Trades about to Happen February 19

“Trades about to happen” gives you trade set ups that are about to trigger. For each trade idea, i will give you the entry, potential targets, and other key information to glean from the charts.

More About “Trades about to Happen”

The idea behind “Trades about to Happen” is to keep your trading “pond” fully stocked with ideas ready to trigger so you can focus on executing trades rather than sifting through hundreds of charts to find set ups. Additionally its important to understand I am a technical trader. I do not consider fundamental factors for these set ups. If you incorporate fundamentals into your criteria, simple apply those considerations to the set ups / stocks of interest. When the fundamentals and technicals align, you should have a nice trade set up.

How to leverage “Trades about to Happen”

Not all the set-ups I provide will be appealing to you. For those you are interested in set alarms at either the level I suggest or at a level where you want to be given a “heads up” about the trade. Once your alarm triggers, you can re-focus on the stock and potential trade. Depending on your current portfolio positions, view of the market,  and a bunch of other factors you may or may not decide to take the trade.  If an alarm triggers and you don’t take the trade, re-set your alarm at a new level where you’d want to take another look.  In this way a stock won’t run away from you without you being aware.

Trades about to Happen

$BIG  Big Lots Daily

Broadline discount retailer Big Lots got the big rug pull treatment in early December. You can see the big gap down. After hitting its low on December 24 like the rest of the market, the stock has recovered to a certain degree and has been consolidating under gap resistance at $32.  Price is now looking like it wants a move into the $7 gap above.  Another aspect I like is the big air pocket just above. Price may move quickly through this void in price discovery.  The technical set up offers a nice risk / reward.  The fly in the ointment is earnings that are due out March 8 BMO which is a week before March expiration.

The Trade

The trigger I’d like to see is for price to take out the 50ema at $32.69. If price clears that, get long against $32.  Additionally 690 March 32.5 Calls were bought on the 19th for 1.90.  Somebody else thinks this is going higher.

Strategy:  Depending on when the trade triggers, you can get long and commit to holding through earnings, or take the trade off before earnings are announced.  Of course the 3rd option is to simply let earnings clear and see how it looks after the dust settles.

$KMB Kimberly Clark Weekly

This set up triggered but I don’t think it’s too late to participate. The potential measured is large enough to warrant getting in now. Stay long against $118.

Original Commentary from February 18

Personal products maker Kimberly Clark is working on a big inverse head and shoulders pattern. Price is flashing an emerging breakout. If you refer to the daily chart, you can see the breakout even more clearly.  The measured move has 20% upside from here. I don’t know if we can expect all that, but even half of that move on a $120 stock would be a nice win.

The Trade

Get long against $118. I’d set a stop around $116.  My first target is $126 with T2 up near $132. Beautiful set up. Let’s see where it goes.

$CYBR  Cyber-Ark  Daily

Cyber-Ark gapped up on its recent earnings report and has now established a compact trading range between $100 and $105.   This sets up for a nice bracket trade.  The idea is to alarm both sides of the trading range and “go with” whatever side price breaks from.  Usually the price movement continues in the direction of the breakout but not always. It could just as easily come back to fill the $14 gap below, especially if the market pulls back..  That isn’t a bad thing if you’re ready for that move.

The Trade

Alarm $105 and $100.  If price breaks above $105, get long and set a stop just below the breakout…say $104.  If price breaks down through $100, get short with a stop around $101.  In either case, if price returns to inside the consolidation area and spends any appreciable time there, take the trade off and reset your alarms for another try.  No earnings for 3 months so no worries there.

$TLT 10 Year Bonds  Daily

What if the market that has gone up 20% in a straight line decides to have a run of the mill 38% Fib pull back?  What if the global synchronized slow-down slows some more?  Can you envision people piling into bonds ?  I can.   Even if you don’t buy into those scenarios, look at the chart. Its not like bonds are falling apart, they are in fact about to break out of a massive inverse head and shoulders formation with a measured move price target of 9% upside. I’ll take that on a $122 instrument. Adding to the bull thesis is the RSI and PPO indicators which have been in bull mode since November. Love this set up.

The Trade

With a price move above $122.50 get long against $122.  Ballparking the targets I’d say T1= $125 and T2 = $130.   Today Calls outpaced puts by 2:1. Assuming this breaks out soon, I like the April $122 Calls for about $1.10. Give it some time to work. This is a powerful set up if it triggers. Set your alarms and don’t miss it.

$AAPL  Apple  60 min

Apple is in the midst of a major Bollinger Band squeeze on the 60 min chart. The stock has traded in a $2 range for over 8 trading days.  Bollinger compression eventually leads to expansion just like a compressed spring. You can’t hold it forever.  When this thing pops, it could produce a really nice move. If you are in front of a monitor all day and can watch it, I think it will be worth the wait.

The Trade

Alarm $171.75 and $169.50. When price violates either level, “go with ” the trade. Long above $171.75 or short below $169.50.   I’d be looking for a fast $2 move for starters and likely more.  No need to go way out in time IMO, grab some weekly calls or puts 7 – 10 days out.  Should move fast.  Set your stops fairly close.

$AAL American Airlines  Daily

For those hunting for a short idea, here’s one for you.  American has been in a persistent downtrend for a year and is an under performer relative to peers. As you can see from the chart, price has been respecting the downtrend the whole way.  Most recently price hugged the down trend line but could not move above it.  I think playing for a move back down to $30 offers a nice risk / reward profile with a clear stop close by.  Notice also momentum has put in a bear cross. That is supportive of a short trade.

The Trade

Get short now against the downtrend line. If price pops above, to say $36.50, kill the trade. The next earnings is after April expiration so I think the April option chain is the right place to be.  You could do an April 35 / 30 put spread for about $1.33 or straight April 35 Puts for $1.67.  Mostly a matter of personal preference.

Notes:

These are ideas and set ups. Please double check when earnings are set to be announced because the earnings reaction has the potential to torpedo any technical set up that may exist.

Also, set you stops according to your own risk tolerance. The ones I have provided are to be used only as a guide. The most important aspect of your stop is to honor them. Some trades work, some don’t. Honoring your stop will ensure your loss on a failed trade will be minimal.

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