6/22 Best Idea For The Week Ahead

We wrapped up another strong week and are back to being firmly entrenched in an uptrend. Look how far above the 8 week we are right now. Other than that small breakdown we dealt with in April, we have spent nearly no time at the 21 week. This has been an incredible 18 months for the market, there is really nothing else to say other than we’re in an uptrend until we’re not. You will know we aren’t in an uptrend when one of these key moving averages is lost, earnings season begins in 2 weeks and will be the bears next chance to do something.

Last week was encouraging on the breadth front as the RSP, the equal weight, bounced at the 21 week and closed over the 8 week. This has lagged the market all year as we haven’t seen much outside of the megacap stocks. This is up about half as much as the SPY this year due to the heavy allocation of the big names in the SPY.

This week’s best idea is a potential takeover name that saw alot of bullish activity yesterday and is potentially setting up for that buyout in the near term. I have 3 different trade ideas on how to play it to for various levels of risk. For the nutty people who want to use an unbalanced risk reversal all the way to the conservative people who can still make 15% on their money and buy this name 30% lower. I have some ideas for every risk level but yesterday saw 2 odd trades with one potentially signaling a buyout within a month.

Laugh now but you saw the massive PENN call buy Thursday hours before Reuters revealed they were a potential takeover name and the stock spiked. Funny enough someone had bought 10,000 calls on PENN in the recap I sent out well before the Reuters news. The only way any of us can get an edge is through what we see in the options market and we already caught a big move in this name because of the options flow the last few months.