New Watch List Entries

CAT - Caterpillar Inc.

SHLD - Sears Holding Corp


Active Watch List Candidates

DIS - Walt Disney Co.

JPM - JPMorgan Chase

PFE - Pfizer Inc.

SBUX - Starbucks Corp.

SYK - Stryker Corp

UNP - Union Pacific Corp

USB - U.S. Bancorp


Dropped Watch List Entries

DFS, V, and VLO all graduated to the play list.



New Watch List Candidates:


Caterpillar Inc. - CAT - close: 84.61

Company Info

There was a lot of chatter this past week about how cheap CAT is and how investors should be buying it now. It makes sense that the stock is sinking since there is a growing expectation that the U.S., Europe, and most of the world are slowing down. However, if the Fed suddenly comes out with some sort of new stimulus it could help turn CAT around and shares could rally pretty fast. The next Fed meeting is at the end of July.

Right now CAT is in a bearish down trend of lower highs and lower lows. Broken support near $90.00 should be new resistance. I am suggesting we wait for CAT to close over $90.50 and then buy calls the next day with a stop loss at $84.75. Our long-term target is the $110-115 zone (although we'll exit the 2013 calls before CAT hits our final target).

Breakout trigger: Close over $90.50, stop loss @ 84.75

BUY the 2013 Jan $95 call (CAT1319A95)

- or -

BUY the 2014 Jan $100 call (CAT1418A100)

Chart of CAT:

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


sears Holding Corp. - SHLD - close: 61.03

Company Info

The company that runs Sears and K-Mart may have found a bottom for its stock price. Shares are rising off the June lows and now the stock is breaking out past resistance at several key moving averages and the $60.00 level. If this rally continues the stock could see a short squeeze. The most recent data listed short interest at 47% of the 45.5 million share float.

I want to see confirmation of this rally. Wait for SHLD to close over $64.00 and then buy calls the next day with a stop loss at $57.40. Our target is $84.00 but we might aim higher. SHLD seems to be building an inverse head-and-shoulders pattern on the weekly chart. This pattern would suggest a rally toward the 2010 highs near $125 (I know, it seems a bit too optimistic).

Breakout trigger: Wait for a close over $64.00, stop loss $57.40

BUY the 2013 Jan $70 call (SHLD1319A70) current ask $3.90

- or -

BUY the 2014 Jan $75 call (SHLD1418A75) current ask $6.35

Chart of SHLD:

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


Active Watch List Candidates:



Walt Disney Co. - DIS - close: $48.04

Comments:
07/07/12 update: DIS posted a loss for the week but shares have maintained the bullish up trend. We may have to wait for DIS to report earnings before this stock finally sees a correction lower. I would not chase it here.

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


JPMorgan Chase - JPM - close: 33.90

Comments:
07/07/12 update: JPM plunged on Thursday as investors reacted to news that JPM might be involved in the current LIBOR price fixing scandal being investigated by U.S. and U.K. regulators. Meanwhile, traders are getting nervous about JPM and its upcoming earnings report this Friday (July 13th). This past week has created a bearish engulfing candlestick reversal pattern. I strongly suspect we'll see JPM spike down into the $30-28 zone again.

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


Pfizer Inc. - PFE - close: 22.54

Comments:
07/07/12 update: It was a down week for PFE with the stock declining three days in a row. We're still waiting for a breakout higher. Currently we want to wait for PFE to close above $23.40 and then buy calls the next day.

Our long-term target is $28.00.

Breakout trigger: Wait for a close over $23.40, use a stop at $20.95

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


Starbucks Corp. - SBUX - close: 51.97

Comments:
07/07/12 update: SBUX has been underperforming the last few days and the stock is down two weeks in a row. Shares currently sit on the bottom of its $51-56 trading range. Our recently adjusted entry point strategy is unchanged.

I am suggesting we wait for SBUX to close above $56.25 and then buy calls the next day with a stop loss at $50.75. Our long-term target is $69.00.

Breakout Trigger: wait for a close over $56.25, stop loss 50.75

BUY the 2013 Jan $60 call (SBUX1319A60)

- or -

BUY the 2014 Jan $65 call (SBUX1418A65)

06/30/12 adjust strategy to wait for a close over $56.25, new stop @ 50.75, adjust option strikes.
05/19/12 adjust stop loss to $45.75

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


Stryker Corp. - SYK - close: 53.54

Comments:
07/07/12 update: SYK hit some profit taking this past week. News out on Friday that SYK was recalling some hip implant products didn't help matters. Shares fell to their 50-dma before paring their losses. Our plan is unchanged.

I am suggesting we wait for SYK to close over $56.50 and then buy calls the next day with a stop loss at $50.75. We will set our targets at $64.50 and $69.50.

Breakout trigger: Wait for close over $56.50 (stop 50.75)

BUY the 2013 Jan $60 call (SYK1319A60)

- or -

BUY the 2014 Jan $60 call (SYK1418A60)

Originally listed on the Watch List: 06/30/12


Union Pacific Corp. - UNP - close: 116.75

Comments:
07/07/12 update: UNP tagged resistance near $120 and retreated this past week. The stock is nearing what should be short-term support in the $116-115 zone. Nimble traders might want to consider buying a bounce from this area. I am suggesting we wait for UNP to close over $121.00 and then buy calls the next day. We will start with a stop loss at $111.75. Our long-term target is $139 (although we'll probably exit our 2013 calls way before UNP hits our target).

Breakout trigger: Wait for a close over $121 (stop loss 111.75)

BUY the 2013 Jan $130 call (UNP1319A130)

- or -

BUY the 2014 Jan $140 call (UNP1418A140)

Originally listed on the Watch List: 06/30/12


U.S. Bancorp - USB - close: 32.01

Comments:
07/07/12 update: USB continues to outperform many of its peers in the financial sector. Yet we did see the stock reverse near resistance at its 2012 highs (around the $32.50 level). We're going to give USB another two weeks and then re-evaluate. Currently the plan is to buy a dip at $29.00. However, readers may want to consider buying calls if USB can close over the $33.00 mark instead (and adjust your stop loss and target appropriately).

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)

06/30/12 readers might want to consider an alternative entry point
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