Editor's Note:

We continue to add to our watch list but we're adjusting some of our entry point strategies to account for the market's strength.


New Watch List Entries

ATI - Allegheny Tech.

BWA - BorgWarner Inc.

HSIC - Henry Schein Inc

ORLY - O'Reilly Automotive


Active Watch List Candidates

AKS - AK Steel holding

BEAV - BE Aerospace Inc.

CMP - Compass Minerals

Costco Wholesale - COST

Fiserv, Inc. - FISV

FLR - Fluor Corp.

JRCC - James River Coal Co.

MAT - Mattel Inc.

MON - Monsanto Co.

NFX - Newfield Exploration

NYB - New York Community Bancorp

Teva Pharmaceuticals - TEVA

TIF - Tiffany & Co.

UNH - UnitedHealth Group, Inc

X - U.S. Steel Corp


Dropped Watch List Entries

MD graduated to our play list. I am removing VZ from the watch list.


New Watch List Candidates:

Alleghney Technology - ATI - close: 66.89

Company Info

Metal-related stocks have continued to show relative strength. I like ATI now that it has cleared resistance near $60.00. Let's wait for a dip back to the $61.00 level. If triggered we'll use a stop loss at $55.75. Our long-term targets are $75 and $85.

Buy-the-Dip trigger: $61.00

BUY the 2012 January $70.00 calls (ATI1221A70)

- or -

BUY the 2013 January $70.00 calls (ATI1221A70)

Chart of ATI:

Originally listed on the Watch List: 02/05/11


BorgWarner Inc. - BWA - close: 67.03

Company Info

This auto parts maker is due to report earnings on February 10th before the opening bell. Analysts are looking for a profit of 82 cents a share. I'm crossing my fingers that the stock sees a post-earnings sell-off so we can buy the dip. I'm suggesting a trigger to buy calls at $61.00 with a stop loss at $54.75. Only open half a position at first since BWA can be a volatile stock. Our first target is $74.00. BWA doesn't have LEAPS so we'll have to settle for July calls.

Buy-the-Dip trigger: $61.00

BUY the 2011 July $65 calls (BWA1116G65)

Chart of BWA:

Originally listed on the Watch List: 02/05/11


Henry Schein Inc. - HSIC - close: 66.30

Company Info

This medical equipment company has rallied to new all-time highs this past week. We don't want to chase it. I am suggesting we wait for a dip to $62.50 and launch positions there. If triggered we'll use a stop at $57.75, just under the 200-dma. Our long-term target is $75 HSIC doesn't have LEAPS so we'll have to settle for July calls.

Buy-the-Dip trigger: $62.50

BUY the 2011 July $65 call (HSIC1116G65)

Chart of HSIC:

Originally listed on the Watch List: 02/05/11


O'Reilly Automotive - ORLY - close: 57.58

Company Info

ORLY is due to report earnings on February 16th after the closing bell. Wall Street is looking for a profit of 63 cents a share. If the stock sees any post-earnings sell-off we want to be ready to buy the dip. The stock should have support in the $54-53 zone near its 200-dma. I am suggesting a trigger to open positions at $53.50 with a stop loss at $49.75. ORLY doesn't have LEAPS so we'll have to settle with the August calls.

Buy-the-Dip trigger: $53.50

BUY the 2011 August $55 calls (ORLY1120H55)

Chart of ORLY:

Originally listed on the Watch List: 02/05/11


Active Watch List Candidates:


AK Steel Holding - AKS - close: 15.84

02/05 update: AKS underperformed some of its peers in the metals industry. The failed rally near $17 might be a short-term top. I am raising our trigger to buy calls to $14.00 and we'll raise our stop loss to $11.75.

