Top Trade Ideas for the Week of October 12, 2015: The Rest Premium

• Posted by Greg Harmon
• on October 11th, 2015

Here are the Rest of the Top 10 with Premium Content in Bold:

Bank of New York Mellon, Ticker: $BK

Bank of New York Mellon, $BK, is printing a Death Cross, with the 50 day SMA crossing down through the 200 day SMA. Yet this stock looks primed for a move higher. The price action since the August low shows three touches at resistance. Friday pulled back but held near that resistance. The momentum indicators RSI and MACD are both bullish and rising supporting more upside. And the Bollinger Bands® are opening to allow the move. Watch for a break of resistance to participate. There is resistance higher at 40.90 and 41.75 followed by 42.85 and 44. Support lower comes at 39.50 and 38. Short interest is low at 1.2%. Enter long on a move over 40.90 with a stop at 39.50. As it moves over 41.50 move the stop to break even and then to a $1.05 trailing stop over 41.95. Take off 1/3 on a stall at 44 or higher. As an options trade consider the October 40.50 Calls (offered at 54 cents late Friday) and trade them like the stock trade (using the stock price as a trigger, stop and target). Sell the October 40 Puts (30 cents) to lower the cost and add leverage. There is big open interest there to buffer a fall this week. For a longer trade consider the November 41 Calls ($1.01) and sell the October 40/41 Strangle (55 cents) to lower the cost. The company reports earnings October 20th.

La-Z-Boy, Ticker: $LZB

La-Z-Boy, $LZB, has held up like a rock through the market turmoil, remaining near all-time highs. Friday was the 3rd touch at resistance. It has support to push through for another leg higher from the rising RSI and MACD, which just crossed up. Consider buying it on a new high print. The price action has created a longer ascending triangle that targets a move to 37.30 as well as a shorter expanding wedge. There is resistance above at 29.70 and 30.20 followed by 31 and support lower comes at 27.80 and 26.30. Short interest is low at 2.5%. Enter long now (over 28.30) with a stop at 27.75. As it moves over 28.75 move the stop to break even and then a 80 cent trailing stop over 29.20. Take off 1/3 on a stall at 37.30 or higher. As an options trade consider the November 30 Calls (85 cents) and trade them like the stock trade.

Northrop Grumman, Ticker: $NOC

Northrop Grumman, $NOC, had a run higher through the end of 2014 and into the first quarter of 2015, but then stalled. But it has moved mainly sideways in a range since. The move Friday though takes it back to resistance at the all-time high with the Bollinger Bands opening. It has support for more upside from the rising RSI and MACD as well. Momentum is on its side. Look for a new high to participate. The price action has also created a Deep Crab harmonic with a Potential Reversal Zone (PRZ) at 192 above. There is no resistance higher and support below comes at 171.50 and 167 followed by 162. Short interest is low at 1.6%. Enter long on a move over 176 with a stop at 173. As it moves over 178 move the stop to break even and then to a $4 trailing stop over 180. Take off 1/3 on a stall at 192 or higher. As an options trade consider the November 175 Calls ($6.80) and trade them like the stock trade. Offset some cost by selling the November 160 Puts ($1.60) and or the November 190 Calls ($1.05)

Royal Bank of Canada, Ticker: $RY

Royal Bank of Canada, $RY, has trended lower for a long time, the last leg from May through to the August low. Since that low it has consolidated in a wide range and found resistance at about 57. That was until last week when it made a higher high over the top. The Bollinger Bands are opening higher and the RSI has moved into the bullish range while the MACD continues higher. Look for continuation higher to participate. There is resistance above at 59.10 and 60.75 before 62.35 and 64.40. Support lower comes at 56.50 and 55.25 followed by 54. Short interest is low at 2.6%. Enter long now (over 56.50) with a stop at 55.25. As it moves over 58 convert it to break even and then to a $1.50 trailing stop over 58.60. Take off 1/3 on a stall at 64.40 or higher. As an options trade consider the November 55 Calls ($2.90) and trade them like the stock trade.

Tractor Supply, Ticker: $TSCO

Tractor Supply, $TSCO, spent a year in a rising trend before pulling back with the market and establishing a low in August. Since then it has consolidated in a range under 89. That range was broken to the upside last week and bodes for continuation higher. The rising and bullish RSI and MACD support a move higher, as does the Bollinger Bands opening to the upside. The Andrews Pitchfork shows a clear trend higher. There is resistance higher at 91 and 92.50 followed by 94 and 96.20. Support lower comes at 88.75 and 86.40 followed by 82.25. Short interest is moderate at 3.4%. Enter long now (over 88.75) with a stop at 87.50. As it moves over 90.15 move the stop to break even and then to a $2.50 trailing stop over 92. Take off 1/3 on a stall at 96.20 or higher. As an options trade consider the October 90 bull Risk Reversal (20 cent credit) for a push to the large open interest at 95 this week, on the same trigger. Give it more time with a November 90/95 Call Spread ($2.35) and sell the November 85 Put ($2.20) to add leverage.

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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, heading into October Options Expiration week sees the equity markets looking stronger, but they have not sent the all clear signal yet.

Elsewhere look for Gold to continue its short term uptrend while Crude Oil does the same but might encounter resistance. The US Dollar Index has a short term bias lower for the week in the broad consolidation while US Treasuries are biased lower short term as well. The Shanghai Composite looks to continue in consolidation while Emerging Markets are biased to the upside.

Volatility looks to return to more normal levels relieving the downward bias on the equity index ETF’s SPY, IWM and QQQ. Their charts all show strength continuing into next week but with the SPY the strongest followed by the QQQ and then the IWM on the longer term look. 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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