4 Trade Ideas for Bank of America: Bonus Idea

FILE PHOTO: A Bank of America sign is shown on a building in downtown Los Angeles, California January 15, 2014. REUTERS/Mike Blake/File Photo

Here is your Bonus Idea with links to the full Top Ten:

Bank of America, $BAC, comes into the week at resistance with the Bollinger Bands® squeezed, often a precursor to a move. It has a RSI rising in the bullish zone with the MACD positive and reset lower. There is resistance at 45 then 46 and 47 before 48 and 50 and the all-time high at 55 from 2006. Support lower is at 44.25 and 43.75 then 43 and 42.50. Short interest is low at 1.3%. The stock pays a dividend with an annual yield of 2.31% and went ex-dividend Friday.

The company is expected to report earnings next on July 16th. The June options chain shows biggest open interest at the 40 put strike and the 45 call strike. In the July chain open interest is spread from 44 to 36 on the put side, biggest at 40. On the call side it builds from 40 to a peak at 46 then fades to 52.50. Finally, in the August chain, open interest is biggest at the 37 put strike and at 50 on the call side.

Bank of America, Ticker: $BAC

Trade Idea 1: Buy the stock on a move over 45 with a stop at 43.50.

Trade Idea 2: Buy the stock on a move over 45 and add a June 44 Put (35 cents) while selling the July 49 Call (31 cents).

Trade Idea 3: Buy the June/July 47 Call Calendar (70 cents) while selling the July 42 Put (57 cents).

Trade Idea 4: Buy the August 42/46/50 Call Spread Risk Reversal (35 cents).

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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 with the June non-farm payroll report in the rearview mirror, saw equity markets show continued progress moving back towards their all-time highs.

Elsewhere look for Gold to continue its uptrend while Crude Oil continues to trend lower. The US Dollar Index continues a short term move to the downside while US Treasuries consolidate in their downtrend. The Shanghai Composite looks to continue in consolidation while Emerging Markets break to the upside.

The Volatility Index looks to continue in the normal range making life easier for equity markets to the upside. Their charts show short term strength on the longer timeframe with strength also returning into the shorter timeframes. The IWM continues to lag the SPY and QQQ in recovery in price and the shift to bullish momentum on the longer timeframe. The classic “V” recovery continues to build in all 3 Index ETFs as the SPY and QQQ close in on their all-time highs. Use this information as you prepare for the coming week and trad’em well.