Top Trade Ideas for the Week February 17, 2015: Bonus Idea

• Posted by Greg Harmon
• on February 17th, 2015

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

Lockheed Martin, $LMT, has been in a strong trend higher for quite some time. Since late December though it has been consolidating in a channel between 187 and 199. Unable to reach 200. The SMA’s show the trend higher and notice that the last bottom in the channel touched the 100 day SMA before moving up.

It now rests at the top of the channel. As it sits there the Bollinger Bands® are opening higher to allow a move. Also the RSI is trending higher with a MACD crossed up and rising. These support more upside price action.

When the stock has moved up it has tended to be in $15 to $20 runs. That could move it to 215 to 220 on a break over 200. That is interesting. There is no resistance above the channel and support lower may come at 192.50 and 187. Short interest is low at about 1%. The company does not report earnings again until April 28th.

The February options chain shows large open interest at both the 195 and 200 Strike Calls, with 200 the biggest. These both are at least double the open interest of any strike on the put side. They could act as a containment zone this week. With the larger open interest at 200 it could also start a break out of the channel on a pin at 200. March open interest shows large size at the 200 Strike Call as well but also at the 170 Strike Put.

Lockheed Martin, Ticker: $LMT

Trade Idea 1: Buy the stock on a move over 199 with a stop at 193.
A straight stock trade.

Trade Idea 2: Buy the March 200 Calls for $2.20.
A cheaper, defined risk way to participate in a move higher in the stock.

Trade Idea 3: Sell the February 195 Straddle for a $3.65 credit.
This trade looks for the range to continue this week and large open interest to stay in control of price. It also offers the possibility of owning the stock at 191.35 at the end of the week.

Trade Idea 4: Buy the February/March 200 Call Calendar for $1.90.
This trade looks to own those March 200 Calls cheaper, using the large open interest at 200 in February as a speed brake.

Trade Idea 5: Buy the February 195/June 210 Call Diagonal for 50 cents.
This is a longer term trade and designed to call the stock at the end of the week, or roll up the February Calls to March Calls.

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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, heading into a shortened February Options Expiration week sees the equity markets looking strong, breaking long consolidations to the upside.

Elsewhere look for Gold to lower in the short term in the longer consolidation while Crude Oil consolidates, and may be ready to reverse higher. The US Dollar Index looks to continue in a consolidation range while US Treasuries are biased lower. The Shanghai Composite looks to continue to pullback in the uptrend and Emerging Markets look to hold in the bear flag, and might prove it a reversal higher.

Volatility looks to remain subdued and now drifting lower, keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts all look strong on both the daily and weekly timeframes. If you had to pick a weakness then the gaps in the QQQ chart and move out of the Bollinger Bands® may signal short term exhaustion not seen in the SPY and IWM. 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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