Editor's Note:

Stocks have seen a sharp two-week correction lower. We are using the pull back as a chance to adjust some entry point strategies below.

- James



New Watch List Entries

FDO - Family Dollar Stores

RIG - Transocean Ltd.

WMT - Wal-Mart Stores Inc.


Active Watch List Candidates

APC - Anadarko Petroleum

ATVI - Activision/Blizzard, Inc.

EBAY - eBay Inc.

ERTS - Electronic Arts

MCD - McDonald's Corp

MSFT - Microsoft Corp.

NVDA - NVIDIA Corp

TJX - TJX Cos. Inc.

USO - U.S. Oil ETF


Dropped Watch List Entries

QCOM graduated to the play list.



New Watch List Candidates:


Family Dollar Stores Inc. - FDO - close: 55.80

Company Info

FDO is only a few points off its all-time high and the long-term trend is still higher. The recent three-week consolidating lower has been slow and orderly and not the violent drop lower we've seen in the market's major indices. Aggressive traders may want to buy calls on FDO now. I am suggesting we use a trigger to buy calls on a dip at $53.00 with a stop loss at $49.45. Our long-term target is $69.50.

Buy-the-Dip trigger: $53.00, stop loss 49.45

BUY the 2013 Jan $60 call (FDO1319A60)

Chart of FDO:

Originally listed on the Watch List: 11/26/11


Transocean Ltd. - RIG - close: 44.51

Company Info

You have to admit the trend in RIG doesn't look very optimistic. Shares are in an eight-month decline of lower lows and lower highs. Yet we still see opportunity. Investors decided that enough was enough and bought the stock twice when it fell into the $42.00 area back in 2008 and 2010. What are the odds that this support level holds up again?

Given the down trend I do consider this an aggressive trade so we'll want to keep our position size small. I am suggesting we buy calls when RIG hits $42.25. If triggered we'll use a stop loss at $39.45. More conservative traders could use a stop closer to $41.45 instead, since that would be a breakdown under its prior lows.

Buy-the-Dip trigger: $42.25, stop loss @ 39.45 (small positions)

BUY the 2013 Jan $50 call (RIG1319A50)

Chart of RIG:

Originally listed on the Watch List: 11/26/11


Wal-Mart Stores Inc. - WMT - close: 56.89

Company Info

The world's largest retailer has been showing some strength the last couple of months. This past week WMT consolidated sideways instead of participating in the market's sell-off lower. Yet I am not convinced the correction in WMT is done. Aggressive traders might want to consider call positions now or on a move past $57.50. I am suggesting readers wait for a dip to $54.50. If triggered at $54.50 we'll use a stop loss at $51.75. Our long-term target is $63.50.

Buy-the-Dip trigger: $54.50, stop loss @ 51.75

BUY the 2013 Jan $60 call (WMT1319A60)

- or -

BUY the 2014 Jan $60 call (WMT1418A60)

Chart of WMT:

Originally listed on the Watch List: 11/26/11


Active Watch List Candidates:



Anadarko Petroleum - APC - close: 71.84

Comments:
11/26 update: Currently APC continues to sink lower through its very large trading range. It is unlikely that APC will close over resistance near $84 any time soon but we're going to keep our "buy a close over $85.25" trigger to launch positions. However, we are also adding a "buy a dip at $62.00" just in case the market gets carried away with the sell-off lower.

In summary, if APC closes over $85.25 then we'll buy calls the next day with a stop loss at $77.00 and we want to use the 2013 Jan $110 calls. On the other hand if APC hits $62.00 (on an intraday basis) then we'll buy calls at $62.00 with a stop loss at $56.50 and we'll use the 2013 $90 calls.

Wait for a close over $85.25 (stop loss $77.00)

BUY the 2013 Jan $110 call (APC1319A110)

- or -

buy calls on a dip at $62.00 (stop loss $56.50)

buy the 2013 Jan $90 call (APC1319A90)

Originally listed on the Watch List: 11/12/11


Activition/Blizzard, Inc. - ATVI - close: 11.75

Comments:
11/26 update: ATVI spent this past week consolidating sideways between resistance near $12.00 and support at its 200-dma near $11.60. Aggressive traders may want to buy calls on a close over $12.10. I am still suggesting readers wait for a much bigger move higher. We're listing a trigger to wait for ATVI to close over $13.00 and then initiate call positions the next morning with a stop at $11.90 (new). Our long-term target is $15.75.

Wait for a close over $13.00

BUY the 2013 Jan $15 call (ATVI1319A15)

Originally listed on the Watch List: 11/19/11


eBay Inc. - EBAY - close: 28.23

Comments:
11/26 update: We are taking a more aggressive approach to bullish positions on EBAY. The stock has been trending lower toward the bottom of its year-long trading range in the $27.00-35.00 zone. It's unlikely that EBAY will close over resistance at $35.00 any time soon. I am listing a riskier entry point to buy calls on a dip at $27.25 with a stop loss at $25.75. We want to keep our position size small to limit our risk. I am updating our strike price below.

Trigger: Buy a dip at $27.25 (stop loss 25.75)

BUY the 2013 Jan $35 call (EBAY1319A35)

11/26/11 updated strategy to use a dip at $27.25 and a stop at $25.75, changed option to 2013 $35 call.

