New Watch List Entries
JJC - iPath Copper ETF
Active Watch List Candidates
AGN - Allergan Inc.
AXP - American Express Co
BCR - C.R.Bard Inc.
HSY - Hershey Co.
MCD - McDonald's Corp.
PEP - Pepsico
T - AT&T Inc.
WLP - Wellpoint Inc.
New Watch List Candidates:
iPath Copper ETF - JJC - close: 56.61
The JJC is an exchange traded fund (ETF) that mimics the Dow Jones-UBS Copper Total Return Sub-Index, which is focused on copper futures contracts. A lot of pundits like to call commodity "Dr. Copper" because the price and demand for copper can tell you the health of the economy. The last four months have seen copper prices declining but the slide started to level off last month. You can see from the weekly chart below that the JJC never broke the long-term up trend. Now after last week's better than expected economic data we're seeing a rally higher in copper prices. Combine that with what looks like a bearish pattern for the U.S. dollar and copper could be poised for a new leg higher.
I do want to point out a couple of concerns. Technically the 50-dma just crossed under the 200-dma a few days ago. Normally this is a very bearish development. Second, the options on JJC do not have a lot of volume or open interest. Option prices could be very volatile and the spreads could get wider on us, putting us at a disadvantage. Third, JJC does not (yet) have LEAPS so we'll have to use the December calls. Fourth, this equity is going to be very sensitive to the movement in the dollar. Finally, this ETF is going gap open, up or down, almost every day as it reacts to the price of copper futures. Therefore we want to keep our position size pretty small to limit our risk.
Short-term JJC looks a little overbought here. I am suggesting we launch bullish positions on a dip at $55.00. If triggered we'll use a stop loss at $51.00, which is under the May low. More conservative traders may want to consider a stop closer to $52.75 instead. Our first target is $61.75. Our second, more aggressive target is $64.00.
Buy-the-Dip trigger: $55.00 (small positions only!)
BUY the 2011 Dec. $60 call (JJC1117L60) current ask $2.90
Chart of JJC:
Weekly Chart of JJC:
Originally listed on the Watch List: 07/02/11
Active Watch List Candidates:
Allergan Inc. - AGN - close: 84.57
I suspect that our plan to buy AGN on a dip near support at $75.00 is not going to work. The market's sudden reversal higher has lifted AGN toward its all-time highs set in May. The $85 level might be resistance so we don't want to launch positions now. I have to suggest we wait a week or two and then re-evaluate.
I'm not moving our trigger tonight so it remains at $75.50 but I doubt AGN will correct that low any time soon.
If triggered at $75.50 we'll use a stop at $72.00.
Our long-term targets are $85 and $97.50.
Buy-the-Dip trigger: $75.50
BUY the 2012 Jan $80 call (AGN1221A80)
- or -
BUY the 2013 Jan $85 call (AGN1319A85)
Originally listed on the Watch List: 06/04/11
American Express Co. - AXP - close: 52.34
The market's super strong rally this past week has lifted AXP past resistance near $52.00. Yet we don't want to chase it here. I am making a significant adjustment and raising our buy-the-dip trigger from $45.50 to $50.00. This is a much more aggressive entry point so we do want to keep our position size small. If triggered at $50.00 we'll use a stop loss at $45.75.
Keep in mind that AXP is due to report earnings on July 20th. Cautious traders may want to avoid initiating new long-term positions in front of earnings. You could choose to wait and see how investors react to AXP's earnings first and then decide on an entry point.
With our new entry point at $50.00 I am updating our targets to $59.00 and $64.00. I've updated our strike prices below.
Buy-the-Dip trigger: $50.00
BUY the 2012 Jan $55 call (AXP1221A55)
- or -
BUY the 2013 Jan $55 call (AXP1319A55)
Chart of AXP:
Originally listed on the Watch List: 05/21/11
C.R.Bard Inc. - BCR - close: 111.69 change: +1.83
We need to adjust our expectations on an entry point in BCR. It is highly unlikely this stock will see a dip toward $100 any time soon. Yet after the market's big rally last week I don't want to chase it here. I am leaving our buy-the-dip trigger unchanged at the moment but we might want to consider buying dips or a bounce near the $110 area. We will re-evaluate next week after we see if BCR has any follow through on the rally or does it consolidate sideways.
