Editor's Note:

Tonight I have removed CS, EL, and LULU as active watch list candidates.



New Watch List Entries

BZH - Beazer Homes

HOV - Hovnanian Enter.

K - Kellogg Co.


Active Watch List Candidates

AIG - Amer. Intl. Group

BEAV - B/E Aerospace

C - Citigroup Inc

DIS - Walt Disney

GM - General Motors

JPM - JPMorgan Chase & Co

UNP - Union Pacific

V - Visa

WDC - Western Digital Corp


Dropped Watch List Entries

LULU, , CS, and EL have been removed.



New Watch List Candidates:


Beazer Homes - BZH - close: 19.82 change: +0.55

Company Info

The bear case on the homebuilders looks pretty daunting. First and foremost the rise in mortgage rates are likely to impact housing sales. 30-year fixed rates hit a new one-year high this past week near 4.0%. Worries that the Federal Reserve might start cutting back on its QE program is also weighing on the homebuilders. Plus, there are concerns about rising material costs and potential shortages in labor. If that wasn't enough there are new concerns about the sudden rise in foreclosures that could put pressure on pricing for new homes. Fundamental investors are concerned about rising stock valuations for the homebuilders.

As an industry most of the homebuilding stocks have seen a three or four week correction lower. BZH is one of them. Yet it looks like shares of BZH may have found a bottom this past week with support in the $18.50-19.00 zone. Right now BZH looks poised to breakout past round-number resistance at $20.00.

I am suggesting investors wait for BZH to close above $20.50 and then buy calls the next day. If triggered we will start with a stop loss at $18.45. Our long-term target is $26.00.

Please note that I am suggesting we keep our position size small to limit our risk.

Breakout trigger: Wait for a close above $20.50, stop $18.45

BUY the 2014 Jan $22 call (BZH1418a22) current ask $2.25

- or -

BUY the 2015 Jan $25 call (BZH1517a25) current ask $3.70

Chart of BZH:

Originally listed on the Watch List: 06/16/13


Hovnanian Enterprises - HOV - close: 6.28

Company Info

HOV is another homebuilder. All the risks I mentioned in the BZH trade above certainly apply to HOV. Investors bought the dip in HOV this past week and now shares are poised for a breakout past resistance near $6.50.

I am suggesting we buy calls on HOV (or buy HOV stock) if shares hit $6.61. No waiting for a close above a certain level. If HOV hits our trigger at $6.61 our long-term target is $8.75. However, I will point out that HOV could have significant resistance in the $7.00 region. Therefore I am suggesting we keep our position size small to limit our risk.

Breakout trigger: $6.61, stop loss @ 5.98

BUY the 2014 Jan $7.00 call (HOV1418a7) current ask $0.85

- or -

BUY the 2015 Jan $7.00 call (HOV1517a7) current ask $1.60

- or -

BUY HOV stock @ $6.61

Chart of HOV:

Originally listed on the Watch List: 06/16/13


Kellogg Co. - K - close: 64.24

Company Info

Kellogg is probably best known for its many brands of breakfast cereals but the company makes a variety of food products. The stock produced a very impressive rally from its July 2012 lows that pushed the stock to new all-time highs. Shares peaked in April 2013 but the consolidation has taken the shape of a bull-flag pattern. We want to be ready if K can breakout higher.

Aggressive investors may want to buy calls on a move above $65.50. The newsletter is suggesting investors wait for shares of K to close above $67.00 and then buy calls the next morning.

Breakout trigger: Wait for a close above $67.00, stop loss $63.75.

BUY the 2015 Jan $75 call (K1517a75) current ask $1.35

Chart of K:

Originally listed on the Watch List: 06/16/13


Active Watch List Candidates:



American Intl. Group - AIG - close: 45.38

Comments:
06/16/13: Believe it or not but AIG managed to post a gain for the week. It wasn't much, just 10 cents. Friday's move looks like another failed rally at resistance near $46.50. More aggressive investors might want to consider buying calls if AIG can close above $46.50.

