New Watch List Entries

DLTR - Dollar Tree

MRK - Merck & Co


Active Watch List Candidates

CSCO - Cisco Systems

WMT - Wal-Mart Stores


Dropped Watch List Entries

CL graduated to the play list.
WLT was removed.



New Watch List Candidates:


Dollar Tree, Inc. - DLTR - close: 41.89

Company Info

DLTR operates a chain of discount variety store where everything is priced at a dollar. Right now many analysts are worried that the recent raise in the payroll tax and rising gas prices are hurting retail sales. Yet at the same time, these two factors might actually push consumers to frequent stores like DLTR more often. We'll find out soon. DLTR is scheduled to report earnings on Feb. 27th. Wall Street expects earnings of 99 cents a share. More important than last quarters results will be management's guidance.

Shares of DLTR have spent the last four months building a bottom in the $37.50-42.00 zone. I am suggesting we wait for shares of DLTR to close above $42.75 and then buy calls the next day. If triggered we will aim for $49.50. Please note that the $45.00 level and the 200-dma could be overhead resistance. Don't be surprised to see DLTR pullback from its initial test of the $45 level.

Breakout trigger: Wait for DLTR to close above $42.75,
then buy calls the next day, stop loss @ 39.50

BUY the 2014 Jan $45 call (DLTR1418a45) current ask $3.10

Chart of DLTR:

Originally listed on the Watch List: 02/23/13


Merck & Co. - MRK - close: 42.97

Company Info

Drug giant MRK has seen its stock show relative strength this past week. The stock is breaking out past its 50-dma and 200-dma and nearing a significant trend line of lower highs. Investors could be looking for defensive trades if they're anticipating market uncertainty or weakness.

Right now there is additional resistance near $44.00. I am suggesting we wait for MRK to close above $44.25 and then buy calls the next day. Our long-term target is $49.50 although the $48.00 level could be resistance.

Breakout trigger: Wait for MRK to close above $44.25,
then buy calls the next day, stop loss @ 41.45

BUY the 2014 Jan $45 call (MRK1418a45) current ask $1.49

- or -

BUY the 2015 Jan $45 call (MRK1517a45) current ask $2.77

Chart of MRK:

Originally listed on the Watch List: 02/23/13


Active Watch List Candidates:



Cisco Systems - CSCO - close: 20.90

Comments:
02/23/13: CSCO came close to hitting our entry point requirements but the stock reversed intraday on Wednesday. Shares ended the week with a nine-cent loss. I don't see any changes from my prior comments. Right now we are waiting for CSCO to close above $21.50 and then buy calls the next day. As an alternative entry point, if the market does see a correction, readers could look for CSCO to dip toward the $19.50-19.00 zone and then buy a bounce. We'll re-evaluate our entry point if CSCO corrects. For now we're waiting for a close above $21.50. Our long-term target is $27.00.

Breakout trigger: Wait for a close above $21.50, buy calls the next day,
stop loss at $19.25.

BUY the 2014 Jan $22 call (CSCO1418a22)

- or -

BUY the 2015 Jan $25 call (CSCO1517a25)

02/02/13 adjust entry trigger to wait for a close above $21.50

Originally listed on the Watch List: 01/12/13


Wal-Mart Stores - WMT - close: 70.40

Comments:
02/23/13: WMT is already bouncing from its February sales "disaster" email story. The company reported earnings a few days ago that beat estimates by 10 cents. Revenues also beat Wall Street estimates. However, management did say they expect Q1 same-store sales to be flat. Technically the stock's bounce has stalled at the simple 100-dma, which was resistance in early February. I don't see any changes from my prior comments.

I am suggesting investors wait for shares of WMT to close above $73.00 a share. Then buy calls the next day with a stop loss at $67.25. Our long-term target is the $85-90 range.

Trigger: Wait for WMT to close above $73.00, then buy calls the next day.
Stop loss @ 67.25

BUY the 2014 Jan $75 call (WMT1418a75)

- or -

BUY the 2015 Jan $80 call (WMT1517a80)

Originally listed on the Watch List: 02/02/13


Walter Energy - WLT - close: 33.25

Comments:
02/23/13: The sell-off in WLT has gotten worse with the stock accelerating lower. Shares have broken below support and fallen to new six-week lows. Our trade has not opened and I am removing WLT as a watch list candidate.

Trade did not open.

02/23/13 removed from the watch list.

Originally listed on the Watch List: 02/16/13