Top Trade Ideas For Week July 27, 2015: Blackstone
Dragonfly Capital | Jul 27, 2015 07:53AM ET
Here is your Bonus Idea with links to the full Top Ten:
Stephen Schwarzman and Peter Peterson founded Blackstone (NYSE:BX), in 1985. The founders named their firm Blackstone, which was a cryptogram derived from the names of the two founders: Schwarz is German for black; Peter, or Petra in Greek, means stone or rock with $400,000 in seed capital. Now it is a premier private equity and investment banking company, owning properties like Seaworld, the Weather Channel and Hilton managing over $300 billion in assets from offices around the globe.
The stock has grown over this time as well. The most recent activity shows the run higher from the October 2014 low to a peak in mid May. The pullback since then has retraced 38.2% of the move higher, a healthy spot for a reversal for a strong stock.
But as it arrives there the RSI is falling and in the bearish zone with a MACD crossing and running lower. These support more downside. And the Bollinger Bands® are opening lower as well. Perhaps it will stop soon at the 200 day SMA just below.
There is support lower from prior price history at 37.25 and 35.80 followed by 34.60 and 32.90, just below the 61.8% retracement. Resistance to the upside may happen at 38.50 and 39.25 followed by 40.70 and 42.10 before the 44.43 high. Short interest is low at under 2% and the company is not expected to report earnings again until October 15th.
The options market shows weekly options for the stock. This week sees very large open interest at the 38.5 Put Strike and then at higher Strikes on both the Put and Call side, a bit of an upward bias. August Monthly options also show an upward bias with big open interest at the 42 Put Strike and the 42 and 43 Call Strikes. And the September options shows the biggest open interest with large size at the 39 and 30 Put Strikes and the 45 Call Strike.
Blackstone, Ticker: BX
Trade Idea 1: Buy the stock on a move over 38.90 with a stop at 37.25.
A straight long stock idea.
Trade Idea 2: Buy the July 31 Expiry 38/38.5 Bull Risk Reversal (offered at 6 cents late Friday).
A short term trade looking for upside and the large open interest at 38.50 on the Put side as protection.
Trade Idea 3: Buy the September 39/August 40 Call Diagonal (77 cents, buy September and sell August) and sell the August 36.5 Put (46 cent credit)
A longer term trade with protection below the big open interest on the Put side in August.
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Trade Idea 4: Sell the stock short on a move under 37.25 with a stop at 38.15.
A straight downside trade.
Trade Idea 5: Buy the August 38 Puts ($1.04).
A defined risk method for trading the downside move.
Trade Idea 6: Buy the August 38/September 34 Put Diagonal (71 cents, buy August and sell September).
A downside trade idea looking for the 61.8% retracement area to act as support.
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 the last week of July sees the equity markets a bit weaker but mixed with the tech names the strongest.
Elsewhere look for gold to continue lower along with crude oil. The US Dollar Index may move sideways or continue higher while US Treasuries are biased to the upside. The Shanghai Composite is looking stronger and has almost dispelled all possibility of a Dead Cat Bounce while and Emerging Markets are confirming the resumption of the move lower.
Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s ARCA:SPY, ARCA:IWM and NASDAQ:QQQ. Their charts are a bit mixed, with all better on the longer timeframe. The QQQ is the leader on the weekly timeframe with the IWM next and then the SPY. On the shorter timeframe the QQQ’s are also looking the strongest with the SPY and IWM worse, but all biased lower short term. Use this information as you prepare for the coming week and trad’em well.
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