Top Trade Ideas for the Week September 19, 2016: Bonus Idea

• Posted by Greg Harmon
• on September 19th, 2016

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

Microsoft, $MSFT, broke above an ascending triangle in October and moved higher. The Measured Move out of the triangle was to 58, and it finally reached that in August. It took 11 months to do it though. Along the way the stock saw several gaps and both a Death Cross and a Golden Cross. The Death Cross was shortly followed by a double bottom in July, and a move higher. That led to a Golden Cross in August.

Since printing the Golden Cross the stock has moved up to test the all-time highs again, from December 1999. The consolidation brings to focus a very long term Cup and Handle pattern. A push over 59 would give a target to 103. The long term RSI is in the bullish zone holding near 60 while the MACD is rising.

The options flow for this stock looks positive over the short run. Options expiring over the next 4 week all have significant open interest to the upside. The October monthly options show nearly 100,000 contracts on the call side. This is the first expiry after the next earnings report. January 2017 options also show an upward bias. A look out to January 2018 is more mixed.

Microsoft, Ticker: $MSFT

Trade Idea 1: Buy the stock on a move over 58 with a stop at 50.

Trade Idea 2: Buy the stock on a move over 58 with a January 2017 57.5/50 Put Spread and selling an October 60 Call ($1.60 for the collar).

Trade Idea 3: Buy the January 2017 50/57.5/62.5 Call Spread Risk Reversal ($1.05).

Trade 1 is a straight long term buy while Trade 2 adds protection to 50 through January. Trade 3 gives upside to 62.5 with a possibility of owning the stock in January at 50.

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Celebrating 5 Years

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 as the books closed on September Options Expiration saw the markets again teetering between bullish and bearish.

Elsewhere look for Gold to test support here and if it fails see a move lower while Crude Oil continues down. The US Dollar Index has short term strength and should continue higher while US Treasuries consolidate in their pullback. The Shanghai Composite is biased to the downside at support and Emerging Markets look to continue consolidation in the down draft.

Volatility looks to remain in the normal range keeping the bias neutral to higher for the equity index ETF’s SPY, IWM and QQQ. Their charts all flash consolidation in the longer timeframe but on the shorter one the IWM and SPY are at risk of more pullback while the QQQ heads higher. 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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