4 Trade Ideas for ADP: Bonus Idea
ADP, $ADP, comes into the week at resistance in a short consolidation at the 38.2% retracement of the last leg lower. This is also over the 200 day SMA. It has an RSI rising in the bullish zone with the MACD positive and climbing. There is resistance at 245 and 249.50 then 252.50 and 260 before 267 and 271 with a gap to fill to 279.50 above. Support is at 237 and 234 followed by 226.50. Short interest is moderate at 3.7%. The stock pays a dividend with an annual yield of 2.81% and has traded ex-dividend since June 12th.
The company is expected to report earnings next on July 29th. The July options chain shows biggest open interest at the 230 put strike and on the call side at 250. In the July 31 expiry options chain the implied move between now and July 31st, covering the earnings report, is about $15.50. In the August chain open interest is spread from the 230 down to 195. On the call side it is focused from 240 to 260, biggest at 250. Finally in the September chain open interest is biggest at the 240 put and much smaller but biggest at the 250 call.
Trade Idea 1: Buy the stock on a move over 245 with a stop at 235.
Trade Idea 2: Buy the stock on a move over 245 and add a July 31 Expiry 235/225 Put Spread ($3.80) while also selling the September 270 Call ($2.80).
Trade Idea 3: Buy the July 31 Expiry/August 260 Call Calendar ($3.20) while selling the July 31 Expiry 225 Put ($1.70).
Trade Idea 4: Buy the September 220/250/270 Call Spread Risk Reversal ($3.90).
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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 start of earnings season, saw equity markets to have settled into a consolidation at their all-time highs.
Elsewhere, look for Gold to continue the short term downtrend along with Crude Oil after its Dead Cat Bounce. The US Dollar Index looks to continue flirt with a break of the 15 month range and transition into an uptrend while US Treasuries threaten to break down through support in consolidation. The Shanghai Composite looks to continue the consolidation in a slow drifting range while Emerging Markets consolidate in their uptrend.
The Volatility Index looks to continue in the normal zone keeping at least a slight tailwind behind equities. The charts of the SPY, the QQQ look ready to start a drift to the upside and possibly overtake the IWM as leaders again. They all continue to look strong on the longer timeframe consolidating at the highs. On the shorter timeframe the SPY made a higher high, a first step, and the QQQ still has some work left in the short term bounce to prove the pullback is over. Making a new all-time high, or at least a move over the June high, with higher momentum readings would solidify that. The IWM, however, possibly starting to feel the pinch of the negative momentum divergence in its consolidation. Use this information as you prepare for the coming week and trad’em well.
