Editor's Note:

FDO, TJX, and MRK have all graduated to the active play list. I removed HNZ tonight. Plus, I've adjusted a few entry points.



New Watch List Entries

ABT - Abbott Labs

VLO - Valero Energy


Active Watch List Candidates

AMRN - Amarin Corp.

DFS - Discover Financial

DIS - Walt Disney Co.

JPM - JPMorgan Chase

PEP - Pepsico Inc.

PFE - Pfizer Inc.

QCOM - QUALCOMM Inc.

SBUX - Starbucks Corp.

USB - U.S. Bancorp

WMT - Wal-Mart Stores


Dropped Watch List Entries

FDO, MRK, & TJX graduated to the play list.
HNZ was removed.



New Watch List Candidates:


Abbott Labs - ABT - close: 62.32

Company Info

ABT is a major drug maker. They also produce a number of medical devices for your eyes. The company's sales growth has been outperforming its peers. The stock has been showing relative strength. ABT is currently trading near its record all-time highs. Currently the Point & Figure chart is suggesting a $94 target.

Before we continue I want to warn you that trading the drug makers or biotech stocks has an industry-specific danger. You never know when an FDA approval might get denied or delayed. Or some clinical trial data might disappoint. Headlines like these can send a stock gapping down. On the other hand positive news could send it soaring.

I am suggesting we wait for ABT to close over $63.50. We'll buy calls the next day with a stop loss at $59.40. Our long-term target is $74.00 (over the next 12-18 mos).

Breakout trigger: Wait for a close over $63.50 (stop 59.40)

BUY the 2013 Jan $65 call (ABT1319A65) current ask $1.38

- or -

buy the 2014 Jan $65 call (ABT1418A65) current ask $3.70

Chart of ABT:

Originally listed on the Watch List: 06/23/12


Valero Energy - VLO - close: 23.50

Company Info

The oil refining stocks appear to have bottomed. Shares of VLO have recently broken out above resistance near $23 and its 200-dma. Yet there is still overhead resistance.

I am suggesting we wait for VLO to close over $24.25 and then we'll buy calls the next day with a stop loss at $22.25. Our long-term target is $29.75.

Breakout trigger: Wait for a close over $24.25 (stop 22.25)

BUY the 2013 Jan $25 call (VLO1319A25) current ask $2.10

- or -

BUY the 2014 Jan $30 call (VLO1418A30) current ask $2.44

Chart of VLO:

Originally listed on the Watch List: 06/23/12


Active Watch List Candidates:



Amarin Corp. - AMRN - close: 12.97

Comments:
06/23/12 update: AMRN has continued to drift higher. The stock is actually flirting with a bullish breakout past resistance near $13.00. Yet it can't quite seem to close over the $13.00 level, which has been our entry point requirement. So our trade isn't open yet.

I am adjusting our entry point strategy. We will wait for AMRN to close over $13.25 and then buy calls the next day.

Earlier Comments:
There has been some speculation that AMRN is a takeover target, which has fueled some of the sharp rallies higher. Currently the Point & Figure chart is bullish with a $15.00 target.

Our long-term target is $17.50.

FYI: We want to keep our position size small. AMRN can be a volatile stock. There are 2014 options available but the spreads are too wide.

Breakout trigger: Wait for a close over $13.25, stop @ 11.40

BUY the 2013 Jan $15 call (AMRN1319A15)

! Small positions !

06/23/12 adjust entry. wait for AMRN to close over $13.25 (instead of $13.00)

Originally listed on the Watch List: 06/09/12


Discover Financial - DFS - close: 33.61

Comments:
06/23/12 update: DFS has bee holding up reasonably well. Shares are still trading near their all-time (2012) highs. I will point out that Thursday's session has created a bearish reversal pattern and Friday's move has not negated that potential reversal.

We have been waiting for DFS to correct lower toward $28.00. That's unlikely to happen any time soon. However, there is still a good chance the financial sector corrects. I am proposing two different entry point strategies.

Our first strategy will be a buy-the-dip strategy to buy calls at $29.00 with a stop loss at $26.40. If triggered at $29.00 we'll use the following options:

buy the 2013 Jan $30 call (DFS1319A30)
- or -
buy the 2014 Jan $35 call (DFS1418A35)

However, we will also list a breakout entry strategy. DFS' record high is $34.75. If DFS can close over $35.00 then we'll buy calls the next day with a stop loss at $31.75. If triggered on this higher entry point then we'll use the following options:

buy the 2013 Jan $37 call (DFS1319a37)
- or -
buy the 2014 Jan $40 call (DFS1418a40)

06/23/12 adjusted entry point strategy to two different entries
06/16/12 DFS is scheduled to report earnings on June 19th.

Originally listed on the Watch List: 06/02/12


Walt Disney Co. - DIS - close: $47.47

Comments:
06/23/12 update: DIS managed a gain for the week and shares are still trading near their midweek highs. We don't want to chase it.

I am suggesting we buy call LEAPS on a dip at $45.00 with a stop loss at $41.75. Our long-term target is $54.50.

