Editor's Note:

We want to close our CHK trade on Tuesday morning, May 27th.


Closed Plays


We closed BIG on Monday, May 19th



Play Updates


American Intl. Group - AIG - close: 53.60

Comments:
05/26/14: Goldman Sachs upgraded AIG to a "buy" on Wednesday and the stock gapped open higher. Shares spent the last three trading days hovering just below resistance near the $54.00 level.

Investors can use a close above $54.00 as a new bullish 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 $1.28/1.34

- or -

May 14, 2014 - entry price on AIG @ 53.94, option @ 4.35*
symbol: AIG160115C60 2016 JAN $60 call - current bid/ask $3.95/4.10

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


Caterpillar Inc. - CAT - close: 104.03

Comments:
05/26/14: It was a volatile week for shares of CAT. The company announced its sales for the three months ending in April. International sales were down -13% from a year ago and sales in Asia were off -25%. Sales in Europe, Africa and the Middle East were down -24% and down -28% in Latin America. North American sales were accelerating with stronger gains each month in February, March and April with a three-month rise of +12%. Altogether it was the worst drop in sales since February 2010.

These results are ugly! There's no way to sugarcoat it. The stock plunged on Tuesday to test its 50-dma. Coincidentally the broader market was also down sharply on Tuesday in reaction to worries over the Federal Reserve (see tonight's market commentary). The market has been in rally mode the last three days and CAT followed it higher.

CAT's results are bad enough that investors may want to exit this trade early right now. I am concerned that this bounce will roll over in the $104-105 zone and we'll see a deeper decline. That's just speculation on my part.

No 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 $3.15/3.20

- or -

APR 03, 2014 - entry price on CAT @ 101.92, option @ 7.40*
symbol: CAT1615a110 2016 JAN $110 call - current bid/ask $6.90/7.15

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: 27.68

Comments:
05/26/14: Shares of CHK were upgraded three times last week and the stock has continued to underperform. After the prior week's reversal lower CHK spent the last five days consolidating sideways near $28. Energy stocks are leading the market higher and CHK is not participating. That's a problem.

I am suggesting an immediate exit on Tuesday, May 27th. We can reconsider CHK again if it closes above $30.50 again.

- Suggested Positions -
MAY 13, 2014 - entry price on CHK @ 30.34, option @ 1.24
symbol: CHK150117C35 2015 JAN $35 call - current bid/ask $0.47/0.53

- or -

MAY 13, 2014 - entry price on CHK @ 30.34, option @ 2.75
symbol: CHK160115C35 2016 JAN $35 call - current bid/ask $1.71/1.75

05/26/14 prepare to exit immediately on Tuesday morning (May 27th)
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

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: 83.32

Comments:
05/26/14: DIS looks great. The stock has been showing relative strength. Its movie studio division is having a great year with big winners at the box office. Shares of DIS are approaching potential resistance at their all-time highs from March this year. A breakout could signal a run towards the $89-90 zone.

Please note our new stop loss at $77.75.

- Suggested Positions -
OCT 23, 2013 - entry price on DIS @ 68.81, option @ 3.70
symbol: DIS1517a75 2015 JAN $75 call - current bid/ask $10.65/10.75

05/26/14 new stop @ 77.75
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: 77.75
Play Entered on: 10/23/13
Originally listed on the Watch List: 10/13/13


Hess Corp. - HES - close: 89.86

Comments:
05/26/14: On Thursday shares of HES soared on news they were selling their retail gas station business, with 1,342 locations, to Marathon Petroleum for $2.6 billion. HES said it will use its profits from the sale to buy back its stock.

Shares of HES hit new multi-year highs near $92 a share before paring its gains.

I am not suggesting new positions at this time.

- Suggested Positions -
APR 22, 2014 - entry price on HES @ 87.50, option @ 3.15*
symbol: HES1517a95 2015 JAN $95 call - current bid/ask $ 3.00/ 3.20

- or -

APR 22, 2014 - entry price on HES @ 87.50, option @ 5.80*
symbol: HES1615a100 2016 JAN $100 call - current bid/ask $ 5.25/5.85

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


Honeywell Intl. - HON - close: 91.97

Comments:
05/26/14: It was another quiet week for HON. The stock bounced from support near $90.00 and looks poised to re-challenge resistance at its 50-dma and 100-dma near $92 soon.