If triggered at $101.00 we plan to use a stop at $97.75.
Buy-the-Dip trigger: $101.00
BUY the 2012 Jan. $105 (BCR1221A105)
Originally listed on the Watch List: 06/11/11
Hershey Co. - HSY - close: 57.41
HSY participated in the stock market's rally but shares remain under significant resistance at $58.00. Now that the market looks short-term overbought and due for a dip we don't want to chase HSY now. It is unlikely that HSY will see a decline toward our current trigger at $52.25. We do need to adjust our entry point strategy but I want to see where HSY goes next before moving that trigger point. Right now I'm watching potential support at its rising 100-dma.
Currently our plan is to buy call LEAPS on a dip at $52.25.
If triggered we'll use a stop loss at $48.75.
Our long-term targets are $60 and $64.
Buy-the-Dip trigger: $52.25
BUY the 2012 $55 calls (HSY1221A55)
- or -
BUY the 2013 $55 calls (HSY1319A55)
Originally listed on the Watch List: 04/02/11
McDonald's Corp. - MCD - close: 85.65
It was a big week for MCD. The stock powered past resistance near $83.00 and surged to new all-time highs. The stock is definitely short-term overbought here. I am adjusting our entry point to a much more aggressive trigger at $83.25. If MCD pulls back and hits our trigger at $83.25 we'll use a stop loss at $79.40. More aggressive traders could place their stop under the 200-dma instead. I have updated our strike price below. Our profit targets are $92.50 and $99.50.
Buy-the-Dip trigger: $83.25
BUY the 2012 Jan $85 call (MCD1221A85)
- or -
BUY the 2013 Jan $90 call (MCD1319A90)
Chart of MCD:
Originally listed on the Watch List: 05/21/11
Pepsico, Inc. - PEP - close: $70.19
After five gains in a row shares of PEP actually stumbled lower on Friday. The weekly chart looks bullish but I'm reluctant to chase PEP after a big one-week move higher. We will raise our buy-the-dip entry point to $67.50 for now but we might have to adjust it again next week. More aggressive traders could look for a dip near $69.00.
If we do get triggered at $67.50 (an unlikely event this week), we'll use a stop loss at $64.75.
Our targets are $75 and $79.
Buy-the-Dip trigger: $67.50
BUY the 2012 Jan. $70 call (PEP1221A70)
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BUY the 2013 Jan. $70 call (PEP1319A70)
Originally listed on the Watch List: 05/14/11
AT&T - T - close: 31.68
AT&T has broken the six-week trend of lower highs but shares remain inside the $30-32 trading range. We probably need to raise our buy-the-dip entry point. The current trigger at $29.25 won't be hit any time soon. However, before we update our entry point strategy I wait and watch AT&T for another week. The larger trend is up but AT&T doesn't move super fast. Investors should keep that in mind when planning a position. Don't tie up too much capital here. There is an opportunity cost if AT&T doesn't move fast enough. Right now I'm thinking another bounce in the $30.50 are might qualify as an entry point but no changes yet.
We have a buy-the-dip entry point at $29.25 with a stop at $27.90. I would keep our position size small to limit our risk.
Our long-term target is the $36-40 zone. AT&T doesn't move very fast so we will need lots of patience.
Buy-the-Dip trigger: $29.25 (small positions)
BUY the 2012 January $30.00 call (T1221A30)
- or -
BUY the 2013 January $30.00 call (T1319A30)
Originally listed on the Watch List: 04/09/11
Wellpoint Inc - WLP - close: 80.79
The story is similar with WLP. The trend is up but I don't want to chase it. Actually on a short-term basis, if you were buying, say August calls, then WLP looks like a buy right now. You could use a stop under the 50-dma. However, I have two concerns. The stock market is short-term overbought and due for a dip. Secondly, if WLP fails near the $82.00 level it will look like a potential bearish double top pattern. Thus while we probably need to adjust our entry point higher I am reluctant to change it tonight.
I am suggesting a buy-the-dip trigger at $70.50 with a stop loss at $64.75.
If we do get triggered we want to keep our position size small to limit our risk.
Buy-the-Dip trigger: $70.50
BUY the 2012 Jan. $75 call (WLP1221A75)
- or -
BUY the 2013 Jan. $80 call (WLP1319A80)
Originally listed on the Watch List: 06/25/11