Top Trade Ideas for the Week of May 6, 2013: Bonus Idea

• Posted by Greg Harmon
• on May 6th, 2013

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

Wells Fargo, Ticker: $WFC

Wells Fargo, $WFC, is moving back up to resistance at 38 after a brief pullback following completion of the bearish Shark pattern discussed in Fins in the Shark Tank last week. This was a 55% retracement satisfying the Harmonic. The Relative Strength Index (RSI) is bullish and moving higher with a Moving Average Convergence Divergence indicator (MACD) that is also rising. Both support further upside price action. The Spinning Top doji from Friday signals indecision, but that can mean continuation higher as well. There is resistance higher at 38.20 and some room above that with a Measured move higher to 39.70-40. Support below comes at 37.40 and 36.70 followed by 36.25.

Trade Idea 1: Buy the stock on a move over 38.20 with a stop at 37.75.

Trade Idea 2: Buy the May 38 Calls (offered at 18 cents late Friday) on a move over 37.80. Open Interest at 38k contracts overwhelms any other strike in this Expiry.

Trade Idea 3: Buy the May/June 38 Call Calendar (39 cents).

Trade Idea 4: Sell the June/October 36 Put Calendar (96 cent credit).

Trade Idea 5: Buy the June/October 39 Call Calendar (78 cents) and consider selling the June/October 36 Put Calendar (96 cent credit) to fund it.

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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, as we head into next week looks for Gold to continue its consolidation with a downside bias while Crude Oil works higher in the neutral zone. The US Dollar Index looks better lower while US Treasuries are biased lower within the longer uptrend. The Shanghai Composite is at support but looks better for a break lower while Emerging Markets are looking strong. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite their moves higher to new highs. Their charts agree and point higher, but look better on the weekly timeframe as the daily views show some signs of being extended with Friday’s moves. Use this information as you prepare for the coming week and trad’em 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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