Dow Chemical (NYSE:DOW), broke above a 15 month resistance level in December, only to fall back after only 2 days above. A failed break out. That started a drive lower that bottomed in January. In a broader scope, this made for a higher high and a higher low, but in a very wide range of consolidation.
Since that bottom the stock has been stair stepping higher, with the last step settling over the 200 day SMA. The next step would measure to resistance. The longer SMA is running pretty flat, not really a time for investment, with the 50 day SMA oscillating around it. But that oscillation suggests trading can be profitable.
The RSI is bullish and rising as well with the MACD flat at higher levels, but pointing up. There is resistance at 50.60 and then 52.75 followed by 54.30 and 57. Support lower comes at 48.75 and 48 followed by 46.25 and 44.75. Short interest is low at 2.2%. The company reports earnings April 28th and the stock goes ex-dividend March 29th. The dividend yield is currently 3.75%.
The options chains show big open interest at 48 and 50 followed by 52.5 this week on the call side matching with 47 and 50 on the put side. April options show a ramping on the [put side to the highest levels at 50. The call side is 10 times bigger though at 50 and then very large again at 52.50.
Dow Chemical Company (NYSE:DOW)
Trade Idea 1: Buy the stock on a move over 50.75 with a stop at 49, for the move to resistance.
Trade Idea 2: Buy the March 51 Calls (offered at 48 cents late Friday).
Trade Idea 3: Buy the March 24 Expiry 51/52.5 Call Spread (63 cents).
Trade Idea 4: Buy the March 24 Expiry/April 52.5 Call Calendar (37 cents).
Trade 1 looks for a run to that resistance, while Trade 2 does so as well but with lower defined risk. Trade 3 gives it 2 weeks to get there and Trade 4 a longer time frame. If the options are in the money near expiry you may want to exercise to also capture the dividend.
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 March Options Expiration sees the Equity markets looking strong and ready for more upside.
Elsewhere look for Gold to consolidate in its uptrend while Crude Oil continues higher. The US Dollar Index looks better to the downside short term in consolidation while US Treasuries are biased lower. The Shanghai Composite is consolidating in a broad range while Emerging Markets are biased to the upside.
Volatility looks to remain subdued and falling back to normal levels putting a breeze at the back of the equity index ETF’s SPY (NYSE:SPY), IWM and QQQ. Their charts all look good for more upside as well on both timeframes. 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.