We are pruning some underperformers from the watch list tonight.



New Watch List Entries


None, no new watch list candidates



Active Watch List Candidates

CHKP - Check Point Software

LLY - Eli Lilly & Co

TGT - Target Corp.


Dropped Watch List Entries

BRCD, FSLR, and PII have been removed from the watch list.


Active Watch List Candidates:



Brocade Communications - BRCD - close: 9.35

Comments:
10/12/14: The sell-off in technology stocks has hit BRCD pretty hard. The stock is down more than 10% in the last two weeks and the breakdown under support near $10.00 looks ugly.

Our trade has not opened yet. Tonight we are removing BRCD as an active watch list candidate.

Trade did not open.

10/12/14 removed from the watch list.

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


Checkpoint Software Tech. - CHKP - close: 66.27

Comments:
10/12/14: CHKP has seen a $4.00 drop in the last two days. Friday's close under the simple 200-dma looks pretty bearish. If this weakness continues we will drop CHKP from the watch list next week. If shares can stabilize then we'll re-evaluate our entry point strategy next week.

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: 53.72

Comments:
10/12/14: Ouch! FSLR has collapsed with a -16% drop in one week. Shares are down even more from their September highs. This stock is off four weeks in a row and last week's plunge produced a breakdown under FSLR's longer-term trend of higher lows.

Our trade has not opened. Tonight we are removing FSLR from the watch list.

Trade did not open.

10/12/14 removed from the watch list.

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


Eli Lilly & Co - LLY - close: 64.15

Comments:
10/12/14: Drug stocks were not immune to the market's volatility last week. As expected LLY held up better than most with only a minor pullback. I don't see any changes from my prior comments. Although if the market weakness continues we might see LLY test the 100-dma.

Earlier Comments: October 5, 2014:
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)

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

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


Polaris Industries Inc. - PII - close: 142.59

Comments:
10/12/14: PII appears to be breaking down from its two-month trading range. It seems unlikely that shares will hit our suggested entry point at $153.50 any time soon. Tonight we are removing PII from the watch list. Yet I would keep it on your radar screen. A dip to the $135.00 level might prove to be a bullish entry point.

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

Trade did not open.

10/12/14 removed from the watch list.

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


Target Corp. - TGT - close: 60.59

Comments:
10/12/14: Investors were in a sell first and ask questions later kind of mood. TGT sliced through its 50-dma. Shares look headed for potential support at $60.00 and its simple 200-dma. If TGT can bounce near $60.00 then we might reconsider our entry point strategy. However, at the moment, our plan is unchanged.

Earlier Comments: October 5, 2014:
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)

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

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