New Watch List Entries

IR - Ingersoll-Rand

MOS - Mosaic Co.


Active Watch List Candidates

BMC - BMC Software

ESV - Ensco Plc.

EXXI - Energy XXI

LTD - Limited Brands Inc

KO - Coca-Cola Co

MMR - McMoRan Exploration

RRC - Range Resources


Dropped Watch List Entries

XOP was removed.



New Watch List Candidates:


Ingersoll-Rand - IR - close: 32.38

Company Info

The July-August sell-off in IR seems way overdone. The stock fell from $47 to $27.50 in less than two months (-41%). The decline is even worse from its May highs. The stock is starting to recover with a higher-high last week. Granted IR was very oversold so a big bounce isn't too surprising.

The company did miss earnings and guide lower back in July (you can see the gap down on July 21st) but at what point is that news priced in? I am suggesting we open long-term call positions on a dip at $30.00 with a stop loss at $26.95. The August low was $27.11. More conservative traders could wait for a dip closer to the $29-28 area instead as your entry point.

We do want to keep our position size small to limit our risk.

Buy-the-Dip trigger: $30.00

BUY the 2012 Jan $35 call (IR1221A35)

- or -

BUY the 2013 Jan $35 call (IR1319A35)

Chart of IR:

Originally listed on the Watch List: 09/03/11


Mosaic Co. - MOS - close: 70.00

Company Info

MOS is specialty chemical and fertilizer company. One enticing aspect about the fertilizer business is that food demand continues to grow every year. The U.S. and Europe might see an economic slow down but many third world countries are still growing. As their economies improve their population can buy more food. The long-term global prospects for the fertilizer business looks strong. Meanwhile short-term the group could be getting a boost by rising corn prices. The current corn crop could see yields significantly below expectations. While it's still going to be a record-breaking harvest demand for the seed is very high. Tight supplies should mean more demand for fertilizer.

MOS has rallied toward resistance in the $74-75 area. I am suggesting we buy calls if MOS hits $75.50 with a stop loss at $67.45. It's a wide stop but MOS can be a volatile stock. We'll use the $80/$85 calls.

FYI: Just in case MOS retreats lower then we'll be watching for a possible entry point on a dip in the $60-55 area instead (and we'll use lower option strikes).

Buy-the-breakout trigger: $75.50

BUY the 2012 Jan $80 call (MOS1221A80)

- or -

BUY the 2013 Jan $85 call (MOS1319A85)

Chart of MON:

Originally listed on the Watch List: 09/03/11


Active Watch List Candidates:



BMC Software - BMC- close: 38.92

update 09/03: The rebound in BMC reversed at resistance near $41.00. Shares look poised to retest its August lows. Aggressive traders may want to buy the dip near the $38.00-37.50 area. I am suggesting we wait and keep our entry point at $35.50.

If triggered at $35.50 we'll use a stop at $33.45. As an alternative readers may want to consider bullish positions if BMC can close above the $40.00 or $41.50 levels.

Buy-the-Dip trigger: $35.50

BUY the 2012 Jan $40 call (BMC1221A40)

- or -

BUY the 2013 Jan $40 call (BMC1319A40)

Originally listed on the Watch List: 08/20/11


Ensco Plc. - ESV - close: 47.14

update 09/03: It could be a while before ESV nears our current entry point. The stock's oversold bounce has reversed under resistance at the 50-dma. On a short-term basis the stock looks like it could dip toward support in the $45-44 area. I still would not buy it there, at least not yet. The plan is to buy calls on a dip at $40.50. If we are triggered at $40.50 we'll use a stop loss at $38.40. We do want to keep our position size small to limit our risk.

buy-the-dip at $40.50

BUY the 2012 Jan $45 call (ESV1221A45)

- or -

BUY the 2013 Jan $45 call (ESV1319A45)

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


Energy XXI - EXXI - close: 25.20

update 09/03: There is no change from my prior comments on EXXI. We're hoping for a dip back toward the August intraday lows. Nimble traders may want to buy a bounce from $22.00 if you see it. Right now our trigger to launch positions is at $21.50 with a stop at $19.45.

