Editor's Note:

MRK - Merck & Co

SBUX - Starbucks Corp.



New Watch List Entries


Active Watch List Candidates

ATVI - Activision Blizzard

AIG - American Intl. Group

AXP - American Express

CREE - Cree, Inc.

DANG - DangDang Inc.

GLD - Gold ETF

HAS - Hasbro

LTD - Limited Brands

MCD - McDonald's Corp

MSFT - Microsoft Corp.

PFE - Pfizer Inc.

SCHW - Charles Schwab

WSM - Williams-Sonoma Inc.


Dropped Watch List Entries

CI, RIG, URBN, and WMT were all removed from the watch list.



New Watch List Candidates:


Merck & Co - MRK - close: 38.84

Company Info

Investors could start focusing on defensive names if the market's major indices start setting new lower lows. MRK could benefit from that attention. Drugs are traditionally considered safe haven names and with a 4.3% annual dividend yield it's a spot investors can get paid to wait.

The stock doesn't move very fast but shares are consolidating sideways and look poised to move higher. I am suggesting we wait for MRK to close over $40.00 and buy calls the next day with a stop loss at $37.75. Our long-term target is $47.50. FYI: The Point & Figure chart has a long-term target of $60.00.

Breakout trigger: Wait for close over $40.00, stop loss @ 37.75

BUY the 2014 Jan $40 call (MRK1418A40) current ask $2.63

Chart of MRK:

Originally listed on the Watch List: 05/05/12


Starbucks Corp. - SBUX - close: 55.56

Company Info

The ubiquitous coffee giant saw its stock rally to new record highs just three weeks ago. Currently shares have corrected lower toward their 50-dma. After such an impressive run higher over the last several months I suspect the correction has farther to go. We want to be ready to buy the dip.

I am suggesting we buy calls if SBUX trades down to $50.25. The $50.00 level should be round-number support. We'll use a stop loss at $47.00. Our long-term target is $64.00.

Buy-the-Dip trigger: $50.25

BUY the 2013 Jan $55 call (SBUX1319A55)

- or -

BUY the 2014 Jan $60 call (SBUX1418A60)

Chart of SBUX

Originally listed on the Watch List: 05/05/12


Active Watch List Candidates:



American Intl. Group - AIG - close: 32.83

Comments:
05/05/12 update: Once again shares of AIG are declining on news that the U.S. Treasury plans to sell more of its stock in AIG. On Friday and again over the weekend there were press releases regarding the government's plan to sell part of their equity stake in AIG. It looks like this secondary offer is going to be 163.9 million shares at $30.50 a share. AIG plans to buy about $2.0 billion worth of this secondary (about 65.5 million shares worth). Odds are we are going to see AIG gap down near $30.00 on Monday morning. Combine that with an already weak stock market and we could see AIG over correct. Therefore I am adjusting our buy-the-dip strategy.

We will move our buy-the-dip trigger down to $28.25 and move our stop loss down to $25.75. We also want to keep our position size small to limit our risk. I am moving our 2013 call strike to the $30.00 strike. Our long-term target is $39.00.

Buy-the-Dip trigger: $28.25, stop $25.75 (small positions only!)

(Small Positions)

BUY the 2013 Jan $30 call (AIG1319A30)

- or -

BUY the 2014 Jan $35 call (AIG1418A35)

05/05/12 The U.S. government is planning to sell 164 million shares at $30.50 and AIG will probably gap down on this news.
Move the trigger down to $28.25, and move the stop loss to $25.75.
04/28/12 adjust buy-the-dip trigger to $30.00 and stop to $27.40

Originally listed on the Watch List: 04/07/12


Activision Blizzard, Inc. - ATVI - close: 12.36

Comments:
05/05/12 update: ATVI had rallied right to resistance near $13.00 but couldn't breakout. Now shares are retreating as the market corrects lower. The company is due to report earnings soon on May 9th and the results could give ATVI a big push either way.

