Top Trade Ideas for the Week of December 27, 2011: Bonus Idea

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

Honeywell International, Ticker: $HON

Honeywell International, $HON, is approaching historical support/resistance at 55.20, creating a Triple Top. As it reaches resistance it has a Relative Strength Index (RSI ) that is bullish and about to move back over 60 and a Moving Average Convergence Divergence (MACD) indicator that has crossed bullishly positive, both supporting more upside movement. Notice that the rising 50 day Simple Moving Average is also creating the bottom rail of an Ascending Triangle, and is about a week from creating a Golden Cross with the 200 day SMA. The triangle give a target for a breakout higher on a Measured Move to 61.40. There is resistance along the way at 57.30 and 59.20-59.50 before the previous top right at that Measured Move. Support lower comes at 53.65 followed by 52.20 and 51.30.

Trade Idea 1: Buy the stock on a move over 55.20 with 2% trailing stop.
Take off 1/3 at 59.20 and another 1/3 at 61.40.

Trade Idea 2: Buy the January 55 Calls on a move over 55.20 using a first to 54.10 on the stock or $1.00 on the option as a stop.
Spending about $1.45 based on Friday’s end of day levels.

Trade Idea 3: Sell the January 52.50 Puts on a move over 55.20.
The premium from this sale should be about 60 cents based on Friday’s activity.

Trade Idea 4: Buy the January 55/52.5 Bull Risk Reversal
This should cost about 85 cents based on late day Friday activity.

Variation For Trade Ideas 2 and 4: Consider also spreading the January 55 Calls against the January 60 Calls after taking the first 1/3 off at 59.20, or rolling up to a 57.5/62.50 Call Spread.

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After reviewing over 900 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 looks as we head into the last week of the year with Gold consolidating but looking to move lower while Crude Oil may consolidate also but is biased to move higher. The US Dollar Index looks to continue higher while US Treasuries consolidate their loses above support. The Shanghai Composite looks to consolidate further within the downtrend while Emerging Markets ride a short term wave higher within their downtrend. Volatility is poised to continue lower. The influencers of the Equity Index ETF’s are mixed but biased to support Equities moving lower. This is in conflict with the short term view in the charts of SPY, IWM and QQQ which look higher within a a broad consolidation range, perhaps signaling a topping. The US Dollar Index joining Treasuries lower will help the rally in equities continue. But a reversal high in Treasuries, joining the Dollar Index, could turn that consolidation range into a move lower. The strongest of the Equity Indexes is the SPY followed by the IWM and the weakest the QQQ. Use this information as you prepare for the coming week and trade’m well.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

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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