Editor's Note:

I am trimming a few candidates from our watch list tonight while adding a couple of new ones. Plus, I want to share what is on my radar screen although these may not all have LEAPS options.

On my radar screen: PVH, ENR, VAR, PEGA, LYV.

- James



New Watch List Entries

EXXI - Energy XXI Ltd

WNR - Western Refining


Active Watch List Candidates

AXP - American Express Co

HSY - Hershey Co.

JJC - iPath Copper ETF

MCD - McDonald's Corp.

PEP - Pepsico

WLP - Wellpoint Inc.


Dropped Watch List Entries

AGN, BCR, and AT&T have been removed.



New Watch List Candidates:


Energy XXI Ltd. - EXXI - close: 34.72

Company Info

EXXI has been very active buying up leases from other firms. EXXI and McMoran have both been very successful with some recent joint ventures and production for the two companies is increasing rapidly. The stock is certainly up significantly over the last two years but shares are still undervalued and EXXI is a takeover target.

Aggressive traders may want to buy calls now. On the weekly chart it looks like EXXI is forming a huge bull-flag pattern. I am suggesting we buy calls on a dpi at $32.25. Essentially I'm looking for the stock to fill the gap from late June. More conservative traders could wait for a close over resistance at $37.00 instead.

If we are triggered at $32.25 I'm suggesting a stop loss at $27.75, under the June low. Our long-term targets are $39.50 and $44.50.

Buy-the-Dip trigger: $32.25

BUY the 2011 Jan $35 call (EXXI1221A35) current ask $4.80

- or -

You could try and buy 2013 calls but the spreads are VERY wide. Consider placing a limit order inside the spread. I would try the 2013 $40 calls.

Chart of EXXI:

Originally listed on the Watch List: 07/09/11


Western Refining Inc. - WNR - close: 20.61

Company Info

WNR is a midcontinent refiner that can take advantage of buying oil at WTI prices while the competition is forced to pay the higher Brent oil prices. Currently the spread between WTI and Brent oil futures is about $20, which is a HUGE difference. I am a little surprised that WNR is not trading higher but shares have seen a significant move already off its June lows. Friday saw WNR breakout to new multi-year highs thanks to some short covering. WNR happens to have very high short interest so the short squeeze could be really big. Yet I don't want to chase a +5% move.

I'm crossing my fingers WNR sees some profit taking so we can hop on board. I am suggesting a buy-the-dip entry point at $19.00. More conservative traders could hope for a dip closer to $18.00 instead. If we are triggered at $19.00 I'll start this trade with a stop loss at $17.25. Our long-term targets are $24.75 and $29.50. More aggressive traders could aim higher. FYI: The Point & Figure chart is bullish with a $28.50 target.

Buy-the-Dip trigger: $19.00

BUY the 2012 Jan $20 call (WNR1221A20) current ask $3.60

- or -

BUY the 2013 Jan $20 call (WNR1319A20) current ask $5.90

Chart of WNR:

Originally listed on the Watch List: 07/09/11


Active Watch List Candidates:



Allergan Inc. - AGN - close: 84.85

07/09 update: AGN delivered a gain for the week but shares essentially churned sideways. The action on Thursday could be seen as a failed rally/reversal near its May highs. Thus AGN is at risk of forming a bearish double top. Thus I am not inclined to chase it here. I would be tempted to buy calls on a dip or a bounce near the 50-dma or the 100-dma but until we get through earnings season or until AGN gets past the threat of a double top I will remain cautious. I am actually going to remove AGN from our watch list. I am still long-term bullish on the stock but I do not see an entry point for buying LEAPS any time soon.

Our trade never opened.

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


American Express Co. - AXP - close: 53.07

07/09 update: AXP has managed to extend its gains and set new multi-year highs. Earnings are coming up in less than two weeks (July 20th). Therefore I want to be patient and keep our entry point at $50.00. There is a chance that AXP will see a post-earnings dip and hit our entry point. More conservative trades could set their entry point closer to $48.00 and the 100-dma instead.

If we are triggered at $50.00 we'll start with a stop loss at $45.75. Our targets are $59.00 and $64.00.

