Editor's Note:

I remain cautious on new watch list candidates. This will be another pivotal week for the market as we face the Aug. 2nd debt extension deadline. Stocks could be a lot higher or a lot, lot lower a week from now.

I've had Core Labs (CLB) on my personal watch list. Friday's bounce from support near $105 looks like a bullish entry point. However, if we do not get a debt deal this stock could fall toward the $100 level or even its 200-dma. Aggressive traders may want to look for a dip. I would consider it an aggressive trade because spreads on the long-term calls are pretty wide. Actually the spreads are wide enough I probably would not list CLB on the newsletter but nimble traders could still make money in it. Check out the long-term weekly chart. A dip toward the $95-100 area would line up with the long-term trend of higher lows.

- James



New Watch List Entries

ESV - Ensco Plc.


Active Watch List Candidates

AXP - American Express Co

EMC - EMC Corp

MMR - McMoRan Exploration

WNR - Western Refining


Dropped Watch List Entries

EXXI and WLP graduated to the play list. HSY was removed.



New Watch List Candidates:


Ensco Plc. - ESV - close: 53.25 change: +0.62

Company Info

ESV is an offshore oil and gas drilling company. The stock has been pretty resistant to the volatility in both the stock market and the oil markets. Given the slowly growing trend of higher lows it looks like ESV may have found a bottom. On Friday the stock actually closed above technical resistance at its 50-dma and 200-dma. I also have to point out that the 50-dma is about to cross under the 200-dma, which is normally a very bearish signal. That's one reason why I would not launch positions just yet. The stock could also have additional resistance at its 100-dma near $55.00.

I am suggesting we wait for ESV to close above the $55.00 level and then buy call LEAPS. We'll use a stop loss at $51.75, just under Friday's low. There is some resistance at $60.00 but we'll set our long-term targets at $64.50 and $69.50. Investors will want to note that ESV does report earnings on August 8th. Wall Street is looking for a profit of 70 cents a share. Conservative traders will want to wait and see how the market reacts to the earnings news before considering new bullish positions.

Breakout trigger: Wait for ESV to close over $55.00

BUY the 2012 Jan $60 call (ESV1221A60)

- or -

BUY the 2013 Jan $65 call (ESV1319A65)

Chart of ESV:

Originally listed on the Watch List: 07/30/11


Active Watch List Candidates:



American Express Co. - AXP - close: 50.04

07/30 update: This could be a defining week for AXP. Shares gave up about two points this past week with a drop toward round-number support at $50.00. Yet the market's reaction to the debt ceiling issue could either launch AXP or crush it. Last week we lowered our buy-the-dip entry point to $49.00. If congress does not get a deal together I would not be surprised to see AXP plunged toward support near $47.00 or the 200-dma near $46.00. Thus I am lowering our buy-the-dip entry point to $47.00 with a stop loss at $44.75. If on the other hand there is a deal then AXP will likely gap open higher on Monday anyway. Should AXP rebound from current levels then we'll reconsider buying it above $50 the following week. Our readers are more nimble than a once a week newsletter so more aggressive traders may want to go ahead and buy calls on AXP if a deal is announced before the open on Monday morning.

Buy-the-Dip trigger: $47.00 - new trigger -

BUY the 2012 Jan $50 call (AXP1221A50)

- or -

BUY the 2013 Jan $55 call (AXP1319A55)

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


EMC Corp. - EMC - close: 26.08

07/30 update: EMC has retreated back toward $26 and looks like it's headed for the 200-dma near $25. If we don't see a debt deal soon I would not be surprised to see EMC actually break down below key support near $25.

Currently 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)

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


Hershey Co. - HSY - close: 56.44

07/30 update: HSY reported earnings on the 26th. The stock saw a spike to a new multi-year high on the news and immediately reversed. Shares have been down on big volume ever since. Now HSY is testing support near $56 and its rising 100-dma. The MACD indicator on the daily chart did not confirm the new high. This is starting to feel like the second peak to a bearish double top. I still think HSY could offer some opportunity but I'm not willing to buy it here. We will remove HSY as a LEAPS candidate and revisit it down the road. A bounce near $54 or its 200-dma might change my mind.

Our trade never opened.

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


McMoRan Exploration Co. - MMR - close: 16.84

07/30 update: It was a rough week for MMR. Shares broke down under both the 50-dma and 200-dma. The stock has essentially filled the gap from late June. Would I buy it here? No. Right now the plan is to launch long-term call positions on a close above $19.25 with a stop at $17.30. Now given the potential for the market to sell-off further if we do not see a debt ceiling deal I'm starting to wonder if MMR will fall toward the bottom of its trading range near $15.00. Buying a bounce from $15.00 would be a much more attractive entry point.

Launch positions on a close above $19.25

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

- or -

BUY the 2013 Jan $20 call (MMR1319A20)

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


Western Refining Inc. - WNR - close: 20.43

07/30 update: WNR has held up very well. Shares only gave up -1.7% versus the -4% drop in the market. I'm still expecting a correction. WNR reports earnings on August 4th. Investors are probably expecting big numbers since WNR gets to buy crude at WTI prices and sell the finished product at Brent prices (that's the story in a nutshell). With expectations high there could be a disappointment. Plus, we have the whole debt ceiling fiasco.

I am lowering our buy-the-dip trigger to $17.75 near the 100-dma. If triggered we'll use a stop loss at $15.75. If a week from now we should have an answer to the debt deal and see the results of WNR's earnings report, which may require an adjustment in our entry point strategy.

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: $17.75 - new trigger

BUY the 2012 Jan $20 call (WNR1221A20)

- or -

BUY the 2013 Jan $20 call (WNR1319A20)

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