Editor's Note:

As noted in tonight's commentary, the bulls have "won". Stocks continue to climb higher no matter what the headlines are. My expectations for a market correction in the second half of January have not been met. Now we need to re-examine our entry points on most of these watch list candidates.


New Watch List Entries

CACI - CACI International

EAT - Brinker International

FSLR - First Solar, Inc.


Active Watch List Candidates

AKS - AK Steel holding

ATI - Allegheny Tech.

BEAV - BE Aerospace Inc.

BWA - BorgWarner Inc.

CMP - Compass Minerals

Costco Wholesale - COST

Fiserv, Inc. - FISV

FLR - Fluor Corp.

HSIC - Henry Schein Inc

JRCC - James River Coal Co.

MAT - Mattel Inc.

MON - Monsanto Co.

NFX - Newfield Exploration

ORLY - O'Reilly Automotive

Teva Pharmaceuticals - TEVA

TIF - Tiffany & Co.

UNH - UnitedHealth Group, Inc

X - U.S. Steel Corp


Dropped Watch List Entries

FISV was promoted. FLR was removed.


New Watch List Candidates:

CACI International - CACI - close: 57.60

Company Info

CACI is an information technology company with a stock breaking out to new four-year highs. The move through resistance in the $54-55 zone was very bullish for CACI. The rally is looking a little tired and we want to be ready to buy the dip when CACI retest support. I am suggesting a trigger to open bullish positions at $54.50. If triggered we'll use a stop loss at $51.50. Our targets are the $67.50-70.00 zone. CACI doesn't have LEAPS so we'll have to settle for September calls. FYI: The Point & Figure chart for CACI is bullish with a $65 target.

Buy-the-Dip trigger: $54.50

BUY the 2011 September $60 calls (CACI1117I60)

Chart of CACI:

Originally listed on the Watch List: 02/12/11


Brinker International - EAT - close: 24.46

Company Info

Consumer sentiment and confidence continues to improve, which should mean consumer spending will improve. The market certainly thinks so given the trends in restaurant stocks. Shares of EAT broke out past resistance near $22.00 recently. I am suggesting we open bullish positions on a dip at $22.50. If triggered we'll use a stop loss at $19.90. Unfortunately, EAT does not have LEAPS so we'll have to settle for July calls. FYI: The Point & Figure chart for EAT is bullish with a $32.50 target.

Buy-the-Dip trigger: $22.50

BUY the 2011 July $25 calls (EAT1116G25)

Chart of EAT:

Originally listed on the Watch List: 02/12/11


First Solar, Inc. - FSLR - close: 166.11

Company Info

Shares of FSLR have been leaping and bounding higher thanks to a high degree of short interest. Every time it looks like FSLR might correct it gets squeezed higher. The most recent data listed short interest a 30% of the relatively small 55 million-share float.

Bigger picture FSLR has spent over a year consolidating sideways and is breaking out past resistance. While we don't want to chase it here there might be an opportunity on a correction and that correction could happen after its earnings report. FSLR is due to report earnings on February 17th, although that date is still unconfirmed. Wall Street is looking for a profit of $1.76 a share.

I am suggesting we open small bullish positions in FSLR on a dip at $150.00. If triggered we'll use a stop loss at $139.00. Our long-term target is $195.00. Warning! These options are not cheap.

Buy-the-Dip trigger: $150.00

BUY the 2012 January $170 calls (FSLR1221A170)

- or -

BUY the 2013 January $180 calls (FSLR1319A180)

Chart of FSLR:

Originally listed on the Watch List: 02/12/11


Active Watch List Candidates:


AK Steel Holding - AKS - close: 15.81

02/12 update: AKS still looks vulnerable to another downdraft that could push it toward its 200-dma and support near $14.00. We will leave our buy-the-dip trigger at $14.00 and our stop loss at $11.75.

Buy-the-Dip trigger: $14.00

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


Alleghney Technology - ATI - close: 67.47

02/12 update: Shares of ATI are still trending higher but it's not outlandish to think that shares could see a correction back toward the $60 area. We will leave our buy-the-dip entry point at $61.00 and our 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)

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


BE Aerospace Inc. - BEAV - close: 38.71

02/12 update: The defense sector indices have broken out to new two-year highs but BEAV seems to be lagging its peers. BEAV may not have fully consolidated following its earnings report in early February. There is still a chance that this stock could correct toward its rising 200-dma. However we will raise our buy-the-dip entry point to $34.00 and raise our stop loss to $29.90. (July options are still the longest available)

Buy-the-Dip trigger: $34.00

BUY the 2011 July $35.00 calls (BEAV1116G30)

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


BorgWarner Inc. - BWA - close: 77.33

02/12 update: BWA rallied sharply last Monday and then rallied again following its stronger than expected earnings report and forecast. Actually the stock was up every day last week to post a +15% gain for the week. BWA is now very short-term overbought. The question is how low will it fall on the correction? Another way to say that is where will BWA find new support?

We will raise our buy-the-dip entry point to $71.00 and raise our stop loss to $66.90. It could take weeks before BWA corrects that deep and it would be a lot healthier if it took a while to correct. A sharp pull back now would make the rally look like a blow-off top. If and when BWA does hit our trigger we will want to keep our positions very small. This stock is obviously a little volatile. BWA doesn't have LEAPS so we'll have to settle for July calls.

