Top Trade Ideas for the Week of November 28, 2011: Bonus Idea
- Posted by Greg Harmon
- on November 27th, 2011
Here is your Bonus Idea with links to the full Top Ten:
CF Industries, Ticker: $CF
CF Industries, $CF, has been in a strong downtrend after making a lower high early in November. Two long red candles last week combined with a bearish Relative Strength Index (RSI) and a Moving Average Convergence Divergence (MACD) indicator that is growing more negative suggest more downside to come. The expanding Bollinger bands concur. A move under support at 139 finds support lower at 133.60 and then 127.75, 124 and 119. Resistance to the upside is found at 151, 157.50 and 161.50.
Trade Idea 1: Short Sell the stock on a move under 139 using a 2% trailing stop. Take off 1/3 at 133.60 and another 1/3 at 127.75, then tightening the stop to a 1% trail.
Trade Idea 2: Buy the December 140/130 Put Spread. This was available for about $4 near the close Friday. Stop the trade on a move over 142.50. As it moves lower take profits by selling the spread as the stock reaches 127.75 on a fast move, or by tightening the spread to a 135/130 Put Spread on a slower move when you can take out 75% of the cost of putting on the initial spread by doing so. This is selling the 140 Put and buying 135 Put.
Trade Idea 3: Buy the December 140/130 Put Spread and sell the December 155 Call to Fund it. The same as Trade Idea #2 but by selling the upside December 155 Call for about $2.20 to reduce the cost to $1.80 and improve the reward to risk ratio from 2.5:1 to 5.5:1. Deal with the Put Spread as above. This runs the risk of being short the stock if it closes over 155 at December Expiry. To avoid this and still profit buy the stock as a hedge on a move over 151 with a 150.50 stop and let it be called away at 155 or sell for a profit if still holding at Expiry.
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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 looked as November turns into December it looks like Santa Claus is sending a message to Americans, as he brings a rally only to the US Dollar and US Treasuries. Gold and Crude oil look ready to continue lower, while the Shanghai Composite and Emerging Markets do the same in their downtrends. Volatility looks to remain in the lower end of the elevated channel but with the first sign of a move higher. All of these combine to produce a horrible environment for the Equity Index ETF’s SPY, IWM and QQQ. The IWM and QQQ look the most extended so look for the SPY to catch up a bit in the coming week. The past week has the US Dollar and Treasuries driving the action and expect that to continue in the coming week. So any reversal in these should benefit Equities. Use this information as you prepare for the coming week and trade’m well.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
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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