New Watch List Entries

AKAM - Akamai Technologies

BRK.B - Berkshire Hathaway (class B)

MSFT - Microsoft Corp.


Active Watch List Candidates

MCD - McDonald's Corp.

PETM - PETsMART

PNRA - Panera Bread Co.

PPDI - Pharmaceutical Product Development Inc.

WMT - Wal-Mart Stores Inc


Dropped Watch List Entries

MOS and POT graduated to our play list last week.


New Watch List Candidates:

AKAMAI Tech. - AKAM - $24.70 -0.61

AKAM has broken the up trend off its summer 2009 lows. We want to be ready to buy the pull back when it's done. Last year was a game changer for AKAM's stock with a major breakout (look at a multi-year chart). Now we just need a correction in the stock to hop on board.

That correction could happen soon. The company reports earnings on Feb. 3rd. Wall Street is looking for a profit of 43 cents a share. Lately investors have been selling the news no matter what the earnings.

I am suggesting we buy call LEAPS on a dip at $21.50. The $20.00 level should offer some support. If triggered our long-term target is $29.50. We'll start with a stop loss at $17.99.

Company Info:
If you use the Internet for anything - to download music or software, check the headlines, book a flight - you've probably used Akamai's services without even knowing it. We play a critical role in getting content from providers to consumers. Akamai has created a digital operating environment for the Web. Our global platform of thousands of specially-equipped servers helps the Internet withstand the crush of daily requests for rich, dynamic, and interactive content, transactions, and applications. When delivering on these requests, Akamai detects and avoids Internet problem spots and vulnerabilities, to ensure Websites perform optimally, media and software download flawlessly, and applications perform reliably. Hundreds of enterprises worldwide use our global platform to sell, inform, entertain, market, advertise, deliver software, and conduct their business online (source: company press release or website)

Buy-the-Dip trigger: $21.50

BUY the 2011 January $25.00 calls (OMU1122A25)

Chart of AKAM:


Berkshire Hathaway Inc. - BRK.B - $76.43 +2.68

Last year Berkshire Hathaway announced the acquisition of Burlington Northern (BNI). In order to reduce the tax effect of this event on BNI shareholders Berkshire split its "baby" B shares 50-to-1 last week. This is great news for the rest of us who didn't want to pay $3,400 for one share of stock. BRK.B (different services have different formats. It could be BRK-B, or BRK/B) has been trading sideways in the $67.50-72.50 zone for months until the split occurred. S&P decided to add the baby-Bs to their index since they needed a replacement for BNI and this news is giving the stock a boost.

Aggressive traders may want to jump in now. I am suggesting that readers wait for a pull back. We'll use a trigger at $71.50 to buy the stock. Our first target is $90.00. Our second target is $99.50.

Company Info:
Berkshire Hathaway and its subsidiaries engage in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B (source: company press release or website)

Buy-the-Dip trigger: $71.50

BUY the Stock (BRK.B) Stop loss at $64.95

Chart of BRK.B:


Microsoft - MSFT - $28.18 -0.98

Investors were unhappy with MSFT's $19 billion in profits last quarter. The company sold 60 million copies of its new Windows 7 software and that wasn't enough. I think this is just investors selling the news to lock in a gain. Stocks don't go up in a straight line. We want to buy the correction. I'm suggesting readers use a trigger to buy call LEAPS on MSFT at $25.00, which is actually under the 200-dma. If triggered we'll use a stop loss at $22.75. Our long-term target is $35.00.

Company Info:
Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential. (source: company press release or website)

Buy-the-Dip trigger: $25.00

BUY the 2012 January $25 calls (WMF1221A25)

Chart of MSFT:


Active Watch List Candidates:


MCD $62.43 -0.40 -- McDonald's Corp.

MCD was showing relative strength last week until Thursday. Now shares appear to have reversed and could play catch up to the rest of the market. Our plan has not changed. We want to buy LEAPS on a dip at $60.00. However, stocks tend to overshoot to the downside. You could wait for a dip toward the 200-dma near $58.00 instead. 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.

Buy-the-Dip trigger: $60.00

BUY the 2011 January $65 calls (VMD-AM)

Chart of MCD:


PETM $25.75 -0.10 -- PETsMART Inc.

PETM is succumbing to market weakness and shares have rolled over like we thought they would. The plan is to buy LEAPS on a dip at $24.00. You could really use the $24.00-23.00 zone since the 200-dma will probably be 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.

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 $71.42 -0.59 -- Panera Bread Co.

PNRA continues to hold up very well considering the market's breakdown. Eventually shares will correction. 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.

Buy-the-Dip trigger: $65.50

BUY the 2011 January $70 calls (ZGM-AN)

Chart of PNRA:


PPDI $23.36 -0.34 -- Pharmaceutical Product Development Inc.

PPDI surprised us last week with a spike past resistance near $23.75 and a move over the $24.00 level. I could not find any company specific news to account for this relative strength. The rally has begun to roll over as the market breaks down. The high last week was $24.11 so we're still sitting on the sidelines wait for a true breakout.

Bigger picture the relative strength is encouraging but with the market sinking I think PPDI corrects. Nimble traders may want to consider buying a bounce near $22.50 and its 50-dma. I'm suggesting readers stick with the plan and use a trigger at $24.25 to open bullish positions. You could even up your trigger to $24.55 just to make sure we're jumping on a more significant breakout above resistance.

If triggered at $24.25 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:


WMT $53.43 +0.82 -- Wal-Mart Stores Inc.

There is no change from last week's comments. WMT doesn't move very fast but it should correct with the rest of the market. The bounce on Friday reversed, which is short-term bearish. I still expect it could take a couple of weeks (or more) before WMT hits our trigger to open long-term positions 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).

Buy-the-Dip trigger: $50.50

BUY the 2012 January $50 calls (WWT-AJ)

Chart of WMT: