Editor's Note:

We added four new plays from our watch list this past week: AIG, CHK, ITW, and WSM.

We want to exit our BIG trade immediately on Monday morning.


Closed Plays



None. No closed plays this week.




Play Updates


American Intl. Group - AIG - close: 52.50

Comments:
05/18/14: The stock market's rally on Monday and Tuesday last week helped lift AIG to new multi-year highs. We had AIG on our watch list with a plan to buy calls if shares closed above $53.75. AIG met that requirement on Tuesday. Our trade opened on Wednesday morning at $53.94. Profit taking in the last couple of days almost erased AIG's weekly gain.

At this point I would be hesitant to launch new positions. We can wait for a dip near $50.00 as an alternative entry point or if the market rallies, then a new close above $54.00 could work as an entry point.

Our long-term target is the $65-70 zone. Currently the point & figure chart is bullish with a $64 target.

- Suggested Positions -
May 14, 2014 - entry price on AIG @ 53.94, option @ 1.50*
symbol: AIG150117C60 2015 JAN $60 call - current bid/ask $1.07/1.12

- or -

May 14, 2014 - entry price on AIG @ 53.94, option @ 4.35*
symbol: AIG160115C60 2016 JAN $60 call - current bid/ask $3.65/3.80

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

Chart of AIG:

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


Big Lots Inc. - BIG - close: 38.70

Comments:
05/18/14: I am worried that we should have waited until after BIG closed above $40.00 as our entry point. The stock has struggled with resistance at $40.00 for the last four weeks in a row. Traders bought the dip at its 50-dma on Friday but upward momentum has clearly stalled.

I am suggesting a conservative approach. We will exit positions immediately on Monday morning to limit any losses and put BIG back on our watch list after it reports earnings on May 29th.

- Suggested Positions -
APR 22, 2014 - entry price on BIG @ 39.29, option @ 4.15*
symbol: BIG1517a40 2015 JAN $40 call - current bid/ask $3.30/3.60

05/17/14 prepare to exit on Monday morning, May 19th,
04/22 trade opens. BIG opened at $39.29
*option entry price is an estimate since the option did not trade at the time our play was opened.
04/21 BIG closed above our trigger at $39.25

Chart of BIG:

Current Target: BIG @ 47.00
Current Stop loss: 35.75
Play Entered on: 04/22/14
Originally listed on the Watch List: 04/13/14


Caterpillar Inc. - CAT - close: 106.03

Comments:
05/18/14: CAT traded up to new two-year highs on Tuesday. The widespread pullback on Thursday pulled CAT to its 30-dma but traders were in a buy-the-dip mood on Friday. I am not suggesting new positions at this time.

Earlier Comments:
Our long-term target is the $115-125 zone. Currently CAT's point & figure chart is bullish with a $126 target.

- Suggested Positions -
APR 03, 2014 - entry price on CAT @ 101.92, option @ 3.50*
symbol: CAT1517a110 2015 JAN $110 call - current bid/ask $4.20/4.30

- or -

APR 03, 2014 - entry price on CAT @ 101.92, option @ 7.40*
symbol: CAT1615a110 2016 JAN $110 call - current bid/ask $8.10/8.40

04/27/14 new stop @ 98.45
04/03/14 trade opens. CAT @ 101.92
*option entry price is an estimate since the option did not trade at the time our play was opened.
04/02/14 CAT meets our entry trigger with a close above $101.00

Current Target: CAT @ 115.00-125.00 zone
Current Stop loss: 98.45
Play Entered on: 04/03/14
Originally listed on the Watch List: 03/30/14


Chesapeake Energy - CHK - close: 27.64

Comments:
05/18/14: There is no way to sugarcoat it. Our CHK trade is off to a terrible start. We had CHK on the watch list with a plan to buy calls if shares could break through resistance at $30.00 and close above $30.25. The stock closed at $30.33 on Monday. Our trade opened on Tuesday morning, which was pretty much the top on the stock. Shares immediately reversed lower.

I couldn't find any news to explain CHK's relative weakness on Wednesday. You already know the entire market was weak on Thursday but CHK bounced off its intraday lows. Friday's drop in CHK (-4.65%) was a reaction to news the company was cutting its full-year production estimates to the slowest level since 2000.

CHK plans to spin off its oilfield services business. This will reduce its debt and interest payments. It will also cuts its headcount by half. The move also reduces revenues by about $250 million. Investors were obviously not pleased with the news. CHK shares are nearing what should be support at $27.00 and its 50-dma.

Technically last week was ugly with the big drop forming a bearish engulfing candlestick reversal pattern on the weekly chart. Currently our stop loss is at $26.75. If the sell-off sees any follow through this week CHK could hit our stop. I am not suggesting new positions at this time.