Chart of EBAY:

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


Electronic Arts - ERTS - close: 20.83

Comments:
11/26 update: Video games are a popular gift for the holidays. You might think that investors would be buying shares of ERTS in anticipation of a strong quarter. Yet the stock is falling lower with the rest of the market. The recent close under its 200-dma is bearish. Shares of ERTS look poised to test support at $20.00 or the $18.00 level.

We already know that this market tends to overshoot to the upside or downside. Therefore we are adjusting our entry point strategy. I am listing a trigger to buy calls on a dip at $18.50 with a stop loss at $17.40, which is under the August lows. We want to keep our position size small to limit our risk. I have adjusted our strike price below.

buy a dip at $18.50 with a stop at $17.40.

BUY the 2013 Jan $25 call (ERTS1319A25)

11/26/11 updated strategy to use a dip at $18.50 and a stop at $17.40, changed option to 2013 $25 call.

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


McDonald's Corp. - MCD - close: 92.10

Comments:
11/26 update: MCD is still holding up well. Shares lost less than a dollar last week. I still expect a dip toward support. We want to buy calls on a dip at $90.00 with a stop loss at $86.45. We will set our long-term target at $108.00.

Buy-the-Dip trigger: $90.00

BUY the 2013 Jan $100 call (MCD1319A100)

11/26/11 adjusted stop loss to $86.45

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


Microsoft Corp. - MSFT - close: 24.30

Comments:
11/26 update: Shares of MSFT have been in freefall the last two weeks. The stock is down seven days in a row. It's unlikely that we'll see the stock breakout past resistance near $27.50 any time soon. However, that doesn't mean we don't see opportunity. Investors have been buying dips in the $23.80-23.60 zone for months. We will adjust our entry point strategy.

I am suggesting we open small bullish positions on a dip at $23.85 with a tight stop loss at $23.35. That way if MSFT nears support we'll be triggered but if it breaks down to new lows we'll quickly get stopped out to limit any risk.

I have adjusted our strike prices below.

Buy a dip at $23.85, stop loss 23.35 (small positions)

BUY the 2013 Jan $25 call (MSFT1319A25)

- or -

BUY the 2014 Jan $25 call (MSFT1418A25)

11/26/11 adjusted our entry point to buy small positions on a dip at $23.85 with a stop loss at $23.35. New strike prices.

Chart of MSFT:

Originally listed on the Watch List: 11/12/11


NVIDIA Corp. - NVDA - close: 14.04

Comments:
11/26 update: NVDA has not broken down to new relative lows like so many of its peers. Shares are consolidating sideways in the $13.50-15.50 zone. There is additional overhead resistance near the exponential 200-dma, the 150-dma and the $16.00 level. There is no change from my prior comments.

Earlier Comments:
I am suggesting we wait for a close over the $16.00 level and then open positions the next day. We'll start bullish positions with a stop loss at $13.90. Our long-term target is $22.50.

NOTE: Due to NVDA's volatility this is an aggressive trade. We want to keep our position size small.

Wait for a close over $16.00 (small positions)

BUY the 2013 Jan. $20 call (NVDA1319A20)

Originally listed on the Watch List: 10/29/11


TJX Cos. Inc. - TJX - close: 58.75

Comments:
11/26 update: TJX is showing relative strength by not participating in the market's sell-off. Shares have managed to consolidate sideways with technical support at its 50-dma. Aggressive traders may want to buy calls on a breakout past $60.00. I am still hoping for a pull back. We have a trigger to buy calls on a dip at $56.25 with a stop loss at $52.40. More conservative traders may want to wait and hope for a dip closer to $55.00 instead as their entry point.

Buy-the-Dip trigger: $56.25, stop loss 52.40

BUY the 2013 Jan $60 call (TJX1319A60)

11/12/11 new trigger @ 56.25, new stop 52.40
10/29/11 adjusted trigger to $55.00, stop to $51.75
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


U.S. Oil ETF - USO - close: 37.16

Comments:
11/26 update: The USO spent last week consolidating sideways. It still looks a little overbought given its huge rally off the October lows. There ETF could definitely see a tug of war between those investors who feel the global economy is slowing (less oil demand) and those that believe rising demand in emerging markets will continue to put pressure on tight supplies. It's going to be months before Libya gets its oil facilities back to 100%. Meanwhile there is the ongoing feud between Israel and Iran over Iran's nuclear weapons program. If that ever escalates to military action oil prices are definitely going higher.

We do want to keep our position size in the USO small. Oil can be a volatile commodity and this ETF is continually rolling over its futures positions to avoid taking delivery, which can cause swings in the ETF's price.

I am suggesting we buy calls on a dip at $36.00. The $35.00 level should offer some support. If triggered we'll use a stop loss at $33.75, under the 50-dma. Our long-term target is the $45-50 zone.

Buy-the-Dip trigger: $36.00

BUY the 2013 Jan $40 call (USO1319A40)

- or -

BUY the 2013 Jan $50 call (USO1418A50)

Originally listed on the Watch List: 11/12/11