New Watch List Entries

BBY - Best Buy Inc.

SPRD - Spreadtrum Communications


Active Watch List Candidates

ATI - Allegheny Tech.

EMN - Eastman Chemical

ROST - Ross Stores

SCHW - Charles Schwab

SWKS - Skyworks Solutions

UIS - Unisys Corp.

WFC - Wells Fargo


Dropped Watch List Entries

URBN graduated to the play list.



New Watch List Candidates:


Best Buy Co. - BBY - close: 17.31

Company Info

This is a BEARISH PUT trade.

Shares of BBY seem to be in a long-term death march. Investors are consistently disappointed with the company's earnings results and the stock has been stair stepping lower in ugly fashion for several quarters. The most recent quarter was pretty bad with profits falling from $150 million in the year ago quarter to just $12 million. Same-store sales fell -1.6% versus a year ago +14% gain. It's widely known that BBY has turned into the high-end showroom for Amazon.com. Consumers come into a BBY store, shop around, ask questions, look at the merchandise, and then go to Amazon.com to buy it.

We think the long slide lower continues. I am suggesting we wait for BBY to close under $17.00 a share and then buy puts the next day. We'll use a stop loss at $20.25 to start. Our long-term target is $10.25.

I do consider this somewhat aggressive because BBY shares have been so volatile in recent weeks. That's why our stop loss is so wide. Plus, there has been talk that BBY might go private. That's probably our biggest risk since BBY shares might pop on news it's going private. FYI: The Point & Figure chart is bearish with a $10 target.

Keep position size small to limit risk!

Breakdown trigger: a Close under $17.00 (stop:20.25)

BUY the 2013 Jan $15 PUT (BBY1319m15) current ask $1.43

- or -

BUY the 2014 Jan $10 PUT (BBY1418m10) current ask $1.45

Chart of BBY:

Originally listed on the Watch List: 08/25/12


Spreadtrum Communications - SPRD - close: 19.61

Company Info

SPRD operates in the semiconductor industry making chipsets for mobile devices like smartphones. The stock has been stuck in the $17-20 range for several weeks. A breakout could signal a new run higher. I am suggesting a trigger to buy calls when SPRD closes above $20.50. We will aim for $24.00 since I'm only listing the 2013 calls. SPRD does have 2014s but the spreads are too wide.

Breakout trigger: Wait for a close over $20.50 (stop: 18.90)

BUY the 2013 Jan $22.50 call (SPRD1319a22.5) current ask $1.70

Chart of SPRD:

Originally listed on the Watch List: 08/25/12


Active Watch List Candidates:



Allegheny Technologies - ATI - close: 30.77

Comments:
08/25/12 update: It was a rough week for ATI. The stock's rally reversed under resistance near $34.00 and its 100-dma. Shares are now testing their 50-dma near $30.75. Overall I don't see any changes from my prior comments.

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.

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.

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

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

- or -

BUY the 2014 Jan $40.00 call (ATI1418A40)

*small positions*

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


Eastman Chemical Co. - EMN - close: 55.27

Comments:
08/25/12 update: EMN has been flirting with resistance near $56.00 all week long. I don't see any changes from my prior comments.

Earlier Comments:
EMN is a major chemical company. Normally you might that with a slowing global economy and rising oil prices (a major input cost for chemicals) that shares of EMN would be suffering. This stock is actually setting new all-time record highs. The $55-56 level has been major resistance for years.

I am suggesting readers wait for EMN to close over $56.00 and then buy calls the next day with a stop loss at $52.40. Our long-term target is to exit our 2014 calls when EMN hits $69.00.

Breakout trigger: Wait for EMN to close over $56.00, buy calls the next day (stop loss 52.40)

BUY the 2013 Jan $60 call (EMN1319A60)

- or -

BUY the 2014 Jan $65 call (EMN1418A65)

Originally listed on the Watch List: 08/18/12


Ross Stores, Inc. - ROST - close: 69.89

Comments:
08/25/12 update: The consolidation in ROST has been pretty mild. Traders bought the dip on Friday and the stock look poised to rally.

I am suggesting we wait for ROST to close over $70.50 and then buy calls the next day with a stop loss at $66.45. Our long-term target is $84.50. FYI: The P&F chart is bullish with a $92 target.

We do want to limit our position size and keep them small to reduce our risk.

Breakout trigger: Wait for a close over $70.50 (stop: 66.45)

*Small Positions*

BUY the 2013 Jan $75 call (ROST1319A75)

- or -

BUY the 2014 Jan $80 call (ROST1418A80)

Originally listed on the Watch List: 08/18/12


Charles Schwab Corp. - SCHW - close: 13.27

Comments:
08/25/12 update: SCHW managed to post a minor gain for the week while many of the financials saw profit taking.

I am suggesting investors wait for SCHW to close over $13.60 and then buy calls the next day. We will start with a stop loss at $12.45. Our long-term target is $15.50 (exit the 2014 calls when SCHW hits $15.50).

Breakout trigger: Wait for SCHW to close over $13.60

BUY the 2013 Jan $12.50 call (SCHW1319A12.5)

- or -

BUY the 2014 Jan $15 call (SCHW1418A15)

Originally listed on the Watch List: 08/18/12


Skyworks Solutions - SWKS - close: 29.64

Comments:
08/25/12 update: SWKS continues to churn sideways under resistance at the $30.00 level.

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)

- or -

BUY the 2014 Jan $35 call (SWKS1418a35)

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


Unisys Corp. - UIS - close: 21.16

Comments:
08/25/12 update: It was a volatile week for UIS. The stock shot higher, trading as high as $22.70 on Tuesday before reversing lower. We are still waiting for a dip toward support near $20.00.

I am suggesting we buy calls on a dip at $20.25. We'll use a stop loss at $18.75. Our target is $24.50. I am only suggesting the 2013 calls because the spread on the 2014 calls is too wide.

Buy-the-Dip trigger: $20.25 (stop 18.75)

BUY the 2013 Jan $20 call (UIS1319A20)

Originally listed on the Watch List: 08/18/12


Wells Fargo & Co - WFC - close: 34.04

Comments:
08/25/12 update: WFC closed virtually unchanged for the week. 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