New Watch List Entries

ASH - Ashland Inc.

IR - Ingersoll-Rand


Active Watch List Candidates

MA - MasterCard Inc.

NKE - Nike Inc.

TJX - The TJX Companies, Inc.

TOL - Toll Brothers, Inc.


Dropped Watch List Entries

EWI has graduated to our active play list.

CVS has been removed.



New Watch List Candidates:

Ashland, Inc. - ASH - close: 129.50

Company Info

ASH is in the basic materials sector. The XLB materials ETF is up +2.3% this year. Shares of ASH are outperforming their peers with a +8% gain in 2015.

According to the company, "Ashland Inc. (ASH) is a global leader in providing specialty chemical solutions to customers in a wide range of consumer and industrial markets, including architectural coatings, automotive, construction, energy, food and beverage, personal care and pharmaceutical. Through our three commercial units - Ashland Specialty Ingredients, Ashland Performance Materials and Valvoline - we use good chemistry to make great things happen for customers in more than 100 countries."

Looking at the last couple of earnings reports ASH has been beating estimates on the bottom line. Their most recent report was January 26th where ASH reported a profit of $1.46 per share on revenues of $1.39 billion. Earnings beat estimates by four cents while revenues were down -2.9% from a year ago thanks to foreign currency headwinds (i.e. impact of the strong dollar). Management said that last quarter their strongest growth was in many of the company's higher-margin products.

Technically shares have been building on a bullish trend of higher lows. The point & figure chart is very bullish and forecasting a long-term target of $200 a share.

The all-time high was set on March 2nd, 2015 at $130.66. Tonight I am suggesting we wait for ASH to close above $130.75 and then buy calls the next morning with a stop loss at $124.75.

FYI: More conservative investors may want to wait until after ASH reports earnings on April 29th before considering new bullish positions.

Breakout trigger: Wait for a close above $130.75
Then buy calls the next morning with a stop at $124.75.

BUY the 2016 Jan $140 call (ASH160115C140) current ask $5.30

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

Chart of ASH:

Originally listed on the Watch List: 04/12/15


Ingersoll-Rand - IR - close: 68.59

Company Info

Shares of IR are on the verge of new all-time highs. The company is in the industrial goods sector. According to the company website, "Ingersoll Rand is a global diversified firm providing products, services and solutions to enhance the quality and comfort of air in homes and buildings, transport and protect food and perishables, secure homes and commercial properties, and increase industrial productivity and efficiency. Driven by a 100-year-old tradition of technological innovation, we enable our customers to create progress and a positive impact in their world."

Looking at their recent earnings reports IR has actually lowered guidance the last two quarters in a row. Yet investors are buying the stock anyway. IR's most recent report was January 30th. Earnings grew +34% from a year ago to $0.82 a share. That was 11 cents above estimates. Revenues would have been up +7% but foreign currency issues reduced that to +4.6%, which was still above estimates.

IR management lowered their 2015 guidance into the $3.66-3.81 per share range but that still equates to +10% to +14% annual growth. They expect 2015 revenues to rise +4.5%.

The market did not react to news that activist investor Nelson Peltz was selling some of his stake in IR recently. Last month he sold about 2.3 million shares of IR. This reduces his stake to about 12.27 million or 4.6% of IR's outstanding shares.

Technically shares of IR have been consolidating sideways in the $66-69 range for about six weeks. They look poised for a bullish breakout higher. The point & figure chart is already bullish and forecasting an $86.00 target.

Tonight I am suggesting we wait for IR to close above $69.25 and then buy calls the next morning with a stop loss at $64.75.

FYI: More conservative investors may want to wait until after IR reports earnings on April 23rd before considering new bullish positions.

Breakout trigger: Wait for a close above $69.25
Then buy calls the next morning with a stop at $64.75.