I am suggesting we wait for ATVI to close over $13.25. We will buy calls the next day with a stop loss at $12.25. Our long-term target is the $16-18 range.

FYI: ATVI is due to report earnings on May 9th.

Breakout trigger: Wait for ATVI to close over $13.25, buy calls the next day with a stop at $12.25

BUY the 2013 Jan $15 call (ATVI1319A15)

- or -

BUY the 2014 Jan $15 call (ATVI1418A15)

Originally listed on the Watch List: 03/24/12


American Express - AXP - close: 60.10

Comments:
05/05/12 update: AXP had held up pretty well considering the market's recent weakness. I remain concerned that the financial sector could see a correction lower. I am temporarily removing our trigger to buy calls. For the next five trading days we are just spectators watching to see how AXP performs. We will re-evaluate a potential entry point next weekend.

- or -

BUY the 2014 Jan $65 call (AXP1418A65)

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No entry this week. Just watch AXP. We will re-evaluate next weekend.

05/05/12 I am temporarily removing our trigger to open positions on AXP. For the next five days we're just watching and will re-evaluate next weekend.
04/28/12 adjust buy-the-dip trigger to $57.50, stop to $53.40, adjusted strike prices.

Originally listed on the Watch List: 04/14/12


Cigna Corp. - CI - close: 45.26

Comments:
05/05/12 update: I am removing CI from the watch list. The stock is down three weeks in a row and breaking several layers of support.

Our trade did not open.

05/05/12 Removed CI from the watch list.

Originally listed on the Watch List: 04/21/12


Cree, Inc. - CREE - close: 31.83

Comments:
05/05/12 update: CREE is holding up reasonably well. Shares came close to breaking out past technical resistance at its simple 300-dma on Thursday. More aggressive traders might want to consider buy call LEAPS on a breakout past the $33.50 level. We are keeping our trigger unchanged at $34.50.

Actually, I am suggesting we launch small bullish positions if CREE can close over $34.50. We'll buy calls the next morning with a stop loss at $29.45. Our long-term target is $44.50.

Breakout trigger: a close over $34.50 (small positions)

BUY the 2013 Jan $40 call (CREE1319A40)

Originally listed on the Watch List: 04/14/12


DangDang Inc. - DANG - close: 8.13

Comments:
05/05/12 update: DANG spent the week churning sideways between overhead resistance and support. I don't see any changes from my prior comments.

Keep in mind that DANG is a volatile stock. I do consider this an aggressive trade. Readers will want to consider keeping position size small to limit risk. Another reason to be cautious is DANG's earnings report is coming up in a couple of weeks (date not yet confirmed).

I am suggesting we wait for DANG to close over $9.25 and then buy call LEAPS the next day with a wide stop loss at $7.25. Our long-term target is $14.50.

Breakout trigger: close over $9.25, stop $7.25

BUY the 2013 Jan $10 call (DANG1319A10)

Originally listed on the Watch List: 04/28/12


Gold ETF - GLD - close: 159.47

Comments:
05/05/12 update: The consolidation in the GLD continues to narrow. You can see the ETF has a pattern of lower highs and higher lows. Traders have been buying the dips near technical support at the GLD's rising 300-dma. This ETF is nearing a major turning point that should send it marching higher or crashing lower.

Nimble traders might want to consider some sort of neutral option straddle or option strangle play since I'm expecting a big move in the next month or two.

The LeapsTrader newsletter's strategy is unchanged.

Earlier Comments:
Currently I am suggesting we wait for the GLD to close over $165.50 and we'll buy calls the next morning with a stop loss at $154.90. This is an aggressive entry point since the inverse H&S pattern would not be complete until shares breakout past the $175 area. The U.S. dollar is likely to see a lot of movement over the next several months, which could cause volatility in gold. Therefore we want to keep our position size small. Our long-term target is $195.

