New Watch List Entries

SWKS - Skyworks Solutions

WBA - Walgreens Boots Alliance


Active Watch List Candidates

EWG iShares Germany ETF

LVLT - Level 3 Communications

UNP - Union Pacific


Dropped Watch List Entries

TXT and UA graduated to our active play list.



New Watch List Candidates:

Skyworks Solutions - SWKS - close: 87.75

Company Info

SWKS is in the semiconductor industry. They're probably best known for being a supplier to Apple Inc. (AAPL).

According to the company, "Skyworks Solutions, Inc. is empowering the wireless networking revolution, connecting virtually everyone and everything, all the time. Our highly innovative analog semiconductors are linking people, places, and things spanning a number of new and previously unimagined applications within automotive, broadband, cellular infrastructure, the connected home, industrial, medical, military, smartphone, tablet and wearable markets."

The stock has been soaring from its 2013 lows. That's because business is booming. SWKS has beaten Wall Street's earnings estimates and raised guidance for the last four earnings reports in a row. Their sales growth is accelerating with sales up +13.1%, 34.6%, 50%, and 59.4% over the last four quarters (results are year over year).

SWKS' most recent report was January 22nd. Earnings were $1.26 a share on revenues of $805.5 million. Management guided higher and expects Q2 results of $1.12 a share on revenues of $750 million. That's versus Wall Street estimates of $1.04 and revenues of $707 million.

Today shares of SWKS are at all-time highs. We don't want to chase it. I suspect the market could see a pullback soon. We want to be ready to take advantage of any pullback. Tonight I am suggesting a buy-the-dip trigger to buy calls at $83.00. We'll try and limit our risk with a stop loss at $79.00.

NOTE: I would start with small positions. SWKS could be volatile after such strong gains.

Buy-the-dip trigger @ $83.00, use a stop at $79.00

BUY the 2016 Jan $90 call (SWKS160115c90) current ask $11.70

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

Chart of SWKS:

Originally listed on the Watch List: 03/01/15


Walgreens Boots Alliance - WBA - close: $83.08

Company Info

Drug store stocks have been healthy this year. Both CVS and WBA are trading near all-time highs. WBA is now an international competitor after completing its merger with Boots.

According to a company press release, "Walgreens Boots Alliance (WBA) is the first global pharmacy-led, health and wellbeing enterprise in the world.

The company was created through the combination of Walgreens and Alliance Boots in December 2014, bringing together two leading companies with iconic brands, complementary geographic footprints, shared values and a heritage of trusted health care services through pharmaceutical wholesaling and community pharmacy care, dating back more than 100 years.

The company employs over 370,000 people and has a presence in more than 25 countries; it is the largest retail pharmacy, health and daily living destination in the USA and Europe. Including its equity method investments, Walgreens Boots Alliance is the global leader in pharmacy-led, health and wellbeing retail with over 12,800 stores in 11 countries. The company includes the largest global pharmaceutical wholesale and distribution network with over 340 distribution centers delivering to more than 180,000† pharmacies, doctors, health centers and hospitals each year in 19 countries. In addition, Walgreens Boots Alliance is the world's largest purchaser of prescription drugs and many other health and wellbeing products.

Its portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No7 and Botanics. More company information is available at www.walgreensbootsalliance.com."

This stock has been showing significant relative strength. Their last earnings report was back in December and they beat analysts' estimates on both the top and bottom line. That was before Walgreens had finished its merger. Expectations are building for margins to improve thanks to synergies between the two companies. In the prior quarter synergies were about $140 million. The company is estimating synergies could reach $650 million in fiscal 2015.

The trend is obviously bullish. The point & figure chart is forecasting at $95.00 target. You could argue that WBA is a buy right now with last week's breakout past resistance near $80.00. However, instead of chasing new highs I am suggesting a buy-the-dip trigger to buy calls at $80.00. More conservative traders could aim lower and hope for a dip near $78 or $79 instead.

Buy-the-dip trigger @ $80.00, use a stop at $74.75

BUY the 2016 Jan $90 call (WBA160115c90) current ask $4.15

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

Chart of WBA:

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


Active Watch List Candidates:



iShares MSCI Germany - EWG - close: 29.70

Comments:
03/01/15: Economic data out of Europe last week was mixed. Regions of the Eurozone continue to deal with deflation. Meanwhile the most recent estimate on German GDP was unchanged at +0.7% last quarter. This week could prove interesting. The European Central Bank (ECB) will hold an interest rate meeting. ECB President Mario Draghi will have a press conference afterwards. Everyone will probably look for new details on the ECB's new QE program that's supposed to start this month.

Meanwhile shares of the EWG posted another weekly gain.

Earlier Comments: February 22, 2015:
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)

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

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


Level 3 Communications - LVLT - close: 53.86

Comments:
03/01/15: LVLT continues to drift sideways. On the plus side this consolidation does have a bullish trend of higher lows. I don't see any changes from last week's update. We want to see LVLT close above $54.50 then buy calls the next morning.

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

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


Union Pacific Corp. - UNP - close: 120.26

Comments:
03/01/15: Railroad stocks did not have a good week. Shares of UNP followed its peers lower. The stock snapped a three-week winning streak. Technically last week's decline has created a potential bearish reversal pattern on the weekly chart. If UNP continues to sink we will likely remove it as a candidate. Currently we're waiting for a close above $125.00.

Earlier Comments: February 22, 2015:
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)

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

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