New Watch List Entries

DOW - The Dow Chemical Co.

FDX - FedEx Corp.

FXE - Euro currency ETF


Active Watch List Candidates

FDO - Family Dollar Stores

LLY - Eli Lilly

MCD - McDonald's Corp

MMM - 3M Co.

MSI - Motorola Solutions

NKE - Nike Inc.

ONNN - ON Semiconductor

V - Visa Inc.


Dropped Watch List Entries

DVN and TEVA have been removed from the watch list.



New Watch List Candidates:


The Dow Chemical Co. - DOW - close: 28.76

Company Info

DOW is a major chemical company. The stock appears to be forming a bottom over the last five months with resistance near $30.00. I am suggesting we wait for DOW to close over $30.25 and then open bullish positions with a stop loss at $27.25. Our long-term target is $39.50. I do expect DOW to find some resistance near $35.00.

FYI: The Point & Figure chart for DOW is bullish with a $46 target.

Breakout trigger: Wait for a close over $30.25, use a stop loss at $27.25

BUY the 2013 Jan $35 call (DOW1319a35)

- or -

BUY the 2014 Jan $40 call (DOW1418a40)

Chart of DOW:

Originally listed on the Watch List: 12/31/11


FedEx Corp. - FDX - close: 83.51

Company Info

Shipping giant FDX is on the verge of a breakout. The stock has been consolidating under resistance near $85-86 and its simple 200-dma for days. A breakout here could signal a run toward its 2011 highs in the $98 zone. In recent headlines FDX was named one of Morningstar's top picks for 2012 due to the company's growing ground shipment business. FDX also recently announced a rate hike increase, which suggest the company has pricing power.

I am suggesting that we wait for FDX to close over $86.50 and then buy calls the next day with a stop loss at $79.75. Our first target is $98.00. FYI: The Point & Figure chart for FDX is bullish with a $101 target.

Breakout trigger: Wait for FDX to close over $86.50, stop @ 79.75

BUY the 2013 Jan $100 call (FDX1319A100)

Chart of FDX:

Originally listed on the Watch List: 12/31/11


CurrencyShares Euro ETF - FXE - close: 128.92

Company Info

The problem in the EU is not going away. While the ECB has done a lot to alleviate some of the liquidity issues with European banks all they have done is kick the can down the road (yet again).

I expect a significant amount of volatility for the euro and the dollar but the path of least resistance for the euro is down. We could see the FXE retest its 2010 lows under $120 over the next twelve months.

More aggressive traders may want to buy put options now. I am suggesting we wait and buy puts when the FXE closes under $128.00. We'll start with a stop loss at $131.25. Our target is $120.00. FYI: The Point & Figure chart for the FXE is bearish with a $116 target.

Buy PUTS when the FXE closes under $128.00, stop @ 131.25

BUY the 2013 Jan $120 PUT (FXE1319M120)

Chart of FXE:

NOTE: As an alternative the other side of this trade would be buying calls on a U.S. dollar ETF (like the UUP).

Originally listed on the Watch List: 12/31/11


Active Watch List Candidates:



Activition/Blizzard, Inc. - ATVI - close: 12.32

Comments:
12/31/11 update: ATVI is showing more improvement. The stock continued to rally last week in spite of the low volume. There is still overhead resistance near $12.60 and the 50-dma. We are adjusting our entry point. Instead of waiting for a close over $13.00 we'll open bullish positions if ATVI can close over $12.75 instead. Our long-term target is $15.75.

Wait for a close over $12.75 (stop 11.90)

BUY the 2013 Jan $15 call (ATVI1319A15)

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


Devon Energy - DVN - close: 62.00

Comments:
12/31/11 update: I cautioned readers a week ago that if DVN did not improve we'll drop it as a candidate. Shares have continued to drift lower so we are removing DVN as a watch list candidate. A breakdown under $58.50 would be very bearish and could signal a drop toward its 2011 lows (near $51). Meanwhile it would take a rally past resistance near $70 before DVN started to look bullish again.

Trade did not open.

12/31/11 Removed DVN from the watch list.

Originally listed on the Watch List: 12/10/11


Family Dollar Stores Inc. - FDO - close: 57.66

Comments:
12/31/11 update: FDO is still quietly consolidating sideways. That could change this week. The company is due to report earnings on January 5th, after the closing bell. Wall Street is expecting a profit of 68 cents a share. Overall I don't see any changes from my prior comments except I would prefer to wait until after we the market's reaction to FDO's earnings before initiating positions.

The current plan is to buy calls if FDO can close over $61.00. We'll use a stop loss at $55.75. Our target is $74.50.

I consider this a more aggressive entry point. We want to keep our position size small.

Wait for a close over $61.00, stop loss @ 55.75 (small positions only)

BUY the 2013 Jan $70 call (FDO1319A70)

12/24/11 adjusted entry point strategy. wait for a close over $61.00
12/03/11 Adjusted trigger to buy the dip at $54.50 and stop loss to $51.25, they were 53.00 and $49.45.