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 $ 9.10/ 9.25

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: 86.40

Comments:
05/26/14: ITW spent most of the week consolidating sideways below short-term resistance at its 10-dma near $86 a share. Friday's move looks like a short-term bullish breakout higher. Investors can use Friday's move as a new bullish entry point to buy calls.

- 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 $ 5.60/ 6.00

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

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: 58.36

Comments:
05/26/14: The correction in JOY is now five weeks old. Shares dipped to its 100-dma on Wednesday before bouncing. Friday's rally failed at its 50-dma, which does not inspire any confidence.

I remain concerned over JOY's recent performance. The intermediate trend is down. Earnings are coming up on June 5th. At this point I would wait until after JOY reports earnings before considering new positions.

- Suggested Positions -
APR 08, 2014 - entry price on JOY @ 60.75, option @ 4.40
symbol: JOY1517a65 2015 JAN $65 call - current bid/ask $ 2.34/ 2.45

- or -

APR 08, 2014 - entry price on JOY @ 60.75, option @ 6.05
symbol: JOY1615a70 2016 JAN $70 call - current bid/ask $ 3.75/4.15

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: 58.20

Comments:
05/26/14: The rally in NS stalled last week with a 75-cent pullback.

Looking at the market the NASDAQ and Russell 2000 started to participate. If these broader market indices start to accelerate higher it could diminish investor appetite for more safe haven trades like NS.

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 $ 4.50/5.20

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: 79.88

Comments:
05/26/14: QCOM spent last week consolidating sideways between short-term support at its 50-dma and the $80 level. The long-term trend is still higher but I am not suggesting new positions. QCOM faces resistance in the $81-82 zone.

- Suggested Positions -
NOV 15, 2013 - entry price on QCOM @ 71.34, option @ 4.90
symbol: QCOM1517a75 2015 JAN $75 call - current bid/ask $7.00/7.15

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: 50.16

Comments:
05/26/14: Financials bounced last week and WFC is helping lead the group higher. The stock closed above round-number, psychological resistance at $50.00 for the first time on Friday.

WFC held an analyst day on May 20th. The company remains upbeat on the U.S. economy.

If you were looking for a new bullish entry point then a close above $50.50 might be a good alternative entry point.

Please note that I am adjusting our long-term target from $54.50 to $59.00.

- Suggested Positions -
DEC 26, 2013 - entry price on WFC @ 45.50, option @ 1.50
symbol: WFC1517a50 2015 JAN $50 call - current bid/ask $ 2.41/2.45

-- or --

DEC 26, 2013 - entry price on WFC @ 45.50, option @ 2.95*
symbol: WFC1615a50 2016 JAN $50 call - current bid/ask $ 3.95/4.05

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

Current Target: Exit WFC hits $59.00
Current Stop loss: 44.80
Play Entered on: 12/26/13
Originally listed on the Watch List: 12/08/13



Williams Sonoma - WSM - close: 67.98

Comments:
05/26/14: WSM surged to new all-time highs following its earnings report.

Wall Street was expecting a profit of 44 cents a share on revenues of $941.25 million. WSM delivered 48 cents and revenues of $974.3 million. Management lowered their Q2 guidance and revenue estimates but raised their 2015 earnings and revenue estimates.

The stock soared from $63.73 to $69.49 on Thursday. Shares started to see some profit taking on Friday. I would not be surprised to see more profit taking as WSM potentially fills the gap. I am not suggesting 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 $ 3.90/4.20

-- or --

MAY 13, 2014 - entry price on WSM @ 64.36, option @ 4.70*
symbol: WSM1615a75 2016 JAN $75 call - current bid/ask $ 5.40/5.90

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 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



CLOSED Plays


Big Lots Inc. - BIG - close: 37.97

Comments:
05/26/14: Last week we were concerned about BIG's performance and in last weekend's newsletter announced plans to close this trade on Monday, May 19th. Shares opened at $38.64 on the 19th and continued to sink throughout the week.

- Suggested Positions -
APR 22, 2014 - entry price on BIG @ 39.29, option @ 4.15*
symbol: BIG1517a40 2015 JAN $40 call - exit $3.30** (-20.4%)

05/19/14 planned exit
**option exit price is an estimate since the option did not trade at the time our play was closed.
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