Top Trade Ideas for the Week March 21, 2016: Bonus Idea

• Posted by Greg Harmon
• on March 21st, 2016

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

Goldman Sachs ($GS) CEO Lloyd Blankfein is sprucing up. You may think it is for Easter or the long weekend ahead and that may be so. But Lloyd was born to Jewish parents so maybe it is for another reason. Maybe Lloyd wants to look good as he anticipates some media attention as the stock price of Goldman Sachs reverses to the upside.

The stock has gone through the doldrums since June last year. Falling over 35%, it may have hit bottom. The consolidation since early in January has taken place on relatively higher volume, a bottoming signal. And the momentum has shifted to the upside. The RSI is on the edge of a move into the bullish zone, while the MACD is rising and nearly positive.

The move in the price Friday takes the stock over the 50 day SMA for the first time since December 7th, on a strong candle and outsized volume. The longer SMA’s are still falling and the falling trend resistance is well above so there is work left to declare any kind of uptrend, but this is promising.

A break of the resistance zone since the beginning of the year sees resistance higher at 167 and 176 followed by 184 before 189 and 194 then 200, where it would finally make a higher high. Along the way it would retrace 38.25 of the down leg at 169.50, currently at the 100 day SMA, with the 200 day SMA above that between a 50 and 61.8% retracement. Support lower comes at 149 and 140. Short interest is low, under 2% and the company is due to report earnings next April 19th.

Looking at the options chains there is very large open interest in this week’s Expiry at the 155 Call Strike. The April Expiry sees open interest above at 160 and then 165 as even bigger, with some focused on the put side at 145 and 150 but much smaller. The April 22 Expiry, the first beyond the earnings report, has little open interest at this point, but what there is shows at 155 and 162.5 to 165 on the Call side. May options open Monday, so the next major monthly Expiry beyond earnings, July, gives a weighting to the upside at 170 on the Calls with a spread from 140 to 150 on the Put side.

Goldman Sachs, Ticker: $GS

Trade Idea 1: Buy the stock on a move over 158 with a stop at 154.

Trade Idea 2: Buy the stock with an April 22 Expiry 157.5/150 Put Spread, July 170 Covered Call collar (50 cent credit on the collar). Giving protection through the earnings event.

Trade Idea 3: Buy the March 24 Expiry/April 155 Call Calendar ($2.05) looking for large open interest this week to draw it lower. Looking for the large open interest to draw price higher over the month.

Trade Idea 4: Buy the April 150/160/165 Call Spread Risk Reversal (28 cents), selling the 150 puts and buying the 160/165 call spread.

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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 Options Expiration behind and a short week ahead of Easter coming sees the Equity Indexes looking strong.

Elsewhere look for Gold to continue higher along with Crude Oil. Both show risk of a short term pullback. The US Dollar Index looks to test the bottom of the consolidation range while US Treasuries continue lower in their wedge. The Shanghai Composite and Emerging Markets are biased to the upside with risk of the Emerging markets running a little lower first.

Volatility looks to remain subdued and biased lower keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts look strong, especially on the weekly timeframe. With the SPY finally over its 200 day SMA and late week action suggesting possible rotation into the IWM to come next. 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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