Top Trade Ideas for the Week of November 7, 2011: Bonus Idea

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

Under Armour, Ticker: $UA

Under Armour, $UA, moved to new highs after reporting earnings before the market opened on October 25. It has been consolidating in a bull flag between 81 and 86 since. The typical decreasing volume pattern from a flag is accompanying a Relative Strength Index that has had a bullish bias since September and a Moving Average Convergence Divergence (MACD) indicator that is fading but remains positive. These both support more upside. The Simple Moving Average’s (SMA) are sloping higher as well, however gently. A break out of the flag higher has a target on a Measured move (MM) to 100. A fall out of the flag lower has support at 79 and then congestion down to 76. Short interest in this name is also high at about 10%. There are several ways to trade this:

Trade 1: Buy the Stock on a move over 86 using a trailing stop and scale out starting with 1/3 at 90.

Trade 2: Buy the November 90/95 Call Spread, buying the November 90 Call and selling the November 95 Call for about 80 cents on a move of the stock over 86. Look to sell the Call Spread over $3.00 for a reward to risk ratio of about 4:1, or stop it out on a move of the stock below 83. If the upside move happens quickly you can roll the trade up to the 95/100 Call Spread taking out profit on the way.

Trade 3: Buy the November 90/77.5 Risk Reversal, buying the November 90 Call and selling the November 77.5 Put, using the same trigger of a move over 86 for the stock. This combination was offered at a debit of 5 cents near the close Friday. The plan on this trade is to own the stock on a close under 77.50 on November Expiry or be prepared to hedge by short selling on a move below 77.50. Also to sell the Call for profits on a move higher. At a price of 90 the Risk Reversal should be worth about $3.00 and both sides could also be closed there for a large profit.

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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 as we head into next week looks for many of the trends from the past week to continue. Gold and Crude Oil look to head higher. Slightly weaker but still looking higher is the US Dollar Index and US Treasuries look to be in a range with the next move biased higher but not yet determined. Both the Shanghai Composite and Emerging Markets also look better to the upside, with the Chinese market stronger. Volatility is in a lower range but stalled at the top of it creating an environment for the Equity Index ETF’s SPY, IWM and QQQ to head higher. The US Dollar and Treasuries are likely to drive the direction of the equity markets next week. If they stay in a range or consolidate then look for Equities to continue to move slowly higher. A sharp rally by either will likely tank the equity markets. 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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