Editor's Note:

In addition to tonight's new watch list candidate, I would add MO, SO and JJC to your radar screen.

MO was showing some relative strength on Friday with a +1.7% gain and a breakout past recent resistance. There is additional resistance near $28.00. Readers may want to wait for a close over $28.00 as a bullish entry point.

SO is a utility stock with a long-term up trend. Shares are less than a dollar away from its recent all-time highs. Traders bought the dip near prior resistance and what is now new support at $41.00 last week. If you think the market retreats again then wait for another dip near $41.

JJC is a copper ETF. Copper has seen a very dramatic sell-off on global slowdown concerns. These worries might be overblown. The bounce last week did produce a bullish reversal pattern on the weekly chart. You could wait for a dip back toward the $41-40 zone as an entry point. Or wait for confirmation of the bullish reversal with a follow up weekly gain. Note - JJC doesn't have LEAPS.

- James



New Watch List Entries

Cisco Systems - CSCO


Active Watch List Candidates

AGN - Allergan

HSY - Hershey Co

LTD - Limited Brands Inc

ROST - Ross Stores

TJX - TJX Cos. Inc.


Dropped Watch List Entries

IWM and IYT moved to the play list. PSMT was dropped.



New Watch List Candidates:


Cisco Systems - CSCO - close: 16.66

Company Info

Business has been tough for technology giant CSCO over the last couple of years. You can see how Wall Street reacted to disappointing earnings news and guidance with the big spikes down on the weekly chart. Now it would seem that all the bad news has been priced in for CSCO. Shares are building a base in the $15.00-17.00 zone. Last week would have been the perfect opportunity for CSCO to breakdown further but traders bought the dip at $15.00 again. Now shares face resistance near $17.00 and its 200-dma around $17.25. A breakout here would be very bullish.

I am suggesting we launch bullish positions when CSCO can close above the $17.50 level (open positions the following session). If triggered we'll use a stop loss at $15.45. Our long-term target is $21.75.

Trigger: Close above $17.50

BUY the 2013 Jan. $20 call (CSCO1319A20)

Chart of CSCO:

Weekly chart of CSCO:

Originally listed on the Watch List: 10/08/11


Active Watch List Candidates:



Allergan Inc. - AGN - close: 81.50

update 10/08: AGN saw a nasty breakdown last Monday. Shares broke the bullish trend of higher lows. Now the oversold bounce is stalling. I'm concerned that AGN is poised to drop back toward $78 or its 200-dma again.

Currently we are waiting for a breakout to new highs. The plan is to buy calls if we see AGN close above $86.00.

If triggered we'll use a stop loss at $79.45. Our long-term target is $99.00.

TRADING NOTE: Good news. The option spreads on the 2013 calls are getting better, but they are still pretty wide. Keep positions small.

Earlier Comments:
Option spreads are wide for these LEAPS. We want to keep our position size pretty small to limit our risk.

Wait for a close over $86.00

BUY the 2013 Jan $100 call (AGN1319A100)

Originally listed on the Watch List: 09/24/11


Hershey Co. - HSY - close: 58.99

update 10/08: Traders bought the dip on Tuesday near $57.00. The rebound is lifting HSY back toward resistance near $60.00. The stock continues to trade inside a bullish trend of higher highs and higher lows.

The larger trend is still up and I suspect that HSY could see more buying interest as people start to think about the Halloween holiday. Right now our plan is to buy calls when HSY closes above $60.25. We'll start with a stop loss at $55.75.

trigger: A close over $60.25

BUY the 2013 Jan $65 call (HSY1319A65)

Originally listed on the Watch List: 09/17/11


Limited Brands, Inc. - LTD - close: 40.43

update 10/08: LTD has been showing a lot of volatility with big swings over the last few weeks. This past week saw a dip toward $37 and its 50-dma. We still do not want to chase it. and remain on the sidelines. The plan is to buy calls on a dip at $35.50. If triggered we'll use a stop loss at $32.90. More aggressive traders may want to keep their stop under the August low instead. We want to keep our position size small.

Buy-the-Dip trigger: $35.50

BUY the 2013 Jan $40 call (LTD1319A40)

10/01/11 adjusted stop loss to $32.90, if triggered
09/24/11 new trigger @ 35.50, updated 2013 option strike
09/17/11 new trigger @ 37.50, updated option strikes.

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


PriceSmart Inc. - PSMT - close: 70.57

update 10/08: I fear we may have missed the entry point in PSMT. Shares dipped to $56.25, just above its 100-dma, on Tuesday and then rallied to $72.36 by Friday morning. That's a +28.6% bounce. Unfortunately our entry point to buy calls was at $55.50. We do not want to chase PSMT higher. I am removing the stock from our watch list. Shares are too volatile right now.

Trade Did Not Open!

Originally listed on the Watch List: 09/24/11


Ross Stores Inc. - ROST - close: 81.99

update 10/08: ROST delivered a dramatic week as well. The stock fell to $74.48 on Tuesday before bouncing back and surging to $82.80 by Friday morning. ROST could see a breakout to new highs soon. Currently the plan is to wait for a close above $83.00. I am adjusting our option strike to the 2013 Jan $100 call with a stop loss at $75.75.

Buy a close over $83.00

BUY the 2013 Jan $100 call (ROST1319A100)

10/08/11 adjusted option strike to 2013 Jan. $100 call
10/01/11 new strategy: buy a close over $83.00
09/24/11 new trigger at $73.00, stop 69.50
09/17/11 new trigger at $76.50, stop @ 71.40, new strikes.

Originally listed on the Watch List: 09/10/11


TJX Cos. Inc. - TJX - close: 55.70

update 10/08: I am not convinced the market's sell-off is over. There is still a good chance that TJX will correct back down toward support near its rising 200-dma. The plan is to buy calls on a dip at $52.00. More conservative traders may want to wait for a bounce from this area instead. If triggered we'll use a stop loss at $49.40.

Buy-the-Dip trigger: $52.00

BUY the 2013 Jan $60 call (TJX1319A60)

Originally listed on the Watch List: 09/24/11