Current Stop loss: 86.90
Play Entered on: 08/06/14
Originally listed on the Watch List: 08/03/14


The Walt Disney Co. - DIS - close: 86.85

Comments:
08/10/14: DIS reported better than expected earnings on August 5th. Analysts were looking for $1.17 a share on revenues of $12.16 billion. DIS delivered $1.28 with revenues rising +7.7% to 12.47 billion. One analyst firm followed up this report by raising their price target on DIS to $96.00.

Shares of DIS have spent the last five weeks consolidating sideways in the $85-88 zone. Investors could use a breakout past $88.00 as a new bullish entry point. Alternatively if the market sees further weakness then a dip near its simple 100-dma could be used as a new entry point. I'd probably use the 2016 $100 calls on new positions.

Our stop loss is at $79.00. More conservative investors may want to use a stop closer to $82 instead.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $12.25/13.00

08/05/14 DIS delivers better than expected earnings and revenues
08/03/14 Investors will want to consider taking profits now before DIS reports earnings.
07/06/14 DIS is testing a trend line of higher highs
06/15/14 new stop @ 79.00
05/26/14 new stop @ 77.75
05/11/14 new stop @ 75.75, adjust exit target from $89 to $97.50
...please see older updates for earlier adjustments...

Current Target: DIS @ 97.50
Current Stop loss: 79.00
Play Entered on: 10/23/13
Originally listed on the Watch List: 10/13/13


The Dow Chemical Co. - DOW - close: $52.28

Comments:
08/10/14: DOW continues to find support near $50.50. The bounce from Wednesday's low has pushed DOW above short-term resistance near $52 and its 50-dma. I would be tempted to buy calls here given DOW's display of relative strength last week.

Earlier Comments:
DOW is in the basic materials sector. The company supplies chemical products as raw materials. The stock is currently in a long-term bullish channel. Investors have lifted shares to multi-year highs as market participants search for yield. DOW currently offers a 3.0% annual yield. Plus, they have an aggressive stock buyback program and plan to buy back $4.5 billion in stock this year.

DOW's business is doing well too. They have faced some rising prices for feedstock and energy costs. Yet they have managed to grow margins in the rest of their business. Management believes this margin growth will continue in 2014. Their Q1 2014 earnings were up +75% from a year ago and marked their sixth quarter in a row of year-over-year earnings growth.

- Suggested Positions -
MAY 29, 2014 - entry price on DOW @ 51.78, option @ 1.95
symbol: DOW150117C55 2015 JAN $55 call - current bid/ask $1.74/1.78

- or -

MAY 29, 2014 - entry price on DOW @ 51.78, option @ 3.90*
symbol: DOW160115C55 2016 JAN $55 call - current bid/ask $4.10/4.30

07/20/14 new stop @ 49.00
06/27/14 DOW declines after DuPont issues an earnings warning
05/29/14 trade begins. DOW opens at $51.78
*option entry price is an estimate since the option did not trade at the time our play was opened.
05/28/14 DOW closed at $51.77, above our trigger of $51.25
Option Format: symbol-year-month-day-call-strike

Current Target: DOW @ 60.00
Current Stop loss: 49.00
Play Entered on: 05/29/14
Originally listed on the Watch List: 05/26/14


DaVita Healthcare Partners - DVA - close: 71.85

Comments:
08/10/14: Last week was quiet for DVA. The stock consolidated sideways. I will point out that DVA is developing a trend of lower highs, which is bearish but it's within the longer-term up trend. I am not suggesting new positions at this time.

Earlier Comments: June 1, 2014:
DVA is in the healthcare sector. The company provides kidney dialysis services and related lab services. The most recent earnings report was lackluster but DVA did report revenue growth above Wall Street estimates. Management has been buying up smaller domestic rivals and expanding overseas into countries like China, Columbia, Germany, India, Malaysia, Portugal, Saudi Arabia, and Taiwan. In the U.S. DVA has about 35% of the outpatient dialysis market.

Bears on this stock would argue the company is at risk for pricing pressures from Medicare. About 90% of its total U.S. dialysis patients are on some form of government-assisted program. Nearly 80% of are part of Medicare. The latest rules from Medicare said there would be no price changes in 2014 and 2015 but there could be reimbursement reductions in 2016 and 2017.

This pressure from Medicare has not stopped Warren Buffet's Berkshire Hathaway from raising its stake in DVA. Berkshire started investing in DVA back in Q4 2011. They have been slowly building a position and this past quarter (Q1 2014) Berkshire added another 1.1 million shares. Their total position is now 37.6 million shares worth about $2.6 billion. Berkshire tends to be a long-term investors, longer than our timeframe but it is still a vote of confidence for DVA.

