Editor's Note:

The stock market continues to hit new relative highs. Eventually the market will see a normal, healthy correction but when it shows up it could be a sharp and scary looking decline. Until the correction appears the trend is up and we will make adjustments to our entry point strategies on the watch list below.

In addition to tonight's new watch list candidates I want to point out a few more stocks on my radar screen. Fedex Corp (FDX) recently warned but the news has not slowed down the rally in its stock price. Shares of FDX look poised to challenge resistance near $100 soon. I'm not suggesting positions now but keep an eye on the $100-95 zone.

SCHN, a steel company, looks like a tempting trade. The stock is bouncing from support near $60 and is currently testing resistance near $65.

The SOX semiconductor index has been in rally mode for months. What is impressive is that the chip stocks have been rallying without much help from Intel (INTC). Now shares of INTC are breaking out over resistance near $22. I'm not suggesting new positions in INTC but if you look at a multi-year chart a breakout past the $23 area could signal a very significant change in trend and might be an entry point.

Boeing Co. (BA) could be a strong candidate. I was very close to listing it as a new play tonight with the suggestion that investors merely start with small positions and slowly add to them on dips or breakouts. BA has been consolidating sideways for months and bigger picture it looks ready to rally past its early 2010 highs. Short-term I would be very tempted to buy calls on a dip near the 50 or 100-dma. Alternatively we could wait for a close over potential resistance near the $76.00 mark. The $90.00 level will probably be a significant hurdle but my long-term target would be the $100-105 area.


New Watch List Entries

C - Citigroup, Inc.

GT - Goodyear Tire


Active Watch List Candidates

AKS - AK Steel holding

ATI - Allegheny Tech.

BEAV - BE Aerospace Inc.

BWA - BorgWarner Inc.

CACI - CACI International

CMP - Compass Minerals

Costco Wholesale - COST

EAT - Brinker International

FSLR - First Solar, Inc.

HSIC - Henry Schein Inc

JRCC - James River Coal Co.

MAT - Mattel Inc.

MON - Monsanto Co.

NFX - Newfield Exploration

Teva Pharmaceuticals - TEVA

UNH - UnitedHealth Group, Inc


Dropped Watch List Entries

ORLY, TIF, and X were removed.


New Watch List Candidates:

Citigroup, Inc. - C - close: 4.91

Company Info

Big picture the trend for the banks is improving. Credit quality for their loan portfolio is improving. Delinquencies are inching lower. There is still risk with high unemployment and a lack of improvement in the residential housing market but overall the banks appear to be doing okay. Looking ahead one year and two years down the road, we have to ask ourselves, "will Citigroup be trading higher or lower from here?"

I strongly suspect that Citigroup could be trading significantly higher so we will want to start building a position when we get the opportunity. On a very short-term basis Citigroup looks poised to breakout from a five-week trading range but I don't want to buy it short-term. We want a long-term entry point. The $5.00-5.15 zone is not only major resistance on the daily charts it is also major resistance on the point-and-figure chart. I would consider launching bullish positions if Citigroup (C) can close over $5.20. In the meantime there is always a chance of some unexpected market decline pushing the banking stocks lower. Citigroup has a long-term trendline of support that should help the stock in the $4.50 area. Therefore, I will list Citigroup with a buy-the-dip trigger at $4.60 but we'll readjust our strategy if we see a close over $5.20.

Right now I do not have a time frame for either entry point to be triggered. It could be weeks from now but I wanted to get you thinking about possible positions. Shares of Citigroup are so cheap that I'm listing buying the stock as an alternative to buying call LEAPS. It's up to you if you want a stock that doesn't expire or call LEAPS that do. Obviously the calls offer more reward for their risk. You could always start small and build a position slowly after the play has been opened.

Buy-the-Dip trigger: $4.60 (alternative entry: close over $5.20)

BUY shares of Citigroup (C) stock (stop loss @ 4.19)

- or -

BUY the 2012 January $5.00 call (C1221A5)

- or -

BUY the 2013 January $5.00 call (C1319A5)

Chart of C:

Originally listed on the Watch List: 02/19/11


Goodyear Tire - GT - close: 14.89

Company Info

Vehicle sales are improving here in the U.S. but they're soaring overseas in emerging markets like China and India. That should bode well for Goodyear. Keep in mind that GT does face one major challenge. Rising commodity costs could be a growing hurdle. Management already expects commodity costs to rise 25% in 2011.

The stock has broken the bearish down trend but shares of GT are short-term overbought. I am suggesting we wait for a dip and use a trigger at $13.50 to enter positions. If triggered we'll use a stop loss at $11.75. Our long-term target is $18.50.

Buy-the-Dip trigger: $13.50

BUY the 2012 January $15.00 call (GT1221A15)

- or -

BUY the 2013 January $15.00 call (GT1319A15)

Chart of GT:

Originally listed on the Watch List: 02/19/11


Active Watch List Candidates:


AK Steel Holding - AKS - close: 17.20

02/19 update: AKS is breaking out and shares just rallied past resistance near $17.00 this past week. It's time for us to adjust our entry point strategy on this stock. Aggressive traders may want to consider new positions now with the stock near $17.00. I am raising our buy-the-dip entry point to $16.10. We'll raise the stop loss to $13.90. If AKS hit our trigger at $16.10 we only want to open small bullish positions (either one half or one quarter your normal trade size) to limit our risk. Our long-term target is the $25.00 area.

Buy-the-Dip trigger: $16.10 <-- new trigger and strikes.

