With strong earnings thus far and a market that looks for any reason to go up and not down, the upcoming two weeks of trading could likely bring the DOW close to the 13,000 level again. Volume remains light and sellers are in short supply.
Gold touched new all-time nominal highs this last week, breaking above $1,500/ounce for the first time ever. Strong earnings reports came out of Apple (AAPL) and General Electric (GE) combined with the continued free fall in the dollar make for a rosy short-term outlook.
With that said, we are looking at three trades that when combined could return 100 percent over the course of another solid trading week (or two) in equities. We scanned our charts looking for strong breakout setups that could fuel upside momentum if equities continue to push forward this week. We came up with the three following charts:
American Express (AXP)- the stock is on the verge of breaking out of an important level. A strong earnings report last week could be the catalyst for continued bullish price action in the stock. With earnings out of the way, implied volatility levels have retreated, making the options cheap. We will be purchasing an In-The-Money May 45 call that will give us a high starting Delta level and positive Vega.
RandGold Resources (GOLD)- With earnings approaching on May 5th and gold continuing to make new all-time nominal highs, it seems likely that this stock will run higher into earnings. The expectation of a strong earnings report, combined with the break above key technical levels, could be the catalyst here. We will utilize a 90/95 May bull call spread which we hope to be able to close before earnings with solid gains.
International Business Machines (IBM)- Over the last year IBM has become a force to be reckoned with. The stock is sitting at all-time highs. The company blew out earnings estimates and raised its profit forecast for the year on Tuesday. With the volatility crush out of the way and the stock closing at new highs on Thursday, look for the next breakout phase to begin with an initial move up to $175 that could be in short order. We will look to open a 170/175 May bull call spread that offers a great risk/reward setup.
Trade Ideas:
BUY +1 AXP 100 MAY 11 45 CALL @2.43 LMT
BUY +2 VERTICAL GOLD 100 MAY 11 90/95 CALL @1.15 LMT
BUY +2 VERTICAL IBM 100 MAY 11 170/175 CALL @1.20 LMT