Breakout trigger: A close over $165.50 (small positions)

BUY the 2013 Jan $190 call (GLD1319A190)

- or -

BUY the 2014 Jan $190 call (GLD1418A190)

Originally listed on the Watch List: 04/14/12


Hasbro Inc. - HAS - close: 36.09

Comments:
05/05/12 update: The sharp bounce in HAS is starting to falter. A downgrade on Friday morning didn't help matters. We are waiting for a breakout past resistance.

Earlier Comments:
I am suggesting we launch bullish positions when HAS closes above $39.25. More aggressive traders might want to jump in early when HAS closes over $38.00 instead. Our long-term target is $44.75.

HAS does not move very fast so we'll need to be patient.

Breakout trigger: wait for a close over $39.25, stop 36.25

BUY the 2013 Jan $40 call (HAS1319A40)

- or -

buy the 2014 Jan $45 call (HAS1418A45)

Originally listed on the Watch List: 04/07/12


JPMorgan Chase & Co - JPM - close: 41.75

Comments:
05/05/12 update: JPM is still correcting lower and the stock accelerated on Friday with a -2.9% decline.

I am suggesting we buy calls on a dip at $40.25 with a stop loss at $37.25. Our long-term target is $49.75.

Buy-the-Dip trigger: $40.25, stop loss 37.25

BUY the 2013 Jan $45 call (JPM1319A45)

- or -

BUY the 2014 Jan $45 call (JPM1418A45)

Originally listed on the Watch List: 04/07/12


Limited Brands, Inc. - LTD - close: 50.27

Comments:
05/05/12 update: LTD continues to show strength and the stock hit a new record high on Thursday near $51.85. I don't want to chase it especially with LTD's earnings report coming up in the next two weeks (date is still unconfirmed).

Currently the plan is to buy a dip at $45.50.

Buy-the-Dip trigger: $45.50 (stop loss @ 41.50)

BUY the 2013 Jan $45 call (LTD1319A45)

04/28/12 adjust entry point to buy a dip at $45.50, stop $41.50
03/24/12 adjusted buy-the-dip trigger to $44.00 with a stop at $39.75

Originally listed on the Watch List: 03/10/12


McDonald's Corp. - MCD - close: 95.87

Comments:
05/05/12 update: Investors have to ask themselves, do you think MCD is going to hold support near $94.00 and its simple 200-dma? Or do you think MCD's three-month consolidation lower is going to keep going, especially with the market poised to breakdown?

I want to play defensively here. Based on the stock market's recent weakness we want to make an adjustment. I'm bullish long-term on MCD the current trend is lower. I am adjusting our buy-the-dip trigger down to $91.00 with a stop loss at $88.40. I am adjusting our option strikes as well.

If we see MCD reverse higher and close above the trend of lower highs then we'll reconsider buying a breakout instead.

Buy-the-Dip trigger: $91.00, stop 88.40

BUY the 2013 Jan $ 95 call (MCD1319A95)

- or - BUY the 2014 Jan $100 call (MCD1418A100)

05/05/12 another adjustment. move the trigger to $91.00, stop to $88.40, adjusted the option strikes.
04/28/12 adjust the buy-the-dip trigger to $95.00
04/14/12 adjust buy-the-dip trigger to $94.00.

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


Microsoft - MSFT - close: 30.98

Comments:
05/05/12 update: You could argue that MSFT has created a bearish double top with the peak in March and the failed rally in mid April. I suspect the correction is going to accelerate lower soon. We are adjusting our buy-the-dip trigger from $29.50 to $29.00.

Buy-the-Dip trigger: $29.00 (stop @ $26.75)

BUY the 2013 Jan $30 call (MSFT1319A30)

- or -

BUY the 2014 Jan $30 call (MSFT1418A30)

05/05/12 adjust the trigger to $29.00
04/28/12 adjust buy-the-dip trigger to $29.50, stop to $26.75

Originally listed on the Watch List: 04/14/12


Pfizer Inc. - PFE - close: 22.38

Comments:
05/05/12 update: PFE reported earnings on May 1st and beat estimates by a penny. The news failed to inspire any new buyers. Shares have been drifting lower as the market sinks. The larger trend is still bullish but PFE could see a deeper correction.

