Top Trade Ideas for the Week April 18, 2016: Bonus Idea

• Posted by Greg Harmon
• on April 18th, 2016

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

Adobe, $ADBE, had a four and a half year run higher, from a low in August 2011 under 23 to a high in December 2015 over 96. A move over 300% during that span. If you were in the stock for that entire ride higher then you are probably still holding it despite the almost 25% pullback through early February.

Two months after printing that low the stock has rebounded and back at the all-time highs, consolidating. The 2 steps it took to get there suggest one more to come to complete a 3 Drives pattern. That would target a move to about 106.50. Several other pieces of the chart suggest now might be the time to start that move.

The momentum indicators are positive and support more upside. The RSI is in the bullish zone and rising. The MACD is sloping slightly downward in the consolidation but positive. The price just touched the 20 day SMA and is riding it back higher. This has acted as support throughout this move. Finally the Bollinger Bands® are squeezing, often a precursor to a move in price. There is resistance at 95.50 and then free air above. Support lower comes at 92.65 and 91.50 followed by 88.50 and 84.20. Short interest is low at just 1.3%.

The options chains for Adobe show only monthly Expiry. The May options show open interest spread from 85 to 95 on the Put side, and from 92.5 to 100 on the Call side. The June chain will open this week but the July options, going over the June 21st reporting date show a bit of downward bias as the Put open interest is spread from 70 to 95, biggest at 80 and 85. While the Call side is spread as well, from 80 to 100, but biggest at 90 and 95, both below the current price.

Adobe, Ticker: $ADBE

Trade Idea 1: Buy the stock on a move over 95.50 with a stop at 92.

Trade Idea 2: Buy the stock on a move over 95.50 and add a July 95/85 Put Spread ($3.25) and sell a October 105 Covered Call ($3.20 credit).

Trade Idea 3: Buy a May 95/100 Call Spread Risk Reversal selling the May 90 Puts ($1.08).

Trade Idea 4: Buy the May/July 100 Call Calendar ($2.06) and sell the May 90 Puts ($1.21).

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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 with April Expiry behind sees the Equity markets held strong and look to have started back higher.

Elsewhere look for Gold to consolidate while Crude Oil consolidates but with a bias to the upside. The US Dollar Index is testing the bottom of the consolidation range while US Treasuries look to move higher. The Shanghai Composite and Emerging Markets look strong and ready to go higher the with risk of Emerging Markets running in place a bit longer.

Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts also look better to the upside now with the weekly charts looking strong. 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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