A TIVO Trade Idea Worth Recording

11/01/2011 9:00 am EST


As popular television stock Tivo Inc. (TIVO) once again tests stubborn resistance, a risk-controlled long entry is apparent if the clearly defined overhead levels are overcome.

Tivo Inc., (TIVO) is approaching resistance at $11 for the sixth time this year. As it gets there, the Relative Strength Index (RSI) is rising sharply after holding the mid line and the Moving Average Convergence Divergence (MACD) indicator is flat but is starting to rise.

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A move above $11 has resistance at $11.50 and then free air to $15.50. Enter long on a move over $11 with a stop at $10.67. As the price hits $11.50, take off one-third the position and convert the stop to a 2% trailing stop. At $13, tighten the trail to 1%.

For a very speculative options play, consider the November 12/13 call spread risk reversal selling the November 9 put. This was available for 11 cents near the close last Friday.

By Greg Harmon of Dragonfly Capital

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