- Suggested Positions -
JUN 04, 2014 - entry price on DVA @ 71.44, option @ 2.65*
symbol: DVA150117C75 2015 JAN $75 call - current bid/ask $2.05/2.35

- or -

JUN 04, 2014 - entry price on DVA @ 71.44, option @ 4.70*
symbol: DVA160115C80 2016 JAN $80 call - current bid/ask $3.50/6.40

07/31/14 DVA reports better than expected bottom and top line results
07/20/14 new stop @ 69.00
06/04/14 trade begins. DVA opens at $71.44
*option entry price is an estimate since the option did not trade at the time our play was opened.
06/03/14 DVA closed at $71.47, above our trigger of $71.25
Option Format: symbol-year-month-day-call-strike

Current Target: DVA @ 85.00
Current Stop loss: 69.00
Play Entered on: 06/04/14
Originally listed on the Watch List: 06/01/14


Expedia Inc. - EXPE - close: 82.55

Comments:
08/10/14: EXPE saw some post-earnings profit taking, which is normal. The stock is nearing what should be short-term support at $82.00. If $82 fails then look for additional support near $80.00. A bounce near $80.00 could be used as a new bullish entry point.

Earlier Comments: June 1, 2014:
EXPE is in the services sector. The company is in the super competitive online travel industry with rivals like Priceline.com (PCLN) and Orbitz Worldwide (OWW).

EXPE is developing a trend of beating analysts' estimates with strong profit and revenue growth. This past quarter EXPE reported revenues of $1.2 billion. That is the fifth quarter in a row that EXPE has delivered double-digit year over year revenue growth. The company has also seen surging growth in its bookings. Q3 2014 saw 15% bookings growth. Q4 2014 was +21%. Q1 2014 was +29%.

Analyst firm Cantor Fitzgerald recently offered bullish comments on EXPE and raised their price target. The company is having success with its Expedia Traveler Preference program. In Q3 2013 there were about 35,000 hotels in the program. By Q1 2014 that has grown to 51,000 hotels. As more hotels join it will boost EXPE's room nights metric and sales.

Billionaire hedge fund manager David Tepper's Appaloosa Management is also bullish on EXPE. The latest 13F filing showed that Appaloosa had initiated a new stake in EXPE in the first quarter of 2014.

Bears could argue that EXPE, PCLN and OWW could face competition from companies like Google and Facebook as they seek to boost their ad revenues to their large audiences. Reuters has reported that Google is experimenting with some programs with a few hotels. This threat is probably a few years away and could eventually make EXPE as potential takeover target.

Technically EXPE experienced a correction from $81 to $67 earlier this year. The stock found support in the $67 area and just recently EXPE has broken out past some key resistance. Currently shares hover just below short-term resistance at $74.00.

Our long-term target is the $90-100 zone.

- Suggested Positions -
JUN 09, 2014 - entry price on EXPE @ 75.30, option @ 8.20*
symbol:EXPE160115C90 2016 JAN $90 call - current bid/ask $10.60/11.30

08/03/14 new stop @ 76.75
07/31/14 EXPE delivers better than expected earnings and revenue growth
07/06/14 new stop @ 74.75
06/09/14 trade begins. EXPE opens at $75.30
*option entry price is an estimate since the option did not trade at the time our play was opened.
06/06/14 EXPE closes above our trigger, above $75.00
Option Format: symbol-year-month-day-call-strike

Current Target: EXPE @ 90.00-100.00 zone
Current Stop loss: 76.75
Play Entered on: 06/09/14

Originally listed on the Watch List: 06/01/14


F5 Networks - FFIV - close: 114.33

Comments:
08/10/14: It was a choppy week for shares of FFIV but traders bought the dip near its 50-dma on Friday. The stock looks poised to rally from here. There does appear to be short-term resistance near $116.00. Investors might want to wait for a close above $116.00 before initiating new bullish positions.

Tonight we'll move the stop higher to $107.40.

Earlier Comments: June 8th, 2014:
FFIV is in the technology sector. The company sells networking equipment and software. The company is seeing a strong turnaround after introducing a new good/better/best pricing model for its products last year. Customers have responded well to the strategy. FFIV said products in this pricing model saw a +83% increase in sales quarter over quarter.

FFIV is also seeing strong sales demand from its telecom customers. The company also announced that it is seeing double-digit growth in America, Europe, Middle East, Africa and Japan. FFIV's most recent earnings report beat Wall Street's estimates on both the top and bottom line. Management then raised their guidance (for FFIV's third quarter).

