New Watch List Entries
WLT - Walter Energy Inc.
Active Watch List Candidates
APA - Apache Corp.
CIR - CIRCOR Intl.
CRS - Carpenter Technology
CVD - Covance Inc.
DE - Deere & Co.
EMC - EMC Corp.
IMN - Imation Corp.
MICC - Millicom Intl.
RT - Ruby Tuesday, Inc.
SAFM - Sanderson Farms Inc.
TRMB - Trimble Navigation
Dropped Watch List Entries
MDR graduated to the play list last week.
New Watch List Candidates:
WLT - Walter Energy Inc. close: $93.43 change: -4.55
When it comes to the coal industry investors seem to favor the companies that mine the metallurgical coal used in the steel and metal production. WLT is a favorite momentum play for stocks in this group. Long-term this could be a good investment as the global economy recovers (we hope). However, short-term the stock may have gotten ahead of itself. Prior to Friday's 4.6% decline shares of WLT were up more than 30% for the year and up almost 55% from its February lows. It is very possible that WLT has been priced for perfection and investors could end up selling the news when the company reports earnings on April 28th.
Aggressive traders may want to consider short-term bearish positions. I am suggesting we buy call LEAPS on a correction. This stock tends to move in extremes so I'm expecting any profit taking to be sharp. Look for a dip to $77.50 as our entry point to buy calls. If triggered our stop loss is $67.50 (under the 200-dma). Our first target is $99.50. Our second target is $110.
FYI: WLT can be a volatile stock. Readers may want to keep their position size small when initiating a position.
Walter Energy is a leading U.S. producer and exporter of premium hard coking coal for the global steel industry and also produces steam coal and industrial coal, metallurgical coke and coal bed methane gas. The Company has revenues of approximately $1.0 billion and employs approximately 2,100 people.
(source: company press release or website)
Buy-the-Dip trigger: $77.50
BUY the 2011 January $85 calls (WLT 11A85.00)
- or -
BUY the 2012 January $90 calls (WLT 12A90.00)
Chart of WLT:
Active Watch List Candidates:
APA - Apache Corp. - close $105.44 change: -1.23
The rally in energy stocks stalled last week and APA continues to struggle with resistance near the $108 level. The action in just the last two sessions suggest APA could be poised to correct lower. I am suggesting we wait for APA to breakout past resistance. We will use a trigger at $110.50 to open bullish positions. If triggered at $110.50 we'll use a stop loss at $102.45. Our first target is $124.75.
FYI: Readers should know that APA is due to report earnings at the end of April but the April 29th announcement date is unconfirmed.
Breakout trigger: $110.50
BUY the 2011 January $115 calls (APA 11A115.00) *updated*
Chart of APA:
CIRCOR Intl. - CIR - close: 34.60 change: +0.06
CIR displayed relative strength again last week but the rally has been unable to breakout past resistance near the $35.00 level. I am still expecting a correction back toward the $30.00 region. More conservative traders may want to wait and buy calls on a bounce from $30.00 instead of buying a dip to $30. If triggered we'll use a stop at $27.75. Our long-term target is the $40 area. FYI: The P&F chart is pointing to a $47 target.
NOTE: I would only start with half a position. We want to keep our exposure limited.
Buy-the-Dip trigger: $30.50
BUY the 2010 NOV $35 calls (CIR 10K35.00)
Chart of CIR:
Carpenter Technology - CRS - close: $38.63 change +0.13
It might be wishful thinking but the recent action in CRS looks like it could be a top. I'm long-term bullish on the stock but don't want to chase it after the big move higher. Odds are when CRS corrects it will be sharp.
We want to wait for a pull back toward the $30.00 level. If triggered we'll use a stop at $27.45. Our long-term target is $44.50. Currently the Point & Figure chart is very bullish with a $57 price target.
Buy-the-Dip trigger: $30.00
BUY the 2010 September $35 calls (CRS 10I35.00)
Chart of CRS:
Covance Inc. - CVD - close: 61.77 change: -0.24
Shares of CVD continue to struggle with resistance near $63.00. At the same time shares did not see that much of a sell-off on Friday. Instead investors were buying the dip intraday. Aggressive traders might want to consider bullish positions on a breakout higher. I am suggesting we wait for a dip back toward support and its 200-dma near $55.00. We'll use a trigger at $56.00 to open positions. If triggered we'll use a stop loss at $53.45.
If triggered our long-term target is $74.50. Currently the Point & Figure chart is bullish with a $79 target.
Buy-the-Dip trigger: $56.00
BUY the 2010 November $60.00 calls (CVD 10K60.00)
Chart of CVD:
DE - Deere & Co. - close: 60.51 change: -1.25
DE managed to tag a new 52-week high on Thursday before reversing. I am still expecting a correction before shares continue their longer-term trend higher. However, I'm adjusting our entry point. We want to launch positions on a dip at $52.50. If triggered we'll use a stop loss at $47.90.
