Trade of the Day: Bank of New York Mellon (BK)

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Our index indicators are giving bullish readings, unchanged from last week.  But a key change is that the Nasdaq has broken above the resistance that has been hemming it and the other major indices into a frustrating trading range over the past few months. The Nasdaq is now waiting to be joined by the Dow Industrials and S&P 500. For that to happen, the Dow must move above 18,200, and the S&P 500 above 2,115.

Our internal indicators are confirming the break out for the  Nasdaq. The 200-day Moving Averages Index remains level 2 bullish, but is just a bullish day or two from moving to level 1. The Advance/Decline Index and Cumulative Volume Index remain level 1 bullish. Seven of the nine major S&P sector funds are level 1 bullish, unchanged from last week. But both Dow sub-indices have improved dramatically, as the Dow Transports and Utility Averages have returned to bullish trends.

Treasury bonds (TLT) reflect the bullishness in stocks, as money moving out of Treasuries and into riskier trades has caused TLT to fall below its 50-day moving average. While some of the weakness is profit-taking, a longer-term reading of the chart reveals that the huge rally by TLT a few months ago might prove to be a “blow off” top. If that is the case, interest rates are about to begin a steady hike higher. The dollar (UUP) has also weakened from earlier this year, but so far UUP has managed to stay above its 50-day moving average.

Also reflecting the trend toward more risk taking, most commodities continue to improve. Gold (GLD) is a notable exception. Nevertheless, GLD weakness is more evidence that a “risk on” mentality is spreading through the market, which bodes well for continued strength in U.S. stocks.

With the major stock indices giving bullish readings, options traders should continue to favor call buying. I have a trade for you today based on an underlying stock with strong technical indicators: Bank of New York Mellon (BK).

BK jumped this week on news of a preferred stock offering, and the technical analysis suggest it’s going to keep climbing.

Buy the BK Jun 43 Calls (BK150619C00043000) at $0.80 or lower. After entry, take profits if BK stock price hits $44.30 or the option price hits $1.80. Exit if the stock price closes below $41.70.

Note: There are several expiration dates for the June series. Be sure you are opening the regular monthly options that expire on June 19.

But with stock markets worldwide being propped up almost entirely by monetary stimulus, a change of sentiment can happen almost overnight, so holding some put positions is also prudent.

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Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990. Try Power Options Weekly today and receive 2 weeks for the price of 1 for only $19.95.


Article printed from InvestorPlace Media, https://investorplace.com/2015/04/nasdaq-bk/.

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