Our long-term target is the $135 region. Currently the point & figure chart is bullish and forecasting at $138 target.

- Suggested Positions -
JUN 11, 2014 - entry price on FFIV @ 111.96, option @ 8.20*
symbol:FFIV150117C120 2015 JAN $120 call - current bid/ask $6.85/7.05

- or -

JUN 11, 2014 - entry price on FFIV @ 111.96, option @ 12.55*
symbol:FFIV160115C130 2016 JAN $130 call - current bid/ask $12.20/12.55

08/10/14 new stop @ 107.40
07/24/14 reported strong earnings and raised guidance
06/22/14 Caution! FFIV has reversed at a trend line of resistance.
06/11/14 trade begins. FFIV opens at $111.96
*option entry price is an estimate since the option did not trade at the time our play was opened.
06/10/14 FFIV closed @ 112.59, above our trigger of $112.50
Option Format: symbol-year-month-day-call-strike

Current Target: FFIV @ 135.00
Current Stop loss: 107.40
Play Entered on: 06/11/14
Originally listed on the Watch List: 06/08/14


Hess Corp. - HES - close: 99.92

Comments:
08/10/14: HESS held up better than some of its peers in the energy industry last week. Traders bought the dip near its 50-dma and HES managed a decent bounce for the week. Shares remain under resistance in the $100-101 zone. At this point I would wait for a close over $101.00 before considering new bullish positions.

- Suggested Positions -
Closed 2015 calls on July 28, 2014
APR 22, 2014 - entry price on HES @ 87.50, option @ 3.15*
symbol: HES1517a95 2015 JAN $95 call - exit $8.10** (+157.1%)

- or -

APR 22, 2014 - entry price on HES @ 87.50, option @ 5.80*
symbol: HES1615a100 2016 JAN $100 call - current bid/ask $ 9.10/10.85

07/28/14 planned exit for 2015 calls
**option exit price is an estimate since the option did not trade at the time our play was closed.
07/27/14 Exit the 2015 calls immediately
07/27/14 new stop @ 94.75
07/20/14 new stop @ 93.95
07/06/14 new stop loss @ 92.25
Investors may want to take profits now with HES testing $100
06/22/14 new stop loss @ 89.65
Investors may want to take profits as HES near the $100 mark
06/08/14 new stop loss @ 85.75
05/22/14 stock spikes as HES announces $2.6 billion deal to sell its gas station business to Marathon.
05/04/14 new stop @ 83.45
04/30/14 HES delivered better than expected earnings and revenues
04/22 trade opened. HES opens at $87.50
*option entry price is an estimate since the option did not trade at the time our play was opened.
04/21 HES closes at $87.78, above our entry trigger of $87.50

Current Target: HES @ 109.00
Current Stop loss: 94.75
Play Entered on: 04/22/14
Originally listed on the Watch List: 04/06/14



Microsoft Corp. - MSFT - close: 43.20

Comments:
08/10/14: Good news! It looks like the post-earnings profit taking in MSFT might be over. Shares pulled back toward support near $42.00 and now they're starting to bounce.

I am suggesting a close above $43.50 as a new entry point to launch bullish positions.

Earlier Comments: June 15, 2014:
Shares of semiconductor giant Intel (INTC) soared on Friday (June 13th) when the company surprised investors by raising its revenue guidance the night before. INTC said they were seeing stronger sales of PCs. That's right. They said PCs. The sale of personal computers has been falling for several quarters as consumer spend the money on laptops, tablets, and smartphones. To be fair INTC did say they were seeing stronger sales of PCs to businesses but it's still good news for INTC but it could be great news for MSFT.

INTC hinted that when MSFT stopped supporting the Windows XP operating system in April this year it has sparked an upgrade cycle. XP has been around for years. One analyst estimated that 25% of the PCs currently connected to the Internet are running XP. That's a huge number of computers and now they're at risk for virus and hacking attempts that MSFT will no longer try to patch.

As businesses and consumers upgrade their PC it should mean strong sales for MSFT's Windows 8 operating software. This upgrade cycle could last a while.

Currently shares of MSFT are in a long-term up trend (see chart) and they closed near 14-year highs on Friday. There is short-term resistance at $41.65. I am suggesting we wait for MSFT to close above $42.00 and then buy calls the next day with a stop loss at $38.40.

I am listing the 2015 and 2016 calls but my preference is for the 2016s.

