Top Trade Ideas for the Week of May 21, 2012: Bonus Idea
- Posted by Greg Harmon
- on May 21st, 2012
Here is your Bonus Idea with links to the full Top Ten:
Chipotle Mexican Grille, Ticker: $CMG, Daily
Chipotle Mexican Grille, $CMG, had an enormous run higher to over $440. Now breaking down it has support at 386 and 363 followed by 350 and 340 as shown on the daily chart above. The Relative Strength Index (RSI) is in bearish territory and heading lower with a Moving Average Convergence Divergence (MACD) indicator that is negative, both supporting more downside. The weekly chart below gives a broader perspective. The current pullback has not even retraced 23.6% of the move higher from 2009. It also shows a RSI and MACD that support further downside.
Chipotle Mexican Grille, Ticker: $CMG, Weekly
Trade Idea 1: Short the stock on a move under 386 with a stop at 402. As it moves under 380 convert it to a $15 trailing stop. Take off 1/3 at 350.
Trade Idea 2: Buy the June 380 Puts (offered at $9.30 late Friday) on the same trigger and trade them like the stock trade above.
Trade Idea 3: Buy the June 380/350 Put Spread ($6.20) on the same trigger and trade them like the stock trade above. A maximum reward to risk of 4.8:1.
Trade Idea 4: Buy the June 380/350 Put Spread and sell the June 420/430 Call Spread (net $3.45) on the same trigger and trade them like the stock trade above. Raising the maximum reward to risk ratio to 8.7:1. You can buy the stock on a move over 415 to hedge the short Call Spread, as this will likely trigger a new uptrend.
Trade Idea 5: Buy the June 380/350/335 Broken Put Butterfly ($5.15), buying the 380 and 335 strike Puts and selling 2 of the 350 strike Puts, on the same trigger. Maximum payout of $30 is at a close on June Expiry at 350, and it is profitable under 374.85. The Maximum profit trails to $9.85 under 335 at the June close.
Trade Idea 6: Buy the September 350/305/260 Put Butterfly ($5.80), buying the 350 and 260 strike Puts and selling 2 of the 305 strike Puts, on the same trigger. Maximum payout of $45 is at a close on September Expiry at 305, and it is profitable between 265.80 and 344.20 at September 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 heading into the last week before the unofficial start of Summer shows the reality of a continued bearish bias is strong. Crude Oil looks better to the downside with Gold heading higher at the same time as global economic fears are growing. The US Dollar Index and Treasuries are looking to continue to strengthen with a chance that the Dollar Index consolidates first. The Shanghai Composite is now firmly heading lower in line with the crash in the Emerging Markets. The Volatility Index broke the pressure cooker to the upside and looks to continue to move higher. These influencers set a backdrop for the Equity Index ETF’s to continue to the downside. There is no disagreement or discussion this week. The charts of the SPY, IWM and QQQ whole-heartedly agree with the downside bias. Look for a reversal in the Dollar Index or Treasuries as a sign that the worst is over for 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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