M&T Bank (MTB) has been consolidating between 94 and 96 for two weeks after a run higher from the breakout over 86.60. It has a Relative Strength Index (RSI) that is bullish and on the edge of being technically overbought, but not extreme. The Moving Average Convergence Divergence indicator (MACD) is barely negative but already showing signs or reversing.
There is no resistance higher and the Measured Move out of consolidation takes it to 103.40, well short of the price objective from the 3-box reversal Point and Figure chart (PnF) at 120. Support lower comes at 89.35 and 87.50 before 86.60.
Trade Idea 1: Buy the stock on a move over 96 with a $1.5 trailing stop.
Straight stock breakout play.
Trade Idea 2: Buy the October 100 Calls (offered at 30 cents late Friday) on the same trigger.
Similar to the stock trade with less capital at risk.
Trade Idea 3: Buy the October 90/100 Bullish Risk Reversal (5 cents), buying the October 100 Call and selling the October 90 Put.
Adds leverage to the straight call trade and an entry point on a pullback.
Trade Idea 4: Buy the November 100 Call selling the November 90/85 Put Spread (35 cents).
Provides more time than the October Risk Reversal and limits the downside risk.
Trade Idea 5: Buy the October/November 100 Call Calendar (60 cents) selling the November 90/85 Put Spread (45 cents).
A play that a breakout stalls at or near 100 over the next 3 weeks before continuing, with limited downside risk.
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 the 4th Quarter begins sees more signs of short term weakness in the Equity markets. Gold looks strong though and ready to move higher while Crude Oil has an upward bias but needs to confirm it.
The US Dollar Index looks poised to continue the bounce in the downtrend while US Treasurys are biased higher, but consolidating. The Shanghai Composite is set up to continue its bounce in the downtrend with Emerging Markets looking to continue lower off of resistance.
Volatility looks to remain subdued though making the picture for the equity index ETF’s SPY, IWM and QQQ, mixed. Low Volatility gives a tailwind, but rising US dollar and Treasurys give Equities a downside bias. The charts of the SPY, IWM and QQQ break the tie by supporting a short-term pullback within their uptrends. Use this information as you prepare for the coming week and trade’m well.
Disclaimer: 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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