- Suggested Positions -
JUN 25, 2014 - entry price on MSFT @ 41.93, option @ 1.05
symbol:MSFT150117c45 2015 JAN $45 call - current bid/ask $ 1.46/1.48

- or -

JUN 25, 2014 - entry price on MSFT @ 41.93, option @ 2.60
symbol:MSFT160115c45 2016 JAN $45 call - current bid/ask $ 3.30/3.40

07/27/14 new stop @ $39.75
07/20/14 Our 2015 call option has almost doubled in value and investors may want to take some money off the table.
06/26/14 Trade begins. MSFT opens down at $41.93
06/25/14 MSFT closes at $42.03, above our trigger of $42.00
06/23/14 MSFT closes at $41.99
Option Format: symbol-year-month-day-call-strike

Current Target: MSFT @ $50.00
Current Stop loss: 39.75
Play Entered on: 06/25/14
Originally listed on the Watch List: 06/15/14


Western Digital Corp. - WDC - close: 101.30

Comments:
08/10/14: Trading in WDC has been really quiet the last four days. Shares have been hovering between potential support at its 10-dma and resistance near $103.00. The stock did manage to post a $1.00 gain for the week. That makes WDC's sixth weekly gain in the last seven weeks.

More conservative traders may want to use a significantly higher stop loss.

I am not suggesting new positions at this time.

Earlier Comments: June 22, 2014:
WDC is in the technology sector. The company manufacturers data storage devices. They make hard drives and solid state drives. The company has about a 45% market share in the hard drive market, just ahead of its biggest rival Seagate Technology (STX). WDC has managed to grow in spite of long-term decline in PC sales. Today WDC's non-PC related devices account for 53% of its sales.

There has been a new development in the death of the PC story. A couple of weeks ago Intel reported that they were seeing growth in PC sales, mostly for business/enterprise use. That could be great news for WDC, who has developed a stronger solid-state drive business focused on enterprise.

The acceptance of cloud storage continues to surge. All of those cloud storage networks need hard drives to store that data, which should benefit WDC.

Technically shares of WDC have been consolidating sideways the last three weeks. The stock closed up on Friday and looks poised to breakout past short-term resistance near $93.00. More aggressive traders may want to launch positions above $93.50. I am suggesting an intraday trigger to buy calls at $95.25.

There is a good chance that $100.00 could be round-number, psychological resistance. Eventually I do expect WDC to rally past the $100 mark. Our long-term target is $110. Currently the Point & Figure chart is bullish and forecasting at $118 target.

- Suggested Positions -
JUL 01, 2014 - entry price on WDC @ 95.25, option @ 5.62
symbol: WDC150117C100 2015 JAN $100 call - current bid/ask $8.00/8.15

- or -

JUL 01, 2014 - entry price on WDC @ 95.25, option @ 8.00*
symbol: WDC160115C110 2016 JAN $110 call - current bid/ask $10.70/11.05

08/03/14 new stop at $92.40
07/30/14 WDC delivered better than expected earnings and revenue results
07/01/14 WDC hit our intraday trigger at $95.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Current Target: WDC @ 110.00
Current Stop loss: 92.40
Play Entered on: 05/28/14
Originally listed on the Watch List: 06/22/14


Wells Fargo & Co. - WFC - close: 50.00

Comments:
08/10/14: Ouch! WFC underperformed its peers in the financial sector last week. Shares broke down under the 100-dma and traded below what should have been round-number support at $50.00. The low on Friday was $49.47 and our stop is at $49.40.

On the weekly chart below you can see that WFC is testing its long-term trend line of higher lows. This should be support. A bounce from here can be used as a new bullish entry point but I would wait for a new close above $50.50 before initiating new positions.

Tonight we're adjusting our stop loss. We're moving it down from $49.40 to $48.80. At 49.40 it's just a little too close to that support line and we do not want to get stopped out on an intraday spike just before WFC rallies.

Earlier Comments:
(June 1, 2014) WFC's management also said they would love to boost the amount of capital they return to shareholders. They'd like to pay out 55% to 75% of their net profits back to shareholders as dividends and stock buybacks. That's up from 34% in 2013. Any changes still have to be approved by regulators.

