New Watch List Entries
MOS - Mosaic Co.
POT - Potash Corp.
Active Watch List Candidates
DSX - Diana Shipping Inc.
Pharmaceutical Product Development Inc. (PPDI)
Dropped Watch List Entries
New Watch List Candidates:
Last week's rally in the stock market was impressive. Several sectors saw huge gains. This widespread rally is mutual funds and index funds putting year-end and quarter end money to work. This rally is going to run out of steam. The question is when? While I'm still concerned that stocks could see a correction in January I'm willing to consider the possibility that the correction doesn't show up. One scenario is that stocks trade sideways or drift higher into earnings season. Then stocks see another spike higher on better than expected earnings and this forms a short-term top that then rolls over into a correction. Remember, we want to see a correction so we can use it as an entry point for our LEAPS positions.
MOS - Mosaic Co. $66.70 +0.94
MOS recently reported earnings. The company missed Wall Street's estimates but beat on the revenue number. The stock rallied higher on then news. Of course it didn't hurt that the stock market was in rally mode. The breakout past $55.00 and the $60 levels was significant. As the global economy rebounds this year the fertilizer stocks should see further strength.
I am suggesting that we buy call LEAPS on a dip back to $60.50. You could argue that $62 will be short-term support but this is a volatile group and MOS will probably over correct. I'm listing our stop loss at $49.00. Our long-term target is the $90-100 zone. (Readers might want to consider the 2012 LEAPS too).
The Mosaic Company is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients. Mosaic is a single source provider of phosphates and potash fertilizers and feed ingredients for the global agriculture industry.
(source: company press release or website)
NOTE: In 2009 MOS issued a special cash dividend of $1.30 per share payable back on December 3rd, 2009. The CBOE issued a new LEAPS symbol to account for the dividend. The old 2011 LEAPS have a root symbol of ZHX. The LEAPS we want to use are the ZXW root symbols.
Buy-the-Dip trigger: $60.50
BUY the 2011 January $70 call (symbol: ZXW-AN)
Chart of MOS:
POT - Potash Corp. $124.43 -0.34
POT is another play in the fertilizer sector. The stock has also see a hefty run up this past week. The same argument for MOS applies to POT. As the global economy improves demand for fertilizer should improve as well. We want to use a dip to $111.00 as an entry point to buy LEAPS. If triggered we'll use a wide stop at $98.50. This can be a very volatile stock so keep your position size small. Our long-term target is $160 or higher.
FYI: The Point & Figure chart is bullish and points to a $168 target. POT is due to report earnings on January 28th and should report before the opening bell. More conservative traders may want to wait until after the earnings report before opening new bullish positions.
PotashCorp is an integrated producer of fertilizer, industrial and animal feed products. We are the world's largest fertilizer enterprise, producing the three primary plant nutrients: potash, phosphate and nitrogen. Among these, potash â€“ the main focus of our business â€“ delivers the highest quality earnings. With large low-cost operations, plans to expand capacity significantly and strategic global investments, we have an unmatched ability to meet the needs of North America and growing offshore potash markets.
(source: company press release or website)
Buy-the-Dip trigger: $111.00
BUY the 2011 January $120 calls (symbol: VPT-AD)
Chart of POT:
Active Watch List Candidates:
DSX $16.09 +0.67 - Diana Shipping Inc.
On your mark. Get set. Go! Shipping stocks sliced higher last week and shares of DSX broke through a handful of short-term resistance levels. The high on Friday was $16.24. That was almost enough to hit our trigger to buy LEAPS. More aggressive traders may want to go ahead and launch positions. Actually if you're nimble enough consider buying LEAPS on a dip in the $15.50-15.00 zone. I'm suggesting the rest of us stick to the plan and wait for DSX to hit our entry point at $16.25. If triggered we'll use a stop loss at $14.25.
Our long-term target is $24.00. We are changing our suggested strike from the 2011 January $20s to the $17.50s.
FYI: Investors should be aware that shipping stocks do face a headwind toward the end of 2010 and early 2011 as more ships come to market and put pressure on shipping rates. The problem is widely acknowledged but over the next six months I don't see it being a factor for us.
Buy-the-Breakout trigger: $16.25
BUY the 2011 January $17.50 LEAPS (symbol: XDJ-AW)
Chart of DSX:
PPDI $22.83 +0.15 -- Pharmaceutical Product Development Inc.
PPDI under performed last week thanks in part to an analyst downgrade. Traders did buy the dip at its rising 30-dma. We're still on the sidelines waiting for a breakout past resistance.
We're going to stick to our plan with a trigger to buy LEAPS at $24.25. If triggered we'll use a stop loss at $21.90. Our first target is $29.25.
Breakout trigger: $24.25
BUY the 2010 July $25.00 calls (symbol: PJQ-GE)
Chart of PPDI: