Top Trade Ideas for the Week of April 14, 2014: Bonus Idea

• Posted by Greg Harmon
• on April 14th, 2014

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

Starbucks, Ticker: $SBUX

Starbucks, $SBUX, has been pulling back from a top at 82.37 in November. The bounce and then reversal lower sets up a AB=CD pattern lower with a target of 65 (without any extension), not so far from the 50% retracement of the major move higher at 63.73. A 138.2% extension on the CD leg would be in line with the 61.8% retracement at 59.33. There is support lower at 69 and 66.55 followed by 63.75 and 62.20. Resistance higher may be found at 70.10 and 72.90. The falling Relative Strength Index (RSI) in the bearish zone and the sinking MACD support more downside. Short interest is under 1% so there is little risk of a short squeeze and they report earnings April 24th. There is large open interest this week at the 67.5 Put Strike and Call Strike with good size at the 65 Strike Put as well. To the upside the open interest at the 70 and 72.50 Puts is sizable as well and the 75 calls are the largest open interest. Look for one of the $2.5 strikes to draw it in near the end of the week.

Trade Idea 1: Short the stock on a move under 68.80 with a stop at 70.

Trade Idea 2: Buy the May 67.5 Puts (offered at $1.83 late Friday) on the same trigger.

Trade Idea 3: Buy the April/May 67.5 Put Calendar ($1.46) on the same trigger.

Trade Idea 4: Buy the April 69/67.5 Put Spread (62 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 Friday which, heading into the shortened Passover and pre-Easter week sees the equity markets looking to continue lower. Elsewhere look for Gold and Crude Oil to continue their moves higher. The US Dollar Index looks weak and headed lower, but with support nearby while US Treasuries may be ready to break the long consolidation to the upside. The Shanghai Composite and Emerging Markets look strong with a chance that Emerging Markets consolidate for a bit. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, but it is biased to the upside and under watch. The equity index ETF’s themselves show no signs of a reversal higher, only a continuation lower. They all still have room to major trend reversal levels but it appears the short term direction is firmly lower. Use this information as you prepare for the coming week and trad’em well.

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