New Watch List Entries

CVS - CVS Health

FB - Facebook

MA - MasterCard Inc.


Active Watch List Candidates

AKAM - Akamai Technologies

COH - Coach Inc.

EXPD - Expeditors Intl.


Dropped Watch List Entries

EWG has been moved to our new play section.

We have removed AMBA, SWKS, and WBA from the watch list.



New Watch List Candidates:

CVS Health - CVS - close: 103.86

Company Info

We just removed WBA as a watch list candidate but we are replacing it with CVS. Both companies are in the drug store business. Both stocks have been showing significant strength the past couple of years. Fortunately for us CVS stock hasn't sprinted away from us like WBA.

The company describes itself as "CVS Health (CVS) is a pharmacy innovation company helping people on their path to better health. Through our 7,800 retail pharmacies, more than 900 walk-in medical clinics, a leading pharmacy benefits manager with nearly 65 million plan members, and expanding specialty pharmacy services, we enable people, businesses and communities to manage health in more affordable, effective ways. This unique integrated model increases access to quality care, delivers better health outcomes and lowers overall health care costsj."

The most recent earnings report was 2014 Q4 numbers on February 10th. CVS' earnings were in-line with estimates. Revenues were up +12.9% to $37.0 billion, which beat estimates for $36.0 billion. Their pharmacy services revenues were up +21.7%.

Full year 2014 earnings were up +13.5% to $4.49 a share. Management guided 2015 earnings in the $5.05-5.19 range (+12% to +15.5%), which is in-line with estimates. Following the earnings report a couple of analysts upgraded their price targets into the $114-115 range. The point & figure chart is very bullish with a long-term target of $141.00.

Currently shares of CVS are hovering just below resistance at the $105.00 level. Tonight I am suggesting we wait for shares of CVS to close inside the $105.00-106.00 zone and buy calls the next day with a stop loss at $99.85.

Breakout trigger: Wait for CVS to close in the $105.00-106.00 zone
Buy calls the next morning with a stop at $99.85.

BUY the 2016 Jan $110 call (CVS160115C110) current ask $3.95

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

Chart of CVS:

Originally listed on the Watch List: 03/22/15


Facebook, Inc. - FB - close: 83.80

Company Info

Facebook probably needs no introduction. It's the largest social media platform on the planet. As of December 31st, 2014 the company reported 1.19 billion monthly active users and 890 million daily active users. If FB were a country that probably puts them as the third most populous country on the planet (behind India and China).

This past week the company announced a new mobile payment service through FB's messenger app. The new service will compete with similar programs through PayPal, Apple Pay, and Google Wallet.

The announcement combined with a broad market rally helped fuel a +7% gain in FB's stock last week. FB's market cap has risen past $230 billion making it the tenth largest company in the S&P 500.

Growth has been phenomenal. According to IBD, FB's Q4 earnings were up +69% form a year ago. Revenues were up +49%. Wall Street is expecting FB's profit to rise +12% in 2015 and +32% in 2016.

Technically shares of FB have broken out from a very significant consolidation pattern. The point & figure chart is bullish and forecasting at $96.00 target. I think it will go higher. After a five-day run we do not want to chase it here. I'm suggesting a buy-the-dip entry trigger at $82.00 with a stop loss at $74.75.

Buy the dip trigger at $82.00 with a stop at $74.75

BUY the 2016 Jan $90 call (FB160115C90) current ask $5.80

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

Chart of FB:

Originally listed on the Watch List: 03/22/15


MasterCard Inc. - MA - close: 89.82

Company Info

Do you have a credit card? How about a debit card? Odds are you do. About 70% of Americans have a credit card and many have more than one. Inside the United States there are over 500 million credit cards between American Express, MA, and Visa. There's more than 1.12 billion globally (not counting the U.S.). There's also another 572 million MA or Visa debit cards in the U.S. (MasterCard has more than 144 million). Not counting America there are more than 1.2 billion debit cards around the world.

Now what if you could charge a small percentage for consumers using their plastic every time they make a purchase? That's MA's business model. As of 2013 their market share of global transactions (credit or debit) was about 27%. They are the second biggest credit and debit card company behind Visa (V). According to the company, "MasterCard (MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world's fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard's products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone."

MA has been delivering steady growth. They reported their Q3 results on October 30th with earnings up +19% from a year ago to $0.87 a share. That beat estimates. Revenues were up +12.8% to $2.5 billion, also above expectations. The bullish trend continued when MA reported its 2014 Q4 results on January 30th. Earnings per share soared +32% from a year ago to $0.69 and revenues grew +13.6% to $2.42 billion. Both metrics were above Wall Street expectations.

The company did warn that the surge in the U.S. dollar was impacting results but they still see strong single-digit revenue growth for 2015. They reaffirmed +20% earnings growth.

Meanwhile one of MA's biggest rivals, American Express (AXP), is not having a good year. AXP lost its exclusive deal with Costco (COST) last month. This deal generated 20% of AXP's loans and about 10% of their annual card growth. AXP is also losing its partnership with JetBlue (JBLU). AXP's losses will likely be MA's and Visa's gain.

Recently MA announced it had signed a 10-year deal with Citigroup. Not only is Citigroup one of the biggest banks on the planet they are the largest credit card issuer in the world. The press release states "Citi will begin aligning the company's consumer proprietary credit and debit portfolios to the MasterCard network in 2015." One analyst has already opined that the deal should provide a "decent tailwind for EPS growth" (for MA). Speaking of opinions, a couple of analysts at Nomura believe that MA is cheap at current valuations and could be seen as safe haven investment given their steady earnings growth.

“Despite a mixed global economy, we delivered solid results for the quarter and for the full year in 2014,” said Ajay Banga, president and CEO, MasterCard. “This year is off to a good start with several new wins, as well as renewals of some important customer agreements, with more in the pipeline. Looking ahead, we will continue to be at the forefront of our industry by driving payment innovation with solutions such as MasterPass, and by increasing electronic payments usage globally as demonstrated by our significant expanded acceptance footprint across Africa.”

Technically shares of MA have started to bounce after a 50% correction of its February rally. The rising 50-dma also provides technical support. The point & figure chart is bullish and currently forecasting at $118.00 target. Aggressive investors might want to consider launching bullish positions on a close above Friday's high of $90.36. I am suggesting we wait for MA to close at a new high above $93.15. Then buy calls the next morning with a stop loss at $86.40.

Breakout trigger: Wait for a close above $93.15
Then buy calls the next morning with a stop at $86.40

BUY the 2016 Jan $100 call (MA160115C100) current ask $3.35

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

Chart of MA:

Originally listed on the Watch List: 03/22/15


Active Watch List Candidates:



Akamai Technology - AKAM - close: 72.87

Comments:
03/22/15: Instead of correcting lower shares of AKAM broke out to new highs. The recent sideways consolidation looks like a potential bull-flag pattern.

Tonight I am adjusting our entry point. Move the buy-the-dip trigger to $71.50. We'll adjust the stop loss to $67.90. We will also adjust the option strike to the $80 calls.

Earlier Comments: March 8, 2015:
If you surf the Internet then you're probably seeing content delivered by AKAM's technology. They help customers speed up online content and have a fast-growing security business.

The company is part of the technology sector. They provide cloud services for delivering content across the Internet. Customers include 47% of the Global 500 companies.

AKAM describes itself as "the global leader in Content Delivery Network (CDN) services, Akamai makes the Internet fast, reliable and secure for its customers. The company's advanced web performance, mobile performance, cloud security and media delivery solutions are revolutionizing how businesses optimize consumer, enterprise and entertainment experiences for any device, anywhere."

Last year was a strong one for earnings and revenue growth. AKAM beat Wall Street estimates on both the top and bottom line the past four quarters in a row. They raised guidance twice. AKAM's average revenue growth last year was +24.5%. Their most recent report was on February 10th where AKAM delivered a profit and revenue number above expectations. Several analyst firms raised their price target on AKAM following its Q4 results.

Management hosted an investor day in late February. They expect sales growth to be in the high teens for 2015. They forecasting sales to hit $5 billion by 2020 compared to about $2 billion in 2014. AKAM reported that their cyber security business is surging with +191% growth last year.

This week AKAM disclosed in their 10-K filing that they were conducting an internal probe into their sales practices in a foreign country. They didn't say which country. This is a potential risk if the U.S. government decides to do their own investigation but the stock didn't really react that much to the news.

It is worth noting that there has been some speculation that AKAM is a buyout target. One analyst suggested that Amazon.com (AMZN) could be a suitor.

After a big rally in February the upward momentum in AKAM has stalled. Shares look like they could see a correction lower. If that occurs then prior resistance near $65.00 should be significant support. We want to be ready to take advantage of the weakness.

Tonight I'm suggesting a buy-the-dip trigger to buy calls if AKAM dips to $65.25. We'll start this trade with a stop at $59.75.

Buy-the-dip trigger @ $71.50
Start with a stop at $67.90

BUY the 2016 Jan $80 call (AKAM160115C80)

03/22/15 Strategy update: Move the buy-the-dip trigger to $71.50, move the stop loss to $67.90, adjust the option to the 2016 Jan. $80.00 call
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 03/08/15


Ambarella, Inc. AMBA - close: 72.39

Comments:
03/22/15: I hate to do it but I am removing AMBA from the watch list. Shares are just moving too fast. The stock is up five weeks in a row with a rally from $50 to $72.

I like the story behind AMBA but it needs to see a pullback before we want to consider bullish positions.

