Editor's Note:

The markets look like they are at a major turning point. Does the rally reverse? Or does the stock market make a run higher into year-end?

Right now the trend is up and investors seem to be growing less worried about Europe. At least that's the tone today. It could change tomorrow.

- James



New Watch List Entries

BZH - Beazer Homes

CSC - Computer Sciences

EBAY - eBay Inc.

GLW - Corning Inc.

MDR - McDermott Intl.

RAI - Reynolds American


Active Watch List Candidates

CBG - CB Richard Ellis Group

CSCO - Cisco Systems

LTD - Limited Brands Inc

TJX - TJX Cos. Inc.


Dropped Watch List Entries

HSY and KBH graduated to the play list.



New Watch List Candidates:


Beazer Homes - BZH - close: 1.97

Company Info

The U.S. residential real estate market is still a long way from being healthy. Yet it looks like investors have priced in all the bad news with shares of BZH trading near $2.00 a share. The stock appears to have formed a bottom over the last couple of months and is beginning to breakout past various levels of resistance.

I am suggesting we open small bullish positions if and when BZH can close over $2.05. When this happens we will open small positions the next day at the open with a stop loss at $1.57. Our long-term target is $3.70 but we might adjust that for the simple 200-dma instead.

Trigger: Buy a close over $2.05

BUY the BZH (the stock) on a close over $2.05

- or -

buy the 2013 Jan $2.50 call (BZH1319A2.5) current bid/ask $0.60/0.75

Chart of BZH:

Originally listed on the Watch List: 10/22/11


Computer Sciences Corp. - CSC - close: 30.03

Company Info

After months of correcting lower it looks like this tech stock has found a bottom. CSC has spent several weeks consolidating sideways in the $26-30 zone. Now CSC is on the verge of a bullish breakout.

I am suggesting that we wait for CSC to close above the $31.00 level and then open positions the next morning. If triggered we'll use a stop loss at $27.75. Our long-term target is $39.00 but we might adjust that for the simple 200-dma. FYI: Readers may want to note that CSC is due to report earnings on November 9th. Cautious investors might want to wait and see how the market reacts to CSC's earnings first before initiating positions.

Trigger: Buy a close over $31.00

BUY the 2013 Jan $35 call (CSC1319A35) current ask $3.50

Chart of CSC:

Originally listed on the Watch List: 10/22/11


eBay Inc. - EBAY - close: 32.12

Company Info

Shares of EBAY have spent nearly a year trading sideways in the $27.00-35.00 range. Currently shares are near the top of the range and traders just bought the dip near its 50 and 200-dma. Given the market's up trend there is a growing chance that EBAY might breakout from its trading range sooner rather than later. If that happens we want to be ready.

I am suggesting investors wait for a close over resistance at $35.00. If that occurs we'll open bullish positions the next day with a stop loss at $29.95. Our long-term target is $45.00.

Trigger: Buy a close over $35.00

BUY the 2013 Jan $40 call (EBAY1319A40) current ask $2.97

Chart of EBAY:

Originally listed on the Watch List: 10/22/11


Corning Inc. - GLW - close: 13.74

Company Info

GLW appears to be breaking out from its seven-month slide from $23 to $12. Now the stock is on the verge of breaking out past its 50-dma and resistance near $14.00. The company is due to report earnings soon on October 26th, which might be the catalyst to fuel the next move higher.

I am suggesting investors wait for a close over $14.00. If this occurs we'll launch positions the next morning with a stop loss at $12.85. Our target is $18.00 but we might need to adjust it for the simple 200-dma.

Trigger: Buy a close over $14.00

BUY the 2013 Jan. $15 call (GLW1319A15) current ask $1.95

Chart of xxx:

Originally listed on the Watch List: 10/22/11


McDermott Intl. - MDR - close: 14.19

Company Info

MDR is a heavy construction company. Investors have been cautious on industrial names due to worries over a potential slow down across the globe. If the EU summit delivers positive news then investor sentiment toward this industry should improve. Currently MDR is consolidating under resistance at $15.00.

I am suggesting we open small bullish positions if MDR can close above $15.25. Should this occur we'll launch positions the next morning with a stop loss at $12.75. Our upside target is $21.00 but we might make an adjustment for the simple 200-dma instead.
NOTE: MDR is due to report earnings on November 8th (still an unconfirmed date). More conservative traders might want to wait and see how the market reacts to MDR's earnings report before initiating positions.

