New Watch List Entries

UA - Under Armour

UNP - Union Pacific

EWG iShares Germany ETF


Active Watch List Candidates

LVLT - Level 3 Communications

TXT - Textron Inc.


Dropped Watch List Entries

LMT and LMT graduated to our active play list.

ASH has been removed as an active watch list candidate.



New Watch List Candidates:

Under Armour, Inc. - UA - close: 75.03

Company Info

We have had UA on our radar screen for a long time. Now we're finally seeing an entry point. UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitnessâ„¢ platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it's actively fighting for market share and recently overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but they saw growth of +32%.

UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance. UA's most recent earnings report was February 4th. The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

Technically shares of UA have recently broken through resistance in the $73.00 area. Now after consolidating sideways the last couple of weeks the stock ended at all-time closing highs. The point & figure chart is bullish and forecasting at $101.00 target.

Wait for UA to close above $75.75 and then buy calls the next morning with a stop loss at $68.25.

Breakout trigger: Wait for UA to close above $75.75
Then buy calls the next morning with a stop at $68.25.

BUY the 2016 Jan $85 call (UA160115c85) current ask $5.40

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

Chart of UA:

Originally listed on the Watch List: 02/22/15


Union Pacific Corp. - UNP - close: 123.66

Company Info

UNP is another stock we have had our eye on for a long time. This company is in the services sector. UNP is the largest railroad in the U.S.

The company describes itself as "Union Pacific Railroad is the principal operating company of Union Pacific Corporation (UNP). One of America's most recognized companies, Union Pacific Railroad connects 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain. From 2005-2014, Union Pacific invested more than $31 billion in its network and operations to support America's transportation infrastructure. The railroad's diversified business mix includes Agricultural Products, Automotive, Chemicals, Coal, Industrial Products and Intermodal. Union Pacific serves many of the fastest-growing U.S. population centers, operates from all major West Coast and Gulf Coast ports to eastern gateways, connects with Canada's rail systems and is the only railroad serving all six major Mexico gateways. Union Pacific provides value to its roughly 10,000 customers by delivering products in a safe, reliable, fuel-efficient and environmentally responsible manner."

The company has been showing consistent earnings growth. Their most recent report was January 22nd. UNP reported Q4 earnings of $1.61 a share, which beat expectations and rose +27% from a year ago. Revenues also beat estimates at $6.15 billion. Several Wall Street analysts raised their price target on UNP following these results. Investors also like UNP for its dividend. The company has been paying dividends for 116 years in a row. A couple of weeks ago they just raised their dividend +10%.

If you believe the U.S. economy will continue to grow in 2015 then demand for transportation should also improve. Technically shares of UNP have been consolidating sideways in the $110-124 range for almost three months. Now shares are poised to breakout higher. The point & figure chart is bullish with a $154.00 target.

Tonight I am suggesting investors wait for UNP to close above $125.00 and then buy calls the next morning with a stop loss at $114.75.

Breakout trigger: Wait for UNP to close above $125.00
Then buy calls the next morning with a stop at $114.75.

BUY the 2016 Jan $135 call (UNP160115c135) current ask $5.00

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

Chart of UNP:

Originally listed on the Watch List: 02/22/15


iShares MSCI Germany - EWG - close: 29.50

Company Info

The EWG is an exchange traded fund (ETF) that mimics the MSCI Germany index. This includes small, mid, and large-cap companies.

The U.S. market has enjoyed several years worth of QE programs that helped fuel market gains. Now that the U.S. QE program is over Europe is about to start on their own QE program. The European Central Bank (ECB) will start its quantitative program in March this year. The central bank will purchase about €60 billion a month through September 2016 but they've already announced that they will extend this deadline if they need to.

This is significant. After years of promising to do something about the Eurozone economy and fight the threat of deflation the ECB is finally acting. They might be too late to fend off deflation but investors seem to have hope that Europe can turn things around.

Germany should be a prime beneficiary of this program. The ECB's QE will continue to pressure the euro lower and that makes Germany's exports more competitive. Investors are have already starting betting on an improvement in the Germany market with a significant bounce in the EWG.

