4 Trade Ideas in Humana: Bonus Idea

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

Humana, $HUM, stock price had moved mainly sideways for more than a year into early November. The last 3 months of that was a very tight range consolidation. It started to move higher after the election and continued until the calendar turned to December. It pulled back for 3 days, in a 3 Black Crows candlestick pattern, but quickly found support at the round figure 200. Since then it has been consolidating under resistance at 207, in an expanding triangle. That hit the 100 day SMA last week and quickly rose to the top of the range where it now sits.

A break higher would give a target to 247 on a Measured Move. Momentum indicators back a break higher. The RSI is rising and on the edge of a move back over 60 in the bullish zone. The MACD is crossed up and starting to rise into positive territory. The Bollinger Bands® are running flat though, neither supporting a move higher nor deterring it.

There is resistance above the 207 level at 217. This was also the high in May 2015. Support lower comes at 200 and 197 followed by 192.50 and 180. Short interest is low under 1%. The company is expected to report earnings next on May 3rd. It pays a dividend of just over 0.5% and went ex-dividend last January 10th, so is not likely to declare another until April. A positive picture in the chart.

The options chains show large open interest this week at the 200 strike and then also on the call side at 220. In March monthly options there is not much open interest built yet but what is there is spread from 190 to 200 on the put side and focused at 210 on the call side. April monthly options show the biggest open interest at the 170 put and then some at the 215 call.

May options, the first beyond the next earnings report, show the biggest open interest below the current price, at the 200 strike. Farther out, the August chain shows a large 185/215 risk reversal or strangle, while the January 2018 expiry has largest open interest at the 240 call strike. A neutral to short term bearish picture and then longer term bullish one in the options.

Humana, Ticker: $HUM

Trade Idea 1: Buy the stock on a move over 207 with a stop at 198.

Trade Idea 2: Buy the stock on a move over 207 and add an April 205/190 Put Spread ($6.90) for protection while selling an April 215 Call ($5.30 credit).

Trade Idea 3: Buy the August 205/215 Call Spread ($7.40) and sell the August 185 Put (8.20 credit).

Trade Idea 4: Buy the January 2018 Expiry 210/240 Call Spread ($14.90) and sell the 190 Put ($15.70 credit).

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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 Friday which heading into February Options Expiration week sees the equity markets looking strong if not moving towards getting overheated.

Elsewhere look for Gold to continue in its uptrend while Crude Oil churns marking time. The US Dollar Index is looking stronger while US Treasuries consolidate in their downtrend. The Shanghai Composite and Emerging Markets both look strong and ready for more upside.

Volatility looks to remain at extremely low levels keeping the wind at the back of the equity index ETF’s SPY, IWM and QQQ. Their charts all look great and ready for more upside in the longer timeframe but the SPY and QQQ are getting a bit hot in the short term and may need a rest. Use this information as you prepare for the coming week and trad’em 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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