- Suggested Positions -
DEC 26, 2013 - entry price on WFC @ 45.50, option @ 1.50
symbol: WFC1517a50 2015 JAN $50 call - current bid/ask $ 2.27/2.32

-- or --

DEC 26, 2013 - entry price on WFC @ 45.50, option @ 2.95*
symbol: WFC1615a50 2016 JAN $50 call - current bid/ask $ 4.15/4.25

08/10/14 adjust stop loss to $48.80
07/11/14 WFC reported earnings that were in-line with estimates
07/06/14 investors may want to take profits before WFC reports earnings on July 11th.
06/29/14 new stop loss @ 49.40
06/08/14 new stop loss @ 47.45
05/26/14 adjust long-term target from $54.50 to $59.00
04/06/14 WFC looks poised for a pullback
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

Chart

Current Target: Exit WFC hits $59.00
Current Stop loss: 48.80
Play Entered on: 12/26/13
Originally listed on the Watch List: 12/08/13


WellPoint Inc. - WLP - close: 108.58

Comments:
08/10/14: Stocks were down sharply on Thursday and the healthcare names underperformed. WLP plunged from $111 toward $107. The close under $110 and its 50-dma is technically bearish. Another challenge is that the prior week's performance created a bearish engulfing candlestick reversal pattern on WLP's weekly chart. This past week's decline would be considered a confirmation.

More conservative investors may want to raise their stop closer to Friday's low of $106.52. I am not suggesting new positions at this time.

Earlier Comments: July 6, 2014:
WellPoint is one of the nation's leading health benefits companies. We believe that our health connects us all. So we focus on being a valued health partner and delivering quality products and services that give members access to the care they need. With nearly 67 million people served by our affiliated companies including nearly 37 million enrolled in our family of health plans (source: WLP website).

Healthcare stocks have been market leaders. Both the XLV healthcare ETF and the XHS healthcare services ETF are at all-time highs. One of the factors driving this move has been Obamacare. Love it or hate it the Affordable Care Act has generated more customers for the healthcare industry. The latest data would suggest about eight million people have signed up for Obamacare. It would appear that 60% of the people that have signed up did not previously have insurance.

A lot of insurance/healthcare firms expect their participation in the Obamacare program to either be a breakeven or end up with negative margins. WLP has been forecasting their Obamacare business should see 3% to 5% margins.

WLP has also done well focusing on the Medicaid business. They are currently the largest participant in Medicaid and they believe it will continue to grow for them at a double-digit rate.

Technically shares of WLP are hitting all-time highs. Shares produced a big rally higher in May and spent most of June consolidating gains in the $105-110 zone. Now WLP is on the verge of a breakout. Thursday's intraday high was $111.01. I am suggesting we wait for WLP to close above $111.00 and then buy calls the next morning with a stop loss at $104.75. Our long-term target is the $130.00 area. Currently the Point & Figure chart is bullish and forecasting at $149.00 target.

- Suggested Positions -
JUL 15, 2014 - entry price on WLP @ 113.05, option @ 4.00*
symbol:WLP150117c120 2015 JAN $120 call - current bid/ask $ 2.09/2.50

-- or --

JUL 15, 2014 - entry price on WLP @ 113.05, option @ 7.35*
symbol:WLP160115c125 2016 JAN $125 call - current bid/ask $ 5.05/6.05

08/10/14 technically WLP is showing weakness and investors might want to raise their stop loss.
07/15/14 trade begins. WLP opens at $113.05
07/14/14 triggered. WLP closed at $113.15, above our $111.00 trigger
*option entry price is an estimate since the option did not trade at the time our play was opened.
Option Format: symbol-year-month-day-call-strike

Current Target: Exit WLP hits $130.00
Current Stop loss: 104.75
Play Entered on: 07/15/14
Originally listed on the Watch List: 07/06/14


Williams Sonoma - WSM - close: 70.49

Comments:
08/10/14: It was an encouraging week if you are bullish on WSM. The stock rebounded and gained more than three points. Shares also rallied past potential resistance at $70.00 and its 50-dma.

I am not suggesting new positions at this time.

- Suggested Positions -
MAY 13, 2014 - entry price on WSM @ 64.36, option @ 2.95*
symbol: WSM1517a70 2015 JAN $70 call - current bid/ask $ 4.70/5.10

-- or --

MAY 13, 2014 - entry price on WSM @ 64.36, option @ 4.70*
symbol: WSM1615a75 2016 JAN $75 call - current bid/ask $ 6.20/6.80

07/27/14 WSM not looking good. Investors may want to exit now
06/29/14 new stop @ 66.40
adjust the exit target to $79.00
06/08/14 new stop @ 61.75
05/13/14 trade begins. WSM opened at $64.36
*option entry price is an estimate since the option did not trade at the time our play was opened.
05/12/14 triggered. WSM closed at $64.55, above our trigger of $64.50

Current Target: Our target is WSM at $79.00
Current Stop loss: 66.40
Play Entered on: 05/13/14

Originally listed on the Watch List: 05/04/14



CLOSED Plays


American Airlines Group, Inc. - AAL - $37.18

Comments:
08/10/14: Airline stocks have had a rough two weeks. AAL was no exception. The company reported growing July traffic numbers. That didn't stop the selling. AAL broke down under support near $38.00 and hit our stop loss at $37.40 on August 5th.

