Top Trade Ideas for the Week October 10, 2016: Bonus Idea

• Posted by Greg Harmon
• on October 10th, 2016

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

You are probably not surprised that Lloyd Blankfein likes his own stock. But shown here, he is discussing why with Hillary Clinton. And in fact, he is giving her 4 trade ideas to help her make money in the stock. Here s a transcript.

“Goldman Sachs, $GS, stock price started moving lower after making a top in July of 2015. Trend resistance marked the downtrend limit and it combined with the falling 200 day SMA since the start of 2016. As the calendar turned to 2016, the price started to consolidate in a channel between 140 and 170.

It remains in that channel now but in mid-August moved back over that 200 day SMA and trend resistance. At the top of the channel, a 38.2% retracement of the move lower, it was pushed back lower and this time held at the prior resistance line, now acting as support. Last week saw a move up higher in the channel to the top again, closing with a strong bullish candle Friday.

There are many features in the chart that suggest this time it will break through. The RSI is entering the bullish zone. That alone is bullish, but the lower low in RSI with a higher low in price creates a Positive RSI Reversal with a target price to 175. The MACD has also crossed up and is rising into positive territory. The Bollinger Bands® are also opening, and the chart printed a Golden Cross, with the 50 day SMA crossing up through the 200 day SMA, in early September.

There is a Measured Move to the upside that gives a target to 175 as well and the ‘W-v’ bottom looks for a return to 200. There is resistance at 172 and then 179.70 followed by 187 and 194 before 200. Support may come at 167 and 163.60 followed by 159. Short interest is low at 1.4% and the company is expected to report earnings October 18th before the open.

The October 14th Expiry options chain shows largest open interest from 170 to 175 on the call side. The October monthly options also favor the upside with the biggest open interest at 170 and 175. Looking longer term the January options show very large open interest at the 200 strike on the call side.

Goldman Sachs, Ticker: $GS

Trade Idea 1: Buy the stock on a move over 172 with a stop at 167.

Trade Idea 2: Buy the stock on a move over 172 and add a Collar with an October 170/160 Put Spread ($2.85) and selling a December 180 Call ($2.53).

Trade Idea 3: Buy the October 170/175 Call Spread ($2.09) and sell the 160 Put (75 cents) for a Call Spread Risk Reversal, or Seagull.

Trade Idea 4: Buy the October/January 175 Call Calendar ($4.70) and sell the October 160 Puts (75 cents).”

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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 next week sees the equity index ETF’s look like they need a breather in the short term.

Elsewhere look for Gold to continue lower while Crude Oil continues to the upside. The US Dollar Index looks strong but range bound while US Treasuries are biased lower again. The Shanghai Composite is biased to the drift to the downside Emerging Markets look like they will continue to consolidate in the uptrend.

Volatility looks to remain in the lower end of the normal range keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts all look to continue consolidating in the short run with the QQQ looking the best for upside and the SPY next, with the IWM at risk for a pullback. 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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