New Watch List Entries

CS - Credit Suisse

WDC - Western Digital Corp

Active Watch List Candidates

EL - The Est

V - Visa

Dropped Watch List Entries

MRVL and NTAP graduated to our active play list.

New Watch List Candidates:

Credit Suisse Group - CS - close: 30.26

Company Info

CS is a major bank based in Switzerland. Many of the European stock markets have surged thanks to central stimulus and big gains from their American rivals. Financials have helped lead the rally. It would appear that investor concerns over the European credit crisis are easing, at least for the moment.

Shares of CS are testing significant resistance at the $30.00 level. A breakout here could be a new bullish buy signal. It would also look like a breakout from the neckline on an inverse head-and-shoulders pattern.

Short-term I am concerned that the U.S. and Europe are overbought and due for a pullback. Bigger picture I do think the trend is higher. I am suggesting we wait for CS to close above $30.65. If the stock closes above this level we can buy calls the next day with a stop loss at $27.75. More conservative investors may want to use a stop closer to $29.00 instead. We do want to keep our position size small since I consider this a more aggressive entry point given the market's major indices look over extended.

If triggered our long-term target is the $37.50-40.00 zone. The Point & Figure chart has a long-term target of $57.50.

Breakout trigger: Wait for a close above $30.65, then buy calls the next day
Use a stop loss at $27.75

BUY the 2014 Jan $33 call (CS1418a33) current ask $1.75

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BUY the 2015 Jan $35 call (CS1517a35) current ask $2.90

Chart of CS:

Originally listed on the Watch List: 05/18/13

Western Digital Corp. - WDC - close: 60.46

Company Info

WDC is in the data storage business. The company is transitioning from a hard-drive, PC-focused business to non-PC memory and storage. According to the CEO this year, 2013, will see more than 50% of WDC's revenues come from non-PC product sales.

Traders have been buying the dips for months but the rally accelerated in May. Shares are currently at new all-time highs. We do not want to chase it here. I am suggesting we wait and buy a dip at $55.00. If you're really patient then look for a dip toward the rising 50-dma, which has been an entry point multiple times this year.

If WDC hits our buy-the-dip trigger at $55.00 our long-term target is $70.00. The Point & Figure chart is currently forecasting a long-term target of $82.00. We'll start with a stop loss at $52.25.

Buy-the-Dip trigger: $55.00, stop loss @ 52.25

BUY the 2014 Jan $65 call (WDC1418a65)

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BUY the 2015 Jan $70 call (WDC1517a70)

Chart of WDC:

Originally listed on the Watch List: 05/18/13

Active Watch List Candidates:

The Est - EL - close: 70.85

05/18/13: The rally in EL has stalled a bit these last couple of weeks. Shares did manage to hit a new intraday high on Wednesday but pulled back from the $72 level. The larger trend is up but the lack of progress is concerning.

We are making a strategy change tonight. Instead of waiting for a close above $72.00 before initiating positions we will switch to a buy-the-dip strategy. Broken resistance in the $65-66 zone should be new support on any significant pullback. We will move the entry trigger to $65.50. We will move the stop loss to $62.25. We are also adjusting the option strike from 2014 Jan $80 down to 2014 Jan $75.

Earlier Comments:
Currently the point & figure chart is bullish with a $93 target. We want to keep our position size small to limit our risk.

NOTE: 2015 calls are available but the spreads are significantly wider.

Buy-the-dip strategy at $65.50, stop loss at $62.25

BUY the 2014 Jan $75 call (EL1418A75) current ask $3.50

05/18/13 strategy change: switch entry point to buy-the-dip at $65.50, move the stop loss to $62.25. Move the option strike to 2014 Jan $75 call

Originally listed on the Watch List: 05/04/13

Visa Inc. - V - close: 184.57

05/18/13: Visa has continued to rally with shares hitting new all-time highs late this past week. I don't want to chase it here although I'm worried that the market's current euphoria might send Visa higher. Shares appear to have broken through the long-term trend of higher highs.

Tonight we are leaving our strategy unchanged. Eventually the market is going to see a correction. When that happens V is not immune. I am suggesting we buy calls on a dip at $171.00. More nimble traders could try and target an entry point on a dip near the 30, 40, or 50-dma instead. If we are triggered at $171.00 I am suggesting a stop loss at $164.75. Our long-term target is $198.50.

Buy-the-Dip trigger: $171.00

BUY the 2014 Jan $180 call (V1418A180)

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BUY the 2015 Jan $200 call (V1517A200)

Originally listed on the Watch List: 05/11/13