Top Trade Ideas for the Week December 22, 2014: Bonus Idea

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

Bank of America, Ticker: $BAC
bac

Bank of America, $BAC, pulled back hard from March through mid-May but has been winding its way higher since. In early October it completed a bearish Bat harmonic and then retraced 61.8% of the pattern, before a bounce at the broad market low. Now it is consolidating in an expanding triangle at the early October high. The doji reversal early last week retouched the 100 day SMA and now it starts the week back at resistance at 17.70. There is resistance higher at 18 and then not much until 23.25 from 2008. The Measured Move from the October low to the middle of the consolidation at 17.25 would target 19.50 on a break out higher. Support lower comes at 17.38 and 17 followed by 16.62 and 16.35. The momentum indicators are mixed in their trend but very short term support the upside. The RSI is rising and about to cross over 60 while the MACD is about to cross up, a bullish signal. Short interest is not a factor at less than 1% and the company is expected to report earnings next on January 21st before the market opens.

Trade Idea 1: Buy the stock on a move over 17.70 with a stop at 17.25.
A straight stock buy with defined downside risk.

Trade Idea 2: Buy the December 17.5 Calls (offered at 23 cents late Friday) on the same trigger.
A short term break out play for defined risk.

Trade Idea 3: Buy the January 17/18 Call Spread and sell the January 9 17 Puts (48 cents).
Looks for upside to 18 Strike in January. As the January 9 Expiry Puts Expire consider selling January Puts.

Trade Idea 4: Buy the March 17/January 18 Call Diagonal (91 cents).
A longer term upside trade. As January Calls expire look to sell February to collect more premium.

Trade Idea 5: Buy the stock on a move over 17.70 and add a January 23 Expiry 17.5/16.5 Put Spread, March 19 Covered Call Collar (7 cents).
A way to own the stock and be protected to 16.50 through the January earnings.

Trade Idea 6: Buy a March 17/18 bullish Risk Reversal (8 cents).
A levered way to be long the stock against downside risk at 17.

Premium Content
The Best

The Rest Premium

Free Content
The Rest

If you like what you see sign up for more ideas and deeper analysis using the Get Premium button above.

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 Holiday shortened week for Christmas, sees the Santa Claus Rally already in full swing for equities.

Elsewhere look for Gold to continue to bounce in its downtrend while Crude Oil gains some footing. The US Dollar Index is making another leg higher while US Treasuries also look towards all-time highs. The Shanghai Composite continues its move higher but requires a cautious stance from a momentum perspective while Emerging Markets are reversing higher.

Volatility looks to remain subdued again and may fall keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Both the SPY and QQQ look to retest their prior highs and the IWM its all-time high. Use this information as you prepare for the coming week and trad’em well.

Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades.

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through December 2014 Expiry and sign up here

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
Dragonfly Caps Blog