Tonight I am adjusting our buy-the-dip trigger to $40.00, up from $38.50. We will raise the stop loss to $36.35. Our long-term target is the $45-50 zone.

Buy-the-Dip trigger: $40.00, stop loss @ 36.35

BUY the 2014 Jan $45 call (AIG1418a45)

- or -

BUY the 2015 Jan $50 call (AIG1517a50)

06/16/13 adjust entry strategy: move the buy-the-dip trigger to $40.00, from 38.50. Move the stop loss to $36.35 from 34.75.

Originally listed on the Watch List: 06/01/13


B/E Aerospace Inc. - BEAV - close: 63.98

Comments:
06/16/13: Shares of BEAV hit some profit taking last week. The stock reversed until traders bought the dip at its rising 50-dma. Thus the longer-term trend of higher lows remains intact. More aggressive investors may want to buy calls now given the bounce from the 50-dma. I am suggesting readers wait for BEAV to close above $65.75 before initiating positions.

Earlier Comments:
Wait for a close above $65.75 and then buy calls the next day. We will start with a stop loss at $61.70. Our long-term target is $74.00.

Breakout trigger: Wait for a close above $65.75, then buy calls the next day.

BUY the 2014 Jan $70 call (BEAV1418a70)

Originally listed on the Watch List: 06/08/13


Citigroup, Inc. - C - close: 49.22

Comments:
06/16/13: Financial stocks were some of the market's worst performers last week. Citigroup lost more than a $1.00. There is potential support near $48 and its 50-dma but we're waiting for a dip to $46.00.

Earlier Comments:
Currently the plan is to wait for a correction lower and buy calls on a dip at $46.00. If triggered we want to start with small positions. Our long-term target is $59.00.

Buy-the-Dip trigger: $46.00, stop loss @ 42.40

BUY the 2014 Jan $50 call (C1418a50)

- or -

BUY the 2015 Jan $55 call (C1517a55)

Originally listed on the Watch List: 05/25/13


Credit Suisse Group - CS - close: 28.29

Comments:
06/16/13: I am removing CS as a watch list candidate. Shares have continued to trend lower over the last four weeks.

Our trade did not open. The plan was to wait for a close above $30.75.

Trade did not open.

06/16/13 removed from the newsletter
06/01/13 adjust entry point: wait for a close above $30.75

Originally listed on the Watch List: 05/18/13


Walt Disney - DIS - close: 63.80

Comments:
06/16/13: There was no follow through on DIS' bounce from the $62 level. Shares gave back more than a $1.00 last week. Currently we are waiting on a correction lower. More aggressive investors could jump in on a dip or a bounce near $60.00. The newsletter is suggesting readers use an entry trigger to buy calls on a dip at $57.00. If triggered we'll use a stop loss at $53.75. Our long-term target is the $75-80 zone.

Buy-the-Dip trigger: $57.00, stop @ 53.75

BUY the 2014 Jan $65 call (DIS1418a65)

- or -

BUY the 2015 Jan $65 call (DIS1418a65)

Originally listed on the Watch List: 06/01/13


The Est - EL - close: 68.41

Comments:
06/16/13: EL managed to show a little bit of relative strength and close up for the week. Yet shares remain stuck under its 50-dma.

Tonight I am removing EL from the watch list. Our trade did not open.

Trade did not open.

06/16/13 removed from the newsletter
06/06/13 EL dips to $65.23 and bounces
06/01/13 adjust the entry trigger to $65.00 (from 65.50)
add the 2015 calls options
05/18/13 strategy change: switch entry point to buy-the-dip at $65.50, move the stop loss to $62.25. Move the option strike to 2014 Jan $75 call

Originally listed on the Watch List: 05/04/13


General Motors - GM - close: 34.29

Comments:
06/16/13: GM was finally starting to correct lower. Then the stock produced a big bounce off its 30-dma thanks to the market's rebound on Thursday. Just like the market's major indices GM did not see any follow through higher on Friday. We are waiting for a correction lower.

