New Watch List Entries

BZH - Beazer Homes

WDC - Western Digital Corp


Active Watch List Candidates

HIG - Hartford Financial Group

VFC - V.F. Corp.


Dropped Watch List Entries

AAP, CRR, MSFT, and SUNE all graduated to our active play list.

EVEP has been removed.



New Watch List Candidates:


Beazer Homes - BZH - close: 20.88

Company Info

BZH is in the industrial goods sector. They are a residential home builder. BZH has been building homes in the U.S. for 35 years and consider one of the top ten homebuilders in the country. Since going public in 1994 the company has built more than 170,000 new homes.

The company's latest earnings report, back in May, was a disappointment. BZH missed analyst estimates on both the top and bottom line. Yet long-term investors are still willing to give BZH time to develop their multi-year plan 2B-10. This is BZH's goal of hitting $2 billion in annual revenues and increasing margins (EBITDA) to 10%.

The stock seems to have found a bottom with support near $18.00 and recent data suggest the housing market continues to improve. On June 23rd the existing home sales numbers rose a better than expected +4.9% in May to an annual rate of 4.89 million units. More importantly the new home sales figures soared +18.6% n May to 504,000, which was significantly better than expected. May 2014 was the first month new home sales were above 500,000 since 2008. At the same time we just saw consumer confidence hit a six-year high.

There are plenty of pundits who believe the housing market is not that healthy. One concern has been the plunge in mortgage applications, which fell -4% last week and is down -15% from a year ago. Considering the still very low mortgage rates that is somewhat troubling.

There is also the risk of shadow inventory coming to market. A number of markets are very hot right now. Example in Denver the average length of time for a home to sell is less than one month. That's because inventory is so low. Yet as home prices rise there are a lot of homeowners who have been underwater on their mortgage. If the value of their home rises above what they owe on it there could be a surge in inventories. That increases competition for new home sales as well.

Technically shares of BZH are breaking out past resistance near $20.00 and past technical resistance at the simple 200-dma. I would like to see some follow through higher.

Tonight I'm suggesting we wait for BZH to close above $21.10 and then buy calls the next morning with a stop loss at $19.75. Our long-term target is the $26.00 area. Currently the Point & Figure chart is bullish and forecasting at $27 target.

Breakout trigger: Wait for a close above $21.10
then buy calls the next day with a stop at $19.75

BUY the 2015 Jan $22 call (BZH150117C22) current ask $1.85

- or -

BUY the 2016 Jan $25 call (BZH160115C25) current ask $2.95

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

Chart of BZH:

Originally listed on the Watch List: 06/22/14


Western Digital Corp. - WDC - close: 92.90

Company Info

WDC is in the technology sector. The company manufacturers data storage devices. They make hard drives and solid state drives. The company has about a 45% market share in the hard drive market, just ahead of its biggest rival Seagate Technology (STX). WDC has managed to grow in spite of long-term decline in PC sales. Today WDC's non-PC related devices account for 53% of its sales.

There has been a new development in the death of the PC story. A couple of weeks ago Intel reported that they were seeing growth in PC sales, mostly for business/enterprise use. That could be great news for WDC, who has developed a stronger solid-state drive business focused on enterprise.

The acceptance of cloud storage continues to surge. All of those cloud storage networks need hard drives to store that data, which should benefit WDC.

Technically shares of WDC have been consolidating sideways the last three weeks. The stock closed up on Friday and looks poised to breakout past short-term resistance near $93.00. More aggressive traders may want to launch positions above $93.50. I am suggesting an intraday trigger to buy calls at $95.25.

There is a good chance that $100.00 could be round-number, psychological resistance. Eventually I do expect WDC to rally past the $100 mark. Our long-term target is $110. Currently the Point & Figure chart is bullish and forecasting at $118 target.

We will start with a stop loss at $89.40.

FYI: Seagate (STX) looks bullish too but WDC has a better balance sheet and larger market share.

Breakout trigger: Buy calls when WDC hits $95.25 (intraday)

BUY the 2015 Jan $100 call (WDC150117c100) current ask $4.70

- or -

BUY the 2016 Jan $110 call (WDC160115c110) current ask $7.40

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

Chart of WDC:

Originally listed on the Watch List: 06/22/14


Active Watch List Candidates:



EV Energy Partners - EVEP - close: 39.40

Comments:
06/29/14: EVEP is slowly creeping higher. Shares look like they might breakout past resistance near $40.00 soon. Unfortunately, I am worried that EVEP just moves too slowly.

Tonight we are removing EVEP as a watch list candidate. We will leave it for investors with more patience.

Trade did not open.

06/29/14 removed from the newsletter. suggested entry was a close above $40.25

Originally listed on the Watch List: 06/15/14


The Hartford Financial Services Group - HIG - close: 35.66

Comments:
06/29/14: HIG is still consolidating sideways. Fortunately it looks like the consolidation is narrowing. I don't see any changes from my earlier comments.

Earlier Comments: June 8, 2014:
Financial stocks helped lead the market higher last week. If this bull market continues then the financials should remain part of the leadership group. HIG has been making progress in its transformation. The company is focusing more on its property and casualty insurance business, its Group Benefits business, and its mutual fund business. They just recently sold their Japan annuity company, which has reduced the company's risk profile.

This turnaround has been productive. Their most recent earnings report came in 25 cents better than Wall Street estimates with a profit of $1.18 per share. This net income of $495 million compares to a $241 million loss in Q1 2013. HIG has also been making improvements in its insurance combined ratio, which is essentially their gross margin on their insurance business. They've also been buying back stock.

Technically the three-week bounce from HIG's rising 200-dma has pushed shares toward resistance near $36.50. This is also the top of a five-month consolidation range. A breakout here should signal the next leg higher.

Tonight I am suggesting we wait for HIG to close above $36.75 and then buy calls the next morning with a stop loss at $33.75. Our long-term target is the $45.00 region.

Breakout trigger: Wait for a close above $36.75
buy calls the next day with a stop loss at $33.75

BUY the 2015 Jan $40 call (HIG150117C40)

- or -

BUY the 2016 Jan $40 call (FFIV160115C40)

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

Originally listed on the Watch List: 06/08/14


V.F. Corp. - VFC - $62.72

Comments:
06/29/14: VFC has been bouncing along technical support at its 50-dma. We are still waiting for a breakout past resistance at $64.00. I don't see any changes from my earlier comments.

Earlier Comments: May 18, 2014:
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)

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

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