New Watch List Entries

CELG - Celgene Corp

LMT - Lockheed Martin


Active Watch List Candidates

BCR - C.R.Bard Inc

CMI - Cummins Inc.

TMO - Thermo Fisher Scientific


Dropped Watch List Entries

CSX and NEM have graduated to our active plays.



New Watch List Candidates:


Celgene Corp. - CELG - close: 89.61

Company Info

If you're looking for opportunity it's hard to beat some of the biotech names. CELG is one of the strongest. According to their press release, "Celgene Corporation, headquartered in Summit, New Jersey, is an integrated global biopharmaceutical company engaged primarily in the discovery, development and commercialization of novel therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation."

What makes CELG so attractive is the company's pipeline. Developing drugs is an expensive business. A lot of older firms are buying other companies for their pipeline. Meanwhile CELG is developing a very strong pipeline. You can view the company's current progress on this webpage.

CELG is also growing earnings. Their most recent earnings report was July 24th. Wall Street was looking for a profit of 89 cents a share on revenues of $1.84 billion. CELG beat estimates with a profit of 90 cents and revenues rising +17.1% to $1.87 billion. Earnings per share are up +18% from a year ago. Management raised their guidance for 2014. Wall Street was a little disappointed with the guidance because analysts are more optimistic.

Big picture, CELG is a strong company and the stock looks poised to breakout. Shares have been consolidating sideways under resistance at $90.00 for the last six weeks. Now it's poised to breakout. The stock is only up +6.0% year to date versus a +16% gain for the IBB biotech ETF and a +19% gain in the XBI biotech ETF. CELG could be poised to catch up with its peers.

Technically the point & figure chart is also bullish with a quadruple top breakout buy signal.

The 2014 high is $90.50. I am suggesting an intraday trigger to buy calls at $91.00. More conservative traders could instead choose to wait for a close above $90.50 as an alternative entry point. If triggered we'll start with a stop loss at $85.75, under the 50-dma. I do expect the $100 level to offer some resistance but our long-term target is the $110-120 zone.

Breakout trigger: intraday trigger at $91.00

BUY the 2015 Jan $100 call (CELG150117c100) current ask $3.10

- or -

BUY the 2016 Jan $100 call (CELG160115c100) current ask $9.65

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

Chart of CELG:

Originally listed on the Watch List: 08/17/14


Lockheed Martin Corp. - LMT - close: 169.16

Company Info

LMT is considered part of the industrial goods sector. According to their press release, "Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 113,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation’s net sales for 2013 were $45.4 billion."

That's a pretty brief summary for such a large company. Their aerospace and defensive business is extensive covering aircraft, ground vehicles, missiles, missile defense, naval systems, radar systems, sensors, tactical communications, training & logistics, transportation, and unmanned systems.

Their information technology business works in biometrics, cloud computing, cyber security, health and life sciences, and more. Their space division includes satellites, exploration, and launch vehicles. Plus their emerging technologies operations covers exciting fields like robotics, nanotechnology, and advanced aeronautics.

Fundamentally the company has managed to navigate both the economy's ups and downs and the constantly stormy political weather in Washington. LMT has managed to beat Wall Street's earnings estimates the last four quarters in a row. Management has raised their guidance three out of the last four quarters. LMT's most recent earnings report was July 22nd. Analysts were expecting a profit of $2.66 a share on revenues of $11.15 billion. LMT delivered $2.76 a share with revenues of $11.31 billion.

If you look at the world today there seems to be a growing number of conflicts, not less. Just this past week U.S. Defense Secretary Hagel was speaking and said, "The world is exploding all over." Sadly that's probably bullish for LMT's military business.

The stock has spent almost six months consolidating its very impressive 2013 gains. Now it looks ready to breakout. Shares are hovering just below resistance in the $170-171 area. Tonight I am suggesting we wait for LMT to close above $171.00 and then buy calls the next morning with a stop loss at $161.95.

The point & figure chart is bullish with a $196.00 target. We'll start this trade with a potential exit target at $199.00.

Breakout trigger: Wait for LMT to close above $171.00
then buy calls the next morning with a stop at $161.95.

BUY the 2015 Jan $180 call (LMT150117C180) current ask $2.75

- or -

BUY the 2016 Jan $190 call (LMT160115c190) current ask $6.40

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

Chart of LMT:

Originally listed on the Watch List: 08/17/14


Active Watch List Candidates:



C. R. Bard Inc. - BCR - close: 149.83

Comments:
08/17/14: BCR's bounce last week failed at short-term resistance near $152.00. Overall our strategy is unchanged.

Earlier Comments: August 3, 2014:
C.R. Bard (a.k.a. BARD) is "a leading multinational developer, manufacturer, and marketer of innovative, life-enhancing medical technologies in the product fields of vascular, urology, oncology, and surgical specialty. BARD markets its products and services worldwide to hospitals, individual health care professionals, extended care facilities, and alternate site facilities. BARD pioneered the development of single-patient-use medical products for hospital procedures; today BARD is dedicated to pursuing technological innovations that offer superior clinical benefits while helping to reduce overall costs (source: company website)."

Thus far 2014 has been a bit of a roller coaster ride for BCR investors. That is a bit surprising considering that BCR has significantly beaten Wall Street's earnings estimates two quarters in a row. The company saw its Q2 revenues rise +8.8% to $827 million. BCR's Q2 profit soared +29.6% to $2.06 a share. Management then raised guidance and the stock broke out past major resistance near $150.00.

The broader market's recent weakness has pulled BCR back toward the $150 area, which should be support. If the stock bounces we want to be ready to hop on board.

