4 Trade Ideas for the Bank of America: Bonus Idea

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

Bank of America, $BAC, comes into the week at short term resistance. This is midway through retracing a pullback to the 200 day SMA at the beginning of August. The Bollinger Bands® have squeezed, often a precursor to a move. The RSI is on the edge of the bullish zone with the MACD moving to positive. There is resistance at 41 and 42 then 44.15 and 46 before 48.50 and 50. Support lower is at 40 and 38.50. Short interest is low under 1%. The stock pays a dividend with an annual yield of 2.58% and has traded ex-dividend since September 6th.

The company is expected to report earnings next on October 15th before the open. October options chain shows big open interest at the 40, 39 and 37 strikes on the put side. On the call side it is biggest at 42. The November chain has biggest open interest at the 37 and 36 put strikes. The call side is largest at 45 then 39 and 40 strikes. Finally, the December chain has biggest open interest at the 35 put and 50 call strikes.

Bank of America, Ticker: $BAC

Trade Idea 1: Buy the stock on a move over 41 with a stop at 39.50.

Trade Idea 2: Buy the stock on a move over 41 and add an October 40/38 Put Spread (60 cents) while selling the November 44 Call (45 cents).

Trade Idea 3: Buy the October/November 42 Call Calendar (55 cents) while selling the October 38 Puts (36 cents).

Trade Idea 4: Buy the December 38/42/47 Call Spread Risk Reversal (7 cents).

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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 the September FOMC meeting and Options Expiration, saw heading into the last full week of September, equity markets showed strength following the FOMC’s first rate cut in 4 years.

Elsewhere look for Gold to continue its uptrend while Crude Oil bounces in its downtrend. The US Dollar Index continues to hold lower in consolidation while US Treasuries are failing at levels that could reverse to an uptrend. The Shanghai Composite looks to continue the bounce in  the downtrend while Emerging Markets rise in consolidation.

The Volatility Index looks to remain low and stabilizing making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe with the SPY making a new all-time high Thursday, breaking a range.  The IWM and QQQ are holding up on the edge of a range break to the upside. On the shorter timeframe the SPY is also strong with the IWM and QQQ building momentum as price reaches the August highs. 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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