New Watch List Entries
MCD - McDonald's Corp.
PETM - PETsMART
PNRA - Panera Bread Co.
WMT - Wal-Mart Stores Inc
Active Watch List Candidates
MOS - Mosaic Co.
POT - Potash Corp.
PPDI - Pharmaceutical Product Development Inc.
Dropped Watch List Entries
New Watch List Candidates:
MCD $63.39 +0.19 -- McDonald's Corp.
It doesn't matter whether you believe we're going to see a double-dip recession or the worst is behind us. Consumers are going to continue to watch their wallets with record high unemployment. That should be good news for MCD. Shares have been out performing the rest of the market and actually look poised to move higher in spite of the market's weakness. I still think MCD will correct.
I am suggesting we buy LEAPS on a dip to $60.00. The 200-dma near $58.00 should be significant support. If triggered at $60 we'll use a stop loss at $53.95. Our long-term target is $74.50. I'm suggesting the 2011 LEAPS. You may want to buy the 2012 instead.
McDonald's is the leading global foodservice retailer with more than 31,000 local restaurants serving more than 58 million people in 118 countries each day. More than 75% of McDonald's restaurants worldwide are owned and operated by independent local men and women. (source: company press release or website)
Buy-the-Dip trigger: $60.00
BUY the 2011 January $65 calls (VMD-AM)
Chart of MCD:
PETM $26.30 -0.47 -- PETsMART Inc.
The concept here is that consumers are going to go out less, which means more time and home with their pets. I suspect that PETM will weather the economic "rebound" or double-dip better than most. I'm suggesting we buy LEAPS on a dip into the $24.00-23.00 zone. The 200-dma should offer decent support. If triggered our stop loss will be $21.40. Our long-term target is the $34-35 zone but given the lack of LEAPS we'll aim for 29.00.
PetSmart, Inc. (PETM) is the largest specialty retailer of services and solutions for the lifetime needs of pets. We have more than 1,149 pet stores in the United States and Canada, more than 161 in-store PetsHotels cat and dog boarding facilities and Doggie Day Camps, and are a leading online provider of pet supplies and pet care information. PetSmart provides a broad range of competitively priced pet food and pet supplies; offers complete pet training and pet adoption services. (source: company press release or website)
Buy-the-Dip trigger: $24.00
Readers may want to consider buying the stock. PETM doesn't have LEAPS. The longest-dated options are 2010 Julys.
BUY the 2010 July $25 calls (QPT-GE)
Chart of PETM:
PNRA $72.81 -0.60 -- Panera Bread Co.
This is a relative strength play. Maybe it was the cold weather driving people into PNRA's store for comfort food but the company pre-announced better than expected earnings last week. The stock gapped open higher and garnered some positive analyst comments. The trend is clearly bullish. However, PNRA has some old resistance in the $75 region. I think the stock will retreat back toward $65.00 before too long.
We want to use a trigger to buy LEAPS at $65.50. If triggered we'll use a stop loss at $59.50. Our long-term target is the $84.50 level.
Panera Bread bakery-cafes showcase the art and craft of bread making, helping customers truly appreciate and enjoy a great loaf of bread by studying its crust, crumb and craft. Panera Bread understands that great bread makes great meals, from made-to-order sandwiches to tossed-to-order salads and soup served in bread bowls. Panera Bread is widely recognized for driving the nationwide trend for specialty breads. As reported by The Wall Street Journal, Panera Bread scored the highest level of customer loyalty among quick-casual restaurants, according to research conducted by TNS Intersearch.
(source: company press release or website)
Buy-the-Dip trigger: $65.50
BUY the 2011 January $70 calls (ZGM-AN)
Chart of PNRA:
WMT $52.94 +0.02 -- Wal-Mart Stores Inc.
WMT is the biggest retailer on the planet. If the economy does recovery then sales should increase. If the economy doesn't recover then consumers, looking to stretch their dollar, will shop at WMT even more! The company is not immune to economic weakness but it should weather any storm better than most.
On a long-term chart WMT broke out from a major consolidation last quarter. I'm suggesting we buy LEAPS on a dip at $50.50. If triggered we'll use a stop loss at $46.75. Our first long-term target is $62.50. More aggressive traders may want to use the 2011 January calls (the $50 strike VWT-AJ).
Walmart serves customers and members more than 200 million times per week at more than 8,424 retail units under 53 different banners in 15 countries. With fiscal year 2009 sales of $401 billion, Walmart employs more than 2.1 million associates worldwide. (source: company press release or website)
Buy-the-Dip trigger: $50.50
BUY the 2012 January $50 calls (WWT-AJ)
Chart of WMT:
Active Watch List Candidates:
MOS - Mosaic Co. $58.63 -1.44
The outlook for MOS has taken a very bearish turn in the last couple of sessions. Hopefully readers aren't surprised. We're expecting a dip toward support near $55.00, which is why we set our trigger to open positions at $56.00. More conservative traders may want to wait and look for a dip toward the rising 200-dma near $52 instead.
If we are triggered at $56.00 the plan is to buy the 2011 January $65 LEAPS with a stop loss on MOS at $49.00.
Our long-term target is the $90-100 zone. (Readers might want to consider the 2012 LEAPS too).
NOTE: In 2009 MOS issued a special cash dividend of $1.30 per share payable back on December 3rd, 2009. The CBOE issued a new LEAPS symbol to account for the dividend. The old 2011 LEAPS have a root symbol of ZHX. The LEAPS we want to use are the ZXW root symbols.
Buy-the-Dip trigger: $56.00
BUY the 2011 January $65 call (symbol: ZXW-AM)
Chart of MOS:
POT - Potash Corp. $109.05 -3.59
POT remains a very volatile stock! This month alone has seen two $15 moves, one up and one down. While the $105 level should be short-term support I now think, given the market's new weakness, that POT could dip toward $100 and its rising 200-dma. Thus I'm moving our trigger to buy LEAPS lower to $101.
POT is due to report earnings on January 28th before the market opens. Wall Street is looking for a profit of 80 cents a share. This report could have a big impact on the stock price and produce even more volatility.
CAUTION: More conservative traders may want to wait until after the report (wait for the dust to settle... give it a couple of days) before initiating new positions - even if POT hits our trigger before the earnings announcement.
If POT hits our trigger to buy LEAPS at $101. we will use a stop loss at $89.00. Our long-term target is $160 or higher.
Buy-the-Dip trigger: $101.00 *new*
BUY the 2011 January $110 calls (symbol: VPT-AB) *new strike*
Chart of POT:
PPDI $23.27 +0.08 -- Pharmaceutical Product Development Inc.
It was an interesting week for PPDI. The company issued an earnings warning on Wednesday. That's what caused the spike lower. Oddly enough traders bought the dip! PPDI expects 2010 earnings in the $1.00-1.12 range versus Wall Street's estimates around $1.27. The fact that PPDI did not sell off on this news and did not sell off on Thursday and Friday with the rest of the market is pretty encouraging.
I do not see any changes to my previous comments. The plan is to buy calls with a trigger at $24.25. If triggered we'll use a stop loss at $21.90. Our first target is $29.25.
Breakout trigger: $24.25
BUY the 2010 July $25.00 calls (symbol: PJQ-GE)
Chart of PPDI: