One of the best kept secrets from last week’s rally was the strength in the Dow Jones Transportation Average (TRAN).
Support at 8,000 was stretched on last Monday’s test to 7,900 but held into the close. Friday’s finish above 8,300 and run toward the 200-day moving average looks bullish.
The sector has been in consolidation between 8,000 and 8,300 since early October. A close above 8,400 could be a huge signal that the overall market follows suit, if cleared.
I told my Momentum Options subscribers that I wanted to see the Transports clear and hold 8,300 this month. Continued follow-through this week could produce a possible new for us. I have UPS (UPS) on my Watch List, and I have been waiting for shares to clear $106 for a possible trade.
The golden crosses that formed in October with the 50 and 100-day moving averages crossing above the 200-day moving average are all in a sharper elevated ascent.
The UPS January $110 calls are trading around 55 cents. Open interest in these calls options is now approaching 20,000 contracts. Speculative traders could jump in here, as these options could become an official Momentum Options trade if there is continued strength in the stock this week.
The breakeven point for the trade would be $110.55, technically, by expiration on Jan. 15, 2016 at current levels. These calls would double if UPS trades past $111 by the same time period.
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