Editor's Note:

Is this bearish reversal in the stock market for real? I certainly hope so. We want to see a correction so we can launch new positions. There are plenty of stocks that caught my eye this weekend. In addition to tonight's new watch list candidates here's a list of stocks on my radar screen that I'm hoping see a significant correction lower:

ORLY, TEVA, AMAT, DVN, ATO, BHI, MTD, BWA, JPM, PJC, ATI, BTU, PCX, TJX, FSLR, WMT, AAPL, ORCL, HLIT, and CRR.


New Watch List Entries

Costco Wholesale - COST

Fiserv, Inc. - FISV

Teva Pharmaceuticals - TEVA


Active Watch List Candidates

AKS - AK Steel holding

BEAV - BE Aerospace Inc.

CMP - Compass Minerals

FLR - Fluor Corp.

JRCC - James River Coal Co.

MAT - Mattel Inc.

MD - MEDNAX Inc.

MON - Monsanto Co.

NFX - Newfield Exploration

NYB - New York Community Bancorp

TIF - Tiffany & Co.

UNH - UnitedHealth Group, Inc

VZ - Verizon Communications

X - U.S. Steel Corp


Dropped Watch List Entries

MAT and NYB were removed from the watch list.


New Watch List Candidates:

Costco Wholesale - COST - close: 71.93

Company Info

The impressive rally in COST has run out of fuel near the $73 area. Friday's action looks like a bearish reversal that will hopefully begin a correction lower. We want to launch long-term bullish positions on a dip at $66.00. If triggered we'll use a stop loss at $61.40, just under the simple 200-dma. FYI: Earnings are due out in early March.

Buy-the-Dip trigger: $66.00

BUY the 2012 January $70 calls (COST1221A70)

- or -

BUY the 2013 January $70 calls (COST1319A70)

Chart of COST:

Originally listed on the Watch List: 01/29/11


Fiserv, Inc. - FISV - close: 61.33 change: -1.54

Company Info

FISV managed to rally to new all-time highs this past week. Friday's move looks like the beginning of a correction. FISV appears to have support near $58 and near $56. Broken resistance near $55.00 offers another level of support. I am suggesting that we launch bullish positions on a dip at $56.00. Unfortunately, FISV does not have LEAPS so the best we can do is September calls. If triggered use a stop loss at $51.90, under the simple 200-dma. FYI: FISV is due to report earnings on February 3rd.

Buy-the-Dip trigger: $56.00

BUY the 2011 September $60 calls (FISV1117I60)

Chart of FISV:

Originally listed on the Watch List: 01/29/11


Teva Pharmaceuticals - TEVA - close: 54.80 change: -1.01

Company Info

TEVA is an Israeli based drug company. The unrest in Egypt has sent the Israel markets lower. The combination of chaos in Egypt and a market correction in the U.S. could pull shares of TEVA back down toward the $50 level. The late December low was $50.25. I am suggesting we wait for another dip to $50.25 and use it as an entry point to buy call LEAPS on TEVA. If triggered we'll use a stop loss at $46.90, which is under the July lows from 2010. FYI: TEVA is due to report earnings on February 8th.

Buy-the-Dip trigger: $50.25

BUY the 2012 January $55 calls (TEVA1221A55)

- or -

BUY the 2013 January $60 calls (TEVA1319A60)

Chart of TEVA:

Originally listed on the Watch List: 01/29/11

Active Watch List Candidates:


AK Steel Holding - AKS - close: 15.58

01/29 update: Steel maker AKS saw a big move higher on its earnings report but the rally ran out of steam near $16.50. I'm keeping our buy-the-dip trigger at $12.25 for now but we may end up adjusting it toward $13 or higher depending on how fast AKS corrects. We want to launch bullish positions at $12.25 with a stop loss at $10.75. The 2010 low was $11.34.

Buy-the-Dip trigger: $12.25

BUY the 2012 January $15.00 calls (AKS1221A15)

- or -

BUY the 2013 January $15.00 calls (AKS1319A15)

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


BE Aerospace Inc. - BEAV - close: 38.24

01/29 update: BEAV spent most of the week bounce from the $38 level before returning to it on Friday's reversal. There is no change from my prior comments. I'm looking for a significant correction lower. Wait for BEAV to dip to $32.50 as our entry point to buy long-term calls. If triggered at $32.50 we'll use a stop loss at $29.45. BEAV doesn't have LEAPS so we'll have to settle for 2011 July calls. FYI: Earnings are due out on February 3rd. Buy-the-Dip trigger: $32.50

BUY the 2011 July $35.00 calls (BEAV1116G30)

Originally listed on the Watch List: 01/22/11


Compass Minerals - CMP - close: 90.92

01/29 update: CMP was showing relative strength last week and broke our through the top of its trading range to hit new highs on Thursday. We don't want to chase it here. I'm hoping for a significant correction back toward support near $80.00. If that doesn't happen I'm looking for support near the $82.50-83.00 area. Unfortunately, CMP does not have any LEAPS available and the longest dated options are 2011 Septembers

Look for CMP's earnings on Feb. 8th.

Buy-the-Dip trigger: $80.50

BUY the 2011 September $85.00 calls (CMP1117I85)

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


Fluor Corp. - FLR - close: 68.33

01/29 update: FLR looks like it's forming a top. Nimble traders may want to buy puts for the move down. There is no change from my prior comment. We want to launch bullish positions at $60.50 with a stop at $54.74.

