Top Trade Ideas for the Week of October 24, 2016: The Best
- Posted by Greg Harmon
- on October 23rd, 2016
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 the last week before the election sees equity markets looking stable long term and mixed in the short run with the QQQ leading and the SPY falling.
Elsewhere look for Gold to continue to press higher short term while Crude Oil continues to show its strength. The US Dollar Index is also strong moving higher while US Treasuries are bouncing short term in their downtrend. The Shanghai Composite continues to drift higher while Emerging Markets mark time in consolidation.
Volatility looks to remain subdued and falling, adding a tailwind to the equity index ETF’s SPY, IWM and QQQ. They are mixed short term though with the QQQ moving higher the IWM flat and the SPY at risk for more downside. Use this information as you prepare for the coming week and trad’em well.
ACADIA Pharmaceuticals, Ticker: $ACAD
ACADIA Pharmaceuticals, $ACAD, fell out of a consolidating triangle at the beginning of October and ran lower. It stopped short of the target move last week with a brief consolidation. Then Friday it had a strong move higher. This was accompanied by turn back higher in the RSI out of oversold space and now the MACD is about to cross up. There is resistance at 26.75 and 30 followed by 31 and 32.50 before 34.20. Support lower stands at 23.10. Short interest is high at 21%. Enter long now (over 24.50) with a stop at 23. As it moves over 25.50 move the stop to break even and then to a $1.50 trailing stop over 26.50. Take off 1/3 on a stall at 32.50 or higher. Options spreads are too wide to use for this trade.
Cavium, Ticker: $CAVM
Cavium, $CAVM, pulled back finding a bottom with the Brexit vote at the end of June. It recovered in a ‘V’ shape rising strongly to the late April high. From there it has consolidated making a series of higher lows against that resistance. It enters the week rising with a RSI moving higher in the bullish zone and a MACD about to cross up. The RSI also underwent a Positive RSI Reversal, which gives a target to 60. That would trigger a target to 81 on a messy Cup and Handle break. There is resistance at 56.50 and 58.75 followed by 60 and 64. Support lower comes at 53 and 50.75. Short interest is high at 14.9%. Enter long on a move over 56.50 with a stop at 53. As it moves over 57.50 move the stop to break even and then to a 42 trailing stop over 58.50. Take off 1/3 on a stall at 64 or higher. As an options trade consider the November 55 Calls (offered at $4 late Friday) and trade them like the stock trade (using the stock price as a trigger, stop and target). Sell the November 60 Calls ($1.70) and November 50 Puts ($1.20) for a bullish Risk Reversal with a 4.5:1 pay out at 60.
CF Industries, Ticker: $CF
CF Industries, $CF, had a steep drop to start the year. After a modest recovery it started back lower gain in March. It has been falling with trend resistance since. Friday saw it peek over the 100 day SMA for the first time since early June. It has done this before only to fall back. But this time the RSI is into the bullish zone and the MACD crossed up and positive. It may be time for a reversal. There is resistance at 26.20 and 28 followed by 32 and 35. Support lower comes at 24.75 and 22.25. Short interest is high at 15.9%. Enter long now (over 24.75) with a stop at 24. As it moves over 26.75 move the stop to break even and then to a $1.25 trailing stop over 27.25. Take off 1/3 on a stall at 31.25 or higher. As an options trade consider the October 28 Expiry 26 Calls (53 cents) and trade them like the stock trade. The company reports earnings November 2nd.
WebMD Health, Ticker: $WBMD
WebMD Health, $WBMD, had a long run higher from October 2015 until May. It retraced almost 65% of that move with a bottom in September and has consolidated since. Last week saw the Bollinger Bands® squeeze and then the stock price break short term consolidation and resistance to the upside Friday. Continuation sees resistance at 52.50 and 56.75 followed by 67.50 and an AB=CD target to 78. The RSI is rising toward s the bullish zone and the MACD is rising and about to cross to positive. Short interest is high at 18.8%. Support lower comes at 51 and 50. Enter long now (over 51) with a stop at 49.50. As it moves over 53 move the stop to a $2 trailing stop and to a $3 trailing stop over 54. Take off 1/3 on a stall at 67.50 or higher. As an options trade consider the November 50 Calls ($3.10) and trade them like the stock trade.
United States Steel, Ticker: $X
United States Steel, $X, found a bottom in January and started higher. It met resistance at the August high and pulled back in April. From there it built a Crab harmonic, reaching the Potential Reversal Zone (PRZ) in August and then retracing 78.6% of the pattern, to a low just above the 200 day SMA. It has been bouncing in a channel between that 78.6% level near 16 and the 50% level and support/resistance zone, near 20 since. Friday saw a push up to the top of that zone, with the Bollinger Bands® expanding higher. The RSI also moved up into the bullish zone and the MACD crossed up and is near a move to positive. There is resistance at 20.25 and 21.65 followed by 23.50 and 25.50 before 27.50. Support lower comes at 18.50 and 16.30. Short interest is high at 28.8%. Enter long on a move over 20.25 with a stop at 19. As it moves over 21 move the stop to a 75 cent trailing stop and take off 1/3 on a stall at 27.50 or higher. As an options trade consider the October 28 Expiry 20 Calls (59 cents) and trade them like the stock trade. The company is expected to report November 1st.
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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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