6 Trade Ideas For Second Week Of July 2014

6 Trade Ideas For Second Week Of July 2014

With the Toronto Stock Exchange sitting at all-time highs, there is bound to be some weakness as we start into the second week of July. However unless a new catalyst appears to the downside the TSX still looks set to move higher. Here are some of the trades I am watching for the start of this week. Not all of these are large cap stocks. Trading options on the TSX is quite different from the American Indexes. For the TSX I tend to look strongly at the technical indicators to determine the best trade possible. I try to stay primarily with large cap stocks, but my watch list has some medium and small cap stocks on it that I keep an eye on for a trade or two.

Alimentation Couche-Tard Stock (ATD.B) – Speculative Trade

Alimentation Couche-Tard Inc. (Couche-Tard) is a convenience store operator in the United States, Europe and Canada. The Company operates its convenience store and gas stations operate under the names of Circle K, Statoil, Couche-Tard and Mac’s. At the end of 2013, Couche-Tard’s network comprised 6,207 convenience stores throughout North America which included 4,698 stores with gas stations. Earnings continue to improve but I have no interest in owning shares. These are short-term trades I do for income and I close at the first sign of trouble and I also close when I have earned 75% of the profit.

Earnings come out July 7 which should push the stock higher. Estimates place expected earnings at 25 cents which is a jump of 25% or 5 cents from the same quarter last year. This should boost the stock. At present money flow shows the stock as oversold. Volume has been average so no heavy selling has been experienced. The last rally in June saw a one day spike in buying.

The Accumulation-Distribution Indicator though shows that the stock is under heavy distribution. In other words, there is more selling pressure than buying pressure over the past 6 months.

Momentum has a weak up signal at present.

The Fast Stochastic also has a weak up signal at present.

I like the $28.00 or $27.33 put strikes for August 16 expiry. If earnings are poor, I will be more interested in selling the $26.00 or $26.67 put strikes for August 16 expiry. There is more support down at $26 than there is at $28 and above.

ATD.B-Stock-July  2014

ATD.B-Stock-July 2014

Rogers Communications Stock (RCI.B) – Big Cap

I have sold puts on Rogers Stock and bought shares in the latest downturn. The company releases its earnings on July 24 and estimates have earnings coming in at .86 cents versus .96 cents last year for the same quarter. This is keeping the stock depressed.

Money flow is neutral and volume is average.

The Accumulation-Distribution Indicator shows that the stock has been under steady distribution every day for the past 6 months. Looking out beyond 6 months the stock was only briefly in accumulation stage in May of 2013. Since then it has been under steady distribution which is never a good sign for a rebound rally.

Momentum shows a weak up signal while the Fast Stochastic has a weak down signal.

I am still selling the $42 put strike. My next trade will be for August 16 if the stock pulls back a bit this week. On July 4 the August 16 $42 put strike was trading for .40 cents, but I think I can squeeze more out of it than .40 cents. Right now I am sitting at .50 cents.

A decent Credit Put Spread would be to sell the August 16 $42 put strike and buy the $39 for .10 cents. This is a profit of .32 cents against capital at risk of 3.00 for a return of 10% if held to expiry. Meanwhile should earnings disappoint on July 24, and the stock fall, the $39 put strike might jump in value.

Rogers Stock to July 4 2014

Rogers Stock to July 4 2014

BCE INC Stock (BCE) – Big Cap

When one telecommunications company is under pressure, almost always, so are the other telecommunications companies. BCE Stock is no exception. It too is trending sideways as investors wait for earnings to be released on August 4. The estimates have earnings coming in at 84 cents versus last year’s 77 cents for the same quarter. I still like the $48 put strike for August 16 expiry, and it is still trading for .55 to .58 cents. Meanwhile the $47 is also worth considering at .30 cents.

Selling the August 16 expiry, $48 put strike naked is fine and I have some at that strike, but for a Credit Put Spread, selling the $47 for .30 cents and then buying the $44 put strike for 8 cents returns .22 cents against $3.00 of risk for a gain of 7.3%. Again, I plan to close this trade once 75% of the profit has been earned.

