New Watch List Entries

EA - Electronic Arts

UA - Under Armour


Active Watch List Candidates

AAPL - Apple Inc.


Dropped Watch List Entries

TSN graduated to our active play list.



New Watch List Candidates:

Electronic Arts - EA - close: 72.07

Company Info

EA has been one of the S&P 500's best performers this year. Just prior to EA's earnings report last week the stock was up +61% year to date. EA reported better than expected results but shares tanked -5.2% on Friday anyway. We see the pullback as an opportunity.

EA is part of the technology sector. According to the company, "Electronic Arts (EA) is a global leader in digital interactive entertainment. The Company delivers games, content and online services for Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 300 million registered players around the world.

In fiscal year 2015, EA posted GAAP net revenue of $4.5 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality blockbuster brands such as The Sims®, Madden NFL, EA SPORTS® FIFA, Battlefield®, Dragon Age® and Plants vs. Zombies®. More information about EA is available at www.ea.com/news."

Looking at EA's earnings results, they tend to beat Wall Street estimates on both the top and bottom line. Their prior to report EA beat estimates but lowered guidance both times. On Thursday night, October 29th, EA reported their Q2 results. Earnings were $0.65 a share. Revenues were down -6.1% to $1.15 billion. These results beat estimates for $0.44 a share on revenues of $1.1 billion.

EA management raised their Q3 earnings and revenue guidance as well as their full year 2016 guidance above analysts' estimates. The company sees a strong launch to their upcoming Star Wars: Battlefront game, which launches on November 17th. EA raised their estimated sales from 9-to-10 million units up to 13 million.

Analysts suggest there is actually more upside since EA tends to provide cautious guidance. One firm raised their price target on EA to $84.00 following EA's earnings report. That happens to coincide with the point & figure chart, which is forecasting an $85 target.

EA's long-term trend line of support should be in the $66-67 area. I suspect EA will drift toward this trend line and then rebound. Tonight I am suggesting a buy-the-dip trigger to buy calls at $68.00. We will try and limit our risk with a stop loss at $64.65.

Buy-the-dip trigger @ $68.00

BUY the 2017 Jan $80 call (EA170120C80) current ask $8.00

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

Chart of EA:

Originally listed on the Watch List: 11/01/15


Under Armour - UA - close: $95.08

Company Info

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 Fitness 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 in 2015 UA 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%.

Management expects UA to see sales grow +20% in 2015. 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. That trend of raising guidance has continued this year. UA has beaten Wall Street's bottom line and top line estimates every quarter this year. They have also raised estimates every quarter this year.

Athletic apparel and shoe companies have been some of the market's best performers in 2015. Odds are they will continue to shine in the fourth quarter and beyond. Yet right now UA is correcting low. The stock should have support at the bottom of its long-term bullish channel (see chart). We want to be ready to take advantage of this short-term weakness.

UA should find support in the $85.00-88.00 area. Tonight we are suggesting a buy-the-dip trigger at $88.50. We will try and limit our risk with a stop loss at $84.00.

Buy-the-dip trigger @ $88.50

BUY the 2017 JAN $100 call (UA170120C100) current ask $14.60

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

Chart of UA:

Originally listed on the Watch List: 11/01/15


Active Watch List Candidates:



Apple Inc - AAPL - close: 119.50

Comments:
11/01/15: Last week AAPL delivered a record-breaking quarter yet the stock is up less than 50 cents for the week.

The company reported Q4 results on October 27th. Earnings were $1.96 a share as revenues surged +22% to $51.5 billion. This beat estimates on both fronts. Gross margins improved from 39% to 39.9%. AAPL sold 48.1 million iPhones last quarter. That is up from 39.3 million a year ago but 48.1 was slightly below Wall Street estimates.

Shares of AAPL rallied on its earnings news but the rally stalled under resistance in the $120 area with the 200-dma as technical resistance at 121.70.

Right now the biggest struggle for AAPL seems to be investor doubt that the company can keep growing at such a tremendous pace. The company itself is doing great and seems to have dominated the smartphone market. iPhones are seen as status symbols in many countries. AAPL seems to be stealing market share from Samsung and Android.

We are now in the fourth quarter of 2015. This is a strong time of year for AAPL products thanks to the holiday shopping season. If AAPL's stock was going to rally it's probably now as investors turn hopeful for a big Christmas season.

Tonight we are flipping our entry point strategy. Instead of using a buy-the-dip strategy we will look for a breakout. AAPL has resistance near $122. Tonight I am suggesting we wait for AAPL to close in the $123-125 zone and buy calls the next day. No initial stop loss at this time.

Please see below for new option information.

Trade Description: September 13, 2015:
Love it or hate it AAPL always has Wall Street's attention. It has a cult-like following. The company's success has turned AAPL's stock into the biggest big cap in the U.S. markets with a current valuation of more than $651 billion.

The company is involved in multiple industries from hardware, software, and media but it's best known for its consumer electronics. The iPod helped perpetuate the digital music revolution. The iPhone, according to AAPL, is the best smartphone in the world. The iPad helped bring the tablet PC to the mass market. The company makes waves in every industry they touch with a very distinctive brand (iOS, iWork, iLife, iMessage, iCloud, iTunes, etc.) and they've done an amazing job at building an Apple-branded ecosystem. Now they're getting into the electronic payments business with Apple Pay.

Earnings growth has been significant as consumer snapped up the iPhone 6 and 6+. The company expects the iPhone to be a major driver as only 20-25% of their user base has upgraded. This past week AAPL held their annual event in September and introduced several upgrades.

AAPL has unveiled new stuff for their smartwatch, they introduced the iPhone 6s and 6s+, they introduced a new, larger iPad that's being called the iPad Pro. The company also introduced a new Apple TV system. They also unveiled a new leasing program for their iPhones.

Normally consumers buy iPhones through their wireless carrier. This past week AAPL announced a deal where consumers could lease their phone from Apple for $32.00 a month and get a free upgrade every year. For the iPhone fanatics it's probably a great deal.

The 2015 holiday shopping season will be here sooner than you expect and AAPL stands to benefit from their parade of new products announced last week. Yet I don't want to buy AAPL at current levels. Odds are good that stocks could sell-off following the FOMC decision this coming Thursday. We want to take advantage of any temporary weakness in shares of AAPL.

Tonight I am listing a buy-the-dip trigger at $101.00. No initial stop loss but investors might want to consider a stop under the August 24th low ($92.00).

Breakout: Wait for AAPL to close in the $123.00-125.00 zone
Then buy calls the next morning. No stop, initially

BUY the 2017 Jan $130 call (AAPL170120C130) current ask $10.25

11/01/15 Strategy Update - new entry point strategy
Use a breakout plan. Wait for AAPL to close in the $123.00-125.00 zone
Then buy calls the next morning. No initial stop loss.
Use a 2017 Jan $130 call
10/27/15 AAPL delivers a record quarter on earnings and revenues
Option Format: symbol-year-month-day-call-strike

Chart

Originally listed on the Watch List: 09/13/15