Top Trade Ideas for the Week of January 27, 2014: Bonus Idea

• Posted by Greg Harmon
• on January 27th, 2014

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

American International Group, Ticker: $AIG

American International Group, $AIG, is a good stock to cover a lot of the market move from last week. The extended weakness Thursday and Friday with gapping real body candles is often a sign of an exhaustive move. But the long real body Friday closing at the low does not say exhaustion. The Relative Strength Index (RSI) is crashing hard to the technically oversold area at 30 and the MACD is moving lower. These support more downside. Coming off of a double top at 52.75 and breaking the rising support trendline that has been in place since the November market low, it looks corrective. That is until you change your view to one of a broad consolidation between 47.10 and 52.75 in a sideways channel. From that perspective it is approaching the bottom of the channel and becoming oversold as it gets there. Will it bounce? We will see early this week. There is support under 47.10 at 46 and 45.35 followed by 43.60 and 42.25. The 50% retracement of the move high from November comes at the tail of June 24 candle at 41.69. Resistance higher is found at 49.60 and 50.45 followed by 51.35, 52 and 52.75.

Trade Idea 1: Sell the stock short on a move under 47.10 with a stop at 48.25.

Trade Idea 2: Buy the February 7 Expiry 47 Puts (offered at 55 cents late Friday) on the same trigger.

Trade Idea 3: Buy the February 21 Expiry 47/42 Put Spreads (89 cents) on the same trigger.

Trade Idea 4: Buy the February 21 Expiry 47/44 1×2 Put Spread (39 cents) on the same trigger.

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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, closing out January sees the equity markets looking like they need to pullback or at best consolidate. Specifically look for Gold and Crude Oil to continue higher. The US Dollar Index seems content to move sideways while US Treasuries are biased to the upside. The Shanghai Composite looks to be reversing higher and Emerging Markets are biased to continue the downside. Volatility looks to remain subdued but moving toward important levels keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, but with less strength. Their charts show that the SPY is the weakest and looks better to continue lower while the IWM and QQQ look a bit stronger in the longer timeframe but could also continue to 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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