Editor's Note:

The market has continued to rally but we do not want to chase some of our watch list candidates. Therefore we are removing some candidates to make room for new ones tonight.



New Watch List Entries

CY - Cypress Semiconductor

EMN - Eastman Chemical Co.

PETM - PetSmart, Inc.


Active Watch List Candidates

DIS - Walt Disney

K - Kellogg Co.

MNST - Monster Beverage

UNP - Union Pacific


Dropped Watch List Entries

M and WFM have graduated to our active play list.
AIG has been moved to our new play section.
BZH, GM, JNJ, SBUX, and V have all been removed. I suggest placing them on your radar screen and we'll look at them again in a couple of weeks.



New Watch List Candidates:


Cypres Semiconductor - CY - close: 11.64

Company Info

As the company name might imply CY is in the semiconductor industry. The stock has been underperforming both the SOX index and the broader market indices. Yet it looks like after almost a year of consolidating sideways below the $11.50 area that the stock may have finally found a bottom.

The recent rally has lifted CY back toward resistance and shares are poised for a breakout. I am suggesting we wait for shares of CY to close above $12.10 and then buy calls the next morning. If triggered we can start with a stop loss at $10.90. Our long-term target is $14.75 for the 2014 calls and $16.00 for the 2015 calls.

Please note that CY is scheduled to report earnings this week on July 18th. More conservative investors will want to wait until after the earnings report to watch how the market reacts before initiating new positions.

Breakout trigger: Wait for a close above $12.10, buy calls the next day
start with a stop at $10.90

BUY the 2014 Jan $13 call (CY1418a13) current ask $0.65

- or -

BUY the 2015 Jan $15 call (CY1517a15) current ask $0.90

Chart of CY:

Originally listed on the Watch List: 07/14/13


Eastman Chemical Co. - EMN - close: 73.96

Company Info

EMN is in the basic materials sector of the market. The company is a major chemical manufacturer. The all-time high is about $75.00 and shares have been consolidating sideways under resistance at $75 for over four months in a row. A breakout here could launch the next major leg higher for the stock.

I am suggesting we wait for shares of EMN to close above $75.25 and then buy calls the next day. If triggered we will start with a stop loss at $69.75. Our long-term target for the 2014 call is $84. Our long-term target for the 2015 call is $95.00. FYI: The Point & Figure chart is bullish with a $91 target.

NOTE: EMN is scheduled to report earnings on July 29th.

Breakout trigger: Wait for a close above $75.25, buy calls the next day
start with a stop at $69.75

BUY the 2014 Jan $80 call (EMN1418a80) current ask $3.10

- or -

BUY the 2015 Jan $90 call (EMN1517a90) current ask $4.60

Chart of EMN:

Originally listed on the Watch List: 07/14/13


PetSmart, Inc. - PETM - close: 72.00

Company Info

PETM is a specialty retailer focused on pet food, pet products and services. If investors expected the economy to improve then consumer spending on pets should increase. I would be concerned that if the price of gasoline continues to rise it could put the brakes to all consumer spending. Yet right now shares of PETM are now showing a lot of concern. The stock's recent rally has pushed it up towards major resistance near the $72.00 level. A breakout here could end a year and a half consolidation under this area.

I am suggesting we wait for PETM to close above $72.50 and then buy calls the next day. More aggressive traders may want to use an intraday trigger instead of waiting for a close above $72.50. If we are triggered I am suggesting a stop loss at $67.90. Our target for the 2014 calls is $79.00 on PETM. Our target for the 2015 calls is $84.00. FYI: The Point & Figure chart is bullish with an $85 target.

NOTE: PETM will begin trading ex-dividend on July 31st. The quarterly cash dividend should be 16.5 cents.

Breakout trigger: Wait for a close above $72.50, buy calls the next day
start with a stop at $67.90

BUY the 2014 Jan $75 call (PETM1418a75) current ask $3.00

- or -

BUY the 2015 Jan $80 call (PETM1517a80) current ask $4.70

Chart of PETM:

Originally listed on the Watch List: 07/14/13


Active Watch List Candidates:



Beazer Homes - BZH - close: 18.78

Comments:
07/14/13: Some of the homebuilders delivered some pretty impressive bounces this past week. BZH surged on Thursday. If I was just looking at the weekly chart on BZH I would be tempted to buy calls here.

The fact that the Fed is likely to stay on the sidelines and keep QE going should help stabilize bond yields and thus mortgage rates. Yet that doesn't mean the bounce in BZH is an entry point. We could be seeing a dead-cat bounce in the stock.

Tonight I am removing BZH from the watch list but I am keeping it on my radar screen. A close above $20.00 is a potential trigger to look at BZH again.

Trade did not open.

07/14/13 removed from the watch list.

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


Walt Disney - DIS - close: 66.98

Comments:
07/14/13: DIS delivered a bullish with a breakout from what is arguably a bull-flag pattern. It is unlikely that shares will correct lower toward the $58 area so we need to adjust our entry point strategy. Tonight we are moving the buy-the-dip trigger up to $65.00. We will move the stop loss up to $61.45. Our new target is $79.00 (although we may have to adjust that for the 2014 calls). I am also adjusting our option strikes.

NOTE: DIS is scheduled to report earnings on August 6th.

Buy-the-Dip trigger: $65.00, stop @ 61.45

BUY the 2014 Jan $70 call (DIS1418a70) current ask $2.54

- or -

BUY the 2015 Jan $70 call (DIS1517a70) current ask $5.60

07/14/13 new entry strategy: adjust buy-the-dip trigger to $65.00
move the stop loss to $61.45. Move the target to $79.00
adjust the option strikes
07/07/13 adjust entry trigger from $57.00 to $58.00

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


General Motors - GM - close: 36.40

Comments:
07/14/13: I am afraid we have missed our entry point on GM. The stock came close with the mid-June correction lower but shares did not hit our entry point near $30.00. Since then GM has produced a very strong, three-week rally and broken out to new two-year highs. We do not want to chase it here.