BUY the 2016 Jan $75 call (IR160115C75) current ask $2.50

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

Chart of IR:

Originally listed on the Watch List: 04/12/15


Active Watch List Candidates:



CVS Health - CVS - close: 102.54

Comments:
04/12/15: Shares of CVS have spent the last six weeks consolidating sideways. On the plus side it has avoided some of the market's volatility. On the downside upward momentum has completely stalled.

Our trade has not opened yet. Tonight we are removing CVS as a candidate. You may want to keep it on your radar screen for a close above resistance near $105.00. I would prefer to watch CVS' rival Walgreens (WBA), which is showing a lot more strength.

Trade did not open.

04/12/15 removed from the watch list, suggested trigger was a close in the $105-106 zone.

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


MasterCard Inc. - MA - close: 88.57

Comments:
04/12/15: Shares of MA look like they may have found a bottom. Currently they're consolidating just below resistance near $90.00. Tonight I am adjusting our entry point. Instead of waiting for a close above $93.15 we will move the trigger down to a close above $90.75. We'll move the stop loss to $84.85. We will not change the option strike.

FYI: MA is scheduled to report earnings on April 29th.

Earlier Comments: March 22, 2015:
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 $90.75
Then buy calls the next morning with a stop at $84.85

BUY the 2016 Jan $100 call (MA160115C100)

04/12/15 Strategy update: adjust the trigger to a close above $90.75 and the stop loss to $84.85 (from a close above $93.15 and a stop at $86.40)
Option Format: symbol-year-month-day-call-strike

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


Nike, Inc. - NKE - close: 99.97

Comments:
04/12/15: Shares of NKE have been struggling with the $100 area. You could argue the stock is inside a $98-102 trading range. Tonight I am adjusting our entry point strategy. We want to see a close above $102.00, then buy calls the next day. We'll move the stop loss to $95.75.

Earlier Comments: March 29, 2015:
In Greek mythology Nike is the winged goddess of victory. It's an appropriate brand name for the American athletic wear giant. Nike is the 800-pound gorilla in the industry with annual sales of more than $30 billion.

If you're not familiar with the company, "NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories, and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories."

The company's most recent earnings report was March 19th, after the closing bell. NKE reported its Q3 2015 results. Analysts were expecting a profit of $0.84 a share on revenues of $7.62 billion. NKE delivered a profit of +0.89 a share or +16% from a year ago. Revenues were up +7% to $7.46 billion. However, if you back out the currency headwinds, their revenues were up +13%.

The company reported sales growth across every geographical region. Their gross margins improved 140 basis points to 45.9 percent. Management said their online sales are soaring. Nike.com saw its revenues jump +42% last quarter.

The current quarter is NKE's 2015 Q4 (March-July) and the company said orders for Q4 in North America are up +15%, which is above analysts' estimates of +11.6%. Orders from China are up +11%, also above estimates. In the company's earnings release NKE said, "As of the end of the quarter, worldwide futures orders for NIKE Brand athletic footwear and apparel scheduled for delivery from March 2015 through July 2015 were 2 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 11 percent."

One big concern is the U.S. dollar. Sales in Europe were up +21% but when you factor in euro weakness and dollar strength that sales growth drops to +10%. The strength in the U.S. dollar is a major headwind but after NKE's Q3 results Wall Street feels that the company is managing the currency impact very well. The company is forecasting low double digit sales growth in the current quarter.

Wall Street applauded the results and shares of NKE gapped open higher on March 20th to hit all-time highs. There was a parade of bullish analyst comments. Several firms raised their price target on NKE. Here's a brief list of new price target: $106, $110, $115, $116.00. The point & figure chart is more optimistic as it is forecasting at $125.00 target.

Shares of NKE have seen some profit taking, which isn't a surprise considering the market's recent decline. However, now that NKE has filled the gap, traders jumped in to buy the dip. The stock looks poised to breakout past round-number resistance at $100.00 (again). Tonight I am suggesting investors wait for NIKE to close above $101.00 and then buy calls the next morning with a stop loss at $94.45.

Breakout trigger: Wait for a close above $102.00
Then buy calls the next morning with a stop loss at 95.75

BUY the 2016 Jan $110 call (NKE160115C110)

04/12/15 Strategy update: adjust the trigger to a close above $102.00 and the stop loss to $95.75 (from a close above $101.00 and a stop at $94.45)
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 03/29/15


The TJX Companies, Inc. - TJX - close: 68.53

Comments:
04/12/15: TJX delivered a disappointing performance last week. Shares look like they're headed for technical support near the rising 100-dma. If the stock doesn't bounce there we'll remove it from the watch list.

Currently we do not want to open positions until TJX closed above $71.00.

Earlier Comments: March 29, 2015:
Investors should take notice when a company lowers guidance but the market doesn't care. Normally when a company lowers their earnings forecast their stock gets clobbered. That hasn't been the case for TJX.

The company describes itself as, "The TJX Companies, Inc. is the leading off-price retailer of apparel and home fashions in the U.S. and worldwide. As of January 31, 2015, the end of the Company’s fiscal year, the Company operated a total of 3,395 stores in six countries, the United States, Canada, the United Kingdom, Ireland, Germany, and Poland, and three e-commerce sites. These include 1,119 T.J. Maxx, 975 Marshalls, 487 HomeGoods and 6 Sierra Trading Post stores, as well as tjmaxx.com and sierratradingpost.com, in the United States; 234 Winners, 96 HomeSense, and 38 Marshalls stores in Canada; and 407 T.K. Maxx and 33 HomeSense stores, as well as tkmaxx.com, in Europe."

Management is increasingly shareholder friendly. They just recently announced a +20% increase to their dividend (now $0.21 a share). TJX also announced they plan to spend $1.8 to $1.9 billion buying back their stock in fiscal year 2016 (ends January 30, 2016). That's about $100 to $200 million more than last year's stock buyback program.

Of course the real question is earnings. TJX reported their Q3 results on November 18th. Earnings were in-line with estimates at $0.85 a share while revenues were up +5.5% to $7.37 billion. Comparable stores sales came in at the high-end of guidance at +2.0%. Unfortunately management guided lower due to currency headwinds. The market didn't care about this lowered guidance and soon TJX stock was at new highs.

The company reported their 2015 Q4 results on February 25th. Earnings were up +15% from a year ago to $0.93. That beat estimates by three cents. Revenues were up +6.3% to $8.3 billion, above estimates. Comparable store sales surged +4%, well above expectations. Their margins improved from 12.0% to 12.4%.

Carol Meyrowitz, Chief Executive Officer of The TJX Companies, Inc., stated, "We are very pleased to end 2014 with excellent results in the fourth quarter! Our EPS growth of 15% and comp increase of 4% significantly exceeded our expectations. We are particularly pleased our comps were almost entirely driven by customer traffic, as consumers responded to our exciting merchandise assortments, amazing values and effective marketing. Merchandise margins were also very strong. We are also very pleased with our full year 2014 performance. Our adjusted earnings per share growth of 12% over last year's 15% increase marks our sixth consecutive year of double-digit EPS increases."

She went on to say, "Like other major international retailers, our 2015 plans also reflect an expected negative impact from foreign currency exchange rates. Our underlying business remains very strong and we are reiterating our 10% to 13% long-term annual EPS growth model. We see tremendous U.S. and international potential for our Company. We are excited to be entering our seventh country, Austria, this spring, and to announce our plans to expand into our eighth country, The Netherlands, later this year. We are growing TJX as a global, value retailer and are well on our way to becoming a $40 billion company and beyond!"

TJX management lowered their 2016 Q1 and full year guidance with expectations for currency headwinds at 5%. They also announced they were raising their minimum wage for workers in the U.S. to $9.00 an hour. This matches a move by larger rival Wal-mart who announced a wage hike. Investors seem unconcerned with the lowered earnings guidance. Traders bought the initial dip and now TJX is trading near new highs.

