4 Trade Ideas for Allstate: Bonus Idea

• Posted by Greg Harmon
• on January 27th, 2020

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

Allstate, $ALL, rose up over resistance in November and then consolidated there until the end of the year. It started higher then and continued until last week. It paused again, consolidating in place to end the week. This is happening at all-time highs while the rest of the market was pulling back late in the week. The RSI is now overbought, but not extreme, while the MACD is positive and rising. The Bollinger Bands® have also opened to the upside. There is no resistance above 118.75. Support lower comes at 117 and 116 then 114.50 and 112.50 before 111 and 109. Short interest is low at 1.2%. The stock pays a dividend with an annual yield of 1.69% and last started trading ex-dividend on November 27th. The company is expected to report earnings next on February 4th. The February options chain shows the biggest open interest at the 110 put strike and then 115 and 120 call strikes. The implied move by expiry is currently $5.40 or 4.6%. In the March options the biggest open interest comes at the 125 call. Finally the April chain has very large open interest at the 115 call.

Allstate, Ticker: $ALL

Trade Idea 1: Buy the stock on a move over 118 with a stop at 116.50.

Trade Idea 2: Buy the February 115/110/105 Put Butterfly for 75 cents.

Trade Idea 3: Buy the February/March 125 Call Calendar (40 cents) and sell the February 110 Put (45 cent credit).

Trade Idea 4: Buy the March 110/125 Bull Risk Reversal for a 5 cent credit.

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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 saw the corona virus as the catalyst that is pushing sellers to enter the market. It is early in the process but so far markets are proving very resilient, with only minor pullbacks. Perhaps because of the strong earnings releases.

Next week could prove to be a very important week for the short term future of equity markets. Elsewhere look for Gold to continue higher while Crude Oil pulls back in broad consolidation. The US Dollar Index looks to continue its short term move higher in the downward channel while US Treasuries accelerate to the upside.

The Shanghai Composite will be closed until February but looks better lower while Emerging Markets pullback in an uptrend. The Volatility Index looks to remain low but is starting to rise off of very low levels. This could put a drag on equity markets. Their charts look strong on the longer timeframe, but the overheated run higher is correcting in the shorter one. On the daily charts the QQQ are pausing with the SPY pulling back while the IWM is pulling back in broad consolidation. 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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