Editor's Note:

We continue to see our watch list candidates graduate to the active trade list. This past week saw CAT and QCOM make the leap. I have removed DIS as a candidate.



New Watch List Entries

ATI - Allegheny Tech.

LEN - Lennar Corp.

SWKS - Skyworks Solutions


Active Watch List Candidates

CLX - The Clorox Co.

HCP - HCP, Inc.

HFC - HollyFrontier

WFC - Wells Fargo


Dropped Watch List Entries

CAT & QCOM graduated to the play list.

I have removed DIS as a candidate.



New Watch List Candidates:


Allegheny Technologies - ATI - close: 32.52

Company Info

ATI is in the metal fabrication industry. If you consider all the negative news about slowing economic data I'm not surprised that shares have been underperforming the market this year. Yet it looks like all the bad news has been priced in. You could argue that ATI has created a bullish double bottom with the lows in June and July. Now the stock is on the verge of breaking out from this $28-33 trading range.

I do consider this an aggressive, higher-risk trade because the economic data is still negative and still suggesting a global slowdown. If this trade does open we want to keep our position size small. I am suggesting we wait for ATI to close over $34.00 and then buy calls the next day. We'll use a wide stop loss at $29.90. Our long-term target is $the $40-45 area. FYI: The Point & Figure chart for ATI has turned bullish with a $44 target.

Breakout trigger: Wait for a close over $34.00 (stop loss 29.90)

BUY the 2013 Jan $37.50 call (ATI1319A37.5) current ask $1.70

- or -

BUY the 2014 Jan $40.00 call (ATI1418A40) current ask $4.30

*small positions*

Chart of ATI:

Originally listed on the Watch List: 08/11/12


Lennar Corp. - LEN - close: 31.20

Company Info

The homebuilders, as a group, continue to climb albeit slowly. LEN appears to have broken out from a potential bull-flag consolidation pattern. Now shares sit just under resistance near $32.00 and multi-year highs.

I am suggesting we wait for LEN to close over $32.25 and then buy calls the next day with a stop loss at $29.75. Our long-term target is $36.00 for the 2013 calls and $39.50 for the 2014 calls. FYI: LEN is due to report earnings in mid September.

Breakout trigger: Wait for close over $32.25 (stop 29.75)

BUY the 2013 Jan $35 call (LEN1319A35) current ask $1.82

- or -

BUY the 2014 Jan $40 call (LEN1418A40) current ask $3.05

Chart of LEN:

Originally listed on the Watch List: 08/11/12


Skyworks Solutions - SWKS - close: 29.63

Company Info

SWKS is a semiconductor stock. This sector has been showing relative strength recently. Shares of SWKS appear to be breaking out from a multi-month consolidation under the $29-30 area. The late July high was $30.10. I am suggesting we wait for SWKS to close over $30.25 and then buy calls the next day. We'll use a stop loss at $27.40. Our long-term target is the $34.00-37.50 range (depending which option you buy).

FYI: The point & figure chart is bullish with a $40 target.

Breakout trigger: Wait for a close over $30.25 (stop loss 27.40)

BUY the 2013 Jan $32 call (SWKS1319a32) current ask $2.95

- or -

BUY the 2014 Jan $35 call (SWKS1418a35) current ask $5.40

Chart of SWKS:

Originally listed on the Watch List: 08/11/12


Active Watch List Candidates:



The Clorox Co. - CLX - close: 71.85

Comments:
08/11/12 update: CLX has bounced off its midweek lows but the rebound is struggling. The stock has hit resistance near $72 and its 50-dma. On a short-term basis CLX looks bearish. If shares don't improve soon we're going to drop it as a candidate.

Right now the plan is to wait for CLX to close over $75.50 and then buy calls the next day.

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: $49.65

Comments:
08/11/12 update: No, that's not a typo. DIS has closed unchanged for the week. There was a strong pop on Wednesday following its earnings report but there was no follow through higher.

I was hoping for some profit taking on the earnings report to provide an entry point. Unfortunately there hasn't been any profit taking yet. The long-term trend is clearly higher but I don't want to chase it. Aggressive traders might want to buy dips or bounce near the 30-dma or 40-dma. I am actually removing DIS as a candidate. I will keep it on my radar screen for a correction.

Trade did not open.

08/11/12 removing DIS as a watch list candidate.

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


HCP, Inc. - HCP - close: 45.45

Comments:
08/11/12 update: We have been expecting HCP to correct lower. So far so good. The stock has broken the multi-week trend line of higher lows. Right now the plan is to buy calls on a dip at $43.00 but if HCP doesn't move faster I'll probably drop it as a candidate and put it back on my radar screen.

Buy-the-Dip trigger: $43.00 (stop loss 39.45)

BUY the 2013 Jan $45 call (HCP1319a45)

08/06/12 adjust trigger dip to $43.00

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


HollyFrontier Corp. - HFC - close: 38.48

Comments:
08/11/12 update: HFC flirted with resistance near $40.00 but failed to close over that level. Now shares are testing short-term support near $38.00. Aggressive traders might want to consider buying calls on Friday's intraday rebound higher. I would prefer to wait.

I am suggesting an entry if HFC can close over $40.50. We'll buy calls the next day with a stop loss at $36.90. Our long-term target is $44.50 for the 2013 calls and $48.50 for the 2014 calls.

Breakout trigger: close over $40.50 (stop 36.90)

BUY the 2013 Jan $42 call (HFC1319A42)

- or -

BUY the 2014 Jan $45 call (HFC1418A45)

Originally listed on the Watch List: 08/06/12


Wells Fargo & Co - WFC - close: 33.83

Comments:
08/11/12 update: It was a very quiet week for some of the large banking stocks. It's worth noting that on the weekly chart WFC just painted a new bearish engulfing candlestick reversal pattern. Overall I don't see any changes from my prior comments.

I am suggesting we buy calls if WFC Can close over $35.00. We'll buy calls the next day. Our starting target is $39.85. We'll use a stop loss at $32.75. FYI: The point & figure chart is bullish with a $57 target.

Breakout trigger: wait for close over $35.00 (stop 32.75)

BUY the 2014 $40 call (WFC1418A40)

Originally listed on the Watch List: 08/06/12