Buy-the-Dip trigger: $45.00 (stop 41.75)

BUY the 2014 Jan $50 call (DIS1418A50)

Originally listed on the Watch List: 06/16/12


H.J. Heinz Co. - HNZ - close: 53.56

Comments:
06/23/12 update: The last few days have been pretty choppy for HNZ. Actually if you look at the last couple of months HNZ has been acting rather volatile. We've been waiting for a close at new highs above $55.50. However, I am dropping HNZ as a candidate.

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

Trade did not open.

06/23/12 removed from the watch list.

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


JPMorgan Chase - JPM - close: 35.99

Comments:
06/23/12 update: JPM has extended its oversold bounce to three weeks in a row. Even news that Moody's had downgraded JPM's credit rating failed to end the rally. Although technically Thursday's session still looks like a potential bearish reversal pattern.

The financials are still at risk for a deeper correction if Europe continues to unravel. If we see JPM produce a new higher low then we'll re-evaluate our entry strategy. Until then we are waiting for a plunge toward $30.00.

Right now the plan is to buy calls when JPM dips to $30.25. More conservative traders might want to wait for a JPM to dip to $29.00 instead.

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)

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


Pepsico, Inc. - PEP - close: 68.70

Comments:
06/23/12 update: This past week PEP warned that unfavorable exchange rates (due to the rising dollar) would negatively impact their earnings results. Shares of PEP held up pretty well in spite of the news although short-term the stock looks poised to contract lower. Our plan is unchanged.

I am suggesting we wait for PEP to close above $70.25. We'll buy calls the next day with a stop loss at $65.75. Our long-term target is $79.00. FYI: The Point & Figure chart is currently forecasting an $80 target.

Breakout trigger: Wait for a close over $70.25, stop loss @ 65.75

BUY the 2014 Jan $75 call (PEP1418A75)

Originally listed on the Watch List: 05/26/12


Pfizer Inc. - PFE - close: 22.73

Comments:
06/23/12 update: Drug stocks as a sector have been doing relatively well. The rally in PFE stalled last week. Shares are churning sideways in a narrow range. I don't see changes from my prior comments.

I am suggesting we wait for this stock to close over $23.20 (and 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. (We'll exit the 2013 calls before shares hit our target)

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

BUY the 2014 Jan $25 call (PFE1418A25)

06/23/12 removed the 2013 call. We'll only play the 2014s
04/28/12 do not launch positions prior to the earnings report on May 1st.

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


QUALCOMM Inc. - QCOM - close: 55.64

Comments:
06/23/12 update: Recent stock action in QCOM doesn't look so healthy. The oversold bounce from a week ago has failed. Now QCOM is sitting on support near the $55.00 level. If we see QCOM close under $55.00 we will drop it as a candidate.

I am adjusting our entry to wait for a close over $60.00 instead of $62.00. The plan is to buy calls the next day with a stop loss at $57.45. Our long-term target is $74.00. We will probably exit the 2013 calls prior to hitting our final target.

Breakout trigger: Wait for close over $60.00, stop 57.45

BUY the 2013 Jan $70 call (QCOM1319A70)

- or -

BUY the 2014 Jan $75 call (QCOM1418A75)

06/23/12 adjust entry requirement to a close over $60.00 (instead of $62.00), if QCOM closes under $55.00 we'll drop it as a candidate.

Originally listed on the Watch List: 06/09/12


Starbucks Corp. - SBUX - close: 54.64

Comments:
06/23/12 update: The mid June rally in SBUX has reversed at resistance near $56.00. There is still a good chance that SBUX will correct toward $50.00. Readers may want to wait for a dip to $49.00 or its simple 200-dma as their entry point instead.

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


U.S. Bancorp - USB - close: 31.72

Comments:
06/23/12 update: The rally in USB has stalled at resistance near $32.00. Thursday's session has created a bearish reversal pattern but it needs to see confirmation. I am adjusting our strategy to buy a dip at $29.00 instead of $28.00. We'll raise the stop loss to $26.40. Our long-term target is $34.00. I prefer the 2014 calls but we'll list the 2013s as well.

Buy-the-Dip trigger: $29.00 (stop loss 26.40)

BUY the 2013 Jan $30 call (USB1319A30)

- or -

BUY the 2014 Jan $30 call (USB1418A30)

06/23/12 adjust entry trigger to $29.00, stop to 26.40
06/02/12 adjust entry trigger to $28.00

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


Wal-Mart Stores - WMT - close: 67.30

Comments:
06/23/12 update: It looks like the rally in WMT is finally losing steam. The Thursday-Friday move does look like a short-term bearish reversal. I would expect the correction to begin soon. I am adjusting our buy-the-dip trigger to $63.00.

Buy-the-Dip trigger: $63.00 (stop loss 57.90)

BUY the 2013 Jan $65 call (WMT1319A65)

- or -

BUY the 2014 Jan $70 call (WMT1418A70)

06/23/12 adjust trigger to $63.00, from $62.00

Originally listed on the Watch List: 06/02/12