New Watch List Entries

LLY - Eli Lilly & Co

TGT - Target Corp.


Active Watch List Candidates

BRCD - Brocade Communications

CHKP - Check Point Software

FSLR - First Solar Inc.

PII - Polaris Industries Inc.


Dropped Watch List Entries

HBI has graduated to our new plays section.



New Watch List Candidates:


Eli Lilly & Co - LLY - close: 65.67

Company Info

You may have noticed that stocks have turned a bit more volatile recently. That could be a new trend after as investors try to look ahead into 2015 and ponder a market environment without a QE program by the Federal Reserve. That's why tonight we're looking at a stock like LLY, which is traditionally considered a more safe haven trade.

LLY has been building on its longer-term trend of higher lows. Plus the company has seen some good news. The U.S. FDA recently approved LLY's new once-a-week injectable diabetes drug for adults with type 2 diabetes. This new treatment, Trulicity, helps improve the patients blood sugar levels. There are an estimated 26 million Americans who suffer with type 2 diabetes. LLY is also teaming up with AstraZeneca to work on a Alzheimer's treatment.

The two-week pullback in shares of LLY was pretty mild and investors are already buying the dip. We want to hop on board if this rebound continues. Tonight we are suggesting investors wait for LLY to close above $66.25 and then buy calls the next morning with a stop loss at $61.90.

Please note that LLY is due to report earnings on October 23rd. You may want to wait on launching any positions until after we see how the market reacts to LLY's results.

trigger: Wait for LLY to close above $66.25
Then buy calls the next morning with a stop at $61.90

BUY the 2016 $70 call (LLY160115c70) current as $3.40

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

Chart of LLY:

Originally listed on the Watch List: 10/05/14


Target Corp. - TGT - close: 63.07

Company Info

It has been an ugly couple of years for shares of TGT as the company deals with the fallout from the massive data breach and hacking scandal from late 2013. It would appear that the damage is done. TGT has produced a major double bottom with its 2014 lows. Shares have been churning through resistance over the last few months.

Nowadays we seem to hear about another data breach or corporate hacking issue once a month if not more often. Their impact might be losing its effect on the consumer. Yet TGT is still dealing with the aftermath of the attack. The most recent quarterly report was only in-line with estimates. Management guided lower for its third quarter. After the initial knee-jerk reaction down on the earnings warning investors have been buying TGT. It might be a case of all the bad news is already priced in. I have seen some comments that TGT's margins might be under pressure due to their heavily promotional activity to get customers back in the story. That doesn't seem to deter the bulls.

TGT had a relatively mild two-week pullback and traders were buying the dip the last couple of days. The stock is poised to rally toward new 2014 highs. The point & figure chart looks very bullish with a quadruple top breakout buy signal that is currently forecasting at $79.00 target.

Friday's intraday high was $63.45. I am suggesting we wait for TGT to close above $63.60 and then buy calls the next morning with a stop loss at $59.85.

Breakout trigger: Wait for a close above $63.60
Then buy calls the next morning with a stop at $59.90

BUY the 2016 $65 call (TGT160115c65) current ask $3.90

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

Chart of TGT:

Originally listed on the Watch List: 10/05/14


Active Watch List Candidates:



Brocade Communications - BRCD - close: 10.61

Comments:
10/05/14: BRCD spent last week ricocheting between short-term resistance at $11.00 and short-term support near $10.50. We are waiting for a breakout past $11.00.

Earlier Comments: September 27, 2014:
BRCD is in the technology sector. They make products for computer networking. According to the company website, "Brocade leads the industry in providing comprehensive network solutions that help the world’s leading organizations transition smoothly to a virtualized world where applications and information reside anywhere. As a result, Brocade facilitates strategic business objectives such as consolidation, network convergence, virtualization, and cloud computing. Today, Brocade solutions are used in over 90 percent of Global 1000 data centers as well as in enterprise LANs and the largest service provider networks."

The stock is a long way from the Internet bubble days where BRCD traded near $130 a share back in 2001. When the bubble popped shares spent years trading under $10 a share. Now the stock appears to be recovering as the company builds on its earnings momentum.
BRCD has beaten Wall Street's earnings estimates four quarters in a row. This past week saw two analyst firms upgrade their price targets on BRCD thanks to improvement in revenue growth and margins.

Technically BRCD just spent the last three weeks consolidating sideways above the $10.00 level, which as prior resistance is now new support. The 2014 high is potential resistance at $11.00. Tonight I'm suggest we wait for BRCD to close above $11.00 and then buy calls the next day.

Breakout trigger: Wait for a close above $11.00
Then buy calls the next morning with a stop at $10.35

BUY the 2016 Jan $12 call (BRCD160115c12)

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

Originally listed on the Watch List: 09/28/14


Checkpoint Software Tech. - CHKP - close: 70.00

Comments:
10/05/14: Friday's display of relative strength in CHKP (+1.95%) might signal the end of its three-week consolidation lower. The pullback in September almost looks like a bull-flag consolidation pattern. Friday's high was $70.39. More aggressive traders may want to consider new bullish positions above $70.50. I am suggesting we stick with the plan and wait for a close above $72.50 before buying calls.