Buy-the-Dip trigger: $50.00

BUY the 2012 Jan $55 call (AXP1221A55)

- or -

BUY the 2013 Jan $55 call (AXP1319A55)

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


C.R.Bard Inc. - BCR - close: 112.82 change: -0.50

07/09 update: I have the same concerns with BCR that I have with AGN. The stock looks bullish and the long-term trend is up. Yet currently shares could be forming a bearish double top. Our current buy-the-dip entry point is way too low. Yet I don't see a potential LEAPS entry point any time soon. Aggressive traders might want to consider buying a dip or a bounce near the 50-dma (near $110). I am actually removing BCR from the watch list. Earnings are coming up in a couple of weeks. Maybe we will see an entry point on a post-earnings sell-off in BCR.

Our play never opened.

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


Hershey Co. - HSY - close: 57.78

07/09 update: We have been waiting for an entry point in HSY for a long time. Right now our buy-the-dip entry point near support at $52.00 seems way too low. Earnings are coming up in about 15 days so I'm willing to wait and see if there is any correction following the earnings results. Then we'll re-evaluate. We certainly do not want to buy HSY here with shares at resistance near $58.00.

Prior Comments:
Currently our plan is to buy call LEAPS on a dip at $52.25. If triggered we'll use a stop loss at $48.75. Our long-term targets are $60 and $64.

Buy-the-Dip trigger: $52.25

BUY the 2012 $55 calls (HSY1221A55)

- or -

BUY the 2013 $55 calls (HSY1319A55)

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


iPath Copper ETF - JJC - close: 57.79

07/09 update: It was a choppy week for the U.S. dollar but copper extended its rally significantly. The metal and the JJC ETF are still short-term overbought. We do not want to chase it. We will adjust our buy-the-dip entry point to $56.00 with a stop loss at $52.75. Our first target is $61.75. Our second, more aggressive target is $64.00.

I want to reiterate some of my concerns. Technically the 50-dma just crossed under the 200-dma a few days ago. Normally this is a very bearish development. Second, the options on JJC do not have a lot of volume or open interest. Option prices could be very volatile and the spreads could get wider on us, putting us at a disadvantage. Third, JJC does not (yet) have LEAPS so we'll have to use the December calls. Fourth, this equity is going to be very sensitive to the movement in the dollar. Finally, this ETF is going gap open, up or down, almost every day as it reacts to the price of copper futures. Therefore we want to keep our position size pretty small to limit our risk.

Buy-the-Dip trigger: $56.00 (small positions only!)

BUY the 2011 Dec. $60 call (JJC1117L60) current ask $2.90

Originally listed on the Watch List: 07/02/11


McDonald's Corp. - MCD - close: 85.60

07/09 update: MCD has extended its gains to challenge the $86.00 level. I do not see any changes from my prior comments. Broken resistance near $83.00 should be new support. We have a trigger to buy calls at $83.25. If MCD pulls back and hits our trigger at $83.25 we'll use a stop loss at $79.40. More aggressive traders could place their stop under the 200-dma instead. Our profit targets are $92.50 and $99.50.

Buy-the-Dip trigger: $83.25

BUY the 2012 Jan $85 call (MCD1221A85)

- or -

BUY the 2013 Jan $90 call (MCD1319A90)

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


Pepsico, Inc. - PEP - close: $69.93

07/09 update: Earnings for PEP are coming up on July 21st. I am reluctant to change our entry point strategy until after we see the market's reaction to PEP's results. Currently our buy-the-dip trigger is at $67.50. If we do get triggered at $67.50, we'll use a stop loss at $64.75. Our targets are $75 and $79.

Buy-the-Dip trigger: $67.50

BUY the 2012 Jan. $70 call (PEP1221A70)

- or -

BUY the 2013 Jan. $70 call (PEP1319A70)

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


AT&T - T - close: 31.14

07/09 update: AT&T offers long-term potential but shares are just moving too slowly. I am removing AT&T as a candidate. The stock never hit our entry point.

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


Wellpoint Inc - WLP - close: 78.00

07/09 update: It looks like WLP is starting to correct lower. Shares are flirting with a breakdown under its 50-dma right now. I am going to leave our buy-the-dip entry point at $70.50 for now. I realize that's pretty low but the $70 level should be significant support. If the market or WLP corrects that is where we want to buy it. WLP is due to report earnings on July 27th.

Prior Comments:
I am suggesting a buy-the-dip trigger at $70.50 with a stop loss at $64.75. If we do get triggered we want to keep our position size small to limit our risk.

Buy-the-Dip trigger: $70.50

BUY the 2012 Jan. $75 call (WLP1221A75)

- or -

BUY the 2013 Jan. $80 call (WLP1319A80)

Originally listed on the Watch List: 06/25/11