New Watch List Entries

ATVI - Activision Blizzard

MS - Morgan Stanley

NUE - Nucor Corp.

ORLY - O'Reilly Auto


Active Watch List Candidates

TMO - Thermo Fisher Scientific


Dropped Watch List Entries

BCR has been removed.



New Watch List Candidates:


Activision Blizzard, Inc. - ATVI - close: 23.54

Company Info

Under promise and over deliver. That appears to be ATVI's model. They consistently offer cautious or lowered guidance and yet continue to beat Wall Street's profit and revenue estimates. ATVI has bested analysts' estimates for at least the last four quarters in a row. Their latest report was August 5th. Management offered EPS guidance below Wall Street's estimates but ATVI raised their revenue guidance significantly above estimates.

If you didn't know ATVI is a giant in the video game industry. They make games like "Call of Duty" and "World of Warcraft". They're about to launch a brand new game called "Destiny" in September this year. Plus, they'll release a new update to Call of Duty in November.

Analysts have been raising their price targets and investors have been buying the dips. This stock ended the week at all-time highs. I am suggesting we wait for the stock to close above $23.80 and buy calls the next morning with a stop loss at $21.95. I prefer the 2016 calls but we'll list the 2015s as well.

Breakout trigger: Wait for a close above $23.80
Then buy calls the next morning with a stop at $21.95

BUY 2015 Jan $25 call (ATVI150117C25) current ask $0.88

- or -

BUY 2016 Jan $25 call (ATVI160115C25) current ask $2.59

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

Chart of ATVI:

Originally listed on the Watch List: 08/31/14


Morgan Stanley - MS - close: 34.31

Company Info

MS is in the financial sector. They're one of the biggest players in the financial services industry. The stock has been outperforming its peers with a +9.4% gain this year versus a +6.8% gain in the XLF financial ETF. MS has managed to beat Wall Street's earnings estimates four quarters in a row.

Technically shares just recently broke through significant resistance in the $33.50 level this past week. This leaves MS at new multi-year highs.

Currently MS is testing short-term resistance at $34.50. I'm suggesting a trigger to buy calls if MS can close above $34.60.

Breakout trigger: Wait for a close above $34.60
Then buy calls the next morning with a stop at $30.90

BUY the 2015 Jan $35 call (MS150117C35) current ask $1.50

- or -

BUY the 2016 Jan $40 call (MS160115C40) current ask $2.67

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

Chart of MS:

Originally listed on the Watch List: 08/31/14


Nucor Corp. - NUE - close: 54.32

Company Info

NUE is in the basic materials sector. The company makes steel and steel-related products. The stock has been dead money for months as NUE consolidating sideways n the $48-54 zone since its 2013 peak but that could be changing soon.

NUE's latest earnings report in July beat Wall Street's estimates on both the top and bottom line. Management issued an optimistic outlook. In August there was good news for domestic steel makers. The U.S. International Trade Commission (ITC) ruled in favor of American companies who make oil country tubular goods (OCTG) after foreign steel makers dumped a ton of product in the U.S. back in 2013. This ITC decision will levy duties against certain steel imports from South Korea, India, Taiwan, Turkey, Ukraine, and Vietnam. While this particular decision doesn't impact NUE's business that much it is a bullish undercurrent for the broader industry as a whole.

Technically NUE has been looking stronger. On August 19th the stock produced a spread-triple top breakout buy signal on its point & figure chart, which is now forecasting at $65 target.

At the moment NUE is hovering just below resistance near $55.00. I am suggesting we wait for NUE to close above $55.25 and then buy calls the next morning with a stop loss at $51.75.

Breakout trigger: Wait for a close above $55.25
Then buy calls the next morning with a stop at $51.75

BUY the 2016 $60 call (NUE160115C60) current ask $2.68

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

Chart of NUE:

Originally listed on the Watch List: 08/31/14


O'Reilly Automotive - ORLY - close: 155.98

Company Info

The U.S. economy is slowly improving. We are seeing slow but consistent job growth. Yet consumers remain cautious. While there has been a healthy trend of new car sales this year most consumers are keeping their old cars. Of the 247 million cars in the U.S. the average age is at a record high. Passenger cars have hit an average age of 11.4 years while light trucks are at 11.3. If consumers are keeping their cars this long that is going to mean more replacement parts and repairs. That has been good news for the auto part companies.

ORLY is one such company. According to their company website, "O'Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, serving both professional service providers and do-it-yourself customers. Founded in 1957 by the O'Reilly family, the Company operated 4,257 stores in 42 states as of June 30, 2014."

One analysts on Wall Street called ORLY a "well-oiled machine." It's easy to see why. The company has delivered four years of consistent double-digit earnings growth. Steady same-store sales are impressive considering the tough retail environment we've seen over the last few years. The company's margins are expected to grow over the next 12-18 months. ORLY is on track to open 200 new stores in 2014. They have also boosted their stock buyback program. On August 13th ORLY announced an additional $500 million, which bumps their total stock repurchase program to $4.5 billion.

Technically shares have been consistently bouncing off their long-term trend of higher lows (on the weekly chart below). ORLY did spent the last few months consolidating sideways but it has started to breakout past resistance. This is our chance to hop on board. A rally past $158.00 could create a new point & figure chart buy signal.

Friday's high was $157.18. I am suggesting we wait for ORLY to close above $157.25 and then buy calls the next morning with a stop loss at $149.75.

NOTE: I am labeling this a more aggressive trade due to the relatively wide option spreads. Consider reducing your normal position size to limit risk.

Breakout trigger: Wait for a close above $157.25
Then buy calls the next morning with a stop at $149.75

BUY 2015 Jan $160 call (ORLY150117C160) current ask $5.60

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

Chart of ORLY:

Originally listed on the Watch List: 08/31/14


Active Watch List Candidates:



C. R. Bard Inc. - BCR - close: 148.44

Comments:
08/31/14: BCR has spent the entire month of August consolidating sideways with shares finding support near the $147.00 mark. Last week I suggested that if BCR didn't move we would drop it. Thus tonight we are removing BCR as a watch list candidate. However, I would keep it on your radar screen for a close above $152.00. Nimble investors might want to consider buying a dip or a bounce from the $145.00 area, which should line up with one of BCR's long-term trend lines of support (if you do I would use a relatively tight stop loss).

Trade did not open.

08/31/14 removed from the watch list, trade did not open.

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


Thermo Fisher Scientific - TMO - close: 120.21

Comments:
08/31/14: TMO has spent the last four weeks consolidating sideways in the $119-123 area. The stock just tested technical support at its 100-dma and should bounce. We are suggesting a trigger to buy calls if TMO closes above $123.00.

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.

Breakout trigger: Wait for a close above $123.00
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)

08/24/14 adjust entry strategy: wait for a close above $123.00 and then buy calls the next day (instead of a close above $122.50)
Option Format: symbol-year-month-day-call-strike

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