Top Trade Ideas for the Week August 29, 2016: Bonus Idea
- Posted by Greg Harmon
- on August 29th, 2016
Here is your Bonus Idea with links to the full Top Ten:
Amgen, $AMGN, has had a long term trend sideways in a broad range since late 2014. In the intermediate term it broke to a higher range at the end of July and has been consolidating in the short term in a narrow range since then. That consolidation is occurring at the top of the broad long term range. The spike down late 2015 touched a 38.2% retracement of the long move higher from 2011.
As it spins its wheels there the RSI is pulling back in the bullish zone while the MACD is rising and positive. Notice that the recent consolidation started when the price hit the upper Bollinger Band®. After 2 years of sideways grind is it ready to move higher again? There is resistance at 176 and then nothing to stop it. Support comes lower at 170 and 165 before 150. Short interest is low at 1.1%. It does carry a big 2.33% dividend yield, but just went ex-dividend August 15th.
Options chains show open interest spread this week from 165 to 175 on the put side and then from 170 to 180 on the call side. The monthly September options chain shows open interest spread on the put side at 160, 170 and 175. On the call side it is tighter and large from 175 to 182.50. October monthly options show a long tail building from 120 to biggest open interest at 170 on the put side, while the call side again is more focused and big from 170 to 180. Finally looking at January 2017 chains, the first beyond the next earnings report October 27th, shows a distribution with a peak at 145 on the put side and 170 on the call side. No big bets to move out of the range.
Amgen, Ticker: $AMGN
Trade Idea 1: Buy the stock on a move over 177 with a stop at 168.
Trade Idea 2: Buy the September/October 175 Call Calendar ($2.30).
Trade Idea 3: Buy the September/January 175 Call Calendar ($7.70).
The first trade gives the upside with a stop that takes effect should it fall below the current flag. The second looks for the open interest in September to hold it near 175 until then and allows upside participation after. The third trade is similar to the second but allows for a sale of calls in October, November and December as well to lower the cost of a longer term trade.
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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 unofficial last week of Summer ahead of the Labor Day holiday the Equity markets are tired, consolidating at their highs and even pulling back.
Elsewhere look for Gold to continue lower while Crude Oil extends to the upside. The US Dollar Index looks to continue higher short term in its broad range while US Treasuries are biased lower in consolidation. The Shanghai Composite and Emerging Markets are both looking like they will continue lower in the short run, more damaging for the Emerging Markets than the Chinese.
Volatility looks to remain subdued but back at more normal levels keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts have lost all their strength though and suggest they may continue to pause or pullback in the short run. 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.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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