Editor's Note:

In addition to the new watch list candidates tonight, here is a list of stocks currently on my radar screen: DRI, SLB, HAL, MCD, VAR, ENR, VMW, and PVH. They don't all have LEAPS but they might offer some longer-term option trades. Consider putting them on your watch list and look for the right entry point.

- James



New Watch List Entries

EMC - EMC Corp

MMR - McMoRan Exploration


Active Watch List Candidates

AXP - American Express Co

HSY - Hershey Co.

EXXI - Energy XXI Ltd

WLP - Wellpoint Inc.

WNR - Western Refining


Dropped Watch List Entries

JJC and MCD have been removed. PEP made it to the play list.



New Watch List Candidates:


EMC Corp. - EMC - close: 27.76

Company Info

EMC is a major player in information storage and given the move toward the "cloud" for both computing and storage it should mean strong business for EMC. The long-term up trend has stalled over the last few months but EMC is only a couple of points from new ten-year highs. A breakout from this consolidation could herald the next leg higher.

I am suggesting we buy call LEAPS when EMC closes at $28.70 or higher. If triggered we'll set our initial stop loss at $26.40. Our long-term targets are $34 and $39.

Trigger: buy on a close above $28.70

BUY the 2012 Jan $30 call (EMC1221A30)

- or -

BUY the 2013 Jan $30 call (EMC1319A30)

Chart of EMC:

Originally listed on the Watch List: 07/23/11


McMoRan Exploration Co. - MMR - close: 18.06

Company Info

MMR is poised for significant growth over the next couple of years. This company, along with EXXI (another LEAPS candidate), are reopening and re-drilling old oil wells and leases in the Gulf of Mexico that larger firms have given up on. The latest tests show that MMR has found some very significant oil and gas reserves.

Aggressive traders may want to go ahead and buy calls now. Over the last several months MMR has been trading under resistance in the $19.00 area. I am suggesting we buy calls when MMR closes above $19.25. When this occurs we'll start the play with a wide stop loss at $17.30. Should MMR retreat then we might reconsider and buy calls on a bounce near $16.50 instead.

Launch positions on a close above $19.25

BUY the 2012 Feb $20 call (MMR1218B20) -Februarys-

- or -

BUY the 2013 Jan $20 call (MMR1319A20)

Chart of MMR:

Originally listed on the Watch List: 07/23/11


Active Watch List Candidates:



American Express Co. - AXP - close: 52.24

07/23 update: AXP delivered a great earnings report on July 20th. Results were 11 cents better than expected at $1.07 a share. AXP said their high-end clientele pushed spending to new highs and borrowing rose as well. It was a bullish report. Yet the stock could not get past resistance near the $53.00 level.

The long-term trend is up but I'm expecting a correction. We will adjust our buy-the-dip entry point down to $49.00 (hopefully inline with the rising 100-dma). We'll move our stop loss to $45.95. Our long-term targets are $59 and $64.

Buy-the-Dip trigger: $49.00

BUY the 2012 Jan $55 call (AXP1221A55)

- or -

BUY the 2013 Jan $55 call (AXP1319A55)

Chart of AXP:

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


Energy XXI Ltd. - EXXI - close: 34.89

07/23 update: Little has changed for EXXI. The stock is still building a bullish trend of higher lows. Aggressive traders may want to buy calls now or on a move over $35.50. I am hoping we get a better entry point on a dip back to $32.50 (previously $32.25). A dip to the 200-dma would be even more exciting. Alternatively we could always go long on a close over resistance at $37.00 instead.

If we are triggered at $32.50 I'm suggesting a stop loss at $27.75, under the June low. Or you could choose an alternative stop closer to the 200-dma instead. Our long-term targets are $44.00 and $49.50.

Buy-the-Dip trigger: $32.50

BUY the 2012 Jan $40 call (EXXI1221A40) - new strike

- or -

buy the 2012 Jan $40 call (EXXI1319A40) - new strike

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


Hershey Co. - HSY - close: 58.93

07/23 update: Friday was a big day for HSY. The stock surged +2.4% and broke out past resistance at $58.00. The stock closed at new five-year highs. The move is bullish and I'm almost tempted to buy calls now. However, I could not find the news that drove the stock higher on Friday. Plus, HSY is due to report earnings on July 26th (Tuesday morning). Analysts are looking for a profit of 55 cents. I do not want to launch positions in front of earnings. If shares are still trading above resistance at $58.00 next week then we'll reconsider a new entry point near these levels. We need to adjust our entry point (currently $52.25) but we need to see the market reaction to earnings before making that change. Nimble traders could try buying a dip near the 50-dma, if HSY sees one, but with a tight stop, maybe near the 100-dma.

In summary, earnings are this week. We will change our entry point strategy or remove HSY as a candidate next week.

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: 57.90

07/23 update: JJC lost six cents for the week. Given the plunge in the dollar this past week I'm surprised that JJC did not see significant gains. Instead the action in JJC looks like a short-term top. Our plan was to buy a dip at $56.00.

Unfortunately, I am giving up on JJC. This ETF still offers opportunity but the spreads on the 2011 December and 2012 March calls are just too wide.

Our trade never opened.

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


McDonald's Corp. - MCD - close: 88.56

07/23 update: MCD is performing very well. The company just reported earnings on July 22nd and results came in at $1.35 a share with revenues up +16%. Analysts were only expecting a profit of $1.28. Worldwide sales were up +5.6%. The stock reacted by gapping open higher and spiking to $89.57 before paring its gains. I remain very bullish on MCD but the stock is just too overbought and overextended for us to consider long-term bullish positions.

I am removing MCD as a candidate but it will be back. Keep it on your watch list. I'd look for a dip toward the 30 or 50-dma.

Our play never opened. MCD is too overbought at current levels.

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


Wellpoint Inc - WLP - close: 74.41

07/23 update: This could be the week we get triggered. WLP is still underperforming but we've been expecting a pull back toward what should be major support at $70.00. The company reports earnings on July 27th. There is always a chance that investors sell the news.

Right now the plan is to buy calls on a dip at $70.00. I am moving our stop loss to $66.50, under the 200-dma.

Prior Comments:
If we do get triggered we want to keep our position size small to limit our risk.

Buy-the-Dip trigger: $70.00

BUY the 2012 Jan. $75 call (WLP1221A75)

- or -

BUY the 2013 Jan. $80 call (WLP1319A80)

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


Western Refining Inc. - WNR - close: 20.80

07/23 update: After four weeks of huge gains it looks like WNR is finally seeing some profit taking. Thus far the pull back has been very mild. Given the big gains WNR might over-correct. I am adjusting our buy-the-dip entry point to $18.50. We'll use a stop loss at $16.95. More conservative traders could hope for a dip closer to $18.00 instead. Our long-term targets are $24.75 and $29.50. More aggressive traders could aim higher.

Earlier Comments:
WNR happens to have very high short interest so the short squeeze could be really big. Plus, the Point & Figure chart is bullish with a $28.50 target.

Buy-the-Dip trigger: $19.00

BUY the 2012 Jan $20 call (WNR1221A20)

- or -

BUY the 2013 Jan $20 call (WNR1319A20)

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