4 Trades In General Electric: Bonus Idea
Dragonfly Capital | Dec 19, 2016 08:32AM ET
Here is your Bonus Idea with links to the full Top Ten:
General Electric (NYSE:GE), had a general trend moving higher until it reached 33 in July. It pulled back from there to a consolidation zone before a push lower that found support in early November. Since then the stock has been rising. Last week it reached the bottom of the initial gap down move from July and has held in consolidation. As it sits there the Bollinger Bands® are opening to allow a move higher.
Momentum is bullish. The RSI is holding in the bullish range and the MACD is moving sideways and positive. There is resistance at 32 and then 33 and then you have to look back beyond the Financial Crisis low to resistance at 34.70 and 37.85 followed by 42, all prior to June 2008. Support lower comes at 31.40 and 31 followed by 30.40. Short interest is low at 1.1%. The stock goes ex-dividend on December 22nd and the company is expected to report earnings next January 20th.
The options chains for this week show a concentration of open interest between 31.50 and 32. For December 30 Expiry the biggest open interest is at the 32 Call strike. January monthly options show the biggest open interest at the 30 strike with large size at 32 and 35 as well. And all the way out in June 2017 open interest is building at the 31 and 32 strikes. Options flow suggests it goes no where.
General Electric Company (NYSE:GE)
Trade Idea 1: Buy the stock on a move over 32 with a stop at 30.50.
Trade Idea 2: Buy the stock on a move over 32 with a January 32/30 Put Spread (70 cents).
Trade Idea 3: Buy the January 30/32 bullish Risk Reversal (24 cents).
Trade Idea 4: Sell the June 32 Straddle for a $3.00 credit.
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 the FOMC and December Options Expiration in the rear view mirror, sees Equity Markets remaining strong at all-time highs with some minor digestion.
Elsewhere look for Gold to continue lower while Crude Oil is set to push higher out of consolidation. The US Dollar Index is poised for more upside while US Treasuries continue to be biased lower. The Shanghai Composite and Emerging Markets are pulling back to the downside but it looks to be a digestive move for the Chinese market.
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Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY (NYSE:SPY), iShares Russell 2000 (NYSE:IWM) and PowerShares QQQ Trust Series 1 (NASDAQ:QQQ). All are in short term pullbacks, that look digestive for the SPY and IWM, and perhaps the QQQ as well which has at this point failed in its break out attempt. Use this information as you prepare for the coming week and trad’em well.
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