New Watch List Entries

ANTM - Anthem, Inc.

ITB - U.S. Home Construction ETF


Active Watch List Candidates

AET - Aetna Inc

LVLT - Level 3 Communications

MAR - Marriott Intl.

WMT - Wal-Mart Stores


Dropped Watch List Entries

FOXA graduated to our active play list.

ASML has been removed from the watch list.

WMT has a new entry point strategy.

NXPI has been moved from the watch list to our new play section.



New Watch List Candidates:

Anthem, Inc. - ANTM - close: 129.80

Company Info

Anthem, Inc. is one of the largest healthcare insurance companies in the world. The company recently changed its name from Wellpoint to Anthem. They currently offer healthcare plans to almost 68 million people.

Healthcare names displayed significant strength last year as Obamacare added millions of new customers to the health insurance industry. That trend should continue into 2015. ANTM's long-term bullish trend has been butting up against major resistance at $130. That resistance broke on Thursday.

We'd like to see some follow through higher. Tonight I'm suggesting we wait for ANTM to close above $132.00 and then buy calls the next morning with a stop loss at $122.45.

FYI: ANTM is scheduled to report earnings on January 28th and shares could be volatile that morning as investors digest the results.

Breakout trigger: Wait for ANTM to close above $132.00
Then buy calls the next morning with a stop at $122.45

BUY the 2016 Jan $140 call (ANTM160115c140) current ask $9.95

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

Chart of ANTM:

Originally listed on the Watch List: 01/11/15


iShares US Home Construction ETF - ITB - close: 26.61

Company Info

The ITB is an exchange traded fund that mimics the Dow Jones U.S. Select Home Construction Index. The top 12 holdings are DHI, LEN, PHM, TOL, NVR, HD, TPH, LOW, RYL, SHW, KBH and MTH.

This index has been stuck in a trading range for years. That looks like it's about to change. Have you looked at a chart of the 10-year bond yield lately? Bond yields are going lower. That's going to pressure mortgage rates lower and that's bullish for home sales. This past week saw 30-year mortgage rates dip below 3.6%. That's a 19-month low.

If that wasn't enough of a tailwind President Obama wants to help. On January 7th the White House announced plans to reduce the government mortgage insurance premiums in an effort to boost home ownership. Another positive for the homebuilders is the U.S. Federal Reserve. We just had two fed governors come out last week saying they think the Fed should hold off on raising rates. The longer the Fed waits to start raising rates the better it will be for homebuilders.

Currently the ITB appears to be breaking out past major resistance and closed at multi-year highs. I'd like to see a little bit more follow through. Tonight I'm suggesting we wait for the ITB to close above $27.00 and then buy calls the next morning with a stop loss at $23.95.

Breakout trigger: Wait for the ITB to close above $27.00 and then buy calls the next morning with a stop at $23.95.

BUY the 2016 Jan $30 call (ITB160115c30) current ask $1.65

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

Chart of ITB:

Originally listed on the Watch List: 01/11/15


Active Watch List Candidates:



Aetna Inc. - AET - close: 91.04

Comments:
01/11/15: Buying AET on a dip near $86 is starting to feel like wishful thinking. Last week, when the market bounced, healthcare stocks soared. AET hit new highs above $92.00.

I do not want to chase the rally here. I'm going to leave AET on our watch list for another week or two and we'll either adjust our entry strategy or remove it.

Earlier Comments: December 7, 2014:
AET is in the healthcare sector. According to a recent press release, "Aetna is one of the nation's leading diversified health care benefits companies, serving an estimated 46 million people with information and resources to help them make better informed decisions about their health care. Aetna's customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups and expatriates."

If you study a one-year chart of AET the stock has definitely seen its ups and downs. That's because the healthcare industry has faced a number of issues. AET's CEO commented on this past year in their latest post-earnings conference call.

Mark T. Bertolini, Aetna chairman, CEO and president, said, "some of the challenges we face this year, including pricing solving for nearly $1 billion in ACA related industry fees and taxes, solving for the largest rate cuts to the Medicare Advantage program in our recent history, navigating a host of new regulatory requirements in our small group and individual businesses, managing through a turbulent launch in public exchanges and controlling pharmacy costs in a year where heavy priced Hepatitis C treatments first became available and treatment guidelines changed in unforeseen ways." (ACA stands for Affordable Care Act, a.k.a. Obamacare).

In spite of all these challenges shares of AET are outperforming the major indices with a +32% gain in 2014 compared to a +12% gain in the S&P 500. AET's strength is due to the company's earnings performance. They have beaten Wall Street's earnings estimates and raised guidance three quarters in a row.

