New Watch List Entries

GS - Goldman Sachs

Active Watch List Candidates

LLY - Eli Lilly & Co

Dropped Watch List Entries

FDX and HUM have graduated to our active play list.

CHKP has been moved to our new plays tonight.

New Watch List Candidates:

Tonight we are only adding one new watch list candidate. I want to add more but the volatility over the last three weeks has been crazy and it might be wiser to wait for the market to settle a bit.

I looked at hundreds and hundreds of stocks this weekend. The market's recent strength is encouraging but we've gone from oversold to overbought in about seven days. We are also in the middle of earnings season, which can produce new entry points but it can also crater a stock on an earnings miss. You don't want to jump in too early and see your stock collapse on a disappointing result or guidance.

Radar Screen:
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself. In no particular order:


Some of these I would like to see a pullback before we consider bullish positions (AAPL, TRV, CELG, CCI).

A few of these have earnings coming up and I'd rather wait to see how the market reacts to their earnings report before we consider long-term bullish positions (CAH, ESRX, ALL).

The Goldman Sachs Group, Inc. - GS - close: $183.35

Company Info

Goldman is in the financial sector. They are considered part of the national investment brokerage industry. Goldman was founded in the year 1869 and is headquartered in New York. The company provides investment banking and management services to corporations, other financial institutions, governments and high-net-worth individuals. The lion share of their business is institutional client services where GS makes markets in fixed income, equities, currencies, and commodities.

The company's recent earnings report was strong. GS announced its Q3 results on October 16th. As of the first nine months of 2014 their revenues were up $1.4 billion above the same period a year ago. Management has managed to boost profits by reducing costs. A strong mergers and acquisitions market in 2014 has helped drive GS' results as the company is gaining market share.

Looking at their recent results Wall Street expected a profit of $3.21 per share on revenues of $7.8 billion for the quarter. GS delivered $4.57 per shares, a +59% increase from a year ago. Revenues soared +25% to $8.4 billion. GS saw $20 billion in net inflows bumping client assets to $1.15 trillion.

The company does have a habit of crushing analysts' earnings estimates so the market wasn't that surprised. The stock actually sank on these results but the initial weakness is over and GS is rebounding.

The stock experienced a -10% correction from its early October high to the mid October low. The recent breakout past resistance near $180 and all of its key moving averages is encouraging. I would be tempted to buy calls right now. However, I suspect the market might see some mild profit taking after last week's big rally.

Tonight I am suggesting a buy-the-dip entry point at $180.50 with a stop loss at $174.50. Our long-term target is the $220-230 zone.

Buy-a-dip at $180.50 with a stop at $174.50

BUY the 2016 Jan $200 call (GS160115c200) current ask $9.60

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

Chart of GS:

Originally listed on the Watch List: 10/26/14

Active Watch List Candidates:

Eli Lilly & Co - LLY - close: 66.05

10/26/14: LLY has seen some really big moves in the last eight trading days. The stock is normally not that volatile, which is one of the reasons we added to the watch list. While the short-term rally is encouraging the stock is now looking a bit overbought.

Tonight I am adjusting our entry point strategy. Instead of waiting for a close above $66.25 we will now wait for a close above $67.00 and then buy calls the next morning.

Earlier Comments: October 5, 2014:
You may have noticed that stocks have turned a bit more volatile recently. That could be a new trend after as investors try to look ahead into 2015 and ponder a market environment without a QE program by the Federal Reserve. That's why tonight we're looking at a stock like LLY, which is traditionally considered a more safe haven trade.

LLY has been building on its longer-term trend of higher lows. Plus the company has seen some good news. The U.S. FDA recently approved LLY's new once-a-week injectable diabetes drug for adults with type 2 diabetes. This new treatment, Trulicity, helps improve the patients' blood sugar levels. There are an estimated 26 million Americans who suffer with type 2 diabetes. LLY is also teaming up with AstraZeneca to work on a Alzheimer's treatment.

The two-week pullback in shares of LLY was pretty mild and investors are already buying the dip. We want to hop on board if this rebound continues. Tonight we are suggesting investors wait for LLY to close above $66.25 and then buy calls the next morning with a stop loss at $61.90.

trigger: Wait for LLY to close above $67.00
Then buy calls the next morning with a stop at $61.90

BUY the 2016 $70 call (LLY160115c70)

10/26/14 adjust entry point strategy. Move trigger from $66.25 to a close above $67.00. Option Format: symbol-year-month-day-call-strike

Originally listed on the Watch List: 10/05/14