Technically the stock has been consolidating just below major resistance at $70.00 for weeks. Today it is poised for a bullish breakout. The point & figure chart displays a quadruple top breakout buy signal with an $89.00 target. I am suggesting we wait for TJX to close above $70.50 and buy calls the next morning with a stop loss at $66.25.

Breakout trigger: Wait for a close above $71.00
Then buy calls the next morning with a stop loss at 66.25

BUY the 2016 Jan $75 call (TJX160115C75)

04/05/15 adjust trigger from a close above $70.50 to a close above $71.00
Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 03/29/15


Toll Brothers - TOL - close: 39.68

Comments:
04/12/15: TOL spent last week consolidating sideways just below resistance at the $40.00 level. The stock did manage an intraday rally above $40.00 on Monday but we want to see a close above $40.50 as our entry trigger.

Trade Description: April 5, 2015:
The residential real estate market appears to be in recovery mode. Tonight I'm suggesting TOL as a way to play the industry.

Here's a brief description of the company: "Toll Brothers, Inc., A FORTUNE 1000 Company, is the nation's leading builder of luxury homes. The Company began business in 1967 and became a public company in 1986. Its common stock is listed on the New York Stock Exchange under the symbol "TOL." The Company serves move-up, empty-nester, active-adult, and second-home buyers and operates in 19 states: Arizona, California, Colorado, Connecticut, Delaware, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Pennsylvania, Texas, Virginia, and Washington, as well as in the District of Columbia.

Toll Brothers builds an array of luxury residential single-family detached, attached home, master planned resort-style golf, and urban low-, mid-, and high-rise communities, principally on land it develops and improves. The Company operates its own architectural, engineering, mortgage, title, land development and land sale, golf course development and management, home security, and landscape subsidiaries. The Company also operates its own lumber distribution, house component assembly, and manufacturing operations. The Company purchases distressed loan and real estate asset portfolios through its wholly owned subsidiary, Gibraltar Capital and Asset Management. The Company acquires and develops commercial and apartment properties through Toll Commercial and Toll Apartment Living, and the affiliated Toll Brothers Realty Trust, and develops urban low-, mid-, and high-rise for-sale condominiums through Toll Brothers City Living."

Earnings reports from the homebuilders have been bullish. KB Home (KBH) recently reported earnings that were above estimates on both the top and bottom line. KBH management said they see stronger margins and accelerated revenue growth in 2015.

Lennar (LEN)'s most recent earnings report beat Wall Street estimates on both the top and bottom line. They believe we are in the early stages of a housing recovery.

TOL's most recent earnings report was February 24th. Analysts were expecting a profit of $0.29 a share on revenues of $771.8 million. Management reported earnings of $0.44 a share and revenues soared +32.6% to $853.5 million.

TOL delivered 5,397 homes in 2014 at an average price of $725,000. Today they are forecasting 5,200 to 6,000 homes in fiscal year 2015 at an average price of $725,000 to $760,000.

Sales data also supports an improvement in the housing sector. A couple of weeks ago the New Home sales numbers for February 2015 hit a seasonally adjusted rate of 539,000. That's the fastest pace in seven years. The January number was revised higher from 481K to 500K. We haven't seen new home sales above 500K for two months in a row since 2008.

Shares of TOL have rallied to major resistance at $40.00. A breakout here would be very bullish. The point & figure chart is already bullish and forecasting at $47.00 target. I am suggesting investors wait for TOL to close above $40.50 and then buy calls the next morning with a stop loss at $37.85.

Readers might want to check out the other big homebuilding stocks as they also look bullish (LEN, RYL, PHM, MHO, DHI, BZH, and KBH).

Breakout trigger: Wait for TOL to close above $40.50
Then buy calls the next morning with a stop at $37.85

BUY the 2016 Jan $45 call (TOL160115C45)

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

Originally listed on the Watch List: 04/05/15