New Watch List Entries

FXI - iShares China ETF


Active Watch List Candidates

MCD - McDonald's Corp

MSI - Motorola Solutions

SHAW - Shaw Group

V - Visa Inc.

YUM - Yum,! Brands


Dropped Watch List Entries

LXK, MMM, ONNN, and TEVA all graduated to the play list.



New Watch List Candidates:


iShares China 25 Index ETF - FXI - close: 38.67

Company Info

After three years of trying to cool off its economy it looks like China has succeeded. This past week the government reported Q4 GDP growth at 8.9%, the slowest pace in ten quarters. Last month the People's Bank of China (PBOC) cut their reserve ratio requirement for banks and many analysts believe they are about to do it again. Cutting the ratio lower provides banks with more cash to loan out. China has already told banks to increase lending in the first quarter. It seems that China has engineered their soft landing, in spite of stories about ghost cities fueled by their need to build to keep workers busy. If the Chinese government starts stoking their economic fire again then their stock market should also heat up.

The FXI China ETF is on the verge of a breakout above resistance in the $39-40 area. You could also argue that the FXI has created an inverse head-and-shoulders pattern and if the neckline is broken (near $39) then it forecasts a bullish target to $49.

I am suggesting we wait and buy call LEAPS when the FXI closes above $40.25. Once this occurs we'll buy calls the next day with a stop loss at $35.75. Our target is $49.50. More aggressive traders could jump in early when the FXI closes over $39.00 instead.

Breakout trigger: Wait for a Close over $40.25, then buy LEAPS the next day. Stop loss at $35.75.

BUY the 2013 Jan $45 call (FXI1319A45)

Chart of FXI:

Originally listed on the Watch List: 01/21/12


Active Watch List Candidates:



Activition/Blizzard, Inc. - ATVI - close: 12.22

Comments:
01/21/12 update: Rival EA is plunging to new 52-week lows but shares of ATVI are holding up. The stock is consolidating sideways above its 200-dma. I don't see any changes from my prior comments.

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


McDonald's Corp. - MCD - close: 101.74

Comments:
01/21/12 update: We have been waiting for a pull back in MCD for weeks but it has failed to materialize. Now the stock is trading near new all-time highs and looks poised to move higher. Yet earnings this week could be a catalyst for profit taking. MCD reports earnings on Jan. 24th before the opening bell.

I am leaving our buy-the-dip trigger at $95.50 on hopes for a post-earnings sell-off. 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


Motorola Solutions, Inc. - MSI - close: 47.59

Comments:
01/21/12 update: The stock market's broad-based rally this past week has boosted MSI toward major resistance near $48.00. Shares hit $48.05 on Thursday. Currently our plan is to wait for MSI to close over $48.25 and then buy calls the next day with a stop at $43.75. However, readers may want to wait and see how the market reacts to MSI's earnings report first. The company reports on January 25th before the opening bell.

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


Shaw Group Inc. - SHAW - close: 28.23

Comments:
01/21/12 update: It was another quiet week for SHAW. Shares are slowly drifting higher. We don't want to chase it here. 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)

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


Visa, Inc. - V - close: 100.58

Comments:
01/21/12 update: Visa rallied to a new all-time high on Wednesday-Thursday only to reverse lower. The stock is testing a long-term trend line of higher highs (just look at the weekly chart). I am still expecting a pull back. The 100-dma should be support. Please note that I am adjusting our buy-the-dip trigger down to $95.50 with a stop loss at $89.40.

Our long-term target is $119.00.

NOTE: Rival MasterCard reports earnings on February 2nd.

Buy-the-Dip trigger: $95.50, with a stop loss @ 89.40

BUY the 2013 Jan $110 call (V1319A110)

01/21/12 adjusted buy-the-dip trigger down to $95.50, stop 89.40
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


Yum! Brands, Inc. - YUM - close: 62.48

Comments:
01/21/12 update: YUM continues to rally but the stock is growing more and more overbought. We don't want to chase it. The plan is to buy a dip at $57.50 with a stop loss at $53.75. 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: $57.50, stop loss $53.75

BUY the 2013 Jan $60 call (YUM1319A60)

- or -

BUY the 2013 Jan $65 call (YUM1418A65)

01/14/12 adjusted entry point strategy to use a trigger at $57.50 and a stop at $53.75

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