Top Trade Ideas for the Week of January 14, 2013: Bonus Idea

• Posted by Greg Harmon
• on January 14th, 2013

Here is your Bonus Idea with links to the full Top Ten:

BHP Billiton, Ticker: $BHP

BHP Billiton, $BHP, had a strong run higher after breaking resistance at 73.25 in early December. After making a top at 80.30 and reaching a technically overbought condition it has been pulling back. Now at support at 76.25 and with a Relative Strength Index (RSI) at the mid line, and a Moving Average Convergence Divergence indicator (MACD) that is negative, it is offering a trading opportunity. A break below 76 has support at 73.25 and then 70 followed by 67.40. However a bounce here and move above 77.50 can be played to the long side with a gap fill to 78.29 and resistance above that at 80.30.

Short Ideas:
1. Short sell the stock under 76 with a stop at 77.
2. Buy the February 75 Puts (offered at $1.28 late Friday) on a break below 76.
3. Buy the February 75/72.5 Put Spreads (62 cents) on a break below 76.
4. Sell the February 80/82.5 Call Spreads (35 cents) on a break below 76.
5. Buy the February 75/72.5 Put Spreads and sell the February 80/82.5 Call Spreads (27 cents) on a move under 76.

Long Ideas:
1. Buy the stock on a move over 77.50 with a stop at 76.50.
2. Buy the February 77.5 Calls ($1.43) on a move over 77.50.
3. Buy the February 77.5/80 Call Spreads (91 cents) on a move over 77.50.
4. Buy the February 77.5/80/82.5 Call Butterfly (56 cents) on a move over 77.50.
5. Sell the February 72.5/70 Put Spreads (30 cents) on a move over 77.50.

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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 next week sees the broad markets continuing to look good but with some caution creeping in. Gold May be bottoming but needs to prove it while Crude Oil continues the trend higher. The US Dollar Index looks to move in a tight range with a downside bias while US Treasuries are biased higher in the downtrend. The Shanghai Composite is finally taking a breather and looks better lower with Emerging Markets consolidating but biased to the upside. Volatility looks to remain subdued and may even move lower keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts agree with the SPY and IWM the strongest and the QQQ’s lagging a bit. 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.

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