For the moment we will leave our trigger unchanged. I am suggesting we wait for PFE to close over $23.20 and then launch positions the next morning.

Our long-term target is $28.00. I will list the 2013 calls but I prefer the 2014 because PFE does not move very fast.

Breakout trigger: Wait for a close over $23.20, use a stop at $20.65

BUY the 2013 Jan $22.50 call (PFE1319A22.5)

- or -

BUY the 2014 Jan $25 call (PFE1418A25)

04/28/12 do not launch positions prior to the earnings report on May 1st.

Originally listed on the Watch List: 04/21/12


Transocean Ltd. - RIG - close: 47.95

Comments:
05/05/12 update: RIG has created a dramatic reversal lower with the failed rally on Thursday under its 50-dma. Now shares look poised to breakdown under its April low. Short-term traders might want to buy May or June puts if RIG drops below $47.40. Based on the stock's recent performance I am dropping it as a watch list candidate.

Our Trade Did Not open.

05/05/12 removed RIG from the watch list.

Originally listed on the Watch List: 04/28/12


Charles Schwab Corp. - SCHW - close: 13.53

Comments:
05/05/12 update: SCHW has also produced a sharp reversal lower. The stock failed near resistance at $14.50 and now it's testing support near $13.50. I'm not making any changes tonight but odds are, if SCHW continues to sink, we will drop it next weekend. Currently I am suggesting we wait for SCHW to close above $14.75 and then launch positions the next morning with a stop loss at $13.35. Our long-term target is the $17.50-19.50 zone.

Breakout trigger: Wait for a close over $14.75, stop 13.35

BUY the 2013 Jan $15 call (SCHW1319A15)

- or -

BUY the 2014 Jan $20 call (SCHW1418A20)

Originally listed on the Watch List: 04/28/12


Urban Outfitters Inc. - URBN - close: 28.31

Comments:
05/05/12 update: URBN continues to see a lot of volatility. This past week saw a rally past resistance at $30.00 and then the stock immediately reversed lower the next day. I am removing URBN from the watch list.

Trade never opened.

05/05/12 removed URBN from the watch list
04/07/12 URBN broke out above resistance at $30.00 this past week but it has yet to close over our trigger at $30.50.

Originally listed on the Watch List: 03/31/12


Wal-Mart Stores - WMT - close: 58.70

Comments:
05/05/12 update: The oversold bounce in WMT is already losing steam. Shares look poised to drop back toward $57.00 and its simple 200-dma again. It could be weeks before we see WMT build a new base or rally back toward its highs so I am removing WMT from the watch list.

Trade did not open.

05/05/12 removed WMT from the watch list.

Originally listed on the Watch List: 04/21/12


Williams-Sonoma Inc. - WSM - close: 38.55

Comments:
05/05/12 update: WSM has seen some dramatic moves the last few days. Wednesday produced a big surge higher but shares failed to close over resistance at $40.00. Thursday did see a breakout above $40.00 but again WSM failed to close over this level. Friday the stock collapsed with a -3.0% decline. The move looks like a bull trap pattern and bearish reversal. If WSM continues lower this week I will likely drop it next weekend.

Currently, I am suggesting we wait for WSM to close over $40.25 and then buy calls the next day. We'll start with a stop loss at $36.90. FYI: Investors should note that WSM is due to report earnings in a couple of weeks but the May 17th date is not yet confirmed.

Breakout trigger: Wait for close over $40.25, stop 36.90

BUY the 2013 Jan $45 call (WSM1319A45)

Originally listed on the Watch List: 04/28/12