New Watch List Entries
DE - Deere & Co
STLD - Steel Dynamics
Active Watch List Candidates
BRK.B - Berkshire Hathaway
BVN - Compania de Minas Buenaventura
HD - Home Depot
SRCL = Stericycle Inc.
VMED - Virgin Media
WYNN - Wynn Resorts Ltd.
Dropped Watch List Entries
GILD was removed. HUM and NVDA graduated to the play list.
New Watch List Candidates:
Deere & Co - DE - close: 72.45 change: +2.81
Shares of DE were hitting new highs on Friday after Russian Prime Minister Putin offered state support for DE to expand its business in Russia. The stock rallied to new 52-week highs. The stock was already on a bullish path with a strong bounce from support near $60 back in August. If investor sentiment regarding the global economy improves then DE should be a winner. However we don't want to chase it here. If the market corrects I'm expecting DE to retest the $66-65 zone. Let's use a trigger to buy calls at $66.50. We'll place our stop loss at $61.90. If triggered our long-term target is $79.00. I prefer the 2012 LEAPS.
Deere & Company, founded in 1837 (collectively called John Deere), has grown from a one-man blacksmith shop into a corporation that today does business around the world and employs more than 50,000 people. John Deere consists of three major business segments (agriculture and turf, construction and forestry, and credit). Those segments, along with the support operations of parts and power systems, are focused on helping customers be more productive as they help to improve the quality of life for people around the world. The company's products and services are primarily sold and serviced through John Deere's dealer network.
(source: company press release or website)
Buy-the-Dip trigger: $66.50
BUY the 2011 March $70.00 calls (DE1119C70)
- or -
BUY the 2012 January $75.00 calls (DE1221A75)
Chart of DE:
Steel Dynamics - STLD - close: 15.01 change: -0.13
You'll notice that shares of STLD have been consolidating sideways in the $13.00-15.00 zone for a few months now. Shares managed to breakout on Friday morning but quickly reversed with the stock closing at the $15.00 strike price for option expiration. What I find very interesting is that STLD (and others) have recently issued earnings warnings for the third quarter. Yet shares of STLD did not sell-off on its earnings warning. Instead the stock continued to march higher throughout the week. If a stock can climb on an earnings warning then investors must have already priced in all the bad news. I do think STLD will correct toward the middle of its previous range. I am suggesting a trigger to buy call LEAPS at $14.25. If triggered we'll use a stop loss at $12.90. Our long-term target is $19.00.
Steel Dynamics, Inc. (SDI) is the nationâ€™s fifth largest producer of carbon steel products with 2009 annual revenues of $4.0 billion on steel shipments of 4.0 million tons. Based in Fort Wayne, Indiana, SDI employs about 6,000 and operates five electric-furnace mini-mills. Over half of the company's steel shipments are flat-rolled steel and the remainder is "long products" (bars and beams) and fabricated products. SDI is among the most profitable American steel companies in terms of profit margins and operating profit per ton (source: company press release or website)
Buy-the-Dip trigger: $14.25
BUY the 2011 February $15.00 calls (STLD1119B15)
- or -
BUY the 2012 January $15.00 calls (STLD1221A15)
Chart of STLD:
Active Watch List Candidates:
Berkshire Hathaway - BRK.B - close: 82.72 change: -0.82
Shares of BRK.B closed unchanged on the week. Unfortunately for the bulls the stock produced a bearish reversal pattern on Friday. We have been waiting for shares to correct so this is a positive sign for us. The plan is to buy calls on a dip at $80.50. If you're patient you could wait for a dip near $79.00 instead. If triggered at $80.50 I'm suggesting a stop loss at $74.95. Our long-term target is $92.50 and $99.00. I prefer the 2012 calls.
Buy-the-Dip trigger: $80.50
BUY the 2011 Jan. $85 calls (BRKB1122A85)
- or -
BUY the 2012 Jan $90 calls (BRKB1221A90)
Chart of BRK.B:
Compania de Minas Buenaventura - BVN - close: 41.22 change: -0.30
BVN also produced a bearish failed rally pattern last week. There is some short-term support at $40.00 but I'm looking for a dip to $38.50. Patient traders could wait for a dip toward the 100-dma instead as their entry point.
If we are triggered at $38.50 we want to use a stop loss at $34.75.
Our long-term target is $47.50 but we might adjust it higher.
Buy-the-Dip trigger: $38.50
BUY the 2011 March $40 calls (BVN1119C40)
Chart of BVN:
Gilead Sciences - GILD - close: 34.56 change: -0.41
I am temporarily removing GILD as a bullish candidate. The original plan could still work. We were waiting for a dip to buy calls at $33.00 with a tight stop loss at $31.49. However, I'm worried any significant correction in the biotech sector could see an exaggerated move in shares of GILD. Readers may want to keep an eye on this stock to see if support near $32.00 will hold.
Home Depot - HD - close: 29.89 change: -0.06
HD's breakout from the July-August trading range has stalled. It's time for a correction. I am adjusting our trigger to buy calls on HD from $29.00 to $28.75. When this stock corrects I'm looking for a pull back toward the simple 50-dma.
If triggered our long-term target is $33.90 and $36.00. We can expect to find resistance near $32.00. I prefer the 2012 calls over the 2011 calls.
Buy-the-Dip trigger: $28.75
BUY the 2011 Jan $30.00 calls (HD1122A30)
BUY the 2012 Jan $30.00 calls (HD1221A30)
Chart of HD:
Stericycle - SRCL - close: 69.97 change: +0.31
SRCL set new all-time highs (again) last week. Although it looks like momentum is slowing near the $70 region. I don't see any changes from last week's comments reposted below:
Investors appear to be interested in medical waste disposal if shares of SRCL are any indication. After more than two months of consolidating near the $65 area it looks like SRCL is poised to move. We do not want to chase it here. Look for a dip back toward $66.00. We'll use a stop loss at $63.40. If triggered our long-term target is $79.00. However, we will have to adjust our exit point as SRCL does not have LEAPS. The longest dated options are 2011 Februarys.
Buy-the-Dip trigger: $66.00
BUY the 2011 February $70 calls (SRCL1119B70)
Chart of SRCL:
Virgin Media - VMED - close: 21.70 change: -0.05
Shares of VMED continue to consolidate sideways. The stock has a lid on it near $21.90-22.00. I am concerned the major market averages are poised to correct so I'm lowering our trigger on VMED down to $20.00. We'll move the stop loss down to $18.40. Our first long-term target is $24.00.
I prefer the 2012 LEAPS over the 2011s. FYI: The Point & Figure chart is forecasting a long-term target of $36.
FYI: Keep your position size small!
Buy-the-Dip trigger: $20.00 *adjusted*
BUY the 2011 Jan $20.00 call (VMED1122A20) *adjusted*
BUY the 2012 Jan $25.00 call (VMED1221A25)
Chart of VMED:
Wynn Resorts - WYNN - close: 91.91 change: +2.10
It's not about Vegas for WYNN. Macau is the engine for growth thanks to China's bustling economy. WYNN is still showing relative strength. The stock closed at new four-week highs. We still don't want to chase it. When the market does correct WYNN could be volatile. I'm keeping our trigger to buy calls at $85.00. If triggered we'll use a stop loss at $79.00. Our first target to take profits is $99.00. Longer-term we'll consider a target at $109. I prefer the 2012 calls over the 2011s but if you're just aiming for $99 the 2011s can work. Remember, small positions to limit your risk. This is an aggressive trade.
Buy-the-Dip trigger: $85.00
BUY the 2011 Jan $90 calls (WYNN1122A90)
- or -
BUY the 2012 Jan $100 calls (WYNN1221A100)
Chart of WYNN: