Top Trade Ideas for the Week December 21, 2015: Bonus Idea

• Posted by Greg Harmon
• on December 21st, 2015

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

Cruise ships have become giant floating cities where you can do anything you might imagine. I can envision the day when people will live on a cruise ship just like many planned communities in high rise apartment. Royal Caribbean Cruises, $RCL, is one of the leaders in the industry and its ship is pictured above.

It has had smooth seas to sail for some time and that has led to the stock price sailing higher. Since the dip in April the stock rose over 50%, tagging $100. That lead to a pullback through November in what now seems to be a rounded bottom. The bounce off of the 100 day SMA seems to be the key.

As it starts higher the Bollinger Bands® are opening up to let it move higher. The momentum, is also positive with the MACD crossed up and rising while the RSI is moving higher after holding in the bullish zone. A Measured Move would suggest a target of 106 to the upside on this leg.

There is support lower at 91.25 and then 87.25 followed by 85.30. Resistance may be found above at 97.50 and 100. The stock has just under 5% of the float short, and the company reports earnings next January 28, 2016.

Looking at the options chains, the January 2016 chain sees very large open interest above on the call side at the 100 strike with some size at 97.5 strike. But there is also large open interest on the put side at 70, well below. Moving out to March, beyond the reporting date, also sees large open interest at 100 and then on the put side at 82.5 below. February options will start trading Monday.

Royal Caribbean Cruises, Ticker: $RCL

Trade Idea 1: Buy the stock on a move over 97.50 with a stop at 92.
A straight stock idea.

Trade Idea 2: Buy the stock with a February 97.5/90 Put Spread (probably about $3.00) and selling the January 100 Calls ($1.39).
Adding a collar to the stock to protect through earnings.

Trade Idea 3: Buy a January 97.5/100 Call Spread ($1.10).
A defined risk way to participate in upside toward the large open interest in January.

Trade Idea 4: Buy a January 97.5/100 Call Spread and sell the January 90 Put (10 cent credit).
Adds leverage to the Call Spread with a possibility of owning the stock below the prior low.

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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 shortened Christmas week sees the equity markets looking weak in the short with the SPY weak in the intermediate term as well.

Elsewhere watch Gold for a bounce in its downtrend while Crude Oil continues lower. The US Dollar Index looks strong and ready for more upside while US Treasuries are mired in broad consolidation. The Shanghai Composite is biased higher in consolidation and Emerging Markets are biased to the downside.

Volatility looks to remain elevated keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their chars concur on the daily feed after back to back strong down days, while the IWM and QQ are nearing support in prior consolidation channels on the intermediate view. The SPY looks to be weaker rolling lower on the longer view. Use this information as you prepare for the coming week and trad’em well.

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Contact me at greg@dragonflycap.com and use the code SANTA in the message to get either an annual subscription for $556 (10% off) or an annual subscription plus my book signed for $600.

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