New Watch List Entries

COF - Capital One Financial

FDO - Family Dollar Stores


Active Watch List Candidates

CCL - Carnival Corp.

DE - Deere & Co.

FTR - Frontier Telecom

GE - General Electric

GLD - Gold ETF

JPM - JPMorgan Chase


Dropped Watch List Entries

KMB and SIRI graduated to our active play list.



New Watch List Candidates:


Capital One Financial Corp. - COF - close: 59.00

Company Info

The financial sector has been showing relative strength. Shares of COF are now testing major resistance near $60.00. A breakout here could signal the beginning of a new leg higher.

COF can be somewhat volatile so we want to keep our position size small. I am suggesting we wait for COF to close above $60.50 and then buy calls the next day. We'll use a stop loss at $57.25. Our long-term target is $74.00 but we'll have to keep an eye on potential resistance at $70.00.

Breakout trigger: Wait for a close over $60.50 (stop 57.25)

BUY the 2014 Jan $65 call (COF1418a65) current ask $5.20

Chart of COF:

Originally listed on the Watch List: 10/06/12


Family Dollar Stores - FDO - close: 69.02

Company Info

I mentioned FDO as a potential candidate in last week's new plays editor's note. The company reported earnings on Oct. 3rd and deliver results that were in-line yet management guided lower for the next quarter. Surprisingly traders bought the news anyway. FDO is now testing resistance near $70.00. I am expecting a correction.

The plan is to launch small bullish positions on a dip at $66.00 with a stop loss at $63.45. I wanted to buy the 2014 January calls but the spreads are outrageously wide. So tonight I am suggesting the April $75 call.

Buy-the-Dip trigger: $66.00 (stop 63.45) *Small Positions*

BUY the 2013 April $75 call (FDO1304d75) current ask $2.65

Chart of FDO:

Originally listed on the Watch List: 10/06/12


Active Watch List Candidates:



Carnival Corp. - CCL - close: 37.13

Comments:
10/06/12: There is still a decent chance the market might correct lower in October so we're not giving up on buying a big dip in CCL yet.

I am suggesting we open small bullish positions on a dip at $35.25 with a stop at $32.75.

Our long-term target is $42.00. FYI: The point and figure chart is bullish with a $48 target.

Buy-the-Dip trigger: $35.25 (stop loss @ 32.75) *Small Positions*

BUY the 2014 Jan $40 call (CCL1418a40)

09/22/12 earnings are due on Sep. 25th. We are adjusting our entry trigger to $35.25 and our stop loss to $32.75
09/15/12 move the trigger to $36.00 and the stop to $33.75

Originally listed on the Watch List: 09/08/12


Deere & Co. - DE - close: 82.78

Comments:
10/06/12: DE is holding up reasonably well and tagged a new relative high on Friday morning before paring its gains. We still don't want to chase it here.

Right now the plan is to wait and buy a dip at $79.00. More aggressive traders may want to consider buying a dip at $80.00 instead. We want to keep our position size small to limit our risk. Our long-term target is $94.00.

Buy-the-Dip trigger: $79.00 (stop loss 74.90) *Small Positions*

BUY the 2014 Jan $90 call (DE1418a90)

09/29/12 adjust our entry point to buy a dip at $79.00, adjust the stop loss to $74.90

Originally listed on the Watch List: 09/15/12


Frontier Comm. - FTR - close: 4.77

Comments:
10/06/12: FTR saw a pullback the first three days of the month but traders bought the dip near support in the $4.55-4.50 area. I don't see any changes from my prior comments. A breakout past resistance near $5.00 and its 300-dma would be bullish.

I am suggesting we buy calls after FTR closes above $5.20. Wait for FTR to close above our trigger and buy calls the next day with a stop at $4.65. Our long-term target is $6.90. More aggressive traders could aim higher.

Breakout trigger: Wait for a close over $5.20 (stop 4.65)

BUY the 2014 Jan $5 call (FTR1418a5)

Originally listed on the Watch List: 09/29/12


General Electric - GE - close: 23.12

Comments:
10/06/12: GE continues to show relative strength. Yet after a five-week climb I strongly suspect the stock could see some profit taking when it reports earnings. GE is scheduled to announce Q3 earnings on Oct. 19th. We will wait for a correction to buy a dip.

I am listing a buy-the-dip entry point at $21.50 with a stop loss at $19.75. Our long-term target is $27.50.

Buy-the-Dip trigger: $21.50 (stop 19.75)

BUY the 2014 Jan $25 call (GE1418a25)

Originally listed on the Watch List: 09/22/12


SPDR Gold ETF - GLD - close: 172.62

Comments:
10/06/12: The U.S. dollar produced a decline this last week, which helped lift GLD to a new relative high on Thursday. I still don't want to chase it at current levels.

Currently I am suggesting we buy calls on a dip at $165.50. Plan to exit the 2013 calls at $174.50. Exit the 2014 calls in the $185-200 range.

Buy-the-Dip trigger: $165.50 (stop loss @ 159.00)

BUY the 2013 Jan $175 call (GLD1319a175)

- or -

BUY the 2014 Jan $200 call (GLD1418a200)

09/15/12 adjust the trigger to $165.50, stop to $159.00.
09/08/12 adjust the buy-the-dip trigger to $164.00 (up from $162)

Originally listed on the Watch List: 09/01/12


JPMorgan Chase - JPM - close: 41.71

Comments:
10/06/12: Hmm... we may have to adjust our entry point strategy. JPM and the financial sector were showing relative strength this past week. JPM is on the verge of breaking out past resistance near $42.00. The company is due to report earnings on October 12th and I do not want to launch new positions at relative highs in front of an earnings report. There is too much risk of a sell-off on a disappointing report.

At the moment we will keep our strategy with a plan to buy a dip at $38.50. However, we will consider re-adjusting our entry point strategy after we see how investors react to JPM's earnings results and guidance. Our long-term target is $45.00.

Buy-the-Dip trigger: $38.50 (stop 35.75)

BUY the 2014 Jan $45 call (JPM1418a45)

Originally listed on the Watch List: 09/22/12