- Suggested Positions -
MAY 13, 2014 - entry price on CHK @ 30.34, option @ 1.24
symbol: CHK150117C35 2015 JAN $35 call - current bid/ask $0.54/0.57

- or -

MAY 13, 2014 - entry price on CHK @ 30.34, option @ 2.75
symbol: CHK160115C35 2016 JAN $35 call - current bid/ask $1.75/1.79

05/13/14 trade begins. CHK opened @ $30.34
05/12/14 CHK closed @ 30.33, above our trigger at $30.25
Please note I'm listing the standardized option symbol:
symbol-year-month-day-call-strike

Chart of CHK:

Current Target: CHK @ 40.00
Current Stop loss: 26.75
Play Entered on: 05/13/14

Originally listed on the Watch List: 05/11/14


The Walt Disney Co. - DIS - close: 80.39

Comments:
05/18/14: DIS also retreated from its Monday highs. Shares are hovering near their 50-dma. If this pullback continues DIS could retest technical support at its 100-dma near $78.00. A close below $78 would be troubling. The long-term trend is still higher but we're not suggesting new positions at this time.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $ 8.70/ 8.80

05/11/14 new stop @ 75.75, adjust exit target from $89 to $97.50
04/27/14 DIS looks poised to hit new relative lows and our stop loss
04/13/14 investors may want to take profits now. DIS could be headed for $70.00
03/09/14 new stop loss @ 74.75, traders may want to take some money off the table here. DIS is overbought and due for a dip.
03/02/14 new stop loss @ 71.75
02/16/14 more conservative traders may want to take profits now.
We are adjusting our long-term target from $84 to $89
01/05/14 new stop loss @ 69.40
12/29/13 new stop loss @ 67.40
12/08/13 new stop loss @ 65.75
11/24/13 new stop loss @ 64.75

Current Target: DIS @ 97.50
Current Stop loss: 75.75
Play Entered on: 10/23/13
Originally listed on the Watch List: 10/13/13


Hess Corp. - HES - close: 87.40

Comments:
05/18/14: The upward momentum in HES has stalled. Shares have been churning sideways for just over two weeks. I am still expecting shares to correct lower into the $84-86 zone. I would wait for that pullback before considering new positions.

- Suggested Positions -
APR 22, 2014 - entry price on HES @ 87.50, option @ 3.15*
symbol: HES1517a95 2015 JAN $95 call - current bid/ask $ 2.31/ 2.43

- or -

APR 22, 2014 - entry price on HES @ 87.50, option @ 5.80*
symbol: HES1615a100 2016 JAN $100 call - current bid/ask $ 4.50/5.05

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: 83.45
Play Entered on: 04/22/14
Originally listed on the Watch List: 04/06/14


Honeywell Intl. - HON - close: 91.20

Comments:
05/18/14: HON soared on Monday thanks to an upgrade and a widespread market rally. Unfortunately the rally reversed. Midweek profit taking shaved off more then three points. HON looks poised to retest support near $90.00 again. Our stop is at $89.75.

More conservative investors may want to just take profits now. I am not suggesting new positions at this time.

- 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 $ 8.45/ 8.65

04/27/14 investors may want to just take profits now!
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...
The plan was to use small positions to limit our risk.

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



Illinois Tool Works, Inc. - ITW - close: 85.63

Comments:
05/18/14: ITW is another watch list candidate that has graduated to our play list. The plan was to wait for shares to close above $86.50 and buy calls the next day. ITW closed at $87.17 on Monday. Our trade opened on Tuesday morning at $87.57. The market's midweek pullback has dragged ITW back toward its 20-dma. It's still less than three points away from all-time highs. The $82-84 zone should be support. Investors could use a bounce from this area ($82-84) as a new bullish entry point.

- Suggested Positions -
MAY 13, 2014 - entry price on ITW @ 87.57, option @ 3.40*
symbol: ITW1517a90 2015 JAN $90 call - current bid/ask $ 2.45/ 2.60

- or -

MAY 13, 2014 - entry price on ITW @ 87.57, option @ 6.65*
symbol: ITW1615a90 2016 JAN $90 call - current bid/ask $ 5.50/ 5.90

05/13/14 trade begins. ITW opens at $87.57
05/12/14 ITW closes @ 87.17, above our suggested entry above $86.50

Chart of ITW:

Current Target: ITW @ $98.00
Current Stop loss: 81.75
Play Entered on: 05/13/13
Originally listed on the Watch List: 05/04/14


Joy Global Inc. - JOY - close: 59.17

Comments:
05/18/14: It was a volatile week for JOY. Monday's bounce failed at resistance near $60 and its 20-dma. The midweek pullback broke down below its 50-dma on Thursday. However, traders were in a buy-the-dip mood on Friday and JOY outperformed the market with a +1.9% bounce.

