Top Trade Ideas for the Week of May 7, 2012: Bonus Idea

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

Family Dollar Stores, Ticker: $FDO

Family Dollar Stores, $FDO, has been in the hottest spot in the markets, stores that sell stuff dirt cheap. With a run higher from consolidation from November to March, it is showing signs of topping with topping tails at 69.60. It has been in this situation before at the beginning of April, when it worked off the top through time before moving higher again. What is different this time is that since then both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicator have been trending lower, with the later crossed negative. Volume has also been falling. These all contribute to the topping thesis. Support lower comes at 66 and 64 followed by 60 and 58. If it can shake off the top and move over 68.60 then look for a Measured Move to 73.

Short Trade Ideas:

Trade 1: Short the stock on a move under 67 with a $1 trailing stop. Take off 1/3 at 64 and another 1/3 at 58.

Trade 2: Buy the May 67.50 Puts using the same stock price trigger, stop and targets as the stock trade above. These were offered at $1.35 late Friday. You can spread them against the May 60 Puts upon the stock hitting the first target.

Trade 3: Sell the May 70/75 Call Spread on the same 67 trigger, looking for it to expire worthless. This spread was offered at 50 cents late Friday.

Trade 4: Buy the May 65 Puts and sell the May 70/75 Call Spread on the same 67 trigger. This combination was offered for free late Friday.

Long Trade Ideas:

Trade 1: Buy the stock on a break over 68.60 with a $1.50 trailing stop. Take first profits at the Measured Move at 73.

Trade 2: Buy the June 67.50 Calls on the same trigger. These were offered at $3 late Friday.

Trade 3: Buy the June 70/75 Call Spreads on the same trigger over 68.60. These were offered at $1.35 late Friday.

Trade 4: Buy the June 70/75 Call Spreads and sell the June 65/60 Put Spread on the same trigger over 68.60. These were offered at 50 cents late Friday.

i am sure you can figure out some other ones too. Good trading!

Premium Content
The Best

The Rest Premium

Free Content
The Rest

If you like what you see sign up for more ideas and deeper analysis using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits feed and on chartly.

After reviewing over 900 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 Saturday which as we recover from the combined effects of celebrations around Cinco de Mayo and the Kentucky Derby has the market is decidedly turning more bearish. Gold looks to continue in the range with a break biased to the downside while Crude Oil looks to crash lower. The US Dollar Index seems content to move sideways while US Treasuries are biased higher in their consolidation range. The Shanghai Composite is on the verge of a full blown bull market while Emerging Markets look to continue to the downside. Volatility looks to remain low but has an increased chance of moving higher. These influencers paint a montage that sets up for lower levels for the equity index ETF’s SPY, IWM and QQQ. Their charts agree with the inter-market set up on the short term but are less convinced on the intermediate term. The SPY looks the strongest with the IWM next and the QQQ the weakest. Use this information as you prepare for the coming week and trade’m well.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

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
Dragonfly Caps Blog