We are adding a couple of new candidates to the watch list. Both have a very good chance of hitting our entry points this week.
New Watch List Entries
BIIB - Biogen IDEC
BWA - BorgWarner Inc.
Active Watch List Candidates
AKAM - Akamai Technologies
FXB - CurrencyShares British Pound
MCD - McDonald's Corp.
MSFT - Microsoft Corp.
PETM - PETsMART
PNRA - Panera Bread Co.
PPDI - Pharmaceutical Product Development Inc.
WMT - Wal-Mart Stores Inc
Dropped Watch List Entries
New Watch List Candidates:
FYI: In addition to tonight's new watch list candidates I'm also watching Carpenter Technology (CRS) and Sanderson Farms (SAFM). Check them out.
Biogen IDEC - BIIB - close: 55.21 change: -0.48
The biotech sector has been one of the strongest performers in this market. The BTK biotech index has been able to recover from the recent sell-off attempts and is still trading near its 52-week high. BIIB has a similar pattern. The stock has been consolidating its gains in a $52-55 range the last several weeks. Now it looks like BIIB is beginning to breakout higher. If you study the weekly chart you'll see resistance near $55.00. Technically BIIB is already in breakout mode. I want to see a little confirmation first so I'm suggesting a trigger to buy long-term LEAPS at $56.60. If triggered our first target is $64.90. We'll use a stop loss at $51.85.
Biogen Idec is among the world's leading global biotechnology companies. We are a Fortune 500 company with more than $4 billion in revenue. Patients in more than 90 countries benefit from our products. In the near term, our success will be driven by continued solid performance of AVONEX, the expansion of RITUXAN into autoimmune treatments, the growth of TYSABRI, and ongoing geographic diversification.
(source: company press release or website)
Breakout trigger: $56.60
BUY the 2011 January $60 calls (OIY1122A60)
Chart of BIIB:
BorgWarner Inc. - BWA - close: 36.64 change: +0.98
The early January rally saw BWA produce a major bullish breakout. Since then the January correction hasn't been that bad. Traders bought the dip twice near support around $34.00. Shares seem to be digesting their gains in a normal, healthy fashion. I am seriously tempted to buy LEAPS on BWA right here. However, on a short-term basis BWA still has a bearish trend of lower highs. I'm suggesting a trigger to buy call LEAPS at $37.55, which should break that trend. More conservative traders can wait for a new relative high over $38.50 before initiating positions. If triggered at $37.55 we'll use a stop loss at $31.90 (more cautious traders could use a stop near $33.75). Our first target is $44.50. Our second target is $49.75.
Auburn Hills, Michigan-based BorgWarner Inc. (NYSE: BWA) is a product leader in highly engineered components and systems for vehicle powertrain applications worldwide. The FORTUNE 500 company operates manufacturing and technical facilities in 64 locations in 17 countries.
(source: company press release or website)
Breakout trigger: $37.55
BUY the 2011 January $40 calls (ZWY1122A40)
Chart of BWA:
Active Watch List Candidates:
AKAMAI Tech. - AKAM - $25.33 -0.19
AKAM gained a penny last week. While shares are sliding sideways the trend of lower highs is still in place. Thus the path of least resistance should be down. I'm expecting a dip toward technical support near its 200-dma currently rising toward $22.00. Currently our trigger to buy LEAPS is at $22.10.
If triggered our long-term target is $29.50. We'll start with a stop loss at $17.99.
Buy-the-Dip trigger: $22.10
BUY the 2011 January $25.00 calls (OMU1122A25)
Chart of AKAM:
FXB - CurrencyShares British Pound Sterling $156.18 -0.27
Investors have heard a lot about the PIIGS lately. That's Portugal, Italy, Ireland, Greece and Spain. All of them are European countries struggling with excessive debt. What a lot of investors don't know is that Britain's economy is still struggling. The British pound has turned bearish. A week ago the pound looked oversold and due for a bounce. That is still the case today. However, I'm adjusting our entry point to buy put LEAPS from $157.50 to $158.50. If triggered we'll use a stop loss at $162.55. Our first target is $150.00. Our second target is $144.00.
