Top Trade Ideas for the Week of May 29, 2012: Bonus Idea
- Posted by Greg Harmon
- on May 29th, 2012
Here is your Bonus Idea with links to the full Top Ten:
Amazon.com, Ticker: $AMZN
Amazon.com, $AMZN, has been moving lower from a gap higher to 234. The Relative Strength Index (RSI) is falling and the Moving Average Convergence Divergence (MACD) indicator is growing more negative, both supporting further downside. Friday it broke below the mini consolidation as the Bollinger bands opened lower. There is support lower at 206.88 and 197 followed by 185.75 and 175. There is also the 200 round number in between. Notice that the biggest price by volume bar is found at 197 as well. Resistance higher is found at 221 and 227 followed by 234 and 241.
Trade Idea 1: Enter short with a $5 trailing stop. Take off 1/3 at a gap fill at 196.38.
Trade Idea 2: Buy the June 210 Puts (offered at $5.60 late Friday) and trade them using the same $5 trailing stop on the stock and the same profit target.
Trade Idea 3: Buy the June 210/195 Put Spread ($3.75). Buying the June 210 Put and selling the June 195 Put this has a reward to risk ratio of 4:1, a maximum profit of $11.25 on a close at 195 or lower on June Expiry, and starts making money on a close under 206.25.
Trade Idea 4: Buy the June 210/195/185 Broken Put Butterfly’s ($2.88). This is buying both the June 210 and 185 Put and selling 2 of the June 195 Puts. It has a maximum profit of $12.12 on a close at 195 on June Expiry and that profit trails off below 195 to a minimum of $2.12 on a close at 185 or lower. It starts making money, net of the premium, at 207.12.
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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 Saturday which heading into the unofficial first week of summer, the bearish feel is still alive. Gold and Crude Oil look to continue the trends lower with a chance of consolidation. The US Dollar Index looks strong but may consolidate after a big move last week, while Treasuries are biased higher after consolidating last week. The Shanghai Composite looks to continue lower with the Emerging Markets consolidating in the downtrend. The Volatility Index remains biased to the upside after holding higher. These influencers set the stage for the Equity Index ETF’s SPY, IWM and QQQ to continue lower. A reversal by the Dollar Index and treasuries could change that. The charts of those Index ETF’s are consolidating short term in a downtrend, with the QQQ looking the worst of the three. Remember consolidation can break either way. A move below last week’s lows will have the bears growling. It will take a lot for the bulls to be happy. Use this information as you prepare for the coming week and trade’m well.
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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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