The market's last correction lasted about four weeks. It looks like stocks could be launching into the next correction lower. Don't be surprised if it lasts a few weeks. We'll be ready to pounce on an entry point with this watch list.
New Watch List Entries
CRM - Salesforce.com
FLS - Flowserve Corp.
Active Watch List Candidates
CIR - CIRCOR Intl.
CRS - Carpenter Technology
DE - Deere & Co.
EMC - EMC Corp.
IMN - Imation Corp.
LMT - Lockheed Martin
MICC - Millicom Intl.
RT - Ruby Tuesday, Inc.
WLT - Walter Energy Inc.
Dropped Watch List Entries
APA, CLR and WLL all graduated to the play list last week. SAFM and TRMB have both been temporarily removed from the watch list.
New Watch List Candidates:
Salesforce.com - CRM - close: 85.60 change: -2.54
It's been a while since we traded CRM. That stock has been an exceptional performer over the last three months. The breakout past resistance at $75.00 was a major milestone for the stock. I suspect the uptrend will continue. The recent GDP data showed businesses were spending more on equipment and software and that might translate into a bullish environment for CRM.
Short-term the stock is overbought and with the market looking vulnerable I would expect a correction in CRM. Broken resistance near $75.00 should be decent support. I'm suggesting a trigger to buy calls at $75.50. If triggered we'll use a stop loss at $67.00. Our long-term target is $99.00.
Salesforce.com is the enterprise cloud computing company. Based on salesforce.comâ€™s real-time, multitenant architecture, the companyâ€™s platform and CRM applications (http://www.salesforce.com/crm) have revolutionized the way companies collaborate and communicate with their customers. Salesforce.com offers the fastest path to customer success with cloud computing. As of January 31, 2010, salesforce.com manages customer information for approximately 72,500 customers.
(source: company press release or website)
Buy-the-Dip trigger: $75.50
BUY the 2011 January $80 calls (CRM 11A80.00)
- or -
BUY the 2012 January $90 calls (CRM 12A90.00)
Chart of CRM:
Flowserve - FLS - close: 114.58 change: -4.33
Plenty of countries are spending their stimulus money on infrastructure, energy and water projects. That should be good news for the likes of FLS. The stock has been flirting with 52-week highs for most of April but I suspect shares are ready to correct lower. That correction may occur after the company reports earnings on May 5th (after the closing bell). It could take two or three weeks but the plan is to open bullish positions on a dip near $100. I am suggesting a trigger to open plays at $102.00. If triggered we'll use a stop loss at $92.40. Our long-term target is $135.00.
Flowserve Corp. is one of the worldâ€™s leading providers of fluid motion and control products and services. Operating in more than 55 countries, the company produces engineered and industrial pumps, seals and valves, as well as a range of related flow management services.
(source: company press release or website)
Buy-the-Dip trigger: $102.00
BUY the 2011 January $110 calls (FLS 11A110.00)
- or -
BUY the 2012 January $120 calls (FLS 12A120.00)
Chart of FLS:
Active Watch List Candidates:
CIRCOR Intl. - CIR - close: 34.46 change: -0.66
It appears the correction in CIR has begun. The stock spiked to $36.33 on Monday and is already off 5%. We are expecting a correction back toward support near $30.00. Stocks tend to drop faster than they climb so CIR could hit our trigger in the next two or three weeks. Keep in mind that CIR is also due to report earnings on May 10th. Readers may want to wait until after we see the reaction to earnings before initiating positions even if the stock does hit our trigger beforehand.
Right now our trigger to open positions is at $30.50.
If triggered we'll use a stop at $27.45. 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: $39.27 change -1.21
CRS is another high-flying momentum stock that is finally starting to roll over. After weeks and weeks of gains it looks like the correction may have finally begun. CRS reported earnings on April 27th. The results were better than expected but it appears the numbers were already baked in and traders sold the news. CRS certainly looks short-term vulnerable here. I am expecting a correction into the $33-30 zone. Currently our trigger to open bullish positions is at $33.00. I am adjusting our stop loss to $28.90. Our long-term target is $44.75. My time frame for CRS to hit our trigger is the next two or three weeks.
Buy-the-Dip trigger: $33.00
BUY the 2010 December $40 calls (CRS 10L40.00)
Chart of CRS:
DE - Deere & Co. - close: 59.82 change: -0.79
DE is another high-profile name that appears to be rolling over. Shares spike to a new high last Monday but couldn't hold it. The move looks like a bull trap and on the weekly chart DE has produced a bearish engulfing candlestick (reversal) pattern, but it needs to see confirmation. I am expecting a correction back toward the rising 200-dma. Currently our plan is to open bullish positions on a dip at $52.50. My time frame is the next two or three weeks before DE hits our trigger. If triggered we'll use a stop loss at $47.90. Our first target is $69.75.
