Here is your Bonus Idea with links to the full Top Ten:
Aetna (NYSE:AET) built an ascending triangle from the beginning of November through to the beginning of May. The sixth touch was the charm and the price broke above the triangle. This gives a target to 165 to complete the pattern. It also has a target to 158 to complete a 3 Drives pattern. When two patterns line up like this it add more power behind the stock.
Momentum also supports a move higher. The RSI is turning back up in the bullish zone while the MACD is leveling after a short pullback and positive. There is resistance above at 145 and then free air to the targets. Support lower comes at 139 and then 134.50 before 125. Short interest is low at 2.8%. The company is expected to report earnings next on August 3rd.
The options chain for this week shows a large open interest sitting at the 148 call strike above. But next week the biggest open interest is at the 140 call. June monthly open interest is centered on the 140 strike with some size at 145 on the call side as well. July open interest is also focused below, biggest at 140 and then sizable down to 125. Finally, the October chain, the first that covers the next earnings report, is much lighter but with the biggest open interest below. Options players do not see a lot of long term upside.
Aetna, Ticker: AET
Trade Idea 1: Buy the stock now (over 139) with a stop at 137.50.
Trade Idea 2: Buy the stock now (over 139) with a June 140/135 Put Spread ($1.43) to protect and selling the June 145 Call ($1.12) to help fund the protection.
Trade Idea 3: Buy the July 135/145 bullish Risk Reversal (67 cents).
Trade Idea 4: Buy a June/October 145 Call Calendar ($4.58) and sell the June 135 Puts (68 cents).
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 with May Options Expiration in the rearview window allowing traders to look toward the Memorial Day Weekend and official kick off of the flight to the Hampton’s each Friday.
Equities head into the summer doldrums firm on the longer time frame but a little shaky short term. Elsewhere look for Gold to continue to trend higher while Crude Oil retains an upward bias in consolidation. The US Dollar Index is sick and looks to continue lower while US Treasuries continue their consolidation.
The Shanghai Composite is also in consolidation mode while Emerging Markets are biased to continue to the upside. Volatility looks to remain low keeping the bias higher for the equity index ETF’s SPDR S&P 500 (NYSE:SPY), iShares Russell 2000 (NYSE:IWM) and PowerShares QQQ Trust Series 1 (NASDAQ:QQQ). Their charts all show consolidation in strength in the longer term, with the QQQ joining this week. In the shorter term there is some minor damage to repair that begun Thursday. Use this information as you prepare for the coming week and trad’em 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.