Weekly Binary Options Trading Briefing 4/22-29/2013 – Stocks Reverse from Highs Despite Better Earnings Figures

Binary Options Trading Recommendations for this week – Markets Information and Trading Tips

S&P breaks short term support at 1533 despite earnings reports coming largely above expectations.  US, UK GDP results, BoJ rate decision, German IFO make up next week’s macro data.

Stocks Reverse from Highs Despite Better Earnings Figures

Stock markets attempted a bounce into the weekly close after the dropped to its lowest levels in 6 weeks (with the S&P 500 breaking historical support at 1533).  Most of the attention last week was placed on corporate earnings reports, with most of the results coming in above expectations.  It is important to note the lack of vigor in the market to post a significant rally after these results were made available.  Possible explanations can come from one of two areas:  Investors are either acutely aware of the fact that analyst projections for earnings were weak to begin with (not overly difficult to surpass), or there is simply not enough active buyers left to push prices higher (creating a profit-taking scenario in the major indices). 

Any further downside extension (i.e. a daily close below 1530 in the S&P) would signal that a near-term top is in place and that we are at least in line for a period of sideways trading.  On the positive side, better than expected earnings were seen from Google, Microsoft, and Capital One.  Earnings negatives were seen from IBM and McDonald’s.  All in, the weekly loss in the S&P was 2.1%, with short term resistance now seen at 1553 (which is also the 100 period EMA on the hourly charts).  An upside break here would take some pressure off the downside and create the possibility of a false break of support at 1533.   

The Week Ahead

In the week ahead, we will have some more macro data to watch, after the light calendar seen last week.  In the US, we will have New Home Sales on Monday, Durable Goods orders on Wednesday, and GDP on Friday.  In the Eurozone, we will have the German IFO on Wednesday.  In Japan, the BoJ rate decision (watch for the accompanying statement) comes on just before the UK GDP numbers on Friday. 

My Trade Ideas (Test on CommuniTraders):

1. The EUR/USD is starting to show a Head and Shoulders pattern on the medium term charts, with neckline support now coming in the 1.3020 area.  A downside break here will be a very bearish event but it pays to be careful given the proximity to psychological support at 1.30.  Because of this, I will wait for an hourly close below 1.30 and then a retracement back into 1.3015 as an area to enter into weekly PUT options.  An upside break of 1.3120 invalidates the trade and will put the focus back on the yearly highs at 1.32.

2. For stocks, I will look to play the rally in Honeywell International (HON).  The stock is trading near its 52-week high, is showing slowing momentum in quarterly growth, and is trading at a price to book valuation of 4.5, which is above average when compared to its sector competitors.  From a chart perspective, resistance comes in at the $75 region, so I will be looking to enter into weekly PUTS in HON at the market open, looking for a retracement back to $71.  There is a large price gap below 73, so if we see a downside break here the trade should be positioned well. 

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