Top Trade Ideas for the Week September 6, 2016: Bonus Idea

• Posted by Greg Harmon
• on September 6th, 2016

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

UPS, $UPS, has the tag line that they run the tightest ship in the shipping business. That may be so, but the chart of their stock price has been a bit looser. Good, but looser. Since making a low in January, it has stepped higher in 3 moves. The first ended with a rounding consolidation in February. The second ended with a falling wedge in to May. And the third has now run into falling trend resistance.

Each pullback has been marked by a pullback in the RSI. And the last two also saw a reset lower in the MACD. And each was ended when the RSI reversed and pushed back to the upside through the falling trend resistance. That may be about to happen again. The RSI did turn to the upside last week. And the price pushed to a high outside of the short term consolidation before falling back.

The Bollinger Bands® have squeezed in, often a precursor to a move. And the MACD held positive. There is resistance at 110.40 and 111.85 then free air. Support lower comes at 108.60 and 106.90. Short interest is low at 1.9%. The company is expected to report earnings next October 27th.

The options chain for this week shows very large open interest at the 115 Call Strike, well above the current price. Moving to the September monthly the biggest open interest is at the 110 Strike, with over 4,400 contracts over both puts and calls. The October monthly chain shows a slight upward bias with large open interest at the 110 and 115 calls. And moving to January, the first chain beyond earnings, sees a strong upward price bias. Here the largest open interest is at the 110 and 120 calls.

UPS, Ticker: $UPS

Trade Idea 1: Buy the stock on a move over 110.50 with a stop at 108.50.

Trade Idea 2: Buy the stock on a move over 110.50 and add a September 110/105 Put Spread ($1.00) while selling the October 14 Expiry 112 Calls (80 cents).

Trade Idea 3: Buy the October 105/110/115 Call Spread Risk Reversal (86 cents).

Trade Idea 4: Buy the January 100/110/120 Call Spread Risk Reversal ($1.65).

Trade 1 is a straight buy and suggest the trade is wrong if the short term support at the 20 day SMA breaks. Trade 2 protects the downside on a long position in the stock to 105, and lowers the cost of protection by selling a covered call. Trade 3 is a levered way to participate in a move higher with a possible entry to the stock at 105 in October. Trade 4 is similar but with a possible entry at 100 in January.

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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 Friday which as summer vacations end and the back to work mentality begins, sees the equity markets rested and ready.

Elsewhere look for Gold to continue higher short term while Crude Oil also bounces and moves higher. The US Dollar Index looks to move higher in the broad consolidation while US Treasuries consolidate in their uptrend. The Shanghai Composite looks to continue a digestive drift lower while Emerging Markets reverse back to the upside.

Volatility looks to continue abnormally low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts show the SPY and QQQ continuing in consolidation, with the IWM breaking to the upside, taking the lead. 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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