Editor's Note:

Our watch list has been working very well lately. We had five candidates make the jump to our active trade list this past week.



New Watch List Entries

HCP - HCP, Inc.

TWX - Time Warner


Active Watch List Candidates

CAT - Caterpillar Inc.

CLX - The Clorox Co.

DIS - Walt Disney Co.

JPM - JPMorgan Chase

SBUX - Starbucks Corp.


Dropped Watch List Entries

CVS, MON, PFE, UNP, USB all graduated to the play list.

I have removed SYK.



New Watch List Candidates:


HCP, Inc. - HCP - close: 45.19

Company Info

HCP is a REIT focused on the healthcare industry. Many of the REITs have been showing relative strength. HCP has rallied to new record highs. We don't want to chase it here. I am suggesting we buy calls on a dip at $42.00. The pullback may not happen immediately but HCP is due to report earnings on July 31st and the news could spark some profit taking.

If triggered on a dip at $42.00 we'll use a stop loss at $39.45. Our long-term target is 48.50 but that might be too optimistic since HCP does not have 2014 calls.

Buy-the-Dip trigger: $42.00 (stop loss 39.45)

BUY the 2013 Jan $45 call (HCP1319a45) current ask $2.35

Chart of HCP:

Originally listed on the Watch List: 07/21/12


Time Warner - TWX - close: 38.86

Company Info

Shares of this media giant have rallied to new multi-year highs. Yet TWX remains under resistance near $40.00. I am suggesting we wait for TWX to close over $40.50 and then buy calls the next day. I prefer the 2014 calls over the 2013 ones.

FYI: TWX is due to report earnings on August 1st.

Breakout trigger: Wait for a close over $40.50 (stop 37.25)

BUY the 2013 Jan $42 call (TWX1319A42) current ask $0.97

- or -

BUY the 2014 Jan $45 call (TWX1418A45) current ask $2.06

Chart of TWX:

Originally listed on the Watch List: 07/21/12


Active Watch List Candidates:



Caterpillar Inc. - CAT - close: 80.95

Comments:
07/21/12 update: CAT managed an oversold bounce off its July 12th lows but shares remain in a down trend. That might change if the company beats the earnings estimate or raises guidance. CAT is due to report earnings on July 25th, before the opening bell.

The stock currently has technical resistance at its 50-dma near $86.40. I am adjusting our entry point requirements. Instead of waiting for a close over $90.50 we will launch positions if CAT can close over $88.00 instead. We'll adjust the stop loss to $79.90.

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 $88.00, stop loss @ 79.90

BUY the 2013 Jan $95 call (CAT1319A95)

- or -

BUY the 2014 Jan $100 call (CAT1418A100)

07/21/12 adjusted entry point to wait for a close over $88.00, stop loss 79.90

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


The Clorox Co. - CLX - close: 72.74

Comments:
07/21/12 update: CLX has been consolidating sideways all week as it flirts with short-term resistance in the $73.50 area. I don't see any changes from my prior comments. I am suggesting we wait for CLX to close over $75.50 and then buy calls the next day.

FYI: CLX has a strong 3.5% dividend yield. The next dividend payment is August 9th with the stock trading ex-dividend on July 23rd, 2012. It should be about 64 cents.

NOTE: CLX is due to report earnings on Aug. 2nd.

Breakout trigger: Wait for a close over $75.50 (stop 71.75)

BUY the 2013 Jan $75 call (CLX1319A75)

- or -

BUY the 2014 Jan $80 call (CLX1418A80)

Originally listed on the Watch List: 07/14/12


Walt Disney Co. - DIS - close: $48.59

Comments:
07/21/12 update: Media giant DIS continues to march higher. Shares rallied toward resistance near $50 this past week. If you look at the weekly chart this pullback from $50 looks like a potential top. Since my market outlook is still bearish I would expect DIS to correct soon.

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:
07/21/12 update: Hmm... There was no follow through on the July 13th rally. JPM has been slowly slipping lower all week. It looks like shares might resume their down trend. We are going to reinstate the buy-the-dip entry near $30 plan.

Buy calls on a dip at $30.25 with a stop loss at $27.75. I 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


Starbucks Corp. - SBUX - close: 51.96

Comments:
07/21/12 update: SBUX was sort of churning higher most of the week but gave it all back with a -4.1% plunge on Friday. The stock is once again testing support near $51 and its 150-dma. I don't see any changes from my prior comments.

SBUX has been stuck in a $51-56 trading range. Wait for a close over $56.25 and then buy calls the next day with a stop loss at $50.75. Our long-term target is $69.00.

FYI: Earnings are July 26th.

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: 51.38

Comments:
07/21/12 update: It was an ugly week for SYK with shares falling on its earnings report. The company missed estimates by a penny. The close under support near $52 and its 200-dma is bearish. Our plan was to wait for SYK to close over $56.50 but that's unlikely to happen any time soon.

I am removing SYK from the watch list.

07/21/12 removed from the watch list.

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