If the ECB does what is expected the U.S. markets could break above recent resistance. However, these pivotal events have a way of coming back to haunt us. Just when everyone thinks the market should rally on good news, the actual event turns into a sell the news headline and the expected rally turns into a loss.
The ECB decision is expected to contain some new stimulus but Mario Draghi has failed to follow through in the past and the markets reacted badly. Given his history there has been some doubt about the ECB decision but his letdown in the past actually suggests he will do something just to keep from disappointing the markets again. However, will that something be enough?
I hesitated adding a position today but there is a decent chance the markets will move higher after the event. If you are not just dying to make a trade I would wait to see what the market impact was before making any trading decisions.
There is always another day to trade if you have money left to invest.
NEW DIRECTIONAL CALL PLAYS
AON - AON Plc - Company Description
AON offers risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services globally with operations in more than 120 countries.
Q4 earnings of $2.09 were up +34%. Revenues of $3.28 billion narrowly missed estimates for $3.33 billion due to the impact of the strong dollar. The dollar reduced earnings by 10 cents. They repurchased 4.2 million shares for $400 million. For the ful lyear free cash flow increased 10% to a record $1.7 billion.
The CEO said in the earnings release "In a year of substantial earnings volatility driven by macroeconomic factors and industry headwinds, investments in our industry leading platform contributed to our strongest rate of organic growth in Risk Solutions since 2007."
Earnings April 29th.
I have wanted to add AON as a position since their post earnings spike in early February but the stock just kept climbing. The last three days provided some consolidation and allowed the call premiums to shrink. I believe AON will continue higher out of this consolidation period to test resistance at $102.50, which would be my exit target.
I want to see a trade at $99.50 to insure we do not enter a new play just as the market rolls over. That is closer to the preferred strike price so the option is going to cost a little more than the price listed below.
With an AON trade at $99.50
Buy April $100 call, currently $1.70, initial stop loss $97.75
NEW DIRECTIONAL PUT PLAYS
No New Bearish Plays