New Watch List Entries

DOW - Dow Chemical Co.

HAL - Halliburton Co.

TPX - Tempur Sealy Intl.


Active Watch List Candidates

AAL - American Airlines Group

PKG - Packaging Corp. of America

VFC - V.F. Corp.


Dropped Watch List Entries

None.



New Watch List Candidates:


The Dow Chemical Co. - DOW - close: $50.68

Company Info

DOW is in the basic materials sector. The company supplies chemical products as raw materials. The stock is currently in a long-term bullish channel. Investors have lifted shares to multi-year highs as market participants search for yield. DOW currently offers a 3.0% annual yield. Plus, they have an aggressive stock buyback program and plan to buy back $4.5 billion in stock this year.

DOW's business is doing well too. They have faced some rising prices for feedstock and energy costs. Yet they have managed to grow margins in the rest of their business. Management believes this margin growth will continue in 2014. Their Q1 2014 earnings were up +75% from a year ago and marked their sixth quarter in a row of year-over-year earnings growth.

Currently DOW is on the verge of breaking out past resistance near $50-51 and out of a three-month consolidation phase. I am suggesting investors wait for DOW to close above $51.25 and then buy calls the next morning with a stop loss at $47.75. We'll start with a long-term target at $60.00.

Breakout trigger: Wait for a close above $51.25
then buy calls the next day with a stop loss at $47.75

BUY the 2015 Jan $55 call (DOW150117C55) current ask $1.50

- or -

BUY the 2016 Jan $55 call (DOW160115C55) current ask $3.45

Option Format: symbol-year-month-day-call-strike

Chart of DOW:

Weekly Chart of DOW:

Originally listed on the Watch List: 05/26/14


Halliburton Co. - HAL - close: 64.01

Company Info

HAL is in the basic materials sector. The company is part of the oil equipment and services industry. They are considered one of "the big three" in the oilfield services industry, competing with Schlumberger (SLB) and Baker Hughes (BHI). Believe it or not but HAL was the first company to "frack" a well in the U.S. over sixty years ago.

The stock is in a long-term up trend. HAL did see a little correction in November-December 2013 but has since been stair-stepping higher. The company has been consistently buying back stock. They repurchased nine million shares in the first quarter and still have $1.2 billion left on their current buy back program.

Earnings have been strong. Their Q4 results beat Wall Street's top and bottom estimates. HAL managed to do it again with their Q1 results and beat analysts' earnings and revenue estimates in spite of a slow down in Brazil and Mexico drilling activity.

Some would consider HAL cheap with a forward-looking P/E of 12.4 based on its 2015 earnings estimates of $5.07 a share. Many Wall Street firms have price targets in the $80 range. Speaking of Wall Street, the current golden boy of Wall Street David Tepper and his Appaloosa Management fund raised their stake in HAL in the first quarter of 2014. This stock was their sixth largest holding.

Currently HAL is consolidating below resistance at the $65.00 level. I am suggesting we wait for HAL to close above $65.50 and then buy calls the next day with a stop loss at $59.75. If triggered our long-term target is the $80-85 zone.

Breakout trigger: Wait for a close above $65.50
then buy calls the next day with a stop loss at $59.75

BUY the 2015 Jan $70 call (HAL150117C70) current ask $2.38

- or -

BUY the 2016 Jan $70 call (HAL160115C70) current ask $5.65

Option Format: symbol-year-month-day-call-strike

Chart of HAL:

Weekly Chart of HAL:

Originally listed on the Watch List: 05/26/14


Tempur Sealy Intl. - TPX - close: 54.98 change: +0.75

Company Info

TPX is in the consumer goods sector. The company manufactures and markets bedding products including mattresses, pillows, and other bed-related hardware. The stock has been slowly recovering from its disastrous 2012 performance. Tempur purchased its rival Sealy in 2013 and this virtually doubled its overall sales. Yet margins retreated from 50% to 40% due to Sealy's lower margins.

TPX has managed to build on its acquisition of Sealy. Both the Q4 and Q1 earnings results delivered better than expected performance on both the top and bottom line. TPX management believes they will continue to see margins improve in 2014 as they focus on synergies from their Sealy acquisition. They just recently purchased the Sealy brand rights in Japan and Continental Europe, which "represent significant future growth" for the company.

The stock's trend is higher but I'll confess TPX doesn't move super fast. We'll need to be patient with this trade. The point and figure chart is bullish and is currently forecasting at $70 target.

At the moment TPX is hovering just below resistance at the $55.00 level. I am suggesting we wait for TPX shares to close above $55.50 and then buy calls the next morning with a stop loss at $49.75. Our long-term target is $69.00 but that might be too optimistic if you buy the 2015 calls.

Breakout trigger: Wait for a close above $55.50
then buy calls the next day with a stop loss at $49.75

BUY the 2015 Jan $60 call (TPX150117C60) current ask $4.40

- or -

BUY the 2016 Jan $70 call (TPX160115C70) current ask $6.10

Option Format: symbol-year-month-day-call-strike

Chart of TPX:

Weekly Chart of TPX:

Originally listed on the Watch List: 05/26/14


Active Watch List Candidates:



American Airlines Group, Inc. - AAL - $39.11

Comments:
05/26/14: AAL spent last week consolidating sideways. I do not see any changes from my earlier comments.