I would wait for a new close above last week's high ($60.23) before initiating new positions. More conservative investors may want to wait until after JOY reports earnings before considering new positions. We do not have a confirmed date yet but JOY will likely announce earnings in the last week of May or early June.

- Suggested Positions -
APR 08, 2014 - entry price on JOY @ 60.75, option @ 4.40
symbol: JOY1517a65 2015 JAN $65 call - current bid/ask $ 2.82/ 2.96

- or -

APR 08, 2014 - entry price on JOY @ 60.75, option @ 6.05
symbol: JOY1615a70 2016 JAN $70 call - current bid/ask $ 4.00/4.65

04/08/14 JOY hit our entry trigger at $60.75

Current Target: We're aiming for the $75-80 zone
Current Stop loss: 55.75
Play Entered on: 04/08/13
Originally listed on the Watch List: 04/06/14


NuStar Energy - NS - close: 58.96

Comments:
05/18/14: Investors remained defensive last week and shares of NS continued to drift higher. The stock is poised to hit new two-year highs soon.

I am raising our stop loss to $53.75.

I am not suggesting new positions at this time.

Earlier Comments:
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.

- Suggested Positions -
APR 04, 2014 - entry price on NS @ 55.25, option @ 3.10*
symbol: NS1517a55 2015 JAN $55 call - current bid/ask $ 5.00/5.50

05/18/14 new stop @ 53.75
04/04/14 our play opens. NS @ 55.25
*option entry price is an estimate since the option did not trade at the time our play was opened.
04/03/14 NS closes above $55.25
Current Target: exit calls when NS hits $64.50
Current Stop loss: 53.75
Play Entered on: 04/04/14
Originally listed on the Watch List: 03/23/14


QUALCOMM Inc. - QCOM - close: 79.42

Comments:
05/18/14: QCOM is virtually unchanged for the week with a minor eight-cent loss. Technically the move last week is a bit more negative. You could argue that QCOM has now filled the gap from April and the rebound is starting to fail. This is technically bearish but there really hasn't been any confirmation yet. We will try and limit our risk by raising the stop loss to $75.75. This keeps the stop below the 100-dma. More conservative traders may want to consider just taking some money off the table now.

In other news QCOM is rumored to be talking to Israeli chipmaker Wilocity about acquiring the company for $300 million.

- Suggested Positions -
NOV 15, 2013 - entry price on QCOM @ 71.34, option @ 4.90
symbol: QCOM1517a75 2015 JAN $75 call - current bid/ask $7.05/7.15

05/18/14 new stop @ 75.75, more conservative traders may want to take some money off the table.
04/24/14 QCOM's earnings were a disappointment and they disclosed a Wells Notice. Investors may want to exit now and wait for the dust to clear.
04/20/14 new stop @ 74.70
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: 75.75
Play Entered on: 11/15/13
Originally listed on the Watch List: 11/03/13


Wells Fargo & Co. - WFC - close: 49.08

Comments:
05/18/14: Banking stocks were some of the market's worst performers last week. WFC managed to close the week unchanged, a small victory. Upward momentum has clearly stalled with resistance at the $50.00 level.

I have been warning investors to expect a correction into the $46-47 zone and I still believe odds are good this will happen. I'm not suggesting new positions at this time.

WFC is scheduled to host an investor day on May 20th.

- Suggested Positions -
DEC 26, 2013 - entry price on WFC @ 45.50, option @ 1.50
symbol: WFC1517a50 2015 JAN $50 call - current bid/ask $ 1.99/2.03

-- or --

DEC 26, 2013 - entry price on WFC @ 45.50, option @ 2.95*
symbol: WFC1615a50 2016 JAN $50 call - current bid/ask $ 3.55/3.70

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

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



Williams Sonoma - WSM - close: 64.05

Comments:
05/18/14: WSM is the fourth watch list candidate to graduate to our play list last week. The plan was to buy calls if WSM closed above $64.50. Shares closed at $64.55 on Monday. Our play opened on Tuesday morning at $64.36. Traders bought the dip on Thursday and WSM was showing relative strength on Friday with a +1.29% gain. The stock is now up four out of the last five weeks. We're long just in time for earnings to come out on May 21st. Earnings announcements can be dangerous if WSM disappoints or guides lower.

Shares look bullish here but investors may want to wait to see how the market reacts to WSM's earnings results before considering new positions.

- Suggested Positions -
MAY 13, 2014 - entry price on WSM @ 64.36, option @ 2.95*
symbol: WSM1517a70 2015 JAN $70 call - current bid/ask $ 2.50/2.75

-- or --

MAY 13, 2014 - entry price on WSM @ 64.36, option @ 4.70*
symbol: WSM1615a75 2016 JAN $75 call - current bid/ask $ 3.90/4.40

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

Chart of WSM:

Current Target: Our target is WSM in the $75-85 zone.
Current Stop loss: 59.75
Play Entered on: 05/13/14

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