AET's most recent quarterly report was October 28th. Analysts were expecting a profit of $1.58 a share on revenues of $14.7 billion. AET delivered a profit of $1.79 a share. Revenues were up +13% to match estimates. The company said they added 470,000 new medical insurance customers in the third quarter, putting the total at 23.6 million.

Bertolini commented on their results, "Aetna reported solid third-quarter results, including our 10th consecutive quarter of membership growth, record quarterly operating revenues, and continued high single-digit pretax operating margin."

The major healthcare companies are reaping the benefits of Obamacare as more people sign up. Management raised their full year 2014 earnings guidance into the $6.60-6.70 zone versus Wall Street's estimate of $6.57.

Just last month AET raised their quarterly dividend 11% to 25 cents a share and added $1 billion to its stock buyback program, up from $464 million. In the last two months the stock has received multiple price target upgrades into the $95-100 zone. The point & figure chart is bullish with a $112.00 target.

The breakout past resistance near $85.00 looks like a significant buy signal. Yet after four weeks of gains I don't want to chase AET here. Tonight I am suggesting a buy-the-dip entry point at $86.00. Eventually AET will see a pullback and we want to be ready. It may not happen soon so we just need to be patient.

Buy-the-dip trigger @ 86.00, stop loss @ 83.45

BUY the 2016 Jan. $90 call (AET160115c90)

12/28/14 adjust the buy-the-dip trigger to $86.00 and raise the stop loss to $83.45
12/14/14 adjust the buy-the-dip trigger from $86.00 to $84.25. Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 12/07/14


ASML Holding - ASML - close: 102.09

Comments:
01/11/15: The market's sell-off from the late December high hit shares of ASML pretty hard. The stock collapsed with a drop from $110 to $100. It's unlikely that ASML will meet our suggested entry point, a close above $110.25, any time soon. Even though $100 is round-number support I don't want to buy calls here. We'll look at ASML again after the company reports earnings on January 21st.

Tonight we are removing ASML from the watch list.

Trade did not open.

01/11/15 removed from the watch list
12/28/14 Strategy update: Instead of a buy-the-dip trigger at $101.50 we will wait for ASML to close above $110.25 and then buy calls the next day. Move the stop loss to $99.65 and adjust the option strike to the 2016 Jan. $120 call. Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 12/14/14


Level 3 Communications - LVLT - close: 47.21

Comments:
01/11/15: LVLT is currently trading near the bottom of a $46.50-50.00 trading range. If shares continue to sink we'll remove it as a candidate. Currently we are on the sidelines. We want to see LVLT close above $50.50.

Earlier Comments: December 28, 2014:
LVLT is a communication services company. Their marketing material describes LVLT as "Level 3 Communications, Inc. is a Fortune 500 company that provides local, national and global communications services to enterprise, government and carrier customers. Level 3's comprehensive portfolio of secure, managed solutions includes fiber and infrastructure solutions; IP-based voice and data communications; wide-area Ethernet services; video and content distribution; data center and cloud-based solutions. Level 3 serves customers in more than 500 markets in over 60 countries over a global services platform anchored by owned fiber networks on three continents and connected by extensive undersea facilities."

They just recently completed a merger with TW Telecom. Earnings have been improving. LVLT has beaten Wall Street's earnings estimates the last three quarters in a row. Technically shares have been outperforming the broader market. The NASDAQ composite is up +15% in 2014 while LVLT is up +50%. The point & figure chart is bullish and forecasting a long-term target at $75.00.

Currently shares of LVLT are hovering just below key resistance at the $50.00 mark. I am suggesting we wait for LVLT to close above $50.50 and then buy calls the next morning with a stop loss at $45.45.

Breakout trigger: Wait for a close above $50.50,
Then buy calls the next day with a stop at $45.45

BUY the 2016 Jan $55 call (LVLT160115c55)

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

Originally listed on the Watch List: 12/28/14


Marriott Intl. - MAR - close: 78.73

Comments:
01/11/15: MAR delivered a strong rebound off last week's lows. Once again the stock is poised to breakout past key resistance and hit new highs. We want to see shares close above $80.25 before buying calls.

Earlier Comments: January 4, 2015:
MAR is in the services sector. The company describes itself as "Marriott International, Inc. (MAR) is a global leading lodging company based in Bethesda, Maryland, USA, with more than 4,100 properties in 79 countries and territories. Marriott International reported revenues of nearly $13 billion in fiscal year 2013. The company operates and franchises hotels and licenses vacation ownership resorts under 18 brands."

