Top Trade Ideas for the Week of October 24, 2011: Bonus Idea
- Posted by Greg Harmon
- on October 23rd, 2011
Here is your Bonus Idea with links to the full Top Ten:
Atlas Pipeline Partners, Ticker: $APL
Atlas Pipeline Partners, $APL, is testing the resistance at 33.15 for the 3rd time, a triple top. As it arrives there it has a Relative Strength Index (RSI) that is trending higher and is above 60 and a Moving Average Convergence Divergence (MACD) indicator that is positive, but may be starting to fade. These could be a bit stronger but support more upside. If it can get over 33.15 it has resistance higher at 34 followed by 35.20 and 36 with a Measured Move (MM) higher at 40.00, from the double bottom area near 27. Enter long on a break over 33.15 with a 2% trailing stop taking some profits at a touch of 35.20.
For an options play consider either a November 34/27 or 35/28 bullish Risk Reversal, using the same trigger of a move of the stock price over 33.15. Using the 34/27 to illustrate, you would buy the November 34 Strike Call (offered at 75 cents near the close Friday) and sell the November 27 Strike Put (bid at 25 cents near Friday’s close) for 50 cents. This spread carries about a 45 delta meaning that a $1 move higher in the stock to 34.15 would add 45 cents to the trade, to 95 cents, and to the 35.20 resistance it would be worth near $1.40. Being short the put exposes you to owning the stock if it closes below 27 on Expiry, November 19 and uses margin. It can also be done as a cash covered put sale in retirement accounts.
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After reviewing over 900 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 Saturday which into next week looks for Gold to continue the move it started lower while Crude Oil consolidates at resistance with the possibility of a pullback. The US Dollar Index and US Treasuries both look to continue lower. The Shanghai Composite is on the edge of collapse and Emerging Markets look lower but may continue to consolidate. Volatility seems biased to the downside creating a supportive environment for the Equity Index ETF’s SPY, IWM and QQQ to continue higher. The SPY has the strongest set up going into the week with the QQQ the weakest. Almost time to get bullish. The moves in the US Dollar Index and US Treasuries continue to be the key drivers for Equity markets so be mindful if they reverse. Also as last week a precipitous fall in the Shanghai Composite could negatively impact US Equities. Use this information as you prepare for the coming week and trade’m well.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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