- Suggested Positions -
Jun 03, 2014 - entry price on AAL @ 41.13, option @ 3.00*
symbol: AAL150117C45 2015 JAN $45 call - exit $1.50** (-50.0%)

- or -

Jun 03, 2014 - entry price on AAL @ 41.13, option @ 6.20*
symbol: AAL160115C45 2016 JAN $45 call - exit $4.10** (-33.8%)

08/05/14 stopped out
**option exit price is an estimate since the option did not trade at the time our play was closed.
06/22/14 new stop @ 37.40
06/03/14 trade begins. AAL opens at $41.13
*option entry price is an estimate since the option did not trade at the time our play was opened.
06/02/14 AAL closed at $41.22, above our trigger of $40.25
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: AAL 50.00
Current Stop loss: 37.40
Play Entered on: 06/03/14
Originally listed on the Watch List: 05/18/14


Halliburton Co. - HAL - close: 68.31

Comments:
08/10/14: Stocks were down sharply on August 5th and HAL was caught up in the selling pressure. Shares underperformed and hit an intraday low of $66.77. That was enough to stop us out (at $66.95).

The story for HAL is still bullish. While our play is closed I would keep this stock on your watch list.

- Suggested Positions -
JUN 04, 2014 - entry price on HAL @ 65.46, option @ 2.90*
symbol: HAL150117C70 2015 JAN $70 call - exit @ 3.25** (+12.0%)

- or -

JUN 04, 2014 - entry price on HAL @ 65.46, option @ 6.40*
symbol: HAL160115C70 2016 JAN $70 call - exit $7.45** (+16.4%)

08/05/14 stopped out
**option exit price is an estimate since the option did not trade at the time our play was closed.
07/27/14 new stop @ 66.95
06/29/14 new stop @ 64.75
06/22/14 new stop @ 63.90
06/04/14 trade begins. HAL opens at $65.46
*option entry price is an estimate since the option did not trade at the time our play was opened.
06/03/14 HAL closed at $65.57, above our trigger of $65.50
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: HAL @ 80-85 zone
Current Stop loss: 66.95
Play Entered on: 06/04/14
Originally listed on the Watch List: 05/26/14



Watch

Industrials, Transports, & Healthcare

by James Brown

Click here to email James Brown



New Watch List Entries

CMI - Cummins Inc.

CSX - CSX Corp.

TMO - Thermo Fisher Scientific


Active Watch List Candidates

BCR - C.R.Bard Inc

NEM - Newmont Mining


Dropped Watch List Entries

DECK graduated to the active play list.

WAG has been removed.



New Watch List Candidates:


Cummins Inc. - CMI - close: 141.39

Company Info

Cummins Inc. was founded back in 1919 by its namesake Clessie Lyle Cummins. The company has four businesses: engines, power generation, components, and distribution. They're headquartered in the state of Indiana with about 48,000 employees worldwide. They do business in 190 countries.

According to the company website CMI describes themselves as "a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems."

CMI reported Q1 earnings on April 29th. They crushed the earnings number and beat the revenue estimates with revenues up +12.3% for the quarter. CMI management raised their 2014 guidance by +6% to +10% (about $18.3-19.0 billion).

When CMI reported Q2 earnings on July 28th Wall Street was expecting a profit of $2.39 a share on revenues of $4.82 billion. CMI beat those numbers with a profit of $2.43 on revenues of $4.84 billion. Profits were up +10.5% from a year ago. Management raised their 2014 guidance again. This time they see revenues up +8% to +11% in 2014. That's about $18.7-19.2 billion.

CMI's Chairman and CEO Tom Linebarger said, "Demand is growing in on-highway markets in North America this year as the economy improves and we have gained market share in medium duty truck and bus markets." Their North American sales surged +14% last quarter versus a -1% pullback in international sales.

That's two quarters in a row that CMI has beat Wall Street's top and bottom line estimates and raised guidance. Yet the stock was crushed following the July earnings number. It appears the upgraded revenue guidance wasn't good enough and analysts were expecting more.

CMI reported sales of $17.3 billion in 2013. Now they're approaching $19 billion. They've already approved a $1 billion stock buyback program to replace their current $1 billion buyback program once it's complete. They have also raised their dividend this year.

The company has rising sales, rising market share, rising profits, and rising dividends. It has a trailing P/E of 17 and a forward P/E of 12.8. That sounds like a pretty good combination.

