5 stocks to watch for next week

Oil and gold are trending lower. Sprint could be headed for a bidding war. Boeing and Lockheed Martin will be reporting earnings.

By MSN Money Partner Apr 19, 2013 11:52AM

Stock market © Digital Vision SuperStockBy Michael Fowlkes, InvestorsObserver


1) Crude oil at its lowest level this year

What's happening: Chevron (CVX) was trending higher for much of 2013 along with crude oil prices, but there's been a pullback in oil recently. Oil dropped sharply lower last week after China reported economic growth numbers that were lower than economists' forecasts. Over the past week, Chevron stock fell 3.7% as WTI crude has fallen from $94.50 a barrel to $87.31.


Technical analysis: CVX was recently trading at $114.81, down $6.75 from its 12-month high and $19.08 above its 12-month low. Technical indicators for CVX are bearish and the stock is showing signs of a possible trend reversal. The stock has resistance under $121. Of the 15 analysts who cover the stock 10 rate it a "strong buy," two rate it a "buy," and three rate it a "hold." The stock receives Standard & Poor's 5 STARS "Strong Buy" ranking.


Analyst's thoughts: I do not expect oil to trade too much lower from its current level. The high-demand summer driving months are approaching, which should help oil find a base and start to recover its recent losses. When it begins to correct, major oil players such as Chevron will rebound as well. I would pay close attention to Chevron's upcoming quarterly report on April 26 to look for any indication how the recent drop in oil will affect the company's earnings, but it will take a much steeper drop to see any material impact on Chevron earnings.


Stock-only trade: If you're looking to establish a long stock position in CVX, consider buying the stock when it is below $114.50 and sell if it falls below $103 or dips more than 10% or take profits if it gets to $131.50.


Option trade: If you are looking for a hedged options trade on CVX, consider a June 100/105 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (62.4% annualized*) and the stock would have to fall 8.1% to cause a problem.


Speculative call-only trade: For those of you with an appetite for higher risk and bigger returns, consider buying the September $110 call. If CVX rises just 3.5% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



2) Boeing steps into the earnings confessional
What's happening
: Boeing (BA) is scheduled to report results for its first quarter on April 24. Analysts have forecast earnings of $0.40 per share, up from $0.38 during the same period last year. Its fourth quarter earnings missed analyst estimates, and Boeing will look to turn things around this quarter. So far this year the stock has gained 15.1%.


Technical analysis: BA was recently trading at $86.69, down $2.77 from its 12-month high and $19.87 above its 12-month low. Technical indicators for BA are bullish and the stock is in a strong upward trend. The stock has resistance under $89 and support above $84.75. Of the 20 analysts who cover the stock 15 rate it a "strong buy," one rates it a "buy," three rate it a "hold," and one rates it a "strong sell." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: Boeing has remained strong despite the grounding of its 787 Dreamliner. I believe this is because Wall Street expects that the problem's impact will be minimal, and that the company will soon fix any problems and gain approval to start flying its jets again. First quarter deliveries of commercial aircraft were flat (WSJ) when compared to the fourth quarter, but still showed a 7% increase over the same period last year. Boeing is expected to launch an improved 777 jet this summer, which should lead to higher sales of its twin-aisle aircraft. Should the company post better than expected earnings, the stock will continue its recent strength. An earnings miss will create a buying opportunity for investors looking for long term potential.


Stock-only trade: If you're looking to establish a long stock position in BA, consider buying the stock when it is below $86.50 and sell if it falls below $78 or dips more than 10% or take profits if it gets to $99.50.


Option trade: If you are looking for a hedged options trade on BA, consider a May 77.50/80 bull-put credit spread for a 25-cent credit. That's a potential 11.1% return (135.2% annualized*) and the stock would have to fall 7.4% to cause a problem.


Speculative call-only trade: For those of you with an appetite for higher risk and bigger returns, consider buying the November $82.50 call. If BA rises just 6.0% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



3) Lockheed Martin rings up earnings Tuesday
What's happening
: Defense contractor Lockheed Martin (LMT) will report first quarter results on April 23. Analysts forecast earnings of $2.04 per share, up from $2.02 during the same period last year. Optimism has returned to the sector following reports that President Barack Obama was planning to reduce scheduled defense budget cuts by 80% in his new budget proposal, from $500 billion to just $100 billion.  


Technical analysis: LMT was recently trading at $95.56, down $2.01 from its 12-month high and $15.42 above its 12-month low. Technical indicators for LMT are bullish and the stock is in a strong upward trend. The stock has resistance under $97.50 and support above $92.75. Of the 17 analysts who cover the stock three rate it a "strong buy," one rates it a "buy," twelve rate it a "hold," and one rates it a "sell." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: While it is unclear exactly how big Pentagon cuts will wind up being, it is clear that they will probably not come anywhere near the $500 billion that was previously expected. Obama will need to get support from his party, which may not be easy, and the Republicans will have to concede on issues such as additional tax revenue. In the end, the cuts will likely be in excess of $100 billion, but still fall well short of the $500 billion. If this does turn out to be the case, then defense contractors, including Lockheed Martin, will see their shares continue to rise. Barring a huge earnings disappointment, I believe we will see LMT continue its recent strength.


