New Watch List Entries

ITW - Illinois Tool Works

RGR - Sturm, Ruger & Co

WSM - Williams-Sonoma Inc.


Active Watch List Candidates

KORS - Michael Kors


Dropped Watch List Entries

CLX has graduated to our active play list.



New Watch List Candidates:


Illinois Tool Works, Inc. - ITW - close: 85.43

Company Info

ITW is in the industrial goods sector. The company makes engineered fasteners, components, and equipment for the automotive, food equipment, and construction industries. ITW has been a strong performer thanks to a trend of better than expected earnings. In their last report a couple of weeks ago ITW raised their guidance and shares rallied to new all-time highs.

Broken resistance near $84.00 is acting as new support and traders just bought the dip there a few days ago. The intraday high in April was $86.46. I am suggesting we wait for a close above $86.50. If that occurs we can buy calls the next morning with a stop loss at $81.75. Our long-term target is the $98-100 zone.

Breakout trigger: Wait for a close above $86.50
then buy calls the next morning with a stop at $81.75

BUY the 2015 Jan $90 call (ITW1517a90) current ask $2.75

- or -

BUY the 2016 Jan $90 call (ITW1615a90) current ask $6.00

Chart of ITW:

Weekly Chart of ITW:

Originally listed on the Watch List: 05/04/14


Sturm, Ruger & Co. - RGR - close: 67.79

Company Info

RGR is in the industrial goods sector. The company has been making firearms since 1949. Shares of gun makers have seen big gains in recent years. Consumers were on a gun buying frenzy on fears that a democrat controlled senate and the Obama administration might pass tougher gun control laws. Now the gun "fever" has passed and the gun makers are facing some tough earnings comparisons to prior years. Yet the long-term trend for RGR remains higher. The industry could see a new round of gun buying pressure as democrats look at the last two years of Obama's presidency as a chance to pass something.

I am setting some strict rules on our potential RGR entry point. The company reports earnings on Monday, May 5th, after the closing bell. Analysts expect a profit of $1.12 a share. If RGR reports positive results and does not lower guidance I would expect shares to surge higher on Tuesday morning due to the high amount of short interest in the name. If RGR disappoints or issues an earnings warning then the stock will likely reverse lower.

Here's the plan, do not even consider initiating positions in RGR until May 7th or later. Ideally we want to see RGR close in the $70.00-72.50 zone. If RGR closes above $72.50 then do not open positions and we will re-evaluate next weekend. Since we're waiting until Wednesday to see where RGR closes, that gives us Thursday and Friday as potential entry points. Remember, if we see RGR close above $72.50, before we are triggered (close in the 70.00-72.50 zone) then the trade is off. More conservative investors may want to just wait and week and let the post-earnings dust settle before considering positions.

If we are triggered with a close in the $70-72.50 zone then we'll start with a stop loss at $64.45. Our long-term target is the $90-100 zone.

This is an aggressive trade, use small positions.

Please see the detail entry point requirements above!

BUY the 2015 Jan $85 call (RGR1517a85) current ask $1.80

Chart of RGR:

Weekly Chart of RGR:

Originally listed on the Watch List: 05/04/14


Williams Sonoma - WSM - close: 63.06

Company Info

WSM is in the services sector. The company runs a chain of home furnishing stores with almost 600 locations. The stock soared to all-time highs back in March following its earnings report. Results were better than expected driven by +10.4% growth in comparable brand revenues, a +14.6% increase in its Pottery Barn brand, and +18.3% sales growth for its West Elm brand. WSM also said its direct-to-consumer sales surged +11.5%. All this sales growth helped investors overlook WSM's lowered earnings guidance. The company lowered profit guidance but raised their 2015 revenue estimates to just above analysts estimates.

The stock hit some profit taking in early April but the selling has stalled. Shares have been consolidating sideways the last three weeks. I am suggesting we wait for WSM to close above $64.50. If that occurs we can buy calls the next day with a stop loss at $59.75. Our long-term target is the $75-85 zone.

Breakout trigger: Wait for WSM to close above $64.50
then buy calls the next morning with a stop at $59.75.

BUY the 2015 Jan $70 call (WSM1517a70) current ask $2.65

- or -

BUY the 2016 Jan $75 call (WSM1615a75) current ask $4.50

Chart of WSM:

Weekly Chart of WSM:

Originally listed on the Watch List: 05/04/14


Active Watch List Candidates:



Michael Kors - KORS - close: 93.21

Comments:
05/04/14: KORS delivered a significant bounce last week with a rebound from support near $86 and a rally toward resistance near $95 and its 50-dma. Shares also garnered some bullish analyst comments, which helped boost shares. I would not chase the bounce here. KORS still has a trend of lower highs.

I am raising our buy-the-dip trigger from $81.00 to $83.00. We'll move the stop loss to $79.00. More aggressive investors might want to consider buying another dip or a bounce near $86 again.

Earlier Comments:
I do want to caution you on this trade. We are attempting to "catch the falling knife". That can be hazardous. If we are triggered our target is $99.00.

Buy-the-Dip trigger: $83.00, stop loss at $79.00

BUY the 2015 Jan $90 call (KORS1517a90)

05/04/14 move the buy-the-dip trigger from $81.00 to $83.00.
move the stop loss to $79.00

Originally listed on the Watch List: 04/13/14