Top Trade Ideas for the Week August 8, 2016: Bonus Idea

• Posted by Greg Harmon
• on August 8th, 2016

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

Weyerhaeuser, $WY, has not seen a price over 33.20 since March 2015. It has come close several times only to get knocked back. The result of that price action since July 2015 has been the creation of an Inverse Head and Shoulders pattern. This is a near perfect pattern with the two shoulders of equal distance from the neckline and the head well above them, with good symmetry on both sides. The price currently sits the neckline and a push higher would give a price objective to at least 44.

The Bollinger Bands® are squeezing in as it consolidated as well. This is often a precursor to a big move. The momentum indicators are bullish. The RSI is strong in the bullish zone while the MACD is positive and somewhat level, but crossed down. The MACD leaves some doubt about the upside.

There is resistance at 33.20 and then 34.40 and 34.90 followed by 35.70 and 37.04 the all-time high from January. Support lower comes at 32 and 31.50 followed by 30. Short interest is low at 2% and the company does not report earnings again until the end of October. The company pays a dividend that gives a 3.77% yield as of Friday’s close.

The weekly options show large open interest at the 31.5 strike on the put side. August monthly options have the biggest open interest at the 30 strike on the put side. This is 4 times larger than the total of the cluster of open interest from 32 to 33 on the call side.

Weyerhaeuser, Ticker: $WY

Trade Idea 1: Buy the stock on a move over 33.25 with a stop at 32.

Trade Idea 2: Buy the stock on a move over 33.25 with an August monthly 32.5 Put (45 cents) for protection.

Trade Idea 3: Buy the August/October 33 Call Calendar (70 cents).

Trade Idea 4: Buy the October 31/34 bullish Risk Reversal (free).

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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 the dog days of August sees the equity markets looking strong.

Elsewhere look for Gold to continue lower short term in the uptrend while Crude Oil bounces in the downtrend. The US Dollar Index looks to continue higher in the broad consolidation while US Treasuries are biased lower. The Shanghai Composite looks to continue to move sideways in a narrow range while Emerging Markets continue higher.

Volatility looks to remain at extremely low levels keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts agree on both the daily and weekly timeframe. If you ranked them the QQQ might be the most ready for a pause or retrench, possibly handing the baton to the IWM. 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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