Editor's Note:

The U.S. stock market is on the edge of a cliff. The major indices are teetering at key support levels. If the market breaks down it could begin a multi-week correction lower. If that happens we'll be looking at more buy-the-dip (correction) type of strategies. This could be a pivotal week for the market. Let's step back and see what happens. No new watch list candidates tonight.


New Watch List Entries

None, no new watch list candidates


Active Watch List Candidates

CACI - CACI International

Costco Wholesale - COST

HSIC - Henry Schein Inc

JRCC - James River Coal Co.

KEY - KeyCorp

MON - Monsanto Co.

SMG - Scott's Miracle Gro


Dropped Watch List Entries

ATI and TEVA graduated to the play list. LDK was removed.

Active Watch List Candidates:


CACI International - CACI - close: 58.26

03/12 update: CACI has continued to fail near resistance at $60.00 and shares appear to be correcting lower. Right now we have a buy-the-dip entry point at $56.50 with a stop loss at $52.45. 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: $56.50

BUY the 2011 September $60 calls (CACI1117I60)

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


Costco Wholesale - COST - close: 72.55

03/12 update: COST is in no man's land between resistance in the $75-76 zone and support near $70 (or lower). I am suggesting a new trigger to buy a breakout higher. We'll set our entry point to buy calls at $76.00. The all-time high is just under $75.50. If triggered we'll start with a stop at $69.95.

Buy-the-breakout trigger: $76.00

BUY the 2012 January $80 calls (COST1221A80)

- or -

BUY the 2013 January $85 calls (COST1319A85)

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


Henry Schein Inc. - HSIC - close: 67.49

03/12 update: HSIC appears to be correcting lower. If the stock can dip toward the $65-64 zone then we might reconsider buying calls on the dip. Otherwise we'll keep our breakout trigger at $70.55. If triggered we'll use a stop loss at $65.75. Our upside target is $79.75. I am suggesting the July calls (not the Octobers).

Prior Comments:
Please note this is an aggressive strategy for us and the option spreads are a little wide. Thus we want to keep our position size VERY small to really limit our risk but still participate if HSIC does breakout.

- Very Small Positions -

Buy-the-breakout trigger: $70.55

BUY the 2011 Jul $75 call (HSIC1116G75)

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


James River Coal Co. - JRCC - close: 20.50

03/12 update: It was a very volatile week for JRCC. The company reported earnings on Monday morning. The stock went from $20 to tag $24 by Tuesday intraday. Yet JRCC gave back all of its gains. Currently we have a buy-the-dip entry point at $19.25 (near the 200-dma) but if JRCC does hit our trigger we want to keep our position size pretty small to really limit our risk. We'll use a stop at $17.25. JRCC doesn't have LEAPS so we'll have to settle for 2011 September calls.

Buy-the-Dip trigger: $19.25

BUY the 2011 September $20 calls (JRCC1117I20)

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


KeyCorp - KEY - close: 9.08

03/12 update: We are waiting for a correction toward the $8.50 area. I am suggesting we launch bullish positions on a dip at $8.60. Alternatively we can look for a breakout and close above round-number resistance at $10.00 as an entry point.

If we are triggered at $8.60 we want to use a stop loss at $7.85. Buy-the-Dip trigger: $8.60

BUY the 2012 January $10.00 call (KEY1221A10)

- or -

BUY the 2013 January $10.00 call (KEY1319A10)

Originally listed on the Watch List: 02/26/11


LDK Solar Co. Ltd. - LDK - close: 10.64

03/12 update: Solar energy stocks have just gotten hammered lately. LDK is plunging lower. The stock is nearing potential support at the $10.00 level (and its 200-dma near $9.60). Aggressive traders may want to buy calls on a dip near $10.00. Our breakout trigger at $15.55 may not get hit for a long time so I am dropping LDK as a candidate.

We are removing LDK as a candidate.

Originally listed on the Watch List: 02/26/11


Monsanto Co. - MON - close: 67.51

03/12 update: MON saw some pretty strong profit taking this past week. On Friday the stock gapped open lower at $65.62 before bouncing higher. I don't see any changes from my prior comments. Currently I'm suggesting a trigger to buy call LEAPS at $65.50. Readers could wait and see if shares dip toward $64.00 instead and use that as an entry point. If we are triggered at $65.50 I am suggesting a stop loss at $59.90 and we want to keep our position size small to limit our risk.

Buy-the-Dip trigger: $65.50 (SMALL POSITIONS)

BUY the 2012 January $70 calls (MON1221A70)

- or -

BUY the 2013 January $75 calls (MON1319A75)

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


Scotts Miracle Grow Co. - SMG - close: 55.91

03/12 update: SMG continues to hold up well. The stock managed to hit new relative highs last week. There is no change from my prior comments. The old 2007 high is $57.45. I am suggesting we wait for a breakout to a new all-time high. Let's use a trigger at $58.00 to open small bullish positions. If triggered at $58.00 we'll use a stop at $53.75. Nimble traders could look for an alternative entry point on a dip near the bullish trendline of higher lows (currently a dip near $53.00 would suffice). We want to keep our position size small to limit our risk. SMG doesn't have LEAPS so we'll have to buy September calls.

Breakout trigger: $58.00

BUY the September $60 calls (SMG1117I60) current ask $2.25

Originally listed on the Watch List: 03/05/11