I do want to warn you that EXXI can be a volatile stock so keep your position size small.

FYI: EXXI does have 2013 January calls but the spreads are way too wide.

Buy-the-Dip trigger: $21.50

BUY the 2012 Jan $25 call (EXXI1221A25)

Originally listed on the Watch List: 08/27/11


Coca-Cola Co - KO - close: 69.74

update 09/03: Wow! I am honestly surprised that our trade on KO is not open yet. Last week I added a secondary entry point to buy call LEAPS if KO could close over $70.50. Shares have continued to show strength. KO hit a new intraday 52-week high of $71.10 on Thursday. Yet our condition to buy calls if KO closed over $70.50 was not met. The stock certainly came close. Shares closed at $70.45 on both Wednesday and Thursday.

Currently I am concerned with the market's steep sell-off the last couple of days. I'm removing our buy the close over $70.50 entry point. We will adjust our buy-the-dip entry point to $66.50 so it's just above the simple 200-dma. The stop loss will remain at $63.40.

Remember, this is a slow-moving stock. It's going to take months for KO to make significant headway but the trend is up. Our plan is to keep positions small to limit our risk.

Buy-the-Dip trigger: $66.50 - new trigger -

BUY the 2012 Jan. $70 call (KO1221A70)

- or -

BUY the 2013 Jan. $70 call (KO1319A70)

09/30 adjusting buy-the-dip trigger to $66.50
09/30 removing the secondary entry point
08/27 Adding a secondary entry point to buy $75 calls if KO can close over $70.50. stop loss at $66.40.

Originally listed on the Watch List: 08/13/11


Limited Brands, Inc. - LTD - close: 35.85

update 09/03: There is no change from my prior comments on LTD. The long-term trend is up but shares appear to be forming a huge bull-flag pattern. Right now shares just failed at the top of the flag. LTD could see a drop back toward the $32-30 zone. Right now we have a buy-the-dip trigger at $32.50 (stop at $29.45) but more conservative traders may want to use a trigger closer to the $30.50 area instead.

If we do not see a pull back in the next couple of weeks we will re-evaluate our entry point strategy.

Buy-the-Dip trigger: $32.50

BUY the 2012 Jan $35 call (LTD1221A35)

- or -

BUY the 2013 Jan $40 call (LTD1319A40)

Originally listed on the Watch List: 08/27/11


McMoRan Exploration Co. - MMR - close: 12.47

update 09/03: MMR is up over +5% for the week even after its pull back on Friday. Aggressive trades may want to consider buying a bounce near $12.00 or the $11.00 level. Currently our plan is to buy a dip at $10.25 with a stop at $9.40. If we do see MMR rebound and form a higher low then we'll re-evaluate our entry point strategy.

We want to keep our position size small.

Buy the dip at $10.25

BUY the 2012 Feb $12 call (MMR1218B12) -Februarys-

- or -

BUY the 2013 Jan $15 call (MMR1319A15)

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


Range Resources Corp. - RRC - close: 59.76

update 09/03: RRC was also showing relative strength and shares ended the week with a +6.4% gain. I am tempted to buy the bounce off Friday's low or even a dip near $60.00. However, the failed rally on Wednesday this past week could be a bearish double top. Given the stock's relative strength we will adjust our buy-the-dip trigger to $55.00 and our stop loss to $51.80, which is under the August low. If we do see RRC find support in the $60-57 area this week then we might re-evaluate our entry point again.

Buy-the-Dip trigger: $55.00 - new trigger -

BUY the 2012 Jan $60 call (RRC1221A60)

- or -

BUY the 2013 Jan $60 call (RRC1319A60)

Originally listed on the Watch List: 08/20/11


S&P Oil & Gas ETF - XOP - close: 51.06

update 09/03: Tonight I am removing XOP as a candidate. We can keep it on our radar screen but I'm a little concerned about energy stocks. There are exceptions. I'm fundamentally bullish on stocks like MMR and EXXI. Yet the XOP just produced another failed rally at resistance near $55.00. I might reconsider if we see the XOP rebound from support in the $46-45 area again.

Trade never opened.

Originally listed on the Watch List: 08/20/11