New Watch List Entries

JPM - JPMorgan Chase

USB - U.S. Bancorp


Active Watch List Candidates

ATVI - Activision Blizzard

CREE - Cree, Inc.

ECA - Encana Corp.

HNZ - H.J. Heinz Co.

MRK - Merck & Co

MSFT - Microsoft Corp.

PFE - Pfizer Inc.

SBUX - Starbucks Corp.


Dropped Watch List Entries

AIG, LTD, and MCD all graduated to our play list.



New Watch List Candidates:


JPMorgan Chase - JPM - close: 33.49

Company Info

JPM has traditionally been considered the "best in breed" among the major banks. That reputation was tarnished this month with the disclosure of $2 billion in trading losses for one of their credit portfolios. The news sparked a significant sell-off. Shares are slicing through support as investors worry about how much risk JPM really has.

This company is so big that even with the $2 billion in losses they will still turn a profit this quarter. This overreaction will probably turn out to be a great entry point for new long-term positions. However, the correction in the financials is probably not over yet. That's why we want to buy calls on a dip near the $30.00 level.

We'll use a trigger to buy calls at $30.25 and we'll use a stop loss at $27.75, which is just under the 2011 low. I would prefer the 2014 calls but more aggressive traders could use the 2013 calls instead.

Buy-the-Dip trigger: $30.25 (stop loss @ 27.75)

BUY the 2013 Jan $33 call (JPM1319a33)

- or -

BUY the 2014 Jan $35 call (JPM1418A35)

Chart of JPM:

Originally listed on the Watch List: 05/19/12


U.S. Bancorp - USB - close: 30.27

Company Info

USB is a large regional U.S. bank that has actually held up pretty well until this last week. The stock finally gave into profit taking and broke its bullish channel that started back in mid 2011.

I am expecting more weakness in the financials but we can use this to our advantage. USB should find support near the $28.00 level. I am suggesting a trigger to buy calls at $28.25. We'll use a stop loss at $25.90. Our long-term target is $34.00. I prefer the 2014 calls but we'll list the 2013s as well.

Buy-the-Dip trigger: $28.25 (stop loss 25.90)

BUY the 2013 Jan $30 call (USB1319A30)

- or -

BUY the 2014 Jan $30 call (USB1418A30)

Chart of USB:

Originally listed on the Watch List: 05/19/12


Active Watch List Candidates:



Activision Blizzard, Inc. - ATVI - close: 11.97

Comments:
05/19/12 update: Shares of ATVI saw a spike higher on the release date of its new Diablo 3 game (May 15th) but the rally failed at resistance near $13.00. Now shares are testing support near $12.00 and its 300-dma. If this stock does not show improvement soon then we'll drop it as a candidate. Currently we are waiting for a breakout over resistance near $13.00.

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


Cree, Inc. - CREE - close: 28.49

Comments:
05/19/12 update: It was an ugly week for technology stocks and semiconductor stocks were hammered harder than most. CREE has corrected from the $33 level to technical support at its simple 200-dma near $28.50. If we see CREE close under $28.00 a week from now we'll likely drop it as a candidate (and short-term traders could buy puts and target a move toward the $22-20 zone).

At the moment we're waiting for a breakout over resistance. 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


Encana Corp. - ECA - close: 19.63

Comments:
05/19/12 update: Energy stocks were also big underperformers last week. ECA has fallen back below the $20 mark and several key moving averages. If this stock does not show improvement soon we will likely drop it as a candidate.

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)

- or -

BUY the 2014 Jan $25 call (ECA1418A25)

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


H.J. Heinz Co. - HNZ - close: 54.10

Comments:
05/19/12 update: HNZ held up reasonably well only losing about 70 cents for the week. This coming week the stock could see some volatility. The company is scheduled to report earnings on May 24th. Wall Street expects a profit of 79 cents a share.

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)

- or -

BUY the 2014 Jan $60 call (HNZ1418A60)

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


Merck & Co - MRK - close: 37.82

Comments:
05/19/12 update: MRK spent the week churning sideways inside a $1.00 range. I don't see any changes from my prior comments.

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: 29.27

Comments:
05/19/12 update: MSFT was down every day last week. Shares look poised to hit $29.00 and its 150-dma and 200-ema on Monday. I suspect we will see MSFT actually fall toward its simple 200-dma near $28.25. Therefore, we will adjust our buy-the-dip trigger to buy calls at $28.50 and move our stop loss down to $26.45.

Buy-the-Dip trigger: $28.50 (stop @ $26.45)

BUY the 2013 Jan $30 call (MSFT1319A30)

- or -

BUY the 2014 Jan $30 call (MSFT1418A30)

05/19/12 adjust the trigger to $28.50, stop to $26.45
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: 22.57

Comments:
05/19/12 update: PFE is still holding up reasonably well. The stock is only down a few cents for the week.

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: 51.53

Comments:
05/19/12 update: Ouch! It was a rough week for SBUX with the stock down five days in a row. We've been expecting a correction toward $50. I am adjusting our stop loss to $45.75 so it's under the 200-dma. FYI: more conservative traders may want to wait for SBUX to close over its simple 10-dma before initiating positions.

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 @ 45.75)

BUY the 2013 Jan $55 call (SBUX1319A55)

- or -

BUY the 2014 Jan $60 call (SBUX1418A60)

05/19/12 adjust stop loss to $45.75

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