Editor's Note:

Investors may want to be cautious on new entries at this time. The market looks a little vulnerable here. A few stocks currently on my radar screen are KO, MCD, and GIS. These large cap, defensive names have been showing relative strength, which says something about investor sentiment at the moment. Yet even these stocks could correct lower if the market starts to slide.

I'd keep an eye on them. We might see an entry point in these names over the next few weeks. I will add that KO and GIS don't move very fast so investors will need patience.



New Watch List Entries

DRI - Darden Restaurants

PEP - Pepsico, Inc.


Active Watch List Candidates

HSY - Hershey Co.

INTC - Intel Corp.

T - AT&T Inc.

ZMH - Zimmer Holdings


Dropped Watch List Entries

DPS has already graduated to the play list.



New Watch List Candidates:


Darden Restaurants - DRI - close: $50.31

Company Info

You might think that with gasoline prices on the rise in recent months a discretionary consumer name like DRI might see its stock price struggle. Money poured into our gas tank means less money for eating out. Yet many of the restaurant names have been performing pretty well. DRI pretty much ignored the market weakness this month. Instead shares are breaking out from a multi-month consolidation sideways. DRI is on the verge of hitting new all-time highs.

Nimble traders may want to consider buying a dip or bounce near the $48.00 level. If the right opportunity presents itself the newsletter my try and do just that. However, tonight we're listing a breakout trigger to open bullish positions when DRI closes above $51.00. That's right, I said when it closes above the $51.00 level. Normally our triggers are based on an intraday move. We'll set our stop loss at $47.40. Our long-term targets are $59.50 and $64.75.

Breakout trigger: $51.00 (a close above this level)

BUY the 2012 Jan $55 call (DRI1221A55) current ask $2.15

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BUY the 2013 Jan $55 call (DRI1319A55) current ask $4.60

Chart of DRI:

Originally listed on the Watch List: 05/14/11


Pepsico, Inc. - PEP - close: $70.56

Company Info

The stock has seen a few false starts and it's taken over a year but PEP has finally and very convincingly broken out past major resistance at the $67.00 level. The stock stalled at $67.00 back in March 2010. PEP saw a few bull traps over the months. Now investors are pouring money into large cap, defensive names and PEP has broken out to new two-year highs.

Currently the stock market's major indices look a little vulnerable to more selling pressure. If that happens we want to be ready to buy a dip in PEP. Broken resistance at $67.00 should be new support. I'm suggesting a buy-the-dip entry point at $68.00 with a stop loss at $66.40. If triggered our long-term targets are $75 and $79. Buy-the-Dip trigger: $68.00

BUY the 2012 Jan. $70 call (PEP1221A70)

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BUY the 2013 Jan. $70 call (PEP1319A70)

Chart of PEP:

Originally listed on the Watch List: 05/14/11


Active Watch List Candidates:



Hershey Co. - HSY - close: 57.34

05/14 update: HSY displayed relative strength this past week. Yet the new rally is stalling near resistance at its recent highs set in April near $58.00. If the market corrects from current levels there is a good chance HSY will finally see some profit taking. We still do not want to chase it at current levels.

I'm suggesting a buy-the-dip entry point at $53.00. If triggered at $53.00 we'll use a stop loss at $49.45. Our long-term targets are $60 and $64.

Buy-the-Dip trigger: $53.00

BUY the 2012 $55 calls (HSY1221A55)

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BUY the 2013 $55 calls (HSY1319A55)

Originally listed on the Watch List: 04/02/11


Intel Corp. - INTC - close: 23.41

05/14 update: The SOX semiconductor index spent the week consolidating sideways. Yet one of its biggest components posted another gain. INTC ended the week just under its highs from a week ago. The stock remains short-term overbought and due for a correction. I am suggesting a buy-the-dip entry point at $22.25 since broken resistance at $22.00 should be new support. More conservative traders may want to wait and see if INTC dips back toward its 50-dma before considering new bullish positions. Our long-term targets are the $26-28 zone. If triggered we'll use a stop loss at $20.75.

Buy-the-Dip trigger: $22.25

BUY the 2012 Jan. $22.50 call (INTC1221A22.5) current ask $2.26

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BUY the 2013 Jan. $22.50 call (INTC1319A22.5) current ask $3.20

Originally listed on the Watch List: 05/07/11


AT&T - T - close: 31.41

05/14 update: AT&T has moved from one sideways consolidation to another. Shares spent most of April moving sideways above prior resistance near $30. Now the stock is moving sideways above prior resistance at $31. If I was just looking at AT&T's chart I'd expect a breakout higher from the current consolidation. Yet the market's major indices look fragile so I'd rather wait and see if AT&T will retest the $30 area.

Currently we have a buy-the-dip entry point at $30.25. If triggered we'll use a stop loss at $28.45. Our long-term target is the $36-40 zone. AT&T doesn't move very fast so we will need lots of patience.

Buy-the-Dip trigger: $30.25

BUY the 2012 January $30.00 call (T1221A30)

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BUY the 2013 January $30.00 call (T1319A30)

Originally listed on the Watch List: 04/09/11


Zimmer Holdings, Inc. - ZMH - close: 68.89

05/14 update: ZMH posted another gain with the big surge higher on May 10th. This is a new two-year high for ZMH. The rally seems to have paused under round-number resistance at $70.00. We don't want to open positions here. Broken resistance in the $64-65 area should be new support. We'll move our buy-the-dip entry point from $63.00 to $64.00 and move our stop loss, if triggered, to $59.90. Our long-term targets are $78.50 and $88.50, although the high $80s might be a little optimistic.

Buy-the-Dip trigger: $63.00

BUY the 2012 Jan. $70 call (ZMH1221A70)

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BUY the 2013 Jan. $70 call (ZMH1319A70)

Originally listed on the Watch List: 04/30/11