New Watch List Entries

AGN - Allergan Inc.

V - Visa


Active Watch List Candidates

AXP - American Express Co

HOT - Starwood Hotels & Resorts

HSY - Hershey Co.

MCD - McDonald's Corp.

PEP - Pepsico

T - AT&T Inc.

ZMH - Zimmer Holdings


Dropped Watch List Entries

COH and INTC have graduated to the play list.



New Watch List Candidates:


Allergan Inc. - AGN - close: 79.82

Company Info

Drug stocks have been a strong sector in the market since the March 2011 lows. The DRG drug index rallied to new two and a half year highs. Not that rally has stalled and the group appears to be correcting. A correction would be normal after such a run up. AGN has a similar pattern. The stock peaked in mid May and is now starting to breakdown through support. Prior resistance at $75.00 should be more significant support.

I am suggesting we buy call LEAPS on a dip near $75.00 (trigger @ 75.50) since a pull back to this level would not break the current up trend in AGN's long-term pattern. If triggered we'll use a stop loss at $71.40, which is under the 200-dma. Our long-term targets are $85 and $97.50. Buy-the-Dip trigger: $75.50

BUY the 2012 Jan $80 call (AGN1221A80)

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BUY the 2013 Jan $85 call (AGN1319A85)

Chart of AGN:

Originally listed on the Watch List: 06/04/11


Visa Inc. - V - close: 79.13

Company Info

Visa has been somewhat resistant to the market's five-week decline. Shares did see a sell-off around May 20th but traders bought the dip at Visa's rising 50-dma. The stock is only a couple of points from its 2011 highs. Long-term the trend of consumers moving away from cash and increasingly to plastic is not going to change.

I am suggesting we wait for Visa to close over $82.50 and then launch bullish positions. Normally our triggers are based on an intraday move but I want to see a close over this level. Currently the P&F chart is bullish with a $93 target. If we are triggered then I'm setting our target at $99.00.

Breakout trigger: wait for a close over $82.50

BUY the 2012 $85 call (V1221A85)

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BUY the 2013 $90 call (V1319A90)

Chart of V:

Originally listed on the Watch List: 06/04/11


Active Watch List Candidates:



American Express Co. - AXP - close: 49.28

06/04 update: AXP has started to correct. You could argue that shares have produced a bearish double top with the two failed rallies under $52.00. I'm expecting the correction to continue but the larger trend is still bullish. Please note that we are adjusting our buy-the-dip entry point to $47.00 (from 47.50). More conservative traders may just want to wait and see where AXP is trading at the end of June since many analysts have turned short-term bearish on the market. We may end up seeing a better entry point in the $45-44 area near its 200-dma. If triggered at $47.00 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: $47.00

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


Starwood Hotels & Resorts - HOT - close: 58.03

06/04 update: There is no change from my previous comments on HOT. The stock is still churning sideways in the $56-62 area. We are waiting for HOT to close over the $62.00 level before we launch new bullish positions. More nimble traders may want to consider buying a bounce from support near $56.00 instead although I'd use a very tight stop loss if you do.

Earlier Comments:
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 $58.00. 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)

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BUY the 2013 Jan $70 call (HOT1319A70)

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


Hershey Co. - HSY - close: 55.02

06/04 update: The correction in HSY continues. The stock's oversold bounce failed at resistance near $56 and its 50-dma. I am now expecting a pull back toward prior resistance and what should be support near $52.00. Therefore we will adjust our buy-the-dip trigger to $52.25 and move our stop loss to $48.75. That puts our stop under $50.00 and its 200-dma. Our long-term targets are $60 and $64.

Buy-the-Dip trigger: $52.25

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


McDonald's Corp. - MCD - close: 80.54

06/04 update: Just as we expected the pull back in MCD has dipped to support near $80.00. I am looking for the correction to continue and we're using a buy-the-dip entry point at $78.50. Cautious traders might want to consider waiting for a dip near the simple 200-dma instead. 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: $68.97

06/04 update: There are no surprises here. PEP has begun to correct lower. The $68-66 area should offer significant support. Please note that I am adjusting our buy-the-dip entry point to $67.00. More aggressive traders could still buy a dip at $68.00 and cautious traders could wait for a dip closer to $66 and its 200-dma instead. If we are triggered at $67.00 we'll use a stop loss at $64.75. Our targets are $75 and $79. Buy-the-Dip trigger: $67.00 <-- updated

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: 30.65

06/04 update: AT&T has broken support at $31 and its 50-dma. The stock should be headed for the $30.00 level soon. I am suggesting we wait for a dip closer to $29 and its 200-dma. We have a buy-the-dip entry point at $29.25.

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: 65.82

06/04 update: ZMH has pulled back toward support near $65.00. If the market continues to slip I do not think this level will hold. I am suggesting we move our buy-the-dip trigger to $63.00. This would be a -10% pull back from its highs near $70 and we'll adjust our stop loss to $58.90. 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 <-- adjusted

BUY the 2012 Jan. $65 call (ZMH1221A65) <-- adjusted

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BUY the 2013 Jan. $70 call (ZMH1319A70)

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