I am removing GM as a watch list candidate but I would keep it on your radar screen for a correction lower.

Trade did not open.

07/14/13 removed from the watch list.
06/30/13 adjust buy-the-dip entry trigger to $30.50, from $30.00.

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


Johnson & Johnson - JNJ - close: 89.99

Comments:
07/14/13: As I discussed last week JNJ has continued to rally and shares are now testing round-number resistance and its May 2013 highs near $90.00. After a three-week rally I would expect a pullback from here. However, JNJ may drift sideways until the company reports earnings on July 16th. JNJ's earnings results could determine its direction for the rest of summer.

We do not want to launch positions this close to the earnings report. Plus, JNJ is unlikely to hit our buy-the-dip entry point any time soon. Therefore I am removing JNJ as an active watch list candidate. However, I would definitely keep this stock on your radar screen. We may look at it again next week.

Trade did not open.

07/14/13 removed from the newsletter

Originally listed on the Watch List: 06/23/13


Kellogg Co. - K - close: 66.50

Comments:
07/14/13: K continues to climb and is now up five out of the last six weeks. As expected shares are testing their highs set in April 2013. A breakout here would be bullish. The high on Friday was $66.68. Thursday's high was $66.76. I am suggesting investors wait for K to close above $67.00 and then buy calls the next morning.

NOTE: K is due to report earnings on August 1st. More conservative traders may want to wait until after we see how the market interprets K's earnings results before initiating new positions even if K meets our entry requirement.

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

BUY the 2015 Jan $75 call (K1517a75) current ask $2.05

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


Monster Beverage Corp. - MNST - close: 59.86

Comments:
07/14/13: MNST's performance last week was disappointing. Shares completely ignored the market's rally and drifted lower instead. If MNST continues to underperform we will likely drop it as a watch list candidate. At the moment I don't see any changes from my earlier comments.

Earlier Comments:
I do consider this an aggressive, higher-risk trade because of the volatility and the risk that another headline regarding the safety of MNST's drinks could send shares lower. Therefore I am suggesting we keep our position size small to limit risk.

Currently MNST has resistance in the $62.50-63.00 area. I am suggesting we wait for MNST to close above $63.00 and then buy calls the next day with a stop loss at $57.90. Our target is $74.00.

Breakout trigger:
Wait for MNST to close above $63.00, then buy calls the next day
stop loss at $57.90 *Small Positions*

BUY the 2014 Jan $70 call (MNST1418a70)

- or -

BUY the 2015 Jan $70 call (MNST1517a70)

Originally listed on the Watch List: 07/07/13


Starbucks Corp. - SBUX - close: 69.72

Comments:
07/14/13: SBUX continues to perform well with a rally that started off its late February 2013 lows. Currently shares have risen to resistance near $70.00 and the top of its bullish channel. We do not want to launch positions now. Since SBUX is not likely to hit our current buy-the-dip trigger near $60 any time soon I am removing the stock as an active watch list candidate. We can re-visit it on a dip near its 50-dma. I would definitely keep SBUX on your radar screen and watch it for a correction.

trade did not open.

07/14/13 removed from the watch list.

Originally listed on the Watch List: 06/23/13


Union Pacific Corp. - UNP - close: 160.75

Comments:
07/14/13: UNP is still showing relative strength with another weekly gain. The stock managed to tag a new all-time high on an intraday basis on Friday. We've been waiting for a breakout past its May 2013 highs. Our plan was to wait for UNP to close above $161.00 and then buy calls the next day. The stock is almost there at our entry. Yet I am going to adjust our entry trigger this close to the earnings report.

Friday's high was $161.70. Let's wait for UNP to close above $162.00 and then buy calls the next day. I actually expect that UNP will churn sideways the next few days as investors wait for UNP's earnings report. The company is due to report earnings on July 18th. The announcement will be ahead of the opening bell. Wall Street expects results of $2.35 a share.

So our new entry trigger is a close above $162.00. We'll adjust the stop loss to $153.00.

More conservative investors will want to consider waiting until after we see how the market digests UNP's earnings before initiating new positions.

Earlier Comments:
Our long-term target is $185.00 for the 2014 calls and $200 for the 2015 calls.

Breakout trigger: Wait for a close above $162.00
stop loss @ 153.00

BUY the 2014 Jan $180 call (UNP1418a180) current ask $2.62

- or -

BUY the 2015 Jan $200 call (UNP1517a200) current ask $4.50

07/14/13 adjust entry trigger to $162.00, adjust stop loss to $153.00

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


Visa Inc. - V - close: 190.72

Comments:
07/14/13: After some volatility earlier in the week Visa managed to bounce back and close almost unchanged for the week. On a short-term basis I would be tempted to buy calls here and target a move to $200. Yet on a long-term, LEAPS time frame basis, we do not want to buy calls now this close to likely resistance at the $200 level.

Thus far our trade has not been triggered. Tonight I am removing Visa as a candidate. The company is due to report earnings in the last week of July. We can re-visit the stock and look at it again in a couple of weeks.

Trade did not open.

07/14/13 removed from the watch list. Look at it again in a couple of weeks after the earnings report.
07/07/13 updated the buy-the-dip entry trigger to $180.50.
Moved the stop loss to $174.40.
Updated the option strikes
06/16/13 I am adjusting the stop loss to $164.50 from 164.75.

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