Buy-the-Dip trigger: $71.00 <-- New Trigger

BUY the 2011 July $75 calls (BWA1116G75)

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


Compass Minerals - CMP - close: 94.82

02/12 update: CMP did not see a lot of reaction to its earnings report last week. I am suggesting we raise our buy-the-dip trigger to $90.50 and we'll raise our stop loss to $87.00. If triggered we want to keep our position size small to limit our risk. Unfortunately, CMP does not have any LEAPS available and the longest dated options are 2011 Septembers

Buy-the-Dip trigger: $90.50 <-- new Trigger

BUY the 2011 September $100 calls (CMP1117I100)

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


Costco Wholesale - COST - close: 75.04

02/12 update: COST has spent the last few days consolidating sideways under long-term resistance at the $75.00 level. Friday's session actually saw COST close just above this mark but the current all-time high is near $75.25. Aggressive traders may want to consider buying a breakout but the newsletter is not ready to do so just yet. Meanwhile our buy-the-dip trigger at $66 seems unrealistic. I'm putting COST on "hold" for the moment. Let's give it another week and see what happens. FYI: Earnings are due out March 2nd.

Trigger to enter positions: temporarily removed.

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


Fiserv, Inc. - FISV - close: 62.34

02/12 update: I would have preferred to buy calls on a dip in the $56-55 zone but that appears unlikely. Instead of watching FISV climb without us, I am promoting this to a new play with new details tonight.

Look for details under the new play section.

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


Fluor Corp. - FLR - close: 73.52

02/12 update: FLR produced a very bullish week with a breakout to new two-year highs. Our buy-the-dip trigger near $60 is no longer reasonable. As a short-term bullish candidate FLR looks great but we may not want to launch long-term positions right here. I am removing it from the watch list and putting it back on my radar screen. Keep in mind that earnings are coming up in about ten days and FLR could see a reaction to its earnings news.

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


Henry Schein Inc. - HSIC - close: 67.36

02/12 update: It's not completely unreasonable to expect HSIC might see a correction toward the $63-62 zone. We will adjust our buy-the-dip entry point to $63.50. Just bear in mind it could take a few weeks for HSIC to pull back that low, especially since it's still in an up trend and by then we may have different option strikes to use. Then again earnings are Feb. 22nd so HSIC could see a reaction to earnings. We will reexamine our entry point following the earnings report. I am adjusting our stop loss to $59.40. HSIC doesn't have LEAPS so we'll have to settle for July calls.

Buy-the-Dip trigger: $63.50 <-- new trigger

BUY the 2011 July $65 call (HSIC1116G65)

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


James River Coal Co. - JRCC - close: 21.20

02/12 update: JRCC has continued to slip although Thursday and Friday saw shares find technical support at the 100-dma. I don't see any changes from my prior comments. 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 (unconfirmed).

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: 75.05

02/12 update: MON is consolidating sideways. Short-term traders might want to buy calls if this stock can breakout past the $77.00 mark. I would not launch new long-term positions at this time. Currently our buy-the-dip entry point at $64.00 is very unlikely to be hit any time soon but I'm not quite ready to adjust it higher. Let's give MON another week and see what happens. (if triggered our stop loss is $59.75)

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: 70.91

02/12 update: News that Egyptian President Mubarak would step down should deflate some of the risk premium in oil and that could suck some of the momentum out of the oil sector. Shares of NFX already look like they are reversing with the failed breakout on Monday, Feb. 7th. NFX is due to report earnings on Feb. 16th so shares could see some profit taking on the news. We will leave our buy-the-dip entry point at $60.50 for now and then reexamine our strategy next week.

If triggered we'll use a stop loss at $54.40. Our long-term targets are the $75 and $85 levels.

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


O'Reilly Automotive - ORLY - close: 57.58

02/12 update: ORLY is still consolidating sideways. The company reports earnings this week on Feb. 16th so the stock could see some profit taking on the news. I am leaving our buy-the-dip entry point at $53.50 for now with the stop loss at $49.75. Nimble investors may want to consider buying a breakout past $59 and its 50-dma should the reaction to earnings prove bullish. 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)

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


Teva Pharmaceuticals - TEVA - close: 51.04

02/12 update: Surprise, surprise! We were expecting that TEVA might see some volatility regarding the situation in Egypt. Instead the stock missed its earnings expectations and issued a warning. The stock almost hit our trigger at $50.25. TEVA is still a titan in the generic drug space and the very long-term trend is up.

I am adjusting our buy-the-dip entry point to $49.00 and moving our stop loss to $46.90 (the 2010 lows were at $47.00). If triggered we want to start small so keep your position size limited.

Buy-the-Dip trigger: $49.00 <-- new Trigger

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: 64.45

02/12 update: TIF has continued to march higher. Our trigger at $55.50 seems highly unlikely to be hit any time soon. The stock should find some support near $65 but a failure here would look like a bearish double top. I like TIF longer-term but our entry strategy needs to change. I'm going to leave it on the watch list tonight but we'll remove our trigger and reexamine things next week.

Buy-the-Dip trigger: temporarily removed.

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


UnitedHealth Group, Inc. - UNH - close: 42.38

02/12 update: UNH is still trending higher but it's losing momentum. Odds are growing this stock will see a decline soon. Shares should find support near $38.00. Currently we have a trigger to buy calls on the dip at $38.50 with a stop loss at $34.50.

Buy-the-Dip trigger: $38.50

BUY the 2012 January $40 calls (UNH1221A40)

- or -

BUY the 2013 January $45 calls (UNH1319A45)

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


United States Steel Corp. - X - close: 58.92

02/12 update: Shares of X did not make a lot of progress last week and yet given the market's advance, a pull back in X toward the $50 area seems less likely. Aggressive traders might want to consider positions on a move over the $61.50 level. X still has long-term potential but our trigger at $48.50 probably won't work. I'm going to temporarily remove our trigger point and we'll revisit X again next week.

Buy-the-Dip trigger: temporarily removed

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