Technically the stock has fallen to its long-term trend line of support (see the weekly chart below). Last week shares have started to rebound from this trend. However, on a short-term basis the breakdown under its 200-dma looks pretty ugly. The bounce last week failed near $144.00 and its 10-dma. Therefore tonight we are suggesting investors wait for CMI to close above $144.00 and then buy calls the next morning with a stop at $137.90.

Breakout trigger: Wait for a close above $144.00
then buy calls the next morning with a stop at $137.90

BUY the 2015 Jan $150 call (CMI150117C150) current ask $4.80

- or -

BUY the 2016 Jan $160 call (CMI160115c160) current ask $9.30

Option Format: symbol-year-month-day-call-strike

Chart of CMI:

Originally listed on the Watch List: 08/10/14


CSX Corp. - CSX - close: 29.54

Company Info

The transportation group has been leading the stock market higher until about two weeks ago. That's then the group peaked. Since then the Dow Jones Transportation Average has seen a -6% pullback. It looks like the profit taking might be over as the group helped lead the bounce on Friday.

The railroads have delivered a similar performance. We want to take advantage of the pullback with CSX. According to the company's website, " CSX Corporation, together with its subsidiaries based in Jacksonville, Fla., is one of the nation's leading transportation suppliers. The company’s rail and intermodal businesses provide rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers. CSX Transportation network encompasses about 21,000 route miles of track in 23 states, the District of Columbia and the Canadian provinces of Ontario and Quebec. Our transportation network serves some of the largest population centers in the nation. Nearly two-thirds of Americans live within CSX's service territory."

The rebound in the U.S. economy should be great news for the railroads. Rising consumer demand would mean more shipments. A healthy automobile market means more auto shipments. The oil and gas shale boom means more energy shipped by rail. Record harvests mean more grain shipments. A stabilizing coal industry will also help put a floor under the railroads.

Altogether the future looks bullish for the railroad companies. That's why we want to take advantage of this post-earnings profit taking in CSX. The stock has retreated to its long-term trend line of support and started to bounce. More aggressive investors may want to buy calls now. I am suggesting we wait for CSX to close above $30.00 and then buy calls the next morning with a stop loss at $28.40.

Our long-term target for the 2016 calls is CSX in the $37-40 zone. Currently the Point & Figure chart is $38.50. If you buy the 2015 calls plan on exiting sooner.

Breakout trigger: Wait for a close above $30.00
then buy calls the next morning with a stop loss at $28.40

BUY the 2015 Jan $30 call (CSX150117C30) current ask $1.33

- or -

BUY the 2016 Jan $35 call (CSX160115C35) current ask $1.09

Option Format: symbol-year-month-day-call-strike

Chart of CSX:

Originally listed on the Watch List: 08/10/14


Thermo Fisher Scientific - TMO - close: 121.16

Company Info

TMO is considered part of the healthcare sector. They provide products and services in their analytical instruments, laboratory services, specialty diagnostics, and their new Life Sciences division.

According to the company website, "Thermo Fisher Scientific Inc. is the world leader in serving science, with revenues of $17 billion and 50,000 employees in 50 countries. Our mission is to enable our customers to make the world healthier, cleaner and safer. We help our customers accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics and increase laboratory productivity. Through our four premier brands – Thermo Scientific, Life Technologies, Fisher Scientific and Unity Lab Services – we offer an unmatched combination of innovative technologies, purchasing convenience and comprehensive support."

TMO is developing a trend of beating Wall Street's estimates. Back in April they reported their first quarter results that beat estimates on both the top and bottom line. Management then raised their guidance for 2014. TMO did it again when they reported Q2 earnings on July 23rd. However, this report is significant because it's the first earnings report including its new Life Sciences acquisition.

Wall Street was expecting TMO to report earnings of $1.63 a share on revenues of $4.25 billion. The company beat these expectations. Earnings rose +30% to $1.72 a share. Revenues soared +33% to $4.32 billion. Gross margins improved 154 basis points to 45.4%. Management then adjusted their revenue guidance higher.

TMO's management has also upgraded their expected synergies from the Life Sciences acquisition. They now expect to reap $350 million in synergies over the next three years. That's up from $300 million.

The stock has reflected TMO's bullish performance with big gains over the past couple of years. Yet the rally peaked in March 2014 and shares have been digesting gains for months. This past week saw TMO testing significant support near its long-term trend of higher lows. This looks like an opportunity to hop on board.

I am suggesting we wait for TMO to close above $122.50 and then buy calls the next morning with a stop loss at $117.40. The $127.00 level is overhead resistance but we're betting on a bullish breakout to record highs.

FYI: The option spreads on TMO are a little bit wide. Investors may want to use smaller positions to limit their risk.

