5 stocks to watch for next week

PVH Corp. to report earnings. Boeing faces concerns of Japanese pilots. Walgreen moves towards becoming an energy producer. Dell resists Icahn proposal. First Solar tries to hold recent gains.

By MSN Money Partner Jun 7, 2013 11:17AM

Stock index © Image Source, Getty ImagesBy Michael Fowlkes, InvestorsObserver


Japanese pilots concerned over safety of Boeing jets

What's happening: After a lengthy review process, Boeing's (BA) 787 Dreamliner jets are back in the air, but some pilots are worried about their safety. Several Japanese pilots have expressed concerns over the fact that Boeing did not make adjustments to the plane's cockpit in order to give pilots better warning signs in case something goes wrong with the lithium-ion batteries that were responsible for multiple incidents earlier this year. Boeing stock has hit resistance over the last month, but still remains up 32.2% year-to-date.


Technical analysis: BA was recently trading at $98.49, 2.98 below its 12-month high and $29.46 above its 12-month low. Technical indicators for BA are bullish and the stock is showing signs of a possible trend reversal. The stock has support above $95.00. Of the 21 analysts who cover the stock 16 rate it a "strong buy," one rates it a "buy," and four rate it a "hold." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: I see little impact on Boeing stock from the concerns of the Japanese pilots regarding the 787 Dreamliner. Even while the investigation into the incidents was taking place and the planes were grounded the stock performed well, so I see little reason to believe that will change based on the concerns of a few pilots. However, should we see even one single incident take place again with the plane's batteries, the stock will not be so fortunate. Boeing has a lot riding on the line, and I do not believe Wall Street will be so forgiving if another incident occurs.


Stock-only trade: If you're looking to establish a long stock position in BA, consider buying the stock under $99, and sell if it falls below $89 or take profits if it gets to $113.50.


Option trade: If you are looking for a hedged options trade on BA, consider a July 85/90 bull-put credit spread for a 45-cent credit. That's a potential 9.9% return (82.0% annualized*) and the stock would have to fall 8.2% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the November $90 call. If BA rises just 5.2% 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.



Walgreen begins testing energy saving technology

What's happening: In an attempt to become more energy-efficient, Walgreen (WAG) announced that it is testing new technology at a new store just north of Chicago. The store will have 800 solar panels, wind turbines, and a geothermal energy system. The company hopes to not only lower its electricity consumption, but to actually generate more power than the store needs. The move is part of the company's plan to reduce its energy consumption by 20% between now and 2020. The stock is up 33% year-to-date.


Technical analysis: WAG was recently trading at $48.63, down $2.62 from its 12-month high and $20.10 above its 12-month low. Technical indicators for WAG are bearish and the stock is showing signs of a possible trend reversal. The stock has support above $46.00. Of the 16 analysts who cover the stock 9 rate it a "strong buy," one rates it a "buy," five rate it a "hold," and one rates it a "sell." The stock receives Standard & Poor's 3 STARS "Buy" ranking.


Analyst's thoughts: I do not see any short-term benefit for the company from its move to become more energy efficient. Having said that, the long term impact could be huge. As it expands into more areas such as Redbox DVD rentals and digital photo scanners, its power consumption has been on the rise. It is vital for the company to keep its energy expenses under control, and if it is able to reduce its energy expenses by 20% it will have a major impact on the bottom line. This move is great for long-term investors, but will have little to no immediate impact on the stock.


Stock-only trade: If you're looking to establish a long stock position in WAG, consider buying the stock under $49, and sell if it falls below $43 or take profits if it gets to $45.50.


Option trade: If you are looking for a hedged options trade on WAG, consider a July 40/45 bull-put credit spread for a 45-cent credit. That's a potential 9.9% return (82.0% annualized*) and the stock would have to fall 6.5% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the October $46 call. If WAG rises just 5.7% 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.



Dell points to holes in Icahn's plan

What's happening: Dell (DELL) continues to weigh its future alternatives, and the most recent development is a report from the company's directors and their advisors stating that Carl Icahn's proposal is not feasible without an additional $4 billion in financing. Icahn is opposed to Michael Dell's proposal to take the company private, but it appears as though the company's board will fight hard to avoid Icahn's special one-time $12 dividend, which he says will allow the company to remain public. The stock has remained in a tight trading range between $13.50 and $14.50 since the end of January.


