New Watch List Entries

LXK - Lexmark Intl.

SHAW - Shaw Group

YUM - Yum! Brands


Active Watch List Candidates

FDO - Family Dollar Stores

FDX - FedEx Corp.

MCD - McDonald's Corp

MMM - 3M Co.

MSI - Motorola Solutions

NKE - Nike Inc.

ONNN - ON Semiconductor

V - Visa Inc.


Dropped Watch List Entries

DOW, FXE and LLY graduated to the active trade section of the newsletter.



New Watch List Candidates:


Lexmark Intl. Inc. - LXK - close: 34.10

Company Info

LXK is a major player in the printer and ink industry. Shares saw some significant swings in 2011. The stock has developed a more positive tone the last few months and looks like it's on the verge of breaking out past major resistance at $35.00.

I am suggesting we wait for LXK to close above $35.25 and then buy calls the next day with a stop at $31.75. There is some resistance near $40 but our long-term target is $44.00.

NOTE: LXK is due to report earnings in very late January or early February. We don't have a confirmed date yet. Investors may want to wait and see how the market reacts to LXK's earnings report before considering new positions.

FYI: The Point & Figure chart on LXK is bullish with a $51 target.

Wait for a close over $35.25, stop loss 31.75

BUY the 2013 Jan $40 call (LXK1319A40)

Chart of LXK:

Originally listed on the Watch List: 01/07/12


Shaw Group Inc. - SHAW - close: 27.28

Company Info

SHAW is a heavy construction company. Shares experienced a very volatile and rough 2011. Yet it looks like the stock ha finally bottomed. Investors have priced in previous worries about a slowing economy and now SHAW is on the mend.

The recent rally that began three weeks ago has stalled at technical resistance near the 200-dma. I am suggesting we wait and buy a dip at $25.00 with a stop loss at $22.35. I would start with small positions to limit risk.

FYI: The Point & Figure chart on SHAW is bullish with a $37 target.

Buy-the-Dip trigger: $25.00, stop loss @ 22.35

BUY the 2013 Jan $30 call (SHAW1319A30)

- or -

BUY the 2014 Jan $30 call (SHAW1418A30)

Chart of SHAW:

Originally listed on the Watch List: 01/07/12


Yum! Brands, Inc. - YUM - close: 59.85

Company Info

YUM is best known by its many franchise brands like Taco Bell, Pizza Hut, and KFC. The stock was a winner in 2011 with the stock closing near all-time highs. Shares are currently trading under resistance at $60.00. I am expecting a correction before YUM continues higher. Therefore I am suggesting a buy-the-dip trigger at $56.00 with a stop loss at $53.40. Our long-term target is $69.00.

NOTE: YUM is due to report earnings on February 6th. Investors may want to wait and see how the market reacts to YUM's earnings report before considering new positions.

FYI: The Point & Figure chart on YUM is bullish with an $84 target.

Buy-the-Dip trigger: $56.00, stop loss $53.40

BUY the 2013 Jan $60 call (YUM1319A60)

- or -

BUY the 2013 Jan $65 call (YUM1418A65)

Chart of YUM:

Originally listed on the Watch List: 01/07/12


Active Watch List Candidates:



Activition/Blizzard, Inc. - ATVI - close: 12.24

Comments:
01/07/12 update: Shares of rival EA were underperforming last week. Yet ATVI found support near $12.00 again. Bulls could argue ATVI is building an inverse head-and-shoulders pattern. The stock needs to breakout past its 50-dma and the $12.50 level.

Our plan is to wait for ATVI to close over $12.75 and then buy calls the next day. 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


Family Dollar Stores Inc. - FDO - close: 53.63

Comments:
01/07/12 update: FDO reported earnings on January 5th, after the closing bell. Investors were disappointed with the results and guidance. The stock plunged toward technical support near its 200-dma. Shares look very vulnerable to more profit taking.

I am dropping FDO as a watch list candidate since it's unlikely that the stock will hit our entry point requirement to close over $61.00 any time soon.

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

Trade did not open.

01/07/12 removed FDO as a watch list candidate. 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


FedEx Corp. - FDX - close: 85.49

Comments:
01/07/12 update: It was a choppy week for FDX but shares managed to post a gain anyway. Shares continue to trade under resistance near $86.00. If the stock can breakout higher we could see it hit our entry point soon.

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)

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


McDonald's Corp. - MCD - close: 100.60

Comments:
01/07/12 update: Tuesday's action in MCD looked like a bearish reversal pattern but there was no follow through lower. The stock recovered to actually post a gain for the week. I still don't want to chase it here.

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.

FYI: MCD is due to report earnings on January 24th. There is always the chance shares sell-off as investors do some profit taking following the announcement.

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: 83.37

Comments:
01/07/12 update: MMM posted gains for the week and shares managed to hold above technical resistance at the simple 150-dma and exponential 200-dma, which is a positive sign.

More aggressive traders might want to buy calls on MMM now. 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.

NOTE: MMM is due to report earnings on January 26th. Investors may want to wait and see how the market reacts to earnings before considering new positions.

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: 46.55

Comments:
01/07/12 update: It was another quiet week for MSI. We're still waiting for a breakout past resistance. If MSI doesn't make any progress by the end of January we might drop it as a candidate. Keep in mind that MSI is due to report earnings on January 25th. Investors may want to wait and see how the market reacts to earnings before considering new positions.

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: 97.99

Comments:
01/07/12 update: NKE has been flirting with a breakout past resistance at $98.00 all week long.

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: 8.06

Comments:
01/07/12 update: Semiconductor stock ONNN continues to march higher. Shares are now testing technical resistance at the 150-dma and its exponential 200-dma. I am focused on price resistance in the $8.30-8.40 zone. That's why 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


Visa, Inc. - V - close: 100.71

Comments:
01/07/12 update: Visa failed to make any progress last week. The stock has been churning sideways in the $103.50-100.00 zone for over two weeks now. I am concerned that shares could see a stronger correction. We will adjust our buy-the-dip entry point down to $96.00 and move our stop loss down to $89.75. Our long-term target is $119.00.

Readers may want to consider an alternative entry point like a close over $104.00 with a stop near $99.00 instead.

NOTE: Visa is due to report earnings in early February.

Buy-the-Dip trigger: $96.00, with a stop loss @ 89.75

BUY the 2013 Jan $110 call (V1319A110)

01/07/12 Adjusted entry point strategy to buy a dip at $96.00 with a stop at $89.75.

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