Top Trade Ideas for the Week of February 21, 2012: Bonus Idea

• Posted by Greg Harmon
• on February 21st, 2012

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

IBM, Ticker: $IBM

IBM, $IBM, is consolidating in a bull flag after rising from support at the bottom of the ascending triangle at 178.25. A move over 194.25 triggers a Measured Move higher to 210.25. The Relative Strength Index (RSI) is holding bullish and the Moving Average Convergence Divergence (MACD) indicator is stalled after a brief and shallow move negative. Should it start higher then both would support a move up in price. The Simple Moving Averages (SMA) are rising to remind that the long term trend is higher. Finally the Bollinger bands which have been squeezing stopped Friday and started to expand allowing for a move. The bias is to the upside. Support on the downside comes at the bottom of the flag at 191.40 and then 189 and 185 before 183.50 where there is also the rising bottom rail of the triangle. There is strong support below that at 176.50.

Trade Idea 1: Buy the stock on a move over 194.25 with a $2 trailing stop.

Trade Idea 2: Buy the March 200 Calls on a move over 194.25.
On a move over 200 take some profits or spread them against the 210 Calls. These were offered at 91 cents late Friday.

Trade Idea 3: Buy the February 200 Calls on the open Tuesday.
Use appropriate size to be comfortable losing the entire 11 cent premium. Sell the February 185 Puts to offset if comfortable owning IBM at 185.

Trade Idea 4: Sell the March 185 Puts.
These were bid at 88 cents late Friday.

Trade Idea 5: Buy the March 200/185 bull Risk Reversal on a move over 194.25.
Would have long exposure for 3 cents based on Friday’s prices.

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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 heading into next week sees Gold continuing to be an enigma, consolidating in a intermediate term downtrend in a long term uptrend, while Crude Oil is breaking higher and looks to continue. The US Dollar Index and Treasuries are in consolidation zones but both are biased lower. The Shanghai Composite and Emerging Markets look ready to continue higher with Emerging Markets perhaps consolidating. The Volatility Index looks to remain low and perhaps test the low support. These influencers create an atmosphere for the Equity Index ETF’s, SPY, IWM and QQQ to continue higher and their charts generally agree, with the exception of the IWM that may consolidate or pullback. Use this information as you prepare for the coming week and trade’m 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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