Esteé Lauder, $EL, accelerated its move higher in November with a gap up and run. It topped in April and pulled back below its 100 day SMA before reversing and making a higher high. Then it dropped again, finding support at the same place. It bounced there, avoiding a double top and is now retesting the top of a consolidation range.
As it rises the Bollinger Bands® have shifted higher with the price. The RSI is rising and into the bullish zone with the MACD moving up and positive. This all adds up to a possible reversal. There is resistance above at 145 and 149.60 with a gap to 152 then more resistance at 154.25 and 158. Support lower comes at 141.40 and 137.40 then 131.80. Short interest is moderate at 4.6%. The company is expected to report earnings next on October 31st.
The October options chain shows the largest open interest on the put side at the 135 strike. On the call side is large from 140 to 155 but biggest at 150. The November chain, covering the earnings report, opens Monday so the only look beyond earnings is in the January options. Those show the largest open interest on the put side at 130, twice as big as the slug at 97.50. On the call side there is no large concentration in January.
Trade Idea 1: Buy the stock on a move over 145 with a stop at 141.
Trade Idea 2: Buy the stock on a move over 145 and add a November 145/130 Put Spread while selling the January 155 Calls to fund it.
Trade Idea 3: Buy the January 130/145/155 Call Spread Risk Reversal for $1.85.
Trade Idea 4: Buy the October/January 150 Call Calendar for $4.15.
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 the 3rd quarter, sees equity strength has rotated from the small cap and tech names into the large caps of the Dow Jones Industrials and the S&P 500. The leaders are making new all-time highs as the laggards hold steady, a strong market.
Elsewhere look for Gold to consolidate in its downtrend while Crude Oil slowly moves higher. The US Dollar Index looks to continue to the downside slowly while US Treasuries are at the bottom of consolidation and look better lower. The Shanghai Composite is bouncing off a retest of the lows but not safe yet and Emerging Markets are bouncing in their downtrend as well.
Volatility looks to remain very low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. The SPY is now leading the way on the shorter timeframe with the QQQ and IWM consolidating, while all look fantastic on the longer timeframe. Use this information as you prepare for the coming week and trad’em well.
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.