Wait for a close above $152.00 and then buy calls the next morning with a stop loss at $146.95. I am not setting an exit target tonight but I'll note that the point & figure chart is bullish and forecasting at long-term target of $194.

Breakout trigger: Wait for a close above $152.00
Then buy calls the next day with a stop at $146.95.

BUY the 2015 Jan $160 call (BCR150117C160)

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

Originally listed on the Watch List: 08/03/14


Cummins Inc. - CMI - close: 140.93

Comments:
08/17/14: CMI is down less than half a point for the week. Yet the action looks bearish with CMI failing at its simple 200-dma and underperforming the market's move higher.

We are not giving up yet. Wait for a close above $144.00.

Earlier Comments: August 10, 2014:
Cummins Inc. was founded back in 1919 by its namesake Clessie Lyle Cummins. The company has four businesses: engines, power generation, components, and distribution. They're headquartered in the state of Indiana with about 48,000 employees worldwide. They do business in 190 countries.

According to the company website CMI describes themselves as "a corporation of complementary business units that design, manufacture, distribute and service diesel and natural gas engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems."

CMI reported Q1 earnings on April 29th. They crushed the earnings number and beat the revenue estimates with revenues up +12.3% for the quarter. CMI management raised their 2014 guidance by +6% to +10% (about $18.3-19.0 billion).

When CMI reported Q2 earnings on July 28th Wall Street was expecting a profit of $2.39 a share on revenues of $4.82 billion. CMI beat those numbers with a profit of $2.43 on revenues of $4.84 billion. Profits were up +10.5% from a year ago. Management raised their 2014 guidance again. This time they see revenues up +8% to +11% in 2014. That's about $18.7-19.2 billion.

CMI's Chairman and CEO Tom Linebarger said, "Demand is growing in on-highway markets in North America this year as the economy improves and we have gained market share in medium duty truck and bus markets." Their North American sales surged +14% last quarter versus a -1% pullback in international sales.

That's two quarters in a row that CMI has beat Wall Street's top and bottom line estimates and raised guidance. Yet the stock was crushed following the July earnings number. It appears the upgraded revenue guidance wasn't good enough and analysts were expecting more.

CMI reported sales of $17.3 billion in 2013. Now they're approaching $19 billion. They've already approved a $1 billion stock buyback program to replace their current $1 billion buyback program once it's complete. They have also raised their dividend this year.

The company has rising sales, rising market share, rising profits, and rising dividends. It has a trailing P/E of 17 and a forward P/E of 12.8. That sounds like a pretty good combination.

Technically the stock has fallen to its long-term trend line of support (see the weekly chart below). Last week shares have started to rebound from this trend. However, on a short-term basis the breakdown under its 200-dma looks pretty ugly. The bounce last week failed near $144.00 and its 10-dma. Therefore tonight we are suggesting investors wait for CMI to close above $144.00 and then buy calls the next morning with a stop at $137.90.

Breakout trigger: Wait for a close above $144.00
then buy calls the next morning with a stop at $137.90

BUY the 2015 Jan $150 call (CMI150117C150)

- or -

BUY the 2016 Jan $160 call (CMI160115c160)

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

Originally listed on the Watch List: 08/10/14


Thermo Fisher Scientific - TMO - close: 121.55

Comments:
08/17/14: TMO garnered some bullish analyst coverage and a new $150 price target. This failed to rally fire up the stock price. TMO consolidating sideways last week with traders buying dips near short-term support at $120.00.

I do not see any changes from my earlier comments.

Earlier Comments: August 10, 2014:
TMO is considered part of the healthcare sector. They provide products and services in their analytical instruments, laboratory services, specialty diagnostics, and their new Life Sciences division.

According to the company website, "Thermo Fisher Scientific Inc. is the world leader in serving science, with revenues of $17 billion and 50,000 employees in 50 countries. Our mission is to enable our customers to make the world healthier, cleaner and safer. We help our customers accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics and increase laboratory productivity. Through our four premier brands – Thermo Scientific, Life Technologies, Fisher Scientific and Unity Lab Services – we offer an unmatched combination of innovative technologies, purchasing convenience and comprehensive support."

TMO is developing a trend of beating Wall Street's estimates. Back in April they reported their first quarter results that beat estimates on both the top and bottom line. Management then raised their guidance for 2014. TMO did it again when they reported Q2 earnings on July 23rd. However, this report is significant because it's the first earnings report including its new Life Sciences acquisition.

Wall Street was expecting TMO to report earnings of $1.63 a share on revenues of $4.25 billion. The company beat these expectations. Earnings rose +30% to $1.72 a share. Revenues soared +33% to $4.32 billion. Gross margins improved 154 basis points to 45.4%. Management then adjusted their revenue guidance higher.

TMO's management has also upgraded their expected synergies from the Life Sciences acquisition. They now expect to reap $350 million in synergies over the next three years. That's up from $300 million.

The stock has reflected TMO's bullish performance with big gains over the past couple of years. Yet the rally peaked in March 2014 and shares have been digesting gains for months. This past week saw TMO testing significant support near its long-term trend of higher lows. This looks like an opportunity to hop on board.

I am suggesting we wait for TMO to close above $122.50 and then buy calls the next morning with a stop loss at $117.40. The $127.00 level is overhead resistance but we're betting on a bullish breakout to record highs.

FYI: The option spreads on TMO are a little bit wide. Investors may want to use smaller positions to limit their risk.

Breakout trigger: Wait for a close above $122.50
then buy calls the next morning with a stop at $117.40

BUY the 2015 Jan $130 call (TMO150117c130)

- or -

BUY the 2016 Jan $130 call (TMO160115c130)

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

Originally listed on the Watch List: 08/10/14