Trade of the Day: Agnico Eagle Mines (AEM)

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The stock market today remains in a bullish trend, but trouble may be brewing beneath the surface.

Our index indicators are giving bullish readings, unchanged from two weeks ago, which implies that momentum remains to the upside. But the uptrend has been relatively sharp and has caused the major indexes to become overbought, so a pullback could be in store. If a pullback does develop, 50-day moving average support could come into play. For the Dow Industrials, that support currently sits at 17,090, for the S&P 500, 1,980, and for the Nasdaq, 4,520.

Our internal indicators have improved along with the indexes. The 200-day Moving Averages Index remains level 3 bullish, and the Advance/Decline Index and Cumulative Volume Index are both level 1 bullish. Eight of the nine major S&P sector funds are in primary bullish trends. The lagging industry is energy, which some analysts point to as a potential problem area that is dragging down the general indexes…but, overall, lower energy costs are a positive for the global economy.

With the improvement in the stock indexes, Treasury bonds (TLT) had been pulling back. But TLT looks to be making a nice “rolling bounce” off its 50-day moving average to stay in a primary bullish trend. With the stock indexes possibly ready to pull back, TLT could be a beneficiary of that. TLT remains bullish by staying above $118.50. Junk bonds (JNK) haven’t been as fortunate; JNK continues to weaken and remains in a bearish trend.

The U.S. dollar (UUP) continues to exert its power in the economy and in the stock market today. UUP is bullish and remains so by staying above $22.80. A strong dollar generally means weak commodity prices, and that is the case now. Copper (CU), gold (GLD) and oil (USO) all remain in primary bearish trends. In fact, oil has broken below key long-term support.

To help you take advantage of this environment, today’s trade recommendation is a bearish option play on a Canada-based gold miner.

Buy the Agnico Eagle Mines Ltd (USA) (AEM) Jan 22.50 Puts (AEM150117P00022500) at $1.10 or lower. Note: These are the puts that expire on Jan. 17, 2015. After entry, take profits if the stock price hits $21.50 or the option price hits $2.30. Exit if the stock price closes above $25.90.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/11/trade-of-the-day-agnico-eagle-mines-aem-stock-market-today/.

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