Breakout trigger: Wait for a close above $122.50
then buy calls the next morning with a stop at $117.40

BUY the 2015 Jan $130 call (TMO150117c130) current ask $3.30

- or -

BUY the 2016 Jan $130 call (TMO160115c130) current ask $11.00

Option Format: symbol-year-month-day-call-strike

Chart of TMO:

Originally listed on the Watch List: 08/10/14


Active Watch List Candidates:



C. R. Bard Inc. - BCR - close: 148.63

Comments:
08/10/14: BCR is down less than a dollar for the week. I do not see any changes from my prior comments.

Earlier Comments: August 3, 2014:
C.R. Bard (a.k.a. BARD) is "a leading multinational developer, manufacturer, and marketer of innovative, life-enhancing medical technologies in the product fields of vascular, urology, oncology, and surgical specialty. BARD markets its products and services worldwide to hospitals, individual health care professionals, extended care facilities, and alternate site facilities. BARD pioneered the development of single-patient-use medical products for hospital procedures; today BARD is dedicated to pursuing technological innovations that offer superior clinical benefits while helping to reduce overall costs (source: company website)."

Thus far 2014 has been a bit of a roller coaster ride for BCR investors. That is a bit surprising considering that BCR has significantly beaten Wall Street's earnings estimates two quarters in a row. The company saw its Q2 revenues rise +8.8% to $827 million. BCR's Q2 profit soared +29.6% to $2.06 a share. Management then raised guidance and the stock broke out past major resistance near $150.00.

The broader market's recent weakness has pulled BCR back toward the $150 area, which should be support. If the stock bounces we want to be ready to hop on board.

Wait for a close above $152.00 and then buy calls the next morning with a stop loss at $146.95. I am not setting an exit target tonight but I'll note that the point & figure chart is bullish and forecasting at long-term target of $194.

Breakout trigger: Wait for a close above $152.00
Then buy calls the next day with a stop at $146.95.

BUY the 2015 Jan $160 call (BCR150117C160)

Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 08/03/14


Newmont Mining Corp. - NEM - close: 25.20

Comments:
08/10/14: The price of gold bounced last week and the GLD gold ETF appears to have broken out from a bullish wedge pattern. Although I will point out the GLD still has a longer-term trend of lower highs.

Meanwhile shares of NEM are looking stronger. Shares displayed relative strength with a +4.7% rally for the week and a new three-month high. If this strength continues we could see NEM meet our entry point requirements soon.

The plan is to wait for NEM to close above $26.75 and then buy calls the next morning.

Earlier Comments: July 13, 2014:
According to the company website, Newmont Mining Corporation is primarily a gold producer, with significant assets or operations in the United States, Australia, Peru, Indonesia, Ghana, New Zealand and Mexico. Founded in 1921 and publicly traded since 1925, Newmont is one of the world's largest gold producers and is the only gold company included in the S&P 500 Index and Fortune 500. Headquartered near Denver, Colorado, the company has around 32,000 employees and contractors worldwide.

NEM also produces copper and silver but they are the second biggest gold producer on the planet by production. The biggest gold producer is Barrick Gold Corp. (ABX) and NEM almost merged with ABX in April this year but discussions fell apart. NEM investors either want the company to resume talks with ABX or break itself up to unlock shareholder value. That seems unlikely but JPMorgan believes the deal talks with ABX may not be dead.

I like NEM more for the technical set up on the charts. It's true that gold has been in rally mode, currently up six weeks in a row and up +10% for the year. Yet the gold miners have been outperforming and the GDX gold miner index is up +29% this year. NEM is only up +12.5% this year but it could play catch up if shares break out from its base.

The stock has been building a base in the $21-26 zone for months. I am suggesting we wait for NEM to close above $26.75 and then buy calls the next morning with a stop loss at $23.75. I would consider this a more aggressive, higher-risk trade because gold and the gold miners can be a volatile group. You may want to limit your position size to reduce your risk.

Breakout trigger: Wait for a close above $26.75
then buy calls the next morning with a stop at $23.75.

BUY the 2015 Jan $30 call (NEM150117c30) current ask $0.71

- or -

BUY the 2016 Jan $30 call (NEM160115c30) current ask $2.53

Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 07/13/14


Walgreen Co - WAG - close: 60.70

Comments:
08/10/14: Shares of WAG collapsed when the company announced they would not do an inversion with their acquisition of Boots. The market was unhappy with this news and shares gapped down from $69 to $58.

We are removing WAG as a candidate.

Trade did not open.

08/10/14 removed from the watch list. suggested entry was a close above $74.00

Originally listed on the Watch List: 07/27/14