Buy-the-Dip trigger: $14.00 <-- New Trigger

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: 37.42

02/05 update: BEAV reported better than expected numbers but the stock is slipping anyway. I'm suggesting a trigger at $32.50. 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: 93.87

02/05 update: CMP is due to report earnings this week on Feb. 8th. I'm expecting some post-earnings volatility. Please note that I'm raising our trigger to buy the dip to $85.50. We'll move our stop loss to $79.00, just under the 200-dma. I would start this trade with small positions to limit our risk. Unfortunately, CMP does not have any LEAPS available and the longest dated options are 2011 Septembers

Buy-the-Dip trigger: $85.50 <-- New Trigger

BUY the 2011 September $90.00 calls (CMP1117I90)

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


Costco Wholesale - COST - close: 74.13

02/05 update: COST rallied to new two-year highs. Yet I wouldn't chase it. The $75.00 level was significant resistance back in 2008. Odds are still good this stock could see a correction. For now our trigger to buy the dip is at $66.00 but I'm considering a move toward the $70 area. 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)

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


Fiserv, Inc. - FISV - close: 60.27

02/05 update: If you look at the weekly chart it appears that FISV has produced a bearish reversal. I'm expecting a pull back toward support near $55.00. We'll use a trigger at $56.00 to open bullish positions. If triggered use a stop loss at $51.90, under the simple 200-dma.

Buy-the-Dip trigger: $56.00

BUY the 2011 September $60 calls (FISV1117I60)

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


Fluor Corp. - FLR - close: 68.69

02/05 update: FLIR still looks top heavy and due for some profit taking. We will re-evaluate our entry point following the earnings report. 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: 21.77

02/05 update: The bounce has failed yet again at the 50-dma. I'm still expecting a correction. More aggressive traders may want to buy the dip at $20.00. 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


Monsanto Co. - MON - close: 74.66

02/05 update: Agriculture names broke to new highs early in the week and then MON's stock ran out of gas. 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: 74.70

02/05 update: Oil service stocks have been strong outperformers. NFX rallied to another high and then stalled near round-number resistance at $75.00. There is still a good chance that NFX will see some profit taking following its earnings report. Plus, when this Egypt news finally blows over the risk premium in oil is going to contract and the energy sector could pull back as oil slides.

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


Teva Pharmaceuticals - TEVA - close: 54.10

02/05 update: There is no change from my prior comments. TEVA is an Israeli based drug company. The unrest in Egypt has sent the Israel markets lower. 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. If TEVA does not see a post-earnings dip we will re-evaluate and probably raise our entry point.

Buy-the-Dip trigger: $50.25

BUY the 2012 January $55 calls (TEVA1221A55)

- or -

BUY the 2013 January $60 calls (TEVA1319A60)

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


Tiffany & Co. - TIF - close: 61.96

02/05 update: The retail sector was a strong performer last week as most of the major retailers reported better than expected January same-store sales in spite of the weather. Shares of TIF received an upgrade that helped spur the rally. I am raising our buy-the-dip trigger to $55.50 but if triggered we only want to use small positions to limit our risk. If triggered we'll use a stop at $49.50.

Buy-the-Dip trigger: $55.50 <-- New Trigger

BUY the 2012 January $60 calls (TIF1221A60)

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


UnitedHealth Group, Inc. - UNH - close: 42.49

02/05 update: Healthcare names have been showing relative strength. UNH has rallied to new multi-year highs. I am raising our trigger to buy the dip to $38.50 and our stop loss to $34.50.

Buy-the-Dip trigger: $38.50 <-- New Trigger

BUY the 2012 January $40 calls (UNH1221A40)

- or -

BUY the 2013 January $45 calls (UNH1319A45)

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


Verizon Communications - VZ - close: $34.95

02/05 update: I am temporarily removing VZ from the watch list. I'd still keep an eye on it in case shares do correct toward the $34-32 zone. On a short-term basis shares look ready to breakout but VZ likely has resistance near the $40 level.

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


United States Steel Corp. - X - close: 58.17

02/05 update: I am tempted to raise our buy-the-dip trigger but X just produced a bearish reversal and potentially a bearish double top. Right now I'm expecting a dip toward the $52.50-50.00 zone. We'll re-evaluate our entry point strategy as X corrects lower. For now our trigger is at $48.50 near the 200-dma. 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