Today the EWG has broken through technical resistance at its simple 200-dma. Now it's about to challenge resistance near the $30.00 mark. Tonight I am suggesting investors wait for the EWG to close above $30.00 and then buy calls the next morning with a stop loss at $26.85.

FYI: If you want a broader European ETF I did consider the VGK but about half of its holdings are British and Swiss companies and may not see the same benefit from a weaker euro.

Breakout trigger: Wait for EWG to close above $30.00
Then buy calls the next morning with a stop at $26.85 .

BUY the 2016 Jan $30 call (EWG160115c30) current ask $1.60

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

Chart of EWG:

Originally listed on the Watch List: 02/22/15


Active Watch List Candidates:



Ashland, Inc. - ASH - close: 127.26

Comments:
02/22/15: Shares of ASH spent last week consolidating sideways in the $126-128 range. I still don't want to chase it at current levels. More aggressive traders may want to consider buying a breakout past $128.00 as an alternative entry point.

Tonight I am removing ASH as a candidate. We might bring it back if shares do test support near $120-122 and bounce.

Trade did not open

02/22/15 removed from the watch list

Originally listed on the Watch List: 02/08/15


Level 3 Communications - LVLT - close: 54.08

Comments:
02/22/15: After consolidating sideways the last few days LVLT ended the week on an up note. The stock looks poised to breakout higher. Tonight we are adjusting our entry point strategy and option strike.

Instead of waiting for a dip to $50.75 we will move the trigger to $54.50. Wait for shares of LVLT to close above $54.50 and then buy calls the next morning with a stop loss at $49.45. We'll bump the option strike up to the 2016 January $60 call.

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.

Trigger: Wait for LVLT to close above $54.50,
then buy calls the next morning with a new stop at $49.45.

BUY the 2016 Jan $60 call (LVLT160115c60) current ask $3.60

02/22/15 Strategy update: Wait for LVLT to close above $54.50, then buy calls the next morning with a new stop at $49.45. Adjust the option strike to 2016 Jan $60 call
02/08/15 Adjust entry point strategy: Buy calls on a dip at $50.75 with a stop loss at $46.25. Option Format: symbol-year-month-day-call-strike

Chart

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


Textron Inc. - TXT - close: 44.99

Comments:
02/22/15: Traders bought the dip in TXT last week at its rising 10-dma. Shares rebounded to close at multi-year highs. The stock is on track to meet our entry point requirement soon.

Earlier Comments: February 15, 2015:
TXT is in the industrial goods sector. They deal mostly in the aerospace industry. According to the company, "Textron Inc. is a multi-industry company that leverages its global network of aircraft, defense, industrial and finance businesses to provide customers with innovative solutions and services. Textron is known around the world for its powerful brands such as Bell Helicopter, Cessna, Beechcraft, Hawker, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, and Textron Systems."

The earnings picture last year was mixed. Better than expected results and bullish guidance helped power a big rally last October. Their most recent earnings report was January 28th. TXT's earnings of $0.76 a share were up +26% from a year ago but 1 cent worse than Wall Street estimates. Revenues were up +16.8% to $4.1 billion, also below estimates.

It's interesting how TXT missed Wall Street's earnings estimates on both the top and bottom line and management lowered their guidance for all of 2015. Yet the stock did not sell off. Normally an earnings miss or weak guidance would spark significant selling. Instead investors just calmly bought the dip and now TXT is breaking out to new multi-year highs.

If bad news like that can't shake the stock lower then the path of least resistance is definitely higher. The last couple of months look like a significant consolidation pattern and now TXT has produced a bullish breakout past resistance in the $44.00-44.50 zone. The point & figure chart is bullish and forecasting a long-term target at $67.00.

Tonight I am suggesting small bullish positions if TXT can close above $45.10. Wait for shares to close above this level and then buy calls the next morning.

Breakout trigger: Wait for TXT to close above $45.10
Then buy calls the next morning with a stop at $39.90.

BUY the 2016 Jan $50 call (TXT160115C50) current ask $3.30

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

Originally listed on the Watch List: 02/15/15