FLR is due to report earnings on Feb. 23rd. Buy-the-Dip trigger: $60.50

BUY the 2012 January $65 calls (FLR1221A65)

- or -

BUY the 2013 January $70 calls (FLR1319A70)

Originally listed on the Watch List: 01/08/11


James River Coal Co. - JRCC - close: 22.24

01/29 update: Coal stocks were showing some relative strength on Friday. I'd still rather wait and see if JRCC corrects toward lower support. I'm watching potential support near $20.00 and near its 200-dma closer to the $18.50 area. I am suggesting a trigger to launch positions at $18.50. If triggered we'll use a stop loss at $15.90. JRCC doesn't have LEAPS so we'll have to settle for 2011 September calls. FYI: Earnings are due out in late February. Buy-the-Dip trigger: $18.50

BUY the 2011 September $20 calls (JRCC1117I20)

Originally listed on the Watch List: 01/22/11


Mattel Inc. - MAT - close: 23.51

01/29 update: I am removing MAT from the watch list. I still think it offers opportunity if we see an entry point in the $22-21 zone. However, I'd rather find something that offers more upside for the newsletter. Our trigger to open positions was never hit.

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


MEDNAX Inc. - MD - close: 66.28

01/29 update: Nimble traders might want to buy puts on MD right here. Shares look poised to drop. However, there is no way to account for the risk of holding over MD's earnings report due out on Feb. 3rd.

There is no change from my prior comments. I am suggesting we launch bullish positions at $61.00. If triggered we'll use a stop loss at $55.90. MD doesn't have LEAPS so we'll have to settle for 2011 August calls. Buy-the-Dip trigger: $61.00

BUY the 2011 August $65 calls (MD1120H65)

NOTE: Keep your position size small. The options on MD wide spreads, which puts us at a disadvantage!

Originally listed on the Watch List: 01/22/11


Monsanto Co. - MON - close: 71.54

01/29 update: The rebound in MON has failed near resistance. The stock looks poised to correct lower. Nimble traders might want to consider buying some short-term puts. I am suggesting we open bullish positions at $64.00 with a stop loss at $59.75. Our targets are $79.00 and $87.50. Buy-the-Dip trigger: $64.00

BUY the 2012 January $70 calls (MON1221A70)

- or -

BUY the 2013 January $75 calls (MON1319A75)

Originally listed on the Watch List: 01/08/11


Newfield Exploration Co. - NFX - close: 69.04

01/29 update: NFX also looks like a short-term put candidate. Nothing has changed from my prior comments. We're looking for a significant correction lower. We want to wait to buy calls at $60.50. If triggered we'll use a stop loss at $54.40. Our long-term targets are the $75 and $85 levels.

FYI: Earnings are Feb. 16th.

Buy-the-Dip trigger: $60.50

BUY the 2012 January $65 calls (NFX1221A65)

- or -

BUY the 2013 January $70 calls (NFX1319A70)

Originally listed on the Watch List: 01/15/11


New York Community Bancorp - NYB - close: 18.27

01/29 update: I am removing NYB from the watch list. Like MAT, shares of NYB offer potential if we get the right entry point. I would rather replace NYB with different stocks in the financial sector that could offer more reward. Our trigger to open positions in NYB was never hit.

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


Tiffany & Co. - TIF - close: 57.54

01/29 update: TIF is another short-term put candidate. The stock looks ready for its next leg lower. I don't see any changes from my prior comments. We want to use a trigger to launch bullish positions on a dip at $52.50. If triggered we'll use a stop loss at $47.75. Buy-the-Dip trigger: $52.50

BUY the 2012 January $60 calls (TIF1221A60)

Originally listed on the Watch List: 01/22/11


UnitedHealth Group, Inc. - UNH - close: 40.93

01/29 update: UNH saw a bullish breakout higher on Thursday only to see those gains wiped out on Friday. It looks like a top. There is no change from my prior comments. I am suggesting we wait for a dip back to $36.50 as an entry point to open long-term positions. If triggered we'll use a stop loss at $33.45. FYI: The P&F chart is bullish with a $67 target.

Buy-the-Dip trigger: $36.50

BUY the 2012 January $40 calls (UNH1221A40)

- or -

BUY the 2013 January $40 calls (UNH1319A40)

Originally listed on the Watch List: 01/15/11


Verizon Communications - VZ - close: $34.95

01/29 update: There is no change from my earlier comments. We want to launch positions at $33.00 with a stop loss at $31.45. Keep your position size small to limit your risk. Our long-term targets are $40.00 and $44.00.

Buy-the-Dip trigger: $33.00

BUY the 2012 January $35.00 calls (VZ1221A35)

- or -

BUY the 2013 January $35.00 calls (VZ1319A35)

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


United States Steel Corp. - X - close: 53.29

01/29 update: Investors continue to buy bad news. X delivered earnings that were a significant miss and yet the stock rallied anyway. We don't want to chase it here. Right now our plan is to buy the correction on a dip at $48.50. Our stop will remain at $44.80. Keep your position size small to limit your risk. Our long-term targets are $64.75 and $74.75.

Buy-the-Dip trigger: $48.50

BUY the 2012 January $55.00 calls (X1221A55)

- or -

BUY the 2013 January $60.00 calls (X1319A60)

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