Top Trade Ideas For The Week Of August 29, 2016: Amgen
Dragonfly Capital | Aug 29, 2016 08:13AM ET
Amgen (NASDAQ:AMGN) has had a long-term trend sideways in a broad range since late 2014. In the intermediate term it broke to a higher range at the end of July and has been consolidating in the short term in a narrow range since then. That consolidation is occurring at the top of the broad long-term range. The spike down in late 2015 touched a 38.2% retracement of the long move higher from 2011.
As it spins its wheels there, the RSI is pulling back in the bullish zone while the MACD is rising and positive. Notice that the recent consolidation started when the price hit the upper Bollinger Bands®. After two years of sideways grind, is it ready to move higher again?
There is resistance at 176 and then nothing to stop it. Support comes lower at 170 and 165 before 150. Short interest is low at 1.1%. It does carry a big 2.33% dividend yield, but just went ex-dividend August 15th.
Options chains show open interest spread this week from 165 to 175 on the put side and then from 170 to 180 on the call side. The monthly September options chain shows open interest spread on the put side at 160, 170 and 175. On the call side it is tighter and large, from 175 to 182.50.
October monthly options show a long tail building from 120 to biggest open interest at 170 on the put side, while the call side again is more focused and big, from 170 to 180. Finally looking at January 2017 chains, the first beyond the next earnings report October 27th, shows a distribution with a peak at 145 on the put side and 170 on the call side. No big bets to move out of the range.
Trade Idea 1: Buy the stock on a move over 177 with a stop at 168.
Trade Idea 2: Buy the September/October 175 Call Calendar ($2.30).
Trade Idea 3: Buy the September/January 175 Call Calendar ($7.70).
The first trade gives the upside with a stop that takes effect should it fall below the current flag. The second looks for the open interest in September to hold it near 175 until then and allows upside participation after. The third trade is similar to the second but allows for a sale of calls in October, November and December as well to lower the cost of a longer-term trade.
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. Heading into the unofficial last week of summer ahead of the Labor Day holiday the equity markets are tired, consolidating at their highs and even pulling back.
Get The News You Want
Elsewhere look for gold to continue lower while crude oil extends to the upside. The US Dollar Index looks to continue higher short term in its broad range while US Treasuries are biased lower in consolidation. The Shanghai Composite and Emerging Markets are both looking like they will continue lower in the short run, more damaging for the Emerging Markets than the Chinese.
Volatility looks to remain subdued but back at more normal levels, keeping the bias higher for the equity index ETFs SPDR S&P 500 (NYSE:SPY), iShares Russell 2000 (NYSE:IWM) and PowerShares QQQ Trust Series 1 (NASDAQ:QQQ). Their charts have lost all their strength though and suggest they may continue to pause or pullback in the short run.
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.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.