BUY the 2012 January $20.00 calls (AKS1221A20)

- or -

BUY the 2013 January $20.00 calls (AKS1319A20)

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


Alleghney Technology - ATI - close: 68.52

02/19 update: There is no change from my prior comments on ATI. The trend is up but $70 is overhead resistance. 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: 36.76

02/19 update: We have been looking for BEAV to correct lower. The stock's long-term trendline of higher lows should meet up near the 200-dma. I am suggesting a trigger to open positions at $34.00 with a stop loss at $29.90. More conservative traders may want to use a stop closer to $32.00 instead. (July options are still the longest available)

Buy-the-Dip trigger: $34.00

BUY the 2011 July $35.00 calls (BEAV1116G35)

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


BorgWarner Inc. - BWA - close: 80.23

02/19 update: The rally in BWA continues with another new high. It looks like momentum has stalled with the stock near $80 but that could be a reflection of February option expiration. I am moving our buy-the-dip entry point to $74.00 and moving our stop loss to $69.75. However, if BWA hits our trigger at $74.00 we want to use very small positions. This would be a higher-risk entry point. BWA doesn't have LEAPS so we'll have to settle for July calls.

Buy-the-Dip trigger: $74.00 <-- new trigger & strikes

BUY the 2011 July $80 calls (BWA1116G80)

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


CACI International - CACI - close: 58.78

02/19 update: There is no change from my prior comments on CACI. 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)

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


Compass Minerals - CMP - close: 95.07

02/19 update: Looking at the weekly chart the action this past week in CMP looks like a top. I am still expecting a correction toward the $90 area. 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

BUY the 2011 September $100 calls (CMP1117I100)

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


Costco Wholesale - COST - close: 75.43

02/19 update: Potential entry point alert! COST has been consolidating sideways in the $74-75 zone for two weeks. The $75.00 level has been resistance for years. This Friday COST actually closed at new all-time highs. Aggressive traders may want to buy calls on this breakout. I am not quite ready to pull the trigger yet but I'm not ready to remove COST from the watch list. Let's see what happens over the next two weeks. My biggest concern is COST's earnings report due out on March 2nd. I want to see the results and investor reaction to the news.

Trigger to enter positions: temporarily removed.

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


Brinker International - EAT - close: 24.16

02/19 update: There is no change from my prior comments on EAT. 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)

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


First Solar, Inc. - FSLR - close: 168.22

02/19 update: Nothing has changed for us with FSLR. The stock actually rallied to another new 52-week high but the action on Friday looks like a bearish reversal candlestick pattern. Instead of FSLR reporting earnings on Feb. 17th the report date has been moved to Feb. 24th. FSLR will announce earnings after the closing bell this coming Thursday. I suspect that FSLR could see a post-earnings drop. 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)

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


Henry Schein Inc. - HSIC - close: 69.85

02/19 update: HSIC is up seven weeks in a row and we don't want to chase it. I suspect the stock could see some profit taking after the earnings report. The company is due to announce on Feb. 22nd. At the moment our plan is to buy a dip at $63.50, although we might want to move that trigger closer to the $65 level. If triggered our stop is at $59.40. HSIC doesn't have LEAPS so we'll have to settle for July calls.

Buy-the-Dip trigger: $63.50

BUY the 2011 July $65 call (HSIC1116G65)

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


James River Coal Co. - JRCC - close: 21.18

02/19 update: Coal stocks have been a mixed bag lately. More aggressive traders may want to buy a dip in JRCC near $20.00. Right now the 200-dma has risen to the $19 level. I will up our buy-the-dip trigger to $19.25 and raise our stop loss to $17.25. 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: $19.25 <-- new Trigger

BUY the 2011 September $20 calls (JRCC1117I20)

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


Monsanto Co. - MON - close: 72.39

02/19 update: The action this past week in MON suggests the stock is poised to correct lower. I'm willing to wait and see. However, I will raise our buy-the-dip trigger to $65.50 and leave the stop loss at $59.75.

Buy-the-Dip trigger: $65.50 <-- new Trigger

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: 68.53

02/19 update: NFX reported earnings last week and missed by nine cents. The stock spiked lower on Thursday following the news. I am looking for a correction toward $60 and its 200-dma. Our buy-the-dip entry point is at $60.50 for now. 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: 55.25

02/19 update: Yuck! What's going on with ORLY? First shares gap higher on its earnings numbers. Then they gap lower on guidance. The low on Friday was $54.72. The $54.00 level and the 200-dma should offer some support but I'm not so sure we want to buy calls at the moment. I am removing ORLY from the watch list tonight since our trade has not been triggered. I'll keep it on my radar screen for a while and let the dust settle for a week or two. FYI: The long-term up trend of higher lows should lie in the $52-51 area for ORLY. Watch that area. Draw a trendline from the October 2008 lows.

Conditions may have changed following earnings. ORLY has been removed.

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


Teva Pharmaceuticals - TEVA - close: 51.04

02/19 update: TEVA spent the week consolidating sideways. There is no change from my prior comments. Currently we have a buy-the-dip trigger at $49.00 with a stop loss at $46.90. If triggered we want to keep our position size small to limit our risk.

Buy-the-Dip trigger: $49.00

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: 64.70

02/19 update: TIF is hovering near its all-time highs and resistance at the $65.00 level. A failure here might be a bearish double top. We do not want to launch bullish positions at this time but I would keep it on your radar screen. I am removing it from the watch list for now.

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


UnitedHealth Group, Inc. - UNH - close: 42.84

02/19 update: UNH has been consolidating sideways for two weeks. I don't see a lot of changes from my prior comments except a new stop. We want to wait for a dip at $38.50 with a stop loss at $35.75.

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: 61.86

02/19 update: It was a bullish week for X. The stock was upgraded by Goldman Sachs and steel stocks in general we're showing strength. Yet X has resistance in the $67-70 zone so we don't want to launch long-term positions right here. I think X offers potential but I am temporarily removing it from the watch list. Keep this stock on your radar screen.

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