Trigger: Buy a close over $15.25

BUY the 2013 Jan. $17.50 call (MDR1319A17.5) current ask $2.50

Chart of MDR:

Originally listed on the Watch List: 10/22/11


Reynolds American Inc. - RAI - close: 39.73

Company Info

A strong dividend and a recession proof product have made RAI a popular stock to own. The stock is currently trading near all-time highs. After two weeks of consolidating sideways RAI looks poised to breakout past resistance at $40.00. Earnings are coming up in just a few days (Oct. 25th) and analysts are expecting a profit of 73 cents a share.

A positive earnings report could be just what this stock needs to breakout. I am suggesting we wait for a close over $40.00. If that occurs we'll launch bullish positions the next morning with a stop loss at $38.25. Our long-term target is $49.00.

Trigger: Buy a close over $40.00

BUY the 2013 Jan $42.50 call (RAI1319A42.5) current ask $2.05

Chart of RAI:

Originally listed on the Watch List: 10/22/11


Active Watch List Candidates:



CB Richard Ellis - CBG - close: 15.29

update 10/22: CBG did not make a lot of progress this past week. Shares bounced around the $14.00-15.50 trading range. Yes, the stock was rather volatile. We should expect more volatility this week with earnings due out on October 25th, after the closing bell. Wall Street is looking for a profit of 26 cents a share.

Aggressive traders may want to consider bullish positions if CBG can breakout past resistance at $15.50. I want to see stronger confirmation. We're suggesting that investors wait for CBG to close above $16.00 and we'll open positions the following day with a stop loss at $13.25. Our long-term target is $20.00. More aggressive traders could aim for the 200-dma instead. FYI: The Point & Figure chart for CBG has turned bullish with a $19.50 target.

NOTE: CBG does not have LEAPS. We're going to speculate with the 2012 March calls.

Buy calls on a close above $16.00

BUY the 2012 March $18 call (CBG1217C18)

Originally listed on the Watch List: 10/15/11


Cisco Systems - CSCO - close: 17.38

update 10/22: CSCO has also seen some volatility with swings from $17.60 to $16.80 but the stock has not yet closed back under its 200-dma or 200-ema. Currently our plan is to open bullish positions on a dip at $16.65 (last week's low was $16.80). I am adding a secondary entry point to launch positions if CSCO can close over $17.75. Obviously we would prefer to buy a dip but the market may not cooperate.

If triggered at either entry we'll use a stop loss at $14.85. Our long-term target is $21.75.

Adjusted entry point - Wait for dip to $16.65 or close over $17.75

BUY the 2013 Jan. $20 call (CSCO1319A20)

10/22/11 Added entry to buy a close over $17.75
10/15/11 We are adjusting our entry point. Wait for a dip to $16.65
10/14/11 CSCO hit our entry point requirement for a close over $17.50.

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


Limited Brands, Inc. - LTD - close: 42.71

update 10/22: LTD has now spent two weeks consolidating sideways inside the $41.00-43.00 zone. The stock looks poised to breakout higher soon. I do not see any changes from my prior comments. Aggressive traders may want to buy calls on a breakout past $43.25. I am suggesting we actually wait for LTD to close over $43.50 and then open positions the next day with a stop loss at $37.90. I'm listing the 2013 $50 call. We want to keep our position size small.

Wait for a close above $43.50, then buy calls!

BUY the 2013 Jan $50 call (LTD1319A50)

10/15/11 New Strategy: buy a close over $43.50, stop 37.90
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


TJX Cos. Inc. - TJX - close: 59.84

update 10/22: Hmm... TJX is showing impressive relative strength. The stock rallied +2.1% on Friday and broke out past resistance near $58.75. Yet we do not want to chase it. TJX has a trend of higher highs but it tends to pull back once it hits the trendline. Plus the $60.00 level could be round-number resistance. We definitely like the long-term up trend but we don't want to buy it near the top of its rising channel.

Currently our plan is to wait for a dip and buy call LEAPS when TJX touches $54.00 again. If triggered we'll use a stop loss at $51.45.

Buy-the-Dip trigger: $54.00

BUY the 2013 Jan $60 call (TJX1319A60)

10/15/11 adjusted entry point to buy the dip at $54.00, stop at $51.45

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