Buy-the-Dip trigger: $52.50
BUY the 2011 January $55 call (DE 11A55.00)
- or -
BUY the 2012 January $60 call (DE 12A60.00)
Chart of DE:
EMC Corp. - EMC - close: 19.01 change: -0.62
Tech stocks were hit hard on Friday and EMC gave up more than 3%. The stock lost about 5% for the week. Shares closed at short-term support near $19.00. I am expecting a 10% correction, which is why our trigger to open positions is at $18.25. More nimble traders may want to try and jump in on a dip closer to the $18.00-17.50 zone. The simple 200-dma has risen to $17.17 and should offer some support. Therefore we'll raise the stop loss to $16.75.
Buy-the-Dip trigger: $18.25
BUY the 2011 January $20.00 LEAP CALL (EMC 11A17.50)
- or -
BUY the 2012 January $20.00 LEAP call (EMC 12A20.00)
Chart of EMC:
Imation Corp. - IMN - close: 10.84 change: -0.73
Ouch! Investors were very unhappy with the company's earnings report on April 27th. IMN missed estimates by 12 cents and the stock was hammered. Traders initially bought the dip at its 50-dma but the selling resumed on Friday. We have been expecting a big correction in IMN but the pace of the pull back is pretty steep. I am moving our trigger to open bullish positions down to $10.00. More conservative traders could focus on what appears to be support near the $9.50 level.
I am suggesting we buy the stock but options are available.
If triggered our first target is $12.25. Our second target is $14.25. We'll use a stop loss at $9.24.
Buy-the-Dip trigger: $10.00 *new*
Buy the IMN stock at $10.00
BUY the 2010 October $10.00 call (IMN 10J10.00) *adjusted*
Chart of IMN:
Lockheed Martin - LMT - close: 84.89 change: -1.48
LMT dipped to $83.89 last week before traders jumped in and pushed it back toward resistance near $87.00. Unfortunately the resistance held and momentum indicators are suggesting LMT could be ready to roll over. I am taking a more conservative approach to new positions in LMT. Our new trigger to buy calls is at $80.50. More nimble traders could try and jump in around the $79-78 zone. If we are triggered at $80.50 we'll use a stop loss at $74.75.
Our first target is $99.00. Our second, longer-term target is $109.00.
FYI: I am suggesting if we do get triggered that readers only launch a half position (or smaller) since the market looks vulnerable.
Buy-the-Dip trigger: $80.50 *adjusted*
Half position or smaller!
BUY the 2011 January $85 calls (LMT 11A85.00) *updated*
BUY the 2012 January $90 calls (LMT 12A90.00)
Chart of LMT:
Millicom Intl. - MICC - close: 88.28 change: +0.06
Traders bought the dip again but it looks like the correction may have begun. MICC has produced a new relative low and a new lower high. Friday's bounce stalled at $90.00. I'm still expecting a correction toward $80.00 and we're adjusting our trigger to open positions to $80.00. Our stop loss, if triggered, will be $74.40. Our long-term target is $99.50 and the $109.00 levels.
Buy-the-Dip trigger: $80.00
BUY the 2011 January LEAP $90.00 calls (MICC 11A90.00)
Chart of MICC:
Ruby Tuesday Inc. - RT - close: $11.19 change: -0.59
The tug-of-war continues but the bulls are starting to look tired. RT is losing steam. I'm expecting a big correction in RT. We want to open positions at $9.50. More nimble or conservative traders could wait and try to jump in on a dip near $9.00 if RT provides one. October options are the longest ones available so I prefer buying the stock over an option. It could take another two or three weeks before RT finally hits our trigger.
If triggered we'll use a stop at $8.45.
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: 56.67 change: -1.07
I am temporarily removing SAFM from the watch list. I still believe shares offer an entry point on a dip back toward the $50-47.50 zone but it could take a while before they correct that deep. I'll be watching it and we'll probably put it back on the watch list as it gets closer to support near $50.00.
Trimble Navigation - TRMB - close: 32.70 change: +0.91
The profit taking in the tech sector and semiconductor sector has had no affect on TRMB. Shares surged to new 52-week highs thanks to a better than expected earnings report and a new broker price target. TRMB is still very overbought and we don't want to chase it here. I am temporarily removing it from our watch list. I still believe TRMB offers potential but it could take weeks before shares provided a decent entry point for a longer-term position. Right now I would watch for a correction toward the $28-27 area.
WLT - Walter Energy Inc. close: $80.81 change: -4.82
We were expecting a sharp correction in WLT but the velocity of the move has been faster than expected. The combination of downgrades in the coal sector, news that the FBI was looking into the recent coal mine disaster was already depressing stocks in the industry. Add to that a disappointing earnings report from WLT and shares plunged toward support near $80 and its 100-dma. I now suspect that WLT could dip toward its rising 200-dma.
I am now suggesting we adjust our trigger to launch bullish positions down to $73.00. If triggered we'll use a stop loss at $64.50. Our first target is $99.00.
FYI: WLT can be a volatile stock. Readers may want to keep their position size small when initiating a position.
Buy-the-Dip trigger: $73.00 *adjusted
BUY the 2011 January $80 calls (WLT 11A80.00) *adjusted
- or -
BUY the 2012 January $90 calls (WLT 12A90.00)
Chart of WLT: