Top Trade Ideas for the Week May 9, 2016: Bonus Idea

• Posted by Greg Harmon
• on May 9th, 2016

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

3M, $MMM, built a “W” from March 2015 to the end of April 2016. It has pulled back in a minor way from that high to this point. Holding support at the lower Bollinger Band® it reversed higher and is approaching the all-time high again. Momentum is strong with the RSI moving back higher after a pullback that held in the bullish zone.

The MACD is starting to level after a reset lower. There is resistance above at 170 and then free air but a target on a Measured Move to 173, and eventually 205. Support lower comes at 166 and 163 followed by 160. Short interest is low at 1.0% and the company is expected to report earnings next July 21st.

The options chains show large put open interest at 150 and 152.5 this week and the 162.5 to 167.5. The all side is much smaller. May monthly options show the biggest open interest at the 175 strike on the call side with smaller amounts at 170 and also 165 on the put side. July options are spread from 130 to 170 on the put side and tighter from 145 175 on the call side. The October options, the first beyond earnings show open interest spiked at 175 on the call side and lower at 150 and 115 on the put side.

3M, Ticker: $MMM

Trade Idea 1: Buy the stock on a move over 170 with a stop at 165.

Trade Idea 2: Buy the stock on a move over 170 with a June 24 Expiry 167.5/160 Put spread and selling a October 180 Call. Zero cost for the collar.

Trade Idea 3: Buy the May 165/170 bullish Risk Reversal for 40 cents.

Trade Idea 4: May/July 170 Call Calendar ($2.50) and sell the July 160 Puts for 45 cents.

#1 is a straight stock buy and #2 adds a collar for protection from 167.5 to 160 over the next 6 weeks while allowing for upside to 180. #3 is a short term leveraged bet to the upside. #4 looks for the move higher to happen after next week.

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After reviewing over 1,000 charts, I have found some good setups for the week. This week’s list contains the first five below to get you started early. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which heading into next week see equities continuing to look better to the downside short term after a week lower, but with a glimpse of promise from the Friday action.

Elsewhere look for Gold to resume its uptrend while Crude Oil moves higher as well. The US Dollar Index is set to continue the bounce while US Treasuries consolidate with an upward bias. The Shanghai Composite continues to consolidate with a bias lower and Emerging Markets are biased to the downside.

Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite the moves lower. Their charts suggest more short term downside though with the QQQ looking the worst. 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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