Top Trade Ideas for the Week of July 15, 2013: Bonus Idea
- Posted by Greg Harmon
- on July 15th, 2013
Here is your Bonus Idea with links to the full Top Ten:
Caterpillar, Ticker: $CAT
Caterpillar, $CAT, is moving higher after basing at 82 with a short term double bottom. It is also in a bearish Gartley Harmonic, with a Potential Reversal Zone (PRZ) at 94.83, well above today’s price. The Relative Strength Index (RSI) is rising and bullish and the Moving Average Convergence Divergence indicator (MACD) is moving higher, both supporting more upside price action. Keep in mind that the Gartley could also morph into a Crab and then the PRZ would jump to over 111.50, but lets not get ahead of ourselves. Resistance higher comes at 89 and 90.50 followed by 92.75 and 95 before 97 and 99. Support lower is found at 86.00 to 86.25 followed by 83.30 and 81.75. There is large Open Interest (OI) at the 90 Strike in July (Expiry this Friday) which could lead to a pin there.
Trade Idea 1: Buy the Stock on a move over the Friday’s high at 87.27 with a stop at 85.75.
Trade Idea 2: Buy the July 87.5 Calls (offered at 58 cents late Friday) on the same trigger.
Trade Idea 3: Buy the August 87.5 Calls ($1.81) on the same trigger.
Trade Idea 4: Sell the August 82.50 Puts (88 cent credit).
Trade Idea 5: Buy the August 82.5/87.5 bull Risk Reversal (94 cents).
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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 markets looking strong but maybe a bit extended. Look for Gold to continue higher in the downtrend while Crude Oil slows at resistance in the uptrend. The US Dollar Index looks to continue lower along with US Treasuries. The Shanghai Composite and Emerging Markets are biased to the upside in their downtrends and have potential to reverse those trends with continued strong moves. Volatility looks to remain low and drifting lower, keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. All are biased higher with the QQQ looking the strongest the IWM and SPY perhaps extended a little in their uptrends. Use this information as you prepare for the coming week and trad’em well.
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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)