Our first target is $69.75. FYI: The Point & Figure chart is bullish with a long-term target of $89.00.
Buy-the-Dip trigger: $52.50
BUY the 2011 January $55 call (DE 11A55.00) *updated*
- or -
BUY the 2012 January $60 call (DE 12A60.00)
Chart of DE:
EMC Corp. - EMC - close: 19.36 change: +0.01
It turned out to be a very bullish week for EMC with the stock soaring last Monday thanks to an upgrade. The stock managed to break out to a new 52-week high. The company is about to report earnings on April 21st. Will investors buy the news or sell the news?
At this time we don't want to chase it but I will raise our trigger to $17.60 from $17.25. We'll keep the stop loss, if triggered, at $15.90.
Our long-term target is $22.50. FYI: The Point & Figure chart is bullish with a $34.50 target. (Readers may want to buy 2012 calls and aim higher)
Buy-the-Dip trigger: $17.60 *new*
BUY the 2011 January $17.50 LEAP CALL (EMC 11A17.50)
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BUY the 2012 January $20.00 LEAP call (EMC 12A20.00)
Chart of EMC:
Imation Corp. - IMN - close: 11.70 change: -0.25
The rally continues for IMN with shares breaking out to a new 52-week high last week. The $12.00 level looks like it could be resistance and we don't want to chase it here. I am adjusting our trigger to open bullish positions from $10.15 to $10.35.
I am suggesting we buy the stock (or calls) on a dip at $10.35. If triggered our first target is $12.25. Our second target is $14.25. We'll use a stop loss at $9.24. FYI: The Point & Figure chart is bullish with a $17.50 target.
Buy-the-Dip trigger: $10.35
Buy the IMN stock at $10.35
BUY the 2010 October $12.50 call (IMN 10J12.50)
Chart of IMN:
Millicom Intl. - MICC - close: 86.45 change: -3.47
MICC issued a press release last week stating the company would pay a special dividend of $4.60 per share on top of the $1.40 annual dividend already in place. Plus the company would initiate a $300 million stock buy back program. The stock initially popped higher on the news and investors immediately sold it! This failed rally pattern looks bearish and the follow through on Friday is even worse. We're still longer-term bullish on MICC but short-term it appears the correction we've been waiting for has finally begun.
This could be an interesting week since MICC is due to report earnings on April 20th. Results come out before the opening bell. Analysts are looking for a profit of $1.31 a share. The $80.00 level should be support. However, I am adjusting our trigger to open bullish positions from $81.00 down to $77.00. The rising 200-dma near $75.00 should offer technical support. We'll move our stop loss down to $69.00.
Our long-term target is $99.50 and the $109.00 levels.
Buy-the-Dip trigger: $77.00
BUY the 2011 January LEAP $90.00 calls (MICC 11A90.00)
Chart of MICC:
Ruby Tuesday Inc. - RT - close: $11.54 change: -0.45
Shares of RT look poised to plunge. The post earnings rally has reversed and traders sold into strength again last week. Nimble traders may want to open bearish positions now with a stop above $12.20 or $12.60. I'm tempted to buy some May puts. However, for the newsletter we're looking at the longer-term bullish posture. Broken resistance in the $9.00-9.50 zone should be support. I am suggesting we buy the stock (or calls) on a dip at $9.50. If triggered we'll use a stop at $8.45.
It could take a few weeks for RT to correct low enough to finally hit our entry point. If we are triggered at $9.50 our first target is $12.00. Our longer-term target is $14.75.
Buy-the-Dip trigger: $9.50
BUY the stock at $9.50
- or -
BUY the 2010 October $10.00 calls (RT 10J10.00)
Chart of RT:
Sanderson Farms Inc. - SAFM - close: 58.37 change: -0.68
SAFM rallied to the top of its bullish channel thanks to an analyst upgrade last Monday. Now the rally looks tired under potential resistance at $60.00. There is no change from my prior comments. We don't want to chase it here.
Right now the plan is to buy calls on a dip at $48.50 with a stop loss at $43.90. However, we might decide to jump in if we see SAFM bounce from the $50 area. If triggered our target is $59.75. I would aim higher but we only have a few months with the November calls.
Buy-the-Dip trigger: $48.50
BUY the 2010 NOV $55 calls (SAFM 10K55.00)
Chart of SAFM:
Trimble Navigation - TRMB - close: 29.83 change: -0.33
TRMB managed to rally to another new 52-week high last week. I'm encouraged by the relative strength but we don't want to chase it. The correction may not happen until after TRMB reports earnings in late April but we want to wait for the stock to pull back. Broken resistance near $26.00 should be support. If you're really conservative you could wait for a dip closer to $25.00. I'm suggesting a trigger for bullish positions at $26.05. If triggered we'll use a stop loss at $23.95. Our first target is $29.95. Our second target is $32.25. FYI: The P&F chart is bullish with a $42 target.
Buy-the-Dip trigger: $26.05
BUY the 2010 November $30 calls (TRMB 10K30.00)
Chart of TRMB: