Black Friday is almost here and investors are increasing their focus on the retailers. We are looking at one tonight.
New Watch List Entries
JCG - J. Crew Group Inc.
Active Watch List Candidates
BVN - Compania de Minas Buenaventura
DE - Deere & Co
F - Ford Motor Co.
GS - Goldman Sachs
HD - Home Depot
NFX - Newfield Exploration
SBUX - Starbucks Corp.
WLL - Whiting Petroleum
Dropped Watch List Entries
AAPL and DECK have been removed.
WYNN graduated to the play list.
New Watch List Candidates:
J. Crew Group, Inc. - JCG - close: 36.49
J. Crew Group, Inc. is a nationally recognized multi-channel retailer of women's, men's and children's apparel, shoes and accessories. As of November 16, 2010, the Company operates 250 retail stores (including 221 J.Crew retail stores, 9 crewcuts stores and 20 Madewell stores), the J. Crew catalog business, jcrew.com and 85 factory outlet stores.
(source: company press release or website)
Why We Like It:
JCG has been lagging its peers in the retail sector for several weeks now. It looks like that's about to change. The stock has spent the last four months building a new base in the $31-36 zone. This just happens to coincide with the 50% retracement of its 2009 rally. While it would be tempting to buy the breakout last week I suspect JCG will see a little profit taking. I'm suggesting we buy calls on a dip to $35.25. If triggered we'll use a stop loss at $32.40. Our first target is $44.75.
Warning: This is an aggressive entry point in front of the company's earnings report. JCG is due to report on Tuesday, November 23rd after the closing bell. Wall Street expects a profit of 54 cents a share. More conservative traders will want to strongly consider waiting until after we see how Wall Street reacts to the company's earnings results before initiating positions.
Buy-the-Dip trigger: $35.25
FYI: 2011 June are the longest dated options available.
BUY the 2011 June $40 calls (JCG1118F40) current ask $3.70
Chart of JCG:
Originally listed on the Watch List: 11/20/10
Active Watch List Candidates:
Apple Inc. - AAPL - close: 308.03
AAPL has seen a $20 pull back from its highs but I still don't want to chase it here. Depending on your outlook AAPL is either consolidating sideways in the $300-320 zone or it is about to form a bearish head-and-shoulders pattern and all it needs to do now is complete the right shoulder. If AAPL does produce an H&S pattern this would forecast a decline toward $280. A drop to $280 would also coincide with a 50% retracement of its August-November rally. It could take weeks before AAPL sees $280 again (if ever) so I'm removing AAPL as a watch list candidate for the time being. We'll certainly be keeping an eye on it. The support levels to watch are $300, $290, $280 and $270.
Summary: We're long-term bullish on AAPL but we don't want to chase it here. We'll wait for a significant correction. I'm dropping it from the watch list to make room for something that offers a higher chance of getting triggered.
Compania de Minas Buenaventura - BVN - close: 53.55
BVN has seen a 10% correction with the intraday November high to the intraday low last week. However, I'm not convinced the correction is over. We want to keep our trigger at $48.00 although more aggressive traders may want to buy a dip near the rising 50-dma.
I would keep your position small (half normal size or less) given our aggressive entry point.
Buy-the-Dip trigger: $48.00 (half a position)
BUY the 2011 JUNE $50 calls (BVN1119F50)
Deere & Co - DE - close: 77.98
DE came close but didn't quite hit our trigger at $73.50. The stock slipped toward the $74.00 level but traders bought the dip at the rising 50-dma. I remain bullish on DE but I am very hesitant to chase it at current levels. I'm suggesting we alter our strategy. Move the trigger to buy long-term calls to $75.50 but we'll also move the stop loss to $73.45. Plus, we want to keep our position size very small since this would be an aggressive entry point.
To further limit our risk I'm adjusting our option as well.
Buy-the-Dip trigger: $75.50 (very small positions)
BUY the 2012 January $90.00 calls (DE1221A90)
Deckers Outdoor Corp. - DECK - close: 66.81
I'm sorry to report that we appear to have missed the entry point on DECK. The stock dipped to $58.40 last week and then surged to new highs. Our trigger at $56.00 remains untouched. I don't want to chase DECK at these levels. I'm removing it from the watch list but suggest readers keep it on their personal watch list for a correction and bounce from support.
Ford Moto Co. - F - close: 16.28
Ford spiked to new multi-year highs over $17 ahead of the GM IPO. I don't see too many changes from my prior comments. However, we will tweak our entry point and move it from $14.30 to $14.50. If we do get triggered I would start with a small position and slowly build a position over time. If triggered we want to use a stop loss at $12.95.
Buy-the-Dip trigger: $14.50
BUY the stock - or -
BUY the 2012 January $15.00 calls (F1221A15) - or -
BUY the 2012 January $17.50 calls (F1319A17.5)
Goldman Sachs - GS - close: 166.67
GS has not seen the same sort of correction the rest of the financial has experienced. The sideways consolidation looks bullish. However, because the banking sector has been relatively week I'm hesitant to launch new positions in GS at current levels. We'll keep our trigger at $160.75.
We'll keep our stop loss at $152.25, just under the simple 200-dma.
I would keep your position small (at least half your normal size) given our more aggressive entry point.
Buy-the-Dip trigger: $160.75
BUY the 2011 April $180 calls (GS1116D180)
- or -
BUY the 2012 January $190 calls (GS1221A190)
Home Depot - HD - close: 31.22
In spite of the volatility last week we are still on the sidelines. HD reported earnings on Nov. 16th. The company beat estimates by 3 cents with revenues that were in-line with estimates. However, the company raised its 2011 guidance. The stock briefly broke out above resistance at $32.00 but failed to hold those gains. Shares closed at $31.71 on Tuesday. Wednesday saw a nasty breakdown under technical support at its 50-dma and 200-dma. Our plan was to buy calls on a close over $32.50 so we're still waiting. If we do not see HD improve over the next week I might drop it as a bullish candidate.
Wait for HD to close over $32.50, then launch positions.
BUY the 2012 Jan $35.00 calls (HD1221A35)
Newfield Exploration - NFX - close: 67.81
Energy stocks have held up pretty well and NFX has continued to show relative strength. The stock closed at new two-year highs on Friday but shares are also nearing significant resistance in the $68-70 zone. We do not want to open positions here. The plan is to wait for a correction back toward prior resistance. If triggered I'm listing our stop loss at $55.75. We'll set our first target at $69.00.
Buy-the-Dip trigger: $61.50
BUY the 2011 June $65 calls (NFX1118F65)
- or -
BUY the 2012 January $65 calls (NFX1221A65)
Starbucks Corp. - SBUX - close: 30.76
SBUX has been resilient and really didn't see that much of a pull back. The sideways consolidation is encouraging but we don't want to buy calls with SBUX trading near its highs. I'm suggesting we stick with the plan and wait for a dip to $28.50.
We'll use a stop loss at $25.90. Our long-term target is $34.75 and $38.75.
Buy-the-Dip trigger: $28.50
BUY the 2012 January $30.00 calls (symbol: SBUX1221A30)
Whiting Petroleum Corp. - WLL - close: 109.38
WLL is yet another energy stock showing relative strength. The stock set a new two-year closing high on Friday and shares are very close to resistance near $110. We don't want to chase it here but I will raise our trigger from $100 to $102.50. We'll also move the stop loss higher to $96.25.
Buy-the-Dip trigger: $102.50
BUY the 2011 March $100 calls (WLL1119C100)
- or -
BUY the 2012 January $110 calls (WLL1221A110)