New Watch List Entries

CTXS - Citrix Systems

SWHC - Smith & Wesson


Active Watch List Candidates

AAPL - Apple Inc.

EA - Electronic Arts

UA - Under Armour


Dropped Watch List Entries

None.



New Watch List Candidates:

Citrix Systems - CTXS - close: 82.02

Company Info

Shares of CTRX surged to multi-year highs in late October following better than expected earnings results.

CTXS is part of the technology sector. They are considered part of the business software industry. According to the company, "Citrix (CTXS) is leading the transition to software-defining the workplace, uniting virtualization, mobility management, networking and SaaS solutions to enable new ways for businesses and people to work better. Citrix solutions power business mobility through secure, mobile workspaces that provide people with instant access to apps, desktops, data and communications on any device, over any network and cloud. With annual revenue in 2014 of $3.14 billion, Citrix solutions are in use at more than 400,000 organizations and by over 100 million users globally."

The company's earnings results have been generally better than expected but guidance has been mixed. On July 28th CTXS reported its Q2 earnings of $1.00 a share. That was 18 cents better than expected. Revenues were up +1.9% to $797 million, also above estimates. Management lowered their Q3 forecasting while slightly raising their fiscal year 2015 guidance.

Earnings improved significantly in the third quarter. Analysts were expecting a profit of $0.85 a share on revenues of $786 million. CTXS beat both estimates. Earnings surged +34% from a year ago to $1.04 a share. Revenues were up +7% to $813 million. Management then raised their guidance above analysts' estimates. This news fueled a multi-day rally to new highs.

According to Reuters, CTXS is trying to sell itself. Wall Street loves M&A news so investors could be positioning themselves for a potential takeover in CTXS. If being bought doesn't pan out CTXS could start selling assets. There is growing speculation they could spin off their GoTo division.

Technically the trend is higher but the rally stalled last week. The point & figure chart is bullish and forecasting at $90 target. Following their Q3 results CTXS garnered a couple of price target upgrades in the $90-100 zone. Tonight I am suggesting a buy-the-dip trigger to buy calls if CTXS dips to $78.00. Shares should find support in the $76-78 zone.

Buy-a-dip trigger at $78.00, start with a stop loss at $73.65

BUY the 2017 JAN $90 call (CTXS170120C90) current ask $8.00

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

Chart of CTXS:

Originally listed on the Watch List: 11/08/15


Smith & Wesson Holding - SWHC - close: 18.17

Company Info

Shares of SWHC have been shooting higher all year long. The stock is showing massive relative strength with a +91% gain year to date. That dwarfs the +8.5% gain in the NASDAQ composite and +1.8% gain in the S&P 500 this year.

SWHC is considered part of the industrial goods sector. According to the company, "Smith & Wesson Holding Corporation (SWHC) is a U.S.-based leader in firearm manufacturing and design, delivering a broad portfolio of quality firearms, related products, and training to the global military, law enforcement, and consumer markets. The company's firearms division brands include Smith & Wesson®, M&P®, and Thompson/Center Arms®. As a leading provider of shooting, reloading, gunsmithing, and gun cleaning supplies, the company's accessories division produces innovative, high-quality products under several brands, including Caldwell® Shooting Supplies, Wheeler® Engineering, Tipton® Gun Cleaning Supplies, Frankford Arsenal® Reloading Tools, Lockdown® Vault Accessories, and Hooyman® Premium Tree Saws. Smith & Wesson facilities are located in Massachusetts, Maine, Connecticut, and Missouri."

The earnings picture for SWHC has been pretty strong. They have beaten Wall Street's earnings estimates the last four quarters in a row. Management has raised guidance three of the last four quarters.

Their most recent earnings report as August 27th. SWHC announced their 2016 Q1 results with earnings of $0.32 a share. That beat estimates of $0.23. Revenues surged +12% to $147.8 million, above expectations. Management raised their Q2 guidance and raised their fiscal year 2016 guidance.

The company benefits from strong retail trends. According to the FBI, gun sales in the U.S. have set a record for the last six months in a row. Now we are moving into the holiday shopping season and this trend should continue for the next two month (at least). Another benefit for SWHC is the current election cycle. Every time one of the democrat candidates says something about increasing gun control laws the sale of guns goes up. The closer we get to the 2016 election the louder these campaign promises about gun control could get.

Technically the trend in SWHC is bullish. The point & figure chart is forecasting at $26.50 target. The stock has been rising inside a big bullish channel (see chart). Rival Ruger (RGR) reported earnings a few days ago and their stock plummeted on a disappointing quarter. Yet shares of SWHC barely budged on the news. Today we see SWHC bouncing from support near the bottom of its bullish channel and its 100-dma. More aggressive investors may want to buy calls now. I am suggesting we wait for SWHC to close above $18.40 and then buy calls the next day.

Breakout trigger: Wait for SWHC to close above $18.40
Then buy calls the next morning with a stop loss at $16.25

BUY the 2017 JAN $20 call (SWHC170120C20) current ask $2.40

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

Chart of SWHC:

Originally listed on the Watch List: 11/08/15


Active Watch List Candidates:



Apple Inc - AAPL - close: 121.06

Comments:
11/08/15: AAPL's post-earnings rally continued last week. Shares flirted with a bullish breakout past technical resistance at its simple 200-dma. AAPL also flirted with our new bullish entry trigger but shares were unable to close high enough.

Tonight I am adjusting our new entry point strategy. Previously we wanted to see AAPL close in the $123.00-125.00 zone and then buy calls. Tonight we'll adjust that to $124.00-126.00 zone, then buy calls the next morning.

We are also adjusting the option strike from the 2017 Jan $130 call to the $140 call.

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 $124.00-126.00 zone
Then buy calls the next morning. No stop, initially

BUY the 2017 Jan $140 call (AAPL170120C140)

11/08/15 Adjust the option strike to the 2017 Jan. $140 call
11/08/15 Adjust entry zone = $124.00-126.00
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

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


Electronic Arts - EA - close: 72.38

Comments:
11/08/15: EA barely managed a gain for the week. Traders bought the dip near $70 support but the bounce failed at $75.00. Our strategy has not changed. We want to buy calls on a dip at $68.00 (and the long-term trend line of support).

Trade Description: November 1, 2015:
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)

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

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


Under Armour - UA - close: $96.01

Comments:
11/08/15: UA spent last week consolidating sideways although it still managed to gain a dollar for the week. Right now we are waiting for a pullback. Our suggested entry point is to buy a dip at $88.50.

Trade Description: November 1, 2015:
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)

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

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