New Watch List Entries

COH - Coach Inc.

HOT - Starwood Hotels & Resorts


Active Watch List Candidates

AXP - American Express Co

HSY - Hershey Co.

INTC - Intel Corp.

MCD - McDonald's Corp.

PEP - Pepsico

T - AT&T Inc.

ZMH - Zimmer Holdings



New Watch List Candidates:


Coach Inc. - COH - close: 63.91

Company Info

You might naturally think that with the markets worried about a possible slow down in the U.S. economy that luxury good retailers would be suffering. The exact opposite is happening. High-end companies like COH and TIF are soaring. COH tagged new all-time highs this past week and shares have been very resistant to the stock market's recent weakness.

It would seem the high-end consumer is spending again. Meanwhile technicals for COH are positive. COH spent most of May in the $58-61 zone. This area should be new support. I am suggesting we buy calls on a dip at $61.00. We'll start this trade with a stop loss at $57.40. More aggressive traders may want to give COH more room and put their stop under $55 instead.

I would keep our position size small to limit our risk. The market's correction may not be over yet and if the market accelerates lower COH will eventually succumb. Buy-the-Dip trigger: $61.00 (small positions)

BUY the 2012 Jan. $65 call (COH1221A65) current ask $5.80

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BUY the 2013 Jan. $70 call (COH1319A70) current ask $7.60

Chart of COH:

Originally listed on the Watch List: 05/28/11


Starwood Hotels & Resorts - HOT - close: 60.48

Company Info

HOT is another surprise. If investors are so worried about a slow down in the economy then why isn't HOT showing more weakness? The stock's simple 200-dma has been technical support for months. Shares of HOT have spent most of the last three months consolidating sideways and now the stock looks ready to rally again. Aggressive traders may want to buy calls now with this past week's rally past $60.00 and its 100-dma.

I see some resistance in the $61.50 area so I am suggesting that we wait for a close over $62.00 to launch positions. Normally our triggers are intraday but this time I'm suggesting we wait for HOT to close above this level. If triggered we'll use a stop loss at $57.00. The $65.00 level remains overhead resistance but I'm setting our long-term target at $74.75. Currently the point and figure chart is bullish with a $72 target.

Breakout trigger: CLOSE above $62.00

BUY the 2012 Jan $65 call (HOT1221A65) current ask $4.20

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BUY the 2013 Jan $70 call (HOT1319A70) current ask $6.65

Chart of HOT:

Originally listed on the Watch List: 05/28/11


Active Watch List Candidates:



American Express Co. - AXP - close: 51.13

05/28 update: Financial stocks produced a nice bounce on Friday but bigger picture the group continues to look bearish. The banking indices have a significant pattern of lower highs and lower lows. Friday's move doesn't change that. AXP happens to buck this trend. The stock is trending higher. However, we don't want to chase it with the market's major indices looking vulnerable.

Our plan is to buy calls on AXP when the stock corrects. The $48-47 area should be significant support. I am suggesting a buy-the-dip entry point at $47.50. If triggered we'll set our stop loss at $43.90, under the 200-dma. Our long-term targets are $55 and $65. Buy-the-Dip trigger: $47.50

BUY the 2012 Jan $50 call (AXP1221A50)

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BUY the 2013 Jan $50 call (AXP1319A50)

Originally listed on the Watch List: 05/21/11


Hershey Co. - HSY - close: 55.02

05/28 update: We have been waiting for HSY to correct. The stock dipped to $53.77 on Thursday morning before bouncing. Unfortunately that's not low enough. We've been hoping for a dip to $53.00. More aggressive traders may want to consider new positions now. I'm still worried about the market's major indices. Since the market's correction may not be over yet we'll stick to our entry point at $53.00. More conservative traders could step back and wait to see if HSY can correct toward the $51-50 area and its 200-dma.

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: 22.21

05/28 update: Yuck! It was an ugly week for shares of INTC. Shares are down five out of the last six session and INTC is quickly approaching what should be significant support at the $22.00 level. Odds are really good that INTC will hit our trigger to buy calls at $22.00 this week. More conservative traders may want to wait. INTC could see a drop toward its 50-dma near $21.60 or its 100-dma near $21.45 instead. Readers could choose to wait and buy a bounce instead of trying to catch the falling knife.

The newsletter will stick to our plan with a trigger at $22.00 since our time frame is several months but you the reader can be much more nimble than our newsletter so consider waiting before initiating new positions. Our long-term targets are the $26-28 zone. If triggered we'll use a stop loss at $20.45.

Buy-the-Dip trigger: $22.00

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

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

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


McDonald's Corp. - MCD - close: 81.62

05/28 update: After a two and a half month rally MCD's rally has finally stalled. It looks like it's time for a correction. More aggressive traders may want to buy calls on a dip near $80.00 since as prior resistance it should offer some support. I'm expecting MCD to correct a bit lower than that. Our plan is to buy calls at $78.50. If triggered we'll use a stop loss at $75.75, under the simple 200-dma. Our long-term targets are $89 and $99. The P&F chart is suggesting a $113 target. Buy-the-Dip trigger: $78.50

BUY the 2012 Jan $80 call (MCD1221A80)

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BUY the 2013 Jan $85 call (MCD1319A85)

Originally listed on the Watch List: 05/21/11


Pepsico, Inc. - PEP - close: $70.40

05/28 update: The move in PEP is similar to the rally in MCD. After several weeks of gains the stock has started to see some profit taking. I am suggesting a buy-the-dip entry point at $68.00. If triggered we'll use a stop loss at $66.40 and use targets at $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)

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


AT&T - T - close: 31.29

05/28 update: AT&T has spent the month of May consolidating sideways above support near $31.00. The stock does have a bearish three-week trend of lower highs but the larger trend is bullish. Even if AT&T broke down from its current consolidation the stock should find support near $30.00. I am considering a higher entry point for this trade. However, since I'm still concerned about the market's major averages we'll wait and leave things the way they are. If the stock market continues to slip then AT&T could see a decline toward its 100 or 200-dma although it could take several weeks to occur.

If triggered at $29.25 our stop will be $27.90. 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: $29.25

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: 68.18

05/28 update: ZMH managed to find some support near $66.50 last week. The stock actually posted a gain for the week with the bounce on Thursday and Friday. On a short-term basis ZMH looks poised to rise. Yet I don't want to chase it here for our long-term trade. Given the cloudy outlook for the market in June I'd rather wait and see if ZMH can retreat toward the $65-64 area. We will leave our trigger to buy calls at $64.00. If triggered we'll use a stop loss at $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: $64.00

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