Stock-only trade: If you're looking to establish a long stock position in LMT, consider buying the stock when it is below $95.50 and sell if it falls below $86 or dips more than 10% or take profits if it gets to $110.


Option trade: If you are looking for a hedged options trade on LMT, consider a June 82.50/87.50 bull-put credit spread for a 45-cent credit. That's a potential 9.9% return (55.5% annualized*) and the stock would have to fall 8.0% to cause a problem.


Speculative call-only trade: For those of you with an appetite for higher risk and bigger returns, consider buying the September $90 call. If LMT rises just 3.0% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.



4) Dish Network makes offer for Sprint Nextel
What's happening
: Wireless carrier Sprint Nextel (S) has been surging as of late in light of multiple buyout offers. The most recent offer comes from Dish Network (DISH), which has offered to pay $7 a share for the struggling carrier. This creates a two-way bidding war for Sprint, which had already received an offer from Japanese telecom company Softbank. The Dish offer is about 13% higher than the one Softbank has made and is receiving a lot of support from some of Sprint's biggest shareholders. The stock instantly shot from $6.22 a share to above $7, with analysts expressing their opinion that whatever deal is reached, it will and possibly wind up being even higher.


Technical analysis: S was recently trading at $7.09, down $0.26 from its 12-month high and $4.79 above its 12-month low. Technical indicators for S are bullish and the stock is in a strong upward trend. The stock has support above $6.30. Of the 20 analysts who cover the stock seven rate it a "strong buy," 11 rate it a "hold," and two rate it a "strong sell." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: I expect that $7 should be a solid floor for the stock, but with two different companies interested in purchasing the company we could see the bids increase and push the stock even higher. The Dish Network offer has gained support from shareholders, but that support could easily shift back to Softbank if a higher offer is made. The downside is extremely limited at this point, but there is still some upside potential.


Stock-only trade: If you're looking to establish a long stock position in S, consider buying the stock if it ever dips below $7 and sell if it falls below $6.50 or dips more than 10% or take profits if it gets to $8.


Option trade: With the recent spike in the stock, and the low chance that the stock will trade lower, the options are not priced favorably enough to warrant a hedged trade at the current time.


Speculative call-only trade: For those of you with an appetite for higher risk and bigger returns, consider buying the November $6 call. If S rises just 4.1% you can pull in a 20% or better profit on the option. However, if the deal falls apart and the stock moves lower, this kind of trade could lose a significant amount.



5) Gold experiences largest sell-off in 30 years
What's happening
: Barrick Gold (ABX) has been selling off sharply since the start of April. The stock was already in a three-month downward trend, but moved sharply lower along with gold prices over the last week. Since the start of April ABX has lost 40%. The stock is trading just above its 52-week low, and has yet to show any signs of support.


Technical analysis: ABX was recently trading at $17.65, down $25.65 from its 12-month high and just $0.14 above its 12-month low. Technical indicators for ABX are bearish and the stock is in a strong downward trend. The stock has resistance under $824.50. Of the 20 analysts who cover the stock six rate it a "strong buy," two rate it a "buy," and twelve rate it a "hold." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: I do not see too much additional downside to gold from its current level. I believe we are likely to see gold form a base over the upcoming weeks and then start to trend higher. Concerns of weakness in China were a bit exaggerated in my opinion. China is still growing, just not as fast as before, and with nations around the corner continuing to flood economies with fiat currency gold has to trend higher. What we are seeing now is panic selling, with just about every analyst predicting lower prices. Typically when we see everyone panic that means that there is not much selling left. I believe gold will regain much of its losses through the summer and help bring strength back into gold stocks such as Barrick Gold.


Stock-only trade: If you're looking to establish a long stock position in ABX, consider buying the stock when it is below $17.75 and sell if it falls below $16 or dips more than 10% or take profits if it gets to $20.50.


Option trade: If you are looking for a hedged options trade on ABX, consider a May 12/15 bull-put credit spread for a 30-cent credit. That's a potential 11.1% return (135.2% annualized*) and the stock would have to fall 13.3% to cause a problem.


Speculative call-only trade: For those of you with an appetite for higher risk and bigger returns, consider buying the July $16 call. If ABX rises just 7.0% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.


*Annualized returns provided for comparison purposes only


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At the time of writing, Mr. Fowlkes does not have direct ownership in any of the other stocks mentioned.

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