Editor's Note:

In addition to tonight's new candidates check out these stocks on my watch list: ANAD, BEAV, LCC, MXIM, TKR.

- James


Kansas City Southern - KSU - close: 51.25 change: +0.83

Stop Loss: 47.90
Target(s): 54.75
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see trigger

Company Description

Why We Like It:
Railroad stocks were showing relative strength on Friday. Both KSU and the Dow Jones Railroad index broke out past resistance to new relative highs. KSU broke through resistance near $50.00, which should be new support. I am suggesting we use a trigger to open bullish positions at $50.50. If triggered our target is $54.75. We will have to decide in a couple of weeks if we want to hold over KSU's earnings report. Normally we would prefer to avoid holding over earnings because announcements can bring unnecessary risk.
FYI: The Point & Figure chart for KSU is bullish with a $78.00 target.

Trigger @ 50.50

Suggested Position: Buy KSU stock @ $50.50

- or -

Buy the 2011 February $50.00 call (KSU1119B50) current ask $2.95

Annotated chart:

Entry on January xx at $xx.xx
Earnings Date 01/27/11 (unconfirmed)
Average Daily Volume: 815 thousand
Listed on January 8th, 2010

SXC Health Solutions - SXCI - close: 44.57 change: +1.49

Stop Loss: 42.40
Target(s): 49.00
Current Gain/Loss: + 0.0%
Time Frame: 8 to 9 weeks
New Positions: Yes, see trigger

Company Description:
SXC Health Solutions Corp. is a leading provider of pharmacy benefits management (PBM) services and Health Care Information Technology (HCIT) solutions to the healthcare benefits management industry. The Company's product offerings and solutions combine a wide range of PBM services and software applications, application service provider (ASP) processing services and professional services, designed for many of the largest organizations in the pharmaceutical supply chain, such as health plans, employers, federal, provincial, and, state and local governments, pharmacy benefit managers, retail pharmacy chains and other healthcare intermediaries. SXC is headquartered in Lisle, Illinois with multiple locations in the US and Canada. (source: company press release or website)

Why We Like It:
Shares of SXCI have spent the last month consolidating its early December gains. Now the stock is on the move again. Positive analyst comments on Friday pushed the stock out of its trading range. This move looks like a new bullish entry point and I am suggesting bullish positions now. Patient traders may want to wait as we could see a better entry point on a dip into the $44.00-43.50 zone. There is potential resistance at the December highs near $45.75 but we're aiming for $49.00.
FYI: The Point & Figure chart for SXCI is bullish with a $62.00 target.

NOTE: Buying the options is a higher-risk trade. The calls on SXCI have wider than normal spreads put option traders at a disadvantage here.

Open Bullish Positions Now

Suggested Position: Buy SXCI stock @ Current levels

- or -

Buy the 2011 February $45.00 calls (SXCI1119B45) current ask $2.05

Annotated chart:

Entry on January 10 at $xx.xx
Earnings Date 03/03/11 (unconfirmed)
Average Daily Volume: xxx million
Listed on January 8th, 2010