We definitely want to keep AMBA on our watch list. I'm crossing my fingers for a correction into the $60-65 zone.

Trade did not open.

03/22/15 removed from the watch list

Originally listed on the Watch List: 03/08/15


Coach, Inc. - COH - close: $41.58

Comments:
03/22/15: Shares of COH posted a gain for the week but the stock's performance lagged behind the broader market. A disappointing earnings report from luxury retailer Tiffany (TIF) did not seem to hurt COH on Friday. I don't see any changes from my prior comments.

Earlier Comments: March 15, 2015:
COH has experienced a rough couple of years. Shares were trading near $80 back in 2012 and they bottomed out in the $33-34 region last year. The big drop was thanks to multiple factors. Investors expectations were pretty high after years of incredible growth. Then COH started to struggle. They had luxury items had started to lose their appeal. Suddenly everyone had a Coach bag so it was no longer a coveted item. Today the company is trying to turn things around.

The company is still suffering from lost market share and falling sales. Their comparable store sales are terrible. Yet after months of bearish reports it looks like all the bad news might be factored in. Wall Street analysts are starting to upgrade the stock because they see the Coach brand finally stabilizing.

Technically shares just started to bounce from support near $40.00. I am suggesting we launch small bullish positions if COH can close above $42.00. However, please note that I consider this a more aggressive, higher-risk trade. We'll try and keep a relatively tight stop loss on this trade.

Breakout trigger: Wait for a close above $42.00
Then buy calls the next day with a stop at $39.65.

BUY the 2016 Jan $45 call (COH160115C45)

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

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


Expeditors Intl. - EXPD - close: 49.27

Comments:
03/22/15: EXPD is still slowly drifting higher. Shares ended the week at new multi-year highs. I'm not giving up yet on a buy-the-dip trigger at $46.25. However, if shares don't cooperate this week we'll re-evaluate our entry strategy.

Earlier Comments: March 15, 2015:
EXPD is showing relative strength. The stock is up +8% in 2015 versus an S&P 500 that is virtually flat (-0.3%). Meanwhile the Dow Jones Transportation Average is down -2%.

EXPD is part of the services sector. According to the company, "Expeditors is a global logistics company headquartered in Seattle, Washington. The company employs trained professionals in 186 full-service offices and numerous satellite locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, domestic time-definite transportation services, purchase order management, warehousing and distribution and customized logistics solutions."

The first half of 2014 was forgettable. EXPD delivered mediocre results with earnings a penny above or below estimates and revenues in-line with expectations. Business improved in the second half of last year. EXPD beat earnings estimates by four cents in the third quarter and by two cents in the fourth quarter. Revenues were up almost +11% in Q3 2014 and up +8.8% in the fourth quarter. Both were above Wall Street estimates.

Bradley Powell, Senior Vice President and CFO commented on the fourth quarter, "During the 2014 fourth quarter we saw strong year-over-year increases in both air and ocean freight volumes. Despite the 10 basis point reduction in overall net revenue margin, airfreight and ocean freight net revenues both managed double digit increases, up 10% and 11%, respectively, as overall net revenue increased 9%."

EXPD has been relatively resistant to any profit taking during the market's decline in March. I'm partially tempted to buy calls here at current levels. However, I'm not convinced the market sell-off is over. Therefore I'd rather use the market's weakness to our advantage. Broken resistance near $46.00 should be support for EXPD. We'll list a buy-the-dip entry point at $46.25 with a stop loss at $43.75.

Buy-the-dip: Buy calls if EXPD dips to $46.25

BUY the 2016 Jan $50 call (EXPD160115C50)

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

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


Skyworks Solutions - SWKS - close: 102.05

Comments:
03/22/15: I am afraid we missed the entry point in SWKS. We were hoping to buy calls on a dip. Unfortunately shares of SWKS sprinted higher. The stock is up six weeks in a row. Shares have rallied from $77.20 to $102.00 in less than two months. This is unsustainable.

I hate to do it but we are removing SWKS from the watch list. We still like the story behind the stock but we'll have to wait for a correction. SWKS is definitely a name to keep on our radar screen.

Trade did not open.

03/22/15 removed from the watch list
03/08/15 adjust the trigger from $83.00 to $85.00
03/08/15 adjust the option strike from the 2016 $90 to the January $100 calls
Option Format: symbol-year-month-day-call-strike

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


Walgreens Boots Alliance - WBA - close: $88.23

Comments:
03/22/15: WBA is another stock that is just moving too far too fast. Shares rallied about $5.00 last week. The breakout past resistance at $84.00 is short-term bullish but we don't want to chase it.

I am removing WBA from our watch list but we definitely want to keep WBA on our radar screen. A correction back into the $80-84 zone might be a bullish entry point for longer-term traders.

Trade did not open.

03/22/15 removed from the watch list, suggested entry was a dip to $80.00

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