Technical analysis: DELL was recently trading at $13.43, down $1.21 from its 12-month high and $4.74 above its 12-month low. Technical indicators for DELL are bearish and the stock is in a strong downward trend. The stock has support above $13.00. Of the 23 analysts who cover the stock 21 rate it a "hold," one rates it a "sell," and one rates it a "strong sell." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: The battle for the future of Dell will only get hotter. The company's founder, Michael Dell, is going to do everything in his power to take his company private, but it will not be an easy fight. Carl Icahn can be very convincing, and once he sets his aim on a target he will do whatever it takes to accomplish his goal, which in this case is to keep Dell private. Icahn loves using the media influence shareholders, and this battle will get much more publicity in the weeks and months ahead. Despite the heightened publicity I see coming, I do not expect to see much movement in the stock. Both parties have put roughly the same valuation on the company, and I do not see that changing. If anything, one side will increase their offer, so there is some upside potential, but very limited downside risk.


Stock-only trade: If you're looking to establish a long stock position in DELL, consider buying the stock under $13.25, and sell if it falls below $12.75 or take profits if it gets to $14.50.


Option trade: With the buyout discussions still taking place, Wall Street is not expecting to see much movement in the stock one way or the other, and therefore options are not priced in a way to facilitate a hedged trade on the stock.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the November $12 call. If DELL rises just 2.1% 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.



PVH Corp. reports earnings Wednesday

What's happening: PVH Corp. (PVH) will report its first quarter results after the market closes on June 12. Analysts have forecast earnings of $1.35 per share, up from $1.30 during the same period last year. The stock has been volatile this year, and is currently down just 0.3% year-to-date.


Technical analysis: PVH was recently trading at $111.18, down $14.32 from its 12-month high and $37.92 above its 12-month low. Technical indicators for PVH are bearish and the stock is showing signs of a possible trend reversal. The stock has support above $105.00. Of the 11 analysts who cover the stock seven rate it a "strong buy," two rate it a "buy," and two rate it a "hold." The stock receives Standard & Poor's 4 STARS "Buy" ranking.


Analyst's thoughts: Based on PVH's strong earnings track record, I do not expect to see any surprises in this quarterly report. The company has topped analysts' estimates each quarter since the start of 2007, and I believe it will continue that streak with its first quarter numbers. PVH is in the textile apparel business, and is behind some of the most popular clothing brands such as Tommy Hilfiger, IZOD, Bass and Arrow. Consumer confidence has been on the rise, and I expect this to translate into another strong quarter for the company.


Stock-only trade: If you're looking to establish a long stock position in PVH, consider buying the stock under $111, and sell if it falls below $103.50 or take profits if it gets to $127.50.


Option trade: If you are looking for a hedged options trade on PVH, consider a July 95/100 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (92.2% annualized*) and the stock would have to fall 9.6% to cause a problem.


Speculative call-only trade: For those with an appetite for higher risk and bigger returns, consider buying the September $110 call. If PVH rises just 6.3% 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.



Solar stocks try to hold recent gains

What's happening: First Solar (FSLR) traded in a tight sideways for the first three months of the year, but really took off higher with the overall solar sector over the last couple of months. The stock hit a new 52-week high last month, but has fallen 13% from that high. On June 11, its competitor LDK Solar (LDK) will report its first quarter results, and any weakness in those earnings could have a negative impact on First Solar.


Technical analysis: FLSR was recently trading at $51.04, down $7.97 from its 12-month high and $38.74 above its 12-month low. Technical indicators for FSLR are bullish and the stock is in a strong upward trend. The stock has resistance below $55.00. Of the 16 analysts who cover the stock one rates it a "strong buy," 11 rate it a "hold," one rates it a "sell," and three rate it a "strong sell." The stock receives Standard & Poor's 3 STARS "Hold" ranking.


Analyst's thoughts: After a strong run-up during April and May, solar stocks have come under pressure, and First Solar runs the risk of giving back additional gains if we see a negative earnings report from LDK Solar on June 11. When First Solar reported its own first quarter results on May 6, it reported disappointing results, which led to a temporary dip in its share price. However, it quickly rebounded and traded up to a new 52-week high before experiencing more selling pressure. If LDK is able to post better-than-expected results for its first quarter, traders may view this as a positive for the entire sector and return to FSLR, but a miss will only increase selling in the stock.


Stock-only trade: If you're looking to establish a long stock position in FSLR, consider buying the stock under $51 and sell if the stock drops under $46.00 or take profits if it gets to $58.50.


Option trade: If you are looking for a hedged options trade on FSLR, consider a July 35/40 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (92.2% annualized*) and the stock would have to fall 20.6% to cause a problem.


Speculative option-only trade: We do not want to set up an option-only trade at the current time. We are bullish on the stock, but with the recent run up in the stock, the call options are not priced favorably at the current time to warrant a call-only trade at the current time.



*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 stocks mentioned.

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