Catamaran Corp Stock (CCT) – Speculative Trade

Here is a speculative trade I cannot decide whether to enter. Earnings are released on July 28 and analysts are estimating earnings will come in at .56 cents versus .52 cents from the previous year on 5.1 billion. For those investors who do not know about Catamaran, it was SXC Health Solutions.  Catamaran is a provider of pharmacy benefit management (PBM) services and healthcare information technology (HCIT) solutions. The Company’s product offerings and solutions combine a range of applications and PBM services designed to assist its customers in reducing the cost and managing the complexity of their prescription drug programs.

You can see that the stock has been stick is a sideways pattern for over two months and is not stuck in a Bollinger Bands Squeeze. It is trending along the Lower Bollinger Band which would suggest the stock may fall as it comes out of the Bollinger Bands Squeeze. The strike that interests me in $42 which for August 16 expiry can be sold for probably 50 cents. For August 16 there are no put strikes at present below $42, but after July 18 more strikes should appear which would allow for Credit Put Spreads.

Money flow is barely positive. Volume is average and nothing to be excited about. The stock has been in heavy distribution for months but now has a very weak accumulation trend. Momentum is neutral to down and the Fast Stochastic is negative.

All in all, this is a tough choice. Should the stock break lower I am considering setting up Credit Call Spreads. For now though I am considering the August 16, $42 put strike if I can get .50 cents or more.

CCT Stock as of July 4 2014

CCT Stock as of July 4 2014

Canadian Imperial Bank Of Commerce Stock (CM) – Big Cap

One of the few bank stocks to not have recovered its previous highs before the credit crisis of 2008-09, CIBC Stock is well worth considering for Put Selling. I plan to sell the $96 put strike for August 16 expiry if there is some weakness to start off this week. There is a lot of support at $96 and in the last pullback I sold puts and bought stock.

Meanwhile money flow is positive. There is slightly buying pressure in the Volume indicator in this latest rally.

Accumulation has been steady and strong.

Momentum is weak but positive for this latest rally.

The Fast Stochastic is still signaling up.

CM Bank Stock July 4 2014

CIBC Stock to July 4 2014

Manulife Financial Stock (MFC) – Big Cap

Another Financial stock that has yet to recover from the credit crisis is Manulife Financial. I have been trading in MFC Stock since before the collapse in 2008-09.  At present the stock looks like it is finally breaking out.

I am still holding shares for a move higher so at present I am more interested in selling the $21 naked put for August 16 expiry which is earning .25 cents. Even the $20.50 is trading for .17 cents and if the stock pulls back to start the week, this will be a great trade.

The stock does not announce its earnings until August 7. Analysts estimate earnings at .40 cents versus 31 cents last year for the same quarter. Revenue is estimated at 10.9 billion.

MFC Stock is easy for Credit Put Spreads. For example, selling the August 16 $21 for .25 cents and buying the August 16 $19 put strike for .6 cents would earn .19 cents against $2.00 of capital risked for a return of 9.5%.

With MFC stock pushing higher a good covered calls trade would be to buy stock and sell the $22 covered call for August 16 which was trading at .48 cents on July 4. This is an easy 2% gain. For more protection, an investor could sell the $21.50 for .70 cents which would return 1.7% if the stock was bought at the close on Friday July 4 for $21.82. With call premiums up, obviously the market maker thinks the stock will break higher.

Manulife Financial Stock to July 4 2014

Manulife Financial Stock to July 4 2014

Trade Ideas Summary

The above 6 trades are those I am considering for Monday. I will have to see how the market performs and how these stocks perform before entering trades. Remember to consider your own comfort zone. I have no stop-losses in use on the above stocks. Should I enter any of the speculative trades I will note in a separate article any stop-loss. For the big cap stocks I would own any that happen to be assigned and then work my way back out of the trade.


Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.

 

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