Editor's Note:

We are trimming several candidates from the watch list.



New Watch List Entries

ECA - Encana Corp.

HNZ - H.J. Heinz Co.


Active Watch List Candidates

ATVI - Activision Blizzard

AIG - American Intl. Group

CREE - Cree, Inc.

LTD - Limited Brands

MCD - McDonald's Corp

MRK - Merck & Co

MSFT - Microsoft Corp.

PFE - Pfizer Inc.

SBUX - Starbucks Corp.


Dropped Watch List Entries

I am removing AXP, DANG, GLD, HAS, SCHW, and WSM from the watch list.

JPM graduated to the play list.



New Watch List Candidates:


Encana Corp. - ECA - close: 21.20

Company Info

ECA is a Canadian natural gas and oil company. Shares have spent over seven months building a significant base in the $17-22 range. Now shares look poised to finally breakout from this zone. If investors turn more defensive then ECA could attract more attention thanks to its 3.8% annual dividend yield.

I am suggesting we wait for ECA to close over $22.50. We'll buy calls the next day with a stop loss at $18.75. Our long-term targets is 29.00 (although we'll probably exit the 2013 calls before ECA hits $29).

Breakout trigger: close over $22.50, stop loss @ 18.75

BUY the 2013 Jan $25 call (ECA1319A25) current ask $1.10

- or -

BUY the 2014 Jan $25 call (ECA1418A25) current ask $2.35

Chart of ECA:

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


H.J. Heinz Co. - HNZ - close: 54.82

Company Info

Based in Pittsburgh, PA, this company sells its condiments to customers around the globe. Not only is HNZ another defensive stock but it offers investors a 3.6% dividend yield. The date is not confirmed yet but HNZ looks like it will report earnings on May 24th. Readers may want to wait until after the earnings report before considering positions.

I am suggesting we wait for HNZ to close over $55.50 and then buy calls the next day with a stop loss at $51.85 (just under the April low). Our long-term target is $64.00.

Breakout trigger: close over $55.50, stop loss @ 51.85

BUY the 2013 Jan $55 call (HNZ1319A55) current ask $2.45

- or -

BUY the 2014 Jan $60 call (HNZ1418A60) current ask $2.40

Chart of HNZ:

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


Active Watch List Candidates:



American Intl. Group - AIG - close: 31.75

Comments:
05/12/12 update: AIG is holding up pretty well following the news a week ago about the U.S. government selling more stock. While shares of AIG are bouncing off their May 7th lows it might just be a bear-flag pattern. Considering the market's recent weakness we will wait for further weakness.

I am suggesting a buy-the-dip trigger @ 28.25. We also want to keep our position size small to limit our risk. 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: 12.65

Comments:
05/12/12 update: ATVI managed a gain for the week in spite of the company lowering their earnings guidance. There is no change from my prior comments.

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.

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: 59.64

Comments:
05/12/12 update: Hmmm... AXP is actually holding up reasonably well considering the weakness in the financials. This stock still has a bullish trend of higher lows. Yet my concern over the financials and the broader market's major indices prevent me from being more bullish here.

I am going to remove AXP from the watch list. It will remain on my radar screen. The trend is up but I don't see an entry point for long-term positions. Short-term traders might want to buy calls if AXP hits $60.25 and plan an exit in the $62-63 zone.

Trade did not open.

05/12/12 We are removing AXP from the watch list for now. It will be back.
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


Cree, Inc. - CREE - close: 32.07

Comments:
05/12/12 update: CREE is still consolidating sideways. If the market would cooperate I would expect shares to breakout higher. I don't see any changes from my prior comments.

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: 7.08

Comments:
05/12/12 update: Ouch! It was an ugly week for DANG with a plunge from $8 to $7. It is unlikely that shares will hit our trigger to buy calls at $9.25 any time soon. Therefore I am removing DANG from our watch list.

Trade did not open.

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

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


Gold ETF - GLD - close: 153.56

Comments:
05/12/12 update: Weakness in the euro has produced strength in the dollar and that was bad news for the price of gold (if you're trading it in dollars). The breakdown in the GLD is bearish. I am removing GLD from the watch list.

Trade did not open.

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

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


Hasbro Inc. - HAS - close: 35.68

Comments:
05/12/12 update: LEAPS traders need patience but I'm not sure I have the patience for HAS. The stock is moving too slowly. We'll look at it again once the stock nears resistance near $38-39. I am removing HAS from the watch list. HAS does not move very fast so we'll need to be patient.

Trade did not open.

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

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


Limited Brands, Inc. - LTD - close: 48.42

Comments:
05/12/12 update: We have been expecting a pullback in LTD. Shares declined toward technical support at the 50-dma. We're still waiting for a correction toward the $45.00 area. Shares might see some profit taking after LTD reports earnings on May 16th.

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: 91.90

Comments:
05/12/12 update: It was an ugly week for MCD with a breakdown under support near $94.00 and its 200-dma and 200-ema. A week ago we were expecting a deeper correction lower and move the buy-the-dip trigger to $91.00. Shares came close but have not yet hit our trigger. I am adjusting the trigger again. This time look for a dip to $90.00. We will move our buy-the-dip trigger to $90.25 with a stop loss at $87.75.

Buy-the-Dip trigger: $90.25, stop 87.75

BUY the 2013 Jan $ 95 call (MCD1319A95)

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

05/12/12 move the trigger to $90.25, stop loss to $87.75
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


Merck & Co - MRK - close: 38.03

Comments:
05/12/12 update: Hmm... MRK has not acted very defensively the last several days. Shares just broke potential support at the 50 and 100-dma this past week. You could argue MRK has created a bearish double top with the January and May peaks. Short-term the trend is down.

Currently we are waiting to launch positions until MRK can close over $40.00 and then buy calls the next day. 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)

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


Microsoft - MSFT - close: 31.16

Comments:
05/12/12 update: MSFT produced a nice bounce off its midweek lows but I am still expecting the correction to continue. The plan is to buy calls on a dip at $29.00. More conservative traders could wait for a dip to the simple 200-dma instead.

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: 22.65

Comments:
05/12/12 update: Traders bought the dip near $22.00 and PFE closed up for the week. The trend of higher lows remains intact for now.

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


Starbucks Corp. - SBUX - close: 55.01

Comments:
05/12/12 update: SBUX has produced a decent bounce off its May 8th lows but shares have been struggling with resistance at the 50-dma the last couple of days. I am still expecting the correction to continue.

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 (stop loss @ 47.00)

BUY the 2013 Jan $55 call (SBUX1319A55)

- or -

BUY the 2014 Jan $60 call (SBUX1418A60)

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


Charles Schwab Corp. - SCHW - close: 13.11

Comments:
05/12/12 update: I am giving up on SCHW, at least for now. The financial sector looks poised for more weakness. It might take a while for SCHW to find support again. It is unlikely that shares will hit our trigger at $14.75 any time soon. I am removing this stock from the watch list.

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

Our trade did not open.

05/12/12 removed from the watch list.

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


Williams-Sonoma Inc. - WSM - close: 37.31

Comments:
05/12/12 update: I am also giving up on WSM. If you look at the weekly chart WSM still has a bullish pattern of higher lows. However, it could be a while before shares rally back toward resistance near $40.00. Our plan was to buy calls if WSM could close over $40.25. We'll keep it on our radar screen but I am removing WSM from the watch list.

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

Our trade did not open.

05/12/12 removed from the watch list.

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