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


Eli Lilly - LLY - close: 41.56

Comments:
12/31/11 update: After a huge four-week surge in LLY the stock finally stalled. Shares are due for a correction.

We're suggesting a buy-the-dip entry point at $39.50 with a stop loss at $37.40. Our long-term targets are $44.75 and $48.00.

Buy-the-Dip trigger: $39.50

BUY the 2013 Jan $45 call (LLY1319A45)

- or -

BUY the 2014 Jan $45 call (LLY1418A45)

Originally listed on the Watch List: 12/17/11


McDonald's Corp. - MCD - close: 100.33

Comments:
12/31/11 update: MCD managed to eke out another weekly gain but momentum has stalled. I am still expecting a correction back toward its 50-dma or support near the $95.00 level. The plan is to buy calls on a dip at $95.50 with a stop loss at $89.50. Our long-term target is $108.00.

Buy-the-Dip trigger: $95.50, stop 89.50

BUY the 2013 Jan $100 call (MCD1319A100)

12/24/11 adjusted entry point to $95.50, stop loss to $89.50
12/17/11 adjusted entry point to $91.50, stop loss to $87.25
11/26/11 adjusted stop loss to $86.45

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


3M Co. - MMM - close: 81.73

Comments:
12/31/11 update: MMM is still hovering under resistance near $83.00 and technical resistance at its exponential 200-dma and its simple 150-dma. There is no change from my prior comments.

More aggressive traders might want to buy calls if MMM can close over $83.50. We are leaving our entry point unchanged with plans to open bullish positions when MMM closes over $85.00. We'll use a stop loss at $78.90. Our long-term target is $97.00.

We are listing the 2013 calls. MMM does have 2014s available.

Wait for Close over $85.00, then buy calls, stop: 78.90

BUY the 2013 Jan $95 call (MMM1319A95)

Originally listed on the Watch List: 12/03/11


Motorola Solutions, Inc. - MSI - close: 46.29

Comments:
12/31/11 update: MSI hit some profit taking this past week but the overall trend is unchanged. We're still waiting for a breakout to new highs.

I am suggesting we wait for MSI to close above $48.25 and then buy calls the next day with a stop loss at $43.75. Our long-term target is $64.50. The Point & Figure chart is bullish with a $58 target.

FYI: 2014 calls are also available.

Wait for MSI to close over $48.25, buy calls the next day, stop 43.75

BUY the 2013 Jan $55 call (MSI1319A55)

Originally listed on the Watch List: 12/10/11


Nike Inc. - NKE - close: 96.37

Comments:
12/31/11 update: NKE spent the week consolidating sideways in the $96-98 range. We are waiting for a breakout past resistance at $98.00.

I am suggesting we buy calls on NKE after the stock closes above $98.50. More conservative traders may want to wait for NKE to close above $100.00 instead since the $100 mark could be round-number resistance. Our long-term target is $119.00. FYI: The Point & Figure chart for NKE is bullish with a $115 target.

NOTE: 2014 calls are available but they're high-dollar options.

Wait for a close over $98.50, stop loss 92.25

BUY the 2013 Jan $110 call (NKE1319A110)

Originally listed on the Watch List: 12/24/11


ON Semiconductor Corp. - ONNN - close: 7.72

Comments:
12/31/11 update: ONNN continues to slowly make progress as it rallied from the bottom of its trading range. There is still significant resistance in the $8.25 area along with its exponential 200-dma and its simple 150-dma.

I am suggesting investors wait for ONNN to close over $8.50 and then buy calls the next day with a stop loss at $7.70. More conservative traders may want to wait for ONNN to close over its simple 200-dma instead. Our long-term target is $11.45. I would keep our position size small.

Wait for ONNN to close over $8.50, buy calls the next day, stop 7.70

BUY the 2013 Jan $10 call (ONNN1319A10)

(small positions)

Originally listed on the Watch List: 12/10/11


Teva Pharmaceuticals Industries - TEVA - close: 40.36

Comments:
12/31/11 update: TEVA has continued to slip lower. Shares are now testing round-number support at $40.00. I suspect that this stock is still building a significant bottom but it could be weeks before we see TEVA breakout past resistance near $45.00. I am removing TEVA from the watch list but we'll keep it on our radar screen.

Trade Did Not Open

12/31/11 Removed TEVA from the watch list.

Originally listed on the Watch List: 12/17/11


Visa, Inc. - V - close: 101.53

Comments:
12/31/11 update: Visa may have just formed a short-term bearish double top with the stock failing twice in the $103.25-103.50 zone. Shares have very short-term support at $100.00 but we want to see a dip back toward $98.00.

Broken resistance near $98.00 should offer new support. I am suggesting we buy calls on a dip at $98.25 with a stop loss at $92.25. Our long-term target is $119.00. FYI: The Point & Figure chart for V is bullish with a $129 target.

Buy-the-Dip trigger: $98.25, with a stop loss @ 92.25

BUY the 2013 Jan $110 call (V1319A110)

Originally listed on the Watch List: 12/24/11