Be aware that CHKP is scheduled to report earnings on October 23rd.

Earlier Comments: September 14, 2014:
CHKP is another technology stock and it is similar to AKAM in that both have beaten earnings estimates every quarter this year and both are trading near 14-year highs. While AKAM facilitates Internet traffic, CHKP seeks to guard its clients against Internet hazards.

The company describes itself as, "the worldwide leader in securing the Internet, provides customers with uncompromised protection against all types of threats, reduces security complexity and lowers total cost of ownership. Check Point first pioneered the industry with FireWall-1 and its patented stateful inspection technology."

"Today, Check Point continues to develop new innovations based on the Software Blade Architecture, providing customers with flexible and simple solutions that can be fully customized to meet the exact security needs of any organization. Check Point is the only vendor to go beyond technology and define security as a business process. Check Point 3D Security uniquely combines policy, people and enforcement for greater protection of information assets and helps organizations implement a blueprint for security that aligns with business needs. Customers include tens of thousands of organizations of all sizes, including all Fortune and Global 100 companies. Check Point's award-winning ZoneAlarm solutions protect millions of consumers from hackers, spyware and identity theft."

It feels like a week doesn't go by that we don't hear about another major hacking scandal in the business world. It's not going away and corporations have to constantly update their cyber defense. CHKP has been working cyber security since 1993.

Shares of CHKP spent much of this year consolidating gains from 2013. However, the last week of August produced a crucial breakout past resistance near $70.00. Tonight I am suggesting a trigger to buy calls if CHKP can close above $72.50. We'll start with a stop at $69.45. The point & figure chart is bullish and currently forecasting an $89.00 target. We'll start with a long-term target in the $95-100 zone (our target to exit the 2015 calls will be lower).

Breakout trigger: Wait for a close above $72.50
Then buy calls the next morning with a stop at $69.45

BUY the 2015 Jan $75 call (CHKP150117C75)

- or -

BUY the 2016 Jan $80 call (CHKP160115c80)

10/05/14 Friday's move might signal the end of the pullback.
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 09/14/14


First Solar, Inc. - FSLR - close: 64.10

Comments:
10/05/14: This is a pivotal week for FSLR. Last week shares retreated toward support near its rising 200-dma and its long-term trend of higher lows. A breakdown here would be very bearish. Naturally a rebound will reaffirm the up trend. Aggressive investors may want to consider new positions on a bounce from current levels. If we do see a rebound we'll reconsider our entry point strategy. At the moment we're waiting for a close above $75.00.

Earlier Comments: September 21, 2014:
FSLR was founded in Arizona back in 1999. Since then the company has grown into a global leader for photovoltaic (PV) solar energy solutions. They have installed more than eight gigawatts (GW) of solar energy around the world.

The acceptance and application of solar energy around the world is growing. FSLR is trying to capitalize on that trend. The company recently announced they're expanding into India.

It has been a bumpy ride for FSLR investors this year with big swings up and down. That's probably thanks to the volatile nature of FSLR's earnings reports. The company has announced some pretty big hits and misses this year. In spite of all the volatility shares of FSLR are up +29.7% in 2014 and they look poised to breakout to new multi-year highs soon.

A rally past $74.00 would generate a new buy signal on the point & figure chart. It could also spark some short covering since the most recent data listed short interest at 12% of the 73.3 million share float.

I am suggesting we wait for FSLR to close above $75.00 and then buy calls the next morning with a stop loss at $69.40. Our long-term target is the $95-100 zone.

Breakout trigger: Wait for FSLR to close above $75.00
Then buy calls the next morning with a stop at $69.40

BUY the 2016 Jan $80 call (FSLR160115C80)

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

Originally listed on the Watch List: 09/21/14


Polaris Industries Inc. - PII - close: 145.60

Comments:
10/05/14: PII was flirting with new highs on Monday and Tuesday last week. Unfortunately the market sell-off sent shares back toward the bottom of its recent trading range (and worse if you look at Thursday's intraday move).

If PII recovers this week then we'll keep our suggested entry point as a close above $153.50. If not then we'll likely remove PII as a watch list candidate.

FYI: PII is scheduled to report earnings on October 22nd.

Earlier Comments: September 27, 2014:
PII is considered part of the consumer goods sector. They are a leader in the powersports industry. The company manufacturers all manner of off-road vehicles, motorcycles, snowmobiles, electric (low-speed) vehicles, a new three-wheeled vehicle called the slingshot, and more. Altogether the company has sales of more than $4 billion a year.

More importantly sales have been improving. The stock soared back in July when PII beat estimates on both the top and bottom line and then raised their 2014 guidance. Now after several weeks of consolidating sideways PII is breaking out to new all-time highs. The point & figure chart is bullish and suggesting a long-term target of $206.

I am suggesting we wait for PII to close above $153.50 and then buy calls the next morning.

Breakout trigger: Wait for a close above $153.50
Then buy calls the next morning with a stop at $146.00

BUY the 2016 Jan $170 call (PII160115c170)

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

Originally listed on the Watch List: 09/28/14