Earlier Comments:
Currently I am suggesting investors use a buy-the-dip trigger at $30.00 to launch call positions on GM. If triggered we'll use a stop loss at $27.75. Our long-term target is the $36-40 zone.

Buy-the-Dip trigger: $30.00, stop @ 27.75

BUY the 2014 Jan $35 call (GM1418a35)

BUY the 2015 Jan $35 call (GM1517a35)

Originally listed on the Watch List: 06/01/13


JPMorgan Chase & Co. - JPM - close: 53.13

Comments:
06/16/13: JPM is another financial stock that trended lower last week. I don't see any changes from my prior comments. I am expecting a correction back toward $50.00, which should be significant support.

We want to be ready to buy calls on a dip near support. I am suggesting a buy-the-dip trigger at $50.25. If triggered we will use a stop loss at $47.40. Our long-term target is $64.00.

Buy-the-Dip trigger: $50.25, stop 47.40

BUY the 2014 Jan $55 call (JPM1418a55)

- or -

BUY the 2015 Jan $55 call (JPM1517a55)

Originally listed on the Watch List: 05/25/13


Lululemon Athletica - LULU - close: 66.15

Comments:
06/16/13: I warned readers that LULU could see a gap move after the earnings report on Monday, June 10th. I was worried about a gap open higher. Instead shares of LULU gapped down sharply on Tuesday, June 11th. LULU's earnings numbers were actually bullish but the CEO said she was resigning. CEO Christine Day said she will remain on board until the company can find a replacement.

Our trade did not open. I am removing LULU as a watch list candidate.

Trade did not open.

06/16/13 removed from the watch list.

Originally listed on the Watch List: 06/08/13


Union Pacific Corp. - UNP - close: 157.02

Comments:
06/16/13: UNP only suffered a minor decline for the week. Traders bought the dip at its rising 40-dma again on Thursday. The stock looks like it's consolidating sideways within its larger up trend but future direction may depend on how the market chooses to interpret the Fed's action this week. I don't see any changes from my prior comments.

Earlier Comments:
I am suggesting investors wait for UNP to close above $161.00 and then buy calls the next morning. If triggered we will start with a stop loss at $151.00. Our long-term target is $185.00 for the 2014 calls and $200 for the 2015 calls.

Breakout trigger: Wait for a close above $161.00
stop loss @ 151.00

BUY the 2014 Jan $180 call (UNP1418a180)

- or -

BUY the 2015 Jan $200 call (UNP1517a200)

Originally listed on the Watch List: 06/08/13


Visa Inc. - V - close: 180.93

Comments:
06/16/13: Visa delivered a gain for the week. More aggressive investors may want to consider buying calls if V can breakout past its May highs near $184.50ish. Personally, I would rather buy a dip so we're sticking with the current plan for now.

Earlier Comments:
The newsletter is suggesting investors buy calls on a dip at $171.00. Our long-term target is $198.50.

Buy-the-Dip trigger: $171.00, stop loss $164.50.

BUY the 2014 Jan $180 call (V1418A180)

- or -

BUY the 2015 Jan $200 call (V1517A200)

06/16/13 I am adjusting the stop loss to $164.50 from 164.75.

Originally listed on the Watch List: 05/11/13


Western Digital Corp. - WDC - close: 63.88

Comments:
06/16/13: Shares of WDC may have just peaked. After seven weeks of gains the stock finally posted a weekly loss. Wednesday's session is a bearish reversal candlestick pattern. Hopefully the correction lower begins soon. I am suggesting we wait and buy a dip at $55.00. If WDC hits our buy-the-dip trigger at $55.00 our long-term target is $70.00. The Point & Figure chart is currently forecasting a long-term target of $82.00. We'll start with a stop loss at $52.25.

Buy-the-Dip trigger: $55.00, stop loss @ 52.25

BUY the 2014 Jan $65 call (WDC1418a65)

- or -

BUY the 2015 Jan $70 call (WDC1517a70)

Originally listed on the Watch List: 05/18/13