New Watch List Entries

A - Agilent Technologies


Active Watch List Candidates

ASH - Ashland Inc.

IR - Ingersoll-Rand

NKE - Nike Inc.

TOL - Toll Brothers, Inc.


Dropped Watch List Entries

MA and TJX have been removed.



New Watch List Candidates:

Agilent Technologies - A - close: 42.98

Company Info

When the stock market turns volatile investors start looking for safety. Some turn to bonds. Others look for safe-haven plays in the equity. Often healthcare names are seen as potential safe havens. Demand for goods and commodities will rise and fall. Yet there seems to be an ever growing need for healthcare especially with an aging population in the U.S., Japan, and Europe.

A is in the healthcare sector. According to the company, "Agilent Technologies Inc. (NYSE: A), a global leader in life sciences, diagnostics, and applied chemical markets, is the premier laboratory partner for a better world. Agilent works with customers in more than 100 countries, providing instruments, software, services, and consumables for the entire laboratory workflow. Agilent generated revenues of $4.0 billion in fiscal 2014. The company employs about 12,000 people worldwide."

The earnings outlook for A is not what you would call exciting but sometimes slow and steady wins the race. The most recent earnings report was in-line with Wall Street estimates. The company did warn that currency headwinds would impact its results in 2015 at this point FOREX issues have become an environmental hazard that everyone has to deal with.

Shares of A have rallied since their mid-February earnings report. Today the stock is on the verge of breaking out from a huge consolidation over the last 18 months or so. The key level to watch is $44.00. The point & figure chart has already turned bullish with a spread triple-top breakout buy signal that is forecasting at $53.00 target.

Tonight I am suggesting we wait for A to close above $44.00 and then buy calls the next morning with a stop loss at $41.75.

Breakout trigger: Wait for shares of A to close above $44.00
Then buy calls the next day with a stop at $41.75

BUY the 2016 $45 call (A160115C45) current ask $2.95

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

Chart of A:

Originally listed on the Watch List: 04/19/15


Active Watch List Candidates:



Ashland, Inc. - ASH - close: 126.06

Comments:
04/19/15: Shares of ASH retreated from resistance near $130 last week. If this weakness continues we'll likely remove ASH as a candidate. Currently we want to see the stock closed above $130.75 as our entry trigger.

Keep in mind that ASH has earnings coming up on April 29th. More conservative investors may want to avoid launch positions, regardless of our entry trigger, until we see how the market reacts to ASH's results.

Trade Description: April 12, 2015:
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)

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

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


Ingersoll-Rand - IR - close: 67.34

Comments:
04/19/15: IR came really close to meeting our entry point requirement. The stock had started to breakout from its recent sideways consolidation. Shares closed at $69.19 on April 15th. Unfortunately the stock reversed the next day and then Friday's session pushed IR even lower.

This week could be critical as IR reports earnings on April 23rd, before the opening bell. I would not launch positions until after we see how the market interprets IR's results. Wait for a close above $69.25.

Trade Description: April 12, 2015:
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)

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

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


MasterCard Inc. - MA - close: 86.93

Comments:
04/19/15: I'm cutting MA loose. The stock had been consolidating sideways in the $88-90 zone but Friday's decline is a breakdown below short-term support. The next support level looks like $85.00.

We will remove MA as a watch list candidate tonight but I would keep it on your radar screen. The company reports earnings on April 29th. Let's wait for the post-earnings dust to settle and then look at MA again.

Trade did not open.

04/19/15 removed from the newsletter, suggested trigger was a close above $90.75
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: 98.55

Comments:
04/19/15: NKE has been stuck in this $98-102 trading range. Technically you could argue that Friday's drop is a breakdown of its pennant-shaped consolidation pattern. Odds are growing that we could see NKE drop toward the $95.00 area. At the moment our suggested entry point is a close above $102.00. More nimble traders may want to consider an alternative entry. If NKE dips to $95.00 then I'd be tempted to buy a bounce with a relatively tight stop loss.

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: 65.25

Comments:
04/19/15: Look out below. The correction in shares of TJX is starting to turn ugly. The stock is down three weeks in a row and it really accelerated last week. TJX has broken its bullish trend of higher lows.

I am removing TJX as a watch list candidate. Interested traders may want to keep it on their radar and look for TJX to find support near $62.00 as a potential entry point.

Trade did not open.

04/19/15 removed from the watch list, suggested entry was a close above $71.00
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: 38.35

Comments:
04/19/15: The homebuilder confidence survey rose to new 2015 highs. Yet the homebuilding stocks struggled. Investors ignored the survey and focused on the disappointing housing starts and building permit data instead. TOL retreated from resistance near $40.00 to short-term support near $38.00.

This week we'll get more real estate data with the latest new home sales and existing sales data.

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