Editor's Note:

Looking for bullish candidates was tough this weekend. There are plenty of stocks that look bullish but the challenge is our time frame. I looked at hundreds of stocks tonight. Everything was either way overbought and ripe for some profit taking or they had been underperforming the market. We don't want to buy long-term options on either of those scenarios. Maybe my bias is getting in the way. We're bullish but odds are pretty good stocks will see a significant pull back in mid to late January. I'm expecting a -5% to -7% decline. Small caps will likely see a bigger correction than large caps.

We are adding one new candidate tonight and that's VZ. I have no doubt that over the next two or three weeks we will be adding lots of new candidates to the watch list.


New Watch List Entries

VZ - Verizon Communications


Active Watch List Candidates

AKS - AK Steel holding

BVN - Compania de Minas Buenaventura

CMP - Compass Minerals

GME - GameStop Corp

MAT - Mattel Inc.

NYB - New York Community Bancorp

TGT - Target Corp

UPS - United Parcel Service

X - U.S. Steel Corp


Dropped Watch List Entries


New Watch List Candidates:

Verizon Communications - VZ - close: $35.78

Company Info

Verizon is a huge telecom here in the U.S. Shares managed to breakout past major resistance near $33.75-34.00 this past month. Now the stock looks a little overbought with its five-week rally. I am suggesting we wait for a dip back toward prior resistance. I'm suggesting a trigger to buy call LEAPS at $33.75. If triggered we'll use a stop loss at $31.75. Our long-term targets are $40.00 and $44.00. FYI: The Point & Figure chart for VZ is bullish with a long-term target of $44.00.

Buy-the-Dip trigger: $33.75

BUY the 2012 January $35.00 calls (VZ1221A35)

- or -

BUY the 2013 January $35.00 calls (VZ1319A35)

Chart of VZ:

Originally listed on the Watch List: 01/01/11


Active Watch List Candidates:


AK Steel Holding - AKS - close: 16.37

AKS spent the week consolidating sideways above the $16 level. We want to wait for a dip toward support near $15.00 and its simple 200-dma. If triggered we'll use a stop loss at $12.75. FYI: The Point & Figure chart for AKS shows a bullish breakout over resistance and a $25 long-term target.

Buy-the-Dip trigger: $15.00

BUY the 2012 January $15.00 calls (AKS1221A15)

- or -

BUY the 2013 January $20.00 calls (AKS1319A20)

Originally listed on the Watch List: 12/25/10


Compania de Minas Buenaventura - BVN - close: 48.96

If you're feeling optimistic you could argue that BVN has found a bottom in the $47-48 region near its rising 100-dma. I'm concerned it could just a meager oversold bounce. Since we're expecting a market correction in January we'll leave our trigger at $45.00. Conservative traders may want to put their trigger near $43-42 instead. Keep your position size small to limit your risk.

Buy-the-Dip trigger: $45.00 (half a position)

BUY the 2011 JUNE $50 calls (BVN1119F50)


Compass Minerals - CMP - close: 89.27

CMP tried to rally again but failed near $90 resistance. The trend of higher lows is bullish but I'm expecting a correction toward old resistance near $82.50. That's why our trigger is at $82.75. If triggered we'll use a stop loss at $77.95 although we might be able to get away with a stop closer to $80.00. Unfortunately, CMP does not have any LEAPS available and the longest dated options are 2011 Junes.

Buy-the-Dip trigger: $82.75

BUY the 2011 June $90.00 calls (CMP1118F90)

Originally listed on the Watch List: 12/25/10


Gamestop Corp. - GME - close: $22.88

GME rallied to new six-month highs but we don't want to chase it. I'm suggesting a trigger to open positions at $21.25. More conservative traders may want to wait for a dip near the 50 or 200-dma instead. If triggered I'm suggesting a stop loss at $18.90. I would be very surprised to see GME breakdown under $20.00. Our long-term targets are $24.90 and $29.75.

Buy-the-Dip trigger: $21.25

BUY the 2012 January $22.50 call (GME1221A22.5)

- or -

BUY the 2013 January $25.00 call (GME1319A25)

Originally listed on the Watch List: 12/11/10


Mattel Inc. - MAT - close: 25.43

It looks like the correction in MAT has already begun. Shares were inching lower almost every day last week. Currently I'm suggesting we open bullish positions on a dip at $24.00. More conservative traders may want to wait for a dip closer to the simple 200-dma near $23.00. If triggered we want to use a stop loss at $22.75. Our long-term targets are $29.00 and $36.00.

Buy-the-Dip trigger: $24.00

BUY the 2012 January $25.00 calls (MAT1221A25)

- or -

Buy the 2013 January $25.00 calls (MAT1319A25)

Originally listed on the Watch List: 12/04/11


New York Community Bancorp - NYB - close: 18.85

After big gains in December shares of NYB have started to see some profit taking. Broken resistance near $18.00 should be new support. I am suggesting we use a buy-the-dip trigger at $18.00. It could take a few weeks for NYB to retrace that far. If triggered we'll start with a stop loss at $16.65. FYI: The Point & Figure chart for NYB is bullish with a long-term target of $33.50.

Buy-the-Dip trigger: $18.00

BUY the 2012 January $17.50 calls (NYB1221A17.5)

- or -

BUY the 2013 January $20.00 calls (NYB1319A20)

Originally listed on the Watch List: 12/25/10


Target Corp. - TGT - close: 60.13

TGT has spent the last week and a half sliding sideways along the $60.00 level. The trend is up but if the market corrects lower then TGT could retest the $56-55 zone. I'm adjusting our trigger to buy LEAPS on a dip at $56.00 instead of $57.00. If triggered we'll start with a stop loss at $53.75. Our long-term target is $69.75.

Buy-the-Dip trigger: $56.00

BUY the 2012 January $60 calls (TGT1221A60)

- or -

BUY the 2013 January $65 calls (TGT1319A65)

Originally listed on the Watch List: 12/11/10


United Parcel Service - UPS - close: 72.58

The transportation sector isn't moving. This group has been consolidating sideways for most of December. We want to wait for UPS to dip toward support near $70.00. More conservative traders could look for a dip near the rising 100-dma instead. If triggered we'll use a stop loss at $65.90. Our long-term targets are $79.50 and $87.50.

Buy-the-Dip trigger: $70.10

BUY the 2012 January $75 calls (UPS1221A75)

- or -

BUY the 2013 January $80 calls (UPS1319A80)

Originally listed on the Watch List: 12/04/10


United States Steel Corp. - X - close: 58.42

Shares of X managed a gain for the week but the stock has essentially been consolidating sideways the last ten days. There is no change from my prior comments. We're waiting for a correction. I am suggesting bullish positions on a dip at $54.00. More conservative traders could just wait and see where X finds support again (it could be $52 or $50). If triggered we will start the play with a stop loss at $48.75. Our long-term targets are $64.75 and $74.75.

Buy-the-Dip trigger: $54.00

BUY the 2012 January $60.00 calls (X1221A60)

- or -

BUY the 2013 January $60.00 calls (X1319A60)

Originally listed on the Watch List: 12/11/10