4 Trades to put you in Good Hands with Allstate: Bonus Idea

  • Posted by on December 18th, 2017 at 7:15 am

Here is your Bonus Idea with links to the full Top Ten:

Allstate, $ALL, has steadily risen since breaking out of consolidation following the 2016 elections. On closer inspection there have been three major runs in this trend with two broad consolidations, the second of which was the deepest. Elliott Wave enthusiasts will look at this and see an ending Wave V completed, and look for an A-B-C correction now. That could happen. And a move under 101 would be a big signal to play the short side. But for now the trend remains higher. Will it break for a 4th leg higher to 117.50?

The stock comes into the week consolidation again under resistance and above the 20 day SMA. The RSI has reset after being technically overbought while the MACD has also reset lower. The Bollinger Bands® are opening to the upside to allow another break to the upside. There is no resistance above 104. Support lower comes at 101.80 and 100.45 then 99 and 94.50. Short interest is low at 1.4%. The company is expected to report earnings next on February 7th.

The options market shows the largest open interest at the 70 strike on the put side, an unlikely draw. On the call side open interest is focused from 100 to 105, and then some at 92.50 as well. It suggest about a $4 move by expiration or a range from 100 to 108. The February options, covering the earnings date, open in Monday. April options have the biggest open interest at the 100 call strike.

Allstate, Ticker: $ALL

Trade Idea 1: Buy the stock on a move over 104 with a stop at 101.

Trade Idea 2: Buy the January/April 105 Call Calendar ($2.35) and sell the April 90 Puts (65 cents) to lower the cost.

Trade Idea 3: Sell the stock short on a move under 101 with a stop at 104.

Trade Idea 4: Buy the January 100 Puts (66 cents) on a move under 101.

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which as Options Expiration and the FOMC meeting pass, sees equity markets looking strong heading into the last full week of trading for the year.

Elsewhere look for Gold to continue to bounce higher while Crude Oil pauses in the uptrend. The US Dollar Index looks to continue to mark time with a downward bias while US Treasuries continue their short term uptrend. The Shanghai Composite remains in a downtrend approaching the long term support and resistance zone while Emerging Markets consolidate in their uptrend.

Volatility looks to remain very low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ into the end of the year. Their charts all look strong on the longer timeframe. On the daily timeframe the SPY and QQQ are also strong with the IWM close to a break out if it moves higher. Use this information as you prepare for the coming week and trad’em well.


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