Earnings in 2014 have been improving and MAR beat Wall Street's estimates the last three quarters in a row. Their most recent report was late October with MAR delivering earnings of $0.65 per share. Revenues were up +9.5% to $3.46 billion, also above estimates. Guidance has only been in-line but that could be management playing it safe. Back in September the company outlined their growth plans through 2017. MAR said they will add more than 200,000 rooms around the world. Revenue per room available (RevPAR) is a key metric for the lodging industry. MAR expects 4 percent to 6 percent RevPAR growth in 2015 through 2017.

MAR is an international company and the CEO was recently asked about the economic slowdown in China, Japan and Europe and if it was hurting business. He said no. MAR's CEO said global travel in 2014 was better than the prior three years and he expects it to be healthy in 2015.

MAR focuses on three types of travel. They have the individual business traveler. There is group travel. Then leisure travel. MAR said they are seeing growth in all three areas. The improving U.S. economy could drive business travel and group travel. Lower gas prices mean more money for consumers so that can boost leisure travel. Plus, America has a ton of baby boomers retiring everyday. They travel more once they retire.

Technically shares of MAR have been consolidating sideways below resistance in the $78-80 zone the last several weeks. I am suggesting we wait for MAR to close above $80.25 and then buy calls the next day with a stop at $74.90.

Breakout trigger: Wait for a close above $80.25
Then buy calls the next day with a stop at $74.90

BUY the 2016 Jan. $90 call (MAR160115c90)

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

Originally listed on the Watch List: 01/04/15


Wal-Mart Stores Inc. - WMT - close: 89.35

Comments:
01/11/15: It was a very bullish week for WMT with shares soaring to all-time highs. The stock displayed significant relative strength. When the market was sinking on Monday and Tuesday last week was holding short-term support near $85.50 and started to rally ahead of everyone else. Then when the market bounced WMT broke out.

On Friday Bloomberg reported that the holiday sales in 2014 were significant better than anticipated. According to ShopperTrak the November-December time frame saw holiday spending surge +4.6%. That beat ShopperTrak's estimate of +3.8% and marked the best performance since 2005. You can bet that WMT was a big beneficiary of this trend, especially since lower gas prices means WMT's customers had a bigger percentage of their income available to spend on other items.

It looks like our plan to buy calls on a dip at $81.50 is not going to happen. Tonight we are updating our strategy. We will move the buy-the-dip trigger from $81.50 to $87.50. We'll move the stop loss to $81.90. Move the option strike to the 2016 Jan. $90 call.

Earlier Comments: December 14, 2014:
WMT is the titan of retail. They are the biggest on the planet with 11,000 stores in 27 countries. Their three main segments are Walmart U.S., Walmart International, and Sam's Club (a Costco rival warehouse club).

The stock has been stuck in a $72-80 trading range for most of the last 18 months. That changed with the November breakout past resistance at $80.00. The company reported earnings on November 13th. Earnings were $1.15 a share, which was three cents above expectations. Revenues were up +2.8% and beat Wall Street estimates at $118.08 billion for the quarter. WMT said their same-store sales were up +0.5% in the third quarter, which is the first positive reading in seven quarters. Guidance was mostly inline with estimates although WMT said they expect comparable store sales to be flat to positive in the fourth quarter.

Retail-related stocks initially struggled following Black Friday as initial reports showed consumer traffic and spending came in below estimates. That was due to the changing nature of the retail experience. Instead of standing in line in the cold for door buster deals as in years past this year consumer shopped online and on their mobile phone. Wal-Mart said their online sales during the Black Friday weekend hit a record. Plus, retailers have extended their Black Friday deals form one-day to several days.

The National Retail Federation (NRF) recently issued a press release following the U.S. government's November retail sales number, which was up +0.6% over October and up +3.2% from November 2013. NRF reiterated their forecast for a strong +4.1% growth in consumer spending during the holidays this year.

We like Wal-Mart because it stands to benefit from the crash in crude oil prices. A large chunk of WMT's shoppers are low to middle income citizens. They are more affected by gasoline prices. The sharp drop in gas at the pump leaves a lot more money in their pocket which they will spend on other things. WMT will be a direct beneficiary from this extra cash that consumers have to spend.

Technically shares have started to correct from all-time highs near $88 set in late November. The point & figure chart is bullish and forecasting a long-term target of $98.00. Broken resistance in the $80-81 should be new support. Tonight I am suggesting a buy-the-dip trigger to buy calls when WMT hits $81.50.

Buy-the-dip Trigger @ $87.50, use a stop loss at $81.90.

BUY the 2016 Jan $90 call (WMT160115c90)

01/11/15 Strategy Update Move the buy-the-dip trigger from $81.50 to $87.50. Move the stop loss to $81.90. Move the option strike from 2016 Jan. $85 call to the 2016 Jan. $90 call. Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 12/14/14