Earlier Comments:
AAL is in the services sector. AAL is the merger between US Airways and American Airlines (AMR). The new company, American Airlines Group, is the largest carrier with nearly 6,700 flights a day, over 330 destinations, to more than 50 countries, with over 100,000 employees worldwide.

Wall Street was worried about the merger between these two big airlines as the U.S. Justice Department initially tried to block the deal. Regulators feared that new company would be too big, hold too much power, and reduce competitiveness and thus impact pricing for consumers. Fortunately, a U.S. district judge just recently approved a settlement worked out between AAL and the Justice Department where the new company agreed to sell certain assets to competitors. Getting the legal hurdle for its merger out of the way it's one more worry that investors can forget.

Summer is almost here and should mean good news for airlines. In addition to more vacation travelers the industry won't have to worry about so many cancellations. The 2014 winter season was brutal. In January and February the Bureau of Transportation Statistics said 6.05% of all domestic flights were cancelled. That number dropped to 4.6% of all flights cancelled in March. Put them all together and you have the worst winter cancellation rate in 20 years.

The Wall Street crowd is bullish on shares of AAL. Goldman Sachs recently put a $46 price target on the stock. In the latest 13F filings it was revealed that Paulson & Co had raised their stake in AAL from 8.5 million shares to 12.2 million. Meanwhile David Tepper is the hot fund manager everyone loves and his Appaloosa Management has AAL as its second largest holding. In the last quarter Appaloosa increased their AAL stake by 22.5%.

On a short-term basis shares of AAL are sitting just below resistance at $40.00. I am suggesting we wait for AAL to close above $40.25 and then buy LEAPS the next morning. We'll start with a stop loss at $36.40. We will tentatively set our exit target at $50.00 for now.

Breakout trigger: Wait for a close above $40.25
then buy calls the next day with a stop at $36.40

BUY the 2015 Jan $45 call (AAL150117C45) current ask $2.30

- or -

BUY the 2016 Jan $45 call (AAL160115C45) current ask $5.50

(note: I have listed the more standardized option symbol format.
symbol-year-month-day-call-strike )

Originally listed on the Watch List: 05/18/14


Packaging Corp of America - PKG - $67.55

Comments:
05/26/14: PKG also spent last week consolidating sideways under resistance near $68 and its 100-dma. I do not see any changes from my earlier comments.

Earlier Comments:
PKG is in the consumer goods sector. The company makes containerboard and corrugated packaging materials in the U.S., Canada, Europe, and Mexico. The stock was a big winner last year thanks in large part to PKG's accelerated growth. The company saw 2013 earnings surge to $436 million, up from $164 million in 2012.

PKG just recently acquired Boise and the new merged company is now the fourth-largest containerboard and corrugated packaging maker in the U.S. Management said they expected significant synergies with the acquisition but the results have actually been better than expected.

The last couple of earnings reports from PKG were both bullish with the company beating Wall Street's estimates on the top and bottom line. The latest announcement for the first quarter reaffirmed their full-year 2014 guidance.

Technically the stock has seen a $10 correction (about -13%) with the pullback from $75 to $65. Now shares are starting to rebound from support near $65 and its long-term trend line of higher lows (see weekly chart below). There is potential resistance at the 50-dma and the $70.00 level.

I am suggesting we wait for PKG to close above $70.50 and buy calls the next day. We'll start with a stop loss at $64.75. Our long-term target is the $90 area.

Breakout trigger: Wait for a close above $70.50
buy calls the next day with a stop loss at $64.75.

BUY the 2015 Jan $75 call (PKG150117C75)

- or -

BUY the 2016 Jan $75 call (PKG160115C75)

(note: I have listed the more standardized option symbol format.
symbol-year-month-day-call-strike )

Originally listed on the Watch List: 05/18/14


V.F. Corp. - VFC - $62.72

Comments:
05/26/14: VFC found support near $62.00 again. More aggressive traders may want to buy calls now with VFC's bounce from $62. I do not see any changes from my earlier comments.

Earlier Comments:
VFC is in the consumer goods sector. The company makes apparel and footwear for sale in the U.S. and Europe. Products include handbags, luggage, backpacks, accessories. Major brands include The North Face, Vans, Timberland, Kipling, Jansport, Reef, Smartwool, Eastpak, Wrangler, Lee, just to name a few.

After big gains in 2013 shares of VFC have been consolidating sideways. The company split their stock 4-for-1 back in December 2013. VFC guided lower back in February but the market reaction was a one-day event. Shares have since recovered. Their most recent report was bullish with VFC beating estimates. That's significant since so many apparel makers blamed the weather on a terrible Q1.

There has been growing speculation that VFC might be Lululemon (LULU) or another athletics apparel brand. Normally the acquiring company's stock goes down on a merger announcement but lately Wall Street has been sending the acquirer's stock higher on positive M&A news.

Technically shares look poised to breakout from their five-month consolidation. The Point & Figure chart is already bullish and forecasting an $80 target.

I am suggesting we wait for VFC to close above $64.25 and then buy calls the next day with a stop loss at $59.75. Our long-term target is the $75.00 region.

Breakout trigger: Wait for a close above $64.25
buy calls the next day with a stop loss at $59.75

BUY the 2015 Jan $70 call (VFC150117C70)

- or -

BUY the 2016 Jan $70 call (VFC160115C70)

(note: I have listed the more standardized option symbol format.
symbol-year-month-day-call-strike )

Originally listed on the Watch List: 05/18/14