Top Trade Ideas for the Week of January 17, 2012: Bonus Idea

Here 5 ways in 3 different timeframes to trade your Bonus Idea, with links to the full Top Ten:

CIT Group, Ticker: $CIT, Daily

CIT Group, $CIT, is approaching prior resistance at 37.35 near the falling 200 day Simple Moving Average, as shown in the daily chart above. As it arrives there the Relative Strength Index (RSI) is in bullish territory at 63.43 and just made a higher high. The Moving Average Convergence Divergence (MACD) indicator turned positive a few days ago, but looks to be fading as price consolidates there. Both the 50 and 100 day SMA are starting to rise, a good sign. If it can get over 37.35 there is resistance higher at 39 followed by 40.60 and 41.70. There is also good support lower at 36.44 and 35.80 followed by 35.10, 34.50 and 33.35. It will be a good play if it can get through resistance. Moving out to the weekly chart below shows real promise for that happening. The break of resistance at 35.90 has it now working through the consolidation that occurred during the spring of 2010, with a RSI that is trending higher and a MACD that is positive and growing. Solid support shows up additionally at 31 and then 30. The bottom appears to be in after a 5 month process.

CIT Group, Ticker: $CIT, Weekly

Trade Idea 1: Buy the stock on a break over 37.35 with a 75 cent trailing stop.
Take or protect profits at 39 and 41.70.

Trade Idea 2: Buy the February 38 Calls for 1.17
Take or protect profits at 39 and 41.70. If it continues to run you can roll these out to the April Strike as well.

Trade Idea 3: Sell the February 34 Puts for 57 cents.
Collecting premium with risk to own the stock at 34 on February Expiry.

Trade Idea 4: Buy the April 38/42 Call Spread for 1.49
Gives more time to work and lowers cost by selling Calls at the upside resistance

Trade Idea 5: Buy the April 38/42 Call Spread Risk Reversal selling the April 31 Put for 67 cents.
This reduces the cost of trade 4 and creates a reward to risk ratio of nearly 6:1, with protection to the long term weekly resistance at 31.

All prices indicated in trade ideas are from market activity late Friday January 13, 2012.

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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 another holiday shortened week looks like the markets continue to improve. Gold looks likely to head a bit lower while Crude Oil consolidates in the short term within the broad 95-102.5 range. Both the US Dollar Index and Treasuries are biased to the upside although Treasuries may continue in their consolidation range. The Shanghai Composite and Emerging Markets look better to the downside with a chance that Emerging Markets consolidate sideways. Volatility looks to continue lower but likely at a slower pace. These inputs set up a scenario where the US Equity Index ETF’s SPY, IWM and QQQ can continue higher. The charts for the SPY and IWM agree moving to new higher highs and looking ready for more. The QQQ has run up against resistance so it may take some time to get through but is also biased higher. 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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