Buy-the-Bounce trigger: $158.50 *new trigger*
BUY the 2010 September $150 put (FWK1018U150)
Chart of FXB:
MCD $63.59 -0.20 -- McDonald's Corp.
MCD spent the week consolidating sideways. There is no change from my prior comments. We're waiting to buy LEAPS on a dip at $60.00.
You could wait for a dip toward the 200-dma near $59.00 instead.
If triggered at $60 we'll use a stop loss at $53.95. Our long-term target is $74.50. I'm suggesting the 2011 LEAPS. You may want to buy the 2012 instead.
Buy-the-Dip trigger: $60.00
BUY the 2011 January $65 calls (VMD-AM)
Chart of MCD:
Microsoft - MSFT - $27.93 -0.19
MSFT spent the week vacillating on either side of $28.00. The short-term trend is still down but shares need to break support near $27.50. I don't believe the correction is over so we're waiting for a deeper retracement. Currently the plan is to buy call LEAPS at $25.00. However, more aggressive traders may want to jump in early if MSFT finds support at its rising 200-dma (closer to $26.00).
If triggered we'll use a stop loss at $22.75. Our long-term target is $35.00.
Buy-the-Dip trigger: $25.00
BUY the 2012 January $25 calls (WMF1221A25)
Chart of MSFT:
PETM $26.59 +0.24 -- PETsMART Inc.
PETM displayed some relative strength last week. The stock gapped higher on Feb. 9th thanks to an analyst upgrade. The rally has stalled at its 50-dma but short-term PETM looks like it wants to trade higher. I'm suggesting we wait for a deeper correction toward support near $24.00 and its 200-dma.
If triggered our stop loss will be $21.40. Our long-term target is the $34-35 zone but given the lack of LEAPS we'll aim for 29.00.
Buy-the-Dip trigger: $24.00
Readers may want to consider buying the stock. PETM doesn't have LEAPS. The longest-dated options are 2010 Julys.
BUY the 2010 July $25 calls (QPT-GE)
Chart of PETM:
PNRA $73.58 +0.67 -- Panera Bread Co.
I was expecting PNRA to see some profit taking when they reported earnings on Feb. 11th since shares had already rallied back in January when management pre-announced positive results. Shares of PNRA did initially gap open lower but the stock quickly rebounded. Now we can't always trust the first session's performance following a major event like earnings. I'm not willing to change our strategy just yet. PNRA, while strong, is overbought. We want to wait for a dip toward $65.00, which should be support. I'm suggesting a trigger at $65.50. If triggered we'll use a stop loss at $59.50. Our long-term target is the $84.50 level.
Buy-the-Dip trigger: $65.50
BUY the 2011 January $70 calls (ZGM-AN)
Chart of PNRA:
PPDI $21.65 -0.09 -- Pharmaceutical Product Development Inc.
The sell-off in PPDI really got ugly last week with a plunge past its 200-dma. Fortunately for shareholders the stock is seeing an oversold bounce. The recent weakness is almost enough to drop PPDI as a candidate. If we don't see some follow through on the recent bounce we will drop it. Our plan remains unchanged. We want to use a trigger to buy LEAPS at $24.25.
If triggered at $24.25 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:
WMT $52.90 -0.18 -- Wal-Mart Stores Inc.
The consolidation in WMT is starting to take on a more bearish tone. We've been expecting a deeper correction. We just wish WMT would move more quickly. Our plan is unchanged. I'm suggesting readers buy call LEAPS at $50.50.
If triggered we'll use a stop loss at $46.75. Our first long-term target is $62.50. More aggressive traders may want to use the 2011 January calls (the $50 strike VWT-AJ).
FYI: WMT is due to report earnings on Feb. 18th.
Buy-the-Dip trigger: $50.50
BUY the 2012 January $50 calls (WWT-AJ)
Chart of WMT: