Top Trade Ideas for the Week of July 23, 2012: Bonus Idea

• Posted by Greg Harmon
• on July 23rd, 2012

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

Honeywell, Ticker: $HON

Honeywell, $HON, is consolidating at 58.50 after a gap higher on earnings July 18. There is resistance higher at 61.10 – 61.50 before clear air higher. Support below is found at 56 and 55.10 followed by 54.60 and 52.80. The Relative Strength Index (RSI) has moved into bullish territory and the Moving Average Convergence Divergence indicator (MACD) is positive and growing, both supporting further upside. Adding further weight to the long case is the 3-box reversal Point and Figure chart (PnF), which has a bullish price objective (PO) of 69. The only caution in this chart is the upper shadows as it consolidates. A move over the 58.50 area brings a Measured Move to 63.25.

Trade Idea 1: Buy the stock on a break over 58.50 with a $1 trailing stop.

Trade Idea 2: Buy the August 57.50 Calls on a break over 58.50.
These were offered at $1.41 late Friday.

Trade Idea 3: Sell the August 52.50 Puts now.
These were bid at 24 cents late Friday. You can add trade #2 later to create bullish Risk Reversal.

Trade Idea 4: Buy the August 60/62.5/65 Call Butterfly.
Buying the August 60 and 65 Calls and selling 2 of the August 62.5 Calls, this should cost around 20 cents.

Trade Idea 5: Buy the September 52.5/60 Bullish Risk Reversal on a break over 58.50.
Giving more time, this was offered at 23 cents late Friday

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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 Saturday which, heading into the next week Gold looks to continue to consolidate in the downtrend with Crude Oil looking higher with a chance of consolidation. The US Dollar Index is poised to continue higher with US Treasuries leading them up. The Shanghai Composite and Emerging Markets look biased to continue lower with Emerging Markets potentially consolidating. The Volatility Index points to continued lower fear allowing for the Equity Indexes, SPY, IWM and QQQ to move higher. The US Dollar and Treasuries suggest that this will not happen though. This correlation between Treasuries, the Dollar and Equities has been broken for a while but will likely reestablish with a divergence soon. The charts of the Equity Indexes show that they remain biased higher in what may be bear flags. Also presenting a cautious view. 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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