Top Trade Ideas for the Week of June 18, 2012: Bonus Idea
- Posted by Greg Harmon
- on June 18th, 2012
Here is your Bonus Idea with links to the full Top Ten:
Union Pacific, Ticker: $UNP
Union Pacific, $UNP, has been trading in a range between 105 and 115 since the beginning of the year. Now at the top of the range it has a Relative Strength Index (RSI) that is making a new higher high and rising with a Moving Average Convergence Divergence (MACD) indicator that is positive and climbing. Both support more upside. It printed a doji candle on Friday though, signaling indecision, on stronger relative volume. The doji can resolve either way, so it is not so surprising to see it a previous resistance. A move over 115 has a Measured Move to 125. Support is fond lower at 113 and 109.80 followed by 107.10 and 105, before breaking the channel. Underneath support shows up at 101.60 and 96.70.
Trade Idea 1: Enter long on a move over 115 with a $2 trailing stop. Take off 1/3 at 120 and another 1/3 at 125.
Trade Idea 2: Sell the July 105 Puts on the same trigger. These were bid at $1.15 late Friday. Collecting premium and a possible entry at a price of 105.
Trade Idea 3: Buy the July 115 Calls on a move over 115 with a $2 trailing stop on the stock price. These were offered at 3.75 late Friday. Use the targets for the stock trade to take profits. Same as the stock trade but for a maximum risk of the premium paid and greater leverage.
Trade Idea 4: Buy the July 115/125 Call Spread on a move over 115. These were offered at $3.33 late Friday. You can leg into this trade, buying the 115 Calls first and then spreading them later at the 120 profit target, against the 125 Calls. Lowers the cost of trade 3 but also caps the upside at a $10 pay out. A reward to risk ratio of 3:1.
Trade Idea 5: Buy the July 115/125 Call Spread Risk Reversal selling the July 105 Puts. There were offered at $2.18 late Friday. Further reducing the cost of the initial Call trade to create a reward to risk ratio of 4.6:1, but opening the possibility of owning the stock with a 107.18 basis on a close under 105 at Expiry.
Trade Idea 6: Buy the July 115/125 Call Spreads selling the July 105/97.5 Put Spreads. These were offered for $2.73 late Friday. Same as trade 5 but reducing the downside risk to $7.50.
Trade Idea 7: Buy the August 115/125 Call Spreads selling the August 100 Puts. This trade was offered for $2.46 late Friday. The same as trade 5 but giving more time for it to play out. The reward to risk ratio adjusts slightly to 4.0:1 also.
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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 Summer Solstice there are a lot of markets at critical points. Gold seems poised to move higher in the intermediate downtrend testing breakout levels while Crude Oil consolidates ahead of the next move, likely lower. The US Dollar Index looks to continue to pullback while US Treasuries are set t move higher. The Shanghai Composite and Emerging Markets are consolidating with Chinese Markets biased to the downside and Emerging Markets higher. Volatility looks to remain elevated but biased lower, making for an environment where the equity index ETF’s SPY, IWM and QQQ favor the downside. But their charts disagree, with the indicators pointing toward the consolidation breaking higher. It is unlikely that both US Equities and Treasuries both move higher, although not unprecedented. A strong move by one will likely push the other in the opposite direction. Keep a close watch. 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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