Monday, December 30, 2013

12/30/2013 New Years Watchlist (6 bullish stocks)

Market: I am still bullish $SPY into 2014. The S&P is currently has forward-P/E of 15.4 which is fair value based on recent history; however the market has traded in the P/E ~25 range back in the late 90s when the tech bubble was brewing. The 20year average P/E is 19 which means, at its currently price $183.8 SPY has 20% more upside, if history repeats. Keep in mind that SPY is due for a correction after this breakout so I expect 190-200 to resist. So for this week as we start the new year, the market is technically bullish and should continue its bullish run. I expect January to be strong because of the January effect which create volatility in this bull market. Given the lite holiday trading volume last week, I expect a dip/consolidation this week which should present dip-buying opportunities because we are still in a buy-and-hold market.



GE - General Electric started breaking out last week due to positive guidance and appointment of new company officers. We bought (March2014 call options) the breakout when GE was trading at $27.3 (now $27.83); so far we are now up +27% on our options contracts. Our goal is to sell for 100% gain, which could be near resistance at $29. Our stop is near $27.3, which is where we entered the trade.

JPM - The Financials sector (index: XLK) is projected to have the highest earnings growth rate for this 4th quarter, so expect a run-up into 4Q earnings season as investors look forward. JPM leads the finance sector with nearly $220B market cap. We still own a starter position in March2014 call options and plan to buy more contracts once it starts breaking out into new highs. Once it breaks out, we see upside to $62 where there is historical resistance. At $62/share, JPM's P/E is still only 14 (currently 13), which is still cheap. I am only bullish JPM mainly because the whole sector could continue upwards due to its strong 4Q guidance; however I do not plan on holding for JPM's earnings on Jan 14th because the estimates are below companies growth streak. Our stop is near the $27.2/27.5 support zone.

AAPL - Apple gapped-up and spiked to 570s with strong trading volume following announcing the China Mobile (ticker: CHL) deal but faded with low holiday trading volume. I expect AAPL to revisit those 570 highs and breakout towards 600. I will fully engage with $650Mar14 call options once the breakout occurs. Breakout is confirmed when it closes the day above 570.1.

FB - Facebook is a classic growth stock in the hot and volatile tech sector (as evident by TWTR from last week's watchlist). FB is ready to continue its breakout into new all time highs. TWTR and FB will continue race each other as they climb higher. The next FB breakout will take it well into the 60s in the next couple weeks, so we do not want to miss this trade. We are preparing to buy $70Mar14 calls once it breaks out to all time highs.


VNDA - In November, Vanda Pharmaceuticals had game changing events with FDA approvals as evident by the massive buying volume after the approvals. VNDA spiked from under $7 to over $15 on the news. It faded back down to 9s after the news and has been running towards its highs and could breakout as investors look forward to commercialization of the new drugs which could boost earnings big time. I will be watching for a cup&handle breakout above that neckline at $13 and sell near $15-16. I will be prepared to buy any positive catalysts (news, upgrades, seeking alpha article etc..).

FNMA - Fannie Mae is still consolidating as it approaches to breakout above $3.30 resistance. The breakout is confirmed when it closes the day above 3.30 with strong volume.

Sunday, December 22, 2013

12/23/2013 Week Watchlist (6 stocks)

Market: $SPY has started setting up for the Santa Rally following the Fed's decision to taper its stimulus to $70B/mo from $80B/mo so expect very bullishness in the weeks ahead. However, I think Monday is a good time to hedge your position, as there is always a slim chance that the market could sell-off as people lock in profits on a very strong year in the stock market, which is up well over 20% in 2013.


JPM - banks are cheap and JP Morgan Chase Bank leads them. Banks are good sympathy plays off the Fed taper. I bought a starter position in JPM at 57.5 in $60Mar14 call options and expect to at least double up my position this week. Price target is 62 in a few weeks time.

AAPL - Apple Inc. is officially working with China Mobile (CHL) in a deal that will bring iphones to over 700Mil new users in China. That is a big time revenue growth potential for the most valued company in the world. AAPL is headed for $600/share + more. I am very bullish AAPL this week. I am looking at a 552 entry point with a stop hard stop at 544. I do expect a big gap-up on this CHL news.

SYY - Sysco Corp.  is a growth stock that just merged with US Foods (also a growth company) in a deal that makes the merger an efficient one that will save the company money in the future. SYY only paid for US Foods at the equivalent of P/E 10. SYY has P/E 21, so this deal makes the new merged company much cheaper than it was prior to the merger. SYY's P/E is approx. 17 after merger, making SYY atleast 20% cheaper now. Therefore I see SYY valued at $42, which is near the highs it gapped up to on the day it announced the merger. I am looking to buy this bottoming price action. My entry point is 36.6 with stop-loss at 36.2. Upside to 40-42/shares.

GE - General Electric just reported that they expect significant growth in organic industrial sales to help the company sales grow 5% in 2014. GE is a growth stock trading at a fair value currently, but its slightly undervalued looking forward. So I think this is a good time to buy the company ahead of the street pricing in this forward growth. My entry point is above the 52week high at 27.5 with stop-loss under 27. Price target is $29/share.

FNMA - believe it or not this Fannie Mae is recovering from the financial crisis and is currently undervalued looking forward as the entire finance sector continues its recovery.  I am watching carefully for a 3.50 breakout. The stock could rebound with plenty of upside. I've see short-term upside to $4-5/shares and long-term upside to $7/share. I've got a hard stop-loss under 2.90.

TWTR - Twitter is a good play off the tech sector strength lead by AAPL. TWTR has plenty of upside as the bubble continues to brew on this fresh ipo and growth stock. Thanks to the overall market breaking out and the big AAPL/CHL deal carrying the tech sector, TWTR should make big moves this week following four consecutive bullish weeks for the stock.