Top Trade Ideas for the Week of May 12, 2014: Bonus Idea

• Posted by Greg Harmon
• on May 12th, 2014

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

Honeywell, Ticker: $HON

Honeywell, $HON, is a stock set up for both the bears and the bulls. The symmetrical triangle that has been in play since February, reflecting tightening expectations by both buyers and sellers, is near the optimal break out point. The long run trend is clearly higher, but with all the banter about large caps following the small caps lower this is a possibility to take advantage of which ever the market gives. The Measured Move out of the triangle targets a $7.30 move and the triggers are a move over 94.25 or under 91.25. The RSI is right at the mid line giving no clear bias and the MACD is tightening its oscillation on the zero level, but about to cross up. A slight bias higher.

Trade Idea 1: Buy the stock on a break over 94.25 with a stop at 93.50.

Trade Idea 2: Buy the June 95 Calls (offered at 71 cents late Friday) on the same trigger.

Trade Idea 3: Buy the June 90/95 bullish Risk Reversal (23 cent credit) on the same trigger.

Trade Idea 4: Sell the stock short on a move under 91.25 with a stop at 92.50.

Trade Idea 5: Buy the June 92.50 Puts ($1.88) on the same trigger.

Trade Idea 6: Buy the June 90/85 Put Spread (74 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 Saturday which, heading into next week sees the equity markets becoming bifurcated. Elsewhere look for Gold to continue in a range along with Crude Oil although the latter has a bias to the upside short term. The US Dollar Index looks to continue to gain strength while US Treasuries are biased lower in the short term in their uptrend. The Shanghai Composite looks weak and is biased lower while Emerging Markets are biased to the upside in their consolidation range. Volatility looks to remain quite low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts are not so enthusiastic though with the SPY the strongest and only looking to continue consolidation while the QQQ consolidates with a downside bias and the IWM looking for more downside. Use this information as you prepare for the coming week and trad’em well.

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